IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT
VIRGILIO ORCILLA et al.,
Plaintiffs and Appellants,
v.
BIG SUR, INC., et al.,
Defendants and Respondents.
excerpt:
Plaintiffs Virgilio and Teodora Orcilla lost their San Jose home (the Property) through a nonjudicial foreclosure sale in May 2010. The Property was purchased by a third party, defendant Big Sur, Inc. (Big Sur). The Orcillas vacated the Property after Big Sur obtained a judgment against them in an unlawful detainer action. Thereafter, the Orcillas sued Big Sur and the parties involved in the nonjudicial foreclosure sale, Bank of America, N.A. (BofA); ReconTrust Company, N.A. (ReconTrust); and Mortgage Electronic Registration Systems, Inc. (MERS) (collectively, the Bank Defendants), to set aside the trustee’s sale.
Big Sur and the Bank Defendants successfully demurred to the operative second amended complaint. The Orcillas, proceeding in propria persona, appeal from a judgment entered in favor of defendants. We reverse and remand with instructions.
[…]
The California Department of Corporations revoked Quick Loan’s lending license on May 27, 2008, having found Quick Loan had pledged trust funds to obtain gambling markers from Las Vegas casinos and was charging borrowers unauthorized fees. The Orcillas allege Quick Loan never sold or assigned the Note or its interest in the Deed of Trust.
II. PROCEDURAL BACKGROUND
The Orcillas filed suit against Big Sur and the Bank Defendants on May 24, 2012. Defendants successfully demurred to the Orcillas’ initial complaint and first amended complaint, but the Orcillas were granted leave to amend those pleadings. The operative second amended complaint, filed on April 2, 2013, asserts 13 causes of action: wrongful foreclosure; violation of Civil Code section 2924;4 violation of section 2924b; violation of section 2924c; violation of section 2924f; violation of section 2932.5; breach of contract; fraud; breach of oral contract; promissory estoppel; quiet title; unlawful business practices in violation the unfair business competition law (UCL) of Business and Professions Code section 17200 et seq.; and declaratory relief.
Each cause of action is largely based on the following allegations: the original loan and the loan modification were unconscionable and unenforceable; no valid notice of default was issued prior to the trustee’s sale because the loan modification cured the second Notice of Default; the trustee’s sale was fraudulent because the Notice of Trustee’s Sale set forth an incorrect date of sale; the Bank Defendants lacked the authority to foreclose on the Property because the Deed of Trust never was assigned to them; the Bank Defendants lacked the authority to foreclose on the Property because the Deed of Trust was invalid, having been bifurcated from the Note; and the Bank Defendants improperly proceeded with the trustee’s sale after promising to postpone it. Big Sur and the Bank Defendants successfully demurred. The trial court sustained defendants’ demurrers without leave to amend as to all causes of action except the promissory estoppel claim against the Bank Defendants, for which leave to amend was granted.
After the Orcillas failed to file a third amended complaint within the leave period, the Bank Defendants moved to dismiss the action. The court granted that motion and entered judgment in favor of defendants. The Orcillas timely appealed.
HSBC BANK USA, N.A., AS TRUSTEE ON BEHALF OF ACE
SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2007-HE4,
ASSET BACKED PASS-THROUGH CERTIFICATES,
Appellee.
No. 4D14-216
[February 10, 2016]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Kathleen Ireland, Senior Judge; L.T. Case No.
CACE09017404.
Patrick Giunta of Patrick Giunta, P.A., Fort Lauderdale, for appellants.
Jeremy W. Harris, Khari E. Taustin, Masimba M. Mutamba, and Angela
Barbarosa Wilborn of Morris, Laing, Evans, Brock & Kennedy, Chtd., West
Palm Beach, for appellee.
FORST, J.
This is a foreclosure case in which the Appellants, Darlene and S.
Joseph Angelini, argue that the Appellee (“the Bank”) failed to prove
standing. Because we agree, the trial court’s decision must be reversed.
The Bank originally brought a lost note count along with its foreclosure
count. The copy of the note attached to the complaint showed a different
bank as the lender and bore no indorsements. The original note eventually
introduced at trial (apparently after being found) had a blank indorsement.
The Bank’s witness was unable to testify when the indorsement was placed
on the note. However, when asked to “testify who owned the note on the
date the complaint was filed,” he answered, “HSBC did.”
“A crucial element in any mortgage foreclosure proceeding is that the
party seeking foreclosure must demonstrate that it has standing to
foreclose” when the complaint is filed. McLean v. JP Morgan Chase Bank
Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). “[S]tanding may be
established from the plaintiff’s status as the note holder . . . .” Id.
Although testimony can be sufficient to establish that a bank has standing
to foreclose, the Bank here failed to introduce evidence that it held
(through the possession of the blank-indorsed paper) the note, as opposed
to merely owned the note, when the foreclosure complaint was filed.
Because the Bank proceeded as the holder rather than as a non-holder in
possession, this error proves fatal to its case.
As Judge Conner stated in his concurring opinion in Rodriguez v. Wells
Fargo Bank, N.A., 18 So. 3d 62 (Fla. 4th DCA 2015), “ownership . . . of the
note is not the issue, with regards to standing, unless the note is not in
bearer form or is payable to someone or some entity other than the plaintiff
filing suit.”1 Id. at 67 (Conner, J., concurring) (emphasis omitted). We
adopt Judge Conner’s reasoning on this issue as our holding here. Put
simply, a holder is not the same as an owner, and testimony as to identity
of the latter is irrelevant to a determination of the former.
1 The Bank’s insistence that the note was blank-indorsed before the complaint
was filed prevents us from applying the final clause of this sentence to this case.
Because the Bank attempted to proceed as the holder of the note rather
than as a non-holder in possession (a theory where the testimony
regarding ownership may have been helpful to it), it was required to
introduce evidence that it actually held the note at the time of filing.
McLean, 79 So. 3d at 173. Instead, it simply introduced evidence that it
was the owner. It would be perfectly consistent for the Bank to have been
the owner of the note (the entity with an equitable interest) without being
the holder (the entity in possession of a blank-indorsed note). Indeed, the
Florida Statutes contemplate such a possibility. See § 673.3011, Fla. Stat.
(2015); Rodriguez, 178 So. 3d at 67 (Conner, J., concurring). However,
“ownership, assignment, or transfer of the note is important to the analysis
of standing only when the plaintiff is a nonholder in possession of the note
with the rights of a holder.” Id. (emphasis added).
The Bank’s testimony did not establish the relevant fact: that it held
the note at the time the complaint was filed. Although the Bank clearly
was the holder at the time it introduced the blank-indorsed note at trial,
“[a] plaintiff’s lack of standing at the inception of the case is not a defect
that may be cured by the acquisition of standing after the case is filed and
cannot be established retroactively by acquiring standing to file a lawsuit
after the fact.” LaFrance v. U.S. Bank Nat’l Ass’n, 141 So. 3d 754, 756
(Fla. 4th DCA 2014) (internal quotation marks omitted).
For that reason, we reverse the decision below and remand for the entry
of involuntary dismissal.
Reversed.
WARNER and TAYLOR, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
Morgan Stanley Agrees to Pay $2.6 Billion Penalty in Connection with Its Sale of Residential Mortgage Backed Securities
The Justice Department today announced that Morgan Stanley will pay a $2.6 billion penalty to resolve claims related to Morgan Stanley’s marketing, sale and issuance of residential mortgage-backed securities (RMBS). This settlement constitutes the largest component of the set of resolutions with Morgan Stanley entered by members of the RMBS Working Group, which have totaled approximately $5 billion. As part of the agreement, Morgan Stanley acknowledged in writing that it failed to disclose critical information to prospective investors about the quality of the mortgage loans underlying its RMBS and about its due diligence practices. Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued by Morgan Stanley in 2006 and 2007.
“Today’s settlement holds Morgan Stanley appropriately accountable for misleading investors about the subprime mortgage loans underlying the securities it sold,” said Acting Associate Attorney General Stuart F. Delery. “The Department of Justice will not tolerate those who seek financial gain through deceptive or unfair means, and we will take appropriately aggressive action against financial institutions that knowingly engage in improper investment practices.”
“Those who contributed to the financial crisis of 2008 cannot evade responsibility for their misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This resolution demonstrates once again that the Financial Institutions Reform, Recovery and Enforcement Act is a powerful weapon for combatting financial fraud and that the department will not hesitate to use it to hold accountable those who violate the law.”
An RMBS is a type of security comprised of a pool of mortgage loans created by banks and other financial institutions. The expected performance and price of an RMBS is determined by a number of factors, including the characteristics of the borrowers and the value of the properties underlying the RMBS. Morgan Stanley was one of the institutions that issued RMBS during the period leading up to the economic crisis in 2007 and 2008.
As acknowledged by Morgan Stanley in a detailed statement of facts that is a part of this agreement (and is quoted below), the company made representations to prospective investors about the characteristics of the subprime mortgage loans underlying its RMBS – representations with which it did not comply:
In particular, Morgan Stanley told investors that it did not securitize underwater loans (loans that exceeded the value of the property). However, Morgan Stanley did not disclose to investors that in April 2006 it had expanded its “risk tolerance” in evaluating loans in order to purchase and securitize “everything possible.” As Morgan Stanley’s manager of valuation due diligence told an employee in 2006, “please do not mention the ‘slightly higher risk tolerance’ in these communications. We are running under the radar and do not want to document these types of things.” As a result, Morgan Stanley ignored information – including broker’s price opinions (BPOs), which are estimates of a property’s value from an independent real estate broker – indicating that thousands of securitized loans were underwater, with combined-loan-to-value ratios over 100 percent. From January 2006 through mid-2007, Morgan Stanley acknowledged that “Morgan Stanley securitized nearly 9,000 loans with BPO values resulting in [combined loan to value] ratios over 100 percent.”
Morgan Stanley also told investors that it did not securitize loans that failed to meet originators’ guidelines unless those loans had compensating factors. Morgan Stanley’s offering documents “represented that ‘[the mortgage loans originated or acquired by [the originator] were done so in accordance with the underwriting guidelines established by [the originator]’ but that ‘on a case-by-case-basis, exceptions to the [underwriting guidelines] are made where compensating factors exist.’” Morgan Stanley has now acknowledged, however, that “Morgan Stanley did not disclose to securitization investors that employees of Morgan Stanley received information that, in certain instances, loans that did not comply with underwriting guidelines and lacked adequate compensating factors . . . were included in the RMBS sold and marketed to investors.” So, in fact, “Morgan Stanley . . . securitized certain loans that neither comported with the originators’ underwriting guidelines nor had adequate compensating factors.”
Likewise, “Morgan Stanley also prepared presentation materials . . . that it used in discussions with potential investors that described the due diligence process for reviewing pools of loans prior to securitization,” but “certain of Morgan Stanley’s actual due diligence practices did not conform to the description of the process set forth” in those materials.
For example, Morgan Stanley obtained BPOs for a percentage of loans in a pool. Morgan Stanley stated in these presentation materials that it excluded any loan with a BPO value exhibiting an “unacceptable negative variance from the original appraisal,” when in fact “Morgan Stanley never rejected a loan based solely on the BPO results.”
Through these undisclosed practices, Morgan Stanley increased the percentage of mortgage loans it purchased for its RMBS, notwithstanding its awareness about “deteriorating appraisal quality” and “sloppy underwriting” by the sellers of these loans. The bank has now acknowledged that “Morgan Stanley was aware of problematic lending practices of the subprime originators from which it purchased mortgage loans.” However, it “did not increase its credit-and-compliance due diligence samples, in part, because it did not want to harm its relationship with its largest subprime originators.” Indeed, Morgan Stanley’s manager of credit-and-compliance due diligence was admonished to “stop fighting and begin recognizing the point that we need monthly volume from our biggest trading partners and that . . . the client [an originator] does not have to sell to Morgan Stanley.”
“In today’s agreement, Morgan Stanley acknowledges it sold billions of dollars in subprime RMBS certificates in 2006 and 2007 while making false promises about the mortgage loans backing those certificates,” said Acting U.S. Attorney Brian J. Stretch of the Northern District of California. “Morgan Stanley touted the quality of the lenders with which it did business and the due diligence process it used to screen out bad loans. All the while, Morgan Stanley knew that in reality, many of the loans backing its securities were toxic. Abuses in the mortgage-backed securities industry such as these helped bring about the most devastating financial crisis in our lifetime. Our office is committed to dedicating the resources necessary to hold those who engage in such reckless actions responsible for their conduct.”
The $2.6 billion civil monetary penalty resolves claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). FIRREA authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The settlement expressly preserves the government’s ability to bring criminal charges against Morgan Stanley, and likewise does not release any individuals from potential criminal or civil liability. In addition, as part of the settlement, Morgan Stanley promised to cooperate fully with any ongoing investigations related to the conduct covered by the agreement.
In conjunction with today’s announcement of the federal government’s settlement with Morgan Stanley, the states of New York and Illinois – also members of the RMBS Working Group – have announced settlements with Morgan Stanley for $550 million and $22.5 million, respectively, arising from its sale of RMBS. Among other resolutions, Morgan Stanley previously paid $225 million to resolve claims brought by the National Credit Union Administration arising from losses related to corporate credit unions’ purchases of RMBS; $1.25 billion to resolve claims by Federal Housing Finance Agency (FHFA) for Morgan Stanley’s alleged violations of federal and state securities laws and common law fraud in connection with RMBS purchased by Fannie Mae and Freddie Mac; and $86.95 million to resolve federal and state securities laws claims brought by the Federal Deposit Insurance Corporation as receiver on behalf of failed financial institutions. Morgan Stanley also previously entered into a consent decree with the U.S. Securities and Exchange Commission (SEC) to pay $275 million to resolve certain RMBS claims. With today’s announcement, Morgan Stanley will have paid nearly $5 billion to members of the RMBS Working Group in connection with its sale of RMBS.
Today’s settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered billions of dollars arising from misconduct related to the financial crisis. The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis. The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the SEC, the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA Office of Inspector General (OIG), the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country. The RMBS Working Group is led by Director Joshua Wilkenfeld and five co-chairs: Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, U.S. Attorney John Walsh of the District of Colorado and New York Attorney General Eric Schneiderman.
“The securitization of defective mortgages and the billions of dollars that were lost as a result caused such a hardship to our economy, the housing industry and our nation as a whole that we are still feeling the effects years after,” said Deputy Inspector General for Investigations Rene Febles of FHFA-OIG. “Morgan Stanley is responsible for their role, which caused enormous losses to investors. This settlement is one step in recovering from those losses. We are proud to work with the RMBS Working Group and the U.S. Department of Justice on this and all RMBS matters.”
The settlement was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the Northern District of California, with investigative support from FHFA-OIG.
Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov
The audacity of the Connecticut State Legislature … creating legislation that structured a two-tiered fee system against MERSCORP Holdings, Inc. and its “baby bastard” MERS!
The Connecticut Supreme Court has just affirmed an appellate court’s ruling that MERSCORP and its illegitimate child are still required to pay higher recording fees because they call MERS a “nominee” for the lender! Things just can’t seem to get any better since MERS and its parent (who seems to let the child bully anyone it wants to with its legal war chest) got their asses handed to them last December in Tennessee in the Ditto case. Read the Connecticut Supreme Court’s Decision here: MERSCORP Holdings Inc. v Malloy et al_2016-sc19376. It’s in pdf format, so you’ll need Adobe Acrobat Reader to view it.
It is a bit disconcerting that the State of Connecticut’s legislature amended the statute to include a “nominee operating a national electronic database to track residential mortgage loans”, thus giving MERSCORP Holdings, Inc., owner of the MERS® System, private latitude for its users to record documents in the public land records on its behalf.
OCC Terminates Mortgage Servicing-Related Consent Orders Against U.S. Bank and Santander, Issues Civil Money Penalties
WASHINGTON—The Office of the Comptroller of the Currency (OCC) today terminated mortgage servicing-related consent orders against U.S. Bank National Association (U.S. Bank) and Santander Bank, N.A. (Santander), and assessed civil money penalties against the banks for previous violations of the orders.
The OCC terminated the consent orders against these banks after determining that the institutions now comply with the orders. The OCC, and the former Office of Thrift Supervision in the case of Santander, originally issued orders against the banks in April 2011. The OCC amended them in February 2013 and June 2015. The termination of the orders ends business restrictions affecting U.S. Bank and Santander that the OCC mandated in June 2015.
The OCC assessed a $10 million civil money penalty against U.S. Bank and a $3.4 million civil money penalty against Santander.
The OCC found that U.S. Bank and Santander failed to correct deficiencies identified in the 2011 consent orders in a timely fashion. As a result, the OCC determined that U.S. Bank violated the 2011 consent order from October 1, 2014 through August 30, 2015, and that Santander violated the 2011 consent order from October 1, 2014 through December 31, 2015.
U.S. Bank and Santander will pay the assessed penalties to the U.S. Treasury.
Justice Department Reaches $470 Million Joint State-Federal Settlement with HSBC to Address Mortgage Loan Origination, Servicing and Foreclosure Abuses
The Justice Department, the Department of Housing and Urban Development (HUD) and the Consumer Financial Protection Bureau, along with 49 state attorneys general and the District of Columbia’s attorney general, have reached a $470 million agreement with HSBC Bank USA NA and its affiliates (collectively, HSBC) to address mortgage origination, servicing and foreclosure abuses.
“This agreement is the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices,” said Acting Associate Attorney General Stuart F. Delery. “This agreement provides for $370 million in creditable consumer relief to benefit homeowners across the country and requires HSBC to reform their servicing standards. The Department of Justice remains committed to rooting out financial fraud and holding bad actors accountable for their actions.”
“This settlement illustrates the department’s continuing commitment to ensure responsible mortgage servicing,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The agreement is part of our ongoing effort to address root causes of the financial crisis.”
“Even as the mortgage crisis recedes, the U.S. Trustee Program will continue to combat mortgage servicer abuse of the federal bankruptcy laws so that homeowners are given their legal right to try to save their homes,” said Director Cliff White of the Justice Department’s U.S. Trustee Program. “Homeowners in financial distress sometimes depend on chapter 13 bankruptcy to help them catch up on their payments. When banks violate bankruptcy laws at the expense of homeowners and other creditors, they must pay a price. This settlement holds HSBC accountable for its actions and helps to protect the most vulnerable homeowners.”
“Mortgage servicers have a responsibility to help struggling borrowers remain in their home, not to push them into foreclosure,” said General Counsel Helen Kanovsky of HUD. “This agreement is another example of how multiple agencies in the federal government and state attorneys general across the country are working to make sure the mortgage industry treats consumers fairly.”
“This agreement not only provides relief to borrowers affected by HSBC’s past practices, it puts in place protections for current and future homeowners through tough mortgage servicing standards,” said Iowa Attorney General Tom Miller. “For years we’ve worked together to hold mortgage servicers responsible for their past conduct. We’re doing that here through this settlement and we’ll continue to address bad conduct in the future.”
The settlement reflects a continuation of enforcement actions by the department and its federal and state enforcement partners to hold financial institutions accountable for abusive mortgage practices. The settlement parallels the $25 billion National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general and the District of Columbia’s attorney general and the five largest national mortgage servicers, as well as the $968 million settlement reached in June 2014 between those same federal and state partners and SunTrust Mortgage Inc. This settlement with HSBC is the result of negotiations that, as has been reported in HSBC Holdings plc’s Annual Report and Accounts, began following the announcement of the NMS.
Under the agreement announced today, HSBC has agreed to provide more than $470 million in relief to consumers and payments to federal and state parties, and to be bound to mortgage servicing standards and be subject to independent monitoring of its compliance with the agreement. More specifically, the settlement provides that:
HSBC will pay $100 million: $40.5 million to be paid to the settling federal parties; $59.3 million to be paid into an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012; and $200,000 to be paid into an escrow fund to reimburse the state attorneys general for investigation costs.
By July 2016, HSBC will complete $370 million in creditable consumer relief directly to borrowers and homeowners in the form of reducing the principal on mortgages for borrowers who are at risk of default, reducing mortgage interest rates, forgiving forbearance and other forms of relief. The relief to homeowners has been underway and will likely provide more than $370 million in direct benefits to borrowers because HSBC will not be permitted to claim credit for every dollar spent on the required consumer relief.
HSBC will be required to implement standards for the servicing of mortgage loans, the handling of foreclosures and for ensuring the accuracy of information provided in federal bankruptcy court. These standards are designed to prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections. The standards provide for oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court. The servicing standards ensure that foreclosure is a last resort by requiring HSBC to evaluate homeowners for other loss-mitigation options first. In addition, the standards restrict HSBC from foreclosing while the homeowner is being considered for a loan modification.
The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia. Compliance with the agreement will be overseen by an independent monitor, Joseph A. Smith Jr., who is also the monitor for the NMS and SunTrust settlement. Smith has served as the North Carolina Commissioner of Banks and is also the former chairman of the Conference of State Banks Supervisors. Smith will oversee implementation of the servicing standards required by the agreement, will certify that HSBC has satisfied its consumer relief obligations and will file regular public reports that identify any quarter in which HSBC fell short of the standards imposed in the settlement. The parties may seek penalties for non-compliance.
The agreement resolves potential violations of civil law based on HSBC’s deficient mortgage loan origination and servicing activities. The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by HSBC, or from punishing wrongful securitization conduct that is the focus of President Barack Obama’s Financial Fraud Enforcement Task Force Residential Mortgage-Backed Securities Working Group. State attorneys general also preserved, among other things, all claims against Mortgage Electronic Registration Systems. Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.
The Department of Treasury, the Federal Trade Commission, the Department of Agriculture, the Veterans Administration and the Special Inspector General for the Troubled Asset Relief Program also made critical contributions to reaching this settlement.
What about the homeowners who were equally screwed??
NYT-
Wells Fargo has agreed to pay $1.2 billion to put to rest claims that it engaged in reckless lending under a Federal Housing Administration program that left a government insurance fund to clean up the mess.
The bank, which is the nation’s largest mortgage lender, has been in talks with the government since 2012 over accusations that it improperly classified some F.H.A. loans as qualifying for federal insurance when they did not, and that it knew of the misclassification but failed to inform housing regulators about the deficiencies before filing insurance claims.
Wells Fargo, based in San Francisco, had been a holdout among large lenders. Citigroup, Bank of America and JPMorgan Chase all previously settled similar claims.
DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FOURTH DISTRICT
FRANK REILLY,
Appellant,
v.
U.S. BANK NATIONAL ASSOCIATION, as Trustee for JP Morgan Trust 2007-S1,
Appellee.
No. 4D14-867
[February 3, 2016]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; Barry Stone, Senior Judge; L.T. Case No. CACE13011685.
Kenneth Eric Trent, Fort Lauderdale, for appellant.
Elliot B. Kula and W. Aaron Daniel of Kula & Associates, P.A., Miami, for appellee.
PER CURIAM.
Appellant Frank Reilly appeals a final judgment of foreclosure, arguing that the trial court erred by proceeding to trial where the case was not yet at issue.1 We agree and reverse.
Mr. Reilly and Mynabel Roche, who were married at the time, executed a promissory note and a mortgage.2 After they failed to make payments, U.S. Bank brought a foreclosure action. U.S. Bank was able to personally serve Ms. Roche with the complaint. It was unable, however, to personally serve Mr. Reilly, and claimed that he was avoiding service. U.S. Bank therefore sought to proceed with notice by publication.
Notice regarding the foreclosure action was published on December 3 and 10, 2013. Also on December 3, the court set the case for trial after receiving an answer from Ms. Roche (but not Mr. Reilly).
On January 2, 2014, Mr. Reilly moved for an extension of time to respond to the complaint. This was Mr. Reilly’s only filing. The trial court did not rule on his request, but proceeded to trial on January 30, 2014. Neither Mr. Reilly nor Ms. Roche attended. The trial court subsequently entered a final judgment of foreclosure in favor of U.S. Bank.
Florida Rule of Civil Procedure 1.440 provides that a case may be set for trial when it is “at issue.” First, however, “[a]n answer must be served by or a default entered against all defending parties before the action is at issue.” Ocean Bank v. Garcia-Villalta, 141 So. 3d 256, 258 (Fla. 3d DCA 2014) (quoting Bennett v. Cont’l Chems., Inc., 492 So. 2d 724, 727 n.1 (Fla. 1st DCA 1986)). Thus, where a defendant has not yet answered the complaint, and the plaintiff has failed to obtain a default, the action is not yet at issue. U.S. Bank Nat’l Ass’n v. Croteau, 40 Fla. L. Weekly D1237 (Fla. 4th DCA May 27, 2015).
U.S. Bank did not obtain a default against Mr. Reilly. Nor did Mr. Reilly file an answer. Therefore, the action was not at issue, either when the trial court set the trial date or when the trial itself was held. This is reversible error. See Tucker v. Bank of N.Y. Mellon, 175 So. 3d 305, 306 (Fla. 3d DCA 2014). Accordingly, we reverse the final judgment of foreclosure as to Mr. Reilly and remand to the trial court for further proceedings consistent with the foregoing.
This reversal does not affect the final judgment as to Ms. Roche. Additionally, although Mr. Reilly also raises challenges on appeal regarding the sufficiency of the service by publication and the trial court’s personal jurisdiction, we decline to rule on these issues. As Mr. Reilly did not raise them before the trial court, he may still argue them on remand.
Reversed and remanded.
WARNER, STEVENSON and FORST, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
The Federal Deposit Insurance Corporation (FDIC), as receiver for three failed banks, today announced a $62.95 million settlement of residential mortgage-backed securities (RMBS) claims against Morgan Stanley & Company LLC.
The settlement funds will be distributed among the receiverships for the three failed banks – Colonial Bank of Montgomery, Alabama, which failed on August 14, 2009; Security Savings Bank of Henderson, Nevada, which failed on February 27, 2009; and United Western Bank of Denver, Colorado, which failed on January 21, 2011. Along with $24 million from a settlement with Morgan Stanley last year of RMBS claims related to Franklin Bank, S.S.B., of Houston, Texas, which failed on November 7, 2008, this settlement brings total RMBS claim settlements by the FDIC with Morgan Stanley to $86.95 million.
This settlement resolves federal and state securities law claims based on misrepresentations in the offering documents for 14 RMBS purchased by the three failed banks. As receiver for failed financial institutions, the FDIC may sue professionals and entities whose conduct resulted in losses to those institutions in order to maximize recoveries. The FDIC as receiver for the three failed banks filed four lawsuits from February 2012 to January 2014 against Morgan Stanley and other defendants for violations of federal and state securities laws in connection with the sale of RMBS to the three failed banks.
As of December 31, 2015, the FDIC has filed 19 RMBS lawsuits on behalf of eight failed institutions, including the four lawsuits against Morgan Stanley, seeking damages for violations of federal and state securities laws. This settlement, which resolves all of the FDIC’s RMBS claims against Morgan Stanley that were brought in those lawsuits, was reached in coordination with the U.S. Department of Justice.
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation’s banking system. The FDIC insures deposits at the nation’s 6,270 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically (go towww.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC’s Public Information Center (877-275-3342 or 703-562-2200). PR-7-2016
One key point was the use of wires to attorney’s IOLTA/Escrow accounts. That is how most foreclosure law firms get payments.
CBS-
The following is a script from “Anonymous, Inc.” which aired on Jan. 31, 2016. Steve Kroft is the correspondent. Graham Messick and Kevin Livelli, producers.
If you like crime dramas and movies with international intrigue, then you probably have a basic understanding of money laundering. It’s how dictators, drug dealers, corrupt politicians, and other crooks avoid getting caught by transforming their ill-gotten gains into assets that appear to be legitimate.
They do it by moving the dirty money through a maze of dummy corporations and offshore bank accounts that conceal their identity and the source of the funds.
And most of it would never happen without the help — witting or unwitting — of lawyers, accountants and incorporators; the people who actually create these anonymous shell companies and help move the money. In fact, the U.S. has become one of the most popular places in the world to do it.
Tonight, with the help of hidden camera footage, we’re going to show you how easy it seems to have become to conceal questionable funds from law enforcement and the public.
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