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Deutsche Bank v Pinette | VT Superior Court – Amazing when the lender doesn’t know … what the right hand isn’t doing from the left hand

Deutsche Bank v Pinette | VT Superior Court – Amazing when the lender doesn’t know … what the right hand isn’t doing from the left hand

H/T Dave Krieger

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal
revision before publication in the Vermont Reports. Readers are requested to notify the Reporter
of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court,
109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may
be made before this opinion goes to press.

2016 VT 71

No. 2015-214

Deutsche Bank

v.

Kevin Pinette

Robert R. Bent, J.

Jeffrey J. Hardiman and Douglas A. Giron of Schechtman Halperin Savage, LLP, Pawtucket,

Rhode Island, for Lender-Appellant.

Grace B. Pazdan, Vermont Legal Aid, Inc., Montpelier, for Borrower-Appellee.

Thomas A. Cox, Portland, Maine, and Geoff Walsh, National Consumer Law Center, Boston,

Massachusetts, for Amicus Curiae National Consumer Law Center.

PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Eaton, JJ.

¶ 1. DOOLEY, J. Plaintiff Deutsche Bank National Trust Company (lender), as
trustee appeals from the decision of the Caledonia Superior Court granting defendant Kevin
Pinette’s (borrower) motion to dismiss. The superior court dismissed lender’s claims for
mortgage foreclosure, the unpaid balance on a promissory note, and a deficiency judgment on the
ground that they were barred by claim preclusion, as lender had previously instituted an identical
action against borrower in 2013, which had been dismissed for failure to prosecute. On appeal,
lender argues that because the 2013 action did not actually adjudge the enforceability of the note
and mortgage, the dismissal did not have preclusive effect. Further, lender urges us to hold that,
in the mortgage foreclosure context, dismissals with prejudice do not bar subsequent actions
based upon new defaults occurring after dismissal of the prior action. We affirm.

¶ 2. Borrower is the owner of real property located at 23 Railroad Street n/k/a 127
Railroad Street in Groton, Vermont. On March 18, 2005, borrower executed a promissory note
to Option One Mortgage Corporation for $54,400.00, secured by a mortgage on the real property
on Railroad Street. The note and mortgage are now held by lender pursuant to an endorsement in
blank contained in an allonge to the note and an assignment of mortgage from American Home
Mortgage Servicing, Inc. (AHMSI), successor-in-interest to Option One. In July 2010, following
a payment default by borrower, borrower and AHMSI entered into a loan modification
agreement under which the principal loan amount was increased to $77,270.65. When borrower
continued to default on his payments, lender filed a complaint for judgment on the promissory
note, mortgage foreclosure, and a deficiency judgment in October 2011.

¶ 3. We examine the complaint in some detail because, as we explain below, lender
filed virtually the exact same complaint1 three times and the nature of the complaint is central to
the resolution of the main issue in this appeal. The complaint has three counts: (1) Count I for
mortgage foreclosure; Count II for judgment on the promissory note of $54,400.00; and (3) a
deficiency judgment if the amounts owing to lender “exceed the value of the mortgaged
premises.” Lender also listed a number of elements of the relief it sought, including foreclosure
of the mortgaged property by sale or strict foreclosure and a “finding by the court of no
substantial value in excess of the mortgage debt,” and a deficiency judgment after “disposition of
the mortgaged premises and application of the proceeds from that disposition to the debt of the
borrower.” With respect to the note balance, lender sought a court order that “borrowers pay to

1 The first complaint did not allege the modification or the new amount of the principal,
even though it occurred before the complaint was filed. The latter two did allege the
modification and increased amount of principal to $77,270.65. However, each of the three
contained the identical count on the note that stated that the principal amount was $54,400 and
borrower defaulted on his obligations under the note.

the clerk of the court for the benefit of lender all amounts due and to become due on the note and
mortgage, with interest thereon, together with sums expended, reasonable attorney’s fees and
costs.”

¶ 4. Borrower did not enter an appearance or file an answer. Following borrower’s
default, lender filed two motions seeking extensions of time to obtain a judgment because the
parties were involved in settlement discussions. These were granted, but after the second
extension expired, the superior court dismissed the action without prejudice on November 26,
2012.

¶ 5. In March 2013, lender filed a second action in the Caledonia Superior Court
against borrower, utilizing an identical complaint with the addition of an allegation of the
modification and increased principal amount. Borrower once again did not answer or appear. In
January 2014, some eight months after borrower defaulted, the superior court notified lender that
borrower had not entered an appearance and directed lender to file a motion for default judgment
within two weeks. Lender failed to do so, and on March 31, 2014, the court dismissed the action
without a specific statement indicating whether dismissal was with or without prejudice.

¶ 6. Apparently, borrower made no further payments on the note. In September 2014,
lender filed the instant action, again using a complaint identical to the 2013 complaint. The
complaint was served on September 29, 2014. This time, borrower filed a pro se appearance and
answer on October 31, 2014; a lawyer employed by Vermont Legal Aid filed a limited
appearance for borrower on the same date and moved to dismiss on the basis of claim preclusion.
Based on that motion, the superior court dismissed the action, but reopened when lender
eventually responded in February, 2015. After briefing, the court again granted the motion to
dismiss, ruling that this third action was barred by the dismissal of the second action with
prejudice.

¶ 7. In its decision, the superior court concluded that under V.R.C.P. 41(b), an
involuntary dismissal that does not specify whether it is with or without prejudice is assumed to
be with prejudice. The court saw no reason to depart from this established principle of Vermont
law in the case at bar; lender “willfully fail[ed] to heed the court’s warning after having a prior
case dismissed,” despite being a “sophisticated user of the court system” with approximately
seventy-five foreclosure cases currently pending in the state. The court noted that it was within
lender’s power to seek an enlargement of time in the dismissed case, file a Rule 60 motion
concerning the dismissal, or appeal the previous dismissal. The court recognized that the result
of lender’s failure to perform any of the above actions was a “windfall” for borrower, but
stressed that such an outcome was fair in light of lender’s multiple squandered opportunities “to
avail itself of the benefits of Vermont’s judicial process” and the necessity of the finality of
judgments to sound judicial administration. This appeal followed.

¶ 8. On appeal, lender asks us to consider the following issues: 1) whether the superior
court abused its discretion in considering an untimely motion to dismiss over lender’s objection;
2) whether a dismissal for failure to apply for default judgment operates as adjudication “on the
merits” which precludes a subsequent action based upon a new default; 3) whether the superior
court misapplied our holding in U.S. Bank National Association v. Kimball, 2011 VT 81, 190
Vt. 210, 27 A.3d 1087; 4) whether, in the context of a foreclosure, a dismissal under V.R.C.P.
41(b)(3) constitutes a permanent bar to foreclose based upon a future default; and 5) whether, to
the extent that the prior dismissal was a sanction, the superior court abused its discretion or
committed an error of law in precluding lender from enforcing the note and/or mortgage. We
hold that in this case, where a mortgagee who has exercised the option to accelerate the amount
due on a promissory note has an action dismissed under V.R.C.P. 41(b)(3), and lender does not
allege a new default after the dismissal, that dismissal functions as an adjudication on the merits
which precludes further litigation on the underlying note. Because borrower does not owe on the
underlying note, the mortgage security cannot be foreclosed.

¶ 9. We review motions to dismiss de novo. Prive v. Vermont Asbestos Group, 2010
VT 2, ¶ 14, 187 Vt. 280, 992 A.2d 1035 (citation omitted). In rendering our decision, “we must
assume as true all factual allegations pleaded by the nonmoving party.” Id. ¶ 2 (quotation
omitted).

¶ 10. We begin by addressing lender’s claim that the case should be reinstated because
borrower’s answer and motion to dismiss were untimely. There are two grounds to reject
lender’s claim.

¶ 11. Under V.R.C.P. 12(a)(1)(A), borrower’s answer was due 20 days after borrower
was served. In fact, it was filed over 30 days after service.2 It included the defense of res
judicata based on the dismissal of the second action. Under V.R.C.P. 12(b), borrower’s motion
to dismiss was due at the same time as his answer. Such a motion was generally required to be
made “before pleading” or with a “responsive pleading.” Id. at 12(b).3 The untimeliness of both
is the basis for lender’s appeal issue.

¶ 12. Irrespective of the timeliness of the answer and motion to dismiss, lender was
required to answer a motion to dismiss within fifteen days or risk that the trial court would
decide the motion without argument at any time thereafter. V.R.C.P. 78(b). Lender did not
timely respond to the motion to dismiss, which the trial court granted on December 2nd. By that
time, lender had waived any opportunity to contest the timeliness of the answer and motion to

2 The record indicates borrower was an incarcerated prisoner in a Connecticut prison.

3 The motion was essentially one for failure to state a claim on which relief could be
granted. See V.R.C.P. 12(b)(6). Although borrower’s counsel attached matters outside the
pleadings, these were court orders of which the court could take judicial notice. See In re Russo,
2013 VT 35, ¶ 16 n.4, 193 Vt. 594, 72 A.3d 900. These did not convert the motion into one for
summary judgment. See V.R.C.P. 12(b).

dismiss. This is the first ground to reject lender’s claim that the motion to dismiss had to be
denied as untimely.

¶ 13. On December 9, lender filed a motion to vacate the dismissal, but failed to assert
at that time that the answer or motion to dismiss was untimely. On February 4, 2015, the court
vacated the dismissal and gave lender an opportunity to address the substance of the motion. On
February 24, lender claimed for the first time that the answer and motion to dismiss were
untimely and should be rejected on that basis. Borrower responded by explaining that the reason
for the delay in filing the answer was due to his inability to communicate with his lawyer in a
timely fashion because he was incarcerated in a Connecticut state prison. Borrower’s lawyer
filed an affidavit confirming the reason for the late filing of the answer and motion, and
requested an enlargement of time to file the answer. The court ruled that it would consider the
motion to dismiss although it was untimely. We consider this ruling to be a grant of borrower’s
motion to extend the time for an answer.

¶ 14. Under V.R.C.P. 6(b)(2), the superior court may grant a motion to enlarge the time
to answer, even after the expiration of the time limit for answer, on a finding of excusable
neglect. V.R.C.P. 6(b)(2). Here, the court acted within its discretion in finding excusable
neglect because the cause of the delay was circumstances beyond the immediate control of
borrower, rather than neglect by the borrower or his lawyer; the delay was relatively short; and
there was no prejudice to lender. See Ji v. Heide, 2013 VT 81, ¶ 14, 194 Vt. 546, 82 A.3d 1160.
Even if the motion for extension could not be granted, the next step would be the entry of a
default judgment pursuant to V.R.C.P. 55(a). At that point, borrower could move to set aside the
default for “good cause shown.” Id. 55(c). Given the absence of any demonstrated prejudice to
lender from the delay, and our liberal standard favoring adjudication on the merits and not by
default, see Dougherty v. Surgen, 147 Vt. 365, 366, 518 A.2d 364, 365 (1986), the court would
act well within its discretion in setting aside the default judgment. This is the second reason for
rejecting lender’s argument that the motion to dismiss should have been rejected as untimely.

¶ 15. We add an additional point from the history of the proceeding. Lender responded
to the motion to dismiss solely with a legal argument. It did not argue that the motion could not
be decided because the record was inadequate or provide relevant evidence to turn the motion to
dismiss into one for summary judgment pursuant to V.R.C.P. 12(b). Lender did file the April
2014 notice of default in this Court as part of its printed case, although it did not file the notice in
the superior court. Unsurprisingly, borrower moved to strike the default letter as outside the
record below. We agree that because the letter was not presented below, it is not properly before
us and should be struck from the record on appeal. Consequently, without any evidence of a
fourth default, we decline to address lender’s argument that a new foreclosure action could be
based on a new default.

¶ 16. Lender’s second argument is that because the trial court did not actually
adjudicate the foreclosure claim in its dismissal of the 2013 action, claim preclusion cannot be
applied to bar the instant case. Lender argues that under Pennconn Enterprises v. Huntington,
148 Vt. 603, 609-610, 538 A.2d 673, 678 (1987), a Rule 41(b)(3) dismissal operates to resolve
“only the merits of what was actually adjudged.” To that end, lender contends that because the
superior court did not adjudge the enforceability of the note and mortgage in the 2013 action, but
dismissed based entirely on lender’s failure to file a motion for default judgment, the court below
in this case committed an error of law in holding that lender’s foreclosure action was barred. We
disagree and affirm on this issue.

¶ 17. Under Rule 41(b)(1)(ii), a court may, by its own motion, dismiss any action where
“all parties against whom a judgment for affirmative relief is sought have failed to plead or
otherwise defend as provided by these rules and the lender has failed to request or apply for a
default judgment within six months of the filing of the action.” Rule 41(b)(3) states that
“[u]nless the court in its order for dismissal otherwise specifies, a dismissal under this
subdivision (b) and any dismissal not provided for in this rule, other than a dismissal for lack of
jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an
adjudication on the merits.” (emphasis added). When interpreting a statute or rule, our
overriding goal is to effectuate the drafter’s intent; “[i]n reaching this goal, we first look at the
[rule’s] plain language.” Dep’t of Taxes v. Murphy, 2005 VT 84, ¶ 5, 178 Vt. 269, 883 A.2d
779. If the language can resolve a dispute without betraying a larger legislative scheme, “we are
bound to follow it,” id. (quotation omitted), and indeed, there is “no need to go further.” Nichols
v. Hofmann, 2010 VT 36, ¶ 7, 188 Vt. 1, 988 A.2d 1040 (quotation omitted).

¶ 18. The plain language of Rule 41(b) is therefore exceedingly clear—by its express
terms, unless a trial court specifically says otherwise in its order, a dismissal predicated on a
lender’s failure to seek a default judgment operates as an adjudication on the merits. There is
nothing in the broader context of Rule 41 to indicate the drafters intended otherwise. Although
lender views this result as imposing a sanction that is unnecessarily harsh for the nature of
lender’s default, we note our rule is consistent with that in the federal courts, as well as many
states. Rule 41(b)(3) is essentially identical to F.R.C.P. 41(b). See Cintron-Lorenzo v.
Departmento de Asuntos del Consumidor, 312 F.3d 522, 525-26 (1st Cir. 2002); Davis v.
Operation Amigo, Inc., 378 F.2d 101, 103 (10th Cir. 1967) (noting that there is “no dispute” that
case may be dismissed “with prejudice” for want of prosecution). State courts have adopted the
same policy. Samber v. Chris Berg, Inc., 394 P.2d 81, 81 (Alaska 1964) (holding dismissal for
failure to prosecute “operates as an adjudication upon the merits, unless specified otherwise in
the order of dismissal”); Battle v. Jackson, 476 A.2d 1143, 1145 (D.C. 1984) (concluding a
dismissal for failure to prosecute is “committed to the sound discretion of the trial court” and
functions as “an adjudication on the merits”); Taylor v. General Motors Corp., 717 So. 2d 747,
748 (Miss. 1998) (stating involuntary dismissal under Rule 41(b) “ordinarily operates as an
adjudication upon the merits and is with prejudice”) (citation omitted); Eischen v. Wayne Twp.,
2008 S.D. 2, ¶ 12, 744 N.W.2d 788 (finding dismissal for failure to prosecute “operates as
dismissal with prejudice as an adjudication on the merits unless the circuit court expressly states
otherwise”); Wagner v. McDonald, 516 P.2d 1051, 1053-54 (Wash. App. 1973) (noting that it is
logical that a dismissal for failure to prosecute “should, unless the court otherwise specifies, bar
a subsequent action”); Caruso v. Pearce, 678 S.E.2d 50, 54 (W.Va. 2009) (“It is well settled that
a dismissal by a circuit court under Rule 41(b) for failure to prosecute operates as an adjudication
on the merits and, unless reinstated by subsequent court order, such a dismissal is with
prejudice” (quotation omitted)).

¶ 19. Lender’s reliance on the narrow holding of Pennconn Enterprises is unavailing.
In Pennconn Enterprises, the lender was unable to proceed on a breach of contract claim under
11 V.S.A. § 2101(a) because he did not have a certificate of authority to transact business in
Vermont at the time of contract formation. He argued that because the underlying contract
remained valid, the suit should not have been dismissed with prejudice. Pennconn Enters, 148
Vt. at 609, 538 A.2d at 677. We agreed that adjudication should be seen as having resolved only
the merits of what was actually adjudged: the availability of a remedy “within this state”. Id.
We went on to specify that the lender’s judgment would not be on the merits for the purposes of
res judicata “in a case such as this”— that is, where the lender retained the option to bring an
action in another state or federal court that could find jurisdiction over the borrower. Id. at 609,
538 A.2d at 678 (emphasis added). The instant suit is not a case like Pennconn Enterprises; here,
the lender’s claim cannot be reinstated because of its own negligence, rather than because of any
state- or claim-specific statute. Id. If Pennconn Enterprises has any application here, it is to
permit lender to seek redress in the courts of another state or the federal system, not to revive a
lost remedy in Vermont. Such an application is of no use in the instant appeal.

¶ 20. Lender’s third argument relies on our decision in U.S. Bank National Ass’n v.
Kimball, 2011 VT 81, 190 Vt. 210, 27 A.3d 1087 for the proposition that anything other than an
adjudication on the underlying indebtedness “cannot cancel [a homeowner’s] obligation arising
from an authenticated note, or insulate her from foreclosure proceedings based on proven
delinquency.” Id. at ¶ 23. While this is a quote from Kimball, it is not applicable here. The
controversy in Kimball arose over whether the bank seeking to collect on the mortgage had
standing for jurisdictional purposes. The court’s dismissal on jurisdictional grounds is not an
adjudication upon the merits. Kimball, 2011 VT 81, ¶ 22; see also V.R.C.P. 41(b)(3) (an
involuntary dismissal, other than one for lack of jurisdiction, operates as an adjudication upon
the merits). The dismissal here was not based on lack of jurisdiction.

¶ 21. Lender’s next argument is that a Rule 41(b)(3) dismissal does not preclude a
subsequent foreclosure action based upon a new default. This argument goes to the merits of this
case and addresses what claim preclusion means in a note collection and mortgage foreclosure
case.

¶ 22. The main difficulty with this argument is that it is raised for the first time on
appeal to this Court. In response to borrower’s motion to dismiss in the superior court, lender
filed a memorandum based primarily on the arguments we have disposed of above. At the very
end of the memorandum, lender added “[a]t the very least, if the court does not allow lender’s
current complaint as it contains the same date of default as the last complaint, the lender should
surely be able to pursue a new foreclosure action for later defaults.” Thereafter, in the
conclusion to the memo, the lender added “should the court grant the borrower’s motion to
dismiss, lender asks that the court issue specific findings of facts that the lender is not barred
from pursuing a subsequent foreclosure action for a later default.” In summary, lender argued
not that there was a new default but instead that there could be a default later than that for which
the 2014 complaint was filed, and that in such a case lender should be allowed to file a new
(fourth) foreclosure complaint. Not surprisingly, because this was a request for an advisory
opinion about future conduct, the superior court did not address it.

¶ 23. Lender has not appealed the failure of the superior court to authorize the filing of
a fourth mortgage foreclosure complaint. Instead, lender has significantly changed its objection
to the dismissal, and done so based on a document not properly before the trial court. Alleging
that it sent a new notice of default on April 5, 2014 setting forth the amount due on that day
“which included payment defaults that occurred after . . . [the] dismissal [of the 2013
complaint],” lender attached this notice to its printed case. This triggered a motion by borrower
to strike the part of the printed case containing the notice because it was not in the record below.
See V.R.A.P. 10(a); State v. Brown, 165 Vt. 79, 82, 676 A.2d 350, 352 (1996) (stating that
documents which were not part of the file in the trial court cannot be considered part of the
record on appeal). We conclude that lender failed to present its theory of a new default, and the
supporting document, in the trial court and therefore has not preserved it for appellate review.
See Ainsworth v. Chandler, 2014 VT 107, ¶ 16, 197 Vt. 541, 107 A.3d 905. We grant the motion
to strike. We cannot, therefore, rely on the new default theory.

¶ 24. Finally, we address lender’s contention that the superior court abused its
discretion or committed an error of law in precluding lender from enforcing the note by holding
that the dismissal of the second action was with prejudice. In its brief to this Court, lender notes
that our case law favors disposition of cases on their merits and that the sanction of dismissal
should be exercised sparingly, reserved for circumstances where, unlike in the present case,
lender has engaged in “opprobrious or offensive conduct.” Lender argues that “to the extent that
the superior court dismissed the instant case on equitable grounds, the court “plainly” abused its
discretion. Lender also warns that barring subsequent foreclosure actions in cases like those at
bar would result in a “significant and unjustified windfall for mortgagors.”

¶ 25. We reiterate our holding above that lender was not subjected to a special penalty
or sanction; the decision that dismissal was with prejudice is explicitly part of Rule 41, and
lender was on notice of it. Even if equitable considerations played some part in the superior
court’s decision, the principles of claim preclusion compelled a grant of borrower’s motion to
dismiss. Lender’s argument that the “sole reason” for the dismissal of the 2013 action was the
“relatively benign” failure to file a motion for default judgment is unavailing. As the Maine
Supreme Court noted, the consequence of a procedural default is usually a windfall to the other
side. Johnson v. Samson Const. Corp., 1997 ME 220, 704 A.2d 866, 869 n.1 (Me. 1997). While
borrower in this instance is enriched, and has kept a benefit he would otherwise be bound to
relinquish, we cannot override settled procedural rules, essential to the swift and efficient
administration of justice, in order to force a contrary result. See In re Verizon Wireless Barton
Permit, 2010 VT 62, ¶ 21, 188 Vt. 262, 6 A.3d 713 (“[P]rocedural rules are devices to ensure
fairness, uniformity and regularity of treatment to all litigants appearing before the courts, and to
be meaningful, they must be enforced” (citation omitted)); Bloomer v. Gibson, 2006 VT 104,
¶ 14, 180 Vt. 397, 912 A.2d 424 (“The court does not abuse its discretion where it enforces the
rules of civil procedure equitably, even against a pro se litigant.” (emphasis added)).

¶ 26. As the trial court determined, at the time of the order on appeal, lender had
seventy five pending cases in the Vermont courts; as a repeat player, it must be familiar with our
procedural rules and its obligations under them. Yet, it has acted in this case and the earlier ones
as if it is oblivious to those rules. Lender had numerous opportunities to avoid the “windfall”
created by the dismissal with prejudice, either by moving for default judgment, appealing the
dismissal or moving to reopen the dismissal. It would have been in a stronger position if the
third complaint, the one in this case, reflected the earlier dismissal and the requested
consequences of that dismissal; instead its filing of the virtually identical complaint in each
action transmits a message that it expected no consequences from its default. The trial court
acted well within the law, and we must uphold its decision.

Affirmed.

FOR THE COURT:

Associate Justice

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BofA’s Merrill Lynch to Pay $415 Million for Misusing Customer Cash and Putting Customer Securities at Risk

BofA’s Merrill Lynch to Pay $415 Million for Misusing Customer Cash and Putting Customer Securities at Risk

FOR IMMEDIATE RELEASE
2016-128

Washington D.C., June 23, 2016 —The Securities and Exchange Commission today announced that Merrill Lynch has agreed to pay $415 million and admit wrongdoing to settle charges that it misused customer cash to generate profits for the firm and failed to safeguard customer securities from the claims of its creditors.

An SEC investigation found that Merrill Lynch violated the SEC’s Customer Protection Rule by misusing customer cash that rightfully should have been deposited in a reserve account.  Merrill Lynch engaged in complex options trades that lacked economic substance and artificially reduced the required deposit of customer cash in the reserve account.  The maneuver freed up billions of dollars per week from 2009 to 2012 that Merrill Lynch used to finance its own trading activities.  Had Merrill Lynch failed in the midst of these trades, the firm’s customers would have been exposed to a massive shortfall in the reserve account.

According to the SEC’s order instituting a settled administrative proceeding, Merrill Lynch further violated the Customer Protection Rule by failing to adhere to requirements that fully-paid for customer securities be held in lien-free accounts and shielded from claims by third parties should a firm collapse.  From 2009 to 2015, Merrill Lynch held up to $58 billion per day of customer securities in a clearing account that was subject to a general lien by its clearing bank and held additional customer securities in accounts worldwide that similarly were subject to liens.  Had Merrill Lynch collapsed at any point, customers would have been exposed to significant risk and uncertainty of getting back their own securities.

“The rules concerning the safety of customer cash and securities are fundamental protections for investors and impose lines that simply can never be crossed,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.  “Merrill Lynch violated these rules, including during the heart of the financial crisis, and the significant relief imposed today reflects the severity of its failures.”

In conjunction with this case, the SEC announced a two-part initiative designed to uncover additional abuses of the Customer Protection Rule.  The first encourages broker-dealers to proactively report potential violations of the rule to the SEC and provides for cooperation credit and favorable settlement terms in any enforcement recommendations arising from self-reporting.  Second, the Enforcement Division, in coordination with the Division of Trading and Markets and the Office of Compliance Inspections and Examinations, will conduct risk-based examinations of certain broker-dealers to assess their compliance with the Customer Protection Rule.

“Simultaneous with today’s action, SEC staff will begin a coordinated effort across divisions to find potential violations by other firms through a targeted sweep and by encouraging firms to self-report any potential violations of the Customer Protection Rule,” said Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit.

In addition to the Customer Protection Rule violations, Merrill Lynch violated Exchange Act Rule 21F-17 by using language in severance agreements that operated to impede employees from voluntarily providing information to the SEC.  Merrill Lynch also engaged in significant remediation in response to the Rule 21F-17 violation, including the revision of its agreements, policies and procedures, and the implementation of a mandatory annual whistleblower-training program for all employees of Merrill Lynch and its parent corporation, Bank of America.  Merrill Lynch and Bank of America also agreed to provide employees, on an annual basis, with a summary of their rights and protections under the SEC’s Whistleblower Program.

The SEC separately announced a litigated administrative proceeding against William Tirrell, who served as Merrill Lynch’s Head of Regulatory Reporting when the firm was misusing customer cash in violation of the Customer Protection Rule.  The SEC’s Enforcement Division alleges that Tirrell was ultimately responsible for determining how much money Merrill Lynch would reserve in its special account, and failed to adequately monitor the trades and provide specific information to the firm’s regulators about the substance and mechanics of the trades.  The litigated administrative proceeding against Tirrell will be scheduled for a public hearing before an administrative law judge who will issue an initial decision stating what, if any, remedial actions are appropriate.

The SEC’s order finds that Merrill Lynch violated Securities Exchange Act Sections 15(c)(3) and 17(a)(1) and Rules 15c3-3, 17a-3(a)(10), 17a-5(a), 17a-5(d)(2)(ii), 17a-5(d)(3), 17a-11(e), and 21F-17.  Its subsidiary Merrill Lynch Professional Clearing Corporation is charged with violating Sections 15(c)(3) and 17(a)(1) and Rules 15c3-3, 17a-3(a)(10) and 17a-5(a).  Merrill Lynch cooperated fully with the SEC’s investigation and has engaged in extensive remediation, including by retaining an independent compliance consultant to review its compliance with the Customer Protection Rule.  Merrill Lynch agreed to pay $57 million in disgorgement and interest plus a $358 million penalty, and publicly acknowledged violations of the federal securities laws.

The SEC’s investigation was conducted by Jeff Leasure and James Murtha with assistance from Eli Bass and Michael Birnbaum.  The case was supervised by Mr. Osnato and Daniel Michael.  The SEC’s litigation against Mr. Tirrell will be led by Michael Birnbaum, Jeff Leasure, and James Murtha.  The SEC appreciates the assistance of the Public Company Accounting Oversight Board.

###
source: SEC.gov
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HSBC Bank USA, N A. v Sanchez | NYSC – Judge Straniere Dissects Mortgage from Cradle to Grave

HSBC Bank USA, N A. v Sanchez | NYSC – Judge Straniere Dissects Mortgage from Cradle to Grave

Decided on June 9, 2016
Supreme Court, Richmond County

HSBC Bank USA, National Association, AS TRUSTEE FOR DEUTSCHE ALT-SECURITES MORTGAGE LOAN TRUST, SERIES 2007-AR3, Plaintiff,

against

Veronica Sanchez, BOARD OF DIRECTORS OF THE BENZINGER AVENUE HOMEOWNERS ASSOCIATION, et.al., , Defendants.

130348/13

Plaintiff

Hogan Lovells US LLP
875 Third Avenue
New York, NY 10022

Defendant
Salfarlie, Salfarlie & assoc.
88-18 Sutphin Boulvard
Jamaica, NY 11435

Philip S. Straniere, J.

The following items were considered in the review of the following Motion for
Summary Judgment
Papers Numbered
Notice of Motion 1
Memorandum in Support of Motion 2
Affirmation in Opposition 3
Reply Memorandum of Law 4
Exhibits Attached to Papers

Upon the foregoing cited papers, the Decision and Order on this Motion is as follows:

After the New York Mets initial season in 1962 where they won only 40 and lost 120 games, their manager Casey Stengel wrote a book entitled “Can’t Anyone Here Play This Game.” The more foreclosure litigation that this court reviews, the more it appears that the title of Stengel’s work would more aptly fit the mortgage industry in the United States during the first decade of this century. It would seem that the instructions to accomplish [*2]simple things like making sure the borrower actually owns the property being mortgaged, has a source of income to repay the loan, and recording the mortgage as a lien against the proper piece of property must have been given in “Stengelese.” For those of you unfamiliar with that particular language, you may want to review Casey Stengel’s testimony before the Senate’s Anti-Trust and Monopoly Subcommittee on July 8, 1958. Apparently the persons involved with this loan on behalf of the plaintiff were diverted by Stengel’s explanation as to why he platooned Hank Bauer and Gene Woodling in right field and did not focus on some of the basics from real estate 101.

Plaintiff, HSBC Bank USA National Association, as Trustee for Deutsche ALT-A Securities Mortgage Loan Trust, Series 2007-AR3, commenced this residential foreclosure action against the defendants, Veronica Sanchez, Board of Directors of The Benziger Avenue Homeowners Association, New York City Environmental Control Board, New York City Parking Violations Bureau, New York City Transit Adjudication Bureau, and “John Doe” alleging that defendant Sanchez failed to make payments as agreed in a promissory note and mortgage.

Currently before the court is plaintiff’s motion for (1) summary judgment; (2) dismissal of any counterclaims; (3) an order of reference; (4) permission to treat defendant’s answer as a limited notice of appearance permitting defendant’s counsel to receive without prior notice a copy of the notice of sale, notice of discontinuance and notice of surplus money, if any; (5) replacing “John Doe” as a party defendant with ” ‘John’ Sanchez” and Alexandra Huertas; (6) appointing a referee to determine the amount due; (7) defaulting all non-appearing or non-answering defendants; and (8) such other and further relief the Court deems just and proper.

Defendant Sanchez has submitted opposition. Plaintiff has produced memoranda of law in support of its motion and a reply.

A. Background and Title Issues:

Defendant Sanchez purchased the premises 68 Benziger Avenue, Staten Island, New York from Frank Rodriguez and Kristin Henderson by deed dated February 23, 2007 for a purchase price of $403,000.00. According to the note, mortgage, and the incomplete HUD-1 provided by plaintiff as an exhibit to its motion, defendant Sanchez borrowed $320,000.00 from a lender called Opteum Financial Services, LLC.

The original recorded mortgage listed the lender as Mortgage Electronic Registration Systems (MERS) as nominee for Opteum Financial Services, LLC. On July 22, 2009, MERS assigned the mortgage to HSBC Bank USA, National Association as Trustee for Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-AR3. By a document dated April 20, 2010, defendant Sanchez entered into a Home Affordable Modification Agreement (HAMP) with Wells Fargo Bank, NA and not the plaintiff named in this action. The HAMP agreement reflected as new principal balance of $345,319.68. There is no assignment of the obligation from the plaintiff to Wells Fargo recorded.

Search of the Richmond County Clerk’s records reveal that there may be a problem with the title.

1. On February 22, 2002, Felix Alla conveyed to Sela Development Corp., a piece of land described as being 33.33 feet wide and 100 feet long at the corner of Benziger Avenue and Daniel Low Terrace. It was also identified as Block 24 Lot 37.

2. On June 18, 2004 Sela Development Corp. conveyed to Tia Johnson a piece of land described as beginning 47.50 from the corner of Benziger Avenue and Daniel Low Terrace and being 33.33 feet wide and 52.50 feet long. It is identified as Block 24 Lot 36. It is also known as 64 Benziger Avenue.

3. On June 13, 2006 Sela Development Corp conveyed to Kristen Henderson and Frank Rodriguez a piece of land described as beginning 47.50 feet from the corner of Benziger Avenue and Daniel Low Terrace and being 33.33 feet wide and 52.50 long. It is identified as Block 24 Lot 36. It also contains the notation that it is a correction deed for a deed dated July 15, 2004 which seeks to correct the property from being listed as Block 24 to 37 in the original deed to Block 24 Lot 36. The original deed created a problem in that the metes and bounds description for the Johnson parcel matches that of the Sanchez lot. The correction deed did not address the duplicate metes and bounds issue.

4. On February 23, 2007 Rodriguez and Henderson conveyed to Veronica Sanchez a piece of land described as beginning 47.50 feet from the corner of Benziger Avenue and Daniel Low Terrace and being 33.33 feet wide and 52.50 long. It is described as Block 24 Lot 36. It is also known as 64 Benziger Avenue.

Based on this title history it appears that Tia Johnson was also the owner of the property in question. The description of the property in Johnson’s original deed by its metes and bounds and tax block and lot matches the property which is the subject to this foreclosure. It may be a “wild deed” or it may have created a title problem which will delay this foreclosure. A correction deed dated June 12, 2006 with the proper description was filed with the County Clerk on November 15, 2006 in regard to Johnson’s purchase which is designated as 64 Benziger Avenue. This correction deed seems intended to properly describe the property that Tia Johnson purchased as 64 Benziger Avenue, Block 24 Lot 37. If this was the intent, then this deed would have effectively caused title to 68 Benziger Avenue, Block 24 Lot 36, to be vested only in Veronica Sanchez. Had someone paid attention at the start, the sloppy workmanship initially pervading this transaction would not have required a correction deed two years later to ensure the purchasers got title to the proper parcels.

There is another problem. On June 18, 2004 Johnson used the property to secure two mortgages. One is a line of credit mortgage from Countrywide Home Loans, Inc. for $49,500.00 and the second for $264,000.00 from MERS. Both loans were secured by mortgages on the Sanchez property and not the Johnson property as the original wrong description was attached to the filed instruments. On January 24, 2006 a correction mortgage with the proper description was recorded with the County Clerk in regard to the $264,000.00 loan. A satisfaction of the $49,500.00 mortgage was recorded on June 20, 2008 [*3]which was more than one year after Sanchez went into title. Whether this is sufficient to correct any title defects is an issue that needs to be addressed by the parties.

There is a more serious issue with the title documents. The description recorded with the Wells Fargo modification agreement of May 2010 which is the document triggering this foreclosure action is not of the Benziger Avenue property. It covers a parcel of land on Woodland Avenue near Giffords Lane on Staten Island, an area miles away in the Great Kills section of Staten Island. Although the Wells Fargo mortgage is filed against the proper block and lot, it contains an incorrect description. The problem that this creates is that a metes and bounds description is paramount to all other subordinate means of describing real property.

It would appear that the property encumbered by the Wells Fargo modification is not the parcel which is supposed to be subject to the mortgage lien. This may be a fatal defect preventing the foreclosure process from going forward. It also may create some liability on Wells Fargo in regard to wrongfully encumbering the lot on Woodland Avenue.

Based on the foregoing the plaintiff will need to produce an expert from a title insurance company acceptable to the court to appear at a hearing and confirm that Sanchez is the proper owner of the property and that plaintiff has the only mortgage lien on the premises and that it is valid irrespective of the patently incorrect metes and bounds description, which is the description contained in the last relevant instrument of record; the Wells Fargo modification agreement.

It is unclear whether Sanchez, or for that matter Wells Fargo, was represented by counsel during the negotiation of the modification agreement. Perhaps had counsel been present when the document was executed, a cursory glance at the instrument would have readily disclosed that the legal description referred to a parcel that bore no relationship to the real property in question. In fact, as noted above, such improperly described real property resulting from flippant and errant drafting may contain a “cloud on title” for that property giving rise to an action in tort by the owners of that property against the lender herein, and for that matter, possibly against Sanchez.

B. Analysis of the Mortgage Closing

Based on the documents produced by the plaintiff, there are several issues raised which call into question the legitimacy of the loan transaction.

First, the copy of the HUD-1which is required by federal law, is incomplete. There are no charges reflected on the sellers’ side of the transaction.

On the buyers’ side an entry labeled “proceeds from 2nd mortgage” is blank. As there is no second mortgage of record, is this a mistake or did the sellers or some other third party make a loan which was not recorded with the County Clerk.

Also on the buyers’ side an entry labeled “seller concession” is likewise blank. Was there or was there not a sellers’ concession? Based on what is disclosed on the HUD-1, Sanchez made a downpayment of $3,500.00 and produced an additional $96,766.63 at closing. Where did that money come from? Did she write a check, incur a second mortgage, or bring the proverbial suitcase of cash?

The $96,766.63 due from Sanchez excludes all of her title charges none of which are shown on the document. Title charges would include a mortgage tax of $5,575.00, plus title insurance premiums, endorsements, search fees and recording charges. Why these expenses are not listed is not disclosed.

This is an issue because the defendant has raised a defense an allegation that the plaintiff violated the Home Ownership and Equity Protection Act of 1994 (HOEPA). The defendant does not cite any particular section of this law. The plaintiff however in its brief analyzed the statute. Presumably defendant is referring to the Truth-in-Lending Act [15 USCA §1601 et seq]. Plaintiff asserts that the act has two possible thresholds to be met to be applicable; the “annual percentage rate (APR) threshold” when the APR exceeds 10 percent or the “points and fees threshold” where the closing costs will exceed the greater of 8% of the total loan amount or $400.00. If the face amount of the mortgage of $320,000.00 is used, 8% would be $25,600.00. Because all of the closing costs are not disclosed, it is impossible to determine if the threshold has been met. Defendant needs to provide a more specific reference to the statute counsel contends has been violated and both parties are to provide some documentation as to the missing figures so that the court can determine if the statute is applicable.

Also, because the HUD-1 is incomplete, the court cannot state for certain that the one-year statute of limitations has run. If the borrower did not receive a completed form at the closing setting forth the total expenses, there cannot have been the required statutory notice to the borrower to trigger the statutes protections.

Plaintiff must produce the complete closing file with all documents executed by the borrower including a properly completed HUD-1, the contract of sale, and all applications submitted indicating the borrower’s ability to pay the loan amount.

C. Is the Mortgage Broker the Agent of the Borrower or the Lender?

As is the case in many of these foreclosure actions, the court

finds it asking for whom was the mortgage broker working; the lender, the borrower or themselves? There would be only one answer if the persons who regulated this industry required mortgage brokers to be deemed a “fiduciary” for the borrower. This is an issue because a review of the HUD-1 provided and the loan documents calls into question which party actually benefited from this transaction other than the mortgage broker.

The mortgage broker listed on the HUD-1 is Hi-Tech Funding. This entity received $9,672.00 as a “mortgage broker” fee which is more than 3% of the loan value. In addition Hi-Tech Funding received an “application fee” of $495.00 and a “processing fee” of [*4]$495.00. This totals $10,662.00. A search of Department of State records discloses that “Hi-Tech Funding, Ltd.” was filed as a domestic corporation in December 2000 and was dissolved by proclamation on July 28, 2010. Dissolution by proclamation is done when an entity fails to pay its required fees for two consecutive years [Tax Law §203-a]. The court needs to take testimony on how did the defendant find this entity?

The lender of the original loan was Opteum Financial Services, LLC. It is listed with the Department of State as a Delaware corporation formed on November 2, 2004. It changed its name to Orchid Island Trs, LLC on July 5, 2007 about four months after this transaction closed. Opteum may actually be the “Sybil” of mortgage lending having had the name Northern Star Funding, LLC (1999); Northern Star Capital, LLC (2000); and Home Star Mortgage Services, LLC (2001) before Opteum. Although Orchid Island is currently an active entity, Opteum is no longer a viable limited liability company. In addition to some minor standard loan related charges Opteum was paid a “lender administration fee” of $795.00. Considering this loan was allegedly immediately transferred the Deutsche Bank Trust, what exactly was Opteum “administering” in order to obtain a fee?

A loan with such expenses may make sense because it is a “really good deal.” A review of the note and mortgage reveals it is an “interest only” loan for ten-years with the initial rate of 7.85% which changes after five years in March 2012. The interest only monthly payment the defendant was scheduled to make was $2,100.00. On the other hand a self-amortizing thirty-year loan at 7.85% interest has payments of $2,320.00 a month. A mortgage loan at that interest rate in 2007 would seem to indicate that the borrower may have had credit problems, or a limited source of income making it impossible for her to pay an additional $220.00 a month. On the other hand perhaps it was a loan which generated the most profit for the mortgage broker. So what was the benefit of the defendant paying all of these fees for an interest only loan when a self-amortizing loan would have cost about the same each month. What if some of the fees the borrower paid the mortgage broker “working for her interest” were used to “buy-down” the rate rather than compensate the mortgage broker or lender, would the parties be in their current positions?

Plaintiff is going to have to produce the mortgage broker to explain why the loan was structured in this manner and whether there was a second mortgage or seller’s concession in the original transaction which is not reflected on the HUD-1.

D. Other Problems in the Documents

1. The default letter dated January 23, 2013, and the default notice of July 23, 2012 are not from Wells Fargo. They are from ASC, America’s Servicing Company. There is no explanation in the letter as to what or who ASC is, what its relationship to the lender is, and why it is sending the default letter. The address in the letter for the borrower to make payment to is in Los Angeles, California. The address on the modification agreement for Wells Fargo is Fort Mill, South Carolina. The address of the lender in the original mortgage is Paramus, New Jersey. Payments in the original note are to be made to an [*5]Atlanta, Georgia address. How would a borrower reasonably know to whom to make payments or to whom to contact about the loan?

2. The “Proof of Filing Statement” required by the New York State Banking Department pursuant to Real Property Actions and Proceeding Law (RPAPL) §1306 to be filed by a lender before commencing a foreclosure proceeding, in the category “Loan Modification” is completed “No Modification” which is not correct. The original loan of February 23, 2007 was modified with Wells Fargo Bank, NA as the lender. It is dated April 10, 2010 yet May 4, 2010 is the date the borrower signed it and May 5, 2010 the date Wells Fargo signed it. There is no indication if a “right of rescission” notice was given to the borrower at that time or if one was required.

3. If the loan was “modified” pursuant to HAMP with Wells Fargo Bank, NA as the lender, should not Wells Fargo be the plaintiff and not the trust? The parties need to brief this issue.

4. Also, because the original note is endorsed in blank, is it necessary for the plaintiff to be in possession of the note not only to commence the action but also during the entire litigation? If not, then what is to prevent someone who obtains possession of the instrument from becoming the holder of this “bearer” paper and terminating the litigation? The parties need to brief this issue.

Conclusion:

Based on the foregoing the parties will appear on Monday, June 27, 2016 at 11:00 AM at the courthouse 927 Castleton Avenue, Staten Island, New York prepared to resolve the issues raised in this decision.

1. Plaintiff will produce the documents requested above as well as a witness a title expert acceptable to the court to testify as to the validity of the title and plaintiff’s lien. The title expert should be prepared to opine as to whether the incorrectly described real property in the Wells Fargo modification agreement mandates dismissal of this foreclosure action because of the improper description. If that is the case, because the plaintiff has elected its remedy would the action have to be dismissed with prejudice leaving the plaintiff only the option of suing on the note and becoming a general judgment creditor of the defendant.

2. Plaintiff will produce the mortgage broker familiar with this transaction to explain why it was structured the way it was.

3. Plaintiff will produce the closing agent to resolve the discrepancies in the HUD-1 and brief the issue if there is any penalty to be imposed under federal or state law for failing to provide a completed HUD-1 at closing.

Defendant Sanchez is to appear along with her counsel. Defendant’s counsel should be familiar with file and able to negotiate the issues.

The foregoing constitutes the decision and order of the court.

Dated:
Staten Island, NY
___________________________________
HON. Philip S. Straniere
Judge, Civil Court
ANS by _______ on _________________

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Posted in STOP FORECLOSURE FRAUD1 Comment

U.S. Bank N.A. v. Mattos | Hawaii Supreme Court Grants Review

U.S. Bank N.A. v. Mattos | Hawaii Supreme Court Grants Review

SCWC-14-0001134
IN THE SUPREME COURT OF THE STATE OF HAWAI’I
________________________________________________________________
U.S. BANK N.A. IN ITS CAPACITY AS TRUSTEE FOR THE REGISTERED HOLDERS OF MASTR ASSET BACKED SECURITIES TRUST 2005-NC1, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-NC1,
Respondent/Plaintiff-Appellee,

vs.

JOSEPH KEAOULA MATTOS, CHANELLE LEOLA MENESES, Petitioners/Defendants-Appellants,

and

CITIFINANCIAL, INC., ASSOCIATION OF APARTMENT OWNERS OF TERRAZA/CORTEBELLA/LAS BRISAS/TIBURON,
EWA BY GENTRY COMMUNITY ASSOCIATION,

Respondents/Defendants-Appellees.
________________________________________________________________
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-14-0001134; CIV. NO. 11-1-1539)
ORDER ACCEPTING APPLICATION FOR WRIT OF CERTIORARI
(By: Recktenwald, C.J., Nakayama, McKenna, Pollack, and Wilson, JJ.)

Petitioners/Defendants-Appellants Joseph Keaoula Mattos and Chanelle Leola Meneses’ application for writ of certiorari filed on May 9, 2016, is hereby accepted and will be scheduled for oral argument. The parties will be notified by the appellate clerk regarding scheduling.

DATED: Honolulu, Hawai’i, June 23, 2016.

Gary Victor Dubin
and Frederick J. Arensmeyer
for petitioners

/s/ Mark E. Recktenwald

/s/ Paula A. Nakayama
/s/ Sabrina S. McKenna
/s/ Richard W. Pollack
/s/ Michael D. Wilson

A. Questions Presented

Did the ICA commit grave errors of fact and law, requiring reversal pursuant to
HRS Section 602-59(bX1), in its concluding that the Circuit Court properly granted
summary judgment because no genuine issues of material fact existed, despite the fact
that the standing of Respondent U.S. Bank, as Trustee, of a securitized trust as
foreclosing mortgagee was in genuine dispute because there was evidence below that:

1. the two mortgage assignments to the securitized trust in the chain of U.S.
Bank’s alleged ownership of Petitioners’ loan were “robo-signed” by persons with
insufficient authority or personal knowledge as to what they swore to, and whose
signatures differed among similar mortgage assignments that they had supposedly
signed and/or notarized ;

2. the two mortgage assignments to the securitized trust in the chain of U. S.
Bank’s alleged ownership of Petitioners’ loan violated the securitized trust’s governing
instrument, known as its Pooling and Servicing Agreement, having been allegedly
transferred more than two years and more than six years respectively after the cut-off
date for placing mortgages in the securitized trust, accompanied by an allonge allegedly
transferring their promissory note to the securitized trust more than three years after its
cut-off date;

3. the two mortgage assignments to the securitized trust in the chain of U. S.
Bank’s alleged ownership of Petitioners’ loan were unproven as supported only by
hearsay declarations inadmissible pursuant to HRCP Rule 56(e) and Hawaii Evidence
Rule 803(b)(3) as U.S. Bank’s Declarants had no personal knowledge of how earlier
business records had been compiled in addition to the two mortgage assignments
having been invalid, supra.

 

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Posted in STOP FORECLOSURE FRAUD0 Comments

FROST v CHRISTINA TRUST | FL 4DCA – Given the many caveats in the PAA, Christiana Trust’s failure to prove that Chase actually purchased the Note, instead of simply acquiring the servicing rights, is fatal to its case

FROST v CHRISTINA TRUST | FL 4DCA – Given the many caveats in the PAA, Christiana Trust’s failure to prove that Chase actually purchased the Note, instead of simply acquiring the servicing rights, is fatal to its case

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA

FOURTH DISTRICT

ROBERT T. FROST a/k/a ROBERT FROST,

Appellant,

v.

CHRISTIANA TRUST, a Division of Wilmington Savings Fund Society,
FSB, as Trustee for Normandy Mortgage Loan Trust, Series 2013-18, JP
MORGAN CHASE BANK, NATIONAL ASSOCIATION, MORTGAGE
ELECTRONIC REGISTRATION SYSTEMS, INC., as Nominee for
AMERICA’S WHOLESALE LENDER, IMPERIAL POINT ASSOCIATION,
INC.,

Appellees.

No. 4D15-534

[ June 22, 2016 ]

Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Kathleen D. Ireland, Senior Judge; L.T. Case No.
09051794 (11).

Michael J. Wrubel of Michael Jay Wrubel, P.A., Davie, for appellant.

Thomas Wade Young and Joseph B. Towne of Lender Legal Services,
LLC, Orlando, for Appellee Christiana Trust.

PER CURIAM.

Robert Frost appeals the final judgment of foreclosure entered in favor
of Christiana Trust, a Division of Wilmington Savings Fund Society, FSB,
as Trustee for Normandy Mortgage Loan Trust, Series 2013-18
(“Christiana Trust”). Frost argues that Christiana Trust failed to prove its
own standing and the standing of the original plaintiff, JP Morgan Chase
Bank, N.A. (“Chase”). Because Christiana Trust failed to prove Chase had
standing at the inception of the case, we reverse.

On September 22, 2009, Chase filed a foreclosure complaint alleging
that it was the owner and holder of the Note and Mortgage or the party
entitled to enforce the subject Note. The original lender on the Note was
Washington Mutual Bank, F.A. (“WAMU”). The Note attached to the
complaint did not have any endorsements. Frost filed an answer and

raised several affirmative defenses, including lack of standing. Chase
substituted Christiana Trust as party plaintiff. The case eventually
proceeded to trial.

At trial, a Chase loan research officer testified that WAMU closed on
September 25, 2008 and the Federal Deposit Insurance Corporation
(“FDIC”) became its receiver. On that same day, Chase and the FDIC
executed a Purchase and Assumption Agreement (“PAA”). The loan officer
testified that the PAA covers “certain assets” including “numerous home
loans” that Chase purchased from the FDIC as the receiver for WAMU.

In addition to the PAA, Christiana Trust introduced a document
tracking report from a Chase servicing system into evidence. The report
stated and the loan officer testified that Frost’s Note and Mortgage were in
Chase’s possession as of July 20, 2009. Christiana Trust also introduced
a default letter that WAMU sent to Frost on July 29, 2009. The heading
of the letter stated “WAMU is becoming CHASE.”

Christiana Trust introduced the original Note with an undated blank
endorsement from WAMU. After Christiana Trust rested its case, defense
counsel attempted to offer an excerpt from a deposition regarding the
endorsement on the Note. Christiana Trust objected, arguing the
deposition was not relevant because Christiana Trust was not relying on
the endorsement to prove standing. The court ruled that the endorsement
was not relevant to Chase’s standing at the inception of the suit. The court
also found that the endorsement was placed on the Note after Chase filed
the complaint and declined to hear any further testimony related to the
endorsement.

The main issues on appeal are whether Chase had standing prior to the
commencement of the action and whether Christiana Trust had standing
at the time of trial.

“This court reviews the sufficiency of the evidence to prove standing to
bring a foreclosure action de novo.” Lamb v. Nationstar Mortg., LLC, 174
So. 3d 1039, 1040 (Fla. 4th DCA 2015).

“[T]he plaintiff must prove that it had standing to foreclose when the
complaint was filed.” McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So.
3d 170, 173 (Fla. 4th DCA 2012). When there is a substitute of the party
plaintiff, the substituted plaintiff may rely on the standing of the original
plaintiff at the inception of the case, but it “must prove its own standing
when judgment is entered.” Sandefur v. RVS Capital, LLC, 183 So. 3d
1258, 1260 (Fla. 4th DCA 2016) (emphasis omitted).

Standing may be established from the plaintiff’s status as the holder of
the note. Perez v. Deutsche Bank Nat’l Trust Co., 174 So. 3d 489, 490–91
(Fla. 4th DCA 2015). A “holder” is defined as “[t]he person in possession
of a negotiable instrument that is payable either to bearer or to an
identified person that is the person in possession.” § 671.201(21)(a), Fla.
Stat. (2009). “Thus, to be a holder, the instrument must be payable to the
person in possession or indorsed in blank.” Murray v. HSBC Bank USA,
157 So. 3d 355, 358 (Fla. 4th DCA 2015) (citing § 671.201(5), Fla. Stat.
(2009)).

A plaintiff also may establish standing as a nonholder in possession
with the rights of a holder. Id. at 357–58 (citing § 673.3011(2), Fla. Stat.).
Ownership, assignment, or transfer of the note become important to the
analysis of standing “when the plaintiff is a nonholder in possession of the
note with the rights of a holder.” Angelini v. HSBC Bank USA, N.A., 4D14–
216, 2016 WL 13519533, at *1 (Fla. 4th DCA Feb. 10, 2016) (quoting
Rodriguez v. Wells Fargo Bank, N.A., 178 So. 3d 62, 67 (Fla. 4th DCA 2015)
(Conner, J., concurring)). Accordingly, “[a] bank employee’s trial testimony
that the plaintiff bank owned the note before the inception of the lawsuit
is sufficient [in some cases] to resolve the issue of standing.” Fiorito v. JP
Morgan Chase Bank, Nat’l Ass’n, 174 So. 3d 519, 521 (Fla. 4th DCA 2015).

Holder

In this case, Christiana Trust failed to prove that Chase held the Note
when it filed the complaint. The original payee on the Note is WAMU and
the copy of the Note attached to the complaint did not have any
endorsements. Although there was a blank endorsement on the Note at
the time of trial, Christiana Trust did not present any evidence regarding
the date of the endorsement. Christiana Trust’s counsel also stated that
it was not relying on the endorsement to prove standing. Because Chase
did not qualify as a holder, Christiana Trust had to prove that Chase was
a nonholder in possession with the rights of a holder in order to establish
standing.1

1 There was also no evidence that Chase was “[a] person not in possession of the
instrument who is entitled to enforce the instrument pursuant to s. 673.3091 or
s. 673.4181(4).” § 673.3011(3), Fla. Stat. (2009).

Nonholder in Possession with Rights of a Holder

Christiana Trust argues that Chase was a nonholder in possession with
the rights of a holder because the FDIC was the successor to “all rights,

titles, powers and privileges” of WAMU and Chase acquired FDIC’s rights
by virtue of the PAA. Frost contends that the PAA was insufficient to
establish that Chase was entitled to enforce the Note. Specifically, Frost
argues that: (1) the language of the PAA does not adequately identify which
loans were acquired in the transaction; (2) Christiana Trust failed to
provide a schedule of the loans to prove that Frost’s loan was part of the
transaction; and (3) Christiana Trust failed to prove that Chase acquired
more than the servicing rights of the loan.

As Frost argues, the language of the PAA alone does not prove that
Chase acquired all of WAMU’s assets. For example, one of the introductory
clauses states “the Assuming Bank [Chase] desires to purchase
substantially all of the assets . . . of the Failed Bank [WAMU]” and Section
3.1 of the PAA notes exceptions to the purchase. (Emphasis added).
Section 3.1 states in pertinent part “[s]ubject to Sections 3.5, 3.6, 4.8, the
Assuming Bank [Chase] hereby purchases from the Receiver, and the
Receiver hereby sells, assigns, transfers, conveys, and delivers to the
Assuming Bank, all right, title, and interest of the Receiver in and to all of
the assets.” (Emphasis added). Section 3.5 and the related schedule lists
assets not acquired by Chase.

In Snyder v. JP Morgan Chase Bank, National Association, 169 So. 3d
1270 (Fla. 4th DCA 2015), we discussed issues similar to the ones raised
in this case. In Snyder, a borrower challenged Chase’s standing to bring
a foreclosure action. Id. at 1271. At trial, Chase introduced the purchase
agreement for the WAMU assets, and its witness testified that Chase
“purchased the assets of WAMU through the [FDIC] in September of 2008,
and [the note] was part of the purchase.” Id. at 1271. On appeal, we held
that Chase did not have possession of the note when it filed suit and
therefore did not prove its entitlement to enforce the note. Id. at 1274. We
also noted:

Whether [Chase] even owned the note on the date of filing suit
is questionable. It relies on the purchase agreement between
Chase, FDIC, and WAMU to prove that it purchased this loan,
but the purchase agreement has many caveats where the
Assuming Bank (Chase) could refuse to acquire assets, thus
reducing the purchase price. . . . . To add to the confusion
over who owned the note, the notice of default was sent out,
not by Chase, but by WAMU. No explanation of why WAMU
would be continuing to act on a loan that it did not own was
provided in the testimony, thus suggesting that the loan was
not as yet transferred to Chase.

Id. at 1273.

This case involves the same purchase agreement as Snyder and
includes the same caveats. Frost points to another caveat: Section
3.6(a)(iii) states in relevant part, “[t]he Receiver may refuse to sell to the
Assuming Bank . . . any Asset or asset essential to the Receiver as
determined by the Receiver in its discretion . . . .” Based on Section 3.6(a),
Frost argues that it is possible that the FDIC refused to sell Frost’s Note
to Chase because the loan was deemed an asset essential to FDIC.

An important distinction between this case and Snyder is that, in this
case, Chase proved that it had possession of the Note before the case
commenced. The loan officer testified that Chase gained possession of the
Note on July 20, 2009. Christiana Trust offered a report from the Chase
system, which stated that the Note was scanned into the system on July
20, 2009. But although Christiana Trust proved that Chase had
possession of the Note, there are other deficiencies in this case that call
into question Chase’s ownership of the Note when it filed suit in September
2009.

As Frost argues, there is no competent, substantial evidence that the
Note was delivered to Chase for the purpose of giving Chase the right to
enforce the instrument. There is some indication that WAMU may have
had some control over the Note even after Chase gained possession on July
20, 2009. WAMU sent the default letter to Frost on July 29, 2009, which
states “WAMU is becoming Chase.” Like in Snyder, there is no explanation
of why WAMU would be continuing to act on a loan that it did not own.
Similarly, Chase did not explain how or why WAMU would have placed a
blank endorsement on the Note after Chase gained possession. The loan
officer’s testimony established that the Note did not have an endorsement
when it was scanned into the Chase system. Both the default letter and
the blank endorsement suggest that WAMU still owned the Note after
Chase gained possession.

There was also a lack of testimony about ownership. The loan officer
testified that the PAA covered “numerous home loans” and that Chase
acquired “certain assets and liabilities.” Unlike the witness in Snyder, the
loan officer never explicitly testified that Chase owned the Note or that the
Note was one of the assets transferred by virtue of the PAA. See Fiorito,
174 So. 3d at 521 (rejecting Chase’s argument that it acquired standing
through the September 25, 2008 “merger” with WAMU where there was no
testimony if and when Chase became owner of the Note by virtue of the
merger).

Frost relies on the loan officer’s testimony to support his argument that
there was insufficient evidence about the specific loans Chase acquired.
Christiana Trust’s counsel asked the loan officer: “[W]as there ever a
schedule created with [the PAA] that — or included in that document that
tells you and tells everyone, these are the loans that were included when
Washington Mutual was subsumed by Chase?” She responded: “Yes,
there is a schedule that states what we did and did not assume.” Counsel
then asked: “And, would home mortgage loans been one of the things that
Chase did assume?” She replied: “Yes.”

The PAA does not make any reference to a schedule of specific loans
acquired. When the loan officer testified that there was a schedule of what
Chase did and did not assume, she may have been referring to Schedule
3.5, which is attached to the PAA. Schedule 3.5 lists “certain assets not
purchased.” A schedule of the loans purchased in the PAA would have
been helpful in determining which loans were transferred. However, based
on the loan officer’s testimony and the language of the PAA, it is not clear
that such a schedule ever existed.

Finally, Frost argues that there is evidence that Chase acquired only
WAMU’s servicing rights via the PAA. Section 3.1 states that “the
Assuming Bank [Chase] specifically purchases all mortgage servicing
rights and obligations of the Failed Bank [WAMU].” As previously noted,
the loan officer never testified that Chase purchased Frost’s Note via the
PAA. However, she made repeated references to Chase servicing the Note.
Given the many caveats in the PAA, Christiana Trust’s failure to prove that
Chase actually purchased the Note, instead of simply acquiring the
servicing rights, is fatal to its case. Even if Chase eventually purchased
the loan, there is insufficient evidence that this purchase occurred prior
to the commencement of this action in September 2009.

Despite the PAA and Chase’s possession of the Note, Christiana Trust
failed to prove that Chase was entitled to enforce the Note at the inception
of this case. Because Christiana Trust failed to prove Chase had standing
at the inception of the case, Christiana Trust’s standing at the time of trial
was irrelevant.

Accordingly, we reverse the final judgment and remand for entry of an
order of involuntary dismissal of the foreclosure action.

Reversed and Remanded.

CIKLIN, C.J., TAYLOR and MAY, JJ., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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JALLALI v CHRISTINA TRUST | 4DCA – On Motion to Recall Mandate…Accordingly, we reverse the final judgment of foreclosure for lack of standing and remand with instructions for the trial court to enter an involuntary dismissal in favor of appellant

JALLALI v CHRISTINA TRUST | 4DCA – On Motion to Recall Mandate…Accordingly, we reverse the final judgment of foreclosure for lack of standing and remand with instructions for the trial court to enter an involuntary dismissal in favor of appellant

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA

FOURTH DISTRICT

FALLON RAHIMA JALLALI,

Appellant,

v.

CHRISTIANA TRUST, a division of WILMINGTON SAVINGS FUND
SOCIETY, FSB, as Trustee for NORMANDY MORTGAGE LOAN TRUST,
SERIES 2013-15,

Appellee.

No. 4D14-2369

[June 8, 2016]

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Cynthia G. Imperato, Judge, and Barry J. Stone, Senior
Judge; L.T. Case No. CACE 07-10279.

Cyrus A. Bischoff, Miami, for appellant.

Melissa A. Giasi of Kass Shuler, P.A., Tampa, for appellee.

ON MOTION TO RECALL MANDATE

KLINGENSMITH, J.

We grant appellant’s motion to recall mandate, withdraw our previous
opinion, and substitute the following in its place:

This case presents us with yet another opportunity to resolve what has
become a common issue for this court. Although this matter has taken a
somewhat tortuous path through the lower court to reach us, the sole
issue we will address among the several raised on appeal is whether there
was sufficient evidence of Christiana Trust’s (“appellee”) standing to
support the final judgment of foreclosure. We find that appellee lacked
standing to foreclose, and reverse.

On May 8, 2007, Countrywide Home Loans, Inc. filed a foreclosure
action against Fallon Rahima Jallali (“appellant”) that contained within its
initial pleading a count alleging a missing note. Countrywide claimed that

2
it had been assigned the mortgage and note, but did not have possession
of the actual documents at that time. Seven months later, Countrywide
filed the original note and original recorded assignment of mortgage with
the court. The note was signed by appellant and bore an undated blank
endorsement. Although the original complaint averred that Countrywide
was assigned the mortgage and note prior to the inception of the lawsuit,
the record shows that the assignment actually occurred on August 8,
2007, three months after the suit was filed. The mortgage ultimately was
assigned to appellee, who later was substituted as plaintiff.1
The case eventually was scheduled for a non-jury trial on January 22,
2014. Six days before that trial date, appellant filed a suggestion of
bankruptcy and a motion to stay the proceedings in the foreclosure action.
To ensure that the trial would proceed as scheduled, appellee’s counsel
sought and received an order from the bankruptcy court confirming that
an automatic stay of the foreclosure action was not in effect. The day
before the scheduled proceedings, appellant’s counsel informed appellee’s
counsel that he received an e-mail from the court stating that the non-jury
trial had been removed from the docket as a result of a suggestion of
bankruptcy being filed.2 Appellee’s counsel did not agree the non-jury trial
was cancelled. She informed appellant’s counsel that an automatic stay
was not in effect and that appellee would proceed with trial as scheduled
if the bankruptcy court confirmed the absence of any stay.
On the morning of January 22, the bankruptcy court confirmed that
an automatic stay was not in effect. Later that afternoon, appellee’s
counsel came to court and checked the trial docket posted outside the
courtroom to confirm the non-jury trial remained scheduled for 1:30 p.m.
She also announced the case to the courtroom, and determined that
appellant was not present. After receiving testimony from appellee’s
witnesses, the trial court immediately entered final judgment for appellee.
1 On or about January 29, 2013, Countrywide assigned the note and mortgage
to LEX Special Assets, LLC, which in turn assigned the note and mortgage to
appellee on November 7, 2013. On December 10, 2013, the trial court granted
appellee’s motion to substitute itself as plaintiff in the foreclosure action.
However, in its motion for substitution, appellee alleged that Countrywide had
been assigned the note and mortgage on August 8, 2007, after the initial
complaint was filed.
2 The e-mail was not received by appellee’s counsel, and referred to proceedings
scheduled for February 14, 2013, even though the case number referred to the
instant case, which was set for non-jury trial on January 22, 2014.

The following day, appellant’s counsel sought out a duty judge to “set
things right,” arguing that the case had proceeded despite being ostensibly
cancelled by the e-mail. That duty judge was persuaded to schedule an
evidentiary hearing on January 24, 2014, wherein the court issued a
vacatur of foreclosure.3

3 Appellee states that it was not made aware of this hearing and never given a
copy of the vacatur of foreclosure. Appellee claims it first learned that the final
judgment had been vacated when appellant later filed a separate quiet title action
against appellee.

After learning that the final judgment had been vacated by the duty
judge, appellee in turn sought to vacate the vacatur of foreclosure, arguing
in part that it had been obtained by an ex-parte communication with the
court. The case then was assigned to a magistrate judge for an evidentiary
hearing on the issue. Following the hearing, the magistrate recommended
that the final judgment be vacated due to the trial’s cancellation, and that
the vacatur of foreclosure be vacated because appellee was not notified
about the hearing and did not attend.

Appellee filed an exception to the magistrate’s report. After multiple
additional hearings, the trial court granted appellee’s motion to vacate the
vacatur of foreclosure and reinstated the final judgment. In so doing, the
trial court explicitly chose not to adopt the magistrate’s report.

Two weeks later, appellant again moved to vacate the final judgment
pursuant to Florida Rule of Civil Procedure 1.540(b), this time alleging
fraud upon the court. The trial court denied that motion and this appeal
ensued.

We have repeatedly stated that:

“A crucial element in any mortgage foreclosure proceeding
is that the party seeking foreclosure must demonstrate that it
has standing to foreclose.” McLean v. JP Morgan Chase Bank
Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). The
plaintiff must prove that it had standing to foreclose when the
original complaint was filed. Id.

Kenney v. HSBC Bank USA, Nat’l Ass’n, 175 So. 3d 377, 379 (Fla. 4th DCA
2015).

As always, “a party must have standing to file suit ‘at its inception and
may not remedy this defect by subsequently obtaining standing.’” Gascue
v. HSBC Bank, U.S.A., 97 So. 3d 263, 264 (Fla. 4th DCA 2012) (quoting
Rigby v. Wells Fargo Bank, N.A., 84 So. 3d 1195, 1196 (Fla. 4th DCA
2012)). When the foreclosing party is not the original lender, it “may
establish standing to foreclose a mortgage loan by submitting a note with
a blank or special endorsement, an assignment of the note, or an affidavit
otherwise proving the plaintiff’s status as the holder of the note.” Kenney,
175 So. 3d at 379 (quoting Focht v. Wells Fargo Bank, N.A., 124 So. 3d
308, 310 (Fla. 2d DCA 2013)).

If the foreclosing party “asserts standing based on an undated
endorsement of the note, it must show that the endorsement occurred
before the filing of the complaint through additional evidence, such as the
testimony of a litigation analyst.” Id. (quoting Lloyd v. Bank of N.Y. Mellon,
160 So. 3d 513, 515 (Fla. 4th DCA 2015)). When a plaintiff attempts to
foreclose based upon an undated, blank-endorsed note that it filed after
the initial complaint, and provides no proof that it was the holder or
authorized representative of the holder prior to the inception of the lawsuit,
it fails to prove its standing to foreclose. See, e.g., Perez v. Deutsche Bank
Nat’l Trust Co., 174 So. 3d 489, 490-91 (Fla. 4th DCA 2015) (reversing final
judgment of foreclosure where bank attempted to prove standing based in
part upon an undated blank-endorsed note filed after the initial complaint,
but failed to provide evidence that it possessed the note prior to the time
suit was filed).

A substituted plaintiff can acquire standing to foreclose if the original
party had standing. Assil v. Aurora Loan Servs., LLC, 171 So. 3d 226, 227
(Fla. 4th DCA 2015) (“Pursuant to Florida Rule of Civil Procedure 1.260, a
substituted plaintiff acquires the standing of the original plaintiff.”)
(quoting Kiefert v. Nationstar Mortg., LLC, 153 So. 3d 351, 353 n.4 (Fla. 1st
DCA 2014)). In this case, the record is devoid of any proof that
Countrywide had possession of the blank-endorsed note prior to the
inception of the lawsuit. Appellee also failed to prove that Countrywide
had standing to foreclose based upon the assignment of mortgage, as it
was clear the assignment took place after suit was filed. See Balch v.
LaSalle Bank N.A., 171 So. 3d 207, 209 (Fla. 4th DCA 2015) (reversing a
foreclosure judgment in part because the “assignment [of the mortgage]
was executed after the complaint was filed”).

Accordingly, we reverse the final judgment of foreclosure for lack of
standing and remand with instructions for the trial court to enter an
involuntary dismissal in favor of appellant.

Reversed and Remanded.

GROSS and GERBER, JJ., concur.

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TFH 6/26 | The Foreclosure Hour’s Sixth Year Anniversary Two-Hour Special: 50 Ways The Foreclosure System Is Rigged Against Homeowners And The Only Thing That Can Possibly Now Be Done About It.

TFH 6/26 | The Foreclosure Hour’s Sixth Year Anniversary Two-Hour Special: 50 Ways The Foreclosure System Is Rigged Against Homeowners And The Only Thing That Can Possibly Now Be Done About It.

COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII

LISTEN TO KHVH-AM (830 ON THE AM RADIO DIAL)

ALSO AVAILABLE ON KHVH-AM ON THE iHEART APP ON THE INTERNET

.

.

Sunday – June 26, 2016

The Foreclosure Hour’s Sixth Year Anniversary Two-Hour Special: 50 Ways The Foreclosure System Is Rigged Against Homeowners And The Only Thing That Can Possibly Now Be Done About It.

A personal note:

On June 14, 2010 I first went on the air with Honolulu’s veteran talk show host Rick Hamada on KHVH-AM in Honolulu for a half hour weekly radio show discussing foreclosures.

At that time, the general public and homeowners in particular knew little about the mysteries of foreclosure litigation, securitized trusts, robo-signers, and judicial officiating, mainly because it was all taking place in relatively isolated and scattered courtrooms.

Eventually with the invaluable assistance of former Hawaii Governor John Waihee, also an attorney, I started my own one-hour talk show on KHVH-AM, The Foreclosure Hour, and John and I have spent almost every Sunday since then investigating virtually every incredibly horrifying and abusive aspect of American foreclosures.

Again, our goal has been to use the medium of radio to educate the general public and homeowners in particular about what has been largely hidden from public view and throughly misunderstood even by those foreclosed on, and also including unfortunately by many if not most judges, lawyers, and legislators alike.

John and I have been surprisingly pleased by all of the emails and voice mail messages that we receive weekly, regrettably more than we possibly have the time to feasibly respond to.

And recognizing that our listenership has greatly increased locally and nationally and even internationally since we first went on the air, John and I thought we would try this Sunday to summarize virtually everything that we have learned and presented on past shows about the American foreclosure system.

No one needs to tell our listeners how bad the foreclosure system is, but John and I believe that no one is aware of the full extent of the amorphous galaxy of abuses inherent in the American foreclosure system and what if anything can be done about it.

John and I literally stumbled onto the solution during our live radio broadcasts, and at the conclusion of this Sunday’s radio show John and I will share our unique findings with everyone.

This is going to be a very challenging and memorable Sixth Year Anniversary Show, and we are indebted to KHVH-AM for allowing us to expand our show this Sunday schedule-wise, which will be heard live for two hours straight, instead of one, from 3:00 p.m. to 5:00 p.m. Hawaii standard time, and we will discuss all of the American foreclosure system’s unseen and indefensible contradictions.

While the problem is incredibly enormous, in contrast the solution to the mortgage crisis seems relatively simple. Please join us and find out.

Gary Dubin

Gary Victor Dubin
Dubin Law Offices
Suite 3100, Harbor Court
55 Merchant Street
Honolulu, Hawaii 96813

Office: (808) 537-2300
Cellular: (808) 392-9191
Facsimile: (808) 523-7733
Email: gdubin@dubinlaw.net

Licensed in California and Hawaii

~

The June 26, 2016 Sixth Anniversary Show of The Foreclosure Hour.

Summarized below is what we have learned during and since the six years that we have been on the air on KHVH-AM, identifying briefly at least 50 all-encompassing ways in which the American foreclosure system has been rigged against homeowner borrowers.

This list will also eventually serve as an index to our past radio shows and perhaps can be annotated with applicable case law on our website.

This is believed to be the first time an effort has been made to list all of the major overwhelming pervasive ways that the American legal system has been abusing homeowner/borrowers.

For that reason we expanded our Sunday’s Sixth Anniversary Show to two hours.

Our working hypothesis is that once all of these abuses, mostly unique to the foreclosure system, are understood and “we see the forest for the trees,” American homeowners will finally be able to better understand the breadth of the injustices waged against us and to finally do something about it with our without the assistance of our courts.

For what is needed is not merely individual court victories however welcome against this inconsistent, contradictory, and corrupt system, but a systemic change, and at the end of the broadcast we suggest what that systemic change is and can be.

Here are the 50 summary topics briefly highlighted on our Sixth Year Anniversary Show — seeing the forest for the trees:

1. Judicial ‘free house” prejudices against borrowers VERSUS judicial inconsistent awarding of “free houses” to foreclosing mortgagees and loan servicers in foreclosure cases.

2. Borrowers paying mortgage insurance premiums VERSUS foreclosing mortgagees inconsistently collecting the insurance reimbursements and running off with double and even triple recoveries in foreclosure cases.

3. Hundreds of billions of federal and state regulatory sanctions assessed against and paid by banks and loan servicers VERSUS inconsistently relative pennies distributed to borrowers foreclosed upon in foreclosure cases.

4. Federal mandated loan documentation as a contract of adhesion VERSUS federal Truth in Lending laws inconsistently mandating accurate loan disclosures.

5. Law degrees and Bar admissions VERSUS inconsistent professional incompetence regarding foreclosure defense.

6. Judicial confirmation of auction sales based on credit bidding in foreclosure auctions VERSUS inconsistent deterrence of competitive bidding which therefore depresses the amount of the successful bid.

7. State control of recording offices guaranteed by the Tenth Amendment to the United States Constitution VERSUS inconsistent back door federalization of mortgage registration in the United States.

8. Federal judicial ethical standards prohibiting a presiding judge’s ownership of even one share of stock in a bank in foreclosure litigation in order to avoid the appearance of impartiality VERSUS contrary State judicial ethical standards prohibiting stock ownership in a bank by a presiding judge in foreclosure litigation only if considered de minimis.

9. Government access to justice programs VERSUS inconsistently the prohibitive cost of access to justice in foreclosure cases.

10. The due process requirement of judicial impartiality in court proceedings VERSUS inconsistently the self-serving, self-recusal procedures in foreclosure litigation.

11. Consumer protections on the books protecting borrowers VERSUS how those consumer protections are inconsistently applied in foreclosure cases concerning contract and constitutional rights, including the right to trial by jury.

12. Regulatory federal and state laws protecting borrowers by regulating banking VERSUS inconsistently the complete lack of enforcement of those laws within the shadow banking securitized mortgage market.

13. The provision of federal and locally funded legal aid programs for those financially disadvantaged VERSUS inconsistently the complete lack of effective assistance for those financially disadvantaged in foreclosure litigation.

14. Federal “state action” jurisdictional restrictions VERSIS the inconsistent reality of extensive federal control over the entire foreclosure process, including the documents used, nonjudicial proceedings, the underwriting guidelines, and the fees and costs chargeable by so-called local foreclosure mills.

15. The politically correct justification for the remedy of foreclosure as supposedly necessary to preserve the housing market and housing values VERSUS the inconsistent reality of the recent destruction of the housing market and housing equity due to foreclosures.

16. The traditional rules of evidence controlling admissibility and trustworthiness in court proceedings VERSUS the inconsistent admission of hearsay uniquely allowed by foreclosing mortgagees in foreclosure cases to satisfy their burden of proof, particularly by so-called Declarations of Indebtedness signed by persons having no such personal knowledge or understand of prior servicers’ business procedures.

17. Foreclosures treated by courts as solely an economic contractual problem VERSUS foreclosures inconsistently being also equally a social and a political problem for the entire community, resulting in divorce, suicide, breakup of the family, substance abuse, and homelessness.

18. Traditional mortgages being governed by contract law VERSUS nontraditional securitized trust mortgages in reality being inconsistently securities with borrower/homeowners involuntary and unknowingly issuers and so-called lenders being inconsistently commissioned securities dealers, requiring the application of securities laws and not real property and negotiable instrument laws.

19. The monetary regulatory sanctions and fines levied upon banks now in the hundreds of billions of dollars since 2008 are indirectly paid by Bank shareholders VERSUS those sanctions in reality are inconsistently indirectly repaid by United States taxpayers through the banks’ virtually unlimited interest-free draws at the Treasury window.

20. Deficiency judgments in foreclosure cases against borrowers have usually been supposedly based upon the right to fully recover what was loaned VERSUS in reality deficiency judgments in foreclosure cases have often represented unjust enrichment for foreclosing mortgagees realizing much more money than what they loaned including double and even triple recoveries by flipping the properties, often immediately, or through government (particularly FDIC) crony capitalism insider subsidies.

21. Professional licensing of lenders, insurance companies, loan servicers, and mortgage brokers is said to protect borrowers VERSUS the inconsistent reality that self-dealing by them continues to predominate in the foreclosure industry, yet there has not been a single criminal prosecution of a major bank executive even started since the mortgage meltdown of 2008.

22. Bills of Rights for homeowner/borrowers have been enacted by many States VERSUS inconsistently a lack of such enforcement predominates due to inadequate funding and personnel.

23. Class actions and whistleblower actions to discipline lenders and loan servicers by compensating borrowers for foreclosure abuses have been filed and occasionally successful VERSUS inconsistently in foreclosure cases the results have been large rewards for class and whistleblower counsel with pennies for the victimized borrowers.

24. The federal government has sponsored loan modification programs to assist homeowner/borrowers VERSUS in reality loan modification processes have been largely unsupervised, subjecting homeowner/borrowers to what has been called “loan modification hell,” a thoroughly dishonest and fraudulent, emotionally over-stressing process, with few loan modifications granted on terms permanently of any real assistance and then only to a relatively few homeowner/borrowers.

25. Loan servicers have admitted using robosigners to create false documents in foreclosure cases and submitting them into evidence in court with false representations designed to and successfully defrauding courts and borrowers by using those fraudulent documents to foreclose and evict VERSUS our courts inconsistently still continuing to themselves robo/rubber-stamp the false admissibility of those documents as evidence in foreclosure cases.

26. The American judiciary understandably adheres to the doctrine of stare decisis which requires that courts follow precedent and only overrule prior judicial decisions when absolutely necessary so as to preserve reliance on past judicial decisions VERSUS what might in the foreclosure field be called “stare stupidious” instead, inconsistently irrationally adhering to case precedent that was designed for enforcing traditional mortgages and not securitized trust mortgages, handed down at a time when such nontraditional mortgages were widely misunderstood, which prior decisions are today known to have no intelligent application in deciding foreclosure disputes and which have become instruments for fostering fraud.

27. Statute of limitations generally begin to run in mortgage/deed of trust contract situations when formally accelerated by written notice including by notice of a nonjudicial foreclosure or by the filing of a foreclosure lawsuit VRRSUS inconsistent recent attempts by foreclosing mortgagees to argue to courts that they have the power to decelerate an acceleration in foreclosure cases by written notice to the borrower, thereby restarting the statute of limitations all over again.

28. The UCC requires that an allonge to a negotiable instrument such as a promissory note be affixed to the note VERSUS the contrary practice in court of foreclosing mortgagees submitting allonges on a separate sheet detached from the note, which are accepted into evidence inconsistently routinely by most courts in foreclosure cases.

29. Most courts continue to require monetary tender as a precondition to borrower relief, such as for securing a temporary restraining order preventing a nonjudicial foreclosure or for securing a stay pending appeal or for being allowed to go to trial to secure a TILA rescission VERSUS to the contrary the reality that no such security should be needed in such situations especially where ownership of the mortgage loan is in dispute, and that even if so the real property itself is partial or full substitute security.

30. One of the fundamental pillars of Anglo-Saxon Jurisprudence is the adversary system based on the premise that the truth is best determined in court if equally equipped and intelligent advocates argue their adverse positions before a disinterested neutral judiciary VERSUS the contrary reality that in foreclosure cases there has been an imbalance of advocacy and an imbalance of funding having the reverse effect than that intended by the adversary system in foreclosure cases.

31. Promissory notes secured by mortgages/deeds of trust on real property are traditionally considered to be negotiable instruments freely transferred like monetary currencies VERSUS to the contrary conditional payment instruments voiding negotiability.

32. Promissory notes secured by mortgages/deeds of trust on real property are often claimed to be UCC endorsed as bearer notes and possession said to be transferred to a holder VERSUS such promissory note endorsements being inconsistently rubber-stamped or inkjet applied and/or undated and/or unaccompanied by powers of attorney authorizing stamping and/or by signatures of individuals no longer employed by the endorsing company by the time the promissory note was created and/or affixed on a separate sheet of paper even though there is room at the bottom of the promissory note for endorsements.

33. Judicial independence is said to be one of the pillars of American democracy VERSUS inconsistently the undemocratic nature of judicial unaccountability especially prevalent in foreclosure litigation.

34. The judicial rejection of the borrowers’ early show-me-the-note foreclosure defense and the inconsistent judicial acceptance of the foreclosing mortgagees’ recent here-is-the-note foreclosure offense VERSUS the contrary reality that with respect to securitized mortgages/deeds of trust the note follows the mortgage due to investor equitable rights controlling the notes.

35. MERS in the stated capacity as nominee for lenders and their assignees is written into over 60 million mortgages in the United States VERSUS to the contrary there being no such capacity in the American laws of agency.

36. MERS in the stated capacity as nominee for lenders and their assignees is written into over 60 million mortgages in the United States VERSUS the failure inconsistently to identify which MERS is the nominee in foreclosure cases since there have been four separate MERS entities: MERS 1 (Merscorp Holdings, Inc., a Delaware corporation, which owns and runs the MERS electronic database), MERS 2 (Mortgage Electronic Registration System, Inc. formed in 1997 by MERS 1), MERS 3 (formed in 1998 as a Delaware corporation by MERS 2 as “NEW MERS, Inc.” lasting six months before changing its name to MERSCORP), and MERS 4 (a Delaware corporation created in 1999 by MERS 1 and also called Mortgage Electronic Registration Systems, Inc., the significance of which MERS is identified as the nominee in a specific mortgage being whether MERS’s 1998 corporate resolution authorizing signing officers applies.

37. Loan Modification procedures established by federal law are controlled by federal regulations and administered by private loan servicers based on borrower qualifying formulae VERSUS the inconsistent existence of conflicts of interest among loan servicers approving loan modifications and contrary restrictions embedded in securitized trust Pooling and Servicing Agreements.

38. Courts have been awarding major damages against banks in favor of and protecting investors in securitized trusts based on securities law violations of lending guidelines VERSUS the opposite treatment given homeowner/borrowers in foreclosure cases.

39. Courts have been awarding relief to lenders through retroactive application of judicial interpretations in foreclosure cases VERSUS inconsistently awarding relief to homeowner/borrowers through prospective application only of judicial interpretations, for example when comparing the United States Supreme Court TILA opinions in Beach in 1998 and Jesinoski in 2015.

40. State legislatures and courts have been requiring foreclosure attorneys to file sworn statements in foreclosure cases subject to disciplinary sanctions that they have personally researched and found the foreclosure paperwork they file in court to be valid in response to national robosigning crisis revelations VERSUS foreclosure attorneys inconsistently merely parroting the hearsay declarations of loan servicer representatives in their so-called attorney affirmations blindly accepted by courts even though contrary to the rules of evidence.

41. Court appointed sale commissioners and power of sale appointed sale trustees are considered neutral auctioneers VERSUS to the contrary they are in effect appointed or controlled often by foreclosing mortgagees providing the illusion of neutrality only.

42. State and federal laws require that litigation be brought in the name of a legal real party in interest having capacity to sue which in foreclosure cases means that a purported foreclosing mortgagee with legal capacity must own the loan when filing a foreclosure lawsuit VERSUS the inconsistent misuse of that requirement by courts to allow substitution of the real owner of the loan during the foreclosure lawsuit or to ratify the original filing during the foreclosure lawsuit, and to enforce a mortgage loan furthermore even if the stated original lender is a fictitious dba having no legal capacity to contract or to sue, not registered as such in the State or County in which the court is located.

43. Rocket dockets have been created by courts to quickly process foreclosure cases to eliminate crowded foreclosure case backlogs often denying borrowers a fair hearing VERSUS inconsistently the slow snails’ pace at which foreclosure appeals to the prejudice of borrowers foreclosed on are considered and disposed of.

44. Courts allow loan servicers to contract for force-placed insurance when borrowers reportedly fail to maintain adequate insurance VERSUS loan servicers as well as lenders often found to be self-dealing, owning an interest in force-placed insurance entities or receiving kickbacks from such entities, resulting in above-market charges in foreclosure cases or even contrived insurance deficiencies charged to borrowers who have current insurance actually in place.

45. The great majority of mortgage loan monthly payments are tied in amount to various changing interest rates subject to changing published indexes supposedly outside the control of lenders VERSUS evidence that at least one such index, the London Libor Rate, has to the contrary been found by regulators to have been continually manipulated by major banks, the courts inconsistently granting relief in the form of damages to investors, but not to borrowers.

46. Discovery is essential to borrowers for winning foreclosure cases VERSUS many courts have to the contrary restricted such discovery, concluding that it would be too burdensome to foreclosing mortgagees or inconsistently irrelevant based on outdated foreclosure case precedents.

47. Courts including the weak opinion of the California Supreme Court in Yvanova have created a distinction between void and voidable note and mortgage assignments stemming from securitized trust transfers VERSUS when in reality to the contrary the issue being not whether a mortgage assignment violated the securitized trust Pooling and Servicing Agreement and thus enforceable or not, and not even whether Remic tax laws were violated, but whether the foreclosing mortgagee can prove it owns the mortgage loan or not based on the validity of the assignment pursuant to the rules of evidence verifying standing.

48. Foreclosing mortgagees whether in foreclosure or ejectment proceedings as plaintiffs have the burden of proof VERSUS courts to the contrary frequently shifting that burden unfairly to borrowers which is often impossible for borrowers to satisfy either financially or time-wise.

49. Foreclosing securitized trust mortgagees as defendants routinely remove borrower state court lawsuits to federal district courts based on diversity of citizenship or there being a federal question involved in the case VERSUS federal district courts to the disadvantage of homeowner/borrowers apply different pleading and jurisdictional requirements that favor foreclosing mortgagees that can result in dismissals with prejudice against borrowers inconsistent with what the result would have been in state courts.

50. Borrowers who receive adverse foreclosure, confirmation, eviction and/or denials of temporary restraining orders against nonjudicial auction decisions have the right to appeal and for a stay of enforcement pending appeal by posting adequate security VERSUS the practice of courts inconsistently to ignore the value of the real property itself in whole or in part as substitute security.

Gary Victor Dubin

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Manager And Two Debt Collectors Plead Guilty In $31 Million Fraudulent Debt Collection Scheme

Manager And Two Debt Collectors Plead Guilty In $31 Million Fraudulent Debt Collection Scheme

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Wednesday, June 15, 2016

Manager And Two Debt Collectors Plead Guilty In $31 Million Fraudulent Debt Collection Scheme

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HEATHER GASTA, a/k/a “Heather Brez,” a former manager of a Buffalo, New York-based debt collection company (the “Company”), pled guilty today to participating in a scheme to coerce thousands of victims across the country through false threats and representations into paying a total of more than $31 million to the Company to resolve debts these victims purportedly owed.  Earlier this week, COLUMBUS SIMMONS, a/k/a “Timothy Ham,” and WILLIAM CLARK, a/k/a “John Harvey,” two former debt collectors at the Company, also pled guilty for their roles in the debt collection scheme.  GASTA, SIMMONS, and CLARK each pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud before U.S. District Judge Katherine Polk Failla.  To date, nine former employees of the Company have pled guilty to participating in the scheme.

U.S. Attorney Preet Bharara said: “As they admitted in court this week, these defendants were key members of a band of predatory debt collectors, or as they called themselves, ‘the elite team.’  Armed with telephones and a litany of threatening lies, they and others at the Company coerced thousands of desperate, debt-ridden victims to send them tens of millions of dollars.  In a practice they called ‘juicing the balance,’ these defendants also falsely inflated the debt owed by the victims so they could collect even more.”

According to the allegations contained in the Indictment to which GASTA, SIMMONS, and CLARK pled guilty and statements made during their plea proceedings:

Between 2010 and February 2015, GASTA, SIMMONS, CLARK, and their co-defendants (collectively, the “defendants”) routinely attempted to trick and coerce thousands of victims throughout the United States into paying millions of dollars in consumer debts through a variety of false statements and false threats.  The defendants, using a variety of aliases, falsely told victims, among other things, that: (1) the Company was affiliated with local government and law enforcement agencies, including the “county” and the district attorney’s office; (2) the consumers had committed criminal acts, such as “wire fraud” or “check fraud,” and if they did not pay the debt immediately, warrants or other process would be issued, at which point they would be arrested or hauled into court; (3) the victims would have their driver’s licenses suspended if they did not pay their debts immediately; (4) the Company was a law firm or mediation firm and that the Company’s employees were working with lawyers, a law firm, mediators, or arbitrators; and (5) a civil lawsuit would be filed, or was pending, against the victims for failing to pay their debts.

As a further part of the scheme, the defendants lied to victims by falsely inflating the balances of the debts so that they could collect more money from the victims than the victims actually owed, a practice known within the Company as “juicing” balances.

GASTA, SIMMONS, and CLARK were members of the Company’s so-called “elite team,” which used particularly aggressive and egregious tactics in attempting to trick consumers into paying debts.  GASTA also served as a Company manager.

*                *                *

GASTA, 41, SIMMONS, 46, and CLARK, 30, all of Buffalo, New York, each pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison and three years of supervised release.  The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

GASTA, is scheduled to be sentenced on September 30, SIMMONS on September 23, and CLARK on September 29, 2016, respectively, before Judge Failla.

In total, nine former employees of the Company have pled guilty to defrauding consumers as part of this debt collection scheme.  In addition to the pleas of GASTA, SIMMONS and CLARK, former Company mangers Mark Lavin and John Salatino and debt collectors Jessica Mann, Charles Starks, Michael Calandra, and Jennifer Sherk each pled guilty for their roles in the fraud.  The other defendants who have not pled guilty are presumed innocent unless and until proven guilty.

On or about May 20, 2016, Mann was sentenced by Judge Failla to a prison term of one year and one day.  The sentencing of the other defendants who have pled guilty is pending.

Mr. Bharara praised the efforts of the Office’s Criminal Investigators.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Edward A. Imperatore and Jordan L. Estes are in charge of the prosecution.

16-169
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CFPB Supervision Finds Mortgage Servicers’ Ongoing Technology Failures and Process Breakdowns Trigger Rule Violations

CFPB Supervision Finds Mortgage Servicers’ Ongoing Technology Failures and Process Breakdowns Trigger Rule Violations

FOR IMMEDIATE RELEASE:
June 22, 2016

CONTACT:
Office of Communications
Tel: (202) 435-7170

CONSUMER FINANCIAL PROTECTION BUREAU SUPERVISION FINDS MORTGAGE SERVICERS’ ONGOING TECHNOLOGY FAILURES AND PROCESS BREAKDOWNS TRIGGER RULE VIOLATIONS
CFPB Releases Special Edition of Supervision Highlights and Updates Mortgage Servicing Exam Procedures

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) released a special edition supervision report focused specifically on mortgage servicers. The report found that some mortgage servicers continue to use failed technology that has already harmed consumers, putting the company in violation of the CFPB’s new servicing rules. In its examinations covering numerous mortgage servicers since the new CFPB rules took effect in January 2014, CFPB examiners have found violations because of deficient technology and process breakdowns. Specifically, examiners have observed problems with loss mitigation and servicing transfers. To spur industry in its general compliance with CFPB rules, the Bureau today is also releasing an updated mortgage servicing exam manual.

“Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules,” said CFPB Director Richard Cordray. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”

Mortgage servicers are responsible for collecting payments from the mortgage borrower and forwarding those payments to the owner of the loan. They handle customer service, collections, loan modifications, and foreclosures. Even before the financial crisis, the mortgage servicing industry at times experienced problems with bad practices and sloppy recordkeeping. As millions of borrowers fell behind on their loans because of the crisis, many servicers were unable to provide the level of service necessary to meet homeowners’ needs.

To address these widespread mortgage servicing problems, the CFPB put in place new, common-sense rules designed to eliminate surprises and runarounds for homeowners. The rules require servicers to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments, and correct errors on request. The rules also include protections for struggling homeowners, including those facing foreclosure. Compliance with many of these requirements necessitates strong policies and procedures related to systems and technology.

The CFPB’s supervision program has made it a priority to address mortgage servicing problems. Today’s report includes supervision work completed between January 2014 and April 2016. While the servicing market has made some investments in compliance, those investments have not been sufficient across the marketplace to ensure compliance. CFPB examiners found that outdated and deficient technology poses risks to consumers across a number of mortgage servicers. In addition, several mortgage servicers lack proper training, testing, and auditing of their computer systems and software platforms and those of their service providers. As a result of this insufficient investment, mortgage servicing problems continue to plague consumers. Among the mortgage servicing problems observed by CFPB examiners:

  • Information about loan modifications is late, incorrect, or deceptive due to technological breakdowns or malfunctions: CFPB examiners found problems with loan modification acknowledgement notices, including sending them too late and having incorrect information or deceptive statements. Examiners found one or more servicers failed to send any acknowledgement notices due to a repeated processing platform malfunction over a significant period of time. These breakdowns caused delays in converting trial modifications to permanent modifications, resulting in harm to borrowers.
  • Consumers get the runaround when loans transfer to a new servicer with incompatible computer systems: The rights to manage a loan are frequently bought and sold among servicers. Transferring loans during the loan modification process heightens risks to consumers, including the risk that documents and information might not be accurately transferred to the new servicer. CFPB examiners found that a number of servicers had incompatible technology platforms that led, in part, to the new servicers failing to identify and honor modification agreements already in place.

Where CFPB examiners find violations of law or other significant problems or weaknesses, they alert the institutions to their concerns and outline necessary remedial measures. When appropriate, the CFPB opens investigations for potential enforcement actions. The CFPB expects all entities under its supervision to respond to customer complaints and identify major issues and trends that may pose broader risks to their customers. The CFPB often finds problems during supervisory examinations that are resolved without an enforcement action. When examiners find violations of law, they direct entities to change their conduct and remediate consumers as applicable.

CFPB examiners also observed that some servicers have made significant improvements in the last several years, in part by enhancing and monitoring their service platforms, staff training, coding accuracy, auditing, and allowing for greater flexibility in operations. For example, one or more servicers had tools in place to search, review, and track complaint records for potential regulatory violations. One or more servicers also created a complaint governance committee to oversee all customer complaints to ensure they receive appropriate treatment.

Mortgage Servicing Exam Procedures
The CFPB regularly publishes a mortgage servicing chapter of the CFPB Supervision and Examination Manual to reflect regulatory changes, to make technical corrections, and to update examination priorities. Today, the CFPB released a third update to its exam procedures. The exam procedures offer valuable guidance to financial institutions and mortgage companies on what the CFPB will be looking for in its exams. Among other things, mortgage servicers should note a greater emphasis in exams on the following:

  • Complaint handling and requests by troubled borrowers: The CFPB has enhanced the section related to consumer complaints to highlight that examiners will be reviewing whether the servicer has an adequate process for expedited evaluation of complaints or information requests from borrowers facing foreclosure. The possibility of foreclosure puts even more weight on the importance of an appropriate complaint escalation process, which is essential to any compliance management system.
  • Discrimination issues: The CFPB is conducting targeted reviews of mortgage servicers’ compliance with fair lending laws. This includes looking at those servicers that are creditors, such as those that participate in a credit decision about whether to approve a mortgage loan modification. These reviews include making sure creditors do not discriminate in any aspect of a credit transaction because of race, color, religion, national origin, sex, marital status, age, income coming from a public assistance program, or an applicant’s exercise of certain consumer protection rights.

This Supervisory Highlights Mortgage Servicing Special Edition is available at: http://www.consumerfinance.gov/policy-compliance/guidance/supervision-examinations/supervisory-highlights-mortgage-servicing-special-edition-issue-11/

The updated mortgage servicing exam procedures is available at: http://www.consumerfinance.gov/policy-compliance/guidance/supervision-examinations/mortgage-servicing-examination-procedures/

###

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

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Wall Street Donors to Clinton: Pick Warren and Your Fundraising Gets It

Wall Street Donors to Clinton: Pick Warren and Your Fundraising Gets It

NY MAG-

Wall Street donors have a message for Hillary Clinton: You can have our cash or Elizabeth Warren as your running mate, but you can’t have both. Dozens of anonymous financial fat cats tell Politico that Vice-President Warren would be “damaging to the economy” — especially the “economy” of Hillary for America.

“If Clinton picked Warren, her whole base on Wall Street would leave her,” a top Democratic donor told the political-news outlet. “They would literally just say, ‘We have no qualms with you moving left, we understand all the things you’ve had to do because of Bernie Sanders, but if you are going there with Warren, we just can’t trust you, you’ve killed it.’”

If the Clinton campaign decided to plant a story to amplify the credibility-enhancing potential of a Warren pick to grieving Sandernistas, this is pretty much how it would read: The dozens of big-money donors all insisted on anonymity because “they feared Warren’s wrath”; they warn that a Vice-President Warren could jeopardize a deal on their preferred version of corporate tax “reform”; they suggest Warren doesn’t feel “comfortable spending time with the rich people you need to raise money from”; and they say there is a “chance for much better relations between business and the White House than during President Barack Obama’s tenure” — a tenure that was so unfriendly to business, it featured the bailout of the financial sector, a “free trade” agreement that actually offerstrade protection to well-connected American industries, and a cabinet staffed with no small number of former Wall Street executives — but not if Warren is in the White House serving as the wet-blanket-in-chief.

[NY MAG]

image: Money.cnn

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OCWEN LOAN SERVICING, LLC v. BURGETTE | OHIO Appeals Court – because the affidavit evidences that her knowledge with respect to those facts was derived from Ocwen’s business records, her affidavit did not satisfy Ocwen’s burden of establishing the absence of a genuine issue of fact with respect to Mr. Burgette’s default

OCWEN LOAN SERVICING, LLC v. BURGETTE | OHIO Appeals Court – because the affidavit evidences that her knowledge with respect to those facts was derived from Ocwen’s business records, her affidavit did not satisfy Ocwen’s burden of establishing the absence of a genuine issue of fact with respect to Mr. Burgette’s default

2016-Ohio-3102

OCWEN LOAN SERVICING, LLC, Appellee,
v.
DENNIS L. BURGETTE, et al., Appellants.

C.A. No. 15CA010785.
Court of Appeals of Ohio, Ninth District, Lorain County.
May 23, 2016.
ROBERT CABRERA, Attorney at Law, for Appellants.

KIMBERLY Y. SMITH RIVERA, Attorney at Law, for Appellee.

DECISION AND JOURNAL ENTRY

MOORE, Presiding Judge.

{¶1} Defendants-Appellants Dennis and Linda Burgette appeal from the judgment of the Lorain County Court of Common Pleas. We affirm in part, reverse in part, and dismiss in part.

I.

{¶2} In 2007, Mr. Burgette executed a promissory note in favor of Bank of America, N.A. for the property located at 41641 Rambler Avenue in Elyria. Mr. Burgette and Ms. Burgette signed a mortgage with Bank of America, N.A., granting it a security interest in the property. At some point, the note was endorsed in blank and, in September 2012, the mortgage was assigned to Plaintiff-Appellee Ocwen Loan Servicing, LLC (“Ocwen”).

{¶3} In August 2013, Ocwen filed a complaint in foreclosure and for reformation of mortgage against Mr. and Ms. Burgette, Blue View Corporation, and the Lorain County Treasurer. Mr. Burgette’s counsel filed an answer on behalf of “Defendants, [Mr.] Burgette, et al[.],” denying the majority of the allegations. Subsequently, after receiving leave, Ocwen filed an amended complaint which added the unknown spouse of Mr. Burgette as a Defendant and excluded the claim for reformation of the mortgage. The amended complaint acknowledged that the personal obligations of Mr. Burgette on the note were discharged in bankruptcy and that Ocwen was not seeking a personal judgment against Mr. Burgette. The amended complaint asserted that the mortgage and note were in default and that Ocwen had satisfied all conditions precedent. Ocwen alleged that, because the note had been accelerated, it was entitled to recover $69,923.41 (the principal amount due and owing) from the sale of the property plus interest. Ocwen further asserted that Blue View Corporation might claim an interest in the property, but that its mortgage was subordinate to Ocwen’s. Ocwen attached to the complaint a copy of the note, mortgage, assignment of the mortgage, and an affidavit incorporating a stipulated entry from another case indicating that Blue View Corporation’s mortgage was subordinate to Bank of America, N.A.’s mortgage.

{¶4} No party filed an answer to the amended complaint. Thereafter, Ocwen filed a motion for default and summary judgment. It sought default judgment against Ms. Burgette, Blue View Corporation, the unknown spouse of Mr. Burgette and summary judgment against Mr. Burgette. Ocwen attached to the motion an affidavit along with a copy of the note and mortgage. Mr. Burgette’s counsel filed a combined motion in opposition and motion to dismiss on behalf of the “Defendants, [Mr.] Burgette, et al.” Ocwen responded, and for the first time asserted that, because Mr. Burgette had failed to file an answer to the amended complaint, he had waived all affirmative defenses, and the allegations in the complaint should be deemed admitted.

{¶5} The trial court granted a default judgment in favor of Ocwen against Ms. Burgette, Blue View Corporation, and the unknown spouse of Mr. Burgette. Additionally, it denied Mr. Burgette’s motion to dismiss and granted summary judgment to Ocwen against Mr. Burgette. In so doing, the trial court did not address whether Mr. Burgette had waived his affirmative defenses or the consequences of Mr. Burgette’s failure to answer. However, in light of the wording of the entry, it appears the trial court declined to adopt Ocwen’s argument concerning those issues.[1]

{¶6} Mr. and Ms. Burgette have appealed, raising two assignments of error for our review.

II.

{¶7} Initially, we address whether Ms. Burgette has standing to appeal the issues raised. Ocwen has argued that she lacks standing to pursue an appeal in this case given that none of the arguments raised relate to the default judgment entered against her.

{¶8} The trial court granted a default judgment against Ms. Burgette after it determined that she failed to file an answer or otherwise plead. Ms. Burgette does not challenge the grant of default judgment against her or otherwise assert that the trial court erred in determining she failed to answer or plead. Instead, she challenges the trial court’s grant of summary judgment to Ocwen against Mr. Burgette and the trial court’s denial of what it characterized as Mr. Burgette’s motion to dismiss.[2] Ms. Burgette has not demonstrated that she has been aggrieved by the trial court’s rulings that have been appealed or explained how the rulings adversely affected her rights in light of the default judgment entered against her. See Smith v. Allied Home Mtge. Corp., 9th Dist. Lorain No. 12CA010145, 2012-Ohio-5434, ¶ 4. Accordingly, Ms. Burgette has failed to demonstrate that she has standing to appeal these issues, and we dismiss the appeal with respect to her. See id.

III.

ASSIGNMENT OF ERROR I

THE TRIAL COURT[‘]S DECISION GRANTING [OCWEN’S] MOTION FOR SUMMARY JUDGMENT WAS AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE.

{¶9} Mr. Burgette argues in his first assignment of error that the trial court erred in granting summary judgment to Ocwen.

{¶10} While Mr. Burgette alleges that the judgment was against the manifest weight of the evidence, this Court does not apply that standard in reviewing a trial court’s decision granting summary judgment.

{¶11} An appellate court reviews an award of summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105 (1996). It applies the same standard as the trial court, viewing the facts of the case in the light most favorable to the non-moving party and resolving any doubt in favor of the non-moving party. Viock v. Stowe-Woodward Co., 13 Ohio App.3d 7, 12 (6th Dist.1983). Pursuant to Civ.R. 56(C), summary judgment is proper if:

(1) No genuine issue as to any material fact remains to be litigated; (2) the moving party is entitled to judgment as a matter of law; and (3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing such evidence most strongly in the favor of the party against whom the motion for summary judgment is made, that conclusion is adverse to that party.

Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327 (1977). The moving party bears the initial burden of informing the trial court of the basis for the motion and pointing to parts of the record that show the absence of a genuine issue of material fact. Dresher v. Burt, 75 Ohio St.3d 280, 292-93 (1996). Once this burden is satisfied, the non-moving party bears the burden of offering specific facts to show a genuine issue for trial. Id. at 293; Civ.R. 56(E).

{¶12} Below, and on appeal, Mr. Burgette asserted that Ocwen’s affidavit in support of its motion for summary judgment was insufficient to demonstrate the absence of a genuine issue of material fact. Specifically, Mr. Burgette challenges the failure of Mary Maguire, the affiant, to append any documentation in support of her assertion that Mr. Burgette was in default. He also argues that the affidavit does not fully explain the basis of her knowledge or identify with particularity the nature of the records on which she relied.

{¶13} “[A] foreclosure requires a two[-]step process. The prerequisites for a party seeking to foreclose a mortgage are execution and delivery of the note and mortgage; valid recording of the mortgage; default; and establishing an amount due.” (Internal quotations and citations omitted.) Sovereign Bank, N.A. v. Singh, 9th Dist. Summit 27178, 2015-Ohio-3865, ¶ 9. “Once a court has determined that a default on an obligation secured by a mortgage has occurred, it must then consider the equities of the situation in order to decide if foreclosure is appropriate.” (Internal quotations and citation omitted.) Id.

{¶14} “[A]ffidavits submitted in support of or in opposition to motions for summary judgment `shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated in the affidavit.'” Bank of Am., N.A. v. Loya, 9th Dist. Summit No. 26973, 2014-Ohio-2750, ¶ 12, quoting Maxum Indemnity Co. v. Selective Ins. Co. of S.C., 9th Dist. Wayne No. 11CA0015, 2012-Ohio-2115, ¶ 18, quoting Civ.R. 56(E). “In addition, Civ.R. 56(E) provides that `[s]worn or certified copies of all papers or parts of papers referred to in an affidavit shall be attached to or served with the affidavit.'” Deutsche Bank Natl. Trust Co. v. Dvorak, 9th Dist. Summit No. 27120, 2014-Ohio-4652, ¶ 10. “Generally, `a mere assertion of personal knowledge satisfies the personal knowledge requirement of Civ.R. 56(E) if the nature of the facts in the affidavit combined with the identity of the affiant creates a reasonable inference that the affiant has personal knowledge of the facts in the affidavit.'” Loya at ¶ 12, quoting Bank One, N.A. v. Lytle, 9th Dist. Lorain No. 04CA008463, 2004-Ohio-6547, ¶ 13. “If particular averments contained in an affidavit suggest that it is unlikely that the affiant has personal knowledge of those facts, [however,] then * * * something more than a conclusory averment that the affiant has knowledge of the facts [is] required.” Loya at ¶ 12, quoting Bank One v. Swartz, 9th Dist. Lorain No. 03CA008308, 2004-Ohio-1986, ¶ 14. “This Court `cannot infer personal knowledge from the averment of personal knowledge alone.'” Loya at ¶ 12, quoting Maxum Indemnity Co. at ¶ 22.

{¶15} Ms. Maguire averred that she had “personal knowledge of the facts and matters stated [in the affidavit]” and was the “Contract Management Coordinator” for Ocwen. She stated that, “[i]n the regular performance of [her] job functions, [she] ha[s] access to and [is] familiar with the business records [(“the Records”)] relating to the servicing of the mortgage loan at issue[.]” She asserted that “[t]he records were made at or near the time by, or from information transmitted from, a person with knowledge of the Transactions.” Additionally, she indicated that she “ha[s] personal knowledge of the manner in which the Records are created, and [she] ha[s] reviewed and relied upon the Records in executing [the] Affidavit.” Ms. Maguire did not further clarify her job duties or explain in what capacity she relies upon the records.

{¶16} Ms. Maguire averred that, “[a]ccording to the Records, [Mr. Burgette’s] last payment received was applied to the September 1, 2011 payment, and [Mr. Burgette] is therefore in default by failing to tender the required monthly payments when due. All sums due and owing pursuant to the terms of the promissory note and mortgage have been accelerated.” Ms. Maguire also indicated that, “[a]ccording to the Records, as a result of the default on the Loan and the acceleration of the debt, there is due on the Loan a principal balance of $69,923.41, together with interest[.]” No documents evidencing the default accompanied the motion for summary judgment or were attached to her affidavit.

{¶17} Even assuming that Ms. Maguire’s affidavit established her personal knowledge of Ocwen’s business records, she acknowledged that her knowledge was based upon her review of those records in making the affidavit. Moreover, the averments at issue in her affidavit are prefaced by the phrase “[a]ccording to the Records[.]” Therefore, “while Ms. [Maguire] averred that Mr. [Burgette] failed to make payments as required by the terms of the note and mortgage, she failed to append any documentation in support of that averment. Thus, * * * [h]aving reviewed the business records attached to Ms. [Maguire’s] affidavit, we cannot conclude that a review of the records would have allowed her to attest to the fact[s] relevant to Mr. [Burgette’s] default.” U.S. Bank, N.A. v. Greenless, 9th Dist. Lorain No. 14CA010618, 2015-Ohio-356, ¶ 13. While this Court did not reverse on this issue in Greenless, it declined to do so only because Mr. Greenless failed to raise that issue. See id. As this issue was raised in the instant case below and on appeal, we conclude that, because Ms. Maguire did not attach the relevant documents upon which she relied in making her affidavit in violation of Civ.R. 56(E), and because the affidavit evidences that her knowledge with respect to those facts was derived from Ocwen’s business records, her affidavit did not satisfy Ocwen’s burden of establishing the absence of a genuine issue of fact with respect to Mr. Burgette’s default. See Dvorak, 2014-Ohio-4652, at ¶ 13.

{¶18} While Mr. Burgette has raised several other issues that he asserts demonstrate that the trial court erred in granting summary judgment, the majority of those he did not raise below in his brief in opposition, and as we have already determined summary judgment was not appropriate, we need not address them at this time.

{¶19} Mr. Burgette’s first assignment of error is sustained.

ASSIGNMENT OF ERROR II

THE TRIAL COURT ERRED IN DENYING [MR. BURGETTE’S] MOTION TO DISMISS PURSUANT TO RES JUDICATA[.]

{¶20} Mr. Burgette argues that the trial court erred in denying his motion to dismiss as Ocwen’s claims were barred by res judicata.

{¶21} Mr. Burgette asserted below that Ocwen sought “foreclosure on the same note and mortgage as were the subject of two prior actions, each having been dismissed pursuant to [Civ.R.] 41[(A)](1)(a)[,]” and thus, argued that “the instant action [was] barred by res judicata.” Therefore, Mr. Burgette maintained that the trial court lacked jurisdiction. Ocwen responded that res judicata did not bar the action and also asserted that Mr. Burgette was barred from raising affirmative defenses as he failed to answer the amended complaint.

{¶22} The trial court denied Mr. Burgette’s motion, concluding that the two cases to which Mr. Burgette pointed as being prior dismissals could not be considered as prior dismissals for purposes of the double-dismissal rule because they involved a loan other than the one at issue. The trial court did not address whether Mr. Burgette’s failure to assert the defense of res judicata in an answer to the amended complaint forfeited his ability to raise the issue; because resolution of that issue would not affect the outcome of this appeal, we will likewise refrain from addressing the issue.

{¶23} There is no argument, nor does the record support, that the complaint alone, or its attachments, would authorize the trial court to dismiss the action based upon res judicata. Further, the attachments to the motion to dismiss do not support Mr. Burgette’s argument either. Mr. Burgette asserted that Ocwen sought “to foreclos[e] on the same note and mortgage as were the subject of two prior actions[,]” and thus res judicata applied based upon U.S. Bank Natl. Assn. v. Gullotta, 120 Ohio St.3d 399, 2008-Ohio-6268. However, the attachments to the motion do not evidence the same. The attachments do not include the note or mortgage at issue in the prior cases. Additionally, Ocwen was not listed as a party in either of the attached complaints and the loans at issue in the attached complaints originated well before the note and mortgage at issue in this case were signed. Mr. Burgette failed to establish that Ocwen previously twice dismissed the same claims via Civ.R. 41(A)(1)(a). See Gullotta at ¶ 25. Further, Mr. Burgette did not direct the trial court or this Court to any authority that would sanction the use of res judicata in light of these facts. See App.R. 16(A)(7). Mr. Burgette did not demonstrate that res judicata applied to bar Ocwen’s action.

{¶24} Mr. Burgette’s second assignment of error is overruled.

III.

{¶25} The appeal is dismissed with respect to Ms. Burgette. Mr. Burgette’s first assignment of error is sustained, and his second assignment of error is overruled. The judgment of the Lorain County Court of Common Pleas is affirmed in part, and reversed in part, and the matter is remanded for proceedings consistent with this opinion.

Appeal dismissed in part, judgment affirmed in part, reversed in part, and cause remanded.

There were reasonable grounds for this appeal.

We order that a special mandate issue out of this Court, directing the Court of Common Pleas, County of Lorain, State of Ohio, to carry this judgment into execution. A certified copy of this journal entry shall constitute the mandate, pursuant to App.R. 27.

Immediately upon the filing hereof, this document shall constitute the journal entry of judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the docket, pursuant to App.R. 30.

Costs taxed equally to both parties.

WHITMORE, J., HENSAL, J., CONCUR.

[1] As noted above, while Ocwen very briefly argued below in its reply brief that, because Mr. Burgette failed to answer the amended complaint, the allegations in the complaint should be deemed admitted, the trial court did not adopt this position, and Ocwen has not advanced this position on appeal. Accordingly, we will not address this issue on appeal and will proceed as though the allegations were not deemed admitted. See Deutsche Bank Natl. Trust Co. v. Byrd, 9th Dist. Summit No. 27280, 2014-Ohio-3704, ¶ 11 (concluding that the issue of whether borrower’s failure to deny conditions precedent with particularity in accordance with Civ.R. 9(C) resulted in an admission was not before the Court where bank failed to raise the issue in its summary judgment motion). We take no position on the merits of the issue.

[2] The record contains filings which indicate that Mr. Burgette’s counsel also may have been representing Ms. Burgette in the trial court. Some filings purport to be filed solely on behalf of Mr. Burgette, while others purport to be filed on behalf of the “Defendants[.]” For example, the combined motion in opposition to Ocwen’s motion for summary judgment and motion to dismiss states that it is being brought by the “Defendants[.]” Nonetheless, the trial court apparently viewed that filing as being filed only on behalf of Mr. Burgette. As Ms. Burgette has not challenged that finding on appeal, we accept the trial court’s characterization for purposes of this appeal.

 

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Posted in STOP FORECLOSURE FRAUD1 Comment

Parrish et al v FNMA | Va Sup Ct Unlawful Detainer Action Vacated and Dismissed

Parrish et al v FNMA | Va Sup Ct Unlawful Detainer Action Vacated and Dismissed

H/T Dave Krieger

PRESENT: Lemons, C.J., Mims, McClanahan, Powell, and Kelsey, JJ., and Russell and
Millette, S.JJ.

BRIAN D. PARRISH, ET AL.

OPINION BY

v. Record No. 150454 JUSTICE WILLIAM C. MIMS

June 16, 2016

FEDERAL NATIONAL MORTGAGE ASSOCIATION

FROM THE CIRCUIT COURT OF HANOVER COUNTY

J. Overton Harris, Judge

In this appeal, we consider whether a general district court has subject matter jurisdiction
under Code §§ 16.1-77(3) and 8.01-126 to adjudicate an action for unlawful detainer when a
homeowner challenges the validity of a trustee’s deed after foreclosure, and whether a circuit
court has such jurisdiction under Code §§ 16.1-106 and 17.1-513 in a de novo appeal from such
a proceeding. We also consider whether a circuit court may consider in a de novo appeal the
pleadings originally filed in the general district court proceeding.

I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW

Brian D. and Teresa D. Parrish owned a parcel of real property situated in Hanover
County, which they conveyed by deed of trust to Brian K. Stevens, trustee, to secure a note in the
principal amount of $206,100, plus interest. In May 2014, ALG Trustee, LLC, the substitute
trustee under the deed of trust, conveyed the parcel by trustee’s deed to Federal National
Mortgage Association (“Fannie Mae”). Fannie Mae thereafter sent the Parrishes a notice to
vacate. It later filed a summons for unlawful detainer in the general district court.

The Parrishes responded by alleging that the foreclosure was invalid because their deed
of trust incorporated 12 C.F.R. § 1024.41(g), which they asserted prohibits foreclosure if a
borrower submitted a completed loss mitigation application more than 37 days before the
foreclosure sale. They alleged that they had submitted such an application. They further alleged

that Fannie Mae (their lender as well as the foreclosure purchaser) and its agent had instigated
the foreclosure despite the pending application and in breach of the deed of trust. The court
awarded Fannie Mae possession and the Parrishes filed a de novo appeal in the circuit court.

In the circuit court, Fannie Mae filed a motion for summary judgment or motion in limine
in which it argued that its trustee’s deed was prima facie evidence of its right of possession. It
argued that the circuit court should exclude any defense contesting the validity of the foreclosure
from which the deed arose because the general district court lacked subject matter jurisdiction to
try title in a proceeding on unlawful detainer. Fannie Mae contended that because the circuit
court’s subject matter jurisdiction on appeal from the general district court was merely derivative
of the general district court’s subject matter jurisdiction, the circuit court also lacked such
jurisdiction. The Parrishes opposed Fannie Mae’s motion, arguing among other things that
because the appeal was de novo, the circuit court could not consider the pleadings filed originally
in the general district court, to which Fannie Mae referred in its motion. The court thereafter
granted Fannie Mae’s motion and awarded it possession of the parcel.

We awarded the Parrishes this appeal.

II. ANALYSIS

In one assignment of error, the Parrishes assert that the circuit court erred by granting
Fannie Mae’s motion for summary judgment and awarding it possession of the parcel. Fannie
Mae responds that the circuit court did not err because it lacked subject matter jurisdiction to
consider the validity of the foreclosure; the general district court had no subject matter
jurisdiction to try title, so the circuit court had none in the appeal.

Subject matter jurisdiction is a threshold question. Spencer v. City of Norfolk, 271 Va.
460, 462, 628 S.E.2d 356, 357 (2006). It is a question of law we review de novo. Glasser &
Glasser, PLC v. Jack Bays, Inc., 285 Va. 358, 369, 741 S.E.2d 599, 604 (2013). Subject matter

jurisdiction “is the authoritygranted through constitution or statute to adjudicate aclass of casesor controversies.” Morrison v. Bestler, 239 Va. 166, 169-70, 387 S.E.2d 753, 755 (1990). Indeciding questions ofsubject matterjurisdiction, weare not limited to the arguments raised bythe parties.Seeid.at 169-70, 387 S.E.2d at 755-56 (noting that courts mayraise questions ofsubject matter jurisdiction sua sponte and that parties can neither waive nor confersubject matterjurisdiction).

As courts not of record,general district courtsare creations of the GeneralAssembly.
Va. Const. art. VI, § 8; Code § 16.1-69.7. Theyare courts of limited jurisdiction andmay
exercise onlysuchsubject matterjurisdiction ashas been expresslyconferred by statute.
Addison v. Salyer, 185 Va. 644, 648, 40 S.E.2d 260, 262 (1946). It is well-settled that whenexercising its appellate jurisdiction in a de novo appeal, the circuit court’s subject matterjurisdiction is derivative of the court not of record from which that appeal is taken. Id.at651-52,
40 S.E.2d at 264. Therefore, whenexercising itsde novo appellate jurisdiction, the circuit court
has no moresubject matter jurisdiction than thegeneral district courthadin that court’s originalproceeding.1 Thus, the scope of thegeneral district court’ssubject matterjurisdiction is thedispositive issue here.

Code §§ 16.1-77(3) and 8.01-126 confer upon general district courtssubject matterjurisdiction to tryactions for unlawful detainer. However, we have expressly held that courts notof record have no subject matterjurisdiction to try title to real property. Addison, 185 Va. at648-49, 40 S.E.2d at 262; see alsoWarwick v. Mayo, 56 Va. (15 Gratt.) 528, 540-41 (1860) (“In

1A court’s appellate jurisdiction is distinct from its original jurisdiction. For example,
circuit courts have original jurisdiction over unlawful detaineractions under Code § 8.01-124 in
addition to appellate jurisdiction over such actions filed originally ingeneral district court, butthisgrant of original subject matter jurisdiction is not invoked in an appealfrom an unlawfuldetainer proceeding originally filed in ageneral district court.

3

Virginia, it is not pretended that [courts not of record]have ever beenempowered byany statute
to try, without writ, titles to land in civil causes.”).In the 156 years sinceWarwick and the 70
years since Addison, the General Assembly has amended the provision currentlycodified atCode § 8.01-126 severaltimes. See, e.g., 1870-71 Acts ch. 130; 1890 Actsch. 213; 1904 Actsch. 211; 1940 Acts ch. 193. Nevertheless, it has notexpresslyconferred upon general district
courtssubject matterjurisdiction to try title in an unlawful detainer action. We presume that the
legislature is aware of its own statutes conferringsubject matter jurisdiction upon courts not ofrecordand our precedents interpreting them. Andrews v. Commonwealth, 280 Va. 231, 286, 699
S.E.2d 237, 269 (2010). Its silence thereforeevidences approval. Manchester OaksHomeowners Ass’n v. Batt, 284 Va. 409, 428, 732 S.E.2d 690, 702 (2012).

However, this creates a conundrum because someactions for unlawful detainernecessarily turn on the question of title. Unlawful detainer is an action against a defendant who
lawfullyentered into possession of real property but whose right to lawful possession has sinceexpired. It is brought bya plaintiff lawfully entitled to possession at the time of suit, which thedefendantis then unlawfully withholding. Allen v. Gibson, 25 Va. (4 Rand.) 468, 473 (1826).
The validity of the plaintiff’sright of possession is an issue that, when disputed, must bedetermined in the adjudication of the unlawful detainer action. Id. at 474. The plaintiff mustshoweither(1) prior actual possession, which was then yielded to the defendantunder sometemporary or defeasible estatethat has ended, or (2) a right of possession acquired after thedefendant’s entry. Id.at 474-76.

Whether the plaintiffhas a right of possession will not alwayspresenta question of title.
Such a question will never arise in thefirst class ofcases, where the plaintiff’s right is based on
prior actual possession. For example, a landlord may bringan action for unlawful detaineragainst a tenant who holds possession of the leased premises in violation of the lease orafter it

4

5
has expired. In such cases, the defendant’s possession is derivative of the plaintiff’s title, and the
defendant is not permitted to challenge it. Emerick v. Tavener, 50 Va. (9 Gratt.) 220, 223
(1852). However, a plaintiff in the second class of cases, who claims a right of possession
acquired after the defendant’s original, lawful entry, must show the validity of that right. When
the plaintiff’s after-acquired right of possession is based on a claim of title, the plaintiff may be
required to establish the validity of that title. Corbett v. Nutt, 59 Va. (18 Gratt.) 624, 648
(1868).2 Actions for unlawful detainer in the foreclosure context generally fall into this
category.3
2 Where the right of possession depends solely upon a claim of title, the question of
whether that title is valid is a threshold question in an unlawful detainer action. While a court’s
resolution of that question in an unlawful detainer action may not, by statute, be preclusive in
actions for ejectment or to quiet title, the court trying the unlawful detainer action nevertheless
must weigh the parties’ competing arguments about validity to determine whether a plaintiff’s
prima facie right of possession evidenced by a trustee’s deed has been rebutted by the defendant.
3 In her opinion concurring in part and dissenting in part, Justice McClanahan overlooks
this distinction between (1) the unlawful detainer plaintiff who once held both title and
possession and thereafter yielded possession temporarily, on terms, to the unlawful detainer
defendant who continues to hold possession in violation of those terms, and (2) the unlawful
detainer plaintiff who never held possession and claims a right of possession based solely upon a
claim that he acquired title after the defendant lawfully entered. While the first plaintiff may
bring an unlawful detainer action to “recover” possession, the second cannot–because he never
had it to begin with. The latter plaintiff can only bring such an action to “obtain” possession for
the first time. When he does so, the validity of his claimed right of possession cannot be severed
from the validity of his claimed title, because his title is the only thing from which any right of
possession appears. Thus, it is he, the unlawful detainer plaintiff, who by seeking to oust the
defendant of possession (based upon a claim of after-acquired title) seeks to establish complete
title (in the terms of Pannill v. Coles, 81 Va. (6 Hans.) 380, 384 (1886)), by “unit[ing] in himself
the possession, the right of possession, and also the right of property.” 2 William Blackstone,
Commentaries *198.
In the specific context of a foreclosure, the foreclosure purchaser plaintiff comes to court
claiming a right of possession based on a claim of legal title, itself based on the trustee’s deed by
which the trustee has ostensibly conveyed to the foreclosure purchaser the legal title conveyed in
the deed of trust to the trustee by the defending homeowner. Meanwhile, the defending
homeowner has possession, which the foreclosure purchaser plaintiff seeks to oust. The question
of which of the two parties is entitled to possession is inextricably intertwined with the validity
of the foreclosure purchaser’s title.

In most foreclosure cases, a trustee’s deed will satisfy the foreclosure purchaser’s burden
to establish that it acquired a right of possession after the homeowner’s original, lawful entry,
and the homeowner will have no good-faith basis to contest it. However, in limited
circumstances, the homeowner could allege facts sufficient to place the validity of the trustee’s
deed in doubt. In such cases, the general district court’s lack of subject matter jurisdiction to try
title supersedes its subject matter jurisdiction to try unlawful detainer and the court must dismiss
the case without prejudice. Warwick, 56 Va. (15 Gratt.) at 542 (“[O]n being convinced that the
case involves a bona fide claim of title to real estate,” a court not of record “is bound to dismiss
[the proceeding] immediately.”).4

4 We said in Warwick that subject matter jurisdiction to try title must be “expressly
conferred [upon courts not of record] by statute.” 56 Va. (15 Gratt.) at 542. Code §§ 16.1-77(3)
and 8.01-126 do not expressly confer that power upon general district courts. The General
Assembly may, of course, amend the statutes to do so, or it may be satisfied that circuit courts
have subject matter jurisdiction both to try title and to adjudicate actions for unlawful detainer
under Code § 8.01-124, which permits foreclosure purchasers to initiate unlawful detainer
actions in circuit court.

This holding does not mean that any naked allegation that the trustee’s deed is invalid
will put the deed in doubt, thereby divesting the general district court of jurisdiction. The
question of title raised by the homeowner’s allegations must be legitimate. Id. at 542 (requiring
dismissal if “the case involves a bona fide claim of title” (emphasis added)). Because “a court
always has jurisdiction to determine whether it has subject matter jurisdiction,” Morrison, 239
Va. at 170, 387 S.E.2d at 755, the court has the authority to explore the allegations to determine
whether, if proven, they are sufficient to state a bona fide claim that the foreclosure sale and
trustee’s deed could be set aside in equity. Stated differently, the allegations must be sufficient
to survive a demurrer had the homeowner filed a complaint in circuit court seeking such relief.

For example, we have indicated that a trustee’s deed could be set aside in “cases
involving fraud, collusion with the purchaser, and a foreclosure sale price of such gross
inadequacy that it shocks the conscience of the court.” Ramos v. Wells Fargo Bank, NA, 289
Va. 321, 324 n.*, 770 S.E.2d 491, 494 n.* (2015) (per curiam) (internal alteration and quotation
marks omitted). This list is not exhaustive. We have also said that a foreclosure sale could be
set aside in equity when it was conducted in material breach of the deed of trust. Smith v.
Woodward, 122 Va. 356, 374, 94 S.E. 916, 921 (1918) (“[A] court of equity will not permit a
grantor in trust to be deprived of his property by an unauthorized act of the trustee, and will set
aside a sale and conveyance where the trustee has exceeded the authority conferred upon him, or
sold the grantor’s land after the purposes of the trust have been accomplished, and especially
where the purchaser has notice, actual or constructive, of the facts.”); see also Wasserman v.
Metzger, 105 Va. 744, 752-53, 54 S.E. 893, 895 (1906) (collecting cases).5

5 A general allegation that the trustee breached the deed of trust is not sufficient. The
homeowner’s allegations must (1) identify with specificity the precise requirements in the deed
of trust that he or she asserts constitute conditions precedent to foreclosure, (2) allege facts
indicating that the trustee failed to substantially comply with them so that the power to foreclose
did not accrue, and (3) allege that the foreclosure purchaser knew or should have known of the
defect. See Squire v. Va. Hous. Dev. Auth., 287 Va. 507, 515-18, 758 S.E.2d 55, 60-61 (2014).

6 Our decision today that general district courts lack subject matter jurisdiction over
unlawful detainer cases where the homeowner raises a legitimate question of title does not
reopen for collateral attack past cases where homeowners could have presented such questions
but did not. General district courts have subject matter jurisdiction over unlawful detainer cases.
What they lack is subject matter jurisdiction to try title. Where the homeowner presented no
question of title, the court’s jurisdiction was complete.

Similarly, where a homeowner does present a question of title but the general district
court determines that it is not legitimate, that decision may be voidable if the homeowner

If the general district court satisfies itself that the allegations are insufficient, it retains
subject matter jurisdiction and may adjudicate the case on the merits. However, if the court
determines that the allegations are sufficient, it lacks subject matter jurisdiction over the case and

it must be dismissed without prejudice.6 The foreclosure purchaser may then seek appropriate

challenges it as erroneous on direct appeal. However, the decision would not be subject to
collateral attack because the general district court will have rendered no judgment it lacked
subject matter jurisdiction to render.

7 Nothing in our decision today relieves a homeowner of the obligation to pay his or her
lender, which arises from the note, not the deed of trust. The deed of trust merely secures the
indebtedness evidenced by the note. As we indicated in Mathews v. PHH Mortgage Corp., 283
Va. 723, 732-33 & n.2, 724 S.E.2d 196, 200 & n.2. (2012), a breach by one party of the note
does not relieve the other party of its obligations under the deed of trust, or vice versa.

remedies in the circuit court under its original jurisdiction.7

We must now apply this rule to the case before us. The Parrishes’ only detailed
allegations are in the pleadings they filed in the general district court. However, in their other
assignment of error they assert that the circuit court erred by considering those pleadings in their
de novo appeal. They argue that the nature of a de novo appeal precludes such consideration.
Fannie Mae responds that the court did not err because Code § 16.1-112 requires the general
district court to transmit the record of the original proceedings to the circuit court when an appeal
is taken there.

The burden lies with the appellant to show reversible error below. Lindsey v. Lindsey,
158 Va. 647, 654, 164 S.E. 551, 553 (1932). Apart from Code § 16.1-106, the Parrishes cite no
legal authority for their argument. Although Code § 16.1-106 provides that appeals from courts
not of record are heard by the circuit court de novo, Code § 16.1-112 requires the lower court to
transmit its record to the circuit court. We have previously held that although de novo, an appeal
in the circuit court is a continuation of the original case. Stacy v. Mullins, 185 Va. 837, 840, 40
S.E.2d 265, 266 (1946). Accordingly, we find no basis to conclude that the circuit court erred by
considering the pleadings filed in the general district court.

Turning to the allegations set forth in those pleadings, we note that the Parrishes alleged
that their deed of trust incorporated 12 C.F.R. § 1024.41(g) as a condition precedent to
foreclosure. That regulation prohibits a foreclosure sale after a homeowner submits a complete

loss mitigation application under certain circumstances. They alleged that they submitted such
an application and that none of the exceptions provided in the regulation (which would have
permitted Fannie Mae and its agent to proceed to foreclosure notwithstanding the application)
applied. We may further infer from their allegations that the foreclosure purchaser, Fannie Mae,
was aware of the alleged violation of the deed of trust because it was the lender that allegedly
committed the violation. We conclude that these allegations are sufficient that, if proved, they
could satisfy a court of equity to set aside the foreclosure.

We therefore hold that the Parrishes raised a bona fide question of title in the unlawful
detainer proceeding, thereby divesting the general district court of subject matter jurisdiction.
Accordingly, the general district court lacked subject matter jurisdiction to try the unlawful
detainer action before it. The circuit court likewise lacked subject matter jurisdiction while
exercising its de novo appellate jurisdiction, because its subject matter jurisdiction was derived
from and limited to the subject matter jurisdiction of the court from which the appeal was taken.
Its authority therefore was limited to dismissing the proceeding without prejudice, thereby
enabling the foreclosure purchaser to pursue its choice of available remedies in the circuit court
under that court’s original jurisdiction.

III. CONCLUSION

We conclude by reiterating that our holding arises from the need to reconcile Addison
and Warwick (i.e., that courts not of record lack power to try title unless expressly conferred by
the General Assembly) with the scope of the subject matter jurisdiction conferred on general
district courts in Code § 8.01-126. We appreciate the concerns about the practical implications
of this holding raised by Justice Powell in her opinion concurring in part and dissenting in part.
We particularly note her observation that our holding provides no opportunity for a defending
homeowner to argue or prove that a trustee’s deed is simply invalid, whether the foreclosure

purchaser is a bona fide purchaser or not. However, these concerns are properly addressed to the
General Assembly. We must determine the scope of subject matter jurisdiction relying upon the
statutes as they are presently enacted.

For the reasons stated above, we vacate the judgment of the circuit court and dismiss the
summons for unlawful detainer, thereby restoring the parties to their status quo ante the
commencement of the unlawful detainer proceeding.

Vacated and dismissed.

JUSTICE McCLANAHAN, concurring in part and dissenting in part.

While I agree with the majority that the circuit court did not err in considering the
pleadings filed in the general district court, I disagree with the majority’s conclusion that the
general district court was divested of subject matter jurisdiction to try the unlawful detainer
action. Furthermore, because the Parrishes’ allegations of a breach of the deed of trust, even if
true, would not entitle the Parrishes to possession of the property in an unlawful detainer action, I
would affirm the judgment of the circuit court.

A. Subject Matter Jurisdiction

In a result-oriented approach, the majority creates, and then resolves, a question of
subject matter jurisdiction that has heretofore never existed. The majority accomplishes this
result by disregarding traditional principles of title to deprive the general district court of
jurisdiction expressly granted to it by the General Assembly. The majority eliminates right of
possession as an element of title and crafts an entirely new, albeit undefined, concept of “title”
along with a new procedure for adjudicating this vague right.

At the outset, the majority’s approach is premised upon a fundamental misunderstanding
of real property law and the nature of an unlawful detainer action. In particular, the majority

11
opinion fails to distinguish between right of possession – a degree of title to real property that is
subject to adjudication in an unlawful detainer action – and complete title, which is not at issue
in an unlawful detainer action. Well-settled principles of title establish that right of possession is
an element or degree of title in and of itself that does not depend on good and complete title.1
“The question to be determined in [an unlawful detainer] case is the right of possession, and to
this end the question of the complete title is not the question to be determined; and to maintain
the action the plaintiff need not have the complete title.” Pannill v. Coles, 81 Va. (6 Hans.) 380,
385 (1886). In Pannill, the Court explained that while an unlawful detainer action does not
involve “complete title,” it is an action “concerning title” because it determines “any element of
1 “There are several stages or degrees requisite to prove a complete title to
lands and tenements:
1st. The lowest and most imperfect degree of title consists in the mere
naked possession or actual occupation of the estate, without any apparent
right or any shadow or pretence of right to hold or continue such
possession. And at all events without such actual possession no title can be
completely good. 2d. The next step to a good and perfect title is the right of
possession, which may reside in one man while the actual possession is not
in himself, but in another. 3d. The mere right of property, the proprietatis,
without either the possession, or the right of possession, the mere right is in
him, the jus merum, and the estate of the owner is in such cases said to be
totally divested, and put to a right. 4th. A complete title to lands,
tenements, and hereditaments. For it is an ancient maxim of the law that no
title is completely good unless the right of possession be joined with the
right of property, which right is then denominated a double right, jus
duplicatum, or droit droit. And when, to this double right the actual
possession is also united, there is, according to the expression of Fleta, juris
et seisinae conjunctio, there and then only is the title completely legal.”
Pannill v. Coles, 81 Va. (6 Hans.) 380, 383-84 (1886) (emphasis added) (quoting 2
William Blackstone, Commentaries 195); see also 2 Henry St. George Tucker, Commentaries on
the Laws of Virginia 178-80 (3d ed. 1846); 2 John B. Minor, Institutes of Common and Statute
Law 511-15 (3d ed. 1882).

complete title,” i.e., right of possession. Id. at 385-86.2 The Court clarified that despite
“expressions” in previous cases “in which possession seems to have been contrasted with the
title,” a controversy concerning right of possession is a controversy concerning title. Id.; see also
Seitz v. Federal National Mortgage Ass’n, 909 F. Supp. 2d 490, 499 (E.D. Va. 2012) (“Thus,
generally speaking, in an unlawful detainer action, the court is largely confined to a
determination within Blackstone’s first and second ‘degrees’ of title.”); In re Cherokee Corp.,
222 B.R. 281, 286 (Bankr. E.D. Va. 1998) (“The issue of proper title is separate and independent
of a determination of lawful possession” and is “irrelevant to a claim of unlawful detainer.”).

2 The Court’s discussion in Pannill of the distinction between right of possession and
complete title arose in the context of the appellee’s motion to dismiss the writ of error on the
grounds that Article VI, Section 2, of the Constitution of Virginia did not confer appellate
jurisdiction on the Court over an unlawful detainer action because it was not a controversy
“concerning the title” of land. Pannill, 81 Va. at 382-83. The Court concluded that an unlawful
detainer action, involving only right of possession, involved an element of title, and therefore,
was an action “concerning title.” Id. at 385-86.

3 Code § 16.1-77(3) provides that “each general district court shall have . . . [j]urisdiction
of actions of unlawful entry or detainer as provided in Article 13 (§ 8.01-124 et seq.) of Chapter
3 of Title 8.01.” Code § 8.01-126(A) provides that “[i]n any case when possession of any house,
land or tenement is unlawfully detained by the person in possession thereof, the landlord, his
agent, attorney, or other person, entitled to the possession may present to a magistrate or a clerk
or judge of a general district court a statement under oath of the facts which authorize the
removal of the tenant or other person in possession.”

Code § 8.01-126 does not make the distinction, as the majority does, between the
unlawful detainer plaintiff “who once held both title and possession” and the unlawful detainer
plaintiff “who never held possession.”

The General Assembly has expressly conferred jurisdiction upon general district courts to
try right of possession in unlawful detainer actions. See Code § 16.1-77(3) and Code § 8.01-
126.3 Following the principles discussed in Pannill, right of possession is a degree of title that
presents an issue for resolution independent of any issue of good and complete title. Therefore,
upon simple application of these principles, it is clear that the general district court had subject
matter jurisdiction to determine whether Fannie Mae was “entitled to the possession” of the

13
property without regard to whether Fannie Mae had good and complete title. Code § 8.01-
126(A).4 The Parrishes’ allegations of a breach of the deed of trust, while they may very well
assert a cloud upon Fannie Mae’s good and complete title, did not divest the general district
court of jurisdiction because right of possession does not depend on good and complete title.5
Despite the clear grant of subject matter jurisdiction to the general district court to try
right of possession and settled law establishing that right of possession does not depend on
complete and good title, the majority creates a question of subject matter jurisdiction by
eliminating right of possession as a distinct element of title separate from complete title and
adopting a new one-dimensional, yet undefined, concept of title from which right of possession
4 Instead of unpacking the broad principle that general district courts are without
jurisdiction to “try title” to understand how it operates in conjunction with settled rules of title
and the statutory grant of jurisdiction to general district courts to try right of possession in
unlawful detainer actions, the majority plainly discards the “first principles” of title previously
approved by this Court. See Pannill, 81 Va. at 383. Armed with its newly crafted concept of
“title,” the majority invokes this broad principle as applied outside the context of unlawful
detainer actions. See, e.g., Addison v. Salyer, 185 Va. 644, 648, 40 S.E.2d 260, 262 (1946) (trial
justice was without jurisdiction to reform deed in an attachment proceeding); Warwick v. Mayo,
56 Va. (15 Gratt.) 528, 540-41 (1860) (where the mayor imposed a fine for alleged obstruction of
a street and person so fined claimed ownership of property on which the obstruction was placed,
the mayor was without jurisdiction to determine ownership of property). These cases do not
involve unlawful detainer actions, and therefore, the jurisdiction granted to courts to adjudicate
right of possession. Furthermore, neither contains any discussion of the successive degrees of
title. Accordingly, they cannot provide any meaningful guidance here.
5 Although the majority characterizes this case as involving a challenge to the validity of
the trustee’s deed, the Parrishes do not seek to invalidate the trustee’s deed. In fact, the Parrishes
readily acknowledge that they cannot and do not seek to set aside the trustee’s deed. The issue
before the general district court was whether the Parrishes’ allegations of a breach of the deed of
trust, if proven true, would entitle them to possession of the property in the absence of setting
aside the trustee’s deed. If proof of a violation of the deed of trust would entitle the Parrishes to
possession, then the general district court would be required to consider such evidence and
determine right of possession. If proof of violation of the deed of trust would not entitle the
Parrishes to possession, then such evidence would be irrelevant to the determination of right of
possession. Under either scenario, the general district court had jurisdiction to determine the
right of possession.

14
flows.6 Having abandoned the traditional elements of title, it is hardly surprising that the
majority finds itself in a “conundrum.” Under the majority’s nebulous concept of title, the broad
principle that general district courts cannot try title takes on a novel meaning and leads to the
absurd result that general district courts are no longer empowered to adjudicate right of
possession whenever a dispute arises over “title” – as that term is understood by the majority.7
Not only has the majority abandoned settled principles of real property law, it has
practically eliminated the availability of the summary proceeding of unlawful detainer to
purchasers of property at foreclosure sales. The majority’s new procedure for obtaining
possession operates to deprive record owners of possession until disputes over “title” are
adjudicated after the record owner has sought the “appropriate” remedy in circuit court.8
6 The majority’s rejection of the principles of title discussed in Pannill appears to be
based on language found in the earlier case of Corbett v. Nutt, 59 Va. (18 Gratt.) 624, 648
(1868), an unlawful detainer action in which the parties presented competing evidence of right of
possession. Noting that the controversy in an unlawful detainer action may turn “upon the
validity of the title under which the defendant claims to hold the possession,” the Court in
Corbett rejected an argument that unlawful detainer was not an appropriate remedy where “title
alone is involved.” This language is entirely consistent with the Court’s recognition in Pannill
that right of possession is a form of title and, in fact, validates the reality that unlawful detainer
actions are an expedient statutory remedy for determining the right of possession, one form of
title – not good and complete title. Furthermore, to the extent the majority relies on this
language as authority for the proposition that right of possession depends on good and complete
title, this interpretation is analytically unsupported because Corbett was decided prior to Pannill,
Pannill is consistent with Corbett, and the majority must abandon the traditional four degrees of
title in favor of a one-dimensional concept of title to get there.
7 Although it is clear that the majority has abandoned the traditional elements of title
recognized in Pannill, it is not clear what the majority means when it refers to the term “title.”
Since the majority has concluded that a general district court must dismiss an unlawful detainer
action that involves a bona fide claim of title, the majority seems to equate its concept of title
with the degree of good and complete title recognized under traditional property law principles.
8 The majority’s flawed understanding of title and the nature of an unlawful detainer
action is illustrated by its suggestion that the circuit court could adjudicate right of possession in
an unlawful detainer action brought under Code § 8.01-124 even when the general district court
could not under Code § 8.01-126. But “judgment in an action of unlawful detainer settles
nothing, even as between the parties, in regard to [good and complete] title.” Brown v. Lawson,
86 Va. 284, 286, 9 S.E. 1014, 1015 (1889). This is true regardless of where the action originates.

Fannie Mae already holds the deed to the property. Thus, it is not apparent what the “appropriate
remedy” for Fannie Mae to seek in circuit court would be.

9 Parties who believe they are aggrieved by a wrongful conveyance of property may file
an action seeking to set aside the conveyance and enjoin prosecution of an unlawful detainer
action. See e.g., Hamilton v. Stephenson, 106 Va. 77, 55 S.E. 577 (1906) (action against trustee
and purchaser to set aside sale and enjoin prosecution of unlawful detainer); Wohlford v.
Wohlford, 121 Va. 699, 93 S.E. 629 (1917) (action to set aside codicil to will and deed and
enjoin prosecution of unlawful detainer); see also Whitlow v. Mountain Trust Bank, 215 Va.
149, 207 S.E.2d 837 (1974) (action to set aside foreclosure sale). Even where a party disputes
the right of possession in an unlawful detainer case and loses, that party is not precluded from
bringing an action to have the deed annulled. Harrison v. Manson, 95 Va. 593, 595-96, 29 S.E.
420, 421 (1898).

10 By altering the definition of title and relegating right of possession to nothing more
than an ambiguous notion, the majority has effectively eliminated the usefulness of this summary
proceeding outside the context of actions between landlords and tenants.

Specifically, under the majority’s holding, the Parrishes are entitled to retain possession of the
property, without any obligation of payment, while record ownership, and the corresponding
obligations of record ownership, including payment of taxes, remain with Fannie Mae. The
majority’s new procedure, which appears to involve determination of something more than right
of possession but something less than good and complete title, is unnecessary since avenues
already exist for claims of a wrongful conveyance of property, e.g., actions to set aside deeds.9
Yet, under the majority’s holding, the Parrishes need not seek to set aside the deed but may,
nevertheless, deny possession to the record owner merely upon the allegations that they have
grounds to set aside the deed if they were so inclined, thereby ousting the general district court of
its jurisdiction.

In sum, I cannot join the majority’s effort to implement a policy in Virginia that
effectively prevents a class of record property owners from obtaining possession of property via
a summary proceeding that has been in place for centuries.10 If it is to be the policy of Virginia
that there should be limitations on the right of purchasers at foreclosure sales to obtain
possession of the property, then the adoption of such a policy and specific limitations on the right

of possession should be accomplished byan act of the General Assembly, not through judicialpronouncement by this Court.SeeBevel v. Commonwealth, 282 Va. 468, 479-80, 717 S.E.2d
789, 795 (2011);Hackleyv. Robey, 170 Va. 55, 66, 195 S.E. 689, 693 (1938). “The
public policy of the Commonwealth is determined by theGeneral Assembly[because] it is the
responsibility of the legislature, and not the judiciary, . . . to strike theappropriate balancebetweencompeting interests.” Uniwest Constr., Inc. v. Amtech Elevator Servs., 280 Va. 428,
440, 699 S.E.2d 223, 229 (2010)(internal quotation marks and citation omitted).

B.Present Right of Possession
SinceIwould hold that the general district court did have subject matter jurisdiction overthe unlawful detainer action, Iwould proceed to determine whether the circuit court erred in
granting summary judgment in favor ofFannie Mae.

In my view, the circuit court did not err in concluding that Fannie Mae was entitled to
possession, since proof of violation of the terms of the deed of trust would not entitle theParrishes to possession of the property in this action. This Courthas stated that “if trusteesinvested with the legal title to an estate conveyed it to another in plain violation of the trust, and
even by a deed which on its face shows such violation, the title of the grantee is good at law, and
resort must be had to acourt of equity to setaside the deed.” Carrington v. Goddin, 54 Va. (13
Gratt.) 587, 601 (1857). Applying that principle here, the trustee’s deed isvalid and establishesFannie Mae’s right of possession unless it is set aside bya court hearing an equitable cause ofaction for such relief. Since that remedy is not available in an unlawful detainer action, which
only determines right ofpossession, the Parrishes’ allegations of a breach of the deed of trust are

16

17
not relevant to a determination of the right of possession.11
For example, the United States District Court for the Eastern District of Virginia
held that where a foreclosure is invalidated, the purchaser at foreclosure is nevertheless in lawful
possession of the property from the time of purchase until the date the sale is invalidated. In re
Cherokee Corp., 222 B.R. 281 (Bankr. E.D. Va. 1998).
Case law is unclear on the issue of whether the purchaser of
property at a trustee’s auction is vested with proper title during the period
before the sale is later invalidated because it was not properly conducted.
However, proper title is irrelevant to a claim of unlawful detainer because,
lawful possession of property is the only issue to be determined in a claim
for unlawful detainer.
We conclude that by virtue of the trustee’s sale [the creditor] had a right to
possess the property until the sale was invalidated on January 20, 1995.
[Debtor] has not proven that [creditor] unlawfully held the property as
against [debtor] because [creditor] rightfully possessed the property.
Id. at 286.
In sum, Fannie Mae presented evidence of its right to possession by virtue of the trustee’s
deed. The Parrishes admit that the property was sold to Fannie Mae and that the deed of
conveyance is recorded in the land records. And there is no claim by the Parrishes that the deed
is facially invalid. Because the Parrishes’ allegations of a violation of the deed of trust, even if
true, would not deprive Fannie Mae of its right to possession, the circuit court did not err in
awarding Fannie Mae possession of the property.
C. Conclusion
For the foregoing reasons, I would affirm the judgment of the circuit court.
11 As noted previously, the Parrishes could have filed an action to set aside the
conveyance after the foreclosure sale if they believed the conveyance was unlawful. In fact, the
record reflects that they ultimately did file an action seeking rescission of the trustee’s deed after
Fannie Mae moved for summary judgment in the unlawful detainer action when it was on appeal
to the circuit court.

JUSTICE POWELL concurring1 in part and dissenting in part.
Although I agree with the majority that general district courts, as courts not of record, do
not have the subject matter jurisdiction to try title to real property, I cannot agree with the
majority’s reasoning that questions concerning title are the equivalent of trying title. In my
opinion, there is a significant difference between an action that turns on the question of title and
an action that tries title. The former is merely an evidentiary question, whereas the latter
involves a conclusive determination of a party’s claim of title. As the majority’s ruling is
unsupported by this Court’s jurisprudence, leads to an unnecessary expansion of the concept of
trying title and impedes the ability of home owners to protect the possession of their homes, I
must respectfully dissent.
As an initial matter, rather than simply equate a question concerning title with trying title,
I believe it is important to first define the term “try title.” Our jurisprudence makes it clear that
the term clearly encompasses a number of different actions. Accordingly it is necessary to
review these actions in order to provide a proper definition. The two most common forms of
trying title are ejectment (Code § 8.01-131, et seq.) and quiet title (Code § 55-153). “Ejectment
is an action at law to determine title and right of possession of real property.” Brown v. Haley,
233 Va. 210, 216, 355 S.E.2d 563, 567 (1987). At common law, an ejectment action “was the
exclusive remedy to try title and settle controverted boundaries of land.” Patterson v. Saunders,
194 Va. 607, 610, 74 S.E.2d 204, 206 (1953). To bring an ejectment action, a plaintiff must
allege he is the owner of the legal title to real property that he does not currently possess. Otey
v. Stuart, 91 Va. 714, 716, 22 S.E. 513, 514 (1895). Further, “[t]he plaintiff has the burden of
1 I fully agree with the majority’s analysis with regard to the circuit court’s consideration
of the pleadings filed in the general district court.

proving that he hasgood title and the right to possession, and he must recover upon the strength
of his own title rather than upon the weakness of the defendant’s title.”Providence Properties,
Inc. v. United VirginiaBank, 219 Va. 735, 744, 251 S.E.2d 474, 479 (1979). Most importantly,
once the plaintiff proveshe hasgood title and theright of possession, the judgment in his favor“shall be conclusiveas to the title or right of possession established in such action, upon thepartyagainst whom it is rendered, and against all persons claimingfrom, through, or under such
party, by title accruingafter the commencement of such action, except as hereinafter mentioned.”
Code § 8.01-163 (emphasis added).

Incontrast to an ejectment action, a partyin possession of the property who claims to
havegood title and the right of possession must bring an action to quiet title. “[A]n action to
quiet title is based on the premise that a person with good title to certain real or personal propertyshould notbe subjected to various futureclaims against that title.” Mainev. Adams, 277 Va.
230, 238, 672 S.E.2d 862, 866 (2009). Further, “in a quiet title action, a plaintiff asks the court
to declare that he hasgood title to the property in question and compels anyadverse claimant toprove a competing ownership claim or forever bebarred from asserting it.” Id. Thus, unlikeejectment, where judgment only concludes the matter between the parties to the action, the
judgment in a quiet title action conclusively establishes complete title to the property in theprevailing party.

In addition to ejectment and actions to quiet title, this Court has recognized a third formof trying title: actions that implicitly try title. Such actions arise where theissue of title is raisedand conclusively adjudicated between the parties in a collateral proceeding. Unlike the otherforms of trying title, actions that implicitly try title do not establish complete title in one party or

19

the other; rather, such actions typically conclusively establish that one party does not hold title to
the property and estops that party from asserting title in a subsequent action.

The trial of an action of trespass may turn upon the question of
title, and if either of the parties puts his title in issue, and it is tried
and passed upon, the verdict and judgment in that suit will be
conclusive evidence in favor of (or against) such title, at least in a
subsequent action of trespass.

Douglas Land Co. v. T. W. Thayer Co., 113 Va. 239, 242, 74 S.E. 215, 216 (1912) (internal
quotation marks and citation omitted).

Noting that the underlying action was for trespass, the Court in Douglas Land Co.
expressed no opinion as to whether, in an ejectment action, “the judgment in the action of
trespass would be conclusive of the title between the parties.” Id. However, upon revisiting the
issue, this Court acknowledged that a party is estopped from relitigating the issue of title in an
ejectment action if that issue has already been raised and conclusively adjudicated on the merits
in a trespass action. Kesler v. Fentress, 223 Va. 14, 18-19, 286 S.E.2d 156, 158 (1982).

When the various actions trying title2 are viewed together the defining characteristic of
these actions becomes readily apparent. An ejectment action conclusively establishes whether or
not the plaintiff is entitled to complete title to the property. An action to quiet title conclusively
establishes who holds complete title to the property. An action that implicitly tries title
conclusively establishes that a party does or does not hold title to the property, thereby estopping
at least one party to the action from subsequently bringing an action to try title. Notably, all of
the actions trying title that have been recognized by this Court will always result in at least one
party being conclusively adjudicated as holding or not holding complete title to the property.

2 That is not to say that these are the only forms of trying title; undoubtedly other forms
exist. However, at present, these are the only forms of trying title that research indicates that our
jurisprudence has recognized.

Thus, the defining characteristic of an action trying title is that collateral estoppel prevents at
least one party to the action from relitigating the issue of title because that issue has been
conclusively determined as to that party. Therefore, in my opinion, the term “try title” refers to
those actions that result in a conclusive adjudication of whether a party does or does not have
title to property.
Unlawful detainer actions, on the other hand, involve a “controversy concerning the
possession of land.” Pannill v. Coles, 81 Va. (6 Hans.) 380, 383 (1886) (emphasis added). The
purpose of such actions is “to try the right of possession.” Gale v. Trust Co. of Norfolk, 142 Va.
170, 171, 128 S.E. 643 (1925). This Court has recognized that, while the determination of who
has the right of possession “may turn altogether upon the validity of [a party’s] title,” Corbett v.
Nutt, 59 Va. (18 Gratt.) 624, 648 (1867), “the question of complete title is not the question to be
determined.” Pannill, 81 Va. (6 Hans.) at 385 (emphasis added). Indeed, for 190 years, this
Court has recognized that in an unlawful detainer action “[t]he only question is, whether the
plaintiff is entitled to possession as against the defendant. For the purpose of determining his
question, the title may be given in evidence.” Allen v. Gibson, 25 Va. (4 Rand.) 468, 477
(1826). By the same token, for the purpose of determining possession, the title that has been
given into evidence should be subject to inquiry, just like any other piece of evidence.

Moreover, as previously noted, the defining characteristic of an action trying title is the
collateral estoppel that attaches with regard to a party’s claim of title. “To ascertain the scope of
the estoppel sought to be asserted, and to determine just what has been adjudicated and between
what parties, inquiry may extend to the evidence and instructions as well as to the pleadings and
judgment.” Patterson v. Anderson, 194 Va. 557, 565, 74 S.E.2d 195, 200 (1953). A review of
the proceedings in this case indicates that neither party sought to conclusively adjudicate the

issue of title. Therefore, because neither party could rely on this action for collateral estoppel
purposes, it cannot be said that the present case is an action to try title.

Not only is neither party seeking to have the issue of title conclusively adjudicated, but
the General Assembly has expressly indicated that neither party could seek to have such an issue
conclusively adjudicated in an unlawful detainer action. Code § 8.01-130 explicitly states:

No judgment in an action brought under the provisions of this
article shall bar any action of trespass or ejectment between the
same parties, nor shall any such judgment or verdict be conclusive,
in any such future action, of the facts therein found.

Code § 8.01-130 makes it clear that the General Assembly did not intend for an unlawful
detainer action to definitively resolve any issue as to title.3 Rather, the General Assembly has
explicitly stated the exact opposite: unlawful detainer actions cannot conclusively establish any
issue as to title. In other words, the General Assembly intended for unlawful detainer actions to
have the limited effect of deciding who among the parties to the action has the right of
possession at that time. In light of the plain language of Code § 8.01-130, it is unclear how it can
be said that an unlawful detainer action “tries title.”4

3 It is worth noting that, absent Code § 8.01-130, there is very little difference between
ejectment and unlawful detainer. Indeed, both actions are “founded on the plaintiff’s right of
possession at the time of the institution of the action.” Williamson v. Paxton, 59 Va. (18 Gratt.)
475, 505 (1867) accord Pettit v. Cowherd, 83 Va. (8 Hans.) 20, 25, 1 S.E. 392, 395 (1887). The
only actual significant difference between the two actions is that an unlawful detainer action
lacks the preclusive effect of an ejectment action due to Code § 8.01-130.

4 It should be noted that Code § 8.01-130 does not distinguish between unlawful detainer
actions brought in the general district court and unlawful detainer actions brought in the circuit
court. Thus, it is clear that the General Assembly did not intend for an unlawful detainer action
to try title, regardless of whether the action is brought in the general district court or the circuit
court. Indeed, the fact that Code § 8.01-130 applies equally to an unlawful detainer action filed
in either court indicates that the General Assembly intended for such actions to be treated the
same, regardless of what court the action is filed in or what defense is raised.

Furthermore, this statutory scheme supports the principle that not only can evidence of
title be presented in an unlawful detainer action, but it can also be disputed. By including Code

§ 8.01-130, the General Assembly indicated that it anticipated evidence of title would be
presented and disputed in an unlawful detainer action. If it did not anticipate such evidence
would be presented, there would be no need for any limitation of the preclusive effects of
unlawful detainer actions, especially with regard to matters that actually try title (i.e., ejectment
actions).

Finally, it cannot be overlooked that the General Assembly has expressly conferred
jurisdiction over unlawful detainer actions upon general district courts with no limitations.
Contrary to the result reached by the majority, nothing in Code §§ 16.1-77(3) or 8.01-126
indicates any limitation upon the jurisdiction of a general district court to hear unlawful detainer
actions.5 For example, Code § 16.1-77(3) does not indicate that general district courts have
jurisdiction over all unlawful detainer actions except those that concern a question of title. Given
our presumption “that the General Assembly, when enacting new laws, is fully aware of the state
of existing law relating to the same general subject matter,” Gillespie v. Commonwealth, 272 Va.
753, 758, 636 S.E.2d 430, 432 (2006), the reason that no such statutory limitation exists is
obvious: such language is unnecessary. A version of Code § 8.01-130 has been codified since at
least 1855, see Olinger v. Shepherd, 53 Va. (12 Gratt.) 462, 473 (1855), and, as previously noted,
it clearly allows for the validity of title to be litigated in an unlawful detainer action. If not, the
prohibitions contained in Code § 8.01-130 would be unnecessary.

5 That is not to say, however, that the General Assembly intended to confer upon general
district courts subject matter jurisdiction to try title. Indeed, there would be no need to confer
such jurisdiction because, as I have repeatedly stated, unlawful detainer actions only concern the
right of possession and do not try title.

Considering that it has been the law of the Commonwealth since at least 1855 that
unlawful detainer actions do not try title, Olinger, 53 Va. (12 Gratt.) at 473, in conjunction with
this Court’s long recognition that the validity of a party’s title may be at issue in an unlawful

detainer action, Corbett, 59 Va. (18 Gratt.) at 648, it is clear to me that general district courtshave jurisdiction to hearunlawful detainer actions and decide the limited issue of possession
even when a bonafidequestion of title is raised. Thus, Ifail to appreciatethe conundrum to
which the majorityrefers. Iam, however, cognizant of the potential conundrum that the majorityopinion creates. Notably, the majority hascreated a new class of cases where a court is deprived
of jurisdiction, not because of the nature of theclaim or the successful assertion that the courtlacks jurisdiction (e.g., a plea in bar), but because the defendant simply raises a specific defense.
To my knowledge, thereexists no other class of cases where acourt loses jurisdiction based on
the nature of the defense raised.

Moreover,I am particularly concerned with whatappears to be an imbalance in the
majority’s approach. Under the majority’s approach, a plaintiff’sallegation ofa valid trustee’sdeed is sufficient to conclusively establish its right of possession. However, a defendant cannotmerely present evidenceto rebut the validity or bona fides of that deed in general district court.
Rather, according to themajority, a defendant must do significantly more than just deny thevalidity of the trustee’s deed. A defendant must assert a bona fide question of title “sufficient to
survive a demurrer had the [defendant] filed a complaint in circuit court seeking [to set aside a
foreclosure.]”In otherwords, a defendant must plead sufficient facts to meet a differentstandard fora different cause of action that can only be raised in a different court.6 Even then,

6Further demonstrating the seeming imbalance of the majority’sapproach, the majorityseeks to foreclose anycollateral attacks on previous unlawful detaineractions where defendantsraised a question concerning title. In holding thatthese decisions are merelyvoidable, themajority presumes that the general district court’sdecision was based on a finding that thedefendant had not raised a bona fide question of title. Rarely will we have anyway of knowingthe basis for thegeneraldistrict court’s ruling. Indeed, it is not beyond of the realm of possibilitythat the defendant raiseda bona fide question of title but lost because thegeneral district court
made a ruling on the merits, notwithstanding the fact that it had no jurisdiction to do so. The

24

only way to determine the basis for the general district court’s ruling is to reopen the case and
allow a collateral attack.

by successfully raising the requisite bona fide question of title, the defendant cannot have the
matter resolved in general district court. Instead, the defendant can only cause the matter to be
removed from the general district court to be heard in the circuit court.

Furthermore, I cannot overlook the fact that the majority effectively holds that a general
district court only has jurisdiction to rule against a defendant. If a defendant has raised sufficient
allegations to allow a general district court to rule in that defendant’s favor, that court loses
jurisdiction over the matter, but if the defendant fails to raise sufficient allegations, the court
retains jurisdiction. Stated differently, the majority has crafted an approach that prevents a
general district court from ruling on the merits in favor of a defendant.

Thus, it is clear to me that the general district court had subject matter jurisdiction to hear
the present case regardless of the defense raised by the Parrishes. As a result, I would also find
that the circuit court properly exercised its derivative jurisdiction. Therefore, it is necessary to
address the circuit court’s decision to grant Fannie Mae summary judgment. In my opinion, the
circuit court erred in granting summary judgment. Notably, by raising a bona fide question of
title, the Parrishes have presented a disputed issue of material fact. Furthermore, our case law
establishes that Fannie Mae was not entitled to judgment as a matter of law on this issue. Indeed,
under this Court’s jurisprudence, the exact opposite is true.

The general rule concerning the position of a trustee under a deed
of trust is that the trustee is a fiduciary for both debtor and creditor
and must act impartially between them. Implicit in this rule is the
proposition that a trustee must refrain from placing himself in a
position where his personal interest conflicts with the interests of
those for whom he acts as fiduciary.

Generally, a trustee cannot be both a seller and a buyer at his own
auction sale, because the two roles are incompatible. When a
trustee buys at his own sale, a constructive fraud exists; the
transaction is voidable; and when attacked, the sale must be setaside.In such a situation, the adequacy of consideration, fairnessof the sale, and good motive of the trustee in purchasing are notcontrolling. A primereason for making such a sale voidable is thenecessity of upholding the fiduciaryrelationship between thetrustee and those for whom he acts.

Whitlow v. Mountain Trust Bank, 215 Va. 149, 152, 207 S.E.2d 837, 840 (1974) (citationsomitted) (emphasis added).

In the presentcase,Atlantic Law Group,LLC (“ALG”), the trustee, wasalso the agent ofthe purchaser,Fannie Mae. Notably, ALG was not only the trustee, but italso representedFannie Mae in the general district court and circuit court throughout the underlying litigation.
Thus, the record clearlydemonstrates that Fannie Mae was both the buyerand, through its agent,
seller at the foreclosure auction. AsWhitlowrequires that the foreclosure sale be set aside, the
trial court had no legal basis forgranting the summary judgment. Accordingly, I would reversethe decision of the trial court and remand thematter for further proceedings.

26

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TFH 6/19 | Ten Hidden Secrets of Securitized Trusts They Desperately Do Not Want You or Your Judge To Know

TFH 6/19 | Ten Hidden Secrets of Securitized Trusts They Desperately Do Not Want You or Your Judge To Know

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Federal Natl. Mtge. Assoc. v Higgins | NYSC- In sum, it does not seem prudent to view possession of a copy of a note as evidence of possession of the original.

Federal Natl. Mtge. Assoc. v Higgins | NYSC- In sum, it does not seem prudent to view possession of a copy of a note as evidence of possession of the original.

Do we have Judge Schack in the making here???

PRESENT:
HON. NOACH DEAR,
J.S.C.
Index No.:511643114

FEDERAL NATIONAL MORTGAGE ASSOC,
Plaintiff,

~against-

RICHARD HIGGINS et aI,
Defendant,
Upon the foregoing cited papers, the Decision/Order on this Motion is as follows:
Plaintiff moves for summary judgment and an order of reference. Defendant opposes and
cross-moves for dismissal arguing that Plaintiff lacks standing.

“Where standing is put into issue by the defendant, a plaintiff must prove its standing if it is to
be entitled to relief’ (Bank of Am., NA. v Paulsen, 125 A.D.3d 909 [2d Dept 2015]). “A plaintiff
establishes its standing in a mortgage foreclosure action by demonstrating that it is both the holder or
assignee of the subject mortgage and the holder or assignee of the underlying note at the time the
action is commenced” (Id.). “Either a written assignment of the underlying note or the physical
delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the
obligation, and the mortgage passes with the debt as an inseparable incident” (US. Bank, NA. v.
C?l1ymore, 68 AD3d 752, 754 [2d Dept 2009] [citations omitted]). In other words, if Plaintiff
demonstrates that the note was either assigned to it prior tothe commencement of the litigation or in
its physical possession at that time, then Plaintiff has standing.

Plaintiff proffers the affidavit of Jennette Hill, a Foreclosure Specialist of Seterus, Inc. (the
servicer of the loan in suit), in support of its motion. Ms Hill attests that the note and mortgage were
transferred to Plaintiff via a series of recorded Assignments of Mortgage (Hill Aff., at 3). Those
assignments do not demonstrate that Plaintiff is the assignee of the note. Per Plaintiff s own affidavit,
the mortgage (but seemingly not the note) was assigned to MERS. Further and more troublingly, Jp
Morgan assigned its interest in the mortgage and note (if it had any) to Chase Home Finance in 2009′
and then assigned that same interest to Plaintiff in 2014. Thus, it would appear that Plaintiff is unable
to dem,demonstrate that the note was properly assigned to it pri6r to the commencement of this action.
Indeed, in its reply, Plaintiff appears to rely solely on “physical possession.” Ms. Hill, however,
never claims that Plaintiff was in physical possession of the note at the time of commencement ofthe
action (or at any othertime for that matter). .

Plaintiff, in reply, argues that the attachment of photocopies of the note, mortgage, and
assignment of the mortgage (by an assignor that no longer had an interest in the mortgage) to its
complaint is sufficient to show that it was in physical possession of the original note at that time. In
support.it quotes Nationstar Mortgage v Catizone, 127 AD3d .115l[2d Dept2015] for the
proposition that such a showing is sufficient. This Court disagrees;

There is no one correct way to demonstrate physical possession of the note. Among other
methods that this Court has recently seen, affidavits from the document custodian of the vault where
the original note is stored with attached vault records have been proffered, Plaintiff s counsel has
offered a certified copy made from the original by one of its attorneys shortly before commencing the
action, and Plaintiff has shown via its business records exactly when, how, and from whom the note was transferred to its custodian. The Court of Appeals has also accepted lesser proof – an affidavit
stating when Plaintiff acquired the note without further details (Aurora Loan Services, LLC v. Taylor,
25 N.Y.3d 355; 362 [2015]; see similarly, Wells Fargo v Joseph, 137 A.D.3d 896 [2d Dept 2016];
Wells Fargo Bank, NA. v Arias, 121 A.D.3d 973, 974 [2d pept 2014]).

Catizone states in relevant part, “the plaintiff established its standing as the holder of the note
and mortgage by demonstrating that the note was in its possession and the mortgage had been
assigned to it prior to the commencement of the action, as evidenced by its attachment of the indorsed
note, the mortgage, and the mortgage assignment to the summons and complaint at the time the action
was commenced” (127 AD.3d at 1152). This holding was reiterated in Deutsche Bank Nat. Trust Co.
v. Leigh, 137 AD.3d 841 [2d Dept 2016]). It, thus, appears that attaching copies of a note, mortgage,
and valid assignment of mortgage suffice. Herein, even were this accurate (and, as discussed below,
this Court does not believe that it is), Plaintiff has not demonstrated that it has standing as the
assignment of mortgage was called into question by Plaintiff’s own evidence ..

The Catizone decision cannot actually mean that attachment of copies of the note, mortgage,
and assignment of mortgage to the complaint is alone sufficient to show possession of the note.
Subsequent appellate decisions have reiterated production of such an assignment in addition to the
note and mortgage are insufficient to demonstrate standing (see, for example, Deutsche Bank Nat.
Trust Co. v. Idarecis, 133 AD.3d 702 [2d Dept 2015]; Deutsche Bank Nat. Trust Co. v. Weiss, 133
AD.3d 704 [2d Dept 2015]).

It is well established that the mortgage passes incident to the note but not vice versa and, thus,
it is the transfer and ownership of the note, rather than the mortgage that is relevant (Bank of New
Yorkv. Silverberg, 86 A.D.3d 274, 280 [2d Dept 2011]). Logic dictates, then, that the assignment of
the mortgage is not evidence of ownership of the note. Possession of a copy of the mortgage is also
not dispositive as recorded mortgages are publicly available. As a result, Plaintiff in its motion papers
draws the conclusion that attaching a copy of the note to the complaint is itself evidence of standing.

While copies of notes are not publicly available, they do not alone demonstrate possession of
the original. Photocopies are clearly made at different times. The parties to the loan, their lawyers,
etc. generally leave the closing with a wet ink or duplicate. This Court regularly sees multiple
versions of the note attached to plaintiffs’ papers, complete with differences in endorsements
(reflecting copies made at different points in time) and, occasionally, different signatures despite the same date on the document (reflecting copies of different originals). It would also be unsurprising if
notes were scanned into the document control systems of the banks and/or servicers. Further, it is
common for a photocopy of a “lost” note to accompany an affidavit of lost note. In sum, it does not
seem prudent to view possession of a copy of a note as evidence of possession of the original.

In light of the foregoing, Plaintiff has not demonstrated that it was in physical possession of
the note at the time of commencement of this litigation and, thus, has not proven that it has standing
and Plaintiff s motion is denied. Defendant’ s cross~motion to dismiss is also denied as issues of fact
remain as to whether Plaintiff had possession of the note.

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CRUZ vs JPMORGAN CHASE | FL 4DCA – On Motions for Rehearing and Clarification – We reverse and remand for entry of an involuntary dismissal of the foreclosure complaint.

CRUZ vs JPMORGAN CHASE | FL 4DCA – On Motions for Rehearing and Clarification – We reverse and remand for entry of an involuntary dismissal of the foreclosure complaint.

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA

FOURTH DISTRICT

OTTONIEL CRUZ and LUZ M. CRUZ,

Appellants,

v.

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, AS
SUCCESSOR IN INTEREST TO WASHINGTON MUTUAL BANK,
FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, F.A.,

Appellee.

No. 4D14-3799

[June 15, 2016]

Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Thomas M. Lynch, IV, Judge; L.T. Case No.
CACE09024572(11).

Paul Alexander Bravo of P.A. Bravo, Coral Gables, and Ricardo Manuel
Corona of Corona Law Firm, Miami, for appellants.

Nancy M. Wallace of Akerman LLP, Tallahassee, William P. Heller of
Akerman LLP, Fort Lauderdale, and Kathryn B. Hoeck of Akerman LLP,
Orlando, for appellee.

On Motions for Rehearing and Clarification

MAY, J.

We grant the owners’ motion for clarification, deny JPMorgan’s motion
for rehearing, and withdraw our previously issued opinion and substitute
the following in its place.

The number of entities through which the note and mortgage traveled
complicates the facts. The bottom line, however, is JPMorgan Chase Bank,
National Association’s (“JPMorgan”) failure to prove standing requires a
reversal of the final judgment of foreclosure.

The borrower executed a mortgage and note in favor of Washington
Mutual Bank F.A. (“WAMU”). On March 5, 2008, the borrower quit-
claimed the property to Ottoniel Cruz and Luz Cruz (“owners”). On
September 25, 2008, the Federal Deposit Insurance Corporation (“FDIC”),
receiver for WAMU, sold substantially all assets and liabilities of WAMU to
JPMorgan through a purchase and assumption agreement (“PAA”).

Section 3.1 of the PAA reads, in part, “[T]he Assuming Bank hereby
purchases from the receiver, and the Receiver hereby sells, assigns,
transfers, conveys, and delivers to the Assuming Bank, all right, title, and
interest of the receiver in and to all of the assets (real, personal and mixed,
wherever located and however acquired) . . . of the Failed Bank.”

Section 3.2 reads, in part, “All Assets and assets of the Failed Bank
subject to an option to purchase by the Assuming Bank shall be purchased
for the amount . . . as specified on Schedule 3.2, except as otherwise may
be provided herein.” Section 3.3 reads, in part, “[T]he conveyance of all
assets . . . purchased by the Assuming Bank under this agreement shall
be made, as necessary, by Receiver’s deed or Receiver’s bill of sale.”
Section 6.2 obligates the FDIC to deliver assets, including loan documents,
“as soon as practicable on or after the date of this Agreement.”

The “Settlement Date” is defined as “the first Business Day immediately
prior to the day which is one hundred eighty (180) days after Bank Closing,
or such other date prior thereto as may be agreed upon by the Receiver
and the Assuming Bank.” Article X explains that as a condition precedent,
the parties were subject to the Receiver “having received at or before the
Bank Closing, evidence reasonably satisfactory to each of any necessary
approval, waiver, or other action by any governmental authority . . . with
respect to this Agreement.”

On December 1, 2008, the owners defaulted by failing to pay their
monthly payment. WAMU sent the default notice on January 28, 2009.
On April 29, 2009, JPMorgan filed a foreclosure action. The complaint
included a count to reestablish a lost note and a count for foreclosure of
the mortgage. JPMorgan alleged that it “owns and holds said note and
mortgage.” The lost note count stated that the note “has been lost or
destroyed and is not in the custody or control of the Plaintiff who is the
owner and holder of the subject Note and Mortgage and its whereabouts
cannot be determined.” It also stated that JPMorgan or its predecessors
were in possession of the note and were entitled to enforce it when the loss
occurred, and “[t]he loss of possession was not the result of a transfer or
a lawful seizure.”

Attached to the complaint was a copy of the mortgage, but not a copy
of the note. On October 26, 2009, JPMorgan dropped the lost note count.
On April 12, 2010, the owners filed their answer and asserted several
affirmative defenses, including lack of standing and failure to comply with
conditions precedent.

In January 2014, JPMorgan transferred its ownership interests in the
mortgage to PennyMac Corporation (“PennyMac Corp.”). On February 21,
2014, the FDIC executed an assignment of the mortgage to JPMorgan. The
assignment read, in part, “This Assignment is intended to further
memorialize the transfer that occurred by operation of law on September
25, 2008 as authorized by Section 11(d)(2)(G)(i)(II) of the Federal Deposit
Insurance Act, 12 U.S.C. § 1821(d)(2)(G)(i)(II).”

On February 21, 2014, JPMorgan then executed an assignment of
mortgage in favor of PennyMac Corp. Servicing of the loan was transferred
from JPMorgan to PennyMac Loan Services, LLC (“PennyMac Loan
Services”), which was the servicer at the time of trial. On August 1, 2014,
JPMorgan moved to substitute PennyMac Corp. as party plaintiff, but the
motion was never heard.

PennyMac Corp. allegedly discovered a week before trial that the
original note was lost. On August 22, 2014, JPMorgan moved to amend
the complaint to add a lost note count, and attached an affidavit from a
PennyMac Loan Services foreclosure operations supervisor. The trial court
denied the motion the day before the trial began.

On August 28, 2014, the case proceeded to a non-jury trial. JPMorgan
called PennyMac Loan Services’ foreclosure operations supervisor as its
witness. She testified that PennyMac Loan Services serviced the loan on
behalf of the current owner, PennyMac Corp., and JPMorgan was the prior
servicer.

She did not have the original note with her because it was lost or
destroyed. The note “was lost after the complaint was filed,” but before it
acquired servicing rights. PennyMac Loan Services conducted its due
diligence, reached out to prior foreclosure counsel, and checked the court
docket to see if the original note was already filed, but it was unable to
find the original note.

The witness reviewed PennyMac Loan Services’ records, and the
original note was not transferred to anyone else or seized by anyone.
PennyMac Corp. was willing to indemnify the note maker for any claims
that might be placed because of the loss. She obtained the copy of the
note from PennyMac Loan Services’ business records, which were
uploaded by PennyMac Loan Services’ loan boarding department at the
time PennyMac Loan Services acquired servicing rights of the subject loan.

When JPMorgan attempted to move the copy of the note into evidence,
defense counsel questioned the witness, and objected to the introduction
of the copy of the note “based on the evidence rule and . . . trustworthiness
and authenticity of it.” Counsel also argued that no reestablishment count
was pending before the court and “their complaint only seeks mortgage
foreclosure and they dropped the establishment of lost mortgage note back
in I believe 2010 . . . . [T]hey are asking the Court to improperly amend
their pleadings . . . .”

JPMorgan responded that it was not asking the court to amend because
“[t]he lost note count is the count that has become tradition to put in the
complaint,” but “it is actually an evidentiary matter.” The trial court
overruled the objection and admitted the copy of the note. The court also
admitted, among other things, a copy of the PAA.

At the end of the trial, the owners moved for an involuntary dismissal,
arguing JPMorgan was required to produce the original note and failed to
comply with the conditions precedent to filing the foreclosure action. The
trial court denied the motion.

The trial court granted final judgment of foreclosure in favor of
JPMorgan. From this judgment, the owners now appeal.

The owners argue JPMorgan failed to prove it had standing to foreclose
at the case’s inception and when the trial court entered final judgment.
JPMorgan failed to attach a copy of the note to the complaint. The copy of
the note that was eventually filed had an undated blank endorsement and
JPMorgan failed to elicit testimony regarding the endorsement date.
JPMorgan also introduced an assignment of mortgage showing its rights
were transferred to PennyMac Corp. six months before trial.

JPMorgan responds that standing is determined at the time suit is filed,
not at the time of trial. The endorsement date was immaterial because it
proved ownership and did not rely on the endorsement. It was authorized
under the Florida Rules of Civil Procedure to continue the action in its
name after transferring its interest to PennyMac Corp.

The owners reply that the evidence failed to establish JPMorgan
acquired standing. The PAA did not provide for the purchase of all WAMU’s
assets, and required a separate conveyance instrument for assets actually
purchased. The PAA provided only that JPMorgan had the right to
purchase certain WAMU assets from the FDIC, but nothing shows any
property was transferred, and 12 U.S.C. § 1821 does not save JPMorgan.

This Court reviews whether a party has standing to bring an action de
novo. Dixon v. Express Equity Lending Grp., LLLP, 125 So. 3d 965, 967
(Fla. 4th DCA 2013).

“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, regardless of any
recorded assignments.” Id. (citation omitted). “If the note does not name
the plaintiff as the payee, the note must bear a special endorsement in
favor of the plaintiff or a blank endorsement.” Id. The plaintiff may also
show “an affidavit of ownership to prove its status as a holder of the note.”
Id.; see Sosa v. U.S. Bank Nat’l Ass’n, 153 So. 3d 950, 951 (Fla. 4th DCA
2014).

“A plaintiff alleging standing as a holder must prove it is a holder of the
note and mortgage both as of the time of trial and also that [it] had
standing as of the time the foreclosure complaint was filed.” Kiefert v.
Nationstar Mortg., LLC, 153 So. 3d 351, 352 (Fla. 1st DCA 2014) (emphasis
added).

Such a plaintiff must prove not only physical possession of
the original note but also, if the plaintiff is not the named
payee, possession of the original note endorsed in favor of the
plaintiff or in blank (which makes it bearer paper). If the
foreclosure plaintiff is not the original, named payee, the
plaintiff must establish that the note was endorsed (either in
favor of the original plaintiff or in blank) before the filing of the
complaint in order to prove standing as a holder.

Id. at 353 (internal citations omitted). “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) (citation
omitted) (internal quotation marks omitted).
A “person entitled to enforce” an instrument is: “1) [t]he holder[1] of the
instrument; 2) [a] nonholder in possession of the instrument who has the
rights of a holder; or 3) [a] person not in possession of the instrument who
is entitled to enforce the instrument pursuant to s[ection] 673.3091 or
s[ection] 673.4181(4).” § 673.3011, Fla. Stat. (2014); see Mazine v. M & I
Bank, 67 So. 3d 1129, 1131 (Fla. 1st DCA 2011). “A person may be a
person entitled to enforce the instrument even though the person is not
the owner of the instrument or is in wrongful possession of the
instrument.” § 673.3011, Fla. Stat.

1 A “holder” is defined as “[t]he person in possession of a negotiable instrument
that is payable either to bearer or to an identified person that is the person in
possession.” § 671.201(21)(a), Fla. Stat. (2014).

JPMorgan alleged that it was the note holder, but it failed to prove its
holder status at trial. JPMorgan did not attach the note to the complaint.
It introduced a copy of the note at trial, which contained an attached
allonge indicating a blank endorsement from “JP Morgan Chase Bank, NA
Successor in Interest by Purchaser from the FDIC as receiver of
Washington Mutual Bank F/K/A Washington Mutual Bank, FA.”
However, PennyMac Loan Services’ witness did not testify to when the
allonge was attached to the note or when the endorsement occurred. No
other record evidence indicated when it occurred or when JPMorgan
became the note holder. See Peoples v. Sami II Trust 2006–AR6, 178 So.
3d 67, 69–70 (Fla. 4th DCA 2015).

Although JPMorgan does not meet any of the requirements of a holder—
and does not attempt to prove it did—it argues it proved standing because
it owned the note and mortgage when it initiated the foreclosure action. It
argues the 2008 PAA and a 2014 assignment of mortgage proved
ownership. We disagree.

To prove its standing to foreclose, JPMorgan would have to prove it was
“[a] person not in possession of the instrument who is entitled to enforce
the instrument pursuant to s[ection] 673.3091 or s[ection] 673.4181(4).”
§ 673.3011(3), Fla. Stat. “[N]othing in [section 673.3011] allows an ‘owner’
to enforce the note without possession, except where the instrument is lost
or destroyed.” Snyder v. JP Morgan Chase Bank, Nat’l Ass’n, 169 So. 3d
1270, 1273 (Fla. 4th DCA 2015). Therefore, JPMorgan would have to
prove: (1) it was the owner, and (2) reestablishment of the lost note under
section 673.3091. See id.

Here, there was no proof that JPMorgan had possession of the note at
the time it filed the complaint. JPMorgan acknowledged that the note was
lost and not in its custody or control. Because the original note was never
filed with the court and there was no other evidence of possession, no
competent substantial evidence exists of possession. See id. at 1272. And,
similar to Snyder, there exists no competent substantial evidence of
ownership. The PAA has caveats where JPMorgan could refuse to acquire
assets and there is no record evidence that the FDIC transferred the note
to JPMorgan before the complaint was filed. Id. We reverse the final
judgment of foreclosure based on JPMorgan’s failure to prove standing.

We reverse and remand for entry of an involuntary dismissal of the
foreclosure complaint.

FORST, J., and SCHER, ROSEMARIE, Associate Judge, concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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Posted in STOP FORECLOSURE FRAUD1 Comment

Magaldi v. Deutsche Bank National Trust Company | bank relies to some extent on the assignment, but the assignment was dated 2010—after suit was filed—and does not offer any indication of whether the bank held the note endorsed in its favor or in blank when it commenced the subject litigation

Magaldi v. Deutsche Bank National Trust Company | bank relies to some extent on the assignment, but the assignment was dated 2010—after suit was filed—and does not offer any indication of whether the bank held the note endorsed in its favor or in blank when it commenced the subject litigation

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

VICTORIA S. MAGALDI,
Appellant,

v.

DEUTSCHE BANK NATIONAL TRUST COMPANY, As Trustee For
WAMU 2005-AR6,
Appellee.

No. 4D15-1043

[June 15, 2016]

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Roger B. Colton, Senior Judge; L.T. Case No.
502009CA015214XXXXMB.

Victoria S. Magaldi, Jupiter, pro se.

Philip E. Rothschild and Brian K. Hole of Holland & Knight LLP, Fort
Lauderdale, for appellee.

CIKLIN, C.J.

Victoria Magaldi appeals the final judgment of foreclosure entered in
favor of Deutsche Bank National Trust Company as Trustee for WAMU
2005-AR6 (“the bank”). We agree with Magaldi that the bank failed to
prove it had standing at the inception of the underlying suit and thus we
reverse.

In 2004, Magaldi executed a promissory note in favor of Washington
Mutual Bank, FA (“the lender”). In 2009, the bank brought a foreclosure
suit against Magaldi. The bank alleged it was the “owner” of the note. It
attached to its complaint a copy of the note made payable to the lender.
The note did not contain any endorsements. In 2014, the bank filed the
original note with the court which contained an undated blank
endorsement by the lender.

At trial, the following exhibits were introduced into evidence: copies
of the original note and mortgage, a pooling and servicing agreement
(“the PSA”), and a post-complaint assignment of the mortgage and note

by JP Morgan Chase Bank to the bank. The bank’s witness, Linda
Kuerzi, was employed by the entity that services the loan for the bank.
She provided testimony about the note, assignment, and the PSA.

This court has explained the process by which standing in a
foreclosure case may be established:

A “person entitled to enforce” an instrument is: “(1) [t]he
holder of the instrument; (2) [a] nonholder in possession of
the instrument who has the rights of a holder; or (3) [a]
person not in possession of the instrument who is entitled to
enforce the instrument pursuant to s[ection] 673.3091 or
s[ection] 673.4181(4).” § 673.3011, Fla. Stat. (2013). A
“holder” is defined as “[t]he person in possession of a
negotiable instrument that is payable either to bearer or to
an identified person that is the person in possession.” §
671.201(21)(a), Fla. Stat. (2013). Thus, to be a holder, the
instrument must be payable to the person in possession or
indorsed in blank. See § 671.201(5), Fla. Stat. (2013).

Murray v. HSBC Bank USA, 157 So. 3d 355, 358 (Fla. 4th DCA 2015)
(alterations in original).

At trial, the bank appeared to proceed as a holder.1 However, none of
the evidence introduced at trial established its standing at the inception
of the suit. The copy of the note attached to the complaint did not
establish standing, as it was not made payable to the bank and did not
contain a special endorsement in the bank’s favor or a blank
endorsement. Although the original note contains an endorsement in
blank, it was filed after suit was brought and thus did not establish
standing at inception of the suit. See McLean v. JP Morgan Chase Bank
Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012).

1 This is confirmed in the bank’s answer brief, in which it explains how it
proved standing as the holder of the note.

The bank relies to some extent on the assignment, but the assignment
was dated 2010—after suit was filed—and does not offer any indication
of whether the bank held the note endorsed in its favor or in blank when
it commenced the subject litigation. To the extent the bank proved,
through the PSA and Kuerzi’s testimony, that the loan was transferred to
the trust in 2005, this does not prove that at the time of the transfer, the
note contained an endorsement in the bank’s favor or in blank. Evidence
of a transfer of the note into a trust is not, standing alone, sufficient to

establish standing at inception of the suit. See Perez v. Deutsche Bank
Nat’l Trust Co., 174 So. 3d 489, 491 (Fla. 4th DCA 2015); Jarvis v.
Deutsche Bank Nat’l Trust. Co., 169 So. 3d 194, 196 (Fla. 4th DCA 2015).

Because the bank did not prove it had standing at inception of the law
suit, we reverse. The remaining issue raised on appeal is moot.

Reversed.

TAYLOR and MAY, JJ., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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Posted in STOP FORECLOSURE FRAUD1 Comment

Higgins v. DYCK-O’NEAL, INC. | FL 1st DCA – Appellee was precluded from filing an action at law seeking damages based on Appellants’ failure to satisfy their promissory note on the property at issue, because Appellees had filed a prior foreclosure action which included a prayer for a deficiency judgment

Higgins v. DYCK-O’NEAL, INC. | FL 1st DCA – Appellee was precluded from filing an action at law seeking damages based on Appellants’ failure to satisfy their promissory note on the property at issue, because Appellees had filed a prior foreclosure action which included a prayer for a deficiency judgment

SYLVIA HIGGINS and COLLIER HIGGINS, Appellants,
v.
DYCK-O’NEAL, INC., Appellee.

Case No. 1D15-4784.
District Court of Appeal of Florida, First District.

Opinion filed June 9, 2016.
Austin Tyler Brown of Parker & DuFresne, P.A., Jacksonville, for Appellants.

Susan B. Morrison, Tampa, for Appellee.

THOMAS, J.

Appellants, Collier Higgins & Sylvia Higgins, seek review of an order denying their motion for relief from a Final Default Judgment, wherein the trial court determined that Appellants were indebted to Appellee, Dyck-O’Neal, Inc. Appellants argued below and reassert here that the trial court lacked subject matter jurisdiction and thus erred in denying their motion for relief, based in part on our decision in Reid v. Compass Bank, 164 So. 3d 49 (Fla. 1st DCA 2015). Appellants argue that Appellee was precluded from filing an action at law seeking damages based on Appellants’ failure to satisfy their promissory note on the property at issue, because Appellees had filed a prior foreclosure action which included a prayer for a deficiency judgment, and the trial court in that action reserved jurisdiction to enter a deficiency judgment. We agree with Appellants, and for the reasons stated herein, we reverse the trial court’s denial of Appellants’ motion for relief from judgment.

Facts

In 2009, Freedom Mortgage Corporation (Freedom) sued Appellants in Duval County to foreclose the mortgage on Appellants’ property. It is undisputed that in its complaint, Freedom included a request for a deficiency judgment against Appellants, if the proceeds were insufficient to pay Freedom’s claim. In September 2009, the trial court entered a Final Summary Judgment in Foreclosure that retained jurisdiction “for the purpose of making any further orders as may be necessary and appropriate herein, including but not limited to all claims for deficiencies.” (Emphasis added.) After the foreclosure sale, the Judgment and Note was assigned to Appellee.

Almost five years later, Appellee filed a new Complaint in law against Appellants in Duval County, seeking damages as a result of Appellants’ failure to satisfy the promissory note on the property. Appellants did not respond to the Complaint, and Appellee moved for default, which was granted. Appellee filed a motion for final default judgment along with supporting affidavits. The trial court ultimately entered a Final Default Judgment against Appellants, totaling $89,724.15.

Approximately 11 months later, Appellants filed a motion for relief from judgment pursuant to rule 1.540(b), Florida Rules of Civil Procedure, asserting the final judgment was void, as it was entered without subject matter jurisdiction, citing Compass Bank. Appellee filed a memorandum of law in opposition to Appellants’ motion for relief from judgment, asserting in part that our decision in Compass Bank which discussed the relevant issue here was dicta. Following a hearing, the trial court denied Appellants’ motion for relief from judgment, and this appeal followed.

Analysis

Appellants argue here that Appellee was prevented from filing an action at law, based on the prayer for a deficiency judgment in the prior foreclosure action, where the prior foreclosure court unequivocally reserved jurisdiction to enter a deficiency judgment. It is undisputed that the argument on appeal concerns an issue of law, which is reviewed de novo. Compass Bank, 164 So. 3d at 52 (citing Fla. Ins. Guar. Ass’n, Inc. v. Bernard, 140 So. 3d 1023, 1027 (Fla. 1st DCA 2014)).

In addressing the legal issue presented here, we return to the analysis of this court’s decision in Compass Bank:

Prior to June 7, 2013, section 702.06, Florida Statutes, which is entitled “Deficiency decree; common-law suit to recover deficiency,” provided:

In all suits for the foreclosure of mortgages heretofore or hereafter executed the entry of a deficiency decree for any portion of a deficiency, should one exist, shall be within the sound judicial discretion of the court, but the complainant shall also have the right to sue at common law to recover such deficiency, provided no suit at law to recover such deficiency shall be maintained against the original mortgagor in cases where the mortgage is for the purchase price of the property involved and where the original mortgagee becomes the purchaser thereof at foreclosure sale and also is granted a deficiency decree against the original mortgagor.

(Emphasis added). Section 702.06 was amended in 2013 to read:

In all suits for the foreclosure of mortgages heretofore or hereafter executed the entry of a deficiency decree for any portion of a deficiency, should one exist, shall be within the sound discretion of the court; however, in the case of an owner-occupied residential property, the amount of the deficiency may not exceed the difference between the judgment amount, or in the case of a short sale, the outstanding debt, and the fair market value of the property on the date of sale. For purposes of this section, there is a rebuttable presumption that a residential property for which a homestead exemption for taxation was granted according to the certified rolls of the latest assessment by the county property appraiser, before the filing of the foreclosure action, is an owner-occupied residential property. The complainant shall also have the right to sue at common law to recover such deficiency, unless the court in the foreclosure action has granted or denied a claim for a deficiency judgment.

See Ch. 13-137, § 5, Laws of Fla. (Emphasis added).

In addressing Appellant’s argument, a review of the case law construing section 702.06 is instructive. In Younghusband v. Ft. Pierce Bank & Trust Co., 100 Fla. 1088, 130 So. 725, 727 (1930), the supreme court held that “[i]f no deficiency judgment is entered in foreclosure sale, it is clear that a suit at law for any amount still due is available to the holder.” In Cragin v. Ocean & Lake Realty Co., 101 Fla. 1324, 135 So. 795, 797 (1931), the supreme court set forth that a plaintiff “having applied for and obtained a deficiency decree in their favor in the court of equity, could not, under the act of 1927, go into a court of law and maintain therein suits for the recovery of the balance due on the notes.” In Provost v. Swinson, 109 Fla. 42, 146 So. 641, 643 (1933), a case relied upon by Appellant, the supreme court set forth, “When the complainant filed his bill in equity to foreclose the mortgage and therein prayed for a deficiency decree, he elected that forum in which to have his right adjudicated and became bound by that choice.”

In Belle Mead Development Corp. v. Reed, 114 Fla. 300, 153 So. 843, 844 (1934), another case relied upon by Appellant, the supreme court explained that in August 1928, the appellee executed three promissory notes payable to the McElroys. It was alleged that the notes were assigned and delivered before maturity to the appellant, the plaintiff in the case. Id. The appellant filed suit for the foreclosure of the mortgage, praying for a deficiency decree. Id. A foreclosure decree was obtained, the property was sold, and the proceeds were applied to the payment of the debt. Id. The appellant asked for a deficiency decree which was “resisted” by the “defendant,” and the chancellor refused to enter a deficiency judgment. Id. The appellant subsequently filed an action at law to recover on the promissory notes, and the trial court “struck those pleas.” Id. The supreme court, in affirming, set forth, “In the case at bar there was a special prayer for affirmative relief [for a deficiency decree]. The complainant thereby elected that forum in which to have its rights adjudicated and became bound by that choice.” Id. The supreme court further set forth, “After specifically praying for a deficiency, the complainant may waive the relief prayed for in that regard, but it does not avoid the choice of the forum by not applying for the deficiency decree.” Id.

In Reid v. Miami Studio Properties, 139 Fla. 246, 190 So. 505, 505 (1939), a case relied upon by Appellee in support of its argument that the action at law was permissible, the supreme court noted that the complainant, in his bill to foreclose, prayed for a deficiency decree in the event the property at issue did not bring enough to pay the amount of the indebtedness and costs. The Chancellor did not enter a deficiency decree and did not consider this phase of the prayer for relief. Id. The supreme court explained that the sole question presented was “whether or not under the facts stated the plaintiff Reid can now maintain an action at law to recover the amount of the deficiency judgment which he prayed for in the foreclosure but which prayer was not considered.” Id. The supreme court noted that the defendant contended that the question should be answered in the negative because “the plaintiff in error elected his forum and is bound by the result of his election.” Id. at 505-06. The defendant relied upon Provost and Belle Mead in support of its argument. Id. at 506. The supreme court set forth:

We understand the law to be that where there is no prayer for a deficiency and where one is not sought or entered in the foreclosure proceeding the law courts may be resorted to to recover one. Since the entry of a deficiency decree under Section 5751, Compiled General Laws of 1927, is within the sound discretion of the Chancellor and if entered, the one in whose favor it is entered may resort to a suit at law to recover it, we see no basis for the logic that he is precluded from an action at law to recover one if the chancellor is importuned to enter it and declines to consider the question or to make any ruling thereon.

The cases relied on by defendant in error have been examined. They involve other factual situations affecting deficiencies but we do not consider that they rule the question we have here nor are we convinced that the elements essential to constitute an election of remedies are present.

In fine, we understand Section 5751, Compiled General Laws of 1927, to mean that if a deficiency decree is asked for in a foreclosure and granted, that settles the question of what forum may be sought for relief but if not asked for or if asked for and overlooked or not considered, the right of the claimant is not affected. He may sue at law and recover such portion as he may prove himself entitled to.

Id. (Emphasis added).

In Crawford v. Woodward, 140 Fla. 38, 191 So. 311, 311 (1939), the supreme court, relying on Provost, Cragin, and Belle Mead and finding Reid distinguishable, determined that the plaintiff could not maintain an action at law after the foreclosure where the plaintiff prayed for a deficiency decree, notwithstanding the facts that the plaintiff later stated in the confirmation of the foreclosure sale that “Complainants are not asking for a deficiency decree” and none was rendered by the chancellor.

In Luke v. Phillips, 148 Fla. 160, 3 So.2d 799, 799 (1941), the supreme court addressed the plaintiff’s contention that Reid overruled Belle Mead. The supreme court, without setting forth the facts of the case, set forth, “[T]he instant case is ruled by Reid . . . wherein we pointed out that the facts of that case were distinct from those in the Belle Mead . . . case and that line of cases which were not inferentially or otherwise overruled.” Id.

In McLarty v. Foremost Dairies, 57 So.2d 434, 434 (Fla.1952), the supreme court considered a petition for writ of certiorari to review a judgment of the Duval County Circuit Court which affirmed the judgment of the Civil Court of Record for Duval County. The supreme court explained that the respondent was the owner and holder of a note secured by chattel mortgage and brought suit in Volusia County against the petitioner to foreclose the mortgage. Id. In the suit to foreclose, the respondent prayed for a deficiency decree. Id. No further action was taken with regard to the prayer for deficiency. Id. The personal property mortgaged was sold pursuant to a final decree entered in the foreclosure proceedings and after crediting the proceeds of the sale to the note, there remained due and owing to the plaintiff $1,548.41. Id. “At no time during the entire proceedings was any request made for a deficiency nor was the matter called to the attention of the Court in any way.” Id. The only time or place where the matter of deficiency appeared in the proceedings was the prayer for deficiency contained in the bill of complaint. Id. The respondent “[i]n due course” filed suit in Duval County for the balance due under the note after crediting the proceeds of the foreclosure sale. Id. The petitioner, the defendant below, pleaded as a defense the foreclosure suit and the prayer for deficiency contained in the bill of complaint. Id. It was the contention of the petitioner that the respondent “having prayed for a deficiency without obtaining one, could not sue upon the note to recover the balance due upon the mortgage note.” Id.

The supreme court found that the case was controlled by Reid and Luke and noted the alleged confusion between those cases and the cases of Crawford and Belle Mead. Id. The supreme court explained that although the facts in Luke did not state that a deficiency decree was prayed for, its review of the record in that case showed that the bill to foreclose the mortgage contained a prayer for a deficiency judgment. Id. at 435. It also explained that the facts of the case at hand were identical to the facts of Luke where the “sale of the mortgage property and disbursements were approved and confirmed by the Chancellor but no deficiency decree was entered or requested.” Id. After noting that its holding in Reid was reaffirmed in Luke, the supreme court set forth, “If the opinion in Reid . . . as affirmed in Luke . . . is in conflict with any other holdings with reference to the subject matter, such holdings, or opinions, are over-ruled to the extent of such conflict.” Id. The supreme court found no departure from the essential requirements of the law in the case before it. Id.

Thereafter, in First Federal Savings & Loan Association of Broward County v. Consolidated Development Corp., 195 So.2d 856, 858 (Fla. 1967), the supreme court addressed McLarty, Reid, and Luke. In First Federal Savings, the petitioner brought a foreclosure suit in Palm Beach County and prayed for a deficiency decree if the proceeds of the mortgage sale were less than the amount due on the mortgage. Id. at 857. The final decree of foreclosure expressly reserved jurisdiction in the court for the determination of any motion for a deficiency decree. Id. The petitioner then brought an action to recover the deficiency in Broward County and represented to the foreclosure court in Palm Beach County that inasmuch as no motion had been made there for a deficiency decree, there was no longer a need for retention of jurisdiction of the cause in that court. Id. The foreclosure court entered an order terminating jurisdiction. Id. The Broward County court dismissed the case before it, ruling that the petitioner, after having selected its forum in Palm Beach County, should not be permitted to subject the respondents to further harassment and expense. Id. The dismissal was appealed to the Fourth District Court of Appeal. Id. After noting that the abandonment of jurisdiction in Palm Beach County did not occur until twenty-six days after the action at law was filed in Broward County, the supreme court explained that the Fourth District decided the case “on the principle that a court may not switch its jurisdiction, or power, on and off as one would an electric light.” Id. at 857-58. The supreme court also noted the Fourth District’s determination that “[f]or the purposes of deficiency decrees vel non this power is not for the benefit of the court; hence, it cannot waive its jurisdiction in that regard. It may refuse or refrain from exercising the power, but the chancellor cannot abjure a court of equity of its innate or inborn jurisdiction by mere words of jacitation.” Id. at 858. The Fourth District concluded that the Palm Beach County Circuit Court still had jurisdiction of the subject matter and the question of a deficiency decree and held that the dismissal in Broward County constituted a dismissal without prejudice to the plaintiff’s right to have the question of deficiency determined by the Palm Beach County Circuit Court. Id.

On first examination of the petition for certiorari, the supreme court concluded that argument should be heard on the matter because of apparent conflict with its prior decisions. Id. The supreme court summarized some of its prior decisions, including Reid, McLarty, and Luke. Id. It distinguished Reid because in the case at hand “the request [for a deficiency decree] was made in the complaint and apparently was not immediately considered but was deferred as the court retained jurisdiction to settle any motion for deficiency.” Id. The supreme court set forth, “So it may be said that the request for deficiency was neither considered nor overlooked. Here again on the salient facts the plaintiff was not at this point free to seek an adjudication elsewhere, hence a conflict was not developed.” Id. The supreme court stated of McLarty, “[T]here was a prayer for a deficiency but thereafter request for that relief was ignored.” Id. It found that the holding in Luke was essentially the same as the one in Reid. Id. The supreme court was ultimately unable to discover the conflict that would vest jurisdiction with it because “there appears to be no inconsistency between what was held here and what was decided in the cited cases.” Id. It set forth, “There has been no disturbance of the rule that if a deficiency is sought and the relief is overlooked or not considered, the one entitled to the recovery of the balance of the debt left over after the proceeds of the mortgage sale have been credited may sue for the remainder at law.” Id. at 859. The court found, however, that the “principle would have to be stretched out of form to condone what the plaintiff undertook in this case.” Id. It concluded that the Fourth District’s decision was sound and did not disrupt the law that “appears firmly established.” Id.

In support of its argument on appeal that its action at law was permissible, Appellee relies not only on Reid but also upon the plain language of section 702.06, both before and after the 2013 amendment. While we agree that the plain language of both versions of section 702.06 supports an argument that a party may file an action at law to recover a deficiency so long as a trial court has not actually ruled upon a request for a deficiency judgment in the foreclosure case, cases such as Belle Mead and First Federal Savings suggest otherwise. We note also that any question as to whether Reid permits a party to file an action at law after including a prayer for a deficiency judgment in a foreclosure complaint and after the trial court reserves jurisdiction to consider such a request was resolved by the supreme court in First Federal Savings. There, as here, the foreclosure complaint contained a prayer for a deficiency decree, and the foreclosure judgment expressly reserved jurisdiction to rule upon a deficiency request. As the supreme court noted in First Federal Savings, there was not a reservation of jurisdiction in Reid. As such, Appellee’s reliance upon Reid is misplaced.

Notwithstanding the fact that First Federal Savings supports the argument that a party is not entitled to pursue an action at law on a promissory note where that party includes a prayer for a deficiency judgment in its foreclosure complaint and the trial court reserves jurisdiction to enter a deficiency judgment, we have determined that affirmance is warranted in this case based upon the circumstances presented. Unlike the situation in First Federal Savings where the foreclosure court entered an order terminating its jurisdiction, the trial court in this case granted Appellee’s motion to consolidate the foreclosure case and the action at law. Therefore, in contrast to the Palm Beach County Circuit Court in First Federal Savings, the trial court in this case still had jurisdiction in the foreclosure case. Although Appellant cites case law for the proposition that consolidated cases maintain their independent status with respect to the rights of the parties involved, Appellant does not contend on appeal that the trial court erred in granting Appellee’s motion to consolidate or in denying his motion to dismiss the action at law. We note also that although Appellant moved to dismiss the action at law prior to Appellee moving for consolidation, the record does not contain any argument put forth below by Appellant in opposition to consolidation. As such, any question as to whether consolidation was proper is not before us.

Compass Bank, 164 So. 3d at 52-57 (footnotes omitted).

Regardless of whether this prior analysis on the merits of the issue was dicta in Reid, we now adopt this analysis in our holding here. And we disagree with our sister court’s holding in in Garcia v. Dyck-O’Neal, Inc., 178 So. 3d 433 (Fla. 3d DCA 2015), that the revised relevant statutory language compels a different result.

The facts in Garcia are very similar to this current appeal. In 2009, BAC Home Loans Servicing brought a successful foreclosure action against Garcia and others, and the prayer for relief included the court taking jurisdiction for the purpose of a deficiency judgment. 178 So. 3d at 434. The final judgment of foreclosure reserved jurisdiction to adjudicate any claim seeking a deficiency judgment. Id. After the foreclosure sale, the appellee was assigned the judgment and note, and filed a separate action in the same county as the foreclosure action against Garcia seeking the deficiency. Id. Garcia did not respond, the clerk’s default was entered in September 2014, and the appellee moved for entry of a final default judgment. Id. Garcia filed a motion to dismiss, arguing that the trial court lacked subject matter jurisdiction of the deficiency action because BAC sought deficiency relief and the foreclosure court expressly retained jurisdiction to adjudicate the deficiency. Id. The trial court rejected this argument, and Garcia appealed, relying on First Federal Savings and Compass Bank.

The Third District found that the portions of the opinions relied upon by Garcia were dicta and, in relevant part, held:

A. First Federal Savings’ Dicta

In First Federal Savings, the plaintiff obtained a judgment of foreclosure in Palm Beach County; the foreclosure court retained jurisdiction to determine a deficiency judgment. The plaintiff then filed an action in Broward County to recover the deficiency. On plaintiff’s motion, the circuit court in Palm Beach County terminated its jurisdiction. The Broward County circuit court, however, dismissed the case because the Palm Beach County circuit court originally had retained jurisdiction. First Fed. Sav., 195 So.2d at 857.

The Fourth District Court of Appeal held that the Palm Beach County circuit court should not have abandoned its jurisdiction. Initially, the Florida Supreme Court granted certiorari review based on an apparent conflict among the districts. In discharging the writ of certiorari, however, the Florida Supreme Court determined that no conflict existed after all. In its conclusion, the Florida Supreme Court’s glancing reference to the rule for recovering a deficiency judgment does not constitute the holding of the case. First Fed. Sav., 195 So.2d at 859.

. . .

C. Statutory Authority Eclipses Dicta

When the clear and unambiguous language of a statute commands one result, as here, while dicta from case decisions might suggest a different result, we must apply the statute so as to give effect to legislative intent. Citizens Prop. Ins. Corp. v. Perdido Sun Condo. Ass’n, Inc., 164 So.3d 663, 666 (Fla.2015). In determining legislative intent, we first look to the language of the statute. State v. Hackley, 95 So.3d 92, 93 (Fla.2012) (“The first place we look when construing a statute is to its plain language—if the meaning of the statute is clear and unambiguous, we look no further.”).

We need look no further than the plain language of section 702.06. The dicta in First Federal Savings and Compass Bank does not carry the weight of authority of section 702.06 as it is now constituted. The remedial nature of the 2013 amendment to section 702.06 militates against our further interpreting an inconsistent body of case law.

178 So. 3d at 435-36 (footnotes omitted).

We respectfully disagree with the Third District’s opinion, which does not dissuade us from adopting this court’s analysis in Compass Bank. In particular, we cannot ignore that part of the supreme court’s First Federal Savings’ holding that its certiorari jurisdiction was unadvisedly granted, based on the fact that the Fourth District’s underlying opinion in First Federal Savings did not disrupt the law that appeared firmly established, and the facts of the case were specifically distinguishable from Reid, as that prior Florida Supreme Court opinion did not involve a reservation of jurisdiction like First Federal Savings. Furthermore, we cannot read the statutory language to effect a monumental change in the law, which would allow a mortgagee to sue to foreclose on the mortgaged property, successfully request the court to reserve jurisdiction to enter a deficiency judgment in the event of a shortfall after the sale of the property, and then after the court reserves jurisdiction at the request of the mortgagor (or the successor), then permit the mortgagor to seek a deficiency judgment at common law. The statute expressly prohibits such a result if the original suit in foreclosure results in an order granting or denying the deficiency judgment. In our view, when the original court in foreclosure reserves jurisdiction to grant or deny the deficiency judgment, the statute cannot be logically or fairly read to permit the plaintiff in the original action to disregard the court’s reservation of jurisdiction, and file another action at law. When the court in the foreclosure action has been requested to grant a deficiency judgment and has reserved jurisdiction to do so, the plaintiff is bound by that court’s ultimate exercise of jurisdiction to rule on the matter.

We agree with the federal district court in Wells Fargo Bank, N.A. v. Jones, 2014 WL 1784062 (M.D. La. May 5, 2014), that to interpret this statute as read by the Third District and asserted by Appellee would permit forum shopping and contravene the Florida Supreme Court case law to the contrary, which the statute does not specifically abrogate. In Jones, like here, the lender had sought a deficiency judgement in the original foreclosure action, that court had reserved jurisdiction to render such relief, but the lender then sought a deficiency judgment at common law in federal court, disregarding its earlier request for relief in the Florida state court which still retained jurisdiction to grant relief. The court in Jones stated: “This Court finds that the Florida law providing the lender with `the right to sue at common law to recover such deficiency’ was never meant to apply to the present situation.” We agree, and further note that the statute cannot be reasonably read to allow a lender to seek a deficiency judgment in the original foreclosure action, where the court is granted the discretion to deny such relief, and retains jurisdiction to do so, and then grant the lender the right to forum shop and file yet another action based on contract principles where the subsequent court is not authorized to deny relief in common law, absent unusual circumstances. Absent specific direction from the legislature, such a reading is not justified. Rather, we read the revised statutory language as simply clarifying and reiterating long-standing judicial holdings that if the original foreclosure court ignores a claim for a deficiency judgment, or one is not sought there, the lender may seek relief at common law.

As we acknowledged in Compass Bank, “While we agree that the plain language of both versions of section 702.06 supports an argument that a party may file an action at law to recover a deficiency so long as a trial court has not actually ruled upon a request for a deficiency judgment in the foreclosure case, cases such as Belle Mead and First Federal Savings suggest otherwise.” 164 So. 3d at 56 (emphasis added). We now hold that while the statutory language may “support” such an argument, it does not persuade us that the legislature intended to actually overrule Florida Supreme Court decisions that address the issue more specifically and hold to the contrary. Thus, we fully agree with our prior opinion that Appellee’s reliance on Reid is misplaced, and we hold that a party is not entitled to pursue an action at law on a promissory note where that party includes a prayer for a deficiency judgment in its foreclosure complaint and the trial court reserves jurisdiction to enter a deficiency judgment. Accordingly, we reverse the trial court’s denial of Appellants’ motion for relief from judgment and remand for the trial court to void the default judgment.

REVERSED and REMANDED.

LEWIS, J., CONCURS; MAKAR, J., DISSENTING WITH OPINION.

MAKAR, J. dissenting.

A final judgment of foreclosure entered against Sylvia and Collier Higgins resulted in their home being sold at auction. Dyck-O’Neal, Inc., which was assigned the judgment and underlying note, sued in a separate proceeding to collect the deficiency between the amount due on the note and the property’s value. A final judgment of default was entered against the Higgins because they failed to respond in the deficiency proceeding. A year later, the Higgins sought to void the default judgment, claiming the trial court lacked jurisdiction because the foreclosure court had reserved jurisdiction to consider a request for a deficiency judgment in that proceeding.

The trial court properly denied the Higgins’ request because the Legislature had just recently enacted a clearly worded statute that established a “right to sue” for a deficiency judgment “unless the court in the foreclosure action has granted or denied a claim for a deficiency judgment.” § 702.06, Fla. Stat.; Ch. 2013-137, Laws of Fla. Because the “court in the foreclosure action” had neither “granted” nor “denied” the claim for a deficiency judgment in that proceeding, Dyck-O’Neal had a clear statutory “right to sue” separately for a deficiency judgment. The statute contemplates this precise situation, i.e., where a foreclosure court has been presented, but not acted upon, a request for a deficiency judgment; in such a case, the complainant has the “right to sue” to recover the deficiency. The statute doesn’t say the complainant must sue in the same court as the foreclosure action; instead, the plain words of the statute envision the possibility of two separate proceedings, perhaps in two different courts.

The plain, unambiguous language of the statute has not escaped judicial notice. Every Florida court addressing the issue of whether section 702.06 jurisdictionally bars a separate suit for a deficiency judgment has said unequivocally that it does not. Instead, the only statutory jurisdictional bar is if the “court in the foreclosure action has granted or denied a claim for a deficiency judgment.” § 702.06, Fla. Stat. The Third District, in two cases with facts like this one, have viewed the 2013 statutory language as “clear,” “plain,” and “unambiguous.” Dyck-O’Neal, Inc. v. Weinberg, 41 Fla. L. Weekly D329 (Fla. 3d DCA Feb. 3, 2016) (reversing an order dismissing for lack of jurisdiction based on “unambiguous” and “plain language of the statute”); Garcia v. Dyck-O’Neal, Inc., 178 So. 3d 433, 436 (Fla. 3d DCA 2015) (“When the clear and unambiguous language of a statute commands one result, as here, . . . we must apply the statute so as to give effect to legislative intent.”); see also Cheng v. Dyck-O’Neal, Inc., 41 Fla. L. Weekly D1076b (Fla. 4th DCA May 6, 2016) (agreeing with Third District decisions “that section 702.06, Florida Statutes, is unambiguous”). As summarized by the Third District in Garcia:

According to the statute, unless the foreclosure court has granted or has declined to grant a deficiency judgment, a plaintiff may pursue deficiency relief in a separate action. In the instant case, the foreclosure court did not grant or decline to grant the deficiency judgment claim; therefore, the trial court below had jurisdiction to consider Dyck-O’Neal’s deficiency claim.

178 So. 3d at 436. Likewise, the Fourth District in Cheng concluded that the “foreclosure judgment’s reservation of jurisdiction does not preclude a separate suit to recover the deficiency where the foreclosure court has not granted or denied a claim for a deficiency judgment.” Cheng, 41 Fla. L. Weekly D1076b. The clarity of the 2013 statutory language decides this case; affirmance is required.

Two additional points are warranted. First, the lengthy discussion of erstwhile caselaw in Reid v. Compass Bank, 164 So. 3d 49, 57 (Fla. 1st DCA 2015), is dicta, immaterial, and misplaced. Because it is dicta, it has only persuasive value; but it has failed to persuade both the Third and Fourth Districts. It is immaterial because the 2013 statutory language at issue trumps whatever perceived inconsistency the panel in Reid may have imagined with prior precedents. See Garcia, 178 So. 3d at 436 (“Statutory Authority Eclipses Dicta”). In addition, the caselaw recited cannot be said to be inconsistent with the 2013 revision. Rather, though the older caselaw is not entirely consistent, it appears that a complainant had the right to pursue an action at law for a deficiency judgment if a deficiency is not sought or entered in the foreclosure proceeding. See Reid v. Miami Studio Props., 190 So. 505, 506 (Fla. 1939); see also First Fed. Sav. & Loan Ass’n of Broward Cnty. v. Consol. Dev. Corp., 195 So. 2d 856, 859 (Fla. 1967) (“There has been no disturbance of the rule that if a deficiency is sought and the relief is overlooked or not considered, the one entitled to the recovery of the balance of the debt left over after the proceeds of the mortgage sale have been credited may sue for the remainder at law.”).

Second, whatever disagreement may exist about the efficiency of allowing a separate proceeding to pursue a deficiency judgment is best left to the Legislature, which has recently addressed and settled the matter. As the Third District said: “In our view, the Legislature drafted a clear statute that resolved the courts’ struggle with the issue in this case.” Garcia, 178 So. 3d at 436. If the statutory “right to sue” in section 702.06 results in significant problems—which appears unlikely given the right in some form has existed for over 75 years—the legislative branch may wish to address them.

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED.

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RICO | BofA, Countrywide Hit With Appraisal Suits By Home Buyers

RICO | BofA, Countrywide Hit With Appraisal Suits By Home Buyers

Law360-

A proposed nationwide class of home buyers have accused Bank of America Corp., Countrywide Financial Corp. and appraisal firm LandSafe Inc. of conducting phony appraisals in an attempt to secure more loans, filing a lawsuit in California federal court on Thursday stemming from previously settled whistleblower claims.

Home buyers in California and Florida allege Countrywide, now owned by Bank of America, used its wholly-owned appraisal firm LandSafe to rip off loan applicants in violation of the Racketeer Influenced and Corrupt Organizations Act. The complaint says the alleged…

[LAW360]

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Freddie Mac Document Custody Procedures Handbook | Document Delivery and Processing Procedures

Freddie Mac Document Custody Procedures Handbook | Document Delivery and Processing Procedures

Background
Document Custodians must verify certain information contained in the Notes and related documents for the Mortgages sold to Freddie Mac and certify those verifications and that the documents are original. We refer to this process as “certification” or “certifying” the Notes.

This chapter details our requirements for certifying Notes delivered to Freddie Mac, including those sold with a Concurrent Transfer of Servicing. For information on Subsequent Transfers of Servicing, see Guide Section 7101.1 and Chapter 5 of this Handbook. Unless the Document Custodian receives a copy of the Purchase Documents between the Seller/Servicer and Freddie Mac, (including the first page with the Seller/Servicer number, the pages with the exceptions detailed, and the signature pages), the Document Custodian must not deviate from the requirements of this Handbook or the Guide.

The information in this chapter is intended to help you fulfill your responsibilities as an approved Document Custodian. This Handbook is a reference tool that complements Freddie Mac’s Single-Family Seller/Servicer Guide. It does not replace the requirements in the Guide, and in the event of a conflict, the Guide controls.
Before you may accept a delivery of Notes from a Seller, Freddie Mac must approve you as a Document Custodian for the Servicer that will service the Mortgages. Refer to Chapter 1 of this Handbook for additional information on becoming an approved Document Custodian.

Sellers may use independent delivery agents, particularly for bulk or seasoned loan portfolio sales. If such an agent contacts you or you receive loan data with respect to the Mortgages from a third party, you must ask to see written evidence of its relationship with the Seller, such as a copy of the first and signature pages of their contract with the Seller or the paragraph in the Freddie Mac Master Commitment that recognizes the agency arrangement. You may rely on the representations of such an agent as if the Seller made them, as the Seller remains liable for the accuracy and completeness of all data. Contact Freddie Mac if you have any questions regarding delivery by an agent. See Guide Directory 9.

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Why are so many bankers committing suicide?

Why are so many bankers committing suicide?

NY POST-

Three bankers in New York, London and Siena, Italy, died within 17 months of each other in 2013-14 in what authorities deemed a series of unrelated suicides. But in each case, the victim had a connection to a burgeoning global banking scandal, leaving more questions than answers as to the circumstances surrounding their deaths.

The March 6, 2013, death of David Rossi — a 51-year-old communications director at Monte dei Paschi di Siena, the world’s oldest bank — came as the institution teetered on the brink of collapse.

Rossi was found dead in an alleyway beneath his third-floor office window in the 14th-century palazzo that served as the bank’s headquarters.

[NEW YORK POST]

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Fannie Mae | DOCUMENT CUSTODIAN CERTIFICATION JOB AIDS

Fannie Mae | DOCUMENT CUSTODIAN CERTIFICATION JOB AIDS

These Job Aids provide additional detailed information regarding what is required for institutions that are providing document certification and custody services on behalf of Fannie Mae. These Job Aids supplement the Fannie Mae Requirements for Document Custodians (RDC) and the Fannie Mae Selling and Servicing Guides.
We recommend that you print these Job Aids and provide a copy to your staff.

 

Document Custodians Job Aid 1

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Chain of Title Specialist | Advertisement for anyone willing to commit felonies for money – counterfeiter and forger wanted…

Chain of Title Specialist | Advertisement for anyone willing to commit felonies for money – counterfeiter and forger wanted…

via: https://www5.recruitingcenter.net/Clients/SPS/PublicJobs/controller.cfm?jbaction=JobProfile&Job_Id=14095

Job Description:

Job Summary: Provides assistance in demonstrating the Investor has the appropriate legal authority to initiate actions through a complete Chain of Title, by recognizing and preparing the required documents to complete the Note with applicable Endorsements, along with any Assignments and other necessary legal documents. Can work independently with the Investor, Client, Custodian, and Attorney Network to resolve any document exceptions in a professional and timely manner.
________________________________________
Principal Duties:
1. Facilitates document requests in a timely manner
2. Comprehensive understanding of proving up all Chain of Title requirements
3. Resolves document exceptions through collaborative efforts with areas outside the Department
4. Conducts training for new and existing employees
5. Assist in gathering required documents for all audits

Minimum Qualifications:
1. Detail oriented
2. Document processing experience
3. Excellent written and verbal communication skills
4. Ability to lift boxes weighing 25 lbs
5. Proficient in Microsoft Office (Excel and Word)

Preferred Qualifications:
1. Experience in Loan Servicing, with emphasis in Bankruptcy and Foreclosure
2. Timeline management
3. Operating imaging hardware/software
4. Records Management
5. Experience with Microsoft Office tools (Access and SQL)

Select Portfolio Servicing an Equal Opportunity Employer and do not discriminate against any employee or applicant for employment because of race, color, sex, age, national origin, religion, sexual orientation, gender identity, status as a veteran, and basis of disability or any other federal, state or local protected class.

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GARY DUBIN LAW OFFICES FORECLOSURE DEFENSE HAWAII and CALIFORNIA
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