Supreme Court of the State of New York, held
in and for the County of KINGS, at
the Courthouse located at 360 Adams
Street, Brooklyn, NY on the 2nd day of
June, 2010
“WHY an order should not be made dismissing the within action due to Plaintiffs lack of standing; together with such other and further relief as this Court may deem just and equitable;”
ORDERED, that pending the hearing . . of this motion, the Plaintiff Mortgage Electronic Registration System as Nominee for US Bank, N.A., and any of its attorneys, agents, successors and assignees,be and are hereby restrained from implementing or any way pursuing the closing of title on any third party sale of the premisesknown as 81 Woodbine Street, Brooklyn, NY 11221; and Plaintiff Mortgage Electronic Registration System as Nominee for US Bank, N.A., and any of its attorneys, agents, successors and assignees be and are hereby restrained from evicting Liborio Munoz and his family and any other occupants from the premises known as 81 Woodbine Street, Brooklyn, NY 11221.
Post staff for NYPOST Last Updated: 4:42 AM, July 5, 2010 Posted: 12:44 AM, July 5, 2010
Brooklyn’s battling Judge Arthur M. Schack has struck again, giving a Brooklyn homeowner an Independence Day gift — freedom from foreclosure.
The judge, who has steadfastly pressed banks in foreclosure cases to prove they own the troubled mortgage and has tossed cases when banks have failed to do so, has again dismissed a foreclosure case — this time because the lawyer on the case, Steven J. Baum, represented the mortgage broker, the bank that bought the loan and the industry registration service serving as the nominee of the loan.
But Baum’s conflict of interest wasn’t the case’s only problem.
Judge Schack, in his decision, also found that the bank, US Bank, never should have filed the foreclosure action because of an “ineffective assignment of the subject mortgage and note to it.” In other words, it sold the mortgage, and the mortgage was securitized, leaving the company simply as the servicer — but it decided to try and take back the Crown Heights home anyway.
The Post has reported that the actions of the Baum firm in foreclosure cases has caught the eye of the US Trustee, the arm of the Justice Department responsible for monitoring the Bankruptcy Court.
Baum, a Buffalo-based foreclosure mill that filed 12,551 foreclosure actions in New York last year, has been scolded by judges for bringing foreclosure cases without proper documentation.
In this case, a Baum lawyer, Elpiniki Bechakas, signed papers claiming to be an executive of Mortgage Electronic Registration System, or MERS, which was given certain rights to the mortgages by the broker, Fremont Investment and Loan, while simultaneously representing Fremont and US Bank, which filed the foreclosure in July 2009.
“The Court is concerned that the concurrent representation by [the Baum firm] of both assignor MERS, as nominee for Fremont, and assignee plaintiff US Bank is a conflict of interest,” Schack wrote.
A Brooklyn judge has rejected a bank’s request for $9,112 in costs for producing subpoenaed documents, calling the claim an example of the excess and greed among “fat cat bankers on Wall Street.”
JPMorgan Chase, a non-party in an action to confirm an arbitration award, sought 25 cents per page and $25 per hour for producing 18,248 pages of subpoenaed documents demanded by the petitioner.
In a blistering 11-page decision, Brooklyn Supreme Court Justice Arthur Schack granted JPMorgan Chase only $1,250.27, or about one-seventh of the amount the bank requested.
“Clearly, Chase’s arbitrary $25.00 per hour … fee for the unsubstantiated 182 hours of research by person or persons unknown only helps to unjustly enrich ‘a bunch of fat cat bankers on Wall Street,'” Justice Schack wrote in Matter of Arbitration of Klein v. Persaud, 8007/09. “This Court is not a collection vehicle to further enrich already rich bankers.”
Schack called the bank’s CEO, James S. Dimon, the “fattest cat” at JPMorgan Chase, citing Dimon’s compensation of nearly $20 million in 2008.
Petitioner Abraham Klein initiated the underlying action to confirm a multimillion-dollar arbitration award against Christine Persaud and Caring Home Care Agency.
In July, Schack asked non-party JPMorgan Chase to submit an affirmation regarding its production expenses.
The bank claimed it provided Klein 18,248 pages of documents and requested $9,112 — $4,550 for locating and retrieving the documents and $4,562 for printing them.
In opposing JPMorgan Chase’s request, Klein called the bank’s demand “flawed and disingenuous.” He argued that the bank sought to be “rewarded for ignoring court orders” and reimbursed for pages it never produced. Klein also claimed that JPMorgan Chase flooded his attorneys with “thousands” of documents they never requested.
JPMorgan Chase denied those allegations.
“Chase produced approximately 12,000 pages by [the] deadline set by the Court … The 12,000 pages are responsive to petitioner’s unequivocal and explicit demand for all documents for that account,” the bank contended in court papers. “Chase has also produced more than 6,000 pages of documents for the other four accounts listed in the June 12th subpoena.”
Schack sided with Klein.
First, the judge reduced the bank’s hourly fee from $25 to $6.55 — the minimum wage in Indiana, where the judge believed the work may have been done, at the time the documents were produced.
“[T]he Court … is guided by the principal that ‘[o]rdinarily, the retrieval and evaluation of documents should be done by the lowest-level person consistent with accurate and reliable identification of the material called for,'” Schack wrote.
The 182 hours worked by JPMorgan Chase employees therefore came to $1,192, not $4,562, the judge concluded.
In order to determine the compensation rate per page the bank copied, the judge “examined” the Web sites of “three major stationary suppliers” and determined that a case of Hammermill Copy Plus Paper, containing 10 reams (i.e., 5,000 sheets) lists for $44.99, or a little less than a penny per page.
Schack therefore awarded JPMorgan Chase one cent per page for paper, plus an additional two cents for “toner, copier maintenance and electricity.”
The judge also noted that of the 18,248 pages that JPMorgan Chase produced, the bank placed 16,317 pages online, as opposed to printing them. For those pages, the bank only deserved compensation for labor and not supplies, the judge wrote, calling the bank’s claim “disingenuous.”
At three cents per page for only 1,939 pages, instead of 25 cents per page for 18,248, the bank deserved $58.17, not $4,562, Schack concluded.
The judge ordered Klein to pay JPMorgan Chase a total of $1,250.27.
Michelle E. Tarson of Simmons, Jannace & Stagg represented Chase. The firm did not return calls for comment.
The judge waves you into his chambers in the State Supreme Court building in Brooklyn, past the caveat taped to his wall — “Be sure brain in gear before engaging mouth” — and into his inner office, where foreclosure motions are piled high enough to form a minor Alpine chain.
Nicole Bengiveno/The New York Times
“I don’t want to put a family on the street unless it’s legitimate,” Justice Arthur M. Schack said.
Every week, the nation’s mightiest banks come to his court seeking to take the homes of New Yorkers who cannot pay their mortgages. And nearly as often, the judge says, they file foreclosure papers speckled with errors.
He plucks out one motion and leafs through: a Deutsche Bank representative signed an affidavit claiming to be the vice president of two different banks. His office was in Kansas City, Mo., but the signature was notarized in Texas. And the bank did not even own the mortgage when it began to foreclose on the homeowner.
The judge’s lips pucker as if he had inhaled a pickle; he rejected this one.
“I’m a little guy in Brooklyn who doesn’t belong to their country clubs, what can I tell you?” he says, adding a shrug for punctuation. “I won’t accept their comedy of errors.”
The judge, Arthur M. Schack, 64, fashions himself a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale. While national debate focuses on bank bailouts and federal aid for homeowners that has been slow in coming, the hard reckonings of the foreclosure crisis are being made in courts like his, and Justice Schack’s sympathies are clear.
He has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model.
His opinions, too, have been greeted by a cry of affront from a bank official or two, who say this judge stands in the way of what is rightfully theirs. HSBC bank appealed a recent ruling, saying he had set a “dangerous precedent” by acting as “both judge and jury,” throwing out cases even when homeowners had not responded to foreclosure motions.
Justice Schack, like a handful of state and federal judges, has taken a magnifying glass to the mortgage industry. In the gilded haste of the past decade, bankers handed out millions of mortgages — with terms good, bad and exotically ugly — then repackaged those loans for sale to investors from Connecticut to Singapore. Sloppiness reigned. So many papers have been lost, signatures misplaced and documents dated inaccurately that it is often not clear which bank owns the mortgage.
Justice Schack’s take is straightforward, and sends a tremor through some bank suites: If a bank cannot prove ownership, it cannot foreclose.
“If you are going to take away someone’s house, everything should be legal and correct,” he said. “I’m a strange guy — I don’t want to put a family on the street unless it’s legitimate.”
Justice Schack has small jowls and big black glasses, a thin mustache and not so many hairs combed across his scalp. He has the impish eyes of the high school social studies teacher he once was, aware that something untoward is probably going on at the back of his classroom.
He is Brooklyn born and bred, with a master’s degree in history and an office loaded with autographed baseballs and photographs of the Brooklyn Dodgers. His written decisions are a free-associative trip through popular, legal and literary culture, with a sideways glance at the business pages.
Confronted with a case in which Deutsche Bank and Goldman Sachs passed a defaulted mortgage back and forth and lost track of the documents, the judge made reference to the film classic “It’s a Wonderful Life” and the evil banker played by Lionel Barrymore.
“Lenders should not lose sight,” Justice Schack wrote in that 2007 case, “that they are dealing with humanity, not with Mr. Potter’s ‘rabble’ and ‘cattle.’ Multibillion-dollar corporations must follow the same rules in the foreclosure actions as the local banks,savings and loan associations or credit unions, or else they have become the Mr. Potters of the 21st century.”
Last year, he chastised Wells Fargo for filing error-filled papers. “The court,” the judge wrote, “reminds Wells Fargo of Cassius’s advice to Brutus in Act 1, Scene 2 of William Shakespeare’s ‘Julius Caesar’: ‘The fault, dear Brutus, is not in our stars, but in ourselves.’ ”
“The court wonders if the instant foreclosure action is a corporate ‘Kansas City Shuffle,’ a complex confidence game,” he reads. “In the 2006 film ‘Lucky Number Slevin,’ Mr. Goodkat, a hit man played by Bruce Willis, explains: ‘A Kansas City Shuffle is when everybody looks right, you go left.’ ”
The banks’ reaction? Justice Schack shrugs. “They probably curse at me,” he says, “but no one is interested in some little judge.”
Little drama attends the release of his decisions. Beaten-down homeowners rarely show up to contest foreclosure actions, and the judge scrutinizes the banks’ papers in his chambers. But at legal conferences, judges and lawyers have wondered aloud why more judges do not hold banks to tougher standards.
“To the extent that judges examine these papers, they find exactly the same errors that Judge Schack does,” said Katherine M. Porter, a visiting professor at the School of Law at the University of California, Berkeley, and a national expert in consumer credit law. “His rulings are hardly revolutionary; it’s unusual only because we so rarely hold large corporations to the rules.”
Banks and the cottage industry of mortgage service companies and foreclosure lawyers also pay rather close attention.
A spokeswoman for OneWest Bank acknowledged that an official, confronted with a ream of foreclosure papers, had mistakenly signed for two different banks — just as the Deutsche Bank official did. Deutsche Bank, which declined to let an attorney speak on the record about any of its cases before Justice Schack, e-mailed a PDF of a three-page pamphlet in which it claimed little responsibility for foreclosures, even though the bank’s name is affixed to tens of thousands of such motions. The bank described itself as simply a trustee for investors.
Justice Schack came to his recent prominence by a circuitous path, having worked for 14 years as public school teacher in Brooklyn. He was a union representative and once walked a picket line with his wife, Dilia, who was a teacher, too. All was well until the fiscal crisis of the 1970s.
“Why’d I go to law school?” he said. “Thank Mayor Abe Beame, who froze teacher salaries.”
He was counsel for the Major League Baseball Players Association in the 1980s and ’90s, when it was on a long winning streak against team owners. “It was the millionaires versus the billionaires,” he says. “After a while, I’m sitting there thinking, ‘He’s making $4 million, he’s making $5 million, and I’m worth about $1.98.’ ”
So he dived into a judicial race. He was elected to the Civil Court in 1998 and to the Supreme Court for Brooklyn and Staten Island in 2003. His wife is a Democratic district leader; their daughter, Elaine, is a lawyer and their son, Douglas, a police officer.
Justice Schack’s duels with the banks started in 2007 as foreclosures spiked sharply. He saw a plague falling on Brooklyn, particularly its working-class black precincts. “Banks had given out loans structured to fail,” he said.
The judge burrowed into property record databases. He found banks without clear title, and a giant foreclosure law firm, Steven J. Baum, representing two sides in a dispute. He noted that Wells Fargo’s chief executive, John G. Stumpf, made more than $11 million in 2007 while the company’s total returns fell 12 percent.
“Maybe,” he advised the bank, “counsel should wonder, like the court, if Mr. Stumpf was unjustly enriched at the expense of W.F.’s stockholders.”
He was, how to say it, mildly appalled.
“I’m a guy from the streets of Brooklyn who happens to become a judge,” he said. “I see a bank giving a $500,000 mortgage on a building worth $300,000 and the interest rate is 20 percent and I ask questions, what can I tell you?”
Nicole Bengiveno/The New York Times
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