Arizona Fed Judge Sedwick Sustains Borrower’s Action for Fraud adv MERS, BAC, Millenium et al

AZ Ct Sustains Action for Fraud SCAN1516_000

We thought we’d be required to wait longer for a decision like this in Arizona. The decision is not particularly novel. The Borrower sued for misrepresentation and the “lender” defended on all the usual grounds that usually either freezes the case or ends up bouncing the Borrower out of court. Judge Sedwick felt the lawsuit filed by the borrower was sufficient to state a cause of action and will let the case go forward. That means discovery. And Discovery is what pretender lenders don’t want. The surprise is that this was in Arizona.

Borrower alleged kickbacks, false representations, fraudulent concealment, accounting, breach of fiduciary duty, constructive fraud and quiet title. Motion to Dismiss was denied despite the fact that the defendants invoked the statute of limitations, with the Judge construing the complaint to say that the Plaintiff filed within 6 months of finding out about the misrepresentation. It remains to be seen how significant this decision from the trial court will be. Other Judges on the same bench may not agree.

18 Responses

  1. Zoe , ask your State Attorney with question , write him what your problems are .I did it in Florida , and the did
    already the half job for the Lawyer .Fantastic -NO CHARGE.

  2. […] This post was mentioned on Twitter by dB Zhivago of Armpit, Deborah Palmer. Deborah Palmer said: Arizona Fed Judge Sedwick Sustains Borrower's Action for Fraud adv MERS, BAC, Millenium et al: […]


    Mortgages — Foreclosure — Consumer law — Motion to dismiss defendant’s non-party counterclaims against law firm representing plaintiff in foreclosure action alleging that firm violated federal Fair Debt Collection Practices Act and Florida Deceptive and Unfair Trade Practices Act and committed abuse of process by creating false assignment of mortgage and note and false affidavit — Litigation privilege does not bar FDCPA claims — It would be premature to dismiss state law claims based on litigation privilege where complaint does not show conclusive applicability of that defense — Where claims against plaintiff for use of false documents are interrelated with alleged actions of law firm employees in creating those documents, law firm’s presence is needed to grant complete relief to defendant, and motion to dismiss counterclaims as improper third-party claims is denied — No merit to argument that foreclosing mortgage is not collection of debt for purposes of FDCPA — Limitation of actions — FDCPA counterclaim is not barred by statute of limitations where it was filed within one year of execution of false documents — Defendant is consumer covered by FDUTPA, even if law firm did not provide services to her — Allegation that law firm engaged in trade or commerce in connection with defendant’s loan by transferring mortgage to plaintiff sufficiently states cause of action under FDUTPA — Abuse of process claim is dismissed where initial service of process was used for intended purpose of foreclosing loan, and issue of whether underlying documents were legal may be addressed in other claims
    GMAC MORTGAGE, LLC, Plaintiff/Counter-Defendant, v. CARRIE GASQUE,. et al., Defendant/Counter-Plaintiff, v. THE LAW OFFICES OF DAVID J. STERN, P.A., a Florida Professional Association, Counterclaim Defendant. Circuit Court, 4th Judicial Circuit in and for Duval County. Case No.16-2008-CA-012971, Division CV-G. September 2, 2010. James L. Harrison, Judge. Counsel: Jeffrey A. Tew, for Counterclaim Defendant Stern. Lynn Drysdale, for Defendant Ms. Gasque. Donna Glick, for Plaintiff GMAC.




    This matter came before the Court on The Law Offices of David J. Stern, P.A. (“Stern”) motion to dismiss Carrie Gasque’s (“Ms. Gasque”) Non-Party Counterclaims. The Court having heard argument of counsel for Ms. Gasque and Stern, reviewed the file and being otherwise advised in the premises, finds as follows:

    History of the case and the basis for Ms. Gasque’s counterclaims
    1. On or about October 1, 2008, the Law Offices of David J. Stern (“Stern”) filed the subject mortgage foreclosure lawsuit on behalf of its client GMAC Mortgage, LLC (“GMAC”). A mortgage payable to Taylor, Bean & Whittaker as “lender” and listing Mortgage Electronic Registration Systems, Inc. (“MERS”) as “nominee for lender” was attached to the complaint. No copy of the note was attached to the Complaint. In Paragraph 4 of the Plaintiff’s Complaint to Foreclose Mortgage and to Enforce Lost Loan Documents, it alleges “Said mortgage was subsequently assigned to GMAC Mortgage, LLC by virtue of an assignment to be recorded.”

    2. Ms. Gasque filed and served her Motion for Leave to File Amended Counterclaims to Add a Non-Party Counterclaim Defendant and to Add a Claim for Punitive Damages on October 19, 2009. The proposed amendments were attached to her motion for leave to amend. In her non-party counterclaims filed pursuant to Rule 1.170(h), Fla.R.Civ.P. she alleged Stern violated the federal Fair Debt Collection Practices Act, 15 U.S.C. §1692, et seq.(“FDCPA”), the Florida Deceptive and Unfair Trade Practices Act, Chapter 501.201, Fla.Stat., et. seq,(“FDUTPA”) and committed an abuse of process. These claims arise out of Stern’s creation of an alleged false assignment of mortgage and note executed by Beth Cerni, a Stern employee, on November 7, 2008 purportedly transferring the mortgage and note from MERS as nominee for Taylor, Bean & Whittaker to Stern’s client, GMAC and an alleged false affidavit of summary judgment also executed by Ms. Cerni on November 13, 2008.

    3. Stern moved to dismiss all counterclaims based upon the following arguments: (1) the entire claim against Stern fails to state a cause of action as a result of the litigation privilege; (2) the claims against Stern, while labeled counterclaims, are actually improper third-party claims; (3) the FDCPA claim fails to state a cause of action because foreclosing upon a mortgage is not the collection of a debt within the meaning of the FDCPA; (4) the FDCPA claim is barred by the statute of limitations; (5) the FDUTPA claim fails to state a cause of action because Ms. Gasque does not sufficiently allege how Stern’s actions constitute “trade or commerce” or that Gasque was a consumer of Stern’s trade or commerce; and (6) the abuse of process claim fails to state a cause of action.

    4. Ms. Gasque opposed each of these arguments.

    Motion to Dismiss Standard
    “In considering a motion to dismiss, a trial court is confined to the allegations contained within the four corners of the complaint.” Crews v. Ellis, 531 So.2d 1372 (Fla. 1st DCA 1988). In addition, “the function of a motion to dismiss a complaint is to raise as a question of law the sufficiency of the facts alleged to state a cause of action, and a court is not permitted to speculate as to whether a plaintiff has any prospect of proving the allegations.” Id.

    The First District Court of Appeal also held

    The party moving for dismissal necessarily admits the truth of all facts in evidence, and every reasonable conclusion or inference based thereon favorable to the nonmoving party. Weaver v. The Leon County Classroom Teacher’s Association, 680 So.2d 478 (Fla. 1st DCA 1996).
    See also Fish v. Post of Amvet #85, 560 So.2d 337, 339 (Fla. 1st DCA 1990) (In analyzing the complaint the trial court is confined to the allegations contained within the four corners of the complaint and may not consider defenses).

    Motion to Dismiss – Litigation Privilege
    Stern claims because the alleged activities occurred during pending litigation all of Ms. Gasque’s claims are barred and subject to an absolute immunity under the litigation privilege. In support of this position Stern relies upon the Florida Supreme Court’s decisions in Echevarria, McCalla, Raymer, Barrett & Frappier, et al v. Cole, 950 So. 2d 380 (Fla. 2007) and Levin, Middlebrooks, Mabie, Thomas, Moves & Mitchell, P.A. v. US. Fire Ins. Co., 639 So.2d 606 (Fla. 1994). While the Supreme Court extended the litigation privilege in Levin to “any act occurring during the course of a judicial proceeding, regardless of whether the act involves a defamatory statement or other tortious behavior,” the Court added “absolute immunity only arises “upon the doing of any act required or permitted by law in the due course of the judicial proceedings.” Id. at 608 (quoting Fridovich v. Fridovich, 598 So. 2d 65, 66 (Fla. 1992)) (emphasis added). See also Echevarria 950 So. 2d at 385, 387.

    These cases are not relevant to the instant alleged violations the FDCPA involving false assignments and affidavits. It is clear the Florida litigation privilege does not bar these federal claims. The United States Supreme Court in Heintz v. Jenkins, 514 U.S. 291, 293 (U.S. 1995) held attorneys actions in litigation were subject to the FDCPA. See also Sayyed v. Wolpoff & Abramson, 485 F.3d 226, 231 (4th Cir. 2007) (if conduct in the course of litigation, or even formal pleadings more specifically, were entirely exempt from the FDCPA, the express exemption provided by §1692e(11) would be unnecessary, courts should disfavor interpretations of statutes that render language superfluous).

    As to Ms. Gasque’s state law claims, the Honorable Timothy J. Corrigan, Middle District of Florida, Jacksonville Division in Northstar Capital Acquisitions, LLC, v. Krig, 611 F.Supp.2d 1324, 1330, (M.D. Fla. 2009) found no binding precedent concerning whether the litigation privilege protects arguably misleading or deceptive documents utilized in litigation. The Court followed the Florida Supreme Court opinion in Echeverria in holding: “[N]ot every event bearing any relation to litigation is protected by the privilege because . . . [i]f the litigation privilege applied to all actions preliminary to or during judicial proceedings, and abuse of process claim would never exist, nor would a claim for malicious prosecution. Id. at 1330. Judge Corrigan began by balancing the rights of parties to an action to the protection of the litigation privilege with consumer’s rights in Florida “to sue debt collectors for alleged unfair collection practices . . .[t]he purpose and intent of the FCCPA, like the FDCPA, is to eliminate abusive and harassing tactics in the collection of debts.” Id. at 1330-31. The Court found “applying the litigation privilege to the communications here would eviscerate the FCCPA and allow attorney debt collectors to avoid liability under state law or potentially abusive and harassing collection practices simply by filing a lawsuit before attempting to collect a debt. Id. at 1332.

    Ms. Gasque claims Stern’s false representations contained in the assignment and affidavits violated the FDCPA which is not subject to the litigation privilege. Assignments of mortgage are used to reflect a transfer of a mortgage, and in this case, the note and the mortgage. An assignment is not generally an act required by litigation. Creating false documents, whether assignments or affidavit, are not conclusively covered by the litigation privilege. Because the litigation privilege is an affirmative defense, it is premature to dismiss the state law claims when the complaint does not affirmatively and clearly show the conclusive applicability of the defense to these claims. Am. National Title & Escrow of Florida, Inc. v. Guarantee Title & Trust Company, 810 So. 2d 996, 998 (Fla. 4th DCA 2002); North Star Capital Acquisitions, LLC v. Krig, 2008 WL 346021 (M.D. Fla. 2008).

    Motion to Dismiss — Improper Third Party Claim Labeled as Counterclaim
    Stern claims Ms. Gasque’s claims are mislabeled third-party claims. Stern relies upon Lindahl v. Laralen Corporation, 661 So. 2d 412 (Fla. 4th DCA 1995) to support its position that the claims against Stern are distinct from the claims against GMAC, the original party, and should be dismissed. Further, as third party claims, Stern argues there must be a claim for derivative liability, indemnification, subrogation or contribution. Leggiere v. Merrill Lynch Realty/Florida, Inc., 544 So. 2d 240 (Fla. 2d DCA 1989); Rupp v. Philpot, 619 So. 2d 1047, 1048 (Fla. 5th DCA 1993).

    Rule 1.170(h), Fla.R.Civ.P. provides

    Additional Parties May Be Brought In. When the presence of parties other than those to the original action is required to grant complete relief in the determination of a counterclaim or crossclaim, they shall be named in the counterclaim or crossclaim and be served with process and shall be parties to the action thereafter if jurisdiction of them can be obtained and their joinder will not deprive the court of jurisdiction of the action. Rules 1.250(b) and (c) apply to parties brought in under this subdivision.
    Ms. Gasque’s allegations regarding the use of false documents against GMAC are interrelated with the direct actions of a Stern employee in creating these same false documents, an assignment of mortgage and note and affidavit in support of summary judgment. Stern’s presence is needed to grant complete relief to Ms. Gasque because of its involvement in creating the questioned documents. General Dynamics Corporation v. Hewitt, 207 So. 2d 44 (Fla. 3rd DCA 1968).

    Stern attempts to re-characterize the non-party counterclaims as third-party claims are inconsistent with the allegations of Ms. Gasque’s counterclaims and, therefore, do not constitute a valid basis for dismissal. See Krig (attorney filing lawsuit on behalf of creditor client is proper non-party counterclaims defendant).

    Motion to Dismiss — Foreclosure is not the collection

    of a debt for purposes of the FDCPA
    Stern claims that seeking the foreclosure of a mortgage is not debt collection. Stern relies upon Judge Corrigan’s decision in Trent v. Mortgage Electronic Registration Systems, Inc., 618 F.Supp.2d 1356, 1360 (M.D. Fla. 2007) to support this position. In Trent, Judge Corrigan found foreclosing a mortgage is “distinct from the collection of the obligation to pay money.” This position fails in the context of this motion to dismiss for two reasons. First, in its Complaint Plaintiff is seeking a foreclosure judgment and “a deficiency judgment be entered, if applicable.” Therefore, Plaintiff is seeking foreclosure and a monetary judgment.

    Second, in an April 21, 2010 decision the United States Supreme Court, Jerman v. Carlisle, McNealy, Rani, Kramer & Ulrich L.A., 130 S.C. 1605 (2010), reversed a summary judgment in favor of the defendant law firm based upon the bona fide error of law defense. Defendant law firm filed a mortgage foreclosure lawsuit against Plaintiff and included with the complaint a notice that the mortgage debt would be assumed valid unless Plaintiff disputed it in writing. The United States Supreme Court reversed the summary judgment and held the law firm was not entitled to the bona fide error of law defense. In doing so, the Supreme Court allowed Plaintiff to pursue her FDCPA claim based solely upon the language contained in a letter served with a mortgage foreclosure complaint. See also Gburik v. Litton Loan Servicing, LP, 2010 WL 2899110 (7th Cir. July 27, 2010) (letter sent offering to try to work out alternatives to foreclosure was a communication in connection with collection of a debt even though servicer was not asking for money); Heintz v. Jenkins, 514 U.S. 291 (1995) (FDCPA applies to attorneys who ‘regularly’ engage in consumer-debt-collection activity, even when that activity consists of litigation).

    Ms. Gasque has sufficiently alleged Stern engaged in the collection of debts in seeking to foreclose upon her mortgage, seeking an accounting of the monetary sums due to GMAC and seeking to hold Ms. Gasque responsible for paying these sums to GMAC. Paragraph 79, Gasque Counterclaims. Therefore, Ms. Gasque has stated a cause of action under the FDCPA.

    Motion to Dismiss — Statute of Limitations.
    Stern also claims Ms. Gasque’s FDCPA claims are barred by the statute of limitations. 15 U.S.C. § 1692k(d) provides an action to enforce liability created by the FDCPA may be brought within one year from the date on which the violation occurs. Ms. Gasque filed her motion for leave to file the subject counterclaims on October 19, 2009. She attached the proposed amended counterclaims to this motion. In Paragraph 62 of her FDCPA count she alleges “GMAC and Stern knew they should not falsify assignments and affidavits. GMAC and Stern falsely represented that the assignments and affidavits were valid in violation of 15 U.S.C.§1692e(10) and 15 U.S.C. §1692f.”

    The assignment referenced in this Paragraph 62 was executed on November 7, 2008 and the subject affidavit was executed on November 13, 2008. Ms. Gasque filed her FDCPA counterclaim within one year of the execution of the documents, therefore, her counterclaims were timely filed.

    Motion to Dismiss

    Deceptive and Unfair Trade Practices Act Failure to

    State a Cause of Action
    Stern claims that Ms. Gasque does not sufficiently allege how Stern’s actions constitute “trade or commerce” or that Gasque was a consumer of Stern’s trade or commerce. Ms. Gasque has alleged she was a consumer and that Stern was engaged in trade or commerce, Paragraphs 67 and 68, Gasque’s counterclaims. The FDUTPA broadly defines “trade or commerce” as “the advertising, soliciting, providing, offering, or distributing, whether by sale, rental, or otherwise, of any good or service, or any property, whether tangible or intangible, or any other article, commodity, or thing of value, wherever situated. §501.203(8), Fla.Stat. (emphasis provided) The FDUTPA is to be construed liberally to cover many types of practices occurring in consumer transactions and to protect the consuming public from those “who engage in. . . deceptive, or unfair acts or practices in the conduct of any trade or commerce.” §501.202(2), Fla.Stat. . This is the express directive of the Florida legislature. Schauer v. General Motors Acceptance Corp., 819 So.2d 809, 812 (Fla. 4th DCA 2002).

    The 1993 amendments to FDUTPA expanded the coverage of the prohibitions to apply to any “trade or commerce.” The 1993 amendments also deleted the terms “consumer transaction” and “supplier.” Beacon Property Management, Inc. v. PNR, Inc, 890 So.2d 274 (Fla. 4th DCA 2004) The Beacon Court found the post-amended FDUTPA was “. . . .now intended by its plain text to apply to any act or practice occurring “in the conduct of any trade or commerce including trade or commerce involving real property.” 890 So.2d at 278.

    Stern relies upon the Florida Southern District Court’s decision in Kelly v. Palmer, Reifler & Associates, P.A. 681 F. Supp.2d 1356 to support its motion to dismiss Ms. Gasque’s FDUTPA claims. Ms. Kelly sued a debt collection law firm as a result of civil theft letters. The Kelly Court found Ms. Kelley was covered by the FDUTPA because in 2001 the statute was amended to substitute the word “person” for the word “consumer.” Therefore, even through the law firm did not provide a product to Ms. Kelly she still was protected by the FDCPA in connection with the letters mailed by the law firm. Similarly, Ms. Gasque is a consumer even if Stern had not provided services to her.

    In response to a motion for summary judgment, the Kelly Court did find that the law firm’s activities in sending collection letters did not constitute trade or commerce. It is important to note that the Kelly Court found that it was improper to dispose of Ms. Kelly’s FDUTPA claims in the context of a motion to dismiss but did ultimately dismiss the case after full development of the facts. 681 F. Supp.2d at 1377. Similarly, in the instant case the motion to dismiss is premature. Based upon the allegations of Ms. Gasque’s counterclaims Stern was involved in “trade or commerce” in connection with Ms. Gasque’s loan because it purportedly transferred her mortgage from MERS to GMAC. Therefore, Stern is providing more than mere legal assistance in this case and is arguably engaging in the trade and commerce by assigning the mortgage and note. See also North Star Capital Acquisitions, LLC v. Krig, 611 F.Supp.2d 1324 (law firm’s motion for summary judgment regarding FDUTPA claims arising from its consumer collection activities denied).

    Therefore, Ms. Gasque has sufficiently stated a cause of action against Stern for violations of the FDUTPA.

    Motion to Dismiss — Abuse of Process Failure to

    State a Cause of Action
    Stem claims Ms. Gasque failed to state a cause of action for abuse of process. A cause of action for abuse of process requires three elements: (1) that the defendant made an illegal, improper, or perverted use of process; (2) that the defendant had ulterior motives or purposes in exercising such illegal, improper, or perverted use of process; and (3) that, as a result of such action on the part of the defendant, the plaintiff suffered damage. Della-Donna v. Nova Univ., Inc., 512 So.2d 1051, 1055 (Fla. 4th DCA 1987). The plaintiff must prove that the process was used for an immediate purpose other than that for which it was designed. Biondo v. Powers, 805 So.2d 67, 69 (Fla. 4th DCA 2002). Where the process was used to accomplish the result for which it was intended, “regardless of an incidental or concurrent motive of spite or ulterior purpose,” there is no abuse of process. Id. (quoting Scozari v. Barone, 546 So.2d 750, 751 (Fla. 3d DCA 1989). This Court finds the initial service of process was used for its intended purpose, to foreclose upon a mortgage. Whether the underlying documents used in the process were legal may be addressed in other claims.

    It is therefore, ordered

    1. Counterclaims Defendant, Stern’s motion to dismiss Count One (Federal Fair Debt Collection Practices Act and Count Two (Florida Deceptive and Unfair Trade Practices Act) is denied.

    2. Counterclaim Defendant, Stern’s motion to dismiss Count Three is granted.

    3. Counterclaim Defendant, Stern shall file a response to Counterclaims Plaintiff’s Counts One and Two within twenty (20) days of the date of this order.

    * * *

  4. Thank you, judge and juicejuice, I will check my state for statute limitations for fraud. I took a close look at my mortgages today and I’m not sure how to proceed with my lawsuit. My husband passed away and I’m having to wade through the paperwork again without his input. If anyone can help me with a few questions, I would appreciate your time.

    When he bought our home, the closing agent made a mistake and came back to our home to have him sign all the closing docs a second time, two weeks later. In the confusion, I think the wrong mortgage was recorded…the one from the first closing date. The mortgage that my husband and I signed (I didn’t sign the note, the application, or the sales contract) to MERS and the originating “lender” was dated Dec 1, but the seller signed a deed to us dated Dec. 14, which was the date of the second closing. Does that mean the mortgage is invalid on its face? How could we sign over rights to property, power of sale, etc. if we didn’t have an executed deed from the seller until two weeks later? Does the date we signed the mortgage matter? These documents were all recorded on Dec. 14. This stuff confuses me beyond words.

  5. In california,

    Fraud 3 yrs. Civ. Proc. §338(d)
    Contracts Written: 4 yrs. §337


    For a list of MERS Fatal Flaws in CA, visit

  6. Thanks Judge Sedwick.

    America is more important than fraudulent moral-hazard banks!

    You are a leader amongst many not so gifted or blinded by pensions.

  7. Check out Matt Weidner law blog:

    What a win for Defendants, check it out

    US Bank National Association v. Garner

  8. Good questions, I think California is 6 years as well. The Department of Real-Estate claims 1 year and I have battled with asking what exactly means the discovery of fraud. You discovered it or did I discovered it? I just asked is this fraud.

    Still to date, is there a reputable lawyer going after all this in Calif.?
    Foreclosed and I’ve been through enough audit scam artist.

  9. I don’t know enough about this case for this comment to be considered informed….

    However, in light of the unexpected ruling on the part of this court, I have to ask the question: Are the court’s intentions honorable? Could the court be allowing the case to progress in order that a precedent be set that favors the defendant bank in cases of this type?

    I feel it best to consider all possibilities. Otherwise you/we/I could be caught totally flat footed.

  10. There is a storm gathering out there, every day there is a flood of denials of lift of stays and reversals, sanctions. The momentum is in our side.

    there are still lawyers that even though they know they can win, they will balk at foreclosure defense or offense because they feel it is too much work. You see justice for these lawyers is TOO MUCH WORK, they would rather get you into BK and then forget about it because is simple and direct.

    You are out of a house and may be some potential damages because the lawyer thinks that justice is too much work.

    Be careful and pick your lawyer with care, ask many questions and ask them about their case load and their success or failure rate. Are they litigants or just paper pushers.

  11. Each state is different. Let us say that you suspect that based on your servicers treatment of your case you feel compelled to order your loan analysis, title search and securitization analysis to get more info that up to now has been withheld from you.

    Now you have your results, and what do they all mean? let us call a lawyer to look at it, and guess what he or she tell you, you know you seem to have issues with these loan, there may be a cause of action for fraud and other claims.

    That is the moment in time when you officially may be actually aware that you may have been a victim of fraud.

    Let us remember one thing is to suspect another is to have proof and evidence!!!!

    But what ever you do, do it right. Once you mess up or some other person messes up in court that creates a bad precedent.

    That is why lawyers and pro se litigants must share info and work along side each other as the ethics rules allow.

    The lawyers must meet with each others and create work groups, co counsel, create a solid front.

    Do not fall into the hole of your little practice and think that you are better than the rest. The enemy is gathering force and they have been successful in many years of hammering us in the courts because our lawyers and our own efforts were ill suited and misguided.

    So please everyone be careful out there and above all else fight on. The law is on your side!!!!!!!!!!!!!!!!!!!!!!

  12. How can the statute start running untill you have all thr players they were hidden it took me two darn years to figure these multiple serial frauds

  13. Hallaluhah! Jesus


  15. YES!!!!!!! TO ZOE

  16. Does this mean that all homeowners must file a lawsuit within six months of all this fraud being made public? Is that why the banks are dragging feet and delaying foreclosure, “reviewing” documents, etc?

  17. For those who want a little humor with these trying times.
    Pro Se Texas Divorce.

  18. Cheers to Judge Sewick another American hero.

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