Attorney Fee Award: Heads the Bank Wins, Tails the Homeowner Loses

Appellate courts stepping on a rake: This thread of decisions makes it extremely important for attorneys representing homeowners to establish the earliest possible safe harbor period so they can recover fees when they win.

These decisions are essentially punishing homeowners on the grounds that they won on an issue that revealed the underhanded, fictitious narratives that are cooked up by central repositories of fabricated data and documents in order to obtain a foreclosure judgment to which the banks and servicers are not entitled.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see Attorney Fees 57-105 DOC030317

The bottom line is that Judge Jennifer Bailey was right and the appellate court was wrong. Another case of the rules being used to twist the court system against itself. There are consequences arising from the Courts making policy (a legislative function). One of them may well be that even the highest court in a state could be subject to obvious reprimand from courts in the Federal system.

Since 2001, foreclosure litigation has been a strange world combining Opposite Day with twisted legal opinions based upon the single premise that the Banks must win and the homeowners must lose. Nowhere is that more obvious than in Florida, where a homeowner can win the case, with Final judgment entered in the Homeowner’s favor, but still lose the case on the issue of recovery of reasonable attorney fees and costs.

Under the logic of the Alexander case and now this third district opinion, the Bank can assert rights under what is an existing contract and, if it wins, recover attorney fees and costs. But the homeowner cannot recover fees if the homeowner wins. Despite the provisions of F.S. §57.105(7) that expressly states that if one party is entitled to recovery of fees in a contract then the provision becomes reciprocal — i.e., if the party using the contract for suit loses the prevailing party gets fees upon winning the case.

As in other decisions the court is hell bent on making it more difficult for homeowners to defend their homes by denying them recovery for their attorney fees. The obvious impact is to increase the risk of challenging the core defect in all foreclosures — standing. The DEBT is simply not owned by any of the parties who have been acting as “servicers”, “collectors” or “lenders” or “investors.”

The logic of the courts is defective and twisted. If US Bank, for example, is defeated in a foreclosure action because it was never a party to any loan contract, written, implied or otherwise, then it nevertheless does not need to pay for attorney fees for the opposition homeowner BECAUSE the homeowner won on standing.

Thus a party like US Bank et al who invokes a presumably valid contract, stands to lose nothing if it loses. The simplicity of the decisions is misleading. The appellate courts are making a finding of fact contrary to that of the trial judge. In this case the trial judge found that the Plaintiff was not a party to the contract and never became one. Hence the court entered judgment for the homeowner and then ruled that the homeowner was entitled to attorney fees and costs and awarded over $40,000 to the defendant as recovery of fees and costs.

But the appellate courts invented a concept that simply does not exist. They are finding that the contract does not exist rather than the trial court’s finding that the Plaintiff never became a party to the contract despite its allegations to the contrary. Either the contract exists or it doesn’t. If it doesn’t exist then nobody gets to enforce it and the the homeowner is now free to quiet title and get the mythological “free house.”

The correct decision under these cases should be that the Plaintiff, having invoked the contract including an award of attorney fees, was admitting that the reciprocity provisions of F.S. §57.105(7) apply and is now bound by the contractual provisions regardless of the outcome of litigation. Having failed to prove their rights under the contract, they are subject to the consequences set forth in the contract that formed the entire basis of their lawsuit in foreclosure.

This issue should be taken up with the Florida Supreme Court. These decisions are essentially punishing homeowners on the grounds that they won on an issue that revealed the underhanded, fictitious narratives that are cooked up by central repositories of fabricated data and documents in order to obtain a foreclosure judgment to which the banks and servicers are not entitled.

But the interesting thing about this reasoning, is that the issue of whether the contract exists or not might lead to a quiet title action for the homeowner.

Having established that the Plaintiff had no right to bring the action, the trial court must then vault such a decision into a rule, per se, that therefore there is no contract. This can only be prevented in the event that the next step in this thread is to suggest that the contract DOES exist but not as to the Homeowner in connection with this Plaintiff. But that will muddy title even more, inasmuch as all the evidence adduced to date was that the loan was somehow under the control of the Plaintiff or Plaintiff’s agents. How does another creditor/predator come along and say “OK, it was really us all along?”

A plain reading of the doctrine of estoppel in a court of equity would clearly allow the award of fees to the homeowner who wins on the issue of standing.

None of this discounts my prime directive that there is no contract at all to enforce becasue the debt was never merged into the note and the mortgage only serves as collateral for the alleged obligations under the note. In the absence of merging the debt (owed to an undisclosed, unidentified third party) into the note, the note represents only a contingent liability — if the note ends up in the hands of a holder in due course who purchased the note in good faith and without knowledge of the borrower’s defenses.

I might add that in the case of the so-called purchase or transfer of loan documents in which the homeowner is already declared in default, the rights of any holder or any possessor of the note are dubious at best, since the note is no longer a negotiable instrument under the UCC.

3rd DCA Florida Decides Statute of Limitations: Deutsch Loses

For further information please call 954-495-9867 or 520-405-1688

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see Third DCA – Beauvais Decision

In the Third District Court of Appeal, Florida, the Court decided Deutsch v Beauvais against the alleged “creditor” Deutsch.. Dozens of appellate decisions across the country are reversing a long-standing pattern of rubber stamping trial courts who exceeded their discretion, authority or even jurisdiction. This case affirms the trial court’s decision that the action was barred by the statute of limitations but reverses the trial court’s decision that the mortgage was null and void. How they reached this decision is going to be a matter in dispute and possibly the subject of a Florida Supreme Court decision soon.

The basic thrust of the decision is this: an unenforceable mortgage is not void. This seems counter-intuitive but it is probably correct. The effect is that the unenforceable mortgage remains as an encumbrance or cloud on title such that upon resale or refinance it might require payment to get a satisfaction or release of the mortgage, even though enforcement is barred by the statute of limitations. Other court decisions are struggling with the same issues. The effect on quiet title actions probably is that the declaration of the rights and duties of the parties includes the mortgage in the title chain and does not nullify the mortgage or remove it from the chain of title. Hence an action to nullify the mortgage would be necessary before it could be removed from the chain of title.

Using the logic from this and other cases, a homeowner cannot remove a mortgage from the chain of title by merely asserting that it is unenforceable. The flip side is that a homeowner could easily get the mortgage removed from the chain of title and to get a judgment in which title is declared free and clear of the mortgage encumbrance IF the homeowner proves that the initial transaction was a sham and that the mortgage should not have been signed or released much less recorded.

This is why the logic behind the “unfunded trust” may be crucial to removing the mortgage from the chain of title. If you can prove that there was no loan at the base of the documentary chain, then you are likely to succeed in nullifying the mortgage and then quieting title. Through discovery and deductive reasoning, it is possible to show that there was no loan of money, in FACT, at the base of the chain of documents. As a caveat, I should add that this issue is certainly not entirely resolved. There are competing decisions and views in Florida and across the country.

The basic thrust of this decision is whether the election to accelerate the entire amount due can be abandoned and thus allow future claims on future installments of the alleged loan.  The court cites AM. Bankers, 905 So. 2d 192. The hidden issue is that the association was successful in foreclosing against the homeowner and Deutsch — because there was no effort to withdraw the acceleration of the alleged loan. I think the decision ignores the doctrine of estoppel and prevents the alleged “creditor” from first exercising its “option” to accelerate and then withdrawing it when they lose the case or voluntary dismiss the case.

The court also makes a distinction between a voluntary dismissal and a judgment or involuntary dismissal with prejudice. In the first case, the court decided that the option to reinstate the later installments not barred by the statute of limitations could exist if the dismissal with prejudice, but does not exist where the option is not exercised. This adds wording to the mortgage contract and the applicable statutes. I think it is wrong.

The decision means that a “creditor” who loses or dismisses an action might be able to accelerate and foreclose multiple times until they finally win. It also introduces parole evidence into the recording process and chain of title. I agree that the mortgage is not automatically removed by losing the case. But I don’t agree that the loser can reinstate the action and sue again. It calls for the entire issue of the origination and transfer of the the alleged loan to be re-litigated. I think it conflicts with the doctrines of res judicata and collateral estoppel. The note, which is the only evidence of the debt, has been rendered unenforceable by the statute of limitations. To say that the mortgage survives as a potentially enforceable instrument on the issue of payment is illogical.

Here are some relevant quotes from the decision:

Where a lender files a foreclosure action upon a borrower’s default, and expressly exercises its contractual right to accelerate all payments, does an involuntary dismissal of that action without prejudice in and of itself negate, invalidate or otherwise “decelerate” the lender’s acceleration of the payments, thereby permitting a new cause of action to be filed based upon a new and subsequent default? [The 3rd DCA answers this question in the negative]

…because the installment nature of the loan payments was never reinstated following the acceleration, there were no “new” payments due and thus there could be no “new” default following the dismissal without prejudice of the initial action.

Smith v. F.D.I.C., 61 F.3d 1552, 1561 (11th Cir. 1995)(holding, “when the promissory note secured by a mortgage contains an optional acceleration clause, the foreclosure cause of action accrues, and the statute of limitations begins to run, on the date the acceleration clause is invoked.”).

The supreme court disapproved of the holding in Stadler and approved the Fourth District’s holding in Singleton:

We agree with the reasoning of the Fourth District that when a second and separate action for foreclosure is sought for a default that involves a separate period of default from the one alleged in the first action, the case is not necessarily barred by res judicata. [Editor’s Note: I think the court ignored the difference between the intention and effect of a statute of limitations and the doctrine of res judicata.]

In Singleton, the dismissal with prejudice disposed not only of every issue actually adjudicated, but every justiciable issue as well. Hinchee v. Fisher, 93 So. 2d 351, 353 (Fla. 1957), overruled in part on other grounds, May v. State ex rel. Ervin, 96 So. 2d 126 (Fla. 1957). In Hinchee, as in Singleton and Stadler, the trial court dismissed an initial action with prejudice. Hinchee, 93 So. 2d at 353. This operated as an adjudication on the merits and, as a general proposition for purposes of res judicata, “puts at rest and entombs in eternal quiescence every justiciable, as well as every actually adjudicated, issue.” Id. (quoting Gordon v. Gordon, 59 So. 2d 40, 43 (Fla. 1952)). As the Court observed in Hinchee:

A judgment on the merits does not require a determination of the controversy after a trial or hearing on controverted facts. It is sufficient if the record shows that the parties might have had their controversies determined according to their respective rights if they had presented all their evidence and the court applied the law.

Res judicata is not the issue in the instant case because the dismissal of the Initial Action was without prejudice, and therefore the borrower here (unlike the borrower in Singleton) did not “prevail in the foreclosure action by demonstrating that she was not in default” nor was there “an adjudication denying acceleration and foreclosure” such that the parties “are simply placed back in the same contractual relationship with the same continuing obligations.” Id.

the only subsequent cause of action which Deutsche Bank could file under the circumstances was an action on the accelerated debt— it could not thereafter sue upon an alleged “new” default because, without reinstating the installment terms of the repayment of the debt, there were no “new” payments due, [e.s.]

Without a new payment due, there could be no new default, and therefore no new cause of action. Because the Current Action was based upon the very same accelerated debt as the Initial Action, and because that Current Action was filed after the expiration of the five-year statute of limitations, it was barred.5

We acknowledge that Singleton has been applied to permit, as against an

asserted statute of limitations bar, the filing of a subsequent action following

dismissal with prejudice (i.e., an adjudication on the merits) of an earlier action.

See 2010-3 SFR Venture, LLC. v. Garcia, 149 So. 3d 123 (Fla. 4th DCA 2014);

Star Funding Solutions, LLC. V. Krondes, 101 So. 3d 403 (Fla. 4th DCA 2012); );

U.S. Bank Nat. Ass’n. v. Bartram, 140 So. 3d 1007 (Fla. 5th DCA 2014) review

granted, Bartram v. U.S. Bank Nat. Ass’n, Nos. SC14-1265, SC14-1266, SC14-

1305 (Fla. Sept. 11, 2014); PNC Bank, N.A., v. Neal, 147 So. 3d 32 (Fla. 1st DCA

2013). We believe our holding is not necessarily inconsistent with the strict

holdings of these cited cases, as each of them involved a dismissal of the earlier

action with prejudice, representing an adjudication on the merits and, at least

implicitly, a determination that there was no default and therefore no valid or

effectual acceleration. [ I think the court is struggling to justify its decision]

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