Florida Supreme Court Reverses: Homeowners can recover attorney fees even if they prove lack of standing when they win

see Page v. Deutsche Bank Tr.

Kudos to Nicole R. Moskowitz of Neustein Law Group, P.A., Aventura, Florida, for Petitioner William L. Grimsley and Kimberly Held Israel, Jacksonville, Florida, Daniel Alvarado, Elia Alvarado, South Florida Defense Group, Bowin Law Group, Michael Jay Wrubel, P.A., Jonathan Kline, P.A.

“The certified conflict issue in this case is whether a unilateral attorney’s fee provision in a note and mortgage is made reciprocal to a borrower under section 57.105(7), Florida Statutes (2019), when the borrower prevails in a foreclosure action in which the plaintiff bank established standing to enforce the note and mortgage at the time of trial but not at the time suit was filed. We have jurisdiction. See art. V, § 3(b)(4), Fla. Const.”

The Bank argues in the alternative that even if we do not approve Page, the trial court nevertheless lacked “subject-matter jurisdiction” to award fees. At the heart of the Bank’s argument is the assertion that “standing is a component of subject-matter jurisdiction” and that the trial court “erred by taking any further action” beyond dismissing the case. We reject the Bank’s argument.

The Bank waived its jurisdictional argument by waiting until the appeal of the fee award to first raise the issue.

Subject-matter jurisdiction is universally acknowledged to never be waivable. See, e.g., United States v. Cotton, 16  535 U.S. *16 625, 630 (2002) (“[S]ubject-matter jurisdiction, because it involves a court’s power to hear a case, can never be forfeited or waived.”). But this Court has held that the issue of standing is a waivable defense. See Krivanek v. Take Back Tampa Political Comm., 625 So. 2d 840, 842 (Fla. 1993). And if standing is waivable, then standing is obviously not “a component of subject-matter jurisdiction.” The Bank’s foundational assertion is thus incorrect. See Paulucci v. Gen. Dynamics Corp., 842 So. 2d 797, 801 n.3 (Fla. 2003) (“Jurisdiction is a broad term that includes several concepts, each with its own legal significance.”). And the Bank offers no other explanation for why its argument should be considered timely. [e.s.]

We conclude that the unilateral fee provisions in the contracts at issue are made reciprocal to the prevailing borrowers under section 57.105(7). Accordingly, we quash Page and approve Madl and Harris.

It is so ordered. POLSTON, LABARGA, LAWSON, MUÑIZ, and COURIEL, JJ., concur.
GROSSHANS, J., did not participate. NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED. Application for Review of the Decision of the District Court of Appeal – Certified Direct Conflict of Decisions

In the never-ending quest of the courts to squelch homeowner defenses, some of the courts of appeal decided that the bank argument was valid. The law was, in a word, NUTS.

This Supreme Court case cures part of the nuttiness. If someone brings a baseless claim they cannot escape liability for fees and costs on the basis that the claim is baseless.

Yes, that is the issue — the lack of basis means that the named Plaintiff in foreclosure had no contractual relationship with the Defendant homeowner. So the fee provision of the contract they were seeking to “enforce” could not apply once it was proven they had no right to enforce it. The case, in my opinion, was probably decided with the elements of estoppel in mind,. Once you invoke a contract or statute and you cannot escape the negative consequence when you lose.

One case I had which is still being litigated for the second time is illustrative of the problem. The homeowners were sued in foreclosure. The various lawyers continued to pursue foreclosure from 2008-the date of trial in August 2016.

The defense was that the named plaintiff had no business being in court and no legal standing. All the documents were all fabricated and U.S. Bank as trustee for a fictitious trust never had ownership of the debt, note, or mortgage. They also never had possession of the note but that was supposedly cured by the claim that the note was received by Ocwen  — AFTER the lawsuit began.

Patrick Giunta and I easily won the case, resting at the conclusion of the Plaintiff’s case. We never put on any evidence. The trial judge took or 2 hours to reach a decision and then dictated into the record the findings of fact and conclusions of law, entering Judgment of Involuntary Dismissal against “U.S. Bank as Trustee of SASCO trust etc.”.

The court found facts showing there was no basis for the action, that U.S. Bank did not own the note or mortgage or debt, and that the trust could not have owned it either. But the judge correctly stated that the law in that District required involuntary dismissal without prejudice once there was a finding of lack of standing.

If the Plaintiff lacked standing, then the court supposedly lacked jurisdiction to do anything except the ministerial act of dismissing without prejudice.

The law in that district also said that even though the homeowner had spent $200,000 in fees and costs, the recovery of attorney fees only applied to a much shorter period during which the Plaintiff had claimed possession of the note even though they had not shown any authority to enforce it. So recovery of fees only started when and if the foreclosure mill filed the original note with the court.

The judge we had clearly did not like what he was required to do so he made it into a final judgment for the homeowner incorporating all of the findings of fact and conclusions of law before the finding of lack of legal standing.

Under the law of that  District, the recovery of fees was thus either cut off or reduced considerably. This left foreclosure mills with the ability to claim attorney fees if they won and avoid liability for fees if they lost — something expressly prohibited by statute and the rules. Now the Florida Supreme Court, in a very well reasoned and well-written decision (J Canady) has established that lawyers cannot sue in the name of a disinterested party to claim foreclosure, attorney fees, and costs — and upon losing avoid the reciprocal liability.

This frees up homeowners’ access to legal representation to defend against illegal fraudulent foreclosures. Lawyers are far more likely to take foreclosure defense cases. If you are looking for a lawyer to represent you start with contacting the lawyers mentioned in this article.

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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FROM FAQ: New Entry – UNAUTHORIZED ASSIGNMENT

QUESTION:

I have an interesting problem with a foreclosure action that was just brought to my attention. The borrower went into default in August of 2007. The “lender” on the note and mortgage was Countrywide Home Loans, Inc. The mortgage had the usual MERS language. Countrywide was kept on as servicer. The borrower went into default in August 2007. On January, 30, 2008, “Carrie A Hoover-1st vice president” signed an assignment on behalf of MERS, assigning the mortgage and note to Bof NY trustee for CWALT 2005-41. (Carrie Hoover is actually a VP for Countrywide) This was prepared by the Attorney in Miami and executed in Texas.
Bof NY filed a foreclosure action a few weeks later. It claimed they owned and held the note and there was no claim for lost note. The borrower hired local counsel who filed an answer and affirmative defenses. He admitted that the Borrower executed the note and not much else.
The affirmative defenses are notice related as well as one alleging the note is “unintelligible, unconscionable and unenforceable”
My usual first line of attack revolves around standing. (they are not the holder or have not established their right to pursue the action) This is done by way of a Motion to dismiss.
My question is because this was not raised initially is it now waived? (I have been retained by the client)
Also what types of claims have you seen used against the alleged “assignment” when it would appear that the signatory does not have apparent authority?
Your wisdom and guidance is always appreciated

Answer:
1. The borrower went into default in August of 2007: You don’t actually know that. I’m sure he stopped paying, but in the scheme of securitization, the payment might have been made by any number of co-obligors that attached to the transaction on the way up the securitization chain. For example, AIG, AMBAC are insurers, credit default swaps might have protected the payment as well, and there was a reserve in the SPV to make the payments even if the borrower didn’t. In addition, depending upon which tranche in the SPV the loan was “assigned” to, the lower tranches might have made the necessary payments. Also the notice of default might have come from a party without any authority to do so and without any knowledge as to whether the holder in due course had been paid despite the lack of payment from the “borrower.” Lastly, how can there be a default on a note that was paid in full? The mortgage aggregator paid 102.5% of the note principal to the “lender” under a Pooling and service agreement” or under the Assignment and Assumption Agreement” that usually predates the date of the loan closing and certainly predates the date of “default.Find out who the mortgage aggregator was.
2. The “lender” on the note and mortgage was Countrywide Home Loans, Inc.: You are quite right to put that in quotes. If you look at http://www.sec.gov and examine the 10k and 8k reports you will find that pools of assets (notes either signed by borrowers were set up with trustees (who may be the successors to any other Trustee or “lender.”). Countrywide was paid off by the mortgage aggregator (which could actually be FNMA or Freddie Mac).
3. The mortgage had the usual MERS language: Actually the language varies. Some states allow MERS to act on behalf of mortgagee or even successors. Florida seems to be split between decisions in the 4th DCA and 2 DCA. I would attack that in all cases because the Fla S. Ct will in my opinion go with NOT letting MERS do what it is set up for. The main focus of the attack is that the parties are trying to make it more difficult for the Borrower to rescind (they didn’t disclose the REAL lender), more difficult to assert valid affirmative defenses and counterclaims and attempts to put the burden on the borrower to bring in the necessary and indispensable parties, when it is MERS or CW that has the access to that information and not the borrower. In a Judicial state like Florida that would be a particularly powerful argument (I think).
4. On January, 30, 2008, “Carrie A Hoover-1st vice president” signed an assignment on behalf of MERS, assigning the mortgage and note to Bof NY trustee for CWALT 2005-41. (Carrie Hoover is actually a VP for Countrywide) This was prepared by the Attorney in Miami and executed in Texas. This sounds like one of Shack’s cases in Kings County, New York. See http://www.livinglies.wordpress.com. Motion to Strike based on fraud on the Court.
5. Bof NY filed a foreclosure action a few weeks later. This is a lot like a case in GA. BONY settled with wiping out the mortgage and note and giving her a reverse mortgage. Not a great settlement but she was happy.
6. It claimed they owned and held the note and there was no claim for lost note. Motion to dismiss. How did they get the note? Request to Produce the Note. Holding the note creates a presummption that they are holder in due course, but they are probably not the a holder in due course, so you need to rebut the preumption. Demand assignments and information concerning who assigned and what their authority was. Look at note carefully. It might have been signed with “squiggle” — i.e., it could be a forgery even though there is an actual note signed by borrower. They did that for “convenience.”
7. The borrower hired local counsel who filed an answer and affirmative defenses. He admitted that the Borrower executed the note and not much else. Motion to amend affirmative defenses based upon new facts elicited from filings by parties with SEC. Too late to file Motion to DIsmiss and too much work to fight over it. Just file the same grounds under the Affirmative Defenses and then file affidavit from borrower along with copies of SEC documentation as attachments for Motion for Partial Summary Judgment.
8. The affirmative defenses are notice related as well as one alleging the note is “unintelligible, unconscionable and unenforceable” – Keep the notice arguments and expand upon them. Borrower was not given notice at closing as to who the real lender was and was therefor deprived of his right to rescission because the “lender” was merely a conduit and protective layer for the real lender who was not registered or chartered to do business in the State of Florida as lender or bank. You STILL want to exercise the right of rescission (the three day rescission) as soon as they will tell you who the real lender was. By covering up the real nature of the transaction, they deprived the borrower of sufficient knowledge about the transaction to properly consider whether to go through it and now he wants to rescind — which should be stated in the affirmative defenses. Your position is that the time for three day rescission never began to run because of all the non-dislcosures of all the parties that were not revealed and all the fees that were paid to all the parties that were not revealed.  Stay away from unconscionability as this is like the insanity defense. It exiss but rarely granted. If you want to keep it then go with the inflated appraisal, and the the payment of the lender and that the equities here do not allow the “lender” to get paid and get the house too. BONY will say they didn’t get paid and they probably didn’t. But they didn’t loan the money either so they are not a holder in due course. The real holder in due course are the investors who now hold the certificates of mortgage backed securities to whom the mortgage and note were pledged in tinny shares along with shares in hundrds of other mortgages and notes.
9. My question is because this was not raised initially is it now waived? (I have been retained by the client) – Being new counsel the court will usually allow some lee-way to create your own pleadings. Waiver of affirmative defenses can only be plead after judgment. Any time up to that you can amend your pleadings liberally in Florida and most states. You can even amend your pleadings at trial to conform to the evidence. If there is any prejudice the trial is continued so that the other side can conduct discovery. Of couse, no guarantees here on this or anything else. Judge could say no to everything.
10. Also what types of claims have you seen used against the alleged “assignment” when it would appear that the signatory does not have apparent authority? —This is basic law. Competency of witness: Oath, Perception, Memory and Communication. If the party signing a document has no knowledge about the “facts” asserted then they are incompetent to sign the affidavit and incompetent to testify.

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