FLORIDA CASE LAW UPDATES
MTGLQ INVESTORS, L.P. V. MERRILL, 1D19-2682 (Fla. 1st DCA Jan. 25, 2021)
Merrill, the borrower, gave her lender a purchase-money mortgage and note in June 2007. In 2013, JPMorgan Chase Bank (“Chase”) filed a foreclosure action alleging that Fannie Mae owned the note, and that Chase was authorized to bring the action. Chase filed the original note and mortgage in 2013. The original note had an allonge with a blank endorsement. In 2014, Chase moved to substitute Fannie Mae as plaintiff. The borrower did not object. In 2016, Fannie Mae recorded an assignment of the mortgage and note to MTGLQ and also executed a power of attorney to MTGLQ, giving it “full power and authority” to take any action that FNMA could take with respect to “mortgage loans, deeds of trust, promissory notes and allonges.” MTGLQ moved to substitute itself as plaintiff; the borrower did not object. In 2018, the trial court scheduled the trial. MTGLQ amended its witness list five days before trial. Although the borrower had not deposed the prior witness, the trial court dismissed the case with prejudice due to the late amendment.
Apparently, the appellate court had previously dismissed MTGLQ’s appeal of the trial court’s order dismissing the foreclosure suit. In 2019, MTGLQ moved to retrieve the original loan documents from the court file, and then amended its motion, citing Fla. R. Jud. P. 2.430(h) that provides ongoing authority to release exhibits and records that are the property of the person or party placing the items in the court records. MTGLQ argued it was entitled to the original note and mortgage as the substituted plaintiff and the assignment (of both the note and mortgage) from Fannie Mae. The borrower argued MTGLQ’s right to enforce did not survive the appellate dismissal because MTGLQ was not the original plaintiff and could not establish a chain of ownership, and a substituted plaintiff does not necessarily own the note or have standing to enforce it.
The trial court denied MTGLQ’s amended motion to retrieve the original loan documents. MTGLQ appealed.
Maryland Fast Track for Vacant and Abandoned Properties Finds New Application during COVID-19 Pandemic
MARYLAND CASE LAW UPDATE
The Maryland “fast track” option for Vacant and Abandoned Properties would require our clients to file a petition pursuant to 7-105.14(f)(4) asserting that the property is vacant and abandoned. The process would look like this:
NEW YORK CASE LAW UPDATE
AXIOM Bank v Dutan, ___AD3d___, 2021 NY Slip Op 00141 [2d Dept 2021]
In a foreclosure action, the Appellate Division affirmed on appeal the judgment of foreclosure and sale, finding that the lender established its strict compliance with RPAPL § 1304, as well as its substantial compliance with paragraph 22 of consolidated mortgage, which required service of specified default notice as condition precedent to acceleration of loan, and further finding that the borrowers’ bare denials of receipt were insufficient to establish their entitlement to summary judgment.
FLORIDA CASE LAW UPDATE
US BANK N.A., AS TRUSTEE V. GARRISON, No. 05-2018-CA-017475 (Fla. 18th Jud. Cir. Jan. 16, 2020)
In a foreclosure suit, the borrower asserted a counterclaim against the lender under the Florida Consumer Collections Practices Act (“FCCPA”), based on the monthly mortgage statement, the included payment coupon and the blank mailing envelope included with the monthly mortgage statements. The trial court granted the lender’s motion to dismiss the counterclaim with prejudice. The court ruled: (1) the monthly mortgage statements were not debt collection activity as that term is understood and defined by the FCCPA [note: the FCCPA does not define the term debt collection activity]; (2) the payment coupons included with the monthly mortgage statements are part of the CFPB’s approved H-30(B) and without any material deviations, are not debt collection activity; and (3) the blank mailing envelope included with the monthly mortgage statements are not debt collection activity.
FLORIDA CASE LAW UPDATE
NAT'L MED. IMAGING, LLC V. LYON FIN. SERVS., 3D20-730 (Fla. 3rd DCA Jan. 13, 2021)The Third District receded from its prior decision which held that the bankruptcy automatic stay provisions are inapplicable in an appellate court where the debtor, who is the defendant in the trial court below and has filed for federal bankruptcy protection, is the appellant.
NEW YORK CASE LAW UPDATE
U.S. Bank N.A. v Auteri, ___AD3d___, 2021 NY Slip Op 00588 [2d Dept 2021]
On an appeal brought by the lender in a foreclosure action seeking review of an order by the Supreme Court that denied the lender’s motion to vacate a stay arising from an owner / borrower’s death and a default judgment against the surviving spouse / co-owner, the Appellate Division reversed, as the decedent’s ownership interest in the mortgaged premises automatically transferred to his surviving spouse by operation of law as they took title as tenants by the entirety, and the deceased borrower’s estate was no longer a necessary party to require substitution before the stay could be lifted as the lender elected not to pursue a deficiency judgment against his estate.
PENNSYLVANIA CASE LAW UPDATE
Frequently, borrowers file for bankruptcy at the 11th hour to halt foreclosure sales. Once a petition for bankruptcy relief has been filed, secured creditors must cease their collection efforts to avoid violating the automatic stay. However, the automatic stay terminates upon a debtor’s dismissal and closure of the bankruptcy case. A Pennsylvania bankruptcy court recently ruled that if a foreclosure sale occurs between the time when a bankruptcy case is dismissed and when it is reinstated, the foreclosure sale is not void and does not violate the automatic stay.
In In re Parker, the debtor filed a petition for bankruptcy relief to prevent a foreclosure sale of her residence. Notably, the debtor failed to file any of the required documents at the time she filed her bare-bones petition. This was the debtor’s fourth bankruptcy filing, and as such, she was familiar with the necessary documents that must be completed and filed in Chapter 13 cases.
The debtor timely filed some, but not all, of the missing documents, and the bankruptcy court thus entered an order dismissing her case. Under section 362(c)(2)(B) of the Bankruptcy Code, at the time a case is dismissed the automatic stay is terminated.
KENTUCKY CASE LAW UPDATE
United States Bank Nat'l Ass'n v. Kinslow, 2020 Ky. App. Unpub. LEXIS 407, 2020 WL 3124443
Kinslow is an unpublished case in Kentucky, but it is significant because the ruling in the case served to strip a lender of its mortgage on the property. Bill Kinslow and his son Allen Kinslow held title to the property as joint tenants with rights of survivorship. Bill entered into a promissory note that was secured by a mortgage. Allen did not sign the promissory note or mortgage for reasons that were not explained in the case. Bill passed away and the loan went into default. The lender foreclosed on the mortgage that encumbered Bill’s ½ interest in the property. The trial court denied the foreclosure and the Court of Appeals upheld the decision. The Court of Appeals ruled that under Kentucky law regarding joint tenancy with right of survivorship, any rights the lender had in the property because of the mortgage signed by Bill were extinguished at the time of Bill's death. Therefore, the mortgagee was unenforceable – even as to Bill’s ½ interest.
OHIO CASE LAW UPDATE
Christiana Trust v. Berter, 2020-Ohio-727, (12th District 2020)
The borrowers raised a number of issues in this case. The most significant issue was their argument that they should be allowed to contest the signatures that appear on the promissory note indorsements. This could present significant problems, not least of which would involve tracking down the individuals that signed the indorsements. Courts in Ohio have not had the opportunity to address this issue in any detail. The borrowers’ argument was based on ORC 1303.35, which corresponds UCC 3-306 and 3-308. Most states have adopted UCC 3-306 and 3-308 in some version so this issue could arise across the country. The Court of Appeals ruled that ORC/UCC does not provide the borrowers with the right to contest signatures that appear on indorsements as that provision was intended to provide the maker of the promissory note with the opportunity to raise the issue of the maker’s signature being fraudulent or forged. The borrowers attempted to appeal this decision to the Ohio Supreme Court, but that court denied jurisdiction. Contrast this with the George decision below.
OHIO CASE LAW UPDATE
U.S. Bank Nat'l Ass'n v. George, 2020-Ohio-6758, (10th District 2020)
This is the second time the George case has been on appeal since 2015. The issue in George I and George II involved copies of a promissory note submitted to the court that contained different indorsements. It is important to note that Ohio is not an original promissory note state. If it were and the original promissory note was presented as evidence, the issue would not have been raised. In the George II trial the original promissory note was offered as evidence and the lender prevailed. However, in both George I and George II the Court of Appeals implied that ORC 1303.35, which corresponds UCC 3-306 and 3-308 could be used by the borrower to challenge signatures on an indorsement to a promissory note. The 10th District Court of Appeals decision in George II is inconsistent with the 12th District Court of Appeals decision in Christiana Trust v. Berter, 2020-Ohio-727, (12th District 2020), which means the Ohio Supreme Court may accept the issue in the future to resolve the conflict.