Header graphic for print

Florida’s Banking Statute of Frauds: You’d Better [Have the Lender] Sign It

Posted in Banking

How does a bank defend against a claim that it failed to comply with an oral agreement to make a loan? Lenders in Florida are protected against such “he said, she said” claims by Florida’s Banking Statute of Frauds – Fla. Stat. § 687.0304.

6 or 9

Florida’s Banking Statute of Frauds prohibits a debtor from maintaining an action on a credit agreement unless the agreement:

  • is in writing,
  • expresses consideration,
  • sets forth the relevant terms and conditions, and
  • is signed by the creditor and the debtor.

A “credit agreement” is “an agreement to lend or forebear repayment of money, goods, or things, to otherwise extend credit, or to make any other financial accommodation.”

Credit Agreement

The Banking Statute of Frauds has consistently been held to bar not only contract claims, Puff ‘N Stuff of Winter Park, Inc. v. Bell, 683 So.2d 1176 (Fla. 5th DCA 1996), but also tort claims based upon oral agreements or promises to lend money. Dixon v. Countrywide Home Loans, Inc., 710 F. Supp. 2d 1325 (S.D. Fla. 2010) (negligent misrepresentation); Mark Andrew of Palm Beaches, Ltd. v. GMAC Commercial Mortgage Corp., 265 F. Supp. 2d 366 (S.D.N.Y. 2003) (promissory estoppel and negligent misrepresentation); University Creek Associates II, Ltd. v. Boston American Financial Group, Inc., 100 F. Supp. 2d 1345 (S.D. Fla. 2000) (promissory estoppel).

 

In Professional Vending Services, Inc. v. Firestone Financial Corp., U.S.D.C. S.D. Fla. Case No. 15-61852-CIV-ZLOCH (Apr. 29, 2016), the U.S. District Court for the Southern District of Florida recently confirmed that Florida’s Banking Statute of Frauds absolutely bars claims that are based on an alleged oral agreement to lend money.  In that case, the claimant alleged that a lender promised to loan a specific amount of money, but the loan closing documents reflected a much lower loan amount.  The Court found that the oral agreement to lend money was a “credit agreement” and that the claims were barred, even though they were styled as claims for negligent misrepresentation and promissory estoppel, because they flowed from the unenforceable oral credit agreement.

Sign Here

When seeking a loan, a borrower needs to remember to tell the lender:

So just sign – (You, you, you’d better sign it)

Right here on this dotted line – (You, you, you’d better sign it)

Where it says you’ll be mine, all mine – (You, you, you’d better sign it)

Until the end of time – (Sign it) (Sign it) (Sign it) (Sign it)

And when a lender is sued for not complying with an oral promise to make a loan, don’t forget about Florida’s Banking Statute of Frauds.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

Court’s Inherent Authority to Deem Motions Abandoned: Even the Non-Prevailing Party Gets Lucky Sometimes

Posted in Banking

HSBC Bank avoided a potential attorney’s fee judgment when the trial judge deemed abandoned a borrower’s post-dismissal motion for costs and attorneys’ fees. In an opinion released this morning, Florida’s Fourth District Court of Appeal affirmed that ruling in the case of Domenic Grosso a/k/a Domenic L. Grosso v. HSBC Bank USA, N.A., 4th DCA Case 4D14-3971 (Apr. 27, 2016).  Deutsche Bank received the same treatment in Felice Berenson v. Deutsche Bank National Trust Company, 4th DCA Case No. 4D14-3985 (Apr. 27, 2016) (borrower’s motion “languished” for 14 months), and Ramon Ramos and Miriam Ramos v. Deutsche Bank National Trust Company, 4th DCA Case No. 4D14-3981 (Apr. 27, 2016) (borrowers’ motion “languished” for 22 months).

 

HSBC sued its borrower for foreclosure, but filed a voluntarily dismissal and the case was closed. The borrower filed a motion for costs and attorneys’ fees, but did not file supporting affidavits, set the motion for hearing, or take any other record activity for 18 months.  After reviewing the docket, the trial judge, Judge Richard Oftedal, ordered that the case be administratively closed and that any post-trial motions that had not been set for hearing be deemed abandoned.

Get Lucky

The borrower argued on appeal that Judge Oftedal’s ruling constituted a dismissal for lack of prosecution, but without compliance with Florida Rule of Civil Procedure 1.420. The Fourth DCA disagreed, finding that Rule 1.420 applies only to “actions” and that the borrower’s motion was “simply a motion.”

 

The appellate court went on to confirm that the trial court did, in fact, have the inherent authority to deem the borrower’s motion abandoned under the circumstances. The Fourth DCA concluded that Judge Oftedal’s presumption was “not erroneous” and that it is not an abuse of discretion to deem abandoned a motion that “was left to languish on the docket for eighteen months.”

Abandoned Papers

Having taken a voluntary dismissal, HSBC was not the prevailing party and very well may have been liable for costs and attorneys’ fees. However, the borrower’s inaction prevented him from having any chance of making HSBC reimburse him for the costs and attorneys’ fees he incurred in defending the case.  So, time does mean something and it shouldn’t be that easy to forget about the fees.  But, “even the losers get lucky sometimes.”


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

Foreclosure Standing – Another Evidentiary Trap for the Unwary Lender

Posted in Banking

It looks like standing is the flavor of the month in foreclosure defense and the issue that lenders need to make sure that they are addressing at trial. Two recent Florida appellate court decisions highlight this issue.

Assignment of Note

In Michael Sorrell v. U.S. Bank National Association, Fla. 2d DCA Case No. 2D14-3883 (Apr. 6, 2016), Florida’s Second District Court of Appeal reversed a final judgment of foreclosure based upon a finding that the lender’s “evidence was legally insufficient to prove that it had standing when it filed the Complaint.”  The note that was attached to the complaint (which was payable to the original lender, was not endorsed, and did not include an allonge) and the mortgage that was attached to the complaint were both in favor of the original lender.  The plaintiff filed an amended complaint with an assignment of the mortgage attached, but no additional documents related to the note, and the borrower asserted a defense of lack of standing.  The plaintiff then filed the original note and mortgage and a copy of the assignment of mortgage, along with an undated allonge, which was a separate document from and not affixed to the note.  No testimony or documentary evidence was offered at trial to establish the date that the plaintiff acquired the note and mortgage; specifically, that the plaintiff owned and held the note and mortgage on the date that the case was filed.  Similarly, no evidence was presented to prove when the allonge was created, signed or attached (if it ever was) to the note.  The trial court entered final judgment of foreclosure, but the appellate court reversed because the plaintiff had not established that it had standing to foreclose on the date that the complaint was filed.  The lack of documentary and testamentary evidence doomed the plaintiff’s case and the 2d DCA remanded with instructions for the trial court to dismiss the case.

Similarly, Florida’s Fourth District Court of Appeal reversed and remanded with instructions to enter judgment in favor of the borrowers in Susan Elman and Bruce Elman v. U.S. Bank, N.A., 4th DCA Case No. 4D14-2520 (Apr. 6, 2016).  In Elman, the plaintiff sought to enforce, as the “holder”, a note with an undated special endorsement allonge.  However, the note and the allonge referenced different loan numbers.  At trial, the plaintiff was not able to establish the date that the allonge was affixed to the original note and other evidence made it, at best, unclear as to who possessed the note when the complaint was filed.  The 4th DCA relied on the proposition that a plaintiff that is seeking to enforce a note, but is not the original payee, must “prove not only a blank or special endorsement in its favor, but also that the endorsement was placed on the note before it filed the original complaint.”  In Elman, the appellate court found that endorsement and allonge were undated and the evidence at trial did not establish that the plaintiff possessed the original note with the allonge affixed thereto as of the date that the complaint was filed.  Accordingly, the 4th DCA found that the plaintiff failed to prove that it had standing to foreclose.

Trial

These cases and others like them stand as a stark reminder to lenders of the importance of presenting sufficient evidence at trial to prove that they had standing at the time that they filed their foreclosure actions. When a lender seeks to enforce a note and mortgage to which it is not the original payee pursuant to an undated endorsement or allonge, it is crucial that it present evidence establishing that it had the right to enforce that note at the time that it filed its complaint.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

50 Cent – What’s the Plan?…and More About Disclosure

Posted in Bankruptcy, Chapter 11, Creditors' Rights, Uncategorized

$100 piggy

Since my April 8th blog post, Curtis James Jackson III, better known as rapper 50 Cent (“Jackson”), filed his proposed First Amended Plan and Disclosure Statement.  The deadline for creditors and parties-in-interest to object to Jackson’s Disclosure Statement is April 27th, followed by a May 18th hearing on approval.

Jackson’s Plan proposes to allow Sleek Audio, LLC’s, Suntrust Bank’s, and Lastonia Leviston’s unsecured claims in the amounts of $17,320.67, $3,890,000.00 and $6,000,000.00, respectively.  He will be contributing up to $23.4 million in cash over the proposed plan of 5 or less years, and will also contribute up to 70% of the net proceeds from his currently pending malpractice claim.  Jackson estimates that general unsecured creditors will receive between 74% and 92% of their allowed claims and each holder of an allowed unsecured claim under $10,000.00 will be paid in full.

What is a disclosure statement? 

A disclosure statement is a document that a Chapter 11 debtor or plan proponent files with the Court in conjunction with his proposed plan of reorganization (or liquidation).  The disclosure statement must provide “adequate information” to allow creditors to make an informed decision about whether to accept or reject the proposed plan.

The Court has broad discretion to determine whether the disclosure statement provides adequate information and that decision is often made based on the nature, history, and complexity of the finances of the Chapter 11 debtor.  Generally, a disclosure statement includes information about the debtor’s financial history, circumstances that resulted in the bankruptcy filing, description and value of the debtor’s assets and the amount and nature of his debts, description of his plan of reorganization and repayment to creditors as compared to a Chapter 7 liquidation.

Why would someone object to a disclosure statement?

Creditors and parties in interest may file an objection on the basis that the plan does not provide sufficient information or analysis which would allow the them to make a decision whether to vote for or against the proposed plan.  They may also object to statements in the plan they believe are incorrect.  Courts have denied approval of disclosure statements where statements contained there in were unsupported by factual information such that creditors were unable to independently evaluate the merits of the plan.

As to Jackson’s amended disclosure statement, upon a quick review, it appears to be quite comprehensive.  Moreover, since he has come to an agreement with his largest unsecured creditors, he may not receive any objections unless the U.S. Trustee’s office or perhaps a secured creditor takes issue with his disclosures.  Jackson is closer to the finish line and his happy ending.  More to report after April 27th!


Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP.  Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation.  You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

Beauvais Reversed – Statute of Limitations Does Not Bar Subsequent Foreclosure Action on Later Default

Posted in Banking

In a highly anticipated ruling, after rehearing en banc, Florida’s Third District Court of Appeal reversed its prior ruling in Deutsche Bank Trust Co. America v. Beauvais, 40 Fla. L. Weekly D1 (Fla. 3d DCA Dec. 17, 2014), and substituted a new opinion in its place.

U-Turn

Beauvais addressed the issue of whether the statute of limitations could defeat a second mortgage foreclosure action after a lender had previously exercised its right to accelerate all payments due under a loan and filed a prior foreclosure action that had been involuntarily dismissed. In December 2014, Judges Shepherd, Emas and Scales ruled that the “acceleration of the debt triggered the commencement of the statute of limitations, and because the installment nature of the loan payments was never reinstated following the acceleration, there were no ‘new’ payments due and thus could be no ‘new’ default following the dismissal without prejudice of the initial action.”  Based on that finding, the Court concluded that the statute of limitations began to run from the date that the loan was initially accelerated, had expired by the time the second foreclosure action was filed, and precluded the second foreclosure action.  In its initial opinion, the 3rd DCA distinguished the Florida Supreme Court’s ruling in Singleton v. Greymar Assocs., 882 So.2d 1004 (Fla. 2004), by noting that “Singleton involved an involuntary dismissal with prejudice of the initial action, whereas [Beauvais] involved an involuntary dismissal without prejudice,” and finding that the former “operated as an adjudication on the merits”, while the latter did not.  The Court noted a potential conflict with U.S. Bank Nat. Ass’n v. Bartram, 140 So.2d 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); and certified conflict with Evergrene Partners, Inc. v. Citibank, N.A., 143 So.2d 954 (Fla. 4th DCA 2014).

Clock is Ticking

On August 3, 2015, the 3rd DCA ordered rehearing en banc and requested supplemental and amicus briefs from various organizations.  The 3rd DCA held oral argument in Beauvais on November 12, 2015.  Meanwhile, the Florida Supreme Court held oral argument in Bartram on November 4, 2015.

A new 5-4 opinion was issued in Beauvais yesterday, with the entire original panel (Shepherd, Emas and Scales) in the dissent.  Judge Wells, writing for the majority, found that Singleton controlled the outcome and allows for multiple actions for individual defaults with accompanying accelerations.  Specifically, the Court held that “the dismissal of a foreclosure action accelerating payment on one default does not bar a subsequent foreclosure action on a later default if the subsequent default occurred within five years of the subsequent default action.”  The 3rd District went on to clarify that it simply does not matter whether the initial foreclosure action was dismissed with or without prejudice.  The new opinion concludes that the parties were returned to the status quo that existed prior to the filing of the initial lawsuit and the subsequent lawsuit was not barred by the statute of limitations.

Restart

The 3rd DCA’s new opinion in Beauvais resolves the inter-district conflict and aligns the 3rd District with the other Florida courts that have addressed this issue.  This is a significant change of course for the 3rd DCA and provides much needed clarity to lenders.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

CFPB’s Constitutionality Questioned by D.C. Circuit Court in PHH Case

Posted in Banking

The Consumer Financial Protection Bureau is in the midst of what many see as its most serious challenge to date. After a CFPB administrative law judge fined PHH Corp. $6 million for allegedly violating RESPA by purportedly receiving kickbacks from mortgage insurers, CFPB Director Richard Cordray increased the penalty to $109 million.  PHH appealed that decision to the D.C. Circuit Court and, at oral argument yesterday, the judges on the panel sharply questioned CFPB’s attorneys about the constitutionality of CFPB’s structure.  The Court’s questions focused on the significant amount of power granted to Cordray, as the single director of CFPB who can be removed by the President only for cause.  Add to that the fact that CFPB is funded by the Federal Reserve and PHH argued that the agency is not accountable to the political branches and is, therefore, unconstitutional.  As an example what appears to be the Court’s view of the far-reaching extent of the power of CFPB’s director, Judge Brett Kavanaugh pointed to the fact that Cordray’s decision in the PHH case essentially outlawed an industry practice that had long been considered acceptable.

Angry Judge

The PHH case questions the very constitutionality of CFPB’s structure and authority. Whichever way the Court rules, it is expected that the losing party will seek further review by a full panel of the D.C. Circuit or the U.S. Supreme Court.  Of course, the Court could simply seek to fashion a remedy that would provide greater authority over the CFPB director.  Either way, at least for now, the hearing before the D.C. Circuit in the PHH case will encourage CFPB targets to continue to aggressively defend CFPB enforcement actions and, when doing so, include challenges to CFPB’s authority.

Constitution Flag and Gavel


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

50 Cent Explains Inconsistencies

Posted in Bankruptcy, Chapter 11, Uncategorized

Since my March 28th post, Curtis James Jackson III, better known as rapper 50 Cent (“Jackson”), filed his sixteen-page, Court ordered explanation (“Disclosure”)  regarding the differences between his original Schedules and Statement of Financial Affairs (“SOFA”) and his subsequent amendments.

Transparent pigIn the Disclosure his attorneys state that “the true benchmark is whether the debtor’s intent to be transparent with creditors, responsive to their requests for information and willing to produce documents and information necessary to address concerns.  Here, the debtor has overwhelmingly met his obligations in good faith.”

The majority of Jackson’s explanation appears to be based on the complexity his numerous business ventures and his (or his professionals) initial uncertainty over the ownership of certain property (including the Georgia condominium and all the automobiles), the value of his businesses, and the existence or status of numerous contracts by Jackson and his businesses.

According to the Disclosure the Georgia condominium was not owned by Jackson individually, but rather, by “3286 Northside Parkway, Unit 302, LLC,” a limited liability company wholly owned by Jackson.  All of the automobiles original listed on the Schedules were not owned by Jackson individually but rather, by “In the Passing Lane, LLC,” also wholly owned by Jackson.  The only vehicle that Jackson appears to own individually is a 2012 Bentley Mulsanne.

Jackson’s Amended Disclosure Statement and Plan, which outline his agreement with his largest creditors for payment of their claims, are due Monday.   I’ll share more news on Jackson’s proposed happy ending next week.


Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP.  Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation.  You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

It Was Only a Matter of Time – DEA Revisiting Federal Status of Marijuana

Posted in Labor & Employment

23 states, plus the District of Columbia and Guam permit some form of medical marijuana use.  And, there are various medical marijuana ballot provisions, including currently in Florida, which likely will lead to more states permitting medical marijuana after this November’s election.

Despite the overwhelming change of law at the state level, federal law still classifies marijuana as a Schedule I drug.  Schedule I drugs are defined as having “no currently accepted medical use and a high potential for abuse.”  So, its no surprise that with almost half the states approving medical use of marijuana there would come a time in which the Drug Enforcement Administration (“DEA”) would have to revisit marijuana’s classification.  That time is now, with the DEA indicating it will issue new guidance on marijuana during the first half of 2016

31629579_s

Descheduling, or the more likely rescheduling, could, over time, have a big impact on employers seeking to enforce a “drug free workplace.”  Employers do not violate the Americans with Disability Act (“ADA”) when they test for illegal drugs, but if marijuana becomes a descheduled or rescheduled drug, the gray area as to the legal treatment of  marijuana grows grayer.

______________

Dori K. Stibolt is a partner with the law firm of Fox Rothschild LLP.  Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.

50 Cent Delay on Amended Plan and Disclosure Statement

Posted in Bankruptcy, Chapter 11, Creditors' Rights

cash pig

As a follow up to my Monday post, Curtis James Jackson III, better known as rapper 50 Cent (“Jackson”), filed a Motion to Extend Time to File Amended Disclosure Statement and to File Objections Regarding Amended Disclosure Statement (“Extension Motion”) yesterday.  Accordingly, it looks like we may have a short delay finding out about Jackson’s proposed happy ending – until April 11th.  More news to follow after Jackson files his amended Plan and Disclosure Statements.


Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP.  Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation.  You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

North Carolina Turns Back the Clock on Discrimination Claims

Posted in Labor & Employment

There has been a ton of news coverage regarding North Carolina’s new bathroom access law included within HB-2.   I’ve written several posts on bathroom access and employment litigation regarding bathroom access.  See my posts here (OSHA guidance on bathroom access), here (EEOC settlement of litigation which included bathroom access claims), here (11th Circuit Court of Appeals overturned summary judgment in favor of employer in discrimination claim that involved restroom access), here (addressing Houston’s bathroom access ordinance) and here (litigation involving Hobby Lobby that included restroom access claims).

54052010_s

Somewhat lost in the hub-bub over the bathroom and locker-room access restrictions, is the more important news that North Carolina’s recent changes to its discrimination laws included a dramatic change that likely removed a private right of action for all North Carolina employees who may have complaints or claims regarding any type of discrimination.   While the LGBT community has been protesting these changes, there has been little focus on the fact that HB-2 has changed the rights of all North Carolina employees to bring discrimination lawsuits based on race, religion, color, national origin, age, biological sex or handicap pursuant to state law.

Specifically, North Carolina Statute § 143-422.3 was amended to provide that

This Article does not create, and shall not be construed to create or support, a statutory or common law private right of action, and no person may bring any civil action based upon the public policy expressed herein.

That change likely translates, in practice, to mean that North Carolina employees will have to file complaints with the United States Equal Employment Opportunity Commission (“EEOC”) and thereafter file their lawsuits solely in Federal Court.  While the North Carolina local politicians shrug off these implications, this change in law will likely mean fewer employment discrimination lawsuits in North Carolina due to statute of limitation differences between federal and state law.

10093750_s

Additionally, HB-2, also limits home rule by towns, cities and counties in North Carolina that want to provide greater protection and rights to their citizens.  Changes to local ordinances to include explicit protection to the LGBT community has been a successful way for this community to gain more protection county by county and town by town in Florida.  See more on this issue over on Fox’s Employment Discrimination Report blog.

Legal challenges to North Carolina HB-2 are already under way.  In fact, one of my former law school professors, Angela Gilmore, is a named Plaintiff is a lawsuit already filed by the ACLU.  I took my first year Real Property course with Professor Gilmore and received an A.

______________

Dori K. Stibolt is a partner with the law firm of Fox Rothschild LLP.  Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.