A trial court may not rely on a legal opinion offered by a party’s expert witness.  Florida’s Third District recently reversed dismissal of a mortgage foreclosure action based on this rule in Citibank, N.A., v. Martin and Jitka Olsak, 3rd DCA Case No. 3D15-1032 (Nov. 30, 2016).

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In Olsak, the borrowers called as a witness at trial a mortgage foreclosure fraud investigator and securitization officer, who was not a lawyer.  He testified that, in his opinion the plaintiff, which was a trust, was not allowed to acquire a promissory note that had been endorsed in blank and that the endorsement on the Olsaks’ note violated certain IRS provisions.  Relying on this opinion, the trial court entered judgment for the borrowers, finding that the plaintiff trust had not acquired an interest in the note or mortgage and, thus, did not have standing to foreclose.

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The appellate court reversed because “even witnesses qualified as experts, generally are precluded from providing testimony in the form of legal conclusions.” It follows that opinion testimony about legal conclusions are inadmissible, so it is reversible error for a trial court to rely on expert opinions to decide questions or law.  Finding that the borrowers’ expert witness offered only legal opinions, not facts, and that the trial court based its rulings on that testimony, reversal was required.  It probably didn’t help that the appellate court found the expert’s testimony to be “often of dubious relevance” and of “questionable probative value.”

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Olsak is a good reminder that, regardless of whether or not expert opinions may be relevant, those opinions are not admissible if they are simply legal conclusions.

 

In my May 26th post, I raised several questions that unsecured creditors in any Chapter 11 case should know the answers to and take action where appropriate.  One of those questions is “Am I entitled to priority payment?”  This is also important to answer in a Chapter 7 case.

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Your delinquent customer told you not to worry, you were first in line for payment, and that payment would be coming soon.  Next thing you know, your customer has filed a bankruptcy and you have not been paid.  As discussed in my June 24th post, you obtain a proof of claim form and are prepared to fill it out and file it before the deadline, but then you get to the last question, number 12 – “Is all or part of the claim entitled to priority under 11 U.S.C. § 507(a)?”

Your first impulse is to check “yes” – of course you are entitled to priority – the debtor told you that you were first place, a VIP for payment.

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NOT so fast…most creditors’ claims are “general” unsecured claims, and not entitled to priority treatment.  Take a breath and ask yourself, does my claim fit into any of the following categories:

  • domestic & child support obligation;
  • salary, wages, or benefits owed to an employee;
  • deposit of less than $2,850.00 towards the purchase, lease, or rental of property or services for personal, family, or household use;
  • claim for contribution to an employee benefit plan;
  • claim of grain farmer or fisherman relating to storage and processing facility;
  • certain unsecured taxes or penalties owed to the government;
  • claim for death or personal injury resulting from operation of a motor vehicle or vessel by an intoxicated debtor;
  • customs duty arising out of the importation of merchandise; or
  • claim based on commitment by the debtor to a Federal depository institutions regulatory agency to maintain the capital of an insured deposition institution.

If you fall into one of these categories, GREAT, but chances are that you DO NOT!  Resist the urge to check “other”!  Check the “No” box, sign the bottom of the form and send it in.

Feeling angry and/or depressed?  If your customer is in Chapter 11, you may want to consider joining a support group – perhaps the “Official Committee of Unsecured Creditors” – fondly referred to as the OCC or GUCCs.  I’ll be back to discuss that in a future blog post!


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.

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Are you ready for “Same Day ACH”?  Implementation of the first-phase of a new rule adopted by NACHA (National Automated Clearing House Association) that will provide for the faster movement of ACH payments, including same-day processing of most ACH payments, starts today.

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All ACH receiving financial institutions must begin accepting same-day ACH credits and make the funds from those transactions available to depositors on the same day.  It is anticipated that Same-Day ACH will be used for transactions like same-day payrolls, business-to-business payments, expedited bill payments, and account-to-account transfers.  Same-Day ACH will not be available for international transactions and transactions in excess of $25,000, which represent only about one percent of ACH transaction volume.  In order to take advantage of Same-Day ACH, instead of having settlement completed on the next business day, ACH Originators will have to pay a same-day fee for each Same-Day ACH transaction to allow the receiving financial institution to recoup its costs.35770438 - stamp with text available today inside, vector illustration

The first phase of the new rule, which is what is being implemented today, is limited to credit entries and non-monetary entries, with funds to be available at the end of the receiving financial institution’s processing day.  The second phase, which will go into effect on September 15, 2017, will add debit entries. The third and final phase, which requires receiving financial institutions to make funds available by 5:00 p.m. their local time for all ACH transactions, becomes effective March 16, 2018. These new rules apply to any account that is able to receive ACH entries.


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.

That look you get when you realize you just bought property at a foreclosure sale that is still subject to liens …

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Foreclosure plaintiffs should take note of the Fourth District Court of Appeal’s recent decision in James Ober v. Town of Lauderdale-By-The-Sea, 4th DCA Case No. 4D14-4597 (Fla. 4th DCA Aug. 24, 2016).  In that case, the Court held that the recording of a lis pendens can “discharge liens that exist or arise prior to the judgment of foreclosure,” but that liens that accrue between entry of the foreclosure judgment and the date of the foreclosure sale are not affected.

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In Ober, after a final judgment of foreclosure had been entered in a prior mortgage foreclosure action, but before the foreclosure sale had been conducted, a municipality recorded a series of liens on the subject real property.  After the property was sold at foreclosure sale, the purchaser sought to quiet title and the municipality sought to foreclose its liens.

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In analyzing the claims, the Fourth District Court of Appeal noted that the relevant statute, Fla. Stat. §48.23, does not provide an end date for a lis pendens.  After considering related statutory provisions and cases that discussed the continuing validity of a lis pendens in other contexts, the Court concluded that a lis pendens terminates “along with the action” or 30 days after the final judgment is entered (assuming an appeal is not timely filed).  Accordingly, the Court rejected the quiet title claim and allowed enforcement of the municipal liens that were recorded and based upon conduct that occurred after the date of the foreclosure judgment.  Foreclosure plaintiffs and those purchasing at foreclosure sales must remember to consider any liens that are recorded after foreclosure judgment has been entered.


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.

The United States Court of Appeals for the Ninth Circuit, in a recent unpublished opinion in Casault v. One West Bank, FSB, et al., U.S.C.A. 9th Cir. Case No. 14-55494 (Aug. 4, 2016), affirmed the dismissal of the borrowers’class action complaint against various banks, servicers and trustees.  The borrowers in Casault claimed that they relied upon offers to modify loans that were allegedly contained in advertisements, websites and mailings, as well as actions taken after they started the loan modification process, and attempted to assert claims for fraud and improper foreclosure under California law.

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The 9th Circuit found that the borrowers had failed to properly allege their claims.  First, the Court determined that it was not reasonable for the borrowers to rely on the loan modification offers, because those offers did not promise or guarantee a loan modification. Second, the Court found that the foreclosures were based upon the borrowers’ failure to pay, not due to reliance upon misrepresentations or omissions that were allegedly made after they started the loan modification process.  Finally, the appellate court outright rejected the borrowers’ argument that the loan servicer had taken over the loans because it had made advances while the loans were delinquent.

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Many recent appellate opinions throughout the country have made it more difficult for lenders to foreclose mortgages and have even awarded damages to borrowers.  The Casault opinion shows that there is, in fact, a limit to this trend.


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.

Another United States Circuit Court has ruled that, for purposes of diversity jurisdiction, a national bank is a citizen only of the state in which it has its main office.  In doing so, the Second Circuit joins a growing list of appellate courts that have rejected the argument that a national bank is also a citizen of the state in which it has its principal place of business.

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In OneWest Bank, N.A. v. Melina, U.S.C.A. 2nd Cir. Case No. 15-3063 (Jun. 29, 2016), a borrower sought dismissal of a foreclosure case for lack of subject matter jurisdiction, arguing that there was not diversity of citizenship because the lender’s principal place of business was in New York (another point with which the appellate court disagreed).  The trial court disagreed, finding that, as a national bank, the lender was a citizen only of California, where its main office was located.

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In order for a Federal Court to exercise diversity jurisdiction, there must be complete diversity at the time the case is filed.  Pursuant to 28 U.S.C. §1348, national banks are deemed to be citizens of the States in which they are located, which the U.S. Supreme Court has interpreted to be the state where the bank has its main office, as designated by its articles of association.  The Second Circuit, joining the Ninth, Eighth, Fifth and Seventh Circuits, held that a national bank is a citizen only of the state in which it has its main office and not also in the state in which it has its principal place of business.

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While the Eleventh Circuit has held that a national bank is a citizen of the state in which it is designated to have its main office, it has not yet addressed whether this is to the exclusion of another state in which that bank has its principal place of business.  This is an issue that will likely arise, as more national banks, whether through mergers or otherwise, end up with their main offices and  their principal places of business in different states.  When this issue arises, OneWest Bank v. Melina provides a well-reasoned argument for the proposition that a national bank is a citizen only of the state in which its main office is located.


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.

Florida’s appellate courts continue to address the sufficiency of evidence in mortgage foreclosure cases.  This week, the Fourth District Court of Appeal provided guidance to lenders for properly establishing interest as part of their damages claim.

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In Marsden v. BAC Home Loans, L.P., Fla. 4th DCA Case No. 4D14-1623 (Jul. 13, 2016), the trial court had granted final judgment of foreclosure after trial.  During the trial, the lender relied upon the payment history as proof of its damages and presented a witness who testified that the amounts set forth in a proposed final judgment were consistent with the payment history.  However, neither the payment history, nor the testimony of the trial witness, set forth calculation of the amount of interest owed. Moreover, the proposed final judgment was not offered into evidence.

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The Fourth DCA ruled that the lender had failed to prove the amount of interest owed and sent the case back to the trial court enter a final judgment without the interest award.  The Court noted that it would have allowed the trial court to take additional evidence if the lender had offered some evidence of the amount of interest owed.  This case serves as a reminder for lenders to ensure that they offer evidence supporting every element of their damages claim.


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.

 

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The results are in!

As I mentioned in my May 25th blog post, Curtis James Jackson III, better known as rapper 50 Cent (“Jackson”) was scheduled for his bankruptcy confirmation hearing yesterday (July 6th).

All impaired creditor classes voted in to accept Jackson’s proposed plan of reorganization (“Repayment Plan”).  He filed his own declaration and the declarations of three professionals in support of his Repayment Plan at 11 am the morning of the hearing.

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No one sought to cross exam the declarants however, the Court did have Jackson take the stand to confirm that he understood his significant repayment obligations under the Repayment Plan and that the were freely undertaken by Jackson.

The Court was specifically concerned with whether Jackson understood the terms of his settlement with Lastonia Leviston (“Leviston”).

Jackson affirmed his understanding that: 1) Leviston had an allowed unsecured claim in the amount of $6 million; 2) as long as he made the payments under the Repayment Plan, she would be paid a percentage of her claim with other unsecured creditors; and 3) if he defaulted in those payments for any reason, her claim is non-dischargeable and that she could pursue the full amount of her claim against him.

When questioned about the possibility of default, Jackson stated “That’s not going to happen.”

He swore that he was committed to making the payments under the Repayment Plan and believed he could make them.

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The Court confirmed Jackson’s Repayment Plan and congratulated the parties and counsel for coming to consensual resolution of the differences that existed the first day they walked into her bankruptcy courtroom.

The Court further stated that is was pleased to confirm Jackson’s Repayment Plan – remarking that it was a significant event and praising Jackson for what it viewed as his very substantial effort to repay creditors.

If you want to read more on this significant event, several articles have been written on Jackson’s bankruptcy success story – VibeThe Guardian, The Wrap, HipHopdx, NME, and TheYBF.


 

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.

 

Three months ago, I posted about North Carolina’s HB2 (the transgender bathroom bill that is still garnering headlines) and that many had overlooked a big change to North Carolina’s discrimination law separate and apart from bathrooms.  As I pointed out in my prior post, lost in the protests over the bathroom issues was the fact that all North Carolina citizens had lost the private right of action to file a state level discrimination claim for race, religion, color, age, biological sex or disability.

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Now, North Carolina legislators have taken steps to reverse that part of HB2 and restore the private right of action for citizens to sue for discrimination related to race, religion, color, age, biological sex or disability.

 

In my May 26th post, I raised several questions that unsecured creditors in any Chapter 11 case should know the answers to and take action where appropriate.  In my prior posts, I have already addressed “first-day motions” and creditors’ meetings.  Let’s move on to three more questions about claims.

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The answers to these three questions are VERY important.  Why?  You may not be eligible to receive any money from the debtor if you do not know the answers and act accordingly!

1) Is my claim properly listed on the debtor’s Schedules?

This question is simple to answer.  Peruse the debtor’s Schedules filed with the Court and see if the debtor has listed you and whether the amount is correct.  If the answer is NO, you need to file a proof of claim before the deadline set by the Court.

2) Has the debtor listed my claim as disputed, unliquidated or contingent? 

The answer to this question is also simple.  Look at the box where your claim is listed (if it is listed) on the Schedules.  There is a section that says…

As of the petition filing date, the claim is:

Check all that apply.

¤   Contingent

¤   Unliquidated

¤   Disputed

If one of these boxes is checked, the answer is YES and you need to file a proof of claim before the deadline set by the Court.

3) When is the deadline to file a proof of claim? 

The clerk of the court (or in some instances the Debtor), send a notice out to all creditors LISTED on the debtor’s Schedules which will set forth the deadline for filing a proof of claim.  If you are not listed as a creditor and do not receive the notice, but are aware of the bankruptcy, you can find out the deadline from looking at the Court docket.

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If you are not listed, your claim is not properly listed, or your claim is listed as contingent, unliquidated, or disputed, you MUST file a proof of claim in order to have your claim accurately allowed in the Chapter 11 case.

DO NOT miss the deadline to file a proof of claim!  There are very few acceptable excuses for late-filed claims and more likely than not, your late-filed claim will be DISALLOWED.


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.