I recently wrote in Fox Rothschild’s Consumer Law Ledger about a Florida appellate court’s ruling that the statute of limitations for a negligent appraisal claim begins to run on the date that the loan is funded, even if a loan default does not occur until much later.

I’ve been told that a Motion for Rehearing En Banc or for Certification for the Florida Supreme Court will be filed by the lender. So, we may not have heard the end of the Llano Financing Group, LLC v. Petit case just yet.

We’ll keep an eye on this one to see if there are any changes to this ruling.

Can a foreclosure sale be held when interrelated counterclaims remain pending?  Florida’s Second District Court of Appeal recently addressed this issue in DeLong v. Paradise Lakes Condominium Association, Inc., 2nd DCA Case No. 2D16-547 (Fla. 2nd DCA Feb. 22, 2017).

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In DeLong, a condominium association was granted a summary final judgment of foreclosure.  However, the condominium Owner’s interrelated counterclaims had not been resolved.  Accordingly, the appellate court found that the Association’s summary final judgment was neither final, nor appealable.

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The Second DCA, treating the appeal as a proceeding for writ of certiorari, concluded that the trial court

departed from the essential requirements of law when it authorized the sale of the property prior to the rendition of an appealable final judgment … .

DeLong should serve as a reminder that a foreclosure sale may not proceed until a final appealable order has been entered and all interrelated claims have been resolved.

In late-2016, the Florida Supreme Court finally addressed the application of the statute of limitations in a re-filed mortgage foreclosure action.  In Bartram v. U.S. Bank, N.A., Fl. Sup. Ct. Case No. SC14-1265 (Fla. Nov. 3, 2016), the Court ruled that the statute of limitations does not bar a lender from filing a new foreclosure action after dismissal of a prior foreclosure action, as long as there was a default within the preceding five years.  Now, Florida’s appellate courts are being asked to further refine the scope of Bartram.

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In Desylvester v. The Bank of New York Mellon, Fla. 2nd DCA Case No. 2D15-5053 (Fla. 2nd DCA Feb. 22, 2017), the Second District answered the question of whether a re-filed foreclosure action that relied upon an initial payment default more than five years earlier was time-barred.  Applying Bartram, the Second DCA found that such a claim would not be barred because the allegation of default in the re-filed Complaint stated, not only the initial default date, but also a failure to make

all subsequent payments.

The lender was able to avoid the statute of limitations by alleging that the borrowers were in

a continuing state of default.

 

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The Court made a point of distinguishing Desylvester from Collazo v. HSBC Bank USA, N.A., 41 Fla. L. Weekly D2315 (Fla. 3d DCA Oct. 13, 2016). Unlike in Desylvester, the lender in Collazo, had tried its case “on the basis of a date of default that was outside of the five-year statute of limitations period.”  The continuing state of default at the time of the re-filed Complaint in Desylvester was the key distinction.

 

In Desylvester, the Second DCA has made clear that, when re-filing a mortgage foreclosure action based upon an initial default that is more than five years earlier, the lender must allege that the borrower continued to miss subsequent payments and remained in a continuing state of default up to the date that the new Complaint is filed.

Florida’s Second District Court of Appeal recently addressed an interesting question concerning whether Florida’s Consumer Collection Practices Act applies to an action seeking a deficiency decree. In the situation presented, the appellate court answered the question in the negative.

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In Dyck O’Neal, Inc. v. Kami Ward, Fla. 2d DCA Case No. 2D15-2989 (Fla. 2nd DCA Jan. 27, 2017), the 2nd DCA was presented with the issue of whether compliance with Fla. Stat. § 559.715, a provision of Florida’s Consumer Collection Practices Act (“FCCPA”) that requires written notice of assignment of a consumer debt at least 30 days before any action to collect that debt, is required in a deficiency action following a foreclosure judgment. Specifically, after a final judgment of foreclosure was entered against Ms. Ward and the property was sold at auction for $100, the judgment was assigned to Dyck O’Neal, Inc., which then filed a deficiency action against Ms. Ward. Ms. Ward defended by arguing that she had not received notice of the assignment at least 30 days before the deficiency action was filed. The trial court agreed and granted summary judgment in her favor.

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The appellate court reversed, finding that FCCPA (Fla. Stat. §§ 559.55 – 559.785) did not apply because a deficiency action is not an action to collect a consumer debt on a note, but rather an action to obtain a monetary judgment on a foreclosure judgment.

Because a deficiency action is not an action to collect consumer debt, section 559.715’s [notice] requirement … does not apply.

The Second District’s opinion provides guidance to lenders as to the applicability of FCCPA to deficiency actions and precludes the assertion of this defense in such cases.

 

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.

 

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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.