Monday, October 31, 2011

Eleventh Circuit Holds That HAMP Does Not Provide Private Cause Of Action

In Nelson v. Bank of America, N.A., et al (11-11091), the Eleventh Circuit affirmed the district court's conclusion that the United States Treasury’s Home Affordable Mortgage Program (HAMP) program does not provide a private right of action. The court stated:
This Court has not addressed in a published opinion the issue of whether HAMP provides for a private right of action, but a host of district courts that have done so have held that it does not. See, e.g., Mosley v. Wells Fargo Bank, N.A., No. 2:11cv268, — F. Supp. 2d — , 2011 WL 3439243, at *3 (E.D. Va. Aug. 5, 2011); Cox v. Mortg. Elec. Registration Sys., Inc., Civil No. 10-4626, — F. Supp. 2d —, 2011 WL 2600700, at *3 (D. Minn. June 30, 2011); Melton v. Suntrust Bank, Civil No. 2:11cv204, — F. Supp. 2d —, 2011 WL 1630273, at *1 (E.D. Va. April 21, 2011); Hart v. Countrywide Home Loans, Inc., 735 F. Supp. 2d 741, 748 (E.D. Mich. 2010); Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1185 (N.D. Cal. 2009). We agree with those courts, and with the district court in the present case, that nothing express or implied in HAMP gives borrowers a private right of action. See Thompson v. Thompson, 484 U.S. 174, 179, 108 S.Ct. 513, 516 (1988) (“The intent of Congress remains the ultimate issue, however, and unless this congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist.”) (quotation marks omitted).

Thursday, October 27, 2011

Dismissal For Lack Of Prosecution Requires Notice & Opportunity To Recommence

In Schaffer v. First Bank (4D11-3406), the Fourth District denied a petition for certiorari that sought to quash a trial court's order vacating a dismissal for lack of prosecution. The facts are fairly simple:
The foreclosure case was administratively dismissed on April 7, 2011. The bank moved to reinstate on May 26, 2011. In the motion, the bank’s attorney explained that he had filed a Notice of Change of Firm Name and Address on May 1, 2009. Despite this, on July 19, 2010, the court mailed the Motion, Notice, and Order of Dismissal—which advised of the lack of record activity and that dismissal would occur if no record activity occurred within sixty days—to the incorrect address.
The petitioners argued that "the trial court acted in excess of its jurisdiction where the motion to reinstate was not served within thirty days of the dismissal." However, the court noted that "Effective October 1, 1968, the Florida Supreme Court removed the italicized sentence," of the rule which stated "provided that actions so dismissed may be reinstated on motion for good cause, such motion to be served by any party within one month after such order of dismissal." Additionally, "in 2005, the Florida Supreme Court amended Subdivision 1.420(e) 'to provide that an action may not be dismissed for lack of prosecution without prior notice to the claimant and adequate opportunity for the claimant to re-commence prosecution of the action to avert dismissal.'”

Therefore, the court held that:
The bank was not provided notice or an opportunity to recommence prosecution of the case before the dismissal. The trial court was not without jurisdiction to reinstate the case under these circumstances. The petition is without merit.

Must Make Diligent Effort At Personal Service Before Serving By Publication

In Blanco v. Bank of New York (4D11-761), the Fourth District reversed the trial court's order "denying the defendant’s “Verified Motion to Quash Service By Publication, Vacate Default and Final Judgment,” because the plaintiff failed to make a diligent effort to personally serve the defendant before serving process by publication."

Eleventh Circuit Addresses "For Value" Defense In Ponzi Scheme Fraudulent Transfer Case

In Perkins v. Haines (10-10683), the Eleventh Circuit released a published opinion addressing an issue of first impression in this Circuit. The question addressed is whether "transfers to the investors prior to the collapse of the Ponzi scheme were “fraudulent transfers” under 11 U.S.C. § 548(a)(1)(A)" or whether the transfers were "for value." The court concluded the transfers were "for value" and affirmed the bankruptcy court's holding. Notably, the Securities and Exchange Commission filed an amicus brief in support of the prevailing appellees. Judge Wm. Terrell Hodges, Judge for the Middle District of Florida sitting by designation, wrote the opinion for the court and was joined by Judge Edmondson and Judge Martin. The opinion began:
International Management Associates, LLC, and several related entities (the “Debtors”) were operated as the instruments of a Ponzi scheme. A receiver ultimately filed voluntary petitions in the bankruptcy court seeking relief for each of the Debtors under Chapter 11 of the Bankruptcy Code. A consolidated plan of liquidation was approved and William F. Perkins was appointed as Plan Trustee. The Trustee then instituted a number of adversary proceedings in the bankruptcy court seeking to avoid and to recover distributions that had been made to the investors in the Debtors. The Trustee claimed that transfers to the investors prior to the collapse of the Ponzi scheme were “fraudulent transfers” under 11 U.S.C. § 548(a)(1)(A) and applicable state law. The investors asserted an affirmative defense under 11 U.S.C. § 548(c), claiming that the transfers were “for value.” The Trustee moved for partial summary judgment. The bankruptcy court denied the motion, effectively upholding the availability of the investors’ affirmative defense. The Trustee filed this appeal. It presents an issue of first impression in this Circuit. We affirm.
The court analyzed the law as follows:
With respect to Ponzi schemes, transfers made in furtherance of the scheme are presumed to have been made with the intent to defraud for purposes of recovering the payments under §§ 548(a) and 544(b). See In re AFI Holding, Inc., 525 F.3d 700, 704 (9th Cir. 2008).....For purposes of this appeal, as in the bankruptcy court, it is presumed that all of the Debtors’ transfers to the investor defendants qualify as fraudulent transfers under § 548(a)(1)(A) and applicable state law.
However, § 548(c) provides a transferee with an affirmative defense where the transferee acts in good faith and “[gives] value to the debtor in exchange for such transfer . . . .” The term “value” is defined to include “satisfaction or securing of a present or antecedent debt of the debtor.”.....In the case of Ponzi schemes, the general rule is that a defrauded investor gives “value” to the Debtor in exchange for a return of the principal amount of the investment, but not as to any payments in excess of principal. 
The Trustee hangs his hat on a line of cases holding that transfers to redeem an equity investment in an insolvent entity (initially made free of fraud) cannot constitute a transfer “for value.”.....The Trustee contends that these decisions should apply here because the Debtors were all insolvent at the time the transfers to the investor defendants were made, and any such transfers served only to redeem their worthless equity interests. We disagree, and find the argument to be unpersuasive for the simple reason that none of these decisions involved Ponzi schemes. Stated differently, none of the stockholders in those cases were fraudulently induced into making their initial investments so that none possessed fraud claims that would be satisfied in whole or in part by virtue of the later transfers. Each case involved a situation in which an insolvent corporation attempted to pay off its shareholders at the expense of creditors, without receiving any value in return and with no regard for satisfying any possible antecedent debts.

The court affirmed the bankruptcy court's order and concluded:

The Trustee agrees that the investor defendants purchased limited partnerships from the Debtors at a time when the Ponzi scheme was already in operation and a claim for fraud or restitution was created in favor of the investors based on the Debtors’ fraudulent activity. Under AFI Holding and the general rule, later transfers from the Debtors up to the amount of the investment satisfied the investor defendants’ restitution or fraud claims and provided value to the Debtors. The bankruptcy court’s denial of the Trustee’s motion for partial summary judgment is AFFIRMED.
The bankruptcy court's order, the briefs filed in the case and the Eleventh Circuit's opinion can be viewed at the links below:

Wednesday, October 26, 2011

Appraisal Not Appropriate If Post Loss Obligations Not Satisfied

In Citizens Property Insurance Corporation v. de los Cuetos (3D11-1512), on a confession of error, the Third District provided a nice collection of cases holding that a trial court cannot order appraisal without first determining whether the insured complied with post-loss obligations. The court stated:
Based on the Appellee’s proper confession of error and our own independent review of the record, we reverse the trial court’s non-final order compelling appraisal and remand for an evidentiary hearing to determine whether post-loss obligations were sufficiently met under the policy. See Citizens Prop. Ins. Corp. v. Gutierrez, 59 So. 3d 177 (Fla. 3d DCA 2011); Citizens Prop. Ins. Corp. v. Mango Hill Condo. Ass’n 12, 54 So. 3d 578 (Fla. 3d DCA 2011); Citizens Prop. Ins. Corp. v. Maytin, 51 So. 3d 591 (Fla. 3d DCA 2010); Citizens Prop. Ins. Corp. v. Galeria Villas Condo. Ass’n, 48 So. 3d 188 (Fla. 3d DCA 2010).

Friday, October 21, 2011

Second District Reverses Foreclosure Judgment

In Feltus v. U.S. Bank National Association (2D10-3727), the Second District reversed a summary judgment of foreclosure "because material issues of fact as to which entity holding the promissory note executed by Feltus existed at the time the trial court entered summary judgment." The court described the facts (in part) as follows:
On August 24, 2009, U.S. Bank filed an unverified complaint seeking to reestablish a lost promissory note and to foreclose the mortgage on Feltus's home. U.S. Bank attached to the complaint a copy of the note and the mortgage, but both documents showed the lender to be Countrywide Bank, N.A.....Notably, these allegations did not include an allegation that Countrywide had assigned the note to U.S. Bank.....
After Feltus filed a motion to dismiss alleging that U.S. Bank had failed to establish that it owned or held the subject note, on November 16, 2009, U.S. Bank filed an affidavit of indebtedness executed by Kathy Repka, an assistant secretary of BAC Home Loan Servicing, L.P., f/k/a Countrywide Home Loan Servicing, L.P. Repka asserted that her affidavit was based on the loan payment records of the servicing agent and her familiarity with those records.....Then on November 18, 2009, U.S. Bank filed another copy of the note as a supplemental exhibit to its complaint. In contrast to the copy attached to the complaint that contained no endorsements, this copy contained two endorsements that were side by side on the last page—the first stated "PAY TO THE ORDER OF: COUNTRYWIDE HOME LOANS, INC. WITHOUT RECOURSE COUNTRYWIDE BANK, N.A." and the second stated "PAY TO THE ORDER OF: __________ WITHOUT RECOURSE COUNTRYWIDE HOME LOANS, INC."....on June 4, 2010, the Bank filed a reply to Feltus's affirmative defenses in which it asserted that it is now in possession of the original note, which it attached and which is the same note it filed on November 18, 2009.
With regard to the legal issues, the Court stated:
We view U.S. Bank's filing of a copy of the note that it later asserted was the original note as a supplemental exhibit to its complaint to reestablish a lost note as an attempt to amend its complaint in violation of Florida Rule of Civil Procedure 1.190(a). U.S. Bank did not seek leave of court or the consent of Feltus to amend its complaint. A pleading filed in violation of rule 1.190(a) is a nullity, and the controversy should be determined based on the properly filed pleadings.
As to the main issue:
The properly filed pleadings before the court when it heard the Bank's motion for summary judgment were a complaint seeking to reestablish a lost note, Feltus's answer and affirmative defenses alleging that the note attached to the complaint contradicts the allegation of the complaint that U.S. Bank is the owner of the note, a motion for summary judgment alleging a lost note of which U.S. Bank is the owner, an affidavit of indebtedness alleging that U.S. Bank was the owner and holder of the note described in the complaint, and U.S. Bank's reply to Feltus's affirmative defenses asserting that it was now in possession of the original note, which it attached to the reply. But the note attached to the complaint showed the lender to be Countrywide Bank, N.A. And the complaint failed to allege that "[t]he person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred."
In addition, the affidavit of indebtedness revealed no basis for the affiant's assertion that U.S. Bank owns and holds the note. The affiant is an assistant secretary for the alleged servicing agent of the Bank, and she asserted that she had personal knowledge of the loan based on the loan payment records. She did not assert any personal knowledge of how U.S. Bank would have come to own or hold the note.
Judge Casanueva wrote a concurring opinion and stated:
....Because the affiant's competency was based only on her review of the loan payment records, she was not competent to aver as to actions of the Bank in accelerating the loan or hiring counsel, and her averments are hearsay and inadmissible at trial. The Bank could have easily established the facts of acceleration of the note and hiring of counsel with affidavits from the Bank's official in charge of foreclosing this loan and/or the Bank's counsel to establish the fact of hiring and of the fee arrangement. Such bank official or counsel would have direct personal knowledge, would be competent, and would have presented evidence admissible at trial. The affidavit the Bank submitted fell woefully short of these requirements and could not aid the Bank in any way to support its motion for summary judgment of foreclosure.

Thursday, October 6, 2011

Constitutional Role of Judges

Justice Scalia and Justice Breyer testified before the Senate Judiciary Committee yesterday. C-SPAN's summary and video of the testimony is below:
Justices Breyer and Scalia testified on the role of judges in the American republic and democratic systems within the U.S. Question topics included the politicization of the judicial confirmation process, cameras in the courtroom, the role of juries, and the 14th Amendment.

Tuesday, October 4, 2011

Eleventh Circuit To Review Two Fair Sentencing Act Cases En Banc

The Eleventh Circuit released two opinions today granting en banc review in criminal cases relating to the Fair Sentencing Act. See HERE and HERE.

In U.S. v. Rojas, the court will consider the appeal en banc and vacated the panel's opinion released on September 7, 2011 and published at 645 F.3d 1234. That order granting en banc review is available HERE. The now vacated panel opinion in this appeal began:
Arthur Smith appeals his 127-month sentence after pleading guilty to possession with intent to distribute 50 grams or more of cocaine base, in violation of 21 U.S.C. § 841(a)(1). He contends that an intervening decision shows that the district court erred by failing to apply the Fair Sentencing Act of 2010 (FSA) in determining his sentence. The government responds that, regardless of the merit of Smith's contention, he waived his right to appeal his sentence and that waiver covers this claim. We hold that FSA claims, like any other type of sentence claim, can be waived by a knowing and voluntary appeal waiver.
In U.S. v. Hudson, the court will consider the appeal en banc and vacated the panel's unpublished opinion released on May 11, 2011. The panel opinion is available HERE and the order granting en banc review is available HERE. This panel opinion began:
Charles Levern Hudson appeals his 240-month, mandatory-minimum sentence for (1) possession with intent to distribute 50 grams or more of cocaine base, in violation of 21 U.S.C. § 841(a)(1), (b)(1)(A)(iii), and (2) possession with intent to distribute 5 grams or more of cocaine base, in violation of § 841(a)(1), (b)(1)(B)(iii). He argues that the Fair Sentencing Act of 2010 (“FSA”), Pub. L. No. 111-220, 124 Stat. 2372 (2010), which was enacted after his offense conduct and conviction but before his sentencing, retroactively lowered the statutory mandatory minimum sentence for his offense. In particular, he contends that our statement to the contrary in United States v. Gomes, 621 F.3d 1343 (11th Cir. 2010), cert. denied, (U.S. Apr. 4, 2011) (No. 10-9271), is dicta that we are not obligated to follow here. For the reasons set forth below, we affirm.

Foreclosure Summary Judgment Reversed Due To Standing And Failure To Seek Relief Granted

In Gee v. U.S. Bank (5D10-1687), the Fifth District reversed a judgment in favor of U.S. Bank "Because U.S. Bank’s motion did not address any facts or law pertaining to its entitlement to summary judgment on its claims to reestablish the lost instruments and reform the deed and mortgage, the trial court erred in entering summary judgment on these grounds."

U.S. Bank filed a foreclosure complaint seeking to foreclose on a mortgage and reestablish a lost note. Subsequently, U.S. Bank filed a motion for summary judgment that "was silent regarding the reestablishment and reformation claims." In support of the summary judgment motion:
American Home, now purporting to act as U.S. Bank’s servicing agent, filed an affidavit, averring that the complaint’s allegations were true based on her knowledge as custodian of U.S. Bank’s business records, that U.S. Bank owned and held the Mortgage, and that Ms. Gee defaulted under the Mortgage by failing to make payments as due. Neither the motion nor the affidavit made mention of the lost note, the lost mortgage, or the claim for reformation of the deed and mortgage. To the contrary, the summary judgment motion stated that “the original promissory note, mortgage and assignment of mortgage would be filed on or before the hearing.” After a hearing, the court entered a summary final judgment of foreclosure, which reestablished the lost Mortgage, reformed the legal description contained in the mortgage and the warranty deed, and foreclosed the reestablished and reformed Mortgage.
The appellant appealed the summary judgment order and argued "among other things, that (1) U.S. Bank lacked standing to bring the foreclosure action, and (2) the summary judgment was entered on grounds that were not raised in the summary judgment motion." With regard to standing, the court stated:
Here, the record does not contain the original Mortgage. To prove its ownership, U.S. Bank filed a copy of the Mortgage as well as two assignments. The first assignment transferred the Mortgage from Advent Mortgage, the original mortgagee, to Option One. The second assignment purported to transfer the mortgage from American Home, as successor in interest of Option One, to U.S. Bank. However, and significant to our consideration, U.S. Bank provided nothing to demonstrate how American Home came to be the successor in interest to Option One. 
Incredibly, U.S. Bank argues that “[i]t would be inequitable for [Ms. Gee] to avoid foreclosure based on the absence of an endorsement to [it].” But that argument flies in the face of well-established precedent requiring the party seeking foreclosure to present evidence that it owns and holds the note and mortgage in question in order to proceed with a foreclosure action. See Verizzo, 28 So. 3d at 978; Philogene v. ABN Amro Mortg. Group Inc., 948 So. 2d 45, 46 (Fla. 4th DCA 2006). When Ms. Gee denied that U.S. Bank had an interest in the Mortgage, ownership became an issue that U.S. Bank, as the plaintiff, was required to prove....As U.S. Bank failed to offer any proof of American Home’s authority to assign the Mortgage, we conclude that it failed to establish its standing to bring the foreclosure action as a matter of law. See Servedio v. U.S. Bank Nat’l Ass’n, 46 So. 3d 1105, 1107 (Fla. 4th DCA 2010) (.....); see also Khan v. Bank of Am., N.A., 58 So. 3d 927, 928 (Fla. 5th DCA 2011) (......); Verizzo, 28 So. 3d at 977 (.....). Cf. Isaac v. Deutsche Bank Nat’l Trust Co., 36 Fla. L. Weekly D727 (Fla. 4th DCA Apr. 6, 2011) (......); Taylor v. Deutsche Bank Nat’l Trust Co., 44 So. 3d 618 (Fla. 5th DCA 2010).
With regard to the second issue, the Court stated that "[a]s Ms. Gee contends, U.S. Bank’s summary judgment motion made no mention of its claim to reestablish the lost Mortgage and identified no evidence to support its claim that these documents were lost. Instead, the motion declared the opposite...."

"Because U.S. Bank’s motion did not address any facts or law pertaining to its entitlement to summary judgment on its claims to reestablish the lost instruments and reform the deed and mortgage, the trial court erred in entering summary judgment on these grounds. By failing to state with particularity the grounds upon which its summary judgment motion was based, U.S. Bank failed to provide Ms. Gee with proper notice of the separate issues to be resolved and why U.S. Bank was entitled to summary judgment...."

The oral argument in this case was held on July 28, 2011, and is below:

[I updated the post above on Tuesday, October 4, 2011, to add the oral argument video.]