Ninety-four percent of Realtors surveyed by the California Association of Realtors participated in a short sale transaction during 2010, demonstrating the growing presence of short sale listings in today's distressed real estate environment. Despite increased market interest in the short sale as an alternative to foreclosure, the survey found that fewer than three out of five actually close in California. The trade group says this fact illustrates "the complexity and difficulty of navigating lenders' and servicers' short sale procedures."
“The lack of standardization, long approval process, and lack of lender approvals are hampering what should be a 45-day short sale process,” Peerce said. “Instead we’re hearing the typical response time for lenders is at least 60 days, and in many instances, their response time exceeds six months.”
More than half (63 percent) of Realtors said that lenders took more than 60 days to return a written response of the approval or disapproval of the short sale agreement submitted. Only 4 percent said they received a written response in less than 14 days.
http://www.dsnews.com/articles/short-sale-success-faces-hurdles-in-california-survey-2011-03-08
Showing posts with label Appellate Court Cases. Show all posts
Showing posts with label Appellate Court Cases. Show all posts
Wednesday, March 9, 2011
Thursday, February 3, 2011
CA App Allows Borroer's Allegations of Loan Modification Misrepresentation to Proceed
The California Court of Appeal, Second District, recently held that a borrower stated claims for promissory estoppel and fraud, in connection with alleged loan modification representations. However, the Court rejected the borrower's efforts to void the related foreclosure sale.
A copy of the opinion is available at:
http://www.courtinfo.ca.gov/opinions/documents/B220922.PDF
The plaintiff borrower filed for bankruptcy, first as a Chapter 7 but then sought to convert to a Chapter 13. She contacted the defendant bank, which allegedly promised to work with her on a loan reinstatement and modification if she would forgo further bankruptcy proceedings. In reliance on that alleged promise, the borrower claimed she did not convert her bankruptcy case to a chapter 13 proceeding or oppose the bank's motion to lift the bankruptcy stay. While the bank was promising to work with borrower, the bank allegedly was simultaneously complying with the notice requirements to conduct a sale under the power of sale in the deed of trust.
The bankruptcy court lifted the stay. But the bank allegedly did not work with borrower in an attempt to reinstate and modify the loan. Rather, it completed the foreclosure.
The borrower filed this action against the bank, asserting a cause of action for promissory estoppel and fraud, among others. She argued the bank's promise to work with her in reinstating and modifying the loan was enforceable, she had relied on the promise by forgoing bankruptcy protection under Chapter 13, and the bank subsequently breached its promise by foreclosing. The trial court dismissed the case on demurrer.
The California appellate court reversed in part, holding: (1) the borrower could have reasonably relied on the bank's promise to work on a loan reinstatement and modification if she did not seek relief under chapter 13; (2) the promise was sufficiently concrete to be enforceable; and (3) the borrower's decision to forgo Chapter 13 relief was detrimental because it allowed the bank to foreclose on the property. The Court therefore allowed the promissory estoppel and fraud claims to survive.
However, the appellate court also held that the borrower's complaint did not allege any irregularities in the foreclosure process that would permit the trial court to void the deed of sale or otherwise invalidate the foreclosure.
The bank argued that an oral promise to postpone either a loan payment or a foreclosure is unenforceable. However, the Court noted that "the doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise." The Court further noted that a promissory estoppel claim generally entitles a borrower to the damages available on a breach of contract claim.
However, the Court also held that, "[b]ecause this is not a case where the homeowner paid the funds needed to reinstate the loan before the foreclosure, promissory estoppel does not provide a basis for voiding the deed of sale or otherwise invalidating the foreclosure."
The Court also rejected the borrower's allegations that: (1) the trustee under the deed of trust was defective because the "Substitution of Trustee" was signed by the bank's attorney-in-fact; and (2) the foreclosure sale was void because the notice of default mistakenly the wrong beneficiary.
A copy of the opinion is available at:
http://www.courtinfo.ca.gov/opinions/documents/B220922.PDF
The plaintiff borrower filed for bankruptcy, first as a Chapter 7 but then sought to convert to a Chapter 13. She contacted the defendant bank, which allegedly promised to work with her on a loan reinstatement and modification if she would forgo further bankruptcy proceedings. In reliance on that alleged promise, the borrower claimed she did not convert her bankruptcy case to a chapter 13 proceeding or oppose the bank's motion to lift the bankruptcy stay. While the bank was promising to work with borrower, the bank allegedly was simultaneously complying with the notice requirements to conduct a sale under the power of sale in the deed of trust.
The bankruptcy court lifted the stay. But the bank allegedly did not work with borrower in an attempt to reinstate and modify the loan. Rather, it completed the foreclosure.
The borrower filed this action against the bank, asserting a cause of action for promissory estoppel and fraud, among others. She argued the bank's promise to work with her in reinstating and modifying the loan was enforceable, she had relied on the promise by forgoing bankruptcy protection under Chapter 13, and the bank subsequently breached its promise by foreclosing. The trial court dismissed the case on demurrer.
The California appellate court reversed in part, holding: (1) the borrower could have reasonably relied on the bank's promise to work on a loan reinstatement and modification if she did not seek relief under chapter 13; (2) the promise was sufficiently concrete to be enforceable; and (3) the borrower's decision to forgo Chapter 13 relief was detrimental because it allowed the bank to foreclose on the property. The Court therefore allowed the promissory estoppel and fraud claims to survive.
However, the appellate court also held that the borrower's complaint did not allege any irregularities in the foreclosure process that would permit the trial court to void the deed of sale or otherwise invalidate the foreclosure.
The bank argued that an oral promise to postpone either a loan payment or a foreclosure is unenforceable. However, the Court noted that "the doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise." The Court further noted that a promissory estoppel claim generally entitles a borrower to the damages available on a breach of contract claim.
However, the Court also held that, "[b]ecause this is not a case where the homeowner paid the funds needed to reinstate the loan before the foreclosure, promissory estoppel does not provide a basis for voiding the deed of sale or otherwise invalidating the foreclosure."
The Court also rejected the borrower's allegations that: (1) the trustee under the deed of trust was defective because the "Substitution of Trustee" was signed by the bank's attorney-in-fact; and (2) the foreclosure sale was void because the notice of default mistakenly the wrong beneficiary.
Monday, November 1, 2010
5th Circuit Denial on Class Certification Against Fannie Mae
The U.S. Court of Appeals for the Fifth Circuit recently affirmed a district court's denial of class certification in an alleged breach of fiduciary case against Fannie Mae, holding that differences in state law precluded class certification.
A copy of the opinion is available at:
http://www.ca5.uscourts.gov/opinions/pub/09/09-40997-CV0.wpd.pdf
The key issue in the case was whether Fannie Mae was in a fiduciary relationship with the plaintiff mortgagors. The plaintiffs were mortgagors whose mortgages for low-income multi-family housing were held or serviced by Fannie Mae and insured by HUD. HUD required mortgagors participating in its insurance program to sign a Regulatory Agreement. The Agreement mandated that mortgagors establish two funds with the mortgagee: 1) a Reserve Fund and 2) a Residual Fund. The Reserve Fund provision of the Agreement specifically contemplated that those funds may take the form of cash deposit or guaranteed investment. Fannie Mae gave mortgagors certain investment options for both their Reserve Fund and Residual Fund moneys. Some mortgagors chose to retain the liquidity and not invest any such funds. The "uninvested funds" were the subject of this lawsuit. Between 1969 and 1995, Fannie Mae invested "uninvested funds" in the overnight federal funds marketplace, retaining the interest proceeds for itself.
Plaintiffs allege that Fannie Mae tried to discourage mortgagor investments in order that Fannie Mae could maximize the earning potential of its federal funds investments. Plaintiffs sued Fannie Mae on behalf of themselves and those similarly situated for breach of fiduciary duty and also sought relief under an unjust enrichment theory.
The district court found that the class satisfied the requirements of Rule 23(a) but denied certification under Rule 23(b). The Fifth Circuit Court of Appeals reviewed the denial of class certification for abuse of discretion, and reviewed de novo the question of whether the district court applied the proper local law.
The Fifth Circuit applied the analysis in the Restatement (Second) of Conflict of Laws and found that the intention to create a trust (such as giving property to the trustee) manifested outside of Washington D.C. for many of the plaintiffs. As a result, there was no single jurisdictional law that could be applied to the class as a whole.
The Fifth Circuit also turned to the Restatement for guidance to examine the unjust enrichment claims. The Court concluded there were not sufficient contacts to apply D.C. law to each plaintiff's unjust enrichment claim, and found that D.C. law should not be applied to all putative plaintiff class members in either the fiduciary law or the unjust enrichment claims.
The Court found that determining whether a trust or fiduciary relationship has been created (and breached) was not as uniform as the plaintiffs' proposed. Although the basic principles of fiduciary law may be the same throughout the country, the nuances vary and those nuances affect the outcome of claims. The Court noted that the plaintiffs failed to demonstrate that state law variations do not preclude the certification of a nationwide class.
The Fifth Circuit held that a court may certify a class under (b)(1)(A) if the court finds that separate lawsuits could create inconsistent results that would establish incompatible standards of conduct for the party opposing the class. The court did not find that separate actions would result in incompatible standards of conduct for Fannie Mae.
Most importantly, the Fifth Circuit found that various state laws apply to different class members. Therefore, varying judgments with respect to plaintiffs' injunctive requests would not be "incompatible" but rather would reflect diverse state fiduciary law. The Court noted that the Supreme Court has held that Rule 23(b)(1)(A) encompasses cases in which the defendant is obliged by law to treat members of the class alike.
Thus, the Fifth Circuit Court of Appeals determined that the district court did not abuse its discretion in failing to certify under either Rule 23(b)(3), Rule 23(b)(1)(a), or Rule 23(b)(2) and the denial of class certification was affirmed.
A copy of the opinion is available at:
http://www.ca5.uscourts.gov/opinions/pub/09/09-40997-CV0.wpd.pdf
The key issue in the case was whether Fannie Mae was in a fiduciary relationship with the plaintiff mortgagors. The plaintiffs were mortgagors whose mortgages for low-income multi-family housing were held or serviced by Fannie Mae and insured by HUD. HUD required mortgagors participating in its insurance program to sign a Regulatory Agreement. The Agreement mandated that mortgagors establish two funds with the mortgagee: 1) a Reserve Fund and 2) a Residual Fund. The Reserve Fund provision of the Agreement specifically contemplated that those funds may take the form of cash deposit or guaranteed investment. Fannie Mae gave mortgagors certain investment options for both their Reserve Fund and Residual Fund moneys. Some mortgagors chose to retain the liquidity and not invest any such funds. The "uninvested funds" were the subject of this lawsuit. Between 1969 and 1995, Fannie Mae invested "uninvested funds" in the overnight federal funds marketplace, retaining the interest proceeds for itself.
Plaintiffs allege that Fannie Mae tried to discourage mortgagor investments in order that Fannie Mae could maximize the earning potential of its federal funds investments. Plaintiffs sued Fannie Mae on behalf of themselves and those similarly situated for breach of fiduciary duty and also sought relief under an unjust enrichment theory.
The district court found that the class satisfied the requirements of Rule 23(a) but denied certification under Rule 23(b). The Fifth Circuit Court of Appeals reviewed the denial of class certification for abuse of discretion, and reviewed de novo the question of whether the district court applied the proper local law.
The Fifth Circuit applied the analysis in the Restatement (Second) of Conflict of Laws and found that the intention to create a trust (such as giving property to the trustee) manifested outside of Washington D.C. for many of the plaintiffs. As a result, there was no single jurisdictional law that could be applied to the class as a whole.
The Fifth Circuit also turned to the Restatement for guidance to examine the unjust enrichment claims. The Court concluded there were not sufficient contacts to apply D.C. law to each plaintiff's unjust enrichment claim, and found that D.C. law should not be applied to all putative plaintiff class members in either the fiduciary law or the unjust enrichment claims.
The Court found that determining whether a trust or fiduciary relationship has been created (and breached) was not as uniform as the plaintiffs' proposed. Although the basic principles of fiduciary law may be the same throughout the country, the nuances vary and those nuances affect the outcome of claims. The Court noted that the plaintiffs failed to demonstrate that state law variations do not preclude the certification of a nationwide class.
The Fifth Circuit held that a court may certify a class under (b)(1)(A) if the court finds that separate lawsuits could create inconsistent results that would establish incompatible standards of conduct for the party opposing the class. The court did not find that separate actions would result in incompatible standards of conduct for Fannie Mae.
Most importantly, the Fifth Circuit found that various state laws apply to different class members. Therefore, varying judgments with respect to plaintiffs' injunctive requests would not be "incompatible" but rather would reflect diverse state fiduciary law. The Court noted that the Supreme Court has held that Rule 23(b)(1)(A) encompasses cases in which the defendant is obliged by law to treat members of the class alike.
Thus, the Fifth Circuit Court of Appeals determined that the district court did not abuse its discretion in failing to certify under either Rule 23(b)(3), Rule 23(b)(1)(a), or Rule 23(b)(2) and the denial of class certification was affirmed.
Thursday, September 30, 2010
Circuit Court of Appeals Cases
Third Circuit, 07/13/2010
In re Visteon Corp.
Debtor-employer may not terminate provision of retiree health and life insurance benefits without complying with section 1114.
Sixth Circuit, 07/22/2010
In re: Darrohn
Bankruptcy court's confirmation of chapter 13 plan reversed in light of the Supreme Court's recent decision in Hamilton v. Lanning where: 1) the bankruptcy court erred when it determined that it was required to use the income calculated on Form B22C, which was derived from the six-month look-back formula, rather than debtors' current monthly income; and 2) the bankruptcy court erred in failing to account for the debtors' intent to surrender properties securing the mortgages in considering reasonable necessary monthly expenses.
Ninth Circuit, 07/16/2010
In re Penrod
Creditor does not have a purchase money security interest in the "negative equity" arising from a vehicle traded in at the time of a new vehicle purchase. (Note: I filed an Amicus Brief in this case)
Tenth Circuit, 07/20/2010
In re Roser
Chapter 7 trustee cannot avoid a creditor's lien, where Colorado Certificate of Title Act (CCTA) did not supersede Colorado UCC section 4-9-317(e) because the provision did not govern the manner or timing of the perfection of liens, and governed only the priority of a lien and was not inconsistent with the CCTA.
Eleventh Circuit, 07/19/2010
In re Tennyson
Above median income debtor, with negative disposable income, may not confirm Chapter 13 bankruptcy plan to last for less than five years when the debtor's unsecured creditors have not been paid in full.
Thanks to Findlaw.com.
In re Visteon Corp.
Debtor-employer may not terminate provision of retiree health and life insurance benefits without complying with section 1114.
Sixth Circuit, 07/22/2010
In re: Darrohn
Bankruptcy court's confirmation of chapter 13 plan reversed in light of the Supreme Court's recent decision in Hamilton v. Lanning where: 1) the bankruptcy court erred when it determined that it was required to use the income calculated on Form B22C, which was derived from the six-month look-back formula, rather than debtors' current monthly income; and 2) the bankruptcy court erred in failing to account for the debtors' intent to surrender properties securing the mortgages in considering reasonable necessary monthly expenses.
Ninth Circuit, 07/16/2010
In re Penrod
Creditor does not have a purchase money security interest in the "negative equity" arising from a vehicle traded in at the time of a new vehicle purchase. (Note: I filed an Amicus Brief in this case)
Tenth Circuit, 07/20/2010
In re Roser
Chapter 7 trustee cannot avoid a creditor's lien, where Colorado Certificate of Title Act (CCTA) did not supersede Colorado UCC section 4-9-317(e) because the provision did not govern the manner or timing of the perfection of liens, and governed only the priority of a lien and was not inconsistent with the CCTA.
Eleventh Circuit, 07/19/2010
In re Tennyson
Above median income debtor, with negative disposable income, may not confirm Chapter 13 bankruptcy plan to last for less than five years when the debtor's unsecured creditors have not been paid in full.
Thanks to Findlaw.com.
Sunday, August 1, 2010
Circuit Court of Appeals Cases
Third Circuit, 06/29/2010
In re Goody's Family Clothing Inc.
"Stub rent" is administrative expense here, section 365(d)(3) does not supplant section 503(b).
Sixth Circuit, 07/02/2010
In re Johnson
perfection of lender's security interest in truck did not occur until March 7, 2005, when the security interest was actually noted on the certificate of title.
Eighth Circuit, 06/28/2010
US v. Mitchell
fraud sentence is affirmed where, in a complicated proceeding such as this, the district court must reasonably approximate the value of the assets that the defendant fraudulently sought to preserve.
Tenth Circuit, 06/29/2010
In re Graves
section 542 does not empower a trustee to demand turnover from a debtor in this case, where debtors' interest in a 2006 tax refund was irrevocably applied pre-petition to 2007 taxes
Thanks to Findlaw.com
In re Goody's Family Clothing Inc.
"Stub rent" is administrative expense here, section 365(d)(3) does not supplant section 503(b).
Sixth Circuit, 07/02/2010
In re Johnson
perfection of lender's security interest in truck did not occur until March 7, 2005, when the security interest was actually noted on the certificate of title.
Eighth Circuit, 06/28/2010
US v. Mitchell
fraud sentence is affirmed where, in a complicated proceeding such as this, the district court must reasonably approximate the value of the assets that the defendant fraudulently sought to preserve.
Tenth Circuit, 06/29/2010
In re Graves
section 542 does not empower a trustee to demand turnover from a debtor in this case, where debtors' interest in a 2006 tax refund was irrevocably applied pre-petition to 2007 taxes
Thanks to Findlaw.com
Monday, July 19, 2010
In re: Johnson Sixth Circuit July 2, 2010
The U.S. Court of Appeals for the Sixth Circuit recently held that the “enabling loan exception” of Section 547(c)(3) of the Bankruptcy Code did not protect an auto finance company’s security interest from avoidance as a preferential transfer during a Chapter 7 bankruptcy proceeding, because under Kentucky law final perfection of a vehicle lien does not occur until physical notation is made on the title, which did not occur within 20 days after the debtor received possession of the collateral.
Plaintiff-Debtor executed an installment sales contract and security agreement with defendant Branch Banking & Trust Company (“BB&T”) to finance an automobile purchase on February 8, 2005, and took possession of the automobile that same day. The title documentation and fees were received by the Letcher County, Kentucky clerk’s office on February 22. However, the county clerk did not stamp the documents as received and upload BB&T’s lien for recordation until March 7. Less than ninety days later, Debtor filed for Chapter 7 bankruptcy, and the bankruptcy trustee filed a complaint to avoid the lien of BB&T as a preferential transfer.
The Bankruptcy Court held that BB&T’s security interest was perfected on February 22, and that the “enabling loan exception” protected BB&T’s interest. The Bankruptcy Appellate Panel disagreed, holding that that BB&T’s interest was not protected by the exception because perfection occurred on March 7. The Sixth Circuit Court of Appeals affirmed.
Under Section 547(b) and (c) of the Code a “trustee may avoid certain transfers of interest in property that occur on or within 90 days preceding the filing date of the bankruptcy petition.” However, the “enabling loan exception” under Section 547(c)(3) protects a purchase money security interest if the security interest is perfected within 20 days after the debtor receives possession of the collateral.
Perfection of a security interest is determined by state law, and therefore the question before the Court was whether perfection of a security interest on a motor vehicle under Kentucky state law “require[s] physical notation on the actual certificate of title as ultimately issued by the county clerk, or is perfection accomplished as and when the required paperwork and fee are submitted to the county clerk?” Upon certification to the Kentucky Supreme Court, that Court concluded that “final perfection of a vehicle lien does not occur until physical notation is made on the title.” Johnson v. Branch Banking & Trust Co., -S.W.3d-, 2010 WL 2470849, at *1 (Ky. June 17, 2010).
Accordingly, the Sixth Circuit held that because perfection did not occur within 20 days after Debtor received possession of the truck, the enabling loan exception of Section 547(c)(3) did not protect BB&T’s interest from avoidance as a preferential transfer.
Plaintiff-Debtor executed an installment sales contract and security agreement with defendant Branch Banking & Trust Company (“BB&T”) to finance an automobile purchase on February 8, 2005, and took possession of the automobile that same day. The title documentation and fees were received by the Letcher County, Kentucky clerk’s office on February 22. However, the county clerk did not stamp the documents as received and upload BB&T’s lien for recordation until March 7. Less than ninety days later, Debtor filed for Chapter 7 bankruptcy, and the bankruptcy trustee filed a complaint to avoid the lien of BB&T as a preferential transfer.
The Bankruptcy Court held that BB&T’s security interest was perfected on February 22, and that the “enabling loan exception” protected BB&T’s interest. The Bankruptcy Appellate Panel disagreed, holding that that BB&T’s interest was not protected by the exception because perfection occurred on March 7. The Sixth Circuit Court of Appeals affirmed.
Under Section 547(b) and (c) of the Code a “trustee may avoid certain transfers of interest in property that occur on or within 90 days preceding the filing date of the bankruptcy petition.” However, the “enabling loan exception” under Section 547(c)(3) protects a purchase money security interest if the security interest is perfected within 20 days after the debtor receives possession of the collateral.
Perfection of a security interest is determined by state law, and therefore the question before the Court was whether perfection of a security interest on a motor vehicle under Kentucky state law “require[s] physical notation on the actual certificate of title as ultimately issued by the county clerk, or is perfection accomplished as and when the required paperwork and fee are submitted to the county clerk?” Upon certification to the Kentucky Supreme Court, that Court concluded that “final perfection of a vehicle lien does not occur until physical notation is made on the title.” Johnson v. Branch Banking & Trust Co., -S.W.3d-, 2010 WL 2470849, at *1 (Ky. June 17, 2010).
Accordingly, the Sixth Circuit held that because perfection did not occur within 20 days after Debtor received possession of the truck, the enabling loan exception of Section 547(c)(3) did not protect BB&T’s interest from avoidance as a preferential transfer.
Hurley v Deutsche Bank. ( 6th Cir App) 2010
The U.S. Court of Appeals for the Sixth Circuit recently held that a delay of over two years before attempting to compel arbitration resulted in waiver of the right to arbitrate.
Plaintiffs filed an action in May of 2007 in federal court against certain mortgage lending defendants for alleged violations of the Servicemembers’ Civil Relief Act. The matter was litigated in federal court for approximately 26 months before the defendants sought to compel arbitration under the terms of the mortgage documents executed by the Plaintiffs. The district court denied the Defendants’ motion and the Defendants appealed.
Agreeing with the lower court the Sixth Circuit found that, the Defendants in this matter waived their agreement to arbitrate by both “(1) taking actions that are completely inconsistent with any reliance on an arbitration agreement; and (2) delaying its assertion to such an extent that the opposing party incurs actual prejudice.”
Defendants acted inconsistently with their arbitration agreement by filing “multiple dispositive and non-dispositive motions,” including a motion to change venue under which, “Defendants proactively selected the forum in which the wished to defend against Plaintiffs’ claims.” In addition to Defendants’ conduct, the Sixth Circuit indicated that the length of time alone likely would have been dispositive. In addition, the Sixth Circuit found that the Defendants’ delay in asserting their right to arbitrate prejudiced the Plaintiffs by causing them to incur costs of over two years active litigation in two federal courts.
Plaintiffs filed an action in May of 2007 in federal court against certain mortgage lending defendants for alleged violations of the Servicemembers’ Civil Relief Act. The matter was litigated in federal court for approximately 26 months before the defendants sought to compel arbitration under the terms of the mortgage documents executed by the Plaintiffs. The district court denied the Defendants’ motion and the Defendants appealed.
Agreeing with the lower court the Sixth Circuit found that, the Defendants in this matter waived their agreement to arbitrate by both “(1) taking actions that are completely inconsistent with any reliance on an arbitration agreement; and (2) delaying its assertion to such an extent that the opposing party incurs actual prejudice.”
Defendants acted inconsistently with their arbitration agreement by filing “multiple dispositive and non-dispositive motions,” including a motion to change venue under which, “Defendants proactively selected the forum in which the wished to defend against Plaintiffs’ claims.” In addition to Defendants’ conduct, the Sixth Circuit indicated that the length of time alone likely would have been dispositive. In addition, the Sixth Circuit found that the Defendants’ delay in asserting their right to arbitrate prejudiced the Plaintiffs by causing them to incur costs of over two years active litigation in two federal courts.
Circuit Court of Appeals Cases from Last Week
Third Circuit, 06/29/2010
In re Goody's Family Clothing Inc.
"Stub rent" is administrative expense here, section 365(d)(3) does not supplant section 503(b).
Sixth Circuit, 07/02/2010
In re Johnson
perfection of lender's security interest in truck did not occur until March 7, 2005, when the security interest was actually noted on the certificate of title.
Eighth Circuit, 06/28/2010
US v. Mitchell
fraud sentence is affirmed where, in a complicated proceeding such as this, the district court must reasonably approximate the value of the assets that the defendant fraudulently sought to preserve.
Tenth Circuit, 06/29/2010
In re Graves
section 542 does not empower a trustee to demand turnover from a debtor in this case, where debtors' interest in a 2006 tax refund was irrevocably applied pre-petition to 2007 taxes
Thanks to Findlaw.com
In re Goody's Family Clothing Inc.
"Stub rent" is administrative expense here, section 365(d)(3) does not supplant section 503(b).
Sixth Circuit, 07/02/2010
In re Johnson
perfection of lender's security interest in truck did not occur until March 7, 2005, when the security interest was actually noted on the certificate of title.
Eighth Circuit, 06/28/2010
US v. Mitchell
fraud sentence is affirmed where, in a complicated proceeding such as this, the district court must reasonably approximate the value of the assets that the defendant fraudulently sought to preserve.
Tenth Circuit, 06/29/2010
In re Graves
section 542 does not empower a trustee to demand turnover from a debtor in this case, where debtors' interest in a 2006 tax refund was irrevocably applied pre-petition to 2007 taxes
Thanks to Findlaw.com
Thursday, June 17, 2010
Circuit Court of Appeals Cases from Last Week
U.S. Supreme Court, June 07, 2010
Hamilton v. Lanning, --- U.S. ---- (2010)(Supreme Court approves "forward looking approach" for computing chapter 13 plans by above-median debtors, i.e. the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation)
9th Circuit Court of Appeals, June 09, 2010
In re Southern Cal. Sunbelt Developers, --- F.3d --- (9th Cir 2010)( 1) bankruptcy court properly concluded that 11 U.S.C. section 303(i) permitted an award of attorney's fees for a section 303 action as a whole, including fees incurred to litigate claims for fees and damages under section 303(i)(1) and (2); 2) section 303(i) permitted an award of punitive damages under section 303(i)(2)(B) in the absence of an award of actual damages under section 303(i)(2)(A); and 3) the bankruptcy court properly held two individual appellants jointly and severally liable for the costs and attorney's fees the debtors incurred in obtaining dismissal of the involuntary petitions. However, the judgment is reversed in part where the bankruptcy court erred by holding the individual appellants liable for the debtors' costs and fees incurred! on the section 303(i) motions themselves)
Thanks to Findlaw.com
Hamilton v. Lanning, --- U.S. ---- (2010)(Supreme Court approves "forward looking approach" for computing chapter 13 plans by above-median debtors, i.e. the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation)
9th Circuit Court of Appeals, June 09, 2010
In re Southern Cal. Sunbelt Developers, --- F.3d --- (9th Cir 2010)( 1) bankruptcy court properly concluded that 11 U.S.C. section 303(i) permitted an award of attorney's fees for a section 303 action as a whole, including fees incurred to litigate claims for fees and damages under section 303(i)(1) and (2); 2) section 303(i) permitted an award of punitive damages under section 303(i)(2)(B) in the absence of an award of actual damages under section 303(i)(2)(A); and 3) the bankruptcy court properly held two individual appellants jointly and severally liable for the costs and attorney's fees the debtors incurred in obtaining dismissal of the involuntary petitions. However, the judgment is reversed in part where the bankruptcy court erred by holding the individual appellants liable for the debtors' costs and fees incurred! on the section 303(i) motions themselves)
Thanks to Findlaw.com
Thursday, April 29, 2010
35 Fla. L. Weekly D700a--- 2nd DCA CASE
In Florida, the Second District Court of Appeals covers the West-Central part of the state . There are now fourteen counties in the Second District which includes a population of over 3.8 million: Pasco & Pinellas, Hardee, Highlands, Polk, DeSoto, Manatee, Sarasota, Hillsborough, Charlotte, Glades, Collier, Hendry, and Lee.
Background Facts
The facts of this case are undisputed, and only Mr. Palacios and the second mortgagee, Appellee Wachovia Bank, N.A., are interested parties in this appellate proceeding. On April 15, 2008, the circuit court entered a final summary judgment of foreclosure in favor of Florida Funding for $60,136.09. On May 9, 2008, the Clerk conducted the foreclosure sale, at which Mr. Palacios and Florida Funding were the only bidders. Florida Funding bid $40,000 and Mr. Palacios ultimately prevailed with a bid of $41,000. Shortly thereafter, Mr. Palacios moved to release his money from the Clerk because he discovered that there was a second mortgage on the property. Then, on May 19, 2008, Wachovia moved to set aside the foreclosure judgment and the sale, claiming that it had not been properly served in the initial proceedings and that there were substantial unexplained irregularities in the final judgment concerning the proper amount owed to Florida Funding. At the hearing on Wachovia’s motion, the circuit court determined that instead of more than sixty thousand dollars, Florida Funding was owed in total only $16,427.28 on its first mortgage because its contract did not properly secure future advances on the mortgage. The circuit court denied Wachovia’s motion to set aside the final judgment of foreclosure and sale and instead merely modified the final judgment to reflect the newly corrected amount owed to Florida Funding. This postsale modification left over twenty-four thousand dollars in excess of the first mortgage to satisfy junior lien holders like Wachovia. The circuit court also retained jurisdiction to later consider Mr. Palacios’ pending motion to return his money.
Mr. Palacios then amended his pending motion to change tack,1 claiming that the amended final judgment of foreclosure and foreclosure sale should be vacated because the judgment was substantially modified after the sale was held. He cited section 45.031, Florida Statutes (2007), which states that a judicial sale will be held no sooner than twenty days after entry of the final judgment. His motion argued that allowing the sale to stand when such a substantial change was made to the final judgment would defeat the intent of the statute and result in a fraud on and injustice to the third-party bidder who has a right to rely on the affidavits and judgments filed prior to a sale. The circuit court heard argument on this motion from Mr. Palacios and Wachovia at a hearing but denied the motion. The circuit court reasoned that there were no known irregularities before the sale, distinguishing 601 West 26 Corp. v. Equity Capital Co., 174 So. 2d 626 (Fla. 3d DCA 1965), on this point. Further, because the amended final judgment decreased rather than increased the amount due, the circuit court concluded that the third-party bidder was neither disadvantaged at the time of the sale nor thereafter. We do not agree.
Analysis
Wachovia adopts the circuit court’s reasoning on appeal, emphasizing that because there were no irregularities noted before the sale, all requirements of the statute were complied with. This is true but misses the point. The statutory notice requirements are meant to ensure that the public, i.e., a potential third-party bidder like Mr. Palacios, is adequately on notice in order to determine his fair market bidding price at the foreclosure sale. Mr. Palacios was prejudiced here by the faulty original foreclosure judgment because it misled him as to the property’s foreclosure market value. Had the correct amount due to Florida Funding under its first mortgage — approximately $16,427 — been known and set forth in the final judgment of foreclosure at the time of the sale, Mr. Palacios would not have been required to outbid Florida Funding’s interest by offering $41,000; a bid of slightly more than $16,427 would have sufficed. At that point, a junior lienor would have been required to bid more or lose its interest in the foreclosed property. Thus, Wachovia, which had a position subordinate to Florida Funding in the foreclosure sale process, would have been required to bid higher or lose the property. Depending on what a junior lien holder would have done at the sale, Mr. Palacios could have bid higher — or not — depending on his evaluation of his particular circumstances. He may not have had to bid much more than $16,000 to acquire the property.
To conduct a fair foreclosure sale, the correct amount needed to pay off the foreclosing first mortgagee must be known to all potential bidders, be they outsiders like Mr. Palacios or junior lien holders like Wachovia. This is so each bidder can assess the situation corresponding to that bidder’s individual circumstance and decide what the bidder is willing to pay to protect that bidder’s interest. When the true circumstances became known to the circuit court, it should have set aside the final judgment of foreclosure and the sale. Instead, the process the circuit court utilized conferred a benefit to the subordinate lien holder, and a corresponding detriment to Mr. Palacios, by awarding Wachovia the amount remaining after satisfaction of the first mortgage, a benefit to which Wachovia was not entitled by law.
Wachovia cites Sundie v. Haren, 253 So. 2d 857 (Fla. 1971), for the proposition that “[a]s to non-party persons, a purchase at an execution sale pursuant to a judgment afterwards reversed is final.” Id. at 859. Sundie is distinguishable in many respects, not least of which is that the third-party bidder there, unlike Mr. Palacios, was not contesting the final judgment of foreclosure or objecting to the sale. Moreover, the supreme court ultimately dismissed Mr. Sundie’s petition for certiorari, deciding it was without jurisdiction because there was no conflict between the decision on which he sought review, Haren v. Sundie, 233 So. 2d 417 (Fla. 3d DCA 1970), and Horn v. Horn, 73 So. 2d 905 (Fla. 1954). This result left standing the Third District’s decision to reverse and remand to the circuit court with directions to enter a final judgment of foreclosure and proceed with a new foreclosure sale.
Most telling of all is the supreme court’s warning that the result in Sundie “is limited to those situations in which the person required to make restitution was connected with the litigation. It is settled law that reversal of a decree on appeal does not affect the rights under that decree as to persons who were not parties to the appeal.” 253 So. 2d at 859. Thus, the supreme court’s dictum in Sundie regarding non-party persons is not controlling here.
It is the Third District’s opinion in Sundie that is more persuasive here. In its decision, the Third District had stated: “[T]he [foreclosed mortgagors] urge that the final judgment should have ordered a sale of the property so that they might exercise their right of redemption. It is apparent that a sale pursuant to a judgment which has been reversed is not a valid sale.” 233 So. 2d at 418 (emphasis added). Thus, although the final judgment of foreclosure sale in Mr. Palacios’ case was not technically reversed on appeal, the circuit court in fact reversed itself when it modified the final judgment by modifying it from $60,136.09 to $16,427.28.
Conclusion
“Whether the complaining party has made the showing necessary to set aside a [foreclosure] sale is a discretionary decision by the trial court, which may be reversed only when the court has grossly abused its discretion.” Ingorvaia v. Horton, 816 So. 2d 1256, 1259 (Fla. 2d DCA 2002) (quoting United Cos. Lending Corp. v. Abercrombie, 713 So. 2d 1017, 1018 (Fla. 2d DCA 1998)). We conclude that the circuit court grossly abused its discretion in declining to vacate the foreclosure sale when the final judgment of foreclosure was substantially modified after the sale. Mr. Palacios made the necessary showing to set aside the sale and his motion to vacate the sale should have been granted.
Reversed and remanded with directions to vacate the sale and proceed thereon in accordance with established procedure based on the amended final summary judgment of foreclosure filed July 1, 2008, that awarded $16,427.28 to Florida Funding. (KELLY and CRENSHAW, JJ., Concur.)
__________________
1Mr. Palacios’ original pleading was an untitled pro se “petition” to release purchase money; it was renamed to “supplemental/amended motion to vacate sale,” filed by newly retained counsel.
Background Facts
The facts of this case are undisputed, and only Mr. Palacios and the second mortgagee, Appellee Wachovia Bank, N.A., are interested parties in this appellate proceeding. On April 15, 2008, the circuit court entered a final summary judgment of foreclosure in favor of Florida Funding for $60,136.09. On May 9, 2008, the Clerk conducted the foreclosure sale, at which Mr. Palacios and Florida Funding were the only bidders. Florida Funding bid $40,000 and Mr. Palacios ultimately prevailed with a bid of $41,000. Shortly thereafter, Mr. Palacios moved to release his money from the Clerk because he discovered that there was a second mortgage on the property. Then, on May 19, 2008, Wachovia moved to set aside the foreclosure judgment and the sale, claiming that it had not been properly served in the initial proceedings and that there were substantial unexplained irregularities in the final judgment concerning the proper amount owed to Florida Funding. At the hearing on Wachovia’s motion, the circuit court determined that instead of more than sixty thousand dollars, Florida Funding was owed in total only $16,427.28 on its first mortgage because its contract did not properly secure future advances on the mortgage. The circuit court denied Wachovia’s motion to set aside the final judgment of foreclosure and sale and instead merely modified the final judgment to reflect the newly corrected amount owed to Florida Funding. This postsale modification left over twenty-four thousand dollars in excess of the first mortgage to satisfy junior lien holders like Wachovia. The circuit court also retained jurisdiction to later consider Mr. Palacios’ pending motion to return his money.
Mr. Palacios then amended his pending motion to change tack,1 claiming that the amended final judgment of foreclosure and foreclosure sale should be vacated because the judgment was substantially modified after the sale was held. He cited section 45.031, Florida Statutes (2007), which states that a judicial sale will be held no sooner than twenty days after entry of the final judgment. His motion argued that allowing the sale to stand when such a substantial change was made to the final judgment would defeat the intent of the statute and result in a fraud on and injustice to the third-party bidder who has a right to rely on the affidavits and judgments filed prior to a sale. The circuit court heard argument on this motion from Mr. Palacios and Wachovia at a hearing but denied the motion. The circuit court reasoned that there were no known irregularities before the sale, distinguishing 601 West 26 Corp. v. Equity Capital Co., 174 So. 2d 626 (Fla. 3d DCA 1965), on this point. Further, because the amended final judgment decreased rather than increased the amount due, the circuit court concluded that the third-party bidder was neither disadvantaged at the time of the sale nor thereafter. We do not agree.
Analysis
Wachovia adopts the circuit court’s reasoning on appeal, emphasizing that because there were no irregularities noted before the sale, all requirements of the statute were complied with. This is true but misses the point. The statutory notice requirements are meant to ensure that the public, i.e., a potential third-party bidder like Mr. Palacios, is adequately on notice in order to determine his fair market bidding price at the foreclosure sale. Mr. Palacios was prejudiced here by the faulty original foreclosure judgment because it misled him as to the property’s foreclosure market value. Had the correct amount due to Florida Funding under its first mortgage — approximately $16,427 — been known and set forth in the final judgment of foreclosure at the time of the sale, Mr. Palacios would not have been required to outbid Florida Funding’s interest by offering $41,000; a bid of slightly more than $16,427 would have sufficed. At that point, a junior lienor would have been required to bid more or lose its interest in the foreclosed property. Thus, Wachovia, which had a position subordinate to Florida Funding in the foreclosure sale process, would have been required to bid higher or lose the property. Depending on what a junior lien holder would have done at the sale, Mr. Palacios could have bid higher — or not — depending on his evaluation of his particular circumstances. He may not have had to bid much more than $16,000 to acquire the property.
To conduct a fair foreclosure sale, the correct amount needed to pay off the foreclosing first mortgagee must be known to all potential bidders, be they outsiders like Mr. Palacios or junior lien holders like Wachovia. This is so each bidder can assess the situation corresponding to that bidder’s individual circumstance and decide what the bidder is willing to pay to protect that bidder’s interest. When the true circumstances became known to the circuit court, it should have set aside the final judgment of foreclosure and the sale. Instead, the process the circuit court utilized conferred a benefit to the subordinate lien holder, and a corresponding detriment to Mr. Palacios, by awarding Wachovia the amount remaining after satisfaction of the first mortgage, a benefit to which Wachovia was not entitled by law.
Wachovia cites Sundie v. Haren, 253 So. 2d 857 (Fla. 1971), for the proposition that “[a]s to non-party persons, a purchase at an execution sale pursuant to a judgment afterwards reversed is final.” Id. at 859. Sundie is distinguishable in many respects, not least of which is that the third-party bidder there, unlike Mr. Palacios, was not contesting the final judgment of foreclosure or objecting to the sale. Moreover, the supreme court ultimately dismissed Mr. Sundie’s petition for certiorari, deciding it was without jurisdiction because there was no conflict between the decision on which he sought review, Haren v. Sundie, 233 So. 2d 417 (Fla. 3d DCA 1970), and Horn v. Horn, 73 So. 2d 905 (Fla. 1954). This result left standing the Third District’s decision to reverse and remand to the circuit court with directions to enter a final judgment of foreclosure and proceed with a new foreclosure sale.
Most telling of all is the supreme court’s warning that the result in Sundie “is limited to those situations in which the person required to make restitution was connected with the litigation. It is settled law that reversal of a decree on appeal does not affect the rights under that decree as to persons who were not parties to the appeal.” 253 So. 2d at 859. Thus, the supreme court’s dictum in Sundie regarding non-party persons is not controlling here.
It is the Third District’s opinion in Sundie that is more persuasive here. In its decision, the Third District had stated: “[T]he [foreclosed mortgagors] urge that the final judgment should have ordered a sale of the property so that they might exercise their right of redemption. It is apparent that a sale pursuant to a judgment which has been reversed is not a valid sale.” 233 So. 2d at 418 (emphasis added). Thus, although the final judgment of foreclosure sale in Mr. Palacios’ case was not technically reversed on appeal, the circuit court in fact reversed itself when it modified the final judgment by modifying it from $60,136.09 to $16,427.28.
Conclusion
“Whether the complaining party has made the showing necessary to set aside a [foreclosure] sale is a discretionary decision by the trial court, which may be reversed only when the court has grossly abused its discretion.” Ingorvaia v. Horton, 816 So. 2d 1256, 1259 (Fla. 2d DCA 2002) (quoting United Cos. Lending Corp. v. Abercrombie, 713 So. 2d 1017, 1018 (Fla. 2d DCA 1998)). We conclude that the circuit court grossly abused its discretion in declining to vacate the foreclosure sale when the final judgment of foreclosure was substantially modified after the sale. Mr. Palacios made the necessary showing to set aside the sale and his motion to vacate the sale should have been granted.
Reversed and remanded with directions to vacate the sale and proceed thereon in accordance with established procedure based on the amended final summary judgment of foreclosure filed July 1, 2008, that awarded $16,427.28 to Florida Funding. (KELLY and CRENSHAW, JJ., Concur.)
__________________
1Mr. Palacios’ original pleading was an untitled pro se “petition” to release purchase money; it was renamed to “supplemental/amended motion to vacate sale,” filed by newly retained counsel.
Floreclosure Mills Covered by Debt Collection Act
JERMAN v. CARLISLE, MCNELLIE, RINI, KRAMER & ULRICH LPA ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
No. 08–1200. Argued January 13, 2010—Decided April 21, 2010
The Fair Debt Collection Practices Act (FDCPA), 15 U. S. C. §1692 et seq., imposes civil liability on “debt collector[s]” for certain prohibited debt collection practices. A debt collector who “fails to comply with any [FDCPA] provision . . . with respect to any person is liable to such person” for “actual damage[s],” costs, “a reasonable attorney’s fee as determined by the court,” and statutory “additional damages.” §1692k(a). In addition, violations of the FDCPA are deemed unfair or deceptive acts or practices under the Federal Trade Commission Act (FTC Act), §41 et seq., which is enforced by the Federal Trade Commission (FTC). See §1692l. A debt collector who acts with “actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is [prohibited under the FDCPA]” is subject to civil penalties enforced by the FTC. §§45(m)(1)(A), (C). A debt collector is not liable in any action brought under the FDCPA, however, if it “shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” §1692k(c).
Held: The bona fide error defense in §1692k(c) does not apply to a violation resulting from a debt collector’s mistaken interpretation of the legal requirements of the FDCPA. Pp. 6–30. a) A violation resulting from a debt collector’s misinterpretation of the legal requirements of the FDCPA cannot be “not intentional” under §1692k(c). It is a common maxim that “ignorance of the law will not excuse any person, either civilly or criminally.” Barlow v. United States, 7 Pet. 404, 411. When Congress has intended to provide a mistake-of-law defense to civil liability, it has often done so more explicitly than here. In particular, the administrative-penalty provisions of the FTC Act, which are expressly incorporated into the FDCPA, apply only when a debt collector acts with “actual knowledge or knowledge fairly implied on the basis of objective circumstances” that the FDCPA prohibited its action. §§45(m)(1)(A), (C). Given the absence of similar language in §1692k(c), it is fair to infer that Con gress permitted injured consumers to recover damages for “intentional” conduct, including violations resulting from a mistaken interpretation of the FDCPA, while reserving the more onerous administrative penalties for debt collectors whose intentional actions.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
No. 08–1200. Argued January 13, 2010—Decided April 21, 2010
The Fair Debt Collection Practices Act (FDCPA), 15 U. S. C. §1692 et seq., imposes civil liability on “debt collector[s]” for certain prohibited debt collection practices. A debt collector who “fails to comply with any [FDCPA] provision . . . with respect to any person is liable to such person” for “actual damage[s],” costs, “a reasonable attorney’s fee as determined by the court,” and statutory “additional damages.” §1692k(a). In addition, violations of the FDCPA are deemed unfair or deceptive acts or practices under the Federal Trade Commission Act (FTC Act), §41 et seq., which is enforced by the Federal Trade Commission (FTC). See §1692l. A debt collector who acts with “actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is [prohibited under the FDCPA]” is subject to civil penalties enforced by the FTC. §§45(m)(1)(A), (C). A debt collector is not liable in any action brought under the FDCPA, however, if it “shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” §1692k(c).
Held: The bona fide error defense in §1692k(c) does not apply to a violation resulting from a debt collector’s mistaken interpretation of the legal requirements of the FDCPA. Pp. 6–30. a) A violation resulting from a debt collector’s misinterpretation of the legal requirements of the FDCPA cannot be “not intentional” under §1692k(c). It is a common maxim that “ignorance of the law will not excuse any person, either civilly or criminally.” Barlow v. United States, 7 Pet. 404, 411. When Congress has intended to provide a mistake-of-law defense to civil liability, it has often done so more explicitly than here. In particular, the administrative-penalty provisions of the FTC Act, which are expressly incorporated into the FDCPA, apply only when a debt collector acts with “actual knowledge or knowledge fairly implied on the basis of objective circumstances” that the FDCPA prohibited its action. §§45(m)(1)(A), (C). Given the absence of similar language in §1692k(c), it is fair to infer that Con gress permitted injured consumers to recover damages for “intentional” conduct, including violations resulting from a mistaken interpretation of the FDCPA, while reserving the more onerous administrative penalties for debt collectors whose intentional actions.
Monday, April 26, 2010
Case Law Update
2nd Circuit Court of Appeals, April 08, 2010
In re Kalikow, --- F.3d --- (2nd Cir. 2010)(Motion to reopen chapter 11 affirmed where: 1) service on creditors' law firm constituted proper service on them; and 2) creditors violated sections 1141 and 524 and the express terms of the Plan and Confirmation Order. However, the order is reversed where creditors were not holders of pre-confirmation claims discharged in bankruptcy who would normally be bound by the provisions of the Plan, and thus the sanctions awarded against them were improper)
Thanks to Findlaw.com
In re Kalikow, --- F.3d --- (2nd Cir. 2010)(Motion to reopen chapter 11 affirmed where: 1) service on creditors' law firm constituted proper service on them; and 2) creditors violated sections 1141 and 524 and the express terms of the Plan and Confirmation Order. However, the order is reversed where creditors were not holders of pre-confirmation claims discharged in bankruptcy who would normally be bound by the provisions of the Plan, and thus the sanctions awarded against them were improper)
Thanks to Findlaw.com
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