MORE BAD BEHAVIOR BY PLAINTIFFS FORECLOSING MORTGAGES AND PLAINTIFF’S LAWYERS

The last post was about the robots with pens signing “funny affidavits.” A recent case in Florida, which is now before the Florida Supreme Court and is the subject of the front page article in the June 1, 2012 Florida Bar News (a newspaper put out by the Florida Bar for its members; lawyers), draws attention to another example of bad conduct by mortgage companies and their lawyers in connection with foreclosures and the dilemma or conundrum facing the courts when they are presented with such conduct.

The facts are contained in the District Court of Appeals, 4th District, Opinion in Pino v. Bank of New York Mellon found at 57 So. 3d 950 (Fla. 4th DCA 2011). BNY Mellon filed a residential foreclosure action in which they alleged that they owned the mortgage and note sought to be foreclosed pursuant to an assignment, but they didn’t file the assignment. When challenged, the Bank filed an amended complaint and attached an assignment which had been unrecorded. The assignment, which was dated shortly before the foreclosure action had been filed, was challenged by the homeowner who claimed it was fraudulent. The homeowner noted that the person who had signed the assignment was employed by the attorney representing the mortgage company, and the commission date on the notary stamp showed that the document could not have been notarized on the date set forth on the document. The homeowner's argument was that this assignment was filed to perpetrate a fraud upon the Court. Depositions were set so that the homeowner could prove his allegations; however, using the time honored rule which allows a plaintiff to dismiss a case, the Bank took a voluntary dismissal. The homeowner’s argument was that he was entitled to sanctions against the Bank and/or its lawyers. However, the District Court of Appeals in Florida ruled that once a case is dismissed, a court has no power (jurisdiction), and that the authority to dismiss a case under these rules is solely that of the plaintiff.

According to the article in the Florida Bar News, the matter was ultimately settled; however, the Florida Supreme Court, to its great credit, has declined to dismiss the appeal and presumably will ultimately address the issue of whether banks, or other plaintiffs, who seek affirmative relief from a court, can avoid punishment through sanctions when they are caught in a lie by utilizing the voluntary dismissal rule. I wait with great interest to see how the Florida Supreme Court is going to deal with this.

The immediate practical lesson here is that preferably a trained person should scrupulously examine everything that a plaintiff files in the foreclosure because sometimes, on the face of their filings, contradictions or suspicious circumstances appear.

The deeper question is whether the courts, in administering the foreclosure process, are going to hold the banks and the lawyers representing the banks accountable.

The thing that interests me the most are the implications regarding the justice system and their concept of justice itself, when confronted with the notion of expediency, productivity, and what is good for the economy and business.

Its application to this Pino case now, before the Florida Supreme Court, is illustrated by a perusal of the “Friend of the Court Brief” filed by the Mortgage Banker’s Association and the Florida Banker’s Association, which of course supports the notion that the banks should be allowed to just voluntarily dismiss the case without being held to account for what appears to be bad conduct. Their argument, according to the Florida Bar News article, is that if we don’t allow these types of voluntary dismissals, it will adversely affect lending practices in Florida; that is, it will discourage moneylenders from lending in Florida because, I guess, they would be worried about being mistreated by the courts.

Economics, what’s right for business, what’s good for the “economy,” is nothing new. In fact, the idea of an independent fair justice system where the outcome of commercial disputes is both predictable and fair and based upon predetermined rules has long been, and continues to be, one of the principle advantages of doing business in America, and is one of the main reasons why, despite the B.S., the national government is able to borrow money from credit rating agencies throughout the world at extremely low interest rates. I unhesitatingly acknowledge that this is a good thing.

But the argument that banks should get away with murder is the same argument that they are too big to fail or, on a more personal label, if you don’t play the game the way we want to, we will take our ball and play elsewhere.

Like everything else in life, the legal system and its functioning, is a question of balance. If “might makes right,” and large and powerful business interests are permitted to dominate, another greater problem is created. Innovation is squelched. Vested interests prevent new technologies from competing. Monopolies exploit both their workers and their customers. Progress is halted.

There has been a well documented movement in the legal system, little noticed by most people, which is generally known as the “Chicago School” fostered by the University of Chicago Economics Department in the 60s, 70s, and 80s, associated with economists such as the famous (some call him infamous) Milton Friedman, and adopted politically by the great communicator, Ronald Reagan, and his British counterpart, Prime Minister Thatcher. The influence of this school of economics spread to the legal system through the legal scholars at the University of Chicago Law School, which promoted and developed what they called the discipline of “Law and Economics.” There was a general reevaluation of the efficacy of antitrust law, a rejection of the “big is bad” notions underpinning our then antitrust law, an attack on punitive damages, which would be “bad for business,” and the notion that the free market and its promotion should be the basic policy upon which legal decisions should be predicated.

Ouch. Big may not be so beautiful. It’s funny how the big banks, when left to their own devices, functioning almost completely unregulated, have brought western society to the brink of the abyss while the resulting “tea party” movement somehow seems to equate that problem with big government and regulation when, from my perspective, it would appear that it was a lack of regulation that was the problem.

The other irony is that Obama actually taught at the University of Chicago Law School, the same place where Supreme Court Justice Scalia taught. Different times. Scalia 1977-1982, Obama 1992-2004. Interesting. There is an in-depth article on this subject in the June 11, 2012 Bloomberg Businessweek which puts things into perspective.

The lesson here is that if you do battle in the court system and try to save your home, our court system, although far from perfect, may very well be the last battlefront ground for David to stand up to Goliath. It’s certainly what gets me out of bed in the morning.