JUDGE DENIES FORECLOSURE BASED ON FRAUDCLOSURE

Judge rules bank failed to prove ownership of couple’s mortgage

REDDICK, Fla. – Jan. 18 2011 – The facts aren’t unusual: In 2008, a couple in Reddick defaulted on a home mortgage and the bank pursued foreclosure. The couple contested the action.

But the outcome defies the usual pattern. The defendants prevailed at a non-jury trial and, to date, have been allowed to keep the home.

According to the attorney handling the homeowners’ case, this didn’t happen because of some groundbreaking ruling or unexpected turn of events during litigation. Rather, it’s a sign that judges are starting to hold more plaintiffs accountable in foreclosure actions.

“We’re all in agreement that the borrower owes the bank the money, but the issue becomes, does the bank have the ability to prove, in a court of law, that the borrower does owe the money? In this case, they failed to do that,” said Matt Englett, a partner with the Orlando law firm of Kaufman, Englett and Lynd.

The scramble to clear the thousands of foreclosure cases clogging Florida’s court dockets has been tempered recently by allegations of improperly prepared paperwork and so-called “robo-signing” at large foreclosure law firms, four of which in Florida have come under investigation by the state Attorney General’s Office. One of them includes the law firm involved in this case.

In addition, several major banking institutions, including Bank of America and JPMorgan Chase, briefly imposed a moratorium on foreclosures late last year after reports of such shortcuts surfaced.

The effect of such troubling news, even as Marion County grapples with a large foreclosure caseload, appears favorable for the homeowner. At least it was for Phillip E. and Viva M. Evans.

Since May 2008, the Reddick couple has owed $482,170 on their home. Chase Home Finance, LLC filed a foreclosure lawsuit in August 2008. The case went all the way to a bench trial before Circuit Judge Brian Lambert in August 2010. The couple had a private attorney.

One month before the trial, however, U.S. Bank National Association, the new lender, and therefore the new plaintiff, filed an affidavit acknowledging the loss of the original promissory note.

It had been delivered to the law offices of Marshall C. Watson in October 2008 via Federal Express, then “placed in a secured and locked vault” in Fort Lauderdale.

The note had been “inadvertently lost or destroyed,” according to an affidavit. The note could not be located.

“They [plaintiffs’ attorneys] can do very sloppy work and no one knows about it because no one contests it,” Englett said. “When you contest it, the wheels really come off because they’re not used to it and it throws a wrench into the system.”

This past December, Lambert issued a final judgment in favor of the homeowners, saying that the plaintiff had failed to meet its burden of proof of showing that Chase – the previous lender and plaintiff – had standing to bring the lawsuit. He also ruled that U.S. Bank failed to meet its burden of proof re-establishing the mortgage note or that it was the owner of the note at the time of trial.

“The court ruled they don’t have the ability to foreclose on it,” Englett said. “If [the Evanses] were to sell the house, they would have to pay the mortgage off, but the bank can’t bring this same action again. Until then, they can live in the house and just not make a mortgage payment.”

According to Englett, the percentage of foreclosure cases that even head to trial are “miniscule.” The volume of cases readily disposed of early on in the process, he added, has resulted in a complacent system that is gradually changing as judges monitor cases more closely.

“I think the judges have been giving the banks the benefit of the doubt with these foreclosures and I think they’ve learned a valuable lesson with that,” he said. “You have to make them prove up their case and I think judges are starting to do that.”

In his Dec. 17 order, Lambert ruled only that the bank lacked the standing to bring this particular foreclosure lawsuit against the Evanses; he did not cancel the underlying mortgage obligation altogether, nor did he find in favor of the couple when it came to their affirmative defenses, such as asserting predatory lending violations or violation of the federal Truth in Lending Act.

Roger S. Rathbun, an attorney with the Law Offices of Marshall C. Watson who pursued the Evans case on behalf of U.S. Bank, expressed caution when it comes to these types of judgments.

“I wish the tenants luck,” he said Friday. “I don’t expect the banks to give them a free house. I expect the bank to re-file the case. Even if the foreclosure was invalid, I can file under a different equitable theory and still take the property.”

Copyright © 2011 Ocala Star-Banner, Fla., Suevon Lee. Distributed by McClatchy-Tribune Information Services.