July 10, 2012

Previously dormant Florida foreclosure cases are being revived. Many of these cases were with the Florida “foreclosure mills” and have been apparently re-assigned to other law Firms. Others are old David Stern cases which have been picked up by other Firms. Still others are those which the Courts have called up to be dismissed for lack of prosecution without some kind of filing by the foreclosing Plaintiff, which files a “Notice of Intent to Prosecute” without more.

As a result, we have been receiving a flood of inquiries from Florida homeowners.

One of the more significant issues is the incomplete nature of discovery when a summary judgment motion is filed. The Florida 4th District Court of Appeal has issued several decisions in the past few months which have reversed summary judgments where discovery, including securitization discovery, was incomplete. The 4th DCA adheres to the “slightest doubt” rule in Florida; that is, if there is the slightest doubt that the outstanding discovery may give rise to a disputed issue of material fact, summary judgment is not proper.

A conflict as to securitization discovery has been created by a recent ruling from the Florida Third District Court of Appeal, which ruled (we believe incorrectly) that a borrower has no standing to challenge compliance by a foreclosing “trustee” bank with the PSA as the borrower is not a third party beneficiary to the PSA. The decision was based on a line of cases (known as the “Correia” and “Livonia Properties” line of cases) which stand for that proposition. However, the case was apparently not argued properly, as one of the courts which originally came to one of these “Correia” decisions recently expressly distinguished the “third party beneficiary” preclusion to apply ONLY to cases where the borrower sues the foreclosing “bank”. When the bank sues the borrower, compliance with the PSA is a standing issue, which the borrower is permitted to raise. The decision is the Williams case (from Hawaii) which clearly sets forth the distinction.

Florida is a “judicial” state: that is, the foreclosing party (bank) has to sue the borrower. As such, the “third party beneficiary” argument does not apply, as raising compliance with the PSA implicates standing of the plaintiff to foreclose, as per Williams. Apparently, whoever argued the case before the 3d DCA was not aware of the Williams distinction. As such, there is now a conflict between the 3d DCA decision and the recent 4th DCA decision which reversed a summary judgment where secuitization discovery, including documents attached or referred to in the PSA and documents concerning the transfer of the mortgage and note, were not produced.

Add to this the decisions in Horace (Alabama) and Hendricks (Michigan) which granted summary judgment to the homeowners where it was shown that the attempted transfer of the loan to the securitized mortgage loan trust did not comply with the PSA.

The one-paragraph 3d DCA decision is being touted by “bank” attorneys as a means to preclude securitization discovery. Borrowers attorneys need to counter this with the 4th DCA decision and Williams (and also with Horace and Hendricks) before more incomplete (and erroneous) precedent is set in Florida.

Jeff Barnes, Esq.,