A “Free House” – That’s Not the Issue, Judge
Currently making the rounds among foreclosure defense attorneys is a transcript of a trial in a foreclosure case that recently took place in Miami. I did not participate, as this wasn’t one of my firm’s cases, but I encourage everyone to read the transcript, as there are significant lessons to be learned here for all involved.
Before I share my thoughts, just read. Here are some pertinent portions:
The Court: My feeling about this equitable lawsuit, foreclosure issues, and I want to get this as a jump off.
Defense Counsel: Okay.
The Court: My concern is, did you sign the Note? Did you sign the Mortgage? Did you get the loan? Did you default? Did you owe the money? Is it your signature or is it somebody else’s signature?
In response, defense counsel attempted to explain that the homeowner had an expert who would testify that the securitized trust, the plaintiff in the foreclosure case, did not actually own and hold the Mortgage because it was conveyed into the Trust after the deadline in the Pooling and Servicing Agreement. Unfortunately, the court seemed less concerned about the legitimacy of this legal argument and more concerned about whether that argument, if granted, would give the homeowner a free house:
The Court: Okay. Okay, so why do I care? Shouldn’t I just be concerned about whether or not they’re the holder of the note at the time that I try the case?
Defense Counsel: There are requirements, like any trust, basic trust law. … The trust has certain requirements that say, all the loans have to be transferred into this trust by X date. If they’re not transferred into the trust by X date the trust doesn’t own or hold anything.
The Court: So if I follow your thinking, your client should be able to live in this house forever, free and clear. Is that what you’re suggesting?
Defense counsel: That may be the ultimate outcome.
The Court: Good luck to you, sir.
Defense counsel: Thank you, Judge.
The Court: Good luck to you, sir.
Defense counsel: Thank you.
The Court: Do you think that I am going to sit here after somebody has been lent hundreds of thousands of dollars and you have the standing to complain that the trust documents were not properly obtained, so your client who got — how much was this loan?
Plaintiff’s counsel: $216,000.
The Court: $216,000, I get to live there forever. You think a court of equity which is what I am sitting as is going to allow that to occur?
Defense counsel: If there is a family trust that says, “all of Bob’s property for his family trust needs to be assigned into the trust by January 1, 2010.” If those — if that res is transferred prior to that January 1st, that’s fine. We as Bob’s family trust own that property.
The Court: Right.
Defense Counsel: But, now there’s a subsequent transfer of 2012 and the document comporting a transfer into Bob’s family trust in 2012 when the trust says, it must be transferred by 2010, and the trust is very particular about this. How can the 2012 transfer into the 2010 trust, you don’t have standing.
The Court: Right, but may — by here’s my problem. My problem is it would seem to me under your circumstances that somebody whose trust assets have been affected might have the ability to come in and say, this has effect on me. What standing does your client have to come along and say, somebody down the line got screwed over because they didn’t do what they were supposed to do? Your client received hundreds of thousands of dollars, has been in this house I assume for three or four years not paying a dime. Have you found one judge in this state that has said, ‘You know what? I buy your argument and you client can live there forever, rent free, mortgage free; because they violated the Pooling Agreement.” Have you found one judge that has –
The Court: So and so, they’ll never be able to foreclose on your client?
Defense counsel: Depending on how the case comes of issue, yes. If it’s an issue that would pertain a res judicata and/or collateral estoppel, yes.
The Court: So what you’re suggesting is that your client should be able to stay in this house forever?
Defense counse: That has been the result. And Judge, yes …
The Court: No, no, no, [defense counsel]
The Court: I think this is a very interesting issue. I think the Third District is doing to have to tell us to tell us that under these circumstances we should listen to this testimony and if the testimony proves what you’ve purported to prove that a person who borrowed hundreds of thousands of dollars should never have to repay it and should be able to live in the house for free, forever.
The Court: Because I’m not doing it.
The Court: You getting that down? All my friends in the Third District, you want to reverse this, you go right ahead and do it.
Defense Counsel: Right, but that’s also presuming that they’re able to prove their prima facie case. Judge, I just want to make the record clear.
The Court: Of course. I mean if they put on evidence of something other than this loan and they don’t convince me that they know what the documents are; they know what the loan figures are; they know that there’s been a default; they’ve complied with all conditions precedent, I can’t give them a judgment. But, I would be shocked. I’m putting that on the record. Shocked if the people of the Courts of this State, District Court of Appeal, would say that in situations like this somebody who has borrowed hundreds of thousands of dollars and has lived mortgage free for years should be able to jump in there and say ‘you guys screwed up and you can never throw me out of that house.’ If that’s what they want to write, that’s their job. They’re my judicial superiors. They can do it, but I’m not doing it. Okay.
My thoughts upon reading this exchange:
1. First off, I am very disappointed to see how the judge framed the issue before him. The issue at this foreclosure trial was not whether the homeowner was entitled to a free house. The issue was whether this plaintiff that filed this lawsuit was entitled to a final judgment of foreclosure against this homeowner. That bears repeating:
The issue was whether this plaintiff that filed this lawsuit was entitled to a final judgment of foreclosure against this homeowner.
I’m pleased to say that many of the judges before whom I appear recognize that this is the issue before them. For those who do not, I think it’s imperative that everyone (be it my my friends, colleagues, and pro se litigants), do whatever you can to force the judges before you appear to frame the issue appropriately. Here, for instance, when the judge kept asking this attorney if his client should get a free house, I think the response should have been something like:
“Respectfully, judge, whether my client winds up with a free house is not the issue before you. The issue before you is whether this plaintiff is entitled to a final judgment of foreclosure against this defendant based on the evidence the plaintiff is about to present. And candidly, judge, I’m troubled that you are not framing the issue in that manner, as it seems you have prejudged this case in a manner adverse to my client, which is causing me fear that you cannot adjudicate this case fairly and cannot be neutral and detached.
If that doesn’t make sense, put yourself in a different context – a murder trial. Suppose the state is relying exclusively on evidence that was procured through an illegal search and seizure and that the law requires the evidence be excluded. Allowing a murderer to go free would be inequitable as hell – I can hardly think of anything less equitable. However, if the law says that the evidence must be excluded, then no judge can allow that evidence to be admitted simply because he/she wouldn’t like the result.
Foreclosure cases are no different. The final outcome, no matter how unseemly it may appear to any judge, cannot justify a court to overlook the rules of evidence and rule of law. Candidly, I think most judges before whom I appear would agree with this, and for those who don’t, let’s all remind them of the issue.
Judge, the issue before you is not a “free house,” but whether this plaintiff is entitled to a foreclosure judgment against this defendant based on the evidence before you.
2. It was very apparent, certainly to me, anyway, that the judge prejudged this case. Most troubling in this regard were the judge’s repeated statements that he was not going to give the homeowner a free house, inviting the Third District to reverse if it so chose. What was so bothersome, of course, is that the judge made these comments before the trial had begun.
Respectfully, how could the judge possibly know whether evidence which he had yet to see would be sufficient to justify a foreclosure? How could he possibly know that the Third District would be in a position of reversing his ruling (adverse to the homeowner) when he hadn’t yet seen any evidence? Pretty clearly, at least in my eyes, the judge knew he was ruling against the homeowner before the trial even started.
As I read the transcript, the judge’s dislike of foreclosure defense only seemed to grow the more the concept of a “free house” was discussed. Unfortunately, this entire premise was misplaced. Hopefully, with input from all of us, everyone will realize the issue in foreclosure cases is not whether the homeowner gets a free house, but whether this plaintiff is entitled to a foreclosure judgment against that defendant based on the evidence in that case.
3. On the issue of whether the defendant has standing to complain about the plaintiff’s lack of standing, I follow the judge’s argument, but I disagree. If the plaintiff is a securitized trust, and the mortgage was not conveyed into the trust in a manner required by the Pooling and Servicing Agreement, then the trust doesn’t own the mortgage. And if the trust doesn’t own the mortgage, then it lacks standing to foreclose.
To say a defendant lacks standing to complain about a plaintiff’s lack of standing is, respectfully, silly. If the plaintiff has no legal right to bring suit, then the defendant always has standing to assert as much. To argue otherwise is to say ”the plaintiff might not be the right plaintiff, but shut up, defendant – you’re a bad actor, and it doesn’t matter if this plaintiff has standing – you’re going to pay.”
“But, judge, I don’t owe this Plaintiff any money.”
“Shut up, Defendant - you owe the money and you’re going to pay.”
I realize this seems a bit crass, and obviously the judge didn’t say “shut up,” but can you imagine that argument in other contexts? For instance, imagine a lawsuit against an insurance company where the issue is coverage for a homeowner. Can you imagine any judge saying “Shut up, insurance company. It doesn’t matter if this is a covered item, and it doesn’t matter if you issued an insurance policy to this homeowner. The house burned down, so you’re going to pay.”
Again, I realize that’s not how this judge worded it, but as I read the transcript, that’s how I interpret the position. It doesn’t matter if the plaintiff is the correct plaintiff, it doesn’t matter if the plaintiff has standing, the defendant can’t complain about it. Respectfully, does that even begin to make sense?
It’s ironic, actually. This judge was so concerned about the homeowner getting a windfall – a “free house” – that he was completely overlooking the fact that he was willing to give the plaintiff a windfall. After all, taking the judge’s position to its logical conclusion, it didn’t matter if that plaintiff actually owned the note - the homeowner was going to pay (and, hence, the plaintiff was going to collect). Maybe the judge didn’t intend to come across that way, but you read the transcript, and you tell me – isn’t that how it seems?
My point here, is this. There are laws that all of us dislike. There are outcomes that all of us find inequitable or inappropriate for one reason or another. However, the end does not justify the means. It’s not up to any of us, especially a judge, to say “this is the outcome that I think should happen, and I’m going to rule accordingly.” There are rules of evidence, procedure, and laws that must be followed. If we act otherwise, then the court system is not enforcing a system of laws, but each judge’s version of morality. And if we start going down that path, there can never be uniformity, as what one person finds inequitable, another will find perfectly appropriate.
Our judicial system functions by a uniform system of laws, which our courts must uphold and enforce. That’s why it’s so important to frame the issue appropriately. The issue isn’t whether a ruling would be fair or consistent with some nebulous standard of morality, but whether such a ruling would be fair and appropriate based on the evidence presented in that case.
Mark Stopa Esq.