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Florida Appellate Court Reverses Prior Decision and Holds That Liens Placed on Property Between Final Foreclosure Judgment and Sale Are Discharged Banner Image

Florida Appellate Court Reverses Prior Decision and Holds That Liens Placed on Property Between Final Foreclosure Judgment and Sale Are Discharged

Month: February 2017

Florida Appellate Court Reverses Prior Decision and Holds That Liens Placed on Property Between Final Foreclosure Judgment and Sale Are Discharged

Posted on by rd_admin

A Florida appellate court recently granted a motion for rehearing and reversed its prior decision, now holding that municipal liens placed on a property after a final judgment of foreclosure but before the judicial sale were discharged by the sale.  See Ober v. Town of Lauderdale-by-the-Sea, 2017 WL 361127 (Fla. Dist. Ct. App. Jan. 25, 2017).  In August, the Court addressed a situation in which a local municipality recorded seven liens on a property after the final judgment of foreclosure was entered but before the property was sold at a foreclosure sale.  There, the Court affirmed a lower court’s decision that a lis pendens remained valid until final judgment, but that any liens recorded after final judgment were not discharged and remained on the property after the sale.  See Ober v. Town of Lauderdale-by-the-Sea, 2016 WL 4468134 (Fla. Dist. Ct. App. Aug. 24, 2016).  The appellant, who had purchased the property after the sale and sought to discharge the liens, filed a motion for rehearing, which the Court granted.  The Court then reversed its prior decision, finding that the all post-judgment liens should be discharged because the lis pendens statute “expressly contemplates that its preclusive operation continues through a ‘judicial sale.’”  It further held that this is “consistent with how foreclosure suits operate in the real world.”

The analysis of the prior decision can be found here.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Clarissa Gomez at cgomez@riker.com.

New York’s Third Department Finds Factual Questions Exist Whether Defendant Timber Company Adversely Possessed Disputed Parcel For Requisite Period

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The Third Department of New York’s Appellate Division recently held that the lower court erred: (1) in granting summary judgment in plaintiff’s favor, because factual questions existed whether defendant timber company adversely possessed the disputed parcel for the requisite period, and (2) in declining to dismiss plaintiff’s claim for punitive damages, which is distinct from his claim for treble damages pursuant to the RPAPL.  See Backus v. Lyme Adirondack Timberlands II, LLC, 144 A.D.3d 1454 (3d Dept. 2016).  In the case, plaintiff and defendant owned adjoining forested parcels.  Defendant retained an independent company (also named a defendant in this action) to manage certain property, and in 2007, the independent company cut the timber in the disputed area.  Plaintiff filed a complaint against defendants seeking treble damages pursuant to RPAPL 861, punitive damages and quiet title to the disputed area.  Defendants argued, among other things, that defendant adversely possessed the disputed area.  Plaintiff moved for summary judgment on liability pursuant to RPAPL and defendants each sought summary judgment or, in the alternative, partial summary judgment dismissing plaintiff’s claims for treble and punitive damages.  The lower court granted plaintiff’s motion for summary judgment, declaring plaintiff owner of the disputed area, and denied defendants’ motions.  On appeal, defendants argued that, although plaintiff’s record title is not challenged, there are factual questions with regard to whether defendant adversely possessed the disputed parcel for the requisite period.  The Third Department agreed and held that when considering the “acts of dominion and control over the premises that would appropriately be undertaken by owners of properties of similar character, condition and location,” defendant’s use of the property raises factual questions with regard to whether it has established ownership based on adverse possession.  The Third Department further held that, to avoid treble damages under RPAPL 861(2), a defendant must prove by clear and convincing evidence that he had cause to believe the land was his own, or he had an easement or right of way across such land which permitted such action, or he had a legal right to harvest such land.  In this case, in light of the evidence that defendant never surveyed the property and was aware of map discrepancies that revealed a gap in the boundary line when defendant marked the area to be cut, there were factual questions whether plaintiff is entitled to treble damages pursuant to RPAPL 861.  However, the Third Department found that the lower court should have dismissed plaintiff’s claim for punitive damages, because punitive damages based on trespass may be warranted only if the plaintiff proves that the trespasser acted with actual malice involving an intentional wrongdoing, or that such conduct amount to a wanton, willful or reckless disregard of a plaintiff’s rights.  The submissions in this case did not demonstrate that defendants’ activities rose to this level, and plaintiff’s damages, if at all, should be limited to those available pursuant to RPAPL 861.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Clarissa Gomez at cgomez@riker.com.

New Jersey Federal Court Dismisses Plaintiffs’ Complaint Against Mortgagee and Servicer on the Grounds That the Claims Are Barred by the Rooker-Feldman, Res Judicata and Entire Controversy Doctrines

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The United States District Court for the District of New Jersey recently granted a motion for summary judgment to a mortgage lender and servicer, among others, on the plaintiffs’ claims that arose from their allegation that the lender unilaterally had increased their interest rate at the closing.  See Thomas v. Jersey Mort. Co., 2016 WL 4705449 (D.N.J. 2016).  The plaintiffs commenced the federal action on January 29, 2013, two days after the sheriff’s sale of their home pursuant to the entry of final judgment of foreclosure in the state court foreclosure action.  In the state court action, the plaintiffs did not deny having defaulted on the mortgage payments, but instead argued that the action was barred because the lender had increased the interest rate on the loan without their knowledge immediately before the closing.  The state court granted summary judgment to the servicer, finding that there was no showing of fraud or misrepresentation, and a final judgment of foreclosure was subsequently entered.  In the present action, the Court sua sponte determined that there exists an issue of subject matter jurisdiction, and found that the final judgment of foreclosure decided many of the matters that the plaintiffs presented in the federal action.  Applying the Rooker-Feldman doctrine, the court held that the state foreclosure judgment necessarily decided many of the claims now brought by the plaintiffs, including the validity of the note and mortgage, the default, and the mortgagee’s right to foreclose.  “To hold—as the [plaintiffs] ask this Court to do—that the defendants defrauded them about the interest rate or violated TILA would potentially invalidate the foreclosure judgment.”  To the extent that the plaintiffs’ federal action contained any claims that were independent of the merits of the foreclosure, the Court determined that “[c]laims that survive scrutiny under Rooker-Feldman may nevertheless be barred by parallel doctrines of res judicata” and the entire controversy doctrine.  Finally, the Court found that the loan closed on October 18, 2006, and the action was brought over six years later, on January 31, 2013; therefore, any of the remaining claims were barred by the statute of limitations.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.

Pennsylvania Federal Court Holds That RESPA Claims for Captive Reinsurance Arrangement Were Not Time-Barred

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The United States District Court for the Eastern District of Pennsylvania recently held that a claim that a lender’s captive reinsurance arrangement violated the anti-kickback provisions of the Real Estate Settlement Procedures Act (“RESPA”) was not time-barred because the alleged kickbacks were a continuing violation.  See White v. PNC Fin. Servs. Grp., Inc., 2017 WL 85378 (E.D. Pa. Jan. 10, 2017).  In this putative class action, the plaintiffs alleged that the lenders referred them to mortgage insurers who then would reinsure the policies with the lender’s affiliated reinsurance company.  The plaintiffs alleged that these arrangements were prohibited kickbacks under RESPA.  See 12 USC 2607.  Although the Court initially dismissed the complaint because the plaintiffs brought it outside RESPA’s one-year statute of limitations, plaintiffs amended the complaint to allege that their claims had been equitably tolled.  The Court then denied the defendants’ motion to dismiss the amended complaint and agreed to stay the action while the Third Circuit Court of Appeals reviewed another RESPA equitable tolling case, Cunningham v. M & T Bank Corp., 814 F.3d 156 (3d Cir. 2016).  Before the Third Circuit decided Cunningham, however, the Consumer Financial Protection Bureau (“CFPB”) released its decision of In the Matter of PHH Corp., in which it decided, inter alia, that every loan payment made as part of a captive reinsurance arrangement was a RESPA violation that reset the limitations period.  The plaintiffs here then moved to amend their complaint again to allege, inter alia, that the defendants’ arrangement constituted a continuing violation of RESPA, and that the complaint therefore was within the one-year limitations period.  The defendants opposed, arguing that the Cunningham decision found that the limitations period for a RESPA claim begins at the closing,  and that the CFPB’s decision had been overturned by the United States Court of Appeals for the D.C. Circuit.

The Court granted the plaintiffs’ motion as it relates to their RESPA claim.  First, it held that the Cunningham decision addressed the equitable tolling argument and found that the plaintiffs there should have been aware of the alleged scheme when they received their disclosures at the closing.  Neither Cunningham nor any other Third Circuit decision addressed the continuing violation argument raised by the plaintiffs.  Second, the Court held that the CFPB’s PHH decision had been vacated for a number of reasons, but that the Court there had expressly reserved the continuing violations issue for the CFPB to address on remand.  “The fact that the D.C. Circuit—having exhaustively reviewed the CFPB decision for error—knows exactly how the CFPB already ruled on this issue is telling. . . . Since the D.C. Circuit ruled on some of the CFPB's substantive RESPA findings, then certainly it could—and would—have reversed the CFPB on this issue had it disagreed with the CFPB's ruling on it.”  Therefore, the plaintiffs were granted leave to make this continuing violation claim.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.

Kansas Federal Courts Issue Conflicting Decisions on Whether Dunning Letter on Time-Barred Debt Violated FDCPA

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The United States District Court for the District of Kansas recently granted a debtor summary judgment on its claims that a letter that sought to collect a time-barred debt violated the Fair Debt Collection Practices Act (“FDCPA”), holding that the letter should have stated that any payment would revive the statute of limitations.  See Smothers v. Midland Credit Mgmt., Inc., 2016 WL 7485686 (D. Kan. Dec. 29, 2016).  In the case, the debt collector sent the debtor a letter requesting a payment on a debt and stating, “[t]he law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.”  However, the letter did not state that any payment on the debt would revive the statute of limitations under Kansas law.  The debtor initiated the lawsuit, and the parties cross-moved for summary judgment.  The Court granted the debtor’s motion and denied the debt collector’s.  It held that the letter’s statement of the benefits of making a payment on the debt was misleading because it omitted the possible risks, which include the possibility that the debt collector would sell the debt to another collector who could sue once the limitations period had been revived.  Therefore, the Court held that the letter was misleading under the FDCPA.  See 15 USC § 1692e.

The next day, however, the United States District Court for the District of Kansas granted the same debt collector summary judgment in a separate action regarding an identical letter.  See Boedicker v. Midland Credit Mgmt., Inc., 2016 WL 7492465 (D. Kan. Dec. 30, 2016).  There, the Court analyzed the same decisions that the Smothers Court analyzed, but reached the opposite conclusion, holding “[n]o case has determined that a debt collector must warn of a potential revival of a time-barred claim[.]”  The Boedicker decision is consistent with a recent holding in the United States District Court for the District of New Jersey.  See Tatis v. Allied Interstate, LLC, 2016 WL 5660431 (D.N.J. Sept. 29, 2016).  However, the Tatis decision specifically stated that the letter did not violate the FDCPA because a partial payment of a debt would not revive the statute of limitations under New Jersey law.

For an analysis on the Tatis decision, please click here.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.

Second Circuit Holds That One-Year Limitations Period Imposed by Bank for Bringing a Claim Was Reasonable

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The United States Court of Appeals for the Second Circuit recently issued a summary order affirming a lower court’s decision to dismiss a bank customer’s complaint as untimely because the bank’s terms and conditions governing the account imposed a one-year limitations period on any claims.  See Wechsler v. HSBC Bank USA, N.A., 2017 WL 66586 (2d Cir. Jan. 6, 2017).  There, the plaintiff opened a savings account with a bank that was eventually purchased by the defendant.  Beginning in January 2014, the defendant began charging maintenance fees on accounts with balances below $500.00, including on the plaintiff’s account.  In July 2015, the plaintiff filed this action, alleging that the defendant had breached its contract and engaged in deceptive practices in violation of the New York Deceptive Practices Act.  The defendant moved to dismiss, claiming that the action was time-barred.  Specifically, the Rules for Deposit Accounts which governed the account at issue state that any action regarding the defendant’s handling of an account must be brought “within one (1) year of the date the problem occurred” as well as that “if the problem involves a series of events, such as a number of forgeries over a period of time, then the date the first event occurred shall be the date by which the period to make any claim or bring any legal action shall begin to run.”  The plaintiff argued that the limitations period was unreasonable and should not apply and, if it did apply, the period should not begin to run when the first fee was charged because the plaintiff did not realize the fees were “a series of events” as defined in the Rules for Deposit Accounts until another fee was charged months later.  The district court agreed with the defendant and dismissed the action, finding that the plaintiff needed to file the complaint within one year of the first fee.  On appeal, the Second Circuit affirmed.  It held that nothing prevented the plaintiff from filing his complaint within the limitations period and there were no “unique circumstance in this case that would defeat the normal rule that one-year limitation periods are reasonable.”  The Court further found no merit in plaintiff’s argument that the “series of events” as defined in the Rules for Deposit Accounts did not begin until later fees were charged.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.

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