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Pragmatism, but No Compassion in Foreclosure

By Sean T. Carnathan, Litigation News Associate Editor – March 12, 2010

Tom Hanks told us, “there’s no crying in baseball.” Now, the Florida Third District Court of Appeals is telling us that there’s no “benevolence and compassion” in a foreclosure proceeding, at least not as a “lawful, cognizable basis for granting relief to one side to the detriment of the other.” Republic Federal Bank, N.A. v. Doyle.


After entering a foreclosure sale date of August 27, 2009, Miami-Dade County Circuit Court Judge Valerie Manno Schurr granted the homeowners a continuance of the sale until October 1, 2009. In granting the homeowners’ motion, Judge Schurr commented that “[u]nless it is abundantly clear to me that it is just an abuse of process, I give extensions on [foreclosure sales] because I don’t want to see anyone lose their house.”


Then, when the matter went before the court of appeals on a petition for writ of mandate, the appellate court took the trial judge to task for extending the time for foreclosure defendants to sell their home before a foreclosure sale.


The court of appeals’ opinion notes that the homeowners had already delayed the sale substantially, in part by filing a “frivolous bankruptcy petition.”


Proponents of the Appellate Court’s Criticism
Charles M. Rosenberg, Miami, attorney to Republic Federal Bank in this case, says the bankruptcy court had sanctioned the homeowners and entered an order barring them from filing another petition in bankruptcy for 180 days.


“The real touchstone for the bank,” says Rosenberg, “was to complete the sale before the 180 days passed.” This was an important decision, says Rosenberg, “because it is one of the first times a court of appeals has said you can only grant a continuance on legitimate grounds, and not because you feel sorry for the debtor,” he says.


“From a debtor and creditor’s rights perspective, I agree with the appellate reasoning and its criticism of the lower court,” says David R. Weinstein, Los Angeles, cochair of the Section of Litigation’s Bankruptcy and Insolvency Litigation Committee.


“The commentary about the nature of judicial discretion seems clearly correct and pertinent in a wide area far beyond mortgage foreclosures.”


Explanation for Trial Court Ruling
Judge Schurr nevertheless had some cause to believe she had equitable discretion to grant the homeowners the extension they requested. The Florida foreclosure statute says explicitly that “[a]ll mortgages shall be foreclosed in equity,” and further affords the court the “jurisdiction, power, and authority to rescind, vacate, and set aside a decree of foreclosure of a mortgage of property at any time before the sale thereof has been actually made.”


The foreclosure problem in Florida is severe. According to the Final Report of the Task Force on Residential Mortgage Foreclosure Cases, established by the Supreme Court of Florida, as of year-end 2009, Florida had an estimated 456,000 pending foreclosures statewide. Miami-Dade County has literally thousands of foreclosures every month, and the foreclosure statistics are posted right on the county court website. In fact, the court website posts information for people facing foreclosure and announces on its home page the establishment of a separate Miami-Dade foreclosure website for users to participate in the “on-line auction process, register, place deposits and research properties.”


Concluding that the magnitude of foreclosures has created an economic crisis in Florida, the Florida Supreme Court issued an administrative order in December 2009, requiring mediation in foreclosure cases statewide. The order applies to all residential mortgage foreclosure actions filed against homestead property involving loans originated under federal truth in lending regulations and requires mediation no earlier than 60 days and no later than 120 days after suit is filed. The court approved this order as “the best method to open communication and facilitate problem-solving between the parties to foreclosure cases while conserving limited judicial resources.”


This administrative order arguably runs afoul of the foreclosure statute, which requires immediate review of a foreclosure complaint upon request of the mortgagee, and prompt issuance of an order to show cause why a judgment should not enter on the foreclosure, with a hearing set no sooner than 20 days but no later than 60 days after service of the order.


Presumably, given the volume of foreclosures overwhelming the Florida courts, the “immediate” review of a foreclosure complaint envisioned by the statute is currently far from immediate. Pragmatism has a place in foreclosure proceedings, even if compassion does not.


Keywords: Florida Third District Court of Appeals, Republic Federal Bank, N.A. v. Doyle, bankruptcy, foreclosures, homeowner continuance


 

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