Wednesday, April 21, 2010

Mediation in the Maryland Court of Special Appeals

I spent over five hours in a mediation session scheduled by the Court of Special Appeals. This is a relatively new program, and I was told that my case was approximately the twentieth case to make use of the program. I am optimistic that this will resolve many cases that could not be resolved at the trial level.

To start, the nine parties and lawyers were introduced to a semi-retired Circuit judge and the head mediator. Unlike mediations held at the trial court level, often conducted before all the facts are developed, and certainly before any legal theories have been tested before a finder of fact, this mediation involved lawyers who knew all the ins-and-outs of the case. This made for a much higher level of discussion, and a more realistic view of each parties "best case" and "worst case" positions. My case did not readily settle, but we have a framework that may bear fruit before the first brief comes due!

Monday, April 19, 2010

Backdating documents in litigation is just wrong.

Some of our lender/servicer clients buck when we request "proof" of assignments into the current lender or owner of the note and beneficial interest in a trust. But a quick read of this ABA Journal article informs of the importance of this simple inquiry.

In the posted story, well known institutions were found to have misrepresented the authenticity of assignments into the named plaintiff. The court found that the plaintiff did not own the mortgage it was suing upon, at the time the complaint was filed.

The Florida court went on to suggest that the law firm employees involved should be deposed to examine their possible complicity.

Due diligence is everything.

Thursday, April 15, 2010

A bit of Due Process stripped out of tax sale foreclosures by Baltimore City

The Gov. signed SB373, which alters the notice and timing provisions of tax sale foreclosure actions against the right of redemption WHEN the tax sale certificate is held by Baltimore City AND the action is against a vacant lot or improved property that is cited as "vacant and unfit for habitation" by formal violation notice. The complaint to foreclose the equity of redemption can now be filed at "any time after the date of sale," and certain notices are excused.

This will modify, slightly, how we review tax sale files in connection with claims for intervening liens and interest. The City has less Due Process to adhere to when foreclosing equities of redemption than a private citizen.

Sunday, April 11, 2010

Mediation during foreclosure closer to reality, but what does it change?

On Saturday, our Legislature continued to rearrange the Titanic's deck chairs, tinkering with a Bill that would permit borrowers to demand mediation with their lender while in the midst of a foreclosure. The lender would be compelled to pay $300 toward the mediation, and the borrower would pay $50. Sen. Frosh says "anything the parties want to negotiate, they can negotiate." And most of the time, that will be nothing!

(and if you are interested in reading the Bill, it is HB 472, not HB475, as cited in the Daily Record article)

I hate to sound jaded, but borrowers who couldn't afford the home in the first instance, and can't afford it during the foreclosure process, bring little to the table. Add to that the mess of relationships that define the "loan-servicer-clearinghouse-mortgage trust-investor" holding the note and beneficial interest in the deed of trust, and you have a process that is poised to do absolutely nothing. Now, the Bill would require disclosure of the entity authorized to modify the loan when the notice for foreclose is filed, but I wouldn't expect the notifications to be complete and accurate, merely pro forma.

Even when you represent a "lender," it can take weeks or even months to get a clear answer on exactly who the "client" is in a particular case.

The Bill does add a whole new layer of litigation to the foreclosure process. If the borrower demands mediation, the lender may petition the court to dismiss the petition, alleging various listed factors. The Bill is not clear whether the borrower and/or the lender will be entitled to any pre-hearing discovery on the issues.

I can't wait to play in the sandbox with this new toy!

Wednesday, April 7, 2010

You can't rely on the Will as evidence of title!!

Here's a common situation, as evidenced by the several questions I've gotten over the last week, alone: A settlement is done to secure a loan to real property, and the only evidence of "ownership" of one or more parties is a copy of a Will, showing the "owner" is an heir to some interest in the real property. The loan is made, the deed of trust is executed by the heir and is recorded, and the title policy is issued to the lender to assure "ownership" of the heir.

But no title document is recorded in the land records showing "ownership." Faux pas!

The Will merely directs the PR or Special Administrator on how property should be passed. Upon death, the entire recorded interest of the decedent becomes estate property. Any interest stated in the Will must be passed out of the estate, by the PR, and that instrument must be recorded in the land records. Period. Reliance by the settlement company/title agent solely on the Will is just wrong! The Will merely evidences the decedent's intent....nothing more.

A lien created after the death of the debtor may not be a lien, at all.

If you have a claim involving an estate, and claims against that estate, take a look at Elder v. Smith, No. 34, September Term 2009, released January 13, 2010. Here, the ex-wife of the decedent reduced a marital award of over $30,000 to judgment AFTER hubby died. The Orphan's Court ordered her to release the lien. Both appellate courts upheld the Orphan's Court determination that the post-death creation of a judgment lien for a pre-death claim is not a permitted way to enhance the priority of a claim against the decedent's estate.

The Court of Appeals went further, saying that it was behond the jurisdiction of the Orphan's Court to invalidate a judgment of the Circuit Court. The Orphan's Court can only administer the estate of the dead fellow, and can only elect to disregard the relative lien priority created by the Circuit Court judgment.

It appears that this factual situation may require litigation in BOTH the Circuit Court and the Orphan's Court.

Tuesday, April 6, 2010

The purchaser out of foreclosure is not hogtied by an appeal by the borrower if no bond posted.

The new appellate decisions are a treasure trove of obvious answers to frequently asked questions. Among them is Mirjafari v. Cohn, reported February 16, 2010, No. 38. It confirms that a purchaser out of foreclosure, if bona fide at the time of the sale, is free to devise the foreclosued property if the borrowers take an appeal but fail to obtain an order staying the effect of the judgment overruling the borrower's exceptions.

This question has come to me three times over the last month, by three different insurance adjusters. It's nice to finally have a black letter case declaring the obvious proposition. My partner and I refer to this as a "the sky is blue" propositions-- the legal maxim is obvious, but there doesn't seem to be a reported decision on the issue.

Of course, if the court holds the foreclosure purchaser is not bona fide, he takes title subject to the outcome of the appeal. It is the finding of bona fide status that is key.

Thursday, April 1, 2010

There is still no zoning estoppel in Maryland.

The dissent captures the essence of this reported opinion. Judge Harrell declares that "[t]he Court of Appeals again wimps-out on adopting the doctrine of zoning estoppel, the contours of which are well established in a number of our sister states."

Of course, I invite you to check out the official group photo of this court. No wimps here, no sir.