Seventh Circuit Applies Agency Principles To Find A Creditor Can Be Held In Civil Contempt For Actions Of Its Attorney (IL)

By: R. Elliott Halsey (IL), Partner

KK TAKEAWAY:

A creditor is liable for an attorney’s actions in the scope of representation, which are imputed to the creditor and viewed in conjunction with the creditor’s own knowledge.

BACKGROUND:

The Seventh Circuit ruled that a creditor could be held in civil contempt when its attorney violates the Bankruptcy discharge even though the attorney could not be held in contempt for the same violations where he lacked actual knowledge of the discharge order.

In In re: Jacqueline M. Sterling, No. 18-2773 (7th Cir. August 13, 2019) a judgment was awarded to the creditor in February 2002, and the debtor repeatedly failed to show up for state court collections hearings. Ultimately the court issued a body attachment in April 2010, and subsequently when the debtor’s car got a flat tire, a police officer stopped to assist and discovered the outstanding warrant. The debtor was arrested and spent two days in jail. However, the debtor had obtained a discharge in January 2010 from her 2009 bankruptcy petition which listed the debt.

The debtor brought suit in the bankruptcy court for violation of the discharge injunction and asked that the creditor and the attorney be held in civil contempt. The bankruptcy court ruled against the debtor, because the debtor had failed to establish that the attorney and creditor “had knowledge of the granting of her discharge … and, despite that knowledge, undertook actions which willfully violated the discharge injunction” for the Court to find contempt. The attorney did not know of the discharge order during the continuances, and the creditor had notice did not willfully violate the discharge order because there was no evidence it ever went beyond initially referring the case for collection proceedings. The district court affirmed and the debtor appealed.

On appeal, the Seventh Circuit reversed the judgment for the creditor. Applying agency principles, finding the creditor could be held in civil contempt for the actions of its attorney, since the attorney was the creditor’s legal counsel and the creditor directed the attorney to collect the debt in violation of the discharge order of which it had notice.

What Qualifies A Fee When It Comes To Summary Judgment In Florida, Parties Must “Jockey Into Position” The Right Way To Be Successful

By: Jason D. Silver, Attorney

KK

TAKEAWAY:

A recent appellate opinion from a dispute over a failed racehorse highlights the importance of providing and filing testimony the correct way under Florida’s amended summary judgment standard in order to both obtain, as well as defeat, a summary judgment.

BACKGROUND:

Since Florida amended the summary judgment standard to be applied by the state courts in line with the federal standard, parties on the losing end of summary judgment have been appealing decisions to test how the appellate courts will apply the standard when there is opposition.

Now that it has been close to two years since the amendment of the standard, appellate opinions are revealing that the amended standard and thresholds are being applied strictly “across the board.” The results provide guidance to attorneys for banks and lenders prosecuting foreclosure actions in Florida.

Effective May 1, 2021, pursuant to In re Amendments to Florida Rule of Civil Procedure 1.510, 309 So. 3d 192 (Fla. 2020), Florida became the 39th state to adopt the federal summary judgment standard derailed by the U.S. Supreme Court in Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (otherwise known as the “Celotex” trilogy).

The latest application of the amended standard was issued in an interesting dispute in Palm Beach County, Fla., over a failed racehorse which was purchased for $400,000.00. See Green v. Rockefeller-Silvia, 4D22-226, 2023 WL 2314913, at *1 (Fla. 4th DCA Mar. 1, 2023).

In Green, one of the investors in the failed racehorse sued a famous equestrian sports athlete and model, alleging breach of contract, fraud in the inducement, breach of fiduciary duty, and civil theft, among other things.

The equestrian athlete defendant responded by seeking his own summary judgment, arguing the investor did not provide any evidence in support of summary judgment, pointing out that more than just argument of counsel is needed to obtain and/or defend against summary judgment.

The Green ruling emphasizes that a response to a Motion for Summary Judgment should supported by actual substantive testimony and facts from a party in the case. Here, the only opposition to the Summary Judgment effort was legal argument from the attorney for the investor. This is not enough.

Parties defending against summary judgment often fail to file factual opposition sworn to by a party or only rely on legal argument about the issues. While such could possibly have worked before the amendment to the rules, it is becoming abundantly clear it will not anymore.

This is certainly applicable in foreclosure and banking law. The Third District Court of Appeal in Miami also applied this standard in a residential foreclosure action where a borrower’s opposition to summary judgment was held to be insufficient because the affidavit at issue filed only contained “conclusory averments, based on supposition and information not derived from personal knowledge.” See Passariello v. Bank of New York Mellon, 347 So. 3d 446, 448 (Fla. 3d DCA 2022).

The above discussed Green opinion shows that “jockeying into position” the correct way when both seeking and defending against summary judgment under the new summary judgment standard is crucial in Florida courts.

Admissibility Of Pooling And Servicing Agreements To Prove Trustee’s Standing At Trial

U.S. Bank Nat’l Ass’n as Tr. for RAMP2006EFC2 v. Bell et al., No. 5D21-2528, 2023 WL 446866, at *1, 48 Fla. L. Weekly D218a (Fla. 5th DCA 2023), reh’g denied (Feb. 16, 2023).

By: Irina Danilyan, Partner KK TAKEAWAY:

Pooling and Servicing Agreements are crucial in the absence of other valid evidence of standing. Plaintiffs’ counsel must be prepared to utilize the readily available, well-established decisional law to promptly deflect defendants’ evidentiary challenges to the admission of such evidence.

BACKGROUND:

In our Fall 2022 Real Estate Edition issue of In the Know, we discussed a recent First District Court of Appeal (“DCA”) opinion, in which the appellate court ruled on the issue of standing of trustees under pooling and servicing agreements (“PSA”) in foreclosure actions. In that case, the First DCA disagreed with the trial court’s refusal to accept PSA as proof of standing because the parties to the PSA did not follow its note indorsement terms. In the current issue, we explore another twist on proof of the foreclosure plaintiffs’ standing at trials - the admissibility of the PSA.

In a recent opinion by the Fifth DCA, the trustee plaintiff in the underlying case sought to establish standing by showing it was the holder of the promissory note (“note”) by virtue of possession of the original note specially indorsed to the trustee. While this was sufficient to prove its holder status on the day of trial, the trustee also faced the task of proving by substantial competent evidence that it was the holder of the note when it filed suit, because a copy of the note with the requisite indorsements was not attached to the initial complaint.

The trustee made a proper attempt to do so through the PSA, pursuant to the established case law. See Deutsche Bank Nat’l Tr. Co. v. Marciano, 190 So. 3d 166, 168 (Fla. 5th DCA 2016); Bolous v. U.S. Bank Nat’l Ass’n, 210 So. 3d 691, 693-94 (Fla. 4th DCA 2016). Like in the case discussed in our prior issue, the PSA provided excellent “timing” evidence, in that it included the subject loan in the master schedule of loans transferred into the trust on a closing date predating the foreclosure complaint. This attempt was met with borrowers’ objection – sustained by the trial court – that the trustee had not established that the PSA was admissible under the business records exception to the hearsay rule. The trial court further sustained an objection to the admissibility of the PSA as a non-hearsay document admissible for its independent legal significance, found that the trustee had failed to establish standing on the date it filed the complaint, and entered judgment for borrowers . The appeal ensued.

In its concise opinion, the Fifth DCA applied a long-established principle enunciated in multiple cited decisions, that signed instruments such as contracts, wills, promissory notes, assignments of mortgage, mortgage modifications, even PSAs , are not hearsay because they characterize verbal acts and thus are admissible into evidence as writings carrying independent legal significance. The District Court held that the PSA was admissible in evidence for its independent legal significance, reversed the trial court’s final judgment for borrowers, and remanded the case to the trial court for further proceedings.