Lender & Law Firm Both Held Liable

Court Rules in Favor of Condominium Association After Lender Fails to Move Foreclosure Proceedings Along or Comply With Court Orders. Bank required to pay over $13,000.00!

On Feb. 8, 2007, the Bank of New York filed a mortgage foreclosure lawsuit against a unit owner, naming the Moorings at Edgewater Condominium Association, Inc. as an additional defendant in the case.  The defaulting unit owner filed for bankruptcy on May 1, 2007, which resulted in an automatic stay of the foreclosure lawsuit.  The unit owner surrendered the property and was discharged from bankruptcy several months later.  The lender waited almost a year from the bankruptcy discharge to file its Motion for Summary Judgment, but never set that Motion for hearing, leaving the association in limbo.

Becoming quite frustrated as a result of the delay, the association hired Attorney Scott Petersen of Becker & Poliakoff’s Sarasota office, who filed a Motion to Compel as a result of the delay.  The Court granted the association’s Motion and Ordered the bank to move its mortgage foreclosure case along on or before June 29, 2009.  Remember, the unit owner surrendered the property, did not reside in the unit and did not contest the mortgage foreclosure action. 

After Bank failed to obey the Court’s Order, Attorney Peterson scheduled a hearing on an Order to Show Cause for September 24, 2009.  The lender attempted to file a Notice of Voluntary Dismissal to avoid the Show Cause hearing.  The Court ultimately granted the Order to Show Cause, ruling that the bank must pay regular and special assessments as a result of the inordinate delay.

After two months of non-payment, Attorney Petersen filed a Motion for Contempt when the Bank’s attorney did not respond to correspondence.  The Bank argued the following as justification for its delay:

1. Owner’s bankruptcy;
2. Difficulties in service of process;
3. Countrywide’s Consent Judgment – implying the parties (owner and lender) were engaged in the loss mitigation process;  and
4. the Court’s Order of May 29, 2009 was illegal pursuant to F.S. 718.116 and the U.S. Bank v. Tadmore case.

The association countered with the following arguments:

1. The Owner’s bankruptcy case was discharged in 2007 and did not cause a 3-year delay;
2. The Affidavits of Service showed that service was attempted during an 8-day stretch from March 1-8, 2007 and then again on April 23, 2007, all of which were unsuccessful. The next attempt at service was June 12, 2008, which was successful, but there was no explanation for the intervening delay;
3. Countrywide’s Consent Judgment was filed Nov. 10, 2008, more than a year after the property was surrendered in bankruptcy and didn’t even apply since the borrower (unit owner) abandoned the property; and (among other things)
4. The facts of this case were so egregious that sanctions were appropriate.

This victory for the association shows community leaders cannot sit back and wait for the bank to foreclose.  Moreover, there are many steps that proactive leaders can take now to guard against future delinquencies and to improve the association’s position.