Florida’s Third District Court of Appeals had harsh words for a foreclosing bank’s counsel in Jade Winds Association v. Citibank, N.A., No. 3D11-275, released on Wednesday, May 4, 2011.

The 3rd DCA not only reversed an order that had cancelled a foreclosure sale at the bank’s request, but called out the bank’s counsel for making “misleading” statements to the trial court, reminding the trial court that it was “free to impose appropriate sanctions” against the bank and/or its counsel on remand.

Basic Facts:

As the case’s name indicates, Jade Winds involved a three-party dispute between a homeowner/borrower, a mortgagor bank, and a condominium association, with the latter two both filing claims for alleged defaulted payments from the homeowner. The condo association obtained a default judgment and took title to the property, then asked for, and received, summary judgment granting the bank’s claim to the property and a date for a foreclosure sale.

On the day the foreclosure sale was to occur, the bank filed an emergency motion to cancel it, supposedly to consider a loan modification for the homeowner. The problem was that the borrower’s mortgage loan couldn’t possibly be modified because the condo association had taken title from the borrower more than a year earlier. To make matters worse, the bank didn’t serve notice of its motion to cancel the sale on the condo association, the actual title holder of the property.

The Holding:

The 3rd DCA was not pleased. Per Jeffrey Kuntz of The Florida Legal Blog

The motion to cancel the January 2011 sale was considered, ex parte, and granted due to “affidavit review.” The Third District stated:

In the instant case, without rehashing the facts set forth in this opinion, it is clear that Citibank failed to properly serve Jade Winds’ counsel with the Second Motion to Cancel and failed to notify counsel of the hearing. We recognize that the Second Motion to Cancel was filed on an “emergency” basis, but note that Citibank apparently made no attempt to notify Jade Winds’ counsel of the motion by either delivery, facsimile, email, or phone call, although Jade Winds’ counsel actively participated in this litigation. Further, based on Judge Langer’s previous order imposing sanctions against Citibank, Citibank knew that its actions were inappropriate. As Judge Langer simply found, Citibank’s “conduct was in direct violation of [Jade Winds’] due process rights” and the Order Canceling Sale was “void for lack of notice.”

The Court then referred Citibank’s counsel to the applicable Miami-Dade administrative order (10-E), In re Amendments to the Florida Rules of Civil Procedure, 44 So. 3d 555, 557-58 (Fla. 2010), and reversed the order canceling the foreclosure sale with instructions to consider whether sanctions should be imposed.

Robyn A. Friedman has additional coverage of the decision in the Daily Business Review (subscription required).  Suffice it to say, the 3rd DCA made it clear that trial courts should not cancel foreclosure sales without giving all interested parties a fair opportunity to appear and be heard, and without an evidentiary record backing up counsel’s assertions.  

Part of a Trend in Florida District Courts?

While interesting in itself, Jade Wind becomes all the more significant when considering recent decisions of the 4th DCA.  Indeed, there appears to be something of a trend emerging in the District Courts of Appeal — they are now cracking down on some of the informal practices/skirting of the rules of procedure (depending on which side you’re on) that aren’t generally tolerated in other litigation, but until now had been frequently overlooked in foreclosure cases.

The 3rd DCA’s strong disapproval of the lack of notice and evidentiary void in Jade Wind dovetails with the 4th DCA’s expression of distaste for similar practices in Arsali v. Deutsche Bank National Trust Company, No. 4D10-3830, just a month earlier.

In Arsali, the trial court granted a motion to cancel the sale retroactively rather than on the day of the sale. Like the trial court in Trade Winds, the trial court overlooked a bank’s failure to put on evidence in support of its motion – and the lack of notice to interested parties.

The bank in Arsali actually filed a motion to cancel the foreclosure sale 2 weeks in advance, but it was never ruled on. Still, the bank didn’t show up for the sale.

The property, which the bank had appraised for $185,000+ (the bank’s judgment against the mortgagee was for $350,000+), was sold to a third party for just $16,100. Needless to say, the bank was not pleased, and filed an emergency motion to rescind the sale.

It submitted no affidavits or other evidence in support. And it didn’t serve the motion on the third party buyer, and didn’t serve the buyer with notice of the UMC hearing it set for the motion. The trial court heard motion and cancelled the sale.

The 4th DCA strongly disagreed with that course of action. Despite using a standard of review allowing reversal “only when the trial court has grossly abused its discretion,” the 4th DCA reversed, “conclud[ing] that the trial court abused its discretion in summarily granting the motion without holding an evidentiary hearing.”

 The 4th DCA’s opinion doesn’t mention sanctions. But its judgment itself amounted to something of a sanction. By reversing the order vacating the sale, the court allowed the purchase to stand – for just 11% of what the bank hoped to recover through foreclosure.

The Florida Supreme Court is About to Join the Fray

Then there’s the 4th DCA’s decision, En Banc, to certify to the Florida Supreme Court a “question of great public importance” (for jurisdiction-conferring purposes under Rule 9.030 of the Florida Rules of Appellate Procedure) in Pino v. Bank of New York Mellon.

The certified issue in that case is whether a bank that voluntarily dismissed a foreclosure case to avoid being sanctioned for alleged fraud in documenting its right to foreclose can be prohibited from pursuing foreclosure by filing a second case. As is common with certified questions of great public importance, the Florida Supreme Court recently accepted jurisdiction over Pino.  So more changes may be on the way.