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Florida Supreme Court hears foreclosure appeal

TALLAHASSEE — In a case that could impact thousands of homeowners facing foreclosure, Florida's Supreme Court heard arguments Thursday on whether a judge can revive a dropped case when the plaintiff is suspected of fraud.

The justices took up Pino vs. The Bank of New York, a Palm Beach County case in which drywall hanger Roman Pino accused his bank of fraudulently backdating documents used against him in foreclosure proceedings.

The bank dropped the foreclosure case, corrected the paperwork and refiled five months later. The parties reached a settlement, but justices still wanted to rule on whether a plaintiff's right to drop a case trumps the court's obligation to penalize for fraud.

This is the first time Florida's high court has taken up a foreclosure case since the housing collapse.

"This is an issue of great concern because it's greater than what goes on in the foreclosure area," Justice Barbara Pariente said.

At issue is a Florida law that allows plaintiffs one chance to voluntarily dismiss a case and bring it back later.

In most cases, the rule is used when an attorney makes an honest mistake or a curveball leaves a plaintiff unprepared. But attorneys for Pino argue that banks routinely exploit the rule to evade fraud accusations.

"This law was not intended as a shield," argued Amanda Lundergan, Pino's attorney.

The court decision could bruise any plaintiff accused of presenting fraudulent documents to the courts. But it offers widespread implications for banks, often accused of cutting corners to keep up with the state's flood of foreclosures.

Lundergan argued the court has a duty to preserve its own credibility, but justices cut her off and hammered her with questions about why they should change a rule that didn't cause harm to the homeowner.

"We have mechanisms in place to prevent fraud. The attorney in this case has been reported to the Bar," Justice Barbara Pariente said.

Lundergan replied, "It sets up a system where every litigant who comes to Florida court has not only been condoned, but encouraged, to lie, to cheat, to steal, knowing that if they are caught, they can voluntarily dismiss."

Pariente shot back, "I understand there are some things that have happened on a grand scale that have been an embarrassment to the industry and to the legal system … but we want to make sure we're faithful to common law and to the rules."

Chief Justice Charles Canady also came down hard on Lundergan.

"What it seems like to me, you're just looking for a 'gotcha' to get out of the mortgage. Am I wrong?" he said.

"Absolutely wrong," Lundergan replied. "This is not about Mr. Pino. This is about the bank and the fraud that was committed."

The justices seemed friendlier toward Bruce Rogow, the bank's attorney, who argued that changing the rules could upset the housing market and contradict case law.

Lundergan did not seek damages for Pino and would not comment on Pino's settlement with the bank. But Palm Beach County property records show he still owns his home, which he bought for $203,000 in 2006, at the height of the boom.

Brittany Alana Davis can be reached at bdavis@tampabay.com.

Florida Supreme Court hears foreclosure appeal 05/10/12 [Last modified: Thursday, May 10, 2012 11:25pm]
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