Legal decision has attorneys talking
Posted at 5:14 PM on
March 30, 2012 by Jessica Mador
Filed under: Courts,
MPR News received a
tip about a complicated story involving an
attorney, a judge and the state's foreclosure
U.S. District Judge
Patrick J. Schiltz has taken the unusual step of
sanctioning Minneapolis attorney William Butler
for filing what the judge calls frivolous
show-me-the-note actions. That's where a
homeowner facing foreclosure argues that because
the mortgage and note are held by different
entities, the home's mortgage or foreclosure on
that mortgage is invalid.
Separating the note
from the mortgage contributed to the practice of
mortgage securitization, one culprit in the
housing bubble and crash.
Some courts in other
states have ruled in favor of homeowners in
cases like these. But here, Judge Schiltz says
it's been established under Minnesota law (he
references Jackson v. Mortgage Electronic
Registration Systems, Inc.) that the entity that
holds the mortgage can foreclose on the mortgage
even if that entity does not also hold the note.
Showing the note is not necessary under
foreclosure by advertisement, which is how most
of Minnesota's foreclosures are processed.
Butler, of Butler
Liberty Law, LLC, brought nearly 30 of such
cases on behalf of several hundred people and
apparently never won.
Among other things,
Judge Schiltz alleges Butler solicited
homeowners facing foreclosure for frivolous
cases and then "judge shopped" for sympathetic
judges while his cases dragged on for months,
allowing him to collect fees from clients and
allowing those clients to continue living in
their homes rent-free.
As punishment, the
court ordered Butler to pay a $50,000 penalty
and cover attorneys fees for some of the largest
firms representing clients like GMAC Mortgage,
Deutsche Bank, The Bank of New York and others.
People familiar with the case expect these
penalties to rise well into the six figures.
Butler also risks losing his license to practice
Daniel Tyson has been handling real estate and
foreclosure cases for decades. He declined to
comment on the specifics of Butler's cases
mentioned in the judge's order. But he says it's
clear the judge's ruling was intended to send a
"The amount of the
sanction is high and the judge wanted to teach
this attorney a lesson that his behavior wasn't
appropriate and if he's going to start a lawsuit
and bring it into federal court or any court it
has to be based upon proper claims, and in this
case the judge determined that the
show-me-the-note claim was not appropriate for
this particular matter before him."
Other attorneys I
spoke to about this case agreed the judge's
order is severe.
Judge Schiltz is
known for being conservative but fair-minded.
Tyson says he hopes
the decision won't deter other attorneys from
bringing foreclosure cases forward.
"I'd hope that the
decision does not have a chilling effect on
bringing claims which are properly brought by
consumers and their attorneys. That would be an
unfortunate result of this claim because there
are many appropriate claims and appropriate
situations - in particular in this foreclosure
area - where bad things were done. That is what
the robo-signing cases were all about, that is
why there are sanctions and that is why we've
got a nationwide settlement with the major
banks, because things were not done properly,"
said Tyson. "I'm hoping it doesn't have a
chilling effect on the ability to bring these.
And I don't think it will because this was a
very limited situation where this individual
attorney was using wrong methods and for those
clients out there and those attorneys out there
who have right claims and good claims to try to
prevent foreclosures, that should be brought
they should be able to bring them. That is our
Butler didn't provide
a comment in time for this post, but says he
plans to appeal the judge's decision.