BAD FAITH: Judges Getting Testy About Lawyer's Representations and Bad Treatment of Borrowers

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“the misleading statements made to both the court and plaintiffs’ counsel constituted willful misconduct.

Accordingly, the defendants are hereby adjudged to have accepted the July 1, 2009 agreement signed by the plaintiffs (Adv. Pro. No. 09-4045 AN, Docket No. 20), and are fully bound by the terms thereof. The terms of that agreement supercede and replace any and all terms that are inconsistent therewith in any and all notes and deeds of trust previously executed by the parties, their successors and assigns.”

submitted by Beth Findsen, Esq., (one of the finest writers in the legal profession), Scottsdale, Az

Editor’s Note: One of the wild cards in this drama is the 800 pound gorilla factor — judges can do what they want and if you don’t like it, go on appeal, where your chances are on average 1 out of 6 that you will get a nod from the appellate court. This particular Judge has expressed in writing what many other Judges have expressed orally in court and in background interviews with me — if what I say is true there will be hell to pay.

Well, it’s true and now everyone knows it. The representations by counsel for the pretender lenders are no longer being taken at face value. They have the lost the advantage of the presumptions they were creating. And here, the court took its gavel and hammered a settlement down the pretender lender’s throat. You can expect more of this behavior each day as this epic unfolds.

From an order signed by Judge Newsome, U.S. Bankruptcy Court

Many, perhaps most, of these debtors are not good candidates for a loan modification. But that does not excuse the indifferent and sometimes deplorable treatment they too often receive at the

hands of their lenders; nor does it obviate the desperate and helpless condition in which they find themselves. Indeed, never in my 27 years on the bankruptcy bench have I witnessed such financially and emotionally distressed families as I have seen pass through this court over the past two years.

Ultimately, there is little this court can do to facilitate the loan modification process or right the wrongs that debtors may have suffered from that process. That is particularly true in chapter 7 cases such as this, where the automatic stay lifts upon entry of the discharge, regardless of what the court does with a lender’s motion for relief from the automatic stay. See 11 U.S.C. § 362(c)(2)(C).

But when attorneys come before the court and play “fast and loose” with the truth, or rely on the bureaucratic obfuscations of their clients to dodge commitments they have made, this court is required to act to protect the integrity of its processes. If the court cannot rely on and trust the authority and words of the lawyers that appear before it, it cannot effectively handle the increasingly heavy volume of work confronting it, thus risking systemic collapse. That trust has been breached in this adversary proceeding, and the remedy of judicial estoppel perfectly suits the facts presented.

Accordingly, the defendants are hereby adjudged to have accepted the July 1, 2009 agreement signed by the plaintiffs (Adv. Pro. No. 09-4045 AN, Docket No. 20), and are fully bound by the terms thereof. The terms of that agreement supercede and replace any and all terms that are inconsistent therewith in any and all notes and deeds of trust previously executed by the parties, their successors and assigns.

As for the issue of sanctions, the defendants’ failure to appear at status conferences and respond in timely fashion to court orders alone amply support a finding of bad faith in the conduct of this litigation. The total indifference shown towards the court’s processes, the waste of judicial resources that resulted, and the misleading statements made to both the court and plaintiffs’ counsel constituted willful misconduct. In re Deville, 361 F.3d 539 (9th Cir. 2004); see also U.S. v. McCall, 235 F.3d 1211, 1217 (10th Cir. 2000).

Although the court’s August 7, 2009 Order Scheduling Evidentiary Hearing does not specifically mention that sanctions might be imposed pursuant to the court’s inherent power, the court made its view clear at the August 5 hearing that the bank’s conduct in not consummating a settlement might constitute bad faith. August 5, 2009 transcript, pg. 5, Adv. Pro. No. 09-4045 AN, Docket No 31. See Doi v. Halekulani Corp., 276 F.3d 1131 n. 7 (9th Cir. 2001); see also In re Lehtinen, 564 F.3d 1052, 1060-61 (9th Cir. 2009).

Tags: Bad FAith, Beth Findsen, Judge Newsome, LOAN MODIFICATION, loan modmification, Sanctions
Posted in bubble, Corruption, Eviction, securities fraud |