HAVE OHIO'S APPELLATE COURTS
CREATED A DOUBLE-STANDARD
FOR THOSE WRONGFULLY FORECLOSED UPON?
November 3, 2011
IS THERE A DOUBLE-STANDARD IN THE 8TH DISTRICT
COURT OF APPEALS, CUYAHOGA COUNTY, OHIO,
FOR THOSE WRONGFULLY FORECLOSED UPON?
Now in his 15thyear of litigation on the subject, Richard Davet quotes the Eighth District Court of Appeals:
“The case law in the 8th District is simple and clear; the putative mortgagee must own the mortgage at the time of the filing of the complaint, otherwise it lacks standing”
See Deutsch Bank Natl. Trust Co. v. Triplett, 2011-Ohio-478 ¶ 12).
In Davet’s case, the record indicates that the plaintiff, Nationsbanc Mortgage Corp. (n/k/a Bank of America), by their own admission, did not acquire Davet’s mortgage until three years after the lawsuit for foreclosure was filed in court. Thus making any judgment in the case void ab initio.
The Northern District of Ohio, Southern District of Ohio, and Ohio state courts have played a pivotal role in formulating an appropriate response to foreclosure fraud on consumers by financial institutions. This role is attributable in large part to Davet’s 15-year quest for justice, which was discussed in a Wall Street Journal law blog:
"An argument Mr. Davet made when the case was filed — that NationsBanc couldn’t bring the suit because it didn’t legally own his mortgage — is the same red-hot legal theory now being embraced by judges and regulators in Ohio and elsewhere to help give homeowners a chance against foreclosure." (See below)
Selective justice is the sign of a broken legal system.
State ex rel, Richard Davet v. The Honorable Kathleen Satula
The Court House:
How One Family Fought Foreclosure
BEACHWOOD, Ohio -- Faced with the threat of
foreclosure, many homeowners give up and abandon their homes.
Then there's Richard Davet.
and his wife, Lynn, lived in a six-bedroom home in this Cleveland suburb
for nearly 20 years when, in 1996, he was served with a foreclosure
lawsuit. Rather than turn over the keys, he hit the law books. Flooding
the courts with papers, Mr. Davet staved off foreclosure for 11 years,
until this past January, when a county sheriff's deputy evicted the
couple and changed the locks. They didn't make a mortgage payment the
"Our four Scottish terriers are buried
there," says the 63-year-old Mr. Davet. "It was heaven on
earth, an unbelievable property, and they took it from us like candy
from a baby."
Mr. Davet's case is believed to be the longest
residential foreclosure of its kind in the history of Cuyahoga County,
which is at the epicenter of the foreclosure crisis currently enveloping
Ohio and many other parts of the country. Foreclosure actions are
generally routine, typically taking from a few months to a couple of
years to get the borrower out of the home. Companies turn the work over
to so-called foreclosure-mill law firms, and generally cases are
ON THE LAW BLOG
Davet's argument -- NationsBanc couldn't bring the suit because it
didn't legally own his mortgage -- is the same red-hot legal theory now
being embraced by judges and regulators in Ohio and elsewhere to help
give homeowners a chance against foreclosure. Is this all about a legal
system at work, or not working? Discuss
These days, more homeowners are digging in their
heels. They delay foreclosures by filing for bankruptcy on the eve of a
court-ordered sale of the property, or by refusing to answer the door
when the plaintiff tries to "serve" them with a foreclosure
lawsuit. They pay lawyers a few hundred dollars to file a motion that
can buy them a little more time.
But few are as dogged as Mr. Davet. And his fight
may not be over yet. Though ousted from his home for nearly a year now,
he is trying to get the charming 1940s house back, plus damages. He's
relying on the legal argument -- currently making headlines -- that a
financial institution can only file a foreclosure action if it can prove
it actually owns and holds the mortgage and promissory note.
"I give him credit. He truly believes a
banking institution did him a great wrong," says Daniel Kalk, one
of several lawyers who at various times represented Mr. Davet in the
case. "The funny thing is, some of the things he argued 10 years
ago -- all of a sudden you see a federal court saying the same
A former jewelry-business owner, Mr. Davet and his
wife, a former graphic-arts tutor, bought their home in 1978 for
$150,000. As its value increased they borrowed against it. They made
their mortgage payments, but on one loan, they allegedly made payments
late -- 90 times, according to NationsBanc Mortgage Corp., which
assessed the couple some $4,000 in late fees.
After the Davets for two years refused demands to
pay the late fees, during which NationsBanc began refusing to accept
their regular mortgage payments, the company sued for foreclosure. At
the time the couple still owed $80,000 in principal, plus an additional
$160,000 on a second mortgage on the home. Mr. Davet insists the late
fees were erroneous -- he points to a deposition in which a NationsBanc
employee conceded that the company couldn't back up its claims for a
chunk of the fees. So he began his full-time crusade in the courts to
keep his home.
He started with the help of lawyers, but those
arrangements didn't last. Dan Dreyfuss, who represented the couple when
the case was filed, called Mr. Davet's strategy "a recipe for how
to confound the courts." He quit after Mr. Davet filed a motion to
disqualify a judge against his advice. Mr. Kalk eventually sued Mr.
Davet, successfully, for unpaid legal fees.
On his own, as a "pro se" litigant, Mr.
Davet was undeterred. Four times a week he went to Case Western Reserve
University School of Law to study legal writing and case law in its
library. His briefs were angry and colorful, including football
analogies and an aside on Enron Corp.
Among his maneuvers: asking a judge to arrest
NationsBanc's CEO for initiating a "sham" proceeding against
him because the company claimed in error that it owned his loan. (The
judge dismissed the request.) He later sought to disqualify the judge
because she had accepted campaign contributions from real-estate
developers, whose Beachwood developments Mr. Davet had publicly
protested before the foreclosure litigation. When he didn't win that
motion, Mr. Davet sought to disqualify the judge who had dismissed it.
He appealed at every chance he could, which bought him extra years in
"Mr. Davet has litigated these same issues
over and over again...and in each instance the courts have dismissed his
claims," said Bank
of America Corp., Charlotte, N.C., which merged with the
owner of NationsBanc.
Several years into the case, Bank of America took
the unusual step of bringing in lawyers from a big corporate law firm, Jones
Day. Five years later, in 2005, a judge granted foreclosure
in the amount Mr. Davet owed and set a sale date for the property so
that the creditors could take the sale proceeds. But when the property
finally went to sale, Mr. Davet set up a shell company to win the
auction, for $436,000. He couldn't pay more than the required $10,000
deposit, but the move delayed his eviction by months.
Mr. Davet says it wasn't a delay tactic and that he
was trying to line up investors to buy the property. The house was later
sold to another family for $410,000.
The eviction finally happened on a snowy day in
January of this year. Don Saunders, who lived three doors down from Mr.
Davet and is a trustee of the neighborhood association, says it came as
a shock in the upscale area.
Mr. Davet continued to try, unsuccessfully, to get
the federal court to agree that the state judgment was invalid. Then, a
possible lifeline arrived this past October, when a federal judge in
Cleveland, Christopher A. Boyko, dismissed 14 foreclosure suits because
the plaintiffs that brought them couldn't prove they owned the mortgages
when the suits were filed.
Such a problem can occur when mortgages are turned
into securities and sold to investors. The companies involved in the
transaction may not have checked that each mortgage was legally
transferred, or "assigned," to the new owners. In essence, the
originating lender continued to legally own the mortgage -- and would
thus need to be the plaintiff in a foreclosure suit. In Mr. Davet's
case, however, the mortgage, which was not securitized, changed hands
multiple times and wasn't actually owned by NationsBanc until three
years after the company filed suit.
Other judges have since followed Judge Boyko's
lead. The Ohio attorney general has asked numerous judges to dismiss or
delay foreclosures based on similar grounds.
Earlier this month, Mr. Davet filed a second
federal appeal, this time citing the Boyko ruling, which he believes he
inspired. It's unclear whether the latest salvo will work. If it
doesn't, Mr. Davet says, he will set his sights on the U.S. Supreme
All the litigation makes the home's new owner, Paul
Mikhli, a dentist, "a little nervous." Should Mr. Davet
succeed, he adds, title insurance should cover his expenses.
After spending much of the year living at the homes of friends and family, including their daughter, a university student in Indiana, the Davets recently moved into a small, $900-a-month home in a rural community east of Cleveland. "The money is short," Mr. Davet said on a recent afternoon, adding that one of his siblings, a pawn-shop owner, has been helping financially.
But hope prevails. From time to time, he drives back to Beachwood, just to see how his old home is doing.
--James R. Hagerty contributed to this article.