Continuing from my last post, this post (also excerpted/adapted from my CLE presentation o the Florida Bar Appellate Practice Section) outlines some unique legal issues that arise in foreclosure appeals.  

Attorney’s Fees

Particularly in residential mortgage cases, fee structures in foreclosure appeals can be different from other cases. On both sides of the aisle, flat fee arrangements are much more common than in other types of civil cases, and reduced hourly rate arrangements are also prevalent.

Successful clients also have the opportunity to collect fees from the opposing party. Most mortgages and loan documents include a prevailing party attorney’s fee provision, generally specifying only that the lender can recover its fees. But borrowers can recover their fees as well.

In Nudel v. Flagstar Bank, FSB, 60 So. 3d 1163 (Fla. 4th DCA 2011), the 4th District Court of Appeal held that under §57.105(7), such provisions in mortgages are deemed to provide for attorney’s fees to foreclosure defense counsel as well as plaintiffs’ counsel. And under §59.46, prevailing party fees are deemed to apply to appellate fees for the prevailing party on appeal. However, when cases are remanded for further proceedings (one of two possible results of a reversal, as will be discussed), appellate fees to appellants are generally awarded conditioned on ultimately prevailing in the litigation.

Whether charging a flat fee or hourly fee, lawyers need to be aware that they have the same obligation to justify the reasonableness of their fees. In Raza v. Deutsche Bank Nat’l Trust Co., 100 So. 3d 121 (Fla. 2d DCA 2012), the 2nd DCA cautioned that even when charging a flat fee, counsel cannot establish the reasonableness of its fees without satisfying the requirements of Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), to show a reasonable number of hours spent at reasonable rates.

Stays Pending Review

As mentioned earlier, we’ve seen many recent published opinions about many aspects of foreclosure litigation. One area where the DCAs have been very quiet, however, is regarding stays pending review in foreclosure cases. In fact, I’m not aware of any new precedent addressing stays pending review in the foreclosure context.

That is surprising. Chief among the concerns of many appellant foreclosure defendants is to retain their property pending the outcome of the appeal. The dearth in case law may be partly attributable to the fact that in many cases, plaintiffs will opt to postpone the sale until after the appeal is resolved, thereby avoiding the complications that can arise if the judgment is reversed after the property is sold to a third party, as well as the possibility that the cloud of the pendency of the appeal will drive down the amount potential buyers are willing to pay for the property. 

When the plaintiff chooses to go ahead with the sale while the appeal is pending, and the defendant seeks a stay, the only guidance comes from older cases addressing stays pending review in foreclosure cases.

Since a foreclosure judgment is not a judgment “solely for the payment of money,” a defendant cannot obtain an automatic stay by posting a bond for the amount of the judgment plus twice the statutory rate of interest under Rule 9.130(b)(1). As a practical matter, most foreclosure defendants would be unable to afford such a bond in any event.

So Rule 9.310(a) governs, making it discretionary with the court based on likelihood of success and likelihood of harm. Courts can also require a bond. But what is the appropriate amount of a bond?

According to the 3rd DCA in Fidelity & Deposit Co. v. Atlantic National Bank, 234 So. 2d 736, 738 (Fla. 3d DCA 1970), it’s not the difference between the market value of the property and the amount of the final judgment. So how should the amount be set?

The best indication may come from the 4th DCA’s decision in Cerrito v. Kovitch, 406 So. 2d 125, 127 (Fla. 4th DCA 1981), in which the court said it could not determine the propriety of the amount of the bond because:

No facts have been brought forward to this Court establishing the present fair market value of the property, the extent of other liens, if any, or waste or other damages which may be occasioned by delay. The trial court, on remand, will necessarily consider each of those factors and perhaps others in determining the amount of bond and conditions to be imposed.

That statement, too, is pretty vague, though. So the law remains unclear as to the appropriate amount of the bond.

Or perhaps it’s more accurate to say that it remains within the discretion of trial court judges. And there is considerable variation among trial judges. Some will grant a stay conditioned on posting a bond equal to what it costs to maintain the property for one year. Others will not grant a stay unless a bond is posted for the full amount of the judgment. Until a new published opinion is issued on this issue, expect the variance to persist. 

Bankruptcy

In the absence of a stay pending appeal, some foreclosure defendants who are appealing the final judgment file for bankruptcy to stop the public sale of their properties. (I wouldn’t deem to judge whether that is proper from a bankruptcy perspective, but it is certainly not uncommon.)

The question that is of interest to appellate lawyers is what effect does a debtor’s bankruptcy filing have on the defendant/debtor’s appeal? The answer, in Florida, depends on where the appeal is pending.

After the Bankruptcy Code was revised in the early 80s, the 3rd DCA was the first DCA to weigh in on the issue in Shop in the Grove, Ltd. v. Union Federal Savings & Loan Association of Miami, 425 So. 2d 1138 (Fla. 3d DCA 1982), and held that where the debtor is the appellant, proceeding with the appeal is not affected by the automatic stay of the bankruptcy code, and the appeal proceeds as if bankruptcy had not been filed. The 3rd DCA continues to adhere to Shop in the Grove today.

By contrast, the 1st DCA, in Taylor v. Barnett Bank, N.A., 737 So. 2d 1105, 1105 (Fla. 1st DCA 1998), the 2nd DCA, in Crowe Group, Inc. v. Garner, 691 So. 2d 1089 (Fla. 2d DCA 1993), and the 4th DCA, in Florida Eastern Development Co., Inc. of Hollywood v. Len-Hal Realty, Inc., 636 So. 2d 756 (Fla. 4th DCA 1994), have held that the automatic stay applies to the appeal even when the debtor is the appellant. The 4th DCA had initially adopted the view expressed in the 3rd DCA’s Shop in the Grove decision, but later reversed course based on developments in federal case law on the issue. I’m not aware of a published opinion from the 5th DCA on this issue.

Despite the 20+ year persistence of the intra-district conflict on this issue, the Florida Supreme Court has yet to weigh in to resolve it. So while a defendant’s bankruptcy filing may temporarily delay the public sale of the property, it does not substitute for a stay pending review, because no review can happen while the stay is in place. Except in the 3rd DCA. 

Effect of Reversal

Most stays pending review are obtained by agreement between the plaintiff and defendants. One reason foreclosure plaintiffs may agree to such stays is due to the consequences of the judgment being reversed after the property has been sold and title transferred.

If there is no stay, the sale takes place and the property is sold to a third party, and the judgment is subsequently reversed on appeal, what happens to the property? Here again, we do not have the benefit of a recent published opinion.

In 2013, the legislature enacted §702.036, under which if a final judgment of foreclosure is set aside, property that has been acquired from a third party cannot be returned to the borrower. There is a misconception that this statute resolved the issue by entitling third party buyers to retain the property if the final judgment is reversed.

But by its terms, the statute appears to apply only to requests to set aside a final judgment after “[a]ll applicable appeals periods have run as to the final judgment of foreclosure of the mortgage with no appeals having been taken or any appeals having been finally resolved,” i.e., when a Rule 1.540 motion to set aside a final judgment is brought, not when the judgment is reversed on direct appeal from the final judgment.

So the issue of whether a property purchased by a third party must be returned to the defendant upon reversal of the final judgment remains open. According to some old cases, it appears the property must be returned to the borrower. In a 1941 case, Bridier v. Burns, 4 So. 2d 853 (Fla. 1941), the Florida Supreme Court held that:

When a foreclosure sale is set aside by an order of court for any fatal irregularity, the title acquired by the purchaser is thereby vacated. The law subrogates the purchaser at the void foreclosure sale to all the rights of the mortgagee in the indebtedness and the mortgage securing the payment of the same.

The court further held that the purchaser should be reimbursed for improvements he/she/it may have made to the property in the interim.

In an even older case, Macfarlane v. Macfarland, 50 Fla. 570, 580-81, 39 So. 995, 998 (1905), the Florida Supreme Court held that any “rents and profits” the purchaser made from the property while it was in his/her/its possession should be offset against the amount to be repaid to the purchaser due to the property reverting to the borrower.

But other cases, such as Sundie v. Haren, 253 So. 2d 857, 859 (Fla. 1971), suggest that when a defendant’s property is purchased by a third party and the final judgment is reversed, the third party retains title to the property, with the defendant entitled to receive only monetary compensation. In the absence of recent precedent on this issue, the issue remains open for the time being.

Is a Facebook friendship really a friendship? Can judges be “friends” with attorneys on Facebook? Florida judges and legal ethicists have been debating these questions for more than four years. Florida District Courts of Appeal have now begun to offer their opinions, as Facebook friending has emerged as an issue in motions to recuse trial court judges. But definitive answers remain illusory. 

Back in 2009, the Judicial Ethics Advisory Committee of the Florida Bar thought it had resolved the issue when it released an ethics opinion weighing in on these issues. According to the JEAC’s opinion, a judge is not permitted to be Facebook friends with a lawyer who may appear before him or her.  

But more than three afters that opinion was released, at an educational program discussing this topic, a justice of the Florida Supreme Court reminded appellate judges and lawyers that the JEAC’s opinion is not necessarily authoritative. The JEAC is an advisory committee, the justice pointed out, and the Supreme Court of Florida is the ultimate arbiter of legal and judicial ethics in Florida. 

During the same discussion, other Florida appellate court judges offered varying viewpoints about the propriety of Facebook friending. Judges are permitted to be friends with lawyers in real life, one pointed out, so why can’t they also be Facebook friends with lawyers? Another took the view that because Facebook is so public, allowing a lawyer to list a judge as his/her Facebook friend might create a forum for a lawyer to try to woo clients by giving the impression of having special influence over the judge presiding over their cases, or might cause opposing parties to fear that the judge might be biased in favor of his/her “friend.”

The 4th DCA Frowns on Facebook Friendship

Now Facebook friendship has become an issue in litigation. In September 2012, the Fourth District Court of Appeal in West Palm Beach became the first Florida appellate court to address Facebook friendship between judges and lawyers in Domville v. State, 103 So. 3d 184 (Fla. 4th DCA 2012). Agreeing with the reasoning of the JEAC’s opinion, the 4th DCA held that a judge was required to recuse himself from a case in which the prosecutor was his Facebook friend.

It may be that the prosecutor’s Facebook friendship with the judge entailed no special influence over the judge whatsoever, the 4th DCA explained. But the existence of the Facebook friendship could “create in a reasonably prudent person a well-founded fear of not receiving a fair and impartial trial” and that fear is sufficient to require the judge’s recusal. The Supreme Court of Florida declined to hear the appeal. 

The 5th DCA Disagrees 

On January 24, 2014, in Chace v. Loisel, the Fifth District Court of Appeal in Daytona Beach became the second Florida District Court of Appeal to weigh in. Making clear that the issue is far from settled, the 5th DCA called into question the 4th DCA’s understanding of the implication of Facebook friendship:

 We have serious reservations about the court’s rationale in Domville. The word “friend” on Facebook is a term of art. A number of words or phrases could more aptly describe the concept, including acquaintance and, sometimes, virtual stranger. A Facebook friendship does not necessarily signify the existence of a close relationship. Other than the public nature of the internet, there is no difference between a Facebook “friend” and any other friendship a judge might have. Domville’s logic would require disqualification in cases involving an acquaintance of a judge. Particularly in smaller counties, where everyone in the legal community knows each other, this requirement is unworkable and unnecessary.

To require judges to step aside from hearing cases based on Facebook friendships, the 5th DCA explained, is to misunderstand “the true nature of a Facebook friendship,” and doing so “casts a large net in an effort to catch a minnow.”

Both Courts Agree That Some Facebook Friending is Out of Bounds

Despite its criticism of Domville, the 5th DCA held that the trial court in Chace should have followed the 4th DCA’s guidance and recused herself. Why? 

For two reasons. First, at the time that the motion to recuse was made, Domville was the only decision of a Florida appellate court on the issue of Facebook friendship. When there is only one appellate court decision on an issue, every trial court in the state is required to apply the law as interpreted in that decision.  

Second, the Facebook activity of the judge in Chace was worse and more likely to result in bias than merely being Facebook friends with one of the parties’ lawyers. The judge in Chace actually sent a Facebook friend request to one of the parties, i.e., Ms. Chace, while her divorce litigation was pending before the judge. On her attorney’s advice, Ms. Chace didn’t accept the request, and feared the judge might hold it against her.

The 5th DCA found the judge’s conduct of reaching out to a litigant with a case pending before her more troubling than a mere Facebook friendship between a judge and an attorney. It regarded Ms. Chace’s fear of bias as well founded, and ordered the judge to recuse herself.

An Open Question

The reality is that most judges are former litigators, and most former litigators have friends — on Facebook and in real life — who are litigators. But it is also a reality that even without Facebook friendships, many litigants are suspicious of the relationships between judges and lawyers.

It is unlikely that judges will ever be banned from having real life friendships with lawyers. At least in the short term, judges in Broward, Palm Beach, Martin, St. Lucie, Indian River, and Okeechobee Counties cannot be Facebook friends with lawyers appearing before them. It remains an open question whether they, and judges throughout the state, will be able to maintain Facebook friendships with lawyers in the long run.   

It’s not uncommon to see pro se litigants butt heads with trial judges. It’s less common to see attorneys doing so. Knowing that they will likely appear before the same judge in the future, most lawyers take great pains to put aside personal grievances in the interest of protecting their clients, current and future.

One Tampa lawyer seems to have gotten under the skin of 13th Judicial Circuit Court Judge Tracy Sheehan. And not just any lawyer, but the supervising chief of the Juvenile Division of the Public Defender’s Office for that Circuit. For her part, Judge Sheehan presides over the Juvenile Division of the 13th Judicial Circuit Court.

She went so far as to recuse herself from all cases in which the defendant is represented by an assistant public defender under the lawyer’s supervision. So the presiding judge of the Juvenile Division essentially disqualified herself from hearing any case in which a juvenile is represented by the Public Defender’s office–which is true in most juvenile cases. Can she do that? 

She can. In its decision in Holt v. Sheehan (filed October 11, 2013), the Second District Court of Appeal of Florida had no problem in principle with Judge Sheehan recusing herself from this broad swath of cases, even though it meant that either the chief judge would need to assign a different judge to handle juvenile cases, or the Public Defender would need to assign a different attorney to supervise the assistant public defenders who handle such cases.

In fact, the court noted, it is not uncommon for a judge to recuse herself from all cases in which a particular attorney is involved. That typically occurs in a different type of situation, however, such as where judicial ethics require a judge to recuse herself from all cases in which her parent, child, spouse, or other close relative represents one of the parties.

But the Second District did not approve of the manner in which Judge Sheehan executed her decision to recuse. The judge should have coordinated with the Chief Judge and Public Defender, according to the court. And she should not have filed a “blanket disqualification order” in a particular case, instead handling the issue through internal court procedures.

Most troubling to the court of appeal, though, was the contents of the judge’s order, in which she publicly disparaged the attorney, call her

incompetent, untrustworthy and extremely dilatory in matters related to her legal duties, based upon Attorney X’s actions and inactions in this Division over the past month and based upon Attorney X’s ten year tenure at the Courthouse which has developed her widespread reputation as an inept supervisor and mean spirited individual who publically berates her underlings as “stupid” and “idiotic.”

No doubt the lawyer in question was not pleased to see these comments memorialized in the public record. 

And the 2nd DCA was not happy about the judge’s departure from the measured tones in which judges usually express themselves from the bench. Indeed, the 2nd DCA judges commented that they had “never seen an order comparable to this one filed in a specific court file.” They suggested that Judge Sheehan’s decision “has the flavor of one made in a moment of frustration and exhaustion” and that she re-evaluate it after additional deliberation.

The bottom line for judges is this: They can recuse themselves from all cases in which a particular attorney is involved, and they should do so if they believe their ability to be impartial could be reasonably questioned. But no matter how strong a judge’s feelings may be, blanket recusals are an internal matter of court procedure, and publicly airing personal feelings and opinions should be avoided.

For lawyers, the bottom line remains the same: Don’t butt heads with the judges who preside over your clients’ cases. The Second District stepped in this time, but there’s no guarantee that they will jump in to save your reputation.

The Florida Supreme Court has acted quickly in response to the Florida Legislature’s June 2011 amendments to Florida’s Probate Code, which include some major departures from existing law.  Because the Code amendments also became effective as soon as the Governor signed them — even applying retroactively to pending cases — the Court immediately adopted a fast-track proposal by the Probate Rules Committee.

Florida lawyers that represent clients in probate cases would be wise to become familiar with the amended Rules.  To that end, here’s a cheat sheet of the Code amendments and corresponding Probate Rule changes (as well as changes to the Rules that weren’t prompted by legislative action).

Statutory Changes: Reformation.

The Code amendments allow two new types of petitions to reform a will.

The first and most drastic change, codified at Florida Statutes Section 732.615, allows for reformation of a will even if its language is unambiguous, where a petitioner proves through clear and convincing evidence that a provision was premised on a mistake of fact or law and is contrary to the intent of the testator.  Check out Craig Dreyer‘s post on Clark Skatoff‘s Florida Probate, Trust & Estate Blog for a more detailed explanation of this amendment.

The second, codified at Florida Statutes Section 732.616, allows for modification of the terms of a will “to achieve the testator’s tax objectives” so long as doing so “is not contrary to the testator’s probable intent.”    

Corresponding Rule Changes:  Adversary Proceeding Rules apply to reformation cases and cases involving pretermitted shares, but not to fee awards.

Rule 5.025 was amended to make all actions for reformation Adversary Proceedings to which Rule 5.025, and the Florida Rules of Civil Procedure, apply.  Although there were no corresponding statutory changes, this Rule was also amended to require that actions regarding pretermitted shares will now be treated as Adversary Proceedings. 

Rule 5.025(d)(2) was also amended to clarify that in all adversary proceedings, fee and cost awards are governed by the Probate Rules and decisions, not the Rules of Civil Procedure. 

Statutory Changes:  The Fiduciary Exception to the Attorney Client Privilege No Longer Applies.

In Florida, as elsewhere, the fiduciary exception to the attorney-client privilege had allowed beneficiaries of wills and trusts to obtain documents in discovery that reflected legal advice given to their fiduciaries.  That is because any legal advice that a fiduciary obtains has traditionally been considered to have been obtained for the benefit of the persons for whom the person was acting as a fiduciary (e.g., the beneficiaries of a trust when a trustee obtained legal advice regarding administration of the trust.)

But the legislature overruled that common law exception in the newly created Florida Statutes Section 90.5021, which makes communications between an attorney and a fiduciary “privileged and protected from disclosure under s. 90.502 to the same extent as if the client were not acting as a fiduciary.”  At the same time, the legislature amended Florida Statutes Section 733.212(2)(b) to require that Notices of Adminstration include a statement informing beneficiaries that “that the fiduciary lawyer-client privilege in s. 90.5021 applies with respect to the personal representative and any attorney employed by the personal representative.”

[Side note: Is it just me, or does giving this notice seem like a waste of ink?  If the beneficiary has a lawyer, the lawyer should already know that the fiduciary exception has been abolished (especially if he/she reads this blog!) and if the beneficiary does not have a lawyer, how likely is he/she to even know that the fiduciary exception ever existed, much less to understand the implication of its abolishment?]

Corresponding Rule Change:

The only change resulting from these amendments to the Probate Code is a minor change to Rule 5.240, which implements the Notice of Administration requirements of Section 733.212.  Rule 5.240(b)(2) was amended so that, consistent with the amendment to Section 733.212(2)(b), it now requires that Notices of Administration include a statement about the fiduciary’s communications with counsel being privileged.

 

That should cover it.  Note that the Rules amendments may be further revised based on comments submitted to the Court, which were not solicited prior to the changes becoming effective due to their fast track nature, but are being accepted until November 28, 2011.  However, because the statutory amendments aren’t going away, the corresponding Rules changes aren’t likely to be revised much either. 

Statutory changes of this magnitude, especially when made applicable to pending cases, usually result in more than a little confusion and much litigation over issues the legislature never even anticipated.  We can look forward to some interesting probate litigation and a good deal of uncertainty, at least until the appellate courts sort out these amendments.