Florida Supreme Court rules on controversial foreclosure case

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A Florida homeowner lost his bid to get a voluntarily dismissed foreclosure case reinstated for the purpose of showing the initial foreclosure proceeding contained fraudulent documentation.

The court's decision is a major one for default attorneys and banks in Florida, especially those dealing with robo-signing or documentation handling issues that were alleged at several major foreclosure law firms a few years ago.

The case — Pino v. Bank of New York Mellon — addresses what can happen when a bank voluntarily dismisses a foreclosure action and the homeowner facing the foreclosure tries to reinstate the case for the purpose of showing the original court filing contained fraudulent documents that merit sanction.

In Pino, the homeowner alleged the fraud was caused by an employee of the now defunct law firm of David J. Stern.

Earlier this week, the Florida Bar cleared the way for Stern to be potentially disciplined for his firm's alleged mishandling of foreclosure-related documents. 

The Florida Supreme Court ruled definitively Thursday that a foreclosure defendant cannot compel a court to reinstate a voluntarily dismissed case for the purpose of attempting to prove a fraud on the court.

However, the court exercised caution by leaving a window of opportunity for foreclosure defendants who may have been harmed by a fraud or mishandled documents filed in a case that has since been voluntarily dismissed by the foreclosing party.

The justices ruled that "the trial court has jurisdiction to reinstate the dismissed action only when the fraud, if proven, resulted in the plaintiff securing affirmative relief to the detriment of the defendant."

In the Pino case, the court says the foreclosing bank — The Bank of New York Mellon — obtained no affirmative relief, so the court could not reinstate the initial case simply to address the allegations of fraud.

However, the court exercised some discretion, possibly fearing a precedent that would allow fraudulent documents to be taken out of a court's purview by a mere voluntary dismissal.

The justices wrote in their final opinion that they do "understand the concerns of those who discuss the multiple abuses that can occur from fraudulent pleadings being filed with the trial courts in this state."

Furthermore, the court asked the state's Civil Procedure Rules Committee to review the decision to determine whether explicit sanction authority should be given to trial courts even after a case has been voluntarily dismissed.

The justices also want the committee to determine whether the rules of procedure should be amended to expressly allow a trial court to retain authority to rule on any sanction motions stemming from the alleged abuses of a party during the litigation process.

kpanchuk@housingwire.com [3]