Well, my job just got more difficult.

MSN had a fascinating article this week about a woman who's been living in her house, mortgage free, for 25 years. It's fascinating both because of the results, and because of the vagueness with which her defenses are described:

Patsy Campbell could tell you a thing or two about fighting foreclosure. She's been fighting hers for 25 years.

The 71-year-old retired insurance saleswoman has been living in her house, a two-story on a half-acre in a tidy middle-class neighborhood here in central Florida, since 1978. The last time she made a mortgage payment was October 1985.

....
Campbell's foreclosure case has outlasted two marriages, three recessions and four presidents. She has seen seven great-grandchildren born, plum real-estate markets come and go and the ownership of her mortgage change six times. Many Florida real-estate lawyers say it is the longest-lasting foreclosure case they have ever heard of.
....
Campbell has challenged her foreclosure on the grounds that her mortgage was improperly transferred between banks and federal agencies, that lawyers for the bank had waited too long to prosecute the case, that a Florida law shields her from all her creditors and for dozens of other reasons. Once, she questioned whether there really was a debt at all, saying the lender improperly separated the note from the mortgage contract.

While the story is interesting and all, I'd be interested to know (a) how much of that 25 years was time in between suits -- that is, when there was no litigation pending at all, and (b) how much of that time was simply the delays brought on by court systems; I had an appeal last 18 months once on a simple procedural issue, and the fact that it took 18 months had nothing to do with my efforts at all.

I'd also like to know how valid the defenses actually are; one lawyer quoted in the story suggests that they're not very valid:

"This is every lender's nightmare," says Robert Summers, a Stuart, Fla., real-estate lawyer who represents Commercial Services of Perry, an Iowa-based buyer of distressed debt, which own Campbell's mortgage and has been trying to foreclose. "Someone defending a foreclosure action can raise defenses that are baseless, but are obstacles for the foreclosing lender," he says, calling the system "an unfair burden" for lenders.

The story doesn't mention whether the homeowner has ever been punished for raising baseless defenses, and a baseless defense is one thing in the eyes of the other lawyer -- every lawyer I've met has thought every claim raised against them was baseless, no matter how stupid they were for thinking that -- and another in the eyes of the Courts. (As I pointed out here.)

What I know is this: Whenever a story like that makes the news, I field calls for 2 or 3 weeks from current and prospective clients who expect me to be able to do the same thing -- so thanks, media, for not bothering to learn the details and provide them in that article; I enjoy spending up to 1/3 of my time in the office explaining to people why their foreclosure isn't necessarily going to be the same as that woman's, and in the process often dashing the hopes of people who thought MSN's story was promising them a free house.

Another mortgage broker sentenced to prison for preparing false loan applications.

While entirely-fraudulent mortgages and mortgage claims have been rare in my practice so far, they haven't been nonexistent, and, as I noted not so very long ago, courts and law enforcement are starting to actually enforce the laws regarding mortgage brokers and bankers who fail to protect the public -- or, worse yet, actively manipulate the public into bad loans for their own personal gain. The latest news on that front is the 5 1/2 year sentence handed down to a member of a mortgage fraud ring:

A former Sun Prairie tax preparer who took part in a mortgage scam with a real estate agent and a bank loan officer was sentenced Thursday to 5½ years in federal prison. Gail L. Mendez, 45, also took part in a scheme to destroy evidence of the mortgage fraud scam once it was discovered, and prepared fraudulent tax forms that falsely claimed dependents and child tax credits. The three took advantage of a Park Bank program that allowed mortgage borrowers to apply for loans using an Individual Taxpayer Identification Number instead of a Social Security number. The program required the submission of two years’ tax returns to the bank as proof of income. From February 2006 to October 2007, the scheme resulted in $8 million in loans using false tax returns that inflated borrowers’ incomes, resulting in a $498,000 loss to Park Bank.

(Source.) That won't necessarily do anything for the borrowers who took out loans they couldn't afford; it's not clear from following the investigation whether the borrowers knowingly signed false documents -- but it is clear that Wisconsin law places a clear duty on the brokers and bankers to not falsify documents, while that chapter, 224, says nothing about borrower duties. So, as I pointed out here, the law says brokers have responsibility for violations even when the borrowers may be liable under other laws. (I haven't yet investigated whether the doctrine of in pari materia would affect claims of borrowers in this type of situation, but I suspect it would.)

Proxy Pro 7 remote access software is a must. If you want to make money, that is. If you're in business to LOSE money, then you don't need this.

The other day, I had to spend over an hour on the phone with a lady from the tech support site at the company where I bought our new laptop; I was having trouble installing the wifi modem and needed help.

Over and over, the very patient lady kept explaining to me what I should do next and how I should do it, speaking like you would to a 3-year-old to make sure I did the stuff right. It would've been simpler to just have HER do the stuff, but, of course, she was not there in my living room; she was Somewhere Else.

If I'd had the remote access software Proxy Pro 7, it wouldn't have mattered where she actually was - -she could have been there and (virtually) in my living room at the same time. The Proxy Pro 7 software allows people who need it to get access to computers remotely -- allowing help desk workers to fix your staffs computers without coming to the site, or allowing you to log onto your work computer from another site, and even allowing you to monitor computers used by your workers without them knowing.

The program has high-level encryption security, so it's not like anyone can just get into your computer; it'll be restricted to the people you WANT to get into your computer -- and will help reduce downtime at your work. I can't count the number of times this year alone that I've had no computer and have been hampered in my blogging... I mean working.

(Actually, I can count. It was 3 in January. But I wanted to make a point.)

You can even customize who can get into what computers and who can do what, so employees can remotely log on and get paperwork and emails, while system administrators can log on and fix problems, making sure that way that you can't have your network destroyed by someone trying to fix their fantasy football team on the weekend.

(Not that that happened to me. You can't prove anything.)

The Proxy Pro 7 software would've saved me an evening at home to do something fun, and more importantly, it'll help keep your office and business running smoothly.

I do my taxes Homer Simpson style. (Consumer Law Matters.)

Before I get around to talking about whether or not Kevin Scheunemann is right about the applicability of the false advertising statute to "tacos" from Taco Bell (SPOILER ALERT! He's right!), I thought I'd give a timely warning to people facing questions about who to call for tax help as those W2s start landing in mail boxes. From CBS MoneyWatch.com comes a story that first hit in August, 2010:

Roni Deutch, television’s “Tax Lady,” was sued Monday for perpetrating a“heartless scheme” that swindled thousands of people across the nation into paying huge fees to stop the IRS from collecting back taxes. “Tax Lady Roni Deutch…promises to significantly reduce [client's] IRS tax debts, but instead preys on their vulnerability, taking large up-front payments but providing little or no help in lowering their tax bills,” said California Attorney General Jerry Brown when announcing the suit. Brown is attempting to permanently stop Deutch’s allegedly misleading advertisements and force her to pay $34 million in restitution to thousands of former clients. Deutch failed to return phone calls prior to press time.

Deutch in the past settled a similar suit filed by New York City's Department of Consumer Affairs.

I tried to get an update on the case, but couldn't find any further information about it. So you've been (vaguely) forewarned.

Yo no quiero carpetas y los suplementos! (Consumer Law)

If you've bought anything at Taco Bell in the last two years in Wisconsin, you might be able to get double your money back. And while doubling the ninety-nine cents you spent on that "taco" may not seem like a great deal, keep in mind that you could also recoup your attorney's fees, so I'll be waiting for your call.

You may already have a claim against Taco Bell because Taco Bell has been sued for false advertising - -the alleged falsity being their claim that they use beef. According to the Denver Post:

A law firm claims in a lawsuit that Taco Bell has advertised falsely in referring to using "seasoned ground beef" or "seasoned beef" in products.

Taco Bell's meat mixture contains binders and extenders and does not meet the minimum requirements set by the Department of Agriculture to be labeled as "beef," according to the legal complaint. The class-action lawsuit was filed Friday in federal court in the Central District of California by the Montgomery law firm Beasley, Allen, Crow, Methvin, Portis & Miles.

One thing to keep in mind: In Wisconsin, at least, the question of reasonable reliance can be a defense to a claim of false advertising -- and can anybody claim they actually believed Taco Bell was selling beef?

Another thing to keep in mind: What in the heck are 'binders and extenders?' I didn't see that on the commercial.

Family Law Involves More Than Just Family.

People don't always realize that Family Law doesn't just involve child custody issues. While custody disputes can be front and center in many family law cases, the dissolution of a marriage -- or other family law cases such as paternity filings, "palimony" or unjust enrichment, and separation -- involves questions beyond simply "where are the kids going to be."

Businesses need to be divided up, tax consequences taken into account, retirement money needs to be thought of, real estate transactions need to be finalized -- all of those complicated legal affairs requiring expertise.

Getting a good family law attorney requires getting someone who can handle the business and financial issues along with the emotional and custodial questions. Groups like the Aitken Partners can be a good start -- a family law group where other in-house professionals know about trusts and estates and business organizations and bankruptcy and financial issues can save time and money by having all your concerns dealt with in-house.

Always choose a lawyer (or any professional) with great care, and always make sure you get professional help and advice for any legal concern.

I may have to start coming in Saturdays. (Laws You Should Know About.)

What are you doing this Saturday? Probably not planning on going to court -- but you could be, because by law the circuit courts have to schedule Saturday sessions in Wisconsin.

Section 753.23 of the Wisconsin Statutes reads:

Night and Saturday sessions. In each circuit having 4 or more branches, at least one branch shall schedule and hold sessions at least one Saturday and 2 evenings after 6 p.m. per month. In each circuit having 2 or 3 branches, at least one branch shall hold one session per month on Saturday or in the evening after 6 p.m. In single branch circuits, Saturday and evening sessions may be held as the convenience of the litigants requires.

Dane County has 17 branches, so they should have at least one Saturday and 2 evening sessions per month. I've practiced here 12 years and never heard of a single evening or weekend session, at all.

So I called the clerk of courts, and asked them if they had any session scheduled for weekends or evenings, and the guy who answered the phone said "There is no court on the weekends." I said "Not a single session scheduled for any night or weekend?" and he said "Nope."

I'll be honest: I did not discover this law entirely on my own. Judge Hue, in Jefferson County, noted in a recent hearing that litigants had a "right" to have a Saturday hearing if they wanted, and Judge Hue's a smart guy -- so I went and looked it up and he's correct.

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Violating a court's placement order can be grounds for modifying that placement order. (Family Law Matters.)

"Family" makes up 25% of the title of this blog, but I tend not to discuss it that much. The main reason for that is that family law makes up only about 10% of my practice, on average, these days -- I tend to gravitate towards the more interesting cases, leaving fights over property division and run-of-the-mill divorces to others.

But I keep an eye on family law cases, nonetheless, and I was intrigued by Stumpner v. Cutting, a December, 2010 unpublished Court of Appeals case that's remarkable for its brevity and for the fact that it apparently found that being held in contempt of a family court placement order can be grounds to modify that order.

The facts are scarce. There's only 951 words in the entire opinion, and the Court gets right into it. As I gather, Stumpner is the mom, and in May, 2009, Stumpner's ex, Cutter, moved for a modification of placement. The grounds for that motion were (apparently) a May, 2009 contempt order holding Stumpner in contempt and requiring supervision of contact for two years as a sanction for violating the placement orders. The violation apparently was allowing contact with some relative of Stumpner's, but that's not entirely clear to me. At the time of the hearing on Cutting's motion, Stumpner hadn't seen the child for five-plus months.

Stumpner argued that the motion was filed within two years of a prior modification of the judgment, in 2007, and so the higher standard for modifications should apply. The Court of Appeals found that part frivolous: the two-year waiting period for modifications runs only from the date of entry of the original order, not subsequent modifications.

Stumpner's other arguments were not as clearly spelled out. The Court of Appeals rejected her claim that the Court hadn't made a "best interests" finding, and held, with respect to the contempt sanction, that

Stumpner has not suggested any legal reason why her failure to prevent Grace's contact with her relative since the 2007 order cannot be considered a substantial change. To the extent Stumpner may now be arguing that the circuit court could not consider those prior matters because there was no transcript from them, we reject the argument. Stumpner had ample opportunity to object on that ground at the hearing, but did not. Furthermore, she did not claim that the circuit court's description of those matters was incorrect, or that she was not herself already familiar with those matters at the time.

Which makes clear that it wasn't the contempt order, per se, that allowed the modification -- but by being held in contempt for violating the Court's order, Stumpner laid the groundwork for the Court to find that same conduct to be proof of a substantial change of circumstances.

All of which is kind of confusing: Stumpner apparently violated the order regarding some contact with a relative -- but the details aren't provided, making it hard to determine what use this case is to future litigants -- and either that violation in and of itself was grounds for modification of the judgment, which seems odd, if only because we don't know who was allowed contact or why or how often, or that violation plus the contempt sanction of supervised visits was a substantial change of circumstances, which lets the circuit court bootstrap itself into modifications by issuing contempt sanctions that then become the basis for later modification.


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Computers pulvis populus quod nunquam screw sursum (Consumer Law Matters/Tales Of Pro Se Litigants)

Corporations may be people, according the US Supreme Court, and women may not be people, according to Justice Antonin Scalia, so the state of the law as to who is a person and who is not is in flux -- and that extends even to credit card collection lawsuits.

In HSBC Bank v. Griswold, an unpublished Wisconsin Court of Appeals opinion, a pro se litigant won one -- despite creative arguments by the creditor about what is or is not hearsay.

HSBC sued Griswold for collection of a $1,300 account -- but didn't attach anything to the complaint. Griswold responded by raising various claims, including that the complaint was insufficient for failure to include a copy of the credit agreement. HSBC moved for summary judgment, and provided two affidavits in support -- one from its lawyers, and one from an employee of the company.

Griswold attacked the affidavits on Palisades grounds, saying that the affiant didn't show that the business records attached -- the credit card statements -- were admissible. The circuit court disagreed and granted summary judgment to HSBC. The Court of Appeals reviewed and described the affidavit as follows:

In her affidavit, Hopper avers that she is a business analyst at HSBC, a custodian of HSBC's records, which are kept in the ordinary course of business, and she is familiar with the records of Griswold's account. She also avers:

3. The Defendant applied for an HSBC credit card account, which application was approved. As the result of receiving and approving said Application, HSBC opened said account for the Defendant and issued to him a credit card to make charges thereon.

4. During the time period indicated on the attached itemized monthly statements, the Defendant made the charges and payments indicated thereon, resulting in a balance due and owing in the amount of $1,319.45 as of the date of the last of such statements, plus any applicable interest, penalties and late fees accruing after such date.

The affidavit, the Court said, failed to establish the admissibility of the records because, first, paragraph 4, there, could not be on personal knowledge. In its footnote, the Court said

With respect to paragraph 4 of Hopper's affidavit, nothing in the affidavit suggests it is based on Hopper's personal knowledge. The only reasonable inference from her affidavit is that this statement is based on her reading of the monthly statements, and HSBC does not argue otherwise. Accordingly, as we have already explained, the critical issue is the admissibility of the monthly statements.

The Court went on to note that Hopper's affidavit doesn't meet all the elements of a business records affidavit:

It is true that Hopper's position with HSBC makes it reasonable to infer that she has firsthand knowledge about how Griswold's monthly statements were prepared.(6) But she does not state in her affidavit how they were prepared. Thus, the affidavit does not make a prima facie case that they were prepared as required by § 908.03(6). Nothing in Palisades suggests that, simply because the affiant is an employee of the original creditor, the affidavit need not aver that the records were made as required by § 908.03(6).

Hopper would have to say how the records were created -- and how that information was obtained. So Hopper has to say how she knows the way the records are created, not just that they were created.

That's where HSBC got creative themselves: Rather than simply put an affidavit of admissible evidence in, HSBC argued, essentially, that the records didn't need to be admissible because they were not made by people.

As an alternative to arguing that Hopper's affidavit shows the statements' admissibility under WIS. STAT. § 908.03(6), HSBC argues, for the first time on appeal, that the statements are computer-generated statements and are not hearsay. HSBC points out that "hearsay" is "a statement [made out of court] by the declarant offered in evidence to prove the truth of the matter asserted," § 908.01(3); and a "statement" is "an oral or written assertion or nonverbal conduct of a person," § 908.01(1) (emphasis added). See also § 908.01(2) ("A 'declarant' is a person who makes a statement."). According to HSBC, the authorities it cites support the view that computer-generated statements do not meet the definition of hearsay and the only issues regarding their admissibility are authentication and relevance.

So, HSBC is saying, computers aren't people, and hearsay must come from people. (Which means, if you are a fan of Justice Scalia's, that women's statements aren't hearsay.)

The Court of Appeals declined to address the issue -- while secretly addressing the issue. Noting that it wouldn't rule on that claim because it wasn't raised in the trial court, the opinion goes on to say

If we were to agree with HSBC on this point, the issue would become: does Hopper's affidavit provide an adequate foundation for authentication of these documents? The authorities on which HSBC relies indicate the affidavit is not adequate, even under HSBC's alternative theory....To demonstrate the authenticity of computer-generated records, HSBC must introduce "[e]vidence describing a process or system used to produce a result and showing that the process or system produces an accurate result."... Hopper's affidavit does not mention the process that generated the monthly statements, nor does the affidavit make any averments from which one might infer that the computer system was accurate and working properly. Therefore, assuming without deciding that the monthly account statements are not hearsay, the affidavit does not show the foundation required for their admissibility under the authorities HSBC provides.

(That was actually the second no-decision the Court makes in the case; it also declined, again, to address what standard of review it will apply to Palisades-decisions by circuit courts.) But the decision does leave open the possibility that in the future, we'll see affidavits simply saying "here's a computer generated billing statement that's presumed accurate because it was generated by a computer."

Because, you know, anything issued by a computer must be accurate. Right? Of course that's right. Computers never screw up.

The matter was remanded to the circuit court for further proceedings, which ought to give HSBC enough time to hire Watson, The Jeopardy! Computer as an expert witness for the trial.



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Lawyer, heal thyself! (Or, rather, DON'T. Get yourself another lawyer.) (Tales Of Pro Se Litigants.)

I very often on this blog advise people to hire a lawyer; typically, what I say is that in response to the question "Do I need a lawyer?" the only possible answer is yes.

That goes doubly for lawyers who represent themselves -- and triply for lawyers who represent themselves in disputes involving their clients, too.

The case of Perine v. Wild, despite the plethora of lawyers involved in it, is a Tale Of Pro Se Litigants because in it, the lawyer at the heart of the case didn't hire himself a lawyer, and ended up on the wrong side of $30,000 in payments.

The underlying case involved the two titular litigants: Perine bought Wild's house because Wild was going to lose it in foreclosure; Wild then rented the home from Perine. When a dispute arose between Wild and Perine, Perine sued to evict Wild and Wild counteclaimed for fraud.

Wild hired a lawyer by the name of Raneda, and Raneda, at the outset of the case, suggested that Wild make rent payments into his trust account pending the final outcome of the case. The court approved that and ordered that Wild make the deposits. Raneda then filed an affidavit in which he swore he would

retain the funds that [he] receive[d] from Mr. Wild in [his] client trust account until further order from the court.

Thereafter, it seems like Wild stopped making those payments, and the Court dismissed his claims as a sanction for violating the order. Meanwhile, and more seriously, Raneda withdrew the money in his account -- $8,700 -- to pay his own fees.

Without telling anyone.

After Wild's claims were dismissed and Wild filed for an appeal, the circuit court held a hearing in which it ordered Raneda to "keep holding" the money. Meanwhile, Perine -- remember him? -- wanted the $8,700 on his claim, so the Court for some reason ordered Perine (the victorious litigant) to file a garnishment action against Raneda.

I don't know why the court didn't simply order Raneda to turn the money over. But it didn't. So Perine started a garnishment and then Raneda disclosed that the money was gone and the Court found that the money "should have remained on deposit," all of which led Perine to file a motion for contempt for Raneda's violating the order to hold the money.

The circuit court then did not find Raneda in contempt, but it did find that the failure to tell everyone the money was gone ran up extra costs, and held Raneda personally responsible for the costs -- which were $24,130.35.

Seriously.

$24,130.35.

On a garnishment?

That's not totally clear from the appellate opinion. But it looks like that's the case, because the court ordered Raneda to pay "all fees incurred since" the date the Court ordered him to hold the money and Perine to start a garnishment. Which was after the case-in-chief had been decided.

I don't know how $24,130.35 in fees is wracked up on a garnishment. Even with a serious amount of work done in the case (judging by CCAP), $24,000 in fees is a phenomenal amount. That's eighty hours of work, if the rate is $300 per hour. That's a lot.

But the Court found it reasonable, so I'm not really in a position to second-guess.

In any event, Raneda was ordered to pay $24,000 in fees plus pay the $8,700 in original money, so he filed an appeal, and that's where things went really wrong.

Raneda's first point on appeal decided everything: Raneda argued that the Court's order for sanctions had to be reversed, but he lost because he hadn't appealed. Raneda's notice of appeal had been filed only in Wild's name, not Raneda, so Raneda had never validly filed the appeal, and the claim was dismissed. (Raneda's argument that the Court could add "and his attorney" to the notice of appeal was rejected.

That left Wild's appeal, in which Wild (through Raneda, apparently) argued that the circuit court should have held that Perine's motion for contempt was frivolous under section 802.05. (Got that argument? Read it twice.)

That's yet another use of the section 802.05 motion that I dislike -- add it to the growing list: Filing an 802.05 motion claiming a case is frivolous -- a very high standard to meet -- when the circuit court ordered the other side to bring the case? And when it's only being brought because you hid the facts from the Court?

But Wild's motion is more specific: Wild says that Perine's request for fees and costs was, itself, frivolous. The opinion doesn't say what Wild's exact argument is, which is sad: I'd love to see how they got around the facts, as I pointed out, that the circuit court had authorized the garnishment and that the garnishment had only failed because Raneda had spent the money on his own fees.

But maybe they didn't even try. The Court of Appeals noted that

Wild has not supported his argument with legal authority or a developed argument.

Which'll cause you to lose, every time.

Wild also appealed from the garnishment order, but since that order was directed at Raneda, who didn't appeal, the Court of Appeals found Wild's appeal to be moot.

In the end, Raneda was himself a pro se litigant who should've hired a lawyer to defend him once it became clear that he was a party to the action -- and especially when it became clear that his interests were increasingly divergent from his client's. Lawyers aren't immune from the same flaws that afflict other pro se litigants' claims. $32,000 is a steep price to pay to learn that lesson -- so now you and I get to learn it for the price of admission to this blog.


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Those Massachusetts foreclosure cases are kind of a big deal, but not for the reasons most people think.

By now, everyone's heard about the big Massachusetts ruling that either completely overturned our economic and property system, or did nothing much at all, depending on who you listened to.

The two cases -- combined as U.S. Bank v. Ibanez, January 7, 2011, from the Massachusetts Supreme Judicial Court -- garnered a lot of attention in the past week, most of it really unjustified, as the cases did nothing more than what courts should have been doing all along: looking at the evidence and trying to determine whether the documented paper trail shows that the foreclosing plaintiff actually holds the mortgage.

In each case, without getting too much into details, it was pretty apparent that neither bank had proven that it held the mortgage. Sure, they'd alleged they held the mortgage, and had the right to sell the property, but they never proved that, using actual paper -- and "actual paper" is the way our property system works: we record interests in property and (so far as I know) every state requires that transfers of interest in property be done in writing (with very limited exceptions), so when a person (and corporations are now people, according to the U.S. Supreme Court, even though women might not be, according to 1/9 of that same Court)(I'm starting to get a little embarrassed by the fact that back in 1994 Justice Scalia met with me at my request.)

The details of the Ibanez cases therefore aren't that interesting: What happened was that through three or four assignments, in some cases assignments-in-blank, the mortgages allegedly ended up in the hands of the foreclosing banks -- which then did what banks do when they believe they hold the note and aren't getting paid: they foreclosed.

At that point, the banks had to prove they held the mortgage at the time of foreclosing, and they didn't do so: The assignments they provided were done after the sales (in one case, backdating the assignment's effective date, a trick that didn't work), so the courts held -- as they should have -- that the banks hadn't proven they had the right to foreclose.

All of that is so straightforward that it shouldn't have gotten any attention: A true headline would have been "Massachusetts court holds that plaintiff must provide evidence to support legal claims." Granted, courts have over the years grown more and more lax about actually enforcing the rule that even banks have to prove their case, but have we progressed so far down the wormhole that imposing a straightforward rule of law (The Massachusetts court described the rule it applied as "well established in [the state's] case law and... statutes").

Apparently so -- but that ruling in and of itself doesn't change anything, especially because it appears that the assignments have now been given and so if the borrowers don't start paying their mortgage, they'll be right back where they started from. Still, it's worth talking about, for two points that went largely unnoticed ...except by me, because I'm sharp that way.

Here's point number one: The banks (or investors) are likely going to be making a killing on these foreclosed properties once things recover. If you thought the bailout was good for banks -- and it was -- wait until property values start climbing back up and the banks start unloading the houses they've got sitting on their books.

In this case, for example, Ibanez borrowed $103,500 on December 1, 2005. After at least five transfers of the loan, the mortgage ended up in a trust pool managed by U.S. Bank. At the foreclosure sale two years later, U.S. Bank bought the property for $94,350 -- "bought" by credit-bidding, I assume, against what it was owed. The court described the amount bid as "significantly less than... the estimated market value of the property."

So even if no money had ever been paid on the loan, U.S. Bank could sell the property for as little as $103,500 and get back all money that had ever been advanced. It could sell the property for $130,000 and get back all money ever advanced, plus, probably, its legal fees and any carrying costs of holding the property.

So if that property was worth, say, $150,00, U.S. Bank could sell the property for $140,000, pay a commission, get back all its money -- and make a nice bit of profit on the property. And that's if the house is worth only $150,000. Over one-half of all houses in Massachusetts have an estimated market value of $176,000 or more, so it seems likely that U.S. Bank can (or could) have sold the Ibanez home for more than $150,000.

So when you ask -- or your clients ask -- why are they so insistent on getting my home, think about that: because they're going (eventually) to make a profit -- a big one. Lenders, and investors in these trusts, have gone from speculating on mortgage-backed securities to speculating on real estate.

(That also maybe means that housing prices will, ironically, be depressed for a long time -- because if the lenders/investors start unloading these houses at below-market values, that will in turn depress prices of other homes -- comparables, in real estate terms -- leading to difficulties in selling houses and refinancing loans. Nicely done, banks! I look forward to TARP II.)

Secondly, and more importantly for lawyers and their ilk, Why didn't US Bank ever produce the documentation that it had the loan? Under the Massachusetts procedures, when U.S. Bank went to confirm the sale, it had to provide proof it had the loan. The first court even gave U.S. Bank more time to get the documents in order... and ultimately, both U.S. Bank and Wells Fargo -- the other lender -- couldn't do it. They provided assignments-in-blank, copies of documents downloaded off websites, unsigned proposals... but no actual assignments of actual mortgages to actual companies.

One of the litigants (it doesn't matter who) tried to "prove" that its client held the mortgage by noting that there was a property designated by ZIP code in the trust pool documents, and that that particular property had the same payments as the borrower. (Which, I'll note, I would believe is sufficient at least to survive a motion for summary judgment; it allows an inference that the property is the one assigned).

But through all that, where were the assignments and trust pools and other signed documents? There were lawyers working on these cases, lawyers from legitimate law firms (I assume) working for legitimate banks (I assume) and through all this time they never produced the documents that showed they held the notes at the time of foreclosure?

Doesn't that mean that they didn't exist? If so, then that led me to question why it would be that the lawyers and banks would even fight the case -- why, once they reviewed their documents and found that they couldn't prove they'd had the assignments at the critical time, did they even bother going on instead of saying "Sorry, judge, it turns out our clients were wrong."

That's what I would have done.

But, then, I don't work for a giant bank that has no real interest in the mortgage at all and is simply trying to keep income flowing to unnamed investors, so I have to make sure that my clients are getting value for their money and my clients pay close enough attention to what I'm doing that I can't simply barge ahead with no real chance of winning.

And, I expect, if the banks had simply said "Sorry, we were wrong," they'd have gotten sued -- potentially -- for wrongful foreclosure or FDCPA violations or some such, so they had to try to fight on it, as a last-ditch effort to avoid that liability... liability that was almost certainly coming anyway, and now will (or could) be coming, because they've lost their case on the merits and are issue precluded from contesting it in an action down the road -- so the investors and lenders paid their lawyers to foreclose, then paid their lawyers to try to justify their foreclosing, and then will pay their lawyers (presumably) to defend against the lawsuits that will be brought for the foreclosing.

But, based on those anticipated property profits, they can afford it.


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Pretty soon, civil complaints will be 147 pages long. With footnotes. Which is okay, because I like footnotes.

Note: I meant to put a picture of a stack of papers on this post, but "stack" on my pictures file led to these cookies, and then I liked the picture. So I left it.

Wisconsin is a "notice pleading" state -- which means that a complaint needs to only contain a

short and plain statement of the claim, identifying the transaction or occurrence or series of transactions or occurrences out of which the claim arises and showing that the pleader is entitled to relief.

Sec. 802.02(1)(a), Stats. The Seventh Circuit Court of Appeals -- federal courts use the same pleading standards, really, as Wisconsin -- once reminded litigants that in moving to dismiss a complaint for leaving something out, the real inquiry should be "what rule requires that the missing information be put in there?"

(For an example of just how skimpy a complaint can be, see this guide to federal forms, including sample complaints for negligence that would surely be attacked if it were filed.)

I began thinking of the sufficiency (or lack thereof) of complaints when I read the second opinion arising out of a malpractice action brought by a flooring-company owner who served two-plus years in prison and sued his criminal defense lawyer for negligence.

The case -- Roehl v. Gisselman, 2009 AP 2801 -- has been around a while. Back in 2000, Gisselman was hired to defend Roehl on an OWI charge; the charge was "5th or subsequent offense," and Roehl was convicted of that count.

Roehl claimed, though, that Gisselman should've collaterally attacked an earlier conviction -- one that was charged as a civil court/municipal matter when it was actually a criminal-level second offense. Had Gisselman successfully attacked the prior conviction and got it set aside, Roehl's offense level would have dropped to 4th offense, which Roehl contended would have led to a shorter sentence. Roehl claimed that the lengthy sentence he got caused his business to go under, and sued Gisselman.

On the first go-round, Gisselman won but the Court of Appeals reversed, finding there to be an issue of material fact as to whether Gisselman's strategy -- to not collaterally attack the conviction -- was a reasonable choice or not.

So on the second go-round, Gisselman abandoned that tactic and instead moved to dismiss Roehl's complaint for failure to state a claim upon which relief could be granted -- arguing that Roehl's failure to allege that he'd been denied the right to counsel in the earlier case was fatal to his claim now.

The Court of Appeals recited the usual mantra about failure-to-state-a-claim motions and then upheld the dismissal of the case because

Based on the allegations in the complaint, Roehl's 1998 conviction was not subject to collateral attack... Roehl's complaint does not allege that he was denied the constitutional right to counsel in his 1998 case.

Well. I don't have Roehl's complaint, so I have to go on what the Court of Appeals said Roehl alleged, which is this:

Roehl's complaint alleges Gisselman was negligent by failing to collaterally attack his 1998 OWI conviction.... it alleges that (1) the judgments in that case were entered without subject matter jurisdiction; and (2) Roehl was denied the constitutional right to be present in court for the adjudication of his guilt."

The Court earlier in the opinion noted that

the complaint also alleged that because second-offense OWI is a criminal offense, Roehl had a constitutional right to be present in court for the adjudication of his guilt, making the default judgments entered against him improper.

(Emphasis added.)

The standard, though, is not just what was plead, but whether what was plead, plus reasonable inferences from what was plead, show that Roehl can prove his case. So the qustion is: do Roehl's allegations-- that he was erroneously charged civilly rather than criminally, that he was not present in court when a default judgment finding him guilty was entered against him, and that he wanted his lawyer to collaterally attack that conviction-- allow a court to reasonably infer that Roehl had no lawyer at the hearing in question?

I think the answer to that is obvious: yes. An argument that he was defaulted in a civil case that was mischarged carries a reasonable inference that Roehl had no lawyer representing him in that case, which in turn allows an inference that Roehl was denied his constitutional right to counsel in a criminal case (because the state mischarged it as a civil offense.)

The Court disagreed with me, and with Roehl, of course -- which narrows the field of notice pleading and imposes a court-issued burden on litigants to plead more specifically than the statutes require.

For good measure, the Court noted that Roehl must also prove, to sue his criminal defense attorney, that he was actually innocent of the charges. That requirement -- unique to malpractice suits against criminal defense attorneys -- goes almost unmentioned and completely undiscussed, but should have been the focal point of the opinion, because it seemed from the opinions in this case that Roehl didn't even contend he was innocent of the earlier charge, so the case should have been dismissed on those grounds, not pleading grounds.

Read more consumer law cases.

You might think a dispute over patent lawyer fees woudl be interesting, but, then you'd be wrong.

It's not often that a basic contract case generates enough interest on my part to write about it -- but when a basic contract case seems to announce new rules of law, applies rules not previously used to decide contract cases, and highlights an ongoing problem with a procedural rule that's supposed to simplify and resolve cases, that case deserves some bloggin'.

So, the case of Ziolkowski v. Great Lakes, although a business case, bears some examining because it does bear on consumer litigation -- as it involves attorney's fees, a contrast with an unpublished consumer case, and the trouble with statutory offers of settlement.

In Ziolkowski, the dispute centered over fees owed to the Ziolkowski firm, which was hired by Great Lakes in 2004 to do its patent work. Great Lakes then switched firms in 2006, leaving an unpaid balance of about $45,000 with Ziolkowski. By 2009, the money must still have been unpaid, because Ziolkowski was in court demanding its money, plus 18% annual interest.

Ziolkowski got summary judgment in its favor, mostly. The circuit court found that Ziolkowski was owed the $45,000 or so, but denied 18% interest on the money. Ziolkowski had argued the 18% interest was justified because the invoices it sent out to Great Lakes had a notation at the bottom that said unpaid balances would face a 1.5% finance charge. Great Lakes said no way, and pointed out that the engagement letter, which it had signed and which was the contract between the parties, said nothing about interest.

The circuit court agreed with Great Lakes, and thereafter, Ziolkowski appeared to lose interest (pun intended!) in its case: It didn't bother drafting a written order commemorating its win, it didn't pursue collection of the amount any further, and it didn't even appear at the final pretrial conference the circuit court held -- a pretrial attended solely by Great Lakes, which got to tell the judge all about all the offers of settlement it had made and convinced the circuit court to enter judgment on the terms it requested, including awarding costs to Great Lakes because Ziolkowski had not responded to the offer of settlement, and setting interest at 5%.

Ziolkowski then woke up and started fighting - -objecting to this and that and the other thing, but the circuit court entered the judgment it said it would -- more or less-- following the ruling it had made at that final pretrial Ziolkowski hadn't bothered to attend.

That left Ziolkowski with no choice but to appeal -- although it's not clear what it was appealing at that point. Sure, the 18% annual interest was a pretty good sum -- $22 per day -- but it had been awarded interest at $7.43 per day, so Ziolkowski was spending appellate money to try to make up that $15 per day-- or about $5,500 per year, or about $20,000. Given the costs of an appeal, it's kind of hard to justify a fight over that amount. But damn the torpedoes! Full speed ahead! Fight on!

And lose on! Mostly. The Court of Appeals affirmed on the interest rate, finding that lawyers have a duty to draft their agreements clearly and that the contract here mentioned nothing about interest rates -- and specifically that the agreement said nothing about a "penalty for late payments."

But the Court of Appeals got there through a curious route. First, it cited to the Supreme Court Rules governing lawyers' ethical duties -- but a host of cases in the past has held that the ethical rules are not substantive rules of law for use in the courts to help determine liability.

Buttressing that offhand reference to the SCR rules is the Court's sentence declaring that

An attorney may not add a material term to a fee agreement without the express agreement of his client

...which makes sense from a contractual point of view, and is no doubt a rule of law applicable to all contracting parties, not just attorneys... but the sentence is given without citation to any case or statute (or even ethical rule) which supports that holding. And the very next case cited in the opinion, Laney v. Ricardo, 169 Wis. 267, is a case that doesn't deal with lawyers at all, doesn't deal with contracts that are silent on an issue, doesn't deal with the addition of material terms to the contract -- all Laney does is support the oft-held rule that a "meeting of the minds" is necessary to a contract.

When contracts are ambiguous - -when there's not a meeting of the minds because different people could understand it different ways-- the Courts are supposed to construe the contract. Here, the contract between the parties was silent as to interest and penalties -- but the invoices, unobjected to (apparently) for years, did say what was supposed to happen. So if the contract was ambiguous, the Court should have looked to parol evidence to construe it (construing it against the drafter, if necessary, a basic rule of contract construction), or, if the contract was unambiguous, the Court didn't need to look at rules of meetings of minds or ethical rules at all; it could have just held that the contract didn't allow for interest or penalties, without getting into what lawyers can do and what the ethical rules say about anything. The opinion could have simply said: "The contract is silent about penalties, and therefore unambiguously does not allow penalties."

Or they could have said "The contract is ambiguous as to whether interest and penalties can be charged; as drafted, that ambiguity goes against Ziolkowski, and so they cannot charge interest and penalties."

But it didn't say either of those things: It talked about there being a meeting of the minds and ethical rules and went on to hold that Ziolkowski and Great Lakes didn't agree on interest or penalties -- so there could be no interest or penalties. In other words: Ziolkowski said black, Great Lakes said white, and white wins. Which is essentially the right rule -- but for the wrong reasons, or at least for the wrong stated reasons.

(The Court of Appeals rightly overruled Ziolkowski's claim that a UCC case governed this issue - -noting that the UCC applies to goods, not services.)

What nobody appeared to bring up was the Unpublished Elephant in the room -- the fact that such a case had earlier come up but could not be cited as precedent because the earlier case was unpublished and was (un)published before the date on which litigants could make marginal use of unpublished decisions.

In the case of Alaskan Fireplace Inc. v. Everett, 2003 WI App 162, a contractor asserted a 1.5% finance charge on overdue invoices -- against a consumer, who argued that the case was governed by the strict protections of the Wisconsin Consumer Act. The Everett creditor got the 18% award: The contract, the Court found, was not a credit contract and not subject to the various requirements the Wisconsin Consumer Act imposed -- and the 18% penalty was allowable. In Everett, the proposal the Everett's signed did say that there would be a 1.5% charge on late payments-- which would have allowed the Court here to cite to Everett as saying that you've got to include the 1.5% charge on the contract, but Everett was unpublished, so it's of no use (except to bloggers who want to talk about it.)

The distinction between those cases would be helpful to have lawyers and litigants rely on, because the rule would be put it in the contract or you can't add it later, but we can't have that distinction because Everett was unpublished, and because Ziolkowski didn't bother to cite any cases for the proposition that a party -- even a lawyer -- cannot alter or amend material terms of the contract without the other party's consent.

As an added bonus, not only was Ziolkowski's reference to lawyers being unable to alter material terms without the consent uncited, but the phrasing also appeared to limit that rule to only lawyers; words matter, as lawyers know, and opting to phrase the rule as

An attorney may not add a material term to a fee agreement without the express agreement of his client

(the exact wording of the opinion) makes that rule seem unnecessarily limited to lawyers; there are no parties (that I'm aware of) which can add material terms to a fee agreement without the express agreement of the other party, so why the restrictive language?

But, again, remember, the Court also found that there was no meeting of the minds --

Ziolkowski and GLD did not agree on the issue of penalties for late payment fees...

So there was no contract on that issue -- or shouldn't have been. Which meant that talking about penalties and additions of material terms was, again, pointless: the parties never agreed to any late charges, period.

An unanswered question that I have about the case is this: while the parties did not agree to a penalty or finance charge, they did, presumably, agree to have Great Lakes pay invoices in a timely manner -- without discussing what would happen if that didn't occur. So isn't the contract ambiguous as to what might occur if the fees aren't paid?

A corollary is this: What if Ziolkowski hadn't put anything in its fee agreement about paying its invoices, period-- say, maybe, assuming that business clients understand they'll be paying the lawyer. Suppose Ziolkowski simply said "We'll charge you $X per hour and bill you monthly." Would the absence of contractual language requiring Great Lakes to pay mean that Ziolkowski couldn't charge Great Lakes? Or, more specifically, could charge them but couldn't force them to pay?

And if not -- if that's ridiculous -- then why does the absence of a late-payment penalty from the contract mean that there can be no penalty? Why, in other words, should Great Lakes understand that it must pay invoices sent it, even if the contract doesn't say so, but not understand that late payment might result in finance charges?

So Ziolkowski amounts to a limited silence is golden rule of contract interpretation: Don't mention an issue in the contract, and that term cannot be enforced... unless, of course, it's so obvious that the term must be enforced that it'll be enforceable. Think about that when you review the next writing you're asked to sign -- or which you ask someone to sign.

That's a conclusion that can be drawn because Ziolkowski didn't bother to simply apply the longstanding rules of contractual interpretation. Application of well-settled rules of law would have made this a run-of-the-mill ho-hum case... and I wouldn't have been talking about it. But application of ethical rules and interpretations without ever mentioning ambiguity or lack thereof, that's worth talking about.

Things get more interesting when the Court takes up a second issue, one involving the statutory offer of settlement made by Great Lakes -- and in this issue, too, Ziolkowski provides a novel set of facts and yet another reason to dislike the statutory offer of settlement procedure, a procedure I find extremely hard to follow and which should be scrapped altogether at this point.

The statutory offer of settlement under section 807.01, Stats., is intended to short-circuit litigation, but frequently (it seems to me) leads to more arguing over the procedures.

Westlaw lists 196 cases which mention, in one way or the other, section 807.01, Stats., and 47 of those also have the word ambiguous in them -- so 47 reported cases deal with ambiguity and offers of settlement. That shows how difficult the statutory offer of settlement procedure can ce -- and Ziolkowski doesn't do much to help that.

Here, the circuit court

on September 3, 2009, ...issued a written decision and order granting summary judgment to Ziolkowski for the unpaid legal fees of $45,656.41, but denying Ziolkowski’s claim for 18% interest on the unpaid fees.

Then, a month later, Great Lakes served a "statutory offer of judgment" proposing to resolve the case by giving Ziolkowski the money awarded plus 5% prejudgment interest, but leaving out the words per diem when discussing how the interest was to be calculated.

Ziolkowski, as I said, didn't respond to that at all, and the circuit court later entered judgment along the lines proposed by Great Lakes, giving Great Lakes costs because Ziolkowski did not get a greater judgment than had been offered.

The Court of Appeals -- without irony -- found the offer of settlement to be ambiguous, because Great Lakes had phrased one section as

(1) the principal sum of $45,656.41; plus (2) $8,596.04 in interest, computed as 5% annual simple interest rate on each of the invoiced amounts shown in the attached spreadsheet, from the date of each invoice to the date hereof; plus (3) 5% annual simple interest on the total amount of $7.43, from the date hereof until the date of acceptance of this offer; plus (4) costs.” The circuit court subsequently entered a judgment for: “(i) $45,656.41 for unpaid bills, plus (ii) 5% annual simple interest on the bills which comprise that amount, from the dates thereof to October 12, 2009, which interest comes to $8,596.04, plus (iii) further 5% interest, in the amount of $7.43 per day on the combined amount of $54,252.45, from October 12, 2009 to the date of entry of judgment.

The offer, as written, seemingly awarded 5% interest on $7.43, rather than on "the principal sum... plus $8,596.04 interest..." because the words per diem were left out... but did it? Did the Ziolkowski firm really read it that way? Because it could be read the way Great Lakes seemingly intended it to read, which would be Ziolkowski, you get the fees, plus 5% interest through the date of judgment, plus interest at 5% from the date of the offer...

(...which, by the way, is why I'm a fan of plain-English writing for lawyers: Write like a lawyer, lose like a lawyer. I try to write like a regular person, and include examples and calculations, something that lawyers always object to and sometimes mock -- but I've never lost thousands of dollars for a client because I tried to be fancy, either.)

In any event, the Court of Appeals found the offer ambiguous, construed it against Great Lakes, and awarded costs to Ziolkowski, rather than Great Lakes.

And, remember how I mentioned that the whole appeal was over $20,000-$30,000 in interest? The fight over costs was for even less. Great Lakes submitted a request for about $1500 in costs. The amended judgment isn't up on CCAP yet, but it's not very likely that Ziolkowski's costs exceeded $3,000. It'd be interesting to see how much time was spent writing, researching, and arguing that $4,500 swing, as at the going rate for most lawyers, more than 15 hours spent on it meant that Ziolkowski lost money arguing the case. My rule on arguing costs? Don't spend more time than you stand to gain. In other words, don't argue about $10 in costs if it costs $15 to make the case.

So a fight over nothing much results in bad rules, strained interpretations, and my first blog post of 2011.

Fraud amongst the gingerbread houses. Allegedly. (That is, the fraud is alleged. The gingerbread houses are real.)

Hilldale Mall in Madison isn't one of my favorite places to shop-- although we did take in Bodies there the other day -- but apparently enough other people like it that the developer and some banks are brewing up a fight over operation of the mall.

Hilldale's in foreclosure, with liens in favor of Bank of America, and a company called TriSail, which is a wholly-owned subsidiary of Bank of America. Back in March, TriSail's lawyers attempted to get a receiver appointed, but the defendants successfully convinced the judge not to take that step by somehow convincing the court -- Judge Albert of Dane County-- that the people who'd missed payments on property taxes (leading to $15,000 a month in penalties) were the best people to leave in charge of the shopping center.

That led to a February, 2010 foreclosure action-- and a judgment of foreclosure in October, 2010... and now, a lawsuit from a different creditor, UW Foundation, claiming that interest payments on loans it made haven't been made since March, 2009, and alleging forgery and a right to triple damages as a result. (The defendants deny the forgery allegations and say they had the right to sign other people's names to the documents.) The lawsuit apparently caught the public attention when the defendants' lawyer filed a motion to stay discovery while a criminal investigation is pending.