Banks

Judge holds bankers in contempt, threatens jail

Posted on Thursday, January 13, 2011

Representatives from six major banks that skipped a hearing in a Miami condo association receivership case could face the wrath of Miami-Dade Circuit Judge Jennifer Bailey today if they fail to show up a second time.
The judge already has declared lenders that own or are foreclosing on units at Bird Grove Condo are on the hook for $105,999 in expenses for the court-appointed receiver for the association. She also held the six in contempt of court.
Bailey last month granted a request by the receiver, Miami attorney Lisa Lehner, to be paid for pulling the building — an asset for the foreclosing banks — back from the brink of condemnation.
When Lehner was appointed in March, garbage hadn't been collected for weeks, electricity was about to be cut off, the building had no insurance, and an elevator was broken. She turned it around in months.
"They have property and collateral that if I walk away from turn into nothing," Lehner said. "Here I am, sitting as their property manager, working for free after practicing law for 28 years. It's just not fair."
Lehner's demand for $5,579 in expenses per unit went uncontested at a Dec. 1 show cause hearing where Bank of America was the only lender to send a representative. Missing were Flagstar Bank, GMAC, PNC Bank, SunTrust Bank, U.S. Bank and Wells Fargo.
In November, banks owned two units and were foreclosing on another 17 units in the 39-unit building at 2734 Bird Ave. between a gas station and a gallery. A one-bedroom, one-bath unit is listed for sale for $50,000. Bank of America filed nine foreclosure cases, followed by GMAC with five.
The six lenders were ordered to send non-attorney representatives to today's hearing, when Bailey will discuss whether the banks also should be required to pay the receiver's upcoming maintenance fees. Bailey's order threatened to have bankers arrested if they didn't show, and she warned, "You may be held in jail up to 48 hours before a hearing is held."
Lawyers for the six banks did not return calls for comment before deadline. They include Hollywood's David G. Cornell with Ben-Ezra & Katz, Weston's Elsa Hernandez Shum with the Law Offices of David J. Stern and Tampa attorney Erik DeL'Etoile with Florida Default Law Group.
It's possible future expenses may not be billed by Lehner, who plans to step down from the post.
"I'm withdrawing. It's their property. They're going to have to figure out what to do with it if they want to save it," she said. "I certainly was prepared to not be paid for a long time." But, she said, she did not think she would be spending 11 months without pay.
Justifying Fees
Lehner's dilemma is similar to many cases involving foreclosing banks and troubled homeowner or condo associations, in which a judge appointed a receiver at the request of the association. But in this instance, the association was almost broke; in March, it had only $6,316 left to operate a building that Lehner estimates costs $10,000 a month to maintain.
The association counted more than $143,000 in accounts receivable, "all of which clearly presented a serious cash-flow problem," Lehner wrote in a July 30 motion.
She would be working for free for an undetermined period of time even though associations typically pay for receiverships.
Demanded Expenses
After spending months ordering repairs, collecting association fees and paying the building's overdue bills, Lehner demanded her expenses, arguing banks were getting a free ride.
Bailey asked her to distinguish her case from a 3rd District Court of Appeal decision in 2009, which determined lenders in the process of foreclosure aren't responsible for unpaid association fees until they take title, regardless of how long they delay final judgment.
Lehner's attorney, Lipscomb Eisenberg partner Deborah Baker, cited a 1911 Florida Supreme Court decision, a 1959 legal treatise and a 1992 opinion from the 11th U.S. Circuit Court of Appeals.
That was enough to convince Bailey, who congratulated Lehner and Baker for their work in court on Nov. 1.
"In all candor, the efforts of the receiver and her attorney have been nothing short of heroic in connection with this building," the judge said.
"No doubt," responded Bank of America's representative, Akerman Senterfitt shareholder Jeff Trinz.
Trinz was the only representative to appear at the show cause hearing the next month.
Lehner and Baker also credited Trinz as being the only bank representative to cooperate with them.
Association Law Group partner David C. Arnold, a North Bay Village attorney who represents condo associations and is not involved in the Miami case, has his doubts about Bailey's ruling.
"How they would hold the banks liable for the receiver, I think, is a stretch. I don't think it's going to hold up. It's innovative thinking, but I just don't see how the 3rd DCA's going to affirm any type of action like that," he said.
State laws governing condo associations ensure common expenses are assessed against unit owners, not the banks holding mortgages, he said.
Undercutting the receiver's arguments is the fact that efforts to save the building might not benefit the banks, Arnold said.
"They don't have to foreclose at all. A lot of them just walk away and give up their mortgages," he said.
The way Lehner described lenders' attitudes in her case could point to that end game.
"Most of the banks don't seem to want to do anything about it," she said. "Without any thought of any consequences, not to care about the human cost? All right, I get that. But not to care about their property? I just don't get that."
Jose Pagliery, DAILY BUSINESS REVIEW


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