"In her relationship with HSBC, Doyle essentially abdicated her professional judgment to a black box." This line came from Circuit Judge Fuentes and summarizes not only this case, but the large scale Mortgage Fraud that has run rampant in our society today. The case In re: Niles C. Taylor; Angela J. Taylor, is a snapshot of why so many people are having so many issues with paying their foreclosures today and it is largely because lawyers and entire firms are ignoring the professional rules of conduct. United States Court of Appeals for the Third Circuit, No. 10-2154 (March, 2011).
The best way to begin discussing this case is with another quote from the court "This case is an unfortunate example of the ways in which overreliance on computerized processes in a high-volume practice, as well as a failure on the part of clients and lawyers alike to take responsibility for accurate knowledge of a case, can lead to attorney misconduct before a court."
In a nutshell, Mr. and Ms. Niles C. and Angela J. Taylor filed for a Chapter 13 bankruptcy in September 2007. In the Taylors' bankruptcy petition, they listed the bank HSBC, which held the mortgage on their house, as a creditor. In turn, HSBC filed a proof of claim in October 2007 with the bankruptcy court.
At the time of the bankruptcy proceeding, HSBC believed the Taylors' home to be in a flood zone and obtained "forced insurance" for the property because of their belief and the cost was passed on to the Taylors. The Taylors disputed HSBC‟s position and continued to pay their regular mortgage payment, without the additional insurance costs. However, when HSBC filed its proof of claim, it failed to mention that the Taylors were making their regular payments and instead treated each payment as a partial payment, so that, in its records, it appeared the Taylors were becoming more delinquent each month.
Because of this, in March 2008, the Taylors filed an objection to HSBC‟s proof of claim. The objection stated pointed out the dispute over the insurance. HSBC's attorney, Lorraine Doyle, of the Udren Law Firm, then filed a response to the objection to the proof of claim. The response did not discuss the insurance issue at all. In fact, Doyle later admitted that she made that statement simply as "part of the form pleading," and "acknowledged having no knowledge of the value of the property and having made no inquiry on this subject." She even said she could not even speak with the client to confirm the information.
Additionally, there were Request For Admissions filed that also claimed that the Taylors were delinquent and also did not mention the insurance. Finally, there was a motion for relief from the stay requested as well.
When the there was a hearing in the bankruptcy court May 2008 for these issues, HSBC was represented at the hearing by a junior associate at the Udren Firm, a Mr. Fitzgibbon. This attorney was forced to admit that HSBC had received a mortgage payment for November 2007, even though both the motion for stay and the response to the Taylors' objection to the proof of claim stated otherwise.
Despite these glaring errors, Mr. Fitzgibbon urged the court to grant the relief from stay, because the Taylors had not responded to HSBC's RFAs. In the RFAs was an "admission" that the Taylors had not made payments from November 2007 to January 2008, which was clearly false.
The bankruptcy court denied the request to enter the RFAs as evidence, noting that the firm "closed their eyes to the fact that there was evidence that . . . conflicted with the very admissions that they asked me [to deem admitted]. They . . . had that evidence [that the assertions in its motion were not accurate] in [their] possession and [they] went ahead like [they] never saw it." Additionally, the court noted: "Maybe they have somebody there churning out these motions that doesn't talk to the people that-you know, you never see the records, do you? Somebody sends it to you that sent it from somebody else. I really find this motion to be in questionable good faith," the court concluded.
Ultimately, the court found the following violations of Rule 9011: Fitzgibbon's for pressing the motion for relief based on claims he knew to be untrue; Doyle's for failing to make reasonable inquiry concerning the representations she made in the motion for relief from stay and the response to the claim objection; Udren's and the Udren Firm's, for the conduct of its attorneys and HSBC's for practices which caused the failure to adhere to Rule 9011.
Though the court seemed particularly put off by these particular defendants' actions, they are far from a singular occurrence. It is these types of practices, mostly through the use of the Mortgage Electronic Registration System (MERS) that puts so many people in trouble with their foreclosures today. If Attorneys who work for the banks were held more accountable and forced to actually deal with not only the home owners but their own clients, then many of the current problem could likely be alleviated or avoided.