MORTGAGE ELIMINATION SCAMMER BITES THE DUST & ATTORNEY WARNED TO STOP MAKING STALL ARGUMENTS

A South Florida company that persuaded scores of troubled Palm Beach County homeowners to give up their property deeds is facing more legal problems as state and federal judges challenge its plan to help borrowers beat the bank.

In three recent court decisions, the firm’s actions were condemned.

Fidelity Land Trust, which was shut down by the state in September, lost a key battle in circuit court last week to unfreeze its operations.

The Jan. 7 order from Broward Circuit Judge Michael Gates follows a blistering report issued last month by a federal magistrate that said the company’s legal theories attempting to cancel underwater mortgages are meritless, frivolous and have “absolutely no chance of success.” That conclusion was affirmed by a federal judge in a Dec. 27 order.

The company, along with an affiliated firm, the Sunshine State Land Trust, owns about 84 homes in Palm Beach County, deeded to them by homeowners believing that they offered a solution to the borrowers’ housing woes. The properties range from a million-dollar Boca Raton mansion on the Intracoastal Waterway to a $60,000 condominium west of Florida’s Turnpike.

Statewide, an estimated 250 homeowners signed over their deeds to the trusts, whose operations were halted in September by the Florida Attorney General’s Office. The civil complaint brought by the office under Florida’s Deceptive and Unfair Trade Practices Act said the land trusts wrongfully guaranteed they could cancel the homeowner’s mortgage, misrepresented that homeowners can void their mortgage through a quiet title action that purports the land trust is a third-party buyer, and charged an advance fee before completing foreclosure rescue services.

Defendants have offered various defenses. Some have said Fidelity’s legal theories should be allowed to run their course in court, not curtailed by the state. At stake are dozens of properties in Fidelity’s possession whose homeowners are in legal limbo — no longer title owner, and either trying to regain their property or hoping Fidelity still will triumph.

The recent orders, however, reflect disdain for Fidelity’s arguments.

“A state judge has told plaintiff (Fidelity) that its legal theory is meritless; a federal judge has told plaintiff its legal theory is frivolous; and the Florida Attorney General has obtained injunctive relief against plaintiff,” wrote federal District Judge Roy Dalton in the Dec. 27 order. “Yet even in its objection, plaintiff clings to the notion that its claims have merit. They do not.”

Dalton also warned Fidelity’s attorney, Boca Raton-based Howard Feinmel, that if he continued to prosecute claims based on the theories presented, he may be referred to a grievance committee. A message left at Feinmel’s office was not returned.

Fidelity’s business model, according to the state’s complaint, is to have homeowners deed their properties to the trust, which then, as the new owner, sues the bank to cancel the mortgage. The idea is if the mortgage was recorded originally, then assigned to another lender without the transfer being recorded, it is not enforceable against Fidelity, which as a third-party purchaser did not know who the new lender was.

The Broward court order by Judge Gates says Fidelity Land Trust was organized in December 2011 by Parkland resident Edward Cherry, using a fictitious name.

In a June article about Fidelity, The Palm Beach Post tied Cherry to the company through his registered fictitious name Edward C. Tudor.

Cherry, who is not an attorney, was permanently barred in a 2009 consent judgment by Florida’s attorney general from dealing in consumer debt-settlement services after a state investigation concluded companies he was involved with “diverted millions of dollars to themselves and a coterie of families and associates.”

Gates’ order denying a request to cancel the state’s asset freeze was in response to a motion by defendant Paul Gellenbeck, who says he is Fidelity’s director of operations. Gellenbeck maintains there are actually two Fidelity companies — Fidelity South, which he runs, and Fidelity North, run by defendant Lawrence Diodato.

Gellenbeck protested the attorney general’s “shotgun approach,” which lumped all defendants and 12 companies together in one complaint. He said his firm is not a foreclosure rescue company and that he never promised he could cancel a client’s mortgage.

Outside companies referred clients to Fidelity, Gellenbeck said. When he learned of inappropriate statements or promises, he asked the companies to correct them.

Also, Fidelity has deeded back several homes to clients who were either unhappy with its service or who the company could not help, a claim supported by county property records.

But the arguments weren’t enough to sway Gates, who wrote, “Despite the established principles of law, Fidelity has misled numerous consumers within Florida since 2011.”

At least 15 lawsuits filed in Florida by Fidelity were moved to federal court by banks. In the majority of cases, Fidelity requested a voluntary dismissal soon after the case was moved. In at least four lawsuits, lenders asked the court to sanction Fidelity and force it to pay attorney fees for filing frivolous cases.

Cherry said in an email last week that the arguments have legal merit and that it wasn’t Fidelity but its attorneys who made the “independent legal decision to dismiss the cases removed to federal court.”

“I wonder why the judiciary will not entertain any legal theory contrary to the position of the banks,” said Cherry, who was not allowed to submit objections in one of the cases.

Indeed, in a case where Fidelity unsuccessfully tried to cancel a mortgage in Orlando, the judge urged sanctions against the firm.

“There was no plausible basis in law for the filing of this action, which any competent, professional attorney would have known by reading the statutes,” wrote U.S. Magistrate Thomas Smith in a December report that recommended Fidelity be forced to pay some bank attorney fees.

Royal Palm Beach-based defense attorney Tom Ice, who tangled with Fidelity to retrieve a client’s deed, said he thinks it will be hard to recover from such sternly worded judicial decisions.

“Faced with this scathing order from a federal judge,” Ice said, “I would definitely have second thoughts about moving forward.”

The Palm Beach Post was the first news organization to bring attention to the controversial practice of transferring a deed and then asking a court to cancel the property’s mortgage.

Three recent court decisions have gone against the land trust.

Jan. 7: Broward County Circuit Judge Michael Gates denied Fidelity’s request to dissolve the attorney general’s injunction that froze its assets, saying the company’s claims are “false, and deceptively and/or unfairly mislead consumers and are contrary to the established law of Florida.”

Dec. 27: U.S. District Judge Roy B. Dalton, of the Middle District of Florida, sanctioned Fidelity Land Trust by requiring it to pay partial attorney fees to the bank it sued trying to cancel an Orlando mortgage. Fidelity voluntarily dismissed its lawsuit 14 days after the bank moved it to federal court. According to Dalton: “(Fidelity) is aware that its claims have no merit. Its business model, however, does not rely on the ability to prevail on the merits. Rather, plaintiff appears to be in the business of delaying lawful foreclosures.”

Dec. 4: U.S. Magistrate Thomas Smith, in the same case involving the Orlando home, wrote in a report that Fidelity brought a “totally meritless” lawsuit against the bank, the real motivation of which was to “further a plan or scheme to defraud the (homeowner) and other consumers.”