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Seventh Circuit Upholds Dismissal of Foreclosure Lawsuit for Failure to State a Claim - Crawford v. Countrywide Home Loans

November 3, 2011

As San Bernardino foreclosure defense lawyers, we were saddened to read a case in which a federal appeals court declined to resurrect a couple's foreclosure lawsuit. In Crawford v. Countrywide Home Loans, L.V. and Yvette Crawford sued their mortgage servicer and, originally, a wealth of other people over their foreclosure and eviction from their Indiana home. The Crawfords took out a mortgage in 2001, but fell behind in payments due to job problems and medical bills. They were ultimately foreclosed on in 2006 and evicted by the local sheriff's department in 2009. They sued the servicer, the sheriff's department and an apparently fraudulent foreclosure prevention lawyer. Ultimately, however, the Seventh Circuit agreed with the district court that they had failed to state a claim.

The Crawfords paid $995 to a foreclosure defense company to negotiate a loan modification with Countrywide. No modification was negotiated or granted, so the firm hired an attorney, Gary Dilk, to represent them in the foreclosure case filed by Countrywide. Dilk never contacted them or did anything on their behalf, and the home was foreclosed in August of 2006. The home was sold that December, and the Crawfords unsuccessfully moved for relief from the foreclosure. They were permitted to stay in the home during an appeal but ultimately were unable to make a payment to an escrow account and lost that right. After eviction, the couple sued in state and federal court, with the cases eventually consolidated in federal court. The opinion doesn't specify their claims, but said they named Dilk, Countrywide, the county sheriff, the county board of commissioners and a John Doe. All defendants but Countrywide were dismissed, and the federal court denied their motion to add Dilk's employer and Bank of America. Countrywide then successfully moved for summary judgment.

The Crawfords appealed. The Seventh Circuit started by establishing that it had subject matter jurisdiction over the claims. Two of these are claims that relitigate issues from the Crawfords' state-court cases; dismissal of these was appropriate. The others were not appropriate for dismissal under the same doctrine, the Seventh said. However, it upheld summary judgment on the other claims over the Crawfords' arguments. They argued that Countrywide did not present enough evidence that there was no genuine issue of material fact in the case. This was incorrect, the appeals court said; the burden of proving such issues exist is up to the Crawfords, and they failed to meet it. Other arguments the couple made against summary judgment were meritless or failed to address important issues. Likewise, the couple's arguments for retaining the county sheriff and Dilk as defendants failed to connect allegations of wrongdoing to any particular claim. Thus, the Seventh upheld the district court's decision on all counts, though it remanded the case to request that the district court send jurisdictional issues back to state court.

The most disappointing thing about this case, in our experience as Costa Mesa foreclosure defense attorneys, is that the Crawfords may very well have had a case. In a footnote, the Seventh Circuit noted that the facts the Crawfords pleaded indicate a possible malpractice claim against Dilk and his employer, but they did not cite those causes of action. There are also plenty of viable actions against foreclosing lenders that fail to honor their legal obligations, although it's not clear whether this case would qualify. Unfortunately, it seems as if the legal representation the couple chose, and the choices that attorney (if any) made, foreclosed their claims. Thus, Countrywide, Dilk and other defendants were able to escape liability without ever addressing the meat of the dispute. As Los Angeles foreclosure defense lawyers, we're proud to promise our clients that while no legal outcome is guaranteed, we will do our very best to ensure that the outcome is not determined by procedural errors.

If your home is in default or foreclosure, or you know you'll be there soon, don't hesitate to call Howard Law, P.C., for help. To set up a meeting and tell us your story, call us today at 1-800-872-5925 or send us a message online.

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