You may not remember the court case IndyMac v. Yano-Horoski by name, but there's probably a good chance that you remember the story. This was the case where a judge wiped out a mortgage and gave the defaulted homeowners their home free and clear because IndyMac (now part of OneWest) had acted in such bad faith in dealing with the homeowner.
The Judge in the case, Jeffrey A. Spinner, normally known for his polite and unassuming manner, spared no adjectives in ripping IndyMac up one side and down the other in his ruling last November. Spinner described IndyMac's conduct as "overreaching, shocking, willful and unconscionable." In court-ordered workout sessions, the IndyMac rep's demeanor toward the Horoskis was "opprobrious" and her attitude was "condescending." In total, IndyMac's actions toward the Horoskis had been "harsh, repugnant, shocking and repulsive," Spinner ruled.
When he got around to spelling out what all this bad faith conduct was going to cost IndyMac, he switched parts of speech, stomping out the mortgage and the debt several times over with a blizzard of verbs. Robert Franco, in his Source of Title Blog, described the judge's orders:
The judge ordered that the note in favor IndyMac be "canceled, voided, avoided, nullified, set aside and of no further force and effect." It further ordered the mortgage to be "vacated, canceled, released and discharged of record." And, just in case that was not enough, IndyMac, "its successors and assigns are hereby barred, prohibited and foreclosed from attempting, in any manner, directly or indirectly, to enforce any provision of the aforesaid Adjustable Rate Note and Mortgage or any portion thereof."
It was as if Spinner subconsciously believed that if he could just destroy this mortgage enough times with enough different words, it would never come back.
But as Robert predicted then, the Horoski mortgage was destined to rise from the dead. According to Robert and many other legal observers, the decision handed down by Judge Spinner exceeded his authority-- exercising a power that had no basis in the law. "Not even a bankruptcy judge has the authority to set aside a residential mortgage," Robert wrote. "I would expect IndyMac to file a successful appeal."
Indeed, the ruling was appealed. And, as expected, when they decided the case last month, the appeals court reversed the decision. The appeals court said that Judge Spinner was not authorized to vacate a foreclosure judgment and wipe out IndyMac's mortgage:
Here, the severe sanction imposed by the Supreme Court of canceling the mortgage and note was not authorized by any statute or rule, nor was the plaintiff given fair warning that such a sanction was even under consideration . The reasoning of the Supreme Court that its equitable powers included the authority to cancel the mortgage and note was erroneous, since there was no acceptable basis for relieving the homeowner of her contractual obligations to the bank, particularly after a judgment had already been rendered in the plaintiff's favor.
Unfortunately for the Horoskis, this decision reinstates a $525,000 mortgage debt and a foreclosure judgment against them. The house is only worth about half the debt, and the Horoskis very likely cannot pay. This likely means that they will lose their home. The Horoskis have health problems and losing their home will likely create great hardship for them. Mr. Horoski sounded resigned when told of the ruling, telling a reporter that he didn't know if he had the heart left to continue fighting the bank. This case, like most foreclosure cases, is unlikely to have a particularly happy ending.
Still, Spinner's ruling will probably be remembered by many as a ray of light in a rather dark period. While the ruling didn't stand up to legal scrutiny, it may have sent a more important message... that the justice system, at least some part of it, still hears the little guy, and isn't going to just stand idly by while he is systematically treated like an inconvenient piece of trash by powerful, moneyed interests.