Voluntary dismissals and foreclosure paperwork irregularities examined.

In a case that could affect thousands of pending and future mortgage foreclosures, the Florida Supreme Court has been asked to prevent lenders from escaping sanctions for using fraudulent documents by filing voluntary dismissals.

But justices appeared skeptical of arguments in May 10 oral arguments that courts have inherent authority to reject the voluntary dropping of the case and instead impose sanctions, including dismissing the foreclosures with prejudice.

The appeal, Pino v. The Bank of New York, [case no. SC11-697] involved a foreclosure action in Palm Beach County. The original filing did not include an assignment of the mortgage, which was subsequently filed. Attorneys for defendant Roman Pino, Ice Legal, P.A., challenged the veracity of the assignment and sought to depose those who had prepared it. The day before those depositions, the bank voluntarily dropped the foreclosure case.

Five months later, it refiled the foreclosure with a different assignment document. That case was eventually settled with Pino, but not before his attorneys challenged the withdrawal of the original suit. They claimed the court should have stayed the dropping of the case and looked into the assignment issue, then imposed sanctions.

The trial court rejected that argument, as did the Fourth District Court of Appeal (57 So. 3d 950 (Fla. 4th DCA 2011)) in an en banc opinion. But the Fourth DCA certified the issue to the Supreme Court, asking if the trial court had the authority to hold an evidentiary hearing under Rule 1.540(b) or under its inherent authority to determine if the plaintiff committed fraud and whether the court should impose sanctions.

Under the current civil procedure rules on voluntarily dismissing a case, "It sets up a system whereby every litigant who comes before our courts has not only been condoned but encouraged to lie, to cheat, to steal, knowing if they are caught they can simply voluntarily dismiss and absolve themselves of that fraud," attorney Amanda Lundergan, representing Pino, told the justices.

But justices closely questioned Lundergan, noting that lawyers and parties already face a variety of sanctions if they use fraudulent documents.

"Once the first lawsuit is dismissed, I don't understand the harm your client has endured if in fact the bank has the right to foreclose," said Chief Justice Charles Canady. "I don't disagree that people should not come into court and file papers that are fraudulent or are inaccurate or are...