Tuesday, February 8, 2011
The Florida Judicial Ethics Advisory Committee opines:
Whether a senior judge who owns several residential mortgages on properties and receives income from those properties is prohibited from handling mortgage foreclosure matters?
The Commentary to Canon 5D(1) cautions that a judge must avoid financial and business dealings that involve the judge in frequent transactions or continuing business relationships with persons likely to come either before the judge personally or before other judges on the judge’s court. It further explains that “this rule is necessary to avoid creating an appearance of exploitation of office or favoritism and to minimize the potential for disqualification.” Additionally, the facts submitted by the inquiring senior judge do not reflect that the judge has invested in, nor has any stock ownership in, any banking institution which may come before the judge. See, e.g., JEAC 96-13 (judge having a de minimis interest in a banking institution should recuse if no appearance is made by adverse party, or, if adverse party appears, the judge shall make disclosure of stock ownership interest where a corporation in which stock is owned is a party to the mortgage foreclosure action). Instead, the inquiring judge is standing in the same shoes as a lending institution by securing the borrowers’ loans on several residential properties. We conclude that under the facts submitted, there is no violation of Canon 5D(1).
Furthermore, Canon 5D(2) permits a judge to hold and manage investments in real estate and to engage in other remunerative activity. Here, the inquiring senior judge is essentially acting as a mortgagee, owning each residential mortgage, and deriving income from each mortgagor/borrower. Under these circumstances, nothing prohibits the inquiring judge from handling mortgage foreclosure matters as a senior judge unless the inquiring senior judge is placed in the unusual circumstance of personally initiating a foreclosure action against any one of the borrowers who should default on the residential mortgages. In the event that this situation arises, then the inquiring senior judge should discontinue handling mortgage foreclosure matters in which the judge's ruling on an issue reasonably could be perceived as providing the judge with persuasive authority in the judge's favor, or some other advantage, in the judge's own case.
One Committee member believes that the judge may have a duty to disclose to the parties that the judge is either involved in a foreclosure action as a mortgagee, or has previously been involved as a mortgagee, or reasonably anticipates becoming involved as a mortgagee. This Committee member believes that it is not just the judge's potential for creating persuasive authority that a party or an attorney representing a mortgagor would reasonably be concerned about, but that the judge may have a bias against mortgagors. If the judge's disclosure reflects that the judge has had bad experiences with non-paying mortgagors, the party may very well have a reason to seek to have the judge disqualified.