Bank of N.Y. Mellon Corp. v. Hernandez

299 So.3d 461

The BANK OF NEW YORK MELLON CORPORATION as Trustee, etc., Appellant,

v.Yigani HERNANDEZ, et al., Appellees.

No. 3D19-328

District Court of Appeal of Florida, Third District.

Opinion filed January 22, 2020.

Akerman LLP, and Nancy M. Wallace (Tallahassee); Akerman LLP, and William P. Heller (Fort Lauderdale); Akerman LLP, and Eric M. Levine (West Palm Beach), for appellant.

Dunlap & Shipman, P.A., and Michael J. Henry (Santa Rosa Beach); Quiñones Law, P.A., and Timothy R. Quiñones (Lake Worth), for appellee Inwood Investments, LLC.

Before FERNANDEZ, MILLER and GORDO, JJ.

GORDO, J.

The Bank of New York Mellon appeals the trial court's sua sponte dismissal of its foreclosure case prior to the presentation of any evidence based on the conclusion that this Court's holding in Yelen v. Bankers Trust Company, 476 So. 2d 767 (Fla. 3d DCA 1985), precluded recovery and rendered the trial futile. The Bank contends it properly invoked the mortgage's due on sale clause and that Yelen is inapplicable as the relevant language differed. We hold that the dismissal was procedurally improper and Yelen is not controlling under the facts of this case. Thus, we reverse and remand for further proceedings.

FACTS AND PROCEDURAL BACKGROUND

In July 2006, Yigani Hernandez executed a promissory note and mortgage encumbering the subject condominium unit. The mortgage contained a due on sale clause providing that upon sale or transfer of the property without the Bank's consent, the Bank would be entitled to accelerate the loan.¹ If Hernandez failed to pay the accelerated loan amount, the Bank would be entitled to file a foreclosure action.

Following an assessments lien foreclosure sale, the property was transferred to the condominium association, and then to Inwood Investments, LLC, the present owner. The Bank did not consent to either transfer. Thus, the Bank accelerated the loan and instituted the underlying foreclosure proceedings upon nonpayment of the full loan amount. The complaint alleged that Hernandez had "defaulted under the Note and Mortgage because the subject property was transferred or sold without the Lender's prior written consent." Inwood argued that the due on sale clause was not triggered and the foreclosure proceedings were improper because Hernandez did not voluntarily initiate either transfer.

The case proceeded to non-jury trial. On the day of trial, the Bank made an ore tenus motion for continuance because it did not have a witness immediately available to testify.² Notwithstanding the pending motion for continuance, the trial court instead dismissed the case finding it futile as a matter of law based on its reading of Yelen. The trial court found that the Bank would be unable to present any testimony or evidence that Hernandez violated the due on sale clause in the mortgage because, as both parties agreed, there had not been a voluntary transfer of title. The trial court entered judgment accordingly and denied rehearing. This appeal followed.

LEGAL ANALYSIS

The trial court's dismissal of the Bank's case without a pending motion and based solely on its legal conclusion drawn from proffered testimony prior to the presentation of any evidence was improper. A trial court cannot dismiss a cause of action without a pending motion or objection. Lawson v. Frank, 197 So. 3d 1269, 1271 (Fla. 2d DCA 2016). It is a due process violation for a trial court to sua sponte dismiss a claim without notice or a hearing. Id.; see also Surat v. Nu-Med Pembroke, Inc., 632 So. 2d 1136, 1138–39 (Fla. 4th DCA 1994) (reversing the trial court's sua sponte dismissal for failure to state a claim at a hearing on a motion in limine because it was "in essence, a hearing on an unfiled, unnoticed motion for summary judgment and ... unfair to the plaintiff"). Further, a trial court is precluded from granting a motion for involuntary dismissal or directing verdict before a plaintiff has concluded its presentation of evidence. See, e.g., A.N. v. M.F.-A., 946 So. 2d 58, 59 (Fla. 3d DCA 2006) (citing Sheldon Greene & Assocs., Inc. v. Williams Island Assocs., 550 So. 2d 1142, 1143 (Fla. 3d DCA 1989) ); SJS Enters., Inc. v. Cates, 547 So. 2d 226, 227 (Fla. 4th DCA 1989). Here, Inwood did not file a proper motion arguing that Yelen barred the Bank from proceeding. Thus, dismissal was inappropriate at that stage of the proceedings.

The trial court's dismissal was based on a misapplication of this Court's opinion in Yelen.³ Indeed, the final judgment specifically stated that the trial court had

reviewed paragraph 18 of the mortgage and the caselaw provided by the Defendant, specifically Yelen v. Bankers Trust , 3rd DCA [sic], 476 So. 2d 767, and determined the borrower would have to have the intent to sell the property to a purchaser in order to violate paragraph 18 of the mortgage and in order to trigger the default.

The trial court continued:

As the undisputed facts do not establish this violation as a matter of law, the Court finds that even if a witness for the Plaintiff were to appear, any testimony provided would be futile and the Plaintiff would not be able to establish a default under paragraph 18 of the mortgage and given that there were no other alleged defaults pled, the Plaintiff would not be able to prevail.

Because the Yelen question is "purely legal, and will not be clarified by further factual development," it is properly before this Court and ripe for our review. Susan B. Anthony List v. Driehaus, 573 U.S. 149, 167, 134 S.Ct. 2334, 189 L.Ed.2d 246 (2014) (quoting Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 581, 105 S.Ct. 3325, 87 L.Ed.2d 409 (1985) ).

It is evident from the record that the plain language in the due on sale clause of the underlying mortgage differs from that interpreted in Yelen. The relevant portion of the due on sale clause at issue here reads as follows:

If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender's prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if such exercise is prohibited by Applicable Law.

(emphasis added).

In contrast, this was the language on which Yelen was decided:

17. Transfer of the Property: Assumption. If all or any part of the Property or an interest therein is sold or transferred by Borrower without Lender's prior written consent, excluding (a) the creation of a lien or encumbrance subordinate to this Mortgage, (b) the creation of a purchase money security interest for household appliances, (c) a transfer by devise, descent or by operation of law upon the death of a joint tenant or (d) the grant of any leasehold interest of three years or less not containing an option to purchase, Lender may, at Lender's option, declare all the sums secured by this Mortgage to be immediately due and payable.

Yelen, 476 So. 2d at 768 (emphasis added). The due on sale clause in the Yelen mortgage clearly required a voluntary transfer "by Borrower." As such, this Court concluded that the foreclosure sale by the Clerk of Courts did not trigger the clause since that sale was not "by Borrower." In the present case, however, the due on sale clause is undeniably different—the operative words "by Borrower" have been removed. The revised due on sale clause encompasses any and all transfers of the subject property. For these reasons, Yelen is neither controlling in this case nor alone precludes the Bank from foreclosing.⁴

The concurring opinion posits that the Yelen question is "unripe and unnecessary to the resolution of this appeal." Based on the trial court's dismissal of the action on the basis of Yelen, it is evident that this issue is indeed ripe for this Court's consideration and review. The parties have briefed the issue at length, acknowledging that the issue is properly before this Court—neither side raising the argument that it is not ripe. The concurrence also intimates that this opinion is advisory because it does not involve a real controversy. An advisory opinion is one "advising what the law would be upon a hypothetical state of facts." North Carolina v. Rice, 404 U.S. 244, 246, 92 S.Ct. 402, 30 L.Ed.2d 413 (1971) (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240–41, 57 S.Ct. 461, 81 L.Ed. 617 (1937) ); see also Hewitt v. Helms, 482 U.S. 755, 761, 107 S.Ct. 2672, 96 L.Ed.2d 654 (1987) ("The real value of the judicial pronouncement—what makes it a proper judicial resolution of a ‘case or controversy’ rather than an advisory opinion—is in the settling of some dispute which affects the behavior of the defendant towards the plaintiff ."). The opinion of this Court is not predicated upon hypothetical facts, but rather on the actual dismissal of the underlying foreclosure suit based on the trial court's interpretation of this Court's precedent. A cardinal principle of judicial restraint is that an appellate court should not sua sponte raise arguments that the parties themselves forewent. Both parties to this appeal and the trial court itself requested this Court consider the issue. Remanding this case without clarification of the...