Fed. Nat'l Mortg. Ass'n v. Morton

196 So.3d 428

FEDERAL NATIONAL MORTGAGE ASSOCIATION, Appellant,

v.Charles A. MORTON, Latasha A. Morton, Chase Bank USA N.A., Valencia Park Homeowners' Association, Inc, Appellees.

No. 2D14–5165.

District Court of Appeal of Florida, Second District.

June 15, 2016.

Rehearing Denied July 14, 2016.

Mary P. Stella, Daniel Stein and David Rosenberg of Popkin & Rosaler, P.A., Deerfield Beach, for Appellant.

Mark P. Stopa of Stopa Law Firm, Tampa, for Appellee Latasha A. Morton.

No appearance for remaining Appellees.

SALARIO, Judge.

Federal National Mortgage Association (Fannie Mae) appeals from a final order dismissing this foreclosure action based on its alleged failure to comply with the notice requirements of paragraph twenty-two of the mortgage. We reverse and remand for further proceedings in light of the substantial compliance standard applicable to paragraph twenty-two questions that we announced in Green Tree Servicing, LLC v. Milam, 177 So.3d 7, 13 (Fla. 2d DCA 2015).

Fannie Mae commenced this suit by filing a foreclosure complaint against Charles and Latasha Morton alleging that they failed to make monthly payments on their note and mortgage. Ms. Morton filed an answer alleging that Fannie Mae failed to comply with paragraph twenty-two of the mortgage.¹ Paragraph twenty-two is a standard term of residential mortgages requiring that the lender provide the borrower with thirty days' written notice of certain matters before accelerating the debt or filing a foreclosure action. There is no dispute in this case that a notice letter was timely sent; the dispute appears to be whether that letter actually did what paragraph twenty-two requires.

The case was called for a nonjury trial on October 3, 2014. Because the notice requirement of paragraph twenty-two is a condition precedent to foreclosure, a determination that Fannie Mae failed to satisfy it would have disposed of the case. See Konsulian v. Busey Bank, N.A., 61 So.3d 1283, 1285 (Fla. 2d DCA 2011). Before they presented any evidence, and in order to avoid a potentially unnecessary trial when there was a question about the satisfaction of that condition, the parties stipulated to having the trial court decide the sufficiency of the content of the notice letter by way of a defense motion for involuntary dismissal at the beginning of trial. The parties proceeded on the basis that the trial court could resolve any issues related to the content of the notice letter by comparing the text of that letter to the text of paragraph twenty-two and determining whether the letter said what paragraph twenty-two required it to say.

Ms. Morton argued that Fannie Mae's letter violated paragraph twenty-two because it failed to specify the type of payment Fannie Mae believed the Mortons failed to make—e.g., principal, interest, taxes, or insurance—failed to specify the action required to cure the alleged default, failed to state that nonpayment could result in foreclosure by judicial proceeding, and failed to state that the Mortons could assert the nonexistence of a default as a defense to a judicial foreclosure proceeding. The trial court agreed with Ms. Morton on all grounds, held that the letter failed to comply with paragraph twenty-two, and dismissed the action without prejudice.

At the time, neither the parties nor the trial court had the benefit of our decision in Green Tree, which held that a notice letter should be evaluated for substantial rather than strict compliance with the requirements of paragraph twenty-two. 177 So.3d at 13. Under that test, “when the content of a lender's notice letter is nearly equivalent to or varies in only immaterial respects from what the mortgage requires, the letter substantially complies, and a minor variation from the terms of paragraph twenty-two should not preclude a foreclosure action.” Id. at 14–15. It is only when “the lender's notice letter varies from paragraph twenty-two in a way that goes to the essence of the parties' bargain” that an alleged defect in a notice letter should forestall a subsequent foreclosure action. Id. at 15 ; see also Lopez v. JPMorgan Chase Bank Nat'l Ass'n, 187 So.3d 343 (Fla. 4th DCA 2016) (adopting substantial compliance standard and holding that language regarding the rights of the borrower to assert defenses in a court action substantially complied with paragraph twenty-two's requirement that a borrower be notified of the right to assert defenses in a foreclosure proceeding); Bank of N.Y. Mellon v. Nunez, 180 So.3d 160, 163 (Fla. 3d DCA 2015) (adopting substantial compliance standard and holding that notice letter that informed borrowers, among other things, “(a) that they were in default for failing to make required payments; [and] (b) of the action required to cure the default—payment of a certain sum by a certain date,” substantially complied).

The trial court did not apply the substantial compliance standard to the paragraph twenty-two issue in this case, which calls for reversal of its dismissal order. See Bank of N.Y. Mellon v. Johnson, 185 So.3d 594, 597 (Fla. 5th DCA 2016) (applying substantial compliance standard to determine that a trial court erred by dismissing a foreclosure for noncompliance with the paragraph twenty-two notice requirements); Nunez, 180 So.3d at 163 (reversing and remanding for further proceedings because the default notice substantially complied with paragraph twenty-two). In the circumstances presented here, the proper course is to remand for the trial court to consider the question under the correct legal standard.

Because paragraph twenty-two in substantial part governs the contents of a notice letter, the principal fact relevant to a determination of substantial compliance will ordinarily be the content of the notice letter at issue. For that reason, a comparison of the text of a notice letter to the requirements of paragraph twenty-two will often be all that is necessary to enable a court to determine whether the lender substantially complied with its requirements. See, e.g., ...