Wednesday, August 23, 2017

FYI: Fla App Ct (5th DCA) Reverses Foreclosure Judgment That Excluded Interest and Escrow

The District Court of Appeal of the State of Florida, Fifth District ("5th DCA"), recently reversed final judgment of foreclosure entered in favor of a mortgagee that omitted interest and escrow amounts due, and remanded to the trial court to modify judgment to include these amounts.

In so ruling, the 5th DCA determined that the mortgagee met its burden to provide the trial court with figures necessary to calculate the interest and escrow amounts through its' witnesses' testimony and evidence.


The Court further reversed the trial court's dismissal of an HOA as a party to the foreclosure action, concluding that neither the HOA nor the mortgagee had presented competent evidence to establish lien priority.


A copy of the opinion is available at:  Link to Opinion


In April 2013, a mortgage servicer mailed a notice of default to the borrowers, alleging a default, and requiring immediate payment of $124,082.20 to cure the default.   After the borrower failed to cure the default, the mortgagee filed a foreclosure complaint seeking the principal amount due on the Note and Mortgage, along with interest from the date of default, late charges, costs of collection, reasonable attorney's fees, and other expenses as permitted by the mortgage. 


The complaint also included the subject property's homeowners' association ("HOA") as a defendant to the foreclosure proceedings, asserting that any interest it may claim in the mortgaged property "is subordinate, junior, and inferior to the lien of [mortgagee's] mortgage."


In its answer and affirmative defenses, the HOA among other things sought judgment proving that its interest was superior to that of the mortgagee, citing its recorded declaration to support its purported entitlement to expenses and assessments.  The borrowers also answered and asserted lack of standing, failure to satisfy a condition precedent, and lack of certification as affirmative defenses.


At the close of trial, the borrowers moved for involuntary dismissal, arguing that the payment history was improperly admitted, and that the mortgagee had failed to establish any amounts due for interest and escrow.  The HOA also moved for involuntary dismissal, arguing that the mortgagee failed to present any evidence that its claim was superior to the HOA's. 


Despite the mortgagee's request for judicial notice of the recorded general warranty deed and recorded mortgage to prove its priority over the HOA's lien, the trial court entered judgment in favor of the mortgagee and against borrowers only in the amount of the principal amount, and dismissed the HOA from the action, holding that "their lien is superior to the mortgage and they are not foreclosed."


The borrowers appealed the final judgment of foreclosure, and the mortgagee cross-appealed the award that was limited to only principal, and the dismissal of the HOA as a superior lienholder.


The 5th DCA first considered the mortgagee's argument that the court erred by omitting interest and escrow from the judgment. 


At trial, the mortgagee's witness testified to the fixed interest rate and unpaid principal for determination of the amount of interest due, and provided the court with the figures necessary to determine the escrow amount.  The Appellate Court concluded that these figures were supported by the payment history, and the note, which combined with the witnesses' testimony, provided the trial court with competent, substantial evidence to easily calculate the interest and escrow amounts. 


Accordingly, the 5h DCA reversed and remanded the foreclosure judgment for the trial court to modify final judgment to include intense and escrow amounts.


As to the trial court's determination that the HOA's lien was superior to that of the mortgagee, the Appellate Court reversed dismissal of the HOA, citing a lack of competent evidence to establish which party had a superior interest and remanded for the trial court to reinstate the HOA as a party to the litigation, and allowing either party to request an evidentiary hearing to resolve the issue. 



Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
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Chicago, Illinois 60602
Direct:  (312) 551-9320
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