Wednesday, October 22, 2014

FYI: Fla App Ct Holds Non-Borrower Mortgagor May Challenge Hearsay Testimony As to Amounts Due on Note

The District Court of Appeal of the State of Florida, Fourth District, recently held that the admission of hearsay testimony regarding the amount due under a note adversely affected a mortgagor’s substantial ownership and redemption rights notwithstanding the mortgagor’s lack of liability under the note.


A copy of the opinion is available at:


A mortgagor and another individual (“decedent”) executed a mortgage.  A corresponding note was executed only by decedent, who passed away before the mortgagee (“Lender”) initiated a foreclosure action.


The matter proceeded to a non-jury trial.  At the conclusion of Lender’s case, Mortgagor moved for involuntary dismissal, arguing there was no evidence as to the amount of debt owed on the note.  The trial court permitted lender to reopen its case to provide such evidence.  Lender presented testimony from a representative of the loan servicer.  The witness testified about the amount due under the note over the objection of Mortgagor’s counsel, who argued that the testimony was inadmissible hearsay because it concerned the contents of business records that had not been introduced into evidence.  The trial court overruled the objection and entered a final judgment of foreclosure in favor of Lender.


On rehearing, Lender conceded that the trial court erred in admitting hearsay testimony as to the amount due.  However, the parties disagreed as to what the court should do about the error.  Mortgagor sought dismissal, and Lender asserted that the trial court could remand for further proceedings to properly establish the amount due under the note.  Alternatively, Lender argued that because Mortgagor had not signed the note and was therefore not liable for any money damages, the appropriate course was to allow the foreclosure to proceed without future evidentiary proceedings because the proceeding was in rem as to Mortgagor. 


The trial court agreed with the alternative argument, allowed the in rem judgment, and denied Mortgagor’s motion for involuntary dismissal.  The Mortgagor appealed.


As you may recall, permitting hearsay testimony constitutes harmless error and is not grounds for a new trial unless a substantial right of a party was adversely affected.  See § 90.104(1) Fla. Stat. (2013).


On appeal, the Appellate Court agreed with Mortgagor’s assertion that the erroneous admission of hearsay testimony as to damages was not made harmless by virtue of Mortgagor’s non-liability for payment of the note. 


The Appellate Court noted that, although Mortgagor would not be responsible for any deficiency that remained after the sale of the property, Mortgagor did sign the mortgage, and the final judgment would foreclose his ownership rights by a judicial sale. 


In addition, the Court noted that Mortgagor had a right of redemption wherein he could prevent divestiture of his legal title upon payment of the amount of the debt specified in the judgment.  See CCC Props., Inc. v. Kane, 582 So. 2d 159, 161 (Fla. 4th DCA 1991). 


Therefore, the Appellate Court concluded that, even though Mortgagor was not personally liable for the debt, the amount of the debt owed was important as it related to Mortgagor’s right of redemption, specifically the amount due under the judgment in order to exercise his right to stop the foreclosure sale.


Accordingly, the Court affirmed the judgment of foreclosure, except as to the amount due under the note, and remanded the matter for further proceedings to determine the amount due under the note.





Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874


Admitted to practice law in Illinois



          McGinnis Wutscher Beiramee LLP





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