McIntosh v. Wells Fargo Bank , 226 So. 3d 377 ( 2017 )

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FIFTH DISTRICT
NOT FINAL UNTIL TIME EXPIRES TO
FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED
ELNA F. MCINTOSH AND
CHRISTOPHER HALLMAN,
Appellants,
v. Case No. 5D16-2189
WELLS FARGO BANK, N.A.
AND BELLALAGO AND ISLES
OF BELLALAGO COMMUNITY
ASSOCIATION, INC.,
Appellees.
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Opinion filed September 18, 2017
Appeal from the Circuit Court
for Osceola County,
Scott Polodna, Judge.
Andrew B. Greenlee, of Andrew B
Greenlee, P.A., Sanford, and Anthony N.
Legendre, II, of Law Offices of Legendre &
Legendre, PLLC, Maitland, for Appellants.
Kimberly S. Mello and Laura J. Bassini, of
Greenberg Traurig, P.A., Tampa, and
Michele L. Stocker, of Greenberg Traurig,
P.A., Ft. Lauderdale, for Appellee, Wells
Fargo Bank, N.A.
No Appearance for Appellee, Isles of
Bellalago Community Association, Inc.
ORFINGER, J.
Elna F. McIntosh and Christopher Hallman (collectively “Borrowers”) appeal a final
judgment of foreclosure entered in favor of Wells Fargo Bank, N.A., following a non-jury
trial. On appeal, Borrowers contend that the trial court erred by concluding that United
States Department of Housing and Urban Development (HUD) regulations were not
conditions precedent to bringing the foreclosure action, denying Borrowers’ motions for
involuntary dismissal, and entering a final judgment of foreclosure. We agree and
reverse.
In April 2010, Borrowers executed a note to FBC Mortgage, LLC, and secured its
payment with a mortgage. The Federal Housing Administration (FHA) insured the loan.
Eventually, Wells Fargo became the holder of the note and mortgage. In its operative
complaint, Wells Fargo generally alleged that it had complied with all conditions precedent
to filing the lawsuit. In their answer, Borrowers denied that Wells Fargo had satisfied all
conditions precedent and asserted several affirmative defenses, including that Wells
Fargo failed to comply with the HUD requirement to send proper delinquency notices
under 24 C.F.R. § 203.602 (2016). Ultimately, the case proceeded to trial. After Wells
Fargo rested its case, Borrowers moved for an involuntary dismissal, asserting several
grounds, only one of which has merit—Wells Fargo’s failure to demonstrate compliance
with applicable HUD regulations prior to filing suit.
The mortgage in this case specifically incorporates HUD regulations as limitations
on acceleration and foreclosure. Paragraph 9 of the mortgage states, in pertinent part:
9. Grounds for Acceleration of Debt.
(a) Default. Lender may, except as limited by
regulations issued by the Secretary [of Housing and
Urban Development], in the case of payment defaults,
require immediate payment in full of all sums secured
by this Security Instrument . . .
2
...
(d) Regulations of HUD Secretary. In many
circumstances regulations issued by the Secretary will
limit Lender’s rights, in the case of payment defaults,
to require immediate payment in full and foreclose if not
paid. This Security Instrument does not authorize
acceleration or foreclosure if not permitted by
regulations of the Secretary.
Paragraph 6(B) of the note similarly provides:
(B) Default
If Borrower defaults by failing to pay in full any monthly
payment, then Lender may, except as limited by regulations
of the Secretary in the case of payment defaults, require
immediate payment in full of the principal balance remaining
due and all accrued interest. Lender may choose not to
exercise this option without waiving its rights in the event of
any subsequent default. In many circumstances regulations
issued by the Secretary will limit Lender’s rights to require
immediate payment in full in the case of payment defaults.
This Note does not authorize acceleration when not permitted
by HUD regulations. As used in this Note, “Secretary” means
the Secretary of Housing and Urban Development or his or
her designee.
Wells Fargo concedes that pursuant to Palma v. JPMorgan Chase Bank, 208 So.
3d 771 (Fla. 5th DCA 2016), compliance with certain HUD regulations is a condition
precedent to bringing a foreclosure action when, as here, the regulations are incorporated
into the terms of the loan.1 In Palma, we held that a promissory note specifically
incorporated HUD regulations by stating that “[i]f Borrower defaults . . . then Lender may,
except as limited by regulations of the Secretary in the case of payment defaults, require
immediate payment in full . . . . This Note does not authorize acceleration when not
1 This Court decided Palma after the trial and after Wells Fargo filed its initial brief
in this case.
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permitted by HUD regulations.” 208 So. 3d at 773. Palma also held that the burden rests
with the plaintiff to prove compliance with conditions precedent if asserted in the complaint
and denied in the answer, but with the defendant if raised instead as an affirmative
defense in the answer. Id. at 774. Here, Borrowers raised noncompliance with § 203.602
and the terms of the note and mortgage as both a specific denial and an affirmative
defense. Thus, the burden remained on Wells Fargo to demonstrate compliance with the
applicable HUD regulations.2 See id. at 775 (holding that specific denial that bank
complied with all conditions precedent shifted burden back to bank to prove at trial that it
complied).
Compliance with HUD regulations was a condition precedent to bringing a
foreclosure action in this case. Wells Fargo’s argument that it substantially complied with
the HUD regulations is unavailing. Accordingly, we reverse and direct the trial court to
enter an order of involuntary dismissal.
REVERSED and REMANDED.
WALLIS and EDWARDS, JJ., concur.
2 Compliance with HUD regulations 24 C.F.R. §§ 203.604 and 203.605 is also
required.
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