Cong. Park Office Condos II, LLC v. First–Citizens Bank & Trust Co.

• Citation: 105 So.3d 602
• Decision Date: 13 February 2013
• Docket Number: No. 4D11–4479.,4D11–4479.
• Court: Court of Appeal of Florida (US)
• Parties: CONGRESS PARK OFFICE CONDOS II, LLC, a Florida limited liability corporation, Yoram Galel, Jeffrey Morris, and Congress Park Owners Associations, Inc., Appellants, v. FIRST–CITIZENS BANK & TRUST COMPANY, a foreign banking corporation, Appellee.

105 So.3d 602

CONGRESS PARK OFFICE CONDOS II, LLC, a Florida limited liability corporation, Yoram Galel, Jeffrey Morris, and Congress Park Owners Associations, Inc., Appellants,

v.FIRST–CITIZENS BANK & TRUST COMPANY, a foreign banking corporation, Appellee.

No. 4D11–4479.

District Court of Appeal of Florida,

Fourth District.

Jan. 16, 2013.

Rehearing Denied Feb. 13, 2013.

Robin Bresky and Jonathan Mann of Law Offices of Robin Bresky, Boca Raton, for appellants.

James S. Telepman of Cohen, Norris, Wolmer, Ray, Telepman & Cohen, North Palm Beach, for appellee.

GROSS, J.

The borrowers in a commercial real estate transaction appeal an order of the trial court granting final judgment of foreclosure in favor of First–Citizens Bank & Trust Co. We affirm, holding that (1) the trial court did not abuse its discretion in granting summary judgment while discovery was outstanding and (2) the borrowers have shown no material issues of fact that would preclude summary judgment.

In 2006, the borrowers executed a promissory note for the sum of $825,000 in favor of Sun American Bank. To secure payment of the note, the borrowers executed and delivered a mortgage and security agreement to Sun. Thereafter, the borrowers executed a renewal promissory note, which increased the principal balance of the debt to $925,000.

In 2010, Sun failed and was put into receivership, with the Federal Deposit Insurance Corporation appointed as the receiver. Thereafter, the FDIC assigned the promissory note and mortgage to First–Citizens, which, on April 5, 2010, provided the borrowers with written notice that they were in default of their February 2010 payment and that First–Citizens intended to accelerate the mortgage.

On September 1, 2010, First–Citizens filed a four count complaint to obtain (1) judgment on the notes, (2) foreclosure of the mortgage, (3) action on the security agreement, and (4) action on the guarantees. The borrowers ¹ filed an answer and four affirmative defenses: ² (1) failure of contractual condition precedent, (2) unclean hands, (3) failure to comply with certain unspecified conditions, and (4) failure to produce the original note and mortgage.³

As to the first affirmative defense—failure of contractual condition precedent—the borrowers alleged that First–Citizens failed to provide adequate notice of default and intent to accelerate, thereby “den[ying the borrowers] a good faith effort, pursuant to the Mortgage and the servicing obligations of [First–Citizens,] to avoid acceleration and ... foreclosure.” Furthermore, the borrowers alleged that First–Citizens “fail[ed] to engage in any foreclosure loss mitigation, as required,” or to “pursue effective foreclosure prevention strategies,” such as “evaluat[ing] the particular circumstances surrounding their claimed default.” The borrowers did not, however, cite any portion of the loan documents or case law that would impose such fiduciary obligations on the lender in a commercial loan transaction.

For their second affirmative defense—unclean hands—the borrowers generally alleged that First–Citizens “intentionally fail[ed] to comply with the material terms of the mortgage and note in terms of notice of default and intent to accelerate,” such that foreclosure of the mortgage and “acceleration of the note would be inequitable, unjust, and ... unconscionable.” Once again, the borrowers failed to provide any specific allegations of impropriety.

On February 14, 2011, First–Citizens moved for summary judgment, alleging that there were no genuine issues of fact remaining. As to the defense of “failure of condition precedent,” First–Citizens argued that paragraph 9.2 of the renewal note “provide[d] that upon default, [First–Citizens,] at its option, had the right to accelerate the entire unpaid principal balance thereof ‘without notice or demand.’ ” Alternatively, if the loan documents required notice, First–Citizens had “provide[d the borrowers with] notice of default and acceleration.”

As to the borrowers' unclean hands defense, First–Citizens argued that the defense was “unsupported by any factual allegation whatsoever ..., [wa]s made in bad faith, and [wa]s insufficient to overcomethe evidence established by the Bank in support of its Motion for Summary Judgment.”

On March 10, 2011, the borrowers filed a request for the production of 146 documents and propounded 22 interrogatories. First–Citizens moved for a protective order. On April 12, 2011, Judge John J. Hoy denied First–Citizens' motion without prejudice, with instructions to specially set a hearing on the protective order at a later date. In addition, Judge Hoy cancelled the upcoming summary judgment hearing and ordered that it be re-set for a date on or after May 27, 2011.

Thereafter, the case was re-assigned to Judge Glenn Kelley. On August 11, 2011, upon First–Citizens' request, Judge Kelley set a hearing on its summary judgment motion for October 18, 2011. At that point, First–Citizens had not complied with the discovery requests.

On October 4, 2011, just two weeks before the scheduled summary judgment hearing, the borrowers moved to compel discovery and for sanctions. Additionally, on October 11, 2011, the borrowers filed a response to First–Citizens' motion for summary judgment, alleging for the first time an affirmative defense of “fraud.” ⁴ Along with their response, the borrowers relied upon an affidavit submitted by one of them, which stated that a representative of Sun “promised that the principal plus interest payments would be readjusted back to interest only payments.” According to the affidavit, “[d]espite Sun['s] numerous representations that the loan would be readjusted back to interest only payments, the adjustment was never made.”

On October 17, 2011, the day before the summary judgment hearing, the parties submitted an agreed order, whereby First–Citizens was required to respond to three interrogatories and outstanding document production requests. The next day, however, notwithstanding the discovery order, the trial court conducted the hearing on First–Citizens' motion for summary judgment, the contents of which are not included in the record. On October 20, 2011, the trial court entered a final judgment of foreclosure in favor of First–Citizens.

Standard of Review

A circuit court's order granting summary judgment is reviewed de novo. Sunshine State Ins. Co. v. Jones, 77 So.3d 254, 257 (Fla. 4th DCA 2012). “ ‘Summary judgment is proper if there is no genuine issue of material fact and if the moving party is entitled to a judgment as a matter of law.’ ” Id. (quoting Volusia Cnty. v. Aberdeen at Ormond Beach, L.P., 760 So.2d 126, 130 (Fla.2000)). The plaintiff “must either factually refute the alleged affirmative defenses or establish that they are legally insufficient to defeat summary judgment.” Knight Energy Servs., Inc. v. Amoco Oil Co., 660 So.2d 786, 788 (Fla. 4th DCA 1995) (citations omitted). If the moving party sustains its initial burden of proof by tendering competent evidence in support of the motion, then the non-moving party has the “burden of coming forward with evidence establishing genuine ... issues [of material fact].” Latour Auto Sales, Inc. v. Stromberg–Carlson Leasing Corp., 335 So.2d 600, 601 (Fla. 3d DCA 1976).

Analysis

On appeal, the borrowers argue that the trial court erred by prematurely granting summary judgment in favor of First–Citizens while discovery was pending. They contend that the requested discovery would have presented genuine issues of fact regarding the affirmative defenses of “standing, fraud, and unclean hands.” They also argue that the defenses of fraud and unclean hands “were inappropriate for summary judgment due to genuine disputed issues of material fact.”

The Borrowers' Failure to Properly Plead Lack of Standing and Fraud as Affirmative Defenses Constituted Waiver

As a preliminary matter, the borrowers failed to properly plead the affirmative defenses of lack of standing and fraud, so they were not properly before the circuit court at the time it granted the motion for summary judgment.

Florida Rule of Civil Procedure 1.110(d) provides that “a party shall set forth affirmatively ... any ... matter constituting an avoidance or affirmative defense.” Application of this rule means “that affirmative defenses must be pleaded or they are considered waived.” Kersey v. City of Riviera Beach, 337 So.2d 995, 997 (Fla. 4th DCA 1976) (citations omitted); see alsoFla. R. Civ. P. 1.140(b) (“Every defense in law or fact to a claim for relief in a pleading shall be asserted in the responsive pleading[.]”). In this regard, lack of standing and fraud are affirmative defenses that must be pled to avoid waiver. See Schuster v. Blue Cross & Blue Shield of Fla., Inc., 843 So.2d 909, 912 (Fla. 4th DCA 2003) (“There is no question that lack of standing is an affirmative defense that must be raised by the defendant and that the failure to raise it generally results in waiver.”); Cocoves v. Campbell, 819 So.2d 910, 913 (Fla. 4th DCA 2002) (“An affirmative defense of fraud that is not pleaded with particularity is deemed waived.”).

In the trial court, the borrowers failed to plead, or even argue, lack of standing as an affirmative defense. Furthermore, although the borrowers suggested fraud as a defense in their response to First–Citizens' motion for summary judgment, such a filing did not discharge their duty to amend their pleadings in compliance with the rules of civil procedure. See Accurate Metal Finishing Corp. v. Carmel, 254 So.2d 556, 557 (Fla. 3d DCA 1971) (“Affirmative defenses must be pleaded and it is not sufficient to sustain a defense to a summary judgment motion to allege such in affidavits.” (citations omitted)); cf. B.B.S. v. R.C.B., 252 So.2d 837, 839 (Fla. 2d DCA 1971) (“An affirmative defense must be pleaded and not raised by a motion for summary judgment supported by an affidavit.” (citations omitted)). If the borrowers sought to raise these two...