Kuhnsman v. Wells Fargo Bank, N.A.

• Decision Date: 30 October 2020
• Docket Number: Case No. 2D19-681
• Citation: 311 So.3d 980
• Parties: Michael E. KUHNSMAN and Erin L. Kuhnsman, Appellants, v. WELLS FARGO BANK, N.A., Appellee.
• Court: Florida District Court of Appeals

311 So.3d 980

Michael E. KUHNSMAN and Erin L. Kuhnsman, Appellants,

v.WELLS FARGO BANK, N.A., Appellee.

Case No. 2D19-681

District Court of Appeal of Florida, Second District.

Opinion filed October 30, 2020

Michael A. Ziegler of the Law Office of Michael A. Ziegler, P.L., for Appellants.

Kimberly S. Mello of Greenberg Traurig, P.A., Orlando; Michele L. Stocker of Greenberg Traurig, P.A., Ft. Lauderdale; Vitaliy Kats of Greenberg Traurig, P.A., Tampa; and Arda Goker of Greenberg Traurig, P.A., Orlando (substituted as counsel of record), for Appellee.

LaROSE, Judge.

Michael and Erin Kuhnsman appeal the foreclosure judgment entered against them. We have jurisdiction. See Fla. R. App. P. 9.030(b)(1)(A). They argue that we must reverse because Wells Fargo Bank, N.A., failed to conduct a face-to-face interview with them, a condition precedent to foreclose upon their Federal Housing Administration-backed loan. We affirm because Wells Fargo substantially complied with the condition precedent.

Background

In 2007, the Kuhnsmans signed a note in favor of Wells Fargo to buy a home. The FHA insured the loan. The note provides that in the event of default, Wells Fargo "may, except as limited by regulations of the Secretary [of Housing and Urban Development] ... require immediate payment in full of the principal balance remaining due and all accrued interest." The note also states that Wells Fargo's ability to accelerate payment and foreclose is prohibited "when not permitted by HUD regulations."

The relevant HUD regulations require Wells Fargo to "have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid." 24 C.F.R. § 203.604(b) (2016).¹ Thus, a mortgagee's ability to foreclose upon an FHA-backed loan is cabined by these federal regulations. See 14 C.F.R. § 203.500 (2016) ("It is the intent of the Department that no mortgagee shall commence foreclosure or acquire title to a property until the requirements of this subpart have been followed."). However, a mortgagee is excused from conducting a face-to-face interview when "[a] reasonable effort to arrange a meeting is unsuccessful." 24 C.F.R. § 203.604(c)(5). A "reasonable effort" is defined as "at a minimum ... one letter sent to the mortgagor certified by the Postal Service as having been dispatched." § 203.604(d). This "reasonable effort" must "also include at least one trip to see the mortgagor at the mortgaged property" to coordinate the face-to-face interview. Id.

In 2010, the Kuhnsmans stopped making their loan payments. Wells Fargo filed a foreclosure action. While the action was pending, the Kuhnsmans sought loss mitigation relief from Wells Fargo. After a final hearing in 2013, the trial court dismissed the action, finding that Wells Fargo "did not make a sincere, bonafide [sic] effort to comply with FHA guidelines." By August 2014, the parties’ loss mitigation efforts failed.

In September 2014, Wells Fargo sent a certified letter to the Kuhnsmans stating that Wells Fargo wished to "arrange a face to face meeting with you and a representative of Wells Fargo" in order "to review your financial situation and discuss mortgage payment assistance options that may help you bring your account current." In early October 2014, the Postal Service returned the letter to Wells Fargo bearing a stamp "Refused" on the envelope. Several weeks later, Wells Fargo received a letter from the Kuhnsmans’ counsel directing Wells Fargo to cease and desist all direct contact with the Kuhnsmans and, instead, to communicate only with counsel.² And so, Wells Fargo did just that.

Customer service notes reflect that counsel spoke with a Wells Fargo representative in October 2014. Wells Fargo requested counsel to update the Kuhnsmans’ financial status since the August 2014 failure of loss mitigation efforts. Another customer service note, from later that same day, recorded that counsel had called Wells Fargo to report that she was "not aware of any changes since the denial." A customer service note from the next day indicates "FHA checklist review passed."

Over two years later, in February 2017, Wells Fargo filed a second foreclosure action. The complaint alleged that all conditions precedent to foreclosure "have been performed, have occurred, or have been waived." The Kuhnsmans denied "satisfaction of conditions precedent required for FHA insured mortgages"; they specifically alleged that Wells Fargo failed "[t]o make a reasonable effort to arrange a face-to-face meeting with the mortgagor" pursuant to section 203.604.

At a nonjury trial, a contretemps arose over Wells Fargo's attempt to elicit testimony from a loan verification consultant concerning the cease and desist letter and the customer service notes. The Kuhnsmans argued that such testimony was offered to demonstrate that they had waived the face-to-face interview, a defense Wells Fargo did not raise. See Fla. R. Civ. P. 1.110(d) ("In pleading to a preceding pleading a party shall set forth affirmatively ... waiver, and any other matter constituting an avoidance or affirmative defense."); Louie's Oyster, Inc. v. Villaggio Di Las Olas, Inc., 915 So. 2d 220, 223 (Fla. 4th DCA 2005) ("As a matter of law, waiver [is an] affirmative defense[ ] that must be pleaded."). Eschewing waiver as a defense, Wells Fargo maintained that the testimony was relevant to show that it substantially complied with the HUD regulations. The trial court sustained the objection insofar as the evidence related to the issue of waiver; it permitted admission as to the matter of compliance, acknowledging that the evidence "could be taken in two different ways."

After Wells Fargo rested its case, the Kuhnsmans moved for involuntary dismissal. They contended that Wells Fargo failed to make a "reasonable effort" to arrange the face-to-face interview. § 203.604(c)(5). Although Wells Fargo had mailed a certified letter attempting to arrange the interview, Wells Fargo failed to make "at least one trip to see the mortgagor at the mortgaged property." § 203.604(d). The Kuhnsmans claimed that their "cease-and-desist" letter was not intended to communicate that they would forego a face-to-face interview, only that the interview was to be conducted through their counsel. The Kuhnsmans relied on Derouin v. Universal American Mortgage Co., 254 So. 3d 595, 602 (Fla. 2d DCA 2018), where we stated:

We are even less inclined to conclude that Ms. Derouin's statement that Universal or its servicer should speak to her lawyer constitutes a clear indication that she was unwilling to cooperate in the face-to-face interview. There was no evidence Universal or its servicer was prohibited from asking the Derouins for a face-to-face meeting through their attorney, nor was there any evidence that the Derouins would not participate in one if asked.

Wells Fargo countered that it substantially complied with section 203.604. Specifically, Wells Fargo contended that after its receipt of the cease-and-desist letter, loss mitigation communications and negotiations continued with the Kuhnsmans’ counsel. The trial court agreed and denied the Kuhnsmans’ motion. The trial court, thereafter, entered judgment for Wells Fargo.

Analysis

I. Standard of Review

Our review of the trial court's denial of the Kuhnsmans’ motion for involuntary dismissal is de novo. See Arsali v. Chase Home Fin. LLC, 121 So. 3d 511, 514 (Fla. 2013) ("[T]his Court undertakes de novo review of questions that present a pure question of law."); Torres v. Deutsche Bank Nat'l Tr. Co., 256 So. 3d 903, 905 (Fla. 4th DCA 2018) ("We review the denial of a motion for involuntary dismissal de novo." (citing Deutsche Bank Nat'l Tr. Co. v. Huber, 137 So. 3d 562, 563 (Fla. 4th DCA 2014) )).

However, "we review the trial court's findings of facts to determine if they are supported by competent substantial evidence." Coconut Grove Acquisition, LLC v. S & C. Venture, 240 So. 3d 92, 94 (Fla. 3d DCA 2018). And, of course, "whether a party has substantially complied with or performed a contract term remains a question of fact." Fed. Nat'l Mortg. Ass'n v. Morton, 196 So. 3d 428, 431 (Fla. 2d DCA 2016). Thus, we review the record for competent, substantial evidence that Wells Fargo substantially complied with a condition precedent to foreclosure.

II. Face-to-face interview as a condition precedent

We have recognized the face-to-face interview as a condition precedent to foreclosure. See, e.g., Derouin, 254 So. 3d at 599 ("The parties tacitly agree that the face-to-face meeting requirement is a condition precedent to filing a foreclosure lawsuit. For purposes of this appeal, we assume the same." (citing ARC HUD I, LLC v. Ebbert, 212 So. 3d 513, 515-16 (Fla. 2d DCA 2017), in which this court reversed a summary judgment award because the mortgagee created an issue of material fact as to whether an exception applied to the "condition precedent" of a face-to-face interview)). We are not alone. See, e.g., Chrzuszcz v. Wells Fargo Bank, N.A., 250 So. 3d 766, 768 (Fla. 1st DCA 2018) ("We agree with the Borrower's contention that, in the current case, the HUD-mandated face-to-face interview (or attempt to interview) was a condition precedent to the foreclosure action, and the Bank shouldered the burden of proving its satisfaction."); White v. Planet Home Lending, LLC, 234 So. 3d 802, 803 n.1 (Fla. 4th DCA 2018) ("Absent evidence that Appellee engaged in a face-to-face interview with Appellant before the former filed its foreclosure complaint or that any exception to the interview requirement applied, it would be appropriate to enter an involuntary dismissal of Appellee's foreclosure complaint." (citing McIntosh v. Wells Fargo Bank, N.A., 226 So. 3d 377, 379 (Fla. 5th DCA 2017) )); Palma v. JPMorgan Chase Bank, Nat'l Ass'n, 208 So. 3d 771, 773, 775 (Fla. 5th DCA 2016) (holding that mortgage language providing, in the event of a default, the debt could be...