MTGLQ Investors, LP v. Leones
| Citation | 320 So.3d 769 |
| Decision Date | 07 April 2021 |
| Docket Number | No. 4D19-3872,4D19-3872 |
| Parties | MTGLQ INVESTORS, LP, Appellant, v. Silvia LEONES a/k/a Silvia Leones and Arturo Cienfuegos, Appellees. |
| Court | Court of Appeal of Florida (US) |
Richard S. McIver of Kass Shuler, P.A., Tampa, for appellant.
Jonathan H. Kline and Joseph G. Paggi III, of Jonathan Kline, P.A., Weston., for appellees.
Appellant, MTGLQ Investors, LP ("the Bank"), appeals the final judgment in the underlying residential foreclosure action in favor of appellees, Silvia Leones and Arturo Cienfuegos ("the Borrowers"). The Bank raises multiple arguments for reversal. We agree with the Bank's argument that the trial court erred in concluding the Bank failed to state a cause of action for foreclosure because the Bank had not alleged a modification in the complaint, where (1) the Bank had not based its claim or evidence on the loan modification agreement, (2) the trial court found that the modification had been cancelled, and (3) the evidence established the Bank's entitlement to judgment absent the modification. We reverse the final judgment and remand with instructions for the trial court to enter a final judgment in the Bank's favor.
This appeal arises out of a residential foreclosure action which the Bank's predecessor in interest initiated against the Borrowers. The complaint alleged that the Borrowers defaulted on the terms of their note and mortgage by failing to make payments due. The Bank was later substituted as the plaintiff.
The Borrowers raised several affirmative defenses, including: (1) accord and satisfaction, in which the Borrowers asserted the original loan documents had been modified by a loan modification agreement; (2) novation, in which the Borrowers again asserted the original note and mortgage had been modified; and (3) failure to state a cause of action.
The matter proceeded to a nonjury trial. At the start of the trial, the Bank explained this was a mortgage foreclosure case against the Borrowers based upon their default on the note and mortgage. During the Bank's case in chief, the Borrowers objected to the introduction of the original note and mortgage into evidence, without the addition of the loan modification agreement. The Bank maintained that it was proceeding under the terms of the original loan. The trial court overruled the Borrowers’ objections, and the note and mortgage were admitted.
During the Borrowers’ case in chief, they both testified that their loan was modified, and the loan modification agreement was then admitted into evidence.
Review of the record reflects that the Bank's trial counsel had initially argued to the court that no loan modification occurred. However, the Bank's counsel eventually clarified its position, stating that no enforceable loan modification occurred. Specifically, the Bank maintained a loan modification may have occurred, but it had been cancelled by oral agreement of the parties, and the terms of the original note and mortgage had been restored. Thus, counsel explained that the Bank was not seeking relief under breach of a loan modification agreement.
The Bank then presented rebuttal evidence to support this position. The Bank's rebuttal evidence included the testimony of its former servicer's operations senior specialist, who testified to notations in the servicing platform indicating the servicer had been advised that the Borrowers did not like the loan modification's terms and had not made any payments on it. She also testified that the payment history showed that a modification in the loan's terms had been made to the loan payment history, but that those changes were subsequently reversed, and the original loan's terms were restored. She confirmed that this adjustment meant the loan modification was reversed.
The Bank's rebuttal evidence also included the testimony of its current loan servicer's assistant secretary of legal proceedings and records custodian, who testified that if a prior servicer modified the loan and then changed it back to the original terms, the transaction history would show the original terms and not the modification terms. He testified that in this case, the transaction history reflected the adjustable interest rate per the note's terms, and not the loan modification agreement's fixed interest rate.
Finally, the Bank recalled the Borrowers who admitted they did not make any payments on the loan modification agreement. When confronted with his prior deposition testimony, Mr. Cienfuegos agreed he had testified that the loan modification terms were "really bad" and that the Borrowers believed if they did not make the modified payments, the loan would revert back to its original terms.
In closing argument, the Bank reiterated its position that no enforceable loan modification occurred because it was cancelled by the parties who did not want to participate in the loan modification and that the loan reverted to the original terms of the note and mortgage, which were the terms upon which the Bank pleaded and proved its case in chief. Additionally, the Bank argued that the two affirmative defenses concerning the loan modification: (1) accord and satisfaction, and (2) novation, failed.
In their closing argument, the Borrowers contended the Bank had not proven the loan modification was orally cancelled by the parties. Notably, the Borrowers conceded that the Bank had proven all of the other foreclosure elements, but argued that pursuant to their affirmative defense of "failure to state a cause of action," by failing to plead the breach of a loan modification agreement or the existence thereof, the Bank's pleadings failed to state a cause of action on the loan modification.
When the trial court asked the Bank's counsel why the Bank did not address the loan modification in its complaint, the Bank's counsel explained that there was no reason to do so because no enforceable loan modification occurred and the Bank was therefore suing on the original note and mortgage.
The trial court orally pronounced its findings, ultimately finding that the Bank had proven each element of a foreclosure action by a preponderance of the evidence and that the Borrowers proved the existence of a loan modification. As to the affirmative defenses, the trial court ruled that the accord and satisfaction and novation defenses failed. However, as to the Borrower's defense of failure to state a cause of action, the trial court concluded that, although the modification was no longer enforceable, the Bank should have nevertheless pled its existence. Notably, the trial court made clear on the record that it was finding "that there was a cancellation" of the loan modification based on the Bank's rebuttal evidence and that there was no doubt about the cancellation. Nonetheless, the trial court explained the issue was one of a technicality, a failure to plead the modification and the subsequent cancellation, both of which the trial court found had been established.
However, the Bank's position was that because the trial court found the Bank had pleaded and proven the elements of the foreclosure action and that the loan modification had been cancelled, the trial court should enter final judgment in its favor. The trial court disagreed and entered final judgment for the Borrowers, incorporating its findings at trial into the final judgment.
The Bank gave notice of appeal.
Issues pertaining to the sufficiency of the complaint are reviewed de novo. Donado v. PennyMac Corp. , 174 So. 3d 1041, 1042 (Fla. 4th DCA 2015) ; Rubenstein v. Primedica Healthcare, Inc. , 755 So. 2d 746, 748 (Fla. 4th DCA 2000). "Additionally, ‘[t]he standard of review of a trial court's interpretation of the rules of civil procedure is de novo.’ " Donado , 174 So. 3d at 1042 (alteration in original) (quoting R.T.G. Furniture Corp. v. Coates , 93 So. 3d 1151, 1153 (Fla. 4th DCA 2012) ).
The Bank argues that the trial court erred in concluding that it failed to state a cause of action for foreclosure because it did not allege the modification in its complaint. The Bank maintains, as it did below, that there was no reason for it to allege the loan modification in its complaint where the Bank was not proceeding on a breach of the loan modification agreement because the modification had been cancelled and the loan's original terms were restored.
"A complaint need only state facts sufficient to indicate that a cause of action exists and need not anticipate affirmative defenses ." Hammonds v. Buckeye Cellulose Corp. , 285 So. 2d 7, 11 (Fla. 1973) (emphasis added); Ervans v. City of Venice , 169 So. 3d 267, 268 (Fla. 2d DCA 2015) (same). Additionally, "[t]he effect of a modification to a legal agreement, to the extent it would constitute an avoidance of all or part of a defendant's liability under the agreement, is an affirmative defense that must be pled and proven by the defendant ." Bank of N.Y. Mellon v. Bloedel , 236 So. 3d 1164, 1167 (Fla. 2d DCA 2018) (citing Fla. R. Civ. P. 1.110(d) ).
We agree with the Bank that in this case, the loan modification was an affirmative defense to be pled and proven by the Borrowers, not the Bank. As the Bank acknowledges, had it premised its claim for recovery on the loan modification, then in that scenario, the Bank would have been required to adequately plead the modification in its complaint. However, the Bank's case was not for breach of the modification...
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