Reverse Mortg. Solutions, Inc. v. Nunez
| Decision Date | 20 March 2019 |
| Docket Number | CASE NO. 18-22204-WILLIAMS |
| Citation | 598 B.R. 876 |
| Parties | REVERSE MORTGAGE SOLUTIONS, INC., Appellant, v. Aleida C. NUNEZ, Appellee. |
| Court | U.S. District Court — Southern District of Florida |
Edwin Gilbert Rice, Bradley Arant Boult Cummings LLP, Tampa, FL, James B. Bailey, pro hac vice, Bradley Arant Boult Cummings LLP, Birmingham, AL, for Appellant.
Edward Freire, Gianny Blanco, Freire & Gonzalez, P.A., Jacqueline Cisneros Ledon, Jeffrey Martin Hearne, Legal Services of Greater Miami, Miami, FL, Laila Shilleh Gonzalez, Freire & Gonzalez, Hialeah, FL, for Appellee.
Appellant appeals the Bankruptcy Court's decision holding that Appellee/Debtor ("Debtor") is a "borrower" under a reverse mortgage issued by Appellant ("RMS"). Debtor filed a Chapter 13 plan proposing to cure the default under the reverse mortgage by paying off the unpaid taxes and insurance. RMS objected to the plan, arguing that Debtor was not a "borrower" under the reverse mortgage and therefore Debtor could only cure the default and prevent foreclosure by paying off the entire debt secured by the mortgage. The Bankruptcy Court overruled RMS's objection to plan confirmation and denied RMS's motion for reconsideration. RMS appeals these orders. For the reasons below, the Court reverses and remands to the Bankruptcy Court for further proceedings in accordance with this order.
This appeal involves a dispute over the interpretation of terms in a reverse mortgage. Multiple documents were executed as part of the transaction. Debtor's mother executed all of the documents, while Debtor only executed one – the home equity conversion mortgage. Debtor's mother died prior to Debtor's Chapter 13 filing. RMS contends that the mother's death constituted a breach as defined under the terms of the reverse mortgage and related documents which entitles RMS to declare the debt due and foreclose on the reverse mortgage. Despite RMS's contention, Debtor proposed a Chapter 13 plan that treated Debtor as a "borrower" under the reverse mortgage who could remain in possession of the property for life without paying the underlying loan in full. RMS objected to the Chapter 13 plan, but the Bankruptcy Judge—relying in part on two cases which were undermined by new case law issued after the initial ruling—overruled the objection by holding that Debtor was a "borrower" under the terms of the reverse mortgage. RMS now appeals.
On June 24, 2008, Debtor's mother, Olga Nunez, executed a Home Equity Conversion Note ("Note") and Home Equity Conversion Loan Agreement ("Loan Agreement") in favor of World Financial Corp. Under the Note and Loan Agreement, Olga Nunez received a loan in the maximum principal amount of $ 531,000, secured by a reverse mortgage on real property located at 99440 Southwest 155th Avenue, Miami, Florida 33196 (the "Property"). The Debtor did not sign the Note or the Loan Agreement.
The Note defined the word "Borrower" as "each person signing at the end of this Note." Olga Nunez is the only person who signed the Note. The Note states that it is "secured by a mortgage, deed of trust or similar security instrument that is dated the same date as this Note and called ‘Security Instrument.’ " Olga Nunez, as "Borrower" under the Note, has "no personal liability for payment of the debt." The lender may only "enforce the debt through the sale of the Property covered by the Security Instrument." Any principal and interest advanced under the Note is due on February 7, 2070, but the lender "may require immediate payment in full of all outstanding principal and accrued interest if ... Borrower dies and the Property is not the principal residence of at least one surviving Borrower."
On the same day that Olga Nunez executed the Note and Loan Agreement, she also executed the Adjustable Rate Home Equity Conversion Mortgage (the "Security Instrument"). The Security Instrument recognizes the existence of the Loan Agreement and Note and the duty to repay amounts advanced as "evidenced by Borrower's Note." The Security Instrument secures "the repayment of the debt evidenced by the Note ... up to a maximum principal amount of Five Hundred and Thirty-One Thousand and 00/100 Dollars ($ 531,000.00)" as well as other amounts due under the Security Instrument and "the performance of Borrower's covenants and agreements under [the] Security Instrument and the Note."
The Debtor is identified by name in two parts of the Security Instrument. First, the Debtor is identified as a mortgagor of her remainder interest in the property subject to the Security Instrument, while her mother Olga Nunez is identified as mortgagor of a life estate in the property: "The mortgagor is Olga Nunez a/k/a Olga E Nunez, a single woman, as to Life Estate interest and Aleida C Nunez, a single woman, as to the remainder, whose address is 9940 Southwest 155th Avenue, Miami, FL 33196 ("Borrower")."
Second, the Debtor's name is on the signature page of the Security Instrument, which reads as follows:
BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants contained in this Security Instrument and in any rider(s) executed by Borrower and recorded with it.
On June 24, 2008, the same day that Olga Nunez signed the Note and Loan Agreement, Debtor and her mother executed a quit claim deed. The quit claim deed transferred Debtor's joint tenancy interest in the Property, granting Olga Nunez a life estate, with Debtor retaining a remainder interest.
The Security Instrument has similar language to the Note about default and acceleration. In particular, paragraph 9 of the Security Instrument provides that "Lender may require immediate payment in full of all sums secured by this Security Instrument if: [a] Borrower dies and the Property is not the principal residence of at least one surviving Borrower...."
In addition to the documents discussed above, Olga Nunez executed many other documents to obtain the reverse mortgage loan. All of these documents identified Olga Nunez as the "Borrower." None of these documents were executed by Debtor. These documents include:
On September 5, 2015, RMS filed a verified complaint to foreclose the Security Instrument against the Property based on Olga Nunez's failure to pay taxes and maintain insurance, as required by the Security Instrument and related loan documents. Eleven months later, on July 23, 2016, Olga Nunez died. RMS then amended its state court foreclosure action to include her death as an additional basis of default under the Note and Security Instrument. Before the state court action concluded, Debtor filed bankruptcy.
On August 30, 3017, two years after the foreclosure action was filed against Olga Nunez and a year after her death, Debtor filed a voluntary petition under Chapter 13 of Title 11 of the United States Code. As a result, the state court foreclosure action was automatically stayed. In November 2017, RMS filed a proof of claim in Debtor's Chapter 13 proceeding, which it amended on January 3, 2018. The amended proof of claim asserts a total secured claim due and owing under the Note and Security Instrument in the amount of $ 390,671.74.
Debtor filed a proposed Chapter 13 plan on the date she filed her petition. The plan proposed that Debtor would cure the arrears for payment of insurance and taxes on the Note and Security Instrument while Debtor retained possession of the Property. The plan made no allowance for paying the Note in full. On October 16, 2017, RMS filed a preliminary objection to Debtor's plan. The objection argued that Debtor's mother, Olga Nunez, was the only Borrower on the Note. Because Olga Nunez had died, the Note had fully matured, and thus became due and payable upon her death, which occurred before the Debtor's bankruptcy filing. Accordingly, RMS argued that Debtor could only modify RMS's rights under § 1322(c)(2) of the Bankruptcy Code by agreeing to pay all amounts due under the Note through the bankruptcy plan.
On October 27, 2017, Debtor amended her Chapter 13 plan, still proposing to retain the Property securing the Note without paying RMS in full. Debtor also filed a response and amended response to RMS's plan objection. Debtor argued that the Security Instrument defined her as a "Borrower...
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In re Winstead, CASE NO. 19-50307-KMS
...even though no privity of contract exists between him and the Bank. The Bank argues that he may not, citing Reverse Mortgage Solutions, Inc. v. Nunez, 598 B.R. 876 (S.D. Fla. 2019). But that case is inapposite. The question there was whether the debtor was a "borrower" under the reverse mor......