Smith v. Reverse Mortg. Solutions, Inc.

• Decision Date: 21 September 2016
• Docket Number: No. 3D13–2261.,3D13–2261.
• Citation: 200 So.3d 221
• Parties: Celia Elmira SMITH, Appellant, v. REVERSE MORTGAGE SOLUTIONS, INC., etc., Appellee.
• Court: Florida District Court of Appeals

200 So.3d 221

Celia Elmira SMITH, Appellant,

v.REVERSE MORTGAGE SOLUTIONS, INC., etc., Appellee.

No. 3D13–2261.

District Court of Appeal of Florida, Third District.

Sept. 21, 2016.

Kronhaus Law Firm, P.A., and Julie W. Kronhaus, Winter Park; Andrew D. Tarr, P.A., and Andrew D. Tarr, for appellant.

Marinosci Law Group, P.C., and Bart Heffernan, Ft. Lauderdale; Akerman LLP, and Nancy M. Wallace, Tallahassee, William P. Heller, Fort Lauderdale, and Kathryn B. Hoeck, Orlando, for appellee.

Before SHEPHERD, ROTHENBERG and SCALES, JJ.

On Motion for Rehearing

SCALES, J.

We deny Reverse Mortgage Solutions's motion for rehearing. We withdraw our prior opinion of July 15, 2015, and substitute the following opinion for that previously issued.

Celia Smith (“Mrs. Smith”), who was the defendant below, appeals from a Final Judgment of Foreclosure arising out of a home equity conversion mortgage signed and executed in May of 2008, by Mrs. Smith and her now deceased husband, Kenneth Smith (“Mr.Smith”). Because Reverse Mortgage Solutions, the plaintiff below and appellee here, failed to establish the occurrence of a condition precedent to its right to foreclose, we reverse.

I. Facts

On May 8, 2008, while Mr. and Mrs. Smith were married, Mr. Smith signed and executed an adjustable rate note secured by a home equity conversion mortgage, or what is commonly referred to as a “reverse mortgage.” A reverse mortgage allows elderly homeowners to receive monthly payments from a lender based upon the homeowners' equity in their principal residence. Instead of the more conventional mortgage arrangement—where the borrower receives a lump sum from a lender, and then repays the lender over time with monthly payments—generally, in a reverse mortgage arrangement, the lender makes monthly payments to the elderly homeowners, and the homeowners' obligation to repay the lender ripens only upon the homeowners' death or when the homeowners move from their home. See, e.g., Bennett v. Donovan, 703 F.3d 582, 584–85 (D.C.Cir.2013).

The reverse mortgage at issue here encumbered the residential property where Mr. and Mrs. Smith lived together as their principal residence. Mrs. Smith executed the mortgage, but she did not sign the promissory note.¹

Following Mr. Smith's death in December 2009, Reverse Mortgage Solutions filed a verified complaint for foreclosure of the reverse mortgage, alleging that Mr. Smith was the “sole borrower under the note and mortgage” and that his death triggered the acceleration clause under the mortgage agreement. No other ground for acceleration was alleged.

The verified complaint alleged that: (i) $229,475 was due under the note and mortgage, plus interest; (ii) all conditions precedent to the acceleration of the note, and to foreclose on the mortgage, had been fulfilled or had occurred; and (iii) Mrs. Smith owned the property.² Mrs. Smith's answer denied the complaint's condition precedent allegations, and specifically pled: “This mortgage should not be accelerated as the Defendant [Mrs. Smith] is still alive and living in the real property as her homestead.”

Following a bench trial, the trial court entered a form final judgment of foreclosure in favor of Reverse Mortgage Solutions in the amount of $248,403.59, foreclosing on Mrs. Smith's interest in the property and setting a September 2013 foreclosure sale date. The final judgment contains no specific findings of fact or other adjudications with regard to whether all conditions precedent had occurred.

Mrs. Smith appeals the trial court's Final Judgment of Foreclosure, contending that acceleration of the mortgage is inappropriate under both the express provisions of the mortgage document and the federal statute governing the insurability of reverse mortgages by the U.S. Department of Housing and Urban Development (HUD).³ Essentially, Mrs. Smith argues that she is a co-borrower under the mortgage, which prohibits foreclosure until she either dies or no longer maintains the property as her principal residence.

We conclude that Mrs. Smith is a co-borrower as contemplated in the mortgage and, therefore, a condition precedent to Reverse Mortgage Solutions's right to foreclose (to wit, Mrs. Smith's death) has not occurred. Thus, we remand for a new trial to allow the trial court to adjudicate specifically whether the other condition precedent to Reverse Mortgage Solutions's right to foreclose has occurred, i.e., whether the encumbered real property was Mrs. Smith's principal residence as of the date of the trial.

II. Analysis

A. Issue Before the Court

The issue before this Court is whether the trial court erred in its implicit determination that all conditions precedent to Reverse Mortgage Solutions's entitlement to foreclosure had occurred. Specifically, we must determine whether, as a matter of law, Mrs. Smith is a “Borrower” as that term is used in the mortgage. If Mrs. Smith is a “Borrower,” either her death or her ceasing to use the subject property as her principal residence is a condition precedent to Reverse Mortgage Solutions's right to foreclose the mortgage.

B. Standard of Review

We first note that, consistent with the dictates of Applegate v. Barnett Bank of Tallahassee, 377 So.2d 1150 (Fla.1979), and its progeny, the burden is on Mrs. Smith as the appellant to demonstrate error by providing this Court with an adequate record of the proceedings below, and, without such a record, affirmance is normally required. When, as here, the issue presented involves a pure question of law (i.e., judicial construction of the reverse mortgage to determine whether Mrs. Smith is a “Borrower” as defined in the reverse mortgage), and the error of law appears on the face of the final judgment,⁴ the absence of a transcript does not prevent reversal. See BarrNunn, LLC v. Talmer Bank & Trust, 106 So.3d 51, 52 (Fla. 2d DCA 2013) (“[T]he absence of a transcript does not preclude reversal where an error of law is apparent on the face of the judgment[.]”) (quoting Chirino v. Chirino, 710 So.2d 696, 697 (Fla. 2d DCA 1998) ).

Normally, in a case such as this, the issue before this Court simply would be whether the trial court's conclusion (subsumed in the final judgment)—that all conditions precedent to the plaintiff's entitlement to foreclosure have occurred—is supported by competent substantial evidence. See Verneret v. Foreclosure Advisors, LLC, 45 So.3d 889, 891 (Fla. 3d DCA 2010) (“Findings of fact by a trial judge in a nonjury proceeding will not be set aside on review unless totally unsupported by competent and substantial evidence.”). In this case, however, the trial court's entry of the Final Judgment of Foreclosure hinged not on weighing any trial evidence, but, rather, upon an interpretation of the reverse mortgage. The trial court found that all conditions precedent had occurred based upon its legal conclusion that Mrs. Smith was not a “Borrower” under the mortgage.

A trial court's construction of notes and mortgages involves pure questions of law, and therefore is subject to de novo review. Nagel v. Cronebaugh, 782 So.2d 436, 439 (Fla. 5th DCA 2001) (determining that general contract principles governed the trial court's interpretation of the promissory note; thus, the appropriate standard of review was de novo). We, therefore, review the trial court's construction of the reverse mortgage de novo.

C. Condition Precedent to Foreclosure

It is axiomatic that in a mortgage foreclosure action a plaintiff must plead and prove the occurrence of all conditions precedent. See Konsulian v. Busey Bank, N.A., 61 So.3d 1283, 1285 (Fla. 2d DCA 2011).

Consistent with the requisites of 12 U.S.C. § 1715z–20(j)⁵ governing reverse mortgages insured by HUD, the subject mortgage contains plain language expressly conditioning the lender's acceleration and foreclosure rights on the death of any “Borrower” whose principal residence is the property encumbered by the mortgage. Because the parties stipulate that Mrs. Smith has not died, and because Mr. Smith's death is the sole ground alleged for Reverse Mortgage Solutions's acceleration and foreclosure, if Mrs. Smith is a “Borrower” under the mortgage, then a condition precedent to the lender's right to foreclose has not occurred, thereby precluding the lender's foreclosure action.

D. Analysis of Relevant Mortgage Language—Mrs. Smith's Status as a “Borrower”

We begin our analysis of whether Mrs. Smith is a “Borrower” by looking at the language of the mortgage.⁶ The first paragraph of the mortgage begins by identifying Mr. Smith as “a married man” and the mortgagor, which it thereafter refers to as the “Borrower.”

The mortgage's fourth paragraph contains the Borrower Covenant,⁷ whereby “the Borrower” acknowledges and covenants to the mortgagee that: (i) the Borrower owns the property; (ii) the Borrower has the right to mortgage, grant, and convey the property; and (iii) the property is otherwise unencumbered. The Borrower Covenant also requires the Borrower to defend the title to the property.

The final portion of the mortgage plainly indicates that: (1) both Mr. and Mrs. Smith are the “Borrower” under the mortgage; (2) both Mr. and Mrs. Smith signed the mortgage as the “Borrower”; and (3) both Mr. and Mrs. Smith's signatures were verified jointly by two witnesses and one notary jurat.

Specifically, immediately before the witnesses's signatures, the mortgage states the following: “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.” Below this statement, both Mr. Smith's and Mrs. Smith's signatures appear. Mrs. Smith's signature was no accident as her name was pre-printed on the document below the line she was required to sign.

Paragraph 9 of the mortgage contains the condition precedent required in such reverse mortgages by virtue of 12 U.S.C. § 1715z–20(j). This provision specifically provides: “Lender may require immediate payment in full of all sums...