Waterfall Vict. Grantor Tr. II v. McDonald
| Decision Date | 25 August 2021 |
| Docket Number | 4D19-3536 |
| Parties | WATERFALL VICTORIA GRANTOR TRUST II, SERIES G, Appellant, v. SARAH MCDONALD, Appellee. |
| Court | Florida District Court of Appeals |
Not final until disposition of timely filed motion for rehearing.
Appeal from the Circuit Court for the Seventeenth Judicial Circuit Broward County; Barry Stone, Senior Judge; L.T. Case No CACE11-0022643.
Eddy Leal of Eddy Leal, P.A., Miami, for appellant.
Nicole R. Moskowitz of Neustein Law Group, P.A., Aventura, for appellee.
Following a non-jury trial, Appellant Waterfall Victoria Grantor Trust II, Series G, successor owner of the mortgage and promissory note at issue, appeals the portion of the trial court's entry of final judgment of foreclosure against appellee Sarah McDonald that awarded Appellant $314, 000 as unpaid principal on an underlying loan. Specifically, Appellant argues that the trial court erred in entering a reduced final judgment of foreclosure that reflected only one of two loan disbursements on which McDonald defaulted, because the trial court concluded Appellant had waived its argument as to the second disbursement by failing to plead a reply to McDonald's affirmative defenses.
While we agree that Appellant was required to file a reply to avoid McDonald's affirmative defenses, we hold that Appellant's failure to do so did not defeat its waiver argument because the issue was tried by consent. We also agree with Appellant's argument that the introduction of a letter from the loan servicer was improper under the business record hearsay exception because the witness could not lay the predicate foundation. Thus, based on these errors, we hold that the trial court erred in entering a reduced final judgment of foreclosure.
In 2006, Sarah and Rick McDonald signed a home equity line of credit agreement ("line of credit") with Countrywide Home Loans (the original lender), secured by a second mortgage on their home. The line of credit provided a credit limit of $1, 000, 000 and obligated the McDonalds to repay whatever they borrowed, up to that amount. When the McDonalds subsequently defaulted on their repayment obligations, a foreclosure complaint was filed against the McDonalds, alleging that they had made two draws on the line of credit. Specifically, the complaint alleged that, upon origination of the loan, the McDonalds made an initial draw of $314, 000 and, five months later, made an additional draw of $690, 000.
In response, Sarah McDonald filed an answer and affirmative defenses. Rick McDonald never responded and was ultimately judicially defaulted (he is not a party to the instant appeal). Sarah McDonald's answer did not dispute either the original loan disbursement of $314, 000 or the second disbursement of $690, 000. Nor did she dispute that in the loan agreement both McDonalds "agree[d] that all borrowers who have executed the Agreement are jointly and severally liable under the terms of the Agreement[.]"
However Sarah McDonald asserted that the second disbursement of $690 000 was made solely at her husband's request without her consent or knowledge and after "the account had been closed[.]" She further alleged that the lender knew or should have known that the account was closed, and yet had allowed her husband to withdraw money from the account without her consent. Sarah McDonald thus denied owing the principal sum of $998, 777.04, drawing the additional $690, 000, and retaining the benefit of the draws. Appellant did not plead a reply to Sarah McDonald's affirmative defenses, and the case proceeded to a non-jury trial.
In support of her affirmative defense that at the time of the $690, 000 draw, Rick McDonald had already requested that Appellant freeze the line of credit account and that the account had, in fact, been frozen at this time, Sarah McDonald called her husband's former attorney as a witness. Through the former attorney's testimony, the court admitted three documents into evidence under the business record hearsay exception: (1) an email from the former attorney to a Countrywide Home Loans representative asking to cancel the subject loan, dated July 18, 2006; (2) a letter from the former attorney to the same Countrywide representative, dated July 18, 2006, again asking to cancel the loan and stating that "Mr. McDonald does not authorize any further transactions on this loan or line of credit"; and (3) an alleged letter from Countrywide confirming receipt of the email, and stating that, per Rick McDonald's request, the account had been frozen.
Regarding the third document-the letter from Countrywide-the former attorney testified: the letter sought to be placed into evidence was an accurate copy of the letter which she maintained in her records; it was made at or near the time indicated; it was made by a person with knowledge; and it was her common business practice as an attorney to maintain such records. However, when questioned by Appellant's counsel, the former attorney testified: she did not and had never worked for Countrywide; she was not present when the letter was created; she did not know if the purported author had actually drafted the letter; she did not know why the two pages of the letter introduced at trial were written in different font sizes and contained different margins; she did not know how Countrywide had photocopied the letter; and she did not know if either of the phone numbers on the letter matched up with those of Countrywide. Over Appellant's objection that the letter was not properly authenticated, the trial court admitted the letter into evidence.
At the conclusion of trial, Appellant argued that Sarah McDonald had waived her affirmative defenses related to the purportedly improper $690, 000 draw because of the "Billing Rights Statement" attached to the original note. That statement provided that, in the event of a billing statement error or dispute concerning the amount borrowed, the McDonalds would have to provide a protest letter within sixty days. If such a letter was not timely sent to Appellant, the McDonalds could not dispute the amount. Appellant also introduced evidence that the McDonalds had received billing statements noting the $690, 000 disbursement, and Sarah McDonald testified that she received a copy of the $690, 000 check drawn on the line of credit account made payable to her husband Rick McDonald. Appellant argued that, because Sarah McDonald had not complied with the Billing Rights Statement's protest requirements and had made payments with respect to the second disbursement, she had waived her ability to contest the disbursement.
In turn, Sarah McDonald argued that Appellant could not contend she had waived her affirmative defenses by failing to comply with the terms of the Billing Rights Statement because Appellant had failed to plead a reply in avoidance of her affirmative defense relating to the improper draw after the account was allegedly frozen. In short, Sarah McDonald maintained that Appellant's waiver argument was waived by failure to plead a reply on the avoidance.
The trial court agreed that Appellant's failure to properly avoid Sarah McDonald's affirmative defenses precluded the court from considering the issue. Thus, while the court ultimately entered final judgment in Appellant's favor, the court awarded damages reflecting only the amount of the initial $314, 000 draw, plus interest, and did not award damages for the $690, 000 draw. Appellant timely appealed.
"[W]here a trial court's conclusions following a non-jury trial are based upon legal error, the standard of review is de novo." Acoustic Innovations v. Schafer, 976 So.2d 1139, 1143 (Fla. 4th DCA 2008). Further, "the standard of review of a trial court's interpretation of the rules of civil procedure is de novo." Donado v. PennyMac Corp., 174 So.3d 1041, 1042 (Fla. 4th DCA 2015) (quoting R.T.G. Furniture Corp. v. Coates, 93 So.3d 1151, 1153 (Fla. 4th DCA 2012)).
When a plaintiff seeks to deny an affirmative defense, a "denial is neither required nor permitted by the rules" of civil procedure. U.S. Bank Nat'l Assoc. for Registered Holders of Citigroup Mortg. Loan Tr. v. Wilson, 252 So.3d 306, 308 (Fla. 5th DCA 2018). Rather, Florida Rule Civil Procedure 1.110(e) provides an automatic denial of every allegation of an affirmative defense so that "[w]hen a defendant files affirmative defenses and the plaintiff does not reply, the affirmative defenses are deemed denied and therefore false." Roman v. Bogle, 113 So.3d 1011, 1014 (Fla. 5th DCA 2013); Fla. R. Civ. P. 1.110(e) (); see also Moore Meats, Inc. v. Strawn, 313 So.2d 660, 662 (Fla. 1975). Conversely, where an answer contains an affirmative defense and the plaintiff seeks to avoid it, Rule 1.100(a) provides that the plaintiff must file a reply on the avoidance. Fla. R. Civ. P. 1.110(a).
Thus, two classes of defensive pleas exist:
The first is a plea by way of traverse. This means a denial of an ultimate fact pleaded in the preceding pleading. The second class of defensive plea is one by way of confession and avoidance. All affirmative defenses are pleas by way of confession and avoidance. They admit the allegations of the plea to which they are directed and allege additional facts that avoid the legal effect of the confession.
Moore Meats, Inc., 313 So.2d at 661-62 (citation omitted). While a denial rejects the facts alleged in the affirmative defense, an avoidance alleges a new matter in opposition to a pleading that admits the facts alleged in the pleading but shows cause as to why those facts should...
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