Ricardo Ortiz, Nuria Almeida and Frank Padron v. PNC Bank, National Association

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA

FOURTH DISTRICT

RICARDO ORTIZ, NURIA ALMEIDA and FRANK PADRON,

Appellants,

v.

PNC BANK, NATIONAL ASSOCIATION,

Appellee.

No. 4D15-242

[March 30, 2016]

Appeal from the Circuit Court for the Seventeenth Judicial Circuit,

Broward County; Lynn Rosenthal, Judge; L.T. Case No. 062012CA025224.

Bruce K. Herman of The Herman Law Group, P.A., Fort Lauderdale, for

appellants.

Ronnie J. Bitman and Kristen M. Rickard of Pearson Bitman LLP,

Maitland, for appellee.

FORST, J.

We sua sponte withdraw our opinion issued March 9, 2016, and

substitute the following opinion in its place.

In this foreclosure case, Appellants Ricardo Ortiz, Nuria Almeida, and

Frank Padron challenge PNC Bank’s (“the Bank”) standing to bring the

foreclosure action and argue that the Bank failed to comply with the

conditions precedent in the mortgage such that the foreclosure was

improper. We address both of these arguments in this opinion, and

ultimately affirm the trial court’s final judgment in favor of the Bank.1

Background

Appellants took out a mortgage and note from a non-party bank, which

indorsed the note to a second non-party bank, which in turn indorsed the

note in blank. When the Bank foreclosed, the copy of the note attached to

the complaint showed these indorsements.

1 We affirm Appellant’s remaining arguments without further comment.

Before the Bank foreclosed, it sent a default letter to Appellants. That

letter stated, in relevant part, “You . . . have the right to bring a court

action if you claim that the loan is not in default or if you believe that you

have any other defense to the foreclosure.” The mortgage’s language

regarding notification, in Paragraph 22 of the document, required the

Bank to inform Appellants of “the right to assert in the foreclosure

proceeding the non-existence of a default or any other defense . . . to

acceleration and foreclosure.”

At trial, the Bank introduced the original note, mortgage, and default

letter, among other documents irrelevant on appeal. The Bank also

introduced testimony from a witness who was unable to testify whether

the Bank had physical possession of the note at the time the complaint

was filed. Appellants moved for involuntary dismissal, but the motion was

denied. The trial court entered judgment in favor of the Bank, and this

appeal ensued.

Analysis

A. The Bank established standing sufficient to defeat a motion for

involuntary dismissal

“Whether a party is the proper party with standing to bring an action

is a question of law to be reviewed de novo.” Westport Recovery Corp. v.

Midas, 954 So. 2d 750, 752 (Fla. 4th DCA 2007). To foreclose, a plaintiff

must establish that it had standing at the time it filed the complaint.

McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th

DCA 2012). “[W]ith bearer notes, possession of the note is the significant

core element to be analyzed.” Rodriguez v. Wells Fargo Bank, N.A., 178 So.

3d 62, 65 (Fla. 4th DCA 2015) (Conner, J., concurring).

Here, the Bank argues the facts that a copy of the note, with a blank

indorsement, was attached to the complaint, and that the original note

matching the copy was later filed with the court, were sufficient to

establish standing to foreclose. In support, the Bank relies upon Clay

County Land Trust v. JPMorgan Chase Bank, National Ass’n, 152 So. 3d 83

(Fla. 1st DCA 2014), in which the First District held:

When appellee filed the foreclosure complaint, it attached a

copy of the note and an undated allonge to the note containing

an endorsement in blank. This was sufficient to establish as

a matter of law that appellee had standing to bring the

foreclosure action.

2

Id. at 85.

We recognize the fact that a copy of a note is attached to a complaint

does not conclusively or necessarily prove that the Bank had actual

possession of the note at the time the complaint was filed. However, if the

Bank later files with the court the original note in the same condition as

the copy attached to the complaint, then we agree that the combination of

such evidence is sufficient to establish that the Bank had actual

possession of the note at the time the complaint was filed and, therefore,

had standing to bring the foreclosure action, absent any testimony or

evidence to the contrary.2

B. The Bank substantially complied with Paragraph 22 of the Mortgage

“[A] trial court’s interpretation of a contract is a matter of law subject

to a de novo standard of review.” Reilly v. Reilly, 94 So. 3d 693, 697 (Fla.

4th DCA 2012).

Paragraph 22 of the mortgage contains various conditions precedent

with which the Bank was required to comply before it could bring a

foreclosure action. The mortgage required the Bank to inform Appellants

of “the right to assert in the foreclosure proceeding the non-existence of a

default or any other defense . . . to acceleration and foreclosure.” The letter

the Bank sent instead told Appellants that “You . . . have the right to bring

a court action if you claim that the loan is not in default or if you believe

that you have any other defense to the foreclosure.”

As an initial matter, we take this opportunity to clarify that substantial

compliance with conditions precedent is all that is required in the

foreclosure context. See Green Tree Servicing, LLC v. Milam, 177 So. 3d 7,

13-14 (Fla. 2d DCA 2015). Substantial compliance is “that performance

of a contract which, while not full performance, is so nearly equivalent to

what was bargained for that it would be unreasonable to deny the [party]

the [benefit].” Casa Linda Tile & Marble Installers, Inc. v. Highlands Place

1981, Ltd., 642 So. 3d 766, 768 (Fla. 4th DCA 1994) (quoting Ocean Ridge

Dev. Corp. v. Quality Plastering, Inc., 247 So. 2d 72, 75 (Fla. 4th DCA

1971)). As such, we join our sister courts in applying a substantial

2 Of course, if the note changes hands during the course of litigation, new

indorsements may be present on the note at trial that were not on the copy

attached to the complaint. We do not address in this opinion what additional

proof is required to demonstrate standing if there is a transfer of holder status

after suit is filed.

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compliance standard. See Bank of N.Y. Mellon v. Nunez, 180 So. 3d 160,

162-63 (Fla. 3d DCA 2015) (noting opinions of the First, Second and Fifth

District Courts of Appeal that have determined that “the lender’s default

notice to borrower must only substantially comply with the conditions

precedent set forth in the mortgage”).

The purpose of the Paragraph 22 notice is “to ensure that borrowers

are informed . . . that they are not required to take a foreclosure complaint

lying down and can defend the case if so inclined.” Milam, 177 So. 3d at

16-17. Instead of clearly notifying Appellants of their right to raise any

defenses within an already-commenced foreclosure proceeding, the Bank

here informed Appellants that they had to go through extra effort to defend

against the foreclosure—they had to bring their own case with the

attendant hassles of filing fees, establishing a proper cause of action, and

the like. The Bank is by far the more sophisticated party in this

relationship. It knew what information it had to provide to Appellants and

simply and inexplicably, in light of the frequency with which such default

notices are sent using boilerplate language, failed to provide it. As such,

the language in the default letter did not strictly conform with the language

in Paragraph 22. However, the question is whether it “substantially”

complied.

While this appeal was pending before us, the Fifth District Court of

Appeal dealt with a case involving a notice letter with similar language. In

Bank of N.Y. Mellon v. Johnson, 41 Fla. L. Weekly D287 (Fla. 5th DCA Jan.

29, 2016), the notice to the homeowner stated “[y]ou may have the right to

bring a court action to assert the non-existence of a default or any other

defense you may have to acceleration and foreclosure.” Id. at D288.

(emphasis omitted). As in the instant case, the condition precedent in

Paragraph 22 of the Johnson mortgage required that the bank inform the

homeowner of “the right to assert in the foreclosure proceeding the non[-

]existence of a default or any other defense . . . to acceleration and

foreclosure.” Id.

At the onset of its analysis of this issue, the Fifth DCA stated that the

default letter sent by the bank “substantially complies with paragraph 22

and caused no prejudice to [the homeowner].” Id. Later, the court

concluded “[i]nsofar as the default letter varies from paragraph 22’s

requirements, any variation caused no actual prejudice to [the

homeowner]. Therefore, we find that the default letter substantially

complies with paragraph 22.” Id.

As such, the Fifth DCA considers not only whether the purportedly

faulty language substantially complied with the mortgage, but also

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whether the language prejudiced the homeowner. Id. (“Absent some

prejudice, the breach of a condition precedent does not constitute a

defense to the enforcement of an otherwise valid contract.” (quoting Gorel

v. Bank of N.Y. Mellon, 165 So. 3d 44, 47 (Fla. 5th DCA 2015))). However,

Johnson appears to conflate “substantial compliance” and “prejudice.”

That is to say, the “insofar” language suggests that the Fifth DCA believes

that if there is no prejudice to the homeowner caused by the faulty

language, then the notice substantially complies with paragraph 22.

The element of prejudice is not part of the inquiry in another recent

opinion issued by one of our other sister courts. In SunTrust Mortgage,

Inc. v. Garcia, 41 Fla. L. Weekly D384 (Fla. 3d DCA Feb. 10, 2016), a case

involving similar language in the notice of default letter, the Third DCA

reversed a trial court order granting summary judgment in the borrower’s

favor on grounds that “the notice provided substantially complies with

paragraph 22 of the mortgage.” Id. at D384.

We adopt the approach of our sister courts and hold that the language

at issue in the default letter substantially complies with paragraph 22 of

the mortgage. We also note that there is no evidence here that Appellant

was prejudiced by the language variation in the default letter. As in

Johnson, the homeowner in this case “retained counsel and vigorously

defended the foreclosure proceedings . . . .” Johnson, 41 Fla. L. Weekly at

D288. Thus, the Bank’s breach letter adequately apprised the Appellants

of their right to assert defenses in the foreclosure proceeding.

Conclusion

The Bank had standing to bring a foreclosure action and substantially

complied with the terms of the mortgage default notification provisions.

We therefore affirm the trial court’s final judgment of foreclosure.

Affirmed.

MAY, J., and SCHER, ROSEMARIE, Associate Judge, concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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