Friday, June 11, 2010

Some mortgage foreclosure rules

Although a mortgagee may properly, upon default by the mortgagor, elect to accelerate, Florida courts have consistently noted that acceleration will be denied where the default is merely technical or where the overall equities of a particular case warrant denial. La Boutique of Beauty Acad. v. Meloy, 436 So. 2d 396 (Fla. 2d DCA 1983) (judgment was affirmed in appeal by mortgagee from order granting summary judgment to appellees, mortgagors, in an action to foreclose on a mortgage. The court concluded it would be unconscionable to allow acceleration and appellant, mortgagee, was estopped from exercising its acceleration rights upon default because appellant had not done so after prior defaults.); Jones, 870 So. 2d at 52 (similar); Pearson v. Arthur, 248 So. 2d 227 (Fla. 3d DCA 1971) (Under the maxim that equity will enjoin the unconscionable exercise of a legal right, the right of a mortgagee to exercise an agreement to accelerate the unpaid indebtedness upon a default may be denied by the court when an acceleration of the due date of the debt would be an inequitable or unjust result and the circumstances would render the acceleration unconscionable.).
In Jones v. City of Winter Haven, 870 So. 2d 52 (Fla. 2d DCA 2003), for example, the owner bought real property from a financial corporation. The property had previously been found to be in violation of the city's ordinances and the corporation had been ordered to bring the property into compliance, subject to daily fines. The owner's agent was allegedly assured that a reduction in fines could have been petitioned for after the property was brought into compliance. In reliance on the representations, the owner improved the property. Two orders imposing fines on the property were recorded and a lien was created by operation of law. The city sued the owner to foreclose on the lien and the owner raised two affirmative defenses, one of which was estoppel. The city was granted summary judgment. On appeal, the Second District held that the final summary judgment was improper because genuine issues of material fact existed concerning the issues alleged in the affirmative defenses. As the city did not conclusively refute the estoppel defense, final summary judgment was improper.
Likewise, in Knight Energy Servs., 660 So. 2d at 788, a major supplier of motor fuel loaned a sum of money to some established petroleum franchises operating branded retail stations. When a dispute arose between the parties, they reached an agreement in which the parties executed notes and mortgages on some of appellant's service stations to secure repayment. The service station operators failed to make payments in accordance with the settlement, and appellee filed a foreclosure action. The service station operators asserted affirmative defenses that included unclean hands and estoppel. The trial court granted appellee's motion for summary judgment. On appeal, the Fourth District Court of Appeal determined that the affirmative defenses were legally sufficient to preclude a final summary judgment of foreclosure, reversed, and held that, because the appellee failed to factually refute the allegations, a genuine issue of material fact existed the precluding the entry of the judgment. Knight Energy Servs., 660 So. 2d at 788-89.
Likewise, in Marin v. Seven of Five, Ltd., 921 So. 2d 699 (Fla. 4th DCA 2006), the borrowers claimed that the mortgagee, who was also the builder of their residence, breached it warranty to repair any defects by failing to repair damage caused by water intrusion around the home's windows. In addition, the borrowers claimed that the mortgagee's partner initially agreed to a new financing arrangement, but then failed to honor his commitment. The Fourth District held that the allegations concerning the new financing arrangement were legally sufficient to support both the unclean hands and promissory estoppel defenses and, because the mortgagee failed to present any evidence refuting the alleged factual predicate of the defenses, the trial court erred in granting summary judgment.