Pijuan v. Bank of America , 253 So. 3d 112 ( 2018 )


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  •           Third District Court of Appeal
    State of Florida
    Opinion filed August 8, 2018.
    Not final until disposition of timely filed motion for rehearing.
    ________________
    No. 3D16-1553
    Lower Tribunal No. 13-5691
    ________________
    Francisco Pijuan, et al.,
    Appellants,
    vs.
    Bank of America, N.A.,
    Appellee.
    An Appeal from the Circuit Court for Miami-Dade County, Eugene J.
    Fierro, Senior Judge.
    Loan Lawyers, LLC, and Chase E. Jenkins (Fort Lauderdale), for appellants.
    Liebler, Gonzalez & Portuondo, and Adam M. Topel, for appellee.
    Before LAGOA, LOGUE and SCALES, JJ.
    SCALES, J.
    Appellants, defendants below, Francisco, Luisa, Francisco Jr. and Sonia
    Pijuan (“Pijuan”)1 appeal the final foreclosure judgment entered in favor of
    1   We refer to the four appellants collectively as Pijuan, while noting their different
    appellee, plaintiff below, Bank of America (“BOA”). After conducting a bench
    trial on BOA’s foreclosure complaint, the trial court found that BOA’s
    predecessor, Countrywide Home Loans, Inc., had entered into a loan modification
    agreement (“LMA”) that constituted a novation of the original loan documents.
    Notwithstanding this finding (which BOA has not cross-appealed), the trial court
    entered a foreclosure judgment against Pijuan that failed to consider the effect of
    its novation finding on the foreclosure case pled and proven by BOA. We conclude
    that, under the facts of this case, once the trial court made the finding that the LMA
    replaced the original loan, then BOA could not prevail without having pled and
    proven a breach of the LMA.
    I. Relevant Facts and Procedural Background
    In December of 2006, Countrywide loaned Francisco and Luisa Pijuan
    $410,000. The loan was memorialized by an adjustable rate promissory note, and
    was secured by a mortgage encumbering Miami Beach real property owned by
    Pijuan. Pursuant to the terms of the note, Pijuan was required to make monthly
    principal and interest payments of $2,050.00 to Countrywide.
    In March of 2009, Pijuan received a letter from Countrywide notifying
    Pijuan that Countrywide had approved a loan modification. In order for the
    modification to be valid, the LMA (enclosed with the letter) would need to be
    roles in the events underlying this litigation. All four of the Pijuans executed the
    mortgage; however, only Francisco and Luisa executed the note and LMA.
    2
    signed by Francisco and Luisa and returned to Countrywide. Pursuant to the LMA,
    Pijuan’s monthly payment was adjusted down from $2,050.00 to $1,630.51,
    effective with the payment due on May 1, 2009. The LMA required compliance
    with all other covenants of the original documents not altered or amended by the
    LMA. The LMA did not alter or amend the condition precedent requirements of
    the mortgage’s paragraph 22.2
    Francisco and Luisa executed the LMA and, on or about March 12, 2009,
    mailed it to Countrywide. From approximately April 20, 2009, through October
    13, 2010, Pijuan, consistent with the LMA’s payment terms, made eighteen
    monthly payments of $1,630.51, totaling $29,349.36.
    Sometime later in 2009, BOA assumed the Pijuan note and mortgage from
    Countrywide. Notwithstanding Pijuan’s return of the executed LMA to BOA, and
    Pijuan’s eighteen monthly payments made pursuant to the LMA’s payment terms,
    BOA, on December 31, 2010, sent a default letter to Pijuan asserting a November
    1, 2009 default date. In this default letter (“BOA’s Notice”), BOA instructed
    Pijuan that BOA must receive a payment of $42,523.45 prior to January 31, 2011,
    in order to “cure” this asserted default. BOA’s Notice did not mention the LMA,
    much less assert any default under the LMA. Consistent with BOA’s Notice, in
    2 Paragraph 22 of the December 2006 mortgage requires, as a condition precedent
    to acceleration and foreclosure, the mortgagee to provide notice to the mortgagor
    specifying, among other things, the specific default and cure amount.
    3
    February 2013, BOA filed the instant suit alleging a default not of the LMA, but of
    the December 2006 note and mortgage. BOA’s verified complaint identified
    November 1, 2009 as the default date “on the Mortgage Note and Mortgage.”
    Paragraph 9 of BOA’s complaint, which was denied by Pijuan, alleged that BOA
    had performed all conditions precedent to acceleration. As an affirmative defense
    to BOA’s foreclosure action, Pijuan asserted that BOA did not perform a condition
    precedent because BOA failed to provide proper default notice as required by the
    mortgage. Pijuan also filed a motion for leave to add an additional affirmative
    defense specifically relating to the failure of BOA to acknowledge the existence of
    the LMA.
    While Pijuan’s motion seeking leave to add this affirmative defense was not heard
    before trial, the issue of whether the LMA constituted a novation of the original
    loan was tried by the parties’ consent.
    The bench trial, conducted in May of 2016, focused almost exclusively on
    whether, by virtue of the March 2009 LMA and subsequent payments consistent
    therewith, the parties had modified the December 2006 loan documents. BOA
    argued that, while it had received the executed LMA from Pijuan and credited
    Pijuan’s account for Pijuan’s payments made pursuant to the LMA, neither BOA
    nor Countrywide ever had approved the modification nor had either entity actually
    executed the document. BOA argued that the document therefore was ineffective.
    4
    At the end of the trial, the court specifically found, as a factual matter, that
    the parties had entered into the LMA in March of 2009, and that the LMA
    constituted a novation of the original December 2006 loan documents. The trial
    court, though, rejected Pijuan’s counsel’s argument that, upon finding a loan
    modification existed, BOA’s foreclosure case should be dismissed under the
    authority of Kuehlman v. Bank of America, N.A., 
    177 So. 3d 1282
    , 1283 (Fla. 5th
    DCA 2015) (holding that when a loan is modified a lender can foreclose only by
    pleading and proving a breach of the modification agreement). Rather, despite no
    allegation by BOA of any breach of the LMA, nor any allegation or proof that
    BOA had complied with the conditions precedent for suing Pijuan under the LMA,
    the trial court found that Pijuan had breached the LMA, and entered the subject
    foreclosure judgment, simply crediting Pijuan with the $29,349.36 that Pijuan had
    paid pursuant to the LMA. It is from this judgment that Pijuan timely appeals.
    II. Discussion
    The trial court found that the LMA constituted a novation;3 that is, the
    original loan documents had been modified by the subsequent LMA. This finding
    has not been challenged on cross appeal by BOA. We follow the persuasive
    precedent of our sister courts in holding that, when a loan modification agreement
    3 A novation is a separate and new agreement, discharging an existing obligation
    and substituting a new one. See Ades v. Bank of Montreal, 
    542 So. 2d 1013
    , 1014
    (Fla. 3d DCA 1989).
    5
    has been reached, a lender can foreclose only by both pleading and proving a
    breach of the modification agreement. Nowlin v. Nationstar Mortg., LLC, 
    193 So. 3d
    1043, 1046 (Fla. 2d DCA 2016); 
    Kuehlman, 177 So. 3d at 1283
    .
    In this case, BOA pleaded a default under the December 2006 loan
    documents, and its trial proofs, including its evidence of compliance with all
    required contractual conditions precedent to acceleration and foreclosure, were
    based exclusively on Pijuan’s alleged breach of the December 2006 loan
    documents. BOA vigorously contested the effectiveness of the LMA, and certainly
    never pleaded or attempted to prove a default thereunder; nor did BOA plead or
    prove that BOA had complied with the conditions precedent to sue Pijuan under
    the LMA.4 Therefore, when the trial court concluded that the LMA constituted a
    novation, and that the LMA replaced the inconsistent provisions of the original
    note, BOA’s foreclosure case – premised entirely on BOA’s allegations and proof
    that Pijuan breached the December 2006 loan documents, rather than the LMA –
    failed. Nowlin, 
    193 So. 3d
    at 1046.5 As argued by Pijuan’s counsel, upon finding
    4Indeed, such proof would have undermined BOA’s principal argument that the
    LMA was ineffective.
    5 Citing dialogue between Pijuan’s counsel and the trial court, the dissent argues
    that, in trying the novation issue by consent, Pijuan necessarily (or impliedly)
    waived both (i) BOA’s obligation to plead and prove compliance with all
    conditions precedent related to a breach of the LMA, and (ii) Pijuan’s affirmative
    defense asserting that BOA did not provide proper default notice to Pijuan. Waiver
    is the voluntary and intentional relinquishment of a known right. Caraffa v.
    6
    that the LMA constituted a novation of the December 2006 loan documents, the
    trial court should have involuntarily dismissed BOA’s case.
    We reverse the trial court’s final foreclosure judgment for BOA and remand
    with instructions to enter an involuntary dismissal of BOA’s case.
    Reversed and remanded, with instructions.
    LAGOA, J., concurs.
    Francisco Pijuan v. Bank of America
    Case No. 3D16-1553
    LOGUE, J. (dissenting)
    I respectfully dissent. Although the trial court entered a final judgment of
    foreclosure after a full trial on the merits, the majority reverses because the Bank’s
    complaint alleged only a default of the original loan—not a default of the loan
    modification. While the majority is correct that the Bank did not allege a default
    Carnival Corp., 
    34 So. 3d 127
    , 130 (Fla. 3d DCA 2010). The language of waiver
    must be clear and unequivocal. See, e.g., Rodriguez v. Ocean Bank, 
    208 So. 3d 221
    , 225 (Fla. 3d DCA 2016). From our review of the record, it does not appear
    that Pijuan, at any time, expressly or impliedly waived the requirement that BOA
    plead and prove compliance with conditions precedent. Indeed, in our view, the
    record reflects just the opposite: immediately after the trial court announced its
    novation determination, Pijuan’s counsel argued that dismissal was required based
    on Kuehlman precisely because of BOA’s default notice infirmities.
    7
    of the loan modification, it ignores the Borrowers’ failure to raise the loan
    modification as an affirmative defense which, as explained below, was their
    burden.
    More importantly, the majority’s focus on the pleadings misses the point.
    The Bank and the Borrowers consented by word and act to try both the issue of
    whether a modification existed and whether the Borrowers had breached the
    modification. Indeed, it was the Borrowers who offered into evidence their
    payments under the loan modification and the fact that they stopped payments. The
    Borrowers’ position at trial was that they were excused from making payments
    during the foreclosure litigation. Because the trial court rightly rejected that
    defense, the final judgment of foreclosure should be affirmed.
    At the beginning of trial, the trial court asked both the Bank and the
    Borrowers to frame the issues to be tried. The parties agreed the focus of the trial
    should be whether there was a loan modification and whether there was a default
    under the loan modification. The following exchange took place:
    The Court: Okay. Counsel, do you see the issues—any
    other issues other than those raised?
    Bank’s Counsel: I do not, Judge. In fact, I think the
    only real issue is going to be the application of payment
    on some alleged loan modification.
    Borrowers’ Counsel: That’s correct, Your Honor. I think
    that’s the heart of the issue.
    8
    (Emphasis added.) At the end of the exchange, Borrowers’ counsel again
    confirmed that the two issues to be tried concerned whether there was a
    modification and “how much was paid towards it and whether those payments
    were properly applied”:
    The Court: So is the issue, as counsel framed it, a
    question of how much?
    Borrowers’ Counsel: Whether there’s a modification and
    how much was paid—how much was paid towards it and
    whether those payments were properly applied.
    (Emphasis added.)
    At trial, the Bank maintained there was no loan modification because the
    Bank never signed a modification contract. To prove the Bank agreed to the
    unsigned modification, the Borrowers presented evidence that they made eighteen
    payments from April 2009 to October 2010 in the amount specified in the loan
    modification and the Bank accepted those payments.
    Without objection, the Borrowers also admitted to stopping payments after
    October 2010. They stopped payments because they believed they did not have to
    pay during the foreclosure litigation:
    The Court: Now, six years, no payments?
    Pijuan: Yes, sir.
    Court: No taxes?
    9
    Pijuan: Nothing.
    The Court: No insurance?
    Pijuan: Nothing.
    ....
    The Court: I want to know why you sat there for six
    years with no payment living there, no taxes, no
    insurance.
    Pijuan: Well, I was told that, you know, that’s how it was
    going to—you know, they were going to be paying
    everything for now until the case was resolved.
    Based on this unobjected-to testimony, the trial court noted that “there’s two
    wrongs here,” and “this is not good for either of you.” He ruled against the Bank
    and found that a loan modification existed, pointing to the Bank’s acceptance of
    eighteen payments in the amount of the loan modification. He then found the
    Borrowers had defaulted under the loan modification based upon their own
    admission. The court then entered a final judgment of foreclosure that fully
    credited the Borrowers for all payments made under the original loan and the loan
    modification.
    If the parties had not tried by consent the issue of the loan modification, the
    judgment of foreclosure would still be proper. The Borrowers’ main defense was
    the loan modification, but they never raised it as an affirmative defense.6 It was
    6 While Pijuan filed a motion for leave to add an additional affirmative
    defense relating to the Bank’s failure to acknowledge the parties’ loan modification
    10
    the Borrowers’ “burden to plead the existence of a modification or forbearance
    agreement as an affirmative defense.” Rouffe v. CitiMortgage, Inc., 
    241 So. 3d 870
    , 873 (Fla. 4th DCA 2018). Since they failed to raise the loan modification as
    an affirmative defense, they technically waived it. Bank of New York Mellon for
    Certificateholders of CWABS, Inc., Asset-Backed Certificates, Series 2005-BC5 v.
    Bloedel, 
    236 So. 3d 1164
    , 1167 (Fla. 2d DCA 2018) (“The effect of a modification
    to a legal agreement, to the extent it would constitute an avoidance of all or part of
    a defendant’s liability under the agreement, is an affirmative defense that must be
    pled and proven by the defendant.”).
    The Borrowers are saved from their technical waiver of the defense of a
    modification; but only because the issue of the modification was tried by consent.
    “The essence of the broad test generally applied to determine whether an issue has
    been tried by implied consent is whether the party opposing introduction of the
    issue into the case would be unfairly prejudiced thereby.” Smith v. Mogelvang,
    
    432 So. 2d 119
    , 122 (Fla. 2d DCA 1983). The Borrowers were not only on notice
    of the issues relating to the loan modification (it was their main defense), they
    expressly agreed to try these issues and provided the evidence of the payments and
    default under the loan modification. They cannot now be heard to argue the issues
    were not raised in the pleadings. “When issues not raised by the pleadings are tried
    agreement, that motion was never heard and never ruled upon.
    11
    by express or implied consent of the parties, they shall be treated in all respects as
    if they had been raised in the pleadings.” Fla. R. Civ. P. 1.190(b).
    These facts bring this case out of the ambit of the cases relied upon by the
    majority. In Nowlin v. Nationstar Mortgage, LLC, 
    193 So. 3d
    1043 (Fla. 2d DCA
    2016), the borrowers raised the modification as an affirmative defense and denied
    breaching the modification. In Kuehlman v. Bank of America, N.A., 
    177 So. 3d 1282
    , 1283 (Fla. 5th DCA 2015) the Fifth District expressly held the breach of the
    loan modification was not tried by consent.
    Accordingly, the final judgment should be affirmed.
    12
    

Document Info

Docket Number: 16-1553

Citation Numbers: 253 So. 3d 112

Filed Date: 8/8/2018

Precedential Status: Precedential

Modified Date: 8/8/2018