Wells Fargo Bank, N.A. v. Clavero ( 2015 )

Third District Court of Appeal
State of Florida
Opinion filed September 2, 2015.
Not final until disposition of timely filed motion for rehearing.
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No. 3D14-520
Lower Tribunal No. 09-56724
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Wells Fargo Bank, N.A., etc.,
Appellant/Cross-Appellee,
vs.
Maria Clavero, et al.,
Appellees/Cross-Appellants.
An Appeal from the Circuit Court for Miami-Dade County, Jacqueline Hogan
Scola, Judge.
Lerman & Whitebook and Carlos D. Lerman (Hollywood), for
appellant/cross-appellee.
Nathan Clark, for appellees/cross-appellants.
Before SUAREZ, C.J., and ROTHENBERG and SALTER, JJ.
SALTER, J.
This is an appeal and cross-appeal arising from a lender’s1 attempt to
foreclose a residential mortgage executed by only one of the four owners of the
home when the loan was closed. Applying the legal doctrine of ratification, the
trial court entered a foreclosure judgment against all four of the owners on the
basis of an equitable lien. The trial court stayed enforcement of that judgment,
however, as to two of the owners for as long as the property remains their
homestead.
The successor lender, Wells Fargo as trustee, appealed the stay of
enforcement, while all four owners cross-appealed the entry of the foreclosure
judgment against them. We affirm in part, reverse in part, and remand for
modification of the final judgment. We do so as a matter of law and based on a
record that is extraordinary—even for the excesses of the Miami residential
lending market at the time. We also do so with deference to the veteran trial
judge’s findings of fact and conscientious efforts to bring some order to a loan
closed without regard to normal underwriting or title examination procedures.
I. Factual and Procedural History
As of 2005, appellees and cross-appellants Elvio and Gliceria Clavero (the
“Parents”) owned a small home in Miami-Dade County that they had purchased
over
1 The original lender was Washington Mutual Bank, not Wells Fargo Bank, N.A.,
as Trustee.
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30 years earlier (the “3789 Property”). In October of that year, they signed and
recorded a quitclaim deed conveying their interests in the 3789 Property to
“MARIA
CLAVERO and HUBERT CLAVERO HUSBAND AND WIFE AND ELVIO
CLAVERO and GLICERIA CLAVERO HUSBAND AND WIFE joint tenants
with
rights of survivorship [sic].” Hubert Clavero was the Parents’ adult son, and at the
time, Maria Clavero was Hubert’s wife. Hubert and Maria had their own home and
did not live in the 3789 Property.
Over two months after recordation of the quitclaim deed, Maria signed the
papers for a $201,500.00 mortgage loan on the 3789 Property, in favor of
Washington Mutual Bank. She was identified as the only “Borrower,” and as a
“married woman.” She initialed each page of the promissory note and mortgage.
The other three owners of record did not sign the note or mortgage.
The Parents received none of the proceeds of the mortgage loan on the 3789
Property, and they never made a payment on the loan. None of the loan proceeds
were invested in or used to pay taxes or other obligations relating to the 3789
Property.
In mid-2009, Wells Fargo filed a foreclosure complaint alleging a payment
default and breach effective as of February 1, 2009. The complaint identified all
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four of the record owners—the Parents, Hubert, and Maria—as defendants. In
2010, Hubert and Maria were divorced; as part of their marital settlement
agreement, they re-conveyed their interests in the 3789 Property to the Parents.
The foreclosure case proceeded to a bench trial in January 2014. Maria (by
then known as Maria Castellon) testified that the Parents executed the October
2005 quitclaim deed to their home so that Maria could collateralize a loan for
another property that was to be used for a daycare business. She testified,
however, that the Parents held no interest in, and received no financial benefit
from, the other property or the daycare business. She told the Parents that she
would be responsible for the loan.
Maria testified that she was the only person among the four record owners of
the 3789 Property who had good credit. The Parents testified that they added their
son and Maria to the title for estate planning purposes, but the trial court rejected
that testimony, finding Maria’s testimony credible. No one from Washington
Mutual Bank testified regarding the origination or closing of the loan—or
regarding the startling omission of three of the four owners from the mortgage—
but the trial court observed that “everybody was hoodwinking everybody.”
Applying the legal principle of ratification, the trial court entered a final
judgment of foreclosure against the 3789 Property, but on the basis of an equitable
lien. The final judgment stayed any sale of the property “until the property is no
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longer the homestead of Elvio/Glicera Clavero.” The court also ordered the
Parents to begin paying their property taxes, and to pay past property taxes to the
extent they are able. Wells Fargo moved for rehearing, and the court amended the
final judgment to require the Parents to report to the court every six months on the
homestead status of the 3789 Property. This appeal and cross-appeal followed.
II. Analysis
As the successor to the loan made by Washington Mutual Bank, Wells Fargo
acquired a promissory note and recorded mortgage executed by only one of the
four titleholders. The record contains no document whereby the Parents subjected
their homestead, the 3789 Property, to that mortgage. Wells Fargo’s ability to
force a sale of the Parents’ homestead property,2 therefore, turns on the
applicability of the principle of ratification. Ratification of a mortgage by a non-
signatory property owner has been upheld in Florida in two distinct types of cases:
(a) when the nonsignatory owner has received the benefit of the mortgage loan
proceeds; or (b) when the non-signatory owner has authorized an attorney-in-fact
to execute the mortgage on behalf of the owner. We consider these categories in
turn.
2 Art. X, § 4(c), Fla. Const.
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A. Receipt of Benefit
The non-signatory’s receipt of mortgage loan proceeds, or receipt of a
benefit from the application of those funds, may cure the failure to sign the
mortgage as a matter of equitable subrogation, see Palm Beach Sav. & Loan Ass’n
v. Fishbein, 619 So. 2d 267 (Fla. 1993), or ratification, see Fleet Fin. & Mortg.,
Inc., 707 So. 2d 949 (Fla. 4th DCA 1998).
In the present case, however, neither the Parents nor the 3789 Property
received a financial benefit from the loan proceeds. It is undisputed that all of the
loan proceeds were utilized by the sole signatory to start the day care business.
The Parents were not owners or employees of that business.
We find no Florida case extending the principle of ratification to a parent’s
expression of a general intention to help a family member secure a loan for
purposes of benefiting the family member. At oral argument, this type of indirect
benefit was advanced by Wells Fargo as a worthy rationale for binding the Parents
to the mortgage loan procured by Maria. We see no legal basis for extending the
legal principle of ratification in such an instance, and on this record. The
Washington Mutual loan circumvented the institutional lending process whereby
the property owners/mortgagors sign documents informing them of the terms of the
transaction, including the amount of the loan procured, federal Truth-in-Lending3
3 15 U.S.C. §§ 1601-1665 and 12 C.F.R. §§ 226.1-.1002.
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rights, interest rates, monthly payment amounts, and subjection of the homestead
to the mortgage loan—all in a transaction in which the non-signatory owners
themselves and the mortgaged property have received no benefit.
Wells Fargo’s reliance on the case of Citron v. Wachovia Mortgage Corp.,
922 F. Supp. 2d 1309 (M.D. Fla. 2013), is unwarranted. In that case, Mr. Citron
was a Florida-licensed mortgage broker. Mrs. Citron worked with him in a
mortgage company, and the two had brokered some 47 mortgage loans for the
lender that originally loaned money to the Citrons, World Savings. Wachovia
Mortgage was the successor by merger to World Savings. The Citrons obtained
hundreds of thousands of dollars of loan proceeds and invested those funds in a
home later conveyed to their family trust.
The Citrons sued Wachovia Mortgage in an attempt to rescind the loan for
Truth-in-Lending violations and other alleged defects in the loan documents. The
trial court denied any such relief because (among a number of facts in the record)
the Citrons had received and had not promptly disgorged all of the direct benefits
of the loan. Additionally, the Citrons had made monthly payments on the loan for
over a year after learning of the alleged defects in the loan documents.
“Ratification is conduct that indicates an intention, with full knowledge of the
facts, to affirm a contract which the person did not enter into or which is otherwise
void or voidable.” 922 F. Supp. 2d at 1321 (quoting Still v. Polecat Indus., Inc.,
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683 So. 2d 634 (Fla. 3d DCA 1996)). In the present case, the Parents neither
received loan proceeds, nor otherwise benefited from the application of those
proceeds, nor made any monthly payments, nor acquired full knowledge of the
material details of the mortgage loan.
B. Attorney-in-Fact
Section 695.01(1), Florida Statutes (2005), provides protection to creditors
and purchasers who accept a conveyance or lien signed by an attorney-in-fact on
behalf of a property owner (and then recorded), so long as the power of attorney
itself is also recorded before the accrual of rights by “creditors or subsequent
purchasers for a valuable consideration and without notice.” Washington Mutual
Bank could have required, but did not, such a power of attorney as a condition to
the loan. And such a power of attorney is only effectual to the extent of the
specific powers granted. Him v. Firstbank Fla., 89 So. 3d 1126 (Fla. 5th DCA
2012).
Execution of the mortgage by an agent “previously unauthorized” may also
be subject to ratification in certain instances. Branford State Bank v. Howell Co.,
102 So. 649 (Fla. 1924). In that case, however, the Supreme Court of Florida held:
“No rule of law is better settled than this: That the ratification of the act of an
agent previously unauthorized must, in order to bind the principal, be with full
knowledge of all the material facts.” Id. at 650. In the present case, there was no
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evidence that Maria (or anyone else) informed the Parents or Hubert of all of the
material facts relating to the Washington Mutual Bank loan and mortgage.
III. Proceedings on Remand
We affirm the trial court’s findings that (a) Maria Castellon signed the
promissory note, obtained the loan proceeds, and remains liable under the terms of
the promissory note,4 (b) the defective Washington Mutual Bank promissory note
and mortgage did not subject the Parents’ homestead property to the lien of the
mortgage and to sale, and (c) Wells Fargo does have an equitable lien to the extent
of disbursements for property taxes and reasonable costs of insurance paid by
Wells Fargo during the pendency of the foreclosure action, recoverable when the
3789 Property is no longer the Parents’ homestead.
We reverse that portion of the final judgment imposing and foreclosing an
equitable lien for the principal or interest on the loan made by Washington Mutual
Bank, with respect to the ownership interest of the Parents in the 3789 Property.
On remand, the trial court should clarify that the Parents and Hubert are not
personally liable for unpaid principal and interest due under the promissory note
signed only by Maria.
4 The original promissory note was surrendered by Wells Fargo and marked
“cancelled.” On remand, the trial court should enter a final judgment against
Maria Castellon, individually, for the principal and interest due under the note.
The trial court may also hear and rule upon any motions for attorney’s fees relating
to collection of sums due under the note.
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Affirmed in part, reversed in part, and remanded for further proceedings in
accordance with this opinion.
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