Onewest Bank v. Palmero

Third District Court of Appeal
State of Florida
Opinion filed April 18, 2018.
Not final until disposition of timely filed motion for rehearing.
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No. 3D14-3114
Lower Tribunal No. 10-3055
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OneWest Bank, FSB,
Appellant,
vs.
Luisa Palmero, et al.,
Appellees.
An Appeal from the Circuit Court for Miami-Dade County, Abby Cynamon,
Judge.
Burr & Forman LLP and Joshua H. Threadcraft (Birmingham, AL), for
appellant.
Carrera & Amador, P.A. and Juan M. Carrera, for appellees.
Before EMAS, LOGUE and LUCK, JJ.
LUCK, J.
The bank appeals the trial court’s judgment for a surviving spouse in this
reverse mortgage foreclosure case. After the borrower-husband passed away, and
the bank sought to foreclose for non-payment, the trial court concluded that the
surviving spouse was not a borrower under the loan but the bank still could not
foreclose because the federal reverse mortgage statute prohibited foreclosure
against a surviving spouse living in the mortgaged residence. We agree the
surviving spouse was not a borrower but vacate the judgment and reverse because
the trial court improperly relied on the statute that no one raised as a defense to the
foreclosure action.
Factual Background and Procedural History
In September 2006, Roberto and Luisa Palmero spoke to a reverse mortgage
counselor for an hour and received “information about the implications of and
alternatives to a reverse mortgage.” In a session tailored to their unique financial
circumstances, the counselor spoke to the Palmeros about the impact of the reverse
mortgage on their estate and heirs. After the counseling session, the Palmeros
certified that they had discussed the financial implications of, and alternatives to,
the reverse mortgage, and they understood its advantages and disadvantages, the
payment plan, and its costs.
In December 2006, the Palmeros mortgaged their home to Value Financial
Mortgage Services, Inc. (The reverse mortgage was later assigned to OneWest
Bank.) As part of the reverse mortgage, the Palmeros executed these five
documents (among some others):
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1. The mortgage. In the mortgage, the borrower was defined as “Roberto
Palmero, a married man reserving a life estate unto himself with the ramainderman
[sic] to Luisa Palmero, his wife, Idania Palmero, a single woman and Rene
Palmero, a single man.” In the signature block, it said, “BY SIGNING BELOW,
Borrower accepts and agrees to the terms contained in this Security Instrument and
in any rider(s) executed by Borrower and recorded with it.” Mr. and Mrs. Palmero
signed as the borrower under this sentence.1
2. The note. The note defined borrower to mean “each person signing at the
end of this Note.” Mr. Palmero was the only person who signed at the end of the
note as the borrower.
3. The loan application. In the loan application, the property was said to be
in Mr. Palmero’s name. Mr. Palmero was named as the borrower, and he signed as
the borrower. Even though there was a space for a co-borrower, Mrs. Palmero was
not listed as the co-borrower and she did not sign the loan application.
4. The loan agreement. In the loan agreement, borrower was defined as Mr.
Palmero. Mr. Palmero, and no one else, signed the loan agreement as the
borrower.
1 The dissenting opinion says we “overlook[ed]” that Mrs. Palmero signed the
mortgage as a borrower. We have not. That fact is in the third paragraph of the
fact section of this opinion, just before this footnote.
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5. The non-borrower spouse ownership interest certification. The Palmeros
acknowledged in the non-borrower spouse ownership interest certification that they
were given ample time “prior to the closing of this reverse mortgage loan to
consult with independent legal and tax experts of [their] own choosing regarding
the ownership or vesting of real property that will serve as collateral for the reverse
mortgage loan.” Mr. Palmero signed the certification as the borrower, while Mrs.
Palmero signed as the non-borrower spouse. In Mrs. Palmero’s portion, she
certified that “should [her] spouse predecease [her] . . . and unless another means
of repayment [was] obtained, the home where [she] reside[s] may need to be sold
to repay Reverse Mortgage debt incurred by [her] spouse. If the home where [she]
reside[s] [was] required to be resold,” Mrs. Palmero agreed she understood “that
[she] may be required to move from [her] residence.”
The bank paid Mr. Palmero from May 2007 through July 2008, until he
passed away in August 2008. Under the terms of the mortgage, with the borrower
now deceased, the bank accelerated the loan in November 2008. When Mrs.
Palmero did not pay the balance of the loan, the bank filed a complaint to foreclose
on the home.
The case proceeded to trial, and after taking testimony and examining the
loan documents, the trial court concluded that Mrs. Palmero was not a borrower.
But the trial court did not enter judgment for the bank because under the federal
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reverse mortgage statute, 12 U.S.C. § 1715z-20(j), “the repayment of a reverse
mortgage loan is deferred until the death of both the borrowing homeowner and the
homeowner’s spouse.” Judgment was entered for Mrs. Palmero, and the bank has
appealed.
Standard of Review
“A trial court’s construction of notes and mortgages involves pure questions
of law, and therefore is subject to de novo review.” Smith v. Reverse Mortg. Sols.,
Inc., 200 So. 3d 221, 224 (Fla. 3d DCA 2016).
Discussion
OneWest contends the trial court erred by relying on the federal reverse
mortgage statute to find for Mrs. Palmero because she did not plead in her answer
that the statute prevented foreclosure and she did not raise the issue at trial. Mrs.
Palmero responds that even without the federal statute, she was a borrower and
could not be foreclosed under the reverse mortgage while she was still alive and
residing in the mortgaged property. The competing arguments raise two questions
for us about the trial court’s final judgment: (1) did the trial court err in relying on
the federal reverse mortgage statute not pleaded as a defense, nor raised at trial, to
find for Mrs. Palmero; and (2) did the trial court err in concluding that Mrs.
Palmero was not a borrower?
1. The federal statute.
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The trial court concluded that even though Mrs. Palmero was not a borrower
under the mortgage, she was still entitled to judgment because OneWest was
precluded from foreclosing on the home under the federal reverse mortgage statute.
Mrs. Palmero answered the foreclosure complaint with fifteen defenses. While
Mrs. Palmero defended against foreclosure based on other federal statutes, her
answer did not cite or rely on the federal reverse mortgage statute. During trial,
and in the post-trial closing arguments, the federal reverse mortgage statute and
regulations were not relied on by either party as a defense to foreclosure.
Judge Padovano has succinctly and correctly described the rule for defenses:
Generally, a defense must be raised in the responsive pleading or it is
waived. Failure to assert an affirmative defense in the answer
ordinarily amounts to a waiver of the defense. Because an affirmative
defense can be waived if not timely raised, the trial judge has no
authority to reject a claim on the basis of an unstated affirmative
defense. For example, the trial judge has no authority to reject a claim
on the ground that the statute of limitations has expired if no party has
raised the statute as a bar to the claim.
Philip J. Padovano, Florida Civil Practice § 7:26 (2017-2018 ed.) (footnotes
omitted); see also Cong. Park Office Condos II, LLC v. First-Citizens Bank & Tr.
Co., 105 So. 3d 602, 607 (Fla. 4th DCA 2013) (“By failing to properly plead lack
of standing and ‘fraud,’ the borrowers waived their right to assert these affirmative
defenses in response to First-Citizens’ summary judgment motion.”); Langford v.
McCormick, 552 So. 2d 964, 967 (Fla. 1st DCA 1989) (“Appellee did not plead
undue influence as an affirmative defense at any point in the proceedings. He never
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attempted to amend the pleadings to raise this issue either before or during trial. It
is well settled that an affirmative defense must be pleaded or it is waived.”); Bilow
v. Benoit, 519 So. 2d 1114, 1117 (Fla. 2d DCA 1988) (“This affirmative defense
was waived by Benoit’s failure to plead it, and the trial court erred in relying on the
defense as a basis for its final judgment.”); Dysart v. Hunt, 383 So. 2d 259, 260
(Fla. 3d DCA 1980) (“[A] judgment upon a matter entirely outside of the issues
made by the pleadings cannot stand; and where, as here, an issue was not presented
by the pleadings nor litigated by the parties during the hearing on the pleadings as
made, a decree adjudicating such issue is, at least, voidable on appeal.” (quotation
omitted)).
There’s an exception to the general rule where a court may consider an
unpleaded defense that was litigated by the consent of the parties. Padovano,
supra, at § 7:26. But the parties did not consent to use the federal reverse mortgage
statute and regulations as a defense to foreclosure. Mrs. Palmero was required to
raise any federal statutory prohibition against foreclosure in her answer. Because
she didn’t, the issue was waived and the trial court could not rely on the federal
reverse mortgage statute to enter judgment for Mrs. Palmero.2
2 Because we conclude the defense based on the federal reverse mortgage statute
was waived, we express no opinion on the merits of whether the statute prohibits
foreclosing a reverse mortgage on a surviving spouse still living in the mortgaged
residence. That issue undoubtedly will be decided another day when the argument
has been properly preserved.
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Despite the fact that the federal statute was not raised by Mrs. Palmero in her
pleadings or as a defense at trial, the dissenting opinion says the statute compels us
to rule for Mrs. Palmero because “it was the Bank itself that required Mrs. Palmero
to sign as a borrower so that the Bank could obtain federal mortgage insurance.
The federal government will not insure this type of loan unless the spouse signs as
a co-borrower.” This statement from the dissenting opinion is flawed for two
reasons.
First, there was no evidence in the record that the bank required Mrs.
Palmero to sign the mortgage because it wanted the federal government to insure
the loan. The bank’s representative testified at trial, and was asked why the bank
would have a non-borrower spouse sign the mortgage. The representative said this
was the bank’s custom and practice so the non-borrower spouse had the
opportunity within three days of the transaction to cancel it. Mrs. Palmero
testified, too, and she said nothing about having to sign because of insurance.
Second, at the time Mrs. Palmero signed the mortgage in 2006, the federal
government was insuring reverse mortgage loans where only one spouse signed as
the mortgagor. See 24 C.F.R. § 206.27(c)(1) (2006) (“The mortgage shall state
that the mortgage balance will be due and payable in full if a mortgagor dies and
the property is not the principal residence of at least one surviving mortgagor, or a
mortgagor conveys all or his or her title in the property and no other mortgagor
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retains title to the property.”). This has since changed. See U.S. Department of
Housing and Urban Development, Home Equity Conversion Mortgage (HECM)
Program: Non-Borrowing Spouse (2014) (“FHA has, since the inception of the
HECM program, interpreted this provision in its regulations as requiring HECMs
be called due and payable upon the death of the last surviving mortgagor . . . .
FHA continues to believe that its original interpretation gives full force and effect
to the intent of the statute. Nevertheless, recent events have advanced another
possible interpretation . . . .”); Bennett v. Donovan, 4 F. Supp. 3d 5, 15 (D.D.C.
2013) (“HUD violated 12 U.S.C. § 1715z–20(j) when it insured the reverse
mortgages of plaintiffs’ spouses pursuant to agency regulation, which permitted
their loan obligations to come due upon their death regardless of whether their
spouses (plaintiffs) were still alive.”). In 2006, there was no federal-mortgage-
insurance reason for the bank to require Mrs. Palmero to sign the mortgage.
2. Borrower.
Even so, Mrs. Palmero contends, she was a borrower under the mortgage.
Because the reverse mortgage limited foreclosure to when the property was “not
the principle residence of at least one surviving Borrower,” and Mrs. Palmero was
a surviving borrower still living on the property, the argument goes, foreclosure
was premature and judgment was properly granted for Mrs. Palmero.
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As we noted earlier, the Palmeros signed a number of agreements as part of
the reverse mortgage. Reading these documents together, as we must, Sardon
Found. v. New Horizons Serv. Dogs, Inc., 852 So. 2d 416, 420 (Fla. 5th DCA
2003) (“Where other instruments are executed contemporaneously with a mortgage
and are part of the same transaction, the mortgage may be modified by these other
instruments. All the documents should be read together to determine and give
effect to the intention of the parties.”), we agree with the trial court that Mrs.
Palmero was not a borrower. The mortgage defined the borrower as Mr. Palmero,
with a life estate to his wife and children. The note defined Mr. Palmero as the
borrower. The loan agreement also defined Mr. Palmero as the borrower. The
loan application from the closing listed Mr. Palmero as the borrower, and did not
list any co-borrowers. Mrs. Palmero signed a “non-borrower spouse ownership
interest certification” certifying “that should my spouse predecease me . . . and
unless other means of repayment is obtained, the home where I reside may need to
be sold to repay Reverse Mortgage debt incurred by my spouse. If the home where
I reside is required to be resold, I understand that I may be required to move from
my residence.” To the extent there was any confusion or inconsistency in the
mortgage, it was cleared up by the note, loan application, loan agreement, and non-
borrower spouse certification, which unequivocally provided that Mrs. Palmero
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was not the borrower for the reverse mortgage and defined Mr. Palmero as the
borrower.
The dissenting opinion relies on our decisions in Smith and Edwards v.
Reverse Mortgage Solutions, Inc., 187 So. 3d 895 (Fla. 3d DCA 2016), but the
loan application, loan agreement, and non-borrower spouse certification
distinguish those cases from this one. In Smith and Edwards, the court had a
limited record, and didn’t have these contemporaneously signed documents, when
it decided that the surviving spouses in those cases were borrowers. In Smith, for
example, there was no transcript of the trial, Smith, 200 So. 3d at 224 (noting “the
absence of a transcript”), no title description, id. at 226 n.8 (“It is not clear from
the record how the subject property was titled at the time the mortgage was
executed by Mr. and Mrs. Smith.”), and no loan application, id. at 223 n.1 (“While
the subject note and mortgage both reference a ‘Loan Agreement’ . . . no Loan
Agreement is contained in the record on appeal.”). Because of this limited record,
the Smith court intentionally limited its discussion to construction of the mortgage.
Id. at 224 (“[T]he issue presented involves . . . judicial construction of the reverse
mortgage . . . .”).
In Edwards, the record was limited because the defendant defaulted by
failing to appear after service and answer the complaint. Edwards, 187 So. 3d at
896. There was a nonjury trial, but the defendant was not allowed to testify and
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was not permitted to assert any defenses. Id. The only loan documents before the
trial court were the mortgage and note. Id. (“The trial court held that [the bank]
was entitled to foreclosure because Mr. Edwards was the only borrower under the
note, and therefore, the only borrower for purposes of the mortgage’s acceleration
provision.”).
Because our record, unlike in Smith and Edwards, contains other
contemporaneously signed agreements, we are required to read them together. See
Quix Snaxx, Inc. v. Sorensen, 710 So. 2d 152, 153 (Fla. 3d DCA 1998)
(“Documents executed by the same parties, on or near the same time, and
concerning the same transaction or subject matter are generally construed together
as a single contract.”); Citicorp Real Estate, Inc. v. Ameripalms 6B GP, Inc., 633
So. 2d 47, 49 (Fla. 3d DCA 1994) (“The law is well established that two or more
documents executed by the same parties, at or near the same time, and concerning
the same transaction or subject matter are generally construed together as a single
contract.”); Bianchi’s from Roma, Inc. v. Big Five Club, Inc., 630 So. 2d 642, 643
(Fla. 3d DCA 1994) (“[W]e conclude that a release which was signed
simultaneously by the parties with the written agreement sued upon [thereby
requiring that both of these instruments be construed together in determining the
parties’ intent] did not, as a matter of law, extinguish the parties’ obligations to
each other under the written agreement.” (brackets in original)). We have done so
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not in a lopsided way, as the dissenting opinion suggests, but in a way that is
faithful to the parties’ intent – by reading Mrs. Palmero’s certification that she was
not a borrower plainly to mean that she was not a borrower. See Acceleration Nat.
Serv. Corp. v. Brickell Fin. Servs. Motor Club, Inc., 541 So. 2d 738, 739 (Fla. 3d
DCA 1989) (“[T]he actual language used in the contract is the best evidence of the
intent of the parties, and the plain meaning of that language controls.”).
Conclusion
We conclude that the trial court erred in granting judgment for Mrs.
Palmero. We reverse the judgment for Mrs. Palmero and remand for the trial court
to enter judgment in favor of the bank.
Reversed and remanded with instructions.
EMAS, J., concurs.
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3D14-3114 OneWest v. Luisa Palmero
(LOGUE, J. (dissenting)
The “reverse mortgage” at issue expressly provides it cannot be foreclosed
upon until “the Property is not the principal residence of at least one surviving
Borrower.” It is undisputed that Mrs. Palmero signed the mortgage and continued
to reside in her home after her husband died. The only open question is whether
Mrs. Palmero signed the mortgage as a borrower. I believe the majority overlooks
a simple fact on the face of the mortgage: that Mrs. Palmero did indeed sign as a
borrower. It seems to me the question of whether a person signed a mortgage as a
borrower can be answered by examining only the mortgage itself.
On the face of the mortgage, immediately above Mrs. Palmero’s signature,
the mortgage states “BY SIGNING BELOW, Borrower accepts and agrees to the
terms contained in this Security Instrument and in any rider(s) executed by
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Borrower and recorded with it.” The form provides a place for the borrowers to
sign. Mrs. Palmero’s signature appears in exactly that place reserved for the
signature of the borrowers. There is no possible ambiguity in this regard. Were
there any ambiguity, it is surely resolved by the fact that, immediately next to her
signature is the printed word, “Borrower.” Furthermore, this signature, “Luisa
Palmero (Borrower),” is notarized.
The Bank does not deny these facts because it cannot. Instead, it attempts to
downplay them by purporting to prove by testimony and other documents that the
signature “Luisa Palmero (Borrower)” does not mean Mrs. Palmero signed as a
borrower. The problem with the Bank’s argument is that Mrs. Palmero did not sign
as “Luisa Palmero (Borrower)” as a result of serendipity, mistake, or accident.
Instead, as the repeated references to federal mortgage insurance in the mortgage
clearly indicate, it was the Bank itself that required Mrs. Palmero to sign as a
borrower so that the Bank could obtain federal mortgage insurance. The federal
government will not insure this type of loan unless the spouse signs as a co-
borrower. The purpose of this requirement is to protect the spouse from foreclosure
as long as he or she resides in the home. See 12 U.S.C.A. § 1715z-20 (2017).
At best, therefore, the Bank’s argument boils down to the proposition that
Mrs. Palmero signed as a borrower for purposes of securing the Bank federal
mortgage insurance, but not for providing Mrs. Palmero the protection from
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foreclosure. This protection from foreclosure is the very reason why federal law
requires her signature as a condition to obtain federal mortgage insurance. Were
this a case of first impression, I would still decline to lend the imprimatur of our
court to such a lopsided interpretation of a legal document. Indeed, the Bank’s
argument in this regard reminds me of the remark by Lily Tomlin: “No matter how
cynical you become, it’s never enough to keep up.”
In any event, whatever its theoretical merits, the Bank’s argument in this
regard has already been expressly rejected by this court twice. In Smith v. Reverse
Mortgage Solutions, Inc., 200 So. 3d 221 (Fla. 3d DCA 2016), this court
considered the identical issue when interpreting a spouse’s similar signature on an
identical mortgage. We held that the issue was purely an issue of law to be
determined by examining only the mortgage. As we specifically stated, “the issue
presented involves a pure question of law . . . i.e., judicial construction of the
reverse mortgage to determine whether Mrs. Smith is a ‘Borrower’ as defined in
the reverse mortgage.” Id. at 224. After reviewing the language of the mortgage,
the Florida Constitution, and federal housing statutes, the panel concluded “that, as
a pure question of law, Mrs. Smith was a ‘Borrower’ as that term is contemplated
in Paragraph 9 . . . of the subject reverse mortgage.” Id. at 228.
Later, our court approved and followed this holding in Edwards v. Reverse
Mortgage Solutions, Inc., 187 So. 3d 895, 897 (Fla. 3d DCA 2016) (adhering to
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Smith and agreeing that “it would be difficult, if not impossible, for us to construe
[the surviving spouse] as anything other than a ‘Borrower’”).
Because the mortgage and the nature of the spouse’s signature in this case
are identical to the ones in Smith and Edwards, we are bound by our rather
unremarkable precedent that, as a matter of law, when the surviving spouse signed
the mortgage as a borrower, as revealed by an examination of the mortgage itself,
the spouse will be treated as a borrower for purposes of the mortgage. Smith, 200
So. 3d at 228; Edwards, 187 So. 3d at 897. I therefore respectfully dissent. Mrs.
Palmero is entitled to stay and live in her home.
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