LAKEVIEW LOAN SERVICING, LLC v. SANTIA LASHAWN WALCOTT-BARR and MARK LIVINGSTON BARR

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
LAKEVIEW LOAN SERVICING, LLC,
Appellant,
v.
SANTIA LASHAWN WALCOTT-BARR and MARK LIVINGSTON BARR,
Appellees.
No. 4D19-1582
[October 14, 2020]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Frank D. Ledee, Judge; L.T. Case No. CACE17-016601.
Paul J. McCord of Deluca Law Group, PLLC, Fort Lauderdale, for
appellant.
Malcolm E. Harrison and Michelle Moore, Wellington, for appellees.
KUNTZ, J.
Lakeview Loan Servicing, LLC appeals the circuit court’s involuntary
dismissal of its foreclosure complaint against the Borrowers, Santia
Lashawn Walcott-Barr and Mark Livingston Barr. The circuit court found
Lakeview violated the requirements of a United States Department of
Housing and Urban Development regulation, 24 C.F.R. § 203.604(d)
(2019), because it failed to introduce evidence from the United States
Postal Service as proof of compliance. We reverse the circuit court’s
involuntary dismissal.
Background
Lakeview filed a foreclosure complaint alleging the Borrowers owed
$318,685.56 plus interest on a note and mortgage. The Borrowers
answered the complaint, asserting seven affirmative defenses including
Lakeview’s failure to comply with 24 C.F.R. § 203.604.
At trial, a loan litigation resolution specialist with Loan Care, LLC,
Lakeview’s servicing agent, testified that she managed Loan Care’s
foreclosure litigation and reviewed business records for trials, depositions,
and settlements. The specialist explained that Loan Care used a third-
party vendor, NCP Solutions, to mail out its letters. Although she never
worked for NCP, she was trained in NCP’s procedures. NCP sent a data
file to Loan Care for approval, and once Loan Care’s “letter librarian”
approved the letter, NCP proofed it, printed it, and mailed it. Once mailed,
NCP scanned and saved the letter into a database housing all of Loan
Care’s letters. The Loan Care specialist testified that all letters were
“scanned with mail codes.” She also had personally visited the USPS
facility where NCP took its letters for mailing.
Relevant to this case, the Loan Care specialist identified the letter
requesting a face-to-face meeting that was sent to the Borrowers by
certified mail. The letter was admitted as an exhibit without objection.
The Loan Care specialist testified that the letter was “the letter typically
sent on FHA loans.” It was sent “[b]ecause it’s required under the pre-
conditions for foreclosure. We have to try to meet with the borrower face-
to-face.” The Loan Care specialist stated that the letter was: addressed to
the Borrowers, sent to the property address, and sent by USPS certified
mail. As additional confirmation that the letter was sent by certified mail,
the witness identified the USPS certified mail tracking number.
The Borrowers, a husband and wife, testified. The wife acknowledged
signing the note and mortgage. She testified that although she received
loan mitigation documents and correspondence about force-placed
insurance, she did not recall receiving letters through certified mail from
Lakeview. The husband acknowledged the mortgage was in default but
denied knowing anything else, because his wife handled everything.
At the close of Lakeview’s case-in-chief, the Borrowers moved for
involuntary dismissal, alleging Lakeview failed to satisfy a condition
precedent to bringing the foreclosure suit. They stated paragraph 9(a) and
(d) of the mortgage contained provisions incorporating HUD regulations:
(a) Default. Lender may, except as limited by regulations
issued by the Secretary in the case of payment defaults,
require immediate payment in full of all sums secured by this
Security Instrument . . . .
...
(d) Regulations of HUD Secretary. In many circumstances
regulations issued by the Secretary will limit Lender rights, in
the case of payment defaults, to require immediate payment
in full and foreclose if not paid. This Security Instrument does
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not authorize acceleration or foreclosure if not permitted by
regulations of the Secretary.
The Borrowers maintained that one HUD regulation, 24 C.F.R. §
203.604, required Lakeview to hold a face-to-face interview with the
mortgagor or “make a reasonable effort” to hold one “before three full
monthly installments due on the mortgage are unpaid.” They asserted
doing so was a condition precedent to bringing the foreclosure suit.
They argued they were entitled to an involuntary dismissal because
there was not a face-to-face interview. Nor could Lakeview avail itself of
any of the exceptions to holding the interview. The Borrowers argued
Lakeview had not shown it made reasonable efforts to schedule an
interview by a certified letter because it did not produce a return receipt.
The court ruled from the bench: Because the Borrowers sufficiently
pleaded failure to comply with 24 C.F.R. § 203.604, Lakeview needed to
overcome the allegation. Under the facts of the case, the only applicable
exception to holding a face-to-face interview was proof that Lakeview made
“reasonable efforts” to schedule the meeting. Lakeview could do so by
showing it visited the Borrowers at least once to attempt a face-to-face
interview and by showing it sent a letter by certified mail asking to
schedule the interview. The court found Lakeview failed to meet its
burden. As to the first prong, Lakeview presented sufficient circumstantial
evidence that a representative tried to personally meet the Borrowers. But
as to the second prong, the court found the omission of a return receipt
from the USPS fatal. For those reasons, the court granted the Borrowers’
motion and dismissed the complaint.
Lakeview moved for reconsideration. The court granted Lakeview’s
motion, limiting the scope of rehearing to 24 C.F.R. § 203.604’s face-to-
face interview requirement. But unmoved by Lakeview’s arguments on
rehearing, the court entered final judgment for the Borrowers.
Analysis
The HUD enacted regulations relating to mortgage foreclosures for
federally backed loans. See 24 C.F.R. §§ 203.500-203.608 (2019). At issue
is 24 C.F.R. § 203.604, “an obscure provision contained in a federal
administrative regulation.” Lee v. CitiMortgage, Inc., 739 F. Supp. 2d 940,
944 (E.D. Va. 2010).
Under 24 C.F.R. § 203.604(b), a mortgagee must hold a face-to-face
interview with the mortgagor or “make a reasonable effort” to hold one
3
“before three full monthly installments due on the mortgage are unpaid.”
Exceptions to the face-to-face interview include instances when a
mortgagor does not reside on the mortgaged property; a mortgagor
suggests she will not cooperate in the interview; the mortgaged property is
more than 200 miles from the mortgagee; there is an agreed repayment;
or “[a] reasonable effort to arrange a meeting is unsuccessful.” 24 C.F.R.
§ 203.604(c)(1)–(5).
The regulation clarifies the minimum actions required to comply with
the “reasonable efforts” exception:
(d) A reasonable effort to arrange a face-to-face meeting with
the mortgagor shall consist at a minimum of one letter sent to
the mortgagor certified by the Postal Service as having been
dispatched. Such a reasonable effort to arrange a face-to-face
meeting shall also include at least one trip to see the
mortgagor at the mortgaged property, unless the mortgaged
property is more than 200 miles from the mortgagee, its
servicer, or a branch office of either, or it is known that the
mortgagor is not residing in the mortgaged property.
24 C.F.R. § 203.604(d). This case turns on the interpretation of this
provision.
Recently, in PennyMac Loan Services LLC v. Ustarez, No. 4D19-3547,
2020 WL 5541982 (Fla. 4th DCA Sept. 16, 2020), we explained that the
same “HUD regulation . . . is not, in and of itself, a condition precedent to
foreclosure.” Id. at *2. Nevertheless, we held that compliance with the
HUD regulation had been “self-impose[d]” as a contractual requirement
that must be satisfied before the lender could accelerate or foreclose. Id.
We understand PennyMac’s holding to be that the HUD regulation is
not a statutory pre-condition to foreclosure applicable to all mortgage
foreclosure suits. Instead, PennyMac concluded that incorporation of the
HUD regulation into a note or mortgage constituted a self-imposed
contractual pre-condition to foreclosure. Regardless of the precise words
used in the opinion, in PennyMac this Court concluded compliance with
the HUD regulation was a condition the lender had to satisfy prior to
foreclosing because the language of the mortgage or note specifically
required it.
4
In this case, because the HUD regulations were incorporated into the
mortgage, Lakeview was required to substantially comply with the HUD
regulation prior to accelerating the obligation or filing the foreclosure
complaint. The circuit court erroneously concluded it did not do so.
The circuit court’s involuntary dismissal turned on the language in the
HUD regulation stating that Lakeview must make a “reasonable effort to
arrange a face-to-face meeting with the mortgagor,” and that the
reasonable effort “shall consist at a minimum of one letter sent to the
mortgagor certified by the Postal Service as having been dispatched.” See
24 C.F.R. § 203.604(d).
The circuit court found that Lakeview made “a reasonable attempt” to
“reach out for a face-to-face” meeting. But it concluded that Lakeview
needed to introduce evidence of a return receipt “green card” from USPS.
We do not interpret the regulation as limiting the manner of establishing
compliance to the introduction of the USPS green card.
“Administrative rules must be interpreted according to their plain
language whenever possible.” Smith v. Sylvester, 82 So. 3d 1159, 1161
(Fla. 1st DCA 2012) (citation omitted). Without a statutory definition,
“courts must look to [the regulation’s] plain and ordinary meaning, which
can be discerned from a dictionary.” Gyongyosi v. Miller, 80 So. 3d 1070,
1075 (Fla. 4th DCA 2012) (citation omitted). Here, we focus on the
definitions of “certify” and “dispatch.”
The term “certify” is defined as “confirm[ing] formally as true, accurate
or genuine,” certify, The American Heritage Dictionary of the English
Language 304 (5th ed. 2016), and “to attest authoritatively [or] . . . to attest
as being true or as represented or as meeting a standard,” certify, Merriam-
Webster’s Collegiate Dictionary 203 (11th ed. 2003). Similarly, Black’s Law
Dictionary defines “certify” as “1. [t]o authenticate or verify in writing. 2.
[t]o attest as being true or as meeting certain criteria.” Certify, Black’s
Law Dictionary (11th ed. 2019).
“Dispatch,” on the other hand, is defined as “[t]he act of sending off, as
to a specific destination,” dispatch, The American Heritage Dictionary of the
English Language 520 (5th ed. 2016), and “to send off or away with
promptness or speed,” dispatch, Merriam-Webster’s Collegiate Dictionary
361 (11th ed. 2003). Black’s Law Dictionary defines dispatch as “[a]
prompt sending off of something.” Dispatch, Black’s Law Dictionary (11th
ed. 2019).
5
Thus, to certify a letter has been dispatched generally means to confirm
or attest to the prompt or speedy sending off of something. The question
then is how a plaintiff may prove compliance with the regulation.
Although this is an issue of first impression in Florida, other
jurisdictions have considered the issue and reached different results. For
example, in PNC Bank, National Association v. Wilson, an Illinois Appellate
Court held the “plain and ordinary meaning of section 203.604(d)
require[d] proof from the United States Postal Service that the letter was
sent.” 74 N.E.3d 100, 106 (Ill. App. Ct. 2017) (citation omitted). But, in
that case, even though the bank did not include USPS proof, the court
found that the bank’s failure did not bar foreclosure because it was a
“technical defect” that did not prejudice the borrower. Id. at 107.
In contrast, in Dan-Harry v. PNC Bank, N.A., No. 17-136 WES, 2019 WL
1253481 (D.R.I. Mar. 18, 2019), the borrower argued, in part, that the
HUD regulation mandated nothing less than proof of mailing from the
United States Post Office. Id. at *1. Unpersuaded by the borrower’s
“creative construction of 24 C.F.R. [§] 203.604(d),” the United States
District Court of Rhode Island held that the regulation did not limit the
type of proof a party could rely on to show compliance. Id. at *2. Citing
cases from various jurisdictions, the court also noted the borrower’s
asserted narrow requirement of proof ran “contrary to the overwhelming
weight of authority.” Id. (citing Aazami v. Wells Fargo Bank, N.A., No. 3:17-
cv-01564-BR, 2019 WL 281286, at *8 (D. Or. Jan. 22, 2019); Campbell v.
Wells Fargo Bank, N.A., No. 1:14-cv-03341-TWT-JFK, 2016 WL 6496458,
at *8 (N.D. Ga. Oct. 6, 2016), adopted by No. 1:14-CV-3341-TWT, 2016
WL 6462070 (N.D. Ga. Nov. 1, 2016); Countrywide Home Loans, Inc. v.
Wilkerson, No. 03 C 50391, 2004 WL 539983, at *1 (N.D. Ill. Mar. 12,
2004); Wash. Mut. Bank v. Mahaffey, 796 N.E.2d 39, 44 (Ohio Ct. App.
2003)).
We agree with those courts holding the plain language of 24 C.F.R. §
203.604(d) does not require a certified mail receipt from the USPS to
establish compliance. As used in the regulation, the terms “certify” and
“dispatch” require the “authentication or verification” of a “prompt sending
off” of the certified letter. No doubt the lender must introduce evidence to
confirm compliance with the regulation. But the regulation does not limit
how a lender can prove such compliance. 1
1 In Wilson, 74 N.E.3d at 106-07, the Illinois Appellate Court held that a return
receipt from the United States Postal Service was needed to establish compliance
with the regulation. But the court still allowed the foreclosure to continue,
finding it a technical violation and that the plaintiff substantially complied with
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Lakeview did not have to introduce a USPS return receipt card.
Lakeview needed to introduce evidence to prove its foreclosure claim,
which included acceleration of the obligation. Because, under the
mortgage, acceleration and foreclosure were “not authorized” absent
compliance with the HUD regulations, Lakeview was required to introduce
evidence that it complied with the regulations to establish acceleration.
See PennyMac Loan Services LLC, 2020 WL 5541982, at *2.
Lakeview established compliance through the Loan Care specialist’s
testimony. The Loan Care specialist identified the letter sent to the
Borrowers requesting a face-to-face meeting. The Loan Care specialist
explained that the letter, admitted as an exhibit without objection, was
sent to the Borrowers at the property address and was sent via USPS
certified mail. She also identified the USPS certified mail tracking number.
This testimony was sufficient to establish a “reasonable effort” under 24
C.F.R. § 203.604(d). See, e.g., Deutsche Bank Tr. Co. Americas as Tr. for
Residential Accredit Loans, Inc. v. Harris, 264 So. 3d 186, 192 (Fla. 4th
DCA 2019).
Conclusion
Lakeview was required to substantially comply with the “self-imposed”
HUD regulations prior to accelerating the obligation or filing the
foreclosure suit. See PennyMac Loan Services LLC, 2020 WL 5541982, at
*2. As explained above, Lakeview established it substantially complied
with the regulation. Thus, we reverse the court’s judgment and remand
for further proceedings.
Reversed and remanded.
FORST, J., concurs.
GROSS, J., concurs specially with opinion.
GROSS, J., specially concurring.
I concur in the majority opinion and write for two reasons—to
distinguish this case from PennyMac Loan Services LLC v. Ustarez, ___ So.
3d ____, 2020 WL 5541982 (Fla. 4th DCA Sept. 16, 2020), and to
the HUD regulations. Id. at 107. Similarly, Lakeview argues that the Borrowers’
failure to establish prejudice excuses any violation. Our resolution of the other
argument renders this issue moot.
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demonstrate how problematic language in that opinion may be disregarded
as dicta.
Because PennyMac floats like a virus in the legal ether, the majority
opinion characterizes Lakeview’s compliance with the applicable HUD
regulations in this case as a “self-imposed” “requirement before the lender
could accelerate or foreclose.” Where such a self-imposed requirement
arises from a contract, the law (except for PennyMac) describes this
requirement as a “condition precedent.”
Generally, conditions precedent to performance “are those acts or
events, which occur subsequently to the making of a contract, that must
occur before there is a right to immediate performance and before there is
a breach of contractual duty.” Reilly v. Reilly, 94 So. 3d 693, 697 (Fla. 4th
DCA 2012) (quoting Chipman v. Chipman, 975 So. 2d 603, 607 (Fla. 4th
DCA 2008)); see also Racing Props., L.P. v. Baldwin, 885 So. 2d 881, 882–
83 (Fla. 3d DCA 2004) (stating that a condition precedent “is a condition
which calls for the performance of an act after a contract is entered into,
upon the performance or happening of which its obligation to perform is
made to depend”).
Where a note and mortgage incorporate the HUD regulations, such
incorporation renders compliance with the regulation a condition
precedent to foreclosure. See, e.g., Harris v. U.S. Bank Nat’l Ass’n, 223 So.
3d 1030, 1032 (Fla. 1st DCA 2017); Palma v. JPMorgan Chase Bank, 208
So. 3d 771, 774–75 (Fla. 5th DCA 2016); Diaz v. Wells Fargo Bank, N.A.,
189 So. 3d 279, 284–85 (Fla. 5th DCA 2016).
For example, in Palma, the note and mortgage incorporated the HUD
regulations. 208 So. 3d at 775. The court found that when a note and
mortgage incorporate HUD regulations, those regulations operate the
same as other conditions of the note and mortgage. Id. In the court’s view,
there was “no meaningful reason to treat compliance with section 203.604
in an FHA mortgage differently than compliance with paragraph twenty-
two in a standard mortgage, which [the] court ha[d] determined [was] a
condition precedent to foreclosure.” Id.
Similarly, in Harris, the First District focused on contract documents’
incorporation of the HUD regulations. 223 So. 3d at 1030. There, the note
and mortgage specifically referenced compliance with the HUD
regulations. Id. at 1032. Thus, “the Bank’s right to foreclose on the
mortgage d[id] not arise unless and until [the] conditions ha[d] been
satisfied, making the HUD regulation at issue a condition
precedent.” Id. Likewise, this same analysis was adopted in Chrzuszcz v.
8
Wells Fargo Bank, N.A., 250 So. 3d 766, 769 (Fla. 1st DCA 2018)
(finding Palma to be the “most analogous” case), and in Derouin v.
Universal American Mortgage Co., 254 So. 3d 595, 599–600 (Fla. 2d DCA
2018).
Unlike the situation where contract documents incorporate the HUD
regulations, in Diaz, the borrower’s note and mortgage did not reference
those regulations. 189 So. 3d at 284. Because the documents were silent,
“it [was] by no means clear that the HUD regulations applicable to federally
insured loans appl[ied] to the instant loan and litigation.” Id. The court
held that when “it is unclear whether alleged conditions precedent apply,
the burden is on the party asserting the existence of the conditions
precedent to establish their applicability.” Id. at 285.
In PennyMac, the panel “agree[d]” with the lender’s argument “that 24
C.F.R. § 203.604 does not operate as a condition precedent to foreclosure,
as it is an administrative regulation subject to monetary sanctions and not
a bar to filing a foreclosure complaint.” 2020 WL 5541982, at *2. The
panel wrote that the “pertinent HUD regulation . . . is not, in and of itself,
a condition precedent to foreclosure.” Id. (italics supplied). The important
phrase is “in and of itself,” because it brings the analysis in line with those
cases, such as Diaz, where the note and mortgage did not reference the
HUD regulations.
This PennyMac discussion is dicta because the note and mortgage in
that case did incorporate the HUD regulations, so it was unnecessary to
analyze the effect of the failure to so incorporate.
PennyMac went on to note that “the text of the Borrower’s note and
mortgage does not authorize acceleration or foreclosure if not permitted by
regulations of the Secretary.” Id. (internal quotation marks omitted). The
panel explained that through incorporation of the HUD regulations in the
mortgage, the lender “contractually agreed to self-impose the HUD
regulation on itself before accelerating and foreclosing here.” Id.
A contractual agreement “to self-impose the HUD regulation on itself
before accelerating and foreclosing” sounds exactly like . . . a condition
precedent.
What’s in a name? In the law, sometimes quite a lot. PennyMac’s
suggestion that the functional equivalent of a condition precedent is
something different unnecessarily injects confusion into the law.
For example, to plead “the performance or occurrence of conditions
9
precedent, it is sufficient to aver generally that all conditions precedent
have been performed or have occurred.” Fla. R. Civ. P. 1.120(c). “A denial
of performance or occurrence shall be made specifically and with
particularity.” Id. If a contractual agreement “to self-impose the HUD
regulation” is not a condition precedent, then it must be pled as a defense
under Florida Rule of Civil Procedure 1.140(b).
The mischaracterization of a condition precedent alters the burden of
proof. If compliance with the HUD regulation is a condition precedent to
foreclosure, the plaintiff carries the burden of proving substantial
compliance with the condition when it presents its case, so long as the
borrower has made a specific denial of the plaintiff’s allegation that it had
satisfied all conditions precedent. 2 See, e.g., Chrzuszcz, 250 So. 3d at
769–70. But if compliance with 24 C.F.R. § 203.604 is an affirmative
defense, “[t]he defendant, as the one who raises the affirmative defense,
bears the burden of proving that affirmative defense.” Id. at 769
(citing Custer Med. Ctr. v. United Auto. Ins. Co., 62 So. 3d 1086, 1096 (Fla.
2010) (“An affirmative defense is an assertion of facts or law by the
defendant that, if true, would avoid the action and the plaintiff is not
bound to prove that the affirmative defense does not exist.”)).
One of the unwritten rules of judging is to do no harm to settled law.
PennyMac does the opposite. It sows confusion and conflicts with the well-
reasoned opinions of other district courts of appeal. However, because the
offending language is dicta, it is not binding authority. See Lewis v. State,
34 So. 3d 183, 186 (Fla. 1st DCA 2010) (observing that “[w]hen a court
makes a pronouncement of law that is ultimately immaterial to the
outcome of the case, it cannot be said to be part of the holding in the
case”).
* * *
Not final until disposition of timely filed motion for rehearing.
2 It makes sense that the plaintiff bank should bear the burden of proof of its
compliance with a HUD regulation because it has unfettered access to the
evidence of its own compliance.
10