harvey v. hsbc - april charney esq. appeal brief - psa
TRANSCRIPT
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DISTRICT COURT OF APPEAL, OF FLORIDA,FIRST DISTRICT
First DCA Case No.: 1D11-4232
L.T. No.: 2006-CA-001265-XXXX-MA
MARILYN G. HARLEY, et al.
Appellant / Defendant,v.
HSBC BANK, USA, NATIONAL ASSOCIATION,As Trustee For Home Equity Loan Trust Series AE 2005-HE5
Appellee / Plaintiff._____________________________________/
APPEAL FROM THE FOURTH JUDICIAL CIRCUIT COURT IN AND FOR
JACKSONVILLE-DUVAL COUNTY, FLORIDA
AMENDED INITIAL BRIEF OF APPELLANT MARILYN G. HARLEY
APRIL CARRIE CHARNEY, ESQ.JACKSONVILLE AREA LEGAL AID, INC.
126 WEST ADAMS STREETJACKSONVILLE, FLORIDA 32202
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TABLE OF CONTENTS
PageTABLE OF CITATIONS ii
STATEMENT OF THE CASE 1
STATEMENT OF THE FACTS 5
QUESTIONS PRESENTED
1. Whether the trial court misapplied the law and committed reversible legalerror in granting judgment of foreclosure in favor of Appellee and on Appellant'scounterclaim?
2. Whether the Appellee trust had any legal right to foreclose the mortgage atthe commencement of this action?
3. Whether the federal Truth-in-Lending (TILA) disclosure statement thatAppellee delivered to Appellant constitutes a material mis-disclosure under TILAthat was unfair and deceptive and that violated the federal Truth-in-Lending Act by
disclosing a "comfort" fixed-rate annual percentage rate in the TILA disclosurestatement that overshadowed the adjustable interest rate information disclosed inthe HUD-1 disclosure statement that Appellee gave to Appellant for the adjustablerate mortgage loan involved in this foreclosure?
4. Whether Appellee violated the applicable material disclosure obligations ofthe federal Truth-in-Lending Act by failing to give Appellant a "CHARMS"
booklet at closing23
5. Whether the Appellee's December 19, 2005 notice of default and intent toaccelerate sent to Appellant failed to conform to the requirements of the mortgagecontract and Florida law?
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6. Whether the Appellee failed to comply with pre-foreclosure preventionnotice requirements imposed by the National Housing Act, 12 USC 1701x(c)5?
SUMMARY OF ARGUMENT 15
ARGUMENT 16
STANDARD OF REVIEW 16
CONCLUSION 37
CERTIFICATE OF SERVICE 38
SERVICE LIST 38
CERTIFICATE OF COMPLIANCE WITH FONT STANDARD33
TABLE OF CITATIONS
Cases
17In re Cummings, 184 N.Y.S. 404 (N.Y. App. Div. 1920)
BAC Funding Consortium , Inc. v. Jean-Jacques 1728 So. 3rd 936 (Fla. 2nd DCA 2010)
Bouskila v. M & I Bank 17
Case No. 1D10-2127 (Fla. 1st DCA 2011)
17In re Doble, No. 10-11296-MM13, 2011 WL 1465559 (Bankr. S.D. Cal. Apr. 14, 2011)
Calderon v. J.B. Nurseries, Inc. 17
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933 So. 2d 553 (Fla. 1st D.C.A. 2006)23,24
In re Celotex, 487 F.3d 1320 (11th Cir. 2007)
Carapezza v. Pate 17143 So.2d 346 (Fla. 3rd DCA 1962)
Crossland Sav. Bank FSB v. Constant 19489 U.S. at 113, 109 S.Ct. 948
DAngelo v. Fitzmaurice 16863 So. 2d 311, 314 (Fla. 2003)
F.A. Chastain Constr. v. Pratt, 146 So.2d 910 (Fla. 3d DCA 1962)
Firestone Tire & Rubber Co. v. Bruch 23489 U.S. 101, 112, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)
17
Gee v. U.S. Bank Natl Assn, No. 5D10-1687, 2011 WL 4645602 (Fla. 5th DCA Sept.30, 2011)
Gomez v. Am. Sav. & Loan Assn, 515 So.2d 301 (Fla. 4th DCA 1987)
Goncharuk v. HSBC Mortgage Serv., Inc., 62 So. 3d 680 (Fla. 2nd DCA 2011)
17
In re Dana, 465 N.Y.S.2d 102 (N.Y. Sup. Ct. 1982)
Jones v. First National Bank in Fort Lauderdale 17
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226 So.2d 834 (Fla. 4th DCA 1969)
Konsulian v. Busey Bank, N.A.
Case No. 2D10-2163 (Fla. 2nd DCA 2011)
Laing v. Gainey Builders, Inc., 17184 So.2d 897 (Fla. 1st DCA 1966)
LaSalle Natl Bank Assn v.Lamy 2012 Misc. 3d 1191A (2006)
Rashid v. Newberry Fed. Sav. & Loan Assn, 502 So.2d 1316 (Fla. 3d DCA 1987),
appeal after remand, 526 So.2d 772 (1988)
Rashid v. Newberry Federal Savings & Loan Assn, supra,
Maniscalco v. Hollywood Federal Savings &Loan Assn397 So.2d 453 (Fla. 4th DCA 1981)
17
In re Hayes, 393 B.R. 259 (Bankr. Mass. 2008)
Verizzo v. Bank of New York 1728 So. 3d 976 (Fla. 2nd DCA 2010)Your Constr. Ctr., Inc., v. Gross, 316 So.2d 596 (Fla. 4th DCA 1975)
In re Fidler, 210 B.R. 411 (D. Mass. 1997)
Statutes
Florida Statute 671.102 20
F.S. 671.102(3) 20,22
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Fla. Stat. Ann. 737.401 (1997)
12 USC 1701x
12 USC 1701x(c)(4)
12 USC 1701x(c)(5)
National Housing Act,12 USC 1701x(c)5
15 U.S.C.1601
15 U.S.C. 1635
15 U.S.C. 1640(a)
New York UCC 3-202(2) 20
Regulations
Reg. Z. 226.18(f); 52 Fed. Reg. 48665 (Dec. 24, 1987)
Rules and Other Citations
Restatement (Second) of Trusts 37 23
Restatement (Second) of Trusts 185 (1959)
Restatement (Second) of Trusts 186 (1959)
Restatement (Second) of Trusts 201 cmt. b (1959)
When Do Allonges Meet The 19Requirements of the New YorkNew York Law Journal, November 27, 2006
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http://www.abcny.org/pdf/report/LEGALDOCS-1.pdf
15
Trusts 201 cmt. b (1959NYA 1-102(3), now RA 1-302
http://www.abcny.org/pdf/report/LEGALDOCS-1.pdf 22
15 U.S.C. 1601, et. seq., Regulation Z, 12 C.F.R. Part 226.
note 48 of Section 226.23 of Regulation Z
National Housing Act 1612 USC 1701x(5)
Trusts 186 (1959)
Trusts 185 (1959)
Trusts 37
http://www.abcny.org/pdf/report/LEGALDOCS-1.pdfhttp://www.abcny.org/pdf/report/LEGALDOCS-1.pdfhttp://www.abcny.org/pdf/report/LEGALDOCS-1.pdfhttp://www.abcny.org/pdf/report/LEGALDOCS-1.pdfhttp://www.abcny.org/pdf/report/LEGALDOCS-1.pdf -
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STATEMENT OF THE CASE
Appellant, Marilyn G. Harley, an original defendant in this residential
foreclosure action, appeals a July 13, 2011 "Final Judgment of Foreclosure"
entered by the Fourth Judicial Circuit Court in and for Duval County, Florida in
favor of the Appellee, HSBC Bank USA, National Association, As Trustee For
Home Equity Loan Trust Series AE 2005-HE5, the foreclosing Plaintiff in the Trial
Court, on July 13, 2011. (R. Vol. 5 Pg. 886-889).
Appellant also appeals the July 25, 2011 final order captioned "Amended
Order on Plaintiff's Motion For Judgment As a Matter of Law On Defendant's
Third Affirmative Defense and Counterclaim" entered by the Circuit Court
granting the Appellee's motion for judgment on Appellant's counterclaim. (R. Vol.
5 Pg. 900).
Appellee filed an "Amended Complaint To Foreclose Mortgage And To
Enforce Lost Loan Documents" (hereinafter "Amended Complaint") against
Appellant on March 3, 2007 seeking to foreclose a recorded mortgage in favor of
Trimerica Mortgage Corporation. Attached to Appellee's amended complaint is an
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assignment of mortgage dated January 30, 2006. In its Amended Complaint,
Appellee claims that it "owns and holds the Note and Mortgage" but that Appellee
"is not presently in possession of the original note and mortgage." (R. Vol. 1 Pg.
43-69; Vol. 7 Pg. 1134-1155).
Appellant timely filed her "First Amended Answer To Amended Complaint,
Affirmative Defenses And Counterclaim" (hereinafter "Amended Answer")
denying that the recorded mortgage, a copy of which introduced into evidence, was
assigned to Appellee; denying that Appellee stated a cause of action for foreclosure
on account of the Appellee not being the true owner of the claim and not being the
real party in interest or shown to be authorized to bring the subject foreclosure
action at the time this action was filed. (R. Vol. 1 Pg. 96-100; Vol. 7 Pg.
1134-1155).
In her Amended Answer, Appellant denies that the subject promissory note is
a negotiable instrument and points out that the Appellee failed to attach a copy of
the underlying promissory note to its Amended Complaint. (R. Vol. 1 Pg. 96-100)
Appellant asserts affirmative defenses in her Amended Answer against the
Appellee's foreclosure action claiming that Appellee failed to provide Appellant
with a "Notice of Default and Intent to Accelerate" (R. Vol. 7 Pg. 1224-1225) that
conformed to the specific requirements of the mortgage and that such notice failure
resulted in a failure of the Appellee to meet the pre-foreclosure obligations
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imposed by the mortgage contract and by Florida law as condition precedent to
acceleration of the underlying debt and to foreclosure of the mortgage. (Id).
Appellant further and additionally asserts affirmative defenses in her
Amended Answer claiming that Appellee failed to comply with the federal
statutory pre-foreclosure prevention notice requirement imposed on Appellee in
equity and also imposed pursuant to a statutory scheme that embeds a federal
statutory notice as a condition precedent to foreclosure of the subject residential
mortgage.
Appellant claims that Appellee did not comply with this condition precedent
to acceleration and foreclosure by failing to send Appellant a notice that contained
information about foreclosure avoidance counseling that Appellee offered to
residential mortgage borrowers and that Appellee failed to send this notice within
45 days of Appellant's initial payment delinquency under the promissory note. (Id)
Finally, Appellant affirmatively defends against the foreclosure and asserts a
counterclaim against Appellee seeking federal Truth-in-Lending rescission of the
subject mortgage on the basis of the Appellees conduct, which amounted to unfair
and deceptive acts and materially violated the mandatory consumer disclosure
obligations set out in the Federal Truth In Lending Act (hereinafter "TILA").
Appellant claims that Appellees illegal conduct is evidenced by the fact that
Appellee gave Appellant a "Federal Truth-In-Lending Disclosure Statement"
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(hereinafter "TILA Statement") (R. Vol. 2 Pg. 209-212; T. 160:18 161:17) that
disclosed a comforting fixed annual percentage rate to Appellant that
overshadowed the HUD-1 disclosure form (Id) also given to Appellant at the
closing for the adjustable rate mortgage that is the subject of this action.
The Appellant also affirmatively defends this foreclosure and states a
counterclaim seeking TILA rescission and other consumer remedies for her
damages proximately caused by the fact that the Appellee also failed to comply
with TILA by failing to give Appellant a CHARMS BOOKLET, which is a
material consumer disclosure and that Appellee failed to give this booklet to
Appellant at the closing of the subject mortgage loan or at all. The CHARMS
BOOKLET is officially referred to as a "Consumer Handbook on Adjustable Rate
Mortgages". (Id).
Four years after this foreclosure action was commenced, Appellee attached an
original promissory note to a notice that Appellee filed in the circuit court. (R. Vol.
2 Pg. 350-380).
A nonjury trial before the circuit court was held on January 24 and March 24,
2011 which resulted in the entry of the July 13, 2011 Final Judgment of
Foreclosure. Appellee filed a motion to cancel/reset the foreclosure sale, which
was granted in part, by order of the circuit court canceling the sale, but NOT
resetting sale. (R. Vol. 5 Pg. 902-905, 923-924). The Final Judgment of
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Foreclosure is a final order; it remains in effect and is adverse to Appellant, as is
the Amended Final Judgment on Counterclaim.
STATEMENT OF FACTS
The Appellee is a trust established pursuant to a trust agreement titled
Pooling and Servicing Agreement Dated as of August 1, 2005 (hereinafter
PSA). The PSA for the Appellee trust provides, in Section 2.09, that Appellee
(represented in this action by HSBC as trustee) is an express trust governed by the
laws of the state of New York. (R. Vol. 6 Pg. 925-1127).
As a New York trust, Appellees legal existence and capacity is controlled by
the PSA pursuant to which HSBC Bank, as trustee, and Wells Fargo, as custodian
and servicer, derive all their respective trust related rights, powers, obligations and
duties in the forming the Appellee trust, in the conveyance and transfer of
qualified mortgage loans into the corpus of the Appellee trust, and in the
servicing of the qualified mortgage loans transferred into the trust.
The PSA is the binding trust contract that controls all of the actions of the
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trustee, the custodian and the servicer with respect to the Appellee trust. (Id).
On April 5, 2005, Appellant refinanced the debt on her home giving a
promissory note to Trimerica Mortgage Corporation secured by a mortgage
recorded in the official records of the Duval Circuit Clerk on April 19, 2005 at
book 12421 and page 1878. (R. Vol. 7 Pg. 1134-1135, 1229-1237).
The referenced PSA (R. Vol. 6 Pg. 925-1127) and a related and incorporated
Custodial Agreement (R. Vol. 7 Pg. 1156-1195) were introduced into evidence at
trial by the Appellee and these agreements contain the following pertinent
definitions:
Agreement is the Pooling and Servicing Agreement and all the exhibits and
schedules. (all definitions are PSA unless otherwise stated).
Assignment is an assignment of a mortgage in recordable form.
Closing Date is August 26, 2005.
Code is the Internal Revenue Code of 1986.
Custodial Agreement is the Custodial Agreement dated as of March 1, 2005
between HSBC as the Trustee, Wells Fargo, as the Custodian and Wells Fargo, as
the Servicer.
Custodian is Wells Fargo.
Custodial File is defined in the Custodial Agreement as any mortgage loan
documents which are delivered to the Custodian relating to each Mortgage
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Loan.
Cut-off Date is August 26, 2005 with respect to each Mortgage Loan.
Depositor is ACE Securities Corp.
Mortgage is the mortgage in a mortgaged property securing a mortgage
note.
Mortgage File is the mortgage loan documents that pertain to a mortgage
loan.
Mortgage Loan Documents are the documents that evidence or relate to the
delivery of the mortgage loan to Wells Fargo, as the Custodian under the Custodial
Agreement on behalf of HSBC, as the trustee.
Mortgage Loan Purchase Agreement (MLPA) is the mortgage loan purchase
agreement between the ACE Securities DB Structured Products, the Seller that is
dated August 26, 2005 and was introduced into evidence by Appellee. (R. Vol. 7
Pg. 1156-1195).
Mortgage Loan Schedule is the initial list of mortgage loans included in
REMIC I attached to the PSA as Schedule that ACE Securities (depositor) must
deliver to Wells Fargo (as servicer and custodian) and to HSBC Bank (trustee) on
August 26, 2005 (the closing date). The Mortgage Loan Schedule must list 37
specific items of information about each mortgage loan delivered by Wells Fargo
(as custodian) to HSBC Bank, as trustee, pursuant to the Custodial Agreement.
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The 37 data points that must be listed for each loan delivered by Wells Fargo
include the mortgagors first and last name and the street address of the mortgaged
property.
Mortgage Note is the original executed note evidencing the debt under a
mortgage loan.
Mortgaged Property is the underlying property securing the residential
mortgage loan.
Mortgagor is the obligor on a mortgage note.
REMIC or real estate mortgage investment conduit is an entity formed for
the purpose of holding a fixed pool of mortgages secured by interests in real
property within the meaning of Section 860 of the IRS Code.
http://www.irs.gov/publications/p550/ch01.html#en_US_2010_publink100010133
REMIC I is the pool of assetsconsisting ofsuch mortgage
loans...subject to the PSA.
Seller is DB Structured Products, Inc. in its capacity as seller under the
MLPA.
Servicer is Wells Fargo appointed under the PSA in connection with the
servicing and administration of the Mortgage Loans.
Startup Day is August 26, 2005 with respect to each Trust REMIC.
Trust is ACE Securities Corp., Home Equity Loan Trust, Serie 2005 -HE5,
http://www.irs.gov/publications/p550/ch01.html%20/%20en_US_2010_publink100010133http://www.irs.gov/publications/p550/ch01.html%20/%20en_US_2010_publink100010133 -
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the trust created under the PSA.
Trust Fund includes all of the assets of REMIC I.
Trust REMIC is REMIC I.
Trustee is HSBC Bank USA, National Association.
Under Section 2.01 of the PSA, ACE, as the Depositor, agreed to transfer to
HSBC Bank, as the Trustee, on behalf of the Appellee Trust, all right, title and
interest of ACE in and to the Mortgage Loans identified on the Mortgage Loan
Schedule concurrently with the execution and delivery of the PSA. This transfer
from the depositor to the trust includes the mortgages securing the mortgage loans.
(R. Vol. 6 Pg. 925-1127).
Under Section 2.02 of the PSA, HSBC Bank, as the Trustee of the Appellee
trust, acknowledges receipt of the Mortgage Loan Documents and all other assets
included within the definition of the REMIC 1, subject to Section 2.01 of the PSA
and Section 2 of the Custodial Agreement. HSBC Bank holds these mortgage
loan documents in trust in its capacity as trustee of the Appellee trust. (Id).
Section 2 of the Custodial Agreement specifies that ACE, as the Depositor,
had to deliver and release, by August 26, 2005, a set of documents to Custodian
Wells Fargo for each of the Mortgage Loans identified in the Mortgage Loan
Schedule that was supposed to be attached to the PSA. (R. Vol. 7 Pg. 1156-1195).
The documents that ACE was required to deliver to Wells Fargo by August
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26, 2005, the closing date of the Appellee trust, under Section 2 of the Custodial
Agreement in order for the subject mortgage loan to be included as part of the
corpus of the subject trust were:
a. the original Mortgage Note bearing all intervening endorsements
necessary to show a complete chain of endorsements from the original payee,
endorsed in blank, via original signature, and, if previously endorsed, signed in the
name of the last endorsee by a duly qualified officer of the last endorsee;
b. the original Assignment of Mortgage executed in blank;
c. the original Mortgage or a certified copy with evidence of recording;
and
d. the originals of any intervening assignment of mortgage or
certified copies with evidence of recording. (Id).
Under Section 2.02 of the PSA, HSBC Bank, as trustee, had authority to
acknowledge receipt of the Mortgage Loan Documents and all the other assets of
REMIC 1 that were delivered to it by ACE through the Custodian Wells Fargo by
August 26, 2005 and to declare that it holds all the Mortgage Loan Documents in
trust. (R. Vol. 6 Pg. 925-1127).
Section 2 of the Custodial Agreement required Wells Fargo as Custodian to
deliver to HSBC Bank the documents specifically identified above the original
Mortgage Note with all intervening endorsements, the original Assignment of
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Mortgage executed in blank and the original Mortgage or a certified copy with
evidence of recording within the limited REMIC time authorized by the PSA. (R.
Vol. 7 Pg. 1156-1195).
Section 3 of the Custodial Agreement, consistent with the PSA, also required
Wells Fargo to deliver an Initial Trust Receipt and Certification to HSBC as trustee
of the Appellee trust, stating that each and every mortgage loan described and
identified in the Mortgage Loan Schedule has a specific set of Mortgage Loan
Documents delivered to HSBC Bank by the August 26, 2005 cut-off date for the
Appellee REMIC trust. (Id).
At trial, there was no evidence presented by Appellee:
a. that the original Harley Mortgage Note, that is the subject of this action
bearing all intervening endorsements necessary to show a complete chain of
endorsements from Trimerica, endorsed in blank, via original signature, was
delivered by ACE to Wells Fargo by August 26, 2005;
b. that an original Assignment of the Harley Mortgage executed in blank
was delivered by ACE to Wells Fargo by August 26, 2005; or that
c. the original or recorded copies of any intervening assignments of the subject
mortgage was delivered by ACE to Wells Fargo by August 26, 2005;
d. that the Initial Trust Receipt and Certification, delivered by Wells Fargo to
HSBC, stated that all of the required Mortgage Loan Documents for the Mortgage
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Loan that is the subject of this foreclosure action was identified in the Mortgage
Loan Schedule or (other than those Mortgage Loans identified on an exception
report) were delivered to HSBC Bank by the cut-off date which was August 26,
2005. (R. Vol. 7 Pg. 1197-1200).
Under the Custodial Agreement in the present case, ACE agreed to purchase
Mortgage Loans from Seller DB Structured Loan Products pursuant to the
Mortgage Loan Purchase Agreement. (R. 1156-1195).
Mortgage Loan is defined in the Custodial Agreement consistent with the PSA
as being [e]ach mortgage loan identified on the Mortgage Loan Schedule that is
supposed to be attached to the Custodial Agreement. (Id).
There was no mortgage loan schedule, meeting the definition of a "mortgage
loan schedule" contained in the PSA, attached to the PSA or attached to any other
document introduced into the evidence in this action. There was supposed to be a
list of loans attached to the PSA, but there is not. (R. Vol. 6 Pg. 925-1127).
Additionally, the Mortgage Loan Schedule is defined in the Custodial
Agreement the same as it is in the PSA as The schedule of Mortgage Loans to be
delivered by the Depositor to the Custodian and the servicer (with a copy to the
Trustee) two Business Days prior to the Closing Date and to be annexed to the
Custodial Agreement asExhibit 8. This Mortgage Loan Schedule must contain
the same 37 data points described in the PSA. (Id). However, there was no
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evidence presented in this case that a Mortgage Loan Schedule was attached to the
PSA.
Under Section 5 of the Custodial Agreement, Wells Fargo was supposed to
review each Custodial File within 180 days after August 26, 2005 and deliver to
HSBC a Final Trust Receipt confirming that, as to each of the mortgage loans
listed on the Mortgage Loan Schedule, all of the above-described mortgage loan
documents were reviewed, that the mortgage loan documents reviewed for each
Mortgage Loan accurately reflected the information on the Mortgage Loan
Schedule; that each Mortgage Note was endorsed and that the Mortgage was
assigned to the Appellee trust in conformity with Section 2 of the Custodial
Agreement. (R. Vol. 7 Pg. 1156-1195).
There was no evidence presented in this case of the existence or delivery by
Wells Fargo to HSBC of a Final Trust Receipt, as defined and specified in the
Custodial Agreement, confirming that the Harley Mortgage Loan that is the subject
of this foreclosure action was listed on any Mortgage Loan Schedule as defined in
the PSA or by the Custodial Agreement. Nor is there any evidence that Wells
Fargo ever confirmed that all of the required documents relating to the Harley
mortgage loan were reviewed by it.
In the present case, there was no qualifying Mortgage Loan Schedule, there
was no evidence presented, nor could there be, that Wells Fargo reviewed any
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documents for the Harley mortgage loan for accuracy and no evidence showing
that Well Fargo confirmed that the Harley Mortgage Note was endorsed or that the
Harley Mortgage was ever assigned in conformity with Section 2 of the Custodial
Agreement.
Section 11.02 of the PSA specifically limits HSBC, as the trustee, and
prohibits the custodian from accepting any mortgage loans as contributions to the
Appellee Trust REMIC after August 26, 2005. (The Qualified Substitute Mortgage
Loan transfer provisions in Section 2.03 of the PSA do not apply to the Harley
loan. (R. Vol. 6 Pg. 925-1127).
At trial, Appellee trust introduced into evidence a copy of the Harley note and
an unauthenticated indorsement called "Allonge To Note" that was not physically
attached to the Harley note, but instead appears on a separate piece of paper, after a
Prepayment Addendum. (R. Vol. 7 Pg. 1229-1237).
SUMMARY OF ARGUMENT
The trial court misapplied the law and committed reversible legal error in
granting judgment of foreclosure in favor of Appellee because the Appellee trust
did not have any legal right to foreclose the mortgage at the commencement of this
action.
The federal Truth-in-Lending disclosure statement that Appellee delivered to
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Appellant constitutes a material misdisclosure under TILA that was unfair and
deceptive and that violated the federal Truth-in-Lending Act by disclosing a
"comfort" fixed rate annual percentage rate that overshadowed the adjustable
interest rate information contained in the HUD-1 disclosure for the adjustable rate
mortgage loan involved in this foreclosure.
Appellee violated the applicable material disclosure obligations of the federal
Truth-in-Lending Act by failing to give Appellant a "CHARMS" booklet at
closing.
The Appellee's December 19, 2005 notice of default and intent to accelerate
failed to conform to the requirements of the mortgage contract or Florida law. The
Appellee failed to accelerate the mortgage debt.
The Appellee failed to comply with preforeclosure prevention notice
requirements imposed by the National Housing Act,12 USC 1701x(c)5.
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ARGUMENT
THE TRIAL COURT MISAPPLIED THE LAW AND COMMITTED
REVERSIBLE LEGAL ERROR IN GRANTING JUDGMENT OF
FORECLOSURE IN FAVOR OF APPELLEE BECAUSE THE APPELLEE
TRUST DID NOT HAVE ANY LEGAL RIGHT TO FORECLOSE THE
MORTGAGE AT THE COMMENCEMENT OF THIS ACTION.
STANDARD OF REVIEW
THE TRIAL COURTS DECISIONS CHALLENGED IN THIS APPEAL ARE
CONTRARY TO LAW. THE STANDARD OF REVIEW ON ALL ISSUES
RAISED IN THIS APPEAL IS DE NOVO. DAngelo v. Fitzmaurice, 863 So. 2d
311, 314 (Fla. 2003);Armstrong v. Harris, 773 So.2d 7 (Fla. 2000) Calderon v. J.B.Nurseries, Inc., 933 So. 2d 553 (Fla. 1st D.C.A. 2006);Mgmt. Computer Controls,
Inc. v. Charles Perry Constr., Inc, 743 So.2d 627 (Fla. 1st D.C.A. 1999) (The
construction of a written contract is, moreover, a matter of law. Therefore, our
review standard over the lower tribunal's construction of the contract is de novo.
Jacobsen v. Ross Stores, 882 So.2d 431 (Fla. 1st D.C.A. 2004); Klonis v. Dep't of
Revenue, 766 So.2d 1186 (Fla. 1st D.C.A. 2000)( Review of this pure question of
law is de novo.)
MISAPPLICATION OF LAW AND REVERSIBLE ERROR
Appellee is a REMIC trust (Real Estate Mortgage Investment Conduit) and
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as such, Appellee is subject to and must comply with the strict IRS regulations
which, in turn, are imposed on Appellee by the strict terms of Article XI of the
PSA. (R. Vol. 6 Pg. 925-1127). It is basic trust law that, in addition to applicable
laws, a trusts founding document controls what rules and regulations must be
adhered to by the trustee on behalf of the trust. This is true in Florida and New
York. Jones v. First National Bank in Fort Lauderdale, 226 So.2d 834 (Fla. 4th
DCA 1969); See also, In re Dana, 465 N.Y.S.2d (N.Y. Sup. Ct. 1982) and In re
Cummings, 184 N.Y.S. 404 (N.Y.App. Div. 1920).
As a REMIC Trust, Appellee had no right or claim to foreclose the
Appellant's mortgage or prevail in this foreclosure action and Appellee failed to
present any admissible evidence that Appellee held or owned the subject mortgage
note at the commencement of this foreclosure action. Absent such essential
evidence of ownership and holder status, Appellee failed to establish standing or
real party in interest status to prosecute this foreclosure action. Gee v. U.S. Bank,
N.A., as Trustee, Case No. 5D10-1687 (Fla. 5th DCA 2011); BAC Funding
Consortium, Inc. v. Jean-Jacques, 28 So. 3rd 936 (Fla. 2nd DCA 2010); and Your
Construction Center, Inc. v. Gross, 316 So.2d 596 (Fla. 4th DCA 1975). And see:
In re Doble, 2011 Bankr. LEXIS 1449 (April 14, 2011) and In re Hayes, 393 B.R,
259 (Bankr. Mass. 2008). Florida law requires that Appellee hold and own the
subject note at the commencement of this action. Ownership of the note and the
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mortgage are material facts at issue in this foreclosure that needed to be proved by
Appellee. Carapezza v. Pate, 143 So.2d346 (Fla. 3rd DCA 1962);Laing v. Gainey
Builders, Inc., 184 So.2d 897 (Fla. 1st DCA 1966) (holder of note and mortgage is
real party in interest in foreclosure action); Verizzo v. Bank of New York, 28 So. 3d
976 (Fla. 2nd DCA 2010) (requiring showing that foreclosing entity hold the note
and mortgage and that it owned same before commencement of the foreclosure),
accord, Bouskila v. M & I Bank, Case No. 1D10-2127 (Fla. 1stDCA 2011) (the
party seeking to foreclose must present evidence that it owns and holds the note
and mortgage to establish standing to proceed with a foreclosure).
The PSA is the only mechanism by which the Appellee trust is competent to
acquire, transfer, dispose of or sell any mortgage loan or other asset. As trustee of
the plaintiff trust, not only is HSBC bound by the strict terms and limitations of the
PSA, but HSBC has no capacity or competency to acquire, transfer, dispose of or
sell any mortgage loan or other asset on the trusts behalf outside the terms of the
PSA.
In this case, HSBC Bank, as trustee of the Appellee trust, had the initial
burden of presenting the Trial Court with evidence that the trust held the Appellant
Harley's note at the commencement of this action. Appellee completely failed to
meet this evidentiary burden and the "Allonge To Note" that Appellee did
introduce into evidence (R. Vol. 7 Pg. 1229-1237) does not meet the technical
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requirements of the New York Uniform Commercial Code (which uses the 1951
version of the UCC) to make the transferee of a promissory note its holder.
Because the PSA adopts for all purposes New York law, the New York version
of the UCC controls how and when the Appellee trust could gain the status and
capacity of a holder of the Appellant's note. New York UCC 3-202(2) states:
An indorsement must be written by or on behalf of the holder and on the
instrument or on a paper so firmly affixed thereto as to become a part thereof.
The detached and separate "Allonge To Note" introduced by Appellee as evidence
in this case is impaired and rendered ineffective under the New York UCC so that
the allonge is not a valid indorsement of the Appellant's promissory note and does
not satisfy the strict terms of the PSA.
This failure of a proper indorsesment and the fact that, by its terms, the
promissory note at issue is not negotiable, are fatal to the Appellee's right to
enforce the Appellant's promissory note as a negotiable instrument and deprive
Appellee of any legal right to foreclose the Appellant's mortgage. The Appellee
failed to establish it held the Harley note under the PSA on August 26, 2005 (or
ever).
The Appellee trust, by the clear terms of the PSA, is governed by New York
law which clearly prohibits the use of any additional piece of paper for an
indorsement, as long as enough space remains to write the indorsement somewhere
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on the negotiable instrument itself. Even if this Court finds the Appellant's
promissory note negotiable, there is space on the note and the No-Space Test
does not allow the use of a separate allonge.
Even when another law allows a separate indorsement, the New York UCC
literally requires an allonge to be firmly affixed to the instrument..." (3 sets of
quotation marks here are we missing one somewhere?) See: Getting Attached -
When do Allonges meet the requirements of the New York UCC?, New York Law
Journal, November 27, 2006, by Lawrence Safran and Joshua Stein. In Crossland
Sav. Bank FSB v. Constant, the indorsements were rejected because they were not
stapled to the negotiable instruments themselves, but instead to the back of another
document in a group of documents that included the notes. Similarly, in LaSalle
Natl Bank Assn v. Lamy, 12 Misc. 3d 1191A (2006), the assignee took an
assignment of the note without at the same time receiving an indorsement from the
proper party. The assignee later did receive an allonge from the proper party, but
did not attach it to the note. The court, holding that this allonge was not an
indorsement under New York UCC 3-202(2), decided that regardless of the
fact that the assignor still owned the note, the assignee could not enforce the note
or obtain a default judgment on the note.
Even if this Court were to accord to the Appellee trust in the present action the
status of a transferee of an instrument by operation of law under the UCC, pursuant
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to its own PSA, the Appellee trust is not and cannot be a holder of the promissory
note, as it is not part of a "qualified mortgage loan" under the PSA. As a result,
Appellee has no legal or contractual right to enforce the Appellant's promissory
note under the UCC and Appellee has no legal ability or capacity to foreclose the
Appellant's mortgage under Florida law.
All the provisions of Florida and New Yorks versions of the UCC are subject
to be varied by private agreement (subject to limitations not applicable to the
instant case). Florida Statute 671.102 titled: Purposes; rules of construction;
variation by agreement states that [t]he effect of provisions of this code may be
varied by agreement. F.S. 671.102(3).
This broad grant of power to private parties to contract away from the UCC
by private agreement is only limited by prohibitions contained in other provisions
of the UCC not applicable here and the parties are prohibited by the UCC from
deviating or contracting away their respective UCC obligations of good faith,
diligence, reasonableness and care.
The UCC clearly respects the right of the Appellee in the present action to
enter into a private agreement - the PSA - which self-limits the Appellee's capacity
and ability to hold the Appellant's promissory note. The PSA, as authorized by the
UCC, is a private agreement which changes the standards by which the Appellee
trust can access holder status and gain UCC rights to enforcement. The UCC
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bestowed the Appellee with the right to set up different standards to become a
holder and these differing standards control as long as the deviations are not
manifestly unreasonable.
The effect of F.S. 671.102(3) is to grant the Appellee the right and power to
execute the PSA and to expressly deny the power of HSBC, as the trustee, to claim
transferee or other non-holder status on behalf of the Appellee in this case
because the Appellant's promissory note and other requisite mortgage loan
documentation was not transferred to the Appellee by August 26, 2005 as required
by the strict terms of the PSA.
New Yorks version of the UCC has the identical provision to the variation
by agreement provision found in F.S. 671.102(3). (formerly NYA 1-102(3), now
RA 1-302) see: the 2004 Report on Revised Article 1 of the Uniform Commercial
Code prepared by the Committee on Uniform State Laws of The Association of the
Bar of the City of New York at:
http://www.abcny.org/pdf/report/LEGALDOCS-1.pdf
The official comments to Article I of both the Florida and New York UCC
inform that the UCC must be liberally construed and applied to permit the
expansion of commercial practices through agreement of the parties. Appellee
was free to enter into the PSA and the other agreements and to change the legal
consequences that would otherwise flow from the application of the UCC.
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The PSA is now the primary source of rules, obligations and limitations that
clearly vary the effect of the UCC with respect to how and when the Appellee trust
can achieve holder status of a negotiable instrument. Assuming that the
Appellant's promissory note is a negotiable instrument, then Appellee failed to
establish holder status which is a statutory and common law precedent to the
Appellee asserting a legal right to enforce the Appellant's promissory note under
the UCC or to foreclose the Appellant's mortgage under Florida law.
Additionally pursuant to the PSA, Appellee has no legal capacity to be a
transferee or a non-holder in possession of the Appellant's promissory note.
It is also clear that under New York law, as the trustee of the Appellee, a New
York common law trust, HSBC cannot act or ratify acts not authorized or in
accordance with its own trust agreement (the PSA). In re Celotex, 487 F.3d 1320
(11th Cir 2007). InIn re Celotex, the Eleventh Circuit was faced with the same
fundamental issue of defining the relative powers of a New York express trust in
the process of resolving whether or not the trustees possessed certain discretionary
authority or whether the Trustees' actions were ultra vires under the Trust
agreement.
The Eleventh Circuit determined that in order to determine the power of the
trustee, the court had to independently interpret the terms of theTrust
Agreement Id., citing: Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,
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112, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) ("As they do with contractual
provisions, courts construe terms in trust agreements without deferring to either
party's interpretation."). "The extent of [a trustee's] duties and powers is
determined by the trust instrument and the rules of law which are applicable, and
not by his own interpretation of the instrument or his own belief as to the rules of
law." Restatement (Second) of Trusts 201 cmt. b (1959).
"From the trust, the trustee derives the rule of his conduct, the extent and limit
of his authority, the measure of his obligation." Jones v. First Nat'l Bank in Fort
Lauderdale, 226 So.2d 834, 835 (Fla. 4th Dist.Ct.App.1969) "[T]he trustee can
properly exercise such powers and only such powers as (a) are conferred upon him
in specific words by the terms of the trust, or (b) are necessary or appropriate to
carry out the purposes of the trust and are not forbidden by the terms of the trust."
Restatement (Second) of Trusts 186 (1959); see also id. 164. Likewise, the
Eleventh Circuit determined in theIn re Celotexcase, that [t]he extent and limit of
the Administrator's powers are similarly determined by the terms of the Trust
Agreement referencing for authority The Restatement (Second) of Trusts 37
("[T]he settlor may grant powers tothe trustee, a beneficiary, or a third person
otherwise unconnected with the trust.").
The Eleventh Circuit found that the general rule is: "If under the terms of the
trust a person has power to control the action of the trustee in certain respects, the
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trustee is under a duty to act in accordance with the exercise of such power, unless
the attempted exercise of the power violates the terms of the trust or is a violation
of a fiduciary duty to which such person is subject in the exercise of the power."
citing The Restatement (Second) of Trusts 185 (1959) as "the black letter law of
trusts". Id.
In the present case, the PSA and the Custodial Agreement bind the trustee of
the Appellee trust to conform to the obligations under these controlling private
agreements to administer the trust in accordance with the agreements. And, "If
under the terms of the trust a person has power to control the action of the trustee
in certain respects, the trustee is [ordinarily] under a duty to act in accordance"
Id. Because the trustee is "a fiduciary to the extent he exercises any discretionary
authority or control," the In re Celotex court held that agents of trusts must
ordinarily comply with the trustees exercise of power as limited by the terms of
the trust agreement. Id, citing, Firestone, supra, 489 U.S. at 113, 109 S.Ct. 948.
As in In Re Celotex, the Trustee and the trust in the instant case are duty
bound to comply with and follow the procedural and substantive limitations on
their authority under the PSA. Neither the Appellee nor HSBC, as trustee, can
take acts that are inconsistent with the express terms of the PSA or that exceed the
power of control or authority granted therein.
Because Appellee failed to acquire the transfer of Appellant's promissory note
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as required by the strict terms of the PSA, Appellee is contractually prohibited and
without legal power to exercise any rights with respect to the Appellant's note or
mortgage.
THE FEDERAL TRUTH-IN-LENDING DISCLOSURE STATEMENT
THAT APPELLEE DELIVERED TO APPELLANT CONSTITUTES A
MATERIAL MISDISCLOSURE UNDER TILA THAT WAS UNFAIR AND
DECEPTIVE AND THAT VIOLATED THE FEDERAL
TRUTH-IN-LENDING ACT BY DISCLOSING A "COMFORT" FIXED
RATE ANNUAL PERCENTAGE RATE THAT OVERSHADOWED THE
ADJUSTABLE RATE INFORMATION CONTAINED IN THE HUD-1
DISCLOSURE FOR THE ADJUSTABLE RATE MORTAGE LOAN
INVOLVED IN THIS FORECLOSURE.
Appellee engaged in unfair and deceptive acts in violation of TILA by giving
Appellant a Federal Truth-In-Lending Disclosure Statement (TILA Statement)
that disclosed a fixed APR of 9.573%. 15 U.S.C. 1601, et. seq., Regulation Z, 12
C.F.R. Part 226. By disclosing a comforting fixed APR in the TILA Statement
that Appellee gave to Appellant, the Appellee put the Annual Percentage Rate
disclosure in the HUD-1 in the shadows. This form of overshadowing of a
material financing term in a consumer contract constitutes an unfair and deceptive
act under TILA because it effectively contradicted, distracted attention from and
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drowned out the HUD-1 APR disclosure that was given to Appellant at closing.
The replacement APR of 9.573 that is imputed to the HUD-1 as a result of the
overshadowing exceeds the .125% tolerance allowed by TILA for the APR
disclosure in this case for the Appellant's loan.
For TILA purposes, the overshadowing disclosure of the APR beyond the
allowable tolerance is a defective, inaccurate and erroneous disclosure of the APR,
the legal effect of which is to establish that the Appellee completely failed to give
Appellant the required material TILA APR disclosure on the HUD-1. 15 U.S.C.
1601.
APPELLEE VIOLATED THE APPLICABLE MATERIAL DISCLOSURE
OBLIGATIONS OF THE FEDERAL TRUTH-IN-LENDING ACT BY
FAILING TO GIVE APPELLANT A "CHARMS" BOOKLET AT CLOSING.
The evidence and the record in the present case establish that the Appellee
materially failed to comply with TILA by failing to give Appellant a Consumer
Handbook on Adjustable Rate Mortgages - a CHARMS handbook - at closing
explaining the features of her adjustable rate mortgage (ARM) as required by 15
U.S.C.1601, et. seq. The CHARMS booklet is a material disclosure which TILA
required the lender in this case, the Appellees predecessor in interest, to give to
Appellant at closing.
Under TILA, the Appellee is liable for the lenders failure to give Appellant
the CHARMS booklet at closing and such failure triggered Appellants right under
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TILA to rescind the loan. See: note 48 of Section 226.23 of Regulation Z.
Because the interest rate for Appellant's mortgage note is adjustable and is
secured by mortgage on her principal dwelling with a maturity longer than one
year, the lender was required to give the CHARMS information to Appellant at
closing.
The lender's failure to disclose the variable rate of this transaction as required
by the TILA ARM disclosure rule is imputed to Appellee and entitles Appellant to
recover from the Appellee her consumer statutory damages and also entitles
Appellant to pursue her rescission right against the Appellee under TILA. In re
Fidler, 210 B.R. 411 (D. Mass. 1997) and see: Reg. Z. 226.18(f); 52 Fed. Reg.
48665 (Dec. 24, 1987).
As a result of the Appellee's unfair and deceptive acts in overshadowing the
ARM disclosure in the HUD-1 and by failing to give Appellant a CHARMS
booklet at closing, TILA gives Appellant a continuing right to rescind the subject
mortgage which right the Appellant exercised by timely sending a rescission letter
to the Appellee pursuant to the Federal Truth-in-Lending Act, 15 U.S.C. 1635 and
Regulation Z, Section 226.23. (R. Vol. 1 Pg. 36-38).
In her rescission letter, Appellant timely notified the Appellee as required by
and in accordance with TILA that Appellant was rescinding the mortgage because
of the understating of the Annual Percentage Rate (APR) by more than the allowed
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.125% and also because of the Appellees failure to give her the CHARMS booklet
explaining the features of adjustable rate mortgages (ARM) at closing as required
by TILA.
Under TILA, Appellee had 20 days after receipt of Appellant's rescission
notice to take all action necessary to terminate the mortgage on her property.
Appellant has no other obligation to affect the legal rescission of her home loan
pursuant to TILA. Appellee failed to introduce any evidence at trial that Appellee
had terminated its security interest in Appellant's real property subject to the
mortgage.
As a result of the Appellee's failure to introduce any evidence that Appellee
canceled the Appellant's mortgage or terminated the security interest represented
by the mortgage, the Appellee violated TILA and is liable to Appellant for her
statutory damages pursuant to 15 U.S.C. 1640(a) for the statutory violation.
Another consequence of the Appellee's failure to terminate its security interest
upon the lawful rescission of the mortgage by Appellant, is that the Appellee came
to trail with unclean hands and without any lawful right to pursue the equitable
remedy of foreclosure.
THE APPELLEE'S DECEMBER 19, 2005 NOTICE OF DEFAULT AND
INTENT TO ACCELERATE FAILED TO CONFORM TO THE
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REQUIREMENTS OF THE MORTGAGE CONTRACT AND FLORIDA
LAW. THE APPELLEE FAILED TO ACCELERATE THE MORTGAGE
DEBT.
The December 19, 2005 notice of default failed to inform Appellant that she
had to cure the payment default on her loan within 30 days of the date of the
notice. Instead, the Appellee's December 19, 2005 notice demands that in order to
avoid acceleration of the mortgage debt, that Appellant pay an additional $455.58
to Appellee over and above the amount due as of the notice date to cure the
payment default. The $455.58 was included by the Appellee to cover a mortgage
payment for January, 2006 that was not yet due.
In this case, the Appellees right to payment is contractually dependent upon
compliance with the notice requirement for default and process by which the
Appellee is contractually authorized to accelerate the mortgage debt is carefully set
out in paragraph 22 of the Appellant's mortgage.
Until the condition of the notice required by paragraph 22 is met, acceleration
of the debt has not occurred and foreclosure must be denied. F.A. Chastain
Construction v. Pratt, 146 So.2d 910 (Fla. 3d DCA 1962) affd with directions, 157
So.2d 101 (1963); See also Gomez v. American Sav. & Loan Assn; 515 So.2d 301
(Fla 4th DCA 1987),Rashid v. Newberry Federal Savings & Loan Association, 526
So.2d 772 (Fla. 3d DCA 1988) and Konsulian v. Busey Bank, N.A., Case No.
2D10-2163 (Fla. 2nd DCA 2011).
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Compliance with the contractual pre-foreclosure notice requirements is
critical to the Appellees entitlement to accelerate the subject debt which, in turn, is
a contractual condition precedent to foreclosure. Rashid v. Newberry Federal
Savings & Loan Assn, supra, Maniscalco v. Hollywood Federal Savings & Loan
Assn, 397 So.2d 453 (Fla. 4th DCA 1981) (Notice required upon subsequent
default after prior default cured). These decisions are consistent with the very
recent ruling by the Florida Second District Court of Appeals in Goncharunk v.
HSBC Mortgage Services, Case No. 2D10-2629 (Fla. 2nd DCA 5/20/11), in which
the court reversed a summary judgment involving a similar notice failure.
Appellee's December 19, 2005 notice of default also failed to substantially
comply with the notice requirements of paragraph 22 of the mortgage because the
notice fails to inform Appellant that she has the right to assert the non-existence of
a default in a foreclosure proceeding. As a result, the Appellant's mortgage debt
was not legally accelerated and a clear condition precedent to foreclosure of the
Appellant's mortgage was not met.
THE APPELLEE FAILED TO COMPLY WITH PRE-FORECLOSURE
PREVENTION NOTICE REQUIREMENTS IMPOSED BY THE
NATIONAL HOUSING ACT, 12 USC 1701x(C)5.
12 USC 1701x(c)(5) imposes a specific statutory obligation on all creditors
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in the United States, including the Appellee in the present case, who service
conventional loans, (non federally-insured home loans) to send a specific notice
about access and availability of homeownership counseling to defaulting
homeowners within 45 days of an initial home loan payment default. The creditor
is obliged to advise the homeowner of any homeownership counseling offered by
the servicer of the loan and/or information about how to access HUD
homeownership counseling.
12 USC 1701x(c)(5) was enacted 21 years ago as part of the Housing and
Community Development Act of 1987 and provides in pertinent part:
12 USC 1701x. Assistance with respect to housing for low-and moderate incomefamilies
(c)(5): Notification of availability of homeownership counseling.(A) Notification of availability of homeownership counseling.
(i) Requirement. Except as provided in subparagraph C, the creditor ofa loanshall provide notice under clause (ii) to (I) any eligiblehomeowner who fails to pay any amount by the date the amount is dueunder a home loan,
(ii) Content. Notification under this subparagraph shall(I) notify the homeownerof the availability of any homeownership
counseling offered by the creditor;(III) notify the homeownerof the availability of
homeownershipcounseling provided by nonprofit organizations approved
bythe Secretary and experienced in the provision ofhomeownership counseling, or provide the toll-freetelephone number described in subparagraph (D)(i);
(B) Deadline for notification. The notification required in subparagraph (A)shall
be made(i) in a manner approved by the Secretary; and(ii) before the expiration of the 45-day period beginning on the date on
Which the failure referred to in such subparagraph occurs.(6) Definitions. For purposes of this subsection:
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(A) The term creditor means a person or entity that is servicing a homeloan on behalf of itself or another person or entity.
(B) The term eligible homeowner means a homeowner eligible forcounseling under paragraph 4.
(C) The term home loan means a loan secured by a mortgage or lienon residential property.
(D) The term homeowner means a person who is obligated under ahome loan.
(E) The term residential property means a 1-family residence,(7) Regulations. The Secretary shall issue any regulations that are necessary tocarry out this subsection.
Under the terms of the statute, an eligible homeowner is one who iseligible for counseling as follows:
12 USC 1701x(c)(4) Eligibility for counseling. A homeowner shall beeligible for homeownership counseling under this subsection if
(A) the home is secured by property that is the principal residenceof thehomeowner;(B) the home is not assisted under title V of the Housing Act of 1949; and(C) the homeowner is, or is expected to be, unable to make payments,
correct a home loan delinquency within a reasonable time, or resume
full home loan payments due to a reduction in the income of thehomeowner because of(i) an involuntary loss of, or reduction in, the employment of
the homeowner, the self-employment of the homeowner,or income from the pursuit of the occupation of thehomeowner; or
(ii) any similar loss or reduction experienced by any person whocontributes to the income of the homeowner.
The secretary of HUD, in a question and answer supplement published inorder to respond to creditor inquiries and to clarify creditor responsibilities under
the statute. 55 FR 2416 (01/24/1990) states: We note that if a creditors
complianceis challenged in court, the ultimate determination of the adequacy of
the creditors notification and the legal consequences of any noncompliance will be
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made by the court. (The question and answer supplement further advises creditors
that:
1. The notification requirement applies to all home loans except those assisted
by the Farmers Home AdministrationThus, both conventional mortgages and
loans, and those insured by HUD or guaranteed by the Department of Veterans
Affairs, are subject to section 169. (Section 169 is a reference to the section of the
Housing and Community Development Act that enacted 12 USC 1701x(c)(5))
2. [S]ince the purpose of the notice is to help the homeowner avert foreclosure,
it should be sent soon enough to enable the homeowner to benefit from the
counseling. HUD recommends that the notice be included in the creditors firstcommunication with the homeowner regarding the delinquency.
3. A notice must be sent to every homeowner every time the homeowner
becomes delinquent. If the homeowner brings the loan current and becomes
delinquent again, another notice must be sent.
4. The notice must contain information on any counseling provided by the
creditor and either the name, address and telephone number of the HUD-approved
counseling agencies near the homeowner or a cost-free telephone number at the
creditors office where the homeowner can obtain this information
5. HUD does not supply a form. It is HUDs view that sufficient information
has been provided on the section 169 notice requirement to enable creditors to
prepare the notice.
6. Creditors may prefer to send the notice to all delinquent homeowners, rather
than attempt to determine the cause of each delinquency.
7. The notice is not required (on) property sold under a land sales
contractuntil the contract is completed
8. The statute does not require any creditor to provide counseling.
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9. If a creditor does provide homeownership counseling, the creditor still has to
notify the delinquent homeowner of the availability of homeownership counseling
by HUD-approved counselors or by the Department of Veterans Affairs
HUD published an advisory on the notice requirement of the statute which states:
[T]he notice requirements apply virtually to all mortgagees and that
noncompliance with the laws requirements could be an actionable event that
could affect a mortgagees ability to carry out foreclosure in a timely
mannerHUD regards the obligations imposed on creditors by the new law as
self-executing: that is, the law speaks directly to creditors, imposing and obligation
upon any and all creditors to notify any eligible homeowner counseling, whenevera home loan is delinquent. 54 Fed. Reg. 20964-65 (May 15, 1989).
The evidence presented in this case established that:
a. the notification requirement of 12 USC 1701x(c)(5) applies to the Appellant's
loan because it is a home loan not assisted under title V of the Housing Act of 1949
that is secured by a mortgage;
b. the Appellee is a creditor within the definition contained in the statute as the
Appellee is a person or entity that is servicing a home loan on behalf of itself or
another person or entity; and
c. Appellant is a homeowner within the definition contained in the statute as a
person who is obligated under a home loan.
The statute required the Appellee in this case to send a notice of
preforeclosure counseling services to Appellant when she became delinquent in
her mortgage payment. The statute required the Appellee to send Appellant a
notice containing information about any foreclosure avoidance counseling that the
Appellee offered to its residential home mortgage borrowers within 45 days of the
delinquency in payment.
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The evidence presented at trial in the present case establishes that the
Appellee did not send a notice to Appellant that complied with the preforeclosure
prevention notice requirement imposed on the Appellee by the National Housing
Act, 12 U.S.C. 1701x(c)(5) before filing this foreclosure action. This failure is the
result of the Appellee's actions in not sending Appellant a notice containing
information on any foreclosure avoidance counseling that the Appellee offered to
its residential home mortgage borrowers at all or within 45 days of the Appellant's
delinquency in payment.
The evidence presented in this case supports a finding that Appellee is not
entitled to access the equitable remedy of foreclosure on account of the Appellees
failure to first comply with the federal statutory pre-foreclosure servicing notice
obligation set out in 12 USC 1701x(c)(5) before instituting this foreclosure action.
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CONCLUSION
The Appellee did not hold Appellant's promissory note at the commencement
of this action. Appellee had no legal right to foreclose the mortgage in this case.
Appellee violated TILA by overshadowing the material APR disclosure and by
failing to give Appellant a CHARMS booklet at closing triggering Appellant's
right to rescind the mortgage. Appellant timely rescinded the subject mortgage.
Appellees security interest in Appellants real property should be terminated by
this appellate court and the subject mortgage canceled.
The December 19, 2005 notice of default sent by the Appellee failed to
comply with the mortgage. The payment obligations under the promissory note
were never legally accelerated before the filing of this foreclosure action.
Appellee failed to comply with the preforeclosure notice requirement
imposed by 12 U.S.C. 1701x(c)(5) by failing to send Appellant a notice
containing information on foreclosure avoidance counseling within 45 days of the
payment delinquency thereby denying Appellee access to the equitable remedy of
foreclosure.
The trial court misapplied the law and committed reversible error. Appellee's
foreclosure complaint should be dismissed with prejudice and this matter should be
remanded for consideration of appellants claim for statutory damages and
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attorneys fees including attorney's fees for the prosecution of this appeal.
CERTIFICATE OF SERVICE
I certify that a copy hereof has been furnished to Maris Ajmo, Shapiro,Fishman & Cache, LLP, 2424 N. Federal Highway Ste. 360, Boca Raton FL.334317780, Attorney for Appellee, by U.S. Mail this 17th day of November, 2011.
SERVICE LIST
Marisa Ajmo, Esq.Shapiro, Fishman & Cache, LLP2424 N. Federal Highway Ste. 360Boca Raton FL. 334317780Attorney for Appellee
April Charney, ESQ.Jacksonville Area Legal Aid. Inc.126 West Adams StreetJacksonville, FL. 32202Attorney for Appellant
JACKSONVILLE AREA LEGAL AID, INC.,
_____________________________________April Carrie Charney, EsquireFla. Bar. No.: 310425126 W. Adams StreetJacksonville, Florida 33202Telephone: (904) 356-8371, ext. 373Facsimile: (904) [email protected] for Appellant
CERTIFICATE OF COMPLIANCE
THE UNDERSIGNED HEREBY CERTIFIES that the initial Brief ofAppellant, Marilyn G. Harley, complies with the font requirements set forth in the Rule9.210(a)(2), Fla. R. App.P.; to with Times New Roman 14-point font.
mailto:[email protected]:[email protected] -
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______________________________April Charney, Esq.