Truth in Lending Act. 15 U.S.C. § 1635(f)
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Vidal v. Liquidation Properties- A Horribly Muddled Decision That Confligrates, Confuses And Befuddles…..
A decision which befuddles and confudlles…..
Cesar and Ruth Vidal (“the Vidals”) appeal the trial court’s order
granting summary judgment and entering a final judgment of foreclosure
in favor of Liquidation Properties, Inc. (“Liquidation”). The Vidals claim
the trial court erred in finding: (1) Liquidation had standing to seek
foreclosure of their note and mortgage, and (2) their affirmative defenses
for fraud, misrepresentation, a n d violation of the federal Truth in
Lending Act were legally insufficient. We reverse on the issue of standing
and the rejection of the Vidals’ affirmative defense of Truth in Lending
violations. We affirm on the remaining issues.
The Vidals executed two notes and mortgages in favor of Option One
Mortgage Corporation for the purchase of their home. On February 5,
2009, Liquidation filed a complaint for foreclosure o n on e of the
mortgages, to enforce a lost note, and to reestablish a lost mortgage. The
Vidals answered and raised fifteen affirmative defenses. Subsequently,
the affirmative defenses were amended down to seven. In the amended
affirmative defenses, the Vidals alleged Liquidation lacked standing to
foreclose. They asserted equitable estoppel a n d fr a u d barred the
complaint due to the lender’s placing false income and other financial
information on the mortgage application. They also alleged, for the first
time, violations of the federal Truth in Lending Act a n d related
regulations, seeking rescission of the mortgage a n d recoupment of
damages based on the lender’s failure to comply with federal disclosure
requirements, for misrepresenting that the loan terms were fixed, and for
failing to disclose the actual payment terms.
At the final hearing on summary judgment, the trial court held that
Liquidation met its initial burden to establish standing to foreclose on
the note and mortgage. To demonstrate standing, Liquidation produced
the original note and mortgage, an undated allonge endorsed in blank,
and a mortgage assignment executed o n February 6, 2009, with an
effective date of January 15, 2009. The trial court then held there was
no material issue of fact as to standing because the Vidals could not
introduce evidence to dispute the assignment took place. The Vidals
argue the trial court erred in this finding because (1) the original note
and mortgage were not produced at least twenty days prior to the
summary judgment hearing, as required by rule 1.510(c), and (2) the
back-dated assignment does not demonstrate, as a matter of law, that a
legal or equitable transfer of the note and mortgage occurred prior to the
filing of the complaint.
Regarding the violation of rule 1.510(c), the transcript reflects that
counsel for the Vidals waived this rule, instead deciding to oppose the
motion for summary judgment on the merits. As the issue was waived, it
cannot be grounds for reversal on appeal. Azanza v. Private Funding
Group, 24 So. 3d 586, 587 (Fla. 4th DCA 2009).
We have held that the one who owns and holds the note is entitled to
foreclose on the mortgage. See, e.g., Riggs v. Aurora Loan Servs., LLC, 36
So. 3d 932 (Fla. 4th DCA 2010). In filing a mortgage foreclosure suit, as
well as seeking a summary judgment, it is incumbent on the plaintiff to
be in a position to prove he, she, or it owns and holds the note as of the
date suit is filed.
“[T]he plaintiff must prove that it had standing to foreclose when the
complaint was filed.” McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79
So. 3d 170, 173 (Fla. 4th DCA 2012). “Standing may be established by
either an assignment or an equitable transfer of the mortgage prior to the
filing of the complaint.” Id. In McLean, the bank filed a complaint for
foreclosure on May 11, 2009. Id. at 171. The mortgage reflected the
mortgagee as a third party.
When ordered to provide proof of
assignment, the bank filed a n assignment of mortgage reflecting an
effective date of May 14, 2009. The bank moved for summary judgment
and filed an affidavit in support of summary judgment. The affidavit did
not state when the note or mortgage was transferred to the bank. Id.
The trial court granted summary judgment, but this Court reversed,
holding the record evidence was insufficient to demonstrate the bank had
standing to foreclose at the time the complaint was filed. Id. at 173.
The McLean court’s reasoning is pertinent to this case and bears
Even where an assignment of mortgage does not occur until
after the complaint is filed, there are several ways a plaintiff
may establish its standing to foreclose at the inception of the
Where the plaintiff contends that its standing to
foreclose derives from an endorsement of the note, the plaintiff
must show that the endorsement occurred prior to the
inception of the lawsuit. If the note or allonge reflects on its
face that the endorsement occurred before the filing of the
complaint, this is sufficient to establish standing. [citation
omitted] Similarly, if the plaintiff relies upon an affidavit of
ownership to prove its status as a holder of the note on the
date the lawsuit was filed, it is sufficient if the body of the
affidavit indicates that the plaintiff was the owner of the note
and mortgage before suit was filed. Alternatively, if the
affidavit itself is executed before the lawsuit is filed, the
allegation that the plaintiff is the “owner and holder of the
note” is sufficient to establish the plaintiff’s standing at the
inception of the lawsuit. . . .
While the original note contained an undated special
endorsement in Chase’s favor, the affidavit filed in support of
summary judgment did not state when the endorsement was
made to Chase. Furthermore, the affidavit, which was dated
after the lawsuit was filed, did not specifically state when
Chase became the owner of the note, nor did the affidavit
indicate that Chase was the owner of the note before suit was
filed. Therefore, Chase failed to submit any record evidence
proving that it had the right to enforce the note on the date the
complaint was filed.
Id. at 174 (emphasis added) (citation omitted).
While Liquidation filed the original note and an allonge to the note
endorsed in blank, the allonge is not dated, and Liquidation did not file
an affidavit demonstrating that the note was transferred prior to the
filing of the complaint. The assignment of mortgage reflects transfer of
only the mortgage, not the note. Although the Assignment of Mortgage
was sworn to o n February 6, 2009, and states “ASSIGNMENT
EFFECTIVE AS OF 01/15/2009,” two inferences can be drawn from the
effective date language. One could infer that ownership of the note and
mortgage were equitably transferred to Liquidation on January 15, 2009,
to backdate an event to their benefit.1 Because the language yields two
possible inferences, proof is needed as to the meaning of the language,
and a disputed fact exists. Soncoast Cmty. Church of Boca Raton, Inc. v.
Travis Boating Ctr. of Fla., Inc., 981 So. 2d 654, 655 (Fla. 4th DCA 2008).
Therefore, we find the trial court erred in ruling there was no issue of
material fact regarding standing, as the record does not reflect as a
matter of law that Liquidation had standing on the date the complaint
The trial court held the affirmative defense of violations of the Truth in
Lending Act was legally insufficient because the statute of limitations
under that Act had run. Federal law imposes a three-year statute of
limitations from the consummation of the transaction on any action for
rescission under the Truth in Lending Act. 15 U.S.C. § 1635(f) (2006);
Dove v. McCormick, 698 So. 2d 585, 587 (Fla. 5th DCA 1997). A one-year
statute of limitation from the date of violation of the Act applies to
actions for recoupment.
15 U.S.C. § 1640(e).
recoupment and setoff are raised as a defense, the one-year statute of
limitations does not apply. Title 15 U.S.C. 1640(e) states:
This subsection does not bar a person from asserting a
violation of this subchapter in an action to collect the debt
which was brought more than one year from the date of the
occurrence of the violation as a matter of defense by
recoupment or set-off in such action, except as otherwise
provided by State law.
The Vidals’ affirmative defense seeking recoupment damages and set-off
for Tru t h in Lending violations was not barred b y th e statute of
limitations set forth in the Truth in Lending Act. Liquidation filed no
sworn statements showing the defense was not valid. The failure to
rebut a properly raised affirmative defense precludes the entry of
summary judgment in favor of Liquidation. Servedio v. US Bank Nat’l
Ass’n, 46 So. 3d 1105, 1107 (Fla. 4th DCA 2010).
The Vidals raised two “fraud” claims as affirmative defenses, both of
which were legally insufficient as a matter of law.
Allowing assignments to be retroactively effective would be inimical to the
requirements of pre-suit ownership for standing in foreclosure cases.
Boiled to its essence, the first fraud claim says that the lender falsely
inflated the Vidals’ income in the loan application that they signed to get
the loan; had the lender taken steps to verify their income then the
exaggerated income would have been revealed. Of course, the Vidals
want damages caused b y the lender’s treachery. The Vidals were
obviously in a position to know their own income. Signing off on their
own fraudulent loan application precludes them from raising this fraud
as a n affirmative defense.
“The recipient of a fraudulent
misrepresentation is not justified in relying upon its truth if he knows
that it is false or its falsity is obvious to him.” M/I Schottenstein Homes,
Inc. v. Azam, 813 So. 2d 91, 93 (Fla. 2002) (quoting Bessett v. Basnett,
389 So. 2d 995, 997 (Fla. 1980) (quoting Restatement (Second) of Torts
(1977) § 541)).
The second claim of “fraud” is that the lender orally misrepresented
the loan to be a fixed rate loan. However, the note and other documents
the Vidals signed at the closing plainly indicate that the note had an
adjustable rate. “A party cannot recover in fraud for alleged oral
misrepresentations that are adequately covered or expressly contradicted
in a later written contract.” Hillcrest Pac. Corp. v. Yamamura, 727 So. 2d
1053, 1056 (Fla. 4th DCA 1999).
We reverse the entry of summary judgment and remand for further