Chrzuszcz v. Wells Farso Bank. N.A.

Court of Appeal of Florida, First District

June 28,2018, Decided
No. 1D16-3239
Reporter
2018 Fla. App. LEXIS 9109 *; 43 Fla. L. Weekly D 1486; 2018 WL 3151206
PIOTR CHRZUSZCZ, Appellant, v. face-to-face interview requirement of 24
WELLS FARGO BANK, N.4., Appellee C.F.R 203. as a condition
precedent to the foreclosure; l2l-
Notice: NOT FINAL UNTIL Although other cases had held that the
DISPOSITION OF ANY TIMELY AND face{o-face counseling requirement
AUTHOR'ZED MOTION UNDER FLA. was an affirmative defense that a
R. APP. P. 9.330 0R 9.331 borrower had to prove, here the
borrower had specifically denied the
Prior History: [*1] On appeal from the allegations of the complaint that all
Circuit Court for Duval County. Virginia conditions precedent had been met,
Norton, Judge. which shifted the burden of proving
compliance with the condition precedent
Gore Terms
back to the bank.
condition precedent, Borrower, face-to-
Outcome
face, interview, affirmative defense,
foreclosure, regulations, burden of
Judgment reversed and action
proof, mortgage, compliance,
remanded for entry of a voluntary
dismissal of the case.
counseling, default, involuntary
dismissal, foreclosure action, trial court LexisNexis@ Headnotes
Case Summary

Overview
HOLDINGS: [1]-ln the bank's
foreclosure action against the borrower,
the trial court erred in denying the
borrower's motion for involuntary
dismissal and entering final judgment in
the bank's favor because the bank
failed to meet its burden of proving that
it had complied with the HUD-mandated
Real Property
Law > Financing > Foreclosures
Real Property
Law > Financing > Federal
Programs > US Department of
Housing & Urban Development
Programs
tg] Financing, Foreclosures A trial court's ruling on a
motion for
involuntary dismissal is reviewed de
The Department of Housing and Urban novo. The court will likewise review de
Development regulations require a novo questions of law, such as which
bank, prior to initiating a foreclosure party bears the burden of proof.
action, to either have a face-to-face
interview with the borrower, or
reasonably attempt to do so, providing Business & Corporate
that the mortgagee must have a face-to- Compliance > ... > Contracts
face interview with the mortgagor, or Law > Contract Conditions &
make a reasonable effort to arrange Provisions > Conditions Precedent
such a meeting, before three full
monthly installments due on the Evidence > Burdens of
mortgage are unpa¡d. lf default occurs Proof > Allocation
in a repayment plan arranged other than
Civil
during a personal interview, the
Procedure > ... > Responses > Defen
mortgagee must have a face-to-face
ses, Demurrers &
meeting with the mortgagor, or make a
Objections > Affirmative Defenses
reasonable attempt to arrange such a
meeting within 30 days after such ttl Contract Gonditions &
default and at least 30 days before Provisions, Gonditions Precedent
foreclosure is commenced. 24 C.F.R. S
203.604(b ) (2012) Conditions precedent to an obligation to
perform are those acts or events, which
occur subsequently to the making of a
Civil contract, that must occur before there is
>
Procedure Appeals Standards of a right to immediate performance and
>
Review > De Novo Review before there is a breach of contractual
duty. Where there are conditions
Evidence > Burdens of precedent to filing the suit, the plaintiff
Proof > Allocation bears the burden of proving substantial
Civil compliance. On the other hand, an
Procedure > Dismissal > lnvoluntary affirmative defense is an assertion of
Dismissals > Motions facts or law by the defendant that, ¡f
true, would avoid the action. The
Civil defendant, as the one who raises the
Procedure > Appeals > Standards of affirmative defense, bears the burden of
Review > Questions of Fact & Law proving that affirmative defense.

tgl Standards of Reviewn De Novo

Review
Page 2 of 8
 Civil
Procedure > ... > Responses > Defen
ses, Demurrers &
Objections > Affirmative Defenses
Real Property
Law > Financing > Foreclosures
Evidence > Burdens of
Proof > Burden Shifting
Real Property
Law > Financing > Federal
Programs > US Department of
Housing & Urban Development
Programs
t*] Defenses, Demurrers &
Objections, Affirmative Defenses
In the context of a foreclosure, where a
bank has asserted in the complaint that
all conditions precedent had been
satisfied, but the borrower has denied
that assertion with the specific claim
that the bank failed to meet the face-to-
face counseling requirement of 24
C.F.R 203.604 the burden of proving
the condition precedent was shifted
back to the bank.
Counsel: Mark P. Stopa of the Stopa
Law Firm, Tampa, for Appellant.
Michele L. Stocker of Greenberg
Traurig, P.A., Fort Lauderdale; Kimberly
S. Mello and Danielle M. Diaz of
Greenberg Traurig, P.4., Tampa, for
Appellee.
Judges: M.K. THOMAS, J. ROWE and
MAKAR, JJ., concur.
Page 3 of 8
Opinion by: M.K. THOMAS
Opinion
M.K. THorvrRs, J.
Piotr "the Borrower,"
Chrzuszcz,
appeals the final judgment of
foreclosure in favor of Wells Fargo, "the
Bank." He argues the trial court erred by
denying his Motion for Involuntary
Dismissal because the Bank failed to
comply with a condition precedent to
foreclosure. We agree and reverse and
remand for entry of an involuntary
dismissal.
l. Facts
ln 1998, the Borrower executed an FHA
fixed-rate promissory note, paragraph
6(8) of which indicated acceleration
would only be permitted if the Lender
followed Housing and Urban
Development, "HUD," regulations:
lf the Borrower defaults by failing to
pay in full any monthly payment,
then Lender may, except as limited
by regulatíons of the Secretary in the
case of payment defaults, require
immediate payment in full of the
principal balance remaining due and
all accrued interest. Lender may
choose not [*2] to exercise this
option without waiving its rights in
the event of any subsequent default.
In many circumstances regulations
issued by the Secretary will limit
Lender's rights to require immediate
 payment in full in the case of loan and foreclosure of the subject
payment defaults. This Note does Mortgage, have been performed, have
not authorize acceleration when not occurred, or were waived." ln response,
permitted by HUD regulations. As the Borrower filed an answer, asserting,
used in this Note, "Secretary" means "[s]pecifically, and without limitation,
Secretary of Housing and Urban [the Bank] failed to comply with the
Development or his or her designee. requirements of the National Housing
(Emphasis added). Act, 12 U.S.C. S 1701x(c)(5) and 24
C.F.R. 203.604, under which [the Bank]
ffi The HUD regulation at issue in this is required to complete pre-foreclosure
case requires the Bank, prior to initiating counseling with the Defendant." The
a foreclosure action, to either have a Borrower did not, however, plead the
face-to-face interview with the Borrower, failure to complete conditions precedent
or reasonably attempt to do so: as a separate affirmative defense.
b) The mortgagee must have a face-
to-face interview with the mortgagor, At the first bench trial, the Borrower
a
or make reasonable effort to argued that the Bank's failure to comply
arrange such a meeting, before with the face-to-face counseling
three full monthly installments due requirement was a condition precedent
on the mortgage are unpaid. lf to fillng suit. Without explanation, the
default occurs in a repayment plan trial judge declined to entertain the
arranged other than during a argument. The Bank then called a
personal interview, the mortgagee single witness, Dustin Green, who was
must have a face-to-face meeting employed by the Bank as a loan
with the mortgagor, or make a verification analyst. He testified based
reasonable attempt to arrange such on his review of various business
a meeting within 30 days after such records. W¡th the exception [*4] of a
default and at least 30 days before default letter dated December 4, 2011,
foreclosure is commenced . . .. and a letter log, Green offered no
testimony regarding whether the Bank
24 C.F.R. S 20s.604(bt (2012t. complied with the face-to-face
counseling requirement.
ln 2012, the Bank filed a verified
complaint seeking [*3] to foreclose the After the Bank rested its case, the
mortgage and recover the indebtedness Borrower moved for an involuntary
under the note as a result of the dismissal based on the Bank's lack of
Borrower's default. The complaint standing. The trial court granted the
included a general claim that the Bank motion, entering an involuntary
had satisfied all conditions precedent to dismissal over the Bank's objection;
initiating suit: "[A]ll conditions however, the trial court later vacated the
precedent, to acceleration of the subject involuntary dismissal upon the Bank's
Page 4 of 8
Motion for Rehearing. Judgment of Foreclosure. The Borrower
filed a timely Motion for Rehearing,
At the second bench trial, before a which was also denied by the trial court.
different trial judge, Mr. Green was This appeal followed.
again the sole witness called by the
Bank. He offered no testimony
regarding whether the Bank complied ll. Standard of Review
with the face-to-face counseling
requirement. At the conclusion of the ¡q "A trial court's ruling on a motion for
Bank's case, the Borrower moved for an involuntary dismissal is reviewed de
involuntary dismissal based on the novo." Loan Trust
Bank's failure to comply with the face- 238 So. 3d 317 31
to-face counseling requirement as a 4th DcA 2018 (citing Deutsche Bank
condition precedent to filing the Nat'l Tr. 60
foreclosure action. (Fla. 4th DCA 2012)). We likewise
review de novo questions of law, such
The Bank responded that compliance as which party bears the burden of
with HUD regulations was an affirmative proof. See, e.9., Brown v. Cowell, 19
defense, as opposed to a condition . 1st DCA 2009
precedent, and the Borrower had failed
to plead noncompliance as an
affirmative defense. The Borrower then lll. Analysis
recalled Mr. Green and elicited
The Borrower argues that the HUD
testimony that: [*5] 1) no documents
requirement that the Bank either have a
reflected any face-to-face counseling
face{o-face interview with the Borrower,
occurred with the Borrower; and 2) none
or make a reasonable effort to arrange
of the five exceptions to the face-to-face
requirement applied. The Bank, as
a face{o-face meeting constituted a
rebuttal evidence, introduced several
condition precedent to foreclosure.

certified letters it sent to the Borrower.

The Borrower objected to the evidence
as irrelevant because, with one
exception, the letters predated the
default.
After the presentation of all the
evidence, the Borrower renewed his
Motion for lnvoluntary Dismissal, which
the trial court took under advisement.
Ultimately, the trial court denied the
Borrower's Motion and entered a Final
Accordingly, [*6] as a condition
precedent, the Bank bore the burden of
proving its satisfaction at trial. The
Bank, on the other hand, asserts the
Borrower's allegation that it failed to
comply with the face-to-face interview
requirement was an affirmative defense;
thus, the Borrower had the responsibility
to specifically plead and prove the
defense. We agree with the Borrower's
contention that, in the current case, the
HUD-mandated face-to-face interview

Page 5 of 8
(or attempt to interview) was a condition was a condition precedent to filing the
precedent to the foreclosure action, and mortgage foreclosure action, the Bank
the Bank shouldered the burden of bore the burden of proving ¡t had
proving its satisfaction. complied.

H "'Conditions precedent to an Florida appellate courts have addressed

obligation to perform are those acts or whether face-to-face interviews as
events, which occur subsequently to the required by section 203.604 constitute a
making of a contract, that must occur condition precedent or an affirmative
before there is a right to immediate defense in a foreclosure suit. In Diaz v.
performance and before there is a Wells Farqo Bank. N.A.. 1 So. 3d
breach of contractual duty."' University 279 201 6 , it was
Housinq b v Davco Coro. v. Foch 22 1 unclear whether the HUD regulations
So. 3d 701. 704 sd DCA 2017) were incorporated into the terms of the
(quoting Land Co. of. Osceola Cty.. LLC mortgage; the Fifth District held that in
v. Genesls lnc.. 169 So. 3d such cases where it was unclear
243. 24 7 (Fla. 4th DCA 201 5) whether alleged conditions precedent
(emphasis omitted)). Where there are even applied, "the burden is on the
conditions precedent to filing the suit, party asserting the existence of the
the plaintiff bears the burden of proving conditions precedent to establish their
substantial compliance. Scialabba. 238 applicability."
So.3d at 319 (citing Liberty Home
Eouitv So/s.. /nc. v Raulston. 206 So. ln Harris v. United Sfafes Bank National
3d 58. 60 (Ha. ath DCA 2016)). Association. 223 3d 1030. 1032
DCA 201 this Court
On the other hand, "[a]n affirmative recognized "[t]his case turns on whether
defense is an assertion of facts or law a HUD regulation, the face-to-face
by the defendant that, if true, would counseling rule, is a condition precedent
avoid the action." Custer Med. Ctr, v- to foreclosure, and ¡f so, whether
United Auto lns. 62 So. 3d 1086. compliance with those regulations was
1096 (Fla. 2010). The defendant, as the properly and timely pled." We
one who raises the affirmative defense, determined the HUD regulation of face-
bears ["7] the burden of proving that to-face counseling was [*8] a condition
affirmative defense. /d. precedent to foreclosure pursuant to the
Thus, if the Bank is correct that its
terms of that particular mortgage;
however, we also held the issue was
alleged failure to conduct the HUD- waived where the Bank never claimed
required face{o-face interview was an
compliance and Harris d¡d not allege
affirmative defense, the Borrower bore
noncompliance until closing arguments.
the burden of proving it below; if, on the ld. at 1032-33.
other hand, the face-to-face interview
Page 6 of 8
The case at hand is most analogous to condition precedent was shifted back to
Palma v. JPMorgan Chase Bank, 208 the Bank.
So. 3d 771 (Fla. \th DCA 2016). There, reliance on the Florida
The Bank's
as here: 1) the note and mortgage
Supreme Court case of Custer Med
clearly required compliance with HUD Center v United Auto lns. 62 So
regulations, including the face-to-face sd1 2010 is
misplaced
interview requirements in section
There, the supreme court noted "a
203.604, as a condition precedent to
defending party's assertion that a
foreclosure; 2) the bank's complaint plaintiff has failed to satisfy conditions
alleged compliance with all conditions precedent necessary to trigger
precedent to foreclosure; and 3) the
contractual duties under an existing
borrower denied the allegation that agreement is generally viewed as an
conditions precedent had been
affírmative defense, for which the
completed and specifically asserted the
defensive pleader has the burden of
bank had failed to comply with the HUD pleading and persuasion." ld. at 1096.
requirement of a face-to-face interview'
However, Custer, as noted in Palma, is
ld. at 773. The Fifth District determined distinguishable from the case at hand
that Palma's specific denial ofthe
for two main reasons. First, Custer dealt
it
bank's allegation had satisfied all not with conditions Precedent to a
conditions precedent to the mortgage foreclosure action pursuant to HUD, but
foreclosure action "shifted the burden
rather, with the issue of whether an
back to Bank to prove at trial that it insured's attendance at a medical
complied wtth fsection 203.6041;' ld. at
examination was a condition precedent
775. The court reasoned there was "no
meaningful reason to treat compliance
to the existence of an automobile
policy that provided personal
with section 203.604 in an FHA insurance injury protection (PlP) benefits. ld.; see
mortgage differently than compliance a/so Palma, 208 So. 3d at 774 n.3.
with paragraph twenty-two in a standard
Further, in Cusfer, the [*101 defendant
mortgage, which our court has raised as an affirmative defense the
determined is [*9] a condition
insured's unreasonable failure to appear
precedent to foreclosure." /d.
at a medical examination. 62 So. 3d at
Here, as in Palma, ffl where the Bank 1096. ln Palma and the current case, on
asserted in the comPlaint that all the other hand, the Bank initially alleged
conditions precedent had been all conditions precedent had been met,
satisfied, but the Borrower denied that in
and the Borrowers, response,
assertion with the specific claim that the specifically denied those allegations.
Bank failed to meet the face-to-face Palma, 208 So. 3d at 774 n.3. The
counseling requirement of section specific denial d¡d not amount to an
203.604, the burden of Proving the affirmative defense. Thus, both here

Page 7 of 8
and in Palma, the burden of Proving
compliance with the condition precedent
shifted back to the Bank.

As such, the Bank bore the burden of

proving it had met the condition
precedent, pursuant to section 203.604,
of holding or attempting to hold face-to-
face interviews with the Borrower. lt
failed to do so.
ReveRseo and ReI¡ANDED for entry of a
voluntary dismissal of this case.
Rowr and MnxnR, JJ., concur.

End of Document

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