Fourth District: New Notice to Attorneys/Parties & New Administrative Order re: Agreed Extensions of Time

Last week the Fourth District issued a new Administrative Order regarding agreed extensions of time and an updated Notice to Attorneys and Parties. 

The Administrative Order regarding agreed extensions of time, Administrative Order 2016-01, can be downloaded HERE. The Fourth District's updated Notice to Attorneys and Parties can be downloaded HERE. 

The First District does not have an agreed extension procedure but the Second District, Third District, Fourth District (see above), and Fifth District do. The Second District's administrative order can be downloaded HERE (June 3, 2013); the Third District's administrative order can be downloaded HERE (amended June 30, 2015); and the Fifth District's administrative order can be downloaded HERE (March 8, 2013). 

Court Must Only Rule Upon Issues Presented And Party Is Entitled To Notice Of All Issues To Be Considered

In Worthington v. Worthington (2D12-1361), the Second District reversed, in part, an order entered by the trial court because the order granted relief not requested in the motion pending before it and because the party opposing the motion had not received notice that other issues would be considered. The court stated:

In modification proceedings, as in other civil matters, courts are not authorized to award relief not requested in the pleadings. To grant unrequested relief is an abuse of discretion and reversible error.” Abbott v. Abbott, 98 So. 3d 616, 617-18 (Fla. 2d DCA 2012) (citations omitted) (internal quotation marks omitted). Additionally, a court should not grant such relief absent proper notice to the parties. Sinton v. Sinton, 749 So. 2d 532, 533 (Fla. 2d DCA 1999).

Arbitration Agreement That Provides For Fees To Prevailing Party, Contrary To The FLSA, Is Unenforceable

In Hernandez v. Colonial Grocers, Inc. (2D11-3415), the Second District determined an arbitration provision was invalid because it conflicted with the relief afforded by the relevant federal statute. The plaintiff filed a lawsuit asserting violations of the "Fair Labor Standards Act [29 U.S.C. § 216(b)] and section 440.205, Florida Statutes (2010), of the Florida Workers' Compensation Act.” The trial court granted the defendant's motion to compel arbitration pursuant to a provision of the employment contract. That arbitration clause included the following language: “...Although the parties shall initially bear the cost of arbitration equally, the prevailing party, if any as determined by the arbitrator at the request of the parties which is hereby deemed made, shall be entitled to reimbursement for its share of costs and reasonable attorneys' fees, as well as interest at the statutory rate.” 

The Second District first rejected the appellant’s argument that Flyer Printing Co. v. Hill, 805 So. 2d 829 (Fla. 2d DCA 2001) provided "a bright-line rule that any fee-splitting provision renders an arbitration clause unenforceable.”

The court stated that "Hernandez also argues on appeal that the instant arbitration agreement is unenforceable because it includes a prevailing party attorney's fee provision that contradicts the attorney's fee provision of the statute under which he brought suit.” As to that second issue, Flyer Printing did require reversal. 

Here, Hernandez brought suit under the federal Fair Labor Standards Act and the Florida Workers' Compensation Law. The federal act states that a prevailing plaintiff is entitled to an award of reasonable attorney's fees, but it does not allow for prevailing party fees for the defendant. 29 U.S.C. § 216(b). The instant arbitration agreement, however, states that whichever party prevails "shall be entitled to reimbursement for its share of costs and reasonable attorneys' fees." Accordingly, should the arbitrator declare Colonial the prevailing party, Hernandez would be obligated under the arbitration agreement to pay Colonial's attorney's fees. This renders the potential cost of arbitration to be far greater to Hernandez than the potential cost of civil litigation, which under no circumstances would include Colonial's attorney’s fees. As such, while the parties' agreement may not contravene any of Hernandez’s rights under the federal act, it does expose him to a potential liability to which he would not be exposed if the litigation occurred in civil court because the federal statute specifically protects him from such liability.

"This is a sufficient enough chilling effect to defeat the remedial purpose of the federal act. The attorney's fees provision of the Fair Labor Standards Act is intended to encourage employees to seek redress when they believe they have been wronged by an employer. The arbitration agreement, however, does just the opposite— it discourages the employee from pursuing a claim. As such, under Flying Printing, it is unenforceable."

Party That Holds Note When Complaint Filed Has Standing To Enforce Its Terms

In American Home Mortgage Servicing, Inc. v. Bednarek (2D12-2099), the Second District reversed the trial court’s order dismissing a complaint for lack of standing. The court described the facts, and chain of ownership of the note and mortgage in question, as follows:

On May 31, 2005, Ms. Bednarek executed a note and mortgage in favor of American Brokers Conduit for the purchase of real property. Thereafter, the loan was sold to Deutsche Bank. On March 30, 2006, American Brokers Conduit assigned the mortgage to the bank's servicing agent, AHMSI-Maryland. In September 2007, AHMSIMaryland filed a complaint for foreclosure alleging it was the owner and holder of the underlying promissory note. With the complaint and the amended complaint, AHMSIMaryland filed copies of the mortgage, the promissory note showing a blank endorsement, and the 2006 assignment of mortgage. In April 2008, AHMSI purchased AHMSI-Maryland, acquiring the company's servicing rights. In 2009, AHMSI filed the original note and mortgage with the trial court.

At the close of testimony in the non-jury trial, counsel for Ms. Bednarek moved for an involuntary dismissal and argued that the plaintiff had failed to establish standing. "Relying on McLean [v. JP Morgan Chase Bank National Ass'n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012)], the trial court granted the motion on the ground AHMSI had failed to prove it was the owner and holder of the note and mortgage.”

The court stated that “a party seeking foreclosure must establish that it had standing to foreclose at the time it filed the complaint. A foreclosure plaintiff has standing if it owns and holds the note at the time suit is filed. A plaintiff may also establish standing to foreclose by submitting evidence of a special endorsement on the note in favor of the plaintiff or a blank endorsement, an assignment from the payee to the plaintiff, or an affidavit of ownership.” Citations removed. Based upon that law, the court held:

Here, both the complaint and the amended complaint reflect that AHMSIMaryland, the original plaintiff, was the owner and holder of the note at the time the complaint was filed. An assignment of mortgage was attached to the complaint which provided that the original lender, American Brokers Conduit, assigned the mortgage to AHMSI-Maryland on March 30, 2006, more than one year prior to the filing of the original complaint. Also attached to the complaint and amended complaint was a copy of the note showing a blank endorsement. Because AHMSI possessed the original note, endorsed in blank, it was the lawful holder of the note entitled to enforce its terms.

Second DCA Certifies Question Regarding Standing In Foreclosure Suits to Florida Supreme Court

In Focht v. Wells Fargo Bank, N.A. (2D11-4511 & 2D11-4980), which was released a few weeks ago, the Second District certified the following question to the Florida Supreme Court as one of great public importance:

CAN A PLAINTIFF IN A FORECLOSURE ACTION CURE THE INABILITY TO PROVE STANDING AT THE INCEPTION OF SUIT BY PROOF THAT THE PLAINTIFF HAS SINCE ACQUIRED STANDING?

In the opinion, written by Judge Silberman, the Court "reverse[d] the final judgment of foreclosure because a genuine issue of material fact exists regarding Well's Fagro's standing to enforce the note and mortgage."

At a summary judgment hearing, "Wells Fargo asserted that it had standing by virtue of an assignment of the note and mortgage dated September 2008, which was several months after the complaint was filed. Wells Fargo alternatively asserted that it had standing as the holder of the original note endorsed in blank. In opposition to Focht's cross-motion for summary judgment, counsel for Wells Fargo addressed Focht's affirmative defenses and argued that each was either factually or legally insufficient."

The court concluded that "A plaintiff who is not the original lender may establish standing to foreclose a mortgage loan by submitting a note with a blank or special endorsement, an assignment of the note, or an affidavit otherwise proving the plaintiff's status as the holder of the note….But standing must be established as of the time of filing the foreclosure complaint….Thus, Wells Fargo's submission of a postfiling assignment of the note and mortgage does not establish that it had standing when it filed the lawsuit." 

In this case, "Wells Fargo alternatively argues that it established standing by submitting the original note endorsed in blank….As with the assignment, however, Wells Fargo did not submit the original note until several months after it had filed the complaint. To establish standing as the holder of a note endorsed in blank, a party must be in possession of the original note…..Thus, Wells Fargo was required to submit evidence that it was in possession of the original note with the blank endorsement at the time it filed the complaint to establish standing."

In this case, the blank endorsement, which is apparently located on the back of the note, did not get copied for the record….Although Wells Fargo alleged in its unsworn complaint that it was the owner and holder of the note and mortgage, it asserted that the original note had been lost or destroyed and 'is not now in the custody and control of [Wells Fargo].' Notably, the affidavit of indebtedness filed in support of summary judgment relies on the postfiling assignment for standing." Therefore, the judgment was reversed.

The court "also certif[ied] a question based on some of the same concerns articulated by Judge Altenbernd in his concurrence."  The court stated:

For our part, appellate courts have seen a recent influx of appeals in which defendants have successfully argued that the trial court erred in entering a foreclosure judgment in favor of the plaintiff because the plaintiff failed to establish standing at the time of filing. ...In many of these cases, the plaintiff presented unrefuted proof of standing acquired after filing but prior to the final hearing. … The appellate courts are nonetheless compelled to reverse based on the district courts' application of a long line of supreme court cases applying the general principle that "the plaintiff's lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed."… 

We note that the supreme court has not applied this standing principle inthe exact context presented in this case. And we question whether, in light of the ongoing foreclosure crisis in this State, the supreme court would adhere to this principle in cases in which a plaintiff has acquired standing by the time judgment is entered. Accordingly, we certify the following question as one of great public importance:

CAN A PLAINTIFF IN A FORECLOSURE ACTION CURE THE INABILITY TO PROVE STANDING AT THE INCEPTION OF SUIT BY PROOF THAT THE PLAINTIFF HAS SINCE ACQUIRED STANDING?

Judge Altenbernd wrote a concurring opinion that began:

I concur in this decision because existing precedent requires me to do so. A requirement that the plaintiff prove that it owned or possessed a promissory note at the commencement of a foreclosure action may have made sense during earlier periods of economic downturn,3 but in this era of securitization of mortgage debt and computerized banking, it has proven to be a restriction that often provides a windfall to a borrower who can prove no harm by the fact that the plaintiff obtains possession of the note after the filing of the lawsuit but before the entry of judgment. So long as there is no dispute that the borrower received the money and defaulted on the note, the law should not use "standing" to require the dismissal of a lawsuit. If the defendant raises this issue at the inception of the lawsuit this affirmative defense may warrant a delay in the proceedings while the plaintiff establishes that it can enforce the note. But especially when the original note in default has already been filed in the court record, the law should generally permit a plaintiff to obtain a judgment of foreclosure if the plaintiff establishes that it has a right to enforce the note at the time it seeks to obtain a final judgment…. 

Breach of Fiduciary Duty Claim Can Be Waived

In Band v. Libby (2D11-4942), the Second District held (in addition to addressing other issues) that a claim for breach of fiduciary duty can be waived. The court stated:

We hold that a party may waive a claim based on the breach of a fiduciary duty. "Parties, by their own knowledge and conduct, can waive or be estopped to raise a wide array of constitutional, statutory, and common law rights . . . ." Ruggio v. Vining, 755 So. 2d 792, 795 (Fla. 2d DCA 2000). Indeed, "[a] party may waive any rights to which he or she is legally entitled, by actions or conduct warranting an inference that a known right has been relinquished." Torres v. K-Site 500 Assocs., 632 So. 2d 110, 112 (Fla. 3d DCA 1994) (emphasis added). It follows that a claim based on a breach of fiduciary duty, like any other claim, may be waived.

 

Second District Certifies Conflict Regarding Jurisdiction To Review Partial Final Judgments

In Universal Underwriters Insurance Co. v. Stathopoulos (2D12-2412, 2D12-3606), the Second District granted a motion to dismiss, concluding that review of the partial final judgment appealed would constitute improper piecemeal review. The court certified conflict to the Florida Supreme Court.

In the case, an underlying lawsuit relating to a car accident had been resolved. The second lawsuit ws described as follows:

In the subsequent lawsuit underlying this appeal, Ms.Stathopoulos and Western General filed a three-count amended complaint againstUniversal for declaratory relief and for breach of contract and bad faith for Universal'sfailure to defend and indemnify the driver in the wrongful death lawsuit. The order onappeal declares that the driver was an insured under Universal's policy and notes thatthe other two counts remain pending.

After discussing its jurisdiction and the various rules, the Second District stated:

Because the amended complaint reflects that the three counts are based on the samefacts and are intertwined, we conclude that allowing an appeal of the declaratory countat this stage would foster impermissible piecemeal review. See Mendez v. W. FlaglerFamily Ass'n, 303 So. 2d 1, 5 (Fla. 1974).

After concluding jurisdiction as a final order or non-final order was inappropriate and that it did not have certiorari jurisdiction, the Second District dismissed the consolidated appeals. However, they also certified conflict to the Florida Supreme Court which was included in a footnote. The issue certified is below:

We note that other courts have resolved appeals in similar postures under rule 9.110(m) or Reed, albeit without explicit jurisdictional analysis. See, e.g., Wilshire Ins. Co. v. Birch Crest Apartments, Inc., 69 So. 3d 975 (Fla. 4th DCA 2011); Am. Reliance Ins. Co. v. Perez, 712 So. 2d 1211 (Fla. 3d DCA 1998). To the extent that the present case is in conflict with these decisions, we certify the conflict. We reach the same conclusion as did the First District in Mercury Insurance Co. of Florida v. Markham, 938 So. 2d 607 (Fla. 1st DCA 2006), although by a somewhat different analysis.

 

"Possession of the Note Determines Standing to Foreclose"

In Everhome Mortgage Co. v. Janssen (2D11-4592), the Second District reversed the trial court's order vacating a judgment and dismissing a complaint for lack of jurisdiction. The court stated:

We are compelled to point out that possession of the note determines standing to foreclose. See Taylor v. Bayview Loan Servicing, LLC, 74 So. 3d 1115, 1117 (Fla. 2d DCA 2011). The holder of the original note endorsed in blank has standing. Id. "[A] mortgage is but an incident to the debt, the payment of which it secures, and its ownership follows the assignment of the debt. If the note or other debt secured by a mortgage be transferred without any formal assignment of the mortgage, or even a delivery of it, the mortgage in equity passes as an incident to the debt . . . ." WM Specialty Mortg., LLC v. Salomon, 874 So. 2d 680, 682 (Fla. 4th DCA 2004)(quoting Johns v. Gillian, 184 So. 140, 143 (Fla. 1938)). More fundamentally, however,"[e]ven if [the plaintiff] lacked standing when it filed suit, the final judgment is merely voidable, not void." Dage v. Deutsche Bank Nat'l Trust Co., 95 So. 3d 1021, 1024 (Fla. 2d DCA 2012) (citing Phadael v. Deutsche Bank Trust Co. Americas, 83 So. 3d 893, 895 (Fla. 4th DCA 2012)).

As a result, the trial court's order was reversed.

Order Denying Fees Based On Flat Fee Agreement With Foreclosure Attorney Affirmed

In Raza v. Deutsche Bank National Trust Company, the Second District determined that the borrower had properly preserved a claim for attorneys fees by pleading entitlement in his answer and filing a motion for fees within thirty days of the involuntary dismissal. However, the borrower did not sufficiently establish the fees incurred. ​

Deutsche Bank argues that Mr. Raza failed to prove a reasonable fee under Florida Patient's Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985). Principally, it argues that the record contains no information regarding the number of hours spent by Mr. Raza's counsel and the amount of work performed. Mr. Raza responds that the flat fee satisfies any evidentiary burden. We cannot agree.

Emphasis supplied.​ The court later stated that "We do not hold that the absence of time records is fatal to an effort to recover fees under a flat fee arrangement." The flat fee may be sufficient when "combined with expert testimony...if it accounts for all matters addressed in Florida Patient's Compensation Fund." In this case, the fee expert's affidavit "was facially inadequate" Finally, "Even if Mr. Raza did present sufficient evidence, the amount of fees remains in the trial court's discretion"

Sanctions For Filing Motion to Vacate Reversed Due To Colorable Claim

​In Swan Landing Development LLC v. First Tennessee Bank National Association (2D11-3410),  the Second District reviewed the trial court's  imposition of sanctions against the Appellant and its attorneys. Ultimately,  the sanctions order was reversed because the organization had a colorable claim and basis to file a motion seeking relief they sought.

​The court stated that "[a] finding that a party is entitled to recover attorney's fees under section 57.105 must be based upon substantial, competent evidence presented at the hearing on attorney's fees or otherwise before the court and in the record." That being said, in this case, the Court stated:

We are compelled to conclude based on the facts of this case that the trial court abused its discretion in awarding fees under section 57.105.  Rule 1.540(b) permits a trial court to relieve a party from a final judgment based, in part, on "newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial or rehearing, . . . fraud . . . , misrepresentation, or other misconduct of an adverse party . . . ."  Here, the Bank's audit inquiry letter, which was sent after entry of the final judgment of foreclosure, facially contradicted the Bank's position at trial that the parties had agreed to a concession.  And because Swan Landing's efforts seeking an explanation of this contradiction proved unsuccessful, we conclude it was reasonable under these circumstances for Swan Landing and its attorneys to pursue the 1.540(b) motion. 

​

Florida Statute Of Limitations Does Not Apply In Arbitration Unless Specifically Included In Agreement

In Raymond James Financial Services, Inc. v. Phillips (2D10-2144), the Second District affirmed the trial court's order and held that Florida's statute of limitations do not apply to arbitration proceedings unless the contract specifically incorporates the statute of limitations into the arbitration clause. Judge Black and Associate Judge Raiden concurred in the per curiam opinion and Judge Kelly dissented. The court also certified the following question to the Florida Supreme Court as one of great public importance:

Does Section 95.011, Florida Statutes, Apply To Artbitration When The Parties Have Not Expressly Included A Provision In Their Arbitration Agreement Stating That It Is Applicable?

The facts were described as follows:

The Account Holders' grievances may briefly be summarized as claims of negligence; misconduct, including breaches of fiduciary duty; and state and federal securities violations. In response to the Account Holders' claims, Raymond James filed a motion to dismiss, asserting that the Account Holders' claims were barred by the limitations periods in chapter 95, Florida Statutes (2005). The Account Holders then invoked the provision in the arbitration agreement which stated that timeliness issues would be decided by the court, and they filed an action in the circuit court of Collier County seeking a declaratory judgment. The Account Holders argued that Florida's statutes of limitations do not apply to arbitration proceedings. The circuit court agreed and issued a final declaratory judgment stating that Florida's statutes of limitations were not applicable to the Account Holders' arbitration claims as a matter of law.

***

The language of the contract at issue in this case does not expressly state that Florida’s statutes of limitations apply to the arbitration claims. Instead, the language states that the contract will not "limit or waive the application of any relevant state or federal statute of limitation." The Account Holders argue, and we agree, that this phrase does not affirmatively incorporate Florida's statutes of limitations into the agreement. The phrase indicates that Raymond James did not intend to waive any relevant statute of limitations defenses.

The court concluded:

In sum, Raymond James did not expressly include the Florida statutes of limitations in the contract. Since the contract is construed against the drafter and since the language of the statute does not state that it applies to arbitration, we hold that Florida's statutes of limitations do not apply to arbitrations where the arbitration agreement does not expressly provide for their application. Thus, the trial court correctly determined that Florida's statutes of limitation do not bar the Account Holders' claims.

Foreclosure Judgment Reversed For Lack Of Notice But Bank Had Standing

In Taylor v. Bayview Loan & Servicing, LLC (2D10-1493), the Second District reversed a trial court's order granting summary judgment to the lender "because genuine issues of material fact remain regarding the Taylors' affirmative defense of lack of notice." The court also rejected the Taylors argument that Bayview lacked standing to foreclose. With regard to standing, the court stated:

Bayview alleged in its complaint that it "owns and holds said note by virtue of the endorsement/allonge." Bayview attached copies of the note and allonge to its complaint. The note and the allonge reflect that on the same day that Joyce Taylor executed the note in favor of USMoney, USMoney in turn endorsed the note without recourse to Bayview. Before the summary judgment hearing, Bayview filed the original note and the allonge. Thus Bayview established its status as holder of the note and its right to enforce the note. See § 671.201(20), Fla. Stat. (2005)....Mortg. Elec. Registration Sys., Inc. v. Azize, 965 So. 2d 151, 153 (Fla. 2d DCA 2007)....Kaminik v. Countrywide Home Loans, Inc., 64 So. 3d 195, 196 (Fla. 4th DCA 2011)....Riggs v. Aurora Loan Servs., LLC, 36 So. 3d 932, 933 (Fla. 4th DCA 2010) ...Bayview also became the equitable owner of the mortgage when USMoney endorsed the note to Bayview because the ownership of the mortgage followed the note.

With regard to notice, the issue which resulted in a reversal, the court stated:

With respect to the affirmative defense of lack of notice, Bayview failed to refute this affirmative defense; it therefore prevents summary judgment in this case. Bayview made a general allegation that all conditions precedent had been performed, but the motion for summary judgment and affidavits do not negate the affirmative defense that Bayview failed to give proper notice of the default in the payments on the note and mortgage. Paragraph 22 of the mortgage, attached to the complaint, requires the lender to give the borrower notice prior to acceleration of the debt. In fact, the notice provision is the same as the one in Konsulian. See Konsulian, 61 So. 3d at 1284. There, the lender failed to establish that it met the condition precedent of providing the requisite notice when the borrower raised the issue as an affirmative defense; therefore, the lender was not entitled to summary judgment. Id. at 1285; see also Goncharuk v. HSBC Mortg. Servs., Inc., 62 So. 3d 680, 682 (Fla. 2d DCA 2011) (reversing summary judgment for plaintiff's failure to address in its motion for summary judgment and affidavits the affirmative defense of lack of notice); Lazuran v. Citimortgage, Inc., 35 So. 3d 189, 189-90 (Fla. 4th DCA 2010) (reversing summary judgment where the plaintiff failed to refute the affirmative defense of lack of notice). For this reason, summary judgment was premature. Therefore, we reverse the final judgment of foreclosure and remand for further proceedings.

Second District Reverses Foreclosure Judgment

In Feltus v. U.S. Bank National Association (2D10-3727), the Second District reversed a summary judgment of foreclosure "because material issues of fact as to which entity holding the promissory note executed by Feltus existed at the time the trial court entered summary judgment." The court described the facts (in part) as follows:

On August 24, 2009, U.S. Bank filed an unverified complaint seeking to reestablish a lost promissory note and to foreclose the mortgage on Feltus's home. U.S. Bank attached to the complaint a copy of the note and the mortgage, but both documents showed the lender to be Countrywide Bank, N.A.....Notably, these allegations did not include an allegation that Countrywide had assigned the note to U.S. Bank.....

After Feltus filed a motion to dismiss alleging that U.S. Bank had failed to establish that it owned or held the subject note, on November 16, 2009, U.S. Bank filed an affidavit of indebtedness executed by Kathy Repka, an assistant secretary of BAC Home Loan Servicing, L.P., f/k/a Countrywide Home Loan Servicing, L.P. Repka asserted that her affidavit was based on the loan payment records of the servicing agent and her familiarity with those records.....Then on November 18, 2009, U.S. Bank filed another copy of the note as a supplemental exhibit to its complaint. In contrast to the copy attached to the complaint that contained no endorsements, this copy contained two endorsements that were side by side on the last page—the first stated "PAY TO THE ORDER OF: COUNTRYWIDE HOME LOANS, INC. WITHOUT RECOURSE COUNTRYWIDE BANK, N.A." and the second stated "PAY TO THE ORDER OF: __________ WITHOUT RECOURSE COUNTRYWIDE HOME LOANS, INC."....on June 4, 2010, the Bank filed a reply to Feltus's affirmative defenses in which it asserted that it is now in possession of the original note, which it attached and which is the same note it filed on November 18, 2009.

With regard to the legal issues, the Court stated:

We view U.S. Bank's filing of a copy of the note that it later asserted was the original note as a supplemental exhibit to its complaint to reestablish a lost note as an attempt to amend its complaint in violation of Florida Rule of Civil Procedure 1.190(a). U.S. Bank did not seek leave of court or the consent of Feltus to amend its complaint. A pleading filed in violation of rule 1.190(a) is a nullity, and the controversy should be determined based on the properly filed pleadings.

As to the main issue:

The properly filed pleadings before the court when it heard the Bank's motion for summary judgment were a complaint seeking to reestablish a lost note, Feltus's answer and affirmative defenses alleging that the note attached to the complaint contradicts the allegation of the complaint that U.S. Bank is the owner of the note, a motion for summary judgment alleging a lost note of which U.S. Bank is the owner, an affidavit of indebtedness alleging that U.S. Bank was the owner and holder of the note described in the complaint, and U.S. Bank's reply to Feltus's affirmative defenses asserting that it was now in possession of the original note, which it attached to the reply. But the note attached to the complaint showed the lender to be Countrywide Bank, N.A. And the complaint failed to allege that "[t]he person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred."

In addition, the affidavit of indebtedness revealed no basis for the affiant's assertion that U.S. Bank owns and holds the note. The affiant is an assistant secretary for the alleged servicing agent of the Bank, and she asserted that she had personal knowledge of the loan based on the loan payment records. She did not assert any personal knowledge of how U.S. Bank would have come to own or hold the note.

Judge Casanueva wrote a concurring opinion and stated:

....Because the affiant's competency was based only on her review of the loan payment records, she was not competent to aver as to actions of the Bank in accelerating the loan or hiring counsel, and her averments are hearsay and inadmissible at trial. The Bank could have easily established the facts of acceleration of the note and hiring of counsel with affidavits from the Bank's official in charge of foreclosing this loan and/or the Bank's counsel to establish the fact of hiring and of the fee arrangement. Such bank official or counsel would have direct personal knowledge, would be competent, and would have presented evidence admissible at trial. The affidavit the Bank submitted fell woefully short of these requirements and could not aid the Bank in any way to support its motion for summary judgment of foreclosure.

Information Learned As Counsel For Adversary In Case Precluded Adverse Representation In Different Case

In Frye v. Ironstone Bank (2D11-905), the Second District granted certiorari and held that the attorneys for the respondent were disqualified from representing the bank. The court's fourteen page opinion began:

Mr. Frye for an alleged breach of a loan guaranty. The question presented is whether the Bank's counsel should be disqualified from representing the Bank in the action on the guaranty where the Bank's counsel also represents Mr. Frye's former lawyer in a legal malpractice action. Mr. Frye's action for legal malpractice includes claims for matters directly related to his former lawyer's representation of Mr. Frye in the defense of the Bank's claims against him. Because the Bank's counsel has access to confidential communications between Mr. Frye and his former lawyer concerning the action on the guaranty by virtue of its representation of the former lawyer in the malpractice action, we conclude that the Bank's counsel is disqualified from representing the Bank in the action on the guaranty. Accordingly, we grant the petition for a writ of certiorari.

Ultimately, the court held that the circuit court departed from the essential requirements of the law by applying the test stated in Kaplan v. Divosta Homes, L.P., 20 So. 3d 459 (Fla. 2d DCA 2009). Instead of relying on Kaplan, the circuit court should have relied upon Adelman v. Adelman, 561 So. 2d 671 (Fla. 3d DCA 1990). The court summarized the problem with relying on Kaplan as follows:

Here, the circuit court applied the conflict of interest analysis in this court's decision in Kaplan to conclude that Mr. Frye had failed to meet the requirements for the disqualification of Henderson Franklin. The circuit court reasoned that because Mr. Frye was not a current or former client of Henderson Franklin, no irrefutable presumption arose that confidential information was disclosed between Mr. Frye and Henderson Franklin. The court also stated that Mr. Frye had failed to make an evidentiary showing that the Bank's action on the guaranty was the same or substantially the same as the legal malpractice matter in which Henderson Franklin is representing Mr. Frye's former counsel.

***

Unlike in Kaplan, Mr. Frye is not seeking to disqualify Henderson Franklin based upon a claimed conflict of interest. Thus Mr. Frye need not establish that he had an attorney-client relationship with Henderson Franklin and that the Bank's action on the guaranty and the legal malpractice claim are the same or are substantially related. Instead, Mr. Frye is seeking the disqualification of Henderson Franklin based on the unfair informational advantage it derives from its access to his confidential communications to Mr. Trupp through its representation of Mr. Trupp and the Arnstein firm in the legal malpractice action. Here, the conflict of interest analysis in Kaplan is not applicable.

Based upon the reliance on Kaplan, the court granted certiorari and stated:

By relying on the conflict of interest analysis in Kaplan, the circuit court applied the wrong legal rule to Mr. Frye's motion for disqualification. The circuit court's application of the wrong law in deciding Mr. Frye's motion to disqualify is a departure from the essential requirements of the law. Moreover, the Third District's analysis in Adelman is applicable here. The circuit court should have granted Mr. Frye's motion to disqualify Henderson Franklin under the reasoning in Adelman. Accordingly, we grant the petition for a writ of certiorari, quash the order under review, and remand this case for further proceedings.

The court also included a footnote stating:

In fairness to the circuit court, we note that neither Mr. Frye nor the Bank directed the circuit court's attention to the Adelman decision. However, Mr. Frye's argument for the disqualification of the Henderson Franklin firm was consistent with the reasoning in Adelman.

Summary Judgment Determining Deficiency Judgment Amount Reversed

In Southern Developers & Earthmoving, Inc. v. Caterpillar Financial Services Corporation [CAT] (2D09-6011 & 2D10-5669), the Second District reversed a summary final judgment "because CAT failed to prove the amount of the deficiency judgment to which it was entitled, summary judgment was improperly granted in its favor."

After CAT sold the foreclosed personal property, CAT "sought a deficiency judgment from Southern. In its answer, Southern specifically denied that the sale of the repossessed equipment had been done in a commercially reasonable manner, and it also raised this claim as an affirmative defense."

CAT subsequently filed a motion for summary judgment, in which it again asserted that it had sold the repossessed equipment in a commercially reasonable manner. In support of its motion, CAT filed the affidavit of a "Special Accounts Representative," who alleged that proper notice was given to Southern and Gill of both of the intended private sales and the subsequent Internet auction. The affidavit also authenticated the various sale notices that were sent to both Southern and Gill and alleged again that the sales were all commercially reasonable. However, neither the affidavit nor the motion provided any details of the sales transactions themselves. CAT did not file any of the contracts or purchase orders relating to the sales, and it submitted nothing to establish what amount it obtained for each piece of repossessed equipment. Further, neither CAT's motion nor its affidavit included any facts concerning the general practices and methodology of selling used equipment in the industrial earthmoving equipment industry.

The court discussed the legal issues as follows:

Under Article 9 of the Uniform Commercial Code, as codified in section 679.609(1), Florida Statutes (2006), a secured party, such as CAT, may take possession of collateral after a default by the debtor. The secured party then "may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing." § 679.610(1). However, if the secured party wishes to preserve its right to seek a deficiency judgment, the secured party is not at liberty to dispose of the repossessed collateral in any manner it wants. Instead, "[e]very aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable." § 679.610(2). This rule is in place " 'to protect the debtor, because [it] help[s] prevent the creditor from acquiring the collateral at less than its true value or unfairly understating its value so as to obtain an excessive deficiency judgment.' "....

If a secured party elects to repossess and resell its collateral, the debtor is liable for any deficiency remaining after the sale as a matter of law....However, the amount of the deficiency judgment to which the secured party is entitled is a matter of fact, not law. To establish entitlement to a deficiency judgment in a certain amount, the secured party must show that its disposition of the collateral was commercially reasonable but nevertheless resulted in the recovery of an amount less than the amount of the secured debt....Accordingly, if the debtor places the commercial reasonableness of the disposition of collateral "in issue," the secured party has the burden to establish that every aspect of that disposition was commercially reasonable....Alternatively, the secured party may concede that its disposition of the collateral was commercially unreasonable, introduce evidence to prove the fair market value of the collateral at the time of repossession, and allow the debtor an additional credit for the difference between the fair market value and the amount obtained by the secured party at the commercially unreasonable sale.

In this case, the court concluded that CAT conceded that the sale was not commercially reasonably at the summary judgment hearing. However, it did not give Southern notice that it would be making this concession nor did it establish the sale price was equal to the fair market value. Therefore, the judgment was reversed. Additionally, the trial court's order denying Southern leave to amend its answer was reversed. Finally, as the underlying judgment was reversed, the orer awarding attorneys fees was reversed.

"Knowledge and Belief" Is Insufficient For Consideration At Summary Judgment Hearing

In Ballinger v. Bay Gulf Credit Union (2D09-4561), the Second District reversed a final judgment based upon the contents of the verified complaint.  Interestingly, the court found "no error in two of the issues raised by" the appellant.  However, concluded that "we must reverse because the verified complaint was insufficiently pleaded and, therefore, final summary judgment was improvidently entered."

In "verified complaint, a Bay Gulf employee....stated that [she] read everything and that the facts stated were "true to the best of my knowledge and belief."  The court stated:

We acknowledge that "[a] verified complaint may serve the same purpose as an affidavit supporting or opposing a motion for summary judgment."...."However, in order to be so considered, the allegations of the verified complaint must meet the requirements of the rule governing supporting and opposing affidavits."....In this case, the verification reflects it was not based on Lenth's personal knowledge.  Bay Gulf asks this court to construe the verification as if it were based on Lenth's personal knowledge because the verification does not say it was based on Lenth's "information and belief" but, rather, states it was based on Lenth's "knowledge and belief."  However, we decline to impose such a construction because the fact that the verification included the word "belief" indicates it was not based on Lenth's personal knowledge.  And, in fact, it is apparent from the record that Lenth could not state she had personal knowledge of the loan documents in question.  The qualified verification here fails to meet the requirements of rule 1.510(e) and, therefore, should not have been considered by the trial court on a motion for summary judgment.  

Order Requiring Production Of Software Source Code Quashed

In Revello Medical Management, Inc. v. Med-Data Infotech USA, Inc. (2D10-534), the Second District granted a petition for certiorari and quashed a trial court order requiring the production of software source code.  The court described the facts as follows:

In simple terms, Med-Data claims that one of its former employees developed a software program to aid in medical insurance billing and that the employee took the program with him when he began working for Revello.  Revello is marketing a computer program that Med-Data claims is based on its trade secrets.  Med-Data sought to discover the computer source code used in Revello's program and, over Revello's objections that its program was a trade secret, the circuit court ordered it to produce the program to Med-Data's expert.  Revello seeks a writ of certiorari to quash the order.  

The court's analysis is copied, almost in its entirety, below:

In response to a defense discovery request for its computer source code, Med-Data stated: "[a]s to source codes, [Med-Data] declines to publish the exact nature of the trade secrets."  Under Florida's "at issue" doctrine, "[w]hen a party has filed a claim, based upon a matter ordinarily privileged, the proof of which will necessarily require that the privileged matter be offered in evidence," he waives his right to claim that the matter is privileged in pretrial discovery....Thus it is clear that Med-Data has neither identified with reasonable particularity the nature of its claimed trade secret nor established that it exists.  As such, it was not entitled to discover the computer source code used in Revello's program.

Still, Med-Data is entitled to some protection of its alleged trade secret in pretrial discovery.  Ordinarily such matters should be submitted to the circuit court to conduct an in-camera review.  But because the alleged trade secret is a computer program, the evidence of its existence likely will consist of computer source code.  We presume this from the fact that Med-Data is seeking to discover the computer source code of Revello's program in order to prove that Revello has misappropriated the alleged trade secret.  If the circuit judge does not have the requisite experience in examining such code, he may wish to appoint a neutral computer expert to review MedData's program.  If it is established that Med-Data indeed has a trade secret to protect, the court may revisit its discovery request for Revello's computer source code and Revello's objections to discovery and craft similar protection for Revello's alleged trade secret.

*Disclaimer: GrayRobinson, P.A. was involved in the above-referenced action.

Jury Verdict Affirmed, Oral Argument

In Monaco Beach Club v. Citizens Prop. Ins. Corp., 2D09-2083, 2010 WL 2520166 (Fla. 2d DCA June 18, 2010), the Second District affirmed a jury verdict. The decision was a PCA and I am only posting this  because I obtained the oral argument video:

The Answer Brief can be viewed HERE.  The Appendix to the Answer Brief can be viewed HERE.  If anyone has a copy of the Initial Brief and/or Reply Brief please send them to me.

Second District Certifies Question About Non-Ad Valorem Special Assessments

In West Villages Improvement District v. North Port Rd. & Drainage District (2D09-2221), the Second District granted certiorari and quashed the circuit court's order "which upheld non-ad valorem special assessments imposed by the North Port Road and Drainage District (NPRDD) upon real property owned by West Villages."  The Second District stated that the "circuit court departed from the essential requirements of law by failing to apply the principle espoused in Blake v. City of Tampa, 156 So. 97 (Fla. 1934), and therefore, we grant certiorari."

The appellant, West Villages "contends that pursuant to Blake, NPRDD could not lawfully impose the non-ad valorem assessments without statutory authority and that the circuit court therefore departed from the essential requirements of law by failing to apply Blake and grant certiorari relief to West Villages."  The Second District agreed.  Additionally, the court certified a question of great public importance to the Florida Supreme Court.  The court stated:

We also certify the following question as one of great public importance, pursuant to Florida Rule of Appellate Procedure 9.030(a)(2)(A)(v):

MAY A MUNICIPAL DEPENDENT SPECIAL DISTRICT, PURSUANT TO MUNICIPAL HOME RULE POWER, IMPOSE A NON-AD VALOREM SPECIAL ASSESSMENT UPON REAL PROPERTY OWNED BY A STATE GOVERNMENTAL ENTITY, IN THE ABSENCE OF EXPRESS OR NECESSARILY IMPLIED LEGISLATIVE AUTHORITY?

Standard For Successor Judge In Ruling on Motion for New Trial

In Sullivan v. Kanarek, M.D. (2D08-6242), the Second District reversed the trial court's order denying a motion for new trial.  After a trial, the defense moved to recuse a trial court judge based upon comments made after trial by the judge that the conduct of defense counsel caused her great concern about the fairness of the trial.  The motion was granted.  Eventually, a third successor judge denied a motion for new trial.  The Second District stated:

In this case, because of the particular credibility issues concerning defense counsel's courtroom behavior—much of which was alleged to be nonverbal and, by its nature, not reflected in the transcribed record—the successor judge was not in a position to fairly rule on the merits of the motion for new trial....In short, this case is precisely the "extraordinary case" we referred to in Cascio, 725 So. 2d at 1191, where "the successor judge may...grant a new trial on the ground that he cannot fairly rule upon the specific motion for new trial in light of particular credibility issues." Id. at 1193-94. While the issue in Cascio involved the manifest weight of the evidence, we believe that the alleged improper conduct of trial counsel is an analogous issue of credibility. It appears that the successor judge in this case felt constrained to rule on the merits of the motion for new trial, even though a granting of the motion without consideration of the merits would have been consistent with this court's holding in Cascio. The successor judge erred in not following his instincts and, instead, denying the motion for new trial. A new trial must be granted where, as here, defense counsel's tactics prevented the presiding trial judge, who witnessed the inappropriate behavior, from considering and ruling on whether the totality of his behavior deprived the parties of a fair trial.