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Fla. App. Court (3rd DCA) Holds Evidentiary Hearing Required to Set Redemption Amount

The Third District Court of Appeal, State of Florida, recently reversed and remanded a trial court’s order incorrectly setting the amount required to redeem a mortgage loan, and held that the trial court must conduct an evidentiary hearing to determine the amount needed to redeem the mortgage loan because the redemption amount was unliquidated.

A copy of the opinion in Wells Fargo Bank v. Sawh, et al. is available at: Link to Opinion.

A mortgagee sued to foreclose its mortgage in October 2013. The complaint alleged that the borrower owed “principal in the amount of $3,331,190.81 … as well as … interest, taxes, insurance, escrow advances, the cost of inspections and property preservation, and … expenses, including attorney’s fees ….”

Five months later, the property owner filed a motion for summary judgment, which argued that the mortgagee lacked standing. The property owner also filed a motion that “asked the trial court to determine the amount that had to be paid to redeem the mortgage.”

The property owner’s counsel scheduled the motion to redeem for a five-minute non-evidentiary hearing less than two weeks later. The trial court ordered that the owner needed to “pay $3,347,233.21 — only $16,042.40 more than the principal amount alleged in the complaint — to redeem the mortgage.”

The trial court then entered an order approving an agreement between the property owner and another party with an interest in the property who was named in the foreclosure complaint. The next day, the property owner paid the amount provided in the redemption order and conveyed the property to a third party.

The mortgagee then moved for reconsideration of the redemption order, arguing that the amount due to redeem was unliquidated and that an evidentiary hearing with adequate notice was required to determine the amount.  Attached to the motion was an affidavit stating “that the redemption amount was $4,624,169.03, or $1,276,935.82 more than the amount set by the trial court….”

The trial court denied the mortgagee’s motion for reconsideration or alternatively to vacate the redemption order, “finding that the motion was untimely; that [the mortgagee] failed to demonstrate excusable neglect; that [it] failed to comply with rule 1.530; that damages were liquidated; that [the mortgagee] did not appeal because damages were liquidated; and that section 45.0315 [of the Florida Statutes] does not require a trial to redeem a mortgage.”

The trial court then dismissed the foreclosure action.  The mortgagee appealed the trial court’s order denying reconsideration, and the order dismissing the foreclosure.

On appeal, the Third District first explained that “questions of law arising from undisputed facts are reviewed de novo” and that “[w]hether damages alleged are liquidated or unliquidated is a question of law subject to de novo review.” Applying that standard, it found that “both the notice and the evidence presented below were insufficient as a matter of law to support the redemption order on appeal.”

The Appellate Court, relying on a 2015 decision from the Fifth District Court of Appeal, found that “while specific damages alleged in a complaint may be considered in some circumstances as liquidated, where, as here, the specific sum stated is claimed to be the amount due ‘to date’ or the minimum amount due or even the amount due exclusive of interest, attorney’s fees, and costs, the amount alleged is not liquidated.”

The Appellate Court then explained that “[i]t is well established that where damages are unliquidated, due process requires meaningful notice of a trial or hearing at which evidence will be adduced to determine the amount due…” and concluded that the 12-days’ notice of a non-evidentiary hearing on the trial court’s motion calendar “was legally insufficient and in our view entitles [the mortgagee] to a reversal of the redemption order.”

The Third District described as “baseless” the former owner’s argument that there was no need for an evidentiary hearing, because the former owner did not dispute the amount alleged in the complaint and this same amount was repeated in the mortgagee’s unsworn estimate of the claim’s value under section 28.241, Florida Statutes, which requires an estimate of the amount to determine the amount of the filing fee on a sliding scale in mortgage foreclosure actions.

The Appellate Court reasoned that section 45.0315, Florida Statutes, which governs the right of redemption, expressly requires payment of “any amounts due because of the exercise of a right to accelerate, plus the reasonable expenses of proceeding to foreclosure incurred to the time of tender, including reasonable attorney’s fees of the creditor.”

Moreover, the Third District also held that the filing fee statute, section 28.241, did not cure the lack of evidence presented as to these amounts. Neither the mortgagee’s section 28.241 estimate of the value of its claim “nor the verified complaint, whether considered alone or together, constitute evidence of, or otherwise establish, the total amount that [the former owner] was obligated to pay to redeem as expressly required by section 45.0315.”

The Appellate Court concluded that “the amounts due to [the mortgagee] under section 45.0315 were not liquidated when the motion to redeem was filed, at the time that motion was heard, or at any subsequent time.” Because of this fact, “the burden fell on [the former owner] as the moving party to set or to have set an evidentiary hearing on its motion to redeem and to adduce evidence or spread a stipulation on the record to prove the amounts that it was obligated to pay under section 45.0315 to redeem. Otherwise, and as section 45.0315 expressly states, ‘there [wa]s no right of redemption.’”

Accordingly, the final order dismissing the foreclosure action was reversed, the redemption order vacated, and the case remanded for an evidentiary hearing to determine the amount needed to redeem the mortgage. The Third District also ordered the mortgagee to return any sums paid under the trial court’s erroneous redemption order to the former owner.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.