2-32 florida real estate transactions _ 32.80

2-32 Florida Real Estate Transactions 32.80Florida Real Estate Transactions > PART V FINANCING, LIENS AND TAXES > CHAPTER 32 REALPROPERTY SECURED TRANSACTIONS > PART I. LEGAL BACKGROUND > F. Remedies onDefault

32.80 Foreclosure

[1] Overview

In Florida, foreclosure is the method whereby the mortgaged property is sold under a court order [see 32.80[2][b] below (judicial sale)]. The proceeds are then applied to the payment of the mortgagedebt. The primary purpose of foreclosure is to subject the mortgaged property to the payment of thedebt [Bobby Jones Garden Apartments, Inc. v. Connecticut Mut. Life Ins. Co., 202 So. 2d 226 (Fla.DCA 2d 1967); see 702.01, Fla. Stat.].

In accordance with the terms in the mortgage and the note, the obligation of the mortgagor to pay andthe right of the mortgagee to foreclose is absolute. The right does not hinge on the personalcircumstances impacting on the mortgagors ability to pay [First Wisconsin Nat. Bank of Milwaukeev. Roose, 348 So. 2d 610 (Fla. DCA 4th 1977)]. For example, a bank had the right to foreclose on amortgage securing the mortgagors home equity line of credit because the mortgagors defaulted underthe terms and conditions of the note and mortgage by failing to make payments when due. The fact thatthe mortgagors were in the midst of a dissolution proceeding and had each attempted to close the creditaccount did not justify the trial courts finding that there had been a novation of the equity line of creditagreement. Instead, the district court noted that the mortgagors had consumed the full amount of theline of credit secured by the mortgage and held that the bank was entitled to a judgment of foreclosure[see Carteret Sav. Bank, F.A. v. Weiner, 601 So. 2d 1310 (Fla. 4th DCA 1992)]. The mortgagorsdefault in payments gives rise to the mortgagees claim to foreclosure [see, e.g., First Wisconsin Nat.Bank of Milwaukee v. Roose, 348 So. 2d 610 (Fla. DCA 4th 1977)].

The remedy of foreclosure assumes the existence of a mortgage. Foreclosure was not available for acreditor under a recorded instrument acknowledging a debt and evidencing the parties agreement thatthe debt would be payable upon the sale of specifically described property. The court held that theinstrument was not a mortgage that could be foreclosed when the subject property was conveyed to athird party. The instrument was more in the nature of an assignment of proceeds from the sale of thedescribed property. Nothing in the terms of the instrument indicated that the property could be subjectto foreclosure. The instrument merely established the due date of the debt and provided the funds toapply toward the debt. The court found that, although there was evidence that the parties intended thatthe instrument secure the debt, there was no evidence that they intended that the real estate, as opposedto the proceeds from the sale of the real estate, secure the debt [see Secretary of Vet. Affairs v. RomaFood Enters., 840 So. 2d 1066 (Fla. 5th DCA 2003)].

As a general rule in the event of default, a mortgagor is permitted to pursue both an action on the noteand an action to foreclose the mortgage. The remedies are not inconsistent and are each available to

satisfy the underlying obligation evidenced by the note [Mellor v. Goldberg, 658 So. 2d 1162, 1163(Fla. 2d DCA 1995)]. However, the parties may provide in the note and mortgage that, in the event ofdefault, the mortgagor will not be personally liable on the note and that the mortgagees only remedyis foreclosure with no deficiency judgment. Such a provision should be carefully drafted, however, toavoid any latent ambiguity that could result in later dispute over the parties original intent [see, e.g.,Mellor v. Goldberg, 658 So. 2d 1162, 1163 (Fla. 2d DCA 1995)]. Similarly, a suit on a guaranty anda foreclosure action are not inconsistent remedies, and therefore pursuit of either without satisfactionis not a bar to the pursuit of the other [Fort Plantation Invs., LLC v. Ironstone Bank, FSB, 85 So. 3d1169, 1170 (Fla. 5th DCA 2012); Gottschamer v. August, Thompson, Sherr, Clark & Shafer, P.C., 438So. 2d 408, 409 (Fla. 2d DCA 1983)]. Thus, when a mortgage holder did not receive completesatisfaction in a foreclosure action, it was entitled to demand the remaining indebtedness from theguarantor of the original note [see LPP Mortg. Ltd. v. Cacciamani, 924 So. 2d 930, 931 (Fla. 3d DCA2006)]. When there is a money judgment entered against a guarantor prior to a foreclosure sale, theguarantor should be allowed to demonstrate that the foreclosure sale reimbursed the mortgagee to theextent that the sale would render enforcement of the guaranty inequitable, either in whole or in part[Mullins v. Sunshine State Serv. Corp., 540 So. 2d 222, 224 (Fla. 5th DCA 1989)].

When mortgaged property sustains an insured loss before foreclosure, the mortgagee is the ownerscreditor at the time of loss and has an election as to how to satisfy the secured debt. He or she mayeither (1) turn to the insurance company for payment as mortgagee and recover the mortgage debt upto the policy limits, or (2) foreclose on the property. If the mortgagee elects to pursue the insurancecompany for payment of the debt, then the debt is fully satisfied and the mortgagee does not have anyadditional recourse against the mortgagor. If the mortgagee elects to foreclose and the foreclosure saledoes not bring the full amount of the mortgage debt, then the mortgagee may recover the deficiencyunder the insurance policy as owner [Lenart v. OCWEN Financial Corp., 869 So. 2d 588, 591 (Fla.3d DCA 2004)].

A mortgagor may successfully contend that its default was waived by the mortgagee. Waiver of adefault requires action by the mortgagee that misleads the mortgagor so that the mortgagor acts in away that it would not have acted if the mortgagor had known that the mortgagee would requireperformance under the strict terms of the mortgage agreement [Flagler Center Bldg. Loan v. ChemicalRealty, 363 So. 2d 344, 347 (Fla. 3d DCA 1978)]. A mortgagor may also have valid equitable defensesto a foreclosure action [see David v. Sun Federal Sav. & Loan Assn, 461 So. 2d 93, 96 (Fla. 1984)].For example, when a mortgagors residence was severely damaged by hurricane, the mortgagorsalleged in defense to foreclosure that the mortgagees (1) defrauded the trial court at an ex parte hearingwhere one of the mortgagees was appointed receiver of the property, (2) interfered with constructioncontracts to restore the property, and (3) misused insurance proceeds. In reversing summary judgmentfor the mortgagee, the appellate court noted that the allegations were supported by competent evidenceon the record and that, taken as true, they could provide the mortgagors with valid equitable defensesto the foreclosure action [Lamb v. Pike, 659 So. 2d 1385 (Fla. 3d DCA 1995); see Star Lakes EstatesAssn v. Auerbach, 656 So. 2d 271, (Fla. 3d DCA 1995)]. Unclean hands also may be asserted as anequitable defense to foreclosure [Quality Roof Servs. v. Intervest Nat. Bank, 21 So. 3d 883, 885 (Fla.4th DCA 2009); Lamb v. Pike, 659 So. 2d 1385, 1387 (Fla. 3d DCA 1995)]; provided the conductconstituting the unclean hands is connected to the matter being litigated [Marin v. Seven of Five Ltd.,921 So. 2d 699, 700 (Fla. 4th DCA 2006)].

2-32 Florida Real Estate Transactions 32.80

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[2] Procedure

[a] Foreclosure Action

[i] In General.

In Florida, all mortgages must be foreclosed in equity [ 702.01, Fla. Stat.; see Blatchley v.Boatmans Nat. Mortg., Inc., 706 So. 2d 317 (Fla. 5th DCA 1997)]. If tried, the foreclosure claimmust be tried without a jury [ 702.01, Fla. Stat.]. However, in its discretion, a court may, forequitable reasons, refuse to grant prayer for a foreclosure [Creamer v. Aultman, 445 So. 2d 382(Fla. 1st DCA 1980)]. Because a mortgage foreclosure is an equitable proceeding, the court ispermitted to reform instruments to reflect the parties true intent [Huntington Nat. Bank v.Merrill Lynch, 779 So. 2d 396, 398 (Fla. 2d DCA 2000); but see Taylor v. First Nat. Bank ofChicago, 908 So. 2d 565, 566567 (Fla. 4th DCA 2005) (courts restructuring of mortgageobligation that was not requested in pleadings or agreed to by parties was improper modificationof parties contractual agreement)].

As foreclosure is an equitable action, equitable defenses are appropriate [see Cross v. FederalNat. Mortg. Assn App., 359 So. 2d 464 (1978); Howdeshell v. First Nat. Bank of Clearwater,369 So. 2d 432 (1979); see also Consortion Trading Intern. v. Lowrance, 682 So. 2d 221 (Fla.3d DCA 1996) (summary judgment reversed when defendants properly pled affirmativedefenses sounding in waiver, estoppel, and bad faith)]. Fraud can be a valid defense in aforeclosure action [Lake Regis Hotel Co. v. Gollick, 110 Fla. 324, 149 So. 204 (1933)(misrepresentation of amount of acreage); Norris v. Paps, 615 So. 2d 735, 737 (Fla. 2d DCA1993)]. Fraud may also be raised as a counterclaim. In some, if not all, cases, fraud in theinducement of a mortgage is a compulsory counterclaim to an action to foreclose the mortgage[Norris v. Paps, 615 So. 2d 735, 737 (Fla. 2d DCA 1993); Yost v. American Nat. Bank, 570 So.2d 350, 353 (Fla. 1st DCA 1990)].A foreclosure action is a local action and must be brought in the county in which the propertyis located [Georgia Cas. Co. v. ODonnell, 109 Fla. 290, 292, 147 So. 267, 268 (1933); Hudlettv. Sanderson, 715 So. 2d 1050, 1052 (Fla. 4th DCA 1998)]. If mortgaged property lies in morethan one county, however, a foreclosure action may be brought in any one of them [ 702.04,Fla. Stat.; see Frym v. Flagship Cmty Bank, 96 So. 3d 452, 453 (Fla. 3d DCA 2012); Penton v.Intercredit Bank, N.A., 943 So. 2d 863, 864 (Fla. 3d DCA 2006) ( 702.04, Fla. Stat. applies toboth contiguous and non-contiguous properties lying in more than one county)].It is axiomatic that foreclosure depends on a debt being owed pursuant to a secured note. In anunusual case, a single promissory note was secured by two mortgages on separate properties.After the debtors default on the note, the mortgagee foreclosed on one of the properties, seekingto recover half of the amount due under the note. A judgment of foreclosure was entered, andthe mortgagee purchased the property at public sale. Later, the mortgagee filed a foreclosureaction on the second property seeking the other half of the amount due under the note. Indefense, the mortgagor asserted that no deficiency had been sought in the first proceeding andclaimed that the value of the property sold in the first foreclosure proceeding exceeded the totalamount due under the note. The trial court granted partial summary judgment for the mortgagee.


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In its judgment, the court acknowledged that a genuine issue of material fact existed as to thevalue of the property sold in the first proceeding. Nonetheless, the court found that themortgagor remained liable to the mortgagee under the mortgage sought to be foreclosed in thesecond proceeding, but the only issue to be determined was the amount of that liability. TheDistrict Court of Appeal noted the inconsistency between the trial courts acknowledgment ofa genuine issue of fact as to the value of the first property foreclosed and the finding that themortgagor remained liable on the note. The court concluded that the trial judge must have foundthat the value of the first property was less than the amount secured by the mortgage at the timeof the foreclosure sale. The appellate court, observing that absolutely nothing in the recordjustifies this finding, reversed the partial summary judgment and remanded for furtherproceedings to determine the value of the property sold in the first proceeding [see Robaina v.Benn, 632 So. 2d 91, 9293 (Fla. 5th DCA 1994)].

A mortgagees right to foreclose on the security for a mortgage depends on its compliance withthe terms of the mortgage contract, and it cannot foreclose until it has proven compliance[DiSalvo v. Suntrust Mortg., Inc., 115 So. 3d 438, 439 (Fla. 2d DCA 2013); see F.A. ChastainConstr., Inc. v. Pratt, 146 So. 2d 910, 913 (Fla. 3d DCA 1962)]. For example, when the termsof the mortgage contract required the lender to give a default notice to the borrower beforeaccelerating the loan, the mortgagee failed to prove that it complied with this requirement whenit submitted an unauthenticated copy of a default notice. The submitted notice did not constituteadmissible evidence on which to base a grant of summary judgment for the mortgagee [seeDiSalvo v. Suntrust Mortg., Inc., 115 So. 3d 438 (Fla. 2d DCA 2013)]. When a mortgagorasserted an affirmative defense that the bank failed to comply with notice of default and rightto cure provisions of the promissory note, the banks offer of a letter attached to its initialcomplaint notifying the mortgagor that all sums due has already been accelerated did notindicate that the mortgagor had been provided with the requisite notice or been informed of theright to cure the default. Thus, the letter did not show that the bank had complied with the termsof its agreement with the mortgagor; nor did it refute the mortgagors affirmative defense andother denials of the banks factual allegations [Harper v. HSBC Bank USA, 148 So. 3d 1285,1287 (Fla. 1st DCA 2014)].

The rights of a senior lienor are not affected by foreclosure of a junior lien; thus the senior lienoris not a proper party to the junior lienors foreclosure action. In Wells Fargo Bank v. Rutledge,Wells Fargo sought foreclosure of a note and mortgage against the mortgagors home. While thataction was pending in circuit court, a homeowners association filed a second foreclosure actionin county court to foreclose a lien on the same property. Wells Fargo was named as a defendantand junior lienholder in the second action, but did not participate and a default was enteredagainst it in the county court. The homeowners association obtained summary judgment and theproperty was sold at public auction to Rutledge. Rutledge filed a certificate of title and joinedthe circuit court foreclosure case as a party. Thereafter, the circuit court granted summaryjudgment for Rutledge, finding that, although Wells Fargo was improperly joined as a party tothe homeowners associations foreclosure proceeding, the bank had slept on its rights by notparticipating in the county court case and was barred by laches and equitable estoppel fromasserting its rights in the circuit court case. The county court granted Wells Fargos subsequentmotion to vacate the county court foreclosure judgment, holding that the banks mortgage


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interest was superior to that of the homeowners association and that thus, the bank was not aproper party and not required to litigate its interest in the associations foreclosure action. Onappeal, the district court found that, as the superior lien holder, Wells Fargo was not a propertyparty to the associations action and, because the bank was not required to participate in thecounty court foreclosure action, its failure to participate could not form the basis of a lachesargument [Wells Fargo Bank N.A. v. Rutledge, 148 So. 3d 533, 534535 (Fla. 2d DCA 1024)citing Citimortgage v. Henry, 24 So. 3d 641, 643 (Fla. 2d DCA 2009); see U.S. Bank Natl Assnv. Bevans, 138 So. 3d 1185, 1187 (Fla. 3d DCA 2014); Garcia v. Stewart, 906 So. 2d 1117, 1120(Fla. 4th DCA 2005)].

Because foreclosure is an equitable action, a judgment creditor who cross-claims in amortgagees foreclosure action must allege that it has exhausted its legal remedies, such asexecution or attachment, in order to invoke the courts powers in equity. Failure to do sodeprives the court of jurisdiction [Decubellis v. Ritchotte, 730 So. 2d 723, 724725 (Fla. 5thDCA 1999)].

When a second and separate action for foreclosure is sought for a default that involves a separateperiod of default from the one alleged in the first action, the case is not necessarily barred byres judicata, regardless of whether or not the mortgagee sought to accelerate payments on thenote in the first suit. This seeming variance from the traditional law of res judicata rests on arecognition of the unique nature of the mortgage obligation and the continuing obligations of theparties in that relationship. If res judicata prevented a mortgagee from acting on a subsequentdefault even after an earlier claimed default could not be established, the mortgagor would haveno incentive to make future timely payments on the note. The adjudication of the earlier defaultwould essentially insulate him or her from future foreclosure actions merely because he or sheprevailed in the first action. The ends of justice require that the doctrine of res judicata not beapplied so strictly so as to prevent mortgagees from being able to challenge multiple defaults ona mortgage [Singleton v. Greymar Associates, 882 So. 2d 1004, 10061008 (Fla. 2004)disapproving Stadler v. Cherry Hill Developers, Inc., 150 So. 2d 468 (Fla. 2d DCA 1963)].

If a foreclosure involves a high-cost loan and is therefore governed by the Florida Fair LendingAct, the mortgagee must, prior to proceeding with foreclosure, notify the mortgagor of his or herright under the Act to reinstate the loan [see 494.00794, Fla. Stat.; see also 32A.44 [1] [a],below].

A crucial element in any mortgage foreclosure proceeding is that the party seeking foreclosuremust demonstrate that it has standing to foreclose [American Home Mortgage Servicing, Inc. v.Bednarek, 132 So. 3d 1222, 1223 (Fla. 2d DCA 2014) citing McLean v. JP Morgan Chase BankN.A., 79 So. 3d 170, 172 (Fla. 4th DCA 2012); see Verizzo v. Bank of N.Y., 28 So. 3d 976, 978(Fla. 2d DCA 2010)]. To establish standing, the party seeking foreclosure must present evidencethat it owns and holds the note and mortgage [Richards v. HSBC United States, 91 So. 3d 233,234 (Fla. 5th DCA 2012); Servedio v. US Bank Natl Assn, 46 So. 3d 1105 (Fla. 4th DCA 2010);see Khan v. Bank of Am., N.A., 58 So. 3d 927, 928 (Fla. 5th DCA 2011); BAC FundingConsortium, Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 938 (Fla. 2d DCA 2010)]. Ifthe note does not name the plaintiff as the payee, the note must bear an endorsement in favor


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of the plaintiff or a blank endorsement. Alternatively, the plaintiff may submit evidence of anassignment from the payee to the plaintiff or an affidavit of ownership to prove its status as aholder of the note [Lyttle v. Bankunited, 115 So. 3d 425, 426 (Fla. 5th DCA 2013) citingRichards v. HSBC United States, 91 So. 3d 233, 234 (Fla. 5th DCA 2012); see Richards v. HSBCBank USA Gee v. U.S. Bank Natl Assn, 72 So. 3d 211, 213 (Fla. 5th DCA 2011)].

Because a promissory note is a negotiable instrument and because a mortgage provides thesecurity for repayment of the note, the person having standing to foreclose a note secured by amortgage may be either the holder of the note or a nonholder in possession of the note who hasa holders rights [Taylor v. Deutsche Bank Natl Trust Co., 44 So. 3d 618, 622 (Fla. 5th DCA2010); see Pennington v. Ocwen Loan Servicing LLC, 151 So. 3d 52, 53 (Fla. 1st DCA 2014);Wells Fargo Bank, N.A. v. Morcom, 125 So. 3d 320, 321322 (Fla. 5th DCA 2013); AmericanHome Mortgage Servicing, Inc. v. Bednarek, 132 So. 3d 1222, 1223 (Fla. 2d DCA 2014); Stonev. BankUnited, 115 So. 3d 411, 413 (Fla. 2d DCA 2013); Mazine v. M&I Bank, 67 So. 3d 1129,1131 (Fla. 1st DCA 2011); see also 673.3011, Fla. Stat.]. A plaintiff alleging standing as aholder must prove it is a holder of the note and mortgage both as of the time of trial and alsothat the (original) plaintiff had standing as of the time the foreclosure complaint was filed[Kiefert v. Nationstar Mortgage LLC, 153 So. 3d 351, ___, 2014 Fla. App. LEXIS 20315 (Fla.1st DCA 2014); Rigby v. Wells Fargo Bank N.A., 84 So. 3d 1195, 1196 (Fla. 4th DCA 2012)].Such a plaintiff must prove not only physical possession of the original note but also, if theplaintiff is not the named payee, possession of the original note endorsed in favor of the plaintiffor in blank (which makes it bearer paper) [Kiefert v. Nationstar Mortgage LLC, 153 So. 3d 351,___, 2014 Fla. App. LEXIS 20315 (Fla. 1st DCA 2014); see Focht v. Wells Fargo Bank N.A., 124So. 3d 308, 310311 (Fla. 2d DCA 2013); Green v. JPMorgan Chase Bank N.A., 109 So. 3d1285, 1288 (Fla. 5th DCA 2013)]. If the foreclosure plaintiff is not the original named payee,the plaintiff must establish that the note was endorsed (either in favor of the original payee orin blank) before the complaint was filed in order to prove standing as a holder [see Ryan v. WellsFargo Bank N.A., 142 So. 3d 974, 975 (Fla. 4th DCA 2014); Focht v. Wells Fargo Bank N.A.,124 So. 3d 308, 310311 (Fla. 2d DCA 2013)].

Attaching a copy of a note and an undated allonge to the note containing an endorsement inblank, has been held sufficient to establish as a matter of law that a bank had standing to bringa foreclosure action [see Clay County Land Trust etc. v. JP Morgan Chase Bank, 152 So. 3d 83,___, 2014 Fla. App. LEXIS 19070 (Fla. 1st DCA 2014); see also Wells Fargo Bank N.A. v.Morcom, 125 So. 3d 320, 322 (Fla. 5th DCA 2013); U.S. Bank Natl Assn v. Knight, 90 So. 3d824 (Fla. 4th DCA 2012)]. When a lender alleged in its unverified complaint to foreclose amortgage that it was the holder of the note and mortgage, but the copy of the note attached tothe complaint contradicted that allegation, the lender lacked standing to bring the action as amatter of law [see Khan v. Bank of America, N.A., 58 So. 3d 927, 928 (Fla. 5th DCA 2011)]. Abank lacked standing to maintain a foreclosure action when the bank failed to establish that itwas the holder of the note and the mortgage. The name shown as the holder on both the noteand the mortgage differed from the name of the bank that brought the action, and a witness forthe bank testified that the two names, while very similar, referred to two different entities [seeMazine v. M&I Bank, 67 So. 3d 1129, 1131 (Fla. 1st DCA 2011)]. An alleged assignee of amortgage note had standing to maintain a foreclosure action as holder of the note regardless of


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any recorded assignments when the note was indorsed in blank, and the assignee was inpossession of the original note, which it had deposited with the circuit court [Harvey v. DeutscheBank Natl Trust Co., 69 So. 3d 300, 304 (Fla. 4th DCA 2011)].While it is clear that the best evidence rule requires the plaintiff to be the holder of the originalnote as it is a negotiable instrument [Deutsche Bank Natl Trust Co. v. Clarke, 87 So. 3d 58,6061 (Fla. 4th DCA 2012) citing Ehrhardt, Florida Evidence 953.1 (2011 ed.); see Bennettv. Deutsche Bank Natl Trust Co., 124 So. 3d 320, ___ (Fla. 4th DCA 2013); Riggs v. AuroraLoan Servs., LLC, 36 So. 3d 932, 933 (Fla. 4th DCA 2010) (endorsement on note wasself-authenticating pursuant to 90.902(8), Fla. Stat.); see also 90.953(1), Fla. Stat.], if theplaintiff does not hold the original mortgage, a duplicate of the mortgage is sufficient to conferstanding. Unlike the note, the mortgage is neither a negotiable instrument, a security, or anyother writing that evidences a right to the payment of money; thus, in the absence of the originalmortgage, a duplicate mortgage will satisfy the best evidence rule [Deutsche Bank Natl TrustCo. v. Clarke, 87 So. 3d 58, 6063 (Fla. 4th DCA 2012) citing Perry v. Fairbanks Capital Corp.,888 So. 2d 725, 726727 (Fla. 5th DCA 2004) and distinguishing Fair v. Kaufman, 647 So. 2d167, 168 (Fla. 2d DCA 1994)]. One court found that, because the plaintiff is the owner andholder of the note for which the mortgage is the security, it is not necessary that the mortgage,itself, be transferred prior to the initiation of the foreclosure suit. The court held that to havestanding, an owner or holder of a note, indorsed in blank, need only show that he or shepossessed the note at the institution of a foreclosure suit; the mortgage necessarily and equitablyfollows the note [U.S. Bank Natl Assn v. Knight, 90 So. 3d 824, 826 (Fla. 4th DCA 2012)].

In Wells Fargo Bank, N.A. v. Bohatka, Wells Fargo filed suit to foreclose the mortgage onproperty owned by Bohatka. In its initial complaint, the bank alleged that it was the owner andholder of the promissory note and mortgage encumbering the subject property. However, thecopy of the note and the copy of the mortgage attached to the complaint both identified OptionOne Mortgage as the lender. Bohatka moved to dismiss the complaint asserting that the banklacked standing because of the inconsistency as to who was the true owner of the note. At thehearing on the motion to dismiss, counsel for Wells Fargo provided the court with a photocopyof an Allonge to Note, which specifically endorsed the note to Wells Fargo Bank, N.A., asTrustee. The bank argued that the allonge established its standing to pursue payment on thenote because the bank was specifically identified in it. The banks counsel explained that theoriginal allonge had been sent to the clerks office, which had not yet received it. Bohatkascounsel objected to consideration of the allonge because it was outside the record for purposesof a motion to dismiss and that he had no opportunity to rebut it on such short notice. Then thetrial judge undertook a physical examination of the original note and found no evidence that anallonge had ever been attached to the note. The complaint was dismissed with prejudice basedon the courts opinion that the initial complaint could not be amended to state a claim for whichthe bank had standing [see Wells Fargo Bank, N.A. v. Bohatka, 112 So. 3d 596, 597600 (Fla.1st DCA 2013)]. On appeal, the First District held that dismissal with prejudice wasinappropriate; rather, the complaint should have been dismissed without prejudice in order toallow the bank to amend its complaint to address the discrepancy in ownership of the note andmortgage and to fortify its allegations and attachments with the allonge, among other thingssubsequently produced by the bank. Noting that [l]iberality in amendment to the banks initial


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complaint was plainly required [Wells Fargo Bank, N.A. v. Bohatka, 112 So. 3d 596, 601 (Fla.1st DCA 2013); see U.S. Bank Natl Assn v. Knight, 90 So. 3d 824, 826 (Fla. 4th DCA 2012);Deutsche Bank Natl Trust Co. v. Lippi, 78 So. 3d 81, 85 (Fla. 5th DCA 2012)], the district courtfound that the trial court had before it the documents upon which the bank would likely rely foran amended complaint. The court also found that the trial courts physical examination of theoriginal note, which resulted in the spontaneous adjudication of disputed facts based on thatexamination, was improper because it by-passed the ordinary means by which the authenticity,relevancy, and admissibility of documents is determined in accordance with the FloridaEvidence Code. Thus, the trial courts conclusion that no allonge could have existed and beenaffixed to the note before the banks complaint was filed was a misstep that is inconsistent withdue process [Wells Fargo Bank, N.A. v. Bohatka, 112 So. 3d 596, 601602 (Fla. 1st DCA2013)].

The plaintiff must prove that it had standing to foreclose at the time the complaint was filed[McLean v. JP Morgan Chase Bank N.A., 79 So. 3d 170, 172173 (Fla. 4th DCA 2012); seeAmerican Home Mortgage Servicing, Inc. v. Bednarek, 132 So. 3d 1222, 1223 (Fla. 2d DCA2014); Lindsey v. Wells Fargo Bank, N.A., 139 So. 3d 903, 906 (Fla. 1st DCA 2013); Gonzalezv. Deutsche Bank Natl Trust, 95 So. 3d 251, 253254 (Fla. 2d DCA 2012); Rigby v. Wells FargoBank, N.A., 84 So. 3d 1195, 1196 (Fla. 4th DCA 2012); Beaumont v. Bank of N.Y. Mellon, 81So. 3d 553, 555 (Fla. 5th DCA 2012); Country Place Cmty. Assn v. J.P. Morgan Mort.Acquisition Corp., 51 So. 3d 1176, 1179 (Fla. 2d DCA 2010)]. The plaintiffs lack of standingat the inception of the case is not a defect that may be cured by the acquisition of standing afterthe case is filed. Thus, he or she may not establish the right to maintain an action retroactivelyby acquiring standing after the action has been filed [Progressive Exp. Ins. Co. v. McGrath Cmty.Chiropractic, 913 So. 2d 1281, 12851286 (Fla. 2d DCA 2005); see Focht v. Wells Fargo Bank,N.A., 124 So. 3d 308, 311312 (Fla. 2d DCA 2013)]. A bank was unable to establish standingwhere the record showed that the mortgage was assigned to the bank three days after theforeclosure complaint was filed. While the original note contained an undated specialendorsement in the banks favor, the affidavit filed in support of summary judgment did not statewhen the endorsement to the bank was made. Additionally, the affidavit, which was dated afterthe suit was filed, did not specifically state when the bank became the owner of the note; nordid it indicate that the bank was the owner of the note before suit was filed [McLean v. JPMorgan Chase Bank N.A., 79 So. 3d 170, 173 (Fla. 4th DCA 2012); see Hall v. REO AssetAcquisitions, LLC, 84 So. 3d 388 (Fla. 4th DCA 2012)].

The owner of the fee simple title is an indispensable party to a foreclosure action; thus, ajudgment in an action to which the fee simple owner is not a party is void because the actionhad no effect on the legal title to the property [see English v. Bankers Trust Co. of California,895 So. 2d 1120, 1121 (Fla. 4th DCA 2005)].

Every complaint in a foreclosure proceeding, filed on or after July 1, 2013, that involvesresidential real property, including individual units of condominiums and cooperatives, designedprincipally for occupation by from one to four families, must contain affirmative allegationsexpressly made by the plaintiff that the plaintiff is the holder of the original note or must allegewith specificity the factual basis by which the plaintiff is a person entitled to enforce the note.


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If the plaintiff is not the holder of the note, the complaint must describe the plaintiffs authorityand identify the document that grants the plaintiff the authority to file the complaint on behalfof the note holder [ 702.015(2), Fla. Stat.; see Fla. Laws ch. 2013-137, 8]. The plaintiff mustfile either the original promissory note or certification that the plaintiff is in physical possessionof the original note, unless it is lost, destroyed, or stolen [ 702.015(3), Fla. Stat.]. If theplaintiff is in possession of the original note, he or she must file a certification with the courtwhen the complaint is filed, under penalty of perjury [ 702.015(4), Fla. Stat.]. If the plaintiffclaims that the note is lost, destroyed, or stolen, the complaint must include an affidavit thatdetails a clear chain of all assignments or endorsements of the promissory note, set forth factsshowing that the plaintiff is entitled to enforce the note, and include exhibits providingprotection to the plaintiff under the Uniform Commercial Code (UCC) [ 702.015(4), Fla. Stat.;see 673.3091, Fla. Stat. (enforcement of lost, destroyed, or stolen instruments under UCC)].These rules do not apply to foreclosure proceedings involving timeshare interests [ 702.015(7),Fla. Stat.].

Under the UCC, a person seeking to enforce a lost, destroyed, or stolen note must prove theterms of the note and his or her right to enforce it. The court may not enter judgment in favorof the person seeking enforcement unless it finds that the person required to pay the instrumentis adequately protected against loss that might occur by reason of a claim by another person toenforce the instrument. Adequate protection may be provided by any reasonable means[ 673.3091(2), Fla. Stat.; see Boumarate v. HSBC Bank USA, N.A., 109 So. 3d 1239, 1240 (Fla.5th DCA 2013); Correa v. U.S. Bank, N.A., 118 So. 3d 952, 954955 (Fla. 2d DCA 2013)]. Inconnection with a mortgage foreclosure, reasonable means of providing adequate protectionmay consist of [ 702.11(1), Fla. Stat.]:

A written indemnification agreement by a person reasonably believed sufficientlysolvent to honor the obligation;

A surety bond;

A letter of credit issued by a financial institution;

A deposit of cash collateral with the clerk of the court; or

Any other security that the court deems appropriate under the circumstances.

Any security given must be on terms and in amounts set by the court for a time period throughthe running of the statute of limitations for enforcing the underlying note. It must be conditionedto indemnify and hold harmless the maker of the note against any loss or damage that mightoccur due to a claim by another person to enforce the note [ 702.11(1), Fla. Stat.; see 702.11(2), Fla. Stat. (consequences for wrongfully claiming entitlement to enforce lost,destroyed, or stolen note)].

A corporate nominee that is the holder of a note secured by a mortgage has standing to bringa foreclosure action for the corporate beneficial owner of the note. Further, if the note is lost,the nominee should be permitted to demonstrate this fact and to reestablish the note[Mortgage Electronic Registration v. Azize, 965 So. 2d 151, 153154 (Fla. 2d DCA 2007); seeCooperativa De Seguros Multiples v. Cintron, 44 So. 3d 623 (Fla. 5th DCA 2010)]. In agreeing


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with the Second Districts decision in Azize, a Third District panel opined that, [t]o the extentthat courts have encountered difficulties with the question [of the standing of a nominee of abeneficial owner of a note to bring a foreclosure action] the problem arises from the difficultyof attempting to shoehorn a modern innovative instrument of commerce into nomenclature andlegal categories which stem essentially from the medieval English land law [citation omitted].Because, however, it is apparentand we so holdthat no substantive rights, obligations ordefenses are affected by the use of the [nominee] device, there is no reason why mere formshould overcome the salutary substance of permitting the use of this commercially effectivemeans of business. [Citation omitted] [Mortgage Electronic Registration v. Revoredo, 955 So.2d 33, 34 (Fla. 3d DCA 2007)].

One of the purposes of the Servicemembers Civil Relief Act [50 U.S.C. 501 et seq.] is toprovide the temporary suspension of judicial and administrative proceedings and transactionsthat may adversely affect the civil rights of servicemembers during their military service. Assuch, the Act allows a servicemember on military duty to move to stay a foreclosure proceedinginitiated against his or her property or to move to stay the execution of a judgment of foreclosureentered against him or her [see 50 U.S.C. 522, 524]. At any stage before final judgment ina foreclosure proceeding, a court may, on its own motion, and must, on the application by theservicemember, stay the proceeding not less than 90 days if the servicemember satisfies tworequirements. The servicemember must submit a letter or other communication setting forthfacts stating the manner in which current military duty requirements materially affect theservicemembers ability to appear and stating a date when the servicemember will be availableto appear [50 U.S.C. 522(b)(2)(A)]. The servicemember must also submit a letter or othercommunication from the servicemembers commanding officer stating that the servicememberscurrent military duty prevents appearance and that military leave is not authorized for theservicemember at the time of the letter [50 U.S.C. 522(b)(2)(B)]. The Act is to be liberallyconstrued in favor of servicemembers serving on active duty [Boone v. Lightner, 319 U.S. 561,575, 63 S. Ct. 1223, 87 L. Ed. 1587 (1943)]. Given that fact and the equitable nature offoreclosure proceedings, an active duty servicemember won a reversal of a final judgment offoreclosure in favor of a homeowners association for nonpayment of association fees despite thefacts that he did not submit the required letter or other communication from his commandingofficer. He did submit multiple letters, which among other things, informed the trial court of hisactive duty military status, advised the court regarding the Acts protections, and attached a copyof his military orders, which required him to be in Pennsylvania two weeks before the scheduledsummary judgment hearing [see Higgins v. Timber Springs Homeowners, 126 So. 3d 394 (Fla.5th DCA (2013)].

[ii] Statute of Limitations.

Generally, a foreclosure action must be filed within five years of the date of maturity of the notesecured by the mortgage [ 95.281(1)(a), Fla. Stat.]. While most courts describe 95.281(1)(a),Fla. Stat. as a statute of limitations (hence that terminology is employed here), some courts havepointed out that it is more properly labeled a statute of repose, which prescribes the enforceablelife of a mortgage lien. A statute of repose operates substantively to prevent a cause of actionfrom arising after its time limitation, whereas a statute of limitations operates procedurally to


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prevent the enforcement of a cause of action that has accrued [see American Bankers Life Assur.v. 2275 West, 905 So. 2d 189, 191192 (Fla. 3d DCA 2005) and Houck Corp. v. New River, Ltd.,Pasco, 900 So. 2d 601, 603 (Fla. 2d DCA 2005); see also Razak v. Marina Club of TampaHomeowners, 968 So. 2d 616, 618619 (Fla. 2d DCA 2007)].

The statute of limitations on a mortgage foreclosure action does not begin to run until the lastpayment is due unless the mortgage contains an acceleration clause [Monte v. Tipton, 612 So.2d 714, 716 (Fla. 2d DCA 1993); Conner v. Coggins, 349 So. 2d 780 (Fla. 1st DCA 1977)]. Inthe case of a mortgage secured by a balloon note, the period begins to run on the notes statedmaturation date [see also Razak v. Marina Club of Tampa Homeowners, 968 So. 2d 616,618619 (Fla. 2d DCA 2007)]. If the mortgage contains an acceleration clause, the statute oflimitations begins to run at the time the mortgagee exercises the right to accelerate [see Montev. Tipton, 612 So. 2d 714, 716 (Fla. 2d DCA 1993)].

If the final maturity of an obligation secured by a mortgage cannot be ascertained from therecord of it, a foreclosure action must be filed within 20 years of the maturity date of the notesecured by the mortgage [ 95.281(1)(b), Fla. Stat.]. The fact that a mortgage includes anadvance clause does not automatically extend the maturity date of the original note by this20-year period. In such a situation, the 20-year term prescribed by 95.281(1)(b) relates tofuture advances that are made after the execution of the mortgage, not to the initial promissorynote that was secured by the mortgage, and the statute creates the lien only for advances that areactually made [Razak v. Marina Club of Tampa Homeowners, 968 So. 2d 616, 619 (Fla. 2d DCA2007)].

If the maturity date of a note secured by a mortgage is extended as evidenced by a recordedextension agreement and the final maturity is ascertainable from the record, a foreclosure actionmust be filed within five years after the maturity date as determined by the extension[ 95.281(2)(a), Fla. Stat.]. As is the case with any instrument concerning real property, toentitle it to be recorded, the execution must be acknowledged by the party executing it, provedby a subscribing witness, or legalized or authenticated by a civil-law notary or notary public [see 695.03, Fla. Stat.; American Bankers Life Assur. v. 2275 West, 905 So. 2d 189, 192 (Fla. 3dDCA 2005); see also 27.03[2][a][i]]. If the notes maturity date is extended and the extensionagreement is recorded, but the final maturity date is not ascertainable from the record, aforeclosure action must be filed within 20 years after the maturity date specified in the extension[ 95.281(2)(b), Fla. Stat.]. An otherwise valid extension agreement that is not recorded will notoperate to extend the time within which a mortgagee may institute foreclosure proceedingsagainst an original mortgagors successor-in-interest with no actual notice of the extension[Zlinkoff v. Von Aldenbruck, 765 So. 2d 840, 842843 (Fla. 4th DCA 2000)].

Under certain circumstances, the doctrine of equitable estoppel or equitable tolling maypreclude the mortgagor from raising the statute of limitations as a defense to a foreclosureaction. Equitable tolling will be applied if the plaintiff has been misled or lulled into inactionand has in some extraordinary way been prevented from asserting his or her rights [AlachuaCounty v. Cheshire, 603 So. 2d 1334, 1337 (Fla. 1st DCA 1992)]. Thus, a mortgagor is estoppedfrom raising the statute of limitations if his or her conduct has induced the mortgagee to forbear


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suit within the applicable limitations period. For example, in one case, the mortgagee held amortgage on property that was acquired by the federal government through forfeitureproceedings. Government agents informed the mortgagee that he did not need to do anything toprotect his lien, and that he would be paid by the ultimate recipient of the property. Eventually,in order to expedite the settling of the lien, the mortgagee filed an action to foreclose hismortgage after the statute of limitations had run. In the interim, the federal government executeda quitclaim deed for the parcel to Alachua County. Alachua County defended against theforeclosure action on the ground that the statute of limitations had run. Under thesecircumstances, the court found that the county was estopped to raise the statute of limitationsdefense [Alachua County v. Cheshire, 603 So. 2d 1334, 1337 (Fla. 1st DCA 1992)].

When the federal government is the mortgagee, there is no statute of limitations that applies toforeclosure, because the federal government has sovereign immunity for state statutes oflimitations and the federal statute of limitations does not apply to actions to establish title to realproperty [LLP Mortg. Ltd. v. Cravero, 851 So. 2d 897, 898 (Fla. 4th DCA 2003) citing UnitedStates v. Summerlin, 310 U.S. 414, 60 S. Ct. 1019, 84 L. Ed. 1283 (1940) and 28 U.S.C. 2415(c)]. An assignee of the federal government enjoys the same protection from the statuteof limitations based on the rationale that an assignee stands in the shoes of, and has all the rightsenjoyed by, the assignor [LPP Mortgage Ltd. v. Tucker, 48 So. 3d 115, 116117 (Fla. 3d DCA2010); LLP Mort. Ltd., v. Cravero, 851 So. 2d 897, 898 (Fla. 4th DCA 2003)].

[iii] Jurisdiction and Service of Process.

A person who owns, uses, or possesses real property within Florida or who holds a mortgage orother lien on the property is subject to the jurisdiction of the Florida courts for the purpose ofa mortgage foreclosure proceeding [ 48.193(1)(c), Fla. Stat.]. Mortgagors who have conveyedto other parties all rights and interests in and to the mortgaged property, however, are neithernecessary nor proper parties to a foreclosure proceeding [Dennis v. Ivey, 134 Fla. 181, 185, 183So. 624, 626 (Fla. 1938); Mitchell v. Fed. National Mortgage Assn, 763 So. 2d 358 (Fla. 4thDCA 2000)].

A guarantor of a mortgage note who has no interest in the mortgaged property, although a properparty, is not a necessary party to an action to foreclose the mortgage. Generally, guarantors areincluded in foreclosure actions to facilitiate enforcement of the guaranty if the sale of thecollateral is insufficient to satisfy the debt [Cukierman v. Bank Atlantic, 89 So. 3d 250, 252 (Fla.3d DCA 2012); see L.A.D. Prop. Ventures, Inc. v. First Bank, 19 So. 3d 1126, 1127 (Fla. 2d DCA2009)].

A homeowner who had been in possession of property under color of title during a banksforeclosure action but who was not served with a summons or named as a party to that action,was denied due process because he did not have adequate notice of the foreclosure proceedings.Thus, the banks writ of possession, which was obtained through the foreclosure action, wasvoid as to the homeowner, regardless of whether or not the homeowners deed to the propertywas void as asserted by the bank [see Hutchison v. Chase Manhattan Bank, 922 So. 2d 311, 315(Fla. 2d DCA 2006)].


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Unless the foreclosing mortgagee can show good cause for any delay, service of process on themortgagor must be made within 120 days of the date the foreclosure complaint is filed [Fla. R.Civ. P. 1.070(i); see Docktor v. McCrocklin, 669 So. 2d 1129 (Fla. 4th DCA 1996)]. If possible,service should be made personally [see 48.031(1), Fla. Stat.; see also Heck v. Bank Liberty,86 So. 3d 1281 (Fla. 1st DCA 2012)]. If the party resides outside the state, service may be madeby sending the original process, the initial pleading, and any order to show cause by registeredmail to the person to be served [ 48.194(2), Fla. Stat.]. Service by registered mail is consideredto be obtained when the person allowed by law to be served signs the return receipt[ 48.194(2)(c), Fla. Stat.].

If service is made personally and the process servers return of service is regular on its face,service is presumed valid [Telf Corp. v. Gomez, 671 So. 2d 818 (Fla. 3d DCA 1996); FloridaNatl Bank v. Halphen, 641 So. 2d 495 (Fla. 3d DCA 1994); see Heck v. Bank Liberty, 86 So.3d 1281, 1284 (Fla. 1st DCA 2012)]. The presumption may be rebutted, however, by clear andconvincing evidence that the summons was not served [Burns v. Bankamerica Nat. Trust Co.,719 So. 2d 999, 1001 (Fla. 5th DCA 1998); Telf Corp. v. Gomez, 671 So. 2d 818 (Fla. 3d DCA1996); see Myrick v. Walters, 666 So. 2d 249 (Fla. 2d DCA 1996)]. The presumption wassuccessfully rebutted when a mortgagor presented his estranged wifes deposition testimony anddocumentary evidence establishing that, when the process server left the summons andcomplaint with the mortgagors wife at the address of the family residence, the mortgagor didnot live at the address; rather that he was residing out of state. The evidence showed that theparties had separated two months earlier, and a petition for dissolution of their marriage waspending [see Heck v. Bank Liberty, 86 So. 3d 1281, 1284 (Fla. 1st DCA 2012)].

If personal service or service by registered mail is not possible, the defendant in a foreclosureproceeding may be served by publication [ 49.021, Fla. Stat.], provided there is strictcompliance with the statutory procedures for service by publication [Shepheard v. DeutscheBank Trust Co., 922 So. 2d 340, 343 (Fla. 5th DCA 2006)]. Failure to strictly comply will rendera subsequent judgment voidable [Floyd v. Fed. Natl Mortg. Assn, 704 So. 2d 1110, 1112 (Fla.5th DCA 1998); see Martins v. Oaks Master Prop. Owners Assn, ___ So. 3d ___, ___, 2014 Fla.App. LEXIS 18683 (Fla. 5th DCA 2014)]. The procedures include submission of a swornstatement showing, among other things, that diligent search and inquiry have been made todiscover the name and residence of the person being served [ 49.041(1), Fla. Stat.; see Martinsv. Oaks Master Prop. Owners Assn, ___ So. 3d ___, ___, 2014 Fla. App. LEXIS 18683; Godsellv. United Guar. Residential Ins., 923 So. 2d 1209, 12131215 (Fla. 5th DCA 2006); Shepheardv. Deutsche Bank Trust Co., 922 So. 2d 340, 343 (Fla. 5th DCA 2006)]. Even though an affidavitmay be facially sufficient, the facts underlying an affidavit of diligent search must show that adiligent search was, in fact, made [Lewis v. Fifth Third Mortg. Co., 38 So. 3d 157, 160161 (Fla.3d DCA 2010); Demars v. Village of Sandalwood Lakes Homeowners Assn, 625 So. 2d 1219,1224 (Fla. 4th DCA 1993); see First Home View Corp. v. Guggino, 10 So. 3d 164, 165 (Fla. 3dDCA 2009); Giron v. Ugly Mortg., Inc., 935 So. 2d 580, 582 (Fla. 3d DCA 2006)]. The plaintiffmust prove that it made an honest and conscientious effort, reasonably appropriate to thecircumstances, to acquire the information necessary to fully comply with the controllingstatutes [Gans v. Heathgate-Sunflower Homeowners Assn, 593 So. 2d 549, 551552 (Fla. 4thDCA 1992); Lewis v. Fifth Third Mortg. Co., 38 So. 3d 157, 160161 (Fla. 3d DCA 2010); Dor


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Cha, Inc. v. Hollingsworth, 876 So. 2d 678, 680 (Fla. 4th DCA 2004)]. While there is nobright-line rule for what constitutes a diligent search, generally, the test is whether thecomplainant reasonably employed the knowledge at his or her command, made diligent inquiry,and exerted an honest and conscientious effort appropriate to the circumstance to acquire theinformation necessary to effect personal service on the defendant [Canzoniero v. Canzoniero,305 So. 2d 801, 803 (Fla. 4th DCA 1975) cited in Peysina v. Deutsche Bank Natl Trust Co., 118So. 3d 237, 238 (Fla. 3d DCA 2013)]. Depending on the circumstances, a diligent search andinquiry may include getting out of the office, finding the property, inquiring of persons inpossession of the property, or talking with neighbors, relatives, or friends [see Floyd v. FederalNatl Mortgage Assn, 704 So. 2d 1110, 1112 (Fla. 5th DCA 1998) cited in Godsell v. UnitedGuar. Residential Ins., 923 So. 2d 1209, 1214 (Fla. 5th DCA 2006)]. If an affidavit is found tobe insufficient to support valid service by publication, the court has no authority to enterjudgment of foreclosure [Shepheard v. Deutsche Bank Trust Co., 922 So. 2d 340, 343 (Fla. 5thDCA 2006); Batchin v. Barnett Bank of S.W. Florida, 647 So. 2d 211, 213 (Fla. 2d DCA 1994)].It is the petitioners responsibility, either through his or her attorney or personally if acting prose, to place the publication in a newspaper [ 702.035, Fla. Stat.].A mortgagor must contest the sufficiency of the service of process at the inception of a caseeither by motion or responsive pleading challenging service [Fla. R. Civ. P. 1.140; DeArdila v.Chase Manhattan Mortg. Corp., 826 So. 2d 419, 420 n. 2 (Fla. 3d DCA 2002); Lennar Homes,Inc. v. Gabb Constr. Servs., 654 So. 2d 649, 651 (Fla. 3d DCA 1995); but see Opella v. BayviewLoan Servicing, LLC, 48 So. 3d 185 (Fla. 3d DCA 2010)]. The defense will be waived if it isnot raised at the first opportunity [Thomas v. Bank of New York, 7 So. 3d 574 (Fla. 1st DCA2009); see Romellotti v. Hanover Amgro Ins. Co., 652 So. 2d 414, 414 (Fla. 5th DCA 1995)quoting M.T.B. Banking Corp. v. Bergamo Da Silva, 592 So. 2d 1215, 1215 (Fla. 3d DCA1992)]. Filing a responsive pleading without challenging service will waive any defense to aforeclosure action based on insufficiency of service [Re-Employment Servc., Ltd. v. Natl LoanAcquisitions Co., 969 So. 2d 467, 470 (Fla. 5th DCA 2007)]. However, no waiver occurs if theinitial motion to dismiss is amended to include the defense before the motion is heard [seeWaxoyl, A.G. v. Taylor, Brion, Buker & Greene, G.P., 711 So. 2d 1251, 1254 (Fla. 3d DCA 1998),Astra v. Colt Indus. Operating Corp., 452 So. 2d 1031, 1032 (Fla. 4th DCA 1984)].

[iv] Alternative Procedure for Uncontested Cases.There is an alternative procedure designed to speed up the foreclosure process in uncontestedcases and in cases where there is no legitimate defense. In such cases, a lienholder may requestan order to show cause for the entry of final judgment. (Lienholder includes the plaintiff andany defendant to the action who holds a lien encumbering the property or any defendant who,by virtue of its status as a condominium association, cooperative association, or homeownersassociation, may file a lien against the real property subject to foreclosure.) When the requestis filed, the court must immediately review both the request and the courts file in chamberswithout a hearing. If, upon examination of the file, the court finds that the complaint is verified,complies with 702.015, Fla. Stat. [see [i], above], and alleges a cause of action to forecloseon real property, the court must promptly issue an order directed to the other parties named inthe action to show cause why a final judgment of foreclosure should not be entered [ 702.10(1),Fla. Stat.].


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The order to show cause must set the date and time for hearing on the order. The date for hearingmay not occur sooner than the later of 20 days after service of the order to show cause or 45days after service of the initial complaint. When service is obtained by publication, the date forthe hearing may not be set sooner than 30 days after the first publication [ 702.10(a)1., Fla.Stat.]. The order must also state the following [see 702.10(1)(a)2.7., Fla. Stat.]:

(1) The time within which service of the order to show cause and the complaint must bemade on the defendant.

(2) That the filing of defenses by a motion, a responsive pleading, an affidavit, or otherpapers before the hearing to show cause that raise a genuine issue of material fact whichwould preclude the entry of summary judgment or otherwise constitute a legal defenseto foreclosure will constitute cause for the court not to enter final judgment.

(3) That the defendant has the right to file affidavits or other papers before the hearing toshow cause and may appear personally or by way of an attorney at the hearing.

(4) That, if a defendant files defenses by a motion, a verified or sworn answer, affidavits,or other papers or appears personally or by way of an attorney at the time of the hearing,the hearing time will be used to hear and consider whether the defendants motion,answer, affidavits, other papers, and other evidence and argument as may be presentedraise a genuine issue of material fact that would preclude the entry of summaryjudgment or otherwise constitute a legal defense to foreclosure.

(5) That the court may enter an order of final judgment of foreclosure at the hearing andorder the clerk to conduct a foreclosure sale.

(6) If a defendant either (a) fails to appear at the hearing to show cause, (b) fails to filedefenses by a motion or by a verified or sworn answer, or (c) files an answer notcontesting the foreclosure, that defendant may be considered to have waived the rightto a hearing, in which case the court may a default against that defendant and, ifappropriate, enter a final judgment of foreclosure ordering the clerk to conduct aforeclosure sale.

(7) If the mortgage provides for reasonable attorneys fees and the requested fees do notexceed three percent of the principal sum owed at the time the complaint was filed, itis unnecessary for the court to hold a hearing or adjudge reasonableness of theattorneys fees requested.

A copy of the proposed final judgment of foreclosure which the movant requests the court toenter at the hearing on the order to show cause must be attached to the request [ 702.10(1)(a)8.,Fla. Stat.].The party seeking final judgment must serve a copy of the order to show cause on the otherparties. If a party has been properly served with the complaint and original process, or the otherparty is the plaintiff in the action, service of the order to show cause on that party may be madein accordance with the Florida Rules of Civil Procedure. If a defendant has not been properlyserved with the complaint and original process, the order to show cause, together with thesummons and a copy of the complaint, must be served on that defendant in the same manner asrequired for service of original process [ 702.10(1)(a)9., Fla. Stat.].


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A defendant waives the right to be heard at the hearing to show cause if, after being duly servedwith the order to show cause, he or she fails to file defenses by a motion or by a sworn orverified answer, affidavits, or other papers or fails to appear personally or by way of an attorneyat the hearing to show cause. If the defendant files defenses by a motion, a verified answer,affidavits, or other papers or presents evidence at or before the hearing, which raise a genuineissue of material fact that would preclude entry of summary judgment or otherwise constitutea legal defense to foreclosure, the court may not enter a final judgment at the hearing to showcause [ 702.10(1)(b), Fla. Stat.; see Barrnunn, LLC v. Talmer Bank & Trust, 106 So. 3d 51, 53(Fla. 2d DCA 2013)].

If the court finds that all defendants have waived the right to be heard, the court must promptlyenter a final judgment of foreclosure without need for further hearing; provided the plaintiff hasshown that he or she is entitled to a final judgment, and has either (1) filed the original note withthe court, (2) satisfied the conditions for establishing a lost note, or (3) shown that the obligationto be foreclosed is not evidenced by a promissory note or other negotiable instrument[ 702.10(1)(d), Fla. Stat.].

If the court finds that a defendant has not waived the right to be heard on the order to showcause, the court must determine whether there is cause not to enter a final judgment. If the courtfinds that cause has not been shown, a judgment of foreclosure must be promptly entered. If thetime allotted for the hearing is insufficient, the court may announce at the hearing a date andtime for the continued hearing. Only the parties who make an appearance at the initial hearingmust be notified of the date and time of the continued hearing [ 702.10(1)(d), Fla. Stat.].

When a final judgment of foreclosure has been entered and the note or mortgage provides forthe award of reasonable attorneys fees, it is not necessary for the court to hold a hearing oradjudge the requested attorneys fees to be reasonable if the fees do not exceed three percent ofthe principal amount owned on the note or mortgage at the time of filing, even if the note ormortgage does not specify the percentage of the original amount that would be paid as liquidateddamages [ 702.10(1)(c), Fla. Stat.].

[v] Order to Make Payments or Vacate Premises.

In any action for foreclosure, other than owner-occupied residential real estate, in addition toany other relief that court may award, the plaintiff may request that the court enter an orderdirecting the defendant to show cause why an order to make payments during the pendency ofthe foreclosure proceedings or an order to vacate the premises should not be entered[ 702.10(2), Fla. Stat.]. (For these purposes, there is a rebuttable presumption that a residentialproperty for which a homestead exemption for taxation was granted before the foreclosureaction was filed is an owner-occupied residential property [see 702.10(2)(i), Fla. Stat.].)

The order must set the date and time for hearing on the order to show cause. The date for hearingmay not be set sooner than 20 days after the order is served. If service is by publication, the datefor the hearing may not be set sooner than 30 days following the first publication[ 702.10(2)(a)1., Fla. Stat.]. The order must also state the following [see 702.10(2)(a), Fla.Stat.]:


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(1) The time within which service of the order to show cause and the complaint must bemade on each defendant.

(2) That, if a defendant has the right to file affidavits or other papers at the time of thehearing and may appear personally or by way of an attorney at the hearing.

(3) If a defendant fails to appear at the hearing to show cause and fails to file defenses bya motion or verified or sworn answer, the defendant may be deemed to have waived theright to a hearing, in which case the court may enter an order to make payment or vacatethe premises.

The moving party must serve a copy of the order to show cause on the defendant. If a defendanthas not been served with the complaint and original process, the moving party must serve thedefendant with the order to show cause, the summons, and a copy of the complaint in the samemanner as for original process [ 702.10(2)(a)5.b., Fla. Stat.]. If a defendant has already beenserved with the complaint and original process, the moving party may serve the order to showcause in the manner provided in the Florida Rules of Civil Procedure [ 702.10(2)(a)5.a., Fla.Stat.].

A defendant waives the right to be heard at the hearing to show cause if, after being duly servedwith the order to show cause, he or she fails engages in conduct that clearly shows that thedefendant has relinquished the right to be heard on the order. A defendants failure to filedefenses by a motion or by a sworn or verified answer or to appear at the hearing to show causepresumptively constitutes such conduct [ 702.10(2)(b), Fla. Stat.]. If the court finds that thedefendant has waived the right to be heard, the court may promptly enter an order requiringpayment or an order to vacate [ 702.10(2)(c), Fla. Stat.].

If the court finds that the defendant has not waived the right to be heard on the order to showcause, the court must, at the hearing on the order to show cause, consider the affidavits and othershowings made by the parties and determine the probable validity of the plaintiffs claims andthe defendants defenses [ 702.10(2)(d), Fla. Stat.].

If the court determines that the plaintiff is likely to prevail in the foreclosure action, the courtmust enter an order requiring the defendant to make payments to the plaintiff as provided forin the mortgage instrument before acceleration or maturity. The obligation to make paymentscommences from the date the plaintiff filed the motion for order to show cause. The order maybe stayed pending final adjudication of the claims of the parties if the defendant files with thecourt a written undertaking executed by an approved surety in an amount equal to the unpaidbalance of the lien being foreclosed [ 702.10(2)(d), (e), Fla. Stat.]. The order requiringpayments must be served on the defendant no later than 20 days before the first payment is due.The order may permit but may not require the plaintiff to take all steps necessary to secure thepremises during the pendency of the foreclosure proceedings [ 702.10(2)(e), Fla. Stat.]. Ingeneral, the order must also provide that the plaintiff is entitled to possession of the premisesif the defendant fails to make the required payments. However, the court may order some othermethod of enforcing its order if the court finds good cause to do so at the hearing on the orderto show cause [ 702.10(2)(f), Fla. Stat.].


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The payments that the defendant makes pursuant to the court order are credited against the lienobligation. However, the payments do not cure any default or waiver and are not a defense tothe lien foreclosure action [ 702.10(2)(g), Fla. Stat.].If the court orders the defendant to vacate the premises and the defendant fails to do so, theplaintiff may enforce the order by filing an affidavit with the clerk of the court, stating that thepremises have not been vacated pursuant to the order. The clerk must then issue to the sheriffa writ for possession [ 702.10(2)(h), Fla. Stat.; see 83.62, Fla. Stat. (writs of possession)].

Against a challenge that Section 702.10(2), Florida Statutes, discussed above, is unconstitutionalbecause it fails to protect the mortgagors due process rights and impermissibly conflicts withFlorida Rule of Civil Procedure 1.610(b), the Florida Supreme Court upheld the constitutionalityof the statute and also found that it does not conflict with Rule 1.610(b) [see Caple v. TuttlesDesign-Build, Inc., 753 So. 2d 49 (Fla. 2000); see also Fla. Laws, ch. 2013-137, 9]. (Section702.10(2) requires the mortgagor in default on a mortgage encumbering nonresidential propertyeither to make payments or to vacate the property. Rule 1.610(b) prohibits entry of a temporaryinjunction unless a bond is posted by the party seeking the injunction.) In upholding theconstitutionality of Section 702.10(2), the Florida Supreme Court reversed a decision of theThird District in which the district court held that, in order to protect the mortgagors dueprocess rights, the statute should either provide for a creditor bond to protect the debtor frommistaken repossession or payment, or require, at a minimum, that mortgage payments be madeinto the court registry to safeguard the mortgagors funds pending resolution of the foreclosureaction. The Florida Supreme Court also reversed the district courts holding that the statute wasin direct conflict with Rule 1.610(b). The district courts conclusion was based on its finding thatan order requiring payment of funds before a judgment is entered is, in effect, an order grantingan injunction [see Tuttles Design-Build, Inc. v. Caple, 712 So. 2d 1213 (Fla. 3d DCA 1998)reversed in Caple v. Tuttles Design-Build, Inc., 753 So. 2d 49 (Fla. 2000)]; see also Fla. Laws,ch. 2013-137, 9].On the due process issue, the Florida Supreme Court applied a totality test, which basicallyrequires a court to determine whether, as a whole, the statute under scrutiny adequately protectsthe parties interests [see Mitchell v. W.T. Grant Co., 416 U.S. 600, 610, 94 S. Ct. 1895, 40 L.Ed. 2d 406 (1974); see also Gazil, Inc. v. Super Food Services, Inc., 356 So. 2d 312 (Fla. 1978)].Applying this test, the Florida Supreme Court found that Section 702.10(2) adequately protectsthe parties due process rights in that [Caple v. Tuttles Design-Build, Inc., 753 So. 2d 49, 53(Fla. 2000)]:

(1) The mortgagee is required to serve a copy of the order to show cause on the mortgagorin a prescribed and protective manner;

(2) The mortgagor has the right to appear at the show cause hearing prior to anydeprivation and to file affidavits or other papers, including affirmative defenses;

(3) The trial judge is authorized to order the mortgagor to continue payments only on afinding that the mortgagee is likely to prevail in the foreclosure action;

(4) The mortgagor has the ability to stay an order to continue payments or repossession ofthe property by posting a bond.


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Regarding the issue that Section 702.10(2), Florida Statutes conflicts with Florida Rule of CivilProcedure 1.610(b), the Florida Supreme Court found that the statute creates a substantiverighti.e., the mortgagees right to petitionand establishes the grounds on which the petitionmay be granted. Because it creates a substantive right and any procedural provisions are directlyrelated to defining those rights, the Florida Supreme Court held that Section 702.10(2) does notinfringe on the courts rulemaking authority [Caple v. Tuttles Design-Build, Inc., 753 So. 2d 49,5355 (Fla. 2000); see VanBibber v. Harford Accident & Indem. Ins. Co., 439 So. 2d 880, 883(Fla. 1983); see also Fla. Laws, ch. 2013-137, 9].

[vi] Judgment in Uncontested Proceedings.In uncontested foreclosure proceedings in which the mortgagee waives the right to recover anydeficiency judgment, the court must enter final judgment within 90 days from the date of theclose of pleadings. For these purposes, a foreclosure proceeding is uncontested if the mortgagorhas filed an answer not contesting the foreclosure, or the court has entered a default judgment[ 702.065(1), Fla. Stat.].

[vii] Counterclaims.

A trial court may, in its discretion, sever a counterclaim from the foreclosure action [see Norrisv. Paps, 615 So. 2d 735, 737 (Fla. 2d DCA 1993)]. However, it is an abuse of discretion to severa counterclaim and affirmative defenses without staying the foreclosure action if the severanceprecludes the trier of fact in the foreclosure action from considering facts inextricably wovenwith the issues presented by the affirmative defenses and counterclaim [Plantation Village Ltd.v. Aycock, 617 So. 2d 729 (Fla. 2d DCA 1993)]. Likewise, severing a counterclaim from theforeclosure action and affirmative defenses is likely to prejudice a party, particularly if thecounterclaim is compulsory, if the legal issues raised by the counterclaim must be tried by jury,or if the evidence supporting the severed counterclaim and an affirmative defense is interrelated[Norris v. Paps, 615 So. 2d 735, 737 (Fla. 2d DCA 1993)]. When possible, the better practiceis to try the foreclosure and any counterclaim together and to set-off any damages for recoveryunder one claim against the other [see Tolin v. Doudov, 626 So. 2d 1054, 1056 (Fla. 4th DCA1993) (reversal and remand for set-off of foreclosure damages against damages for breach ofcontract)].Whether a counterclaim is compulsory is judged by the logical relationship test adopted by theFlorida Supreme Court in Londono v. Turkey Creek, Inc. A claim has a logical relationship tothe original claim if it arises out of the same aggregate of operative facts as the original claim,that is, either [Londono v. Turkey Creek, Inc., 609 So. 2d 14, 1920 (Fla. 1992); see CallawayLand & Cattle v. Banyon Lakes C., 831 So. 2d 204, 207 (Fla. 4th DCA 2002); see also Fla. R.Civ. P. 1.170(a) (compulsory counterclaims)]:

(1) the same aggregate of operative facts serves as the basis of both claims; or(2) the aggregate core of facts on which the original claim rests activates additional legal

rights in a party defendant that would otherwise remain dormant.

In a case certified for review to the Florida Supreme Court by the Eleventh Circuit, the courtapplied this test to determine that defendants, who were not obligors on the original note and


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mortgage in an in rem foreclosure action, were not required to bring, as compulsorycounterclaims, tort claims arising out of the foreclosure action. The tort claims asserted that theforeclosing bank interfered with the defendants business relationship with the obligor and werebased on a loan extension agreement between the foreclosing bank and the obligor. Theextension agreement was an unrecorded instrument signed two years after the mortgageagreement and was not mentioned in or attached to the banks foreclosure complaint [seeAguilar v. Southeast Bank, N.A., 728 So. 2d 744 (Fla. 1999); see also Aguilar v. Southeast BankN.A., 177 F.3d 1226 (11th Cir. 1999)].

[viii] Courts Power to Set Aside Foreclosure Decree Before Sale.A circuit court may set aside a decree of foreclosure at any time before the judicial sale, anddismiss the foreclosure proceeding on payment of all court costs [ 702.07, Fla. Stat.]. Once aforeclosure decree has been set aside and the proceeding has been dismissed, the mortgage,together with its lien and the debt secured by that lien, will be completely restored to the statusas it existed before the foreclosure proceeding was initiated [ 702.08, Fla. Stat.]. In thiscontext, mortgage includes any written instrument securing the payment of money oradvances. It also includes liens to secure payment of condominium and cooperative assessments,and liens created pursuant to the recorded covenants of a homeowners association [ 702.09,Fla. Stat.; see 712.01(4), 720.301(7), Fla. Stat. (homeowners association defined)].

The fact that 702.07, Fla. Stat. permits a circuit court to set aside a foreclosure decree priorto sale does not deprive the same court of jurisdiction to, on proper motions, set aside orreconsider a foreclosure judgment once the sale has been held [Maule Indus., Inc. v. SeminoleRock & Sand Co., 91 So. 2d 307, 309310 (Fla. 1956); Taylor v. Day, 102 Fla. 1006, 136 So.701, 703 (1931); Sterling Factors v. U.S. Bank Nat. Assn, 968 So. 2d 658, 662665 (Fla. 2dDCA 2007)].While 702.07 grants a circuit court the jurisdiction, power, and authority to rescind, vacate,and set aside a decree of foreclosure, the section does not set forth the grounds on which a courtmay do so. Thus, the statute must be read in conjunction with Fla. R. Civ. P., Rule 1.540(b),which specifies the bases upon which a court may grant relief from a judgment, decree, or order[Toler v. Bank of Am. N.A., 78 So. 3d 699, 702704 (Fla. 4th DCA (2012)]. Under the Rule, aparty must demonstrate one of the following [Fla. R. Civ. P. Rule 1.540(b)]:

Mistake, inadvertence, surprise, or excusable neglect [see Yale Mortg. Corp. v. Blot,107 So. 3d 1181, 1182 (Fla. 3d DCA 2013); Gascue v. HSBC Bank, 97 So. 3d 263, 264(Fla. 4th DCA 2012); Lazcar Intl, Inc. v. Caraballo, 957 So. 2d 1191, 1192 (Fla. 3dDCA 2007)];

Newly discovered evidence which by due diligence could not have been discovered intime to move for a new trial or rehearing;

Intrinsic or extrinsic fraud, misrepresentation, or other misconduct of an adverse party; That the judgment is void; or That the judgment has been satisfied, released, or discharged, or a prior judgment on

which it is based has been reversed or otherwise vacated, or it is no longer equitable thatthe judgment should have prospective application.


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[b] Judicial Sales Procedure

[i] Final Judgment.

After the foreclosure has been allowed [see [a], above], the trial court has discretion in settingthe terms of the sale [Coombes v. Wheeler, 131 Fla. 593, 179 So. 785, 786 (1938); Randall v.Bisbee-Baldwin Corp., 995 So. 2d 1004, 1005 (Fla. 1st DCA 2008)]. For purposes of a judicialsale, the court must, in the order or final judgment, direct the clerk to sell the property at publicsale [ 45.031(1)(a), Fla. Stat.; see Bankers Trust Co. v. Edwards, 849 So. 2d 1160, 1162 (Fla.1st DCA 2003); First Nationwide Sav. v. Thomas, 513 So. 2d 804, 805 (Fla. 4th DCA 1987)].If the mortgage being foreclosed is secured by several parcels of real property, and the totalvalue of all the parcels would more than satisfy the amount owed on the foreclosed mortgage,the court may order the parcels sold one at a time rather than ordering a sale en masse; providedsuch a serial sale is practical and equitable to all parties [Randall v. Bisbee-Baldwin Corp., 995So. 2d 1004, 1005 (Fla. 1st DCA 2008); Applefield v. Fid. Fed. Sav. & Loan Assn of Tampa,137 So. 2d 259, 261262 (Fla. 2d DCA 1962)].

The court must specify a date for the sale that is at least 20 days, but no more than 35 days, afterthe date of the court order [ 45.031(1)(a), Fla. Stat.]. While the matter of fixing the time fora judicial sale is set by statute, the trial court has reasonable discretion within the statutoryframework to set or reset the sale date [ LR5A- JV v. Little House, LLC, 50 So. 3d 691, 693694(Fla. 5th DCA 2010)]. However, if the mortgagee or the mortgagees attorney consents to it, asale may be held more than 35 days after the date of the final judgment or order. The fact thata sale is held more than 35 days after the final judgment or order does not affect the validity orfinality of either the judgment or the sale [ 45.031(1)(b), (c), Fla. Stat.; see Bankers Trust Co.of Cal. v. Weidner, 688 So. 2d 453 (Fla. 5th DCA 1997)].

While, generally speaking, the trial court has discretion to grant a continuance or apostponement of the sale, granting a one-month continuance on the ground of benevolenceand compassion to allow the defendants to explore the possibility of arranging for payment ofthe underlying debt was an abuse of that discretion; particularly since such a continuancecontravened the statutory requirement that a sale must take place no more than 35 days after thecourt order [see Republic Federal Bank, N.A. v. Doyle, 19 So. 3d 1053, 10541055 (Fla. 3d DCA2009)].

The final judgment must contain the following statement in conspicuous type [ 45.031(1)(a),Fla. Stat.]:

IF THIS PROPERTY IS SOLD AT PUBLIC AUCTION, THERE MAY BE ADDITIONALMONEY FROM THE SALE AFTER PAYMENT OF PERSONS WHO ARE ENTITLEDTO BE PAID FROM THE SALE PROCEEDS PURSUANT TO THIS FINAL JUDGMENT.

IF YOU ARE A SUBORDINATE LIENHOLDER CLAIMING A RIGHT TO FUNDSREMAINING AFTER THE SALE, YOU MUST FILE A CLAIM WITH THE CLERK NOLATER THAN 60 DAYS AFTER THE SALE. IF YOU FAIL TO FILE A CLAIM, YOUWILL NOT BE ENTITLED TO ANY REMAINING FUNDS.


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If the property being foreclosed on has qualified for the homestead tax exemption, the finaljudgment must also include the following statement [ 45.031(1)(b), Fla. Stat.]:

IF YOU ARE THE PROPERTY OWNER, YOU MAY CLAIM THESE FUNDSYOURSELF. YOU ARE NOT REQUIRED TO HAVE A LAWYER OR ANY OTHERREPRESENTATION AND YOU DO NOT HAVE TO ASSIGN YOUR RIGHTS TOANYONE ELSE IN ORDER FOR YOU TO CLAIM ANY MONEY TO WHICH YOUARE ENTITLED. PLEASE CHECK WITH THE CLERK OF THE COURT, [Insertinformation for applicable court] WITHIN TEN (10) DAYS AFTER THE SALE TO SEEIF THERE IS ADDITIONAL MONEY FROM THE FORECLOSURE SALE THAT THECLERK HAS IN THE REGISTRY OF THE COURT.

IF YOU DECIDE TO SELL YOUR HOME OR HIRE SOMEONE TO HELP YOU CLAIMTHE ADDITIONAL MONEY, YOU SHOULD READ VERY CAREFULLY ALL PAPERSYOU ARE REQUIRED TO SIGN, ASK SOMEONE ELSE, PREFERABLY ANATTORNEY WHO IS NOT RELATED TO THE PERSON OFFERING TO HELP YOU,TO MAKE SURE THAT YOU UNDERSTAND WHAT YOU ARE SIGNING AND THATYOU ARE NOT TRANSFERRING YOUR PROPERTY OR THE EQUITY IN YOURPROPERTY WITHOUT THE PROPER INFORMATION. IF YOU CANNOT AFFORD TOPAY AN ATTORNEY, YOU MAY CONTACT [name of local or nearest legal aid office andtelephone number] TO SEE IF YOU QUALIFY FINANCIALLY FOR THEIR SERVICES.IF THEY CANNOT ASSIST YOU, THEY MAY BE ABLE TO REFER YOU TO A LOCALBAR REFERRAL AGENCY OR SUGGEST OTHER OPTIONS. IF YOU CHOOSE TOCONTACT [name of local or nearest legal aid office] FOR ASSISTANCE, YOU SHOULDDO SO AS SOON AS POSSIBLE AFTER RECEIPT OF THIS NOTICE.

The clerk must furnish, by first class mail, a copy of the final judgment to the last known addressof every party to the action, or his or her attorney of record. However, any irregularity in themailing or the failure to include these statements in the final order or judgment will not affectthe validity of either the judgment or order, or the sale [ 45.031(1)(c), Fla. Stat.].In one case, a foreclosure judgment did not cut off the mortgagors right to convey a leaseholdinterest in the subject property when the judgment creditors accepted a quitclaim deed insteadof letting the foreclosure sale take place. The judgment only gave the judgment creditor the rightto have the property sold and the proceeds applied against the judgment. When no foreclosuresale ever took place, the mortgagors right to convey a leasehold interest in the property wasnever cut off and the rights the judgment creditors acquired when they subsequently acceptedthe quitclaim deed were subject to the lease of which the creditors had prior notice [Morris v.Osteen, 948 So. 2d 821, 826827 (Fla. 5th DCA 2007)].

A trial court did not deny a mortgagor procedural due process by entering final judgment infavor of the mortgagee, including an award of reasonable attorneys fees, after an evidentiaryhearing, even though the foreclosure action was never set for trial. The mortgagor was awarethat a hearing was scheduled, received a witness and exhibit list, and even appeared at thehearing without invoking Fla. R. Civ. P. Rule 1.440, which requires a case to be set for trial [seeZumpf v. Countrywide Home Loans Inc., 43 So. 3d 764, 766767 (Fla. 3d DCA 2010)].


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In any action or proceeding in which a party seeks to set aside, invalidate, or challenge thevalidity of a final judgment of mortgage foreclosure, or to establish or reestablish a lien orencumbrance on the property in abrogation of the final judgment of a mortgage foreclosure, thecourt must treat the request solely as a claim for monetary damages and may not grant relief thatadversely affects the quality or character of the title to the property provided [ 702.036(1)(a),Fla. Stat.]:

The party seeking relief from the final judgment was properly served in the foreclosureproceeding;

The final judgment was entered; All applicable appeals periods as to the final judgment have run with no appeals having

been taken or any appeals having been resolved; and

The property has been acquired for value by a person who is not affiliated with theforeclosing lender or the foreclosed owner, at a time in which no lis pendens regardingthe suit to set aside, invalidate, or challenge the foreclosures appears in the officialrecords of the county in which the property was located.

This does not limit the right to pursue any other relief to which a person may be entitled,including compensatory, punitive, statutory, or consequential damages, injunctive relief, or feesand costs; provided the relief sought does not adversely affect ownership of the title to theproperty as vested in the unaffiliated purchaser for value [ 702.036(1)(b), Fla. Stat.]. Personsconsidered to be affiliated with the foreclosing lender include, without limitation [ 702.036(2),Fla. Stat.]:

1. The foreclosing lender or any loan servicer for the loan being foreclosed;

2. Any past or present owner or holder of the loan being foreclosed;

3. Any maintenance company, holding company, or foreclosure services company undercontract with regard to the loan being foreclosed;

4. Any law firm under contract to any company listed in 1.3., above with regard to theloan being foreclosed;

5. Any parent entity, subsidiary, or other person who directly, or indirectly through oneor more intermediaries, controls or is controlled by, or is under common control with,any entity listed in 1.3.

After foreclosure of a mortgage based on the enforcement of a lost, destroyed, or stolen note,a person who is not a party to the underlying foreclosure action but who claims to be the personentitled to enforce the note secured by the foreclosed mortgage has no claim against theforeclosed property after it is conveyed for valuable consideration to a person who is notaffiliated with the foreclosing lender or the foreclosed owner [ 702.036(3), Fla. Stat.]. Thisdoes not preclude a person claiming to be the actual holder of the note from pursuing recoveryfrom any adequate protection as required by the UCC [ 702.036(3), Fla. Stat.; see 673.3091,Fla. Stat. (enforcement of lost, destroyed, or stolen instruments under UCC); see also 702.11,Fla. Stat. (adequate protection for lost, destroyed, or stolen notes)]. A person claiming to be the


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actual holder may also pursue damages from (1) the party who wrongfully claimed to be theowner or holder of the note, (2) the maker of the note, or (3) any other person against whom theactual holder may have a claim [ 702.036(3), Fla. Stat.].

[ii] Notice of Sale.

Notice of the sale must be published once a week for two consecutive weeks in a newspaper ofgeneral circulation published in the county where the sale is to be held [ 45.031(2), Fla. Stat.;see 702.035, Fla. Stat. (placing notice for publication is petitioners responsibility)]. Thesecond publication must be at least five days before the sale. The notice must contain thefollowing information [ 45.031(2), Fla. Stat.]:

(1) A description of the property to be sold.(2) The time and place of sale.(3) A statement that the sale will be made pursuant to the order or final judgment.(4) The caption of the action.(5) The name of the clerk making the sale.(6) A statement that any person claiming an interest in the sale surplus, if any, other than

the property owner as of the date of the lis pendens must file a claim within 60 daysafter the sale.

The court may change or extend the time of sale. However, notice of the changed time of salemust be published as noted above [ 45.031(2), Fla. Stat.; but see Blatchley v. Boatmans Nat.Mortg., Inc., 706 So. 2d 317 (Fla. 5th DCA 1997) (appellate court upheld trial courts denial ofmortgagees motion to vacate sale when advertised sale date was changed but not readvertised;trial court extended mortgagees right to redeem to compensate for changed date)].

[iii] Conduct of Sale.

The sale must be conducted by public auction at the time and place set forth in the finaljudgment [ 45.031(3), Fla. Stat.]. Before the sale, the clerk is entitled to receive from theplaintiff a $60 service charge for services rendered in making, recording, and certifying the saleand title [ 45.031(3), 45.035(1), Fla. Stat.]. At the time of the sale, the successful high biddermust post with the clerk a deposit equal to five percent of the final bid. The deposit must beapplied to the sale price at the time of payment. If final payment is not made within theprescribed period, the clerk must readvertise the sale as set forth above and must pay all costsof the sale from the deposit. Any remaining funds must be applied toward the judgment[ 45.031(3), Fla. Stat.].

If the sale is conducted by electronic means, electronic proxy bidding will be allowed and theclerk may require bidders to advance sufficient funds to pay the five percent deposit requiredfor a sale that is not conducted electronically. The clerk must provide access to the sale bycomputer terminals open to the public at a designated location, and must accept an advancecredit proxy bid from the plaintiff of any amount up to the maximum allowable credit bid of the


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plaintiff. The clerk may receive sale-related electronic deposits and payments [ 45.031(10),Fla. Stat.].A losing bidder has standing to complain that a particular bid is not valid because he or she hasa direct financial interest by virtue of the bidders own bid. However, that standing is confinedto the issue of whether the amount of the bid exceeds the bidders own and whether paymentin accordance with the successful bid is forthcoming. In the absence of fraud in the bidding, astranger to the foreclosure action does not acquire standing to complain of supposed defects inthe foreclosure proceedings [Jagodinski v. Washington Mut. Bank, 63 So. 3d 791, 792793 (Fla.1st DCA 2011) and REO Properties Corp. v. Binder, 946 So. 2d 572, 574 (Fla. 2d DCA 2006)citing Heilman v. Suburban Coastal Corp., 506 So. 2d 1088, 1090 (Fla. 4th DCA 1987)].

[iv] Post-Sale Procedures.The amount of the bid for the property at the time of sale is conclusively presumed to besufficient consideration for the sale [ 45.031(8), Fla. Stat.]. Once the sale is completed, theclerk must promptly file a certificate of sale and serve a copy of the certificate on all of theparties not in default [ 45.031(4), Fla. Stat.; see 32.250 (sample form)]. Within 10 days afterthe clerk files the certificate of sale, any party may serve an objection to the amount bid. Iftimely objections to the bid are served, the objections must be heard by the court; however,service of objections to the amount of the bid does not in any manner affect or cloud title of thepurchaser of the property [ 45.031(8), Fla. Stat.]. In order to hear any objections on theamount bid, the court must provide both notice and an opportunity for any interested party toaddress those objections [Shlishey the Best v. Citifinancial Equity, 14 So. 3d 1271, 12751276(Fla. 2d DCA 2009) (entry of order granting motion to vacate foreclosure sale and certificate ofsale without notice to purchaser violated purchasers procedural due process rights].

In U.S. Bank National Association v. Bjeljac, a mortgagee filed a motion to cancel andreschedule the sale based on allegations that the bid price was inadequate and the mortgageemistakenly failed to send a representative to the sale. The trial court summarily denied themotion without affording the mortgagee notice and an opportunity to be heard. The district courtrecognized that the specific parameters of the notice and opportunity to be heard required byprocedural due process should be evaluated by the requirements of the particular proceeding.Consequently, the court refused to hold that a court may only hear objections to a foreclosuresale at an in-court proceeding with counsel physically present. Nonetheless, the court stated itsbelief that the question of whether the mortgagees failure to have a representative present at thesale was the result of a mistake is inherently a factual question that requires a hearing before thecourt. Thus, the court held that, because the trial court summarily denied the motion to set asidethe sale without a hearing, the record was devoid of anything that would support or refute themortgagees allegation of mistake and that due process required more. The court reversed thetrial courts order denying the motion to set aside the foreclosure sale and ordered a return ofthe funds to the third-party purchasers and remanded the case for further proceedings [see U.S.Bank Nat. v. Bjeljac, 43 So. 3d 851, 853 (Fla. 5th DCA 2010)].If the case is one in which a deficiency judgment may be sought and application is made for adeficiency, the court may consider the amount bid at the sale as one of the factors in determining


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