RICHARD DEROUIN & KIM DEROUIN v. UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC

Citation: 254 So. 3d 595Docket: 17-1002

Court: District Court of Appeal of Florida; August 22, 2018; Florida; State Appellate Court

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Richard and Kim Derouin appealed a final foreclosure judgment in favor of Universal American Mortgage Company, LLC, asserting that Universal failed to conduct a face-to-face meeting as required by federal regulations (24 C.F.R. 203.604) before initiating foreclosure proceedings. The Derouins argued that the trial court incorrectly determined they waived Universal's compliance with these regulations. The court found no evidence of waiver, leading to a reversal of the lower court's decision and a remand for an involuntary dismissal of the foreclosure action.

The background reveals that Universal loaned money to the Derouins for a home purchase, with the loan insured by the Federal Housing Administration (FHA). The loan agreement stipulated that Universal could not accelerate the loan unless permitted by HUD regulations. The relevant HUD regulations mandate that a mortgagee must conduct a face-to-face interview or make reasonable efforts to arrange such a meeting before three monthly installments are unpaid, and they restrict foreclosure actions until this requirement is met.

Exceptions to the face-to-face meeting requirement include circumstances where the mortgagor indicates non-cooperation or when reasonable efforts to arrange a meeting are unsuccessful. A "reasonable effort" entails at least one certified letter and one visit to the mortgagor's property. Universal alleged it met all conditions precedent to the foreclosure, but the Derouins contested this in their response to the complaint and asserted several affirmative defenses. The trial court allowed the Derouins to amend their answer multiple times, consistent with Florida's procedural rules favoring amendments.

The Derouins contested Universal's compliance with conditions precedent before filing suit, specifically alleging that Universal did not conduct a required face-to-face meeting within ninety days of default. They asserted an affirmative defense based on Universal's failure to meet the face-to-face contact requirement set forth in 24 C.F.R. 203.604. Universal did not respond to this defense. After trial, the court granted the Derouins' motion for involuntary dismissal due to an unrelated evidentiary issue. Universal sought rehearing, which the Derouins opposed, citing Universal's noncompliance with the HUD requirement as a reason for dismissal. The trial court granted the rehearing, ruling that the Derouins had waived their right to enforce the face-to-face meeting requirement based on Ms. Derouin's testimony about a prior telephone call from Universal, indicating she did not wish to be contacted directly. The court concluded that the Derouins were not prejudiced by the absence of a face-to-face meeting and subsequently awarded Universal a final judgment of foreclosure.

The appellate review employs multiple standards; de novo review is used for the trial court's interpretation of the note, while findings of fact are given deference if supported by competent, substantial evidence. However, the appellate court noted that the trial court's decision to grant rehearing lacked such evidence, leading to a reversal. Additionally, the de novo review of the note indicated that involuntary dismissal was appropriate, prompting the court to order such relief on remand. The standard for involuntary dismissal requires that, when evidence is viewed favorably for the non-moving party, it must still fail to establish a prima facie case. If no evidence supports the case in a non-jury trial, an involuntary dismissal is warranted.

The face-to-face meeting requirement under 24 C.F.R. 203.604 is established as a condition precedent for filing a foreclosure lawsuit. The parties involved agree on this assumption for the appeal. Case law indicates that without evidence of such a meeting or an applicable exception, a foreclosure complaint may be dismissed involuntarily. Courts have consistently held that compliance with this requirement is necessary before initiating foreclosure actions. Notably, the mortgage language often incorporates federal regulations, including the face-to-face interview stipulation. There remains ambiguity in case law regarding whether noncompliance should be raised as an affirmative defense or specific denial; however, the trial court's error was in requiring the latter. Typically, a defendant asserting that a plaintiff has not met conditions precedent carries the burden of proof. In this case, since the Bank claimed compliance in its complaint and the Borrower contested that assertion, the burden to prove compliance fell back on the Bank. The appellate court refrains from resolving broader conflicts in case law that do not directly impact the current case. The Derouins prudently raised noncompliance both as an affirmative defense and a specific denial, necessitating Universal to prove its compliance or justify any noncompliance as the litigation progressed.

Borrowers asserted noncompliance with HUD regulations and the terms of a note and mortgage as both a specific denial and an affirmative defense, placing the burden on Wells Fargo to prove compliance, which it failed to do. The Derouins adequately alleged Universal's failure to meet the face-to-face meeting requirement, following the procedural standards of Florida law regarding pleading conditions precedent. Universal did not properly address the affirmative defense of noncompliance; it was obligated to file a reply if it aimed to counter the affirmative defense raised by the Derouins. The law mandates that affirmative defenses, like waiver, must be explicitly pleaded. Since Universal neglected to reply to the Derouins' affirmative defense, the trial court improperly considered the waiver issue, leading to an erroneous grant of summary judgment. Furthermore, when Appellee invoked unclean hands as a defense to Appellants' affirmative defenses, it was required to plead this in a reply, a step it failed to take. The trial court's reliance on issues not properly framed by the pleadings constituted an error.

The Derouins specifically alleged that Universal failed to make the required face-to-face contact as mandated by 24 C.F.R. 203.604. This accusation shifts the burden of proof to Universal to demonstrate compliance or justify an exception. Universal did not meet this burden. Testimony from Universal's staff revealed no attempts to visit the Derouins for a face-to-face meeting, nor did they request such a meeting within three months after the Derouins’ initial default. Although a staff member stated they contacted the Derouins about forty-five days post-default, the Derouins instructed the servicer to communicate solely through their attorney, which Universal accepted. The servicer continued to send letters directly to the Derouins despite not requesting a face-to-face meeting. Under 24 C.F.R. 203.604(c)(3), a face-to-face meeting requirement can be waived if the mortgagor indicates unwillingness to cooperate, which the Derouins did not do. Ms. Derouin clarified that she never refused a meeting as none was offered. Therefore, the absence of Universal's initiative to arrange a meeting undermines any claim that the Derouins were unwilling to cooperate. Moreover, there is no evidence that the Derouins would have declined participation if asked through their attorney.

The trial court's waiver finding was criticized as being unsupported, particularly because the Derouins expressed no interest in mediation and there is no obligation for post-filing mediation under Section 203.604. Ms. Derouin's rejection of mediation after the lawsuit was filed does not indicate her willingness to mediate prior to filing. Universal's failure to comply with Section 203.604 cannot be remedied by subsequent actions. The requirement for face-to-face meetings can be excused only if reasonable efforts to arrange such meetings were made, which was contradicted by testimonies from Universal’s and Ms. Derouin’s witnesses, confirming no efforts were made. 

Universal's argument that the waiver issue was tried by consent is dismissed. Under Florida Civil Procedure Rule 1.190(b), issues not raised in pleadings can be treated as if they had been when tried by consent; however, this requires that evidence on the issue be irrelevant to any pled issues. The court found that the failure to object to evidence does not imply consent to trial on unpleaded theories if the evidence is pertinent to the issues being tried. Universal's claim that the Derouins consented to the waiver issue by introducing evidence regarding a request for communication with an attorney is rejected, as this evidence was relevant to the Derouins' affirmative defense concerning Universal's lack of reasonable effort to arrange a meeting, not to Universal's unpleaded defense.

Universal's argument for trial by consent is unsupported due to two main points. First, the trial court's request for written memoranda on the waiver issue did not necessitate a contemporaneous oral objection from the Derouins. Second, the Derouins' written memorandum clarified that waiver was not an option since Universal failed to plead it. Their written closing argument effectively served as an objection, similar to precedents where a lack of contemporaneous objection did not prevent appellate review. The court concluded that the Derouins did not waive Universal's compliance with HUD regulations, which are a prerequisite for foreclosure. Consequently, the court reversed the trial court's decision and remanded for an order of involuntary dismissal.