The Florida Supreme Court recently ruled that a mortgage and a note should be read together and that if there is a conflict the note will prevail, overturning the Third District Court of Appeals decision as it was in conflict with the established precedent of the Court.
A copy of the notice in FMAC funding against Palmero is available on: Link to Opinion.
The husband and wife applied for a loan as co-borrowers secured by a reverse mortgage on their house, but they did not take out the loan. Instead, a few months later, the husband applied for the same type of loan, but as a single borrower.
Although only the husband signed the note, he and his wife signed a âcertificate of participation in the ownership of the non-borrowing spouseâ, which identified the husband as âthe borrowerâ and the wife as ânon-borrowing spouseâ. “.
Both parties signed the reverse mortgage. Although the mortgage defined the husband as âthe borrowerâ, it also contained signature lines for both parties at the end âwhich were pre-printed with their names and the wordâ borrower â.
The husband is deceased, which “[a]s with a typical reverse mortgage,â¦ [triggered] acceleration of the debt before the repayment date identified in the note and the mortgage.
The mortgagee at the time then filed an action for mortgage foreclosure. In response, the wife and her two adult children argued that, since she continued to reside in the property as her principal residence, the mortgage could not be foreclosed because “the note and the mortgage conditioned the execution of the debt to the following: “A borrower dies and the [mortgaged] The property is not the primary residence of at least one surviving borrower.
The case went to trial and although the court of first instance ruled that the wife “was not a co-borrower[,] â¦ He denied foreclosure on the basis of a federal law that governs the insurability of reverse mortgages by the secretary of the Department of Housing and Urban Development.
On appeal, the Florida Third District Court of Appeals ruled, “in a new bench hearing, that the trial court erred in relying on federal law to deny foreclosure because the he application of the law was neither raised as an affirmative defenseâ¦ nor challenged by the consent of the parties to the trial.
However, the Third District then ruled “in law” that the wife was a co-borrower, disagreeing with the trial court on this issue, but nonetheless “upheld the trial court’s denial of foreclosure on the issue. basis of his conclusion that [the bank] has failed to establish that a condition precedent to its foreclosure right has arisen, i.e. that the property in question is not the principal residence of [the wife], a surviving co-borrower on the Instant Reverse Mortgage. “
The Florida Supreme Court “accepted jurisdiction to resolve the express and direct conflict between the Third District’s decision and its earlier decisions dating from 1907 and 1934. Review the Third District’s decision under the legal standard de novo because the ‘interpretation of notes and mortgages are pure questions of law, the Court concluded that the wife was not a co-borrower â[b]because the correct application of our precedent establishes that it is not âand overturned the decision of the court of appeal.
The Supreme Court ruled that “over a hundred years ago” it “explained why, in foreclosure actions, the general rule is that a mortgage must be interpreted with the note it secures …”. In other words, because they were signed as part of the same transaction, the note and the mortgage must be read together.
The Court continued, finding that it had “for as long explained that”[t]The general rule is that if there is a conflict between the terms of a note and a mortgage, the note should prevail.
The Supreme Court noted that the note and the mortgage defined the husband as “the borrower” and that the wife had only joined the mortgage because it “would have been necessary for the lender to have a valid security because the mortgaged property was his family property. , “before disagreeing with the decision of the Third District that the location of the wife’s signature on the mortgage” unambiguously and in law, … my[de] she is a co-borrower under the mortgage.
Because, the Court concluded, â[t]The detention of the Third District ignores not only that the mortgage expressly defines [the husband] as “the borrower,” but it also ignores that this Court’s foreclosure precedent requires the courts to read the mortgage with the note it secures,. . . and to look to the note to resolve any conflict, … “it was a mistake to look beyond” the note and the mortgage to other documents that were part of the same transaction to determine, in law, how the parties intended to define the term âBorrowerâ.
Finally, in disagreement with the dissent, the Supreme Court explained that it did not matter that the court’s foreclosure precedent dealt with âtraditional mortgages and therefore should not apply to the reverse mortgage in issueâ because â the principles documents involved – tell us why we should read a mortgage with the note it secures, regardless of the type of mortgage to be seized: “[T]The promissory note, and not the mortgage, is the operational instrument in a mortgage loan transaction, because “a mortgage is only an accessory to the debt, of which it guarantees payment, and its ownership follows the assignment. debt “.