Chapter 6-5 Additional Causes of Action
6-5 Additional Causes of Action
In addition to a claim to foreclose the note and mortgage, the plaintiff may assert other claims in its complaint necessitated by the facts of its situation. Below is a discussion of some of the more common claims brought in conjunction with a standard mortgage foreclosure claim.
6-5:1 A Claim Against a Guarantor
In addition to a note and mortgage, the borrower or another person may have signed a personal guaranty for payment of the debt. A guaranty may be absolute upon default or conditional on other events. A plaintiff may bring a count against the guarantor for money damages based on the guaranty in its mortgage foreclosure action.135
6-5:2 Reestablishment: When the Note Has Been Lost
Occasionally, an original promissory note is lost before the plaintiff files its action. Florida has enacted, among other things, those portions of the Uniform Commercial Code which permit enforcement of lost notes and which set forth the requirements for enforcing a lost, destroyed, or stolen note.136
To enforce a lost or destroyed promissory note, the plaintiff must show that it was entitled to enforce the note at the time that the note was lost, or that it directly or indirectly acquired ownership of the note from someone who was entitled to enforce the note when the note was lost.137 The plaintiff also must show that the loss of possession was not the result of a transfer by the person or a lawful seizure and that it cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.138 Additionally, the plaintiff must show, by reasonable means, that the borrower is adequately protected against potential claims by another person to enforce the instrument.139 Finally, the plaintiff ultimately must prove the terms of the note.140 The cause of action to enforce the lost note accrues upon the borrower's default, not when the note was lost.141
In its complaint, the plaintiff must attach an affidavit that (1) details a clear chain of all endorsements, transfers, or assignments of the note; (2) assert facts showing that the plaintiff is entitled to enforce the note; and (3) include as exhibits to the affidavit copies of the note and any allonges to the note, audit reports showing receipt of the original note, or other evidence of the acquisition, ownership, and possession of the note as may be available to the plaintiff.142
Although Fla. Stat. § 673.3091 does not require the re-establishment of the note, many foreclosure plaintiffs who have lost the note commonly bring a separate count to reestablish the lost note. On the other hand, Form 1.944(b) in the appendix to the Florida Rules of Civil Procedure provides a template for a complaint seeking to enforce a lost note without a second claim to re-establish the note and recent case law holds that the re-establishment of a lost note is not an independent cause of action.143
6-5:3 Reformation: When the Mortgage or Deed Contains a Mistake
A plaintiff may discover that the mortgage or the deed to the property contains a misspelling, an incorrect legal description, or similar typographical errors. While courts have deemed legal descriptions of properties sufficient despite minor mistakes where the description of the property could be determined from a review of the entire instrument, the plaintiff may need to reform the instrument to obtain marketable title.144 To do so, the plaintiff should address these errors in its complaint.145 A count for reformation of the document containing the mistake is appropriate in this situation.146
A claim for reformation of the mortgage is an equitable claim.147 In reforming a written instrument, the court does not alter the agreement of the parties but only corrects the instrument so that it accurately reflects the true terms of the agreement actually reached.148 Accordingly, the error being corrected must be the kind of error that arose from a mutual mistake between the parties.
In its allegations in support of this count, the plaintiff should identify the error specifically and allege that the error was the result of a mutual mistake between the parties.149 The plaintiff should also allege the parties' actual, mutual intent. For example, if the legal description in the mortgage contains a typographical error, the plaintiff should provide the erroneous language and then provide the correct legal description, asking the court to reform the mortgage to reflect the corrected legal description. Ultimately, the plaintiff will be required to demonstrate the mutual mistake as well as the intentions of the parties through clear and convincing evidence.150 Where the instrument being reformed is a deed, the original grantors and grantees involved in the mistake are necessary parties to the action, so the plaintiff should name them in the complaint.151
6-5:4 Equitable Subrogation and Equitable Liens
As discussed in Chapter 5, mortgages should be recorded in the official records of the county in which the property lies as soon as possible after their execution. Doing so ensures that the world has notice of the mortgage and establishes the mortgage's priority relative to other liens.152 When a mortgage is not recorded, or where an owner of the property failed to sign the mortgage, its terms may still be enforceable, but it may be subject to other liens that were recorded after the mortgage's execution. The plaintiff should consider whether to include a claim for an equitable lien or for equitable subrogation in its complaint in such a case.
The plaintiff's pre-suit review of title should help identify the need for these causes of action. The plaintiff also should review the title insurance policy for the mortgage loan transaction and notify its title insurer before deciding whether to bring these claims. The failure to invoke the protections of the title insurance policy may result in a waiver of any potential title-related claims that otherwise might be covered.
As the terms indicate, both equitable subrogation and equitable liens are creatures of equity.153 An equitable lien may arise where the conduct of the parties affected would entitle one party as a matter of equity to proceed against certain property.154 The elements of an equitable lien count are similar to those of an unjust enrichment claim.155 In its complaint, the plaintiff should allege the existence of the mortgage, that it provided the benefit of funding to the defendant under the terms of the mortgage, that the defendant accepted the funds, that the defendant defaulted under the obligations of the mortgage, and that it would be inequitable for the defendant to retain the property under the circumstances.
The plaintiff may also need to assert a claim for equitable subrogation. Equitable...
To continue reading
Request your trial