Chapter 7-3 Affirmative Defenses
7-3 Affirmative Defenses
7-3:1 Introduction
An affirmative defense admits liability of the plaintiff's claim and seeks to avoid the claim by some other means.30 There are numerous affirmative defenses to foreclosure, including lack of standing, failure of conditions precedent, and defenses related to payment and waiver. Other common law and statutory defenses are regularly asserted as well. These defenses must be pleaded with certainty and with sufficient ultimate facts to establish the necessary elements of the defense.31
7-3:2 Lack of Standing
Standing is an affirmative defense to be raised by a defendant in a responsive pleading.32 Failure to raise standing as an affirmative defense may result in a waiver of the right to contest it.33 Standing in a mortgage foreclosure case is broader than the question of ownership of the beneficial interest of a note.34 Standing in a mortgage foreclosure case is also unique, inasmuch as it may also be an element of the plaintiff's claim.35
The party seeking to foreclose a mortgage must demonstrate that it has standing and must also demonstrate that the plaintiff that filed the case had standing at the time that the complaint was filed.36 Because a mortgage promissory note is a negotiable instrument, standing may be determined by whether the plaintiff is the holder of the note or otherwise entitled to enforce the note, pursuant to Chapter 673, Florida Statutes.37 A defendant asserting an affirmative defense to a plaintiff's standing must therefore allege that the plaintiff was not entitled to enforce the note and foreclose the mortgage. The defense must raise facts in support of this allegation without resorting to issues of whether a plaintiff has complied with the strictures of contractual arrangements to which the defendant was neither a party nor a third-party beneficiary.38
Under the statutes governing negotiable instruments, either a holder, a non-holder in possession who has the rights of a holder, or a person not in possession who is entitled to enforce the instrument may have standing in a foreclosure case.39 A holder is the person in possession of a negotiable instrument that is payable either to the person in possession or to blank.40 However, a substituted plaintiff may become a holder without demonstrating that it had physical possession of the original note.41 Where there is a trustee relationship regarding the note, an endorsement to a trustee is sufficient to establish standing, regardless of whether the identity of the trust is, itself, clear.42 Under Florida law, the mortgage follows the note, meaning that the person or entity entitled to enforce the note is also entitled to foreclose the mortgage.43
Standing may be established in a number of ways. First, an assignment of mortgage or equitable transfer of the mortgage prior to the filing of the complaint may be proven.44 Secondly, a special endorsement on the note in favor of plaintiff or a blank endorsement may be used to demonstrate standing.45 Additionally, an assignment from the payee to the plaintiff or an affidavit of ownership may prove plaintiff's status as a holder of the note.46 Alternatively, proof of mere delivery of the note and mortgage, with the intention to pass title based upon a proper consideration is sufficient to demonstrate standing.47 A plaintiff may establish that the note is lost and that plaintiff is entitled to enforce the lost note pursuant to statute.48 A plaintiff may rely on a pooling and servicing agreement to establish standing, showing that a note was transferred into the trust.49 Moreover, the conduct of the parties may be used to determine whether a plaintiff has standing. If a plaintiff has been paying for upkeep of the property, in terms of paying for items such as taxes and insurance, then a court may use that fact to infer standing on the part of that plaintiff.50 Ultimately, a plaintiff will need to demonstrate one or more of the following: evidence of a valid assignment; proof of the purchase of the debt; or evidence of an effective transfer.51 A plaintiff may possess standing as the owner of the note, the holder of the note, or the agent of either.52 The manner in which a plaintiff pleads its standing may determine the manner in which a defendant pleads its defense, because it controls the evidence necessary to prove or disprove standing, at trial.53 Filing the note with the court establishes a clear presumption that the plaintiff has standing, at least as of the date that the note is filed.54 Where the note filed with the court is endorsed either in blank or to plaintiff, and where the same endorsement appears on the copy of the note attached to the complaint, a plaintiff's standing as holder of the note is established.55 The copy of the note attached to the complaint must be an exact copy of the original note introduced at trial, and redaction of information on the copy attached to the complaint may complicate a plaintiff's ability to establish standing.56 Possession of the note may be actual or constructive.57 Constructive possession occurs if a third party has physical possession of the note, but the plaintiff has the power to exercise control over the note.58 A party that is substituted as plaintiff may acquire the status with regard to standing that the original plaintiff had at the time that suit was filed.59
An endorsement may be on a separate sheet of paper, referred to as an "allonge."60 The endorsement or the allonge need not be dated.61 However, issues of fact arise when an endorsement is not dated, and the plaintiff will need to prove that the endorsement in blank or in favor of the original plaintiff occurred prior to the filing of the complaint.62
7-3:3 Failure of Conditions Precedent
The pleading and denial of conditions precedent are governed by Rule 1.120(c), Florida Rules of Civil Procedure. A plaintiff may simply plead that all conditions precedent have been performed or have occurred.63 In denying the performance of conditions precedent, the defendant must make a denial specifically and with particularity.64 An allegation that is subject to interpretation as to the manner of non-compliance is insufficient to meet the requirement that the allegation be made specifically and with particularity.65 The failure to perform a condition precedent is an affirmative defense, and the defendant asserting it bears the burden of pleading and persuasion.66 An element of this defense includes a demonstration of prejudice to the defending party.67 Defendants in foreclosure actions typically raise two affirmative defenses alleging failures of conditions precedent: that the plaintiff failed to comply with paragraph 22 of the mortgage and that plaintiff failed to comply with statutory conditions that have been expressly incorporated into the loan documents.
Paragraph 22 of the form mortgage at issue in most foreclosure cases in Florida requires that the party seeking to foreclose provide a notice to the defendant. The notice must specify that there has been a default, what the default is, what action is required to cure the default, a date not less than 30 days from the date the notice is given by which the default must be cured, and that failure to cure the default may result in acceleration of the debt, foreclosure by judicial proceeding, and sale of the property. The notice must further inform the defendant of the right to reinstate the loan and the right to assert defenses in the foreclosure proceeding.
A defendant may allege that the plaintiff has failed to send the notice of intent to accelerate or may allege that, although the notice was sent, it was non-compliant with the strictures of the mortgage. Defendants may attempt to allege that strict compliance with paragraph 22 of the mortgage is required or that, at least, compliance with each of the six requirements in paragraph 22 is required.68 Plaintiffs will allege that, because the mortgage is a contract, the plaintiff is required to substantially comply with the terms of the mortgage.69 Plaintiffs have been held to be required to substantially comply with conditions precedent found within the mortgage.70 In either case, the doctrines of futility and anticipatory breach may operate to bar the defense.71 This affirmative defense is successful where the notice was not given in the manner provided under the mortgage. This affirmative defense is also successful in circumstances in which the notice suffers from major deficiencies.
Where the loan documents specifically incorporate other statutory schemes, defendants will allege that conditions precedent in those statutes create contractual conditions precedent. There has been a recent trend toward agreement with this proposition. For instance, if a note or mortgage specifically incorporate the regulations of the federal Department of Housing and Urban Development regulations, such regulations are treated no differently than compliance with conditions precedent that are defined within the terms of the contract.72 Following this reasoning, courts have held that federal Department of Veterans Affairs regulations may create contractual conditions precedent, provided that the contract expressly and specifically incorporates those regulations.73 However, if the regulations are not specifically incorporated by the terms of the contract, then they do not constitute contractual conditions precedent.74
These conditions precedent, like those appearing on the face of the mortgage, are reviewed for whether the plaintiff has substantially complied with their requirements.75 Substantial compliance differs from strict compliance, the standard usually reserved for compliance with statutory conditions precedent. Substantial compliance is that which, while not full performance, is nearly equivalent to what was bargained for.76
7-3:4 Defenses Related to Payment
Mortgage payments may be applied in different ways, depending on the loan documents at issue in the case. Generally...
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