Third District Court of Appeal
State of Florida
Opinion filed July 15, 2015.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D13-2261
Lower Tribunal No. 11-23099
________________
Celia Elmira Smith,
Appellant,
vs.
Reverse Mortgage Solutions, Inc., etc.,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Jon I. Gordon,
Judge.
Kronhaus Law Firm, P.A., and Julie W. Kronhaus (Winter Park), for
appellant.
Marinosci Law Group, P.C., and Bart Heffernan (Ft. Lauderdale), for
appellee.
Before SHEPHERD, ROTHENBERG and SCALES, JJ.
SCALES, J.
Celia Smith (“Mrs. Smith”), who was the defendant below, appeals from a
Final Judgment of Foreclosure arising out of a home equity conversion mortgage
signed and executed in May 2008, by Mrs. Smith and her now-deceased husband,
Kenneth Smith (“Mr. Smith”). Because Reverse Mortgage Solutions, Inc., the
plaintiff below and appellee here, failed to establish the occurrence of a condition
precedent to its right to foreclose, we reverse.
I. FACTS
On May 8, 2008, while Mr. and Mrs. Smith were married, Mr. Smith signed
and executed an adjustable rate note secured by a home equity conversion
mortgage, or what is commonly referred to as a “reverse mortgage.” A reverse
mortgage allows elderly homeowners to receive monthly payments from a lender
based upon the homeowners’ equity in their principal residence. Instead of the
more conventional mortgage arrangement—where the borrower receives a lump
sum from a lender, and then repays the lender over time with monthly payments—
generally, in a reverse mortgage arrangement, the lender makes monthly payments
to the elderly homeowners, and the homeowners’ obligation to repay the lender
ripens only upon the homeowners’ death or when the homeowners move from their
home. See, e.g., Bennett v. Donovan, 703 F.3d 582, 584-85 (D.C. Cir. 2013).
2
The reverse mortgage at issue here encumbered the residential property
where Mr. and Mrs. Smith lived together as their principal residence. Mrs. Smith
executed the mortgage, but she did not sign the promissory note.1
Following Mr. Smith’s death in December 2009, Reverse Mortgage
Solutions filed a verified complaint for foreclosure of the reverse mortgage,
alleging that Mr. Smith was the “sole borrower under the note and mortgage” and
that his death triggered the acceleration clause under the mortgage agreement. No
other ground for acceleration was alleged.
The verified complaint alleged that: (i) $229,475 was due under the note and
mortgage, plus interest; (ii) all conditions precedent to the acceleration of the note,
and to foreclose on the mortgage, had been fulfilled or had occurred; and (iii) Mrs.
Smith owned the property. Mrs. Smith’s answer denied the complaint’s condition
precedent allegations, and specifically pled: “This mortgage should not be
accelerated as the Defendant [Mrs. Smith] is still alive and living in the real
property as her homestead.”
1 Unlike a traditional mortgage arrangement, in a reverse mortgage arrangement,
the lender, after determining the value of the borrower’s principal residence,
generally will make regular (usually monthly) payments to the borrower during the
borrower’s lifetime. The note’s principal amount is derived by a lender formula
that includes the sum of the value of the lender’s payments to the borrower, closing
costs, accrued interest, insurance and servicer/lender fees. See, e.g., Bennett, 703
F.3d at 584-85. While the subject note and mortgage both reference a “Loan
Agreement” (which, presumably, defines the monthly amount paid to the borrower
and the calculation of the note’s principal), no Loan Agreement is contained in the
record on appeal. The subject note’s principal amount is $544,185.
3
Following a bench trial, the trial court entered a form final judgment of
foreclosure in favor of Reverse Mortgage Solutions in the amount of $248,403.59,
foreclosing on Mrs. Smith’s interest in the property and setting a September 2013
foreclosure sale date. The final judgment contains no specific findings of fact or
other adjudications with regard to whether all conditions precedent had occurred.
Mrs. Smith appeals the trial court’s Final Judgment of Foreclosure,
contending that acceleration of the mortgage is inappropriate under both the
express provisions of the mortgage document and the federal statute governing the
insurability of reverse mortgages by the U.S. Department of Housing and Urban
Development (HUD).2 Essentially, Mrs. Smith argues that she is a co-borrower
under the mortgage, which prohibits foreclosure until she either dies or no longer
maintains the property as her principal residence.
We conclude that Mrs. Smith is a co-borrower as contemplated in the
mortgage, and, therefore, a condition precedent to Reverse Mortgage Solutions’
right to foreclose (to wit, Mrs. Smith’s death) has not occurred. Thus, we remand
for a new trial to allow the trial court to adjudicate specifically whether the other
condition precedent to Reverse Mortgage Solutions’ right to foreclose has
occurred, i.e., whether the encumbered real property was Mrs. Smith’s principal
residence as of the date of the trial.
2 See 12 U.S.C. § 1715z-20(j), infra note 4.
4
II. ANALYSIS
A. Issue Before the Court
The issue before this Court is whether the trial court erred in its implicit
determination that all conditions precedent to Reverse Mortgage Solutions’
entitlement to foreclosure had occurred. Specifically, we must determine
whether—as a matter of law—Mrs. Smith is a “Borrower” as that term is used in
the mortgage. If Mrs. Smith is a “Borrower,” either her death or her ceasing to use
the subject property as her principal residence is a condition precedent to Reverse
Mortgage Solutions’ right to foreclose the mortgage.
B. Standard of Review
We first note that, consistent with the dictates of Applegate v. Barnett Bank
of Tallahassee, 377 So. 2d 1150 (Fla. 1979), and its progeny, the burden is on Mrs.
Smith as the appellant to demonstrate error by providing this Court with an
adequate record of the proceedings below, and, without such a record, affirmance
is normally required. When, as here, the issue presented involves a pure question
of law (i.e., judicial construction of the reverse mortgage to determine whether
Mrs. Smith is a “Borrower” as defined in the reverse mortgage), and the error of
law appears on the face of the final judgment,3 the absence of a transcript does not
3 Paragraph 7 of the Final Judgment of Foreclosure expressly forecloses all of Mrs.
Smith’s interest in the subject property and implicitly recognizes that she is still
alive. Hence, the error appears on the face of the judgment on appeal.
5
prevent reversal. See BarrNunn, LLC v. Talmer Bank & Trust, 106 So. 3d 51, 52
(Fla. 2d DCA 2013) (“[T]he absence of a transcript does not preclude reversal
where an error of law is apparent on the face of the judgment[.]”) (quoting Chirino
v. Chirino, 710 So. 2d 696, 697 (Fla. 2d DCA 1998)).
Normally, in a case such as this, the issue before this Court would simply be
whether the trial court’s conclusion (subsumed in the final judgment)—that all
conditions precedent to the plaintiff’s entitlement to foreclosure occurred—is
supported by competent substantial evidence. See Verneret v. Foreclosure
Advisors, LLC, 45 So. 3d 889, 891 (Fla. 3d DCA 2010) (“Findings of fact by a
trial judge in a nonjury proceeding will not be set aside on review unless totally
unsupported by competent and substantial evidence.”). In this case, however, the
trial court’s entry of the Final Judgment of Foreclosure hinged not on weighing any
trial evidence, but, rather, upon an interpretation of the reverse mortgage. The trial
court found that all conditions precedent had occurred based upon its legal
conclusion that Mrs. Smith was not a “Borrower” under the mortgage.
A trial court’s construction of notes and mortgages involves pure questions
of law, and therefore is subject to de novo review. Nagel v. Cronebaugh, 782 So.
2d 436, 439 (Fla. 5th DCA 2001) (determining that general contract principles
governed the trial court’s interpretation of the promissory note; thus, the
6
appropriate standard of review was de novo). We, therefore, review the trial court’s
construction of the reverse mortgage de novo.
C. Condition Precedent to Foreclosure
It is axiomatic that in a mortgage foreclosure action a plaintiff must plead
and prove the occurrence of all conditions precedent. See Konsulian v. Busey
Bank, N.A., 61 So. 3d 1283, 1285 (Fla. 2d DCA 2011).
Consistent with the requisites of 12 U.S.C. § 1715z-20(j)4 governing reverse
mortgages insured by HUD, the subject mortgage contains plain language
expressly conditioning the lender’s acceleration and foreclosure rights on the death
of any “Borrower” whose principal residence is the property encumbered by the
mortgage. Because the parties stipulate that Mrs. Smith has not died, and because
Mr. Smith’s death is the sole ground alleged for Reverse Mortgage Solutions’
acceleration and foreclosure, if Mrs. Smith is a “Borrower” under the mortgage,
4 This statutory provision, discussed in more detail in section II(F), below, reads in
its entirety, as follows:
(j) Safeguard to prevent displacement of homeowner
The Secretary may not insure a home equity conversion mortgage
under this section unless such mortgage provides that the
homeowner’s obligation to satisfy the loan obligation is deferred until
the homeowner's death, the sale of the home, or the occurrence of
other events specified in regulations of the Secretary. For purposes of
this subsection, the term “homeowner” includes the spouse of a
homeowner. Section 1647(b) of Title 15 and any implementing
regulations issued by the Board of Governors of the Federal Reserve
System shall not apply to a mortgage insured under this section.
7
then a condition precedent to the lender’s right to foreclose has not occurred,
thereby precluding the lender’s foreclosure action.
D. Analysis of Relevant Mortgage Language—Mrs. Smith’s Status as a
“Borrower”
We begin our analysis of whether Mrs. Smith is a “Borrower” by looking at
the language of the mortgage.5 The first paragraph of the mortgage begins by
identifying Mr. Smith as “a married man” and the mortgagor, which it thereafter
refers to as the “Borrower.”
The mortgage’s fourth paragraph contains the Borrower Covenant6, whereby
“the Borrower” acknowledges and covenants to the mortgagee that: (i) the
Borrower owns the property; (ii) the Borrower has the right to mortgage, grant, and
convey the property; and (iii) the property is otherwise unencumbered. The
Borrower Covenant also requires the Borrower to defend the title to the property.
The final portion of the mortgage plainly indicates that: (1) both Mr. and
Mrs. Smith are the “Borrower” under the mortgage; (2) both Mr. and Mrs. Smith
5With regard to the note, only Mr. Smith is referenced as the “Borrower.” Mrs.
Smith is neither mentioned nor referenced in the note. Reverse Mortgage
Solutions, however, seeks no relief from Mrs. Smith based on the note. It is only
Mrs. Smith’s status as a mortgagor that is implicated in this appeal.
6 The Borrower Covenant reads in its entirety, as follows:
BORROWER COVENANTS that Borrower is lawfully seised of the
estate hereby conveyed and has the right to mortgage, grant and
convey the Property and that the Property is unencumbered. Borrower
warrants and will defend generally the title to the Property against all
claims and demands, subject to any encumbrances of record.
8
signed the mortgage as the “Borrower”; and (3) both Mr. and Mrs. Smith’s
signatures were jointly verified by two witnesses and one notary jurat.
Specifically, immediately before the witnesses’ signatures, the mortgage
states the following: “BY SIGNING BELOW, Borrower accepts and agrees to the
terms and covenants contained in this Security Instrument and in any rider(s)
executed by Borrower and recorded with it.” Below this statement, both Mr.
Smith’s and Mrs. Smith signatures appear. Mrs. Smith’s signature was no accident
as her name was pre-printed on the document below the line she was required to
sign.
Paragraph 9 of the mortgage contains the condition precedent required in
such reverse mortgages by virtue of 12 U.S.C. § 1715z-20(j); that provision
specifically provides: “Lender may require immediate payment in full of all sums
secured by this Security Instrument if: (i) A Borrower dies and the Property is
not the principal residence of at least one surviving Borrower[.]” (emphasis
added).
Thus, based on the plain and unambiguous language of the mortgage—
which was executed by both Mr. and Mrs. Smith—(i) both Mr. and Mrs. Smith
were treated as the “Borrower” under the mortgage, and (ii) each borrower is
protected from the foreclosure of the mortgage until both borrowers die.
9
Hence, this Court’s determination that Mrs. Smith is a co-borrower—and,
therefore, that her death is a condition precedent to Reverse Mortgage Solutions’
ability to foreclose—could end here.
E. Conclusion Consistent With Florida’s Homestead Provisions
However, our conclusion that Mrs. Smith is a “Borrower” under the
mortgage is also supported by the reference to Mr. Smith as a “married man” in the
mortgage’s opening paragraph, coupled with the provision of the Borrower
Covenant whereby “the Borrower” expressly covenants that “the Borrower” has
the right to mortgage, grant, and convey the property.
Florida’s Constitution requires Mrs. Smith’s signature on the mortgage to
effectuate the lender’s security interest in their homestead property. Art. X, § 4(c),
Fla. Const. (“The owner of homestead real estate, joined by the spouse if married,
may alienate the homestead by mortgage . . . .”); see Pitts v. Pastore, 561 So. 2d
297, 301 (Fla. 2d DCA 1990) (holding that a mortgage is ineffectual as a lien until
such time as either the spouse joins in the alienation or the property loses its
homestead status). Additionally, since Mr. Smith was married to Mrs. Smith at the
time the mortgage was executed, only a deed containing Mrs. Smith’s signature
could validly convey her interest in the property. Id.
Therefore, only if Mrs. Smith is a “Borrower” would this portion of the
Borrower Covenant be accurate; Mr. Smith, acting alone, did not “have the right”
10
to either encumber or convey both his and Mrs. Smith’s interest in the couple’s
homestead property.7
Plainly, Reverse Mortgage Solutions intended for the Borrower Covenant to
confirm the mortgage’s validity and enforceability by having “the Borrower”
warrant its capacity and ability to encumber and convey the property. Under
Florida’s constitutional homestead provisions, this goal is achieved only if Mrs.
Smith is a “Borrower.”
F. Application of Federal Reverse Mortgage Law
Even more persuasive to our determination is the application of relevant
provisions of federal law related to reverse mortgages.8
At oral argument, the parties conceded that the subject mortgage was,
indeed, a “home equity conversion mortgage” issued by Reverse Mortgage
Solutions, and insured by HUD, pursuant to 12 U.S.C. § 1715z-20.9 12 U.S.C. §
7It is not clear from the record how the subject property was titled at the time the
mortgage was executed by Mr. and Mrs. Smith. Reverse Mortgage Solutions’
verified complaint, however, alleges that Mrs. Smith is the owner of the subject
property, an allegation Mrs. Smith admits in her answer.
8 Paragraph 17 of the mortgage reads, in relevant part, as follows: “This Security
Instrument shall be governed by Federal law and the law of the jurisdiction in
which the Property is located.”
9 The record is replete with proof that the subject mortgage is a “home equity
conversion mortgage” issued and insured under the auspices of 12 U.S.C. § 1715z-
20. The subject mortgage references: (i) a Federal Housing Authority case
number, (ii) requirements promulgated by the HUD Secretary, (iii) certain events
of default triggering the lender’s right to foreclosure if authorized by the HUD
11
1715z-20(j) is titled “[s]afeguard to prevent displacement of homeowner” and
provides, in relevant part:
The Secretary may not insure a home equity conversion mortgage
under this section unless such mortgage provides that the
homeowner’s obligation to satisfy the loan obligation is deferred until
the homeowner’s death, the sale of the home, or the occurrence of
other events specified in regulations of the Secretary.
(emphasis added). This provision goes on to expressly define the term
“homeowner” as including the spouse of the homeowner: “For purposes of this
subsection, the term ‘homeowner’ includes the spouse of a homeowner.” Id.
While the plain language of the statute imposes an obligation only on the
Secretary of HUD with regard to provisions that must be contained in reverse
mortgages insured by HUD, it is undisputed that the subject mortgage is, indeed, a
reverse mortgage insured by HUD. We are compelled to construe a contract
consistent with specific statutes that regulate and govern the contract. See
Westside EKG Assocs. v. Found. Health, 932 So. 2d 214, 216 (Fla. 4th DCA
2005); see also S. Crane Rentals, Inc. v. City of Gainesville, 429 So. 2d 771, 773
Secretary, (iv) the right of the lender to accelerate the amounts secured by the
mortgage if the HUD Secretary notifies the lender within eight months of loan
initiation that the loan is not insurable pursuant to the National Housing Act
(included in which is 12 U.S.C. § 1715z-20). Additionally, both the verified
complaint and the mortgage expressly reference a second mortgage—in which
HUD is the mortgagee—securing any payments HUD may make on behalf of the
Borrower pursuant to the National Housing Act. Indeed, HUD was named as a
defendant in the action and HUD’s second mortgage was foreclosed in the Final
Judgment of Foreclosure.
12
(Fla. 1st DCA 1983) (“The laws which exist at the time and place of the making of
a contract enter into and become a part of the contract made, as if they were
expressly referred to and incorporated in its terms, including those laws which
affect its construction, validity, enforcement or discharge.”).
The explicit purpose of 12 U.S.C. § 1715z-20(j) is to provide a safeguard
against the displacement of elderly homeowners. The statute would be without
effect if a mortgagee were permitted to foreclose on a mortgage while a
“homeowner,” as that term is expressly defined in the statute, maintains the subject
property as his or her principal residence. This is true especially when, as here, the
“homeowner” executed the very mortgage giving the mortgagee a security interest
in the subject property.
Our interpretation of the subject reverse mortgage is made rather easy in
light of Congress’s clear intent to protect from foreclosure a reverse mortgagor’s
surviving spouse who is maintaining the encumbered property as his or her
principal residence.10 The subject reverse mortgage is insured by HUD pursuant to
10 It appears that, as part of the reverse mortgage origination process, some reverse
mortgage originators are alleged to have advised one elderly spouse to execute a
quit-claim deed, deeding their jointly owned property to the other spouse, so that a
single “Borrower” would appear on all paperwork. See, e.g., Bennett, 703 F.3d at
585; Welte v. Wells Fargo Bank, N.A., No. EDCV-13-00463JGB, at *2-3 (C.D.
Cal. Dec. 18, 2013); Wiseman v. First Mariner Bank, No. ELH-12-2423, at *4 (D.
Md. Sept. 23, 2013). No such allegations have been made in this case. In fact, as
mentioned earlier, the verified complaint specifically alleges that Mrs. Smith owns
the subject property, and Mrs. Smith executed the subject mortgage. We need not,
and do not, reach the issues implicated in those cases where the nature of the
13
a Congressionally prescribed scheme that expressly requires deferment of the
obligation to satisfy the loan secured by such mortgages until the death of the
borrower and any spouse of the borrower.
G. Summary
Against the backdrop of this unambiguous Congressional mandate, it would
be difficult, if not impossible, for us to construe Mrs. Smith as anything other than
a “Borrower” for the purposes of Paragraph 9’s express conditions precedent. Our
conclusion is reinforced by Mrs. Smith having executed the subject mortgage
before a notary and two witnesses—over her pre-printed name on the subject
mortgage—under a heading that reads, “BY SIGNING BELOW, Borrower
accepts and agrees to the terms and covenants contained . . . .” in the mortgage
(emphasis added). Our conclusion is further reinforced by the express provisions
of the mortgage’s Borrower Covenant, as well as Florida’s constitutional
requirement that the reverse mortgage could not have encumbered Mrs. Smith’s
interest in the subject property absent her signature. Art. X, § 4(c), Fla. Const.
III. CONCLUSION
In light of the foregoing, we conclude that, as a pure question of law, Mrs.
Smith was a “Borrower” as that term is contemplated in Paragraph 9 (Grounds for
Acceleration of Debt) of the subject reverse mortgage. Therefore, pursuant to
surviving spouse’s ownership interest in the subject property is in dispute.
14
Paragraph 9, as a condition precedent to its entitlement to foreclosure, Reverse
Mortgage Solutions was required to establish either that: (i) Mrs. Smith had died,
or, (ii) as of August 5, 2013 (the date of trial), the property was no longer Mrs.
Smith’s principal residence.
Because the record before us contains no facts regarding whether the
property was Mrs. Smith’s principal residence as of August 5, 2013, we remand
the case for a new trial limited to that issue, if Reverse Mortgage Solutions chooses
to amend its complaint and proceed on that issue.11
Reversed and remanded with instructions.
ROTHENBERG, J., concurs.
11Of course, nothing in this opinion should be construed to limit Reverse Mortgage
Solutions’ ability to file a new foreclosure action upon the future occurrence of any
of the conditions precedent outlined in Paragraph 9 of the subject mortgage.
15
Celia Elmira Smith v. Reverse Mortgage Solutions, Inc., etc.
Case No. 3D13-2261
SHEPHERD, J., dissenting.
The labor expended by the majority to keep Kenneth Smith’s widow in her
home is admirable. Unfortunately, the legal analysis used does not measure up.
For this reason, I respectfully dissent.
I.
The central issue in this case is whether there was a default under the
mortgage, authorizing Reverse Mortgage Solutions, Inc., to foreclose. Reverse
Mortgage Solutions asserts there was a default under Paragraph 9(a)(i) of the
mortgage. This paragraph reads as follows:
9. Grounds for Acceleration of Debt.
(a) Due and Payable. Lender may require immediate payment
in full of all sums secured by this Security Instrument if:
(i) A Borrower dies and the Property is not the principal
residence of at least one surviving borrower, or . . .
(underline emphasis added).
The applicable acceleration clause in the mortgage is triggered when: (1) a
Borrower dies; (2) there is a “surviving borrower;” and (3) the property is not the
residence of a surviving borrower. It was Reverse Mortgage Solution’s burden at
trial to prove the existence of the default. The Court has not been provided with a
16
transcript of the trial, and the form Final Judgment of Foreclosure includes no
findings of fact. It merely states, “On the evidence presented, IT IS ORDERED
AND ADJUDGED that Plaintiff’s Final Judgment of Foreclosure is GRANTED.”
The trial court may have reasoned in one of two ways: (1) Final Judgment of
Foreclosure was warranted because Celia Smith is not a “Borrower” under the
mortgage; or (2) Celia Smith was a “Borrower,” but a Final Judgment of
Foreclosure was nevertheless warranted because by the date of the trial, the home
was no longer her “principal residence.” The majority grounds its reversal of the
Final Judgment of Foreclosure in this case on its belief that “The trial court found
that all conditions precedent had occurred based upon its legal conclusion that Mrs.
Smith was not a ‘Borrower’ under the mortgage.” Maj. Op. at p. 6. There is no
record support for the statement. The Court may as well have reasoned that Celia
Smith was a “Borrower” but no longer made the home her “principal residence.”12
This case should be affirmed on the strength of Applegate v. Barnett Bank of
Tallahassee, 377 So. 2d 1150 (Fla. 1979). As the Florida Supreme Court
explained, “Even when based on erroneous reasoning, a conclusion or decision of a
trial court will generally be affirmed if the evidence or an alternative theory
supports it.” Applegate, 377 So. 2d at 1152 (emphasis added). I do not believe
12 The “principal residence” issue was squarely before the trial court. In her
Answer, Celia Smith asserted as a defense that “This mortgage should not be
accelerated as the defendant, CELIA ELMIRA SMITH, is still alive and living in
the real property as her homestead.” (emphasis added).
17
Celia Smith was a “Borrower,” as will be demonstrated below, but even if she was,
the record of proceedings may have included an alternate ground for affirmance if
one had been brought to us. We should affirm the Final Judgment of Foreclosure
in this case for lack of a complete record.13
II.
If it is necessary to join issue on the question of whether or not Celia Smith
is a “Borrower” under the mortgage document, I conclude she is not. The
mortgage document in this case is a home equity conversion mortgage, insured by
the United States Department of Housing and Urban Development Home Equity
Conversion Mortgage (HECM) Program for Elderly Homeowners, under 12
U.S.C.A. 1715z-20. The mortgage and associated promissory note are HECM
form contract documents which follow the statute. The face of the mortgage
identifies the decedent, Kenneth Smith, and no other person, as the “Borrower”:
State of Florida ADJUSTABLE RATE
HOME EQUITY CONVERSION MORTGAGE
13 Also, it is improper for this court to remand this case “for a new trial to allow the
trial court to adjudicate specifically whether the other condition precedent, [the
principal residence question,] to Appellee’s right to foreclose has occurred.” See
Maj. Op. at p. 4 (emphasis added). This case has had its trial. If it was necessary
for Reverse Mortgage Solutions to prove that “the Property [was] not the principal
residence” of Celia Smith, the existence of the Final Judgment makes clear that the
lender must have done so. The majority forgets that “[i]n appellate proceedings,
the decision of a trial court has the presumption of correctness.” Applegate, 377
So. 2d at 1152.
18
THIS MORTGAGE (“Security Instrument”) is given on May 08, 2008. The
mortgagor is KENNETH S. SMITH, A MARRIED MAN, whose address is
9991 SW 154TH AVENUE, MIAMI, FL 33196 (“Borrower”). . . . The
agreement to repay is evidenced by Borrower’s Note dated the same date as this
Security Instrument (“Note”). This Security Instrument secures to Lender: (a) the
repayment of the debt evidenced by the Note . . . up to a maximum principal
amount Five Hundred Forty-Four Thousand One Hundred Eighty-Five and
00/100 Dollars ($544,185.00). . . .The full debt, including all amounts described
in (a), (b), and (c) above, if not paid earlier, is due and payable on September 07,
2086. For this purpose, Borrower does hereby mortgage, grant and convey to
Lender, the following described property located in MIAMI-DADE county,
Florida:
The real property located at 9991 SW 154th Avenue, Miami, FL, in the County of
Miami Dade, state of FL, described more fully on Exhibit A attached to this
mortgage.
(underline emphasis added).
The majority counters that Celia Smith must be a “Borrower” under the
mortgage because she signed it. The signature block, found on the last page of the
mortgage document, does indeed bear Celia Smith’s signature. It reads as follows:
BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants
contained in this Security Instrument and in any rider(s) executed by Borrower
and recorded with it.
Witness: _____________/s/___________________
_____________/s/___________________
Signature:
______________________________ ______________________________
______________________________ ______________________________
/s/ Kenneth S. Smith /s/ Celia Smith
CELIA SMITH
19
However, there is nothing in the signature block (or elsewhere in the mortgage
document) that indicates Celia Smith signed the document as a “Borrower.” In
fact, the language of the signature block continues to reference a single
“Borrower,” just as does the opening paragraph of the mortgage quoted above.14
The only argument the majority offers to the contrary is its statement that
“Mrs. Smith’s signature was no accident” because “it was pre-printed on the
document below the line she was required to sign.” All can concede that her
signature on the document was arranged with forethought and was not an accident.
However, that just begs the question of the purpose of the drafters in requiring her
signature.
The majority recognizes that a necessary purpose for the signature is that the
mortgage would have been unenforceable absent Celia’s joinder in the document.
14The majority insinuates that Celia Smith may have been in title to the property at
the time Kenneth Smith executed the mortgage. The majority places its reliance
for this inference on the allegation found in Paragraph 7 of the Verified Complaint
for foreclosure that “Defendant(s), CELIA ELMIRA SMITH, own(s) the
property.” Of course, the Verified Complaint for foreclosure was filed after
Kenneth Smith’s death. Ironically, if one were to carry the insinuation of the
majority to its logical conclusion, then Celia Smith would be a borrower, liable
under the promissory note as well. See Maj. Op. at p. 9 (“‘BY SIGNING
BELOW, Borrower accepts and agrees to the terms and covenants contained in the
Security Instrument . . .’”); see also R. at 16 (“[Mortgage Agreement Paragraph 1:]
Payment of Principal and Interest. Borrower shall pay when due the principal of,
and interest on, the debt evidenced by the note.”). The logic of the majority has the
additional unintended consequence of placing Reverse Mortgage Solutions, Inc. in
violation of 12 C.F.R. § 202.7(d)(1) (2014) (“A creditor shall not deem the
submission of a joint financial statement or other evidence of jointly held assets as
an application for joint credit.”).
20
See Art. X, §4(c), Fla. Const. (“The owner of homestead real estate, joined by the
spouse if married, may alienate homestead by mortgage, sale, deed or gift . . .);
Pitts v. Pastore, 561 So. 2d 297, 301 (Fla. 2d DCA 1990) (holding that a mortgage
is ineffectual as a lien until such time as either the spouse joins in the alienation or
the property loses its homestead status.). This imputation of purpose for Celia
Smith’s signature is harmonious with the evident intent of the drafters in the first
paragraph of the mortgage document. The additional imputation, interpretively
imposed on the mortgage document by the majority, conflicts with the
unambiguous definition and identity of the “Borrower” in the first paragraph of the
document. It is a basic principle of statutory and contractual interpretation that
where one interpretation of a statute or contract appears to conflict with another,
the courts will choose an interpretation which harmonizes the conflicting
interpretations wherever possible. See Homestead v. Johnson, 760 So. 2d 80, 84
(Fla. 2000) (“[W]e rely upon the rule of construction requiring courts to read
provisions of a contract harmoniously in order to give effect to all portions
thereof.”); see also Triple E Dev. Co. v. Floridagold Citrus Corp., 51 So. 2d 435,
438-39 (Fla. 1951) (“[I]f clauses in a contract appear to be repugnant to each other,
they must be given such an interpretation and construction as will reconcile them if
possible; if one interpretation would lead to an absurd conclusion, then such
21
interpretation should be abandoned and the one adopted which would accord with
reason and probability”). We should do so in this case.
The conclusion reached by the majority that Celia Smith is a “Borrower” on
the mortgage is also counter to the express terms of the promissory note. The
promissory note defines the “Borrower” as meaning “each person signing at the
end of this Note.” The only person who signed the promissory note was the
decedent, Kenneth Smith. Moreover, the promissory note contains substantially
identical acceleration language to that found in the mortgage document. Paragraph
7 of the promissory note reads as follows in relevant part:
7. IMMEDIATE PAYMENT IN FULL
(A) Death or Sale
Lender may require immediate payment in full of all outstanding
principal and accrued interest if:
(i) A Borrower dies and the Property is not the principal
residence of at least one surviving borrower, or . . .
(underline emphasis added). The decision of the majority creates the anomalous
result that the “Borrower” – expressly defined in two simultaneously executed and
related documents to be Kenneth Smith – now has two meanings. Although I am
unwilling to place my total confidence in the federal drafters of these financial
instruments (see Part III, infra), I do give them more credit than does the majority
in their ability to use the same word, in the same fashion, at the same time, in the
same transaction.
22
Finally, the use of a single-borrower reverse mortgage vehicle by a married
couple is not ipso facto nefarious. The calculation of the amount that can be
borrowed and the size of the resulting line of credit, lump sum, or periodic
payment available to the borrower varies with the age of the borrower. See
Plunkett v. Castro, 2014 WL 4243384 (D.D.C. 2014) (explaining why an older
borrower will almost always be able to receive a bigger loan amount). One might
envision many circumstances – e.g., the need for a significant, large lump sum to
apply to a medical emergency – where a married couple might find a single-
borrower reverse mortgage to be appropriate for their needs. By its decision today,
the majority imposes its own collectivistic view of life planning on a cadre of
seniors who have demonstrated they are capable of amassing wealth and governing
their own affairs. We should allow the citizenry to be their own deciders.
III.
The final question is whether the fact that the mortgage in this case is
insured under the federal Home Equity Conversion Mortgage Program for Elderly
Homeowners compels a contrary conclusion. The majority is of two minds on the
question. The majority first agrees that “the plain language of the statute imposes
an obligation only on the Secretary of HUD[15] with regard to the provisions that
must be contained in reverse mortgages insured by HUD” but in the next breath
15 The United States Department of Housing and Urban Development.
23
incorporates section 12 U.S.C.A. 1717z-20(j) into the mortgage document in this
case. Maj. Op. at pp. 13-14 (emphasis added). The majority was right the first
time.
The language relied upon by the majority reads as follows:
The Secretary may not insure a home equity conversion mortgage
under this section unless such mortgage provides that the
homeowner's obligation to satisfy the loan obligation is deferred until
the homeowner's death, the sale of the home, or the occurrence of
other events specified in regulations of the Secretary. For purposes of
this subsection, the term “homeowner” includes the spouse of a
homeowner.
12 U.S.C.A. 1715z-20(j). However, the majority fails to appreciate that at the time
Kenneth Smith signed the mortgage document and promissory note, the Secretary
was promoting and cheerfully insuring single-borrower home equity conversion
mortgages in circumstances of the type before us. These actions were based on a
rule sentiently created by the Secretary, which the Secretary has since all but
admitted directly conflicted with 1715z-20(j), and which the United States District
Court for the District of Columbia has recently confirmed to be so. Bennett v.
Donovan, 4 F. Supp. 3d 5 *11 (D.D.C. 2013). The rule read as follows:
The mortgage shall state that the mortgage balance will be due and
payable in full if a mortgagor dies and the property is not the principal
residence of at least one surviving mortgagor, or a mortgagor conveys
all or [sic] his or her title in the property and no other mortgagor
retains title to the property.
24
24 C.F.R. §206.27(c)(1) (adopted August 16, 1995). Asked by the United States
Court of Appeals for the District of Columbia Circuit during an intermediate
appellate phase of the Bennett litigation to justify the rule in the face of the
governing statute, the only explanation the Secretary could muster for flouting the
plain language of the federal statute was “concern[] about the scenario in which a
homeowner, after taking out a reverse mortgage, marries a spouse--particularly a
young spouse--and thereby significantly increases a lender’s risk.” Bennett v.
Donovan, 703 F. 3d 582, 586 (D.C. Cir. 2013).16 More recently, just five months
ago – perhaps recognizing that the United States Congress was right all along or,
forfend, having a momentary mental relapse to that quaint time in the past when it
was dogma that the Congress made the laws and the Executive carried them out –
the Secretary, at great expense and additional program risk, is now offering to
purchase single-borrower home equity loans of the type involved in this case from
the private lenders who funded them and allowing the non-borrowing spouse to
remain in the home until she dies or leaves the residence. See Letter 2015-03 from
16Technically speaking, the HECM program is administered by Federal Housing
Administration, commonly known as the FHA. The FHA is an agency housed
within the United States Department of Housing and Urban Development. The
FHA was created pursuant to the National Housing Act of 1934, Pub. L. No. 73-
479, 48 Stat. 847 (1934), and has long had as its purpose the expansion of
mortgage access and the enablement of home ownership. In this case, it simply
forgets its place in our constitutional firmament.
25
U.S. Dep’t of Hous. and Urban Dev., to All Approved Mortgagees at p. 8 et seq.
(January 29, 2015) (on file with author).
In all of this, HUD recognizes that section 1715z-20(j) does not empower it
to void or alter the terms of a bona fide mortgage contract between a “Borrower”
and a private lender. Id. at p. 3; Bennett v. Donovan, 797 F. Supp. 69, 77 (D.D.C.
2011) (“As the Secretary points out, whether the mortgages were properly insured
or not does not affect the mortgage’s own contractual terms, and it is these terms
that require Plaintiff’s spouses’ estates to repay the mortgages or sell the houses.”);
see also United States v. Neustadt, 366 U.S. 696, 709 and n. 24 (1961) (finding that
existence of mortgage insurance program did not create a legal relationship
between the government and the individual mortgagor.). Yet, the majority
somehow seeks to empower HUD where Congress through section 1715z-20(j)
does not. Perhaps the majority is swayed by the initial-appearing heavy-
handedness or unfairness of the program. However, there is no allegation of fraud,
misrepresentation, or trickery in this case, and fairness is in the eye of the beholder.
As explained in full detail in Plunkett, HUD incentivized this program in this
fashion. It does not follow that just because HUD went rogue, agreements made
between private parties are ipso facto unenforceable. In this case, a private lender
and a private individual made their own private deal. We should not contort
ourselves to impose our own view of what is right or good. “Law is something
26
more than will exerted as an act of power.” Hurtado v. California, 110 U.S. 516,
535 (1884).
I would affirm the decision of the trial court.
27