Supreme Court of Florida
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No. SC19-1920
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WVMF FUNDING, AS SUCCESSOR TO ONEWEST BANK, FSB,
Petitioner,
vs.
LUISA PALMERO, et al.,
Respondents.
June 24, 2021
LAWSON, J.
The decision on review presents the legal questions of whether,
in a foreclosure action, the terms of the mortgage and note must be
construed together and, if so, in the event of a conflict between the
two documents, which prevails. We answered both of these
questions long ago, holding that the mortgage must be read
alongside the note it secures and that the note prevails in the event
of a conflict. See Graham v. Fitts, 43 So. 512, 513-14 (Fla. 1907)
(requiring joint construction of note and mortgage in foreclosure
actions); Hotel Mgmt. Co. v. Krickl, 158 So. 118, 119 (Fla. 1934)
(setting forth the “general rule” for foreclosure actions that “if there
is a conflict between the terms of a note and mortgage, the note
should prevail”). Because the Third District Court of Appeal in
OneWest Bank, FSB v. Palmero, 283 So. 3d 346 (Fla. 3d DCA 2019),
failed to follow our precedent and instead looked solely at the
location of a signature on a mortgage to hold that the term
“Borrower” means something different than both the mortgage and
the note define it to mean, we granted review based on express and
direct conflict with our decisions in Graham and Krickl, see art. V, §
3(b)(3), Fla. Const., and now quash the Third District’s decision.
BACKGROUND
Roberto Palmero and his wife, Respondent Luisa Palmero,
initially applied as co-borrowers for a loan that was to be secured
by a reverse mortgage on their primary residence and homestead.
See Palmero, 283 So. 3d at 347. Several months later, however, the
Palmeros changed course, and Mr. Palmero applied for the same
type of loan, only this time, as the sole borrower. See id. 1
1. “[B]ecause Mr. Palmero was the only borrower under the
terms of the loan agreement, he qualified for—and received—a
higher amount than would have been paid had Mrs. Palmero been a
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Five documents relate to Mr. Palmero’s loan: (1) a residential
loan application; (2) a home equity conversion loan agreement; (3)
an adjustable rate note; (4) a non-borrower spouse ownership
interest certification; and (5) a reverse mortgage. See id. at 347-48;
see also id. at 356-57 (Emas, C.J., dissenting).
The first three documents, all signed on the same date,
identified Mr. Palmero as the sole borrower and were signed only by
him. Id. at 347. Of these three documents, the note is of primary
importance, and it defines “Borrower” as “each person signing at
the end of this Note.” Id. at 357 (Emas, C.J., dissenting). Mr.
Palmero is the only person whose signature appears at the end of
the note. Id. (Emas, C.J., dissenting).
Both Mr. and Mrs. Palmero signed the fourth document, the
non-borrower spouse ownership interest certification. Id. at 348.
Although the date on the certification is illegible, like the three
documents signed solely by Mr. Palmero, the certification identified
Mr. Palmero as the borrower. Id. at 357 (Emas, C.J., dissenting).
co-borrower.” Palmero, 283 So. 3d at 357 n.14 (Emas, C.J.,
dissenting).
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The certificate also identified Mrs. Palmero as the “Non-Borrower
Spouse.” Id. at 348.
Finally, to secure the note, Mr. and Mrs. Palmero both
executed the fifth document, the reverse mortgage. Id. at 347. The
mortgage bears the same date as the note, and it expressly refers to
the note, including defining the mortgage as a “Security
Instrument” given to “secure[] to Lender . . . the repayment of the
debt evidenced by the Note.” Consistent with the other documents,
the mortgage defined the “Borrower” as “Roberto Palmero, a married
man.” Id. at 348. The signature block of the mortgage provided
that “BY SIGNING BELOW, Borrower accepts and agrees to the
terms contained in this Security Instrument and in any rider(s)
executed by Borrower and recorded with it.” Id. at 357 (Emas, C.J.,
dissenting). Both Mr. and Mrs. Palmero signed their names on lines
beneath this sentence that were preprinted with their names and
the word “Borrower.” Id. at 348.
As with a typical reverse-mortgage loan, certain events would
trigger acceleration of the debt prior to the repayment date
identified in the note and mortgage. See generally Estate of Jones v.
Live Well Fin., Inc., 902 F.3d 1337, 1338-39 (11th Cir. 2018)
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(explaining reverse-mortgage loans). As relevant here, the triggering
event was Mr. Palmero’s death. See Palmero, 283 So. 3d at 349.
Following Mr. Palmero’s death, when his estate did not repay
the loan, Petitioner’s predecessor, OneWest Bank, FSB (OneWest),
sought to foreclose the mortgage that secured the loan. Id.
Respondents, Mrs. Palmero and her two adult children, defended
against the foreclosure action by arguing that Mrs. Palmero, who
continued to principally reside in the mortgaged property, was a
co-borrower under the mortgage. Id. Mrs. Palmero’s status (or not)
as a co-borrower was critical because both the note and mortgage
conditioned enforcement of the debt on the following: “A Borrower
dies and the [mortgaged] Property is not the principal residence of
at least one surviving Borrower.” Id. at 364 n.23 (Miller, J.,
dissenting).
Following a bench trial, the trial court ruled that Mrs. Palmero
was not a co-borrower. Id. at 350. However, it denied foreclosure
based on a federal statute that governs the insurability of reverse
mortgages by the Secretary of the Department of Housing and
Urban Development. See id. (citing 12 U.S.C. § 1715z-20(j)).
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On appeal, the Third District held, on rehearing en banc, that
the trial court erred by relying on the federal statute to deny
foreclosure because the statute’s application “was neither raised as
an affirmative defense . . . nor litigated by the consent of the parties
at the bench trial.” Id. However, the Third District disagreed with
the trial court’s factual finding that Mrs. Palmero was not a co-
borrower, ruling instead that, “as a matter of law,” id. at 350, the
mortgage unambiguously defined her as a “Borrower.” See id. at
350-52. Accordingly, the Third District affirmed the trial court’s
denial of foreclosure based on its conclusion that “OneWest failed to
establish the occurrence of a condition precedent to its right to
foreclose, i.e., that the subject property is not the principal
residence of Mrs. Palmero, a surviving co-borrower under the
instant reverse mortgage.” Id. at 347.
In support of its holding, the Third District relied on its prior
decisions in Smith v. Reverse Mortgage Solutions, Inc., 200 So. 3d
221 (Fla. 3d DCA 2016), and Edwards v. Reverse Mortgage
Solutions, Inc., 187 So. 3d 895 (Fla. 3d DCA 2016), where the
district court had “considered reverse mortgages identical to the
[Palmeros’] reverse mortgage and determined that, as a matter of
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law, the surviving spouse is a co-borrower.” Palmero, 283 So. 3d at
353 (emphasis omitted). The Third District looked to these prior
decisions to construe the loan documents at issue over strong
dissents arguing that the court should instead apply longstanding
foreclosure precedent that governs the construction of notes and
mortgages. See id. at 361 (Emas, C.J., dissenting) (identifying,
among other failings in the majority’s decision, that it “ignores the
fact that the contemporaneously executed note contains only Mr.
Palmero’s name and signature as borrower”); see also id. at 362
(Miller, J., dissenting) (“[I]n addition to failing to mutually construe
the contemporaneously executed documents, the majority
dispenses with a body of well-reasoned, established jurisprudence,
the controlling provisions of the promissory note, and the express
terms of the mortgage in determining that the inclusion of Mrs.
Palmero’s unnotarized signature on the mortgage renders her a
‘Borrower,’ as a matter of law.”).
We accepted jurisdiction to resolve the express and direct
conflict between the Third District’s decision and our decisions in
Graham and Krickl. See art. V, § 3(b)(3), Fla. Const.
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ANALYSIS
We review de novo the Third District’s legal conclusion that
Mrs. Palmero is a co-borrower. See Bank of New York Mellon v.
Withum, 204 So. 3d 136, 137 (Fla. 4th DCA 2016) (“[C]onstruction
of notes and mortgages are pure questions of law subject to de novo
review.”). Because proper application of our precedent establishes
that she is not, we quash the district court’s decision. 2
Over one hundred years ago, we explained why, in foreclosure
actions, the general rule is that a mortgage should be construed
together with the note that it secures:
The note and mortgage were executed at the same
time in one transaction relating to the same subject, and
the mortgage refers to the note. Therefore they should be
2. Although the parties and the dissent also raise arguments
regarding the federal insurability statute, we exercise our discretion
not to reach them, as they were not properly litigated in the trial
court and are not controlling of the jurisdictional issue. See Savoie
v. State, 422 So. 2d 308, 312 (Fla. 1982) (“[A]uthority to consider
issues other than those upon which jurisdiction is based is
discretionary with this Court and should be exercised only when
these other issues have been properly briefed and argued.”); see
also Estate of Jones, 902 F.3d at 1341-42 (explaining that the “plain
language” of 12 U.S.C. § 1715z-20(j) “applies only to HUD and
speaks only to what the Secretary can and cannot do” in terms of
insuring mortgages and concluding that because the statute “says
nothing about private contractual obligations one way or the other,
. . . [it] cannot be read to alter or affect the enforceability of the
mortgage contract or its terms”).
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considered together in determining their meaning and
effect. By construing them together as parts of one
contract, the provisions of the principal note as to when
it shall become due and payable, when taken with the
provision of the mortgage that it is given to secure the
payment of the note, with interest, “according to the true
intent and meaning of said note,” it is clear that the
provisions of the note control. The note constitutes the
written evidence of the indebtedness, and the terms of its
payment are stated therein. The mortgage was given to
secure the payment “according to the true intent and
meaning of the note.”
Graham, 43 So. at 513-14 (citations omitted); see also Flinn v.
Lisenby, 136 So. 599, 601 (Fla. 1931) (“The note and mortgage was
a single contract and therefore must be read and construed
together.”).
We have also long explained that “[t]he general rule is that, if
there is a conflict between the terms of a note and mortgage, the
note should prevail. Effect should be given to both however, where
there is no actual or necessary conflict.” Krickl, 158 So. at 119
(citation omitted).
Here, both the mortgage and the note expressly define Mr.
Palmero as the “Borrower.” It is true that Mrs. Palmero also joined
in the mortgage—as would have been required for the lender to
have a valid security interest because the mortgaged property was
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her homestead, see art. X, § 4(c), Fla. Const.—and that she did so
by signing her name in the “Borrower” signature block. However,
contrary to the Third District’s holding, the location of Mrs.
Palmero’s signature on the mortgage did not unambiguously and as
a matter of law, see Palmero, 283 So. 3d at 352, make her a co-
borrower under the mortgage.
The Third District’s holding ignores not only that the mortgage
expressly defines Mr. Palmero as the “Borrower,” but it also ignores
that this Court’s foreclosure precedent requires courts to read the
mortgage together with the note it secures, see Graham, 43 So. at
513-14, and to look to the note to resolve any conflict, see Krickl,
158 So. at 119. As Judge Miller cogently explained in her dissent
below, applying our precedent, the location of Mrs. Palmero’s
signature on the mortgage
cannot be used to circumvent unambiguous, bargained-
for contractual language. Mr. Palmero was the sole
defined “Borrower” under both the note and mortgage.
Moreover, as the note and mortgage must be harmonized
to effect the intent of the parties, and any purported
conflicts between the note and mortgage should be
resolved in favor of the note, . . . Mr. Palmero was the
sole “Borrower,” and upon his death, the lender was
entitled to foreclose.
Palmero, 283 So. 3d at 366 (Miller, J., dissenting).
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Because the note—which defines Mr. Palmero and only Mr.
Palmero as the “Borrower”—resolves any conflict created by Mrs.
Palmero’s signing her name in the “Borrower” signature block of the
mortgage, we need not look beyond (and it was unnecessary for the
trial court to look beyond) the note and mortgage to the other
documents that were part of the same transaction to determine, as
a matter of law, how the parties intended to define the term
“Borrower.” See generally Sardon Found. v. New Horizons Serv.
Dogs, Inc., 852 So. 2d 416, 417, 420 (Fla. 5th DCA 2003)
(explaining that “[t]he primary rule of construction of a mortgage is
to ascertain the intention of the parties” and that “[w]here other
instruments are executed contemporaneously with a mortgage and
are part of the same transaction, the mortgage may be modified by
these other instruments”).3 We do note, however, that all of the
3. Similarly, because the proper application of our foreclosure
precedent resolves any conflict between the mortgage and the note
as a matter of law, we reject Respondents’ argument that we should
construe any ambiguity against the lender as the drafter. See
Emerald Pointe Prop. Owners’ Ass’n v. Com. Constr. Indus., Inc., 978
So. 2d 873, 878 n.1 (Fla. 4th DCA 2008) (“[T]he rule of adverse
construction is a ‘secondary rule of interpretation’ or a ‘rule of last
resort,’ which should not be utilized if the parties’ intent can
otherwise be conclusively determined.”).
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other documents consistently show that the parties intended for Mr.
Palmero to be the sole “Borrower,” and the record shows that Mr.
Palmero “qualified for—and received—a higher amount than would
have been paid had Mrs. Palmero been a co-borrower.” Palmero,
283 So. 3d at 357 n.14 (Emas, C.J., dissenting). 4
Finally, the Respondents argue and the dissent concludes that
our precedent involves traditional mortgages and therefore should
not apply to the reverse mortgage at issue here. However, first
principles—i.e., the reason for the documents at issue—tell us why
we should read a mortgage together with the note it secures
regardless of the type of mortgage being foreclosed: “[T]he
promissory note, not the mortgage, is the operative instrument in a
mortgage loan transaction, since ‘a mortgage is but an incident to
the debt, the payment of which it secures, and its ownership follows
the assignment of the debt.’ ” HSBC Bank USA, N.A. v. Perez, 165
4. Indeed, although we apply our precedent to resolve the
issue as a matter of law, as Chief Judge Emas pointed out in his
dissent below, after having held a bench trial on the issue of
whether Mrs. Palmero is a co-borrower, the trial court made a
factual finding, which is supported by competent, substantial
evidence, that she is not. See Palmero, 283 So. 3d at 356, 360-61
(Emas, C.J., dissenting).
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So. 3d 696, 699 (Fla. 4th DCA 2015) (quoting WM Specialty Mortg.,
LLC v. Salomon, 874 So. 2d 680, 682 (Fla. 4th DCA 2004)); see also
Palmero, 283 So. 3d at 363 (Miller, J., dissenting) (“The note
represents a promise to pay, while the mortgage merely secures that
promise in the event of a default.”).
CONCLUSION
Our foreclosure precedent is clear that the mortgage must be
read together with the note it secures and that, if the terms of the
two documents conflict, the note prevails. See, e.g., Graham, 43 So.
at 513-14; Krickl, 158 So. at 119. Applying our precedent to the
mortgage and note in this foreclosure case, Mr. Palmero was the
sole borrower as a matter of law. Accordingly, because the Third
District erred in affirming the trial court’s denial of foreclosure on
the ground that, as a matter of law, Mrs. Palmero is a surviving co-
borrower, we quash its decision in Palmero. We also disapprove the
Third District’s prior decisions in Smith and Edwards to the extent
they are inconsistent with this opinion.
It is so ordered.
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CANADY, C.J., and MUÑIZ, COURIEL, and GROSSHANS, JJ.,
concur.
LABARGA, J., dissents with an opinion, in which POLSTON, J.,
concurs.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION
AND, IF FILED, DETERMINED.
LABARGA, J., dissenting.
I respectfully disagree with the majority’s conclusion that
Mr. Palmero was the sole borrower as a matter of law. While I agree
that, under both Graham and Krickl, the note prevails in the
conventional mortgage context, there is no authority requiring the
same result in the reverse mortgage context. In relying on Graham
and Krickl, the majority looks to nearly one-hundred-year-old
precedent which undoubtedly does not consider the intricacies of
reverse mortgages, nor the incentives for the parties involved.
Moreover, because Graham and Krickl are not reverse mortgage
cases, they do not involve the same federal law concerns under 12
U.S.C. § 1715z-20(j). Accordingly, I do not view this Court’s
decisions in Graham and Krickl as determinative in the present
case.
The majority correctly states that the note is the operative
instrument in a loan transaction. Majority op. at 12. However,
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conventional mortgages are distinguishable from reverse mortgages
because no personal liability is attached to a borrower in a reverse
mortgage. Accordingly, in a conventional mortgage the note is the
primary instrument, whereas in a reverse mortgage the mortgage is
the primary instrument. Because conventional mortgages and
reverse mortgages are distinguishable, I do not believe that this
Court should so heavily rely on outdated case law governing
conventional mortgages.
The Third District has performed a thoughtful legal analysis
for this same legal issue twice before in Smith and Edwards,
holding that, as a matter of law, when the surviving spouse signs a
mortgage as a co-borrower, the spouse will be treated as a borrower
for purposes of the mortgage. Smith, 200 So. 3d at 228; Edwards,
187 So. 3d at 897. In the present case, the reverse mortgage was
signed by both Mr. and Mrs. Palmero, suggesting that Mrs. Palmero
is a co-borrower.
I do not disagree with the conclusion in Graham, that a
mortgage should be construed together with the note it secures.
See Graham, 43 So. at 513-14. However, given the intricacies of
reverse mortgages which did not exist when Graham was decided,
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this Court should look beyond legal principles used in conventional
mortgages in a reverse mortgage analysis. Here, for instance, in
order to ensure that Mrs. Palmero would not invoke a homestead
claim to the mortgaged property as a defense to foreclosure, her
signature on the mortgage was necessary. This suggests that the
parties intended for Mrs. Palmero to sign as a co-borrower to be in
compliance with the homestead provisions of the Florida
Constitution. Furthermore, federal law expressly prohibits insuring
any mortgage that would allow the lender to commence a
foreclosure on the property while the non-borrowing spouse of the
borrower remains alive and in possession. 12 U.S.C. § 1715z-20(j)
(2017). The purpose of this requirement is to protect the spouse
from foreclosure as long as the spouse resides in the home. See
Edwards, 187 So. 3d at 897. Therefore, if this Court interprets the
contractual obligations of the parties as consistent with the federal
regulations governing the contract at the time it was entered into,
then Mrs. Palmero would be a co-borrower. I do not see any other
reason for Mrs. Palmero to sign the mortgage if she did not intend
to be a co-borrower.
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Because I believe Mrs. Palmero is a co-borrower under the
terms of the mortgage and that she should prevail because a
condition precedent to the lender’s right to foreclose has not
occurred, I dissent.
POLSTON, J., concurs.
Application for Review of the Decision of the District Court of Appeal
– Direct Conflict of Decisions
Third District - Case No. 3D14-3114
(Miami-Dade County)
William P. McCaughan of Law Office of William P. McCaughan, Key
Biscayne, Florida; Joshua H. Threadcraft of Burr & Forman LLP,
Birmingham, Alabama; and Jonathan B. Morton, Mallory M.
Cooney, and Joshua C. Carpenter of K & L Gates LLP, Miami,
Florida,
for Petitioner
Jeffrey M. Hearne and Maxine M. Long of Legal Services of Greater
Miami, Inc., Miami, Florida; Jacqueline C. Ledón of J. Muir &
Associates, P.A., Miami, Florida; and Juan M. Carrera of Carrera &
Amador, P.A., Miami, Florida,
for Respondents
Lynn Drysdale of Jacksonville Area Legal Aid, Inc., Jacksonville,
Florida; and Julie Nepveu of AARP Foundation, Washington,
District of Columbia,
for Amici Curiae AARP, AARP Foundation, and Jacksonville
Area Legal Aid, Inc.
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