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Due Diligence and Florida Procedural Requirements

Editor’s Note: This story originally appeared in the January issue of DS News.

The Florida Third District Court of Appeals (DCA) recently rendered an opinion wherein it addressed several procedural technicalities that were seemingly insignificant but in fact dispositive of significant issues in a foreclosure case. In Santos v. HSBC Bank USA, etc., Case No. 3D17-531 (Fla. 3d DCA October 31, 2018), the mortgagor executed a note and mortgage in 2005 and defaulted in 2009. The bank filed a foreclosure complaint naming Santos as a defendant in 2015. Santos answered the complaint and asserted several affirmative defenses. The bank replied to Santos’ affirmative defenses but did not move to strike them.

The lower court set the matter for a February 2017 non-jury trial and entered judgment in favor of the bank when Santos and her attorney failed to appear for the trial. Santos later moved to vacate the judgment on the grounds of “excusable neglect, improper trial setting, and insufficient evidence of indemnification.” However, prior to having the motion to vacate heard by the lower court, Santos appealed the final judgment, thereby divesting the lower court of jurisdiction to rule on the motion to vacate. Upon Santos’ request, the Third DCA relinquished jurisdiction and the lower court heard and denied Santos’ motion to vacate. Santos failed to amend her notice of appeal to include the court’s denial of her motion to vacate or to otherwise appeal that order.

The Third DCA reasserted its jurisdiction and proceeded with the appeal of the final judgment. In her brief, Santos argued the final judgment should have been vacated “because her counsel’s failure to appear for trial was due to excusable neglect ... the case was not properly scheduled for trial because it was not at issue” and the bank failed to present sufficient evidence “to support the final judgment’s finding on indemnification.” The Third DCA affirmed the final judgment. However, the court included discussion regarding whether the case was at issue and properly noticed for trial because it brings to light an unfavorable practice in which many foreclosure attorneys engage. Although the bank replied to Santos’ affirmative defenses and argued they were legally deficient, it did not move to strike the defenses. The Third DCA, citing the Florida Rules of Civil Procedure, explained that “failure to state a legal defense in an answer … must be asserted by motion to strike the defense.” Ultimately in Santos, the lack of an unresolved motion to strike rendered the case “at issue” for purpose of trial and formed the basis for affirming judgment in favor of the bank.

However, this result should not be misinterpreted to mean it is best to reply to rather than strike legally deficient affirmative defenses. This is clearly demonstrated in several cases but most blatantly in a decision rendered many years ago by the Fourth DCA in Bay Colony Office Bldg. Joint Venture v. Wachovia Mortg. Co., 342 So. 2d 1005, 1006 (Fla. 4th DCA 1977). In Bay Colony, the court explained: “The trial court may not on its own initiative strike an affirmative defense [because] it is legally insufficient; in that case, a motion by a party is required.” The only basis that a court can strike an affirmative defense is if it finds the defense “redundant, immaterial, impertinent, or scandalous.”

If a pled defense is legally insufficient, a party must move to strike it. Successfully striking legally insufficient defenses has many benefits. It limits the permissible discovery a party can seek, expediting the litigation and reducing litigation costs. It also limits the issues that must be proved on summary judgment or at trial. Also, from an appellate perspective, the appeal of an order striking a party’s affirmative defenses is reviewed at the higher standard of abuse of discretion. That is a very difficult standard because the appellant must demonstrate that “no reasonable man would take the view adopted by the lower court.”

About Author: Roy Diaz

Roy A. Diaz is the Managing Shareholder of Diaz, Anselmo Lindberg, P.A. The firm provides representation in Florida, Illinois, Ohio, Indiana, Kentucky, Wisconsin and Michigan. Diaz has been a member of the Florida Bar since 1988. He has concentrated his practice in the areas of real estate, litigation, and bankruptcy. He has represented lenders, servicers of both conventional and GSE loans, private investors, and real estate developers throughout his career with an emphasis on the mortgage servicing industry for over 25 years.

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