Full Opinion

FIRST DISTRICT COURT OF APPEAL STATE OF FLORIDA _____________________________ No. 1D18-4146 _____________________________ MTGLQ INVESTORS, L. P., Appellant, v. DARRELL MOORE, SAMANTHA SNOW, etc., Appellees. _____________________________ On appeal from the Circuit Court for Leon County. Karen Gievers, Judge. April 9, 2020 PER CURIAM. MTGLQ appeals a final judgment in favor of Samantha Snow and Darrell Moore in this mortgage foreclosure case. MTGLQ contends the trial court erred in denying foreclosure and discharging the lis pendens, thereby eliminating its secured interest in the subject property. Because the trial court abused its discretion and erred as a matter of law, and because its factual findings are not supported by competent, substantial evidence, we reverse the denial of foreclosure and remand for further proceedings consistent with this opinion. We affirm, without further comment, the trial court’s determination that the proceedings are not barred by res judicata. Facts MTGLQ filed a foreclosure complaint against Snow and Moore seeking a judgment of foreclosure on the mortgaged property. Receiving no timely response to the complaint, the trial court ordered responses by a date certain. Again, no responses were filed by Snow or Moore, so MTGLQ requested a default judgment. Ultimately, Moore filed a response in the form of a motion, and on the same day, the trial court set the matter for trial. At trial, MTGLQ’s corporate representative, Snow, Moore, and Moore’s current wife all testified. The trial testimony revealed that in October 2004, Snow—who at the time was married to Moore— executed a promissory note (Note) in favor of Flagstar Bank in the amount of $243,750.00. Moore, however, did not sign the Note. Snow and Moore then jointly entered a mortgage agreement with Flagstar Bank, granting it a security interest in the subject property, which was owned by both parties. The mortgage, in relevant part, provides as follows: 1. Payment of Principal, Interest, Escrow Items, Prepayment Charges, and Late Charges. Borrower shall pay when due the principal of, and interest on, the debt evidenced by the Note and any prepayment charges and late charges due under the Note. .... 13. Joint and Several Liability; Co-signers; Successors and Assigns Bound. Borrower covenants and agrees that Borrower's obligations and liability shall be joint and several. However, any Borrower who co-signs this Security Instrument but does not execute the Note (a "co-signer”): (a) is co-signing this Security Instrument only to mortgage, grant and convey the co-signer’s interest in the Property under the terms of this Security instrument; (b) is not personally obligated to pay the sums secured by 2 this Security Instrument; and (c) agrees that Lender and any other Borrower can agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Note without the co- signer's consent. The Note was transferred among various entities between 2004 and 2016, with MTGLQ being the owner and holder of the note when this foreclosure complaint was filed. MTGLQ’s corporate representative testified that the loan had been in default since October of 2012. 1 He also testified to the contents of corporate records admitted into evidence, which showed the loan history and amounts owed under the Note and mortgage. The testimony established that Snow and Moore divorced in 2007. Snow testified, without objection, that the divorce decree named Moore as solely responsible for the Note payments. Pursuant to the divorce decree, she quitclaimed the subject property to Moore. In turn, Moore was to take the necessary actions to remove her name from the Note, whether by refinance or otherwise. However, Moore did not do so. Neither Snow nor Moore entered any divorce order into evidence, and in fact, during the trial, Moore stated he did not want to introduce the divorce decree. In May 2008, Snow wrote a letter to Countrywide Home Loans, which at that time apparently owned the Note. In the letter, Snow specifically refused to give any authorization for Countrywide to supply information pertaining to the loan. She also wrote that “a court” had ordered Moore to make all payments and that the loan was not to remain in her name. No evidence was presented that Countrywide ever received a copy of any divorce order or received authorization from Snow to speak with Moore about the loan. Moore testified, without objection, that he attempted to make a payment on the loan in September of 2007 to NetBank but was informed that it had been closed by the Office of Thrift 1 The testimony revealed that no payments had been made in eleven years. Countrywide Home Loans had filed a foreclosure in 2008, but ultimately dismissed the case. 3 Supervision. 2 He contacted the Federal Deposit Insurance Corporation and was told that the loan was held by either Countrywide or EverBank. He testified that he got through to Countrywide by using Snow’s social security number, but never elaborated at trial as to his specific conversation with any bank representatives about receiving access to the loan. At some unknown date, he was able to speak to lender representatives about possible reinstatement of the loan. He further asserted that the amounts the lenders were demanding to be paid to reinstate the loan were amounts he could not afford. In his opinion, Countrywide imposed additional charges somewhere between “$15,000, $20,000, or $30,000” that appeared to him to be improper. He acknowledged that he understood MTGLQ’s position in the case and that he did not want to be liable for any deficiency. He did not establish, when he spoke to lenders, which lenders he spoke to, or any specific conversations he may have had with the lenders. During Moore’s testimony, which occurred after MTGLQ’s representative testified, the trial court raised, sua sponte, the issue of whether MTGLQ or any of its predecessors had unclean hands. Neither Snow nor Moore had raised this affirmative defense in any responsive pleadings or at trial. The trial court also announced during Moore’s testimony that it believed that MTGLQ had the burden to show it had clean hands when it sought to foreclose on the property. No objection was raised by MTGLQ. Ultimately, the trial court ruled that the foreclosure was precluded by the lack of clean hands on the part of a prior lender. In support, the trial court found that Countrywide, when it was the lender, should have complied with the divorce decree, taken 2 The Office of Thrift Supervision, a former federal bureau of the Department of the Treasury, “was abolished effective October 19, 2011, and its rulemaking authority and operative rules were transferred to other agencies pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.” Removal of Office of Thrift Supervision Regulations, 82 Fed. Reg. 47,083 (Oct. 11, 2017) (noticing removal of 12 C.F.R. Chapter V, effective October 11, 2018). 4 the loan out of Snow’s name, given Moore access to the account information, and allowed Moore to accept responsibility for the loan and make monthly payments. The trial court further concluded that Moore attempted to keep the loan current, and that Countrywide improperly imposed charges as an attempt to extort Moore to agree to pay more than what was due. As a result, the trial court concluded that MTGLQ was not entitled to foreclose. As a remedy, the trial court ordered that the principal balance be frozen in time, with Moore having the option to reinstate the loan. If he chose to do so, MTGLQ would be required to file a new amortization schedule based solely upon the outstanding principal amount of the loan. Subsequently, Moore filed a notice to reinstate the loan. MTGLQ, pursuant to the trial court’s order, filed an amortization schedule. However, the trial court rejected MTGLQ’s proposed amortization schedule because it did not provide an address where Moore should send his monthly payments. Also, the trial court believed that MTGLQ’s proposals in responding to Moore’s desire to reinstate the loan added conditions that modified the trial court’s previous order. As a result, the trial court ordered MTGLQ take nothing as to Snow, denied the request for foreclosure, and eliminated any security interest that MTGLQ had in the subject property. In the same order, despite the fact Moore was not a signor on the Note, the trial court held that Moore owed MTGLQ the principal amount of the loan, but granted Moore thirty days from the date of the judgment to refinance the property with a lender of his choice. This is MTGLQ’s appeal. Legal Analysis When a trial court’s decision is based, in part, on factual findings, it presents a mixed question of law and fact. Gainesville Health Care Ctr., Inc. v. Weston, 857 So. 2d 278, 283 (Fla. 1st DCA 2003). The trial court’s factual findings are reviewed under a competent, substantial evidence standard. Id. The trial court’s application of the law to the facts is reviewed de novo. Id. “The trial court's interpretation of the contract is a matter of law subject to a de novo standard of review.” Imagine Ins. Co., Ltd. v. State ex rel. Dep’t of Fin. Servs., 999 So. 2d 693, 696 (Fla. 1st DCA 2008) 5 (quoting Jenkins v. Eckerd Corp., 913 So. 2d 43, 49 (Fla. 1st DCA 2005)). Unclean hands is an equitable defense akin to fraud; its purpose is to “discourage unlawful activity.” Bank of Am., N.A. v. Pate, 159 So. 3d 383, 385 (Fla. 1st DCA 2015) (citing Congress Park Office Condos II, LLC v. First-Citizens Bank & Trust Co., 105 So. 3d 602, 609 (Fla. 4th DCA 2013)). The words “sneaky” and “deceitful” have been equated with unclean hands. Hensel v. Aurilio, 417 So. 2d 1035, 1038 (Fla. 4th DCA 1982). Hensel also observed that “[e]quity will stay its hand where a party is guilty of conduct condemned by honest and reasonable men. Unscrupulous practices, overreaching, concealment, trickery or other unconscient[i]ous conduct are sufficient to bar relief.” Id. (quoting 22 Fla. Jur. 2d Equity § 50). Relying on the partial dissent of Judge Walden in Cain v. Cain, 436 So. 2d 367, 369 (Fla. 4th DCA 1983), the court in Hitt v. Hitt, 535 So. 2d 631, 634 (Fla. 4th DCA 1988), observed that “[d]enying access to the [c]ourt based on the doctrine of unclean hands is an extreme sanction which ought to be invoked under only the most provocative or contumacious circumstances. It is tantamount to striking a party’s pleadings.’ Id. The trial court’s findings and its application of the doctrine of unclean hands is not supported by competent, substantial evidence or the law. In its decision, the trial court placed great emphasis on Countrywide’s refusal to comply with Snow and Moore’s divorce decree. However, no evidence was presented that Countrywide ever received it. In fact, Moore refused to introduce the divorce decree into evidence. The only evidence of a divorce and the terms thereof was Snow’s May 14, 2008, letter to Countrywide, in which she specifically refused to give authorization to Countrywide to disclose information pertaining to the loan but demanded she be taken off the loan. Even if the terms of the divorce were known by Countrywide, there is no legal authority that demands a lender be bound by the terms of a divorce decree in a case to which it was not a party, and then have its collateral stripped if it does not modify its note and mortgage to comport with a court’s order in a divorce case. Here, the trial court determined that Countrywide acted wrongfully by refusing to remove Snow as the payor of the Note and have Moore 6 installed as the new debtor. However, courts are not free to alter or extinguish a divorcing couple’s financial obligations to their lenders. “It is well established in this state that an acceleration clause or promise in a mortgage confers a contract right upon the note or mortgage holder which he may elect to enforce upon default.” David v. Sun Fed. Sav. & Loan Ass’n, 461 So. 2d 93, 95 (Fla. 1984). “Safeguarding the validity of such contracts, and assuring the right of enforcement thereof, is an obligation of the courts which has constitutional dimensions.” Id. Thus, we agree with MTGLQ that under Florida law while a foreclosure may be a proceeding in equity, “[o]nly under certain clearly defined circumstances may a court of equity refuse to foreclose a mortgage.” Id. “Mere notions or concepts of natural justice of a trial judge which are not in accord with established equitable rules and maxims may not be applied in rendering a judgment.” Id; accord Smiley v. Manufactured Hous. Assocs. III Ltd. P’ship, 679 So. 2d 1229, 1232 (Fla. 2d DCA 1996) (“We recognize that mortgage foreclosure is an equitable remedy. However, in determining whether to grant equitable relief, the trial court cannot look solely to the result but must apply rules which confer some degree of predictability on the decision-making process.” (internal citation omitted)). Moore was not a party to the Note and could not force the holder to enter into a new contract with him to reinstate or modify the Loan. Under Florida law, “[c]ourts may not rewrite contracts . . . .” Dahl-Eimers v. Mut. of Omaha Life Ins. Co., 986 F.2d 1379, 1382 (11th Cir. 1993) (citing State Farm Mut. Auto. Ins. Co. v. Pridgen, 498 So. 2d 1245, 1248 (Fla. 1986)); see also Siegle v. Progressive Consumers Ins. Co., 819 So. 2d 732, 739 (Fla. 2002) (noting that a court cannot create additional terms of a contract “out of whole cloth” (quoting Pastori v. Commercial Union Ins. Co., 473 So. 2d 40, 41 (Fla. 3d DCA 1985))). Here, Snow was the only party to sign the Note, and while Moore signed the mortgage, its plain language detailed that he did so only in his capacity as the co-owner of the property and had no other substantive rights in the mortgage transaction. MTGLQ argues, and we agree, that the trial court’s disregard for the plain language of the mortgage and apparent 7 determination that Moore had the right to be added as a borrower under the Note constitute a gross abuse of discretion. To the extent the trial court reasoned that the divorce decree (which was not introduced into evidence) required Countrywide to substitute Moore in the place of Snow as the borrower under the Note, such a finding is erroneous. Initially, the court that issued the divorce decree had no more power to unilaterally rewrite the terms of the Note and mortgage than did the trial court. Moreover, there is no evidence that Countrywide or any other lender or servicer was a party to Moore and Snow’s divorce proceeding. “It is axiomatic that a trial court may not issue an injunction that interferes with the rights of those who are not parties to the action.” Trans Health Mgmt. Inc. v. Nunziata, 159 So. 3d 850, 857 (Fla. 2d DCA 2014); accord Oakland Props. Corp. v. Hogan, 117 So. 846, 848 (Fla. 1928) (“The general rule in equity is that all persons materially interested, either legally or beneficially, in the subject-matter of a suit, must be made parties either as complainants or defendants, so that a complete decree may be made binding upon all parties.”). The trial court’s finding that Moore attempted to keep the loan current is also not supported by competent, substantial evidence. Moore testified that he attempted to make a payment back in 2007 and generally advised of several attempts to call lenders. The evidence showed he lived in the house for eleven years without making a payment. He did not pay any property taxes or tender payment for insurance. However, he did spend money for improvements to the house. For the doctrine of unclean hands to apply, a party must prove injury. See McCollem v. Chidnese, 832 So. 2d 194, 196 (Fla. 4th DCA 2002). In this case, neither Moore nor Snow were injured as a result of any mortgagee’s conduct. Moore does not owe MTGLQ under the Note. He lived in the house for several years without making any payments; all the while interest accrued with the various mortgagees paying property taxes and insurance. Snow is not injured because she was always responsible for the amounts MTGLQ seeks. Her demand that she be taken off the loan without anything more does not absolve her from the responsibility of paying the debt she incurred. As with Moore, she has spent several years not paying amounts she obligated herself to pay. 8 Regarding the trial court’s determination that Countrywide erroneously charged Snow and Moore between $15,000 to $30,000, this finding too is not supported by the evidence presented at trial. The only testimony presented by Moore was that it appeared to him that he was overcharged by Countrywide. The business records introduced at trial reveal that the total amount owed consists of the principal amount of $213,193.85, $66,252.20 in interest, $64,753.51 for property taxes and hazard insurance, and $12,997.77 for additional charges that appear to be for items such as property preservation, inspections, pool maintenance, filing fees, and court costs, all of which were amounts that could properly be awarded pursuant to the Note and mortgage. It should also not be overlooked that the business records reflect that some late fees, including those imposed by Countrywide, were apparently waived and not sought by MTGLQ in the total amount claimed. Lastly, the trial court erred by awarding relief that was never requested by Snow or Moore. “‘A trial court is without jurisdiction to award relief that was not requested in the pleadings or tried by consent.’” Bayview Loan Servicing, LLC v. Newell, 231 So. 3d 588, 590 (Fla. 1st DCA 2017) (quoting Wachovia Mortg. Corp. v. Posti, 166 So. 3d 944, 945 (Fla. 4th DCA 2015)). In fact, “granting relief, which was neither requested by appropriate pleadings, nor tried by consent, is a violation of due process.” Id. (quoting Bank of Am., N.A. v. Nash, 200 So. 3d 131, 135 (Fla. 5th DCA 2016)). It is only under clearly defined circumstances that a court using its equitable powers should refuse to foreclose a mortgage. David, 461 So. 2d at 95. Conclusion Even if the trial court’s factual findings were supported by competent, substantial evidence—we find they were not— such facts do not support the trial court’s legal conclusion that MTGLQ was estopped from foreclosing because it had unclean hands through a predecessor lender. The trial court’s order that MTGLQ be stripped of its collateral as a result of unclean hands is also not supported by the law. The application of unclean hands is reserved for those who act unlawfully and attempt to trick and deceive others. In this case, the evidence does not establish that MTGLQ or the former lenders acted in an unlawful or deceitful manner that 9 merits the denial of a foreclosure and an extinguishment of the mortgage on the subject property. Not relieving Snow of her obligation to pay a debt she incurred and substituting Moore as the payor of the Note is not unlawful or deceitful conduct. Additionally, even if insurance overcharges were charged several years before, the trial court’s decision to deny the foreclosure and strip MTGLQ’s collateral is too extreme of a sanction where the trial court had the alternative remedy of reducing the total amount due. Accordingly, we REVERSE the final judgment entered in favor of Snow and Moore. Additionally, because the evidence adduced at trial otherwise established MTGLQ’s right to foreclose, we REMAND with directions that the trial court enter an in rem final judgment of foreclosure. Because Moore is not legally obligated by the Note to pay any amounts due, the final judgment of foreclosure should reflect that no deficiency judgment be entered against Moore. The trial court’s determination that res judicata does not bar the proceedings is AFFIRMED. WOLF and M.K. THOMAS, JJ., and DUNCAN, J. SCOTT, ASSOCIATE JUDGE, concur. _____________________________ Not final until disposition of any timely and authorized motion under Fla. R. App. P. 9.330 or 9.331. _____________________________ Brian A. Wahl of Bradley Arant Boult Cummings LLP, Birmingham, for Appellant. No appearance for Appellees. 10