Florida's Second DCA finally holds that a lender can adhere to Paragraph 22 notice requirements through substantial compliance

On July 29, 2015, Florida's Second District Court of Appeals (“DCA”) in Green Tree Servicing, LLC v. Milam, Case No.: 2D14-660, held that “a lender's adherence to the requirements of paragraph twenty-two is reviewed for substantial compliance rather than strict compliance.” This should be the nail in the coffin in the Second DCA and constitute persuasive authority in other districts throughout Florida to borrower's counsel's reliance on Samaroo v. Wells Fargo Bank, 137 So.3d 1127 (Fla. 5th DCA 2014), and Haberl v. 21ST Mortg. Corp., 138 So. 3d 1192 (Fla. 5th DCA 2014), for the proposition that the breach letter sent to a borrower must strictly comply with the language of Paragraph 22 of the Mortgage.

Unfortunately, in counties such as Miami-Dade and Volusia, to name a few, judges have taken this misguided strict compliance interpretation and granted summary judgments or involuntary dismissals at trials against lenders whose default letters did not strictly comply. As many around the mortgage foreclosure industry have known and advocated in the Florida courts, the interpretation of these cases has been incorrect as those cases do not require strict compliance. The Second DCA in Milam clarified that Samaroo did not hold that the doctrine of strict compliance applied in the paragraph 22 context.  Rather, per the court in Milam, the court in Samaroo held that a breach letter which is silent as to one of the five requirements precludes the lender's substantial compliance argument.  Thus, the analysis was not one of strict versus substantial compliance but rather compliance in general, which was missing in Samaroo due to a missing term.

Florida's appellate and trial courts have been providing their interpretation of substantial versus strict compliance, albeit in piecemeal fashion, although not until the Milam decision has a court in Florida been as direct and thorough in its analysis of substantial compliance as the standard to be followed. For example, in U.S. Bank Nat. Ass'n v. Busquets2014 WL 1133333 (Fla. 2d DCA 2014), the Second DCA stated that compliance with all components can be achieved without strictly complying with the language of paragraph 22. In other words, the borrower can be advised of each of the components of paragraph 22 without having to use the verbatim language listed in the mortgage. Likewise, in U.S. Bank, Nat. Ass’n v. Lord, 2014 WL 3674680 *2 (Fla.Cir.Ct . July 10, 2014), the court stated that “[w]ith regard to the contents of the letter, the court finds it adequately addressed all the matters that paragraph 22 required.”) Moreover, the court in One West Bank, FSB v. Andreana, 2012 WL 4835502 (Fla. 17th Cir. Ct. 2012), stated that “[e]ven if the language of the notice was not 100% perfect, strict compliance with conditions precedent is not the requisite standard in Florida. To the contrary, the Plaintiff need only show substantial compliance with conditions precedent.” While earlier this year in Astoria Fed. Sav. & Loan Ass’n v. Kaufman, 2015 WL 24109 (Fla. 5th DCA Jan. 2, 2015), the Fifth DCA reversed the lower court's ruling that the case was dismissed based on the demand letter's failure to strictly comply with the provisions of Paragraph 22 of the mortgage. Even more recently, the Fifth DCA in two decisions stated that absent some prejudice, the breach of a condition precedent does not constitute a defense to the enforcement of an otherwise valid contract. Gorel v. Bank of New York Mellon, 165 So.3d 44, 47 (Fla. 5th DCA 2015) and Vasilevskiy v. Wachovia Bank, Nat. Ass’n, 2015 WL 4577415 (Fla. 5th DCA 2015).

The Milam decision takes these cases and the progeny of long standing Florida case law that state that substantial performance of conditions precedent is all that is needed to authorize recovery for performance of a contract and succinctly states that “when the content of a lender's notice letter is nearly equivalent to or varies in only immaterial respects from what the mortgage requires, the letter substantially complies, and a minor variation from the terms of paragraph twenty-two should not preclude a foreclosure action.”

The opinion will not be final until the time period for a motion for rehearing expires or the motion for rehearing is denied.  To date, a Motion for Rehearing has not been filed, but is not due until August 13, 2015 pursuant to Fla. R. App. P. 9.330.  We will continue to monitor this case to determine if the opinion becomes final and can become a defense to the challenges lenders face regarding breach letters sent to borrowers in connection with obtaining foreclosure judgments.