The Second DCA reversed a bank’s final judgment of foreclosure and remanded the case for an order of involuntary dismissal finding the bank’s evidence was insufficient to prove it satisfied conditions precedent. Spencer v. Ditech Fin., No. 2D16-4817, 2018 Fla. App. LEXIS 4541 (2d DCA Apr. 4, 2018). In Spencer, the bank, EverHome Mortgage Company[i] (“EverHome” or “the Bank”), filed its complaint which alleged it satisfied conditions precedent. The borrowers answered, denying that the Bank satisfied conditions precedent and affirmatively asserting EverHome failed to give them notice of default and an opportunity to cure.

The matter proceeded to trial where the admissibility and sufficiency of the Bank’s evidence that it satisfied conditions precedent became a key issue. The Bank proffered the demand letter and witness testimony to prove it satisfied conditions precedent. The witness, Ms. Knight, was employed by Ditech, EverHome’s servicer. Although the admissibility of the demand letter was not an issue, Ms. Knight’s competence to testify that the letter was actually mailed was. EverHome, not Ditech, generated the demand letter and the witness never worked for EverHome. Over the Spencers’ hearsay objections, the Bank “… testified to the general industry standards and practices followed by servicers such as Ditech and EverHome to advise borrowers that their loans are in default. She…described the process by which the letter was generated and kept in the ordinary course of business.” The Spencers argued the Bank’s witness lacked the requisite “personal knowledge to testify about EverHome’s routine business practices because she was not an employee of EverHome.”

The lower Court overruled the Spencers’ objections and the Bank’s witness proceeded to explain that, based on her training, she understood it was “EverHome’s procedure and policy, [that] once a letter is generated it is mailed.” However, the Court noted, “when pressed, she admitted that this ‘training’ consisted of informally discussing EverHome’s policies and procedures with coworkers who currently worked for Ditech but had previously worked for EverHome.” The Court explained: “She further admitted that she had never worked for EverHome, had never sent default letters on behalf of EverHome, and had not read EverHome’s written policies and procedures from June 2010.” Besides the demand letter and Ms. Knight’s above testimony, the Bank failed to offer any other evidence that it mailed the demand letter. Despite these deficiencies, the lower Court entered judgment in favor of the Bank.

On appeal, the Fourth DCA reversed finding the Bank’s testimony to be impermissible hearsay. The Court explained, to have the requisite personal knowledge, “the witness must be employed by the entity drafting the letters and must have firsthand knowledge of the company’s routine practice for mailing letters.” The Court acknowledged this firsthand knowledge was not necessary to establish “admissibility under the business records exception,” explaining that “basic familiarity…for generating, storing, and sending a default notice in the normal course of business is all that is required to establish the admissibility of a default notice under the business records exception.” However, the Court pointed out the admissibility of the demand letter was not at issue; rather, the issue was sufficiency of the evidence that EverHome mailed the demand letter. Because Ms. Knight lacked personal knowledge of EverHome’s mailing practices, her testimony could not be relied upon to establish satisfaction of conditions precedent. The Bank’s only remaining evidence was the demand letter itself. Quoting its prior opinion in Allen[ii], the Court explained: “The fact that a document is drafted, is insufficient in itself to establish that it was mailed.”  This is not to say witness testimony is the only means of establishing a letter was mailed; however, where there are no system notes or logs which demonstrate the bank followed a routine business practice of mailing, the witness must have personal knowledge to testify to this fact.

The Court remanded the matter and directed the lower Court “to enter an order of involuntary dismissal.”

The concurring opinion is interesting . . .  and telling. Judge Salario wrote a specially concurring opinion to discuss remand for dismissal versus remand for a new trial. Judge Salario explained that “outside the foreclosure context” if a party failed “to meet its burden of proof in the trial court,” it did not get a “second bite at the apple” to prove its case. Judge Salario referred to this as “the general rule” and “the default position,” but noted “something different” was “happening in foreclosure cases.” Judge Salario explained various situations where a foreclosure matter is remanded for a new trial or new hearing, rather than dismissal, despite a determination on appeal that a party’s evidence was insufficient to support the judgment. Judge Salario suggested he would be “open to examining” this issue “in an appropriate case…with the object of settling on a general approach that we can apply on a principled basis across cases.”

Judge Salario’s concurring opinion is of no precedential value; however, it provides insight into the Court’s reasoning on this issue and pointing out appellate practice that is unique to mortgage foreclosure litigation.

When proceeding to trial, it is imperative that (i) witnesses possess the requisite personal knowledge to testify competently, and (ii) counsel is familiar with evolving evidentiary requirements. Most evidentiary disputes can be anticipated, especially evidence intended to prove key issues in the case. If available, the Bank should be prepared to proffer redundant evidence since it likely will not get a “second bite at the apple” if an appellate court deems a portion of its evidence inadmissible or insufficient.

[i] After entry of judgment, Ditech was substituted as party plaintiff for EverHome.

[ii] Allen v. Wilmington Tr., 216 So. 3d 685 (Fla. 2d DCA 2017).