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Wells Fargo Bank, N.A. v. Richards

Florida Court of Appeals, Fourth District

August 30, 2017

WELLS FARGO BANK, N.A., Appellant,

         Not final until disposition of timely filed motion for rehearing.

         Consolidated appeals from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Meenu Sasser, Judge; L.T. Case No. 2012-CA-005363-XXXX-MB (AI).

          Kimberly S. Mello and Jonathan S. Tannen of Greenberg Traurig, P.A., Tampa, and Michele L. Stocker of Greenberg Traurig, P.A., Fort Lauderdale, for appellant.

          Steven M. Singer of Steven M. Singer, P.A., Plantation, and Mark Feinstein of Feinstein & Sorota, P.A., Plantation, for appellees.

          Gross, J.

         The parties to this appeal of a foreclosure judgment attended mediation prior to trial. The homeowners left mediation believing they reached a very, very favorable settlement agreement with the bank that would permanently modify their loan. When the bank did not honor the terms of that perceived agreement, the homeowners moved to enforce the settlement, which the trial court granted. Because oral modification of a credit agreement is precluded by both the statute of frauds and the Banking Statute of Frauds, we reverse.

         At the hearing on the motion to enforce, the homeowners conceded no written settlement agreement was signed at the mediation or afterwards. They also acknowledged the bank provided a written final loan modification agreement, which they refused to sign because it included terms different from what they claimed to be the mediation agreement. To describe the homeowners' testimony on the key terms of the loan modification as imprecise is an understatement.[1] The homeowners insisted the loan modification was for an amount significantly lower than what was owed on the original loan.

         Because the bank had no witness to testify to what happened at mediation, the trial court found the homeowners' vague testimony "fully credible" and granted their motion to enforce the oral settlement agreement. There are a variety of reasons this was error, such as the requirement found in Florida Rule of Civil Procedure 1.730(b) that mediation agreements must be reduced to writing. However, the only arguments preserved for appeal are those based on the general statute of frauds and the Banking Statute of Frauds.

         The original statute of frauds was first enacted in England in 1677. 29 Chas. II, c. 3 (1677); see § 725.01, Fla. Stat. (2016). The statute's centuries-long history includes the evolution of a variety of equitable defenses such as the doctrine of full or complete performance. Many states, including Florida, have recognized these common-law exceptions to their codification of the statute of frauds. See Hiatt v. Vaughn, 430 So.2d 597 (Fla. 4th DCA 1983); see also Terzis v. Pompano Paint & Body Repair, Inc., 127 So.3d 592, 595 (Fla. 4th DCA 2012) ("full performance by one party to the contract works to remove an oral agreement from the purview of the statute of frauds") (quoting 101 Monument Rd., Inc. v. Delta Prop. Mgmt., Inc., 993 So.2d 181, 182 (Fla. 4th DCA 2008)).

         By contrast, credit-agreement statutes, referred to in Florida as the Banking Statute of Frauds, are a relatively new creation. They were enacted by many states in the mid-1980's to address a surge in lawsuits brought by borrowers against lending institutions for breach of oral commitments regarding new or existing loans. See John C. Murray, Credit-Agreement Statutes Revisited: Are Equitable Defenses Permitted?, 51 Real Prop. Tr. & Est. L.J. 373, 374 (2017). In an attempt to thwart these types of cases, states either enacted statutes that brought credit agreements within the scope of the statute of frauds or created a separate Banking Statute of Frauds, as Florida did in 1989 with the enactment of section 687.0304, Florida Statutes.

         The purpose of these statutes was to discourage lender liability actions based on purported oral credit agreements. Jeffrey A. Tochner, Limiting Lender Liability in Florida: The Application of a Statute of Frauds to Credit Agreements, 44 Fla. L. Rev. 807, 828 (1992) (citing H.R. of Florida, Comm. On Commerce, Final Staff Analysis and Economic Impact Statement on H.B. 878, at 2). This purpose was achieved by "severely restricting borrowers' ability to sue creditors." Id.

         Section 687.0304(2) provides that "[a] debtor may not maintain an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor." A credit agreement is defined as "an agreement to lend or forbear repayment of money . . . to otherwise extend credit, or to make any other financial accommodation." § 687.0304(1)(a). A "loan modification agreement . . . is both an agreement which extends credit and which makes a financial accommodation, " thus implicating the Banking Statute of Frauds. Vargas v. Deutsche Bank Nat'l Trust Co., 104 So.3d 1156, 1168 (Fla. 3d DCA 2012).

         The Banking Statute of Frauds applied to the purported oral loan modification in this case. We reject the homeowners' claim that the doctrine of full performance removed the modification from the statute's purview. First, allowing borrowers to use equitable doctrines offensively to establish enforceable oral credit agreements would eviscerate the purpose of the Banking Statute of Frauds. Second, even if the doctrine could be used offensively, by their own testimony, the homeowners had not fully performed the alleged loan modification.

         Equitable doctrines, like full performance, are typically used defensively to prevent a plaintiff from unjustly claiming rights under an agreement. See, e.g., United of Omaha Life Ins. Co. v. Nob Hill Assocs., 450 So.2d 536 (Fla. 3d DCA 1984) (allowing estoppel as a defense to ...

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