Plain English Summary:
A woman took out a mortgage, and when the bank filed foreclosure, she raised the defense that the loan application contained false information- mainly the total of her assets and monthly income. The trial court judge said the bank could not foreclose as they knew about the fraud and dismissed the case.
The appellate court reviewing the case found that the woman testified that she didn’t bother to read the mortgage application before signing, failing her duty to read what she was signing (a long-standing Florida principle of law), and thus “not feel bad for her” in that she could not now use the incorrect loan application as a defense to foreclosure or to claim that she was not responsible for the loan money unpaid.
The 4th DCA recently, in Wells Fargo Bank, N.A. v. Hilary A. Williamson, Case No. 4D15-285, 2016 WL 3745477 (Fla. 4th DCA 2016), reversed a trial court’s dismissal of a foreclosure action in favor of the borrower. Opinion here.
The Court affirmed its prior holding in Vidal v. Liquidation Properties, Inc., 104 So. 3d 1274 (4th DCA 2013) that a borrower is in the best position to know their own financial information. If a borrower fills out a loan application containing false information, that borrower is precluded from raising fraud as an affirmative defense to foreclosure against them. See Shahar v. Green Tree Servicing, 125 So. 3d 251 (Fla. 4th DCA 2013).
The borrower here raised fraud as an affirmative defense to foreclosure alleging that “”the original lender’s loan consultant falsified the loan application by overstating the borrower’s liquid assets, her monthly income, and ownership of real estate.” She also raised the defense of unclean hands. At trial, “[t]he borrower testified that the income and asset information were false and the loan consultant inserted the information without her knowledge.” She also testified that she did not read the application, although she was not prevented from doing so, and that she knew that the loan had an adjustable-rate although she requested a fixed-rate mortgage. She further knew the amount she was borrowing.
The trial court found that Wells Fargo either knew about or failed to conduct due diligence and therefore went along with the fraudulent conduct, and was thus barred from foreclosing and dismissed the foreclosure case. On appeal, the 4th DCA reversed the trial court.
The 4th DCA found Wells Fargo did not have unclean hands and that Shahar was applied incorrectly by the trial court. It states that the original lender’s actions did not rise to the level of unclean hands because the borrower (1) had time to review the loan documents, (2) had the opportunity to review the falsified information, (3) specifically noticed the change from a fixed rate to an adjustable rate, (4) was not coerced into signing the application, (5) subsequently obtained a second loan in the form of a line of credit from the same lender, and (6) admitted that she failed to read the loan documents.
The 4th DCA found that the borrower here failed to introduce any evidence at all that she relied on the alleged lender misconduct or the the result was misconduct. The Court further stated that that it is well-settled in Florida that unless a party can show that he was prevented from reading a contract, he cannot defend against an action on the contract solely because he signed without reading it.
Thus, the 4th DCA reversed the dismissal and sent the case back to the trial court for Wells Fargo to continue with its foreclosure action.