The Importance of Strict Compliance with Notice of Default Provisions in Loan Documents

In Judy v. MSMC Venture, LLC, 100 So. 3d 1287 (Fla. 2d DCA 2012), a mortgagee brought a foreclosure action.  At issue were two promissory notes executed by Thomas and Jill Judy in favor of Market Street Mortgage Corp., who was the defendant, MSMC Venture, LLC’s predecessor-in-interest.  In August 2007, MSMC sent a notice of default and breach to the Judys for both loans, and thereafter filed a mortgage foreclosure action.  The Judys’ answer asserted as an affirmative defense that MSMC had not provided proper notice of default as required by the mortgage terms.  MSMC denied the affirmative defenses and proceeded to file a motion for final summary judgment which was granted by the trial court.  The Judys appealed, and on appeal, the Second District Court of Appeal concluded that the trial court erred because MSMC failed to conclusively refute the Judys’ affirmative defenses regarding sufficiency of notice.  The Second District Court of Appeal examined the default provisions of the two mortgages, and noted that the specific terms of each mortgage provided as follows:

Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument…. The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding[,] and sale of the Property

Lender prior to acceleration shall give notice to Borrower as provided in paragraph 12 hereof specifying: (1) the breach; (2) the action required to cure such breach; (3) a date, not less than 10 days from the date the notice is mailed to Borrower, by which such breach must be cured; and (4) that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by this Mortgage, foreclosure by judicial proceeding, and sale of the Property.

The court found that the notices of default failed to specify the breach, and only generally alleged that the Judys committed a breach.  This failure to specify the default as required by the mortgage terms caused the Second District Court of Appeal to reverse the summary judgment in favor of the mortgagee because MSMC did not meet its burden in refuting the Judys' affirmative defense of insufficient notice.

This is a classic example of the importance of reading and complying with the terms of a mortgage, and other loan documents, when proceeding with mortgage foreclosure actions.  In this case, the lender would presumably have incurred significant appellate attorneys’ fees and expenses, all of which could have been potentially avoided by a careful reading of the documents at hand.  The attorneys’ at Schecter Law have vast experience in all aspects of complex commercial and residential mortgage foreclosures.  We dedicate detailed and in-depth attention and analysis to all of our cases at a level that surpasses the big firms, but with legal fees that do not.