Paragraph 22: Where Are We?
For much of the last two-plus years, paragraph 22 has been my baby. I’ve argued it in Florida courtrooms many hundreds – perhaps thousands – of times. I’ve blogged about it (here, here, and here), trying to help everyone understand the argument. I’d like to think this has changed foreclosure defense in Florida. I feel like it has for my clients, as I’ve had hundreds of foreclosure cases dismissed (by 32 different circuit court judges in 10 different counties) on this basis.
Like anything in law or in life, paragraph 22 doesn’t always work. Many judges don’t like it. Many don’t agree with it. The biggest problem, though, has been the relative absence of published case law from Florida’s appellate courts. As a result thereof, any two, randomly chosen, circuit court judges could pick up the same paragraph 22 letter and reach vastly different conclusions. Some may think the information in the letter is sufficient; others may not. Some may think the letter must “comply,” others may believe “substantial compliance” is okay.
By and large, that’s what has been happening for much of the last two years. Some judges will dismiss a case based on certain language in the paragraph 22 letter, while other judges won’t. Having argued this many hundreds of times, the randomness of the results I obtain is sometimes difficult to accept. Particularly in counties where the judges who preside over foreclosure hearings randomly rotate, the difference between winning and losing a case can hinge not on what the paragraph 22 letter says, but on what judge happens to be sitting on the bench that day. Since the American justice system strives to give predictable, consistent rulings, that’s obviously not ideal.
Within the last week, though, the landscape has changed. After going many months without any published decisions on paragraph 22 from the appellate courts, we got two such decisions within the past week. Interestingly, the homeowner prevailed in one such appeal but lost in the other. So where are we? What’s the current state of the law on paragraph 22?
U.S. Bank v. Busquets and Samaroo v. Wells Fargo Bank may seem vastly different, particularly given the result in each case. However, I see these decisions as remarkably similar, helping frame the issues for judges and counsel in foreclosure cases.
First, prejudice is irrelevant. Banks love to argue prejudice in the paragraph 22 context by saying, in layman’s terms: ”sure, the letter may not contain the information required by paragraph 22 of the mortgage, but the homeowner wasn’t paying the mortgage anyway, so any defects in the language of the letter are irrelevant.” Now that we have three cases – Busquets, Samaroo, and Judy v. MSMC Venture, LLC, 100 So. 3d 1287 (Fla. 2d DCA 2012) – which have engaged in a paragraph 22 analysis without discussing prejudice, I think it’s fair to say the concept of “prejudice” in the paragraph 22 context is dead. It doesn’t matter whether the homeowner is harmed by defects in the paragraph 22 letter – the letter still must contain the required information.
Score one for homeowners here.
Similarly, “substantial compliance” is dead. Busquets, Samaroo, and Judy do not engage in a “substantial compliance” analysis. Re-read Judy and Busquets and you won’t find “substantial compliance” mentioned anywhere. It’s completely missing. As I see it, if ”substantial compliance” were how courts were supposed to evaluate paragraph 22 letters, these decisions would have at least mentioned the term. Meanwhile, the Fifth District in Samaroo explicitly rejects the concept, saying substantial compliance is ”an argument we cannot credit.”
This is a huge win for Florida homeowners. Huge. Some may disagree, but what I see is three published decisions, none of which adopt a “substantial compliance” analysis, all of which make it clear that ”close enough” is not good enough. Hooray! “Substantial compliance” is dead.
One defect is one too many. The paragraph 22 letters in Judy and Samaroo had just one defect, yet both courts did not allow foreclosure based on that one defect. As such, I think it’s clear a bank cannot foreclose in Florida if the paragraph 22 letter is missing just one piece of information. (Notably, even if “substantial compliance” were the standard, the Florida Supreme Court has adopted this same approach – one defect is one too many – in that context. See Olivier v. City of St. Petersburg, 65 So. 2d 71 (Fla. 1953)).
Read the letter – nothing more. Perhaps the best part of these three cases, though, is the most subtle. Do you notice, in all three decisions, how the courts do nothing except look at the letter and decide whether it says what it’s supposed to say? Under no circumstance do the courts resort to extrinsic evidence. At no point do they cite the need for testimony (from homeowners, banks, or any witnesses). Clearly, no testimony is necessary to evaluate the sufficiency of the letter. Instead, judges review each letter and determine, as a matter of law, whether the letter says what it is supposed to say.
I don’t want to bog you down with legalese, but this makes a huge difference. If testimony were needed to adjudicate the sufficiency of a paragraph 22 letter, getting a case dismissed on this basis would be much harder, much more complicated, and much more expensive. But it’s not. It’s easy. Get the bank to produce the letter, admit in a deposition, interrogatory answer, or affidavit that is the letter it sent, and set a motion for summary judgment for hearing. Following Judy, Busquets, and Samaroo, the judge can look at the letter and decide, as a matter of law, whether the letter says what it needs to say. If it doesn’t, your case should be dismissed.
For two-plus years, I’ve been doing precisely this. I’ve been moving for summary judgment, presenting the paragraph 22 letters to judges, and arguing they are defective. I’ve been arguing prejudice and substantial compliance are not part of the analysis, that testimony regarding the content of the letter is unnecessary, and the judges can rule on the content of the letter as a matter of law. Now, the appellate courts have accepted this approach. It won’t always work (see Busquets), and not every letter is defective. But paragraph 22 is not only live and well in Florida, it’s never been better.
Mark Stopawww.stayinmyhome.com
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