November 13, 2024*
Schwartz Sladkus Reich Greenberg Atlas LLP (“SSRGA”) secured a significant victory in Florida’s Fourth District Court of Appeal (“Fourth DCA”), obtaining reversal and vacatur of a sanctions order and final judgment against the note holder in a commercial foreclosure case.
The note holder filed the foreclosure action after the borrower defaulted on its mortgage note. When the note holder submitted an affidavit in support of a motion for summary judgment, the defendants claimed that one sentence in the affidavit was false and sought sanctions under Rule 1.510(g) of the Florida Rules of Civil Procedure. The trial court found no intentional misconduct by the note holder and no basis for contempt or sanctions. However, the court expressed concern over an alleged incurred date listed in the verified complaint. A successor judge heard the defendants’ motion for sanctions. He made no findings from the bench, only stating that he had some “concerns” about the note holder.
The borrower submitted a lengthy proposed order, which the judge signed almost immediately and without making any edits. This sanctions order contained numerous findings that the judge himself had not made, even holding the note holder in criminal contempt of court and striking the mortgage from the public records. The note holder filed motions for clarification and rehearing and to vacate the order. The trial court made some revisions to the sanctions order. Nevertheless, the court still entered a final judgment against the note holder, preventing foreclosure as a sanction based on the revised sanctions order.
The borrower retained SSRGA to pursue an appeal. In our briefs, we argued that the judgment was void because it granted relief outside the scope of the pleadings and violated the note holder’s due process rights. SSRGA further contended that the trial court’s wholesale adoption of the defendants’ proposed order verbatim, created an appearance of impropriety and a lack of independent judicial deliberation. Moreover, SSRGA argued that the judgment effectively dismissing the foreclosure action was an unduly harsh sanction and was not supported by competent substantial evidence.
The appellate court agreed with these points. In its opinion, the Fourth DCA held that the trial court’s final judgment and contempt order were void because they improperly granted relief not requested by the defendants, and considered issues not raised in the motion for sanctions or tried by consent. The appellate court found that the note holder’s due process rights were violated by inadequate notice of the defendants’ claim that the note holder had violated the covenant of good faith and fair dealing during settlement negotiations.
The appellate court also found that the trial court erred in adopting the borrower’s proposed order verbatim without performing a thoughtful, independent analysis of the facts, issues, and applicable law. The verbatim adoption violated the note holder’s due process rights and created an appearance that the court failed to consider the merits of the case independently.
Additionally, the appellate court determined that imposing the final judgment in favor of the defendants was an unduly harsh sanction. The court emphasized that the note holder did not act with “unclean hands” and, if any sanctions were warranted, a lesser sanction would have sufficed.
The Fourth DCA reversed and vacated the trial court’s final judgment and the underlying sanctions order. The opinion also directed that the case be reassigned to a different judge on remand to the trial court so as to avoid further prejudice or any appearance of impropriety.
SSRGA is pleased that this result eliminates the trial court’s erroneous sanctions order and final judgment, protects the note holder’s interests, and enables the note holder to continue its pursuit of justice in the trial court.
*The appellate opinion is not final until the disposition of any timely motion for rehearing.