Title: WVMF Funding v. Palmero

State: florida

Issuer: Florida Supreme Court

Document:

Supreme Court of Florida 
 
 
____________ 
 
No. SC19-1920 
____________ 
 
WVMF FUNDING, AS SUCCESSOR TO ONEWEST BANK, FSB, 
Petitioner, 
 
vs. 
 
LUISA PALMERO, et al., 
Respondents. 
 
June 24, 2021 
 
LAWSON, J. 
 
 
The decision on review presents the legal questions of whether, 
in a foreclosure action, the terms of the mortgage and note must be 
construed together and, if so, in the event of a conflict between the 
two documents, which prevails.  We answered both of these 
questions long ago, holding that the mortgage must be read 
alongside the note it secures and that the note prevails in the event 
of a conflict.  See Graham v. Fitts, 43 So. 512, 513-14 (Fla. 1907) 
(requiring joint construction of note and mortgage in foreclosure 
actions); Hotel Mgmt. Co. v. Krickl, 158 So. 118, 119 (Fla. 1934) 
 
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(setting forth the “general rule” for foreclosure actions that “if there 
is a conflict between the terms of a note and mortgage, the note 
should prevail”).  Because the Third District Court of Appeal in 
OneWest Bank, FSB v. Palmero, 283 So. 3d 346 (Fla. 3d DCA 2019), 
failed to follow our precedent and instead looked solely at the 
location of a signature on a mortgage to hold that the term 
“Borrower” means something different than both the mortgage and 
the note define it to mean, we granted review based on express and 
direct conflict with our decisions in Graham and Krickl, see art. V, § 
3(b)(3), Fla. Const., and now quash the Third District’s decision.  
BACKGROUND 
 
Roberto Palmero and his wife, Respondent Luisa Palmero, 
initially applied as co-borrowers for a loan that was to be secured 
by a reverse mortgage on their primary residence and homestead.  
See Palmero, 283 So. 3d at 347.  Several months later, however, the 
Palmeros changed course, and Mr. Palmero applied for the same 
type of loan, only this time, as the sole borrower.  See id.1 
 
1.  “[B]ecause Mr. Palmero was the only borrower under the 
terms of the loan agreement, he qualified for—and received—a 
higher amount than would have been paid had Mrs. Palmero been a 
 
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Five documents relate to Mr. Palmero’s loan: (1) a residential 
loan application; (2) a home equity conversion loan agreement; (3) 
an adjustable rate note; (4) a non-borrower spouse ownership 
interest certification; and (5) a reverse mortgage.  See id. at 347-48; 
see also id. at 356-57 (Emas, C.J., dissenting).   
The first three documents, all signed on the same date, 
identified Mr. Palmero as the sole borrower and were signed only by 
him.  Id. at 347.  Of these three documents, the note is of primary 
importance, and it defines “Borrower” as “each person signing at 
the end of this Note.”  Id. at 357 (Emas, C.J., dissenting).  Mr. 
Palmero is the only person whose signature appears at the end of 
the note.  Id. (Emas, C.J., dissenting). 
Both Mr. and Mrs. Palmero signed the fourth document, the 
non-borrower spouse ownership interest certification.  Id. at 348.  
Although the date on the certification is illegible, like the three 
documents signed solely by Mr. Palmero, the certification identified 
Mr. Palmero as the borrower.  Id. at 357 (Emas, C.J., dissenting).  
 
co-borrower.”  Palmero, 283 So. 3d at 357 n.14 (Emas, C.J., 
dissenting). 
 
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The certificate also identified Mrs. Palmero as the “Non-Borrower 
Spouse.”  Id. at 348. 
Finally, to secure the note, Mr. and Mrs. Palmero both 
executed the fifth document, the reverse mortgage.  Id. at 347.  The 
mortgage bears the same date as the note, and it expressly refers to 
the note, including defining the mortgage as a “Security 
Instrument” given to “secure[] to Lender . . . the repayment of the 
debt evidenced by the Note.”  Consistent with the other documents, 
the mortgage defined the “Borrower” as “Roberto Palmero, a married 
man.”  Id. at 348.  The signature block of the mortgage provided 
that “BY SIGNING BELOW, Borrower accepts and agrees to the 
terms contained in this Security Instrument and in any rider(s) 
executed by Borrower and recorded with it.”  Id. at 357 (Emas, C.J., 
dissenting).  Both Mr. and Mrs. Palmero signed their names on lines 
beneath this sentence that were preprinted with their names and 
the word “Borrower.”  Id. at 348. 
As with a typical reverse-mortgage loan, certain events would 
trigger acceleration of the debt prior to the repayment date 
identified in the note and mortgage.  See generally Estate of Jones v. 
Live Well Fin., Inc., 902 F.3d 1337, 1338-39 (11th Cir. 2018) 
 
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(explaining reverse-mortgage loans).  As relevant here, the triggering 
event was Mr. Palmero’s death.  See Palmero, 283 So. 3d at 349. 
 
Following Mr. Palmero’s death, when his estate did not repay 
the loan, Petitioner’s predecessor, OneWest Bank, FSB (OneWest), 
sought to foreclose the mortgage that secured the loan.  Id.  
Respondents, Mrs. Palmero and her two adult children, defended 
against the foreclosure action by arguing that Mrs. Palmero, who 
continued to principally reside in the mortgaged property, was a  
co-borrower under the mortgage.  Id.  Mrs. Palmero’s status (or not) 
as a co-borrower was critical because both the note and mortgage 
conditioned enforcement of the debt on the following: “A Borrower 
dies and the [mortgaged] Property is not the principal residence of 
at least one surviving Borrower.”  Id. at 364 n.23 (Miller, J., 
dissenting). 
 
Following a bench trial, the trial court ruled that Mrs. Palmero 
was not a co-borrower.  Id. at 350.  However, it denied foreclosure 
based on a federal statute that governs the insurability of reverse 
mortgages by the Secretary of the Department of Housing and 
Urban Development.  See id. (citing 12 U.S.C. § 1715z-20(j)). 
 
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On appeal, the Third District held, on rehearing en banc, that 
the trial court erred by relying on the federal statute to deny 
foreclosure because the statute’s application “was neither raised as 
an affirmative defense . . . nor litigated by the consent of the parties 
at the bench trial.”  Id.  However, the Third District disagreed with 
the trial court’s factual finding that Mrs. Palmero was not a co-
borrower, ruling instead that, “as a matter of law,” id. at 350, the 
mortgage unambiguously defined her as a “Borrower.”  See id. at 
350-52.  Accordingly, the Third District affirmed the trial court’s 
denial of foreclosure based on its conclusion that “OneWest failed to 
establish the occurrence of a condition precedent to its right to 
foreclose, i.e., that the subject property is not the principal 
residence of Mrs. Palmero, a surviving co-borrower under the 
instant reverse mortgage.”  Id. at 347.   
In support of its holding, the Third District relied on its prior 
decisions in Smith v. Reverse Mortgage Solutions, Inc., 200 So. 3d 
221 (Fla. 3d DCA 2016), and Edwards v. Reverse Mortgage 
Solutions, Inc., 187 So. 3d 895 (Fla. 3d DCA 2016), where the 
district court had “considered reverse mortgages identical to the 
[Palmeros’] reverse mortgage and determined that, as a matter of 
 
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law, the surviving spouse is a co-borrower.”  Palmero, 283 So. 3d at 
353 (emphasis omitted).  The Third District looked to these prior 
decisions to construe the loan documents at issue over strong 
dissents arguing that the court should instead apply longstanding 
foreclosure precedent that governs the construction of notes and 
mortgages.  See id. at 361 (Emas, C.J., dissenting) (identifying, 
among other failings in the majority’s decision, that it “ignores the 
fact that the contemporaneously executed note contains only Mr. 
Palmero’s name and signature as borrower”); see also id. at 362 
(Miller, J., dissenting) (“[I]n addition to failing to mutually construe 
the contemporaneously executed documents, the majority 
dispenses with a body of well-reasoned, established jurisprudence, 
the controlling provisions of the promissory note, and the express 
terms of the mortgage in determining that the inclusion of Mrs. 
Palmero’s unnotarized signature on the mortgage renders her a 
‘Borrower,’ as a matter of law.”). 
We accepted jurisdiction to resolve the express and direct 
conflict between the Third District’s decision and our decisions in 
Graham and Krickl.  See art. V, § 3(b)(3), Fla. Const. 
 
 
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ANALYSIS 
 
We review de novo the Third District’s legal conclusion that 
Mrs. Palmero is a co-borrower.  See Bank of New York Mellon v. 
Withum, 204 So. 3d 136, 137 (Fla. 4th DCA 2016) (“[C]onstruction 
of notes and mortgages are pure questions of law subject to de novo 
review.”).  Because proper application of our precedent establishes 
that she is not, we quash the district court’s decision.2 
Over one hundred years ago, we explained why, in foreclosure 
actions, the general rule is that a mortgage should be construed 
together with the note that it secures: 
The note and mortgage were executed at the same 
time in one transaction relating to the same subject, and 
the mortgage refers to the note.  Therefore they should be 
 
2.  Although the parties and the dissent also raise arguments 
regarding the federal insurability statute, we exercise our discretion 
not to reach them, as they were not properly litigated in the trial 
court and are not controlling of the jurisdictional issue.  See Savoie 
v. State, 422 So. 2d 308, 312 (Fla. 1982) (“[A]uthority to consider 
issues other than those upon which jurisdiction is based is 
discretionary with this Court and should be exercised only when 
these other issues have been properly briefed and argued.”); see 
also Estate of Jones, 902 F.3d at 1341-42 (explaining that the “plain 
language” of 12 U.S.C. § 1715z-20(j) “applies only to HUD and 
speaks only to what the Secretary can and cannot do” in terms of 
insuring mortgages and concluding that because the statute “says 
nothing about private contractual obligations one way or the other, 
. . . [it] cannot be read to alter or affect the enforceability of the 
mortgage contract or its terms”). 
 
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considered together in determining their meaning and 
effect.  By construing them together as parts of one 
contract, the provisions of the principal note as to when 
it shall become due and payable, when taken with the 
provision of the mortgage that it is given to secure the 
payment of the note, with interest, “according to the true 
intent and meaning of said note,” it is clear that the 
provisions of the note control.  The note constitutes the 
written evidence of the indebtedness, and the terms of its 
payment are stated therein.  The mortgage was given to 
secure the payment “according to the true intent and 
meaning of the note.” 
 
Graham, 43 So. at 513-14 (citations omitted); see also Flinn v. 
Lisenby, 136 So. 599, 601 (Fla. 1931) (“The note and mortgage was 
a single contract and therefore must be read and construed 
together.”).   
We have also long explained that “[t]he general rule is that, if 
there is a conflict between the terms of a note and mortgage, the 
note should prevail.  Effect should be given to both however, where 
there is no actual or necessary conflict.”  Krickl, 158 So. at 119 
(citation omitted). 
Here, both the mortgage and the note expressly define Mr. 
Palmero as the “Borrower.”  It is true that Mrs. Palmero also joined 
in the mortgage—as would have been required for the lender to 
have a valid security interest because the mortgaged property was 
 
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her homestead, see art. X, § 4(c), Fla. Const.—and that she did so 
by signing her name in the “Borrower” signature block.  However, 
contrary to the Third District’s holding, the location of Mrs. 
Palmero’s signature on the mortgage did not unambiguously and as 
a matter of law, see Palmero, 283 So. 3d at 352, make her a co-
borrower under the mortgage.   
The Third District’s holding ignores not only that the mortgage 
expressly defines Mr. Palmero as the “Borrower,” but it also ignores 
that this Court’s foreclosure precedent requires courts to read the 
mortgage together with the note it secures, see Graham, 43 So. at 
513-14, and to look to the note to resolve any conflict, see Krickl, 
158 So. at 119.  As Judge Miller cogently explained in her dissent 
below, applying our precedent, the location of Mrs. Palmero’s 
signature on the mortgage 
cannot be used to circumvent unambiguous, bargained-
for contractual language.  Mr. Palmero was the sole 
defined “Borrower” under both the note and mortgage.  
Moreover, as the note and mortgage must be harmonized 
to effect the intent of the parties, and any purported 
conflicts between the note and mortgage should be 
resolved in favor of the note, . . . Mr. Palmero was the 
sole “Borrower,” and upon his death, the lender was 
entitled to foreclose. 
 
Palmero, 283 So. 3d at 366 (Miller, J., dissenting). 
 
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Because the note—which defines Mr. Palmero and only Mr. 
Palmero as the “Borrower”—resolves any conflict created by Mrs. 
Palmero’s signing her name in the “Borrower” signature block of the 
mortgage, we need not look beyond (and it was unnecessary for the 
trial court to look beyond) the note and mortgage to the other 
documents that were part of the same transaction to determine, as 
a matter of law, how the parties intended to define the term 
“Borrower.”  See generally Sardon Found. v. New Horizons Serv. 
Dogs, Inc., 852 So. 2d 416, 417, 420 (Fla. 5th DCA 2003) 
(explaining that “[t]he primary rule of construction of a mortgage is 
to ascertain the intention of the parties” and that “[w]here other 
instruments are executed contemporaneously with a mortgage and 
are part of the same transaction, the mortgage may be modified by 
these other instruments”).3  We do note, however, that all of the 
 
3.  Similarly, because the proper application of our foreclosure 
precedent resolves any conflict between the mortgage and the note 
as a matter of law, we reject Respondents’ argument that we should 
construe any ambiguity against the lender as the drafter.  See 
Emerald Pointe Prop. Owners’ Ass’n v. Com. Constr. Indus., Inc., 978 
So. 2d 873, 878 n.1 (Fla. 4th DCA 2008) (“[T]he rule of adverse 
construction is a ‘secondary rule of interpretation’ or a ‘rule of last 
resort,’ which should not be utilized if the parties’ intent can 
otherwise be conclusively determined.”). 
 
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other documents consistently show that the parties intended for Mr. 
Palmero to be the sole “Borrower,” and the record shows that Mr. 
Palmero “qualified for—and received—a higher amount than would 
have been paid had Mrs. Palmero been a co-borrower.”  Palmero, 
283 So. 3d at 357 n.14 (Emas, C.J., dissenting).4 
Finally, the Respondents argue and the dissent concludes that 
our precedent involves traditional mortgages and therefore should 
not apply to the reverse mortgage at issue here.  However, first 
principles—i.e., the reason for the documents at issue—tell us why 
we should read a mortgage together with the note it secures 
regardless of the type of mortgage being foreclosed: “[T]he 
promissory note, not the mortgage, is the operative instrument in a 
mortgage loan transaction, since ‘a mortgage is but an incident to 
the debt, the payment of which it secures, and its ownership follows 
the assignment of the debt.’ ”  HSBC Bank USA, N.A. v. Perez, 165 
 
4.  Indeed, although we apply our precedent to resolve the 
issue as a matter of law, as Chief Judge Emas pointed out in his 
dissent below, after having held a bench trial on the issue of 
whether Mrs. Palmero is a co-borrower, the trial court made a 
factual finding, which is supported by competent, substantial 
evidence, that she is not.  See Palmero, 283 So. 3d at 356, 360-61 
(Emas, C.J., dissenting). 
 
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So. 3d 696, 699 (Fla. 4th DCA 2015) (quoting WM Specialty Mortg., 
LLC v. Salomon, 874 So. 2d 680, 682 (Fla. 4th DCA 2004)); see also 
Palmero, 283 So. 3d at 363 (Miller, J., dissenting) (“The note 
represents a promise to pay, while the mortgage merely secures that 
promise in the event of a default.”). 
CONCLUSION 
 
Our foreclosure precedent is clear that the mortgage must be 
read together with the note it secures and that, if the terms of the 
two documents conflict, the note prevails.  See, e.g., Graham, 43 So. 
at 513-14; Krickl, 158 So. at 119.  Applying our precedent to the 
mortgage and note in this foreclosure case, Mr. Palmero was the 
sole borrower as a matter of law.  Accordingly, because the Third 
District erred in affirming the trial court’s denial of foreclosure on 
the ground that, as a matter of law, Mrs. Palmero is a surviving co-
borrower, we quash its decision in Palmero.  We also disapprove the 
Third District’s prior decisions in Smith and Edwards to the extent 
they are inconsistent with this opinion. 
 
It is so ordered. 
 
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CANADY, C.J., and MUÑIZ, COURIEL, and GROSSHANS, JJ., 
concur. 
LABARGA, J., dissents with an opinion, in which POLSTON, J., 
concurs. 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION 
AND, IF FILED, DETERMINED. 
 
LABARGA, J., dissenting. 
I respectfully disagree with the majority’s conclusion that 
Mr. Palmero was the sole borrower as a matter of law.  While I agree 
that, under both Graham and Krickl, the note prevails in the 
conventional mortgage context, there is no authority requiring the 
same result in the reverse mortgage context.  In relying on Graham 
and Krickl, the majority looks to nearly one-hundred-year-old 
precedent which undoubtedly does not consider the intricacies of 
reverse mortgages, nor the incentives for the parties involved.  
Moreover, because Graham and Krickl are not reverse mortgage 
cases, they do not involve the same federal law concerns under 12 
U.S.C. § 1715z-20(j).  Accordingly, I do not view this Court’s 
decisions in Graham and Krickl as determinative in the present 
case. 
The majority correctly states that the note is the operative 
instrument in a loan transaction.  Majority op. at 12.  However, 
 
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conventional mortgages are distinguishable from reverse mortgages 
because no personal liability is attached to a borrower in a reverse 
mortgage.  Accordingly, in a conventional mortgage the note is the 
primary instrument, whereas in a reverse mortgage the mortgage is 
the primary instrument.  Because conventional mortgages and 
reverse mortgages are distinguishable, I do not believe that this 
Court should so heavily rely on outdated case law governing 
conventional mortgages. 
The Third District has performed a thoughtful legal analysis 
for this same legal issue twice before in Smith and Edwards, 
holding that, as a matter of law, when the surviving spouse signs a 
mortgage as a co-borrower, the spouse will be treated as a borrower 
for purposes of the mortgage.  Smith, 200 So. 3d at 228; Edwards, 
187 So. 3d at 897.  In the present case, the reverse mortgage was 
signed by both Mr. and Mrs. Palmero, suggesting that Mrs. Palmero 
is a co-borrower. 
I do not disagree with the conclusion in Graham, that a 
mortgage should be construed together with the note it secures.  
See Graham, 43 So. at 513-14.  However, given the intricacies of 
reverse mortgages which did not exist when Graham was decided, 
 
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this Court should look beyond legal principles used in conventional 
mortgages in a reverse mortgage analysis.  Here, for instance, in 
order to ensure that Mrs. Palmero would not invoke a homestead 
claim to the mortgaged property as a defense to foreclosure, her 
signature on the mortgage was necessary.  This suggests that the 
parties intended for Mrs. Palmero to sign as a co-borrower to be in 
compliance with the homestead provisions of the Florida 
Constitution.  Furthermore, federal law expressly prohibits insuring 
any mortgage that would allow the lender to commence a 
foreclosure on the property while the non-borrowing spouse of the 
borrower remains alive and in possession.  12 U.S.C. § 1715z-20(j) 
(2017).  The purpose of this requirement is to protect the spouse 
from foreclosure as long as the spouse resides in the home.  See 
Edwards, 187 So. 3d at 897.  Therefore, if this Court interprets the 
contractual obligations of the parties as consistent with the federal 
regulations governing the contract at the time it was entered into, 
then Mrs. Palmero would be a co-borrower.  I do not see any other 
reason for Mrs. Palmero to sign the mortgage if she did not intend 
to be a co-borrower. 
 
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Because I believe Mrs. Palmero is a co-borrower under the 
terms of the mortgage and that she should prevail because a 
condition precedent to the lender’s right to foreclose has not 
occurred, I dissent. 
POLSTON, J., concurs. 
Application for Review of the Decision of the District Court of Appeal 
– Direct Conflict of Decisions 
 
Third District - Case No. 3D14-3114 
 
(Miami-Dade County) 
 
William P. McCaughan of Law Office of William P. McCaughan, Key 
Biscayne, Florida; Joshua H. Threadcraft of Burr & Forman LLP, 
Birmingham, Alabama; and Jonathan B. Morton, Mallory M. 
Cooney, and Joshua C. Carpenter of K & L Gates LLP, Miami, 
Florida, 
 
for Petitioner 
 
Jeffrey M. Hearne and Maxine M. Long of Legal Services of Greater 
Miami, Inc., Miami, Florida; Jacqueline C. Ledón of J. Muir & 
Associates, P.A., Miami, Florida; and Juan M. Carrera of Carrera & 
Amador, P.A., Miami, Florida, 
 
 
for Respondents 
 
Lynn Drysdale of Jacksonville Area Legal Aid, Inc., Jacksonville, 
Florida; and Julie Nepveu of AARP Foundation, Washington, 
District of Columbia, 
 
for Amici Curiae AARP, AARP Foundation, and Jacksonville 
Area Legal Aid, Inc.