Court Opinion

ID: 5126602
Source: CourtListenerOpinion
Date Created: 2021-11-17 16:03:32.198841+00
Date Added: 2024-06-11T08:22:57.636179
License: Public Domain

Third District Court of Appeal
                               State of Florida

                      Opinion filed November 17, 2021.
       Not final until disposition of timely filed motion for rehearing.

                            ________________

                             No. 3D19-1118
                       Lower Tribunal No. 16-32717
                          ________________

                    JPMorgan Chase Bank, N.A.,
                                  Appellant,

                                     vs.

                          Jorge Llovet, et al.,
                                 Appellees.

       An Appeal from the Circuit Court for Miami-Dade County, David C.
Miller, Judge.

     León Cosgrove, LLP, and Derek E. León, Andrew B. Boese, and John
R. Byrne, for appellant.

     Jacobs Legal, PLLC, and Bruce Jacobs, for appellee Jorge Llovet.

Before EMAS, LOGUE, and HENDON, JJ.

     LOGUE, J.
      JPMorgan Chase Bank, N.A., a non-party to the litigation below, seeks

review of the denial of its motion for a protective order from post-judgment

discovery. For the reasons stated below, we reverse.

                              BACKGROUND

      On September 7, 2005, Llovet borrowed $1,340,000 from Washington

Mutual Bank, FA, and signed both a note and mortgage. On or around April

1, 2012, Llovet stopped making payments.

      On December 22, 2016, U.S. Bank N.A., successor Trustee to Bank of

America, N.A., successor in interest to LaSalle Bank N.A., on behalf of the

holders of the WaMu Mortgage Pass-Through Certificates, Series 2005-

AR15 (the “Plaintiff Trust”), filed a foreclosure action against Llovet. After

amendments, the operative July 20, 2017 complaint consisted of one

foreclosure count. Attached was a copy of the note with a signed, undated

indorsement reading: “Pay to the order of _____ Without Recourse

Washington Mutual Bank, FA by Cynthia Riley, Vice President.”1 Referring

to the attachment, the Plaintiff Trust alleged it was “the holder in possession

of the blank-endorsed original Note and Mortgage at the time this action was

commenced on December 22, 2016, and pursuant to section 673.3011,

1
  Although either is acceptable, we use “indorsement” rather than
“endorsement” because that spelling is adopted by Florida’s Uniform
Commercial Code under Chapter 673 of the Florida Statutes.
                                 2
Florida Statutes, is entitled to enforce the Note and Mortgage.” In the

operative August 10, 2017 amended answer, Llovet made a general denial

of all allegations in the complaint and raised lack of standing as an affirmative

defense.

      After the case was placed on a trial calendar, the parties settled. Llovet

agreed to the entry of a consent judgment of foreclosure in return for the

Plaintiff Trust’s agreement to waive a deficiency judgment and to delay the

foreclosure sale. At a February 7, 2018 hearing, the trial court entered the

consent judgment and canceled the original note, which appears in the court

file. The consent final judgment set a sale date of May 8, 2018.

      On April 5, 2018, Llovet filed a motion pursuant to Florida Rule of Civil

Procedure 1.540(b) to vacate the consent judgment for fraud. Llovet’s motion

to vacate raised the issue of standing that he had previously raised in his

answer. This time, however, he asserted that the Plaintiff Trust’s assertion

of standing was not simply incorrect but that it was fraudulent. Llovet’s claim

is based on the alleged fraud arising from the securitization of Llovet’s loan.

      Llovet’s original lender was Washington Mutual Bank. In 2005, within

six months of Llovet signing the loan, Washington Mutual joined Llovet’s loan

with other loans making a $2.5-billion-dollar package for securitization and

sale to investors. As part of the transfer of the mortgages from Washington

                                       3
Mutual to the Plaintiff Trust, the Pooling and Servicing Agreement required

Washington Mutual to indorse the mortgages either “(A) in blank, without

recourse, (B) to the Trustee, without recourse, or (C) to the Trust, without

recourse.”

      Securitization also involved a contract to retain a loan servicer as agent

for the Trust. 2 Over the life of Llovet’s loan, there were three separate loan

servicers. When Washington Mutual securitized the loan, it continued to act

as loan servicer for the note and mortgage and as the agent for the Plaintiff

Trust. In the next decade, Washington Mutual developed financial troubles

and went into receivership with the Federal Deposit Insurance Corporation.

As receiver, the FDIC sold Washington Mutual’s banking operations to

Appellant, JPMorgan Chase Bank, N.A. The sale included “all mortgage

servicing rights and obligations of [Washington Mutual.].” JPMorgan Chase

thus became the second loan servicer. Subsequently, Select Portfolio

Servicing, Inc. took over the loan servicing. While the entity servicing the

2
  Servicing the loan entails collecting the monthly payment and making
disbursements to the Plaintiff Trust, and paying applicable property taxes,
property insurance, and even foreclosing on the note. The servicer is entitled
to take its fees and costs out of the funds it collects. Servicing of loans can
be a profitable business separate and apart from lending. It is important to
keep in mind, however, that even when the loan servicer is enforcing the
note (including foreclosing), it is doing so only as the servicing agent—not
the owner—of the note. The legal owner remains the Trust.
                                        4
loan changed, there is nothing in the record indicating that the Plaintiff Trust

ever transferred its legal ownership of the note.

      As mentioned above, the original note of Llovet’s loan contains an

undated, blank indorsement signed by Cynthia Riley as Vice President of

Washington Mutual. In his motion to vacate under Rule 1.540, Llovet asserts

that Riley’s indorsement was fraudulent: “JP Morgan Chase affixed the

Cynthia Riley endorsement years after [Washington Mutual] ceased to exist

and Cynthia Riley lacked any authority to negotiate assets of [Washington

Mutual].” The motion has attached to it 278 pages of documents as exhibits.

      Llovet served a subpoena duces tecum on JPMorgan Chase seeking

discovery to support his assertion that the Riley indorsement was

unauthorized. Among other things, Llovet sought “the complete chain of any

sale or purchase of . . . [the] loan” including screen shots of any images of

the notes and all communications, contracts, manuals, policies, and

procedures concerning the loan and other specified loans. JPMorgan Chase

filed a motion for protective order. The trial court limited the production to

documents and manuals relating to the subject loan, but otherwise denied

JPMorgan Chase’s motion. JPMorgan Chase timely sought review.

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                                   ANALYSIS

      We have jurisdiction. 3 JPMorgan Chase argues that Llovet cannot re-

open a consent judgment to obtain discovery regarding matters that he knew

or should have known about and for which he could have sought discovery

before he entered into the consent judgment. In support, JPMorgan Chase

correctly notes that Llovet is trying to use Rule 1.540 as a vehicle to set aside

not only the consent judgment but also his written agreement to settle. This

aspect of the case “is of some importance because the principles of law to

be applied in an action to set aside a contract for unilateral mistake or fraud

are more stringent than the standards that have so far been established for

3
   We have held that an order compelling a non-party to produce discovery
“is, indeed, a final order as to [it].” United Servs. Auto. Ass’n v. Law Offs. of
Herssein & Herssein, P.A., 233 So. 3d 1224, 1230 n.6 (Fla. 3d DCA 2017);
see also Varela v. OLA Condo. Ass’n, 279 So. 3d 266, 267 n.1 (Fla. 3d DCA
2019) (“We note that Varela properly sought review through a notice of
appeal rather than a petition for certiorari in this case because she is not a
party to the litigation below. The order on appeal ended all judicial labor in
the case as to Varela and constitutes a final appealable order.”); Fla. House
of Representatives v. Expedia, Inc., 85 So. 3d 517, 520 (Fla. 1st DCA 2012)
(finding that an order compelling discovery by nonparties was final because
it “adjudicates the legal rights of nonparties and because it otherwise meets
the general test of finality”); Office of the Pub. Def. v. Lakicevic, 215 So. 3d
112 (Fla. 3d DCA 2017) (treating an order denying the public defender’s
motion for a protective order from a third-party subpoena duces tecum for
deposition as a final order reviewable on appeal, rather than via a petition for
writ of certiorari). Nevertheless, treating this matter as a petition for certiorari
would yield the same result. See Fla. R. App. P. 9.040(c).

                                         6
the setting aside of a judgment pursuant to Rule 1.540.” Smiles v. Young,

271 So. 2d 798, 801 (Fla. 3d DCA 1973) (citations omitted).

      In Smiles, we reversed the grant of a motion to vacate a consent

judgment under Rule 1.540 because the motion failed to state a ground for

relief when it merely identified information in the hands of the opposing party

that would have caused the complaining party to refuse to settle. This was

because the complaining party could have and failed to properly pursue the

information in discovery before entering into the consent judgment. Id. In so

holding, we explained that Rule 1.540(b) “does not have as its purpose or

intent the reopening of lawsuits to allow parties to state new claims or offer

new evidence omitted by oversight or inadvertence.” Id. 802–03. “Nor does

the rule allow a party to avoid the consequences of a decision to settle

litigation even if the party regards the settlement as ‘bad’ in retrospect.” Id.

      We have recently reiterated the holding of Smiles in the foreclosure

context in Bank of New York Mellon v. Simpson, 227 So. 3d 669, 671 (Fla.

3d DCA 2017). Using the standard set forth in Smiles, we reversed a grant

of a motion to vacate a consent final judgment of foreclosure because the

allegations “were known and could have been discovered by due diligence

at the time the foreclosure suit” was pending. We concluded that “Rule

1.540(b) does not have as its purpose or intent the reopening of lawsuits to

                                        7
allow parties to state new claims or offer new evidence omitted by oversight

or inadvertence.” Id. at 670.

      Applying this law to the instant case, we agree with JPMorgan Chase

that Llovet is barred from re-opening discovery post-judgment because the

discovery he now seeks could have been requested pre-judgment. Llovet

was obviously aware of the standing issue before he consented to the final

judgment because he raised lack of standing as an affirmative defense in his

answer. The arguments and materials Llovet offered in support of his Rule

1.540 motion predate the 2018 consent final judgment and include:

         • Deposition of Cynthia Riley, JPMorgan Chase Bank, N.A. v.
           Orozco, No. 2009-29997-CA (Fla. 11th Cir. Ct. Jan. 15, 2013);4

         • Consent Order, U.S. Dep’t of the Treasury, Comptroller of the
           Currency, In re JPMorgan Chase Bank, N.A., AA-EC-11-15,
           2011 WL 6941542 (April 13, 2011);5 and

4
  Riley, a Washington Mutual official, testified that Llovet’s indorsement was
done properly and timely, albeit on a mass basis. See § 673.4011(2)(a),
Florida Statutes (“A signature may be made . . . [m]anually or by means of a
device or machine.”). Although filed by Llovet, this document undercuts his
claim. In any event, this deposition predates the consent judgment.
5
  JPMorgan Chase agreed to not litigate future foreclosure proceedings
without ensuring the proper indorsement of notes. But JPMorgan Chase
expressly did not admit “any wrongdoing.” JPMorgan Chase’s commitment
in this regard without any admission falls far short of indicating that Riley’s
indorsement on Llovet’s loan was fraudulent. See Simpson, 227 So. 3d at
671 (holding fraud cannot be established by “generalized complaints about
the mortgage banking industry” that “have no specific relation to the facts of
this case”). In any event, this document also predates the consent judgment.

                                      8
         • Order Granting Final Judgment to Defendant, Wells Fargo Bank,
           N.A. v. Riley, No. 2016-010759-CA (Fla. 15th Cir. Ct. Dec. 12,
           2017). 6

Llovet makes no attempt to explain why due diligence would not have

provided him these materials and arguments prior to his agreement to the

consent judgment.

                               CONCLUSION

      “[L]itigation must, at some point, come to an end.” Witt v. State, 387

So. 2d 922, 925 (Fla. 1980). The right to conduct discovery post-judgment is

much more limited than the right to conduct discovery pre-judgment. Here,

the trial court committed reversible error in allowing Llovet to re-open a final

judgment to obtain discovery regarding matters that Llovet could have,

through the exercise of due diligence, obtained prior to entry of the final

consent judgment. Allowing such discovery amounts to licensing an

impermissible “fishing expedition[] in post-judgment proceedings.” Rooney

v. Wells Fargo Bank, N.A., 102 So. 3d 734, 736 (Fla. 3d DCA 2012).

      Reversed.

6
  This case involved different parties, a different note, mortgage, trial court,
record, and even different legal issues. More importantly, it conflicts with
cases like HSBC Bank USA, Nat’l Ass’n v. Buset, 241 So. 3d 882, 885 (Fla.
3d DCA 2018). In any event, this too predates the consent judgment.

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