Nowlin v. Nationstar Mortgage, LLC

District Court of Appeal of Florida
2016 Fla. App. LEXIS 8947, 193 So. 3d 1043, 2016 WL 3201483 (2016)

ELI5:

Rule of Law:

Under the 'mailbox rule,' acceptance of a contract offer is effective upon mailing when mailing is an authorized method of acceptance, regardless of whether the offeror receives it. Furthermore, a party ratifies a contract by knowingly accepting the benefits of the agreement, and is thereby estopped from challenging its validity.

Facts:

On October 7, 2002, Walter and Valerie Nowlin executed a mortgage and promissory note.
In July 2009, the lender, BAC Home Loans Servicing, offered the Nowlins a loan modification.
The offer required the Nowlins to sign and return modification documents in a provided Federal Express envelope and make three consecutive monthly payments beginning October 1, 2009.
On August 17, 2009, the Nowlins sent the signed and notarized documents back to BAC via the provided envelope, with a receipt showing delivery on August 18, 2009.
The Nowlins sent, and BAC cashed, cashier's checks for the three required trial payments for October, November, and December 2009.
In December 2009, BAC sent the Nowlins a letter stating it was accelerating the loan due to a missed payment from August 1, 2009 (a date prior to the modification's terms).
When contacted, BAC informed Ms. Nowlin that the modification had been cancelled in November because they had no record of receiving the modification paperwork.

Procedural Posture:

BAC Home Loans Servicing filed a foreclosure complaint against the Nowlins in a Florida trial court.
Nationstar Mortgage, LLC, was substituted as the plaintiff after the loan was transferred.
Following a bench trial, the trial court entered a final judgment of foreclosure in favor of Nationstar.
The Nowlins, as appellants, appealed the trial court's final judgment to the Florida Second District Court of Appeal.
Nationstar Mortgage, LLC, was the appellee in the appeal.

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Issue:

Does a valid loan modification agreement exist when borrowers mail the required signed documents and tender the required trial payments, which the lender accepts, even if the lender later claims to have no record of receiving the documents?

Opinions:

Majority - Casanueva, Judge

Yes, a valid loan modification agreement exists. The court held that a binding contract was formed because the Nowlins accepted BAC's offer according to its specific terms. Under the 'mailbox rule' established in Florida law, acceptance was effective on August 17, 2009, when the Nowlins dispatched the signed documents using the authorized method of Federal Express, not when BAC received or processed them. The lender's internal failure to locate the documents does not invalidate the acceptance. Furthermore, BAC (and its successor, Nationstar) ratified the agreement by accepting and cashing the three trial payments made by the Nowlins. A party cannot accept the benefits of a contract and later deny its existence. Therefore, Nationstar could only foreclose by proving a breach of the valid modification agreement, which it failed to allege or prove.

Analysis:

This decision reaffirms the vitality of the classic 'mailbox rule' in the context of modern consumer contracts like loan modifications, protecting consumers who perform their obligations from a counterparty's internal administrative errors. It establishes that a lender's act of cashing trial payments constitutes acceptance of benefits, thereby ratifying the modification agreement and estopping the lender from denying its validity. This provides a crucial safeguard for borrowers, ensuring that their meticulous compliance with modification terms creates an enforceable contract, even if the lender's record-keeping is flawed.

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