August 17, 2023Share
“Manifestly Unjust”: FLA 4th DCA Rejects Application of Collateral Estoppel
By: Bryan Jones
Collateral estoppel cannot be invoked to enforce a judgment that is clearly erroneous.
The Fourth District Court of Appeals reversed a final judgment entered in favor of the mortgagors, holding the trial court wrongfully applied the Doctrine of Collateral Estoppel to enforce a judgment in a prior case finding that the lender lacked standing due to an “invalid” allonge. Relying on the “manifest injustice exception” to collateral estoppel, the Court reasoned that “[a]pplying collateral estoppel here and perpetuating the 2012 judgment’s erroneous conclusion would be manifestly unjust.”
In the case of Federal National Mortgage Association v. Trinidad, 358 So.3d 754 (Fla. 4th DCA 2023), Fannie Mae sought to foreclose a mortgage secured by a lost promissory note. In a previous case filed in 2012 to foreclose the same mortgage, a trial court entered judgment in favor of the mortgagors, holding that that Fannie Mae lacked standing to foreclose because the first allonge on the promissory note was “invalid” since the allonge pre-dated the note by five days. Fannie Mae did not appeal.
In 2018, Fannie Mae filed a new mortgage foreclosure action, this time seeking to enforce a lost promissory note, as the promissory note was lost sometime after the conclusion of the 2012 case. At trial in the 2018 action, Fannie Mae was able to set forth sufficient evidence to demonstrate its standing to enforce the promissory note and mortgage. However, to prove that it was the holder of the promissory note at the time the promissory note was lost, Fannie Mae necessarily relied on the allonge deemed “invalid” by the trial court in the 2012 case. In turn, the mortgagors argued that, under the Collateral Estoppel Doctrine, Fannie Mae could not rely on the allonge because it was previously adjudicated in the 2012 action that the allonge was invalid. The trial court agreed, and judgment was again entered in favor of the mortgagors.
On appeal, the Fourth District Court of Appeals reversed, holding that the trial court’s application of collateral estoppel was error. As the appellate court pointed out, it has already been established under Florida law that an allonge is not defective simply on the basis that the allonge pre-dates the note. See Bank of New York Mellon v. Florida Kalanit 770 LLC, 269 So.3d 571 (Fla. 4th DCA 2019). Therefore, the 2012 judgment was “clearly erroneous” and could not be enforced by collateral estoppel. The Court also found that the mortgagors failed to plead collateral estoppel as an affirmative defense, and it rejected the mortgagors’ argument that the defense was tried by consent. The case was remanded for the trial court “to grant the establishment of the lost note and for further proceedings on the mortgage foreclosure.”