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Judgment Granting Relief Wholly Outside the Pleadings is Void

Posted on: September 6, 2013

In The Bank of New York Mellon v. Reyes, No.: 3D12-1900 (Fla. 3d DCA 2013), the Bank appealed the denial of its Florida Rule of Civil Procedure 1.540(b) motion to set aside a default final judgment nullifying an unpaid promissory note. The action began when the Bank filed a complaint to foreclose a mortgage securing a $293,500 promissory note and to reestablish that note. Reyes responded that the mortgage at issue had been modified and that it was not in default. Further, Reyes filed a counterclaim alleging that the Bank had breached its contract by seeking to foreclose the mortgage and sought to nullify the mortgage.

Two months after the foreclosure complaint was filed, the Bank moved to voluntarily dismiss. The court entered an order dismissing the case and cancelling the notice of lis pendens. Subsequently, Reyes moved for default because the Bank failed to file a responsive pleading to Reyes’ counterclaim. The Bank tried to avoid default by claiming confusion over another foreclosure action between these parties and that it had no knowledge of any pending counterclaim in the instant action; however, default was entered against the Bank.

When the final default judgment was entered against the Bank, there was no mention of the mortgage and instead declared the promissory note executed by Reyes “null and void.” The final default judgment also obligated the Bank to hold Reyes harmless thereon. The Bank moved to vacate under Rule 1.540(b).

The Third District concluded that the judgment was void and reversed. The Third District Court reasoned that Reyes’ counterclaim alleged nothing more than a breach of contract by the Bank. No fraud, mistake, undue influence, or other equitable ground that would support rescission of the mortgage modification agreement or mortgage was alleged. Further, the counterclaim made no mention of the promissory note secured by the mortgage at issue and alleged no grounds on which relief from that note might be granted.