An overlooked topic in foreclosure law is the effect of savings clauses in loan documents. Notes, mortgages, modifications, and just about any other document affecting the validity or viability of a loan may have a savings clause. Review of loan document templates is necessary because savings clauses may be helpful, but also may not completely solve the issues they were meant to address.
Simply stated, a savings clause is a clause in a contract that provides that the contract will remain intact and enforceable to the extent allowable by law, even if certain portions of the contract are deemed invalid or unenforceable. These clauses can both be general and apply to the contract as a whole or specific and apply to key provisions or subject areas of the contract.
A general savings clause is frequently styled as a “severability” clause because the contract explains that the parties intend for the court to sever any portion of the contract that is legally invalid or unenforceable while maintaining the remainder of the agreement. These clauses are helpful to clarify issues that may be severed. See generally Gessa v. Manor Care of Fla., Inc., 86 So. 3d 484, at passim (Fla. 2011). However, courts may find certain portions of the clause ineffective. For instance, a limitations of remedies provision is not severable, regardless of whether the contract contains a severability clause. Id.at 490‐491 & n. 5. Thus, a severability clause may be an attractive addition to a loan document, but it must be understood that there are circumstances under which the provision will, itself, not be enforced.
In the case of mortgage promissory notes, a specific savings clause will usually be focused on interest and the calculation of payments. These clauses may clarify that interest shall not accrue or be charged at any unlawful rate. This type of savings clause can have multiple purposes. First, it can act to attempt to sever any provision that would allow for unlawful interest. Secondly, it can function as evidence of intent.
This second function is helpful in the face of a claim or defense that the loan at issue is usurious. Usury occurs when a loan is intentionally given with an interest rate that exceeds the maximum amount allowable by law. A usurious loan is subject to a setoff against recovery and, in some cases, cancellation of the debt or damages.
Florida law used to provide that a savings clause that expressed a desire for the loan to be nonusurious was sufficient to warrant dismissal of a charge of usury. However, that has changed. InLevine v. United Cos. Life Ins. Co., 638 So. 2d 183, 184 (Fla. 3d DCA 1994), the court examined a mortgage note that “expressly stated that interest was to be charged only at a lawful percentage.” The court held that the “inclusion of this language in loan documents has been held to warrant dismissal of a usury claim.” Id. (citing Forest Creek Dev. Co. v. Liberty Property Sav. & Loan Ass’n, 531 So. 2d 356, 357 (Fla. 5th DCA 1988)). The opinion in Levine, 638 So. 2d at 184 was later disapproved by the Florida Supreme Court to the extent that it explained, “a savings clause is one factor to be considered in the overall determination of whether the lender intended to exact a usurious interest rate.” Levine v. United Cos. Life Ins. Co., 659 So. 2d 265, 267 (Fla. 1995). (Internal quotations omitted.) In other words, the savings clause now presents an issue of fact that is to be weighed in making a determination whether a usurious loan was given.
Savings clauses should be used wisely. They may be helpful in a defensive posture once litigation ensues, both in terms of rescuing the enforceability of an agreement and in expressing the intent of the parties at the time of the agreement. However, it should not be taken as a given that either of these strategies will work in any particular case.
Van Ness Law Firm regularly prosecutes and defends appellate actions throughout the State of Florida. This portion of our practice includes representation in all five district courts of appeal and the Florida Supreme Court. We routinely appear in front of the courts for oral argument.
Van Ness Law Firm appeared at oral argument in front of the Second District Court of Appeal on March 13, 2019 in Deutsche Bank v. Hopson. The trial court had granted attorney’s fees in favor of the borrower following a judgment in favor of defendant at trial. The trial court found that there were no endorsements on the note and that the assignment of mortgage was not necessarily valid. Plaintiff filed a motion for rehearing on the fees issue due to the fact the trial court had previously found a lack of a relationship between the plaintiff and both the note and mortgage. The trial court agreed that fees should not have been awarded. Hopson appealed.
The borrower argued Madl, a case in which no valid transfer of the note occurred but a valid assignment of mortgage was made. The borrower also filed the Florida Supreme Court opinion inGlass prior to oral argument. Our firm argued that Madl goes against the literal language in the statute governing fees. Our firm also argued that the exception in Madl does not apply because there was no evidence of a valid transfer of the mortgage and such a transfer was required by the court in Madl. Further, our firm argued that Glass only applies in circumstances in which there is no determination on the merits that a party lacks a relationship to the relevant contracts.
The panel questioned the parties regarding matters outside the briefing. Judge Lucas was interested in questioning whether a mortgage is a contract. Judge Silberman wanted to know how a defendant in a case such as this could possibly get fees. And there was inquiry as to the meaning of the wording of the trial court’s order. On this latter inquiry, we made sure to remind the court that the trial court’s order was one that the borrower’s counsel had drafted, themselves.
An opinion will follow when the Court elects to issue one. Van Ness Law Firm will continue to advocate on behalf of its clients at each level of the Florida courts.
By Sam Reisman
Law360 (February 21, 2019, 7:20 PM EST) — A Florida attorney and the federal government on Wednesday clashed over fees for accessing certain documents through PACER, with the attorney arguing they amount to a breach of contract and the government saying while court opinions are usually free, it’s up to the judge to determine what constitutes an opinion.
In dueling briefs, Theodore D’Apuzzo, the Fort Lauderdale litigator who brought the action, and the government clashed over a central question of whether a contract or implied covenant was established between the government and users of the Public Access to Court Electronic Records, and what duties, if any, are owed to users with respect to access to opinions.
“Under the undisputed facts, a contract was formed between the government and plaintiff as to plaintiff’s PACER usage,” according to D’Apuzzo’s brief. “As such, the breach of implied covenant claim is on sound footing, and is in no way duplicative to or contrary to the express terms of the express or implied-in-fact contract.”
The government countered that no such valid contract exists between the government and people accessing court documents through PACER, and any supposed duties owed to PACER users under the alleged contract are without basis.
“While plaintiff alleges that the PACER registration process is an online agreement, it is not a valid contract because it is insufficiently definite,” the government argued.
Furthermore, while the E-Government Act of 2002 mandates that written opinions should be made available for free, the government argued that there is no clear uniform guidance as to what constitutes a written opinion and authoring judges have discretion determining what qualifies as an opinion.
Even if the court finds a valid contract exists between PACER and its users, the government argued, that does not mean the government would be required to undertake new duties, such as standardizing the process by which documents are labeled opinions.
“That opinions are provided without charge does not require the government to take unspecified ‘steps’ to ensure that ‘[Case Management/Electronic Case Files] websites’ use the ‘same methods’ for designating documents as opinions,” the government’s brief said.
D’Apuzzo initially filed his suit in November 2016, arguing individual judges and their staffs are responsible for designating documents as “judicial opinions,” resulting in inconsistencies and PACER users having to improperly pay for access.
He pointed to several documents that he said had wrongly racked up PACER charges, including a 29- page opinion granting a motion to dismiss from the bankruptcy court in the Eastern District of Michigan, a memorandum opinion and order from the District of Columbia, and opinions from the Southern District of Ohio and the Middle District of Florida. Each of the documents was referred to specifically as an “opinion” but was not made available for free, D’Apuzzo claims.
The parties filed cross-motions for summary judgment in December.
“We as the plaintiff feel good about our position and we can only hope the court will agree, as we believe the public does have a right to free access to federal court opinions and that this is an important right worthy [of] fighting for,” Douglas J. Giuliano, counsel for D’Apuzzo, wrote in an email on Thursday.
Counsel for the government did not immediately respond to a request for comment.
A separate class action lawsuit that could have profound implications for PACER fees in general is now before the United States Court of Appeals for the Federal Circuit.
In that action, originally filed in 2016, three nonprofit groups alleged that the judiciary overcharged PACER users and unlawfully used fees collected through the system for expenses other than maintaining the online documents portal.
A federal district judge partially agreed in March and found that some $198 million in PACER fees were misapplied to projects that did not enhance public access to court documents, in violation of the E-Government Act.
The nonprofit organizations have received the support of former U.S. Sen. Joseph Lieberman, who sponsored the E-Government Act, as well as seven retired federal judges and a host of media advocacy and legal organizations. In a Feb. 7 editorial titled “Public Records Belong to the Public,” The New York Times also championed their cause.
“The government’s practice of charging fees to access court documents that are greater than the costs of making those documents accessible is at odds with the text, history and purpose of the E-Government Act,” Lieberman wrote in an amicus brief.
D’Apuzzo is represented by Nicole W. Giuliano and Douglas J. Giuliano of Giuliano Law PA and John Anthony Van Ness and Morgan L. Weinstein of Van Ness Law Firm PLC.
The government is represented by Alicia H. Welch of the U.S. Department of Justice’s Civil Division. The case is Theodore D’Apuzzo PA et al. v. U.S., case number 0:16-cv-62769, in the U.S. District
Court for the Southern District of Florida.
–Additional reporting by Carolina Bolado, Dave Simpson, RJ Vogt and Emma Cueto. Editing by Michael Watanabe.