US Bank loses mortgage case after Zoom stuff up

In a decision with broad implications for virtual courtroom proceedings, a Florida appellate court overturned a foreclosure judgment last week after finding that a borrower’s attorney had been excluded from a Zoom hearing until after the bank’s case had been presented and decided.

The Fourth District Court of Appeal ruled that the exclusion - though apparently inadvertent - violated the homeowner’s constitutional right to due process. The court also found that the bank failed to properly establish the admissibility of its financial records, further undermining the trial court’s ruling.

The case, Frank Cayard v. U.S. Bank National Association, stemmed from a $500,000 mortgage on property owned by Mr. Cayard. After a foreclosure judgment was initially entered in favor of U.S. Bank, serving as trustee for a structured mortgage trust, the Fourth District reversed in 2022, instructing the trial court to recalculate interest, adjust flood insurance charges, and reassess legal fees. A follow-up hearing was held on February 29, 2024, via Zoom.

According to the record, the hearing began promptly at 8:00 a.m., with the court and the bank’s representatives present. Seeing no other participants in the Zoom waiting room, the court proceeded. Over the next several minutes, the bank introduced nine exhibits into evidence and offered testimony supporting new interest and insurance figures. The trial court granted the bank’s motion to amend the final judgment and set a foreclosure sale date.

Only then was Cayard and his counsel admitted to the virtual courtroom.

“Like locking the courtroom door”

Judge Melanie G. May, writing for the panel, likened the mishap to barring a litigant from entering a physical courtroom. “Even if unintentional, the exclusion of counsel from the initial hearing segment denied the borrower a full and fair opportunity to be heard,” the court held.

Cayard’s lawyer stated he had joined the correct Zoom link before the hearing began and remained in the virtual waiting room, unseen by the court during screen sharing. Once admitted, he was permitted only to ask limited questions about one exhibit. Broader challenges to the bank’s evidence were denied.

The appellate court found that such limitations were impermissible. “Both parties are entitled to be present, to hear all testimony, and to participate fully in the adversarial process,” the opinion stated. “A procedural misstep, however minor in appearance, cannot justify excluding one side from the proceeding.”

Business records rejected

Beyond the access issue, the court also took issue with how the trial court admitted the bank’s documents into evidence. Florida law requires that business records meet specific statutory conditions before being considered admissible: they must be created at or near the time of the events recorded, by a person with knowledge, and in the regular course of business.

The court concluded that the bank’s witness failed to lay that foundation. “Those requirements were neither satisfied before the documents were admitted, nor remedied after,” the panel found, effectively stripping the records of their evidentiary value.

Back to the trial court

As a result of these combined procedural and evidentiary errors, the court reversed the amended foreclosure judgment and remanded the case for new proceedings consistent with its prior mandate.

The case highlights the challenges courts and litigants continue to face in adapting to hybrid legal environments. While remote hearings remain a staple of post-pandemic litigation, they require precision - and vigilance - to preserve the integrity of the process.

Implications for lenders and servicers

For lenders and mortgage servicers, the ruling serves as a cautionary tale. Even when legal claims appear well supported, a misstep in procedure or evidentiary presentation can derail enforcement. It also underscores the burden on financial institutions to ensure their documentation not only exists but is properly presented through competent testimony.