Part two of the Higgins foreclosure case from Florida -no separate lawsuit for deficiency collection!

As a bankruptcy attorney in Mount Vernon, IL for over 20 years, I read through and analyze court rulings throughout the country as eventually, it will affect bankruptcy attorneys here in Mount Vernon and all of southern Illinois.

 

 

Here we have Higgins v. Dyck-O’Neal, Inc., — So. 3d —-, 2016 WL 3191146 (Fla. 1st DCA 2016). It is a long and involved case, and I split the decision into two blogs – Click here to read Part One.

 

 

On first examination of the petition for certiorari, the Supreme Court concluded that argument should be heard on the matter because of apparent conflict with its prior decisions. Id. The Supreme Court summarized some of its prior decisions, including Reid, McLarty, and Luke. Id. It distinguished Reid because in the case at hand “the request [for a deficiency decree] was made in the complaint and apparently was not immediately considered but was deferred as the court retained jurisdiction to settle any motion for deficiency.” Id. The Supreme Court set forth, “So it may be said that the request for deficiency was neither considered nor overlooked. Here again on the salient facts the plaintiff was not at this point free to seek an adjudication elsewhere, hence a conflict was not developed.” Id. The Supreme Court stated of McLarty, “[T]here was a prayer for a deficiency but thereafter request for that relief was ignored.” Id. It found that the holding in Luke was essentially the same as the one in Reid. Id. The Supreme Court was ultimately unable to discover the conflict that would vest jurisdiction with it because “there appears to be no inconsistency between what was held here and what was decided in the cited cases.” Id. It set forth, “There has been no disturbance of the rule that if a deficiency is sought and the relief is overlooked or not considered, the one entitled to the recovery of the balance of the debt left over after the proceeds of the mortgage sale have been credited may sue for the remainder at law.” Id. at 859. The court found, however, that the “principle would have to be stretched out of form to condone what the plaintiff undertook in this case.” Id. It concluded that the Fourth District’s decision was sound and did not disrupt the law that “appears firmly established.” Id.

In support of its argument on appeal that its action at law was permissible, Appellee relies not only on Reid but also upon the plain language of section 702.06, both before and after the 2013 amendment. While we agree that the plain language of both versions of section 702.06 supports an argument that a party may file an action at law to recover a deficiency so long as a trial court has not actually ruled upon a request for a deficiency judgment in the foreclosure case, cases such as Belle Mead and First Federal Savings suggest otherwise. We note also that any question as to whether Reid permits a party to file an action at law after including a prayer for a deficiency judgment in a foreclosure complaint and after the trial court reserves jurisdiction to consider such a request was resolved by the Supreme Court in First Federal Savings. There, as here, the foreclosure complaint contained a prayer for a deficiency decree, and the foreclosure judgment expressly reserved jurisdiction to rule upon a deficiency request. As the Supreme Court noted in First Federal Savings, there was not a reservation of jurisdiction in Reid. As such, Appellee’s reliance upon Reid is misplaced.

Notwithstanding the fact that First Federal Savings supports the argument that a party is not entitled to pursue an action at law on a promissory note where that party includes a prayer for a deficiency judgment in its foreclosure complaint and the trial court reserves jurisdiction to enter a deficiency judgment, we have determined that affirmance is warranted in this case based upon the circumstances presented. Unlike the situation in First Federal Savings where the foreclosure court entered an order terminating its jurisdiction, the trial court in this case granted Appellee’s motion to consolidate the foreclosure case and the action at law. Therefore, in contrast to the Palm Beach County Circuit Court in First Federal Savings, the trial court in this case still had jurisdiction in the foreclosure case. Although Appellant cites case law for the proposition that consolidated cases maintain their independent status with respect to the rights of the parties involved, Appellant does not contend on appeal that the trial court erred in granting Appellee’s motion to consolidate or in denying his motion to dismiss the action at law. We note also that although Appellant moved to dismiss the action at law prior to Appellee moving for consolidation, the record does not contain any argument put forth below by Appellant in opposition to consolidation. As such, any question as to whether consolidation was proper is not before us. Compass Bank, 164 So. 3d at 52-57 (footnotes omitted).

Regardless of whether this prior analysis on the merits of the issue was dicta in Reid, we now adopt this analysis in our holding here. And we disagree with our sister court’s holding in in Garcia v. Dyck-O’Neal, Inc., 178 So. 3d 433 (Fla. 3d DCA 2015), that the revised relevant statutory language compels a different result.

The facts in Garcia are very similar to this current appeal. In 2009, BAC Home Loans Servicing brought a successful foreclosure action against Garcia and others, and the prayer for relief included the court taking jurisdiction for the purpose of a deficiency judgment. 178 So. 3d at 434. The final judgment of foreclosure reserved jurisdiction to adjudicate any claim seeking a deficiency judgment. Id. After the foreclosure sale, the appellee was assigned the judgment and note, and filed a separate action in the same county as the foreclosure action against Garcia seeking the deficiency. Id. Garcia did not respond, the clerk’s default was entered in September 2014, and the appellee moved for entry of a final default judgment. Id. Garcia filed a motion to dismiss, arguing that the trial court lacked subject matter jurisdiction of the deficiency action because BAC sought deficiency relief and the foreclosure court expressly retained jurisdiction to adjudicate the deficiency. Id. The trial court rejected this argument, and Garcia appealed, relying on First Federal Savings and Compass Bank.

The Third District found that the portions of the opinions relied upon by Garcia were dicta and, in relevant part, held:

  1. First Federal Savings’ Dicta

In First Federal Savings, the plaintiff obtained a judgment of foreclosure in Palm Beach County; the foreclosure court retained jurisdiction to determine a deficiency judgment. The plaintiff then filed an action in Broward County to recover the deficiency. On plaintiff’s motion, the circuit court in Palm Beach County terminated its jurisdiction. The Broward County circuit court, however, dismissed the case because the Palm Beach County circuit court originally had retained jurisdiction. First Fed. Sav., 195 So.2d at 857.

The Fourth District Court of Appeal held that the Palm Beach County circuit court should not have abandoned its jurisdiction. Initially, the Florida Supreme Court granted certiorari review based on an apparent conflict among the districts. In discharging the writ of certiorari, however, the Florida Supreme Court determined that no conflict existed after all. In its conclusion, the Florida Supreme Court’s glancing reference to the rule for recovering a deficiency judgment does not constitute the holding of the case. First Fed. Sav., 195 So.2d at 859.

. . .

  1. Statutory Authority Eclipses Dicta

When the clear and unambiguous language of a statute commands one result, as here, while dicta from case decisions might suggest a different result, we must apply the statute so as to give effect to legislative intent. Citizens Prop. Ins. Corp. v. Perdido Sun Condo. Ass’n, Inc., 164 So.3d 663, 666 (Fla.2015). In determining legislative intent, we first look to the language of the statute. State v. Hackley, 95 So.3d 92, 93 (Fla.2012) (“The first place we look when construing a statute is to its plain language—if the meaning of the statute is clear and unambiguous, we look no further.”).

We need look no further than the plain language of section 702.06. The dicta in First Federal Savings and Compass Bank does not carry the weight of authority of section 702.06 as it is now constituted. The remedial nature of the 2013 amendment to section 702.06 militates against our further interpreting an inconsistent body of case law.  178 So. 3d at 435-36 (footnotes omitted).

We respectfully disagree with the Third District’s opinion, which does not dissuade us from adopting this court’s analysis in Compass Bank. In particular, we cannot ignore that part of the Supreme Court’s First Federal Savings’ holding that its certiorari jurisdiction was unadvisedly granted, based on the fact that the Fourth District’s underlying opinion in First Federal Savings did not disrupt the law that appeared firmly established, and the facts of the case were specifically distinguishable from Reid, as that prior Florida Supreme Court opinion did not involve a reservation of jurisdiction like First Federal Savings. Furthermore, we cannot read the statutory language to effect a monumental change in the law, which would allow a mortgagee to sue to foreclose on the mortgaged property, successfully request the court to reserve jurisdiction to enter a deficiency judgment in the event of a shortfall after the sale of the property, and then after the court reserves jurisdiction at the request of the mortgagor (or the successor), then permit the mortgagor to seek a deficiency judgment at common law. The statute expressly prohibits such a result if the original suit in foreclosure results in an order granting or denying the deficiency judgment. In our view, when the original court in foreclosure reserves jurisdiction to grant or deny the deficiency judgment, the statute cannot be logically or fairly read to permit the plaintiff in the original action to disregard the court’s reservation of jurisdiction, and file another action at law. When the court in the foreclosure action has been requested to grant a deficiency judgment and has reserved jurisdiction to do so, the plaintiff is bound by that court’s ultimate exercise of jurisdiction to rule on the matter.

We agree with the federal district court in Wells Fargo Bank, N.A. v. Jones, 2014 WL 1784062 (M.D. La. May 5, 2014), that to interpret this statute as read by the Third District and asserted by Appellee would permit forum shopping and contravene the Florida Supreme Court case law to the contrary, which the statute does not specifically abrogate. In Jones, like here, the lender had sought a deficiency judgement in the original foreclosure action, that court had reserved jurisdiction to render such relief, but the lender then sought a deficiency judgment at common law in federal court, disregarding its earlier request for relief in the Florida state court which still retained jurisdiction to grant relief. The court in Jones stated: “This Court finds that the Florida law providing the lender with `the right to sue at common law to recover such deficiency’ was never meant to apply to the present situation.” We agree, and further note that the statute cannot be reasonably read to allow a lender to seek a deficiency judgment in the original foreclosure action, where the court is granted the discretion to deny such relief, and retains jurisdiction to do so, and then grant the lender the right to forum shop and file yet another action based on contract principles where the subsequent court is not authorized to deny relief in common law, absent unusual circumstances. Absent specific direction from the legislature, such a reading is not justified. Rather, we read the revised statutory language as simply clarifying and reiterating long-standing judicial holdings that if the original foreclosure court ignores a claim for a deficiency judgment, or one is not sought there, the lender may seek relief at common law.

As we acknowledged in Compass Bank, “While we agree that the plain language of both versions of section 702.06 supports an argument that a party may file an action at law to recover a deficiency so long as a trial court has not actually ruled upon a request for a deficiency judgment in the foreclosure case, cases such as Belle Mead and First Federal Savings suggest otherwise.” 164 So. 3d at 56 (emphasis added). We now hold that while the statutory language may “support” such an argument, it does not persuade us that the legislature intended to actually overrule Florida Supreme Court decisions that address the issue more specifically and hold to the contrary. Thus, we fully agree with our prior opinion that Appellee’s reliance on Reid is misplaced, and we hold that a party is not entitled to pursue an action at law on a promissory note where that party includes a prayer for a deficiency judgment in its foreclosure complaint and the trial court reserves jurisdiction to enter a deficiency judgment. Accordingly, we reverse the trial court’s denial of Appellants’ motion for relief from judgment and remand for the trial court to void the default judgment.

REVERSED and REMANDED.

LEWIS, J., CONCURS; MAKAR, J., DISSENTING WITH OPINION.

MAKAR, J. dissenting.

A final judgment of foreclosure entered against Sylvia and Collier Higgins resulted in their home being sold at auction. Dyck-O’Neal, Inc., which was assigned the judgment and underlying note, sued in a separate proceeding to collect the deficiency between the amount due on the note and the property’s value. A final judgment of default was entered against the Higgins because they failed to respond in the deficiency proceeding. A year later, the Higgins sought to void the default judgment, claiming the trial court lacked jurisdiction because the foreclosure court had reserved jurisdiction to consider a request for a deficiency judgment in that proceeding.

The trial court properly denied the Higgins‘ request because the Legislature had just recently enacted a clearly worded statute that established a “right to sue” for a deficiency judgment “unless the court in the foreclosure action has granted or denied a claim for a deficiency judgment.” § 702.06, Fla. Stat.; Ch. 2013-137, Laws of Fla. Because the “court in the foreclosure action” had neither “granted” nor “denied” the claim for a deficiency judgment in that proceeding, Dyck-O’Neal had a clear statutory “right to sue” separately for a deficiency judgment. The statute contemplates this precise situation, i.e., where a foreclosure court has been presented, but not acted upon, a request for a deficiency judgment; in such a case, the complainant has the “right to sue” to recover the deficiency. The statute doesn’t say the complainant must sue in the same court as the foreclosure action; instead, the plain words of the statute envision the possibility of two separate proceedings, perhaps in two different courts.

The plain, unambiguous language of the statute has not escaped judicial notice. Every Florida court addressing the issue of whether section 702.06 jurisdictionally bars a separate suit for a deficiency judgment has said unequivocally that it does not. Instead, the only statutory jurisdictional bar is if the “court in the foreclosure action has granted or denied a claim for a deficiency judgment.” § 702.06, Fla. Stat. The Third District, in two cases with facts like this one, have viewed the 2013 statutory language as “clear,” “plain,” and “unambiguous.” Dyck-O’Neal, Inc. v. Weinberg, 41 Fla. L. Weekly D329 (Fla. 3d DCA Feb. 3, 2016) (reversing an order dismissing for lack of jurisdiction based on “unambiguous” and “plain language of the statute”); Garcia v. Dyck-O’Neal, Inc., 178 So. 3d 433, 436 (Fla. 3d DCA 2015) (“When the clear and unambiguous language of a statute commands one result, as here, . . . we must apply the statute so as to give effect to legislative intent.”); see also Cheng v. Dyck-O’Neal, Inc., 41 Fla. L. Weekly D1076b (Fla. 4th DCA May 6, 2016) (agreeing with Third District decisions “that section 702.06, Florida Statutes, is unambiguous”). As summarized by the Third District in Garcia:

According to the statute, unless the foreclosure court has granted or has declined to grant a deficiency judgment, a plaintiff may pursue deficiency relief in a separate action. In the instant case, the foreclosure court did not grant or decline to grant the deficiency judgment claim; therefore, the trial court below had jurisdiction to consider Dyck-O’Neal’s deficiency claim.

178 So. 3d at 436. Likewise, the Fourth District in Cheng concluded that the “foreclosure judgment’s reservation of jurisdiction does not preclude a separate suit to recover the deficiency where the foreclosure court has not granted or denied a claim for a deficiency judgment.” Cheng, 41 Fla. L. Weekly D1076b. The clarity of the 2013 statutory language decides this case; affirmance is required.

Two additional points are warranted. First, the lengthy discussion of erstwhile case law in Reid v. Compass Bank, 164 So. 3d 49, 57 (Fla. 1st DCA 2015), is dicta, immaterial, and misplaced. Because it is dicta, it has only persuasive value; but it has failed to persuade both the Third and Fourth Districts. It is immaterial because the 2013 statutory language at issue trumps whatever perceived inconsistency the panel in Reid may have imagined with prior precedents. See Garcia, 178 So. 3d at 436 (“Statutory Authority Eclipses Dicta”). In addition, the case law recited cannot be said to be inconsistent with the 2013 revision. Rather, though the older case law is not entirely consistent, it appears that a complainant had the right to pursue an action at law for a deficiency judgment if a deficiency is not sought or entered in the foreclosure proceeding. See Reid v. Miami Studio Props., 190 So. 505, 506 (Fla. 1939); see also First Fed. Sav. & Loan Ass’n of Broward Cnty. v. Consol. Dev. Corp., 195 So. 2d 856, 859 (Fla. 1967) (“There has been no disturbance of the rule that if a deficiency is sought and the relief is overlooked or not considered, the one entitled to the recovery of the balance of the debt left over after the proceeds of the mortgage sale have been credited may sue for the remainder at law.”).

Second, whatever disagreement may exist about the efficiency of allowing a separate proceeding to pursue a deficiency judgment is best left to the Legislature, which has recently addressed and settled the matter. As the Third District said: “In our view, the Legislature drafted a clear statute that resolved the courts’ struggle with the issue in this case.” Garcia, 178 So. 3d at 436. If the statutory “right to sue” in section 702.06 results in significant problems—which appears unlikely given the right in some form has existed for over 75 years—the legislative branch may wish to address them.

 

 

A quick analysis of the case is locate here.

 

About the blogger:

Michael Curry of Curry Law Office in Mount Vernon, Illinois (http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

You can also find his website at http://www.mtvernonbankruptcylawyer.com.

 

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One thought on “Part two of the Higgins foreclosure case from Florida -no separate lawsuit for deficiency collection!

  1. Pingback: Brief analysis of the Higgins case (Florida) – keeping foreclosure cases at their word! | Curry Law Office

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