The Higgins foreclosure case from Florida -no separate lawsuit to collect a deficiency! Part One

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 – This is Part One.

 

 

SYLVIA HIGGINS AND COLLIER HIGGINS, APPELLANTS,

V.

DYCK-O’NEAL, INC., APPELLEE.

Case No. 1D15-4784.

District Court of Appeal of Florida, First District.

Opinion filed June 9, 2016.

Austin Tyler Brown of Parker & DuFresne, P.A., Jacksonville, for Appellants.

Susan B. Morrison, Tampa, for Appellee.

THOMAS, J.

 

Appellants, Collier Higgins & Sylvia Higgins, seek review of an order denying their motion for relief from a Final Default Judgment, wherein the trial court determined that Appellants were indebted to Appellee, Dyck-O’Neal, Inc. Appellants argued below and reassert here that the trial court lacked subject matter jurisdiction and thus erred in denying their motion for relief, based in part on our decision in Reid v. Compass Bank, 164 So. 3d 49 (Fla. 1st DCA 2015). Appellants argue that Appellee was precluded from filing an action at law seeking damages based on Appellants’ failure to satisfy their promissory note on the property at issue, because Appellees had filed a prior foreclosure action which included a prayer for a deficiency judgment, and the trial court in that action reserved jurisdiction to enter a deficiency judgment. We agree with Appellants, and for the reasons stated herein, we reverse the trial court’s denial of Appellants’ motion for relief from judgment.

FACTS

In 2009, Freedom Mortgage Corporation (Freedom) sued Appellants in Duval County to foreclose the mortgage on Appellants’ property. It is undisputed that in its complaint, Freedom included a request for a deficiency judgment against Appellants, if the proceeds were insufficient to pay Freedom’s claim. In September 2009, the trial court entered a Final Summary Judgment in Foreclosure that retained jurisdiction “for the purpose of making any further orders as may be necessary and appropriate herein, including but not limited to all claims for deficiencies.” (Emphasis added.) After the foreclosure sale, the Judgment and Note was assigned to Appellee.

Almost five years later, Appellee filed a new Complaint in law against Appellants in Duval County, seeking damages as a result of Appellants’ failure to satisfy the promissory note on the property. Appellants did not respond to the Complaint, and Appellee moved for default, which was granted. Appellee filed a motion for final default judgment along with supporting affidavits. The trial court ultimately entered a Final Default Judgment against Appellants, totaling $89,724.15.

Approximately 11 months later, Appellants filed a motion for relief from judgment pursuant to rule 1.540(b), Florida Rules of Civil Procedure, asserting the final judgment was void, as it was entered without subject matter jurisdiction, citing Compass Bank. Appellee filed a memorandum of law in opposition to Appellants’ motion for relief from judgment, asserting in part that our decision in Compass Bank which discussed the relevant issue here was dicta. Following a hearing, the trial court denied Appellants’ motion for relief from judgment, and this appeal followed.

ANALYSIS

Appellants argue here that Appellee was prevented from filing an action at law, based on the prayer for a deficiency judgment in the prior foreclosure action, where the prior foreclosure court unequivocally reserved jurisdiction to enter a deficiency judgment. It is undisputed that the argument on appeal concerns an issue of law, which is reviewed de novo. Compass Bank, 164 So. 3d at 52 (citing Fla. Ins. Guar. Ass’n, Inc. v. Bernard, 140 So. 3d 1023, 1027 (Fla. 1st DCA 2014)).

In addressing the legal issue presented here, we return to the analysis of this court’s decision in Compass Bank:

Prior to June 7, 2013, section 702.06, Florida Statutes, which is entitled “Deficiency decree; common-law suit to recover deficiency,” provided:

In all suits for the foreclosure of mortgages heretofore or hereafter executed the entry of a deficiency decree for any portion of a deficiency, should one exist, shall be within the sound judicial discretion of the court, but the complainant shall also have the right to sue at common law to recover such deficiency, provided no suit at law to recover such deficiency shall be maintained against the original mortgagor in cases where the mortgage is for the purchase price of the property involved and where the original mortgagee becomes the purchaser thereof at foreclosure sale and also is granted a deficiency decree against the original mortgagor.

(Emphasis added). Section 702.06 was amended in 2013 to read:

In all suits for the foreclosure of mortgages heretofore or hereafter executed the entry of a deficiency decree for any portion of a deficiency, should one exist, shall be within the sound discretion of the court; however, in the case of an owner-occupied residential property, the amount of the deficiency may not exceed the difference between the judgment amount, or in the case of a short sale, the outstanding debt, and the fair market value of the property on the date of sale. For purposes of this section, there is a rebuttable presumption that a residential property for which a homestead exemption for taxation was granted according to the certified rolls of the latest assessment by the county property appraiser, before the filing of the foreclosure action, is an owner-occupied residential property. The complainant shall also have the right to sue at common law to recover such deficiency, unless the court in the foreclosure action has granted or denied a claim for a deficiency judgment.  See Ch. 13-137, § 5, Laws of Fla. (Emphasis added).

In addressing Appellant’s argument, a review of the case law construing section 702.06 is instructive. In Younghusband v. Ft. Pierce Bank & Trust Co., 100 Fla. 1088, 130 So. 725, 727 (1930), the supreme court held that “[i]f no deficiency judgment is entered in foreclosure sale, it is clear that a suit at law for any amount still due is available to the holder.” In Cragin v. Ocean & Lake Realty Co., 101 Fla. 1324, 135 So. 795, 797 (1931), the supreme court set forth that a plaintiff “having applied for and obtained a deficiency decree in their favor in the court of equity, could not, under the act of 1927, go into a court of law and maintain therein suits for the recovery of the balance due on the notes.” In Provost v. Swinson, 109 Fla. 42, 146 So. 641, 643 (1933), a case relied upon by Appellant, the supreme court set forth, “When the complainant filed his bill in equity to foreclose the mortgage and therein prayed for a deficiency decree, he elected that forum in which to have his right adjudicated and became bound by that choice.”

In Belle Mead Development Corp. v. Reed, 114 Fla. 300, 153 So. 843, 844 (1934), another case relied upon by Appellant, the supreme court explained that in August 1928, the appellee executed three promissory notes payable to the McElroys. It was alleged that the notes were assigned and delivered before maturity to the appellant, the plaintiff in the case. Id. The appellant filed suit for the foreclosure of the mortgage, praying for a deficiency decree. Id. A foreclosure decree was obtained, the property was sold, and the proceeds were applied to the payment of the debt. Id. The appellant asked for a deficiency decree which was “resisted” by the “defendant,” and the chancellor refused to enter a deficiency judgment. Id. The appellant subsequently filed an action at law to recover on the promissory notes, and the trial court “struck those pleas.” Id. The supreme court, in affirming, set forth, “In the case at bar there was a special prayer for affirmative relief [for a deficiency decree]. The complainant thereby elected that forum in which to have its rights adjudicated and became bound by that choice.” Id. The Supreme Court further set forth, “After specifically praying for a deficiency, the complainant may waive the relief prayed for in that regard, but it does not avoid the choice of the forum by not applying for the deficiency decree.” Id.

In Reid v. Miami Studio Properties, 139 Fla. 246, 190 So. 505, 505 (1939), a case relied upon by Appellee in support of its argument that the action at law was permissible, the supreme court noted that the complainant, in his bill to foreclose, prayed for a deficiency decree in the event the property at issue did not bring enough to pay the amount of the indebtedness and costs. The Chancellor did not enter a deficiency decree and did not consider this phase of the prayer for relief. Id. The Supreme Court explained that the sole question presented was “whether or not under the facts stated the plaintiff Reid can now maintain an action at law to recover the amount of the deficiency judgment which he prayed for in the foreclosure but which prayer was not considered.” Id. The Supreme Court noted that the defendant contended that the question should be answered in the negative because “the plaintiff in error elected his forum and is bound by the result of his election.” Id. at 505-06. The defendant relied upon Provost and Belle Mead in support of its argument. Id. at 506. The Supreme Court set forth:

We understand the law to be that where there is no prayer for a deficiency and where one is not sought or entered in the foreclosure proceeding the law courts may be resorted to recover one. Since the entry of a deficiency decree under Section 5751, Compiled General Laws of 1927, is within the sound discretion of the Chancellor and if entered, the one in whose favor it is entered may resort to a suit at law to recover it, we see no basis for the logic that he is precluded from an action at law to recover one if the chancellor is importuned to enter it and declines to consider the question or to make any ruling thereon.

The cases relied on by defendant in error have been examined. They involve other factual situations affecting deficiencies but we do not consider that they rule the question we have here nor are we convinced that the elements essential to constitute an election of remedies are present.

In fine, we understand Section 5751, Compiled General Laws of 1927, to mean that if a deficiency decree is asked for in a foreclosure and granted, that settles the question of what forum may be sought for relief but if not asked for or if asked for and overlooked or not considered, the right of the claimant is not affected. He may sue at law and recover such portion as he may prove himself entitled to. Id. (Emphasis added).

In Crawford v. Woodward, 140 Fla. 38, 191 So. 311, 311 (1939), the supreme court, relying on Provost, Cragin, and Belle Mead and finding Reid distinguishable, determined that the plaintiff could not maintain an action at law after the foreclosure where the plaintiff prayed for a deficiency decree, notwithstanding the facts that the plaintiff later stated in the confirmation of the foreclosure sale that “Complainants are not asking for a deficiency decree” and none was rendered by the chancellor.

In Luke v. Phillips, 148 Fla. 160, 3 So.2d 799, 799 (1941), the Supreme Court addressed the plaintiff’s contention that Reid overruled Belle Mead. The supreme court, without setting forth the facts of the case, set forth, “[T]he instant case is ruled by Reid . . . wherein we pointed out that the facts of that case were distinct from those in the Belle Mead . . . case and that line of cases which were not inferentially or otherwise overruled.” Id.

In McLarty v. Foremost Dairies, 57 So.2d 434, 434 (Fla.1952), the supreme court considered a petition for writ of certiorari to review a judgment of the Duval County Circuit Court which affirmed the judgment of the Civil Court of Record for Duval County. The Supreme Court explained that the respondent was the owner and holder of a note secured by chattel mortgage and brought suit in Volusia County against the petitioner to foreclose the mortgage. Id. In the suit to foreclose, the respondent prayed for a deficiency decree. Id. No further action was taken with regard to the prayer for deficiency. Id. The personal property mortgaged was sold pursuant to a final decree entered in the foreclosure proceedings and after crediting the proceeds of the sale to the note, there remained due and owing to the plaintiff $1,548.41. Id. “At no time during the entire proceedings was any request made for a deficiency nor was the matter called to the attention of the Court in any way.” Id. The only time or place where the matter of deficiency appeared in the proceedings was the prayer for deficiency contained in the bill of complaint. Id. The respondent “[i]n due course” filed suit in Duval County for the balance due under the note after crediting the proceeds of the foreclosure sale. Id. The petitioner, the defendant below, pleaded as a defense the foreclosure suit and the prayer for deficiency contained in the bill of complaint. Id. It was the contention of the petitioner that the respondent “having prayed for a deficiency without obtaining one, could not sue upon the note to recover the balance due upon the mortgage note.” Id.

The Supreme Court found that the case was controlled by Reid and Luke and noted the alleged confusion between those cases and the cases of Crawford and Belle Mead. Id. The Supreme Court explained that although the facts in Luke did not state that a deficiency decree was prayed for, its review of the record in that case showed that the bill to foreclose the mortgage contained a prayer for a deficiency judgment. Id. at 435. It also explained that the facts of the case at hand were identical to the facts of Luke where the “sale of the mortgage property and disbursements were approved and confirmed by the Chancellor but no deficiency decree was entered or requested.” Id. After noting that it’s holding in Reid was reaffirmed in Luke, the Supreme Court set forth, “If the opinion in Reid . . . as affirmed in Luke . . . is in conflict with any other holdings with reference to the subject matter, such holdings, or opinions, are over-ruled to the extent of such conflict.” Id. The Supreme Court found no departure from the essential requirements of the law in the case before it. Id.

Thereafter, in First Federal Savings & Loan Association of Broward County v. Consolidated Development Corp., 195 So.2d 856, 858 (Fla. 1967), the Supreme Court addressed McLarty, Reid, and Luke. In First Federal Savings, the petitioner brought a foreclosure suit in Palm Beach County and prayed for a deficiency decree if the proceeds of the mortgage sale were less than the amount due on the mortgage. Id. at 857. The final decree of foreclosure expressly reserved jurisdiction in the court for the determination of any motion for a deficiency decree. Id. The petitioner then brought an action to recover the deficiency in Broward County and represented to the foreclosure court in Palm Beach County that inasmuch as no motion had been made there for a deficiency decree, there was no longer a need for retention of jurisdiction of the cause in that court. Id. The foreclosure court entered an order terminating jurisdiction. Id. The Broward County court dismissed the case before it, ruling that the petitioner, after having selected its forum in Palm Beach County, should not be permitted to subject the respondents to further harassment and expense. Id. The dismissal was appealed to the Fourth District Court of Appeal. Id. After noting that the abandonment of jurisdiction in Palm Beach County did not occur until twenty-six days after the action at law was filed in Broward County, the Supreme Court explained that the Fourth District decided the case “on the principle that a court may not switch its jurisdiction, or power, on and off as one would an electric light.” Id. at 857-58. The Supreme Court also noted the Fourth District’s determination that “[f]or the purposes of deficiency decrees vel non this power is not for the benefit of the court; hence, it cannot waive its jurisdiction in that regard. It may refuse or refrain from exercising the power, but the chancellor cannot abjure a court of equity of its innate or inborn jurisdiction by mere words of jacitation.” Id. at 858. The Fourth District concluded that the Palm Beach County Circuit Court still had jurisdiction of the subject matter and the question of a deficiency decree and held that the dismissal in Broward County constituted a dismissal without prejudice to the plaintiff’s right to have the question of deficiency determined by the Palm Beach County Circuit Court. Id.

 

Continued in Part Two

 

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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2 thoughts on “The Higgins foreclosure case from Florida -no separate lawsuit to collect a deficiency! Part One

  1. Pingback: Part two of the Higgins foreclosure case from Florida -no separate lawsuit for deficiency collection! | Curry Law Office

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

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