Bonita Real Estate Partners, LLC v. SLF IV Lending, L.P.
222 So. 3d 647
Fla. Dist. Ct. App.2017Background
- Borrowers obtained a $6.1M commercial mortgage in 2011; note governed by Texas law but the note/mortgage expressly said the law of the state where the property is located (Florida) governs creation, perfection, priority and foreclosure of the mortgage liens. Mortgage reiterated that Florida law applies to foreclosure procedures while Texas substantive law governs the loan obligations.
- Borrowers defaulted; trial court entered a foreclosure judgment in May 2012 and a foreclosure sale occurred in June 2012 (lender purchased property). The court reserved jurisdiction for a deficiency.
- Lender filed a motion for deficiency under Fla. Stat. § 702.06 and later pursued damages on the note and guaranties at trial in 2014. Appellants asserted the property’s fair market value exceeded the indebtedness; lender contended Texas law applied and parties had waived statutory offset rights under Texas law.
- Mortgage and guarantees included waivers of rights under Texas Property Code sections addressing deficiency offsets; the note itself did not contain that waiver.
- The trial court ruled Texas law applied to the lender’s damages/deficiency claim, granted partial summary judgment calculating deficiency under Texas law, and entered a final money judgment of roughly $8.01M against the appellants.
- The Second District reversed as to the deficiency: it held the deficiency claim was a continuance of the foreclosure (governed by Florida law per the loan documents) and therefore the trial court erred applying Texas law to the deficiency calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for deficiency | Lender: claims on note/guaranties are governed by Texas law per loan documents | Borrowers: deficiency is a continuation of foreclosure and Florida law governs foreclosure/deficiency | Court: Deficiency is a continuation of foreclosure; Florida law governs deficiency determination |
| Waiver of right to offset fair market value | Lender: waivers in mortgage/guaranties preclude offset under Texas law | Borrowers: Florida law allows debtor to introduce FMV; waivers under Texas law should not apply to a Florida-governed deficiency | Court: Because Florida law governs deficiency, Texas waivers cannot preclude presentation of FMV under Florida law (trial court erred applying Texas waiver) |
| Timeliness/waiver of lender’s choice-of-law claim | Lender: entitled to pursue damages under Texas law even if raised late | Borrowers: lender waived assertion of Texas law by not timely asserting it | Court: addressed but ruled choice-of-law resolution governed by documents; primary error was applying Texas law to deficiency because foreclosure/deficiency are governed by Florida law |
| Nature of final judgment (deficiency vs. separate money judgment) | Lender: proceeding on note/guaranties was independent claim for damages | Borrowers: after foreclosure sale, lender limited to collecting any deficiency only | Court: The damages awarded that represent balance after sale operate as a deficiency judgment; motion for deficiency was continuation of foreclosure |
Key Cases Cited
- Aluia v. Dyck-O'Neal, Inc., 205 So. 3d 768 (Fla. 2d DCA 2016) (foreclosure can encompass both legal and equitable remedies; note and mortgage may merge into foreclosure judgment)
- Hammond v. Kingsley Asset Mgmt., LLC, 144 So. 3d 673 (Fla. 2d DCA 2014) (party may pursue foreclosure and damages on note but cannot recover twice; deficiency is the proper remedy after sale)
- L.A.D. Prop. Ventures, Inc. v. First Bank, 19 So. 3d 1126 (Fla. 2d DCA 2009) (motion for deficiency may be a continuance of foreclosure proceedings)
- Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1 (Tex. 2014) (Texas law permitting offset of deficiency by fair market value unless waived)
- Vantium Capital, Inc. v. Hobson, 137 So. 3d 497 (Fla. 4th DCA 2014) (once foreclosure sale price is introduced, burden shifts to debtor to present evidence of fair market value)