Neha Dagley
Landmark Florida Supreme Court Decision: Florida’s Economic Loss Rule
In Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., the Florida Supreme Court held, in a five-to-two decision, that the economic loss rule is limited to products liability cases. Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., 2013 WL 828003 (Fla. Mar. 7, 2013). The case came to the Florida Supreme Court for review in the form of a certified question by the United States Court of Appeals for the Eleventh Circuit. The Eleventh Circuit certified a question to the Florida Supreme Court, which was restated by the Florida Supreme Court as follows:
DOES THE ECONOMIC LOSS RULE BAR AN INSURED'S SUIT AGAINST AN INSURANCE BROKER WHERE THE PARTIES ARE IN CONTRACTUAL PRIVITY WITH ONE ANOTHER AND THE DAMAGES SOUGHT ARE SOLELY FOR ECONOMIC LOSSES?
Answering the certified question in the negative, it was held that “the application of the economic loss rule is limited to products liability cases.”
The crux of the underlying lawsuit was essentially a claim by Tiara Condominium Association, Inc. (Tiara) sounding in tort and contract against its insurance broker, Marsh & McLennan Companies, Inc. (Marsh) for failing to provide adequate professional advice where Marsh had advised Tiara that its loss limits coverage was per occurrence, relying upon which advice, Tiara proceeded with expensive remediate efforts. Ultimately, it turned out that the insurer, Citizens Property Insurance Corporation (Citizens), claimed that the loss limit was not as advised by the Marsh, and that it was $50 million in the aggregate, not per occurrence. While a settlement ensued between Tiara and Citizens in an approximate amount of $89 million, the amount was less than the $100 million plus expended by Tiara. Tiara filed suit against Marsh, alleging (1) breach of contract, (2) negligent misrepresentation, (3) breach of the implied covenant of good faith and fair dealing, (4) negligence, and (5) breach of fiduciary duty. A summary judgment was entered as to all counts except negligence and breach of fiduciary duty. It was as to these two claims, the appeals court certified a question to the Florida Supreme Court to determine whether the economic loss rule prohibited recovery, or whether an insurance broker falls within the professional services exception that would allow Tiara to proceed with the claims.
In its analysis, the Florida Supreme Court discusses, at length, the origins and development of the Economic Loss Rule, the pertinent aspects of which are summarized as follows: (1) The rule appeared initially in both state and federal courts in products liability type cases, and historically the doctrine was introduced to address attempts to apply tort remedies to traditional contract law damages. (2) The rule was recognized as the fundamental boundary between contract law, which was designed to enforce the expectancy interests of the parties, and tort law, which imposed a duty of reasonable care thereby encouraging citizens to avoid causing physical harm to others. (3) The contractual privity rule provided that, generally, a tort action is barred where a defendant has not committed a breach of duty apart from a breach of contract. (4) However, an exception to the above rule was also recognized, allowing torts committed independently of a contractual breach, such as for fraud in the inducement. (5) Another situation where the economic loss rule was limited was in the case of neglect in providing professional services.
The Florida Supreme Court subsequently engaged in a discussion regarding the roots of the doctrine originating in the products liability context where the focus of the rule was directed to damages resulting from defects in the product itself. The Court goes on to state that for some time, the Court had been concerned with what they perceived as an “over-expansion of the economic loss rule”, and noting the expression of this concern in various cases.
After going through an extensive analysis of the origin and original purpose of the economic loss rule, and the extension thereof being classified as “unprincipled”, the Florida Supreme Court stated, in pertinent part, as follows:
…[W]e now take this final step and hold that the economic loss rule applies only in the products liability context. We thus recede from our prior rulings to the extent that they have applied the economic loss rule to cases other than products liability. The Court will depart from precedent as it does here ‘when such departure is necessary to vindicate other principles of law or to remedy continued injustice.’”…Stare decisis will also yield when an established rule has proven unacceptable or unworkable in practice…Our experience with the economic loss rule over time, which led to the creation of the exceptions to the rule, now demonstrates that expansion of the rule beyond its origins was unwise and unworkable in practice. Thus, today we return the economic loss rule to its origin in products liability.
Justice Pariente wrote a concurring opinion to address Justice Canady’s assertion in his dissenting opinion that the Court’s decision represents a “dramatic unsettling of Florida law.” The concurring and dissenting opinions can be read in their entirety, at http://www.floridasupremecourt.org/decisions/2013/sc10-1022.pdf
This is certainly a landmark decision, and it will be interesting to see the effects of this case unfolding, and its impact upon Florida tort litigation.
Re-weighing Evidence on Appeal
In Demida Miami Gardens, LLC v. Master Excavators, Inc., the appellants, Demida Miami Gardens, LLC and David Paul appealed a final judgment in the amount of $933,617.43 which was a result of an action to enforce a personal guarantee provided to Master Excavators by Paul. On appeal, two arguments were asserted: one, that the guarantee was unenforceable because there was no consideration, and two, that Master failed to satisfy conditions precedent to its enforcement.
On appeal, both of these arguments were rejected. The court found that while the record contained testimony and evidence supporting the appellants’ arguments, it also contained other competent and substantial testimony and evidence that directly contradicted them. Citing to G & G Fashion Design, Inc. v. Garcia, the Third District Court of Appeal noted that re-weighing the evidence and credibility of the witnesses is not a function ascribed to the appellate courts. G & G Fashion Design, Inc. v. Garcia, 870 So. 2d 870, 873 (Fla. 3d DCA 2004).
Aircraft Financing Commission Dispute – Implied Contract Theory
A contract implied in law, or quasi contract, operates where there Is no contract in place to provide a remedy where one party is unjustly enriched, and where that party received a benefit under circumstances that made it unjust to retain it without giving compensation. The plaintiff n Associated Leasing International Corp. v. Alpha Capital Services, Inc. utilized this theory in an attempt to recover a commission on aircraft financing transaction. Associated Leasing International Corp. v. Alpha Capital Services, Inc., 992 So. 2d 283 (Fla. 4th DCA 2008).
An abridged version of the extensive facts of the case is as follows: Herbert Beck (“Beck”) was the owner of Jet Travel, a charter jet service. Beck approached John Casserly (“Casserly”), who was an aircraft broker doing business as Alpha Capital, Inc., and sought his assistance for securing refinancing for a Lear 55 jet. Casserly was successful and received a broker’s fee. Thereafter, in 1995, Beck again approached Casserly regarding refinancing of the Lear 55. Casserly introduced Beck to Associated Leasing (“Associated”) to provide the refinancing. However, before any determination was made by Associated, Jet Travel filed for bankruptcy, and Associated was unable to fund the refinancing.
After Associated turned down the financing, Casserly submitted an application to GE Capital, and made several other inquiries to lenders, including Joe Dini at Finova Capital Corporation. The transaction was never presented to Finova because at the time Casserly was dealing with GE Capital. After over a year of working on the refinancing, the Lear 55 was repossessed by the original lender. GE Capital turned down the transaction, and Casserly stopped working on the refinancing. Beck told Casserly that he was moving back to his home country Austria.
Sometime later, Beck who was doing business as Quicksilver, contacted Ronald Shane, the president of Associated about financing of two smaller Lear jets. Beck told Shane that he had terminated his relationship with Casserly; Shane did not confirm this with Casserly. Shane called Finova and asked if Finova would be interested in working with Beck. Shane was a longtime acquaintance of the president of Finova. Joe Dini called Shane; thereafter Beck flew out and met with Dini; thereafter, Finova made a proposal which was accepted by Beck. Associated was kept informed of the negotiations. Two deals were ultimately made, one as to a Lear 35 jet, and the other as to a Lear 36 jet. A commission was paid by Finova to Associated in connection with the financing transaction. Dini testified that it was expected that if another broker was involved that they would work out any commission split between them.
Casserly sued Associated for commissions on both the Lear 35 jet and the Lear 36 jet under an implied contract theory claiming that Casserly had conferred a benefit on Associated of which Associated knew, and that Associated had retained that benefit; Casserly further alleged that it would be inequitable for Associated to retain the benefit because Casserly was the procuring cause of the commission paid to Associated by Finova. A jury returned a verdict in favor of Casserly, and a final judgment on the verdict was entered by the court. Associated appealed.
On appeal, the Fourth District Court of Appeal reversed finding that no benefit was conferred upon Associated, thereby reversing and remanding for entry of a judgment in the favor of defendants. Casserly contended that he conferred a benefit upon Associated by introducing it to Beck and preparing the financing documents. The court disagreed with this contention and found that neither one of these two items constituted a benefit to Associated: (1) the court found that Casserly’s effort in compiling the documents did not constitute a benefit conferred upon Associated because the documents were prepared for the benefit of GE Capital and Beck in order to close on the prior financing transaction for the Lear 55. (2) The introduction of Beck to Associated for purposes of obtaining refinancing of the Lear 55 did not constitute a benefit upon Associated in connection with the financing of the Lear 35 and Lear 36 jets, and furthermore there was no testimony that the Lear 35 and 36 transactions were considered to be part of the same transaction as the Lear 55. (3) Additionally, there was no evidence presented that Associated was aware of the “benefit” of the introduction of Beck; Casserly had introduced Beck to Associated in hopes of Associated’s refinancing of the Lear 55, and thus Associated’s contact was as a lender, not a broker.
Contract litigation is replete with a variety of issues whether you are seeking to enforce a contract, or defending against enforcement of it. The attorneys at Schecter Law have the knowledge and experience to tackle complex contractual disputes and can assist you or your business with all of your business contract litigation needs.
Lack of Personal Jurisdiction – Breach of Contract Action by Broker for Failure to Pay a Commission on Aircraft Sale
In Corporacion Aero Angeles, S.A. v. Fernandez, 69 So. 3d 295 (Fla. 4th DCA 2011), the plaintiff, Jamie Gaston Fernandez (“Fernandez”) brought an action for breach of contract arising out an oral brokerage agreement for the sale of a jet owned by Aero Angeles, a Mexican corporation (“Aero”). Fernandez claimed that he was not paid a commission in connection with the sale, and filed suit seeking damages. Aero contended that it did not enter into a contract with him to pay a commission. The aircraft in question was a Falcon 900B jet; it was Aero’s only asset according to Antonio Ortiz Palero (“Palero”), the general director of Aero, and the pilot of the aircraft. The jet was used primarily for personal use, and was headquartered in Mexico. It was never offered for charter flights to Florida or for Florida residents. Palero testified that the company had no business in Florida, and nor did it have employees, offices, phone listings, bank accounts, leases or sales in Florida. The entity furthermore did not do business in Florida, nor did it have an agent in Florida for service of process.
When the owner of Aero decided to buy a new aircraft, he directed Palero to sell the Falcon. Palero contacted Fernandez about selling the aircraft. The testimony indicated that Aero would not pay a commission, nor would it engage an exclusive broker, but instead the owner expected a certain price, and the broker could keep anything received over that price.
Fernandez testified that he approached several buyers in Florida and advertised the plane in national magazines. He received one offer that was rejected, and received another call thereafter from Canadian clients. The buyers viewed the plane in Mexico and placed a $500,000 deposit held by an Oklahoma escrow agent. Palero met with the Canadian clients in Montreal and worked out a contract. Thereafter, Palero accepted a purchase price of $18,575,000, and the $575,000 was to be for Fernadez or the other brokers involved. The sale closed in Canada, and neither party paid Fernandez a commission.
Several years later, Fernandez sued Aero. Aero moved to dismiss for lack of personal jurisdiction, and an evidentiary hearing was held. After the hearing, the court determined that there were sufficient contacts to provide jurisdiction. Aero appealed the determination of jurisdiction.
On appeal, the court reversed the finding of jurisdiction. Applying the two prong test set forth in Venetian Salami Co. v. Parnethais, 554 So. 2d 499 (Fla.1989), the appellate court found that the first prong bringing the action within Florida’s long arm statute had been satisfied; in a breach of contract action, where no place of payment is designated, the payment is presumed to be made at the residence of the creditor which in this case was Florida.
The second prong of Venetian Salami which required sufficient minimum contacts, was however, not satisfied. To satisfy minimum contacts, a defendant’s contacts (1) must be related to plaintiff’s cause of action or have given rise to it, (2) must involve some act by which defendant has purposefully availed itself of the privilege of conducting activities within this forum, and (3) the defendant’s contacts with the forum must be such that the defendant should reasonably anticipated being haled into court there.
According to the appellate court’s findings, none of these criteria were met. While the trial court determined that a contract existed to sell the plane to Canadian buyers, the trial court did not determine that Aero gave Fernandez an exclusive listing agreement. Aero’s contacts with Florida in relation to the sale of the plane to Canadian buyers were non-existent. Neither the plane, the owner, nor even Palero came to Florida in connection with the sale. No contract was delivered in Florida; no closing took place in Florida, and no deposit was escrowed in Florida. The determination of jurisdiction was accordingly reversed, with directions to dismiss the cause for lack of jurisdiction.
Jurisdictional disputes of this kind often lead to lengthy and complicated legal battles, at times even involving extensive jurisdictional discovery. The attorneys at Schecter Law are experienced in this field, and can assist you whether you are a non-resident of Florida seeking to resist personal jurisdiction, or whether you are seeking to impose personal jurisdiction over a non-resident defendant in Florida state courts.
Florida Statute section 702.10 – Expedite Foreclosure Procedure
Florida Statute section 702.10 provides for an expedited procedure by which a mortgagee can seek to foreclose on a mortgage. Through this statutory section, a mortgagee can accelerate a foreclosure case by moving the court to conduct a hearing to show cause, and if no cause shown, the mortgagee can obtain a final judgment of foreclosure. Barrnunn, LLC v. Talmer Bank and Trust, et al., Case No. 2D12-446 (Fla. 2d DCA Feb. 1, 2013).
In that regard, section 702.10(1) provides that a mortgagee in a foreclosure proceeding may move the court for an order to show cause for the entry of final judgment. Upon such request, the court is required to review the complaint, and if the complaint is verified and alleges a cause of action for foreclosure, the court must issue the order setting a date and time for a hearing. The statute furthermore sets forth specific guidelines regarding when the hearing must be held; the hearing can be no later than 60 days after service of the order to show cause; it also sets forth various provisions that must be included in the order to show cause.
When conducting the show cause hearing, the trial court is to engage in a two-part analysis: (1) The court must determine if the right to be heard has been waived as set forth in subsection (b) of section 702.10(1). If the court determines that the defendant has waived that right, the court is obligated to enter final judgment for the plaintiff pursuant to subsection (d) of the statute. (2) If there is no waiver, the court must then determine whether the defendant has shown cause not to enter the judgment; and where the defendant has filed defenses by motion at or before the hearing, subsection (b) of the statute makes it clear that the court is precluded from entering final judgment. Barrnunn, LLC.
In Barnunn, LLC, the trial court entered a final judgment of foreclosure in favor of the mortgagee, Talmer Bank and Trust (“Talmer”). On August 15, 2011, Talmer filed a complaint against Barnunn and others seeking to foreclose on a mortgage, and on the same day Talmer filed a motion pursuant to section 702.10(1) requesting that the trial court enter an order to show cause. Three days later, the order was entered setting the show cause hearing for October 5, 2011. On September 30, 2011, Barnunn and another defendant filed a lengthy motion to dismiss the complaint, raising a number of issues including that allegations in the complaint were contradicted by exhibits attached to it. Thereafter, the hearing was held, and the trial court entered a final judgment of foreclosure on January 11, 2012, finding in part that the motion to dismiss did not present any meritorious defenses. Barnunn appealed, contending that it was error for the trial court to enter a final judgment after it had filed its motion to dismiss.
On appeal, Talmer argues that the trial court properly used the show cause hearing to hear the defendant’s motion to dismiss, deny it as meritless, and enter a final judgment. The appellate court disagreed on grounds that this interpretation conflicted directly with the clear and unambiguous language of subsection (b) which declared that the filing of defenses “constitutes cause and precludes the entry of a final judgment”. Accordingly, the final judgment of foreclosure was reversed, and the cause was remanded for further proceedings.
Our attorneys have vast experience in the areas of complex commercial foreclosures, and the various, related procedural nuances occurring in Florida law. We bring insightful legal analysis and hard work to every aspect of your case.
Requirement of Original, Uncanceled Promissory Note
Florida law requires the production of the original note for a party to recover on same. A payee's possession of an original uncanceled promissory note raises a presumption of non-payment that shifts the burden of proof to the payor to establish payment or another defense. In the absence of the original note, the burden will then be on the plaintiff to affirmatively establish his right to recover on the lost or destroyed note pursuant to Florida Statute section 673.3091, and that he is holder in due course and therefore entitled to enforce the note.
In that regard, Florida Statute section 673.3011 provides in pertinent part that: A “person entitled to enforce” an instrument includes (1) the holder of the instrument or (2) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 673.3091. A holder in due course is a holder who takes an instrument without apparent evidence of forgery or alteration for value, in good faith, and without notice of certain claims and defenses. Accordingly, if a party is claiming that it is the holder in due course, said party has the burden to prove that status by a preponderance of the evidence.
Additionally, while it is true that In order to recover on a promissory note, the holder must produce the actual note, where a note has been lost, stolen, or destroyed, the holder can seek enforcement but only by complying with the requirements of Florida Statute section 673.3091. In that regard, section 673.3091 requires that a person not in possession of an instrument is entitled to enforce the instrument if: (a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred; (b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and (c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process. The statute further requires the person seeking enforcement of a lost, destroyed or stolen instrument to prove the terms of the instrument and the person's right to enforce the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.
The attorneys at Schecter Law have vast experience in all aspects of complex commercial and residential loan disputes. Furthermore, our attorneys’ vast experience in the area of Florida foreclosure law enables us to assist our clients in developing creative and cost-effective solutions to mortgage foreclosure and deficiency related issues.
Florida Dispute Resolution Update: Arbitration or Litigation of a Fraud Dispute Stemming from a Real Property Purchase Transaction?
The Florida Supreme Court ruled that an action for fraud was within the scope of an arbitration provision in a contract for the purchase and sale of real property. George Jackson, et al. v. The Shakespeare Foundation, Inc., et al., No. SC11-1196 (Fla. Jan. 31, 2013).
The underlying facts of the case are summarized as follows: In 2006, George Jackson, Kerry Jackson, and the Jackson Realty Team, Inc. decided to sell the real property that was the subject of the contract forming the basis of the dispute. An advertisement was posted on the Bay County Multiple Listing Service making certain representations regarding the use of the land; however, at the time that the advertisement was posted, the Jacksons had in their possession a land use analysis that was contrary to the advertisement, and which indicated that 25% of the property constituted wetlands. Subsequently, the Jacksons and the respondents entered into contract negotiations, and during the negotiations, the Shakespeare Foundation told the Jacksons of their intention to develop the property into a 27-unit low income housing development. The Shakespeare Foundation relied upon the Jacksons’ representations and entered into a contract to purchase the property. After closing, the Shakespeare Foundation discovered that wetlands constituted 26% of the entire tract which was equal to 9 of the 27 units that were going to be developed. The Shakespeare Foundation filed an action against the Jacksons for fraudulent misrepresentation. The Jacksons moved to dismiss the action asserting that the matter fell within the arbitration provision of the contract, which provided for arbitration of “all controversies, claims, and other matters in question arising out of or relating to” the transaction or the contract. The trial court granted the motion to dismiss, and the Shakespeare Foundation appealed. On appeal, the First District Court of Appeal, determined that while the subject arbitration provision was broad in scope, the specific fraud claim did not come within that scope, because the fraud claim arose from a general duty established under the common law, and not from an obligation arising under the contract. The First District Court of Appeal reversed the trial court’s order, and then certified conflict with the decision of the Fifth District Court of Appeal in Maguire v. King, 917 So. 2d 263 (Fla. 5th DCA 2005).
On appeal, the Florida Supreme Court determined that the action based on fraud was within the scope of the arbitration provision. In so ruling, the Florida Supreme Court relied on what is known as the “significant relationship” test. Generally, there are two types of arbitration provisions: those that are narrow in scope and application, and those that are broad. A narrow arbitration provision is one that typically requires arbitration of claims “arising out of” the contract, whereas a broad provision is one that requires arbitration of claims “arising out of or relating to” the contract; the addition of the words “relating to” broadens the scope, thereby including those claims that are described as having a “significant relationship” to the contract, regardless of whether the claim sounds in contract or tort. A “significant relationship” exists between the arbitration provision and a claim if there is a “contractual nexus” between the claim and the contract. Such a contractual nexus exists if the claim presents circumstances that would require either reference to, or construction of, a portion of the contract.
Applying these principles to the case before it, the Florida Supreme Court held that the arbitration provision passed the “significant relationship” test because the fraud claim was inextricably intertwined with both the circumstances surrounding the contact and the contract itself, and the resolution of the fraud claim required consideration and construction of the duties arising under the contract. The decision below was quashed, and remanded for further consideration, and the decision in Maguire was approved to the extent that it was consistent with the court’s opinion.
Moving for Summary Judgment Prior to an Answer – A Difficult Burden
Another case in point where a summary judgment entered in favor of a mortgagee was reversed on appeal. In Dominko v. Wells Fargo Bank, N.A., 102 So. 3d 696 (Fla. 4th DCA 2012), a mortgagor appealed from a grant of summary judgment in favor of the mortgagee. In February 2010, Wells Fargo filed a mortgage foreclosure action against the defendant. The defendant failed to serve an answer to the complaint. Wells Fargo, however, did not move for a default. Instead, in April 2010, Wells Fargo filed a motion for summary judgment, and subsequently filed the original note (endorsed in blank), and an amended affidavit as to amounts due and owing.
The defendant also filed a motion for summary judgment in November 2010 arguing that the suite should be dismissed because Wells Fargo failed to comply with the pre-suit notice requirement in the acceleration clause of the mortgage. Defendant did not set his motion for hearing, and in April 2011, he filed an opposition to Plaintiff’s motion, without submitting any supporting affidavits.
The trial court granted Wells Fargo’s motion, and entered a final judgment of mortgage foreclosure. On appeal, the defendant argues that summary judgment was improper because a genuine issue of material fact existed as to whether Wells Fargo complied with the condition precedent of providing a pre-suit default notice. In that regard, the mortgage required the lender to give the borrower thirty days’ notice and an opportunity to cure the default prior to filing suit. The appellate court agreed with the defendant.
Furthermore, the court noted that when Wells Fargo moved for summary judgment, defendant had not filed an answer and a default had not been entered against him. A plaintiff who moves for summary judgment before a defendant files an answer has a “difficult burden” in that the plaintiff must not only establish that no genuine issue of material fact exists but that the defendant could not raise any genuine issue of material fact if the defendant were permitted to answer the complaint. The plaintiff must essentially anticipate the content of the defendant’s answer and establish the record accordingly. In this case, while Wells Fargo made a general allegation in its complaint that all conditions precedent had occurred, there was no evidence in the record that Wells Fargo complied with the pre-suit notice requirements set forth in the mortgage; Wells Fargo’s affidavit made no mention of the conditions precedent.
Accordingly, the Fourth District Court of Appeal reversed the final judgment of foreclosure and remanded the case for further proceedings.
The attorneys at Schecter Law bring hard work and insight to your legal dispute, no matter how simple or complex, to avoid or minimize the type of procedural issues highlighted by the above case. We strategize every case at its inception, and our case strategies are continuously refined and reevaluated at every stage so as to never lose sight of the end goals of our clients.
The Importance of Strict Compliance with Notice of Default Provisions in Loan Documents
In Judy v. MSMC Venture, LLC, 100 So. 3d 1287 (Fla. 2d DCA 2012), a mortgagee brought a foreclosure action. At issue were two promissory notes executed by Thomas and Jill Judy in favor of Market Street Mortgage Corp., who was the defendant, MSMC Venture, LLC’s predecessor-in-interest. In August 2007, MSMC sent a notice of default and breach to the Judys for both loans, and thereafter filed a mortgage foreclosure action. The Judys’ answer asserted as an affirmative defense that MSMC had not provided proper notice of default as required by the mortgage terms. MSMC denied the affirmative defenses and proceeded to file a motion for final summary judgment which was granted by the trial court. The Judys appealed, and on appeal, the Second District Court of Appeal concluded that the trial court erred because MSMC failed to conclusively refute the Judys’ affirmative defenses regarding sufficiency of notice. The Second District Court of Appeal examined the default provisions of the two mortgages, and noted that the specific terms of each mortgage provided as follows:
Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument…. The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding[,] and sale of the Property
Lender prior to acceleration shall give notice to Borrower as provided in paragraph 12 hereof specifying: (1) the breach; (2) the action required to cure such breach; (3) a date, not less than 10 days from the date the notice is mailed to Borrower, by which such breach must be cured; and (4) that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by this Mortgage, foreclosure by judicial proceeding, and sale of the Property.
The court found that the notices of default failed to specify the breach, and only generally alleged that the Judys committed a breach. This failure to specify the default as required by the mortgage terms caused the Second District Court of Appeal to reverse the summary judgment in favor of the mortgagee because MSMC did not meet its burden in refuting the Judys' affirmative defense of insufficient notice.
This is a classic example of the importance of reading and complying with the terms of a mortgage, and other loan documents, when proceeding with mortgage foreclosure actions. In this case, the lender would presumably have incurred significant appellate attorneys’ fees and expenses, all of which could have been potentially avoided by a careful reading of the documents at hand. The attorneys’ at Schecter Law have vast experience in all aspects of complex commercial and residential mortgage foreclosures. We dedicate detailed and in-depth attention and analysis to all of our cases at a level that surpasses the big firms, but with legal fees that do not.
Shareholder Derivative Action versus Shareholder Direct Action – A Basic Explanation
Whether an action against a corporation is direct or derivative is one that has been addressed frequently under Florida law. A derivative action is a cause of action that is brought by a shareholder to enforce a right of action that exists on behalf of the corporation, seeking to redress an injury suffered by the corporation or its shareholders generally.
On the other hand, an action by a shareholder against a corporation that seeks redress for an injury suffered directly by that shareholder, and where the injury is separate from that sustained by other shareholders, the action is then classified as a “direct action.” Florida employs the separate and distinct injury test to determine whether a shareholder may bring a direct action. Under this test, the injury must be sustained directly by the shareholder and the injury must be separate and distinct from any injury sustained by other shareholders.
Florida Statute section 607.07401 governs shareholders’ derivative actions, and sets forth specific requirements for the bringing of such an action. For example, a complaint in a proceeding brought in the right of a corporation must be verified and alleged with particularity the demand made to obtain action by the board of directors and that the demand was refused or ignored by the board of directors for a period of at least 90 days from the first demand, unless the person was notified in writing of a rejection, or unless irreparable injury would result to the corporation by waiting for the 90-day period to expire. Furthermore, a proceeding that is commenced under section 607.07401 cannot be discontinued or settled without court approval.
Lastly, it is important to note that subsection (5) of the statute provides that a court can require a plaintiff to pay the defendant’s reasonable expenses, including reasonable attorneys’ fees, if it finds that the proceeding was commenced without reasonable cause. As a corollary to same, subsection (6) provides that the court can award reasonable expenses and attorneys’ fees to a successful plaintiff or the person commencing the proceeding who receives any relief, whether by judgment, compromise or settlement, provided however, that subsection (6) is inapplicable to any relief rendered for the benefit of injured shareholders only and limited to a recovery of the loss or damage of the injured shareholders.
Shareholders are key players in your corporation. In many instances, they are your primary source of capital and can affect the flow, growth and overall vitality of your business. However, there are many issues that commonly surface between corporations and their shareholders, and when left unresolved can result in costly, time-consuming disputes. The attorneys of Schecter Law have helped numerous corporations in Broward, Palm Beach and Miami-Dade counties find solutions for shareholder disputes. Whether you run a small business or privately held corporation, we can assist you. We fully analyze the issues that exist in your dispute and help you determine the proper course of action.
