NEWS

New Decision: Deficiencies/Forum Shopping (Dyck-O’Neal v. Lanham)
August 06, 2018

Resolving a conflict among the districts concerning which forum has jurisdiction for a mortgage foreclosure deficiency judgment was at issue in Dyck-O’Neal, Inc. v. Lanham, 17 Fla. L. Weekly S278, Case No. SC17-975 (Fla. July 5, 2018).

A mortgage foreclosure judgment expressly reserved jurisdiction concerning a deficiency. A deficiency was not sought in the same forum. Instead, Dyck-O’Neal, the assignee of the mortgage and note, filed a separate legal action against the borrower seeking a deficiency judgment. The trial court granted judgment for the borrower but based solely on the validity of an assignment of the mortgage and note. The First District Court of Appeal quashed the trial court’s judgment concluding that the foreclosure court, not the court where the money claim was newly filed, had jurisdiction pursuant to §702.06, Fla. Stat. (2014).

The issue framed by the Supreme Court was:

… Whether a complainant may pursue a separate action at law to recover a deficiency judgment when the foreclosure court reserved jurisdiction in its final judgment to adjudicate the deficiency claim.

The Court began its analysis with a review of the statute:

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 . . . . 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.

§702.06, Fla. Stat. (2014) (Emphasis added by Court).

The Supreme Court held that the language “plainly allows,” indicating that the language was clear and unambiguous, that:

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.

A separate action is prohibited only when the court handling the foreclosure action has actually granted or denied a deficiency claim.

In quashing the First District’s decision, the Court agreed with decisions from the other four districts:

Garcia v. Dyck-O’Neal, Inc., 178 So. 3d 433 (Fla. 3d DCA 2015);

Dyck-O’Neal, Inc. v. Hendrick, 200 So. 3d 181 (Fla. 5th DCA 2016);

Gdovin v. Dyck-O’Neal, Inc., 198 So. 3d 986 (Fla. 2d DCA 2016); and,

Dyck-O’Neal, Inc. v. McKenna, 198 So. 3d 1038 (Fla. 4th DCA 2016).

The decision provides a number of important lessons for practitioners. First, the Court remarked on the First District Court of Appeal’s reliance on an earlier decision which in turn relied on an earlier version of the statute. The 2013 amendments to the statute included the italicized language quoted above. Thus, relying on a prior court decision for statutory interpretation may require determining whether and how the statute has changed over time.

Strategically, the legislative change allows, if not begs for, forum shopping. After all, why would a deficiency claimant go through the exercise of drafting a new complaint, incurring filing fees and service fees, starting from scratch, as opposed to merely proceeding with a deficiency. The proofs would be similar. One exception, of course, would be if the foreclosure action was a purely in rem proceeding without obtaining personal jurisdiction over the borrowers; however, in that instance a foreclosure judgment would presumably not reserve jurisdiction for a deficiency.

In the condominium context it is noted that for quite some time the courts recognized that the Condominium Act provided a separate independent basis for a money damage claim. Maya Marca Cd’m Apts., Inc. v. O’Rourke, 669 So.2d 1089 (Fla. 4th DCA 1996).

Last week the First District Court of Appeal acknowledged the Lanham reversal in apparently similar case, Dyck-O’Neal, Inc. v. Stermilli, Case No. 1D17-3396 (Fla. 1st DCA, August 3, 2018).

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

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Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified:

Real Estate Attorney

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


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