Capital Bank v. Needle

• Citation: 596 So.2d 1134
• Decision Date: 18 March 1992
• Docket Number: No. 91-1722,91-1722
• Parties: 17 Fla. L. Weekly D757 CAPITAL BANK, Appellant, v. Robert NEEDLE and Mona Reis, f/k/a Mona Needle and Lake Worth Properties, Inc., Appellees.
• Court: Court of Appeal of Florida (US)

Page 1134

596 So.2d 1134

17 Fla. L. Weekly D757

CAPITAL BANK, Appellant, v. Robert NEEDLE and Mona Reis, f/k/a Mona Needle and Lake Worth Properties, Inc., Appellees.

No. 91-1722.

District Court of Appeal of Florida Fourth District.

March 18, 1992.

Rehearing Denied May 11, 1992.

Keith F. Backer of Becker and Poliakoff, P.A., West Palm Beach, for appellant.

Louis M. Silber and Larry Klein of Klein and Walsh, P.A., West Palm Beach, for appellees.

ANSTEAD, Judge.

Capital Bank appeals from a summary judgment entered in favor of appellees, Robert Needle and Mona Reis, f/k/a/ Mona Needle, and Lake Worth Properties, Inc., in an action brought by Capital Bank for the balance owing on a promissory note. We reverse.

FACTS

On February 14, 1985, Robert Needle and Mona Reis, then married ("the Needles"), executed and delivered a promissory note in the principal amount of $200,000.00 to Capital Bank, using a mortgage on property they owned as security for the note. The note was renewed, the mortgage modified, and the payment terms extended several times thereafter. Lake Worth Properties, Inc. was a guarantor of the obligation.

The Needles subsequently defaulted on their obligation to pay the note. Capital Bank sued for foreclosure of the mortgage and also prayed for a deficiency judgment should the proceeds of the sale of the property be insufficient to satisfy the debt. Capital Bank's mortgage on the property was inferior to that of Suburban Bank, and during the pendency of the foreclosure proceedings, Suburban Bank arranged a sale of the subject property. The terms of the sale required that Capital Bank release its mortgage on the property and dismiss its foreclosure action, in exchange for a $50,000.00 payment to Capital Bank from the sale proceeds.

A voluntary dismissal with prejudice was executed by the attorney who represented Capital Bank in the foreclosure action, and was delivered to the attorney for Suburban Bank to be held in escrow. Among the conditions required by Capital Bank for the release and filing of the voluntary dismissal was the execution by the Needles of a letter agreement acknowledging that the $50,000.00 was only a partial payment on the debt. The Needles signed the letter agreement, the property was sold, and Capital Bank was paid the $50,000.00. The voluntary dismissal with prejudice was released from escrow and filed almost two months after the letter was signed.

The provisions of the parties' letter agreement directly relating to the issue on appeal provide:

In furtherance of Suburban's efforts to sell Kevin's Lounge to its present tenant and occupant, and apply the sale proceeds as partial payment of the loan amounts owed to Suburban and Capital Bank, Capital Bank has agreed to voluntarily dismiss the pending mortgage foreclosure and provide a partial release of their mortgage on the property in consideration of their receipt of $50,000.00 out of such sales proceeds.

The condition imposed upon my law firm, as escrow agent, for release of the documents referred to above and in our possession, is that Robert Needle and Mona Needle, as borrowers, as well as Lake Worth Properties, Inc., as guarantor, acknowledge that Capital Bank's receipt of the portion of the sales proceeds represents a partial payment of the indebtedness owed. It is therefore understood and acknowledged between the borrowers, guarantors and Capital Bank, as lender, that acceptance of such payment and release of the documents held by us in escrow, does not constitute a waiver of any rights held by all parties to such loan transactions regarding the collection of the remaining loan balance owed to Capital Bank subsequent to application of the sales proceeds from this transaction.

This acknowledgement of the partial payment contemplated to be made to Capital Bank and non-waiver of lender's, borrowers' and guarantor's rights relative to the remaining indebtedness owed to Capital Bank is being required in lieu of the proposed reaffirmation of debt agreement which was previously found to be unacceptable by you and Robert Needle.

After the Needles failed to make any further payments, Capital Bank sued for the balance due on the note. The Needles sought and received a summary judgment on the grounds that the dismissal with prejudice of the mortgage foreclosure action constituted a bar to the new suit.

LAW

Capital Bank's primary argument is that the March 21, 1990 letter agreement executed by the Needles precluded entry of summary judgment in their favor. Capital Bank asserts that the letter contractually prevents the Needles from claiming that the voluntary dismissal bars the present action on the balance due on the note. The Needles counter that the letter is irrelevant because as a matter of law the voluntary dismissal with prejudice constituted a bar to the second suit.

RES JUDICATA

Neither party has provided us legal authority involving facts similar to those involved herein. As a general rule, a voluntary dismissal with prejudice operates as an adjudication on the merits, barring a subsequent action on the same claim. McKibbin v. Fujarek, 385 So.2d 724 (Fla. 4th DCA 1980); Drady v. Hillsborough County Aviation Authority, 193 So.2d 201 (Fla. 2d DCA 1966), cert. denied, 210 So.2d 223 (Fla.1968); Lomelo v. American Oil Co., 256 So.2d 9 (Fla. 4th DCA 1971). Similarly, case law seems to suggest that where a party seeks a foreclosure and a deficiency judgment for failure to pay on a promissory note, and there is an actual adjudication on the merits of the claim for deficiency, that party cannot proceed on a new action based on the same promissory note. Cragin v. Ocean & Lake Realty Co., 133 So. 569 (Fla.1931), aff'd., 101 Fla. 1324, 135 So. 795 (Fla.1931), app. dism., 286 U.S. 523, 52 S.Ct. 494, 76 L.Ed. 1267 (U.S.1932); Provost v. Swinson, 109 Fla. 42, 146 So. 641 (Fla.1933); Belle Mead Development Corporation v. Reed, 114 Fla. 300, 153 So. 843 (Fla.1934); Coffrin v. Sayles, 128 Fla. 622, 175 So. 236 (Fla.1937).

For example, in Scheneman v. Barnett, 53 So.2d 641 (Fla.1951), the supreme court, upon reviewing an order denying a deficiency, observed that once the jurisdiction of the equity court is invoked to seek a deficiency, the matter becomes res judicata:

While the decree of the court below comes to us with a presumption of validity, the equitable considerations justifying a refusal to grant any portion of the deficiency should be made clearly to appear in the record for the reason that, once the jurisdiction of the equity court is invoked to determine this question, its decision thereon is final (but subject, of course to review on appeal), and the matter then becomes res adjudicata. Coffrin v. Sayles, 128 Fla. 622, 175 So. 236; Reid v. Miami Studio Properties, 139 Fla. 246, 190 So. 505; [ (1939) ] Atlantic Shores Corp. v. Zetterlund, 103 Fla. 761, 138 So. 50, 54 [ (1931) ].

Id. at 641-642. At the least, this appears to mean that a trial court's actual decision on a claim for deficiency will bar the relitigation of that issue in any subsequent action at law.

Capital Bank argues that the prevailing law is set out in earlier decisions such as Reid v. Miami Studio Properties, 139 Fla. 246, 190 So. 505 (Fla.1939). There, although the plaintiff requested a deficiency decree in his prayer for relief in the mortgage foreclosure action, the court did not even consider the issue. The supreme court allowed a later suit at law, declaring:

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 Id. at 506. Similarly, in Gober v. Braddock, 100 Fla. 1406, 131 So. 407 (Fla.1930), a second suit at law for a deficiency was permitted even though a request for a deficiency had been denied in an earlier foreclosure action.

the right of the claimant is not affected. He may sue at law and recover such portion as he may prove himself entitled to.

These holdings appear to be based upon the same statutory provisions now contained in section 702.06, Florida Statutes (1989), which provide:

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...