Centerstate Bank Cent. Fla., N.A. v. Krause, 5D10–4099.
| Court | Court of Appeal of Florida (US) |
| Citation | 87 So.3d 25 |
| Docket Number | No. 5D10–4099.,5D10–4099. |
| Parties | CENTERSTATE BANK CENTRAL FLORIDA, N.A., Appellant, v. James A. KRAUSE and Daphney S. Krause, et al., Appellee. |
| Decision Date | 05 April 2012 |
CENTERSTATE BANK CENTRAL FLORIDA, N.A., Appellant,
v.
James A. KRAUSE and Daphney S. Krause, et al., Appellee.
No. 5D10–4099.
District Court of Appeal of Florida,
Fifth District.
April 5, 2012.
[87 So.3d 26]
Kristie Hatcher–Bolin, Monterey Campbell, Stephen Watson, and Mark N. Miller, of GrayRobinson, P.A., Lakeland, for Appellant.
Jill D. Simon and H. Gregory McNeill, of Lowndes, Drosdick, Doster, Kantor & Reed, P.A., Orlando, for Appellee.
[87 So.3d 27]
ORFINGER, C.J.
Centerstate Bank Central Florida, N.A. (“CSB”) appeals a final summary judgment declaring a note and mortgage given by Krause Grove Enterprises, LLC (“KGE”) to CSB to be void and of no force and effect. On appeal, CSB argues that James A. Krause and Daphney S. Krause lack standing to challenge the validity of the note and mortgage. We agree and reverse.
The Krauses owned fifteen acres of agricultural property (“Property”) that had been in their family for generations. In 2006, the Krauses entered into a joint venture with Michael Ross and Abraham Wilson to develop the Property. The Krauses claim that under the terms of the oral agreement, in exchange for the Property, they were to obtain membership in KGE. In addition, Mr. Krause was to be KGE's chief executive, and they, along with Mr. Ross and Mr. Wilson, would share in the profits to be made as the Property was developed. The Krauses subsequently deeded the Property to KGE without consideration. However, KGE's Articles of Organization were prepared without mention of the Krauses, instead listing Mr. Ross and Mr. Wilson as its only members.
As KGE's managing members, Mr. Ross and Mr. Wilson executed a promissory note and mortgage in favor of CSB, encumbering five lots comprising a portion of the Property. At the loan's closing, and on CSB's request, KGE adopted a resolution certifying KGE's existence, identifying Mr. Ross and Mr. Wilson as its only members, authorizing the two members acting together to bind KGE, and stating the resolution's validity continued until written revocation was delivered to CSB. A year later, Mr. Ross and Mr. Wilson executed a replacement note and mortgage, again adopting an identical resolution authorizing the two members acting together to bind KGE. Days after executing the second resolution, Mr. Ross filed KGE's annual report with the State of Florida, listing himself as KGE's sole managing member. That same day, Mr. Ross, acting alone, applied for an additional $700,000 loan from CSB, secured by a mortgage encumbering the entire Property (collectively, “Development Loan”). CSB approved the Development Loan, and the financing documents, executed solely by Mr. Ross, included a new resolution certifying KGE's existence and representing that Mr. Ross, as sole managing member, was now authorized to bind KGE. 1
After becoming aware of the Development Loan, the Krauses filed suit against Mr. Ross and KGE, claiming breach of contract and fraud in the inducement regarding the Property's transfer. They sought the imposition of a constructive trust and equitable lien on the Property.2 The Krauses also recorded a lis pendens affecting the entire Property.
KGE subsequently defaulted on both outstanding loans. CSB filed a complaint against KGE, seeking to foreclose the Development Loan.3 The Krauses were named as defendants in the foreclosure complaint because of their recorded lis pendens against the Property. The
[87 So.3d 28]
Krauses filed an answer and counterclaim to CSB's foreclosure action, seeking a declaration that the Development Loan was void because it had been executed solely by Mr. Ross who, they alleged, lacked the authority, acting alone, to bind KGE. CSB moved for summary judgment, asserting that the Krauses lacked standing to challenge the enforceability of the Development Loan. The Krauses also moved for summary judgment, again challenging Mr. Ross's authority to execute the Development Loan. The trial court denied CSB's summary judgment motion, finding that the Krauses had standing and granted the Krauses' motion for summary judgment declaring the Development Loan void and unenforceable, finding that Mr. Ross lacked the authority to borrow money and encumber property on KGE's behalf. This appeal followed.
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