David v. Sun Federal Sav. and Loan Ass'n

• Decision Date: 05 April 1983
• Docket Number: No. AM-242,AM-242
• Citation: 429 So.2d 1277
• Parties: Robert DAVID and Loretta G. David, his wife, Appellants, v. SUN FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellee.
• Court: Florida District Court of Appeals

Page 1277

429 So.2d 1277

Robert DAVID and Loretta G. David, his wife, Appellants, v. SUN FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellee.

No. AM-242.

District Court of Appeal of Florida,

First District.

April 5, 1983.

Rehearing Denied May 3, 1983.

James M. Donohue of Henry, Buchanan, Mick & English, P.A., Tallahassee, Cynthia S. Tunnicliff of Macfarlane, Ferguson, Allison & Kelly, Tampa, for appellants.

John C. Lovett of Messer, Rhodes & Vickers, Tallahassee, for appellee.

MILLS, Judge.

The Davids appeal a judgment declaring that Sun Federal properly accelerated a note, that the Davids were not personally liable for the note but that their newly purchased home was subject to a mortgage securing the note, and that foreclosure was appropriate. We affirm.

The Davids arranged to purchase a house with an assumable mortgage from the Browns. Title Searchers, Inc. was to serve as closing agent, handling the funds placed in escrow. The closing occurred on 3 November 1980. Brown had not made his October payment, but it was to be paid from escrow funds and charged to Brown. David was responsible for the November payment which was to be paid similarly. After the closing, Title Searchers misfiled the closing documents and never made the payments. On 6 November, Sun Federal demanded the past due payments from Brown, who still resided in the house. The demand letter was discarded unopened. Likewise, the letter notifying Brown of acceleration of his obligation was discarded. The error was discovered when David attempted to make his December payment. Sun Federal did not know of the assumption of the obligation by the Davids, although the deed noting the assumption was recorded in November and Sun Federal had provided Title Searchers with the information necessary for an assumption.

This Court is faced with a dispute between two parties, neither of which is at fault. Given no fault by either party, equity will not interfere with the enforcement of Sun Federal's contractual rights. An exhaustive catalogue of situations where equity prevents acceleration of an obligation and foreclosure to enforce it was provided in Campbell v. Werner, 232 So.2d 252 (Fla. 3d DCA 1970). None of these is present in this case. A creditor does not have an obligation to continuously search the public record for transactions or to follow up every inquiry concerning mortgaged property.

AFFIRMED.

PEARSON, TILLMAN (Ret.), Associate Judge, concurs.

ERVIN, J., dissents with opinion.

ERVIN, Judge, dissenting.

I respectfully, but emphatically, dissent. As an appellate judge, I am reluctant to set aside the trier of facts' exercise of discretion, yet when that discretion is exercised without properly taking into account well established equitable precepts, in my judgment such discretion has been abused. There were a number of equitable considerations which the lower court apparently did not entertain in reaching its result. Had the record disclosed the existence of only one of them, I might concur with the majority however the cumulative effect of them all convinces me that foreclosure should not have been ordered.

Similar to the facts before the court in Northside Bank of Miami v. La Melle, 380 So.2d 1322 (Fla. 3d DCA 1980), we find from the record here that the mortgagee had a long history of accepting late monthly payments on the mortgage. Given such circumstances, a court of equity may refuse to foreclose a mortgage. La Melle. Indeed, the loan history of the Browns, the former predecessors in title, for the years 1979 and 1980 reveals a consistent pattern of both missed and long overdue payments, resulting in the assessment of numerous late charges. The Association's acquiescence in accepting late payments continued until May 27, 1980, when the Association advised the Browns that because the payments for the months of April and May had not yet been forwarded, it considered the loan in default and notified them that the maturity debt was accelerated. Nevertheless, the Association later permitted the Browns to reinstate their loan upon the payment of the two monthly installments, together with late charges.

Another well recognized equitable consideration is that a lender has the right to accelerate the mortgage when the violation of the acceleration provision goes to the impairment of the lender's security. First Federal Savings & Loan Association of Englewood v. Lockwood, 385 So.2d 156 (Fla. 2d DCA 1980); Woodcrest Apartments, Ltd. v. Ipa Realty, 397 So.2d 364 (Fla. 1st DCA 1981). This is because the only interest the mortgagee retains in the secured property is a lien. Shavers v. Duval County, 73 So.2d 684 (Fla.1954). Consequently, the mortgagee would ordinarily have no right to restrict the mortgagor's transfer of the mortgage to another by insisting on an acceleration of the note and mortgage caused by the transfer, unless it could show that the transaction resulted in an impairment of the security. ¹ See Consolidated Capital Properties, II, Ltd. v. National Bank of North America, 420 So.2d 618 (Fla. 5th DCA 1982) (breach of acceleration clause prohibiting conveyance of secured property to another by the mortgagor gives no right to the mortgagee to accelerate, in the absence of a demonstration of an impairment of the lender's security). One means of ascertaining whether the lender's security is impaired is to establish first the value of the security, and then the balance remaining on the note and mortgage. Thus, if the security far exceeds that of the balance due, this may be a proper factor in determining whether the mortgagee should be permitted to accelerate. See Overholser v. Theroux, 149 So.2d 582, 584 (Fla. 3d DCA 1963). In the present case, we find that the property secured by the mortgage had been sold for the total sum of $71,662 on November 3, 1980, and the balance remaining due on the loan as of the date the Association exercised its option to accelerate, November 28, 1980, was $31,362.29, including accrued unpaid interest and late charges. Consequently, the lower court could reasonably have concluded that the value of the security far exceeded the balance due on the note and mortgage, and that there was no realistic impairment to the lender's security.

Since the primary reason for permitting a mortgagee to accelerate a note is to protect its security, see First Federal Savings & Loan Ass'n v. Lockwood, a mortgagee, whose conduct is so inconsistent as to indicate a lack of a genuine concern that its security is impaired by a default, may be precluded from exercising its right to accelerate. Such conduct may occur in instances where the mortgagee accepts substantially all amounts due under the mortgage, even after it has elected to accelerate. Amerifirst Federal Savings & Loan Association of Miami v. Century 21...