Freehling v. MGIC Financial Corp., 81-1999

• Decision Date: 07 September 1983
• Docket Number: No. 81-1999,81-1999
• Parties: Herbert S. FREEHLING, Trustee in Bankruptcy, Appellant, v. MGIC FINANCIAL CORPORATION, Appellee.
• Court: Florida District Court of Appeals

Page 191

437 So.2d 191

Herbert S. FREEHLING, Trustee in Bankruptcy, Appellant, v. MGIC FINANCIAL CORPORATION, Appellee.

No. 81-1999.

District Court of Appeal of Florida,

Fourth District.

Sept. 7, 1983.

Gary M. Farmer of Goldberg, Young & Borkson, P.A., Fort Lauderdale, for appellant.

Paul R. Lipton of Paul R. Lipton, P.A., North Miami Beach, for appellee.

ON REHEARING

DELL, Judge.

This court's opinion of April 20, 1983, is hereby withdrawn and the following opinion is substituted therefor.

Bryan A. Graydon, property owner and mortgagor, and Herbert S. Freehling, his trustee in bankruptcy, appeal from a final summary judgment of foreclosure in favor of MGIC Financial Corporation, mortgagee.

Graydon and MGIC entered into an agreement to take over the Players' Club. As part of this agreement, Graydon borrowed money from MGIC to purchase the club. Each party agreed to make certain payments as part of their agreement. Graydon subsequently defaulted on mortgage payments, and MGIC filed an action to foreclose its mortgage in the circuit court. However, before MGIC could obtain service of summons and complaint, Graydon filed a voluntary petition in bankruptcy, which resulted in an automatic stay of the foreclosure suit under 11 U.S.C. § 362. MGIC filed its complaint to lift the stay pursuant to § 362(d)(1) which permits the bankruptcy court to grant such relief for cause. "Cause" includes a situation where an interested party lacks adequate protection of his interest in the property. The bankruptcy court made extensive findings of fact on the many financial matters raised by the parties, including a finding that certain actions by Graydon placed MGIC's secured interest in the property in jeopardy. In its final judgment, the bankruptcy court ordered Graydon to take certain actions and provided that if Graydon failed to comply with these orders, then the automatic stay would be modified to permit MGIC to pursue its foreclosure complaint in the Florida circuit court. Appellee thereafter filed in the bankruptcy court various motions alleging appellant's non-compliance with the final judgment. The bankruptcy court held a hearing which resulted in an order providing that if Graydon did not take certain actions by a specified date, then "the automatic stay is automatically lifted to permit [appellee], MGIC, to proceed with and complete its foreclosure action in the Circuit Court of the State of Florida."

Graydon did not comply. MGIC filed in the circuit court copies of portions of the bankruptcy record and an affidavit of non-compliance. MGIC later filed a motion for summary judgment, and Graydon filed an affidavit in which he alleged that the parties disagreed as to the amount of money MGIC owed to Graydon, which Graydon claimed as a set-off. The circuit court took judicial notice of the bankruptcy case, found no material issue other than that which the bankruptcy court previously ruled upon, and entered summary judgment in favor of MGIC.

Appellants present three points on appeal, all of which interrelate and all of which depend upon the resolution of a single issue: whether the findings and conclusions of the bankruptcy court, made on a complaint for relief from automatic stay, bind the Florida circuit court in this foreclosure proceeding.

In its motion for summary judgment, appellee argued that the findings and conclusions of the bankruptcy court, incorporated into its final judgment, rendered any possible defense res judicata. We disagree.

To bring the doctrine of res judicata into valid play there must be (1) identity in the thing sued for; (2) identity of the cause of action; (3) identity of the persons and parties to the actions; and (4) identity of the quality or...