In re Diamond
| Decision Date | 30 April 1996 |
| Docket Number | Bankruptcy No. 95-21954-BKC-PGH. Adv. No. 95-1330-BKC-PGH-A. |
| Citation | 196 BR 635 |
| Parties | In re Angelo J. DIAMOND and Clarita A. Diamond, his wife, Debtors. FIRST UNION NATIONAL BANK, OF FLORIDA, Plaintiff, v. Angelo J. DIAMOND and Clarita A. Diamond, his wife, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
COPYRIGHT MATERIAL OMITTED
Scott E. Simowitz, Mandel, Simowitz, Weisman, Scherer & Diaz, P.A., Boca Raton, FL.
Christopher J. Keith, Ft. Lauderdale, FL, for debtors.
FINDINGS OF FACT AND CONCLUSIONS OF LAW GRANTING PLAINTIFF'S, FIRST UNION NATIONAL BANK OF FLORIDA, MOTION FOR SUMMARY JUDGMENT
THIS CAUSE came before the Court pursuant to Plaintiff's, First Union National Bank of Florida ("First Union"), Motion for Summary Judgment and Incorporated Memorandum of Law (the "Motion"), Defendants', Angelo J. Diamond and Clarita A. Diamond (collectively, the "Debtors") Response to Motion for Summary Judgment (the "Response"), First Union's Reply to Defendants' Response, the Joint Stipulation of Facts (the "Joint Stipulation") and the Supplemental Joint Stipulation of Facts at to Plaintiff's Motion for Summary Judgment (the "Supplemental Joint Stipulation"). The Court having reviewed and considered the Motion, the Response, the Reply and supporting memoranda, the Joint Stipulation and the Supplemental Joint Stipulation and having noted that the material facts are not in dispute and being otherwise fully advised in the premises hereby makes the following findings of fact and conclusions of law.
Based on the Joint Stipulation and the Supplemental Joint Stipulation, the following facts are undisputed. On September 11, 1991, the Debtors executed and delivered to First Union a Prime Equity Line Agreement and Disclosure Statement (collectively, the "Note") with a maximum credit limit of one hundred and sixty five thousand dollars ($165,000.00). The Note contains the following provision:
Security: I am giving you a deed to Secure debt, Mortgage or Deed of Trust (referred to as "Security Instrument" in this Agreement) on my home or other real estate as security for my account located at 2431 S.W. 27th Terrace, Ft. Lauderdale, Florida 33312.
Contemporaneous therewith, in order to secure the Debtor's obligations under the Note, the Debtors executed and delivered to First Union a mortgage (the "Mortgage") granting First Union a security interest in real property (the "Real Property") which is described more specifically as:
First Union lost the original Note and Mortgage before the Mortgage was recorded. Finally, the parties stipulated that the Debtors intended to grant First Union a mortgage lien against the Real Property.
On November 22, 1994, First Union brought an action against the Debtors styled First Union National Bank of Florida v. Angelo J. Diamond and Clarita A. Diamond, His Wife, Case Number XX-XXXXXX (12) in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida for the reestablishment of the lost Note and Mortgage (the "State Court Action"). The Debtors filed an Answer in the State Court Action wherein they admitted the execution and delivery of the Note and Mortgage to First Union. In connection with the State Court Action, on December 1, 1994, First Union recorded a notice of lis pendens (the "Notice") in Official Record Book 22883, Page 558, Official Records of Broward County, Florida. The Notice stated that the relief sought in the State Court Action was an action for the reestablishment of the lost Note and Mortgage on the Real Property. Subsequent to First Union's filing of the State Court Action, the Debtors ceased making payments under the Note. On May 19, 1995 (the "Petition Date"), the Debtors filed a petition for relief under Chapter 7 of the Bankruptcy Code. The Debtors have remained in default on the Note during this bankruptcy proceeding.
In their schedules, the Debtors list the Real Property as homestead property claiming it as exempt from the Bankruptcy estate by virtue of Article X, Section 4 of the Constitution of the State of Florida. Neither the Trustee nor the Debtors' creditors objected to the Debtors' claimed exemption of the Real Property. First Union filed a Proof of Claim in this bankruptcy proceeding as a secured creditor claiming that it is a secured creditor in the amount of one hundred sixty three thousand three hundred sixty three dollars and eighty eight cents ($163,363.88) plus pre-petition interest, costs and fees.
This Court has jurisdiction over this subject matter pursuant to 28 U.S.C. §§ 1334 and 157. This is a core proceeding whereby this Court is authorized to hear and determine all matters regarding this case in accordance with 28 U.S.C. § 157(b)(2)(A), 157(b)(2)(K) and 157(b)(2)(O ).
In order to prevail on a motion for summary judgment, the movant must meet the statutory criteria set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Gui L.P. Govaert, Trustee et al. v. Southern Nat'l Bank of North Carolina and Anthony S. Caserta, Debtor (In re Anthony Sestilio Caserta, Debtor), 182 B.R. 599, 603-605 (Bankr.S.D.Fla.1995). Rule 56(c) of the Federal Rules of Civil Procedure states that summary judgment shall be entered only if "there is no genuine issue as to any material fact and . . . the moving party is entitled to summary judgment as a matter of law." Fed.R.Civ.P. 56; Clemons v. Dougherty Co., Georgia, 684 F.2d 1365, 1368 (11th Cir.1982) citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970).
A fact is material if it "might affect the outcome of the suit under governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). There is no genuine issue for trial if the record, taken as a whole, does not lead a rational trier of fact to find for the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Co., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Having reviewed all the relevant pleadings, this Court finds that there is no genuine issue of material fact that is in dispute and summary judgment must be granted in favor of First Union as a matter of law.
On September 22, 1995, First Union commenced this adversary proceeding seeking this Court's determination of the extent, priority, and validity of First Union's lien pursuant to 28 U.S.C. § 157(b)(2)(K). Although First Union concedes that it failed to record the Mortgage, First Union claims that it retained an equitable lien on the Real Property, which is superior to all other interests in the Real Property. First Union also seeks a declaratory judgment establishing the extent, priority, and validity of its lien against the Real Property by virtue of the original Note and Mortgage and this Court's imposition of an equitable lien on the Real Property. Furthermore, First Union states that the recording of the Notice would have charged prospective purchasers and encumbrancers with constructive notice of the pendency of litigation and such purchasers and encumbrancers would take subject to the decree of the State court regarding First Union's alleged lien.
The Debtors claim, however, that there are no special equities justifying this Court's imposition of an equitable lien on the Real Property since it is exempt as homestead property pursuant to Article 10, Section 4 of the Florida Constitution. In addition, the Debtors assert that any lien held by First Union is avoidable pursuant to 11 U.S.C. §§ 522 and 544. The Debtors state that it is a longstanding tenet of Bankruptcy law that a trustee always has the power to avoid any unperfected lien, even an equitable lien, which could have been perfected but was not. Furthermore, the Debtors claim that since the Notice only affords constructive notice of First Union's alleged lien, the "strong arm" provisions of 11 U.S.C. § 544 can be used to avoid First Union's alleged lien.
A court's determination of a creditor's entitlement to an equitable lien on real property must be made in accordance with applicable state law. Matter of Bob Cooper, Inc., 65 B.R. 609, 611 (Bankr.M.D.Fla.1986). As stated by the bankruptcy court in Olga Gilman v. Barnett Bank of South Florida (In re Olga Gilman), 31 B.R. 930, 931 (Bankr.S.D.Fla.1983), the prevailing view of the State courts of Florida is a disjunctive two-prong test whereby the imposition of an equitable lien may be founded upon two basis. The imposition of an equitable lien may be founded upon (1) a contract showing an intent to charge a particular property with a debt or an obligation or (2) a court may impose such a lien out of general considerations of right or justice. See Jones v. Carpenter, 90 Fla. 407, 106 So. 127 (1925); Ross v. Gerung, 69 So.2d 650 (Fla.1954).
Generally under Florida law, the imposition of an equitable lien based upon general considerations of right or justice requires some equitable basis supporting a court's equitable jurisdiction such as fraud, mutual mistake, estoppel or reprehensible conduct. See Merritt v. Unkefer, 223 So.2d 723 (Fla.1969); Rosen v. Fierro, 340 So.2d 955 (Fla. 3rd Dist.Ct.App.1976); Plotch v. Gregory, 463 So.2d 432 (Fla. 4th Dist.Ct.App. 1985). The fraud, mutual mistake, estoppel or reprehensible conduct must be chargeable to the party resisting the imposition of the lien. See Zaleznik v. Gulf Coast Roofing Co., Inc., 576 So.2d 776 (Fla. 2d Dist.Ct.App. 1991).
However, the Debtors state that when homestead rights are in jeopardy, Florida law requires far more than a mere equitable...
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