In re Ferry

• Decision Date: 13 July 2021
• Docket Number: Case No. 8:11-bk-01854-RCT
• Citation: 631 B.R. 790
• Parties: IN RE Suzanne V. FERRY, Debtor.
• Court: U.S. Bankruptcy Court — Middle District of Florida

631 B.R. 790

IN RE Suzanne V. FERRY, Debtor.

Case No. 8:11-bk-01854-RCT

United States Bankruptcy Court, M.D. Florida, Tampa Division.

Signed July 13, 2021

Jonathan A. Semach, Buddy D. Ford, Buddy D. Ford, P.A., Tampa, FL, for Debtor.

ORDER ON DISBURSEMENT OF PROCEEDS FROM THE SALE OF 600 COREY AVENUE AND 618 73RD AVENUE, ST. PETE BEACH, FLORIDA

Roberta A. Colton, United States Bankruptcy Judge

Before the Court is the dispute between Debtor Suzanne V. Ferry and Secured Creditor E-Z Cashing, LLC ("E-Z") regarding the distribution of proceeds from the sale of Debtor's investment properties located in St. Pete Beach, Florida at 600 Corey Avenue ("600 Corey Ave.") and 618 73rd Avenue ("618 73rd Ave.") (together the "Properties"). The dispute centers on E-Z's entitlement, if any, to default interest arising under the note and mortgage once secured by the Properties (the "Loan").¹

In its Order Denying Debtor's Renewed Motion for Summary Judgment,² the Court rejected Debtor's contention that § 1141(a) of the Bankruptcy Code³ together with the doctrine of res judicata bar E-Z from contesting the interest rate applicable to the Loan, finding that Debtor's confirmed plan unambiguously incorporated the mortgage which provided for the right to collect default interest. What was left unanswered, and what has preoccupied the parties for some time, are (1) whether E-Z had waived, either in whole or in part, sums claimed as default interest and (2) whether E-Z should be equitably estopped from asserting amounts in excess of those set forth in a payoff letter dated September 25, 2019 issued by E-Z's predecessor in interest, Bayview Loan Servicing, LLC ("Bayview").

These two related questions proceeded to a full day video trial, at which the Court admitted numerous exhibits⁴ and received testimony from the Debtor, E-Z's manager Joel Weiser, and Sergio Serrano, Senior Vice President for the Loss Mitigation Department at Bayview now known as Community Loan Servicing. After considering the evidence adduced at trial, together with the record, the Court finds that, first, E-Z did not waive its entitlement to default interest and, second, E-Z is not estopped from claiming more than the amounts stated in Bayview's estoppel letter. However, the Court does not find that E-Z is entitled to interest after it received payment from the approved sale of the Properties.

In addition to the findings of fact set forth below, the Court incorporates its previous recitation of the undisputed facts and procedural history from both its Order Denying Debtor's Motion for Summary Judgment⁵ and its Order Denying Debtor's Renewed Motion for Summary Judgment,⁶ and further presumes the parties’ familiarity with the record in this case.

Findings of Fact

Debtor is an experienced real-estate investor, who has been investing in commercial real estate for approximately fifty years.⁷ At the time of filing, Debtor owned, among several others, investment real property located at 600 Corey Ave. and 618 73rd Ave. in St. Pete Beach, Florida (again, the "Properties").⁸ Bayview held a note and mortgage secured by the Properties.⁹

The Balloon Promissory Note,¹⁰ dated May 26, 2004, provided for a fixed interest rate of 11.99% for the first year and thereafter a variable interest rate with a minimum rate of 12.99%. Amounts due were amortized over 20 years with a balloon payment due at the end of five years. The Mortgage and Security Agreement,¹¹ also dated May 26, 2004, secured, inter alia , Debtor's obligations under the note. The loan documents provided that upon a default, interest would start automatically accruing at the highest rate permitted by Florida law.¹² The mortgage provided:

All remedies available to the Mortgagee with respect to this Mortgage shall be cumulative and may be pursued concurrently or successively. There are not conditions precedent to the enforcement by the Mortgagee of any of its remedies. No delay by the Mortgagee in exercising any such remedy shall operate as a waiver thereof or preclude the exercise thereof during the continuance of that or any subsequent default.¹³

Debtor filed her Chapter 11 case on February 1, 2011.¹⁴ At that time, and for some time prior, Debtor was in default of her payment obligations under the Loan.¹⁵

Bayview timely filed a proof of claim in the amount of $1,116,326.50. The claim indicated that the Loan had been in default since January 26, 2008 and that since, Bayview had charged default interest at a rate of 18%. The claim included default interest of $343,118.72 and for accruing default interest.¹⁶ Debtor never objected to Bayview's claim.

In her Fourth Amended Plan of Reorganization (the "Plan"), Debtor proposed to treat the Loan as follows:

Class VI: Class V shall consist of the secured claim of Bayview Loan Servicing, LLC , who holds a mortgage on real property located at 600 Corey Avenue, St. Pete Beach FL and 618 73rd Avenue, St. Pete Beach Florida, who filed claim in the amount of $660,000 secured and $456,326.50 unsecured (Claim #16). The Debtor has obtained an appraisal on this real property having a value of $340,000.00 (the "Secured Claim"). The parties have agreed to a value of $480,000.00.

The secured amount allowed shall be amortized over twenty-four (24) years at 7% interest per annum and the Debtor will pay to this creditor a monthly principal and interest payment of $3,445.25 reflecting the valued amount until the total allowed secured claim is paid in full. Said payments shall commence thirty (30) days from the entry of the confirmation Order or as set forth in the Order determining value of the collateral.

In the event there is a deficiency claim allowed, this portion of the Creditor's claim shall be considered unsecured and will be treated under Class XIII.¹⁷

Bayview voted to accept the Plan, and the Plan was confirmed in June 2012.¹⁸

Per the order confirming plan (hereafter, the "Confirmation Order"),¹⁹ Debtor was to make her first payment to Bayview on the modified Loan by July 29, 2012. Debtor promptly defaulted. Debtor's first post-confirmation payment to Bayview was not received until October 2012.²⁰ And Debtor's ongoing payments were haphazard at best. The dates and amounts of Debtor's payments to Bayview on account of the Loan are reflected in Bayview's Loan History Summary.²¹

In January 2018, Debtor obtained a payoff letter from Bayview regarding the Loan (the "January 2018 Payoff"). That payoff letter reflected the accrual of default interest in the amount of $41,006.00.²² In June 2018, Debtor obtained a second payoff letter (the "June 2018 Payoff"). That letter also reflected the accrual of default interest, this time in the amount of $210,403.20, and provided a total pay off for the Loan of $895,078.56.²³ Both payoffs provided for the accrual of per diem interest of $231.38 following their respective projected payoff dates. The calculation of the per diem interest amount was based upon the default interest rate.

In October 2018, based upon Debtor's payment defaults under the Confirmation Order, Bayview filed a motion to dismiss, or alternatively, for relief from the stay with respect to its three mortgage loans, including the Loan secured by the Properties.²⁴ At an October 30, 2018 hearing on the motion, the parties announced they had reached an agreement and would work together to submit a proposed agreed order.²⁵ Although Debtor's counsel mentioned that the parties needed to "true up" the amounts due Bayview, he did not suggest that Debtor disputed the accrual of default interest. Rather, Debtor disputed certain escrow shortages, namely force-placed insurance premiums Bayview had charged when Debtor purportedly had insurance coverage.²⁶

On November 8, 2018, the Court entered an agreed order (the "Agreed Stay Order"),²⁷ which indicated:

• Bayview and Debtor tentatively agreed that the balance due on the Loan was $895,078.56, the amount reflected in the June 2018 Payoff; however, a footnote indicated that there were ongoing negotiations between the parties as to the total indebtedness owed;

• Debtor was to make the monthly payments as provided in the Confirmation Order with respect to each mortgage loan as well as pay an additional $10,000 per month to reduce the arrears that had accrued due to Debtor's payment defaults under the confirmed plan; and

• Each loan would mature in thirteen (13) months with Bayview to be paid in full.

Though contemplated, no amended order setting forth a revised figure for the total indebtedness on the Loan was ever submitted.²⁸

Debtor testified that she understood the Agreed Stay Order to "reset" the Loan and waive the default interest that had previously been included in earlier payoff statements.²⁹ But Debtor's testimony on this point was not credible. Even if true, Debtor promptly defaulted on the Agreed Stay Order's payment terms, failing to make any of the $10,000 arrearage payments and most of the $3,445.25 monthly payments.³⁰

Payment issues aside, in August 2019, as contemplated by the parties’ agreement, Debtor contracted to sell 600 Corey Ave. When Debtor informed Bayview of the contract, Bayview reminded Debtor that the Loan was secured by both 600 Corey Ave. and 618 73rd Ave. and advised that it would not consent to a proposed splitting of the Loan.³¹ Around this same time, a title search of 600 Corey Ave. revealed a second impediment to Debtor's proposed sale, namely a second mortgage held by Gary and Lucia Apostolov (the "Apostolov Mortgage").³²

These issues notwithstanding, per her request, Debtor obtained from Bayview a payoff letter dated September 25, 2019 showing a total payoff amount for the Loan, as of October 31, 2019, of $745,603.58 (the "September 2019 Payoff").³³ The itemization in the payoff did not include any sums for default interest. Per diem interest, to run from November 1, 2019, was calculated using a 7% interest rate. But the September 2019 Payoff also stated:

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