Thunderbird, Ltd. v. Great American Ins. Co.

• Decision Date: 18 June 1990
• Docket Number: 88-01935,Nos. 88-01934,s. 88-01934
• Citation: 566 So.2d 1296
• Parties: 15 Fla. L. Weekly D1621 THUNDERBIRD, LTD., a Florida limited partnership; Thunderbird Management, Inc., a Florida corporation; Financial Investment Corporation, a Florida corporation; J. Steven Wilson; Courtenay Sands Wilson; Philip A. Browning, Jr.; Patricia Browning; and Boston Sports Associates, a general partnership under the Partnership Act of the Commonwealth of Massachusetts, Appellants/Cross-Appellees, v. GREAT AMERICAN INSURANCE COMPANY, Appellee/Cross-Appellant.
• Court: Florida District Court of Appeals

Page 1296

566 So.2d 1296

15 Fla. L. Weekly D1621

THUNDERBIRD, LTD., a Florida limited partnership; Thunderbird Management, Inc., a Florida corporation; Financial Investment Corporation, a Florida corporation; J. Steven Wilson; Courtenay Sands Wilson; Philip A. Browning, Jr.; Patricia Browning; and Boston Sports Associates, a general partnership under the Partnership Act of the Commonwealth of Massachusetts, Appellants/Cross-Appellees, v. GREAT AMERICAN INSURANCE COMPANY, Appellee/Cross-Appellant.

Nos. 88-01934, 88-01935.

District Court of Appeal of Florida First District.

June 18, 1990.

As Clarified on Rehearing

Sept. 27, 1990.

John L. Taylor, Jr., Otto F. Feil, III, and Michael A. Cole of Vincent, Chorey, Taylor & Feil, Atlanta, Ga., for appellants/cross-appellees, Philip A. Browning, Patricia Browning, Financial Inv. Corp., and Thunderbird Management, Inc.

C. Harris Dittmar and Timothy J. Corrigan of Bedell, Dittmar, DeVault & Pillans, Jacksonville, for appellants/cross-appellees J. Steven Wilson and Courtenay Sands Wilson.

Gerry S. Gibson of Steel, Hector & Davis, Miami, and Frederick R. Brock of Gartner, Brock & Simon, Jacksonville, for appellee/cross-appellant.

WIGGINTON, Judge.

These consolidated appeals and the cross-appeal arise from a lawsuit filed by Great American Insurance Company to foreclose on its mortgages following default by the mortgagee, Thunderbird, Ltd. We affirm in part and reverse in part.

The circumstances leading to the instant lawsuit began on February 27, 1978, when Thunderbird, Ltd. executed two promissory notes in favor of Great American's predecessor and assignor, the Provident Bank, in the respective amounts of $2,725,000 and $800,000. Both notes were secured by the real and personal property and other assets making up the Thunderbird Resort Motel in Jacksonville. Additionally, the $800,000 note was also guaranteed by appellants Wilsons and Brownings, but only to the extent of $800,000. Thereafter, on December 18, 1978, Thunderbird, Ltd. executed a third promissory note in the amount of $1,375,000, secured by an additional mortgage on the same motel. This third note was also guaranteed by the Brownings and the Wilsons but without the cap specifically provided for in the $800,000 guaranty.

Following a default by Thunderbird, Ltd. on the three notes in July 1982, Great American filed the instant lawsuit to foreclose its mortgages and security agreements, and to seek other relief. Counts V and VI of the complaint advanced claims against the Wilsons and the Brownings, as guarantors, for repayment of the notes based upon the default of Thunderbird. For approximately 18 months beginning in October 1982, the foreclosure action was stayed pending resolution of Thunderbird's filing for reorganization under Chapter 11 of the United States Bankruptcy Code. When the Chapter 11 proceeding was ultimately dismissed in March 1984, the instant proceeding resumed. In November, the trial court appointed a receiver for the motel, who operated the motel until foreclosure. Ultimately, the trial court entered a final summary judgment foreclosing on the property and directing sale of the motel to satisfy the indebtedness on the note, including interest, reimbursement for real estate taxes, attorney's fees and costs for a total debt of $6,820,948.56.

Thereafter, on January 30, 1985, Great American appeared at the foreclosure sale and bid in $3,600,000 of its debt for the property as reflected on the certificate of sale. Pursuant to the certificate of sale, a certificate of title was issued to Great American for the motel and certain other collateral. Great American then voluntarily dismissed its claim for deficiency against Thunderbird and proceeded solely on Counts V and VI of the complaint against the Wilsons and the Brownings as guarantors.

At the non-jury trial held to determine the guarantor's liability, Great American in its case-in-chief introduced only the certificate of sale as evidence of the value of the property it had received at the foreclosure sale. Following the close of Great American's case, appellants moved for an "involuntary dismissal." The court denied the motion.

In their case, appellants presented expert testimony that the fair market value of the subject property on the date of foreclosure exceeded $7,000,000. Great American unsuccessfully moved to exclude the appraisers' opinions. However, over appellants' objections, the trial court permitted Great American in rebuttal to introduce expert testimony that the fair market value of the property was $3,600,000. Nevertheless, at the conclusion of the trial, the court found as a matter of fact that the "value of the Thunderbird Resort Hotel on January 30, 1985 [the date of foreclosure sale] was $5,600,000."

A post-trial hearing was conducted to determine how the $5,600,000 should be applied against the debt due on the three notes. The trial court adopted Great American's position that said amount should be applied first to the $2,725,000 non-guaranteed note, holding that the "main principle of equity applicable to this case is that a creditor should be made whole" and that appellants "have no legal right to insist on an allocation of the foreclosure sale proceeds to reduce the extent of their obligation under the guaranties."

Additionally, in its original final judgment, the court held that the guarantors were not liable for Great American's payment of the $400,000 in ad valorem taxes on the property. However, on rehearing, the court reversed itself holding that the guarantors "are responsible for the delinquent real estate taxes." The court denied appellants' motion for rehearing concerning the pro rata allocation of same.

Great American also sought attorney's fees of $183,000 and the court, after conducting an evidentiary hearing, awarded $160,551.20 in fees. In arriving at that sum, the trial court reduced the requested fee first by $13,000 found to be travel expenses by Great American's Miami counsel, and a further 10%, or $9500, for unspecified matters conducted by that firm "unrelated to the guaranties."

Finally, the court awarded Great American over $206,000 in costs, concluding that because the guaranties provided the guarantors would reimburse Great American "for all expenses incurred" in enforcing the guaranties, the court need not look at the reasonableness of Great American's costs. This cost award included over $33,000 for Great American's expert appraiser, and over $159,000 in expenses which Great American allegedly had incurred in the foreclosure action. Consistent with these rulings, the court entered an "Order on Motions for Rehearing, Motion for Award of Attorney's Fees and Expenses, and Amended Final Judgment on Counts V and VI of the Complaint" which adjudged that the guarantors were jointly and severally liable in the total amount of $1,668,156.49, plus attorneys' fees of $160,551.20, additional expert witness fees of $2,025.00, and costs in the amount of $206,597.83, for a total judgment of $2,037,330.52. Five points are now raised by appellants on appeal and two points are raised by appellee on cross-appeal. These points shall be addressed below seriatim.

I

Under Point I, appellants argue that the trial court erred in failing to grant the guarantors' motion for involuntary dismissal on the basis that Great American did not prove the value of the assets was insufficient to satisfy the debt. In so arguing, they rely on the general rule that as plaintiff in an action at law on the guaranties, Great American had the burden of proving that the value of the assets it received through foreclosure was less than the total indebtedness which appellants partially guaranteed. Norwest Bank Owatonna, N.A. v. Millard, 522 So.2d 546 (Fla. 4th DCA 1988); CSI Services, Ltd. v. Hawkins Concrete Construction Co., 516 So.2d 337 (Fla. 1st DCA 1987).

While the foregoing is a correct statement of the law, we disagree with appellants that Great American's action in placing before the trial court the certificate of sale would entitle appellants to judgment as a matter of law. Certainly, as was shown in R.K. Cooper Construction Co. v. Fulton, 216 So.2d 11 (Fla.1968), such evidence would have been insufficient upon which the trial court could have entered summary judgment in favor of Great American, but it was nonetheless sufficient evidence below to shift the burden to appellants of going forward with other evidence concerning fair market value of the property. Fara Manufacturing Co., Inc. v. First Federal Savings and Loan Association of Miami, 366 So.2d 164 (Fla. 3d DCA 1979). A legal presumption exists that the foreclosure sale price equals the fair market value of the property. Withers v. Flagship Peoples Bank of Tallahassee, 473 So.2d 789, 791 n. 1 (Fla. 1st DCA 1985). Thus, once Great American presented evidence of its $3.6 million foreclosure sale bid, appellants had the burden of presenting contrary evidence on the issue of value. Significant, however, is the fact that the trial court did not find that fair market value was as reflected in the certificate of sale, but instead found fair market value to lie somewhere in between that amount presented by Great American and the figures presented by appellants' experts. Accordingly, for the foregoing reasons, we affirm.

II

As their Point II on appeal, the Wilsons assert that in assessing the guarantors' liability, the trial court erred in failing to pro rate the value of the foreclosed property received by Great American among the three promissory notes. In a separately filed appellate brief, the Brownings advance an alternative argument to pro rata allocation--in which argument the Wilsons concur--maintaining that both guaranty contracts contain express language resolving this issue in favor of the guarantors. In support thereof, the Brownings point to language in paragraph (4) of the contracts which allowed Great American to elect at its option whether...