Title & Trust Co. of Florida v. Parker

• Decision Date: 14 May 1985
• Docket Number: No. AV-7,AV-7
• Citation: 10 Fla. L. Weekly 1191,468 So.2d 520
• Court: Florida District Court of Appeals
• Parties: 10 Fla. L. Weekly 1191 TITLE & TRUST COMPANY OF FLORIDA, a Florida corporation, Appellant, v. Nathan O. PARKER and Joyce T. Parker, Appellees.

Page 520

468 So.2d 520

10 Fla. L. Weekly 1191

TITLE & TRUST COMPANY OF FLORIDA, a Florida corporation, Appellant, v. Nathan O. PARKER and Joyce T. Parker, Appellees.

No. AV-7.

District Court of Appeal of Florida,

First District.

May 14, 1985.

Delbridge L. Gibbs of Marks, Gray, Conroy & Gibbs, Jacksonville, for appellant.

James E. Cobb, Jack W. Shaw, Jr., Dennis R. Schutt of Mathews, Osborne, McNatt, Gobelman & Cobb, Jacksonville, for appellees.

SMITH, Judge.

Appellant Title & Trust Company of Florida (Title & Trust) appeals a final judgment granting the Parkers $175,000.00 in compensatory damages, $23,303.70 prejudgment interest, and $22,000.00 attorney's fees. The Parkers cross-appeal the amount of compensatory damages, contending the trial judge failed to apply the proper measure of damages. We affirm both the appeal and the cross-appeal.

The Parkers filed a complaint seeking damages from Title & Trust for an alleged breach of a commitment to provide title insurance covering a mortgage held by the Parkers on a parcel of real property located in Jacksonville, Florida. Initially, the trial court granted summary judgment against the Parkers on the issue of liability, finding that the Parkers' loss was excluded from coverage by the policy's "possession exception" clause. However, on appeal this court held that the "possession exception" clause found in the commitment issued by Title & Trust did not apply, Parker v. Title & Trust Company of Florida, 429 So.2d 1267 (Fla. 1st DCA 1983) (Parker I ), and rendered partial summary judgment in favor of the Parkers on the issue of liability. Id. at 1269. The cause was then remanded for trial on the issue of damages, which resulted in the judgment appealed from.

The Parkers, residents of California, were approached in May 1980 by representatives of a California corporation known as EAC, Inc. (EAC), who proposed a loan from the Parkers to EAC. The loan, as contemplated, called for the Parkers' advancement of $200,000.00, with repayment to be made by EAC ninety days later in the amount of $305,000. As security for the loan, the Parkers received a mortgage on a parcel of real property in Jacksonville, Florida, which was allegedly owned by EAC. Although the loan was evidenced by a note with a stated principal of $305,000.00, and a per annum interest rate of eighteen percent (18%), the true principal involved was $200,000.00, of which amount only $175,000.00 was actually distributed to EAC. ¹ According to the testimony of John Holl, an expert on mortgage valuations presented by Title and Trust, the actual interest rate involved in the transaction was fifty-two percent (52%) per annum, and was in excess of two hundred percent (200%) for the ninety days.

Prior to distribution of the loan proceeds, the Parkers received a title insurance commitment covering the mortgaged Jacksonville property from Title & Trust. Subsequently, Title & Trust discovered that the deed under which EAC allegedly held title to the property was a forgery. The true owner of the property, Southeastern Aluminum Products, Inc., then instituted a quiet title action against the Parkers and EAC, resulting in a judgment declaring the purported interests of EAC and the Parkers in the property null and void. Title & Trust declined to defend the Parkers' putative interest in the Jacksonville property, having discovered the fraud during its investigation of the property title subsequent to issuance of the title insurance commitment. As a further result of the foregoing, Title & Trust refused to issue a title insurance policy covering the Jacksonville parcel. By the time Title & Trust gave notice to Mr. Parker of EAC's defective title, disbursement of the loan principal to the EAC officers had already been made.

Title and Trust raises essentially two points on appeal, both of which relate to Florida's usury statute, Section 687.071(3), (7), Florida Statutes (1981), under which the charging of in excess of forty-five percent (45%) per annum interest is a felony, and the debt is unenforceable in the courts of Florida. First, Title and Trust asserts that under the usury statute, the Parkers' note and mortgage were unenforceable; thus they sustained no "loss" under the policy when their mortgage interest in the Jacksonville property was declared null and void. Secondly, Title and Trust maintains that the trial judge committed reversible error by refusing to grant its motion to file a second amended affirmative defense based on usury, since no prejudice to the Parkers could have resulted from the granting of the amendment.

The Parkers, on cross-appeal, contend that they are entitled to $305,000.00 in damages, the amount stated in the title insurance commitment. After considering the briefs and oral arguments, we are satisfied that the trial judge here committed no reversible error.

Considering first Title & Trust's contention that the trial judge should have allowed it to file an amended answer raising the affirmative defense of usury, we find no abuse of the trial judge's abundant discretion. Rule 1.190(e), Florida Rules of Civil Procedure, provides in pertinent part:

At any time in furtherance of justice, upon such terms as may be just, the court may permit any process, proceeding, pleading, or record to be amended ...

While it is generally true that amendments are viewed favorably so as to assure the trial of cases on their merits, amendments are not allowed where they would "change the issue, introduce new issues, or materially vary the grounds of relief." International Patrol and Detective Agency Company, Inc. v. Aetna Casualty & Surety Company, 396 So.2d 774, 776 (Fla. 1st DCA 1981) (citations omitted), aff'd on other grounds, 419 So.2d 323 (Fla.1982). This rule is especially applicable where the amendment is sought shortly before trial, since the liberality to be exercised in granting amendments diminishes as a case progresses to trial. Brown v. Montgomery Ward, 252 So.2d 817, 819 (Fla. 1st DCA 1971); Allett v. Hill, 422 So.2d 1047, 1049 (Fla. 4th DCA 1982); Price v. Morgan, 436 So.2d 1116, 1122 (Fla. 5th DCA 1983). Here, Title & Trust sought leave to amend two weeks prior to trial, in order to raise a new issue, usury. As a practical matter, prejudice to Title and Trust does not clearly appear, since Title & Trust was allowed, over objection, to introduce testimony concerning the usurious nature of the Parkers' loan transaction and the Parkers failed to appeal this evidentiary ruling to this court. Moreover, even were the Parkers' objection properly before this court, we would not be inclined to overrule the trial judge, as a court may, on its own motion, take notice of illegal contracts coming before it Citizens Bank & Trust Co. v. Mabry, 102 Fla. 1084, 136 So. 714, 717 (1931), citing Escambia Land & Manufacturing Co. v. Ferry Pass Inspectors' & Shipper's Ass'n., 59 Fla. 239, 52 So. 715 (1910). Nevertheless, the proffered amendment would have effected at least a technical change in the issues to be tried, since the loan itself was made and was payable in California, so that we cannot say that the trial judge abused his discretion in denying the amendment. Chitty & Company v. Preston H. Haskell Company, 423 So.2d 460, 461 (Fla. 1st DCA 1982).

We find that Title and Trust's contention that the Parkers sustained no "loss," and the Parkers' contentions, regarding the amount of damages, implicate much the same legal and factual considerations. Both parties agree that the measure of damages in a suit on a mortgage title insurance policy is accurately set forth in Goode v. Federal Title and Insurance Corporation, 162 So.2d 269, 270 (Fla. 2d DCA 1964):

... the fundamental rule [is] that an insured is entitled to recover the actual loss or damage sustained from a defect, lien, or encumbrance affecting his title.... Broadly speaking, most of the cases in which the question has arisen have deemed a mortgagee's loss to be the difference between the value of the mortgage subject to the defect and what its value would have been had the defect not existed....

Quoting Annot., 60 A.L.R.2d 972 (1958); see also Safeco Title Ins. Co. v. Reynolds, 452 So.2d 45, 47-48 (Fla. 2d DCA 1984).

The trial judge found the Parkers entitled to $175,000.00 in damages, rather than the face amount of the policy, $305,000, because "... that is the amount of their loss. And I think that if they got anything more, it would be speculative and contrary to the public policy and everything else." It is evident from this statement that the trial judge was troubled by the usurious nature of the underlying loan between the Parkers and EAC, and its impact on the damages they stood to receive on the title insurance commitment issued by Title & Trust. We are likewise troubled by the prospect that our disapproval of the trial judge's final judgment, limiting the Parkers' recovery to the actual damages sustained...