E-Z Cashing, LLC v. Ferry (In re Ferry)

Decision Date21 February 2023
Docket Number8:20-cv-1179-VMC,Bankr. 8:11-bk-1854-RCT
PartiesIN RE SUZANNE V. FERRY, Debtor. E-Z CASHING, LLC, Appellant/Cross-Appellee, v. SUZANNE V. FERRY, Appellee/Cross-Appellant.
CourtUnited States District Courts. 11th Circuit. United States District Court of Middle District of Florida
ORDER

VIRGINIA M. HERNANDEZ COVINGTON UNITED STATES DISTRICT JUDGE

In the context of an adversary proceeding commenced in a Chapter 11 bankruptcy case, Appellant/Cross-Appellee E-Z Cashing, LLC appeals the Bankruptcy Court's May 7, 2020, decision granting Appellee/Cross-Appellant Suzanne Ferry's motion for summary judgment and denying E-Z Cashing's crossmotion for summary judgment. E-Z Cashing filed a brief in support of its appeal on February 8, 2022. (Doc. # 47). On April 5, 2022, Ms. Ferry filed a response to E-Z Cashing's appeal. (Doc. # 52). She also cross-appeals the Bankruptcy Court's May 7, 2020, decision denying her motion for attorney's fees and costs. (Id.). Both parties filed response and reply briefs. (Doc. ## 58, 60). As discussed below, the Court affirms in part and reverses in part the decision of the Bankruptcy Court as to its order on the cross-motions for summary judgment. The Court dismisses as moot Ms. Ferry's cross-appeal regarding her motion for attorney's fees.

I. Background
A. Adversary Proceeding before the Bankruptcy Court
1. 550 Corey Loan

Ms. Ferry signed a promissory note and mortgage in favor of Allied Mortgage & Financial Corp. dated May 26, 2004, in the principal amount of $550,000 (the “Loan”). (Doc. # 8-8 at 13). The Loan was secured by 550 Corey Avenue, St. Pete Beach, Florida (“550 Corey”). (Doc. # 8-14 at 2). Bayview Loan Servicing, LLC acquired the Loan by assignment in September 2007. (Doc. # 8-14 at 2).

The 550 Corey Loan contains three clauses relevant to the case at bar. First, Section 5.12 establishes that interest would accrue upon default at the “maximum rate permissible under Florida law.” (Doc. # 8-100 at 17). Second, Section 4.03(a) provides that “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.” (Id. at 14). Third, Section 1.08(a) provides that the mortgagee is entitled to reasonable attorney's fees and expenses if “the Mortgagee commences an action against the Mortgagor . . . for the recovery of any sum secured hereby[.] (Id. at 4). Section 1.08(a) also provides:

Notwithstanding the existence of Florida Statute 57.105(2) or any statute of a like or similar nature, the Mortgagor hereby waives any right to any attorneys' fees thereunder and the Mortgagor agrees that the Mortgagee exclusively shall be entitled to indemnification and recovery of any and all attorneys' fees arising out of or related to this Mortgage and/or any agreement contemplated to be executed in conjunction herewith.

(Id.).

2. Bankruptcy Proceeding

Ms. Ferry filed for protection under Chapter 11 of the Bankruptcy Code on February 1, 2011. (Doc. # 8-8). She listed 550 Corey on Schedule A, and Bayview's Loan is item number 4 on Schedule D. (Id. at 13, 22). Bayview filed Proof of Claim 14-1 in the amount of $941,887.77. (Doc. # 8-113). In its claim, Bayview stated that the loan balance as of Petition Date was $941,887.77, of which $282,806.26 represented accrued interest at a default rate of 18 percent. (Id. at 3). The proof of claim stated that [i]nterest continues to accrue at the default rate of interest, post petition.” (Id.).

On June 29, 2012, the Bankruptcy Court entered an order confirming Ms. Ferry's Fourth Amended Plan of Reorganization (the Plan). (Doc. # 8-20). The Plan reduced the secure portion of the 550 Corey Loan from $941,887.77 to $680,000 and required Ms. Ferry to make monthly payments of $4,880.77. (Doc. # 8-18 at 4).

On October 5, 2018, Bayview filed a motion to dismiss, or alternatively, for relief from the automatic stay with respect to three of Ms. Ferry's properties, including 550 Corey (the Motion for Stay Relief). (Doc. # 8-21). As to 550 Corey, Bayview alleged that Ms. Ferry failed to comply with her payment obligations under the Plan. (Id.).

On November 8, 2018, the Court entered an order granting, in part, Bayview's Motion for Stay Relief (the “Stay Relief Order”). (Doc. # 8-27). The Stay Relief Order provided in relevant part:

2. Hie Debtor and Creditor, Bay view Loan Servicing, LLC (collectively the Parties) have agreed that the Debtor owes Creditor the following sums on the three (3) mortgage loans (collectively the “Loans”):1
Mortgage loan encumbering 600 Corey Ave. (XXX4040) $895,078.56
Mortgage loan encumbering 550 Corey Ave. (XXX6402) $1,177,838.42
Mortgage loan encumbering 1130 Pinellas Bayview S (XXX2461) $1,1130,665.79
3. The Parties have agreed to treat the Loans as follows:
Mortgage loan encumbering 600 Corey Ave. (XXX4040) $3,445.25/mos.
Mortgage loan encumbering 550 Corey Ave. (XXX6402) $4,880.77/mos.
Mortgage loan encumbering 1130 Pinellas Bayview S (XXX2461) $4,665.44/mos.
4. In addition to the above referenced monthly Loan payments, the Parties have agreed that the Debtor shall pay the Creditor the sum of $10,000.00 per month to account for the arrears owed on each Loan as a result of Debtor's default under the confirmed plan.
5. All three Loans shall mature in 13 months, with the total indebtedness owed to Creditor being paid by the Debtor on the 13 th month following entry' of this Order.
6. Should the Debtor default; Creditor may file a Notice of Default, and if the Debtor docs not cure such default within 72 hours, Creditor may submit an order granting relief from the automatic stay without necessity of a hearing.
1 The Parties are continuing their negotiation as to the full indebtedness owed on the Loans. In the event the full indebtedness owed under the Loans is re-calculated, the Parties will submit a revised order. Notwithstanding this, the Debtor shall pay the Creditor based on the payment terms set forth in paragraphs 3, 4 and 5 of this Order, with the Loans maturing in month 13 following entry of this Order

(Id. at 2). The Bankruptcy Court never entered a revised Stay Relief Order.

Sometime around September 17, 2019, Ms. Ferry requested an estoppel letter from Bayview for 550 Corey pursuant to Fla. Stat. § 701.04(1). (Doc. # 8-84 at 1). In response, Bayview sent Ms. Ferry an estoppel letter dated September 25, 2019, showing a total payoff amount of $965,242.52 as of October 31, 2019, itemized as follows:

The current Unpaid Principal Balance is:

$645,370.33

Interest through 10/31/2019

$211,074.18

Statement Fees

$100.00

Late Charges/NSF Fees

$1,636.04

Recoverable Fees

$0.00

Prepayment Consideration

N/A

Lockout

$0.00

Release Fees

$250.00

Legal Fees

$0.00

Default Interest

$0.00

Corporate Advances

$444.00

Other funds owed by Borrower

$93,907.20

Loss Draft Balance

$0.00

Unapplied funds owed to Borrower

$0.00

Escrow Shortage and Property Inspection

$12,460.77

Notice Fee Amount

$0.00

**TOTAL AMOUNT DUE TO PAYOFF LOAN IN FULL**

$965,242.52

Interest will accrue at $125.49 per day from 11/1/2019 to the date sufficient funds are received in this office.

(Doc. # 8-65 at 2) (emphasis added) (the “Estoppel Letter”). The second page of the Estoppel Letter contained the following paragraphs:

A. YOU MUST CALL THE NUMBER LISTED BELOW TO UPDATE FIGURES PRIOR TO REMITTING FUNDS, AS FIGURES ARE SUBJECT TO CHANGE WITHOUT NOTICE.
B. Note holder reserves the right to adjust these figures and refuse any funds which are insufficient to pay the loans in full or for any reason, including but not limited to error in calculation of payoff amount, previously dishonored check or money order, or additional disbursements made by this note holder between the date of this payoff statement and receipt of funds.

(Id. at 3). The Estoppel Letter was valid through October 31, 2019. (Id. at 2).

Ms. Ferry entered into a contract to sell 550 Corey for $1.5 million on November 19, 2019. (Doc. # 8-86 at 2). On December 20, 2019, Ms. Ferry filed a motion seeking leave to sell 550 Corey for $1.5 million. (Doc. # 8-62). Ms. Ferry requested permission to sell 550 Corey free and clear of the Loan lien and instead asked that the lien attach to the sale proceeds. (Id. at 2). She stated that the proceeds would be held in trust until the Bankruptcy Court approved its distribution. (Id.). In the motion, she stated that the sale was “fair and equitable.” (Id.). While noting that she disagreed with the amount, Ms. Ferry indicated that Bayview “alleged it held a claim of no less than $1,177,838.42” secured by 550 Corey. (Id.). She did not explain why she disagreed with the amount.

On February 3, 2020, the Bankruptcy Court granted Ms. Ferry's motion to sell 550 Corey. (Doc. # 8-66). The sale order did not declare or limit the amount owed by Ms. Ferry under the Loan. (Id.). It provided that the lien would attach to the sale proceeds, which would be held in trust pending a later determination of entitlement. (Id.).

On February 12, 2020, Ms. Ferry requested an updated estoppel letter from Bayview (Doc. # 8-86 at 3), but she did not receive an updated estoppel letter in response to her request. (Id.). Bayview did provide Ms. Ferry with a loan history summary dated February 13, 2020, for the period of August 15, 2007, through February 10, 2020. (Id. at 2).

On February 28, 2020, Bayview purportedly assigned the Loan to E-Z Cashing. (Doc. # 8-100 at 2). On the same day, Ms. Ferry sold 550 Corey, generating sale proceeds of $1,404,833.20. (Doc. # 8-68 at 2). Ms. Ferry's title agent performed a search prior to closing and did not find an assignment of the Loan to E-Z Cashing. (Doc. # 8-96 at 2).

On March 2, 2020, E-Z Cashing sent Ms. Ferry's counsel a letter indicating that E-Z...

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