Opinion
Case No. 8:11-bk-01854-RCT
2021-07-13
IN RE Suzanne V. FERRY, Debtor.
Jonathan A. Semach, Buddy D. Ford, Buddy D. Ford, P.A., Tampa, FL, for Debtor.
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").
E.g. , Docs. 563 & 622.
In its Order Denying Debtor's Renewed Motion for Summary Judgment, the Court rejected Debtor's contention that § 1141(a) of the Bankruptcy Code 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").
Doc. 622.
11 U.S.C. §§ 101 –1532 ("Code" or "Bankruptcy Code").
These two related questions proceeded to a full day video trial, at which the Court admitted numerous exhibits 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.
The Court admitted, largely pursuant to stipulation (Doc. 632), Debtor's Exhibits ("D Ex(s).") 1, 3–56, & 59 (Docs. 623, 624, 625, 627, & 630) and E-Z's Exhibits ("E-Z Ex(s).") 1–48, 51, & 52 (Docs. 626, 616, & 632).
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 Judgment and its Order Denying Debtor's Renewed Motion for Summary Judgment, and further presumes the parties’ familiarity with the record in this case.
Doc. 563.
Doc. 622.
Findings of Fact
Debtor is an experienced real-estate investor, who has been investing in commercial real estate for approximately fifty years. 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"). Bayview held a note and mortgage secured by the Properties.
First Stipulation of Undisputed Facts and Documents in Connection with Hearing on Entitlement to Certain Real Estate Sale Proceeds (Doc. 616) ("Jnt. Stip.") ¶ 1; Mar. 15, 2021 Trial Tr. ("Tr.") at 142:23–25.
See, e.g. , Jnt. Stip. ¶ 5; D Ex. 1; E-Z Exs. 26 & 28.
Jnt. Stip. ¶ 3.
The Balloon Promissory Note, 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, 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. The mortgage provided:
E-Z Ex. 1.
E-Z Ex. 2.
E-Z Ex. 1 at 2; E-Z Ex. 2 at § 5.12.
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.
E-Z Ex. 2 at § 4.03(a).
Debtor filed her Chapter 11 case on February 1, 2011. At that time, and for some time prior, Debtor was in default of her payment obligations under the Loan.
Jnt. Stip. ¶ 5.
Jnt. Stip. ¶ 4; E-Z Ex. 3.
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. Debtor never objected to Bayview's claim.
Jnt. Stip. ¶ 6; E-Z Ex. 3.
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.
D Ex. 1; E-Z Ex. 4.
Bayview voted to accept the Plan, and the Plan was confirmed in June 2012.
Jnt. Stip. ¶ 7; D Ex. 3; E-Z Ex. 5.
Per the order confirming plan (hereafter, the "Confirmation Order"), 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. 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.
D Ex. 3; E-Z Ex. 5.
Debtor's payment made in September 2012 was returned for insufficient funds. E-Z Ex. 6 at 20.
E-Z Ex. 6; D Ex. 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. 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. 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.
Jnt. Stip. ¶¶ 9–10; D Ex. 4; E-Z Ex. 10.
Jnt. Stip. ¶¶ 12–13; D Ex. 6; E-Z Ex. 13. Mr. Serrano suggested that the sizeable difference in the amount of the default interest reflected in the January 2018 Payoff and June 2018 Payoff may have been due to an internal miscalculation. Mr. Serrano explained that when Bayview provided a payoff letter, default interest had to be separately calculated as its software did not automatically calculate such charges. Tr. at 66:19–68:10; 43:4–16.
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. 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. 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.
Jnt. Stip. ¶ 15; E-Z Ex. 16; see also Doc. 374.
E-Z Ex. 16; D Ex. 60.
E-Z Ex. 16 at 5:1–5; E-Z Ex. 17.
On November 8, 2018, the Court entered an agreed order (the "Agreed Stay Order"), which indicated:
D Ex. 5; E-Z Ex. 18.
• 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.
Jnt. Stip. ¶¶ 17–18.
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. 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.
Tr. at 174:23–175:7; see also Tr. at 154:16–23.
Jnt. Stip. ¶¶ 18–19; E-Z Ex. 6.
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. 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").
E-Z Exs. 20 & 21; see also E-Z Ex. 22.
E-Z Ex. 20.
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"). 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:
D Ex. 10.
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.
D Ex. 10. Both the January 2018 Payoff and June 2018 Payoff contained identical disclaimers. D Exs. 4 & 6.
Regarding the September 2019 Payoff, Mr. Serrano testified that it was not uncommon for Bayview to offer a borrower a temporarily discounted payoff opportunity conditioned upon receipt of payment before a specified date. Mr. Serrano testified that Bayview had, in fact, offered Debtor a temporarily discounted payoff opportunity. Based upon his conversations with Bayview representatives, Mr. Weiser understood the same. As supported by Bayview's internal notes, the September 2019 Payoff's "good through" date was October 31, 2019.
Tr. at 47:15–48:1; 71:16–72:11.
Tr. at 103:11–17; 120:9–21.
E-Z Ex. 21
Shortly after receiving the September 2019 Payoff, Debtor again asked Bayview to approve the sale of 600 Corey Ave. separately from 618 73rd Ave. Again, she was denied. Within days, Debtor contracted to sell 618 73rd Ave.
Id.
Jnt. Stip. ¶ 28.
On October 17, 2019, a mere two weeks before the expiration of September 2019 Payoff, Debtor filed a series of motions before this Court including emergency motions to sell the Properties (the "Sale Motions"). Debtor sought emergency relief on the basis that closings on the Properties were set for October 28, 2019. At an emergency hearing on October 21, the Court granted the Sale Motions on the express condition that the sales be accompanied by the sale of a nearby non-debtor property and that net proceeds, after costs and expenses, from all three sales be escrowed in sufficient amount to fully satisfy the Loan per the September 2019 Payoff and the Apostolov Mortgage. Given the expedited nature of Debtor's request, the Court waived the fourteen-day stay provided under Federal Rule of Bankruptcy Procedure 6004(h). The Court entered its orders authorizing the sales of the Properties on October 25, 2019 (the "Sale Orders").
Jnt. Stip. ¶¶ 33–35; E-Z Exs. 25, 27, & 29; D Exs. 18 & 19.
D Ex. 20; Jnt. Stip. ¶¶ 37 & 39.
Debtor testified that during this period, she had communicated regularly with Bayview's Senior Asset Manager, Paul Petti, who assured her that Bayview would give her additional time beyond October 31, 2019 to close the sales on the Properties if she needed it. However, again, Debtor's testimony on this point was not entirely credible.
Tr. at 149:6–19.
On October 29, 2019, E-Z acquired Bayview's interest in the Loan. That same day, E-Z's counsel emailed Debtor's counsel informing Debtor's counsel that E-Z had purchased the Loan and that E-Z disagreed with the loan balance reflected in the September 2019 Payoff.
Jnt. Stip. ¶ 40.
Jnt. Stip. ¶ 41; E-Z Ex. 33; D Ex. 39.
Mr. Weiser testified that Bayview regularly sent him prospects of underperforming loans that were available for purchase. He worked frequently with Paul Petti, among others. According to Mr. Serrano, Bayview routinely sold its underperforming loans, i.e. , loans for which the borrowers were in default. Pending payoff letters were not considered by Bayview when deciding whether to sell or offer to sell a loan unless Bayview had agreed to waive unpaid principal. Mr. Serrano explained that Bayview did not consider pending payoff letters because the issuance of a payoff does not guarantee that the borrower will, in fact, pay off the loan.
Tr. at 89:13–21; 91:14–21.
Tr. at 52:21–54:25.
Mr. Weiser expressed interest in acquiring the Loan on the Properties several months before the September 2019 Payoff was issued. When first reviewing the Loan for potential purchase, Mr. Weiser examined the note, mortgage, title, and Debtor's performance history on the Loan. Although aware of the bankruptcy, Mr. Weiser was not aware of the September 2019 Payoff before agreeing to purchase the Loan or wiring the loan purchase price.
Tr. at 119:19–24.
Tr. at 91:14–92:17.
Tr. at 141:14–18; 94:3–7; 95:13–21; 96:4–8.
Debtor testified that Bayview never informed her that it was in negotiations to sell the Loan nor that it had sold the Loan. On this point, Debtor's testimony was credible. However, Debtor identifies no obligation on Bayview's part to inform her of a potential sale of the Loan much less negotiations with third parties that might or might not lead to a sale.
Tr. at 149:20–22; 151:15–18.
Regardless of Bayview's failure to notify her of the sale, Debtor learned of E-Z's purchase of the Loan almost immediately through counsel and certainly knew within a few days of the closing of the transaction as she participated in a telephone conference to discuss the parties’ dispute two days thereafter. D Ex. 39; Jnt. Stip. ¶ 43.
On November 4, 2019, the title agent working on the closings of the Properties contacted Mr. Petti at Bayview because she had not received an updated payoff that she had requested a few days prior. Mr. Petti advised that E-Z had been assigned the Loan and that the title agent should contact Mr. Weiser. Later that same day, the title agent sent an email to Mr. Weiser requesting a payoff for the Loan. It is undisputed that E-Z did not provide the title agent with an updated payoff letter for the Loan.
Jnt. Stip. ¶¶ 44, 46–47.
Tr. at 118:17–119:2; 152:19–21.
On November 8, 2019, E-Z timely filed an emergency motion for reconsideration of the Sale Orders (the "Reconsideration Motion"). E-Z alleged that the amount owed on the Loan was at least $1,033,780.31, which included significant additional default interest calculated from entry of the Agreed Stay Order. Over the course of the next ten days, the Court held three hearings on the Reconsideration Motion and a related motion by Debtor to determine the secured status of and to strip the Apostolov Mortgage. Debtor appeared with her counsel at each hearing.
Jnt. Stip. ¶ 49.
E-Z Ex. 38.
Jnt. Stip. ¶¶ 50–52.
E-Z Exs. 40, 42, & 44.
In the end, the parties came to a global agreement whereby the planned sales would generate sufficient proceeds to satisfy the Apostolov Mortgage, the undisputed Loan balance in the September 2019 Payoff, as well as those disputed amounts reflected in the Reconsideration Motion, while also leaving some room for adjustments and reservations by E-Z and some funds for the Debtor. The agreement was memorialized by an agreed order, which was jointly drafted by the parties and entered by the Court on November 22, 2019 (the "Agreed Sale Order").
Debtor claimed, and maintains, that the Apostolov Mortgage was not valid. Tr. at 181:25–182:10; 189:1–4. Nonetheless, Debtor and the Apostolovs agreed to settle the claim for $175,000 to be paid by the purchasers at closing. Debtor's motion to determine the secured status of the Apostolov Mortgage was later withdrawn in advance of a continued hearing as contemplated by the parties’ global agreement. D Ex. 41; Doc. 439.
Jnt. Stip. ¶¶ 53–54; D Ex. 41; E-Z Ex. 45
Through the Agreed Sale Order, the prior Sale Orders were vacated but the sales of the Properties were reauthorized subject to new agreed terms and conditions, including that the "lien rights of E-Z shall automatically attach to the proceeds of the sale[s]." Debtor stipulated that E-Z was owed "at least" $745,603.45, the balance due as reflected in the September 2019 Payoff. The Agreed Sale Order also expressly reserved to E-Z the right "to seek additional loan proceeds on account of its lien rights[.]"
D Ex. 41 ¶ 8.
Id.
Later that same day, Debtor closed on the sale of the Properties. As directed by the Agreed Stay Order, E-Z was paid the stipulated $745,603.45 from the closing proceeds, and after the payment of closing costs and expenses as well as $175,000 to satisfy the Apostolov Mortgage, the balance of the proceeds were placed in trust with Debtor's counsel. Debtor does not claim that the Properties sold for less than their fair market value.
Jnt. Stip. ¶¶ 55, 58, 60.
Jnt. Stip. ¶ 57.
As of February 5, 2021, Debtor's counsel held in trust (a) $518,214.46 in cash and (b) a secured note in the principal amount of $325,000 from the purchaser of 618 73rd Ave., as to which the entire principal remained unpaid.
Jnt. Stip. ¶ 60.
Positions of the Parties
Claiming she relied on the September 2019 Payoff when deciding to proceed with the sale of the Properties, Debtor argues that E-Z should be equitably estopped from asserting a balance due on the Loan in excess of that indicated in the September 2019 Payoff. Debtor, though acknowledging the Reconsideration Motion, asserts that E-Z failed to provide an updated payoff upon request. Debtor further asserts that had she received a payoff showing a higher payoff amount than that in the September 2019 Payoff, she would not have closed on the Properties.
Additionally, Debtor argues that Bayview, into whose shoes E-Z stepped and by whose actions Debtor asserts E-Z is bound, expressly waived its right to collect default interest via the representations of Mr. Petti and the September 2019 Payoff. Debtor adds that E-Z also impliedly waived any right to default interest by failing to provide an updated payoff letter to replace the September 2019 Payoff, which did not include default interest.
Noting the high burden of proof required, E-Z argues that Debtor has failed to establish all the elements necessary for her equitable estoppel claim. Among other points, E-Z asserts Debtor failed to show that her reliance upon the September 2019 Payoff was reasonable and that she suffered any "legally recognizable harm" based upon her alleged reliance.
As to waiver, E-Z argues, in the first instance, that the anti-modification and anti-waiver provisions of the mortgage are fatal to Debtor's position as a matter of law. But even if that were not the case, E-Z asserts that Debtor failed to demonstrate "unequivocal" conduct by either Bayview or E-Z that evidenced the intent to permanently waive default interest.
Conclusions of Law
While similar and often seen as related, the doctrines of waiver and estoppel are distinct under Florida law. Waiver is premised upon the tenet that "[a] party may waive any right to which he is legally entitled, whether secured by contract, conferred by statute, or guaranteed by the Constitution." Estoppel, on the other hand, "is an equitable doctrine which prevents a party from raising a claim or taking a legal position when his conduct with regard to that claim is contrary to his position." The former requires a court to examine the conduct of only one party while the latter requires examination of the conduct of both. Further, while "[e]stoppel frequently carries the implication of fraud, ... waiver never does."
See DK Arena, Inc. v. EB Acquisitions I, LLC , 112 So. 3d 85, 97–98 (Fla. 2013) ; see also Dooley v. Weil (In re Garfinkle) , 672 F.2d 1340, 1346–47 (11th Cir. 1982).
DK Arena, Inc. , 112 So. 3d at 97 (quoting Gilman v. Butzloff , 155 Fla. 888, 22 So. 2d 263, 265 (1945) ).
In re Garfinkle , 672 F.2d at 1346–47.
DK Arena, Inc. , 112 So. 3d at 98 (quoting 22 Fla. Jur.2d, Estoppel and Waiver § 31 ).
1. Waiver
Waiver is succinctly described as the "intentional relinquishment of a known right." "Waiver requires (1) the existence at the time of the waiver a right, privilege, advantage, or benefit which may be waived; (2) the actual or constructive knowledge thereof; and (3) an intent to relinquish such right, privilege, advantage, or benefit."
In re Garfinkle , 672 F.2d at 1347 ; see, e.g. Fireman's Fund Ins. Co. v. Vogel , 195 So. 2d 20, 24 (Fla. Dist. Ct. App. 1967).
In re Garfinkle , 672 F.2d at 1347.
A waiver may be either express or implied and when implied, the conduct or circumstances that give rise to the waiver "must make out a clear case." A party's intent to waive its rights must be shown through "unequivocal acts" and may not be "inferred from doubtful and ambiguous [circumstances]." Further, a party's waiver, even when found, is not necessarily permanent.
Id. (citing Fireman's Fund , 195 So. 2d at 24 ); see, e.g. , Woods v. Christensen Shipyards, Ltd. , No. 04-61432-CIV, 2005 WL 5654643, at *2 (S.D. Fla. Sept. 23, 2005).
Woods , 2005 WL 5654643, at *2 ; see Fireman's Fund , 195 So. 2d at 24.
See BMC Indus., Inc. v. Barth Indus., Inc. , 160 F.3d 1322, 1334 (11th Cir. 1998) ("[W]hile a party that has agreed to a contract modification cannot cancel the modification without giving consideration for the cancellation, a party may unilaterally retract its waiver of a contract term provided it gives reasonable notice."); see also Exim Brickell, LLC v. Bariven, S.A., No. 09-cv-20915-GOLD, 2011 WL 13131263, at *42 (S.D. Fla. Aug. 16, 2011) (discussing retraction of a waiver under the UCC); Ingram v. Pfizer, Inc ., No. 6:09-cv-1134-Orl-35-GJK, 2010 WL 11626709, at *2 (M.D. Fla. June 29, 2010) (addressing a plaintiff's "belated attempt to retract" a waiver to jury trial); see generally 13 WILLISTON ON CONTRACTS § 39:20 (4th ed. 1993) (discussing retraction of a waiver).
Here, the Court finds no express waiver of default interest by either Bayview or E-Z. Debtor directs the Court to the Agreed Stay Order and the September 2019 Payoff, but neither is an express waiver of the right to collect default interest.
The Agreed Stay Order indicated a total indebtedness taken from the June 2018 Payoff which clearly reflected default interest. And though the order contained a footnote indicating negotiations were ongoing, the footnote is silent as to the focus of those negotiations, and the evidence reflects that those negotiations were focused upon forced placed insurance charges that Debtor disputed. Certainly, the willingness on Bayview's part to discuss the total indebtedness as a general matter cannot be an express waiver of the right to collect default interest.
So too, the September 2019 Payoff is not an express, blanket waiver of the right to collect default interest. Rather, it contained express disclaimers indicating, among others, that Bayview reserved the right to adjust the payoff "for any reason, including but not limited to error in calculation of payoff amount[.]" And, as explained by Mr. Serrano and corroborated by the Loan notes, the September 2019 Payoff was a temporary, conditional waiver of default interest should Debtor close on the Properties by the "good through" date. Debtor did not satisfy the condition.
D Ex. 10.
Debtor also cites as an express waiver the oral representation of Mr. Petti that she would be provided additional time to close on the Properties after October 31, 2019 if such time was needed. However, as previously indicated, Debtor's testimony on this point was not credible.
As to an implied waiver of default interest, Debtor relies on these same facts together with Bayview's and E-Z's election of remedies, namely allowing Debtor to sell the Properties rather than proceed in foreclosure. But this argument is unavailing. Debtor points to no requirement in the Loan documents, and the Court finds none, that to collect default interest Bayview or E-Z were required to elect a specific remedy or formally declare a default. And while it is true that unlike the January 2018 Payoff and June 2018 Payoff, the September 2019 Payoff did not reflect the accrual of default interest, in light of Mr. Serrano's testimony and the express disclaimers, this fact does not make out the "clear case" that is required for the Court to find an implied waiver.
Debtor's arguments as to the default provision of the Agreed Stay Order are equally unavailing. The provision simply provided that should Bayview notify Debtor of a payment default and that default remain uncured after 72 hours, Bayview could obtain relief from the automatic stay without need for further hearing.
Last, as to E-Z's own actions, there can be little doubt that its conduct does not unequivocally and unambiguously imply a waiver. At all relevant times, beginning with E-Z's counsel email "disavowing" the September 2019 Payoff, E-Z has maintained its right to collect default interest. Nonetheless, Debtor points to E-Z's failure to provide the title agent an updated payoff as evidence of an implied waiver. But this single omission, when viewed in the larger context, does not establish an "unequivocal act[ ]" of waiver.
Given its findings, the Court need not decide whether the anti-waiver provision of the mortgage on the Properties forecloses Debtor's position as a matter of law.
To the extent E-Z argues that the mere inclusion of an anti-waiver provision in a mortgage, regardless of its language, bars a finding a waiver, it is mistaken. See, e.g. , In re S & I Invs. , 421 B.R. 569, 581 (Bankr. S.D. Fla. 2009) ("[A]nti-waiver provisions can be enforceable and have been upheld by Florida courts. However, such recognition is not without limitation. An examination of the specific language contained in the particular anti-waiver provision is required." (citations omitted)).
In sum, the Court concludes that neither Bayview nor E-Z waived, either in whole or part, the right to claim default interest.
2. Estoppel
Estoppel is an equitable doctrine premised upon "principles of fair play and essential justice" and applies " ‘where one, by word, act or conduct, willfully cause[s] another to believe in the existence of a certain state of things, and thereby induces him to act on this belief injuriously to himself, or to alter his own previous condition to his injury’ " As the Court has previously stated, under Florida law, "[i]n order to demonstrate equitable estoppel, the following elements must be shown: 1) a representation as to a material fact that is contrary to a later-asserted position; 2) reliance on that representation; and 3) a change in position detrimental to the party claiming estoppel, caused by the representation and reliance thereon." A party claiming equitable estoppel generally must prove the elements of estoppel by clear and convincing evidence.
Fla. Dep't of Health & Rehab. Servs. v. S.A.P. , 835 So. 2d 1091, 1096–97 (Fla. 2002) (quoting State ex rel. Watson v. Gray , 48 So. 2d 84, 88 (Fla. 1950) ).
State Dep't of Revenue v. Anderson , 403 So. 2d 397, 400 (Fla. 1981).
Watson Clinic, LLP v. Verzosa , 816 So. 2d 832, 834 (Fla. Dist. Ct. App. 2002) ; Castro v. East Pass Enters., Inc. , 881 So. 2d 699, 700 (Fla. Dist. Ct. App. 2004).
Debtor premises her equitable estoppel claim on the September 2019 Payoff, upon which she alleges she reasonably relied to her detriment. Debtor asserts that the payoff amount did not include any default interest and further that the payoff did not include any language that would have put her on notice that default interest might be included in the calculation after October 31, 2019. While the former is true, the latter is not. The September 2019 Payoff contained an express declaimer indicating the payoff figure was "subject to change" and that Debtor needed to contact Bayview to update the figure in advance of closing. And while the Court might take issue as to whether the September 2019 Payoff constitutes the requisite representation of material fact contrary to a later asserted position given E-Z's retraction in advance of the closing, the Court declines to address this issue as it finds that Debtor has failed to establish the remaining two elements of her estoppel claim.
First, Debtor purported reliance on the September 2019 Payoff was not reasonable. Debtor is an experienced commercial real estate investor, who, at the time she commenced this case, had a significant portfolio of investment properties. Debtor should have been well attuned to the issue of default interest and the practices of secured creditors generally and, given the number of loans in default, Bayview's practices specifically. The evidence, including Bayview's claim, the January 2018 Payoff, and the June 2018 Payoff, reflects that until the September 2019 Payoff, Bayview had maintained its claim for default interest, which should have suggested that, as Mr. Serrano attested, the September 2019 Payoff was a temporary, conditional waiver of default interest.
Debtor's testimony that Mr. Petti assured her that Bayview would work with her and honor the reduced payoff even after October 31 was not credible. But even so, Debtor, as an experienced investor, should have known the inherent risks involved in relying on such an oral representation. Given her experience, the express disclaimers contained in the payoff, her payment history relative to the Loan, and her failure to close on the Properties by the "good through" date, Debtor's reliance on the September 2019 Payoff cannot be said to be reasonable.
Debtor also testified that she relied upon the September 2019 Payoff in part due to the monthly billing statements she received which did not reflect default interest. Tr. at 157: 25–158:6. But, the monthly billing statements, e.g. , D Ex. 31, like the payoffs themselves contain an important disclaimer:
This is your Principal Balance only, not the amount required to pay your loan in full. Please contact Customer Service for your exact payoff balance in the event you are in default or foreclosure, you must contact 1.800.457.5105 for payoff information.
Accordingly, the billing statements do not support Debtor's position.
Cf. Regions Bank v. The 62’ Ocean Sport Fish , No. 13-20966-CIV, 2014 WL 4055707, at *11 (S.D. Fla. Aug. 14, 2014) (concluding that a borrower's estoppel defense failed because his reliance on the oral assurances of a bank officer was unreasonable as a matter of law given language in the loan documents requiring that modifications be memorialized in writing).
Debtor also notes that the Loan history she received from Bayview is consistent with the September 2019 Payoff, thus supporting her contention that her reliance was reasonable. But Debtor did not receive the Loan history until May 2020, six months after the closing. Thus, it could not have informed her decision whether to proceed with the closing on the Properties.
But there is more. On the very day that the Loan was assigned to E-Z, E-Z disavowed the September 2019 Payoff, exercising the right reserved to it, as the note holder, in the payoff. Debtor participated in discussions with E-Z regarding the payoff dispute as early as October 31. E-Z timely moved for reconsideration of the Sale Orders, which had incorporated the September 2019 Payoff amount, and Debtor personally attended three hearings on E-Z's motion, in which E-Z argued the payoff was in error and advanced its entitlement to collect default interest. And last, Debtor entered into an agreement, embodied in the Agreed Sale Order, whereby she acknowledged that E-Z was owed "at least" the amount in the September 2019 Payoff and agreed that E-Z would be allowed to seek additional loan proceeds based upon its lien rights. Debtor's testimony that she was unaware of E-Z's claim to default interest prior to the closing strains credulity.
Tr. at 191:3–194:7.
Second, Debtor failed to establish that she relied to her detriment on the September 2019 Payoff in deciding to proceed with the closing. Debtor does not contend that she sold the Properties at less than fair market value nor at a reduced price to meet the terms of the revised maturity date arising from the Agreed Stay Order. Debtor very well might not have elected to proceed with the sale of the Properties had she known of the increased payoff amount. But that standing alone does not show clear and convincing evidence of detrimental reliance, particularly given that it is likely that upon the maturity of the Loan, less than one month later, E-Z would have sought relief from the stay to foreclose. By proceeding with the sale pursuant to the Agreed Sale Order, Debtor remained, to some degree, in control of her destiny and maintained the possibility that she might retain some of the sale proceeds. The fact that Debtor ultimately may not receive the amount of proceeds to which she believed she is entitled does not constitute detrimental reliance.
Cf. Watson Clinic, 816 So. 2d at 835 ("No detrimental change in position can occur where the only claimed harm is the inability to retain money that should never have been received in the first place.").
Insofar as Debtor also asserts that by relying on the September 2019 Payoff and proceeding to close, she was exposed to ongoing litigation and the related attorney's fees, the assertion misses the mark. True, the litigation in this Court between the parties has been both protracted and costly. But that litigation was by no means certain at the time of the closing. At the final hearing on the Reconsideration Motion, Debtor's counsel announced that the parties hoped to resolve their dispute quickly and suggested they might do so without further involvement of the Court.
E-Z Ex. 44.
For that matter, based upon the steadfast positions the parties have taken relative to this matter, the Court believes that it is almost certain that a near equal amount of litigation would have ensued had Debtor failed to close and thereby been in default of the revised maturity date in the Agreed Stay Order. Not only might there have been extended litigation before this Court on a motion for reconsideration of any order granting E-Z relief from the stay but also before the state court on the inevitable foreclosure proceeding. Suffice it to say, the Court does not find that the increased litigation costs here were a detriment caused by Debtor's reliance on the September 2019 Payoff and her decision to close on the Properties.
Debtor's reliance on those cases in which a court found an estoppel where the party to be estopped had both a duty and an opportunity to speak but failed to do so is misplaced. Without doubt, a party's silence in such circumstances may be a "representation" upon which an estoppel might be based. But E-Z was not silent here. Even still, "in Florida, a lender's failure to provide an accurate estoppel letter does not [necessarily] excuse the promisor's contractual obligation to pay interest due under the note."
See, e.g. , In re Garfinkle , 672 F.2d at 1347.
Branch Banking & Trust Co. v. Kraz, LLC (In re Kraz, LLC) , 626 B.R. 432, 439 (M.D. Fla. 2020) (citing Eckert Realty Corp. v. Eckert , 941 So. 2d 426 (Fla. Dist. Ct. App. 2006) ).
For these reasons, the Court concludes that E-Z is not equitably estopped from asserting amounts different than those set forth in the September 2019 Payoff.
3. Disbursement of Sale Proceeds Due E-Z
Having determined that neither estoppel nor waiver is a bar to E-Z's collection of default interest, the Court must determine the amount of the distribution due E-Z from the sale proceeds currently in trust with Debtor's counsel. E-Z claims that it is owed $409,532.47 in default interest as of the trial with additional default interest accruing at $163.44 per day along with yet to be determined attorney's fees and costs. Debtor takes the position that E-Z is not entitled to any additional distributions but asserts that should the Court find E-Z is so entitled, at best, E-Z is owed $52,478.98. For ease, the Court mirrors E-Z's analysis using three time-segments, which are roughly defined by reference to entry of the Agreed Stay Order and the closing on the Properties.
For the first segment, E-Z proposes to use the period from March 13, 2013, the date Bayview first provided a default notice to Debtor post-confirmation, through June 29, 2018, the "good through" date as reflected in the June 2018 Payoff from which the tentative loan balance figure was drawn for the Agreed Stay Order. For this period, E-Z calculates it is owed $279,767.67 in default interest. E-Z calculates this figure using an 11% annual default interest premium and $480,000.00 as the principal balance, the agreed value for the Properties provided in the Confirmation Order. Unsurprisingly given her arguments, Debtor does not address the accrual of default interest during this segment.
E-Z voluntarily agreed at trial to reduce the length of time in the first segment, which otherwise could have run from Debtor's initial default under the Confirmation Order to the date of entry of the Agreed Stay Order. Tr. 123:12–124:17; 126:14–18, 127:19–128:12; 129:9–25. The Court finds E-Z's voluntary reduction in the length of this segment reasonable and adopts the same.
This premium represents the difference between the 7% base interest rate, which was provided for in the Confirmation Order, and the 18% default interest rate.
(($480,000.00 [principal] x .11[default interest premium]) / 365 days) x 1,934 days = $279,767.67.
The Court calculates the amount of default interest owed to E-Z for the first segment to be $272,613.61. The Court's calculation differs due to an adjustment to the principal balance. To align with the dates defining this period and to account for payments that Debtor made during this segment, the Court has averaged the principal balance as reflected on the Loan history for March 13, 2013 and the principal balance as reflected on the June 2018 Payoff.
(($467,725.71 [est. principal] x .11[default interest premium]) / 365 days) x 1,934 days = $272,613.61.
($472,691.57 [as of 3/13/13] + $462,759.84 [as of 6/29/18]) / 2 = $467,725.71. E-Z Ex. 6 at 18; E-Z Ex. 13.
For the second segment, E-Z proposes to use the period from November 30, 2018, Debtor's first default under the Agreed Stay Order, and November 22, 2019, the date of the closing on the Properties. For this period, E-Z calculates it is owed $51,498.08 in default interest. Again, E-Z calculates this figure using an 11% annual default interest premium and $480,000.00 as the principal balance. Debtor calculates a nearly identical figure of $52,478.98. Debtor's calculation also uses an 11% annual default interest premium but instead uses $458,249.47 as the principal balance, taken from the September 2019 Payoff, and a slightly longer period beginning with the date of entry of the Agreed Stay Order.
(($480,000.00 [principal] x .11[default interest premium]) / 365 days) x 356 days = $51,498.08. E-Z's calculation is short by one day.
The Court calculates the amount of default interest owed to E-Z for the second segment to be $49,505.40. Again, the Court's calculation differs due to an adjustment to the principal balance. To align with the dates defining this period and to account for payments that Debtor made during this segment, the Court has averaged the principal balance as reflected on the Loan history for November 30, 2018 and the principal balance as reflected on the September 2019 Payoff.
(($460,134.23 [est. principal] x .11[default interest premium]) / 365 days) x 357 days = $49,505.40.
A precise principal balance as of Nov. 30, 2018 in not indicated in the Loan history. However, the balance did not change from Aug. 30, 2018 until Feb. 27, 2019. Accordingly, the Court uses the balance as reflected as of Nov. 14, 2018, the last entry before the date of default. E-Z Ex. 6 at 3–4.
($462,019.00 [as of 11/14/18] + $458,249.47 [as of 10/31/19]) / 2 = $460,134.23. E-Z Ex. 6 at 3; D's Ex. 10.
For the third and final segment, E-Z proposes a period beginning the day after the closing on the Properties and continuing until it is paid-in-full. For this period, E-Z calculates it is owed $78,122.06 in default interest as of the date of trial, with additional interest accruing at a rate of $163.44 per day. Unsurprisingly given her arguments, Debtor does not address the accrual of default interest during this segment.
The Court concludes that no default interest is owed to E-Z for this third and final segment. Nor, for that matter, is E-Z entitled to basic interest for this period. To begin, having complied with the terms of the Agreed Sale Order, Debtor is no longer in default on the Loan or prior orders of this Court. Per the parties’ agreement, the sale of the Properties would generate sufficient proceeds to satisfy the Apostolov Mortgage, the undisputed Loan balance in the September 2019 Payoff and those additional disputed amounts, i.e. , default interest, as reflected in the Reconsideration Motion subject to certain reservations. Debtor closed on the sales, E-Z received at closing the undisputed Loan balance, and Debtor placed in trust, as agreed, the balance of the proceeds after payment of closing costs and funds sufficient to satisfy the Apostolov Mortgage.
Notably, E-Z has not identified any specific default on Debtor's part other than the failure to turnover those disputed sums held in trust. But E-Z was a party to the agreement which contemplated the subsequent resolution of the open issues and provided, as adequate protection, a replacement lien upon the proceeds held in trust. The Agreed Sale Order does not provide for any specific time frame in which or mechanism by which Debtor and E-Z were to resolve their dispute. Furthermore, the order does not provide for the accrual of additional interest.
The parties had contemplated a resolution either by trial or meditation on the disputed issue of the amounts due E-Z occurring within about 90 days of the closing, E-Z Ex. 42, but no trial was requested. The Court is unaware if the matter went to mediation. E-Z Ex. 44.
As the Court understood the matter, further distributions to E-Z, if any, would be attributable either to (a) unpaid default interest through the date of the closing or (b) additional charges and expenses unaccounted for on the September 2019 Payoff including E-Z's reasonable attorney's fees and costs. It is undisputed that the funds tendered at closing were sufficient to satisfy the outstanding principal balance of the Loan. E-Z has articulated no basis upon which it is entitled to interest upon interest, must less default interest upon default interest. While E-Z preserved its right to a determination of its reasonable attorney's fees and costs, E-Z has not presented evidence of any other mortgage related charges or expenses unaccounted for on the September 2019 Payoff.
Per the note, default interest would accrue based on the principal balance of the Loan. E-Z Ex. 1 ("While in default, ... the principal of this Note shall bear interest at a rate equal to the maximum rate permissible under Florida Law ...." (emphasis added)). The Mortgage incorporated the Note. E-Z Ex. 2.
Tr. 132:8–10.
In sum, the Court finds that as an additional distribution, E-Z is owed $322,119.01 in default interest and a yet to be determined amount of reasonable attorney's fees and costs incurred.
For these reasons, it is
ORDERED AND ADJUDGED:
1. Because of its rights under the terms of the Loan as incorporated into the Confirmation Order, E-Z Cashing LLC is entitled to and is owed $322,119.01 in default interest.
2. Within twenty-one (21) days of entry of this Order, Debtor's counsel shall disburse to E-Z from the sale proceeds held in his trust account the sum of $322,119.01.
3. Within twenty-one (21) days of entry of this Order, counsel for E-Z shall prepare and file an appropriate attorney's fee affidavit, including detailed time records, setting for his fees and costs claimed incurred in pursuit of this matter. Thereafter, Debtor shall have
twenty-one (21) days to object to the claimed fees and costs. Although a hearing is not anticipated, the Court reserves the right to set a hearing upon review of the parties’ papers.
Service of the Order other than by CM/ECF is not required. Local Rule 9013-3(b).
ORDERED.