Hammond v. Kingsley Asset Management, LLC , 2014 Fla. App. LEXIS 12414 ( 2014 )

FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
VIRGINIA HAMMOND a/k/a VIRGINIA )
HAMMOND KHAN, )
)
Appellant, )
)
v. ) Case Nos. 2D13-4425
) 2D13-4522
KINGSLEY ASSET MANAGEMENT, LLC, )
a limited liability company; NABEL )
MUHANNA, M.D., an individual; S.H.I. ) CONSOLIDATED
HOLDINGS, LLC; KIRAN SHAILENDRA, )
an individual; RAHIM SABADIA, as )
cotrustee of the Sabadia Family Trust; )
I.A. KHAN; PHANI R. TUMMALA; )
MILLENIUM PARTNERS, LLC, a Georgia )
limited liability company; and KING )
ENGINEERING ASSOCIATES, INC., a )
Florida corporation, )
)
Appellees. )
)
Opinion filed August 13, 2014.
Appeals pursuant to Fla. R. App. P. 9.130
from the Circuit Court for Pasco County;
William H. Burgess, III, Judge.
Virginia Hammond, pro se.
Luis Martinez-Monfort, Amanda M. Uliano,
and Keith W. Meehan of Gardner Brewer
Martinez-Monfort, P.A., Tampa, for
Appellee Kingsley Asset Management,
LLC.
E.A. "Seth" Mills, Jr., and Adam Denver
Griffin of Mills Paskert Divers, P.A., Tampa,
for Appellees Millenium Partners, LLC, and
I.A. Khan.
No appearance for remaining Appellees.
DAVIS, Chief Judge.
In these consolidated appeals, Virginia Hammond, pro se, challenges the
trial court's nonfinal orders denying her motion to dissolve a writ of garnishment entered
against her and granting the garnishee's motion to deposit funds into the registry of the
court. Because Kingsley Asset Management has not obtained a deficiency judgment in
the underlying foreclosure proceeding, we reverse.
Kingsley brought a three-count action against Hammond and five other
named defendants. Count one of the complaint was for foreclosure of a mortgage on a
piece of commercial property in Pasco County and specifically sought a foreclosure sale
and, "if the proceeds of the sale are insufficient to Plaintiff's claim, a Deficiency
Judgment against Defendant." Count two was an action for damages on the promissory
note. And count three alleged damages stemming from the guaranty agreements the
defendants each signed.
Following a bench trial, the trial court entered a final judgment of
foreclosure against Hammond in the amount of $13,953,990.32.1 That judgment
specifically stated that the clerk was not to set the matter for a foreclosure sale until
1
Based on the terms of the note, Hammond and her coinvestors were
jointly and severally liable on the mortgage debt.
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written application for such was made by Kingsley. On the breach of promissory note
alleged in count two, the trial court entered a separate final judgment against Hammond
in the same amount identified in the foreclosure judgment. This order specifically
stated, "[L]et execution issue." Both of these orders were entered on the same day and
in the same circuit court case number.
Kingsley subsequently applied for a foreclosure sale, and that sale was
held May 22, 2013. Hammond's 15.75% interest in the property was sold at public
auction to Kingsley for a credit bid of $1100. Kingsley did not seek a deficiency
judgment below, and based on the record before us, none has been entered.
At the same time that the underlying cause was progressing below,
Hammond and her ex-husband Ishtiaq Khan, who holds an interest in Kingsley, were
engaging in binding arbitration in Georgia to settle postdissolution disputes arising from
the terms of their divorce settlement. Following that arbitration, the Georgia arbitrator
directed Khan to pay Hammond the lump sum of $1,164,595.
Subsequent to entry of that award, Kingsley filed its "Notice to Defendant
of Service of Writ of Garnishment" and a motion for writ of garnishment naming Khan as
the garnishee and seeking a response from Khan as to whether he was indebted to
Hammond. The writ of garnishment was issued the same day. Khan then filed his
answer, stating that he was indebted to Hammond in the amount of $1,164,595, and his
motion to deposit those funds into the registry of the court. The trial court granted
Khan's motion after an evidentiary hearing. Hammond then moved to dissolve the writ
of garnishment, but the trial court denied the motion after evidentiary hearing.
Hammond now challenges these two orders of the trial court.
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On appeal, Hammond first argues that the trial court erred in issuing the
writ of garnishment in Kingsley's favor because Kingsley never obtained a deficiency
judgment in the foreclosure proceedings. We agree.
Initially, we note that Kingsley is correct that it has the right to pursue both
a claim for foreclosure of the mortgage and a claim for damages on the note. "It has
long been the common law that, to collect money owed on a note, a mortgagee may
pursue its legal and equitable remedies simultaneously, until the debt is satisfied."
Royal Palm Corp. Ctr. Ass'n v. PNC Bank, NA, 89 So. 3d 923, 929 (Fla. 4th DCA 2012).
"[T]he reason that an action at law on a note may be pursued simultaneously with the
equitable remedy of foreclosure is that the two remedies are not inconsistent." Id. at
932.
However, Kingsley cannot rely on Royal Palm to support its conclusion
that it need not obtain a deficiency judgment in the instant case. Although Royal Palm
and the instant case share some factual similarities, the posture of the Royal Palm case
is different than that presented here.
Royal Palm is similar to the instant case in that the plaintiff filed a
multicount complaint seeking both to foreclose the mortgage and to receive damages
for breach of the note. The trial court found in favor of the plaintiff on both counts and
did not set a sale of the mortgaged property, withholding the sale pending application by
the plaintiff. On the damages count, the trial court in Royal Palm ordered the defendant
to pay the designated amount, stating "for which let execution issue." So, similar to the
instant case, the damages judgment in Royal Palm was final and collectible, but the
foreclosure judgment was not "collectible" until the plaintiff requested a foreclosure sale.
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It is at that point in Royal Palm that the defendant appealed, arguing that such was an
improper procedure for the trial court. Accordingly, the only questions before the Fourth
District in Royal Palm were whether the plaintiff could pursue both the equitable and
legal remedy simultaneously and whether the trial court could rule on both issues. The
Fourth District answered both those questions affirmatively because there was no
danger of double recovery.
In the instant case, however, the final judgments for damages and
foreclosure are not before us. Rather, the issue before us is whether, now that Kingsley
has sought and obtained a foreclosure sale of the property, it can collect purely on the
money judgment without first obtaining a deficiency judgment. We conclude that it
cannot.
This case is analogous to Century Group, Inc. v. Premier Financial
Services East, L.P., 724 So. 2d 661, 662 (Fla. 2d DCA 1999), in which "[t]he question
this court face[d] [wa]s the effect on a collection action if the party attempts to execute
on a promissory note following a foreclosure sale rather than pursue the deficiency
amount in a deficiency judgment hearing." In addressing that issue, this court stated:
It is axiomatic that a party can only recover
once on the same debt. Thus, if Premier had pursued
execution of the money judgment and recovered the
entire judgment amount, then it could not pursue
execution of the foreclosure judgment. If Premier
pursued foreclosure, and the sale amounts satisfied
the judgment, then Premier could not pursue its
judgment on the note. Complications arise, however,
if the proceeds resulting from the initial collection
method, execution on the note or foreclosure, do not
satisfy the entire debt. In that circumstance, a party is
required to pursue another method of collection to
obtain the entire amount of the judgment.
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Id. at 662 (citation omitted). This court further noted that "[a]lthough a party may pursue
both a foreclosure action and an execution on note, typically a party will follow a
foreclosure sale by initiating a deficiency hearing to obtain a deficiency judgment." Id.
This court reversed, concluding that
Premier is attempting to execute on the promissory
note to obtain the difference between the foreclosure
sale amount and the amount of the judgment.
Premier's collection efforts have the potential to result
in an inequity. By executing on a promissory note
and then setting-off the amount recovered at
foreclosure, Premier avoids a hearing on the amount
of deficiency between the foreclosure sale amount
and the judgment amount pursuant to section 702.06,
Florida Statutes.
Id.; see also Flagship Bank v. Bryan, 384 So. 2d 1323, 1324 n.3 (Fla. 5th DCA 1980)
("[T]he indebtedness can be collected only once, and any payment on any of the
judgments must be credited to the others.").
The same is true here. To avoid the possibility of a double recovery,
before Kingsley can execute on the promissory note, the trial court must conduct a
deficiency hearing to determine the amount of set-off from the foreclosure sale.2 We
therefore reverse the trial court's order denying the motion to set aside the writ of
garnishment. Accordingly, we must also reverse the trial court's order granting the
garnishee's motion to place funds in the registry of the court pursuant to the writ of
2
We also note that because Hammond is jointly and severally liable here,
a deficiency hearing will allow the court to determine if Kingsley has collected on the
debt from any of the other defendants.
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garnishment.3 We remand with instructions to grant Hammond's motion to dissolve the
writ of garnishment and for further proceedings consistent with this opinion.
Reversed and remanded.
KELLY and LaROSE, JJ., Concur.
3
Although on appeal both parties raise arguments as to whom the funds
should then be dispersed, that issue has yet to be considered by the trial court and
therefore is not before us.
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