Lehman Brothers Holdings Inc. v. B. G. Phillips

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 13-14782
Non-Argument Calendar
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D.C. Docket No. 3:12-cv-00154-RV-CJK
LEHMAN BROTHERS HOLDINGS INC,
Plaintiff-Appellant,
versus
B G PHILLIPS,
a.k.a. Barbara Gayle Phillips,
TRISTATE APPRAISERS, LLC,
Defendants-Appellees.
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Appeal from the United States District Court
for the Northern District of Florida
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(June 23, 2014)
Before HULL, MARCUS and KRAVITCH, Circuit Judges.
PER CURIAM:
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In this appeal, we must determine whether the district court properly found
that Lehman Brothers Holdings Inc. (LBHI)’s negligence action was barred by the
statute of limitations. Because we conclude the complaint was untimely, we
affirm.
I.
In March 2006, Barbara Phillips conducted an appraisal of real property in
Panama City, Florida. This appraisal, valuing the property at $1.2 million, was
then used to secure two mortgage loans – the first in the amount of $960,000 and
the second in the amount of $120,000. These two loans were then sold on the
secondary market to Lehman Brothers Bank, a subsidiary of LBHI, and then to
LBHI in May 2006. LBHI, in turn, sold the first mortgage to SASCO and the
second mortgage to CitiMortgage.
On July 12, 2007, CitiMortgage contacted LBHI and demanded it
repurchase the loan, per the terms of an agreement between the two companies,
after CitiMortgage discovered a misrepresentation of the owners’ debt. Thereafter,
on September 11 and October 24, 2007, Aurora Loan Services (ALS), one of
LBHI’s subsidiaries, conducted two internal appraisal reviews. In each review,
ALS determined that the property was overvalued and was actually worth about
$750,000. LBHI repurchased the second mortgage on November 7, 2007, and the
first mortgage on December 19, 2007. On February 28, 2008, ALS prepared an
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Equity Analysis, which valued the property at $ 625,000. LBHI ultimately wrote
off the second mortgage as a total loss. It sold the first mortgage on May 30, 2008,
for $364,765.14.
On March 30, 2012, LBHI filed a three-count complaint alleging negligence,
negligent misrepresentation, and negligence per se against Phillips and Tristate
Appraisers, LLC (collectively Phillips), in connection with the alleged
misrepresentation in the value of the property. 1 Phillips moved for summary
judgment on the ground that the complaint was barred by Florida’s four-year
statute of limitations, Fla. Stat. § 95.11(3). 2 According to Phillips, even though the
specific amount of damages was unknown at the time, LBHI had notice of the right
of action no later than December 19, 2007, the date on which it repurchased the
first mortgage, more than four years before it filed the complaint.
The district court granted summary judgment, finding that the four-year
statute of limitations began to run no later than December 19, 2007, when LBHI
repurchased the first mortgage, because it would have been aware of the alleged
misrepresentation by that date. The court explained that under Florida law, the
“discovery rule” applied, and the limitations period began when the injury was
sustained. The court further explained that, even though the amount of damages
1
The district court had jurisdiction over this diversity action under 28 U.S.C. § 1332.
2
Phillips also argued that LBHI’s claims failed because it could not show that it relied on the
alleged misrepresentation. The district court did not address this issue because it found the
statute of limitations argument persuasive.
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was uncertain until LBHI resold the loan at a loss, there was an injury in the loss of
the time value of money as of December 19, 2007. LBHI now appeals.
II.
We review de novo the district court’s grant of summary judgment.
Robinson v. Tyson Foods, Inc., 595 F.3d 1269, 1273 (11th Cir. 2010). Summary
judgment is proper “if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). “We draw all factual inferences in a light most favorable to the
nonmoving party.” Shiver v. Chertoff, 549 F.3d 1342, 1343 (11th Cir. 2008). In a
diversity action such as this, we apply the state’s substantive law. Sierminski v.
Transouth Fin. Corp., 216 F.3d 945, 950 (11th Cir. 2000). We review the district
court’s interpretation of state law in a diversity case de novo. Jones v. United
Space Alliance, L.L.C., 494 F.3d 1306, 1309 (11th Cir. 2007).
III.
LBHI argues that the district court erred by concluding that the limitations
period began to run no later than the date on which it repurchased the first
mortgage. It contends that no Florida court has addressed the damages issue when
the claim involved negligent real estate appraisals. Turning to case law from other
jurisdictions, LBHI asserts that the limitations period should begin when the
amount of damage is known, that is, when LBHI actually sustained the financial
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loss by selling the loan, because prior to that date any amount of damage was
speculative. Finally, LBHI contends that the district court’s reasoning creates bad
public policy by requiring parties to sue based on speculative damages that may
never materialize.
Under Florida law, the statute of limitations for negligence actions is four
years. See Fla. Stat. § 95.11(3). “A cause of action accrues when the last element
constituting the cause of action occurs.” Id. § 95.031(1). The last element of a
cause of action based on negligence is actual loss or damage. Clay Elec. Coop.,
Inc. v. Johnson, 873 So. 2d 1182, 1185 (Fla. 2003). Although “the mere possibility
of damage at a later date” is insufficient to commence the limitations period, once
damage occurs, the fact that the exact amount of damages is uncertain will not stop
the limitations clock from running. Kellermeyer v. Miller, 427 So. 2d 343, 346-47
(Fla. Dist. Ct. App. 1983). As the Florida Supreme Court explained:
The general rule, of course, is that where an injury, although slight, is
sustained in consequence of the wrongful act of another, and the law
affords a remedy therefor, the statute of limitations attaches at once. It
is not material that all the damages resulting from the act shall have
been sustained at that time and the running of the statute is not
postponed by the fact that the actual or substantial damages do not
occur until a later date.
City of Miami v. Brooks, 70 So. 2d 306, 308 (Fla. 1954).
We agree with the district court that Florida’s long-standing “discovery rule”
dictates the conclusion that LBHI’s complaint was untimely. LBHI knew or
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should have known no later than December 19, 2007, that the appraisal on the first
mortgage misrepresented the value of the property. At that time, when LBHI
repurchased the first mortgage, it sustained at least a slight injury in the loss of its
investment, even if the exact amount of damage would not be known until LBHI
resold the loan or otherwise disposed of the investment. The fact that the “exact
amount of []damages might not have been foreseen at that time . . . is not the test.”
Kellermeyer, 427 So. 2d at 346. Rather, at the moment LBHI repurchased the first
mortgage, it knew it had sustained damages and “a redressable harm or injury”
ha[d] been established.” Phillips v. City of West Palm Beach, 133 So. 3d 1071,
1074-75 (Fla. Dist. Ct. App. 2014) (quoting McLeod v. Bankier, 63 So. 3d 858, 860
(Fla. Dist. Ct. App. 2011)).
LBHI’s reliance on case law from other jurisdictions is unavailing. We are
bound by Florida’s “discovery rule,” Brooks, 70 So. 2d at 308, and see no need to
create a separate rule for negligence in property appraisals. 3
Nor does our ruling uphold a bad public policy. As the Florida courts have
explained:
The primary purpose of a statute of limitations is to compel the
exercise of a right of action within a reasonable time so that the
3
Even if we considered case law from other jurisdictions, we would agree with the reasoning in
Vision Mortgage Corp., Inc. v. Patricia J. Chiapperini, Inc., 722 A.2d 527, 585-86 (N.J. 1999)
(applying “discovery rule” and concluding that “the accrual of a cause of action should not await
the sale of the mortgaged properties, but rather that the cause of action should accrue when the
mortgagee knows or has reason to know that its collateral has been impaired or endangered by
the negligent appraisal. At that time, the mortgagee knows that it has suffered legal injury.”).
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opposing party has a fair opportunity to defend. This purpose is
predicated on public policy, and statutes of limitations are designed to
encourage plaintiffs to assert their causes of action with reasonable
diligence, while the evidence is fresh and available, to protect
defendants from unfair surprise and stale claims.
Estate of Eisen v. Philip Morris USA, Inc., 126 So. 3d 323, 328 (Fla. Dist. Ct.
App. 2013) (internal citation omitted). If we were to adopt LBHI’s
argument, the statute of limitations would be completely dependent on an
indefinite date entirely within LBHI’s control. This would run afoul of the
purpose of the limitations period and subject defendants to unfair surprise,
stale claims, destruction of evidence, and the forgetfulness of witnesses.
IV.
For the foregoing reasons, we conclude that LBHI’s complaint, filed
in 2012, was untimely under Florida’s four-year statute of limitations.
Accordingly, we affirm the district court’s order granting summary
judgment.
AFFIRMED.
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