Scott Cleveland and Stephanie Cleveland v. Crown Financial, LLC

IN THE DISTRICT COURT OF APPEAL
FIRST DISTRICT, STATE OF FLORIDA
SCOTT CLEVELAND and NOT FINAL UNTIL TIME EXPIRES TO
STEPHANIE CLEVELAND, FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED
Appellants,
CASE NO. 1D15-3036
v.
CROWN FINANCIAL, LLC,
Appellee.
_____________________________/
Opinion filed January 15, 2016.
An appeal from the Circuit Court for Walton County.
William P. White, Jr., Judge.
Jeffrey U. Beaverstock and Daniel L. Burkard of Burr & Forman, LLP, Mobile, AL,
for Appellants.
Robert J. Powell and Matthew T. Davidson of Clark, Partington, Hart, Larry, Bond
& Stackhouse, Pensacola, for Appellee.
LEWIS, J.
Appellants, Scott and Stephanie Cleveland, appeal a foreclosure judgment
entered in favor of Appellee, Crown Financial, LLC, raising three arguments, only
one of which warrants discussion. Appellants contend that the trial court erred in its
calculation of indebtedness because the parties’ Profit Sharing Agreement expressly
limited the financial advances made to Appellants by Appellee to $300,000. For the
following reasons, we reverse the judgment and remand.
In March 2010, the parties, along with Marine Tank Terminal, Inc. (“MTT”),
executed a Profit Sharing Agreement (“Agreement”). Appellant Scott Cleveland
was labeled the Guarantor. In consideration of the mutual promises and covenants
of the parties, Paragraph 1 of the Agreement provided in part:
Subject to the terms and conditions contained in this Agreement,
[Appellee] agrees to make the sum of $300,000.00 available to MTT
on a revolving basis for a term of one (1) year beginning on the date of
this Agreement, solely for the purpose of purchasing Crude Products.
All sums to be advanced by [Appellee] under this Agreement shall be
advanced at such times, in such amounts, to such parties, in such
manner, and under such terms and conditions as [Appellee] (in its sole
discretion) may approve. The aggregate amount outstanding at any
one time shall never exceed the sum of $300,000.00.
(Emphasis added). As security for “MTT’s obligations,” MTT agreed to deliver a
mortgage executed by Appellants for the Walton County property at issue, a security
agreement executed by MTT granting Appellee a first lien and security interest in
all of MTT’s inventory and accounts receivable, a mortgage for an Alabama
property, and a guaranty agreement executed by Appellant Scott Cleveland.
Paragraph 8 of the Agreement provided in part, “Upon the expiration of the term or
earlier termination of this Agreement, MTT shall pay to [Appellee] the outstanding
balance due hereunder (including without limitation, all advances which have not
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been repaid, and all Profit and Preferred Return).” Paragraph 11(d) provided that
“[t]his Agreement may be amended only by an instrument in writing executed by
the parties hereto.” Paragraph 11(e) provided that “[t]his Agreement constitutes the
entire agreement of the parties, and supersedes all understandings with respect to the
subject matter hereof.”
The parties’ Mortgage provided in part as follows:
Mortgagor is justly indebted to Mortgagee, having executed and
delivered to Mortgagee that certain Profit Sharing Agreement . . .
bearing the date of March 14, 2010 . . . according to the terms and
conditions specified in the Agreement.
In consideration of the indebtedness and to secure the payment
to Mortgagee of the principal with interest and all other sums provided
for in the Agreement and in this mortgage, including, but not limited
to, any future advances that may be made by Mortgagee to Mortgagor
in accordance with Paragraph 24 hereof, up to the maximum amount
stated herein, and for performance of the agreements, conditions,
covenants, provisions, and stipulations contained herein and therein,
and in certain other agreements and instruments made and given by
Mortgagor to Mortgagee in connection therewith, Mortgagor has
granted, bargained, sold, and conveyed, and by these presents does
grant, bargain, sell, and convey, unto Mortgagee that tract or parcel of
land in Walton County . . . .
Paragraph 24 provided:
Future Advances: Pursuant to F.S. 697.04, this mortgage shall secure
not only the existing indebtedness evidenced by the note but also such
future advances as may be made by Mortgagee to Mortgagor within 20
years from the date hereof to the same extent as if such future advances
were made on the date of the execution of this mortgage. The total
amount of indebtedness that shall be so secured by this mortgage may
decrease or increase from time to time, provided that the total unpaid
balance so secured at any one time shall not exceed a principal amount
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greater than double the original principal amount of the loan plus
interest thereon and plus any disbursements made for the payment of
taxes, levies, or insurance on the property covered by the lien of this
mortgage, together with interest on such disbursements.
Appellee filed its Mortgage Foreclosure Complaint against Appellants in 2013
and its Second Amended Mortgage Foreclosure Complaint in 2015. Appellee
alleged that the Agreement and Mortgage were in default and claimed that it was
owed $418,972.22 in principal. During the bench trial, one of Appellee’s members
and managers, Chad Tribe, testified. When asked to describe the money advanced
to Appellants, Tribe explained:
The initial advance was in the amount of $300,000. We advanced
Cleveland and MTT based on the premise that he was going to go buy
crude products, turn around and sell them, make a blend, whatever he
does in the crude world. To secure performance on that deal, he had
just purchased these two pieces of property, one in Florida and one in
Alabama, and he showed us the closing statement. He said: Look, I
will put these properties up to back up the amounts that you can put, up
to $300,000.
We looked at the properties. We became comfortable to go
ahead and move forward, which we did.
The first deal of 300,000 paid back with the profit, based on the
Profit Sharing Agreement terms. The second deal went out very
quickly after that in the amount of 265,000, I believe. That deal also
turned around and paid off, along with a nice profit. Soon thereafter,
the third deal went out and the – I want to say around $300,000. And
then within a month, he had requested us to go up over and above the
300 that the Profit Sharing Agreement limited the initial advance to or
the outstanding advance to. And we did reach $500,000 at one point.
And in the third deal is where everything kind of started going the
wrong way.
When asked if the last loan advance was for $500,000, Tribe replied, “I believe that
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is correct.” Tribe also testified regarding the credits made by Appellants toward the
outstanding advances and the credit that was based upon the sale of the foreclosed
Alabama property referred to in the Agreement. When asked if the additional
advances were memorialized in any of the documents before the trial court, Tribe
replied, “No.”
Appellee’s counsel argued to the trial court that the advances over $300,000
were secured by the Mortgage pursuant to the Mortgage’s future advances clause.
Appellants’ counsel argued that there was “an absolute prohibition beyond $300,000
in the Profit Sharing Agreement” and that “if anything,” the Mortgage’s future
advances language conflicted with the “never exceed” language in the Agreement.
Appellants made the same arguments in their post-trial brief.
In the Final Judgment, the trial court found that the principal due on the
Agreement and Mortgage was $419,069.64, implicitly agreeing with Appellee on
the issue at hand and rejecting Appellants’ argument to the contrary. With interest,
taxes, and attorney’s fees and costs and with a deduction for credited payments of
$114,415.45, the trial court ruled that Appellants owed Appellee $382,047.23 and
ordered the sale of the Walton County property. The trial court denied Appellants’
motion for rehearing and motion to stay. This appeal followed.
Given that the issue on appeal involves contract interpretation, our standard
of review is de novo. CitiMortgage, Inc. v. Turner, 172 So. 3d 502, 504 (Fla. 1st
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DCA 2015). The cardinal rule of contractual interpretation is that when the language
of a contract is clear and unambiguous, the contract must be interpreted and enforced
in accordance with the plain meaning. Columbia Bank v. Columbia Developers,
LLC, 127 So. 3d 670, 673 (Fla. 1st DCA 2013). A contract is ambiguous when it is
susceptible to more than one reasonable interpretation. Turner, 172 So. 3d at 504.
“An ambiguous term in a contract is to be construed against the drafter.” City of
Homestead v. Johnson, 760 So. 2d 80, 84 (Fla. 2000).
This case involves the interpretation of both the parties’ Agreement, which
both deem a promissory note, and their Mortgage. A “mortgage is the security for
the payment of the negotiable promissory note.” Perry v. Fairbanks Capital Corp.,
888 So. 2d 725, 727 (Fla. 5th DCA 2004). A promissory note is not a
mortgage. Bank of N.Y. Mellon v. Reyes, 126 So. 3d 304, 308 (Fla. 3d DCA 2013).
Instead,
“The promise to pay is one distinct agreement, and, if couched in proper
terms is negotiable. The pledge of real estate to secure that promise is
another distinct agreement, which ordinarily is not intended to affect in
the least the promise to pay, but only to give a remedy for failure to
carry out the promise to pay. The holder of the note may discard the
mortgage entirely, and sue and recover on the note.”
Id. (quoting Taylor v. Am. Nat’l Bank of Pensacola, 57 So. 678 (Fla. 1912)). “When
a conflict exists between the terms of a note and the provisions of a mortgage . . . the
terms of the note should prevail.” Lewis v. Estate of Turcol, 709 So. 2d 186, 187
(Fla. 5th DCA 1998). Effect should be given to both the note and mortgage,
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however, “where there is no actual or necessary conflict.” Hotel Mgmt. Co. v.
Krickl, 158 So. 118, 119 (Fla. 1934).
Appellee argues, as it did below, that any advances it made to Appellants over
the $300,000 provided for in the Agreement constituted future advances pursuant to
Paragraph 24 in the Mortgage. We might agree with Appellee had the Agreement
merely stated a principal sum of $300,000. However, the Agreement, which was
expressly secured by the Mortgage and incorporated therein, provided that the
“aggregate amount outstanding at any one time shall never exceed the sum of
$300,000.” While Appellants did not attend the bench trial or introduce any
evidence to refute Mr. Tribe’s testimony as to the amount of advances and credits,
Mr. Tribe testified that Appellant Scott Cleveland said that he would “put these
properties up to back up the amounts that you can put, up to $300,000.” Appellant’s
intent is evidenced in the plain language of the Agreement. Although it is undisputed
that Appellants requested that Appellee go above the $300,000 for what was
described as the “third deal,” the Agreement, which provided that the Mortgage at
issue would secure Appellants’ obligations, was not amended to reflect a $500,000
maximum advance amount. We note also that this was not a situation where the
additional funds were advanced outside of the Agreement’s one-year timeframe.
Instead, according to Mr. Tribe, all of the advances were made within that time
period.
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To read, as Appellee does, the Agreement and the Mortgage to mean that the
Mortgage secures anything over $300,000 up to $600,000, would render
meaningless the “never exceed the sum of $300,000” language included within the
Agreement. In reaching this determination, we are guided by the principle that a
promissory note must prevail over a mortgage in the face of a conflict. See Lewis,
709 So. 2d at 187. We are also guided by the principle that any ambiguity caused
by the Mortgage’s future advances clause in the face of the Agreement’s “never
exceed” language must be construed against Appellee, which, according to Mr.
Tribe, had both the Agreement and the Mortgage drafted. See City of Homestead,
760 So. 2d at 84. While Appellee alternatively contends that Appellants waived
their right to make their argument on appeal, that contention was not made below,
and the record provides no indication that the trial court made any findings on the
issue or relied upon that ground in rendering its judgment. See Popular Bank of Fla.
v. R.C. Asesores Financieros, C.A., 797 So. 2d 614, 619 (Fla. 3d DCA 2001)
(“Generally speaking, the issue of waiver is one for the fact finder.”); Lodestar
Tower N. Palm Beach, Inc. v. Palm Beach Television Broad., Inc., 665 So. 2d 368,
370 (Fla. 4th DCA 1996) (“While an equitable estoppel argument may exist, that
too, is a matter for the finder-of-fact to determine.”); see also Bueno v. Workman,
20 So. 3d 993, 998 (Fla. 4th DCA 2009) (“[A]n appellate court cannot employ the
tipsy coachman rule where a lower court has not made factual findings on an issue
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and it would be inappropriate for an appellate court to do so.”).
Based upon the foregoing, we reverse the Final Judgment and remand with
instructions that the trial court recalculate Appellants’ indebtedness to Appellee
consistent with this opinion.
REVERSED in part and REMANDED with instructions.
BILBREY, J., CONCURS; BENTON, J. CONCURS WITH OPINION.
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BENTON, J., concurring.
I join the court’s opinion. Crown Financial, LLC, stated a single count
complaint relying entirely on the Agreement and Mortgage under which it is not
entitled to relief. Crown Financial, LLC, is not entitled to relief on grounds it did
not plead or prove.
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