Case Name: FIRST UNION NATIONAL BANK OF FLORIDA, Appellant, v. GOODWIN BEACH PARTNERSHIP, et al., Appellees
Court: Florida District Court of Appeal
Jurisdiction: Florida
Decision Date: 1994-09-16
Citations: 644 So. 2d 1361
Docket Number: No. 93-743
Parties: FIRST UNION NATIONAL BANK OF FLORIDA, Appellant, v. GOODWIN BEACH PARTNERSHIP, et al., Appellees.
Judges: DAUKSCH, J., concurs.
Reporter: Southern Reporter, Second Series
Volume: 644
Pages: 1361–1368

Head Matter:
FIRST UNION NATIONAL BANK OF FLORIDA, Appellant, v. GOODWIN BEACH PARTNERSHIP, et al., Appellees.
No. 93-743.
District Court of Appeal of Florida, Fifth District.
Sept. 16, 1994.
Rehearing Denied Dec. 1, 1994.
E. Lanny Russell and Mary E. McManus of Smith, Hulsey & Busey, Jacksonville, for appellant.
Frank D. Upchurch, III of Upchurch, Bailey and Upchurch, P.A., St. Augustine, and Stephen Stratford, Jacksonville, for appel-lees.

Opinion:
COBB, Judge.
This appeal concerns the denial of a deficiency judgment sought by a mortgagee on the basis of the trial court's determination that the fair market value of the realty securing the debt exceeded the judgment debt at the time of the foreclosure sale. See Ricard v. Equitable Life Assurance Society of U.S., 462 So.2d 592 (Fla. 5th DCA 1985); F.D.I.C. v. Circle Bar Ranch, Inc., 450 So.2d 921 (Fla. 5th DCA 1984). The decision below is flawed in several respects, necessitating reversal for a new trial on the deficiency issue.
In 1990, First Union's predecessor in interest, Southeast Bank, N.A., filed a foreclosure action against Goodwin Beach Partnership and other defendants, resulting in a final judgment which aggregated $4,986,487.00 as of the date of the foreclosure sale. First Union purchased the property at the foreclosure sale in November, 1991 for the nominal sum of $1,000.00 and thereafter moved for entry of a deficiency judgment. Jurisdiction to entertain deficiency proceedings was retained in the foreclosure judgment itself. Prior to commencement of the deficiency hearing, First Union sold the realty for $2,500,000.00 to a third party.
At the evidentiary hearing, First Union presented evidence of its sale of the property for $2,500,000.00; the tax assessment for 1991 of $3,106,500.00; and the expert opinion of an MAI based upon an income approach that the value of the property was $2,180,-000.00. The defendants (hereinafter referred to as Goodwin) presented opinion evidence from three appraisal experts whose value estimates, based upon a comparable sale method, ranged from $5,000,000.00 to $5,200,-000.00. One of these experts, Crenshaw, found the value to be $4,800,000.00 based on a discounted cash flow method. Crenshaw's appraisal was erroneously based upon an assumption that there were 69.13 acres involved rather than the correct acreage, as determined by the trial court, of 65 acres.
At the conclusion of the hearing, the trial judge declined to award a deficiency judgment, finding that "comparable sales were not helpful because of the special nature of this parcel." The trial court specifically rejected any consideration of unpaid real estate taxes of $124,953.00 extant as of the date of the foreclosure sale. The trial court found that any such tax consideration was barred by the doctrine of res judicata and cited to the case of Horne v. Smith, 368 So.2d 392 (Fla. 1st DCA 1979).
Initially, it should be noted that the trial court's judgment is intrinsically inconsistent in rejecting comparable sales as "not helpful" and thereafter relying on appraisals at trial utilizing that method of appraisal. The appraisals at trial utilizing a different method— i.e., discounted cash flow — did not exceed the amount of $4,800,000.00, an amount which would have justified a deficiency judgment of some $186,500.00, exclusive of the tax consideration.
More egregious, however, was the trial court's refusal to consider the amount of unpaid ad valorem taxes on the subject property as detracting from its value on the date of foreclosure on the theory that the plaintiff should have had the delinquent tax amount of $124,953.00 included in the final judgment of foreclosure it obtained. The trial court clearly misconstrued Horne, which involved two separate actions. That case held that mortgagees who foreclosed a second mortgage on property with outstanding ad valorem taxes due thereon, and who acquired title thereto without raising the issue of a deficiency in that action, could not thereafter seek to recover those unpaid taxes from the prior owners in a subsequent action. It is obvious that the doctrine of res judicata cannot apply where there is one continuing action. The court in Horne explicitly noted that "No deficiency judgment was ever entered in the foreclosure ease." 368 So.2d at 393. Section 702.06, Florida Statutes, authorizes entry of a deficiency decree, should a deficiency exist, in all suits for the foreclosure of mortgages. The mortgagees here are simply seeking a deficiency judgment in connection with the foreclosure action.
The underlying theory that a purchaser at a mortgage foreclosure sale is presumed to have made allowances for prior liens in making his bid cannot logically apply to the instant situation where the token price of $1,000.00 paid by the mortgagee at foreclosure sale was totally rejected (and rightfully so) by the trial court as indicative of true market value. Whether or not First Union National Bank of Florida considered the tax indebtedness on the property in fashioning its successful bid at foreclosure sale is therefore irrelevant. It is obvious that real estate with an outstanding tax indebtedness against it is worth less than that same property free and clear of debt, and that should have been equally obvious to the trial judge. The amount of the delinquent taxes should have been considered in arriving at a fair market value. See Federal Deposit Ins. Corp. v. Morley, 915 F.2d 1517 (11th Cir. 1990); City Savings Bank of Bridgeport v. Miko, 1 Conn.App. 30, 467 A.2d 929 (1983); First of America Bank-Oakland Macomb, N.A. v. Brown, 158 Mich.App. 76, 404 N.W.2d 706 (1987); McCrum v. Rubbert, 219 Iowa 454, 257 N.W. 766 (1934). If Horne actually stood for the proposition attributed to it by the trial court and the dissent herein, then we should simply reject it as illogical and inequitable.
REVERSED AND REMANDED FOR NEW TRIAL.
DAUKSCH, J., concurs.
W. SHARP, J., dissents with opinion.
. The case of Patron v. American National Bank of Jacksonville, 382 So.2d 156 (Fla. 5th DCA 1980) cited by the dissent, has no applicability to the instant issue for the simple reason that it involved a mortgagee's purchase of property at foreclosure sale for the full amount of its final judgment, thereby satisfying that judgment in full. Hence, no deficiency was possible. In other words, the bargain made by the bidding mortgagee was to give up its entire judgment for the property as encumbered. Patron at 158. That did not happen in the instant case. In point of fact, contrary to the assertions of the dissent, there is not a single Florida case that has held that tax encumbrances against foreclosed property cannot be considered as affecting the value of that property so long as the issue is raised in the foreclosure action and not in a subsequent action, as occurred in Horne. And, contrary to the concept of the dissent, a deficiency proceeding is not a separate and subsequent action giving rise to res judicata considerations. It is ancillary to, and an integral part of, the foreclosure action itself. Cragin v. Ocean & Lake Realty Co., 101 Fla. 1324, 133 So. 569, aff'd on rehearing, 101 Fla. 1337, 135 So. 795 (1931); Edwards v. Meyer, 100 Fla. 235, 130 So. 57 (1930); § 702.06, Fla. Stat. (1993).
. Consales, N.V. v. Sunshine State Mortgage Trust, 639 So.2d 170 (Fla. 3d DCA 1994), cited by the dissent, is distinguishable from the instant case for two obvious reasons: (1) the bid on the property therein far exceeded the amount of the foreclosure judgment; and (2) the foreclosure judgment being satisfied, no deficiency judgment was involved in that case.