Court Opinion

ID: 4434459
Source: CourtListenerOpinion
Date Created: 2019-08-29 14:03:10.911682+00
Date Added: 2024-06-11T15:01:45.101763
License: Public Domain

FIRST DISTRICT COURT OF APPEAL
                STATE OF FLORIDA
                 _____________________________

                         No. 1D17-2996
                 _____________________________

ATKINS NORTH AMERICA, INC.,

    Appellant,

    v.

TALLAHASSEE MH PARKS, LLC
and TALLAHASSEE REAL ESTATE
HOLDINGS, LLC,

    Appellees.
                 _____________________________

On appeal from the Circuit Court for Leon County.
Karen A. Gievers, Judge.

                        August 29, 2019

KELSEY, J.

     Atkins North America appeals a final judgment foreclosing
three mortgages held by Tallahassee MH Parks (TMHP) as
assignee of the original mortgagee. Atkins is a lienholder with a
recorded money judgment against the mortgagor, Tallahassee
Real Estate Holdings (TREH). Atkins raises four issues on appeal,
one of which we affirm with no further comment. We reverse
because we find merit in the other three issues: the mortgage
reformation improperly prejudiced Atkins’s rights; the amount of
the debt was not supported by competent, substantial evidence;
and the amount of the debt and corresponding bid credit
incorrectly included funds on which the evidence failed to prove
the payment of required intangible and documentary stamp taxes.
                               Facts

    In 2005, TREH obtained three loans from Farmers &
Merchants Bank to buy three “crime-ridden mobile home parks
with a plan to turn them into affordable housing communities,” in
the words of TREH’s manager and now sole member, Daniel
Manausa. The loans were memorialized in three separate notes
and secured with three mortgages.

     In 2009, Atkins obtained and recorded a final money judgment
against TREH for services Atkins provided in the first apartment
project, which turned out to be the only one that was completed.
Every year from 2006 through 2012, one or more of the notes was
renewed; and although there were sporadic capital payments or
other decreases in principal, the principal amount of each note was
increased at least once and up to three times. In 2013, the bank
consolidated the three original notes into two new notes. In 2015,
the bank assigned its interests in the new notes and the original
mortgages to TMHP.

     In 2016, TMHP filed a foreclosure action and asked the court
to reform one of the mortgages to include a parcel, Lot 45, that
allegedly was omitted from the original mortgage description by
mutual mistake of the original parties, TREH and the bank. The
foreclosure complaint identified nine persons or entities with
recorded liens against the mortgaged properties, but TMHP
claimed its interests were superior to the claims of all other
lienholders. Atkins was the only defendant that answered the
complaint. It denied that its lien was inferior.

     At the bench trial, no representative of the bank testified. Mr.
Manausa was the sole witness. He testified in support of the
mortgage reformation claim that the original parties, TREH and
the bank, had intended to add another parcel of land, Lot 45, under
one of the mortgages as additional security, but by mutual mistake
had failed to document the intention. Over Atkins’s objection due
to its being prejudiced by such a retroactive modification of the
mortgage, the trial court granted reformation.

    Regarding the total amount due at foreclosure, Mr. Manausa
deferred to the loan documents themselves and a loan summary
document created by TMHP. Those documents reflected the
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principal balance as of the loan consolidation, but not the balance
due at foreclosure. The trial court nevertheless set the amount of
damages at the unpaid balance of the three original notes on the
date they were consolidated in the two successor notes.

     With respect to whether intangible and documentary stamp
taxes were paid on all new money, Mr. Manausa admitted that his
personal knowledge was limited, and deferred to the loan
documents, which he authenticated. He testified that he believed
the bank lent TREH new money only twice, and all required taxes
were paid; and that any other principal advances were used to pay
property taxes or insurance, on which no taxes were due.

     The loan documents, however, flatly contradict this
testimony. The documents show that the notes were renewed
multiple times, and additional principal was advanced in
connection with at least six of those renewals. However, none of
the advances was designated for tax-exempt payment of taxes or
insurance on the properties. On the contrary, two advances were
for renovations, one was to rezone twenty-five acres for
apartments, and another was for “seven new units.” Although any
tax payments would be evidenced on the documents themselves,
the record shows taxes were paid only on the original loan amounts
and two—but not all—subsequent principal advances.

                             Analysis

     Atkins first claims the court erred when it reformed one of the
mortgages, because the reformation prejudiced legal rights Atkins
obtained through its pre-reformation money judgment. Second,
Atkins claims the record lacked sufficient evidence to support the
amount the court determined to be owed on the notes. Third,
Atkins claims the judgment is void because TMHP failed to pay
required documentary stamp taxes on the notes. We will discuss
the issues in turn, beginning with the mortgage reformation.

                  The Mortgage Reformation

    We reverse as to the effect of the mortgage reformation on
Atkins’s interests. A mortgage reformation is an equitable remedy
within the court’s sound discretion. See Pendelton v. Witcoski, 836
So. 2d 1025, 1025 (Fla. 1st DCA 2002) (holding the equitable

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remedy of rescission was “within the sound discretion of the trial
court”); Bevis Constr. Co. v. Grace, 134 So. 2d 516, 519 (Fla. 1st
DCA 1961) (describing a mortgage reformation as an equitable
remedy).

     A mortgage can be reformed to conform to the parties’ original
intent, and that reformation generally relates back, but with an
important limitation: reformation cannot prejudice a person or
entity that had acquired legal rights before the reformation occurs.
See Straight’s Tr. v. Comm’r of Internal Revenue, 245 F.2d 327, 329
(8th Cir. 1957) (“The broad rule as to the effect of a reformation
decree is that it relates back to the date of the instrument reformed
and is binding upon all except bona fide purchasers without notice
‘and those standing in similar relations’[] - in short, covering those
who have acquired some legal rights which would be destroyed or
injured by subsequent reformation nunc pro tunc.”) (citation
omitted); accord Barlow v. Stevens, 150 So. 245, 246 (Fla. 1933);
Whitice Bonding Agency, Inc. v. Levitz, 559 So. 2d 755, 756 (Fla.
4th DCA 1990); Burleson v. Brogdon, 364 So. 2d 491, 494 (Fla. 1st
DCA 1978). “The lien of a judgment creditor stands upon the
precise footing of that of a purchaser in good faith, as against a
mortgage with an incorrect description.” Whitice, 559 So. 2d at 756.

     Here, Atkins recorded its money judgment in 2009, and
therefore it stands in the place of a purchaser in good faith
regarding the later-reformed mortgage. The trial court abused its
discretion when it reformed the mortgage and injured legal rights
Atkins had obtained prior to the reformation, and therefore we
reverse this aspect of the final judgment. Atkins has priority as to
Lot 45.

                The Sufficiency of the Evidence

     We reverse as to balance due, because the trial court’s findings
are not supported by competent, substantial evidence. “It is
axiomatic that the party seeking foreclosure must present
sufficient evidence to prove the amount owed on the note.” Wolkoff
v. Am. Home Mortg. Servicing, Inc., 153 So. 3d 280, 281 (Fla. 2d
DCA 2014). Where a foreclosure is tried without a jury, a party
may challenge the sufficiency of the evidence on direct appeal
without having lodged a contemporaneous objection. Id. at 282
(quoting Fla. R. Civ. P. 1.530(e)). We review the court’s findings to
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determine whether they are supported by competent, substantial
evidence. Id. at 283. Substantial evidence is “such relevant
evidence as a reasonable mind would accept as adequate to support
a conclusion.” De Groot v. Sheffield, 95 So. 2d 912, 916 (Fla. 1957);
see also Gonci v. Panelfab Products, Inc., 179 So. 2d 856, 858 (Fla.
1965) (noting that competent, substantial evidence must comport
with logic and reason). “[A]n essential finding or conclusion [based]
solely on unreliable evidence should be held insufficient.” Fla. Rate
Conference v. Fla. R. R. & Pub. Utils. Comm’n, 108 So. 2d 601, 607
(Fla. 1959). Testimony that conflicts with valid documentary
evidence is not legally sufficient to support findings or conclusions
contrary to the documentary evidence. Cf. Wiggins v. Fla. Dep’t of
High. Saf. & Motor Veh., 209 So. 3d 1165, 1166 (Fla. 2017) (holding
findings based on testimony were not supported by sufficient
evidence because the testimony was “totally contradicted and . . .
refuted by video evidence”). We cannot accept trial court findings
based on clearly unreliable evidence. See id. at 1172.

     Mr. Manausa authenticated the loan documents and attested
to their accuracy, and the documents were admitted into evidence.
His testimony, although presented as being based on the loan
documents, contradicts the documents in several respects. For
instance, the final order states that according to Mr. Manausa’s
testimony “there had been no principal reduction in the balance
due under [the original notes] after the last of the renewals or after
those notes were consolidated into [the two successor notes],” but
the loan documents clearly show that the outstanding principal
balance on one of the successor notes was reduced twice in 2014.
This reduction is also reflected in the plaintiff’s loan summary
sheet, which Mr. Manausa confirmed to be correct. The court’s
findings on the amount outstanding on the loans, which were
based on Mr. Manausa’s testimony, are contrary to the very
documents on which Mr. Manausa relied. Therefore, his testimony
cannot serve as sufficient evidence to support the trial court’s
finding on the balance due at consolidation, nor to support a
finding of balance due at foreclosure. The loan documents must
control to determine that issue, which must be quantified on
remand.

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                 Documentary Stamp Taxes

     We reverse the trial court’s finding that all required
documentary stamp taxes were paid. Mr. Manausa testified that
the bank only made two future principal advances to TREH, but
the loan documents that he authenticated reference six advances.
Because Mr. Manausa’s testimony contradicts the very documents
he authenticated and confirmed as accurate, his testimony does
not constitute legally sufficient evidence on this issue. If the
documentary evidence is correct, this may make at least portions
of the outstanding balance unenforceable, which in turn would
place Atkins in a priority position to the extent of the
unenforceable portions of the debt. See § 201.08(1)(b); Glenn
Wright Homes (Delray) LLC v. Lowy, 18 So. 3d 693, 696–97 (Fla.
4th DCA 2009); Somma v. Metra Elecs. Corp., 727 So. 2d 302, 304
(Fla. 5th DCA 1999). However, because the trial court failed to
make sufficient factual findings based on the documentary
evidence, we are unable to resolve this issue.

     In evidentiary proceedings on remand, the parties shall
present competent documentary evidence establishing the dollar
amount of new-money advances on which taxes were not paid prior
to the foreclosure—which amounts are unenforceable as to Atkins
and must be deducted from the debt and bid credit. The parties
shall present competent documentary evidence proving the
accurate enforceable amount due at foreclosure. Atkins shall have
first priority as to Lot 45. The trial court shall determine the
respective rights of the parties accordingly.

    REVERSED and REMANDED.

LEWIS and M.K. THOMAS, JJ., concur.

                 _____________________________

    Not final until disposition of any timely and
    authorized motion under Fla. R. App. P. 9.330 or
    9.331.
               _____________________________

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Karl E. Pearson of Pearson Doyle Mohre & Pastis, LLP, Maitland,
for Appellant.

James M. Durant, Jr. of Boyd & Durant, P.L., Tallahassee, for
Appellee Tallahassee MH Parks, LLC; Kyle L. Shaw and Daniel E.
Manausa of Manausa Law Firm, P.A., Tallahassee, for Appellee
Tallahassee Real Estate Holdings, LLC.

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