Court Opinion

ID: 2679814
Source: CourtListenerOpinion
Date Created: 2014-06-23 14:00:33.763865+00
Date Added: 2024-06-11T12:37:09.986850
License: Public Domain

Case: 13-14782   Date Filed: 06/23/2014   Page: 1 of 7

                                                         [DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT
                        ________________________

                              No. 13-14782
                          Non-Argument Calendar
                        ________________________

                  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.

                        ________________________

                 Appeal from the United States District Court
                     for the Northern District of Florida
                       ________________________

                                 (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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