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Foreclosure Defense Florida

Case Update- US Bank v. Kramer- Appointing A Receiver In Foreclosure Cases

U.S. Bank National Association, as Trustee (U.S. Bank), appeals an order denying its second amended motion for the appointment of a receiver for a former gas station property on which it had already obtained a final judgment of foreclosure. Because the foreclosure sale was necessarily deferred pending the survey and remediation of environmental problems affecting the property, the circuit court abused its discretion in denying U.S. Bank’s motion for the appointment of a receiver.

On or about August 10, 2006, U.S. Bank’s predecessor in interest loaned Terence B. Cramer and Nancy H. Cramer the sum of $937,500. As security for the debt, the Cramers executed a mortgage on real property that was formerly the site of a gas station. At the time of the proceedings in the circuit court, the operations on the property included an automotive repair shop, an automotive sales business, and a car wash. Notably, the mortgage provided that upon a default by the Cramers, “the court shall forthwith appoint such receiver . . . as a matter of strict right to Lender and without notice to [the Cramers] and without reference to the adequacy or inadequacy of the value of the Property.”
The loan went into default in 2008. U.S. Bank filed its action for foreclosure in December 2009. On August 25, 2010, the circuit court entered a final judgment of foreclosure in favor of U.S. Bank. Under the final judgment, the amount due to U.S. Bank as of August 25, 2010, was $1,269,949.66.

The circuit court conducted three separate hearings on the motion for appointment of a receiver. At the conclusion of the third hearing, the circuit court did not rule on the motion. Instead, the circuit court asked the parties to submit legal memoranda directed to the issue of whether the circuit court had the authority to appoint a receiver after the entry of final judgment. U.S. Bank timely submitted the requested memorandum to the court; the Cramers did not. After U.S. Bank submitted its memorandum, the circuit court entered a written order denying the motion. The circuit court’s order did not explain the basis for its ruling. This appeal followed.

“A receiver is typically appointed in foreclosure proceedings to preserve the status quo, preserve the property, and collect and apply rents and profits to the payment of the mortgage.” DeSilva v. First Cmty. Bank of Am., 42 So. 3d 285, 290 (Fla. 2d DCA 2010); see also Baumgartner, 128 So. at 248 (observing same). “The appointment of a receiver . . . should be approached with caution and circumspection.” DeSilva, 42 So. 3d at 288 (alteration in original) (quoting Edenfield v. Crisp, 186 So. 2d 545, 548 (Fla. 2d DCA 1966)). A cautious approach to the appointment of a receiver is appropriate because such an appointment “is in derogation of the fundamental right of the legal owner to possession of the property.” Twinjay Chambers P’ship v. Suarez, 556 So. 2d 781, 781 (Fla. 2d DCA 1990); see also Plaza v. Plaza, 78 So. 3d 4, 6 (Fla. 3d DCA 2011) (“Appointing a receiver is a rare and extraordinary remedy.”); Warshall v. Price, 617 So. 2d 751, 752 (Fla. 4th DCA 1993) (“Before . . . trial[,] . . . a motion for the appointment of a receiver of the property of the defendant is a drastic matter constituting a taking of property and requires a showing of exigent circumstances.”); Electro Mech. Prods., Inc. v. Borona, 324 So. 2d 638, 639 (Fla. 3d DCA 1976) (“The appointment of a receiver is a drastic matter in that it constitutes a taking of property and, therefore, should not be used by the courts except in cases of necessity.”).

After the entry of a final judgment, the requirement that the movant establish some legal right in the property is satisfied, as in this case, by virtue of the final judgment. In addition, under Florida law, as U.S. Bank argued in its memorandum submitted to the circuit court, a court has the authority to appoint a receiver postjudgment. See Warshall, 617 So. 2d at 752; see also Fed. Land Bank of Columbia v. Evans, 143 So. 403, 404 (Fla. 1932) (recognizing that in certain circumstances, a receiver may be appointed after the entry of a final judgment of foreclosure); Carr v. Marion Mortg. Co., 128 So. 12, 14 (Fla. 1930) (noting same).

On the facts of this case, the grounds asserted by U.S. Bank for the appointment of a receiver based on the nonpayment of taxes and insurance and the alleged violations of the rents order were arguably insufficient. We cannot say that the circuit court abused its discretion in declining to appoint a receiver for these reasons. However, we conclude that the circuit court abused its discretion in denying U.S. Bank’s motion because (1) the mortgage expressly provided for the appointment of a receiver in the event of a default and (2) U.S. Bank established that it had been unable to sell the property in a timely manner because of the existing environmental contamination on the property.

On the facts of this case, the grounds asserted by U.S. Bank for the appointment of a receiver based on the nonpayment of taxes and insurance and the alleged violations of the rents order were arguably insufficient. We cannot say that the circuit court abused its discretion in declining to appoint a receiver for these reasons. However, we conclude that the circuit court abused its discretion in denying U.S. Bank’s motion because (1) the mortgage expressly provided for the appointment of a receiver in the event of a default and (2) U.S. Bank established that it had been unable to sell the property in a timely manner because of the existing environmental contamination on the property.

 

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