Stearns Bank National Association v. Shiraz Investments, LLC et al
Filing
53
ORDER: Plaintiff's Motion to Enforce Assignment of Rents 39 is GRANTED. See Order for details. Signed by Judge Virginia M. Hernandez Covington on 9/14/2012. (KAK)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
STEARNS BANK, N.A.,
Plaintiff,
Case No.: 8:12-cv-313-T-33TGW
v.
SHIRAZ INVESTMENTS, LLC, ET AL.,
Defendants.
__________________________________/
ORDER
This cause comes before the Court pursuant to Plaintiff’s
Motion to Enforce Assignment of Rents (Doc. # 39), filed July
27, 2012.
Defendants filed a Response (Doc. # 41) on August
9, 2012.
Plaintiff filed a Reply (Doc. # 49), with leave of
Court, on August 27, 2012.
The Court grants the Motion for
the reasons stated at oral argument held on September 14,
2012, and for the reasons that follow.
I.
Background
Between March 2003 and September 2005, several of the
Defendants entered into four separate loan agreements with
First State Bank.
(Doc. # 1).1
Plaintiff, Stearns Bank N.A.,
1
(1) Loan number 1010890463; principal amount equals
$650,000; loan date March 7, 2003; borrower Alaedin & Majdi
Investments, Inc.; original lender First State Bank;
collateral commercial properties located at or between 2819 2825 S. Macdill Ave., Tampa, Fla. 33629;
(2) Loan number 101890464; principal amount equals $375,000;
is a successor to First State Bank by asset acquisition from
the Federal Deposit Insurance Corporation.
On February 14,
2012,
for
Stearns
Bank
filed
a
Complaint
Commercial
Foreclosure against the Defendants containing the following
counts:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Breach of Guaranties against Ala Falasiri;
Breach of Guaranties against Majdi Falasiri;
Breach of Guaranty against Shiraz Oriental Rug Gallery;
Foreclosure of $732K Mortgage;
Breach of the $732K Note;
Enforcement of the $732K Assignment of Rents;
Foreclosure of the $1.04MM Mortgage;
Foreclosure of the $1.04MM Personal Property;
Breach of the $1.04MM Note;
Enforcement of the $1.04MM Assignment of Rents;
Foreclosure of the $650K Mortgage;
Breach of the $650K Note;
Enforcement of the 650K Assignment of Rents;
Foreclosure of the $375K Mortgage;
loan date March 14, 2003; borrower Alaedin & Majdi
Investments, Inc.; original lender First State Bank;
collateral interests include: mortgage on and assignment of
rents for various commercial properties located at 3109 Bay to
Bay Blvd., Tampa, Fla. 33629;
(3) Loan Number 1017628463; principal amount equals $732,000;
loan date August 30, 2005; borrower Shiraz Investment, LLC;
original lender First State Bank; collateral interests
include: a mortgage on and assignment of all rents on a
commercial property located at 2905 West Kennedy Blvd., Tampa,
Fla. 33609 as well as all commercial fixtures located therein;
(4) Loan Number 1017624163; principal amount equals
$1,040,000; loan date September 23, 2005; borrower Shiraz
Investment, LLC; original lender First State Bank; collateral
interests include: a mortgage on and assignment of all rents
on a commercial property located at the southwest corner of
U.S. 41 and South Lake Shore Drive, Sarasota, Fla. 34231.
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15.
16.
Breach of the $375K Note; and
Enforcement of the $375K Assignment of Rents.
(Doc. # 1).
Defendants filed an Answer, Affirmative Defenses, and
Counterclaims (Doc. # 12) on March 19, 2012. This Court
dismissed the Counterclaims, which were based on state law
defamation and slander of title, on July 31, 2012. (Doc. #
40). At this juncture, Plaintiff seeks an assignment of rents
from Defendants Shiraz Investments, LLC and Alaedin & Majdi
Investments, Inc., only.
II.
Motion to Enforce Assignment of Rents
During
the
hearing,
Defendants
indicated
that
the
property subject to the $732K loan generates approximately
$14,000 in rents monthly, and that the subject lease is set to
expire in October 2012. Defendants further indicated that the
property subject to the $650K loan generates approximately
$8,500 in rents monthly, and that the subject lease is set to
expire in December 2012. In addition, the property subject to
the $375K loan generates approximately $3,800 in rents monthly
and the subject lease is set to expire in approximately three
years.
The property subject to the $1.04MM loan is not a
finished property and is not rented.
Plaintiff asserts that assignment of rents is appropriate
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pursuant to Florida Statute Section 697.07(4) as well as the
various Assignment of Rents documents attached to the Motion
to Enforce Assignment of Rents.2
Florida Statute Section 697.07(4) states:
Upon application by the mortgagee or mortgagor, in
a foreclosure action, and notwithstanding any
asserted
defenses
or
counterclaims
of
the
mortgagor, a court of competent jurisdiction,
pending final adjudication of any action, may
require the mortgagor to deposit the collected
rents into the registry of the court, or in such
depository as the court may designate.
However,
the court may authorize the use of the collected
rents, before deposit into the registry of the
court or other depository, to:
(a) Pay the reasonable expenses solely to protect,
preserve, and operate the real property,
including, without limitation, real estate
taxes and insurance;
(b) Escrow sums required by the mortgager or
separate assignment-of-rents instrument; and
(c) Make payments to the mortagee.
III. Analysis
Defendants array a plethora of arguments in opposition to
the Motion to Enforce Assignment of Rents, including (1) that
2
The Assignment of Rents documents before the Court are
voluminous and consist of the following: Assignment of Rents
between Shiraz Investment, LLC and First State Bank dated
August 30, 2005 (Doc. # 39-1); Assignment of Rents, Leases,
and Contracts between Shiraz Investments LLC and First State
Bank dated September 23, 2005 (Doc. # 39-2); Assignment of
Rents between Alaedin & Majdi Investments, Inc. and First
State Bank dated March 7, 2003 (Doc. # 39-3); and Assignment
of Rents between Alaedin & Majdi Investments, Inc. and First
State Bank dated March 14, 2003 (Doc. # 39-4).
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Plaintiff Bank does not own and does not have standing to
enforce the notes; (2) that because Defendants are current on
three of the four loans (the $732K loan, the $650K loan, and
the $375K loan) and because there are no rents coming from the
$1.04MM loan, the Bank is entitled to no rents; (3) that
Plaintiff breached the loan agreements first and is “in
default” so that Plaintiff is entitled to no relief under the
agreements; (4) that Plaintiff waived its right to collect
rents; and (5) that enforcing the assignment of rents would
lead to Defendants’ financial ruin.
During the hearing, the
Court heard argument from the parties on these arguments and
others.
After
reviewing
the
entire
file
and
upon
consideration of the parties’ arguments, the Court determines
that the Motion should be granted.
Specifically, as to Defendants’ standing argument, the
Court finds that Plaintiff acquired all of its rights from an
FDIC assignment.
and
privileges
Plaintiff accordingly has all of the rights
as
note
owner.
As
correctly
argued
by
Plaintiff, “there is no indication that the FDIC did not
intend to assign the rights under the assignment of rents to
Stearns Bank, to the contrary, the FDIC intended to assign all
of its interests in all of the loan documents to Stearns Bank.
As the owner and holder of the notes, Stearns Bank also owns
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the security instruments securing the notes.” (Doc. # 49 at
3).
In particular, the assignment of the mortgages securing
the notes effectively transferred to Stearns Bank “for value
received”
not
only
the
mortgages,
evidences
of
indebtedness,
but
collateral,
also
“all
liens,
notes,
security
interests (real, personal and mixed property), loan documents
and any other instrument that the FDIC has an interest in with
respect to the Mortgage and loan . . . together with all
rights to payments and proceeds therefrom.” (Doc. # 1-7 at 2;
Doc. # 1-14 at 2; Doc. # 1-21 at 2; and Doc. # 1-27 at 2).
See Johns v. Gillian, 184 So. 140, 143 (1938)(“The transfer of
the note or obligation evidencing the debt . . . operates as
an assignment of the mortgage securing the debt, and it is not
necessary that the mortgage papers be transferred, nor, in
order that the beneficial interest shall pass, that a written
assignment be made.”)(internal citation omitted); see also
Taylor v. Bayview Loan Servicing, LLC, 74 So. 3d 1115, 1118
(Fla. 2d DCA 2011)(“a mortgage– as a mere incident to the debt
it secures– follows the note unless the parties have clearly
expressed a contrary intent.”).
Defendants’ second argument is also unavailing.
The
Court finds that the cross default provision contained in the
loan documents (Doc. # 1-1 at 4; Doc. # 1-4 at 4) signifies
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that
a
default
obligations.
on
one
obligation
is
a
default
on
all
Although Defendants contest that there has been
a default, the Court disagrees and finds that there has been
a default as to the $1.04MM loan.
This default triggers the
Plaintiff Bank’s right to assignment of rents as to all
properties at issue.
All of the properties are connected via
the loan documents.
It does not matter that the property
secured by the $1.04MM note is not being rented. A default on
that property opens the door to an assignment of rents as to
the other properties, which are being rented.
The Court also rejects the Defendants’ third argument-that the Plaintiff Bank “breached” first or is otherwise in
default and was the first to repudiate the agreement. Florida
Statute Section 687.0340(2)-(3)(a), commonly known as the bank
statute of frauds, eviscerates Defendants’ arguments.
Under
that statute and controlling case law, if a purported loan
modification agreement (1) was not signed by the Bank or
borrower and (2) lacks separate consideration, the Bank is not
bound by the purported modification. See Diaz-Verson v. Bank
of Am., 159 F. App’x 71, 73 (11th Cir. 2005)(loan modification
must be in writing and supported by separate consideration
pursuant to Florida banking statute of frauds); St. Joe Corp.
v. McIver, 875 So. 2d 375, 382 (Fla. 2004).
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Defendants have
demonstrated neither that there was a signed writing nor the
existence of separate consideration supporting the purported
loan modification.
Since the Plaintiff Bank was not bound by
any purported modification, the Plaintiff Bank cannot be held
in breach of such modification, and such alleged breach is not
a bar to granting the Motion to Enforce Assignment of Rents.
In addition, Defendants’ fourth argument of waiver is
unavailing.
“Waiver is the intentional relinquishment of a
known right.”
Costello v. Curtis Bldg. P’ship, 864 So. 2d
1241, 1244 (Fla. 5th DCA 2004).
Plaintiff has not waived any
of its rights in this action by accepting post default and
acceleration payments from Defendants.
Before the Court is a
letter from Stearns Bank to Alaedin & Majdi Investment, Inc.
dated March 19, 2012, stating that the Plaintiff Bank will
accept and apply post-acceleration payments from Defendants to
the loan balance but that “application of such payments does
not
waive,
release,
or
excuse
the
existing
default.
Application of this payment does not either constitute a
waiver of the existing defaults or prevent or otherwise limit
in any way Stearns Bank’s rights, remedies, or recourse for
the
existing
defaults,
and
Stearns
Bank
requires
strict
performance of any and all terms, conditions, or provisions of
the loan documents.” (Doc. # 49-1 at 2). Thus, there has been
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no waiver.
Finally, while recognizing that enforcing the assignment
of
rents
provision
will
work
a
financial
hardship
on
Defendants, the Court determines that this is what the parties
bargained for.
This Court has a duty to enforce agreed
contract terms when such terms are unambiguous, as is the case
here.
The Court is not inclined to rewrite agreements simply
because the circumstances and the market have changed, making
a once profitable situation a bad investment for one of the
parties. See Executive Square Ltd. v. Delray Executive Square,
Ltd., 546 So. 2d 434 (Fla. 4th DCA 1989)(assignment of rents
became absolute upon mortgagor’s default and operative upon
mortgagee’s written demand).
IV.
Conclusion
The Court grants the Plaintiff Bank’s request for an
Order directing Shiraz and Alaedin & Majdi Investments, Inc.
to pay from the rents solely the reasonable expenses necessary
to protect, preserve, and operate the properties, such as
insurance premiums, utility invoices, real property taxes,
repairs, and maintenance to the properties, and to remit the
balance of the rents pending final adjudication of this matter
to the Registry of the Court.
The Court further directs
Shiraz and Alaedin & Majdi Investments, Inc. to deliver
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monthly operating statements to Plaintiff itemizing all rents
received
in
connection
with
the
properties
and
all
disbursements of rents or other monies in payment of expenses
or other items for the properties. The Court expects that the
parties will be able to internally resolve any disputes that
they have concerning whether an expense is necessary to
preserve and protect the properties.
Accordingly, it is hereby
ORDERED, ADJUDGED, and DECREED:
Plaintiff’s Motion to Enforce Assignment of Rents (Doc.
# 39) is GRANTED.
DONE and ORDERED in Chambers in Tampa, Florida, this 14th
day of September, 2012.
Copies:
All Counsel of Record
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