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Florida Appeals Court Reinstates a Deficiency Action


On March 6th, 2019, the District Court of Appeal of the Florida Second District reversed a lower court’s decision to dismiss a deficiency action for an alleged failure to prosecute the claim in time. In the case of NRG Investment Partners, LLC vs. MDC 6, LLC, a lender sought a deficiency judgement against a borrower following the foreclosure of a commercial property. Here, our West Palm Beach commercial litigation attorneys provide an overview of this decision and explain the implications for lenders and borrowers.

Background: A Foreclosure Did Not Satisfy the Debt  

In 2013 NRG Investment Partners, LLC (NRG) — a Florida-based investment banking company — foreclosed on a commercial property that was operated by Medallion Convenience Stores. Eventually, they sought a deficiency judgement against the borrower.

In contrast to some other states, Florida allows mortgage lenders to seek a deficiency judgement if a foreclosure sale is insufficient to satisfy the full debt that was owed by the borrower. Essentially, a lender can attempt to hold a borrower personally liable for the difference between the unpaid mortgage and the market value of the foreclosed property.

Though, there are very strict rules for obtaining a deficiency judgment. In particular, there are strict deadlines that banks must follow in order to seek this type of judgement. In this case, a lower court dismissed NRG’s claim on the grounds that the company waited too long to take legal action. This is referred to as a ‘lack of prosecution’ dismissal.

Reversed: The Dismissal for Lack of Prosecution  

As the Second District Court of Appeal noted in its decision, Florida has developed a wide body of case law on the issue of lack of prosecution of a deficiency judgment. Once a court sends out a notice of lack of prosecution in a deficiency judgment case, the party seeking such a judgment generally only has 60 days to pursue its claim. If it fails to do so, the case will be dismissed.

In this case, NRG did send notice that it was pursuing the judgement within the 60-day timeframe — including setting a date for a hearing. However, that hearing itself actually occurred after the 60-day period expired. On review, the appeals court determined that the lower court erred in dismissing the claim — ruling that any ‘record activity’ is sufficient to keep the claim alive. This is true even if the hearing is scheduled outside of the 60-day window. It is crucial that both borrowers and lenders understand this procedural requirement. After a foreclosure, you do not want to be surprised.

Get Help From a Commercial Litigation Attorney in South Florida

At Pike & Lustig, LLP, our West Palm Beach commercial litigation attorneys have extensive experience handling the full range of banking litigation cases. To get more information about how our commercial litigation attorneys can assist you or your company, please contact us for a confidential consultation. Our primary office is located in West Palm Beach, we have an additional office in Miami, and we represent clients throughout the state of Florida.




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