The District Court of Appeal of the State of Florida, Fourth District, recently held that a creditor may obtain a post-foreclosure deficiency judgment against a borrower when the borrower was personally served with process in the post-foreclosure deficiency action, and the fact that the foreclosure court only acquired in rem jurisdiction due to service by publication in the prior foreclosure did not matter.

In addition, the Appellate Court held that section 702.06, Florida Statutes, which governs deficiency judgments, is unambiguous and allows a separate suit to recover a deficiency where the foreclosure judgment did not adjudicate a claim for a deficiency judgment.

A copy of the opinion in Dyck-O’Neal, Inc. v. Meikle is available at: Link to Opinion.

A borrower defaulted on his mortgage. The mortgagee sued to foreclose and obtained a final judgment of foreclosure. The final judgment reserved jurisdiction to enter a deficiency judgment.

The property encumbered by the mortgage was sold at judicial sale, but the proceeds were not enough to satisfy the amount owed. The right to pursue the deficiency was assigned to a company, which sued the borrower for a deficiency judgment.

In the deficiency action, the borrower filed an answer and moved for summary judgment, arguing that the trial court lacked jurisdiction to enter a deficiency judgment “because he was served with the original foreclosure complaint by publication.” The trial judge granted the borrower’s motion, reasoning that section 702.06, Florida Statutes, which governs deficiency judgments, was “both vague and a violation of due process.”

On appeal by the creditor, the Fourth District reversed, finding the “[lower] court’s ruling was incorrect on all accounts.”

First, relying on its 1986 decision in NCNB Natl. Bank of Florida v. Pyramid Corp., the Appellate Court held that because the borrower was personally served with process in the deficiency action, the lower court had personal jurisdiction over him, and the fact that the foreclosure court only acquired in rem jurisdiction due to service by publication was irrelevant.

Second, the Appellate Court held that the trial court misread section 702.06, noting that the Appellate Court recently held in two 2016 cases involving the same creditor that the relevant statutory language — “The complainant shall also have the right to sue at common law to recover such deficiency, unless the court in the foreclosure action has granted or denied a claim for a deficiency judgment” — was “unambiguous and permits a separate suit to recover a deficiency where the foreclosure court did not grant or deny a claim for a deficiency judgment.”

Accordingly, the trial court’s grant of summary judgment in favor of the borrower was reversed and the case was remanded.