Recently, the Fifth District Court of Appeals decided Fort Plantation Investments, LLC v. Ironstone Bank, a case that may be of interest to lenders considering their options in pursuing a borrower for mortgage foreclosure and also a money judgment against guarantors. The good news is that Fort Plantation Investments is another case supporting the bank’s ability to do both simultaneously.
The bank sued the borrower on the note and for mortgage foreclosure and also the guarantors on their obligations under the guaranty agreements. The trial court entered a summary judgment in favor of the bank on the foreclosure count and also a money judgment against the guarantors. On appeal, the borrower and guarantors argued that the bank was not entitled to obtain a money judgment until it sought deficiency judgment after the foreclosure sale. The appellate court disagreed, holding that, if the guaranty is unconditional, the lender can pursue both a mortgage foreclosure and an action against the guarantors in the same lawsuit and can also obtain a money judgment against the guarantors at the same time as the foreclosure judgment.
There are a few other interesting aspects to this case. First, it implies that the judgment against the guarantors should contain a provision allowing the guarantor to seek set off for the value of the mortgaged property or, if it is sold to a third party at the foreclosure sale, a credit for the amount of sale proceeds received by the bank. As the bank cannot collect more than its judgment, this makes sense. In addition, the trial court entered an order preventing the bank’s collection efforts until after entry of deficiency judgment. In effect, this prevents a shifting of the burden of proving deficiency to the guarantor and keeps that burden with the bank. In effect then, the bank would still need to move for deficiency judgment in order to clear the way to collection of the judgment. Finally, I think the real benefit of obtaining the money judgment in this fashion is that it might allow the lender to achieve a higher lien priority vis-a-vis other creditors than it would if it had waited until after the foreclosure sale to seek a deficiency judgment. In that sense, being first in line can certainly be beneficial!