Florida Appellate Court holds that amount of foreclosure bid alone may establish fair market value of foreclosed property.

In an unanimous opinion, a panel of the Court of Appeal of Florida, Fourth District, reversed a trial court’s refusal to enter deficiency judgments in a consolidated appeal.  Vantium Capital, Inc. v. Hobson, 2014 Fla. App. LEXIS 4372 (Fla. 4th DCA Mar. 26, 2014).

Vantium Capital, Inc.’s predecessor obtained judgment against three debtors, Hobson ($199,936.39), Cordiero ($275,989.88), and Bengelsdorf ($199,936.39).   At foreclosure sale the Hobson Property brought $162,700.00, the Cordiero brought $21,100.00, and the Bengelsdorf Property brought $21,100.00.  After the sale, Vantium Capital, Inc. (“Vantium”) substituted into each foreclosure action as plaintiff, and moved for deficiency judgment.

The trial court held a single hearing for all three deficiency motions, and none of the debtors or their counsel appeared at the hearing.  During the hearing, Vantium established the amount each property brought at foreclosure sale.  Vantium also attempted to enter three affidavits containing the testimony of appraisers as to the market value of each property.  The trial court refused to consider these affidavits, even though no defendants (or defendants’ counsel) were present at the hearing to object to the affidavits.  The Fourth District held that since no one was present to object, the court should have considered the affidavits.  This in and of itself should be interesting to those pursuing deficiency judgments.  Testimony by affidavit is much more cost effective than live testimony.

The most interesting part of this opinion, however, is the Fourth District’s holding that the trial court abused its discretion in refusing to enter a deficiency judgment based on the foreclosure price alone.  The Court noted that:

“The secured party has the initial burden of proving that the fair market value of the property was less than the total debt determined by the final judgment.” Chidnese v. McCollem, 695 So. 2d 936, 938 (Fla. 4th DCA 1997). However, “[a] legal presumption exists that the foreclosure sale price equals the fair market value of the property.” Thunderbird, Ltd. v. Great Am. Ins. Co., 566 So. 2d 1296, 1299 (Fla. 1st DCA 1990). “Therefore, once the party seeking a deficiency judgment introduces evidence of the foreclosure sale price, the burden shifts to the judgment debtor to present evidence concerning the property’s fair market value.” Liberty Bus. Credit Corp. v. Schaffer/Dunadry, 589 So. 2d 451, 452 (Fla. 2d DCA 1991). “In the absence of such evidence, the trial court has the power to act upon the assumption that the sale price reflects the fair market value.

The upshot of this opinion is obvious – the foreclosure sale price is nearly always lower than an appraised market value, particularly when the mortgage holder credit bids the property.  Lower market value means a higher deficiency judgment.  The Fourth District went on to note, however, that since Vantium offered the affidavits as evidence of market value, the court should have considered those affidavits even though Vantium was not required to offer them.  In other words, Vantium could have prevailed in the deficiency based on the amount of the foreclosure sale alone – but since Vantium offered the affidavits they must be considered in arriving at market value.