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Chapter 727 ABC Proceeding — Lawyer Justin Carlin Prevails on Behalf of Creditor in Case of First Impression

August 31, 2016

Earlier this month, the Fourth District Court of Appeal issued an opinion in Pro Finish, Inc. v. Estate of All American Trailer Manufacturers, Inc., — So. 3d —-,2016 WL 4132721 (Fla. 4th DCA 2016). Fort Lauderdale business lawyer Justin Carlin represented the appellant after handling the case at the trial level. The decision is important, because there is little case law on Chapter 727 assignment-for-the-benefit of creditors proceedings (so-called “ABCs”), and the proceedings have been widely used by debtors who don’t qualify for bankruptcy but who seek to evade creditors’ claims.

The opinion issued in the case can be found here. Here’s a portion of the Court’s ruling, which, for the first time in Florida, makes clear that the provisions of Chapter 727 are to be strictly construed and that the failure to adhere to those provisions renders the assignment void:

Chapter 727 “provide[s] a uniform procedure for the administration of insolvent estates, and . . . ensure[s] full reporting to creditors and equal distribution of assets according to priorities as established under [chapter 727].” § 727.101, Fla. Stat. (2013). Section 727.104(1), Florida Statutes, provides the form of the assignment and requires compliance with it. § 727.104(1), Fla. Stat. (2013); see Smith v. Effective Teleservices, Inc., 133 So. 3d 1048, 1050–51 (Fla. 4th DCA 2014). The June 11, 2013 Assignment did substantially follow the required form. “Section 727.104 . . . [also] requires the assignee to record the assignment in the public records as well as to file a petition and bond in the circuit court.” Moecker v. Antoine, 845 So. 2d 904, 910–11 (Fla. 1st DCA 2003). Subsection (2) requires that this be done within ten days after delivery of the assignment to the assignee. § 727.104(2), Fla. Stat.

Here, the record lacks evidence as to when the June 11, 2013 Assignment was recorded. The only record evidence of the June 11, 2013 Assignment is a copy attached to the ABC Proceeding petition. It does not indicate whether or when it was recorded. But, the creditor also argues the assignee failed to file the ABC Proceeding petition within the section 727.104(2) time limits. The creditor suggests the failure to timely petition the trial court for the ABC Proceeding “is in direct contravention of Chapter 727 and violates public policy, which favors the expedient payment of just debts to creditors and prompt notice to creditors of an assignment of the debtor’s assets.” We agree and reverse.

“There is little case law addressing chapter 727, and none addresses the issues presented here.” Lanier, 898 So. 2d at 144. However, “the provisions of an assignment which are inconsistent with the applicable statute are void, and the assignment as a whole is void where it fails to comply with such a statute, or is against public policy.” 21 C.J.S. Creditor and Debtor § 9 (footnotes omitted). Here, the assignee failed to file the petition in the circuit court within ten days of delivery of the assignment. The assignee petitioned for the ABC Proceeding on November 26, 2013, and signed the acceptance of the June 11, 2013 Assignment on July 15, 2013. Although the June 11, 2013 Assignment met the section 727.104(1) form requirements, the untimely filing invalidated the ABC Proceeding under section 727.104(2).

If you’re in need of a Fort Lauderdale business lawyer to assist you with a complex business litigation matter or appeal, call (954) 440-0901 or e-mail [email protected].

Partitioning Property: A Private Sale May Be Authorized Only by Agreement

February 3, 2016

By: Justin C. Carlin

Knife cutting house in halves

When property (such as real estate or a building) is co-owned and not capable of being divided in half (e.g., a house cannot be cut in half without ruining the house), either co-owner may petition the Circuit Court in which the property is located to have the property partitioned—i.e., sold by an Order of the Court, with the proceeds from the sale, after payment of the costs of the sale and attorneys’ fees associated with the partition action, divided between the co-owners in accordance with his or her proportionate ownership interest in the property.

The procedures for partitioning property are set forth in Chapter 64 of the Florida Statutes. In addition, there are several appellate court decisions that have interpreted that Chapter. Taken together, the rules for partitioning property are well-defined but, unfortunately, often misunderstood or misapplied, even by experienced lawyers and judges. Moreover, some of the rules are counter-intuitive, resulting in the erroneous application of the rules by trial courts and the implementation of nonsensical strategies by lawyers initiating or defending against partition actions.  These patterns are illustrated by (among other things) the frequency at which appellate courts have reversed all or a portion of trial courts’ decisions relating to the partition of property. READ MORE

Standing–A Common Defense to Mortgage Foreclosure

December 15, 2015

By: Justin C. Carlin

There is, unfortunately, a lot of misinformation among the public regarding mortgage foreclosure cases.  As an attorney who has both prosecuted and defended mortgage foreclosure cases, I believe that those holding misconceptions about foreclosures can usually be placed into two groups—those who believe that there are virtually no defenses to a mortgage foreclosure case, and those who (for whatever strange reason) believe that they are unlikely to lose a foreclosure case (despite having not paid their mortgage for months) and, therefore, underestimate a lender’s ability to foreclose.  In reality, banks and lenders rightfully win the overwhelming majority of mortgage foreclosure cases, but there are occasionally times when the borrower should (and does) win a foreclosure action.

By far, the most common defense to a foreclosure action is a lender’s purported lack of standing—i.e., the claim that the lender is not the party entitled to bring the foreclosure lawsuit.  (An example of standing in the non-foreclosure context: A (but only A) is injured in a car accident caused by B‘s negligence.  A would be legally permitted to bring a lawsuit against B, but C could not, because he has not suffered any injury as a result of B‘s negligence.  An exception might exist if there was an assignment, by which A, for value or for some other reason, transferred his claim against B to C.)  Standing is a legal defense that is often frivolously asserted in a mortgage foreclosure case, but it is occasionally (more often than some would expect) validly asserted.  The legal principle not only prevents a borrower from potentially being sued twice on the same debt obligation, but it also prevents an entity that is not owed funds from a homeowner from forcing the sale of the homeowner’s property in satisfaction of a debt owed to someone else. READ MORE

Top 5 Ways to Avoid Business Litigation

December 1, 2015

By: Justin C. Carlin

Concept of justice. Law scales on green background. 3d

As a business litigator who depends on business litigation cases to sustain my business law practice, it may seem strange that I would write a blog post about how to avoid litigation.  But my goal as a business attorney is to provide valuable services to people, so I’ve always made it a practice to assist my clients with avoiding litigation, even though I am a litigator.  Here below are my top five strategies for avoiding business litigation in South Florida: READ MORE

Florida’s Worthless Check Statute Allows for Triple Damages

November 24, 2015

By: Justin C. Carlin

Businesses who do not require advanced payment for services frequently find themselves without any kind of payment for their services.  In more unusual circumstances,

A person making a payment with a check.
A person making a payment with a check.

they encounter a client or customer who tenders a worthless check for services performed or, in an effort to defraud the business, stops payment on a check after services are performed.  As infuriating as it may be to not get paid and have to pay bank service charges because of a non-paying client, Florida Statutes Section 68.065 (known as Florida’s Worthless Check Statute) provides a remedy for businesses or individuals who are the recipients of bad checks, drafts or orders of payment.  It reads: READ MORE

Florida’s Fraudulent Lien Statute

November 17, 2015

By: Justin C. Carlin

In the Florida construction law context, contractors, subcontractors, and sub-subcontractors sometimes assert liens on property for (i) amounts that exceed that which is actually owed by a property owner, or (ii) work that was not actually performed on the property.  When either of such events occurs, a court may find that the lien is fraudulent, declare that the lien unenforceable, and award actual and punitive damages to any person who is damaged by the fraudulent lien.

Concept For Corruption, Bankruptcy Court, Bail, Crime, Bribing, Fraud, Auction Bidding. Judges or Auctioneer Gavel, Soundboard And Bundle Of Dollar Cash On The Rough Wooden Textured Table Background.
Concept For Corruption, Bankruptcy Court, Bail, Crime, Bribing, Fraud, Auction Bidding. Judges or Auctioneer Gavel, Soundboard And Bundle Of Dollar Cash On The Rough Wooden Textured Table Background.

Section 713.31(2)(a) of the Florida Statutes defines a fraudulent lien as a lien containing:

  •  A willful exaggeration as to the amount of the claim; or
  •  A claim for work not performed upon the property upon which the lienor seeks to impress its lien; or
  •  A claim for materials not furnished for the property upon which the lienor seeks to impress it lien; or
  •  A claim that is compiled “with such willful and gross negligence as to amount to a willful exaggeration.”

READ MORE

When Property Owners Can’t Agree on How Property Is To Be Used

November 10, 2015

By: Justin C. Carlin

At some point in their lives, many people will purchase a piece of real property with another person (or several other people), perhaps as part of a business venture, or perhaps to establish a marital residence.  On other occasions, a person inherits a partial interest in property along with his or her family members.  Many of these arrangements turn out badly because the interested parties disagree over how the property should be used.  Disputes arise, for example, regarding who should be permitted to live in the property and whether the property should be sold. READ MORE

Defamation—A Common (But Somewhat Confusing) Business Tort

November 3, 2015

By: Justin C. Carlin

One of the most common types of business torts in Florida is the tort of defamation, which consists of the following elements:

1. A false and defamatory statement concerning another;

2. An unprivileged publication to a third-party;

3. Fault amounting at least to negligence on the part of the publisher; and

4. Either actionability of the statement irrespective of special harm the existence of special harm caused by the publication.

See Rapp v. Jews for Jesus, Inc., 944 So. 2d 460- 464-65 (Fla. 4th DCA 2006).

SLANDERDespite being loaded with legal terms of art (e.g., “unprivileged,” “publication,” “negligence,” “actionability,” and “special harm”), the cause of action is actually fairly straightforward.  Indeed, at least one court has explained the concept in rather simple terms: “To establish a cause of action for defamation, the plaintiff must show that: (1) the defendant published a false statement about the plaintiff, (2) to a third-party, and (3) the falsity of the statement caused injury to the plaintiff.”  Mile Marker, Inc. v. Petersen Publishing, LLC, 811 So. 2d 841, 845 (Fla. 4th DCA 2002).  There is a special Chapter in the Florida Statutes (Ch. 770) that governs defamation claims against newspapers that publish false information in writing, but that Chapter does not apply to causes of action against private individuals in business litigation cases.  Rather, within the business context, a cause of action for defamation is typically governed by common law—i.e., so-called “judge-made” law beginning with court decisions rendered in the country of England during the 15th Century and continuing through the date of this blog post in a variety of jurisdictions, including the State of Florida.  As a consequence, some of the law and the terminology relating to defamation may seem a bit archaic.  Yet, as a practical matter, the law is actually quite functional, as evidenced by the distinction between defamation “per se” and defamation “per quod.” READ MORE

Coach Jimbo Fisher’s Contract Extension Illustrates Basic Principle of Florida Contract Law

October 27, 2015

By: Justin C. Carlin

Those who know me even moderately well know that I am a huge Florida State football fan. So, I was obviously very pleased to learn that FSU’s contract with its preeminent coach, Jimbo Fisher, was extended for five years. Upon reading the contract extension, however, I was somewhat dismayed that the buyout for his early termination of the contract was “a mere” $5 million in 2016, $3 million between 2017 and 2018, and $1 million before 2019.

While buyouts in the low millions are properly considered “real money,” it’s conceivable that a competing university (or even an NFL team) could, at some juncture, pay the buyout money and lure Jimbo Fisher away from FSU.  If Jimbo Fisher is considered so valuable to FSU, and FSU is offering Jimbo such a high salary (in terms of pay, the contract places Jimbo in the top five of all college coaches), why wouldn’t FSU reqDollarphotoclub_59197294__1428628400_73.205.77.214uire that the buyout be higher?

Rather than any inability of FSU to convince Coach Fisher to accept a higher buyout, I surmise that the buyout was mostly the result of Florida law, which prohibits so-called “penalty clauses” in contracts.  Under Florida law,

parties to a contract may stipulate in advance to an amount to be paid or retained as liquidated damages in the event of a breach. The Florida Supreme Court has established a two-prong test to determine whether a liquidated damages provision will be stricken as a penalty clause. First, the damages consequent upon a breach must not be readily ascertainable. Second, the sum stipulated to be forfeited must not be so grossly disproportionate to any damages that might reasonably be expected to follow from a breach as to show that the parties could have intended only to induce full performance, rather than to liquidate their damages. READ MORE

U.S. Supreme Court Weighs In on Issue Raised in Mortgage Foreclosure Case

January 14, 2015

By: Justin C. Carlin

It’s not often that the United States Supreme Court issues an opinion that has an effect on Florida mortgage foreclosure cases, but that’s exactly what the Court did today when it issued its opinion is Jesinoski v. Countrywide Home Loans, Inc.  The case involved borrowers who rescinded their mortgage documents based on the lender’s failure to make certain disclosures under the federal Truth-in-Lending Act (“TILA”).  After making payments on the mortgage for nearly three years, the borrowers sent notice to the lender of their rescission of the agreement.  The issue in the case was whether the borrowers’ subsequent action for a declaratory judgment (by a court declaring the mortgage rescinded) was time-barred under TILA as having been brought more than four years after the execution of the mortgage.  The Supreme Court found that the action was not time-barred, because the borrowers complied with the applicable limitations agreement set forth in TILA by providing notice of their recession within three years from the execution of the loan documents.

Military Couple in Front of House and Foreclosure For Sale Real Estate Sign.The Jesinoski case is notable, but not just because of its holding.  First, the case illustrates the tremendous protection that TILA affords to Florida consumers. Under Florida law, a contract of any kind (whether a promissory note, a mortgage, or any other kind of contract) may usually not be rescinded after the parties have changed their positions as a result of the contract.  Under TILA, however, a consumer in Florida appears to have the ability to rescind the contract years after the contract is entered into. READ MORE