The surplus is the remaining funds after payment of all disbursements required by the final judgment of foreclosure and shown on the certificate of disbursements. Under Florida law, the entitlement to surplus is determined by priority; in order of time in which they became liens. It is the duty of the court to prioritize the interests of the competing junior lien holders and the amounts due each.
Default does not waive lienholder’s rights to surplus funds. A junior lienholder has priority over the property holder for surplus funds. A senior lienholder is not entitled to share in surplus funds. Entitlement to balance of surplus after payment of priority interests - payable to the record owner as of the date of the filing of the lis pendens.
A deficiency is the difference between the fair market value of the security received and the amount of the debt. A deficiency can be obtained only if a request for that relief is made in the pleadings and if personal jurisdiction has been obtained over the defendant or defendants against whom the deficiency is sought. The granting of a deficiency judgment is the rule rather than the exception.
Deficiency judgments are not allowable if based on constructive service of process. New service of process on defendant was not required for deficiency judgment where personal jurisdiction had been originally conferred by service of foreclosure complaint. “The law contemplates a continuance of the proceedings for entry of a deficiency judgment as a means of avoiding the expense and inconvenience of an additional suit at law to obtain the balance of the obligation owed by a debtor.”
Trial court has discretion to enter deficiency decree. The court needs to hold an evidentiary hearing. The court can enter a default judgment provided the defendant was properly noticed. The exercise of discretion in denial of a deficiency decree must be supported by disclosed equitable considerations which constitute sound and sufficient reasons for such action. A cause of action for deficiency cannot accrue until after entry of final judgment and a sale of the assets to be applied to the satisfaction of the judgment.
The amount of deficiency is determined at the time of the foreclosure sale. The amount bid art foreclosure sale is not conclusive evidence of the property’s market value. The appraisal determining the fair market value must be properly admitted into evidence and be based on the sale date. The formula to calculate a deficiency judgment is the final judgment of foreclosure total debt minus the fair market value of the property.
The amount paid by a mortgage assignee for a debt is "legally irrelevant" to the issue of whether the assignee is entitled to a deficiency award after a foreclosure sale.
Proving the Burden
The secured party has the burden to prove that the fair market value of the collateral is less than the amount of the debt. However, the Third District Court has held that the burden is on the mortgagor resisting a deficiency judgment to demonstrate that the mortgagee obtained property in foreclosure worth more than the bid price at the foreclosure sale.
Denial of deficiency decree in foreclosure suit for jurisdictional reasons, as distinguished from equitable grounds, is not res judicata so as to bar an action for deficiency. Reservation of jurisdiction in the final judgment of foreclosure – If jurisdiction is reserved, new or additional service of process on defendant is not required. The motion and the notice of hearing must be sent to the attorney of record for the mortgagor.
No reservation of jurisdiction in the final judgment - motion for deficiency must be made within ten (10) days of issuance of title. The lender can file a separate action for post-foreclosure deficiency. In a separate action, the defendant has the right to demand a trial by jury. Florida law mandates that final judgments in a separate action for deficiency contain the address and social security number of the judgment debtor, if known. This requirement is not imposed in a mortgage foreclosure action, in which an in rem judgment is sought.
Statute of Limitations
A deficiency judgment or decree is barred when an action on the debt secured by the mortgage is barred. Florida law imposes a five-year statute of limitations for a foreclosure deficiency judgment. “A cause of action for deficiency does not accrue, and thus the statute of limitations does not begin to run, until the final judgment of foreclosure and subsequent foreclosure sale.”
There are statutory limitations imposed on a deficiency judgment when a purchase money mortgage is being foreclosed. These statutes include language that impairs the entitlement to a deficiency judgment with respect to a purchase money mortgage, when the mortgagee becomes the purchaser at foreclosure sale. Specifically, this statutory limitation provides: “the complainant shall also have the right to sue at common law to recover such deficiency, provided no suit at law to recover such deficiency shall be maintained against the original mortgagor in cases where the mortgage is for the purchase price of the property involved and where the original mortgagee becomes the purchaser thereof at foreclosure sale and also is granted a deficiency decree against the original mortgagor.”
Essentially, if the lender purchases the subject property he has not incurred the damages and in fact may recoup or profit at a later sale. One Florida court ruled in a case where the purchase money mortgagee was also the purchaser that the "all important distinction" in the case was that "the purchaser at the foreclosure sale was not the mortgagee but ... an utter stranger to the parties," a third party purchaser, warranting reversal of the trial court’s denial of deficiency judgment.