Community Associations Agressive in Collection of Delinquent Assessments.


Election of Remedies in Mortgage Foreclosure

In an action to collect delinquent assessments, a community association is permitted by law to the entry of a judgment of foreclosure and a money judgment simultaneously.  The principal of the election of remedies only requires that only one of the alternate remedies be satisfied.

In contrast to what the law allows, community association attorneys are in the habit of bringing a two count lawsuit, one count for foreclosure and one count for damages, but electing a remedy at the time of judgment.  This process is viewed as necessary by the Courts under the doctrine of election of remedied. However, election at this time is not required by law.

Seeking judgment for both damages and foreclosure will preserve the association’s options to have the property sold or to collect from the owner personally.  This is significant because most properties are underwater in their first mortgages, limiting interest at sale, and making it probable the association will be the purchaser at sale.  In effect the association’s only collection option in foreclosure is to beome a landlord and rent the unit that it cannot sell due to the remaining first mortgage. 

In BARBE v. VILLANEUVE, 505 So.2d 1331 (1987), the Supreme Court discusses the doctrine of election of remedies, and the distinction between application of the doctrine to consistent and inconsistent remedies.  In BARBE the Plaintiff brought suit for damages and replevin of a yacht.  The Court ruled that entry of judgment for both prayed for remedies was improper because the factual scenarios giving rise to each were inconsistent.

The Court went on to discuss the election of remedies doctrine.  “The election of remedies doctrine is an application of the doctrine of estoppel and operates on the theory that a party electing one course of action should not later be allowed to avail himself of an incompatible course”.  BARBE, at 1332.  “The purpose of the doctrine is to prevent double recovery for the same wrong.”  Id.  “However, the election of remedies doctrine applies only where the remedies in question are coexistent and inconsistent.”  Id.

The BARBE Court cites the explanation given in AMERICAN PROCESS CO. v. FLORIDA WHITE PRESSED BRICK CO., 56 Fla. 116 (1908) to explain the election of remedies doctrine.  “If the allegations of fact necessary to support one remedy are substantially inconsistent with those necessary to support the other, then adoption of one remedy waives the right to the other… Where the law affords several distinct, but not inconsistent, remedies for the enforcement of a right, the mere election or choice to pursue one of such remedies does not operate as a waiver of the right to pursue the other remedies….If more than one remedy exists, but they are not inconsistent, only a full satisfaction of the right asserted will estop the plaintiff from pursuing other consistent remedies.  All consistent remedies may in general be pursued concurrently even to final adjudication; but the satisfaction of the claim by one remedy puts an end to the other remedies.”  BARBE at 1333.

For one remedy to bar another on grounds of inconsistency they must proceed from opposite and irreconcilable claims of right and must be so inconsistent that a party could not follow one without renouncing the other.  BARBE at 1333.

The Court in BARBE finds that a suit for damages due to theft and replevin are inconsistent, but discusses a case cited by the parties in which the court found a suit for damages and a foreclosure action to be consistent.  “Unlike the situation at bar…a suit on note and a foreclosure action on the collateral securing that note are consistent remedies.”  BARBE citing JUNCTION BIT & TOOL CO., 262 So.2d 660.

The Third DCA addressed the issue of whether foreclosure and suit on the note are inconsistent remedies in LISBON HOLDING AND INVESTMENT, CO. v. VILLAGE APARTMENTS, INC., 237 So.2d 197 (Fla. 3rd DCA 1970).  In LISBON the Court notes that, “…the great weight of authority seems to be that the remedies available to a mortgagee, i.e. suit on the note or foreclosure of the mortgage, are not inconsistent remedies, and pursuit of one without satisfaction is not a bar to the other.”  LISBON at 198.

A party is only held to have elected a remedy so as to bar other or different courses of action when the remedy elected and the alternate remedy sought are inconsistent.  KLONDIKE, INC. v. BLAIR, 211 So.2d 41 (1968).  When the remedies pursued are consistent, only satisfaction of the claim results in a bar to other remedies.  Id. At 42.

The test of inconsistency of remedies: “It has been said that the so-called ‘inconsistency of remedies’ is not in reality an inconsistency between the remedies themselves, but must be taken to mean that a certain state of facts relied on as the basis of certain remedy is inconsistent with, and repugnant to, another certain state of facts relied as the basis of another remedy.”  KLONDIKE, INC. v BLAIR, 211 So.2d 41(Fla. 4th DCA 1968) citing Am.Jur.2d Sec. 11.

“…[A] remedy is not inconsistent where it merely seeks further relief which the court may grant consistent with that already given…”  Id.

“Thus, remedies are merely cumulative and not inconsistent where the party in the one expresses upon the record reliance upon the same facts upon which he relies in the other, as where both remedies recognize the existence and validity of a contract and proceed in affirmance thereof, or are predicated on a breach of the contract and seek redress for such breach,…”  Id. Citing Am.Jur.2d Sec. 12.

The KLONDIKE court gives an example of an inconsistent remedy as follows: the relief sought in WEEKE v. REEVE, 65 Fla. 374 (1913), is inconsistent where the Plaintiff had previously brought suit for damages on breach of contract, then brought suit to rescind the same contract when the first action was unsuccessful.

The KLONDIKE Court then finds that the relief sought in that case, which is to foreclose a mortgage following judgment on the accompanying note, is not inconsistent.  Suit on the note and foreclosure of a mortgage, are not inconsistent remedies, and pursuit of one without satisfaction is not a bar to the other.  KLONDIKE at 43.

Community association liens are foreclosed in the manner of a mortgage, causing the above analysis to be applicable to association foreclosures, and allowing the association to request a judgment for damages and foreclosure simultaneously.  Doing so keeps the association’s option for collection open, which is important in the current real estate climate where owner are ready to surrender their under water properties and collection through foreclosure sale is unlikely.

Community Association Collections and the FDCPA

After initial opinions finding that the Fair Debt Collections Practices Act did not apply to collection of Community Association Assessments, the Courts reversed their position in those initial opinions and have expressed a strong and generally accepted position that homeowners and unit owners are protected by the FDCPA in efforts to collect unpaid assessments.

In NEWMAN v. BOEHM, PEARLSTEIN, & BRIGHT, LIMITED, 119 F.3d 477 (7th Cir. 1997), the court stated the issue up for its consideration as follows: “The question presented by these appeals…is whether an assessment owed to a homeowners or condominium association qualifies as a ‘debt’ under the Fair Debt Collections Practices Act…”

In NEWMAN the Court discussed the lower court’s finding that community association assessments did not meet the definition of “debt” under the FDCPA.  The lower court based its ruling on the fact that the definition of debt under the FDCPA had been interpreted to require an, “offer or extension of credit to a consumer”.  See RITER v. MOSS & BLOOMBERG, LTD., 932 F.Supp. 210 (N.D.Ill. 1996) and ZIMMERMAN v. HBO AFFILIATE GROUP, 834 F.2d 1163 (3d Cir. 1987).  The NEWMAN Court noted that between the lower court ruling and its consideration of the current appeal the 7th Circuit in BASS v. STOLPER, KORITZINSKY, BREWSTER & NEIDER, S.C., 111 F.3d 1322 (7th Cir. 1997), rejected the credit requirement under the definition of “debt” in the Act.  “All that is required…is a transaction creating an obligation to pay.”  Id.

The NEWMAN Court went on to note that all Federal Court decisions finding that an association assessment is not a “debt” under the Act relied on the reasoning in ZIMMERMAN.  And, concluding that all said decisions are now rejected allowing the NEWMAN Court to, “write on a clean slate”.

The NEWMAN Court considers whether the requirement of a transaction establishing the debt, and whether the debt incurred was primarily for personal, family, or household purposes is met under the circumstances of association assessments.  The Court reasons that, “[b]y paying the purchase price and accepting title to their home, the [Owners] became bound by the Declaration…, which required the payment of regular and special assessments imposed by the association.  The purchase of the home or unit constitutes the transaction whereby the Consumer voluntarily takes upon themselves the debt obligation, which is payment of assessments as imposed by the Association.  Further, because the subject of the transaction is the purchase of a family home, the court concludes that, “there can be little doubt that the subject of those ‘transactions’ had a personal, family, or household purpose”.  But, beyond consideration of the nature of the “transaction”, which is the purchase of the home, the Court finds that the assessments themselves meet the requirement of being for personal, family, or household purposes, because they directly benefit the household through such activities as repair of common roofs, or maintenance of common walkways, yards, or landscaping.  NEWMAN, 119 F.3d 477.

The Tenth Circuit specifically cited the NEWMAN Court’s reasoning in reachin the same conclusion in LADICK v. VAN GEMERT, 146 F.3d 1205 (10th Cir. 1998).  See Also SNOW v. RIDDLE, 143 F.3d 1350 (10th Cir. 1998).  “The assessment at issue in this case therefore qualifies as an ‘obligation of a consumer to pay money arising out of a transaction'”.  LADICK. Citing 15 U.S.C. Sec. 1692a(5).

The Middle District of Florida addressed this issue in FULLER v. BECKER & POLIAKOFF, P.A., 192 F.Supp.2d 1361 (M.D. Fla. 2002).  The Collector argued for the Court to follow the Northern District of Florida’s decision in AZAR v. HAYTER (citiation omitted in FULLER), which relied on the previously overruled decision in ZIMMERMAN v. HBO AFFILIATE GROUP, 834 F.2d 1163 (3d Cir. 1987), in finding that an assessment is not a debt.  The Court in FULLER notes, “…Defendants urge this Court to accept the reasoning that maintenance assessments are not debts. However, Defendants fail to acknowledge that…in subsequent decisions the Eleventh Circuit expressly rejected the notion that a debt under the FDCPA must involve an extension of credit”.  See BROWN v. BUDGET RENT-A-CAR, 119 F.3d at 924.

The FULLER Court goes on to rely on the reasoning in the line of cases from the Seventh Circuit discussed above in finding that, “the maintenance assessments that the Association sought to collect…are debts subject to the FDCPA.

The generally accepted principal, based on the NEWMAN and BASS line of cases, is now that community association regular and special assessments are debts, the collection of which is subject to the FDCPA.  The attorney or collector seeking to collect these past due assessments must ensure its compliance with the FDCPA to avoid liability for damages pursuant to the Act.