||Third District Court of Appeal
State of Florida, January Term, A.D. 2008
||983 So.2d 739, 33 Fla. L. Weekly
||June 11, 2008
||OCEAN TWO CONDOMINIUM
ASSOCIATION, INC., APPELLANT,
GREGORY KLIGER AND FAINA KLIGER, APPELLEES.
||An Appeal from the Circuit Court
for Miami-Dade County, Sarah I. Zabel, Judge. Lower Tribunal Nos. 04-11174
||McConnell Lipton and H. Hugh
McConnell, for appellant.
||Mark S. Sussman; Mark L.
Pomeranz (Hallandale Beach), for appellees.
||The opinion of the court was
delivered by: Salter, J.
||Before WELLS and SALTER, JJ.,
and SCHWARTZ, Senior Judge.
||Ocean Two Condominium
Association appeals a final judgment denying the foreclosure of alleged
liens on two condominium units owned by Gregory and Faina Kliger. The
result turns on the Kligers' right to make partial payments during the
pendency of their dispute with the Association. We affirm the trial
court's determination that the Association and its management company
improperly refused a tendered payment in the early part of the dispute,
with the result that the lien foreclosure action was premature.
||The problem that arose in this
case is a common one, unfortunately. For one reason or another, a unit
owner falls behind in payment. If efforts to resolve the problem are
unavailing, the condominium association--usually through a management
company--turns the matter over to the association's attorneys for the
imposition of a lien and the commencement of a lien foreclosure action.
If, as here, the unit owners wish to dispute part of the association's
claim (interest and attorney's fees, for example), and to pay the
undisputed monthly maintenance amounts, there is evidently a
misapprehension by some management companies and associations that they
should reject any such partial payment. Apparently the reason--not
recognized in the condominium statute--is that the association's claim
will be waived or impaired if a partial payment is accepted after
"it's been turned over to the attorneys."
||Because of the statutory lien
rights and the power to prosecute the foreclosure action, an association
and its attorneys have ample leverage, and the unit owners have very
little. Every telephone call, meeting, or hearing regarding the genesis of
the dispute and the amount due produces an incremental unit of attorney
billings, and every day until resolution of the dispute increases the
||This system is not unfair and
functions appropriately when the unit owners have no bona fide basis for
dispute. But when the unit owners do have a good faith argument for
disputing the billings, the interest, late charges, or attorney's fees,
the lien amount can become a moving target for the unit owners. It becomes
cheaper for the unit owners to settle above what they actually owe than to
continue the dispute.
this case, the Kligers used a direct debit "Sure Pay" account to
pay maintenance fees. The Kligers asserted at trial that their Sure Pay
account was inadvertently debited for three months after they sold another
unit in the same condominium, with the result that the balance in the
account was insufficient to cover the charges for their two remaining
units in January 2004. The Association presented evidence to the contrary,
but it is undisputed that once the Kligers received billings showing
insufficient funds in the Sure Pay account and arrearages (including late
charges and bank fees) for January and February 2004, they tendered checks
to the management company for the Association in an effort to bring
current all undisputed monthly maintenance fees. XXX
1 The evidence showed, however, that the tendered checks
were refused by the management company because the Kligers' account had
been turned over to the Association's attorneys and accepting a payment
"might jeopardize the lien."
||No such prejudice or jeopardy
can occur under the statute, however, because it specifically provides
that the payments will be applied on account, without prejudice to the
association's and unit owner's respective positions, even if the unit
owners place a "restrictive endorsement, designation, or instruction
. . . on or accompanying the payment." § 718.116(3), Fla. Stat.
(2004) (emphasis added). Had the Association accepted and applied the
tendered payments, the dispute would have been reduced to an
inconsequential amount, and the Association's attorneys could not in good
faith have filed to foreclose the miniscule claim remaining. XXX
||The trial court's determination
that the Association's foreclosure suit was premature is supported by
competent substantial evidence. The cautionary point is that a management
company, Association, or Association attorney rejects a tendered payment
at its peril (but in accepting and applying the payment is protected from
a claim of waiver or accord and satisfaction by the express language of
the statute). The receipt and application of a payment--even a payment
less than the amount computed by the Association or its attorneys, and
even a payment which does not completely resolve the dispute--reduces the
amount in controversy, reduces the accrual of interest, and increases the
likelihood of a negotiated resolution of the balance of the dispute. And
that is a good thing, in stark contrast to what happened here.
||In this case, the attorneys for
the Association also rejected partial payments by the Kligers in March
2004. A "supervisor" for the law firm, signing under the name of
the law firm but not admitted to The Florida Bar or appearing on the law
firm's letterhead, returned each check with a statement that the attempted
payment "does not represent payment in full of the above referenced
matter." XXX 4
In this case, a non-lawyer did, in the name of a law firm, precisely what
no lawyer is supposed to do--reject a payment tendered to reduce the
amount in controversy in a collection action--despite the clear protection
of section 718.116(3) XXX 5
and the well-known duty to mitigate. We are not persuaded, therefore, by
the Association's argument here that the trial court's ruling will
unfairly "saddle the Kligers' neighbors" with the legal fees
incurred by the Association but not recovered from the Kligers. Because
the Association, its management company, and its attorney improperly
rejected payments, we question whether such fees were ever earned in this
1 The Kligers initially delivered paper checks dated
February 1, 2004 to replace the unsuccessful "Sure Pay"
automatic debits, but the checks were drawn on the same bank and bank
account as the "Sure Pay" debits and were also returned for
insufficient funds. After realizing this, on March 8, 2004, the Kligers
brought new and "good" checks to the property management office,
but these checks were refused. The record indicates that the Kligers had
been on direct debit payments without incident for three units over a
two-year period before the problem with the January 2004 debits.
This was the testimony of the management company representative assigned
to accounts receivable for the Association. A handwritten note by the
property manager on the Kligers' letter tendering the payments also stated
that the Kligers' account "is in the attorney's hand for collection
and we are not permitted to interfere with that process." The Kligers,
intent upon trying to keep their account current, then made direct
deposits to the Association's bank account.
3 Because of the duty of
all litigants in Florida to mitigate damages, attorneys and associations
expending $215 (the filing fee when the case was filed) to launch a lien
foreclosure to collect on a $25 account balance (plus at most, if a lien
form has already been recorded, a paralegal fee and costs for preparing
and filing the standard form) would be expected to make a renewed, good
faith effort to settle the matter before commencing a lawsuit.
The Association's appellate counsel were not the attorneys who represented
the Association below and who rejected the payment.
To be clear, the Association would not have been required to release its
claim of lien immediately in response to a payment of less than the full
amount claimed; but the Kligers made no such demand. Our holding simply
confirms that the Association, its property manager, and its attorneys may
not reject and refuse to apply a payment, even a partial payment, while
the matter is in dispute.