4th DCA Finds Probate Court Erred In Failing To Award Interest Due To Claimaint Under Promissory Note Due To Plain Languge of §733.705(9), Fla. Stat. and Promissory Note Itself

Posted on April 22, 2016

In Oreal v. Steven Kwartin, P.A., 2016 Fla. App. LEXIS 4922 (Fla. 4th DCA, 2016), the Fourth DCA found that the probate court erred in failing to award all of the interest due to the claimant under the promissory note because the plain language of Section 733.705(9), Fla. Stat. and the promissory note did not allow the probate court to relieve the estate of the interest as previously agreed to by the parties.

In the subject case, Wayne Oreal (“Decedent”), died in 2009, and his will was submitted to probate. Subsequently, Steven Kwartin, P.A. (“the firm”), and its principal, Steven Kwartin, each filed a statement of claim against the estate. Kwartin’s individual claim was based on a $125,000 promissory note. The firm’s claim was based on a promissory note in the amount of $500,000. At the time, the remaining principal on the firm’s note was $375,000 with an accrued interest of $397,000, for a total of $772,500. The estate objected to Kwartin’s individual claim, but not to the firm’s claim. The probate court directed the estate to pay the note’s principal, but reserved jurisdiction to determine the amount of interest due on the note. To determine the amount of default interest, the probate court considered the promissory note’s terms. The promissory note had an interest rate of 8% per annum and a default interest rate of 12% per annum. The note further provided that outstanding principal due on the note should be immediately due and payable if an Event of Default, as defined, should occur and set forth the interest accrual rate. The note listed several occurrences which would constitute an Event of Default, including, if the Makers were to fail to make any payment of principal or interest when due.

The probate court entered an order on the firm’s motion to compel payment of claim and found that since the estate failed to file a timely objection to the claim, the court had no authority to conduct an evidentiary hearing on the issue of how much interest was due under the promissory note. However, the probate court also exercised its equitable powers by reserving the right to determine whether a setoff against the firm’s interest component was appropriate due to any unexcused and excessive delay exercised by the firm in attempting to collect on its valid unpaid claim. The estate filed a motion for equitable setoff which was granted by the probate court, which found that the firm had an equitable duty to prevent the accumulation of interest. The probate court ruled that interest shall accrue only until the date the estate moved for an extension of time to object to the firm’s claim. The firm appealed which limited the amount of interest due as a result of the firm’s alleged delay in pursuing payment of its claim.

On appeal, the Fourth DCA found that the probate court erred when it imposed an equitable setoff and decreased the amount of the interest due to the firm. In its reasoning, the Court noted that as a court cannot rewrite a contract to relieve a party from an apparent hardship of an improvident bargain, see Dickerson Fla., Inc. v. McPeek, 651 So. 2d 186, 187 (Fla. 4th DCA 1995), a court cannot use equity to remedy a situation the court perceives to be unfair. See Flagler v. Flagler, 94 So. 2d 592, 594(Fla. 1957) (en banc). Section 733.705(9) plainly and unambiguously provides for the payment of interest and does not provide any judicial discretion. Since there is a full, adequate, and complete remedy at law, equity has no role. U.S. Bank Nat’l Ass’n v. Farhood, 153 So. 3d 955, 958 (Fla. 1st DCA 2014); Wildwood Crate & Ice Co. v. Citizens’ Bank of Inverness, 98 Fla. 186, 123 So. 699, 701 (Fla. 1929). Thus, the plain language of Section 733.705(9) and the promissory note did not allow the probate court to relieve the estate of the interest (via equitable set-off) as previously agreed to by the parties. Therefore, the Court reversed and remanded the probate court on that issue and directed the probate court to award the full amount of interest due to the firm. The Court affirmed the probate court with regard to all other issues raised on appeal.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or gmednick@mednicklawgroup.com.

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