A Florida appellate court recently held that a profit sharing agreement between a mortgagor and a mortgagee that limited the mortgagee’s advances prevailed over a mortgage that secured future advances, and effectively limited the mortgagor’s liability under the mortgage regardless of the amount loaned.  See Cleveland v. Crown Fin., LLC, 183 So. 3d 1206 (Fla. Dist. Ct. App. 2016).  In the case, the parties entered into a profit sharing agreement that stated “[t]he aggregate amount outstanding at any one time shall never exceed the sum of $300,000.00”  To secure this obligation, the borrower executed a mortgage that secured “not only the existing indebtedness evidence by the note but also such future advances as may be made by Mortgagee to Mortgagor within 20 years from the date hereof[.]”  After the mortgagee made two advances that the mortgagor paid back, the mortgagee advanced $500,000.  The mortgagor eventually defaulted, and the trial court found that the mortgagor was responsible for the entire amount loaned pursuant to the mortgage’s “future advances” provision.  The mortgagor appealed, arguing that the terms of the profit-sharing agreement controlled and limited its liability under the mortgage to $300,000.  On appeal, the appellate court reversed, stating that it was “guided by the principle that a promissory note must prevail over a mortgage in the face of a conflict” and that the trial court’s decision “would render meaningless the ‘never exceed the sum of $300,000’ language included within the Agreement”.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.