The District Court of Appeal of Florida, Second District, recently affirmed the trial court's denial of a third party record title holder's motion to cancel a mortgage foreclosure sale, even though the third party movant acquired title in a prior homeowners association lien foreclosure action, and even though the third party movant alleged that the mortgagee thwarted its redemption rights by supposedly failing to provide an estoppel letter.
A copy of the opinion is available at: Link to Opinion
In December of 2012, a mortgagee filed a foreclosure action along with a lis pendens against the property owners and the community association that held a lien on the property for unpaid assessments. The lis pendens was recorded in the public records of the county where the case was filed shortly thereafter.
The trial court granted the mortgagee's motion for summary judgment and entered a final foreclosure judgment in March of 2014, which scheduled the sale date for July of 2014. The sale was later rescheduled at the request of the plaintiff for September of 2014.
Two days before the sale, a third party filed an emergency motion to cancel the sale, arguing that it was the owner of record pursuant to a certificate of title issued in July of 2013 in a separate foreclosure action filed by the community association, and that because the mortgagee failed to provide the estoppel letter required by section 701.04, Florida Statutes, the mortgagee wrongly prevented the third party movant from redeeming the property before the foreclosure sale.
The trial court initially granted the third party's motion to cancel the foreclosure sale, but re-set the sale for November of 2014. Four days prior to the sale, the third party filed another motion to cancel the sale on the same grounds as the first motion, but also adding an argument that the notice of the foreclosure sale violated section 702.035, Florida Statutes. The trial court denied motion, finding that the third party movant lacked standing, and the third party movant appealed.
On appeal, the third party movant argued that as the owner of record, it had a clear interest in the property, and thus the trial court erred in finding that it lacked standing to challenge the sale.
The Court first noted the common law rule that unless one is a party to a lawsuit, he or she lacks standing to request relief from the court, but then found that by moving to cancel the sale and asserting its interest in the property as owner, the third party movant effectively sought to intervene in the mortgage foreclosure action.
However, the Court then noted the settled rule in Florida that "when property is purchased during a pending foreclosure action in which a lis pendens has been filed, the purchaser generally is not entitled to intervene in the pending foreclosure action."
The Court found that the notice of lis pendens filed by the mortgagee put the third party movant on notice of the pending mortgage foreclosure action before the third party movant acquired title. Rejecting the third party movant's arguments, the Court reasoned that the purpose of the lis pendens was "developed from a common law doctrine that the result of pending litigation affecting property superseded transactions concerning the property before termination of the litigation."
Because the third party movant acquired title of the property after the mortgagee recorded its notice of lis pendens, the Court held that the third party movant took the property subject to the court's ruling in the mortgagee's foreclosure action, including the foreclosure sale ordered by the final judgment.
The Court pointed out that the third party movant was not asserting that the association's lien, from which its title was derived, was somehow superior to the mortgagee's lien. The Court also pointed out that the mortgage was recorded in 2006, and thus even if the mortgagee had not recorded a lis pendens, the third party movant had constructive notice of the mortgagee's prior and superior lien on the property.
The Court concluded that the third party movant's interest in the property was not legally cognizable and did not confer standing, because even though it held legal title, the third party movant acquired the property subject to the mortgagee's foreclosure action as a matter of law.
Finally the Court rejected the third party movant's argument that its right to redeem the property was thwarted by the mortgagee's alleged failure to provide an estoppel letter, because under section 45.0315, Florida Statutes, which governs the right of redemption, the third party movant could simply pay the amount of the foreclosure judgment in order to redeem the property.
Ralph T. Wutscher
Maurice Wutscher LLP
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