The District Court of Appeals of the State of Florida, Fourth District, held that a subordinate lienholder failed to show good cause for entitlement to the surplus from a foreclosure sale, even though the subordinate lienholder asserted it was never provided the final judgment or certificate of disbursements, and therefore did not have actual notice of the surplus until it was too late.
The Appellate Court rejected the subordinate lienholder’s arguments that Florida Statutes § 45.031 and § 45.032 cannot be interpreted as imposing a sixty-day bar for subordinate lienholders’ claims to the surplus, and held that plain language of the statutes: (i) clearly warn that a subordinate lienholder will not be entitled to any surplus if it fails to file a timely claim, and; (ii) establishes a rebuttable legal presumption that the owner is entitled to any surplus after payment of subordinate lienholders who have timely filed a claim. Fla. Stat. § 45.031(1)(a); § 45.032(2).
A copy of the opinion is available at: http://www.4dca.org/opinions/March%202015/03-25-15/4D13-4815.op.pdf
The primary lienholder filed suit to foreclose its mortgage on the subject property. After default was entered against the borrowers and subordinate lienholder, the trial court entered a final judgment of foreclosure in favor of the primary lienholder. The judgment set a date for the foreclosure sale, and provided the requisite language notifying subordinate lienholders that any claim to surplus must be made within 60 days after the sale pursuant to Fla. Stat. § 45.031(1)(a).
After the sale was rescheduled, the clerk subsequently published a re-notice of sale, which notified any persons claiming interests to file a claim within sixty days after the sale pursuant to Fla. Stat. § 45.031(2)(f).
A third party purchased the property at the foreclosure sale in an amount which exceeded the final judgment. The certificate of disbursements provided that any person claiming right to funds remaining after the sale must file a claim no later than 60 days after the sale, and that after 60 days, only the owner of record as of the date of the recording of the is pendens may claim the surplus. See Fla. Stat. § 45.031(7)(b).
After more than sixty days passed after the sale, the borrowers filed a claim to the surplus. The subordinate lienholder subsequently filed its claim to surplus, acknowledging that it was untimely, but claiming that it was never provided the final judgment or certificate of disbursements, and thus, never had proper notice or opportunity to timely file a claim. The subordinate lienholder argued that the borrowers “should not be permitted an inequitable windfall simply because [it] missed the 60-day deadline by a few weeks.”
The trial court entered a written order directing the clerk to disburse the remaining surplus in favor of the subordinate lienholder, finding “good cause for [its] claim filed after the sixty (60) day period.” This appeal followed.
The borrowers argued that the subordinate lienholder’s should not be entitled to surplus because: (i) its claim was untimely under the applicable Florida Statutes and that no extension of time is permitted; (ii) its lack of notice was irrelevant because the recorded final judgment and re-notice of sale provided constructive notice of its rights and obligation to file a timely claim, and; (iii) the subordinate lienholder’s appeal to equity lacked merit because “equity follows the law and cannot be used to eliminate its established rules.” Davis v. Starling, 799 So. 2d 373, 378 (Fla. 4th DCA 2001).
The subordinate lienholder countered the borrowers’ arguments by asserting that: (i) sections 45.031 and 45.032 cannot be interpreted as imposing a sixty-day bar for subordinate lienholders’ claims to the surplus, pursuant to DeMario v. Franklin Mortgage & Investment Co., 648 So. 2d 210 (Fla. 4th DCA 1994); (2) the subordinate lienholder’s untimely claim should be excused because it did not receive a copy of the final judgment or certificate of disbursements; and (3) the homeowners’ claim did not acknowledge that the subordinate lienholder may have a claim to the surplus, and if the homeowners’ claim had acknowledged such a claim, then the court would have held an evidentiary hearing on the entitlement to the surplus. See § 45.032(3)(b), Fla. Stat. (2012).
The Appellate Court rejected the subordinate lienholder’s argument under DeMario, because unlike the rule at issue in DeMario (Fla. Admin. Code Rule 12D-13.065 governing surplus funds from a tax deed sale) conflicted with sections 45.031 and 45.032. The Appellate Court instead held that the plain language of statutory sections 45.031(1)(a) and 45.031(7)(b) require the clerk to pay the surplus to only those claims filed within sixty days of the sale, and are not in conflict with any other rule.
The subordinate lienholder’s arguments that it did not receive copies of the final judgment or certificate of disbursements, and that the borrower’s claim did not acknowledge its right to surplus, were also rejected for lacking merit.
As it was undisputed that the subordinate lienholder did not timely file its claim, the Appellate Court instead looked to the plain language of statutory sections 45.031(1)(a) and section 45.032(2) to determine that the homeowners, and not the subordinate lienholder, were entitled to the surplus. See Dever v. Wells Fargo Bank Nat’l Ass’n, 147 So. 3d 1045, 1047-48 (Fla. 2d DCA 2014) (trial court erred in disbursing surplus to subordinate lienholder which failed to file a claim for the surplus within sixty days after the sale); Mathews, 139 So. 3d at 500-01 (same).
Accordingly, the Appellate Court reversed the trial court’s order directing the clerk to disburse the remaining surplus from the foreclosure sale to the subordinate lienholder, and remanded for the trial court to enter an order directing the clerk to disburse the remaining surplus to the homeowners.
Ralph T. Wutscher
McGinnis Wutscher LLP
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