Thursday, September 1, 2016

FYI: Fla App Ct (4th DCA) Holds Lis Pendens Expires at Judgment of Foreclosure

The District Court of Appeal of Florida, Fourth District (Fourth DCA), recently held that real property liens arising after a final judgment of foreclosure are not discharged by Florida's lis pendens statute.


A copy of the opinion is available at:  Link to Opinion


A mortgagee recorded a lis pendens on real property as part of a foreclosure proceeding against a homeowner. Subsequently, the mortgagee obtained a final judgment of foreclosure. However, the foreclosure sale was not conducted for some 4 years following entry of the judgment of foreclosure.


After the foreclosure, and before the foreclosure sale occurred, the town recorded seven liens on the property related to various code violations, which arose from violations that occurred after the foreclosure was entered.


The property was later sold at a foreclosure sale, and a certificate of title was issued.  After the sale and the issuance of the certificate of title, the town imposed three more liens on the property.


The purchaser filed suit to quiet title, attempting to strike the town's liens against the property. The town counterclaimed to foreclose the liens.  Both parties moved for summary judgment.


The trial court granted the town's motion, denied the purchaser's motion, and entered final judgment of foreclosure in favor of the town as to all ten of its liens. The purchaser appealed.


As you may recall, under the Florida lis pendens provisions at Florida Stat. § 48.23(1)(d):


[T]he recording of . . . lis pendens . . . constitutes a bar to the enforcement against the property described in the notice of all interests and liens . . . unrecorded at the time of recording the notice unless the holder of any such unrecorded interest or lien intervenes in such proceedings within 30 days after the recording of the notice. If the holder of any such unrecorded interest or lien does not intervene in the proceedings and if such proceedings are prosecuted to a judicial sale of the property described in the notice, the property shall be forever discharged from all such unrecorded interests and liens.


Thus, Florida Stat. § 48.23(1)(d) "not only bars enforcement of an accrued cause of action, but may also prevent the accrual of a cause of action when the final element necessary for its creation occurs beyond the time period established by the statute."  Adhin v. First Horizon Home Loans, 44 So. 3d 1245, 1253 (Fla. 5th DCA 2010).  The Court noted that the statute does not provide an end date for the lis pendens.


On appeal, the purchaser argued that the lis pendens continues to the date of the judicial sale, which in this case was over four years after the foreclosure. The town argued that the lis pendens applied only to liens existing or accruing prior to the date of final judgment.


The Appellate Court rejected the purchaser's argument, looking to a related provisions in the Florida statute. 


The Court noted that section 48.23(1)(a) states that "[a]n action in any of the state or federal courts in this state operates as a lis pendens . . . only if a notice of lis pendens is recorded." The Court held that the "plain meaning of this provision indicates that the action itself is the actual lis pendens, which takes effect if and when a notice is filed," and "[t]he lis pendens therefore logically must terminate along with the action." 


From this, the Appellate Court noted that the "action" in this case was the foreclosure action initiated by the mortgagee, "which terminated thirty days after the court's issuance of a final judgment."   


Relying upon De Pass v. Chitty, 105 So. 148, 149 (Fla. 1925), a Florida Supreme Court case that used the "until final judgment" phrase when describing the scope of a lis pendens, the Appellate Court held that a lis pendens in Florida" bars liens only through final judgment, and does not affect the validity of liens after that date, even if they are before the actual sale of the property."


The Court noted that the case revealed a misstatement of the law in Form 1.996(a) of the Florida Rules of Civil Procedure, which provide an example foreclosure judgment that includes a provision stating "[o]n filing the certificate of sale, defendant(s) and all persons claiming under or against defendant(s) since the filing of the notice of lis pendens shall be foreclosed."


Acknowledging the conflict between the form and its holding, the Court explained that to hold in conformity with the form would be to create a conflict between its decision and both the legislative intent and prior case law, and noted that an amendment to the Florida Civil Procedure forms would be appropriate.


Thus, the Fourth DCA ruled that the Florida lis pendens statute "serves to discharge liens that exist or arise prior to the final judgment of foreclosure unless the appropriate steps are taken to protect those interests," but "[i]does not affect liens that accrue after that date."




Ralph T. Wutscher
Maurice Wutscher LLP
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