The Supreme Court of Florida recently held that trial courts have continuing jurisdiction hear a third party purchaser's motion to recover the value of repairs and improvements made to property purchased at a foreclosure sale that was later vacated, quashing and reversing the contrary ruling of Florida's First District Court of Appeal.
A copy of the opinion is available at: Link to Opinion
A mortgagee obtained a final judgment of foreclosure. Prior to the foreclosure sale, the owners entered into a "short sale agreement" to sell the property to a third party for $900,000. "However, due to an error, the law firm representing [the mortgagee] at the time did not file a motion to cancel the sale." The property sold at the foreclosure sale to a third party purchaser for $75,000.
The mortgagee moved to set aside the sale and certificate of title to the purchaser. In opposition to the motion, the third party purchaser argued "that he had spent approximately $160,000 related the repair of the property." The trial court granted the motion and vacated the sale, finding "that the foreclosure bid was grossly inadequate, and that while there was no misconduct, [the purchaser's] bid could not be characterized as a good faith bid."
The third party purchaser moved for rehearing on the grounds that the trial court "failed to order the return of his purchase funds to him and had not reserved jurisdiction to determine the amount of money he was owed for his improvements to the property."
The trial court entered an amended order setting aside the sale and providing that the purchaser "was entitled to a return of his foreclosure sale purchase price" and reserving jurisdiction to determine whether the purchaser was entitled to relief for the repairs and improvements he made to the property.
Shortly thereafter, the third party purchaser "filed a motion for damages due to betterment[,]" seeking "the value of the improvements he had made to the property, in the amount of $368,000." The motion remained pending for more than 4 years, and in the interim, the foreclosure sale was rescheduled two more times. The judge referred the matter to mediation, which was unsuccessful. Eventually, the property sold to a another bank as "successor trustee."
The judge referred the matter to mediation again and the third party purchaser "moved to strike the order referring the case to mediation, arguing the circuit court was without jurisdiction to order it to mediate the motion for damages more than seven years after the foreclosure judgment had become final." The trial court denied this motion.
The third party purchaser appealed. The First District concluded that the trial court "did not have jurisdiction to entertain [the third party purchaser's] motion for damages after it rendered the final judgment in 2010.'"
The purchaser appealed to the Florida Supreme Court.
The Florida Supreme Court agreed with the purchaser's argument that the trial court "presiding over the foreclosure action has continuing jurisdiction to consider his motion for damages for repairs and improvements made to the property he purchased at a foreclosure sale that was later vacated[,]" and quashed the First District's decision.
Citing a 2014 decision from the Third District Court of Appeal and a 1904 Florida Supreme Court case, the Court reasoned that "'[i]n a foreclosure case, after entry of a final judgment and expiration of time to file a motion for rehearing or for a new trial, the trial court loses jurisdiction of the case … unless jurisdiction was reserved to address that matter or the issue is allowed to be considered post-judgment by statute or under a provision of the Florida Rules of Civil Procedure.' … However, a court of equity has the power to set aside the sale of mortgaged property made pursuant to foreclosure 'to protect parties from all fraud, unfairness, and imposition.'"
The Florida Supreme Court cited a 1941 Florida Supreme Court case holding that "'[t]he purchaser also is entitled to be put into the same situation he was before the purchase[,]' [and] … the purchaser is also entitled to such sums the purchaser may have paid out in good faith, relying on the validity of the title transferred under the sales, for improvements on the property, at least to the extent that the value of the property was increased by such improvements."
The Court in that 1941 case directed the lower court to require the purchasers to account for any rents they collected after the foreclosure sale was set aside and order the parties to file appropriate pleadings, "'thereby arriving at issues as to the credits and debits which have accrued since the entry of the final decree'; and enter judgment on those new pleadings." Accordingly, the trial court "retained jurisdiction to address claims the [purchasers] could have raised arising after the order vacating their title."
The Florida Supreme Court explained that "[c]ontrary to [its 1941 decision], the First District in this case concluded that the circuit court lost jurisdiction to address a purchaser's claims arising after the final judgment and that the [third party purchaser's] claims are appropriately the subject of a new proceeding." The First District's decision was "too broad" because "circuit courts retain postjudgment jurisdiction to address a number of possible issues that can arise."
Accordingly, the Court quashed the First District's decision and remanded the case "for further proceedings consistent with this opinion."
Ralph T. Wutscher
Maurice Wutscher LLP
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