In the always fascinating world of residential foreclosure cases, the specter of Ahab’s “free house” lurks in the minds of attorneys and litigants alike. The phenomenon is rarely seen and is most often prevented through creative (if outright strained) reasoning by courts who seem intent on helping prevent monolithic banks which pay far too little attention to their customers and accounts from being prejudiced by monolithic foreclosure law firms who pay far too little attention to their cases and clients. The “free house” ranges somewhere between a dream and a myth for distressed homeowners in foreclosure.
A recent case in the Fourth DCA might represent the first step towards that dream for some homeowners faced with egregiously poor showings by banks and their attorneys in foreclosure suits. In Nolan v. Mia Real Holdings, LLC, the Fourth DCA applied a commonly used procedural mechanism to the seemingly always abstract world of foreclosures to determine that, a second dismissal of the foreclosure action--even where the foreclosing entity has changed at some time during the process--will result in adjudication on the merits of the case. 185 So. 3d 1275, 1276 (Fla. 4th DCA 2016).
In Nolan, the appellate court determined that a dismissal of the foreclosure action by the bank would stand as an adjudication on the merits since it was the second dismissal (the case was first voluntarily dismissed by the predecessor bank which assigned its interest subsequent to that first dismissal) in the action against the homeowner. Since the second dismissal (again, voluntary) involved an action on the same note and alleging the same breach, the trial court determined (and the appellate court agreed) that judgment should be entered in favor of the borrowers.
The court left the bank some wiggle room in its opinion, however, stating that the lender would be “required to refile a lawsuit against the homeowners alleging a new and separate breach by non-payment of the note.” This point does not squarely address the issue which is commonly presented in situations such as this; wherein the bank has already accelerated the note and declared all payments due. In such cases, trial courts have allowed the Bank to ‘change its mind’ by decelerating the note and declaring a new breach on unpaid installments that would have been due subsequent to the previous acceleration. This bit of contract sleight of hand fails to address the mechanism by which a bank could undo its decision to cancel all future payments in favor of a lump sum due, but is a commonly applied trick to avert the “free house” phenomenon which would likely, on the balance, not be a just and equitable result in most instances.
If you are in the process of dealing with a default or foreclosure and have questions about the process, contact Icard Merrill’s foreclosure litigation attorneys, who have experience dealing with the often turbulent foreclosure arena and can help answer your questions and guide you through the process.
A recent decision by the Fourth DCA raises the question of whether an association can add a new lien against a homeowner for unpaid assessments and actually take priority over the lender’s mortgage on that property. In U.S. Bank Nat. Ass'n v. Grant, the appellate court found that, though the association’s declaration had been filed prior to the lender’s mortgage, a later added lien for unpaid assessments could not take priority over the bank’s mortgage because the declarations failed to state that a later lien would be superior to purchase money liens or that the later liens would related back to the date of recording of the declaration. 180 So. 3d 1092, 1093 (Fla. 4th DCA 2015).
The Fourth DCA cited in the opinion Florida’s Supreme Court in Holly Lake Ass'n v. Fed. Nat. Mortg. Ass'n, wherein the Court distinguished declaration language such as that in Grant from another case wherein “the language in the declaration of restrictions put all parties on notice that an ongoing, automatic lien had been created at the time that the property was purchased, and that this lien would continue each month until the owner paid the monthly assessment fee.” 660 So. 2d 266, 268 (Fla. 1995).
Based on this decision and the line of cases finding similarly, smart homeowner’s associations could try to incorporate a lien right ‘shoehorn’ for sliding later-filed liens for unpaid assessments in ahead of even purchase money or other mortgage interest rights.
If you have questions about your association’s lien rights and whether the findings in these cases may be applicable to your declaration, contact our knowledgeable attorneys who practice in association law. Icard Merrill represents clients in a number of homeowner and condo owner association lien matters and disputes. Put one of our attorneys to work for you today.