NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
BALLANTRAE HOMEOWNERS )
ASSOCIATION, INC., )
)
Appellant, )
)
v. ) Case Nos. 2D15-1025
) 2D15-1026
FEDERAL NATIONAL MORTGAGE )
ASSOCIATION, )
) CONSOLIDATED
Appellee. )
)
Opinion filed September 2, 2016.
Appeal from the Circuit Court for Pasco
County; Linda H. Babb, Judge.
Karen Cox of Bush Ross, P.A., Tampa
(withdrew after briefing); Lilliana M. Farinas-
Sabogal of Becker & Poliakoff, P.A., Coral
Gables (substituted as counsel of record),
for Appellant.
Victor Kline and Aaron Williams of
Greenspoon Marder, P.A., Orlando, for
Appellee.
CASANUEVA, Judge.
In this consolidated appeal, Ballantrae Homeowners Association, Inc.,
appeals the final summary judgments entered by the trial court in favor of Federal
National Mortgage Association, commonly known as Fannie Mae. Fannie Mae initiated
actions against the Association seeking declaratory relief and injunctive relief regarding
the extent of its liability for unpaid Association assessments. Because the trial court
erred in granting the motions for summary judgment, we reverse.
I. FACTS
Each of the two properties at issue in this consolidated appeal is subject to
and governed by the Association's Declaration of Covenants, Conditions and
Restrictions. Each property was encumbered by a recorded first mortgage, and each
property was encumbered by a lien in favor of the Association for unpaid homeowners'
assessments. Servicers of the loans initiated foreclosure proceedings against each
property; in neither foreclosure action was the Association named as a defendant or
joined as a party. Accordingly, the Association's secured lien rights, if any, were not
adjudicated.
Final judgments of foreclosure were entered in each case, and Fannie
Mae purchased the properties at foreclosure sale in 2013. Subsequently, Fannie Mae
sought an estoppel letter from the Association as to amounts due on each property.
The calculation of amounts due to the Association was rejected by Fannie Mae,
precipitating the institution of the actions below.
In its count for declaratory relief, Fannie Mae sought a determination that,
pursuant to the terms of the Declaration, its financial responsibility to the Association
was limited to the assessments that accrued after it acquired title to each respective
property. In its count for injunctive relief, it sought to compel the Association to provide
an estoppel letter for the correct amounts due under the Declaration.
-2-
The Association contended that, because it had not been named or joined
in either foreclosure action, its liens were not impacted by either foreclosure judgment
and thus remained due and owing. Further, the Association asserted that had it been
made a party to the foreclosure actions it would have been afforded certain
opportunities as a junior lienor, including the ability to bid on the properties and to share
in any surplus proceeds.
In its orders granting summary final judgment in favor of Fannie Mae, the
trial court concluded that Fannie Mae was liable to the Association only for the unpaid
assessments levied after Fannie Mae acquired title. Further, the Association was
ordered to provide an estoppel letter to Fannie Mae reflecting that reduced amount, and
upon payment by Fannie Mae, the account for the property would be considered paid in
full except for any statutorily permitted actions against the prior owners.
II. DISCUSSION
Relying on article V, section eight of the Declaration, which was in place at
the time the mortgage was executed,1 the trial court determined that Fannie Mae was
not liable to the Association for any unpaid assessments that came due prior to Fannie
Mae acquiring title. Article V, section eight of the Declaration provides, in pertinent part:
Subordination of the Lien to Mortgagees' Rights. The lien of
the assessments provided for herein is unequivocally
subordinate to the lien of any first mortgage . . . now or
hereafter placed upon [property] subject to assessment prior
to the recording in the public records of a notice stating the
amount of or unpaid assessment attributable to [the
property]; provided, however, that such subordination shall
apply only to the assessments which have become due and
1
The parties agree that section 720.3085, Florida Statutes (2013), cannot
be retroactively applied and is not controlling in this case. See Coral Lakes Cmty. Ass'n
v. Busey Bank, N.A., 30 So. 3d 579, 583-85 (Fla. 2d DCA 2010).
-3-
payable prior to a sale or transfer of such property pursuant
to a decree of foreclosure, or any other proceeding in lieu of
foreclosure, including a sale or transfer of such property
pursuant to a deed in lieu of foreclosure.
The trial court cited Coral Lakes Community Ass'n v. Busey Bank, N.A., 30 So. 3d 579
(Fla. 2d DCA 2010); and Ecoventure WGV, Ltd. v. Saint Johns Northwest Residential
Ass'n, 56 So. 3d 126 (Fla. 5th DCA 2011), in support of its conclusion.
First, we find these cases distinguishable as to the language of the
declarations relied on by the courts. In Coral Lakes, the Declaration provided as
follows:
Where any person obtains title to a LOT pursuant to the
foreclosure of a first mortgage of record, or where the holder
of a first mortgage accepts a deed to a LOT in lieu of
foreclosure of the first mortgage of record of such lender,
such acquirer of title, its successors and assigns, shall not
be liable for any ASSESSMENTS or for other moneys owed
to Coral Lakes which are chargeable to the former OWNER
of the LOT and which became due prior to acquisition of title
as a result of the foreclosure or deed in lieu thereof, unless
the payment of such funds is secured by a claim of lien
recorded prior to the recording of the foreclosed or
underlying mortgage.
30 So. 3d at 581.
In Ecoventure, the Declaration provided that assessment liens shall be
subordinate to prior-recorded mortgages as to amounts owed prior to transfer pursuant
to foreclosure or proceedings in lieu of foreclosure and further provided that "[t]he total
amount of assessment which remains unpaid as a result of a mortgagee obtaining title
to the Building Site, shall be added to the total budget for Common Expenses and shall
be paid by all owners including the mortgagee on a pro rata basis." 56 So. 3d at 127
n.1. The Fifth District explained:
-4-
The Association made two promises, by and through section
6.5 of its Declaration . . . . First, it promised that any lien for
unpaid assessments was subordinate to any mortgage that
was "perfected by recording" before its claim of lien was
recorded. Second, it promised that any mortgagee who
subsequently obtained title to the property "by deed in lieu of
foreclosure, pursuant to a decree of foreclosure, or . . . any
other proceeding in lieu of foreclosure of such mortgage,"
would not be entirely responsible for the unpaid
assessments of its mortgagor.
Id. at 127.
Here, the Declaration's subordination of lien provision relied on by Fannie
Mae contains the first promise made in Ecoventure, subordinating the assessment lien
to the first mortgage, but it does not contain language specifically limiting or eliminating
a subsequent owner's liability for unpaid assessment. See id.; see also Coral Lakes, 30
So. 3d at 582; Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners Ass'n,
169 So. 3d 145, 148 (Fla. 4th DCA 2015) (quoting declaration provision expressly
limiting subsequent owner's personal liability for delinquent assessments).
Second, Coral Lakes and Ecoventure are distinguishable in that they do
not address a subsequent owner's liability for assessments following a foreclosure that
failed to include the association. "Under the common law, the foreclosure of a senior
mortgage extinguishes the liens of any junior mortgages listed in the final judgment."
Abdoney v. York, 903 So. 2d 981, 983 (Fla. 2d DCA 2005). It is well settled that when a
junior lienor is omitted as a party to a foreclosure action brought by a senior mortgage
holder, "the lien of the junior mortgagee is unaffected by the judgment." Id.; see also
Willoughby Estates v. Bankunited, No. 2014AP000015, 2015 WL 5472506, at *2 (Fla.
15th Cir. Ct. June 23, 2015). "This is so because 'while a sale has been held, it is not a
sale in which the junior was a participant. He had no opportunity to bid for the property
-5-
himself, nor to attempt to stir up other bidders in order to maximize the price paid for the
property.' " Abdoney, 903 So. 2d at 983 (quoting Grant S. Nelson, Real Estate Finance
Law, § 7.15, at 573 (4th ed. 2001)).
Here, the servicers who foreclosed the first mortgages on behalf of Fannie
Mae did not name the Association in the foreclosure actions. Thus, the Association's
liens have not been foreclosed and remain on the properties as if the foreclosures never
happened.
The only remedies available to the purchaser, here Fannie Mae, against
the omitted junior lienor, the Association, are moving to compel redemption or filing a de
novo action to re-foreclose. See id.; Marina Funding Grp., Inc. v. Peninsula Prop.
Holdings, Inc., 950 So. 2d 428, 430 (Fla. 4th DCA 2007) ("The remedies of a purchaser
at the foreclosure sale against an omitted junior mortgagee are a motion to compel
redemption by the junior, or re-foreclosure in a suit de novo."). "The omitted junior
mortgagee may defend in the same manner as if the foreclosure had not happened."
Abdoney, 903 So. 2d at 983. Fannie Mae elected to bring these matters before the
court as actions for declaratory and injunctive relief, neither of which is a recognized
remedy for removing the lien of an omitted junior lienor.
Fannie Mae argues that it is nonetheless entitled to declaratory relief and
an estoppel letter stating that its liability is limited only to those assessments that have
accrued since it purchased the properties at foreclosure sale. In support of this
argument, Fannie Mae points to Willoughby Estates. In that case, the declaration
specifically provided that any institutional first mortgagee who obtains title to a lot
pursuant to foreclosure or deed in lieu of foreclosure "shall not be liable for any unpaid
-6-
assessment or charges accrued against said Lot prior to the acquisition of title to said
Lot by such Mortgagee." Willoughby Estates, 2015 WL 5472506, at *1.
The Fifteenth Judicial Circuit Court of Florida, sitting in its appellate
capacity, held that Bankunited's failure to join the association as a defendant in a
foreclosure proceeding did not preclude it from taking advantage of the provision
absolving it from liability for unpaid assessments that accrued prior to Bankunited
acquiring title. Id. at *2. The Declaration provision relied on by the trial court in the
instant case, however, does not contain such a provision absolving Fannie Mae from
liability for any unpaid assessments. Furthermore, the court in Willoughby noted that
Bankunited's failure to include the association in its foreclosure left the association's lien
intact as to the property. Id. at *2 (citing Abdoney, 903 So. 2d at 983).
Finally, we reject Fannie Mae's contention that the Association is not
harmed by the declaratory and injunctive relief granted by the trial court. Had the
Association been named as a defendant in the foreclosure it would have had the
opportunity to bid for the property or stir up other bidders in hopes of benefiting from a
surplus, in addition to having the opportunity to assert any available defenses. See
Abdoney, 903 So. 2d at 983. The Association had no such opportunities here. Thus,
even if Fannie Mae had established its entitlement to limited liability on assessments,
the trial court erred in requiring the Association to provide an estoppel letter stating that
payment of that reduced amount would constitute payment in full to the Association,
essentially eliminating the Association's lien without foreclosure. See Marina Funding
Grp., 950 So. 2d at 430 ("Since a lien is a charge on property for the payment or
discharge of a debt or duty, it stands to reason that where there is no longer a debt or
-7-
duty owing, no lien can be claimed." (quoting Harbour Vill. at Saga Bay, Inc. v. Dahm,
367 So.2d 1100, 1102 (Fla. 3d DCA 1979))).
III. CONCLUSION
In conclusion, Fannie Mae has failed to prove its entitlement to limited
liability and an estoppel letter from the Association in that reduced amount. We reverse
the final summary judgments entered in favor of Fannie Mae.
Reversed and remanded.
WALLACE and KHOUZAM, JJ., Concur.
-8-