DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
CAN FINANCIAL, LLC,
Appellant,
v.
JACEK NIKLEWICZ, et. al.,
Appellee.
No. 4D19-3668
[November 12, 2020]
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Howard K. Coates, Jr., Judge; L.T. Case No. 50-2017-CA-
001330-XXXX-MB.
Damian Waldman and Farha Ahmed of the Law Offices of Damian G.
Waldman, P.A., Largo, for appellant.
Michael Wrubel of Michael Jay Wrubel, P.A., Davie, and Timothy
Quinones of Quinones Law, P.A., Lake Worth, for appellee.
CONNER, J.
Can Financial, LLC (“the Bank”) appeals the trial court’s order vacating
the foreclosure sale of the property to third-party purchaser Jack Niklewicz
(“the Purchaser”) and order denying rehearing. Because the Purchaser’s
failure to investigate the status of the property before purchasing it at a
foreclosure sale was attributable solely to the Purchaser, the Purchaser
did not demonstrate adequate grounds to vacate the foreclosure sale where
due diligence would have revealed a superior mortgage on the property.
We conclude the trial court erred in vacating the foreclosure sale.
Therefore, we reverse and remand for further proceedings.
Background
The Bank obtained a final judgment of foreclosure against the
homeowners. The property was subsequently sold to the Purchaser, a
third-party purchaser, at a judicial foreclosure sale. The Purchaser paid
a substantial sum, well above the amount due as determined by the
judgment, for the property. Nine days after the sale, the Purchaser filed
an objection to the sale, citing general irregularities in the sale such as
failure to disclose matters related to the sale and the property, that the
property was subject to another lien, and inadequacy of the sale price.
The Purchaser’s testimony at the hearing on his objections can be
summarized as follows: (1) he was not a sophisticated purchaser and this
was his first attempt to purchase property at a foreclosure sale; (2) the
purchase turned out to be “worst day of his life” because the money used
for the bidding was his savings over the last twenty years; and (3) although
he reviewed the mortgage being foreclosed, he was unaware that there was
a superior first mortgage, and the first mortgage was also in default and
in the process of foreclosure, which would result in the Purchaser having
no equity in the property despite having paid a substantial amount well
above the amount due under the judgment on the junior mortgage.
The trial court deferred ruling on the objection and ordered the parties
to prepare memoranda briefing the issues outlined at the hearing. The
Purchaser’s subsequent memorandum identified the following three
issues: (1) unilateral mistake to rescind a contract; (2) lack of diligence or
ignorance of law as a defense to contractual agreement; and (3) the trial
court’s discretion, as a court of equity, to sustain an objection and vacate
a sale.
Following submission of the parties’ memoranda, the trial court entered
an order that sustained the Purchaser’s objections, vacated the sale, and
reset the foreclosure sale for a later date. Relying on the testimony of the
Purchaser, the trial court determined that: (1) he was not a sophisticated
purchaser and the sale was his first attempt to purchase property through
a foreclosure sale; (2) his “successful bid became a nightmare in the
making” because the money used for the bidding was the savings from
“daily toiling” by him and his wife for over twenty-one years; (3) although
he reviewed the mortgage being foreclosed, Purchaser was unaware that
there was a superior first mortgage, and the first mortgage was also in
default and in foreclosure, which would result in the Purchaser having no
equity in the property, despite having paid a substantial amount well
above the amount due under the judgment; and (4) had he known the true
facts, he would not have bid as he did. After acknowledging that
“ignorance of the law is generally not a defense to avoid a contractual
agreement, or in this case the efficacy of a bid,” the trial court found that
it was a close call but “determine[d] that a unilateral mistake ha[d]
occurred and conclude[d] the evidence sufficient to establish that such
mistake was not the product of an inexcusable lack of due care.”
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The trial court denied the Bank’s motion for rehearing. The Bank then
gave notice of appeal.
Appellate Analysis
“The standard of review of a trial court’s ruling on a motion to set aside
a foreclosure sale is whether the trial court grossly abused its discretion.”
U.S. Bank, N.A. v. Vogel, 137 So. 3d 491, 493 (Fla. 4th DCA 2014). “[T]he
issue of whether the trial court properly applied the law is reviewed de
novo.” Id. A trial court abuses its discretion when there is no competent
substantial evidence to support its findings. Eckert v. Eckert, 107 So. 3d
1235, 1238 (Fla. 4th DCA 2013) (“On this record, permitting relocation is
an abuse of discretion, because there is no competent substantial evidence
to support it.”).
Section 45.031(5), Florida Statues (2019), permits a party to file
objections to the sale within ten days after issuance of the certificate of
sale. § 45.031(5), Fla. Stat. (2019). In Arsali v. Chase Home Finance LLC,
121 So. 3d 511 (Fla. 2013), our supreme court stated that “this court is
committed to the doctrine that a judicial sale may on a proper showing
made, be vacated and set aside on any or all [equitable] grounds.” Id. at
515 (alteration in original) (quoting Moran-Alleen Co. v. Brown, 123 So.
561, 561 (1929)). To set aside a foreclosure sale, litigants are required to
“allege one or more adequate equitable factors and make a proper showing
to the trial court that they exist in order to successfully obtain an order
that sets aside a judicial foreclosure sale.” Id. at 518. Equitable factors
that could be legally sufficient to set aside a foreclosure sale include “gross
inadequacy of consideration, surprise, accident, or mistake imposed on
complainant, and irregularity in the conduct of the sale.” Brown, 123 So.
at 561 (emphasis added).
Courts have consistently held that “the substance of an objection to a
foreclosure sale under section 45.031(5) must be directed toward conduct
that occurred at, or which related to, the foreclosure sale itself.” Skelton v.
Lyons, 157 So. 3d 471, 473 (Fla. 2d DCA 2015) (emphases added) (quoting
IndyMac Fed. Bank FSB v. Hagan, 104 So. 3d 1232, 1236 (Fla. 3d DCA
2012)). This is because “the purpose of allowing an objection to a
foreclosure sale ‘is to afford a mechanism to assure all parties and bidders
to the sale that there is no irregularity at the auction or any collusive
bidding, etc.’” Hagan, 104 So. 3d at 1236 (quoting Emanuel v. Bankers Tr.
Co., 655 So. 2d 247, 250 (Fla. 3d DCA 1995)).
The trial court in this case reasoned that our decision in Vogel was a
basis for setting aside the sale. While it is true that we said that “[o]ne
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such equitable ground for vacating a judicial sale is mistake,” Vogel, 137
So. 3d at 494, the trial court’s reliance on Vogel was misplaced because it
is factually distinguishable from this case. In Vogel, we reversed the denial
of a motion to vacate a sale because “[a] mistake sufficient to set aside a
judicial sale [was] shown where the owner became deprived of an
opportunity to bid at the sale when, because of inadvertence or a mistake,
an attorney who was to represent the owner there for that purpose was not
present.” Id. at 494 (emphasis added) (citing Kerrigan v. Mosher, 679 So.
2d 874, 875 (Fla. 1st DCA 1996)). Here, the Purchaser was not deprived
of an opportunity to bid at the sale due to the mistake of an agent.
Even applying the trial court’s reasoning that analogized a judicial sale
bid to a contract, its finding that the Purchaser’s mistake was sufficient to
set aside the sale was erroneous.
A contract may be set aside on the basis of a unilateral
mistake of material fact if: (1) the mistake was not the result of
an inexcusable lack of due care; (2) denial of release from the
contract would be inequitable; and (3) the other party to the
contract has not so changed its position in reliance on the
contract that rescission would be unconscionable.
DePrince v. Starboard Cruise Servs., Inc., 271 So. 3d 11, 20 (Fla. 3d DCA
2018) (emphasis added). Here, the first element was not met because the
law is clear that a purchaser at a junior lien foreclosure sale takes the
property subject to the superior lien and the failure to discover the
superior lien is one of inexcusable lack of due care. Maryland Cas. Co. v.
Krasnek, 174 So. 2d 541, 543 (Fla. 1965) (recognizing the longstanding
principle stated that “the law . . . prevent[s] equitable relief on the ground
of unilateral mistake in instances in which the mistake is the result of a
lack of due care”); see also Lindsley v. Phare, 155 So. 812, 815 (Fla. 1934)
(“A purchaser at a judicial sale takes title subject to defects, liens,
incumbrances, and all matters which may defeat the title of which he has
notice, or of which he could obtain knowledge in the exercise of ordinary
prudence and caution.”); Garcia v. Stewart, 906 So. 2d 1117, 1120 (Fla.
4th DCA 2005) (“[T]he successful bidder at a junior lien foreclosure takes
title subject to the prior liens.” (alteration in original) (quoting Conversion
Prop., L.L.C. v. Kessler, 994 S.W. 2d 810, 813 (Tx. Ct. App. 1999))).
Critical to our analysis are the statements of our supreme court in
Arsali with regards to the court’s reliance on Brown. Arsali, 121 So. 3d at
520 (“We also expressly state that Brown and Arlt [v. Buchanan, 190 So.
2d 575 (Fla. 1966),] are not in conflict and, therefore, any determination
or analysis to the contrary proffered by the district courts of appeal is
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disapproved.”). In Arsali, our supreme court reiterated that Chief Justice
Glenn Terrell “eloquently stated” in Brown that:
On the question of gross inadequacy of consideration,
surprise, accident, or mistake imposed on complainant, and
irregularity in the conduct of the sale, this court is committed
to the doctrine that a judicial sale may on a proper showing
made, be vacated and set aside on any or all of these grounds.
Id. at 519 (quoting Brown, 123 So. at 561).
In this case, the Purchaser failed to take action to protect his interests
when he bid on the property without conducting a proper title search that
would have revealed the superior first mortgage. There is no argument or
allegation that the first mortgage was not recorded. Thus, the Purchaser
was deemed to have constructive notice of it and purchased the property
subject to the superior lien. See CCC Props., Inc. v. Kane, 582 So. 2d 159,
161 (Fla. 4th DCA 1991) (“A purchaser of property at a judicial sale is
generally subject to the rule of caveat emptor. The recording of a document
gives the purchaser and the public notice of its contents. By the recording
of the [document] appellants were given constructive notice prior to the
issuance of the certificate of title . . . .” (internal citations omitted)). As
such, the Purchaser “could easily and should have discovered the
existence of the [mortgage] in the exercise of ordinary prudence and
caution.” U.S. Bank Nat’l Ass’n v. Rios, 166 So. 3d 202, 210 (Fla. 2d DCA
2015) (determining third-party purchaser failed to establish grounds to set
aside foreclosure sale because “[a] purchaser takes title subject to defects,
liens, incumbrances, and all matters of which he has notice, or of which
he could obtain knowledge in the exercise of ordinary prudence and
caution” (quoting Cape Sable Corp. v. McClurg, 74 So. 2d 883, 885 (Fla.
1954))). As noted above, there is no evidence that the Purchaser was
deprived of an opportunity to bid at the sale because of inadvertence or a
mistake. Instead, the Purchaser should have exercised due care to
investigate the status of prior liens, which he failed to do. In short, the
Purchaser failed to demonstrate any mistake imposed on complainant.
Although it is likely that “the trial court’s motivation in reaching its
decision was inspired by benevolence and compassion for the [Purchaser],”
Chase Home Loans, LLC v. Sosa, 104 So. 3d 1240, 1241 (Fla. 3d DCA
2012), “[a] party cannot obtain relief from a foreclosure sale ‘solely by
reference to that party’s own lack of diligence.’” Suntrust Mortg. v.
Torrenga, 153 So. 3d 952, 954 (Fla. 4th DCA 2014) (quoting John Crescent,
Inc. v. Schwartz, 382 So. 2d 383, 386 (Fla. 4th DCA 1980)). Applying the
appropriate principles announced in Brown and Arsali, we determine that
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there was no competent substantial evidence to support a finding that
equitable grounds existed for vacating the foreclosure sale. Without a
sufficient evidentiary basis for vacating the sale, the trial court abused its
discretion in vacating the sale. For those reasons, we reverse the trial
court’s order vacating the foreclosure sale and remand to the trial court
for further proceedings.
Reversed and remanded for further proceedings.
LEVINE, C.J., and KLINGENSMITH, J., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
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