IN THE DISTRICT COURT OF APPEAL FOURTH DISTRICT OF FLORIDA CASE NO. 4D14-4597 L.T. CASE NO. 14-6782 (05) JAMES OBER, RECEIVED, 10/14/2016 1:39 PM, Clerk, Fourth District Court of Appeal vs. Appellant, TOWN OF LAUDERDALE-BY-THE- SEA, a Florida municipality, Appellee. / AMICUS CURIAE BRIEF OF THE FLORIDA LAND TITLE ASSOCIATION On Appeal from a Final Order of the Seventeenth Judicial Circuit, In and For Broward County, Florida Chris W. Altenbernd Florida Bar No. 197394 Marty J. Solomon Florida Bar No. 523151 Nicholas A. Brown Florida Bar No. 90929 CARLTON FIELDS JORDEN BURT, P.A. 4221 W. Boy Scout Boulevard, Suite 1000 Tampa, Florida 33607 Telephone: 813-223-7000 Facsimile: 813-229-4133 Attorneys for the Florida Land Title Association
TABLE OF CONTENTS Page TABLE OF AUTHORITIES... ii STATEMENT OF IDENTITY CONCERNING THE FLORIDA LAND TITLE ASSOCIATION (FLTA) AND ITS INTEREST IN THIS CASE... 1 SUMMARY OF THE ARGUMENT... 2 ARGUMENT... 4 I. THE IMPACT OF THE COURT S CURRENT HOLDING... 4 II. THE ACTUAL ISSUE IN THIS CASE.... 7 III. IV. THE BROADER ISSUE ADDRESSED IN THE COURT S OPINION.... 10 A FINAL COMMENT ON THE DEFINITION OF JUDICIAL SALE.... 14 CONCLUSION... 15 CERTIFICATE OF SERVICE... 17 CERTIFICATE OF COMPLIANCE... 19 i
TABLE OF AUTHORITIES Page Cases In re Amendments To The Florida Rules Of Civil Procedure, 44 So. 3d 555 (Fla. 2010)... 14 Bartley v. Church, 347 So. 2d 838 (Fla. 2d DCA 1977)... 10 Bonafide Props. v. Wells Fargo Bank, N.A., No. 2D14-5720, 2016 WL 145809 (Fla. 2d DCA Jan. 13, 2016)... 9 City of Palm Bay v. Wells Fargo Bank, N.A., 57 So. 3d 226 (Fla. 5th DCA 2011)... 10 In re Florida Rules of Civil Procedure, 253 So. 2d 404 (1971)... 12 Hancock Advert., Inc. v. Dep't of Transp., 549 So. 2d 1086 (Fla. 3d DCA 1989)... 12 Jallali v. Knightsbridge Vill. Homeowners Ass'n, Inc., No. 4D15-2036, 2016 WL 3548843 (Fla. 4th DCA June 29, 2016)... 9 Maddox v. State, 923 So. 2d 442 (Fla. 2006)... 13 Saidi v. Wasko, 687 So. 2d 10 (Fla. 5th DCA 1996)... 14 Statutes 11 U.S.C. 363... 9 45.031, Fla. Stat.... 11, 13 48.23, Fla. Stat....passim 56.27, Fla. Stat.... 9 162.09, Fla. Stat.... 7 ii
TABLE OF AUTHORITIES (Continued) Page 627.782, Fla. Stat.... 5 627.7841, Fla. Stat.... 5 iii
STATEMENT OF IDENTITY CONCERNING THE FLORIDA LAND TITLE ASSOCIATION (FLTA) AND ITS INTEREST IN THIS CASE The FLTA is a trade association representing the land title insurance industry in Florida. Its members represent approximately 4,000 title agents and underwriters, including attorney agents; approximately 550 title agencies; and all of the major title insurers in Florida. Members perform title searches, examine title, clear title objections, handle closings, and issue the title insurance policies that permit Florida s real estate economy to function. The FLTA produces educational materials and seminars, drafts and promotes legislation, and occasionally befriends courts to further the well-being of Florida s land title system. The FLTA has extensive knowledge of Florida title insurance policies and title practices, including those associated with foreclosure sales. Its members have insured untold numbers of titles stemming from foreclosure sales. This Court s recent opinion in this case has inadvertently created a rule of law that will have serious negative consequences for title insurers and for purchasers of foreclosed properties. The FLTA has a strong interest in preserving the commonly understood rule of law under which foreclosure sales have occurred and title policies and commitments have been issued for many years. 1
SUMMARY OF THE ARGUMENT The dispositive issue in this case was not expressly announced in the court s opinion. The issue is undoubtedly a legal issue to be reviewed de novo. The actual narrow issue in this case is whether a purchaser of a home at a judicial sale remains liable for unpaid code enforcement fines imposed on the prior owner when a municipality files a statutory code enforcement lien more than thirty days after the rendition of the judgment of foreclosure and prior to the completion of the judicial sale. The answer to that question should be no. Chapter 162 provides enforcement mechanisms that the Town of Lauderdale-By-The-Sea (the Town) could have chosen to use during the long delay in the bank s judicial sale. None of these mechanisms would have generated revenue for the Town and there is no legal justification to permit it to achieve a better outcome against the new owner when it was entitled to nothing from the liens it filed against the actual violator. The issue addressed by the court appears to be the much broader issue of whether, in a foreclosure action that is prosecuted to a judicial sale, a properly filed lis pendens under section 48.23, Fla. Stat. (2007), serves to provide the legal notice required for the foreclosure action to discharge liens and interests in property up to the completion of the judicial sale. This court should answer that question in the 2
affirmative and hold that a lis pendens is discharged by the completion of the judicial sale. This holding is consistent with the forms authorized by the Florida Supreme Court since 1971 and with the common understanding of section 48.23 shared by lawyers and title insurers even prior to 1971. This court should apply the statute in the same way that it has been applied for these many years. The Town s attorneys who enforce these code violations can make no claim that they are surprised by this application of section 48.23 given that this has been the express outcome of every foreclosure action utilizing the authorized form since at least since 1971. The absurdity doctrine allows the judiciary on rare occasion to come to the aid of the Legislature to save a poorly-worded statute when the Legislature s intent is unquestionably clear and a literal reading of the statute would bring about an absurd result. Because the statute discharges or ends the lis pendens with the completion of the judicial sale, there is no basis to invoke this doctrine. As demonstrated by the other amici supporting the Appellant and by the FLTA, the addition of the 30-day end date to this statute actually creates absurd results rather than avoids them. Finally, the FLTA would note that it uses the phrase completion of the judicial sale purposefully. There may be some debate as to when a judicial sale is complete for purposes of section 48.23. The FLTA maintains that the sale is 3
complete when the certificate of title is filed and delivered. In this case, even if the court picked an earlier date, the relevant liens were filed before the judicial sale and they were discharged by that sale. Thus, it is not necessary for the Court to decide this question. ARGUMENT I. THE IMPACT OF THE COURT S CURRENT HOLDING. The other amici supporting the Appellant have all stressed the serious impact that the holding in this case will have upon the law of Florida. The FLTA will not repeat those concerns, but agrees with all of them. The undersigned attorneys are well aware that district courts of appeal frequently receive unfounded motions for rehearing claiming that the world as we know it will end unless the court changes its ruling. The world will not end with this Court s holding. But this actually is one of those rare cases where the holding i.e., declaring that a lis pendens ends thirty-one days after the rendition of the judgment of foreclosure will have a very adverse, and undoubtedly unintended, impact upon real estate transactions throughout Florida. As the FLTA explained in its motion to file this brief, the opinion s impact on title insurance is hard to overstate. Because the long-settled understanding has been that all liens prior to judicial sale are discharged by the sale, title insurance policies have not generally excepted such liens from coverage, and purchasers 4
have taken properties with the understanding that they are free and clear of such liens. For the thousands, or even tens of thousands, of title insurance policies issued on properties that have gone through foreclosure in the past, there may now be exposure to liens recorded in the newly-created gap that now exists between the thirtieth day and the completion of the judicial sale. Because this ruling contradicts long-settled understanding in the industry, the state-regulated premiums charged for these title insurance policies did not and do not take this new risk into consideration. See 627.782, Fla. Stat. When a title commitment is issued setting out the policy that an insurer is willing to issue, it is required by statute to insure against the possible existence of adverse matters or defects in the title which are recorded during the period of time between the effective date of the commitment and the date of recording of the document creating the estate or interest to be insured, except as to matters of which the insured has knowledge. See 627.7841. Commitments are regularly issued for property that parties plan to purchase at foreclosure sales. These commitments facilitate smooth purchases of foreclosed property by assuring an adequate supply of purchasers willing to take title through judicial sales. This Court s change in the law will force changes in the issuance of such commitments, will increase the risk taken by purchasers at judicial sales, and will restrict the pool of bidders at judicial sales. 5
In the future, it will be very difficult to address such liens in title policies issued in conjunction with judicial sales. In preparing to file this brief, the undersigned attorneys have had discussions trying to envision methods to quiet titles affected by this Court s holding. Simply stated, there are no easy methods to assure clean title or to resolve the anticipated problems. The court s broad holding applies well beyond the realm of code enforcement liens. As mentioned on page thirteen (13) of the Florida Bankers Association s brief, the Court s holding would logically apply to all interests in property as well as liens. See 48.23(1)(d). Interests include transfers of title prior to judicial sale. If such transfers are actually successful, there is nothing to sell at the judicial sale. In the last few years, some homeowners in hard-fought foreclosure proceedings have transferred title to a third-party immediately prior to the sale in an attempt to remain in the home. To date, those efforts have been mostly futile and have not been regarded as a serious problem for title insurers. But this Court s holding may breathe life into such deeds, which may now become commonplace. There is no simple solution to the problems these deeds will create. 6
II. THE ACTUAL ISSUE IN THIS CASE. Code enforcement is generally regulated by Chapter 162, Florida Statutes. Local governments are authorized to impose daily fines against owners who do not maintain their property. See 162.09(2). These fines rapidly add up. In this case, for example, the Answer Brief of the Town recites that the $500 per day fines resulted in liens well in excess of $100,000. While code enforcement liens are occasionally used to seek reimbursement for municipal funds actually expended to improve the property, in most cases these liens are filed to collect the accrued fines from the violator. Section 162.09(3) provides an enforcement mechanism by lien. It warrants quotation in its entirety: A certified copy of an order imposing a fine, or a fine plus repair costs, may be recorded in the public records and thereafter shall constitute a lien against the land on which the violation exists and upon any other real or personal property owned by the violator. Upon petition to the circuit court, such order shall be enforceable in the same manner as a court judgment by the sheriffs of this state, including execution and levy against the personal property of the violator, but such order shall not be deemed to be a court judgment except for enforcement purposes. A fine imposed pursuant to this part shall continue to accrue until the violator comes into compliance or until judgment is rendered in a suit filed pursuant to this section, whichever occurs first. A lien arising from a fine imposed pursuant to this section runs in favor of the local governing body, and the local governing body may execute a satisfaction or release of lien entered pursuant to this section. After 3 months from the filing of any such lien which remains unpaid, the enforcement board may authorize the local governing 7
body attorney to foreclose on the lien or to sue to recover a money judgment for the amount of the lien plus accrued interest. No lien created pursuant to the provisions of this part may be foreclosed on real property which is a homestead under s. 4, Art. X of the State Constitution. The money judgment provisions of this section shall not apply to real property or personal property which is covered under s. 4(a), Art. X of the State Constitution. [Id.] In this case, the Town recorded its liens after: (1) the recording of the bank s mortgage, (2) the recording of the lis pendens in the bank s foreclosure action, and (3) the recording of the bank s final judgment of foreclosure. The Town cannot argue that its liens were filed without legal notice of the lis pendens and the provisions in the judgment that would discharge these liens through the judicial sale. Nor can it contest that its liens were junior to both the mortgage and the recorded judgment of foreclosure. Although the record is unclear, it is implicit that the bank s foreclosure sale did not generate sufficient funds to pay the Town s liens. It is the Town s position that its junior liens somehow survived the judicial sale and that the successor owner of this home is still responsible to pay the fines imposed upon the prior owner or risk losing this home. Thus, the actual, narrower issue in this case is whether a purchaser of a home at a judicial sale remains liable for code enforcement fines imposed on the prior owner because the statutory code enforcement lien was filed more than thirty 8
days after the rendition of the judgment of foreclosure and prior to the completion of the judicial sale. The answer to this narrow issue clearly is no, and no prior precedent has suggested otherwise. Examining the statute quoted above, if the Town had commenced its own foreclosure action during the long period of delay and had sold the home at its own judicial sale, the home would have been discharged of the Town s liens. See Jallali v. Knightsbridge Vill. Homeowners Ass'n, Inc., No. 4D15-2036, 2016 WL 3548843 (Fla. 4th DCA June 29, 2016); Bonafide Props. v. Wells Fargo Bank, N.A., No. 2D14-5720, 2016 WL 145809 (Fla. 2d DCA Jan. 13, 2016). But the Town almost certainly would have received no funds because its foreclosure sale would have sold the property subject to the bank s mortgage and the judgment of foreclosure into which that mortgage merged. If the Town had levied on the property by execution as authorized by section 162.09(3), once again the bank s judgment was prior in time. The Town would perhaps have obtained a minimal $500 benefit as liquidated expenses from the execution sale, see 56.27(1), Fla. Stat., and the property would have been released from its lien by the execution sale. Indeed, even if the prior owner had filed bankruptcy immediately prior to the sale, and the bankruptcy trustee had eventually sold the property, the Town s liens would have been discharged and the money from the sale would first have gone to pay the bank. See 11 U.S.C. 363. 9
The Town should not be permitted to achieve some remarkably superior position against the new owner by declining to exercise its statutory rights of enforcement against the violator. See City of Palm Bay v. Wells Fargo Bank, N.A., 57 So. 3d 226, 226 (Fla. 5th DCA 2011) (city cannot grant its code enforcement liens superpriority over a prior recorded mortgage). There is no basis to penalize the new owner, personally, for the violations of the prior owner. Indeed, a new owner cannot even enter the property purchased at a judicial sale to fix anything until the certificate of title completing the sale is filed and delivered. See Bartley v. Church, 347 So. 2d 838, 839 (Fla. 2d DCA 1977) (affirming damages for trespass during this window). If the Town s actual goal is to return dilapidated properties to code compliant properties, slapping the new owner with the prior violator s fines is a counterproductive policy. The negative answer to this narrow question ought to be the end of this appeal. III. THE BROADER ISSUE ADDRESSED IN THE COURT S OPINION. This Court s opinion addresses a far bigger issue, which presents a much greater concern to the FLTA. This Court s opinion holds that a lis pendens cannot discharge a lien if the lien is filed more than thirty days after the rendition of the final judgment of foreclosure. The FLTA joins with the other amici supporting the Appellant in urging this Court to reconsider that holding. The FLTA agrees with 10
arguments presented by the other amici supporting the Appellant, and will not waste this Court s time with a repetition of those arguments. Instead, the FLTA will briefly explain why the court s decision to invoke the absurdity doctrine and to add the phrase end date to the statute defining that phrase with reference to the date used to end one s right to appeal is not a proper use of the absurdity doctrine. Section 48.23(1)(a) expressly allows notices of lis pendens to expire or to be withdrawn or discharged. Section 48.23(1)(d) provides, in part: 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. It is undisputed that the bank in this case did not allow its lis pendens to expire and that it did not withdraw the lis pendens. It is also undisputed that the Town did not intervene in the proceedings prior to the judicial sale. Had it done so, its lien would have been wiped out and it apparently would have received no distribution. Thus, the plain language of the statute provides that the Town s code enforcement liens for fines imposed prior to the sale were forever discharged. Section 48.23 must be read in context with section 45.031, which governs the judicial sales referred to in section 48.23. The discharge of the lis pendens discussed in section 48.23(1)(a) occurs with the judicial sale. Thus, there is no 11
need to add an end date because the very purpose of having a statutory discharge of a lis pendens when the judicial sale is completed is to provide an end date. As discussed by the other amici supporting the Appellant, one of the very first standard forms added to Florida s new modern rules of civil procedure was the standard final judgment of foreclosure. See In re Florida Rules of Civil Procedure, 253 So. 2d 404, 419 (Fla. 1971). It provided in paragraph 6: On filing the certificate of title defendant and all persons claiming under or against him since the filing of the notice of lis pendens are foreclosed of all estate or claim in the property and the purchaser at the sale shall be let into possession of the property. [Id.] This form was submitted by the rules committee to the supreme court with paragraph 6 because that paragraph represented the understanding of the law and the procedures used by real estate attorneys at the time it was created. It was approved by the supreme court because the rule proceeding in the court did not generate dispute among the members of the bar or the court as to its accuracy. In reaching the common and ordinary meaning of a statute, the practical construction which has in fact been adopted by the industry is a matter that courts consider. See Hancock Advert., Inc. v. Dep't of Transp., 549 So. 2d 1086, 1089 (Fla. 3d DCA 1989). The fact that lawyers and judges have, until this case, 12
uniformly viewed lis pendens as ending when discharged by judicial sale is a matter that this court can and should rely upon in resolving this case. The undersigned attorneys cannot deny that on rare occasion the judiciary can come to the aid of the Legislature to save a poorly-worded statute when the Legislature s intent is unquestionably clear and a literal reading of the statute would bring about an absurd result. See Maddox v. State, 923 So. 2d 442, 447 (Fla. 2006). But it is hard to deny that the judiciary risks overstepping its bounds when it relies on the absurdity doctrine to rewrite statutes. This is particularly true when the judiciary adds substantial language to the statute. In this case, the result that occurs when one relies on the language of the standard form judgment from 1971 to interpret the statute is far from absurd. It simply allows the lis pendens to be discharged at the same time that the judicial sale reaches its completion. It provides the same result for the Town that it would have received if it had filed its own foreclosure action during the several years of delay. The actual absurdity is interpreting the statute in a manner that makes a new owner following a judicial sale responsible for the payment of code enforcement fines levied on the prior owner for that prior owner s failure to maintain the property before the judicial sale. Thus, there is no basis to invoke the absurdity doctrine in this case. If this court addresses this broader issue, it should hold that when a foreclosure action is 13
prosecuted to the completion of a judicial sale, a properly filed lis pendens under section 48.23, Florida Statutes (2007), serves to provide the legal notice required for the foreclosure action to discharge liens and interests in property through the completion of the judicial sale. It should hold that the lis pendens is discharged by the completion of the judicial sale. IV. A FINAL COMMENT ON THE DEFINITION OF JUDICIAL SALE. Especially for those of us old enough to remember sales on the courthouse steps, that event felt like the sale. But the sale is not complete, the owner cannot enter the property, and the lienholders cannot be paid until the certificate of title is filed and delivered under section 45.031(6). The Florida Bankers Association in its brief has described the judicial sale, which transfer title, as occurring with the filing of that certificate. The FLTA agrees with that position. The Court should be informed, however, that the standard form judgment of foreclosure was amended in 2010 so that the current version refers to foreclosure at the filing of the certificate of sale. That change does not appear to have occurred for any reason relevant to this case, but was made to address issues concerning the timing of redemption. See In re Amendments To The Florida Rules Of Civil Procedure, 44 So. 3d 555, 558 (Fla. 2010); Saidi v. Wasko, 687 So. 2d 10, 12 (Fla. 5th DCA 1996). 14
In this case, the code enforcement liens at issue, according to the Town s answer brief, were all filed after the entry of the final judgment of foreclosure and no later than October 27, 2011. The record reflects two more liens filed after the issuance of the certificate of title in 2013, but they are not relevant to this legal issue. According to the Town s answer brief, the public sale in this case occurred on September 27, 2012, and the certificate of title issued on October 9, 2012. Thus, for purposes of this case, it makes no difference on which, if any, of these dates this Court determines the judicial sale occurred. Thus, while the FLTA would prefer a holding that the lis pendens is discharged by the filing and delivery of the certificate of title, this Court has no need to say more than the discharge of the lis pendens occurs upon the completion of the judicial sale. CONCLUSION The FLTA thanks this court for the opportunity to file this amicus brief. The court should grant rehearing and either resolve the case narrowly as suggested by this brief or hold that when a foreclosure action is prosecuted to the completion of a judicial sale, a properly filed lis pendens under section 48.23, Florida Statutes (2007), serves to provide the legal notice required for the foreclosure action to discharge liens and interests in property through the completion of the judicial sale. It should hold that the lis pendens is discharged by the judicial sale. 15
Respectfully submitted, /s/ Chris W. Altenbernd Chris W. Altenbernd Florida Bar No. 197394 Marty J. Solomon Florida Bar No. 523151 Nicholas A. Brown Florida Bar No. 90929 CARLTON FIELDS JORDEN BURT, P.A. 4221 W. Boy Scout Boulevard, Suite 1000 Tampa, Florida 33607 Telephone: 813-223-7000 Facsimile: 813-229-4133 Attorneys for the Florida Land Title Association 16
CERTIFICATE OF SERVICE WE HEREBY CERTIFY that a true and correct copy of the foregoing was electronically filed through the edca portal and served via e-mail this 14th day of October, 2016 to: Manuel Farach, Esq. McGlinchey Stafford, PLLC One East Broward Blvd., Suite 1400 Ft. Lauderdale, FL 33301-1834 mfarach@mcglinchey.com nalicea@mcglinchey.com Counsel for Appellant James Ober Susan L. Trevarthen, Esq. Laura K. Wendell, Esq. Eric P. Hockman, Esq. Weiss Serota Helfman Cole & Bierman P.L. 2525 Ponce de Leon Blvd., Suite 700 Coral Gables, FL 33134 strevarthen@wsh-law.com nsalgado@wsh-law.com lwendell@wsh-law.com lmartinez@wsh-law.com ehockman@wsh-law.com szavala@wsh-law.com Counsel for Appellee Town of Lauderdale-by-the-Sea Alexander L. Palenzuela, Esq. Law Offices of Alexander L. Palenzuela, P.A. 1200 Brickell Avenue, Suite 1440 Miami, FL 33131-3205 alp@alp-law.com Counsel for Amicus Curiae City of Coral Gables Joseph E. Foster, Esq. Carrie Ann Wozniak Akerman LLP 420 S. Orange Avenue, Suite 1200 P.O. Box 231 Orlando, FL 32802-0231 ed.foster@akerman.com carrieann.wozniak@akerman.com and Richard H. Martin Akerman LLP 401 E. Jackson Street, Suite 1700 Tampa, FL 33602 richard.martin@akerman.com Counsel for Amicus Curiae Florida Bankers Association 17
Heather J. Judd, Esq. Jordan R. Wolfgram, Esq. Office of the City Attorney for the City of St. Petersburg, FL P.O. Box 2842 St. Petersburg, FL 33731 eservice@stpete.org heather.judd@stpete.org jordan.wolfgram@stpete.org Counsel for Amicus Curiae City of St. Petersburg David Rosenberg, Esq. Robert R. Edwards, Esq. Robertson, Anschutz & Schneid, PL 6409 Congress Avenue, Suite 100 Boca Raton, FL 33487 drosenberg@rasflaw.com redwards@rasflaw.com mail@rasflaw.com Counsel for American Legal and Financial Network ( ALFN ) David Newman, Esq. Ari Miller, Esq. Choice Legal Group, P.A. P.O. Box 9908 Ft. Lauderdale, FL 33310-9908 david.newman@clegalgroup.com ari.miller@clegalgroup.com Co-Counsel for ALFN Irwin R. Gilbert, Esq. Kelley Kronenberg 1475 Centrepark Blvd., Suite 275 West Palm Beach, FL 33401 igilbert@kelleykronenberg.com Counsel for Amicus Curiae The Florida Bar Business Law Section Andrea R. Tromberg, Esq. Jason Joseph, Esq. Gladstone Law Group, P.A. 1499 W. Palmetto Park Road, Suite 300 Boca Raton, FL 33486 atromberg@gladstonelawgroup.com jjoseph@gladstonelawgroup.com Co-Counsel for ALFN Kenneth B. Bell, Esq. John W. Little, III, Esq. Gunster 777 S. Flagler Drive, Suite 500E West Palm Beach, FL 33401 kbell@gunster.com jlittle@gunster.com and Robert W. Goldman Goldman, Felcoski & Stone, P.A. The 745 Building 745 12 th Avenue South, Suite 101 Naples, FL 34102 Counsel for Amicus Curiae Real Property, Probate and Trust Law Section of The Florida Bar 18
/s/ Chris W. Altenbernd Chris W. Altenbernd CERTIFICATE OF COMPLIANCE The undersigned hereby certifies that this brief complies with the font requirements set forth in Florida Rule of Appellate Procedure 9.210 by using Times New Roman 14-point font. /s/ Chris W. Altenbernd Chris W. Altenbernd 19