[CLC-Discussion] Fwd: [RPPTL RP Div New Decision: Foreclosures of Trusts (CDC Builders v. Biltmore-Sevilla Debt. Inv.)

[Roberts, Hardy L.]

FYI


From: condomania-bounces at lists.flabarrpptl.org<mailto:condomania-bounces at lists.flabarrpptl.org> [mailto:condomania-bounces at lists.flabarrpptl.org] On Behalf Of Michael J. Gelfand
Sent: Monday, September 22, 2014 4:37 PM
To: RPPTL Condominium and Planned Development Committee (condomania at lists.flabarrpptl.org<mailto:condomania at lists.flabarrpptl.org>)
Subject: [RPPTL-condomania] New Decision: Foreclosures of Trusts (CDC Builders v. Biltmore-Sevilla Debt. Inv.)

Dear Committee Members:
This reports on last Wednesday’s decision reversing a summary judgment and addressing whether through intermediaries an owner can purchase a mortgage encumbering its property with the intent of foreclosing and extinguishing junior liens. CDC Builders v. Biltmore-Sevilla Debt Investors, LLC, 3rd DCA Case No. 3D13-603 (Fla 3rd DCA, September 17, 2014)<http://www.3dca.flcourts.org/Opinions/3D13-0603.pdf>.
As the issue may foreshadow, the facts are somewhat complex.  To start, perhaps inauspiciously,  the Court called out the fact that the manager of the inter-related land development (“Developers”)  companies was an attorney.  One of the Developers hired CDC Builders to construct luxury homes on the property.
When Developers failed to pay CDC, Builders recorded statutory construction liens and filed suit to foreclose the liens. Apparently in the interim, the Developers did not pay SunTrust for the mortgage on the property.
Now it gets creative.  The Developers’ attorney structured partial payments to SunTrust, not to reduce the mortgage principal, but to create “junior liens” in an effort to limit the equity available to satisfy CDC’s liens.
Even though SunTrust was not actively marketing the loan, the attorney created a new entity, Biltmore-Sevilla which purchased the mortgage and note from SunTrust. Very interestingly, SunTrust memoed its file that Biltmore-Sevilla bought the loan documents rather than satisfying the mortgage and note.
Now comes the good part.  Biltmore-Sevilla then sought to foreclose the mortgage!  The foreclosure named CDC as a defendant seeding to extinguish CDC’s contractor lien.  The Developers answering Biltmore-Sevilla’s complaint, but did not file any defenses.
Relying on the Third Restatement of Property, Section 6.4 (comment e) (1997), the Court held that:
The law does not permit a person to borrow money from a bank, give the bank a mortgage, incur additional liens and junior mortgages on the property, purchase the mortgage back from the bank, and then foreclose on the mortgage for the primary purpose of eliminating the additional liens and junior mortgages.
The holding was based on the principle that “equity will not apply the principle of subrogation, where to do so would deprive a party of a legal right.” Further, “what investors cannot do indirectly through a single company, investors cannot do indirectly through a network of companies.”
Interestingly, while the Court acknowledged “disagreement or confusion” regarding the basis for the equitable principle, the Court expressly avoided determining the source, merely stating that the principle is “part of Florida law.”
Thank you, Mr. Christie, for providing the opinion.
Have a great week.


[cid:image9aa80e.jpg at 78c6435f.f6fe4e7e]   [A with acronym.jpg]
Michael J. Gelfand
Florida Bar Board Certified Real Estate Attorney
Florida Supreme Court Certified Mediator:
   Civil Circuit Court & Civil County Court
Gelfand & Arpe, P.A.<http://www.gelfandarpe.com/>
"Assisting Communities to Efficiently Reach Goals"
1555 Tower, Suite 1220
1555 Palm Beach Lakes Blvd.
West Palm Beach Florida 33401-2329
(561) 655-6224

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