Foreclosure Defense Florida

BofA v. Kipps- I Wonder if LM Funding Will Revise The Risks Articulated in Their Public Offering?

By December 9, 2015No Comments

Florida’s Second District Court of Appeals just released an absolute BOMBSHELL of an opinion in the case Bank of America v. Kipps Colony.  Now when a company like LM Funding goes public, they are required to report potential risks and all kinds of details with the Securities and Exchange Commission, called “Risk Factors” on the Prospetus…(See Here For the SEC Prospectus)

In reading through the Risk Factors, I wonder whether the disclosures are enough of a warning about potentially adverse appellate court decisions that can change the entire dynamic in foreclosure cases…like Kipps Colony.

The Kipps Colony decision is so important across all of foreclosures and real property in general because it blows completely out of the water the homeowner’s association foreclosure sale in this particular case…but in so many others…the reach and impact of this decision across so many different industries cannot be overstated. Just read the decision here:

During the pendency of the appeal and before it was perfected, the
Association, as an appellee in the case, asked this court to relinquish jurisdiction to
allow the trial court to rule on the Association’s motion to amend the final judgment
pursuant to rule 1.540(a), which alleged that the foreclosure judgment contained a
clerical error. This court relinquished jurisdiction. Bank of America joined in the
Association’s rule 1.540(a) motion. At the hearing on that motion, the Association
argued that the final judgment failed to delineate which of Bank of America’s mortgages
the Association’s lien was foreclosing and that this was a clerical error or misnomer,
correctable via a rule 1.540(a) motion. The trial court denied the motion, finding that the
complaint “only alleged the one Bank of America O.R. book and page of the mortgage,”
and “that there was no additional mortgage noted in the initial complaint.” Therefore,
the court ruled that it would be a substantive issue to amend the final judgment and not
a clerical change. The court also found that “to the extent [the Assocation] complains
that the Final Judgment improperly purports to eliminate a first mortgage of Bank of
America, the [c]ourt is persuaded that said issue has already been litigated adverse to
Bank of America in [the quiet title action].” However, the only issue before the court in
the quiet title action was whether service on Bank of America was proper. Bank of
America appealed the court’s denial of the rule 1.540(a) motion, commencing case
number 2D14-4436.

A foreclosure extinguishes the liens of any junior mortgagees, Abdoney v.
York, 903 So. 2d 981, 983 (Fla. 2d DCA 2005), but it “does not terminate interests in the
foreclosed real estate that are senior to the mortgage being foreclosed,” U.S. Bank Nat’l
Ass’n v. Bevans, 138 So. 3d 1185, 1187 (Fla. 3d DCA 2014) (citation omitted). “A prior
mortgagee may elect for himself the time and manner of enforcing his security. He
cannot be compelled to be a party to a suit by a junior encumbrancer foreclosing his
lien.” Citimortgage, Inc. v. Henry, 24 So. 3d 641, 643 (Fla. 2d DCA 2009) (quoting
Cone Bros. Constr. Co. v. Moore, 193 So. 288, 290 (Fla. 1940)); accord Futrell Custom
Pools, Inc. v. Sunshine Custom Builders, Inc., 112 So. 3d 653, 653 (Fla. 5th DCA 2013)
(concluding that Cone Brothers is still good law and affirming the trial court’s orders
vacating in part the final judgment of foreclosure).

It is on that basis that Bank of America argued the Association’s action
could not foreclose Bank of America’s first mortgage and that the final judgment
purporting to do so is void.

A void judgment is so defective that it is deemed never to
have had legal force and effect. In contrast, a voidable
judgment is a judgment that has been entered based upon
some error in procedure that allows a party to have the
judgment vacated, but the judgment has legal force and
effect unless and until it is vacated.

We recognize that our reversal of the motion for relief from judgment will
directly impact Inland Asset’s interest in the property. In that regard, we note that Bank
of America, as a superior lien holder, was not required to litigate its interest in the
Association’s foreclosure action. See Wells Fargo Bank, N.A. v. Rutledge, 148 So. 3d
533, 534 (Fla. 2d DCA 2014); Bevans, 138 So. 3d at 1187 (“The Association . . . could
not name a superior lienholder like the Bank as a defendant in the Association’s suit to
foreclose on its junior lien.”). Further, because Bank of America filed its lis pendens and
original foreclosure suit in 2009, in order for the Association to enforce its property
interest—which was unrecorded at the time Bank of America’s lis pendens was filed—
the Association was required to intervene in the Bank’s foreclosure suit. See U.S. Bank
Nat’l Ass’n v. Quadomain Condo. Ass’n, 103 So. 3d 977, 979 (Fla. 4th DCA 2012)
(citing § 48.23, Fla. Stat. (2010)). “[T]he court presiding over the action which created
the lis pendens has exclusive jurisdiction to adjudicate any encumbrance or interest in
the subject property from the date the lis pendens is recorded to the date it enters final
judgment.” Id. at 979-80. “[A]ll other actions are barred,” and “the court in the
Association’s lien foreclosure action did not have jurisdiction to foreclose the lien.”


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