In short: Not in this case. A condo association argued that Deutsche Bank’s discounted payoff offer was a binding settlement the bank sabotaged by barring any payment to junior lienholders. The trial court refused to enforce it, and in two consolidated appeals in La Gorce Palace Condominium Association v. Deutsche Bank the Third District affirmed without a written opinion on May 3, 2017. The same day the association waived rehearing and dismissed its appeal under a settlement.
The Facts
Deutsche Bank National Trust Company foreclosed a mortgage on a unit at La Gorce Palace, a Miami-Dade condominium. The bank won a final judgment and was the high bidder at the foreclosure sale, but according to the argument the clerk never issued a certificate of title. The association, which according to the bank had foreclosed its own lien against the unit owner in 2012, appealed the final judgment (No. 3D14-2816).
While that appeal was pending, the Third District relinquished jurisdiction. The parties negotiated, and the bank’s agent issued a discounted payoff offer. The offer barred any payment to junior lienholders. The association moved to enforce what it called a settlement, and the trial court denied the motion. The association appealed that order too (No. 3D16-1891), and the two appeals were consolidated. The points below are what the lawyers argued, not findings by the court.
- The association argued there was an enforceable discounted payoff agreement backed by correspondence and a draft closing statement, and that the bank breached the implied covenant of good faith by refusing to take the certificate of title that would have wiped out the junior liens.
- The bank argued the association was not a party to the payoff offer, which was addressed to the former owner, that the association was a third-party purchaser that took title subject to the mortgage, and that a third-party purchaser cannot raise the borrower’s defenses.
- On the foreclosure itself, the association argued the bank never proved standing. The bank had filed the original note with the clerk during the case, the clerk later could not find it, and the bank proceeded on a lost note theory. The panel pressed the bank on what evidence showed the blank endorsement was on the note when the complaint was filed.
- The bank argued the court could reestablish the lost court record under its inherent authority, and that no one claimed the copy differed from the original.
The Decision
The Third District affirmed on May 3, 2017. The ACIS docket lists the disposition in both consolidated appeals as “Affirmed – Per Curiam Affirmed,” with no written opinion.
The same day, the association filed a notice waiving rehearing and dismissing the appeal under a settlement. On May 4, 2017 the court recognized that notice and dismissed the appeal, without issuing a mandate. A per curiam affirmance decides only this case, and the settlement means the parties resolved their dispute themselves. Neither tells us how the court viewed the standing or lost note issues.
The Law
A settlement is a contract. To be enforced, it needs a meeting of the minds on the essential terms. A discounted payoff letter that sets conditions one side cannot meet may be an offer that never ripened into a deal, which is the problem the panel raised at argument.
After a foreclosure sale, the clerk files a certificate of sale under section 45.031(4). If no objection is filed within 10 days, the clerk issues a certificate of title under section 45.031(5), and title passes to the purchaser. Until then, the sale is not complete.
When a court file is lost, section 71.011 lets an interested person reestablish it, and the statute preserves common law and equitable ways of doing so. A foreclosing plaintiff that lacks the original note must also satisfy section 673.3091, Florida’s lost instrument statute, and must prove it had standing when it filed suit.
Lessons
- A discounted payoff letter is not the same as a signed settlement. If the terms cannot be performed, a court may find there was never an agreement.
- If junior liens stand in the way of a closing, deal with them expressly in the payoff terms before relying on the deal.
- Lenders should not file an original note with the clerk without a reason. A lost note in the court file creates a second fight over standing.
- An association that takes title to a unit through its own lien foreclosure generally takes subject to a senior first mortgage, so it needs a plan for that debt.
Watch the Oral Argument
This is the recording of the actual oral argument, posted on the channel. What lawyers and judges say at argument is not the ruling; the decision is summarized above.
Bank's Discounted Payoff Barred Paying Junior Liens: Was There an Enforceable Settlement?
Go Deeper
- Paid $52,000 Under a Mediation Deal, Then Hit With a New $20,000 Bill (Lentz v. Community Bank)
- How Far Back Does a Condo Buyer Owe Unpaid Assessments? (Park West v. Londono)
- Is An Original Promissory Note Required In Florida Foreclosure Proceedings? (Yes, Yes, Yes!)
Frequently Asked Questions
Is a bank's discounted payoff letter a binding settlement?
Not automatically. A court will enforce it only if the parties agreed on all essential terms. In La Gorce Palace, the trial court refused to enforce a discounted payoff the association relied on, and the Third District affirmed without opinion.
Do junior liens have to be paid off in a short payoff or short sale?
Junior lienholders rarely release their liens for nothing, so a payoff that bars any payment to them can be impossible to close. A completed foreclosure sale and certificate of title would cut off junior liens, but here the certificate of title was never issued.
What happens if the original note is lost in the court file?
The lender must reestablish it, either under the court’s inherent authority or section 71.011, and still prove it had standing when it filed suit. Lost instrument enforcement is governed by section 673.3091.
Can a condo association that took title to a unit fight the bank's foreclosure?
The bank argued that a third-party purchaser takes subject to the mortgage and cannot raise the borrower’s defenses. The panel questioned whether standing, which the lender must prove, works that way. The appeal ended in a per curiam affirmance and a settlement, so the question was not decided.
Talk to a Florida real estate litigation lawyer
Weidner Law, P.A. handles Florida real estate disputes, title problems and appeals from St. Petersburg. If you need a real estate litigation lawyer, call (727) 954-8752 or email weidner@mattweidnerlaw.com.
Read the law yourself, free: every Florida statute and court rule is on floridarules.net.
This article is general information about Florida law, not legal advice about your situation. Reading it, watching the videos, or contacting the firm does not create an attorney-client relationship. Every case turns on its own facts, and past results do not guarantee a similar outcome. The hiring of a lawyer is an important decision that should not be based solely upon advertisements.
