25
Mar
2010 by CaseClarity dot com

Vacate Foreclosure Judgment & Sale? “No
Problem”


Mortgage companies filing
foreclosure actions on shaky ground generally do not worry about their
judgments or sales being set aside because they know a secret.  They
have a get-out-of-jail-card granted to them by our Florida Supreme
Court.

The secret, and legal issue, may
explain one reason why foreclosing plaintiffs and their attorneys have
not been more diligent in bringing their claims against property owners
with complete or even truthful pleadings and documentation.  The secret
and its history begins with precedent established during the great
depression in Quinn Plumbing Co., Inc., v. New Miami Shores Corp.,
100 Fla. 413, 129 So. 690, 692, 73 A.L.R. 600 and later affirmed by Bridier
v. Burns
, 148 Fla. 587, 4 So.2d 853 (Fla. 1941).  In these  two
Supreme Court cases it was held that when real property, subject of a
mortgage foreclosure judgment, is sold and that sale is later set aside,
the mortgage company does not have to return the money paid by the
purchaser.  Instead, the court established that in vacating the sale the
defendant property owner is restored to his position as title holder,
effectively wiping out any deed created with the completion of the
public sale, the rights of the mortgagee are then subrogated to the
purchaser.  In other words, the purchaser steps into the shoes of the
mortgage company and now has all the rights the mortgagee had.  The
Bridier court stated “[S]uch purchaser becomes virtually an equitable
assignee of the mortgage and of the debt it secured, with all rights of
the original mortgagee, and becomes entitled to an action de novo for
the foreclosure of such mortgage against all parties”.  Accordingly, to
recover money paid for the purchase of the property the purchaser now
has to enforce the mortgage and note.

In the case leading to Bridier,
Bridier v. Burns, 145 Fla. 642, 200 So. 355, a foreclosure
judgment led to the sale of real property in Volusia County. The sale
was timely challenged by the filing of objections backed by a proper
supersedeas bond.  The Clerk of the Court rejected the bond and relief
was sought by petition seeking certiorari.  In granting certiorari the
court declared the deed resulting from the sale as null and void.  On
remand, however, the lower court denied the original property owner to
be restored as title holder and that issue was brought before the
appellate court as a petition for modification.  In reversing the lower
court, the opinion stated “[W]hen a foreclosure sale is set aside by an
order of court for any fatal irregularity, the title acquired by the
purchaser is thereby vacated. The law subrogates the purchaser at the
void foreclosure sale to all the rights of the mortgagee in the
indebtedness and the mortgage securing the payment of the same.  The
mortgage and final decree are not affected by the void sale.”

The Bridier court cited Quinn,
where the court held “It is well established in this jurisdiction that
the purchaser of mortgaged property at a foreclosure sale, when for any
reason the foreclosure proceedings are imperfect or irregular, becomes
subrogated to all the rights of the mortgagee in such mortgage and to
the indebtedness that it secured. Such purchaser becomes virtually an
equitable assignee of the mortgage and of the debt it secured, with all
rights of the original mortgagee, and becomes entitled to an action de
novo for the foreclosure of such mortgage against all parties holding
junior encumbrances who were omitted as parties to the foreclosure
proceedings under which the purchaser bought.”  The holding in Bridier
remains law in Florida as it was also cited in American Bankers Life
Assur. Co. of Fla. v. Williams, Salomon, Kanner & Damian
, 399
So.2d 365 (Fla. 3rd DCA 1981).

So what’s the big deal?  For
starters, there appears to be very little incentive for the foreclosing
plaintiff to make its foreclosure complaint to be accurate or even
truthful at the time of filing the action.  Foreclosing plaintiffs
realize that judges are always inclined to grant a foreclosure
judgment.  Why work any harder?  There is also little risk associated
with presenting shoddy or even fraudulent foreclosure pleadings because
after the property is sold, and the plaintiff gets paid, the law
established by Quinn and Bridier shield the mortgage
company from having to forfeit the proceeds – assuming someone else has
purchased and paid for the property.  If the foreclosing plaintiff has
acquired the property by bidding any portion of their judgment there is
also little risk because the setting aside of the sale merely leads to
restoring the property owner to his position as title holder prior to
the completion of the vacated sale.  No sanctions, attorneys’ fees or
other form of risk – ever.

Additionally, if the foreclosing
plaintiff has also taken possession of the property beyond the sale,
even if set aside, Florida law even shields the mortgage company from
having to relinquish possession to the mortgagor according to the
holding in 601 West 26 Corp. v. Equity Capital Company, 178
So.2d 894 (Fla. 3rd DCA 1965)(holding it would not be proper
under the law to require the mortgagee in possession to surrender the
premises to the mortgagor (or to a receiver unless need for the later
should appear) pending accounting and necessary resale. This is so
because it is established that a mortgagee who acquires possession of
property in good faith on a foreclosure sale which later is set aside
holds as a ‘mortgagee in possession,’ entitled to retain the property
until the mortgage debt is paid or redeemed, or the property
foreclosed).

This might explain the mortgage
industry’s mad dash to get foreclosure complaints through the courts as
quickly as possible.  The strategy has been effective and even aided by
the concept of a “rocket-docket”.  And, the foreclosure mills are all
too eager to be paid to prop up the scheme.  It’s easy money.  For about
$1,200 a case all we have to do is get the judgment – using a
production line workflow.  File the complaint, even if it is not
accurate, complete or truthful; push it through and get the judgment;
sell the property and collect the money.  The buyer at auction is S-O-L
if the sale is set aside – minor detail.  Mortgage company client gets
to keep the proceeds and the buyer has to work it out.  Next case.  One
has to wonder how many times this precedent has been the subject of
discussions, negotiations or letters exchanged between foreclosure
property buyers and the foreclosing plaintiff’s attorney.  It would be
throwing good money after bad for the investor to try getting their
purchase money back especially with precedent dating back to 1930. 
Investors would simply have to take it on the chin.

The foregoing suggests that any
litigation flowing from vacated judgments or sales set aside, the fight
over the property, the rights of the mortgagee and anything related to
the proceedings leading up to the public auction and sale will be
between the former property owner and the purchaser at the sale
conducted by the Clerk of the Court.  Such a deal.  Can anyone say
“caveat emptor”.  In the end, this well-kept secret will continue to
fuel the mortgage industry’s rush to displace homeowners even when there
is no right to foreclose in the first place.  After all, what’s the
risk?

Advertisements