50 Nov 2012 FLCAJ

s most community associations are well aware, it is extremely frustrating, to say the least, watching how long it takes a mort- gage foreclosure action to be completed from start to finish. The reasons for delay are numerous, but usually not convincing as justified. In this regard, a recent decision against a mortgage holder has a dose of “poetic justice,” and will be of interest to Florida community associations. A Florida court ruled a mortgage foreclosure action should be dismissed because the lender failed to prosecute the case, or move the case forward, for too long. In certain circumstances, a judge can dismiss a foreclosure filed in Florida Circuit Court if the case remains stagnant for over twelve

Mortgage Foreclosures

A

floridalaw

by Michael J. Gelfand, Esq.

FLCAJ Nov 2012 51

months. And better yet, if the mortgage holder delayed way too long, they likely would be barred from re-filing to foreclose the same mortgage! The decision was issued in Spencer v. EMC Mortgage Cor-poration, No. 3D11-136 (Fla. 3rd DCA, August 20, 2012). The mortgage holder, EMC Mortgage, filed a foreclosure complaint in November 2002, alleging that the owner defaulted on the mortgage over five years earlier in July 1997. The owner raised several affirmative defenses, including the defense that the “statute of limitations” barred the lawsuit because of the passage of time. The case sat for thirteen months. The trial court issued a notice of lack of prosecution, asking the mortgage holder to explain why the case should not be dismissed. No one filed any documents in the case for the next sixty days. Eighty-three days later, EMC filed a response and a motion for summary judgment. EMC’s counsel advised the court that he had only learned of the notice of lack of prosecu-tion two weeks earlier since the notice was sent to the offices of prior counsel. The court denied the motion to dismiss for lack of prosecution and granted EMC’s motion for summary judgment, foreclosing the mortgage. The Florida appellate court reversed the decision of the trial court. Further, it was ordered that the case must be dismissed for the lender’s failure to prosecute the case within the required time frame! The court noted that Florida Rule of Civil Proce-dure Rule 1.420(e) provides

that if a case is stagnant of record for over ten months, then if a claimant does not move the case forward in the next 60 days or provide good cause why the case should not be dismissed, then the case should be dismissed. The court pointed out that no one filed any documents in the case for over ten months before the court issued the notice of lack of prosecution. There was no activity in the case for the 60 days following the instance of the Notice. Furthermore, the lender did not show good cause why the case should remain pending. Then, moving to the commentary that most associations would appre-ciate, the appellate court stated that even if the case was not dismissed for failure to prosecute, the enforcement of the note and mortgage was

52 Nov 2012 FLCAJ

“likely” barred by Florida’s five-year statute of limita-tions. The complaint alleged that the default occurred in July 1997, and the lawsuit was not filed until November 2002. Generally, the foreclosure of a mortgage upon Florida’s real property must be filed no more than five years after the owner’s default. If that was not enough reason for dismissal, the appellate court further stated that the case would have been reversed because of the “patently incorrect” compu-tations of indebtedness. The judgment amount included the principal balance of $67,976.78 with interest from November 1, 2007, through March 15, 2010, in the amount of $110,112.08 and additional costs and fees for a total judg-ment amount of $279,320.49. Clearly, the interest calcula-tions for a three-year period were wrong. Because mortgage holders all too frequently sit on their hands and do not move cases forward in a timely manner, Florida community associa-tions may request that coun-sel attempt to move the case forward. In doing so, there may be a better chance of avoiding a case being dis-missed for lack of prosecution. Alternatively, if five years has passed from default , then an association might be able to have a mortgage invalidated. Of course, associations seek-ing to foreclose must have good records with proper computations. If you have any questions about mortgage foreclosures in your commu-nity, contact your associa-tion’s counsel to determine what options you may have.

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Assessments: Tenant Liability to Pay Rent to Association Last year, the Florida leg-islature amended the Florida Condominium Act and Florida Homeowners Associ-ation Act to address tenant liability for assessments. In what may be the first Florida appellate court decision addressing the tenant liability for assessments, a Florida appellate court affirmed the trial court, which allocated rents between a condomin-ium association and a lender. In Ocean Bank v. 107 Avenue Office Park Condominium Asso-ciation, Inc., No. 3D12-538, (Fla. 3rd DCA, August 15, 2012), the trial court ordered the tenant of a condomin-ium office to divide its rents between the condominium association and the lender. Both the condominium asso-ciation and the lender filed foreclosure actions. How-ever, the appellate court ruled that there was no basis for deducting the association’s attorney’s fees payable in the lien foreclosure case from the mortgagee’s share of the rents. In affirming the trial court decisions, more questions appear to be left unanswered than answered. For example, if the association was fore-closing upon the bank, was this a second mortgage and inferior to the association’s claim of lien? Thus, the prec-edential authority of this decision may be limited. Michael J. Gelfand is a Partner in the law firm of Gelfand & Arpe, P.A., in West Palm Beach, Florida. You may reach him by e-mail at Michael@flcaj.com or by phone at (561) 655-6224. !