>
>Daily Development for Thursday, March 30, 2006
>by: Patrick A. Randolph, Jr.
>Elmer F. Pierson Professor of Law
>UMKC School of Law
>Of Counsel: Blackwell Sanders Peper Martin
>Kansas City, Missouri
>dirt@umkc.edu
>
>CONDOMINIUMS; ASSESSMENTS; FORECLOSURE PROCEEDS: Although, under Florida law, a condominium owner is jointly and severally liable for assessment liens against the unit, the association may not reach surplus proceeds from foreclosure of a mortgage junior to the association’s assessment lien unless it obtains an adjudication of a personal claim against the unit owner in the foreclosure proceeding.  The Association’s retains the right to foreclose its senior lien against the foreclosure sale purchaser.

>
>Garcia v. Stewart, 906 So. 2d 1117 (Fla. App. 2005) 
>
>Garcia was in default in payment of assessment liens on his condominium unit, and also on both a first and second mortgage.  The first mortgagee commenced a foreclosure action.  The association joined that action and cross-claimed for foreclosure of its lien in that action.  No final judgment was ever filed in that action, and a foreclosure sale was never held.

>
>Following the filing of the first mortgage foreclosure action, the junior mortgagee commenced an independent lawsuit by naming the condominium association as a party defendant and alleging that it had priority as against the association’s lien.  The association appeared and established that its lien, under Florida law, was in fact senior to that of the foreclosing mortgagee.  The court then dismissed the association from the action.  (Remember that at this time the first mortgage foreclosure, with the association’s cross complaint for its own foreclosure, was still pending.)

>
>The unit owner himself defaulted in the second mortgage foreclosure action, and the foreclosure sale was held, producing a surplus of almost $18,000.  The purchaser at that sale entered the first lien foreclosure action before it was final and offered to pay off the first mortgage.  The first mortgagee accepted.

>
>The association then went into the court where the first mortgage foreclosure and its own foreclosure were still pending, and claimed that the surplus proceeds from the second mortgage foreclosure should be paid over to it.  It asserted  that what was once a assessment lien claim for about $1200 had now grown, through interest, attorney’s fees, and an additional special assessment, to a claim of over $17,000.  The trial court in the first mortgage foreclosure action ordered disbursement of the proceeds to the association from the surplus created by the second mortgage foreclosure action.

>
>On appeal by the mortgagor (suddenly awakened by this turn of events: Held: Reversed.
>
>The Florida Court of Appeals noted that the trial court in the second mortgage foreclosure had been correct in its initial ruling determining that the holder of a  junior lien could not compel a senior lienholder to participate in the junior’s foreclosure proceeding, and that the court consequently properly dismissed the association from the foreclosure action. 

>
>It noted, however that the Association did have an alternative remedy - it could have joined the foreclosure action as a party plaintiff, seeking a personal judgment against the owner for its assessment claim and payment out of proceeds of that claim with priority.  It might have sought a personal judgment or a foreclosure of its senior lien.   It had elected to do neither, and therefore had no claim to the foreclosure proceeds.  It cited the Restatement of Mortgages as authority for this position.  The fact that the association already had an action pending to foreclose its lien in the first mortgage foreclosure action was of no consequence to the court.  That action was in the wrong court to permit it to get at these proceeds.  It retained the right, at least so far as the court was concerned to proceed for foreclose its lien against the second mortgage foreclosure purchaser.

>
>Comment:   The editor suspects that what really was going on here was that the association and the second mortgage foreclosure purchaser had cut a deal and that the association had already released its claim against the property, assuming that it was protected by the surplus proceeds.  The appeals court action likely was a bit “whoopsie!!”

>
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