Cambridge Capital Corp. v. Halcon Enterprises, Inc.

Decision Date21 October 1993
Docket NumberNo. 92-424-CIV.,92-424-CIV.
PartiesCAMBRIDGE CAPITAL CORP., a Florida Corporation, and Boston Investors Group, Inc. a Florida Corporation, Plaintiffs, v. HALCON ENTERPRISES, INC., a Florida Corporation; FDIC successor in interest for Creditbank, a Florida Corporation; The Orion Insurance Company; and All Other Parties Claiming Or Who Might Claim An Interest in the Subject Property, Defendants.
CourtU.S. District Court — Southern District of Florida

Damodar S. Airan, Miami, FL, for plaintiffs.

Brian K. Goodkind, Wesley R. Parsons, Adorno & Zeder, P.A., Miami, FL and L. Bruce Swiren, Orlando, FL, for FDIC.

Odalys Ibrahim, Miami, FL, for Halcon Enterprises, Inc.


GRAHAM, District Judge.

THIS CAUSE came before the Court upon Defendant, Federal Deposit Insurance Corporation's, in its Corporate Capacity ("FDIC-Corporate"), Motion for Summary Final Judgment (D.E. 26), filed August 11, 1993. For the reasons stated in the memorandum opinion below, the motion for summary final judgment is granted.


The Federal Deposit Insurance Corporation is a corporation organized and existing pursuant to an act of Congress of the United States known as the Federal Deposit Insurance Act, 12 U.S.C. § 1811, et seq., with its principal place of business located in Washington, D.C. Prior to and including January 26, 1990, CreditBank was a banking institution organized and existing under the laws of Florida with its principal place of business in Dade County, Florida. On January 26, 1990, the Office of the Comptroller of the Currency found CreditBank to be insolvent and appointed the Federal Deposit Insurance Corporation as Receiver for CreditBank pursuant to 12 U.S.C. § 1821 et seq. On that same date, the appointment was accepted, and FDIC-Corporate, as authorized by 12 U.S.C. § 1823(c), purchased by contract of sale and by assignment, certain assets of CreditBank from the Federal Deposit Insurance Corporation as Receiver, including the mortgage loan that is the subject of this action.

On January 24, 1992, Plaintiffs filed this action to quiet title to real property located in Dade County, Florida in the Circuit Court for the Eleventh Judicial Circuit in and for Dade County, Florida. FDIC-Corporate removed this action to this Court on February 21, 1992. The property is a condominium unit described as: "Kendall Falls Condo, Unit 2, Undiv 1/18 int in common elements, Off Rec XXXXX-XXXX." In their Complaint, Plaintiffs allege they acquired legal title to the property in a public tax sale through issuance of a tax deed on January 10, 1992.1 CreditBank had a first mortgage on the property, which FDIC-Corporate now owns and holds and has held since its purchase of the mortgage two years prior to the tax sale.2 Plaintiffs allege FDIC-Corporate's first mortgage was extinguished in the public sale and by issuance of the tax deed.

On May 13, 1992, FDIC-Corporate filed a counterclaim against Plaintiffs and a crossclaim against Halcon and Defendant, Orion Insurance Company ("Orion"), seeking a declaration that, pursuant to special rights granted to FDIC-Corporate by Congress in 12 U.S.C. § 1825(b)(2), FDIC-Corporate's interest as a mortgagee was not extinguished by the tax sale and issuance of the tax deed and its mortgage survived these events. FDIC-Corporate pleaded two counts in its Counterclaim and Crossclaim seeking, specifically, a declaration that its first mortgage interest survived this tax sale and still encumbers the property, and, generally, a declaration that 12 U.S.C. § 1825(b)(2) mandates that any property interest of the Federal Deposit Insurance Corporation as Receiver (or FDIC-Corporate pursuant to 12 U.S.C. § 1823(d)(3)(A)) survives a state tax sale, unless the Federal Deposit Insurance Corporation has consented to the extinguishment of such interest. The Clerk entered a default against Plaintiffs on FDIC-Corporate's Counterclaim on July 13, 1992, and against Orion on FDIC-Corporate's Crossclaim on September 22, 1992.

On October 1, 1992, Halcon filed for bankruptcy relief under Chapter 7 of Title 11, United States Code. In response thereto, on November 30, 1992, this Court stayed this action and placed it in its civil suspense file. On May 4, 1993, the United States Bankruptcy Court for the Southern District of Florida lifted the automatic stay to allow this action to proceed as to all parties except Halcon. On August 19, 1993, the Court removed this case from its suspense docket and lifted its stay.

On October 9, 1992, FDIC-Corporate moved for the entry of default final judgment on its Counterclaim against Plaintiffs and on its Crossclaim against Orion. The Court entered a default final judgment thereon on September 28, 1993.


A district court must grant summary judgment if it appears through pleadings, depositions, admissions, and affidavits, considered in the light most favorable to the opposing party, that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986); Real Estate Financing v. Resolution Trust Corporation, 950 F.2d 1540, 1542 (11th Cir.1992); McGahee v. Northern Propane Gas Co., 858 F.2d 1487, 1493 (11th Cir.1988); Cubbage v. Averett, 626 F.2d 1307, 1308 (5th Cir.1980).


The sale of property for unpaid taxes is governed by Chapter 197, Florida Statutes (1991). Assessed but unpaid property taxes on a parcel of property become a first priority lien on such property on January 1 of the year they are levied. Section 197.122(1), Florida Statutes (1991). The Clerk then issues a Tax Sale Certificate for all parcels on which taxes are unpaid as of June 1 of the following year, which certificates are auctioned to the highest bidder, who pays the taxes on the property. Section 197.432. After the Tax Sale Certificate has been issued, it may be redeemed through payment of the certificate. Section 197.472. After two years have passed since April 1 of the year of the purchase of the Tax Sale Certificate, the owner of the certificate may apply to the County Clerk to sell the property, Section 197.502-.542, the proceeds therefrom going to the owner of the certificate, Section 197.582.

The sale of the property and the issuance of a tax deed in accordance with the above procedure purportedly extinguish any "right, interest, restriction, or other covenant" other than a covenant running with land or an interest held by a municipal or county government. Section 197.552. A tax deed is "prima facie evidence of the regularity of all proceedings from the valuation of the lands to the issuance of the deed, inclusive." Id.

B. THE EFFECT OF 12 U.S.C. § 1825(B)(2) ON TAX SALES.

Pursuant to Section 1825(b)(2) of Title 12, the Federal Deposit Insurance Corporation, when acting in its capacity as receiver, is exempted from the extinguishment of its property interests through sale, foreclosure, or levy. Section 1825(b) provides in full:

(b) Other exemptions
When acting as a receiver, the following provisions shall apply with respect to the Federal Deposit Insurance Corporation:
(1) The Corporation including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation imposed by and State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed, except that, notwithstanding the failure of any person to challenge an assessment under State law of such property's value, such value, and the tax thereon, shall be determined as of the period for which such tax is imposed.
(2) No property of the Corporation shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Corporation, nor shall any involuntary lien attach to the property of the Corporation.
(3) The Corporation shall not be liable for any amounts in the nature of penalties or fines, including those arising from the failure of any person to pay any real property, personal property, probate, or recording tax or any recording or filing fees when due.
This subsection shall not apply with respect to any tax imposed (or other amount arising) under Title 26.3

The court recently held in GWN Petroleum Corp. v. Ok-Tex Oil & Gas, Inc., 998 F.2d 853, 855-56 (10th Cir.1993), that Section 1825(b) operates in favor of FDIC-Corporate by virtue of 12 U.S.C. § 1823(d)(3)(A). This statute provides:

With respect to any asset acquired or liability assumed pursuant to this section, the Corporation shall have all of the powers, rights, privileges, and authorities of the Corporation as receiver under sections 1821 and 1825(b) of this title.

The Federal Deposit Insurance Corporation, acting in both its corporate and receivership capacities (the "FDIC"), has issued a Tax Policy Statement and Legal Memorandum4 thereon which sets forth a policy of recognizing claims for any property taxes secured by a valid lien with priority over a lien interest held by the FDIC. The FDIC Tax Policy Statement also states, however, that while a lien for taxes may attach, no lien held by the FDIC can be eliminated by foreclosure (to which the analogy in this case is the tax sale and this subsequent quiet title action) without the FDIC's consent. The policy against involuntary foreclosure or sale reflects both the express terms of Section 1825(b)(2), and the established federal common law that a real estate tax lien cannot be foreclosed in derogation of a mortgage interest held by a federal entity where immunity has not been waived.

Section 1825(b)(2) prevents FDIC-Corporate's mortgage from being extinguished by a tax sale under...

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