Eurovest, Ltd. v. Segall

• Decision Date: 12 July 1988
• Docket Number: No. 87-396,87-396
• Citation: 528 So.2d 482,13 Fla. L. Weekly 1616
• Parties: 13 Fla. L. Weekly 1616 EUROVEST, LTD., Appellant, v. Matthew J. SEGALL, Appellee.
• Court: Florida District Court of Appeals

Page 482

528 So.2d 482

13 Fla. L. Weekly 1616

EUROVEST, LTD., Appellant, v. Matthew J. SEGALL, Appellee.

No. 87-396.

District Court of Appeal of Florida,

Third District.

July 12, 1988.

Rehearing Denied Aug. 11, 1988.

Greenfield & DuVal and Harvie S. DuVal, North Miami, for appellant.

Horton, Perse & Ginsberg and Mallory Horton, Miami, for appellee.

Before BARKDULL, NESBITT and JORGENSON, JJ.

PER CURIAM.

Eurovest Limited appeals an order declaring its mortgage invalid. We reverse.

David Kaplan formed Eurovest Limited, a Cayman Islands corporation, in April 1972. At the time of incorporation, Kaplan was the sole stockholder. On March 1, 1972, he and his wife executed a note and mortgage in the sum of $150,000 to the corporation encumbering their residence. The mortgage deed was recorded on May 8, 1972, in the Dade County Public Records. Kaplan, joined by his wife, deeded the property to Segall on September 14, 1975, in full payment for Segall's legal representation in an unrelated matter. Subsequently, Segall filed an action to quiet title alleging that the mortgage held by Eurovest was invalid for failure of consideration. Segall alleged that the mortgage was a "scam" created by Kaplan to give the impression that the corporation had assets; and that Kaplan told him at the time the property was conveyed that the mortgage was not valid. Eurovest counterclaimed for foreclosure of its mortgage. The claims were bifurcated for trial. In the first proceeding, the trial court granted Segall a judgment quieting title to the property subject to a later determination as to Eurovest's counterclaim for foreclosure of its mortgage. In a second trial, the lower court found that Segall had standing to question the validity of the mortgage and permitted him to raise, as a defense, that the mortgage was not supported by consideration. The trial court, therefore, denied Eurovest's counterclaim for foreclosure. Eurovest appeals. Its claim here is that Segall did not have standing to contest the mortgage on the affirmative defenses of a) want of consideration and b) that the mortgage constituted a fraud on creditors. We agree with Eurovest for the following reasons.

When a purchaser takes title to property without actual notice of a prior mortgage, he will be charged with constructive notice of, and will take title subject to, any duly recorded mortgage. See Feemster v. Schurkman, 291 So.2d 622 (Fla. 3d DCA 1974). See generally 59 C.J.S. Mortgages § 256 (1949) (discussion of the type and effect of notice given to subsequent purchasers by recording). Moreover, it is established that a purchaser who takes title by assuming payment of the mortgage may not assert the invalidity of that mortgage. Key West Wharf & Coal Co. v. Porter, 63 Fla. 448, 58 So. 599 (1912) (subsequent purchaser who assumed mortgage may not assert usury and failure of consideration as defenses to foreclosure action). It follows that a purchaser who takes title to property subject to a mortgage without assuming any personal liability for repayment of the underlying debt is also estopped from contesting the validity of the mortgage. See Spinney v. Winter Park Bldg. & Loan Ass'n, 120 Fla. 453, 162 So. 899 (1935) (defense of usury to mortgage foreclosure is not available to subsequent owner taking property subject to mortgage); Nesbitt v. Citicorp Sav., 514 So.2d 371 (Fla. 3d DCA 1987) (same). A subsequent purchaser may not defend against a preexisting mortgage lien on grounds which would be unavailable to him had he assumed payment of the mortgage. Spinney, 162 So. at 903. Accordingly, Segall, as subsequent purchaser, is estopped from protesting Eurovest's foreclosure action based on his claim that Kaplan did not receive consideration for the mortgage.

Because a subsequent purchaser taking title to property which is subject to a mortgage does not assume any personal liability to satisfy the mortgage, see Alabama-Florida Co. v. Mays, 111 Fla. 100, 149 So. 61 (1933), it follows that Segall would not be personally liable for the debt evidenced by the note and mortgage. Consequently, he would not be subject to a deficiency judgment in the event the amount received from a forced sale of the property is insufficient to satisfy the debt. Segall does, however, retain all legal and equitable...