Jp Morgan Chase Bank v. U.S. Bank Nat.

• Decision Date: 17 May 2006
• Docket Number: No. 4D05-478.,No. 4D05-2309.,4D05-478.,4D05-2309.
• Parties: JP MORGAN CHASE BANK as Trustee for the Home Equity Trust Series 2003-7, Appellant, v. U.S. BANK NATIONAL ASSOCIATION, Royale Gardens Condominium Association, Inc., Neera Persad, and Home Equity Loss Prevention Corp., Appellees.
• Court: Florida District Court of Appeals

929 So.2d 651

JP MORGAN CHASE BANK as Trustee for the Home Equity Trust Series 2003-7, Appellant, v. U.S. BANK NATIONAL ASSOCIATION, Royale Gardens Condominium Association, Inc., Neera Persad, and Home Equity Loss Prevention Corp., Appellees.

No. 4D05-478.

No. 4D05-2309.

District Court of Appeal of Florida, Fourth District.

May 17, 2006.

Brian L. Rosaler of Popkin & Rosaler, P.A., Deerfield Beach, for appellant.

David A. Kupperman of Katzman & Korr, P.A., Fort Lauderdale, for Appellee-Home Equity Loss Prevention Corp.

STONE, J.

JP Morgan challenges the trial court's distribution of surplus proceeds in a foreclosure action and its failure to vacate or reconsider the distribution order.

We reverse, as the trial court should have vacated the order when it became aware of the unsatisfied second mortgage, the mortgagee's lack of agreement with the disbursement, and the order's adverse impact on the lienholder's rights. Further, the trial court's decision is not supported by the evidence.

Upon foreclosure of a first mortgage, the defendants included property owner Neera Persad; the initial second mortgagee, Aames Funding Corporation (Aames); and Royale Gardens Condominium (the condo). The complaint recognized that Aames "may claim some interest in the subject real property by virtue of that Mortgage recorded at Official Records Book 35988, Page 147 of the Public Records of Broward County, Florida, however, whatever interest asserted by virtue of said instrument is subordinate and inferior to the lien of the mortgage being foreclosed herein."

Persad and the condo answered; Aames, the junior lienholder, defaulted. JP Morgan is a successor to Aames' interest. JP Morgan's standing is not at issue.

Following the summary judgment of foreclosure, the property was sold to a third party and funds in excess of U.S. Bank's entitlement were filed with the court registry. Home Equity Loss Prevention Corp. (HELP), a non-party to the action, then filed a motion for disbursement from court registry, attaching a partial assignment of Persad's interest in the surplus funds. The motion states that HELP owns the equity of redemption and that one or more of the parties on the attached service list may claim a superior interest in the surplus but have not yet filed any paper seeking disbursement. Only the condo filed a motion to disburse.¹

Attorneys for HELP and/or the condo then provided the trial court with an "agreed" order directing the clerk to disburse sums from the court registry. The only "hearing" held on this order was at motion calendar. The trial court entered the order which resulted in disbursement to the condo for unpaid fees and assessments and attorney's fees associated with their collection, with Persad to receive 70% of the balance ($11,843.74), and the remaining 30% to go to HELP ($5,075.89). There is no mention in the "agreed" order of the Aames second mortgage that was acknowledged in the complaint, HELP's motion, and the final judgment. The order was entered on December 22, 2004.

On January 18, 2005, JP Morgan, as Aames' assignee, filed an emergency motion to vacate the agreed order and a motion to determine priority of liens.

JP Morgan submitted proof that it held the unsatisfied second mortgage. At the hearing on JP Morgan's motions, the trial court recognized uncertainty in the law concerning the court's obligation to seek out interest holders or parties who have defaulted. In this case, JP Morgan's assignment from Aames had not yet been recorded, although the monthly payments had been paid by Persad to JP Morgan for some time.

The trial court decision denying relief to JP Morgan was based on its conclusion that Aames had been properly noticed prior to disbursement and that JP Morgan had failed to appear or even timely record its assignment, "that it sat on its rights." In other words, the court determined priorities not based upon time of lien or proof of satisfaction, but on the fact of notice to JP Morgan's assignor.

Without proof of satisfaction of the second mortgage, and even in the absence of an appearance, the funds should have been left in the court's registry until the second mortgagee came forward to claim them or until proof of Appellees' entitlement was presented to the court.

It is undisputed that Persad and HELP recognized that there was a junior lienholder and that its second mortgage was not satisfied. Certainly, the foreclosure of the first did not extinguish the second; it merely transferred the lien from the property to the surplus funds that took its place. "After removal from the land, it [the lien] then attached to what had taken the place of the land in the eyes of the law, to wit, whatever remained as surplus after paying off the first mortgage and costs." Waybright v....