Regions Bank v. Deluca

• Decision Date: 22 August 2012
• Docket Number: No. 2D11–3828.,2D11–3828.
• Citation: 97 So.3d 879
• Parties: REGIONS BANK, Successor by Merger with AmSouth Bank, Appellant, v. Albert and Adrienne DELUCA; and JPMorgan Chase Bank, National Association, as Purchaser of the Loans and Other Assets of Washington Mutual Bank, formerly known as Washington Mutual Bank, F.A., Appellees.
• Court: Florida District Court of Appeals

97 So.3d 879

REGIONS BANK, Successor by Merger with AmSouth Bank, Appellant,

v.Albert and Adrienne DELUCA; and JPMorgan Chase Bank, National Association, as Purchaser of the Loans and Other Assets of Washington Mutual Bank, formerly known as Washington Mutual Bank, F.A., Appellees.

No. 2D11–3828.

District Court of Appeal of Florida, Second District.

Aug. 22, 2012.

Cary A. Lubetsky of Krinzman, Huss & Lubetsky, LLP, Miami, and José D. Vega of Bradley Arant Boult Cummings, LLP, Birmingham, Alabama, for Appellant.

Benjamin B. Brown, Andrew G. Tretter, and Kevin R. Lottes of Quarles & Brady, LLP, Naples, for Appellees.

WALLACE, Judge.

Regions Bank, successor by merger with AmSouth Bank, appeals a final summary judgment determining that because of certain irregularities in the formatting of the legal description of the subject real property in its mortgage, Albert Deluca; Adrienne Deluca; and JPMorgan Chase Bank, National Association, were bona fide purchasers for value and without notice of Regions Bank's prior recorded mortgage. Because the irregularities in the formatting of the legal description were capable of being corrected from other parts of the same instrument, the Delucas and JPMorgan had constructive notice of the mortgage held by Regions Bank. Accordingly, we reverse the final summary judgment.¹

I. THE FACTUAL BACKGROUND

From June 2003 through June 2005, Ralph A. Fulchino and Katheryn Y. Fulchino owned real property in Naples referred to as “the Olde Cypress property.” In 2003, the Fulchinos gave AmSouth Bank a first mortgage and a second mortgage on the Olde Cypress property.

In 2005, the Fulchinos applied for a new mortgage loan from AmSouth to purchase real property in Bonita Springs referred to as “the Bayfront Gardens property.” On April 12, 2005, in connection with their purchase of the Bayfront Gardens property, the Fulchinos borrowed $1,690,000 from AmSouth and gave AmSouth a mortgage. The new mortgage was prepared on a standard Fannie Mae/Freddie Mac mortgage form document intended for use in Florida. The entire instrument consists of nineteen pages. The first eleven pages consist of the basic mortgage document. The loan number appears on the first page of the mortgage. The twelfth page is labeled “EXHIBIT ‘A’ ”; it contains legal descriptions of the Bayfront Gardens property and the Olde Cypress property. Exhibit “A” is followed by three riders: (1) a two-page “Planned Unit Development Rider,” (2) a two-page “Adjustable Rate Rider,” and (3) a three-page “1–4 Family Rider.”

There is a blank space approximately three inches high on page two of the form. The drafter or drafters of the form provided this space for the scrivener of the mortgage to insert the legal description of the mortgaged property. Notably, this space remains blank on the mortgage. In other words, the scrivener did not insert the legal description of either the Bayfront Gardens property or the Olde Cypress property in the space provided for that purpose. In addition, the scrivener failed to insert words to the effect of “See attached EXHIBIT ‘A’ for legal description.” Immediately after the blank space the scrivener completed the portion of the form provided for the insertion of the address of the mortgaged property as follows: “which currently has the address of 239 Bayfront Drive, Bonita Springs, FL 34134 (‘Property Address').” This is the address for the Bayfront Gardens property, not the Olde Cypress property.

The single page Exhibit “A” to the mortgage bears some examination. In the upper left hand corner of Exhibit “A” appears the name of the mortgagor, “Fulchino,” and a ten-digit number that corresponds to the loan number referenced on the first page of the mortgage instrument. The designation “Parcel 1” appears below “Exhibit ‘A,’ ” followed by the legal description and parcel identification number for the Bayfront Gardens property. Belowthat legal description and parcel identification number appears a legend centered and in capital letters that reads: “PROPERTY DESCRIBED BELOW CONSTITUTES ADDITIONAL COLLATERAL TO SECURE THE DEBT EVIDENCED BY THIS MORTGAGE.” The words “AND Parcel 2” appear below this legend. The legal description and the parcel identification number for the Olde Cypress property follow. Finally, Exhibit “A” concludes with a release clause for the mortgage applicable to Parcel 2, the Olde Cypress property.

The Fulchinos executed the mortgage as “Borrower” on April 12, 2005. The mortgage was recorded on April 15, 2005, in Official Record Book 3776, pages 79 through 97, of the Public Records of Collier County, Florida. At this point, the bread fell butter side down. The clerk's office properly indexed the mortgage under the names of the Fulchinos in the grantor/grantee index. But the abstract of the legal description of the property subject to the mortgage in the clerk's index included only the Bayfront Gardens property, not the Olde Cypress property.

On June 28, 2005, approximately two and one-half months after the AmSouth third mortgage was executed and recorded, the Fulchinos sold the Olde Cypress property to the Delucas for $1,200,000. In connection with their purchase of the Olde Cypress property, the Delucas obtained a loan for $900,000 from JPMorgan's predecessor in interest.² This subsequent mortgage, now held by JPMorgan, was dated June 28, 2005, and recorded July 22, 2005, in Official Record Book 3850, page 3953, of the Public Records of Collier County, Florida.

Unfortunately, the title search conducted in connection with the Delucas' purchase of the Olde Cypress property from the Fulchinos did not disclose the existence of the AmSouth third mortgage. AmSouth's first and second mortgages on the Olde Cypress property were satisfied from the closing proceeds. However, because of its omission from the title search, the AmSouth third mortgage was neither satisfied nor released as to the Olde Cypress property at the closing between the Fulchinos and the Delucas. The closing statement prepared in connection with the transaction reflects that the Fulchinos received net proceeds from the closing of $517,380.28. There is no evidence in the record that either the Delucas or JPMorgan's predecessor in interest had actual notice that AmSouth claimed to hold a third mortgage on the Olde Cypress property.

At some point after the Fulchinos sold the Olde Cypress property to the Delucas, AmSouth Bank was merged into Regions Bank. In the remainder of this opinion, we will refer to the AmSouth third mortgage that was not satisfied or released at the closing between the Fulchinos and the Delucas as “the Regions Bank mortgage.”

Mr. Fulchino died in December 2008. Thereafter, the Regions Bank mortgage went into default. In October 2009, Regions Bank filed an action to foreclose its mortgage on both the Bayfront Gardens property and the Olde Cypress property. Because the Delucas and JPMorgan had interests in the Olde Cypress property as owners and mortgagee, respectively, Regions Bank named them as defendants in its foreclosure action. The Delucas and JPMorgan filed an answer and affirmative defenses. They alleged as one of their affirmative defenses that they “were bona fide purchasers without notice of any interestRegions [Bank] or its predecessor may have had in [the Olde Cypress property].”

II. THE SUMMARY JUDGMENT MOTION AND THE CIRCUIT COURT'S RULING

Later, the Delucas and JPMorgan moved for summary judgment regarding Regions Bank's foreclosure of the Olde Cypress property. In support of their motion, the Delucas and JPMorgan argued “that they were bona fide purchasers of [the Olde Cypress property] without any notice of the [Regions Bank] Mortgage's alleged encumbrance, and hence, Regions [Bank] cannot foreclose the Mortgage against [the Olde Cypress property].”

At the hearing on the motion, the circuit court announced its oral ruling as follows:

[T]he Delucas were bona fide purchasers for value of [the Olde Cypress] property and ... there was not sufficient notice. As was stated, the only portion of the mortgage body referred to a[n] address, and that address was not the one that was encumbered.

It is the law, from the Court's memory, that if an address is stated and you can relate that to the legally-described property, that's what is effective. And the Court ... feels that the—the only address was the one that was not encumbered by the Delucas.

In the final summary judgment, the circuit court ruled that the Delucas and JPMorgan were bona fide purchasers for value and without notice of the Regions Bank mortgage, and it dismissed Regions Bank's foreclosure action with prejudice as to the Olde Cypress property. This appeal followed.

III. THE STANDARD OF REVIEW

The pertinent facts here are essentially undisputed. The parties agree that the applicable standard of review for the final summary judgment is de novo. See Volusia Cnty. v. Aberdeen at Ormond Beach, L.P., 760 So.2d 126, 130 (Fla.2000).

IV. THE PARTIES' ARGUMENTS

Florida's recording statute, section 695.01, Florida Statutes (2004), provides, in pertinent part, as follows:

(1) No conveyance, transfer, or mortgage of real property, or of any interest therein, nor any lease for a term of 1 year or longer, shall be good and effectual in law or equity against creditors or subsequent purchasers for a valuable consideration and without notice, unless the same be recorded according to law....

“The act of recording an instrument in accordance with this statute constitutes constructive notice of a prior encumbrance on the property which is the subject of the instrument.” Lafitte v. Gigliotti Pipeline, Inc., 624 So.2d 844, 845 (Fla. 2d DCA 1993) (citing Bank of S. Palm Beaches v. Stockton, Whatley, Davin & Co., 473 So.2d 1358, 1360 (Fla. 4th DCA 1985), abrogated on other grounds by Suntrust Bank v. Riverside Nat'l Bank of Fla., 792 So.2d 1222 (Fla. 4th DCA 2001)). “Constructive notice is a legal inference, and it is imputed to creditors and...