Sens v. Slavia, Inc.

• Decision Date: 13 November 1974
• Docket Number: No. 45508,45508
• Citation: 304 So.2d 438
• Parties: Gilbert SENS, as Trustee, Petitioner, v. SLAVIA, INC., et al., Respondents.
• Court: Florida Supreme Court

Page 438

304 So.2d 438

Gilbert SENS, as Trustee, Petitioner, v. SLAVIA, INC., et al., Respondents.

No. 45508.

Supreme Court of Florida.

Nov. 13, 1974.

Rehearing Denied Dec 30, 1974.

Irving B. Levenson of Sibley, Giblin, Levenson & Ward, Miami Beach, for petitioner.

Joe N. Unger, Miami Beach, and Fink & Syna, Miami, for respondents.

ERVIN, Justice.

We review by conflict certiorari a per curiam without written opinion decision of the District Court of Appeal, Third District, in Sens, as Trustee v. Slavia, Inc., 292 So.2d 627.

This lawsuit involves the right to the surplus fund resulting from a mortgage foreclosure sale as between the holder of the equity of redemption at the time of the sale and certain unsecured creditors (primarily tenants who had made advance payments of rents) of the former owner of the foreclosed property who had no legally recognized lien status which would give them a legal basis upon which to claim the surplus.

In order to understand the case the factual situation has to be set forth in considerable detail.

The Petitioner, Gilbert Sens, as Trustee, was the owner and holder of the equity of redemption at the time of the foreclosure sale. The active or litigating Respondents are the unsecured tenant-creditors of the defaulting mortgagor, the named Respondent Slavia, Inc.

The subject property is the old Wofford Beach Hotel located in Miami Beach, Florida. The property was owned by Slavia, Inc., a Florida corporation, whose operating officer was one Sima Kvajic who on January 8, 1973 abandoned not only the corporation and his duties to it, but the subject property as well.

Ten days after the mentioned abandonment and on January 18, 1973, Five Points Furniture, Inc., a Florida corporation, and others stated this litigation in the trial court by filing the complaint to foreclose the second and third mortgages on the property. In that complaint, in addition to naming Slavia, Inc., the mortgagor and owner of the property, as a defendant, some 97 individual tenants were named as defendants. Paragraph 11 of the complaint states:

'All of the other named Defendants are tenants in said premises and may claim some right of possession to the demised premises by virtue of either written or oral leases made between them and the Defendant, SLAVIA, INC., which tenancy and right of possession is inferior and subordinate to the rights of the and utilities and services could no longer

The relief prayed for in the complaint was that typically sought in a mortgage foreclosure; namely, that the estate, interest or claim in and to the subject property of each and all of the defendants, as well as anyone claiming by, through or under them, be forever barred and foreclosed. A notice of lis pendens was duly filed and named all of the tenants.

On January 22, 1973, the Department of Business Regulation, Division of Hotels and Restaurants, issued its 'Order of Suspension,' thereby suspending the license for the operation of the Wofford Beach Hotel on the ground that the same was a danger to the safety and health of tenants and guests. That order provides that the premises be immediately vacated and not reoccupied by tenants and guests until the suspension is lifted.

On February 2, 1973 application for appointment of a receiver was filed to preserve and protect the property. On that same day the court appointed a receiver and, inter alia, directed the receiver to gain entry into the premises and conduct an inspection in conjunction with the proper governmental officials and determine the condition of the property and report the same to the court.

On February 12, 1973 the defendant-tenants (Respondents) filed their answer and cross-claim for damages. The answer is a general denial coupled with the assertion that they are tenants of the mortgagor and that their claims are not inferior or subordinate to the rights of the foreclosing mortgagee. The cross-claim of the tenants claimed no lien or vested right to the property but simply claimed damages for breach of contract by Slavia, Inc., the defaulting mortgagor. The cross-claim admits that the tenants (Respondents) are no longer in possession and have no possessory rights but allege that:

'On or about January 20, 1973 the Defendant-tenants were constructively evicted after Defendants SLAVIA, INC., KVAJIC abandoned possession and utilities and services could not longer be maintained causing damages to the Defendant-tenants in the total sum of $100,000 apportioned as their interests may appear.'

On February 12, 1973 the plaintiff (the foreclosing mortgagee) moved for a default and the same was entered against Slavia, Inc. However, the following day Slavia, Inc. moved for an extension of time within which to plead and asserted that both it and the premises had been abandoned by Sima Kvajic, and that George Kvajic, a previously inactive vice-president of the corporation, had authority to represent the corporation, employed an attorney, and that it would be in the best interest of the corporation, its junior lienors, as well as its unsecured creditors, that the heretofore 'rudderless' corporation be afforded an opportunity not only to defend but seek a private sale of the property. The motion was granted on March 12, 1973, the order stating that the junior lienors and the unsecured creditors of the corporation would do better if Slavia, Inc. (the defaulting mortgagor) could negotiate a private sale.

On March 15, 1973, the plaintiff (the foreclosing mortgagee) filed its motion for summary judgment asserting, inter alia, that none of the defendants had any right, title or interest in the subject property sought to be foreclosed that was superior to the plaintiff's and that the existing cross-claims between various tenants and the defaulting mortgagor in no way affected the plaintiff's right to a final judgment of foreclosure.

On April 11, 1973 the court entered the 'Final Judgment of Foreclosure.' That final judgment was never appealed. In that judgment the court found that it had jurisdiction of the parties and the cause, and the plaintiff was entitled to foreclosure, as a matter of law, and was due on its defaulted mortgage the sum of $101,634.95. Paragraph 4 of the judgment expressly finds that the 'Plaintiffs hold a lien for the total sum superior to Any claim or estate of All Defendants.' (Emphasis supplied.) The court set the mortgage foreclosure sale for May 3, 1973 in the event the judgment remained unpaid. The final judgment also provided:

'On filing the certificate of title Defendants and all persons claiming under or against them since the filing of the notice of lis pendens are foreclosed of all estate or claim in the property and the purchaser at the sale shall be let into possession of the property.'

The mortgage foreclosure sale was duly noticed and took place, as scheduled, on May 3, 1973.

The day prior to the foreclosure sale (May 2, 1973) Samuel Skliar, as Trustee, was substituted as the party-plaintiff, having acquired that position by assignment from the plaintiff-mortgagees. Skliar was the successful bidder at the sale for a price of $165,000 above the first mortgage. Skliar, as Trustee, purchased the property at judicial sale free and clear of all liens except the first mortgage, and given credit for the plaintiff-mortgagees' position, Skliar's bid of $165,000, subject as stated to the first mortgage, resulted in a surplus fund of $66,276.99. A certificate of title was issued to Skliar dated May 15, 1973.

In February, 1973 the inactive vice-president of Slavia, Inc. came forward and sought to defend the corporation and obtained extra time to plead and search for a private sale of the property in the best interest of both the corporation and its unsecured creditors. This is where the Petitioner, Gilbert Sens, enters the scene of this litigation. Sens never having known or done business with Slavia, Inc. or any of its principals, made the highest private offer to purchase the property of those with whom Slavia negotiated for a private sale of the property as authorized by the court. When Sens became interested in the property, the building had been padlocked by the City of Miami Beach and the defendant-tenants (Respondents) were completely out of possession, and the receiver had already reported to the court that the property could not feasibly be restored. Sens' interest in the property was for land development. In exchange for his $850,000 purchase price he wanted good title to the property, free and clear of all liens and encumbrances, save and except for the first mortgage. The deposit receipt agreement between Slavia, Inc. and Sens dated March 13, 1973 provides in its concluding paragraph the following:

'It is the firm understanding of the parties that the Purchaser is to receive a good and marketable title and possession free and clear of all claims, liens, mortgages, other than the first Mortgage, and the Purchaser and or his attorney shall be the sole persons who have a right...