U.S. Bank Nat. Ass'n v. Lloyd

• Court: Florida District Court of Appeals
• Writing for the Court: Wallace
• Citation: U.S. Bank Nat. Ass'n v. Lloyd, 981 So.2d 633 (Fla. App. 2008)
• Decision Date: 21 May 2008
• Docket Number: No. 2D07-2730.,2D07-2730.
• Parties: U.S. BANK NATIONAL ASSOCIATION, Appellant, v. John LLOYD, Stephen King, and Richard Avichouser, Trustees of the 6001 4th Avenue South Trust dated 6/6/06; Robert Bender; Kenneth B. Rhodes and Katinka Rhodes; and City of St. Petersburg, a municipal corporation, Appellees.

981 So.2d 633

U.S. BANK NATIONAL ASSOCIATION, Appellant, v. John LLOYD, Stephen King, and Richard Avichouser, Trustees of the 6001 4th Avenue South Trust dated 6/6/06; Robert Bender; Kenneth B. Rhodes and Katinka Rhodes; and City of St. Petersburg, a municipal corporation, Appellees.

No. 2D07-2730.

District Court of Appeal of Florida, Second District.

May 21, 2008.

Cindy L. Runyan of Echevarria, Codilis & Stawiarski, Tampa, for Appellant.

Jane H. Grossman of Law Office of Jane H. Grossman, St. Petersburg, for Appellees John Lloyd, Stephen King, Richard Avichouser, and Robert Bender.

No appearance for Appellees Kenneth B. Rhodes, Katinka Rhodes, or City of St. Petersburg.

WALLACE, Judge.

John Lloyd, Stephen King, and Richard Avichouser, Trustees of the 6001 4th Avenue South Trust dated 6/6/06, and Robert Bender (collectively Lloyd) obtained a judgment by default in the circuit court against U.S. Bank National Association (the Bank). The Bank moved to vacate the clerk's default and the default judgment, and the circuit court denied the Bank's motion. The Bank appeals the circuit court's order. Because Lloyd obtained a clerk's default without giving notice to the Bank even though Lloyd had actual knowledge that the Bank was represented by counsel and that it intended to defend the action, the circuit court erred in failing to vacate the clerk's default and the default judgment. Accordingly, we reverse the circuit court's order, and we remand for further proceedings.

I. THE FACTUAL BACKGROUND

A. The Priorities Dispute

The litigation between Lloyd and the Bank involved a dispute about the relative priority of two mortgages on real property located in Pinellas County. The Bank held a mortgage on the property. The Bank's mortgage may be referred to as "the Fremont mortgage." Lloyd claimed to own the property free and clear of any claim by the Bank. Lloyd had purchased the property at a foreclosure sale involving a different mortgage. That mortgage may be referred to as "the Ligori mortgage." The problem began when a title search incident to a sale of the property failed to disclose the existence of the Ligori mortgage. This difficulty was exacerbated when a deed and the Fremont mortgage that had been executed in conjunction with the sale were not recorded until six months after the transaction had been closed. To outline the facts that led to the parties' dispute, we begin by describing the state of the title to the property before the defective title search and the recording irregularities occurred.

Before September 21, 2005, the property was owned by Harold L. Lee, Jr.¹ The property was subject to two mortgages. Wells Fargo Bank, N.A., held a first mortgage on the property. Nelson I. Ligori held the Ligori mortgage, which was junior to the Wells Fargo mortgage.

On September 21, 2005, Mr. Lee executed a warranty deed to the property in favor of Kenneth B. Rhodes. On the same day, Mr. Rhodes gave a mortgage on the property to Fremont Investment & Loan. The Fremont mortgage secured a promissory note to Fremont in the amount of $214,400. Proceeds from the Fremont loan in the amount of $144,889.37 were paid to satisfy the existing first mortgage held by Wells Fargo. The Ligori mortgage was not disclosed in the title search conducted in conjunction with the sale of the property. Because the Ligori mortgage was not disclosed by the title search incident to the sale, it was not satisfied at the closing and remained a lien against the property.

For reasons unexplained in our record, the warranty deed from Mr. Lee to Mr. Rhodes and the Fremont mortgage were not recorded until March 20, 2006, approximately six months after the closing. Meanwhile, on November 17, 2005, Mr. Ligori filed an action against Mr. Lee—the property's titleholder of record—to foreclose the Ligori mortgage. Because Mr. Ligori had no record notice of Mr. Rhodes' interest in the property or of the existence of the Fremont mortgage, he did not join either Mr. Rhodes or Fremont in the foreclosure action. A final summary judgment foreclosing the Ligori mortgage was entered on May 4, 2006. Lloyd bought the property for $9200 at the foreclosure sale. On June 19, 2006, the clerk of the court issued a certificate of title for the property to Lloyd.

While the Ligori foreclosure action was pending, Fremont assigned its mortgage to the Bank. On May 10, 2006, the Bank filed a foreclosure action against Mr Rhodes and other defendants. However, the Bank did not name Mr. Ligori as a defendant in its action to foreclose the Fremont mortgage. On August 10, 2006, the circuit court entered a summary final judgment of foreclosure in favor of the Bank with respect to the Fremont mortgage.

After Lloyd bought the property at the foreclosure sale of the Ligori mortgage, it attempted to obtain title insurance on the property. This effort led to Lloyd's discovery of the impending foreclosure sale of the property under the Bank's judgment foreclosing the Fremont mortgage. To respond to this new information, Lloyd took two separate, but related, steps. First, it filed a motion to intervene and a motion to cancel the foreclosure sale (the motion to intervene) in the Bank's pending mortgage foreclosure proceeding. Second, it filed a separate quiet title action in the circuit court against Mr. Rhodes and the Bank. These developments lead us to a discussion of the proceedings in the circuit court between Lloyd and the Bank.

B. The Motion to Intervene and the Quiet Title Action

Lloyd filed its motion to intervene in the Bank's pending mortgage fore-closure action on September 1, 2006. On the same day, Lloyd filed a separate quiet title action in the circuit court against Mr. Rhodes and the Bank. In both filings, Lloyd alleged that it owned the property free and clear of any claim by the Bank and that the Bank's mortgage claim was a cloud on Lloyd's title to the property. In the motion to intervene filed in the Bank's pending foreclosure action, Lloyd requested the following relief: (1) an order allowing Lloyd to intervene in the action, (2) the cancellation of the scheduled foreclosure sale of the property, (3) a determination that the Bank's interest in the property was subordinate to Lloyd's title, and (4) general relief. Lloyd requested similar relief in the separate quiet title action: (1) a judicial determination that Lloyd's title to the property was superior to the claims of the Bank and other parties, (2) a judgment quieting Lloyd's title to the property against any competing claims, and (3) general relief. Thus both the claim that Lloyd asserted and the relief that it requested in the mortgage foreclosure action and the quiet title action were substantially similar.

The law firm of Echevarria, Codilis & Stawiarski (the Echevarria firm) represented the Bank in the foreclosure proceeding. Lloyd served the Echevarria firm with a copy of the motion to intervene. Lloyd also furnished the Echevarria firm with a courtesy copy of the complaint in the separate quiet title action.

Upon receipt of the copies of the motion to intervene filed in the fore-closure action and the complaint filed in the quiet title action, the Echevarria firm took certain preliminary steps to address the matter. Initially, the Echevarria firm cancelled the scheduled foreclosure sale of the property. In addition, the Echevarria firm forwarded copies of Lloyd's filings to the Bank's title insurer on the Fremont mortgage, Southern Title Insurance Corporation (Southern Title). The Echevarria firm had previously filed a title claim relative to the matter with Southern Title, and the title insurer proposed to retain the Echevarria firm to defend the Bank against the claim that Lloyd had asserted in the motion to intervene and in the quiet title action. However, the Echevarria firm delayed undertaking this additional representation until it could obtain a waiver of any potential conflict of interest from the Bank.

While the Echevarria firm was waiting for a response from the Bank about the conflict waiver, Lloyd's trial counsel² made several inquiries to the Echevarria firm concerning whether it would accept service on behalf of the Bank of the complaint in the quiet title action. On November 22, 2006, an attorney with the Echevarria firm responded to these inquiries by leaving a message with the secretary for Lloyd's trial counsel. According to an affidavit made later by Lloyd's trial counsel, the message read: "[She] got a response from [the Bank], they decided not to represent [the Bank] in the quiet title action. Feel it is a conflict."

On November 24, 2006, the Echevarria firm notified Southern Title, the Bank's title insurer, that it could not undertake the defense of the Bank with regard to Lloyd's claim. A few days later, Peter A. Walther, Southern Title's claims manager, spoke by telephone with Lloyd's trial counsel in an attempt to negotiate a settlement of Lloyd's claim. In a second telephone conversation that apparently occurred on December 7, 2006, Mr. Walther and Lloyd's trial counsel were unable to reach an agreement concerning a settlement of Lloyd's claim. At that point, Mr. Walther advised Lloyd's trial counsel that Southern Title would retain counsel on behalf of the Bank to defend Lloyd's claim. Mr. Walther also suggested that Lloyd's trial counsel serve the summons and complaint in the quiet title action directly on the Bank.

On December 13, 2006, Mr. Walther made arrangements to retain the law firm of Awerbach & Cohn, P.A. (the Awerbach firm), to represent the Bank concerning the title issues raised in the pending foreclosure action and to defend the Bank in the quiet title action. At that time, neither Mr. Walther nor the Awerbach firm notified Lloyd's trial counsel that the Awerbach firm had been retained to represent the Bank with respect to Lloyd's claim.

The next day, December 14, Lloyd's trial counsel acted on Mr. Walther's suggestion that he serve the Bank...