Third District Court of Appeal
State of Florida
Opinion filed October 3, 2018.
Not final until disposition of timely filed motion for rehearing.
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No. 3D17-370
Lower Tribunal No. 09-55435
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Federal National Mortgage Association,
Appellant,
vs.
JKM Services, LLC, as Receiver for Cedar Woods Homes
Condominium Association, Inc.,
Appellee.
An Appeal from a non-final order from the Circuit Court for Miami-Dade
County, Samantha Ruiz-Cohen, Judge.
Levine Kellogg Lehman Schneider + Grossman and Jeffrey C. Schneider
and Marcelo Diaz-Cortes; Greenspoon Marder and Aaron T. Williams (Fort
Lauderdale), for appellant.
Shir Law Group and Stuart J. Zoberg and Guy M. Shir (Boca Raton), for
appellee.
Before SALTER, EMAS and LINDSEY, JJ.
SALTER, J.
Federal National Mortgage Association (“FNMA”) appeals a final circuit
court order denying its motions to intervene in, and to terminate, a receivership
proceeding insofar as it affected three condominium units recently subject to
FNMA foreclosure proceedings, and to determine the amount owed by FNMA to
Cedar Woods Homes Condominium Association, Inc., the appellee
(“Association”), under the so-called “Safe Harbor Statute,” section 718.116(b),
Florida Statutes (2014). FNMA’s motions presented the circuit court, and now
present us, with several novel issues that arose within condominium associations in
the real estate downturn and foreclosure crisis of the past decade.
Based on the analysis which follows, we are constrained to reverse the
orders denying relief to FNMA, and to remand the receivership case to the trial
court for further proceedings.
I. Background and Proceedings in the Circuit Court
In this case, the Association reached a point in 2009 where over ninety
percent of its 165 condominium units were delinquent in assessment payments, and
the majority of those units were also in foreclosure. The Association needed the
assessments to cover repairs, maintenance, and capital improvements.
For a variety of reasons, the lenders and loan servicers on the units in
foreclosure were slow to prosecute their cases. Notwithstanding delays measured
in years rather than months, by law the foreclosing lenders obtaining title were not
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obligated to pay any accrued arrearages for assessments beyond the lesser of
“unpaid common expenses and regular periodic assessments which accrued or
became due during the 12 months immediately preceding the acquisition of title
[by the lender]” or one percent of the original mortgage debt (quoting from the
Safe Harbor Statute cited above).
A. The 2009 Receivership
In law as in engineering, necessity is the mother of invention. In 2009, the
Association filed an emergency petition in the circuit court seeking the
appointment of a receiver to preserve and protect the condominium property in
light of the overwhelming delinquency rate by unit owners. The Association
claimed, and a magistrate judge found, that the great majority of units were subject
to bank foreclosure actions, with several units “abandoned and vacant for as long
as two years.” The property manager’s affidavit in support of the petition reported
that the Association appeared to be insolvent and had received final notices that
water, common area electricity, and garbage service would soon be terminated.
The Association’s petition was based on a provision of the Condominium
Act, section 718.116(6)(c), Florida Statutes (2009):
If the unit is rented or leased during the pendency of the foreclosure
action, the association is entitled to the appointment of a receiver to
collect the rent. The expenses of the receiver shall be paid by the
party which does not prevail in the foreclosure action.
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The petition sought the appointment of a receiver “over those units subject
to foreclosure actions or soon-to-be-filed foreclosure actions by the Association to
collect unpaid assessments” and to “(a) collect rents due to unit owners currently
being sued by the Association to foreclose assessments liens; (b) hire a
management company to manage, maintain and lease units subject to assessments
lien foreclosures; (c) hire a locksmith to break door locks and change door locks to
vacant units subject to assessments lien foreclosures; (d) lease or rent units and
evict non-paying tenants; (e) contract with contractors to repair and maintain units
subject to foreclosure lien assessments; and [pursue other relief as permitted by the
court].”
After various hearings and orders, in 2010 the trial court appointed a
receiver (“Receiver”) to manage and preserve all “Foreclosure Rented Units” and
“Foreclosure Abandoned Units,” with assessments delinquent for sixty days or
more and subject to foreclosure by the Association. The Receiver was to collect
all rental income from such units, initiate eviction for non-payment of rent on such
units, and use the collected income to pay back-owed assessments, the Receiver’s
costs and expenses, and “any and all expenses associated with the Condominium.”
The emergency petition for the appointment of the Receiver was filed by the
Association and as a separate action. It did not join or name the owner or
mortgagee of any unit as a party when filed. A magistrate judge recommended
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relief regarding the Association’s petition, and the circuit court entered orders
appointing the Receiver and expanding the Receiver’s authority. The orders
relating to the Receiver did not attach property descriptions or otherwise place the
mortgage lenders in this case on notice of the Receiver’s powers.1
B. FNMA’s Title to Three Units
The three condominium units at issue in this appeal, each within Cedar
Woods Homes, are identified as Unit 10-105, Unit 10-102, and Unit 17-103. Each
was subject to a recorded mortgage ultimately owned by FNMA. Each of the
mortgages was recorded in 2006, years before the commencement of the
receivership by the Association. The foreclosing plaintiffs (in three separate
circuit court foreclosures) were GMAC in April 2009 (Unit 10-105); Nationstar
Mortgage in 2012 (Unit 10-102); and Bank of America in 2013 (Unit 17-103).
These entities held and serviced the mortgage loans on behalf of the owner,
FNMA.
Apparently unaware of the Receiver’s appointment and powers, the
foreclosing lenders did not move to intervene in the separate receivership
proceeding during the pendency of their respective foreclosure cases. Similarly,
the Receiver never asserted liens or other claims against the foreclosing
mortgagees during the pendency of the three foreclosure cases. Final judgments of
1 The Association sent written notice of the emergency petition for appointment of
a receiver to individual unit owners two months after commencing the case.
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foreclosure were entered in all three cases, the three units went to foreclosure sale
by the clerk, and FNMA received certificates of title in 2014.
After FNMA obtained title, it requested an estoppel certificate from the
Association to pay the amount dictated by the Safe Harbor Statute for each unit.
But the Receiver responded on behalf of the Association with a much more
substantial, itemized demand for multiple years of past-due assessments,
Receiver’s fees, attorney’s fees for the Receiver’s attorneys, and other charges.
C. FNMA’s Motions to Intervene in the Receivership Case
After attempts to negotiate a settlement with the Receiver and Association,
in 2016 FNMA filed motions to intervene in the 2009 receivership case, to
terminate the receivership as to each of the three units, to determine amounts due
under the Safe Harbor Statute, and to compel an accounting and quarterly financial
reports by the Receiver. The circuit court denied the motions as to all three units,
finding FNMA waited too long to seek relief, “became subject to this receivership”
on obtaining title in 2014, and accepted the benefit of work performed by the
Receiver. The trial court also found that “receiver amounts” were payable by
FNMA above and beyond the condominium unit assessments capped by the Safe
Harbor Statute. This appeal followed.
II. Analysis
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We address, in turn, a collection of four issues with varying standards of
review and sources of controlling authority.
A. Intervention
Was FNMA entitled to intervention in the receivership case under
Florida Rule of Civil Procedure 1.230?
The trial court denied FNMA’s motions to intervene as moot, concluding
that FNMA became subject to the receivership as a party when it received
certificates of title to units subject to the receivership proceeding. Rulings on
motions to intervene are reviewed for an abuse of discretion. Union Cent. Life Ins.
Co. v. Carlisle,
593 So. 2d 505, 507 (Fla. 1992).
The receivership had not concluded, and the Receiver had not been
discharged, when FNMA sought intervention. FNMA clearly had a direct
(ownership) interest in the three units; the Receiver claimed a lien and assessment
and other amounts substantially in excess of the amount computed by FNMA.
These factors supported intervention.
Id. at 507-08. Although we do not agree
that FNMA’s motion to intervene was unnecessary or moot because FNMA
“became subject to this receivership” upon taking title to the units,2 the trial court
correctly concluded that FNMA’s motions should be heard and determined.
2 In the order under review—which was prepared and submitted by counsel for the
Receiver—FNMA is characterized as if a third-party purchaser at a foreclosure
sale “who does not need to intervene under Rule 1.230 in order to have standing to
appeal” (quoting Arsali v. Deutsche Bank Nat’l Tr. Co.,
82 So. 3d 833, 835 (Fla.
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B. Validity of the Receivership Orders as Against FNMA
Were the receivership orders valid as against FNMA?
The trial court’s authority to appoint a receiver for condominium units in
arrears on condominium assessments, whether by statute or as a matter of equity
and common law, is a legal issue reviewable under the de novo standard of review,
but the decision to appoint a receiver is reviewed for an abuse of discretion. Puma
Enters. Corp. v. Vitale,
566 So. 2d 1343, 1344 (Fla. 3d DCA 1990).
As already noted, the Condominium Act expressly authorizes the
appointment of a receiver to collect rent payable by the occupant of a unit during
the pendency of “the foreclosure action.” § 718.116(6)(c). When read in context,
however, this refers to the foreclosure of a condominium association’s lien on a
unit “to secure the payment of assessments,” section 718.116(5)(a); section
718.116(6)(a) authorizes an action in the association’s name “to foreclose a lien for
assessments in the manner a mortgage of real property is foreclosed.”
So the statutory authority in the Condominium Act for a receiver relates to a
unit which has accrued, unpaid assessments, but has been leased by the owner to a
tenant. The receiver is then able to collect the rent and apply it (after allowed
expenses) to the unpaid assessments. The statutory assessment does not extend to
4th DCA 2011), and citing similar cases). Those cases relate to intervention in
underlying foreclosure actions rather than the situation presented here. In this
case, FNMA was seeking intervention in a separate action, the 2009 receivership
case.
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all units, or all units in pending mortgage foreclosure proceedings, or in
foreclosure proceedings which might eventuate after the appointment of the
receiver for a specific unit.
Nonetheless, Florida common law provides substantial authority for the
appointment of a receiver to take custody of real property embroiled in litigation in
order to preserve and protect the property as the rights of the parties are
determined. See, e.g., Metro-Dade Invs. Co. v. Granada Lakes Villas Condo., Inc.,
74 So. 3d 593 (Fla. 2d DCA 2011); see also Fla. R. Civ. P. 1.620. We conclude
that the trial court had the authority to appoint a receiver to preserve and protect
enumerated units that were in arrears regarding their assessment payments and
subject to an Association lien. We need not reach the validity of the receivership
orders insofar as they purported to affect units other than the three units involved
in this appeal.
This power, whether based on (1) the court’s statutory authority conferred
by section 718.116(6) of the Condominium Act, or (2) the court’s inherent
equitable authority, was limited in scope to the owners and occupants of the units
subject to an Association lien for unpaid assessments. The Receiver’s authority
and trial court’s jurisdiction in the 2009 receivership case did not automatically
implead existing or subsequent lenders foreclosing mortgage loans on units in
Cedar Woods Homes. More specifically, FNMA neither authorized the
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appointment of the Receiver nor agreed to compensate the Receiver and Receiver’s
attorneys for any work they may have done.
C. Validity and Priority of the Parties’ Claims
As between the Receiver’s claims regarding each of the three units and
FNMA’s final judgment lien and certificate of title, which of the Receiver’s
claims are valid and enforceable against the units, and if so, what is the extent
and priority of each claim?
The priority of lien claims in real estate as between condominium
associations for assessments and foreclosing mortgage lenders is governed by
statute, and our review is de novo. U.S. Bank Nat’l Ass’n v. Farhood,
153 So. 3d
955, 958-59 (Fla. 1st DCA 2014).
These issues are generally determined by the operation of sections 28.222,
(regarding clerks of court, official records, and register of recorded instruments),
695.11 (sequence per official records book and page to determine priority), and
695.01 (conveyances, transfers, or mortgages of real property, or of any interest
therein, required to be recorded to establish priority “against creditors or
subsequent purchasers for a valuable consideration and without notice”). City of
Palm Bay v. Wells Fargo Bank, N.A.,
114 So. 3d 924, 927 (Fla. 2013).
Applying these statutes and the particular provision governing liens for
condominium assessments vis-a-vis first mortgages of record (section
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718.116(5)(a)), the FNMA mortgage liens enjoyed priority over the condominium
assessment liens, save for (1) those arrearage amounts for which the mortgage
lenders became responsible under the Safe Harbor Statute, and (2) duly-imposed
Association assessments for the period commencing with FNMA’s certificate of
title and continuing through FNMA’s subsequent conveyance of title, if that has
occurred.
The Receiver’s compensation, attorney’s fees, and costs, are payable by the
non-prevailing party if the receivership was commenced under subsection
718.116(6). Paragraph (c) of that provision specifies that the expenses of a
receiver appointed pursuant to that statute “shall be paid by the party which does
not prevail in the foreclosure action.”
In the case of a common law receivership established for the preservation
and protection of property involved in a pending lawsuit, the “courts are generally
vested with considerable discretion in determining who shall pay the cost and
expenses of receiverships,” though “[r]eceivership fees, being a part of costs,
follow the result of the suit.” Barredo v. Skyfreight, Inc.,
430 So. 2d 513, 514 (Fla.
3d DCA 1983). Where there are no remaining assets in a receivership from which
to make payments, “such costs, if recoverable at all, must be recovered in a
separate action for that purpose.”
Id.
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Under either of these scenarios and sources of authority, FNMA did not
move for the Receiver’s appointment and was not a party to the 2009 receivership
lawsuit until its interests in intervention were asserted by motion. FNMA thus has
no apparent obligation on this record to pay the Receiver and related receivership
expenses.3
D. Extent of the Association’s Claim: the Safe Harbor Statute
Is FNMA’s liability for condominium assessments during the
foreclosure proceedings, and through and including issuance of the
certificates of title, limited to the amount computed according to the Safe
Harbor Statute?
For the reasons already detailed in preceding sections of this opinion, the
computation of FNMA’s “safe harbor” amount is a factual issue that was not
addressed by the trial court because of its determination that FNMA’s claims were
untimely. The amount payable by FNMA to the Association will be a matter for
determination by the trial court on remand, although it should be a matter of
arithmetic and agreed resolution.4
3 One can posit circumstances in which, for example, a foreclosing lender lacking
a security interest in rents paid by a non-borrower tenant during the foreclosure
case nevertheless received those rents—in derogation of the right of a court-
appointed receiver designated under section 718.116(6)(c) to collect those rents.
But no such facts are apparent in this record, and we therefore decline to address
the merits or outcome of such a hypothetical case.
4 The Safe Harbor Statute is clear that the liability of FNMA is for the lesser of (a)
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FNMA’s entitlement to the statutory cap on liability for accrued, unpaid
condominium assessments prior to the date it obtained title is well-established.
When FNMA initiates a foreclosure in its own name, we have affirmed the
application of the Safe Harbor Statute. Catalina W. Homeowners Ass’n v. Federal
Nat’l Mortg. Ass’n,
188 So. 3d 76, 81 (Fla. 3d DCA 2016). FNMA’s entitlement
to the limitation as a loan purchaser and assignee of a final judgment of foreclosure
obtained by a servicer on FNMA’s behalf is equally well-settled. Beltway Capital,
LLC v. Greens COA, Inc.,
153 So. 3d 330, 334 (Fla. 5th DCA 2014) (“In making
this decision, this Court joins the long line of trial courts to find [FNMA] was
entitled to safe harbor under similar circumstances”); see also Hemingway Villa
Condo. Owners Ass’n v. Wells Fargo Bank, N.A.,
240 So. 3d 104 (Fla. 3d DCA
2018).
III. Conclusion
The Association’s petition for a multi-unit, flexible receivership for
abandoned, delinquent, and in-foreclosure condominium units was innovative and
“unpaid common expenses and regular periodic assessments” that became due
during the 12 months immediately preceding FNMA’s certificate of title, “and for
which payment in full has not been received by the association,” and (b) one
percent of the original mortgage debt. (Emphasis provided). The “one percent”
alternative would be considered here because the foreclosing lender “joined the
association as a defendant in the foreclosure action.” § 718.116(1)(b)1.a., 1.b. On
remand, this computation could require an evidentiary hearing to establish the date
and amount of unpaid common expenses and assessments during the 12-month
period as affected by any rent collections by the Receiver and the manner in which
those amounts may have been applied to the unit arrearages.
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responsive to a crisis at Cedar Woods Homes. The resulting stand-alone
receivership lawsuit, however, is a departure from the traditional adversarial array
of parties with disputed claims, liens, and interests in property.5
As a result, the Receiver essentially became little more than an officious
intermeddler vis-à-vis the foreclosing mortgage lenders, with no authorization to
act on behalf of those lenders. The Receiver served as a court-authorized property
manager for certain units and also acted as an eviction and collection agency for
the Association.
On this record, the receivership expenses were not ratified by the
Association for apportionment and assessment to all unit owners as other capital
and operating expenses would be, and the Receiver’s itemized claims evidence no
such apportionment or authorization with the requisite Association corporate
formalities.
Due process required notice to the foreclosing first mortgagees before they
could be taxed, after the fact, with receivership expenses for services they never
sought or authorized. We reiterate, however, that the Receiver’s expenditures at
the behest of, and for the benefit of, the Association may provide a basis for claims
5 The receivership proceeding in the circuit court is thus styled, In re Cedar Woods
Homes Condominium Association, Inc., Petitioner. Until FNMA objected to the
Receiver’s claims against its three units, the Association and Receiver were the
only parties in the case. A successor trial judge (who had not entered the
receivership orders) was tasked with the unenviable duty of evaluating and ruling
on FNMA’s motions in a unique proceeding.
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against persons or entities other than FNMA: defaulting unit owners, tenants, or
the Association itself, to the extent that the Receiver paid for common area
improvements, for example. As no such claims are before us, we express no
opinion regarding them.
We reverse the order denying FNMA’s motions and remand the case for
further proceedings to compute the amount specified by the Safe Harbor Statute.
Upon payment of any such amount, FNMA’s units are to be released from further
claims or proceedings in the receivership case and by the Receiver. As a unit
owner from and after the certificate of title, and through its term of ownership,
FNMA is responsible for condominium assessments as they become due.
Reversed and remanded for further proceedings.
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