MARK KOYFMAN v. 1572 PLEDGER LLC

Third District Court of Appeal
State of Florida
Opinion filed December 16, 2020.
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No. 3D19-1521
Lower Tribunal No. 13-38896
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Mark Koyfman,
Appellant,
vs.
1572 Pledger LLC,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Abby Cynamon,
Judge.
Michael S. Kaufman, for appellant.
Stok Kon + Braverman, and Robert A. Stok and Michael E. Bonner (Fort
Lauderdale), for appellee.
Before EMAS, C.J., and GORDO and LOBREE, JJ.
LOBREE, J.
ON MOTION FOR REHEARING
We deny the motion for rehearing but withdraw our prior opinion and issue
the following in its stead.
Mark Koyfman appeals from a final judgment of foreclosure entered in favor
of 1572 Pledger, LLC (the “subsequent mortgagee”), as well as the denial of his
counterclaim to quiet title, charging error to the trial court’s failure to dismiss the
suit below and enter judgment in his favor pursuant to CDC Builders, Inc. v.
Biltmore-Sevilla Debt Investors, LLC, 151 So. 3d 479 (Fla. 3d DCA 2014). For the
following reasons, we agree and reverse. 1
Having lived together and just had a child, Koyfman and Irina Kosterina
decided to move to Florida in 2003. He was a licensed realtor by trade. She was an
accountant. As a couple, they invested in at least one business and purchased several
properties. In 2007, Kosterina acquired the apartment foreclosed on below and
executed a note and mortgage in favor of Regions Bank (the “original mortgagee”)
in connection with a personal $50,000 line of credit. In 2008, she quit-claimed the
property to 604 Harbour House, LLC (the “first company”), an entity she formed
and managed herself.
In 2009, Koyfman and Kosterina ended their personal and business
relationship. Kosterina, through her first company, quit-claimed the apartment to
1
We decline to reach the remaining issues raised on appeal.
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Koyfman. The deed was “[s]ubject to that certain Mortgage given by [Kosterina] in
favor of [the original mortgagee].” Koyfman made the apartment his primary
residence, and paid for maintenance, condominium dues, and all property taxes. He
failed, however, to make any mortgage payments.
In 2013, after several years of continuing to make mortgage payments on the
loan for which the apartment served as collateral and having consulted the attorneys
who represented her below, Kosterina created Apt. 604 Bal Harbour Condo, LLC
(the “second company”). According to her testimony, she did this “in order to
purchase the mortgage and note from [the original mortgagee] to satisfy [her] debts
and recover [her] loss.” Through her second company, created and managed solely
by her, Kosterina paid off the balance of the loan. However, she asked the original
mortgagee to sell the rights to the mortgage to her second company, instead of
satisfying the loan and extinguishing the mortgage. Her second company then
obtained the assignment of the mortgage by the original mortgagee.
That same year, her attorneys—now representing the second company—
allegedly wrote to Koyfman to alert him of his continuing default on the mortgage
from the time he took title. Thereafter, Kosterina’s second company sued to
foreclose, accelerating payment on the mortgage and naming both Kosterina and
Koyfman as defendants. Koyfman’s answer alleged that the first company had failed
to effectively purchase the mortgage it attempted to foreclose on, since the payment
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for the assignment should have satisfied the debt and extinguished the mortgage
instrument’s obligation. He also counterclaimed to quiet title due to the cloud
created by the purported assignment.
In 2017, Kosterina found it hard to cope with the litigation expenses of her
second company’s foreclosure suit. Having consulted her attorneys, she then
assigned her second company’s rights under the mortgage to a third legal entity: the
subsequent mortgagee. That same year, the subsequent mortgagee was substituted
as the party foreclosing below. Koyfman then filed an answer to the second
company’s cross counter-claim, again challenging the subsequent mortgagee’s
standing as a note holder and alleging that he was not unjustly enriched because
Kosterina deeded him the property in exchange for other real property interests of
his.
After discovery and a trial where Koyfman and Kosterina testified, and
different views were expressed as to the nature of the transaction, 2 the lower court
entered judgment of foreclosure in favor of the subsequent mortgagee. The order
2
It was disputed whether Kosterina’s transfer of title to Koyfman was “gratuitous,”
as claimed by her, or one “among numerous exchanges of assets,” as claimed by
him. Koyfman gave deposition testimony that, in an independent effort to amicably
and fairly split their assets, he ceded to Kosterina sole title to the property where the
couple lived at the time, while, in return, she quit-claimed the apartment at issue to
him. The trial court made no findings on this issue and, neither set of circumstances,
if true, would change the legal result here. Accordingly, we express no view on this
issue.
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relevantly found that the subsequent mortgagee owned a valid and outstanding
mortgage lien against the apartment; that Koyfman’s deed subjected his interest to
said mortgage; that both Koyfman and Kosterina had defaulted on the mortgage, the
balance of which ascended to $72,095.27; and, as such, while Kosterina was
personally liable for that debt, Koyfman was estopped from challenging the validity
of the mortgage. Accordingly, the trial judge denied Koyfman’s counterclaim and
ordered the sale of Koyfman’s apartment to satisfy the outstanding mortgage.
“To the extent the trial court’s final judgment of foreclosure ‘is based on
factual findings, we will not reverse unless the trial court abused its discretion;
however, any legal conclusions are subject to de novo review.’” Gonzalez v. Fed.
Nat’l Mortg. Ass’n, 276 So. 3d 332, 335 (Fla. 3d DCA 2018) (quoting Verneret v.
Foreclosure Advisors, LLC, 45 So. 3d 889, 891 (Fla. 3d DCA 2010)). Koyfman
argues that the trial court erred in failing to find that the subsequent mortgagee did
not own a valid mortgage assignment given that the purchase by or assignment of
the original mortgage to Kosterina’s second company was unenforceable under the
Third Restatement of Property and CDC Builders, 151 So. 3d at 479. Before
analyzing whether this case falls under CDC Builders, we clarify the contours of the
standard recognized therein.
In CDC Builders, 151 So. 3d at 480, a contractor holding junior liens on real
property built under contract appealed from a final summary judgment of foreclosure
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in favor of the senior lien. The contractor unsuccessfully defended against the
foreclosure and extinguishment of its liens, arguing that the foreclosing entity that
acquired the senior mortgage by assignment was formed and managed by the same
individuals controlling the entity that was the original owner and mortgagor of the
property, and that the assignment had been a strategy by the owner to improve its
development, fail to pay the contractor, and later extinguish any resulting liens. Id.
We found that the evidence created an issue of fact as to whether the same
individuals were behind the entity now foreclosing, and whether, in acquiring the
original mortgage by assignment instead of satisfying it, their intent had been to
defeat the interest of the contractor. Id. We observed:
The law does not permit a person to borrow money from a
bank, give the bank a mortgage, incur additional liens and
junior mortgages on the property, purchase the mortgage
back from the bank, and then foreclose on the mortgage
for the primary purpose of eliminating the additional liens
and junior mortgages.
Id. at 482. In so noting, we referred to the Third Restatement of Property, which
explains:
When a payment in full is made by a person who is
primarily responsible for the obligation, but the payor and
payee agree not to extinguish the mortgage, the payor
might attempt to claim ownership of the mortgage, either
under the principle of subrogation or by taking a formal
assignment of the mortgage from the mortgagee. The
payor might then purport to foreclose the mortgage against
the holder of some junior lien or other interest subordinate
to the mortgage. However, subrogation is inapplicable to
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this situation, since one who is primarily responsible for
an obligation cannot have subrogation upon paying it;
Indeed, even a formal assignment of the mortgage to the
payor would confer no power on the payor to foreclose the
mortgage against junior interests, since doing so would
unjustly enrich the payor.
Id. at 482-83. The Restatement relevantly recognized the challenge of some courts
when confronted by unusual suits in this context:
In some cases, a property owner who has paid an
obligation secured by the owner’s land then brings suit to
recover the obligation from another person. In some of
these cases, the owner characterizes the payment as a
“purchase” of the note and mortgage. Some courts have
been misled by this characterization and have held that the
obligation is enforceable if the mortgage has not merged
into the fee. Because the owner intended to keep the
interests distinct, these courts have held that the obligation
is enforceable. As with the other situations described in
this Comment c, however, the doctrine of merger is
irrelevant to the issue of enforceability of the obligation. .
. . When a property owner pays a mortgage debt, the
owner’s ability to enforce the debt against another is
determined by the doctrine of subrogation. (1) An owner
who is primarily liable for an obligation cannot recover
from anyone: The owner’s payment extinguishes the
obligation.
Restatement (Third) of Property § 8.5 cmt. c (1997). We observed that “[t]his rule
has been part of Florida law since at least 1932,” and that “Florida has expressly
recognized that this rule holds true even if the borrower obtains and forecloses the
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mortgage through a corporation that it controls.” CDC Builders, 151 So. 3d at 483.
Appropriate exceptions to the rule have also been recognized. 3
The rule enunciated in CDC Builders, therefore, is that where payment in full
is made by a person who is primarily responsible for the obligation, but the payor
and payee nevertheless agree not to extinguish that obligation, that same payor may
not claim ownership of the obligation—whether under principles of subrogation or
assignment—or foreclosing on it “against the holder of some junior lien or other
interest subordinate to the mortgage.” 151 So. 3d at 482. “[E]quity will not apply
3
The Third Restatement of Property relevantly observes:
In many situations a mortgage obligation is discharged by
one having a legal duty to do so . . . However, in many
situations subrogation is appropriate even though the
subrogee is personally liable on the obligation being paid,
if that liability is partial or secondary. One example is . . .
the mortgagor who sells the real estate subject to, or with
an assumption of, the mortgage debt, with the purchaser
paying cash equal to the difference between the agreed
purchase price and the balance owing on the mortgage
debt. Such a mortgagor, while still personally liable to the
mortgagee by virtue of having executed the original note
or other evidence of debt, becomes, as between the
mortgagor and the grantee, secondarily liable as a surety
when the transfer occurs . . . The mortgagor may pay the
debt and be subrogated to the mortgage (whether the
transfer was with an assumption or was merely “subject
to” the mortgage) as well as the debt (if the transferee
assumed the debt).
Restatement (Third) of Property § 7.6 cmt. c (1997).
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the principle of subrogation, where to do so would deprive a party of a legal right.”
Id. at 483.
The subsequent mortgagee’s attempts to distinguish CDC Builders are
unavailing. Although CDC Builders involved a contractor holding junior liens and
the unjust enrichment at issue entailed the property owner’s benefit from the
contractor’s work, the general rule applies where the original mortgagor or owner
attempts to later extinguish not only subsequent junior interests, such as contractor
liens, but also any “other interest subordinate to the mortgage.” CDC Builders, 151
So. 3d at 483 (emphasis added). Here, as conceded by the subsequent mortgagee,
Koyfman’s interest is in fee simple subject to the mortgage. Although different from
the contractor’s junior interest in CDC Builders, Koyfman’s is still an interest
equally subject to the mortgage at issue, with vested legal rights the deprivation of
which equity will not allow. Id.
Because CDC Builders applies, the lower court and subsequent mortgagee’s
reliance on C.T.W. Co.. v. Rivergrove Apartments, Inc., 582 So. 2d 18, 19 (Fla. 2d
DCA 1991), is misplaced. CDC Builders correctly distinguished C.T.W., as in that
case, unlike here, no sufficient evidence existed of identity between the original
borrower, payor, or mortgagor and the subsequent mortgagee assigned the mortgage
instrument and seeking foreclosure. 151 So. 3d at 485.
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Here, it was undisputed that there was “substantial identity” between
Kosterina and her first and second companies, through which she purported to
preserve and assign the otherwise extinguished mortgage obligation allegedly
justifying foreclosure below. This gave rise to the reasonable inference that
Kosterina’s preservation of the mortgage was intended to violate the rule adopted in
CDC Builders. The inference was only reinforced by Kosterina’s testimony as to
why she attempted to preserve the mortgage.
She first answered that she did not know why she preserved and assigned the
mortgage, and it had simply been her attorney’s advice. Subsequently, she explained
that she had intended to prevent the further ruin of her credit, as well as to foreclose
on the property to recover her loss. The first amounted to no more than a conclusory
and evasive answer and, the second, as the trial court noted, lacked any rational basis,
since, having fully paid the balance of her personal obligation, her credit could not
be further ruined on account of satisfied debt. Relevantly, when asked near the end
of trial why her own personal debt was a “loss” that she should recover for by
foreclosing a subordinate interest after her payment of that balance, the following
exchange took place:
[Counsel]: You’re testifying . . . you’re attempting to
foreclose out and dispossess [the Subsequent Owner] of
his property you’re saying it was his obligation and I’m
asking you at any point prior to the alleged . . . letter where
was there any one notice to [him] you haven’t paid this for
five years. Why?
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[Kosterina]: How about he never paid for his child support
for five years? You want this person to pay for that? . . .
Thus, in addition to conclusory and insufficient reasons, Kosterina clearly alluded
to Koyfman’s alleged failure to pay child support as the reason why she devised the
mortgage assignment. This provided clear and undisputed evidence that her primary
purpose in devising the assignment transaction was to wrongfully divest Koyfman
of title already legally vested in him, which fell short of the rule in CDC Builders.
“While it is true that the plaintiff by substitution ‘stands in the shoes of the
original plaintiff/mortgagee,’ . . . an order of substitution does not create standing.
Rather, the substituted party acquires the standing (if any) of the original plaintiff at
the time the case was filed . . . [and] must prove its own standing.” Sandefur v. RVS
Cap., LLC, 183 So. 3d 1258, 1260 (Fla. 4th DCA 2016) (quoting Miller v. Kondaur
Cap. Corp., 91 So. 3d 218, 219 (Fla. 4th DCA 2012)). Here, the rule recognized in
CDC Builders precluded the assignment from conferring any power on the assignee
to foreclose against the other interests subordinate to the mortgage. Kosterina’s
second company, thus, was legally estopped from foreclosing on the mortgage. The
subsequent mortgagee could not, by purporting to purchase the defective
assignment, exercise a right greater than that which it received. Thus, not only was
it also estopped from doing so, but it simultaneously lacked standing to begin with,
as it relied on an unenforceable mortgage.
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Because the trial court erred in entering final judgment of foreclosure in favor
of the subsequent mortgagee, we vacate the order, as well as the denial of Koyfman’s
counterclaim to quiet title. We remand for entry of judgment of dismissal of the
subsequent mortgagee’s complaint, for entry of judgment in favor of Koyfman on
his counterclaim to quiet title, and for any other proceedings consistent with this
opinion.
Reversed and remanded with instructions.
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