FLORIDA APPELLATE COURT AFFIRMS ORDER QUIETING TITLE AGAINST MORTGAGE HOLDER IN FAVOR OF PURCHASER PENDENTE LITE

Florida’s Fourth Appellate District recently affirmed a judgment which quieted title against U.S. Bancorp (“Bancorp”) in favor of third-party purchaser, Taharra Assets. U.S. Bancorp v. Taharra Assets 5544, Inc., 2024 WL 252945 (Fla. 4th DCA 2022). In Taharra, the Fourth DCA analogized the facts of the case to that of a four-act play.[i]

The Court explained: In the first act, Dorman and Laura Henry (“the Henrys”), obtained a mortgage with funds they had embezzled from Jasco Construction Company (“Jasco”). Jasco obtained a constructive trust over the mortgaged property. In the second act, the Henrys stopped paying their mortgage, Jasco quitclaimed its interest in the property to Taharra and Bancorp obtained a judgment of foreclosure. The judgment did not affect Jasco’s interest (or Taharra’s derived interest) in the property because Bancorp inexplicably dropped Jasco from the proceedings prior to entry of the judgment. Bancorp purchased the property at the foreclosure sale.

In the third act, Taharra unsuccessfully[ii] challenged Bancorp’s writ of possession and (simultaneously) sought to quiet title against Bancorp arguing that the foreclosure judgment was a cloud on Taharra’s title. Taharra argued its interest in the property was not affected by the foreclosure judgment because Bancorp dropped Jasco, an indispensable party, from the foreclosure action. Taharra moved for summary judgment in the quiet title action. Bancorp opposed on the grounds that both Jasco and Taharra were “purchasers pendent lite, who took the property subject to the foreclosure.”[iii] The trial court disagreed finding the foreclosure was a cloud on title and entered a judgment in favor of Taharra quieting title against Bancorp.

This takes us to the fourth and final act: The appeal. Bancorp appealed Taharra’s summary judgment again relying on the fact that both Jasco and Taharra were purchasers pendente lite. Although the Fourth DCA acknowledged Bancorp’s mortgage lien was valid and retained its first priority status over Jasco’s constructive lien, it found the foreclosure judgment to be void because Bancorp dropped Jasco from the proceedings.[iv] The Court explained: “It is well-settled that a foreclosure proceeding that fails to include the only indispensable party is void.” Because the judgment was void, Jasco’s quitclaim of title to Taharra was valid even though the transfer occurred after recording of the lis pendens in the foreclosure action.[v] The Court elaborated: “Jasco could not defeat its status as an indispensable party…by quitclaiming its interest to Taharra, in the same way that Taharra could not become a party to the foreclosure by acquiring an interest in the property after the lis pendens was filed.”

Concluding that Taharra had legal title to the property and Bancorp’s judgment was void, the Court affirmed the summary judgment in Taharra’s favor. The Court clarified that Bancorp’s mortgage remained a valid, first-priority lien so Bancorp could file another foreclosure action to enforce its mortgage. Unfortunately, the delay caused while unsuccessfully litigating these issues along with the property preservation costs, attorneys’ fees and opposing party fees was a costly lesson. This case demonstrates the importance of understanding the effect and significance of title transfers, especially in the context of a purchaser pendente lite. Fortunately, the bank can still foreclose its lien and likely recover some of its losses.

[i] Taharra, at *1. All future references or quotations regarding this case are to this citation until indicated otherwise.

[ii] Ostensibly, Taharra’s challenge to issuance of the writ of possession was unsuccessful because Taharra, although moving to intervene in Bancorp’s foreclosure, never obtained an order making it a party to the foreclosure action. Taharra, at *1. In fact, Taharra had no right to intervene having obtained title while the foreclosure was pending. Taharra, at *3.

[iii] Taharra, at *2. All future references or quotations regarding this case are to this citation until indicated otherwise.

[iv] Taharra, at *4. All future references or quotations regarding this case are to this citation until indicated otherwise.

[v] Taharra, at *3. All future references or quotations regarding this case are to this citation until indicated otherwise.