Wednesday, December 9, 2009

Superior Mortgagee May Elect The Time And Manner Of Enforcing Security

In CitiMortgage, Inc. v. Henry, et al (2D07-5982, 2D08-6252), the Second District reversed the trial court's judgment and denial of a motion to vacate a default judgment in a related proceeding.  The court stated:
In resolving this consolidated appeal, the issue that we must address is whether the trial court's judgment of foreclosure entered on the Wachovia mortgage was valid so as to be a viable affirmative defense to Citimortgage's foreclosure proceeding. If the prior foreclosure proceeding was a nullity, then not only should the summary judgment on appeal be reversed, but also the order that denied Citimortgage's request to vacate the prior foreclosure judgment.
Turning to a 1940 decision from the Florida Supreme Court, the Second District stated:
Our resolution of this issue is controlled by Cone Bros. Construction Co. v. Moore, 193 So. 288 (Fla. 1940)...The court determined that the service of process was sufficient and that the first foreclosure court had jurisdiction over Mrs. Moore. However, the court determined that the trial court was correct in concluding that the Cone Brothers' foreclosure action was not a proper forum to litigate Mrs. Moore's mortgage if in fact that mortgage was the superior interest in the real property.
A prior mortgagee may elect for himself the time and manner of enforcing his security. He cannot be compelled to be a party to a suit by a junior encumbrancer foreclosing his lien. It is not proper in foreclosure proceedings to try a claim of title superior or paramount to that of the mortgagor and even if a party having title is made a party and judgment entered after a hearing, it will not bind his interest; but if such claim is set up by a defendant, and this be litigated, then both parties will be bound by the decree.
. . . .
If it be determined on final hearing that the mortgage of [Mrs. Moore] is entitled to priority over that of [Cone Brothers], then the decree of the lower court, in so far [sic] as it affects the rights of [Mrs. Moore], is ineffectual—[Mrs. Moore] not being [a] proper part[y] to the suit; but if it be found that the contrary is true, then the decree rendered in the former suit is binding on [Cone Brothers].
Accordingly, the trial court erred in granting summary judgment and instead should have held an evidentiary hearing to determine whether the mortgage interest held by Citimortgage is indeed superior to the Wachovia mortgage interest. On remand, if the trial court finds that the interest of Citimortgage is superior, the trial court should not only deny Wachovia's affirmative defenses but also vacate as void the prior final judgment entered in Wachovia's favor to the extent that it extinguished the MERS mortgage interest in the real property. However, if Wachovia can show that the interest of Citimortgage is inferior to that of Wachovia, the prior foreclosure judgment would be valid and judgment in favor of Wachovia on its affirmative defense would be proper in the Citimortgage foreclosure proceeding. Similarly, the denial of the motion to vacate in the Wachovia foreclosure proceeding would be appropriate.


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