Per Ober: Lis Pendens Protection Is Over Upon Entry Of Final Judgment Of Foreclosure

Author: Starlett M. Massey, Partner at McCumber Daniels

On August 24, 2016, the Fourth District Court of Appeal issued a troubling opinion in Ober v. Town of Lauderdale-By-The-Sea, 4D14-4597, 2016 WL 4468134, interpreting anew the statute governing lis pendens, Florida Statute § 48.23.  The Ober opinion holds that a lis pendens expires upon the entry of the final judgment of foreclosure.  Therefore, the lis pendens no longer precludes the attachment of liens that are recorded after the entry of final judgment through the date of the foreclosure sale.  This holding upends the current understanding of lis pendens protection amongst practitioners and lenders by creating the potential for cloud on title in a variety of circumstances involving a delayed foreclosure sale.lis-pendens-imageLIS PENDENS IN GENERAL

Upon commencing a real estate foreclosure action in Florida, in conjunction with filing a complaint for foreclosure with the clerk of court, a lender records a lis pendens in the Official Records for the county in which the property is located. Lis pendens literally means “pending suit.” Med. Facilities Dev., Inc. v. Little Arch Creek Properties, Inc., 675 So. 2d 915, 917 (Fla. 1996). A notice of lis pendens protects both the lis pendens proponent and third parties. Id. The notice protects the lis pendens proponent’s interest both from extinguishment and from any impairment from intervening liens. Id. The notice also protects future purchasers or encumbrancers of the property by informing them that there is a current suit involving the property’s title. Id.

OBER V. TOWN OF LAUDERDALE-BY-THE-SEA

In Ober v. Town of Lauderdale-by-the-Sea, 2016 WL 4468134 at *1 (Fla. 4th DCA August 24, 2016), the Court addressed the question as to how long a lis pendens protects a lis pendens proponent. The court held that the duration of the action itself determines the duration of the lis pendens.  Id.  The lis pendens takes effect when a notice of action is filed.  An action terminates upon the court’s issuance of a final judgment[1]. Id.  Therefore, the lis pendens does not affect liens that are recorded after that date, regardless of whether they attach prior to the judicial foreclosure sale of the property. Id.

In Ober, a bank recorded a lis pendens against certain property located in Lauderdale-by-the-Sea (the “Town”) on November 26, 2007.  Id. On September 22, 2008, the court entered a final judgment of foreclosure in favor of the bank.  Id. Beginning on July 13, 2009 and continuing through October 27, 2011, the Town recorded seven liens for code violations. Id. The liens stemmed from violations occurring after the court entered its final judgment on September 22, 2008.  Id. On September 27, 2012, Ober purchased the property at foreclosure sale for $37,900.00.  Id. Ober then filed suit to quiet title, attempting to strike the liens from his property. Id. The Town counterclaimed to foreclose on the liens.  Id. Both parties moved for summary judgment and the court granted the Town’s motion for summary judgment and held that the lis pendens only barred liens existing or accruing prior to the date of the final judgment. Id.  The court granted the Town a final judgment of foreclosure against Ober in the amount of $345,092.59.  The current value of the property is approximately $310,000.00.

Ober appealed. Id. In the appeal, the Town again argued that the lis pendens applied only to liens existing or accruing prior to the date of the final judgment. Id. Ober argued that the lis pendens continued through the date of the judicial sale, which in this case was over four years later. Id. The court ultimately held that the lis pendens only prevents the accrual of liens recorded after the court’s issuance of a final judgment, regardless of when the clerk holds the foreclosure sale.  Id.

This opinion is a new interpretation of an existing statute and will control throughout Florida until other opinions are issued.  Trial courts in all jurisdictions in the state will be bound by this case until their own controlling District Court of Appeal weighs in on the matter.

EFFECT OF OBER

This holding is concerning, as it will create substantial problems for lenders when a foreclosure sale is put on hold after the court enters a final judgment of foreclosure.  A foreclosure sale might be delayed for a number of reasons, with, perhaps, the most common causes being a mortgagor’s filing of a bankruptcy case post-judgment and a lender’s voluntary cancellation or postponement of a sale pending loss mitigation negotiations.

During the period of time after the entry of the final judgment, but before the foreclosure sale is held, the mortgagor remains the titled owner of the property. Thus, once the lis pendens protection expires, liens against the mortgagor can attach to the property without the lender’s knowledge.  Third-party purchasers at a foreclosure sale purchase the property “as is” and are responsible for conducting their own research as to the property being sold, including whether any potential liens or other defects in title exist. Thus, lenders may escape the liability and cost associated with intervening liens if they are not the successful bidder at the foreclosure sale.  The real problems arise for lenders where the lender is the winning bidder at a foreclosure sale and a lien or liens have attached to the property between final judgment and the sale. Worst case scenario, as in Ober, a lender could purchase the property at the foreclosure sale only to have its interest extinguished by lien foreclosure. Alternatively, a lender could purchase the property at foreclosure sale and be forced to pay or settle a lien(s) in order to convey clear title to a third-party purchaser.

RECOMMENDATIONS TO LENDERS

Foreclosing lenders should consider changes to their current practices in order to reduce the risk of intervening liens by minimizing delays between the entry of final judgment and sale.  For example, lenders may consider limiting or discontinuing loss mitigation once the court has entered its final judgment.  Lenders may also decline to offer consent judgments with extended sale dates, which might previously have been offered to allow the borrower to undertake loss mitigation efforts.  Where a lender is working with a borrower who is seeking a refinance of the debt, the lender should require an updated title report to and require that the borrower be responsible for eliminating any intervening liens in order to ensure that the new mortgage lien will have the agreed upon priority.  Lenders should additionally consider obtaining updated title reports prior to a delayed foreclosure sale in order to determine the existence of any intervening liens because such liens may alter the lender’s maximum bid at the foreclosure sale.

[1] When no appeal is taken, an action terminates when the time for appeal expires. S. Title Research Co. v. King, 186 So. 2d 539, 544-45 (Fla. 4th DCA 1966).  That time is thirty days after rendition of the order. Fla. R. App. P. 9.110(b).  The Ober court declined to determine whether a lis pendens expires at the time of entry of the final judgment or whether it expires thirty days after the entry of the final judgment because none of the liens in that case were recorded during that time period.

A Picture is Worth a 1,000 Words

Author: Fred J. Hughes

A recent study published by the Journal of the American Academy of Pediatrics shows that including a patient’s photo on an order verification screen within the Electronic Medical Record (EMR) can significantly reduce the number of orders entered into the wrong patient’s records.

The Children’s Hospital in Colorado conducted a hospital-wide quality improvement program to improve patient identification and verification practices.  In 2009, the placement of orders on the wrong patient’s chart was the second most common reason that care was provided to the wrong patient, and accounted for 24% of reported errors.  Due to these findings, the hospital upgraded their EMR systems to include a computerized order entry verification process which included a centrally placed photo of each patient.  In 2010, the number of errors was dramatically reduced (12 reported cases) and in 2011, only three cases were reported, all of which did not have a photo included in the EMR.

It goes without saying that reducing errors should lead to a reduction in medical-legal actions.  Given the mandate that the health care industry must begin to utilize electronic medical records, all health care facilities are going to face a variety of challenges in implementing and operating such a system.  One major challenge involves treatment errors related to medication orders being placed in the wrong patient’s record and then being carried out for the incorrect patient.  The Children’s Hospital Colorado study shows us that the simple use of a photograph within the record can reduce those errors, improve patient safety, and support better patient outcomes.  This will in turn improve the facility’s community relations and help to avoid the costs, both physical and economic, associated with litigation.  This picture just may be worth much more than 1,000 words.

 

The Fine Print and The Costa Concordia Disaster

Author: Mark B. Hartig

Some Americans take for granted legal protections our court system provides. This may especially be apparent to those American victims of the Costa Concordia accident off the coast of Italy. Many reported accounts say the cause of the accident was human error when the ship was steered off its plotted course and ran aground causing it to sink killing at least 16 passengers and injuring scores of others.

Americans who were on this cruise signed a contract with Costa agreeing that any legal action must take place in Genoa, Italy where Costa’s corporate offices are. And while Costa is owned by Carnival Cruise Lines, an American corporation based out of Miami, the contract passengers have is with Costa Cruises.

It is all but certain that an attorney will file a claim against Costa, and perhaps Carnival here in the U.S., but the odds of claim succeeding in an American court are slim. U.S. Courts have previously upheld forum clauses such as the one in the Costa Concordia ticket unless plaintiff makes a “strong showing that enforcement would be unfair and unreasonable under the circumstances.”

The test on whether the choice of forum would be “unfair and unreasonable” is if (1) its formation was induced by fraud or overreaching; (2) the plaintiff would be deprived of its day in court because of inconvenience or unfairness; (3) the chosen law would deprive the plaintiff of a remedy or (4) the enforcement would contravene public policy.

It will be very challenging for the American citizens who were aboard the Concordia to invalidate the venue provision of their cruise contract. Their strongest argument would be that they may be deprived of their “day in court” because of the unfairness of bringing the claim in Italy. Apparently a Plaintiff in Italy must post a bond of 10% of their expected damage award to simply file a lawsuit. This cost would certainly be a bar to most people trying to bring a suit. The legal battle though to bring the claim here in the U.S. will also undoubtedly be costly, time consuming and subject to appeals as Costa and other cruise lines would likely vigorously fight a challenge to the venue clause.

While no one likes to contemplate potential disaster in advance of a vacation, the lesson here is that when traveling abroad it is important to review your travel documents to see what limitations on venue and damages are stated. This is especially true if your trip has segments that do not originate and terminate outside the U.S. If there are limits which would not cover you for what you may lose if you were to lose your possessions or be injured, you may want to consider purchasing travel insurance when planning your trip, as you may not be able to count on the American legal system to protect your rights.

Do the Changes to Florida’s Mediation Procedures Rules Really Help?

Author: Amy L. Miles

Florida’s Supreme Court amended Florida Rule of Civil Procedure 1.720, governing mediation procedures with the changes effective as of January 1 of this year. Substantively, the court added a definition of “party representative having full authority to settle” and a requirement that the party certify to the court the identity of that representative and that he or she actually have the required authority to settle before the mediation conference takes place.

It is clear from the committee notes on the amended rule that the purpose for the new definition is to create an “objective standard” by which the court, without input from a mediator who is bound by confidentiality requirements, can measure the authority of a party representative to settle the dispute. So, too, the certification is a “direct representation to the court” that can be verified “upon motion by a party or inquiry by the court without involvement of the mediator and would not require disclosure of confidential mediation communications.” We must not forget that rule 1.720 contains a sanctions provision for failure to appear at the mediation conference.

So, is the amendment a cure for something that is broken? Will there be more settlements coming out of court-ordered mediations as a result? Those we have spoken to are doubtful.

Let’s first look at the purpose for mediation. Mediation is a process that has been formally incorporated into the litigation system to facilitate dispute resolution. It was added with the idea that mediation will save parties time and money while enabling them to come to a mutually-acceptable resolution.

What element of involving the court further in the mediation process as an enforcer, not of the agreement but of the process itself, will decrease the cost and time spent? Cost and time will not be saved by additional motions filed by parties when, for instance, the individual certified to attend has a sudden emergency? Nor is cost and time saved by motions to dispense with mediation altogether because the only nationally-based corporate officer with the actual ability to authorize millions of dollars of settlement is unable to attend a court-ordered mediation over a local dispute with which he or she is unfamiliar. Similarly, cost and time will not be saved by post-mediation motions for sanctions—and the discovery or hearings they will generate—based on the perceived failure to attend the conference in strict compliance with the rule.

Courts have, for years, recognized the benefits of permitting persons to appear by telephone. Telephonic hearings permit the case to move along where individuals necessary for the hearing would otherwise be unable to attend due to location, time, or cost constraints. Although the new amendments don’t change the requirements that those authorized to settle the case appear personally, they do take it a step further from having the ability to confer with corporate superiors if necessary. This may ultimately increase the cost of mediation and decrease the possibility of settlement—or at least slow the process down—as often local representatives familiar with the case will not have the authority to settle without the need to seek further approval and those who must attend are fewer in number, possibly much further away and without intimate knowledge of the case that would assist in a mediated settlement.

And what about that representative who is the “final decision maker with respect to all issues presented by the case who has the legal capacity to execute a binding settlement agreement”? In the context of large corporations involved in considerable amounts of litigation, such as insurance companies and banks, who will be tending the daily operations and financial management of the corporation if the final decision maker—often asked to be able to commit the corporation to a settlement of hundreds of thousands, if not millions of dollars, is out attending mediations most of the time? If a corporation must attend several mediation conferences within short time periods the logistics and cost of travel for this executive certainly would frustrate the purpose of reducing time and money spent on litigation. Alternatively, how many representatives could a company afford to provide full financial authority to at any given time period? And if the mediation happens to require decisions on something other than a dollar amount—such as changes in company policy, waiver of rights between the parties, or other business decisions, a whole new set of questions arise as to how many representatives—each one able to address a specific issue—a corporation must have personally attending. If mediation becomes a process that makes it difficult for these types of corporations to adequately monitor their own operations, it may discourage them from doing business in Florida in the first place.

There is no doubt that at times mediation conferences have not been attended with a good faith attempt to settle. Rule 1.720 provides for the parties to stipulate alternative procedures and alternative requirements for attendance. In all respects, to the extent that the parties work with each other, mediation will a successful means of resolving disputes. To the extent, however, that mediation makes it more difficult for a party to participate in the resolution process, it will work only to delay and increase the cost and complexity of litigation as a whole.

Trying to Muzzle Your Critics Online

Author: Mark B. Hartig

Some doctors and other professionals are slipping in so-called “gag orders” in their contracts for services to prevent their patients from criticizing them in online posts. What seems to have spurred this on are the proliferation of websites where patients can rate and critique their experiences with doctors and other professionals. Sites such as yelp.com, healthgrades.com, ratemds.com, vitals.com, and numerous others, invite people to rate their doctors on different criteria and allow them to leave comments about their opinions and experiences with them. Are these gag orders enforceable?

A patient of a New York dentist will soon find out, as he has filed a class action lawsuit against his dentist to try to get the Court to rule that his contract with her that promised he would not make negative comments about her online “is unethical, invalid and illegal.”

It doesn’t seem likely that Courts will uphold the validity of this attempt by doctors to prevent their patients from posting reviews of their services online as long as it is clear they are merely the “opinions” of their customers, or just factual renditions of their experiences. If they could, you would think hotels, restaurants, and many other businesses would have already slipped in these clauses from their customers. While a person can contract away their constitutional rights, (such as your freedom of speech), a good argument can be made that a clause that prevents consumers from sharing their experiences is against public policy and void.

It will be interesting to see what comes out of this case. If the Court does uphold the “gag order” expect to see them in many more contracts that you would enter into for services.

The Florida Supreme Court on Nursing Home Arbitration – Did they get it right?

Author: Mark B. Hartig

Arbitration agreements exist all around us. Virtually everyone who reads this is bound to one. You have them with your credit card holders, your auto lease company, with your bank and mortgage broker, and maybe even with your own treating doctor. In almost all of these cases, if a dispute arises and you want to sue, you are going to arbitration, no matter what.

That’s because the enforcement of arbitration agreements have become commonplace in state and federal courts throughout the country. It’s not controversial. It’s actually considered a “favored” form of dispute resolution. So much so, that that is written in to the Federal Arbitration Act, and mimicked in numerous state arbitration codes and court case decisions.

This is apparently not so when it comes to nursing homes. The Florida Supreme Court invalidated two arbitration agreements last week and in the process appeared to lash out at arbitration as a favored form of dispute resolution but only when it comes to nursing homes. The Court found that limitations in arbitration agreements on the amounts nursing home residents could collect if they were in court “violate public policy” and thus is illegal.
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I’m Sorry? A recent study shows that nurses are less likely to disclose medical error if they believe they may be sued or reprimanded

Many states are now passing laws commonly referred to as “apology legislation” which is designed to allow medical professionals to express empathy for, and take ownership of an unforeseen outcome without the risk of retaliatory litigation based solely on the statements made at the time of the apology. However, this is only part of the problem. Recent studies have shown the communication process and policies need to be improved for nurses to disclose errors. A study set for publication in the January 2012 issue of the Journal of Nursing Care Quality reveals that almost one-third of respondents were less likely to disclose an error if they believed they might be sued or reprimanded. The reason given was that they thought efforts toward supporting and educating nurses who might report errors was inadequate.

This study implores healthcare facilities to look within and consider changes in their policies and procedures which encourages disclosure when an error occurs. Importantly, education and training should stress accountability when mistakes happen. The nurse must be taught at the outset that it is their professional responsibility to report their mistakes as well as mistakes of their colleagues. The institutions should strive to alleviate fear that an error will result in the immediate dismissal and focus on a case by case analysis which provides additional in-service training to ensure mistakes are not repeated. Indeed, the focus must be changed from a climate of blaming individuals for errors, but should be treated as opportunities to improve the system and patient safety.

Author: Michael P. Gould

* This study is scheduled for publication in January, 2012. A link to the site where the study will be available is: http://journals.lww.com/jncqjournal/Abstract/2011/10000/Registered_Nurses__Judgments_of_the_Classification.3.aspx

McCumber Daniels Secures Two More Appellate Victories

Earlier this year in Jaylene v. Moots, 995 So.2d 566 (Fla. 2nd DCA 2009) McCumber Daniels attorneys Mark B. Hartig and Mara B. Levy, convinced the Second District Court of Appeals to reverse a trial court decision denying the enforcement of a nursing home’s arbitration agreement.  In Moots, the Second District ruled that a Power of Attorney does not need to specifically provide for the right to arbitrate disputes so long as the agreement grants the attorney in fact broad authority to handle the business affairs. On November 13, 2009, Mr. Hartig and Ms. Levy secured two more significant decisions from the Second District reversing the trial courts’ orders denying motions to compel arbitration.

In Jaylene, Inc. v. Steuer, the Second District rejected the trial court’s finding a nursing home resident’s power of attorney did not confer the authority to agree to arbitration on the resident’s behalf and the trial court’s finding that the arbitration agreement was void as against public policy. The power of attorney included provisions granting the authority to execute contracts as well as to institute, prosecute, defend, compromise or settle civil claims and litigation.  The Second District determined that this power of attorney was sufficiently broad to confer upon the attorney-in-fact the authority to bind the resident to the arbitration provision in the admissions contract.  With regard to the public policy issue, the Second District’s reaffirmed its decision in Rollins, Inc. v. Lighthouse Bay Holdings, Ltd., 898 So. 2d 86 (Fla. 2d DCA 2005), that “[t]he arbitrator should in the first instance decide the validity of the remedial restrictions in the arbitration provision.”  Id. at 87.  Under Rollins, the trial court should have let the arbitrators decide any challenges based on public policy.

The second case, Candansk, LLC v. Estate of Hicks, dealt solely with whether the power of attorney granted the attorney-in-fact the authority to agree to waive a jury trial and have any dispute resolved by arbitration.  The Court concluded that the power of attorney executed by the resident was sufficiently broad to confer the authority to agree to arbitration because it referred to “claims and litigation.”  In reaching this conclusion, the Court rejected the plaintiff’s argument that a reference to “property” in the power of attorney somehow limited this broad grant of authority.  The Court first explained that the resident’s claim against the nursing home is the property of the Estate.  This is significant because in many cases, plaintiff attorneys, especially Wilkes and McHugh as in these cases, attempt to draw attention away from the provisions of a power of attorney that confer broad authority over contracts or claims and litigation by arguing that these provisions are limited to specific property interests.  In this case, the Second District made it clear that if a power of attorney includes provisions that are sufficient to confer the authority to agree to arbitration, the fact that the power of attorney refers to property elsewhere is not inconsistent with this broad grant of power. The Court also noted that the form power of attorney that the resident used in this case is typical of forms used throughout the country.  In the states that have statutes that provide for these forms, the inclusion of “claims and litigation” uniformly empowers the attorney-in-fact to submit to arbitration.

These two cases provide much needed guidance to litigants and the trial courts regarding the correct interpretation of powers of attorney and will significantly reduce plaintiffs’ ability to argue that the authority conferred under many standard powers of attorney is not broad enough to include the authority to agree to arbitration.

McCumber Daniels is a full service, Martindale-Hubbell AV-rated civil litigation firm with offices in Florida and Pennsylvania. McCumber Daniels offers a wide variety of litigation services for insurers, health care facilities, businesses and licensed professionals. With years of legal, corporate, medical, administrative and legislative experience, the firm provides full-service representation for all of our clients in all types of civil disputes or litigation.

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