BLG's Monthly Newsletter - August 2014

Case Law Update – Central Mortgage Company v. Callahan

by Candice J. Gundel

Despite a recovering real estate market many community associations continue to struggle financially and nearly all are still dealing with the fallout from the mortgage foreclosure crisis. Since 2008 Business Law Group has been aggressively representing community associations against foreclosing banks both during and after the mortgage foreclosure in order to collect the maximum amount of assessments. This representation often ends in litigation and even appeals, as we discussed in the April 2014 memo in the Bermuda Dunes v. Bank of America case. We are pleased to announce another recent appeal strengthens the Association’s position in litigating against banks, on July 16, 2014 the Third District Court of Appeal issued an opinion in the case of Central Mortgage Company v. Callahan.

The Central Mortgage case deals with a specific form of litigation where a bank, unsatisfied with the estoppel they received from the community association, attempts to have the trial court that ruled on the mortgage foreclosure also rule on the amount of assessments due to the association. This procedure is often termed a motion to determine or motion to enforce. Our firm has strenuously objected to this procedure as improper because the trial court lacked jurisdiction to determine the amount of assessments due from the bank to the association. Despite our objections some courts overruled our arguments and entered orders for the bank. The appellate court in Central Mortgage has now sustained our objections and held that the motion to determine procedure is improper. Further the appellate court held that the trial court lacked subject matter jurisdiction to resolve the dispute regarding assessments due and owing to the community association.

This technical argument may not seem significant on its face however it has far reaching effects for community associations throughout the State of Florida. This important ruling will now require that any dispute regarding the amount of funds due and owing to a community association from a foreclosing bank will be argued and heard by the correct court and the correct judge. Taking the Central Mortgage case together with amended Florida Statutes, community associations are now in a better position to pursue payment from the banks via a lien foreclosure action.

What about the prior cases where this improper motion to determine procedure was used and a court has already ruled on the amount of assessments? Because the appellate court in Central Mortgage held that the trial court lacked subject matter jurisdiction any order the trial court enters in that procedure is void ab initio, i.e. invalid from the beginning. These void judgments mean that collection against the bank should be immediately reopened to ensure the correct amounts are collected and the account resolved properly. Our office has already begun the tedious task of reviewing all prior cases and will be contacting our Clients directly who are affected by this ruling to resume the collection efforts against the bank.

The continued support of our Clients, community association professionals, and perseverance with the courts and Legislature has seen significant improvements in Associations collections and legislation in the last 6 months. We look forward to continuing on this path and improving the financial stability of our Clients and neighbors.