Community Associations – Service of Process

I recently came across the case of FREMONT REORGANIZING CORPORATION F/K/A FREMONT INVESTMENT & LOAN D/B/A FREMONT INVESTMENT AND LOAN v. THE GRAND CONDOMINIUM ASSOCIATION, INC., which highlights the importance of proper service of process. Specifically, the appellate court affirmed that the trial court properly vacated the default and default final foreclosure judgment after finding that the foreclosure judgment was void because the owner had not been properly served with the foreclosure complaint. However, the appellate court found that the trial court erred in refusing to vacate the subsequent sheriff’s deed and sheriff’s sale. The sheriff’s deed, and resulting sheriff’s sale, were both based upon the void final judgment of foreclosure, which was itself based upon the void default. Ultimately, the appellate court held that once the trial court concluded that the underlying foreclosure judgment was void, it had no choice but to finish the job and vacate the subsequent transactions predicated solely upon the “void” decree. The full text of the case is copied below.

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FREMONT REORGANIZING CORPORATION F/K/A FREMONT INVESTMENT & LOAN D/B/A FREMONT INVESTMENT AND LOAN, Appellant, v. THE GRAND CONDOMINIUM ASSOCIATION, INC. Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case No. 16-342 AP. L.T. Case No. 11-15916 CC 05. August 1, 2017. An appeal from the County Court in and for Miami Dade County. Theresa Thomas, Judge. Counsel: Phillip H. Hutchinson, for Appellant. Roniel Rodriguez, IV, for Appellee.

I. INTRODUCTION

(HANZMAN, J.) In December 29, 2010 Appellant, Fremont Investment & Loan Company (“Appellant” or “Fremont”), obtained record title to a unit within what is known as “The Grand,” a condominium operated by Appellee, The Grand Condominium Association, Inc. (“Appellee” or “Grand”). Fremont secured title to the unit after foreclosing a mortgage it had received as collateral for a promissory note executed by the unit’s prior owner.

On September 13, 2011 Grand filed a claim of lien against the unit based upon allegedly unpaid assessments. Approximately a month later, on October 26, 2011, Grand filed a complaint to foreclose this lien. Although Fremont was never served with process or otherwise given notice of either the lien or foreclosure action, the trial court eventually entered a default final judgment against it based upon an affidavit of diligent search which, on its face, failed to satisfy the requirements of Florida Statute § 49.051(3). Based on that default final judgment Grand sought — and secured — a sheriff’s deed which resulted in a sheriff’s sale of the property for $5.00 to non-party Credo, LLC (“Credo”). Fremont was not given notice of this sale. Credo in turn then sold the property to non-party JNN Real Estate, LLC (“JNN”).

Upon discovering that its property had been foreclosed and subsequently sold, Fremont filed a “Motion to Vacate Sheriff’s Deed, Vacate Final Judgment, Vacate Default and Quash Service of Process,” arguing that the default final judgment was void and, as a result, that judgment, as well as the sheriff’s deed and sale resulting therefrom, must be vacated pursuant to Fla. R. Civ. P. 1.540(b)(4). After hearing argument the trial court concluded that Fremont had not been properly served with Grand’s foreclosure suit and that the resulting judgment of foreclosure was in fact void. The trial court therefore vacated both the default and the default final judgment. The trial court’s finding that those decrees are void, and its consequent decision to vacate them, have not been challenged on appeal.

Despite vacatur of the underlying default final judgment, the trial court nevertheless refused to vacate the sheriff’s deed and sale resulting directly from that void judgment, pointing out that — contrary to one of the arguments advanced by Fremont — the clerk’s office had in fact “issued a writ of execution.” For this reason the trial court concluded that Fremont’s “factual allegation” to the contrary (i.e., the allegation that the clerk had not issued a writ) “does not warrant vacating the Sheriff’s Deed.” The trial court therefore denied Fremont’s motion to vacate the sheriff’s deed without prejudice — never addressing the substantive claim that this deed, secured as a consequence of a void judgment, was itself void.

Fremont appeals the trial court’s order denying its Rule 1.540(b)(4) motion to vacate the sheriff’s deed, arguing that this “deed” is no less void than the judgment which was used to secure it. We agree and reverse.

II. ANALYSIS

First, “[i]ts is axiomatic that a judgment entered without due service of process is void,” Castro v. Charter Club, Inc., 114 So. 3d 1055, 1059 (Fla. 3d DCA 2013) [38 Fla. L. Weekly D1233a], and that when a final judgment is void a trial court is obligated to vacate it. Horton v. Rodriguez Espaillat y Asociados, 926 So. 2d 436, 437 (Fla. 3d DCA 2006) [31 Fla. L. Weekly D985a]. Here the trial court found that Fremont was never properly served in the foreclosure suit brought by Grand and, as a result, the default and default final judgment of foreclosure were both void. Appellee does not challenge this finding either via a cross appeal or a “tipsy-coachman” argument supporting affirmance of the trial court’s order refusing to vacate the sheriff’s deed. See, e.g., Robertson v. State, 829 So. 2d 901, 906 (Fla. 2002) [22 Fla. L. Weekly S641a] (“[T]he ‘tipsy coachman’ doctrine allows an appellate court to affirm a trial court that ‘reaches the right result, but for the wrong reasons’ so long as ‘there is any basis which would support the judgment in the record.’ ” (quoting Dade County Sch. Bd. v. Radio Station WQBA, 731 So. 2d 638, 644-45 (Fla.1999) [24 Fla. L. Weekly S216a])). It is therefore conclusive — for purposes of this appeal — that the trial court’s underlying final judgment was void and properly vacated.

Secondly, it is undeniable that the sheriff’s deed, and resulting sheriff’s sale, were based solely upon the void (and now vacated) final judgment of foreclosure, which was itself based solely upon the void (and now vacated) default. It thus inexorably follows that the subsequent transactions predicated upon these void decrees are likewise void. Gans v. Heathgate-Sunflower Homeowners Ass’n, Inc., 593 So. 2d 549 (Fla. 4th DCA 1992) (where plaintiff had failed to comply with statutory requirements for service by publication, trial court was required to vacate resulting foreclosure and clerk’s sale); Batchin v. Barnett Bank of SW. Florida, 647 So. 2d 211, 213 (Fla. 2d DCA 1994) (“[a]ny action by a court against a defendant based upon improper service by publication is without authority of law”); Klinger v. Milton Holding Co., 186 So. 526, 531 (Fla. 1938) (“. . . the decree of foreclosure . . . was void because the court had not acquired jurisdiction of the parties”); Greisel v. Gregg, 733 So. 2d 1119, 1121 (Fla. 5th DCA 1999) [24 Fla. L. Weekly D1330a] (a void judgment “creates no binding obligation on the parties, is legally ineffective and is a nullity”).

Appellee in fact does not challenge the trial courts finding that the underlying foreclosure judgment is “void.” Nor does Appellee suggest that the sheriff’s deed and resulting sheriff’s sale predicated solely upon that judgment are any less “void” than the judgment itself. Rather, Appellee’s claim here is not that the trial court was legally correct, but that it “properly declined the Appellant’s invitation to trample the fundamental due process guarantees afforded to the Third-Party Purchasers,” who were allegedly not provided notice and opportunity to be heard. Put another way, Appellee defends the trial court’s order by advancing the alleged due process rights of non-parties.

As an initial matter, and though not disclosed by either party in their appellate briefs, at the time Fremont’s motion was heard JNN had a pending motion to intervene in the case which: (a) had laid dormant since its filing in November 2015; and (b) which JNN elected not to have heard prior to the trial court taking up Fremont’s motion. See Transcript, p. 3 (JNN’s counsel — who was present at the hearing — advising the trial court that “depending on the outcome of the hearing, then we will decide whether we need to move forward with our motion to intervene”). Appellee’s counsel (Roniel Rodriguez IV), who is affiliated with and routinely represents Credo, also was present at the hearing on Fremont’s motion and had every opportunity to be heard. Put simply, both of these parties had actual knowledge of Fremont’s requested relief, were present at the hearing before the trial court, and had and the ability to oppose the motion. See, e.g., Spencer v. EMC Mortg. Corp., 97 So. 3d 257, 262 (Fla. 3d DCA 2012) [37 Fla. L. Weekly D2068a] (Schwartz concurring) (“I see no reason why the failure to properly serve something on someone who already knows of the document’s existence should relieve that individual of the consequences which would inevitably flow from his failure to establish, at any time or in any way, that he was entitled to relief”); see also, Grainger v. Wald, 29 So. 3d 1155 (Fla. 3d DCA 2010) [35 Fla. L. Weekly D381b] (holding service of notice to creditors upon creditor’s personal injury attorney instead of probate attorney was effective insofar as creditor had actual notice of limitations period for filing claim).

Furthermore, there is no suggestion here that either Credo — which paid $5.00 for its sheriff’s deed — or JNN — are bona fide purchasers for value. See, e.g., Batchin, 647 So. 2d at 213 (the parties have not addressed whether trial court’s judgment was void or voidable, a distinction which might affect right of a claimed bona fide purchase for value). And even if they are, it is well settled that:

Where the service by publication is void on its face a reversal of the order of sale will defeat the title of the non-party who purchases the property in good faith at the judicial sale.

Gans, 593 So. 2d at 552-53. Here, it is undeniable that the foreclosure judgment ultimately resulting in the sheriff’s sale was void (and properly vacated) due to a circumstance (i.e., non-service) having nothing to do with these subsequent purchasers. And because the judgment was “void” all transactions predicated upon it are also void. Goethel v. First Properties Intern., Ltd., 363 So. 2d 1117, 1119 (Fla. 3d DCA 1978) (noting that this “court found that the judgments were void in their entirety and, pursuant thereto, vacated the writs issued for the enforcement of the judgments”).

It is no doubt true, as Appellee points out, that a third party purchaser at a foreclosure sale has “a protectable legal interest” which bestows upon it “due process rights” and “an opportunity to be heard” on matters such as objections to the sale. Skelton v. Lyons, 157 So. 3d 471, 472 (Fla. 2d DCA 2015) [40 Fla. L. Weekly D403a] (purchaser at foreclosure sale was entitled to notice and opportunity to be heard on objection to sale); Avi-Isaac v. Wells Fargo Bank, N.A., 59 So. 3d 174, 176 (Fla. 2d DCA 2011) [36 Fla. L. Weekly D483a] (purchaser at foreclosure sale was entitled to meaningful opportunity to be heard on motion to vacate foreclosure sale). And although these decisions did not involve a claim of voidness, there is also no doubt that the outcome of a Rule 1.540(b)(4) motion can operate to “defeat the title” of even a bona fide foreclosure purchaser, Gans, supra, and a trial court should therefore afford such a subsequent purchaser notice and opportunity to be heard before vacating a sale, regardless of the grounds advanced for vacatur. But these third party purchasers again had actual notice of Fremont’s claim and were given ample opportunity to be heard. Moreover, any claimed procedural error in this regard was clearly harmless as: (a) the third party purchasers were undeniably aware of Fremont’s requested relief and strategically chose not to insist upon formal intervention before the trial court ruled; and (b) the question at issue (i.e., was service on Fremont properly perfected) focused exclusively on events these purchasers had nothing to do with.¹ There is therefore no reason to believe that providing them any further “opportunity to be heard” could possibly alter the outcome.

Ultimately, once the trial court concluded that the underlying foreclosure judgment was void, it had no choice but to finish the job and vacate the subsequent transactions predicated solely upon that “void” decree. It therefore erred in refusing to vacate the subsequent sheriff’s deed and sheriff’s sale.

REVERSED AND REMANDED. (HERSCH, JOHNSON, CONCUR.)