declaratory judgment action seeking distribution of surplus funds

[Paul Mendel]

Hello All,

I run a condo association in Pinellas county, FL, and we had a unit sell at tax auction last year, there was significant surplus funds from the auction (about 8k, the HOA was owed over that and the tax lien beat us to foreclosure). We where the only lien holder to reply to the surplus funds and submitted our paperwork properly. We know from dealing with it the bank (1st lien holder) is MIA and has not been contactable throughout our foreclosure, tax lien foreclosure, or the quite title suit the new owner brought up after buying it.

Now a year later I call the county asking why we have not been issues the funds(we where told it would take up to a year) as the only lien holder to respond(Florida has great online records where you can check) in the time allowed, And I get this response:

"I just wanted to let you know the status of your surplus claim. The county attorney’s office recommended an interpleader action on this file because they have not received a claim from the primary lien holder. It usually takes a few months before an interpleader case is scheduled. The county attorney’s office recommends that if you would like to expedite the process you may wish to consider filing a declaratory judgment action seeking distribution of surplus." 

So when talking to the person behind the phone she says basically even though the bank did not file a claim of lien the county gives them special permission and a large amount of time to request it anyways. But I can do this "declaratory judgment action" But she has "no idea what that means or how to do it" My local attorney from the HOA said they rather not get involved and that it would be in our best interest to just keep waiting...

Any ideas or suggestions??

[Ned Carey]

I certainly don't know the laws specifically in your area but this is a very specialized and technical area. You need an attorney familiar with tax sales. 

In MD for example in addition to the statutory laws there are many court cases the determine how surplus is handled.

[Parker Detweiler]

If you are talking about an HOA in FL, you actually have no rights to the excess funds in a tax deed sale. The only person who holds a legal claim to is the previous legal title holder and to secure your position in the foreclosure of your own, you should have paid off the taxes and attached them to the judgment. Sorry to say but technically you are not even entitled to the funds and they are supposed to go into FL unclaimed property under the previous legal title owners name.

[Ned Carey]

@Parker Detweiler if what  you say is true then why is the county saying that the mortgage holder has rights to the surplus.

[Parker Detweiler]

It is a mistaken clerk, they are not a judge nor an attorney. The reason I know this is from actually buying my own property back and claiming the surplus, I bought the property via HOA foreclosure and the bank would never respond to a payoff nor was paying the taxes and/or insurance. So we decided to buy the tax certificates hold it for two years (while renting) and the bought the property back at tax deed (the judge wouldn't give us a quiet title against the mortgage). The association tried to make a claim from the dues we didn't pay and the judge gladly let them know that they had no rights and should've redeemed if they wanted any.

As with my other post I am not an attorney and not providing any legal advice, just saying what my experiences have been in these situations.

[Parker Detweiler]

As well the association would have received notice of the sale in FL and they were given their chance to redeem then. Should've done it but decided not to probably due to the cost and/or legal advice they were given. That was the mistake from the beginning on this one.

The best thing they could have done in this situation was to satisfy the taxes and to foreclose the unit. After they gained both title and possession they should rent the unit until the bank got around to foreclosing. If the bank never came around in a reasonable time frame (In FL four years normally) they would then file a Quiet Title Suit and gain clear title and be able to market the unit for sale. All of the excess funds at that point would then be the associations.

I am not an attorney and not providing any legal advice, just saying what my experiences have been in these situations.

[Ned Carey]

@Parker Detweiler very interesting. I am surprised that a bank can be wiped out after only 4 years but that makes sense for a public policy standpoint of allowing properties to get clear title instead of remain in limbo forever.

[Parker Detweiler]

@Ned Carey

In a tax deed sale I can wipe the bank in thirty to ninety days (depending on court scheduling) in an HOA foreclosure I have to wait up to four years. Normally they come to foreclose or I just pay them their payoff if I am buying it because I believe it has equity.

[Ned Carey]

@Parker Detweiler thanks for the clarification. The bank has four years after an HOA foreclosure. I was thinking just 4 years in general if a bank disappears. - My confusion

[Parker Detweiler]

@Ned Carey 

That is just a time frame that is accepted in FL to be able to file a Quiet Title against the bank. That doesn't mean every judge is going to grant you the suit. "I am not going to Quiet Title a 1st lien holder of an HOA foreclosed property" is what judge said to my attorney one time. That is why:

"I bought the property via HOA foreclosure and the bank would never respond to a payoff nor was paying the taxes and/or insurance. So we decided to buy the tax certificates hold it for two years (while renting) and the bought the property back at tax deed (the judge wouldn't give us a quiet title against the mortgage)."

as i mentioned earlier.

[Parker Detweiler]

@Ned Carey

You can try and Quiet Title them right away but normally the judge will just laugh at you even if they don't respond.

[Rick H.]

Suggest you begin using the term "wipe off" as it relates to the separation of the debt from the collateral. In most jurisdictions, the debt remains, however the voluntary lien (mortgage) is eliminated from chain of title and debts laid in a pro tonto manner. 

State appeals court trumps Superior court; State Supreme court is trumped by Federal BK court, etc. the point us, it ain't over till it's over.

You have anti-deficiency statute in FL? 

I'm a CA note guy and don't mess with out of state debt myself. 

Calling Wayne Brooks!

[Paul Mendel]

I'm going to have to disagree, As the association president, and the guy who let it go to tax auction instead of wrapping up the HOA foreclosure, and the guy who bought it at tax deed sale, and the guy who has quieted the title.

The HOA had lien's recorded so we are entitled to the surplus. or we would have not been mailed the claim of surplus funds by the county in the first place. The counties distributes the funds in priority to the 1st lien holder/mortgage first, any other lien holders 2nd(the HOA) and IF it was free and clear then the original owner.

The original issue i posted about was not who gets what, but how to force the county to stop waiting for the 1st lien holder to make a move.

[Dion DePaoli]

An HOA with a proper lien is entitled to surplus in Florida. Surplus needs to be claimed and then ordered for disbursement.

@Paul Mendel the clerk told you what to do even though she didn't understand it herself.

When the surplus is created a certificate is filed and held by the clerk.  It is a Certificate of Surplus.  Each interested party [in the subject property] is then given a chance to lay claim to all or a portion of those funds held in certificate.  The party must fill out the form and send it in.  The claims are processed by the court and the hierarchy of disbursements is set forth in an order issued from the court to the clerk to pay out the funds.

In your situations, the clerk is saying they know the first lien is present and probably has a right to claim these proceeds but they have not filed yet.  The clerk suggested to you that you interplead the surplus, in other words, you go in front of a court to settle the dispute your claiming being the only claim made versus that of waiting for any other claim to be processed.  The clerk is saying scheduling that type of hearing can take a little time.  If you do not wish to wait, then you would have to file a motion for declaratory judgement which essentially asks the court to make the same ruling.  

In your particular case, since it seems the Mortgagee is MIA either path probably works.  Since both result in the likely absence of any other potential claimant from expressing an interest in the surplus.  You filing the motion for DJ just brings it before the court faster.  That is why the attorneys are telling you to just wait.  Essentially telling you to simply attend the interpleading hearing and as the only claimant you will be fine.  Having your attorney file a MDJ will cost money in legal expenses that might not make sense for the amounts collectible.  

Do notate, the clerk can not distribute any funds unless they are order by the court.  

I would call the clerk back or talk to your counsel about securing the interpleading hearing date and sit back and wait for it to come around.  Good luck.

[Paul Mendel]

@Dion DePaoli Thank for helping explain it in with a little more detail. 

To push it a little further can anyone file a MDJ or must it be an attorney? Is this a standard document that if i had one i could just edit and do myself? Anyone have a template?

after all who has time to wait for money :)

[Dion DePaoli]

Originally posted by @Paul Mendel:

@Dion DePaoli Thank for helping explain it in with a little more detail. 

To push it a little further can anyone file a MDJ or must it be an attorney? Is this a standard document that if i had one i could just edit and do myself? Anyone have a template?

after all who has time to wait for money :)

 Well I suppose "anyone" can try and file the motion and follow up with all of the court's nuances but I would not recommend it.

If you must have it now, lobby your attorney to file it for you or perhaps see if you can get an early interplead date.  

[Emmett R. McCarthy]

I don't know the law in FLA on this point, but in IL a PERSON can always represent themselves (but remember "He who represents himself has a fool for a lawyer"), but a legal entirety (such as a HOA) must retain an attorney for court/pleadings.

[Wayne Brooks]

I read the statute, and attorney opinions, on this.  The clerk can Not simply distribute to you, If there is a superior lien, whether or not they have filed a claim, without the court order.

[Paul Mendel]

I just don't get why they have a required document to claim the lien, only allow 90 days for it to be filed, and then ignore there own rules for someone who did not complete it on time.

[Mark Harrington]

Hi Paul, Did you ever receive the surplus funds from the tax deed sale?

[Paul Mendel]

@Mark Harrington ... Nope..

I got this back in January 15'  from the assistant county attorney: 

"Unfortunately, there is no deadline in Florida law for filing a surplus claim; the Clerk requests 90 days in order to expedite the process for all claimants, but failure to claim never “cuts off” a claimant’s entitlement to surplus. The only options if an apparent priority lienholder does not claim are to file an interpleader action (so a judge can determine which party should receive the surplus), or to treat the funds as “unclaimed” and send them to the State to hold until a claim is made. In the interpleader process, if the Bank does not answer the complaint, the judge can award the funds to the Condo Association. I hope this helps."

With that said there has been no updates in that time on any changes in the file.

And my attorney simply said it was a waste of my & his time...

[Mark Harrington]

Can you please provide the Certificate # or APN/ Parcel # so I can verify and see if the funds are still available? 

Verify

Verify

[J Bishop]

What about an interpleader action in superior court Ga. for surplus funds? No mortgage holder, just owner claim.