Posted on August 7, 2018, by Jonathan Lewis
The Third District Court of Appeal’s recent decision in Rahimi v. Global Discoveries, Ltd., Case No. 3D16-2756, (August 1, 2018) is a significant development worth noting by banking institutions in Florida, surplus recovery firms and attorneys whose practices involve tax deed sales. The ruling obtained on behalf of MLG’s client clarifies a long-standing ambiguity in the statutory scheme governing surplus funds by stating unequivocally that the determination of which parties are entitled to the surplus proceeds of a tax sale is to be made at the time of the sale.
The dispute in Rahimi arose after a condominium was sold for unpaid taxes at a tax deed sale. After the payment of the property tax bill for the property, a surplus remained in the Court registry of $92,519.89. Global Discoveries, a company which specializes in the recovery of surplus proceeds on behalf of mortgagees, received an assignment from Regions Bank to attempt to collect the surplus proceeds in partial satisfaction of Regions’ outstanding mortgage loan. Global filed a declaratory judgment action to recover the funds. However, the prior titleholder also filed a competing action claiming entitlement to the surplus funds.
The simple resolution to these competing claims became complicated when, while the two cases were pending, Regions Bank canceled and discharged the subject mortgage. The prior titleholder asserted that, because the mortgage had been released, the debt was eliminated, and prior titleholder should receive all surplus funds. Global responded that the release of mortgage did not eliminate the underlying debt and that regardless of the later release, Regions was entitled to the proceeds because its lien had priority on the date of the sale. The trial court agreed and granted Global’s motion for summary judgment.
In affirming the trial court’s ruling, the Third District Court of Appeal pointed to three points in the statutory framework which indicated that priority should be determined as of the sale date. First, the statute providing for presale notice provides that only those lienholders who hold liens twenty days prior to the sale are entitled to notice of the tax sale; second statute governing the post-sale notice of surplus proceeds which identifies those parties entitled to the benefit of the proceeds based on the pre-sale notice, and; third, the statute providing that no lien rights shall survive the issuance of the tax deed. As the court noted, these prior liens are extinguished at the time of the sale, in exchange for a claim against the proceeds.
Prior to the Court’s ruling, many individual prior titleholders were successful in obtaining all or some of the surplus proceeds from tax deed sales, even where their mortgages were released after a sale for reasons unrelated to a payoff of their loan. The Rahimi decision clarifies that this should not occur and provides a discrete point in time for trial courts to look to in evaluating the priority of competing surplus claims.
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