liens, liens, everywhere a lien

©2013 Attorneys’ Title Fund Services, LLC. All Rights Reserved.

Duplication Prohibited. These materials are for educational use in Fund seminars. They should not be relied on without first considering the law and facts of a matter. Legal documents for others can only be prepared by an attorney after consultation with the client.

Liens, Liens, Everywhere a

Lien

Presented by: Legal Education Department

Attorneys’ Title Fund Services, LLC



Unless otherwise noted, all original material is Copyright © 2013

by Attorneys’ Title Fund Services, LLC

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reprinted from WestLaw with the permission of Thomson Reuters

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These materials are for educational use in Fund seminars. They should not be relied on without first considering the law and facts of a matter. Legal documents for others can only be prepared by an attorney after consultation with the client.



Liens, Liens, Everywhere a Lien

General

1 “Liens, Liens, Everywhere a Lien” Slides 1

2 FLA. CONST. art. X, § 4 (Homestead; exemptions) 39

Judgment Liens

3 FLA. STAT. § 55.10 (Judgments, orders, and decrees; lien of all, generally; extension of liens; transfer of liens to other security.) 40

4 Farkus v. Fla. Land Sales & Dev. Co., 915 So. 2d 688 (Fla. 5th DCA 2005) 42

5 Robinson v. Sterling Door & Window Co., 698 So. 2d 570 (Fla. 1st DCA 1997) 44

6 Franklin Fin., Inc. v. White, 932 So. 2d 434 (Fla. 4th DCA 2006) 46

7 FLA. STAT. § 55.081 (Statute of limitations, lien of judgment.) 50

8 Petersen v. Whitson, 14 So. 3d 300 (Fla. 2d DCA 2009) 51

9 Corzo Trucking Corp. v. West, 61 So. 3d 1285 (Fla. 4th DCA 2011) 55

10 Decubellis v. Ritchotte, 730 So. 2d 723 (Fla. 5th DCA 1999) 60

11 Gamez v. First Union Nat’l Bank of Fla., 31 So. 3d 220 (Fla. 4th DCA 2010) 66

12 Orange Brevard Plumbing & Heating Co. v. La Croix, 137 So. 2d 201 (Fla. 1962) 71

13 Aetna Ins. Co. v. LaGasse, 223 So. 2d 727 (Fla. 1969) 87

14 King v. King, 652 So. 2d 1199 (Fla. 4th DCA 1995) 90

15 Olmstead v. Fed. Trade Comm.’n, 44 So. 3d 76 (Fla. 2010) 94

16 FLA. STAT. § 608.433 (Right of assignee to become member.) 113

17 Knox’s Basic Judgment Lien Paradigm 115



Federal Tax Liens

18 26 U.S.C. § 6502 (Collection after assessment) 117

19 26 U.S.C. § 6323 (Validity and priority against certain persons) 118

20 U.S. v. Estate of Romani, 523 U.S. 517 (1998) 127

21 26 U.S.C. § 7425 (Discharge of liens) 141

22 U.S. v. Craft, 535 U.S. 274 (2002) 144

23 Paternoster v. U.S., 640 F.Supp.2d 983 (S.D. Ohio 2009) 166

Condominium Liens

24 FLA. STAT. § 718.116 (Assessments; liability; lien and priority; interest; collection.) 176

25 FLA. STAT. § 718.121 (Liens.) 184

26 FLA. STAT. § 718.112 (Bylaws.) 186

27 Bay Holdings, Inc. v. 2000 Island Blvd. Condo. Assoc., 895 So. 2d 1197 (Fla. 3d DCA 2005) 199

Homeowners’ Association Liens

28 FLA. STAT. § 720.3085 (Payment for assessments; lien claims.) 201

29 Ecoventure WGV, Ltd. v. St. Johns NW Residential Assoc., Inc., 56 So. 3d 126 (Fla. 5th DCA 2011) 208

30 Holly Lake Ass’n v. Fed. Nat’l Mortgage Ass’n, 660 So. 2d 266 (Fla. 1995) 211

31 Coral Lakes Cmty. Ass’n, Inc. v. Busey Bank, N.A., 30 So. 3d 579 (Fla. 5th DCA 2010) 215

32 In re Jimenez, 472 B.R. 106 (Bankr. M.D. Fla. 2012) 223

33 Homeowners’ Association First Mortgagee Assessment Liability Flowchart 233



Code Enforcement Board Liens

33 FLA. STAT. § 162.09 (Administrative fines; costs of repair; liens.) 234

34 FLA. STAT. § 162.10 (Duration of lien.) 236

35 City of Palm Bay v. Wells Fargo Bank, N.A., 2013 WL 2096257 (Fla. May 16, 2013) 237

Municipal Liens

36 FLA. STAT. § 170.08 (Final consideration of special assessments; equalizing board to hear complaints and adjust assessments; rebate of difference in cost and assessment.)

244

37 FLA. STAT. § 153.67 (Unpaid fees to constitute lien.) 245

38 FLA. STAT. § 159.17 (Lien of service charges.) 246

39 FLA. STAT. § 170.09 (Priority of lien; interest; and method of payment.) 247

40 First Nationwide Mortgage Corp. v. Brantley, 851 So. 2d 885 (Fla. 4th DCA 2003) 248

41 FLA. STAT. § 95.11 (Limitations other than for the recovery of real property.) 251

42 City of Riviera Beach v. Reed, 987 So. 2d 168 (Fla. 4th DCA 2008) 256

43 FLA. STAT. § 173.04 (Procedure for bringing foreclosure suit; certificate of attorney as to notice of suit; jurisdiction obtained by publication of notice of suit; form of notice.)

259

44 FLA. STAT. § 173.13 (Procedure under this chapter optional.) 262

45 FLA. STAT. § 173.01 (Foreclosure of municipal tax certificates authorized.) 263

46 FLA. STAT. § 173.03 (Conditions determining when suit may be brought; lands and claims included.) 264

47 Ismael v. Certain Lands Upon Which Special Assessments are Delinquent, 51 So. 3d 583 (Fla. 3d DCA 2010) 265

48 Laws of Fla. 2013-241 268

1

Liens, Liens, Everywhere a Lien

Maggie Atkins, Esq.Legal & Branch Education Manager

[email protected]

Materials:http://www.thefund.com/content/_files/Portal/Services/EdMaterials/LienMaterials7‐14‐11.pdf

Topics Addressed

Judgment LiensFederal Tax LiensHomeowners’ Association LiensCondominium Association LiensCode Enforcement Board LiensMunicipal Liens

3

2

A Note About Bankruptcy

All time periods for enforcement are tolled during the pendency of a bankruptcy actionA bankruptcy action may not have extinguished the applicable lien

A Note About Homestead

Florida’s Constitutional Homestead Protection, Fla. Const. art. X, § 4 [39]Does not apply to:Payment of taxes and assessments on propertyObligations for the purchase, improvement or repair of propertyObligations contracted for house, field or other labor performed on the property

3

6

JUDGMENT LIENS

Lien on Real Property

Certified copy of judgment recorded in Official RecordsMust contain address of lien holder; ORAddress affidavit filed simultaneously with certified copy of judgmentF.S. § 55.10(1) [40]

7

Judgment Liens

6

Address Issues

Assignment of judgment containing creditor’s address does not cure lack of address in original judgmentFarkus v. Fla. Land Sales & Dev. Co., 915 So. 2d 688 (Fla. 5th DCA 2005) [42]

Address of attorney in action was not sufficientRobinson v. Sterling Door & Window Co., 698 So. 2d 570 (Fla. 1st DCA 1997) [44] 12

Judgment Liens

Initial Duration

July 1, 1987 – June 30, 19947 years from date of recording certified copy

July 1, 1994 and after10 years from date of recording certified copy

F.S. § 55.10(1) [40]

13

Judgment Liens

7

Extensions

Prior to expiration of lien, rerecord:Certified copy of judgmentAddress affidavit with current address of lien holder

Extends lien for additional 10 years from date of rerecordingExtension ineffective without address affidavitF.S. §55.10(2) [40] 14

Judgment Liens

Rerecording After Extension Expiration

Creditor may rerecord after extension expirationBUT, judgment is a new lien with priority INFERIOR to prior recorded liensFranklin Fin., Inc. v. White, 932 So. 2d 434 (Fla. 4th DCA 2006) [46]

15

Judgment Liens

8

Extension Limit

Can not exceed 20 years from date of entry of judgment

F.S. § 55.081 [50]

Creditor may file an action to renew the judgment for an additional 20 years prior to the expiration of the original 20 year limit

Petersen v. Whitson, 14 So. 3d 300 (Fla. 2d DCA 2009) [51]

Statute of limitations defense must be specifically pled

Corzo Trucking Corp. v. West, 61 So. 3d 1285 (Fla. 4th DCA 2011) [55]

16

Judgment Liens

Foreclosure

Court lacked subject matter jurisdiction in lien foreclosure where exhaustion of legal remedies was not pledDecubellis v. Ritchotte, 730 So. 2d 723 (Fla. 5th DCA 1999) [48]

17

Judgment Liens

9

Satisfactions

Must be filed in the official recordsCan be executed and recorded by the attorney of recordTN 18.05.01(A)

18

Judgment Liens

Unsatisfied Liens

Perfected liens attach to the property and are enforceable, even against a subsequent bona fide purchaserGamez v. First Union Nat’l Bank of Fla., 31 So. 3d 220 (Fla. 4th DCA 2010) [66]

19

Judgment Liens

10

Homestead

No lien attaches to homestead property or proceeds from sale so long as proceeds are reinvested in a reasonable amount of time after saleOrange Brevard Plumbing & Heating Co. v. La Croix, 137 So. 2d 201 (Fla. 1962) [71]

20

Judgment Liens

Present and Future Interests

Liens can attach to vested remaindersAetna Ins. Co. v. LaGasse, 223 So. 2d 727 (Fla. 1969) [87]

Liens can attach to life estatesKing v. King, 652 So. 2d 1199 (Fla. 4th DCA 1995) [92]

21

Judgment Liens

11

Limited Liability Companies

A judgment debtor’s right, title and interest in his single member LLC can be ordered surrendered to satisfy judgment against memberOlmstead v. Fed. Trade Comm’n, 44 So. 3d 76 (Fla. 2010) [94]

22

Judgment Liens

Limited Liability Companies

F.S. § 608.433 [113] amended effective May 31, 2011 to clarify Olmstead

Charging order is sole and exclusive remedy to satisfy judgment against member of multi‐member LLCCharging order is sole and exclusive remedy to satisfy judgment against member of single member LLC, UNLESS:

Creditor will not receive full payment in a “reasonable” timeCourt may then order sale of interest and buyer of interest becomes a member, not an assignee

Amendments to F.S. § 608.433 apply retroactively

23

Judgment Liens

12

24

FEDERAL TAX LIENS

Duration

10 years from assessment of the tax26 U.S.C. § 6502 [117]

May be extended for additional 10 years by refiling up to 10 years and 30 days from assessment26 U.S.C. § 6323(g)(3) [118]

25

Tax Liens

13

26

Date of Assessment

Last Date for Refiling

Rerecording After Extension Expiration

IRS may rerecord after extension expirationBUT, judgment is a new lien with priority INFERIOR to prior recorded liens

27

Tax Liens

14

Priority

Federal tax liens do not have priority over prior recorded liensU.S. v. Estate of Romani, 523 U.S. 517 (1998) [127]

28

Tax Liens

Right of Redemption

United States has 120 day right of redemption in any forced sale for prior recorded liens26 U.S.C. § 7425(d) [141]

29

Tax Liens

15

Sheriff’s Sale

Sheriff’s sale does not eliminate federal tax liens recorded prior to the saleFederal tax liens can be eliminated through foreclosure by:Joining United States as party to actionGiving United States 120 day redemption period

26 U.S.C. § 7425 [141]

30

Tax Liens

Homestead Property

Individual taxpayers federal tax lien attaches to homestead propertyIncludes property held as a tenancy by the entirety U.S. v. Craft, 535 U.S. 274 (2002) [144]

31

Tax Liens

16

Deceased Debtors

Tenancy by the Entirety Lien of deceased spouse survives death and remains a lien on property

Paternoster v. U.S., 640 F.Supp.2d 983 (S.D. Ohio 2009) [166]

Appears to apply to Joint Tenancy with Right of Survivorship and Tenancy in Common“No Action Letter” from IRS may be obtained to allow commitment or policy to be issued without exception

Call Underwriting regarding specific transactions

32

Tax Liens

Application for Withdrawal

Removal of lien from public recordForm 12277Paid off debt in full; orPaying down debt of $25,000 or less, have no additional tax liabilities, and register for automatic withdrawals

Tax Liens

17

34

CONDOMINIUM LIENS

Lien on Condominium Unit

Condominium association has lien for all unpaid and due and owing association assessmentsLien relates back to the date of recording of the condominium declaration establishing the unitF.S. § 718.116(5)(a) [176]

35

Condominium Lien

18

Notice of Intent to Lien

Association must deliver to unit owner a Notice of Intent to Lien 30 days prior to filing Claim of LienNotice mailed to owner’s last known address by:Certified or registered mail, return receipt requested; ANDFirst‐class mail

F.S. § 718.121(4) [184] 36

Condominium Lien

Claim of Lien

Must contain:Legal descriptionName of ownerName and address of associationAmount dueDue dates for amounts due

Executed and acknowledged by officer or authorized agent of associationSecures assessments stated and after accruingF.S. § 718.116(5)(b) [176]

37

Condominium Lien

19

Acceleration of Assessments

Assessments may be accelerated for calendar year in which lien is filedRight to accelerate must appear in condominium documentsF.S. § 718.112(2)(g) [186]

38

Condominium Lien

Duration of Claim of Lien

One year from date of recordingUNLESS ‐ association brings foreclosure action earlierOne year period suspended during any automatic stay in bankruptcyLien holder to file satisfaction upon payment in fullF.S. § 718.116(5)(b) [176]

39

Condominium Lien

20

Notice of Contest of Lien

Unit owner may file Notice of Contest of LienRequires condominium association to bring foreclosure action within 90 days of service to enforce lien or lien is voidStatutory notice form availableF.S. § 718.116(5)(c) [176]

40

Condominium Lien

Subordination to First Mortgages

Condominium association assessment liens subordinate to first mortgageWith respect to first mortgages, condominium association assessment liens have priority as of date of recording of claim of lienF.S. § 718.116(5)(a) [176]

41

Condominium Lien

21

First Mortgagee’s Assessment Liability

Lesser of:12 months preceding acquisition of title; OR1% of original mortgage debt

Limit only applies if condominium association joined in foreclosure actionAssessment must be paid within 30 days of taking title or association may record Claim of Lien and forecloseF.S. § 718.116(1) [176]

42

Condominium Lien


Limited assessment liability applies only to:Mortgages recorded on or after April 1, 1992; ANDMortgages recorded prior to April 1, 1992 where condominium declaration specifically included future amendments to Chapter 718

F.S. § 718.116(1)(d) [176]43

Condominium Lien

22

44


Limited assessment liability applies only to:First mortgageesSubsequent holders of first mortgages

F.S. § 718.116(1) [176]

DOES NOT APPLY TO: Short sale purchaserAssignees of final judgment of foreclosure

Bay Holdings, Inc. v. 2000 Island Blvd. Condo Assoc., 895 So. 2d 1197 (Fla. 3d DCA 2005) [199]

45

Condominium Lien

23

Association’s Assessment Liability

Association not liable to any other association holding a superior lien for amounts which came due before the association’s acquisition of title including:

Unpaid assessmentsLate feesInterestReasonable attorney’s fees and costs

F.S. § 718.116(1)(b)(2) [176]46

Condominium Lien

47

HOMEOWNERS’ ASSOCIATION

LIENS

24

Lien on Property

Homeowners’ association has lien for all unpaid and due and owing association assessments, if authorized by the governing documentsLien relates back to the date of recording of the original declaration of the community F.S. § 720.3085(1) [201]

48

HOA Lien

Written Demand for Payment

Association must deliver to owner a written notice or demand for past due assessments at least 45 days prior to filing Claim of Lien Notice mailed to owner’s last known address by:

Certified or registered mail, return receipt requested; ANDFirst‐class mail; ANDTo address of parcel, if not same as owner’s last known address

F.S. § 720.3085(4) [201]

49

HOA Lien

25

Claim of Lien

Must contain:Legal descriptionName of ownerName and address of associationAmount dueDue dates for amounts due

Secures assessments stated and after accruingF.S. § 720.3085(1)(a) [201]

50

HOA Lien

Notice of Contest of Lien

Unit owner may file Notice of Contest of LienRequires association to bring foreclosure action within 90 days of service to enforce lien or lien is voidStatutory notice form availableF.S. § 720.3085(1)(b) [201]

51

HOA Lien

26

Subordination to First Mortgages

Homeowners’ association assessment liens subordinate to first mortgageWith respect to first mortgages, HOA assessment liens have priority as of date of recording of claim of lienF.S. § 720.3085(1) [201]

52

HOA Lien


Lesser of:12 months preceding acquisition of title; OR1% of original mortgage debt

Limit only applies if HOA was joined in mortgage foreclosure actionF.S. § 720.3085(2)(c) [201]

53

HOA Lien

27


Governing documents may provide different schemeEcoventure WGV, Ltd. v. St. Johns NW Residential Assoc., Inc., 56 So. 3d 126 (Fla. 5th DCA 2011) [208]

Holding may be limited to mortgages recorded prior to July 1, 2008 HOAs can incorporate future changes to Chapter 720 in governing documents

54

HOA Lien


Holly Lake Ass’n v. Fed. Nat’l Mortgage Ass’n, 660 So. 2d 266 (Fla. 1995) [211]Coral Lakes Cmty. Ass’n, Inc. v. Busey Bank, N.A., 30 So. 3d 579 (Fla. 2d DCA 2010) [215]In re Jimenez, 472 B.R. 106 (Bankr. M.D. Fla. 2012) [223]REMEMBER: These case ARE NOT applicable to condominium associations!

55

HOA Lien

28

Association’s Assessment Liability

Association not liable to any other association holding a superior lien for amounts which came due before the association’s acquisition of title including:

Unpaid assessmentsLate feesInterestReasonable attorney’s fees and costs

F.S. § 720.3085(2)(d) [201]56

HOA Lien

Qualifying Offer

Written offer to pay all amounts secured by the lien plus amounts accruing during pendency of the offer§720.3085(6) [185]

57

HOA Lien

29

Qualifying Offer

Delivered to HOA’s attorneyHand delivery, obtaining written receipt; ORCertified mail, return receipt requested

Filed with courtForeclosure stayed for period stated in qualifying offer, not to exceed 60 days from date of service and no sooner than 30 days before date of trial, whichever occurs firstF.S. § 720.3085(6) [185]

58

HOA Lien

Qualifying Offer

Must be in writingSigned by all parcel owners and their spouse (if spouse resides or claims homestead)Acknowledged by notaryStatutory form availableNo additional legal fees may be assessed during stay periodF.S. § 720.3085(6)(c) [185]

59

HOA Lien

30

60

CODE ENFORCEMENT BOARD LIENS

Governing Authority

F.S. Ch. 162 is supplementaryCounties and municipalities may enforce its code by any other means

61

CEB Liens

31

Creation of Lien

Recording certified copy of order imposing fine, or fine and repair costs creates lienLien created against:Property where violation occursAll other real and personal property of violator

F.S. § 162.09(3) [234]62

CEB Liens

Enforcement

Enforcement board may authorize its attorney to foreclose on lien or seek a money judgmentEnforcement may not begin prior to 3 months from date lien recorded

No lien may be foreclosed on homestead propertyF.S. § 162.09(3) [234]

63

CEB Liens

32

Duration of Lien

20 years from recordingF.S. § 162.10 [236]

64

CEB Liens

Priority

CEB liens can not be granted super priority status by local ordinance City of Palm Bay v. Wells Fargo Bank, N.A., 114 So. 3d 924 (Fla. 2013)[237]

65

CEB Liens

33

66

MUNICIPAL LIENS

Types

Municipal services provided, e.g. water, sewer, and gas servicesSpecial assessments for improvements, e.g. sidewalk installation, road paving, etc.Other liens covered by local ordinances

67

Municipal Liens

34

Identifying Municipal Liens

Recorded liensRecorded resolutionsRecorded ordinancesOutstanding service bills

68

Creation of Lien

Service chargesLien appears to be created on date service charge becomes due

TN 25.03.09

Special assessmentsLien created on date special assessment adopted by locality, not on date of maturity for payment

F.S. § 170.08 [244]69

Municipal Liens

35

Priority

Superior to all other liens, including purchase money mortgages

F.S. §§ 153.67 [245], 159.17 [246], 170.09 [247]

Municipal home improvement loan not a lien for the “delivery of municipal services, including liens for special assessments, code enforcement and the like…”

First Nationwide Mortgage Corp. v. Brantley, 851 So. 2d 885 (Fla. 4th DCA 2003) [248]

70

Municipal Liens

Enforcement: Service Charges

Service charge liens are enforceable in the manner provided for the foreclosure of mortgagesF.S. § 95.11(2)(c) establishes a 5 year statute of limitation to foreclose a mortgageCity of Riviera Beach v. Reed, 987 So. 2d 168 (Fla. 4th DCA 2008) [256]

71

Municipal Liens

36

Enforcement: Special Assessments

Statutory enforcement procedureF.S. § 173.04 [259]

Statutory enforcement procedure NOT mandatory

F.S. § 173.13 [262]

BUT, all enforcement procedures must be in substantial accordance with the practice, pleading, and procedures for mortgage foreclosures

F.S. § 173.01 [263] 72

Municipal Liens

Time for Special Assessment Enforcement

After the expiration of 1 year from the date any special assessment or installment became due and payableF.S. § 173.03(1)(c) [264]

73

Municipal Liens

37

Private Party Enforcement

City attorney may assign its foreclosure rights to private party lienholdersIsmael v. Certain Lands Upon Which Special Assessments are Delinquent, 51 So. 3d 583 (Fla. 3d DCA 2010) [265]

74

Municipal Liens

Hidden Liens Bill

Liens by government or quasi‐government entity must be recorded to attachNotice of lien must contain:Name of owner of recordDescription or address of propertyTax or parcel ID number

75

Municipal Liens

38

Hidden Liens Bill

Bill does not apply to:Taxes (ad valorem or non‐ad valorem)Special assessmentsUtilities

Laws of Fla. 2013‐241 (effective Oct. 1) [268]

76

Municipal Liens

Course Credits

Bar course #1200561N1.0 General CLER credit1.0 Real Estate Certification credit1.0 Business Litigation credit

NALA 1.0 hour ([email protected])DFS 1.0 hour ([email protected])Contact information:

Maggie [email protected] x 7474

77

West's F.S. Const. Art. 10 § 4 Page 1

West's Florida Statutes Currentness

Florida Constitution--1968 Revision (Refs & Annos) Article X. Miscellaneous (Refs & Annos)

§ 4. Homestead; exemptions (a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person: (1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner's consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner's family; (2) personal property to the value of one thousand dollars. (b) These exemptions shall inure to the surviving spouse or heirs of the owner. (c) The homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the home-stead may be devised to the owner's spouse if there be no minor child. The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer the title to an estate by the entirety with the spouse. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law. CREDIT(S) Amended, general election, Nov. 7, 1972; general election, Nov. 6, 1984; general election, Nov. 3, 1998.

© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. 39

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F.S. § 55.10 Page 1

© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

Effective: July 1, 2004

Florida Statutes HUCurrentnessU

Title VI. Civil Practice and Procedure (Chapters 45-89) HU(Refs & Annos)U HU Chapter 55UH. Judgments HU(Refs & Annos)U

55.10. Judgments, orders, and decrees; lien of all, generally; extension of liens; transfer of liens to other security

(1) A judgment, order, or decree becomes a lien on real property in any county when a certified copy of it is re-corded in the official records or judgment lien record of the county, whichever is maintained at the time of recorda-tion, provided that the judgment, order, or decree contains the address of the person who has a lien as a result of such judgment, order, or decree or a separate affidavit is recorded simultaneously with the judgment, order, or de-cree stating the address of the person who has a lien as a result of such judgment, order, or decree. A judgment, or-der, or decree does not become a lien on real property unless the address of the person who has a lien as a result of such judgment, order, or decree is contained in the judgment, order, or decree or an affidavit with such address is simultaneously recorded with the judgment, order, or decree. If the certified copy was first recorded in a county in accordance with this subsection between July 1, 1987, and June 30, 1994, then the judgment, order, or decree shall be a lien in that county for an initial period of 7 years from the date of the recording. If the certified copy is first re-corded in accordance with this subsection on or after July 1, 1994, then the judgment, order, or decree shall be a lien in that county for an initial period of 10 years from the date of the recording. (2) The lien provided for in subsection (1) or an extension of that lien as provided by this subsection may be ex-tended for an additional period of 10 years, subject to the limitation in subsection (3), by rerecording a certified copy of the judgment, order, or decree prior to the expiration of the lien or the expiration of the extended lien and by si-multaneously recording an affidavit with the current address of the person who has a lien as a result of the judgment, order, or decree. The extension shall be effective from the date the certified copy of the judgment, order, or decree is rerecorded. The lien or extended lien will not be extended unless the affidavit with the current address is simultane-ously recorded. (3) In no event shall the lien upon real property created by this section be extended beyond the period provided for in HUs. 55.081UH or beyond the point at which the lien is satisfied, whichever occurs first. (4) This act shall apply to all judgments, orders, and decrees of record which constitute a lien on real property; ex-cept that any judgment, order, or decree recorded prior to July 1, 1987, shall remain a lien on real property until the period provided for in HUs. 55.081UH expires or until the lien is satisfied, whichever occurs first. (5) Any lien claimed under this section may be transferred, by any person having an interest in the real property upon which the lien is imposed or the contract under which the lien is claimed, from such real property to other se-curity by either depositing in the clerk's office a sum of money or filing in the clerk's office a bond executed as surety by a surety insurer licensed to do business in this state. Such deposit or bond shall be in an amount equal to the amount demanded in such claim of lien plus interest thereon at the legal rate for 3 years plus $500 to apply on any court costs which may be taxed in any proceeding to enforce said lien. Such deposit or bond shall be condi-

40

F.S. § 55.10 Page 2


tioned to pay any judgment, order, or decree which may be rendered for the satisfaction of the lien for which such claim of lien was recorded and costs plus $500 for court costs. Upon such deposit being made or such bond being filed, the clerk shall make and record a certificate showing the transfer of the lien from the real property to the secu-rity and mail a copy thereof by registered or certified mail to the lienor named in the claim of lien so transferred, at the address stated therein. Upon the filing of the certificate of transfer, the real property shall thereupon be released from the lien claimed, and such lien shall be transferred to said security. The clerk shall be entitled to a service charge of up to $15 for making and serving the certificate. If the transaction involves the transfer of multiple liens, an additional service charge of up to $7.50 for each additional lien shall be charged. Any number of liens may be transferred to one such security. (6) Any excess of the security over the aggregate amount of any judgments, orders, or decrees rendered, plus costs actually taxed, shall be repaid to the party filing the security or his or her successor in interest. Any deposit of money shall be considered as paid into court and shall be subject to the provisions of law relative to payments of money into court and the disposition of these payments. (7) Any party having an interest in such security or the property from which the lien was transferred may at any time, and any number of times, file a complaint in chancery in the circuit court of the county where such security is deposited for an order: (a) To require additional security; (b) To require reduction of security; (c) To require change or substitution of sureties; (d) To require payment or discharge thereof; or (e) Relating to any other matter affecting said security. CREDIT(S) Laws 1875, c. 2040, §§ 43, 44; Laws 1899, c. 4725; Gen.St.1906, § 1619; Rev.Gen.St.1920, § 2823; Comp.Gen.Laws 1927, § 4510; Laws 1939, c. 19270, §§ 1, 2; Comp.Gen.Laws Supp.1940, § 4865(3); Laws 1967, c. 67-254, § 9; Laws 1971, c. 71-56, § 1; Laws 1977, c. 77-462, § 1; HULaws 1987, c. 87-67, § 2 UH; HULaws 1987, c. 87-145, § 7UH; HULaws 1991, c. 91-45, § 12UH; HULaws 1993, c. 93-250, § 10UH. Amended by HULaws 1994, c. 94-348, § 15, eff. June 3, 1994UH; HULaws 1995, c. 95-147, § 1357, eff. July 10, 1995UH; HULaws 2000, c. 2000-258, § 7, eff. July 1, 2000UH; HULaws 2001, c. 2001-130, § 1, eff. July 1, 2001UH; HULaws 2003, c. 2003-402, § 68, eff. July 1, 2004UH; HULaws 2004, c. 2004-265, § 47, eff. July 1, 2004UH.

41

District Court of Appeal of Florida,Fifth District.

Debbie FARKUS, Appellant,v.

FLORIDA LAND SALES AND DEVELOPMENTCOMPANY, Appellee.

No. 5D05-174.Nov. 4, 2005.

Rehearing Denied Dec. 13, 2005.

Background: Assignee of a final default judgmententered against land owner brought action to fore-close a judgment lien against owner's real property.The Circuit Court, Sumter County, Hale R. Stancil,J., awarded summary judgment to owner. Assigneeappealed.

Holding: The District Court of Appeal, Palmer, J.,held that judgment did not become a lien againstowner's real property.

Affirmed.

West Headnotes

[1] Judgment 228 767

228 Judgment228XV Lien

228k766 Recording and Docketing Judgment228k767 k. Sufficiency to Create Lien in

General. Most Cited Cases

Judgment 228 847

228 Judgment228XVIII Assignment

228k846 Rights and Liabilities of Parties228k847 k. As to Judgment Debtor in

General. Most Cited CasesFinal default judgment entered against land

owner did not become a lien against owner's real

property and, thus, assignee of judgment could notforeclose any such lien against owner's property,even though documents assigning judgment to as-signee contained assignee's address; final judgmentitself did not contain judgment creditor's address,judgment was not recorded with an affidavit curingsuch defect, and assignee acquired no greater rightsthan those held by judgment creditor. West's F.S.A.§ 55.10(1).

[2] Assignments 38 90

38 Assignments38V Rights and Liabilities

38k90 k. Nature and Extent of Rights of As-signee in General. Most Cited Cases

Assignments 38 109

38 Assignments38V Rights and Liabilities

38k105 Liabilities of Assignee38k109 k. On Contract Assigned. Most

Cited CasesAn assignee succeeds to his assignor's rights

under the assignment of a contract and takes it withall the burdens to which it is subject in the hands ofthe assignor.

*688 Howard Hadley, Maitland, for Appellant.

No Appearance for Appellee.

PALMER, J.Debbie Farkus appeals the final summary judg-

ment order entered by the trial court in favor ofFlorida Land Sales and Development Company(Florida Land). Finding no reversible error commit-ted by the trial court, we affirm.

Farkus filed a complaint seeking to foreclose afinal judgment lien on real property owned by Flor-ida Land. The complaint explained that a final de-fault judgment had been entered against Florida

Page 1915 So.2d 688, 30 Fla. L. Weekly D2534(Cite as: 915 So.2d 688)


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Land in favor of CNL Income Fund IX, Ltd., inJanuary 2003, and that said final judgment was as-signed by CNL to Farkus in February 2004.

Florida Land filed an answer denying liabilityas well as a separate motion for summary judgment.The motion asserted that entry of summary judg-ment in favor of Florida Land was warranted basedon the fact that the default judgment failed to com-ply with the terms of section 55.10(1) of the FloridaStatutes (2003), which provides that a judgmentdoes not become a lien on real property unless theaddress of the person who has the lien is containedin the judgment. The trial court granted the motionand entered summary judgment in favor of FloridaLand. This appeal timely followed.

Section 55.10(1) of the Florida Statutesprovides that a judgment becomes a lien on realproperty when a certified copy of it is recorded inthe official records “provided that the judgment ...contains the address of the person who has a lien asa result of such judgment ... or a separate *689 affi-davit is recorded simultaneously with the judgment... stating the address of the person who has a lienas a result of such judgment, order, or decree.” §55.10(1), Fla. Stat. (2003).

[1] The final judgment entered against FloridaLand and in favor of CNL does not contain any ad-dress for CNL. As such, the judgment did not be-come a lien on Florida Land's property. See Butlerv. Butler, 870 So.2d 239 (Fla. 2d DCA 2004)(holding that no liens attached to husband's undi-vided one-half interest in former marital residenceas result of recordation of judgments against hus-band where wife/lienholder's address did not appearon judgments); Decubellis v. Ritchotte, 730 So.2d723 (Fla. 5th DCA 1999)(holding that judgmentagainst debtor never matured into a lien wherecreditor's address did not appear on judgment lien).

In challenging the trial court's ruling, Farkusargues that the provisions of section 55.10(1) arenot applicable in this case because the assignmentdocuments contain her address. In the alternative,

Farkus argues that by placing her address on the as-signment documents, she met the requirements ofsection 55.10(1). We disagree.

[2] In addition to the fact that Farkus cites nostatutory or case law to support her arguments, thearguments fail to recognize the applicability of thecommon law relating to assignments whichprovides that an assignment gives the assignee nogreater rights against the principal debtor than thoseheld by the assignor. To that end, the trial courtproperly concluded that Farkus' complaint failed toset forth a viable claim for enforcement of a judg-ment lien since her complaint asserted a claim of li-ability based entirely on Farkus' capacity as the as-signee of CNL's judgment. “The law is well settledthat an assignee succeeds to his assignor's rightsunder the assignment of a contract and takes it withall the burdens to which it is subject in the hands ofthe assignor.” Shreve Land Co., Inc. v. J & D Fin-ancial Corp., 421 So.2d 722 (Fla. 3d DCA 1982).FN1

FN1. Nothing prevents the holder of a re-corded judgment which does not properlycontain the address of the judgment credit-or from curing the defect by re-recordingthe judgment and simultaneously filing anaffidavit with the address as provided forin section 55.10 of the Florida Statutes.Such re-recording would not relate back tothe original recording of the judgment, butwould create a lien on property from thedate of the re-recording forward.

AFFIRMED.

GRIFFIN and THOMPSON, JJ., concur.

Fla.App. 5 Dist.,2005.Farkus v. Florida Land Sales and Development Co.915 So.2d 688, 30 Fla. L. Weekly D2534

END OF DOCUMENT








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District Court of Appeal of Florida,First District.

Claude E. ROBINSON, Appellant,v.

STERLING DOOR & WINDOW COMPANY,INC., Appellee.

No. 96-1623.July 21, 1997.

Rehearing Denied Aug. 28, 1997.

Judgment debtor filed complaint for declarat-ory judgment, claiming that judgment lien on judg-ment debtor's real property was defective because itdid not include judgment creditor's address as re-quired by statute. The Circuit Court, WaltonCounty, Thomas T. Remington, J., found that lienwas valid, and judgment debtor appealed. The Dis-trict Court of Appeal held that statute governingwhen judgments, orders, or decrees become lienson real estate unambiguously requires that judg-ment creditor's address be on judgment lien.

Reversed and remanded.

West Headnotes

[1] Statutes 361 176

361 Statutes361VI Construction and Operation

361VI(A) General Rules of Construction361k176 k. Judicial Authority and Duty.

Most Cited Cases

Statutes 361 190


361VI(A) General Rules of Construction361k187 Meaning of Language

361k190 k. Existence of Ambiguity.Most Cited Cases

In applying statutes, courts are obliged to giveeffect to language the legislature has used; thus, un-ambiguous statutes should not be subject to con-struction or interpretation.



228k766 Recording and Docketing Judgment228k767 k. Sufficiency to Create Lien in

General. Most Cited CasesJudgment that did not contain judgment credit-

or's address did not become lien on judgment debt-or's real estate. West's F.S.A. § 55.10(1).

*570 David B. Pleat of Barth & Pleat, Destin, forAppellant.

Joseph M. Scheyd, Jr., Destin, for Appellee.

*571 PER CURIAM.Appellant filed the instant appeal based on the

trial court's determination that Appellee has a validlien on property owned by Appellant. Appellantfiled a complaint for a declaratory judgment, claim-ing Appellee's judgment lien is defective because itdoes not include Appellee's address, as required bysection 55.10(1), Florida Statutes. The trial courtdetermined that Appellee's lien is valid because thenames of the attorneys involved in the proceedingsgiving rise to the judgment lien were contained inthe judgment lien, thereby satisfying the terms andintent of section 55.10(1), Florida Statutes.

[1][2] The issue on appeal is whether the trialcourt erred when applying section 55.10(1), FloridaStatutes, to Appellee's judgment lien on Appellant'srealty. Courts are “obliged to give effect to the lan-guage the Legislature has used ...”; thus, unambigu-ous statutes should not be subject to construction orinterpretation. Baker v. State, 636 So.2d 1342, 1343(Fla.1994) (citation omitted). Section 55.10(1),Florida Statutes, provides that:





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A judgment, order, or decree becomes a lien onreal estate in any county when a certified copy of itis recorded in the official records or judgment lienrecord of the county, whichever is maintained at thetime of recordation, and it shall be a lien for a peri-od of 7 years from the date of the recordingprovided that the judgment, order, or decree con-tains the address of the person who has a lien as aresult of such judgment, order, or decree or a separ-ate affidavit is recorded simultaneously with thejudgment, order, or decree stating the address of theperson who has a lien as a result of such judgment,order, or decree. A judgment, order, or decree doesnot become a lien on real estate unless the addressof the person who has a lien as a result of suchjudgment, order, or decree is contained in the judg-ment, order, or decree or an affidavit with such ad-dress is simultaneously recorded with the judgment,order, or decree.

§ 55.10(1), Fla. Stat. (emphasis added). Ac-cordingly, section 55.10(1) unambiguously requiresthat Appellee's address be on the judgment lien. Be-cause Appellee's judgment did not contain his ad-dress, it “d[id] not become a lien on [the] real es-tate....” Id. Thus, the trial court's final judgmentshould be reversed and the case remanded for pro-ceedings consistent with this opinion.

BOOTH, WOLF and PADOVANO, JJ., concur.

Fla.App. 1 Dist.,1997.Robinson v. Sterling Door & Window Co., Inc.698 So.2d 570, 22 Fla. L. Weekly D1814

END OF DOCUMENT








District Court of Appeal of Florida,Fourth District.

FRANKLIN FINANCIAL, INC., Appellant,v.

Thomas K. WHITE, Norma Jean Prevatt a/k/aNorma Jean White, and Big Lake National Bank,

Appellees.

No. 4D05-1063.May 17, 2006.

Background: Assignee of judgment against prop-erty owner filed complaint to foreclose a judgmentlien on owner's property, and named as a defendanta mortgagee that recorded a mortgage on the prop-erty after assignee recorded its judgment. The Nine-teenth Judicial Circuit Court, Okeechobee County,Larry Schack, J., awarded summary judgment tomortgagee, finding that it had the superior interestin the property. Assignee appealed.

Holdings: The District Court of Appeal, May, J.,held that:(1) assignee's judgment was valid, and(2) assignee could rerecord the judgment after ex-piration of any judgment lien obtained by originaljudgment creditor.

Reversed.

West Headnotes


228 Judgment228VI On Trial of Issues

228VI(B) Parties228k244 k. Designation of Parties. Most

Cited CasesA judgment that contains errors or omissions as

to the names, addresses, or social security numbersof the parties is still valid if the parties for andagainst whom it is rendered are so referred to

therein as that a reference to its caption, or to thepleadings, process, and proceedings in the action,will make certain the names of the parties thus re-ferred to. West's F.S.A. § 55.01.


228 Judgment228XII Construction and Operation in General

228k526 k. Construction with Reference toPleadings or Other Proceedings. Most Cited Cases

Every judgment may be construed and aided bythe entire record.


228 Judgment228VI On Trial of Issues

228VI(B) Parties228k242 k. Judgment for or Against Party

Deceased. Most Cited Cases

Judgment 228 530

228 Judgment228XII Construction and Operation in General

228k529 Parties Liable228k530 k. In General. Most Cited Cases

Judgment 228 851

228 Judgment228XIX Suspension, Enforcement, and Revival

228k851 k. Judgments Enforceable in Gener-al. Most Cited Cases

Judgment against property owner and her de-ceased husband, among others, was valid, and thusassignee of the judgment could seek to enforce itagainst owner; judgment named owner and husbandin the caption, and established liability against the“defendants” in its body, and record from the un-derlying lawsuit made clear that judgment boundowner personally. West's F.S.A. § 55.01.

[4] Judgment 228 795(4)







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228k794 Duration of Lien228k795 In General

228k795(4) k. Continuance by Revivalof Judgment. Most Cited Cases

Judgment 228 864(2)


228k864 Persons Who May Revive Judgment228k864(2) k. Assignees. Most Cited

Cases

Mortgages 266 151(5)

266 Mortgages266III Construction and Operation

266III(D) Lien and Priority266k151 Priorities of Mortgages in Gen-

eral266k151(5) k. Mortgages and Judg-

ments or Executions. Most Cited CasesAssignee of judgment against property owner

could rerecord the judgment after expiration of anyjudgment lien obtained by original judgment credit-or, and thus mortgage lien recorded after assigneererecorded judgment was inferior to assignee'sjudgment lien; expiration of original judgment liencaused such lien to lose priority over any liens at-taching before judgment was rerecorded, but didnot preclude creation of a new lien that would besuperior to any liens attaching to the property there-after. West's F.S.A. § 55.10(1, 2).

[5] Judgment 228 785(1)


228k785 Priorities Between Judgment andOther Liens or Claims

228k785(1) k. In General. Most CitedCases

When a judgment is recorded, the judgment li-en takes priority over any liens recorded thereafter;

it maintains this priority so long as it exists. West'sF.S.A. § 55.10(1, 2).

[6] Judgment 228 785(1)


228k785 Priorities Between Judgment andOther Liens or Claims


Judgment 228 795(1)


228k794 Duration of Lien228k795 In General


If a judgment creditor allows a judgment lien tolapse without filing for an extension, the judgmentlien ceases to exist; the judgment creditor maychoose to rerecord the judgment at a later time, buta new judgment lien is created and it takes no prior-ity over liens already recorded. West's F.S.A. §55.10(1, 2).

*435 James J. Webb of Haley, Sinagra, Paul & To-land, P.A., Fort Lauderdale, for appellant.

Daniel S. Mandel of Mandel, Weisman, Heimberg& Brodie, P.A., Boca Raton, for appellees.

MAY, J.A judgment lien holder and a mortgage lien

holder each claim a superior interest in the samereal property. The appeal raises two issues: whetherthe judgment was valid and whether a judgment li-en may be rerecorded after it expires. Franklin Fin-ancial, Inc., the judgment lien holder, appeals a fi-nal summary judgment in favor of Big Lake Na-tional Bank, the mortgage lien holder. The court de-clared Franklin Financial's judgment invalid andtherefore it had no judgment lien. For the reasonsthat follow, we reverse.







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In the early 1990's, a judgment was enteredagainst Norma K. Prevatt FN1 and her now de-ceased husband. The judgment also named severalother interested parties as defendants. The originaljudgment holder appears to have attempted to re-cord the judgment in 1994. It is unclear from the re-cord if this judgment lien ever matured, but in anyevent, the original judgment holder never executedon the judgment.

FN1. Mrs. Prevatt has remarried since theoriginal judgment issued. She is nowknown as Norma Jean White.

Through a series of assignments, Franklin Fin-ancial came to hold the judgment. On January 29,2003, Franklin Financial recorded the judgmentalong with an affidavit containing its address. Itfiled a complaint to foreclose the judgment lien onproperty owned by Mrs. Prevatt in OkeechobeeCounty, Florida.

The complaint also named Mrs. Prevatt's cur-rent husband, Thomas White, and Big Lake Nation-al Bank (“Big Lake”) as defendants. After FranklinFinancial recorded the judgment, Mrs. Prevatt con-veyed the property to her husband and Big Lake re-corded a mortgage on the property.

Both Franklin Financial and Big Lake filed mo-tions for summary judgment. Franklin Financialasked the court to declare its interest superior whileBig Lake asked the court to declare Franklin Finan-cial's interest in the property invalid.

*436 The court found Franklin Financial hadno valid lien on the property. It held the underlyingjudgment defective because it failed to affix liabil-ity to a specific defendant in the body of the judg-ment. The trial court granted summary judgment forBig Lake finding it had the superior interest in theproperty.

This appeal presents two issues. The first issueinvolves the validity of the judgment.

[1][2] There are certain requirements for a

judgment to be valid. A final judgment must con-tain the address and the social security number, ifknown to the prevailing party, of each personagainst whom the judgment is rendered. § 55.01,Fla. Stat. (1994). However, errors in names, ad-dresses, or social security numbers, or the failure toinclude the same, shall in no way affect the validityor finality of a final judgment. § 55.01, Fla. Stat.(1994). A judgment is still valid “if the parties forand against whom [it] is rendered are so referred totherein as that a reference to its caption, or to thepleadings, process, and proceedings in the action,will make certain the names of the parties thus re-ferred to.” Taylor v. Branham, 35 Fla. 297, 17 So.552, 555 (1895). “Every judgment may be con-strued and aided by the entire record.” Id.

[3] The judgment here identifies Mrs. Prevattand her deceased husband in the caption and estab-lishes liability against the “defendants” in its body.The record from the earlier lawsuit clearly estab-lishes the judgment bound Mrs. Prevatt personally.Therefore, the judgment is valid as a matter of lawand the court erred in entering a summary judgmentin favor of Big Lake.

[4] The second issue involves whether FranklinFinancial can rerecord the judgment after the ori-ginal judgment lien has expired. The original judg-ment lien holder attempted to record the judgmentin 1994. It is unclear if it properly recorded thejudgment. Whatever the case, no judgment lienwould have existed when Franklin Financial cameto hold the judgment in 2003. The original judg-ment lien would have either never existed becauseit was improperly recorded or would have expiredunder the statute then in force.

Franklin Financial claims a plain reading of thestatute governing judgment liens allows a judgmentcreditor to rerecord a judgment after the first judg-ment lien has expired. We agree.

Section 55.10(1), Florida Statutes (2003),provides that a judgment becomes a lien on realproperty in any county where a certified copy of it









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is recorded in the official records of the county. Thejudgment lien lasts for a period of ten years.FN2 Id.The lien may be extended for an additional periodby rerecording a certified copy of the judgment pri-or to the expiration of the lien and by simultan-eously recording an affidavit with the current ad-dress of the person who has a lien as a result of thejudgment. § 55.10(2), Fla. Stat. (2003). No judg-ment can be a lien beyond twenty years after thedate of the original judgment. § 55.081, Fla. Stat.(2003). The statute is silent as to whether the judg-ment may be rerecorded after the original judgmentlien has expired.

FN2. At the time the original judgmentholder attempted to record the judgment, ajudgment lien was only valid for a periodof seven years. § 55.10(1), Fla. Stat.(2004).

[5] The statutory mechanism for extending thelife of a judgment lien was designed to allow thejudgment creditor to maintain its priority over anysubsequent lien holders. When a judgment is recor-ded, the judgment lien takes priority over *437 anyliens recorded thereafter. It maintains this priorityso long as it exists. If the judgment lien begins toreach its statutorily defined time limit, the judgmentcreditor may file for an extension pursuant to sec-tion 55.10(2). The logical result of filing an exten-sion is that the life of the original judgment lien isextended. By extending the judgment lien's life, thejudgment creditor maintains the judgment lien's pri-ority over any liens recorded after its original dateof recording and also over any liens recorded afterits date of extension.

[6] A different outcome is produced if the judg-ment creditor allows the judgment lien to lapsewithout filing for an extension. In that case, thejudgment lien ceases to exist. The judgment credit-or may choose to rerecord the judgment at a latertime, but a new judgment lien is created and it takesno priority over liens already recorded. Like a childthat wanders out of a queue, the newly rerecordedjudgment lien has lost its place and must go to the

back and stand behind all previously recorded judg-ment liens.FN3

FN3. Obviously, the judgment is againstthe judgment debtor personally. When thejudgment creditor rerecords the judgment,the new judgment lien only attaches toproperty then in the judgment debtor's pos-session and not to property that has beentransferred by the judgment debtor sincethe original judgment lien expired.

We hold a judgment creditor may rerecord ajudgment even after the original judgment lien hasexpired. Franklin Financial's judgment was a validjudgment against Mrs. Prevatt. The recording ofthat judgment created a valid judgment lien. BigLake's mortgage, recorded after Franklin Financial'sjudgment lien, is the junior interest.

Reversed.

STONE and GROSS, JJ., concur.

Fla.App. 4 Dist.,2006.Franklin Financial, Inc. v. White932 So.2d 434, 31 Fla. L. Weekly D1394

END OF DOCUMENT










F.S. § 55.081 Page 1

Effective:[See Text Amendments]

Florida Statutes Currentness

Title VI. Civil Practice and Procedure (Chapters 45-89) (Refs & Annos) Chapter 55. Judgments (Refs & Annos)

55.081. Statute of limitations, lien of judgment Subject to the provisions of s. 55.10, no judgment, order, or decree of any court shall be a lien upon real or personal property within the state after the expiration of 20 years from the date of the entry of such judgment, order, or de-cree. CREDIT(S) Laws 1955, c. 29954, § 1; Laws 1967, c. 67-254, § 9; Laws 1987, c. 87-67, § 1.


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District Court of Appeal of Florida,Second District.

C. Thomas PETERSEN, Appellant,v.

Edmund S. WHITSON, Jr., Appellee.

No. 2D09-877.Aug. 19, 2009.

Background: Judgment creditor filed actionagainst judgment debtor to renew original judg-ment. Judgment debtor filed motion to dismiss forlack of personal jurisdiction. The Circuit Court,Pinellas County, David A. Demers, J., denied mo-tion. Judgment debtor appealed.

Holding: The District Court of Appeal, Wallace, J.,held that because an action to renew a judgment ismerely a continuation of the original proceeding,circuit court had continuing jurisdiction over judg-ment debtor, even though judgment debtor was nolonger a resident of Florida.

Affirmed.

West Headnotes


228 Judgment228XXI Actions on Judgments

228XXI(A) Domestic Judgments228k900 k. Judgment as Cause of Action

in General. Most Cited Cases

Judgment 228 925


228XXI(B) Foreign Judgments228k925 k. Foreign Judgment as Cause of

Action in General. Most Cited CasesA judgment, whether domestic or foreign, con-

stitutes a cause of action upon which a new and in-dependent action may be based.



228XXI(A) Domestic Judgments228k902 k. Nature and Form of Remedy.

Most Cited CasesThe main purpose of an action on a judgment is

to obtain a new judgment which will facilitate theultimate goal of securing satisfaction of the originalcause of action.

[3] Judgment 228 910(3)


228XXI(A) Domestic Judgments228k910 Time to Sue and Limitations

228k910(3) k. Accrual of Cause of Ac-tion. Most Cited Cases

If the statute of limitation period has almostrun on a judgment, the judgment creditor can startthe limitation period anew by bringing an actionupon the judgment and obtaining a new judgment.West's F.S.A. § 95.11(1).

[4] Courts 106 30

106 Courts106I Nature, Extent, and Exercise of Jurisdiction

in General106k30 k. Loss or Divestiture of Jurisdiction.

Most Cited CasesBecause an action to renew a judgment is

merely a continuation of the original proceeding,circuit court had continuing jurisdiction over judg-ment debtor in judgment creditor's action to renewjudgment, even though judgment debtor was nolonger a resident of Florida.

[5] Courts 106 30






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106 Courts106I Nature, Extent, and Exercise of Jurisdiction

in General106k30 k. Loss or Divestiture of Jurisdiction.

Most Cited Cases

Judgment 228 870(1)


228k870 Scire Facias to Revive Judgment228k870(1) k. In General. Most Cited

Cases

Judgment 228 871


228k871 k. Actions to Revive Judgment.Most Cited Cases

An action on a judgment, whether under a newcomplaint or by a writ of scire facias, is a continu-ation of the original action, and thus the court thatrendered the judgment in the original action hascontinuing jurisdiction over the defendant in an ac-tion to renew the judgment.

*301 William H. Phelan, Jr., of Bond, Arnett,Phelan, Smith & Craggs, P.A., Ocala, for Appel-lant.

William H. Walker and Adam S. Rubenfield of TheLaw Office of William H. Walker, Chartered, St.Petersburg, for Appellee.

WALLACE, Judge.This nonfinal appeal arises out of an action to

renew a judgment brought by Edmund S. Whitson,Jr. (the judgment creditor), against C. ThomasPetersen (the judgment debtor). The judgment debt-or, a Georgia resident, challenges the circuit court'sorder denying his motion to dismiss the action forlack of personal jurisdiction.FN1 Because an actionto renew a judgment is merely a continuation of theoriginal proceeding, the circuit court had continu-ing jurisdiction over the nonresident judgment debt-

or for the purpose of the judgment creditor's action.Accordingly, we affirm the circuit court's order.

FN1. This court has jurisdiction in accord-ance with Florida Rule of Appellate Pro-cedure 9.130(a)(3)(c)(i).

THE FACTS AND PROCEDURAL BACK-GROUND

In September 1988, Whitson & Whitson, P.A.,a Florida professional association, filed an action inthe Pinellas County Circuit Court against the judg-ment debtor.FN2 When the original action wascommenced, the judgment debtor was a resident ofFlorida, conducted business in Florida, and main-tained an office in Florida. The judgment debtorwas served with process and appeared pro se in theoriginal action. He did not contest the circuit court'sjurisdiction over his person. On December 6, 1988,the circuit court entered a final summary judgmentin favor of Whitson & Whitson, P.A., and againstthe judgment debtor for damages in the amount of$434,514.96. Subsequently, Whitson & Whitson,P.A., assigned the judgment to the judgment credit-or.

FN2. The statement of the facts and pro-cedural background is taken from the cir-cuit court's order and the documentsprovided by the judgment debtor in the ap-pendix to his initial brief.

In June 2007, the judgment debtor left Floridaand moved to Georgia. The judgment debtor hasbeen a resident of Georgia since he left Florida.

On April 25, 2008, the judgment creditor filedan action in the Pinellas County Circuit Court to re-new the original judgment. In his complaint, thejudgment creditor alleged the following pertinentmatters: (1) the entry of the original judgment; (2)the judgment creditor's ownership of the judgmentby assignment from Whitson & Whitson, P.A.; (3)nonpayment of the judgment; (4) the amount of thebalance *302 due on the judgment with accrued in-terest; (5) the judgment debtor's residence in Pinel-




















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las County when the original judgment was entered;(6) the judgment debtor's current residence in Geor-gia; and (7) allegations supporting service on thejudgment debtor outside the State of Florida undersection 48.193, Florida Statutes (2007).

After the judgment debtor was served with pro-cess in Georgia, he filed a motion to dismiss forlack of jurisdiction over the person and a support-ing affidavit. The judgment debtor's affidavit re-cited the facts concerning his relocation to Georgiaand his current lack of any substantial contacts withFlorida. In his motion, the judgment debtor arguedthat he was not a Florida resident and that he hadnot “done any act which would submit himself tothe jurisdiction of the courts of the State of Florida[] pursuant to § 48.193, Fla. Stat. (2007)[,] or other-wise.”

After a hearing, the circuit court ruled that ithad jurisdiction over the judgment debtor at thetime of the original action “and such jurisdictioncontinued to the filing of the instant (renewal ...)action.” Finding service against the judgment debt-or under section 48.193 to be valid, the circuit courtdenied the judgment debtor's motion to dismiss.This appeal followed.

DISCUSSION[1][2][3][4] “[A] judgment, whether domestic

or foreign, constitutes a cause of action upon whicha new and independent action may be based.”Crane v. Nuta, 157 Fla. 613, 26 So.2d 670, 671(1946). “[T]he main purpose of an action on a judg-ment is to obtain a new judgment which will facilit-ate the ultimate goal of securing satisfaction of theoriginal cause of action.” Adams v. Adams, 691So.2d 10, 11 (Fla. 4th DCA 1997) (citing 47Am.Jur.2d Judgments § 945 (1995)). The statute oflimitations applicable to an action on a judgment ordecree of a court of record in Florida is twentyyears. § 95.11(1), Fla. Stat. (2007); Commercebank,N.A. v. Taylor, 964 So.2d 817, 818 (Fla. 3d DCA2007); Marsh v. Patchett, 788 So.2d 353, 354 (Fla.3d DCA 2001). “ ‘[I]f the statute of limitation peri-od has almost run on the judgment ... the judgment

creditor can start the limitation period anew bybringing an action upon the judgment and obtaininga new judgment.’ ” Adams, 691 So.2d at 11(alterations in original) (quoting Koerber v. Middle-sex College, 136 Vt. 4, 383 A.2d 1054, 1057 (1978)). By bringing a new action on the judgment, thelife of the original judgment may be extended. SeeMarsh, 788 So.2d at 355 (citing Adams, 691 So.2dat 11).

The writ of scire facias was formerly used inFlorida to revive a dormant judgment so that execu-tion could issue.FN3 See Burshan v. Nat'l UnionFire Ins. Co. of Pittsburgh, Pa., 805 So.2d 835, 841(Fla. 4th DCA 2001) (citing Spurway v. Dyer, 48F.Supp. 255, 258 (S.D.Fla.1942)). See generallyHenry P. Trawick, Jr., Florida Practice and Pro-cedure §§ 25:16, 37:9 (2008-09) (explaining thefunction of the writ of scire facias). A proceedingby writ of scire facias to revive a judgment was re-garded not as a new proceeding but rather as a con-tinuation of the original action. See B.A. Lott, Inc.v. Padgett, 153 Fla. 304, 14 So.2d 667, 669 (1943);Massey v. Pineapple Orange Co., 87 Fla. 374, 100So. 170, 171 (1924).

FN3. Relief that was formerly available byscire facias may now be obtained by mo-tion after notice. See Fla. R. Civ. P.1.100(d).

[5] In our view, an action on a judgment,whether under a new complaint or *303 by a writ ofscire facias, is a continuation of the original action.See McGraw v. Parsons, 142 Mich.App. 22, 369N.W.2d 251, 252 (1985). From this premise, it fol-lows that the court that rendered the judgment inthe original action has continuing jurisdiction overthe defendant in an action to renew the judgment.See Huff v. Pharr, 748 F.2d 1553, 1555 (11thCir.1984); Cadle Co. II, Inc. v. Fiscus, 163Cal.App.4th 1232, 78 Cal.Rptr.3d 238, 244 (2008);Kaylor v. Turner, 210 Ga.App. 2, 435 S.E.2d 233,235 (1993), disapproved on other grounds byOkekpe v. Commerce Funding Corp., 218 Ga.App.705, 463 S.E.2d 23, 25 (1995); Bank of Edwards-












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ville v. Raffaelle, 381 Ill. 486, 45 N.E.2d 651, 653(1942); Bahan v. Youngstown Sheet & Tube Co.,191 So.2d 668, 671-72 (La.Ct.App.1966); Ewing v.Bolden, 194 Mich.App. 95, 486 N.W.2d 96, 99(1992); McGraw, 369 N.W.2d at 252; Duffy v.Hartsock, 187 Va. 406, 46 S.E.2d 570, 574 (1948).Thus the circuit court had continuing jurisdictionover the judgment debtor and properly denied hismotion to dismiss.

Affirmed.

WHATLEY and LaROSE, JJ., Concur.

Fla.App. 2 Dist.,2009.Petersen v. Whitson14 So.3d 300, 34 Fla. L. Weekly D1676

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CORZO TRUCKING CORPORATION, a FloridaCorporation, Obdulio Corzo and RITA Corzo, Ap-

pellants,v.

Bob WEST, individually and d/b/a West Enter-prises, Richard Douse and Nancy Douse, Ap-

pellees.

Nos. 4D10–33, 4D10–880.June 1, 2011.

Background: After its attempt to execute a Floridajudgment in Georgia was denied, due to the Geor-gia court's conclusion that Georgia's shorter statuteof limitations on the enforcement of judgments ap-plied, judgment creditor filed action to “renew” thejudgment. The Fifteenth Judicial Circuit Court,Palm Beach County, entered default final judgmentin favor of judgment creditor. Subsequently, theCircuit Court, Karen M. Miller, J., denied judgmentdebtor's motion to vacate the default judgment andthen sua sponte granted it. Judgment creditor ap-pealed, and the District Court of Appeal, 974 So.2d627, reversed. After the Georgia courts denied exe-cution of that judgment, judgment creditor filed amotion to clarify the judgment and a new action onthe judgment. The Circuit Court, Glenn Kelley, J.,denied the motion to clarify, and the Circuit Court,Thomas Barkdull, III, J., dismissed the action onthe judgment. Judgment creditor appealed, and theappeals were consolidated.

Holding: The District Court of Appeal, Gross, C.J.,held that judgment creditor's action to “renew” theoriginal judgment was an action on a judgment, andthus judgment obtained in the renewal action was anew judgment for limitations purposes.

Affirmed in part and reversed in part.

See also 281 Ga.App. 361, 636 S.E.2d 39.

See also 296 Ga.App. 399, 674 S.E.2d 414.

West Headnotes



228XXI(A) Domestic Judgments228k900 k. Judgment as cause of action in

general. Most Cited CasesEvery judgment is regarded as a cause of action

upon which a new and independent action may bebased.


228 Judgment228XI Collateral Attack

228XI(B) Grounds228k517 k. Matters available or questions

presented in original action. Most Cited Cases

Judgment 228 906


228XXI(A) Domestic Judgments228k906 k. Defenses. Most Cited Cases

In defending an action on a judgment, a de-fendant cannot avail himself of defenses which hemight have interposed in the original action;however, a defendant may interpose defenses whichhave arisen since the rendition of the judgment,such as payment, release, accord and satisfaction,or the statute of limitations. Restatement (First) ofJudgments § 47 comment.



228k871 k. Actions to revive judgment. Most




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Cited Cases

Judgment 228 922


228XXI(A) Domestic Judgments228k922 k. Judgment, and enforcement

thereof. Most Cited CasesJudgment creditor's action to “renew” an exist-

ing judgment was an action on a judgment, ratherthan a continuation of the original lawsuit, and thusjudgment obtained in the renewal action was a newjudgment as to which the statute of limitations onenforcement began to run when it was entered,rather than when the underlying judgment wasentered. West's F.S.A. § 95.11(1).

[4] Limitation of Actions 241 182(5)

241 Limitation of Actions241V Pleading, Evidence, Trial, and Review

241k181 Pleading Statute as Defense241k182 Necessity

241k182(5) k. Waiver or estoppel byfailure to plead. Most Cited Cases

Statute of limitations defense is waived unlesspleaded.



228XXI(A) Domestic Judgments228k902 k. Nature and form of remedy.

Most Cited CasesAn action on a judgment is different than post

judgment proceedings, filed under the same casenumber as the final judgment, where the goal is tosatisfy the judgment; such proceedings are merelycontinuations of an action, which create nothinganew, but may be said to reanimate that which be-fore had existence.

[6] Execution 161 75

161 Execution

161III Issuance, Form, and Requisites of Writ161k75 k. Time for issuance. Most Cited

CasesAn execution may issue during the 20-year life

of the judgment on which it is based. West's F.S.A.§ 55.081.

*1286 Carl M. Collier, Lake Worth, and Arthur J.Morburger, Miami, for appellants.

Carey E. Atkins of Moore Ingram Johnson &Steele, LLP, for appellee Bob West.

GROSS, C.J.This is a tale of modern courts confronting a

common law cause of action, an action on a judg-ment. In entering a final judgment in 2006, the cir-cuit court used *1287 language which obscured thenature of the final judgment. The judgment creditorsought to address that problem by filing an actionon that judgment. The circuit court dismissed theaction with prejudice. We reverse, holding that thejudgment creditor was authorized to bring an actionon the 2006 judgment.

On March 6, 1985, appellant Corzo TruckingCorporation obtained an amended final judgmentagainst appellee Bob West. The judgment amendeda final judgment entered on June 5, 1984. CorzoTrucking was unable to enforce the judgment.

In 2001, Corzo Trucking discovered that Westwas residing in Georgia. It filed the Florida judg-ment in Georgia and sought execution.FN1 TheGeorgia courts held the Florida judgment was sub-ject to Georgia's ten year statute of limitations onthe enforcement of judgments and that the statutebegan to run when the judgment was rendered inFlorida in 1985. Corzo Trucking Corp. v. West, 281Ga.App. 361, 636 S.E.2d 39 (2006). The Georgiaappellate court relied upon Potomac Leasing Co. v.Dasco Technology Corp., 10 P.3d 972 (Utah 2000);it described Potomac as holding that a “judgmentmust be filed in Utah within Utah's eight-year stat-ute of limitation, which begins to run from the date









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the judgment is entered or last renewed in the ren-dering state.” Corzo, 636 S.E.2d at 41 (emphasisadded).

FN1. In Florida, “an execution is valid andeffective during the life of the judgment ordecree on which it is issued.” § 56.021,Fla. Stat. (2009). “Subject to the provisionsof s. 55.10, no judgment, order, or decreeof any court shall be a lien upon real orpersonal property within the state after theexpiration of 20 years from the date of theentry of such judgment, order, or decree.”§ 55.081, Fla. Stat. (2009).

On August 3, 2006, Corzo Trucking filed alawsuit in Florida against West entitled “Complaintto Renew Judgment,” apparently tracking the lan-guage used by the Georgia court. It appears thatWest was personally served in Georgia on August11, 2006. The circuit court entered a default finaljudgment on September 14, 2006; the judgmentstated that the original judgment, as amended,“should be renewed” and the decretal portion of thejudgment stated that the “Final Judgment asamended by Amended Final Judgment is renewedwith all accrued post judgment interest.” The 2006judgment awarded the original principal amount ofthe 1985 amended final judgment plus $297,933.61,which represents 22 years, 3 months, and 9 days ofinterest.

Corzo Trucking returned to Georgia to enforceits renewed judgment. The Georgia courts held thatthe “2006 renewal” of the “1985 Florida judgment”was unenforceable in Georgia. Corzo TruckingCorp. v. West, 296 Ga.App. 399, 674 S.E.2d 414,415 (2009). The court reasoned that the renewedjudgment did not avoid Georgia's ten-year statute oflimitations, because to “hold otherwise would allowthe Florida judgment to have a longer life than ajudgment in Georgia, which directly contradicts theprinciple that litigation under the [Uniform En-forcement of Foreign Judgments Law] is limited tothat which is afforded [to] any other Georgia judg-ment.” Id. The court commented that “the record

clearly shows that the 2001 [sic ] judgment is a re-newal of the 1985 judgment and not a new action.”Id.

After the 2009 Georgia appellate opinion,Corzo Trucking returned to Florida and took twoseparate litigation tacks.

First, in March, 2009, it filed a new case seek-ing an “action on a judgment” and other relief. Invarious pleadings, including an answer, West ar-gued that the statute of limitations on the originaljudgment *1288 had expired in 2005, so both the2006 judgment and any new action were barred.Corzo Trucking moved for summary judgment;West filed a response. Without explanation, CircuitJudge Barkdull denied the motion for summaryjudgment, dismissed the complaint with prejudiceand entered final judgment “for defendant.”

Corzo Trucking's second approach was to file amotion under Florida Rule of Civil Procedure1.540(a) to clarify the 2006 “renewed” final judg-ment by “removing” the words “renew” and“renewed.” Circuit Judge Kelley denied the motion“finding that there is no error by way of omissionor oversight under Rule 1.540(a).”

[1] To decide this case, we must first examinethe common law cause of action called an “actionupon a judgment.” Every judgment “is regarded asa cause of action ... upon which a new and inde-pendent action may be based.” Crane v. Nuta, 26So.2d 670, 671 (Fla.1946); see also Petersen v.Whitson, 14 So.3d 300, 302 (Fla. 2d DCA 2009).“At common law, a party has a right of action upona judgment as soon as it is recovered[.]” 47 AM.JUR. 2d Judgments § 762 (updated May 2011).

We explained in Burshan v. National UnionFire Insurance Co. of Pittsburgh that the main pur-pose of an action on a judgment, a separate cause ofaction from the original judgment, was to obtain anew and independent judgment which would“facilitate the ultimate goal of securing satisfactionof the original cause of action.” 805 So.2d 835, 841





























(Fla. 4th DCA 2001) (quoting Adams v. Adams, 691So.2d 10, 11 (Fla. 4th DCA 1997)). We also ex-plained:

If a limitations period has almost run on a judg-ment, a judgment creditor “can start the limita-tion period anew by bringing an action on thejudgment to obtain a new judgment.” 47 Am. Jur.2d Judgments § 945 (1995); accord Adams, 691So.2d at 11 (quoting Koerber v. Middlesex Col-lege, 136 Vt. 4, 383 A.2d 1054, 1057 (1978)). Aparty may not relitigate the merits of the originalcause of action in an action on a judgment. SeeKlee v. Cola, 401 So.2d 871, 872 (Fla. 4th DCA1981).

Id.

[2] In defending an action on a judgment, a“defendant cannot avail himself of defenses whichhe might have interposed in the original action.”RESTATEMENT (FIRST) OF JUDGMENTS § 47cmt. e. However, a defendant may “interpose de-fenses which have arisen since the rendition of thejudgment, such as payment, release, accord and sat-isfaction, or the [s]tatute of [l]imitations.” Id.

[3][4] The cause of action underlying the 2006judgment was an action on a judgment. That judg-ment was not merely a continuation of the 1984–85case, but a new and independent judgment. See 50C.J.S. Judgments § 1261 (updated Mar. 2011). Asin a newly filed case, there was service of processon West to secure jurisdiction over him in the 2006case. The use of the words “renew” and “renewed”in the judgment may have led to confusion, butthose words have been used in Florida cases to de-scribe the effect of an action on a judgment. FN2

Although it appears that the *1289 20 year statuteof limitations on an action on a judgment FN3 hadrun by 2006 when the case was filed, that defense“is waived unless pleaded.” Aboandandolo v. Von-ella, 88 So.2d 282, 284 (Fla.1956); see also Ramosv. Philip Morris Cos., Inc., 743 So.2d 24, 30 (Fla.3d DCA 1999). West thus could not attempt to re-surrect that defense in this current and separate ac-

tion.

FN2. In Petersen, 14 So.3d at 303, thesecond district, in discussing the circuitcourt's personal jurisdiction over a defend-ant in an action on a judgment, wrote that“the court that rendered the judgment inthe original action has continuing jurisdic-tion over the defendant in an action to re-new the judgment.” (Emphasis added.) InBurshan, 805 So.2d at 843, this court con-trasted proceedings supplementary andscire facias with an action on a judgment:“Unlike an action upon a judgment, neitherproceeding renews or extends the twentyyear life of a judgment.” 805 So.2d at 843.

FN3. § 95.11(1), Fla. Stat. (2009).

[5][6] An action on a judgment is different thanpost judgment proceedings, filed under the samecase number as the final judgment, where the goalis to satisfy the judgment. Such proceedings aremerely “ ‘continuation [s] of an action,’ ” which “‘create[ ] nothing anew, but may be said to reanim-ate that which before had existence.’ ” Massey v.Pineapple Orange Co., 87 Fla. 374, 100 So. 170,171 (1924) (quoting Brown v. Harley, 2 Fla. 159(1848)). For example, the 2006 action was not aproceeding by writ of scire facias, which wasformerly used to revive a dormant judgment so thatexecution could issue. Petersen, 14 So.3d at 302.Such a proceeding was not regarded as a new pro-ceeding, “but rather as a continuation of the origin-al action.” Id.; see also Burshan, 805 So.2d at841–43. If applicable, a petition for relief availableby scire facias would be filed in the same casewhere the judgment issued.FN4 Petersen, 14 So.3dat 302. We are aware of no such “continuation ofthe original action” that extends the 20 year life ofa Florida judgment.

FN4. Florida Rule of Civil Procedure1.100(d) provides that “[a]ny relief avail-able by scire facias may be granted on mo-tion after notice without the issuance of a


























































writ of scire facias.” It is unclear whenscire facias relief is appropriate today. Atone time, Florida law limited the issuanceof a writ of execution to three years afterthe entry of a judgment. Burshan, 805So.2d at 841. A writ of scire facias ad-dressed this limitation. In 1924, for ex-ample, “a writ of scire facias revived ajudgment and caused a writ of execution toissue after three years, but during thetwenty year life of a judgment.” Id. Undercurrent law, an execution may issue duringthe 20 year life of the judgment on which itis based. Id. at 839.

Corzo Trucking was authorized to bring the2009 action on the 2006 judgment. No useful pur-pose is usually served by bringing an action on ajudgment so soon after the rendition of the underly-ing judgment. However, the unusual circumstancesin this case explain Corzo Trucking's motivation.The 2009 action was authorized by the rule articu-lated by the Florida Supreme Court that a judgment“constitutes a cause of action upon which a newand independent action may be based.” Crane, 26So.2d at 671; see Dahlin v. Kroening, 796 N.W.2d503, 505 (Minn.2011) (indicating that “an action ona judgment results in a new judgment, which maythen serve as the basis for a subsequent action on ajudgment”).

We reverse the circuit court's dismissal of theaction on the judgment. We affirm the denial ofRule 1.540 relief, since we find no abuse of discre-tion. See Schultz v. Time Warner Entm't Co., 906So.2d 297, 299 (Fla. 5th DCA 2005).

POLEN and DAMOORGIAN, JJ., concur.

Fla.App. 4 Dist.,2011.Corzo Trucking Corp. v. West61 So.3d 1285, 36 Fla. L. Weekly D1161

END OF DOCUMENT






















Magna M. DECUBELLIS, et al., Appellants,v.

Douglas RITCHOTTE, et al., Appellees.

No. 98-1991Feb. 5, 1999.

Rehearing Denied March 4, 1999.

Following entry of judgment of foreclosure, theCircuit Court, Orange County, Jeffords D. Miller,J., denied claimants' motion for relief from judg-ment. Claimants appealed. The District Court ofAppeal, Dauksch, J., held that: (1) trial court lackedsubject matter jurisdiction to enter foreclosure judg-ment; (2) judgment was void because claimantswere never given notice of proceedings; and (3)claimants were entitled to have judgment set aside.

Reversed.

West Headnotes



228k801 k. Foreclosure of lien. Most CitedCases

Lienholder's failure to plead exhaustion of rem-edies in its answer and cross-claim deprived trialcourt of jurisdiction to enter foreclosure judgment;lienholder did not allege that it had resorted to exe-cution, attachment, or other legal remedies, or thatsuch remedies were inadequate.



228k754 k. Creation and existence of lien ingeneral. Most Cited Cases

Judgment against debtor never matured into alien, where creditor's address did not appear onjudgment lien. West's F.S.A. § 55.10(1).



228k801 k. Foreclosure of lien. Most CitedCases

Lis Pendens 242 12.1

242 Lis Pendens242k12 Notice of Pendency of Action

242k12.1 k. In general. Most Cited CasesClaimants were never served with process or

otherwise given notice of foreclosure proceedings,and thus foreclosure judgment was void; claimantswere not joined as parties in case, notice of lis pen-dens filed by third party was dismissed beforeclaimant acquired deed, and lienholder did not fileits own notice of lis pendens. West's F.S.A. § 48.23.


228 Judgment228IV By Default

228IV(B) Opening or Setting Aside Default228k144 k. Irregularities or defects in

proceedings on default. Most Cited Cases

Judgment 228 145(1)

228 Judgment228IV By Default

228IV(B) Opening or Setting Aside Default228k145 Meritorious Cause of Action or

Defense228k145(1) k. In general. Most Cited

CasesProperty claimants were entitled to have de-

fault judgment of foreclosure set aside; judgmentwas based on fatal pleading deficiencies by lien-






















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holder, claimants never had notice of proceedings,and claimants established meritorious defenses.West's F.S.A. RCP Rule 1.540.

*724 Howard S. Marks and Samuel M. Nelson ofGraham, Clark, Jones, Builder, Pratt & Marks,Winter Park, for Appellants.

Ronald H. Roby of Ronald H. Roby, P.A., WinterPark, for Appellees.

DAUKSCH, J.This appeal arises out of a mortgage and lien

foreclosure action. Because of fatal pleading defi-ciencies and the lien-holder's failure to comply withstatutory requirements, we reverse the appealedforeclosure judgment.

In 1994, appellee Orange County Raceway (theRaceway) obtained a summary final judgmentagainst Robert Lamp (not a party to this appeal).The judgment was recorded in the Orange Countypublic records, but failed to state the Raceway's ad-dress. The following year, Lamp acquired the realproperty at issue in this appeal and used it to securea mortgage to the Ritchottes (not a party to this ap-peal). In June 1997, the Ritchottes filed a complaintand lis pendens to foreclose their mortgage fromLamp. The Raceway answered, counterclaimedagainst the Ritchottes, and cross-claimed againstLamp, asserting that it was an unpaid senior credit-or of Mr. Lamp and therefore entitled to proceedsfrom the foreclosure sale. However, the Racewayfailed to file a lis pendens in connection with itsclaim. As a consequence, Orange County public re-cords reflected only the Ritchottes' lis pendens asencumbering the subject property.

On July 30, 1997, appellant Howard Builderspaid off the Ritchottes on behalf of the Lamps andobtained the property by warranty deed. On August5, the Ritchottes voluntarily dismissed their claimand released the lis pendens. Howard Builders thenrecorded the warranty deed in Orange County'spublic records and used the property to secure a

mortgage to appellant Citrus Bank. On April 10,1998, eight months after the Ritchottes' lis pendenswas dissolved, Howard Builders conveyed a portionof the property to appellant Magna Decubellis bywarranty deed. Decubellis used the property to se-cure a $90,000 loan from appellant North Americ-an.

After defaulting all adverse parties to its cross-claim, on April 28, 1998, the Raceway obtained ajudgment setting the foreclosure sale for June 2.The Raceway was the high bidder and received acertificate of sale the same day. Appellants werenever joined as parties to the Raceway's foreclosureclaim, were never served with the Raceway's cross-claim, and never knew of the Raceway's lien in-terest. Consequently, they never opposed the Race-way's default and judgment, either collectively orindividually, until after the foreclosure sale. Afterdiscovering the judgment and sale on June 4, appel-lants filed a Motion for Relief from Judgment andto Vacate Judgment and Sale. The circuit courtdenied the motion this appeal followed.

Appellants argue that the court below lackedsubject-matter jurisdiction to enter the foreclosurejudgment for two reasons. First, they contend thatthe Raceway's failure to plead exhaustion of remed-ies in its answer and cross-claim deprived the courtof jurisdiction. Second, appellants argue that theRaceway's money summary judgment against Lampnever matured into a lien because it failed to statethe creditor's address as required by statute. Weagree on both points and address each issue in turn.

[1] In Miller v. Security-Peoples Trust Co., 142Fla. 434, 195 So. 191 (Fla.1940), the court held that“before a creditor can resort to ... a creditor's bill hemust first secure a judgment at law and exhaust allmeans afforded by the law to recover on such judg-ment.” Id. at 194. The court went on to *725 statethat “allegations relating to jurisdiction of equitycannot be shown by general averments ... but factsmust be alleged showing that only in equity will theremedy be full, adequate and complete.” Id. Thethird district in Gantz v. First Nat'l Bank of Miami,














138 So.2d 367 (Fla. 3d DCA 1962) interpreted thisruling to require creditors to plead exhaustion ofremedies in order to properly invoke a court's juris-diction in equity. Id. at 368. However, neither ofthese decisions applied this rule to creditors whoentered the litigation as cross-claimants in the un-derlying foreclosure action.

The third district in Young v. Charnack, 295So.2d 665 (Fla. 3d DCA 1974), though, appliedGantz to facts which are procedurally identical tothe instant appeal. In Charnack, the mortgageebrought a foreclosure action against the appellant-property owners. Id. at 665. Appellee, a seniorjudgment creditor, answered and cross-claimed fora share of foreclosure proceeds, but failed to allegeexhaustion of remedies in the cross-claim. The trialcourt granted summary judgment in favor of themortgagee and ordered that appellee-judgmentcreditor be paid out of proceeds generated by theforeclosure sale. On appeal, the third district re-versed, holding in relevant part that “a resort toequity for collection of a judgment is not authorizedin the absence of a showing of unavailability of col-lection by legal process.” Id. at 666 (citing Gantz.)The court noted that “the cross-claim of the judg-ment holders made no such showing, allegingmerely the existence and priority of the judgmentand that it had not been paid.” Id. at 667. Con-sequently, the court reversed that portion of thejudgment ordering the payment of foreclosure pro-ceeds to the appellee-creditor.

Charnack makes clear that exhaustion must bepled even by cross-claimants in foreclosure suitswho seek to invoke the court's powers in equity. Asin Charnack, the Raceway entered this case as across-claimant seeking to defend its judgment byestablishing a right in the debtor's (Mr. Lamp)property. Its answer, counter-claim, and cross-claimalleges only that it is the holder of a final judgmentagainst Lamp, that the judgment is past due, thatLamp owns the subject property, and that the Race-way is therefore entitled to proceeds from the fore-closure sale. It does not allege that it has resorted to

execution, attachment, or other legal remedies tosatisfy the judgment, or that such remedies are in-adequate. Nor does the record indicate that theRaceway has utilized, much less exhausted, avail-able legal avenues. We conclude that the Racewaydid not properly invoke the circuit court's jurisdic-tion in equity.

[2] Further, the underlying judgment againstLamp failed to comply with section 55.10(1), Flor-ida Statutes (1997) and, thus, never matured into alien. The statute dictates the procedure for creatingjudgment liens on real property as follows:

A judgment, order, or decree becomes a lien onreal estate in any county when a certified copy ofit is recorded in the official records or judgmentlien record of the county, whichever is main-tained at the time of recordation, and it shall be alien for a period of 7 years from the date of therecording provided that the judgment, order, ordecree contains the address of the person whohas a lien as a result of such judgment, order, ordecree or a separate affidavit is recorded simul-taneously with the judgment, order, or decreestating the address of the person who has a lienas a result of such judgment, order, or decree. Ajudgment, order or decree does not become a lienon real estate unless the address of the personwho has a lien as a result of such judgment, or-der, or decree is contained in the judgment, or-der, or decree or an affidavit with such address issimultaneously recorded with the judgment, orderor decree.

Id. (emphasis added). Although the Racewayargues that the statute is ambiguous, the first dis-trict recently ruled in a per curiam opinion that sec-tion 55.10(1) “unambiguously requires that [thecreditor's] address be on the judgment lien.” Robin-son v. Sterling Door & Window Co., 698 So.2d 570,571 (Fla. 1st DCA 1997). Significantly, the courtconcluded that the address of the lien-holder's attor-ney was insufficient to satisfy the statutory require-ment. Id. See also Hott Interiors, Inc. v. Fostock,721 So.2d 1236 (Fla. 4th DCA 1998) (attorney's ad-






















dress does not satisfy unambiguous requirements of§ 55.10).

*726 [3] The Raceway's address does not ap-pear anywhere on the recorded summary judgmentagainst Lamp. Nor did the Raceway avail itself ofthe § 55.10(1) safety net and file an affidavit statingits address. Given the statute's clear language andthe Robinson ruling, we conclude that the Race-way's judgment against Lamp never matured into alien nor attached to the subject property. Accord-ingly, the foreclosure judgment is reversed.

Appellants next argue that the foreclosure judg-ment is void because they were never served withprocess or otherwise given notice of the proceed-ings. They also note that they were never on noticeof the Raceway's cross-claim until after the fore-closure sale. Citing this district's decision in Fine v.Fine, 400 So.2d 1254 (Fla. 5th DCA 1981), theycontend that if the pleadings in a case do not join aparty, that party does not come within the court'sjurisdiction. Appellants concede that filing of a lispendens gives constructive notice to the world ofimpending action involving particular property, andthat subsequent legal action cuts off the rights ofthird parties in the property whether joined or not.However, they argue that this exception to Fine isinapplicable because the Ritchottes dismissed theirnotice of lis pendens before appellant HowardBuilders recorded its interest in the property. TheRaceway responds that Howard Builders acquiredthe deed on July 30, before the Ritchottes dismissedtheir notice of lis pendens. Citing Marchand v.DeSoto Mortgage Co., 149 So.2d 357, 359 (Fla. 2dDCA 1963), the Raceway argues that the lis pen-dens therefore served as notice of all facts pled andissues raised in the Ritchottes' proceeding-particu-larly the Raceway's answer, counter-claim, andcross-claim.

We conclude that the appellants had no actualor constructive notice of the Raceway's interest un-der a logical reading of the lis pendens statute andcase-law. Section 48.23, Florida Statutes (1997)defines the effect of a notice of lis pendens on

rights in the encumbered property. In relevant part,section 48.23 states that:

[T]he filing for record of such notice of lis pen-dens shall constitute a bar to the enforcementagainst the property ... of all [unrecorded] in-terests and liens ... unless the holder of any suchunrecorded interest or lien shall intervene ...within 20 days after the filing and recording ofsaid notice of lis pendens. If the holder of anysuch unrecorded interest or lien does not inter-vene in the proceedings [before] judicial sale ofthe property described, ... the property shall beforever discharged from all such unrecorded in-terests and liens. In the event said notice of lispendens is discharged by order of the court, thesame shall not in any way affect the validity ofany unrecorded interest or lien.

Id. (emphasis added). The filing of a lis pen-dens, then, “implies a pending suit and ... is the jur-isdiction, power or control which courts acquire ofproperty involved in a suit.” Marchand, 149 So.2dat 359. The Florida Supreme Court has defined thescope of notice created by a lis pendens filing asfollows:

The general rule is that lis pendens is notice of allfacts apparent on the face of the pleadings andsuch other facts as the pleadings would necessar-ily put the purchaser on inquiry and of the con-tents of exhibits filed and proved if they are per-tinent to the matter in issue or the relief sought.

* * * * * *

The notice arising from a pending suit ... does notaffect property not embraced within the descrip-tions of the pleadings; nor does its operation ex-tend beyond the prayer for relief. Notice is alsolimited to those matters in dispute between theparties to the action.

DePass v. Chitty, 90 Fla. 77, 82, 105 So. 148,150 (Fla.1925)(emphasis added). Some states con-sider the filing of lis pendens as notice to the worldsimply that there is a suit pending with regard to the




















encumbered property. See 54 C.J.S. Lis Pendens §33 (1993). However, Florida courts have apparentlybroadened the scope of notice to include “all factsapparent on the face of the pleadings.” Chitty, 105So. at 150. The Raceway argues that this ruling ap-plies to the facts and issues pled in its cross- andcounter-claims to the Ritchottes's underlying action.In effect, the Raceway seeks the protection of theblanket notice provided by *727 the Ritchottes's lispendens. However, an application of this interpreta-tion to the facts at bar causes an illogical result.

In cases where the notice of lis pendens is dis-missed, but judicial sale is ordered to satisfy cross-claimants in the underlying action, persons who ac-quire interests in the property after dismissal butbefore sale are without notice of the underlyingclaim unless served. Accordingly, the rule stated inChitty, that filing of lis pendens gives notice offacts and issues pled in the underlying action,should be interpreted more narrowly than is sugges-ted by the Raceway. The statute itself states that adischarged notice of lis pendens can not affect thevalidity of third party interests in the property. Con-sequently, if the dismissal of a lis pendens removesnotice of the facts and issues pled by the party whofiled the notice, it should certainly remove notice ofpending cross- and counter-claims. This is suppor-ted by the Florida Supreme Court's recent ruling inMedical Facilities Dev., Inc. v. Little Arch CreekProp., Inc., 675 So.2d 915 (Fla.1996). The courtanalyzed the protection provided by a lis pendensfiling as follows: “The notice protects the lis pen-dens proponent's interest [and] also protects futurepurchasers or encumbrancers of the property.” Id.at 917 (emphasis added). There is no indication thatthe notice protection extends to past encumbrancerswho enter the fray as cross-claimants seeking toprotect their established interest. The Racewayshould have filed its own notice of lis pendens toprotect its interest as it would have had to do had itbrought an independent foreclosure action againstthe Lamps.

[4] Finally, appellants argue that the court's

failure to set aside the default judgment as permit-ted by Rule 1.540, Florida Rules of Civil Procedure, was an abuse of discretion in light of the facts inthis case. They argue that the foreclosure judgmentwas based on fatal pleading deficiencies-particu-larly the Raceway's failure to plead exhaustion ofremedies and failure to include its address on thejudgment against Lamp. Appellants also contendthat they have established excusable neglect bydemonstrating that their failure to contest the Race-way's claim resulted from their lack of notice.

We agree that the court below erred by denyingappellants' motion for relief from the default fore-closure judgment. Florida's well-settled rule is thatto reverse a default judgment, “a defendant mustshow excusable neglect, a meritorious defense, anddue diligence in seeking relief after learning of thedefault.” Khubani v. Mikulic, 620 So.2d 800, 801(Fla. 2d DCA 1993). Further, “[a]ny reasonabledoubt regarding the vacation of a default should beresolved in favor of granting the application and al-lowing a trial on the merits.” Id. (citing NorthShore Hosp. v. Barber, 143 So.2d 849 (Fla.1962)).Accordingly, Florida courts have found excusableneglect and reversed defaults under facts demon-strating such neglect much less clearly than the caseat bar. See, e.g., Marshall Davis, Inc. v. Incapco,Inc. 558 So.2d 206 (Fla. 2d DCA 1990)(defendantproperly served with complaint, but failed to notifyits attorney and defend against plaintiff's claims);Khubani, 620 So.2d at 801 (defendant properlyserved with complaint, but refused to accept deliv-ery of and defend against plaintiff's motion for de-fault).

The appellants in this case have demonstratedexcusable neglect. They failed to defend against theRaceway's claim because they never had notice ofthe proceedings, either by service of process or oth-erwise. The lis pendens had already been dis-charged by the time Howard Builders and sub-sequent transferees recorded their respective in-terests in the property. Further, even if appellantshad notice of the lis pendens, the Raceway's claims




























were beyond the scope of the notice provided be-cause the filing was for the benefit of the Rit-chottes.

Appellants have also established meritoriousdefenses which, if properly litigated below, wouldhave resulted in dismissal of the Raceway's cross-claim. They have shown that the Raceway failed toplead exhaustion of remedies as required with ac-tions in equity, thereby depriving the court belowof subject-matter jurisdiction. They have alsodemonstrated that the Raceway's failure to includeits address on the recorded judgment against Lampprecluded that judgment from maturing into a lien.Finally, they established that the default judgmentwas void because it was entered without notice toappellants.

*728 Appellants also exercised due diligence inseeking relief from the default. The Raceway ob-tained the foreclosure judgment on April 28, 1998,after defaulting all adverse parties. The resultingforeclosure sale took place on June 2, and appel-lants first learned of the judgment and sale on June4. One week later, appellants filed their Motion forRelief from Judgment and to Vacate Judgment andSale. The motion set out the facts demonstratingtheir excusable neglect and meritorious defensesand appellants executed a notarized verification ofthe same. There was no appreciable delay betweenfinal judgment and appellants' motion for relief.Nor does the record indicate that the Raceway tookany actions during the intervening period, such astransferring or encumbering the property, whichmay have been prejudiced by the short delay.

In sum, we conclude that the court below ab-used its discretion by denying appellants' motion.The judgment is reversed.

REVERSED.

GOSHORN and ANTOON, JJ., concur.

Fla.App. 5 Dist.,1999.Decubellis v. Ritchotte

730 So.2d 723, 24 Fla. L. Weekly D360

END OF DOCUMENT






Gilberto and Sandra GAMEZ, Appellants,v.

FIRST UNION NATIONAL BANK OF FLORIDAf/k/a Florida National Bank, Appellee.

No. 4D09-3130.March 10, 2010.

Background: Record owners of real property thatwas subject to a judgment lien filed motion toquash and/or vacate an order authorizing the levyand execution sale of the property. The NineteenthJudicial Circuit Court, Indian River County, Paul B.Kanarek, J., denied the motion. Record owners ap-pealed.

Holding: The District Court of Appeal, Polen, J.,held that order authorizing the levy and executionsale of the property did not violate the proceduraldue process rights of record owners.

Affirmed.

West Headnotes


161 Execution161XIV Supplementary Proceedings

161k358 k. Nature and purpose of remedy.Most Cited Cases

Execution 161 360


161k360 k. Judgments and executions onwhich proceedings are authorized. Most CitedCases

Execution 161 377


161k373 Proceedings for Examination ofDebtor

161k377 k. Pleadings and affidavits. MostCited Cases

Once a judgment creditor has filed an affidavitstating that it holds an unsatisfied judgment andthat the execution is valid and outstanding, it is en-titled to “proceedings supplementary,” which are aprocedural mechanism that provide a judgmentcreditor with means to investigate assets of thejudgment debtor that might be used to satisfy ajudgment. West's F.S.A. § 56.29(1).



161k358 k. Nature and purpose of remedy.Most Cited Cases

“Supplementary proceedings” are a creature ofstatute to aid a judgment creditor in discovering as-sets of the debtor which might be appropriated tosatisfy the judgment. West's F.S.A. § 56.29.

[3] Constitutional Law 92 3879

92 Constitutional Law92XXVII Due Process

92XXVII(B) Protections Provided andDeprivations Prohibited in General

92k3878 Notice and Hearing92k3879 k. In general. Most Cited

CasesProcedural due process requires notice and a

real opportunity to be heard. U.S.C.A.Const.Amend. 14.



92XXVII(B) Protections Provided andDeprivations Prohibited in General







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92k3878 Notice and Hearing92k3881 k. Notice. Most Cited Cases

The notice required by procedural due processmust be reasonably calculated, under all the cir-cumstances, to apprise interested parties of the pen-dency of the action and afford them an opportunityto present their objections; the notice must be ofsuch nature as reasonably to convey the required in-formation, and it must afford a reasonable time forthose interested to make their appearance. U.S.C.A.Const.Amend. 14.

[5] Constitutional Law 92 4013(3)


92XXVII(E) Civil Actions and Proceedings92k4007 Judgment or Other Determina-

tion92k4013 Enforcement

92k4013(3) k. Attachment, execu-tion, and garnishment; supplementary proceedings.Most Cited Cases

Execution 161 222(1)

161 Execution161XI Sale

161XI(A) Manner, Conduct, and Validity161k222 Notice of Sale

161k222(1) k. In general. Most CitedCases

Trial court's order authorizing the levy and exe-cution sale of property formerly owned by judg-ment debtor did not violate the procedural due pro-cess rights of record owners of the property; recordowners had not attempted to intervene in the actionand had not yet received the statutory notice of theexecution sale of the real property, and record own-ers would have a reasonable time after the receiptof such notice to make an appearance and asserttheir defenses. U.S.C.A. Const.Amend. 14; West'sF.S.A. § 56.21.

[6] Constitutional Law 92 4013(3)


92XXVII(E) Civil Actions and Proceedings92k4007 Judgment or Other Determina-

tion92k4013 Enforcement

92k4013(3) k. Attachment, execu-tion, and garnishment; supplementary proceedings.Most Cited Cases

Execution 161 214

161 Execution161XI Sale

161XI(A) Manner, Conduct, and Validity161k214 k. Statutory provisions. Most

Cited CasesStatute establishing the notice requirement for

the execution sale of real property provides for suf-ficient notice to a third party real property ownerand affords such property owners a reasonable timeto make an appearance; where the third party prop-erty owner is given notice as required by the stat-ute, they have the opportunity to intervene in theaction and assert their defenses. U.S.C.A.Const.Amend. 14; West's F.S.A. § 56.21.

*221 David J. Kohs and Stacy J. Ford of Pohl &Short, P.A., Winter Park, for appellants.

Robert D. Friedman and Debra L. Greenberg ofFriedman & Greenberg, P.A., Plantation, for ap-pellee.

POLEN, J.Appellants, Gilbert and Sandra Gamez, appeal

the trial court's non-final order denying their mo-tion to quash/vacate a prior order which authorizedthe levy and execution sale of their real property.The Gamezes argue the trial court erred in denyingtheir Motion to Quash/ Vacate the *222 Order Au-thorizing Levy because the Order Authorizing Levywas entered in violation of their procedural dueprocess rights. We hold that there was no error andaffirm.










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On or about July 29, 1989, Angela Volmar in-herited a 1/3 interest in Lots 10, 12, and 14 of Trop-ical Village Estates located in Indian River County.On June 17, 1991, First Union National Bank ofFlorida obtained a final default judgment againstRobert and Angela Volmar in the amount of$8,078.65 which was recorded in Indian RiverCounty public records the next day.

In February 1996, Angela Volmar inherited an-other 1/6 interest in Lots 10, 12, and 14 making herthe owner of a 1/2 interest in the subject lots. OnNovember 28, 2000, a certified copy of First Uni-on's judgment was re-recorded in the Indian RiverCounty public records. Also on that date, the affi-davit of Robert D. Friedman, counsel for First Uni-on, was recorded in the Indian River County publicrecords with the final judgment. The affidavitprovided an address for the plaintiff/lien holder,Cypress Recovery Corporation, and listed the de-fendants as “Robert W. Volmar, et al.” but did notspecifically list Angela Volmar as a defendant.

On February 22, 2003, Angela Volmar con-veyed her 1/2 interest in Lots 10, 12 and 14 to JohnSwearingen via Warranty Deed. On May 21, 2003,John Swearingen conveyed Lots 10 and 12 FN1 toGilberto and Sandra Gamez.

FN1. According to appellants' initial brief,Swearingen had obtained the other 1/2 in-terest in the property via an earlier War-ranty Deed from the other co-owner of theproperty.

In January 2009, Cypress Recovery Corpora-tion, as assignee of First Union, filed a Motion forOrder Authorizing Levy of Real Property. The mo-tion contained a certificate of service stating that acopy of the motion had been provided to AngelaVolmar and Gilberto and Sandra Gamez. Followinga hearing at which Gilberto and Sandra Gamezwere present,FN2 the trial court granted the motionfinding that Angela Volmar's 2003 transfer of theproperty was subject to the lien of First Union's fi-nal judgment. The order also authorized the Indian

River County Sheriff to levy on the property “nowowned by Gilberto Gamez and Sandra Gamez,which may be sold at execution sale.” FN3 On May20, 2009, Cypress Recovery Corporation filed anEx Parte Motion for Writ of Alias Execution in or-der to proceed with its levy of the subject property.No certificate of service was attached to the mo-tion. Legal counsel for Gilberto and Sandra Gamezentered a Notice of Appearance on June 1, 2009.On June 8, 2009, the trial court granted the motionon an ex parte basis and issued an Alias Executionon June 9, 2009.

FN2. There is no transcript of this hearing.However, it was noted at a later hearingthat Gilberto and Sandra Gamez werepresent at this hearing. The court advisedthe appellants to contact their title insur-ance company.

FN3. The order did not limit the levy toAngela Volmar's previous 1/2 interest inthe property. However, During the June30, 2009 hearing, counsel acknowledgedthat only the 1/2 interest previously heldby Angela Volmar would be levied.

Gilberto and Sandra Gamez filed a Motion toQuash and/or Vacate the Order Authorizing Levyand to Stay Levy and/or Execution Sale arguingthey had not been properly joined as parties to theaction and that the Order Authorizing Levy wasprocedurally and legally deficient. Specifically, theGamezes argued that a judgment creditor seeking tolevy upon real property titled in the name of a thirdparty/non-*223 debtor must implead that third partyand proceed under section 56.29, Florida Statutes(2005), which Cypress Recovery had failed to do.Gilberto and Sandra Gamez also proposed severalaffirmative defenses which they could argue oncethe trial court afforded them due process. Specific-ally, the Gamezes planned to assert that (1) the lienis no longer valid because it was not properlyrerecorded every seven years,FN4 and (2) becausethe affidavit recorded with the lien did not nameAngela Volmar as a defendant, Gilberto and Sandra





Gamez had no actual knowledge of the subject finaljudgment. During a hearing on the motion, CypressRecovery argued that the procedure which theGamezes argued was required involved personalproperty, and thus was not required in the presentcase which involves the levy of real property. Thetrial court denied the Gamezes' Motion to Quash/Vacate. Gilberto and Sandra Gamez now timely ap-peal.

FN4. Prior to its amendment in 2000, sec-tion 55.10, Florida Statutes, provided that ajudgment remained a lien on property for aperiod of seven years after which it mustbe rerecorded. This section currentlyprovides that a judgment remains a lien onreal property for ten years after which itmust be rerecorded. See § 55.10, Fla. Stat.(2000).

[1] The Gamezes insist that Cypress Recoverywas and is required to initiate proceedings supple-mentary under section 56.29, Florida Statutes, andthat its failure to do so violates their procedural dueprocess rights. Generally, section 56.29 providesthat a judgment creditor may file an affidavit statingthat it holds an unsatisfied judgment and that theexecution is valid and outstanding. § 56.29(1), Fla.Stat. (2005). Once a judgment creditor has filedsuch an affidavit, it is entitled to proceedings sup-plementary, which are a “procedural mechanismthat provide a judgment creditor with means to in-vestigate assets of the judgment debtor that mightbe used to satisfy a judgment.” In re Hill, 332 B.R.835, 843 (M.D.Fla.2005).

[2] The Gamezes point specifically to section56.29(5) which provides: “The judge may order anyproperty of the judgment debtor, not exempt fromexecution, in the hands of any person or due to thejudgment debtor to be applied toward the satisfac-tion of the judgment debt.” As this court has noted,“Supplementary proceedings are a creature of stat-ute to aid a judgment creditor in discovering assetsof the debtor which might be appropriated to satisfythe judgment.” Conrad v. McMechen, 338 So.2d

1306, 1307 (Fla. 4th DCA 1976).

Cypress calls this court's attention to In re Hin-ton, 378 B.R. 371 (M.D.Fla.2007), in which thecourt stated that a plain reading of section 56.29makes it clear that the “court's powers to help ajudgment creditor obtain transferred property ex-pressly apply only to personal property and not toreal property.” Id. at 383.

Section 56.21, Florida Statutes (2005), estab-lishes the notice requirement for the execution saleof real property and provides in relevant part:

Notice of all sales under execution shall be givenby advertisement once each week for 4 success-ive weeks in a newspaper published in the countyin which the sale is to take place.... On or beforethe date of the first publication or posting of thenotice of sale, a copy of the notice of sale shall befurnished by certified mail to the attorney of re-cord of the judgment debtor, or to the judgmentdebtor at the judgment debtor's last known ad-dress if the judgment debtor does not have an at-torney of record.... When levying upon real prop-erty, notice of such levy and execution sale shallbe made to the property *224 owner of record inthe same manner as notice is made to any judg-ment debtor pursuant to this section. Whenselling real or personal property, the sale dateshall not be earlier than 30 days after the date ofthe first advertisement.

Thus, Cypress Recovery maintains that theGamezes' due process rights are provided for andsatisfied by the requirements of section 56.21. Inaddition, Florida courts have consistently held thatindividuals who purchase real property after a judg-ment lien has been recorded, as Gilberto and SandraGamez did in the present case, take title with noticeof the lien and subject to the lienor's right to levyexecution. E.g., Eppes v. Dade Developers, Inc.,126 Fla. 353, 170 So. 875 (1936); State ex rel.Eppes v. Lehman, 109 Fla. 331, 147 So. 907 (1933);Sharpe v. Calabrese, 528 So.2d 947 (Fla. 5th DCA1988).


































[3][4] Procedural due process requires noticeand a real opportunity to be heard. Keys CitizensFor Responsible Gov't, Inc. v. Florida Keys Aque-duct Auth., 795 So.2d 940, 948 (Fla.2001).

[T]he notice must be “reasonably calculated, un-der all the circumstances, to apprise interestedparties of the pendency of the action and affordthem an opportunity to present their objections.The notice must be of such nature as reasonablyto convey the required information, and it mustafford a reasonable time for those interested tomake their appearance.”

Id. (quoting Mullane v. Cent. Hanover Bank &Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94L.Ed. 865 (1950)) (emphasis added). Mullane sug-gests that fulfilling a party's due process rights isnot the duty or burden of any specific entity butrather that a party whose rights may ultimately beaffected by a proceeding must be given noticeenough in advance so that he may obtain a hearingbefore he is deprived of his property.

[5][6] Section 56.21 provides for sufficient no-tice to a third party real property owner and affordssuch property owners a reasonable time to make anappearance. Where the third party property owneris given notice as required by section 56.21, theyhave the opportunity to intervene in the action andassert their defenses. Inasmuch as the Gamezeshave not yet received notice of the execution sale oftheir property and have not even attempted to inter-vene in the action, their procedural due processrights have not been violated by the proceedingsbelow. Thus, we affirm the trial court's order deny-ing the motion to quash/vacate.

Affirmed.

WARNER and STEVENSON, JJ., concur.

Fla.App. 4 Dist.,2010.Gamez v. First Union Nat. Bank of Florida31 So.3d 220, 35 Fla. L. Weekly D550

END OF DOCUMENT

















Supreme Court of Florida.ORANGE BREVARD PLUMBING & HEATING

COMPANY, Appellant,v.

Henry J. LA CROIX and Helen P. LaCroix, Ap-pellees.

No. 31270.Jan. 31, 1962.

Action in which plaintiff, having obtainedjudgment, sought to levy against proceeds fromvoluntary sale of defendants' homestead property.The Circuit Court, Orange County, Terry B. Patter-son, J., dissolved the judgment creditor's writ ofgarnishment and the judgment creditor appealed.The Supreme Court, Hobson, J., held that so muchof the proceeds from the voluntary sale of thehomestead as the owners intended to reinvest in an-other homestead within a reasonable time, as estab-lished by a preponderance of the evidence, was ex-empt from the claims of the judgment creditor, butthat the cause would have to be remanded for amore full development of the facts.

Order accordingly.

Thomas and Drew, JJ., and Odom, CircuitJudge, dissented.

West Headnotes

[1] Homestead 202 77

202 Homestead202I Nature, Acquisition, and Extent

202I(D) Property Constituting Homestead202k75 Proceeds of Homestead

202k77 k. Voluntary Sale, Exchange,or Mortgage. Most Cited Cases

So much of the proceeds from voluntary sale ofhomestead as owners intended to reinvest in anoth-er homestead within a reasonable time as estab-

lished by a preponderance of the evidence, was ex-empt from claims of judgment creditor.F.S.A.Const. art. 10, § 1.





In order to satisfy requirements of exemptionfrom claims of creditors of funds from voluntarysale of homestead, funds must not be commingledwith other monies of the vendor but must be keptseparate and apart and held for the sole purpose ofacquiring another home. F.S.A.Const. art. 10, § 1.





The “reasonable time” within which proceedsfrom voluntary sale of homestead must be reinves-ted in acquiring another homestead in order thatsuch funds be exempt from claims of creditors,must be determined from facts and circumstancesof each case. F.S.A.Const. art. 10, § 1.

*201 Gilbert Bentley, Orlando, for appellant.

Sanders, McEwan, Schwarz & Mims, Orlando, forappellees.

HOBSON, Justice.On May 22, 1959, the appellant, who was the

plaintiff in the action below, abtained and recordeda judgment in the circuit court for Orange County,Florida against the appellees in the sum of

Page 1137 So.2d 201(Cite as: 137 So.2d 201)




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$5,972.18. At the time the judgment was renderedand for some three and one-half years prior theretothe appellees owned as tenants by the entirety andoccupied as their homestead certain real property inOrange County, Florida. On July 22, 1959, the ap-pellees sold this homestead property. The attorneysfor the purchaser, having discovered the aforemen-tioned judgment of record, withheld from the ap-pellees $6,000.00 of the purchase price of the prop-erty pending a determination that it was homesteadproperty as of the date of sale.

While the attorneys for the purchaser were thusholding the sum of $6,000.00 the appellant causedto be issued by the Circuit Court of Orange Countyin September 1959 a writ of garnishment againstthe attorneys. Thereafter the garnishees filed theiranswer in which they admitted holding the sum of$6,000.00 for and on behalf of the appellees. Sub-sequently the appellees filed a motion to dissolvethe writ of garnishment on the ground that the sumof $6,000.00 held by the garnishees was exemptfrom forced levy, *202 since that sum representedproceeds of the sale of homestead property. In sup-port of its motion the appellees filed an affidavit ofappellee Henry J. LaCroix, the contents of whichare set forth herewith:

‘I, Henry J. LaCroix, having first been dulysworn upon oath by the undersigned officer, deposeand say as follows:

‘1. That I am one of the Defendants in theabove style [sic] cause and the other Defendant,Helen P. LaCroix, is my wife.

‘2. That on the 22nd day of May, 1959, and forapproximately three and one-half (3 1/2) years priorthereto my wife and I owned Lot 3, Stonehurst Es-tates as per plat thereof, recorded in Plat Book_____, Page ___, of the Public Records of OrangeCounty, Florida. Said property is located in OrangeCounty outside the corporate limit of any municip-ality. Said property is less than one-half acre insize. The street address of said property is 1807Stonehurst Drive, Winter Park, Florida.

‘3. Located upon said property is a single fam-ily residence and on the aforesaid date and duringthe aforesaid period my wife and I resided uponsaid property with our children, Patricia B. andHenry J. LaCroix, Jr. During all said time we havecontinuously resided in Florida and on said prop-erty with the intention of making Florida our per-manent home.

‘4. During the latter part of 1958 and the earlypart of 1959, I was selfemployed in the business ofconstructing houses and the business failed toprosper and it was necessary that I discontinue saidbusiness at a time when I was heavily indebted. Asa result of business failure, it became necessary forme to sell the above described property because Icould no longer afford to maintain a house as largeand as expensive. Said house had a market value ofapproximately $25,000.00 and an area of 2,000square feet. In July I listed the house for sale withthe intention of selling it and purchasing a smallerand less expensive home for my family. On the15th day of July, 1959, I entered into a contract tosell the house and the transaction was closed on Ju-ly 22, 1959. The attorney for the purchaser in ex-amining title of said property discovered the judg-ment of record in the amount of $5,972.18 obtainedby Orange Brevard Plumbing & Heating Companyagainst me and my wife and withheld the sum of$6,000.00 from the proceeds of the sale pending adetermination that the property was homestead ondate of said sale.

‘5. On the date of the sale and on date of theclosing my wife and I were residing on the propertyand continued to reside there until approximatelyAugust 15, 1959, when we rented a house at 514Dunblane Street, Winter Park, Florida, where weintended to reside until we could find a suitablehouse to purchase for our home.

‘I intend to purchase a home with the funds inthe hands of Winderweedle & Hunter when they arepaid to me.

‘Further affiant sayeth not.’



A hearing was held before the circuit court onthe motion to dissolve the writ of garnishment, andit was agreed by the parties that the issues shouldbe determined on the basis of the affidavit of HenryJ. LaCroix. Thereafter the court entered an orderdissolving the writ of garnishment and finding thatthe sum of $6,000.00 held by the garnishees wasexempt from forced levy under the Constitution andlaws of the State of Florida.

The appellant then appealed to the DistrictCourt of Appeal, Second District. The district court,however, noting that the circuit court in its orderhad construed a controlling provision of the Consti-tution*203 and that therefore exclusive jurisdictionof the appeal rested with the Supreme Court,ordered the appeal transferred to this court pursuantto Rule 2.1, subd. a(5) (d), Florida Appellate Rules,31 F.S.A.

The question with which we are faced, there-fore, is whether the exemption of homestead prop-erty from forced sale which is accorded by ArticleX, Section 1 of the Florida Constitution, F.S.A., ex-tends also to the proceeds of a voluntary sale of ahomestead when it is intended in good faith thatsuch proceeds are to be reinstated in a newhomestead.

Article X, Section 1 of the Florida Constitutionprovides in part:

‘A homestead to the extent of one hundred andsixty acres of land, or the half of one acre withinthe limits of any incorporated city or town, ownedby the head of a family residing in this State, to-gether with one thousand dollars worth of personalproperty, and the improvements on the real estate,shall be exempt from forced sale under process ofany court, and the real estate shall not be alienablewithout the joint consent of husband and wife,when that relation exists.’

The specific question raised herein is one of thefirst impression before this court. There are,however, two Florida cases which are sufficiently

related to the matter at hand to merit our attention.In Hill v. First National Bank, 79 Fla. 391, 84 So.190, 20 A.L.R. 270, it was held that where a personowning a homestead brings an action to recoverdamages sustained because of an unlawful invasionof the homestead rights, the damages recovered insuch an action partake of the nature of thehomestead property and are also exempt. The factsof the case were that the defendant had a judgmentagainst the plaintiff which the defendant sought tohave satisfied by execution and forced sale of theplaintiff's homestead. The homestead property wassold at a judicial sale and as a consequence thereofthe plaintiff was deprived of the use of the propertyand was put to the expense of bringing an action toset aside the levy and sale. After the judicial sale ofthe homestead had been set aside, the plaintiffbrought an action to recover the damages which shehad suffered as a result of the unlawful judicial saleof her homestead. The defendants attempted to setoff from plaintiff's damages the amount of theirjudgment which gave rise to the judicial sale. TheSupreme Court held that such set off could not beallowed for the reason that the damages suffered bythe plaintiff were exempt under the homestead ex-emption provision of the Constitution. The follow-ing statement by the court appears on page 193 ofthe opinion and is pertinent here:

‘It may be said that the Constitution protectshomestead property from a ‘forced sale’ only, andthat the plea of set-off in this case does not amountto a ‘forced sale’ of plaintiff's exempt property. Butsuch contention would be out of harmony with whatthe courts almost universally hold to be the objectand policy of exemption laws. It ignores the rule ofliberal construction to which this court and manyother courts are committed.'

The court employed similar reasoning andreached a similar result in a subsequent case wherethe question raised was whether the proceeds of afire insurance policy due to be paid for destructionof the homestead by fire are exempt from claims ofcreditors. It was held in Kohn v. Coats, 103 Fla.








264, 138 So. 760, that such proceeds were exemptand were not subject to garnishment. The court inthat case recognized that it was committed to a lib-eral interpretation of the homestead law and stated:

‘The reason for the rule [exempting fire insur-ance proceeds] is that the homestead was providedfor the benefit of the exemptor's family, and it may*204 be insured to protect them from loss. The in-surance is intended to restore the property in case itis destroyed by fire; those contracting with the ex-emptor are on knowledge of this fact, and to holdthat creditors could seize the proceeds of the insur-ance policy would give them an advantage theynever contemplated would deprive the insured ofthe means provided to take the place of and restorehis homestead.’

Although these cases do not decide the pointnow before us they are valuable precedents in thatthey shed light on the attitude of this court in simil-ar cases and reflect our predisposition toward a lib-eral interpretation of the homestead provision ofour Constitution.

The policy of the Constitution cannot be mis-apprehended. Its design and purpose is to benefitthe debtor by securing to him his homestead beyondall liability from forced sale under process of anycourt. The case law of this state dictates thathomestead exemption laws should be liberally ap-plied to the end that the family shall have shelterand shall not be reduced to absolute destitution.Bessemer Properties v. Gamble, 158 Fla. 38, 27So.2d 832; Olesky v. Nicholas, Fla., 82 So.2d 510;Slatcoff v. Dezen, Fla., 76 So.2d 792. ObviouslyArticle X intended to confer valuable rights on theowner of the homestead and was not drawn for thebenefit of creditors. However, it should also be keptin mind that ‘* * * the law should not be so appliedas to make it an instrument of fraud or impositionupon creditors'. Milton v. Milton, 63 Fla. 533, 58So. 718.

Turning to the authorities of other jurisdictionson the point of law before us, we find that there is a

definite split of authority. See the annotations in 1A.L.R 483, supplemented in 46 A.L.R. 814; 40C.J.S. Homesteads § 71; and 26 Am.Jur.,Homestead, Section 48 which states:

‘Whether the statute [exempting homesteads]may be invoked for the protection of a fund whichhas been derived from a voluntary sale of thehomestead property is a question which has occa-sioned a conflict of authority.

‘In the absence of statutory provisions to thecontrary, the voluntary sale of homestead propertyis held, in a majorith of jurisdictions, to be a com-plete extinguishment of the homestead right; andconsequently, the proceeds of such a sale, until in-vested in other exempt property, may be subjectedto the claims of creditots. While a contrary opinionhas been expressed, the claim of homestead is un-ually held not to be sustainable as to the proceedsof a sale of the homestead, although the sale mayhave been made by the claimant with the intentionof acquiring other property to be used as ahomestead. A view sometimes taken is that the pro-ceeds of the sale of a homestead constitute exemptproperty for a reasonable time pending the invest-ment of the same in another homestead; and suchan exemption has been held to be implied by a stat-ute which gives an absolute right to exchange onehomestead for another, or to sell the homestead andacquire a new one, which shall be exempt to thesame extent as the former one. Likewise, a provi-sion that the debtor may convey his homestead freefrom all liens has been held to imply the exemptionof the proceeds of such sale which are in good faithintended by the debtor to be used in the purchase ofanother homestead.’ (Italics supplied.)

Notwithstanding the statement just quotedwhich indicates that the majority rule is that theproceeds of a voluntary sale of the homestead arenot exempt, there appear to be substantial and re-sponsible authorities favoring the minority viewthat such proceeds are exempt where there is a bonafide intention on the part of the owner of thehomestead to reinvest them in another homestead.
















*205 The homestead exemption laws of theState of Oklahoma are, with respect to the problemat hand, essentially no different from our own ex-cept that there is a $5,000.00 limitation on the valueof the homestead protected. In Field v. Goat, 70Okl. 113, 173 P. 364, 365; 1 A.L.R. 478, it washeld that under the rule of liberal construction theexemption of the homestead ‘must be held to im-pliedly extend to the proceeds of a voluntary sale ofthe homestead bona fide intended to be invested inanother homestead’. (Italics supplied) This prin-ciple has since been reaffirmed in the case of Stateex rel. Freeling v. Brown, 92 Okl. 137, 218 P. 816.

Under a Kentucky statute which provided foran exemption from sale, execution, attachment orjudgment of a homestead not exceeding $1,000.00in value and which also provided that if the value ofthe homestead exceeds $1,000.00, the property maybe sold and $1,000.00 of the proceeds paid to thedebtor to enable him to purchase anotherhomestead, the Kentucky Supreme Court held, inMarcum v. Edwards, 181 Ky. 683, 205 S.W. 798that these provisions by implication protected fromattachment $1,000.00 of the proceeds of the volun-tary sale of the homestead. See also Becher v.Shaw, 44 Wash. 166, 87 P. 71.

A similar result has been reached in Kansas,which has homestead provisions similar to ourown. Smith v. Gore, 23 Kan. 488, Smith testifiedthat when he received the proceeds from the noteand mortgage executed upon the sale of hishomestead, he intended to buy another home. Thecourt in its decision stated, ‘Whether at any timeprevious to the trial, Smith ever expected or inten-ded to use the money due on said note and mort-gage to purchase another homestead, is not shown.The foregoing testimony is all the evidence thattended to show that he ever at any time had anysuch expectation or intention * * * We think the in-tention to use the proceeds in procuring anotherhomestead should be formed at or before the timeof the sale, and the intention should be to procureanother homestead with the proceeds immediately.

It would not do to form the intention two years afterthe sale, nor would a present intention to procurethe homestead two years afterward be sufficient. Ifthe party himself supposed that he could get alongwithout a homestead, the law would not protect hismoney or his credits, and exempt them from thepayment of his debts, merely because it supposedhe needed a homestead.’ The court held that al-though the state homestead-exemption laws areconstrued liberally Smith had not shown that hewas entitled to have the money due on the note andmortgage exempt. It was stated that ‘The law doesnot, in express terms, in any case exempt money orcredits, merely because they are proceeds of ahomestead. They are exempted only by a sort ofequitable fiction drawn from the spirit of thehomestead exemption laws, and adopted for thepurpose of enabling persons to change theirhomesteads when they desire.’ A later case, FirstNational Bank of Manhattan v. Dempsey, 135 Kan.608, 11 P.2d 735, contains the following syllabusby the court: ‘In a proceeding in garnishment tosubject a sum of money due defendant from a thirdparty to the satisfaction of defendant's debt toplaintiff, the evidence tended to show that themoney garnisheed was part of the proceeds of thesale of a homestead which the debtor intended toinvest in another homestead, and that he had suchintention at the time he sold his forst homestead,and had not abandoned that intention at the time thegarnishment process was invoked. Held, the moneywas exempt, and the garnishment was properly cis-charged.’

In Iowa the homestead statute specificallyprovides that the homestead may be sold and a newhomestead acquired which shall be exempt fromexecution to the extent of the value of the old. It isnot, however, specifically provided that the pro-ceeds themselves shall be exempt. Nevertheless, theIowa Supreme Court has consistently held that inorder to effectuate the object of *206 the statute,the proceeds collected from the voluntary sale ofthe old homestead which are intended to be used forthe purchase of another homestead and which are















not put to an intervening use are exempt while thusin transit from the old homestead to the new. Statev. Geddis, 44 Iowa 537; Mann v. Corrington, 93Iowa 108, 61 N.W. 409; Schuttloffel v. Collins, 98Iowa 576, 67 N.W. 397; Millsap v. Faulkes, 236Iowa 848, 20 N.W.2d 40, 161 A.L.R. 1252. Seealso Watkins v. Blatschinski, 40 Wis. 347. The caseof Cullen v. Harris, 111 Mich. 20, 69 N.W. 78,reaches a similar result, but lays down the addition-al requirement that the fund, in order to be exempt,must be segregated from other monies of the debt-or.

A number of the cases alluded to are from jur-isdictions where the homestead provisions specific-ally provide for the sale of the homestead and theacquisition of a new one free from the claims ofcreditors. It might be urged that this factor shouldserve as a distinguishing feature between the casesalluded to and the case at bar. However, we per-ceive no essential difference between the law of ourstate and that of the states referred to. By the veryterms of our constitution, the homestead may besold with joint consent of husband and wife whenthat relationship exists. Moreover, there is no ques-tion but that a head of a family residing in the statemay, after disposing of one homestead, acquire an-other, which will, upon the satisfaction of all thehomestead requirements, be exempt just as theformer one was.

[1][2] After a full consideration of the applic-able authorities representing both views on the is-sue before us, and in recognition of the liberal in-terpretation of the homestead exemption to whichthis court is committed, we hold the proceeds of avoluntary sale of a homestead to be exempt fromthe claims of creditors just as the homestead itselfis exempt if, and only if, the vendor shows, by apreponderance of the evidence an abiding goodfaith intention prior to and at the time of the sale ofthe homestead to reinvest the proceeds thereof inanother homestead within a reasonable time.Moreover, only so much of the proceeds of the saleas are intended to be reinvested in another

homestead may be exempt under this holding. Anysurplus over and above that amount should betreated as general assets of the debtor. We furtherhold that in order to satisfy the requirements of theexemption the funds must not be commingled withother monies of the vendor but must be kept separ-ate and apart and held for the sole purpose of ac-quiring another home. The proceeds of the sale arenot exempt if they are not reinvested in anotherhomestead in a reasonable time or if they are heldfor the general purposes of the vendor.

The homestead exemption provision was notplaced in our Constitution for the purpose of tyingthe owner thereof and his family to a particularhome, once established, for the remaining period oftheir natural lives. It is a protection which shouldremain inviolate so long as the head of the familywho is indebted acts in good faith and with reason-able diligence in converting one homestead into an-other. In our modern peripatetic society it often be-comes necessary for a family to give up its formerhomestead and move to a new home out of econom-ic necessity or for other compelling reasons. Tohold other than we have in the instant case wouldbe to deny to a family finding itself in such circum-stances the full benefit of the homestead exemptionprovision of our Constitution and would be inimicalto our declared policy of a liberal constructionthereof.

We have considered the early case of Druckerv. Rosenstein, 19 Fla. 191, wherein it was held thatthe intent of the owner of a parcel of land to build ahome thereon and to occupy it as his homestead isnot sufficient to invest such land with the characterof a homestead and thus put it beyond the reach ofcreditors. Our present holding is by no means in-consistent with *207 that case. We adhere to therule that intent alone is not a sufficient basis for theestablishment of a homestead. There must first be,as there unquestionably was in this case, propertywhich meets the constitutional requirements of ahomestead. In the Drucker case there was never anyreal property to which the homestead exemption















could attach. In the instant case, on the other hand,the appellees had established and maintained ahomestead up until the time of the sale. Havingdone so, the funds realized from such sale enjoy anexempt status provided the other requirements forsuch exemption as herein set forth are fully met.

The principle established by this decision isakin to the doctrine of equitable conversion, whichobtains in this state. Trotter v. Van Pelt, 144 Fla.517, 198 So. 215, 131 A.L.R. 1018. The funds res-ulting from the voluntary sale of the homestead are‘converted’, and while ‘in transit’ assume the char-acter of the exempt real property, dependent,however, upon a bona fide intent of the seller to re-invest such funds in another homestead within areasonable time. The requirement as to the intentionof the seller to reinvest is necessary in order tocarry into effect the real, underlying purpose of thehomestead exemption as hereinbefore outlined.

[3] It is not for the courts to fix in a case suchas this an iron clad inflexible period of time andthereby define reasonable period of time. The ques-tion whether funds received from the sale of ahomestead are invested in another homestead with-in a reasonable time must be determined from thefacts and circumstances of each case.

Returning now to the facts of the instant caseas they are presented to us on this appeal, we are ofthe opinion that additional evidence should be takenbefore a proper final decision can be reached. Aspreviously pointed out the only evidence which thetrial court had before it was the affidavit of theseller. Although the parties stipulated that the is-sues should be decided on the basis of this affidavit,we feel that in light of the views expressed in thisopinion the parties should be given an opportunityto produce additional evidence on the materialpoints. There appears to be no concrete evidence asto the time within which Mr. LaCroix expects topurchase a new home, nor does it clearly appearthat the entire amount of the $6,000.00 now held bythe attorneys is needed and is to be used for thepurchase of a new home. In this connection it is

noted that the affidavit does not reveal the saleprice of the former homestead but merely states thatits market value was approximately $25,000.00.Moreover, there is no evidence as to what disposi-tion was made of the proceeds of the sale, if any,over and above $6,000.00. If there were other fundscoming into his hands as a result of the sale, then itwould be an act of bad faith on the part of the sellerto place these funds beyond the reach of his credit-ors in some manner and yet hold the remainder ofthe proceeds for reinvestment in anotherhomestead.

In order that all the facts may be fully de-veloped and that a decision may be reached in har-mony with the views expressed herein, the judg-ment below is reversed and the cause remanded inthe interest of simple justice, for further proceed-ings in accordance with this opinion.

It is so ordered.

ROBERTS, C. J., and TERRELL and THORNAL,JJ., concur.THOMAS and DREW, JJ., and ODOM, C. J., dis-sent.

DREW, Justice (dissenting).The majority opinion commits this Court to the

proposition that it is a judicial function to determ-ine in every instance when a homestead is sold theamount of and extent to which the proceeds derivedfrom the *208 sale are exemptFN1 from executionand the length of time which such proceeds shall beendowed with that status. This means that thisCourt now assumes the power to determine the sizeand value of a homestead which will be exemptfrom forced sale under the Constitution when thehead of a family sells his homestead and determinesto purchase and acquire another.

FN1. The pertinent provision of the Con-stitution is Section 1, of Article X whichreads as follows:

‘ § 1. Exemption of homestead: extent.-A







homestead to the extent of one hundredand sixty acres of land, or the half of oneacre within the limits of any incorporatedcity or town, owned by the head of a fam-ily residing in this State, together with onethousand dollars worth of personal prop-erty, and the improvements on the real es-tate, shall be exempt from forced sale un-der process of any court, and the real estateshall not be alienable without the joint con-sent of husband and wife, when that rela-tion exists. But no property shall be ex-empt from sale for taxes or assessments, orfor the payment of obligations contractedfor the purchase of said property, or for theerection or repair of improvements on thereal estate exempted, or for house, field orother labor performed on the same. The ex-emption herein provided for in a city ortown shall not extend to more improve-ments or buildings than the residence andbusiness house of the owner; and no judg-ment or decree or execution shall be a lienupon exempted property except asprovided in this Article.’ (Emphasis sup-plied).

The validity of these deductions is establishedfrom the judgment of the majority in this casewhich, as I view it, is summarized in the followinglanguage extracted verbatim from the opinion itself,viz:

‘* * * we hold the proceeds of a voluntary saleof a homestead to be exempt from the claims ofcreditors just as the homestead itself is exempt if,and only if, the vendor shows, by a preponderanceof the evidence an abiding good faith intention pri-or to and at the time of the sale of the homestead toreinvest the proceeds thereof in another homesteadwithin a reasonable time. Moreover, only so muchof the proceeds of the sale as are intended to be re-invested in another homestead may be exempt un-der this holding. Any surplus over and above thatamount should be treated as general assets of the

debtor. We further hold that in order to satisfy therequirements of the exemption the funds must notbe commingled with other monies of the vendor butmust be kept separate and apart and held for thesole purpose or acquiring another home. The pro-ceeds of the sale are not exempt if they are not rein-vested in another homestead in a reasonable time orif they are held for the general purposes of thevendor.’

Moreover, the majority opinion poses far morequestion than it answers. It endows upon what hasbeen aptly referred to as our legal chameleonFN2

the additional characteristics acteristics of a contor-tionist and size of a dragon. Now it may not onlychange colors to meet any environment in which itsuddenly finds itself but may take on differentshapes to fit into any crevice that might in a partic-ular circumstance be suitable; the size of thecrevice may be increased or decreased to fit the sizeof this legal monstrosity.

FN2. A most thorough review of thesecases appears in the article by Harold B.Crosby and George John Miller entitled‘.our Legal Chameleon, The FloridaHomestead Exemption: I-III,’ Universityof Florida Law Review, Spring to Fall,1949, Vol. II, #3, pp. 12 to 84 inclusive.Particularly see PP. 77 et seq.

I humbly suggest that when the majority opin-ion is carefully analyzed, it is clear and unmistak-ably judicial legislation. It recognizes a situationwhich could result in injury to the family. The res-ult reached is possibly a humane one and, were I amember of the Legislature, I might be persuaded tovote for it even though it must be conceded that, inso doing, I would be closing my eyes to the rightsof those to whom money is owed. They constitutenot an inconsiderable portion of our population.

*209 My conclusions that mere intention can-not create a homestead status in property and thatthe remedy for the situation which exists, if it re-quires remedying, is in the Legislature and not in



this Court is not an original idea. The echoes of aunanimous opinion of this Court written more thaneighty years ago can clearly be heard.FN3 In thatcase a Florida citizen, when he was insolvent anddeeply in debt, borrowed $180.00 and earned$20.00 playing the violin. With this $200.00 he pur-chased a lot for the sole purpose of making thesame his homestead by building a residence thereonand occupying the same with his family consistingof himself, his wife and seven children. He recor-ded his statement of intention in the public records.Nevertheless, one of his judgment creditors leviedagainst the property. In disposing of the contentionthat the land constituted the homestead and was,therefore, exempt from execution, the Court mademany pertinent observations, among which werethe following:

FN3. Drucker v. Rosenstein, 19 Fla. 191(1882).

‘The almost uniform current of decisions is thatactual occupation of property as a home of the fam-ily is necessary to impress upon it the character of ahomestead. * * * ’ (text p. 195)

The Court went on to discuss the meaning andscope of the constitutional provision. Inherent in itsdiscussion is the conclusion that to come within theorbit of the constitutional protection, there must beland and some structure thereon suitable for habita-tion.FN4 Justice Van Valkenburgh, writing for theCourt, said:

FN4. This, of course, does not have refer-ence to the provision for the exemption of$1000.00 of personal property which is re-ferred to and discussed later in the opinion.

‘* * * It is not necessary that a dwelling-houseshould be upon the premises; he might with hisfamily reside in a tent set upon poles or a cabinerected upon it while building his house, and suchoccupation would give to it the character of ahomestead and protect it under the statute fromforced sale.

‘While the object of the homestead provisionsof the Constitution and law is to protect the debtorand his family in the enjoyment of a home againstcreditors * * *, yet the property must, when claimedas exempt, be stamped with the character of a homeby some circumstance other than the intention tomake it so. A bare lot unoccupied cannot be ahomestead. Lumber placed upon it for the purposeof building is not such occupancy, even thoughthere may be a contract made for building. Thewhole claim is based upon the bare declared inten-tion to build a house upon the lot, and the presenceof pieces of timber which may be so used when thedefendant can find the means to complete it. Thisdebtor, should he enjoin a levy and sale on theground that he intended to make a homestead on thelot, might do nothing further toward building ahouse until another levy is made and thereby pla-cing a few more sticks of timber on the lot againclaim the homestead exemption on the ground thathe was still building or preparing to build a houseto be occupied by his family, and in this he may besincere, but yet the lot is not his homestead withinthe legal definition of the term.

‘It may be said that under the law, as we under-stand it, a poor man may never be able to obtain ahomestead. This may be a defect in the law, but wecannot make laws to supply such defects, if theyexist. To hold that this lot is exempt as ahomestead, because the defendant intended to makeit so at some future time might be defended as anact of mercy, but that is rather the *210 office ofthe Legislature. It would be difficult to draw theline where exemption begins to attach to unoccu-pied land if this claim of immunity is allowed.

‘If we declare this lot exempt as a homestead,where would the exemption cease to operate if thehouse was not built or completed?

‘Many of the cases decided in other States gofar toward protecting property from sale for debtsunder the homestead laws, but none of them go sofar as we would be required to go in this case to ex-empt this property from sale. It is not a homestead,





though the intention may be to make it one at somefuture time. We believe that the provisions of thehomestead laws should be carried out in the liberaland beneficient [sic] spirit in which they were en-acted, but care should be taken at the same time toprevent them from becoming the instruments offraud.’ (text pp. 198, 199) (Italics theirs).

The keystone of the majority opinion in thiscase is the intention of the seller to use the proceedsto purchase a new home. For more than eightyyears this Court has said that mere intention cannotgive even real property the status of homestead.How cna it then be logically contended thatsomething so intangible as money can attain thatconstitutional dignity and status merely by a courtlooking into the mind of the individual and determ-ining that such intention existed?

The majority opinion holds the proceeds of avoluntary sale are exempt from the claims of credit-ors if the head of the family ‘by a preponderance ofthe evidence’ establishes ‘an abiding good faith in-tention prior to and at the time of the sale of thehomestead to reinvest the proceeds thereof in an-other homestead within a reasonable time.’ It nextholds that ‘only so much of the proceeds of the saleas are intended to be reincested in anotherhomestead may be exempt under [the] holding.’These two ukases necessarily mean the one sellinghis homestead must know exactly how much he isto pay for another home at the time he makes thesale in order that the proceds may be exempt, apremise that in many cases from the standpoint of acreditor would be impossible to refute. Moreover,the majority opinion holds ‘[a]ny surplus over andabove that amount should be treated as general as-sets of the debtor.’ How is the creditor to knowwhat amount may be subject to attachment of levy;how is he to know when it may be subject to attach-ment and levy; how is the homestead owner toknow how long he has to reinvest the proceeds inanother home; what is to become of the rights ofthe creditor if the homestead owner decides toabandon his ‘abiding good faith intention’ and re-

move himself and proceeds to another state; is theseller to be the sole arbiter of how much of the saleis to be exempt merely by a mental process of de-termining how much of the proceeds of the sale hewill reinvest in another homestead; is a reasonabletime the same in all instances or is it different fordifferent people and, if it is different under differentcircumstances and for different people, does thisoperate within the constitutional requirement ofequal protection of the laws; what happens to the li-abilities of an honest and diligent creditor who at-taches such proceeds and thereafter the Court de-termines that ‘reasonable time’ has not elapsed forthe owner to reinvest the same or the creditor hasattached too much; what is the meaning of thewords ‘the founds must not be commingled withother monies of the vendor but must be kept separ-ate and apart and held for the sole purpose of ac-quiring another home’?

These unanswered questions could be readilysolved in the legislative forum of Florida by rulesapplicable to all and with uniform provisions andlimitations as has been done in other states but, inmy judgment, we are creating a serbonian bog inwhich we will become inextricably mired *211 byattempting to do that judicially which should bedone legislatively. Let us now look more closely atthis particular case and the authorities of this andother states on the subject.

The affidavit which formed the factual basisfor the entry of the final decree in this case for thepurpose of a clear understanding of the discussionwhich will follow hereafter is contained in the foot-note.FN5

FN5. ‘COUNTY OF ORANGE

‘STATE OF FLORIDA

‘AFFIDAVIT

‘I, Henry J. LaCroix, having first beenduly sworn upon oath by the undersignedofficer, depose and say as follows:



‘1. That I am one of the Defendants in theabove styled cause and the other Defend-ant, Helen P. LaCroix, is my wife.

‘2. That on the 22nd day of May, 1959,and for approximately three and one-half(3-1/2) years prior thereto my wife and Iowned Lot 3, Stonehurst Estates as per platthereof, recorded in municipality. Saidproperty is less than Records of OrangeCounty, Florida. Said property is located inOrange County outside the corporate limitof any municipality. Said property is limitof any one-half acre in size. The street ad-dress of said property is 1807 StonehurstDrive, Winter Park, Florida.

‘3. Located upon said property is a singlefamily residence and on the aforesaid dateand during the aforesaid period my wifeand I resided upon said property with ourchildren, Patricia B. and Henry J. LaCroix,Jr. During all said tiem we have continu-ously resided in Florida and on said prop-erty with the intention of making Floridaour permanent home.

‘4. During the latter part of 1958 and theearly part of 1959, I was self-employed inthe business of constructing houses and thebusiness failed to prosper and it was neces-sary that I discontinue said business at atime when I was heavily indebted. As aresult of business failure, it became neces-sary for me to sell the above describedproperty because I could no longer affordto maintain a house as large and as expens-ive. Said house had a market value of ap-proximately $25,000.00 and an area of2,000 square feet. In July I listed the housefor sale with the intention of selling it andpurchasing a smaller and less expensivehome for my family. On the 15th day ofJuly, 1959, I entered into a contract to sellthe house and the transaction was closedon July 22, 1959. The attorney for the pur-

chaser in examining title on said propertydiscovered the judgment of record in theamount of $5,972.18 obtained by OrangeBrevard Plumbing & Heating Companyagainst me and my wife and withheld thesum of $6,000.00 from the proceeds of thesale pending a determination that the prop-erty was homestead on date of said sale.

‘5. On the date of the sale and on date ofthe closing my wife and I were residing onthe property and continued to reside thereuntil approximately August 15, 1959, whenwe rented a house at 514 Dunblane Street,Winter Park, Florida, where we intended toreside until we could find a suitable houseto purchase for our home.

‘I intended to purchase a home with thefunds in the hands of Winderweedle &Hunter when they are paid to me.

‘Further affiant sayeth not.

‘Henry J. LaCroix’

In addition to the reasons to which I have al-luded above, I am firmly convinced that the greatweight of authority in this Country is contrary tothe opinion and judgment of the majority in thiscause and, while I will not undertake to discuss allof the cases cited in support of the view of the ma-jority, I mention here, as I do later in the opinion,the fact that the different language used in the con-stitutions of the various states when taken in con-nection with other provisions of the same constitu-tions and the legal philosophy of the courts of otherstates constitute little precedent for the determina-tion of the point under consideration here. I pro-nounce here, as I reiterate later in the opinion, thefact that our own Constitution and our own de-cisions are largely determinative of the questionand that, while it might be well for the Legislatureto consider the question under discussion and per-haps provide some method by which the resultsreached by the majority opinion may be accom-



plished, such has not been done in over eighty yearsalthough many, many sessions of the Legislaturehave come and gone since Mr. Justice Valkenburghspoke as he did in 1882.

*212 The question presented and here restatedis whether the proceeds derived form the voluntarysale of homestead property are exempt from forcedsale and, if so, the extent of such exemption. In sev-eral cases this Court has discussed various aspectsof this question, but I find no case which would bedeterminative of the issue squarely presented in thiscase, although many cases, in my view, clearlypoint the way to the solution.

The subject provision of the Constitution hasbeen a fruitful source of litigation in this State andthe many decisions which have been rendered con-struing it have been the source of much comment.FN6 In spite of the plethora of cases, however, I re-peat that research reveals none that have directlydecided the point presented in this case. Moreover,in an exhaustive study and analysis of decisionsform other states, I have found no uniform judicialthinking upon the subject. The weight of authority,however, is that the purchase price of a voluntarysale of homestead property is not exempt from theclaims of creditors in the absence of express stat-utory provisions authorizing such exemption.FN7

American Jurispurdence observes:

FN6. See supra note2.

FN7. See the annotations beginning onpage 483 of 1 A.L.R. following Field v.Goat, 70 Okl. 113, 173 P. 364 (1918), 1A.L.R. 478, et seq.; also the supplementaryannotations in the footnote followingSmith v. Hart, 49 S.D. 582, 207 N.W 657(1926), 46 A.L.R. 811 (annotation begin-ning page 814).

‘In the absence of statutory provisions to thecontrary, the voluntary sale of homestead propertyis held, in a majority of jurisdictions, to be a com-plete extingushment of the homestead right; and

consequently, the proceeds of such a sale, until in-vested in other exempt property, may be subjectedto the claims of creditors.'FN8

FN8. 26 Am.Jur. Homestead, Sect. 48(1940).

Corpus Juris Secundum, in discussing whetherthe proceeds in a voluntary sale are exempt fromforced sale, deals primarily with the discussion ofstatutes which limit or circumscribe the proceedsfrom a voluntary sale but contains the following ob-servation:

‘As determined by the statutory provisions, theproceeds of a voluntary sale of a homestead may beexempt in all circumstances, or not exempt, or un-conditionally exempt for a designated period, or ex-empt, for a designated or reasonable period, if in-tended for reinvestment in another homestead.’FN9 (Italics supplied).

FN9. 40 C.J.S. Homesteads § 71 (1944).

As a careful study of these texts and the an-notations above referred to reveal, there are stateswhich hold that in the absence of a statutory provi-sion fixing the period within which an investmentin a new homestead must be made, a reasonabletime will be allowed therefor during which periodsuch proceeds are exempt from execution.FN10

FN10. See 40 C.J.S. § 71, supra, and thecases cited in footnotes numbered 24, 25and 26.

It is exceedingly difficult, however, to relatethe applicability of these cases to the situationpresented by our particular constitutional provisionor that of other states because in a great many in-stances the courts, in deciding these cases, most ofwhich are quite old, have not recited the pertinentconstitutional or statutory provisions which vary toa great extent in many states. For instance, in theannotation appearing in 1 A.L.R. 484, in discussinga Missouri case, the annotator states ‘* * the court











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states arguendo that the statutes which are not setout, recognize the right to sell one homestead andpurchase another with the proceeds.’ (Emphasissupplied). In Kentucky there appear to be a numberof cases which apparently support the view *213that proceeds of the homestead are exempt, at leastwhile being held for a reasonable time, for reinvest-ment in another homestead. The appellant in itsbrief discusses these Kentucky cases and refers par-ticularly to Marcum v. Edwards, 181 Ky. 683, 205S.W. 798 (1918), which is relied upon strongly byappellees to support the theory of exemption. Ap-pellant sets forth a Kentucky Statute #1705 (nowSection 427.090) which, it says, was in force in1918 at the time of the Marcum case and whichcontains a specific provision that ‘One thousanddollars, of the money arising from the sale shall bepaid to the [debtor] to enable him to purchase an-other home.’ The judgment in the Marcum case wasfor $1,000.00, therefore bringing into direct playthe statutory provision of Kentucky above referredto. This statute sheds light upon the apparent gener-ality of the judicial assertion of the Kentucky courtot the effect that the proceeds of such voluntarysale were exempt. With reference to these Kentuckycases, the annotator in 1 A.L.R., supra, has state ‘** * but the value of these cases as precedents is im-paired by the failure of the reports to disclose theterms of the Homestead Statute in this regard, orwhether or not there were any express provisions asto the exemption of proceeds.’

Turning now to our own cases which have dealtwith various phases of the question, although notthe direct question itself, the statement by Mr.Justice Whitfield in the case of Norman v. Kannon,FN11 is quoted below:

FN11. 133 Fla. 710, 182 So. 903, 905(1938).

‘ If a permissible conveyance of a homesteadfor a proper consideration is duly made, the consid-eration takes the place of the exempted propertyand the Constitution may not thereby be violated.Such conveyances of homesteads serve the public

policy of a limited exercise of the natural right ofalienation and preserves the organic homestead ex-emption for the protection of the family.’(Emphasis supplied).

A number of casesFN12 are cited in support ofthe above quoted language but they do not lendsupport to the italicized portion of the opinion whentaken out of context with the remaining part there-of. The case from which the above quotation istaken decided the question of whether a homesteadmay be conveyed by husband and wife without con-sideration to a third person and immediately there-after reconveyed back to husband and wife as ten-ants by the entirety, thereby defeating the rights ofthe children in the homestead itself. This was theonly point involved. The court held in this case thatsuch conveyance was ineffective for such purpose.Reverting back, however, to the italicized portionof the quoted language above, each of the casescited in support thereof dealt with a similar situ-ation, namely the requirements of the Constitutionwith reference to the formalities which must be ob-served by husband and wife in the alienation ofsuch, homestead. For instance, in the Byrd case, theholding merely was that the conveyance of thehomestead real estate to the wife executed by thehusband alone was void. In the Hart v. Gulf Fertil-izer case the facts were somewhat complicated. Thecourt there held that an owner may alienate hishomestead as provided by the Constitution withoutmaking it subject to a previously acquired judg-ment. It did not deal with the question of whetherthe proceeds derived from the sale were subject toattachment or garnishment or other process. Wrightv. Wright dealt with the question of the require-ments of the Constitution as to the method of ac-knowledgment by the wife. Shad v. Smith againemphasized that any attempt to convey thehomestead without the strict observation of the con-stitutional*214 provisions rendered the instrumentvoid. So it is that the portion of the statement whichI have italicized cannot be taken as authority for theproposition that the proceeds of the sale, taking theplace of the homestead itself, are exempt from at-







tachment, garnishment or other process. Moreover,such italicized portion is obviously now judicial ob-iter being wholly unnecessary to the decision in thatcase.

FN12. Hart v. Gulf Fertilizer Co., 91 Fla.991, 108 So. 886 (1926); Byrd v. Byrd, 73Fla. 322 74 So. 313 (1917); Wright v.Wright, 75 Fla. 7, 77 So. 616 (1918); Shadv. Smith, 74 Fla. 324, 76 So. 897 (1917).

Norman v. Kannon, supra, was decided in1938. In 1943 this Court, speaking through Mr.Justice Terrell in the case of Richards v. Byrnes,153 Fla.705, 15 So.2d 610, was dealing with thequestion of whether furniture in a homestead of avalue in excess of $1000.00 was a part of the ex-empt homestead. In that case the appraisementshowed that furnishings in the residence on thehomestead were appraised at $7959.50. In holdingthat the Constitution limited the value of the fur-nishings to $1000.00, the Court said:

‘It is quite true that this Court has repeatedlyheld that the homestead laws should be liberallyconstrued in the interest of the family. We do notdepart from this holding; at the same time the con-tent of the homestead cannot be construed as ex-tending beyond the plain words of the Constitutioncreating it. Section One of Article Ten limits it to160 acres of land, or the half of one acre in an in-corporated city or town owned by the head of thefamily residing in this State together with one thou-sand dollars worth of personal property and the im-provements on the real estate.’

‘The personal property may be in cash, furnish-ings, or any other personalty owned by the head ofthe family at his death but cannot exceed in valuemore than one thousand dollars and may be desig-nated by the court something after the mannerprovided in Section 222.07 and 222.08, FloridaStatutes of 1941, F.S.A. * * *'FN13 (Emphasis sup-plied).

FN13. These statutes appear to be applic-able to the current question. They now ap-pear under Title XIV Florida Statutes 1959entitled ‘Homestead and Exemption.’F.S.A. The present provisions which seemapplicable to the current question are Sec-tions 222.06 et seq. While obviously thischapter deals with all exemptions whichmay be allowed by law without specific-ally mentioning the homestead exemption,its mechaincs are clearly applicable to this$1000.00 personal exemption under theConstitution.

In 1959 this Court decided Olsen v. Simpson.FN14 In this case qppears the most direct answer tothe question found in any of the reported cases al-though it could be argued that the language used isobiter. Nevertheless, what was said there was thebasis upon which the decree of the trial court, hold-ing certain proceeds of the voluntary sale of an al-leged homestead to be exempt, was reversed.Without burdening this opinion with a recitation ofthe facts in that case, the Court, speaking throughMr. Justice Barns, observed at page 803, with refer-ence to the proceeds of the sale of the property inthat case alleged to be homestead:

FN14. 39 So.2d 801 (Fla.1949).

‘* * * it seems that the wife is the judgmentcreditor of the husband and that the husband's sharein the proceeds of the sale is subject to the satisfac-tion of the judgments held by the wife.

‘The property is now personalty, * * *.’

Following the last sentence the homestead pro-vision of the Constitution is quoted followed imme-diately by the quotation:

‘We are faced with the question as to whetheror not the defendant husband is the head of a fam-ily. If so, he is entitled to a homestead exemption of‘one thousand dollars worth of personal property.’'

The last sentence preceding the judgment in

















that case is the following:*215 ‘* * * The appellant's interest lost its

character as ‘land’ when the sale because fully ef-fective.' (Emphasis supplied).

I think the answer to the question posed in thisappeal, in spite of the confusion and the many di-verse holdings in other states, is found not only inDrucker v. Rosenstein, supra, but in the plain lan-guage of the Constitution itself. I re-emphasize herewhat was said by Mr. Justice Terrell for the Courtin Richards v. Byrnes, supra:

‘* * * the content of the homestead cannot beconstrued as extending beyond the plain words ofthe Constitution creating it. * * *’

At the time the Constitution was written in1885, the people were dealing primarily with an ag-ricultural economy. In numerous decisions in thisand other courts we and they have held that the pur-pose of inserting in the Constitution similar provi-sions to our Section 1 of Article X was the protec-tion of the family home and its contents and thefamily itself. When a voluntary sale of a hom-seatead has been made by husband and wife in themanner provided by the Constitution itself and inaccordance with the decisions of this Court whichhave so strictly construed these provisions, the pro-ceeds become personal property and no longer par-take, either in the spirit or letter of the Constitution,of the characteristics of the homestead intended tobe protected by the Constitution. Such proceedsthen become personalty and are protected fromforced sale to the extent of the value of $1000.00specifically mentioned in the Constitution. ThisCourt, in Richards v. Byrnes, supra, held specific-ally that such could consist of cash. So far as thisprovision of the Constitution is concerned, therecan be no distinction between the head of a familywho sells his homestead for cash and his neighbor,likewise the head of a family, who does not own ahomestead but has the same amount of cash. Asimple example will illustrate the fallacy of the ideathat the whole proceeds of a voluntary sale of thehomestead are exempt from forced sale. A and B

reside in homes adjacent to each other of the samesize and value. Both are the heads of a family. Aowns his property while B rents his. A voluntarilysells his homestead for $X and receives it in cashwith the intention of buying another home. B hassaved $X over the years to purchase a home. Underthe theory that the proceeds of the sale are exempt,A's $X would be exempt from forced sale while B'swould not. Such an obviously fallacious interpreta-tion is absurd.

Neither Kohn v. CoatsFN15 nor Hill v. FirstNational Bank FN16 are authority for the proposi-tion urged by appellee that the proceeds of the sub-ject sale are exempt. While both cases hold that thehomestead exemption should receive a liberal inter-pretation, a careful analysis demonstrates that bothare entirely inapplicable to the present situation.Both cases present the outer limits of exemption.Nevertheless, the conclusion in each does not un-justifiably stretch the purpose and meaning of theconstitutional provision. Hill v. First NationalBank, supra, (the basic authority for Kohn v. Coats)was simply a case where this Court held that ajudgment creditor could not do indirectly thatwhich the Constitution prohibited him from doingdirectly. This is clearly established by the exampleof the cow and a calf in the opinion. The Court ob-served, 84 So. at page 193, with reference to a priorunlawful execution sale by the bank:

FN15. 103 Fla. 264, 138 So. 760 (1931).

FN16. 79 Fla. 391, 84 So. 190, 20 A.L.R.270 (1920).

‘* * * This cow and calf were sold and werenever returned to plaintiff. Suppose that instead ofone cow and calf taken, there had been takentwenty cows of the aggregate value of $400, andthat such cows had been sold and not returned toplaintiff just as the one cow and calf were. Plaintiff*216 clearly would have been entitled to recoverthe value of such cows because of the unwarrantedconversion of them, the court having previouslyheld them exempt from forced sale because of their








character as homestead property. * * *

‘* * * In this case it would give to defendantsthe fruits of a ‘forced sale’ although such sale wasillegal and therefore wrongful. It would permit de-fendants to do indirectly what they are enjoinedfrom doing directly, and thereby defeat the benefi-cial purpose of the law. * * *'

This case was decided in 1920. More than tenyears later in Kohn v. Coats this Court held that theproceeds of an insurance policy representing thevalue of a destroyed homestead were exempt fromforced sale. We did so under the theory that it wasan involuntary conversion and

‘* * * The insurance is intended to restore theproperty in case it is destroyed by fire; those con-tracting with the exemptor are on knowledge of thisfact, and to hold that creditors could seize the pro-ceeds of the insurance policy would give them anadvantage they never contemplated would deprivethe insured of the means provided to take the placeof and restore his homestead.’

Kohn v. Coats is in accord with many decisionsholding that the proceeds of an involuntary salesuch as by condemnation or as in that case by de-struction by fire are exempt from forced sale.FN17

It must be borne in mind that so far as Kohn v.Coats is concerned, the home and furnishings whichwere destroyed represented only a part of thehomestead. The land was still intact so it cannot besaid in that case that there was any voluntary alien-ation nor that the homestead had been abandonedvoluntarily or otherwise.

FN17. Hutcheson v. Hutcheson, 176Tenn. 468, 143 S.W.2d 886 (1940); Whitev. Fulghum, 87 Tenn. 281, 10 S.W. 501(1889); First National Bank of Scottsvillev. Duncan, 210 Ky. 777, 276 S.W. 848(1925); Franklin Fire Ins. Co. v. Butts, 184Ark. 263, 42 S.W.2d 559, 563 (1931);Thompson-Ritchie & Co. v. Graves, 167La. 1024, 120 So. 634, 635, 63 A.L.R.1283 (1929); Albrecht v. Albrecht, N.D.,

99 N.W.2d 229 (1959); Goldberg v.Salyer, 188 Va. 573, 50 S.E.2d 272 (1948).

In summary, therefore, I would hold that wherethere is a voluntary sale of homestead property, theproceeds of such a sale become personal propertyand are not exempt from forced sale or other pro-cess under Article X, Section 1 of the Florida Con-stitution, except to the extent of $1,000.00 and thenonly when such exemption is duly claimed in ac-cordance with the applicable statutes. FN18

FN18. In Lane v. Richardson, 1889, 104N.C. 642, 10 S.E. 189, the North CarolinaCourt said, with reference to the samequestion under a very similar constitutionalprovision:

‘* * * The answer is that when Harriss soldhis homestead he converted it into personalproperty, which became the subject of thepersonal property exemption, while theland retained the quality of the homesteadexemption in the hands of the purchaser.’

I, therefore, respectfully dissent.

THOMAS, J., and ODOM, C. J., concur.

Fla. 1962Orange Brevard Plumbing & Heating Co. v. LaCroix137 So.2d 201

END OF DOCUMENT























Supreme Court of Florida.AETNA INSURANCE COMPANY, Petitioner,

v.Kathleen LaGASSE, Respondent.

No. 37821.May 14, 1969.

As Amended on Denial of Rehearing June 11 1969.

The judgment creditor brought action for de-claratory judgment to effect that its judgment lienwas superior to judgment debtor's claim ofhomestead exemption. The Circuit Court, SarasotaCounty, Lynn N. Silvertooth, J., rendered a judg-ment in favor of the creditor and the debtor ap-pealed. The District Court of Appeal, 213 So.2d454, reversed and certiorari was granted. The Su-preme Court, Drew, J., held that judgment debtor,who had remainder interest in property which hadbeen the homestead of the mother and father, byliving on property with mother, the life tenant, afterfather's death did not acquire a possessory right suf-ficient to support homestead exemption claimwhich would have priority over prior recordedjudgment whose lien had attached to remainder in-terest of debtor.


Roberts, J., and Ervin, C.J., dissented.

West Headnotes



202I(E) Liabilities Enforceable AgainstHomestead

202k92 Exception of Pre-Existing Liabil-ities and Liens

202k95 k. Liabilities Existing BeforeEstablishment of Homestead. Most Cited Cases

Homestead property is subject to levy underjudgments recorded prior to time such property be-comes homestead of judgment debtor. F.S.A. §55.10.


161 Execution161II Property Subject to Execution

161k31 Particular Estates or Interests161k33 k. Real Property. Most Cited

CasesVested remainder is an interest in real property

subject to levy.




202k106 Proceedings for Enforcement ofClaims

202k108 k. Exhaustion of Other Prop-erty Before Resort to Homestead. Most Cited Cases

Judgment creditor was not estopped from levy-ing on property belonging to judgment debtor, whoas only child had a vested remainder therein ondeath of her father and acquired the entire interesttherein on death of her mother a few months later,based on claim that creditor, whose judgment hadbeen recorded prior to father's death, failed to levyon interest during brief period between death offather and death of mother, the life tenant of prop-erty which had been the homestead of the fatherand mother and on which debtor lived.




202k92 Exception of Pre-Existing Liabil-ities and Liens







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202k94 k. Liabilities Existing BeforeAcquisition of Property. Most Cited Cases

Homestead 202 141(1)

202 Homestead202III Rights of Surviving Husband, Wife, Chil-

dren, or Heirs202k141 Rights of Surviving Wife


At death of judgment debtor's father, debtor, asonly child, became vested with remainderman's titleto property which had been the father's homestead,the prior recorded judgment lien attached to debt-or's interest and debtor's surviving mother had rightof occupancy and use essential to homestead untilher death several months later.

[5] Life Estates 240 7

240 Life Estates240k7 k. Possession of Real Property. Most

Cited CasesConsent by life tenant to remainderman's occu-

pancy of property does not divest life tenant ofparamount present interest.

[6] Homestead 202 142(1)

202 Homestead202III Rights of Surviving Husband, Wife, Chil-

dren, or Heirs202k142 Rights of Children or Heirs


Judgment debtor, who had a remainder interestin property which had been the homestead of themother and father, by living on property with moth-er, the life tenant, after father's death did not ac-quire a possessory right sufficient to supporthomestead exemption claim which would have pri-ority over prior recorded judgment whose lien hadattached to remainder interest of debtor.

*727 Richard V. Harrison, Venice, of Snyder,Hazen, Isphording & Harrison, for petitioner.

Charles J. Cheves, Jr., Punta Gorda, of Wotitzky,Wotitzky, Schoonover & Cheves, for respondent.

*728 DREW, Justice.The petitioner, Aetna Insurance Company, ob-

tained a final decree in the circuit court holding thatthe lien of its $91,500 judgment against the re-spondent LaGasse and others, recorded in 1961,was entitled to priority over her claim ofhomestead. She claimed exemption of propertywhich she inherited as the only child of her parents,upon the death of her father in April, 1965, and hermother, September 8, 1965. On appeal the decreewas reversed, the court holding that the respondentdebtor had a right to exemption because ‘the judg-ment could not have been a lien on the property it-self until title vested in’ the judgment debtor uponthe death of her mother in September, 1965, andthat the homestead right accrued at least concur-rently.

The material facts are stated at length in theopinion on appeal, 213 So.2d 454. The respondentwas separated from her husband when her fatherdied in April 1965, at which time she acquired thevested remainder and her mother a life tenancy inthe property which had been her father's homestead.According to the opinion, she had by June 1965abandoned her marital residence and moved withher child into the parental home to care for her in-valid mother, who was completely disabled by ter-minal cancer. The court found that respondent ranthe household and, because her mother was physic-ally and financially dependent on her, was the headof a family at that time without regard to her marit-al status.

On these facts the appellate court held that pe-titioner's recorded judgment did not become ‘a lienon the property itself until title vested in * * * thejudgment debtor’ at the death of her mother, the lifetenant.[FN1] The court found that petitioner's claimof priority based on its recorded judgment lien ac-cruing against the debtor's vested remainder in-terest, acquired by her at her father's death in April






















1965, was ‘wholly immaterial’ because ‘nothingwas done by Aetna to enforce the judgment untilafter the mother's death.’ [FN2] The writ of certior-ari has issued on the ground of conflict betweenthis decision and previous cases holding that thetitle in fee vests in a remainderman rather than alife tenant who has only a right of possession ofreal property;[FN3] and that under our law a priorrecorded judgment creates a lien, eo instanti uponthe debtor's acquisition of title to land, superior to aright of homestead exemption accruing before levyis attempted.[FN4]

FN1. LaGasse v. Aetna Ins. Co.,Fla.App.1968, 213 So.2d 454, 459.

FN2. Ibid., p. 457.

FN3. Kingsley v. Broward, 19 Fla. 722.

FN4. Porter-Mallard Co. v. Dugger, 117Fla. 137, 157 So. 429. See also Pasco v.Harley, 73 Fla. 819, 75 So. 30; First Nat'lBank of Chipley v. Peel, 107 Fla. 413, 145So. 177; Giddens v. McFarlan, 152 Fla.281, 10 So.2d 807; Abernathy v. Gruppo,Fla.App.1960, 119 So.2d 398.

[1][2] In view of the conceded fact that a re-mainder interest in real property is subject to levy,[FN5] we are unable to follow respondent's conten-tion that such a vested remainder is not, prior to ter-mination of the life tenancy, an interest in ‘real es-tate’ to which a lien may attach under our statute.[FN6] This reasoning, in our opinion, constitutes nobasis for rejecting application of the rule of numer-ous decisions holding homestead property subjectto levy under judgments recorded prior to the timesuch property became the homestead of the judg-ment debtor.[FN7] Certainly our decisions do notcharacterize a vested remainder as anything otherthan an interest in real property.

FN5. Anemaet v. Martin-Senour Com-pany, Fla.App.1959, 114 So.2d 23.

FN6. Sec. 55.10, F.S., 1963, F.S.A.

FN7. Note 4, supra.

[3] Assuming attachment of a lien at the timethis vested remainder interest was acquired by re-spondent, the pleading and *729 proof in this casepresent no grounds whatever for invoking the doc-trine of estoppel for failure to levy during the briefperiod prior to death of the life tenant. Respondentpresents no other rationale or authority in supportof the contention that petitioner either acquired nolien until the death of her mother, the life tenant, orthat merger of the present and future interests atthat time made the prior lien subordinate.

[4] Petitioner does not question the rule accord-ing priority to a homestead right ‘if the homesteadright and the lien attach simultaneously, as in thecase of a purchase or inheritance of land by a judg-ment debtor * * *.'[FN8] That principle is inapplic-able in the present case, however, because at thedeath of respondent's father, when she became ves-ted with the remainderman's title to which the priorrecorded judgment lien attached, her survivingmother had the right of occupancy and use essentialto a homestead claim:

FN8. Quigley v. Kennedy & Ely Ins.,Inc., Fla.1968, 207 So.2d 431, 433. Seealso Milton v. Milton, 63 Fla. 533, 58 So.718; Pasco v. Harley, note 4, supra. 26Am.Jur., Homesteads, Sec. 101, p. 64.

‘By great weight of precedent a claim ofhomestead may not attach to either vested or con-tingent future estates or interests in land, because aremainder expectant upon cessation of a precedingestate creates no present right to possession * * *the chancellor ruled correctly in holding that the re-mainder interest of appellants in the land in ques-tion is subject to levy.'[FN9]

FN9. Anemaet v. Martin-Senour Com-pany, note 5, supra, 114 So.2d p. 27.

[5][6] Respondent's alternative argument hereis that she did in fact occupy the property and care





























for her dependent mother when her father died, andthat the particular circumstances were sufficient togive her a possessory right sufficient to support ahomestead exemption claim by her as head of thefamily at that time. The uniform view of the courtsin similar situations, however, has been that con-sent by a life tenant to a remainderman's occupancydoes not divest the life tenant of a paramountpresent interest.[FN10] The record here presents noreasonable basis upon which any conveyance of apresent interest to respondent can be found.

FN10. ‘For the reason that land held in re-mainder is not susceptible of that immedi-ate occupancy which is contemplated bylaw in order to support a claim ofhomestead, a homestead may not beclaimed therein by the remainderman; andThe same rule applies where the remain-derman occupies the premises during thelife of the life tenant by the latter's permis-sion.’ (e.s.) and: Anno. 89 A.L.R. 523.

The decision is reversed and the cause re-manded with directions for reinstatement of the de-cree for the plaintiff Aetna in the trial court.

THORNAL, ADKINS, BOYD and CALDWELL(Retired) JJ., concur.ROBERTS, J., dissents with Opinion.ERVIN, C.J., dissents with Opinion and concurswith ROBERTS, J.

ROBERTS, Justice (dissenting).The concept of exempting the homestead occu-

pied by the head of a family was clearly expressedby the people in Section 1, Article X, Constitutionof Florida (1885), F.S.A. when they said:

‘A homestead to the extent of one hundred andsixty acres of land, or the half of one acre withinthe limits of any incorporated city or town, ownedby the head of a family residing in this State, to-gether with one thousand dollars worth of personalproperty, and the improvements on the real estate,Shall be exempt from forced sale under process of

any court, * * *.’ (Emphasis added.)

*730 The same concept was brought forwardand strengthened by the people in the 1968 Consti-tutional Revision in this language:

‘SECTION 4 (Article X) Homestead; exemptions.(a) There shall be exempt from forced sale un-

der process of any court, and no judgment, decreeor execution shall be a lien thereon, except for thepayment of taxes and assessments thereon, obliga-tions contracted for the purchase, improvement orrepair thereof, obligations contracted for house,field or other labor performed on the realty, the fol-lowing property owned by the head of a family:

(1) a homestead, if located outside a municipal-ity, to the extent of one hundred sixty acres of con-tiguous land and improvements thereon, whichshall not be reduced without the owner's consent byreason of subsequent inclusion in a municipality; orif located within a municipality, to the extent ofone-half acre of contiguous land, upon which theexemption shall be limited to the residence of theowner or his family;

* * *.' (Emphasis added.)

The humane reasons for this protection of thehome against general creditors have been an-nounced many times. The respondent LaGasse washead of a family composed of herself and an infantchild. She has a judgment creditor who seeks tolevy on a homestead owned and occupied by her. Inmy opinion, Section 1, Article X, Florida Constitu-tion 1885, and Section 4, Article X, Florida Consti-tution as Revised 1968, clearly prohibit the levy ofexecution. I therefore respectfully dissent.

ERVIN, C.J., concurs.ERVIN, Chief Justice(dissenting):

I concur with Justice ROBERTS in his dissent,but state in addition thereto that the reasoning andconclusions of law announced by the District Courtof Appeal appear properly dispositive of the issuespresented.



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Furthermore, Section 2 of Article X, State Con-stitution (1885), provides homestead exemption‘shall inure to the widow and Heirs of the party en-titled to such exemption.’ (Emphasis supplied.) Re-spondent and her mother (widow) simultaneouslyinherited a vested remainder and life estate, respect-ively, in the homestead property and were pos-sessed of it together.

ROBERTS, J., concurs.

Fla. 1969.Aetna Ins. Co. v. LaGasse223 So.2d 727

END OF DOCUMENT






Bradley E. KING, Appellant,v.

Ben F. KING, Appellee.

No. 93-2951.March 29, 1995.

Rehearing Denied May 9, 1995.

Son who obtained judgment against father forvoluntary payments for mortgage, condominium as-sessments and maintenance sought forced sale offather's life estate in homestead property to collectjudgment. The Circuit Court, Broward County, MelGrossman, J., ruled that father's life estate was ex-empt from forced sale. Son appealed. The DistrictCourt of Appeal held that father's life estate inhomestead property was exempt from forced sale tosatisfy judgment debt of son for voluntarily paidexpenses.

Affirmed.

Stone, J., concurred and filed opinion.

West Headnotes

Homestead 202 97



202k97 k. Claims and Liens for Creation,Improvement, or Preservation of Property. MostCited Cases

Homestead 202 99


202I(E) Liabilities Enforceable Against

Homestead202k99 k. Loans and Advances. Most

Cited CasesFather's life estate in homestead property was

exempt from forced sale by son who obtained judg-ment against father for expenses paid, voluntarily,for mortgage payments, condominium assessmentsand maintenance; son's judgment did not differenti-ate between that portion of debt representing cur-rent benefit to father's interest, such as current in-terest on mortgage, and that portion of son's pay-ments ultimately benefitting only son as remainder-man. West's F.S.A. Const. Art. 10, § 4.

*1199 Perry W. Hodges, Jr. of Hodges & Carry,P.A., Fort Lauderdale, for appellant.

R. Alan Hale of Law Offices of R. Alan Hale, P.A.,Fort Lauderdale, for appellee.

*1200 PER CURIAM.We affirm an order determining that Appellee's

life estate in homestead property is exempt fromforced sale. Appellant, who is Appellee's son, ob-tained a judgment against his father for $3,204 inexpenses paid, voluntarily, for mortgage payments,condominium assessments and maintenance.

The son claims that these debts, upon which themoney judgment is founded, are expressly exceptedfrom the homestead exemption in article X, section4, of the Florida Constitution, which provides, inpart:

There shall be exempt from forced sale underprocess of any court, and no judgment, decree orexecution shall be a lien thereon, except for thepayment of taxes and assessments thereon, obliga-tions contracted for the purchase, improvement orrepair thereof, or obligations contracted for house,field or other labor performed on the realty....

Art. X, § 4(a), Fla. Const.























The judgment does not differentiate betweenthat portion of the debt representing a current bene-fit to Appellee's interest, such as current interest onthe mortgage, and that portion of Appellant's pay-ments ultimately benefiting only Appellant-re-mainderman, such as the principal reductions on themortgage. See generally Williams v. Williams, 120So.2d 202 (Fla. 3d DCA 1960). See also, Snow v.Arnold, 132 Fla. 435, 181 So. 7 (1938). We haveconsidered, and deem inapposite, Palm Beach Sav.& Loan Ass'n, F.S.A. v. Fishbein, 619 So.2d 267(Fla.1993) and Burns v. Estate of Cobb, 589 So.2d413, 416 (Fla. 5th DCA 1991), relied upon by Ap-pellant.

The trial court did not err in concluding that thefather's interest in the homestead is exempt fromforced sale. We need not reach the additional issueaddressed in the concurring opinion.

POLEN, J. and DONNER, AMY STEELE, Asso-ciate Judge, concur.STONE, J., concurring specially with opinion.STONE, Judge, concurring.

I concur in the opinion but would also note thatthe judgment in this case does not involve, and doesnot purport to be founded on, concepts of equitablelien, equitable subrogation or constructive trust.Nor has Appellant even claimed such relief. Appel-lant's money judgment is for voluntary payments,and is not based upon a claim of fraud or a contractobligation between the parties. I also note that thereis no reason to apply a different principle here thanin a circumstance where an owner of homesteadproperty borrows funds which are subsequently ap-plied to repairs or mortgage payments by the debt-or. See, e.g., Perry v. Beckerman, 97 So.2d 860(Fla.1957).

Fla.App. 4 Dist.,1995.King v. King652 So.2d 1199, 20 Fla. L. Weekly D778

END OF DOCUMENT




















Supreme Court of Florida.Shaun OLMSTEAD, et al., Appellants,

v.FEDERAL TRADE COMMISSION, Appellee.

No. SC08-1009.June 24, 2010.

Rehearing Denied Aug. 31, 2010.

Background: The United States Court of Appealsfor the Eleventh Circuit, 528 F.3d 1310, certified aquestion concerning the rights of a judgment credit-or regarding the respective ownership interests ofjudgment debtors in certain single-member limitedliability companies (LLCs).

Holding: The Supreme Court, Canady, J., held thatcourt could order judgment debtor to surrender allright, title, and interest in debtor's single-memberLLC.

Question answered.

Lewis, J., dissented and filed opinion in whichPolston, J., joined.

West Headnotes

[1] Corporations and Business Organizations101 3610

101 Corporations and Business Organizations101XV Unincorporated Business Organizations

101XV(E) Limited Liability Companies101k3610 k. In general; nature and status.

Most Cited Cases(Formerly 241Ek6 Limited Liability Companies)A “limited liability company (LLC)” is a busi-

ness entity originally created to provide tax benefitsakin to a partnership and limited liability akin to thecorporate form.

[2] Corporations and Business Organizations

101 3630


101XV(E) Limited Liability Companies101k3627 Capital and Stock; Contribu-

tions101k3630 k. Transfer, pledge, or as-

signment of interest. Most Cited Cases(Formerly 241Ek30 Limited Liability Compan-

ies)

Corporations and Business Organizations 1013638


101XV(E) Limited Liability Companies101k3632 Members, Owners, and Share-

holders101k3638 k. Management of company

affairs in general. Most Cited Cases(Formerly 241Ek30 Limited Liability Compan-

ies)In addition to eligibility for tax treatment like

that afforded partnerships, “limited liability com-panies (LLCs)” are characterized by restrictions onthe transfer of ownership rights that are related tothe restrictions applicable in the partnership con-text; in particular, the transfer of managementrights in an LLC generally is restricted.




tions101k3631 k. Rights of creditors; char-

ging orders. Most Cited Cases(Formerly 241Ek31 Limited Liability Compan-

ies)

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The “limited liability company (LLC) chargingorder remedy” is a remedy derived from the char-ging order remedy created for the personal creditorsof partners and affords a judgment creditor accessto a judgment debtor's rights to profits and distribu-tions from the business entity in which the debtorhas an ownership interest.



101XV(E) Limited Liability Companies101k3610 k. In general; nature and status.

Most Cited Cases(Formerly 241Ek25 Limited Liability Compan-

ies)

Corporations and Business Organizations 1013633


101XV(E) Limited Liability Companies101k3632 Members, Owners, and Share-

holders101k3633 k. In general; rights and li-

abilities. Most Cited Cases(Formerly 241Ek25 Limited Liability Compan-

ies)A “limited liability company (LLC)” is a type

of corporate entity, and an ownership interest in anLLC is personal property that is reasonably under-stood to fall within the scope of corporate stock.

[5] Debtor and Creditor 117T 11

117T Debtor and Creditor117Tk11 k. Creditors' suit. Most Cited CasesThe general rule is that where one has any in-

terest in property which he may alien or assign, thatinterest, whether legal or equitable, is liable for thepayment of his debts.




tions101k3630 k. Transfer, pledge, or as-

signment of interest. Most Cited Cases(Formerly 241Ek30 Limited Liability Compan-

ies)The sole member in a single-member limited li-

ability company (LLC) may freely transfer theowner's entire interest in the LLC.




tions101k3631 k. Rights of creditors; char-

ging orders. Most Cited Cases(Formerly 241Ek30 Limited Liability Compan-

ies)Court could order a judgment debtor to sur-

render all right, title, and interest in the debtor'ssingle-member LLC to satisfy an outstanding judg-ment; provision authorizing the use of charging or-ders under the Limited Liability Company (LLC)Act was not the sole remedy for a judgment creditoragainst a judgment debtor's interest in a single-member LLC and did not displace the creditor'sremedy under statute governing property subject toexecution. West's F.S.A. § 608.433(4).

[8] Statutes 361 158

361 Statutes361V Repeal, Suspension, Expiration, and Re-

vival361k158 k. Implied repeal in general. Most

Cited Cases

Statutes 361 159














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361 Statutes361V Repeal, Suspension, Expiration, and Re-

vival361k159 k. Implied repeal by inconsistent or

repugnant act. Most Cited CasesRepeal of a statute by implication is not

favored and will be upheld only where irreconcil-able conflict between the later statute and earlierstatute shows legislative intent to repeal.

*77 Thomas C. Little, Clearwater, FL, for Appel-lant.

William Blumenthal, General Counsel, John F.Daly, Deputy General Counsel and John AndrewSinger, Attorney, Federal Trade Commission,Washington, D.C., for Appellee.

Daniel S. Kleinberger, Professor, William MitchellCollege of Law, St. Paul, MN, as Amicus Curiae.

CANADY, J.In this case we consider a question of law certi-

fied by the United States Court of Appeals for theEleventh Circuit concerning the rights of a judg-ment creditor, the appellee Federal Trade Commis-sion (FTC), regarding the respective ownership in-terests of appellants Shaun Olmstead and Julie Con-nell in certain Florida single-member limited liabil-ity companies (LLCs). Specifically, the EleventhCircuit certified the following question: “Whether,pursuant to Fla. Stat. § 608.433(4), a court may or-der a judgment-debtor to surrender all ‘right, title,and interest’ in the debtor's *78 single-member lim-ited liability company to satisfy an outstandingjudgment.” Fed. Trade Comm'n v. Olmstead, 528F.3d 1310, 1314 (11th Cir.2008). We have discre-tionary jurisdiction under article V, section 3(b)(6),Florida Constitution.

The appellants contend that the certified ques-tion should be answered in the negative because theonly remedy available against their ownership in-terests in the single-member LLCs is a charging or-der, the sole remedy authorized by the statutory

provision referred to in the certified question. TheFTC argues that the certified question should beanswered in the affirmative because the statutorycharging order remedy is not the sole remedy avail-able to the judgment creditor of the owner of asingle-member limited liability company.

For the reasons we explain, we conclude thatthe statutory charging order provision does not pre-clude application of the creditor's remedy of execu-tion on an interest in a single-member LLC. In linewith our analysis, we rephrase the certified questionas follows: “Whether Florida law permits a court toorder a judgment debtor to surrender all right, title,and interest in the debtor's single-member limitedliability company to satisfy an outstanding judg-ment.” We answer the rephrased question in the af-firmative.

I. BACKGROUNDThe appellants, through certain corporate entit-

ies, “operated an advance-fee credit card scam.”Olmstead, 528 F.3d at 1311-12. In response to thisscam, the FTC sued the appellants and the corpor-ate entities for unfair or deceptive trade practices.Assets of these defendants were frozen and placedin receivership. Among the assets placed in receiv-ership were several single-member Florida LLCs inwhich either appellant Olmstead or appellant Con-nell was the sole member. Ultimately, the FTC ob-tained judgment for injunctive relief and for morethan $10 million in restitution. To partially satisfythat judgment, the FTC obtained-over the appel-lants' objection-an order compelling appellants toendorse and surrender to the receiver all of theirright, title, and interest in their LLCs. This order isthe subject of the appeal in the Eleventh Circuit thatprecipitated the certified question we now consider.

II. ANALYSISIn our analysis, we first review the general

nature of LLCs and of the charging order remedy.We then outline the specific relevant provisions ofthe Florida Limited Liability Company Act (LLCAct), chapter 608, Florida Statutes (2008). Next, wediscuss the generally available creditor's remedy of























levy and execution under sale. Finally, we explainthe basis for our conclusion that Florida law per-mits a court to order a judgment debtor to surrenderall right, title, and interest in the debtor's single-member LLC to satisfy an outstanding judgment. Inbrief, this conclusion rests on the uncontested rightof the owner of the single-member LLC to transferthe owner's full interest in the LLC and the absenceof any basis in the LLC Act for abrogating in thiscontext the long-standing creditor's remedy of levyand sale under execution.

A. Nature of LLCs and Charging Orders[1][2][3] The LLC is a business entity origin-

ally created to provide “tax benefits akin to a part-nership and limited liability akin to the corporateform.” Elf Atochem North Am., Inc. v. Jaffari, 727A.2d 286, 287 (Del.1999). In addition to eligibilityfor tax treatment like that afforded partnerships,LLCs are characterized by restrictions on the trans-fer of ownership *79 rights that are related to therestrictions applicable in the partnership context. Inparticular, the transfer of management rights in anLLC generally is restricted. This particular charac-teristic of LLCs underlies the establishment of theLLC charging order remedy, a remedy derived fromthe charging order remedy created for the personalcreditors of partners. See City of Arkansas City v.Anderson, 242 Kan. 875, 752 P.2d 673, 681-683(1988) (discussing history of partnership chargingorder remedy). The charging order affords a judg-ment creditor access to a judgment debtor's rights toprofits and distributions from the business entity inwhich the debtor has an ownership interest.

B. Statutory Framework for Florida LLCsThe rules governing the formation and opera-

tion of Florida LLCs are set forth in Florida's LLCAct. In considering the question at issue, we focuson the provisions of the LLC Act that set forth theauthorization for single-member LLCs, the charac-teristics of ownership interests, the limitations onthe transfer of ownership interests, and the author-ization of a charging order remedy for personalcreditors of LLC members.

Section 608.405, Florida Statutes (2008),provides that “[o]ne or more persons may form alimited liability company.” A person with an own-ership interest in an LLC is described as a“member,” which is defined in section 608.402(21)as “any person who has been admitted to a limitedliability company as a member in accordance withthis chapter and has an economic interest in a lim-ited liability company which may, but need not, berepresented by a capital account.” The terms“membership interest,” “member's interest,” and“interest” are defined as “a member's share of theprofits and losses of the limited liability company,the right to receive distributions of the limited liab-ility company's assets, voting rights, managementrights, or any other rights under this chapter or thearticles of organization or operating agreement.” §608.402(23), Fla. Stat. (2008). Section 608.431provides that “[a]n interest of a member in a limitedliability company is personal property.”

Section 608.432 contains provisions governingthe “[a]ssignment of member's interest.” Under sec-tion 608.432(1), “[a] limited liability company in-terest is assignable in whole or in part except asprovided in the articles of organization or operatingagreement.” An assignee, however, has “no right toparticipate in the management of the business andaffairs” of the LLC “except as provided in the art-icles of organization or operating agreement” andupon obtaining “approval of all of the members ofthe limited liability company other than the memberassigning a limited liability company interest” orupon “[c]ompliance with any procedure providedfor in the articles of organization or operatingagreement.” Id. Accordingly, an assignment of amembership interest will not necessarily transferthe associated right to participate in the LLC's man-agement. Such an assignment which does not trans-fer management rights only “entitles the assignee toshare in such profits and losses, to receive such dis-tribution or distributions, and to receive such alloc-ation of income, gain, loss, deduction, or credit orsimilar item to which the assignor was entitled, tothe extent assigned.” § 608.432(2)(b), Fla. Stat.











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(2008).

Section 608.433-which is headed “Right of as-signee to become member”-reiterates that an as-signee does not necessarily obtain the status ofmember. Section 608.433(1) states: “Unless other-wise provided in the articles of organization or op-erating agreement, an assignee of a limited*80 liab-ility company interest may become a member onlyif all members other than the member assigning theinterest consent.” Section 608.433(4) sets forth theprovision-mentioned in the certified question-whichauthorizes the charging order remedy for a judg-ment creditor of a member:

On application to a court of competent jurisdic-tion by any judgment creditor of a member, thecourt may charge the limited liability companymembership interest of the member with paymentof the unsatisfied amount of the judgment withinterest. To the extent so charged, the judgmentcreditor has only the rights of an assignee of suchinterest. This chapter does not deprive any mem-ber of the benefit of any exemption laws applic-able to the member's interest.

C. Generally Available Creditor's Remedy ofLevy and Sale under Execution

[4][5] Section 56.061, Florida Statutes (2008),provides that various categories of real and person-al property, including “stock in corporations,”“shall be subject to levy and sale under execution.”A similar provision giving judgment creditors aremedy against a judgment debtor's ownership in-terest in a corporation has been a part of the law ofFlorida since 1889. See ch. 3917, Laws of Fla.(1889) (“That shares of stock in any corporation in-corporated by the laws of this State shall be subjectto levy of attachments and executions, and to saleunder executions on judgments or decrees of anycourt in this State.”). An LLC is a type of corporateentity, and an ownership interest in an LLC is per-sonal property that is reasonably understood to fallwithin the scope of “corporate stock.” “The generalrule is that where one has any ‘interest in propertywhich he may alien or assign, that interest, whether

legal or equitable, is liable for the payment of hisdebts.’ ” Bradshaw v. Am. Advent Christian Home& Orphanage, 145 Fla. 270, 199 So. 329, 332(1940) (quoting Croom v. Ocala Plumbing & Elec-tric Co., 62 Fla. 460, 57 So. 243, 245 (1911)).

At no point have the appellants contended thatsection 56.061 does not by its own terms extend toan ownership interest in an LLC or that the orderchallenged in the Eleventh Circuit did not comportwith the requirements of section 56.061. Instead,they rely solely on the contention that the Legis-lature adopted the charging order remedy as an ex-clusive remedy, supplanting section 56.061.

D. Creditor's Remedies Against the OwnershipInterest in a Single-Member LLC

Since the charging order remedy clearly doesnot authorize the transfer to a judgment creditor ofall an LLC member's “right, title and interest” in anLLC, while section 56.061 clearly does authorizesuch a transfer, the answer to the question at issuein this case turns on whether the charging orderprovision in section 608.433(4) always displacesthe remedy available under section 56.061. Spe-cifically, we must decide whether section608.433(4) establishes the exclusive judgment cred-itor's remedy-and thus displaces section 56.061-with respect to a judgment debtor's ownership in-terest in a single-member LLC.

[6] As a preliminary matter, we recognize theuncontested point that the sole member in a single-member LLC may freely transfer the owner's entireinterest in the LLC. This is accomplished through asimple assignment of the sole member's member-ship interest to the transferee. Since such an interestis freely and fully alienable by its owner, section56.061 authorizes a judgment creditor with a judg-ment for an amount equaling or exceeding *81 thevalue of the membership interest to levy on that in-terest and to obtain full title to it, including all therights of membership-that is, unless the operationof section 56.061 has been limited by section608.433(4).




























Section 608.433 deals with the right of assign-ees or transferees to become members of an LLC.Section 608.433(1) states the basic rule that absenta contrary provision in the articles or operatingagreement, “an assignee of a limited liability com-pany interest may become a member only if allmembers other than the member assigning the in-terest consent.” See also § 608.432(1)(a), Fla. Stat.(2008). The provision in section 608.433(4) withrespect to charging orders must be understood inthe context of this basic rule.

The limitation on assignee rights in section608.433(1) has no application to the transfer ofrights in a single-member LLC. In such an entity,the set of “all members other than the member as-signing the interest” is empty. Accordingly, an as-signee of the membership interest of the sole mem-ber in a single-member LLC becomes a member-and takes the full right, title, and interest of thetransferor-without the consent of anyone other thanthe transferor.

Section 608.433(4) recognizes the applicationof the rule regarding assignee rights stated in sec-tion 608.433(1) in the context of creditor rights. Itprovides a special means-i.e., a charging order-for acreditor to seek satisfaction when a debtor's mem-bership interest is not freely transferable but is sub-ject to the right of other LLC members to object toa transferee becoming a member and exercising themanagement rights attendant to membership status.See § 608.432(1), Fla. Stat. (2008) (setting forthgeneral rule that an assignee “shall have no right toparticipate in the management of the business af-fairs of [an LLC]”).

Section 608.433(4)'s provision that a“judgment creditor has only the rights of an assign-ee of [an LLC] interest” simply acknowledges thata judgment creditor cannot defeat the rights ofnondebtor members of an LLC to withhold consentto the transfer of management rights. The provisiondoes not, however, support an interpretation whichgives a judgment creditor of the sole owner of anLLC less extensive rights than the rights that are

freely assignable by the judgment debtor. See In reAlbright, 291 B.R. 538, 540 (D.Colo.2003)(rejecting argument that bankruptcy trustee wasonly entitled to a charging order with respect todebtor's ownership interest in single-member LLCand holding that “[b]ecause there are no othermembers in the LLC, the entire membership in-terest passed to the bankruptcy estate”); In re Mod-anlo, 412 B.R. 715, 727-31 (D.Md.2006)(following reasoning of Albright ).

Our understanding of section 608.433(4) flowsfrom the language of the subsection which limitsthe rights of a judgment creditor to the rights of anassignee but which does not expressly establish thecharging order remedy as an exclusive remedy. Therelevant question is not whether the purpose of thecharging order provision-i.e., to authorize a specialremedy designed to reach no further than the rightsof the nondebtor members of the LLC will permit-provides a basis for implying an exception from theoperation of that provision for single-memberLLCs. Instead, the question is whether it is justifiedto infer that the LLC charging order mechanism isan exclusive remedy.

On its face, the charging order provision estab-lishes a nonexclusive remedial mechanism. There isno express provision in the statutory text providingthat the *82 charging order remedy is the only rem-edy that can be utilized with respect to a judgmentdebtor's membership interest in an LLC. The oper-ative language of section 608.433(4)-“the courtmay charge the [LLC] membership interest of themember with payment of the unsatisfied amount ofthe judgment with interest”-does not in any waysuggest that the charging order is an exclusive rem-edy.

In this regard, the charging order provision inthe LLC Act stands in stark contrast to the chargingorder provisions in both the Florida Revised Uni-form Partnership Act, §§ 620.81001-.9902, Fla. Stat. (2008), and the Florida Revised Uniform LimitedPartnership Act, §§ 620.1101-.2205, Fla. Stat.(2008). Although the core language of the charging





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order provisions in each of the three statutes isstrikingly similar, the absence of an exclusive rem-edy provision sets the LLC Act apart from the othertwo statutes. With respect to partnership interests,the charging order remedy is established in section620.8504, which states that it “provides the exclus-ive remedy by which a judgment creditor of a part-ner or partner's transferee may satisfy a judgmentout of the judgment debtor's transferable interest inthe partnership.” § 620.8504(5), Fla. Stat. (2008)(emphasis added). With respect to limited partner-ship interests, the charging order remedy is estab-lished in section 620.1703, which states that it“provides the exclusive remedy which a judgmentcreditor of a partner or transferee may use to satisfya judgment out of the judgment debtor's interest inthe limited partnership or transferable interest.” §620.1703(3), Fla. Stat. (2008) (emphasis added).

“[W]here the legislature has inserted a provi-sion in only one of two statutes that deal withclosely related subject matter, it is reasonable to in-fer that the failure to include that provision in theother statute was deliberate rather than inadvert-ent.” 2B Norman J. Singer & J.D. Shambie Singer,Statutes and Statutory Construction § 51:2 (7thed.2008). “In the past, we have pointed to languagein other statutes to show that the legislature ‘knowshow to’ accomplish what it has omitted in the stat-ute [we were interpreting].” Cason v. Fla. Dep't ofMgmt. Services, 944 So.2d 306, 315 (Fla.2006); seealso Horowitz v. Plantation Gen. Hosp. Ltd. P'ship,959 So.2d 176, 185 (Fla.2007); Rollins v. Piz-zarelli, 761 So.2d 294, 298 (Fla.2000).

[7] The same reasoning applies here. The Le-gislature has shown-in both the partnership statuteand the limited partnership statute-that it knowshow to make clear that a charging order remedy isan exclusive remedy. The existence of the expressexclusive-remedy provisions in the partnership andlimited partnership statutes therefore decisively un-dermines the appellants' argument that the chargingorder provision of the LLC Act-which does notcontain such an exclusive remedy provision-should

be read to displace the remedy available under sec-tion 56.061.

[8] The appellants' position is further under-mined by the general rule that “repeal of a statuteby implication is not favored and will be upheldonly where irreconcilable conflict between the laterstatute and earlier statute shows legislative intent torepeal.” Town of Indian River Shores v. Richey, 348So.2d 1, 2 (Fla.1977). We also have previously re-cognized the existence of a specific presumptionagainst the “[s]tatutory abrogation by implication ofan existing common law remedy, particularly if theremedy is long established.” Thornber v. City ofFort Walton Beach, 568 So.2d 914, 918 (Fla.1990).The rationale for that presumption with respect tocommon law remedies is equally applicable to the“abrogation by implication” of a long-established*83 statutory remedy. See Schlesinger v. Council-man, 420 U.S. 738, 752, 95 S.Ct. 1300, 43 L.Ed.2d591 (1975) (“ ‘[R]epeals by implication are dis-favored,’ and this canon of construction applieswith particular force when the asserted repealerwould remove a remedy otherwise available.”)(quoting Reg'l Rail Reorganization Act Cases, 419U.S. 102, 133, 95 S.Ct. 335, 42 L.Ed.2d 320 (1974)). Here, there is no showing of an irreconcilableconflict between the charging order remedy and thepreviously existing judgment creditor's remedy andtherefore no basis for overcoming the presumptionagainst the implied abrogation of a statutory rem-edy.

Given the absence of any textual or contextualsupport for the appellants' position, for them to pre-vail it would be necessary for us to rely on a pre-sumption contrary to the presumption against im-plied repeal-that is, a presumption that the legislat-ive adoption of one remedy with respect to a partic-ular subject abrogates by implication all existingstatutory remedies with respect to the same subject.Our law, however, is antithetical to such a pre-sumption of implied abrogation of remedies. SeeRichey; Thornber; Tamiami Trail Tours, Inc. v.City of Tampa, 159 Fla. 287, 31 So.2d 468, 471



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(Fla.1947).

In sum, we reject the appellants' argument be-cause it is predicated on an unwarranted interpret-ive inference which transforms a remedy that isnonexclusive on its face into an exclusive remedy.Specifically, we conclude that there is no reason-able basis for inferring that the provision authoriz-ing the use of charging orders under section608.433(4) establishes the sole remedy for a judg-ment creditor against a judgment debtor's interest insingle-member LLC. Contrary to the appellants' ar-gument, recognition of the full scope of a judgmentcreditor's rights with respect to a judgment debtor'sfreely alienable membership interest in a single-member LLC does not involve the denial of theplain meaning of the statute. Nothing in the text orcontext of the LLC Act supports the appellants' po-sition.

III. CONCLUSIONSection 608.433(4) does not displace the cred-

itor's remedy available under section 56.061 withrespect to a debtor's ownership interest in a single-member LLC. Answering the rephrased certifiedquestion in the affirmative, we hold that a courtmay order a judgment debtor to surrender all right,title, and interest in the debtor's single-memberLLC to satisfy an outstanding judgment.

It is so ordered.

QUINCE, C.J., and PARIENTE, LABARGA, andPERRY, JJ., concur.LEWIS, J., dissents with an opinion, in which POL-STON, J., concurs.

LEWIS, J., dissenting.I cannot join my colleagues in the judicial re-

writing of Florida's LLC Act. Make no mistake, themajority today steps across the line of statutory in-terpretation and reaches far into the realm of rewrit-ing this legislative act. The academic communityhas clearly recognized that to reach the result oftoday's majority requires a judicial rewriting of thislegislative act. See, e.g., Carter G. Bishop & Daniel

S. Kleinberger, Limited Liability Companies: Taxand Business Law, ¶ 1.04[3][d] (2008) (discussingfact that statutes which do not contemplate issueswith judgment creditors of single-member LLCs“invite Albright-style judicial invention ”); CarterG. Bishop, Reverse Piercing: A Single MemberLLC Paradox, 54 S.D. L.Rev. 199, 202 (2009);Larry E. Ribstein, *84Reverse Limited Liability andthe Design of Business Associations, 30 Del. J.Corp. L. 199, 221-25 (2005) (“The situation in Al-bright theoretically might seem to be better re-dressed through explicit application of traditionalstate remedies than by a federal court trying toshoehorn its preferred result into the state LLCstatute. The problem ... is that no state remedy isappropriate because the asset protection was expli-citly permitted by the applicable statute. The appro-priate solution, therefore, lies in fixing the statute.”(emphasis supplied)); Thomas E. Rutledge &Thomas Earl Geu, The Albright Decision-Why anSMLLC Is Not an Appropriate Asset ProtectionVehicle, Bus. Entities, Sept.-Oct.2003, at 16; JacobStein, Building Stumbling Blocks: A Practical Takeon Charging Orders, Bus. Entities, Sept.-Oct.2006,at 29. (stating that the Albright court “ignored Col-orado law with respect to the applicability of acharging order” where the “statute does not exemptsingle-member LLCs from the charging order limit-ation”). An adequate remedy is available withoutthe extreme step taken by the majority in rewritingthe plain and unambiguous language of a statute.This is extremely important and has far-reachingimpact because the principles used to ignore theLLC statutory language under the current factualcircumstances apply with equal force to multimem-ber LLC entities and, in essence, today's decisioncrushes a very important element for all LLCs inFlorida. If the remedies available under the LLCAct do not apply here because the phrase“exclusive remedy” is not present, the same theor-ies apply to multimember LLCs and render the as-sets of all LLCs vulnerable.

I would answer the certified question in thenegative based on the plain language of the statute























and an in pari materia reading of chapter 608 in itsentirety. At the outset, the majority signals its de-parture from the LLC Act as it rephrases the certi-fied question to frame the result. The question certi-fied by the Eleventh Circuit requested this Court toaddress whether, pursuant to section 608.433(4), acourt may order a judgment debtor to surrender all“right, title, and interest” in the debtor's single-member limited liability company to satisfy an out-standing judgment. The majority modifies the certi-fied question and fails to directly address the critic-al issue of whether the charging order provision ap-plies uniformly to all limited liability companies re-gardless of membership composition. In addition,the majority advances a position with regard tochapter 56 of the Florida Statutes that was neitherasserted by the parties nor discussed in the opinionof the federal court.

Despite the majority's claim that it is not creat-ing an exception to the charging order provision ofthe statute for single-member LLCs, its analysis ne-cessarily does so in contravention of the plain stat-utory language and general principles of Floridalaw. The LLC Act inherently displaces the availab-ility of the execution provisions in chapter 56 of theFlorida Statutes by providing a remedy that is in-tended to prevent judgment creditors from seizingownership of the membership interests in an LLCand from liquidating the separate assets of the LLC.In doing so, the LLC Act applies uniformly tosingle-and multimember limited liability compan-ies, and does not provide either an implicit or ex-press exception that permits the involuntary transferof all right, title, and interest in a single-memberLLC to a judgment creditor. The statute also doesnot permit a judgment creditor to liquidate the as-sets of a non-debtor LLC in the manner allowed bythe majority today. Therefore, under the currentstatutory scheme, a judgment creditor seeking satis-faction must follow the statutory remedies specific-ally afforded under chapter 608, which include butare not limited to a *85 charging order, regardlessof the membership composition of the LLC.

Although this plain reading may require addi-tional steps for judgment creditors to satisfy, anLLC is a purely statutory entity that is created, au-thorized, and operated under the terms required bythe Legislature. This Court does not possess the au-thority to judicially rewrite those operative statutesthrough a speculative inference not reflected in thelegislation. The Legislature has the authority toamend chapter 608 to provide any additional rem-edies or exceptions for judgment creditors, such asan exception to the application of the charging or-der provision to single-member LLCs, if that is thedesired result. However, by basing its premise onprinciples of law with regard to voluntary transfers,the majority suggests a result that can only beachieved by rewriting the clear statutory provisions.In effect, the majority accomplishes its result by ju-dicially legislating section 608.433(4) out of Flor-ida law.

For instance, the majority disregards the prin-ciple that in general, an LLC exists separate fromits owners, who are defined as members under theLLC Act. See §§ 608.402(21) (defining “member”),608.404, Fla. Stat. (2008) ( “[E]ach limited liabilitycompany organized and existing under this chaptershall have the same powers as an individual to doall things necessary to carry out its business and af-fairs....”). In other words, an LLC is a distinct entitythat operates independently from its individualmembers. This characteristic directly distinguishesit from partnerships. Specifically, an LLC is not im-mediately responsible for the personal liabilities ofits members. See Litchfield Asset Mgmt. Corp. v.Howell, 70 Conn.App. 133, 799 A.2d 298, 312(2002), overruled on other grounds by Robinson v.Coughlin, 266 Conn. 1, 830 A.2d 1114 (2003). Themajority obliterates the clearly defined linesbetween the LLC as an entity and the owners asmembers.

Further, when the Legislature amended theLLC requirements for formation to allow single-member LLCs, it did not enact other changes to theprovisions in the LLC Act relating to an involun-





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tary assignment or transfer of a membership interestto a judgment creditor of a member or to the remed-ies afforded to a judgment creditor. Moreover, noother amendments were made to the statute todemonstrate any different application of the provi-sions of the LLC Act to single-member and mul-timember LLCs. For example, the LLC Act gener-ally does not refer to the number of members in anLLC within the separate statutory provisions. TheLegislature is presumed to have known of the char-ging order statute and other remedies when it intro-duced the single-member LLC statute. Accordingly,by choosing not to make any further changes to thestatute in response to this addition, the Legislatureindicated its intent for the charging order provisionand other statutory remedies to apply uniformly toall LLCs. This Court should not disregard the clearand plain language of the statute.

In addition, the majority fails to correctly setforth the status of a member in an LLC and the as-sociated rights and interests that such membershipentails. An owner of a Florida LLC is classified asa “member,” which is defined as

any person who has been admitted to a limited li-ability company as a member in accordance withthis chapter and has an economic interest in alimited liability company which may, but neednot, be represented by a capital account.

§ 608.402(21), Fla. Stat. (2008) (“Definitions”)(emphasis supplied). Therefore, to be a member ofa Florida LLC it is now necessary to be admitted assuch under *86 chapter 608 and to also maintain aneconomic interest in the LLC. Moreover, a memberof an LLC holds and carries a “membership in-terest” that encompasses both governance and eco-nomic rights:

“Membership interest,” “member's interest,” or“interest” means a member's share of the profitsand the losses of the limited liability company,the right to receive distributions of the limited li-ability company's assets, voting rights, manage-ment rights, or any other rights under this chapteror the articles of organization or operating agree-

ment.

§ 608.402(23), Fla. Stat. (2008) (emphasis sup-plied). This provision was adopted during the 1999amendments, which was after the modification toallow single-member LLCs. See ch. 99-315, § 1, at4, Laws of Fla. In stripping the statutory protectionsdesigned to protect an LLC as an entity distinctfrom its owners, the majority obliterates the distinc-tion between economic and governance rights byallowing a judgment creditor to seize both from themember and to liquidate the separate assets of theentity.

Consideration of an involuntary lien against amembership interest must address what interests ofthe member may be involuntarily transferred. Con-trary to the view expressed by the majority, a mem-ber of an LLC is restricted from freely transferringinterests in the entity. For instance, because an LLCis a legal entity that is separate and distinct from itsmembers, the specific LLC property is not transfer-able by an individual member. In other words, pos-session of an economic and governance interestdoes not also create an interest in specific LLCproperty or the right or ability to transfer that LLCproperty. See § 608.425, Fla. Stat. (2008) (statingthat all property originally contributed to the LLCor subsequently acquired is LLC property); see alsoBishop, supra, 54 S.D. L.Rev. at 226 (discussing incontext of federal tax liens the fact that “[t]ypically,a member is not a co-owner and has no transferableinterest in limited liability company property”)(citing Unif. Ltd. Liab. Co. Act § 501 (1996), 6AU.L.A. 604 (2003)). The specific property of anLLC is not subject to attachment or execution ex-cept on an express claim against the LLC itself. SeeBishop & Kleinberger, supra, ¶ 1.04[3][d].

The interpretation of the statute advanced bythe majority simply ignores the separation betweenthe particular separate assets of an LLC and a mem-ber's specific membership interest in the LLC. Theability of a member to voluntarily assign his, her, orits interest does not subject the property of an LLCto execution on the judgment. Under the factual cir-








cumstances of the present case, the trial courtforced the judgment debtors to involuntarily sur-render their membership interests in the LLCs andthen authorized a receiver to liquidate the specificLLC assets to satisfy the judgment. In doing so, thetrial court ignored the clearly recognized legal sep-aration between the specific assets of an LLC and amember's interest in profits or distributions fromthose assets. See F.T.C. v. Peoples Credit First,LLC, No. 8:03-CV-2353-T-TBM, 2006 WL1169677, *2 (M.D.Fla. May 3, 2006) (ordering theappellants to “endorse and surrender to the Receiv-er, all of their right, title and interest in their owner-ship/equity unit certificates” of the LLCs for the re-ceiver to liquidate the assets of these companies).The majority approves of this disregard by improp-erly applying principles of voluntary transfers to al-low creditors of an LLC member to attack and li-quidate the separate LLC assets.

Additionally, the transfer of a membership in-terest is restricted by law and by the internal operat-ing documents of the *87 LLC. Although a membermay freely transfer an economic interest, a membermay not voluntarily transfer a management interestwithout the consent of the other LLC members. See§ 608.432(1), Fla. Stat. (2008). Contrary to theview of the majority, in the context of a single-member LLC, the restraint on transferability ex-pressly provided for in the statute does not disap-pear. Unless admitted as a member to the LLC, thetransferee of the economic interest only receives theLLC's financial distributions that the transferringmember would have received absent the transfer.See § 608.432(2), Fla. Stat. (2008); see also Bishop& Kleinberger, supra, ¶ 1.01[3][c]. Consequently, amember may cease to be a member upon the assign-ment of the entire membership interest (i.e., trans-ferring all of the following: (1) share of the profitsand losses of the LLC, (2) right to receive distribu-tions of LLC assets; (3) voting rights, (4) manage-ment rights, and (5) any other rights). See §§608.402(23), 608.432(2)(c), Fla. Stat. (2008). Fur-thermore, a transferring member no longer qualifiesunder the statutory definition of “member” upon a

transfer of the entire economic interest. See §608.402(21), Fla. Stat. (2008) (defining “member”as a person who has an economic interest in anLLC). However, unless otherwise provided in thegoverning documents of the entity (i.e., the articlesof incorporation and the operating agreement), thepledge or granting of “a security interest, lien, orother encumbrance in or against, any or all of themembership interest of a member shall not causethe member to cease to be a member or to have thepower to exercise any rights or powers of a mem-ber.” § 608.432(2)(c), Fla. Stat. (2008) (emphasissupplied). Accordingly, a judgment or a chargingorder does not divest the member of a membershipinterest in the LLC as the member retains gov-ernance rights. It only provides the judgment credit-or the economic interest until the judgment is satis-fied.

Whether the LLC Act allows a judgment cred-itor of an individual member to obtain this entiremembership interest to exert full control over theassets of the LLC is the heart of the underlying dis-pute. Neither the Uniform Limited Liability Com-pany Act nor the Florida LLC Act contemplates thepresent situation in providing for single-memberLLCs but restricting the transferability of interests.This problematic issue is not one solely limited toour state, though our decision must be based solelyon the language and purpose of the Florida LLCAct. Thus, in my view, this Court must apply theplain meaning of the statute unless doing so wouldrender an absurd result. In contrast, the majoritysimply rewrites the statute by ignoring those incon-venient provisions that preclude its result.

Legislative Intent With Regard to the Rights of aJudgment Creditor of a Member

I understand the policy concerns of the FTCand the majority with the inherent problems in thetransferability of both governance and economic in-terests under the LLC Act because the plain lan-guage does not contemplate the impact of a judg-ment creditor seeking to obtain the entire member-ship interest of a single-member LLC and to obtain








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the ability to liquidate the assets of the LLC. TheFlorida statute simply does not create a differentmechanism for obtaining the assets of a single-member LLC as opposed to a multimember LLCand, therefore, there is no room in the statutory lan-guage for different rules.

However, I decline to join in rewriting the stat-ute with inferences and implications, which is theapproach adopted by the majority. This Court gen-erally avoids *88 “judicial invention,” as accom-plished by the majority, when the statute may beconstrued under the plain language of the relevantlegislative act. See Bishop & Kleinberger, supra, ¶1.04[3][d]. In construing a statute, we strive to ef-fectuate the Legislature's intent by considering firstthe statute's plain language. See Kasischke v. State,991 So.2d 803, 807 (Fla.2008) (citing Borden v.East-European Ins. Co., 921 So.2d 587, 595(Fla.2006)). When, as it is here, the statute is clearand unambiguous, we do not “look behind the stat-ute's plain language for legislative intent or resortto rules of statutory construction to ascertain in-tent.” Daniels v. Fla. Dep't of Health, 898 So.2d 61,64 (Fla.2005). This is especially applicable in theinstance of a business entity created solely by statestatute.

If the statute had been written as the majoritysuggests here, I would agree with the result reques-ted by the FTC. However, the underlying conclu-sion lacks statutory support. By reading only self-selected provisions of the statute to support this res-ult, the majority disregards the remainder of theLLC Act, which destroys the isolated premise thatthe charging order provision only applies to mul-timember LLCs and that other statutory restrictionsdo not exist.

Additionally, exceptions not found within thestatute cannot simply be read into the statute, as themajority does by holding that single-member LLCsare an implicit exception to the charging order pro-vision. The remedy provided to the FTC by the fed-eral district court and approved by the majority inthis instance-that a judgment creditor of a single-

member LLC is entitled to receive a surrender andtransfer of the full right, title, and interest of thejudgment debtor and to liquidate the LLC assets-isnot provided for under the plain language of theLLC Act without judicially writing an exception in-to the statute.

Judgment Creditor Can Charge the Debtor Mem-ber's Interest in the LLC With Payment of the Un-

satisfied JudgmentAs a construct of statutory creation, an LLC is

an entity separate and distinct from its members,and thus the liability of the LLC is not directly im-puted to its members. In a similar manner, the liab-ility of individual members is not directly imposedseparately upon the LLC.

Although a member's interest in an LLC is con-sidered to be personal property, see § 608.431, Fla.Stat. (2008), and personal property is generally anasset that may be levied upon by a judgment credit-or under Florida law, see § 56.061, Fla. Stat.(2008), there are statutory restrictions in the LLCcontext. Any rights that a judgment creditor has tothe personal property of a judgment debtor are lim-ited to those provided by the applicable creatingstatute.

The appellants contend that if a judgment cred-itor may seek satisfaction of a member's personaldebt from a non-party LLC, the plain language ofthe LLC Act limits the judgment creditor to a char-ging order. See § 608.433(4), Fla. Stat. (2008). Acharging order is a statutory procedure whereby acreditor of an individual member can satisfy itsclaim from the member's interest in the limited liab-ility company. See Black's Law Dictionary 266 (9thed.2009) (defining term in the context of partner-ship law). It is understandable that the FTC chal-lenges the charging order concept being deemed aremedy for a judgment creditor because, from thecreditor's perspective, a charging order may not beas attractive as just seizing the LLC assets. For ex-ample, a creditor may not receive any satisfactionof the judgment if there are no actual distributionsfrom the LLC to the judgment creditor through the

















debtor-member's economic interest. See ElizabethM. Schurig & Amy P. Jetel, A *89 Shocking Revel-ation! Fact or Fiction? A Charging Order is theExclusive Remedy Against a Partnership Interest,Probate & Property, Nov.-Dec.2003, at 57, 58. Thepreferred creditor's remedy would be a transfer andsurrender of the membership interest that is subjectto the charging order, which is a more permanentremedy and may increase the creditor's chances ofhaving the debt satisfied. See id.

The application of the charging order provi-sion, including its consequences and implications,has been hotly debated in the context of both part-nership and LLC law because of the similarities ofthese entities. The language of the charging orderprovision in the Revised Uniform Limited Partner-ship Act (1976), as amended in 1985, is virtuallyidentical to that used in the Uniform Limited Liab-ility Company Act, as well as in the Florida LLCAct. See §§ 608.433(4), 620.153, Fla. Stat. (2008).The Uniform Limited Partnership Act of 2001 sig-nificantly changed this provision by explicitly al-lowing execution upon a judgment debtor's partner-ship interest. See Schurig & Jetel, supra, at 58.However, the Florida Partnership Act provides thata charging order is the exclusive remedy for judg-ment creditors. See § 620.8504(5), Fla. Stat. (2008)(stating the charging order provision provides the“exclusive remedy by which a judgment creditor ofa partner or partner's transferee may satisfy a judg-ment out of the judgment debtor's transferable in-terest in the partnership”). In the context of partner-ship interests, Florida courts have also determinedthat a charging order is the exclusive remedy forjudgment creditors based on the straightforwardlanguage of the statute. See Givens v. Nat'l Loan In-vestors L.P., 724 So.2d 610, 612 (Fla. 5th DCA1998) (holding that charging order is the exclusiveremedy for a judgment creditor of a partner); Myr-ick v. Second Nat'l Bank of Clearwater, 335 So.2d343, 345 (Fla. 2d DCA 1976) (substantially simil-ar). The Florida LLC Act has neither adopted anexplicit surrender-and-transfer remedy nor does itinclude a provision explicitly stating that the char-

ging order is the exclusive remedy of the judgmentcreditor. The plain language of the charging orderprovision only provides one remedy that a judg-ment creditor may choose to request from a courtand that the court may, in its discretion, choose toimpose. See § 608.433(4), Fla. Stat. (2008).

To support its conclusion that charging ordersare inapplicable to single-member LLCs, the major-ity compares the provision in the partnership statutethat mandates a charging order as an exclusive rem-edy to the non-exclusive provision in the LLC Act.The exclusivity of the remedy is irrelevant to thisanalysis. By relying on an inapplicable statute, themajority ignores the plain language of the LLC Actand the other restrictions of the statute, which uni-versally apply the use of a charging order to judg-ment creditors of all LLCs, regardless of the com-position of the membership. The majority opinionnow eliminates the charging order remedy for mul-timember LLCs under its theory of“nonexclusivity” which is a disaster for those entit-ies.

Plain Meaning of the Statute's Actual LanguageThe charging order provision does not act as a

reverse-asset shield against the creditors of a mem-ber. Instead, the LLC Act implements statutory re-strictions on the transfer and assignment of mem-bership interests in an LLC. These restrictions limitthe mechanisms available to a judgment creditor ofa member of any type of LLC to obtain satisfactionof a judgment against the membership interest. Spe-cifically, section 608.433(4) grants a court of com-petent jurisdiction the discretion*90 to enter a char-ging order against a member's interest in the LLCin favor of the judgment creditor:

608.433. Right of assignee to become mem-ber.-

(1) Unless otherwise provided in the articles oforganization or operating agreement, an assigneeof a limited liability company interest may be-come a member only if all members other thanthe member assigning the interest consent.





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(2) An assignee who has become a memberhas, to the extent assigned, the rights and powers,and is subject to the restrictions and liabilities, ofthe assigning member under the articles of organ-ization, the operating agreement, and this chapter.An assignee who becomes a member also is li-able for the obligations of the assignee's assignorto make and return contributions as provided in s.608.4211 and wrongful distributions as providedin s. 608.428. However, the assignee is not oblig-ated for liabilities which are unknown to the as-signee at the time the assignee became a memberand which could not be ascertained from the art-icles of organization or the operating agreement.

(3) If an assignee of a limited liability companyinterest becomes a member, the assignor is notreleased from liability to the limited liabilitycompany under ss. 608.4211, 608.4228, and608.426.

(4) On application to a court of competent jur-isdiction by any judgment creditor of a member,the court may charge the limited liability com-pany membership interest of the member withpayment of the unsatisfied amount of the judg-ment with interest. To the extent so charged, thejudgment creditor has only the rights of an as-signee of such interest. This chapter does not de-prive any member of the benefit of any exemp-tion....

§ 608.433, Fla. Stat. (2008) (emphasis sup-plied).

The majority asserts that the placement of thecharging order provision within the section titled“Right of assignee to become member” mandatesthat the provision only applies to circumstanceswhere the interest of the member is subject to therights of other LLC members. There is absolutelynothing to support the notion that the Legislature'splacement of the charging order provision as a sub-section of section 608.433, instead of as a separ-ately titled section elsewhere in the statute, was in-tended to unilaterally link its application only to the

multimember context. For instance, the RevisedUniform Limited Liability Company Act, unlike theFlorida statute, places the charging order provisionas a separately titled section within the article thatdiscusses transferable interests and rights of trans-ferees and creditors. See Unif. Ltd. Liab. Co. Act §503 (revised 2006), 6B U.L.A. 498 (2008). Otherstates have also adopted a statutory scheme thatplaces the charging order remedy within a separateprovision specifically dealing with the rights of ajudgment creditor. See Conn. Gen.Stat. § 34-171(2007). Thus, the majority's interpretation wouldagain fail by a mere movement of the charging or-der provision to a separately titled section withinthe Act.

In contrast to the majority, my review of thisprovision begins with the actual language of thestatute. In construing a statute, it is our purpose toeffectuate legislative intent because “legislative in-tent is the polestar that guides a court's statutoryconstruction analysis.” See Polite v. State, 973So.2d 1107, 1111 (Fla.2007) (citing Bautista v.State, 863 So.2d 1180, 1185 (Fla.2003)) (quotingState v. J.M., 824 So.2d 105, 109 (Fla.2002)). Astatute's *91 plain and ordinary meaning must begiven effect unless doing so would lead to an un-reasonable or absurd result. See City of MiamiBeach v. Galbut, 626 So.2d 192, 193 (Fla.1993).Here, the plain language establishes a charging or-der remedy for a judgment creditor that the courtmay impose. This section provides the only mech-anism in the entire statute specifically allocating aremedy for a judgment creditor to attach the mem-bership interest of a judgment debtor. In the mul-timember context, the uncontested, general rule isthat a charging order is the appropriate remedy,even if the language indicates that such a decisionis within the court's discretion. See Myrick, 335So.2d at 344. As the Second District explained:

Rather, the charging order is the essential firststep, and all further proceedings must occur un-der the supervision of the court, which may takeall appropriate actions, including the appointment





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of a receiver if necessary, to protect the interestsof the various parties.

Id. at 345. Without express language to thecontrary, the discretionary nature of this remedy ap-plies with equal force to single-and multimemberLLCs, which the majority erases from the statute.

Nevertheless, the certified question before us isnot the discretionary nature of this remedy butwhether a court should even apply the charging or-der remedy to single-member LLCs. The majorityrephrases the question certified to this Court as notconsidering whether an exception to the chargingorder provision should be implied for single-member LLCs. In doing so, the majority unjustifi-ably alters and recasts the question posited by thefederal appellate court to fit the majority's result.The convoluted alternative presented by the major-ity is premised on a limited application of a char-ging order without express language in the statutoryscheme to support this assertion.

Here, the plain language crafted by the Legis-lature does not limit this remedy to the multimem-ber circumstance, as the majority holds. Further,exceptions not made in a statute generally cannotbe read into the statute, unless the exception iswithin the reason of the law. See Cont'l AssuranceCo. v. Carroll, 485 So.2d 406, 409 (Fla.1986)(“This Court cannot grant an exception to a statutenor can we construe an unambiguous statute differ-ent from its plain meaning.”); Dobbs v. Sea IsleHotel, 56 So.2d 341, 342 (Fla.1952) ( “We appre-hend that had the legislature intended to establishother exceptions it would have done so clearly andunequivocally.... We cannot write into the law anyother exception....”). Thus, without going behindthe plain language of the statute, at first blush, thestatute applies equally to all LLCs, regardless ofmembership composition.

The distinction asserted by the FTC is clearlyinconsistent with the plain language of section608.434 with regard to the proper method for ajudgment creditor to reach the interest of a member

in a LLC in that a complete surrender of the mem-bership interest and the subsequent liquidation ofthe LLC assets are not contemplated by the LLCAct. The majority's interpretation that the chargingorder remedy only applies to multimember LLCscan only be given effect if the plain language of thisprovision renders an absurd result, which it doesnot.

The purpose of creating the charging order pro-vision was never limited to the protection of“innocent” members of an LLC. Moreover, whenamending the LLC Act to permit single-memberLLCs, the Legislature did not also amend the as-signment of interest and charging order provisionsto create different procedures for *92 single-andmultimember LLCs. The appellants argue that thisindicates a manifestation of legislative intent;however, it appears more likely that our Legis-lature, as with many other states, had not yet con-templated the situation before us. Even so, the ap-propriate remedy in this circumstance is not for thisCourt to impose its speculative interpretation, butfor the Legislature to amend the statute to reflect itsspecific intention, if necessary. When interpreting astatute that is unambiguous and clear, this Court de-fers to the Legislature's authority to create a newlimitation and right of action. Here, the actual lan-guage of the statute does not distinguish betweenthe number of members in an LLC. Thus, the char-ging order applies with equal force to both single-member and multimember LLCs, and the assign-ment provision of section 608.433 does not renderan absurd result.

The majority purports to base its analysis onthe plain language of the statute. However, the FTCand a multitude of legal theorists agree that theplain language of the statute does not support thisresult. See e.g., Bishop & Kleinberger, supra, ¶1.04[3][d]; Bishop, supra, 54 S.D. L.Rev. at 202;Ribstein, supra, 30 Del. J. Corp. L. at 221-25; Rut-ledge & Geu, supra, Bus. Entities, Sept.-Oct.2003at 16; Stein, supra, Bus. Entities, Sept.-Oct.2006 at28. All authorities recognize that the sole way to
















achieve the result desired by the FTC and the ma-jority is to ignore the plain language of the statute.No external support exists for the majority's bareassertions.

Rights of an AssigneeThe plain language of section 608.433(4) ap-

plies the charging provision to the judgment credit-or of both a single-member and multimember LLC.The next analytical step is to determine what rightsthat charging order provision grants the judgmentcreditor. To the extent that a membership interest ischarged with a judgment, the plain text of the stat-ute specifically provides that the judgment creditoronly possesses the rights of an assignee of such in-terest. See § 608.433(4), Fla. Stat. (2008) (“To theextent so charged, the judgment creditor has onlythe rights of an assignee of such interest.”).

To determine the rights of an assignee of suchan interest, we look to section 608.432, whichdefines these rights. To divine the intent of the Le-gislature, we construe related statutory provisionstogether, or in pari materia, to achieve a consistentwhole that gives full, harmonious effect to all re-lated statutory provisions. See Heart of Adoptions,Inc. v. J.A., 963 So.2d 189, 199 (Fla.2007) (quotingForsythe v. Longboat Key Beach Erosion ControlDist., 604 So.2d 452, 455 (Fla.1992)). The FTC as-serts that the rights delineated in this section renderan absurd result when applied to single-memberLLCs; however, the FTC ignores that the same ruleapplies even if only a part of a member's interest isneeded to satisfy a debt amount. Further, an assign-ee is entitled solely to an economic interest and isnot entitled to governance rights without the unan-imous approval of the other members or as other-wise provided in the articles of incorporation or theoperating agreement.

The plain reading of this provision does not es-tablish the judgment creditor as an assignee of suchinterest, only that to the extent of the judgmentamount charged to the economic interest, the judg-ment creditor has the same rights as an assignee.Though section 608.433(4) directs that the judg-

ment creditor has only the rights of an assignee ofsuch interest, as provided in section 608.432, it isimportant to clarify that the judgment creditor doesnot become*93 an assignee; the language merelyindicates that the judgment creditor's rights do notexceed those of an assignee.

This clear distinction can be seen when consid-ering the voluntary and involuntary nature of thesedifferent interests-an assignment is generally a vol-untary action made by an assignor, whereas a char-ging order is clearly an involuntary assignment by ajudgment debtor. For that reason, the majority for-mulates a false conclusion that section 608.433(1)provides a foundation for the bare assertion that acharging order is inapplicable in the context of asingle-member LLC. Exploiting this false founda-tion, the majority asserts a result that is unsupport-able when considered in pari materia with the en-tirety of the statutory scheme.

The question before this Court requires articu-lation of a general principle of law that applies toall types of judgments, whether less than, equal to,or greater than the value of a membership interest,and to all types of LLCs. Reading section608.433(4) and 608.432 together, a judgment cred-itor may be assigned a portion of the economic in-terest, depending on the amount of the judgment.This provision contemplates that a charging ordermay not encompass a member's entire membershipinterest if the judgment is for less than the availableeconomic distributions of an LLC. For instance, ifthe LLC membership interest here were worth morethan the $10 million judgment, it would be unne-cessary under this provision to transfer the full eco-nomic interest in the LLC to satisfy the judgment.Further, a member does not lose the economic in-terest and membership status unless all of the eco-nomic interest is charged to the judgment creditor.See § 608.432(2)(c), Fla. Stat. (2008). Thus, if thejudgment were for less than the value of either themembership interest or the assets in the LLC, themembers could transfer a portion of their economicinterest and still retain their membership interest, in



















that they would still hold an economic and gov-ernance interest in the LLC. The FTC would thenonly have the right to receive distributions or alloc-ations of income in an amount corresponding to sat-isfaction of a partial economic interest. Regardlessof the amount of the interest assigned, the judgmentcreditor does not immediately receive a governanceinterest. See § 608.432(1), (2), Fla. Stat. (2008).

In such a circumstance, the result contemplatedby the FTC does not come to pass-the single mem-ber maintains his, her, or its membership rights be-cause a member only ceases to be a member and tohave the power to exercise any governance rightsupon assignment of all of the economic interest ofsuch member. See id. The majority disregards thisfactual possibility and considers only the applica-tion of the statutory scheme in the context of ajudgment that is equal to or greater than the valueof the membership interest. Under the majority's in-terpretation of the statute, a judgment creditor couldforce a single-member LLC to surrender all of itsinterest and liquidate the assets specifically ownedby the LLC, even if the judgment were for less thanthe assets' worth.

Alternative RemediesCurrently, the plain language of the statute

provides additional remedies to the charging orderprovision for judgment creditors seeking satisfac-tion on a judgment that is equal to or greater thanthe economic distributions available under a char-ging order-(1) dissolution of the LLC, (2) an orderof insolvency against the judgment debtor, or (3) anorder conflating the LLC and the member to allowa court to reach the property assets of the LLC.First, upon the issuance of a charging order that ex-ceeds a member's economic *94 interest in an LLCfor satisfaction of the judgment, dissolution may beachieved because the remaining member ceases topossess an economic interest and governance rightsin the LLC following the assignment of all of itsmembership interest. See § 608.432(2)(c), Fla. Stat.(2008) (“Assignment of member's interest”). Thestatutory provision with regard to the assignment of

a member's interest provides, in relevant part:

(2) Unless otherwise provided in the articles oforganization or operating agreement:

....

(c) A member ceases to be a member and tohave the power to exercise any rights or powersof a member upon assignment of all of the mem-bership interest of such member. Unless other-wise provided in the articles of organization oroperating agreement, the pledge of, or granting ofa security interest, lien, or other encumbrance inor against, any or all of the membership interestof a member shall not cause the member to ceaseto be a member or to have the power to exerciseany rights or powers of a member.

Id. (emphasis supplied). This demonstrates aclear and unambiguous distinction between a volun-tary assignment of all the interest and the grantingof an encumbrance against any or all of the mem-bership interest. Because a “member” is defined asan actual or legal person admitted as such underchapter 608, who also has an economic interest inthe LLC, it is the assignment of all of that econom-ic interest that divests the member of his, her, or itsstatus and power. Thus, if the charging order isonly for a part of the economic interest held by thejudgment debtor, the statute does not require thatthe member cease to be a member. See §§608.402(21), 608.432(2)(c), Fla. Stat. (2008). If, onthe other hand, the charging order is to the extentthat it requires a surrender of all of the member'seconomic interest, in that circumstance, the mem-ber ceases to be a member under section608.432(2)(c). In the case of a member-managedLLC, this would leave the LLC without anyone togovern its affairs. However, within the manager-managed LLC context, the manager would remainin a position to direct the LLC and distribute anyprofits according to any governing documents.

This provision need not be limited to single-member LLCs. For example, if the appellants had











entered into a multimember LLC, that entity wouldbe subject to the same statutory construction issuesas a single-member LLC. Once the FTC obtained ajudgment against a member of the multimemberLLC, a charging order would be lodged against thatmember's interest. In that circumstance, thoughthere may be charging orders against separate mem-bership interests, in essence the same divestiture ofthe membership interest would occur if the judg-ment was for all of each member's economic in-terest.

It is important to note, however, if an LLC be-comes a shell or legal fiction with no actual govern-ing members, the LLC shall be dissolved under sec-tion 608.441. The dissolution statute provides:

(1) A limited liability company organized un-der this chapter shall be dissolved, and the lim-ited liability company's affairs shall be con-cluded, upon the first to occur of any of the fol-lowing events:

....

(d) At any time there are no members;however, unless otherwise provided in the art-icles of organization or operating agreement, thelimited liability company is not dissolved and isnot required to be wound up if, within 90 days, orsuch other period as provided in the *95 articlesof organization or operating agreement, after theoccurrence of the event that terminated the con-tinued membership of the last remaining member,the personal or other legal representative of thelast remaining member agrees in writing to con-tinue the limited liability company and agrees tothe admission of the personal representative ofsuch member or its nominee or designee to thelimited liability company as a member, effectiveas of the occurrence of the event that terminatedthe continued membership of the last remainingmember; or

....

(4) Following the occurrence of any of theevents specified in this section which cause thedissolution of the limited liability company, thelimited liability company shall deliver articles ofdissolution to the Department of State for filing.

§ 608.441(1)(d), (4), Fla. Stat. (2008)(emphasis supplied). A dissolved LLC continues itsexistence but does not carry on any business exceptthat which is appropriate to wind up and liquidateits business and affairs under section 608.4431.Once dissolved, the liquidated assets may then bedistributed to a judgment creditor holding a char-ging order. See § 608.444(1), Fla. Stat. (2008).

The judgment creditor may also seek an orderof insolvency against the individual member, inwhich instance that member ceases to be a memberof the single-member LLC, and the member's in-terest becomes part of the bankruptcy estate. InFlorida, the commencement of a bankruptcy pro-ceeding also terminates membership within anLLC. See §§ 608.402(4), 608.4237, Fla. Stat (2008). The decisions advanced by the FTC involvedbankruptcies of the judgment debtor, and the rightsof a judgment creditor in a bankruptcy are substan-tially different than the rights of a judgment credit-or generally. See In re Modanlo, 412 B.R. 715(Bankr.D.Md.2006), aff'd, No. 06-2213, 266Fed.Appx. 272, 2008 WL 481957 (4th Cir.2008); Inre Albright, 291 B.R. 538, 539(Bankr.D.Colo.2003). Upon commencement of abankruptcy proceeding, a bankruptcy estate in-cludes all legal or equitable property interests of thedebtor. An LLC membership interest is the personalproperty of the member. Therefore, when a judg-ment debtor files for bankruptcy, or is subject to anorder of insolvency, the judgment debtor effectivelytransfers any membership interest in an LLC to thebankruptcy estate. In this context, it is reasonablefor the bankruptcy courts to construe the LLC Actto no longer require a charging order because thejudgment debtor has passed the entire membershipinterest to the bankruptcy estate, and the trusteestands in the shoes of the judgment debtor, who is



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now seeking reorganization of its assets. See, e.g.,In re Albright, 291 B.R. at 541. The majority re-fuses to even acknowledge any of these approaches.

This bankruptcy context is distinguishablefrom the general case of a judgment creditor seek-ing to execute upon the assets of an LLC becausethe judgment may not meet or exceed the economicinterest remaining in the LLC. Thus, the Albrightbankruptcy situation should not alter our determina-tion that the plain language of the statute appliesthe charging order provision to both single-andmultimember LLCs. This may be a more complic-ated procedure than to allow a court to simply“shortcut” and rewrite the law and enter a sur-render-and-transfer order of a member's entireright, title, and interest in an LLC as the majorityaccomplishes today. However, it is the method pre-scribed by the statute. Although the procedures cre-ated by the statute may involve multiple steps andlegal proceedings, they are not *96 absurd or irre-concilable with chapter 608 as a whole.

A Charging Order, in and of Itself, Does Not En-title a Judgment Creditor to Seize and Dissolve a

Florida LLCBased on the plain language of the statute and

the construction of chapter 608 in pari materia, Iwould answer the certified question in the negative:A court may not order a judgment debtor to sur-render and transfer outright all “right, title, and in-terest” in the debtor's single-member LLC to satisfyan outstanding judgment. If a judgment creditorwishes to proceed against a single-member LLC, itmay first request a court of competent jurisdictionto impose a charging order on the member's in-terest. If the judgment creditor is concerned that themember is constraining distribution of assets andincomes, the creditor may seek judicial remedies toenforce proper distribution. In addition, if the eco-nomic interest so charged is insufficient to satisfythe judgment, the judgment creditor may movethrough additional proceedings: (1) seek to dissolvethe LLC and to have its assets liquidated and sub-sequently distributed to the judgment creditor; (2)

seek an order of insolvency against the judgmentdebtor, in which case the trustee of the bankruptcyestate will control the assets of the LLC, or (3) re-quest a court to pierce the liability shield to makeavailable the personal assets of the company to sat-isfy the personal debts of its member. This plainreading of chapter 608 may create additional stepsfor judgment creditors and judgment debtors to sat-isfy, as characterized by the federal district court inthis case. However, only the Legislature, as the ar-chitects of this statutorily created entity, has the au-thority to provide a more streamlined surrender ofthese rights, not the judicial branch through select-ive reading and rewriting of the statute. As enacted,the plain meaning of the statute is unambiguous anddoes not require “judicial invention” of exceptionsthat are clearly not provided in the LLC Act. If theLegislature wishes to make either an exception tothe charging order provision for single-memberLLCs or to provide additional remedies to judgmentcreditors, it may do so through an amendment ofchapter 608.

Accordingly, I would answer the certified ques-tion in the negative. Under Florida law, a courtdoes not have the authority to order an LLC mem-ber to surrender and transfer all right, title, and in-terest in an LLC and have LLC assets liquidatedwithout first going through the statutory require-ments created by the Legislature.

POLSTON, J., concurs.

Fla.,2010.Olmstead v. F.T.C.44 So.3d 76, 2010-1 Trade Cases P 77,079, 35 Fla.L. Weekly S357

END OF DOCUMENT







West's F.S. § 608.433 Page 1


Effective: May 31, 2011


Title XXXVI. Business Organizations (Chapters 606-623) Chapter 608. Limited Liability Companies (Refs & Annos)

608.433. Right of assignee to become member (1) Unless otherwise provided in the articles of organization or operating agreement, an assignee of a limited liabil-ity company interest may become a member only if all members other than the member assigning the interest con-sent. (2) An assignee who has become a member has, to the extent assigned, the rights and powers, and is subject to the restrictions and liabilities, of the assigning member under the articles of organization, the operating agreement, and this chapter. An assignee who becomes a member also is liable for the obligations of the assignee's assignor to make and return contributions as provided in s. 608.4211 and wrongful distributions as provided in s. 608.428. However, the assignee is not obligated for liabilities which are unknown to the assignee at the time the assignee became a member and which could not be ascertained from the articles of organization or the operating agreement. (3) If an assignee of a limited liability company interest becomes a member, the assignor is not released from liabil-ity to the limited liability company under s. 608.4211, s. 608.4228, or s. 608.426. (4)(a) On application to a court of competent jurisdiction by any judgment creditor of a member or a member's as-signee, the court may enter a charging order against the limited liability company interest of the judgment debtor or assignee rights for the unsatisfied amount of the judgment plus interest. (b) A charging order constitutes a lien on the judgment debtor's limited liability company interest or assignee rights. Under a charging order, the judgment creditor has only the rights of an assignee of a limited liability company inter-est to receive any distribution or distributions to which the judgment debtor would otherwise have been entitled from the limited liability company, to the extent of the judgment, including interest. (c) This chapter does not deprive any member or member's assignee of the benefit of any exemption law applicable to the member's limited liability company interest or the assignee's rights to distributions from the limited liability company. (5) Except as provided in subsections (6) and (7), a charging order is the sole and exclusive remedy by which a judgment creditor of a member or member's assignee may satisfy a judgment from the judgment debtor's interest in a limited liability company or rights to distributions from the limited liability company. (6) In the case of a limited liability company having only one member, if a judgment creditor of a member or mem-ber's assignee establishes to the satisfaction of a court of competent jurisdiction that distributions under a charging order will not satisfy the judgment within a reasonable time, a charging order is not the sole and exclusive remedy by which the judgment creditor may satisfy the judgment against a judgment debtor who is the sole member of a

113

West's F.S. § 608.433 Page 2


limited liability company or the assignee of the sole member, and upon such showing, the court may order the sale of that interest in the limited liability company pursuant to a foreclosure sale. A judgment creditor may make a showing to the court that distributions under a charging order will not satisfy the judgment within a reasonable time at any time after the entry of the judgment and may do so at the same time that the judgment creditor applies for the entry of a charging order. (7) In the case of a limited liability company having only one member, if the court orders foreclosure sale of a judgment debtor's interest in the limited liability company or of a charging order lien against the sole member of the limited liability company pursuant to subsection (6): (a) The purchaser at the court-ordered foreclosure sale obtains the member's entire limited liability company interest, not merely the rights of an assignee; (b) The purchaser at the sale becomes the member of the limited liability company; and (c) The person whose limited liability company interest is sold pursuant to the foreclosure sale or is the subject of the foreclosed charging order ceases to be a member of the limited liability company. (8) In the case of a limited liability company having more than one member, the remedy of foreclosure on a judg-ment debtor's interest in such limited liability company or against rights to distribution from such limited liability company is not available to a judgment creditor attempting to satisfy the judgment and may not be ordered by a court. (9) Nothing in this section shall limit: (a) The rights of a creditor that has been granted a consensual security interest in a limited liability company interest to pursue the remedies available to such secured creditor under other law applicable to secured creditors; (b) The principles of law and equity which affect fraudulent transfers; (c) The availability of the equitable principles of alter ego, equitable lien, or constructive trust, or other equitable principles not inconsistent with this section; or (d) The continuing jurisdiction of the court to enforce its charging order in a manner consistent with this section. CREDIT(S) Added by Laws 1993, c. 93-284, § 34, eff. Oct. 1, 1993. Amended by Laws 1997, c. 97-102, § 56, eff. July 1, 1997; Laws 1999, c. 99-315, § 1, eff. Oct. 1, 1999; Laws 2011, c. 2011-77, § 1, eff. May 31, 2011.

114

Wasthe

judgmentrecorded

before or afterJuly 1,1987

Before

After

Wasthe

judgmentrecorded

before or afterJuly 11994 AfterBefore

Stilla

lien

Wasthe

judgmentre-recorded prior

to expirationof the10 yrs

NoYes

Wasa

simultaneousaddressaffidavitrecorded

No

Yes

Didthe judgmentcontain thecreditor’saddress

Yes

No

Wasthe

judgmentre-recorded prior

to expirationof the7 yrs

Yes

No

Is acertified

copy of thejudgmentrecorded

Yes

No

Not a lien

Isthe

judgmentmore than

20 years old

Yes

No

Not a lien

Not a lien

Not a lien

Wasa

simultaneousaddressaffidavitrecorded

No

Yes

Stilla

lien

Has itbeen more

than 10 yearssince recording

Yes

No

Wasthe

judgmentrecorded

before or afterOct 1, 1993

After

Before

Didthe judgmentcontain thecreditor’saddress

Yes

No

KNOX’SBASIC JUDGMENT LIEN

PARADIGM

Still a lien Not a lien

WARNING!Any subsequentrecordings ofthe judgmentwill have to berun through theparadigm also.

F.S. 55.081

Hott Interiors, Inc. v. Fostock,721 So. 2d 1236 (Fla 4th DCA 1998)

115

The Basic Judgment Lien Paradigm is an effort to organize the various changes to Florida judgment lien law since 1987. The inspiration was Rohan Kelly’s use of a paradigm to organize and simplify Florida homestead law. Like the homestead paradigm, the sheet is divided into two parts. If the answers to the questions leave you on the left hand side of the page, then the judgment is still a lien. If the answers carry you to the right hand margin at any point, then the judgment is not a lien. The basic paradigm is based on the following assumptions: 1) It deals only with case law as it exists on April 1, 2001, and statutory law as it will exist on July

1, 2001. The user must stay current on statutory and case law changes. 2) It deals solely with Florida judgments. No effort has been made to factor in the various

domestication processes for judgments of other jurisdictions. 3) It assumes that the debtor owns a piece of non exempt property that is subject to levy, i. e. the

basic paradigm does not address issues of homestead, entireties, bankruptcy, etc. 4) The word “After” in the paradigm means “on or after”. Because the recording of a certified

copy is an absolute requirement for a judgment lien, where the words “recorded”, “recording”, or “re-recorded” are used in connection with a judgment, it means a certified copy.

WARNING: Each recording of a judgment must be reviewed independently to determine if a lien has been created. Just because the initial recording of a judgment contains a defect that prevents it from being a lien, does not preclude a later recording that complies with the requirements to create a lien. Below is F.S. 55.10 as it will be amended effective July 1, 2001: 55.10 (1) A judgment, order, or decree becomes a lien on real property in any county when a certified copy of it is recorded in the official records or judgment lien record of the county, whichever is maintained at the time of recordation, provided that the judgment, order or decree contains the address of the person who has a lien as a result of such judgment order or decree or a separate affidavit is recorded simultaneously with the judgment, order, or decree stating the address of the person who has a lien as a result of such judgment, order, or decree. A judgment, order, or decree does not become a lien on real property unless the address of the person who has a lien as a result of such judgment, order, or decree is contained in the judgment, order, or decree or an affidavit with such address is recorded simultaneously with the judgment, order, or decree. If the certified copy was first recorded in a county in accordance with this subsection between July 1, 1987 and June 30, 1994, then the judgment, order, or decree shall be a lien in that county for an initial period of 7 years from the date of the recording. If the certified copy is first recorded in accordance with this subsection on or after July 1, 1994, then the judgment, order, or decree shall be a lien in that county for an initial period of 10 years from the date of the recording. (2) The lien provide for in subsection (1) or an extension of that lien as provided for by this subsection may be extended for an additional period of 10 years, subject to the limitations in subsection (3), by rerecording a certified copy of the judgment, order, or decree prior to the expiration of the lien or the expiration of the extended lien and by simultaneously recording an affidavit with the current address of the person who has a lien as a result of the judgment, order, or decree. The extension shall be effective from the date the certified copy of the judgment, order, or decree is rerecorded. The lien or extended lien will not be extended unless the affidavit with the current address is simultaneously recorded. (3) In no event shall the lien upon real property created by this section be extended beyond the period provided for in s. 55.081, or beyond the point at which the lien is satisfied, whichever occurs first.

(4) This act shall apply to all judgments, orders, and decrees of record which constitute a lien on real property; except that any judgment, order, or decree recorded prior to July 1, 1987 shall remain a lien on real property until the period provided for in s. 55.081 expires or until the lien is satisfied, whichever occurs first.

Copyright ©2001 Attorneys’ Title Insurance Fund, Inc.

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Effective: December 31, 1999

United States Code Currentness

Title 26. Internal Revenue Code (Refs & Annos) Subtitle F. Procedure and Administration (Refs & Annos)

Chapter 66. Limitations (Refs & Annos) Subchapter A. Limitations on Assessment and Collection (Refs & Annos)

§ 6502. Collection after assessment (a) Length of period.--Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun--

(1) within 10 years after the assessment of the tax, or

(2) if--

(A) there is an installment agreement between the taxpayer and the Secretary, prior to the date which is 90 days after the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer at the time the installment agreement was entered into; or

(B) there is a release of levy under section 6343 after such 10-year period, prior to the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer before such release.

If a timely proceeding in court for the collection of a tax is commenced, the period during which such tax may be collected by levy shall be extended and shall not expire until the liability for the tax (or a judgment against the tax-payer arising from such liability) is satisfied or becomes unenforceable. (b) Date when levy is considered made.--The date on which a levy on property or rights to property is made shall be the date on which the notice of seizure provided in section 6335(a) is given. CREDIT(S) (Aug. 16, 1954, c. 736, 68A Stat. 806; Nov. 2, 1966, Pub.L. 89-719, Title I, § 113(b), 80 Stat. 1146; Oct. 4, 1976, Pub.L. 94-455, Title XIX, § 1906(b)(13)(A), 90 Stat. 1834; Nov. 10, 1988, Pub.L. 100-647, Title I, § 1015(u)(1), 102 Stat. 3573; Dec. 19, 1989, Pub.L. 101-239, Title VII, § 7811(k)(2), 103 Stat. 2412; Nov. 5, 1990, Pub.L. 101-508, Title XI, § 11317(a), 104 Stat. 1388-458; July 22, 1998, Pub.L. 105-206, Title III, § 3461(a), 112 Stat. 764.)

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Effective: July 22, 1998



Chapter 64. Collection Subchapter C. Lien for Taxes

Part II. Liens (Refs & Annos) § 6323. Validity and priority against certain persons

(a) Purchasers, holders of security interests, mechanic's lienors, and judgment lien creditors.--The lien im-posed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Sec-retary. (b) Protection for certain interests even though notice filed.--Even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid--

(1) Securities.--With respect to a security (as defined in subsection (h)(4))--

(A) as against a purchaser of such security who at the time of purchase did not have actual notice or knowledge of the existence of such lien; and

(B) as against a holder of a security interest in such security who, at the time such interest came into existence, did not have actual notice or knowledge of the existence of such lien.

(2) Motor vehicles.--With respect to a motor vehicle (as defined in subsection (h)(3)), as against a purchaser of such motor vehicle, if--

(A) at the time of the purchase such purchaser did not have actual notice or knowledge of the existence of such lien, and

(B) before the purchaser obtains such notice or knowledge, he has acquired possession of such motor vehicle and has not thereafter relinquished possession of such motor vehicle to the seller or his agent.

(3) Personal property purchased at retail.--With respect to tangible personal property purchased at retail, as against a purchaser in the ordinary course of the seller's trade or business, unless at the time of such purchase such purchaser intends such purchase to (or knows such purchase will) hinder, evade, or defeat the collection of any tax under this title.

(4) Personal property purchased in casual sale.--With respect to household goods, personal effects, or other

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tangible personal property described in section 6334(a) purchased (not for resale) in a casual sale for less than $1,000, as against the purchaser, but only if such purchaser does not have actual notice or knowledge (A) of the existence of such lien, or (B) that this sale is one of a series of sales.

(5) Personal property subject to possessory lien.--With respect to tangible personal property subject to a lien under local law securing the reasonable price of the repair or improvement of such property, as against a holder of such a lien, if such holder is, and has been, continuously in possession of such property from the time such lien arose.

(6) Real property tax and special assessment liens.--With respect to real property, as against a holder of a lien upon such property, if such lien is entitled under local law to priority over security interests in such property which are prior in time, and such lien secures payment of--

(A) a tax of general application levied by any taxing authority based upon the value of such property;

(B) a special assessment imposed directly upon such property by any taxing authority, if such assessment is im-posed for the purpose of defraying the cost of any public improvement; or

(C) charges for utilities or public services furnished to such property by the United States, a State or political subdivision thereof, or an instrumentality of any one or more of the foregoing.

(7) Residential property subject to a mechanic's lien for certain repairs and improvements.--With respect to real property subject to a lien for repair or improvement of a personal residence (containing not more than four dwelling units) occupied by the owner of such residence, as against a mechanic's lienor, but only if the contract price on the contract with the owner is not more than $5,000.

(8) Attorneys' liens.--With respect to a judgment or other amount in settlement of a claim or of a cause of action, as against an attorney who, under local law, holds a lien upon or a contract enforceable against such judgment or amount, to the extent of his reasonable compensation for obtaining such judgment or procuring such settlement, except that this paragraph shall not apply to any judgment or amount in settlement of a claim or of a cause of ac-tion against the United States to the extent that the United States offsets such judgment or amount against any li-ability of the taxpayer to the United States.

(9) Certain insurance contracts.--With respect to a life insurance, endowment, or annuity contract, as against the organization which is the insurer under such contract, at any time--

(A) before such organization had actual notice or knowledge of the existence of such lien;

(B) after such organization had such notice or knowledge, with respect to advances required to be made auto-matically to maintain such contract in force under an agreement entered into before such organization had such notice or knowledge; or

(C) after satisfaction of a levy pursuant to section 6332(b), unless and until the Secretary delivers to such or-ganization a notice, executed after the date of such satisfaction, of the existence of such lien.

(10) Deposit-secured loans.--With respect to a savings deposit, share, or other account, with an institution de-scribed in section 581 or 591, to the extent of any loan made by such institution without actual notice or knowl-edge of the existence of such lien, as against such institution, if such loan is secured by such account.

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(c) Protection for certain commercial transactions financing agreements, etc.--

(1) In general.--To the extent provided in this subsection, even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid with respect to a security interest which came into existence after tax lien filing but which--

(A) is in qualified property covered by the terms of a written agreement entered into before tax lien filing and constituting--

(i) a commercial transactions financing agreement,

(ii) a real property construction or improvement financing agreement, or

(iii) an obligatory disbursement agreement, and

(B) is protected under local law against a judgment lien arising, as of the time of tax lien filing, out of an unse-cured obligation.

(2) Commercial transactions financing agreement.--For purposes of this subsection--

(A) Definition.--The term “commercial transactions financing agreement” means an agreement (entered into by a person in the course of his trade or business)--

(i) to make loans to the taxpayer to be secured by commercial financing security acquired by the taxpayer in the ordinary course of his trade or business, or

(ii) to purchase commercial financing security (other than inventory) acquired by the taxpayer in the ordinary course of his trade or business;

but such an agreement shall be treated as coming within the term only to the extent that such loan or pur-chase is made before the 46th day after the date of tax lien filing or (if earlier) before the lender or pur-chaser had actual notice or knowledge of such tax lien filing.

(B) Limitation on qualified property.--The term “qualified property”, when used with respect to a commercial transactions financing agreement, includes only commercial financing security acquired by the taxpayer before the 46th day after the date of tax lien filing.

(C) Commercial financing security defined.--The term “commercial financing security” means (i) paper of a kind ordinarily arising in commercial transactions, (ii) accounts receivable, (iii) mortgages on real property, and (iv) inventory.

(D) Purchaser treated as acquiring security interest.--A person who satisfies subparagraph (A) by reason of clause (ii) thereof shall be treated as having acquired a security interest in commercial financing security.

(3) Real property construction or improvement financing agreement.--For purposes of this subsection--

(A) Definition.--The term “real property construction or improvement financing agreement” means an agree-ment to make cash disbursements to finance--

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(i) the construction or improvement of real property,

(ii) a contract to construct or improve real property, or

(iii) the raising or harvesting of a farm crop or the raising of livestock or other animals.

For purposes of clause (iii), the furnishing of goods and services shall be treated as the disbursement of cash.

(B) Limitation on qualified property.--The term “qualified property”, when used with respect to a real prop-erty construction or improvement financing agreement, includes only--

(i) in the case of subparagraph (A)(i), the real property with respect to which the construction or improvement has been or is to be made,

(ii) in the case of subparagraph (A)(ii), the proceeds of the contract described therein, and

(iii) in the case of subparagraph (A)(iii), property subject to the lien imposed by section 6321 at the time of tax lien filing and the crop or the livestock or other animals referred to in subparagraph (A)(iii).

(4) Obligatory disbursement agreement.--For purposes of this subsection--

(A) Definition.--The term “obligatory disbursement agreement” means an agreement (entered into by a person in the course of his trade or business) to make disbursements, but such an agreement shall be treated as coming within the term only to the extent of disbursements which are required to be made by reason of the intervention of the rights of a person other than the taxpayer.

(B) Limitation on qualified property.--The term “qualified property”, when used with respect to an obligatory disbursement agreement, means property subject to the lien imposed by section 6321 at the time of tax lien fil-ing and (to the extent that the acquisition is directly traceable to the disbursements referred to in subparagraph (A)) property acquired by the taxpayer after tax lien filing.

(C) Special rules for surety agreements.--Where the obligatory disbursement agreement is an agreement en-suring the performance of a contract between the taxpayer and another person--

(i) the term “qualified property” shall be treated as also including the proceeds of the contract the perform-ance of which was ensured, and

(ii) if the contract the performance of which was ensured was a contract to construct or improve real property, to produce goods, or to furnish services, the term “qualified property” shall be treated as also including any tangible personal property used by the taxpayer in the performance of such ensured contract.

(d) 45-day period for making disbursements.--Even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid with respect to a security interest which came into existence after tax lien filing by reason of disbursements made before the 46th day after the date of tax lien filing, or (if earlier) before the person making such disbursements had actual notice or knowledge of tax lien filing, but only if such security interest--

(1) is in property (A) subject, at the time of tax lien filing, to the lien imposed by section 6321, and (B) covered by

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the terms of a written agreement entered into before tax lien filing, and

(2) is protected under local law against a judgment lien arising, as of the time of tax lien filing, out of an unse-cured obligation.

(e) Priority of interest and expenses.--If the lien imposed by section 6321 is not valid as against a lien or security interest, the priority of such lien or security interest shall extend to--

(1) any interest or carrying charges upon the obligation secured,

(2) the reasonable charges and expenses of an indenture trustee or agent holding the security interest for the bene-fit of the holder of the security interest,

(3) the reasonable expenses, including reasonable compensation for attorneys, actually incurred in collecting or enforcing the obligation secured,

(4) the reasonable costs of insuring, preserving, or repairing the property to which the lien or security interest re-lates,

(5) the reasonable costs of insuring payment of the obligation secured, and

(6) amounts paid to satisfy any lien on the property to which the lien or security interest relates, but only if the lien so satisfied is entitled to priority over the lien imposed by section 6321,

to the extent that, under local law, any such item has the same priority as the lien or security interest to which it re-lates. (f) Place for filing notice; form.--

(1) Place for filing.--The notice referred to in subsection (a) shall be filed--

(A) Under State laws.--

(i) Real property.--In the case of real property, in one office within the State (or the county, or other gov-ernmental subdivision), as designated by the laws of such State, in which the property subject to the lien is situated; and

(ii) Personal property.--In the case of personal property, whether tangible or intangible, in one office within the State (or the county, or other governmental subdivision), as designated by the laws of such State, in which the property subject to the lien is situated, except that State law merely conforming to or reenacting Federal law establishing a national filing system does not constitute a second office for filing as designated by the laws of such State; or

(B) With clerk of district court.--In the office of the clerk of the United States district court for the judicial district in which the property subject to the lien is situated, whenever the State has not by law designated one office which meets the requirements of subparagraph (A); or

(C) With Recorder of Deeds of the District of Columbia.--In the office of the Recorder of Deeds of the Dis-trict of Columbia, if the property subject to the lien is situated in the District of Columbia.

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(2) Situs of property subject to lien.--For purposes of paragraphs (1) and (4), property shall be deemed to be situated--

(A) Real property.--In the case of real property, at its physical location; or

(B) Personal property.--In the case of personal property, whether tangible or intangible, at the residence of the taxpayer at the time the notice of lien is filed.

For purposes of paragraph (2)(B), the residence of a corporation or partnership shall be deemed to be the place at which the principal executive office of the business is located, and the residence of a taxpayer whose resi-dence is without the United States shall be deemed to be in the District of Columbia.

(3) Form.--The form and content of the notice referred to in subsection (a) shall be prescribed by the Secretary. Such notice shall be valid notwithstanding any other provision of law regarding the form or content of a notice of lien.

(4) Indexing required with respect to certain real property.--In the case of real property, if--

(A) under the laws of the State in which the real property is located, a deed is not valid as against a purchaser of the property who (at the time of purchase) does not have actual notice or knowledge of the existence of such deed unless the fact of filing of such deed has been entered and recorded in a public index at the place of filing in such a manner that a reasonable inspection of the index will reveal the existence of the deed, and

(B) there is maintained (at the applicable office under paragraph (1)) an adequate system for the public indexing of Federal tax liens,

then the notice of lien referred to in subsection (a) shall not be treated as meeting the filing requirements under paragraph (1) unless the fact of filing is entered and recorded in the index referred to in subparagraph (B) in such a manner that a reasonable inspection of the index will reveal the existence of the lien.

(5) National filing systems.--The filing of a notice of lien shall be governed solely by this title and shall not be subject to any other Federal law establishing a place or places for the filing of liens or encumbrances under a na-tional filing system.

(g) Refiling of notice.--For purposes of this section--

(1) General rule.--Unless notice of lien is refiled in the manner prescribed in paragraph (2) during the required re-filing period, such notice of lien shall be treated as filed on the date on which it is filed (in accordance with sub-section (f)) after the expiration of such refiling period.

(2) Place for filing.--A notice of lien refiled during the required refiling period shall be effective only--

(A) if--

(i) such notice of lien is refiled in the office in which the prior notice of lien was filed, and

(ii) in the case of real property, the fact of refiling is entered and recorded in an index to the extent required by subsection (f)(4); and

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(B) in any case in which, 90 days or more prior to the date of a refiling of notice of lien under subparagraph (A), the Secretary received written information (in the manner prescribed in regulations issued by the Secretary) concerning a change in the taxpayer's residence, if a notice of such lien is also filed in accordance with subsec-tion (f) in the State in which such residence is located.

(3) Required refiling period.--In the case of any notice of lien, the term “required refiling period” means--

(A) the one-year period ending 30 days after the expiration of 10 years after the date of the assessment of the tax, and

(B) the one-year period ending with the expiration of 10 years after the close of the preceding required refiling period for such notice of lien.

(4) Transitional rule.--Notwithstanding paragraph (3), if the assessment of the tax was made before January 1, 1962, the first required refiling period shall be the calendar year 1967.

(h) Definitions.--For purposes of this section and section 6324--

(1) Security interest.--The term “security interest” means any interest in property acquired by contract for the purpose of securing payment or performance of an obligation or indemnifying against loss or liability. A security interest exists at any time (A) if, at such time, the property is in existence and the interest has become protected under local law against a subsequent judgment lien arising out of an unsecured obligation, and (B) to the extent that, at such time, the holder has parted with money or money's worth.

(2) Mechanic's lienor.--The term “mechanic's lienor” means any person who under local law has a lien on real property (or on the proceeds of a contract relating to real property) for services, labor, or materials furnished in connection with the construction or improvement of such property. For purposes of the preceding sentence, a per-son has a lien on the earliest date such lien becomes valid under local law against subsequent purchasers without actual notice, but not before he begins to furnish the services, labor, or materials.

(3) Motor vehicle.--The term “motor vehicle” means a self-propelled vehicle which is registered for highway use under the laws of any State or foreign country.

(4) Security.--The term “security” means any bond, debenture, note, or certificate or other evidence of indebted-ness, issued by a corporation or a government or political subdivision thereof, with interest coupons or in regis-tered form, share of stock, voting trust certificate, or any certificate of interest or participation in, certificate of de-posit or receipt for, temporary or interim certificate for, or warrant or right to subscribe to or purchase, any of the foregoing; negotiable instrument; or money.

(5) Tax lien filing.--The term “tax lien filing” means the filing of notice (referred to in subsection (a)) of the lien imposed by section 6321.

(6) Purchaser.--The term “purchaser” means a person who, for adequate and full consideration in money or money's worth, acquires an interest (other than a lien or security interest) in property which is valid under local law against subsequent purchasers without actual notice. In applying the preceding sentence for purposes of sub-section (a) of this section, and for purposes of section 6324--

(A) a lease of property,

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(B) a written executory contract to purchase or lease property,

(C) an option to purchase or lease property or any interest therein, or

(D) an option to renew or extend a lease of property,

which is not a lien or security interest shall be treated as an interest in property.

(i) Special rules.--

(1) Actual notice or knowledge.--For purposes of this subchapter, an organization shall be deemed for purposes of a particular transaction to have actual notice or knowledge of any fact from the time such fact is brought to the attention of the individual conducting such transaction, and in any event from the time such fact would have been brought to such individual's attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conduct-ing the transaction and there is reasonable compliance with the routine. Due diligence does not require an individ-ual acting for the organization to communicate information unless such communication is part of his regular du-ties or unless he has reason to know of the transaction and that the transaction would be materially affected by the information.

(2) Subrogation.--Where, under local law, one person is subrogated to the rights of another with respect to a lien or interest, such person shall be subrogated to such rights for purposes of any lien imposed by section 6321 or 6324.

(3) Forfeitures.--For purposes of this subchapter, a forfeiture under local law of property seized by a law en-forcement agency of a State, county, or other local governmental subdivision shall relate back to the time of sei-zure, except that this paragraph shall not apply to the extent that under local law the holder of an intervening claim or interest would have priority over the interest of the State, county, or other local governmental subdivision in the property.

(4) Cost-of-living adjustment.--In the case of notices of liens imposed by section 6321 which are filed in any calendar year after 1998, each of the dollar amounts under paragraph (4) or (7) of subsection (b) shall be increased by an amount equal to.--

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substi-tuting “calendar year 1996” for “calendar year 1992” in subparagraph (B) thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.

(j) Withdrawal of notice in certain circumstances.--

(1) In general.--The Secretary may withdraw a notice of a lien filed under this section and this chapter shall be applied as if the withdrawn notice had not been filed, if the Secretary determines that--

(A) the filing of such notice was premature or otherwise not in accordance with administrative procedures of the

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Secretary,

(B) the taxpayer has entered into an agreement under section 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise,

(C) the withdrawal of such notice will facilitate the collection of the tax liability, or

(D) with the consent of the taxpayer or the National Taxpayer Advocate, the withdrawal of such notice would be in the best interests of the taxpayer (as determined by the National Taxpayer Advocate) and the United States.

Any such withdrawal shall be made by filing notice at the same office as the withdrawn notice. A copy of such notice of withdrawal shall be provided to the taxpayer.

(2) Notice to credit agencies, etc.--Upon written request by the taxpayer with respect to whom a notice of a lien was withdrawn under paragraph (1), the Secretary shall promptly make reasonable efforts to notify credit report-ing agencies, and any financial institution or creditor whose name and address is specified in such request, of the withdrawal of such notice. Any such request shall be in such form as the Secretary may prescribe.

CREDIT(S) (Aug. 16, 1954, c. 736, 68A Stat. 779; Feb. 26, 1964, Pub.L. 88-272, Title II, § 236(a), (c)(1), 78 Stat. 127, 128; July 5, 1966, Pub.L. 89-493, § 17(a), 80 Stat. 266; Nov. 2, 1966, Pub.L. 89-719, Title I, § 101(a), 80 Stat. 1125; Oct. 4, 1976, Pub.L. 94-455, Title XII, § 1202(h)(2), Title XIX, § 1906(b)(13)(A), Title XX, § 2008(c), 90 Stat. 1688, 1834, 1892; Nov. 6, 1978, Pub.L. 95-600, Title VII, § 702(q)(1), (2), 92 Stat. 2937, 2938; Oct. 22, 1986, Pub.L. 99-514, Title XV, § 1569(a), 100 Stat. 2764; Nov. 10, 1988, Pub.L. 100-647, Title I, § 1015(s)(1), 102 Stat. 3573; Nov. 5, 1990, Pub.L. 101-508, Title XI, §§ 11317(b), 11704(a)(26), 104 Stat. 1388-458, 1388-519; July 30, 1996, Pub.L. 104-168, Title V, § 501(a), 110 Stat. 1460; July 22, 1998, Pub.L. 105-206, Title I, §§ 1102(d)(1)(A), Title III, 3435(a), (b), 112 Stat. 704, 760, 761.)

126

Supreme Court of the United StatesUNITED STATES, Petitioner,

v.ESTATE OF Francis J. ROMANI et al.

No. 96-1613.Argued Jan. 12, 1998.

Decided April 29, 1998.

The administrator of a judgment debtor's in-solvent estate petitioned for authorization to trans-fer real estate to a judgment creditor in lieu of exe-cution and the federal government opposed the peti-tion. The Pennsylvania Court of Common Pleas,Cambria County, No. 11-94-14,Thomas A. Swope,Jr., J., granted the petition. Government appealed.The Superior Court, No. 1358 Pittsburgh 1994, af-firmed, and the Pennsylvania Supreme Court, No.59 W.D. Appeal Docket 1995, 547 Pa. 41, 688 A.2d703, affirmed. Certiorari was granted. The SupremeCourt, Justice Stevens, held that the federal Tax Li-en Act, rather than the federal priority statute, un-der which a claim of United States Government“shall be paid first” when debtor's estate cannot payall of its debts, is the governing statute when theGovernment claims a preference in the insolvent es-tate of a delinquent taxpayer and, therefore, an un-recorded federal tax lien did not have priority overa judgment lien that had been perfected underPennsylvania law.

Judgment affirmed.

Justice Scalia filed an opinion concurring inpart and concurring in the judgment.

West Headnotes

[1] Internal Revenue 220 4860

220 Internal Revenue220XXV Collection

220XXV(B) Levy or Distraint

220k4860 k. Sale. Most Cited Cases

Taxation 371 2947

371 Taxation371III Property Taxes

371III(L) Sale of Land for Nonpayment ofTax

371k2945 Notice of Sale371k2947 k. Necessity. Most Cited

Cases(Formerly 371k658(2))Under Pennsylvania law, once judgment has

been recorded, judgment creditor has same right asmortgagee to notice of tax sale. 42 Pa.C.S.A. §4303(a).



228k775 Property or Interest Affected andExtent of Lien

228k778 k. Situation of Property. MostCited Cases

Under Pennsylvania law, recording of judg-ment in one county does not create lien on propertylocated elsewhere. 42 Pa.C.S.A. § 4303(a).


220 Internal Revenue220XXIII Liens

220k4781 k. Priority in General. Most CitedCases

Judgment creditor perfected its lien on debtor'sreal property in Pennsylvania before debtor's deathand before Government served notice of its tax li-ens, for purposes of determining whether judgmentlien had priority over federal tax lien. 42 Pa.C.S.A.§ 4303(a).

[4] Internal Revenue 220 4768.1

220 Internal Revenue

118 S.Ct. 1478 Page 1523 U.S. 517, 1998-49 I.R.B. 6, 118 S.Ct. 1478, 140 L.Ed.2d 710, 81 A.F.T.R.2d 98-1729, 66 USLW 4295, 98-1USTC P 50,368, 98-1 USTC P 60,311, 1998-2 C.B. 697, 98 Cal. Daily Op. Serv. 3175, 98 Daily Journal D.A.R.4379, 11 Fla. L. Weekly Fed. S 497(Cite as: 523 U.S. 517, 118 S.Ct. 1478)









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220XXIII Liens220k4768 Creation

220k4768.1 k. In General. Most CitedCases

Unrecorded federal tax liens were not valid asagainst preexisting judgment lien created by earlierrecording of judgment under Pennsylvania law. 26U.S.C.A. § 6323(a); 42 Pa.C.S.A. § 4303(a).

[5] United States 393 76(4)

393 United States393IV Debts Due the United States; Priority

393k76 Priority of United States as Creditor393k76(4) k. Nature of Competing

Claims; Perfection and Priority in Time. Most CitedCases

Federal priority statute, under which a claim ofUnited States Government “shall be paid first”when debtor's estate cannot pay all of its debts,does not always accord federal government priorityover judgment creditors; Government's priority asagainst specific, perfected security interests is notsettled. 31 U.S.C.A. § 3713(a).



220k4781 k. Priority in General. Most CitedCases

Tax Lien Act, rather than federal priority stat-ute, under which a claim of United States Govern-ment “shall be paid first” when debtor's estate can-not pay all of its debts, is governing statute whenGovernment claims preference in insolvent estateof delinquent taxpayer and, therefore, unrecordedfederal tax lien did not have priority over judgmentlien that had been perfected under Pennsylvanialaw. 26 U.S.C.A. § 6323(a); 31 U.S.C.A. § 3713(a);42 Pa.C.S.A. § 4303(a).

**1479 *517 Syllabus FN*

FN* The syllabus constitutes no part of theopinion of the Court but has been prepared

by the Reporter of Decisions for the con-venience of the reader. See United States v.Detroit Timber & Lumber Co., 200 U.S.321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499.

After a third party perfected a $400,000 judg-ment lien under Pennsylvania law on Francis Ro-mani's Cambria County real property, the InternalRevenue Service filed notices of tax liens on theproperty, totaling some $490,000. When Mr. Ro-mani died, his entire estate consisted of real estateworth only $53,001. Because the property was en-cumbered by both the judgment lien and the federaltax liens, the estate's administrator sought thecounty court's permission to transfer the property tothe judgment creditor in lieu of execution. Thecourt authorized the conveyance, overruling theFederal Government's objection that the transfer vi-olated the federal priority statute, 31 U.S.C. §3713(a), which provides that a Government claim“shall be paid first” when a decedent's estate cannotpay all of its debts. The Superior Court ofPennsylvania affirmed, as did the Pennsylvania Su-preme Court. The latter court determined that therewas a “plain inconsistency” between § 3713 and theFederal Tax Lien Act of 1966, which provides thata federal tax lien “shall not be valid” against judg-ment lien creditors until a prescribed notice hasbeen given, 26 U.S.C. § 6323(a). The court con-cluded that the 1966 Act effectively limited § 3713's operation as to tax debts, relying on United Statesv. Kimbell Foods, Inc., 440 U.S. 715, 738, 99 S.Ct.1448, 1463-1464, 59 L.Ed.2d 711, which noted thatthe 1966 Act modified the Government's preferredposition in the tax area and recognized the priorityof many state claims over federal tax liens.

Held: Section 3713(a) does not require that afederal tax claim be given preference over a judg-ment creditor's perfected lien on real property. Pp.1482-1488.

(a) There is no dispute about the meaning ofeither the Pennsylvania lien statute or the Tax LienAct. It is undisputed that, under the state law, thejudgment creditor acquired a valid lien on Romani's








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real property before his death and before the Gov-ernment**1480 served notice of its tax liens. Thatlien was therefore perfected in the sense that thereis nothing more to be done to have a choate lien.E.g., United States v. City of New Britain, 347 U.S.81, 84, 74 S.Ct. 367, 369-370, 98 L.Ed. 520. And areview of the Tax Lien Act's history reveals thateach time Congress has revisited the federal tax li-en, it has ameliorated pre-existing harsh con-sequences for the delinquent taxpayer's other se-cured creditors. Here, all agree that by *518 §6323(a)'s terms, the Government's liens are not val-id as against the earlier recorded judgment lien. Pp.1482-1483.

(b) Because this Court has never definitivelyresolved the basic question whether the federal pri-ority statute gives the United States a preferenceonly over other unsecured creditors, or whether italso applies to the antecedent perfected liens of se-cured creditors, see, e.g., United States v. Vermont,377 U.S. 351, 358, n. 8, 84 S.Ct. 1267, 1271, n. 8,12 L.Ed.2d 370, it does not seem appropriate toview the issue here as whether the Tax Lien Act hasimplicitly amended or repealed § 3713(a). Instead,the proper inquiry is how best to harmonize the twostatutes' impact on the Government's power to col-lect delinquent taxes. Pp. 1483-1486.

(c) Nothing in the federal priority statute's textor its long history justifies the conclusion that it au-thorizes the equivalent of a secret lien as a substi-tute for the expressly authorized tax lien that theTax Lien Act declares “shall not be valid” in a caseof this kind. On several occasions, this Court hasconcluded that a specific policy embodied in a laterfederal statute should control interpretation of theolder federal priority statute, despite that law's liter-al, unconditional text and the fact that it had notbeen expressly amended by the later Act. See, e.g.,Cook County Nat. Bank v. United States, 107 U.S.445, 448-451, 2 S.Ct. 561, 564-567, 27 L.Ed. 537.United States v. Emory, 314 U.S. 423, 429-433, 62S.Ct. 317, 320-323, 86 L.Ed. 315, and United Statesv. Key, 397 U.S. 322, 324-333, 90 S.Ct. 1049,

1051-1056, 25 L.Ed.2d 340, distinguished. So toohere, there are sound reasons for treating the TaxLien Act as the governing statute. That Act is thelater statute, the more specific statute, and its provi-sions are comprehensive, reflecting an obvious at-tempt to accommodate the strong policy objectionsto the enforcement of secret liens. It representsCongress' detailed judgment as to when the Gov-ernment's claims for unpaid taxes should yield tomany different sorts of interests (including, e.g.,judgment liens, mechanic's liens, and attorney's li-ens) in many different types of property (including,e.g., real property, securities, and motor vehicles).See § 6323. Indeed, given this Court's unambiguousdetermination that the federal interest in the collec-tion of taxes is paramount to its interest in enfor-cing other claims, see Kimbell Foods, Inc., 440U.S., at 733-735, 99 S.Ct., at 1461-1462, it wouldbe anomalous to conclude that Congress intendedthe priority statute to impose greater burdens on thecitizen than those specifically crafted for tax collec-tion purposes. Pp. 1486-1488.

547 Pa. 41, 688 A.2d 703, affirmed.

STEVENS, J., delivered the opinion of theCourt, in which REHNQUIST, C. J., andO'CONNOR, KENNEDY, SOUTER, THOMAS,GINSBURG, and BREYER, JJ., joined. SCALIA,J., filed an opinion concurring in part and concur-ring in the judgment, post, p. 1488.*519 Kent L. Jones, Washington, DC, for petition-er.

Patrick F. McCartan, Cleveland, OH, for respond-ent.

For U.S. Supreme Court briefs, see:1997 WL453659 (Pet.Brief)1997 WL 615770(Resp.Brief)1997 WL 695463 (Reply.Brief)

Justice STEVENS delivered the opinion of theCourt.

The federal priority statute, 31 U.S.C. §3713(a), provides that a claim of the United StatesGovernment “shall be paid first” when a decedent's









































estate cannot pay all of its debts.FN1 The questionpresented is whether **1481 that statute requiresthat a federal tax claim be given preference over ajudgment creditor's perfected lien on real propertyeven though such a preference is not authorized bythe Federal Tax Lien Act of 1966, 26 U.S.C. § 6321et seq.

FN1. “ § 3713. Priority of Governmentclaims

“(a)(1) A claim of the United StatesGovernment shall be paid first when-

“(A) a person indebted to the Govern-ment is insolvent and-

“(i) the debtor without enough propertyto pay all debts makes a voluntary as-signment of property;

“(ii) property of the debtor, if absent, isattached; or

“(iii) an act of bankruptcy is committed;or

“(B) the estate of a deceased debtor, inthe custody of the executor or adminis-trator, is not enough to pay all debts ofthe debtor.

“(2) This subsection does not apply to acase under title 11.” 31 U.S.C. § 3713.

The present statute is the direct descend-ent of § 3466 of the Revised Statutes,which had been codified in 31 U.S.C. §191.

IOn January 25, 1985, the Court of Common

Pleas of Cambria County, Pennsylvania, entered ajudgment for $400,000 in favor of Romani Indus-tries, Inc., and against Francis *520 J. Romani. Thejudgment was recorded in the clerk's office andtherefore, as a matter of Pennsylvania law, it be-

came a lien on all of the defendant's real property inCambria County. Thereafter, the Internal RevenueService filed a series of notices of tax liens on Mr.Romani's property. The claims for unpaid taxes, in-terest, and penalties described in those noticesamounted to approximately $490,000.

When Mr. Romani died on January 13, 1992,his entire estate consisted of real estate worth only$53,001. Because the property was encumbered byboth the judgment lien and the federal tax liens, theestate's administrator sought permission from theCourt of Common Pleas to transfer the property tothe judgment creditor, Romani Industries, in lieu ofexecution. The Federal Government acknowledgedthat its tax liens were not valid as against the earlierjudgment lien; but, giving new meaning to Frank-lin's aphorism that “in this world nothing can besaid to be certain, except death and taxes,” FN2 itopposed the transfer on the ground that the prioritystatute (§ 3713) gave it the right to “be paid first.”

FN2. Letter of Nov. 13, 1789, to Jean Bap-tiste Le Roy, in 10 The Writings of Ben-jamin Franklin 69 (A. Smyth ed.1907). Asis often the case, the original meaning ofthe aphorism is clarified somewhat by itscontext: “Our new Constitution is now es-tablished, and has an appearance thatpromises permanency; but in this worldnothing can be said to be certain, exceptdeath and taxes.” Ibid.

The Court of Common Pleas overruled theGovernment's objection and authorized the convey-ance. The Superior Court of Pennsylvania affirmed,and the Supreme Court of the State also affirmed.547 Pa. 41, 688 A.2d 703 (1997). That court firstdetermined that there was a “plain inconsistency”between § 3713, which appears to give the UnitedStates “absolute priority” over all competingclaims, and the Tax Lien Act of 1966, whichprovides that the federal tax lien “shall not be val-id” against judgment lien creditors until a pre-scribed notice has been given. *521Id., at 45, 688A.2d, at 705. FN3 Then, relying on the reasoning in













**1482United States v. Kimbell Foods, Inc., 440U.S. 715, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979),which had noted that the Tax Lien Act of 1966modified the Federal Government's preferred posi-tion in the tax area and recognized the priority ofmany state claims over federal tax liens, id., at 738,99 S.Ct., at 1463-1464, the court concluded that the1966 Act had the effect of limiting the operation of§ 3713 as to tax debts.

FN3. The Federal Tax Lien Act of 1966,26 U.S.C. § 6321 et seq., provides in per-tinent part:

“§ 6321. Lien for taxes

“If any person liable to pay any tax neg-lects or refuses to pay the same after de-mand, the amount (including any in-terest, additional amount, addition to tax,or assessable penalty, together with anycosts that may accrue in addition thereto)shall be a lien in favor of the UnitedStates upon all property and rights toproperty, whether real or personal, be-longing to such person.”

“ § 6323. Validity and priority againstcertain persons

“(a) Purchasers, holders of security in-terests, mechanic's lienors, and judgmentlien creditors

“The lien imposed by section 6321 shallnot be valid as against any purchaser,holder of a security interest, mechanic'slienor, or judgment lien creditor until no-tice thereof which meets the require-ments of subsection (f) has been filed bythe Secretary.”

Section 6323(f)(1)(A)(i) provides thatthe required notice “shall be filed[,] ...[i]n the case of real property, in one of-fice within the State (or the county, orother governmental subdivision), as des-

ignated by the laws of such State, inwhich the property subject to the lien issituated.” If the State has not designatedsuch an office, notice is to be filed withthe clerk of the federal district court “forthe judicial district in which the propertysubject to the lien is situated.” §6323(f)(1)(B).

The decision of the Pennsylvania SupremeCourt conflicts with two federal Court of Appealsdecisions, Kentucky ex rel. Luckett v. United States,383 F.2d 13 (C.A.6 1967), and Nesbitt v. UnitedStates, 622 F.2d 433 (C.A.9 1980). Moreover, in itspetition for certiorari, the Government submittedthat the decision is inconsistent with our holding inThelusson v. Smith, 2 Wheat. 396, 4 L.Ed. 271(1817), and with the admonition that “ ‘[o]nly theplainest inconsistency would warrant our finding animplied exception to the operation of so clear a*522 command as that of [31 U.S.C. § 3713],’ ”United States v. Key, 397 U.S. 322, 324-325, 90S.Ct. 1049, 1051, 25 L.Ed.2d 340 (1970) (quotingUnited States v. Emory, 314 U.S. 423, 433, 62 S.Ct.317, 322-323, 86 L.Ed. 315 (1941)). We grantedcertiorari, 521 U.S. 1117, 117 S.Ct. 2506, 138L.Ed.2d 1010 (1997), to resolve the conflict and toconsider whether Thelusson, Key, or any of our oth-er cases construing the priority statute requires adifferent result.

IIThere is no dispute about the meaning of two

of the three statutes that control the disposition ofthis case. It is therefore appropriate to comment onthe Pennsylvania lien statute and the Federal TaxLien Act before considering the applicability of thepriority statute to property encumbered by an ante-cedent judgment creditor's lien.

[1][2][3] The Pennsylvania statute expresslyprovides that a judgment shall create a lien againstreal property when it is recorded in the countywhere the property is located. 42 Pa. Cons.Stat. §4303(a) (1995). After the judgment has been recor-ded, the judgment creditor has the same right to no-















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tice of a tax sale as a mortgagee.FN4 The recordingin one county does not, of course, create a lien onproperty located elsewhere. In this case, however, itis undisputed that the judgment creditor acquired avalid lien on the real property in *523 CambriaCounty before the judgment debtor's death and be-fore the Government served notice of its tax liens.Romani Industries' lien was “perfected in the sensethat there is nothing more to be done to have a cho-ate lien-when the identity of the lienor, the propertysubject to the lien, and the amount of the lien areestablished.” United States v. City of New Britain,347 U.S. 81, 84, 74 S.Ct. 367, 369, 98 L.Ed. 520(1954); see also Illinois ex rel. Gordon v. Camp-bell, 329 U.S. 362, 375, 67 S.Ct. 340, 347-348, 91L.Ed. 348 (1946).

FN4. The Pennsylvania Supreme Court haselaborated:

“We must now decide whether judgmentcreditors are also entitled to personal orgeneral notice by the [County TaxClaim] Bureau as a matter of due processof law.

“Judgment liens are a product of centur-ies of statutes which authorize a judg-ment creditor to seize and sell the landof debtors at a judicial sale to satisfytheir debts out of the proceeds of thesale. The judgment represents a bindingjudicial determination of the rights andduties between the parties, and estab-lishes their debtor-creditor relationshipfor all the world to notice when the judg-ment is recorded in a Prothonotary's Of-fice. When entered of record, the judg-ment also operates as a lien upon all realproperty of the debtor in that county.” Inre Upset Sale, Tax Claim Bureau ofBerks County, 505 Pa. 327, 334, 479A.2d 940, 943 (1984).

[4] The Federal Government's right to a lien ona delinquent taxpayer's property has been a part of

our law at least since 1865.FN5 Originally the lienapplied, without exception, to all property of thetaxpayer immediately upon the neglect or failure topay the tax upon demand.FN6 An unrecorded taxlien **1483 against a delinquent taxpayer's prop-erty was valid even against a bona fide purchaserwho had no notice of the lien. United States v.Snyder, 149 U.S. 210, 213-215, 13 S.Ct. 846,847-848, 37 L.Ed. 705 (1893). In 1913, Congressamended the statute to provide that the federal*524tax lien “shall not be valid as against any mort-gagee, purchaser, or judgment creditor” until noticehas been filed with the clerk of the federal districtcourt or with the appropriate local authorities in thedistrict or county in which the property subject tothe lien is located. Act of Mar. 4, 1913, 37 Stat.1016. In 1939, Congress broadened the protectionagainst unfiled tax liens to include pledgees and theholders of certain securities. Act of June 29, 1939,§ 401, 53 Stat. 882-883. The Federal Tax Lien Actof 1966 again broadened that protection to encom-pass a variety of additional secured transactions,and also included detailed provisions protectingcertain secured interests even when a notice of thefederal lien previously has been filed. 80 Stat.1125-1132, as amended, 26 U.S.C. § 6323.

FN5. The post-Civil War ReconstructionCongress imposed a tax of three cents perpound on “the producer, owner, or holder”of cotton and a lien on the cotton until thetax was paid. Act of July 13, 1866, § 1, 14Stat. 98. The same statute also imposed ageneral lien on all of a delinquent taxpay-er's property, see § 9, 14 Stat. 107, whichwas nearly identical to a provision in therevenue Act of Mar. 3, 1865, 13 Stat.470-471, quoted in n. 6, infra.

FN6. The 1865 revenue Act contained thefollowing sentence: “And if any person,bank, association, company, or corpora-tion, liable to pay any duty, shall neglect orrefuse to pay the same after demand, theamount shall be a lien in favor of the





















United States from the time it was due un-til paid, with the interests, penalties, andcosts that may accrue in addition thereto,upon all property and rights to property;and the collector, after demand, may levyor by warrant may authorize a deputy col-lector to levy upon all property and rightsto property belonging to such person, bank,association, company, or corporation, or onwhich the said lien exists, for the paymentof the sum due as aforesaid, with interestand penalty for non-payment, and also ofsuch further sum as shall be sufficient forthe fees, costs, and expenses of such levy.”13 Stat. 470-471. This provision, asamended, became § 3186 of the RevisedStatutes.

In sum, each time Congress revisited the feder-al tax lien, it ameliorated its original harsh impacton other secured creditors of the delinquent taxpay-er. FN7 In this case, it is agreed that by the terms of§ 6323(a), the Federal Government's liens are notvalid as against the lien created by the earlier re-cording of Romani Industries' judgment.

FN7. For a more thorough description ofthe early history and of Congress' reactionsto this Court's tax lien decisions, seeKennedy, The Relative Priority of the Fed-eral Government: The Pernicious Career ofthe Inchoate and General Lien, 63 YaleL.J. 905, 919-922 (1954) (hereinafterKennedy).

IIIThe text of the priority statute on which the

Government places its entire reliance is virtuallyunchanged since its enactment in 1797.FN8 As wepointed out in *525United States v. Moore, 423U.S. 77, 96 S.Ct. 310, 46 L.Ed.2d 219 (1975), notonly were there earlier versions of the statute,FN9

but “its roots reach back even further into the Eng-lish common law,” id., at 80, 96 S.Ct., at 313. Thesovereign prerogative that was exercised by theEnglish Crown and by many of the States as “an in-

herent incident of sovereignty,”**1484 ibid., ap-plied only to unsecured claims. As Justice Brandeisnoted in Marshall v. New York, 254 U.S. 380, 384,41 S.Ct. 143, 145, 65 L.Ed. 315 (1920), the com-mon-law priority “[did] not obtain over a specificlien created by the debtor before the sovereign un-dertakes to enforce its right.” Moreover, the statuteitself does not create a lien in favor of the UnitedStates.FN10 Given this background, respondent ar-gues that the statute should be read as *526 givingthe United States a preference over other unsecuredcreditors but not over secured creditors. FN11

FN8. The Act of Mar. 3, 1797, § 5, 1 Stat.515, provided:

“ And be it further enacted, That whereany revenue officer, or other personhereafter becoming indebted to theUnited States, by bond or otherwise,shall become insolvent, or where the es-tate of any deceased debtor, in the handsof executors or administrators, shall beinsufficient to pay all the debts due fromthe deceased, the debt due to the UnitedStates shall be first satisfied; and the pri-ority hereby established shall be deemedto extend, as well to cases in which adebtor, not having sufficient property topay all his debts, shall make a voluntaryassignment thereof, or in which the es-tate and effects of an absconding, con-cealed, or absent debtor, shall be at-tached by process of law, as to cases inwhich an act of legal bankruptcy shall becommitted.” Compare § 3466 of the Re-vised Statutes, with the present statutequoted in n. 1, supra.

It has long been settled that the federalpriority covers the Government's claimsfor unpaid taxes. Price v. United States,269 U.S. 492, 499-502, 46 S.Ct. 180,180-182, 70 L.Ed. 373 (1926); Mas-sachusetts v. United States, 333 U.S.611, 625-626, and n. 24, 68 S.Ct. 747,























755-756, and n. 24, 92 L.Ed. 968 (1948).

FN9. “The earliest priority statute was en-acted in the Act of July 31, 1789, 1 Stat.29, which dealt with bonds posted by im-porters in lieu of payment of duties for re-lease of imported goods. It provided thatthe ‘debt due to the United States' for suchduties shall be discharged first ‘in all casesof insolvency, or where any estate in thehands of executors or administrators shallbe insufficient to pay all the debts duefrom the deceased....’ § 21, 1 Stat. 42. A1792 enactment broadened the Act's cover-age by providing that the language ‘casesof insolvency’ should be taken to includecases in which a debtor makes a voluntaryassignment for the benefit of creditors, andthe other situations that § 3466, 31 U.S.C.§ 191, now covers. 1 Stat. 263.” UnitedStates v. Moore, 423 U.S., at 81, 96 S.Ct.,at 313.

FN10. “In construing the statutes on thissubject, it has been stated by the court, ongreat deliberation, that the priority towhich the United States are entitled, doesnot partake of the character of a lien on theproperty of public debtors. This distinctionis always to be recollected.” United Statesv. Hooe, 3 Cranch 73, 90, 2 L.Ed. 370(1805).

FN11. Although this argument was notpresented to the state courts, respondentmay defend the judgment on a ground notpreviously raised. Heckler v. Campbell,461 U.S. 458, 468-469, n. 12, 103 S.Ct.1952, 1958, n. 12, 76 L.Ed.2d 66 (1983).We will rarely consider such an argument,however. Ibid.; see also Matsushita Elec.Industrial Co. v. Epstein, 516 U.S. 367,379, n. 5, 116 S.Ct. 873, 880, n. 5, 134L.Ed.2d 6 (1996).

There are dicta in our earlier cases that support

this contention as well as dicta that tend to refute it.Perhaps the strongest support is found in JusticeStory's statement:

“What then is the nature of the priority, thuslimited and established in favour of the UnitedStates? Is it a right, which supersedes and over-rules the assignment of the debtor, as to anyproperty which the United States may afterwardselect to take in execution, so as to prevent suchproperty from passing by virtue of such assign-ment to the assignees? Or, is it a mere right ofprior payment, out of the general funds of thedebtor, in the hands of the assignees? We are ofopinion that it clearly falls, within the latter de-scription. The language employed is that whichnaturally would be employed to express such anintent; and it must be strained from its ordinaryimport, to speak any other.” Conard v. AtlanticIns. Co. of N.Y., 1 Pet. 386, 439, 7 L.Ed. 189(1828).

Justice Story's opinion that the language em-ployed in the statute “must be strained” to give itany other meaning is entitled to special respect be-cause he was more familiar with 18th-century usagethan judges who view the statute from a20th-century perspective.

[5] We cannot, however, ignore the Court'searlier judgment in Thelusson v. Smith, 2 Wheat., at426, 4 L.Ed. 271, or the more recent dicta in UnitedStates v. Key, 397 U.S., at 324-325, 90 S.Ct., at1051-1052. In Thelusson, the Court held that thepriority statute gave the United States a preferenceover the claim of a judgment creditor who had ageneral lien on the debtor's real property. *527 TheCourt's brief opinion FN12 is subject to the inter-pretation that the statutory priority always accordsthe Government a preference over judgment credit-ors. For two reasons, we do not accept that readingof the opinion.

FN12. The relevant portion of the opinionreads, in full, as follows:


































“These [statutory] expressions are asgeneral as any which could have beenused, and exclude all debts due to indi-viduals, whatever may be their dignity....The law makes no exception in favour ofprior judgment creditors; and no reasonhas been, or we think can be, shown towarrant this court in making one.

“ ... The United States are to be first sat-isfied; but then it must be out of thedebtor's estate. If, therefore, before theright of preference has accrued to theUnited States, the debtor has made abona fide conveyance of his estate to athird person, or has mortgaged the sameto secure a debt; or if his property hasbeen seized under a fi. fa., the property isdevested out of the debtor, and cannot bemade liable to the United States. A judg-ment gives to the judgment creditor a li-en on the debtor's lands, and a prefer-ence over all subsequent judgment cred-itors. But the act of congress defeats thispreference in favour of the UnitedStates, in the cases specified in the 65thsection of the act of 1799.” Thelusson v.Smith, 2 Wheat. 396, 425-426, 4 L.Ed.271 (1817).

In the later Conard case, Justice Storyapologized for Thelusson: “The reasonsfor that opinion are not, owing to acci-dental circumstances, as fully given asthey are usually given in this Court.”Conard v. Atlantic Ins. Co. of N.Y., 1Pet. 386, 442, 7 L.Ed. 189 (1828).

First, as a factual matter, in 1817 when the casewas decided, there was no procedure for recordinga judgment and thereby creating a choate lien on aspecific parcel of real estate. **1485 See generally2 L. Dembitz, A Treatise on Land Titles in theUnited States § 127, pp. 948-952 (1895). Notwith-standing the judgment, a bona fide purchaser couldhave acquired the debtor's property free from any

claims of the judgment creditor. See Semple v.Burd, 7 Serg. & Rawle 286, 291 (Pa.1821) (“Theprevailing object of the Legislature, has uniformlybeen, to support the security of a judgment creditor,by confirming his lien, except when it interfereswith the circulation of property by embarrassing afair purchaser”). That is not the case with respect to*528 Romani Industries' choate lien on the propertyin Cambria County.

Second, and of greater importance, in his opin-ion for the Court in the Conard case, which wasjoined by Justice Washington, the author ofThelusson,FN13 Justice Story explained why thatholding was fully consistent with his interpretationof the text of the priority statute:

FN13. Justice Washington's opinion forthis Court in Thelusson affirmed, and wasessentially the same as, his own opiniondelivered in the Circuit Court as a CircuitJustice. 2 Wheat., at 426, 4 L.Ed. 271, n. h.

“The real ground of the decision, was, that thejudgment creditor had never perfected his title,by any execution and levy on the Sedgely estate;that he had acquired no title to the proceeds as hisproperty, and that if the proceeds were to bedeemed general funds of the debtor, the priorityof the United States to payment had attachedagainst all other creditors; and that a mere poten-tial lien on land, did not carry a legal title to theproceeds of a sale, made under an adverse execu-tion. This is the manner in which this case hasbeen understood, by the Judges who concurred inthe decision; and it is obvious, that it establishedno such proposition, as that a specific and perfec-ted lien, can be displaced by the mere priority ofthe United States; since that priority is not of it-self equivalent to a lien.” Conard, 1 Pet., at 444,7 L.Ed. 189.FN14

FN14. Relying on this and several othercases, in 1857 the Attorney General of theUnited States issued an opinion concludingthat Thelusson “has been distinctly over-























ruled” and that the priority of the UnitedStates under this statute “will not reachback over any lien, whether it be general orspecific.” 9 Op. Atty. Gen. 28, 29. See alsoKennedy 908-911 (advancing this same in-terpretation of the early priority Act de-cisions).

The Government also relies upon dicta fromour opinion in United States v. Key, 397 U.S., at324-325, 90 S.Ct., at 1051-1052, which quotedfrom our earlier opinion in United States v. Emory,314 U.S., at 433, 62 S.Ct., at 322-323: “Only theplainest inconsistency would warrant our *529finding an implied exception to the operation of soclear a command as that of [§ 3713].” Because bothKey and Emory were cases in which the competingclaims were unsecured, the statutory command wasperfectly clear even under Justice Story's construc-tion of the statute. The statements made in that con-text, of course, shed no light on the clarity of thecommand when the United States relies on the stat-ute as a basis for claiming a preference over a se-cured creditor. Indeed, the Key opinion itself madethis specific point: “This case does not raise thequestion, never decided by this Court, whether §3466 grants the Government priority over the priorspecific liens of secured creditors. See UnitedStates v. Gilbert Associates, Inc., 345 U.S. 361,365-366, 73 S.Ct. 701 [704-705], 97 L.Ed. 1071(1953).” 397 U.S., at 332, n. 11, 90 S.Ct., at 1056,n. 11.

The Key opinion is only one of many in whichthe Court has noted that despite the age of the stat-ute, and despite the fact that it has been the subjectof a great deal of litigation, the question whether ithas any application to antecedent perfected lienshas never been answered definitively. See UnitedStates v. Vermont, 377 U.S. 351, 358, n. 8, 84 S.Ct.1267, 1271, n. 8, 12 L.Ed.2d 370 (1964) (citingcases). In his dissent in the United States v. GilbertAssociates, Inc., 345 U.S. 361, 73 S.Ct. 701, 97L.Ed.2d 1071 (1953), Justice Frankfurter referred tothe Court's reluctance to decide the issue “not only

today but for almost a century and a half.” 345U.S., at 367, 73 S.Ct., at 705.

The Government's priority as against specific,perfected security interests is, if possible, even lesssettled with regard to real property. The Court hassometimes concluded that a competing creditor whohas not “divested” the debtor of “either title or pos-session”**1486 has only a “general, unperfected li-en” that is defeated by the Government's priority.E.g., id., at 366, 73 S.Ct., at 704-705. Assuming thevalidity of this “title or possession” test for decid-ing whether a lien on personal property is suffi-ciently choate for purposes of the priority statute (aquestion of federal law, see Illinois ex rel. Gordonv. Campbell, 329 U.S., at 371, 67 S.Ct., at345-346), we are not aware of any decisions sinceThelusson applying that theory to claims for realproperty,*530 or of any reason to require a lienor ormortgagee to acquire possession in order to perfectan interest in real estate.

Given the fact that this basic question of inter-pretation remains unresolved, it does not seem ap-propriate to view the issue in this case as whetherthe Tax Lien Act of 1966 has implicitly amended orrepealed the priority statute. Instead, we think theproper inquiry is how best to harmonize the impactof the two statutes on the Government's power tocollect delinquent taxes.

IV[6] In his dissent from a particularly harsh ap-

plication of the priority statute, Justice Jackson em-phasized the importance of considering other relev-ant federal policies. Joined by three other Justices,he wrote:

“This decision announces an unnecessarilyruthless interpretation of a statute that at its bestis an arbitrary one. The statute by which the Fed-eral Government gives its own claims against aninsolvent priority over claims in favor of a stategovernment must be applied by courts, not be-cause federal claims are more meritorious orequitable, but only because that Government has






































more power. But the priority statute is an asser-tion of federal supremacy as against any contrarystate policy. It is not a limitation on the FederalGovernment itself, not an assertion that the prior-ity policy shall prevail over all other federalpolicies. Its generalities should not lightly beconstrued to frustrate a specific policy embodiedin a later federal statute.” Massachusetts v.United States, 333 U.S. 611, 635, 68 S.Ct. 747,760-761, 92 L.Ed. 968 (1948).

On several prior occasions the Court had fol-lowed this approach and concluded that a specificpolicy embodied in a later federal statute shouldcontrol our construction of the priority statute, eventhough it had not been expressly *531 amended.Thus, in Cook County Nat. Bank v. United States,107 U.S. 445, 448-451, 2 S.Ct. 561, 564-567, 27L.Ed. 537 (1883), the Court concluded that the pri-ority statute did not apply to federal claims againstnational banks because the National Bank Act com-prehensively regulated banks' obligations and thedistribution of insolvent banks' assets. And inUnited States v. Guaranty Trust Co. of N.Y., 280U.S. 478, 485, 50 S.Ct. 212, 214, 74 L.Ed. 556(1930), we determined that the Transportation Actof 1920 had effectively superseded the priority stat-ute with respect to federal claims against the rail-roads arising under that Act.

The bankruptcy law provides an additionalcontext in which another federal statute was giveneffect despite the priority statute's literal, uncondi-tional text. The early federal bankruptcy statuteshad accorded to “ ‘all debts due to the UnitedStates, and all taxes and assessments under the lawsthereof’ ” a preference that was “coextensive” withthat established by the priority statute. GuaranteeTitle & Trust Co. v. Title Guaranty & Surety Co.,224 U.S. 152, 158, 32 S.Ct. 457, 459, 56 L.Ed. 706(1912) (quoting the Bankruptcy Act of 1867, Rev.Stat. § 5101). As such, the priority Act and thebankruptcy laws “were to be regarded as in parimateria, and both were unqualified; ... as neithercontained any qualification, none could be interpol-

ated.” 224 U.S., at 158, 32 S.Ct., at 457. The Bank-ruptcy Act of 1898, however, subordinated the pri-ority of the Federal Government's claims (exceptfor taxes due) to certain other kinds of debts. ThisCourt resolved the tension between the new bank-ruptcy provisions and the priority statute by apply-ing the former and thus treating the Governmentlike any other general creditor. Id., at 158-160, 32S.Ct., at 459-460; Davis v. Pringle, 268 U.S. 315,317-319, 45 S.Ct. 549, 550, 69 L.Ed. 974 (1925).FN15

FN15. Congress amended the priority stat-ute in 1978 to make it expressly inapplic-able to Title 11 bankruptcy cases. Pub.L.95-598, § 322(b), 92 Stat. 2679, codified in31 U.S.C. § 3713(a)(2). The differencesbetween the bankruptcy laws and the prior-ity statute have been the subject of criti-cism: “[As] a result of the continuing dis-crepancies between the bankruptcy and in-solvency rules, some creditors have had adistinct incentive to throw into bankruptcya debtor whose case might have beenhandled, with less expense and less burdenon the federal courts, in another form ofproceeding.” Plumb, The Federal Priorityin Insolvency: Proposals for Reform, 70Mich. L.Rev. 3, 8-9 (1971) (hereinafterPlumb).

**1487 *532 There are sound reasons for treat-ing the Tax Lien Act of 1966 as the governing stat-ute when the Government is claiming a preferencein the insolvent estate of a delinquent taxpayer. Aswas the case with the National Bank Act, the Trans-portation Act of 1920, and the Bankruptcy Act of1898, the Tax Lien Act is the later statute, the morespecific statute, and its provisions are comprehens-ive, reflecting an obvious attempt to accommodatethe strong policy objections to the enforcement ofsecret liens. It represents Congress' detailed judg-ment as to when the Government's claims for un-paid taxes should yield to many different sorts ofinterests (including, for instance, judgment liens,



























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mechanic's liens, and attorney's liens) in many dif-ferent types of property (including, for example,real property, securities, and motor vehicles). See26 U.S.C. § 6323. Indeed, given our unambiguousdetermination that the federal interest in the collec-tion of taxes is paramount to its interest in enfor-cing other claims, see United States v. KimbellFoods, Inc., 440 U.S., at 733-735, 99 S.Ct., at1461-1462, it would be anomalous to conclude thatCongress intended the priority statute to imposegreater burdens on the citizen than those specific-ally crafted for tax collection purposes.

Even before the 1966 amendments to the TaxLien Act, this Court assumed that the more recentand specific provisions of that Act would applywere they to conflict with the older priority statute.In the Gilbert Associates case, which concerned therelative priority of the Federal Government and aNew Hampshire town to funds of an insolvent tax-payer, the Court first considered whether the towncould qualify as a “judgment creditor” entitled topreference under the Tax Lien Act. 345 U.S., at363-364, 73 S.Ct., at 703-704. Only after decidingthat question in the negative did the Court concludethat *533 the United States obtained preference byoperation of the priority statute. Id., at 365-366, 73S.Ct., at 704-705. The Government would now por-tray Gilbert Associates as a deviation from two oth-er relatively recent opinions in which the Courtheld that the priority statute was not trumped byprovisions of other statutes: United States v. Emory,314 U.S., at 429-433, 62 S.Ct., at 320-323 (the Na-tional Housing Act), and United States v. Key, 397U.S., at 324-333, 90 S.Ct., at 1051-1056 (Chapter Xof the Bankruptcy Act). In each of those cases,however, there was no “plain inconsistency”between the commands of the priority statute andthe other federal Act, nor was there reason to be-lieve that application of the priority statute wouldfrustrate Congress' intent. Id., at 329, 90 S.Ct., at1053-1054. The same cannot be said in the presentsuit.

The Government emphasizes that when Con-

gress amended the Tax Lien Act in 1966, it de-clined to enact the American Bar Association's pro-posal to modify the federal priority statute, andCongress again failed to enact a similar proposal in1970. Both proposals would have expresslyprovided that the Government's priority in insolv-ency does not displace valid liens and security in-terests, and therefore would have harmonized thepriority statute with the Tax Lien Act. See Hearingson H.R. 11256 and 11290 before the House Com-mittee on Ways and Means, 89th Cong., 2d Sess.,197 (1966) (hereinafter Hearings); S. 2197, 92dCong., 1st Sess. (1971). But both proposals alsowould have significantly changed the priority stat-ute in many other respects to follow the priorityscheme created by the bankruptcy laws. See Hear-ings, at 85, 198; Plumb 10, n. 53, 33-37. The earlierproposal may have failed because its wide-rangingsubject matter was beyond the House Ways andMeans Committee's jurisdiction. Id., at 8. The fail-ure of the 1970 proposal in the Senate JudiciaryCommittee-explained by no reports or hearings-might merely reflect disagreement with the broadchanges to the priority statute, or an **1488 as-sumption that the proposal was not needed because,as Justice Story had believed, the priority statutedoes not *534 apply to prior perfected security in-terests, or any number of other views. Thus, theCommittees' failures to report the proposals to theentire Congress do not necessarily indicate that anylegislator thought that the priority statute should su-persede the Tax Lien Act in the adjudication of fed-eral tax claims. They provide no support for the hy-pothesis that both Houses of Congress silently en-dorsed that position.

The actual measures taken by Congress providea superior insight regarding its intent. As we havenoted, the 1966 amendments to the Tax Lien Actbespeak a strong condemnation of secret liens,which unfairly defeat the expectations of innocentcreditors and frustrate “the needs of our citizens forcertainty and convenience in the legal rules govern-ing their commercial dealings.” 112 Cong. Rec.22227 (1966) (remarks of Rep. Byrnes); cf. United

























States v. Speers, 382 U.S. 266, 275, 86 S.Ct. 411,416, 15 L.Ed.2d 314 (1965) (referring to the“general policy against secret liens”). These policyconcerns shed light on how Congress would wantthe conflicting statutory provisions to be harmon-ized:

“Liens may be a dry-as-dust part of the law, butthey are not without significance in an industrialand commercial community where constructionand credit are thought to have importance. Onedoes not readily impute to Congress the intentionthat many common commercial liens should becongenitally unstable.” E. Brown, The SupremeCourt, 1957 Term-Foreword: Process of Law, 72Harv. L.Rev. 77, 87 (1958) (footnote omitted).

In sum, nothing in the text or the long historyof interpreting the federal priority statute justifiesthe conclusion that it authorizes the equivalent of asecret lien as a substitute for the expressly author-ized tax lien that Congress has said “shall not bevalid” in a case of this kind.

The judgment of the Pennsylvania SupremeCourt is affirmed.

It is so ordered.

*535 Justice SCALIA, concurring in part and con-curring in the judgment.

I join the opinion of the Court except that por-tion which takes seriously, and thus encourages inthe future, an argument that should be laughed outof court. The Government contended that 31 U.S.C.§ 3713(a) must have priority over the Federal TaxLien Act of 1966, because in 1966 and again in1970 Congress “failed to enact” a proposal put for-ward by the American Bar Association that wouldhave subordinated § 3713(a) to the Tax Lien Act,citing hearings before the House Committee onWays and Means, and a bill proposed in, but notpassed by, the Senate. See Brief for United States25-27, and n. 10 (citing American Bar Association,Final Report of the Committee on Federal Liens 7,122-124 (1959), contained in Hearings on H.R.

11256 and 11290 before the House Committee onWays and Means, 89th Cong., 2d Sess., 85, 199(1966); S. 2197, 92d Cong., 1st Sess. (1971)). TheCourt responds that these rejected proposals“provide no support for the hypothesis that bothHouses of Congress silently endorsed” the suprem-acy of § 3713, ante, at 1488, because those propos-als contained other provisions as well, and mighthave been rejected because of those other provi-sions, or because Congress thought the existing lawalready made § 3713 supreme. This implies that, ifthe proposals had not contained those additionalfeatures, or if Members of Congress (or some partof them) had somehow made clear in the course ofrejecting them that they wanted the existing su-premacy of the Tax Lien Act to subsist, the rejec-tion would “provide support” for the Government'scase.

That is not so, for several reasons. First andmost obviously, Congress cannot express its will bya failure to legislate. The act of refusing to enact alaw (if that can be called an act) has utterly no legaleffect, and thus has utterly no place in a serious dis-cussion of the law. The Constitution sets forth theonly manner in which the Members of Congresshave the power to impose their will upon the coun-try: *536 by a bill that passes both Houses and iseither signed by the President or repassed by a su-permajority after his veto. **1489 Art. I, § 7.Everything else the Members of Congress do iseither prelude or internal organization. Congresscan no more express its will by not legislating thanan individual Member can express his will by notvoting.

Second, even if Congress could express its willby not legislating, the will of a later Congress that alaw enacted by an earlier Congress should bear aparticular meaning is of no effect whatever. TheConstitution puts Congress in the business of writ-ing new laws, not interpreting old ones. “[L]ater en-acted laws ... do not declare the meaning of earlierlaw.” Almendarez-Torres v. United States, 523 U.S.224, 237, 118 S.Ct. 1219, 1227, 140 L.Ed.2d 350















(1998); id., at 269-270, 118 S.Ct., at 1243(SCALIA, J., dissenting) (“This later amendmentcan of course not cause [the statute] to have meant,at the time of petitioner's conviction, something dif-ferent from what it then said”). If the enacted intentof a later Congress cannot change the meaning ofan earlier statute, then it should go without sayingthat the later unenacted intent cannot possibly doso. It should go without saying, and it should gowithout arguing as well.

I have in the past been critical of the Court'susing the so-called legislative history of an enact-ment (hearings, committee reports, and floor de-bates) to determine its meaning. See, e.g., Conroyv. Aniskoff, 507 U.S. 511, 518-528, 113 S.Ct. 1562,1566-1572, 123 L.Ed.2d 229 (1993) (SCALIA, J.,concurring in judgment); United States v.Thompson/Center Arms Co., 504 U.S. 505, 521,112 S.Ct. 2102, 2111-2112, 119 L.Ed.2d 308(1992) (SCALIA, J., concurring in judgment);Blanchard v. Bergeron, 489 U.S. 87, 98-100, 109S.Ct. 939, 946-948, 103 L.Ed.2d 67 (1989)(SCALIA, J., concurring in part and concurring injudgment). Today, however, the Court's fascinationwith the files of Congress (we must consult them,because they are there) is carried to a new silly ex-treme. Today's opinion ever-so-carefully analyzes,not legislative history, but the history of legislation-that-never-was. If we take this sort of material seri-ously, we require conscientious counsel to investig-ate (at clients' expense) not only the hearings,*537committee reports, and floor debates pertaining tothe history of the law at issue (which is badenough), but to find, and then investigate the hear-ings, committee reports, and floor debates pertain-ing to, later bills on the same subject that were nev-er enacted. This is beyond all reason, and we shouldsay so.

U.S.Pa.,1998.U.S. v. Estate of Romani523 U.S. 517, 1998-49 I.R.B. 6, 118 S.Ct. 1478,140 L.Ed.2d 710, 81 A.F.T.R.2d 98-1729, 66USLW 4295, 98-1 USTC P 50,368, 98-1 USTC P

60,311, 1998-2 C.B. 697, 98 Cal. Daily Op. Serv.3175, 98 Daily Journal D.A.R. 4379, 11 Fla. L.Weekly Fed. S 497

END OF DOCUMENT


















26 U.S.C. § 7425 I.R.C. § 7425

Page 1





Chapter 76. Judicial Proceedings Subchapter B. Proceedings by Taxpayers and Third Parties (Refs & Annos)

§ 7425. Discharge of liens (a) Judicial proceedings.--If the United States is not joined as a party, a judgment in any civil action or suit de-scribed in subsection (a) of section 2410 of title 28 of the United States Code, or a judicial sale pursuant to such a judgment, with respect to property on which the United States has or claims a lien under the provisions of this title--

(1) shall be made subject to and without disturbing the lien of the United States, if notice of such lien has been filed in the place provided by law for such filing at the time such action or suit is commenced, or

(2) shall have the same effect with respect to the discharge or divestment of such lien of the United States as may be provided with respect to such matters by the local law of the place where such property is situated, if no notice of such lien has been filed in the place provided by law for such filing at the time such action or suit is com-menced or if the law makes no provision for such filing.

If a judicial sale of property pursuant to a judgment in any civil action or suit to which the United States is not a party discharges a lien of the United States arising under the provisions of this title, the United States may claim, with the same priority as its lien had against the property sold, the proceeds (exclusive of costs) of such sale at any time before the distribution of such proceeds is ordered. (b) Other sales.--Notwithstanding subsection (a) a sale of property on which the United States has or claims a lien, or a title derived from enforcement of a lien, under the provisions of this title, made pursuant to an instrument creat-ing a lien on such property, pursuant to a confession of judgment on the obligation secured by such an instrument, or pursuant to a nonjudicial sale under a statutory lien on such property--

(1) shall, except as otherwise provided, be made subject to and without disturbing such lien or title, if notice of such lien was filed or such title recorded in the place provided by law for such filing or recording more than 30 days before such sale and the United States is not given notice of such sale in the manner prescribed in subsection (c)(1); or

(2) shall have the same effect with respect to the discharge or divestment of such lien or such title of the United States, as may be provided with respect to such matters by the local law of the place where such property is situ-ated, if--

(A) notice of such lien or such title was not filed or recorded in the place provided by law for such filing more than 30 days before such sale,

141

26 U.S.C. § 7425 I.R.C. § 7425

Page 2


(B) the law makes no provision for such filing, or

(C) notice of such sale is given in the manner prescribed in subsection (c)(1).

(c) Special rules.--

(1) Notice of sale.--Notice of a sale to which subsection (b) applies shall be given (in accordance with regulations prescribed by the Secretary) in writing, by registered or certified mail or by personal service, not less than 25 days prior to such sale, to the Secretary.

(2) Consent to sale.--Notwithstanding the notice requirement of subsection (b)(2)(C), a sale described in subsec-tion (b) of property shall discharge or divest such property of the lien or title of the United States if the United States consents to the sale of such property free of such lien or title.

(3) Sale of perishable goods.--Notwithstanding the notice requirement of subsection (b)(2)(C), a sale described in subsection (b) of property liable to perish or become greatly reduced in price or value by keeping, or which cannot be kept without great expense, shall discharge or divest such property of the lien or title of the United States if no-tice of such sale is given (in accordance with regulations prescribed by the Secretary) in writing, by registered or certified mail or by personal service, to the Secretary before such sale. The proceeds (exclusive of costs) of such sale shall be held as a fund subject to the liens and claims of the United States, in the same manner and with the same priority as such liens and claims had with respect to the property sold, for not less than 30 days after the date of such sale.

(4) Forfeitures of land sales contracts.--For purposes of subsection (b), a sale of property includes any forfeiture of a land sales contract.

(d) Redemption by United States.--

(1) Right to redeem.--In the case of a sale of real property to which subsection (b) applies to satisfy a lien prior to that of the United States, the Secretary may redeem such property within the period of 120 days from the date of such sale or the period allowable for redemption under local law, whichever is longer.

(2) Amount to be paid.--In any case in which the United States redeems real property pursuant to paragraph (1), the amount to be paid for such property shall be the amount prescribed by subsection (d) of section 2410 of title 28 of the United States Code.

(3) Certificate of redemption.--

(A) In general.--In any case in which real property is redeemed by the United States pursuant to this subsec-tion, the Secretary shall apply to the officer designated by local law, if any, for the documents necessary to evi-dence the fact of redemption and to record title to such property in the name of the United States. If no such of-ficer is designated by local law or if such officer fails to issue such documents, the Secretary shall execute a cer-tificate of redemption therefor.

(B) Filing.--The Secretary shall, without delay, cause such documents or certificate to be duly recorded in the proper registry of deeds. If the State in which the real property redeemed by the United States is situated has not by law designated an office in which such certificate may be recorded, the Secretary shall file such certificate in the office of the clerk of the United States district court for the judicial district in which such property is situ-

142

26 U.S.C. § 7425 I.R.C. § 7425

Page 3


ated.

(C) Effect.--A certificate of redemption executed by the Secretary shall constitute prima facie evidence of the regularity of such redemption and shall, when recorded, transfer to the United States all the rights, title, and in-terest in and to such property acquired by the person from whom the United States redeems such property by virtue of the sale of such property.

CREDIT(S) (Added Pub.L. 89-719, Title I, § 109, Nov. 2, 1966, 80 Stat. 1141, and amended Pub.L. 94-455, Title XIX, § 1906(b) (13) (A), Oct. 4, 1976, 90 Stat. 1834; Pub.L. 99-514, Title XV, § 1572(a), Oct. 22, 1986, 100 Stat. 2765.)

143

Supreme Court of the United StatesUNITED STATES, petitioner,

v.Sandra L. CRAFT.

No. 00-1831Argued Jan. 14, 2002.

Decided April 17, 2002.

Wife of delinquent taxpayer brought actionagainst United States, seeking to quiet title to pro-ceeds in escrow account containing half of proceedsobtained from sale of entireties property. Followingdecision that Government's tax lien did not attach totaxpayer's interest in entireties property, and re-mand for consideration of alternative claim thatconveyance was fraudulent, 140 F.3d 638, theUnited States District Court for the Western Dis-trict of Michigan, Gordon J. Quist, J., 65 F.Supp.2d651, awarded Internal Revenue Service (IRS) ashare of proceeds of sale of property. Governmentand taxpayer's wife appealed. The United StatesCourt of Appeals for the Sixth Circuit, 233 F.3d358, held that prior panel opinion that lien did notattach was law of the case. Certiorari was granted.The Supreme Court, Justice O'Connor, held thathusband, as tenant by the entirety under Michiganlaw, possessed “property” or “rights to property” towhich federal tax lien could attach.


Justice Scalia filed dissenting opinion in whichJustice Thomas joined.

Justice Thomas filed dissenting opinion inwhich Justices Stevens and Scalia joined.

West Headnotes



220XXIII Liens220k4767 k. What Law Governs. Most Cited

CasesWhether taxpayer's interest in property he held

as tenant by the entirety constituted “property andrights to property” to which lien could attach underfederal tax lien statute was ultimately question offederal law, but answer to that federal questionlargely depended upon state law. 26 U.S.C.A. §6321.



220k4767 k. What Law Governs. Most CitedCases

The federal tax lien statute itself creates noproperty rights but merely attaches consequences,federally defined, to rights created under state law.26 U.S.C.A. § 6321.




In determining whether a taxpayer's interest inproperty held as a tenant by the entirety can be sub-ject to a lien under the federal tax lien statute, theSupreme Court looks initially to state law to de-termine what rights the taxpayer has in the propertythe Government seeks to reach, then to federal lawto determine whether the taxpayer's state-delineatedrights qualify as “property” or “rights to property”within the compass of the federal tax lien legisla-tion. 26 U.S.C.A. § 6321.




122 S.Ct. 1414 Page 1535 U.S. 274, 122 S.Ct. 1414, 152 L.Ed.2d 437, 89 A.F.T.R.2d 2002-2005, 2002-1 USTC P 50,361, 2002-2 C.B.548, 02 Cal. Daily Op. Serv. 3283, 2002 Daily Journal D.A.R. 4111, 15 Fla. L. Weekly Fed. S 196(Cite as: 535 U.S. 274, 122 S.Ct. 1414)






































With reference to the common idiom describ-ing property as a “bundle of sticks,” that is, a col-lection of individual rights which, in certain com-binations, constitute property, state law determinesonly which sticks are in a person's bundle; whetherthose sticks qualify as “property” for purposes ofthe federal tax lien statute is a question of federallaw. 26 U.S.C.A. § 6321.



220k4771 Property Subject to Lien220k4771.1 k. In General. Most Cited

CasesIn looking to state law to determine which

rights to property a taxpayer has, for purposes ofdeciding whether the property is subject to a lienunder the federal tax lien statute, the SupremeCourt must be careful to consider the substance ofthe rights state law provides, not merely the labelsthe State gives these rights or the conclusions itdraws from them. 26 U.S.C.A. § 6321.




Internal Revenue 220 4771.1



CasesLabels that a State gives to the rights it

provides are irrelevant to the federal question ofwhich bundles of rights constitute property thatmay be attached by a federal tax lien. 26 U.S.C.A. §6321.

[7] Husband and Wife 205 14.2(1)

205 Husband and Wife205I Mutual Rights, Duties, and Liabilities

205k14 Conveyances to Husband and Wife205k14.2 Tenancy by Entirety in General

205k14.2(1) k. Nature and Incidents.Most Cited Cases

Joint Tenancy 226 1

226 Joint Tenancy226k1 k. Nature and Incidents in General. Most

Cited Cases

Tenancy in Common 373 1

373 Tenancy in Common373I Creation and Existence

373k1 k. Nature and Incidents of Cotenancy.Most Cited Cases

English common law provided three legalstructures for the concurrent ownership of propertythat have survived into modern times: tenancy incommon, joint tenancy, and tenancy by the entirety.

[8] Descent and Distribution 124 8

124 Descent and Distribution124I Nature and Course in General

124k8 k. Property Subject to Descent or Dis-tribution. Most Cited Cases


373 Tenancy in Common373II Mutual Rights, Duties, and Liabilities of

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Tenancy in Common 373 28(1)


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pation373k28(1) k. In General. Most Cited




























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Cases



Cotenants373k35 k. Sales and Conveyances to Third

Persons. Most Cited CasesUnder the common law, tenants in common

may each unilaterally alienate their shares throughsale or gift or place encumbrances upon theseshares, and they also have the power to pass theseshares to their heirs upon death, as well as manyother rights in the property, including the right touse the property, to exclude third parties from it,and to receive a portion of any income producedfrom it.

[9] Joint Tenancy 226 8

226 Joint Tenancy226k7 Mutual Rights, Duties, and Liabilities of

Joint Tenants226k8 k. In General. Most Cited Cases

Under the common law, joint tenants possessmany of the rights enjoyed by tenants in common:the right to use, to exclude, and to enjoy a share ofthe property's income.


226 Joint Tenancy226k6 k. Survivorship. Most Cited CasesUnder the common law, the main difference

between a joint tenancy and a tenancy in commonis that a joint tenant also has a right of automatic in-heritance known as “survivorship,” pursuant towhich, upon the death of one joint tenant, that ten-ant's share in the property does not pass throughwill or the rules of intestate succession; rather, theremaining tenant or tenants automatically inherit it.


226 Joint Tenancy226k4 k. Severance. Most Cited Cases

Joint Tenancy 226 13

226 Joint Tenancy226k11 Rights and Liabilities of Joint Tenants

as to Third Persons226k13 k. Sale and Conveyance of Joint

Property. Most Cited CasesUnder the common law, joint tenants' right to

alienate their individual shares is somewhat differ-ent from that of tenants in common, in that in orderfor one joint tenant to alienate his or her individualinterest in the tenancy, the estate must first besevered, that is, converted to a tenancy in commonwith each tenant possessing an equal fractionalshare; most States allowing joint tenancies facilitatealienation, however, by allowing severance to auto-matically accompany a conveyance of that interestor any other overt act indicating an intent to sever.





Under the common law, a tenancy by the en-tirety is a unique sort of concurrent ownership thatcan only exist between married persons.




205k14.2(6) k. Survivorship. MostCited Cases

Joint Tenancy 226 6

226 Joint Tenancy226k6 k. Survivorship. Most Cited CasesUnder the common law, tenants by the entirety,

like joint tenants, enjoy the right of survivorship.









































205k14.2(5) k. Severance and Termin-ation. Most Cited Cases

Husband and Wife 205 14.10


205k14 Conveyances to Husband and Wife205k14.10 k. Separate Conveyance or

Mortgage. Most Cited CasesUnder the common law, as with a joint ten-

ancy, unilateral alienation of a spouse's interest inentireties property is typically not possible withoutseverance; typically, severance requires the consentof both spouses or the ending of the marriage in di-vorce.




205k14.2(7) k. Rights and Liabilitiesof Spouses. Most Cited Cases

Michigan characterizes its tenancy by the en-tirety as creating no individual rights whatsoever.





Under Michigan law, one tenant by the entiretyhas no interest separable from that of the other;each is vested with an entire title.





Under Michigan law, each tenant by the en-tirety possesses the right of survivorship. M.C.L.A.§ 554.872(g).





Under Michigan law, each tenant by the en-tirety, the wife as well as the husband, may use theproperty, exclude third parties from it, and receivean equal share of the income produced by it.M.C.L.A. § 557.71.

[19] Husband and Wife 205 14.10



Mortgage. Most Cited CasesUnder Michigan law, neither of the spouses

holding a tenancy in the entirety may unilaterallyalienate or encumber the property, although thismay be accomplished with mutual consent.





Under Michigan law, divorce ends a tenancy bythe entirety, generally giving each spouse an equal

































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interest in the property as a tenant in common, un-less the divorce decree specifies otherwise.M.C.L.A. § 552.102.





Husband and Wife 205 14.2(6)








Husband and Wife 205 14.10



Mortgage. Most Cited CasesUnder Michigan law, husband, as tenant by the

entirety, had, among other rights, right to use prop-erty, right to exclude third parties from it, right toshare of income produced from it, right of survivor-ship, right to become tenant in common with equalshares upon divorce, right to sell property withwife's consent and to receive half the proceeds fromsuch sale, right to place encumbrance on propertywith wife's consent, and right to block wife from

selling or encumbering property unilaterally.M.C.L.A. §§ 554.872(g), 557.71.



220k4771 Property Subject to Lien220k4776 k. Cotenancy and Partnership

Property. Most Cited CasesAs tenant by the entirety under Michigan law,

husband possessed “property” or “rights to prop-erty” to which federal tax lien could attach;Michigan law provided husband with essentialrights of use, exclusion, and income, as well asright to alienate property with consent of wife, andright of survivorship. 26 U.S.C.A. § 6321.



220k4771 Property Subject to Lien220k4775 k. Taxpayer's Interest in Gener-

al. Most Cited CasesThe statutory language authorizing a federal

tax lien is broad and reveals on its face that Con-gress meant to reach every interest in property thata taxpayer might have. 26 U.S.C.A. § 6321.




CasesIn determining whether a federal taxpayer's

state-law rights constitute “property” or “rights toproperty” for purposes of the federal tax lien stat-ute, the important consideration is the breadth ofthe control the taxpayer could exercise over theproperty. 26 U.S.C.A. § 6321.




















































220XXIII Liens220k4771 Property Subject to Lien

220k4771.1 k. In General. Most CitedCases

Federal tax liens may attach to property thatcannot be unilaterally alienated. 26 U.S.C.A. §6321.




Property. Most Cited CasesFact that husband could not unilaterally alien-

ate property held in tenancy by the entirety did notpreclude him from possessing “property and rightsto property” for purposes of federal tax lien statute.26 U.S.C.A. § 6321.





Under Michigan law governing tenancies bythe entirety, husband possessed right of survivor-ship, that is, right to automatically inherit whole ofestate should his wife predecease him.




Property. Most Cited CasesThe federal tax lien attaches to an individual

partner's interest in the partnership, that is, to thefair market value of his or her share in the partner-ship assets; as a holder of this lien, the FederalGovernment is entitled to receive the profits to

which the assigning partner would otherwise be en-titled, including predissolution distributions and theproceeds from dissolution. 26 U.S.C.A. § 6321.


220 Internal Revenue220XXV Collection

220XXV(B) Levy or Distraint220k4857 k. Property Subject to Distraint.

Most Cited CasesIn imposing a tax lien, the Federal Government

may not compel the sale of partnership assets, al-though it may foreclose on the partner's interest. 26U.S.C.A. § 6321.

[30] Statutes 361 217.4


361VI(A) General Rules of Construction361k213 Extrinsic Aids to Construction

361k217.4 k. Legislative History inGeneral. Most Cited Cases

Failed legislative proposals are a particularlydangerous ground on which to rest an interpretationof a prior statute.

[31] Statutes 361 220


361VI(A) General Rules of Construction361k213 Extrinsic Aids to Construction

361k220 k. Legislative Construction.Most Cited Cases

Congressional inaction lacks persuasive signi-ficance, for purposes of statutory interpretation, be-cause several equally tenable inferences may bedrawn from such inaction, including the inferencethat the existing legislation already incorporated theoffered change.

[32] Husband and Wife 205 14.11































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205k14 Conveyances to Husband and Wife205k14.11 k. Rights of Creditors as to Es-

tate in Entirety or in Common. Most Cited CasesUnder Michigan law, land held by husband and

wife as tenants by the entirety is not subject to levyunder execution on judgment rendered againsteither husband or wife alone.




The interpretation of the federal tax lien statuteis a federal question, and in answering that questionthe Supreme Court is in no way bound by statecourts' answers to similar questions involving statelaw. 26 U.S.C.A. § 6321.




Exempt status under state law does not bind thefederal collector.

**1417 *274 SyllabusFN*

FN* The syllabus constitutes no part of theopinion of the Court but has been preparedby the Reporter of Decisions for the con-venience of the reader. See United States v.Detroit Timber & Lumber Co., 200 U.S.321, 337, 26 S.Ct. 282, 50 L.Ed. 499.

When respondent's husband failed to pay feder-al income tax liabilities assessed against him, a fed-eral tax lien attached to “all [of his] property andrights to property.” 26 U.S.C. § 6321. After the no-tice of the lien was filed, respondent and her hus-band jointly executed a quitclaim deed purportingto transfer to her his interest in a piece of real prop-erty in Michigan that they owned as tenants by theentirety. Subsequently, the Internal Revenue Ser-

vice**1418 (IRS) agreed to release the lien and al-low respondent to sell the property with half the netproceeds to be held in escrow pending determina-tion of the Government's interest in the property.She brought this action to quiet title to the es-crowed proceeds. The Government claimed, amongother things, that its lien had attached to the hus-band's interest in the tenancy by the entirety. TheDistrict Court granted the Government summaryjudgment, but the Sixth Circuit held that no lien at-tached because the husband had no separate interestin the entireties property under Michigan law, andremanded the case for consideration of an alternat-ive claim not at issue here. In affirming the DistrictCourt's decision on remand, the Sixth Circuit heldthat its prior opinion on the issue whether the lienattached to the husband's entireties property was thelaw of the case.

Held: The husband's interests in the entiretiesproperty constitute “property” or “rights to prop-erty” to which a federal tax lien may attach. Pp.1420-1426.

(a) Because the federal tax lien statute itselfcreates no property rights, United States v. Bess,357 U.S. 51, 55, 78 S.Ct. 1054, 2 L.Ed.2d 1135,this Court looks initially to state law to determinewhat rights the taxpayer has in the property theGovernment seeks to reach and then to federal lawto determine whether such state-delineated rightsqualify as property or rights to property under §6321, Drye v. United States, 528 U.S. 49, 58, 120S.Ct. 474, 145 L.Ed.2d 466. A common idiom de-scribes property as a “bundle of sticks”-a collectionof individual rights which, in certain combinations,constitute property. State law determines whichsticks are in a person's bundle, but federal law de-termines whether those sticks constitute propertyfor federal tax lien purposes. In looking to statelaw, this Court must consider the substance of thestate law rights, not the labels the State gives themor the conclusions it draws from them. Pp.1420-1421.

*275 b) Michigan law gave respondent's hus-






























band, among other rights, the right to use the en-tireties property, the right to exclude others from it,the right of survivorship, the right to become a ten-ant in common with equal shares upon divorce, theright to sell the property with respondent's consentand to receive half the proceeds from such a sale,the right to encumber the property with respond-ent's consent, and the right to block respondentfrom selling or encumbering the property unilater-ally. Pp. 1421-1422.

(c) The rights Michigan law granted respond-ent's husband qualify as “property” or “rights toproperty” under § 6321. The broad statutory lan-guage authorizing the tax lien reveals that Congressmeant to reach every property interest that a tax-payer might have. United States v. National Bank ofCommerce, 472 U.S. 713, 719-720, 105 S.Ct. 2919,86 L.Ed.2d 565. The husband's rights of use, exclu-sion, and income alone may be sufficient to subjecthis entireties interest to the lien, for they gave him asubstantial degree of control over the property. SeeDrye, supra, at 61, 120 S.Ct. 474. He also had theright to alienate the property with respondent's con-sent. The unilateral alienation stick is not essentialto “property.” Federal tax liens may attach to prop-erty that cannot be unilaterally alienated, UnitedStates v. Rodgers, 461 U.S. 677, 103 S.Ct. 2132, 76L.Ed.2d 236, and excluding such property wouldexempt a rather large amount of what is commonlythought of as property. A number of the sticks inrespondent's husband's bundle were presently exist-ing, so it is not necessary to consider whether hissurvivorship right alone, which respondent claimsis an expectancy, would qualify as property orrights to property. Were this Court to reach a con-trary conclusion, the entireties property would be-long to no one for § 6321 purposes because re-spondent had no more interest in the property thanher husband. Such a result seems absurd and wouldallow spouses to shield their property from federaltaxation by **1419 classifying it as entireties prop-erty, facilitating abuse of the federal tax system.Legislative history does not support respondent'sposition that Congress did not intend that a federal

tax lien attach to an entireties property interest. Andthe common-law background of the tax lien stat-ute's enactment is not enough to overcome thebroad language Congress actually used. Pp.1422-1425.

(d) That Michigan makes a different choicewith respect to state law creditors does not dictatethe choice here. Because § 6321's interpretation is afederal question, this Court is in no way bound bystate courts' answers to similar questions involvingstate law. Pp. 1425-1426.

233 F.3d 358, reversed and remanded.

O'CONNOR, J., delivered the opinion of theCourt, in which REHNQUIST, C.J., and Kennedy,Souter, Ginsburg, and BREYER, JJ., joined.SCALIA, J., filed a dissenting opinion, in whichTHOMAS, J., joined, post, p. 1426. THOMAS, J.,filed a dissenting opinion, in which STEVENS andSCALIA, JJ., joined, post, p. 1426.*276 Kent L. Jones, Washington, DC, for the peti-tioner.

Jeffrey S. Sutton, Columbus, OH, for the respond-ent.

For U.S. Supreme Court briefs, see:2001 WL1480824 (Pet.Brief)2001 WL 1631569 (Resp.Brief)

Justice O'CONNOR delivered the opinion of theCourt.

This case raises the question whether a tenantby the entirety possesses “property” or “rights toproperty” to which a federal tax lien may attach. 26U.S.C. § 6321. Relying on the state law fiction thata tenant by the entirety has no separate interest inentireties property, the United States Court of Ap-peals for the Sixth Circuit held that such property isexempt from the tax lien. We conclude that, despitethe fiction, each tenant possesses individual rightsin the estate sufficient to constitute “property” or“rights to property” for the purposes of the lien, andreverse the judgment of the Court of Appeals.

I

































In 1988, the Internal Revenue Service (IRS) as-sessed $482,446 in unpaid income tax liabilitiesagainst Don Craft, the husband of respondentSandra L. Craft, for failure to file federal incometax returns for the years 1979 through 1986. App. toPet. for Cert. 45a, 72a. When he failed to pay, afederal tax lien attached to “all property and rightsto property, whether real or personal, belonging to”him. 26 U.S.C. § 6321.

At the time the lien attached, respondent andher husband owned a piece of real property inGrand Rapids, Michigan, as tenants by the entirety.App. to Pet. for Cert. 45a. After notice of the lienwas filed, they jointly executed a *277 quitclaimdeed purporting to transfer the husband's interest inthe property to respondent for one dollar. Ibid.When respondent attempted to sell the property afew years later, a title search revealed the lien. TheIRS agreed to release the lien and allow the salewith the stipulation that half of the net proceeds beheld in escrow pending determination of the Gov-ernment's interest in the property. Ibid.

Respondent brought this action to quiet title tothe escrowed proceeds. The Government claimedthat its lien had attached to the husband's interest inthe tenancy by the entirety. It further asserted thatthe transfer of the property to respondent was inval-id as a fraud on creditors. Id., at 46a-47a. The Dis-trict Court granted the Government's motion forsummary judgment, holding that the federal tax lienattached at the moment of the transfer to respond-ent, which terminated the tenancy by the entiretyand entitled the Government to one-half of thevalue of the property. **1420No. 1:93-CV-306,1994 WL 669680, *3 (W.D. Mich., Sept. 12, 1994).

Both parties appealed. The Sixth Circuit heldthat the tax lien did not attach to the property be-cause under Michigan state law, the husband had noseparate interest in property held as a tenant by theentirety. 140 F.3d 638, 643 (C.A.6 1998). It re-manded to the District Court to consider the Gov-ernment's alternative claim that the conveyanceshould be set aside as fraudulent. Id., at 644.

On remand, the District Court concluded thatwhere, as here, state law makes property exemptfrom the claims of creditors, no fraudulent convey-ance can occur. 65 F.Supp.2d 651, 657-658(W.D.Mich.1999). It found, however, that respond-ent's husband's use of nonexempt funds to pay themortgage on the entireties property, which placedthem beyond the reach of creditors, constituted afraudulent act under state law, and the court awar-ded the IRS a share of the proceeds of the sale ofthe property equal to that amount. Id., at 659.

*278 Both parties appealed the District Court'sdecision, the Government again claiming that its li-en attached to the husband's interest in the entiretiesproperty. The Court of Appeals held that the priorpanel's opinion was law of the case on that issue.233 F.3d 358, 363-369 (C.A.6 2000). It also af-firmed the District Court's determination that thehusband's mortgage payments were fraudulent. Id.,at 369-375.

We granted certiorari to consider the Govern-ment's claim that respondent's husband had a separ-ate interest in the entireties property to which thefederal tax lien attached. 533 U.S. 976, 122 S.Ct.23, 150 L.Ed.2d 804 (2001).

II[1][2][3] Whether the interests of respondent's

husband in the property he held as a tenant by theentirety constitutes “property and rights to prop-erty” for the purposes of the federal tax lien statute,26 U.S.C. § 6321, is ultimately a question of feder-al law. The answer to this federal question,however, largely depends upon state law. The fed-eral tax lien statute itself “creates no property rightsbut merely attaches consequences, federallydefined, to rights created under state law.” UnitedStates v. Bess, 357 U.S. 51, 55, 78 S.Ct. 1054, 2L.Ed.2d 1135 (1958); see also United States v. Na-tional Bank of Commerce, 472 U.S. 713, 722, 105S.Ct. 2919, 86 L.Ed.2d 565 (1985). Accordingly,“[w]e look initially to state law to determine whatrights the taxpayer has in the property the Govern-ment seeks to reach, then to federal law to determ-




























ine whether the taxpayer's state-delineated rightsqualify as ‘property’ or ‘rights to property’ withinthe compass of the federal tax lien legislation.”Drye v. United States, 528 U.S. 49, 58, 120 S.Ct.474, 145 L.Ed.2d 466 (1999).

[4] A common idiom describes property as a“bundle of sticks”-a collection of individual rightswhich, in certain combinations, constitute property.See B. Cardozo, Paradoxes of Legal Science 129(1928) (reprint 2000); see also Dickman v. Commis-sioner, 465 U.S. 330, 336, 104 S.Ct. 1086, 79L.Ed.2d 343 (1984). State law determines onlywhich sticks are in a person's bundle. *279 Whetherthose sticks qualify as “property” for purposes ofthe federal tax lien statute is a question of federallaw.

[5][6] In looking to state law, we must be care-ful to consider the substance of the rights state lawprovides, not merely the labels the State gives theserights or the conclusions it draws from them. Suchstate law labels are irrelevant to the federal ques-tion of which bundles of rights constitute propertythat may be attached by a federal tax lien. In Dryev. United States, supra, we considered a situationwhere state law allowed an heir subject to a federaltax lien to disclaim his interest in the estate. Thestate law also provided that such a disclaimerwould “creat[e] the legal fiction” that the heir hadpredeceased the decedent and would correspond-ingly be deemed to have had no property interest**1421 in the estate. Id., at 53, 120 S.Ct. 474. Weunanimously held that this state law fiction did notcontrol the federal question and looked instead tothe realities of the heir's interest. We concludedthat, despite the State's characterization, the heirpossessed a “right to property” in the estate-theright to accept the inheritance or pass it along to an-other-to which the federal lien could attach. Id., at59-61, 120 S.Ct. 474.

IIIWe turn first to the question of what rights re-

spondent's husband had in the entireties property byvirtue of state law. In order to understand these

rights, the tenancy by the entirety must first beplaced in some context.

[7][8] English common law provided three leg-al structures for the concurrent ownership of prop-erty that have survived into modern times: tenancyin common, joint tenancy, and tenancy by the en-tirety. 1 G. Thompson, Real Property § 4.06(g) (D.Thomas ed. 1994) (hereinafter Thompson). The ten-ancy in common is now the most common form ofconcurrent ownership. 7 R. Powell & P. Rohan,Real Property §51.01[3] (M. Wolf ed. 2001)(hereinafter Powell). The common law character-ized tenants in common as each owning *280 a sep-arate fractional share in undivided property. Id., §50.01[1]. Tenants in common may each unilaterallyalienate their shares through sale or gift or place en-cumbrances upon these shares. They also have thepower to pass these shares to their heirs upon death.Tenants in common have many other rights in theproperty, including the right to use the property, toexclude third parties from it, and to receive a por-tion of any income produced from it. Id., §§50.03-50.06.

[9][10][11] Joint tenancies were the predomin-ant form of concurrent ownership at common law,and still persist in some States today. 4 Thompson §31.05. The common law characterized each jointtenant as possessing the entire estate, rather than afractional share: “[J]oint-tenants have one and thesame interest ... held by one and the same undi-vided possession.” 2 W. Blackstone, Commentarieson the Laws of England 180 (1766). Joint tenantspossess many of the rights enjoyed by tenants incommon: the right to use, to exclude, and to enjoy ashare of the property's income. The main differencebetween a joint tenancy and a tenancy in commonis that a joint tenant also has a right of automatic in-heritance known as “survivorship.” Upon the deathof one joint tenant, that tenant's share in the prop-erty does not pass through will or the rules of in-testate succession; rather, the remaining tenant ortenants automatically inherit it. Id., at 183; 7 Powell§ 51.01[3]. Joint tenants' right to alienate their indi-




















vidual shares is also somewhat different. In orderfor one tenant to alienate his or her individual in-terest in the tenancy, the estate must first besevered-that is, converted to a tenancy in commonwith each tenant possessing an equal fractionalshare. Id., § 51.04[1]. Most States allowing jointtenancies facilitate alienation, however, by allow-ing severance to automatically accompany a con-veyance of that interest or any other overt act indic-ating an intent to sever. Ibid.

[12] A tenancy by the entirety is a unique sortof concurrent ownership that can only existbetween married persons. 4 *281 Thompson §33.02. Because of the common-law fiction that thehusband and wife were one person at law (that per-son, practically speaking, was the husband, see J.Cribbet et al., Cases and Materials on Property 329(6th ed. 1990)), Blackstone did not characterize thetenancy by the entirety as a form of concurrentownership at all. Instead, he thought that entiretiesproperty was a form of single ownership by themarital unity. Orth, Tenancy by the Entirety: TheStrange Career of the Common-Law Marital Estate,1997 B.Y.U.L. Rev. 35, 38-39. Neither spouse wasconsidered to own any individual interest in the es-tate; rather, it belonged to the couple.

**1422 [13][14] Like joint tenants, tenants bythe entirety enjoy the right of survivorship. Alsolike a joint tenancy, unilateral alienation of aspouse's interest in entireties property is typicallynot possible without severance. Unlike joint tenan-cies, however, tenancies by the entirety cannot eas-ily be severed unilaterally. 4 Thompson § 33.08(b).Typically, severance requires the consent of bothspouses, id., § 33.08(a), or the ending of the mar-riage in divorce, id., § 33.08(d). At common law,all of the other rights associated with the entiretiesproperty belonged to the husband: as the head ofthe household, he could control the use of the prop-erty and the exclusion of others from it and enjoyall of the income produced from it. Id., § 33.05.The husband's control of the property was so ex-tensive that, despite the rules on alienation, the

common law eventually provided that he could uni-laterally alienate entireties property without sever-ance subject only to the wife's survivorship interest.Orth, supra, at 40-41.

[15][16][17][18][19][20] With the passage ofthe Married Women's Property Acts in the late 19thcentury granting women distinct rights with respectto marital property, most States either abolished thetenancy by the entirety or altered it significantly. 7Powell § 52.01[2]. Michigan's version of the estateis typical of the modern tenancy by the entirety.Following Blackstone, Michigan characterizes itstenancy by the entirety as creating*282 no individu-al rights whatsoever: “It is well settled under thelaw of this State that one tenant by the entirety hasno interest separable from that of the other .... Eachis vested with an entire title.” Long v. Earle, 277Mich. 505, 517, 269 N.W. 577, 581 (1936). Andyet, in Michigan, each tenant by the entirety pos-sesses the right of survivorship. Mich. Comp. LawsAnn. § 554.872(g) (West Supp. 1997), recodified at§ 700.2901(2)(g) (West Supp. Pamphlet 2001).Each spouse-the wife as well as the husband-mayalso use the property, exclude third parties from it,and receive an equal share of the income producedby it. See § 557.71 (West 1988). Neither spousemay unilaterally alienate or encumber the property,Long v. Earle, supra, at 517, 269 N.W., at 581; Ro-gers v. Rogers, 136 Mich.App. 125, 134, 356N.W.2d 288, 292 (1984), although this may be ac-complished with mutual consent, Eadus v. Hunter,249 Mich. 190, 228 N.W. 782 (1930). Divorce endsthe tenancy by the entirety, generally giving eachspouse an equal interest in the property as a tenantin common, unless the divorce decree specifies oth-erwise. Mich. Comp. Laws Ann. § 552.102 (West1988).

[21] In determining whether respondent's hus-band possessed “property” or “rights to property”within the meaning of 26 U.S.C. § 6321, we look tothe individual rights created by these state lawrules. According to Michigan law, respondent'shusband had, among other rights, the following

























rights with respect to the entireties property: theright to use the property, the right to exclude thirdparties from it, the right to a share of income pro-duced from it, the right of survivorship, the right tobecome a tenant in common with equal shares upondivorce, the right to sell the property with the re-spondent's consent and to receive half the proceedsfrom such a sale, the right to place an encumbranceon the property with the respondent's consent, andthe right to block respondent from selling or en-cumbering the property unilaterally.

*283 IV[22][23] We turn now to the federal question of

whether the rights Michigan law granted to re-spondent's husband as a tenant by the entirety quali-fy as “property” or “rights to property” under §6321. The statutory language authorizing the tax li-en “is broad and reveals on its face that Congressmeant to reach every interest in property that a tax-payer might have.” **1423United States v. Nation-al Bank of Commerce, 472 U.S., at 719-720, 105S.Ct. 2919. “Stronger language could hardly havebeen selected to reveal a purpose to assure the col-lection of taxes.” Glass City Bank v. United States,326 U.S. 265, 267, 66 S.Ct. 108, 90 L.Ed. 56(1945). We conclude that the husband's rights in theentireties property fall within this broad statutorylanguage.

[24] Michigan law grants a tenant by the en-tirety some of the most essential property rights: theright to use the property, to receive income pro-duced by it, and to exclude others from it. SeeDolan v. City of Tigard, 512 U.S. 374, 384, 114S.Ct. 2309, 129 L.Ed.2d 304 (1994) (“[T]he right toexclude others” is “ ‘one of the most essentialsticks in the bundle of rights that are commonlycharacterized as property’ ” (quoting Kaiser Aetnav. United States, 444 U.S. 164, 176, 100 S.Ct. 383,62 L.Ed.2d 332 (1979))); Loretto v. TeleprompterManhattan CATV Corp., 458 U.S. 419, 435, 102S.Ct. 3164, 73 L.Ed.2d 868 (1982) (including “use”as one of the “[p]roperty rights in a physicalthing”). These rights alone may be sufficient to

subject the husband's interest in the entireties prop-erty to the federal tax lien. They gave him a sub-stantial degree of control over the entireties prop-erty, and, as we noted in Drye, “in determiningwhether a federal taxpayer's state-law rights consti-tute ‘property’ or ‘rights to property,’ [t]he import-ant consideration is the breadth of the control the[taxpayer] could exercise over the property.” 528U.S., at 61, 120 S.Ct. 474 (some internal quotationmarks omitted).

The husband's rights in the estate, however,went beyond use, exclusion, and income. He alsopossessed the right to alienate (or otherwise encum-ber) the property with the consent of respondent,his wife. Loretto, supra, at 435, 102 S.Ct. 3164 (the*284 right to “dispose” of an item is a propertyright). It is true, as respondent notes, that he lackedthe right to unilaterally alienate the property, a rightthat is often in the bundle of property rights. Seealso post, at 1429-1430 (THOMAS, J., dissenting).There is no reason to believe, however, that thisone stick-the right of unilateral alienation-is essen-tial to the category of “property.”

[25] This Court has already stated that federaltax liens may attach to property that cannot be uni-laterally alienated. In United States v. Rodgers, 461U.S. 677, 103 S.Ct. 2132, 76 L.Ed.2d 236 (1983),we considered the Federal Government's power toforeclose homestead property attached by a federaltax lien. Texas law provided that “ ‘the owner orclaimant of the property claimed as homestead[may not], if married, sell or abandon thehomestead without the consent of the other spouse.’” Id., at 684-685, 103 S.Ct. 2132 (quoting Tex.Const., Art. 16, § 50). We nonetheless stated that“[i]n the homestead context ..., there is no doubt ...that not only do both spouses (rather than neither)have an independent interest in the homestead prop-erty, but that a federal tax lien can at least attach toeach of those interests.” 461 U.S., at 703, n. 31, 103S.Ct. 2132; cf. Drye, supra, at 60, n. 7, 120 S.Ct.474 (noting that “an interest in a spendthrift trusthas been held to constitute ‘ “property” for pur-


































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poses of § 6321’ even though the beneficiary maynot transfer that interest to third parties”).

[26] Excluding property from a federal tax liensimply because the taxpayer does not have thepower to unilaterally alienate it would, moreover,exempt a rather large amount of what is commonlythought of as property. It would exempt not onlythe type of property discussed in Rodgers, but alsosome community property. Community propertyStates often provide that real community propertycannot be alienated without the consent of bothspouses. See, e.g., Ariz. Rev. Stat. Ann. § 25-214(C) (2000); Cal. Fam. Code Ann. § 1102 (West1994); Idaho Code § 32-912 (1996); La. Civ. CodeAnn., Art. 2347 (West Supp. 2002); Nev. Rev. Stat.Ann. § 123.230(3) *285 (Supp. 2001); N.M. Stat.Ann. § 40-3-13 (1999); Wash. Rev. Code §26.16.030(3) (1994). Accordingly, the fact that re-spondent's**1424 husband could not unilaterallyalienate the property does not preclude him frompossessing “property and rights to property” for thepurposes of § 6321.

[27] Respondent's husband also possessed theright of survivorship-the right to automatically in-herit the whole of the estate should his wife prede-cease him. Respondent argues that this interest wasmerely an expectancy, which we suggested in Dryewould not constitute “property” for the purposes ofa federal tax lien. 528 U.S., at 60, n. 7, 120 S.Ct.474 (“[We do not mean to suggest] that an expect-ancy that has pecuniary value ... would fall within §6321 prior to the time it ripens into a present es-tate”). Drye did not decide this question, however,nor do we need to do so here. As we have discussedabove, a number of the sticks in respondent's hus-band's bundle were presently existing. It is there-fore not necessary to decide whether the right tosurvivorship alone would qualify as “property” or“rights to property” under § 6321.

That the rights of respondent's husband in theentireties property constitute “property” or “rightsto property” “belonging to” him is further under-scored by the fact that, if the conclusion were other-

wise, the entireties property would belong to no onefor the purposes of § 6321. Respondent had nomore interest in the property than her husband; ifneither of them had a property interest in the en-tireties property, who did? This result not onlyseems absurd, but would also allow spouses toshield their property from federal taxation by clas-sifying it as entireties property, facilitating abuse ofthe federal tax system. Johnson, After Drye: TheLikely Attachment of the Federal Tax Lien to Ten-ancy-by-the-Entireties Interests, 75 Ind. L. J. 1163,1171 (2000).

[28] Justice SCALIA's and Justice THOMAS'dissents claim that the conclusion that the husbandpossessed an interest in the entireties property towhich the federal tax lien could *286 attach is inconflict with the rules for tax liens relating to part-nership property. See post, at 1426 (opinion ofSCALIA, J.); see also post, at 1429, n. 4. This isnot so. As the authorities cited by Justice THOMASreflect, the federal tax lien does attach to an indi-vidual partner's interest in the partnership, that is, tothe fair market value of his or her share in the part-nership assets. Ibid. (citing B. Bittker & M. McMa-hon, Federal Income Taxation of Individuals ¶44.5[4][a] (2d ed. 1995 and 2000 Cum. Supp.)); seealso 1 A. Bromberg & L. Ribstein, Partnership §3.05(d) (2002-1 Supp.) (hereinafter Bromberg &Ribstein) citing Uniform Partnership Act § 28, 6U.L.A. 744 (1995). As a holder of this lien, theFederal Government is entitled to “receive ... theprofits to which the assigning partner would other-wise be entitled,” including predissolution distribu-tions and the proceeds from dissolution. UniformPartnership Act § 27(1), id., at 736.

[29] There is, however, a difference betweenthe treatment of entireties property and partnershipassets. The Federal Government may not compelthe sale of partnership assets (although it may fore-close on the partner's interest, 1 Bromberg & Rib-stein § 3.05(d)(3)(iv)). It is this difference that isreflected in Justice SCALIA's assertion that part-nership property cannot be encumbered by an indi-





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vidual partner's debts. See post, at 1426. This dis-parity in treatment between the two forms of own-ership, however, arises from our decision in UnitedStates v. Rodgers, supra (holding that the Govern-ment may foreclose on property even where the co-owners lack the right of unilateral alienation), andnot our holding today. In this case, it is instead thedissenters' theory that departs from partnership law,as it would hold that the Federal Government's liendoes not attach to the husband's interest in the en-tireties property at all, whereas the lien may attachto an individual's interest in partnership property.

**1425 [30][31] *287 Respondent argues that,whether or not we would conclude that respondent'shusband had an interest in the entireties property,legislative history indicates that Congress did notintend that a federal tax lien should attach to suchan interest. In 1954, the Senate rejected a proposedamendment to the tax lien statute that would haveprovided that the lien attach to “property or rightsto property (including the interest of such person astenant by the entirety).” S. Rep. No. 1622, 83dCong., 2d Sess., 575 (1954). We have elsewhereheld, however, that failed legislative proposals are“a particularly dangerous ground on which to restan interpretation of a prior statute,” Pension BenefitGuaranty Corporation v. LTV Corp., 496 U.S. 633,650, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990), reas-oning that “ ‘[c]ongressional inaction lacks persuas-ive significance because several equally tenable in-ferences may be drawn from such inaction, includ-ing the inference that the existing legislationalready incorporated the offered change’.” CentralBank of Denver, N.A. v. First Interstate Bank ofDenver, N.A., 511 U.S. 164, 187, 114 S.Ct. 1439,128 L.Ed.2d 119 (1994). This case exemplifies therisk of relying on such legislative history. As wenoted in United States v. Rodgers, 461 U.S., at 704,n. 31, 103 S.Ct. 2132, some legislative history sur-rounding the 1954 amendment indicates that theHouse intended the amendment to be nothing morethan a “clarification” of existing law, and that theSenate rejected the amendment only because itfound it “superfluous.” See H. R. Rep. No. 1337,

83d Cong., 2d Sess., A406 (1954) (noting that theamendment would “clarif[y] the term ‘property andrights to property’ by expressly including thereinthe interest of the delinquent taxpayer in an estateby the entirety”); S. Rep. No. 1622, at 575 (“It isnot clear what change in existing law would bemade by the parenthetical phrase. The deletion ofthe phrase is intended to continue the existinglaw”).

The same ambiguity that plagues the legislativehistory accompanies the common-law backgroundof Congress' enactment of the tax lien statute. Re-spondent argues that *288 Congress could not haveintended the passage of the federal tax lien statuteto alter the generally accepted rule that liens couldnot attach to entireties property. See Astoria Fed.Sav. & Loan Assn. v. Solimino, 501 U.S. 104, 108,111 S.Ct. 2166, 115 L.Ed.2d 96 (1991) (“[W]here acommon-law principle is well established ... thecourts may take it as given that Congress has legis-lated with an expectation that the principle will ap-ply except ‘when a statutory purpose to the contraryis evident’ ”). The common-law rule was not sowell established with respect to the application of afederal tax lien that we must assume that Congressconsidered the impact of its enactment on the ques-tion now before us. There was not much of a com-mon-law background on the question of the applic-ation of federal tax liens, as the first court of ap-peals cases dealing with the application of such a li-en did not arise until the 1950's. United States v.Hutcherson, 188 F.2d 326 (C.A.8 1951); Raffaele v.Granger, 196 F.2d 620 (C.A.3 1952). This back-ground is not sufficient to overcome the broad stat-utory language Congress did enact, authorizing thelien to attach to “all property and rights to prop-erty” a taxpayer might have.

[32][33][34] We therefore conclude that re-spondent's husband's interest in the entireties prop-erty constituted “property” or “rights to property”for the purposes of the federal tax lien statute. Werecognize that Michigan makes a different choicewith respect to state law creditors: “[L]and held by



























husband and wife as tenants by entirety is not sub-ject to levy under execution on judgment renderedagainst either husband or wife alone.” Sanford v.Bertrau, 204 Mich. 244, 247, 169 N.W. 880, 881(1918). But that by no means dictates our choice.The interpretation of 26 U.S.C. § 6321 is a federalquestion, and in answering that question we are inno way **1426 bound by state courts' answers tosimilar questions involving state law. As we else-where have held, “ ‘exempt status under state lawdoes not bind the federal collector.’ ” Drye v.United States, 528 U.S., at 59, 120 S.Ct. 474. Seealso Rodgers, supra, at 701, 103 S.Ct. 2132(clarifying that the Supremacy Clause “provides the*289 underpinning for the Federal Government'sright to sweep aside state-created exemptions”).

VWe express no view as to the proper valuation

of respondent's husband's interest in the entiretiesproperty, leaving this for the Sixth Circuit to de-termine on remand. We note, however, that insofaras the amount is dependent upon whether the 1989conveyance was fraudulent, see post, at 1426, n. 1(THOMAS, J., dissenting), this case is somewhatanomalous. The Sixth Circuit affirmed the DistrictCourt's judgment that this conveyance was notfraudulent, and the Government has not sought cer-tiorari review of that determination. Since the Dis-trict Court's judgment was based on the notion that,because the federal tax lien could not attach to theproperty, transferring it could not constitute an at-tempt to evade the Government creditor, 65F.Supp.2d, at 657-659, in future cases, the fraudu-lent conveyance question will no doubt beanswered differently.

The judgment of the United States Court ofAppeals for the Sixth Circuit is accordingly re-versed, and the case is remanded for proceedingsconsistent with this opinion.

It is so ordered.

Justice SCALIA, with whom Justice THOMASjoins, dissenting.

I join Justice THOMAS's dissent, which pointsout (to no relevant response from the Court) that aState's decision to treat the marital partnership as aseparate legal entity, whose property cannot be en-cumbered by the debts of its individual members, isno more novel and no more “artificial” than aState's decision to treat the commercial partnershipas a separate legal entity, whose property cannot beencumbered by the debts of its individual members.

I write separately to observe that the Court nul-lifies (insofar as federal taxes are concerned, atleast) a form of property*290 ownership that was ofparticular benefit to the stay-at-home spouse ormother. She is overwhelmingly likely to be the sur-vivor that obtains title to the unencumbered prop-erty; and she (as opposed to her business-worldhusband) is overwhelmingly unlikely to be thesource of the individual indebtedness against whicha tenancy by the entirety protects. It is regrettablethat the Court has eliminated a large part of this tra-ditional protection retained by many States.

Justice THOMAS, with whom Justice STEVENSand Justice SCALIA join, dissenting.

The Court today allows the Internal RevenueService (IRS) to reach proceeds from the sale ofreal property that did not belong to the taxpayer, re-spondent's husband, Don Craft,FN1 because, in theCourt's **1427 view, he “possesse[d] individualrights in the [tenancy by the entirety] estate suffi-cient to constitute ‘property’ or ‘rights to property’for the purposes of the lien” created by 26 U.S.C. §6321. Ante, at 1419. The Court does not contest thatthe tax liability the IRS seeks to satisfy is Mr.Craft's alone, and does not claim that, underMichigan law, real property held as a tenancy bythe entirety belongs to either spouse individually.Nor does the Court *291 suggest that the federal taxlien attaches to particular “rights to property” heldindividually by Mr. Craft. Rather, borrowing themetaphor of “property as a ‘bundle of sticks'-a col-lection of individual rights which, in certain com-binations constitute property,” ante, at 1420, theCourt proposes that so long as sufficient “sticks” in
























the bundle of “rights to property” “belong to” a de-linquent taxpayer, the lien can attach as if the prop-erty itself belonged to the taxpayer, ante, at 1424.

FN1. The Grand Rapids property was ten-ancy by the entirety property owned byMr. and Mrs. Craft when the tax lien at-tached, but was conveyed by the Crafts toMrs. Craft by quitclaim deed in 1989. Thatconveyance terminated the entirety estate.Mich. Comp. Laws Ann. § 557.101 (West1988); see also United States v. CertainReal Property Located at 2525 Leroy Lane, 910 F.2d 343, 351 (C.A.6 1990). The Dis-trict Court and Court of Appeals both heldthat the transfer did not constitute a fraud-ulent conveyance, a ruling the Governmenthas not appealed. The IRS is undoubtedlyentitled to any proceeds that Mr. Craft re-ceived or to which he was entitled from the1989 conveyance of the tenancy by the en-tirety property for $1; at that point the ten-ancy by the entirety estate was destroyedand at least half of the proceeds, or 50cents, was “property” or “rights to prop-erty” “belonging to” Mr. Craft. By con-trast, the proceeds that the IRS claims hereare from Mrs. Craft's 1992 sale of theproperty to a third party. At the time of thesale, she owned the property in fee simple,and accordingly Mr. Craft neither receivednor was entitled to these funds.

This amorphous construct ignores the primacyof state law in defining property interests, eviscer-ates the statutory distinction between “property”and “rights to property” drawn by § 6321, and con-flicts with an unbroken line of authority from thisCourt, the lower courts, and the IRS. Its applicationis all the more unsupportable in this case because,in my view, it is highly unlikely that the limited in-dividual “rights to property” recognized in a ten-ancy by the entirety under Michigan law are them-selves subject to lien. I would affirm the Court ofAppeals and hold that Mr. Craft did not have

“property” or “rights to property” to which the fed-eral tax lien could attach.

ITitle 26 U.S.C. § 6321 provides that a federal

tax lien attaches to “all property and rights to prop-erty, whether real or personal, belonging to” a de-linquent taxpayer. It is uncontested that a federaltax lien itself “creates no property rights but merelyattaches consequences, federally defined, to rightscreated under state law.” United States v. Bess, 357U.S. 51, 55, 78 S.Ct. 1054, 2 L.Ed.2d 1135 (1958)(construing the 1939 version of the federal tax lienstatute). Consequently, the Government's lien under§ 6321 “cannot extend beyond the property in-terests held by the delinquent taxpayer,” UnitedStates v. Rodgers, 461 U.S. 677, 690-691, 103 S.Ct.2132, 76 L.Ed.2d 236 (1983), under state law. Be-fore today, no one disputed that the IRS, by opera-tion of § 6321, “steps into the taxpayer's shoes,”and has the same rights as the taxpayer in propertyor rights to property subject*292 to the lien. B. Bit-tker & M. McMahon, Federal Income Taxation ofIndividuals ¶ 44.5 [4][a] (2d ed. 1995 and 2000Cum. Supp.) (hereinafter Bittker). I would not ex-pand “ ‘the nature of the legal interest’ ” the tax-payer has in the property beyond those interests re-cognized under state law. Aquilino v. United States,363 U.S. 509, 513, 80 S.Ct. 1277, 4 L.Ed.2d 1365(1960) (citing Morgan v. Commissioner, 309 U.S.78, 82, 60 S.Ct. 424, 84 L.Ed. 1035 (1940)).

AIf the Grand Rapids property “belong[ed] to”

Mr. Craft under state law prior to the termination ofthe tenancy by the entirety, the federal tax lienwould have attached to the Grand Rapids property.But that is not this case. As the Court recognizes,pursuant to Michigan law, as under English com-mon law, property held as a tenancy by the entiretydoes not belong to either spouse, but to a single en-tity composed of the married persons. See ante, at1421-1422. Neither spouse has “any separate in-terest in such an estate.” Sanford v. Bertrau, 204Mich. 244, 249, 169 N.W. 880, 882 (1918); see also

122 S.Ct. 1414 35 U.S. 274, 122 S.Ct. 1414, 152 L.Ed.2d 437, 89 A.F.T.R.2d 2002-2005, 2002-1 USTC P 50,361, 2002-2 C.B.548, 02 Cal. Daily Op. Serv. 3283, 2002 Daily Journal D.A.R. 4111, 15 Fla. L. Weekly Fed. S 196(Cite as: 535 U.S. 274, 122 S.Ct. 1414)



























Long v. Earle, 277 Mich. 505, 517, 269 N.W. 577,581 (1936) (“Each [spouse] is vested with an entiretitle and as against **1428 the one who attemptsalone to convey or incumber such real estate, theother has an absolute title”). An entireties estateconstitutes an indivisible “sole tenancy.” See Bud-wit v. Herr, 339 Mich. 265, 272, 63 N.W.2d 841,844 (1954); see also Tyler v. United States, 281U.S. 497, 501, 50 S.Ct. 356, 74 L.Ed. 991 (1930)(“[T]he tenants constitute a unit; neither can dis-pose of any part of the estate without the consent ofthe other; and the whole continues in the surviv-or”). Because Michigan does not recognize a separ-ate spousal interest in the Grand Rapids property, itdid not “belong” to either respondent or her hus-band individually when the IRS asserted its lien forMr. Craft's individual tax liability. Thus, the prop-erty was not property to which the federal tax liencould attach for Mr. Craft's tax liability.

*293 The Court does not dispute this character-ization of Michigan's law with respect to the essen-tial attributes of the tenancy by the entirety estate.However, relying on Drye v. United States, 528U.S. 49, 59, 120 S.Ct. 474, 145 L.Ed.2d 466 (1999), which in turn relied upon United States v. Irvine,511 U.S. 224, 114 S.Ct. 1473, 128 L.Ed.2d 168(1994), and United States v. Mitchell, 403 U.S. 190,91 S.Ct. 1763, 29 L.Ed.2d 406 (1971), the Courtsuggests that Michigan's definition of the tenancyby the entirety estate should be overlooked becausefederal tax law is not controlled by state legal fic-tions concerning property ownership. Ante, at1420-1421. But the Court misapprehends the ap-plication of Drye to this case.

Drye, like Irvine and Mitchell before it, wasconcerned not with whether state law recognized“property” as belonging to the taxpayer in the firstplace, but rather with whether state laws could dis-claim or exempt such property from federal tax li-ability after the property interest was created. Dryeheld only that a state-law disclaimer could not ret-roactively undo a vested right in an estate that thetaxpayer already held, and that a federal lien there-

fore attached to the taxpayer's interest in the estate.528 U.S., at 61, 120 S.Ct. 474 (recognizing that adisclaimer does not restore the status quo ante be-cause the heir “determines who will receive theproperty-himself if he does not disclaim, a knownother if he does”). Similarly, in Irvine, the Courtheld that a state law allowing an individual to dis-claim a gift could not force the Court to be “struckblind” to the fact that the transfer of “property” or“property rights” for which the gift tax was due hadalready occurred; “state property transfer rules donot transfer into federal taxation rules.” 511 U.S., at239-240, 114 S.Ct. 1473 (emphasis added). Seealso Mitchell, supra, at 204, 91 S.Ct. 1763 (holdingthat right to renounce a marital interest under statelaw does not indicate that the taxpayer had no rightto property before the renunciation).

Extending this Court's “state law fiction” juris-prudence to determine whether property or rights toproperty exist under state law in the first placeworks a sea change in the *294 role States have tra-ditionally played in “creating and defining” prop-erty interests. By erasing the careful line betweenstate laws that purport to disclaim or exempt prop-erty interests after the fact, which the federal tax li-en does not respect, and state laws' definition ofproperty and property rights, which the federal taxlien does respect, the Court does not follow Drye,but rather creates a new federal common law ofproperty. This contravenes the previously settledrule that the definition and scope of property is leftto the States. See Aquilino, supra, at 513, n. 3, 80S.Ct. 1277 (recognizing unsoundness of leaving thedefinition of property interests to a nebulous bodyof federal law, “because it ignores the long-established role that the States have played in creat-ing property interests and places upon the courts thetask of attempting to ascertain a taxpayer's propertyrights under an undefined rule of federal law”).

BThat the Grand Rapids property does not be-

long to Mr. Craft under Michigan **1429 law doesnot end the inquiry, however, since the federal tax












































lien attaches not only to “property” but also to any“rights to property” belonging to the taxpayer.While the Court concludes that a laundry list of“rights to property” belonged to Mr. Craft as a ten-ant by the entirety,FN2 it does not suggest that thetax lien attached to any of these particular rights.FN3 Instead, the Court gathers *295 these rights to-gether and opines that there were sufficient sticks toform a bundle, so that “respondent's husband's in-terest in the entireties property constituted‘property’ or ‘rights to property’ for the purposes ofthe federal tax lien statute.” Ante, at 1425, 1424.

FN2. The parties disagree as to whetherMichigan law recognizes the “rights toproperty” identified by the Court as indi-vidual rights “belonging to” each tenant inentireties property. Without deciding aquestion better resolved by the Michigancourts, for the purposes of this case I willassume, arguendo, that Michigan law re-cognizes separate interests in these “rightsto property.”

FN3. Nor does the Court explain how such“rights to property” survived the destruc-tion of the tenancy by the entirety, al-though, for all intents and purposes, it ac-knowledges that such rights as it identifiesexist by virtue of the tenancy by the en-tirety estate. Even Judge Ryan's concur-rence in the Sixth Circuit's first ruling inthis matter is best read as making the Fed-eral Government's right to execute its liendependent upon the factual finding that theconveyance was a fraudulent transaction.See 140 F.3d 638, 648-649 (C.A.6 1998).

But the Court's “sticks in a bundle” metaphorcollapses precisely because of the distinction ex-pressly drawn by the statute, which distinguishesbetween “property” and “rights to property.” TheCourt refrains from ever stating whether this caseinvolves “property” or “rights to property” eventhough § 6321 specifically provides that the federaltax lien attaches to “property” and “rights to prop-

erty” “belonging to” the delinquent taxpayer, andnot to an imprecise construct of “individual rightsin the estate sufficient to constitute ‘property’ or‘rights to property’ for the purposes of the lien.”Ante, at 1419.FN4

FN4. The Court's reasoning that because ataxpayer has rights to property a federaltax lien can attach not only to those rightsbut also to the property itself could havefar-reaching consequences. As illustration,in the partnership setting as elsewhere, theGovernment's lien under § 6321 places theGovernment in no better position than thetaxpayer to whom the property belonged:“[F]or example, the lien for a partner's un-paid income taxes attaches to his interest inthe firm, not to the firm's assets.” Bittker ¶44.5[4][a]. Though partnership propertycurrently is “not subject to attachment orexecution, except on a claim against thepartnership,” Rev. Rul. 73-24, 1973-1Cum. Bull. 602; cf. United States v. Kauf-man, 267 U.S. 408, 45 S.Ct. 322, 69 L.Ed.685 (1925), under the logic of the Court'sopinion partnership property could be at-tached for the tax liability of an individualpartner. Like a tenant in a tenancy by theentirety, the partner has significant rightsto use, enjoy, and control the partnershipproperty in conjunction with his partners. Isee no principled way to distinguishbetween the propriety of attaching the fed-eral tax lien to partnership property to sat-isfy the tax liability of a partner, in contra-vention of current practice, and the propri-ety of attaching the federal tax lien to ten-ancy by the entirety property in order tosatisfy the tax liability of one spouse, alsoin contravention of current practice. I donot doubt that a tax lien may attach to apartner's partnership interest to satisfy hisindividual tax liability, but it is well settledthat the lien does not, thereby, attach toproperty belonging to the partnership. The












problem for the IRS in this case is that, un-like a partnership interest, such limitedrights that Mr. Craft had in the Grand Rap-ids property are not the kind of rights toproperty to which a lien can attach, and theGrand Rapids property itself never“belong[ed] to” him under Michigan law.

*296 Rather than adopt the majority's ap-proach, I would ask specifically, as the statute does,whether Mr. Craft had any particular “rights toproperty” to which the federal tax lien could attach.He did not.FN5 Such “rights to property” that have**1430 been subject to the § 6321 lien are valuableand “pecuniary,” i.e., they can be attached, andlevied upon or sold by the Government.FN6 Drye,528 U.S., at 58-60, and n. 7, 120 S.Ct. 474. Withsuch rights subject to lien, the taxpayer's interesthas “ripen [ed] into a present estate” of some formand is more than a mere expectancy, id., at 60, n. 7,120 S.Ct. 474, and thus the taxpayer has an appar-ent right “to channel that value to [another],” id., at61, 120 S.Ct. 474.

FN5. Even such rights as Mr. Craft argu-ably had in the Grand Rapids property bearno resemblance to those to which a federaltax lien has ever attached. See W. Elliott,Federal Tax Collections, Liens, and Levies¶ ¶ 9.09[3][a]-[f] (2d ed.1995 and 2000Cum. Supp.) (hereinafter Elliott) (listingexamples of rights to property to which afederal tax lien attaches, such as the rightto compel payment; the right to withdrawmoney from a bank account, or to receivemoney from accounts receivable; wagesearned but not paid; installment paymentsunder a contract of sale of real estate; an-nuity payments; a beneficiary's rights topayment under a spendthrift trust; a liquorlicense; an easement; the taxpayer's in-terest in a timeshare; options; the taxpay-er's interest in an employee benefit plan orindividual retirement account).

FN6. See 26 U.S.C. §§ 6331, 6335-6336.

In contrast, a tenant in a tenancy by the entiretynot only lacks a present divisible vested interest inthe property and control with respect to the sale, en-cumbrance, and transfer of the property, but alsodoes not possess the ability to devise any portion ofthe property because it is subject to the other's in-destructible right of survivorship. *297Rogers v.Rogers, 136 Mich.App. 125, 135-137, 356 N.W.2d288, 293-294 (1984). This latter fact makes theproperty significantly different from communityproperty, where each spouse has a present one-halfvested interest in the whole, which may be devisedby will or otherwise to a person other than thespouse. See 4 G. Thompson, Real Property §37.14(a) (D. Thomas ed. 1994) (noting that a mar-ried person's power to devise one-half of the com-munity property is “consistent with the fundamentalcharacteristic of community property”: “communityownership means that each spouse owns 50% ofeach community asset”).FN7 See also Drye, 528U.S., at 61, 120 S.Ct. 474 (“[I]n determiningwhether a federal taxpayer's state-law rights consti-tute ‘property’ or ‘rights to property,’ the importantconsideration is the breadth of the control the tax-payer could exercise over the property” (emphasisadded, citation and brackets omitted)).

FN7. And it is similarly different from thesituation in United States v. Rodgers, 461U.S. 677, 103 S.Ct. 2132, 76 L.Ed.2d 236(1983), where the question was not wheth-er a vested property interest in the familyhome to which the federal tax lien couldattach “belong[ed] to” the taxpayer.Rather, in Rodgers, the only question waswhether the federal tax lien for the hus-band's tax liability could be foreclosedagainst the property under 26 U.S.C. §7403, despite his wife's homestead rightunder state law. See 461 U.S., at 701-703,and n. 31, 103 S.Ct. 2132.

It is clear that some of the individual rights of atenant in entireties property are primarily personal,dependent upon the taxpayer's status as a spouse,
































and similarly not susceptible to a tax lien. For ex-ample, the right to use the property in conjunctionwith one's spouse and to exclude all others appearsparticularly ill suited to being transferred to anoth-er, see ibid., and to lack “exchangeable value,” id.,at 56, 120 S.Ct. 474.

Nor do other identified rights rise to the levelof “rights to property” to which a § 6321 lien canattach, because they represent, at most, a contingentfuture interest, or an “expectancy” that has not“ripen[ed] into a present estate.” Id., at 60, n. 7, 120S.Ct. 474 (“Nor do we mean to suggest that an ex-pectancy*298 that has pecuniary value and is trans-ferable under state law would fall within § 6321prior to the time it ripens into a present estate”). Cf.Bess, 357 U.S., at 55-56, 78 S.Ct. 1054 (holdingthat no federal tax lien could attach to proceeds ofthe taxpayer's life insurance policy because “[i]twould be anomalous to view as ‘property’ subjectto lien proceeds never within the insured's reach toenjoy”). By way of example, the survivorship rightwholly depends upon one spouse outliving the oth-er, at which time the survivor gains “substantialrights, in respect of the property, theretofore neverenjoyed by [the] survivor.” Tyler, 281 U.S., at 503,50 S.Ct. 356. While the Court explains that it is**1431 “not necessary to decide whether the rightto survivorship alone would qualify as ‘property’ or‘rights to property’ ” under § 6321, ante, at 1424,the facts of this case demonstrate that it would not.Even assuming both that the right of survivabilitycontinued after the demise of the tenancy estate andthat the tax lien could attach to such a contingentfuture right, creating a lienable interest upon thedeath of the nonliable spouse, it would not help theIRS here; respondent's husband predeceased her in1998, and there is no right of survivorship at issuein this case.

Similarly, while one spouse might escape theabsolute limitations on individual action with re-spect to tenancy by the entirety property by obtain-ing the right to one-half of the property upon di-vorce, or by agreeing with the other spouse to sever

the tenancy by the entirety, neither instance is anevent of sufficient certainty to constitute a “right toproperty” for purposes of § 6321. Finally, while thefederal tax lien could arguably have attached to atenant's right to any “rents, products, income, orprofits” of real property held as tenants by the en-tirety, Mich. Comp. Laws Ann. § 557.71 (West1988), the Grand Rapids property created no rents,products, income, or profits for the tax lien to at-tach to.

In any event, all such rights to property, de-pendent as they are upon the existence of the ten-ancy by the entirety *299 estate, were likely des-troyed by the quitclaim deed that severed the ten-ancy. See n. 1, supra. Unlike a lien attached to theproperty itself, which would survive a conveyance,a lien attached to a “right to property” falls squarelywithin the maxim that “the tax collector not onlysteps into the taxpayer's shoes but must go barefootif the shoes wear out.” Bittker ¶ 44.5[4][a] (notingthat “a state judgment terminating the taxpayer'srights to an asset also extinguishes the federal taxlien attached thereto”). See also Elliott ¶9.09[3][d][i] (explaining that while a tax lien mayattach to a taxpayer's option on property, if the op-tion terminates, the Government's lien rights wouldterminate as well).

Accordingly, I conclude that Mr. Craft hadneither “property” nor “rights to property” to whichthe federal tax lien could attach.

IIThat the federal tax lien did not attach to the

Grand Rapids property is further supported by theconsensus among the lower courts. For more than50 years, every federal court reviewing tenanciesby the entirety in States with a similar understand-ing of tenancy by the entirety as Michigan has con-cluded that a federal tax lien cannot attach to suchproperty to satisfy an individual spouse's tax liabil-ity.FN8 This *300 consensus is supported by theIRS' consistent recognition, arguably against its**1432 own interest, that a federal tax lien againstone spouse cannot attach to property or rights to




















property held as a tenancy by the entirety.FN9

FN8. See IRS v. Gaster, 42 F.3d 787, 791(C.A.3 1994) (concluding that the IRS isnot entitled to a lien on property owned asa tenancy by the entirety to satisfy the taxobligations of one spouse); Pitts v. UnitedStates, 946 F.2d 1569, 1571-1572 (C.A.41991) (same); United States v. AmericanNat. Bank of Jacksonville, 255 F.2d 504,507 (C.A.5), cert. denied, 358 U.S. 835, 79S.Ct. 58, 3 L.Ed.2d 72 (1958) (same); Raf-faele v. Granger, 196 F.2d 620, 622-623(C.A.3 1952) (same); United States v.Hutcherson, 188 F.2d 326, 331 (C.A.81951) (explaining that the interest of onespouse in tenancy by the entirety property“is not a right to property or property inany sense”); United States v. Nathanson,60 F.Supp. 193, 194 (E.D.Mich.1945)(finding no designation in the Federal Rev-enue Act for imposing tax upon propertyheld by the entirety for taxes due from oneperson alone); Shaw v. United States, 94F.Supp. 245, 246 (W.D.Mich.1939)(recognizing that the nature of the estateunder Michigan law precludes the tax lienfrom attaching to tenancy by the entiretyproperty for the tax liability of one spouse). See also Benson v. United States, 442F.2d 1221, 1223 (C.A.D.C.1971)(recognizing the Government's concessionthat property owned by the parties as ten-ants by the entirety cannot be subjected toa tax lien for the debt of one tenant); Colev. Cardoza, 441 F.2d 1337, 1343 (C.A.61971) (noting Government concession that,under Michigan law, it had no valid claimagainst real property held by tenancy bythe entirety).

FN9. See, e.g., Internal Revenue Manual §5.8.4.2.3 (RIA 2002), available at WEST-LAW, RIA-IRM database (Mar. 29, 2002)(listing “property owned as tenants by the

entirety” as among the assets beyond thereach of the Government's tax lien); id., §5.6.1.2.3 (recognizing that a consensual li-en may be appropriate “when the federaltax lien does not attach to the property inquestion. For example, an assessment ex-ists against only one spouse and the federaltax lien does not attach to real propertyheld as tenants by the entirety”); IRS ChiefCounsel Advisory (Aug. 17, 2001) (notingthat consensual liens, or mortgages, are tobe used “as a means of securing the Gov-ernment's right to collect from property theassessment lien does not attach to, such asreal property held as a tenancy by the en-tirety” (emphasis added)); IRS LitigationBulletin No. 407 (Aug. 1994)(“Traditionally, the government has takenthe view that a federal tax lien against asingle debtor-spouse does not attach toproperty or rights to property held by bothspouses as tenants by the entirety”); IRSLitigation Bulletin No. 388 (Jan. 1993)(explaining that neither the Department ofJustice nor IRS chief counsel interpretedUnited States v. Rodgers, 461 U.S. 677,103 S.Ct. 2132, 76 L.Ed.2d 236 (1983), tomean that a federal tax lien against onespouse encumbers his or her interest in en-tireties property, and noting that it “do[es]not believe the Department will again ar-gue the broader interpretation of Rodgers,”which would extend the reach of the feder-al tax lien to property held by the en-tireties); Benson, supra, at 1223; Cardoza,supra, at 1343.

That the Court fails to so much as mention thisconsensus, let alone address it or give any reasonfor overruling it, is puzzling. While the positions ofthe lower courts and the IRS do not bind this Court,one would be hard pressed to explain why the com-bined weight of these judicial and administrativesources-including the IRS' instructions to its ownemployees-do not constitute relevant authority.




































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*301 IIIFinally, while the majority characterizes

Michigan's view that the tenancy by the entiretyproperty does not belong to the individual spousesas a “state law fiction,” ante, at 1419, our preced-ents, including Drye, 528 U.S., at 58-60, 120 S.Ct.474, hold that state, not federal, law defines prop-erty interests. Ownership by “the marriage” is ad-mittedly a fiction of sorts, but so is a partnership orcorporation. There is no basis for ignoring this fic-tion so long as federal law does not define property,particularly since the tenancy by the entirety prop-erty remains subject to lien for the tax liability ofboth tenants.

Nor do I accept the Court's unsupported as-sumption that its holding today is necessary be-cause a contrary result would “facilitat[e] abuse ofthe federal tax system.” Ante, at 1424. The Govern-ment created this straw man, Brief for United States30-32, suggesting that the property transfer fromthe tenancy by the entirety to respondent was some-how improper, see id., at 30-31, n. 20(characterizing scope of “[t]he tax avoidancescheme sanctioned by the court of appeals in thiscase”), even though it chose not to appeal the lowercourt's contrary assessment. But the longstandingconsensus in the lower courts that tenancy by theentirety property is not subject to lien for the tax li-ability of one spouse, combined with the Govern-ment's failure to adduce any evidence that this hasled to wholesale tax fraud by married individuals,suggests that the Court's policy rationale for itsholding is simply unsound.

Just as I am unwilling to overturn this Court'slongstanding precedent that States define and createproperty rights and forms of ownership, Aquilino,363 U.S., at 513, n. 3, 80 S.Ct. 1277, I am equallyunwilling to redefine or dismiss as fictional formsof property ownership that the State has recognizedin favor of an amorphous federal common-lawdefinition of property. I respectfully dissent.

U.S.,2002.

U.S. v. Craft535 U.S. 274, 122 S.Ct. 1414, 152 L.Ed.2d 437, 89A.F.T.R.2d 2002-2005, 2002-1 USTC P 50,361,2002-2 C.B. 548, 02 Cal. Daily Op. Serv. 3283,2002 Daily Journal D.A.R. 4111, 15 Fla. L. WeeklyFed. S 196

END OF DOCUMENT









United States District Court,S.D. Ohio,

Eastern Division.Mary J. PATERNOSTER, Plaintiff,

v.The UNITED STATES of America, et al., Defend-

ants.

No. 2:08-cv-388.July 22, 2009.

Background: Owner of property, which was sub-ject to survivorship tenancy between owner and herhusband, brought Ohio state-court action againstUnited States, seeking to quiet title to property andalleging claims for failure to release tax lien againsthusband, unauthorized collection, slander, and fordeclaratory judgment. Government removed action.Parties both moved for summary judgment.

Holdings: The District Court, Gregory L. Frost, J.,held that:(1) rights held by owner's husband constitutedproperty within scope of statute regarding tax liens,and(2) government was not equitably estopped fromasserting interest in property or escrowed proceeds.

Owner's motion denied and government's mo-tion granted.

West Headnotes




Once it has been determined that state law hascreated property interests sufficient for a federal taxlien to attach, state law is inoperative to prevent theattachment of such liens.









Regardless of the label, the survivorship ten-ancy under Ohio law is the equivalent of tenancy bythe entirety, providing within its bundle of rightsthe rights to use, exclusion, and income, as well asright to become a tenant in common with equalshares upon divorce. Ohio R.C. § 5302.17.



220k4771 Property Subject to Lien220k4775 k. Taxpayer's Interest in Gener-

al. Most Cited CasesRights held by property owner's husband,

whose interest in property was based on survivor-ship tenancy under Ohio law, to use, exclusion, andincome, as well as right to become tenant in com-mon with equal shares upon divorce, constitutedproperty or rights to property within scope of In-ternal Revenue Code statute regarding tax liens,and thus lien attached prior to husband's death andencumbered property, regardless of whether hus-band's survivorship right, by itself, was sufficientunder statute. 26 U.S.C.A. § 6321; Ohio R.C. §§5302.17, 5302.20(C)(1, 5).

[4] Estoppel 156 62.2(4)

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156 Estoppel156III Equitable Estoppel

156III(A) Nature and Essentials in General156k62 Estoppel Against Public, Govern-

ment, or Public Officers156k62.2 States and United States

156k62.2(4) k. Particular UnitedStates Officers, Agencies, or Proceedings. MostCited Cases

Government was not equitably estopped fromasserting interest in subject property or escrowedproceeds due to its purported change of positionsregarding tax lien prior to sale of property, in prop-erty owner's action to quiet title and for failure torelease tax claim against owner's husband and un-authorized collection; owner knew of government'spurported change of position prior to culminatingsale, and letter, which was written by Internal Rev-enue Service (IRS) advisor in response to owner'srequest for certificate of non-attachment, was am-biguous as to whether statement that owner's sub-missions were “sufficient,” was intended to meanthat owner's request was well taken, as opposed tothat owner's application was complete. 26 U.S.C.A.§§ 7432, 7433; 28 U.S.C.A. § 2410(a)(1).

*984 Timothy S. Rankin, Craig J. Spadafore, OndaLabuhn Rankin & Boggs Co. LPA, Columbus, OH,for Plaintiff.

Bethany J. Hamilton, Assistant United States Attor-ney, Columbus, OH, for Defendants.

OPINION AND ORDERGREGORY L. FROST, District Judge.

This matter is before the Court for considera-tion of the following sets of filings:

(1) Plaintiff's motion for summary judgment(Doc. # 32), Defendant's memorandum in opposi-tion (Doc. # 35), and Plaintiff's reply memorandum(Doc. # 37); and

(2) Defendant's motion for summary judgment(Doc. # 33), Plaintiff's memorandum in opposition

(Doc. # 34), and Defendant's reply memorandum(Doc. # 36).

For the reasons that follow, the Court DENIESPlaintiff's motion for summary judgment (Doc. #32) and GRANTS Defendant's motion for summaryjudgment (Doc. # 33).

I. BackgroundThe parties have stipulated to the following

facts: FN1

FN1. The parties' January 30, 2009 JointStipulations include parenthetical designa-tions of exhibits submitted as stipulatedexhibits. For ease of reading, the Court hasdeleted these parentheticals from the stipu-lated facts without expressly indicating theomissions.

1. On March 1, 1989, Plaintiff, formerly knownas Mary J. Streitenberger, and her sister, SusanA. Streitenberger *985 (“Susan”), jointly ac-quired the residential real property commonlyknown as 5085 Springfield Court, Westerville,Ohio 43081 (“Property”).

2. In December 1992, Plaintiff married MichaelD. Paternoster.

3. On August 15, 1995, Plaintiff acquiredSusan's interest in the Property, thereby becom-ing the sole owner of the Property.

4. On August 15, 1995, Plaintiff conveyed herinterest in the Property to herself and Michael Pa-ternoster by Survivorship Deed, thereby creatinga survivorship tenancy between Plaintiff and Mi-chael Paternoster.

5. On November 24, 2003, Michael Paternosterwas individually assessed a Trust Fund RecoveryPenalty (the “Assessment”) pursuant to 26 U.S.C.§ 6672 for tax periods ending March 31, 2002,June 30, 2002, September 30, 2002, December31, 2002, and March 31, 2003.





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6. On January 21, 2004, the Detroit, Michiganoffice of the Internal Revenue Service (“IRS”)filed a Notice of Federal Tax Lien in the office ofthe Franklin County Recorder (“Lien”) againstMichael Paternoster with respect to the Assess-ment.

7. On January 26, 2004, Michael Paternosterdied.

8. As of January 26, 2004, the amount due tothe IRS on the Assessment was $40,661.24.

9. As of January 26, 2004, the Property was en-cumbered by the Lien, the validity of whichPlaintiff disputes, a mortgage in favor of U.S.Health Credit Union, Inc. and a second mortgagein favor of U.S. Health Credit Union, Inc.

10. Defendant did not levy or attempt to levyupon the Property prior to Michael Paternoster'sdeath.

11. On February 3, 2004, an Affidavit forTransfer to Survivor was filed of record with theFranklin Court, Ohio Recorder's Office.

12. On June 7, 2004, Michael Paternoster wasindividually assessed a Trust Fund Recovery Pen-alty for tax periods ending June 30, 2003,September 30, 2003, and December 31, 2003.

13. On May 14, 2007, via overnight delivery,Plaintiff submitted an Application for Certificateof Nonattachment of Federal Tax Lien(“Application”) with supporting documentationto the IRS, directed to the Technical ServiceGroup Manager, pursuant to 26 U.S.C. § 6325(e),in order to obtain a determination that the Lienencumbering Michael Paternoster's interest in theProperty was extinguished upon his death and ac-cordingly, that the Lien no longer attached to theProperty.

14. On July 30, 2007, via certified mail andfacsimile, Plaintiff resubmitted the Application tothe IRS, Technical Services Group Manager,

based upon the failure of the IRS to acknowledgereceipt of the Application or issue a response toit.

15. On August 2, 2007, the IRS sent writtencorrespondence to Plaintiff acknowledging re-ceipt of the Application.

16. On September 20, 2007, the IRS issued aresponse to the Application.

17. In the fall of 2007, Plaintiff entered into areal estate purchase contract with Corey W.Steele (“Purchaser”) in order to sell the Propertyfor the amount of $194,900.00.

18. Prior to closing on the Property, ChicagoTitle Insurance Company (“Chicago Title”), thecompany responsible for insuring title to theProperty for the benefit of Purchaser, contactedthe IRS to confirm that the Lien did not attach tothe Property.

19. A representative of the IRS orally respon-ded that the Lien remained *986 attached to theProperty and that the IRS's interest was a fixednumber on the date of death.

20. To facilitate the closing of the Property,Plaintiff, Purchaser, and Chicago Title entered in-to an escrow agreement to escrow $42,000.00 ofthe net sale proceeds (“Escrowed Proceeds”).

21. On November 9, 2007, the sale of the Prop-erty to Purchaser closed and the Escrowed Pro-ceeds were deposited with Chicago Title pursuantto the terms of the Escrow Agreement.

22. Upon the agreement of the parties, ChicagoTitle subsequently deposited the Escrowed Pro-ceeds with the Court.

23. Subsequent to the closing, Plaintiff's Coun-sel continued to attempt to resolve the Lien dis-pute with the IRS Technical Service Group andthe Office of Chief Counsel.



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24. The IRS Technical Service Group and theOffice of Chief Counsel rejected Plaintiff's Ap-plication and request for a Certificate of Nonat-tachment of the Lien.

25. Plaintiff has not submitted a claim formoney damages to the Internal Revenue Servicefor injury or loss of property or wrongful act oromission of any employee of the Governmentwhile acting within the scope of his office or em-ployment.

26. Plaintiff has not submitted a claim to theInternal Revenue Service for any actual, directeconomic damages sustained by Plaintiff which,but for the actions of the Internal Revenue Ser-vice, would not have been sustained.

27. Plaintiff has not submitted a claim to theInternal Revenue Service for any actual, directeconomic damages sustained by Plaintiff as aproximate result of reckless or intentional or neg-ligent action of an officer or employee of the In-ternal Revenue Service.

(Doc. # 30, at 1-5.) In addition to recognizingthe foregoing stipulated facts, the Court notesthat Plaintiff originally filed the instant action onApril 7, 2008, in the Court of Common Pleas inFranklin County, Ohio. (Doc. # 3.) Defendantsubsequently removed the action to this Court onApril 23, 2008. (Doc. # 2.) Plaintiff later filed afive-count amended complaint that asserts thefollowing claims: a count to quiet title pursuantto 28 U.S.C. § 2410(a)(1), a count for the failureto release the lien pursuant to 26 U.S.C. § 7432,an unauthorized collection action count pursuantto 26 U.S.C. § 7433, a slander of title count; anda count for declaratory judgment. After filing thejoint stipulations of fact (Doc. # 30) and stipu-lated exhibits (Doc. # 31), both sides have filedmotions for summary judgment (Docs. # 32, 33).Briefing on the motions has ended, and the mo-tions are now ripe for disposition.

II. Discussion

A. Standards InvolvedThe parties both move for summary judgment

on various claims set forth in the amended com-plaint. (Doc. # 23.) Summary judgment is appropri-ate “if the pleadings, the discovery and disclosurematerials on file, and any affidavits show that thereis no genuine issue as to any material fact and thatthe movant is entitled to judgment as a matter oflaw.” Fed.R.Civ.P. 56(c). The Court may thereforegrant a motion for summary judgment if the non-moving party who has the burden of proof at trialfails to make a showing sufficient to establish theexistence of an element that is essential to thatparty's case. See Muncie Power Prods., Inc. v.United Tech. Auto., Inc., 328 F.3d 870, 873 (6thCir.2003) (citing Celotex Corp. v. Catrett, 477 U.S.317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).

*987 In viewing the evidence, the Court mustdraw all reasonable inferences in favor of the non-moving party, which must set forth specific factsshowing that there is a genuine issue of materialfact for trial. Id. (citing Matsushita Elec. Indus.Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587,106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)); Hamad v.Woodcrest Condo. Ass'n, 328 F.3d 224, 234 (6thCir.2003). A genuine issue of material fact exists“if the evidence is such that a reasonable jury couldreturn a verdict for the nonmoving party.” Muncie,328 F.3d at 873 (quoting Anderson v. LibertyLobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91L.Ed.2d 202 (1986)). Consequently, the central is-sue is “ ‘whether the evidence presents a sufficientdisagreement to require submission to a jury orwhether it is so one-sided that one party must pre-vail as a matter of law.’ ” Hamad, 328 F.3d at234-35 (quoting Anderson, 477 U.S. at 251-52, 106S.Ct. 2505).

Defendant also moves to dismiss select claimspursuant to Federal Rule of Civil Procedure12(b)(1). That rule provides that an action may bedismissed for lack of subject matter jurisdiction.Under the Federal Rules of Civil Procedure,“[p]laintiffs have the burden of proving jurisdiction



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in order to survive a Rule 12(b)(1) motion ....”Weaver v. Univ. of Cincinnati, 758 F.Supp. 446,448 (S.D.Ohio 1991) (citing Moir v. Greater Cleve-land Reg'l Transit Auth., 895 F.2d 266, 269 (6thCir.1990)). See also Rapier v. Union City Non-Ferrous, Inc., 197 F.Supp.2d 1008, 1012 (S.D.Ohio2002) (citing McNutt v. General Motors Accept-ance Corp. of Indiana, Inc., 298 U.S. 178, 189, 56S.Ct. 780, 80 L.Ed. 1135 (1936); Rogers v. StrattonIndus., Inc., 798 F.2d 913, 915 (6th Cir.1986))(“The plaintiff bears the burden of establishing, bya preponderance of the evidence, the existence offederal subject matter jurisdiction”). Moreover, thisCourt may resolve any factual disputes when adju-dicating a defendant's jurisdictional challenge. SeeMoir, 895 F.2d at 269.

B. AnalysisBenjamin Franklin once wrote that “in this

world nothing can be said to be certain, exceptdeath and taxes.” United States v. Estate of Romani,523 U.S. 517, 520 n. 2, 118 S.Ct. 1478, 140L.Ed.2d 710 (1998) (quoting Letter of Nov. 13,1789, to Jean Baptiste Le Roy, in 10 The Writingsof Benjamin Franklin 69 (A. Smyth ed.1907)). Inthis case, however, the unfortunate demise ofPlaintiff's spouse has introduced a notable degree ofuncertainty into the continued vitality of the tax li-en recorded against decedent Michael Paternoster.The resulting issue before this Court is deceptivelysimple in its phrasing: Did Michael Paternoster'sdeath extinguish the lien involved in this case, ordid the lien attach to the property and survive hisdeath?

Defendant moves for summary judgment onCounts I and V, the quiet title and declaratory judg-ment claims, on the grounds that the lien attachedto Michael Paternoster's one-half interest in theproperty involved before his death and that the lientherefore survived his death and the property's sub-sequent transfer of title to Plaintiff. Plaintiff alsomoves for summary judgment on these two counts,arguing that under Ohio law, the lien against Mi-chael Paternoster was extinguished upon his death

so that Plaintiff is entitled to the escrowed funds.

Resolution of the lien issue turns on two feder-al statutes and their intersection with state law. Thefirst relevant federal statute, 26 U.S.C. § 6321,provides:

If any person liable to pay any tax neglects or re-fuses to pay the same after demand, the amount(including any interest, additional amount, addi-tion to *988 tax, or assessable penalty, togetherwith any costs that may accrue in additionthereto) shall be a lien in favor of the UnitedStates upon all property and rights to property,whether real or personal, belonging to such per-son.

26 U.S.C. § 6321. The second relevant federalstatute, 26 U.S.C. § 6322, provides:

Unless another date is specifically fixed by law,the lien imposed by section 6321 shall arise at thetime the assessment is made and shall continueuntil the liability for the amount so assessed (or ajudgment against the taxpayer arising out of suchliability) is satisfied or becomes unenforceable byreason of lapse of time.

26 U.S.C. § 6322. Under this statutory scheme,the federal tax lien recorded with the FranklinCounty Recorder on January 21, 2004, attached toMichael Paternoster's undivided one-half interest inthe property before his death on January 26, 2004.Because there is nothing in the record indicatingthat the assessment has been satisfied or has be-come unenforceable due to a lapse of time, Defend-ants argue that the lien remains viable under § 6322.

Some support for this proposition exists in therationale underlying an arguably similar case,Brickley v. United States, No. 1:03 CV 112, 2003WL 22272298 (N.D.Ohio July 30, 2003). InBrickley, a district court addressed a situation inwhich a husband and wife held property in a surviv-orship tenancy, with each individual possessing anequal share of the property involved. Id. at *2. Fed-







































eral tax liens attached to the husband's interest inthe property pursuant to § 6321. Id. Several yearslater, the husband executed a quitclaim deed trans-ferring his half-interest in the property to his wife.Id. at *3. The issue before the district court waswhether the liens survived this sequence of events.Recognizing that after execution of the quitclaimdeed the wife now “owned the entire legal interestin the property,” the district court explained that“this interest remains burdened, in part, by the fed-eral tax liens attached to [the husband's] interestprior to transfer.” Id. (citing United States v. Bankof Celina, 721 F.2d 163, 167 (6th Cir.1983); UnitedStates v. Bess, 357 U.S. 51, 57, 78 S.Ct. 1054, 2L.Ed.2d 1135 (1958)). The district court thus de-clined to cancel the liens as the wife sought.

Similarly, the instant case involves propertypreviously owned by a husband and wife in surviv-orship tenancy. See Ohio Rev.Code § 5302.17. Atax lien attached to the husband's interest in theproperty, and thereafter circumstances led to thewife owning the entire legal interest in the property.See Ohio Rev.Code § 5302.20(B). Whether by aright of survivorship due to the death of a spouse ora spouse executing a quitclaim deed as in Brickley,the end result is arguably the same-one spouse pos-sesses the entire interest in the property. Thus, un-der this rationale, regardless of the vehicle of trans-fer of the formerly divided interests, a federal taxlien is not extinguished but still retains its vitality.Such an outcome would mean that Plaintiff here,similar to the surviving spouse in Brickley, “hasfailed ... to demonstrate how and when the federaltax lien [ ] on the half-interest transferred to herwere divested.” Id.

Plaintiff presents a number of arguments as towhy this Court should reach a contrary conclusion.For example, Plaintiff asserts that operation of OhioRevised Code § 5302.20(C) “[i]n essence ... subor-dinates the interest of survivorship transferees tothe survivorship rights of the co-joint tenants,”which means that because Michael Paternoster's in-terest was subordinate to Plaintiff's right of surviv-

orship, the interest and therefore the lien were“immediately and automatically extinguished at thetime of his death” and *989 “Michael Paternoster'sinterest in the Property automatically and immedi-ately vested in Plaintiff free and clear of the Lien.”(Doc. # 34, at 2, 3.) Plaintiff argues that Defendantcould have defeated such destruction of the lien byproceeding under Ohio Revised Code § 5302.20(C)(4), which provides for an action in which “[a]creditor of a survivorship tenant may enforce a lienagainst the interest of one or more survivorship ten-ants ....” Ohio Rev.Code § 5302.20(C)(4).

The § 5302.20(C) argument fails to recognizethat the state statute cannot provide Defendant withthe mechanism for enforcing its federal liens.Rather, as Defendant notes in its briefing, the feder-al government is permitted to enforce its liens byproceeding under 26 U.S.C. § 7403 or 26 U.S.C. §6331. (Doc. # 36, at 1-2.) None of the state lawcases to which Plaintiff directs this Court explainhow the state statute can or does control the mech-anism by which Defendant could have proceededhere and none provide a sufficient rationale fordeeming the lien involved here extinguished. ThisCourt's own research has failed to divulge such acase. The Court therefore rejects Plaintiff's apparentargument that § 5302.20(C) somehow extinguishedthe federal lien involved in this litigation.

[1] The United States Supreme Court has ex-plained that “once it has been determined that statelaw has created property interests sufficient for [a]federal tax lien to attach, state law is ‘inoperative toprevent the attachment’ of such liens.” UnitedStates v. Rodgers, 461 U.S. 677, 683, 103 S.Ct.2132, 76 L.Ed.2d 236 (1983) (describing holding ofand quoting in part Bess, 357 U.S. at 56-57, 78S.Ct. 1054). The extant question in light of thisstatement is whether Ohio law creates a propertyinterest here for § 6321 purposes. Instructive in thisregard is the United States Supreme Court's de-cision in United States v. Craft, 535 U.S. 274, 122S.Ct. 1414, 152 L.Ed.2d 437 (2002).

In Craft, the United States Supreme Court ad-







































dressed the issue of whether a federal tax lien at-tached to a taxpayer's interest in entireties property;the delinquent taxpayer had quitclaimed his interestin the real property involved to his wife, who thensold the property. Id. at 277, 122 S.Ct. 1414. In ap-proaching this factual scenario, the Craft majorityexplained that they must “look initially to state lawto determine what rights the taxpayer has in theproperty the Government seeks to reach, then tofederal law to determine whether the taxpayer'sstate-delineated rights qualify as ‘property’ or‘rights to property’ within the compass of the feder-al tax lien legislation.” Id. at 278, 122 S.Ct. 1414(quoting Drye v. United States, 528 U.S. 49, 58,120 S.Ct. 474, 145 L.Ed.2d 466 (1999)). The ma-jority went on to clarify the analysis arising fromthis approach:

A common idiom describes property as a“bundle of sticks”-a collection of individualrights which, in certain combinations, constituteproperty. See B. Cardozo, Paradoxes of LegalScience 129 (1928) (reprint 2000); see also Dick-man v. Commissioner, 465 U.S. 330, 336, 104S.Ct. 1086, 79 L.Ed.2d 343 (1984). State law de-termines only which sticks are in a person'sbundle. Whether those sticks qualify as“property” for purposes of the federal tax lienstatute is a question of federal law.

Id. at 278-79, 122 S.Ct. 1414. The Craft major-ity held that the husband's interests in the entiretiesproperty constituted § 6321 “property” or “rights toproperty” to which the federal tax lien attached. Id.at 288, 122 S.Ct. 1414.

[2] Craft directs today's decision. At firstblush, that case may seem distinguishable becauseit involved the attachment*990 of a lien to aspouse's interest in a tenancy by the entirety. Id. at277, 122 S.Ct. 1414. But the interest of Michael Pa-ternoster in the instant case is analogous because“statutory estates by the entireties are recognized inOhio, although the statute, through amendment, haseliminated the term ‘tenancy by the entireties' andinstead refers to a ‘survivorship tenancy.’ ” 19 Ohio

Jur.3d (2009) Cotenancy § 5 (citing Ohio Rev.Code§ 5302.17). Regardless of the label, the survivor-ship tenancy the Paternosters enjoyed is thereforeOhio's form of tenancy by the entireties. Lookingbeyond the labels to reach this conclusion is appro-priate because, as the United States Supreme Courthas explained,

[i]n looking to state law, [judges] must be carefulto consider the substance of the rights state lawprovides, not merely the labels the State givesthese rights or the conclusions it draws fromthem. Such state law labels are irrelevant to thefederal question of which bundles of rights con-stitute property that may be attached by a federaltax lien.

Craft, 535 U.S. at 279, 122 S.Ct. 1414. What istherefore important is not the label a state appliesbut the bundle of rights falling within the label em-ployed.

In Craft, the majority explained that “[i]n de-termining whether respondent's husband possessed‘property’ or ‘rights to property’ within the mean-ing of 26 U.S.C. § 6321, [the majority] look[ed] tothe individual rights created by these state lawrules.” Id. at 282, 122 S.Ct. 1414. Reviewing theapplicable state law, the majority found that

respondent's husband had, among other rights,the following rights with respect to the entiretiesproperty: the right to use the property, the right toexclude third parties from it, the right to a shareof income produced from it, the right of survivor-ship, the right to become a tenant in commonwith equal shares upon divorce, the right to sellthe property with the respondent's consent and toreceive half the proceeds from such a sale, theright to place an encumbrance on the propertywith the respondent's consent, and the right toblock respondent from selling or encumbering theproperty unilaterally.

Id. Identifying as “some of the most essentialproperty rights ... the right to use the property, to



































receive income produced by it, and to exclude oth-ers from it,” the majority noted that “[t]hese rightsalone may be sufficient to subject the husband's in-terest in the entireties property to the federal tax li-en.” Id. at 283, 122 S.Ct. 1414.

In the case sub judice, Ohio law provides that“[a] survivorship tenancy has the following charac-teristics or ramifications”:

Unless otherwise provided in the instrument cre-ating the survivorship tenancy, each of the sur-vivorship tenants has an equal right to share inthe use, occupancy, and profits, and each of thesurvivorship tenants is subject to a proportionateshare of the costs related to the ownership anduse of the real property subject to the survivor-ship tenancy.

Ohio Rev.Code § 5302.20(C)(1). Thus, Ohiolaw, like the state law involved in Craft, provideswithin its bundle of rights the rights to “use, exclu-sion, and income.” Craft, 535 U.S. at 284, 122 S.Ct.1414. Ohio law also provides the right to become atenant in common with equal shares upon divorce,just as the bundle of rights involved in Craftprovided. See Ohio Rev.Code § 5302.20(C)(5);Craft, 535 U.S. at 282, 122 S.Ct. 1414.

Notably, both the bundle of rights at issue hereand the bundle of rights in Craft include the right ofsurvivorship. Ohio Rev.Code § 5302.20; *991Craft,535 U.S. at 282, 122 S.Ct. 1414. The Craft majorityrecognized this right as “the right [of the husband]to automatically inherit the whole of the estateshould his wife predecease him.” Craft, 535 U.S. at285, 122 S.Ct. 1414. Given the various other rightsinvolved in that case-rights that the Craft majoritydescribed as “presently existing”-the majorityopined that “[i]t is therefore not necessary to decidewhether the right to survivorship alone would quali-fy as ‘property’ or ‘rights to property’ under § 6321.” Id.

[3] This Court agrees that, as in Craft, no opin-ion need be expressed here on whether Michael Pa-

ternoster's survivorship right alone would be suffi-cient for § 6321 purposes. The remaining rights touse, exclusion, and income, as well as the right tobecome a tenant in common with equal shares upondivorce, place this case within the scope of theCraft rationale. What this means is that, as in Craftand not unlike the lien in Brickley, the lien here at-tached prior to Michael Paternoster's death and en-cumbered the property because the husband's in-terest constitutes “property” or “rights to property”within the scope of § 6321. Although Plaintiff auto-matically obtained full vested interest in the prop-erty upon her spouse's death, this did not defeat orextinguish the already attached lien that accompan-ied the automatic transfer. See Rodgers, 461 U.S. at691 n. 16, 103 S.Ct. 2132 (“Of course, once a lienhas attached to an interest in property, the lien can-not be extinguished (assuming proper filing and thelike) simply by a transfer or conveyance of the in-terest.”).

Urging a contrary outcome, Plaintiff assertsthat the Internal Revenue Service's Notice 2003-60mandates the conclusions that “a surviving non-li-able spouse takes entirety property or property heldjointly with the right of survivorship unencumberedby a federal tax lien because the taxpayer's interestin the property is extinguished by operation of lawat death.” (Doc. # 34, at 4.) That Internal RevenueService publication provides in relevant part:

Q4. Does the federal tax lien on entireties prop-erty survive the death of the taxpayer? What ef-fect does the death of the non-taxpayer have onthe federal lien?

A4. As is the case with joint tenancy with theright of survivorship, if a taxpayer's interest inentireties property is extinguished by operation oflaw at the death of the taxpayer, then there is nolonger an interest of the taxpayer to which thefederal lien attaches. When a taxpayer dies, thesurviving non-liable spouse takes the propertyunencumbered by the federal tax lien.

Internal Revenue Bulletin No.2003-39, Notice



































2003-60 (Sept. 29, 2003). Similarly, Plaintiff ar-gues that the Internal Revenue Manual also com-pels such a result. The manual provides in relevantpart:

In most states, if the individual, against whoseproperty a federal lien attaches, dies before anyof the other joint tenants, then the lien ceases toattach to the property. However, if the same indi-vidual is the last survivor of the joint tenants, thetax lien then attaches to the entire property. In afew states, however, this is not the rule. Wiscon-sin is an exception to the general rule: if the fed-eral tax lien has attached to the interest of onejoint tenant who then dies, the surviving jointtenant takes the property encumbered with thefederal tax lien. United States v. Librizzi, 108F.3d 136 (7th Cir.1997). Connecticut is also anexception to the general rule. Conn. Gen.Stat.47-14f.

Internal Revenue Manual § 5.17.2.5.2.2.

Neither publication proves dispositive here.Ohio may indeed be in the apparent *992 minorityof states in which the result reached today occurs,but the issue is not whether the result is atypical,but whether it is mandated. Although Ohio does nothave a statute that explicitly provides that a liensurvives the death of the taxpayer as the states ref-erenced above do, see Wis. Stat. § 700.24; Conn.Gen.Stat. § 47-14f, the bundle of rights set forth inOhio Rev.Code § 5302.20(C)(1) nonetheless placesthe deceased taxpayer's interests within the dispos-itive rationale of Craft. What this means is that §§6321 and 6322 compel today's result in light of theapplicable Ohio law and binding precedent, whichmeans that only Defendant is entitled to summaryjudgment on Counts I and V.

[4] Plaintiff also argues that as a result of itspurported change of positions regarding the lienprior to the sale of the property involved,“Defendant should be estopped from asserting aninterest in the Property and/or the Escrowed Pro-ceeds.” (Doc. # 37, at 8.) This estoppel argument isbased on a September 20, 2007 letter from an In-

ternal Revenue Service advisor to Plaintiff's repres-entative. After noting that the letter was in responseto Plaintiff's request for a certificate of non-attachment and after setting forth the timeline ofrelevant events that Plaintiff had presented in herrequest, the advisor wrote: “Under Ohio Law, ifReal Estate is owned jointly with rights of survivor-ship, upon death, that property becomes the prop-erty of the surviving spouse. Therefore the combin-ation of the documents you have presented: the8-21-1995 Deed and the Death Certificate are suffi-cient.” (Doc. # 31-15.) Given the events surround-ing the sale of the property involved and the con-tents of this letter, application of the equitable doc-trine of estoppel is not appropriate here for at leasttwo reasons.

First, Plaintiff knew of Defendant's purportedchange of position prior to culminating the sale ofthe property and cannot therefore be said to haverelied on the initial position in effectuating the con-cluded sale. Reasonable reliance is therefore ques-tionable because no evidence exists before thisCourt indicating that Plaintiff could not have de-clined to close on the sale to Corey W. Steelewithout penalty or prejudice as a result of Defend-ant's alleged change in position.

Second, the September 20, 2007 letter is poorlyworded so as to invite debate over whether its de-scription of Ohio law actually answers the lienquestion and whether its describing the“combination of documents” that Plaintiff submit-ted as “sufficient” was intended to mean thatPlaintiff's request for a certificate was well taken asopposed to being a complete application. Plaintiffdescribes the letter as “stating that the documentsand evidence presented were ‘sufficient’ to releasethe Lien under Ohio law. ” (Doc. # 32, at 11(emphasis added).) This self-serving characteriza-tion overreaches, and any reliance on the ambigu-ous letter was not reasonable. Accordingly, thereare no grounds for estoppel against the governmenthere, and Defendant remains entitled to summaryjudgment on Count I and V.






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In its motion, Defendant also seeks the dis-missal of Counts II, III, and IV pursuant to Rule12(b)(1) for lack of subject matter jurisdiction.These claims are moot as a result of the Court's dis-position of Counts I and V because the Court hasdetermined that Defendant's lien has not been extin-guished. Moreover, Plaintiff has stipulated that shefailed has failed to submit a claim to the InternalRevenue Service, which means that her Count IVstate law tort claim for slander of title cannot pro-ceed. See 28 U.S.C. §§ 1346(b), 2671-2680. Simil-arly, because she failed to file administrative claimsfor the conduct constituting Count II (the failure torelease the lien claim) and Count III (the *993 un-authorized collection action claim), Plaintiff's re-maining two claims are barred. See 26 U.S.C. §7432(d)(1) (providing that a plaintiff cannot obtaina judgment for damages for a failure to release a li-en “unless the court determines that the plaintiff hasexhausted the administrative remedies available tosuch plaintiff within the Internal Revenue Ser-vice”); 26 U.S.C. § 7433(d)(1) (providing that aplaintiff cannot obtain a judgment for damages foran unauthorized collection action “unless the courtdetermines that the plaintiff has exhausted the ad-ministrative remedies available to such plaintiffwithin the Internal Revenue Service”); 26 C.F.R. §301.7432-1(e) (prohibiting the filing of a civil ac-tion in district court for the failure to release a lienprior to the filing of an administrative claim); 26C.F.R. § 301.7433-1(d) (prohibiting the filing of acivil action in district court for an unauthorized col-lection action prior to the filing of an administrativeclaim).

III. ConclusionFor the foregoing reasons, the Court DENIES

Plaintiff's motion for summary judgment (Doc. #32) and GRANTS Defendant's motion for summaryjudgment (Doc. # 33). The Court ORDERS that byAugust 21, 2009, the parties shall either submit anagreed order as to the distribution of the escrowedproceeds deposited with the Clerk or inform theCourt that briefing on the issue is necessary if thereis a dispute as to the distribution.

IT IS SO ORDERED.

S.D.Ohio,2009.Paternoster v. U.S.640 F.Supp.2d 983, 104 A.F.T.R.2d 2009-5530,2009-2 USTC P 50,520

END OF DOCUMENT





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West's F.S.A. § 718.116 Page 1


Effective: July 1, 2011 West's Florida Statutes Annotated Currentness

Title XL. Real and Personal Property (Chapters 689-724) Chapter 718. Condominiums (Refs & Annos)

Part I. General Provisions (Refs & Annos) 718.116. Assessments; liability; lien and priority; interest; collection

(1)(a) A unit owner, regardless of how his or her title has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments which come due while he or she is the unit owner. Addi-tionally, a unit owner is jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the owner may have to recover from the previous owner the amounts paid by the owner. (b) 1. The liability of a first mortgagee or its successor or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee's acquisition of title is limited to the lesser of: a. The unit's unpaid common expenses and regular periodic assessments which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or b. One percent of the original mortgage debt. The provisions of this paragraph apply only if the first mortgagee joined the association as a defendant in the foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location which was known to or reasonably discoverable by the mortgagee. 2. An association, or its successor or assignee, that acquires title to a unit through the foreclosure of its lien for as-sessments is not liable for any unpaid assessments, late fees, interest, or reasonable attorney's fees and costs that came due before the association's acquisition of title in favor of any other association, as defined in s. 718.103(2) or s. 720.301(9), which holds a superior lien interest on the unit. This subparagraph is intended to clarify existing law. (c) The person acquiring title shall pay the amount owed to the association within 30 days after transfer of title. Failure to pay the full amount when due shall entitle the association to record a claim of lien against the parcel and proceed in the same manner as provided in this section for the collection of unpaid assessments.

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(d) With respect to each timeshare unit, each owner of a timeshare estate therein is jointly and severally liable for the payment of all assessments and other charges levied against or with respect to that unit pursuant to the declaration or bylaws, except to the extent that the declaration or bylaws may provide to the contrary. (e) Notwithstanding the provisions of paragraph (b), a first mortgagee or its successor or assignees who acquire title to a condominium unit as a result of the foreclosure of the mortgage or by deed in lieu of foreclosure of the mortgage shall be exempt from liability for all unpaid assessments attributable to the parcel or chargeable to the previous owner which came due prior to acquisition of title if the first mortgage was recorded prior to April 1, 1992. If, however, the first mortgage was recorded on or after April 1, 1992, or on the date the mortgage was recorded, the declaration in-cluded language incorporating by reference future amendments to this chapter, the provisions of paragraph (b) shall apply. (f) The provisions of this subsection are intended to clarify existing law, and shall not be available in any case where the unpaid assessments sought to be recovered by the association are secured by a lien recorded prior to the recording of the mortgage. Notwithstanding the provisions of chapter 48, the association shall be a proper party to intervene in any foreclosure proceeding to seek equitable relief. (g) For purposes of this subsection, the term “successor or assignee” as used with respect to a first mortgagee includes only a subsequent holder of the first mortgage. (2) The liability for assessments may not be avoided by waiver of the use or enjoyment of any common element or by abandonment of the unit for which the assessments are made. (3) Assessments and installments on assessments which are not paid when due bear interest at the rate provided in the declaration, from the due date until paid. The rate may not exceed the rate allowed by law, and, if no rate is provided in the declaration, interest accrues at the rate of 18 percent per year. If provided by the declaration or bylaws, the asso-ciation may, in addition to such interest, charge an administrative late fee of up to the greater of $25 or 5 percent of each delinquent installment for which the payment is late. Any payment received by an association must be applied first to any interest accrued by the association, then to any administrative late fee, then to any costs and reasonable attorney's fees incurred in collection, and then to the delinquent assessment. The foregoing is applicable notwith-standing any restrictive endorsement, designation, or instruction placed on or accompanying a payment. A late fee is not subject to chapter 687 or s. 718.303(4). (4) If the association is authorized by the declaration or bylaws to approve or disapprove a proposed lease of a unit, the grounds for disapproval may include, but are not limited to, a unit owner being delinquent in the payment of an as-sessment at the time approval is sought. (5)(a) The association has a lien on each condominium parcel to secure the payment of assessments. Except as oth-erwise provided in subsection (1) and as set forth below, the lien is effective from and shall relate back to the recording of the original declaration of condominium, or, in the case of lien on a parcel located in a phase condominium, the last to occur of the recording of the original declaration or amendment thereto creating the parcel. However, as to first

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mortgages of record, the lien is effective from and after recording of a claim of lien in the public records of the county in which the condominium parcel is located. Nothing in this subsection shall be construed to bestow upon any lien, mortgage, or certified judgment of record on April 1, 1992, including the lien for unpaid assessments created herein, a priority which, by law, the lien, mortgage, or judgment did not have before that date. (b) To be valid, a claim of lien must state the description of the condominium parcel, the name of the record owner, the name and address of the association, the amount due, and the due dates. It must be executed and acknowledged by an officer or authorized agent of the association. The lien is not effective 1 year after the claim of lien was recorded unless, within that time, an action to enforce the lien is commenced. The 1-year period is automatically extended for any length of time during which the association is prevented from filing a foreclosure action by an automatic stay resulting from a bankruptcy petition filed by the parcel owner or any other person claiming an interest in the parcel. The claim of lien secures all unpaid assessments that are due and that may accrue after the claim of lien is recorded and through the entry of a final judgment, as well as interest and all reasonable costs and attorney's fees incurred by the association incident to the collection process. Upon payment in full, the person making the payment is entitled to a satisfaction of the lien. (c) By recording a notice in substantially the following form, a unit owner or the unit owner's agent or attorney may require the association to enforce a recorded claim of lien against his or her condominium parcel:

NOTICE OF CONTEST OF LIEN TO: (Name and address of association) You are notified that the undersigned contests the claim of lien filed by you on___, (year) , and recorded in Official Records Book___ at Page___, of the public records of___ County, Florida, and that the time within which you may file suit to enforce your lien is limited to 90 days from the date of service of this notice. Executed this___ day of___, (year) .

Signed: (Owner or Attorney) After notice of contest of lien has been recorded, the clerk of the circuit court shall mail a copy of the recorded notice to the association by certified mail, return receipt requested, at the address shown in the claim of lien or most recent amendment to it and shall certify to the service on the face of the notice. Service is complete upon mailing. After service, the association has 90 days in which to file an action to enforce the lien; and, if the action is not filed within the 90-day period, the lien is void. However, the 90-day period shall be extended for any length of time during which the association is prevented from filing its action because of an automatic stay resulting from the filing of a bankruptcy petition by the unit owner or by any other person claiming an interest in the parcel. (6)(a) The association may bring an action in its name to foreclose a lien for assessments in the manner a mortgage of real property is foreclosed and may also bring an action to recover a money judgment for the unpaid assessments without waiving any claim of lien. The association is entitled to recover its reasonable attorney's fees incurred in either a lien foreclosure action or an action to recover a money judgment for unpaid assessments. (b) No foreclosure judgment may be entered until at least 30 days after the association gives written notice to the unit

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owner of its intention to foreclose its lien to collect the unpaid assessments. If this notice is not given at least 30 days before the foreclosure action is filed, and if the unpaid assessments, including those coming due after the claim of lien is recorded, are paid before the entry of a final judgment of foreclosure, the association shall not recover attorney's fees or costs. The notice must be given by delivery of a copy of it to the unit owner or by certified or registered mail, return receipt requested, addressed to the unit owner at his or her last known address; and, upon such mailing, the notice shall be deemed to have been given, and the court shall proceed with the foreclosure action and may award attorney's fees and costs as permitted by law. The notice requirements of this subsection are satisfied if the unit owner records a notice of contest of lien as provided in subsection (5). The notice requirements of this subsection do not apply if an action to foreclose a mortgage on the condominium unit is pending before any court; if the rights of the association would be affected by such foreclosure; and if actual, constructive, or substitute service of process has been made on the unit owner. (c) If the unit owner remains in possession of the unit after a foreclosure judgment has been entered, the court, in its discretion, may require the unit owner to pay a reasonable rental for the unit. If the unit is rented or leased during the pendency of the foreclosure action, the association is entitled to the appointment of a receiver to collect the rent. The expenses of the receiver shall be paid by the party which does not prevail in the foreclosure action. (d) The association has the power to purchase the condominium parcel at the foreclosure sale and to hold, lease, mortgage, or convey it. (7) A first mortgagee acquiring title to a condominium parcel as a result of foreclosure, or a deed in lieu of foreclosure, may not, during the period of its ownership of such parcel, whether or not such parcel is unoccupied, be excused from the payment of some or all of the common expenses coming due during the period of such ownership. (8) Within 15 days after receiving a written request therefor from a unit owner or his or her designee, or a unit mortgagee or his or her designee, the association shall provide a certificate signed by an officer or agent of the asso-ciation stating all assessments and other moneys owed to the association by the unit owner with respect to the con-dominium parcel. (a) Any person other than the owner who relies upon such certificate shall be protected thereby. (b) A summary proceeding pursuant to s. 51.011 may be brought to compel compliance with this subsection, and in any such action the prevailing party is entitled to recover reasonable attorney's fees. (c) Notwithstanding any limitation on transfer fees contained in s. 718.112(2)(i), the association or its authorized agent may charge a reasonable fee for the preparation of the certificate. The amount of the fee must be included on the certificate. (d) The authority to charge a fee for the certificate shall be established by a written resolution adopted by the board or provided by a written management, bookkeeping, or maintenance contract and is payable upon the preparation of the certificate. If the certificate is requested in conjunction with the sale or mortgage of a unit but the closing does not occur and no later than 30 days after the closing date for which the certificate was sought the preparer receives a

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written request, accompanied by reasonable documentation, that the sale did not occur from a payor that is not the unit owner, the fee shall be refunded to that payor within 30 days after receipt of the request. The refund is the obligation of the unit owner, and the association may collect it from that owner in the same manner as an assessment as provided in this section. (9)(a) A unit owner may not be excused from payment of the unit owner's share of common expenses unless all other unit owners are likewise proportionately excluded from payment, except as provided in subsection (1) and in the following cases: 1. If authorized by the declaration, a developer who is offering units for sale may elect to be excused from payment of assessments against those unsold units for a stated period of time after the declaration is recorded. However, the developer must pay common expenses incurred during such period which exceed regular periodic assessments against other unit owners in the same condominium. The stated period must terminate no later than the first day of the fourth calendar month following the month in which the first closing occurs of a purchase contract for a unit in that con-dominium. If a developer-controlled association has maintained all insurance coverage required by s. 718.111(11)(a), common expenses incurred during the stated period resulting from a natural disaster or an act of God occurring during the stated period, which are not covered by proceeds from insurance maintained by the association, may be assessed against all unit owners owning units on the date of such natural disaster or act of God, and their respective successors and assigns, including the developer with respect to units owned by the developer. In the event of such an assessment, all units shall be assessed in accordance with s. 718.115(2). 2. A developer who owns condominium units, and who is offering the units for sale, may be excused from payment of assessments against those unsold units for the period of time the developer has guaranteed to all purchasers or other unit owners in the same condominium that assessments will not exceed a stated dollar amount and that the developer will pay any common expenses that exceed the guaranteed amount. Such guarantee may be stated in the purchase contract, declaration, prospectus, or written agreement between the developer and a majority of the unit owners other than the developer and may provide that, after the initial guarantee period, the developer may extend the guarantee for one or more stated periods. If a developer-controlled association has maintained all insurance coverage required by s. 718.111(11)(a), common expenses incurred during a guarantee period, as a result of a natural disaster or an act of God occurring during the same guarantee period, which are not covered by the proceeds from such insurance, may be assessed against all unit owners owning units on the date of such natural disaster or act of God, and their successors and assigns, including the developer with respect to units owned by the developer. Any such assessment shall be in accordance with s. 718.115(2) or (4), as applicable. (b) If the purchase contract, declaration, prospectus, or written agreement between the developer and a majority of unit owners other than the developer provides for the developer to be excused from payment of assessments under para-graph (a), only regular periodic assessments for common expenses as provided for in the declaration and prospectus and disclosed in the estimated operating budget shall be used for payment of common expenses during any period in which the developer is excused. Accordingly, no funds which are receivable from unit purchasers or unit owners and payable to the association, including capital contributions or startup funds collected from unit purchasers at closing, may be used for payment of such common expenses.

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(c) If a developer of a multicondominium is excused from payment of assessments under paragraph (a), the devel-oper's financial obligation to the multicondominium association during any period in which the developer is excused from payment of assessments is as follows: 1. The developer shall pay the common expenses of a condominium affected by a guarantee, including the funding of reserves as provided in the adopted annual budget of that condominium, which exceed the regular periodic assess-ments at the guaranteed level against all other unit owners within that condominium. 2. The developer shall pay the common expenses of a multicondominium association, including the funding of re-serves as provided in the adopted annual budget of the association, which are allocated to units within a condominium affected by a guarantee and which exceed the regular periodic assessments against all other unit owners within that condominium. (10) The specific purpose or purposes of any special assessment, including any contingent special assessment levied in conjunction with the purchase of an insurance policy authorized by s. 718.111(11), approved in accordance with the condominium documents shall be set forth in a written notice of such assessment sent or delivered to each unit owner. The funds collected pursuant to a special assessment shall be used only for the specific purpose or purposes set forth in such notice. However, upon completion of such specific purpose or purposes, any excess funds will be considered common surplus, and may, at the discretion of the board, either be returned to the unit owners or applied as a credit toward future assessments. (11)(a) If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay to the association the subsequent rental payments and continue to make such payments until all monetary obligations of the unit owner related to the unit have been paid in full to the association. The tenant must pay the monetary obligations to the association until the associ-ation releases the tenant or the tenant discontinues tenancy in the unit. 1. The association must provide the tenant a notice, by hand delivery or United States mail, in substantially the fol-lowing form:

Pursuant to section 718.116(11), Florida Statutes, the association demands that you pay your rent directly to the condominium association and continue doing so until the association notifies you otherwise.

Payment due the condominium association may be in the same form as you paid your landlord and must be sent by United States mail or hand delivery to ...(full address)..., payable to ...(name)...

Your obligation to pay your rent to the association begins immediately, unless you have already paid rent to your landlord for the current period before receiving this notice. In that case, you must provide the association written proof of your payment within 14 days after receiving this notice and your obligation to pay rent to the association would then begin with the next rental period.

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Pursuant to section 718.116(11), Florida Statutes, your payment of rent to the association gives you complete immunity from any claim for the rent by your landlord for all amounts timely paid to the association.

2. The association must mail written notice to the unit owner of the association's demand that the tenant make pay-ments to the association. 3. The association shall, upon request, provide the tenant with written receipts for payments made. 4. A tenant is immune from any claim by the landlord or unit owner related to the rent timely paid to the association after the association has made written demand. (b) If the tenant paid rent to the landlord or unit owner for a given rental period before receiving the demand from the association and provides written evidence to the association of having paid the rent within 14 days after receiving the demand, the tenant shall begin making rental payments to the association for the following rental period and shall continue making rental payments to the association to be credited against the monetary obligations of the unit owner until the association releases the tenant or the tenant discontinues tenancy in the unit. (c) The liability of the tenant may not exceed the amount due from the tenant to the tenant's landlord. The tenant's landlord shall provide the tenant a credit against rents due to the landlord in the amount of moneys paid to the asso-ciation. (d) The association may issue notice under s. 83.56 and sue for eviction under ss. 83.59-83.625 as if the association were a landlord under part II of chapter 83 if the tenant fails to pay a required payment to the association after written demand has been made to the tenant. However, the association is not otherwise considered a landlord under chapter 83 and specifically has no obligations under s. 83.51. (e) The tenant does not, by virtue of payment of monetary obligations to the association, have any of the rights of a unit owner to vote in any election or to examine the books and records of the association. (f) A court may supersede the effect of this subsection by appointing a receiver. CREDIT(S) Laws 1976, c. 76-222, § 1; Laws 1977, c. 77-174, § 1; Laws 1977, c. 77-221, § 9; Laws 1977, c. 77-222, § 7; Laws 1978, c. 78-328, § 6; Laws 1984, c. 84-368, § 8. Amended by Laws 1990, c. 90-151, § 12, eff. Oct. 1, 1990; Laws 1991, c. 91-103, § 9, eff. April 1, 1992; Laws 1991, c. 91-426, § 4, eff. Dec. 20, 1991; Laws 1992, c. 92-49, § 6, eff. April 2, 1992; Laws 1994, c. 94-350, § 10, eff. Oct. 1, 1994; Laws 1995, c. 95-211, § 87, eff. July 10, 1995; Laws 1997, c. 97-102, § 856, eff. July 1, 1997; Laws 1998, c. 98-322, § 7, eff. May 30, 1998; Laws 1999, c. 99-6, § 33, eff. June 29, 1999; Laws 2000, c. 2000-201, § 1, eff. Oct. 1, 2000; Laws 2000, c. 2000-302, § 56, eff. June 15, 2000; Laws 2003, c. 2003-14, § 7, eff. May 21, 2003; Laws 2007, c. 2007-80, § 6, eff. May 24, 2007; Laws 2008, c. 2008-240, § 5, eff. July 1, 2008; Laws 2010, c. 2010-174, § 12, eff. July 1, 2010; Laws 2011, c. 2011-196, § 6, eff. July 1, 2011.

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Current with chapters in effect from the 2013 1st Reg. Sess. of the 23rd Legislature through May 20, 2013 (C) 2013 Thomson Reuters. No Claim to Orig. US Gov. Works END OF DOCUMENT

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Effective: October 1, 2008



Part I. General Provisions (Refs & Annos) 718.121. Liens

(1) Subsequent to recording the declaration and while the property remains subject to the declaration, no liens of any nature are valid against the condominium property as a whole except with the unanimous consent of the unit owners. During this period, liens may arise or be created only against individual condominium parcels. (2) Labor performed on or materials furnished to a unit shall not be the basis for the filing of a lien pursuant to part I of chapter 713, the Construction Lien Law, against the unit or condominium parcel of any unit owner not expressly consenting to or requesting the labor or materials. Labor performed on or materials furnished to the common ele-ments are not the basis for a lien on the common elements, but if authorized by the association, the labor or materials are deemed to be performed or furnished with the express consent of each unit owner and may be the basis for the filing of a lien against all condominium parcels in the proportions for which the owners are liable for common ex-penses. (3) If a lien against two or more condominium parcels becomes effective, each owner may relieve his or her condo-minium parcel of the lien by exercising any of the rights of a property owner under chapter 713, or by payment of the proportionate amount attributable to his or her condominium parcel. Upon the payment, the lienor shall release the lien of record for that condominium parcel.

<Subsection (4) added by Laws 2008, c. 2008-28, § 12> (4) Except as otherwise provided in this chapter, no lien may be filed by the association against a condominium unit until 30 days after the date on which a notice of intent to file a lien has been delivered to the owner by certified mail, return receipt requested, and by first-class United States mail to the owner at his or her last known address as re-flected in the records of the association. However, if the address reflected in the records is outside the United States, then the notice must be sent by first-class United States mail to the unit and to the last known address by regular mail with international postage, which shall be deemed sufficient. Delivery of the notice shall be deemed given upon mailing as required by this subsection. Alternatively, notice shall be complete if served on the unit owner in the manner authorized by chapter 48 and the Florida Rules of Civil Procedure.

<Subsection (4) added by Laws 2008, c. 2008-202, § 3> (4) Except as otherwise provided in this chapter, no lien may be filed by the association against a condominium unit until 30 days after the date on which a notice of intent to file a lien has been delivered to the owner by registered or certified mail, return receipt requested, and by first-class United States mail to the owner at his or her last address as reflected in the records of the association, if the address is within the United States, and delivered to the owner at the

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address of the unit if the owner's address as reflected in the records of the association is not the unit address. If the address reflected in the records is outside the United States, sending the notice to that address and to the unit address by first-class United States mail is sufficient. Delivery of the notice shall be deemed given upon mailing as required by this subsection. CREDIT(S) Laws 1976, c. 76-222, § 1. Amended by Laws 1990, c. 90-109, § 26, eff. Jan. 1, 1991; Laws 1997, c. 97-102, § 858, eff. July 1, 1997; Laws 2008, c. 2008-28, § 12, eff. Oct. 1, 2008; Laws 2008, c. 2008-202, § 3, eff. July 1, 2008.

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West's F.S. § 718.112 Page 1


Effective: July 1, 2013 West's Florida Statutes Currentness


Part I. General Provisions (Refs & Annos) 718.112. Bylaws

(1) Generally.-- (a) The operation of the association shall be governed by the articles of incorporation if the association is incorporated, and the bylaws of the association, which shall be included as exhibits to the recorded declaration. If one association operates more than one condominium, it shall not be necessary to rerecord the same articles of incorporation and bylaws as exhibits to each declaration after the first, provided that in each case where the articles and bylaws are not so recorded, the declaration expressly incorporates them by reference as exhibits and identifies the book and page of the public records where the first declaration to which they were attached is recorded. (b) No amendment to the articles of incorporation or bylaws is valid unless recorded with identification on the first page thereof of the book and page of the public records where the declaration of each condominium operated by the association is recorded. (2) Required provisions.--The bylaws shall provide for the following and, if they do not do so, shall be deemed to include the following: (a) Administration.-- 1. The form of administration of the association shall be described indicating the title of the officers and board of administration and specifying the powers, duties, manner of selection and removal, and compensation, if any, of officers and boards. In the absence of such a provision, the board of administration shall be composed of five mem-bers, except in the case of a condominium which has five or fewer units, in which case in a not-for-profit corporation the board shall consist of not fewer than three members. In the absence of provisions to the contrary in the bylaws, the board of administration shall have a president, a secretary, and a treasurer, who shall perform the duties of such of-ficers customarily performed by officers of corporations. Unless prohibited in the bylaws, the board of administration may appoint other officers and grant them the duties it deems appropriate. Unless otherwise provided in the bylaws, the officers shall serve without compensation and at the pleasure of the board of administration. Unless otherwise

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provided in the bylaws, the members of the board shall serve without compensation. 2. When a unit owner files a written inquiry by certified mail with the board of administration, the board shall respond in writing to the unit owner within 30 days of receipt of the inquiry. The board's response shall either give a substantive response to the inquirer, notify the inquirer that a legal opinion has been requested, or notify the inquirer that advice has been requested from the division. If the board requests advice from the division, the board shall, within 10 days of its receipt of the advice, provide in writing a substantive response to the inquirer. If a legal opinion is requested, the board shall, within 60 days after the receipt of the inquiry, provide in writing a substantive response to the inquiry. The failure to provide a substantive response to the inquiry as provided herein precludes the board from recovering at-torney's fees and costs in any subsequent litigation, administrative proceeding, or arbitration arising out of the inquiry. The association may through its board of administration adopt reasonable rules and regulations regarding the fre-quency and manner of responding to unit owner inquiries, one of which may be that the association is only obligated to respond to one written inquiry per unit in any given 30-day period. In such a case, any additional inquiry or inquiries must be responded to in the subsequent 30-day period, or periods, as applicable. (b) Quorum; voting requirements; proxies.-- 1. Unless a lower number is provided in the bylaws, the percentage of voting interests required to constitute a quorum at a meeting of the members is a majority of the voting interests. Unless otherwise provided in this chapter or in the declaration, articles of incorporation, or bylaws, and except as provided in subparagraph (d)4., decisions shall be made by a majority of the voting interests represented at a meeting at which a quorum is present. 2. Except as specifically otherwise provided herein, unit owners may not vote by general proxy, but may vote by limited proxies substantially conforming to a limited proxy form adopted by the division. A voting interest or consent right allocated to a unit owned by the association may not be exercised or considered for any purpose, whether for a quorum, an election, or otherwise. Limited proxies and general proxies may be used to establish a quorum. Limited proxies shall be used for votes taken to waive or reduce reserves in accordance with subparagraph (f)2.; for votes taken to waive the financial reporting requirements of s. 718.111(13); for votes taken to amend the declaration pursuant to s. 718.110; for votes taken to amend the articles of incorporation or bylaws pursuant to this section; and for any other matter for which this chapter requires or permits a vote of the unit owners. Except as provided in paragraph (d), a proxy, limited or general, may not be used in the election of board members. General proxies may be used for other matters for which limited proxies are not required, and may be used in voting for nonsubstantive changes to items for which a limited proxy is required and given. Notwithstanding this subparagraph, unit owners may vote in person at unit owner meetings. This subparagraph does not limit the use of general proxies or require the use of limited proxies for any agenda item or election at any meeting of a timeshare condominium association. 3. Any proxy given is effective only for the specific meeting for which originally given and any lawfully adjourned meetings thereof. A proxy is not valid longer than 90 days after the date of the first meeting for which it was given. Every proxy is revocable at any time at the pleasure of the unit owner executing it. 4. A member of the board of administration or a committee may submit in writing his or her agreement or disagree-ment with any action taken at a meeting that the member did not attend. This agreement or disagreement may not be

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used as a vote for or against the action taken or to create a quorum. 5. If any of the board or committee members meet by telephone conference, those board or committee members may be counted toward obtaining a quorum and may vote by telephone. A telephone speaker must be used so that the conversation of those members may be heard by the board or committee members attending in person as well as by any unit owners present at a meeting. (c) Board of administration meetings.--Meetings of the board of administration at which a quorum of the members is present are open to all unit owners. A unit owner may tape record or videotape the meetings. The right to attend such meetings includes the right to speak at such meetings with reference to all designated agenda items. The division shall adopt reasonable rules governing the tape recording and videotaping of the meeting. The association may adopt written reasonable rules governing the frequency, duration, and manner of unit owner statements. 1. Adequate notice of all board meetings, which must specifically identify all agenda items, must be posted con-spicuously on the condominium property at least 48 continuous hours before the meeting except in an emergency. If 20 percent of the voting interests petition the board to address an item of business, the board at its next regular board meeting or at a special meeting of the board, but not later than 60 days after the receipt of the petition, shall place the item on the agenda. Any item not included on the notice may be taken up on an emergency basis by at least a majority plus one of the board members. Such emergency action must be noticed and ratified at the next regular board meeting. However, written notice of any meeting at which nonemergency special assessments, or at which amendment to rules regarding unit use, will be considered must be mailed, delivered, or electronically transmitted to the unit owners and posted conspicuously on the condominium property at least 14 days before the meeting. Evidence of compliance with this 14-day notice requirement must be made by an affidavit executed by the person providing the notice and filed with the official records of the association. Upon notice to the unit owners, the board shall, by duly adopted rule, designate a specific location on the condominium or association property where all notices of board meetings are to be posted. If there is no condominium property or association property where notices can be posted, notices shall be mailed, de-livered, or electronically transmitted at least 14 days before the meeting to the owner of each unit. In lieu of or in addition to the physical posting of the notice on the condominium property, the association may, by reasonable rule, adopt a procedure for conspicuously posting and repeatedly broadcasting the notice and the agenda on a closed-circuit cable television system serving the condominium association. However, if broadcast notice is used in lieu of a notice physically posted on condominium property, the notice and agenda must be broadcast at least four times every broadcast hour of each day that a posted notice is otherwise required under this section. If broadcast notice is provided, the notice and agenda must be broadcast in a manner and for a sufficient continuous length of time so as to allow an average reader to observe the notice and read and comprehend the entire content of the notice and the agenda. Notice of any meeting in which regular or special assessments against unit owners are to be considered for any reason must specifically state that assessments will be considered and provide the nature, estimated cost, and description of the purposes for such assessments. 2. Meetings of a committee to take final action on behalf of the board or make recommendations to the board regarding the association budget are subject to this paragraph. Meetings of a committee that does not take final action on behalf of the board or make recommendations to the board regarding the association budget are subject to this section, unless those meetings are exempted from this section by the bylaws of the association.

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3. Notwithstanding any other law, the requirement that board meetings and committee meetings be open to the unit owners does not apply to: a. Meetings between the board or a committee and the association's attorney, with respect to proposed or pending litigation, if the meeting is held for the purpose of seeking or rendering legal advice; or b. Board meetings held for the purpose of discussing personnel matters. (d) Unit owner meetings.-- 1. An annual meeting of the unit owners shall be held at the location provided in the association bylaws and, if the bylaws are silent as to the location, the meeting shall be held within 45 miles of the condominium property. However, such distance requirement does not apply to an association governing a timeshare condominium. 2. Unless the bylaws provide otherwise, a vacancy on the board caused by the expiration of a director's term shall be filled by electing a new board member, and the election must be by secret ballot. An election is not required if the number of vacancies equals or exceeds the number of candidates. For purposes of this paragraph, the term “candidate” means an eligible person who has timely submitted the written notice, as described in sub-subparagraph 4.a., of his or her intention to become a candidate. Except in a timeshare condominium, or if the staggered term of a board member does not expire until a later annual meeting, or if all members' terms would otherwise expire but there are no candi-dates, the terms of all board members expire at the annual meeting, and such members may stand for reelection unless prohibited by the bylaws. If the bylaws or articles of incorporation permit terms of no more than 2 years, the associ-ation board members may serve 2-year terms. If the number of board members whose terms expire at the annual meeting equals or exceeds the number of candidates, the candidates become members of the board effective upon the adjournment of the annual meeting. Unless the bylaws provide otherwise, any remaining vacancies shall be filled by the affirmative vote of the majority of the directors making up the newly constituted board even if the directors con-stitute less than a quorum or there is only one director. In a condominium association of more than 10 units or in a condominium association that does not include timeshare units or timeshare interests, coowners of a unit may not serve as members of the board of directors at the same time unless they own more than one unit or unless there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy. Any unit owner desiring to be a candidate for board membership must comply with sub-subparagraph 4.a. and must be eligible to be a candidate to serve on the board of directors at the time of the deadline for submitting a notice of intent to run in order to have his or her name listed as a proper candidate on the ballot or to serve on the board. A person who has been suspended or removed by the division under this chapter, or who is delinquent in the payment of any monetary obligation due to the association, is not eligible to be a candidate for board membership and may not be listed on the ballot. A person who has been convicted of any felony in this state or in a United States District or Territorial Court, or who has been convicted of any offense in another jurisdiction which would be considered a felony if committed in this state, is not eligible for board membership unless such felon's civil rights have been restored for at least 5 years as of the date such person seeks election to the board. The validity of an action by the board is not affected if it is later determined that a board member is ineligible for board membership due to having been convicted of a felony.

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3. The bylaws must provide the method of calling meetings of unit owners, including annual meetings. Written notice must include an agenda, must be mailed, hand delivered, or electronically transmitted to each unit owner at least 14 days before the annual meeting, and must be posted in a conspicuous place on the condominium property at least 14 continuous days before the annual meeting. Upon notice to the unit owners, the board shall, by duly adopted rule, designate a specific location on the condominium property or association property where all notices of unit owner meetings shall be posted. This requirement does not apply if there is no condominium property or association property for posting notices. In lieu of, or in addition to, the physical posting of meeting notices, the association may, by rea-sonable rule, adopt a procedure for conspicuously posting and repeatedly broadcasting the notice and the agenda on a closed-circuit cable television system serving the condominium association. However, if broadcast notice is used in lieu of a notice posted physically on the condominium property, the notice and agenda must be broadcast at least four times every broadcast hour of each day that a posted notice is otherwise required under this section. If broadcast notice is provided, the notice and agenda must be broadcast in a manner and for a sufficient continuous length of time so as to allow an average reader to observe the notice and read and comprehend the entire content of the notice and the agenda. Unless a unit owner waives in writing the right to receive notice of the annual meeting, such notice must be hand delivered, mailed, or electronically transmitted to each unit owner. Notice for meetings and notice for all other pur-poses must be mailed to each unit owner at the address last furnished to the association by the unit owner, or hand delivered to each unit owner. However, if a unit is owned by more than one person, the association must provide notice to the address that the developer identifies for that purpose and thereafter as one or more of the owners of the unit advise the association in writing, or if no address is given or the owners of the unit do not agree, to the address pro-vided on the deed of record. An officer of the association, or the manager or other person providing notice of the association meeting, must provide an affidavit or United States Postal Service certificate of mailing, to be included in the official records of the association affirming that the notice was mailed or hand delivered in accordance with this provision. 4. The members of the board shall be elected by written ballot or voting machine. Proxies may not be used in electing the board in general elections or elections to fill vacancies caused by recall, resignation, or otherwise, unless otherwise provided in this chapter. This subparagraph does not apply to an association governing a timeshare condominium. a. At least 60 days before a scheduled election, the association shall mail, deliver, or electronically transmit, by sep-arate association mailing or included in another association mailing, delivery, or transmission, including regularly published newsletters, to each unit owner entitled to a vote, a first notice of the date of the election. Any unit owner or other eligible person desiring to be a candidate for the board must give written notice of his or her intent to be a can-didate to the association at least 40 days before a scheduled election. Together with the written notice and agenda as set forth in subparagraph 3., the association shall mail, deliver, or electronically transmit a second notice of the election to all unit owners entitled to vote, together with a ballot that lists all candidates. Upon request of a candidate, an infor-mation sheet, no larger than 8 1/2 inches by 11 inches, which must be furnished by the candidate at least 35 days before the election, must be included with the mailing, delivery, or transmission of the ballot, with the costs of mailing, delivery, or electronic transmission and copying to be borne by the association. The association is not liable for the contents of the information sheets prepared by the candidates. In order to reduce costs, the association may print or duplicate the information sheets on both sides of the paper. The division shall by rule establish voting procedures consistent with this sub-subparagraph, including rules establishing procedures for giving notice by electronic trans-mission and rules providing for the secrecy of ballots. Elections shall be decided by a plurality of ballots cast. There is no quorum requirement; however, at least 20 percent of the eligible voters must cast a ballot in order to have a valid

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election. A unit owner may not permit any other person to vote his or her ballot, and any ballots improperly cast are invalid. A unit owner who violates this provision may be fined by the association in accordance with s. 718.303. A unit owner who needs assistance in casting the ballot for the reasons stated in s. 101.051 may obtain such assistance. The regular election must occur on the date of the annual meeting. Notwithstanding this sub-subparagraph, an election is not required unless more candidates file notices of intent to run or are nominated than board vacancies exist. b. Within 90 days after being elected or appointed to the board, each newly elected or appointed director shall certify in writing to the secretary of the association that he or she has read the association's declaration of condominium, articles of incorporation, bylaws, and current written policies; that he or she will work to uphold such documents and policies to the best of his or her ability; and that he or she will faithfully discharge his or her fiduciary responsibility to the association's members. In lieu of this written certification, within 90 days after being elected or appointed to the board, the newly elected or appointed director may submit a certificate of having satisfactorily completed the educa-tional curriculum administered by a division-approved condominium education provider within 1 year before or 90 days after the date of election or appointment. The written certification or educational certificate is valid and does not have to be resubmitted as long as the director serves on the board without interruption. A director who fails to timely file the written certification or educational certificate is suspended from service on the board until he or she complies with this sub-subparagraph. The board may temporarily fill the vacancy during the period of suspension. The secretary shall cause the association to retain a director's written certification or educational certificate for inspection by the members for 5 years after a director's election or the duration of the director's uninterrupted tenure, whichever is longer. Failure to have such written certification or educational certificate on file does not affect the validity of any board action. c. Any challenge to the election process must be commenced within 60 days after the election results are announced. 5. Any approval by unit owners called for by this chapter or the applicable declaration or bylaws, including, but not limited to, the approval requirement in s. 718.111(8), must be made at a duly noticed meeting of unit owners and is subject to all requirements of this chapter or the applicable condominium documents relating to unit owner deci-sionmaking, except that unit owners may take action by written agreement, without meetings, on matters for which action by written agreement without meetings is expressly allowed by the applicable bylaws or declaration or any law that provides for such action. 6. Unit owners may waive notice of specific meetings if allowed by the applicable bylaws or declaration or any law. If authorized by the bylaws, notice of meetings of the board of administration, unit owner meetings, except unit owner meetings called to recall board members under paragraph (j), and committee meetings may be given by electronic transmission to unit owners who consent to receive notice by electronic transmission. 7. Unit owners have the right to participate in meetings of unit owners with reference to all designated agenda items. However, the association may adopt reasonable rules governing the frequency, duration, and manner of unit owner participation. 8. A unit owner may tape record or videotape a meeting of the unit owners subject to reasonable rules adopted by the division.

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9. Unless otherwise provided in the bylaws, any vacancy occurring on the board before the expiration of a term may be filled by the affirmative vote of the majority of the remaining directors, even if the remaining directors constitute less than a quorum, or by the sole remaining director. In the alternative, a board may hold an election to fill the vacancy, in which case the election procedures must conform to sub-subparagraph 4.a. unless the association governs 10 units or fewer and has opted out of the statutory election process, in which case the bylaws of the association control. Unless otherwise provided in the bylaws, a board member appointed or elected under this section shall fill the vacancy for the unexpired term of the seat being filled. Filling vacancies created by recall is governed by paragraph (j) and rules adopted by the division. 10. This chapter does not limit the use of general or limited proxies, require the use of general or limited proxies, or require the use of a written ballot or voting machine for any agenda item or election at any meeting of a timeshare condominium association. Notwithstanding subparagraph (b)2. and sub-subparagraph 4.a., an association of 10 or fewer units may, by affirma-tive vote of a majority of the total voting interests, provide for different voting and election procedures in its bylaws, which may be by a proxy specifically delineating the different voting and election procedures. The different voting and election procedures may provide for elections to be conducted by limited or general proxy. (e) Budget meeting.-- 1. Any meeting at which a proposed annual budget of an association will be considered by the board or unit owners shall be open to all unit owners. At least 14 days prior to such a meeting, the board shall hand deliver to each unit owner, mail to each unit owner at the address last furnished to the association by the unit owner, or electronically transmit to the location furnished by the unit owner for that purpose a notice of such meeting and a copy of the pro-posed annual budget. An officer or manager of the association, or other person providing notice of such meeting, shall execute an affidavit evidencing compliance with such notice requirement, and such affidavit shall be filed among the official records of the association. 2. a. If a board adopts in any fiscal year an annual budget which requires assessments against unit owners which exceed 115 percent of assessments for the preceding fiscal year, the board shall conduct a special meeting of the unit owners to consider a substitute budget if the board receives, within 21 days after adoption of the annual budget, a written request for a special meeting from at least 10 percent of all voting interests. The special meeting shall be conducted within 60 days after adoption of the annual budget. At least 14 days prior to such special meeting, the board shall hand deliver to each unit owner, or mail to each unit owner at the address last furnished to the association, a notice of the meeting. An officer or manager of the association, or other person providing notice of such meeting shall execute an affidavit evidencing compliance with this notice requirement, and such affidavit shall be filed among the official records of the association. Unit owners may consider and adopt a substitute budget at the special meeting. A substitute budget is adopted if approved by a majority of all voting interests unless the bylaws require adoption by a greater percentage of voting interests. If there is not a quorum at the special meeting or a substitute budget is not adopted, the annual budget previously adopted by the board shall take effect as scheduled.

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West's F.S. § 718.112 Page 8


b. Any determination of whether assessments exceed 115 percent of assessments for the prior fiscal year shall exclude any authorized provision for reasonable reserves for repair or replacement of the condominium property, anticipated expenses of the association which the board does not expect to be incurred on a regular or annual basis, or assessments for betterments to the condominium property. c. If the developer controls the board, assessments shall not exceed 115 percent of assessments for the prior fiscal year unless approved by a majority of all voting interests. (f) Annual budget.-- 1. The proposed annual budget of estimated revenues and expenses must be detailed and must show the amounts budgeted by accounts and expense classifications, including, if applicable, but not limited to, those expenses listed in s. 718.504(21). A multicondominium association shall adopt a separate budget of common expenses for each con-dominium the association operates and shall adopt a separate budget of common expenses for the association. In addition, if the association maintains limited common elements with the cost to be shared only by those entitled to use the limited common elements as provided for in s. 718.113(1), the budget or a schedule attached to it must show the amount budgeted for this maintenance. If, after turnover of control of the association to the unit owners, any of the expenses listed in s. 718.504(21) are not applicable, they need not be listed. 2. In addition to annual operating expenses, the budget must include reserve accounts for capital expenditures and deferred maintenance. These accounts must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and for any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. The amount to be re-served must be computed using a formula based upon estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance. This subsection does not apply to an adopted budget in which the members of an association have determined, by a majority vote at a duly called meeting of the association, to provide no reserves or less reserves than required by this subsection. However, prior to turnover of control of an association by a developer to unit owners other than a developer pursuant to s. 718.301, the developer may vote to waive the reserves or reduce the funding of reserves through the period expiring at the end of the second fiscal year after the fiscal year in which the certificate of a surveyor and mapper is recorded pursuant to s. 718.104(4)(e) or an instrument that transfers title to a unit in the condominium which is not accompanied by a recorded assignment of developer rights in favor of the grantee of such unit is recorded, whichever occurs first, after which time reserves may be waived or reduced only upon the vote of a majority of all nondeveloper voting interests voting in person or by limited proxy at a duly called meeting of the association. If a meeting of the unit owners has been called to determine whether to waive or reduce the funding of reserves, and no such result is achieved or a quorum is not attained, the reserves included in the budget shall go into effect. After the turnover, the developer may vote its voting interest to waive or reduce the funding of reserves. 3. Reserve funds and any interest accruing thereon shall remain in the reserve account or accounts, and may be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a duly called meeting of the association. Prior to turnover of control of an association by a developer to unit owners

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West's F.S. § 718.112 Page 9


other than the developer pursuant to s. 718.301, the developer-controlled association shall not vote to use reserves for purposes other than that for which they were intended without the approval of a majority of all nondeveloper voting interests, voting in person or by limited proxy at a duly called meeting of the association. 4. The only voting interests that are eligible to vote on questions that involve waiving or reducing the funding of reserves, or using existing reserve funds for purposes other than purposes for which the reserves were intended, are the voting interests of the units subject to assessment to fund the reserves in question. Proxy questions relating to waiving or reducing the funding of reserves or using existing reserve funds for purposes other than purposes for which the reserves were intended shall contain the following statement in capitalized, bold letters in a font size larger than any other used on the face of the proxy ballot: WAIVING OF RESERVES, IN WHOLE OR IN PART, OR ALLOWING ALTERNATIVE USES OF EXISTING RESERVES MAY RESULT IN UNIT OWNER LIABILITY FOR PAY-MENT OF UNANTICIPATED SPECIAL ASSESSMENTS REGARDING THOSE ITEMS. (g) Assessments.--The manner of collecting from the unit owners their shares of the common expenses shall be stated in the bylaws. Assessments shall be made against units not less frequently than quarterly in an amount which is not less than that required to provide funds in advance for payment of all of the anticipated current operating expenses and for all of the unpaid operating expenses previously incurred. Nothing in this paragraph shall preclude the right of an association to accelerate assessments of an owner delinquent in payment of common expenses. Accelerated assess-ments shall be due and payable on the date the claim of lien is filed. Such accelerated assessments shall include the amounts due for the remainder of the budget year in which the claim of lien was filed. (h) Amendment of bylaws.-- 1. The method by which the bylaws may be amended consistent with the provisions of this chapter shall be stated. If the bylaws fail to provide a method of amendment, the bylaws may be amended if the amendment is approved by the owners of not less than two-thirds of the voting interests. 2. No bylaw shall be revised or amended by reference to its title or number only. Proposals to amend existing bylaws shall contain the full text of the bylaws to be amended; new words shall be inserted in the text underlined, and words to be deleted shall be lined through with hyphens. However, if the proposed change is so extensive that this procedure would hinder, rather than assist, the understanding of the proposed amendment, it is not necessary to use underlining and hyphens as indicators of words added or deleted, but, instead, a notation must be inserted immediately preceding the proposed amendment in substantially the following language: “Substantial rewording of bylaw. See bylaw _____ for present text.” 3. Nonmaterial errors or omissions in the bylaw process will not invalidate an otherwise properly promulgated amendment. (i) Transfer fees.--No charge shall be made by the association or any body thereof in connection with the sale, mortgage, lease, sublease, or other transfer of a unit unless the association is required to approve such transfer and a fee for such approval is provided for in the declaration, articles, or bylaws. Any such fee may be preset, but in no event may such fee exceed $100 per applicant other than husband/wife or parent/dependent child, which are considered one

194

West's F.S. § 718.112 Page 10


applicant. However, if the lease or sublease is a renewal of a lease or sublease with the same lessee or sublessee, no charge shall be made. The foregoing notwithstanding, an association may, if the authority to do so appears in the declaration or bylaws, require that a prospective lessee place a security deposit, in an amount not to exceed the equivalent of 1 month's rent, into an escrow account maintained by the association. The security deposit shall protect against damages to the common elements or association property. Payment of interest, claims against the deposit, refunds, and disputes under this paragraph shall be handled in the same fashion as provided in part II of chapter 83. (j) Recall of board members.--Subject to s. 718.301, any member of the board of administration may be recalled and removed from office with or without cause by the vote or agreement in writing by a majority of all the voting interests. A special meeting of the unit owners to recall a member or members of the board of administration may be called by 10 percent of the voting interests giving notice of the meeting as required for a meeting of unit owners, and the notice shall state the purpose of the meeting. Electronic transmission may not be used as a method of giving notice of a meeting called in whole or in part for this purpose. 1. If the recall is approved by a majority of all voting interests by a vote at a meeting, the recall will be effective as provided in this paragraph. The board shall duly notice and hold a board meeting within 5 full business days after the adjournment of the unit owner meeting to recall one or more board members. At the meeting, the board shall either certify the recall, in which case such member or members shall be recalled effective immediately and shall turn over to the board within 5 full business days any and all records and property of the association in their possession, or shall proceed as set forth in subparagraph 3. 2. If the proposed recall is by an agreement in writing by a majority of all voting interests, the agreement in writing or a copy thereof shall be served on the association by certified mail or by personal service in the manner authorized by chapter 48 and the Florida Rules of Civil Procedure. The board of administration shall duly notice and hold a meeting of the board within 5 full business days after receipt of the agreement in writing. At the meeting, the board shall either certify the written agreement to recall a member or members of the board, in which case such member or members shall be recalled effective immediately and shall turn over to the board within 5 full business days any and all records and property of the association in their possession, or proceed as described in subparagraph 3. 3. If the board determines not to certify the written agreement to recall a member or members of the board, or does not certify the recall by a vote at a meeting, the board shall, within 5 full business days after the meeting, file with the division a petition for arbitration pursuant to the procedures in s. 718.1255. For the purposes of this section, the unit owners who voted at the meeting or who executed the agreement in writing shall constitute one party under the petition for arbitration. If the arbitrator certifies the recall as to any member or members of the board, the recall will be ef-fective upon mailing of the final order of arbitration to the association. If the association fails to comply with the order of the arbitrator, the division may take action pursuant to s. 718.501. Any member or members so recalled shall deliver to the board any and all records of the association in their possession within 5 full business days after the effective date of the recall. 4. If the board fails to duly notice and hold a board meeting within 5 full business days after service of an agreement in writing or within 5 full business days after the adjournment of the unit owner recall meeting, the recall shall be deemed effective and the board members so recalled shall immediately turn over to the board any and all records and property

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West's F.S. § 718.112 Page 11


of the association. 5. If the board fails to duly notice and hold the required meeting or fails to file the required petition, the unit owner representative may file a petition pursuant to s. 718.1255 challenging the board's failure to act. The petition must be filed within 60 days after the expiration of the applicable 5-full-business-day period. The review of a petition under this subparagraph is limited to the sufficiency of service on the board and the facial validity of the written agreement or ballots filed. 6. If a vacancy occurs on the board as a result of a recall or removal and less than a majority of the board members are removed, the vacancy may be filled by the affirmative vote of a majority of the remaining directors, notwithstanding any provision to the contrary contained in this subsection. If vacancies occur on the board as a result of a recall and a majority or more of the board members are removed, the vacancies shall be filled in accordance with procedural rules to be adopted by the division, which rules need not be consistent with this subsection. The rules must provide pro-cedures governing the conduct of the recall election as well as the operation of the association during the period after a recall but before the recall election. 7. A board member who has been recalled may file a petition pursuant to s. 718.1255 challenging the validity of the recall. The petition must be filed within 60 days after the recall is deemed certified. The association and the unit owner representative shall be named as the respondents. 8. The division may not accept for filing a recall petition, whether filed pursuant to subparagraph 1., subparagraph 2., subparagraph 5., or subparagraph 7. and regardless of whether the recall was certified, when there are 60 or fewer days until the scheduled reelection of the board member sought to be recalled or when 60 or fewer days have elapsed since the election of the board member sought to be recalled. (k) Arbitration.--There shall be a provision for mandatory nonbinding arbitration as provided for in s. 718.1255. (l) Certificate of compliance.-- A provision that a certificate of compliance from a licensed electrical contractor or electrician may be accepted by the association's board as evidence of compliance of the condominium units with the applicable fire and life safety code must be included. Notwithstanding chapter 633 or of any other code, statute, or-dinance, administrative rule, or regulation, or any interpretation of the foregoing, an association, condominium, or unit owner is not obligated to retrofit the common elements, association property, or units of a residential condominium with a fire sprinkler system in a building that has been certified for occupancy by the applicable governmental entity if the unit owners have voted to forego such retrofitting by the affirmative vote of a majority of all voting interests in the affected condominium. The local authority having jurisdiction may not require completion of retrofitting with a fire sprinkler system before the end of 2019. By December 31, 2016, an association that is not in compliance with the requirements for a fire sprinkler system and has not voted to forego retrofitting of such a system must initiate an application for a building permit for the required installation with the local government having jurisdiction demon-strating that the association will become compliant by December 31, 2019. 1. A vote to forego retrofitting may be obtained by limited proxy or by a ballot personally cast at a duly called membership meeting, or by execution of a written consent by the member, and is effective upon recording a certificate

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West's F.S. § 718.112 Page 12


attesting to such vote in the public records of the county where the condominium is located. The association shall mail or hand deliver to each unit owner written notice at least 14 days before the membership meeting in which the vote to forego retrofitting of the required fire sprinkler system is to take place. Within 30 days after the association's opt-out vote, notice of the results of the opt-out vote must be mailed or hand delivered to all unit owners. Evidence of com-pliance with this notice requirement must be made by affidavit executed by the person providing the notice and filed among the official records of the association. After notice is provided to each owner, a copy must be provided by the current owner to a new owner before closing and by a unit owner to a renter before signing a lease. 2. If there has been a previous vote to forego retrofitting, a vote to require retrofitting may be obtained at a special meeting of the unit owners called by a petition of at least 10 percent of the voting interests. Such a vote may only be called once every 3 years. Notice shall be provided as required for any regularly called meeting of the unit owners, and must state the purpose of the meeting. Electronic transmission may not be used to provide notice of a meeting called in whole or in part for this purpose. 3. As part of the information collected annually from condominiums, the division shall require condominium associ-ations to report the membership vote and recording of a certificate under this subsection and, if retrofitting has been undertaken, the per-unit cost of such work. The division shall annually report to the Division of State Fire Marshal of the Department of Financial Services the number of condominiums that have elected to forego retrofitting. 4. Notwithstanding s. 553.509, an association may not be obligated to, and may forego the retrofitting of, any im-provements required by s. 553.509(2) upon an affirmative vote of a majority of the voting interests in the affected condominium. (m) Common elements; limited power to convey.-- 1. With respect to condominiums created on or after October 1, 1994, the bylaws shall include a provision granting the association a limited power to convey a portion of the common elements to a condemning authority for the purpose of providing utility easements, right-of-way expansion, or other public purposes, whether negotiated or as a result of eminent domain proceedings. 2. In any case where the bylaws are silent as to the association's power to convey common elements as described in subparagraph 1., the bylaws shall be deemed to include the provision described in subparagraph 1. (n) Director or officer delinquencies.--A director or officer more than 90 days delinquent in the payment of any monetary obligation due the association shall be deemed to have abandoned the office, creating a vacancy in the office to be filled according to law. (o) Director or officer offenses.--A director or officer charged by information or indictment with a felony theft or embezzlement offense involving the association's funds or property must be removed from office, creating a vacancy in the office to be filled according to law until the end of the period of the suspension or the end of the director's term of office, whichever occurs first. While such director or officer has such criminal charge pending, he or she may not be appointed or elected to a position as a director or officer. However, if the charges are resolved without a finding of

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West's F.S. § 718.112 Page 13


guilt, the director or officer shall be reinstated for the remainder of his or her term of office, if any. (3) Optional provisions.--The bylaws as originally recorded or as amended under the procedures provided therein may provide for the following: (a) A method of adopting and amending administrative rules and regulations governing the details of the operation and use of the common elements. (b) Restrictions on and requirements for the use, maintenance, and appearance of the units and the use of the common elements. (c) Provisions for giving notice by electronic transmission in a manner authorized by law of meetings of the board of directors and committees and of annual and special meetings of the members. (d) Other provisions which are not inconsistent with this chapter or with the declaration, as may be desired. CREDIT(S) Laws 1976, c. 76-222, § 1; Laws 1977, c. 77-174, § 1; Laws 1977, c. 77-221, § 5; Laws 1977, c. 77-222, §§ 3, 4; Laws 1978, c. 78-340, § 1; Laws 1979, c. 79-314, § 6; Laws 1980, c. 80-323, § 2; Laws 1981, c. 81-225, § 2; Laws 1982, c. 82-113, § 1; Laws 1982, c. 82-199, § 4; Laws 1984, c. 84-368, § 6; Laws 1986, c. 86-175, § 6. Amended by Laws 1988, c. 88-148, § 2, eff. July 1, 1988; Laws 1990, c. 90-151, § 7, eff. Oct. 1, 1990; Laws 1991, c. 91-103, § 5, eff. April 1, 1991; Laws 1991, c. 91-103, § 5, eff. April 1, 1992; Laws 1991, c. 91-103, § 5, eff. Jan. 1, 1992; Laws 1992, c. 92-49, § 3, eff. April 2, 1992; Laws 1994, c. 94-336, § 3, eff. Oct. 1, 1994; Laws 1994, c. 94-350, § 7, eff. Oct. 1, 1994; Laws 1995, c. 95-274, § 36, eff. June 14, 1995; Laws 1996, c. 96-396, § 2, eff. June 2, 1996; Laws 1997, c. 97-93, § 32, eff. July 1, 1997; Laws 1997, c. 97-102, § 1773, eff. July 1, 1997; Laws 1997, c. 97-301, § 1, eff. Oct. 1, 1997; Laws 1998, c. 98-195, § 2, eff. May 24, 1998; Laws 1998, c. 98-322, § 3, eff. May 30, 1998; Laws 2000, c. 2000-302, § 53, eff. June 15, 2000; Laws 2001, c. 2001-64, § 21, eff. July 3, 2001; Laws 2002, c. 2002-27, § 9, eff. July 1, 2002; Laws 2003, c. 2003-14, § 5, eff. May 21, 2003; Laws 2004, c. 2004-345, § 4, eff. Oct. 1, 2004; Laws 2004, c. 2004-353, § 4, eff. Oct. 1, 2004; Laws 2005, c. 2005-2, § 134, eff. July 5, 2005; Laws 2008, c. 2008-28, § 7, eff. Oct. 1, 2008; Laws 2009, c. 2009-21, § 88, eff. July 7, 2009; Laws 2010, c. 2010-174, § 10, eff. July 1, 2010; Laws 2011, c. 2011-196, § 3, eff. July 1, 2011; Laws 2013, c. 2013-122, § 5, eff. June 6, 2013; Laws 2013, c. 2013-159, § 1, eff. July 1, 2013; Laws 2013, c. 2013-188, § 3, eff. July 1, 2013.

198

District Court of Appeal of Florida,Third District.

BAY HOLDINGS, INC., et al., Appellant,v.

2000 ISLAND BOULEVARD CONDO. ASS'N,etc., et al., Appellee.

No. 3D04-1851.Feb. 23, 2005.

Background: Action was brought. The CircuitCourt, Miami-Dade County, Maxine Cohen Lando,J., entered judgment that assignee of foreclosurejudgment relating to condominium unit did not fallwithin safe harbor limiting liability for unpaid con-dominium assessments. Assignee appealed.

Holding: The District Court of Appeal, Shepherd,J., held that assignee did not fall within safe harbor.

Affirmed.

West Headnotes

[1] Common Interest Communities 83T 137

83T Common Interest Communities83TVI Unit Purchases and Other Voluntary

Transfers83Tk137 k. Transferee's rights and liabilities

independent of transfer contract. Most Cited Cases(Formerly 89Ak12 Condominium)Assignee of foreclosure judgment relating to

condominium unit did not fall within safe harborprovision limiting liability for unpaid condominiumassessments that became due prior to acquisition oftitle to the unit; safe harbor applied only to firstmortgagee or subsequent holder of first mortgage.West's F.S.A. § 718. 116(1).


92 Constitutional Law

92XX Separation of Powers92XX(C) Judicial Powers and Functions

92XX(C)2 Encroachment on Legislature92k2472 Making, Interpretation, and

Application of Statutes92k2473 k. In general. Most Cited

Cases(Formerly 92k70.1(2))

Statutes 361 203


361VI(A) General Rules of Construction361k187 Meaning of Language

361k203 k. Words omitted. Most CitedCases

Court is not at liberty to add words to statutesthat were not placed there by the legislature; to doso, would be an abrogation of legislative power.

*1197 Camner, Lipsitz and Poller, P.A., and NealeJ. Poller and Bruce Jacobs (Coral Gables), for ap-pellant.

Phillips, Eisinger & Brown, P.A., and Jed L.Frankel (Hollywood), for appellee.

Before COPE, WELLS and SHEPHERD, JJ.

SHEPHERD, J.[1] Bay Holdings, Inc., a wholly-owned subsi-

diary of Bank United FSB, appeals an adverse judg-ment below holding that it does not come under thesafe harbor provision of section 718. 116(1) of theFlorida Statutes. Bay Holdings was the subsequentassignee of a final judgment of foreclosure obtainedby Bank United, after Bank United became theforeclosing first mortgagee on a condominium unitin Miami-Dade County, Florida. Section 718. 116(1) provides a statutory cap on liability of foreclos-ing mortgagees for unpaid condominium assess-ments that become due prior to the first mortgagee's






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acquisition of title pursuant to a foreclosure pro-ceeding. Because the statute clearly and unambigu-ously affords this safe harbor only to first mort-gagees or “a subsequent holder of the first mort-gage, ” (emphasis supplied), we affirm. See § 718.116(1), Fla. Stat.

[2] As the Florida Supreme Court has recentlyreminded, “[w]e are not at liberty to add words tostatutes that were not placed there by the Legis-lature.” Knowles v. Beverly Enterprises, 898 So.2d1, 11, 2004 WL 2922097, slip op. at 11 (Fla.December 16, 2004) (Cantero, J., concurring), cit-ing Hayes v. State, 750 So.2d 1, 4 (Fla.1999). To doso, would be an abrogation of legislative power.Donato v. American Tel. & Tel. Co., 767 So.2d1146, 1150 (Fla.2000); Holly v. Auld, 450 So.2d217, 219 (Fla.1984) (courts are “without power toconstrue an unambiguous statute in a *1198 waywhich would extend, modify, or limit its expressterms”).

Affirmed.

Fla.App. 3 Dist.,2005.Bay Holdings, Inc. v. 2000 Island Blvd. Condo.Ass'n895 So.2d 1197, 30 Fla. L. Weekly D547

END OF DOCUMENT




















West's F.S. § 720.3085 Page 1


Effective: July 1, 2013 West's Florida Statutes Currentness

Title XL. Real and Personal Property (Chapters 689-724) Chapter 720. Homeowners' Associations (Refs & Annos)

Part I. General Provisions 720.3085. Payment for assessments; lien claims

(1) When authorized by the governing documents, the association has a lien on each parcel to secure the payment of assessments and other amounts provided for by this section. Except as otherwise set forth in this section, the lien is effective from and shall relate back to the date on which the original declaration of the community was recorded. However, as to first mortgages of record, the lien is effective from and after recording of a claim of lien in the public records of the county in which the parcel is located. This subsection does not bestow upon any lien, mortgage, or certified judgment of record on July 1, 2008, including the lien for unpaid assessments created in this section, a pri-ority that, by law, the lien, mortgage, or judgment did not have before July 1, 2008. (a) To be valid, a claim of lien must state the description of the parcel, the name of the record owner, the name and address of the association, the assessment amount due, and the due date. The claim of lien secures all unpaid as-sessments that are due and that may accrue subsequent to the recording of the claim of lien and before entry of a certificate of title, as well as interest, late charges, and reasonable costs and attorney's fees incurred by the association incident to the collection process. The person making payment is entitled to a satisfaction of the lien upon payment in full. (b) By recording a notice in substantially the following form, a parcel owner or the parcel owner's agent or attorney may require the association to enforce a recorded claim of lien against his or her parcel:

NOTICE OF CONTEST OF LIEN TO: (Name and address of association) You are notified that the undersigned contests the claim of lien filed by you on _____, (year) , and recorded in Official Records Book __________ at page __________, of the public records of __________ County, Florida, and that the time within which you may file suit to enforce your lien is limited to 90 days following the date of service of this notice. Executed this __________ day of __________, (year) .

Signed: (Owner or Attorney)

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West's F.S. § 720.3085 Page 2


After the notice of a contest of lien has been recorded, the clerk of the circuit court shall mail a copy of the recorded notice to the association by certified mail, return receipt requested, at the address shown in the claim of lien or the most recent amendment to it and shall certify to the service on the face of the notice. Service is complete upon mailing. After service, the association has 90 days in which to file an action to enforce the lien and, if the action is not filed within the 90-day period, the lien is void. However, the 90-day period shall be extended for any length of time that the association is prevented from filing its action because of an automatic stay resulting from the filing of a bankruptcy petition by the parcel owner or by any other person claiming an interest in the parcel. (c) The association may bring an action in its name to foreclose a lien for assessments in the same manner in which a mortgage of real property is foreclosed and may also bring an action to recover a money judgment for the unpaid assessments without waiving any claim of lien. The association is entitled to recover its reasonable attorney's fees incurred in an action to foreclose a lien or an action to recover a money judgment for unpaid assessments. (d) If the parcel owner remains in possession of the parcel after a foreclosure judgment has been entered, the court may require the parcel owner to pay a reasonable rent for the parcel. If the parcel is rented or leased during the pendency of the foreclosure action, the association is entitled to the appointment of a receiver to collect the rent. The expenses of the receiver must be paid by the party who does not prevail in the foreclosure action. (e) The association may purchase the parcel at the foreclosure sale and hold, lease, mortgage, or convey the parcel. (2)(a) A parcel owner, regardless of how his or her title to property has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments that come due while he or she is the parcel owner. The parcel owner's liability for assessments may not be avoided by waiver or suspension of the use or enjoyment of any common area or by abandonment of the parcel upon which the assessments are made. (b) A parcel owner is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the present parcel owner may have to recover any amounts paid by the present owner from the previous owner. For the purposes of this paragraph, the term “previous owner” shall not include an association that acquires title to a delinquent property through foreclosure or by deed in lieu of foreclosure. The present parcel owner's liability for unpaid assessments is limited to any unpaid assessments that accrued before the association acquired title to the delinquent property through foreclosure or by deed in lieu of foreclosure. (c) Notwithstanding anything to the contrary contained in this section, the liability of a first mortgagee, or its successor or assignee as a subsequent holder of the first mortgage who acquires title to a parcel by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee's acquisition of title, shall be the lesser of: 1. The parcel's unpaid common expenses and regular periodic or special assessments that accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or

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West's F.S. § 720.3085 Page 3


2. One percent of the original mortgage debt. The limitations on first mortgagee liability provided by this paragraph apply only if the first mortgagee filed suit against the parcel owner and initially joined the association as a defendant in the mortgagee foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location that was known to or reasonably discoverable by the mortgagee. (d) An association, or its successor or assignee, that acquires title to a parcel through the foreclosure of its lien for assessments is not liable for any unpaid assessments, late fees, interest, or reasonable attorney's fees and costs that came due before the association's acquisition of title in favor of any other association, as defined in s. 718.103(2) or s. 720.301(9), which holds a superior lien interest on the parcel. This paragraph is intended to clarify existing law. (3) Assessments and installments on assessments that are not paid when due bear interest from the due date until paid at the rate provided in the declaration of covenants or the bylaws of the association, which rate may not exceed the rate allowed by law. If no rate is provided in the declaration or bylaws, interest accrues at the rate of 18 percent per year. (a) If the declaration or bylaws so provide, the association may also charge an administrative late fee not to exceed the greater of $25 or 5 percent of the amount of each installment that is paid past the due date. (b) Any payment received by an association and accepted shall be applied first to any interest accrued, then to any administrative late fee, then to any costs and reasonable attorney's fees incurred in collection, and then to the delin-quent assessment. This paragraph applies notwithstanding any restrictive endorsement, designation, or instruction placed on or accompanying a payment. A late fee is not subject to the provisions of chapter 687 and is not a fine. (4) A homeowners' association may not file a record of lien against a parcel for unpaid assessments unless a written notice or demand for past due assessments as well as any other amounts owed to the association pursuant to its gov-erning documents has been made by the association. The written notice or demand must: (a) Provide the owner with 45 days following the date the notice is deposited in the mail to make payment for all amounts due, including, but not limited to, any attorney's fees and actual costs associated with the preparation and delivery of the written demand. (b) Be sent by registered or certified mail, return receipt requested, and by first-class United States mail to the parcel owner at his or her last address as reflected in the records of the association, if the address is within the United States, and to the parcel owner subject to the demand at the address of the parcel if the owner's address as reflected in the records of the association is not the parcel address. If the address reflected in the records is outside the United States, then sending the notice to that address and to the parcel address by first-class United States mail is sufficient. (5) The association may bring an action in its name to foreclose a lien for unpaid assessments secured by a lien in the same manner that a mortgage of real property is foreclosed and may also bring an action to recover a money judgment for the unpaid assessments without waiving any claim of lien. The action to foreclose the lien may not be brought until

203

West's F.S. § 720.3085 Page 4


45 days after the parcel owner has been provided notice of the association's intent to foreclose and collect the unpaid amount. The notice must be given in the manner provided in paragraph (4)(b), and the notice may not be provided until the passage of the 45 days required in paragraph (4)(a). (a) The association may recover any interest, late charges, costs, and reasonable attorney's fees incurred in a lien foreclosure action or in an action to recover a money judgment for the unpaid assessments. (b) The time limitations in this subsection do not apply if the parcel is subject to a foreclosure action or forced sale of another party, or if an owner of the parcel is a debtor in a bankruptcy proceeding. (6) If after service of a summons on a complaint to foreclose a lien the parcel is not the subject of a mortgage fore-closure or a notice of tax certificate sale, the parcel owner is not a debtor in bankruptcy proceedings, or the trial of or trial docket for the lien foreclosure action is not set to begin within 30 days, the parcel owner may serve and file with the court a qualifying offer at any time before the entry of a foreclosure judgment. For purposes of this subsection, the term “qualifying offer” means a written offer to pay all amounts secured by the lien of the association plus amounts accruing during the pendency of the offer. The parcel owner may make only one qualifying offer during the pendency of a foreclosure action. If a parcel becomes the subject of a mortgage foreclosure or a notice of tax certificate sale while a qualifying offer is pending, the qualifying offer becomes voidable at the election of the association. If the parcel owner becomes a debtor in bankruptcy proceedings while a qualifying offer is pending, the qualifying offer becomes void. (a) The parcel owner shall deliver a copy of the filed qualifying offer to the association's attorney by hand delivery, obtaining a written receipt, or by certified mail, return receipt requested. (b) The parcel owner's filing of the qualifying offer with the court stays the foreclosure action for the period stated in the qualifying offer, which may not exceed 60 days following the date of service of the qualifying offer and no sooner than 30 days before the date of trial, arbitration, or the beginning of the trial docket, whichever occurs first, to permit the parcel owner to pay the qualifying offer to the association plus any amounts accruing during the pendency of the offer. (c) The qualifying offer must be in writing, be signed by all owners of the parcel and the spouse of any owner if the spouse resides in or otherwise claims a homestead interest in the parcel, be acknowledged by a notary public, and be in substantially the following form:

QUALIFYING OFFER

AUTOMATIC STAY INVOKED PURSUANT TO F.S. 720.3085 I/We, [Name(s) of Parcel Owner(s)], admit the following: 1. The total amount due the association is secured by the lien of the association.

204

West's F.S. § 720.3085 Page 5


2. The association is entitled to foreclose its claim of lien and obtain a foreclosure judgment for the total amount due if I/we breach this qualifying offer by failing to pay the amount due by the date specified in this qualifying offer. 3. I/We will not permit the priority of the lien of the association or the amounts secured by the lien to be endangered. 4. I/We hereby affirm that the date(s) by which the association will receive $ [specify amount] as the total amount due is [specify date, no later than 60 days after the date of service of the qualifying offer and at least 30 days before the trial or arbitration date], in the following amounts and dates: 5. I/We hereby confirm that I/we have requested and have received from the homeowners' association a breakdown and total of all sums due the association and that the amount offered above is equal to or greater than the total amount provided by the association. 6. This qualifying offer operates as a stay to all portions of the foreclosure action which seek to collect unpaid as-sessments as provided in s. 720.3085. Signed: (Signatures of all parcel owners and spouses, if any) Sworn to and subscribed this (date) day of (month) , (year) , before the undersigned authority. Notary Public: (Signature of notary public) If the parcel owner makes a qualifying offer under this subsection, the association may not add the cost of any legal fees incurred by the association within the period of the stay other than costs acquired in defense of a mortgage foreclosure action concerning the parcel, a bankruptcy proceeding in which the parcel owner is a debtor, or in response to filings by a party other than the association in the lien foreclosure action of the association. (7) If the parcel owner breaches the qualifying offer, the stay shall be vacated and the association may proceed in its action to obtain a foreclosure judgment against the parcel and the parcel owners for the amount in the qualifying offer and any amounts accruing after the date of the qualifying offer. (8)(a) If the parcel is occupied by a tenant and the parcel owner is delinquent in paying any monetary obligation due to the association, the association may demand that the tenant pay to the association the subsequent rental payments and continue to make such payments until all the monetary obligations of the parcel owner related to the parcel have been paid in full to the association and the association releases the tenant or until the tenant discontinues tenancy in the parcel. 1. The association must provide the tenant a notice, by hand delivery or United States mail, in substantially the fol-lowing form:

205

West's F.S. § 720.3085 Page 6


Pursuant to section 720.3085(8), Florida Statutes, we demand that you make your rent payments directly to the homeowners' association and continue doing so until the association notifies you otherwise.

Payment due the homeowners' association may be in the same form as you paid your landlord and must be sent by United States mail or hand delivery to (full address) , payable to (name) .

Your obligation to pay your rent to the association begins immediately, unless you have already paid rent to your landlord for the current period before receiving this notice. In that case, you must provide the association written proof of your payment within 14 days after receiving this notice and your obligation to pay rent to the association would then begin with the next rental period.

Pursuant to section 720.3085(8), Florida Statutes, your payment of rent to the association gives you complete immunity from any claim for the rent by your landlord.

2. A tenant is immune from any claim by the parcel owner related to the rent timely paid to the association after the association has made written demand. (b) If the tenant paid rent to the landlord or parcel owner for a given rental period before receiving the demand from the association and provides written evidence to the association of having paid the rent within 14 days after receiving the demand, the tenant shall begin making rental payments to the association for the following rental period and shall continue making rental payments to the association to be credited against the monetary obligations of the parcel owner until the association releases the tenant or the tenant discontinues tenancy in the unit. The association shall, upon request, provide the tenant with written receipts for payments made. The association shall mail written notice to the parcel owner of the association's demand that the tenant pay monetary obligations to the association. (c) The liability of the tenant may not exceed the amount due from the tenant to the tenant's landlord. The tenant shall be given a credit against rents due to the landlord in the amount of assessments paid to the association. (d) The association may issue notice under s. 83.56 and sue for eviction under ss. 83.59-83.625 as if the association were a landlord under part II of chapter 83 if the tenant fails to pay a monetary obligation. However, the association is not otherwise considered a landlord under chapter 83 and specifically has no obligations under s. 83.51. (e) The tenant does not, by virtue of payment of monetary obligations, have any of the rights of a parcel owner to vote in any election or to examine the books and records of the association. (f) A court may supersede the effect of this subsection by appointing a receiver. CREDIT(S) Added by Laws 2007, c. 2007-183, § 1, eff. July 1, 2007. Amended by Laws 2008, c. 2008-175, § 1, eff. July 1, 2008; Laws 2010, c. 2010-174, § 26, eff. July 1, 2010; Laws 2011, c. 2011-196, § 20, eff. July 1, 2011; Laws 2013, c.

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2013-218, § 7, eff. July 1, 2013.

207


ECOVENTURE WGV, LTD., Appellant,v.

SAINT JOHNS NORTHWEST RESIDENTIALASSOCIATION, INC., Appellee.

No. 5D10–542.March 11, 2011.

Background: Homeowners' association brought ac-tion against mortgagee that was the high bidder atforeclosure sale of property that was part of the as-sociation, seeking to recover unpaid association as-sessments that accrued while mortgagor owned theproperty. The Circuit Court, St. Johns County, J.Michael Traynor, J., entered judgment in favor ofassociation. Mortgagee appealed.

Holding: The District Court of Appeal, Cohen, J.,held that application to mortgagee of statute makinga parcel owner jointly and severally liable for un-paid assessments would impair mortgagee's vestedcontract rights under association's declaration.

Reversed.

West Headnotes

Common Interest Communities 83T 137

83T Common Interest Communities83TVI Unit Purchases and Other Voluntary

Transfers83Tk137 k. Transferee's rights and liabilities

independent of transfer contract. Most Cited Cases

Mortgages 266 551

266 Mortgages266X Foreclosure by Action

266X(M) Sale266k551 k. Liabilities of purchasers. Most

Cited Cases

Application, to mortgagee that was high bidderat foreclosure sale of property that was part ofhomeowners' association, of statute making a parcelowner jointly and severally liable with the formerowner for any unpaid homeowners' association as-sessments due at the time of transfer would impairmortgagee's vested contract rights under associ-ation's declaration of covenants and restrictions,and thus mortgagee was not jointly and severally li-able with mortgagor for mortgagor's unpaid assess-ments; declaration promised any mortgagee laterobtaining title that unpaid assessments would be ad-ded to association's budget for common expensesand paid by all homeowners on a pro-rata basis.West's F.S.A. § 720.3085(2).

*126 Jeffrey C. Regan of Regan Zebouni & Walk-er, P.A., Jacksonville, for Appellant.

Rosanne P. Perrine of Law Office of Rosanne Per-rine, P.A., Ponte Vedra Beach, for Appellee.

*127 COHEN, J.Ecoventure WGV, Ltd. (hereafter

“Ecoventure”), challenges whether section720.3085, Florida Statutes (2007), may be appliedto impose joint and several liability on it for the un-paid homeowner's association assessments incurredby its mortgagor. Concluding it cannot, we reverse.

In 1997, Ecoventure purchased a parcel ofproperty that was subject to Saint Johns NorthwestResidential Association, Inc.'s Declaration of Cov-enants and Restrictions (hereafter “Declaration”).In 2001, Ecoventure sold the property to DMHBHoldings, LLC, taking back a purchase moneymortgage. Ecoventure foreclosed on its mortgageafter DMHB defaulted and was issued title after be-ing the high bidder at the foreclosure sale in March2008.

Subsequently, the Association demanded Ecov-enture pay more than two years' worth of assess-ments incurred by DMHB. Ecoventure refused and







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the Association filed suit, arguing that its Declara-tion and section 720.3085 imposed an obligation onEcoventure to pay the delinquent assessments. Inrelevant part, the trial court found that section720.3085 operated “outside of the Declarations”and imposed “an additional requirement on a cer-tain class of property owners over and above whatthe Declarations may require.” Because Ecoventurewas a parcel owner as defined by section720.3085(1), the trial court concluded it was jointlyand severally liable for the unpaid assessments.

The trial court rejected Ecoventure's argumentthat imposing liability was a retroactive applicationof the statute because liability only attached for un-paid assessments that were due at the time title wastransferred and Ecoventure obtained title after thestatute's effective date. The trial court also foundthat applying the statute did not impair Ecoven-ture's rights under its mortgage with DMHB be-cause the statute permitted it to seek recovery fromDMHB of any amounts it paid. Consequently, thetrial court entered judgment against Ecoventure forthe unpaid assessments, interest, and administrativecosts. We review these legal conclusions de novo.See Fla. Hosp. Waterman, Inc. v. Buster, 984 So.2d478, 485 (Fla.2008).

Of the arguments raised by Ecoventure, the onewe find dispositive is whether applying section720.3085 impaired its contract rights. The trialcourt concluded the statute could be applied be-cause it did not impair Ecoventure's rights under itsmortgage with DMHB. This, however, is not theappropriate contract on which to focus.

The Association made two promises, by andthrough section 6.5 of its Declaration, to inducelenders to extend mortgages on property subject tothe Declaration. First, it promised that any lien forunpaid assessments was subordinate to any mort-gage that was “perfected by recording” before itsclaim of lien was recorded. Second, it promised thatany mortgagee who subsequently obtained title tothe property “by deed in lieu of foreclosure, pursu-ant to a decree of foreclosure, or ... any other pro-

ceeding in lieu of foreclosure of such mortgage,”would not be entirely responsible for the unpaid as-sessments of its mortgagor. Instead, the unpaid as-sessments would be added back to the Association'sbudget for common expenses and paid by all of thehomeowners, including the mortgagee, on a pro-rata basis.FN1

FN1. Section 6.5 Subordination of Lien toMortgages.

The lien of the assessments provided forby this Declaration shall be subordinateto the lien of any bona fide mortgagewhich is perfected by recording prior tothe recording of the claim of lien for anysuch unpaid assessments. Such subordin-ation shall apply only to the assessmentswhich have become due and payable pri-or to a sale or transfer of the BuildingSite by deed in lieu of foreclosure, pur-suant to a decree of foreclosure, or pur-suant to any other proceeding in lieu offoreclosure of such mortgage. The totalamount of assessment which remains un-paid as a result of a mortgagee obtainingtitle to the Building Site, shall be addedto the total budget for Common Ex-penses and shall be paid by all ownersincluding the mortgagee on a pro ratabasis. No sale or other transfer shall re-lieve any Building Site from liability forany assessments thereafter becomingdue, nor from the lien of any such sub-sequent assessments. A written statementof the Association that its lien is subor-dinate to a mortgage shall be dispositiveof any question of subordination.

When Ecoventure extended its mortgage toDMHB in 2001, its rights under the Declarationvested. Imposing section 720.3085, which was en-acted after the mortgage was extended, completelyalters Ecoventure's vested rights by making it *128jointly and severally liable with the “previous par-cel owner for all unpaid assessments that came due














up to the time of transfer of title.” § 720.3085(2).FN2 The court in Coral Lakes Community Associ-ation, Inc. v. Busey Bank, N.A., 30 So.3d 579, 584(Fla. 2d DCA 2010), recently addressed the very is-sue raised in this appeal and concluded the enact-ment of “section 720.3085 cannot disturb that prior,established contractual relationship.” We likewiseagree that imposing the statute on Ecoventure“would operate to severely, permanently, and im-mediately change the parties' economic relationship... a circumstance not supportable under the law.”FN3 Id.; see also Sarasota County v. Andrews, 573So.2d 113 (Fla. 2d DCA 1991). Accordingly, we re-verse the final judgment.

FN2. This conclusion is not altered by thefact that the “present parcel owner may[seek] to recover any amounts paid by thepresent owner from the previous owner.” §720.3085(2), Fla. Stat. When a homeown-er's association's declaration provides foreither reduced or no liability, having theright to attempt to recover from the priorowner is hardly meaningful relief. This isparticularly true when title is obtained as aresult of foreclosure proceedings and, as inthis case, the foreclosed property ownerfiled for bankruptcy.

FN3. The Association could have incorpor-ated the subsequent enactment of section720.3085 into the Declaration by includinglanguage expressly incorporating by refer-ence the provisions of Chapter 720. SeeAngora Enters., Inc. v. Cole, 439 So.2d832 (Fla.1983). However, no such lan-guage was in the Declaration.

REVERSED.

GRIFFIN and PALMER, JJ., concur.

Fla.App. 5 Dist.,2011.Ecoventure WGV, Ltd. v. Saint Johns NorthwestResidential Ass'n, Inc.56 So.3d 126, 36 Fla. L. Weekly D530

END OF DOCUMENT






















Supreme Court of Florida.HOLLY LAKE ASSOCIATION, Petitioner,

v.FEDERAL NATIONAL MORTGAGE ASSOCI-

ATION, Respondent.

No. 84242.July 6, 1995.

Rehearing Denied Sept. 11, 1995.

The Florida District Court of Appeal certifiedto the Supreme Court as a question of great publicimportance whether a claim of lien recorded pursu-ant to a declaration of covenants by a homeowners'association had priority over an intervening recor-ded mortgage. The Supreme Court, Grimes, C.J.,held that for claim of lien recorded pursuant to de-claration of covenants to have priority over inter-vening recorded mortgage, declaration had to con-tain specific language indicating that lien relatedback to date of filing of declaration or that it other-wise took priority over intervening mortgages.

Question answered.

West Headnotes

[1] Mortgages 266 165


266III(D) Lien and Priority266k162 Priority of Record

266k165 k. Relation Back. Most CitedCases

Homeowners' association's declaration of cov-enants failed to put mortgagee on notice that associ-ation claimed continuing lien on property securingmonthly maintenance assessments, and thus, mort-gage recorded after declaration was recorded buteight years before recording of association's claimof lien had priority over lien, where declaration au-thorized association to impose lien for assessments

but did not otherwise indicate that lien related backto or took priority over intervening mortgage.

[2] Mortgages 266 165



266k165 k. Relation Back. Most CitedCases

In order for a claim of lien recorded pursuant todeclaration of covenants to have priority over inter-vening recorded mortgage, declaration must containspecific language indicating that lien relates back todate of filing of declaration or that it otherwisetakes priority over intervening mortgages.

*267 Larry A. Karns, Fort Lauderdale, for petition-er.

Steven L. Brannock and Julia S. Waters of Holland& Knight, Tampa, for respondent.

GRIMES, Chief Justice.We review Federal National Mortgage Ass'n v.

McKesson, 639 So.2d 78 (Fla. 4th DCA 1994), inwhich the district court of appeal certified the fol-lowing as a question of great public importance:

WHETHER A CLAIM OF LIEN RECORDEDPURSUANT TO A DECLARATION OF COV-ENANTS BY A HOMEOWNERS' ASSOCI-ATION HAS PRIORITY OVER AN INTER-VENING RECORDED MORTGAGE WHERETHE DECLARATION AUTHORIZES THE AS-SOCIATION TO IMPOSE A LIEN FOR AS-SESSMENTS BUT DOES NOT OTHERWISEINDICATE THAT THE LIEN RELATES BACKOR TAKES PRIORITY OVER AN INTERVEN-ING MORTGAGE.

Id. at 80. We have jurisdiction under article V,section 3(b)(4) of the Florida Constitution.

Page 1660 So.2d 266, 20 Fla. L. Weekly S314(Cite as: 660 So.2d 266)
























Petitioner, Holly Lakes Association (the Asso-ciation), is the homeowners' association for HollyLakes, a mobile home park development. In 1974,the Association's predecessor recorded a declara-tion of covenants covering the real property withinthe development. The declaration required residentsto pay a monthly assessment for maintenance oftheir mobile home sites and included the followingprovision:

In the event the monthly mobile type home sitecharge is not paid when due, Owner, or its de-signee, shall have the right to a lien against saidsite and the improvements contained thereon forany such unpaid charges; and shall have the rightto enforce said lien in any manner provided bylaw for the enforcement of mechanics' or stat-utory liens, but Owner shall not be restricted tosuch procedure in the collection of said overduecharges.

John and Denise McKesson became the ownersof a mobile home site in Holly Lakes and executeda mortgage on the property to the assignor of re-spondent, Federal National Mortgage Association(FNMA). The mortgage was recorded in 1983. In1991, the Association recorded a claim of lienagainst the McKessons' property after they failed topay the monthly maintenance assessment. In 1992,FNMA brought a foreclosure action against theMcKessons for failure to pay the promissory notesecured by the mortgage. The Association filed acounterclaim against FNMA asserting that it had asuperior lien against the property because it relatedback to the 1974 declaration of covenants contain-ing the provision granting the Association the rightto institute a lien for past-due maintenance assess-ments. FNMA contended *268 that its mortgage li-en was superior because it was recorded eight yearsbefore the recording of the Association's lien. Thetrial court held that the Association's lien had prior-ity over FNMA's mortgage and granted summaryjudgment in favor of the Association.

The Fourth District Court of Appeal reversedthe summary judgment. The court reasoned that the

Association's declaration of covenants, rather thancreating an ongoing automatic lien, merely createda right to a lien in the event that the maintenanceassessment was not paid when due. BecauseFNMA's 1983 mortgage lien was recorded prior tothe Association's 1991 assessment lien, the courtheld that FNMA's lien had priority.

[1] The Association and FNMA agree that theapplicable rule governing priority of lien interests is“first in time is first in right.” Walter E. Heller &Co. Southeast, Inc. v. Williams, 450 So.2d 521, 532(Fla. 3d DCA 1984), review denied, 462 So.2d1108 (Fla.1985). However, both parties assert thattheir respective lien was first in time and thereforehad priority. Relying on our decision in Bessemer v.Gersten, 381 So.2d 1344 (Fla.1980), the Associ-ation argues that its lien is first in time because itrelates back to the recording date of the declarationof covenants.

Bessemer involved the issue of whether a de-veloper's recreation assessment lien could take pri-ority over a property owner's homestead right. Thedeveloper in Bessemer filed a declaration of restric-tions which required purchasers to pay a monthlyassessment for use of the development's recreation-al facilities. The declaration of restrictions statedthat the developer “shall have a lien upon suchowner's lot for the aforesaid amount of $10.00 permonth until such amount is paid.” Id. at 1346.

In 1970, the Gerstens purchased a house and lotfrom the developer. In 1975, the developer's suc-cessor in interest brought suit to foreclose a lienagainst the Gerstens for nonpayment of the recre-ation assessment. The Gerstens argued that theirhomestead right had priority because the lien couldonly arise upon nonpayment and, therefore, the liendid not come into existence until after they hadtaken possession of the house and lot as theirhomestead.

This Court determined that the Gerstens mani-fested an intent to let the real property stand as se-curity for the recreation assessment obligation












when they accepted the deed with actual or con-structive notice of the language in the declaration ofrestrictions. Id. at 1348. We further determined that“the creation of the lien by acceptance of the deedrelates back to the time of the filing of the declara-tion of restrictions.” Id. Holding that the caseshould be treated as if the Gerstens had taken titlesubject to a preexisting lien, we ruled that the de-veloper's lien had priority over the Gerstens'homestead right.

We find that Bessemer is inapplicable to thesituation before us in this case. Bessemer involveda conflict between a creditor's lien and the propertyowner's homestead right, whereas the instant caseinvolves a conflict between two creditors.Moreover, the language contained in the Associ-ation's declaration of covenants differs significantlyfrom that contained in the Bessemer declaration ofrestrictions. In Bessemer, the language in the de-claration of restrictions put all parties on notice thatan ongoing, automatic lien had been created at thetime that the property was purchased, and that thislien would continue each month until the ownerpaid the monthly assessment fee. In contrast, thelanguage in the declaration of covenants before usmerely granted the Association the right to file a li-en in the event of nonpayment.

The Association's declaration of covenantsfailed to put FNMA on notice that the Associationclaimed a continuing lien on the property securingthe monthly maintenance assessments. WhenFNMA's mortgage was recorded in 1983, the Asso-ciation had not yet filed a lien against the McK-essons' property. Therefore, FNMA could not becharged with constructive notice FN1 of the exist-ence of the Association's lien.

FN1. The Association also contends thatFNMA's assignor had actual notice of thedeclaration of covenants. This is irrelevantbecause we have construed the declarationas not creating a continuing lien.

Facing a similar issue in St. Paul Federal Bank

for Savings v. Wesby, 149 Ill.App.3d 1059, 103Ill.Dec. 390, 501 N.E.2d 707 (1986), *269 appealdenied, 114 Ill.2d 557, 108 Ill.Dec. 425, 508N.E.2d 736 (1987), the court also construed the lan-guage of a declaration of condominium ownershipas being insufficient to create a continuing lien forunpaid association expenses which would relateback to the date the declaration was filed. The courtdistinguished the Bessemer decision in much thesame way we have done. In concluding that therewas nothing in the declaration which would putmortgagees on notice of the possibility of a relationback, the court said:

To hold that priority of such a debt relates backto the date the declaration is recorded or re-gistered, would expose lenders to unknown risks,and would undercut the principle, embodied inthe recordation and registration statutes, that per-sons who are about to acquire an interest in landare entitled to know the extent to which that in-terest is impaired.

Id. 103 Ill.Dec. at 399, 501 N.E.2d at 716.

[2] We hold that in order for a claim of lien re-corded pursuant to a declaration of covenants tohave priority over an intervening recorded mort-gage, the declaration must contain specific lan-guage indicating that the lien relates back to thedate of the filing of the declaration or that it other-wise takes priority over intervening mortgages. Cf.New York Life Ins. & Annuity Corp. v. HammocksCommunity Ass'n, Inc., 622 So.2d 1369 (Fla. 3dDCA 1993) (homeowners association's assessmentlien had priority over a mortgage lien because ofspecific language in the declaration of covenantswhich gave the association's assessment lien prior-ity over any first mortgage amortized over a periodof less than ten years). We therefore answer the cer-tified question in the negative and approve the de-cision of the district court of appeal.

It is so ordered.

OVERTON, SHAW, KOGAN, HARDING,

















WELLS and ANSTEAD, JJ., concur.

Fla.,1995.Holly Lake Ass'n v. Federal Nat. Mortg. Ass'n660 So.2d 266, 20 Fla. L. Weekly S314

END OF DOCUMENT





District Court of Appeal of Florida,Second District.

CORAL LAKES COMMUNITY ASSOCIATION,INC., Appellant,

v.BUSEY BANK, N.A.; Scott Haley; Ruth Haley;and Riverside Bank of the Gulf Coast, Appellees.

No. 2D08-5062.Feb. 19, 2010.

Background: Bank instituted a foreclosure actionagainst homeowners, adding the home owner's as-sociation (HOA) as a party defendant because ofthe accrued unpaid assessments. HOA answeredand claimed bank's mortgage was subordinate tomortgaged premises' accrued and unpaid commonexpenses. The Circuit Court, Lee County, MichaelT. McHugh, J., granted bank summary judgment.HOA appealed.

Holdings: The District Court of Appeal, Casanueva, C.J., held that:(1) bank, as third-party beneficiary to declaration ofcovenants, was entitled to seek enforcement of sub-ordination provision in declaration, and(2) retroactive application of statute, which re-quired subordination of a mortgagee's interest, wasconstitutionally unreasonable, as applied to bank'svested contractual rights.

Affirmed.

Wallace, J., concurred in result only.

West Headnotes

[1] Covenants 108 49

108 Covenants108II Construction and Operation

108II(C) Covenants as to Use of Real Prop-

erty108k49 k. Nature and operation in gener-

al. Most Cited Cases

Covenants 108 118

108 Covenants108IV Actions for Breach

108k117 Evidence108k118 k. Presumptions and burden of

proof. Most Cited CasesRestrictions found within a homeowners' asso-

ciation's (HOA) declaration of covenants are af-forded a strong presumption of validity, and a reas-onable unambiguous restriction will be enforced ac-cording to the intent of the parties as expressed bythe clear and ordinary meaning of its terms.

[2] Contracts 95 187(1)

95 Contracts95II Construction and Operation

95II(B) Parties95k185 Rights Acquired by Third Persons

95k187 Agreement for Benefit ofThird Person


Covenants 108 77.1


108II(D) Covenants Running with the Land108k77 Persons Entitled to Enforce Real

Covenants108k77.1 k. In general. Most Cited

Cases

Mortgages 266 159


266III(D) Lien and Priority266k159 k. Priority as affected by provi-









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sions of mortgage or by agreement. Most CitedCases

Bank, as first mortgagee of property, althoughnot a party to declaration of covenants and restric-tions, which subordinated any claim for unpaidhome owners' association (HOA) assessments to afirst mortgagee's claim upon foreclosure or deed inlieu of foreclosure, was a third-party beneficiary tocontract, and, thus, was entitled to seek enforce-ment of subordination provision in covenant; HOAcould have protected itself if it had included lan-guage in declaration that its lien for unpaid assess-ments related back to the date the declaration wasrecorded or that it otherwise had lien superiorityover intervening mortgages, but, instead, took op-posite tack to entice lenders to finance purchases inits community.

[3] Contracts 95 187(1)

95 Contracts95II Construction and Operation

95II(B) Parties95k185 Rights Acquired by Third Persons

95k187 Agreement for Benefit ofThird Person


Covenants 108 54


108II(D) Covenants Running with the Land108k54 k. Statutory provisions. Most

Cited Cases

Mortgages 266 159



sions of mortgage or by agreement. Most CitedCases

Statutes 361 278.34


361VI(D) Retroactivity361k278.24 Validity of Particular Retro-

active Statutes361k278.34 k. Mortgages and liens.

Most Cited CasesRetroactive application of statute, which re-

quired subordination of a mortgagee's interest inmortgaged premises to unpaid common expenseswhich accrued or came due during time period pre-ceding mortgagee's acquisition of title at foreclos-ure sale or by deed in lieu of foreclosure, was con-stitutionally unreasonable, as applied to bank'srights, as third-party beneficiary to declaration ofcovenants and restrictions, which subordinated anyclaim for unpaid home owners' association (HOA)assessments to a first mortgagee's claim in such cir-cumstances, as application of statute would result inimmediate diminishment in value of the mortgage,as well as the power of bank's priority position.West's F.S.A. § 720.3085; West's F.S.A. Const. Art.1, § 10.


92 Constitutional Law92XXI Vested Rights

92k2631 Property in General92k2632 k. In general. Most Cited Cases

Covenants 108 54


108II(D) Covenants Running with the Land108k54 k. Statutory provisions. Most

Cited Cases

Mortgages 266 159



sions of mortgage or by agreement. Most Cited







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CasesAssuming balancing test of Pomponio v. Clar-

idge applied, degree of impairment in retroactivelyapplying statute which required mortgagee's vestedcontractual rights in mortgaged premises to be sub-ordinated to unpaid common expenses which ac-crued or came due during time period precedingmortgagee's acquisition of title at foreclosure sale,was not outweighed by benefit that statute sought toaddress in dealing with economic problem facinghomeowners' associations in general, but would op-erate to severely, permanently, and immediatelychange parties' economic relationship retroactively,a circumstance not supportable under law; applica-tion would place economic burden not onhomeowner, the root of problem of unpaid assess-ments, but on entity that previously made construc-tion or purchase of home possible. West's F.S.A. §720.3085; West's F.S.A. Const. Art. 1, § 10.

West CodenotesLimited on Constitutional GroundsWest's F.S.A. §720.3085. *581 Ashley D. Lupo and Christopher D.Donovan of Roetzel & Andress, LPA, Naples, forAppellant.

Gordon R. Duncan of Duncan & Associates, P.A.,Fort Myers, for Appellee Busey Bank, N.A.

No appearance for Appellees Scott Haley, RuthHaley, and Riverside Bank of the Gulf Coast.

CASANUEVA, Chief Judge.Coral Lakes Community Association, Inc. (the

“HOA”), appeals a final summary judgment offoreclosure awarded to Busey Bank, N.A. (the“Bank”). The final judgment determined that theBank had no liability to the HOA for past due HOAassessments that the HOA claimed pursuant to sec-tion 720.3085(2), Florida Statutes (2008). The dis-position of this case is determined by the HOA'sDeclaration of Covenants and Restrictions vis-à-visthe relevant regulatory statutes. As one would ex-pect, these two competing parties possess diamet-rically opposed legal positions regarding whether

the Bank should be liable for the mortgagors' un-paid HOA assessments that will have accrued bythe time title may be transferred to the Bank. Forthe reasons explained below, we conclude the Bankis not required to pay those delinquent assessmentsand affirm the summary judgment in foreclosure.

BackgroundThe facts are undisputed. In May 2006, ap-

pellees Scott and Ruth Haley (“the homeowners”)executed a note and mortgage in favor of the Bankfor $252,255.80 to purchase property located in theCoral Lakes community. The community's govern-ing document at this time, the Declaration of Cov-enants and Restrictions of Coral Lakes, providedthe following: FN1

FN1. This provision clearly favors poten-tial first mortgage holders who generallybuy the properties upon which they fore-close. We make this observation becausethe remaining, unquoted portion of thissection does not exclude other types ofbuyers of homes with delinquent fees frompayment of those fees. This section waslikely added to the Declaration to inducelenders to aid homeowners in purchasingproperty in the community by awardingthem priority over the HOA's claims forunpaid assessments.

9.1.6 Subordination of Lien. Where any personobtains title to a LOT pursuant to the foreclosureof a first mortgage of record, or where the holderof a first mortgage accepts a deed to a LOT inlieu of foreclosure of the first mortgage of recordof such lender, such acquirer of title, its suc-cessors and assigns, shall not be liable for anyASSESSMENTS or for other moneys owed toCoral Lakes which are chargeable to the formerOWNER of the LOT and which became due priorto acquisition of title as a result of the foreclosureor deed in lieu thereof, unless the payment ofsuch funds is secured by a claim of lien recordedprior to the recording of the foreclosed or under-lying mortgage.


















By January 2008, the homeowners were in ar-rears on both their mortgage payments due theBank and assessments due the HOA. On June 3,2008, the Bank instituted a foreclosure actionagainst the homeowners, adding the HOA as a partydefendant because of the accrued unpaid assess-ments.FN2 On June 24, 2008, the HOA *582answered and claimed as its first affirmative de-fense that pursuant to section 720.3085, FloridaStatutes (2007),FN3 the Bank's mortgage was sub-ordinate to all of the mortgaged premises' unpaidcommon expenses which accrued or came due dur-ing the time period preceding the Bank's acquisitionof title at foreclosure sale or by deed in lieu of fore-closure. FN4 As its second affirmative defense, theHOA claimed that if a purchaser, including theBank and its successors or assigns, purchases themortgaged premises, including but not limited to, ata foreclosure sale, then this purchaser shall bejointly and severally liable with the previous ownerto pay twelve months' assessments which accruedpreceding transfer of title or one percent of the ori-ginal mortgage debt, whichever is less.

FN2. Riverside Bank of the Gulf Coast isapparently the holder of another, inferiorlien but has not appeared in this appeal.

FN3. At the time of the filing of the fore-closure suit and the HOA's answer and af-firmative defenses, section 720.3085, Flor-ida Statutes (2007), provided in part:

(1) A parcel owner, regardless of howhis or her title to property has been ac-quired, including by purchase at a fore-closure sale or by deed in lieu of fore-closure, is liable for all assessments thatcome due while he or she is the parcelowner. The parcel owner's liability forassessments may not be avoided bywaiver or suspension of the use or enjoy-ment of any common area or by aban-donment of the parcel upon which theassessments are made.

(2) A parcel owner is jointly and sever-ally liable with the previous parcel own-er for all unpaid assessments that camedue up to the time of transfer of title.This liability is without prejudice to anyright the present parcel owner may haveto recover any amounts paid by thepresent owner from the previous owner.

This was the initial enactment of thissection, effective July 1, 2007. See ch.2007-183, §§ 1-2, at 1603-05, Laws ofFla. On July 1, 2008, after the foreclos-ure complaint and the answer and af-firmative defenses were filed, the newlyamended version of the statute becameeffective. A new subsection (1) was ad-ded (not at issue here); former subsec-tion (1) was renumbered subsection(2)(a); former subsection (2) was re-numbered subsection (2)(b); and newlanguage was inserted, numbered sub-section (2)(c), as follows:

(c) Notwithstanding anything to the con-trary contained in this section, the liabil-ity of a first mortgagee, or its successoror assignee as a subsequent holder of thefirst mortgage who acquires title to aparcel by foreclosure or by deed in lieuof foreclosure for the unpaid assess-ments that became due before the mort-gagee's acquisition of title, shall be thelesser of:

1. The parcel's unpaid common expensesand regular periodic or special assess-ments that accrued or came due duringthe 12 months immediately precedingthe acquisition of title and for whichpayment in full has not been received bythe association; or

2. One percent of the original mortgagedebt. The limitations on first mortgageeliability provided by this paragraph ap-







ply only if the first mortgagee filed suitagainst the parcel owner and initiallyjoined the association as a defendant inthe mortgagee foreclosure action. Join-der of the association is not required if,on the date the complaint is filed, the as-sociation was dissolved or did not main-tain an office or agent for service of pro-cess at a location that was known to orreasonably discoverable by the mort-gagee.

Ch. 2008-175, § 1-2, at 2034-35, Lawsof Fla.

Thus, instead of being jointly and sever-ally responsible for all unpaid assess-ments of a foreclosed homeowner, as ofJuly 1, 2008, the first mortgagee whoholds title now has limited liability,either the prior twelve months' worth ofunpaid assessments or one percent of theoriginal mortgage debt, whichever isless.

FN4. We note that at the time the HOAfiled its answer and affirmative defenses,the homeowners were still the record title-holders of the property as there had not yetbeen a judgment of foreclosure, a foreclos-ure sale, or a certificate of sale filed. Sub-sequent to filing the notice of appeal in thiscase, the Bank bought the home at theforeclosure sale and its certificate of titlewas recorded on December 24, 2008.

The lawsuit proceeded quickly and as a fairlyroutine foreclosure action. On July 23, 2008, theBank filed a motion for summary judgment of fore-closure, claiming the *583 execution of the noteand mortgage was not disputed, the failure to timelypay the note was not disputed, the priority of thenote and mortgage was not disputed, and the onlymatters of law to be argued were the general law ofnotes, mortgages, and negotiable instruments andthe Bank's entitlement to attorney's fees and costs.

The Bank also claimed that, as a matter of law, thestatutory changes to section 720.3085 FN5 shouldnot be applied retroactively to its note and mort-gage that predated the statutory change.

FN5. See footnote 2, above.

At the hearing on the motion for summaryjudgment, the only contentious issue was whetherthe Bank was excused from paying the unpaid HOAassessments that had accrued. The Bank argued thatat the time of the execution of its note and mort-gage in 2006, the HOA's Declaration gave its lien adistinct and very advantageous priority positionover any HOA lien for unpaid assessments.Moreover, the Bank, by virtue of being an intendedthird-party beneficiary of this paragraph of the De-claration, could not have this benefit removed byoperation of the statute, which was not in existenceat the time it entered into its contract with thehomeowners. Further, the Bank argued, citing toCity of Sanford v. McClelland, 121 Fla. 253, 163So. 513 (1935), applying the new statutory lan-guage would impair the Bank's contractual right,i.e., its vested lien priority. See id. at 514-15 (“Avested right has been defined as ‘an immediate,fixed right of present or future enjoyment’ and alsoas ‘an immediate right of present enjoyment, or apresent, fixed right of future enjoyment.’ ” (quotingPearsall v. Great N. Ry. Co., 161 U.S. 646, 673, 16S.Ct. 705, 40 L.Ed. 838 (1896))).

The HOA countered that the issue was not ret-roactive application of the amended statute becausethe Bank had not yet taken title to the parcel; there-fore, assuming that the Bank would take title at afuture foreclosure sale, it would be constrained tofollow the dictates of the amended 2008 version ofthe statute at that time. Cf. LR5A-JV, LP v. LittleHouse, LLC, 998 So.2d 1173, 1175 (Fla. 5th DCA2008) (holding section 720.3085(2), Florida Stat-utes (2007), inapplicable because the appellant/mortgagee was not yet at the time of the suit thesubsequent parcel owner; however, in dictum, thecourt stated that “[f]urthermore, there is nothing inthe plain language of section 720.3085 that can



















reasonably be construed to give the Association's li-en priority over [the lender's] mortgage”).

The trial court agreed with the Bank, notingthat City of Sanford would control to precludeimpairment of vested rights by a statutory change.On September 22, 2008, the trial court entered a fi-nal judgment in foreclosure with the following lan-guage specifically addressing the lien priority/un-paid assessments issue:

8. Upon filing the certificate of sale, the pur-chaser at the sale shall be let into possession ofthe property and the Defendants and all personsclaiming under or against them since the filing ofthe Notice of Lis Pendens shall be fore-closed ofall estate or claim in the property except that anypurchaser other than Plaintiff [the Bank] shall beliable for unpaid assessments due [the HOA] pur-suant to the provision of Section 720.3085, Flor-ida Statutes.

Analysis[1][2][3] We conclude that because of the De-

claration's plain and unambiguous language subor-dinating any claim for unpaid HOA assessments toa first mortgagee's claim upon foreclosure or deedin lieu of foreclosure, it controls and absolves the*584 Bank, as first mortgagee, from liability forany assessments accruing before it acquires the par-cel. “Restrictions found within a Declaration are af-forded a strong presumption of validity, and a reas-onable unambiguous restriction will be enforced ac-cording to the intent of the parties as expressed bythe clear and ordinary meaning of its terms....”Shields v. Andros Isle Prop. Owners Ass'n, 872So.2d 1003, 1005-06 (Fla. 4th DCA 2004) (quotingEmerald Estates Cmty. Ass'n v. Gorodetzer, 819So.2d 190, 193 (Fla. 4th DCA 2002)). In this case,the restriction in the Declaration disadvantages theHOA, which the drafter had every right to do, andbenefits all first mortgagees of homes in the com-munity. First mortgagees in this community, al-though not parties to the Declaration that is the con-tract between the HOA and its members, are clearlythird-party beneficiaries of this contract. See

Greenacre Props., Inc. v. Rao, 933 So.2d 19, 23(Fla. 2d DCA 2006) (explaining that to enforcerights under a contract like a declaration, “[a] thirdparty must establish that the contract either ex-pressly creates rights for them as a third party orthat the provisions of the contract primarily and dir-ectly benefit the third party or a class of persons ofwhich the third party is a member”). The HOAcould have protected itself if, in drafting its Declar-ation, it had included language that its lien for un-paid assessments related back to the date the De-claration was recorded or that it otherwise had liensuperiority over intervening mortgages. SeeLR5A-JV, 998 So.2d at 1175 n. 2. However, theHOA took the opposite tack to entice lenders to fin-ance purchases in its community. The statutorychange in section 720.3085 cannot disturb that pri-or, established contractual relationship.

To hold otherwise would implicate constitu-tional concerns about impairment of vested contrac-tual rights. See art. I, § 10, Fla. Const. (“No bill ofattainder, ex post facto law or law impairing the ob-ligation of contracts shall be passed.”). In this state,it is a “well-accepted principle that virtually no de-gree of contract impairment is tolerable.” Pomponiov. Claridge of Pompano Condo., Inc., 378 So.2d774, 780 (Fla.1979) (citing Yamaha Parts Distribs.,Inc. v. Ehrman, 316 So.2d 557 (Fla.1975)). Toavoid this longstanding principle, the HOA arguesthat even if applying section 720.3085 to this casewould impair the Bank's contractual rights, suchimpairment is constitutionally reasonable or minim-al. We do not agree.

The facts of this case are similar to those inSarasota County v. Andrews, 573 So.2d 113 (Fla.2d DCA 1991). There, Sarasota County passed anordinance declaring that a fine imposed by thecounty on property, when recorded, becomes a lienagainst the property that is superior to all other li-ens except a lien for taxes. Pursuant to this ordin-ance, the county imposed a fine on a property foroperation of an illegal landfill and recorded it as alien. The property at issue in the case was subject to






























a prior mortgage in favor of Coast Federal Savings& Loan Association. Sarasota County filed suitagainst the property owner to foreclose its claim oflien, added the mortgagee Coast Federal as a de-fendant, and sought a declaration that Coast Feder-al's lien was inferior to the county's lien. The trialcourt entered a final summary judgment findingCoast Federal's lien superior because it found thatthe portion of the ordinance making the county's li-en superior to all nontax liens was unconstitutional,as applied. We affirmed the summary judgment,saying:

We think the priority provision of the County'sordinance substantially impairs Coast Federal'sprior mortgage lien by subordinating it to theCounty's lien. If by operation of the County's or-dinance, Coast Federal's lien can be relegated to asecondary position, it is obviously of *585 lessvalue than the first-priority lien for which CoastFederal had contracted. Thus, the ordinance retro-spectively impairs Coast Federal's contractual po-sition.

Id. at 115.

Much like the county's argument in SarasotaCounty v. Andrews, the HOA here argues that anyimpairment is permissible as minimal. We dis-agreed with this argument in Sarasota County v.Andrews and disagree with it here:

[T]he priority provision [of the ordinance] hasworked an immediate impairment on Coast Fed-eral's preexisting mortgage lien. The nature ofpriority is such that Coast Federal is automatic-ally at a substantially greater risk of losing its in-vestment if it has only a second, as opposed to afirst, priority lien. Furthermore, mortgages heldby commercial institutions are frequently sold onthe secondary market, and the subordination ofCoast Federal's lien impairs the marketability ofits mortgage. This immediate diminishment in thevalue of Coast Federal's contract is repugnant toour constitutions.

Id.

More recently, this court reviewed an impair-ment challenge in Lee County v. Brown, 929 So.2d1202 (Fla. 2d DCA 2006). There, homebuilderschallenged the validity of a local ordinance impos-ing a school impact fee on those applying for abuilding permit. This court recognized that Pom-ponio required the application of a balancing testwhich “weighs the degree of impairment against thesource of authority under which the law is enactedand the ‘evil’ the law is intended to remedy.” 929So.2d at 1208 (citing Pomponio, 378 So.2d at 780).However, the Pomponio balancing test is not re-quired under Sarasota County v. Andrews where thestatutory enactment “results in an immediate dimin-ishment in the value of the contract.” 929 So.2d at1208-09 (citing Sarasota County v. Andrews, 573So.2d at 115). Impairment, in this context has beendefined, in part, as “to make worse; to diminish inquantity, value, excellency or strength[.]” Id. at1208 (quoting Pomponio, 378 So.2d at 781 n. 41).If we were to apply the amended statute in this in-stance, the economic value of the Bank's mortgagewould be lessened as well as the power of its prior-ity position.

[4] Alternatively, were it appropriate to applythe balancing test, the HOA's argument would stillfail. While the law may deal with the economicproblem facing homeowners' associations in gener-al, its application here would place the economicburden not on the homeowner, the root of the prob-lem of the unpaid assessments, but on the entitythat previously made the construction or purchaseof the home possible. Moreover, the Declaration ofCovenants and Restrictions was never altered toplace a lender on notice that its economic positionwould be subordinate to the HOA's claims. Whenbalanced in this factual circumstance, the statutewould operate to severely, permanently, and imme-diately change the parties' economic relationshipretroactively, a circumstance not supportable underthe law.

Conclusion































The HOA yielded any right to claim it had asuperior lien position to the Bank's preexistingmortgage by virtue of the plain and unambiguouslanguage of its Declaration,FN6 which the Bankhad every right to rely upon when deciding to fin-ance the homeowners' home in the Coral Lakes*586 community. The trial court did not err in find-ing the Bank's first mortgage lien superior to theHOA's claim for unpaid assessments notwithstand-ing section 720.3085.

FN6. We make no comment on the HOA'sargument that the Florida Legislature ef-fectively rewrote section 9.1.6 of its De-claration when it enacted or amended sec-tion 720.3085 because that was not thebasis of the trial court's summary judg-ment.

Affirmed.

DAVIS, J., Concurs.WALLACE, J., Concurs in result only.

Fla.App. 2 Dist.,2010.Coral Lakes Community Ass'n, Inc. v. Busey Bank,N.A.30 So.3d 579, 35 Fla. L. Weekly D431

END OF DOCUMENT








United States Bankruptcy Court,M.D. Florida,

Orlando Division.In re Carlos Alberto JIMENEZ and Maribel Jimenez,

Debtor[s].

No. 6:11–bk–10129–KSJ.May 23, 2012.

Background: Debtors objected to proof of securedclaim filed by homeowners' association for unpaid as-sessments, interest and attorney fees and moved tovalue association's claim.

Holdings: The Bankruptcy Court, Karen S. Jennemann,J., held that:(1) even if declaration of covenants gave clear noticethat association's lien for assessments would relate backto filing of declaration, association first had to record aclaim of lien in public records before its lien could havepriority over competing mortgage;(2) once debtors objected to fees and interest includedin homeowners' association's proof of claim, burdenshifted to homeowners' association, as unsecured credit-or not entitled to postpetition interest and fees, to intro-duce evidence that interest fees were incurred prepeti-tion; and(3) as unimpaired creditor, whose claim would be paidin full, association was not entitled to vote for or againstdebtors' proposed Chapter 11 plan.

Motion granted; objection sustained.

West Headnotes

[1] Common Interest Communities 83T 76(2)

83T Common Interest Communities83TIV Unit Owners' Association

83Tk72 Dues, Assessments, Fines, and OtherFees

83Tk76 Lien83Tk76(2) k. Perfection and priority. Most

Cited Cases

Mortgages 266 165



266k165 k. Relation back. Most CitedCases

Under Florida law, in order for homeowners' asso-ciation's claim of lien recorded pursuant to declarationof covenants to have priority over intervening recordedmortgage, declaration of covenants had to contain spe-cific language indicating that lien would relate back todate of filing of declaration or that it otherwise wouldtake priority over intervening mortgages. West's F.S.A.§ 720.3085.




83Tk76 Lien83Tk76(1) k. In general. Most Cited Cases

Common Interest Communities 83T 76(2)




Cited Cases



266III(D) Lien and Priority266k151 Priorities of Mortgages in General

266k151(1) k. In general. Most Cited Cases

Page 1472 B.R. 106, 23 Fla. L. Weekly Fed. B 337(Cite as: 472 B.R. 106)




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Language in declaration of covenants for real estatedevelopment, indicating that declaration was to be con-strued “in accordance with the laws of the state of Flor-ida, both substantive and remedial,” without specificallyreferring to Chapter 720 of Florida laws, was too gener-al to expressly incorporate provision of that chapterwhich dealt with homeowners' association's lien rightsand with relative priority of mortgages and association'slien for assessments. West's F.S.A. § 720.3085.





Cited Cases

Mortgages 266 165



266k165 k. Relation back. Most CitedCases

Under provision of Florida law which dealt withhomeowners' associations' lien rights and with relativepriority of mortgages and of association's lien for as-sessments, even if its declaration of covenants gaveclear notice that its lien for assessments would relateback to filing of declaration, association first had to re-cord a claim of lien in public records before its liencould have priority over competing mortgage. West'sF.S.A. § 720.3085.





Cited Cases



266III(D) Lien and Priority266k151 Priorities of Mortgages in General

266k151(1) k. In general. Most Cited CasesProvision of Florida law that dealt with homeown-

ers' association's lien rights and with relative priority ofmortgages and association's lien for assessments did notoperate retroactively to improve association's lien prior-ity to position that it did not have prior to provision's ef-fective date. West's F.S.A. § 720.3085.

[5] Bankruptcy 51 2926

51 Bankruptcy51VII Claims

51VII(E) Determination51k2925 Evidence

51k2926 k. Presumptions and burden ofproof. Most Cited Cases

Once debtors objected to fees and interest includedin homeowners' association's proof of claim, burdenshifted to homeowners' association, as unsecured credit-or not entitled to postpetition interest and fees, to intro-duce evidence that this interest and these fees were in-curred prepetition, and its claim had to be disallowed toextent there was insufficient evidence to demonstratewhen fees and interest charges arose. 11 U.S.C.A. §506(b).





Bankruptcy 51 2927



































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51k2927 k. Weight and sufficiency. MostCited Cases

Bankruptcy 51 2928



51k2928 k. Effect of proof of claim. MostCited Cases

Once claimant has presented evidence of validlyexecuted proof of claim, burden of proof shifts to ob-jecting party to produce evidence equivalent in probat-ive value to that of creditor to rebut prima facie effectof proof of claim. Fed.Rules Bankr.Proc.Rule 3001(f),11 U.S.C.A.





Bankruptcy 51 2928



51k2928 k. Effect of proof of claim. MostCited Cases

Objecting creditor can rebut prima facie validity ofproperly executed and filed proof of claim by producingspecific and detailed allegations that dispute the claim,or by presenting legal arguments based on claim and itssupporting documentation, or lack thereof, that questionvalidity of claim. Fed.Rules Bankr.Proc.Rule 3001(f),11 U.S.C.A.





Bankruptcy 51 2927



51k2927 k. Weight and sufficiency. MostCited Cases

Once objecting party has rebutted prima facie valid-ity of properly executed and filed proof of claim,claimant then bears ultimate burden of persuasion toprove its claim by preponderance of evidence.Fed.Rules Bankr.Proc.Rule 3001(f), 11 U.S.C.A.


51 Bankruptcy51XIV Reorganization

51XIV(B) The Plan51k3541 Acceptance

51k3543 k. “Deemed” acceptance; unim-paired classes. Most Cited Cases

Bankruptcy 51 3544

51 Bankruptcy51XIV Reorganization

51XIV(B) The Plan51k3541 Acceptance

51k3544 k. Eligibility to vote; impairment.Most Cited Cases

As unimpaired creditor, whose claim would be paidin full, creditor was not entitled to vote for or againstdebtors' proposed Chapter 11 plan, but was deemed tohave accepted plan, even if it did not agree with treat-ment provided on its claim. 11 U.S.C.A. § 1126(f).

*108 Kenneth D. Herron, Jr., Orlando, FL, for Debtors.

Miriam G. Suarez, Orlando, FL, United States Trustee's















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Office.

Robyn Severs Braun, Taylor & Carls, P.A., AltamonteSprings, FL, for Alafaya Woods Homeowners Associ-ation.

Kevin A. Comer, Tampa, FL, for Federal NationalMortgage Association.

MEMORANDUM OPINION GRANTING DEBTORS'MOTION TO VALUE, SUSTAINING DEBTORS' OB-JECTION TO CLAIM, AND GRANTING DEBTORS'

MOTION FOR CRAM DOWNKAREN S. JENNEMANN, Bankruptcy Judge.Debtors object FN1 to Alafaya Homeowners Associ-ation's secured proof of claim for a delinquenthomeowners' association (“HOA”) assessment and havefiled a motion to determine the secured status of theirclaim under § 506(a)(1) of the Bankruptcy Code. Debt-ors also argue that Alafaya's claim is unsecured and, assuch, Alafaya is not entitled to post-petition fees or ex-penses under § 506(b). Debtors also have filed a motionto cram down FN2 Alafaya's unsecured claim under itsplan of reorganization.FN3

FN1. Doc. No. 120.

FN2. Doc. No. 136.

FN3. Doc. No. 132.

Alafaya disputes that its lien is unsecured, arguing a rel-atively new Florida statute gives an HOA lien retroact-ive priority over other lien holders. Because Alafayacontractually subordinated its lien to all first mort-gagees' liens and never recorded a claim of lien as re-quired by the recently amended Florida statute, the stat-ute does not apply. The Court grants debtors' motion tovalue, finding that Alafaya's claim is unsecured and sus-tains debtors' objection as to Alafaya's claim for post-petition fees and costs. Because *109 debtors' plan willpay Alafaya the full value of its allowed unsecuredclaim, Alafaya is unimpaired, and debtors' motion forcram down is granted.

Debtors' Motion to Value is GrantedAfter debtors filed bankruptcy on July 1, 2011, Alafayafiled a secured proof of claim in the amount of$1,025.55 consisting of (1) a delinquent HOA fee of$165 plus interest of $3.31, (2) legal fees and costs re-lated to foreclosure work of $254.86, and (3) $602.38 inadministrative and attorney's fees and expenses.FN4

Alafaya documented its proof of claim as follows:

FN4. Claim No. 13.

Homeowners assessments due 03/01/11 $ 165.00

Interest @ 6% per annum through 07/01/11 $ 3.31

Administrative fees $ 32.38

Attorney's fees for mortgage foreclosure action $ 250.00

Attorney's costs for mortgage foreclosure action:

Copies $ 3.20

Postage $ 1.66

Attorney's fees and costs for bankruptcy action $ 570.00

Total included in Proof of Claim $ 1,025.55

Alafaya's claim arose from debtors' failure to paynormal homeowners' association fees associated withthe ownership of their residential property in Oviedo,Florida.FN5 The residence, located in the Alafaya

Woods Neighborhood Development, is bound by a De-claration of Covenants, Conditions, Restrictions, Reser-vations and Easements for the Alafaya Woods Develop-ment (the “Declaration”) recorded on February 22,1985. According to the Declaration, the annual and spe-













cial assessments, together with late charges, interest,and costs of collection, creates a continuing lien on theresidence. FN6

FN5. Doc. No 120. The property is not debtor'sprincipal residence.

FN6. Doc. No. 131, Exhibit 1, Section 6.1. Pre-sumably, Alafaya means that the lien relatesback to the date the Declaration was recorded.See Holly Lake Ass'n v. Federal Nat. Mortg.Ass'n, 660 So.2d 266, 269 (Fla.1995).

Debtors purchased the residence subject to the De-claration with the help of a first mortgage loan fromFederal National Mortgage (“Federal”) in the amount of$236,000.FN7 Federal recorded its mortgage lien onMarch 19, 2007. FN8 Even though Federal recorded themortgage after the Declaration was filed in the publicrecords, Federal held a first priority mortgage lien be-cause the Declaration specifically subordinated any fu-ture HOA liens resulting from non-payment of fees to“any [other] mortgage recorded prior to recordation of aclaim of lien.” FN9

FN7. Claim No. 19, Exhibit 2.

FN8. Claim No. 19, Exhibit 3.

FN9. Doc. No. 131. The Declaration, Section6.8 entitled “Subordination of the Lien,” reads:

The lien of the assessment provided for inthis Article VI shall be subordinate to tax li-ens and to the lien of any mortgage recordedprior to the recordation of a claim of lien,which mortgage encumbers any Lot or Unitand is in favor of any institutional mortgageeand is now or hereafter placed upon a portionof The Properties subject to assessment;provided, however, that any institutionalmortgagee when in possession or any receiv-er, and in the event of a foreclosure, any pur-chaser at a foreclosure sale, and any institu-tional mortgagee acquiring a deed in lieu offoreclosure, and all persons claiming by,through or under any such purchaser or mort-

gagee, shall hold title subject to the liabilityand lien of any assessment becoming dueafter such foreclosure (or conveyance in lieuof foreclosure). Doc. No. 131 Exhibit 1.

Upon debtors' bankruptcy, Federal filed a securedproof of claim in the amount of $286,352.74, which in-cludes all amounts due under its note and mortgage, in-cluding late fees and interest.FN10 Based on the *110undisputed value of the residence of $165,000,FN11

Federal asserts it has an allowed secured claim of$165,000 and an allowed unsecured claim of$121,352.74.FN12 Alafaya disputes Federal's priorityclaim and argues it has a superior, fully secured lien be-cause a new Florida statute enacted in 2008 allows Ala-faya's lien to trump Federal's lien, despite the subordin-ation clause in the recorded Declaration.FN13 The rel-evant section of Fla. Stat. § 720.3085(1) reads:

FN10. Doc. No. 123. IBM Lender BusinessProcess Services, as servicer for Federal, filedthe proof of claim on October 28, 2011.

FN11. Doc. No. 123. The Court granted debt-ors' motion to value (Doc. No. 25) and held thevalue of the property at 1061 Providence Lane,Oviedo, FL is $165,000. Doc. No. 120, FN 1(Seminole County Property Appraiser determ-ined the value is $164,714).

FN12. Doc. No. 120 at 3. See 11 U.S.C. §506(b); Till v. SCS Credit Corp., 541 U.S. 465,124 S.Ct. 1951, 158 L.Ed.2d 787 (2004)(interpreting § 506(b)).

FN13. Doc. No. 131.

When authorized by the governing documents, the[homeowners'] association has a lien on each parcel tosecure the payment of assessments and other amountsprovided for by this section. Except as otherwise setforth in this section, the lien is effective from andshall relate back to the date on which the original de-claration of the community was recorded. However,as to first mortgages of record, the lien is effectivefrom and after recording of a claim of lien in the pub-













lic records of the county in which the parcel is loc-ated. This subsection does not bestow upon any lien,mortgage, or certified judgment of record on July 1,2008, including the lien for unpaid assessments cre-ated in this section, a priority that, by law, the lien,mortgage, or judgment did not have before July 1,2008.FN14

FN14. Fla. Stat. § 720.3085 (emphasis added).

Alafaya claims this statute makes Alafaya's lien su-perior to Federal's mortgage lien, and as such, Alafayais over-secured and entitled to its full claim of$1,025.55, which includes post-petition fees, costs, andexpenses.

The relative lien priority of the two parties' claimsis significant because the value of the home is notenough to pay both parties' claims in full. If Alafayaholds a superior interest to Federal's mortgage lien, Ala-faya has an over-secured claim in the full allowedamount of $1,025.55. If Alafaya has an inferior interest,Alafaya's claim is wholly unsecured, and Alafaya willreceive treatment as an unsecured creditor under debt-ors' plan of reorganization. Alafaya as an unsecuredcreditor is not entitled to the portion of its claim forpost-petition fees and expenses because § 506(b) of theBankruptcy Code FN15 authorizes a creditor to recoverpost-petition fees, costs, and other expenses only if thecreditor holds an over-secured claim.FN16

FN15. All references to the Bankruptcy Codeshall be to 11 U.S.C. § 101 et seq.

FN16. 11 U.S.C. § 506(b). See In re ElectricMachinery Enterprises, Inc., 371 B.R. 549,550–51 (Bankr.M.D.Fla.2007) (discussing fourreasons why courts have held that unsecuredcreditors are not entitled to fees and costs).

In this case, § 720.3085 does not apply becauseAlafaya never filed a claim of lien for debtors' delin-quent HOA fees. Alafaya's continuing lien, granted asof the date of the Declaration, is not equivalent to aclaim of lien as required by the statute. The Declarationclarifies the difference. Section 6.1 of the Declaration

automatically creates a continuing lien that relates backto the Declaration when fees are assessed, but accordingto Section 6.8, a claim of lien does not occur automatic-ally. Alafaya specifically must have recorded a claim oflien in the public records to be *111 entitled to elevatedpriority under § 720.3085, which it never did. There-fore, Fla. Stat. § 720.3085 does not apply.

[1] Notice is a fundamental principle of propertylaw.FN17 Recording a claim of lien puts all others onnotice of an encumbrance on property. In Florida, anHOA is entitled to lien priority only if it records a claimof lien and its declaration places others on notice that itintends to seek priority status.FN18 As the Florida Su-preme Court said In Holly Lake Association v. FederalNational Mortgage Association, “in order for a claim oflien recorded pursuant to a declaration of covenants tohave priority over an intervening recorded mortgage,the declaration must contain specific language indicat-ing that the lien relates back to the date of the filing ofthe declaration or that it otherwise takes priority overintervening mortgages.” FN19 Along that vein, Ala-faya's primary argument that § 720.3085 applies FN20

is based on footnote found in Ecoventure WGV. Ltd. inwhich the Fifth District Court of Appeals suggests thatan HOA could have promoted its lien status by“including language expressly incorporating by refer-ence the provisions of Chapter 720.” FN21

FN17. Bessemer v. Gersten, 381 So.2d 1344,1348 (Fla.1980) (citing Certain Lands v. IdealFarms Drainage District, 156 Fla. 774, 778, 24So.2d 585, 587 (1945); Feemster v. Schurkman,291 So.2d 622, 626 (Fla. 3d DCA 1974)).

FN18. Fla. Stat. § 720.3085.

FN19. Holly Lake Ass'n v. Federal Nat. Mortg.Ass'n, 660 So.2d 266 (Fla.1995) (citing NewYork Life Ins. & Annuity Corp. v. HammocksCommunity Ass'n, Inc., 622 So.2d 1369 (Fla.3d DCA 1993)).

FN20. Doc. No. 131.

FN21. Ecoventure WGV, Ltd. v. Saint Johns







































Northwest Residential Ass'n, Inc., 56 So.3d126, 128 n. 3 (Fla.Dist.Ct.App. 5th 2011)(citing Angora Enters., Inc. v. Cole, 439 So.2d832 (Fla.1983)).

[2][3] Alafaya points to Section 10.22 of the De-claration that requires the Declaration “be construed inaccordance with the laws of the state of Florida, bothsubstantive and remedial” as incorporating Chapter 720into the Declaration.FN22 The Court finds this falls farshort of expressly incorporating Fla. Stat. § 720.3085because it does not refer to Chapter 720 specifically.FN23 Furthermore, Ecoventure overlooks the funda-mental mandate in Florida Statute § 720.3085 that anHOA must first record a claim of lien in the public re-cords before it can trump another claim.

FN22. Doc. No. 131, Exhibit 1.

FN23. See Coral Lakes Comm. Ass'n, Inc. v.Busey Bank, N.A., 30 So.3d 579, 584(Fla.Dist.Ct.App.2d 2010).

[4] Even if Alafaya did file a claim of lien, which ithas not, two District Court of Appeals in Florida haveheld § 720.3085 does not operate retroactively to im-prove a lien's priority to a position it did not have priorto July 1, 2008.FN24 Both the Second and Fifth DistrictCourts of Appeals in Florida noted that a retroactive ap-plication of the statute would be an unconstitutionalimpairment of contracts and “would operate to severely,permanently, and immediately change the parties' eco-nomic relationship ... a circumstance not supportableunder the law.” FN25 The apparent purpose of this stat-ute is to give homeowners' associations in Florida atleast some protection that their liens will not be com-pletely disregarded should a homeowner fail to payHOA dues and then lose his home to foreclosure.However, imposing*112 those protections on lendersholding liens recorded prior to July 1, 2008, such asFederal, would “result in an immediate diminishment inthe value of [their] contract[s] ... a result repugnant toour constitutions.” FN26 Federal's lien relates back tothe dates of its 2007 mortgage, and the 2008 Floridastatute cannot reach back to alter the priorities estab-lished at that date.

FN24. See Ecoventure, 56 So.3d at 127–28;Coral Lakes, 30 So.3d at 583–84.

FN25. Ecoventure, 56 So.3d at 128 (citing Cor-al Lakes, 30 So.3d at 584).

FN26. Coral Lakes, 30 So.3d at 585.

For these reasons, Alafaya may not rely on FloridaStatute § 720.3085 to elevate its lien priority ahead ofFederal. No creditor, had it looked, would have beenable to determine that Alafaya was claiming a priorityinterest ahead of any mortgagees because Alafaya nevergave appropriate notice through a claim of lien. As aresult, Alafaya's HOA lien remains subordinate to Fed-eral's mortgage lien, and Alafaya's claim is unsecured.

Alafaya claims that this result is inequitable be-cause debtors will retain their home and avoid their ob-ligation to pay the pre-petition HOA assessment. FN27

But this is exactly what Alafaya bargained for. Alafayadrafted the Declaration and purposefully subordinatedits lien to all first mortgagees, presumably “to inducelenders to extend mortgages on property subject to theDeclaration.” FN28 The homeowners in the neighbor-hood benefit from this arrangement,FN29 and all haveagreed to pay an additional assessment should onehomeowner fail to meet its obligation to pay HOA duesas promised. FN30 Alafaya's contention that “to allowthe [d]ebtors to escape liability for these amounts,means that the remaining paying owners in the com-munity will have to pay the [d]ebtors' *113 share of thecommon expenses” FN31 is simply disingenuous.

FN27. The case Alafaya cites to support thisargument, In re Rivera, 256 B.R. 828(Bankr.M.D.Fla.2000), does not apply becausedebtors are not seeking a discharge of post-petition HOA assessments. The Court in Riveraheld that a debtor may not be released from itsobligation to pay post-petition assessments be-cause an HOA lien is a covenant running withthe land. Debtors in this case are seeking todischarge pre-petition HOA fees. BankruptcyCode § 523(a)(16) clarifies the distinction:




































A discharge under 727 ... does not dischargean individual debtor from any debt—(16) fora fee or assessment that becomes due andpayable after the order for relief to ... a lot ina homeowners association, for as long as thedebtor or the trustee has a legal, equitable, orpossessory ownership interest in such unit,such corporation, or such lot, but nothing inthis paragraph shall except from dischargethe debt of a debtor for a membership associ-ation fee or assessment for a period arisingbefore entry of the order for relief in apending or subsequent bankruptcy case.

FN28. Ecoventure, 56 So.3d at 127 (describingthe incentives an HOA uses to induce mortgagelenders to extend mortgages on properties sub-ject to an HOA declaration, including subordin-ating their HOA interest and assessing allhomeowners for delinquent fees when onehomeowner fails to pay).

FN29. Coral Lakes, 30 So.3d at 585. Presum-ably, residential mortgages in the neighborhoodwould be more expensive (i.e., have higher in-terest rates) if mortgagees' interests alwayswere subordinate to HOA liens because secondpriority liens are riskier and subordination im-pairs the marketability of a mortgage on thesecondary market. Id. The HOA assessmentsare to be used for the “maintenance, operation,management and insurance of the CommonProperties [of the neighborhood] ... and to pro-mote the health, safety, welfare and recreation-al opportunities of the Members of the[HOA].” Doc. No. 131, Exhibit 1.

FN30. Doc. No. 131, Exhibit 1, Section 6.8(“Any unpaid assessment which cannot be col-lected as a lien against any Lot or Unit by reas-on of the provisions of this Section 6.8 shall bedeemed to be an assessment divided among,payable by and a lien against all Lots and Unitsas provided in Section 6.1 of this Article VI,including the Lot or Unit as to which the fore-closure (or conveyance in lieu of foreclosure)

took place.”).

FN31. Doc. No. 131 at ¶ 11.

The subordination clause in the Declaration in-duced Federal to loan debtors the money to purchase theresidential property in exchange for a secured prioritylien. Florida Statute § 720.3085 does not apply to alterthe parties' priorities because it does not operate retro-actively. Alafaya, however, never filed a claim of lienor otherwise noticed its intention to seek a priority in-terest. Accordingly, debtors' motion to value FN32 isgranted. Federal has an allowed secured claim of$165,000 and an allowed unsecured claim of$121,352.74.FN33 Alafaya's claim is wholly unsecured.

FN32. Doc. No. 120.

FN33. Doc. 120 at 3. See 11 U.S.C. § 506(b);Till v. SCS Credit Corp., 541 U.S. 465, 124S.Ct. 1951, 158 L.Ed.2d 787 (2004)(interpreting § 506(b)).

Debtors' Objection to Alafaya's Claim is SustainedDebtors next object to the amount of Alafaya's un-

secured claim to the extent that Alafaya requests anyamounts for post-petition attorney' fees, costs, interest,or any other post-petition charge.FN34 Debtors argueAlafaya's allowed unsecured claim should be limited tothe $165 HOA assessment and the $3.31 in pre-petitioninterest because Alafaya has proven it was owed theseamounts at the time debtors filed bankruptcy. Debtorsspecifically object to Alafaya's request for $250 in legalfees for pursuing a foreclosure because Alafaya in-curred this expense post petition.FN35 Alafaya disputesthe $250 in legal fees was incurred post petition, but haspresented no evidence to support its claim.

FN34. Debtors' Objection to Claim of AlafayaWoods Homeowners Association (Doc. No.120).

FN35. Doc. No. 120 at 3.

[5][6][7][8] The Court will sustain debtors' objec-tion as to any additional fees because, even though Ala-faya submitted an itemized proof of claim, the claim














lacks significant dates. Alafaya has a valid claim for theHOA fee and interest because the first two entries inAlafaya's proof of claim are dated and show that debtorsowed a $165 HOA fee and accrued interest on that as-sessment of $3.31 at the time they filed bankruptcy.Alafaya, however, has not produced any evidence toprove it incurred other pre-petition costs in its proof ofclaim. Alafaya could have rebutted debtors' claim ob-jection by filing a detailed billing statement showing thecosts accrued pre-petition, but it failed to do so. Despitehaving full knowledge of debtors' objection to any addi-tional fees beyond the delinquent HOA fees, Alafayahas not provided a shred of evidence that would supportthe full amount of its claim. Upon a claim dispute, acreditor has the obligation to prove the amounts itclaims to be owed.FN36

FN36. Once a claimant has presented evidenceof a valid claim, the burden of proof shifts toan objecting party to produce evidence“equivalent in probative value to that of thecreditor to rebut the prima facie effect of theproof of claim.” In re Southern Cinemas, Inc.,256 B.R. 520, 526 (Bankr.M.D.Fla.2000). Anobjecting creditor can do this by producingspecific and detailed allegations that disputethe claim, or by presenting legal argumentsbased on the claim and its supporting docu-mentation (or lack thereof) that question thevalidity of its claim. In re Taylor, 363 B.R.303, 308 (Bankr.M.D.Fla.2007) (citations omit-ted). The creditor then bears the ultimate bur-den of persuasion to prove its claim by a pre-ponderance of the evidence. Id.

Debtors' objection to Alafaya's claim is sustained.Alafaya has an allowed, unsecured*114 claim of$168.31, which includes pre-petition HOA assessmentof $165 and $3.31 for accrued interest as of the date ofdebtors' bankruptcy petition. All other claim amountsare disallowed.

Debtors' Motion for Cram Down is Granted[9] Debtors have filed a plan of reorganization that

proposes to pay Alafaya's unsecured claim of $168.31in full in Class 18.FN37 Alafaya objected to this treat-

ment and to the confirmation of debtors' plan. In re-sponse, Debtors filed a motion to cram down its plan onAlafaya under § 1129(b) of the Code.FN38

FN37. Debtors' Amended Plan of Reorganiza-tion (Doc. No. 132); Objection of Creditor toConfirmation of Debtors' Second AmendedPlan of Reorganization and Objection to Debt-ors' Motion for Cram Down of Class 18 (Doc.No. 140). Debtors' plan treats Alafaya differ-ently depending on the amount of its unsecuredclaim. If Alafaya had an allowed unsecuredclaim of the full amount it requested,$1,025.55, debtors' plan would treat it as a gen-eral unsecured claim and pay it 1%, or $10.25.

FN38. Doc. No. 136.

Courts will confirm plans of reorganization not-withstanding an impaired creditor's objection as long asall the other requirements of § 1129(a) are met,FN39

the plan does not discriminate unfairly, and the plan isfair and equitable with respect to each class of claims orinterests that is impaired under, and has not accepted,the plan.FN40 “As to a dissenting class of unsecuredcreditors, such a plan may be found to be ‘fair andequitable’ only if the allowed value of the claim is to bepaid in full ... or, in the alternative, if ‘the holder of anyclaim or interest that is junior to the claims of such im-paired unsecured class will not receive or retain underthe plan on account of such junior claim or interest anyproperty.’ ” FN41

FN39. Except for 11 U.S.C. § 1129(a)(8) whichrequires all impaired creditors to consent to aplan.

FN40. 11 U.S.C. § 1129(b)(1).

FN41. In re Lett, 632 F.3d 1216, 1219 (11thCir.2011) (citing Bank of America Nat. Trustand Sav. Ass'n v. 203 N. LaSalle Street Part-nership, 526 U.S. 434, 441–42, 119 S.Ct. 1411,1415–16, 143 L.Ed.2d 607 (1999)).

In this case, Alafaya has no cause to complain. Ala-faya is not impaired such that it can obstruct confirma-










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tion by voting against the plan.FN42 Debtors' plan pro-poses to pay Alafaya's allowed claim of $168.31 in full.As an unimpaired creditor, Alafaya is not entitled tovote for or against debtors' plan because unimpairedcreditors are deemed to have accepted a proposed planunder § 1126(f), even if they do not agree with the treat-ment. Therefore, because Alafaya is not impaired andmay not vote against the plan, debtors' motion for cramdown is granted.

FN42. 11 U.S.C. § 1124(1).

In conclusion, Debtors' motion to value Alafaya'sclaim is granted because Florida Statute § 720.3085does not apply. Debtors' objection to Alafaya's claim issustained. Alafaya has an unsecured claim for $168.31that will be paid in full in Class 18. Alafaya is not animpaired creditor, and Debtors' motion for cram down isgranted. A separate order consistent with this opinionshall be issued.

DONE AND ORDERED.

Bkrtcy.M.D.Fla.,2012.In re Jimenez472 B.R. 106, 23 Fla. L. Weekly Fed. B 337

END OF DOCUMENT



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Homeowners’ Association

First Mortgagee Assessment Liability

F.S. § 720.3085

Was mortgage recorded before or after July 1,

2008?

Before After

Does Declaration have scheme for dealing with delinquent assessment liabilities different from

scheme in F.S. § 720.3085(2)(c)?

No

Yes

Does Declaration incorporate future changes to Chapter

720?

No

Yes

Use scheme set forth in Declaration

SAFE HARBOR APPLIES

Safe harbor became effective for HOAs July 1, 2008 Lesser of:

1% of original mortgage debt 12 months preceding acquisition of title

Limit only applies if HOA joined in mortgage foreclosure action F.S. § 720.3085(2)(c) 233

F.S. § 162.09 Page 1


Effective: October 1, 2004


Title XI. County Organization and Intergovernmental Relations (Chapters 124-164) (Refs & Annos) Chapter 162. County or Municipal Code Enforcement (Refs & Annos)

Part I. Local Government Code Enforcement Boards 162.09. Administrative fines; costs of repair; liens

(1) An enforcement board, upon notification by the code inspector that an order of the enforcement board has not been complied with by the set time or upon finding that a repeat violation has been committed, may order the viola-tor to pay a fine in an amount specified in this section for each day the violation continues past the date set by the enforcement board for compliance or, in the case of a repeat violation, for each day the repeat violation continues, beginning with the date the repeat violation is found to have occurred by the code inspector. In addition, if the viola-tion is a violation described in s. 162.06(4), the enforcement board shall notify the local governing body, which may make all reasonable repairs which are required to bring the property into compliance and charge the violator with the reasonable cost of the repairs along with the fine imposed pursuant to this section. Making such repairs does not create a continuing obligation on the part of the local governing body to make further repairs or to maintain the property and does not create any liability against the local governing body for any damages to the property if such repairs were completed in good faith. If a finding of a violation or a repeat violation has been made as provided in this part, a hearing shall not be necessary for issuance of the order imposing the fine. If, after due notice and hearing, a code enforcement board finds a violation to be irreparable or irreversible in nature, it may order the violator to pay a fine as specified in paragraph (2)(a). (2)(a) A fine imposed pursuant to this section shall not exceed $250 per day for a first violation and shall not exceed $500 per day for a repeat violation, and, in addition, may include all costs of repairs pursuant to subsection (1). However, if a code enforcement board finds the violation to be irreparable or irreversible in nature, it may impose a fine not to exceed $5,000 per violation. (b) In determining the amount of the fine, if any, the enforcement board shall consider the following factors: 1. The gravity of the violation; 2. Any actions taken by the violator to correct the violation; and 3. Any previous violations committed by the violator. (c) An enforcement board may reduce a fine imposed pursuant to this section. (d) A county or a municipality having a population equal to or greater than 50,000 may adopt, by a vote of at least a majority plus one of the entire governing body of the county or municipality, an ordinance that gives code enforce-ment boards or special magistrates, or both, authority to impose fines in excess of the limits set forth in paragraph (a). Such fines shall not exceed $1,000 per day per violation for a first violation, $5,000 per day per violation for a

234

F.S. § 162.09 Page 2


repeat violation, and up to $15,000 per violation if the code enforcement board or special magistrate finds the viola-tion to be irreparable or irreversible in nature. In addition to such fines, a code enforcement board or special magis-trate may impose additional fines to cover all costs incurred by the local government in enforcing its codes and all costs of repairs pursuant to subsection (1). Any ordinance imposing such fines shall include criteria to be considered by the code enforcement board or special magistrate in determining the amount of the fines, including, but not lim-ited to, those factors set forth in paragraph (b). (3) A certified copy of an order imposing a fine, or a fine plus repair costs, may be recorded in the public records and thereafter shall constitute a lien against the land on which the violation exists and upon any other real or per-sonal property owned by the violator. Upon petition to the circuit court, such order shall be enforceable in the same manner as a court judgment by the sheriffs of this state, including execution and levy against the personal property of the violator, but such order shall not be deemed to be a court judgment except for enforcement purposes. A fine imposed pursuant to this part shall continue to accrue until the violator comes into compliance or until judgment is rendered in a suit filed pursuant to this section, whichever occurs first. A lien arising from a fine imposed pursuant to this section runs in favor of the local governing body, and the local governing body may execute a satisfaction or release of lien entered pursuant to this section. After 3 months from the filing of any such lien which remains un-paid, the enforcement board may authorize the local governing body attorney to foreclose on the lien or to sue to recover a money judgment for the amount of the lien plus accrued interest. No lien created pursuant to the provi-sions of this part may be foreclosed on real property which is a homestead under s. 4, Art. X of the State Constitu-tion. The money judgment provisions of this section shall not apply to real property or personal property which is covered under s. 4(a), Art. X of the State Constitution. CREDIT(S) Laws 1980, c. 80-300, § 1; Fla.St.1981, § 166.059; Laws 1982, c. 82-37, § 8; Laws 1985, c. 85-150, § 2; Laws 1986, c. 86-201, § 8; Laws 1987, c. 87-391, § 2; Laws 1989, c. 89-268, § 8. Amended by Laws 1994, c. 94-291, § 4, eff. May 29, 1994; Laws 1995, c. 95-297, § 1, eff. Oct. 1, 1995; Laws 1999, c. 99-360, § 5, eff. Oct. 1, 1999; Laws 2000, c. 2000-125, § 1, eff. April 24, 2000; Laws 2004, c. 2004-11, § 65, eff. Oct. 1, 2004.

235

F.S. § 162.10 Page 1


Effective: April 24, 2000


Title XI. County Organization and Intergovernmental Relations (Chapters 124-164) (Refs & Annos) Chapter 162. County or Municipal Code Enforcement (Refs & Annos)

Part I. Local Government Code Enforcement Boards 162.10. Duration of lien

No lien provided under the Local Government Code Enforcement Boards Act shall continue for a period longer than 20 years after the certified copy of an order imposing a fine has been recorded, unless within that time an action is commenced pursuant to s. 162.09(3) in a court of competent jurisdiction. In an action to foreclose on a lien or for a money judgment, the prevailing party is entitled to recover all costs, including a reasonable attorney's fee, that it incurs in the action. The local governing body shall be entitled to collect all costs incurred in recording and satisfy-ing a valid lien. The continuation of the lien effected by the commencement of the action shall not be good against creditors or subsequent purchasers for valuable consideration without notice, unless a notice of lis pendens is re-corded. CREDIT(S) Laws 1982, c. 82-37, § 9; Laws 1986, c. 86-201, § 9; Laws 1989, c. 89-268, § 9. Amended by Laws 1994, c. 94-291, § 5, eff. May 29, 1994; Laws 2000, c. 2000-125, § 2, eff. April 24, 2000.

236

Supreme Court of Florida.CITY OF PALM BAY, Appellant,

v.WELLS FARGO BANK, N.A., Appellee.

No. SC11–830.May 16, 2013.

Background: Bank brought foreclosure actionagainst owner of property in city, and named city asparty due to existence of city code enforcement li-ens on property that were recorded after bank'smortgage interest was recorded. The Circuit Court,Brevard County, Bruce W. Jacobus, J., grantedbank's summary judgment motion. City appealed.The District Court of Appeal, 57 So.3d 226,Cohen,J., affirmed, and certified question as to whether amunicipal ordinance may validly establish superpri-ority status for municipal code enforcement liens.

Holding: The Supreme Court, Canady, J., held thatcity ordinance that established a superpriority statusfor municipal code enforcement liens was both in-consistent with, and in direct conflict with, the gen-eral statutory scheme for priority of rights with re-spect to interests in real property created by the le-gislature, and thus, invalid.

Certified question answered in the negative.

Perry, J., filed dissenting opinion, in whichPariente, J., concurred.

West Headnotes

[1] Municipal Corporations 268 69

268 Municipal Corporations268III Legislative Control of Municipal Acts,

Rights, and Liabilities268k69 k. Imposition of liabilities in general.

Most Cited Cases

City ordinance that established a superprioritystatus for municipal code enforcement liens wasboth inconsistent with, and in direct conflict with,the general statutory scheme for priority of rightswith respect to interests in real property created bythe legislature, and thus, was invalid; giving effectto the ordinance's superpriority provision would al-low a municipality to displace the policy judgmentreflected by the legislature, and allow the municip-ality to destroy property rights established by statelaw. West's F.S.A. Const. Art. 8, § 2(b); West'sF.S.A. §§ 166.021, 695.01(1).

[2] Municipal Corporations 268 111(2)

268 Municipal Corporations268IV Proceedings of Council or Other Govern-

ing Body268IV(B) Ordinances and By-Laws in Gener-

al268k111 Validity in General

268k111(2) k. Conformity to constitu-tional and statutory provisions in general. MostCited Cases

Municipal ordinances are inferior to laws of thestate and must not conflict with any controlling pro-vision of a statute; when a municipal ordinanceflies in the face of state law, that is, cannot be re-conciled with state law, the ordinance cannot besustained. West's F.S.A. Const. Art. 8, § 2(b).

[3] Municipal Corporations 268 111(2)

268 Municipal Corporations268IV Proceedings of Council or Other Govern-

ing Body268IV(B) Ordinances and By-Laws in Gener-

al268k111 Validity in General

268k111(2) k. Conformity to constitu-tional and statutory provisions in general. MostCited Cases

Although municipalities generally have thepower to enact legislation concerning any subject
































matter upon which the state Legislature may act, inexercising their power within that scope municipal-ities are precluded from taking any action that con-flicts with a state statute. West's F.S.A. §166.021(3).

*925 James David Stokes, City Attorney, AndrewPatrick Lannon, Palm Bay, FL, and Steven L. Bran-nock, Tampa, FL, for Petitioner.

Matthew J. Conigliaro and Leah A. Sevi of CarltonFields, P.A., St. Petersburg, FL, Michael K. Win-ston of Carlton Fields, P.A., West Palm Beach, FL,for Respondent.

Mark Partick Barnebey, Scott Ellis Rudacille, andKurt Eugene Lee of Kirk Pinkerton, P.A., Sarasota,FL, for Amicus Curiae City of Palmetto.

Jamie Alan Cole and Susan Lanelle Trevarthen ofWeiss Serota Helfman Pastoriza Cole & Boniske,P.L., Fort Lauderdale, FL, Edward G. Guedes ofWeiss Serota Helfman Pastoriza Cole & Boniske,P.L., Coral Gables, FL, for Amicus Curiae FloridaLeague of Cities.

Erin Jane O'Leary, Catherine Dwyer Reischmann,William Edward Reischmann, Usher Larry Brownof Brown, Garganese, Weiss & D'Agresta, P.A.,Orlando, FL, for Amicus Curiae City of Cassel-berry, Florida, City of Palm Coast, Florida, andCity Winter Park, Florida.

*926 Heather M. Christman of Christman Law,P.L., Winter Haven, FL and Stephen Russell Sennof Peterson & Meyers, P.A., Lakeland, FL, forAmicus Curiae Peter and Laurie Pepe and PortMalabar Country Club, Inc.

Alan Beaumont Fields, Tallahassee, Florida andHomer Duvall, III, St. Petersburg, FL, for AmicusCuriae Florida Land Title Association.

Virginia Bullerman Townes and Carrie AnnWozniak of Akerman Senterfitt, Orlando, FL, forAmicus Curiae Florida Bankers Association.

CANADY, J.In this case we consider whether a municipal

ordinance may validly establish superpriority statusfor municipal code enforcement liens. In City ofPalm Bay v. Wells Fargo Bank, N.A., 57 So.3d 226(Fla. 5th DCA 2011), the Fifth District Court ofAppeal concluded that such an ordinance superpri-ority provision is invalid because it conflicts with astate statute and that the City's lien accordingly didnot have priority over the lien of Wells Fargo'smortgage that was recorded before the City's lienwas recorded. Palm Bay sought review, and we ac-cepted jurisdiction based on the Fifth District's cer-tification of the following question of great publicimportance:

Whether under Article VIII, section 2(b), FloridaConstitution, section 166.021, Florida Statutesand Chapter 162, Florida Statutes, a municipalityhas the authority to enact an ordinance statingthat its code enforcement liens, created pursuantto a code enforcement board order and recordedin the public records of the applicable county,shall be superior in dignity to prior recordedmortgages?

City of Palm Bay v. Wells Fargo Bank, N.A., 67So.3d 271, 271 (Fla. 5th DCA 2011) (mem.).

On appeal, the City argues that the ordinancesuperpriority provision is within the “broad homerule powers” of the City. Petitioner's Brief on theMerits at 5, City of Palm Bay v. Wells Fargo Bank,N.A., 114 So.3d 924, 2013 WL 2096257 (Fla.2013).The City contends that because the Legislature hasmade certain exceptions to the general rules gov-erning the priority of liens, municipalities have thepower to likewise make exceptions. For the reasonswe explain, we conclude that the Fifth District cor-rectly decided that the ordinance superpriority pro-vision is invalid. Accordingly, we answer the certi-fied question in the negative. Before explaining ourconclusion, we will review the pertinent provisionsof the Palm Bay ordinance, the constitutional andstatutory provisions relevant to the City's exerciseof power, and the statutory framework governing









































the priority of interests based on recorded instru-ments.

I. BACKGROUNDCity of Palm Bay Ordinance 97–07 provides

for the operation of the City's Code EnforcementBoard and contains the following superpriority pro-vision:

Liens created pursuant to a Board order and re-corded in the public record shall remain liens co-equal with the liens of all state[,] county[,] dis-trict [,] and municipal taxes, superior in dignity toall other liens[,] titles [,] and claims until paid,and shall bear interest annually at a rate not to ex-ceed the legal rate allowed for such liens andmaybe foreclosed pursuant to the procedures setforth in Florida Statutes, Chapter 173.

City of Palm Bay, Ordinance No. 97–07, § 1(1997).

*927 Chapter 162, Florida Statutes (2004),contains the Local Government Code EnforcementBoards Act. Section 162.03, Florida Statutes (2004), authorizes municipalities to establish by ordinancelocal code enforcement boards. Section 162.09(3),Florida Statutes (2004), provides that “[a] certifiedcopy of [a code enforcement] order imposing a fine,or a fine plus repair costs, may be recorded in thepublic records and thereafter shall constitute a lienagainst the land on which the violation exists andupon any other real or personal property owned bythe violator.” The Act contains no provision ex-pressly authorizing municipalities to establish su-perpriority for such liens.

Article VIII, section 2(b), Florida Constitution,contains a general provision relating to the exerciseof municipal powers: “Municipalities shall havegovernmental, corporate and proprietary powers toenable them to conduct municipal government, per-form municipal functions and render municipal ser-vices, and may exercise any power for municipalpurposes except as otherwise provided by law. ”(Emphasis added). Section 166.021, Florida Stat-

utes (2004), contains general provisions governingthe exercise of municipal powers under the frame-work established in article VIII, section 2(b). Sec-tion 166.021(1) states: “As provided in s. 2(b), Art.VIII of the State Constitution, municipalities shallhave the governmental, corporate, and proprietarypowers to enable them to conduct municipal gov-ernment, perform municipal functions, and rendermunicipal services, and may exercise any power formunicipal purposes, except when expressly prohib-ited by law.” Section 166.021(3) provides in pertin-ent part as follows:

The Legislature recognizes that pursuant to thegrant of power set forth in section 2(b), Art. VIIIof the State Constitution, the legislative body ofeach municipality has the power to enact legisla-tion concerning any subject matter upon whichthe state Legislature may act, except:

....

(c) Any subject expressly preempted to state orcounty government by the constitution or by gen-eral law....

The priority of interests in real estate underFlorida law is generally determined by the opera-tion of three statutes. Section 28.222(2), FloridaStatutes (2004), requires the clerk of the circuitcourt to record instruments in the official recordsand to “keep a register in which he or she shallenter at the time of filing the filing number of eachinstrument filed for record, the date and hour of fil-ing, the kind of instrument, and the names of theparties to the instrument.” Section 695.11, FloridaStatutes (2004), provides that “[t]he sequence of[official register numbers required under section28.222] shall determine the priority of recordation”so that “[a]n instrument bearing the lower numberin the then-current series of numbers shall have pri-ority over any instrument bearing a higher numberin the same series.” The legal significance of prior-ity of recordation comes into play in the context ofthe rule established in section 695.01(1), FloridaStatutes (2004), which provides as follows: “No
























conveyance, transfer, or mortgage of real property,or of any interest therein ... shall be good and effec-tual in law or equity against creditors or subsequentpurchasers for a valuable consideration and withoutnotice, unless the same be recorded according tolaw.” FN1

FN1. The Fifth District states that section695.11 “codifies ... the common law ruleof first in time, first in right.” Palm Bay,57 So.3d at 227. Although it has no bear-ing on the preemption question at issue inthis case, we note that this characterizationof Florida law is misleading. The commentincorrectly leaves section 695.01(1) out ofconsideration and suggests that priority ofrecordation necessarily establishes priorityof right. A thoughtful discussion of the op-eration of Florida law in determining prior-ity of interests in real property is containedin Argent Mortgage Co., LLC v. WachoviaBank N.A., 52 So.3d 796 (Fla. 5th DCA2010); see also Van Eepoel Real EstateCo. v. Sarasota Milk Co., 100 Fla. 438,129 So. 892 (1930).

*928 The Legislature has, however, providedseparately for the priority of certain liens over thepriority established under chapter 695. For ex-ample, section 197.122(1), Florida Statutes (2004),provides that “[a]ll taxes imposed pursuant to theState Constitution and laws of this state shall be afirst lien, superior to all other liens.” Similarly, sec-tion 170.09, Florida Statutes (2004), provides thatspecial assessment liens are “coequal with the lienof all state, county, district, and municipal taxes,superior in dignity to all other liens, titles, andclaims, until paid.”

II. ANALYSIS[1] Based on the provisions of article VIII, sec-

tion 2(b), Florida Constitution, and the related pro-visions in section 166.021, we have acknowledgedthat “[i]n Florida, a municipality is given broad au-thority to enact ordinances under its municipalhome rule powers.” City of Hollywood v. Mulligan,

934 So.2d 1238, 1243 (Fla.2006). We have alsostated that—as is recognized in section 166.021—“a municipality may legislate concurrently withthe Legislature on any subject which has not beenexpressly preempted to the State.” Hollywood, 934So.2d at 1243. But we have never interpreted eitherthe constitutional or statutory provisions relating tothe legislative preemption of municipal home rulepowers to require that the Legislature specificallystate that the exercise of municipal power on a par-ticular subject is precluded. Instead, we have heldthat “[t]he preemption need not be explicit so longas it is clear that the legislature has clearly preemp-ted local regulation of the subject.” Barragan v.City of Miami, 545 So.2d 252, 254 (Fla.1989). Wehave also recognized that where concurrent stateand municipal regulation is permitted because thestate has not preemptively occupied a regulatoryfield, “a municipality's concurrent legislation mustnot conflict with state law.” Thomas v. State, 614So.2d 468, 470 (Fla.1993).

[2] The critical phrase of article VIII, section2(b) —“except as otherwise provided bylaw”—establishes the constitutional superiority ofthe Legislature's power over municipal power. Ac-cordingly, “[m]unicipal ordinances are inferior tolaws of the state and must not conflict with anycontrolling provision of a statute.” Thomas, 614So.2d at 470. When a municipal “ordinance flies inthe face of state law”—that is, cannot be reconciledwith state law—the ordinance “cannot be sus-tained.” Barragan, 545 So.2d at 255. Such “conflictpreemption” comes into play “where the local en-actment irreconcilably conflicts with or stands as anobstacle to the execution of the full purposes of thestatute.” 5 McQuillin Mun. Corp. § 15:16 (3d ed.2012).

Here, it is undisputed that the Palm Bay ordin-ance provision establishes a priority that is incon-sistent with the priority established by the pertinentprovisions of chapter 695. In those statutory provi-sions, the Legislature has created a general schemefor priority of rights with respect to interest in real












































property. Giving effect to the ordinance superprior-ity provision would allow a municipality to displacethe policy judgment reflected in the Legislature'senactment of the statutory provisions. And it wouldallow the municipality to destroy *929 rights thatthe Legislature established by state law. A moredirect conflict with a statute is hard to imagine.Nothing in the constitutional or statutory provisionsrelating to municipal home rule or in the LocalGovernment Code Enforcement Boards Actprovides any basis for such a municipal abrogationof a state statute. The conflict between the PalmBay ordinance and state law is a sufficient groundfor concluding that the ordinance superpriority pro-vision is invalid.

[3] We categorically reject the City's argumentthat the legislative enactment of exceptions to astatutory scheme provides justification for municip-alities to enact exceptions to the statutory scheme.No authority supports this argument. The power tocreate exceptions to a legislative scheme is thepower to alter that legislative scheme.“Fundamental to the doctrine of preemption is theunderstanding that local governments lack the au-thority to craft their own exceptions to general statelaws.” 5 McQuillin Mun. Corp. § 15:18 (3d ed.2012). Although municipalities generally have “thepower to enact legislation concerning any subjectmatter upon which the state Legislature may act,” §166.021(3), Fla. Stat. (2004), in exercising theirpower within that scope municipalities are pre-cluded from taking any action that conflicts with astate statute. In this context, concurrent power doesnot mean equal power.

III. CONCLUSIONThe Fifth District correctly concluded that the

superpriority provision of the Palm Bay ordinanceis invalid because it conflicts with state law. We ap-prove that determination and answer the certifiedquestion in the negative.

It is so ordered.

POLSTON, C.J., and LEWIS, QUINCE, and LAB-

ARGA, JJ., concur.PERRY, J., dissents with an opinion, in whichPARIENTE, J., concurs.

PERRY, J., dissenting.The majority holds that the City of Palm Bay's

home rule authority does not provide it with the au-thority to enact an ordinance providing code en-forcement liens superior priority over prior recor-ded mortgages. Because I disagree that the ordin-ance irreconcilably conflicts with the mechanicalrecording statute provided in section 162.09, Flor-ida Statutes (2004), or that the Florida Legislaturehas expressed a scheme “so pervasive as to evid-ence an intent to preempt the particular area,” FN2

I would find that the city's ordinance was properlyenacted. Accordingly, I dissent.

FN2. Sarasota Alliance for Fair ElectionsInc. v. Browning, 28 So.3d 880, 886, 888(Fla.2010).

The majority reasons that section 162.09(3)“contains no provision expressly authorizing muni-cipalities to establish special priority for such li-ens.” Maj. op. at 927. However, this is not the ap-propriate test to determine whether a municipalityhas exceeded its powers. The City of Palm Baydoes not require the Legislature's express permis-sion to act under its home rule powers. Section166.021(1) states in relevant part that“municipalities ... may exercise any power for mu-nicipal purposes, except when expressly prohibitedby law.” Further, section 166.021(3)(c) providesthat the municipality has the power to enact legisla-tion concerning any subject matter upon which theLegislature may act except “[a]ny subject expresslypreempted to state or county government by theconstitution or by general law....” (Emphasis ad-ded). Thus, it is not whether the Legislature has ex-pressly authorized municipal power, but whethersuch power *930 has been expressly prohibited.Here, there has been no express preemption thatwould prohibit the City's action.

Because the language contained in sections























http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000006&DocName=FLSTS166.021&FindType=L&ReferencePositionType=T&ReferencePosition=SP_e3ad0000a5b05

162.09, 695.11, and related provisions does not ex-pressly conflict with the ordinance, the City waswithin its authority to enact the ordinance. The ma-jority avoids this outcome by relying on a singleline from this Court's decision in Barragan v. Cityof Miami, 545 So.2d 252, 254 (Fla.1989), stating,“[t]he preemption need not be explicit so long as itis clear that the legislature has clearly preemptedlocal regulation of the subject.” Maj. op. at 928.The majority's reliance on Barragan here is mis-guided and misleading.

Barragan concerned an ordinance that permit-ted the City to deduct workers' compensation bene-fits from an employee's pension benefits in contra-diction to the provisions of section 440.21, FloridaStatutes (1987). Because the workers' compensationscheme outlined in chapter 440 explicitly applied toevery employer and employee working in the state,the City's ordinance was expressly preempted bythe statute. See Barragan, 545 So.2d at 254 (citing§ 440.03, Fla. Stat. (1987)). In Barragan, ChiefJustice Ehrlich emphasized that, “The city shouldnot be permitted to do indirectly that which it can-not do directly.” Id. at 255 (Ehrlich, C.J., concur-ring in result only). In contrast, here the mechanicalrecording statute does not provide an all-encompassing lien priority scheme. Clearly there isno express preemption of the subject matter con-cerning the City's ordinance. Yet, the majoritymaintains that “the Palm Bay ordinance is invalidbecause it conflicts with state law.” Again, the ma-jority applies the improper test.

Express preemption is not the same as impliedpreemption or conflict—this Court has previouslydistinguished between these concepts. See SarasotaAlliance for Fair Elections, Inc. v. Browning, 28So.3d 880, 886, 888 (Fla.2010) (defining impliedpreemption as “when the legislative scheme is sopervasive as to evidence an intent to preempt theparticular area, and where strong public policy reas-ons exist for finding such an area to be preemptedby the Legislature” and conflict as “when two legis-lative enactments cannot coexist”); see also

Phantom of Brevard Inc. v. Brevard Cnty., 3 So.3d309, 314 (Fla.2008); City of Hollywood v. Mul-ligan, 934 So.2d 1238, 1243, 1246–47 (Fla.2006)(internal quotations omitted). Here, section 166.021provides that the City may act except where ex-pressly preempted, not impliedly preempted or inconflict. These are distinct tests that should not beconflated. However, no matter the test applied here,there is no preemption evident in the statutes,neither explicit nor implicit.

While the majority recognizes that municipalit-ies can legislate concurrently with the Legislature,see Maj. op. at 928 (citing City of Hollywood, 934So.2d at 1243), the majority nevertheless“categorically reject[s] the City's argument that thelegislative enactment of exceptions to a statutoryscheme provides justification for municipalities toenact exceptions to the statutory scheme.” Maj. op.at 929. To read the statute and ordinance as unableto coexist ignores that the Legislature has not previ-ously regarded the mechanical recording statute asa pervasive scheme without exemptions. See §170.09, Fla. Stat. (2004) (providing lien priorityand superiority for non-home rule municipality spe-cial assessments); § 197.552, Fla. Stat. (2004)(providing superiority for tax deeds except to muni-cipal liens); § 718.116(5)(a), Fla. Stat. (2004)(providing superior lien priority for condominiumassessments); § 713.07(2), Fla. Stat. (2004)(providing lien priority for construction liens). Ad-ditionally, lien priority*931 can be altered by con-tract. Likewise, courts have recognized liens withsuperior priority despite their inferior filing dates.In Gailey v. Robertson, 98 Fla. 176, 123 So. 692(Fla.1929), this Court found that a “mortgagee hasno greater vested right ... than the fee simple ownerand the rights of both must yield alike to the sover-eign power when exercised to impose proper andlawful taxes.” Id. at 179, 123 So. 692. The Courtaccordingly found that the mortgage held by Gaileywas not prior in dignity to the lien claimed by thecity of Winter Haven, despite its prior recordingdate. Id. at 177, 123 So. 692. In First NationwideMortg. Corp. v. Brantley, 851 So.2d 885 (Fla. 4th



































http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000006&DocName=FLSTS718.116&FindType=L&ReferencePositionType=T&ReferencePosition=SP_74740000f3a65











DCA 2003), the Fourth District found that a city li-en was not superior to the mortgage because it “wasnot the result of municipal services, special assess-ments or any other type lien covered under section23–68 of the City's Code of Ordinances.” Id. at 887.

I would find that the Legislature has thereforenot expressed a pervasive scheme—the statutes onthe issue are scattered and separately enacted. Be-cause the Legislature has provided several exemp-tions to the “first in time” rule, the City may like-wise legislate such a rule under its home rule au-thority. See Wyche v. State, 619 So.2d 231, 238(Fla.1993) (“Although municipalities and the legis-lature may legislate concurrently in areas not ex-pressly preempted to the state, a municipality's con-current legislation may not conflict with statelaw.”).

I would likewise find that there is nothing insection 695.11 that expressly preempts the City ofPalm Bay's ordinance. As described in ArgentMortgage Co. v. Wachovia Bank, N.A., 52 So.3d796, 800 (Fla. 5th DCA 2010), section 695.11 is a“mechanism for determining the time at which aninstrument was deemed to be recorded.” Becausethere is no express limitation by section 695.11,The City of Palm Bay had authority under section166.021 to enact the ordinance. Accordingly, I dis-sent.

PARIENTE, J., concurs.

Fla.,2013.City of Palm Bay v. Wells Fargo Bank, N.A.114 So.3d 924, 38 Fla. L. Weekly S322

END OF DOCUMENT



















West's F.S. § 170.08 Page 1


Effective:[See Text Amendments] West's Florida Statutes Currentness

Title XII. Municipalities (Chapters 165-185) Chapter 170. Supplemental and Alternative Method of Making Local Municipal Improvements (Refs & An-

nos) 170.08. Final consideration of special assessments; equalizing board to hear complaints and adjust

assessments; rebate of difference in cost and assessment At the time and place named in the notice provided for in s. 170.07, the governing authority of the municipality shall meet and hear testimony from affected property owners as to the propriety and advisability of making the improve-ments and funding them with special assessments on property. Following the testimony, the governing authority of the municipality shall make a final decision on whether to levy the special assessments. Thereafter, the governing authority shall meet as an equalizing board to hear and consider any and all complaints as to the special assessments and shall adjust and equalize the assessments on a basis of justice and right. When so equalized and approved by resolution or ordinance of the governing authority, a final assessment roll shall be filed with the governing authority of the municipality, and such assessments shall stand confirmed and remain legal, valid, and binding first liens upon the property against which such assessments are made until paid; however, upon completion of the improvement, the municipality shall credit to each of the assessments the difference in the assessment as originally made, ap-proved, and confirmed and the proportionate part of the actual cost of the improvement to be paid by special as-sessments as finally determined upon the completion of the improvement, but in no event shall the final assessments exceed the amount of benefits originally assessed. Promptly after such confirmation, the assessments shall be re-corded by the city clerk in a special book, to be known as the “Improvement Lien Book,” and the record of the lien in this book shall constitute prima facie evidence of its validity. The governing authority of the municipality may by resolution grant a discount equal to all or a part of the payee's proportionate share of the cost of the project consist-ing of bond financing costs, such as capitalized interest, funded reserves, and bond discount included in the esti-mated cost of the project, upon payment in full of any assessment during such period prior to the time such financing costs are incurred as may be specified by the governing authority. CREDIT(S) Laws 1923, c. 9298, § 8; Comp.Gen.Laws 1927, § 3029; Laws 1959, c. 59-396, § 5; Laws 1978, c. 78-330, § 1; Laws 1981, c. 81-259, § 73. Amended by Laws 1987, c. 87-103, § 6, eff. July 1, 1987.

244





Title XI. County Organization and Intergovernmental Relations (Chapters 124-164) (Refs & Annos) Chapter 153. Water and Sewer Systems

Part II. County Water and Sewer Districts (Refs & Annos) 153.67. Unpaid fees to constitute lien

In the event that the fees, rates or charges for the services and facilities of any water or sewer system shall not be paid as and when due, any unpaid balance thereof and all interest accruing thereon shall be a lien on any parcel or property affected thereby. Such liens shall be superior and paramount to the interest on such parcel or property of any owner, lessee, tenant, mortgagee or other person except the lien of county taxes and shall be on a parity with the lien of any such county taxes. In the event that any such service charge shall not be paid as and when due and shall be in default for thirty days or more the unpaid balance thereof and all interest accrued thereon, together with attor-neys fees and costs, may be recovered by the district in a civil action, and any such lien and accrued interest may be foreclosed or otherwise enforced by the district by action or suit in equity as for the foreclosure of a mortgage on real property. CREDIT(S) Laws 1959, c. 59-466, § 18.

245





Title XI. County Organization and Intergovernmental Relations (Chapters 124-164) (Refs & Annos) Chapter 159. Bond Financing (Refs & Annos)

Part I. Revenue Bond Act of 1953 (Refs & Annos) 159.17. Lien of service charges

Any municipality issuing revenue bonds hereunder shall have a lien on all lands or premises served by any water system, sewer system or gas system for all service charges for such facilities until paid, which liens shall be prior to all other liens on such lands or premises except the lien of state, county and municipal taxes and shall be on a parity with the lien of such state, county and municipal taxes. Such liens, when delinquent for more than 30 days, may be foreclosed by such municipality in the manner provided by the laws of Florida for the foreclosure of mortgages on real property. CREDIT(S) Laws 1967, c. 67-550, § 8.

246





Title XII. Municipalities (Chapters 165-185) Chapter 170. Supplemental and Alternative Method of Making Local Municipal Improvements (Refs & An-

nos) 170.09. Priority of lien; interest; and method of payment

The special assessments shall be payable at the time and in the manner stipulated in the resolution providing for the improvement; shall remain liens, coequal with the lien of all state, county, district, and municipal taxes, superior in dignity to all other liens, titles, and claims, until paid; shall bear interest, at a rate not to exceed 8 percent per year, or, if bonds are issued pursuant to this chapter, at a rate not to exceed 1 percent above the rate of interest at which the improvement bonds authorized pursuant to this chapter and used for the improvement are sold, from the date of the acceptance of the improvement; and may, by the resolution aforesaid and only for capital outlay projects, be made payable in equal installments over a period not to exceed 30 years notwithstanding any special act to the con-trary, to which, if not paid when due, there shall be added a penalty at the rate of 1 percent per month, until paid. However, the assessments may be paid without interest at any time within 30 days after the improvement is com-pleted and a resolution accepting the same has been adopted by the governing authority. CREDIT(S) Laws 1923, c. 9298, § 9; Comp.Gen.Laws 1927, § 3030; Laws 1959, c. 59-396, § 6; Laws 1961, c. 61-349, § 1; Laws 1967, c. 67-552, § 4; Laws 1980, c. 80-318, § 3; Laws 1981, c. 81-259, § 74; Laws 1982, c. 82-195, § 5; Laws 1982, c. 82-198, § 2; Laws 1983, c. 83-204, § 33. Amended by Laws 1999, c. 99-378, § 29, eff. July 1, 1999.

247


FIRST NATIONWIDE MORTGAGE CORPORA-TION, Appellant,

v.Carolyn BRANTLEY, City of Lauderdale Lakes,

and Fairiers Construction Company, Inc., Ap-pellees.

No. 4D02-2036.Aug. 13, 2003.

Purchase money mortgagee filed complaint toforeclose claiming default. City answered claimingits lien was superior. The Seventeenth Judicial Cir-cuit Court, Broward County, Leonard L. Stafford,J., ruled that city's lien was superior to, and had pri-ority over, purchase money mortgage. Mortgageeappealed. The District Court of Appeal held thatpurchase money mortgage was superior to city's li-en for home improvement loan.

Reversed.

Fleet, J. Leonard, Associate Judge, concurredspecially with opinion.

West Headnotes

Mortgages 266 158


266III(D) Lien and Priority266k158 k. Priority of Mortgage for Pur-

chase Money. Most Cited CasesLien held by city on home was not superior to

purchase money mortgage lien, where city's lienarose from lending of money for home improve-ments and was not the result of municipal services,special assessments, or any other type lien coveredby ordinance giving municipal liens priority overany other lien.

*886 Donna S. Glick of Law Offices of David J.Stern, P.A., Plantation, for appellant.

Joseph F. Poklemba of James C. Brady & Asso-ciates, Fort Lauderdale, for Appellee-City of Laud-erdale Lakes.

PER CURIAM.We review the determination of the priority of

liens in a mortgage foreclosure action. The trialcourt ruled that the lien of appellee, City of Lauder-dale Lakes (City), was superior to and had priorityover the purchase money mortgage of appellant,First Nationwide Mortgage Corporation (First Na-tionwide). We reverse.

In 1997, a purchase money mortgage on theproperty was assigned to and recorded by First Na-tionwide. The following year, Carolyn Brantleytook title to the property. On June 6, 2001, Brantleyexecuted a Home Loan Agreement and mortgage infavor of the City. The agreement stated that theloan was given in connection with the City's HomeInvestment Partnership Program for the purpose ofmaking home repairs to the property.

On October 4, 2001, First Nationwide filed aComplaint to Foreclose Mortgage, claiming a de-fault under the terms of the note and mortgage. TheCity answered the complaint, contending that its li-en was superior to First Nationwide's mortgage.The court entered summary judgment in favor ofFirst Nationwide, but reserved jurisdiction to de-termine the issue of priority of liens. Thereafter, thecourt ruled that the City's lien was superior to andhad priority over First Nationwide's mortgage,basing its ruling on the authority of Miami ShoresVillage v. Gibraltar Savings & Loan, 561 So.2d 27(Fla. 3d DCA 1990), and Gailey v. Robertson, 98Fla. 176, 123 So. 692 (1929).

In Gailey, Gailey held a mortgage which heclaimed was superior to a lien claimed by the Cityof Winter Haven. The city's lien was a special as-

Page 1851 So.2d 885, 28 Fla. L. Weekly D1890, 28 Fla. L. Weekly D2054(Cite as: 851 So.2d 885)

















sessment against property for a local improvement-the paving of certain streets abutting the property.In holding that the city's lien took priority, the courtnoted:

All private rights and interests in real property ina municipality are subject to the statutory powersof the municipality to levy assessments for localimprovements pursuant to its governmental func-tions; and the legislature may b[y] statute createliens upon private property in favor of a municip-ality for local improvements, and make such lienssuperior to other liens acquired subsequent to theenactment of the statute. The intention of the lawmaking power to give priority to a municipal lienfor local improvements over contract liens of in-dividuals may be implied from the *887 languageof the law creating the lien and from the natureand purpose of the lien.

Id. at 693. Therefore, because the improvementserved a valid public purpose, the city's lien was su-perior.

In Miami Shores, the trial court ruled thatGibralter's lien was superior to Miami Shores' spe-cial assessment lien for unpaid waste fees againstthe subject property. The third district reversed,holding that 1) the waste collection lien was superi-or to the mortgage lien; and 2) Miami Shores hadthe authority to impose such a lien. Id. at 28. Thisholding was based upon the reasoning of Gleason v.Dade County, 174 So.2d 466 (Fla. 3d DCA 1965).There, the court found that certain waste fees due tothe county after the enactment of a city ordinanceimposing them as special assessment liens were su-perior to Gleason's mortgage. Id. at 469.

First Nationwide acknowledges the power ofmunicipalities to attain superior liens under certaincircumstances, but argues that this situation is dis-tinguishable because the mortgage held by the Cityarises from nothing more than the lending of moneyfor home improvements. The City responds that itsmortgage was a municipal lien, superior to that ofFirst Nationwide, because the loan to Brantley was

part of community redevelopment and related ser-vices. It relies on section 23-68 of its Code of Or-dinances, which states:

Each and every municipal lien existing from thedelivery of municipal services, including liens forspecial assessments, code endorsement and thelike, shall be deemed to be prior in dignity to anyother lien, including mortgages, irrespective ofthe date of the recording of the municipal lien orthe date of the recording of any mortgage or anyother lien on real property, and such lien shallsurvive any action to foreclose such inferior lienwhether such inferior lien arises by virtue of amortgage, a mechanic's lien or other security in-terest in real property: provided, however, thatnothing here contained shall be construed to berespecting the priority of liens, and where suchlaw or statute specially provides for the priorityof liens, the provisions hereof shall be construedto achieve harmony therewith.

Here, although the City's loan to Brantley wasprovided in connection with the Home InvestmentPartnership Program, it was nonetheless given forthe purpose of making home repairs. While an im-proved home ultimately may positively affect thesurrounding property values and make the neigh-borhood more attractive for potential home buyers,the lien held by the City was not the result of muni-cipal services, special assessments or any other typelien covered under section 23-68 of the City's Codeof Ordinances. It therefore does not take priorityover First Nationwide's purchase money mortgage.

REVERSED.

SHAHOOD and TAYLOR, JJ., concur.FLEET, J. LEONARD, Associate Judge, concursspecially with opinion.FLEET, J. LEONARD, Associate Judge, concursspecially with opinion.

I concur.

While laudable in its goal, the Community Re-development Act of 1969 must still comport with










fundamental constitutional requirements. Article I,Section 10 of the United States Constitution andArticle I, Section 10 of Florida's Declaration ofrights each specifically prohibit governmental bod-ies from enacting any law which impairs the obliga-tion of contract. To accept the proposition that gov-ernmental assistance to an individual, natural orcorporate, for residential improvement automatic-ally*888 becomes superior in dignity to a previ-ously recorded mortgage simply fails to pass consti-tutional muster.

Fla.App. 4 Dist.,2003.First Nationwide Mortg. Corp. v. Brantley851 So.2d 885, 28 Fla. L. Weekly D1890, 28 Fla.L. Weekly D2054

END OF DOCUMENT





Effective: June 7, 2013 West's Florida Statutes Currentness

Title VIII. Limitations (Chapters 93-96) Chapter 95. Limitations of Actions; Adverse Possession (Refs & Annos)

95.11. Limitations other than for the recovery of real property Actions other than for recovery of real property shall be commenced as follows: (1) Within twenty years.--An action on a judgment or decree of a court of record in this state. (2) Within five years.-- (a) An action on a judgment or decree of any court, not of record, of this state or any court of the United States, any other state or territory in the United States, or a foreign country. (b) A legal or equitable action on a contract, obligation, or liability founded on a written instrument, except for an action to enforce a claim against a payment bond, which shall be governed by the applicable provisions of paragraph (5)(e), s. 255.05(10), s. 337.18(1), or s. 713.23(1)(e), and except for an action for a deficiency judgment governed by paragraph (5)(h). (c) An action to foreclose a mortgage. (d) An action alleging a willful violation of s. 448.110. (e) Notwithstanding paragraph (b), an action for breach of a property insurance contract, with the period running from the date of loss. (3) Within four years.-- (a) An action founded on negligence. (b) An action relating to the determination of paternity, with the time running from the date the child reaches the age of majority.

251



(c) An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest. (d) An action to recover public money or property held by a public officer or employee, or former public officer or employee, and obtained during, or as a result of, his or her public office or employment. (e) An action for injury to a person founded on the design, manufacture, distribution, or sale of personal property that is not permanently incorporated in an improvement to real property, including fixtures. (f) An action founded on a statutory liability. (g) An action for trespass on real property. (h) An action for taking, detaining, or injuring personal property. (i) An action to recover specific personal property. (j) A legal or equitable action founded on fraud. (k) A legal or equitable action on a contract, obligation, or liability not founded on a written instrument, including an action for the sale and delivery of goods, wares, and merchandise, and on store accounts. (l) An action to rescind a contract. (m) An action for money paid to any governmental authority by mistake or inadvertence. (n) An action for a statutory penalty or forfeiture. (o) An action for assault, battery, false arrest, malicious prosecution, malicious interference, false imprisonment, or any other intentional tort, except as provided in subsections (4), (5), and (7). (p) Any action not specifically provided for in these statutes.

252



(q) An action alleging a violation, other than a willful violation, of s. 448.110. (4) Within two years.-- (a) An action for professional malpractice, other than medical malpractice, whether founded on contract or tort; pro-vided that the period of limitations shall run from the time the cause of action is discovered or should have been discovered with the exercise of due diligence. However, the limitation of actions herein for professional malpractice shall be limited to persons in privity with the professional. (b) An action for medical malpractice shall be commenced within 2 years from the time the incident giving rise to the action occurred or within 2 years from the time the incident is discovered, or should have been discovered with the exercise of due diligence; however, in no event shall the action be commenced later than 4 years from the date of the incident or occurrence out of which the cause of action accrued, except that this 4-year period shall not bar an action brought on behalf of a minor on or before the child's eighth birthday. An “action for medical malpractice” is defined as a claim in tort or in contract for damages because of the death, injury, or monetary loss to any person arising out of any medical, dental, or surgical diagnosis, treatment, or care by any provider of health care. The limitation of actions within this subsection shall be limited to the health care provider and persons in privity with the provider of health care. In those actions covered by this paragraph in which it can be shown that fraud, concealment, or intentional misrepresentation of fact prevented the discovery of the injury the period of limitations is extended forward 2 years from the time that the injury is discovered or should have been discovered with the exercise of due diligence, but in no event to exceed 7 years from the date the incident giving rise to the injury occurred, except that this 7-year period shall not bar an action brought on behalf of a minor on or before the child's eighth birthday. This paragraph shall not apply to actions for which ss. 766.301-766.316 provide the exclusive remedy. (c) An action to recover wages or overtime or damages or penalties concerning payment of wages and overtime. (d) An action for wrongful death. (e) An action founded upon a violation of any provision of chapter 517, with the period running from the time the facts giving rise to the cause of action were discovered or should have been discovered with the exercise of due diligence, but not more than 5 years from the date such violation occurred. (f) An action for personal injury caused by contact with or exposure to phenoxy herbicides while serving either as a civilian or as a member of the Armed Forces of the United States during the period January 1, 1962, through May 7, 1975; the period of limitations shall run from the time the cause of action is discovered or should have been discovered with the exercise of due diligence. (g) An action for libel or slander. (5) Within one year.--

253



(a) An action for specific performance of a contract. (b) An action to enforce an equitable lien arising from the furnishing of labor, services, or material for the improve-ment of real property. (c) An action to enforce rights under the Uniform Commercial Code--Letters of Credit, chapter 675. (d) An action against any guaranty association and its insured, with the period running from the date of the deadline for filing claims in the order of liquidation. (e) Except for actions governed by s. 255.05(10), s. 337.18(1), or s. 713.23(1)(e), an action to enforce any claim against a payment bond on which the principal is a contractor, subcontractor, or sub-subcontractor as defined in s. 713.01, for private work as well as public work, from the last furnishing of labor, services, or materials or from the last furnishing of labor, services, or materials by the contractor if the contractor is the principal on a bond on the same construction project, whichever is later. (f) Except for actions described in subsection (8), a petition for extraordinary writ, other than a petition challenging a criminal conviction, filed by or on behalf of a prisoner as defined in s. 57.085. (g) Except for actions described in subsection (8), an action brought by or on behalf of a prisoner, as defined in s. 57.085, relating to the conditions of the prisoner's confinement. (h) An action to enforce a claim of a deficiency related to a note secured by a mortgage against a residential property that is a one-family to four-family dwelling unit. The limitations period shall commence on the day after the certificate is issued by the clerk of court or the day after the mortgagee accepts a deed in lieu of foreclosure. (6) Laches.--Laches shall bar any action unless it is commenced within the time provided for legal actions concerning the same subject matter regardless of lack of knowledge by the person sought to be held liable that the person alleging liability would assert his or her rights and whether the person sought to be held liable is injured or prejudiced by the delay. This subsection shall not affect application of laches at an earlier time in accordance with law. (7) For intentional torts based on abuse.--An action founded on alleged abuse, as defined in s. 39.01, s. 415.102, or s. 984.03, or incest, as defined in s. 826.04, may be commenced at any time within 7 years after the age of majority, or within 4 years after the injured person leaves the dependency of the abuser, or within 4 years from the time of dis-covery by the injured party of both the injury and the causal relationship between the injury and the abuse, whichever occurs later. (8) Within 30 days for actions challenging correctional disciplinary proceedings.--Any court action challenging prisoner disciplinary proceedings conducted by the Department of Corrections pursuant to s. 944.28(2) must be commenced within 30 days after final disposition of the prisoner disciplinary proceedings through the administrative

254



grievance process under chapter 33, Florida Administrative Code. Any action challenging prisoner disciplinary pro-ceedings shall be barred by the court unless it is commenced within the time period provided by this section. (9) Sexual battery offenses on victims under age 16.--An action related to an act constituting a violation of s. 794.011 involving a victim who was under the age of 16 at the time of the act may be commenced at any time. This subsection applies to any such action other than one which would have been time barred on or before July 1, 2010. (10) For intentional torts resulting in death from acts described in s. 782.04 or s. 782.07.--Notwithstanding paragraph (4)(d), an action for wrongful death seeking damages authorized under s. 768.21 brought against a natural person for an intentional tort resulting in death from acts described in s. 782.04 or s. 782.07 may be commenced at any time. This subsection shall not be construed to require an arrest, the filing of formal criminal charges, or a conviction for a violation of s. 782.04 or s. 782.07 as a condition for filing a civil action. (11) Court costs and fines.--Notwithstanding subsection (1), an action to collect court costs, fees, or fines owed to the state may be commenced at any time. CREDIT(S) Laws 1872, c. 1869, § 10; Laws 1889, c. 3900, § 1; Rev.St.1892, § 1294; Gen.St.1906, § 1725; Laws 1919, c. 7838, § 10, subd. 19; Rev.Gen.St.1920, § 2939; Comp.Gen.Laws 1927, § 4663; Laws 1943, c. 21892, § 1; Laws 1947, c. 24337, § 7, subd. B; Laws 1957, c. 57-1, § 24; Laws 1959, c. 59-188, § 1; Laws 1967, c. 67-284, § 1; Laws 1971, c. 71-254, § 1; Laws 1973, c. 73-333, § 30; Laws 1974, c. 74-382, § 7; Laws 1975, c. 75-9, § 7; Laws 1977, c. 77-174, § 1; Laws 1978, c. 78-435, § 11; Laws 1980, c. 80-322, § 1. Amended by Laws 1983, c. 83-38, § 34, eff. May 16, 1983; Laws 1984, c. 84-13, § 1, eff. May 3, 1984; Laws 1985, c. 85-63, § 1, eff. July 30, 1985; Laws 1986, c. 86-220, § 139, eff. Oct. 1, 1986; Laws 1986, c. 86-231, § 1, eff. Oct. 1, 1986; Laws 1986, c. 86-272, § 1, eff. Oct. 1, 1986; Laws 1988, c. 88-397, § 1, eff. Oct. 1, 1988; Laws 1990, c. 90-109, § 20, eff. Jan. 1, 1991; Laws 1992, c. 92-102, § 1, eff. April 8, 1992; Laws 1995, c. 95-147, § 520, eff. July 10, 1995; Laws 1995, c. 95-283, § 2, eff. June 15, 1995; Laws 1996, c. 96-106, § 4, eff. July 1, 1996; Laws 1996, c. 96-167, § 1, eff. July 1, 1996; Laws 1998, c. 98-280, § 15, eff. June 30, 1998; Laws 1999, c. 99-5, § 2, eff. July 29, 1999; Laws 1999, c. 99-137, § 12, eff. July 1, 1999; Laws 2001, c. 2001-211, § 2, eff. July 1, 2001; Laws 2005, c. 2005-230, § 15, eff. Oct. 1, 2005; Laws 2005, c. 2005-353, § 1, eff. Dec. 12, 2005; Laws 2006, c. 2006-145, § 1, eff. July 1, 2006; Laws 2010, c. 2010-45, § 2, eff. May 11, 2010; Laws 2010, c. 2010-54, § 1, eff. July 1, 2010; Laws 2011, c. 2011-39, § 1, eff. May 17, 2011; Laws 2012, c. 2012-100, § 13, eff. July 1, 2012; Laws 2012, c. 2012-211, § 1, eff. Oct. 1, 2012; Laws 2013, c. 2013-137, § 1, eff. June 7, 2013.

255


CITY OF RIVIERA BEACH, a political subdivi-sion of the State of Florida, Appellant,

v.Gladys J. REED, George S. Johnson and Bobbie

Johnson, his wife, their heirs, successors, and/or as-signs and any other parties claiming by, through or

under them, State of Florida, State Farm MutualAutomobile Insurance Company, Seibels Bruce In-surance Co., and Lawrence Shuler, Jr., Appellees.

No. 4D07-3102.July 16, 2008.

Background: City brought action to foreclose liensit had acquired due to property owners' failure topay certain water, sewer, lot cleaning and demoli-tion special assessments. The Fifteenth Judicial Cir-cuit Court, Palm Beach County, Jeffrey J. Colbath,J., granted property owners' motion to dismiss onthe ground that the statute of limitations had ex-pired. City appealed.

Holdings: The District Court of Appeal, Stevenson,J., held that:(1) city's causes of action accrued on dates city re-corded its liens in county's official record books,and(2) expiration of statute of limitations was a properground for dismissal of city's action.

Affirmed.

West Headnotes


241 Limitation of Actions241II Computation of Period of Limitation

241II(A) Accrual of Right of Action or De-fense

241k58 Liabilities Created by Statute

241k58(6) k. Recovery of Taxes or As-sessments. Most Cited Cases

City's causes of action to foreclose liens thatwere acquired due to property owners' failure topay certain water, sewer, lot cleaning, and demoli-tion special assessments accrued, for purposes offive-year statute of limitations, on dates city recor-ded such liens in county's official record books;city had the legal ability to foreclose on the liens assoon as they were recorded. West's F.S.A. §§ 95.11(2)(c), 153.67, 159.17.

[2] Limitation of Actions 241 43

241 Limitation of Actions241II Computation of Period of Limitation

241II(A) Accrual of Right of Action or De-fense

241k43 k. Causes of Action in General.Most Cited Cases

A statute of limitations period begins to runwhen the action may be brought. West's F.S.A. §95.031.


241 Limitation of Actions241V Pleading, Evidence, Trial, and Review

241k180 Demurrer, Exception, or MotionRaising Defense

241k180(7) k. Motion. Most Cited CasesExpiration of five-year statute of limitations

was a proper ground for dismissal of city's action toforeclose liens acquired due to property owners'failure to pay certain assessments, where facts con-clusively establishing that more than five years hadelapsed since city recorded its liens appeared on theface of the complaint. West's F.S.A. §§ 95.11(2)(c),153.67, 159.17; West's F.S.A. RCP Rule 1.130(b).

*169 Karen E. Roselli and Thomas J. Baird ofBaird & Roselli, North Palm Beach, for appellant.

Gwendolyn S. Tuggle of Gwendolyn Key Tuggle,P.A., West Palm Beach, for appellees Gladys J.







http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=241II%28A%29









http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=241II%28A%29
















Reed, George S. Johnson and Bobbie Johnson, hiswife.

STEVENSON, J.In this lawsuit initiated by the City of Riviera

Beach to foreclose certain utility and special assess-ment liens, the trial court dismissed the amendedcomplaint on the ground that the action was filedoutside of the statute of limitations period. Becausethe latest of these liens were recorded on September17, 1996, and the foreclosure action was filed onJuly 1, 2005, we agree that the five-year limitationsperiod has run and the amended complaint wasproperly dismissed.

By city council resolution dated May 3, 1995,the City of Riviera Beach acquired liens againstproperty owned by the appellees for the non-payment of various water, sewer, lot cleaning anddemolition special assessments billed from1985-95. The City recorded the liens in the PalmBeach County official records books on July 7,1995, and September 17, 1996. The City initiatedthis foreclosure action on July 1, 2005, and filed itsamended complaint on December 6, 2006. On theappellees' motion, the trial court dismissed theamended complaint with prejudice, ruling that thepresent suit is time-barred by the applicable five-year statute of limitations.

In its amended complaint, the City requests re-lief under sections 153.67 and 159.17, Florida Stat-utes (2005). Section 153.67 establishes liens for thenonpayment of water or sewer charges. Section159.17 establishes liens for unpaid water, sewer, orgas service charges. Both statutes instruct that therespective liens are *170 enforceable in the mannerprovided by law for the foreclosure of mortgageson real property. See §§ 153.67, 159.17, Fla. Stat.(2005).

Section 95.11(2)(c), Florida Statutes (1995),establishes a five-year limitations period for an ac-tion to foreclose a mortgage. The City maintainsthat the five-year statute of limitations did not be-

gin to run until the City filed the instant foreclosureaction, and that it had twenty years to foreclose onthe liens under the statute of repose pertaining tomortgage liens with no ascertainable maturity date.See § 95.281(1)(b), Fla. Stat. (1995). FN1 The Cityalso raises the procedural issue that the statute oflimitations bar was not a proper ground for dis-missal.

FN1. The City correctly acknowledges thata lien's duration under the statute of reposeis subject to the running of the five-yearstatute of limitations. See, e.g., HouckCorp. v. New River, Ltd., Pasco, 900 So.2d601, 603 (Fla. 2d DCA 2005) (holding thatthe twenty-year statute of repose was not astatute of limitations and did not alter theunequivocal five-year limitations periodenunciated in section 95.11, Florida Stat-utes).

[1][2] Section 95.031, Florida Statutes, in-structs that a statute of limitations period runs fromthe time the cause of action accrues. § 95.031, Fla.Stat. (2005); Margolis v. Andromides, 732 So.2d507, 509 (Fla. 4th DCA 1999). “A cause of actionaccrues when the last element constituting the causeof action occurs.” § 95.031(1), Fla. Stat. (2005). Putanother way, the limitations period begins to runwhen the action “may be brought.” State Farm Mut.Auto. Ins. Co. v. Lee, 678 So.2d 818, 821(Fla.1996). The City had the legal ability to fore-close on the liens in the manner provided by law forthe foreclosure of mortgages on real property asearly as 1995, when it acquired the liens. Therefore,the trial court did not err in ruling that the recordingof the liens triggered the five-year statute of limita-tions. Cf. County Collection Servs., Inc. v. Allen,650 So.2d 650 (Fla. 4th DCA 1995) (holding thatcode enforcement liens had accrued on the datethey were recorded). The City acquired its liens in1995 and recorded them in 1995 and 1996. Basedon the recording dates of the liens, the limitationsperiod ended in 2000 and 2001, several years be-fore the City filed the instant foreclosure action.


































[3] The City also argues that the statute of lim-itations was an improper ground for dismissing itsamended complaint. We find that the trial courtproperly granted the motion to dismiss on statute oflimitations grounds because the facts in supportthereof “ ‘affirmatively appear on the face of thecomplaint and establish conclusively that the statuteof limitations bars the action as a matter of law.’ ”Aquatic Plant Mgmt., Inc. v. Paramount Eng'g,Inc., 977 So.2d 600, 604 (Fla. 4th DCA 2007)(quoting Bott v. City of Marathon, 949 So.2d 295,296 (Fla. 3d DCA 2007) (citation omitted));Roehner v. Atl. Coast Dev. Corp., 356 So.2d 1296,1297 (Fla. 4th DCA 1978) (holding that dismissal isappropriate where it is “inescapably clear from theface of the complaint that the suit was filed beyondthe statutory period”); see also Fla. R. Civ. P.1.130(b) (“Any exhibit attached to a pleading shallbe considered a part thereof for all purposes.”).

Affirmed.

GROSS and MAY, JJ., concur.

Fla.App. 4 Dist.,2008.City of Riviera Beach v. Reed987 So.2d 168, 33 Fla. L. Weekly D1776

END OF DOCUMENT
















F.S. § 173.04 Page 1




Title XII. Municipalities (Chapters 165-185) Chapter 173. Foreclosure of Municipal Tax and Special Assessment Liens (Refs & Annos)

173.04. Procedure for bringing foreclosure suit; certificate of attorney as to notice of suit; jurisdiction ob-tained by publication of notice of suit; form of notice

(1) Any suit hereby authorized shall be commenced by bill in chancery in the circuit court of the county in which such city or town is situated, in the name of the city or town whose taxes, tax certificates and special assessments are sought to be en-forced, as complainant, and against any or all lands upon which any taxes, tax certificates and special assessments are delin-quent (as the case may be) for the period aforesaid, as defendant, in which bill there shall be briefly described the levy and nonpayment of taxes and special assessments which are delinquent for the period aforesaid, and of all other taxes and special assessments then due and payable to said city or town and sought to be recovered in such bill, the lands proceeded against and the amount chargeable to each parcel or tract. It shall be unnecessary to name in such bill or proceedings any person owning or having any interest in or lien upon such lands as defendants. At least 30 days prior to the filing of any such bill in chancery, written notice of intention to file the same shall be sent by registered mail to the last known address of the holder of the record title and to the holder of record of each mortgage or other lien, except judgment liens, upon each tract of land to be included in said bill in chancery; such notice shall briefly describe the particular lot or parcel of land, shall state the amount of tax certificate and special assessment liens sought to be enforced and shall warn said owner and holders of liens, mort-gages or other liens that on or after the day therein named said bill in chancery to enforce the same will be filed, unless paid on or before said date. (2) A certificate of the attorney shall be attached to the bill of complaint to the effect that said written notice has been given, and such certificate shall be prima facie evidence that the provisions of this section have been complied with. The complain-ant's counsel shall make diligent inquiry as to the address of the record title and holders of record liens other than judgments and the clerk of the circuit court shall mail by registered mail a copy of the notice hereinafter provided for, to such record owner and holders of record liens other than judgments at such last known address. (3) Jurisdiction of any of said lands and of all parties interested therein or having any lien thereon shall be obtained by publi-cation of a notice to be issued as of course by the clerk of the circuit court in which such bill is filed on the request of com-plainant, once each week for not less than 2 consecutive weeks, directed to all persons and corporations interested in or hav-ing any lien or claim upon any of the lands described in said notice and said bill. Such notice shall describe the lands in-volved and the respective principal amounts sought to be recovered in such suit for taxes, tax certificates and special assess-ments on such respective parcels of land, and requiring all such parties to appear and defend said suit on or before the day specified in said notice, which shall be not less than 4 weeks after the date of the first publication of such notice. Said notice may be in substantially the following form, with blanks appropriately filled in: (Name City or Town) Complainant, IN THE CIRCUIT

259

F.S. § 173.04 Page 2


vs. COURT FOR _________ COUNTY, FLORIDA. Certain lands upon which (here insert

the word “taxes,” or the words IN CHANCERY. “special assessments” or both, as the case may be) are delinquent,

Defendant.

NOTICE To all persons and corporations interested in or having any lien or claim upon any of the lands described herein: You are hereby notified that (name city or town) has filed its bill of complaint in the above named court to foreclose delin-quent __________ (here insert the words “tax liens, tax certificates or special assessments,” as the case may be) with interest and penalties, upon the parcels of land set forth in the following schedule, the aggregate amount of such __________ (here insert the words “tax liens, tax certificates or special assessments,” as the case may be) interest and penalties, against said respective parcels of land, as set forth in said bill of complaint, being set opposite such parcels in the following schedule, to wit:

DESCRIPTION OF LANDS Amount of __________ (here insert the word “taxes,” or the words “special assessments” or both, as the case may be). In addition to the amounts set opposite each parcel of land in the foregoing schedule, interest and penalties, as provided by law, on such delinquent taxes and special assessments, together with a proportionate part of the costs and expenses of this suit, are sought to be enforced and foreclosed in this suit. You are hereby notified to appear and make your defenses to said bill of complaint on or before the __________ day of __________, and if you fail to do so on or before said date the bill will be taken as confessed by you and you will be barred from thereafter contesting said suit, and said respective parcels of land will be sold by decree of said court for nonpayment of said taxes and assessment liens and interest and penalties thereon and the costs of this suit. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of said court, this __________ day of __________.

(Clerk of said court.)

By (Deputy clerk.) (4) Proof of publication of said notice, as herein required, shall be by affidavit of the publisher or some agent or employee thereof filed in said cause. CREDIT(S)

260

F.S. § 173.04 Page 3


Laws 1931, c. 15038, § 4; Comp.Gen.Laws Supp.1936, § 3004(5); Laws 1971, c. 71-355, § 32. Amended by Laws 1990, c. 90-279, § 18, eff. Oct. 1, 1990.

261

F.S. § 173.13 Page 1





173.13. Procedure under this chapter optional The exercise of the power and provisions conferred in this chapter shall be optional with the municipalities and shall not be mandatory upon any municipality of the state. Any municipality desiring to proceed hereunder may elect to proceed hereunder by formal action of its governing authority and by proceeding as described herein. CREDIT(S) Laws 1931, c. 15038, § 8; Comp.Gen.Laws Supp.1936, § 3004(9).

262






173.01. Foreclosure of municipal tax certificates authorized The lien of any and all taxes, except those ad valorem taxes collectible by the county tax collector, tax certificates, and special assessments imposed by any incorporated city or town in the state upon real estate may be foreclosed by such city or town by suit in chancery. The practice, pleading, and procedure in any such suit shall be in substantial accordance with the practice, pleading, and procedure for the foreclosure of mortgages of real estate, except as herein otherwise provided. CREDIT(S) Laws 1931, c. 15038, § 1; Comp.Gen.Laws Supp.1936, § 3004(2); Laws 1973, c. 73-332, § 31.

263

F.S. § 173.03 Page 1





173.03. Conditions determining when suit may be brought; lands and claims included (1) Suit may be brought at any time after any one or more of the following events, respectively: (a) After the expiration of 2 years from the date of any tax certificate issued and held by a city or town whose charter provides for or requires the issuing of tax certificates for delinquent taxes; (b) After the expiration of 2 years from the date any tax becomes delinquent which was imposed by a city or town whose charter does not provide for or require the issuing of tax certificates; or (c) After the expiration of 1 year from the date any special assessment or installment thereof becomes due and pay-able. (2) There may be included in any suit all or any part of the lands upon which tax certificates have been outstanding or taxes have remained delinquent or any special assessment or installment thereof shall have been in default for the respective periods aforesaid, and there may be included therein all claims and demands of said city or town against said lands or any part thereof for taxes, tax certificates and special assessments or installments thereof which may be due and payable to such city or town at the time of the institution of such suit. CREDIT(S) Laws 1931, c. 15038, § 3; Comp.Gen.Laws Supp.1936, § 3004(4).

264

District Court of Appeal of Florida,Third District.

Manuel ISMAEL, Appellant,v.

CERTAIN LANDS UPON WHICH SPECIAL AS-SESSMENTS ARE DELINQUENT, Appellee.

No. 3D10–1394.Dec. 29, 2010.

Rehearing Denied Jan. 28, 2011.

Background: Buyer of municipal liens against realproperty brought in rem foreclosure action and ob-tained final default judgment of foreclosure. Afterconfirmation of the foreclosure sale, former ownermoved to vacate the final default judgment. TheCircuit Court, Miami–Dade County, Gisela Car-donne Ely, denied former owner's exceptions to amagistrate's report rejecting his arguments, anddenied the motion to vacate. Former owner ap-pealed.

Holdings: The District Court of Appeal, Rothen-berg, J., held that:(1) buyer of liens had standing to commence an inrem foreclosure action against the property, and(2) former owner had actual and constructive noticeof the in rem foreclosure lawsuit.

Affirmed.

West Headnotes


268 Municipal Corporations268IX Public Improvements

268IX(F) Enforcement of Assessments andSpecial Taxes

268k557 Actions for Sale of Land268k560 k. Right of action of contract-

or or assignee. Most Cited CasesBuyer of municipal liens against former own-

er's property for outstanding special assessmentshad standing to commence an in rem foreclosureaction against the property, even though statutegoverning such actions required that they bebrought in the name of the city or town whose spe-cial assessments were being enforced, where cityattorney was granted authority by ordinance to del-egate and assign city's right to collect special as-sessment liens, and city attorney assigned to lienbuyer the right to enforce the respective liens.West's F.S.A. § 173.04(1).

[2] Assignments 38 1

38 Assignments38I Property, Estates, and Rights Assignable

38k1 k. Nature of right to assign. Most CitedCases

In Florida, statutory rights are freely assignablein the absence of an express or obvious prohibition.


268 Municipal Corporations268IX Public Improvements

268IX(F) Enforcement of Assessments andSpecial Taxes

268k557 Actions for Sale of Land268k563 k. Jurisdiction. Most Cited

CasesFormer owner of real property had actual and

constructive notice of in rem foreclosure lawsuitbrought by buyer of municipal liens against theproperty, as necessary for trial court to have per-sonal jurisdiction over former owner; multiple no-tices of the lawsuit were received at former owner'sresidence and published in weekly newspaper.

*584 Peter C. Bianchi, Jr., Miami, for appellant.

Kuvin & Stettin and Eric L. Stettin, Fort Lauder-dale, for appellee Joel Israel; John L. Penson, BayHarbor Islands, for appellee Bullet Cement Co.






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Before RAMIREZ, C.J., and SUAREZ andROTHENBERG, JJ.

ROTHENBERG, J.Manuel Ismael (“the former owner”) appeals

from an order denying his exceptions to the reportand recommendation of the general magistrate, andthe final order denying his motion to vacate the de-fault final judgment and foreclosure sale. We af-firm.

In 2003, the City of Miami passed an ordinanceauthorizing the City Attorney “to take any action inlaw or in equity to collect on municipal liens, in-cluding, but not limited to foreclosure,” and provid-ing the City Attorney with the power to “delegatethis authority to the holders of municipal liens ortheir counsel.” Miami, Fla., Resolution R–03–1221(Dec. 18, 2003). Joel Israel (“the lienholder”) hadpreviously purchased lien certificates from the Cityon multiple properties upon which special assess-ments were outstanding. One of those properties(“Parcel 9”) belonged to the former owner. On June1, 2004, the City Attorney sent a letter to the lien-holder, assigning to him the City's right to take anyaction at law or in equity to collect on the lien certi-ficates the lienholder held.

Pursuant to that assignment, counsel for the li-enholder mailed two written notices of his intent toforeclose on Parcel 9 to the former owner. Theformer owner did not respond. In July 2005, the li-enholder, “as authorized delegate and assignee ofthe *585 City of Miami,” filed the instant action inrem to foreclose on a number of properties, includ-ing Parcel 9. The lienholder proceeded under sec-tion 173.02, Florida Statutes (2005), whichprovides for actions in rem to foreclose upon out-standing special assessment liens. Section173.04(1) provides that such suits shall be brought“in the name of the city or town whose ... specialassessments are sought to be enforced.”

Notice and a copy of the complaint were sentby certified mail and received by the former owner.

Also, the clerk of the trial court published notice ofthe lawsuit in a weekly newspaper. The formerowner did not appear, and the trial court granted thelienholder's motion for default. On April 3, 2006,the trial court entered a final default judgment offoreclosure as to Parcel 9. The trial court appointeda special master to conduct the foreclosure sale.Notice of the sale was mailed to the former ownerand published by the clerk of the trial court in aweekly newspaper. Bullet Cement Co. (“Bullet”)was the highest bidder at the foreclosure sale. OnMay 18, 2006, the trial court confirmed the sale,and Bullet obtained title to Parcel 9.

In December 2007, the former owner moved tovacate the final default judgment of foreclosure andsale, arguing that the judgment was void. The trialcourt referred the matter to a general magistratewho, after a series of evidentiary hearings, issuedher report and recommendation rejecting the formerowner's arguments. The trial court issued an orderdenying the former owner's exceptions to the gener-al magistrate's report and recommendation. The tri-al court then issued an order denying the formerowner's motion to vacate the final default judgment.This appeal followed.

[1] The former owner first argues that the finaldefault judgment is void because the lienholder hadno standing to proceed under chapter 173. Becausesection 173.04(1) requires that such actions in rembe commenced “in the name of the city or townwhose ... special assessments are sought to be en-forced,” the former owner contends that under nocircumstances may an individual commence an ac-tion under chapter 173. We disagree.

[2] Without question, the City was authorizedto commence a chapter 173 foreclosure action. Byvalid ordinance,FN1 the City Attorney was grantedthe authority to delegate and assign the City's rightto take any action at law or in equity to collect onoutstanding special assessment liens to individuallienholders. By letter, in June 2004, the City Attor-ney assigned to the lienholder the City's right toforeclose on multiple properties, including Parcel 9.












In Florida, statutory rights are freely assignable inthe absence of an express or obvious prohibition.VOSR Indus., Inc. v. Martin Props., Inc., 919 So.2d554, 556 (Fla. 4th DCA 2005) (“Florida law recog-nizes the general right to assign common law andstatutory rights, unless there is an express prohibi-tion in a statute, or a showing that an assignmentwould clearly offend an identifiable publicpolicy.”); see also Art. VIII, § 2(b), Fla. Const.(“Municipalities ... may exercise any power for mu-nicipal purposes except as otherwise provided bylaw.”); § 17.0415, Fla. Stat. (2005) (authorizingChief Financial Officer to assign state claimsagainst third parties to facilitate collection); *586Cnty. Collection Servs., Inc. v. Charnock, 789So.2d 1109, 1110 (Fla. 4th DCA 2001) (holdingthat “Palm Beach County does have the power toassign [lot clearing and code enforcement] liens”).

FN1. As the general magistrate correctlyfound, the four-year statute of limitationsin section 95.11(3)(p), bars any challengeto Miami, Florida, Resolution R–03–1221,and thus, the ordinance is valid.

The former owner has not provided this Courtwith any statutory provision, case, or persuasivepolicy argument suggesting that the City's assign-ment of the instant special assessment liens shouldbe invalidated. Accordingly, we hold that the lien-holder, as “delegate and assignee of the City ofMiami,” had standing under chapter 173, and prop-erly commenced this action in rem as against Parcel9.

[3] Next, the former owner contends that hewas not notified of the lienholder's lawsuit and sub-sequent foreclosure sale in strict accordance withchapter 173, and therefore, the judgment cannotstand for lack of personal jurisdiction. Again, wedisagree.

The general magistrate—considering the mul-tiple notices received at the former owner's resid-ence and the notices published in the newspa-per—found that the former owner had both actual

and constructive notice of the lawsuit and foreclos-ure sale. The former owner did not specificallychallenge that finding, and based on the record nowbefore us, we see no reason to disturb it. Instead,we conclude that the former owner received noticeof the proceedings, and any alleged technical errorin notice was harmless. See Krischer v. Sch. Bd. ofDade Cnty., 555 So.2d 436, 437 (Fla. 3d DCA1990) (holding that technical violation of statutorynotice provision did not require reversal of orderterminating teacher's employment where teacherwas not prejudiced); S. Kornreich & Sons, Inc. v.Titan Agencies, Inc., 423 So.2d 940, 942 (Fla. 3dDCA 1982) (refusing to agree that technical stat-utory notice violation was harmful).

Furthermore, we note that the trial court's juris-diction over both the lands and parties involved inthis case was conferred by publication of notice andof the lawsuit and sale by the clerk of the trial courtin 2005. § 173.04(3). Thus, the former owner's jur-isdictional arguments (as to both personal and sub-ject matter jurisdiction) are without merit.

We therefore affirm the trial court's ordersdenying the former owner's exceptions to the reportand recommendation of the general magistrate, anddenying the former owner's motion to vacate thedefault final judgment of foreclosure and sale as toParcel 9.

Affirmed.

Fla.App. 3 Dist.,2010.Ismael v. Certain Lands Upon Which Special As-sessments are Delinquent51 So.3d 583, 36 Fla. L. Weekly D53

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CHAPTER 2013-241

Committee Substitute for House Bill No. 267

An act relating to real property liens and conveyances; amending s. 689.02,F.S.; deleting a requirement that blank spaces be included on a warrantydeed to allow for entry of social security numbers of grantees on the deed;conforming provisions; amending s. 695.01, F.S.; providing that certaintypes of governmental or quasi-governmental liens on real property arevalid and effectual against certain creditors or purchasers only if recordedin a specified manner; providing an effective date.

Be It Enacted by the Legislature of the State of Florida:

Section 1. Subsection (2) of section 689.02, Florida Statutes, is amendedto read:

689.02 Form of warranty deed prescribed.—

(2) The form for warranty deeds of conveyance to land shall include ablank space for the property appraiser’s parcel identification numberdescribing the property conveyed, which number, if available, shall beentered on the deed before it is presented for recording, and blank spaces forthe social security numbers of the grantees named in the deed, if available,which numbers may be entered on the deed before it is presented forrecording. The failure to include such blank space spaces, or the parcelidentification number, or any social security number, or the inclusion of anincorrect parcel identification number or social security number, does shallnot affect the validity of the conveyance or the recordability of the deed. Suchparcel identification number is shall not constitute a part of the legaldescription of the property otherwise set forth in the deed and may shall notbe used as a substitute for the legal description of the property beingconveyed, nor shall a social security number serve as a designation of thegrantee named in the deed.

Section 2. Subsection (3) is added to section 695.01, Florida Statutes, toread:

695.01 Conveyances and liens to be recorded.—

(3) A lien by a governmental entity or quasi-governmental entity thatattaches to real property for an improvement, service, fine, or penalty, otherthan a lien for taxes, non-ad valorem or special assessments, or utilities, isvalid and effectual in law or equity against creditors or subsequentpurchasers for a valuable consideration only if the lien is recorded in theofficial records of the county in which the property is located. The recordednotice of lien must contain the name of the owner of record, a description oraddress of the property, and the tax or parcel identification numberapplicable to the property as of the date of recording.

1CODING: Words stricken are deletions; words underlined are additions. 268

Section 3. This act shall take effect October 1, 2013.

Approved by the Governor June 28, 2013.

Filed in Office Secretary of State June 28, 2013.

Ch. 2013-241 LAWS OF FLORIDA Ch. 2013-241

2CODING: Words stricken are deletions; words underlined are additions. 269

liens, liens, everywhere a lien

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