When a property is foreclosed upon and sold in a foreclosure sale, it sometimes sells for more than the mortgagee is entitled to under its foreclosure judgment. When the sale price paid is more than the final judgment amount, the excess amount called the "surplus." If there is a surplus following a mortgage foreclosure sale of real property, you may be wondering who gets those surplus funds. Does the surplus go back to the former owner of the property or to additional lienholders? Florida law requires a subordinate lienholder to file a claim for surplus foreclosure proceedings within 60 days in the manner required by Florida Statute § 45.031(7)(b). If the subordinate lienholder fails to do so it is not entitled to the surplus proceeds even if it filed an answer in the foreclosure action requesting surplus proceeds be distributed to it.subordinate lien holders (or junior lienholders) have 60 days to claim the surplus in order to satisfy the former property owner's outstanding debt.
In Dever v. Wells Fargo Bank National Ass'n --- So.3d ----, 2014 WL 4212760 (Fla. 2d DCA 2014), decided on August 27, 2014, the Second District Court of Appeal for the State of Florida enforced this , 60-day deadline against a subordinate lienholder, Wells Fargo Bank. As reflected in that opinion, no claims to the surplus were filed during this sixty-day period. The Devers, the borrowers and former owners of the property, successfully argued that they were entitled to the surplus and that Wells Fargo Bank was barred from claiming the surplus because it had failed to file a claim for the funds within the sixty days following the foreclosure sale.
About Dever v. Wells Fargo Bank National Association
In this case, Fifth Third Mortgage Company filed a foreclosure suit against the Devers in April 2011. Wells Fargo filed an answer, admitting that it was a junior lienholder and stating that it would be entitled to any and all surplus funds generated by a foreclosure sale in this case up to the full amount of indebtedness. The Devers owed Wells Fargo $134,578.17. A default judgment was entered against the Devers on March 23, 2012. The final judgment of foreclosure enetered against the Devers included the following language, as required by section 45.031(1), Florida Statutes (2011):
IF THIS PROPERTY IS SOLD AT PUBLIC AUCTION, THERE MAY BE ADDITIONAL MONEY FROM THE SALE AFTER PAYMENT OF PERSONS WHO ARE ENTITLED TO BE PAID FROM THE SALE PROCEEDS PURSUANT TO THIS FINAL JUDGMENT.
IF YOU ARE A SUBORDINATE LIENHOLDER CLAIMING A RIGHT TO FUNDS REMAINING AFTER THE SALE, YOU MUST FILE A CLAIM WITH THE CLERK NO LATER THAN 60 DAYS AFTER THE SALE. IF YOU FAIL TO FILE A CLAIM, YOU WILL NOT BE ENTITLED TO ANY REMAINING FUNDS.
IF YOU ARE THE PROPERTY OWNER, YOU MAY CLAIM THESE FUNDS YOURSELF.
A foreclosure sale was held in April 2012, and resulted in a surplus of $85,899.06, which was placed in the court registry.
In November 2012, after the 60-day time period for filing a claim to the surplus had expired, the Devers filed a motion to disburse the surplus funds. In their motion, the Devers acknowledged that Wells Fargo, as a subordinate lienholder, may at one point have had a claim to the surplus funds. However, the Devers argued that Wells Fargo was barred from claiming the surplus because it had failed to file a claim for the funds within the sixty days following the sale. In March 2013, Wells Fargo filed its own motion to disburse surplus funds and a memorandum of law opposing the Devers' motion. Wells Fargo relied on Citibank v. PNC Mortgage Corp. of America, 718 So.2d 300 (Fla. 2d DCA 1998) and other cases decided before July 2006, when the sixty day time period for filing a claim for surplus funds became effective , to support its argument.
The trial court granted Wells Fargo's motion, denied the Devers' motion, and ordered the surplus funds to be disbursed to Wells Fargo. The trial court's decision was reversed by the Second DCA. In its opinion, the appellate court relied on another 2014 decision by the same court in Mathews v. Branch Banking & Trust Co., 139 So. 3d 498 (Fla. 2d DCA 2014) in which the court concluded that the language in section 45.031(7)(b), Florida Statutes is clear and unambiguous: any person claiming a right to the surplus funds must file a claim with the clerk no later than sixty days after the sale. Furthermore, section 45.031(1)(a), Florida Statutes specifically warns that if a subordinate lienholder fails to file a claim, it will not be entitled to any remaining funds. In short, all claims to the surplus be filed within the sixty days following the sale and if no claims are filed during that period the owner is presumed to be entitled to the surplus. The court also concluded that the 1998 decision in Citibank v. PNC Mortgage Corp. of America, relied upon by Wells Fargo and the trial court, and a number of earlier decisions relied upn by Wells Fargo do not apply because of changes in the laws governing surplus funds enacted following those decisions. As a result, the Devers received the surplus instead of the Wells Fargo Bank.
Are you dealing with foreclosure surplus litigation?
If you are dealing with a dispute concerning a foreclosure sale surplus, you should consult with knowledgeable legal counsel. I am a Palm Beach real estate trial attorney who has experience handling surplus-related foreclosure litigation matters. As a skilled lawyer, I can help you determine whether you are entitled to these funds and then assist you with your claim or appeal. Whatever side of the case you are on, my law firm—Gregg H. Glickstein, P.A.—is here to help you navigate the process! Call my firm to set up a consultation.