5D06-871 Morris v. Osteen

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State: Florida

Court: Florida Fifth District Court

Docket No: 5D06-871

Case Date: 01/15/2007

Preview:IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FIFTH DISTRICT JANUARY TERM 2007

JEANNE MORRIS AND CHUCK PATE, Appellant, v. ARTHUR J. OSTEEN, ETC. ET AL., Appellee. ________________________________/ Opinion filed January 19, 2007 Appeal from the Circuit Court for Citrus County, Carol Falvey, Judge. Jonathan M. Smith, and Michael Bowlus of Ford, Bowlus, Duss, Morgan, Kenney, Safer & Hampton, P.A., Jacksonville, for Appellant. William A. Post , Dunnellon, for Appellee. Case No. 5D06-871

GRIFFIN, J. Jeanne Morris and Chuck Pate ["Morris and Pate"] appeal the trial court's order granting Appellees', Neil T. and Lisa M. Barzano ["Barzanos"], summary final judgment on their claim for ejectment, foreclosure and reasonable rental value. We reverse. This case is about rights to a single piece of property, initially owned by Ronald and Carla Gagliano ["Gaglianos"]. The Gaglianos mortgaged the property to Arthur Osteen. The Gaglianos later defaulted on the mortgage and, on January 15, 2004, Osteen obtained a Final Judgment of Foreclosure. The foreclosure judgment ordered the court clerk to sell the property by public sale, but the Gaglianos were in Chapter 13

bankruptcy proceedings.

The automatic stay associated with that proceeding

apparently interfered with a sale on the scheduled date. On May 17, 2004, with the approval of the bankruptcy court, the Gaglianos entered into an agreement to lease a portion of the property to Morris and Pate . The lease was for a two-year term and included an option for Morris to purchase the property for $275,000. Morris and Pate made improvements to the property and

operated a restaurant and lounge on the premises. On July 8, 2004, Osteen assigned the mortgage he had against the Gaglianos' property to the Barzanos for value. The Gaglianos' bankruptcy action was later

dismissed, and the Barzanos renewed the foreclosure action against the property. On June 22, 2005, the circuit court issued an Amended Final Judgment of Foreclosure. According to this amended judgment, the Barzanos were due $282,500.25, plus interest. If that amount were not paid, along with interest and all costs accruing after the judgment, the clerk of the court was to sell the land on July 21, 2005, by public sale, and the proceeds applied to satisfy the Barzanos' foreclosure judgment against the Gaglianos. As is typical, the foreclosure judgment recited: 6. At the conclusion of the public sale, upon the filing of the certificate of sale, defendant and all persons claiming under or against defendant since the filing of the notice of lis pendens shall be foreclosed of all estate or claim in the property and the purchaser at the sale shall be let into possession of the property. On July 14, 2005, the circuit court granted Morris and Pate's motion to intervene in the foreclosure proceedings to protect their interests under the lease. Then, before the date of the scheduled sale, the Gaglianos and the Barzanos entered into an agreement for a deed in lieu of foreclosure, whereby the Barzanos agreed to release

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the Gaglianos from any personal liability under the foreclosure judgment in exchange for a quitclaim deed to the property. Title was conveyed to the Barzanos on about July 7,

2005. At the Barzanos' request, the court subsequently cancelled the foreclosure sale. On August 4, 2005, the Barzanos filed an action for ejectment and foreclosure against Morris and Pate. Morris and Pate admitted that their leasehold interest was subject to the January 15, 2004, foreclosure judgment. However, Morris and Pate contend that their rights under the lease are valid as against the Barzanos' ejectment claim because that claim is based on the Barzanos' title and not on their foreclosure judgment. Morris filed an affidavit stating that she made proper rent payments to the Gaglianos or their bankruptcy trustee throughout the term of the lease, up until the time that the Gaglianos transferred over their rights in the property to the Barzanos. Morris asserted that she tendered rent to the Barzanos and honored all other terms of the lease agreement and exercised her option to purchase under it, but the Barzanos have refused to honor the agreement. On November 21, 2005, the Barzanos filed a motion for summary judgment on the ejectment claim, and later filed a motion to determine and award reasonable rental value to the Barzanos for Morris and Pate's use of the property. The trial court

subsequently issued a summary judgment granting ejectment and reasonable rental value, ruling that the lease was not binding on the Barzanos. In deciding in favor of the Barzanos, the trial court made several findings. In pertinent part, the court said: The original Judgment of Foreclosure, entered January 15, 2004, which foreclosed the mortgage encumbering the real property subject to this dispute, was prior in time to the lease with option asserted by Intervenors which was dated May 4,

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2004. The lease with option was given by Gagliano while he was the foreclosure judgment debtor and the debtor in his bankruptcy proceeding. As determined by this court in its November 7, 2005 order, the lease with option could not grant any right to occupancy, use or ownership greater than Gagliano's equity of redemption. By executing the July 7, 2005 deed, Mr. and Mrs. Gagliano deeded all their, right, title, interest in the subject property to the Barzano's. [sic] The lease with option was subject to the operation of 695.01 F.S. because it was given for a term of two years, but it was not recorded at the time the Barzano's obtained the deed from the Gagliano's. The Barzano's [sic] as assignees from Osteen, stood in Osteen's shoes as creditors of the Gagliano's [sic], with a valid lien on the subject property. Thus, the trial court appears to have concluded that, subsequent to foreclosure judgment, the Gaglianos could not have conveyed a lease superior to the Barza nos' rights in the property. Alternatively, the court appears to have reasoned that the

Barzanos subsequent quitclaim title took priority over the lease under section 696.01, because the lease was not recorded. After making the above findings, the court

concluded that the Barzanos were entitled to immediate possession of the property. We disagree and reverse. On appeal, Morris and Pate argue that the Gaglianos did have the power t o convey a valid lease. Also, because the Barzanos' ejectment claim is based upon the title they received through the quitclaim deed1 and because the Barzanos had actual

"[I]t is well established that a quitclaim deed only conveys such title or interest as possessed by the grantor at the time of the making of the deed . . . and `one who accepts a quitclaim deed is conclusively presumed to have agreed to take the title subject to all risks as to defects and incumbrances [sic].'" Florida E. Coast Ry. v. Patterson, 593 So. 2d 575, 577 (Fla. 3d DCA 1992)(quoting St. Clair v. City Bank & Trust Co., 175 So. 2d 791, 792 (Fla. 2d DCA 1965)) (citations omitted).

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notice of Morris and Pate's lease when they accepted the quitclaim deed, their title is subject to that lease. The Barzanos contend that "the lease and the option rights claimed by [Morris and Pate]" have always been "subject to the pre-existing rights of the [Barzanos] as owners of the Osteen mortgage and as judgment creditors." They urge that because the lease is subject to the Barzanos' foreclosure judgment, it is also subject to the Barzanos' title under the quitclaim deed. They rely on section 695.01(1), Florida

Statutes, to support their contention that their rights as judgment creditors defeat Morris and Pate's rights under the lease. In Florida, a mortgage is simply a lien on the property to which it relates, and not "a conveyance of the legal title or of the right of possession."

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