Court Opinion

ID: 4643454
Source: CourtListenerOpinion
Date Created: 2020-12-16 16:02:41.829187+00
Date Added: 2024-06-11T08:00:39.880044
License: Public Domain

Third District Court of Appeal
                             State of Florida

                      Opinion filed December 16, 2020.

                             ________________

                              No. 3D19-1521
                        Lower Tribunal No. 13-38896
                            ________________

                             Mark Koyfman,
                                 Appellant,

                                     vs.

                           1572 Pledger LLC,
                                  Appellee.

      An Appeal from the Circuit Court for Miami-Dade County, Abby Cynamon,
Judge.

     Michael S. Kaufman, for appellant.

     Stok Kon + Braverman, and Robert A. Stok and Michael E. Bonner (Fort
Lauderdale), for appellee.

Before EMAS, C.J., and GORDO and LOBREE, JJ.

     LOBREE, J.

                      ON MOTION FOR REHEARING
        We deny the motion for rehearing but withdraw our prior opinion and issue

the following in its stead.

        Mark Koyfman appeals from a final judgment of foreclosure entered in favor

of 1572 Pledger, LLC (the “subsequent mortgagee”), as well as the denial of his

counterclaim to quiet title, charging error to the trial court’s failure to dismiss the

suit below and enter judgment in his favor pursuant to CDC Builders, Inc. v.

Biltmore-Sevilla Debt Investors, LLC, 151 So. 3d 479 (Fla. 3d DCA 2014). For the

following reasons, we agree and reverse. 1

        Having lived together and just had a child, Koyfman and Irina Kosterina

decided to move to Florida in 2003. He was a licensed realtor by trade. She was an

accountant. As a couple, they invested in at least one business and purchased several

properties. In 2007, Kosterina acquired the apartment foreclosed on below and

executed a note and mortgage in favor of Regions Bank (the “original mortgagee”)

in connection with a personal $50,000 line of credit. In 2008, she quit-claimed the

property to 604 Harbour House, LLC (the “first company”), an entity she formed

and managed herself.

        In 2009, Koyfman and Kosterina ended their personal and business

relationship. Kosterina, through her first company, quit-claimed the apartment to

1
    We decline to reach the remaining issues raised on appeal.

                                           2
Koyfman. The deed was “[s]ubject to that certain Mortgage given by [Kosterina] in

favor of [the original mortgagee].” Koyfman made the apartment his primary

residence, and paid for maintenance, condominium dues, and all property taxes. He

failed, however, to make any mortgage payments.

      In 2013, after several years of continuing to make mortgage payments on the

loan for which the apartment served as collateral and having consulted the attorneys

who represented her below, Kosterina created Apt. 604 Bal Harbour Condo, LLC

(the “second company”). According to her testimony, she did this “in order to

purchase the mortgage and note from [the original mortgagee] to satisfy [her] debts

and recover [her] loss.” Through her second company, created and managed solely

by her, Kosterina paid off the balance of the loan. However, she asked the original

mortgagee to sell the rights to the mortgage to her second company, instead of

satisfying the loan and extinguishing the mortgage. Her second company then

obtained the assignment of the mortgage by the original mortgagee.

      That same year, her attorneys—now representing the second company—

allegedly wrote to Koyfman to alert him of his continuing default on the mortgage

from the time he took title. Thereafter, Kosterina’s second company sued to

foreclose, accelerating payment on the mortgage and naming both Kosterina and

Koyfman as defendants. Koyfman’s answer alleged that the first company had failed

to effectively purchase the mortgage it attempted to foreclose on, since the payment

                                         3
for the assignment should have satisfied the debt and extinguished the mortgage

instrument’s obligation. He also counterclaimed to quiet title due to the cloud

created by the purported assignment.

       In 2017, Kosterina found it hard to cope with the litigation expenses of her

second company’s foreclosure suit. Having consulted her attorneys, she then

assigned her second company’s rights under the mortgage to a third legal entity: the

subsequent mortgagee. That same year, the subsequent mortgagee was substituted

as the party foreclosing below. Koyfman then filed an answer to the second

company’s cross counter-claim, again challenging the subsequent mortgagee’s

standing as a note holder and alleging that he was not unjustly enriched because

Kosterina deeded him the property in exchange for other real property interests of

his.

       After discovery and a trial where Koyfman and Kosterina testified, and

different views were expressed as to the nature of the transaction, 2 the lower court

entered judgment of foreclosure in favor of the subsequent mortgagee. The order

2
  It was disputed whether Kosterina’s transfer of title to Koyfman was “gratuitous,”
as claimed by her, or one “among numerous exchanges of assets,” as claimed by
him. Koyfman gave deposition testimony that, in an independent effort to amicably
and fairly split their assets, he ceded to Kosterina sole title to the property where the
couple lived at the time, while, in return, she quit-claimed the apartment at issue to
him. The trial court made no findings on this issue and, neither set of circumstances,
if true, would change the legal result here. Accordingly, we express no view on this
issue.

                                           4
relevantly found that the subsequent mortgagee owned a valid and outstanding

mortgage lien against the apartment; that Koyfman’s deed subjected his interest to

said mortgage; that both Koyfman and Kosterina had defaulted on the mortgage, the

balance of which ascended to $72,095.27; and, as such, while Kosterina was

personally liable for that debt, Koyfman was estopped from challenging the validity

of the mortgage. Accordingly, the trial judge denied Koyfman’s counterclaim and

ordered the sale of Koyfman’s apartment to satisfy the outstanding mortgage.

      “To the extent the trial court’s final judgment of foreclosure ‘is based on

factual findings, we will not reverse unless the trial court abused its discretion;

however, any legal conclusions are subject to de novo review.’” Gonzalez v. Fed.

Nat’l Mortg. Ass’n, 276 So. 3d 332, 335 (Fla. 3d DCA 2018) (quoting Verneret v.

Foreclosure Advisors, LLC, 45 So. 3d 889, 891 (Fla. 3d DCA 2010)). Koyfman

argues that the trial court erred in failing to find that the subsequent mortgagee did

not own a valid mortgage assignment given that the purchase by or assignment of

the original mortgage to Kosterina’s second company was unenforceable under the

Third Restatement of Property and CDC Builders, 151 So. 3d at 479. Before

analyzing whether this case falls under CDC Builders, we clarify the contours of the

standard recognized therein.

      In CDC Builders, 151 So. 3d at 480, a contractor holding junior liens on real

property built under contract appealed from a final summary judgment of foreclosure

                                          5
in favor of the senior lien. The contractor unsuccessfully defended against the

foreclosure and extinguishment of its liens, arguing that the foreclosing entity that

acquired the senior mortgage by assignment was formed and managed by the same

individuals controlling the entity that was the original owner and mortgagor of the

property, and that the assignment had been a strategy by the owner to improve its

development, fail to pay the contractor, and later extinguish any resulting liens. Id.

We found that the evidence created an issue of fact as to whether the same

individuals were behind the entity now foreclosing, and whether, in acquiring the

original mortgage by assignment instead of satisfying it, their intent had been to

defeat the interest of the contractor. Id. We observed:

             The law does not permit a person to borrow money from a
             bank, give the bank a mortgage, incur additional liens and
             junior mortgages on the property, purchase the mortgage
             back from the bank, and then foreclose on the mortgage
             for the primary purpose of eliminating the additional liens
             and junior mortgages.

Id. at 482. In so noting, we referred to the Third Restatement of Property, which

explains:

             When a payment in full is made by a person who is
             primarily responsible for the obligation, but the payor and
             payee agree not to extinguish the mortgage, the payor
             might attempt to claim ownership of the mortgage, either
             under the principle of subrogation or by taking a formal
             assignment of the mortgage from the mortgagee. The
             payor might then purport to foreclose the mortgage against
             the holder of some junior lien or other interest subordinate
             to the mortgage. However, subrogation is inapplicable to

                                          6
            this situation, since one who is primarily responsible for
            an obligation cannot have subrogation upon paying it;
            Indeed, even a formal assignment of the mortgage to the
            payor would confer no power on the payor to foreclose the
            mortgage against junior interests, since doing so would
            unjustly enrich the payor.

Id. at 482-83. The Restatement relevantly recognized the challenge of some courts

when confronted by unusual suits in this context:

            In some cases, a property owner who has paid an
            obligation secured by the owner’s land then brings suit to
            recover the obligation from another person. In some of
            these cases, the owner characterizes the payment as a
            “purchase” of the note and mortgage. Some courts have
            been misled by this characterization and have held that the
            obligation is enforceable if the mortgage has not merged
            into the fee. Because the owner intended to keep the
            interests distinct, these courts have held that the obligation
            is enforceable. As with the other situations described in
            this Comment c, however, the doctrine of merger is
            irrelevant to the issue of enforceability of the obligation. .
            . . When a property owner pays a mortgage debt, the
            owner’s ability to enforce the debt against another is
            determined by the doctrine of subrogation. (1) An owner
            who is primarily liable for an obligation cannot recover
            from anyone: The owner’s payment extinguishes the
            obligation.

Restatement (Third) of Property § 8.5 cmt. c (1997). We observed that “[t]his rule

has been part of Florida law since at least 1932,” and that “Florida has expressly

recognized that this rule holds true even if the borrower obtains and forecloses the

                                          7
mortgage through a corporation that it controls.” CDC Builders, 151 So. 3d at 483.

Appropriate exceptions to the rule have also been recognized. 3

        The rule enunciated in CDC Builders, therefore, is that where payment in full

is made by a person who is primarily responsible for the obligation, but the payor

and payee nevertheless agree not to extinguish that obligation, that same payor may

not claim ownership of the obligation—whether under principles of subrogation or

assignment—or foreclosing on it “against the holder of some junior lien or other

interest subordinate to the mortgage.” 151 So. 3d at 482. “[E]quity will not apply

3
    The Third Restatement of Property relevantly observes:
               In many situations a mortgage obligation is discharged by
               one having a legal duty to do so . . . However, in many
               situations subrogation is appropriate even though the
               subrogee is personally liable on the obligation being paid,
               if that liability is partial or secondary. One example is . . .
               the mortgagor who sells the real estate subject to, or with
               an assumption of, the mortgage debt, with the purchaser
               paying cash equal to the difference between the agreed
               purchase price and the balance owing on the mortgage
               debt. Such a mortgagor, while still personally liable to the
               mortgagee by virtue of having executed the original note
               or other evidence of debt, becomes, as between the
               mortgagor and the grantee, secondarily liable as a surety
               when the transfer occurs . . . The mortgagor may pay the
               debt and be subrogated to the mortgage (whether the
               transfer was with an assumption or was merely “subject
               to” the mortgage) as well as the debt (if the transferee
               assumed the debt).
Restatement (Third) of Property § 7.6 cmt. c (1997).

                                             8
the principle of subrogation, where to do so would deprive a party of a legal right.”

Id. at 483.

      The subsequent mortgagee’s attempts to distinguish CDC Builders are

unavailing. Although CDC Builders involved a contractor holding junior liens and

the unjust enrichment at issue entailed the property owner’s benefit from the

contractor’s work, the general rule applies where the original mortgagor or owner

attempts to later extinguish not only subsequent junior interests, such as contractor

liens, but also any “other interest subordinate to the mortgage.” CDC Builders, 151

So. 3d at 483 (emphasis added). Here, as conceded by the subsequent mortgagee,

Koyfman’s interest is in fee simple subject to the mortgage. Although different from

the contractor’s junior interest in CDC Builders, Koyfman’s is still an interest

equally subject to the mortgage at issue, with vested legal rights the deprivation of

which equity will not allow. Id.

      Because CDC Builders applies, the lower court and subsequent mortgagee’s

reliance on C.T.W. Co.. v. Rivergrove Apartments, Inc., 582 So. 2d 18, 19 (Fla. 2d

DCA 1991), is misplaced. CDC Builders correctly distinguished C.T.W., as in that

case, unlike here, no sufficient evidence existed of identity between the original

borrower, payor, or mortgagor and the subsequent mortgagee assigned the mortgage

instrument and seeking foreclosure. 151 So. 3d at 485.

                                         9
      Here, it was undisputed that there was “substantial identity” between

Kosterina and her first and second companies, through which she purported to

preserve and assign the otherwise extinguished mortgage obligation allegedly

justifying foreclosure below. This gave rise to the reasonable inference that

Kosterina’s preservation of the mortgage was intended to violate the rule adopted in

CDC Builders. The inference was only reinforced by Kosterina’s testimony as to

why she attempted to preserve the mortgage.

      She first answered that she did not know why she preserved and assigned the

mortgage, and it had simply been her attorney’s advice. Subsequently, she explained

that she had intended to prevent the further ruin of her credit, as well as to foreclose

on the property to recover her loss. The first amounted to no more than a conclusory

and evasive answer and, the second, as the trial court noted, lacked any rational basis,

since, having fully paid the balance of her personal obligation, her credit could not

be further ruined on account of satisfied debt. Relevantly, when asked near the end

of trial why her own personal debt was a “loss” that she should recover for by

foreclosing a subordinate interest after her payment of that balance, the following

exchange took place:

             [Counsel]: You’re testifying . . . you’re attempting to
             foreclose out and dispossess [the Subsequent Owner] of
             his property you’re saying it was his obligation and I’m
             asking you at any point prior to the alleged . . . letter where
             was there any one notice to [him] you haven’t paid this for
             five years. Why?

                                           10
             [Kosterina]: How about he never paid for his child support
             for five years? You want this person to pay for that? . . .

Thus, in addition to conclusory and insufficient reasons, Kosterina clearly alluded

to Koyfman’s alleged failure to pay child support as the reason why she devised the

mortgage assignment. This provided clear and undisputed evidence that her primary

purpose in devising the assignment transaction was to wrongfully divest Koyfman

of title already legally vested in him, which fell short of the rule in CDC Builders.

      “While it is true that the plaintiff by substitution ‘stands in the shoes of the

original plaintiff/mortgagee,’ . . . an order of substitution does not create standing.

Rather, the substituted party acquires the standing (if any) of the original plaintiff at

the time the case was filed . . . [and] must prove its own standing.” Sandefur v. RVS

Cap., LLC, 183 So. 3d 1258, 1260 (Fla. 4th DCA 2016) (quoting Miller v. Kondaur

Cap. Corp., 91 So. 3d 218, 219 (Fla. 4th DCA 2012)). Here, the rule recognized in

CDC Builders precluded the assignment from conferring any power on the assignee

to foreclose against the other interests subordinate to the mortgage. Kosterina’s

second company, thus, was legally estopped from foreclosing on the mortgage. The

subsequent mortgagee could not, by purporting to purchase the defective

assignment, exercise a right greater than that which it received. Thus, not only was

it also estopped from doing so, but it simultaneously lacked standing to begin with,

as it relied on an unenforceable mortgage.

                                           11
      Because the trial court erred in entering final judgment of foreclosure in favor

of the subsequent mortgagee, we vacate the order, as well as the denial of Koyfman’s

counterclaim to quiet title. We remand for entry of judgment of dismissal of the

subsequent mortgagee’s complaint, for entry of judgment in favor of Koyfman on

his counterclaim to quiet title, and for any other proceedings consistent with this

opinion.

      Reversed and remanded with instructions.

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