       Third District Court of Appeal
                               State of Florida

                        Opinion filed November 16, 2016.
         Not final until disposition of timely filed motion for rehearing.

                               ________________

                               No. 3D15-1575
                         Lower Tribunal No. 14-201-K
                             ________________


                               Norma Barton,
                                    Appellant,

                                        vs.

   MetroJax Property Holdings, LLC, a Nevada limited liability
                       company, et al.,
                                   Appellees.

                       ____________________________


   MetroJax Property Holdings, LLC, a Nevada limited liability
                          company,
                                Cross-Appellant,

                                        vs.

      The City of Key West, a Florida municipal corporation,
                                 Cross-Appellee.


      An Appeal from the Circuit Court for Monroe County, Donald C. Evans,
Senior Judge, and Mark Jones, Judge.
      Highsmith & Van Loon, P.A., and David Van Loon and Kasey W.
Liberatore, for appellant.

      McGlinchey Stafford, and Manuel Farach (Fort Lauderdale), for
appellee/cross-appellant, MetroJax Property Holdings, LLC.

      Shawn D. Smith, City Attorney, and George B. Wallace, Assistant City
Attorney, for appellee/cross-appellee, The City of Key West.


Before WELLS and LOGUE, JJ., and LEVY, Senior Judge.

                            Partial Confession of Error

      PER CURIAM.

      Norma Barton (“Barton”) appeals and MetroJax Property Holdings, LLC

(“MetroJax”) cross-appeals from a final judgment of foreclosure. We affirm in

part, reverse in part, and remand for entry of a final judgment consistent with this

opinion.

      On October 22, 2003, Barton executed a note and mortgage in favor of

Bayrock Mortgage Company (“Bayrock”), and the mortgage was recorded on

November 5, 2003. The note was assigned to Wells Fargo Bank, N.A. (“Wells

Fargo”) on October 28, 2003, but the assignment of the mortgage was not

recorded.

      In July and September 2011, The City of Key West (“the City”) recorded

code compliance liens against Barton. Thereafter, in January 2013, an affidavit of

lost or missing assignment was recorded reflecting the assignment of the mortgage


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from Bayrock to Wells Fargo. Eventually, in March 2013, the note and mortgage

were assigned to MetroJax.

        In March 2014, MetroJax filed a mortgage foreclosure action against Barton

and the City, alleging that MetroJax was the current owner and holder of the

promissory note and mortgage originally executed by Barton in favor of Bayrock.

In addition, MetroJax alleged that the City may claim an interest in the real

property based on the City’s recorded liens, but the mortgage has priority over the

City’s liens.    In response, the City filed its answer and affirmative defenses,

asserting that because an assignment of the mortgage from Bayrock to Wells Fargo

was not recorded prior to the City’s recording of its liens, based on the application

of section 701.02(1) of the Florida Statutes,1 the City’s liens were superior to the

mortgage, even though the mortgage was recorded first.

        Following a bench trial, the trial court entered a final judgment foreclosing

MetroJax’s mortgage. The trial court, however, ruled that “because Wells Fargo

failed to comply with the clear language of F.S. 701.02(1),” the City’s code

1   Section 701.02(1), Florida Statutes (2011), provides:
         Assignment not effectual against creditors unless recorded and
         indicated in title of document; applicability.—
                (1) An assignment of a mortgage upon real property or of any
         interest therein, is not good or effectual in law or equity, against
         creditors or subsequent purchasers, for a valuable consideration, and
         without notice, unless the assignment is contained in a document that,
         in its title, indicates an assignment of mortgage and is recorded
         according to law.


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compliance liens are superior to MetroJax’s lien on the property. Barton’s appeal

and MetroJax’s cross-appeal followed.

         Without any further discussion, we affirm the portion of the final judgment

foreclosing MetroJax’s mortgage. However, based upon MetroJax’s proper partial

confession of error, we reverse the portion of the final judgment awarding

attorney’s fees and costs to MetroJax and remand for the entry of an amended final

judgment reflecting the correct amount due from Barton to MetroJax.

         In its cross-appeal, MetroJax contends that the trial court erred by holding

that the City’s later-recorded code compliance liens have priority over MetroJax’s

earlier-recorded mortgage based on the application of section 701.02(1). We

agree.

         In determining the priority of interests in real property, Florida is a “notice”

state. See § 695.01(1), Fla. Stat. (2013) (“No conveyance, transfer, or mortgage of

real property, or of any interest therein, . . . shall be good and effectual in law or

equity against creditors or subsequent purchasers for a valuable consideration and

without notice, unless the same be recorded according to law . . . .”); Argent

Mortg. Co., LLC v. Wachovia Bank, N.A., 52 So. 3d 796, 800 (Fla. 5th DCA

2010) (rejecting argument that Florida was converted from a “notice” state to a

“race-notice” state based on the addition of the following language in 1967 to

section 695.11, titled “Instruments deemed to be recorded from time of filing”:



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“The sequence of such official numbers shall determine the priority of recordation.

An instrument bearing the lower number in the then-current series of numbers

shall have priority over any instrument bearing a higher number in the same

series.”) (emphasis added); see also City of Palm Bay v. Wells Fargo Bank, N.A.,

114 So. 3d 924, 927 n.1 (2013) (providing that “[a] thoughtful discussion of the

operation of Florida law in determining priority of interests in real property is

contained in Argent Mortgage”). However, the Florida Legislature has enacted

statutes giving priority to “certain liens over the priority established under chapter

695.” City of Palm Bay, 114 So. 3d at 928 (noting that section 197.122(1) of the

Florida Statutes provides that “[a]ll taxes imposed pursuant to the State

Constitution and laws of this state shall be a first lien, superior to all other liens”).

      In the instant case, prior to recording its code compliance liens in 2011, the

City had constructive notice of the earlier-recorded mortgage executed by Barton

in favor of Bayrock in 2003. See Regions Bank v. Deluca, 97 So. 3d 879, 883 (Fla.

2d DCA 2012) (“Constructive notice is a legal inference, and it is imputed to

creditors and subsequent purchasers by virtue of any document filed in the

grantor/grantee index—the official records.”) (quoting Dunn v. Stack, 418 So. 2d

345, 349 (Fla. 1st DCA 1982), quashed on other grounds, 444 So. 2d 935

(Fla.1984)). Therefore, based on section 695.01(1), the earlier-recorded Bayrock

mortgage, which is now owned by MetroJax, is superior to the City’s later-



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recorded code compliance liens. However, the City argued below, and the trial

court found, that the earlier-recorded mortgage lost its priority based on the

application of section 701.02(1) solely because an assignment of the mortgage

from Bayrock to Wells Fargo was not recorded prior to the City’s recording of its

liens. The City’s and the trial court’s reliance on section 701.02(1) is misplaced.

      In JP Morgan Chase v. New Millennial, LC, 6 So. 3d 681 (Fla. 2d DCA

2009), our sister court addressed the application of section 701.02(1) as it relates to

the failure to record an assignment of a mortgage. In JP Morgan, Mr. Jahren

obtained two mortgages from AmSouth when he purchased real property in 2000.

In 2004, AmSouth assigned these mortgages to JP Morgan, but the assignments

were not recorded.

      In 2006, Mr. Jahren sold his real property to New Millennial, who executed

a note and mortgage in favor of BB & T. Based on the closing agent’s error, the

AmSouth mortgages, which at the time were assigned to JP Morgan, were never

satisfied. Shortly thereafter, the two mortgages went into default, and JP Morgan,

as AmSouth’s assignee, filed a foreclosure action against several defendants,

including New Millennial and BB & T. New Millennial and BB & T defended the

foreclosure action “by arguing that the mortgages were ineffective and

unenforceable against them because JP Morgan had not recorded the assignments

received from AmSouth, as required by section 701.02, Florida Statutes (2004).”



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Id. at 683. Both sides filed motions for summary judgment.

      The trial court granted New Millennial and BB & T’s motion for summary

judgment, finding that New Millennial was protected by section 701.02 because it

is a subsequent purchaser for valuable consideration who was without notice of the

assignments. The trial court also determined that BB & T was protected by section

701.02 because it is a subsequent creditor for valuable consideration who was

without notice of the assignments.

      On appeal, the Second District Court of Appeal reversed the summary

judgment granted in favor of New Millennial and BB & T, concluding that the trial

court misapplied section 701.02(1). In doing so, the Second District held that

section 701.02(1)

      only applies to estop an earlier purchaser/assignee of a mortgagee—
      the person or entity that loaned the money involved in the mortgage
      and obtained a security interest on the piece of property—from
      claiming priority in the same mortgage chain as against a subsequent
      assignee of the same mortgage when the earlier mortgagee fails to
      record the earlier assignment of the mortgage. In other words, if the
      original mortgagee assigns the mortgage to Entity A and Entity A fails
      to record that assignment, Entity A cannot claim priority over a latter
      assignee of the same mortgage (Entity B).

In reaching this conclusion, the Second District relied on Kapila v. Atlantic

Mortgage & Investments Corp. (In re Halabi), 184 F.3d 1335 (11th Cir. 1999),

which held that section “701.02’s recording requirement is applicable only to (and

enforceable by) competing creditors or subsequent bona fide purchasers of the



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mortgagee, not by the mortgagor.” Id. at 1338 (emphasis added in JP Morgan).

The Second District also noted that in In re Halabi, 184 F.3d at 1338, the Eleventh

Circuit stated:

      The recording requirement is not intended to protect one claiming
      under a mortgagor-against whose property there is already a perfected
      mortgage-with respect to subsequent assignments of the mortgage.
      The mortgagor has actual notice of the original mortgage, and anyone
      claiming under the mortgagor has constructive notice if the mortgage
      is recorded. From the point of view of the mortgagor or someone
      standing in his shoes, a subsequent assignment of the mortgagee’s
      interest-whether recorded or not-does not change the nature of the
      interest of the mortgagor or someone claiming under him. Nor should
      a failure to record any subsequent assignment afford the mortgagor or
      [anyone] standing in his shoes an opportunity to avoid the mortgage.

(emphasis added and alteration supplied in JP Morgan).

      As stated earlier, it is undisputed that the City had, at the very least,

constructive notice of the earlier-recorded Bayrock mortgage when it recorded its

code compliance liens against Barton. As set forth in JP Morgan, the purpose of

section 701.02(1)’s recording requirement is to protect assignees of mortgages, not

creditors of borrowers or others who place liens on the real property after the

mortgage has been recorded. The failure to record an assignment of the mortgage

from Bayrock to Wells Fargo prior to the City’s recording of the code compliance

liens does not give the City’s liens priority over the earlier-recorded mortgage. See

Bradenburg v. Residential Credit Sols., Inc., 137 So. 3d 604, 605 (Fla. 4th DCA

2014) (“[T]he failure to record an assignment [of the mortgage] does not render it



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invalid but simply affects the rights/priority of the assignee mortgagees against

other assignees.”) (citing § 701.02, Fla. Stat. (2013); JP Morgan, 6 So. 3d at 684-

86). As stated in JP Morgan, “[a]ny other interpretation of section 701.02 would

turn well-established secured transaction principles on their heads[.]” Id. at 685.

Therefore, we reverse and remand for entry of an amended final judgment of

foreclosure that reflects that MetroJax’s earlier-recorded mortgage has priority

over the City’s later-recorded code compliance liens.

      Affirmed in part, reversed in part, and remanded for entry of an amended

final judgment of foreclosure consistent with this opinion.




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