Case: 17-15513 Date Filed: 05/25/2018 Page: 1 of 7
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________
No. 17-15513 Non-Argument Calendar ________________________
D.C. Docket No. 0:16-cv-61911-UU
U.S. BANK NATIONAL ASSOCIATION, as Trustee successor in interest to Bank of America, National Association as Trustee as successor by merger to LaSalle Bank and WAMU Mortgage Pass Through Certificates Series 2007-HYS Trust,
Plaintiff - Appellant,
versus
HANS HENNING LARSEN, SHARON JANICE WALKER, VILLAS OF PEMBROKE LAKES ASSOCIATION, INC., UNKNOWN TENANTS, NOVA PROPERTIES, LLC, et al.,
Defendants - Appellees.
________________________
Appeal from the United States District Court for the Southern District of Florida ________________________
(May 25, 2018) Case: 17-15513 Date Filed: 05/25/2018 Page: 2 of 7
Before MARCUS, MARTIN, and ROSENBAUM, Circuit Judges.
PER CURIAM:
U.S. Bank National Association appeals the grant of summary judgment in
favor of Max and Smadar Hefter in its action relating to a parcel of real property
owned by the Hefters. U.S. Bank argues the district court erred in holding the
doctrines of merger and res judicata barred it from foreclosing on the Hefters’
parcel, when that parcel’s legal description was left off of a mortgage already
foreclosed upon by U.S. Bank. After careful review, we affirm.
I.
This case is about two parcels of land in Florida, referred to as the “Vacant
Parcel” and the “Improved Parcel.” The Vacant Parcel has no structures, while the
Improved Parcel has a house and a barn on it. In 2004, Hans Larsen and his wife,
Sharon Walker, purchased the Improved Parcel. In 2005, Larsen alone purchased
the Vacant Parcel. Then, Larsen and Walker mortgaged both properties in the
amount of $980,000. In 2007, Larsen and Walker refinanced the loan, executing a
note and new mortgage in the amount of $1.3 million. U.S. Bank’s predecessor
trustee held both the note and the new mortgage.
The old mortgage included the legal descriptions of both the Vacant and
Improved Parcels. But the new mortgage listed only the legal description of the
Vacant Parcel. It is true that the new mortgage contained some ambiguities as to
2 Case: 17-15513 Date Filed: 05/25/2018 Page: 3 of 7
what property it covered, containing the parcel number of the Improved Parcel (not
the Vacant Parcel), and an address that served both parcels. The parties to the new
mortgage all agree that it was intended to encumber both the Vacant and Improved
Parcels.
In July 2008, Larsen and Walker executed a quitclaim deed conveying the
Improved Parcel to Larsen alone. Larsen then defaulted on the mortgage. As a
result, U.S. Bank’s predecessor trustee filed a state court action to foreclose the
mortgage. The predecessor trustee also filed a notice of lis pendens, which
included the legal description of only the Vacant Parcel, matching the legal
description in the mortgage. In March 2014, U.S. Bank entered into a settlement
agreement with Larsen, who consented to a final judgment of foreclosure with a
waiver of deficiency. In April 2014, a judgment of foreclosure was entered in
favor of U.S. Bank for $1,853,687.49. In September 2014, U.S. Bank got a title
certificate that included the legal description of only the Vacant Parcel.
In November 2015, Larsen conveyed the Improved Parcel to Nova
Properties, LLC for $25,000. The Hefters are the sole managing members of Nova
Properties. Larsen said he told the Hefters that the Improved Parcel was
encumbered and belonged to U.S. Bank before transferring it. The Hefters deny
being told about any potential encumbrance. In December 2015, Nova Properties
conveyed the Improved Parcel to the Hefters. U.S. Bank introduced expert
3 Case: 17-15513 Date Filed: 05/25/2018 Page: 4 of 7
testimony suggesting that fair market value of the Improved Parcel at the time it
was sold to Nova Properties was $460,000—close to 20 times what Nova
Properties paid for it.
At some point, U.S. Bank realized it only had title to the Vacant Parcel,
which its expert estimated to have fair market value of merely $48,000. But U.S.
Bank did not seek to modify or vacate the state court foreclosure judgment.
Instead, in August 2016, U.S. Bank brought suit against the Hefters in federal
court.1 U.S. Bank sought (1) declaratory relief that it holds a valid enforceable
mortgage against the Improved Parcel; (2) reformation of the mortgage to include
the legal description of the Improved Parcel; and (3) foreclosure of the mortgage
against the Improved Parcel. In the alternative, U.S. Bank sought foreclosure of an
equitable lien and to set aside the settlement agreement with Larsen.
On October 13, 2017, the Hefters moved for summary judgment. The
district court granted the Hefters’ motion for summary judgment, determining that
U.S. Bank’s claims were barred by the doctrines of merger and res judicata. This
appeal followed.
II.
We review de novo a district court’s grant of summary judgment. Edward
Lewis Tobinick, MD v. Novella, 848 F.3d 935, 943 (11th Cir. 2017). The grant of
1 U.S. Bank initially brought suit against a number of other parties as well, but only claims against the Hefters remain for purposes of this appeal. 4 Case: 17-15513 Date Filed: 05/25/2018 Page: 5 of 7
summary judgment is appropriate when “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). Questions of law, including the application of the doctrines of
merger and res judicata, are reviewed de novo. See Batchelor-Robjohns v. United
States, 788 F.3d 1280, 1284 (11th Cir. 2015).
III.
Under Florida law, the doctrine of merger provides that “the cause of action
on the debt and damages recoverable on it merge into any judgment entered on the
cause of action.” Whitehurst v. Camp, 699 So. 2d 679, 682 (Fla. 1997) (per
curiam). After a foreclosure, then, “[t]he mortgage is merged into the judgment, is
thereby extinguished, and loses its identity.” Nack Holdings, LLC v. Kalb, 13 So.
3d 92, 94 n.2 (Fla. 3d DCA 2009) (quotation omitted). Once a mortgage has
merged into a judgment, no further action can be taken on the mortgage unless the
foreclosure judgment is vacated. Aluia v. Dyck-O’Neal, Inc., 205 So. 3d 768, 775
n.4 (Fla. 2d DCA 2016).
The district court determined that the doctrine of merger barred U.S. Bank’s
claims. Because the mortgage was extinguished when the state court judgment
became final, the district court found that U.S. Bank could not seek modification of
the mortgage by way of a federal court action. U.S. Bank argues that merger does
not foreclose its claims because Florida has long recognized that when a mortgage
5 Case: 17-15513 Date Filed: 05/25/2018 Page: 6 of 7
covers multiple parcels, the mortgage holder is not required to foreclose on all the
parcels at once. U.S. Bank says the mortgage should be read to encumber both the
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Case: 17-15513 Date Filed: 05/25/2018 Page: 1 of 7
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________
No. 17-15513 Non-Argument Calendar ________________________
D.C. Docket No. 0:16-cv-61911-UU
U.S. BANK NATIONAL ASSOCIATION, as Trustee successor in interest to Bank of America, National Association as Trustee as successor by merger to LaSalle Bank and WAMU Mortgage Pass Through Certificates Series 2007-HYS Trust,
Plaintiff - Appellant,
versus
HANS HENNING LARSEN, SHARON JANICE WALKER, VILLAS OF PEMBROKE LAKES ASSOCIATION, INC., UNKNOWN TENANTS, NOVA PROPERTIES, LLC, et al.,
Defendants - Appellees.
________________________
Appeal from the United States District Court for the Southern District of Florida ________________________
(May 25, 2018) Case: 17-15513 Date Filed: 05/25/2018 Page: 2 of 7
Before MARCUS, MARTIN, and ROSENBAUM, Circuit Judges.
PER CURIAM:
U.S. Bank National Association appeals the grant of summary judgment in
favor of Max and Smadar Hefter in its action relating to a parcel of real property
owned by the Hefters. U.S. Bank argues the district court erred in holding the
doctrines of merger and res judicata barred it from foreclosing on the Hefters’
parcel, when that parcel’s legal description was left off of a mortgage already
foreclosed upon by U.S. Bank. After careful review, we affirm.
I.
This case is about two parcels of land in Florida, referred to as the “Vacant
Parcel” and the “Improved Parcel.” The Vacant Parcel has no structures, while the
Improved Parcel has a house and a barn on it. In 2004, Hans Larsen and his wife,
Sharon Walker, purchased the Improved Parcel. In 2005, Larsen alone purchased
the Vacant Parcel. Then, Larsen and Walker mortgaged both properties in the
amount of $980,000. In 2007, Larsen and Walker refinanced the loan, executing a
note and new mortgage in the amount of $1.3 million. U.S. Bank’s predecessor
trustee held both the note and the new mortgage.
The old mortgage included the legal descriptions of both the Vacant and
Improved Parcels. But the new mortgage listed only the legal description of the
Vacant Parcel. It is true that the new mortgage contained some ambiguities as to
2 Case: 17-15513 Date Filed: 05/25/2018 Page: 3 of 7
what property it covered, containing the parcel number of the Improved Parcel (not
the Vacant Parcel), and an address that served both parcels. The parties to the new
mortgage all agree that it was intended to encumber both the Vacant and Improved
Parcels.
In July 2008, Larsen and Walker executed a quitclaim deed conveying the
Improved Parcel to Larsen alone. Larsen then defaulted on the mortgage. As a
result, U.S. Bank’s predecessor trustee filed a state court action to foreclose the
mortgage. The predecessor trustee also filed a notice of lis pendens, which
included the legal description of only the Vacant Parcel, matching the legal
description in the mortgage. In March 2014, U.S. Bank entered into a settlement
agreement with Larsen, who consented to a final judgment of foreclosure with a
waiver of deficiency. In April 2014, a judgment of foreclosure was entered in
favor of U.S. Bank for $1,853,687.49. In September 2014, U.S. Bank got a title
certificate that included the legal description of only the Vacant Parcel.
In November 2015, Larsen conveyed the Improved Parcel to Nova
Properties, LLC for $25,000. The Hefters are the sole managing members of Nova
Properties. Larsen said he told the Hefters that the Improved Parcel was
encumbered and belonged to U.S. Bank before transferring it. The Hefters deny
being told about any potential encumbrance. In December 2015, Nova Properties
conveyed the Improved Parcel to the Hefters. U.S. Bank introduced expert
3 Case: 17-15513 Date Filed: 05/25/2018 Page: 4 of 7
testimony suggesting that fair market value of the Improved Parcel at the time it
was sold to Nova Properties was $460,000—close to 20 times what Nova
Properties paid for it.
At some point, U.S. Bank realized it only had title to the Vacant Parcel,
which its expert estimated to have fair market value of merely $48,000. But U.S.
Bank did not seek to modify or vacate the state court foreclosure judgment.
Instead, in August 2016, U.S. Bank brought suit against the Hefters in federal
court.1 U.S. Bank sought (1) declaratory relief that it holds a valid enforceable
mortgage against the Improved Parcel; (2) reformation of the mortgage to include
the legal description of the Improved Parcel; and (3) foreclosure of the mortgage
against the Improved Parcel. In the alternative, U.S. Bank sought foreclosure of an
equitable lien and to set aside the settlement agreement with Larsen.
On October 13, 2017, the Hefters moved for summary judgment. The
district court granted the Hefters’ motion for summary judgment, determining that
U.S. Bank’s claims were barred by the doctrines of merger and res judicata. This
appeal followed.
II.
We review de novo a district court’s grant of summary judgment. Edward
Lewis Tobinick, MD v. Novella, 848 F.3d 935, 943 (11th Cir. 2017). The grant of
1 U.S. Bank initially brought suit against a number of other parties as well, but only claims against the Hefters remain for purposes of this appeal. 4 Case: 17-15513 Date Filed: 05/25/2018 Page: 5 of 7
summary judgment is appropriate when “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). Questions of law, including the application of the doctrines of
merger and res judicata, are reviewed de novo. See Batchelor-Robjohns v. United
States, 788 F.3d 1280, 1284 (11th Cir. 2015).
III.
Under Florida law, the doctrine of merger provides that “the cause of action
on the debt and damages recoverable on it merge into any judgment entered on the
cause of action.” Whitehurst v. Camp, 699 So. 2d 679, 682 (Fla. 1997) (per
curiam). After a foreclosure, then, “[t]he mortgage is merged into the judgment, is
thereby extinguished, and loses its identity.” Nack Holdings, LLC v. Kalb, 13 So.
3d 92, 94 n.2 (Fla. 3d DCA 2009) (quotation omitted). Once a mortgage has
merged into a judgment, no further action can be taken on the mortgage unless the
foreclosure judgment is vacated. Aluia v. Dyck-O’Neal, Inc., 205 So. 3d 768, 775
n.4 (Fla. 2d DCA 2016).
The district court determined that the doctrine of merger barred U.S. Bank’s
claims. Because the mortgage was extinguished when the state court judgment
became final, the district court found that U.S. Bank could not seek modification of
the mortgage by way of a federal court action. U.S. Bank argues that merger does
not foreclose its claims because Florida has long recognized that when a mortgage
5 Case: 17-15513 Date Filed: 05/25/2018 Page: 6 of 7
covers multiple parcels, the mortgage holder is not required to foreclose on all the
parcels at once. U.S. Bank says the mortgage should be read to encumber both the
Vacant Parcel and the Improved Parcel, and that its previous decision to foreclose
on the Vacant Parcel should not prevent it from now foreclosing on the Improved
Parcel. This argument fails.
The doctrine of merger clearly prohibits a federal action by U.S. Bank to
correct an error in the legal description of the property encumbered by the already-
foreclosed-upon mortgage. We find Lucas v. Barnett Bank of Lee County, 705 So.
2d 115 (Fla. 2d DCA 1998), to be persuasive on this point. In that case, the court
wrote:
When a mortgage contains an incorrect legal description, a court may correct the mistake before foreclosure. If, however, the mistaken legal description is not corrected before final judgment of foreclosure, and the mistake is carried into the advertisement for sale and the foreclosure deed, a court cannot reform the mistake in the deed and judgment; rather, the foreclosure process must begin anew.
Id. at 116. To the extent U.S. Bank seeks reformation of the now-extinguished
mortgage, first, “the deed to the property must be canceled, and the
original foreclosure judgment set aside, such that the parties are returned to their
original status.” Id.
In an attempt to avoid this result, U.S. Bank seems to argue it is not seeking
reformation of the mortgage but instead a declaration that the mortgage always
should have been read to cover both parcels. In support, U.S. Bank cites a number 6 Case: 17-15513 Date Filed: 05/25/2018 Page: 7 of 7
of cases involving mortgages covering multiple parcels or involving multiple
lienholders, in which Florida courts allowed foreclosures to be brought in separate,
sequential actions. But it is not obvious from the face of U.S. Bank’s mortgage
that it was intended to encumber two separate parcels. The mortgage contained the
legal description of one parcel: the Vacant Parcel. And while U.S. Bank points to
some ambiguities in the mortgage documents that could have alerted a close reader
to an error in the legal description, U.S. Bank did not raise those ambiguities with
the state court. In fact, the title certificate issued to U.S. Bank mirrored the legal
description in U.S. Bank’s mortgage. This effectively resolved any ambiguity
about what property the mortgage encumbered in favor of what was included in the
legal description. To the extent U.S. Bank’s mortgage contained an erroneous
legal description, U.S. Bank should have raised this issue with the state court
before the final judgment of foreclosure, or through a motion to vacate that
judgment. See id.
The district court was correct in holding that the doctrine of merger bars
U.S. Bank’s claims seeking to reopen proceedings on a mortgage that has been
merged in its entirety into a judgment. We do not therefore reach that court’s
alternate holding that U.S. Bank’s claims were also barred by the doctrine of res
judicata.
AFFIRMED.