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Kenneth A. Frank and Angela Dipilato v. Ocean 4660

November 18, 2011

KENNETH A. FRANK AND ANGELA DIPILATO, PLAINTIFFS,
v.
OCEAN 4660, LLC, ET AL., DEFENDANTS.



ORDER GRANTING EMERGENCY MOTION TO DISCHARGE LIS PENDENS

THIS CAUSE is before the Court on Defendants 8444 Investments, LLC ("8444 Investments") and 6323 Investments, LLC's ("6323 Investments") Emergency Motion to Discharge Lis Pendens [DE 134] ("Motion"). The Court has carefully considered the Motion and accompanying Memorandum of Law [DE 135 at 1-12] ("Memorandum"), and the record in this case, and is otherwise fully advised in the premises.*fn1

I. BACKGROUND

On September 13, 2011, Plaintiffs Kenneth A. Frank and Angela DiPilato, acting pro se, filed this action against 94 defendants. See Complaint [DE 1]. The Complaint brings the following claims: (1) violations of the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18U.S.C. § 1962, et. seq.,1964(c), and 1965(a)-(b); (2) violation of the Hobbs Act, 18 U.S.C. § 1951 et. seq.; (3) Declaratory Judgment under 28 U.S.C. § 2201; (4) violations of the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), Fla. Stat. § 501.203, et. seq.; (5) violations of Florida's Civil RICO Act, Fla. Stat. § 772.101, et. seq.; (6) conversion; (7) civil theft; (8) unjust enrichment; (9) temporary and permanent injunctive relief; (10) imposition of equitable liens; and (11) foreclosure of equitable Iiens. Compl. ¶ 1.

On November 17, 2011, Defendants 8444 Investments and 6323 Investments filed the instant motion to discharge a lis pendens and an equitable lien on real property known as the Radisson Hotel Orlando and Orlando Metropolitan Resort located at 8444 International Drive, Orlando, Florida 32819 (the "8444 Property") and the Orlando Metropolitan Express located at 6323 International Drive, Orlando, Florida 32819 (the "6323 Property"). According to the Affidavit of Hanna Karcho, the sole member of both 8444 Investments and 6323 Investments, Plaintiffs filed and recorded a "Notice of Claim of Lien" against the 8444 Property and the 6323 Property, with the Orange County Records Office on October 10, 2011. Affidavit of Owner [DE 135 at 17-20] ("Karcho Affidavit") ¶¶ 1, 2, 9; see also Notice of Claim of Lien [DE 135-2 at 33-36]. The Karcho Affidavit also represents that Plaintiffs filed a "Notice of Pendency" (the "lis pendens") relating to this action on October 10, 2011. Karcho Affidavit ¶ 10; see also Notice of Pendency [DE 135-2 at 37-41].

Defendants 8444 Investments and 6323 secured financing for their respective properties from Intervest National Bank, and as security for the loans, granted a security interest through a mortgage. Id. ¶¶ 5-6. Both mortgages provide, in pertinent part, as follows:

If any mechanic's lien and/or materialman's lien is filed against the Premises on or after the date of this Mortgage, or any other lien or encumbrance is filed against the Mortgaged Property, . . . Mortgagor shall cause such lien or encumbrance to be discharged of record by payment, bonding or otherwise within thirty (30) days after the Mortgagor is given notice thereof. Failure to so discharge of record any such lien or encumbrance within such thirty (30) day period shall be an event of default under this Mortgage, and shall entitle the Mortgagee, at Mortgagee's option and without further notice or cure period, to exercise any and all of the remedies of Mortgagee . .

Id. ¶ 7; Mortgages [DE's 135 at 31-50, 135-1 at 1-15, 135-1 at 16-25, 135-2 at 1-24] at 16 § 11. The lis pendens and equitable lien constitute encumbrances on the subject properties, and could be utilized by the mortgagees to declare a default. Karcho Affidavit ¶ 11. As a result of such a default, Defendants 8444 Investments and 6323 Investments "will be exposed to foreclosure, loss of property, increased interest and related damages." Id. ¶ 12. Thus, Defendants 8444 Investments and 6323 Investments seek an Order from this Court discharging the lis pendens and equitable lien. In the alternative, Defendants 8444 Investments and 6323 Investments request that the Court compel Plaintiffs to post a bond of $24,882,281 because of the potential damages that Defendants 8444 Investments and 6323 Investments would face if the liens forced a breach of the underlying mortgages.

II. MOTION TO DISCHARGE LIENS

A federal court has the authority to utilize Florida Statute § 48.23(3) to discharge a lien "when the pending pleading does not show that the action is founded on a duly recorded instrument or on a lien claimed under Part I of Chapter 713 [construction liens] or when the action no longer affects the subject property." Fla. Stat. § 48.23(3). In Beefy King Int'l, Inc. v. Veigle, 464 F.2d 1102, 1104 (5th Cir. 1972),*fn2 the Court of Appeals affirmed the authority of a federal district court to discharge a lis pendens under Florida law because the court "determined that the suit does not directly affect the real property." Under Florida law, "the proponent of a notice of lis pendens has the burden of proof to show a fair nexus between the property and the dispute." Med. Facilities Dev., Inc. v. Little Arch Creek Props., Inc., 675 So. 2d 915, 917 (Fla. 1996) (citing Chiusolo v. Kennedy, 614 So. 2d 491 (Fla. 1993)).

A. Authority to Use § 48.23(3) to Discharge Liens

The Court finds that it has authority to use § 48.23(3) to discharge the instant lis pendens and equitable lien because the pending Complaint does not show that the action is founded on a duly recorded instrument or on a construction lien, and the action does not affect the subject properties. First, for a recorded instrument to provide the predicate for a lis pendens as of right, it must put a good faith purchaser on notice that there is a cloud on the title. See Ross v. Breder, 528 So. 2d 64, 65 (Fla. Dist. Ct. App. 1988) (finding the fact that a partnership agreement and warranty deed to the subject property did not place the matter outside the purview of § 48.23(3) because "the partnership agreement and deed would not put a good faith purchaser on notice that there is a cloud on the title.") (citations omitted). Nothing in the Complaint references any such recorded instrument. Second, the Complaint also does not reference any type of construction lien on the properties at issue.

Finally, with respect to the relation to the subject properties, "[a] complaint which will not support a claim against the specific property at issue cannot provide a basis for tying it up by a filing of notice of lis pendens." Lake Placid Holding Co. v. Paparone, 414 So. 2d 564, 566 (Fla. Dist. Ct. App. 1982). "A cause of action for equitable relief such as a lis pendens does not arise simply because a promise to pay is subsequently broken." Id. "When the primary purpose of a lawsuit is to recover money damages and the action does not directly affect the title to or the right of possession of real property, the filing of a notice of lis pendens is not authorized." DeGuzman v. Balsini, 930 So. 2d 752, 755 (Fla. Dist. Ct. App. 2006). Further, under Florida law, an equitable lien may be imposed on real property when (1) a written contract evidences an intent to bind the property as security, or (2) the circumstances involve fraud or other misrepresentations involving the property subject to the lis pendens. Hallmark Mfg., Inc. v. Lujack Const. Co., Inc., 372 So. 2d 520, 522 (Fla. Dist. Ct. App. 1979). Neither situation arises here. Thus, the pending action does not affect the subject properties within the meaning of § 48.23(3).

Plaintiffs therefore cannot "show a fair nexus between the property and the dispute." Little Arch Creek Properties, 675 So. 2d at 917. Consequently, because this action is not founded upon a duly recorded instrument or a construction lien, and because the action does not affect the subject property within the meaning of ยง ...


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