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Green Emerald Homes, LLC v. Residential Credit Opportunities Trust

Florida Court of Appeals, Second District

June 27, 2018

GREEN EMERALD HOMES, LLC, Appellant,
v.
RESIDENTIAL CREDIT OPPORTUNITIES TRUST; JOHN DOE OR ANY OTHER PERSON IN POSSESSION; and MAGNOLIA PARK AT RIVERVIEW HOMEOWNERS ASSOCIATION, INC., Appellees.

         NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED

          Appeal from the Circuit Court for Hillsborough County; Richard A. Nielsen, Judge.

          Brennan Grogan of Levine Law Group, Palm Beach Gardens, for Appellant.

          Melisa Manganelli of Law Offices of Mandel, Manganelli & Leider, P.A., Boca Raton, for Appellee Residential Credit Opportunities Trust.

          No appearance for remaining Appellees.

          BLACK, JUDGE.

         Green Emerald Homes, LLC, challenges the order granting Residential Credit Opportunities Trust's motion to sequester rents pursuant to section 697.07, Florida Statutes (2017). The order requires that Green Emerald Homes-as title owner to property which is the subject of Residential Credit's foreclosure action-deposit rents collected on the property into the trust account of Residential Credit's attorneys pending resolution of the foreclosure action. We reverse.

         In 2008, three individuals-Jonathan Orjuela, Yury Tatiana Mesa Diaz, and Michael Arjuela (the borrowers)-executed a promissory note and mortgage in favor of CTX Mortgage Company, LLC. The mortgage contains an assignment of rents provision and was recorded in the public records of Hillsborough County in March 2008.

         In June 2014, as the result of a junior lienholder foreclosure action instituted by Magnolia Park at Riverview Home Owners Association, Inc., Green Emerald Homes purchased the property and was issued a certificate of title. In September 2014, Residential Credit was assigned the note and mortgage, becoming the senior lienholder.[1] One month later, Residential Credit filed a foreclosure action, naming Green Emerald Homes, Magnolia Park, and unknown tenants as defendants.[2]In April 2017, after issuing "demand for rents" letters to Green Emerald Homes and the borrowers but not receiving those rents, Residential Credit filed a "Motion to Sequester Earnings, Revenues, Rents, Issues, Profits, and Incomes," relying on section 697.07 and the terms of the mortgage. The motion sought an order directing any and all defendants, including specifically Green Emerald Homes, to deposit "all earnings, revenues, rents, issues, profits and income earned and derived from the property at issue."

         Following a hearing, the trial court granted Residential Credit's motion and ordered Green Emerald Homes to file a copy of any rental agreements to which it was a party for 2017 and to deposit into the trust account of Residential Credit's attorneys any rents collected from March 2017 forward. The order also required that any rents due but not previously paid to Green Emerald Homes by renters of the property be tendered by the renters to Residential Credit's attorneys for deposit into their trust account. We conclude that the trial court erred in granting the motion to sequester rents.[3]

         The mortgage executed by the borrowers contains the following assignment of rents provision:

Borrower unconditionally assigns and transfers to Lender all of the rents and revenues of the Property. Borrower authorizes Lender or Lender's agents to collect the rents and revenues and hearby directs each tenant of the Property to pay the rents to Lender or Lender's agents. However, prior to Lender's notice to Borrower of Borrower's breach of any covenant or agreement in the Security Instrument, Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower. This assignment of rents constitutes an absolute assignment and not an assignment for additional security only.
If Lender gives notice of breach to Borrower: (a) all rents received by Borrower shall be held by Borrower as trustee for benefit of Lender only, to be applied to the sums secured by the Security Instrument; (b) Lender shall be entitled to collect and receive all of the rents of the Property; and (c) each tenant of the Property shall pay all rents due and unpaid to Lender or Lender's agent on Lender's written notice to the tenant.
Borrower has not executed any prior assignment of the rents and has not and will not perform any act that would prevent Lender from exercising ...

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