Equitable Lien: Unclean Hands; Prejudment Interest

Tribeca Lending Corporation v. Real Estate Depot, Inc., ___ So. 3d ___, 35 Fla. L. Weekly D1568 (Fla. 4th DCA 7/14/10)

Before their home was scheduled to be sold at foreclosure, the husband and wife entered into a sale and leaseback agreement with RED.  After this agreement, a forged quitclaim deed was recorded that transferred title back from RED to the husband and wife, and the wife filed for bankruptcy.  The husband then obtained a new mortgage from Tribeca and used a portion of the funds he borrowed to pay off the old mortgage.  RED then brought an action, among other things, to quiet title to the property, and Tribeca filed a cross-claim and counterclaim to foreclose on its mortgage or to impose an equitable lien on the property.   The trial court entered summary judgment for Tribeca on its counterclaim for an equitable lien, and the appellate court affirmed.  Tribeca could not foreclose because its mortgage was tainted by the fraudulent quitclaim deed, but Tribeca was entitled to an equitable lien to prevent the unjust enrichment of RED.  Regardless of the state of its knowledge, the doctrine of unclean hand did not bar Tribeca’s counterclaim for an equitable lien because (1) RED’s interest in the property was inferior to the lien of the original mortgage holder, (2) Tribeca stepped into the shoes of the original mortgage holder when Tribeca satisfied its lien, and (3) the satisfaction of the original mortgage holder’s lien did not prejudice RED.  The wife’s bankruptcy did not nullify Tribeca’s mortgage because her homestead property was exempt from the bankruptcy estate.  The trial judge did make a mistake in providing that the “defendants” would be foreclosed of all estate or claim in the property upon filing of the certificate of sale because Tribeca was a defendant and RED was a counterdefendant.  Tribeca waived its claim to prejudgment interest by failing to raise it before appeal.  The trial court erred by providing for retention of the proceeds from the judicial sale pending the resolution of conflicting claims because “Tribeca’s right was superior to any other claimant, and it was entitled to the proceeds of sale to the extent that they satisfied [its equitable] lien.”