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Court Rules that Sought Funds be Spelled Out in Original Suit

  • Court Rules that Sought Funds be Spelled Out in Original Suit

    Court Rules that Sought Funds be Spelled Out in Original Suit

    The Third District Court of Appeal recently handed down a ruling concerning the practice of sequestering rental income from a property when the property is in foreclosure.

    Deutsche Bank National Trust foreclosed on an investment property which belonged to UV Cite III LLC in 2016. Then, while the case was still pending, the bank tried to require that the owners of the property deposit rent it was receiving from its tenants into the court registry. The courts later ruled in favor of Deutsche Bank and the bank won the release of all of the rent funds that were deposited.

    However, UV Cite objected to the fact that the money went to the bank, saying that the trial court did not have jurisdiction over the original money and that Deutsche Bank received more relief than it originally sought with the suit. UV Cite stated that since the bank did not originally plead for the rent money as part of the suit and only moved to have the funds deposited after the original notice, it was not entitled to the rent money. UV Cite’s attorney stated that there needs to give a notice that you are seeking the money and give a reason for it. Deutsche Bank’s original complaint sought to foreclose on the property and reform the mortgage and deed.

    The Third District Court of Appeal stated in their decision that, “Because the rent was not the subject of Deutsche Bank’s lawsuit and there was no other basis for sequestering the money, the trial court had no authority to order that the rent UV Cite collected from its tenant abe deposited in the registry of the court.”

    While this kind of rent assignment is common in commercial mortgages such as offices or retail properties, they are relatively rare in residential mortgages. One attorney stated that these practices are meant to pressure the borrower because they are cut off from the cash flow of the rental.

    In addition to the ruling, the appellate court suggested both parties did not present enough information during the trial, as neither party cited a case that showed a trial court’s jurisdiction in regards to money that is not originally claimed.