SUPREME COURT STATE OF FLORIDA

SUPREME COURT STATE OF FLORIDA DONALD M. MACLEOD AND KIM MACLEOD, Petitioners, v. CASE NO. SC08-825 L.T. No. 1D07-1770 ORIX FINANCIAL SERVICES, INC., f/k/a ORIX CREDIT ALLIANCE, INC., Respondent. / JURISDICTIONAL BRIEF OF PETITIONERS, DONALD M. MACLEOD AND KIM MACLEOD ON REVIEW FROM A DECISION OF THE FIRST DISTRICT COURT OF APPEAL ROBERT N. CLARKE, JR. Fla. Bar No. 0592900 MARTIN B. SIPPLE Fla. Bar No. 0135399 Ausley & McMullen, P.A. 227 South Calhoun Street P.O. Box 391 (zip 32302) Tallahassee, Florida 32301 (850) 224-9115 telephone (850) 222-7560 facsimile Attorneys for Petitioners

TABLE OF CONTENTS TABLE OF AUTHORITIES... iii STATEMENT OF THE CASE AND FACTS... 1 SUMMARY OF ARGUMENT... 2 JURISDICTIONAL BASIS... 3 ARGUMENT... 3 I. THE FIRST DISTRICT S DECISION CONFLICTS WITH DECISIONS OF OTHER DISTRICT COURTS ON THE SAME ISSUE... 3 II. STRONG POLICY CONSIDERATIONS SUPPORT ACCEPTANCE OF JURISDICTION... 7 CONCLUSION... 10 CERTIFICATE OF SERVICE... 11 CERTIFICATE OF TYPE SIZE AND STYLE... 11 ii

TABLE OF AUTHORITIES CASES Anderson v. North Florida Production Credit Association, 642 So.2d 88 (Fla. 1 st DCA 1994)... passim Bakalarz v. Luskin, 560 So.2d 283 (Fla. 4 th DCA 1990)... 2, 3, 4, 5 Greenpoint Mortgage Funding, Inc. v. Schlossberg, 390 Md. 211, 888 A.2d 297 (Md. Ct. App. 2005)... passim Mlecka v. Citrus County, 610 So.2d 677 (Fla. 5 th DCA 1993)... 2, 3, 6 Orix Financial Services, Inc. v. MacLeod, 977 So.2d 658 (Fla. 1 st DCA 2008)... 1, 2, 4 STATUTES Section 28.222(2), Florida Statutes... 5, 6 Section 695.02, Florida Statutes... 6 Section 695.11, Florida Statutes... 3, 5 OTHER AUTHORITIES Florida Constitution, Article V, Section 3(b)(3)... 3 Maryland Code, Section 3-302(a)... 8 Maryland Rule 12-102... 8 Maryland Rule 12-102(b)... 10 iii

STATEMENT OF THE CASE AND FACTS Respondent, Orix Financial Services, Inc. ( Orix ), recorded a judgment lien on real property in Dixie County, Florida. See Orix Financial Services, Inc. v. MacLeod, 977 So.2d 658 (Fla. 1 st DCA 2008). 1 However, the clerk of the circuit court improperly indexed the lien. Id. Petitioners, Donald M. MacLeod and Kim MacLeod ( the MacLeods ), subsequently acquired the property without notice of the lien due to the indexing error. Id. Orix brought suit against the MacLeods to foreclose the lien. Id. The trial court entered judgment in favor of the MacLeods. Id. The First District Court of Appeal reversed. Id. It did so based upon its previous decision in Anderson v. North Florida Production Credit Ass n, 642 So.2d 88 (Fla. 1 st DCA 1994). Orix, 977 So.2d at 658. In Anderson, the First District held that, under Section 695.11, Fla. Stat., official recordation occurs at such time as the office of the clerk of the circuit court affixes to an instrument the official register numbers required by law, and at such time shall be notice to all persons. Orix, 977 So.2d at 658. Based on the decision in Anderson, the district court in this case held that Orix is entitled to a foreclosure judgment and that the MacLeods remedy for the erroneous indexing, if any, will lie against the title insurer or abstractor or against the clerk of the circuit court itself, 1 The Orix decision is a single-page decision. 1

which can make no claim of sovereign immunity. Orix, 977 So.2d at 658. SUMMARY OF ARGUMENT The First District s decisions in this Orix case and in Anderson directly conflict with the decisions of the Fifth District and the Fourth District, respectively, in Mlecka v. Citrus County, 610 So.2d 677 (Fla. 5 th DCA 1993), and Bakalarz v. Luskin, 560 So.2d 283 (Fla. 4 th DCA 1990). In Mlecka and Bakalarz, the courts held that a circuit clerk s indexing error precludes enforcement of the lien against a subsequent innocent purchaser without notice. The dispositive legal issue is which party should bear the burden of a clerk s indexing error. Aside from the palpable unfairness to the MacLeods, the First District s decision has far-reaching implications and threatens to compromise the marketability of titles in Florida. In a virtually identical case, the Maryland Supreme Court recently held that the burden of a clerk s error should fall on the only party in a position to prevent it, the filer, because [w]ithout recording nothing works. Greenpoint Mortgage Funding, Inc. v. Schlossberg, 390 Md. 211, 237, 888 A.2d 297, 313 (Md. Ct. App. 2005). If prospective purchasers cannot rely on the real property index to determine the existence of liens, a chilling effect on the willingness to enter into real estate transactions may result. 2

JURISDICTIONAL BASIS This Court has jurisdiction under Article V, 3(b)(3), Fla. Const. As further discussed below, the MacLeods respectfully submit that the First District's decisions in this case and in Anderson are in conflict with the decisions in Mlecka and Bakalarz. The issues to be presented to this Court are of importance not only because of the palpable unfairness of the decision to the MacLeods, but also as a matter of statewide precedent. ARGUMENT I. THE FIRST DISTRICT S DECISION CONFLICTS WITH DECISIONS OF OTHER DISTRICT COURTS ON THE SAME ISSUE The First District dealt with the issue of which party, the lien-filer or an innocent subsequent purchaser without notice, should bear the burden of a clerk indexing error. The district court adopted its previous decision in Anderson, in which the First District held that the plain language of Section 695.11 places the burden on the innocent purchaser. Anderson, 642 So.2d at 89. Section 695.11 provides as follows: All instruments which are authorized or required to be recorded in the office of the clerk of the circuit court of any county in the State of Florida, and which are to be recorded in the Official Records as provided for under 28.222, and which are filed for recording on or after the effective date of this act, shall be deemed to have been officially accepted by the said officer, and officially recorded, at the 3

time she or he affixed thereon the consecutive official register numbers required under 28.222, and at such time shall be notice to all persons. The sequence of such official numbers shall determine the priority of recordation. An instrument bearing the lower number in the then-current series of numbers shall have priority over any instrument bearing a higher number in the same series. Section 695.11, Fla. Stat. The Anderson court construed this statute to mean that [w]hile indexing is required, priority is not contingent upon such... Anderson, 642 So.2d at 89. Orix argued in this case, and the First District agreed, that Anderson compels a decision that notice to the MacLeods occurred upon presentation of the judgment to the Dixie County Clerk for recording, notwithstanding the clerk s failure to correctly index the document. The Anderson decision, to which the First District adhered in this Orix case, conflicts with the Fourth District s decision in Bakalarz. The facts in Bakalarz are for all practical purposes identical to those in this case. There, a circuit court imposed a constructive trust against real property owned by the parents of a divorcing husband. The clerk indexed the court s order by the names of the parties to the divorce proceeding, but did not index it under the names of the property owners -- the parents. Id. at 284. The parents subsequently sold the property to Ronald Bakalarz, whose title search did not reveal the order due to the indexing error. When the divorcing wife discovered the sale, she brought a foreclosure action. The 4

trial court entered an order directing a sheriff s sale of the property notwithstanding the indexing error. The Fourth District reversed. The court acknowledged the existence of Section 695.11, but construed it in conjunction with Section 28.222(2), Fla. Stat. (which is expressly referred to in Section 695.11). The Bakalarz court noted that Section 28.222(2) requires that the court clerk maintain a general alphabetical index, direct and inverse, of all instruments filed for record. Bakalarz, 560 So.2d at 286, quoting Section 28.222(2), Fla. Stat. Reading the two statutes together, the court held that [the purchaser] had a right to rely on the record as disclosed by a full and complete search at the time of purchase. Bakalarz, 560 So.2d at 286. The court elaborated on its construction of the statutes as follows: Id. at 287. [The purchaser] was entitled to rely upon compliance with the dictates of Florida Statutes section 28.222, that recorded judgments be indexed by name. Clearly, it would create great uncertainty in the conveyance of real property if a careful title examiner could not rely upon the clerk s index to determine whether there are any recorded judgments that constitute a prior lien on property. To hold otherwise would require that all outstanding recorded judgments be scoured at the time of every search for inclusion of names and rights not revealed by reference to the index. In our view such documents are deserving of no more stature, with respect to notice, than the recording of a wild instrument. 5

The First District s decision in this case (and in Anderson) also conflicts with the decision of the Fifth District in Mlecka v. Citrus County, 610 So.2d 677 (Fla. 5 th DCA 1993). There, Citrus County filed a special assessment lien that applied to the property at issue. Louis Mlecka subsequently purchased the property at a tax deed sale. When the County sought to enforce the special assessment lien, Mr. Mlecka brought suit. He alleged, inter alia, that the clerk of court improperly recorded the lien by not indexing it in the official records, as required by Sections 28.222 and 695.02. The trial court held that the complaint did not state a cause of action and entered an order of dismissal. Id. at 678. The Fifth District reversed. The court squarely held: If the special assessment lien was improperly recorded, it failed to give constructive notice in accordance with the applicable statute. The purchaser, without actual notice of the special assessment liens, took title free and clear of those liens, and it is the county that may have suffered damages as a result of the clerk s negligence in recording the county s special assessment liens. Id. at 678-79 (emphasis added). In Mlecka, the Fifth District held that an innocent purchaser takes title free and clear of liens erroneously indexed. Mlecka, 610 So.2d at 678-79. The First District held in this case and in Anderson that an innocent purchaser does not take title free and clear of liens erroneously indexed. Thus, on identical facts, the result will be different depending upon 6

the appellate district in which the real property is located. In Dixie County, the innocent purchaser of property subject to a mis-indexed lien can be foreclosed upon. In Orange County, the same purchaser takes free and clear. Conflict jurisdiction exists precisely to prevent such situations and to insure uniformity of the law throughout the State. The Court should therefore accept jurisdiction. II. STRONG POLICY CONSIDERATIONS SUPPORT ACCEPTANCE OF JURISDICTION Strong policy considerations support this Court accepting jurisdiction and addressing the merits of this case. As previously noted, Maryland s highest court recently construed virtually identical provisions of its state law to require indexing as a prerequisite to constructive notice. The decision is instructive both in terms of the court s approach to interpreting the pertinent statutes and rules, and as to the potential impact on the real estate market of adopting the First District s approach. See Greenpoint Mortgage Funding, Inc. v. Schlossberg, 390 Md. 211, 888 A.2d 297 (Md. Ct. App. 2005). Greenpoint arose from a divorce case. The trial court appointed receivers on behalf of the wife to preserve and liquidate real property owned by the husband. However, certain notices of lis pendens filed by the wife s receivers were misindexed by the clerks in the counties involved. Id. at 219, 888 A.2d at 302. When the husband executed deeds of trust in favor of a bank and a mortgage company with respect to two of the 7

properties, the receivers filed a declaratory judgment action alleging that, by virtue of the notices of lis pendens, the mortgagees interests were inferior in priority to the wife s interest in the properties. The bank and the mortgage company countered that, because of the indexing error, they were innocent purchasers. The trial court found in favor of the wife s receiver, who had filed the notices of lis pendens. The court did so based largely on the plain language of Md. Rule 12-102(b), which governs notices of lis pendens in Maryland. The trial court held that, because the rule does not mandate recording and indexing, the filing of the notices was sufficient to create constructive notice on the part of the husband s mortgagees. Id. at 221, 888 So.2d at 303. This is essentially the exact same rationale adopted by the First District in this case. Before the intermediate court of appeals issued a ruling, the State s highest court granted certiorari on its own motion in order to address the issue. The Court reversed the trial court s decision. The Court noted that, as in Florida, Maryland law requires the clerk of the circuit court to maintain an alphabetical index of every deed and other instrument affecting title to real property. Id. at 229, 888 A.2d at 308, citing Section 3-302(a), Maryland Code. The Court held that the rule governing filing of notices of lis pendens (Rule 12-102), upon which the wife s receiver relied, should be construed in a manner consistent with the notice function it is intended to facilitate, and thus must be read broadly as incorporating the 8

indexing (and other) requirements of the various statutes. Id. at 229, 888 So.2d at 308. The Court then squarely held: Were the Court to hold that because the Rule does not contain a direct indexing requirement, it affords notice without indexing, we in effect, would overrule the statutory requirement that instruments affecting title must be indexed. Such an interpretation would change the statutory requirements for the placing of notices, i.e., instruments affecting title to real property in the land records of a county-and that they be indexed. Id. at 230, 888 So.2d at 308. The Court also analyzed which party, as a matter of public policy, should bear the risk of the clerk s indexing error. Id. at 232, 888 A.2d at 309. The Court reviewed the general process by which titles are examined in the United States and noted that, if a prospective purchaser could not rely upon indexing, it would be impossible in a lifetime to examine every original document of every kind ever filed in the land and other records, which would be necessary if the buyer or lender is to be assured that the property is lien free and is owned by the person who is selling it... Id. at 236, 888 A.2d at 312. The Court emphasized that, in contrast to the helpless purchaser, the party recording the lis pendens always has it in his power to examine the records and satisfy himself that his paper has been duly and accurately recorded... Id. at 242, 888 A.2d at 316, quoting Federal Nat l Mortgage Ass n v. Levine-Rodreguez, 153 Misc.2d 8, 11, 579 N.Y.S.2d 975, 977-78 (N.Y.Sup.Ct. 1991). 9

The Greenpoint Court recognized that the nature of recording systems are such that [w]ithout indexing nothing works. Id. at 237, 888 A.2d at 313 (emphasis added). The Court therefore held that [i]ndexing mistakes should be at the risk of the person who had the ability to insure that the document was indexed correctly -- the filer. Id. at 235, 888 A.2d at 311. The Court reasoned that, if the risk of indexing errors is placed on the innocent purchaser, the marketability of titles would be seriously compromised and the entire system of property in this country might collapse. Id. at 237, 888 A.2d at 313 (emphasis added). Florida s statutory scheme for recording instruments affecting title to real property is virtually identical to Maryland s. Cf. Md. Rule 12-102(b) & Maryland Code Sec. 3-302(a) with Secs. 695.11 & 28.222, Fla. Stat. The Greenpoint Court rejected the very same rationale adopted by the First District in this case. The First District s approach conflicts with the law in the Fourth and Fifth Districts, is inconsistent with the statutory scheme governing recording of Florida real estate documents, and would threaten the integrity and functioning of the Florida title system. CONCLUSION Jurisdiction should be accepted. 10

CERTIFICATE OF SERVICE I HEREBY CERTIFY that a copy of the foregoing has been furnished by United States Mail, first class postage prepaid, to the following this 9 th day of May, 2008 to: Katherine E. Giddings Akerman Senterfitt 106 E. College Avenue, 12 th Floor Tallahassee, Florida 32301 and James E. Foster Akerman Senterfitt P.O. Box 231 420 South Orange Avenue Suite 1200 Orlando, Florida 32802-0231 CERTIFICATE OF TYPE SIZE AND STYLE This brief is typed using Courier New 12 point, a font which is not proportionately spaced. Respectfully submitted, AUSLEY & McMULLEN, P.A. /s/ Martin B. Sipple Robert N. Clarke, Jr. Fla. Bar No. 0592900 Martin B. Sipple Fla. Bar No. 0135399 227 South Calhoun Street P.O. Box 391 (zip 32302) Tallahassee, Florida 32301 (850) 224-9115 telephone (850) 222-7560 facsimile ATTORNEYS FOR PETITIONERS 11