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Failure of a Mortgagee to File a Statement of Claim in a Deceased Borrower’s Probate Voids Right to Collect a Deficiency
It is well settled law that a mortgagee’s lien is an exception to Statute of Nonclaim set forth in Florida Statute, section 733.710, which bars any claim regardless of notice after two years from the date of the decedent’s death. Florida Statute 733.710(3) provides that a duly recorded mortgage remains intact and fully enforceable notwithstanding the lienholder’s failure to file a claim in the probate.
Why then should a mortgagee file a claim in a deceased borrower’s probate action?
The answer to this question is best answered by way of review of a Florida Supreme Court decision, In re Comstock’s Estate, dating all the way back to 1940.
In the case of In re Comstock’s Estate, the Florida Supreme Court held failure by the mortgagee to file a claim within the statutory timeline barred the right to enforce any personal liability on the estate, thereby limiting the mortgagee’s only remedy to enforcement of its mortgage against the specific real property via a foreclosure action. The probate court was prohibited from mandating that the decedent’s estate pay the mortgage debt. This was true despite the personal representative’s prior partial payment of the mortgage debt.
In its opinion, the Florida Supreme Court also provides a hypothetical scenario wherein it concludes a mortgagee who fails to file a timely claim within a decedent’s probate would be proscribed from reaching to the cash assets of a surviving widow because the property value was less than that of the outstanding mortgage debt. The mortgagee would be limited to enforcement of the mortgage only, as any right to collect a deficiency became void upon expiration of the statutory period in which a claim had not been filed.
This hypothetical is critical. In contemplating a deficiency scenario, the Court undoubtedly conditions a mortgagee’s right to collect a deficit from a deceased borrower’s estate, on compliance with the dictates set forth by The Probate Code, namely the filing of a claim in the probate.
The Court also reminded that “the lien of any duly recorded mortgage…and the right to foreclose or enforce such mortgage…shall not be impaired or affected by failure to file a claim...” Again, it is very well settled law that a mortgagee’s lien is an exception to Statute of Nonclaim.
While the case In re Comstock’s Estate may be dated, it is just as relevant today as it became the day it was decided on June 18, 1940. It set a new precedent, making new law, that Florida courts are bound by, and which appellate courts throughout the state of Florida have ruled consistently with over the last 80 plus years.
For this very reason, it crucial that a mortgagee served with a Notice to Creditors file a statement of claim in a deceased borrower’s probate action if there exists any uncertainty at all regarding the value of the real property serving as collateral for the loan. Read Notice as Due Process, and the Importance of Timely Filing a Claim Upon Receipt of Notice, to learn why not only the filing of a claim is essential, but so it the timeliness of it.
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