IN THE CIRCUIT COURT, OF THE FOURTH

JUDICIAL CIRCUIT, IN AND FOR DUVAL

COUNTY, FLORIDA

CASE NO.: 16-2009-CA-0001694

DIVISION: CV-E

WATSON REALTY CORP., a Florida

corporation,

Plaintiff,
vs.

RENATE L. WALLACE.; ET AL.,

Defendants.
_______________________________/

MEMORANDUM OF LAW IN SUPPORT OF SHAHAB DERAZI’S MOTION TO

VACATE FORECLOSURE SALE, CERTIFICATE OF SALE AND CERTIFICATE OF
TITLE

SHAHAB DERAZI (“DERAZI”), through counsel, submits the following memorandum

of law in support of his Motion to Vacate Foreclosure Sale, Certificate of Sale and Certificate of
Title.
I. Introduction

Derazi has set forth adequate grounds to justify the equitable relief sought in his Motion
to Vacate Foreclosure Sale, Certificate of Sale and Certificate of Title and the Motion should be
granted. The facts of this case, as more fully set out below, establish that the language
intentionally used by the Plaintiff in both its Complaint for Foreclosure and the Final Summary
Judgment of Mortgage Foreclosure misled Derazi and caused him to believe he was bidding at a
first mortgage foreclosure sale when in fact he was bidding on a second mortgage foreclosure
sale. Foreclosure actions and motions to vacate foreclosure sales are equitable matters and the
most basic rules of equity prohibit one from knowingly looking on while another expends
money under an erroneous opinion of title. This is especially true when the party who benefits
from the mistake helped create the erroneous opinion in the first place through the intentional
use of words or phrases in their pleadings.

II. Facts
 1. On or about February 28, 2005 Watson Mortgage Corp. loaned the Defendant,
Renate L. Wallace, $320,000.00. This loan was secured by a mortgage recorded in OR 12338,
Pages 2465 through 2482, of the Duval County public records on March 9, 2005 (the First
Mortgage).
2. Watson Mortgage Corp. immediately assigned the First Mortgage to Indymac
Bank, F.S.B. by assignment dated February 28, 2005. The assignment was recorded in OR
12338, Page 2483, of the Duval County public records on March 9, 2005.
3. On or about February 27, 2006 Watson Mortgage Corp. made another loan to
Renate L Wallace in the amount of $297,000.00. This loan was secured by a mortgage recorded
in OR 13111, Pages 774 through 778, of the Duval County public records on March 7, 2006 (the
Second Mortgage).
4. Watson Mortgage Corp. then assigned the Second Mortgage to the Plaintiff by
assignment dated February 27, 2006. The assignment is recorded in OR 13111, Page 779, of the
Duval County public records on March 7, 2006.
5. Indymac filed a foreclosure action on the First Mortgage on December 12, 2008
and filed a Lis Pendens providing notice of that foreclosure action in OR Book 14727 page 1531
of the Duval County Public Records.
6. Indymac served the Plaintiff with a copy of the foreclosure suit on December 22,
2008.
7. The Plaintiff filed this action on February 2, 2009.
8. In paragraph 7 of the complaint the Plaintiff states that “Plaintiff’s Mortgage is a
lien superior in dignity to any prior or subsequent right, title, claim, lien or interest arising
out of the Defendants.”
9. On July 16, 2009 this Court entered a Final Summary Judgment of Mortgage
Foreclosure on a form drafted by the Plaintiff.
10. Paragraph 3 the Final Judgment provides that “the lien of the Plaintiff is superior
in dignity to any right, title, interest or claim of the Defendants and all persons, firms or
corporations claiming by, through, or under the Defendants …”
11. On August 19, 2009 the property was offered for sale at an online foreclosure
auction and Derazi, believing he was bidding on a first mortgage, bid $170,200.00 and was the
high bidder.
12. Derazi’s belief that he was bidding on a first mortgage was based on the false and
misleading statements in paragraph 7 of the complaint, paragraph 3 of the final judgment and on
his erroneous belief that the Second Mortgage in favor of Watson Mortgage Corp. was made to
refinance the First Mortgage in favor of Watson Mortgage Corp.
13. Based on offers Derazi received from third parties seeking to purchase the subject
property it is worth between $280,000.00 and $320,000.00.
14. The outstanding balance due on the First Mortgage is in excess of $320,000.00.

III. Standard for Vacating Judicial Sales

The decision to set aside a judicial sale rests in the Trial Court’s discretion. The Trial
Court’s decision, however, must be based on facts adequate to justify the equitable relief
granted. In considering a motion to vacate a judicial sale the Trial Court may consider the
adequacy of the sales price, surprise, accident or mistake imposed on the complainant as well as
any irregularity in the conduct of the sale. MacFarlane v MacFarland, 50 Fla. 570, (Fla.1905);
Moran-Alleen Company v. C.H. Brown, 98 Fla. 203, (Fla. 1929); Sulkowski v. Sulkowski, 561
So. 2d 416 (Fla. 2nd DCA 1990).
Generally the doctrine of Caveat Emptor applies to those who purchase property at
judicial sales. However, basic principles of equitable estoppel have been applied to relax the
application of this harsh rule in the context of judicial sales and in cases in which a person buys
property after a lis pendens is filed. Doyle v. Tutan, 110 So.2d 42, (Fla. 3rd DCA 1959), See
generally, Lindsley v Phare, 115 Fla. 454, (Fla. 1934). Essentially the doctrine of equitable
estoppel can be applied to prevent one party from benefiting from a transaction when another
party acquires a piece of property based on an erroneous opinion of title caused, at least in part,
by the activity or inactivity of a party who benefited from the transaction.
IV. Argument
A. False and Misleading Statements Contained in Complaint and Final
Judgment
The Plaintiff in this case drafted the foreclosure complaint in such a way that it led
Derazi to believe that the foreclosed mortgage was a first mortgage. The allegation contained in
paragraph 7 of the complaint that the Plaintiff’s mortgage is “superior.. to any prior .. lien ..
arising out of the Defendants” is a false statement of a material fact. Plaintiff was served with
a foreclosure complaint by a “prior” lien holder prior to the date on which Plaintiff filed its
complaint. Therefore it is clear that Plaintiff knew or should have known that the allegation
contained in paragraph 7 of the complaint was false and that it would be misleading to
prospective purchasers at a foreclosure sale.
 Plaintiff then compounded the problem by using similarly misleading language in the
final judgment it submitted to this Court for entry. Form 1.996 of the Florida Rules of Civil
Procedure provides sample language for use in a Final Judgment of Foreclosure. The rules
provide that the forms provided therein may be varied as long as the substance is expressed
without “prolixity”. See, FRCP 1.900(b). Paragraph 2 of form 1.996, which contains similar
findings to those set out in paragraph 3 of the Final Judgment, states “Plaintiff holds a lien for
the total sum superior to any claim or estate of defendant, … on the following described
property ..” The Plaintiff chose to go above and beyond this basic language and did, in fact,
express the substance of the form with “prolixity” when it stated that: “the lien of the Plaintiff is
superior in dignity to any right, title, interest or claim of the Defendants and all persons, firms or
corporations claiming by, through, or under the Defendants…”
The Plaintiff argues in its written response to Derazi’s motion that the “claims of parties
by through or under the Defendants are necessarily any such claims following the initiation of
the foreclosure action and recording of the Lis Pendens in the subject case, not superior lien
holders.” Unfortunately, a reading of the complaint together with the final judgment easily leads
the reader to believe that the Plaintiff is alleging that it has a first mortgage lien that is superior
to all liens arising out of these Defendants, including any liens that may arise from any other
mortgages. By choosing to ignore the language suggested by the rules of procedure and instead
using language that is unnecessarily prolonged, essentially false and certainly misleading the
Plaintiff caused Derazi to form an erroneous belief as to the status of the title to the property he
ultimately bid on.
Given Plaintiff’s knowledge of the prior encumbrance Plaintiff should have gone out of
its way to avoid any confusion regarding the priority of its lien. It could have easily avoided the
problems created by its intentional choice of words by eliminating the word “prior” from
paragraph 7 of its complaint and by using words similar to that suggested in Form 1.996 in
paragraph 3 of the Final Judgment. Plaintiff could have also helped eliminate the confusion
created by paragraph 7 of the complaint by inserting the words “since the filing of the notice of
lis pendens” at the appropriate location in paragraph 3 of the Final Judgment. The undersigned is
not aware of whether or not the Plaintiff made a conscious choice to insert the false and
misleading language into its pleadings or rather was simply using boiler plate language from a
prior foreclosure complaint involving a first mortgage. Unfortunately, the result is the same
either way. The materially false allegation in the complaint and erroneous finding in the Final
Judgment induced Derazi into bidding on the subject property and as a result he did not buy
what he thought he was buying.
 B. Caveat Emptor does not apply based on the facts of this case.
Although many Florida cases have stated that the rule of Caveat Emptor applies to those
claiming title under judicial sales, this rule should not be applied to bar the relief sought by
Derazi. The Florida Supreme Court in its decision in Lindsley v Phare, discusses the doctrine of
Caveat Emptor in the context of Judicial sales. The Lindsley court quotes a number of decisions
from around the country all of which stand for the proposition that Caveat Emptor generally
applies in the context of judicial sales. However, the rulings referred to by the Lindsley court all
have a common theme that Caveat Emptor applies only when the true condition of the title is set
out in the pleadings. Lindsley v Phare, 155 So. 812, at 814-815, (Fla. 1934). Furthermore, even
the case cited by the Plaintiff in its response to Derazi’s motion seems to indicate that if the
moving party had shown some evidence of fraud or mistake, the court could have vacated the
sale regardless of the doctrine of Caveat Emptor. Coney v. First State Bank of Miami, 405 So.
2nd 257 (Fla. 3rd DCA 1981).
In this case the pleadings do not set out the true condition of the title and the doctrine of
equitable estoppel should be applied to prevent an unjust result. Because of the existence of the
First Mortgage and the current state of the real estate market it was unlikely that anybody would
have bid on the subject property were it not for the misleading language contained in Plaintiff’s
pleadings. In the case of Doyle v Tutan the 3rd DCA addressed a situation in which an innocent
third party purchased property from one of two litigants involved in a suit regarding title to real
property. Although both litigants were aware that the purchaser did not know, despite the
existence of a recorded Lis Pendens, about the pending law suit neither party did anything to
correct the purchaser’s erroneous opinion regarding title to the land. Ultimately, the party who
prevailed in the law suit sought to assert a claim to the property over the purchasers claim. The
appellate Court relied on the basic concepts of equitable estoppel and found for the purchaser.
The Court stated that equitable estoppel prevents a party, through his acts or words, from leading
another party to take a position based on an erroneous opinion of title. Doyle v Tutan, 110 So.
2d 42, (Fla. 3rd DCA 1959).
Although the facts of the Doyle case do not involve a judicial sale the equitable theory
applied by the Doyle Court is easily applied to the facts of this case. The Plaintiff drafted a
complaint and final judgment both of which were false and misleading. Derazi reviewed these
pleadings together with public records that were confusing and misleading and bid on the
foreclosed property under the mistaken belief that he was bidding on the foreclosure of a first
mortgage lien. If the Court denies Derazi’s motion it will essentially reward the Plaintiff for its
actions which are tantamount to fraud in the inducement. Based on the actual value of the land it
is unlikely that anyone would have bid on the subject property and the Plaintiff should have
received nothing at the sale. As it stands now the Plaintiff has been made whole and there is a
surplus of funds in the registry of the Court that could potentially be awarded to the home
owner. To allow both the Plaintiff and the homeowner to be rewarded with what amounts to a
windfall profit when no profit should exist flies in the face of the most basic principles of equity.
C. Confusing Official Records
As set forth above a quick glance of the public records reveals that, Watson Mortgage
Corp., an entity affiliated with the Plaintiff, made a loan to Renate Wallace. This entity assigned
this First Mortgage to a third party on the very same day it recorded the mortgage and the
assignment is recorded on the very next page following the mortgage itself. Watson Mortgage
Corp. then made a loan to the same borrower, encumbering the same property for a slightly
lower amount almost exactly 1 year later. The existence of these two mortgages coupled with the
false and misleading statements contained in the pleadings led Derazi to believe that the Second
Mortgage had refinanced the First Mortgage. This type of innocent mistake is the type of
mistake a Trial Court can rely on as justification for vacating a judicial sale especially coupled
with the other factors set forth in this memoranda.
Unfortunately, most of the case law in this area involves cases in which the party
requesting the Court to vacate a sale alleges an inadequate sales price. Although that is clearly
not the case in this action some of those cases may be helpful in the analysis of these facts.
Courts have held that a sale should be set aside due to a technically improper sale date even
though the appellant clearly should have known the actual date the sale was to take place.
Helinger v Allen, 352 So.2d 122, (Fla. 2nd DCA 1977). In another case the Court vacated a sale
because of the “appellee’s active participation in the sale process by publishing the ambiguous or
misleading notice of sale.” Marrouche v Homasy, 532 So.2d 92, (Fla 4th DCA 1988). In yet
another case the Court set aside a sale based on the unilateral mistake on the part of the party
seeking to vacate the sale. Long Beach Mortgage v. Bebble, 985 So. 2d 611, (Fla 4th DCA 2008).
This list is not dispositive of the various justifications that exist for vacating a sale and
the facts of these cases are distinguishable from the case before this Court. However, it is
reasonable to apply the judicial logic from these cases to the facts of this one. Although Derazi
made a unilateral mistake when he thought he was bidding on a first mortgage the fact remains
that the Plaintiff actively participated in creating this mistake by publishing pleadings that were
false and misleading. With that in mind this Court should not allow the Plaintiff to benefit from
its misconduct at the expense of an innocent third party who relied on the misstatements of
material facts Plaintiff made in its legal pleadings.
 D. Conclusion
Derazi was induced into bidding on the subject property as a direct result of both the
conduct of the Plaintiff and the confusing nature of the various mortgages encumbering the
subject property. The Plaintiff loaned money on this property and it alone should bear the risk of
loss if its mortgage is now worthless due to fluctuations in the real estate market. Innocent
bidders should not be forced to bear the losses of a Plaintiff whose conduct induces the bidder
into buying the land for a price that, when you factor in the actual first mortgage balance, is at
least $170,000.00 over market value. Equity should act in this case to prevent the wrong result
and remedy a clear case of injustice.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing was mailed, by U.S.
Mail, postage prepaid, this _____ of November, 2009, to:

Robert J. Dykes, Esquire Richard R. Thames, Esquire

Watson, Dykes & Schloth, P.A. Stutsman, Thames & Markey, P.A.
208 Ponte Vedra Beach, FL 32082 50 N. Laura Street, Suite 1600
Jacksonville, FL 32202

Jonathan S. Meyers, Esquire Renate L. Wallace

P.O. Box 220620 227 Prindle Drive East
Hollywood, FL 33022-0620 Jacksonville, FL 32225

DUANE C. ROMANELLO, P.A.

__________________________
Duane C. Romanello, Esquire
Florida Bar No.: 0098213
1919 Blanding Blvd.; Suite 8
Jacksonville, Florida 32210
Telephone: (904) 384-1441
Facsimile: (904) 384-4868
Attorneys for Derazi