Frank et al v. Ocean 4660, LLC.

Filing 124

ORDER granting 116 Motion to Discharge Lis Pendens or, Alternatively, to Set Lis Pendens Bond. Please see Order for details. Signed by Judge James I. Cohn on 10/26/2011. (awe)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 11-62004-CIV-COHN/SELTZER
KENNETH A. FRANK and
ANGELA DIPILATO,
Plaintiffs,
v.
OCEAN 4660, LLC, et al.,
Defendants.
________________________________/
ORDER GRANTING EMERGENCY MOTION TO DISCHARGE
LIS PENDENS AND EQUITABLE LIENS
THIS CAUSE is before the Court upon Defendant Ocean 4660, LLC’s
Emergency Motion to Discharge Lis Pendens and Equitable Liens or, Alternatively, to
Set Lis Pendens Bond [DE 116] (“Motion”). The Court has carefully considered the
Motion and accompanying Memorandum of Law [DE 117], Plaintiffs Kenneth A. Frank
and Angela DiPilato’s Response [DE 120], Defendant Ocean 4660's Reply [DE 123],
and the record in this case, and is otherwise fully advised in the premises.
I. BACKGROUND
On September 13, 2011, Plaintiffs Kenneth A. Frank and Angela DiPilato, acting
pro se, filed this action against 94 defendants. See Complaint [DE 1]. The Complaint
brings the following claims: (1) violations of the Racketeer Influenced Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1962, et. seq.,1964(c), and 1965(a)-(b); (2)
violation of the Hobbs Act, 18 U.S.C. § 1951 et. seq.; (3) Declaratory Judgment under
28 U.S.C. § 2201; (4) violations of the Florida Deceptive and Unfair Trade Practices Act
(“FDUTPA”), Fla. Stat. § 501.203, et. seq.; (5) violations of Florida’s Civil RICO Act, Fla.

Stat. § 772.101, et. seq.; (6) conversion; (7) civil theft; (8) unjust enrichment; (9)
temporary and permanent injunctive relief; (10) imposition of equitable liens; and (11)
foreclosure of equitable Iiens. Compl. ¶ 1.
On October 14, 2011, Defendant Ocean 4660, LLC (“Ocean 4660”) filed the
instant motion to discharge a lis pendens and two equitable liens on the property or
alternatively, to set a lis pendens bond. According to the Affidavit of Hanna Karcho, the
sole member of Defendant Ocean 4660, Plaintiffs filed and recorded an “Equitable
Lien” against the property at 4658-4660 North Ocean Drive, Lauderdale-by-the-Sea,
Florida, with the Broward County Clerk on August 16, 2011. Affidavit of Owner [DE 117
at 19-22] (“Karcho Affidavit”) ¶¶ 1, 2, 10. The Karcho Affidavit also represents that
Plaintiffs filed a “Notice of Pendency” (the “lis pendens”) relating to this action on
September 13, 2011, and filed and recorded another “Equitable Lien” against the
property on September 26, 2011. Id. ¶ 10. On September 2, 2011, Defendant Ocean
4660 entered into an agreement to sell the property at issue to a non-party for
$13,250,000. Id. ¶ 7. The agreement provides for a 60-day period to resolve any title
issues, and permits the purchaser to terminate the agreement if any title issues are not
resolved within that period. Id. ¶ 8. The purchaser has identified the lis pendens and
the two equitable liens filed by Plaintiffs as such title issues that must be resolved within
the title issue resolution period. Id. at ¶ 11. Thus, Defendant Ocean 4660 seeks an
Order from this Court discharging the lis pendens and equitable liens. In the
alternative, Defendant Ocean 4660 requests that the Court compel Plaintiffs to post a
bond of $13,250,000 because the liens will cause the sale of the property to fall
through. Plaintiff opposes the motion.

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II. LEGAL STANDARD
A federal court has the authority to utilize Florida Statute § 48.23(3) to discharge
a lien “when the pending pleading does not show that the action is founded on a duly
recorded instrument or on a lien claimed under Part I of Chapter 713 [construction liens]
or when the action no longer affects the subject property.” Fla. Stat. § 48.23(3). In
Beefy King Int’l, Inc. v. Veigle, 464 F.2d 1102, 1104 (5th Cir. 1972),1 the Court of
Appeals affirmed the authority of a federal district court to discharge a lis pendens
under Florida law because the court “determined that the suit does not directly affect
the real property.” Under Florida law, “the proponent of a notice of lis pendens has the
burden of proof to show a fair nexus between the property and the dispute.” Med.
Facilities Dev., Inc. v. Little Arch Creek Props., Inc., 675 So. 2d 915, 917 (Fla. 1996)
(citing Chiusolo v. Kennedy, 614 So. 2d 491 (Fla. 1993)).
III. ANALYSIS
A. Motion to Discharge Lis Pendens and Equitable Liens
Plaintiffs argue that the liens should not be discharged because (1) their action is
founded on a duly recorded instrument, and (2) the action is sufficiently related to the
subject property. As explained below, both arguments fail.

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The decisions of the United States Court of Appeals for the Fifth Circuit, as that
court existed on September 30, 1981, handed down by that court prior to the close of
business on that date, shall be binding as precedent in the Eleventh Circuit, for this
court, the district courts, and the bankruptcy courts in the Circuit. Bonner v. Pritchard,
661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).
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1. This Action is Not Founded Upon a
Duly Recorded Instrument
This action is not founded upon a duly recorded instrument. The “recorded
instrument” to which Plaintiffs refer is the Restaurant Management Agreement [DE 120
at 19-31]. See Resp. at 3. However, the mere fact that Plaintiffs happen to have
recorded this contract does not place the matter outside the purview of § 48.23(3). A
recorded instrument does not provide the predicate for a lis pendens as of right if it
does not put a good faith purchaser on notice that there is a cloud on the title, and the
Restaurant Management Agreement does not provide such notice. See Ross v.
Breder, 528 So. 2d 64, 65 (Fla. Dist. Ct. App. 1988) (finding the fact that a partnership
agreement and warranty deed to the subject property did not place the matter outside
the purview of § 48.23(3) because “the partnership agreement and deed would not put
a good faith purchaser on notice that there is a cloud on the title.”) (citations omitted).
Therefore, the Restaurant Management Agreement does not prohibit this Court from
discharging the lis pendens and equitable liens.
2. This Action Does Not Affect
the Subject Property
This action does not affect the subject property within the meaning of § 48.23(3).
“A complaint which will not support a claim against the specific property at issue cannot
provide a basis for tying it up by a filing of notice of lis pendens.” Lake Placid Holding
Co. v. Paparone, 414 So. 2d 564, 566 (Fla. Dist. Ct. App. 1982). “A cause of action for
equitable relief such as a lis pendens does not arise simply because a promise to pay is
subsequently broken.” Id. “When the primary purpose of a lawsuit is to recover money
damages and the action does not directly affect the title to or the right of possession of

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real property, the filing of a notice of lis pendens is not authorized.” DeGuzman v.
Balsini, 930 So. 2d 752, 755 (Fla. Dist. Ct. App. 2006). Plaintiffs highlight that “[t]he
entire Complaint is laced with allegations of fraud, misrepresentations of essential facts
and other wrong doings,” Resp. at 5, but they fail to show how such allegations are
connected to the title or any right of possession of the subject property. Plaintiffs
suggest that the subject property was involved in collecting, withholding, and refusing to
pay various sales taxes and tourism taxes, see id. at 6-7, but again, Plaintiffs have not
shown that such claims justify the encumbrances that Plaintiffs have imposed on the
property. Any request for relief against the subject property has no basis in the forms of
relief available to Plaintiffs for the majority of their claims. Indeed, the majority of the
counts in the Complaint request damages, equitable and injunctive relief relating to
Defendants’ acts and practices, and a declaration regarding Defendants’ purported
violations. See Compl.
Plaintiffs also point specifically to their claim for imposition of equitable liens as
evidence that this action is sufficiently connected to the subject property. In their
Response, Plaintiffs contend that this claim stems from the fact that they “made
substantial improvements to the Defendant Ocean 4660, LLC’s real property,” Resp. at
8, but the Complaint states only that the equitable lien claims arise “pursuant to
Plaintiffs’ claims for Declaratory Relief, and violation(s) of the Racketeer Influenced
Corrupt Organizations Act . . .,” Compl. ¶ 559 (no mention of any work performed on
the property). Under Florida law, an equitable lien may be imposed on real property
when (1) a written contract evidences an intent to bind the property as security, or (2)
the circumstances involve fraud or other misrepresentations involving the property

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subject to the lis pendens. Hallmark Mfg., Inc. v. Lujack Const. Co., Inc., 372 So. 2d
520, 522 (Fla. Dist. Ct. App. 1979). Neither situation arises here.
First, Plaintiffs have pointed to no written contract evidencing an intent to bind
the subject property as security. Though Plaintiffs have attached their Restaurant
Management Agreement to their Response, this agreement does not indicate that
Plaintiffs are entitled to charge the subject property with any debt or obligation. See
Ness Raquet Club, LLC v. Renzi Holdings, Inc., 959 So. 2d 758, 761 (Fla. Dist. Ct. App.
2007) (discharging lis pendens where agreement was “indubitably a service agreement
for the breach of which no lien may attach and which will not support the filing of a lis
pendens”). Plaintiffs have pointed to no other contract showing that Defendant Ocean
4660 intended to offer its real property in connection with any debt or obligation.2 See
Blumin v. Ellis, 186 So. 2d 286, 294 (Fla. Dist. Ct. App. 1966) (“An equitable lien or
mortgage will [only] arise from a written contract which shows an intention to charge or
mortgage some particular property with a debt or obligation.”); see also Hansen v. Five
Points Guar. Bank, 362 So. 2d 962, 964 (Fla. Dist. Ct. App. 1978) (“An equitable lien
results . . . only when the intention to offer the land as security for the debt is clearly
apparent.”).
Second, Plaintiffs have not pointed to any circumstances involving fraud or other
misrepresentations involving the subject property. As Defendant Ocean 4660 notes in

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Contrary to Plaintiffs’ contention that section 6.11.3 of the Restaurant
Management Agreement demonstrates consent to the issuance and imposition of the
lis pendens, see Resp. at 4, this section states only that the parties consent to “the
issuance of an Order to Show cause, injunction or restraining order . . . restraining any
threatened breach or any continuing breach of any covenant imposed upon the parties
herein,” Restaurant Mgmt. Agmt. § 6.11.3. This section does not evidence consent to
the issuance of a lis pendens.
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its Reply, Plaintiffs’ allegations involve the ownership of a liquor license, general
background allegations concerning a purported enterprise and Defendants’ purported
prior conduct, tax payment issues and general conclusory allegations concerning
Defendants’ purported criminal conduct. Reply at 7. The sole fact that the subject
property was owned by individuals who are accused of perpetrating certain fraud and
other misconduct is insufficient to justify the encumbrances that Plaintiffs have placed
on the property.
Therefore, Plaintiffs have not met their “burden of proof to show a fair nexus
between the property and the dispute.” Little Arch Creek Properties, 675 So. 2d at 917.
Consequently, because this action is not founded upon a duly recorded instrument and
because the action does not affect the subject property within the meaning of
§ 48.23(3), the Court has the authority to utilize § 48.23(3) to discharge the lien.
3. The Lis Pendens and Equitable Liens
Will be Discharged
Pursuant to § 48.23(3), “the court shall control and discharge the recorded notice
of lis pendens as the court would grant and dissolve injunctions,” Fla. Stat. § 48.23(3).
In order to obtain a preliminary injunction under Federal Rule of Civil Procedure 65, a
party must establish the following four elements: (1) a substantial likelihood of success
on the merits; (2) a substantial threat that the party will suffer irreparable injury if the
injunction is not granted; (3) the threatened injury outweighs the threatened harm the
injunction may do to the opposing party; and (4) granting the preliminary injunction will
not disserve the public interest. Church v. City of Huntsville, 30 F.3d 1332, 1342 (11th
Cir.1994); McDonald’s Corp. v. Roberts, 147 F.3d 1301, 1306 (11th Cir. 1998).
Applying these standards apply to this case demonstrates that Defendant Ocean
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4660’s Motion should be granted.
First, even though Plaintiffs bears the burden to show a fair nexus between their
claims and the subject property, Defendant Ocean 4660 has shown a substantial
likelihood of success on the merits that the present lawsuit does not have a fair nexus
to the real property. The claims in the Complaint are focused upon an alleged
enterprise involving taxes, money laundering, and other allegedly criminal acts in the
operation of the Defendants’ business operations. Such an enterprise does not affect
the subject property to the extent that it requires encumbrances on the sale of the
property. Second, Defendant Ocean 4660 has demonstrated a substantial threat of
irreparable harm if the Motion is not granted by showing specific evidence that it will
lose the opportunity to close on a signed contract to sell the property for over $13
million. See Karcho Affidavit. The lis pendens and equitable liens filed by Plaintiffs
effectively prohibit the real property from being sold. Beefy King, 464 F.2d at 1104.
Third, such injury outweighs any injury to Plaintiffs as allowing the sale of the property
does not inhibit Plaintiffs from recovering any relief to which they are entitled under their
claims. Finally, the public interest is best served by allowing real property to be sold on
the open market, and to discourage possible frivolous filings of liens on property that
would stifle such sales. Therefore, the Court will grant Defendant Ocean 4660’s Motion
and discharge the pending lis pendens and equitable liens.
B. Alternative Motion to Set Bond
Regarding the alternative request to compel Plaintiffs to post a bond of
$13,250,000, the Court will not impose a bond at this time because it is granting the
request to discharge the lis pendens and equitable liens. However, should Plaintiffs

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appeal this Order, the appeal will effectively perpetuate the liens and preclude
Defendant Ocean 4660 from completing its sale. Therefore, in accordance with the
above discussion and this Court’s recent decision in DiPilato v. Rudd & Diamond, P.A.
et al., Case No. 10-62492, DE 119 (S.D. Fla. filed on Dec. 22, 2010) (“Rudd &
Diamond”), if Plaintiffs appeal this Order, they shall immediately post a bond to cover
the potential damages if their failure to discharge the lis pendens and equitable liens
causes the contract for sale of the subject property not to close. As in Rudd &
Diamond, the amount of the bond is best determined by the amount of the contracted
price for the property, $13,250,000. Id.; see also Karcho Affidavit ¶¶ 7-8.
IV. CONCLUSION
Based on the foregoing, it is hereby ORDERED AND ADJUDGED as follows:
1.

Defendant Ocean 4660, LLC’s Emergency Motion to Discharge Lis
Pendens and Equitable Liens or, Alternatively, to Set Lis Pendens Bond
[DE 116] is GRANTED;

2.

The Notice of Pendency filed in the records of Broward County, Florida,
with filing location CFN # 110266750, OR BK 48175 Page 1779,
Recorded 09/13/2011 at 12:41 PM, is hereby DISCHARGED;

3.

The Notice of Claim of Lien filed in the records of Broward County,
Florida, with filing location CFN # 110216326, OR BK 48116 Page 1756,
Recorded 08/16/2011 at 01:37 PM, is hereby DISCHARGED; and

4.

The Notice of Claim of Lien filed in the records of Broward County,
Florida, with filing location CFN # 110289655, OR BK 48202 Page 188,
Recorded 09/26/2011 at 12:27 PM, is hereby DISCHARGED;
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It is further ORDERED AND ADJUDGED that if Plaintiffs appeal this Order:
1.

Plaintiffs shall, contemporaneously with their appeal, file a supersedeas
bond in the amount of $13,250,000 in the docket of this action;

2.

Plaintiffs shall immediately take the necessary action to release and/or
discharge the following:
a.

The Notice of Pendency filed in the records of Broward County,
Florida, with filing location CFN # 110266750, OR BK 48175 Page
1779, Recorded 09/13/2011 at 12:41 PM;

b.

The Notice of Claim of Lien filed in the records of Broward County,
Florida, with filing location CFN # 110216326, OR BK 48116 Page
1756, Recorded 08/16/2011 at 01:37 PM; and

c.

The Notice of Claim of Lien filed in the records of Broward County,
Florida, with filing location CFN # 110289655, OR BK 48202 Page
188, Recorded 09/26/2011 at 12:27 PM;

3.

Failure to timely file the bond shall result in the release of the Notice of
Pendency and both Notices of Claim of Lien.

DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County,
Florida, this 26th day of October, 2011.

Copies provided to:
Counsel of record via CM/ECF
Angela DiPilato and Kenneth A. Frank, pro se
via CM/ECF regular mail
and facsimile to 954-657-8405
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