The District Court of Appeal of the State of Florida for the First District recently held that the statute of limitations does not bar a second mortgage foreclosure action based on a subsequent default, regardless of whether the first case was dismissed with or without prejudice.

A copy of the opinion is available at: Link to Opinion.

The borrowers defaulted on their mortgage in February of 2007. In April of 2007, the plaintiff mortgagee’s predecessor in interest accelerated the note based on the February, 2007 breach and sued to foreclose the mortgage. The case was dismissed without prejudice in October of 2007 when the mortgagee’s counsel failed to appear at a case management conference.

In November of 2010, the plaintiff mortgagee sent a new notice of intent to accelerate based on the failure to pay the March, 2007 installment. The default was not cured and the plaintiff mortgagee filed a second foreclosure action in November of 2012.

The borrowers raised the statute of limitations as an affirmative defense, arguing that the second action was barred because it was not filed within five years after the 2007 acceleration of the note. The trial court entered summary judgment in the borrowers’ favor, holding that the second action was barred by the statute of limitations.  The plaintiff mortgagee appealed.

On appeal, the First District held that the Florida Supreme Court’s holding in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004) controlled.

As you may recall, Singleton held that the failure to pay each installment was a separate default that “created a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action,” finding it “irrelevant whether acceleration had been sought in earlier foreclosure actions.”

The First District observed that in the case at bar, both the note and mortgage contained typical clauses “reflecting the parties’ agreement that the mortgagee’s forbearance or inaction do not constitute waivers or release [borrowers] from their obligation to pay the note in full,” and that such binding contractual terms are inconsistent with the trial court’s judgment.

In addition, the Appellate Court noted that it had previously held that “not even a dismissal with prejudice of a foreclosure action precludes a mortgagee ‘from instituting a new foreclosure action based on a different act or a new date of default not alleged in the dismissed action.’”

The First District found that the plaintiff mortgagee’s “assertion of the right to accelerate was not irrevocably ‘exercised’ within the meaning of cases defining accrual for foreclosure actions, when the right was merely asserted and then dismissed without prejudice.”

The Court concluded that “[a]fter the dismissal without prejudice, the parties returned to the status quo that existed prior to the filing of the dismissed complaint.  As a matter of law, appellant’s 2012 foreclosure action, based on breaches that occurred after the breach that triggered the first complaint, was not barred by the statute of limitations.”

In so ruling, the First District acknowledged that its decision was contrary to the Third District Court of Appeal’s current holding in Deutsche Bank Trust Co. Americas v. Beauvais, but reasoned that a federal district court recently refused to follow Beauvais because it is “contrary to the overwhelming weight of authority,” which the Beauvais court itself acknowledged. The First District also noted that the Beauvais court had “set the case for rehearing en banc [and] it remains to be seen whether the merits disposition will change.”

Accordingly, the trial court’s judgment was reversed and remanded for further proceedings.