On April 13, 2016, Florida's Third District Court of Appeal issued two significant statute of limitations decisions concerning mortgage foreclosure proceedings. First, it ended months of speculation by releasing its much anticipated decision in the en banc rehearing of the roundly criticized opinion in Deutsche Bank Trust Co. Americas v. Beauvais, 40 Fla. L. Weekly D1 (Fla. 3d DCA Dec. 17, 2014). In a lengthy, 31-page opinion, the Third District Court of Appeal vacated the original panel decision that had held that a mortgagee, which had not taken any affirmative action to decelerate the underlying debt, was barred from refiling a foreclosure action more than five years after the filing date of a prior foreclosure action that had been dismissed without prejudice for failure to attend a case management conference. In its place, the Third District Court of Appeal substituted a new opinion holding that a dismissal, with or without prejudice, of a foreclosure action does not bar a subsequent foreclosure action on a later default as long as the subsequent default occurs within five years of the new action. Then, in the unrelated case of Collazo v. HSBC Bank USA, N.A., the Third District Court of Appeal applied its new Beauvais decision to reject a claim that a second foreclosure action filed more than five years after a prior foreclosure action on the same default was time-barred; but it, nonetheless, reversed the final judgment of foreclosure with instructions for the trial court to determine the correct sum of principal and interest due under the note by excluding each monthly installment that came due more than five years prior to the commencement of the second action. Each of these decisions will be discussed in more detail below.
In Beauvais, the mortgagee had filed an action in December of 2012, seeking to foreclose on a $1,440,000 promissory note. The complaint alleged that the borrower failed to pay the October 2006 installment “and all subsequent payments.” At the time the action was filed, the borrower no longer owned the property, having been already foreclosed out by the governing condominium association, and, as a result, did not contest the foreclosure. The condominium association, however, did contest the foreclosure, arguing that it was time barred because it had not been filed within five years of the commencement of a foreclosure action filed by the mortgagee's predecessor in interest in 2007, which was subsequently dismissed without prejudice for failing to appear at a case management conference. The trial court agreed and granted judgment in favor of the condominium association, holding that the commencement of the first foreclosure action triggered the running of the statute of limitations with respect to the entire balance of the mortgage and note.
Although a panel of the Third District Court of Appeal initially agreed with the trial court's judgment, the Third District Court of Appeal, upon rehearing before the full court, ultimately reversed the trial court's decision. In doing so, the Third District Court of Appeal aligned itself with its sister courts in the First, Fourth, and Fifth District Courts of Appeal and with the United States District Courts for the Middle and Southern Districts of Florida. The Third District Court of Appeal now recognizes that that the Florida Supreme Court's decision in Singleton v. Greymar Associates, 882 So.2d 1004 (Fla. 2004) (holding that “successive foreclosure suits, regardless of whether or not the mortgagee sought to accelerate payments on the note in the first suit,” were not barred if the second suit was based on a different default because each new default creates a separate right to accelerate payment on the note in a subsequent foreclosure action), while issued in a res judicata context, is equally applicable in statute of limitations cases. The Third District Court of Appeal noted that the Singleton decision considered and rejected one of the fundamental underpinnings of the original panel decision – namely, that acceleration of payments in a foreclosure action on one defaulted payment allegedly put the entire loan balance at issue, thereby precluding a second foreclosure action on a subsequent default. As a result, the Third District Court of Appeal concluded that “dismissal of a foreclosure action accelerating payment on one default does not bar a subsequent foreclosure action on a later default if the subsequent default occurred within five years of the subsequent action.” The court further held that “a lender's right to file a subsequent action to foreclose on an accelerated note following a subsequent default does not turn on whether the first action to foreclose on an earlier default and acceleration was dismissed with or without prejudice.” Either type of dismissal, it explained, abandons the acceleration of the note and mortgage and “return[s] the parties to the status quo that existed prior to the filing of the dismissed action, leaving the lender free to accelerate and foreclose on subsequent defaults.” The court also concluded that the mortgagee was not required to take any action to decelerate the loan after the initial foreclosure action was dismissed because a loan secured by the standard Fannie Mae/Freddie Mac Uniform Mortgage retains its installment nature “until a final judgment of foreclosure is entered.”
The Third District Court of Appeal provided additional clarification on the application of the statute of limitations in foreclosure actions with its simultaneously released decision in Collazo. In that case, a mortgagee had filed a foreclosure action more than five years after the borrowers defaulted. The foreclosure action was also more than five years after the mortgagee had sent the borrowers a notice accelerating the entire debt and more than five years after it had commenced a prior foreclosure action which was subsequently dismissed. Although the borrowers raised the statute of limitations as a defense, the trial court ultimately granted judgment in favor of the mortgagee. The Third District Court of Appeal, relying on its en banc decision in Beauvais, swiftly rejected the borrowers' argument that the foreclosure action was barred by the statute of limitations. Nonetheless, it reversed the final judgment and directed the trial court to re-calculate the correct sum of principal and interest due under the note by excluding each monthly installment that came due more than five years prior to the commencement of the second action.
Combined, the Third District Court of Appeal's decisions in Beauvais and Collazo provide a giant step towards resolving the uncertainty that has surrounded foreclosures of mortgages based on dated defaults. However, just as we noted last fall while opining that “the legal and equitable arguments were turning in the mortgage industry's favor and that the statute of limitations issue may soon be a thing of the past in Florida,” see Insight: Mortgage Banking (November 10, 2015), we are still not ready to “count our chickens” on this one. The Fifth District Court of Appeal's decision in U.S. Bank, N.A. v. Bartram, 140 So.3d 1007 (Fla. 5th DCA 2014) (holding that new defaults after dismissal of a foreclosure action give rise to new causes of action), is still under review by the Florida Supreme Court. With four of the five District Courts of Appeal now having addressed the issue and with all of them now singing the same tune, we fully anticipate that the Florida Supreme Court will either affirm Bartram or decline to issue any opinion at all. However, given that four of the ten judges on the Third District Court of Appeal disagreed with the en banc decision in Beauvais, there clearly continues to be some level of disagreement with the general consensus on the statute of limitations issue. Therefore, while we will sleep a little easier tonight, we will continue to keep one eye open until the Florida Supreme Court releases its decision in Bartram.