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Mortgage Disputes Make It to the Florida Supreme Court

By Keith Gaudioso

The Florida Supreme Court will soon rule on a major mortgage issue that has previously come up in Florida’s First, Fourth, Fifth and, most recently, Third District Courts. This ruling could impact many home owners in Florida , especially those in dire financial straits.

In April 2016, the District Court of Appeal of Florida, Third District, en banc, held in Deutsche Bank Trust Company Americas v. Beauvais[1] that dismissal of a foreclosure action with or without prejudice returns the parties to their prior positions.  The significance of this holding is that an acceleration by the bank in the dismissed action is treated as if it never occurred, and the lender is free to institute foreclosure on any monthly default occurring after the default sued upon in the dismissed action.

Mortgage notes are installment contracts and, under Florida law, each unpaid monthly installment is a distinct default.[2]  The five-year statute of limitations to institute an action on a written contract runs from each distinct default.[3]  However, where an installment contract gives the payee the option to accelerate all sums due upon a default, and the payee exercises that option by accelerating the contract, the five-year statute of limitations runs on the entire balance due from the date of acceleration.[4]

The housing market crash overwhelmed lenders who had to deal with an unprecedented number of defaults.  As a result, many foreclosure actions were dismissed without prejudice due to the lender’s failure to prosecute or failure to appear for a pre-trial conference.  After dismissal of the initial foreclosure, the lender or a successor in interest would subsequently re-file for foreclosure, often more than five years after acceleration in the initial action.  In such cases, the lender would face a statute of limitations defense.

In Beauvais, a three-judge panel of the Third District Court of Appeal held that Deutsche Bank’s second suit, instituted more than five years after the initial acceleration in the dismissed foreclosure, was barred by the statute of limitations.  On rehearing, the full Court reversed, concluding that dismissal of a foreclosure action accelerating payment on one default does not bar a subsequent foreclosure action on a later default.  The ruling brings the Third District in line with its sister courts in the First,[5] Fourth[6] and Fifth[7] Districts.  This issue is presently before the Florida Supreme Court in U.S. Bank Ass’n v. Bartram,[8] which was argued in November 2015.

 

[1] 188 So. 3d 938 (Fla. 3d DCA 2016).

[2] Greene v. Bursey, 733 So. 2d 1111 (Fla. 4th DCA 1999).

[3] Fla. Stat. § 95.11(2)(b).

[4] Monte v. Tipton, 612 So. 2d 714, 716 (Fla. 2d DCA 1993).

[5] Nationstar Mortg., LLC v. Brown, 175 So. 3d 833 (Fla. 1st DCA 2015).

[6] Evergreen Partners, Inc. v. Citibank, N.A., 143 So. 3d 954 (Fla. 4th DCA 2014).

[7] Hicks v. Wells Fargo Bank, N.A., 178 So. 3d 957 (Fla. 5th DCA 2015).

[8] 140 So. 3d 1007 (Fla. 5th DCA 2014).

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