By: Tracy M. Evans, Esq., Associate, Saxon Gilmore & Carraway, P.A.

TracyEvans-cOn April 13, 2016, the Third District Court of Appeal (“Third DCA”) ruled that the five year statute of limitations does not ban a subsequent foreclosure action where a dismissed prior foreclosure suit was filed more than five years ago. The decision brings the Third DCA in line with other District Courts of Appeal in Florida, and provides further clarification and analysis on the unique nature of an installment contract, and how the statute of limitations applies.

Previously, a three judge panel of the Third DCA concluded that where a foreclosure complaint accelerating the entire debt is dismissed without an adjudication on the merits, the dismissal does nothing to affect the accelerated nature of the loan unless the lender affirmatively “decelerates” the loan by giving the borrower written notice that the lender is reinstating the installment terms of the contract post-dismissal. Where the lender takes no action to decelerate the loan post-dismissal, the entire balance of the loan remains due from the date of the filing of the dismissed lawsuit, and any subsequent lawsuit seeking to foreclose the loan not brought within five years of the prior suit is barred by the statute of limitations.

On rehearing, the entire Third DCA withdrew the panel’s decision, instead holding that dismissal of a prior foreclosure suit, regardless of the reason for the dismissal, returns the parties to the status quo before acceleration. Thus, no affirmative deceleration of the mortgage debt is required in order to reinstate the installment nature of the loan. Rather, the installment nature of the loan remains intact through the original acceleration and continues even after dismissal of the suit, regardless of whether the dismissal was the result of adjudication on the merits of the case.

The Third DCA wrote a lengthy opinion relying in large part on the Florida Supreme Court’s decision in Singleton v. Greymar Associates, 882 So.2d 1004 (Fla. 2004), which held that each missed installment payment of a mortgage note creates a new and separate default and an independent right in the mortgagee to accelerate payment in a subsequent foreclosure action. Thus, dismissal of a foreclosure action accelerating payment on one default, does not bar a subsequent action on a later default filed within five years of the subsequent default. Under Singleton, even a dismissal with prejudice which adjudicates the merits of the case, only precludes the lender from recovering on the particular installment default sued upon in that action, and does not bar foreclosure actions based on subsequent defaults.

The Third DCA also took into consideration the positions and arguments raised by a number of amicus briefs submitted by various interested parties including Fannie Mae, Freddie Mac, the Business Law Section of The Florida Bar, the Real Property Probate & Trust Section of The Florida Bar, the National Association of Consumer Advocates, the National Consumer Law Center, and the Jerome N. Frank Legal Services Organization at the Yale Law School. The Third DCA, considering the policy arguments in these briefs, concluded that its interpretation of the mortgage contract is in accord with standard mortgage industry practices, and serves the best interests of both lenders and borrowers. The Third DCA recognized that while other states may have reached different conclusions regarding this issue, the Florida Supreme Court has already made the determination in Singleton to reject those differing conclusions.

At the height of the mortgage foreclosure crisis, Florida courts and foreclosure firms were faced with a backlog of cases, many of which remained stagnant and were dismissed for lack of prosecution. Now that the tide of foreclosures has ebbed, these previously dismissed cases, many of which were filed over five years ago, are cycling back around and are being refiled based on new and subsequent defaults. The Third DCA’s decision helps ensure that lenders in these cases and future cases are not left with nullified mortgages, and can continue to pursue new and subsequent defaults occurring within the past five years, regardless of the disposition of prior foreclosure cases.


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