It is double-down time at the Florida Supreme Court! 

            Yesterday the Supreme Court issued its long-awaited decision concerning the impact of a lender’s acceleration of a note and mortgage when the lender’s foreclosure suit is later dismissed in Bartram v U.S. Bank National Association, Case No. SC14-1265, (Fla. November 3, 2016). 

            In short summary of a perhaps complex scenario, if the loan documents provide for acceleration to be effective upon the entry of judgment, if the lender accelerates note installments, and if thereafter the lender’s foreclosure lawsuit is involuntarily dismissed pursuant to Rule 1.420(B), then the 5 year statute of limitations does not bar a second foreclosure suit so long as there is a “new” installment default occurring after the dismissal of the first lawsuit and within five years of filing of the second lawsuit.

            The Supreme Court approved the intermediate appellate court’s decision in U. S. Bank National Ass’n v. Bartram, 147 So. 3d 1007 (Fla. 5^th DCA, 2014) which was addressed in this author’s Condomania posting on April 24, 2014.  The facts leading to the decision are relatively unexceptional and are summarized as follows:

            2005, February.  Bartram provided a mortgage for $650,000.00.

2006, January.  Mortgage in default.

2006, May,  Lender files first foreclosure complaint,

2011, May 5, Foreclosure involuntarily dismissed pursuant to Fla.R.Civ.P. Rule 1.420(d).

2012.  In a second mortgage foreclosure lawsuit, Bartram files a cross-claim seeking to cancel the mortgage and to quiet title (The decision does not state the date the second lawsuit was filed).

The trial court granted Bartram’s motion for summary judgment cancelling the note and mortgage and releasing plaintiff’s lien against the property.

            In response to the Fifth District Court of Appeal’s certified question, the Supreme Court rephrased the question as follows:

DOES ACCELERATION OF PAYMENTS DUE UNDER A RESIDENTIAL NOTE AND MORTGAGE WITH A REINSTATEMENT PROVISION IN A FORECLOSURE ACTION THAT WAS DISMISSED PURSUANT TO RULE 1.420(B), FLORIDA RULES OF CIVIL PROCEDURE, TRIGGER APPLICATION OF THE STATUTE OF LIMITATIONS TO PREVENT A SUBSEQUENT FORECLOSURE ACTION BY THE MORTGAGEE BASED ON PAYMENT DEFAULTS OCCURRING SUBSEQUENT TO DISMISSAL OF THE FIRST FORECLOSURE SUIT?

The Supreme Court answered the question in the negative. 

            The introductory reference to doubling down refers to the Court’s reinforcement of the holding in Singleton v. Greymar Associates, 882 2d 1004 (Fla. 2014).  In particular, acceleration of mortgage installments in a foreclosure does not place future installments at issue when “standard” loan documents are utilized.  Critical to the analysis is the unique status of an installment payment secured by a mortgage, and the actual text of the mortgage allowing acceleration. 

            Singleton addressed the res judicata impact after dismissal upon a subsequent foreclosure suit for the same installments.  This decision extends Singleton, to the statute of limitations realm.  Thus, dismissal of an initial foreclosure action does not bar a new lawsuit based upon subsequent installment defaults. Each default of an installment creates a new cause of action.  Of course, the new defaults must be within the statute of limitations period.

            Importantly, the Court analyzed the mortgage’s actual words, quoting extensively from the loan documentation.  The Court also relied heavily upon the recently published Deutsche Bank Trust Co. Americas v Beauvais, 198 So. 3d 938 (Fla. 3 DCA 2016).  In Beauvais, you will recall that the Third District undertook a close textural analysis of the loan documents.  Reading the documents, it was discovered that the acceleration clause is contingent upon the language of the loan documents which should not be a surprise.  As in Beauvais, Mr. Bartram’s loan documents provided that acceleration is final only upon the entry of final judgment. 

            While not highlighting the term “equity”, the Court did undertake an alternative review applying an equity analysis.  It would not meet “the ends of justice” to bar Appellant from pursuing a foreclosure after initial dismissal.  The Court expressly seeks to put the parties back into the same position they were before the foreclosure was initiated.  In the realm of equity, the Court also recognized that although there have been many allegations of unfair bank practices in other lawsuits by other borrowers, this borrower, Bartram, did not raise any such defense in this regard. 

            Justice Lewis concurred, but strenuously objected to the unbridled extension of Singleton. He also pointed out the discrepancy between the majority opinion and the loan documentation, writing that the documentation reinstatement provisions require the borrower to undertake action as opposed to the majority concluding that reinstatement occurred upon issuance of a dismissal.

            This decision should now provide some finality as to the acceleration issue, at least to the extent that “standard” loan documents are utilized, and defaults of individual installments are within the limitations period.  Recognizing that there is not a statutory set of forms, parties must remain vigilant as to the contents of the documents, at the drafting, negotiation, execution, breach and enforcement stages.  There may be more give and take as acceleration, and especially de-acceleration provisions are negotiated, if there the borrower actually has any negotiating power.

            This decision raises a question as to the ultimate purpose and viability of the concept of the statute of limitations.  It can always be said that limitations does provide a windfall for a defendant, based solely on the passage of time; however, is it not the exact purpose of a statute of limitations to force a claimant to action so that the courts are not clogged with stale claims and to allow a debtor to move forward without constantly looking over his or her shoulder?  The concept literally harkens back to biblical texts encouraging that at some point a debtor is entitled to a clean slate.  While it can be said that each installment of a note is properly the basis for a separate claim in the foreclosure context, it is questioned whether the Court intended the very broad implications of its option that limitations should not allow a windfall.  This point is raised because that broad implication does not appear justified in other contexts and is counter to the policy of statutes of limitations.

            It must be highlighted that the Supreme Court called out the “excellent amici briefs submitted by the Real Property Probate & Law Section of The Florida Bar...”!!  Kudos to the Section’s Amicus Committee, especially the primary drafter of the Section’s brief, co-chair John W. Little of West Palm Beach!

            Many thanks to Doug Christy, Brian Leebrick and Susan Spurgeon for swiftly identifying and providing the decision. 

            Best for a great weekend.  Remember to vote!

Michael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

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Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2016 Michael J. Gelfand