Consumer Finance Litigation

Florida's Third District Court of Appeal retreated from one of its most unpopular opinions this morning. The Third DCA surprised many with its original ruling in Deutsche Bank Trust Company Americas v. Beauvais ¸ 3D14-575 when it split with the Fourth District Court of Appeal and held that if a prior foreclosure is dismissed without prejudice, the statute of limitations continues to run from the date of the first foreclosure filing. In the year that followed, the Third DCA's Beauvais opinion was universally panned by the First, Fourth, and Fifth District Courts of Appeal and numerous federal courts alike. On rehearing en banc, in a sharply divided 5-4 ruling, the Third District Court of Appeal withdrew its prior opinion in Beauvais and substituted in its place an opinion which is largely in line with the opinions of its sister courts. The Court held: "We reverse because we, like our sister courts, find the Florida Supreme Court's decision in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004), applicable to the instant action, and that it mandates reversal. . . . We therefore conclude 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." Gone is the much maligned holding that the distinction between dismissal with, or without, prejudice is dispositive. Substituted in its place the Third DCA found: "Simply stated, the holding in Singleton cannot be distinguished away on a with prejudice/without prejudice distinction. Whether voluntarily dismissed or dismissed with or without prejudice the result is the same: upon dismissal, acceleration of a note and mortgage is abandoned with the parties returned 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." One issue that seems to be a new split is what allegations in a complaint are necessary to access these holdings. Does a complaint which alleges that a borrower has failed to pay the mortgage installments due over five years ago "and all payments due thereafter" trigger the holding? It seems that it should, insofar as the suit is predicated, at least in part, on installments within the last five years, assuming the loan did not mature over five years ago. Or is it necessary that every default alleged in the factual averments of the Complaint be within the last five years? The Third DCA has held that "all subsequent payments" language is enough: "It is the fact that the bank alleged the failure to pay the October 1, 2006 installment payment 'and all subsequent payments' that makes the instant case fall within the rule as set out herein." This seems to break with a contrary holding in the Fifth DCA opinion Hicks v. Wells Fargo Bank, N.A., 178 So. 3d 957, 959 (Fla. 5th DCA 2015), which did not find such language in the complaint sufficient. Finally, the Court also held that no affirmative act is necessary to "de-accelerate" the loan outside of dismissal to permit new non-time-barred causes of action to accrue: "There was no obligation on the bank to take any action to "decelerate" this loan following dismissal of the first foreclosure action because the mortgage itself confirms that the installment nature of the loan continues even after acceleration and the filing of a foreclosure action: [block quoting sections 19 and 12 of the uniform mortgage covenants, and section 6 of the note]." Much to the ire of borrower's counsel, the majority also drew solace that its holding was consistent with Florida and nationwide mortgage lending industry practice and interpretation. In a spirited dissent authored by Judge Scales, and joined by Judges Shepherd, Salter and Emas, the dissenters asserted that the contract does not provide for de-acceleration and is construed against the drafter. As such, where the lender announced its election to accelerate, such election can only be altered by the res judicata effect of a dismissal with prejudice. In the absence of such a res judicata effect, the prior acceleration remains in place and is the date the cause of action to foreclose the balance of the debt accrued. The issue is of course before the Florida Supreme Court in its review of the Fifth District Court of Appeal's Bartram decision, so the Third DCA's most recent opinion will not be the final word on the issue. That being said, the new found unanimity within the majority opinions of Florida's District Courts of Appeal, strongly suggests a favorable outcome is more likely in Bartram. The presence of such a spirited dissent in Beauvais however, cautions that the outcome in Bartram is far from assured. The Third DCA's most recent opinion can be found here: http://www.3dca.flcourts.org/Opinions/3D14-0575.rh.pdf