Consumer Finance Litigation

In Hicks v. Wells Fargo, 5D14-1748, Florida's Fifth District Court of Appeal issued the first appellate opinion to pass on the proper method of pleading a re-filed foreclosure where a prior foreclosure effort was dismissed and certain defaults are now outside the five year statute of limitations for mortgage foreclosure. The facts of the case were as follows: a foreclosure complaint was filed in September 8, 2006 premised on the borrowers' alleged failure to make the June 1, 2006 payment. The complaint was voluntarily dismissed in 2008. A new notice of default was sent in 2011 utilizing the same default date, January 1, 2006. A second foreclosure complaint was filed on January 9, 2013, and again alleged the borrowers' failure to make the June 1, 2006, "and all subsequent payments." The Fifth DCA held that because the new complaint did not allege a different default than the prior foreclosure, but rather sought to again foreclose based on a default from June 1, 2006, the new complaint should have been dismissed because it did not seek to foreclose within the applicable five year statute of limitations. However, the Fifth DCA held that each missed payment created a new cause of action for foreclosure, and that a cause of action premised on a different default not previously sued upon could provide the basis for a new foreclosure if filed within the applicable statute of limitations. The Fifth DCA also held that the voluntary dismissal of the prior complaint meant that the "the loan was no longer in a state of acceleration." This holding is a rebuke to arguments popularized following the Third DCA's opinion in Deutsche Bank Trust Co. Americas v. Beauvais, No. 3D14-575, 2014 WL 7156961 (Fla. 3d DCA Dec. 17, 2014), that a dismissal without prejudice did not serve to undue the lender's prior election to accelerate. The Third DCA's opinion in Beauvais is currently on rehearing en banc with the full Third DCA. Unless the Fifth DCA's opinion in Hicks is withdrawn or superseded, it would be prudent to expressly include language in re-filed foreclosures that the suit is premised on new and subsequent payment defaults which occurred after the termination of any prior foreclosure efforts and fall within the applicable statute of limitations. Barring averments in the complaint of a new and subsequent act of default, the holding of the Fifth DCA in Hicks suggests that such foreclosures should be dismissed without prejudice. Ultimately, however, the opinion in Hicks raises more questions than it answers. Why didn't the inclusion of the language "and all subsequent payments" in the re-filed foreclosure necessarily sue upon defaults within the five year statute of limitations that were not previously sued upon in the prior dismissed action? Is the problem that by such an averment the lender suing for all defaults, and not just those within the limitations period? And in a re-filed action, can the lender recover all the accelerated payments, or only those within five years of the filing which makes the election to accelerate? The Hicks opinion provides no answers to these questions. The case also contained a fact favorable to the lender that may not be present in many presently pending re-filed foreclosures, which is that a new notice of default and intent to accelerate delivered to the borrower after the dismissal of the first foreclosure. However, the Court did not speak to the content of the notice or whether such a new notice was necessary or simply overkill in light of prior notices of default. Such questions will certainly provide fodder for future appeals as the fractured case law on Florida's statute of limitations for mortgage foreclosure continues the slow process of coalescing into settled legal principals. A copy of the slip opinion released in Hicks is available here.