Consumer Finance Litigation

In Ros v. Lasalle Bank, N.A., et al., 14-CIV-22112-BLOOM/VALLE (S.D. Fla. July 18, 2014) the Southern District of Florida became the first United States District Court to apply the holding in Evergrene Partners, Inc. v. Citibank, N.A., 39 Fla. L. Weekly D1342 (Fla. 4th DCA 2014) regarding efforts quiet title of a mortgage based upon the alleged expiration of the statute of limitations for mortgage foreclosure. As discussed in previous posts, after a failed foreclosure lawsuit occurs, it has become common for borrowers to file quiet title suits which allege that the applicable five year statute of limitations for mortgage foreclosure has run on the whole debt because the foreclosure lawsuit purported to accelerate the debt. In Evergrene Partners, the Fourth District Court of Appeal held however, that since a cause of action for mortgage foreclosure can accrue for new defaults which occur after dismissal of the prior foreclosure, such allegations cannot state a claim for invalidation of a mortgage. In Ros, recently appointed United States District Court Judge Beth Bloom became the first to United States District Court to apply Evergrene Partners to dismiss, with prejudice, a complaint for quiet title based upon the statute of limitations theory. While much ink had already been spilled on the legal issues presented it the case, the decision in Ros is still notable for several reasons. First, the borrowers urged the Court to interpret Evergrene Partners as wrongly decided and in direct conflict with Spencer v. EMC Mortgage Corp., 97 SO. 3d 257 (Fla. 3d DCA 2012). Many borrowers cite to Spencer, but the decision had never been cited by any published judicial opinion available on Westlaw or Lexis. However, in footnote 4 of the Ros decision, the Court distinguished Spencer from both the instant case and Evergrene Partners, noting that the decision in Spencer occurred outside the context of a quiet title action and therefore Evergrene Partners and prior decisions in United States District Courts concerning motions to dismiss quiet title actions were more applicable to the quiet title issue. Second, while many borrowers in such quiet title actions assert that public policy favors elimination of mortgages (to prevent further re-litigation of foreclosure claims regarding mortgages years after the first payment default), few courts had engaged the issue. The decision in Ros however met these public policy arguments head on. The Court was not persuaded, noting that: "[t]o permit a mortgagor to wholly void a mortgage based on a prior unsuccessful foreclosure suit, despite continuing defaults, would nullify myriad mortgages, generating tremendous windfall for borrowers at the severe expense of lenders." The Court also declined to stay the case pending a ruling by the Florida Supreme Court on the legal issues raised. With Ros, the case law has firmly consolidated, in both state and federal court, around the position that efforts to quiet title based upon the alleged expiration of the statute of limitations cannot survive a motion to dismiss and should be dismissed with prejudice.