Consumer Finance Litigation

The Florida Third District Court of Appeal released an opinion which dramatically alters the landscape of foreclosure law in Florida. The opinion is Deutsche Bank Trust Company Americas, v. Harry Beauvais, et al., No. 3D14-575, and it rewrites much of what you thought you knew about the statute of limitations for mortgage foreclosure. Specifically, the opinion adopts an extremely narrow reading of the Fifth District Court of Appeal's ruling in Bartram v. U.S. Bank N.A., 140 So. 3d 1007 (Fla. 5th DCA 2014) and certifies conflict with the Fourth District Court of Appeal's ruling in Evergrene Partners, Inc. v. Citibank, N.A., 143 So. 3d 954 (Fla. 4th DCA 2014). Central to all of the above cases is the Florida Supreme Court's ruling in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004) which held that a subsequent foreclosure action was not barred by res judicata principals, even though a prior foreclosure action was dismissed with prejudice. The Court in Singleton reasoned that when a borrower prevails in a foreclosure action, the borrower and the lender are "simply placed back in the same contractual relationship with the same continuing obligations." Therefore, any failure to pay installments which come due after the conclusion of the prior foreclosure action constitute a new act of default and therefore create a new cause of action for foreclosure, unimpeded by any res judicata implications of the prior foreclosure effort. In Bartram, the Fifth District Court of Appeal extended the rationale in Singleton to the statute of limitations for mortgage foreclosure. The Court held that "a default occurring after a failed foreclosure attempt creates a new cause of action for statute of limitations purposes, even where acceleration had been triggered and the first case was dismissed on its merits." The Bartram opinion did not attach any significance to the issue of dismissal with prejudice. See Bartram, footnote1(concluding that "the distinction is not material for purposes of the issue at hand.") Therefore, it came as no surprise when the Fourth District Court of Appeal's Evergrene Parters opinion extended the Bartram rationale to instances of dismissal without prejudice. By contrast, the recent Third District Court of Appeal opinion in Beauvais holds that the distinction between dismissal with, and without prejudice, is crucial to a statute of limitations analysis. Specifically, the opinion in Beauvais states that: "In Bartram (as in Singleton), a new default (and therefore a new cause of action) existed only because the dismissal of the first action was with prejudice, constituting an adjudication on the merits and a determination that there was no valid acceleration. Here, by contrast, because the dismissal was without prejudice, there was no adjudication on the merits, and thus no determination regarding Deutsche Bank's acceleration of the debt in the Initial Action. Without an adjudication on the merits, the acceleration of the debt remained in place, meaning that the entire balance of the debt was and remained immediately due. Under those circumstances, there are no new payments due. Without any new payment due there could be no new default, and without a new default there could be no new cause of action." Therefore, the Court went on to hold that: "[U]nder the facts of this case, once Deutsche Bank accelerated the debt under the terms of the mortgage and note, and in the absence of a contractual reinstatement, modification by the parties, or an adjudication on the merits, the accelerated debt was not 'decelerated' by an involuntary dismissal without prejudice." This opinion sharply contradicts the holding of Evergrene Partners, for which the Third District Court of Appeal has certified a conflict. The Third District Court of Appeal seems to have accepted the proposition that in most cases (absent a separate independent act of acceleration prior to the foreclosure filing) the filing of a standard foreclosure complaint which purports to accelerate the debt is the date on which the cause of action for foreclosure of the entire debt accrues. Therefore, following dismissal without prejudice, a litigant would have five years from the date of its first filing to reinstitute foreclosure or else its cause of action for the entire accelerate debt will be time-barred. Following dismissal with prejudice, the Third District Court Appeal appears to have expressed its intent to follow Bartram that foreclosure based on subsequent acts of default is not time-barred merely by the filing and dismissal with prejudice of a prior foreclosure action. For additional information, click to read "Third DCA Issues Opinion Today Defining When and How Acceleration Occurs and Addressing Nature of Contractual Conditions Precedent to Acceleration."