Lead Opinion
The issue before the Court involves the application of the five-year statute of limitations to “[a]n action to foreclose a mortgage” pursuant to section 95.11(2)(c), Florida Statutes (2012).
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?
We have jurisdiction. See art. V, § 3(b)(4), Fla. Const.
In this case, it is uncontroverted that the borrower, Lewis Brooke Bartram, also referred to as the mortgagor, stopped making payments on his $650,000 mortgage and note, both before and after the foreclosure action was brought and subsequently dismissed. For the reasons set forth in this opinion, we answer the rephrased certified question in the negative and hold, consistent with our reasoning in Singleton, that the mortgagee, also referred to as the lender, was not precluded by the statute of limitations from filing a subsequent foreclosure action based on payment defaults occurring subsequent to the dismissal of the first foreclosure action, as long as the alleged subsequent default occurred within five years of the subsequent foreclosure action. When a mortgage foreclosure action is involuntarily dismissed pursuant to Rule 1.420(b), either with or without prejudice, the effect of the involuntary dismissal is revocation of the acceleration, which then reinstates the mortgagor’s right to continue to make payments on the note and the right of the mortgagee, to seek acceleration and foreclosure based on the mortgagor’s subsequent defaults. Accordingly, the statute of limitations does not continue to run on the amount due under the note and mortgage.
Absent a contrary provision in the residential note and mortgage, dismissal of the foreclosure action against the mortgagor has the effect of returning the parties to their pre-foreclosure complaint status, where the mortgage remains an installment loan and the mortgagor has the right to continue to make installment payments without being obligated to pay the entire amount due under the note and mortgage. Accordingly, we approve the Fifth District’s opinion in U.S. Bank National Association v. Bartram,
FACTS AND PROCEDURAL BACKGROUND
On November 14, 2002, Petitioners Lewis Bartram (“Bartram”) and his then-wife
In order to comply with the divorce court’s order, on February 16, 2005, Bar-tram obtained a $650,000 loan through Finance America, LLC, secured by a mortgage on the Property in favor of Mortgage Electronic Registration Systems, Inc., in its capacity as nominee for Finance America (the “Mortgage”). Finance America subsequently assigned the Mortgage to Respondent, U.S. Bank National Association (the “Bank”), as trustee and assignee. A day later, on February 17, 2005, Bar-tram executed a second mortgage (the “Second Mortgage”) to Patricia as security for a second mortgage note of $120,000.
The Mortgage was a standard residential form mortgage and required the lender to give the borrower notice of any default and an opportunity to cure before the mortgagee could proceed against the secured property in a judicial foreclosure action. Specifically, paragraph 22 of the Mortgage was an optional acceleration clause and provided that the lender was required to give the borrower notice that failure to cure the default “may result in acceleration of the sums secured” by the mortgagee and foreclosure of the property:
Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may foreclose this Security Instrument by judicial proceeding. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence.
(Emphasis added).
In addition to providing optional acceleration and foreclosure as a remedy for default, paragraph 19 of the Mortgage also granted the borrower a right to reinstate the note and Mortgage after acceleration if certain conditions were met, including paying the mortgagee all past defaults and other related expenses that would be due “as if no acceleration had occurred”:
Borrower’s Right to Reinstate After Acceleration. If Borrower meets certain conditions, Borrower shall have the right*1014 to have enforcement of this Security Instrument discontinued at any time prior to the earliest of: (a) five days before sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable Law might specify for the termination of Borrower’s right to reinstate; or (c) entry of a judgment enforcing this Security Instrument. Those conditions are that Borrower: (a) pays Lender all sums which then would be due under this Security Instrument and the Note as if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, reasonable attorneys’ fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting Lender’s interest in the Property and rights under this Security Instrument; and (d) takes such action as Lender may reasonably require to assure that Lender’s interest in the Property and rights under this Security Instrument, and Borrower’s obligation to pay the sums secured by this Security Instrument, shall continue unchanged. Lender may require that Borrower pay such reinstatement and expenses in one or more of the following forms, as selected by Lender: (a) cash; (b) money order; (c) certified check, bank check, treasurer’s check or cashier’s check, provided any such check is drawn upon an institution whose deposits are insured by a federal agency, instrumentality or entity; or (d) Electronic Funds Transfer. Upon reinstatement by Borrower, this Security Instrument and obligations secured hereby shall remain fully effective as if no acceleration had occurred. However, this right to reinstate shall not apply in the case of acceleration under Section 18.4
(Emphasis added). The designated maturity date of the note was March 1, 2035.
On January 1, 2006, Bartram stopped making payments on the Mortgage, and never made payments on the Second Mortgage. Around the same time, Bartram also stopped paying homeowners’ association assessments to the Plantation at Ponte Vedra, Inc. (the “HOA”), the homeowners’ association of the development where the Property was located. The HOA subsequently placed a lien on the Property for nonpayment of the HOA assessments.
On May 16, 2006, the Bank filed a complaint to foreclose the Mortgage based on Bartram’s failure to make payments due from January of that year to the date of the complaint. The foreclosure complaint stated that all conditions precedent to the acceleration of the Mortgage and to the foreclosure of the Mortgage had been fulfilled or had occurred, and declared the full amount payable under the note and Mortgage to be due. Nearly five years later, on May 5, 2011, the foreclosure action was involuntarily dismissed after the Bank failed to appear at a case management conference.
Following the dismissal of the foreclosure action, Bartram filed a motion to cancel the promissory note and release the lien on the mortgage. The trial court denied the motion in an order dated August
Approximately a year later, after the dismissal of the foreclosure action and almost six years after the Bank filed its foreclosure complaint, Bartram filed a crossclaim against the Bank in a separate foreclosure action Patricia had brought against Bartram, the Bank, and the HOA. Bartram’s crossclaim sought a declaratory judgment to cancel the Mortgage and to quiet title to the Property, asserting that the statute of limitations barred the Bank from bringing another foreclosure action.
Bartram then moved for summary judgment on his crossclaim. The trial court found no genuine issue as to any material fact, granted summary judgment, quieted title in Bartram, found the Bank had no further ability to enforce its rights under the note and Mortgage that were the subject matter of the Bank’s dismissed foreclosure action, and cancelled the note and Mortgage. In doing so, the trial court released the Bank’s lien on the Property. The Bank subsequently filed a motion for rehearing, and after the trial court denied the Bank’s motion, appealed to the Fifth District.
Before the Fifth District, the Bank relied on this Court’s decision in Singleton for its position that the trial court’s dismissal “nullified [the Bank’s] acceleration of future payments; accordingly, the cause of action on the accelerated payments did not accrue and the statute of limitations did not begin to run on those payments, at least until default occurred on each installment.” Bartram,
The Fifth District agreed with the Bank and held that if a “new and independent right to accelerate” exists in a res judicata analysis under Singleton,
ANALYSIS
The rephrased certified question involves a pure question of law. There
I. Singleton v. Greymar Associates
In Singleton, a mortgagee brought two consecutive foreclosure actions against a mortgagor.
The mortgagor appealed, and “the Fourth District affirmed the circuit court’s decision, finding that ‘[e]ven though an earlier foreclosure action filed by appellee was dismissed with prejudice, the application of res judicata does not bar this lawsuit. The second action involved a new and different breach.’ ” Id. (citing Singleton v. Greymar Assocs.,
Stadler also involved two successive foreclosure actions where the first foreclosure action had been dismissed with prejudice.
After analyzing the position of the two appellate courts, this Court agreed with the Fourth District that “when a second and separate action for foreclosure is sought for a default that involves a separate period of default from the one alleged in the first action, the case is not necessarily barred by res judicata.” Singleton,
Our reading of the case law set out above leads us to conclude that a final adjudication in a foreclosure action that also prays for a deficiency judgment on the underlying debt may, but does not necessarily, bar a subsequent action on the debt. For instance, if the plaintiff in a foreclosure action goes to trial and loses on the merits, we do not believe such plaintiff would be barred from filing a subsequent foreclosure action based upon a subsequent default. The adjudication merely bars a second action relitigating the same alleged default. A dismissal with prejudice of the foreclosure action is tantamount to a judgment against the mortgagee. That judgment means that the mortgagee is not entitled to foreclose the mortgage. Such a ruling moots any prayer for a deficiency, since a necessary predicate for a deficiency is an adjudication of foreclosure. There was no separate count in the Capital Bank complaint seeking a separate recovery on the promissory note alone.
Accordingly, we do not believe the dismissal of the foreclosure action in this case barred the subsequent action on the balance due on the note.
Singleton,
Our holding in Singleton was based on the conclusion that an “acceleration and foreclosure predicated upon subsequent and different defaults present a separate and distinct issue” than a foreclosure action and acceleration based on the same default at issue in the first foreclosure action. Id. Indeed, we cited with approval another decision of the Fourth District, Olympia Mortgage Corp. v. Pugh,
This seeming variance from the traditional law of res judicata rests upon a recognition of the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship. For example, we can envision many instances in which the application of the Stadler decision would result in unjust enrichment or other inequitable results. If res judicata prevented a mortgagee from acting on a subsequent default even after an earlier claimed default could not be established, the mortgagor would have no incentive to make future timely payments on the note. The adjudication of the earlier default would essentially insulate her from future foreclosure actions on the note— merely because she prevailed in the first action. Clearly, justice would not be served if the mortgagee was barred from challenging the subsequent default payment solely because he failed to prove the earlier alleged default.
Singleton,
Our recognition in Singleton that each new default presented a separate cause of action was based upon the acknowledgement that because foreclosure is an equitable remedy, “[t]he ends of justice require that the doctrine of res judicata not be applied so strictly so as to prevent mortgagees from being able to challenge multiple defaults on a mortgage.” Id. at 1008. Thus, the failure of a mortgagee to foreclose the mortgage based on an alleged default did not mean the mortgagor had automatically and successfully defeated his
II. Mortgage Foreclosure Cases Post-Singleton: Application to Statute of Limitations Context
In cases concerning mortgage foreclosure actions, since our decision in Singleton, both federal and state courts have applied our reasoning in Singleton in the statute of limitations context and have concluded that because of “the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship,” an “adjudication denying acceleration and foreclosure” does not bar subsequent foreclosure actions based on separate and distinct defaults. See id. at 1007. As the Fourth District explained, under Singleton, a “new default, based on a different act or date of default not alleged in the dismissed action, creates a new cause of action.” Star Funding Sols., LLC v. Frondes,
Other district courts of appeal have similarly applied our reasoning in Singleton to determine that the five-year statute of limitations did not bar a subsequent foreclosure action when the mortgagee had brought an initial foreclosure action that accelerated all sums due under the mortgage and note, on that same mortgage outside the statute of limitations window. For instance, in Deutsche Bank Trust Co. Americas v. Beauvais,
With reasoning similar to Beauvais, in Evergrene Partners, Inc. v. Citibank, N.A.,
Federal district courts in the state have also applied Singleton to dismiss claims seeking cancellation of a mortgage and note that are premised on the expiration of the statute of limitations after an initial
Similarly, in Torres v. Countrywide Home Loans, Inc., No. 14-20759-CIV,
We agree with the reasoning of both our appellate courts and the federal district courts that our analysis in Singleton equally applies to the statute of limitations context present in this case. As the Fifth District concluded, “[i]f a ‘new and independent right to accelerate’ exists in a res judicata analysis, there is no reason it would not also exist vis-á-vis a statute of limitations issue.” Bartram,
Consistent with the reasoning of Singleton, the statute of limitations on the balance under the note and mortgage would not continue to run after an involuntary dismissal, and thus the mortgagee would not be barred by the statute of limitations from filing a successive foreclosure action premised on a “separate and distinct” default. Rather, after the dismissal, the parties are simply placed back in the same contractual relationship as before, where the residential mortgage remained an installment loan, and the acceleration of the residential mortgage declared in the unsuccessful foreclosure action is revoked.
III. Significance of an Involuntary Dismissal and Reinstatement Provision
Having reaffirmed our prior holding in Singleton and the application of its reasoning to a statute of limitations context, we finally consider whether the type of dismissal of a foreclosure action has any bearing on our analysis and the effect of the Mortgage’s reinstatement provision. In this case, the first foreclosure action was dismissed pursuant to Florida Rule of Civil
The Fifth District determined that the involuntary dismissal was with prejudice but concluded that “the distinction is not material for purposes” of the statute of limitations analysis. See Bartram,
Whether the dismissal of the initial foreclosure action by the court was with or without prejudice may be relevant to the mortgagee’s ability to collect on past defaults. However, it is entirely consistent with, and follows from, our reasoning in Singleton that each subsequent default accruing after the dismissal of an earlier foreclosure action creates a new cause of action, regardless of whether that dismissal was entered with or without prejudice.
Our conclusion is buttressed by the reinstatement provision of the Residential Mortgage that by its express ta-ms granted the mortgagor, even after acceleration, the continuing right to reinstate the Mortgage and note by paying only the amounts past due as if no acceleration had occurred. Specifically, the reinstatement provision in paragraph 19 of Bartram’s form residential mortgage gave Bartram “the right to have enforcement of this Security Instrument discontinued at any time prior to the earliest of ... (c) entry of a judgment enforcing this Security Instrument,” as long as Bartram “(a) pa[id] the Lender all sums which then would be due under this Security Instrument and Note as if no acceleration had occurred.”
Under the reinstatement provision of paragraph 19, then, even after the optional acceleration provision was exercised through the filing of a foreclosure action— as it was in this case—the mortgagor was not obligated to pay the accelerated sums due under the note until final judgment was entered and needed only to bring the loan current and meet other conditions— such as paying expenses related to the enforcement of the security interest and meeting other requirements established by the mortgagee-lender to ensure the mortgagee-lender’s interest in the property would remain unchanged—to avoid foreclosure. “Stated another way, despite acceleration of the balance due and the filing of an action to foreclosure, the installment
Accepting Bartram’s argument that the installment nature of his contract terminated once the mortgagee attempted to exercise the mortgage contract’s optional acceleration clause—ignoring the existence of the mortgage’s reinstatement provision—would permit the mortgagee only one opportunity to enforce the mortgage despite the occurrence of any future defaults. As we cautioned in Singleton, “justice would not be served if the mortgagee was barred from challenging the subsequent default payment solely because he failed to prove the earlier alleged default.”
IY. This Case
Here,.the Bank’s first foreclosure action was involuntarily dismissed, and therefore there was no judicial determination that a default actually occurred. Thus, even if the note had been accelerated through the Bank’s .foreclosure complaint, the dismissal of the foreclosure action had the effect of revoking the acceleration. By the express terms of the reinstatement provision, if, in the month after the dismissal of the foreclosure action, Bartram began to make monthly payments on the note, the Bank could not have subsequently accelerated the entire note until there were future defaults. Once there were future defaults, however, the Bank had the right to file a subsequent foreclosure action—and to seek acceleration of all sums due under the note—so long as the foreclosure action was based on a subsequent default, and the statute of limitations had not run on that particular default.
There have been many claims of unfair and predatory practices by banks and mortgage holders in the aftermath of the financial crisis that shook the country, and in particular, Florida. See, e.g., Pino v. Bank of N.Y.,
CONCLUSION
The Fifth District properly extended our reasoning in Singleton to the statute of limitations context in a mortgage foreclosure action. Here, the Bank’s initial foreclosure action was involuntarily dismissed. Therefore, as we previously explained in Singleton, the dismissal returned the parties back to “the same contractual relationship with the same continuing obligations.”
Accordingly, we approve the Fifth District’s decision in Bartram and answer the rephrased certified question in the negative.
It is so ordered.
Notes
. In addition to the briefs of the parties, we have also reviewed briefs submitted on behalf of the parties by the following amici curiae: the U.S. Financial Network, the Mortgage Bankers Association and the American Legal and Financial Network on behalf of Respondent and Bradford and Cheri Langworthy and the Titcktin Law Group, P.A., Baywinds Community Association, Upside Property Investment, LLC, the Florida Alliance for Consumer Protection, the Community Associations Institute, and the National Association of Consumer Advocates on behalf of Bartram.
. Our holding is consistent with the views of the excellent amici briefs submitted by the Real Property Probate & Law Section of The Florida Bar, The Business Law Section of The Florida Bar, and the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation at the request of the Third District in Deutsche Bank Trust Co. Americas v. Beauvais,
. Gideon Gratsiani was substituted as a party by order of this Court after Gratsiani purchased Patricia Bartram’s mortgage.
. Paragraph 18 concerned the transfer of the mortgaged property in a real estate sale without the Lender’s "prior written consent,” and required "immediate payment in full of of all sums secured by this Security Instrument” if breached.
. The Record does not indicate what action occurred, if any, in the first foreclosure action from the date the complaint was filed in 2006 until it was dismissed in 2011.
. On May 24, 2012, Bartram filed a motion for default against the Bank for failure to respond to his crossclaim, but the trial court never ruled on this motion.
Concurrence Opinion
concurring in result only.
I am troubled by the expansion of Singleton v. Greymar Associates,
[T]he Supreme Court omitted explanation of 1) what constitutes a valid new default after the initial round of default, acceleration, foreclosure filing, and dismissal; 2) how the fact-finder below determines that a valid new default has occurred; and 3) what conditions constitute valid new default, including whether the lender must reinstate the original note and mortgage terms in the interim or serve a second notice of intent to accelerate. Moreover, the court in no way addressed the effect of the involuntary dismissal on the statute of limitations.
Andrew J. Bernhard, Deceleration: Restarting the Expired Statute of Limitations in Mortgage Foreclosures, Fla. B.J., Sept.-Oct.2014, at 30, 32. Given the procedural posture of this matter and the relatively sparse record before this Court, the decision today fails to address eviden-tiary concerns regarding how to determine the manner in which a mortgage may be reinstated following the dismissal of a foreclosure action, as well as whether a valid “subsequent and separate” default occurred to give rise to a new cause of action. See Singleton,
In this case, there is no evidence contained in the record before this Court to show whether the parties tacitly agreed to a “de facto reinstatement” following the dismissal of the previous foreclosure action.
Instead, I find myself more closely aligned with the dissenting opinion of Judge Scales in Beauvais,
First, Judge Scales pointed out that the mortgage in Beauvais, like the mortgage in this case, created the borrower’s right to reinstatement only under specific conditions, which did not include dismissal of a prior foreclosure action. Id. at 956-57 (“Neither the note nor the mortgage contain any provision reinstating the installment nature of the note if, after acceleration, a lender foreclosure action is dismissed.”). Further reviewing the clear terms of the mortgage, Judge Scales explained that the mortgage ceased to be an installment contract upon the exercise of the lender’s right to acceleration. Id at 961-62. Thus, the conclusion that a court’s dismissal of a foreclosure action itself can end acceleration and reinstate the mortgage ignores basic principles of Florida contract law:
The majority opinion rewrites the parties’ note and mortgage to create a reinstatement provision—i.e., reinstating the installment nature of the note, as if acceleration never occurred, upon any dismissal of any lawsuit—that the parties did not include when drafting their documents. Singleton does not say this; the parties’ contract documents certainly do not say this; and Florida law is repugnant to the majority’s insertion of a provision into the parties’ private contract that the parties themselves most assuredly omitted. [FN. 23]
[FN. 23]: Brooks v. Green,993 So.2d 58 , 61 (Fla. 1st DCA 2008) (holding that a court is without authority to*1025 rewrite a clear and unambiguous contract between parties).
Id. at 963.
Moreover, Judge Scales cogently explained that the overbroad construction of Singleton will undermine its limited holding. Singleton indicated that “an adjudication denying acceleration and foreclosure” should not bar a successive foreclosure predicated upon a “subsequent and separate alleged default.”
Finally, the expansion of Singleton’s holding that res judicata “does not necessarily” bar the filing of successive foreclosure actions to the statute of limitations ignores critical distinctions between these two doctrines, at a serious cost to the statute of limitations and the separation of powers. As long recognized in this State, res judicata is a doctrine of equity not to “be invoked where it would defeat the ends of justice.” Id. at 967 n. 31 (citing State v. McBride,
I recognize the concern raised by this Court and others regarding the need to avoid encouraging delinquent borrowers from abusing the lending process by remaining in default after an initial foreclosure action is dismissed. See Singleton,
. Moreover, the precise nature of the dismissal in this case is even more uncertain than the mortgage in Beauvais, which was dismissed without prejudice. See Deutsche Bank Tr. Co. Americas v. Beauvais,
. The mortgage note provides the following right to reinstatement:
Borrower’s Right to Reinstate After Acceleration. If Borrower meets certain conditions, Borrower shall have the right to have enforcement of this Security Instrument discontinued at any time prior to the earliest of: (a) five days before sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable Law might specify for the termination of Borrower’s right to reinstate; or (c) entry of a judgment enforc*1024 ing this Security Instrument. Those conditions are that Borrower: (a) pays Lender all sums which then would be due under this Security Instrument and the Note as if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, reasonable attorneys' fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting Lender’s interest in the Property and rights under this Security Instrument; and (d) takes such action as Lender may reasonably require to assure that Lender’s interest in the Property and rights under this Security Instrument, and Borrower’s obligation to pay the sums secured by this Security Instrument, shall continue unchanged. Lender may require that Borrower pay such reinstatement and expenses in one or more of the following forms, as selected by Lender; (a) cash; (b) money order; (c) certified check, bank check, treasurer’s check or cashier's check, provided any such check is drawn upon an institution whose deposits are insured by a federal agency, instrumentality or entity; or (d) Electronic Funds Transfer. Upon reinstatement by Borrower, this Security Instrument and obligations secured hereby shall remain fully effective as if no acceleration had occurred. However, this right to reinstate shall not apply in the case of acceleration under Section 18.
See majority op. at 1013-14.