On November 3, in a case that was closely watched by industry participants, the Florida Supreme Court held that a mortgagor’s default that occurs after the dismissal of a prior foreclosure action in which the loan payments were accelerated resets the five-year statute of limitations for filing a subsequent foreclosure suit. In Bartram v. U.S. Bank, N.A., the court explained that dismissal of the initial foreclosure action 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.
In the case, the mortgagor, Bartram, stopped making mortgage payments in 2006, and the mortgagee, a bank, filed a foreclosure lawsuit and accelerated the payments due under the terms of the loan. Nearly five years later, the bank’s foreclosure action was involuntarily dismissed after the bank failed to appear at a case management conference. Approximately a year later, Bartram filed a cross-claim against the bank in a separate lawsuit seeking a declaratory judgment to cancel the mortgage and quiet title to the property. Bartram argued that the bank’s cause of action for default of future installment payments accrued upon acceleration in 2006, thus starting the five-year statute of limitations clock. Bartram argued that the bank never revoked its acceleration, and thus it was barred by the limitations period from bringing another foreclosure suit. The trial court sided with Bartram, but Florida’s Fifth District Court of Appeal reversed and held that “a default occurring after a failed foreclosure attempt creates a new cause of action for statute of limitations purposes.”
On appeal, the Florida Supreme Court affirmed the Fifth District. In so doing, the court relied on its 2004 decision in Singleton v. Greymar Associates, which held that each new default presents a separate cause of action for res judicata purposes. The court extended the holding in Singleton to the statute-of-limitations context, holding that “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.” With its ruling, the court put to rest an issue that had divided lower courts in interpreting Florida foreclosure law and brought much needed certainty for various stakeholders in the mortgage industry.