Impact of New Statute of Limitations Case Law
The following article authored by Michael Ziegler, PA was recently published in the Clearwater Bar Associations monthly newsletter.
For decades, practitioners could rely on well-established maximums to guide them in foreclosure law, such as “the mortgage follows the note.” After the advent of mortgage securitization, MERS, and other economic efficiencies, mortgage loan enforcement has become more dynamic, and the case law reflects the efforts of the courts to change with it. The most recent evolution applies to the statute of limitations.
The basic functionality of the statute of limitations is to prevent litigation of stale claims. For all civil claims, irrespective of how great the harm, the legislature has instructed us that we only have a limited time to pursue legal remedy – except for intentional acts resulting in death. For a claim based upon a written contract, litigants are afforded five years in Florida to pursue their remedy. Fla. Stat. 95.11.
The statute of limitations becomes more complicated with installment loans, including mortgage loans. For an installment loan, the aggrieved party has five years to collect on each missed payment until the loan matures. Once the loan has matured, the statute of repose gives the installment loan creditor a five-year “drop dead” opportunity to collect. Fla. Stat. 95.281. This renewing SOL gives the installment-loan creditor much longer to collect than their lump-sum creditor counterpart; however, the installment-loan creditor is also limited to collect on the missed installments. Conner v. Coggins, 349 So. 2d 780 (Fla. 1st DCA 1977). The exception to this rule is where the loan agreement allows the installment-loan creditor to accelerate the balance, in which case the installment-loan lender is effectively advancing the date of maturity and making the full balance due. Central Home Trust Co. v. Lippincott, 392 So. 2d 931 (Fla. 5th DCA 1980). Where a lender has accelerated the balance on the loan, the traditional line of thought was that the creditor is seeking to collect on the fully matured balance, and therefore has the same obligation as any other lump sum creditor to finish the job in five years. Monte v. Tipton, 612 So 2d 714, 716 (Fla. 2d DCA 1993).
Two recent opinions filed in the District Courts of Appeal seem to call the traditional SOL understanding into question: US Bank, N.A. v. Bartram, 5d12-3823 (Fla. 5th DCA April 25 2014) and Evergrene Partners v. Citibank, 4d13-2236 (Fla. 4th DCA June 25, 2014) (not yet final). Both cases rely on a Fla. Supreme Court case, Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004) which held that dismissal with prejudice in a mortgage foreclosure action does not necessarily bar, on res judicata grounds, a subsequent foreclosure action on the same mortgage even if the mortgagee accelerated the note in the first suit. Based on Singleton, the respective DCA cases held that a lender can foreclose on a new period of default to satisfy the SOL (even after the loan has been accelerated).
These cases create a benefit for mortgage lenders that is not provided for any other civil litigant: in effect, a mortgage lender can prosecute a case for the full balance of the loan as many times as they would like for the duration of a mortgage, plus five years.
There are some balancing considerations. The Evergene opinion is not yet final, and Bartram was certified to the Florida Supreme Court. So it is possible these decisions may yet be altered or superseded. Additionally, there is a conflicting decision in Spencer v. EMC Mortg. Corp., 97 So.3d 257 (Fla. 3d DCA 2012), where the Third District acknowledged that an accelerated loan was likely barred by the statute of limitations.
Until appellate courts provide clearer guidance, practitioners and court administration need to prepare for the impact that Bartram and Evergrene may have. Conceivably, foreclosure cases where the lender has unsatisfactory evidence could be litigated and re-litigated for more than 30 years during the life of a mortgage. Older cases for foreclosures and other installment loan debt that may have been years dismissed may now have an opportunity to come back to life. In an economic climate which would seemingly support finality in foreclosure cases, the Bartram and Evergene opinions may extend foreclosure case resolution for many years to come.