Property Law Legal Research Blog CIVIL PROCEDURE: Effect of Dismissals Without Prejudice in Mortgage Foreclosure Suits Posted

by Andrea
Stokes on Tue, Jul 12, 2016 @ 16:07 PM inShare0 Andrea Stokes, Senior Attorney, National Legal Research Group Most practitioners are aware of the
potential problems and limitations associated with the use of voluntary dismissal without prejudice. Less well known, perhaps, is the limitation on
refiling an action after more than one involuntary dismissal without prejudice, particularly in the mortgage foreclosure context. Florida Rule of Civil
Procedure 1.420(b), addressing involuntary dismissals, provides that [u]nless the court in its order for dismissal otherwise specifies, a dismissal under
this subdivision and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction or for improper venue or for lack of an
indispensable party, operates as an adjudication on the merits. Fla. R. Civ. P. 1.420(b). So it is the odd occasion, indeed, where a trial court
involuntarily dismisses without prejudice a second or third time after a motion or sua sponte order under Rule 1.420(b). The question may then arise
whether a plaintiff can continue to take "bites at the apple" or if there exists a limitation on those bites. And when viewed in the context of a mortgage
foreclosure, this question becomes even more vexing. Beyond the language quoted above, the rule itself provides no further guidance. To ensure that
an involuntary dismissal does not operate as an adjudication on the merits, Rule 1.420(b) requires that the order of dismissal expressly state that the
dismissal is without prejudice. See id. R. 1.420 author's cmt. ("Dismissals except a voluntary one constitute an adjudication on the merits unless the
court provides otherwise."). A related and often inextricably intertwined question is whether the applicable limitations period has expired. If so, then it is
axiomatic that the complainant has no further avenues by which to refile even with a dismissal without prejudice. The Florida Supreme Court's most oft-
cited foray into this issue came in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004). Singleton was most recently discussed by Florida's
Third District Court of Appeal ("DCA") after a motion for rehearing en banc in Deutsche Bank Trust Co. Americas v. Beauvais, 188 So. 3d 938 (Fla. 3d
DCA 2016). In Singleton, the Florida Supreme Court held that "successive foreclosure suits, regardless of whether or not the mortgagee sought to
accelerate payments on the note in the first suit," were not barred where the predicate for the second suit was a new default because a "subsequent
and separate alleged default create[s] a new default and independent right in the mortgagee to accelerate payment on the note in a subsequent
foreclosure action. Id. at 941-42 (alteration and emphasis in original) (quoting Singleton, 882 So. 2d at 1008). And as Beauvais pointed out, Under
Singleton, subsequent defaults allow for subsequent accelerations regardless of the nature of a prior dismissal. A lender's right to file a subsequent
action to foreclose on an accelerated note following a subsequent default does not turn on whether the first action to foreclose on an earlier default and
acceleration was dismissed with or without prejudice. As Singleton teaches, even a dismissal with prejudice which adjudicates the merits of a first filed
foreclosure action only precludes the lender from recovering on the underlying defaulted installment and returns the lender and the borrower to the
status quo which permits the lender to file subsequent foreclosure actions based on subsequent defaults. Id. at 945 (citing Singleton, 882 So. 2d at
1007). Thus, "[a] dismissal without prejudice which does not adjudicate the merits of a first filed foreclosure action, [and] can do no more than terminate
a lender's ability to collect on the underlying defaulted installment." Id. (citing Nationstar Mortg., LLC v. Brown, 175 So. 3d 833, 834-35 (Fla. 1st DCA
2015) (applying Singleton)). "Thus, as concluded in Bartram, and alluded to in Dorta, the 'with' or 'without prejudice' dismissal is a distinction without a
difference." Id. at 946 (citing U.S. Bank v. Bartram, 140 So. 3d 1007, 1013 n.1 (Fla. 5th DCA) ("We acknowledge that the Bank suffered a dismissal
with prejudice of its earlier foreclosure action, unlike the dismissal in Dorta, but conclude that the distinction is not material for purposes of the issue at
hand."), review granted, 160 So. 3d 892 (Fla. 2014); Dorta v. Wilmington Trust, No. 13-cv-185-Oc-10PRL, 2014 WL 1152917, at *6 n.3 (M.D. Fla. Mar.
24, 2014) (relying on Singleton, 882 So. 2d 1004 ("Singleton involved a dismissal with prejudice; whereas Citibank's foreclosure action was merely
dismissed without prejudice. Dismissals without prejudice are not considered adjudications of the merits, and therefore there was no effective
acceleration of the Note and the Mortgage." (emphasis added)))); see also s28 Solenenko v. Ga. Notes 18, LLC, 182 So. 3d 876, 877 (Fla. 4th DCA
2016) (same; certifying conflict with Deutsche Bank Trust Co. Americas v. Beauvais, No. 3D14-575, 2014 WL 7156961 (Fla. 3d DCA Dec. 17, 2014),
but "declin[ing] to certify an issue of great public importance, as the certification of conflict is sufficient to allow appellants to seek the discretionary
review of the Florida Supreme Court"). In conclusion, the Beauvais court summarized that "[s]imply stated, the holding in Singleton cannot be
distinguished away on a with prejudice/without prejudice distinction. Whether voluntarily dismissed or dismissed with or without prejudice the result is
the same." 188 So. 3d at 946 (citing Singleton, 882 So. 2d 1004). Accordingly, the only remaining question is whether the refiled mortgage foreclosure
action is predicated on the same underlying defaults as the dismissed action was. If so, and the applicable five-year limitations period has run, then
regardless of whether the dismissal was with or without prejudice, the complainant is at the end of its road. If not, even if the limitations period for the
original defaults sued upon has run, the new action will not be precluded regardless of the number or type of prior dismissals. Topics: mortgage
foreclosure, civil procedure, Andrea Stokes, dismissal without prejudice, limitations period expired

Read more at: http://www.nlrg.com/property-law-legal-research/civil-procedure-effect-of-dismissals-without-prejudice-in-mortgage-foreclosure-suits

Deceleration: Restarting the Expired Statute of Limitations in

Mortgage Foreclosures
by Andrew J. Bernhard

Page 30

The 2007 debt crisis spawned a wave of mortgage foreclosure filings that overwhelmed the Florida state court
system. As Florida courts struggled to process the swelling foreclosure actions, so too did lenders and their
foreclosure firms, leading to mass misfilings, the David J. Stern and Ben Ezra Katz law firm implosions, rocket
dockets and mobbed for-want-of-prosecution calendars, and the robo-signing pandemic. In reaction, many lenders
voluntarily dismissed up to thousands of foreclosure actions, thinking it better to collect their original loan
documents and refile another day. Likewise, the courts involuntarily dismissed innumerable foreclosure actions to
clear their overcrowded dockets. The statute of limitations on mortgage foreclosure is five years, and seven years
have passed without refilings of these dismissed foreclosure actions.1 Are many of these mortgage foreclosures now
time-barred?

Institutional lenders across the country are confronting this time-bar question. Lenders are asserting that the panacea
is deceleration. Deceleration is the act of undoing a mortgage notes acceleration and the accrual of the limitations
period to return the lending arrangement to status quo ante an installment agreement maturing in the distant
future. Florida appellate courts have yet to flesh out mortgage deceleration.2 In anticipation of a surge in deceleration
litigation in Florida, this article explains the concept of deceleration and its capacity to extend the foreclosure flood
for years to come.

Accrual of Mortgage Foreclosure Actions and the Statute of Limitations

Mortgages in Florida are property liens securing the payment of debt, memorialized in a promissory note. Judicial
foreclosure is the primary remedy available to recoup unpaid mortgage debt.3 Thus, at its simplest, a mortgage
foreclosure is an action in breach of a promissory note, requesting judicial sale of property secured by the note
through the mortgage. Modern notes and mortgages are most often installment contracts, whereby a new payment is
due each month until the note and mortgage reach a maturity date.4 As such, the statute of limitations for an action
on a written contract or foreclosure on a mortgage applies to enforcement of the note and mortgage. Florida law
provides a five-year statute of limitations for both.5 The five-year limitations period for foreclosure begins when the
foreclosure claim accrues against the borrower.6

Unlike causes of action that entirely accrue on a single date, separate claims accrue on a mortgage contract for each
period in which the borrower fails to make a payment, creating a separate five-year limitations period for each
unpaid installment.7 However, if the mortgage gives the lender an option to accelerate the entire debt balance after a
defaulted payment, a single claim for the entire remaining balance can and does accrue when the lender exercises the
contractual right to accelerate.8

Acceleration in lending parlance is the lenders demand for immediate repayment of the entire loan balance.
Acceleration transforms a loan from a long-term installment contract with a monthly payment plan to a loan whose
entire remaining principal balance is immediately due. If the borrower does not immediately pay the entire principal
balance of an accelerated mortgage loan, then the lender may foreclose upon the mortgage loan, recovering up to the
entire loan value from proceeds of the judicial foreclosure sale. This acceleration process is of great convenience to
the lender, given that many mortgages bear 30-year maturity dates. Through acceleration, the lender need not bear
the cost and inefficiency of a suit upon every default through maturity, and the borrower need not spend the next 30
years under the threat, uncertainty, and cost of constant litigation.9

If a lender has the option to accelerate, it must make clear its intention to exercise this contractual right, usually by
serving a notice letter to the borrower.10 Notice of intent to accelerate is almost always a contractual condition
precedent to a foreclosure action on the entire mortgaged debt.11 If the lender neither sends written notice of intent to
accelerate nor alleges acceleration in foreclosure pleadings, and there is no other external sign of acceleration, then a
new cause of action should continue to accrue on each installment payment that the borrower misses. 12 However, if
the lender sends written notice of acceleration or alleges acceleration in foreclosure pleadings, then the note and
mortgage evolve from an installment contract to a single-payment lump-sum debt, due immediately.

Further, if a lender takes affirmative action to accelerate the note and mortgage, then the application and accrual of
the statute of limitations for recovering under the note and mortgage also evolve. Rather than accruing with each
defaulted installment, one unified limitations period accrues immediately on all of the installment payments, i.e.,
triggering the limitations period for the entire principal balance through maturity.13 Thus, if the mortgage gives the
lender an option to accelerate the entire debt balance after a defaulted payment, a single claim for the entire
remaining balance can and does accrue when the lender exercises the contractual right to accelerate. 14 It is of some
debate in Florida whether the acceleration of the note and mortgage debt and the accrual of the statute of limitations
may thereafter be undone by reinstatement of the original installment terms or dismissal of the foreclosure complaint
alleging acceleration.15 Whether there can be a deceleration of the accelerated note and mortgage to restart the clock
remains unanswered by Florida state courts.
Deceleration is the post-acceleration process of returning the contractual lending arrangement between lender and
borrower to status quo ante an installment contract under which the statute of limitations for the entire loan debt
has not been triggered. Although most mortgage contracts delineate the prerequisites of acceleration, they neither
address the right nor the procedure of deceleration, leaving much to postulation, conjecture, or judicial
determination. Compounding the uncertainty, lenders rarely, if ever, proactively decelerate through a written notice
of intent to the borrower. Instead, lenders retroactively assert deceleration in the lenders second foreclosure action
or the borrowers action to quiet title. These lender assertions respond to the borrowers allegation that the five-year
statute of limitations precludes enforcement of the note and mortgage. In these instances, the lender must argue that
the accelerated mortgage effectively decelerated through either the involuntary dismissal or voluntary dismissal of
its initial foreclosure complaint.16

Deceleration and Involuntary Dismissal

Beginning with Singleton v. Greymar Assocs., 882 So. 2d 1004 (Fla. 2004), courts have been pouring the foundation
of deceleration in Florida. In Singleton, the Florida Supreme Court held that an involuntary dismissal with prejudice
of a mortgage foreclosure action did not preclude by res judicata a later foreclosure action based on a subsequent
default involving the same note and mortgage. The court held against res judicata preclusion because the dismissal
with prejudice only had the effect of adjudication on the merits as to the first date of default, leaving the lender free
to assert foreclosure and acceleration as to the subsequent default. The court stated:

[A borrower] may prevail in a foreclosure action by demonstrating that she [or he] was not in default on the payments alleged to be in default, or that the
[lender] had waived reliance on the defaults. In those instances, the [lender and borrower] are simply placed back in the same contractual relationship with
the same continuing obligations. Hence, an adjudication denying acceleration and foreclosure under those circumstances should not bar a subsequent action
a year later if the [borrower] ignores [his or] her obligations on the mortgage and a valid default can be proven. . . . 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. . . . If res judicata prevented a [lender] from acting on a subsequent default even after an earlier claimed default could not be established, the
[borrower] would have no incentive to make future timely payments on the note. 17

The court reasoned that clearly, justice would not be served if the [lender] was barred from challenging the
subsequent default payment solely because he [or she] failed to prove the earlier alleged default. 18 The court held
that a later valid default provided a new and independent right to accelerate the note for a later foreclosure action,
which was not precluded by the prior adjudication.19

Although the court did not use the term deceleration in the mortgage foreclosure context, the court did state that
the earlier adjudication was a denial of the earlier acceleration, and the parties were thereby simply placed back in
the same contractual relationship with the same continuing obligations.20 This statement invokes the core of the
deceleration concept: the act of undoing a mortgage and notes acceleration to return the lending arrangement to
status quo ante. Without stating it explicitly, the Supreme Court in Singleton had opened the door to deceleration in
Florida.

However, the 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.

Nevertheless, lenders have since argued for application of Singleton outside of the res judicata context to evade the
statute of limitations time-bar. These lenders assert that they can refile a second foreclosure after any dismissal by
simply alleging any new default date within the limitations period without analysis of whether 1) a valid new default
in fact occurred; 2) contractual accelerations or decelerations in fact occurred, and if so, how many and by what
method; or 3) the prior foreclosure action was dismissed voluntarily or involuntarily.21

Dorta v. Wilmington Trust National Assn, 2014 WL 1152917, slip op. at *5 (M.D. Fla. 2014), exemplified this
broad-scope application of Singleton outside the ambit of res judicata. In Dorta, the Middle District of Florida held
that a single involuntary dismissal without prejudice for lack of prosecution in a mortgage foreclosure action did not
bar a later foreclosure action on the same note and mortgage. The Dorta court came to this conclusion even though
the five-year limitations period had expired since the first foreclosure filing. There was no court adjudication
rejecting acceleration, and the record showed no affirmative act by the lender or borrower to decelerate the contract
between them.22 According to the Dorta court, the involuntary dismissal for lack of prosecution ipso facto
decelerated the note and mortgage thereby disengaging the expired statute of limitations. 23

To justify its holding, the Dorta court both relied heavily on Singleton and greatly expanded its holding, expressly
stating:

To be sure, Singleton limits its discussion to the application of the doctrine of res judicata however, the analysis applies with equal effect to the
arguments before this [c]ourt. [The borrower] contends that [the lender]s unsuccessful attempt to foreclose on the [n]ote and the [m]ortgage based on a
[2007] default forever barred [the lender] from bringing any further foreclosure proceedings because the statute of limitations had run. Singleton directly
refutes this argument, holding that even where a [lender] initiates a foreclosure action and invokes its right of acceleration, if the [lender]s foreclosure
action is unsuccessful for whatever reason, the [lender] still has the right to file later foreclosure actions and to seek acceleration of the entire debt so
long as they are based on separate defaults.24

However, the Singleton court did not hold that an unsuccessful mortgage foreclosure, for whatever reason,
decelerates a note and mortgage, and did not address the statute of limitations.

Such reliance upon noncontextual language from Singleton without case-by-case factual investigation and legal
analysis has expanded Singleton beyond its reasonable scope. Appropriate application should require a
determination whether a valid or factually new default occurred, whether accelerations or decelerations factually
occurred, and whether the prior foreclosure action was dismissed voluntarily or involuntarily. As discussed later in
this article, courts in other states have focused on the evidence of a valid deceleration and new default. These courts
have specifically required further external acts by a lender to decelerate a note and mortgage and evade the statute of
limitations time-bar.

Deceleration and Voluntary Dismissal

No Florida decision has directly addressed the question of whether the voluntary dismissal of a foreclosure action
reverses an acceleration and unwinds an expired limitations period if measured from the filing date of the initial
foreclosure action. However, there are shades of the deceleration principle in Olympia Mortg. Corp. v. Pugh, 774 So.
2d 863 (Fla. 4th DCA 2000), and Kaan v. Wells Fargo Bank, N.A., 2013 WL 5944074 at *2 (S.D. Fla. 2013).

The appellate court in Pugh addressed whether two prior voluntary dismissals precluded a third foreclosure action,
as the second dismissal would have operated as an adjudication on the merits under Floridas two-dismissal rule. 25
The appellate court expressed that [b]y voluntarily dismissing the [first] suit, Olympia [the foreclosing plaintiff] in
effect decided not to accelerate payment on the note and mortgage at that time.26 This statement invokes the core
concept of deceleration: the undoing of a mortgage and notes acceleration to return the lending arrangement to
status quo ante.

After the lender in Pugh had voluntarily dismissed its first two foreclosure actions, but before filing the third, the
lender applied escrow funds toward a defaulted payment from three years earlier. The lender attempted to thereby
create a factually new default. The trial court held that this did not create a new claim and held the third foreclosure
action was barred by res judicata. The Fourth DCA reversed, holding that the first voluntary dismissal in effect
was a decision not to accelerate, supporting a conclusion that the entire balance of the note was neither at issue nor
adjudicated by the voluntary dismissal of the second action.27

However, it appears that the lender in Pugh did not make a separate notice of intent to accelerate, only a demand in
its complaint. This lack of a separate notice of intent to accelerate in Pugh is important because without an
acceleration notice independent of the foreclosure complaint, a voluntary dismissal alone could effectively unwind
the only evidence of acceleration the statement of acceleration in the foreclosure complaint. The result might
have been different if the lender had made an independent statement of intent to accelerate prior to filing its
foreclosure action because a return to status quo ante through voluntary dismissal would not have eliminated the
independent statement of intent to accelerate. The borrower or the court could have pointed to the remaining notice
and argued that it was unaffected evidence of acceleration and the accrual and expiration of the statute of limitations,
in which case, the voluntary dismissal would not have undone the acceleration.

In the end, the crux of the Pugh holding was insufficient identity between the first two actions because of the
differences in default dates rather than deceleration.28 In other words, the facts necessary to the maintenance of the
first suit were not the same as in the second suit, and the judgment sought in each suit did not require the same proof
to justify them.29 Nevertheless, the Pugh courts statement that the first voluntary dismissal represented a decision
not to accelerate is not mere dictum because the appellate court could not have reached the conclusion that there was
insufficient identity between the first two actions if the initial acceleration demand had not decelerated before the
second action. As such, this decision is helpful, although not ultimately dispositive on the limitations issue.

More recently in Kaan, the Southern District of Florida addressed whether the statute of limitations barred
enforcement of a note and mortgage when the lender had accelerated through an initial foreclosure complaint,
voluntarily dismissed, and failed to refile within five years of the initial filing. The Kaan court held that the note and
mortgage were still enforceable.30

The borrower, Kaan, had filed an action to quiet title and release the note and mortgage encumbering his property
after five years had elapsed from the initial foreclosure filing. Prior to the quiet title action, the borrower had
defaulted in July 2007 on a note with an October 2046 maturity date. The lender had filed a foreclosure action in
February 2008 alleging that the entire principal balance was then due (an allegation of acceleration). In September
2011, the lender voluntarily dismissed without prejudice, and, in 2013, the borrower filed his action to quiet title,
alleging that the five-year statute of limitations barred enforcement of the note or mortgage. 31 The trial court rejected
the borrowers assertion, holding that the lender could file a second foreclosure action based on the default of any
payment owed within five years a decision that tacitly required deceleration of the note and mortgage after the
lenders February 2008 foreclosure filing.32

The Kaan court did not directly address whether the lender had given separate notice of intent to accelerate, whether
the lender had properly pled or effected acceleration in its 2008 foreclosure complaint, or any decelerating effect of
the lenders voluntary dismissal. Instead, the Kaan court relied on a broad interpretation of Singleton and its
progeny, finding that Singleton held that a first foreclosure action did not bar a second foreclosure action.33 This
interpretation, together with the obligation to construe the facts alleged in the light most favorable to the lender and
the possibility of other breaches of the mortgage contract, supported the trial courts holding that the note and
mortgage were still enforceable, requiring dismissal of the borrowers quiet title action without prejudice to refile as
to subsequent defaults.34

Lenders may be tempted to misuse the broad language in Kaan to support an argument that an unsuccessful
mortgage foreclosure, for whatever reason, decelerates a note and mortgage. This may be so even though the
Singleton court limited its discussion to the res judicata effect of a first foreclosure action. In fact, the current Florida
trend is toward reliance upon noncontextual language from Singleton without an in-depth, case-by-case analysis
regarding whether a valid or factually new default occurred, whether accelerations or decelerations occurred, or
whether the prior foreclosure action was dismissed voluntarily or involuntarily. This trend may expand Singleton
beyond its reasonable scope. Courts in other states have not embraced this approach, but rather have focused on
whether a valid new default occurred on an evidentiary level and the external acts a lender must perform to truly
decelerate a note and mortgage to unwind the statute of limitations.35

Other State Courts on Deceleration of an Accelerated Mortgage Note

The following nonexhaustive review illustrates that courts in other states disagree on the effect of a voluntary
dismissal on acceleration and the effect of a voluntary dismissal on allegations of acceleration in a foreclosure
complaint.
In U.S. Bank National Assn v. Gullotta, 120 Ohio St. 3d 399 (2008), the Supreme Court of Ohio distinguished a
factually new and valid default from one strategically pled to evade legal preclusion. In Gullotta, a lender attempted
to avoid a two-dismissal res judicata bar with a third foreclosure complaint that alleged acceleration on a date after
its second voluntary dismissal, arguing that the third action was different because it sought payments running from
the month after its second dismissal.36 The Supreme Court of Ohio held that the two-dismissal rule would not bar a
third claim if it were factually different from the dismissed claim, but concluded that simply altering the pleadings
without a valid and distinct default in fact would not suffice:

[I]n an attempt to get around having its claim barred by res judicata, [the lender] amended its third complaint to include a prayer for interest from [a date
after its second dismissal]. That amendment was merely a change to the complaint, not a change in the common nucleus of operative facts supporting the
claim. . . . Although [the lenders] complaint changed, the operative facts remained the same. Plaintiffs cannot save their claims from the two-dismissal rule
simply by changing the relief sought in their complaint. Allowing [the lender] to do so would be like allowing a plaintiff in a personal-injury case to save
his [or her] claim from the two-dismissal rule by amending his [or her] complaint to forgo a couple of months of lost wages. 37

The Supreme Court of Kentucky reached a similar result in Hamlin v. Peckler, 2005 WL 3500784 (Ky. 2005),
stating:

[N]o Kentucky case appears to squarely address whether there can be subsequent defaults after suit is brought on an accelerated debt. However, the answer
would appear to be no as one of the principal purposes of pleadings is to develop the precise point in dispute by formulating the true issues. Thus, when
the [lender] sought recovery of the entire unpaid indebtedness and sought to subject the real property upon which the mortgage lien had been granted to
payment of the indebtedness, a default was asserted with respect to every installment of the debt, foreclosing assertion of some subsequent claim of
default.38

The Supreme Court of Nevada has weighed in as well. In Cadle Co. II, Inc. v. Fountain, 281 P.3d 1158 (Nev. 2009),
the Supreme Court of Nevada held that a lender that failed to accompany its voluntary dismissal with a clear,
unequivocal, and written memorialization of intent to withdraw an acceleration notice failed to reverse or decelerate
its prior acceleration of the note.39 The Fountain court spurned the lenders assertion that its voluntary dismissal
nullified acceleration under Nevadas voluntary dismissal rule, holding the lenders later foreclosure action as time-
barred.40 These decisions expressly contradict Pugh as to the effect of a voluntary dismissal on an allegation of
acceleration, providing ammunition to Florida borrowers combating enforcement of potentially time-barred notes
and mortgages.

Other courts have focused on the evidentiary effect of acceleration allegations in voluntarily dismissed foreclosure
complaints, which may survive the dismissal. For example, the U.S. Court of Appeals for the Eighth Circuit applied
Missouri law in First Bank of Marietta v. Hogge, 161 F.3d 506 (8th Cir. 1998), to hold that a lenders allegation of
acceleration in a voluntarily dismissed foreclosure complaint was admissible in a later suit as evidence that the
lender had previously accelerated the note.41 The lender in Hogge had filed an initial complaint under a lease-
purchase agreement, alleging that it had accelerated all payments following a default on the agreement. 42 The lender
voluntarily dismissed that suit, filed anew, and alleged that it had never accelerated the note, supporting its
contention with affidavits from its president and vice president stating that no acceleration had occurred. 43 The
district court disagreed, holding that the lender had, in fact, accelerated all payments, and the Eighth Circuit
affirmed. The appellate court found the lenders later denials of acceleration wholly inconsistent with its earlier
allegations of acceleration in the dismissed action and held that no reasonable juror could find that the lender did not
accelerate. The Eighth Circuits holding implies that a voluntary dismissal alone does not decelerate a note and
mortgage.

Notwithstanding these decisions interpreting Ohio, Nevada, and Missouri law, at least two California courts have
leaned in the other direction albeit long ago. In the 1920 decision of Keeler v. Baird, 191 P. 563 (Cal. Ct. App.
1920), a California appeals court held that dismissal of a lenders action alleging acceleration amounts to withdrawal
and waiver of that acceleration, although the Keeler court made this statement in dictum.44 Twenty years before
Keeler, the Supreme Court of California had acknowledged in California Savings & Loan Soc. v. Culver, 59 P. 292
(Cal. 1899), that a dismissal by stipulation could effect a waiver of acceleration, stopping accrual of the statute of
limitations.45 Further, the Supreme Court of Arkansas held in Mitchell v. Fed. Land Bank of St. Louis, 174 S.W.2d
671 (Ark. 1943), that a lender could waive acceleration by unilateral action.46 The Mitchell court resolved that
deceleration could be accomplished through a voluntary dismissal expressly stating that there was an agreement
between the lender and borrower, or by sending a letter of deceleration to the borrower. However, the Mitchell court
did not find that a voluntary dismissal alone could effect a deceleration. 47

These decisions supplement Florida law on deceleration, providing arguments both for borrowers and lenders.
Hamlin stands squarely against lender assertion of a post-acceleration default, while Gullotta at least stands against
strategic pleading to avoid the statute of limitations, requiring a distinct factual default to create a new controversy.
By extension, a distinct factual default after acceleration may require a distinct factual deceleration and
reinstatement of the installment contract, evidenced by external signs from the lender. Such distinct and evident
deceleration appears to be required under Fountain. Without such a distinct and evident deceleration, a lender should
be subject to the evidentiary weight of its acceleration allegations in prior foreclosure complaints, as detailed in
Hogge. Notwithstanding, Culver and Keeler, and even Mitchell, may require no more than the voluntary dismissal
itself.

Arguing Pugh and Singleton to Determine the Statute of Limitations

Question
Proactive borrowers are filing actions to remove the Damocles swords hanging over their homes, requesting quiet
title to release unpaid and potentially unenforceable mortgages and notes. Lenders are simultaneously gearing up to
refile the foreclosure actions that were dismissed in the peak of the recession, despite having initially filed many of
these actions over five years ago. Going forward, lenders must find a way around the five-year statute of limitations.
Deceleration should play a crucial role. To properly invoke deceleration and thereby extend, restart, or unwind the
statute of limitations, lenders should argue for an extension of Singleton to encompass a voluntarily dismissed
foreclosure action, or rely on Pugh to argue that the lender decelerated by voluntary dismissal. Borrowers, in turn,
should argue against the broad-brush application of Singleton and Pugh, and instead request a more detailed, case-
by-case factual analysis of lender acceleration and deceleration with the scrutiny employed in Ohio, Nevada, and
Missouri.

Lenders may continue to argue that the holding in Singleton should be expanded to encompass any unsuccessful
foreclosure action, even though Singleton solely addressed the res judicata effect of an involuntary dismissal. Under
this expansive application, courts would hold that mortgages automatically decelerate upon the voluntary or
involuntary dismissal of a mortgage foreclosure action. As in Singleton, justice may not be served if a lender were
barred from collecting on an entire note through maturity merely because the lender did not or could not complete its
prior foreclosure action. This broad-scope argument has gained traction, as seen in Dorta and Kaan. However, as
borrowers are sure to argue, this extension of Singleton may ignore the purpose of the statute of limitations, which
includes encouraging the alienability of real property, protecting the unexpected enforcement of stale claims brought
by plaintiffs who have slept on their rights, and ensuring fairness by not allowing enforcement of unfresh claims
against parties who are left to shield themselves from liability with nothing more than tattered or faded memories,
misplaced or discarded records, and missing or deceased witnesses.48 Justice may not be served by extending the
filing deadline on these belated foreclosure actions up to the statute of repose, mortgage maturity, or indefinitely.

In the alternative, lenders can rely on the Pugh courts analysis that a voluntary dismissal in effect returns the lender-
borrower relationship to status quo ante. This may be very effective if the only evidence of acceleration lies in the
allegations contained in the voluntarily dismissed complaint, because the voluntary dismissal undoes the only record
act of acceleration the initial foreclosure complaint. However, in using Pugh as the legal foundation for a
deceleration argument, lenders may face evidentiary obstacles. Although the Pugh court held that a voluntary
dismissal of an initial foreclosure action was in effect a decision by the lender not to accelerate at that time, other
courts have required more affirmative acts and express statements of deceleration.

If something more than a mere dismissal is required to decelerate, the lenders are in trouble. It is not the regular
practice of lenders to deliver independent notices of deceleration, to collect on individual installments or send
monthly invoices after voluntary dismissal of an initial foreclosure action, or to send second notices of intent to
accelerate. Further, lenders do not regularly allege deceleration or subsequent default in their second foreclosure
complaints, as their foreclosure firms simply reuse their standard complaint forms. These practices may damage the
lenders position because the allegation of a different default after the first voluntary dismissal was critical in both
Singleton and Pugh. If lenders do not modify these practices, a discerning court to a second foreclosure action might
hold that when a lender accelerated its note and mortgage in or before the first foreclosure complaint, did not take
sufficient steps to decelerate, and did not allege a factually valid subsequent default, a second foreclosure is time-
barred. This may be so even if a lender later amended its complaint to allege a timely default.

It remains to be seen whether Florida courts will continue to amplify the reach of Singleton or begin to demand
evidence of deceleration from lenders. Lenders may change their practices and bolster their arguments under
Singleton and Pugh by affirmatively alleging deceleration and secondary default within the limitations period or
sending notice of deceleration. However, none of these practices, applied retroactively, may overcome the
borrowers right to enforcement of the statute of limitations against lenders who have slept on their rights or failed to
monitor their own foreclosure attorneys, loan documents, and limitations periods.

The Florida Bar Journal

Advertising Rates Submission

Guidelines Archives Subscribe
News

Journal HOME

February, 2017 Volume

91, No. 2

Foreclosing Bartram
by Bert McBride

Page 30

inShare0

With the Cubs winning the 2016 World Series, there is a lot of talk in Chicago about the specters of the billy goat
and the infamous Bartman finally being vanquished.1 With one final victory, on November 2, 2016, Chicago Cubs
fans finally let out a sigh of relief and put their 108-year nightmare to rest.2 Cubs fans werent alone in experiencing
this relief though. That very week, lenders in Florida had the opportunity to celebrate a similar victory over their
chief rival, those who default on their mortgages.

Bartman, meet Bartram, as in Mr. Lewis Bartram, the Florida man who instead of famously disrupting a routine foul
ball, committed a similarly egregious act by failing to make his mortgage payments and attempting to garner a
windfall by taking advantage of a neglected foreclosure action. Luckily, on November 3, 2016, a day after the Cubs
excised Bartman by winning the 2016 World Series, the Florida Supreme Court handed down its decision in
Bartram v. United States Bank Natl Assn, 2016 Fla. LEXIS 2424 (Fla. Nov. 3, 2016), which had a similar effect on
Mr. Bartram.

In February 2005, Mr. Bartram executed a standard form installment mortgage that provided for both the optional
acceleration of the sums secured by the mortgage as well as the borrowers right to reinstate the mortgage by curing
any default.3 Installment payments under the mortgage were to continue until March 2035.4 In January 2006, less
than a year after receiving the loan, Mr. Bartram stopped making payments on his mortgage. 5 Shortly thereafter, in
May 2006, the lender filed a foreclosure suit on Mr. Bartrams residential property, which served as security for the
mortgage.6 The lenders foreclosure suit exercised the mortgages acceleration clause and declared the full amount
payable under the note and mortgage to be due.7 For an unspecified reason, this foreclosure action languished. 8
Nearly five years later, on May 5, 2011, the foreclosure suit against Mr. Bartram was involuntarily dismissed due to
the lenders failure to appear at a case management conference.9

A year after the original dismissal, as part of a cross-claim in another foreclosure proceeding, Mr. Bartram sought a
declaratory judgment to cancel the mortgage and quiet title to the property.10 Mr. Bartram asserted that the applicable
five-year statute of limitations, set forth in F.S. 95.11(2)(c), barred the lender from bringing another foreclosure
action.11 The trial court agreed with Mr. Bartram, who had not made a mortgage payment since 2006, and granted
summary judgment in his favor against the lender.12 The trial court cancelled the note and mortgage and released the
lenders lien on the property.13

The lender appealed the trial courts decision to the Fifth District Court of Appeal, arguing that even though it had
accelerated the amounts due on the mortgage at the outset of its original foreclosure, the dismissal of that foreclosure
had served to de-accelerate the mortgage, thus, reinstating its installment nature.14 In response, Mr. Bartram argued
that the trial courts decision should stand because the lenders acceleration of all payments due in the first
foreclosure action triggered the statute of limitations for all future payments at that time. 15 Essentially, Mr. Bartram
argued that, for statute of limitations purposes, each foreclosure proceeding should act as a one-game, winner-take-
all series, and since he had won the first game (i.e., foreclosure), he should never have to repay the lender.

In considering these arguments, the Fifth District Court of Appeal analyzed the Florida Supreme Courts decision in
Singleton v. Greymar Assocs., 882 So. 2d 1004 (Fla. 2004), which held that res judicata did not bar a lender from
foreclosing on a mortgage based on defaults occurring subsequent to the dismissal of a prior foreclosure proceeding
regardless of whether the lender sought to accelerate payments on the note in the first suit. 16 Although the Singleton
decision did not deal with statute of limitations issues, the Fifth District Court of Appeal found that the Florida
Supreme Courts reasoning in Singleton was applicable to the case at bar.17

Relying on Singleton, the Fifth District reversed the trial courts award of summary judgment on the grounds that the
dismissal of the first foreclosure action and the expiration of the statute of limitations after that proceeding did not
bar the lender from moving forward with a foreclosure action for default in payments occurring after the order of
dismissal in the first foreclosure action [. . .], provided the subsequent foreclosure action on the subsequent defaults
is brought within the limitations period.18 In so doing, the Fifth District certified a question of great public
importance to the Florida Supreme Court, which was slightly revised to read as follows: 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? 19

In affirming the reasoning of the Fifth District Court of Appeal, the Florida Supreme Court answered this certified
question in the negative.20
The Florida Supreme Court began its analysis of the question presented by the Fifth District Court of Appeal by
reviewing its decision in Singleton.21 The Court pointed out that Singleton quoted with approval the Fourth District
Court of Appeal reasoning in Capital Bank v. Needle, 595 So. 2d 1134 (Fla. 4th DCA 1992), that a final adjudication
in a foreclosure proceeding merely bars a second action relitigating the same alleged default.22 The Court further
reemphasized Singletons common-sense rationale that:

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. 23

The Court acknowledged that a foreclosure proceedings unique nature as an equitable remedy necessitated the
result in Singleton, which stood for the proposition that, for res judicata purposes, a lenders failure to foreclose on
one alleged default did not mean that the borrower had successfully defeated his or her continuing obligation to
make payments on the note.24 Just like in the World Series, a loss in game one doesnt serve as res judicata on the
entire series.

The Court then went on to review several post-Singleton state and federal decisions applying its Singleton res
judicata reasoning to statute of limitations arguments.25 Each of these decisions had relied on Singleton in finding
that the expiration of the statute of limitations after the initial foreclosure proceeding did not preclude the lender
from seeking a subsequent foreclosure based on a default for which the statute of limitations had not yet expired
even if the initial proceeding had sought to accelerate all payments due on the note. 26 The Court agreed with the
reasoning expressed in those cases and found that its decision in Singleton was applicable in the statute of
limitations context.27

The Court found that in the statute of limitations context, consistent with its reasoning in Singleton, 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.28 The Court reached the conclusion that
even if the lenders prior foreclosure action was dismissed with prejudice, the lender could still proceed forward
with a subsequent foreclosure so long as that foreclosure was based on new defaults that were themselves not barred
by the statute of limitations.29 The Florida Supreme Court reasoned that:

The Fifth District determined that the involuntary dismissal was with prejudice but concluded that the distinction
was not material for purposes of the statute of limitations analysis. We agree. While a dismissal without prejudice
would allow a mortgagee to bring another foreclosure action premised on the same default as long as the action was
brought within five years of the default per section 95.11(2)(c), critical to our analysis is whether the foreclosure
action was premised on a default occurring subsequent to the dismissal of the first foreclosure action. As the federal
district court in Dorta reasoned, if the mortgagees foreclosure action is unsuccessful for whatever reason, the
mortgagee still has the right to file subsequent foreclosure actions and to seek acceleration of the entire debt
so long as they are based on separate defaults.

Whether the dismissal of the initial foreclosure action by the court was with or without prejudice may be relevant to
the mortgagees 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 dismissal of an earlier foreclosure action creates a
new cause of action, regardless of whether that dismissal was entered with or without prejudice. 30

This finding applies even if the lender attempted to exercise the mortgages acceleration provision, thus, making all
amounts under the mortgage due subject to the borrowers rights of reinstatement.31 The Court found that its
conclusions were buttressed by the mortgages reinstatement provision because it granted the [borrower], 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.32 The Court reasoned that the existence of this provision showed that the acceleration
of all amounts due did not truly occur until final judgment was entered. 33 This supported the Courts conclusion that
the dismissal of a foreclosure with or without prejudice only serves to place the parties back in the same contractual
relationship with the same continuing obligations.34 Therefore, the borrower had the continuing obligation to make
any mortgage payments that did not serve as the predicate for the first foreclosure, including those that accrued after
the first foreclosures dismissal.35 If the borrower fails to make those payments, the lender has the right to foreclose
based on those subsequent defaults.36

The Courts holding on subsequent defaults goes both ways, though. As the lender has its right to foreclose on
subsequent defaults, so too does the borrower have the right to make those payments going forward and, thus, avoid
any further foreclosure on the mortgage, no matter how egregious the borrowers prior defaults.37

Consistent with Singleton, this holding was necessary to prevent borrowers from achieving a significant windfall by
permanently cancelling their obligations to repay loans because of one failed foreclosure and the running of the
statute of limitations after that foreclosure. While the dismissal of a foreclosure with prejudice will serve to
foreclose the lenders right to readjudicate defaults that served as the basis for that foreclosure, it will not act as a bar
to the lender pursuing any future defaults that occur.38

In Mr. Bartrams situation, he executed a mortgage and note that contemplated continuing installment payments until
March 2035.39 The effect of the Courts holding is that, despite the previous failed foreclosure, the lender has a
continuing right to initiate another foreclosure proceeding against Mr. Bartram for every payment missed within the
five years pre-dating the filing of the suit. If Mr. Bartram continues to miss his payments, the lender presumably
would be able to initiate a foreclosure proceeding as far out as 2040. Just like the billy goat curse and the Cubs, the
specter of another foreclosure proceeding will hang over Mr. Bartram for a long time to come.

Mr. Bartrams attempt at imposing a one-strike and youre out rule on Florida lenders was sent packing by the
Florida Supreme Court. Floridas lenders may breathe a bit easier going forward knowing that one failed foreclosure
will not immediately start the clock ticking on their ability to foreclose on their collateral going forward. Mr.
Bartrams argument for a windfall has gone the way of Bartman. Each has finally been put to rest.