BLOG: Bartram Affirmed by Florida Supreme Court
The Florida Supreme Court ruled in Bartram v. U.S. Bank National Association, Case No. SC14-1265 (Fla. November 3, 2016), that Florida’s Statute of Limitations does not bar foreclosure for missed monthly installment mortgage payments notwithstanding that the mortgage had been previously accelerated through suit. The Court reached its conclusion through a two-part analysis: a discussion of whether its previous holding in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004) (successive mortgage foreclosures are not barred by resjudicata) can be extended to the Statute of Limitations, and the application of Florida Rule of Civil Procedure 1.420 (b) to the standard mortgage form. Specifically, the Court ruled on the following certified question:
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?
Understanding the Court’s opinion begins with Singleton, a 2004 decision in which the Court ruled that res judicata does not bar successive suits on the same mortgage notwithstanding the mortgage had been previously accelerated. The argument of the borrower in Singleton was that a lender was permitted merely one acceleration of the note and mortgage, and failure to successfully foreclose the mortgage in the first suit barred further foreclosures on res judicata grounds. The Court viewed each monthly mortgage installment as a separate obligation, and accordingly, viewed each monthly as beginning the running of a new statute of limitations. Accordingly, res judicata might bar a foreclosure based on a missed payment of February 1, 2000 but would not bar foreclosure based on a missed payment of March 1, 2000. Recognizing that such an analysis runs counter to the greater weight of law regarding multiple suits, the Singleton Court emphasized the equitable nature of mortgage foreclosure actions.
This analysis carried into the Bartram decision as the Court restated Singleton’s comment 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.” Bartram at 13 – 14. Bartram also restated Singleton’s view that mortgage foreclosure is an equitable remedy, and accordingly, borrowers should not be incentivized to stop making payments on future installments just because they were able to defeat foreclosure based on one particular default. The Court then discussed eight post-Singleton cases that extended Singleton’s res judicata analysis to cases involving a statute of limitations defense, and concluded that the underlying reasons support both res judicata and statute of analysis. The Court then turned to the mortgage itself and the dismissal rule itself.
Analyzing the rule itself, the Court concluded that dismissal may or may not operate as an adjudication on the merits depending on whether the dismissal was with or without prejudice, but the difference was of no consequence if the later foreclosure action is based on a different default than the prior foreclosure since that is a different action than the first. Moreover, this analysis is “buttressed” by the terms of the standard mortgage itself as the standard mortgage in controversy has a reinstatement provision. Specifically, the standard mortgage permits de-acceleration, i.e., reinstatement, at any time up to final judgment being entered. This provision, according to the Court, runs counter to the borrower’s assertion that acceleration could only happen once. Under the borrower’s analysis, for example, a borrower could reinstate after one default and then claim the lender could not foreclose ever again meaning the borrower would be excused from ever having to make mortgage payments again.
Notwithstanding its clear holding, several questions remain from Bartram. First, the mortgage in controversy contained an optional acceleration clause where the mortgage was accelerated by filing suit, thus making the argument that dismissal vitiates the acceleration more palatable. However, does Bartram also apply to a mortgage with an automatic acceleration clause, i.e., a default automatically results in acceleration. Likewise, most monthly mortgage payments contain a mixture of interest and principal. Does basing a default on a later missed monthly payment mean that a lender has waived the principal for the installment payments prior to the default or can the lender accelerate all principal even it portions were contained in previous installments. Finally, many lenders file later suits based on a defaults that reference the first installment payment with the additional words “and all subsequent payments.” Is this sufficient to fall within the Bartram rule? Additional cases are pending before the Florida Supreme Court, and practitioners are hopeful these additional cases will answer these questions.