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Each Subsequent Default Restarts the Clock in Foreclosure Cases

livinglies.wordpress.com | November 4, 2016

By Neil Garfield

The long-awaited decision in U.S. Bank v. Bartram was released yesterday. At issue was whether lenders and servicers could restart foreclosures after five years, or if they would be barred by Florida’s five-year statute of limitations. Yesterday, the Florida Supreme Court clarified that a lender/servicer can restart the foreclosure clock by declaring a new default date.

Specifically, the Supreme Court revisited its decision in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004), and analyzed its progeny. As you will recall, the Supreme Court held in Singleton that each “subsequent and separate alleged default created a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action.” 882 So. 2d at 1008. The court recognized that each separate default presented a distinct issue and therefore res judicata did not apply. Since the decision in Singleton, both state and federal courts in Florida have applied the court’s reasoning in Singleton to the statute of limitations.

Yesterday, the Supreme Court confirmed that the Singleton analysis applies equally to the statute of limitations. Therefore, with each subsequent default, the statute of limitations runs from the date of each new default, providing the mortgagee the right, but not the obligation, to accelerate all sums then due under the note and mortgage. As a result, lenders/servicers are not precluded by the statute of limitations from filing a subsequent foreclosure action based on default dates that occurred after the dismissal of the first foreclosure action, provided that the alleged default occurred within five years of the filing of the subsequent foreclosure action.

The Supreme Court took its analysis one step further and confirmed that the type of dismissal of a previous foreclosure action (whether with or without prejudice) is irrelevant. Indeed, the court reiterated that after any 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 or decelerated.

This decisions means that lenders/servicers will still be able to foreclose in those cases where the initial foreclosure action was dismissed due to foreclosure moratoriums or foreclosure firms that went out of business. Whether the dismissal was with or without prejudice may be relevant only as to the ability to collect on past defaults. For instance, in those cases where the dismissal was without prejudice, the lender/servicer would be allowed to file a new foreclosure action premised on the same default date as long as the action was brought within five years of the default. However, in any case, any subsequent default creates a new cause of action and starts the statute of limitations running.

 

 

 

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