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FLORIDA COURT REVERSES JUDGMENT QUIETING TITLE AGAINST BANK & FINDS MORTGAGEE HOLDS VALID & FORECLOSABLE LIEN

The Fourth District Court of Appeals recently published an opinion wherein the DCA reversed a circuit court’s summary judgment in favor of an owner (non-mortgagor) based on a quiet title action affecting property situated in St. Lucie County, Florida. Avelo Mortg., Ltd. Liab. Co. v. Vero Ventures, Ltd. Liab. Co.[1]

In Vero Ventures, the owner of the property, Vero Ventures, LLC (“VV-LLC”), obtained title to the property sometime in the first half of 2013. Prior to VV-LLC taking title, the mortgagee, Avelo Mortgage, LLC (“Avelo”), attempted to foreclose its lien. In 2010, the circuit court dismissed Avelo’s foreclosure action due to lack of prosecution. After the dismissal, Avelo did not refile. In June 2013, within two months of acquiring title, VV-LLC brought a quiet title action against Avelo alleging VV-LLC’s interest in the property was superior to Avelo’s mortgage. Avelo denied VV-LLC’s allegations of superiority and filed a counterclaim against VV-LLC seeking a declaration that Avelo’s mortgage was superior and constituted “a valid, enforceable lien on the subject property…” Both parties moved for summary judgment.

VV-LLC argued enforcement of Avelo’s mortgage lien was “barred by the applicable statute of limitations and repose,” the doctrine of laches, and because “Avelo failed to raise a foreclosure action as a compulsory counterclaim to the quiet title action.” The lower court agreed with VV-LLC on all grounds and entered a summary judgment quieting title to the property in favor of VV-LLC “and declar[ed] Avelo’s mortgage null and void.”

Avelo appealed the summary judgment. The Fourth DCA addressed each of the lower court’s findings starting with the statute of limitations, which requires an action to foreclose a mortgage be commenced within five years. The lower court reasoned that “enforcement of Avelo’s mortgage was barred by the statute of limitations and the statute of repose” because by June 2013, when VV-LLC filed its quiet title action, more than five years passed from when Avelo filed its foreclosure complaint. The court erroneously found the statute of limitations continued to run despite dismissal of Avelo’s foreclosure action in 2010. Not surprisingly, the Fourth DCA rejected this argument with minimal discussion citing Bartram v. U.S. Bank National Ass’n, 211 So. 3d 1009 (Fla. 2016). The Court explained “the effect of an involuntary dismissal of a foreclosure action is revocation of the acceleration” so the “statute of limitations does not continue to run on the amount due under the note and mortgage regardless of the reason why the dismissed foreclosure action was unsuccessful.”

The Fourth DCA then addressed the lower court’s application of the doctrine of laches. The Court explained VV-LLC was required to prove Avelo failed to “assert a right for an unreasonable and unexplained length of time” and that Avelo’s failure to assert its rights resulted in prejudice to VV-LLC. The Court then surmised that “any delay by the mortgagee in enforcing its rights generally acts to the property owner’s benefit in permitting him or her to remain in the property and cannot amount to legal prejudice.” The Court concluded no exceptions to this general rule were applicable and that the doctrine of laches did not prevent Avelo from enforcing its lien.

The Fourth DCA also addressed the finding that Avelo’s failure to file a compulsory counterclaim to foreclose its lien in response to the quiet title action barred Avelo from ever enforcing its mortgage. The Court also rejected this finding, which is highlighted in two points. First, the Court noted each new default under a mortgage created a new cause of action. The Court explained the basis for a counterclaim had not accrued as to a “foreclosure action predicated upon a future period of default.” The unaccrued claim was not mature and therefore not compulsory. The Court concluded:

“Avelo’s failure to file a foreclosure action as a counterclaim could not legally serve to bar a future foreclosure action predicated upon a future period of default which has not yet occurred.”

Second, the Court explained “even if Avelo’s failure to file a compulsory counterclaim barred it from bringing a future foreclosure action, Avelo’s mortgage nonetheless remained a valid lien against the property…until five years after the maturity date of the debt secured by the mortgage.”

The Court reversed the summary judgment entered in favor of VV-LLC and remanded the matter for entry of summary judgment in favor of Avelo. Judge Damoorgian’s well-reasoned opinion provides additional insight on the statute of limitations and several other defenses mortgagors and owners often rely upon. Once it becomes final, it will set a valuable precedent for mortgagees.

[1] This decision will become final July 13, 2018 provided a motion for rehearing is not filed before that date.