FLORIDA DCA FINDS STATUTE OF LIMITATIONS DID NOT PREVENT BANK FROM REESTABLISHING A LOST NOTE & FORECLOSING
SHD successfully tried a case which included a count to reestablish a promissory note. The Defendant argued the right to reestablish the note was barred by the Statute of Limitations. Earlier this month the First DCA issued a written opinion again addressing the statute of limitations, this time in the context of a foreclosure action which included a count to reestablish a lost note under § 673.3091, Fla. Stat. Mielke v. Deutsche Bank Nat’l Tr. Co. as Tr. for GSAA Home Equity Tr. 2005-MTR1. This is the first time a Florida District Court issued a written opinion on this specific topic. We wrote about a similar holding in last October’s eBlast where a federal court addressed the same issue in Bank of New York Mellon for Nationstar Home Equity Trust 2007-A v. Pederson.
In Mielke, the borrowers defaulted by failing to make their February 2008 payment. Deutsche Bank (“the Bank”) initiated foreclosure proceedings and sought to reestablish a lost note in May 2008, but voluntarily dismissed the case without prejudice in 2010. In 2016, SHD filed a second foreclosure action against the Mielkes again seeking to reestablish the lost note.
The Mielkes answered the complaint and moved for summary judgment on the basis that the Bank “was barred by the statute of limitations on its count to reestablish the lost note… [because the Bank] was aware of the lost promissory note during its previous 2008 complaint.” The trial court denied the Mielkes’ motion for summary judgment and after a trial, entered a final judgment in favor of the Bank finding that a claim to reestablish a lost note under Florida Statute § 673.3091 “clearly contemplates that an action to re-establish a lost note is filed in connection with an action to enforce the [n]ote.” The Mielkes appealed the Bank’s final judgment to the First DCA which framed the issue on appeal as “whether the ability to enforce a lost note accrues when the plaintiff discovers that the note is lost.”
The Mielkes argued that the statute of limitations barred the Bank’s lost note count because “the last element constituting the cause of action” accrued in 2008 when the Bank filed its first foreclosure action and asserted that the note was lost. The First DCA rejected this argument explaining that:
“The language of section 673.3091 demonstrates that it is not intended to create a cause of action to reestablish a lost note. Rather, it only recognizes that an entity not possessing an instrument is still entitled to enforce it if the entity meets certain conditions. The cause of action is the enforcement itself; section 673.3091 only sets forth special requirements if the plaintiff does not possess the instrument.”
The Court surmised:
“[T]he right to enforce a lost note, in the foreclosure context, travels with the breach that triggers the need to seek enforcement—default by a mortgagor. As a result, section 673.3091 does not create a standalone cause of action apart from a breach.”
Finally, the Court affirmed the Bank’s final judgment concluding that the “right to enforce a promissory note accrues when the default occurs, regardless of whether the plaintiff possesses the note.”
The First DCA’s decision in Mielke is another in a long strand of cases which further limits the applicability of the statute of limitations in the foreclosure context. Although this decision is not binding on the other Florida District Courts, it is likely to favorably influence them if they address the same issue.