The Fourth DCA reversed an involuntary dismissal of a Pinellas County, Florida mortgage foreclosure action finding the bank did in fact satisfy conditions precedent contrary to the trial court’s finding otherwise. HSBC Bank USA, N.A. as Tr. for Registered Holders of Renaissance Equity Loan Asset-Backed Certificates, Series 2007-3 v. Leone. In Leone, the bank first initiated foreclosure proceedings in May 2011 after providing the borrowers, Sabatino and Diana Leone, with written notice of their July 2010 default. In the 2011 foreclosure, the borrowers moved to dismiss and for summary judgment and filed an affidavit alleging the bank failed to provide them with default notice prior to initiating suit. The bank failed to offer “any counterevidence” to rebut the borrowers’ affidavit. As a result, the court dismissed the bank’s foreclosure “without prejudice.” The loan remained in default.

In June 2013, the bank again initiated foreclosure proceedings by filing a complaint which alleged the same July 2010 default date. The bank did not redemand before filing the second foreclosure; instead it relied on its prior default notice and the borrowers’ July 2010 default which remained uncured. The matter proceeded to a bench trial where the bank introduced the default letter into evidence. The borrowers “moved for an involuntary dismissal, arguing that a new default notice was required to be mailed prior to filing the second foreclosure action.” The trial court agreed reasoning that “the amount due to cure the default would be much higher than the one stated in the prior default notice.” The trial court entered an order of involuntary dismissal of the second foreclosure and the bank appealed that order.

On appeal, the borrowers maintained that dismissal was proper since the bank was required, but failed, to mail a new default notice prior to initiating the second suit. The Fourth DCA disagreed explaining that the plain language of the mortgage contract created no such requirement. The Court noted paragraph 22 of the mortgage required the bank give the borrowers notice “prior to acceleration.” The same provision also provided:

“ . . . failure to cure the default on or before the date specified in the notice may result in acceleration…, foreclosure…and sale of the Property.” The Court also pointed out that the mortgage specifically indicated that if the default was not cured after demand the lender could require “immediate payment in full…without further demand and may foreclose…by judicial proceeding.”

Based on this clear contractual language, the Court concluded unless the borrowers cured the default before the bank initiated the second foreclosure, the initial default notice was sufficient to satisfy conditions precedent.

In its holding, the DCA distinguished Bartram and Schindler and explained the borrowers’ reliance on both cases was misplaced. The Court distinguished Bartram on the basis that the right to accelerate was distinct from the obligation to satisfy conditions precedent. The Court concluded the borrowers’ right to deceleration upon dismissal of the bank’s first foreclosure did not affect the bank’s right to accelerate and foreclose a loan that remained in default. The Court distinguished Schindler based on the fact the court’s first dismissal in that case was with prejudice, rendering it an adjudication on the merits. When the bank in Schindler filed a second foreclosure action based on the same default, dismissal was proper based on doctrine of res judicata. The DCA again noted the lower court’s dismissal in Leone was without prejudice. Finally, the Court, quoting Sill, concluded that requiring a second notice of default “would serve no practical purpose” when a borrower fails to cure the default between receipt of the default notice, dismissal of the first foreclosure without prejudice and the filing of a second foreclosure complaint. This ruling is a welcomed development on the issue of the bank’s contractual requirement to satisfy conditions precedent and should serve to reduce litigation on this heavily contested issue.