The Third DCA affirmed a Fannie Mae foreclosure judgment and issued a written opinion for the limited purpose of discussing[i] the borrowers’ statute of limitations defense. Gonzalez v. Federal National Mortgage Association. In Gonzalez, the borrowers defaulted by failing to make their June 2007 mortgage payment. The bank sent the required demand notice and initiated the first of two foreclosure proceedings in October 2007 alleging a continuous default starting with the June 1, 2007 payment. In June 2008, the trial court dismissed the bank’s first foreclosure for unknown reasons.

In June 2013, the bank filed a second foreclosure action again based on the missed June 1, 2007 payment “and all subsequent payments.” The bank also alleged it was “exercising its right to accelerate all amounts due under the Note and Mortgage.” The matter proceeded to a bench trial and the court entered a Final Judgment of Foreclosure in favor of the bank. The borrowers appealed the judgment on multiple grounds including that the bank was “barred by the five-year statute of limitations from collecting any amounts that were due on the Note prior to the dismissal of the first action, as the instant complaint alleges the same default date… as alleged in the first action.”

The Third DCA disagreed with the borrowers’ conclusion based on the Florida Supreme Court’s holding in Bertram. The Court reasoned that dismissal of the first foreclosure had no bearing on the amount the bank could seek in the subsequent foreclosure because the bank was entitled to “all sums due under the note.” The Court explained: “By exercising its contractual right to acceleration, the note holder is not seeking to collect a series of individual past and future installment payments due to it. Instead, the holder elects to accelerate the entirety of the obligation owed to it under the terms of the note and mortgage, such that the entire sum owed—including principal, interest, advances, costs, and fees—will be included in the judgment. It is that entire debt—not individual installments of it—that comes due upon acceleration and that is sought to be liquidated in a foreclosure action.”

The Court noted that for purposes of the statute of limitations, it is “the triggering default”, not the sums due, that must “occur within the five-year limitations period.” If the bank alleges and proves the borrower missed a specific payment and “all subsequent payments”, that requirement is met. Once that requirement is met, the limitations period does not bar the bank “from seeking a final judgment that includes amounts due outside the five-year statute of limitations.” The Third DCA affirmed the bank’s final judgment, expressly refusing to reduce the judgment amount as the Fifth DCA did in Veldon. In Veldon, under similar facts, the Fifth DCA ordered the trial court “to exclude an award of damages for any defaults that occurred more than five years prior to the filing date” from the bank’s final judgment. Notably, the Third DCA’s decision in Gonzalez is not final.

Fifteen days after Gonzalez, the Fourth DCA joined in Bank of America, N.A. vs. Graybush, Similarly, the Fourth DCA also found that the Lender was not limited to seeking amounts due within five years from the filing of the Complaint and joined the Third DCA in certifying conflict with the Fifth DCA. The Fourth also made notice that recent Bankruptcy Judge Kimball in the Southern District of Florida was very critical of the five-year limitation period in, In re BCML Holding LLC. The Appellants in Graybush are currently seeking to stay the finality of the opinion.

With these cases, servicers and investors have a legal basis to attempt to seek the total amount due. However, these matters are not final, and these opinions could make its way up to the Florida Supreme Court due to the certified conflict between the Third and Fifth Districts.

[i] Ostensibly, the Third DCA accepted Judge Lawson’s invitation to the district courts to reconsider the statute of limitations issue. Bollettieri Resort Villas Condo. Ass’n, Inc. v. Bank of New York Mellon, 228 So. 3d 72, 75 (Fla. 2017) (“Although my individual view expressed in this context has no precedential value, the district courts can, of course, reconsider this issue on their own.”) Judge Lawson’s specially concurring opinion in Bollettieri was the subject of our November eBlast.