Foreclosure Litigation: Emerging Jurisprudence

Foreclosure Litigation: Emerging Jurisprudence

2018 Edition

11161 E State Road 70 #110-213Lakewood Ranch, Florida 34202

www.lawpracticecle.com941-584-9833

LawPracticeCLE is a national continuing legal education company designed to provide education on current, trending issues in the legal world to judges, attorneys, paralegals and other interested business professionals. New to the playing field, LawPracticeCLE is a major contender with its offerings of Live Webinars, On-Demand Videos, and In-person Seminars. LawPracticeCLE believes in quali-ty education, exceptional customer service, long-lasting relationships and networking beyond the classroom. We cater to the needs

of three divisions within the legal realm: Pre-Law and Law Students, Paralegals and other support staff, and Attorneys.

At LawPracticeCLE, we partner with experienced attorneys and legal professionals from all over the country to bring hot topics and current content that are relevant in legal practice. We are always looking to welcome dynamic and accomplished lawyers to share their knowledge!

As a LawPracticeCLE Speaker, you receive a variety of benefits. In addition to CLE teaching credit attorneys earn for presenting, our presenters also receive complimentary tuition on LawPracticeCLE’s entire library of webinars and self-study courses.

LawPracticeCLE also affords expert professors unparalleled exposure on a national stage in addition to being featured in our Speakers catalog with your name, headshot, biography and link back to your personal website. Many of our courses accrue thousands of views, giving our speakers the chance to network with attorneys across the country. We also offer a host of ways for our team of speakers to promote their programs, including highlight clips, emails, and much more!

1. A Course Description2. 3-4 Learning Objectives or Key Topics3. A Detailed Agenda4. A Comprehensive PowerPoint Presentation

Bankruptcy LawBusiness LawCannabis LawConstruction LawCriminal LawEducation Law Employment LawEmployment LawEntertainment Law Estate Planning

Ethics, Bias and ProfessionalismFamily LawFederal LawFood and Beverage LawGun LawHealth LawImmigration LawImmigration LawInsurance LawNonprofit Law

Paralegal StudiesPersonal Injury LawPractice Management & Trial PrepReal Estate LawSocial Security LawSpecialized TopicsTax LawTax LawTechnology Law

LawPracticeCLE will seek approval of any CLE program where the registering attorney is primarily licensed and a single alternate state. The application is submitted at the time an attorney registers for a course, therefore approval may not be received at the time of broadcasting. In the event a course is denied credit, a full refund or credit for another LawPracticeCLE course will be provided.

LawPracticeCLE does not seek approval in Illinois or Virginia, however the necessary documentation to seek CLE credit in such states will be provided to the registrant upon request.

LawPracticeCLE Unlimited is an elite program allowing Attorneys and Legal Professionals unlimited access to all LawPracticeCLE live and on-demand courses for an entire year.

LawPracticeCLE provides 20 new continuing legal education courses each month that will not only appeal to your liking, but also meet your State Bar Requirements.

Top Attorneys and Judges from all over the country partner with us to provide a wide variety of course topics from basic to advanced. Whether you are a paralegal or an experienced attorney, you can expect to grow from the wealth of knowledge our speakers provide.

Facebook: https://www.facebook.com/LawPracticeCLE

LinkedIn: https://www.linkedin.com/company/lawpracticecle

Instagram: https://www.instagram.com/lawpracticecle

Twitter: https://twitter.com/LawPracticeCLE

NO BRAKES: LOAN ACCELERATION AND DIMINISHING

FORECLOSURE DEFENSES

Eric A. Zacks & Dustin A. Zacks

Wayne State University Law School Legal Studies Research Paper Series

No. 2018-45

Wake Forest Journal of Business and Intellectual Property Law Volume 18, Spring 2018, Number 3

Papers posted in the Wayne State University Law School Legal Studies Research Paper

Series can be downloaded at the following url: http://www.ssrn.com/link/Wayne-State-U-LEG.html

Electronic copy available at: https://ssrn.com/abstract=3196805

�

WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW

� �� !�� "��

NO BRAKES: LOAN ACCELERATION AND DIMINISHING

FORECLOSURE DEFENSES

Eric A. Zacks & Dustin A. Zacks†

I. INTRODUCTION .......................................................... 390�II. STATE LAW TREATMENT OF ACCELERATION

CLAUSES, RES JUDICATA AND THE STATUTE OF

LIMITATIONS ................................................................ 396�A.�ONE BITE AT THE APPLE ......................................... 398�B.�MULTIPLE AND NEARLY UNLIMITED BITES AT THE

APPLE....................................................................... 410�III. UNDERSTANDING ACCELERATION AND RES

JUDICATA AND STATUTE OF LIMITATION CASES ........ 427�A.�THE FRAME OF THE FORECLOSURE STORY .............. 428�B.�A NEW “SYSTEMIC” FRAME OF FORECLOSURE ........ 432�C.�AN EQUITABLE APPROACH WHERE EQUITY DOES

NOT APPLY............................................................... 434�D.�INEFFICIENT EFFICIENCY ......................................... 440�

IV. CONCLUSION ........................................................... 442�

† © 2018 Eric A. Zacks is an Associate Professor of Law, Wayne State

University Law School. B.A., University of Michigan, 1998; J.D., Harvard Law School, 2002. Dustin A. Zacks is a member of King, Nieves, & Zacks PLLC in West Palm Beach, Florida. B.A., University of Michigan, 2004; J.D., University of Michigan Law School, 2007. The authors are grateful to Charles Roarty for superlative research assistance.


�

��!� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

The high volume of foreclosures during and following the Great Recession in the United States led to the revelation of many troubling lending practices. It also led to problematic judicial decisions that erode borrower protection by curtailing or eliminating procedural requirements and substantive defenses with respect to foreclosure. This Article examines the treatment of statute of limitation and res judicata defenses after a loan has been accelerated following a borrower default. Some courts ignore the traditional rule that acceleration under a contract starts the clock for statute of limitation purposes or that acceleration consolidates the loan instrument into a single obligation as opposed to an installment obligation. Instead, these courts have permitted lenders to accelerate loans repeatedly without triggering the statute of limitations or res judicata defenses. Consequently, lenders are permitted to assert foreclosure claims with respect to the same underlying debt amount over and over again. Rather than being used as a last resort, acceleration and the subsequent foreclosure process can now be wielded as a significant threat to borrowers throughout the life of their home loan. Consistent with favoritism demonstrated in our prior research, we argue that creating exceptions for lenders in the application of statutes of limitation and res judicata defenses provides little incentive for banks and servicers to reform questionable lending and collection practices.

I.�INTRODUCTION

This Article examines the treatment of statute of limitation and res judicata defenses after a loan has been accelerated following a default and is in foreclosure. The Great Recession resulted in a sizable wave of foreclosures that led commentators to compare the era (and the policy responses) to the Great Depression.1 The enormous amount of cases filed placed a strain on courts, court administrators, legislators, and of course the parties to these suits.2 This strain meant delayed resolutions for thousands of cases.3 This increased caseload meant that many state

1 See, e.g., Monica D. Armstrong, From the Great Depression to the Current

Housing Crisis: What Code Section 108 Tells Us About Congress’s Response to Economic Crisis, 26 AKRON TAX J. 69, 97, 105 (2011).

2 See generally Aleatra P. Williams, Foreclosing Foreclosure: Escaping the Yawning Abyss of the Deep Mortgage and Housing Crisis, 7 NW. J.L. & SOC. POL’Y 455, 470–71 (2012) (discussing the effects of the large amount of foreclosure cases on courts and legislatures following the Great Recession).

3 Krista Franks Brock, Moody’s: Foreclosure Timelines on the Rise; More Losses to RMBS, DSNEWS, http://dsnews.com/news/foreclosure/03-23-2012/moodys-foreclosure-timelines-on-rise-more-losses-to-rmbs-2012-03-23 (last

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

court systems were inundated with an untenable number of cases that few judges wanted to hear.4 With many court systems’ funding tied to case clearance numbers, courts and court administrators attempted numerous changes in an effort to process thousands of cases efficiently and fairly.5

Some of these procedures were aimed at diverting parties from litigation and, for example, encouraging or even mandating early mediation.6 Although some scholars have argued that certain efforts were successful,7 other research suggests that these programs were not a panacea because banks and their representatives attending mediations often lacked the authority to settle, basic information about the given case at hand, and basic flexibility, such as the ability to contemporaneously review borrower financial information as a basis to provide an offer of settlement.8

Aside from diversion programs aimed at moving parties towards settlement early in the foreclosure process, courts also set up additional court procedures and structures to process the large number of foreclosures.9 These procedures included, for example, temporarily rehiring additional retired judges to help process the cases and setting up trial and summary judgment calendars with hundreds of cases scheduled during a single day or afternoon. 10 While such actions undoubtedly assisted in reducing the number of pending foreclosure

visited Mar. 27, 2018) (noting that judicial foreclosure timelines average 654 days, whereas non-judicial foreclosures age an average of 297 days).

4 See, e.g., Andrew J. Kazakes, Protecting Absent Stakeholders in Foreclosure Litigation: The Foreclosure Crisis, Mortgage Modification, and State Court Responses, 43 LOY. L.A. L. REV. 1383, 1401 (2010) (describing how this overwhelming increase in caseload has led to rubber stamping and an abbreviated foreclosure process).

5 See, e.g., Greg Allen, Fast-Paced Foreclosures: Florida’s ‘Rocket Docket’, NPR (Oct. 21, 2010, 4:17 PM), http://www.npr.org/templates/story/story.php?storyId=130729666 (describing a Florida court which hears about 200 foreclosure cases a day).

6 Alan M. White, Foreclosure Diversion and Mediation in the States, 33 GA. ST. U. L. REV. 411, 412, 415 (2017).

7 See id. at 412, 416. 8 Adolfo Pesquera, State Mediation Program Helps Few Homeowners, DAILY

BUS. REV. (June 29, 2011, 12:00 AM), https://www.law.com/dailybusinessreview/almID/1202498811107/State-mediation-program-helps-few-homeowners/ (“There were 63,019 mortgage holders eligible for mediation between the program’s launch in March 2010 and the end of the year. Of those, there were 26,150 reported contacts and 8,669 mediations conducted. Mediations leading to some sort of agreement totaled 2,309, or 3.7 percent of the eligible population.”).

9 Allen, supra note 5. 10 Id.

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

cases, the creation of parallel or shadow court systems strictly for foreclosure matters meant that borrowers’ counselors were met with immense judicial skepticism, with pressure to conduct trials in extremely short amounts of time, and with limited judicial consideration of cases.11 The lack of safeguards for litigants triggered harsh criticism, including accusations of implementing procedures that “almost uniformly disadvantage homeowners.”12

At a bare minimum, faster foreclosure case processing times meant that judges often ignored or did not have sufficient time to devote to accusations of fraud and other unethical behavior by foreclosing entities and their attorneys.13 Furthermore, research suggests that courts across the country, and not merely in the states with the highest number of foreclosures, have systematically reduced the availability of debtor defenses, debtor discovery, and consequences to banks for fraud upon courts.14 Not only that, but even years into the foreclosure crisis, some courts lack basic understanding of how modern mortgage developments function.15

The judicial practice of “previewing” foreclosure cases, discussed in our previous research, also creates additional problems. 16 Previewing occurs where judges begin a foreclosure case or decision, regardless of the actual issue being appealed or argued, by noting that a default under a note has not been disputed, or that a certain party has not made a mortgage payment in a certain amount of time.17 This

11 Petition for Writ of Certiorari or Writ of Prohibition at 2, Merrigan v. Bank of

N.Y. Mellon, 64 So. 3d 685 (Fla. Dist. Ct. App. 2011) (No. 09–CA–055758), 2011 Fla. App. LEXIS 11139.

12 Id. at 13. 13 See id. at 16, 33–34. 14 See Eric A. Zacks & Dustin A. Zacks, Not a Party: Challenging Mortgage

Assignments, 59 ST. LOUIS U. L.J. 175, 179–83 (2014) [hereinafter Not a Party]. 15 In the case of Mortgage Electronic Registration Systems, Inc. (“MERS”), for

example, a company expressly created not to physically possess, store, or hold promissory notes has repeatedly explained that it is never the holder of promissory notes. See Frequently Asked Questions, MERS, https://www.mersinc.org/about/faq (last visited Apr. 3, 2018). Despite MERS itself admitting it does not hold notes, this has not dissuaded courts from proclaiming exactly the opposite. See, e.g., Taylor v. Deutsche Bank Nat’l Tr. Co., 44 So. 3d 618, 623 (Fla. Dist. Ct. App. 2010) (concluding that MERS could arguably be a holder of promissory notes).

16 See Dustin A. Zacks, Standing in Our Own Sunshine: Reconsidering Standing, Transparency, and Accuracy in Foreclosures, 29 QUINNIPIAC L. REV. 551, 571 (2011) [hereinafter Standing in Our Own Sunshine] (“[M]any courts will correctly assume that a lender or successor owner would not buy a MERS loan if it did not assent to MERS remaining its nominee with the associated rights to foreclose.”).

17 See generally Eric A. Zacks & Dustin A. Zacks, A Standing Question: Mortgages, Assignment, and Foreclosure, 40 J. CORP. L. 706, 727 (2015)

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

previewing almost always is followed by a rejection of the borrowers’ legal arguments. The judicial reaction to the foreclosure crisis thus appears largely disinterested in procedural safeguards for debtors and generally disposed toward the interests of banks and lenders.18

Mixed empirical data shows the possibility that reducing case numbers at the expense of basic due process might still be seen as a net gain for the wellbeing of the public and of the economy. For example, some research offers that additional foreclosure processing time results in lenders making future credit offers more expensive. 19 Similarly, other data produced during the Great Recession shows that greatly elongated foreclosure time frames, by providing an opportunity for continuing dilapidation of properties and neighborhoods, might increase crime and decrease surrounding property values.20

Whatever economic and societal benefits have been made by the acceleration of foreclosure procedures and the short attention given to foreclosure cases, quicker judicial foreclosures gave cover to a wide variety of bank and lender malfeasance. 21 Courts largely failed to address or remedy the many allegations of robo-signing, service of process deficiencies, forced-placed insurance scams, and other problematic practices that came to light during the foreclosure boom.22 The lack of oversight, whether willful or not, reflected poorly on courts when it was revealed that thousands of fraudulent or perjured documents had been filed in litigation around the country, when attorneys general instituted revealing investigations into high volume foreclosure law firms, when national banks and government-sponsored enterprises were forced to halt foreclosures to internally assess their foreclosure practices, and when certain lenders ultimately paid millions in fines arising from their foreclosure practices.23

As mentioned, a corollary to, or perhaps an outgrowth from, court

[hereinafter A Standing Question] (explaining how “previewing” is not unique to a particular type of claim).

18 See Not a Party, supra note 14, at 179, 182, 186. 19 Dustin A. Zacks, The Grand Bargain: Pro-Borrower Responses to the

Housing Crisis and Implications for Future Lending and Homeownership, 57 LOY. L. REV. 541, 562 (2011).

20 Id. at 546–54. 21 A Standing Question, supra note 17, at 706. 22 See, e.g., Dustin A. Zacks, Robo-Litigation, 60 CLEV. ST. L. REV. 867, 891–

92 (2013) [hereinafter Robo-Litigation] (examining judges’ muted reactions to misconduct in response to the foreclosure crisis).

23 See id. at 875–76, 878, 884–90, 904–05 (describing multiple instances of attorney misconduct in light of the foreclosure crisis); David Dayen, Another Slap on the Wrist for a Company That Abused Homeowners, NEW REPUBLIC (Dec. 20, 2013), https://newrepublic.com/article/116010/ocwen-mortgage-fraud-settlement-servicer-fined-homeowner-abuse.

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

systems’ general orientation towards speeding up foreclosure cases has been the systematic narrowing of borrower defenses.24 In response to debtor defenses related to Mortgage Electronic Registration Systems, Inc. (“MERS”) and its capacity to foreclose, or to assign, transfer, or negotiate mortgage notes, courts largely deferred to whatever argument MERS sought to assert. 25 Again, this occurred despite publicly available evidence that MERS and its attorneys were propounding diametrically opposing positions to courts around the country regarding exactly what ownership or agency interest, if any, MERS held. 26 Courts, accordingly, generally acceded to MERS’s ascendance as a prominent placeholder on the public record of millions of homes and to the detriment of hundreds of years of traditional recording rules, despite the fact that MERS was created undemocratically by private parties (including banks and lenders) expressly for the purpose of avoiding statutory recording requirements.27

In other related areas of contentious foreclosure litigation, courts also tended to downplay or ignore borrower defenses based on faulty assignments of notes and mortgages.28 Although standing is a primary defense against a foreclosing entity that did not make the original loan, many courts not only downplayed such defenses based on assignment issues, but they also refused to allow discovery on assignments and transfers of their mortgage loan.29 Again, this general trend appears to have ignored the readily available evidence that thousands of assignments were fraudulent or otherwise problematic.30

This Article extends this previous body of research to yet another area of defense to foreclosure and debt in which judges appear to proceed along the same continuum described above. We examine the treatment of statute of limitation and res judicata defenses after a loan has been accelerated following a default. Some courts have ignored the traditional rule that acceleration under a contract starts the clock for statute of limitation purposes or that acceleration consolidates the loan instrument into a single obligation as opposed to many separate installment obligations.31 Instead, these courts have permitted lenders to accelerate loans repeatedly without triggering the statute of

24 See A Standing Question, supra note 17, at 708–11. 25 See, e.g., Standing in Our Own Sunshine, supra note 16, at 570. 26 Id. 27 Id. 28 A Standing Question, supra note 17, at 708. 29 See id. at 711. 30 See id. 31 See, e.g., Allen, supra note 5 (describing “shortcuts” that some courts have

taken to “hear[] as many as 200 foreclosure cases each day” that “deny many homeowners their right to due process”).

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

limitations or res judicata defenses. 32 Consequently, lenders are permitted to assert foreclosure claims with respect to the same underlying debt amount over and over again.33 Rather than being used as a last resort, acceleration and the subsequent foreclosure process can now be wielded as a significant threat to borrowers throughout the life of their home loan.34

When presented with new and novel statute of limitations and res judicata defenses to foreclosure, courts have again shown their propensity to preview and predict the ultimate outcome of a lender’s claim before wrestling with whatever legal issue is actually being appealed or argued.35 Such previews inevitably damage homeowners and result in exceptions and special treatment for banks, lenders, servicers, and other foreclosing entities. 36 Such decisions provide another powerful example of courts ignoring longstanding procedural and substantive rules in favor of foreclosing entities in the name of judicial expediency.37

As we have done in previous research, we argue that this continuation of courts’ general anti-homeowner orientation, even in the face of years of lender malfeasance, produces serious negative externalities.38 Just as judicial refusal to entertain robo-signing claims or to grant discovery on such issues gave cover to high-volume foreclosure firms and their clients and kept questionable ethical practices in the dark for years, new exceptions for banks and lenders in the application of statutes of limitation and res judicata defenses have provided little incentive for banks and servicers to reform questionable

32 See Singleton v. Greymar Assocs., 882 So. 2d 1004, 1006–07 (Fla. 2004). 33 See id. at 1007–08 (“[A]n acceleration and foreclosure predicated upon

subsequent and different defaults present a separate and distinct issue . . . . The ends of justice require that the doctrine of res judicata not be applied so strictly as to prevent mortgagees from being able to challenge multiple defaults on a mortgage.”).

34 See David Hahn, The Roles of Acceleration, 8 DEPAUL BUS. & COM. L.J. 229, 244 (2010) (“Acceleration is the means of action. Through its right to accelerate the debt, the creditor can materialize the consequences of a covenant violation and inflict severe harm to the borrower's operations and survival as a viable entity. It is the ultimate threat of a creditor against the borrower . . . .”).

35 Joseph K. Gilligan, Note, Acceleration Clauses in Notes and Mortgages, 88 U. PA. L. REV. 94, 107–10 (1939).

36 Id. at 109. 37 Id. 38 Id.; see generally A Standing Question, supra note 17, at 730 (“Encouraging

more settlements benefits society as a whole, particularly those jurisdictions that have had higher numbers of foreclosures. This is because preventing foreclosures can help eliminate significant negative externalities. The normal neighborhood-level effects of foreclosed homes are significant in terms of crime, blight, and reduced property values.”).

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

lending or foreclosure practices. 39 Because these court-created exceptions can revive a bank’s claim that was previously dismissed in part because the foreclosure was questionable, we again argue that courts have continued to contribute to the many problematic ways in which banks litigate foreclosure cases.

II.�STATE LAW TREATMENT OF ACCELERATION CLAUSES, RES

JUDICATA AND THE STATUTE OF LIMITATIONS

Acceleration clauses are contractual provisions designed to provide lenders with additional protection in the event that a borrower repeatedly fails to pay.40 These clauses provide, either automatically or at the option of the lender, for the entire loan amount to become due and payable following a default under the note, such as a borrower’s failure to make a monthly payment.41

In the absence of an acceleration clause, a lender would be forced to bring separate claims against the borrower each time the borrower failed to make an additional monthly payment (since each monthly payment would not otherwise be due until the stated due date in the promissory note).42 An acceleration clause also is helpful to lenders because it provides them with an opportunity to exit the transaction immediately (by accelerating the loan and foreclosing) once the borrower’s ability to pay is threatened.43 This could be more advantageous than waiting until

39 See Robo-Litigation, supra note 22, at 869. 40 See Gilligan, supra note 35, at 95 (describing the evolution of acceleration

clauses during the nineteenth century). 41 Mitchell v. Fed. Land Bank of St. Louis, 174 S.W.2d 671, 676–77 (Ark.

1943) (describing various formulations of acceleration clauses); Gilligan, supra note 35, at 109 (“They contend that the acceleration clause is for the benefit of the creditor—it is another arrow in his quiver. The debtor has done wrong. He has defaulted.”).

42 Gilligan, supra note 35, at 94 (“It is universally accepted that the failure of a mortgagor to meet installments of principal or interest, or to pay taxes, assessments and insurance will not cause the whole debt to mature at once upon default, absent a provision in the bond or mortgage to that effect.”); Hahn, supra note 34, at 231 (“A priori, acceleration may be conceived as an enforcement clause, facilitating the collection of the loan. By modifying the original terms of the agreement and making the entire amount payable on demand, the creditor may move forward and use collection measures sanctioned by the applicable debtor-creditor law. In this sense, acceleration is an accessory of the contractual remedy of enforcement.”).

43 See, e.g., 9 ALFRED TARTAGLIA, WARREN’S WEED NEW YORK REAL

PROPERTY § 95.50[12] (Matthew Bender 2018) (“Acceleration clauses have been used in mortgage instruments and deemed valid and enforceable in a wide range of conditions. The most common provisions for acceleration of the mortgage debt result from the mortgagor’s failure to pay an installment of principal or interest; or the failure to pay taxes, water rates, or assessments; or the failure of the mortgagor to keep the premises insured.” (citations omitted)); Hahn, supra note 34, at 231 (“A

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

the borrower breaches each monthly payment obligation before the entire loan amount is due, at which point the borrower may have no ability to pay and the underlying property may be worth less.44

The implicit threat of acceleration is also important with respect to deterring borrower default.45 Borrowers know that if they breach one monthly installment, the entire loan may become due and they could lose the house in foreclosure.46 This provides borrowers with incentives to pay regularly.47 The threat of loan acceleration can also be useful in pre-foreclosure negotiations with buyers who are delinquent with respect to their monthly payment obligations.48 Disclosures mandated in many form mortgages attempt to dull the sharp blade of acceleration, including specific language that informs borrowers that the entire amount of the loan might be demanded presently at once if a default is not cured.49

One issue that has divided courts is how to rule on attempts by lenders to accelerate the loan and bring foreclosure proceedings in repetitive fashion.50 This Article addresses two approaches regarding how particular defenses should apply once a loan has been accelerated but the original claim for breach of the promissory note is dismissed or otherwise lost. For example, if a first action on a note accelerated by

second entity a creditor must worry about, which has been widely neglected by the financial literature, are other self-interested creditors who rush to dismantle the common debtor upon the latter’s financial distress. Creditors whose claims are payable in the future lack the fundamental legal tools to practically protect their interests against a run on the debtor's assets.”).

44 SCOTT T. TROSS, NEW JERSEY FORECLOSURE LAW & PRACTICE 4–5 (N.J. Law Journal Books 2001) (“Most mortgages contain acceleration clauses, which give the mortgagee the right to foreclose the entire indebtedness in the event the mortgagor defaults under the loan documents. Where the mortgage contains such a clause, the mortgagee is authorized to require payment of the entire mortgage debt upon default. Absent an acceleration clause, the mortgagee is without power to alter the maturity date of the outstanding principal balance of the loan upon default.”).

45 Hahn, supra note 34, at 244 (“Acceleration is the means of action . . . . Absent the creditor’s contractual power to call the entire loan back the force of the covenants would diminish. A borrower who is aware of the limited enforcement options of its creditors would attach a lower price tag to a potential covenant violation. Acceleration is, thus, the complementary measure that adds credibility to the covenants’ intended deterrence. It perfects the threat by signaling to the borrower that it better not dare even think about violating the covenants.”).

46 See id. 47 See id. 48 See id. 49 See, e.g., FANNIE MAE, MORTGAGE UNIFORM INSTRUMENT ¶ 22,

https://www.fanniemae.com/singlefamily/security-instruments (last visited Apr. 3, 2018).

50 See U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 990 (Ohio 2008); see also Singleton v. Greymar Assocs., 882 So. 2d 1004, 1005–06 (Fla. 2004).

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

the lender was dismissed, but the borrower subsequently breaches again, should the lender be permitted to accelerate and sue on the note again? Ordinarily, claims litigated and lost on the merits cannot be brought again under the doctrine of res judicata.51 Secondly, if the party accelerated the note but took too long to file or attempt to refile its claim, the applicable statute of limitations could prevent a claim from being brought.52

In the foreclosure context, the issue often turns on whether the earlier and subsequent claims for breach and acceleration are treated as one and the same.53 If the two claims for breach are deemed to be the “same,” then the doctrine of res judicata may apply and prevent the lender from attempting to collect on the loan “again” if the lender lost the first claim on the merits.54 Similarly, if the lender accelerated the loan but did not pursue its claim in a timely fashion, the statute of limitations may bar subsequent claims for breach and acceleration.55 If the two claims are treated as separate and distinct claims, however, then neither res judicata nor the statute of limitations will apply, and the lender will be permitted to accelerate the entire loan again based upon subsequent breaches of the promissory note and pursue foreclosure.56 This section describes how different courts approach this issue.

A.� One Bite at the Apple

The traditional rule in installment contracts, such as home loans, is

that individual breaches of installment obligations are treated separately, but that acceleration of the entire amount due following a breach under the installment contract changes that treatment.57 Many cases hold that once acceleration of the entire home loan occurs, the entire outstanding indebtedness under the promissory note should be treated as becoming due (by nature of the acceleration clause) and, more

51 RESTATEMENT (FIRST) OF JUDGMENTS § 48 (AM. LAW INST. 1942). 52 H. A. Wood, Annotation, Acceleration Provision in Note or Mortgage as

Affecting the Running of the Statute of Limitations, 161 A.L.R. 1211 (1946). 53 See Singleton, 882 So. 2d at 1008. 54 See Stadler v. Cherry Hill Developers, Inc. 150 So. 2d 468, 471 (Fla. Dist. Ct.

App. 1963). 55 See Deutsche Bank Tr. Co. Ams. v. Beauvais, No. 3D14–575, 2014 Fla. App.

LEXIS 20422, at *20 (Fla. Dist. Ct. App. Dec. 17, 2014), rev’d on reh’g en banc, 188 So. 3d 938 (2016).

56 See Singleton, 882 So. 2d at 1008. 57 9 TARTAGLIA, supra note 43, § 95.50[1] (“An acceleration clause in a

mortgage, bond or note will generally provide that all unpaid principal, along with any accrued interest and other charges, becomes immediately due and payable upon the happening of any condition or conditions specified in the instrument.”).

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

importantly, as indivisible.58 This means that if a lender accelerates the loan and loses on the merits, then the lender cannot sue again, even if the borrower subsequently “defaults” by not making a monthly payment.59 Courts so holding have relied upon res judicata, which provides that:

[T]he judgment of a court of concurrent jurisdiction directly upon a matter is conclusive between the same parties as to that matter when drawn in question in another court. The rule rests on the ground that once a party has litigated, or has had the opportunity to litigate, the same matter in a court of competent jurisdiction, that party or its privy should not be permitted to litigate it

again to the harassment and vexation of its adversary.60

Res judicata, then, exists to prevent harassment of a person when a claim was already litigated or could have been litigated in another court.61 Without it, claimants could simply attempt to bring their claims in different jurisdictions until finding one that agrees with them.62 This is particularly important with regard to mortgage contracts, where the disparity in bargaining power and litigation resources is vast. 63

58 See U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 990 (Ohio 2008); see

also Johnson v. Samson Constr. Corp., 704 A.2d 866, 869 (Me. 1997). 59 See Johnson, 704 A.2d at 869; see also Stadler, 150 So. 2d at 472–73. 60 John F. Wagner, Jr., Annotation, Proper Test to Determine Identity of Claims

for Purposes of Claim Preclusion by Res Judicata Under Federal Law, 82 A.L.R. Fed. 829, Art. 1 § 2(a) (1987); see also, e.g., LA. STAT. ANN. § 13:4231 (2017) (“A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment.”); VA. SUP. CT. R. 1:6 (2018) (“A party whose claim for relief arising from identified conduct, a transaction, or an occurrence, is decided on the merits by a final judgment, shall be forever barred from prosecuting any second or subsequent civil action against the same opposing party or parties on any claim or cause of action that arises from that same conduct, transaction or occurrence . . . .”).

61 1 RICHARD W. BOURNE & JOHN A. LYNCH, JR., MODERN MARYLAND CIVIL

PROCEDURE § 12.2(a) (3d ed. 2017) (“[A] judgment between the same parties and their privies is a final bar to any other suit upon the same cause of action, and is conclusive not only as to all matters that have been decided in the original suit, but as to all matters which with propriety could have been litigated in the first suit . . . .” (citation omitted)).

62 Wagner, Jr., supra note 60, § 2(a) (“Claim preclusion will therefore apply to bar a subsequent action on res judicata principles where parties or their privies have previously litigated the same claim to a valid final judgment. In most cases, the key question to be answered in adjudging the propriety of a claim preclusion defense appears to be whether in fact the claim in the second action is ‘the same as,’ or ‘identical to,’ one upon which the parties have previously proceeded to judgment.”).

63 See Frank S. Alexander et al., Legislative Responses to the Foreclosure Crisis continued . . .


�

!!� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

Typically, res judicata analysis turns on a court’s determination regarding whether the subsequent claim arises out of the same transaction that was the subject of the earlier claim.64

Accordingly, under traditional application, once the entire indebtedness had been accelerated and had become due, then the borrower only had one contractual obligation: to pay the entire loan amount.65 The lender’s failure to prevail with respect to the borrower’s breach of that singular contractual obligation could therefore doom future claims against the borrower, even if those future claims related to subsequent monthly installment obligations.66

Res judicata traditionally may also be invoked through the “two-dismissal” rule, which treats the second voluntary dismissal of a claim as a loss on the merits.67 Accordingly, if the debt is treated as indivisible once accelerated, then the second voluntary dismissal can prevent lenders from bringing a third claim based upon a subsequent breach of the note, even if the original two claims were dismissed voluntarily and were not disposed of on the merits.68 In this instance, it would not

in Nonjudicial Foreclosure States, 31 REV. BANKING & FIN. L. 341, 360 (2011) (noting the financial restraints that often bar borrowers from obtaining proper legal counsel in foreclosure litigation).

64 See Hamlin v. Peckler, No. 2005–SC–000166–MR, 2005 WL 3500784, at *1 (Ky. Dec. 22, 2005) (“The only difference between the 1999 claim and the 2004 claim was that MERS asserted a subsequent default on the note. Significantly, however, the 1999 complaint and the 2004 complaint allege that the entire debt became due on the same date, May 23, 1998. Hamlin pled res judicata and the trial court initially sustained this plea in open court and dismissed the subsequent action. Under authority of CR 60.02, however, the trial court, sua sponte, vacated its dismissal order and reinstated the 2004 claim.”).

65 United States v. Boozer, 732 F. Supp. 20, 22 (N.D.N.Y. 1990) (“By contrast, defendant contends that the government’s right of action accrued upon defendant's initial default on each loan. . . . This court’s review of the case law reveals that the government’s right of action accrues in a case such as this when the government first makes a demand for payment in full.”).

66 U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 992 (Ohio 2008) (“The obligations to pay each installment merged into one obligation to pay the entire balance on the note.”); Stadler v. Cherry Hill Developers, Inc., 150 So. 2d 468, 472 (Fla. Dist. Ct. App. 1963) (“The essential question is whether the election to accelerate put the entire balance, including future installments at issue. . . . There can be no doubt that the accelerated balance was at issue and that the prayer of the complaint sought, not one interest installment, but the entire amount due. Accordingly, it seems clear that the actions are identical.”).

67 Gullotta, 899 N.E.2d at 991 (“Because the second dismissal here functioned as an adjudication on the merits, res judicata would bar an action ‘based upon any claim arising out of the transaction or occurrence that was the subject of the previous action.’” (quoting Grava v. Parkman Twp., 653 N.E.2d 226, 227 (Ohio 1995))).

68 Cadle Co. II v. Fountain, No. 49488, 2009 WL 1470032, at *1 (Nev. Feb. 26, 2009) (“Because an affirmative act is necessary to accelerate a mortgage, the same is

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

!��

matter that the relief sought in the original two claims were different or based on subsequent actions.69

In addition, the lender only has a certain amount of time to bring a claim for acceleration and foreclosure following a breach of the mortgage.70 The statute of limitations in each state sets this amount of time and can vary. 71 Typically, the statute of limitations for foreclosures is tied to a breach of the underlying promissory note that the mortgage secures.72 This is because the mortgage usually provides for foreclosure rights in the event that the borrower breaches the promissory note.73 For example, in New York, the statute of limitations

needed to decelerate. Accordingly, a deceleration, when appropriate, must be clearly communicated by the lender/holder of the note to the obligor. Here, if CIT intended to revoke the acceleration of the debt due under the note, it should have done so in a writing documenting the changed status. The voluntary dismissal did not decelerate the mortgage because it was not accompanied by a clear and unequivocal act memorializing that deceleration.”); Beneficial Ohio, Inc. v. Lemaster, No. 2008 CA 0100, 2009 WL 2457710, at *4 (Ohio Ct. App. July 30, 2009) (“In the case sub judice, all of the complaints arose from the same note, the same mortgage and the same default. From the time of appellants’ original default, the entire principal became due as a result of the acceleration clause in the note. The terms of the note and/or mortgage were never changed. As in the Gullotta case, from the time of appellants’ original breach, appellant’s [sic] owed the entire amount of the principal because of the acceleration clause.”).

69 Gullotta, 899 N.E.2d at 993 (“Although U.S. Bank’s complaint changed, the operative facts remained the same. Plaintiffs cannot save their claims from the two-dismissal rule simply by changing the relief sought in their complaint. Allowing U.S. Bank to do so would be like allowing a plaintiff in a personal-injury case to save his claim from the two-dismissal rule by amending his complaint to forgo a couple of months of lost wages.”); Parish, 2012 WL 966640, at *6 (“[W]e agree with the Parishes’ position that when a borrower defaults on a note and the holder invokes an acceleration clause, the holder cannot file and dismiss an unlimited number of lawsuits solely because the borrower makes payments after the holder files each suit. In this scenario all claims would still arise from ‘the same note, the same mortgage, and the same default.’” (quoting Gullotta, 899 N.E.2d at 991)).

70 10 ARTHUR L. CORBIN ET AL., CORBIN ON CONTRACTS § 53.9 (Matthew Bender 2017) (“No doubt there is much authority for the statement that where separate actions would lie for a series of such breaches, the statute operates against each one separately as of the time when each one could have been brought, and that this rule is not affected by the fact that after two or more such breaches have occurred the plaintiff must join them all in one action. Of course, if an action for a first installment is barred by the statute, it cannot properly be included in an action for later installments that are not yet barred.”).

71 Id. 72 Id. (“The period fixed by a statute of limitations begins to run from the

‘accrual of the cause of action.’”). 73 12 KARL B. HOLTZSCHUE, PURCHASE AND SALE OF REAL PROPERTY § 36.07

(Matthew Bender 2017) (“The most important feature of the mortgage relationship is the power of the mortgagee to force the sale of the mortgaged land. The proceeds of the sale are first used to cover any loss the mortgagee may have incurred because of

continued . . .


�

!�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

to bring a foreclosure action following failure to pay on the underlying promissory note is six years.74 This means that if the borrower fails to make a payment on the note, then the lender only has six years from the borrower’s breach of the obligation to make that payment to bring a foreclosure action, or it essentially waives the claim.75

For statute of limitation purposes, treating the debt as indivisible following acceleration means that the statute of limitations with respect to all claims for payment under the promissory note begins to run once the loan has been accelerated.76 If the lender fails to pursue all claims for payment under the promissory note before the statute of limitation expires (as triggered by the loan acceleration), then the lender will be barred from bringing future claims under the promissory note or from foreclosure under the mortgage.77 This is in fact the traditional rule.78

the debtor’s default in meeting the terms of the mortgage obligation. ‘Foreclosure’ became the process for transferring title to the mortgaged interest out of the mortgagor—or the successor—to the purchaser at the mortgagee’s foreclosure sale, which may be, and in most cases is, the mortgagee itself.”).

74 Fed. Nat’l Mortg. Ass’n v. Mebane, 618 N.Y.S.2d 88, 89 (N.Y. App. Div. 1994) (citing the applicable statute).

75 35 JEFFERSON JAMES DAVIS & CHARLES J. NAGY, FLORIDA JURISPRUDENCE § 73 (West 2d ed. 2013) (“This rule is consistent with the policy behind the statute of limitations, which is to prevent unreasonable delay in the enforcement of legal rights and to protect against the risk of injustice.”).

76 In re Bennett Funding Grp., Inc., 292 B.R. 476, 480 (N.D.N.Y 2003) (“[In addressing a line of credit claim], causes of action seeking to recover the entire contractual amount on installment contracts containing an optional acceleration clause do not accrue until the option is exercised.” (alteration in original)); Loiacono v. Goldberg, 658 N.Y.S.2d 138, 139 (N.Y. App. Div. 1997) (“The law is well settled that with respect to a mortgage payable in installments, there are ‘separate causes of action for each installment accrued, and the Statute of Limitations [begins] to run, on the date each installment [becomes] due’ unless the mortgage debt is accelerated.” (alteration in original) (quoting Pagano v. Smith, 608 N.Y.S.2d 268, 270 (N.Y. App. Div. (1994); then citing Khoury v. Alger, 571 N.Y.S.2d 829, 830 (N.Y. App. Div. 1991))); Mebane, 618 N.Y.S.2d at 90 (“Once the mortgage debt was accelerated, the borrowers’ right and obligation to make monthly installments ceased and all sums became due and payable. Therefore, the six-year Statute of Limitations began to run at that time. Consequently, this foreclosure action is time-barred.” (citations omitted)).

77 Hamlin v. Peckler, No. 2005–SC–000166–MR, 2005 WL 3500784, at *2 (Ky. Dec. 22, 2005) (“No Kentucky case appears to squarely address whether there can be subsequent defaults after suit is brought on an accelerated debt. However, the answer would appear to be ‘no’ as one of the principal purposes of pleadings is to develop the precise point in dispute by formulating the true issues. Thus, when the mortgagee sought recovery of the entire unpaid indebtedness and sought to subject the real property upon which the mortgage lien had been granted to payment of the indebtedness, a default was asserted with respect to every installment of the debt, foreclosing assertion of some subsequent claim of default.”).

78 There does, however, appear to be a split in jurisdictions when the continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

!��

U.S. Bank National Ass’n v. Gullotta, an Ohio Supreme Court case, is an illustrative example of the traditional application of contract law principles and res judicata with respect to acceleration clauses and foreclosure.79 In 2003, Giuseppe Gullotta had taken out a mortgage from MILA, Inc. to buy a home in Canton, Ohio. 80 As in many mortgages, Gullotta’s contained an acceleration clause that could be exercised upon default of a monthly installment payment. 81 After Gullotta missed several payments, U.S. Bank accelerated the loan in April 2004 and demanded the entire amount due under the note, seeking interest from November 1, 2003.82 Three months later, U.S. Bank voluntarily dismissed this first case against Gullotta.83

In late 2004, U.S. Bank once again filed for foreclosure by accelerating the debt and asked for interest from December 1, 2003, one month apart from the allegation or demand in the first suit.84 U.S. Bank dismissed this second case in 2005.85 U.S. Bank filed for foreclosure a third time, in October 2005, seeking foreclosure of the entire loan amount with interest from November 1, 2003, as in the first attempted foreclosure case.86 Gullotta’s motion to dismiss, treated as a motion for summary judgment,87 argued that under the two-dismissal rule, U.S.

acceleration clause operates automatically, as opposed to by the voluntary election of the mortgagee. 55 AM. JUR. 2D Mortgages § 428 (1973); see also Cook v. Merrifield, 335 So. 2d 297, 299 (Fla. Dist. Ct. App. 1976) (holding that a mortgage-acceleration clause providing that “failure to pay any installments herein promptly when due shall cause the entire indebtedness to become immediately due and payable” is self-executing and acceleration was automatic upon default); Miles v. Hamilton, 189 P. 926, 927–28 (Kan. 1920). But see Atkinson v. Kirby, 117 So. 2d 392, 395–96 (Ala. 1960); Fed. Land Bank of Omaha v. Wilmarth, 252 N.W. 507, 511–12 (Iowa 1934); Lawman v. Barnett, 177 S.W.2d 121, 123 (Tenn. 1944) (holding that the rule that a provision for acceleration of the maturity of a debt secured by mortgage upon default of payment of an installment does no more than confer an option upon the holder of the indebtedness is applicable where a statute provides for an acceleration); Walker Bank & Tr. Co. v. Neilson, 490 P.2d 328, 328–30 (Utah 1971).

79 U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987 (Ohio 2008). 80 John Weber, Ohio Lenders Precluded from Bringing Third Complaint on

Same Note, REAL EST. ADVISOR L. BLOG (May 11, 2009), http://www.realestateadvisorlawblog.com/2009/05/articles/ohio-lenders-precluded-from-bringing-third-complaint-on-same-note/.

81 ‘Two Dismissal Rule’ Applies to Mortgage Foreclosure Suit When Dismissed Actions Based on Same Default, SUP. CT. OHIO & OHIO JUD. SYS. (Dec. 10, 2008), https://www.supremecourt.ohio.gov/PIO/summaries/2008/1210/071144.asp.

82 Id. 83 Id. 84 Id. 85 Id. 86 Id. 87 U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 989 (Ohio 2008).

continued . . .


�

!� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

Bank had already failed to prevail on the same claim twice and could not bring another suit. 88 U.S. Bank maintained each missed loan payment was a separate actionable claim.89

U.S. Bank argued that its third claim was different from the first two cases, insofar as: (i) U.S. Bank alleged and sought interest starting from different default dates (November 2003 in the first foreclosure case, December 2003 in the third foreclosure case, and April 2005 in its Amended Complaint in the third foreclosure case); and (ii) each suit contained and encapsulated new payments that had become due in the time since the previous cases were filed.90 Gullotta, naturally, argued that each suit contained a common nucleus of facts that would preclude the third suit from being maintained.91

The trial court found for U.S. Bank, stating that when the first case was voluntarily dismissed the note decelerated, and U.S. Bank’s second claim involved a different timeline (December 2003 in the second suit; November 2003 in the first) not litigated in the first action and therefore res judicata did not apply.92 Accordingly, U.S. Bank’s motion for summary judgment was granted.93 The Ohio Fifth District Court of Appeals affirmed the trial court, but did note conflict with previous case law regarding res judicata in installment note claims.94 The Ohio Fifth District Court of Appeals stated that it disagreed with previous case law and that “each new missed payment on an installment note is a new claim.”95 Therefore, the Ohio Fifth District Court of Appeals held the two-dismissal rule and res judicata did not apply.96

In explaining the public policy grounds for its decision, the appellate court argued that if Gullotta were to escape judgment, lenders would

88 See id. 89 See id. 90 See id. at 988–89. 91 Id. at 989 (“On February 10, 2006, the trial court converted Gullotta’s motion

to dismiss into a motion for summary judgment because the motion was ‘founded on matters outside the pleadings.’ The trial court also granted U.S. Bank's motion for leave to file an amended complaint. In its amended complaint, U.S. Bank brought alternative claims. First, the bank sought judgment against Gullotta in the amount of $164,390.91 plus interest at the rate of 7.35 percent per year from December 1, 2003. In the alternative, the bank sought judgment against Gullotta in the amount of $164,390.91 plus interest at the rate of 7.35 percent per year from April 1, 2005. That April 1, 2005 date moved the start date for the collection of interest on the overall debt to a time after U.S. Bank’s second dismissal.”).

92 Id. 93 Id. 94 Id. at 990; see also EMC Mortg. Co. v. Jenkins, 841 N.E.2d 855, 862–63

(Ohio Ct. App. 2005). 95 U.S. Bank Nat’l Ass’n v. Gullotta, No. 2006CA00145, 2007 WL 1248407, at

*5 (Ohio Ct. App. Apr. 30, 2007), rev’d, 899 N.E.2d 987 (Ohio 2008). 96 Id.

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

!��

have less incentive to try and settle foreclosure suits with borrowers, as dismissal of the action upon settlement would require a full examination of whether the foreclosing entity waives all future foreclosure rights.97 Gullotta subsequently filed a motion to certify the conflict between the Ohio District Courts of Appeals.98

The Ohio Supreme Court disagreed with the lower court rulings and instead determined that U.S. Bank had in fact made the same claim each time it accelerated the debt and brought a case.99 The court held that the entire note was due upon the breach due to acceleration, not just the installment payments missed.100 In other words, once acceleration of a debt occurs, the entire debt then becomes indivisible and all of the individual installments merged into one balance.101 All of U.S. Bank’s claims were the same, and trying to skirt around res judicata by adding interest charges would not change the “common nucleus of operative facts.”102 The court analogized this situation to a personal injury case: if U.S. Bank could avoid res judicata or the two-dismissal rule merely by amending its damages demand by a few months, then a personal injury plaintiff presumably could avoid res judicata simply by reducing his or her demand for future lost wages by a couple of months, a seemingly nonsensical result.103 The court clarified, though, that should a renegotiation of the loan and its terms occur, causing a material change after a default and foreclosure action, then the next claim would not be the same.104

Subsequent Ohio courts have struggled to deal with Gullotta’s open-ended statement about whether a mortgage loan had materially changed. 105 Lower courts have found ways to avoid the extreme application implications of Gullotta and the double dismissal defense, particularly when a subsequent payment is made by the debtor or if acceleration is not automatic.106 Similar to the reasoning discussed in

97 See id. 98 Gullotta, 899 N.E.2d at 990. 99 See id. at 990, 993–94. 100 Id. at 992. 101 Id. 102 Id. at 993. 103 Id. 104 Id. 105 See, e.g., Beneficial Ohio, Inc. v. Parish, No. 11CA3210, 2012 WL 966640,

at *6–7, *9 (Ohio Ct. App. Mar. 16, 2012) (finding that, in a third foreclosure action, the trial judge erred in awarding summary judgment to the holder because genuine issues of material fact existed as to whether the complaints arose from the same transaction or occurrence, and as to whether res judicata applied based on the double dismissal rule).

106 See, e.g., Bridge v. Ocwen Fed. Bank FSB, No. 1:07 CV 2739, 2013 WL 4784292, at *9 (N.D. Ohio Sept. 6, 2013) (“The facts of Gullotta could not be more

continued . . .


�

!�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

Stadler v. Cherry Hill Developers, Inc., subsequent payments on the mortgage or materially altering the mortgage contract may result in a new claim.107

It should be noted, however, that courts wrestling with these questions often expressly state that making an additional payment alone is not enough to prevent res judicata.108 In Bank of America v. Gaizutis, for example, the Ohio Eleventh District Court of Appeals held that Gaizutis’s subsequent payment on the debt reworked the contract and decelerated the loan at that point. 109 The only material difference between Gaizutis and Gullotta was that in the former, the debtor made a payment on the debt which included a letter stating it would bring the loan up to date and the initial suit could be dismissed, which according

dissimilar than the facts presently before the Court. In this case, after the initial default, the Lisa Bridge cured and Deutsche Bank did not accelerate the loan. Further, Lisa Bridge made numerous additional payments after the initial default, and at times, was current on her payments. Moreover, in this lawsuit, Deutsche Bank does not demand the same principal payment as it would have demanded in foreclosure based upon the cured 2002 default.”).

107 See id.; Stadler v. Cherry Developers, Inc., 150 So. 2d 468 (Fla. Dist. Ct. App. 1963); see also Deutsche Bank Nat’l Tr. Co. v. Smith, No. C–140514, 2015 WL 4508449, at *3 (Ohio Ct. App. July 24, 2015) (“The court would have also been right to deny amendment on the basis that it would be a futile act. In support of her argument that res judicata applies, Ms. Smith relies upon [Gullotta], a case in which the two-dismissal rule was applied to dismiss a foreclosure action. But in Gullotta, the court explained that ‘Civ. R. 41(A) would not apply to bar a third claim if the third claim were different from the dismissed claims.’ In fact, ‘[h]ad there been any change as to the terms of the note or mortgage, had any payments been credited, or had the loan been reinstated res judicata would not be in play.’ Here, Ms. Smith admits that she paid Deutsche Bank $4,755.56 to cure any default in 2007. Because a payment had been credited, the present claim is different than the previously dismissed claims, and the two-dismissal rule would not apply.” (alteration in original) (quoting Gullotta, 899 N.E.2d at 993)).

108 See Parish, 2012 WL 966640, at *6 (“[T]he holder cannot file and dismiss an unlimited number of lawsuits solely because the borrower makes payments after the holder files each suit. In this scenario all claims would still arise from ‘the same note, the same mortgage, and the same default.’” (quoting Gullotta, 899 N.E.2d at 991)).

109 See Bank of America, N.A. v. Gaizutis, No. 2014–G–3176, 2014 WL 4825371, at *8 (Ohio Ct. App. Sept. 30, 2014) (“Instead of filing the agreed judgment entry of dismissal signed by appellant’s attorney, appellee’s then-attorney filed a unilateral dismissal, pursuant to Civ. R. 41(A)(1). However, if there was a claim that a material term of the letter agreement had been breached, no such claim appears in this record. The one thing that is clear from the correspondence is that the parties agreed to have the suit dismissed upon payment of a significant lump sum that would be applied to the amount due on the loan. While the documentation suggests a clear intention to ‘reinstate’ the loan, based on the discussion from the Supreme Court in Gullotta, supra, whether it was actually reinstated or not matters little.”).

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

! �

to the Gaizutis court materially changed the contract.110 As a result, the Gaizutis court affirmed the lower court’s ruling for the bank.111

Although the Ohio Fifth Circuit District Court of Appeals suggested that harsh rules on dismissal might dissuade lenders from renegotiating with borrowers, the traditional Gullotta approach to res judicata and the two-dismissal rule described above arguably would provide more encouragement to lenders to negotiate with borrowers.112 Banks and servicers would have to seriously consider settling with borrowers before accelerating and suing on the loan, because any action on that acceleration may only be permitted once.113 Similarly, the higher stakes for bearing a dismissal on the merits might mean that lenders will act

110 See id. 111 Id. (“The amount of the payment and documentation contained in the record

reflects the parties’ desire to have the foreclosure dismissed and the appellants back to a position where they could remain in their home. Further, the mortgage at issue contemplates the right of a borrower to reinstate the mortgage after acceleration contingent upon the borrower meeting certain conditions outlined in the mortgage. The mortgage further states that upon reinstatement by the borrower, ‘this Security Instrument and obligations secured hereby shall remain fully effective as if no acceleration had occurred.’”).

112 See U.S. Bank Nat’l Ass’n v. Gullotta, No. 2006CA00145, 2007 WL 1248407, at *5 (Ohio Ct. App. Apr. 30, 2007) (“In addition, the application of Rule 41(A) per the EMC case would discourage a lender, such as appellant, from working with a borrower, such as appellee, when the borrower defaults on a mortgage. Frequently, after filing a foreclosure action, a lender will work with the buyer so that the buyer can retain his or her property. The lender will then dismiss the foreclosure action. A lender would not be inclined to do so if a dismissal precluded a bank from eventually foreclosing on a borrower’s property after a default. As a result, the number of foreclosures would increase as would the number of individuals losing their homes.”), rev’d, 899 N.E.2d 987 (Ohio 2008).

113 See Parish, 2012 WL 966640, at *6 (“Nonetheless, we agree with the Parishes’ position that when a borrower defaults on a note and the holder invokes an acceleration clause, the holder cannot file and dismiss an unlimited number of lawsuits solely because the borrower makes payments after the holder files each suit. In this scenario all claims would still arise from ‘the same note, the same mortgage, and the same default.’” (quoting Gullotta, 899 N.E.2d at 991)); see also Deutsche Bank Tr. Co. Ams. v. Beauvais, 188 So. 3d 938, 969 (Fla. Dist. Ct. App. 2016) (Scales, J., dissenting) (“The expiration of a statute of limitations, however, generally results in a windfall for the escaping defendant. In my view, neither the moral imperative that borrowers pay their obligations, nor Singleton, has abrogated decades of Florida jurisprudence governing the statute of limitations in foreclosure cases.”); U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 993 (Ohio 2008) (“Although U.S. Bank’s complaint changed, the operative facts remained the same. Plaintiffs cannot save their claims from the two-dismissal rule simply by changing the relief sought in their complaint. Allowing U.S. Bank to do so would be like allowing a plaintiff in a personal-injury case to save his claim from the two-dismissal rule by amending his complaint to forgo a couple of months of lost wages.”).

continued . . .


�

!�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

more conservatively in undertaking oft-criticized servicing activities.114 For example, some lenders have been accused of inducing missed payment defaults by fraudulently charging force-placed insurance policies and demanding large sums for escrow, or by telling homeowners that loss mitigation assistance will not be made available until they fall behind on their payments.115

In a jurisdiction where a dismissal on a fact dispute about default might preclude a future foreclosure action, perhaps lenders would be less likely to bring marginal cases to court. In this way, the risk of a dismissal on future actions may spur banks and servicers to be additionally diligent about following servicing guidelines before electing for the severe remedy of acceleration and foreclosure.

Justice Cardozo long ago recognized the blatant oppression that can occur to the mortgagor when the mortgagee is allowed to unsheathe its acceleration sword without considering external factors.116 In light of the many irregularities and abuses of lenders with respect to foreclosure practices we have noted elsewhere, it seems that such external factors remain relevant.117 Thus, while our research seems to suggest that some courts are creating exceptions to harsh rules like res judicata and the double dismissal rule, these exceptions only seem to engage with one side of Gullotta’s implications, specifically that banks might face harsh results.118 Such allowances, however, do not address potentially harsh results for other parties, namely that failure to strictly enforce longstanding principles like res judicata will encourage lenders to bring cases with flimsy or fraudulent evidence, to induce defaults with no ultimate consequences, and to otherwise repeatedly impair a

114 See Parish, 2012 WL 966640, at *6. 115 See id.; see also Beauvais, 188 So. 3d at 960 n.19. 116 Gilligan, supra note 35, at 94 n.3 (citing and quoting Graf v. Hope Bldg.

Corp., 171 N. E. 884, 889 (1930) (Cardozo, J., dissenting)) (“There, through an error in a bookkeeper’s arithmetic, payment of what should have been an installment of $6,121.56 was $401.87 short of the correct amount. Enforcement of the acceleration provision (as sustained by the majority) meant that because of the $401.87 deficiency, the mortgagor’s interest was foreclosed in a property mortgaged for $335,000. ‘In this case, the hardship is so flagrant . . . the oppression so apparent, as to justify a holding that only through an acceptance of the tender will equity be done. . . . The deficiency, though not so small as to be negligible within the doctrine of de minimis, was still slight and unimportant when compared with the payment duly made.’”).

117 A Standing Question, supra note 17, at 706 (“In the rush to originate and assign as many mortgages as possible, and in the face of an overwhelming volume of foreclosures to be processed, mortgagees and their assignees often failed to assign the mortgages properly and, in some instances, committed fraud or other unauthorized acts in order to correct the assignment paper trail.”).

118 See supra notes 106–07 and the accompanying text. continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

!��

homeowner’s peace and wellbeing, regardless of the merits of the claims the lender repeatedly brings.119

It also bears mentioning that these exceptions that do not adapt the Gullotta reasoning ignore the fact that dismissals, whether voluntary or involuntary, are exceedingly avoidable in foreclosure litigation.120 In many judicial foreclosure jurisdictions, the burden of proof is low, court procedures have been enacted specifically for the benefit of banks and their attorneys, 121 and very few documents are needed to prove entitlement to foreclose.122 In light of such incredibly low litigation burdens, the fact that a bank even faces a two-dismissal rule bar, in the absence of renegotiation or other intervening circumstances, is an astonishing de facto admission of either basic incompetence by lender attorneys or the complete lack of pertinent evidence supporting foreclosure. It is unclear why courts feel obligated to reward such conduct in allowing repetitive successive actions. 123 While some scholars, and indeed judges, fear giving “free” houses to mortgagors,124 logic does not dictate that procedural predictability, longstanding precedent, and incentivizing good litigation practices should be totally abandoned. 125 Gullotta and similar cases recognize that while

119 See Parish, 2012 WL 966640, at *6. 120 Cf. Wells Fargo Bank, N.A. v. Drayer, No. CV–2015–105086, 2016 Ohio

Misc. LEXIS 10334, at *2 (Ohio C.P. Summit Cty. Oct. 19, 2016) (“Lenders like the Plaintiff would be more willing to discuss alternatives that require the dismissal of foreclosure if they had assurances that their dismissals would not threaten the long-term contractual relationship between the parties. Therefore, it is in the best interests of the parties to dismiss this action without prejudice.”).

121 Petition for Writ of Certiorari, supra note 11, at 17–19. 122 Id. at 27–28. 123 See infra Section III.A. 124 See, e.g., Singleton v. Greymar Assocs., 882 So. 2d 1004, 1007–08 (Fla.

2004) (“If res judicata prevented a mortgagee from acting on a subsequent default even after an earlier claimed default could not be established, the mortgagor would have no incentive to make future timely payments on the note. The adjudication of the earlier default would essentially insulate her from future foreclosure actions on the note—merely because she prevailed in the first action. Clearly, justice would not be served if the mortgagee was barred from challenging the subsequent default payment solely because he failed to prove the earlier alleged default.”).

125 Even the mere fact that judges sometimes reference “free” houses is evidence of the previewing bias effect that we have covered in previous research and herein. See infra Part IV. Only reflexive, unthinking preconceptions could lead a fact-finder to enter a proceeding believing that a pro-homeowner ruling means a house is actually obtained for free, when many homeowners faced foreclosure after years of regular payments, when many put their life savings into the purchase of the home, when any homeowner asserting defenses undoubtedly will have to expend sums on attorneys, and when any such pro-homeowner ruling—even if ultimately successful—will likely result in appeal and more legal costs to the homeowner. See infra Section III.C. In the case of res judicata and the two-dismissal rule in

continued . . .


�

�!� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

exceptions should exist for real world application of a harsh remedy like res judicata or the statute of limitations, the opposite can also mean the harsh result of innumerable successive actions, regardless of the merits of the claims repeatedly litigated.

B.� Multiple and Nearly Unlimited Bites at the Apple

Over time, some courts have narrowed the application of res

judicata and the statute of limitations to permit lenders to bring multiple foreclosure claims after accelerations of the promissory note.126 For example, erosion of the traditional rules in Florida began with courts rejecting holdings that suggest acceleration of an installment obligation creates a single indivisible obligation, at least with respect to home mortgages.127 In this view, a lender’s earlier acceleration of a loan can be ignored because the lender’s subsequent voluntary dismissal of the earlier claim means that the lender actually elected not to accelerate and demand the full amount due under the note.128 Accordingly, res judicata may not bar future claims if they are based on different dates of default.129

particular, homeowners will have had to pay an attorney to defend more than one lawsuit. See U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 990–91 (Ohio 2008) (explaining that the two-dismissal rule requires repetitive litigation); see also Wagner, Jr., supra note 60, § 2(a) (explaining that res judicata rests on the existence of repetitive litigation).

126 See, e.g., Olympia Mortg. Corp. v. Pugh, 774 So. 2d 863, 866 (Fla. Dist. Ct. App. 2000).

127 See id. (finding that the decision to accelerate did not affect the lender’s ability to bring claims for subsequent defaults); see also Singleton, 882 So. 2d at 1006 (“While it is true that a foreclosure action and an acceleration of the balance due based upon the same default may bar a subsequent action on that default, an acceleration and foreclosure predicated upon subsequent and different defaults present a separate and distinct issue.”).

128 See Pugh, 774 So. 2d at 866 (“By voluntarily dismissing the suit, [the lender] in effect decided not to accelerate payment on the note and mortgage at that time.” (alteration in original)); see also Mitchell v. Fed. Land Bank, 174 S.W.2d 671, 677 (Ark. 1943) (“[T]he declaration of plaintiff’s election by bringing the first action did not put it out of his power to waive the penalty, which he did by accepting the interest and dismissing the action.” (quoting Cal. Sav. & Loan Soc’y v. Culver, 59 P. 292, 294 (Cal. 1899))).

129 See, e.g., Bartram v. U.S. Bank Nat’l Ass’n, 211 So. 3d 1009, 1012, 1023 (Fla. 2016) (“[W]hen a second and separate action for foreclosure is sought for a default that involves a separate period of default from the one alleged in the first action, the case is not necessarily barred by res judicata. . . . [A]n acceleration and foreclosure based upon subsequent and different defaults present a separate and distinct issue.” (quoting Singleton, 882 So. 2d at 1006–07)), reh’g denied, 2017 Fla. LEXIS 593 (Fla. Mar. 17, 2017); see also Afolabi v. Atl. Mortg. & Inv. Corp., 849 N.E.2d 1170, 1175 (Ind. Ct. App. 2006) (“[W]e conclude that . . . res judicata does

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

This evolving exception to longstanding doctrine is said to “[rest] upon a recognition of the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship.”130 If res judicata precluded a lender from bringing future lawsuits based upon future defaults, courts fear there would be no penalty for borrowers failing to pay amounts when due under the contract, which would lead to inequitable results.131 A “subsequent and separate alleged default”

not bar successive foreclosure claims, regardless of whether or not the mortgagee sought to accelerate payments on the note in the first claim.”). As discussed infra Part II, courts disagree on how and whether lenders can revoke acceleration. John A. Walker, Jr., Simple Real Estate Foreclosures Made Complex: The Byzantine Tennessee Process, 62 TENN. L. REV. 231, 242 (1995) (“Even if the deed of trust contains an acceleration clause, the mortgagor may be able to defeat it by properly tendering an overdue payment before the mortgagee actually accelerates the indebtedness. However, tendering the overdue amount after acceleration has occurred, even if done before the sale, will not revoke acceleration unless so agreed by the parties. The Tennessee Supreme Court succinctly posited the above rules in Lee v. Security Bank & Trust Co.” (citations omitted)); see also 1 BRUCE J. BERGMAN, BERGMAN ON NEW YORK MORTGAGE FORECLOSURES § 5.02 (Matthew Bender 2017) (“Thus, the mere acceptance of a post-acceleration partial payment does not represent an affirmative act revoking acceleration.”). But see In re Taddeo, 685 F.2d 24, 26 (2d Cir. 1982) (“First, we think that the power to cure must comprehend the power to ‘de-accelerate.’ This follows from the concept of ‘curing a default.’ A default is an event in the debtor-creditor relationship which triggers certain consequences -- here, acceleration. Curing a default commonly means taking care of the triggering event and returning to pre-default conditions. The consequences are thus nullified.”); Callan v. Deutsche Bank Tr. Co. Ams., 93 F. Supp. 3d 725, 734 (S.D. Tex. 2018) (discussing whether Texas law permits unilateral notices of rescission of acceleration, thereby restarting the statute of limitations); Fed. Nat’l Mortg. Ass’n v. Mebane, 618 N.Y.S.2d 88, 89 (N.Y. App. Div. 1994) (“It cannot be said that a dismissal by the court constituted an affirmative act by the lender to revoke its election to accelerate.”). The right to rescind acceleration may also be limited. See Coca-Cola Bottling Co. v. Citizens Bank of Portland, 583 N.E.2d 184, 190 (Ind. Ct. App. 1991) (“An election to accelerate a debt may become irrevocable if the election causes the defaulting party to rely and act upon the acceleration to its detriment.”). The mortgage itself also may address the issue and permit reinstatement of the installment nature of the contract. Deutsche Bank Tr. Co. Ams. v. Beauvais, 188 So. 3d 938, 962 (Fla. Dist. Ct. App. 2016) (en banc) (citing the reinstatement provisions of the mortgage as continuing the installment nature of the contractual obligations even after acceleration and filing of a foreclosure claim).

130 Singleton, 882 So. 2d at 1007 (alteration in original). But see FDIC v. Massingill, 24 F.3d 768, 777–78 (5th Cir. 1994) (discussing how various states determine whether acceleration has been properly rescinded); Johnson vs. Samson Constr. Corp., 704 A.2d 866, 869 (Me. 1997); Snyder v. Exum, 315 S.E.2d 216, 218 (Va. 1984) (“[W]e see no valid distinction between an acceleration clause in a lease and one contained in a note.”).

131 Singleton, 882 So. 2d at 1008 (“Clearly, justice would not be served if the mortgage was barred from challenging the subsequent default solely because he

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

thus can provide “a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action.”132

The two-dismissal rule can be defeated under this approach as well, since each claim made with respect to different default dates will be treated as separate and distinct, even if acceleration previously occurred. 133 Accordingly, lenders will not be prevented from repeatedly filing and dismissing claims as long as the claims involve subsequent defaults that are separate and distinct.134 As Part IV will discuss, this analysis is not compelled by traditional two-dismissal rule analysis and, in fact, would render the two-dismissal rule “meaningless in the context of foreclosure actions because every successive attempt to foreclose a mortgage could be construed as a new claim.”135

This exception to res judicata and the two-dismissal rule also potentially applies to statute of limitations analysis. If each default starts its own individual statute of limitations, then the expiration of the statute of limitations with respect to an earlier claim will have no bearing on whether the lender can bring other claims, even if the loan had been accelerated when the first claim was filed.136 This would

failed to prove the earlier alleged default.”). There is also a fear that borrowers could enter into settlement with the lender that, coupled with a dismissal with prejudice, would “insulate the mortgagor from the consequences of a subsequent default.” Fairbank’s Capital Corp. v. Milligan, 234 Fed. App’x 21, 24 (3d Cir. 2007). Again, these points of view completely ignore the light burden that foreclosing entities bear and the immediate questions and doubts that should arise when any foreclosing entity is forced to continually retry its cases. See supra notes 120–25 and accompanying text.

132 Singleton, 882 So. 2d at 1008. 133 See, e.g., Pugh, 774 So. 2d at 863 (finding that the decision to accelerate did

not affect the lender’s ability to bring claims based on different dates of default). 134 See id. 135 U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 992 (Ohio 2008). The

Ohio Supreme Court noted that nothing in the two-dismissal rule (as in effect in Ohio) “indicates that it should not apply to foreclosure actions.” Id.; see also Deutsche Bank Tr. Co. Ams. v. Beauvais, 188 So. 3d 938, 963 (Fla. Dist. Ct. App. 2016) (Scales, J., dissenting) (“Explicit in Singleton is that, in order to reinstate the parties’ previous contractual relationship so that subsequent defaults may occur, the trial court’s adjudication of the first foreclosure action must deny the lender’s acceleration. Otherwise . . . the lender’s affirmative, contractually prescribed acceleration remains unaffected.”).

136 10 CORBIN ET AL., supra note 70, § 53.9 (“[U]nder an installment contract the statute of limitations runs only against each installment at the time it becomes due. ‘In essence,’ the court explained, ‘this rule treats each missed or otherwise deficient payment as an independent breach of contract subject to its own limitations period.’” (quoting Pierce v. Metro. Life Ins. Co., 307 F. Supp. 2d 325, 328–29 (D.N.H. 2004)). But see Beauvais, 188 So. 3d at 965 (Scales, J., dissenting) (“[The majority holds] that payment default and not acceleration constitute the last element of a foreclosure cause of action. . . . [T]his holding marks an upheaval of well-

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

apply even where the first claim, after acceleration of the loan and demand for the entire amount due on the note, had been lost on the merits.137

Recent cases in Florida illustrate how the traditional approach has been transformed in the foreclosure context so as to essentially eviscerate the protection of the statute of limitations and res judicata.138 In Singleton v. Greymar Associates, the Florida Supreme Court confronted an appellate circuit split regarding acceleration and foreclosure after a first foreclosure case was dismissed.139 On one side, the Florida Fourth District Court of Appeal held in Singleton that the earlier dismissal did not bar the present suit under res judicata.140 The Florida Second District Court of Appeal, by contrast, held in Stadler v. Cherry Hill Developers, Inc. that a mortgagee who had their first lawsuit dismissed with prejudice was barred from filing a future suit by res judicata.141

In Singleton, Gwendolyn Singleton had a mortgage on her home that

established Florida law.” (alteration in original)).

137 See Collazo v. HSBC Bank USA, N.A., 213 So. 3d 1012, 1013 (Fla. Dist. Ct. App. 2016) (“This Court’s decision issued on rehearing en banc in the case of [Beauvais], holds that the five-year statute does not bar a second foreclosure suit filed on a subsequent payment default occurring within the five-year statutory period preceding the commencement of the second suit. . . . The record in the present case discloses that HSBC asserted the same payment default date and basis for acceleration in both the 2008 and 2014 complaints, a date over five years preceding the commencement of the 2014 case in the circuit court. As a result, we reverse the final judgment of foreclosure and remand the case for dismissal without prejudice in accordance with this Court's recent opinion on rehearing en banc in Beauvais.” (alteration in original) (citations omitted)); see also Beauvais, 188 So. 3d at 938 (finding that each default has a separate statute of limitation, even if the loan had been previously accelerated and regardless of whether the claim was dismissed with or without prejudice); U.S. Bank Nat’l Assoc. v. Bartram, 140 So. 3d 1007, 1014 (Fla. Dist. Ct. App. 2014) (“Therefore, we conclude that a foreclosure action for default in payments occurring after the order of dismissal in the first foreclosure action is not barred by the statute of limitations found in section 95.11(2)(c), Florida Statutes, provided the subsequent foreclosure action on the subsequent defaults is brought within the limitations period.”), aff’d, 211 So. 3d 1009 (Fla. 2016), reh’g denied, 2017 Fla. LEXIS 593 (Fla. Mar. 17, 2017).

138 See Singleton v. Greymar Assocs., 882 So. 2d 1004 (Fla. 2004). 139 See id. 140 See id. at 1005 (“On appeal, the Fourth District affirmed the circuit court’s

decision, finding that ‘even though an earlier foreclosure action filed by appellee was dismissed with prejudice, the application of res judicata does not bar this lawsuit. . . . The second action involved a new and different breach.’” (alteration in original) (quoting Singleton v. Greymar Assocs., 840 So. 2d 356, 356 (Fla. Dist. Ct. App. 2003), aff’d, 882 So. 2d 1004 (Fla. 2004))).

141 See Stadler v. Cherry Hill Developers, Inc., 150 So. 2d 468, 473 (Fla. Dist. Ct. App. 1963).

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

contained an acceleration clause.142 Greymar Associates brought an action alleging default that extended from nonpayment from September 1, 1999, to February 1, 2000.143 After Greymar failed to appear at a case management conference, the circuit court dismissed the case with prejudice.144 Greymar brought a second action and alleged different default dates, claiming damages from April 1, 2000, onward.145 The trial court rejected the mortgagor’s res judicata defense.146 The Florida Fourth District Court of Appeal affirmed the trial court’s decision because the second lawsuit alleged what the court termed a new and separate breach.147 Singleton then petitioned the Florida Supreme Court to deal with the “express and direct conflict between the Fourth District’s decision and the Second Circuit’s decision” in Stadler.148

In Stadler, the foreclosing Plaintiff, Cherry Hill Developers (“Cherry Hill”), missed a deadline to preserve testimony or set a trial under a later-expired Florida rule of procedure.149 As a result, the trial court granted Stadler’s motion for a final judgment.150 The second lawsuit filed by Cherry Hill was “essentially identical” to the claims made in the first lawsuit, except for allegations of a different default date.151 The default alleged against Stadler in the first case was May 1960, but the default date alleged in the second suit was August 1960.152 In the Florida Second District Court of Appeal, Cherry Hill argued that the dismissal of the first claim was not clearly on the merits and not related to default or acceleration, and that res judicata should therefore not apply.153 While recognizing longstanding exceptions to the harsh application of res judicata, such as unjust enrichment or possible misunderstanding of the finality and effect of the first order or judgment, the Florida Second District Court of Appeal reasoned:

The essential question is whether the election to accelerate put the entire balance, including future installments at issue. If it was at issue then the second action seeks the same relief under the same contract and

142 Singleton, at 1009. 143 Id. at 1005. 144 See id. 145 See id. 146 See id. 147 See id. 148 Id. 149 Stadler v. Cherry Hill Developers, Inc., 150 So. 2d 468, 469 (Fla. Dist. Ct.

App. 1963). 150 Id. 151 Id. 152 Id. 153 Id. at 470–72.

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

is predicated on a failure to comply with the same requirement. There can be no doubt that the accelerated balance was at issue and that the prayer of the complaint sought, not one interest installment, but the entire amount due. Accordingly, it seems clear that the actions are identical.154

The Stadler court noted that this holding, as researched in its 1960 decision, was based on near unanimity among authorities determining the effect of acceleration. 155 That is, electing to accelerate a loan necessarily entails demanding the entire amount of the loan, which “puts all future installment payments in issue and forecloses successive suits.”156 Accordingly, the court upheld the dismissal of the second suit on res judicata grounds because the two foreclosure suits against Stadler were identical.157

Significantly, the Florida Supreme Court in Singleton did not describe how the Second District’s definition of acceleration and its legal effect was wrong or unfounded, or describe any development in jurisprudence or change in mortgage term definitions that would suggest acceleration does not mean that the entire agreement is integrated into one claim or demand or that future installments are necessarily part of any accelerated claim.158 Instead, the court merely noted discontent with Stadler’s “stricter and more technical” view of acceleration. 159 The support cited in favor of this novel view of acceleration, provided by the Florida Supreme Court, was a single citation to a Florida appellate opinion, which the Florida Supreme Court quoted as authority to suggest that acceleration does not place any future installments at issue.160

In this sole case cited for this brand-new conception of acceleration, Olympia Mortgage Corp. v. Pugh, the foreclosing entity, Olympia Mortgage Corporation (“Olympia Mortgage”), had filed three successive foreclosure actions.161 The first alleged a default date of April 1995 and was voluntarily dismissed.162 The appellate court noted that at the time of the first suit, Olympia Mortgage had not been

154 Id. at 472. 155 See id. at 472–73. 156 Id. at 472. 157 See id. at 473. 158 See Singleton v. Greymar Assocs., 882 So. 2d 1004, 1007 (Fla. 2004). 159 Id. at 1006. 160 See id. at 1006 (citing Olympia Mortg. Corp. v. Pugh, 774 So. 2d 864, 866

(Fla. Dist. Ct. App. 2000)). 161 See Pugh, 774 So. 2d at 864. 162 See id. at 865.

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

assigned the mortgage loan it sought to enforce.163 The second suit alleged a default date of May 1995 and was also voluntarily dismissed, as Olympia Mortgage again failed to complete basic pre-suit requirements necessary to maintain its claim.164 The third case alleged the same May 1995 default date as alleged in the second suit; and, even without the difference in the April and May 1995 default dates as described in the case history, the parties apparently stipulated that “the parties agreed that both [the first and second foreclosure] actions alleged April 1, 1995 as the initial date of default.”165

Confronting this set of confusing facts brought on by lack of proof and by incompetent litigation in the first two suits, the Pugh court hunted for a coherent reason to determine why the traditional definition of acceleration, in light of the authority that acceleration places future installments at issue, should not be respected.166 In a remarkable bit of trying to fit a square peg into a round hole, the Florida Fourth District Court of Appeal produced something akin to a verbal representation of an Escher painting:

[I]f we treat Olympia’s voluntary dismissal of the first foreclosure action as an adjudication on the merits against Olympia, then the payment on the note and mortgage could not have been accelerated. Although Olympia sought to accelerate, had Olympia gone through with the suit and lost on the merits, then the court would have necessarily found that the Pughs had not defaulted on the payments due to date. If the Pughs had not defaulted, then Olympia would not be entitled to accelerate payment on the note and mortgage. By voluntarily dismissing the suit, Olympia in effect decided not to accelerate payment on the note and mortgage at that time.167

The Pugh court thus opened the door to two concepts previously unknown in acceleration. First, it implicates that in every dismissal for whatever cause, any alleged default is necessarily disproven, rendering acceleration a factual impossibility.168 This is apparently so by virtue of the Fourth District’s judicial fiat, regardless of whether the actual

163 See id. 164 See id. 165 Id. at 865 n.1 (alteration in original). 166 Stadler v. Cherry Hill Developers, Inc., 150 So. 2d 468, 472 (Fla. Dist. Ct.

App. 1963). 167 Pugh, 774 So. 2d at 866. 168 See id.

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

� �

default date was a contested issue in the case.169 It is entirely unclear how a dismissal on the merits of a case seen through to a verdict, in the Pugh reasoning’s example above, would necessarily mean that default was disproven. Nothing inherent in a dismissal, whether voluntary or involuntary, means a default was disproven, because defeat of a foreclosing entity’s claims can be defeated on innumerable grounds not involving a default question that would be deemed “on the merits.”170

The second fiction in the Pugh court’s decision is that acceleration is only a fact if ratified by a court. In other words, the Pugh court declared that acceleration, the demand for all payments due under a note, only occurs if a court reaches a final judgment in favor of a bank or foreclosing entity.171 This, of course, is contradicted by longstanding jurisprudence on acceleration and res judicata, as noted above.172 In its supposition that “voluntary dismissal of a suit” always means that a foreclosing entity “in effect decided not to accelerate payment on the note and mortgage at that time,” 173 the Florida Supreme Court constructed the only possible legal reading that would give banks continual opportunities to file suit, regardless of the actual reason for dismissal.174 It is extremely rare for a voluntary dismissal to contain language that indicates mortgagors are thereafter not being demanded to pay the full amount of their loans, as would be implied by this artificial, automatic deceleration rule.175 Judicial dismissal under this theoretical approach actually performs a significant service to foreclosing banks’ claims, as courts consequently deem the note decelerated and the bank can continue to bring defective claims ad infinitum.176

169 See id. (emphasis added). 170 Id. These would include conditions precedent, standing, fraud, etc. For

example, a party may fail to comply with an order of court to produce discovery and have their case dismissed. See FLA. R. CIV. P. 1.420(b) (“Any party may move for dismissal of an action or of any claim against that party for failure of an adverse party to comply with . . . any order of court.”). Although such decision would be “on the merits” of the case, the Pugh court would apparently reason that a dismissal based upon failure to respond to discovery would also mean that default was disproven, even if it had never been at issue in the case and had never been litigated. See Pugh, 774 So. 2d. at 866.

171 See Pugh, 774 So. 2d at 867. 172 See supra notes 65–66 and accompanying text. 173 Pugh, 774 So. 2d at 866. 174 See id. at 867. 175 See id. at 866 (“[W]hether the mortgagor will make future installment

payments is not at issue in a foreclosure action.”). 176 Among other questionable propositions in the Pugh decision is the assertion

that “whether the mortgagor will make future installment payments is not the issue in a foreclosure action. The issue is whether there has already been a default.” Pugh, 774 So. 2d at 866. If payment of future installments is not at issue in

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

The Pugh court’s liberalized judicial approach, then, laid the groundwork for the Florida Supreme Court in Singleton to overrule longstanding rules of acceleration and to declare that acceleration, in foreclosure or installment payment cases only, should not be given strict or technical enforcement as in Stadler.177 Unsurprisingly, the Singleton court, citing other cases that held that a second and separate action on a different alleged default date does not necessarily bar successive suits, ruled against the application of res judicata and ruled in favor of the foreclosing entity.178 In effect, the Singleton court eliminated the effect of res judicata in foreclosures in one decision: “acceleration and foreclosure predicated upon subsequent and different defaults present a separate and distinct issue.”179 Singleton thus implicitly opened the floodgates to the kind of slight, de minimis, variation in pleadings and claims the Gullotta court worried about.180 That is, the Singleton court decision authorizes foreclosing entities to file suit to claim 29 years or 348 months of payments, and then change their allegations to demand, for example, 347 months of payments, to create a “separate and distinct claim” necessary to avoid res judicata.181

The Singleton court attempted to minimize the implications of its ruling. Specifically, the court stated:

We conclude that the doctrine of res judicata does not necessarily bar successive foreclosure suits, regardless of whether or not the mortgagee sought to accelerate payments on the note in the first suit. In this case the 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. Thus, we approve the Fourth District's decision in

foreclosure actions, then why do foreclosure judgments grant entitlement to the entire amount of the loan not due for 30 years? See, e.g., Beneficial Ohio, Inc. v. Lemaster, No. 2008 CA 0100, 2009 WL 2457710, at *4 (Ohio Ct. App. July 30, 2009). Indeed, the entire point of acceleration is to place future payments at front and center of any case—as banks should not have to file a separate action for every month a payment is missed. See Hahn, supra note 34. And, in actual fact, this results in the scenario presented by Beauvais: later courts have piggybacked on this absurd notion and opined that a dismissal not only means automatic deceleration, but also that the homeowners are placed back into a situation where they can resume their normal payments. See infra Part IV. This is highly dubious.

177 See Singleton v. Greymar Assocs., 882 So. 2d 1004, 1006–08 (Fla. 2004). 178 Id. at 1007. 179 Id. 180 See id. at 1006; U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987, 992–93

(Ohio 2008). 181 Singleton, 882 So. 2d at 1006–07.

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

Singleton, and disapprove of the Second District's holding in Stadler.182

Again, given that the Singleton court ruled on a case where the difference in default date allegations was one month, it would seem that its assertion that res judicata “may, but does not necessarily” apply is misleading.183 The court phrased the ruling as an exception to res judicata, but the practical effect of this ruling means that the exception is now the rule. In other words, any competent attorney in a successive foreclosure suit now will allege a separate default date and thereby successfully avoid res judicata (even if the subsequent suit is the tenth successive attempted claim relating to the same loan). Although the court did pay lip service to the “tension” between the harsh remedy of res judicata and the equities of a given foreclosure case, it is patently clear the court felt the “ends of justice” lay with banks and lenders, not homeowners.184

Along the same lines, the Florida Supreme Court eradicated the effect of the statute of limitations in foreclosure actions in Deutsche Bank Trust Co. Americas v. Beauvais.185 Harry Beauvais took out a mortgage note from American Home Mortgage Servicing, Inc. (“AHMSI”) in February 2006.186 After Beauvais missed a few monthly payments, AHMSI initiated a foreclosure proceeding in January 2007 and accelerated the debt.187 AHMSI ignored a court order to appear at a case management conference and thus the case was dismissed in December 2010. 188 In a separate action, Beauvais’s condominium association, Aqua Master Association, Inc., commenced its own foreclosure proceeding and took title to the property in 2011.189 In December 2012, Deutsche Bank, the new putative owner of the mortgage loan, commenced a foreclosure action citing Beauvais’s initial default as well as every payment after.190 The condominium

182 Id. at 1008 (emphasis added). 183 Id. at 1007 (quoting Capital Bank v. Needle, 596 So. 2d 1134, 1138 (Fla. Dist.

Ct. App. 1992)). 184 Id. at 1008 (“We must also remember that foreclosure is an equitable remedy

and there may be some tension between a court’s authority to adjudicate the equities and the legal doctrine of res judicata. The ends of justice require that the doctrine of res judicata not be applied so strictly so as to prevent mortgagees from being able to challenge multiple defaults on a mortgage.”).

185 Deutsche Bank Tr. Co. Ams. v. Beauvais, 188 So. 3d 938 (Fla. Dist. Ct. App. 2016) (en banc).

186 Id. at 954–55. 187 Id. at 940. 188 Id. at 941. 189 Id. at 940. 190 Id.

continued . . .


�

�!� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

association raised an affirmative defense that the statute of limitations had run, as Deutsche Bank’s December 2012 filing date was at least five years past the date of the acceleration claim in AHMSI’s Complaint filed in January 2007.191 The condominium association thus argued that the debt was never decelerated.192 Deutsche Bank, taking the lead from Singleton, argued that each subsequent payment was a separate default and thus a separate claim, each with its own statute of limitations.193

The trial court granted the condominium association’s motion to dismiss, holding that the statute of limitations barred the claim.194 The trial court also stated that Singleton had no application to the present case because Singleton involved a decision based on res judicata and not the statute of limitations.195 On appeal, the Florida Third District Court of Appeal affirmed the trial court’s order barring the claim under the statute of limitations.196 The court distinguished earlier Florida law by stating in this case the initial claim was dismissed without prejudice, which meant that the debt was not decelerated.197 Therefore there were no “new payments” due because after acceleration there was only one payment due: the entire amount of the accelerated loan.198 This holding was consistent with Gullotta, which meant that after acceleration there would only be one claim for the entire debt, not one for each installment payment.199

On rehearing en banc, the Florida Third District Court of Appeal reversed, citing Singleton.200 The court expanded Singleton’s holding based on res judicata to apply to statute of limitations cases.201 Largely adopting the Singleton approach, the court held that each installment payment was a separate claim, and therefore it had its own statute of limitations as well.202 Thus, as in res judicata scenarios, the bank was

191 Id. 192 Id. at 940–41 (alleging once the debt was accelerated, the bank had five years

to pursue a foreclosure action, thus in essence stating the debt had never decelerated).

193 Id. at 941 (quoting the lower court’s opinion). 194 Id. (quoting the lower court’s opinion). 195 Id. (quoting the lower court’s opinion). 196 Deutsche Bank Tr. Co. Ams. v. Beauvais, No. 3D14–575, 2014 Fla. App.

LEXIS 20422, at *12 (Fla. Dist. Ct. App. Dec. 17, 2014), rev’d on reh’g en banc, 188 So. 3d 938 (2016).

197 Id. at *9–10. 198 Id. 199 Id. 200 Beauvais, 188 So. 3d at 941. 201 Id. at 944 (“Here we follow that choice. And, as have numerous post-

Singleton courts before us, we apply this determination, while made in the context of a res judicata defense, to a statute of limitations defense.”).

202 Id. continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

not precluded from seeking missed installment payments within the statute of limitations.203 Perhaps an even more explicit expansion of Singleton (and a not very subtle clue to the Beauvais court’s view of foreclosure litigation) is provided in the court’s express assertion that whether a prior foreclosure suit was dismissed with or without prejudice is irrelevant for res judicata and statute of limitations analysis purposes.204 In other words, in this 2016 decision, years after Florida’s courts and the state bar association were nationally embarrassed by exposure that the courts had permitted the filing of thousands of fraudulent documents and claims,205 the Florida Third District Court of Appeal essentially concluded that even a case of dismissal with prejudice for any reason, including fraud on the court, would not preclude a bad actor from continually refiling against a given homeowner.206

After concluding that the “foreclosure exception” to res judicata also applies to statute of limitations cases, and after ordering future courts to ignore the reasons a prior unsuccessful claim might have been dismissed, the Beauvais court cited factual statements of Fannie Mae, Freddie Mac, the Business Law Section of the Florida Bar, and the Real Property Probate and Trust Law Section of the Florida Bar in support of the court’s conclusions.207 While distinguishing and diminishing cases presented by borrower and consumer advocates, the court thus relied upon lending industry and lender bar statements as support for the proposition that dismissal of an action for any reason means automatic deceleration—the idea suggested by the earlier Pugh decision.208 The court, while finding that dismissal does act as an automatic deceleration without any affirmative act requirement on the part of banks or lenders, did not cite or discuss other decisions holding that an affirmative act was required to accelerate a loan.209 Thus, under

203 Id. 204 Id. at 945. 205 See generally Robo-Litigation, supra note 22, at 872–80, 884–88 (examining

the “sketchy” foreclosure practices of various Florida law firms and the responses from the Florida Attorney General and State Bar).

206 See Beauvais, 188 So. 3d at 946 (“[T]he ‘with’ or ‘without’ prejudice’ dismissal is a distinction without a difference.” (citations omitted)). Again, this appears to be a statement that the Third District only applies to foreclosure litigation. See U.S. Bank Nat’l Ass’n v. Bartram, 140 So. 3d 1007, 1012 (Fla. Dist. Ct. App. 2014), aff’d, 211 So. 3d 1009 (Fla. 2016), reh’g denied, 2017 Fla. LEXIS 593 (Fla. Mar. 17, 2017).

207 Beauvais, 188 So. 3d at 947–50. 208 Id.; see Olympia Mortg. Corp. v. Pugh, 774 So. 2d 863, 867 (Fla. Dist. Ct.

App. 2000) (confirming that voluntary dismissal of foreclosure action on an accelerated mortgage and note did not bar a subsequent action on a later default).

209 Beauvais, 188 So. 3d at 947–50. continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

the Beauvais court’s reasoning, a statute of limitations clock for acceleration does not occur until a foreclosing entity takes an affirmative act.210 Yet to decelerate, no such requirement is needed.211 Unsurprisingly, both of these inconsistent holdings are to the sole detriment of homeowners raising any sort of statute of limitations defense.212

The dissent of Judge Scales pointed out the many deficiencies in the majority’s decision and noted its singular expansion of Singleton—a case which the dissent notes does not even mention the statute of limitations once.213 Aside from disagreeing with this extension of a res judicata case to a statute of limitations issue, Judge Scales noted several compelling disagreements with the majority opinion. 214 First, the dissent understood Beauvais to improperly suggest that the installment nature of a contract is unaffected by the acceleration of the note.215 The majority opinion, in Judge Scales’s view, created a “court-imposed fiction that, after acceleration, subsequent monthly installment payments somehow continue to become due.”216 In other words, a loan could be accelerated, tied up in court for years, and a bank or lender could continuously demand the full accelerated amount. Yet upon dismissal, the same bank may sue for any one of the defaults during that same time period in which they demanded the full amount.217 This is “irreconcilable,” in Judge Scales’s view, with “decades of case law holding that a loan acceleration—whether automatic or exercised at the option of the lender—causes the entire indebtedness immediately to become due.”218

Aside from creating the “fiction” of continuous installment payments coming due regardless of acceleration, Judge Scales noted, as noted above, that the Beauvais majority extends to every dismissal, no matter the reason or the issues adjudicated in such dismissal, the presumption that acceleration and/or default has been disproven and that the installment payment duties are reinstituted automatically.219 Again, this simplistically “discounts the dramatic variances that can

210 Id. 211 Id. 212 Id. at 959; see Singleton v. Greymar Assocs., 882 So. 2d 1004, 1007 (Fla.

2004). 213 Beauvais, 188 So. 3d at 966–68 (Scales, J., dissenting). 214 Id. at 959, 967. 215 Id. at 963. 216 Id. at 962. 217 Id. at 962–63 n.21. 218 Id. 219 Id. at 959.

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

result from different dismissal orders.”220 Further, Judge Scales noted inconsistency between the majority’s view that acceleration does not end the installment nature of a loan and its view that dismissal automatically places parties back in their pre-acceleration places: “If acceleration does not terminate the installment nature of the loan, then dismissal is also irrelevant because acceleration has not altered the parties’ status quo in the first place.”221

Judge Scales also suggested that automatic reinstatement of the loan upon dismissal is not something that would be granted in the event a borrower moved for it at the end of a case where acceleration and default were not at issue.222 The majority, in what Scales deems a procedurally unfair fashion, nevertheless grants automatic reinstatement to lenders, which is a benefit when seeking to avoid the harsh statute of limitations preclusion.223

Finally, Judge Scales noted the incredible deference granted to lenders and foreclosing entities by the wholesale extension of Singleton to statute of limitations cases.224 He noted that “it seems that equitable considerations—rather than any explicit pronouncement in Singleton—fuel the majority opinion’s sweeping construction of Singleton.”225 Such equitable considerations may have been appropriate for a res judicata case like Singleton, but statutes of limitation are purely legislative processes predicated on public policy, not any judicially intuited sense of fairness. 226 Accordingly, Judge Scales posits, the majority’s equitable powers should not interfere with what is supposed to be a “province of the legislative branch.”227

Eventually, the Florida Supreme Court, in Bartram v. U.S. Bank National Ass’n, adopted the holding in Beauvais that the installment nature of the contract continued despite acceleration and that Singleton fully applies to statute of limitations cases.228 Lewis Bartram, obligated

220 Id. at 961 n.19. 221 Id. at 959 n.15. 222 Id. at 964. 223 See id. at 964–65 (“In my view, this conclusion turns procedural fairness on

its head by giving the sanctioned party (the lender) the after-the-fact benefit of reinstatement: a remedy that the prevailing party (the borrower) never would receive.”).

224 See id. at 966 (“[B]y allowing the lender’s acceleration and potential re-accelerations to keep delaying the operation of the statute of limitations, the majority establishes the note’s maturity date as the only date that can trigger application of the five-year statute of limitations.”).

225 Id. at 968. 226 Id. at 967. 227 Id. at 967. 228 Bartram v. U.S. Bank Nat’l Ass’n, 211 So. 3d 1009, 1022 (Fla. 2016), reh’g

denied, 2017 Fla. LEXIS 593 (Fla. Mar. 17, 2017). continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

to purchase his ex-wife’s interest in their property pursuant to a divorce agreement, obtained a loan through Finance America LLC in the amount of $650,000 in February 2005.229 That loan was subsequently assigned to U.S. Bank.230 On January 1, 2006, Bartram stopped making payments.231 In May 2006, U.S. Bank filed a foreclosure complaint and accelerated the debt. 232 Nearly five years later, the suit was involuntarily dismissed after the bank failed to appear at a case management conference.233

Following that dismissal, which occurred more than five years after acceleration, Bartram filed a motion to cancel the promissory note and to release the lien of the mortgage.234 The trial court denied this request due to lack of jurisdiction given that an adjudication on the merits had already occurred.235 Bartram filed a similar crossclaim against U.S. Bank a year later in a separate foreclosure action that his ex-wife had brought against U.S. Bank and Bartram.236 The trial court granted summary judgment and quieted title to Bartram.237 The court denied a rehearing and U.S. Bank appealed to the Florida Fifth District Court of Appeal, which essentially adopted Singleton wholesale.238

Accepting jurisdiction as a question of great public importance, the Florida Supreme Court held that subsequent suits were not barred and accepted Beauvais’s reasoning that the installment nature of the contract remained.239 The court, citing a number of state court and federal court

229 Id. at 1013. 230 Id. 231 Id. at 1014. 232 Id. 233 Id. 234 Id. 235 Id. at 1014–15. 236 Id. at 1015 (“Approximately a year later, after the dismissal of the

foreclosure action and almost six years after the Bank filed its foreclosure complaint, Bartram filed a crossclaim against the Bank in a separate foreclosure action Patricia had brought against Bartram, the Bank, and the HOA. Bartram’s crossclaim sought a declaratory judgment to cancel the Mortgage and to quiet title to the Property, asserting that the statute of limitations barred the Bank from bringing another foreclosure action.”).

237 Id. 238 U.S. Bank Nat’l Ass’n v. Bartram, 140 So. 3d 1007, 1014 (Fla. Dist. Ct. App.

2014), aff’d, 211 So. 3d 1009 (Fla. 2016), reh’g denied, 2017 Fla. LEXIS 593 (Fla. Mar. 17, 2017).

239 Bartram, 211 So. 3d at 1019 (“Consistent with the reasoning of Singleton, the statute of limitations on the balance under the note and mortgage would not continue to run after an involuntary dismissal, and thus the mortgagee would not be barred by the statute of limitations from filing a successive foreclosure action premised on a ‘separate and distinct’ default. Rather, after the dismissal, the parties are simply placed back in the same contractual relationship as before, where the

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

decisions since Singleton, adopted the expansion and extension of res judicata analysis to statute of limitations questions.240

The Bartram court next wrestled with the many criticisms of Singleton’s singular disregard of the various effects that different dismissals can implicate. 241 Instead of describing the innumerable reasons dismissal could occur and the various implications of any such dismissal, the court broadly stated that whether a dismissal is with or without prejudice only affects a lender’s ability to collect on past defaults, not any future defaults. 242 Accordingly, it would not be hyperbole to say that under this interpretation, a bank can lie, cheat, and

steal243 during the pendency of a foreclosure case, receive a dismissal of its cause (which requires payment of all sums due under the entire note and mortgage for the life of the loan) with prejudice as a sanction for repugnant conduct, and emerge relatively unscathed with a new lawsuit based upon an arbitrarily picked later default date.244 And while the court relies upon uniform mortgages’ reinstatement provisions to assert that dismissal places the parties back in the positions they were in prior to the lawsuit, this is patently misleading—the reinstatement clause typically requires, for example, that borrower pay lenders all of their legal expenses in the first lawsuit before reinstatement can be given effect. 245 Again, this is without any regard to why the suit was dismissed in the first place and independent of the presence of fraud, disregard of court orders, or any other improper foreclosure litigation practices.246

Perhaps most remarkable is the Bartram court’s contention that its decision is in fact pro-borrower: failure to agree with its interpretations of the reinstatement clause would mean borrowers still owe the accelerated amount even after a dismissal, which could “[lead] to an unavoidable default.”247 Of course, this decision completely ignores

residential mortgage remained an installment loan, and the acceleration of the residential mortgage declared in the unsuccessful foreclosure action is revoked.”).

240 Id. at 1018–19. 241 Id. at 1020. 242 Id. 243 See Robo-Litigation, supra note 22, at 885. 244 Bartram, 211 So. 3d at 1020 (“Whether the dismissal of the initial

foreclosure action by the court was with or without prejudice may be relevant to the mortgagee's ability to collect on past defaults. However, it is entirely consistent with, and follows from, our reasoning in Singleton that each subsequent default accruing after the dismissal of an earlier foreclosure action creates a new cause of action, regardless of whether that dismissal was entered with or without prejudice.”).

245 Id. at 1013. 246 Id. at 1020. 247 Id. at 1021 (alteration in original).

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

that in a dismissal scenario, months or years after a case was filed, many months of payments and expenses will be owed.248 Thus, there is no functional difference for the average distressed borrower (many of whom are too impoverished even to afford legal counsel) between demanding an accelerated sum and demanding a reinstatement sum of years of defaults and accompanying expenses. 249 Worse, the court describes a world in which banks might accept regular monthly payments immediately after a dismissal that, under the revised doctrine, automatically decelerates the loan.250 Again, reinstatement requires payment of all past due amounts and all expenses so far incurred by the bank.251 Accordingly, it is inconceivable that a bank would be required to, or would actually accept, a borrower’s regular monthly payment amount immediately after protracted litigation.

Each installment payment, the Bartram decision held, could be a separate default, meaning it was its own claim for res judicata purposes and thus each claim had its own statute of limitations.252 In so doing, the court implicitly rejected Stadler.253

Finally, the Bartram court held that whether an involuntary dismissal occurred with or without prejudice did not matter for purposes of the new lawsuit.254 The distinction only mattered if banks wanted to pursue the same defaulted payment as before.255 If the first lawsuit was dismissed with prejudice, then that default could not be pursued again, however any future payments were recoverable in future lawsuits.256 A dismissal without prejudice would allow the bank to pursue the same default as the first lawsuit.257

248 Id. at 1020. 249 Id. at 1021. 250 Id. at 1023. 251 Id. at 1020. 252 Id. at 1019. 253 Id. at 1016 (“Stadler also involved two successive foreclosure actions where

the first foreclosure action had been dismissed with prejudice. The mortgagee brought a second foreclosure action that was identical except for alleging a different period of default. That action was successful, and the mortgagor appealed. The Second District reversed the judgment of foreclosure entered on the basis of res judicata and concluded that the ‘election to accelerate put the entire balance, including future installments at issue.’ Therefore, even though different periods of default were asserted, the ‘entire amount due’ was the same and thus the ‘actions are identical.’ Accordingly, the Second District concluded that res judicata barred the second foreclosure action.” (quoting and citing Stadler v. Cherry Hill Developers, Inc., 150 So. 2d 468, 469, 472–73 (Fla. Dist. Ct. App. 1963))).

254 Id. at 1020. 255 Id. 256 Id. 257 Id.

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

� �

Judge Lewis’s concurrence in Bartram noted apprehension at the approach that gives any sort of dismissal, for any reason, the effect of automatic deceleration.258 This was particularly troubling where there are no facts in the record to show even a hint of “de facto reinstatement” following the initial dismissal.259 Judge Lewis echoed the dissent of Judge Scales in the Beauvais case, pointing out again that the equitable considerations that led courts in Florida to create exceptions for banks and lenders should not govern statute of limitations cases.260

III.�UNDERSTANDING ACCELERATION AND RES JUDICATA AND

STATUTE OF LIMITATION CASES

Our previous research has established a number of patterns in judicial treatment of foreclosure cases. 261 We have noted that an unceasing drive for faster foreclosure processing time resulted in less procedural and substantive due process protections for homeowners, and undoubtedly contributed to the impressive number of false and fraudulent documents filed in state courts around the country.262 We also described an overall trend of courts narrowing novel defenses to foreclosures that have arisen in the wake of the Great Recession.263 As a result, our research has painted a picture of a specific and narrow area of law in which the party with the most resources seems to largely receive the benefit of any judicial doubt. The virtual destruction of the statute of limitations and res judicata in Florida as to foreclosure cases, and the singularly expansive rulings given in favor of banks and foreclosing entities in the cases discussed supra fit neatly into the

258 Id. at 1023 (Lewis, J., concurring in the result) (“Given the procedural

posture of this matter and the relatively sparse record before this Court, the decision today fails to address evidentiary concerns regarding how to determine the manner in which a mortgage may be reinstated following the dismissal of a foreclosure action, as well as whether a valid ‘subsequent and separate’ default occurred to give rise to a new cause of action. See Singleton v. Greymar Assocs., 882 So. 2d 1004, 1008 (Fla. 2004). Instead of addressing these concerns, the Court flatly holds that the dismissal itself—for any reason—‘decelerates’ the mortgage and restores the parties to their positions prior to the acceleration without authority for support.”).

259 Id. (“In this case, there is no evidence contained in the record before this Court to show whether the parties tacitly agreed to a ‘de facto reinstatement’ following the dismissal of the previous foreclosure action. Further, despite the assumption of the majority of the Court to the contrary, the mortgage itself did not create a right to reinstatement following acceleration and the dismissal of a foreclosure action.”).

260 Id. at 1024. 261 See, e.g., A Standing Question, supra note 17, at 708–11. 262 See id. at 729; Not a Party, supra note 14, at 182–83. 263 See Not a Party, supra note 14, at 179–80, 182–83.

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

pattern we have established. 264 Ultimately, as we have argued previously, the failures of the judiciary lead to negative externalities that were ignored or downplayed in the lender-friendly opinions we examined.265

A.� The Typical Frame of Foreclosure

We begin by attempting to shed light on why research seems to

show that judges are inclined to overlook irregularities in the foreclosure process or to modify doctrine to liberally permit foreclosures.266 As discussed in the sections above, courts often cite equitable concerns, particularly the desire to avoid awarding “free houses” to debtors that have defaulted on their mortgages.267 These equitable concerns, however, are necessarily rooted in a particular and narrow view of the mortgage and foreclosure process.268 Accordingly, it is important to discuss the “frames” themselves.

Upon examination, it is clear that judges may be predisposed to discount debtor defenses because of how foreclosure cases are situated within the judicial system. Given the backlog of foreclosures during the height of the housing crisis, judges were under apparent pressure to resolve these cases as expeditiously as possible.269 The courts’ ability to do so may even be tied to the funding for the courts.270 Judges unsurprisingly may be reluctant to seriously consider defenses, particularly those that merely act as a “stall” to an otherwise valid claim.271

264 See Singleton v. Greymar Assocs., 882 So. 2d 1004, 1005 (Fla. 2004);

Olympia Mortg. Corp. v. Pugh, 774 So. 2d 863, 866 (Fla. Dist. Ct. App. 2000) (illustrating recent cases in Florida that have essentially eviscerated the protections of the statute of limitations and res judicata); Stadler v. Cherry Hill Developers, 150 So. 2d 468, 469–70 (Fla. Dist. Ct. App. 1963).

265 See A Standing Question, supra note 17, at 730; see also infra text accompanying note 304.

266 A Standing Question, supra note 17, at 729. 267 Singleton, 882 So. 2d at 1008. 268 Id. 269 See, e.g., Foreclosure Initiative Workgroup, Foreclosure Backlog Reduction

Plan for the State Courts System, FLA. CTS. 6 (Apr. 10, 2013), http://www.flcourts.org/core/fileparse.php/251/urlt/RecommendationsForeclosureInitiativeWorkgroup.pdf (proposing a process to clear foreclosure backlogs).

270 See id. at 4 (discussing docket clearance rates and their link to court funding). 271 Allen, supra note 5 (describing shortcuts that some Florida courts took to

facilitate fast resolution at the expense of many homeowners); Adolfo Pesquera, Miami-Dade Aggressively Pushes Foreclosure Cases Through System, DAILY BUS. REV. (Aug. 2, 2013), http://www.dailybusinessreview.com/id=1202613700227/MiamiDade-Aggressively-Pushes-Foreclosure-Cases-Through-System?slreturn=20150028155007 (quoting one

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

We have previously noted immense judicial skepticism to debtor defenses based on the assumed underlying culpability of debtors.272 For example, with rare exception courts were largely silent and unobtrusive amid the marching onslaught of MERS, the electronic placeholder that acts as nominal mortgagee for lenders for the life of loans, eliminating the need for many assignments of loans to be recorded.273 This new tracking system reduced recording revenues by millions, and reduced transparency in public records by lowering the likelihood of any given homeowner being able to access the correct current owner of his or her loan.274 Similarly, its development led to inaccurate and contradictory pleadings all across the nation.275 Yet it appears that in the majority of jurisdictions, judges have ruled that MERS will not face significant financial liability for its conduct and judges have largely accepted the arguments of MERS and its attorneys at face value.276

Similarly, we have noted that courts have tended to ignore debtor defenses based on standing.277 Again, with rare exception, many courts imply, or indeed occasionally express, the posture that to whom the debt is owed is largely irrelevant, as long as a given case seems plausible.278 Discovery may also be routinely denied based upon the existence of the debtors’ default.279

judge as saying, “If you can’t do [the trial] within an hour, you’re not a trial attorney”).

272 A Standing Question, supra note 17, at 711. 273 Standing in Our Own Sunshine, supra note 16, at 551–52, 555. 274 Id. at 552. 275 Id. 276 Cf. Taylor v. Deutsche Bank Nat’l Tr. Co., 44 So. 3d 618, 623 (Fla. Dist. Ct.

App. 2010) (finding that MERS could arguably be a proper holder of promissory notes).

277 See, e.g., Not a Party, supra note 14, at 182; Pino v. Bank of N.Y. Mellon, No. SC11–697, 2011 WL 1537260, at *1 (Fla. Apr. 15, 2011).

278 Maraulo v. CitiMortgage, Inc., No. 12–CV–10250, 2013 WL 530944, at *7 (E.D. Mich. Feb. 11, 2013) (“Furthermore, none of the facts alleged indicate that the assignment may subject Plaintiffs to a risk of having to pay their mortgage twice. In fact, Plaintiffs’ complaint alleges that the assignor of the mortgage, American, went out of business in 2008 and ceased to exist as a corporate entity. Given that the assignor does not exist, Plaintiffs are not at any risk of paying the same claim twice, and have never alleged that they are at risk of such double payment.” (citations omitted)); Shumake v. Deutsche Bank Nat’l Tr. Co., No. 1:11–CV–353, 2012 WL 366923, at *3 (W.D. Mich. Feb. 2, 2012) (“Really, Shumake’s injury is fairly traceable to the fact that he failed to make his mortgage payments . . . whether Shumake made his mortgage payments on time had nothing to do with whether Chase validly assigned the mortgage to Deutsche Bank. Either way, Shumake still had to make the same payments-the assignment only altered to whom he made the payments; the assignment had no other consequence to Shumake.” (citations omitted)).

279 Consider, as one example, a sitting judge recently submitted an article to the continued . . .


�

�!� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

Such foreclosure decisions, as with other judicial decisions, are often framed and influenced by the perceived primary actor in the conflict.280 In other words, judges often appear to imagine the most likely counterfactual scenario that would have avoided the foreclosure situation and thereby determine the “but for” cause of foreclosure.281 It may seem obvious, then, that judges would perceive debtors’ default to be the primary cause for the situation and therefore be inclined to be more sympathetic to the mortgagee, the aggrieved party in this instance.

For example, in many states, there are judges assigned to particular areas of the law, such as foreclosures.282 Their repeated exposure to similar cases perhaps causes cynicism and skepticism regarding borrower defenses. Judges consequently choose to frame the issues as one of “deadbeat” borrowers that are seeking to take advantage of a bank that inadvertently failed to follow up on a claim after acceleration within the statute of limitations.283 There may be some truth to this stereotype, of course; homeowners may readily admit that they are seeking legal counsel in order to gain as much time as possible before having to settle, whether through a loan modification or a short sale.284 This can be particularly true of investors in rental property, who may

Florida bar that suggests that all notes are negotiable. See William H. Burgess, III, Negotiability of Promissory Notes in Foreclosure Cases: Ballast Is Not Luggage, 88 FLA. B.J., 8, 10, 18 (2014). This is troubling on a number of levels, (1) that a sitting judge—and the previous head of all foreclosure cases for a Florida county––felt impelled to dissuade others from attempting to assert a defense based on failure to meet holder status under the Uniform Commercial Code in foreclosure cases, and (2) that he also would clearly attempt to influence other judges to preclude any inquiry in individual cases regarding whether or not a given note is a negotiable instrument by making broad pronouncements about all uniform promissory notes based largely on out-of-state cases. See id. at 18.

280 See A Standing Question, supra note 17, at 708. 281 See id. at 725–26. 282 See, e.g., Alison Fitzgerald, Homeowners Steamrolled as Florida Courts

Clear Foreclosure Backlog, CTR. FOR PUB. INTEGRITY (Sept. 10, 2014), https://www.publicintegrity.org/2014/09/10/15463/homeowners-steamrolled-florida-courts-clear-foreclosure-backlog; Juan Gonzales, Brooklyn Court Overwhelmed by Way of Foreclosures, N.Y. DAILY NEWS (Mar. 8, 2016), http://www.nydailynews.com/new-york/brooklyn/brooklyn-court-overwhelmed-wave-foreclosures-article-1.2557744.

283 See In re Washington, No. 14–14573–TBA, 2014 WL 5714586, at *1 (Bankr. D.N.J. Nov. 5, 2014) (“No one gets a free house.”), rev’d sub nom., Specialized Loan Servicing, LLC v. Washington, 2:14–CV–8063–SDW, 2015 WL 4757924 (D.N.J. Aug. 12, 2015), aff’d sub nom., In re Washington, 669 Fed. App’x 87 (3d Cir. 2016).

284 See generally Lambros Politis, How Can I Slow or Stop the Foreclosure Process?, ARK L. GROUP (Nov. 25, 2013), https://www.arklawgroup.com/blog/how-can-i-slow-or-stop-the-foreclosure-process (providing general advice on foreclosure delay tactics).

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

heavily leverage to finance the initial purchase of the real estate and then lease it to tenants.285 The investors have very little skin in the game and may collect rent while delaying an otherwise valid foreclosure claim, with very little downside.286

Judges also are undoubtedly aware of the financial arrangements for many foreclosure defense attorneys, which can contribute to reluctance to seriously consider debtor defenses.287 When foreclosure proceedings have begun, many foreclosure defense attorneys in judicial foreclosure states offer to defend the proceedings for a monthly fee that is substantially less than the mortgage payment.288 In other words, one way of conceptualizing foreclosure defense is as an inexpensive option to lengthen proceedings and stall the inevitable. Any delay by virtue of defending a cause, however, is valuable to debtors that consequently will be permitted to stay in their homes for a monthly fee that is a fraction of their monthly mortgage payment.289 Judicial distaste for the stalling of an otherwise valid claim, particularly in light of the underlying financial arrangement that benefits both the debtor and the debtor’s attorney the longer the claim is stalled, may affect the reception of asserted foreclosure defenses. In some instances, this distaste has even manifested itself in the court’s willingness to rely on the unsworn amici of the banking bar as to the proper interpretation of the contract and acceleration rights.290

Confirming this assertion, in response to debtor assertions of defenses or even at the outset of the case, judges often seek to confirm that the debtor did not in fact pay as required (e.g., “But your client did

285 See A Standing Question, supra note 17, at 727–28 n.114. 286 See id. 287 See generally id. at 705 (providing examples of judges’ skepticism toward

debtor defenses). 288 See How Much Will a Foreclosure Attorney Charge?, NOLO,

https://www.nolo.com/legal-encyclopedia/how-much-will-foreclosure-attorney-charge.html (last visited Mar. 29, 2018).

289 Id. 290 Deutsche Bank Tr. Co. Ams. v. Beauvais, 188 So. 3d 938, 948 (Fla. Dist. Ct.

App. 2016) (en banc) (“Adding support to our conclusion, both The Business Law Section of The Florida Bar and The Real Property Probate & Trust Law Section of The Florida Bar confirm that the custom and practice in Florida is to treat a dismissal of a foreclosure action as ‘decelerating’ an acceleration made in a foreclosure action.”); see Cooke v. Commercial Bank of Miami, 119 So. 2d 732, 735 (Fla. Dist. Ct. App. 1960) (“Although customs and usages of the banking business may have a binding force as between banks, and between a bank and the person with whom it deals in the absence of an express agreement to the contrary.”); see also Sabatino v. Curtiss Nat’l Bank of Miami Springs, 446 F.2d 1046, 1053 (5th Cir. 1971) (“Absent instructions or an express agreement to the contrary, general customs and usage of the banking business may have a binding effect between banks, and between a bank and the person with whom it deals.”).

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

not actually pay, correct?”) or to express a concern about awarding free houses to someone that defaulted (e.g., “We are not going to be awarding free houses”).291 While this sentiment may seem appropriate, it actually is misplaced in that it unfairly previews the case outcome. In other civil contexts, it would be intuitively inappropriate for a judge at the outset (or in response to an asserted defense) to assert the propriety or likelihood of victory of the plaintiff’s claim.292 In a more extreme example, it would clearly strike us as improper if a judge blithely dismissed or ignored access to counsel or discovery in a criminal case because “your client committed the crime, right?”293 This is not, of course, to suggest that previewing does not occur in these other circumstances but instead to assert that it is improper in each instance.

B.� A New “Systemic” Frame of Foreclosure

In light of this Article’s discussion of yet another longstanding

substantive area of law being changed, modified, or amended post-Great Recession for the benefit of banks and lenders, another frame must also be discussed. Separate and apart from individual judges “previewing” a case’s merits before making substantive decisions, in the manner we have discussed above and in previous research, we may also posit that judicial systems and court administration create what we may call a new “systemic” frame in which judges view foreclosure. In this new conception of a systemic frame, we posit that judicial systems as a whole, in response to the Great Recession, created structures, procedures, and requirements that were largely to the detriment of borrowers. Accordingly, we may say that court systems, before a given case is even assigned to a judge, have primed the judiciary, or framed the proceedings, for what the “optimal” reaction to foreclosure litigation should be.

In some jurisdictions, special foreclosure procedures, rules, and

291 See, e.g., Michael Corkery, Foreclosure to Home Free, as 5-Year Clock

Expires, N.Y. TIMES (Mar. 29, 2015), https://www.nytimes.com/2015/03/30/business/foreclosure-to-home-free-as-5-year-clock-expires.html (“‘No one gets a free house,’ Judge Michael B. Kaplan of the United States Bankruptcy Court in Trenton wrote in an opinion late last year, reflecting what he characterized as a longstanding ‘admonition’ he and others made during the foreclosure crisis.”); Fox 4 News Investigates Lee County’s “Rocket Docket” Program, 4CLOSUREFRAUD (Sept. 16, 2010), http://4closurefraud.org/2010/09/16/fox-4-news-investigates-lee-countys-rocket-docket-program/ (“I was specifically told by one judge, counselor stop. I have 180 cases on my docket this morning. I’ve heard all the evidence I’m going hear. The defendant didn’t pay the mortgage, we’re done here.”).

292 See MODEL CODE OF JUDICIAL CONDUCT r. 2.10 (Am. Bar Ass’n 2011). 293 See id.

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

even court divisions were created, wherein cases would be sent to trial en masse, leaving little time for each individual case, even for a judge so inclined to hear cases on their merits.294 Pejoratively termed the “rocket docket,” the American Civil Liberties Union (“ACLU”) challenged one instance of such a mass foreclosure docket, noting that the special procedures were not authorized by “statute, local rule, or administrative order.”295 The ACLU’s brief exposed what many have argued: that judges facing immense caseloads, in the face of what are seen as “simple” cases of defaulting homeowners, may disregard application of what may be seen as technicalities. One judge in particular is cited as saying, “I have 180 cases on my docket this morning. . . . The defendant didn’t pay the mortgage, we’re done here.”296

While this is obviously an example of an individual judge framing an entire case and its proof on one anti-homeowner fact (“didn’t pay the mortgage”), we suggest that the court system already framed the case by virtue of scheduling it at once with 179 other cases. In other words, before a given case reaches a judge’s desk, court administration has already framed the case so as to be by necessity tilted against any effective defense to foreclosure.297 Similarly, creating entire divisions dedicated solely to foreclosure cases may contribute to the inherent idea that such cases are less important than other divisions, especially when such divisions often employ retired, unelected judges to assist in processing large numbers of cases.298 Such judges were not presumably called up by the court system to assist in discovering the truth of each individual case or to sniff out possible fraud or misconduct on either side––rather, they were explicitly called in to assist in closing cases.299

294 See, e.g., Allen, supra note 5. 295 Petition for Writ of Certiorari, supra note 11, at 1–2. 296 Id. at 16. 297 It should also be posited here that in facing unprecedented numbers of

foreclosures, it was by no means clear that the court system would take the sharp turn towards pro-lender overtures. In light of the credible accounts of thousands of false documents soiling court records, courts surely could have taken a different tack and forced procedures and requirements on banks to ensure that cases with lack of proof are not brought to court. Faced with thousands of complaints that falsely claimed original notes were lost, for example, Florida required lenders to begin having their complaints verified under penalty of perjury by their clients. See FLA. STAT. § 702.015 (2017). While this requirement could have created a systemic frame of priming judges to be aware and vigilant towards possible bank misconduct, it may have actually contributed to the further “ghettoization” of foreclosure litigation in the sense that any reputable practice area worth expending time upon would not have required such a new rule of procedure.

298 See Allen, supra note 5. 299 See id. (“[J]udges [were] brought back from retirement specifically to hear

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

Thus, while we have previously posited that judges preview the merits of individual foreclosure claims and discount homeowner claims accordingly,300 we now suggest that the overall systemic frame of court administration responses to the foreclosure crisis enforced and created an atmosphere of almost ministerial enforcement or of a collection mechanism rather than serving any truth-seeking function.

Framing lawsuits primarily in terms of efficiency rather than fact-finding renders foreclosure a foregone conclusion, especially when judges have an incentive to clear a large backlog of foreclosure cases such as those pending after the 2008 financial crisis.301 While perhaps easier or faster than dealing with every case as it should be, this type of thinking can be crushing for debtors when there are many other options for lenders that promote an efficient mortgage market. 302 It is particularly bad for society in the long haul, whether it leads to increased crime rates in neighborhoods, blight, or other negative externalities.303 Within these two frames, therefore, the story of the creation of brand new exceptions to res judicata and the statutes of limitation solely for foreclosure cases are altogether unsurprising.

C.� An Equitable Approach Where Equity Does Not Apply

Almost ninety years ago, then-Chief Judge Cardozo protested, to no

avail, a formalistic approach to mortgage enforcement that ignored the

foreclosures in Fort Myers.” (alteration in original)).

300 See A Standing Question, supra note 17, at 727. 301 Id. at 729 (“What is clear, though, is that foreclosure is desirable from a

judicial perspective. Judges have been, implicitly or explicitly, charged with the task of clearing the backlog of foreclosures and have accordingly carved a legal path that enables foreclosures to occur more quickly and with less attorney effort.”).

302 Id. at 727 (“Under these lines of analysis, if the foreclosure is inevitable because the debtor is in default and the lender would necessarily desire a foreclosure, then the courts should not put up unnecessary roadblocks to foreclosure by permitting procedural challenges. These approaches, however, are deeply flawed because they are both predicated on an underlying assumption that foreclosure would and should occur whenever the debtor is in default.”).

303 Id. at 730 (“Yet this approach, as with the other housing crisis issues driven largely by a demand for faster results, is ultimately shortsighted. First, although a longer foreclosure process costs lenders and servicers more, these costs may help incentivize servicers to settle more cases, rather than enduring a long slog through the court system. Similarly, the longer time period may assist borrowers in bolstering their financial resources or in weathering a financial hardship, again making settlement more likely. Encouraging more settlements benefits society as a whole, particularly those jurisdictions that have had higher numbers of foreclosures. This is because preventing foreclosures can help eliminate significant negative externalities. The normal neighborhood-level effects of foreclosed homes are significant in terms of crime, blight, and reduced property values.”).

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

impact of foreclosure.304 In Graf v. Hope Building Corp., through an error in a bookkeeper’s arithmetic, payment of what should have been an installment of $6,121.56 was $401.87 short of the correct amount.305 Enforcement of the acceleration provision (as sustained by the majority) meant that because of the $401.87 deficiency, the mortgagor’s interest was foreclosed in a property mortgaged for $335,000.306 The majority chose to permit acceleration and foreclosure based on the clear terms of the contract.307 In his dissent, Chief Judge Cardozo argued:

In this case, the hardship is so flagrant, the oppression so apparent, as to justify a holding that only through an acceptance of the tender will equity be done. . . . The deficiency, though not so small as to be negligible within the doctrine of de minimis, was still slight and unimportant when compared with the payment duly

made.308

As Chief Judge Cardozo’s view did not prevail, one would expect the formalism that was used to justify foreclosure would also be employed when lenders fail to comply with statutory, common law, or contractual requirements with respect to mortgage assignment, enforcement, acceleration, or foreclosure.

In each instance, however, lenders are often instead protected by a contextual or equitable approach that seeks to preserve their right to foreclose.309 As we have suggested elsewhere, courts use a formalistic approach with respect to debtor accountability, but not mortgagee accountability, under the contract. 310 Mortgagees are permitted to enforce loan and mortgage instruments under virtually all circumstances, even where the contracting circumstances are suspect or where the mortgagee’s title to the underlying instruments is questionable.311

304 Graf v. Hope Bldg. Corp., 171 N.E. 884, 886 (N.Y. 1930) (Cardozo, C.J.,

dissenting). 305 Id. at 884 (majority opinion). 306 Id. at 885. 307 Id. (“We feel that the interests of certainty and security in real estate

transactions forbid us, in the absence of fraud, bad faith or unconscionable conduct, to recede from the doctrine that is so deeply imbedded in equity.”).

308 Id. at 889 (Cardozo, C.J., dissenting). 309 See Basil H. Mattingly, The Shift from Power to Process: A Functional

Approach to Foreclosure Law, 80 MARQ. L. REV. 77, 92–93 n.76 (1996). 310 A Standing Question, supra note 17, at 707 (“In somewhat counterintuitive

fashion, however, courts have permitted mortgagees and their assignees to subvert, supplant, and circumvent the very formalities that they utilize to foreclose upon the debtors in the first place.”).

311 Id. continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

In the context of res judicata and the statute of limitations, courts have pursued a contextual or equitable approach to preserve the ability of mortgagors to foreclose.312 As seen in Beauvais, courts create a legal fiction that all dismissals, voluntary or not, of foreclosure of an accelerated debt, represent a judicial adjudication that acceleration was improper or ineffective, thereby permitting mortgagors to accelerate and seek foreclosure innumerable times.313 As seen in Bartram, courts permit a contractual vagueness with respect to the deceleration of a debt to be construed in favor of the drafter, despite the disparity in bargaining power or the inability of a debtor to negotiate the underlying contracts.314

One way to understand the inclination of some courts to permit the erosion of res judicata and statute of limitations defenses is ensuring consistency with their equitable inclination in other doctrinal contexts to liberalize the foreclosure process and to prevent debtors in default from being awarded “free houses.” 315 This equitable inclination, however, is particularly problematic in the context of the defenses of res judicata, double-dismissal rules and statute of limitations. Equity

312 Deutsche Bank Tr. Co. Ams. v. Beauvais, 188 So. 3d 938, 943 (Fla. Dist. Ct.

App. 2016) (en banc). 313 Id. at 947 (“Stated another way, despite acceleration of the balance due and

the filing of an action to foreclose, the installment nature of a loan secured by such a mortgage continues until a final judgment of foreclosure is entered and no action is necessary to reinstate it via a notice of ‘deceleration’ or otherwise.”).

314 Bartram v. U.S. Bank Nat’l Ass’n, 211 So. 3d 1009, 1024 (Fla. 2016) (Lewis, J., concurring in the result) (“The majority opinion rewrites the parties’ note and mortgage to create a reinstatement provision—i.e., reinstating the installment nature of the note, as if acceleration never occurred, upon any dismissal of any lawsuit—that the parties did not include when drafting their documents. Singleton does not say this; the parties’ contract documents certainly do not say this; and Florida law is repugnant to the majority’s insertion of a provision into the parties’ private contract that the parties themselves most assuredly omitted.” (quoting Beauvais, 188 So. 3d at 963)), reh’g denied, 2017 Fla. LEXIS 593 (Fla. Mar. 17, 2017).

315 Fairbank’s Capital Corp. v. Milligan, 234 F. App’x 21, 24 (3d Cir. 2007) (“If we were to so hold [that dismissal of a former lawsuit prevented the bank from going after the mortgagor later], it would encourage a delinquent mortgagor to come to a settlement with a mortgagee on a default in order to later insulate the mortgagor from the consequences of a subsequent default. This is plainly nonsensical.” (alteration in original)); Singleton v. Greymar Assocs., 882 So. 2d 1004, 1007–08 (Fla. 2004) (“If res judicata prevented a mortgagee from acting on a subsequent default even after an earlier claimed default could not be established, the mortgagor would have no incentive to make future timely payments on the note. The adjudication of the earlier default would essentially insulate her from future foreclosure actions on the note—merely because she prevailed in the first action. Clearly, justice would not be served if the mortgagee was barred from challenging the subsequent default payment solely because he failed to prove the earlier alleged default.”).

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

� �

should not be relevant in these instances because it is the very nature of such defenses to create inequitable results.316 The proper application of res judicata or the double-dismissal rules will result in instances where a valid substantive claim will be dismissed. 317 That is indeed inequitable. Similarly, the proper application of the statute of limitations will necessary result in the dismissal or preclusion of valid substantive claims.318 It is unclear why a court would understand the inequitable result arising from a disallowed foreclosure to be more compelling than the inequitable results arising in other circumstances, such as criminal acts or intentional torts that cannot be prosecuted or pursued because of res judicata or statute of limitations defenses.

Further, upon examination and analysis of the preceding cases and their development, it seems clear that many judges tend to see equity lying with only one side of foreclosure litigation. In the majority opinions we have discussed supra, the decisions consistently note the “free house” scenario and warn against the inequities if homeowners behaved opportunistically in the face of strict claim preclusion rules.319 These same decisions often accept at face value whatever factual proclamation bank and lender industry groups pronounce.320 Yet, these same decisions neither discuss––nor mention in their concurring or dissenting opinions––the inequities that their pro-lender expansions may produce.321

The conception of “free houses” suggests a lack of practical knowledge of foreclosure litigation and, indeed, homeownership in general. The cases we have discussed herein have been decided only

316 Beauvais, 188 So. 3d at 969 (Scales, J., dissenting) (“The expiration of a

statute of limitations, however, generally results in a windfall for the escaping defendant. In my view, neither the moral imperative that borrowers pay their obligations, nor Singleton, has abrogated decades of Florida jurisprudence governing the statute of limitations in foreclosure cases.”).

317 See Ronald D. Weiss, Who Wants a Free House? Applying Res Judicata to Foreclosure Cases, RONALD D. WEISS P.C. (Mar. 24, 2017), http://www.ny-bankruptcy.com/who-wants-a-free-house-applying-res-judicata-to-foreclosure-cases-2/.

318 Tyler T. Ochoa & Andrew J. Wistrich, The Puzzling Purposes of Statutes of Limitation, 28 PAC. L.J. 453, 465 (1997) (“[I]t may be more unjust to permit an old claim to be revived than it would be to extinguish it.” (citation omitted)).

319 See Bartram, 211 So. 3d at 1017; Beauvais, 188 So. 3d at 943–44; Singleton, 882 So. 2d at 1007.

320 See Bartram, 211 So. 3d at 1007; Beauvais, 188 So. 3d at 945; Singleton, 882 So. 2d at 1012.

321 See Bartram, 211 So. 3d at 1025–26 (Lewis, J., concurring in the result) (noting that the majority’s holding may lead to inequities to borrowers); Beauvais, 188 So. 3d at 964–65 (Scales, J., dissenting) (stating that the majority gives the lender a benefit the borrower would never receive); see generally Singleton, 882 So. 2d at 1008 (discussing only inequities to the lender).

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

after years of protracted litigation, multiple lawsuits, and presumably extensive legal bills.322 The homeowner will have borne the costs of the litigation and the deleterious health effects of foreclosure.323 And, in many cases, the homeowner will have paid their loan faithfully for years before any financial difficulties caused default, and others will have been induced into default by servicers informing them that loss mitigation assistance will not be available until they actually stop making regular payments.324

In addition, in light of the case law development we have discussed, it appears that banks and foreclosing entities will have nearly unlimited chances to attempt foreclosure in those jurisdictions that have adopted multiple-bites-at-the-apple positions.325 In such jurisdictions, while it now appears nearly impossible to win an actual “free” house through a dismissal, we hold little hope that judges will suddenly stop believing and asserting that a “free house” is the ultimate outcome of any dismissal, and that therefore homeowner defenses must be viewed with skepticism.

Likewise, we do not expect courts to suddenly demand foreclosing entities cease filing lengthy cases that are ultimately dismissed for malfeasance or lack of proof––the very cases which, when refiled, can sometimes implicate res judicata and statute of limitations considerations. That is to say, having expanded the exceptions to claim preclusion and the statute of limitations to give banks nearly unlimited chance to foreclose without regard to the effects on homeowners, courts still remain unlikely to change their allegiance to more thoroughly consider the equities that lie with a given homeowner.326 In light of our previous research and the continuing points made in this Article, we do

322 See Bartram, 211 So. 3d at 1014–15; Beauvais, 188 So. 3d at 940–41;

Singleton, 882 So. 2d at 1005. 323 See Foreclosure Process Takes Toll on Physical, Mental Health, ROBERT

WOOD JOHNSON FOUND. (Oct. 21, 2011), https://www.rwjf.org/en/library/articles-and-news/2011/10/foreclosure-process-takes-toll-on-physical-mental-health.html (identifying a link between foreclosure and a decline in overall health); What Will a Foreclosure Lawyer Cost Me?, LEGALMATCH.COM, https://www.legalmatch.com/law-library/article/how-much-will-a-foreclosure-lawyer-cost.html (last updated Jan. 31, 2017) (stating that usually each party pays its own costs but that in some cases homeowners must pay the lender’s legal fees as well).

324 See, e.g., Aldo Svaldi, Foreclosure Paperwork Miscues Piling Up, DENVER

POST, https://www.denverpost.com/2010/11/12/foreclosure-paperwork-miscues-piling-up/ (last updated May 5, 2016, 3:46 AM) (identifying foreclosures brought on by injury and misleading statements by the lender).

325 See Bartram, 211 So. 3d at 1012 (following the Singleton rule); Beauvais, 188 So. 3d at 944 (following the Singleton rule).

326 See supra Section III.C. continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

not expect judges to begin to recognize the extensive damage that repetitive successive lawsuits can cause. 327 Indeed, in this new landscape where foreclosure appears inevitable––even in the face of a previous dismissal with prejudice for severely troubling conduct—one may well expect forthcoming opinions to say it is inequitable to force a foreclosing entity, who might otherwise win a suit, to have to refile for the same relief later, despite any wrongdoing in the present case.

Finally, and again as we have discussed in prior research, we note that foreclosing entities cannot be said to have earned the sympathies of foreclosure courts to merit such one-sided examinations of the equities of a given case.328 In other words, one cannot reasonably say that strategic homeowners knowingly and wittingly created a backlog on court systems in an effort to bilk lenders out of money despite banks’ best efforts to assist. 329 While ample evidence certainly exists to suggest that many homeowners defaulted strategically,330 the far more accurate scenario writ large is that millions of Americans faced financial hardship through no fault of their own.331

Banks, lenders, and their attorneys, by contrast, have earned every bit of disapprobation received in the past decade.332 Even if courts ignored the substantial research on bank misconduct in the years before the great recession, courts would have to be exceptionally inattentive not to have noticed a similar amount of reportage on attorney misconduct in foreclosure litigation:

Among a host of problematic practices, foreclosure attorneys have been cited for signing documents on behalf of servicers without having the authority to do so, changing affidavits without knowledge of servicers, filing a myriad of false or inappropriate claims in pleadings, filing documents signed by attorneys who had already left the firm, signing blank documents with information to be filled in later, repeatedly missing hearings without notifying other parties or the court, and

ignoring notarization requirements.333

327 See supra Section III.C. 328 See A Standing Question, supra note 17, at 711. 329 Id. at 710. 330 Brent T. White, Underwater and Not Walking Away: Shame, Fear, and the

Social Management of the Housing Crisis, 45 WAKE FOREST L. REV. 971, 979 (2010).

331 Id. at 976–77. 332 See generally Robo-Litigation, supra note 22, at 888–90 (listing numerous

examples of misconduct by attorneys representing banks and servicers). 333 Id. at 869–70 (citations omitted).

continued . . .


�

!� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

Yet, despite these many documented problematic practices, it appears that recent jurisprudence clings to the notion that precluding a bank or servicer’s ability to collect on a loan is the most serious equitable consideration courts face in foreclosure.334 This ignores the pertinent and troubling issues of whether or not a bank or servicer is the proper party to sue, is seeking unsubstantiated damages or charges, or is bringing a claim when previous suits were dismissed for flagrant misconduct.335

Even in cases specifically discussing acceleration, res judicata, and statutes of limitation, banks and foreclosing entities behave opportunistically and have done so for as long as cases have been reported on such issues.336 Again, even though in these specific sub-areas of foreclosure litigation jurisprudence, it is homeowners who are not seen to have equity on their side.337 The expansion of the exceptions to res judicata, the double dismissal rule, and statutes of limitation are simply more evidence of the pervasive view among the judiciary that equities in foreclosure cases only lie with banks and lenders.338

D.� Inefficient Efficiency

As we have noted here and in previous research, judges and court

administrators seem to be wedded to the idea that speeding up foreclosure cases is the only optimal policy.339 Yet, we have noted, this approach, as with the other housing crisis issues driven largely by a demand for faster results, is ultimately shortsighted.340 Although a longer foreclosure process costs lenders and servicers more, these costs may help incentivize servicers to settle more cases, rather than enduring a long slog through the court system.341 Similarly, the longer time period may assist borrowers in bolstering their financial resources or in weathering a financial hardship, again making settlement more likely.342

Even if a more efficient foreclosure system were recognized as the most important goal of foreclosure litigation, rather than fact finding, the efficiency arguments are completely undercut by the factual circumstances that give rise to the burgeoning foreclosure statute of

334 See Fairbank’s Capital Corp. v. Milligan, 234 F. App’x 21, 24 (3d Cir. 2007);

Singleton v. Greymar Assocs., 882 So. 2d 1004, 1007–08 (Fla. 2004). 335 See supra text accompanying notes 318–19. 336 See supra text accompanying notes 305–06, 312–13. 337 See supra text accompanying notes 314–19. 338 See supra text accompanying notes 314–19. 339 Robo-Litigation, supra note 22, at 867. 340 A Standing Question, supra note 17, at 730. 341 Id. 342 Id.

continued . . .


�

�!��,� ��$��$--��$'��$�.�.��/�� &��-��.�&��

��

limitations jurisprudence.343 On one hand, we have noted that judges may give little attention to borrower defenses or discovery because of this unceasing drive for speed and efficiency in court systems.344 On the other hand, the mere fact that a foreclosure action faces a five-year statute of limitations bar potentially signals a significant level of incompetence, nonfeasance, or malfeasance on the part of banks and their attorneys. A typical judicial state foreclosure may only produce one or two witnesses and five to ten exhibits, and such trials typically do not entail jury selection.345 It is unclear then, in this fact pattern, why the efficiency argument would lie in favor of the party that was not prepared for trial or had its case dismissed after years and years of litigation.

Allowing banks to continuously refile these cases only incentivizes the leisurely and cavalier manner in which their attorneys have prosecuted actions in the past.346 If banks were certain that statute of limitations defenses would apply in a dismissal of a cause proceeding for longer than five years, one would expect banks to wait to file their cases until absolutely ready to prosecute, and would not require more than five years to obtain a judgment or dismissal.

Similarly, affording foreclosing banks the exceptions to claim preclusion we have explored herein further incentivizes the shoddy work that created such large numbers of dismissals.347 As with the statute of limitations, if banks knew that they would not be able to bring unlimited lawsuits, they would be less apt to file questionable suits based on questionable documents that get dismissed and ultimately waste the time and resources of the court and all parties. Ultimately, however, it seems that the fact that a foreclosure case might take more than five years is seen more as a result of homeowners’ dilatory tactics (which should not be rewarded), rather than incompetence on the part of foreclosing entities (which for practical purposes is ignored when creating exceptions for the statute of limitations and res judicata).348

343 See supra Section III.C. 344 See Allen, supra note 5; supra text accompanying note 294. 345 See Petition for Writ of Certiorari, supra note 11, at 24. 346 See supra notes 332–33 and accompanying text. 347 See, e.g., Deutsche Bank Tr. Co. Ams. v. Beauvais, 188 So. 3d 938, 969 (Fla.

Dist. Ct. App. 2016) (Scales, J., dissenting) (“The expiration of a statute of limitations, however, generally results in a windfall for the escaping defendant. In my view, neither the moral imperative that borrowers pay their obligations, nor Singleton, has abrogated decades of Florida jurisprudence governing the statute of limitations in foreclosure cases.”).

348 See generally Petition for Writ of Certiorari, supra note 11, at 16 (arguing that the mass foreclosure docket has revealed judicial bias against mortgagors).

continued . . .


�

�� #$%��&��'�()�"��)�*��'��)��)��)�

+��)��

IV.�CONCLUSION

We have described elsewhere the myriad of actors who either ignored, downplayed, or incentivized problematic practices in foreclosure litigation. 349 These include the government-sponsored entities retaining attorneys for foreclosure based on speed ratings, state bar associations ignoring misconduct for years, and state attorneys general completing showpiece settlements with banks and servicers that did not require substantial reforms.350 In theory, at least in judicial foreclosure states, judges might be, or ought to be, the preeminent disciplinarian in the foreclosure process. It is judges who see daily the human misery in-part created by banks’ lending policies leading up to the Great Recession, and it is judges who see the questionable, and in many cases, outrageous conduct in the prosecution of foreclosure claims.351 And it is only judges’ orders, rulings, and jurisprudence that could eliminate the most common malfeasance in foreclosure litigation. Yet, we have posited here and in previous research that judges largely previewed foreclosure cases to the detriment of borrowers, set up a system to process foreclosure cases in a less scrutinizing fashion than other comparable civil litigation that encourages that very previewing, and have narrowed borrower defenses and expanded anti-bank exceptions to longstanding rules.352

We note that the fact that a state provides judicial review of foreclosures or is a power-of-sale state is a product of the state legislature.353 We also note that the applicable statute of limitations is created by the legislature.354 Yet, by individually previewing cases, creating a system designed for efficiency rather than truth-seeking, and downplaying debtor defenses while expanding exceptions for banks so as to be meaningless, the judiciary in many instances has short-circuited these legislative creations. Our findings lead us to believe that, if given a choice, many judges overseeing foreclosure cases in judicial-foreclosure jurisdictions would simply do away with the legislative creation of judicial foreclosure altogether, and, to some extent, they may already have substantively succeeded.

349 See, e.g., White, supra note 6, at 414. 350 See, e.g., A Standing Question, supra note 17, at 730. 351 Matt Taibbi, Invasion of the Home Snatchers, ROLLING STONE (Nov. 10,

2010), http://www.rollingstone.com/politics/news/matt-taibbi-courts-helping-banks-screw-over-homeowners-20101110.

352 See, e.g., A Standing Question, supra note 17, at 727. 353 See Alexander et al., supra note 63, at 342–43. 354 See FLA. STAT. § 95.281 (2017).

12/17/2018 Mitchell Shaw v. the Fed. Land Bk. of St. Louis, 174 S.W.2d 671, 206 Ark. 253 – CourtListener.com

https://www.courtlistener.com/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/ 1/3

Cited By (13) (/feed/search/?type=o&q=cites%3A(3276873))This case has been cited by these opinions:

F.D.I.C. v. Massingill (1994) (/opinion/6496/fdic-v-massingill/?)Rossi v. Rossi (1995) (/opinion/1768839/rossi-v-rossi/?)Brooks v. Baker (1945) (/opinion/3270648/brooks-v-baker/?)Elliott v. Elliott (1972) (/opinion/1709562/elliott-v-elliott/?)Ashworth v. Hankins (1966) (/opinion/1573776/ashworth-v-hankins/?)

View All Citing Opinions (/?q=cites%3A(3276873))

Authorities (6)This opinion cites:

California Sav. Etc. Soc. v. Culver, 59 P. 292 (Cal. 1899) (/opinion/3301932/california-sav-etc-soc-v-culver/?)Richardson v. State, 273 S.W. 367 (Ark. 1925) (/opinion/3272955/richardson-v-state/?)Johnson v. Guaranty Bank Trust Company, 9 S.W.2d 3 (Ark. 1928) (/opinion/3265330/johnson-v-guaranty-bank-trust-company/?)Hodges v. Dilatush, 136 S.W.2d 1018 (Ark. 1940) (/opinion/3266661/hodges-v-dilatush/?)Willett v. Kelley, 157 S.W.2d 34 (Ark. 1941) (/opinion/3269807/willett-v-kelley/?)

View All Authorities (/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/authorities/?)

Share (mailto:?subject=Mitchell%20Shaw%20v.%20the%20Fed.%20Land%20Bk.%20of%20St.%20Louis%2C%20174%20S.W.2d%20671%2C%20206%20Ark.%20253%20at%20CourtListener.com&body=https://www.coushaw-v-the-fed-land-bk-of-st-louis/) (http://www.facebook.com/share.php?u=https://www.courtlistener.com/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/&t=Mitchell Shaw v. the Fed.Land Bk. of St. Louis, 174 S.W.2d 671, 206 Ark. 253 at CourtListener.com) (http://twitter.com/home?status=https://www.courtlistener.com/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/)

https://www.courtlistener.com/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/

Mitchell Shaw v. the Fed. Land Bk. of St. Louis, 174 S.W.2d 671 (Ark. 1943)Supreme Court of ArkansasFiled: October 25th, 1943

Precedential Status: Precedential

Citations: 174 S.W.2d 671, 206 Ark. 253

Docket Number: Nos. 4-7124 and 4-7125 consolidated

Author: Ed F. McFaddin (/person/3766/ed-f-mcfaddin/)

This opinion involves two appeals, in which appellants, as judgment creditors, (1) claim their judgment liens to be superior to the mortgage liens of the Federal Land Bank; and (2) challenge the right of theFederal Land Bank to accelerate its indebtedness and mortgage liens in the foreclosure suits filed in 1939.

The Facts

In April, 1927, Rufus Smith, for value received, executed a note to the Federal Land Bank of St. Louis for $24,000 with interest and principal due and payable on an amortization plan in serial, semi-annualpayments to and including June, 1963, conditioned that failure to make any payment when due would mature the entire obligation at the option of the payee. The note was secured by a first mortgage on541 acres of land in Logan county, Arkansas, and the mortgage, describing the indebtedness and the maturity thereof, was duly filed and recorded. The mortgage also stated that failure to make anypayment on the note when due, or failure to pay the insurance premiums or taxes when due, gave the *Page 255 mortgagee the option to declare the entire indebtedness due and payable.

Likewise, in May, 1927, Hoyt Smith, for value received, executed a note to the Federal Land Bank for $25,000, with the same provisions as to payments and default and optional acceleration of maturity asin the Rufus Smith note. The Hoyt Smith note was secured by a mortgage on 660 acres of land in Logan county, which mortgage was duly filed and recorded, and contained the same language as tomaturity of indebtedness, default and optional acceleration of maturity, as in the Rufus Smith mortgage.

The Rufus Smith and Hoyt Smith transactions were entirely separate; but in June, 1931, each note and mortgage became delinquent. In October, 1931, the State Bank Commissioner obtained certain jointand several judgments against Rufus Smith and Hoyt Smith, which judgments were liens on the lands on which the Federal Land Bank had the first mortgages, as above recited.

In November, 1931, the Federal Land Bank filed foreclosure suits in the Logan chancery court, being cause No. 1053 on the Rufus Smith note and mortgage, and cause No. 1052 on the Hoyt Smith noteand mortgage: and in each suit the Federal Land Bank exercised its option to accelerate the entire indebtedness and mortgage; and notice of lis pendens was duly filed and recorded for each suit. Areceiver was appointed, who took charge of the lands and rendered reports, and the foreclosure suits remained on the docket until February 21, 1938.

In 1932, the First National Bank of Paris (an appellant here) secured a joint and several judgment against Rufus Smith and Hoyt Smith, which judgment was a lien on the land; and the Paris bank has allthe time kept the lien of its judgment alive and continuous by timely revivor proceedings; and the Paris bank was never a party to the foreclosure suits, Nos. 1052 and 1053, as above detailed. In 1933, theState Bank Commissioner, by several assignments, transferred to A. L. Mitchell and Bruce H. Shaw (appellants here) the judgments obtained by the *Page 256 Bank Commissioner against Rufus Smithand Hoyt Smith, above mentioned. The Bank Commissioner had been duly made a party defendant in each of the foreclosure suits; but neither Mitchell nor Shaw was a party in the foreclosure suits, Nos.1052 and 1053. Mitchell and Shaw have all the time kept the liens of their judgments alive and continuous by timely revivor proceedings.

On February 21, 1938, the foreclosure suits (Nos. 1052 and 1053) were dismissed by an order in each case. The judge's docket contains the notation: "Cause dismissed without prejudice, as perprecedent." The order, as entered in each case, is as follows:

"And it appearing to the court that the defendants herein consent and agree to the dismissal of said suit and further agree that the dismissal of same shall in no way affect the mortgage and note suedupon, as described in plaintiff's complaint, or impair the rights of the plaintiff, the mortgagee therein, and that the unpaid portion of the mortgage indebtedness and the priority of plaintiff's lien securing itspayment shall be and remain in full force and effect as though no suit had been filed.

"It is, therefore, considered, ordered and decreed that said cause be and same is hereby dismissed without prejudice to future action.

"It is further ordered and decreed that the dismissal of said suit shall in no way affect the validity of the mortgage and note sued upon or impair the rights of the plaintiff, the mortgagee therein, and thatsame shall be and remain in full force and effect as though no suit had been filed."

On December 21, 1939 (22 months after the dismissals) the Federal Land Bank of St. Louis again filed foreclosure suits in the Logan chancery court on the 1927 notes and mortgages, as previouslymentioned, being cause No. 1659 on the Rufus Smith note and mortgage, and cause No. 1658 on the Hoyt Smith note and mortgage; and in each suit the Federal Land Bank alleged delinquencies in1939 and again exercised its option to accelerate the entire indebtedness and mortgage. Appellants were made defendants (along with the Smiths and *Page 257 other parties) in each suit; and

https://www.courtlistener.com/feed/search/?type=o&q=cites%3A(3276873)

https://www.courtlistener.com/opinion/6496/fdic-v-massingill/?

https://www.courtlistener.com/opinion/1768839/rossi-v-rossi/?

https://www.courtlistener.com/opinion/3270648/brooks-v-baker/?

https://www.courtlistener.com/opinion/1709562/elliott-v-elliott/?

https://www.courtlistener.com/opinion/1573776/ashworth-v-hankins/?

https://www.courtlistener.com/?q=cites%3A(3276873)

https://www.courtlistener.com/opinion/3301932/california-sav-etc-soc-v-culver/?

https://www.courtlistener.com/opinion/3272955/richardson-v-state/?

https://www.courtlistener.com/opinion/3265330/johnson-v-guaranty-bank-trust-company/?

https://www.courtlistener.com/opinion/3266661/hodges-v-dilatush/?

https://www.courtlistener.com/opinion/3269807/willett-v-kelley/?

https://www.courtlistener.com/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/authorities/?

mailto:?subject=Mitchell%20Shaw%20v.%20the%20Fed.%20Land%20Bk.%20of%20St.%20Louis%2C%20174%20S.W.2d%20671%2C%20206%20Ark.%20253%20at%20CourtListener.com&body=https://www.courtlistener.com/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/

http://www.facebook.com/share.php?u=https://www.courtlistener.com/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/&t=Mitchell%20Shaw%20v.%20the%20Fed.%20Land%20Bk.%20of%20St.%20Louis,%20174%20S.W.2d%20671,%20206%20Ark.%20253%20at%20CourtListener.com

http://twitter.com/home?status=https://www.courtlistener.com/opinion/3274122/mitchell-shaw-v-the-fed-land-bk-of-st-louis/

https://www.courtlistener.com/person/3766/ed-f-mcfaddin/



appellants (1) claimed their judgment liens to be superior to the mortgage liens of the Federal Land Bank; and (2) challenged the right of the Federal Land Bank to accelerate its indebtedness andmortgage liens in causes Nos. 1658 and 1659, since in causes Nos. 1052 and 1053 acceleration had been first claimed and then waived. From an adverse decree, the appellants have appealed to thiscourt in appeal No. 7125.

While the causes, Nos. 1658 and 1659, were pending in the chancery court, appellants, Mitchell and Shaw, on October 20, 1941, filed in each of the original causes Nos. 1052 and 1053 a motion for ordernunc pro tunc, seeking to have the February 21, 1938, order of dismissal (set out above) show that no testimony was heard and no agreement was made before the court, and seeking to show that theorder was merely a voluntary nonsuit. From a refusal of the court to enter the requested nunc pro tunc order, appellants have appealed to this court in appeal No. 7124. The two appeals are consolidatedin this court.

Opinion

I. The One-Year Nonsuit Statute. Appellants invoke the one-year nonsuit statute, which is 8947 of Pope's Digest, pointing out that the orders of dismissal in the first foreclosure suits were made inFebruary, 1938, and that the second foreclosure suits were not filed until December, 1939 (22 months later). But this contention of appellants is without merit. Mr. Justice Frauenthal, speaking for the court,in Love v. Cahn, 93 Ark. 215,124 S.W. 259, said: "But the statute (Kirby's Digest, 5083) which tolls the statute of limitation for one year where the plaintiff suffers a nonsuit does not narrow the period oflimitation in which an action may be brought upon a claim which is not otherwise barred by the general statute of limitation applicable to such claim. This provision of the statute only applies to thosecauses of action which, under the general statute of limitation applicable to such cause of action, would otherwise be barred before the running of one year from the time of taking such nonsuit. Thestatute, instead of shortening *Page 258 the period of limitation, really extends the period provided by the general statute of limitation applicable to the cause of action." To the same effect see Dressler v.Carpenter, 107 Ark. 353, 155 S.W. 108; K.C.S. Ry. Co. v. Akin, 138 Ark. 10, 210 S.W. 350; and annotation in 83 A.L.R. 486.

II. The Five-Year Statute of Limitation. Appellants claim that the mortgages were barred by the five-year statute of limitation when the 1939 suits were filed; but since the testimony of the treasurer of theFederal Land Bank shows that the defaults in payments occurred in June, 1939, and since the recorded mortgages show payments to be due semi-annually in June and December of each year to 1963, itis certainly clear that payments were made within five years of the filing of the suits in December, 1939, and, therefore, there is no merit to a plea of limitations under 8933 of Pope's Digest.

III. The Marginal Indorsement Statute. Appellants urge the five-year statute of limitations because of appellees' failure to make marginal indorsements under 9436 and 9465 of Pope's Digest, appellants'reasoning being that: (1) in the suits filed in 1931 appellee accelerated the maturity of the mortgages; (2) this acceleration was for all purposes; (3) the lis pendens notices in the 1931 suits stated that themortgages were accelerated; (4) the lis pendens was notice of the maturity of all of the indebtedness in 1931; (5) there were no payments noted on the margin of the records where the mortgages wererecorded; (6) five years after 1931 the mortgages became barred as to third persons; and (7) appellants are such third persons under 9465 of Pope's Digest.

This is a very skillfully constructed argument, but there are several vices in the structure of this argument. For instance, the mortgages, as recorded, stated the maturities were due semi-annually to andincluding 1963, so each mortgage showed on its face that it was not past due, and thus marginal notations of payments would not be required to keep alive a mortgage which was not past due by itsterms. Another answer to appellants' argument — and thoroughly decisive — is that appellants have *Page 259 changed the entire purpose of a lis pendens notice from a shield of protection to a sword ofattack. The notice of lis pendens is for the purpose of preserving rights pending the litigation. In the third and fourth steps of then argument, the appellants have changed lis pendens into a signal for thebeginning of limitations. Appellants, Mitchell and Shaw, purchased their judgments in 1933; and the First National Bank of Paris had secured its judgment in 1932. Both of these events were during thependency of the first foreclosure suits, which were commenced in 1931 and dismissed by stipulation in 1938; and there was a lis pendens notice duly recorded for each case in full compliance with 8959 ofPope's Digest. In Cherry v. Dickerson, 128 Ark. 572, 194 S.W. 690, Chief Justice McCULLOCH, speaking for this court, said: "The statute of this state on the subject of lis pendens notice is but declaratoryof the common law, restricted to written notice of the pendency of the action which must be filed with the recorder of deeds."

The rule of lis pendens applies not only to purchasers pending the suit (see Bailey v. Ford, 132 Ark. 203,200 S.W. 797), but also to a creditor obtaining a judgment during the pendency of the suit (see 38C.J. 61); and the rule is clearly stated in 38 C.J. 4, as follows: "One who acquires from a party an interest in property which is at that time involved in a litigation in a court having jurisdiction of the subject-matter and of the person the one from whom the interest is acquired, takes subject to the rights of the parties to the litigation, as finally determined by the judgment or decree, and is as conclusively boundby the results of the litigation as if he had been a party thereto from the outset." The final determinations of the 1931 foreclosure suits were the orders of dismissal of 1938, wherein the mortgages werereinstated "in full force and effect as though no suit had been filed." This order was binding on appellants under the lis pendens rule, and this fact defeats the marginal indorsement argument of limitationswhich the appellants have advanced.

IV. The Nunc Pro Tunc Proceedings. To overcome the argument that they were bound by the terms of the *Page 260 1938 order of dismissal, appellants, Mitchell and Shaw, sought to have a nunc protunc entered in the original causes, Nos. 1052 and 1053, so as to show only a simple voluntary nonsuit rather than a consent to reinstatement. This motion for order nunc pro tunc came before the courtwith the same judge presiding as when the orders of dismissal were made in 1938; and the fact that, under these circumstances, the court, at the hearing in 1941, refused to grant the motion for ordernunc pro tunc is highly persuasive that the original orders of dismissal spoke the truth. Certainly the chancery court felt that the testimony, as offered by appellants in support of their motion, did not fulfillthe requirements stated by this court in Turnbow v. Baird, 143 Ark. 543, 220 S.W. 826, where it was stated: "In the case of Midyett v. Kerby,129 Ark. 301, 195 S.W. 674, we said: `Courts should be cautiousin rendering nunc pro tunc orders and decrees. The power may be exercised upon parol testimony alone, but the evidence should be clear, decisive and unequivocal. It should be of sufficient characterand weight to overcome the written memorial. Bobo v. State, 40 Ark. 224; Liddell v. Bodenheimer, 78 Ark. 364, 95 S.W. 475, 115 Am. St. Rep. 42; Murphy v. Citizens Bank, 84 Ark. 100,104 S.W. 187;Sloan v. Williams, 118 Ark. 593, 177 S.W. 427.'"

At all events, the making or refusing of the order rested in the sound discretion of the lower court. Richardson v. State, 169 Ark. 167 (/opinion/3272955/richardson-v-state/), 273 S.W. 367(/opinion/3272955/richardson-v-state/); Ward v. Magness, 75 Ark. 12, 86 S.W. 822; 30 Am.Jur. 868; and on appeal, we will not reverse the action of the lower court in refusing to make the order nunc protunc unless there was either a clear abuse of discretion, or no substantial legal evidence to support the ruling of the lower court. In Freeman on Judgments (5th Ed.), 136, it is stated: "In considering thesufficiency of the evidence to sustain an order directing or refusing to direct a nunc pro tunc entry, an appellate court will follow the usual rule governing review of questions of fact and will not disturb theruling below if it is sustained by any substantial evidence." *Page 261

So we leave undisturbed the refusal of the lower court to make the order nunc pro tunc; and thus the order of dismissal of February 21, 1938, remains unimpaired.

V. The First Acceleration. As an additional argument for the application of 9465 of Pope's Digest, appellants contend that when the Federal Land Bank exercised its option to accelerate the mortgages in1931, such acceleration matured the indebtedness and mortgages for all purposes, and limitations commenced at that time. This statement is true; but this right to accelerate rested in the option of themortgagee and it could and did waive the acceleration by its own act, since there was no prejudice to the mortgagor or change of position by the mortgagor based on such acceleration. We havefrequently considered the nature and effect of acceleration clauses and the waiver of acceleration. Some of such cases decided by this court are: Farnsworth v. Hoover,66 Ark. 367, 50 S.W. 865;McCormick v. Daggett,162 Ark. 16, 257 S.W. 358; Johnson v. Guaranty Bank Trust Company, 177 Ark. 770 (/opinion/3265330/johnson-v-guaranty-bank-trust-company/), 9 S.W.2d 3(/opinion/3265330/johnson-v-guaranty-bank-trust-company/); Helena Wholesale Grocery Company v. Moore, 194 Ark. 855 (/opinion/3265185/helena-wholesale-gro-co-v-moore/),109 S.W.2d 958(/opinion/3265185/helena-wholesale-gro-co-v-moore/); Hodges v. Dilatush, 199 Ark. 967 (/opinion/3266661/hodges-v-dilatush/), 136 S.W.2d 1018 (/opinion/3266661/hodges-v-dilatush/); Willett v. Kelley,203 Ark. 350 (/opinion/3269807/willett-v-kelley/), 157 S.W.2d 34 (/opinion/3269807/willett-v-kelley/); (and for other cases, see West's Arkansas Digest, "Mortgages," 401). In Johnson v. Guaranty BankTrust Company, supra, this court declared that an acceleration clause "is not treated as a forfeiture clause, but rather as a stipulation for a period of credit on condition." Therefore, not being a penaltyclause, the acceleration clause is to be construed as any other provision in the instruments involved.

Acceleration clauses are of two kinds: (1) optional; and (2) automatic. As stated in a very illuminating article in the University of Pennsylvania Law Review of 1939 (Vol. 88, p. 94): "The first is the electivetype, and provides that the whole of the principal sum shall become due at the option of the mortgagee, upon some specified default, such as a failure to pay an installment of interest or principal, or upona delinquency of taxes, assessments or insurance premiums . . . The second *Page 262 type of acceleration clause is similar in every way except that it stipulates that the whole debt shall become dueimmediately upon default. It is `automatic' in its operation, in that it purports to mature the entire debt ipso facto, without requiring any election." In Hodges v. Dilatush, supra, there was involved anautomatic acceleration clause; and we held that, in such a case, limitations commenced immediately on default. In the case at bar, the acceleration, clause is clearly of the optional type; so the rule inHodges v. Dilatush has no application here. In Johnson v. Guaranty Bank Trust Company and in Helena Wholesale Grocery Company v. Moore, the acceleration clause involved in each case was of theoptional type. So, what was said in those cases applies to the case at bar. In Johnson v. Guaranty Bank Trust Company, Chief Justice HART, speaking for this court, said: "The stipulation for acceleratingthe time of payment of the whole debt may be waived by the mortgagee, especially when it is made to depend upon his option." In Helena Wholesale Grocery Company v. Moore, the creditor had declaredthe entire series of notes due, and then accepted a payment from the debtor, and this court, speaking by Mr. Justice MEHAFFY, said: "This had the effect of canceling the declaration that all of them weredue." And again: "The appellant had the right to exercise its option and declare all the notes due, but it had the same right, of course, to cancel that declaration, and it did so in this letter. When thisdeclaration exercising its option was canceled, and the appellant told Moore that he would be given a reasonable time on the other notes, the notes would not then be due, as there were no other actionsdeclaring them all due on the dates mentioned in the notes."

The effect of our holding in the above cases is that when the acceleration clause is of the optional type, then the creditor has the privilege of declaring the acceleration and likewise of waiving theacceleration. The right to accelerate the indebtedness is exercised by the unilateral act of the creditor; and likewise, the right to waive the acceleration may be exercised by the unilateral act of the creditor,in the absence of any claim or showing *Page 263 that the debtor has changed position because of the acceleration. In the case at bar, there is no allegation or showing that any of the parties changedposition by reason of the acceleration being declared in 1931; and in the absence of any such showing, the Federal Land Bank had the right, by its unilateral act, to waive its acceleration and restore allthe terms of the mortgages as originally executed. The 1938 order dismissing the first set of foreclosures stated that there was an agreement between the plaintiff and defendants; and the refusal of thecourt to change that order has been previously discussed. But even in the, absence of any such agreement, still the Federal Land Bank had the right to waive its acceleration and reinstate its mortgages

https://www.courtlistener.com/opinion/3272955/richardson-v-state/

https://www.courtlistener.com/opinion/3272955/richardson-v-state/

https://www.courtlistener.com/opinion/3265330/johnson-v-guaranty-bank-trust-company/

https://www.courtlistener.com/opinion/3265330/johnson-v-guaranty-bank-trust-company/

https://www.courtlistener.com/opinion/3265185/helena-wholesale-gro-co-v-moore/

https://www.courtlistener.com/opinion/3265185/helena-wholesale-gro-co-v-moore/

https://www.courtlistener.com/opinion/3266661/hodges-v-dilatush/

https://www.courtlistener.com/opinion/3266661/hodges-v-dilatush/

https://www.courtlistener.com/opinion/3269807/willett-v-kelley/

https://www.courtlistener.com/opinion/3269807/willett-v-kelley/



by its own unilateral act in the absence of any showing of prejudice to the rights of the parties; and no showing of prejudice is offered in the cases at bar. The text books and cases from other jurisdictionssupport our conclusion. In Wiltsie on Mortgage Foreclosure (5th Ed.), 56, in discussing the waiver of acceleration, the following appears: "The mortgagee can, of course, voluntarily waive his election orright to elect to foreclose for the entire indebtedness upon default in payment of an installment of principal or interest. . . . And a subsequent default is not affected by a waiver of a previous default."

In Jones on Mortgages (8th Ed.), 1513, in discussing the right to waive an acceleration clause in a mortgage,. the rule is stated: "The mortgagee may waive such option at any time, even after taking stepsto exercise it."

In the case of Van Vlissingen v. Lenz, 171 Ill. 162,49 N.E. 422, the Supreme Court of Illinois, in deciding on the right of the mortgagee to waive acceleration theretofore declared, said: "Nor can it be saidthat, having elected to declare the entire sum due and payable on account of any default, he may not, upon such default having been removed, or for any other reason satisfactory to himself, waive hiselection, and permit the contract of indebtedness to continue under its original terms."

And the Supreme Court of California, in the case of California Savings Loan Society v. Culver, *Page 264 127 Cal. 107 (/opinion/3301932/california-sav-etc-soc-v-culver/), 59 P. 292(/opinion/3301932/california-sav-etc-soc-v-culver/), had before it a case where the plea of limitations was offered just as in the case at bar; and in allowing the mortgagee to waive the election and restorethe mortgage, the court said: "And the declaration of plaintiff's election by bringing the first action did not put it out of his power to waive the penalty, which he did by accepting the interest and dismissingthe action."

The Illinois case and the California case are both so well considered that citation of further authorities is unnecessary. We, therefore, hold that the Federal Land Bank in the case at bar could and did waiveits previously declared acceleration and reinstate its mortgages according to their original terms when the first foreclosure suits were dismissed in 1938; and that these acts could be done without requiringany consent or contract from the appellee or the mortgagee.

VI. The Second Acceleration. Finally, appellants contend that since the Federal Land Bank exercised its right of acceleration in 1931, and then waived the acceleration, the right of acceleration could notbe exercised again thereafter; and that in the 1939 foreclosure, the Federal Land Bank could not foreclose for the entire debt, but only for the matured installments. There is a tendency on the part ofcourts of equity to relieve mortgagors from the hardships of acceleration of maturities. An annotation on this point may be found in 70 A.L.R. 993. But in the case at bar no facts or circumstances aresuggested which would indicate the right of a court of equity to grant any such relief. The fact remains that the Federal Land Bank, in 1938, waived its acceleration and reinstated the mortgages for allpurposes. The mortgages being thus reinstated for all purposes, and with all of the provisions in full force and effect, it necessarily follows that the mortgagee would have the right on a subsequent defaultto avail itself of the right of acceleration.

Finding no error, the decrees of the chancery court are in all things affirmed. *Page 265

Newsletter

Sign up to receive the Free Law Project newsletter with tips and announcements.

Email Address

Subscribe

https://www.courtlistener.com/opinion/3301932/california-sav-etc-soc-v-culver/

https://www.courtlistener.com/opinion/3301932/california-sav-etc-soc-v-culver/

[Cite as U.S. Bank Natl. Assn. v. Gullotta, 120 Ohio St.3d 399, 2008-Ohio-6268.]

U.S. BANK NATIONAL ASSOCIATION, TRUSTEE, APPELLEE, v. GULLOTTA,

APPELLANT, ET AL.

[Cite as U.S. Bank Natl. Assn. v. Gullotta,

120 Ohio St.3d 399, 2008-Ohio-6268.]

Civ.R. 41(A)(1) — “Two-dismissal rule” — Adjudication on the merits — Res

judicata — Foreclosure actions.

(No. 2007-1144 – Submitted March 12, 2008 – Decided December 10, 2008.)

CERTIFIED by the Court of Appeals for Stark County,

No. 2006CA00145, 2007-Ohio-2085.

__________________

PFEIFER, J.

{¶ 1} The court below certified to us this question: “Whether or not each

missed payment under a promissory note and mortgage yields a new claim such

that any successive actions on the same note and mortgage involve different

claims and are thus exempt from the ‘two-dismissal rule’ contained in Civ. R.

41(A)(1).” In this case, under these facts, we answer the question in the negative.

Factual and Procedural Background

{¶ 2} This matter arises from the third foreclosure action filed by

plaintiff-appellee U.S. Bank National Association against defendant-appellant

Giuseppe Gullotta. All three foreclosure actions filed against Gullotta by U.S.

Bank relate to the same note and mortgage. Gullotta argues that since U.S. Bank

dismissed the first two actions pursuant to Civ.R. 41(A)(1)(a), the second

dismissal constituted an adjudication upon the merits of U.S. Bank’s claim, and

res judicata therefore barred the third action. Given the facts of this particular

case, we agree.

SUPREME COURT OF OHIO

2

{¶ 3} In June 2003, Gullotta executed an adjustable rate note and a

mortgage in the amount of $164,900 with MILA, Inc., which subsequently

assigned the note to U.S. Bank. On April 9, 2004, U.S. Bank filed a complaint for

money judgment, foreclosure, and relief, declared the entire debt due, and prayed

for judgment in foreclosure in the entire amount of the principal due on the note,

$164,390.91, plus interest at the rate of 7.35 percent per year from November 1,

2003. On June 8, 2004, U.S. Bank voluntarily dismissed that complaint pursuant

to Civ.R. 41(A).

{¶ 4} On September 9, 2004, U.S. Bank filed a second complaint for

money judgment, foreclosure, and relief. Again, the bank alleged a default under

the note and mortgage, declared the entire debt due, and prayed for judgment in

foreclosure in the amount of the principal due on the note, $164,390.91, plus

interest at the rate of 7.35 percent per year from December 1, 2003. On March

15, 2005, U.S. Bank dismissed that complaint pursuant to Civ.R. 41(A). That

second dismissal was filed by a different lawyer from the one who previously had

filed the two earlier complaints and the first dismissal.

{¶ 5} On October 26, 2005, U.S. Bank filed another complaint for

money judgment, foreclosure, and relief. Again, the bank alleged a default under

the note and mortgage, declared the entire debt due, and prayed for judgment in

foreclosure in the amount of the principal due on the note, $164,390.91, plus

interest at the rate of 7.35 percent per year from November 1, 2003.

{¶ 6} On January 4, 2006, Gullotta filed a motion to dismiss the third

action pursuant to Civ.R. 12(B)(6), arguing that pursuant to Civ.R. 41(A), the

bank’s second dismissal constituted an adjudication on the merits, rendering the

third complaint barred by res judicata. On February 6, 2006, U.S. Bank filed a

response to Gullotta’s motion and also filed a motion for leave to file an amended

complaint. U.S. Bank wrote in its response:

January Term, 2008

3

{¶ 7} "Defendant in his Motion to Dismiss claims the subject matter of

the litigation is exactly the same as the first two cases that were filed in the Court

of Common Pleas, Stark County, Ohio. However, should the Court allow

Plaintiff to amend its Complaint, Defendant's Motion to Dismiss would become

moot. It is true that Plaintiff has brought these proceedings in this Court based

upon the default of the note and mortgage that were the subject of the previous

two case[s]. It is also true that the two previous actions were dismissed voluntarily

under [Civ.R.] 41(A). Nevertheless, the instant proceedings would represent a

new and different cause of action and, therefore, res judicata would not apply.”

{¶ 8} On February 10, 2006, the trial court converted Gullotta’s motion

to dismiss into a motion for summary judgment because the motion was “founded

on matters outside the pleadings.” The trial court also granted U.S. Bank’s

motion for leave to file an amended complaint. In its amended complaint, U.S.

Bank brought alternative claims. First, the bank sought judgment against Gullotta

in the amount of $164,390.91 plus interest at the rate of 7.35 percent per year

from December 1, 2003. In the alternative, the bank sought judgment against

Gullotta in the amount of $164,390.91 plus interest at the rate of 7.35 percent per

year from April 1, 2005. That April 1, 2005 date moved the start date for the

collection of interest on the overall debt to a time after U.S. Bank’s second

dismissal.

{¶ 9} The trial court relied on the alternate date raised by the bank in its

amended complaint in overruling Gullotta’s motion for summary judgment. The

court held:

{¶ 10} “The April 1, 2005 default date is after the second dismissal on

March 13, 2005 and, therefore, could not have been included in either of the first

two actions. Because the second dismissal is an adjudication on the merits,

Defendant was at that time no longer in default and the note would be decelerated.

However, Defendant's obligation to continue making payments would begin again


4

in April of 2005. The current action covers months not litigated in the first two

foreclosure actions and relates to a later delinquency in payments. Thus, because

the subsequent action is based upon a demand and cause of action, res judicata

does not apply.” (Footnote omitted.)

{¶ 11} On April 18, 2006, U.S. Bank filed a motion for summary

judgment, which the trial court granted on May 11, 2006. Gullotta appealed. The

Fifth District Court of Appeals affirmed the trial court, agreeing that res judicata

did not bar appellee's third foreclosure complaint because it covered dates of

default and months not litigated in the first two complaints.

{¶ 12} The appellate court noted its disagreement with the decision of

the Tenth District Court of Appeals in EMC Mtge. Corp. v. Jenkins, 164 Ohio

App.3d 240, 2005-Ohio-5799, 841 N.E.2d 855. In EMC, the court had held that

each missed payment under a promissory note and mortgage did not yield a new

claim that would obviate res judicata concerns upon an application of the two-

dismissal rule. Id. at ¶ 26. The court below instead held:

{¶ 13} “We find that each new missed payment on an installment note is

a new claim. Two Rule 41(A) dismissals of complaints, which allege the same

default dates, would not be an adjudication that the note (debt) is no longer in

existence because it has been paid. Rather, it would be an adjudication that the

obligor is no longer in default under the terms of the note as of the date alleged

and that the entire balance of the note is not due and payable immediately. The

balance would still be due per the installment payment arrangements in the note.”

U.S. Bank Natl. Assn. v. Gullotta, 5th Dist. No. 2006CA00145, 2007-Ohio-2085, ¶

34.

{¶ 14} Finally, the court below cited a policy reason behind its decision,

finding that imposing the two-dismissal rule to foreclosure actions might militate

against settlement negotiations between lenders and borrowers:

January Term, 2008

5

{¶ 15} “In addition, the application of Rule 41(A) per the EMC case

would discourage a lender, such as appellant, from working with a borrower, such

as appellee, when the borrower defaults on a mortgage. Frequently, after filing a

foreclosure action, a lender will work with the buyer so that the buyer can retain

his or her property. The lender will then dismiss the foreclosure action. A lender

would not be inclined to do so if a dismissal precluded a bank from eventually

foreclosing on a borrower's property after a default. As a result, the number of

foreclosures would increase as would the number of individuals losing their

homes.” Id. at ¶ 35.

{¶ 16} Gullotta filed a motion to certify a conflict in the court of

appeals, asserting that the court’s decision directly conflicted with the Tenth

District’s decision in EMC. The Fifth District granted Gullotta’s motion,

certifying the following issue:

{¶ 17} “Whether or not each missed payment under a promissory note

and mortgage yields a new claim such that any successive actions on the same

note and mortgage involve different claims and are thus exempt from the ‘two-

dismissal rule’ contained in Civ.R. 41(A)(1).”

Law and Analysis

{¶ 18} The question certified to us defies an answer that can apply to all

cases. In this case, we hold that each missed payment under the promissory note

and mortgage did not give rise to a new claim and that Civ.R. 41(A)’s two-

dismissal rule does apply. Thus, res judicata barred U.S. Bank’s third complaint.

{¶ 19} This case is this case. The significant facts here are that the

underlying note and mortgage never changed, that upon the initial default, the

bank accelerated the payments owed and demanded the same principal payment

that it demanded in every complaint, that Gullotta never made another payment

after the initial default, and that U.S. Bank never reinstated the loan.


6

{¶ 20} With those facts as our backdrop, we address the effect of the

bank’s two voluntary dismissals on its attempt to prosecute its claim against

Gullotta. Civ.R. 41(A) reads:

{¶ 21} “(1) * * * [A] plaintiff, without order of court, may dismiss all

claims asserted by that plaintiff against a defendant by * * *

{¶ 22} “(a) filing a notice of dismissal at any time before the

commencement of trial * * *.

{¶ 23} “Unless otherwise stated in the notice of dismissal or stipulation,

the dismissal is without prejudice, except that a notice of dismissal operates as an

adjudication upon the merits of any claim that the plaintiff has once dismissed in

any court.” (Emphasis added.)

{¶ 24} In Olynyk v. Scoles, 114 Ohio St.3d 56, 2007-Ohio-2878, 868

N.E.2d 254, ¶ 10, this court discussed the res judicata effect of two Civ.R. 41(A)

voluntary dismissals on a third complaint filed by the same plaintiff against the

same defendant:

{¶ 25} “It is well established that when a plaintiff files two unilateral

notices of dismissal under Civ.R. 41(A)(1)(a) regarding the same claim, the

second notice of dismissal functions as an adjudication of the merits of that claim,

regardless of any contrary language in the second notice stating that the dismissal

is meant to be without prejudice. * * * In that situation, the second dismissal is

with prejudice under the double-dismissal rule, and res judicata applies if the

plaintiff files a third complaint asserting the same cause of action. See 1970 Staff

Note to Civ.R. 41 (when a dismissal is with prejudice, ‘the dismissed action in

effect has been adjudicated upon the merits, and an action based on or including

the same claim may not be retried’).”

{¶ 26} Because the second dismissal here functioned as an adjudication

on the merits, res judicata would bar an action “based upon any claim arising out

of the transaction or occurrence that was the subject matter of the previous

January Term, 2008

7

action.” Grava v. Parkman Twp. (1995), 73 Ohio St.3d 379, 653 N.E.2d 226,

syllabus. Our question then is whether the claim in U.S. Bank’s amended

complaint arose out of the transaction or occurrence that was the subject matter of

the previously dismissed actions.

{¶ 27} For purposes of res judicata analysis, a “transaction” is defined

as a “ ‘common nucleus of operative facts.’ ” Grava, 73 Ohio St.3d at 382, 653

N.E.2d 226, quoting 1 Restatement of the Law 2d, Judgments (1982) 198-199,

Section 24, Comment b. That a plaintiff changes the relief sought does not rescue

the claim from being barred by res judicata: “ ‘The rule * * * applies to extinguish

a claim by the plaintiff against the defendant even though the plaintiff is prepared

in the second action * * * [t]o seek remedies * * * not demanded in the first

action.’ (Emphasis added.)” Grava, 73 Ohio St.3d at 383, 653 N.E.2d 226,

quoting 1 Restatement of the Law 2d, Judgments (1982) 209, Section 25.

{¶ 28} Do the claims here arise from a common nucleus of operative

facts? U.S. Bank argues that its third bite at the apple is different from its first

two because in its amended complaint, it sought interest only from April 1, 2005.

However, all of the claims in all of the complaints filed by U.S. Bank against

Gullotta arise from the same note, the same mortgage, and the same default. The

note and mortgage have not been amended in any way. From the time of

Gullotta’s original breach, he has owed the entire amount of the principal. The

amended third complaint alleged the same amount of principal due as the other

two complaints.

{¶ 29} The key here is that the whole note became due upon Gullotta’s

breach, not just the installment he missed. There is a distinction between an

action for recovery of installment payments under an installment note where the

entire principal is accelerated, and an action to recover for nonpayment under an

installment note where only the amount of the principal to date, and no future

amount, is sought. The general rule that each missed payment in an installment


8

loan gives rise to a separate cause of action does not hold true when there is an

acceleration clause in the loan agreement:

{¶ 30} “The general rule regarding loans repayable in installments is

that each default in payment may give rise to a separate cause of action. Humitsch

v. Collier (Dec. 29, 2000), Lake App. No. 99-L-099 [2001 WL 20733], at 3, citing

Eden Realty Co. v. Weather[-]Seal, Inc. (1957), 102 Ohio App. 219, 224, 142

N.E.2d 541. Further, a recovery for the monthly installments due at the time the

action is commenced will not bar recovery for installments that subsequently

come due. General Dev. Corp. v. Wilber [Wilbur-]Rogers Atlanta Corp. (1971),

28 Ohio App.2d 35, 37, 273 N.E.2d 908. Thus, a breach of an installment contract

by non-payment does not constitute a breach of the entire contract. The parties to

the note may avoid the operation of this rule by including an acceleration clause

in the agreement. Humitsch at 3, citing Buckeye Fed. S & L Assn. v. Olentangy

Motel (Aug. 22, 1991), Franklin App. No. 90-AP-1409 [1991 WL 224486]. An

acceleration clause ‘ * * * requires the maker, drawer or other obligor to pay part

or all of the balance sooner than the date or dates specified for payment upon the

occurrence of some event or circumstance described in the contract * * *[,]’ such

as a default by nonpayment. Black's Law Dictionary (7th Ed. Rev.1999) 12.”

Citizens Bank of Logan v. Marzano, 4th Dist. No. 04CA4, 2005-Ohio-163, 2005

WL 103165, ¶ 16.

{¶ 31} By agreeing to an acceleration clause, the parties in this case

have avoided the operation of the general rule that nonpayment on an installment

loan does not constitute a breach of the entire contract. In a contract with an

acceleration clause, a breach constitutes a breach of the entire contract. Once

Gullotta defaulted and U.S. Bank invoked the acceleration clause of the note, the

contract became indivisible. The obligations to pay each installment merged into

one obligation to pay the entire balance on the note.

January Term, 2008

9

{¶ 32} Despite the existence of the acceleration clause, the court below

held that each successive time that Gullotta failed to make a payment, a new

cause of action arose. We agree with the contrary position adopted by the court in

EMC. EMC is akin to this case. There, as here, the defendant missed the first

payment under the note and mortgage and continually remained in default. All

the complaints against the mortgagor in EMC “sought judgment for the entire

amount of the principal due under the note, with accrued interest, late charges,

advances for taxes and insurance, and costs.” EMC, 164 Ohio App.3d 240, 2005-

Ohio-5799, 841 N.E.2d 855, at ¶ 26. The mortgagor never “cured his default or

had his loan reinstated.” Id. The EMC court refused to adopt the proposition that

each missed payment under a promissory note and mortgage yields a new claim,

such that any successive actions on the same note and mortgage involve different

claims and are, thus, exempt from the two-dismissal rule. The court wrote that

“EMC’s position would render the Civ.R. 41(A)(1) two-dismissal rule

meaningless in the context of foreclosure actions because every successive

attempt to foreclose a mortgage could be construed as a new claim.” Id. at ¶ 23.

Nothing in Civ.R. 41(A) indicates that it should not apply to foreclosure actions.

{¶ 33} Civ.R. 41(A) would not apply to bar a third claim if the third

claim were different from the dismissed claims. As the court in EMC pointed out,

there are examples from Ohio courts where successive foreclosure actions were

indeed considered to be different claims. In those cases, however, the underlying

agreement had significantly changed or the mortgage had been reinstated

following the earlier default. In Aames Capital Corp. v. Wells (Apr. 3, 2002),

Summit App. No. 20703, 2002 WL 500320, the mortgagor argued that res

judicata barred a second foreclosure action on the same note and mortgage. In the

first foreclosure action, the trial court had ruled against the mortgagee and

required it to reinstate the note and mortgage. The mortgagee filed its second

foreclosure action when the mortgagor failed to make payments on the reinstated


10

note. The court in Aames held, “As the bases for the two complaints were

different, the present action is not barred by res judicata.” Aames at *5.

{¶ 34} In Midfed Sav. Bank v. Martin (July 13, 1992), Butler App. No.

CA91-12-202, 1992 WL 165143, the court held that res judicata did not prevent

the mortgagee from bringing a second foreclosure action on the same note

because the entry in the first foreclosure action stated that the mortgagee’s claim

related only to the delinquency that had arisen up to the date of judgment. The

mortgagor had paid the amount of the original delinquency and became current on

the note, leading to a dismissal with prejudice of the first foreclosure action.

Midfed Sav. Bank at * 1, 3. Thus, the court found that the second delinquency

was distinct from the first.

{¶ 35} In Homecomings Fin. Network, Inc. v. Oliver, Hamilton App.

No. C-020625, 2003-Ohio-2668, the court found that a second foreclosure action

differed from the first because the claims involved different acts of default by the

mortgagors, as well as different rates of interest and different amounts of principal

owed. These distinctions thwarted the mortgagors’ res judicata argument.

{¶ 36} There are no such differences among U.S. Bank’s claims in this

case. Here, in an attempt to get around having its claim barred by res judicata,

U.S. Bank amended its third complaint to include a prayer for interest from April

1, 2005. That amendment was merely a change to the complaint, not a change in

the common nucleus of operative facts supporting the claim. The complaint still

arose from Gullotta’s original default, when the entire principal became due.

Gullotta did not make a single payment after the debt was first declared due, the

parties changed none of the terms of the note, and U.S. Bank asked for the same

amount of principal in each of its complaints.

{¶ 37} Although U.S. Bank’s complaint changed, the operative facts

remained the same. Plaintiffs cannot save their claims from the two-dismissal

rule simply by changing the relief sought in their complaint. Allowing U.S. Bank

January Term, 2008

11

to do so would be like allowing a plaintiff in a personal-injury case to save his

claim from the two-dismissal rule by amending his complaint to forgo a couple of

months of lost wages.

{¶ 38} The court below was concerned that an interpretation like the

court’s in EMC could lead to banks’ deciding not to negotiate with mortgagors to

assist them in becoming current on their mortgages. We agree that negotiations

between a mortgagee and mortgagor to prevent an ultimate foreclosure are

desirable for all the parties and for the state as a whole. Here, there is nothing in

the record to indicate that there were any fruitful negotiations between the parties.

Had there been any change as to the terms of the note or mortgage, had any

payments been credited, or had the loan been reinstated, then this case would

concern a different set of operative facts, and res judicata would not be in play.

Instead, 15 months passed between the date of the alleged default and U.S. Bank’s

second voluntary dismissal. In that period, nothing changed between the parties.

It remained within U.S. Bank’s control as to whether it should dismiss its second

complaint. It did dismiss the complaint a second time, and Civ.R. 41(A) operated

as it would against any other plaintiff.

{¶ 39} Accordingly, we reverse the judgment of the appellate court.

Judgment reversed

and cause remanded.

MOYER, C.J., and O’CONNOR, LANZINGER, and CUPP, JJ., concur.

LUNDBERG STRATTON and O'DONNELL, JJ., dissent.

__________________

O’DONNELL, J., dissenting.

{¶ 40} I respectfully dissent and would affirm the decision of the court

of appeals. In my view, the double-dismissal rule set forth in Civ.R. 41(A)(1)(a)

does not apply in this case because U.S. Bank presented a different cause of

action in its third complaint.


12

{¶ 41} U.S. Bank filed three actions to foreclose on Gullotta’s

mortgage. In its first and second actions, the bank sought to invoke the

acceleration clause to recover the full amount of the principal, $164,390.91 at

7.35 percent interest, alleging that Gullotta had defaulted as of November 1, 2003.

The bank voluntarily dismissed both actions pursuant to Civ.R. 41(A)(1)(a). In

the third action, however, the bank alleged that Gullotta was in default as of April

1, 2005, one payment period after it had dismissed the second foreclosure action.

Thus, the bank sought the full amount of principal and interest from that date, not

November 1, 2003.

{¶ 42} As the majority recognizes, “The general rule regarding loans

repayable in installments is that each default in payment may give rise to a

separate cause of action.” Citizens Bank of Logan v. Marzano, 4th Dist. No.

04CA4, 2005-Ohio-163, 2005 WL 103165, ¶ 16. “Further, a recovery for the

monthly installments due at the time the action is commenced will not bar

recovery for installments that subsequently come due. * * * Thus, a breach of an

installment contract by non-payment does not constitute a breach of the entire

contract.” Id. However, when the parties have included an acceleration clause in

the contract, the failure to pay one installment results in a breach of the entire

contract, with the entire balance becoming due. Id.

{¶ 43} In this case, Gullotta’s mortgage has an acceleration clause,

providing that upon his failure to make any monthly payment, the bank has a right

to demand from him “the full amount of Principal which has not been paid and all

the interest that [Gullotta] owe[s] on that amount.” Thus, when he defaulted in

November 2003, U.S. Bank accrued a cause of action that would have entitled it

to the entire amount of the loan, including interest. The bank, however, failed to

prosecute this cause of action for this default, twice dismissing its complaints

pursuant to Civ.R. 41(A)(1)(a).

January Term, 2008

13

{¶ 44} In Olynyk v. Scoles, 114 Ohio St.3d 56, 2007-Ohio-2878, 868

N.E.2d 254, ¶ 10, we explained that “when a plaintiff files two unilateral notices

of dismissal under Civ.R. 41(A)(1)(a) regarding the same claim, the second notice

of dismissal functions as an adjudication of the merits of that claim, * * *. In

that situation, the second dismissal is with prejudice under the double-dismissal

rule, and res judicata applies if the plaintiff files a third complaint asserting the

same cause of action.” (Emphasis added.)

{¶ 45} Accordingly, U.S. Bank’s voluntary dismissal of its second

complaint functioned as an adjudication on the merits of the cause of action based

on Gullotta’s default. In other words, the bank failed to prove, and can never

again prove, that Gullotta was in default as of November 1, 2003.

{¶ 46} U.S. Bank’s third complaint, however, asserted that Gullotta had

defaulted on the loan in April 2005, subsequent to the date that the bank

voluntarily dismissed its second complaint. The question, therefore, is whether

the third complaint presented a different cause of action.

{¶ 47} In concluding that it did not, the majority reasons that “[o]nce

Gullotta defaulted, and U.S. Bank invoked the acceleration clause of the note, the

contract became indivisible. The obligations to pay each installment merged into

one obligation to pay the entire balance on the note.” Moreover, it states, “The

[third] complaint still arose from Gullotta’s original default, when the entire

principal became due.” Thus, according to the majority, U.S. Bank’s third

complaint presented the same claim as the first two complaints because the bank

sought the full amount of principal under the acceleration clause, even though

Gullotta had already defaulted in November 2003.

{¶ 48} In my view, this conclusion rests on the assumption that “[f]rom

the time of Gullotta’s original breach, he has owed the entire amount of the

principal.” This “original breach,” which occurred in November 2003, was the

subject matter of U.S. Bank’s first two complaints. But pursuant to Olynyk, the


14

voluntary dismissal of the bank’s second complaint for this cause of action

functioned as an adjudication that Gullotta had not defaulted in November 2003.

In other words, there was no breach of contract at that time.

{¶ 49} For this reason, Gullotta’s mortgage payments were not

accelerated in November 2003. As stated in Marzano, “An acceleration clause ‘ *

* * requires the maker, drawer or other obligor to pay part or all of the balance

sooner than the date or dates specified for payment upon the occurrence of some

event or circumstance described in the contract * * *[,]’ such as a default by

nonpayment.” (Emphasis added.) 2005-Ohio-163, 2005 WL 103165, ¶ 16,

quoting Black’s Law Dictionary (7th Ed.1999) 12. Here, the double-dismissal of

this cause of action functioned as an adjudication on the merits, to the effect that

there was no default in November 2003. Consequently, the acceleration clause

was not triggered, and Gullotta had no obligation to make any more than his

regular monthly payments after U.S. Bank voluntarily dismissed its second

complaint in March 2005.

{¶ 50} But Gullotta did not make the next payment after the second

dismissal. As a result, the bank filed a third complaint, alleging that Gullotta had

defaulted in April 2005. Although the complaint also alleges a breach of contract,

the cause of action is based on a breach different from the one in the first two

actions. Res judicata and the double-dismissal rule do not apply here because the

claim does not “aris[e] out of the transaction or occurrence that was the subject

matter of the previous action.” Grava v. Parkman Twp. (1995), 73 Ohio St.3d

379, 653 N.E.2d 226, syllabus.

{¶ 51} The majority also reasons that the causes of action in the three

complaints are identical because U.S. Bank sought the same amount of principal

in all three actions. But the double-dismissal rule applies only to identical causes

of action, not to identical prayers for relief. See Olynyk, 114 Ohio St.3d 56, 2007-

Ohio-2878, 868 N.E.2d 254; Civ.R. 41(A)(1)(a). Moreover, a claimant may

January Term, 2008

15

demand any amount or type of relief for a cause of action, but this demand does

not mean the claimant is entitled to that relief. Thus, the fact that U.S. Bank

sought the same amount of principal in its third complaint as it did the first and

second complaints is irrelevant to the determination of whether the claim is barred

by the double-dismissal rule.

{¶ 52} Furthermore, the instant matter is distinguishable from EMC

Mtge. Corp. v. Jenkins, 164 Ohio App.3d 240, 2005-Ohio-5799, 841 N.E.2d 855,

in which the mortgagee filed three successive complaints, each of which alleged

the same date of default. And while the majority cites several other appellate

decisions, these cases are inapposite because they provide only other bases for not

applying the double-dismissal rule.

{¶ 53} I am persuaded, rather, by the decision of the Supreme Court of

Florida in Singleton v. Greymar Assocs. (Fla.2004), 882 So.2d 1004, which

addressed virtually the same issue we are confronted with here. In that case, the

mortgagee, Greymar Associates, filed a foreclosure action against the mortgagor,

Gwendolyn Singleton, based on her alleged failure to make payments from

September 1, 1999, to February 1, 2000. Greymar also sought acceleration of the

debt pursuant to the contract. The trial court, however, dismissed the action with

prejudice after Greymar failed to appear at a case-management conference.

Greymar then filed a second foreclosure action, but it changed the alleged date of

default to April 1, 2000. The trial court rejected Singleton’s defense that

dismissal of the first action with prejudice barred any successive claim, and the

appellate court affirmed.

{¶ 54} On further appeal, the Supreme Court of Florida also affirmed:

{¶ 55} “While it is true that a foreclosure action and an acceleration of

the balance due based upon the same default may bar a subsequent action on that

default, an acceleration and foreclosure predicated upon subsequent and different

defaults present a separate and distinct issue. * * * For example, a mortgagor may


16

prevail in a foreclosure action by demonstrating that she was not in default on the

payments alleged to be in default, or that the mortgagee had waived reliance on

the defaults. In those instances, the mortgagor and mortgagee are simply placed

back in the same contractual relationship with the same continuing obligations.

Hence, an adjudication denying acceleration and foreclosure under those

circumstances should not bar a subsequent action a year later if the mortgagor

ignores her obligations on the mortgage and a valid default can be proven.” Id. at

1007.

{¶ 56} The court further stated that “[i]f res judicata prevented a

mortgagee from acting on a subsequent default even after an earlier claimed

default could not be established, the mortgagor would have no incentive to make

future timely payments on the note. The adjudication of the earlier default would

essentially insulate her from future foreclosure actions on the note – merely

because she prevailed in the first action. Clearly, justice would not be served if

the mortgagee was barred from challenging the subsequent default payment solely

because he failed to prove the earlier alleged default.” Id. at 1007-1008.

{¶ 57} Other courts have reached similar conclusions. See, e.g., Afolabi

v. Atlantic Mtge. & Invest. Corp. (Ind.App.2006), 849 N.E.2d 1170, 1175 (“res

judicata does not bar successive foreclosure claims * * *. Here, the subsequent

and separate alleged defaults under the note created a new and independent right

in the mortgagee to accelerate payment on the note in a subsequent foreclosure

action”); Fairbank's Capital Corp. v. Milligan (C.A.3, 2007), 234 Fed.Appx. 21,

24 (a “stipulated dismissal with prejudice * * * cannot bar a subsequent mortgage

foreclosure action based on defaults occurring after dismissal of the first action *

* *. If we were to so hold, it would encourage a delinquent mortgagor to come to

a settlement with a mortgagee on a default in order to later insulate the mortgagor

from the consequences of a subsequent default. This is plainly nonsensical”).

January Term, 2008

17

{¶ 58} Under today’s holding, the voluntary dismissal of U.S. Bank’s

second action in effect results in an adjudication that Gullotta has no further

obligation to make payments toward the mortgage and that the bank will not be

able to foreclose. While this outcome favors the defaulting homeowner in this

case, the impact of the majority opinion will work against Ohio homeowners

because mortgagees will have little incentive to resolve defaults with distressed

mortgagors.

{¶ 59} For these reasons, I respectfully dissent.

LUNDBERG STRATTON, J., concurs in the foregoing opinion.

__________________

Shapiro & Felty, L.L.P., and John A. Polinko, for appellee U.S. Bank

National Association.

McKinzie & Associates, Timothy D. McKinzie, and Kerry G. MacKenzie,

for appellant.

______________________

12/17/2018 STADLER v. CHERRY HILL DE | 150 So.2d 468 (1963) | so2d4681484 | Leagle.com

https://www.leagle.com/decision/1963618150so2d4681484 1/3

Home / Browse Decisions / So.2d / 150 So.2d / 150 So.2d 468 (1963)

Email | Print | Comments (0)

STADLER v. CHERRY HILL DEVELOPERS, INC.Nos. 3406, 3412.

View Case Cited Cases Citing Case

150 So.2d 468 (1963)

Albert STADLER et al., Appellants, v. CHERRY HILL DEVELOPERS, INC., et al., Appellees.

District Court of Appeal of Florida. Second District.

February 15, 1963.

Rehearing Denied March 11, 1963.

Attorney(s) appearing for the Case

Thomas H. Anderson, of Anderson & Nadeau, Miami, for appellants.

William S. Turnbull, Orlando, for appellees.

ALLEN, Judge.

This cause arises on interlocutory appeal and appeal from an order granting defendant-appellees' motion for summary judgment. It might be noted atthe outset that the order granting the motion for summary judgment is not a �nal decree and that only the interlocutory appeal is proper. Cruden v.State Bank of Apopka, Fla.App. 1962, 136 So.2d 357; Elliott v. Lazar, Fla. App. 1958, 104 So.2d 618.

Plainti�-appellants are holders of a �rst (construction) mortgage. Defendant-appellees are the fee owners, the holders of a subordinated or second(purchase money) mortgage, and various persons having or claiming an interest in the property.

In September of 1960, plainti�-appellants instituted suit to foreclose and elected to accelerate the entire indebtedness because of a default in aninterest payment due May 20, 1960. A decree pro confesso was entered against defendant-appellee fee holders but the other defendants answered.Defendant-appellees Lenzen, holders of the subordinated mortgage, answered denying, inter alia, the allegations of the complaint as to ownership ofthe mortgage, the existence of the indebtedness and the existence of any default. In a�rmative defense they contested the validity of the subordinationagreement and contended that their mortgage was superior. The Lenzen answer also contained a counterclaim which they later moved to dismiss.Plainti�s answered the counterclaim and the cause became at issue on April 26, 1961. It appears that plainti�s served notice of �nal hearing in July, butdid not move the court for an order �xing the time in which testimony would be taken or setting the cause for trial as prescribed by former Rule 3.13,Florida Rules of Civil Procedure, 31 F.S.A., in e�ect at the time.

In August of 1961, the period for the taking of testimony as prescribed in the aforementioned rule having expired, defendants Lenzen moved for a �naldecree on bill and answer. In the same month, the court granted the motion and, �nding that the answer was responsive and denied all materialallegations of the complaint, entered a �nal decree dismissing the complaint with prejudice. No appeal was taken from this decree.

We note in passing that the attorneys representing the appellants on appeal did not represent the plainti�s in the original action.

In October of 1961, plainti�s again �led suit for foreclosure. Their complaint was essentially identical to that in the �rst suit except a default of paymentdue in August, 1960, rather than the May default was alleged. Defendants Lenzen answered. Their answer was essentially identical to that in the �rstsuit except an additional defense, res judicata, was alleged. Speci�cally,

[150 So.2d 470]

they answered that, with the exception of an omitted party defendant and a di�erent alleged default, the second action was identical to the �rst; that theelection to accelerate in the �rst suit made all subsequent payments part of that suit; that the decree in the �rst suit was an adjudication on the meritsand that res judicata barred the second action. The Lenzens then �led a motion for summary judgment based on the defense of res judicata, whichmotion was granted and is here appealed.

Essentially two questions are presented: Did the election in the �rst complaint to accelerate the balance upon an initial default render a decree in the

https://www.leagle.com/

https://www.leagle.com/decisions

https://www.leagle.com/decisions/browse/series/So.2d

https://www.leagle.com/decisions/browse/series/volume/150%20So.2d

https://www.leagle.com/decision/citedcases/1963618150so2d4681484

https://www.leagle.com/decision/citingcases/1963618150so2d4681484

https://www.leagle.com/cite/136%20So.2d%20357





Essentially, two questions are presented: Did the election, in the �rst complaint to accelerate the balance upon an initial default render a decree in the�rst suit res judicata as to an action for a second default, and, was the �nal decree on bill and answer a decree on the merits and res judicata as to thesecond action? Since resolution of the second question is essential to consideration of the �rst, the e�ectiveness of the decree in the �rst suit as anadjudication on the merits will be explored �rst.

Appellants contend that the decree pursuant to hearing on bill and answer when the time for taking testimony has expired is not res judicata and urgestwo distinct arguments in support of this contention. They argue that the basis for the decision is ambiguous, possibly resting on matters in abatement,and therefore not an adjudication on the merits and further, that the decree was predicated on non-compliance with a rule of court and should not beres judicata.

In asserting that the decree was predicated on non-compliance with a rule of court and that it was entered upon a technicality, appellants misconceivethe function of the hearing and decree on bill and answer when the time for taking testimony has expired. The decree was not, as appellants urge,similar to a dismissal for failure to prosecute. Rather, it was a decree on the pleadings when and after appellants had waived the right to o�er proof. Itwas, under current practice and at the time of its entry, a summary decree authorized by Rule 1.36(b), Florida Rules of Civil Procedure, 30 F.S.A.

While no case holding the type of proceeding and decree in question to be one contemplated by Rule 1.36(b) has been found, an examination of theorigin and history of the proceeding impels this conclusion. The practice of entering, upon defendants' motion, a decree on the pleadings when the timefor taking testimony had expired was formalized in Rule 85, Rules for Government of Circuit Courts in Equity Cases, and was distinct from the procedurefor a decree on the pleadings upon plainti�s' motion contemplated in Laws of 1931, c. 14658, § 40 and later in Equity Rule 40(h). See Chatham Inv. Co. v.Sunshine Investments, Inc., Fla. 1929, 98 Fla. 783, 124 So. 374; Miami Bridge Co. v. Miami Beach Ry. Co., Fla. 1943, 152 Fla. 458, 12 So.2d 438; Stoltenbergv. Hughes, Fla. 1944, 154 Fla. 519, 18 So.2d 475.

The procedure outlined in former Rule 85 had no exact counterpart in the 1949 Equity Rules, but logically must have been subsumed in either Rule 33(c)of those Rules, now Rule 1.11(c), Florida Rules of Civil Procedure, or in Rule 40(b) of the 1949 Equity Rules, now Rule 1.36(b), Florida Rules of CivilProcedure. This uncertainty was resolved when, in Starlight Corp. v. City of Miami Beach, Fla. 1952, 57 So.2d 6, the court categorized the decree enteredon defendant's motion as being authorized by Equity Rule 40. However, in Reinhard v. Bliss, Fla. 1956, 85 So.2d 131, the Court categorized a similarproceeding as being authorized by Rule 1.11(c), Florida Rules of Civil Procedure, the successor to Equity Rule 33(c). This apparent con�ict is resolved,however, by the language of the Court in the Reinhard case:

A test * * * heard wholly on the pleading under our rule 1.11(c), * * * is the same as a motion * * for a summary judgment * * * under * * * Staterule 1.36(b). (85 So.2d 132.)

[150 So.2d 471]

The decision in that case having turned on the su�ciency of the complaint, the characterization was entirely proper. See City of Miami v. Miami TransitCo., Fla.App. 1957, 96 So.2d 799. Nevertheless, the earlier decision in the Starlight case, supra, coupled with the decision in Strong v. Clay, Fla. 1951, 54So.2d 193, indicate that a decree on bill and answer after the time for taking testimony has expired is a summary decree under Rule 1.36(b) and that thehearing and decree are "on the merits" and res judicata. Nystrom v. Nystrom, Fla. App. 1958, 105 So.2d 605; Needle v. A.F. Kisinger & Associates, Inc.,Fla.App. 1960, 118 So.2d 35. See Da Costa v. Dibble, Fla. 1898, 40 Fla. 418, 423, 24 So. 911, 913.

Appellants' second argument relative to the validity of the decree on bill and answer as res judicata is based on alleged ambiguity in the decree.Speci�cally, appellants contend that the decree could have rested on the denial of default and a �nding that the action was premature, and not havereached the merits. Appellants further contend that when a decision could turn on matters not reaching the merits or on the merits, a presumption thatthe former was the basis of decision exists and that a party invoking res judicata as a bar must show that the decree relied upon did, in fact, adjudicatethe merits of the cause. An examination of the authority relied upon by appellants reveals that these doctrines concerning the certainty of adjudicationand the burden of proof have been invoked or announced for the most part in cases involving estoppel by judgment, although occasionally applied incases involving res judicata. See 50 C.J.S. Judgments, §§ 627, 717 (1947); 30A Am. Jur., Judgments, §§ 347, 348 (1958).

In Florida, however, the distinction between res judicata and estoppel by judgment is more closely observed. See Youngblood v. Taylor, Fla. 1956, 89So.2d 503; 19 Fla. Jur., Judgments and Decrees, §§ 105-106 (1958), and the principles relied upon by appellants have had application only in casesinvolving estoppel by judgment. See 19 Fla.Jur., Judgments and Decrees, §§ 143, 145 and 174 (1958).

Insofar as res judicata is involved, the �nal decree in the prior suit is conclusive as to all matters which were or could have been raised in the prior suit.Matthews v. Matthews, Fla.App. 1961, 133 So.2d 91; See 19 Fla.Jur., Judgments and Decrees, § 120 (1958). Accordingly, the decree in the �rst foreclosureproceeding, from which no appeal was taken, would generally conclude all of the issues presented in that suit. The decree of dismissal was entered"with prejudice." If appellants felt this to have been error, they could have availed themselves of proceedings to amend or appeal. Failing to do this, theywill generally not be allowed to question that decree or to relitigate issues concluded by it.

However, there is a recognized exception to the strict application of the doctrine of res judicata which, while not detracting from the soundness of thedoctrine, permits the courts to mitigate its severity in certain factual situations and thus serve the ends of justice. Wallace v. Luxmoore, Fla. 1945, 156Fla. 725, 24 So.2d 302; Universal Const. Co. v. City of Fort Lauderdale, Fla. 1953, 68 So.2d 366.

In the latter case the Supreme Court recognized that when the fact of an adjudication on the salient issue was doubtful, when the party against whomthe bar of res judicata was invoked was possibly misled in their understanding of such adjudication and when strict application of the doctrine wouldresult in unjust enrichment to the party invoking the doctrine, res judicata should not be applied. Recognizing that this exception to the application ofres judicata should and must itself be strictly limited in application if the doctrine is to serve the meritorious end for which it was formulated, it seemsessential that justi�cation for the exception must at least equal that in the Universal Construction Company case.

[150 So.2d 472]

Both the elements of potential unjust enrichment and possible misunderstanding of the adjudication are present in the instant case. If res judicata isapplied plainti�-appellants will lose all rights under a $25,000 mortgage; a loss occasioned by failure to comply with a rule that has since beenrepealed. The adjudication could quite properly have been limited to the issue of a default, the issue essential to the cause of action. See Meredith v.Long, Fla. 1928, 96 Fla. 719, 119 So. 114. Similarly, appellants may have misconceived the decree as one occasioned by the absence of an essentialallegation — and thus not res judicata. See Kautzmann v. James, Fla. 1953, 66 So.2d 36, 19 Fla.Jur., Judgments and Decrees, § 148. Accordingly,misunderstanding of the adjudication as the reason for the absence of direct attack is possible













Copyright © 2017, Leagle, Inc. Disclaimer | Terms of Use | Privacy Statement | About Us | Contact Us

1000 Characters Remaining

misunderstanding of the adjudication as the reason for the absence of direct attack is possible.

There remains the element of doubt as to adjudication of the salient issue. This "doubt" is not the doubt or misunderstanding of the parties, but a realdoubt existent even when the decree is properly understood and its scope and e�ect de�ned. When the pleadings and decree are examined in light of thescope and e�ect of the decree hereinabove set out, no doubt can exist as to the adjudication of salient issues. Speci�cally, the complaint's allegations ofindebtedness, execution of the mortgage and ownership of the mortgage were denied in the answer. On decree on bill and answer when the time fortaking testimony has expired, the responsive denials are assumed true. The decree thus concluded the essential issues in defendant-appellees' favor.There being no doubt as to this e�ect and the adjudication thereupon, res judicata must be applied.

The foregoing discussion of the applicability of res judicata has assumed that the second suit was on the same cause of action. If, in fact, the second suitis on a di�erent cause of action, res judicata is per se inapplicable. See 19 Fla.Jur., Judgments and Decrees, § 111, and cases cited therein.

Appellees' argument, going to the issue of identity of the causes of action, is that the original complaint elected to accelerate the entire balance andaccrued interest, that as a consequence, the entire amount due was at issue, that the decree concluded the issue for defendant-appellees and that thesecond complaint is for the balance due and interest which was sought in the �rst complaint and is the same cause of action. Appellants argue thatresolution of the question of acceleration was dependent on an exercise of discretion, that the decree does not indicate this exercise, that theacceleration was dependent on a �nding of a default, that such a �nding was and could not have been made and that by reason of both of these negativesthe issue of acceleration was not adjudicated and the second cause is distinct from the �rst.

Both parties seem to emphasize the question of an adjudication on the issue of acceleration, although in fact this is insigni�cant. The essential questionis whether the election to accelerate put the entire balance, including future installments at issue. If it was at issue then the second action seeks thesame relief under the same contract and is predicated on a failure to comply with the same requirement. There can be no doubt that the acceleratedbalance was at issue and that the prayer of the complaint sought, not one interest installment, but the entire amount due. Accordingly, it seems clearthat the actions are identical.

While it is axiomatic that a suit for one installment payment does not preclude suit for a later installment on a divisible contract, the scant authorityfound seems unanimous in the view that an election to accelerate puts all future installment payments in issue and forecloses successive suits.Tiedeman Mortgage & Finance Co. v. Carlson, Ga. App. 1930, 41 Ga.App. 406, 152 S.E. 909; Kearney v. Fenerty, La. 1936, 185 La. 862, 171 So. 57; Jones v.Morris Plan Bank of Portsmouth, Va. 1937, 168 Va. 284, 191 S.E. 608. The one case remotely on

[150 So.2d 473]

point cited by appellant, Hoefer v. Fortmann, 1935, 219 Iowa 746, 259 N.W. 494, can at most be construed as holding that an acceleration clause is notself-executing and that such a clause will be construed to the advantage of the party for whose bene�t it exists. In the instant case, there is a clearelection to rely upon the acceleration clause and no area of doubt as to the construction of the clause.

The cause of action in both suits being identical, the doctrine of res judicata is, as the learned chancellor held, applicable.

Case No. 3406, being a �nal appeal, is dismissed. The interlocutory appeal, Case No. 3412, is a�rmed.

KANNER, Acting C.J., and WHITE, J., concur.

Comment

Your Name

Your Email

Comments

Submit

Leagle.com reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

https://www.leagle.com/disclaimer

https://www.leagle.com/terms-of-use

https://www.leagle.com/privacy

https://www.leagle.com/about-us

https://www.leagle.com/contact-us

12/17/2018 SINGLETON v. GREYMAR ASSOCIATES | FindLaw

https://caselaw.findlaw.com/fl-supreme-court/1468595.html 1/3

FindLaw Caselaw Florida FL Supreme Ct. SINGLETON v. GREYMAR ASSOCIATES

ResetAAFont size:Print

SINGLETON v. GREYMAR ASSOCIATES

Supreme Court of Florida.

Gwendolyn SINGLETON, et vir., Petitioners, v. GREYMAR ASSOCIATES,Respondent.

No. SC03-936.

Decided: September 15, 2004

William Chennault of Chennault Attorneys and Counsellors at Law, Fort Lauderdale, FL, for Petitioner. MarkEvans Kass, Miami, FL, for Respondent.We have for review Singleton v. Greymar Associates, 840 So.2d 356 (Fla. 4th DCA 2003), which expressly anddirectly conflicts with the decision in Stadler v. Cherry Hill Developers, Inc., 150 So.2d 468 (Fla. 2d DCA 1963). We have jurisdiction. See art. V, § 3(b)(3), Fla. Const. For the reasons set out below we approve thedecision in Singleton and hold that a dismissal with prejudice in a mortgage foreclosure action does notnecessarily bar a subsequent foreclosure action on the same mortgage.

PROCEEDINGS TO DATE

Greymar Associates brought two consecutive foreclosure actions against Gwendolyn Singleton alleging defaulton a mortgage and note between the parties. Singleton v. Greymar Assocs., 840 So.2d 356, 356 (Fla. 4th DCA2003). The first action was predicated on an alleged default that the mortgagors had failed to make paymentsdue from September 1, 1999 to February 1, 2000. Id. After the mortgagee, Greymar, failed to appear at a casemanagement conference, the circuit court dismissed the foreclosure action with prejudice.1 Id. Subsequently,a second foreclosure action was brought alleging a default that the mortgagors had failed to make paymentsfrom April 1, 2000, onward. Id. The circuit court eventually entered a summary final judgment of foreclosurefor the mortgagee in the second suit, rejecting the defense that the prior dismissal barred relief in the secondaction. Id.

On appeal, the Fourth District affirmed the circuit court's decision, finding that “[e]ven though an earlierforeclosure action filed by appellee was dismissed with prejudice, the application of res judicata does not barthis lawsuit․ The second action involved a new and different breach.” Id. To support its decision, the FourthDistrict quoted its holding in a similar previous case, which stated: “ ‘[A] final adjudication in a foreclosureaction that also prays for a deficiency judgment on the underlying debt may, but does not necessarily, bar asubsequent action on the debt.’ ” Id. (quoting Capital Bank v. Needle, 596 So.2d 1134, 1138 (Fla. 4th DCA1992)). Singleton petitioned this Court for jurisdiction, citing express and direct conflict between the FourthDistrict's decision and the Second District's decision in Stadler v. Cherry Hill Developers, Inc., 150 So.2d 468(Fla. 2d DCA 1963).

Stadler also involved two successive foreclosure actions. Id. at 469. In the first action, the circuit courtdismissed the complaint with prejudice upon the defendants' motion because the plaintiffs did not taketestimony within the time period provided by the Rules of Civil Procedure. Id. Thereafter, the plaintiffs filed asecond action alleging that the mortgagor had again defaulted on the note. Id. at 469-70. (“Their complaintwas essentially identical to that in the first suit except a default of payment due in August, 1960, rather thanthe May default was alleged.”). The Second District reversed a judgment of foreclosure and held that resjudicata prohibited the bringing of the second action. Id. at 472-73. The Second District discussed the factthat the existence of the acceleration clause was key to their analysis:

View More

FindLaw Career Center

Select a Job Title

Search Jobs Post a Job | Careers Home

AttorneyCorporate CounselAcademicJudicial ClerkSummer AssociateInternLaw Librarian

Not a Legal Professional? Visit our consumer site

Search FindLawCASES & CODES PRACTICE MANAGEMENT JOBS & CAREERS NEWSLETTERS BLOGS LAW TECHNOLOGY

Forms Lawyer Marketing Corporate Counsel Law Students JusticeMail Reference

https://lp.findlaw.com/

https://caselaw.findlaw.com/

https://caselaw.findlaw.com/courts/Florida

https://caselaw.findlaw.com/court/fl-supreme-court

javascript:window.print()

https://careers.findlaw.com/

https://www.indeed.com/hire?indpubnum=791244634154558



https://www.findlaw.com/


https://practice.findlaw.com/


https://newsletters.findlaw.com/

https://legalblogs.findlaw.com/

https://technology.findlaw.com/

https://forms.lp.findlaw.com/

https://www.lawyermarketing.com/

https://corporate.findlaw.com/

https://lawstudents.findlaw.com/

http://www.justice.com/

https://reference.findlaw.com/



The essential question is whether the election to accelerate put the entire balance, including futureinstallments at issue. If it was at issue then the second action seeks the same relief under the same contractand is predicated on a failure to comply with the same requirement. There can be no doubt that theaccelerated balance was at issue and that the prayer of the complaint sought, not one interest installment, butthe entire amount due. Accordingly, it seems clear that the actions are identical.

․

The cause of action in both suits being identical, the doctrine of res judicata is, as the learned chancellor held,applicable.

Id. at 472-73. We have accepted jurisdiction to review the conflict between the holdings in these cases.

RES JUDICATA IN FORECLOSURE CASES

The Fourth District has consistently taken the position that res judicata does not prevent mortgagees fromforeclosing on a mortgage in successive foreclosure cases when the alleged dates of default are different. SeeSingleton, 840 So.2d at 356; Capital Bank v. Needle, 596 So.2d at 1138; see also Olympia Mortgage Corp. v.Pugh, 774 So.2d 863, 867 (Fla. 4th DCA 2000) (“A comparison of the two foreclosure actions reveals that thefacts necessary to establish a default in the first foreclosure action differ from the facts necessary to establish adefault in the second foreclosure action.”); State Street Bank & Trust Co. v. Badra, 765 So.2d 251, 254 (Fla. 4thDCA 2000) (“The doctrine of res judicata has no applicability where there was no adjudication on the merits inthe first suit and where the relief in the second suit was not the same relief sought in the first suit.”).

In contrast, the Second District's holding in Stadler shows that it takes a stricter and more technical view ofmortgage acceleration elections. See 150 So.2d at 472 (“While it is axiomatic that a suit for one installmentpayment does not preclude suit for a later installment on a divisible contract, the scant authority found seemsunanimous in the view that an election to accelerate puts all future installment payments in issue andforecloses successive suits.”).

We agree with the position of the Fourth District that when a second and separate action for foreclosure issought for a default that involves a separate period of default from the one alleged in the first action, the case isnot necessarily barred by res judicata. See Capital Bank, 596 So.2d at 1138 (“[W]e do not believe that dismissalof the foreclosure action in this case barred the subsequent action on the balance due on the note.”). InCapital Bank, after reviewing the case law on the issue, the court concluded:

Our reading of the case law set out above leads us to conclude that a final adjudication in a foreclosure actionthat also prays for a deficiency judgment on the underlying debt may, but does not necessarily, bar asubsequent action on the debt. For instance, if the plaintiff in a foreclosure action goes to trial and loses onthe merits, we do not believe such plaintiff would be barred from filing a subsequent foreclosure action basedupon a subsequent default. The adjudication merely bars a second action relitigating the same allegeddefault. A dismissal with prejudice of the foreclosure action is tantamount to a judgment against themortgagee. That judgment means that the mortgagee is not entitled to foreclose the mortgage. Such a rulingmoots any prayer for a deficiency, since a necessary predicate for a deficiency is an adjudication of foreclosure. There was no separate count in the Capital Bank complaint seeking a separate recovery on the promissorynote alone.

Accordingly, we do not believe the dismissal of the foreclosure action in this case barred the subsequent actionon the balance due on the note.

Id. at 1134; see also Frumkes v. Mortgage Guarantee Corp., 173 So.2d 738, 740-41 (Fla. 3d DCA 1965) (“Denialof an application for deficiency decree for jurisdictional reasons as distinguished from equitable grounds is notres judicata so as to bar an action thereon at law.”)

While it is true that a foreclosure action and an acceleration of the balance due based upon the same defaultmay bar a subsequent action on that default, an acceleration and foreclosure predicated upon subsequent anddifferent defaults present a separate and distinct issue. See Olympia Mortgage Corp., 774 So.2d at 866 (“Wedisagree that the election to accelerate placed future installments at issue.”); see also Greene v. Boyette, 587So.2d 629, 630 (Fla. 1st DCA 1991) (holding that a mortgagee can successfully recover twice on one mortgagefor multiple periods of default because the payments were different “installments”). For example, amortgagor may prevail in a foreclosure action by demonstrating that she was not in default on the paymentsalleged to be in default, or that the mortgagee had waived reliance on the defaults. In those instances, themortgagor and mortgagee are simply placed back in the same contractual relationship with the samecontinuing obligations. Hence, an adjudication denying acceleration and foreclosure under thosecircumstances should not bar a subsequent action a year later if the mortgagor ignores her obligations on themortgage and a valid default can be proven.

This seeming variance from the traditional law of res judicata rests upon a recognition of the unique nature ofthe mortgage obligation and the continuing obligations of the parties in that relationship. For example, we



can envision many instances in which the application of the Stadler decision would result in unjust enrichmentor other inequitable results. If res judicata prevented a mortgagee from acting on a subsequent default evenafter an earlier claimed default could not be established, the mortgagor would have no incentive to make futuretimely payments on the note. The adjudication of the earlier default would essentially insulate her fromfuture foreclosure actions on the note-merely because she prevailed in the first action. Clearly, justice wouldnot be served if the mortgagee was barred from challenging the subsequent default payment solely because hefailed to prove the earlier alleged default.

We must also remember that foreclosure is an equitable remedy and there may be some tension between acourt's authority to adjudicate the equities and the legal doctrine of res judicata. The ends of justice requirethat the doctrine of res judicata not be applied so strictly so as to prevent mortgagees from being able tochallenge multiple defaults on a mortgage. See deCancino v. Eastern Airlines, Inc., 283 So.2d 97, 98(Fla.1973) (“[T]he doctrine [of res judicata] will not be invoked where it will work an injustice․”). We can findno valid basis for barring mortgagees from challenging subsequent defaults on a mortgage and note solelybecause they did not prevail in a previous attempted foreclosure based upon a separate alleged default.

CONCLUSION

We conclude that the doctrine of res judicata does not necessarily bar successive foreclosure suits, regardlessof whether or not the mortgagee sought to accelerate payments on the note in the first suit. In this case thesubsequent and separate alleged default created a new and independent right in the mortgagee to acceleratepayment on the note in a subsequent foreclosure action. Thus, we approve the Fourth District's decision inSingleton, and disapprove of the Second District's holding in Stadler.

It is so ordered.

FOOTNOTES

1. The petitioners' brief relates that the circuit court dismissed the first action due to the respondent's failureto appear at the case management conference. Additionally, the petitioners' brief states that both foreclosureactions sought to accelerate the entire indebtedness against the petitioners. The respondent does notchallenge these assertions.

PER CURIAM.

PARIENTE, C.J., and WELLS, ANSTEAD, LEWIS, QUINCE, CANTERO, and BELL, JJ., concur.

RESEARCH THE LAW

MANAGE YOUR PRACTICE

MANAGE YOUR CAREER

NEWS AND COMMENTARY

GET LEGAL FORMS

ABOUT US

FIND US ON

Cases & Codes / Opinion Summaries / Sample Business Contracts / Research An Attorney or Law Firm

Law Technology / Law Practice Management / Law Firm Marketing Services / Corporate Counsel Center

Legal Career Job Search / Online CLE / Law Student Resources

Law Commentary / Featured Documents / Newsletters / Blogs / RSS Feeds

Legal Forms for Your Practice

Company History / Media Relations / Contact Us / Privacy / Cookies / Advertising / Jobs

Copyright © 2018, Thomson Reuters. All rights reserved.

https://www.facebook.com/FindLawLegalProfessionals

https://twitter.com/findlawLP


https://caselaw.findlaw.com/summary.html

https://corporate.findlaw.com/contracts/

https://lawyers.findlaw.com/






https://westlegaledcenter.com/home/homepage.jsf?sc_cid=Findlawclecntrtab


https://supreme.findlaw.com/legal-commentary.html

https://blogs.findlaw.com/courtside/



https://www.findlaw.com/rss-index.html

https://www.uslegalforms.com/lpfindlaw/

https://company.findlaw.com/company-history/findlaw-corporate-information-press-company-background.html

https://company.findlaw.com/press-center/findlaw-corporate-information-press-media-relations.html

https://company.findlaw.com/contact-us/contacts.html

https://www.thomsonreuters.com/en/privacy-statement.html

https://company.findlaw.com/media-kit.html

https://company.findlaw.com/employment/employment.html

12/17/2018 OLYMPIA MORTGAGE CORP v. John Doe and Jane Doe as unknown tenants in possession, Appellees. | FindLaw

https://caselaw.findlaw.com/fl-district-court-of-appeal/1391404.html 1/3

FindLaw Caselaw Florida FL Dist. Ct. App.OLYMPIA MORTGAGE CORP v. John Doe and Jane Doe as unknown tenants in possession, Appellees.

ResetAAFont size:Print

OLYMPIA MORTGAGE CORP v. John Doe and Jane Doeas unknown tenants in possession, Appellees.

District Court of Appeal of Florida,Fourth District.

OLYMPIA MORTGAGE CORP., Appellant/Cross-Appellee, v. Theodore D. PUGHand Pamela A. Pugh, his wife, Appellees/Cross-Appellants, John Doe and Jane Doe

as unknown tenants in possession, Appellees.

No. 4D00-128.

Decided: December 27, 2000

Forrest G. McSurdy of Law Offices of David J. Stern, P.A., Plantation, for appellant/cross-appellee. Steven L.Perry of McCarthy, Summers, Bobko, Wood, Sawyer, & Perry, P.A., Stuart, for Appellees/Cross-Appellants-Theodore Pugh and Pamela A. Pugh, his wife.Olympia Mortgage Corporation (Olympia) filed a complaint for mortgage foreclosure against Theodore Pughand Pamela Pugh. The Pughs asserted as an affirmative defense that the cause of action was barred by FloridaRule of Civil Procedure 1.420(a), the two-dismissal rule. In its final judgment, the trial court applied the two-dismissal rule and held that Olympia forfeited certain amounts owing on the mortgage, but not the totalbalance of the mortgage. Olympia appeals and the Pughs cross-appeal.

Olympia filed two successive mortgage foreclosure actions against the Pughs in Martin County Circuit Court,which Olympia voluntarily dismissed. Both mortgage foreclosure actions were based on the same promissorynote and in each Olympia elected to accelerate payment of the entire amount due on the note and mortgage.

The first foreclosure action was filed on July 23, 1996, alleging a payment default date of April 1, 1995, and anunpaid principal of $124,050.97. The action was voluntarily dismissed on February 16, 1998. The courtrecord does not indicate why Olympia elected to voluntarily dismiss the action; however, on the date thatOlympia filed the action it had not yet been assigned the note and mortgage. Olympia was not assigned thenote and mortgage until August 7, 1996.

The second foreclosure action was filed on February 17, 1998, alleging a payment default date of May 1, 1995,and unpaid principal of $123,947.26. The case was voluntarily dismissed on May, 28, 1998, because Olympiafailed to comply with certain necessary technical requirements prior to institution of the foreclosure action. The Pughs did not reinstate the loan subject to either of the two foreclosure actions. However, in 1998,Olympia applied funds held in escrow and belonging to the Pughs to the payment due for April of 1995.

On October 13, 1998, Olympia filed the instant mortgage foreclosure action against the Pughs, alleging apayment default date of May 1, 1995 and unpaid principle of $123,947.26. The Pughs asserted as anaffirmative defense that the two dismissal rule precluded Olympia from obtaining a foreclosure judgment. Inthe course of the bench trial, the parties agreed that the two prior foreclosure actions had alleged failure to paythe April 1, 1995 payment and “all payments subsequent thereto.” 1

In its final judgment, the trial court found that Olympia applied monies held in escrow, belonging to the Pughs,to pay the amount owing for April of 1995, solely to create a new cause of action. The trial court further foundthat the instant foreclosure action presents the same claim as the two prior foreclosure actions, irrespective ofthe different default alleged herein. The trial court concluded that Olympia is entitled to foreclose themortgage because no payments have been made under the note and mortgage since April of 1995.

View More

FindLaw Career Center

Select a Job Title

Search Jobs Post a Job | Careers Home

AttorneyCorporate CounselAcademicJudicial ClerkSummer AssociateInternLaw Librarian

Not a Legal Professional? Visit our consumer site

Search FindLawCASES & CODES PRACTICE MANAGEMENT JOBS & CAREERS NEWSLETTERS BLOGS LAW TECHNOLOGY

Forms Lawyer Marketing Corporate Counsel Law Students JusticeMail Reference



https://caselaw.findlaw.com/courts/Florida

https://caselaw.findlaw.com/court/fl-district-court-of-appeal

javascript:window.print()


https://www.indeed.com/hire?indpubnum=791244634154558



https://www.findlaw.com/







https://forms.lp.findlaw.com/




http://www.justice.com/

https://reference.findlaw.com/



Nevertheless, the trial court held that Olympia forfeited all amounts owing under the promissory note andmortgage from March of 1995 through February of 1998, based on the two dismissal rule, Florida Rule of CivilProcedure 1.420(a).2 The trial court assumed, for purposes of relief, that the mortgage was current throughand including February of 1998. Furthermore, the trial court held that the Pughs defaulted under themortgage by failing to pay all amounts due under the mortgage since March 1, 1998. This included principal,interest, taxes, insurance and other charges allowable under the mortgage, amounting to $31,381.90. Additionally, if the Pughs failed to reinstate the mortgage by January 1, 2000, Olympia would be due$151,518.48 and entitled to foreclose on the mortgage.

Olympia argues on appeal that the “Two Dismissal Rule” does not apply in this case and that the trial courtshould have awarded it the entire balance due on the note and mortgage. We agree.

The two dismissal rule, Florida Rule of Civil Procedure 1.420(a), provides that “a notice of dismissal operatesas an adjudication on the merits when served by a plaintiff who has once dismissed in any court an actionbased on or including the same claim.” As used in the two dismissal rule, the word “action” denotes an “entirecontroversy,” whereas the word “claim” describes a “cause of action.” Crump v. Gold House Restaurants, Inc.,96 So.2d 215, 218 (Fla.1957). Therefore, the rule applies where there is an identity of the causes of action. Edmondson v. Green, 755 So.2d 701 (Fla. 4th DCA 1999) (citing Variety Children's Hosp. v. Mt. Sinai Hosp. ofGreater Miami, Inc., 448 So.2d 546, 547 (Fla. 3d DCA 1984)).

Whether there is an identity of the causes of action depends upon a comparison of the facts constituting theunderlying transaction. Id. If the facts necessary to the maintenance of the first suit are the same as in thesecond suit, and the judgment sought in each requires the same proof to justify it, then the third suit should bebarred by the rule. See Variety Children's Hosp. v. Mt. Sinai Hosp. of Greater Miami, Inc., 448 So.2d 546,548 (Fla. 3d DCA 1984).

The Pughs contend that there is identity of the causes of action. They argue that when Olympia elected toaccelerate payment on the note in the first and second foreclosure actions, it placed the entire balance of thenote at issue, thereby eliminating any factual distinctions between the two foreclosure actions.

We disagree that the election to accelerate placed future installments at issue. We note our decision inCapital Bank v. Needle, 596 So.2d 1134 (Fla. 4th DCA 1992), where we stated:

[A] final adjudication in a foreclosure action that also prays for a deficiency judgment on the underlying debtmay, but does not necessarily, bar a subsequent action on the debt. For instance, if the plaintiff in aforeclosure action goes to trial and loses on the merits, we do not believe such plaintiff would be barred fromfiling a subsequent foreclosure action based upon a subsequent default. The adjudication merely bars asecond action relitigating the same alleged default. A dismissal with prejudice of the foreclosure action istantamount to a judgment against the mortgagee. That judgment means that the mortgagee is not entitled toforeclose the mortgage. Such a ruling moots any prayer for a deficiency, since a necessary predicate for adeficiency is an adjudication of foreclosure.

Id. at 1138.

Applying the reasoning in Capital Bank to this case, if we treat Olympia's voluntary dismissal of the firstforeclosure action as an adjudication on the merits against Olympia, then the payment on the note andmortgage could not have been accelerated. Although Olympia sought to accelerate, had Olympia gonethrough with the suit and lost on the merits, then the court would have necessarily found that the Pughs hadnot defaulted on the payments due to date. If the Pughs had not defaulted, then Olympia would not beentitled to accelerate payment on the note and mortgage. By voluntarily dismissing the suit, Olympia in effectdecided not to accelerate payment on the note and mortgage at that time.

Accordingly, whether the mortgagor will make future installment payments is not at issue in a foreclosureaction. The issue is whether there has already been a default which if decided in favor of the mortgagee,would entitle the mortgagee to elect to accelerate and foreclose in accordance with the note and mortgage.

In this case, both the first and second foreclosure actions sought foreclosure and an acceleration of the balancedue on the note and mortgage. However, the facts at issue in each foreclosure action differed, because thepossible dates of default differed.

The parties stipulated that the first and second foreclosure actions alleged failure to pay the installment dueApril 1, 1995 and “all payments subsequent thereto.” Therefore, at issue in both actions was whether therewas a default on April 1, 1995, or at any time thereafter while the action was pending, thereby entitlingOlympia to accelerate payment on the note.

The first foreclosure action was dismissed on February 16, 1998. Therefore, at issue in that action waswhether the Pughs defaulted on the note and mortgage between April of 1995 and February of 1998. Thesecond foreclosure action was dismissed on May 28, 1998. Therefore, at issue in that action was whether thePughs defaulted on the note and mortgage between April of 1995 and May of 1998.



A comparison of the two foreclosure actions reveals that the facts necessary to establish a default in the firstforeclosure action differ from the facts necessary to establish a default in the second foreclosure action. Inboth foreclosure actions, a court would need to determine whether there are sufficient facts to establish adefault between the dates of April 1995 and February 1998. However, in the second foreclosure action, thecourt would also have had to determine whether there was a default between February 1998 and May 1998, aquestion which could not have been at issue in the first foreclosure action.

The consideration of additional facts and the evidence related to those facts in the second foreclosure action issufficient to prevent identity of the first and second causes of action. In the absence of identity of the first andsecond causes of action, the two dismissal rule does not apply in this case. See Edmondson v. Green, 755So.2d 701 (Fla. 4th DCA 1999).

The Pughs contend in their cross-appeal that the two dismissal rule, Florida Rule of Civil Procedure 1.420(a)bars any foreclosure actions on the note and accordingly they should not have to make any payments on thenote.

The Pughs misconstrue the application of the two dismissal rule. The two dismissal rule does not bar asubsequent suit. The two dismissal rule merely states that when the rule applies the dismissal of the secondsuit operates as an adjudication on the merits. Once there is an adjudication on the merits, it is the doctrineof res judicata which bars subsequent suits on the same cause of action. See State Street Bank and Trust Co.v. Badra, 765 So.2d 251 (Fla. 4th DCA 2000) (citing State of Wisconsin v. Martorella, 670 So.2d 1161, 1162 (Fla.4th DCA 1996)); Youngblood v. Taylor, 89 So.2d 503, 505 (Fla.1956).

Having found that the two dismissal rule does not apply, the dismissal of the second suit did not operate as anadjudication on the merits. Because there has not been a prior adjudication on the merits on the same causeof action, the instant foreclosure action is not barred by res judicata.

Therefore, the trial court erred when it found that the two dismissal rule applied in this case and held that as aresult Olympia forfeited certain amounts due and owing under the note and mortgage. Accordingly, wereverse and remand with instructions to enter judgment in favor of Olympia in accordance with this opinion.

Reversed and remanded.

FOOTNOTES

1. Although, as previously stated, the first foreclosure action alleged an initial default date of April 1, 1995and the second foreclosure action alleged an initial default date of May 1, 1995, the parties agreed that bothactions alleged April 1, 1995 as the initial date of default.

2. February of 1998 was when the first foreclosure action was dismissed and the second foreclosure actionwas filed.

HAZOURI, J.

WARNER, C.J., and DELL, J., concur.

RESEARCH THE LAW

MANAGE YOUR PRACTICE

MANAGE YOUR CAREER

NEWS AND COMMENTARY

GET LEGAL FORMS

ABOUT US

FIND US ON

Cases & Codes / Opinion Summaries / Sample Business Contracts / Research An Attorney or Law Firm

Law Technology / Law Practice Management / Law Firm Marketing Services / Corporate Counsel Center

Legal Career Job Search / Online CLE / Law Student Resources

Law Commentary / Featured Documents / Newsletters / Blogs / RSS Feeds

Legal Forms for Your Practice

Company History / Media Relations / Contact Us / Privacy / Cookies / Advertising / Jobs

Copyright © 2018, Thomson Reuters. All rights reserved.

https://www.facebook.com/FindLawLegalProfessionals

https://twitter.com/findlawLP


https://caselaw.findlaw.com/summary.html

https://corporate.findlaw.com/contracts/

https://lawyers.findlaw.com/






https://westlegaledcenter.com/home/homepage.jsf?sc_cid=Findlawclecntrtab


https://supreme.findlaw.com/legal-commentary.html

https://blogs.findlaw.com/courtside/



https://www.findlaw.com/rss-index.html

https://www.uslegalforms.com/lpfindlaw/

https://company.findlaw.com/company-history/findlaw-corporate-information-press-company-background.html

https://company.findlaw.com/press-center/findlaw-corporate-information-press-media-relations.html

https://company.findlaw.com/contact-us/contacts.html

https://www.thomsonreuters.com/en/privacy-statement.html

https://company.findlaw.com/media-kit.html

https://company.findlaw.com/employment/employment.html

Supreme Court of Florida ____________

No. SC14-1265

____________

LEWIS BROOKE BARTRAM, Petitioner,

vs.

U.S. BANK NATIONAL ASSOCIATION, etc., et al., Respondents.

____________

No. SC14-1266

____________

THE PLANTATION AT PONTE VEDRA, Petitioner,

vs.


____________

No. SC14-1305

____________

GIDEON M.G. GRATSIANI, Petitioner,

vs.


[November 3, 2016]

- 2 -

PARIENTE, J.

The issue before the Court involves the application of the five-year statute of

limitations to “[a]n action to foreclose a mortgage” pursuant to section 95.11(2)(c),

Florida Statutes (2012).1 The Fifth District Court of Appeal relied on this Court’s

reasoning in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004),

rejecting that the statute of limitations had expired. Because of the importance of

this issue to both lenders and borrowers, the Fifth District certified to this Court a

question of great public importance, which we have rephrased to acknowledge that

the note in this case is a standard residential mortgage, which included a

contractual right to reinstate:

DOES ACCELERATION OF PAYMENTS DUE UNDER A

RESIDENTIAL NOTE AND MORTGAGE WITH A

REINSTATEMENT PROVISION IN A FORECLOSURE ACTION

THAT WAS DISMISSED PURSUANT TO RULE 1.420(B),

FLORIDA RULES OF CIVIL PROCEDURE, TRIGGER

APPLICATION OF THE STATUTE OF LIMITATIONS TO

PREVENT A SUBSEQUENT FORECLOSURE ACTION BY THE

MORTGAGEE BASED ON PAYMENT DEFAULTS OCCURRING

SUBSEQUENT TO DISMISSAL OF THE FIRST FORECLOSURE

SUIT?

1. In addition to the briefs of the parties, we have also reviewed briefs

submitted on behalf of the parties by the following amici curiae: the U.S. Financial

Network, the Mortgage Bankers Association and the American Legal and Financial

Network on behalf of Respondent and Bradford and Cheri Langworthy and the

Titcktin Law Group, P.A., Baywinds Community Association, Upside Property

Investment, LLC, the Florida Alliance for Consumer Protection, the Community

Associations Institute, and the National Association of Consumer Advocates on

behalf of Bartram.

- 3 -

We have jurisdiction. See art. V, § 3(b)(4), Fla. Const.

In this case, it is uncontroverted that the borrower, Lewis Brooke Bartram,

also referred to as the mortgagor, stopped making payments on his $650,000

mortgage and note, both before and after the foreclosure action was brought and

subsequently dismissed. For the reasons set forth in this opinion, we answer the

rephrased certified question in the negative and hold, consistent with our reasoning

in Singleton, that the mortgagee, also referred to as the lender, was not precluded

by the statute of limitations from filing a subsequent foreclosure action based on

payment defaults occurring subsequent to the dismissal of the first foreclosure

action, as long as the alleged subsequent default occurred within five years of the

subsequent foreclosure action. When a mortgage foreclosure action is

involuntarily dismissed pursuant to Rule 1.420(b), either with or without prejudice,

the effect of the involuntary dismissal is revocation of the acceleration, which then

reinstates the mortgagor’s right to continue to make payments on the note and the

right of the mortgagee, to seek acceleration and foreclosure based on the

mortgagor’s subsequent defaults. Accordingly, the statute of limitations does not

continue to run on the amount due under the note and mortgage. 2

2. Our holding is consistent with the views of the excellent amici briefs

submitted by the Real Property Probate & Law Section of The Florida Bar, The

Business Law Section of The Florida Bar, and the Federal National Mortgage

Association and the Federal Home Loan Mortgage Corporation at the request of

the Third District in Deutsche Bank Trust Co. Americas v. Beauvais, 188 So. 3d

- 4 -

Absent a contrary provision in the residential note and mortgage, dismissal

of the foreclosure action against the mortgagor has the effect of returning the

parties to their pre-foreclosure complaint status, where the mortgage remains an

installment loan and the mortgagor has the right to continue to make installment

payments without being obligated to pay the entire amount due under the note and

mortgage. Accordingly, we approve the Fifth District’s opinion in U.S. Bank

National Association v. Bartram, 140 So. 3d 1007 (Fla. 5th DCA 2014), and

answer the rephrased certified question in the negative.

FACTS AND PROCEDURAL BACKGROUND

On November 14, 2002, Petitioners Lewis Bartram (“Bartram”) and his

then-wife Patricia Bartram3 (“Patricia”), purchased real property in St. Johns

County, Florida (the “Property”). Less than a year later, Patricia filed for

dissolution of the couple’s marriage, which was officially dissolved on November

5, 2004. Pursuant to a prenuptial agreement the Bartrams had previously executed,

the divorce court ordered Bartram to purchase Patricia’s interest in the Property.

938 (Fla. 3d DCA 2016). These amici briefs addressed the same issue presented

by the rephrased certified question and limited their discussion to the terms of the

standard form mortgage that is the subject of this case.

3. Gideon Gratsiani was substituted as a party by order of this Court after

Gratsiani purchased Patricia Bartram’s mortgage.

- 5 -

In order to comply with the divorce court’s order, on February 16, 2005,

Bartram obtained a $650,000 loan through Finance America, LLC, secured by a

mortgage on the Property in favor of Mortgage Electronic Registration Systems,

Inc., in its capacity as nominee for Finance America (the “Mortgage”). Finance

America subsequently assigned the Mortgage to Respondent, U.S. Bank National

Association (the “Bank”), as trustee and assignee. A day later, on February 17,

2005, Bartram executed a second mortgage (the “Second Mortgage”) to Patricia as

security for a second mortgage note of $120,000.

The Mortgage was a standard residential form mortgage and required the

lender to give the borrower notice of any default and an opportunity to cure before

the mortgagee could proceed against the secured property in a judicial foreclosure

action. Specifically, paragraph 22 of the Mortgage was an optional acceleration

clause and provided that the lender was required to give the borrower notice that

failure to cure the default “may result in acceleration of the sums secured” by the

mortgagee and foreclosure of the property:

Acceleration; Remedies. Lender shall give notice to Borrower prior

to acceleration following Borrower’s breach of any covenant or

agreement in this Security Instrument (but not prior to acceleration

under Section 18 unless Applicable Law provides otherwise). The

notice shall specify: (a) the default; (b) the action required to cure the

default; (c) a date, not less than 30 days from the date the notice is

given to Borrower, by which the default must be cured; and (d) that

failure to cure the default on or before the date specified in the notice

may result in acceleration of the sums secured by this Security

Instrument, foreclosure by judicial proceeding and sale of the

Property. The notice shall further inform Borrower of the right to

- 6 -

reinstate after acceleration and the right to assert in the foreclosure

proceeding the non-existence of a default or any other defense of

Borrower to acceleration and foreclosure. If the default is not cured

on or before the date specified in the notice, Lender at its option may

require immediate payment in full of all sums secured by this Security

Instrument without further demand and may foreclose this Security

Instrument by judicial proceeding. Lender shall be entitled to collect

all expenses incurred in pursuing the remedies provided in this

Section 22, including, but not limited to, reasonable attorneys’ fees

and costs of title evidence.

(Emphasis added).

In addition to providing optional acceleration and foreclosure as a remedy

for default, paragraph 19 of the Mortgage also granted the borrower a right to

reinstate the note and Mortgage after acceleration if certain conditions were met,

including paying the mortgagee all past defaults and other related expenses that

would be due “as if no acceleration had occurred”:

Borrower’s Right to Reinstate After Acceleration. If Borrower meets

certain conditions, Borrower shall have the right to have enforcement

of this Security Instrument discontinued at any time prior to the

earliest of: (a) five days before sale of the Property pursuant to any

power of sale contained in this Security Instrument; (b) such other

period as Applicable Law might specify for the termination of

Borrower’s right to reinstate; or (c) entry of a judgment enforcing this

Security Instrument. Those conditions are that Borrower: (a) pays

Lender all sums which then would be due under this Security

Instrument and the Note as if no acceleration had occurred; (b) cures

any default of any other covenants or agreements; (c) pays all

expenses incurred in enforcing this Security Instrument, including, but

not limited to, reasonable attorneys’ fees, property inspection and

valuation fees, and other fees incurred for the purpose of protecting

Lender’s interest in the Property and rights under this Security

Instrument; and (d) takes such action as Lender may reasonably

require to assure that Lender’s interest in the Property and rights

under this Security Instrument, and Borrower’s obligation to pay the

- 7 -

sums secured by this Security Instrument, shall continue unchanged.

Lender may require that Borrower pay such reinstatement and

expenses in one or more of the following forms, as selected by

Lender: (a) cash; (b) money order; (c) certified check, bank check,

treasurer’s check or cashier’s check, provided any such check is

drawn upon an institution whose deposits are insured by a federal

agency, instrumentality or entity; or (d) Electronic Funds Transfer.

Upon reinstatement by Borrower, this Security Instrument and

obligations secured hereby shall remain fully effective as if no

acceleration had occurred. However, this right to reinstate shall not

apply in the case of acceleration under Section 18.4

(Emphasis added). The designated maturity date of the note was March 1, 2035.

On January 1, 2006, Bartram stopped making payments on the Mortgage,

and never made payments on the Second Mortgage. Around the same time,

Bartram also stopped paying homeowners’ association assessments to the

Plantation at Ponte Vedra, Inc. (the “HOA”), the homeowners’ association of the

development where the Property was located. The HOA subsequently placed a

lien on the Property for nonpayment of the HOA assessments.

On May 16, 2006, the Bank filed a complaint to foreclose the Mortgage

based on Bartram’s failure to make payments due from January of that year to the

date of the complaint. The foreclosure complaint stated that all conditions

precedent to the acceleration of the Mortgage and to the foreclosure of the

Mortgage had been fulfilled or had occurred, and declared the full amount payable

4. Paragraph 18 concerned the transfer of the mortgaged property in a real

estate sale without the Lender’s “prior written consent,” and required “immediate

payment in full of of all sums secured by this Security Instrument” if breached.

- 8 -

under the note and Mortgage to be due. Nearly five years later, on May 5, 2011,

the foreclosure action was involuntarily dismissed after the Bank failed to appear

at a case management conference.5 The Bank did not appeal the dismissal.

Following the dismissal of the foreclosure action, Bartram filed a motion to

cancel the promissory note and release the lien on the mortgage. The trial court

denied the motion in an order dated August 29, 2011, citing to its lack of

jurisdiction in the matter since the May 5, 2011, involuntary dismissal under Rule

1.420(b) “was an adjudication on the merits and the case has been closed.”

Approximately a year later, after the dismissal of the foreclosure action and

almost six years after the Bank filed its foreclosure complaint, Bartram filed a

crossclaim against the Bank in a separate foreclosure action Patricia had brought

against Bartram, the Bank, and the HOA. Bartram’s crossclaim sought a

declaratory judgment to cancel the Mortgage and to quiet title to the Property,

asserting that the statute of limitations barred the Bank from bringing another

foreclosure action.6

5. The Record does not indicate what action occurred, if any, in the first

foreclosure action from the date the complaint was filed in 2006 until it was

dismissed in 2011.

6. On May 24, 2012, Bartram filed a motion for default against the Bank for

failure to respond to his crossclaim, but the trial court never ruled on this motion.

- 9 -

Bartram then moved for summary judgment on his crossclaim. The trial

court found no genuine issue as to any material fact, granted summary judgment,

quieted title in Bartram, found the Bank had no further ability to enforce its rights

under the note and Mortgage that were the subject matter of the Bank’s dismissed

foreclosure action, and cancelled the note and Mortgage. In doing so, the trial

court released the Bank’s lien on the Property. The Bank subsequently filed a

motion for rehearing, and after the trial court denied the Bank’s motion, appealed

to the Fifth District.

Before the Fifth District, the Bank relied on this Court’s decision in

Singleton for its position that the trial court’s dismissal “nullified [the Bank’s]

acceleration of future payments; accordingly, the cause of action on the accelerated

payments did not accrue and the statute of limitations did not begin to run on those

payments, at least until default occurred on each installment.” Bartram, 140 So. 3d

at 1009-10. The Bank acknowledged, however, that it could not seek to foreclose

the Mortgage based on Bartram’s defaults prior to the first foreclosure action, but

could seek foreclosure based on defaults occurring subsequent to the dismissal of

the first foreclosure action. Id. at 1009. Bartram contended on appeal, joined by

Patricia and the HOA, “that the cause of action for default of future installment

payments accrued upon acceleration, thus triggering the statute of limitations clock

to run, and because the Bank did not revoke its acceleration at any time after the

dismissal, the five-year statute of limitations period eventually expired, barring the

- 10 -

Bank from bringing another suit [to foreclose the Mortgage].” Id. at 1010

(citations omitted).

The Fifth District agreed with the Bank and held that if a “new and

independent right to accelerate” exists in a res judicata analysis under Singleton,

882 So. 2d at 1008, then “there is no reason it would not also exist vis-à-vis a

statute of limitations issue.” Id. at 1013. The Fifth District reasoned that a “new

and independent right to accelerate” would mean that each new default would

present new causes of action, regardless of whether the payment due dates had

been accelerated in the first foreclosure action. Id. at 1013-14. Based on

Singleton, the Fifth District explained, “a default occurring after a failed

foreclosure attempt creates a new cause of action for statute of limitations

purposes, even where acceleration had been triggered and the first case was

dismissed on its merits.” Id. at 1014. The Fifth District accordingly reversed the

trial court’s judgment, remanded the case to the trial court, and certified the

question of great public importance we now address.

ANALYSIS

The rephrased certified question involves a pure question of law. Therefore,

the standard of review is de novo. See Christensen v. Bowen, 140 So. 3d 498, 501

(Fla. 2014). In answering the rephrased certified question, we begin by reviewing

this Court’s decision in Singleton, which the Fifth District and most courts

throughout the state have held to be determinative of the rephrased certified

- 11 -

question. We then discuss the cases, both state and federal, that concern

successive mortgage foreclosure actions in a statute of limitations context decided

after Singleton. In doing so, we examine whether our analysis in Singleton, which

was decided on res judicata grounds, extends to the statute of limitations context

present in this case. We then discuss the significance to our analysis, if any, of the

involuntary dismissal of the foreclosure action pursuant to Rule 1.420(b) and the

effect of the Mortgage’s reinstatement provision. Based on this analysis, we

conclude by answering the rephrased certified question in the negative and

approving the Fifth District’s decision in Bartram.

I. Singleton v. Greymar Associates

In Singleton, a mortgagee brought two consecutive foreclosure actions

against a mortgagor. 882 So. 2d at 1005. The first foreclosure action was based on

the mortgagor’s failure to make mortgage payments from September 1999 to

February 2000 and “sought to accelerate the entire indebtedness against” the

mortgagor. Id. & n.1. The first foreclosure action was dismissed with prejudice by

the trial court after the mortgagee failed to appear at a case management

conference. Id. After this involuntary dismissal, the mortgagee filed a second

foreclosure action based on a separate default that occurred when the mortgagor

failed to make mortgage payments starting in April 2000. Id. at 1005. The

mortgagor contended that the dismissal of the first foreclosure action barred relief

- 12 -

in the second foreclosure action, but the trial court rejected this argument and

entered a summary final judgment of foreclosure for the mortgagee. Id.

The mortgagor appealed, and “the Fourth District affirmed the circuit court’s

decision, finding that ‘[e]ven though an earlier foreclosure action filed by appellee

was dismissed with prejudice, the application of res judicata does not bar this

lawsuit. The second action involved a new and different breach.’ ” Id. (citing

Singleton v. Greymar Assocs., 840 So. 2d 356, 356 (Fla. 4th DCA 2003)).

Singleton petitioned this Court for jurisdiction, citing an express and direct conflict

with Stadler v. Cherry Hill Developers, Inc., 150 So. 2d 468 (Fla. 2d DCA 1963).

Id.

Stadler also involved two successive foreclosure actions where the first

foreclosure action had been dismissed with prejudice. 150 So. 2d at 469. The

mortgagee brought a second foreclosure action that was identical except for

alleging a different period of default. That action was successful, and the

mortgagor appealed. The Second District reversed the judgment of foreclosure

entered on the basis of res judicata and concluded that the “election to accelerate

put the entire balance, including future installments at issue.” Id. at 472.

Therefore, even though different periods of default were asserted, the “entire

amount due” was the same and thus the “actions are identical.” Id. Accordingly,

the Second District concluded that res judicata barred the second foreclosure

action. Id. at 473.

- 13 -

After analyzing the position of the two appellate courts, this Court agreed

with the Fourth District that “when a second and separate action for foreclosure is

sought for a default that involves a separate period of default from the one alleged

in the first action, the case is not necessarily barred by res judicata.” Singleton,

882 So. 2d at 1006-07. In support, we cited with approval the Fourth District’s

reasoning in Capital Bank v. Needle, 596 So. 2d 1134 (Fla. 4th DCA 1992):

Our reading of the case law set out above leads us to conclude

that a final adjudication in a foreclosure action that also prays for a

deficiency judgment on the underlying debt may, but does not

necessarily, bar a subsequent action on the debt. For instance, if the

plaintiff in a foreclosure action goes to trial and loses on the merits,

we do not believe such plaintiff would be barred from filing a

subsequent foreclosure action based upon a subsequent default. The

adjudication merely bars a second action relitigating the same alleged

default. A dismissal with prejudice of the foreclosure action is

tantamount to a judgment against the mortgagee. That judgment

means that the mortgagee is not entitled to foreclose the mortgage.

Such a ruling moots any prayer for a deficiency, since a necessary

predicate for a deficiency is an adjudication of foreclosure. There was

no separate count in the Capital Bank complaint seeking a separate

recovery on the promissory note alone.

Accordingly, we do not believe the dismissal of the foreclosure

action in this case barred the subsequent action on the balance due on

the note.

Singleton, 882 So. 2d at 1007 (quoting Capital Bank, 596 So. 2d at 1138)

(emphasis added).

Our holding in Singleton was based on the conclusion that an “acceleration

and foreclosure predicated upon subsequent and different defaults present a

separate and distinct issue” than a foreclosure action and acceleration based on the

- 14 -

same default at issue in the first foreclosure action. Id. Indeed, we cited with

approval another decision of the Fourth District, Olympia Mortgage Corp. v. Pugh,

774 So. 2d 863, 866 (Fla. 4th DCA 2000), which held—contrary to the Second

District’s conclusion in Stadler—that an acceleration of debt in a mortgage

foreclosure action did not place future installments at issue. As we explained, the

unique nature of a mortgage compelled this result:

This seeming variance from the traditional law of res judicata rests

upon a recognition of the unique nature of the mortgage obligation

and the continuing obligations of the parties in that relationship. For

example, we can envision many instances in which the application of

the Stadler decision would result in unjust enrichment or other

inequitable results. If res judicata prevented a mortgagee from acting

on a subsequent default even after an earlier claimed default could not

be established, the mortgagor would have no incentive to make future

timely payments on the note. The adjudication of the earlier default

would essentially insulate her from future foreclosure actions on the

note—merely because she prevailed in the first action. Clearly,

justice would not be served if the mortgagee was barred from

challenging the subsequent default payment solely because he failed

to prove the earlier alleged default.

Singleton, 882 So. 2d at 1007-08 (emphasis added).

Our recognition in Singleton that each new default presented a separate

cause of action was based upon the acknowledgement that because foreclosure is

an equitable remedy, “[t]he ends of justice require that the doctrine of res judicata

not be applied so strictly so as to prevent mortgagees from being able to challenge

multiple defaults on a mortgage.” Id. at 1008. Thus, the failure of a mortgagee to

foreclose the mortgage based on an alleged default did not mean the mortgagor had

- 15 -

automatically and successfully defeated his or her obligation to make continuing

payments on the note.

II. Mortgage Foreclosure Cases Post-Singleton: Application to Statute of

Limitations Context

In cases concerning mortgage foreclosure actions, since our decision in

Singleton, both federal and state courts have applied our reasoning in Singleton in

the statute of limitations context and have concluded that because of “the unique

nature of the mortgage obligation and the continuing obligations of the parties in

that relationship,” an “adjudication denying acceleration and foreclosure” does not

bar subsequent foreclosure actions based on separate and distinct defaults. See id.

at 1007. As the Fourth District explained, under Singleton, a “new default, based

on a different act or date of default not alleged in the dismissed action, creates a

new cause of action.” Star Funding Sols., LLC v. Krondes, 101 So. 3d 403 (Fla.

4th DCA 2012). That is because, as the First District has also explained, this

Court’s “analysis in Singleton recognizes that a note securing a mortgage creates

liability for a total amount of principal and interest, and that the lender’s

acceptance of payments in installments does not eliminate the borrower’s ongoing

liability for the entire amount of the indebtedness.” Nationstar Mortg., LLC v.

Brown, 175 So. 3d 833, 834 (Fla. 1st DCA 2015).

Other district courts of appeal have similarly applied our reasoning in

Singleton to determine that the five-year statute of limitations did not bar a

- 16 -

subsequent foreclosure action when the mortgagee had brought an initial

foreclosure action that accelerated all sums due under the mortgage and note, on

that same mortgage outside the statute of limitations window. For instance, in

Deutsche Bank Trust Co. Americas v. Beauvais, 188 So. 3d 938, 947 (Fla. 3d DCA

2016), the Third District concluded that because the subject mortgage’s

reinstatement provision granted the mortgagor the right to avoid foreclosure by

paying only the past due defaults, that “despite acceleration of the balance due and

the filing of an action to foreclose, the installment nature of a loan secured by such

a mortgage continue[d] until a final judgment of foreclosure [was] entered and no

action [was] necessary to reinstate it via a notice of ‘deceleration’ or otherwise.”

With reasoning similar to Beauvais, in Evergrene Partners, Inc. v. Citibank,

N.A., 143 So. 3d 954, 955 (Fla. 4th DCA 2014), a mortgagor challenged, on statute

of limitations grounds, a second foreclosure action brought by the mortgagee when

the mortgagee had voluntarily dismissed a prior foreclosure action based on a

separate default. The Fourth District held that the mortgage was still enforceable

because “the statute of limitations ha[d] not run on all of the payments due

pursuant to the note,” specifically those payments missed after the initial alleged

default. Id. In reaching this conclusion, the Fourth District relied on Singleton,

and emphasized that “[w]hile a foreclosure action with an acceleration of the debt

may bar a subsequent foreclosure action based on the same event of default, it does

not bar subsequent actions and acceleration based upon different events of

- 17 -

default.” Id. Similarly, in PNC Bank, N.A. v. Neal, 147 So. 3d 32, 32 (Fla. 1st

DCA 2013), the First District held that an initial foreclosure action that sought

acceleration and was dismissed with prejudice did not bar the mortgagee from

“instituting a new foreclosure action based on a different act or a new date of

default not alleged in the dismissed action.”

Federal district courts in the state have also applied Singleton to dismiss

claims seeking cancellation of a mortgage and note that are premised on the

expiration of the statute of limitations after an initial foreclosure action that sought

acceleration was dismissed. In Dorta v. Wilmington Trust National Ass’n, No.

5:13-cv-185-Oc-10PRL, 2014 WL 1152917 (M.D. Fla. Mar. 24, 2014), the

mortgagor brought an action seeking cancellation of the mortgage based on the

expiration of the statute of limitations where the mortgagee previously accelerated

payments and brought a foreclosure action that was ultimately dismissed without

prejudice more than five years prior. Id. at *1-2. In dismissing the mortgagor’s

complaint, the federal district court held that even when the initial foreclosure

action is dismissed without prejudice, “where a mortgagee initiates a foreclosure

action and invokes its right of acceleration, if the mortgagee’s foreclosure action is

unsuccessful for whatever reason, the mortgagee still has the right to file later

foreclosure actions . . . so long as they are based on separate defaults.” Id. at *6.

Similarly, in Torres v. Countrywide Home Loans, Inc., No. 14-20759-CIV,

2014 WL 3742141, at *1 (S.D. Fla. July 29, 2014), the federal district court

- 18 -

dismissed a complaint that sought a declaration that the statute of limitations

barred foreclosing on a mortgage after a prior foreclosure action where the

mortgagee had sought acceleration of the note that had been dismissed. Relying on

Singleton, the court noted that “each payment default that is less than five years old

creates a basis for a subsequent foreclosure or acceleration action.” Id. at *4; see

also Romero v. SunTrust Mortg., Inc., 15 F. Supp. 3d 1279 (S.D. Fla. 2014)

(holding that the installment nature of the note remained in effect after dismissal of

a foreclosure action where the mortgagee had sought acceleration); Kaan v. Wells

Fargo Bank, N.A., 981 F. Supp. 2d 1271 (S.D. Fla. 2013) (same).

We agree with the reasoning of both our appellate courts and the federal

district courts that our analysis in Singleton equally applies to the statute of

limitations context present in this case. As the Fifth District concluded, “[i]f a

‘new and independent right to accelerate’ exists in a res judicata analysis, there is

no reason it would not also exist vis-à-vis a statute of limitations issue.” Bartram,

140 So. 3d at 1013. This conclusion follows from our prior reasoning that a

“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.” Singleton, 882 So. 2d at 1008. 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.

- 19 -

Consistent with the reasoning of Singleton, the statute of limitations on the

balance under the note and mortgage would not continue to run after an

involuntary dismissal, and thus the mortgagee would not be barred by the statute of

limitations from filing a successive foreclosure action premised on a “separate and

distinct” default. Rather, after the 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.

III. Significance of an Involuntary Dismissal and Reinstatement Provision

Having reaffirmed our prior holding in Singleton and the application of its

reasoning to a statute of limitations context, we finally consider whether the type

of dismissal of a foreclosure action has any bearing on our analysis and the effect

of the Mortgage’s reinstatement provision. In this case, the first foreclosure action

was dismissed pursuant to Florida Rule of Civil Procedure 1.420, which provides

for involuntary dismissals, and is the rule upon which the rephrased certified

question is premised. Involuntary dismissal of a legal action by a court under Rule

1.420(b) terminates a court’s jurisdiction over that action and may be with or

without prejudice. A dismissal under Rule 1.420(b) operates as an adjudication on

the merits as long as the dismissal was not for “lack of jurisdiction or for improper

venue or for lack of an indispensable party,” neither of which were a basis for the

trial court’s dismissal of the Bank’s foreclosure action in this case.

- 20 -

The Fifth District determined that the involuntary dismissal was with

prejudice but concluded that “the distinction is not material for purposes” of the

statute of limitations analysis. See Bartram, 140 So. 3d at 1013 n.1. We agree.

While a dismissal without prejudice would allow a mortgagee to bring another

foreclosure action premised on the same default as long as the action was brought

within five years of the default per section 95.11(2)(c), critical to our analysis is

whether the foreclosure action was premised on a default occurring subsequent to

the dismissal of the first foreclosure action. As the federal district court in Dorta

reasoned, “if the mortgagee’s foreclosure action is unsuccessful for whatever

reason, the mortgagee still has the right to file subsequent foreclosure actions—and

to seek acceleration of the entire debt—so long as they are based on separate

defaults.” 2014 WL 1152917 at *6 (emphasis added). Accord Espinoza v.

Countrywide Home Loans Servicing, L.P., No. 14-20756-CIV, 2014 WL 3845795,

at *4 (S.D. Fla. Aug. 5, 2014) (finding the issue of whether the initial foreclosure

action was dismissed with or without prejudice a distinction that was “irrelevant”

to its analysis of whether acceleration of a mortgage note barred a subsequent

foreclosure action brought outside the statute of limitations period).

Whether the dismissal of the initial foreclosure action by the court was with

or without prejudice may be relevant to the mortgagee’s ability to collect on past

defaults. However, it is entirely consistent with, and follows from, our reasoning

in Singleton that each subsequent default accruing after the dismissal of an earlier

- 21 -

foreclosure action creates a new cause of action, regardless of whether that

dismissal was entered with or without prejudice.

Our conclusion is buttressed by the reinstatement provision of the

Residential Mortgage that by its express terms granted the mortgagor, even after

acceleration, the continuing right to reinstate the Mortgage and note by paying only

the amounts past due as if no acceleration had occurred. Specifically, the

reinstatement provision in paragraph 19 of Bartram’s form residential mortgage

gave Bartram “the right to have enforcement of this Security Instrument

discontinued at any time prior to the earliest of . . . (c) entry of a judgment

enforcing this Security Instrument,” as long as Bartram “(a) pa[id] the Lender all

sums which then would be due under this Security Instrument and Note as if no

acceleration had occurred.”

Under the reinstatement provision of paragraph 19, then, even after the

optional acceleration provision was exercised through the filing of a foreclosure

action—as it was in this case—the mortgagor was not obligated to pay the

accelerated sums due under the note until final judgment was entered and needed

only to bring the loan current and meet other conditions—such as paying expenses

related to the enforcement of the security interest and meeting other requirements

established by the mortgagee-lender to ensure the mortgagee-lender’s interest in

the property would remain unchanged—to avoid foreclosure. “Stated another way,

despite acceleration of the balance due and the filing of an action to foreclosure,

- 22 -

the installment nature of a loan secured by such a mortgage continues until a final

judgment of foreclosure is entered and no action is necessary to reinstate it via a

notice of ‘deceleration’ or otherwise.” Beauvais, 188 So. 3d at 947. Or, as the

Real Property Law Section of the Florida Bar has explained, “[t]he lender’s right to

accelerate is subject to the borrower’s continuing right to cure.” Brief for The Real

Property Probate & Trust Law Section of the Florida Bar at 8, Beauvais, 188 So.

3d 938 (Fla. 3d DCA 2016), 2015 WL 6406768, at *8. In the absence of a final

judgment in favor of the mortgagee, the mortgagor still had the right under

paragraph 19 of the Mortgage, the reinstatement provision, to cure the default and

to continue making monthly installment payments.

Accepting Bartram’s argument that the installment nature of his contract

terminated once the mortgagee attempted to exercise the mortgage contract’s

optional acceleration clause—ignoring the existence of the mortgage’s

reinstatement provision—would permit the mortgagee only one opportunity to

enforce the mortgage despite the occurrence of any future defaults. As we

cautioned in Singleton, “justice would not be served if the mortgagee was barred

from challenging the subsequent default payment solely because he failed to prove

the earlier alleged default.” 882 So. 2d at 1008. Following to its logical

conclusion Bartram’s argument that acceleration of the loan was effective before

final judgment in favor of the mortgagee-lender in a foreclosure action would

mean that the mortgagor-borrower would owe the accelerated amount after the

- 23 -

dismissal, effectively rendering the reinstatement provision a nullity, and—in most

cases—leading to an unavoidable default.

IV. This Case

Here, the Bank’s first foreclosure action was involuntarily dismissed, and

therefore there was no judicial determination that a default actually occurred.

Thus, even if the note had been accelerated through the Bank’s foreclosure

complaint, the dismissal of the foreclosure action had the effect of revoking the

acceleration. By the express terms of the reinstatement provision, if, in the month

after the dismissal of the foreclosure action, Bartram began to make monthly

payments on the note, the Bank could not have subsequently accelerated the entire

note until there were future defaults. Once there were future defaults, however, the

Bank had the right to file a subsequent foreclosure action—and to seek

acceleration of all sums due under the note—so long as the foreclosure action was

based on a subsequent default, and the statute of limitations had not run on that

particular default.

There have been many claims of unfair and predatory practices by banks and

mortgage holders in the aftermath of the financial crisis that shook the country, and

in particular, Florida. See, e.g., Pino v. Bank of N.Y., 121 So. 3d 23, 27 (Fla.

2013) (discussing allegations of fraudulent backdating of mortgage assignments);

see also In re Amends. to Fla. Rules of Civ. Pro.—Form 1.996, 51 So. 3d 1140

(Fla. 2010) (noting the necessity for verification of ownership of the note or right

- 24 -

to enforce the note in a foreclosure action because of “recent reports of alleged

document fraud and forgery in mortgage foreclosure cases”). Some of these claims

have included allegations that mortgage holders have precipitously sought

foreclosure even though the mortgagor missed only one or two payments and

attempted to cure their defaults. In this case, quite the opposite is true. Bartram

raised no defense as to the terms of the Mortgage and note itself. His sole claim is

that the Bank lost the right to seek foreclosure of the Mortgage based on distinct

defaults that occurred subsequent to the dismissal of the initial foreclosure

complaint.

After Bartram defaulted on the Mortgage, the Bank, in accordance with the

terms of the mortgage contract, notified Bartram that failure to cure his past

defaults would result in acceleration of the sums due under the mortgage and

judicial foreclosure. When Bartram failed to cure the past defaults, the Bank filed

its foreclosure complaint and exercised the optional acceleration clause. Yet, the

reinstatement provision of the Mortgage afforded Bartram the opportunity to

continue the installment nature of the loan by curing the past defaults. Until final

judgment was entered in favor of the Bank, Bartram was not obligated to pay the

accelerated loan amount. Dismissal of the foreclosure action therefore returned the

parties to their pre-foreclosure complaint status. In considering the law, the facts,

and equity, Bartram’s position simply has no validity.

CONCLUSION

- 25 -

The Fifth District properly extended our reasoning in Singleton to the statute

of limitations context in a mortgage foreclosure action. Here, the Bank’s initial

foreclosure action was involuntarily dismissed. Therefore, as we previously

explained in Singleton, the dismissal returned the parties back to “the same

contractual relationship with the same continuing obligations.” 882 So. 2d at 1007.

Bartram and the Bank’s prior contractual relationship gave Bartram the

opportunity to continue making his mortgage payments, and gave the Bank the

right to exercise its remedy of acceleration through a foreclosure action if Bartram

subsequently defaulted on a payment separate from the default upon which the

Bank predicated its first foreclosure action. Therefore, the Bank’s attempted prior

acceleration in a foreclosure action that was involuntarily dismissed did not trigger

the statute of limitations to bar future foreclosure actions based on separate

defaults.

Accordingly, we approve the Fifth District’s decision in Bartram and answer

the rephrased certified question in the negative.

It is so ordered.

LABARGA, C.J., and QUINCE, CANADY, and PERRY, JJ., concur.

POLSTON, J., concurs in result.

LEWIS, J., concurs in result only with an opinion.

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND

IF FILED, DETERMINED.

- 26 -

LEWIS, J., concurring in result only.

I am troubled by the expansion of Singleton v. Greymar Associates, 882 So.

2d 1004 (Fla. 2004), to potentially any case involving successive foreclosure

actions. Other courts in this State have already broadly applied Singleton—a

decision involving res judicata and dismissal with prejudice—to cases that were

either dismissed for lack of prosecution or voluntarily dismissed by the note-

holder, as well as to cases that concern the statute of limitations, without careful

consideration of the procedural distinctions of each case. E.g., In re Anthony, 550

B.R. 577 (M.D. Fla. 2016); Dorta v. Wilmington Tr. Nat’l Ass’n, 2014 WL

1152917 (M.D. Fla. 2014); Romero v. Suntrust Mortg., Inc., 15 F. Supp. 3d 1279

(S.D. Fla. 2014); Kaan v. Wells Fargo Bank, N.A., 981 F. Supp. 2d 1271 (S.D. Fla.

2013); Evergrene Partners, Inc. v. Citibank, N.A., 143 So. 3d 954 (Fla. 4th DCA

2014); see also In re Rogers Townsend & Thomas, PC, 773 S.E.2d 101, 105-06

(N.C. Ct. App. 2015) (relying on Singleton in a case involving previous voluntary

dismissals and the statute of limitations). Today’s decision will only continue that

expansion, which I fear will come at the cost of established Florida law and

Floridians who may struggle with both the costs of owning a home and uncertain

behavior by lenders. I therefore respectfully concur in result only.

At its narrowest, Singleton simply held that “when a second and separate

action for foreclosure is sought for a default that involves a separate period of

default from the one alleged in the first action, the case is not necessarily barred by

- 27 -

res judicata.” 882 So. 2d at 1006-07 (emphasis supplied). However, as has been

noted elsewhere, Singleton left several matters unanswered:

[T]he Supreme Court omitted explanation of 1) what constitutes

a valid new default after the initial round of default, acceleration,

foreclosure filing, and dismissal; 2) how the fact-finder below

determines that a valid new default has occurred; and 3) what

conditions constitute valid new default, including whether the lender

must reinstate the original note and mortgage terms in the interim or

serve a second notice of intent to accelerate. Moreover, the court in

no way addressed the effect of the involuntary dismissal on the statute

of limitations.

Andrew J. Bernhard, Deceleration: Restarting the Expired Statute of Limitations in

Mortgage Foreclosures, Fla. B.J., Sept.-Oct. 2014, at 30, 32. Given the procedural

posture of this matter and the relatively sparse record before this Court, the

decision today fails to address evidentiary concerns regarding how to determine the

manner in which a mortgage may be reinstated following the dismissal of a

foreclosure action, as well as whether a valid “subsequent and separate” default

occurred to give rise to a new cause of action. See Singleton, 882 So. 2d at 1008.

Instead of addressing these concerns, the Court flatly holds that the dismissal

itself—for any reason—“decelerates” the mortgage and restores the parties to their

positions prior to the acceleration without authority for support. Majority op. at 3.

In this case, there is no evidence contained in the record before this Court to

show whether the parties tacitly agreed to a “de facto reinstatement” following the

- 28 -

dismissal of the previous foreclosure action.7 Further, despite the assumption of

the majority of the Court to the contrary, the mortgage itself did not create a right

to reinstatement following acceleration and the dismissal of a foreclosure action.

The contractual right to reinstatement under the terms of this mortgage existed

only under specific conditions,8 which do not appear to have been satisfied in the

7. Moreover, the precise nature of the dismissal in this case is even more

uncertain than the mortgage in Beauvais, which was dismissed without prejudice.

See Deutsche Bank Tr. Co. Americas v. Beauvais, 188 So. 3d 938, 964 (Fla. 3d

DCA 2016) (Scales, J., dissenting). The trial court below dismissed the first

foreclosure action after indicating that it had informed the parties that “[f]ailure of

the parties . . . to appear in person [at the case management conference] may result

in the case being dismissed without prejudice.” Order of Dismissal, U.S. Bank

Nat’l Ass’n v. Bartram, No. CA06-428 (Fla. 7th Cir. Ct. May 5, 2011) (emphasis

added). However, the trial court’s order did not explicitly state whether this

dismissal was with or without prejudice. Id. (“The Complaint to Foreclose

Mortgage . . . is hereby dismissed.”). Further complicating the matter, the Fifth

District below stated that this dismissal was with prejudice, but summarily

determined “that the distinction is not material for purposes of the issue at hand.”

U.S. Bank Nat’l Ass’n v. Bartram, 140 So. 3d 1007, 1013 n.1 (Fla. 5th DCA

2014).

8. The mortgage note provides the following right to reinstatement:

Borrower’s Right to Reinstate After Acceleration. If Borrower meets

certain conditions, Borrower shall have the right to have enforcement

of this Security Instrument discontinued at any time prior to the

earliest of: (a) five days before sale of the Property pursuant to any

power of sale contained in this Security Instrument; (b) such other

period as Applicable Law might specify for the termination of

Borrower’s right to reinstate; or (c) entry of a judgment enforcing this

Security Instrument. Those conditions are that Borrower: (a) pays

Lender all sums which then would be due under this Security

Instrument and the Note as if no acceleration had occurred; (b) cures

any default of any other covenants or agreements; (c) pays all

expenses incurred in enforcing this Security Instrument, including, but

- 29 -

record before this Court. Parties, particularly those as sophisticated as the banks

and other lenders that routinely engage in such litigation, should be required to

present evidence that the mortgage was actually decelerated and reinstated, rather

than require our courts to fill in the blank and assume that deceleration

automatically occurred upon dismissal of a previous foreclosure action.

Instead, I find myself more closely aligned with the dissenting opinion of

Judge Scales in Beauvais, 188 So. 3d at 954 (Scales, J., dissenting). A majority of

the en banc Third District Court of Appeal reached the same conclusion as the

majority of this Court does today regarding very similar facts. By contrast, Judge

Scales, joined by three of his colleagues, raised several concerns that arise from the

not limited to, reasonable attorneys’ fees, property inspection and

valuation fees, and other fees incurred for the purpose of protecting

Lender’s interest in the Property and rights under this Security

Instrument; and (d) takes such action as Lender may reasonably

require to assure that Lender’s interest in the Property and rights

under this Security Instrument, and Borrower’s obligation to pay the

sums secured by this Security Instrument, shall continue unchanged.

Lender may require that Borrower pay such reinstatement and

expenses in one or more of the following forms, as selected by

Lender: (a) cash; (b) money order; (c) certified check, bank check,

treasurer’s check or cashier’s check, provided any such check is

drawn upon an institution whose deposits are insured by a federal

agency, instrumentality or entity; or (d) Electronic Funds Transfer.

Upon reinstatement by Borrower, this Security Instrument and

obligations secured hereby shall remain fully effective as if no

acceleration had occurred. However, this right to reinstate shall not

apply in the case of acceleration under Section 18.

See majority op. at 6-7.

- 30 -

conclusion that a mortgage is automatically decelerated and reinstated following

the dismissal of a foreclosure action for any reason.

First, Judge Scales pointed out that the mortgage in Beauvais, like the

mortgage in this case, created the borrower’s right to reinstatement only under

specific conditions, which did not include dismissal of a prior foreclosure action.

Id. at 956-57 (“Neither the note nor the mortgage contain any provision reinstating

the installment nature of the note if, after acceleration, a lender foreclosure action

is dismissed.”). Further reviewing the clear terms of the mortgage, Judge Scales

explained that the mortgage ceased to be an installment contract upon the exercise

of the lender’s right to acceleration. Id. at 961-62. Thus, the conclusion that a

court’s dismissal of a foreclosure action itself can end acceleration and reinstate

the mortgage ignores basic principles of Florida contract law:

The majority opinion rewrites the parties’ note and mortgage to

create a reinstatement provision—i.e., reinstating the installment

nature of the note, as if acceleration never occurred, upon any

dismissal of any lawsuit—that the parties did not include when

drafting their documents. Singleton does not say this; the parties’

contract documents certainly do not say this; and Florida law is

repugnant to the majority’s insertion of a provision into the parties’

private contract that the parties themselves most assuredly omitted.

[FN. 23]

[FN. 23]: Brooks v. Green, 993 So. 2d 58, 61 (Fla. 1st

DCA 2008) (holding that a court is without authority to

rewrite a clear and unambiguous contract between

parties).

Id. at 963.

- 31 -

Moreover, Judge Scales cogently explained that the overbroad construction

of Singleton will undermine its limited holding. Singleton indicated that “an

adjudication denying acceleration and foreclosure” should not bar a successive

foreclosure predicated upon a “subsequent and separate alleged default.” 882 So.

2d at 1007, 1008. Yet, under the majority decisions of the Third District and this

Court, any dismissal of a foreclosure action can support a successive foreclosure

action. See Beauvais, 188 So. 3d at 963-64 (Scales, J., dissenting). The form

dismissal in Beauvais should not constitute an “adjudication denying acceleration

and foreclosure,” which could, at least according to Singleton, restore the parties to

their respective pre-acceleration positions. Id. at 964 (quoting Singleton, 882 So.

2d at 1007). In light of the even more vague dismissal at issue in this case, I agree

with Judge Scales’ warning that “[w]e should be reluctant to hold that a trial

court’s form dismissal order visits upon the borrower and lender a host of critical,

yet unarticulated, adjudications that fundamentally change the parties’ contractual

relationship and are entirely unsupported by the existing law or by the record

below.” Id. at 965.

Finally, the expansion of Singleton’s holding that res judicata “does not

necessarily” bar the filing of successive foreclosure actions to the statute of

limitations ignores critical distinctions between these two doctrines, at a serious

cost to the statute of limitations and the separation of powers. As long recognized

in this State, res judicata is a doctrine of equity not to “be invoked where it would

- 32 -

defeat the ends of justice.” Id. at 967 n.31 (citing State v. McBride, 848 So. 2d

287, 291 (Fla. 2003); Aeacus Real Estate Ltd. P’ship. v. 5th Ave. Real Estate Dev.,

Inc., 948 So. 2d 834 (Fla. 4th DCA 2007)); see also Singleton, 882 So. 2d at 1008

(citing deCancino v. E. Airlines, Inc., 283 So. 2d 97, 98 (Fla. 1973)). However,

“equity follows the law”; therefore, equitable principles are subordinate to statutes

enacted by the Legislature, including the statute of limitations. May v. Holley, 59

So. 2d 636 (Fla. 1952); Beauvais, 188 So. 3d at 967-68 (Scales, J., dissenting)

(citing Dobbs v. Sea Isle Hotel, 56 So. 2d 341, 342 (Fla. 1952); Cragin v. Ocean &

Lake Realty Co., 133 So. 569, 573-74 (Fla. 1931)). This untenable extension of an

equitable, judicial doctrine into an area of law expressly governed by legislative

action veers perilously close to violating the separation of powers. Nonetheless,

the majority opinion of this Court fails to recognize these concerns and justifies the

imposition of Singleton’s equitable focus onto the statute of limitations by simply

reviewing the decisions of federal and Florida courts that have reached this same

conclusion without acknowledging the critical distinctions between res judicata

and the statute of limitations.

I recognize the concern raised by this Court and others regarding the need to

avoid encouraging delinquent borrowers from abusing the lending process by

remaining in default after an initial foreclosure action is dismissed. See Singleton,

882 So. 2d at 1008; see also Fairbank’s Capital Corp. v. Milligan, 234 Fed. Appx.

21, 24 (3d Cir. 2007) (relying on Singleton and seeking to avoid “encourag[ing] a

- 33 -

delinquent mortgagor to come to a settlement with a mortgagee on a default in

order to later insulate the mortgagor from the consequences of a subsequent

default”). Nonetheless, these legitimate policy concerns should not outweigh the

established law of this State. In light of the narrow holding of Singleton, I fear that

its expansion today to a case involving a previous dismissal (presumably) without

prejudice and no clear reinstatement of the mortgage terms in either the note or the

facts of this limited record will lead to inequitable results. Just as the courts should

not encourage mortgage delinquency, so too should they avoid encouraging lenders

from abusing Florida law and Floridians by “retroactively reinstating” mortgages

after many of those lenders initially slept on their own rights to seek foreclosures.

See Bernhard, supra, at 27. Therefore, I concur in result only.

Application for Review of the Decision of the District Court of Appeal – Certified

Great Public Importance

Fifth District - Case No. 5D12-3823

(St. Johns County)

Kendall B. Coffey, Jeffrey B. Crockett, and Daniel Frederick Blonsky of Coffey

Burlington, P.L., Miami, Florida; Dineen Pashoukos Wasylik of Dineen Pashoukos

Wasylik, P.A., Tampa, Florida; Thomas R. Pycraft, Jr. of Pycraft Legal Services,

LLC, Saint Augustine, Florida; and Michael Alex Wasylik of Ricardo & Wasylik,

PL, Dade City, Florida,

for Petitioner Lewis Brooke Bartram

Paul Alexander Bravo of P.A. Bravo, Coral Gables, Florida,

for Petitioner Gideon M.G. Gratsiani

- 34 -

Joel Stephen Perwin of Joel S. Perwin, P.A., Miami, Florida,

for Petitioner The Plantation at Ponte Vedra, Inc.

Michael Darren Starks and Kelly Overstreet Johnson of Baker, Donelson,

Bearman, Caldwell & Berkowitz, PC, Orlando, Florida; William Power

McCaughan, Stephanie N. Moot and Karen Poy Finesilver of K&L Gates LLP,

Miami, Florida; and David R. Fine of K&L Gates LLP, Harrisburg, Pennsylvania,

for Respondent U.S. Bank National Association

Lynn Drysdale of Jacksonville Area Legal Aid, Inc., Jacksonville, Florida; Thomas

A. Cox of The National Consumer Law Center, Portland, Maine; J.L. Pottenger, Jr.

of Jerome N. Frank Legal Services Organization, New Haven, Connecticut; and

James C. Sturdevant of The Sturdevant Law Firm, San Francisco, California,

for Amici Curiae National Association of Consumer Advocates, The

National Consumer Law Center, and The Jerome N. Frank Legal Services

Organization

Steven Michael Siegfried, Nicholas David Siegfried, and Nicole Reid Kurtz of

Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, P.A., Coral Gables,

Florida; and Todd L. Wallen of The Wallen Law Firm, P.A., Coral Gables, Florida,

for Amicus Curiae Community Associations Institute

John Granville Crabtree, George Richard Baise, Jr., and Brian Carson Tackenberg

of Crabtree & Associates, P.A., Key Biscayne, Florida; Alice Maria Vickers of

Florida Alliance for Consumer Protection, Tallahassee, Florida; Kimberly Laura

Sanchez of Community Legal Services of Mid-Florida, Orlando, Florida; Sarah

Elizabeth Mattern of Brevard County Legal Aid, Inc, Rockledge, Florida; and

Peter P. Sleasman of Florida Legal Services Inc., Newberry, Florida,

for Amici Curiae Florida Alliance for Consumer Protection, Brevard

County Legal Aid, and Consumer Umbrella Group of Florida Legal Services

Andrew David Manko and John Stewart Mills of The Mills Firm, P.A.,

Tallahassee, Florida,

for Amici Curiae Upside Property Investment, LLC, Signature Land, Inc.,

Upside Property Enterprises, Inc., and The Lynne B. Preminger Living Trust

- 35 -

Major Best Harding and John R. Beranek of Ausley McMullen, Tallahassee,

Florida; and John Russell Hargrove of Hargrove Pierson & Brown P.A., Boca

Raton, Florida,

for Amicus Curiae Baywinds Community Association, Inc.

Peter David Ticktin, Timothy Richard Quinones, and Kendrick Almaguer of The

Ticktin Law Group, P.A., Deerfield Beach, Florida,

for Amici Curiae Bradford and Cheri Langworthy, and The Ticktin Law

Group, P.A.

Robert Rex Edwards and Jessica Pierce Quiggle of Robertson, Anschutz &

Schneid, PL, Boca Raton, Florida; Melissa A. Giasi and Richard Slaughter McIver

of Kass Shuler, P.A., Tampa, Florida; Shaib Yariel Rios and Curtis James Herbert

of Brock and Scott PLLC, Fort Lauderdale, Florida; Andrea Rachael Tromberg of

Gladstone Law Group, P.A., Boca Raton, Florida; Elizabeth Redchuk Wellborn of

Elizabeth R. Wellborn, P.A., Deerfield Beach, Florida; Michelle Garcia Gilbert

and Jennifer Lima-Smith of Gilbert Garcia Group, P.A., Tampa, Florida,

for Amicus Curiae American Legal and Financial Network

Robert Mark Brochin, Joshua Charles Prever, and Brian Michael Ercole of

Morgan, Lewis & Bockius LLP, Miami, Florida,

for Amicus Curiae Mortgage Bankers Association

David William Rodstein of Padula Hodkin, PLLC, Boca Raton, Florida,

for Amicus Curiae US Financial Network

12/17/2018 Statutes & Constitution :View Statutes : Online Sunshine

http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&URL=0000-0099/0057/Sections/0057.105.html 1/2

Select Year: 2018 Go

The 2018 Florida Statutes

Title VI CIVIL PRACTICE AND PROCEDURE

Chapter 57 COURT COSTS

View Entire Chapter

57.105 Attorney’s fee; sanctions for raising unsupported claims or defenses; exceptions; service ofmotions; damages for delay of litigation.—

(1) Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee,including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and thelosing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the courtfinds that the losing party or the losing party’s attorney knew or should have known that a claim or defense wheninitially presented to the court or at any time before trial:

(a) Was not supported by the material facts necessary to establish the claim or defense; or(b) Would not be supported by the application of then-existing law to those material facts.(2) At any time in any civil proceeding or action in which the moving party proves by a preponderance of the

evidence that any action taken by the opposing party, including, but not limited to, the filing of any pleading orpart thereof, the assertion of or response to any discovery demand, the assertion of any claim or defense, or theresponse to any request by any other party, was taken primarily for the purpose of unreasonable delay, the courtshall award damages to the moving party for its reasonable expenses incurred in obtaining the order, which mayinclude attorney’s fees, and other loss resulting from the improper delay.

(3) Notwithstanding subsections (1) and (2), monetary sanctions may not be awarded:(a) Under paragraph (1)(b) if the court determines that the claim or defense was initially presented to the

court as a good faith argument for the extension, modification, or reversal of existing law or the establishment ofnew law, as it applied to the material facts, with a reasonable expectation of success.

(b) Under paragraph (1)(a) or paragraph (1)(b) against the losing party’s attorney if he or she has acted in goodfaith, based on the representations of his or her client as to the existence of those material facts.

(c) Under paragraph (1)(b) against a represented party.(d) On the court’s initiative under subsections (1) and (2) unless sanctions are awarded before a voluntary

dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to besanctioned.

(4) A motion by a party seeking sanctions under this section must be served but may not be filed with orpresented to the court unless, within 21 days after service of the motion, the challenged paper, claim, defense,contention, allegation, or denial is not withdrawn or appropriately corrected.

(5) In administrative proceedings under chapter 120, an administrative law judge shall award a reasonableattorney’s fee and damages to be paid to the prevailing party in equal amounts by the losing party and a losingparty’s attorney or qualified representative in the same manner and upon the same basis as provided in subsections(1)-(4). Such award shall be a final order subject to judicial review pursuant to s. 120.68. If the losing party is anagency as defined in s. 120.52(1), the award to the prevailing party shall be against and paid by the agency. Avoluntary dismissal by a nonprevailing party does not divest the administrative law judge of jurisdiction to makethe award described in this subsection.

(6) The provisions of this section are supplemental to other sanctions or remedies available under law or undercourt rules.

http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Index&Title_Request=VI#TitleVI

http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&URL=0000-0099/0057/0057ContentsIndex.html

http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&URL=0000-0099/0057/0057.html

http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&Search_String=&URL=0100-0199/0120/Sections/0120.68.html

http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&Search_String=&URL=0100-0199/0120/Sections/0120.52.html

12/17/2018 Statutes & Constitution :View Statutes : Online Sunshine

http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&URL=0000-0099/0057/Sections/0057.105.html 2/2

(7) If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take anyaction to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when thatparty prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsectionapplies to any contract entered into on or after October 1, 1988.

History.—s. 1, ch. 78-275; s. 61, ch. 86-160; ss. 1, 2, ch. 88-160; s. 1, ch. 90-300; s. 316, ch. 95-147; s. 4, ch. 99-225; s. 1, ch. 2002-77;s. 9, ch. 2003-94; s. 1, ch. 2010-129.

Copyright © 1995-2018 The Florida Legislature • Privacy Statement • Contact Us

http://www.leg.state.fl.us/cgi-bin/View_Page.pl?File=privacy.html&Directory=welcome/&Location=app&Tab=info_center&Submenu=4

http://www.leg.state.fl.us/cgi-bin/View_Page.pl?File=contact.html&Directory=Info_Center/help/&Location=app&Tab=info_center&Submenu=4

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FOURTH DISTRICT

NATIONSTAR MORTGAGE LLC d/b/a CHAMPION MORTGAGE COMPANY,

Appellant,

v.

MARIE ANN GLASS, UNKNOWN SPOUSE OF MARIE ANN GLASS, UNITED STATES OF AMERICA, ACTING ON BEHALF OF THE

SECRETARY OF HOUSING AND URBAN DEVELOPMENT, CITIBANK, NATIONAL ASSOCIATION SUCCESSOR BY MERGER TO

CITIBANK SOUTH DAKOTA, N.A., UNKNOWN TENANT #1, UNKNOWN TENANT #2,

Appellees.

No. 4D15-4561

[April 12, 2017]

Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; Joel T. Lazarus, Senior Judge; L.T. Case No. CACE13-027304(11).

Marc James Ayers of Bradley Arant Boult Cummings LLP, Birmingham,

AL., for appellant. Amy L. Fischer and F. Malcolm Cunningham, Jr. of The Cunningham

Law Firm, P.A., for appellee Marie Ann Glass.

ON MOTION FOR ATTORNEY’S FEES AND COSTS

KUNTZ, J. Nationstar Mortgage LLC appealed the court’s dismissal with prejudice

of its amended foreclosure complaint. After briefing, Nationstar filed a notice of voluntary dismissal and we dismissed the appeal. Prior to the dismissal, Marie Ann Glass timely filed a motion for appellate attorney’s fees and costs. She has since filed a renewed motion stating that she is entitled to her attorney’s fees and costs based upon a provision in the mortgage and the reciprocity provisions of section 57.105(7), Florida Statutes. We deny the motion for attorney’s fees on the merits, and deny the motion for costs without prejudice to seek any taxable costs in the

2

appropriate court. With regard to her request for attorney’s fees, it is well established that

Florida follows the “American Rule”; thus, attorney’s fees may only be awarded when authorized by contract or statute. TGI Friday’s, Inc. v. Dvorak, 663 So. 2d 606, 614 (Fla. 1995) (Wells, J., concurring in part) (“There is a long-standing adherence in Florida law to the ‘American Rule’ that attorney fees may be awarded by a court only when authorized by statute or agreement of the parties.”).

Here, Glass relies upon section 57.105(7), Florida Statutes (2016), in

support of her motion. This section provides that a contractual fee provision is to be applied to the benefit of both parties even if the fee provision, as written, is one-sided. HFC Collection Ctr., Inc. v. Alexander, 190 So. 3d 1114, 1115 (Fla. 5th DCA 2016). However, because the statute is in derogation of the common law, it must be strictly construed. Id. (citing Willis Shaw Express Inc. v. Hilyer Sod, Inc., 849 So. 2d 276, 278 (Fla. 2003)). The plain language of section 57.105(7) has two requirements. First, the party must have prevailed. Second, the party had to be a party to the contract containing the fee provision.

Glass prevailed in the circuit court based on her argument that

Nationstar lacked standing under the contract. On appeal, she argued that the court correctly dismissed Nationstar’s complaint for lack of standing. In a situation such as this, where a party prevails by arguing the plaintiff failed to establish it had the right pursuant to the contract to bring the action, the party cannot simultaneously seek to take advantage of a fee provision in that same contract. The result is different when the plaintiff was also the originating lender. Nudal v. Flagstar Bank, FSB, 60 So. 3d 1163 (Fla. 4th DCA 2011). In that situation, the lender was a party to the contract at issue.

The Third District recently addressed this issue in Bank of New York

Mellon Trust Company, N.A. v. Fitzgerald, 42 Fla. L. Weekly D519 (Fla. 3d DCA Mar. 1, 2017). In Fitzgerald, following a non-jury trial, the trial court entered a final judgment in favor of the borrower after concluding that the bank failed to establish standing. Id. at D520. Relying on Alexander, the Third District held that, because the trial court found no contract existed between the parties which would entitle one to recover attorney’s fees in the first place, there was no basis to invoke the compelled mutuality provisions of section 57.105(7). Id. at D521 (citing Alexander, 190 So. 3d at 1117). Therefore, the Third District concluded that the circuit court erred in awarding fees “based on a non-existent contract between the parties.” Id.

3

Alexander relied in part on this court’s opinion in Florida Medical

Center, Inc. v. McCoy, 657 So. 2d 1248, 1252 (Fla. 4th DCA 1995), where we held that if there is no contract between the parties, “there is no basis to invoke the compelled mutuality provisions” of the statute. The Fifth District also recently held that “a stranger to the contract cannot recover attorney’s fees based on the contract.” Sand Lake Hills Homeowners Ass’n, Inc. v. Busch, 42 Fla. L. Weekly D219 (Fla. 5th DCA Jan. 20, 2017).

Simply put, to be entitled to fees pursuant to the reciprocity provision

of section 57.105(7), the movant must establish that the parties to the suit are also parties to the contract containing the fee provision. A party that prevails on its argument that dismissal is required because the plaintiff lacks standing pursuant to the contract sued upon cannot satisfy that requirement. Therefore, the motion for appellate attorney’s fees is denied.

We also deny her request for appellate costs without prejudice as a request for costs is not properly presented to the appellate court. Fla. R. App. P. 9.400(a) (“Costs shall be taxed by the lower tribunal on a motion served no later than 45 days after rendition of the court’s order.”). We make no determination that there are, or are not, any costs to be taxed should such a motion be timely filed in the circuit court.

Motion denied.

CIKLIN, C.J., and GROSS, J., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

Third District Court of AppealState of Florida

Opinion filed March 1, 2017.Not final until disposition of timely filed motion for rehearing.

________________

No. 3D16-981Lower Tribunal No. 09-44683

________________

The Bank of New York Mellon Trust Company, N.A. f/k/a The Bank of New York Trust Company, N.A., as trustee for Chaseflex

Trust Series 2007-2,Appellant,

vs.

Jill Fitzgerald,Appellee.

An Appeal from the Circuit Court for Miami-Dade County, Jennifer Bailey, Judge.

Lapin & Leichtling, LLP, and Jeffrey S. Lapin, Alejandra Arroyave Lopez, and Jan Timothy Williams, for appellant.

The Ticktin Law Group, PLLC, and Peter Ticktin, Kendrick Almaguer, and Geovanni Denis (Deerfield Beach), for appellee.

Before WELLS, ROTHENBERG, and LAGOA, JJ.

2

LAGOA, J.

The Bank of New York Mellon Trust Company, N.A. f/k/a The Bank of

New York Trust Company, N.A., as trustee for Chaseflex Trust Series 2007-2 (the

“Bank”), appeals a final judgment awarding attorney’s fees to Jill Fitzgerald

(“Fitzgerald”) pursuant to the reciprocity provision of section 57.105(7), Florida

Statutes (2014). Because Fitzgerald successfully obtained a judgment below that

the Bank lacked standing to enforce the subject mortgage and note against her, we

find that no contract existed between the Bank and Fitzgerald that would allow

Fitzgerald to invoke the reciprocity provisions of section 57.105(7). The trial court

therefore erred in awarding Fitzgerald attorney’s fees pursuant to section

57.105(7), and we reverse.

I. FACTUAL AND PROCEDURAL HISTORY

The borrower, Fitzgerald, entered into a mortgage with the lender, Northstar

Mortgage Company (“Northstar”), on January 31, 2007. The mortgage contained

the following attorney’s fees provision in favor of Northstar: “Lender shall be

entitled to collect all expenses incurred in pursuing the remedies provided in this

Section 22, including, but not limited to, reasonable attorneys’ fees and costs of

title evidence.”

Concurrent with the mortgage, Fitzgerald signed a promissory note made

payable to Northstar. The note bore a special indorsement from Northstar which

3

stated: “PAY TO THE ORDER OF JPMORGAN CHASE BANK, N.A., ITS

SUCCESSORS AND/OR ASSIGNS WITHOUT RECOURSE.”

On June 11, 2009, the Bank filed an action against Fitzgerald seeking to

foreclose upon the note and mortgage. The Bank alleged that it “is now the holder

of the Mortgage Note and Mortgage and/or is entitled to enforce the Mortgage

Note and Mortgage.” The Bank’s complaint attached a copy of the note and

mortgage.

On March 13, 2013, Fitzgerald filed her answer and affirmative defenses. In

her affirmative defenses, Fitzgerald asserted that the Bank lacked standing because

the note was specially indorsed to an entity other than the Bank, and that the Bank

was not the lawful assignee of the note and mortgage. Fitzgerald also asserted that

the Bank was not the holder of the note and mortgage, nor did it own or possess the

note and mortgage. Fitzgerald demanded attorney’s fees “pursuant to terms of the

agreement between the parties and Florida Statutes, Section 57.105.”

The case proceeded to a non-jury trial, and on January 15, 2014, the trial

court entered final judgment in favor of Fitzgerald after finding that the Bank

failed to establish standing. In reaching its ruling, the trial court found that “[t]here

was no Assignment of Mortgage, or any other document evidencing a transfer to

the [Bank] prior to the institution of the action attached to the Complaint.” The

trial court further found that “[t]here was never any actual delivery of the note to

4

the [Bank] and no evidence of intent to deliver the note to the [Bank] on the part of

J.P. Morgan Chase Bank, the sole holder under the special indorsement.” The trial

court therefore found that the note “was never negotiated in favor of the [Bank]

and the [Bank] never became the holder of the note under Florida Statute §

673.3011(1), such that it could enforce the note.” Lastly, the trial court found that

the Bank did not qualify as a non-holder in possession of the instrument who has

the rights of a holder.1 The trial court reserved jurisdiction to award attorney’s

fees and costs.

On January 29, 2014, Fitzgerald filed a motion for entitlement to tax costs

and attorney’s fees pursuant to section 57.105(7), Florida Statutes (2014). In her

motion, Fitzgerald argued that she was entitled to attorney’s fees and costs “as the

prevailing party based on the contract between the parties which formed the basis

of the action.” In its memorandum of law in opposition to the motion for

entitlement, the Bank argued that Fitzgerald could not prevail on the merits on the

grounds that the Bank is not a party to the mortgage contract and yet rely on that

same contract to seek attorney’s fees from the bank under the contract’s fee

provision and the reciprocity provision in section 57.105(7), Florida Statutes.

The trial court subsequently entered an order granting Fitzgerald’s motion

for entitlement. After an evidentiary hearing, the trial court entered a final

1 The Bank did not appeal from the final judgment in favor of Fitzgerald.

5

judgment taxing attorney’s fees and costs against the Bank. The trial court

awarded Fitzgerald $34,829.06 in attorney’s fees, $2,728.45 in pre-judgment

interest, and $3,562.50 for expert witness fees, for a total amount of $41,120.01.

This appeal ensued.

II. STANDARD OF REVIEW

Because it concerns a question of law, we review de novo a trial court’s final

judgment determining entitlement to attorney’s fees based on a fee provision in the

mortgage and the application of section 57.105(7). Florida Cmty. Bank, N.A. v.

Red Road Residential, LLC, 197 So. 3d 1112, 1114 (Fla. 3d DCA 2016);

Attorney’s Title Ins. Fund, Inc., v. Landa-Posada, 984 So. 2d 641, 643 (Fla. 3d

DCA 2008) (finding that “[o]ur standard of review is de novo because the ruling

on the attorney’s fees involves an erroneous interpretation and application of

Florida law”).

III. ANALYSIS

It is well-established that attorney’s fees may not be awarded unless

authorized by contract or statute. See Attorney’s Title Ins., 984 So. 2d at 643

(“Florida has long followed the so-called ‘American Rule,’ which stands for the

proposition that attorney’s fees are awardable pursuant to an entitling statute or a

contract between the parties.”); Leitman v. Boone, 439 So. 2d 318, 319 (Fla. 3d

6

DCA 1983). Here, Fitzgerald’s claim to fees rests on the mortgage’s fee provision

and the reciprocity provision of section 57.105(7).

On appeal, the Bank argues that because the trial court found that the Bank

lacked standing to bring suit under both the mortgage and note, Fitzgerald cannot

recover fees pursuant to section 57.105(7). We agree.

Section 57.105(7) provides as follows:

(7) If a contract contains a provision allowing attorney's fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney's fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsection applies to any contract entered into on or after October 1, 1988.

Because section 57.105(7) shifts the responsibility for attorney’s fees, it is in

derogation of common law and must be strictly construed. See Florida Cmty.

Bank, 197 So. 3d at 1115. The effect of section 57.105(7) is to statutorily

transform a unilateral attorney’s fees contract provision into a reciprocal provision.

Id.

Section 57.105(7), however, cannot transform a contract’s unilateral fee

provision into a reciprocal obligation where, as here, no contract exists between the

parties. Fielder v. Weinstein Design Group, Inc., 842 So. 2d 879, 880 (Fla. 4th

DCA 2003) (finding that individual who was not a party to the contract cannot

recover prevailing party fees nor can such fees be assessed against him); Hanna v.

7

Beverly Enterprises-Fla., 738 So. 2d 424, 425 (Fla. 4th DCA 1999) (affirming

denial of attorney’s fees under section 57.105(2)2 because no contract existed

between the parties); Florida Med. Ctr., Inc. v. McCoy, 657 So. 2d 1248, 1252

(Fla. 4th DCA 1995) (holding that where trial court found that defendant did not

incur obligations under contract containing attorney’s fees provision, “there is no

basis to invoke the compelled mutuality provision of section 57.105(2)”); cf. Bank

of New York Mellon v. Mestre, 159 So. 3d 953, 957 (Fla. 5th DCA 2015) (holding

that there was no contractual basis for attorney’s fees where signatures on

mortgage were fraudulent and noting that “we are doubtful that section 57.105(7)

authorizes attorney’s fees pursuant to a contract that was found to have never

existed”); Novastar Mortg., Inc. v. Strassburger, 855 So. 2d 130, 131 (Fla. 4th

DCA 2003) (finding that appellees were not entitled to recover attorney’s fees

under the mortgage and section 57.105(7) because they were not parties to the

mortgage).

We find our sister court’s opinion in HFC Collection Ctr., Inc. v. Alexander,

190 So. 3d 1114 (Fla. 5th DCA 2016), squarely on point. In that case, HFC

Collection Center (“HFC”) sued Stephanie Alexander (“Alexander”) to collect past

due amounts that Alexander allegedly owed American Express pursuant to a credit

card agreement. HFC claimed that it was the assignee of the credit card

2 Subsection (2) of section 57.105 was renumbered as (7) in 2003. The text of the subsection was unchanged.

8

agreement, and was therefore entitled to pursue American Express's collection

rights against Alexander. Alexander, however, asserted in an affirmative defense

that that HFC lacked standing to bring suit, and Alexander prevailed when the trial

court entered summary judgment in her favor. In awarding summary judgment in

Alexander’s favor, the trial court found that HFC failed to prove that it was an

assignee of the credit card agreement, and that therefore no contractual relationship

existed between HFC and Alexander. 190 So. 3d at 1116.

Following the entry of summary judgment in her favor, Alexander moved to

recover fees pursuant to both the attorney’s fees provision contained in the credit

card agreement and section 57.105(7). Id. The trial court granted attorney’s fees

in favor of Alexander and the circuit court sitting in its appellate capacity affirmed

the award of attorney’s fees.

On appeal, the Fifth District reversed the fee award. The Fifth District

concluded that the trial court's determination that HFC was not the assignee of the

credit card agreement between American Express and Alexander meant that no

contract existed between HFC and Alexander. The Fifth District, therefore,

reasoned that “[i]f there is no contract between the parties, which would entitle one

to recover attorney's fees in the first place, ‘there is no basis to invoke the

compelled mutuality provisions of’ section 57.105(7).” Id. at 1117 (quoting

Florida Med. Ctr., Inc. v. McCoy, 657 So. 2d 1248, 1252 (Fla. 5th DCA 1995)).

9

The court further held that because no contract existed between the parties,

“Alexander cannot employ section 57.105(7) as a basis for an attorney's fees award

after she proved that HFC never became a party to the contract.” Id. at 1117.

This Court’s opinion in Florida Community Bank is similarly instructive on

the issue of section 57.105(7)’s application within the context of a mortgage

foreclosure. In that case, the appellant bank sought to foreclose the mortgage on

the property of the appellee, Ada Rios (“Rios”). The mortgage at issue contained a

unilateral attorney’s fees provision in favor of the bank. In the motion to dismiss

filed by Rios, she asserted that she never signed the mortgage. Rios further argued

throughout the litigation that her signature on the mortgage documents was

fraudulent. After the bank voluntarily dismissed Rios from its lawsuit, Rios sought

attorney’s fees against the bank based on both the attorney’s fees provision

contained in the mortgage and section 57.105(7). The trial court found that Rios

was entitled to attorney’s fees, and entered a judgment awarding attorney’s fees to

Rios against the bank.

This Court reversed the trial court’s order and held that in order for Rios to

avail herself of section 57.105(7)’s reciprocity as the prevailing party, she “had the

threshold burden to plead and establish that she was a party to the mortgage

containing the fee provision.” 197 So. 3d at 1116. This is so because “[o]nly the

parties to a contract may avail themselves of section 57.105(7)’s entitlement to

10

attorney’s fees.” Id. (emphasis added). This Court therefore reversed the fee

judgment against the bank because Rios’s successful, principal defense was that

she was a non-party to the contract, i.e., the mortgage. Reversal of the fee award

was, therefore, required as Rios could not as a non-party to the contract establish

her ability to invoke section 57.105(7)’s reciprocity. Id.

Here, the trial court specifically found that the Bank lacked standing because

“[t]here was no Assignment of Mortgage, or any other document evidencing a

transfer to the [Bank] prior to the institution of the action.” The trial court also

found that the note was never negotiated in favor of the Bank, and that the Bank

was neither a holder nor non-holder in possession with the rights of a holder. In

awarding final judgment to Fitzgerald, the trial court determined that no contract

existed between the Bank and Fitzgerald. Because the trial court found that no

contract existed between the parties, “which would entitle one to recover attorney’s

fees in the first place, ‘there is no basis to invoke the compelled mutuality

provisions of’ section 57.105(7).” HFC Collection Ctr., 190 So. 3d at 1117.

Therefore, we find that the trial court erred in awarding fees to Fitzgerald based on

a non-existent contract between the parties.

IV. CONCLUSION

Because Fitzgerald successfully obtained a judgment below that the Bank

lacked standing to enforce the mortgage and note against her, we find that no

11

contract existed between the Bank and Fitzgerald that would allow Fitzgerald to

invoke the mutuality provisions of section 57.105(7). Because no contract existed

between the parties, the trial court erred in awarding Fitzgerald attorney’s fees

pursuant to section 57.105(7), and we reverse the trial court’s order awarding fees

in favor of Fitzgerald.

Reversed and remanded.

12/17/2018 NUDEL v. FLAGSTAR BANK, F | 60 So.3d 1163 (2011) | 20110518222 | Leagle.com

https://www.leagle.com/decision/inflco20110518222 1/3

Home / Browse Decisions / So.3d / 60 So.3d / 60 So.3d 1163 (2011)

Email | Print | Comments (0)

NUDEL v. FLAGSTAR BANK, FSBNo. 4D10-3001.

View Case Cited Cases Citing Case

60 So.3d 1163 (2011)

Tatyana NUDEL, Appellant, v. FLAGSTAR BANK, FSB, Unknown Spouse of Tatyana Nudel, Mortgage Electronic Registration Systems, Inc. as Nomineefor Flagstar Bank, FSB, Palm Beach County, Adorno & Yoss, LLP, Unknown Tenant(s) in Possession, and All Other Unknown Parties, including, if anamed Defendant is deceased, the personal representatives, the surviving spouse, heirs, devisees, grantees, creditors, and all other parties claiming,by, through, under or against that Defendant, and all claimants, persons or parties, natural or corporate, or whose exact legal status is unknown,claiming under any of the above named or described Defendants, Appellees.

District Court of Appeal of Florida, Fourth District.

May 18, 2011.

Attorney(s) appearing for the Case

Enrique Nieves of Ice Legal, P.A., Royal Palm Beach, for appellant.

William T. Viergever of Sonneborn Rutter Cooney & Klingensmith, P.A., West Palm Beach, for appellee Flagstar Bank, FSB.

GROSS, C.J.

In this case we hold that a defendant is entitled to recover her attorney's fees as a prevailing party under subsection 57.105(7), Florida Statutes (2009),after the court granted a motion to dismiss a mortgage foreclosure action and dismissed the case without prejudice.

On June 30, 2009, Flagstar Bank sued Tatyana Nudel to foreclose a mortgage. According to the mortgage, Flagstar was de�ned as the "lender" whichlent Nudel $220,000; Mortgage Electronic Registration Systems, Inc., ("MERS") was the "mortgagee" under the instrument, acting as a "nominee" forFlagstar; and Nudel was the "[b]orrower." Under section 22 of the mortgage, the "lender" Flagstar was entitled to reasonable attorney's fees and costsin foreclosure proceedings. MERS assigned the mortgage to Flagstar on August 21, 2009.

Nudel moved to dismiss the complaint, arguing that Flagstar lacked standing because MERS did not assign the bank the mortgage until after the bank�led the complaint. See Fla. R. Civ. P. 1.140(b). The circuit court agreed, granted the motion, and dismissed the case without prejudice on March 29,2010. Nudel moved for attorney's fees and costs on April 15, relying in part on the attorney's fee provision in the mortgage. The circuit court denied themotion for fees, accepting Flagstar's argument that Nudel had waived entitlement to fees under Stockman v. Downs, 573 So.2d 835 (Fla.1991), andSardon Foundation v. New Horizons Service Dogs, Inc., 852 So.2d 416 (Fla. 5th DCA 2003), because she had not sought attorney's fees in her motion todismiss.

Initially, we hold Nudel did not waive her entitlement to attorney's fees. It was proper for her to seek attorney's fees in a motion �led after the entry ofthe dismissal without prejudice, because she had not yet �led a responsive pleading. In Stockman, the supreme court set forth a general rule thatattorney's fee "must be pled" or else they are waived. 573 So.2d at 837-38. Green v. Sun Harbor Homeowner's Ass'n, 730 So.2d 1261, 1263 (Fla. 1998),explained that when the Supreme Court used the phrase "must be pled" in Stockman, it referred to pleadings as those de�ned in Florida Rule of CivilProcedure 1.100(a)—complaints, answers, and counterclaims. Because a motion to dismiss is not a pleading, Stockman does not require the movant toraise the attorney's fee claim in the motion; rather, "a defendant's claim for attorney fees is to be made either in the defendant's motion to dismiss orby a separate motion which must be �led within thirty days following a dismissal of the action. If the claim is not made within this time period, theclaim is waived." Id. Nudel timely moved for attorney's fees within thirty days of the dismissal, so she did not waive her claim.

Additionally, Nudel was entitled to recover her attorney's fees. The mortgage between Nudel and Flagstar entitled Flagstar to reasonable attorney's feesfor enforcement. By operation of subsection 57.105(7), the contractual provision also allows attorney's fees to Nudel if she is the prevailing party. See §57.105(7) ("If a contract contains a provision allowing attorney's fees to a party when he or she is required to take any action to enforce the contract, thecourt may also allow reasonable

[60 So.3d 1165]

1


https://www.leagle.com/decisions

https://www.leagle.com/decisions/browse/series/So.3d

https://www.leagle.com/decisions/browse/series/volume/60%20So.3d

https://www.leagle.com/decision/citedcases/inflco20110518222

https://www.leagle.com/decision/citingcases/inflco20110518222

https://www.leagle.com/attorney/cite/Enrique%20Nieves/NUDEL%20v.%20FLAGSTAR%20BANK%2C%20FSB/inflco20110518222

https://www.leagle.com/attorney/cite/William%20T.%20Viergever/NUDEL%20v.%20FLAGSTAR%20BANK%2C%20FSB/inflco20110518222







1000 Characters Remaining

[60 So.3d 65]

attorney's fees to the other party when that party prevails in any action, whether as plainti� or defendant, with respect to the contract.").

Nudel is the prevailing party within the meaning of subsection 57.105(7). This court has held that a plainti�'s voluntary dismissal makes a defendant a"prevailing party" in the dismissed action even where the plainti� re�les the case and prevails. In Alhambra Homeowners Ass'n v. Asad, 943 So.2d 316,317-18 (Fla. 4th DCA 2006), an association sued some of its homeowners, but voluntarily dismissed its lawsuit without prejudice before a summaryjudgment hearing. The association subsequently re-�led the suit after unsuccessful mediation talks. Id. at 318. In the other, dismissed action, thehomeowners moved for prevailing party attorney's fees. Id. The circuit court found the homeowners to be the prevailing parties and awarded them fees.Id. Following Thornber v. City of Fort Walton Beach, 568 So.2d 914 (Fla. 1990), this court a�rmed. Id. at 318-20. We held that the homeowners were"entitled to recover attorney's fees under a statute awarding fees to the prevailing party in litigation after the plainti� took a voluntary dismissalwithout prejudice." Id. at 317. This was so "even though the plainti� subsequently re�led the identical lawsuit and ultimately prevailed." Id.

For the purpose of determining a "prevailing party" under section 57.105(7), we see no reason to distinguish between a voluntary dismissal withoutprejudice and a court's involuntary dismissal without prejudice. This same conclusion was reached in Bank of New York v. Williams, 979 So.2d 347 (Fla.1st DCA 2008), where the �rst district a�rmed an award of prevailing party attorney's fees on facts similar to those in this case. There, the bank suedthe defendant to foreclose a mortgage. Id. at 347. The defendant moved to dismiss because the bank failed to show that it owned the mortgage andpromissory note and, thus, it lacked standing to sue. Id. The court dismissed a complaint and amended complaint without prejudice; "[w]hen the Bankdeclined to �le a second amended complaint, the trial court dismissed the amended complaint with prejudice." Id. The bank did not appeal this order,but instead instituted a new foreclosure action. Id. In the �rst action, the court awarded the defendant prevailing party attorney's fees and costs. Id.

On appeal, the bank argued that, "because the same factual and legal issues raised in the dismissed action [were] also the subject of the new litigation,[the defendant] [could] [not] be the prevailing party." Id. at 347-48. Relying on a voluntary dismissal without prejudice case, State ex rel. Marsh v.Doran, 958 So.2d 1082 (Fla. 1st DCA 2007), the �rst district rejected the bank's argument. Id. at 348. "The re�ling of the same suit after the voluntarydismissal does not alter the appellees' right to recover prevailing party attorney's fees incurred in defense of the �rst suit." Id. (quoting Doran, 958So.2d at 1082 (citing, inter alia, Alhambra Homeowners Ass'n, 943 So.2d at 319)). Accordingly, the court held that the defendant was the prevailing partyand a�rmed her award. Id. We agree with Williams and conclude that Nudel was a prevailing party entitled to recover attorney's fees.

Finally, we reject Flagstar's argument of estoppel. Flagstar and Nudel were described as the "lender" and "borrower" respectively in the mortgage andthey are bound by it. Flagstar may not seek a�rmative relief under the mortgage and then take the position that provisions of the mortgage do notapply to it. See Ross v. Hacker, 284 So.2d 399 (Fla. 3d DCA 1973).

[60 So.3d 1166]

Reversed and remanded for further proceedings.

POLEN and DAMOORGIAN, JJ., concur.

FootNotes

1. We do not address the grounds for dismissal since Flagstar did not appeal that �nal order.

Comment

Your Name

Your Email

Comments

Submit

Leagle.com reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.








Copyright © 2017, Leagle, Inc. Disclaimer | Terms of Use | Privacy Statement | About Us | Contact Us

https://www.leagle.com/disclaimer

https://www.leagle.com/terms-of-use

https://www.leagle.com/privacy

https://www.leagle.com/about-us

https://www.leagle.com/contact-us

IN THE SUPREME COURT OF FLORIDA

SUPREME COURT CASE NO: SC17-1387

FOURTH DISTRICT CASE NO: 4D15-4561

LOWER COURT CASE NO: 502013DR027304 NBFJ

MARIE ANN GLASS,

Petitioner,

vs.

NATIONSTAR MORTGAGE, et al.

Respondent

BRIEF OF AMICUS CURIAE

FLORIDA LEGAL AID AND LEGAL SERVICES CONSUMER GROUP,

LEGAL SERVICES OF GREATER MIAMI, INC.,

JACKSONVILLE AREA LEGAL AID, INC. AND

FLORIDA ALLIANCE FOR CONSUMER PROTECTION

IN SUPPORT OF PETITIONER, MARIE ANN GLASS

Alice M. Vickers, Esq., FBN: 0402631

FLORIDA ALLIANCE FOR CONSUMER

PROTECTION, INC.

623 Beard Street

Tallahassee, FL 32303

T: 850 556-3121

F: 850 222-3119

[email protected]

Counsel for Florida Alliance for

Consumer Protection, Inc.

Lynn Drysdale, Esq., FBN: 508489

JACKSONVILLE AREA LEGAL AID, INC.

126 West Adams Street

Jacksonville, Florida 32202

T: (904) 356-8371, Ext. 306

F: (904) 515-2662

[email protected]

Counsel for Jacksonville Area Legal

Aid, Inc.

Mandy L. Mills, Esq., FBN: 41654

Matt Bayard, Esq., FBN: 32209

LEGAL SERVICES OF GREATER MIAMI, INC.

4343 West Flagler Street, Ste. 100

Miami, Florida 33134

T&F Mills: (305) 438-2437

T&F Bayard: (305) 438-2413

[email protected]

[email protected]

Counsel for Legal Services of Greater

Miami, Inc.

Mandy L. Mills, Esq., FBN: 41654

LEGAL SERVICES OF GREATER MIAMI,

INC.

4343 West Flagler Street

Miami, FL 33134

T&F: (305) 438-2437

[email protected]

Counsel for Florida Legal Aid and

Legal Services Consumer Group

Filing # 69828270 E-Filed 03/26/2018 08:21:36 PMR

EC

EIV

ED

, 03/

26/2

018

08:2

3:29

PM

, Cle

rk, S

upre

me

Cou

rt

https://maps.google.com/?q=623+Beard+Street+Tallahassee,+FL+32303&entry=gmail&source=g

https://maps.google.com/?q=623+Beard+Street+Tallahassee,+FL+32303&entry=gmail&source=g

tel:(850)%20556-3121

tel:(850)%20222-3119

mailto:[email protected]

i

Table of Contents

STATEMENT OF IDENTITY OF AMICUS CURIAE ........................................... 1

SUMMARY OF ARGUMENT ................................................................................. 2

I. Applying Florida Statute §57.105(7) to Provide Reciprocal Attorney’s

Fees to Defendants, Even When a Plaintiff Fails to Meet its Burden of

Proof, Accomplishes Florida’s Goal of Ensuring Meaningful Access to Civil

Justice to All .......................................................................................................... 4

a. Florida Statute §57.105(7), With its Statutory Fee-Shifting Provision,

Increases Floridians’ Access to the Courts by Financially Incentivizing

Attorneys to Represent People Who Otherwise Would Not Be Able to Afford

an Attorney. ......................................................................................................... 4

i. Lack of access to justice in Florida’s courts is a real, ongoing and

pervasive problem for low- and moderate-income Floridians. ........................... 5

ii. The Florida Legislature Intended that Florida Statute §57.105 Level the

Playing Field........................................................................................................ 7

iii. Other states have enacted similar reciprocal fee statutes in recognition of

the importance of incentivizing attorneys to represent people who would not

otherwise be able to afford an attorney. .............................................................. 8

b. Justice Should Not Be Limited to Those Who Can Afford to Hire an

Attorney. ............................................................................................................12

c. Mortgage foreclosure defendants’ access to legal representation promotes

judicial economy and efficiency ........................................................................16

CONCLUSION .......................................................................................................17

CERTIFICATE OF SERVICE ................................................................................18

CERTIFICATE OF FONT COMPLIANCE ...........................................................18

ii

TABLE OF AUTHORITIES

Cases

Bank of New York v. Bell, 23 A.3d 121, 126 (Conn. Super. Ct. 2011) ............. 11, 12

Bilanzich v. Lonetti, 160 P. 3d 1041 (Utah 2007)...................................................... 9

Brodkin v. Tuhaye Golf, LLC, 355 P. 3d 244 (Utah App. 2015) .........................9, 10

Fraiser v. ETA Ass’n. Inc., 580 A.2d 94, 96 (Conn. Super. Ct. 1990) ....................12

Hooban v. Unicity International Inc., 285 P. 3d 766 (Utah 2012) ..........................10

Hsu v. Abbara, 9 Cal. 4th 863 (Cal. 1995) ...............................................................11

International Billing Services v. Emigh, 84 Cal. App. 4th 1175 (2000)...................10

Port-A-Weld v. Padula & Wadsworth Construction, 984 So.2d 564, 570 (Fla. 4th

DCA 2008) ............................................................................................................14

Statutes

§57.105(7), Fla. Stat. (2018) ............................................................................ passim

Cal. Civ. Code § 1717 ....................................................................................... 10, 11

Conn. Gen. Stat. Ann. § 42–150bb ................................................................... 11, 12

Utah Code § 78B-5-826 .........................................................................................8, 9

Other Authorities

Federal Reverse Mortgage Program Results in Widows Losing Their Homes After

Death of Spouse, March 12, 2018, California Reinvestment Coalition ........ 14, 15

Gary Blankenship, Civil Legal Assistance Act Vetoed, Florida Bar News, June 15,

2005 ................................................................................................................ 12, 13

In re: Florida Commission on Access to Civil Justice, Administrative Order 14-15

Corrected, November 24, 2014 ...........................................................................5, 6

Journal of the House of Representatives for Regular Session 1988, Vol. II, April 5,

1988. ........................................................................................................................ 7

Journal of the Senate for Regular Session 1988, April 5, 1988. ............................... 7

Legal Services Corporation Leaders Confident of Bipartisan Support in Wake of

Defunding Proposal, Press Release by LSC, February 12, 2018 .........................12

Melanca Clark and Maggie Barron, Foreclosures: A Crisis in Legal

Representation, 22-24 (2009), Brennan Center for Justice at New York

University School of Law .....................................................................................14

iii

New FOIA Response from HUD Reveals 646% Increase in Foreclosures against

Seniors in 2016, November 15, 2017, California Reinvestment Coalition…….14

Ramón A. Abadin, Filling the Civil Justice Gap with a New Business Model,

Florida Bar Journal, November 2015, Vol. 89 ...................................................6, 7

Senate Journal, April 21, 1988. ................................................................................. 7

Senate Staff Analysis, Florida State Archives, Series 18 Carton 1694. .................... 8

Study Shows Free Legal Assistance for the Poor are Good for Business, WLRN

Public Radio and Television, February 9, 2017 ............................................ 12, 13

The Justice Gap: Measuring the Unmet Civil Legal Needs of Low-Income

Americans 61, Appendix Table B1.1, Legal Services Corporation (June 2017) 12,

13

1

STATEMENT OF IDENTITY OF AMICUS CURIAE

AND INTEREST IN THE CASE

The Florida Legal Aid and Legal Services Consumer Law Group (“Florida

Public Interest Consumer Law Group”) is an unincorporated Florida statewide

association of approximately 100 public interest, not-for-profit attorneys – from

independent, county, and regional legal aid and legal service organizations, as well

as law professors from Florida law schools and private attorneys specializing in

consumer protection law.

Legal Services of Greater Miami, Inc., (“LSGMI”) is a nonprofit civil legal

services program providing services to the poor in Miami-Dade and Monroe

Counties. The program’s dedicated attorneys represent the most vulnerable in the

community in a wide range of administrative and civil cases affecting health, income

and housing, including foreclosures of reverse and traditional mortgages.

Jacksonville Area Legal Aid, Inc. (“JALA”) is a not-for-profit civil legal

services program providing quality services to the low to working-poor members of

its seventeen (17) county community on issues relating to shelter, income and quality

of life. One of the organization’s many areas of expertise include assisting elderly

consumers who would otherwise lack the ability to access the system of justice in

Florida.

Florida Alliance for Consumer Protection (“FLACP”) is a statewide, not-for-

profit organization that was formed by individuals who provide legal services to

2

consumers and who act as advocates for consumers in the public policy arena, as

well as other individuals who are concerned about protecting Florida’s consumers.

FLACP advances consumer protection through research, education and advocacy.

The Court’s determination in this case will have a direct impact on low-

income individuals’ ability to access Florida’s justice system when they are forced

to defend contract claims, such as with reverse mortgages, when the contract

contains a one-sided attorney’s fee provision. Amicus Curiae are particularly

interested in this case because its organizations have a history of advocating to

protect vulnerable homeowners facing foreclosure, specifically homeowners with

reverse mortgages. Part of that advocacy includes protecting the fundamental issue

of access to courts for homeowners facing foreclosure. In short, amicus curiae

believe it is imperative that the Court be made aware of how the application of

Florida Statute section 57.105(7) affects our most vulnerable citizens.

SUMMARY OF ARGUMENT

In recent years both the Florida Supreme Court and the Florida Bar have

recognized that the lack of access to the courts for low-income Floridians is a

serious impediment to the fair administration of justice in this state. Like the

defendant in the case now before this Court, many elderly Florida homeowners

have faced, and will continue to face, foreclosure actions of dubious merit. To be

able to meaningfully assert their rights under the law, these homeowners must be

3

able to retain competent legal counsel, as Marie Ann Glass did. Florida Statute

section 57.105(7) is one of the few mechanisms available to low-income Floridians

to obtain legal counsel when faced with the terrifying prospect of losing their

homes.

Underlying the purpose behind Florida Statute section 57.105(7) is the goal

of promoting fairness between parties of unequal bargaining power. This idea is

not unique to Florida. Some of our sister states have enacted reciprocal attorney’s

fees statutes that are similar to Florida Statute section 57.105(7). Courts in these

respective states have uniformly found that their legislators believed these statutes

were necessary to level the playing field and to place the burden of litigation costs

where it properly belonged, on the party with the poorly thought out claim.

The authors of this Amicus Brief have extensive experience representing

elderly homeowners faced with reverse mortgage foreclosure. The elderly

population of Florida is one of its most vulnerable and is at risk to exploitation.

Examples abound of financial institutions foreclosing upon reverse mortgages on

questionable legal grounds. Involvement of counsel on behalf of the homeowner

can almost always prevent a miscarriage of justice in these cases. However, legal

aid and legal service organizations cannot provide representation to all who

deserve it. Legal aid and legal services organizations lack the necessary resources

to address all these issues, including foreclosure, and many homeowners with

4

meritorious defenses will go unrepresented. The involvement of private attorneys

on behalf of homeowners is crucial to ensuring these Floridians have the

opportunity to assert their rights. It is only by allowing Marie Ann Glass, and many

others like her, to recover the attorney’s fees she incurred while defending her

home that all Floridians, regardless of economic status, will have access to justice.

I. Applying Florida Statute §57.105(7) to Provide Reciprocal Attorney’s

Fees to Defendants, Even When a Plaintiff Fails to Meet its Burden of Proof,

Accomplishes Florida’s Goal of Ensuring Meaningful Access to Civil Justice

to All

Florida Statute section 57.105(7) promotes access to justice for Floridian’s

when they are forced to defend themselves in contract cases, like reverse mortgage

foreclosures, where the contract contains a one-sided attorney’s fee provision. The

attorney’s fee reciprocity provision in Florida Statute section 57.105(7)

incentivizes attorneys to represent people such contract cases who otherwise would

not be able to afford an attorney.

a. Florida Statute §57.105(7), With its Statutory Fee-Shifting Provision,

Increases Floridians’ Access to the Courts by Financially Incentivizing

Attorneys to Represent People Who Otherwise Would Not Be Able to

Afford an Attorney.

When faced with foreclosure, many Floridians lack the funds necessary to

hire legal counsel. The consequence of this is that Defendants with meritorious

defenses cannot afford the key to the Courtroom. Judges are not allowed to assist

either party, so Plaintiffs with legally insufficient claims and claims subject to

5

defensive attack nonetheless prevail, and elderly homeowners such as Ms. Glass,

many of whom are low-income, lose their homes and stability without meaningful

participation in the process. Most mortgage documents contain a one-sided

attorney’s fees provisions providing that the mortgagee may recoup attorney’s fees

from the homeowner if it must enforce the mortgage, like with a foreclosure. If a

homeowner wants legal counsel to help defend the foreclosure, she can only do so

if she can afford an attorney or hope that our extremely limited legal services

organizations can take on the case. Florida Statute section 57.105(7), goes a long

way in evening the playing field. This promise of an award of attorney’s fees upon

prevailing incentivizes attorneys to represent people who otherwise would not be

able to find an attorney, and also allows homeowners to recoup fees paid to an

attorney if the homeowner could afford to pay. This means a prevailing

homeowner does not end up with the bill when they win just like the mortgagee

gets to ask for fees if it prevails.

i. Lack of access to justice in Florida’s courts is a real, ongoing and

pervasive problem for low- and moderate-income Floridians.

The Supreme Court of Florida recognizes the existence and negative impact

of the unmet civil legal needs of disadvantaged, low-income and moderate-income

Floridians. See In re: Florida Commission on Access to Civil Justice,

Administrative Order 14-65 Corrected, November 24, 2014. In fact, the Court

6

established the Florida Commission on Access to Civil Justice to study and address

such unmet civil legal needs. Id. In its Administrative Order establishing this

Commission, the Court recited specific problems that low- and moderate-income

people face when accessing the courts. During its review of the instant case, the

Court should interpret Florida Statute §57.105(7) through the lens of its

acknowledgement of these specific and pervasive court-access problems. The more

pertinent acknowledgments of the Court include:

“the American and Florida judicial systems are founded upon the

fundamental principle that justice should be accessible to all persons,

the advancement of which is of profound interest to the Supreme

Court of Florida; . . . access to civil justice for lower income and

disadvantaged persons is a critical challenge for the legal system,

especially in difficult economic times; . . . the population that is

eligible for Legal Services Corporation-funded legal services has

grown dramatically in recent years while at the same time federal

funding for the Legal Services Corporation declined approximately

seventeen percent from 2010 to 2012; . . . [despite the efforts of many

groups to help,] Floridians continue to encounter barriers when

seeking meaningful and informed access to the civil justice system; . . .

the Supreme Court of Florida recognizes the importance of

responding to the unmet legal needs of low and moderate income

Floridians, the increasing complexity of civil legal services delivery,

the importance of access to civil justice in the proper functioning of

our democracy, and the need for leadership and effective coordination

of access to civil justice efforts in Florida; . . . .” Id. (emphasis added).

In 2015 then-Florida Bar President Ramón A. Abadin identified lack of

access to competent legal counsel as a significant barrier to justice for low-income

7

people. “When confronted with a civil legal problem, 30 percent of low-income

Americans give up and seek no legal redress. Many working-class Floridians earn

too much to qualify for legal aid, but not enough to hire an attorney.” Ramón A.

Abadin, Filling the Civil Justice Gap with a New Business Model, Florida Bar

Journal, November 2015, Vol. 89, p. 4. He went on to advocate for a legal system

that treats all people fairly: “We have a justice crisis in Florida that makes the

fundamental principle that justice should be accessible to everyone-- regardless of

economic status or disadvantage--nothing more than a theory. We must work with

all deliberate speed to address this crisis.” Id.

ii. The Florida Legislature Intended that Florida Statute §57.105 Level the

Playing Field

The meager legislative history that remains makes it clear Florida Statute

§57.105(7) was intended to provide access for all parties to have legal

representation. During the 1988 Florida legislative session both Senate Bill 2151 in

the Senate and House Bill 1142 in the House were introduced. Senate Judiciary –

Civil passed its Bill unanimously.3 House Judiciary passed the measure 12 to 1,

including a favorable vote by now Justice Canady.4 Committee staff analyses for

1 Journal of the Senate for Regular Session 1988, April 5, 1988. 2 Journal of the House of Representatives for Regular Session 1988, Vol. II, April

5, 1988. 3 Senate Journal, April 21, 1988. 4 Id.

8

the most part provide only the language of the bill, itself, as explanation –

indicating the plain reading of the statutory language was sufficient – if “a contract

allowed one party to recover attorney’s fees when he is required to take any action

to enforce the contract, the court could also award attorney’s fees to the other party

if that party prevailed in any action related to the contract.”5 Both bills passed the

floor of each house unanimously, with a minor amendment as to the retroactivity

of the provision. Governor Martinez signed the bill into law.

iii. Other states have enacted similar reciprocal fee statutes in recognition

of the importance of incentivizing attorneys to represent people who

would not otherwise be able to afford an attorney.

A number of other states have enacted reciprocal attorney fee statutes that

are similar to Florida Statute section 57.105(7). In interpreting their statutes, courts

in these other states have recognized that their legislatures’ fundamental purpose in

enacting these statutes was to promote the idea of fairness between parties of

unequal bargaining power. These Courts found strong public policy reasons for

ensuring that both sides in litigation stood on equal footing.

Utah’s attorney fee statute is similar in wording to Florida Statute section

57.105(7).6 The Utah Supreme Court interpreted the statute in the following way,

5 Senate Staff Analysis, Florida State Archives, Series 18 Carton 1694. 6 Utah Code § 78B-5-826 [Formerly cited as 78–27–56.5]: “A court may award

costs and attorney fees to either party that prevails in a civil action based upon any

promissory note, written contract, or other writing executed after April 28, 1986,

9

“Utah Code section [Formerly cited as UT ST § 78-27-56.5] was designed to

‘creat[e] a level playing field’ for parties to a contractual dispute. . . The statute

levels the playing field by allowing both parties to recover fees where only one

party may assert such a right under contract, remedying the unequal allocation of

litigation risks built into many contracts of adhesion. In addition, this statute

rectifies the inequitable common law result where a party that seeks to enforce a

contract containing an attorney fees clause has a significant bargaining advantage

over a party that seeks to invalidate the contract. The former could demand

attorney fees if successful, while the latter could not. . . .” Bilanzich v. Lonetti, 160

P.3d 1041(Utah2007)(internal cites omitted).

Subsequent Utah appellate courts found the statute applied to litigants who

sought to enforce a contract of which they were later determined to have no right to

enforce. “Moreover, ‘an action is ‘based upon’ a contract under the statute if a

‘party to the litigation assert[s] the writing's enforceability as basis for recovery.’. .

That condition results when a litigant ‘rested his claims in the district court on a

right to enforce the [contract]’ even if he is ultimately ‘deemed a stranger to the

contract’ with ‘no rights to enforce it or obligations under it.’” Brodkin v. Tuhaye

when the provisions of the promissory note, written contract, or other writing allow

at least one party to recover attorney fees.”

10

Golf, LLC, 355 P. 3d 244 (Utah App. 2015) (quoting Hooban v. Unicity

International Inc., 285 P. 3d 766 (Utah 2012)(internal citation omitted).

California’s reciprocal fee statute is found at Cal. Civ. Code § 1717.7 In

interpreting the law, one state appellate Court held, “The reciprocity provision of

section 1717 was designed to prevent overreaching in litigation. Absent the

reciprocity provision, contracting parties with superior economic bargaining power

would routinely insert one-sided fees provisions in contracts. In the event of a

dispute, and regardless of the merits vel non of the disputant's claims, the drafting

party would have an unfair litigation advantage from the outset: Even if it lost, it

would only have to pay contract damages; if it won, the weaker party would also

have to pay fees. ‘One-sided attorney's fees clauses can thus be used as instruments

of oppression to force settlements of dubious or unmeritorious claims. . . Section

1717 was obviously designed to remedy this evil.’ . . . Thus, section 1717

represents an important public policy protecting those ‘who may be in a

disadvantageous contractual bargaining position....’” International Billing Services

v. Emigh, 84 Cal. App. 4th 1175 (2000)(internal cites omitted)(emphasis added).

7 Subsection (a) of the statute states: “In any action on a contract, where the

contract specifically provides that attorney's fees and costs, which are incurred to

enforce that contract, shall be awarded either to one of the parties or to the

prevailing party, then the party who is determined to be the party prevailing on the

contract, whether he or she is the party specified in the contract or not, shall be

entitled to reasonable attorney's fees in addition to other costs.”

11

The California Supreme Court has recognized the importance of its state’s

attorney fee statute in preventing inherent unfairness between parties to a contract.

“As this court has explained, ‘[s]ection 1717 was enacted to establish mutuality of

remedy where [a] contractual provision makes recovery of attorney's fees available

for only one party, and to prevent oppressive use of one-sided attorney's fees

provisions. ’ . . . The statute would fall short of this goal of full mutuality of

remedy if its benefits were denied to parties who defeat contract claims by proving

that they were not parties to the alleged contract or that it was never formed. To

achieve its goal, the statute generally must apply in favor of the party prevailing on

a contract claim whenever that party would have been liable under the contract for

attorney fees had the other party prevailed.” Hsu v. Abbara, 9 Cal. 4th 863 (Cal.

1995)(internal citations omitted)(emphasis added).

Perhaps the clearest articulation of the policy reasons underlying a reciprocal

fee statute came from a Connecticut appellate court in reviewing its state law.8

“Not only will this [Conn. Gen. Stat. Ann. § 42–150bb] discourage frivolous suits,

but it will place the burden where it belongs—on the party with the poorly thought

8Conn. Gen. Stat. Ann. § 42–150bb provides in relevant part: “Whenever any

contract or lease entered into on or after October 1, 1979, to which a consumer is a

party, provides for the attorney's fee of the commercial party to be paid by the

consumer, an attorney's fee shall be awarded as a matter of law to the consumer

who successfully prosecutes or defends an action or a counterclaim based upon the

contract or lease.”

12

out complaint or hastily conceived writ. It will also discourage vexatious litigation

and the use of pretrial discovery and depositions to harass defendants.” Bank of

New York v. Bell, 23 A.3d 121, 126 (Conn. Super. Ct. 2011)(quoting Fraiser v.

ETA Ass’n. Inc., 580 A.2d 94, 96 (Conn. Super. Ct. 1990)).

Courts in each of these states have identified strong public policy reasons

underlying their reciprocal fees statutes. Perhaps in no other area is the idea of

fairness between parties of unequal bargaining power more important that in the

reverse mortgage context. Elderly reverse mortgage borrowers are often retired and

living on fixed and limited incomes. Lending institutions, on the other hand, have

near-unlimited resources to pay for their attorney’s fees and court costs when they

seek to divest these borrowers of their homes. Reciprocal attorney’s fee provisions

like that in Florida Statute section 57.105(7), help promote access to justice.

b. Justice Should Not Be Limited to Those Who Can Afford to Hire an

Attorney.

Legal services and legal aid organizations do not have the resources to

handle all cases for low to moderate income defendants, and these organizations’

resources are consistently at risk of reduction.9 In Florida, 21.1% of Floridians are

9 President Trump’s Fiscal Year 2019 budget calls for defunding the Legal

Services Corporation (LSC). See Legal Services Corporation Leaders Confident of

Bipartisan Support in Wake of Defunding Proposal, Press Release by LSC,

February 12, 2018, https://www.lsc.gov/media-center/press-releases/2018/legal-

services-corporation-leaders-confident-bipartisan-support. Funding for legal aid

https://www.lsc.gov/media-center/press-releases/2018/legal-services-corporation-leaders-confident-bipartisan-support

https://www.lsc.gov/media-center/press-releases/2018/legal-services-corporation-leaders-confident-bipartisan-support

13

considered low-income (i.e. their income is below 125% of the Federal Poverty

Level). See The Justice Gap: Measuring the Unmet Civil Legal Needs of Low-

Income Americans 61, Appendix Table B1.1, Legal Services Corporation (June

2017). According to LSC’s Justice Gap Measurement Survey, “[s]eventy-one

percent of low-income households have experienced at least one civil legal

problem in the past year. Many of these households have had to deal with several

issues. Indeed, more than half (54%) faced at least two civil legal problems and

about one in four (24%) has faced six or more in the past year alone. Id. at 21.

“More than half (53% to 70%) of the problems that low-income Americans bring

to [Legal Services Corporation] grantees will receive limited legal help or no legal

help at all because of lack of resources to serve them.” Id. at 13. These disturbing

figures do not even count individuals whose income exceeds the low-income level,

but who still cannot afford an attorney.

under Florida’s Access to Civil Legal Assistance Act has been vetoed for a number

of years. (See Gary Blankenship, Civil Legal Assistance Act Vetoed, Florida Bar

News, June 15, 2005, https://www.floridabar.org/news/tfb-

news/?durl=%2Fdivcom%2Fjn%2Fjnnews01.nsf%2F8c9f13012b96736985256aa9

00624829%2Fe75ee07d35c695ed852570180064e29f,

http://legalservicesmiami.org/2014/06/09/governor-scott-vetoes-facla-funding-for-

legal-aid-programs-statewide/. Also, Florida’s IOTA funds, which help fund legal

assistance to Florida’s poor, have decreased significantly over the years as interest

rates have remained low. See Study Shows Free Legal Assistance for the Poor are

Good for Business, WLRN Public Radio and Television, February 9, 2017,

http://wlrn.org/post/study-shows-free-legal-services-poor-are-good-business-not-

just-feel-good, and https://thefloridabarfoundation.org/media-kit/fact-sheet/.

https://www.floridabar.org/news/tfb-news/?durl=%2Fdivcom%2Fjn%2Fjnnews01.nsf%2F8c9f13012b96736985256aa900624829%2Fe75ee07d35c695ed852570180064e29f



http://legalservicesmiami.org/2014/06/09/governor-scott-vetoes-facla-funding-for-legal-aid-programs-statewide/

http://legalservicesmiami.org/2014/06/09/governor-scott-vetoes-facla-funding-for-legal-aid-programs-statewide/

http://wlrn.org/post/study-shows-free-legal-services-poor-are-good-business-not-just-feel-good

http://wlrn.org/post/study-shows-free-legal-services-poor-are-good-business-not-just-feel-good

https://thefloridabarfoundation.org/media-kit/fact-sheet/

14

It is important that those who do not qualify for help from legal aid or legal

services organizations have access to competent legal representation. Lawyers

assist homeowners by ensuring that lenders meet the necessary legal requirements

to bring a claim. See Melanca Clark and Maggie Barron, Foreclosures: A Crisis in

Legal Representation, 22-24 (2009), Brennan Center for Justice at New York

University School of Law. When lawyers represent the poor, they “are on the front

lines in protecting homes from foreclosure [and] can perform a critical function in

sharing their clients’ perspectives on the crisis with state legislatures and local

governing bodies.” Id., at 25-26.

The need for access to quality counsel, is highlighted by data provided by

the United States Department of Housing and Urban Development showing that

reverse mortgage foreclosures have increased at least 646% from 2009 to 2016.

See New FOIA Response from HUD Reveals 646% Increase in Foreclosures

against Seniors in 2016, November 15, 2017, California Reinvestment Coalition.10

Data from HUD relating to just one lender revealed a 302% increase in its

foreclosures filed. Id. During that period of time there were at least 13,600 reverse

mortgage foreclosures filed in Florida. Id. In fact, a program created by HUD to

turn around the tide of increased reverse mortgage foreclosure lawsuits filed

10 Article located at http://www.calreinvest.org/news/new-foia-response-from-hud-

reveals-646-increase-in-foreclosures-against-seniors-in-2016.

http://www.calreinvest.org/news/new-foia-response-from-hud-reveals-646-increase-in-foreclosures-against-seniors-in-2016

http://www.calreinvest.org/news/new-foia-response-from-hud-reveals-646-increase-in-foreclosures-against-seniors-in-2016

15

against widows and widowers has not been successful. See Federal Reverse

Mortgage Program Results in Widows Losing Their Homes After Death of Spouse,

March 12, 2018, California Reinvestment Coalition.11

An example of a Florida reverse mortgage foreclosure case where counsel

was crucial involved an elderly couple, both who were hard of hearing, who were

sued because they “no longer occupied their home.” Nationstar v. Thompson, et al.

Case Number: 2014-CA-000252, Duval County, Florida, Docket Entry Number 5,

Complaint and attachments thereto. Their alleged default was failure to return an

occupancy form, even though this form was not required by the note or mortgage,

it was the trigger for the foreclosure. Id. The complaint was served on them at their

home, indicating the home was “owner occupied” meaning either service was not

proper or they lived in their home. Id. Docket Entries Numbered 25 and 30, return

of service of summons.

They initially had a private attorney who withdrew and a foreclosure

judgment was entered. Id. Docket Entries Number 46 and 58, Order of

Withdrawal and Final Judgment. The Plaintiff purchased the property at the

foreclosure sale and obtained a Writ of Possession. Id. Docket Entries Numbered

74 and 77, Writ issued and served. Everything the couple owned was thrown in

11 Article located at http://www.calreinvest.org/news/federal-reverse-mortgage-

program-results-in-widows-losing-their-homes-after-death-of-spouse.

http://www.calreinvest.org/news/federal-reverse-mortgage-program-results-in-widows-losing-their-homes-after-death-of-spouse

http://www.calreinvest.org/news/federal-reverse-mortgage-program-results-in-widows-losing-their-homes-after-death-of-spouse

16

their front yard, most of it then stolen, and they were forced to live with relatives.12

They finally were directed to a legal aid attorney who got the judgment, sale and

title set aside. Id. Docket Entry 82.

Similarly, a 90 year old Florida widow was served with two reverse

mortgage foreclosure lawsuits in less than two years. Onewest Bank, N.A. v.

Lofton, Polk County Case Number: 2014-CA-004708 (“Onewest”) and CIT Bank,

N.A. v. Lofton, Polk County Case Number: 2016-CA-001327 (“CIT”). The first

foreclosure was for “non-occupancy.” The complaint was served on her at her

home and her son was able to resolve the foreclosure. Id. Onewest at Docket

Entries 4 and 19. Then she was sued again, this time because the Plaintiff stated

she owed it 27 cents. She had misread a bill for force-placed insurance and sent in

3 cents rather than the 30 cents required. It took counsel assisting her in getting the

second foreclosure resolved. Id. CIT Docket Entry 35, Amended Answer,

Affirmative Defenses and Counterclaims.

c. Mortgage foreclosure defendants’ access to legal representation promotes

judicial economy and efficiency

Additionally, increasing attorney representation of foreclosure defendants

promotes time- and cost-effective litigation. With the prospect of obtaining

12 See, http://jacksonville.com/news/metro/2014-12-15/story/judge-lets-couple-

back-home-while-foreclosure-case-continues

http://jacksonville.com/news/metro/2014-12-15/story/judge-lets-couple-back-home-while-foreclosure-case-continues

http://jacksonville.com/news/metro/2014-12-15/story/judge-lets-couple-back-home-while-foreclosure-case-continues

17

prevailing party attorney’s fees, attorneys will be incentivized to take on cases with

true merit for the chance to win, end the case, and get fees. Without the potential

for true reciprocity in awarding attorneys’ fees, many defendants either go without

counsel or scrounge what little money they have to pay foreclosure defense

attorneys who charge monthly flat fees for the service of staving off the

inevitable—a foreclosure judgment and sale of the home. The prospect of

prevailing party attorney’s fees encourages foreclosure counsel to effectively

prosecute, as opposed to delay the case. Meaningful case selection and acceptance

based upon merit would help unclog the courts’ dockets and help promote judicial

economy. Also, Judges will spend less time having to explain matters to pro se

defendants and will get relief from feeling ethically challenged to not provide legal

advice to pro se defendants.

CONCLUSION

This Court should consider the serious impact Florida Statute section

57.105(7) has on elderly and low-income Floridian’s access to justice when

interpreting the application of the statute’s attorney’s fees reciprocity provision.

Respectfully Submitted,

/s/ Lynn Drysdale

Lynn Drysdale, Esq.

18

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on March 26, 2018, I electronically filed the

foregoing document with the Clerk of Court using the eDCA Filing Portal. I also

certify that the foregoing document is being served this day on all counsel of

record by electronic mail, pursuant to Florida Rules of Judicial Administration

2.516 on Marc James Ayers, Esquire; Counsel for Respondent, Bradley Arant

Boult Cummings LLP, One Federal Place, 1819 Fifth Avenue North, Birmingham,

Alabama 35203-2104 via [email protected] and F. Malcolm Cunningham, Jr.,

Esquire and Amy L. Fischer, Esquire, The Cunningham Law Firm, P.A., Counsel

for Petitioner, 400 So. Australian Avenue, Suite 700, West Palm Beach, Florida

33401 via [email protected] and [email protected] on

this 26th day of March, 2018.

/s/Lynn Drysdale

Lynn Drysdale

FBN: 508489

CERTIFICATE OF FONT COMPLIANCE

I certify that the lettering in this brief is Times New Roman 14-point Font

and complies with the font requirements of Florida Rule of Appellate Procedure

9.210(a)(2).

/s/ Lynn Drysdale

Lynn Drysdale, Esq.




Foreclosure Litigation: Emerging Jurisprudence

Documents

Transcript of Foreclosure Litigation: Emerging Jurisprudence