Locke Lord QuickStudy: All Subsequent Payments: Second District of Florida Overturns Judgment in Favor of Borrower and Clarifies Bartram Holding on Statute of Limitations

On April 27, 2018, Locke Lord obtained an opinion in a Florida District Court of Appeal matter overturning a judgment that had incorrectly dismissed a foreclosure action on the basis that it was improper to allege pre-dismissal defaults. This is a significant development in Florida mortgage foreclosure law that will benefit all mortgage lenders and servicers.

In HSBC Bank USA, National Association, as Trustee v. Clare Nelson, et al., Case No. 2D17-740 (Fla. 2d DCA, April 27, 2018), the Second District Court of Appeal considered whether it was improper to allege defaults that occurred before the dismissal of a prior foreclosure action. After oral argument, the Second District concluded that “regardless of whether HSBC’s August 8, 2008, complaint was dismissed with or without prejudice, its February 7, 2013 complaint alleged a separate and distinct default entitling it to pursue foreclosure, notwithstanding that the complaint also alleged the pre-dismissal defaults.”

At the trial court level, the borrower argued that Bartram v. U.S. Bank Nat. Ass’n, 211 So. 3d 1009, 1011 (Fla. 2016) necessitated dismissal for failure to allege an initial post-dismissal default. But the Second District noted that Florida Supreme Court actually held that a foreclosure action could be brought on the same default as long as the action was brought within five years of the default date.

The Second District further confirmed that it is sufficient to allege a default based on “all subsequent payments” when bringing a foreclosure action that includes a default that occurs pre-dismissal or even outside the statute of limitations.

The Second District also declined to apply the tipsy coachman doctrine to affirm the dismissal based on alleged non-compliance with the mortgage agreement. The doctrine allows an appellate court to affirm a trial court that reaches the right result, but for the wrong reasons. The Second District held that it “cannot employ the tipsy coachman rule where a lower court has not made factual findings on an issue and it would be inappropriate for an appellate court to do so.” The Court also found that argument was outside the scope of review on this appeal.

Impact: Alleging that “all subsequent payments” have been missed in a foreclosure action in Florida is sufficient to avoid dismissal based upon the statute of limitations.

The court’s ruling clarifies that it is sufficient to allege either a pre-dismissal default date or an initial default date that is outside the statute of limitations as long as the complaint alleges a default on “all subsequent payments.”