Acceleration of Debt in Mortgage Foreclosures: Beware of the Statute of Limitations

Mortgage foreclosures in Florida took an interesting twist in December 2014, due to the recent decision in Deutsche Bank Trust Company, et al. v. Beauvais, et al. This decision effects the time period for bringing foreclosure claims in the event of acceleration and a prior dismissal of a foreclosure lawsuit.

In Beauvais, the court addressed the effect of a lender’s involuntary dismissal without prejudice of its foreclosure suit, when the lender accelerated all payments due. This Florida appeals court held the lender’s acceleration of payments triggered the running of the statute of limitations and, because the loan was never reinstated after a dismissal without prejudice, the statute of limitations did not start anew. Therefore, the subsequent action (on the same payment default) was time barred.

The facts in Beauvais can be summarized as follows:

• January 2007 – original lender filed foreclosure action, accelerating all payments due (the “2007 Lawsuit”). The date of default was alleged to be October 2006.
• December 2010 – 2007 Lawsuit dismissed without prejudice.
• 2011 – condominium association, where the subject property was located, obtained title to the property because of assessments owed.
• December 2012 – plaintiff (assignee of original lender) filed its foreclosure action, alleging the same payment default date as that in the 2007 Lawsuit (the “2012 Lawsuit”).

The condominium association in Beauvais moved for summary judgment, arguing the 2012 Lawsuit was barred by the five-year statute of limitations, since the claim accrued in October 2006 (the date of default sued on in both lawsuits). The trial court agreed with the association, finding the lender’s action in the 2012 Lawsuit was time barred. As a result, the trial court also found the mortgage was null and void.

The appeals court agreed the 2012 Lawsuit was time barred because the lender never reinstated the installment terms of the note. Since the loan was not reinstated and there was no adjudication on the merits of the 2007 lawsuit, the statute of limitations continued to run on the October 2006 default. Without an adjudication on the merits of the 2007 Lawsuit, the acceleration of the debt remained in place, and the entire balance of the debt remained immediately due.

The appeals court, however, disagreed the mortgage was null and void. The appeals court reasoned the applicable statute of repose, section 95.281 of the Florida Statutes, had not expired and, therefore, the mortgage was still valid.

As a result of the ruling in Beauvais, lenders and borrowers in a mortgage foreclosure setting must be aware of possible statute of limitations implications in the event of a dismissal without prejudice.