Mortgage Foreclosure Action Barred By Statute Of Limitations Based On Prior Involuntary Dismissal Without Prejudice

Introduction

On Dec. 17, 2014, Florida's Third District Court of Appeal (Third District) issued its opinion in Deutsche Bank Trust Company Americas v. Beauvais, __ So. 3d __ (Fla. 3rd DCA 2014), holding that an involuntary dismissal without prejudice of a mortgage foreclosure action "did not by itself negate, invalidate or otherwise decelerate the lender's acceleration of the debt in the initial action." Without reinstatement or modification following the lender's acceleration of the debt, there were no new payments due and, therefore, no new default. Accordingly, the second action—filed more than five years after the lender accelerated the debt in the first action—was barred by the statute of limitations.

The Decision In Beauvais

In January 2007, American Home Mortgage Servicing, Inc. (AHMS) filed a mortgage foreclosure action against Beauvais after he defaulted on his mortgage payments in September 2006 (the Initial Action). The note and mortgage were executed Feb. 10, 2006, in the principal amount of $1,440,000 for his purchase of a condominium in Miami Beach, Fla. The action was dismissed without prejudice Dec. 6, 2010, when AHMS failed to appear at a case management conference. AHMS did not appeal and took no further action regarding its acceleration of the payments.

Following the involuntary dismissal without prejudice, Aqua Master Association, Inc., the condominium association (Association), foreclosed its lien on the property based on Beauvais' failure to pay assessments. Title to the property was issued to the Association subject to the AHMS mortgage.

Deutsche Bank, based on a mortgage assignment from AHMS, filed a subsequent mortgage foreclosure action Dec. 18, 2012, alleging that Beauvais defaulted by failing to make the payment due Oct. 1, 2006, and all subsequent payments. The trial court granted the Association's summary judgment motion finding that (i) the action was barred by the statute of limitations because it was filed more than five years after the Initial Action in January 2007; and (2) the mortgage was null and void.

On appeal, Deutsche Bank argued the involuntary dismissal effectively "decelerated" the loan and reinstated Beauvais' payment obligations. Consequently, Deutsche Bank argued that when Beauvais failed to timely make his payment on Oct. 1, 2006, one month after the default date in the Initial Action, it was a new default, giving Deutsche Bank the contractual right to accelerate the loan payments.

The Third...