3rd DCA Florida Decides Statute of Limitations: Deutsch Loses

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see Third DCA – Beauvais Decision

In the Third District Court of Appeal, Florida, the Court decided Deutsch v Beauvais against the alleged “creditor” Deutsch.. Dozens of appellate decisions across the country are reversing a long-standing pattern of rubber stamping trial courts who exceeded their discretion, authority or even jurisdiction. This case affirms the trial court’s decision that the action was barred by the statute of limitations but reverses the trial court’s decision that the mortgage was null and void. How they reached this decision is going to be a matter in dispute and possibly the subject of a Florida Supreme Court decision soon.

The basic thrust of the decision is this: an unenforceable mortgage is not void. This seems counter-intuitive but it is probably correct. The effect is that the unenforceable mortgage remains as an encumbrance or cloud on title such that upon resale or refinance it might require payment to get a satisfaction or release of the mortgage, even though enforcement is barred by the statute of limitations. Other court decisions are struggling with the same issues. The effect on quiet title actions probably is that the declaration of the rights and duties of the parties includes the mortgage in the title chain and does not nullify the mortgage or remove it from the chain of title. Hence an action to nullify the mortgage would be necessary before it could be removed from the chain of title.

Using the logic from this and other cases, a homeowner cannot remove a mortgage from the chain of title by merely asserting that it is unenforceable. The flip side is that a homeowner could easily get the mortgage removed from the chain of title and to get a judgment in which title is declared free and clear of the mortgage encumbrance IF the homeowner proves that the initial transaction was a sham and that the mortgage should not have been signed or released much less recorded.

This is why the logic behind the “unfunded trust” may be crucial to removing the mortgage from the chain of title. If you can prove that there was no loan at the base of the documentary chain, then you are likely to succeed in nullifying the mortgage and then quieting title. Through discovery and deductive reasoning, it is possible to show that there was no loan of money, in FACT, at the base of the chain of documents. As a caveat, I should add that this issue is certainly not entirely resolved. There are competing decisions and views in Florida and across the country.

The basic thrust of this decision is whether the election to accelerate the entire amount due can be abandoned and thus allow future claims on future installments of the alleged loan.  The court cites AM. Bankers, 905 So. 2d 192. The hidden issue is that the association was successful in foreclosing against the homeowner and Deutsch — because there was no effort to withdraw the acceleration of the alleged loan. I think the decision ignores the doctrine of estoppel and prevents the alleged “creditor” from first exercising its “option” to accelerate and then withdrawing it when they lose the case or voluntary dismiss the case.

The court also makes a distinction between a voluntary dismissal and a judgment or involuntary dismissal with prejudice. In the first case, the court decided that the option to reinstate the later installments not barred by the statute of limitations could exist if the dismissal with prejudice, but does not exist where the option is not exercised. This adds wording to the mortgage contract and the applicable statutes. I think it is wrong.

The decision means that a “creditor” who loses or dismisses an action might be able to accelerate and foreclose multiple times until they finally win. It also introduces parole evidence into the recording process and chain of title. I agree that the mortgage is not automatically removed by losing the case. But I don’t agree that the loser can reinstate the action and sue again. It calls for the entire issue of the origination and transfer of the the alleged loan to be re-litigated. I think it conflicts with the doctrines of res judicata and collateral estoppel. The note, which is the only evidence of the debt, has been rendered unenforceable by the statute of limitations. To say that the mortgage survives as a potentially enforceable instrument on the issue of payment is illogical.

Here are some relevant quotes from the decision:

Where a lender files a foreclosure action upon a borrower’s default, and expressly exercises its contractual right to accelerate all payments, does an involuntary dismissal of that action without prejudice in and of itself negate, invalidate or otherwise “decelerate” the lender’s acceleration of the payments, thereby permitting a new cause of action to be filed based upon a new and subsequent default? [The 3rd DCA answers this question in the negative]

…because the installment nature of the loan payments was never reinstated following the acceleration, there were no “new” payments due and thus there could be no “new” default following the dismissal without prejudice of the initial action.

Smith v. F.D.I.C., 61 F.3d 1552, 1561 (11th Cir. 1995)(holding, “when the promissory note secured by a mortgage contains an optional acceleration clause, the foreclosure cause of action accrues, and the statute of limitations begins to run, on the date the acceleration clause is invoked.”).

The supreme court disapproved of the holding in Stadler and approved the Fourth District’s holding in Singleton:

We agree with the reasoning of 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. [Editor’s Note: I think the court ignored the difference between the intention and effect of a statute of limitations and the doctrine of res judicata.]

In Singleton, the dismissal with prejudice disposed not only of every issue actually adjudicated, but every justiciable issue as well. Hinchee v. Fisher, 93 So. 2d 351, 353 (Fla. 1957), overruled in part on other grounds, May v. State ex rel. Ervin, 96 So. 2d 126 (Fla. 1957). In Hinchee, as in Singleton and Stadler, the trial court dismissed an initial action with prejudice. Hinchee, 93 So. 2d at 353. This operated as an adjudication on the merits and, as a general proposition for purposes of res judicata, “puts at rest and entombs in eternal quiescence every justiciable, as well as every actually adjudicated, issue.” Id. (quoting Gordon v. Gordon, 59 So. 2d 40, 43 (Fla. 1952)). As the Court observed in Hinchee:

A judgment on the merits does not require a determination of the controversy after a trial or hearing on controverted facts. It is sufficient if the record shows that the parties might have had their controversies determined according to their respective rights if they had presented all their evidence and the court applied the law.

Res judicata is not the issue in the instant case because the dismissal of the Initial Action was without prejudice, and therefore the borrower here (unlike the borrower in Singleton) did not “prevail in the foreclosure action by demonstrating that she was not in default” nor was there “an adjudication denying acceleration and foreclosure” such that the parties “are simply placed back in the same contractual relationship with the same continuing obligations.” Id.

the only subsequent cause of action which Deutsche Bank could file under the circumstances was an action on the accelerated debt— it could not thereafter sue upon an alleged “new” default because, without reinstating the installment terms of the repayment of the debt, there were no “new” payments due, [e.s.]

Without a new payment due, there could be no new default, and therefore no new cause of action. Because the Current Action was based upon the very same accelerated debt as the Initial Action, and because that Current Action was filed after the expiration of the five-year statute of limitations, it was barred.5

We acknowledge that Singleton has been applied to permit, as against an

asserted statute of limitations bar, the filing of a subsequent action following

dismissal with prejudice (i.e., an adjudication on the merits) of an earlier action.

See 2010-3 SFR Venture, LLC. v. Garcia, 149 So. 3d 123 (Fla. 4th DCA 2014);

Star Funding Solutions, LLC. V. Krondes, 101 So. 3d 403 (Fla. 4th DCA 2012); );

U.S. Bank Nat. Ass’n. v. Bartram, 140 So. 3d 1007 (Fla. 5th DCA 2014) review

granted, Bartram v. U.S. Bank Nat. Ass’n, Nos. SC14-1265, SC14-1266, SC14-

1305 (Fla. Sept. 11, 2014); PNC Bank, N.A., v. Neal, 147 So. 3d 32 (Fla. 1st DCA

2013). We believe our holding is not necessarily inconsistent with the strict

holdings of these cited cases, as each of them involved a dismissal of the earlier

action with prejudice, representing an adjudication on the merits and, at least

implicitly, a determination that there was no default and therefore no valid or

effectual acceleration. [ I think the court is struggling to justify its decision]

15 Responses

  1. My cousin has a strange situation with the SOL. Her bank has filed 2 complaints. The bank dismissed one & the court dismissed the 2nd one. They then filed a 3rd complaint and she responded with a Motion to Dismiss due to the SOL. The bank then immediately filed for dismissal of the 3rd complaint AND filed a motion with the court to reinstate the prior complaint. We think they did that because the prior complaint was filed before the SOL ran out, so they would rather continue fighting that complaint versus risking an SOL decision. That seems strange to me. The court will allow such nonsense??

  2. Ian , not every RMBS pool is registered. Many were done as a private placement pursuant to an offering memorandum, versus a prospectus, or supplement prospectus.

    Merry Christmas to all…

  3. NPV- I think that where this article may apply is on refi’s rather than purchase money mortgages. If you did a refi on a 200k loan for example, how on earth would you know that your servicer/lender hadn’t declared you in default (to the MBS) years earlier, collected the lions share of the mortgage amount, say 180k, you’ve been paying on the 200k all these years, and now they want to collect the 200k plus fees etc all over again via foreclosure? How is anyone to know? I keep reading complaints filed, looking for my 2 “MBS pools” but can’t find em anywhere. Anyone pursuing this angle? Thx

  4. As bad as CA is from a non-judicial standpoint, this res judicata whim is a non issue. There is nothing preventing the lender from rescinding the notice of default and trustee sale, which also acts to rescind / restore the loan to a point before acceleration And it can be recorded in the CA recorders’ office.

  5. NPV,

    Thin skinned, huh? Political-correctness (read: institutionalized and regulated hypocrisy) does that. Doesn’t mean he’s on the wrong track. Some hurts take time to get over.

    That Storm Bradford guy has a facebook on which he posts very relevant things and doesn’t editorialize. I like what he posts and stands for. Bob Hurt is one of my favorites and has been for a long time. Neither comes here (unless under a pseudonym but Bob never hid himself and he was Oh! so vocal here…He may even have gotten kicked out! Regardless, he moved on! Don’t tell me Storm is… No! You must be kidding! S.O.A.G!)

    The point is simple: after having destroyed itself by shipping out all its strength, this country has been revolutionized from the outside-in in 10 years to a level people don’t grasp. John Wayne and what he stood for aren’t coming back. And Moses sure as hell is sick and tired of looking like Charlton Heston. Yet, our liquid elected (McCain and Co,) still want to fight. Fight whom? Fight what? Fight what for? They are for show.

    As a species, we need clean air. Clean water. Food. Homes.

    This country gave up on A, B and C. Now is the time to fight for D because that only will restore A, B and C. With work. A lot of it. Outside wants in to do that work.

    NPV, we’ve talked about many issues for a long time. You know I’m legit.


  6. Christine, I have been breaking his balls for years. i heard about him through Bob Hurt. He is a real smart guy, but like the rest of the egotistical maniacs, incredibly thin-skinned.

  7. NPV,

    With that lousy 24 hrs/day and still so much to learn, I had never heard of Storm Bradford. Thing is… the guy won on a TILA. I won on a RESPA. Solid statutes. And he doesn’t waste his time chasing dragonflies over swamps.

  8. Where did my $100,000 hard fiat cash down deposit go ???????

  9. NPV:

    The people who sold me the house (and were at the closing table) got a check for the full amount. Even if it is only a game of writing numbers between bank accounts, that seller from that point on had the ability to go to his bank, deposit those funds and physically withdraw them at a later date (banks don;t typically have more than 20,000 or 30,000 in their vault. Any big withdrawal forces them to “order” it from the federal reserve. Takes about week.”

    In any event, there was a loan, there were payments. What may be a question is “Was the loan between the parties alleged to have been involved?” Flat out denying that there was a loan is ludicrous. And dangerous.

  10. “Your honor… check this out”. “There was no loan at the base of the documentary chain” “I showed up at this guys office, signed a bunch of papers that said I get a free house. An hour later the nice guy, with the bushy eyebrows and the “cheesy” scales of justice on his desk, threw a brother some keys, which just happened to open the door to the structure I have called home for the past 4 years.

    “Somehow, we ended up with all this crap about promissory notes and mortgages”.

    “You think about it for couple minutes your honor – I need to run and take a quick shit”…

  11. Christine, are you on the Storm Bradford junket?

  12. Christine, how do you know that the borrower at the closing table did not simply get the house for $10:00 and other valuable consideration. I mean… isn’t that the amount that MERS, as nominee for the closing lender, claimed they were paid for conveying the note and mortgage to the Trustee.

    Hell, maybe the house was originally purchased for $5:00 and other valuable consideration, and MERS actually ,made a 100% return on their money when it was sold to the Trust.

  13. “If you can prove that there was no loan at the base of the documentary chain, then you are likely to succeed in nullifying the mortgage and then quieting title.”

    This premise is wrong on so many levels, it isn’t even funny. No matter how you slice it, there WAS a loan. Physical currency may not have changed hands but someone who did not have money was allowed to move into a house… worth money and previously owned by someone else, in exchange for monthly payments for a period of time, at the end of which ownership would be finalized by paperwork (recording, among other things).

    That the loan might not be between the exact parties named on the loan contract is a different matter. That a defaulted loan might have generated some insurance payment is also a different matter but to flat out state that there was no loan is so unconscionable that whoever is kamikaze enough to tell it to a judge shouldn’t be surprised of the resulting reaction.

  14. SOL = Shit outta Luck.

  15. “doctrines of res judicata and collateral estoppel”

    That’s what my attorney said, Judicial state also.

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