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In CCM Pathfinder Palm Harbor Management, LLC v. Unknown Heirs of Gendron, No. 2D13-5286 (Fla. 2d DCA January 21, 2015), CCM Pathfinder Palm Harbor Management, LLC, a mortgage loan servicing agent for a consortium of lenders that financed a $29 million condominium conversion loan in 2005, filed a March 2013 mortgage foreclosure action in the circuit court against the forty-five condominium unit owners who had never paid Pathfinder release fees due under the loan agreement secured by the mortgage at issue.

After a hearing on motions to dismiss Pathfinder’s amended complaint filed by six of the multiple defendants in the foreclosure action, the circuit court entered an order dismissing the complaint with prejudice as to these defendants finding that the foreclosure action was barred by the five year statute of limitations period to foreclose a mortgage under Fla. Stat. § 95.11(2)(c) and the five year statute of repose set forth in Fla. Stat. § 95.281(1).

On appeal, the Second District Court of Appeal reversed the circuit court on both the statute of limitations and statute of repose issues.  The court noted that the recorded mortgage attached to the amended complaint contained a provision waiving the statute of limitations as a defense to a foreclosure action and that Pathfinder alleged that the defendants took title to their units subject to the prior recorded mortgage. Accordingly, the court held that the circuit court erred in granting the defendants’ motions on statute of limitations grounds since Pathfinder’s well-pleaded complaint allegations precluded a statute of limitations defense on a motion to dismiss.

Turning to the statute of repose issue, the court reviewed the key provisions in the loan documents and mortgage at issue.  The original condominium developer, Palm Harbor One, LLC, had signed a promissory note which was secured by the mortgage.  The note contained a maturity date of November 30, 2006, which was also set forth in the mortgage.  The mortgage was subsequently recorded in the public record, but the note itself was not.

Palm Harbor also signed a separate loan agreement that was part of the same transaction and set forth additional terms and conditions related to the loan and satisfaction of the note and mortgage.  The loan agreement did not contain a specific maturity date, but identified it as “twelve (12) months after the Mortgage is recorded.”  The loan agreement and its terms were incorporated into the mortgage by specific reference, but (unlike with the maturity date of the note) the mortgage did not identify the maturity date of the loan agreement.  The mortgage was recorded on December 16, 2005, making the maturity date of the loan agreement December 16, 2006.  Like the note, the loan agreement was never recorded in the public record.

One of the terms of the loan agreement required Palm Harbor to pay Pathfinder a “release fee” when each condominium unit was sold.  In exchange for the release fee on each individual unit and upon receipt of its payment, Pathfinder agreed to release its mortgage lien as to that unit and provide Palm Harbor and the unit owner with a partial release of its mortgage.

In March 2013, after Pathfinder did not receive the release fees from either Palm Harbor One or the unit owners as to forty-five units, Pathfinder filed the foreclosure action against the forty-five unit owners, including the six who ultimately moved to dismiss the amended complaint.

The court distinguished a “statute of limitations” from a “statute of repose” noting that while both may bar a party from proceeding with an action, each does so pursuant to separate legal theories:  “A ‘statute of limitations’ is a procedural statute that prevents the enforcement of a cause of action that has accrued whereas a ‘statute of repose’ is a substantive statute which not only bars enforcement of an accrued cause of action but may also prevent the accrual of a cause of action where the final element necessary for its creation occurs beyond the time period established by the statute.”  The court explained that a statute of repose does not work to provide a time limitation for filing a suit (as with a statute of limitations) but prevents a cause of action from arising after its time limitation.

Addressing the statute of repose set forth in Fla. Stat. § 95.281(1), the court observed that it operates to terminate a mortgage lien and render it completely unenforceable if specified statutory conditions are satisfied:  “The lien of a mortgage shall terminate after the expiration of the following periods of time:  (a) If the final maturity of an obligation secured by a mortgage is ascertainable from the record of it, 5 years after the date of maturity. (b) If the final maturity of an obligation secured by a mortgage is not ascertainable from the record of it, 20 years after the date of the mortgage. . . .”  Fla. Stat. § 95.281(1)(a)-(b).

According to the court, the “dispositive question” for decision was whether the final maturity date of the obligation secured by the recorded mortgage is ascertainable from the face of the recorded mortgage itself:  “A maturity date is ‘ascertainable from the record of it’ if the maturity date can be determined by reading the public records.  If so, the statute of repose is five years from the date of maturity.  If not, the statute of repose is twenty years.”

Because the loan agreement, the operative loan document containing the release fee obligations sued upon by Pathfinder, was not recorded and the mortgage did not identify the loan agreement maturity date (as it did with the note), the court determined that the maturity date was not ascertainable from the public record and so the twenty year statute of repose applied.  Since the foreclosure action was filed within twenty years from the December 5, 2006 maturity date, the court reversed the circuit court’s order granting the defendants’ motions to dismiss on statute of repose grounds (as well as finding error on the statute of limitations issue).

The Second DCA concluded by acknowledging that the result on the statute of repose issue may seem at odds with the overall purpose of recording documents such as mortgages in the public record, i.e., to provide a measure of certainty about real property ownership and encumbrances upon them and to protect subsequent purchasers from unrecorded instruments:

[I]t seems counterintuitive—and counterproductive—to provide a longer statute of repose when the recorded documents provide less certain information.

Unless and until the Legislature changes the law, however, the court noted that it must follow the plain statutory language and hold that the statute of repose did not bar Pathfinder’s foreclosure action.