On March 16, 2017, the Florida Supreme Court solidified the position of its November 3, 2016 opinion in Bartram v. U.S. Bank, N.A., SC14-1266, 2016 WL 6538647 by denying the motions for rehearing filed in response to the Court’s holding that an involuntary dismissal unwinds acceleration, returning lender and borrower to their previous positions and allowing lender to pursue foreclosure on future defaults.   The finality of the Bartram opinion brings relief and some clarity to many residential lenders, especially with standard form residential mortgages with reinstatement provisions, that a failed attempt at foreclosure will not bar subsequent attempts to foreclose for missed installment payments.

While Bartram provides relief for Florida lenders, the battleground over the statute of limitations on Florida mortgage debt continues to shift.  Even before the Court denied rehearing, the foreclosure defense bar was already crafting new defenses based on the gaps in the law left unfilled by the Bartram opinion.  For instance, in new foreclosures filed after an involuntary dismissal, some borrowers are challenging the use of default dates that predate the dismissal date for the earlier foreclosure suits.  Lenders should expect borrowers with continuing defaults and prior foreclosure lawsuits to challenge subsequent foreclosures on the collectability of time barred installment payments, Collazo v. HSBC Bank USA, N.A., No. 3D14-2208 (Fla. 3d DCA Apr. 2016)(withdrawn on rehear’g) and time barred default dates. Bollettieri Resort Villas Condo. Ass’n, Inc. v. Bank of New York Mellon, 198 So. 3d 1140 (Fla. 2d DCA 2016), review granted, SC16-1680 (Fla. Nov. 2, 2016).

On December 2, 2016, Florida’s Fifth District Court of Appeal filed an opinion overturning a foreclosure sale on grounds that the foreclosing bank failed to meet with the borrower in person prior to filing suit, as required by HUD regulations. See Palma v. JPMorgan Chase Bank, N.A., et. al., Case No. 5D15-3358 (Fla. 5th DCA Dec. 2, 2016). The promissory note at issue in Palma contained a clause expressly incorporating HUD regulations into the terms of the loan, including 24 C.F.R. § 203.604(b) which requires, among other things, that “the mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three monthly installments due on the mortgage are unpaid. . . .” While the bank alleged generally that it complied with all conditions precedent to foreclosure, as the bank was permitted to do under Fla. R. Civ. P. 1.120(c), the borrower answered the complaint by specifically denying that the bank complied with the face-to-face interview requirement. At trial, the bank did not present evidence of its compliance with 24 C.F.R. § 203.604(b), or any of the enumerated exceptions thereto. The borrower moved to dismiss at the end of the bank’s case in chief, but the trial court ruled that the borrower’s specific denial was an affirmative defense requiring proof from the borrower. The borrower promptly recalled the bank’s representative who testified that she did not have information on whether the required interview was offered or refused. The borrower then testified that she would have participated in the face-to-face interview, but that the bank never offered her that opportunity. Although the borrower renewed her motion for involuntary dismissal, the trial court found in favor of the bank and entered a foreclosure judgment.

The borrower appealed to the Fifth District Court of Appeal, which had recently held that a borrower bears the burden of demonstrating that HUD regulations apply to a loan before a 24 C.F.R. § 203.604(b) argument can be considered. See Diaz v. Wells Fargo Bank, N.A., 189 So. 3d 279, 284 (Fla. 5th DCA Apr. 8, 2016). In the instant case, however, the appellate court had no difficulty finding the HUD regulations applied, as they were specifically incorporated into the loan documents by reference. The appellate court held that a specific denial of a condition precedent is not an affirmative defense and that the bank, as plaintiff, bears the burden of proving that a specifically denied condition was satisfied or excused. The appellate court reversed the judgment and remanded the case finding that the bank had not provided any evidence that it engaged in a face-to-face interview before filing the complaint or that any of the enumerated exceptions to 24 C.F.R. § 203.604(b) applied.

There are multiple lessons to take from Palma at different stages of the mortgage servicing process. To name a few, it is good practice for banks, servicers and foreclosure counsel, alike, to: (i) carefully review the note and mortgage to identify any regulations that might modify the obligations of the parties at the time of boarding and the time of default; (ii) determine whether all applicable regulations and contractual conditions are satisfied or otherwise excused before notices are sent to the borrower and especially before a complaint is filed; and (iii) to inform the bank or servicer’s litigation specialists and witness of any contested conditions precedent well before trial so that the servicer can assess whether to escalate the matter or proceed to trial.


A Hillsborough County Court recently held that Florida’s offer of judgment statute, Fla. Stat. § 768.79, is preempted by the Florida Consumer Collection Practices Act (the “FCCPA”), Fla. Stat. § 559.72.  This decision and, others like it, have stripped defendants in lender liability suits of valuable settlement tools.  In May 2013, the plaintiff in Hall v. Deutsche Bank Nat’l Tr. Co. & Ocwen Loan Servicing LLC, No. 13-CC-13185 (Fla. Hillsborough County Ct. Aug. 25, 2015), filed a one count complaint against a mortgagee and a mortgage servicer alleging a violation of the FCCPA.  The defendants filed an offer of judgment and the plaintiff moved to strike the offer of judgment arguing that the offer of judgment statute is preempted by the FCCPA.  Florida’s offer of judgment statute, Section 768.79, is used by plaintiffs and defendants alike to resolve cases prior to trial.  The statute was enacted to encourage settlement by taxing attorneys’ fees against a party that rejects a reasonable offer or demand for judgment.  Florida courts, however, have held that the offer of judgment statute is preempted in a number of actions including actions under Florida’s FCCPA, the Federal Fair Debt Collection Practices Act (the “FDCPA) and 42 U.S.C. § 1983.  See, e.g., Clayton v. Bryan, 753 So. 2d 632, 633 (Fla. 5th DCA 2000).

In striking the offer of judgment, the Hillsborough County Court cited Clayton as the controlling appellate authority on this issue.  Clayton, 753 So. 2d at 634.  In Clayton, Florida’s Fifth District Court of Appeal held that the FDCPA preempts a defendant’s use of an offer of judgment under § 768.79 in actions arising under either the federal FDCPA or the state law FCCPA.  Specifically, the offer of judgment statute is preempted by the FDCPA because the FDCPA only allows a prevailing defendant to recover its attorneys’ fees if the court expressly finds that the plaintiff’s case was brought in bad faith for the purpose of harassment.  Id. at 633.  Even though the state law FCCPA is silent as to awarding attorneys’ fees to successful defendants, the FCCPA is bound by the rule that it must be at least as protective of a consumer as the FDCPA.  Id. at 634.  In the event of an inconsistency in the application of these two consumer protection statutes, the FCCPA must adopt whichever provision is more protective of the consumer.  See Fla. Stat. § 559.552; Clayton, 753 So. 2d at 634.  The Fifth DCA found that the attorneys’ fee shifting provision of the FDCPA is more protective of the consumer and therefore that provision also applies under the FCCPA.  Clayton, 753 So. 2d at 634.  As a result, offers of judgment under § 768.79 are also preempted for state law FCCPA claims. Id.

While the Hillsborough County Court noted that its decision striking the offer of judgment was not a final order, it stated that if its decision were a final order, it would certify the following as a question of great public importance for review by the Second District Court of Appeal: “Does a claim made pursuant to Fla. Stat. 559.72 (FCCPA) pre-empt the application of the offer of judgment provisions of Fla. Stat. 768.79?”  It is worth noting that other circuits within the Second District Court of Appeal have also expressed agreement with the preemption analysis in Clayton, including the neighboring Sixth Judicial Circuit in Pinellas County, which, in its appellate capacity, stated that “a proposal of settlement made pursuant Florida Statute, § 768.79, is not applicable to claims filed under the Florida Consumer Collection Practices Act.”  Townsend v. Asset Acceptance Corp., No. 03-1921CI-88A (Fla. 6th Cir. App. Ct. Aug. 6, 2004).

A recent decision from the Second DCA reinforces that a subsequent mortgagee or servicer must be prepared to lay a proper foundation in order to introduce a predecessor mortgagee or servicer’s payment history by testifying as to the successor’s independent verification of the predecessor’s records and the procedures used to verify the accuracy of the predecessor’s records.  See Sas v. Federal National Mortgage Association, Case No. 2D14-1003.[1]  Sas is one of the most recent in line of cases to interpret and apply the Second DCA’s decision in WAMCO XXVIII, Ltd. V. Integrated Electronic Environments, Inc., 903 So. 2d 230, 233 (Fla. 2d DCA 2005), which provided that a prior servicer’s payment histories are admissible by a successor servicer if the successor servicer’s records custodian lays an appropriate foundation by explaining how the prior servicer’s records were independently verified for accuracy and stating that there were no discrepancies in the prior servicer’s records as to the loan at issue.

In the Sas decision, the Second DCA held that the trial court properly granted a new trial after it previously excluded a predecessor servicer’s business records on the ground that the Plaintiff’s records custodian did not have personal knowledge of the predecessor servicer’s record-keeping practices.  The Court reiterated that, under WAMCO, a successor servicer’s record custodian does not require personal knowledge as to how the predecessor servicer entered or maintained the records.  The Sas decision further reinforces and provides factual context to Second DCA’s holding in WAMCO by finding that the predecessor servicer’s payment history was admissible where the successor servicer’s records custodian testified, among other things: 1) that he was familiar with the successor servicer’s business practices in making and maintaining business records; 2) that the successor servicer and predecessor servicer were both bound by the same record-keeping requirements for mortgage loan servicers, 3) that he was familiar with the servicer industry’s general practices regarding business records; 4) that he was familiar with the successor servicer’s verification procedures for boarding loans from predecessor servicers; 5) that no discrepancies were found in the predecessor servicing records with respect to the loan at issue; and 6) that if discrepancies were found, the loan would have been resubmitted to the predecessor servicer for repurchase.

The Second DCA also took care to distinguish a number of recent decisions which applied WAMCO to hold that the successor servicer could not admit the predecessor’s payment history.  See Holt v. Calchas, LLC, 155 So. 3d 499 (Fla. 4th DCA 2015); Burdeshaw v. Bank of New York Mellon, 148 So. 3d 819 (Fla 1st DCA 2014); Hunter v. Aurora Loan Services, LLC, 137 So. 3d 570 (Fla. 1st DCA 2014)In each of the above cases, the successor servicer’s records custodian either: 1) failed to testify that the successor servicer independently verified the payment history of the predecessor servicer or 2) failed to testify in detail as to the procedures used for such verification.

[1] http://www.2dca.org/opinions/Opinion_Pages/Opinion_Pages_2015/June/June%2010,%202015/2D14-1003.pdf


On December 17, 2014, Florida’s Third District Court of Appeal issued an opinion holding that a mortgage loan is not automatically “decelerated” when a foreclosure suit is dismissed without prejudice.  Under the Court’s opinion in Deutsche Bank Trust Company Americas v. Beauvais, No. 3D14-575, 2014 WL 7156961 (Fla. 3d DCA, Dec. 17, 2014), the statute of limitations on an entire mortgage debt starts running when the debt is accelerated and the collection of the debt will be time barred after five years unless the loan is somehow “decelerated.”  This opinion, which has not yet been released for permanent publication, will negatively impact creditors’ rights if it is adopted by other Florida courts.

The basic procedural posture in Beauvais is all too common in the backlogged foreclosure dockets across Florida.  In Beauvais, Deutsche Bank sued on a note and mortgage that its predecessor in interest, American Home Mortgage Servicing, Inc. (“AHMS”), had previously accelerated and sued on over five years earlier.  In the prior suit, AHMS’s attorney failed to appear at a hearing, resulting in an involuntary dismissal without prejudice.  Deutsche Bank subsequently filed a new foreclosure suit on the same note and mortgage, but the trial court held that the 5-year statute of limitations barred enforcement of the loan since AHMS had already accelerated the entire indebtedness.

Florida’s Third District Court of Appeals agreed, holding that an involuntary dismissal without prejudice does not, by operation of law, “decelerate” the loan or otherwise reinstate the installment payment nature of the loan.  The crux of the holding is that a dismissal without prejudice is not a judgment on the merits.  On the other hand, any dismissal with prejudice is an adjudication on the merits, having the effect of exonerating a borrower from the claimed default and thus “decelerating” the loan and returning the parties to their pre-suit positions.  See Singleton v. Greymar Assocs., 882 So. 2d 1004, 1007 (Fla. 2004) (holding that after a case is dismissed with prejudice, a subsequent default on an installment can be the basis for a new foreclosure suit and such suit is not barred by res judiciata).  According to the Court, when a foreclosure suit is merely dismissed without prejudice, there is no ruling that the borrower did not default and thus, the debt remains fully accelerated absent (i) a contractual “deceleration”; or (ii) subsequent modification of the loan.  While there was no deceleration or modification in Beauvais, contractual deceleration could be accomplished through a reinstatement provision in the note or mortgage, and a subsequent modification could be accomplished pursuant to the modification provisions in the note and mortgage.

The Beauvais case conflicts with Evergrene Partners v. CitiBank, N.A., 143 So. 3d 945, 956 (Fla. 4th DCA 2014), Dorta v. Wilmington Trust Nat. Ass’n, No. 5:13-cv-185-Oc-10PRL, 2014 WL 1152917 (M.D. Fla. Mar. 24, 2014), and a handful of other Florida cases holding that the statute of limitations does not bar a subsequent foreclosure action following a dismissal without prejudice.  The Third Circuit certified this conflict within the opinion, but also stated that its decision might not conflict with U.S. Bank Nat. Ass’n v. Bartram, 140 So. 3d 1007 (Fla. 5th DCA, 2014) review granted, No. SC14-1265, 2014 WL 4662078 (Fla. Sept. 11, 2014). 

In Bartram, Florida’s Fifth District Court of Appeals held that “a default occurring after a failed foreclosure attempt creates a new cause of action for statute of limitations purposes, even where acceleration had been triggered and the first case was dismissed on its merits.”  The Florida Supreme Court has granted review of Bartram and the Fifth District Court of Appeals’ certified question of great public importance:

Does acceleration of payments due under a note and mortgage in a foreclosure action that was dismissed pursuant to Rule 1.420(b), Florida Rules of Civil Procedure, trigger application of the statute of limitations to prevent a subsequent foreclosure action by the mortgagee based on all payment defaults occurring subsequent to dismissal of the first foreclosure suit?

Bartram, 140 So. 3d at 1014 (Fla. 5th DCA, April 25, 2014).

            The Florida Supreme Court’s answer to this question is likely to materially impact the ultimate resolution of the issues in Beauvais, because the certified question does not distinguish between dismissals on the merits and dismissals without prejudice.  The Third District’s certification of a conflict with Evergrene also increases the likelihood that the Florida Supreme Court will review the Beauvais decision.  In the meantime Florida lenders and servicers should scrutinize their special asset portfolios to flag files that may be impacted by Beauvais.