Photo of Geremy W. Gregory

Geremy is an attorney based in Balch & Bingham’s Jacksonville, FL office.  Licensed in both Florida and Georgia, Geremy represents financial institutions in state and federal courts from Miami to North Georgia.  He is experienced in handling lender liability claims, FDCPA, FCRA, identity theft, wrongful foreclosure, and claims asserted under the Uniform Commercial Code.

Last week, after much anticipation and speculation, the Florida Supreme Court decided Bartram v. U.S. Bank National Association, No. SC14-1265 (Fla. Nov. 3, 2016).  To the relief of lenders, the Court rejected the borrower’s attempt to use Florida’s five-year statute of limitations for mortgage foreclosures to avoid the mortgage on his home based on the bank’s earlier unsuccessful attempt to foreclose.  This decision means that Florida courts will be less likely to find that subsequent attempts to foreclosure are time-barred.

In early 2005, Bartram obtained a $650,000.00 loan secured by his Ponte Vedra home.  One day later, Bartram granted a $120,000.00 second mortgage on the home to his ex-wife.  Bartram stopped making payments on the first mortgage in January 2006 and never made payments on the second mortgage.

In May 2006, U.S. Bank N.A., as assignee (the “bank”), sued to foreclose the first mortgage based on Bartram’s failure to make installment payments.  In the complaint, the bank claimed it was accelerated the note and declared that all amounts under the note were due.  Almost five years later, the bank’s foreclosure action was involuntarily dismissed because the bank failed to appear at a case management conference.

About a year later, Bartram’s ex-wife sued to foreclosure her second mortgage.  Bartram filed a crossclaim against the bank to cancel the first mortgage based on the statute of limitations.  Bartram argued that any claim by the bank under the mortgage would be time-barred because over five years had passed since he defaulted, the bank accelerated the loan, and the bank attempted to foreclose the mortgage.  The trial court agreed with Bartram and entered an order that, in effect, released the bank’s lien on the property.  The bank appealed to the Fifth District Court of Appeal, and the Fifth District reversed.  The Florida Supreme Court later granted review of the Fifth District’s decision.

The Florida Supreme Court held that the dismissal of the previous foreclosure action returned the parties to their “prior contractual relationship,” meaning that (1) Bartram had the opportunity to restart making his installment payments and (2) the bank had the right to accelerate the loan through a foreclosure action if Bartram subsequently defaulted.  Because Bartram failed to make any installment payments after the prior case’s dismissal, the court determined that there were new defaults within the statute of limitations that entitled the bank to accelerate the loan and foreclose the mortgage.

Note that the court based its determination that the previous case’s dismissal returned the parties to their prior contractual relationship, at least in part, on the fact that the mortgage at issue was a standard residential form mortgage that grants the right to reinstate after acceleration to the borrower if the borrower meets certain conditions.  It is unclear whether a judge in the future will decide that a different result should occur where the mortgage at issue does not grant a right to reinstate to the borrower.

In a case sure to encourage more class action filings under Florida’s Unfair and Deceptive Trade Practice Act, the Eleventh Circuit upheld a Florida District Court’s certification of a class of consumers that purchased or leased 2014 Cadillac CTS Sedans in Florida.  Carriulo et. al v. General Motors Company, Doc. No. 15-14442 (11th Cir. May 17, 2016) Opinion.  The consumers alleged General Motors violated Florida’s Unfair and Deceptive Trade Practices Act by affixing window stickers to the CTS Sedans that claimed the vehicles received five-star safety ratings from the National Highway Traffic and Safety Administration (“NHTSA”).  Id. 3-6.  Specifically, the stickers represented each CTS Sedan received perfect five-star ratings in driver frontal crash tests, passenger frontal crash tests, and rollover crash tests. Id.  But, the NHTSA had not yet rated the CTS Sedan. Id. The NHTSA later rated the CTS Sedan as five-star rated in driver frontal crash and rollover, but only awarded a four-star rating in passenger frontal crash tests. Id.

The consumers argued they incurred damages due to the erroneous stickers.  GM argued that the predominance requirement for certifying a class was not met as “the liability question will be highly individualized because the buying and leasing experiences of each proposed class member was not uniform.”  Id. p. 11.  Specifically, some buyers may not have seen the sticker, may not have relied on it, may not have cared about safety, and each proposed class member’s price negotiation would have been different.  Id. The Eleventh Circuit (and the District Court) rejected this argument, noting:

“Because a plaintiff asserting a FDUTPA claim ‘need not show actual reliance on the representation or omission at issue,’ the mental state of each class member is irrelevant. In Davis, the First District Court of Appeal of Florida recognized that the absence of a reliance requirement means ‘the impediment to class litigation that exists for multiple intrinsic fraud claims does not exist’ in FDUTPA cases. Thus, General Motors is incorrect to suggest that the plaintiffs must prove that every class member saw the sticker and was subjectively deceived by it.”

Id. p. 11.

The Eleventh Circuit went on to address damages and causation, holding:

Moreover, because the injury is not determined by the plaintiffs’ subjective reliance on the alleged inaccuracy, causation and damages may also be amenable to class-wide resolution. FDUTPA damages are measured according to ‘the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered according to the contract of the parties.’” Rollins, Inc. v. Heller, 454 So. 2d 580, 585 (Fla. Dist. Ct. App. 1984) (quotation omitted).

* * *

“The plaintiffs may show that a vehicle presented with three perfect safety ratings is more valuable than a vehicle presented with no safety ratings. General Motors received the same benefit of the bargain from the sale or lease to each class member — even if individual class members negotiated different prices — because a vehicle’s market value can be measured objectively.

As the district court recognized here, a manufacturer’s misrepresentation may allow it to command a price premium and to overcharge customers systematically. Even if an individual class member subjectively valued the vehicle equally with or without the accurate [] sticker, she could have suffered a loss in negotiating leverage if a vehicle with perfect safety ratings is worth more on the open market. As long as a reasonable customer will pay more for a vehicle with perfect safety ratings, the dealer can hold out for a higher price than he would otherwise accept for a vehicle with no safety ratings.”

Id. pp. 13-15.

GM also argued that since two of the three five-star ratings actually turned out to be true, consumers could not maintain claims as to those ratings.  The Eleventh Circuit rejected this argument also, declaring “[a] defendant may not escape FDUTPA liability under Florida law merely because a deceptive or misleading statement later turns out to be true. The injury occurs at the point of sale because the false statement allows the seller to command a premium on the sales price.”

Although this statement begs the question, “if the statement turns out to be true, isn’t a premium price warranted?” the Eleventh Circuit did not address that question– nor did it address the Supreme Court’s Spokeo injury-in-fact requirement.

This decision shows that financial services clients should take FDUPTA class allegations seriously and should brace for the filing of more such claims.

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.

The Truth in Lending Act (“TILA”) gives borrowers the right to rescind certain loans up to three years after the loan transaction is consummated if a lender fails to provide certain TILA disclosure. 15 U.S.C. § 1635(f). In Jesinoski v. Countrywide Home Loans, Inc., ___ U.S. ___, 2015 WL 144681, 2015 U.S. LEXIS 607 (January 13, 2015), the United States Supreme Court addressed what steps a borrower has to take under TILA to rescind the loan within three years.

In Jesinoski, plaintiffs-borrowers refinanced the mortgage on their home on February 23, 2007. Three years later, the borrowers mailed a letter to Countrywide Home Loans, Inc. (“Countrywide”), their lender, purporting to rescind the loan transaction. Borrowers file suit against Countrywide and others over a year later. Countrywide and other lender-defendants argued that borrowers’ suit was barred because they were required to file a lawsuit within three years to properly rescind the loan. Both lower courts agreed with lenders. The United States Supreme Court, unanimously, did not.

As the Court explained, TILA unequivocally provides that a borrower “shall have the right to rescind … by notifying the creditor, in accordance with regulations of the Board, of his intention to do so.” 15 U.S.C. § 1635(a). The Court concluded that the language of § 1635(a), “leaves no doubt that rescission is effected” by a borrower’s written notice to lender, and therefore, a borrower is not required to additionally file a lawsuit within three years in order to rescind the loan.

The Court addressed and rejected several arguments made by lenders. First, the Court rejected lenders’ argument that written notice effects rescission only if a borrower’s TILA claims are legitimate, because § 1635(a) does not contain a distinction between disputed rescission and undisputed rescission, must less a lawsuit required for the latter.

Second, the Court reasoned that other provisions of TILA do not alter its conclusion. The Court found § 1635(f) only dictates when the right to rescind must be exercised – not how that right is exercised. The Court also found § 1635(g)’s provision of additional judicial relief available to a borrower for lenders’ violations does not indicate that judicial action is required for a borrower to effectively rescind the loan transaction.

Third, and most persuasively, lenders argued that permitting rescission of a loan by simple notice to the borrower effectively rendered common law rescission avenues (rescission at law which requires the borrower to tender the amount due and rescission in equity which requires a judicial decree) meaningless. This argument was a practical one; however, it was also rejected by the Court. The Court specifically responded:

Nothing in our jurisprudence, and no tool of statutory interpretation requires that a congressional Act must be construed as implementing the closest common-law analogue.

The lenders’ statutory argument in Jesinoski was difficult. It is surprising that both the Eighth Circuit and Ninth Circuit had previously held that a borrower is required to file suit within the three year deadline to effect a rescission of the loan given TILA’s statutory language. Despite the difficult statutory arguments in support of lenders’ position, there is certainly potential for abuse by borrowers as a result Jesinoski.  The holding could allow a borrower to assert frivolous claims that a lender failed to provide the borrower with certain TILA disclosures in an effort to avoid foreclosure. So long as a borrower alleges he provided lender with written notice of lender’s failure to provide the statutory disclosures within three years after the consummation of the loan, most courts will likely find a properly stated claim for relief.



Florida Appellate Court holds that amount of foreclosure bid alone may establish fair market value of foreclosed property.

In an unanimous opinion, a panel of the Court of Appeal of Florida, Fourth District, reversed a trial court’s refusal to enter deficiency judgments in a consolidated appeal.  Vantium Capital, Inc. v. Hobson, 2014 Fla. App. LEXIS 4372 (Fla. 4th DCA Mar. 26, 2014).

Vantium Capital, Inc.’s predecessor obtained judgment against three debtors, Hobson ($199,936.39), Cordiero ($275,989.88), and Bengelsdorf ($199,936.39).   At foreclosure sale the Hobson Property brought $162,700.00, the Cordiero brought $21,100.00, and the Bengelsdorf Property brought $21,100.00.  After the sale, Vantium Capital, Inc. (“Vantium”) substituted into each foreclosure action as plaintiff, and moved for deficiency judgment.

The trial court held a single hearing for all three deficiency motions, and none of the debtors or their counsel appeared at the hearing.  During the hearing, Vantium established the amount each property brought at foreclosure sale.  Vantium also attempted to enter three affidavits containing the testimony of appraisers as to the market value of each property.  The trial court refused to consider these affidavits, even though no defendants (or defendants’ counsel) were present at the hearing to object to the affidavits.  The Fourth District held that since no one was present to object, the court should have considered the affidavits.  This in and of itself should be interesting to those pursuing deficiency judgments.  Testimony by affidavit is much more cost effective than live testimony.

The most interesting part of this opinion, however, is the Fourth District’s holding that the trial court abused its discretion in refusing to enter a deficiency judgment based on the foreclosure price alone.  The Court noted that:

“The secured party has the initial burden of proving that the fair market value of the property was less than the total debt determined by the final judgment.” Chidnese v. McCollem, 695 So. 2d 936, 938 (Fla. 4th DCA 1997). However, “[a] legal presumption exists that the foreclosure sale price equals the fair market value of the property.” Thunderbird, Ltd. v. Great Am. Ins. Co., 566 So. 2d 1296, 1299 (Fla. 1st DCA 1990). “Therefore, once the party seeking a deficiency judgment introduces evidence of the foreclosure sale price, the burden shifts to the judgment debtor to present evidence concerning the property’s fair market value.” Liberty Bus. Credit Corp. v. Schaffer/Dunadry, 589 So. 2d 451, 452 (Fla. 2d DCA 1991). “In the absence of such evidence, the trial court has the power to act upon the assumption that the sale price reflects the fair market value.

The upshot of this opinion is obvious – the foreclosure sale price is nearly always lower than an appraised market value, particularly when the mortgage holder credit bids the property.  Lower market value means a higher deficiency judgment.  The Fourth District went on to note, however, that since Vantium offered the affidavits as evidence of market value, the court should have considered those affidavits even though Vantium was not required to offer them.  In other words, Vantium could have prevailed in the deficiency based on the amount of the foreclosure sale alone – but since Vantium offered the affidavits they must be considered in arriving at market value.