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How to Calculate the Statute of Limitations in a Mortgage Foreclosure

HourglassThe simple question of how to calculate the statute of limitations in a mortgage foreclosure has finally been answered by the Florida Supreme Court.  And the banks won. Mortgage lenders may file new foreclosure actions against borrowers who won foreclosure cases more than five years ago if the borrowers defaulted again within five years of the first case’s dismissal, the court ruled.

We discussed this topic previously.  At the time, the Florida Supreme Court had not issued its ruling in Bartram v. U.S. Bank National Association, a case focused on whether the statute of limitations had run or not.  In Bartram, the mortgagor obtained a note and mortgage with a Bank.  Within the year, he stopped making the required payments.  The Bank subsequently filed a foreclosure action which was involuntary dismissed five years later when the Bank failed to appear at a case management conference.  After dismissal, the mortgagor once again failed to make the required payments and the Bank once again filed to foreclose the property.  The mortgagor stated that the Bank could not file the claim because it was outside of the 5-year statute of limitations.

On certified question by the 5th DCA the Florida Supreme Court was asked whether an acceleration of payments due under a residential note and mortgage with a reinstatement provision in a foreclosure action that was dismissed pursuant to the Florida Rules of Civil Procedure, triggers application of the statute of limitations to prevent a subsequent foreclosure action by the mortgagee based on the payment defaults occurring after the dismissal of the first foreclosure action.

The Court answered that question in the negative.  The Court explained that a lender is not precluded by the statute of limitations from filing a subsequent foreclosure action after the involuntary dismissal (with or without prejudice) of the first foreclosure action if the alleged subsequent default occurred within five years of the subsequent foreclosure action.

The Court reasoned that the effect of an involuntary dismissal is a revocation of the acceleration, which reinstates the mortgagor’s right to continue to make payments on the note and the right of the lender to seek acceleration and foreclosure based on the mortgagor’s subsequent defaults.

A subsequent default after dismissal is a new and independent right to accelerate which starts a new statute of limitations.

The lender is not barred by the statute of limitations from filling a subsequent foreclosure action premised on a separate and distinct default.  The statute of limitations runs from the date of the new default, and this new default gives the lender the right to accelerate all payments due.

The Court concluded that since the original foreclosure action was dismissed, the Bank could not then accelerate the payments but the default after dismissal triggered the Bank’s ability to file a second foreclosure and accelerate the payments.

How to Calculate the Statute of Limitations in a Mortgage Foreclosure

HourglassLawyers are often accused of complicating simple topics. One such question that we get asked about often by both lenders and debtors is when does the statute of limitations run on a mortgage foreclosure in Florida.  This simple question has actually generated national headlines.  So we will devote this post on how to calculate the statute of limitations in a mortgage foreclosure.

A statute of limitations is best described as a statute prescribing a period of limitation for the bringing of certain kinds of legal action. For example, in Florida, if you were involved in a car accident, you have four years from the date of that accident to file a lawsuit. If you wait four years and a day, then your claim is barred.

In Florida, actions based on a contract have a five year statute of limitations. So presumably, if one fails to pay their mortgage and the lender waits five years and a day, then the lender’s claim is barred by Florida’s five year statute of limitations.

But what happens when a lender, or the court, dismisses an otherwise timely lawsuit for mortgage foreclosure, and the lender then re-files that lawsuit five years and a day after the initial default?

To answer that simple question turns on many different factors. This issue, however, is actually going to be decided, and resolved, by the Florida Supreme Court.

But today there exists a conflict in the different courts of appeal, in Florida, and that existing conflict is what the Florida Supreme Court is going to resolve.

For instance, some appellate courts in Florida adhere to the “continuing default” theory. The Fourth and Fifth District Court of Appeal have each concluded that after a foreclosure was dismissed that the lender could re-file based on the new default that occurred after the dismissal of the suit. That was the case even if the original default, the one that served as the basis for the original suit, had occurred more than five years go.

Under that “continuing default” theory, the dismissal negates the acceleration of the loan such that mortgage payments would continue to be due and owing each month after the lawsuit’s dismissal. Therefore, this permits the lender to reaccelerate the loan following a new default.

As the Fourth DCA noted in Evergrene Partners v. Citibank, when “the claims of acceleration and subsequent acts of default have never been adjudicated on their merits in this case, … any acts of default still within the statute of limitations may be raised in a subsequent suit.”

However, the Third District Court of Appeal, the appellate court governing Miami, in Deutsche Bank v. Beauvais, has expressly disagreed with the Fourth and Fifth District Court of Appeal and has rejected the “continuing default” theory.

In Beauvais, the Third DCA noted that the dismissal “did not by itself negate, invalidate or otherwise decelerate the lender’s acceleration of the debt in the initial action.” Since the lender took no affirmative action to reinstate the loan following the dismissal, the second foreclosure action filed more than five years after the original default was deemed untimely and barred by the statute of limitations.

But as it stands today, the best course of action for lenders is to ensure that their actions are filed within five years of the original default even if the case has already been dismissed one time. For debtors, if more than five years have passed, you will need to check to see if the lender ever attempted to “deaccelerate” and then “reaccelerate” the loan after the dismissal. If they did, then the five year statute of limitations may have been extended. With that said, do not hesitate to contact us should you wish to discuss your legal rights as they relate to the calculation of the statute of limitations for a mortgage foreclosure.

Miami Foreclosures are Reversed by Appellate Court

foreclosureThe Third District Court of Appeal has reversed two foreclosures recently.  Each case represented a unique fact pattern.  But taken together, these cases represent a continued effort by the Third District Court of Appeal to ensure that homeowners have their fair day in court.  The Third District Court of Appeal is attempting to ensure that all the procedures that are followed in just about every other case are also followed in foreclosure matters too.

In Rocketrider Pictures v. Bank United, 138 So.2d 1223 (Fla. 3d DCA 2014), the appellate court was confronted with the issue as to whether or not the judicial sale of property after the entry of a foreclosure judgment was proper given that the judgment entered was only against the wife, and not the husband, despite the fact that the property was owned by both the husband and wife as tenants by the entireties.   It is a fundamental concept that where tenants by the entireties are involved, one title holder cannot be divested of title without the other because both tenants own the entire property together; equally and completely. As a result, “[p]roperty held as an estate by the entireties is not subject to the hen of a judgment against one tenant alone.”   Teardo v. Teardo, 461 So.2d 276 (Fla. 5th DCA 1985).

Nevertheless, in the Rocetrider case, the defendant was erroneously foreclosed on and the jointly held property sold at the judicial sale despite there being no interest to transfer.  Therefore, the appellate court reversed the sale and held that an “estate by the entireties is not capable of being the object of satisfaction for the debt of one of the tenants alone.  Thus, the interest of the judgment debtor alone could not pass by the sale.”

In Morlock v. Nationstar, No. 3D14-1247 (Fla. 3d DCA 2014), a homeowner won a wrongful foreclosure dispute with its bank.  In that case, the appellate court concluded that the trial court had abused its discretion when it wrongfully entered a final judgment against the homeowner.  The final judgment was entered because the homeowner was defaulted.  However, the default should never have been entered given that the homeowner had properly and timely filed extensions and had also filed its answer to the complaint and asserted affirmative defenses as well.

Don’t hesitate to contact us to discuss these cases further, or if our firm could be of additional assistance to you and your real estate needs.

Arguing Standing In Foreclosure Defense Claims

DadecountycourthouseIn just about all foreclosure defense claims, one of the threshold issues that need to be addressed is whether or not the bank has standing to foreclose.  The general law in the state of Florida is that the plaintiff’s lack of standing at the inception of the case is a fatal defect that may not be cured by the acquisition of standing after the case is filed.

In Focht v. Wells Fargo Bank, the Second District Court of Appeal was presented with this standing question.  In that case, the borrower had asserted that the bank did not have standing to foreclose.  The trial judge did not address that defense and simply entered judgment in favor of the bank.  Judgment was entered in the bank’s favor despite long standing Florida law that the bank had the obligation to prove that it had standing to foreclose at the time the lawsuit was filed.

The Second District Court of Appeal actually reversed the lower court’s entry of final judgment.  In so doing, the Second DCA recognized that the bank had failed to adequately overcome the standing defense and prove that it did, in fact, have standing to bring the foreclosure action.

However, the Second DCA was clearly troubled by what it saw the inequities playing out in foreclosure cases across the state of Florida.  Indeed, the concurrence goes on to lament about homeowners who collect rent while the properly is in foreclosure.

As a result, the Second DCA presented the following question regarding the above mentioned standing issue, “can a plaintiff in a foreclosure action cure the inability to prove standing at the inception of suit by proof that the plaintiff has since acquired standing?”

While it would have been an interesting to see how the Florida Supreme Court would have ruled in that case, the appeal has since been withdrawn by the bank.

Nonetheless, bank attorneys in foreclosure disputes will no doubt point to this case as somehow supporting their position that the law should not be followed.  But to do ignores the actual result of the case.  And the actual result resulted in the reversal of the entry of a final judgment in the bank’s favor since the bank was unable to overcome the borrower’s standing defense.   (more…)

Florida Supreme Court Ruling Clears Up Ambiguity in Disputes Involving Escrow Accounts and Hands Developers a Significant Victory in Pre-Construction Contract Disputes

Victory for Developers.jpgBack in September of 2011, we discussed the impact of the Third District Court of Appeal’s ruling mandating that developers must keep pre-construction deposits in separate escrow accounts.

However, the Florida Supreme Court has since reversed that ruling. In so doing, the Florida Supreme Court concluded that the deposits could be kept in one account so long as the accounting was done separately and the monies were not commingled with the developer’s own money.

The Florida Supreme Court’s ruling clears up an ambiguity regarding Fla. Stat. Sec. 718.202 and the requirements set forth in that statute governing the maintenance of pre-construction deposits. Simply put, the ruling is a significant victory for developers because developers are now free to keep money from condo buyers in one account so long as that account is not commingled with the developer’s money and proper accounting is kept.

This is a significant ruling that will no doubt have an impact on both ongoing development as well as many South Florida legal battles that continue to rage on in South Florida’s courts.

Since the real estate market went bust back in 2007, developers and pre-construction contract buyers of condominiums (many of which were never built) have flooded South Florida’s court system with lawsuits. Many of those lawsuits focus on the buyer’s effort to have their deposit returned. In most cases, those deposits were either 10 or 20 percent of the purchase price.

Florida Statute Sec. 718.202 protects condo buyers’ deposits of up to 10% of the purchase price and forbids developers from using that money during construction. Failure to adhere to the statute may result in 3rd a degree felony against the developer. However, the developer is permitted use funds in excess of 10% of the purchase price for construction purposes. But Fla. Stat. Sec. 718.202 imposes certain requirements on those funds too.

Thus, an ambiguity arose in the interpretation of that statute. The legal question became whether or not the monies that could be used for construction purposes were to be held in the same escrow account as the initial 10% deposit, or whether those funds needed to be placed in their own separate escrow account
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The Third District Court of Appeal’s ruling was favorable for buyers because the Third District Court of Appeal concluded that two separate accounts needed to be established, and that the funds could not be commingled in one account. Failure to establish the second account would result in voiding the contract and returning all monies deposited to the buyer. Such a ruling was no doubt a favorable ruling for buyers.

In 2010, Florida’s legislature attempted to clarify this ambiguity in the then existing law by revising the applicable statutes and stating that one account could be maintained, and also stating that if one account was to be used that separate accounting would be required. Despite that clarification, however, the Third District Court of Appeal in 2011 still ruled that two accounts were required. As such, an appeal was taken to the Florida Supreme Court to help further resolve these ambiguities.

The Florida Supreme Court’s analysis noted that the statute was, in fact, ambiguous in terms of whether or not two separate accounts were required to hold the escrow deposits. Given that ambiguity, the Florida Supreme Court next looked at the statute’s legislative history to help resolve the ambiguity. The Florida Supreme Court concluded that the legislative history was not helpful in resolving the ambiguity.

However, the Florida Supreme Court noted that the statute did carry criminal penalties in the event that developers failed to follow the escrow requirements set forth in Fla. Stat. Sec. 718.202. Given that criminal component, the Florida Supreme Court concluded that the statutory rule of lenity applied. The rule of lenity states that if a statute is subject to competing reasonable interpretations then the statute shall be construed most favorably to the accused.

Consequently, since the statute at issue herein was subject to competing, but reasonable, interpretations, the Florida Supreme Court applied the rule of lenity to resolve the matter. The rule of lenity mandated that the statute be interpreted most favorably to developers so as to prevent developers from being subject to criminal penalties.

Thus, developers are permitted to keep all pre-construction deposits in one escrow account so long as the funds are not commingled and separate accounting records are maintained.

Appellate Court Renders Rulings Regarding Miami Foreclosures

foreclosurejpg-b2bd8d258facfb84.jpgWe recently discussed the impact Miami’s rocket docket is having on Miami foreclosures. Here are but three more cases illustrating the issues being raised on appeal as a result of the issues being raised, and ruled upon, during foreclosure rocket docket sessions.

In Lopez v. U.S. Bank, the trial court granted U.S. Bank a final judgment against Ana Lopez, which was later reversed by the Third District Court of Appeal. They reversed because the case was tried before it was “at issue.” Florida Rule of Civil Procedure 1.440 states, in pertinent part, that “an action is at issue after ant motions directed to the last pleading served have been disposed of or, if no such motions are served, 20 days after the service of the last pleading.”

In Lopez, the Defendant served her answer and affirmative defenses on January 21, 2012 and the trial court issued an order setting trial for February 8, 2013. The time allotted between Lopez’s pleading and trial is within the 20 days, making it the case not “at issue” on February 8, 2013, which is when the trial took place.

Both sides agreed that final judgment must be reversed due to the case not being “at issue” during the date of trial. Due to these factors the case was remanded for new trial. And this is just another illustration of the “rush” to judgment at times during Florida’s foreclosure rocket docket sessions.

In HSBC Bank v. Williams, the appellate court affirmed an attorney fee award in the Defendant’s favor of $74,429. That attorney fee award was issued as a result of the bank’s discovery misconduct which resulted in the bank’s foreclosure complaint being dismissed. The appellate court affirmed the trial court’s attorney fee ruling, and concluded that the bank should pay $74,429 to the borrower as a result of all the “run around” the borrower was put through during the court of the underlying litigation.

However, in Mendoza v. Chase, the appellate court affirmed the lower’s court ruling. In that case, the Defendants were appealing from a final judgment of foreclosure along with the ensuing sale and certificate of title. They claimed that they did not receive adequate notice of the non-jury trial. This Court determined that regardless of notice the outcome would have been the same so the ruling is confirmed from the lower court. The footnote explains that “there was no cognizable defense to the foreclosure action so that the same result would have occurred in any event.”

Miami Appellate Court Reverses Foreclosure Judgment Because the Bank Failed to Properly Perfect Service of Process

rocket docket 001z.jpgThe 11th Judicial Circuit in Miami-Dade County is under a lot of strain. The strain stems from a “perfect storm” of events. First, the real estate collapse led to an explosion of foreclosure filings in Miami. Second, the real estate collapse also triggered an extreme economic down turn. That resulted in the court system, and, in particular, the courts here in Miami, to lose much needed financial resources. So the end result is that our courts have been asked to do more with less.

The courts initially tried to balance the interests of those being foreclosed on with the growing weight of increased filings. In Miami, a program was initiated that required all parties to attend mediation within a set time frame after the filing of a foreclosure. Filing fees were also substantially increased for banks filing foreclosures. Yet, these programs did very little to either slow the overwhelming number of foreclosures being filed, or help struggling homeowners.

As a result, the judiciary took it upon themselves to try and push these cases through the judicial system to help alleviate the strain our judiciary was facing given the foreclosure crises. The creation of the “rocket docket” has helped lower the amount of foreclosures currently pending in our judicial system, and possibly even helped fuel the real estate recovery that is currently underway.

But the “rocket docket” is not without its problems. The rush to judgment may actually create more work for the judiciary if proper procedure is not followed prior to judgment being entered.

For instance, the Third District Court of Appeal in Peysina v. Deutsche Bank reversed a judgment that was entered against the homeowner in large part because of the court’s rush to judgment and failure to follow proper procedure. Peysina stemmed from a judgment of foreclosure against Natalie Peysina. Peysina argued that service of process was not properly perfected on her at the commencement of the lawsuit. Apparently, the Bank was unsuccessful at serving Peysina and chose publication as an alternate route. The trial court ruled that service was proper and immediately moved for trial on the foreclosure.

The Third District Court of Appeal, reversed that ruling, stating that the trial court failed to hold an evidentiary hearing regarding the service of process. The court also explained that service of process by publication requires a conscientious and honest effort, appropriate to the circumstances, which must be made to acquire necessary information.

Moreover, the record does not demonstrate that the Bank exerted an appropriate effort under the circumstances to be able to effectuate personal service upon Peysina. For these reasons the trial court must conduct an evidentiary hearing to ascertain enough information to make a ruling on the service of process. Once this has been determined then the foreclosure hearing can be determined.

Brazen Fraud – Fraudulent Deeds Creating Problems for Homeowners and Purchasers Alike

fraud.jpgA large number of claims in Florida are being filed as a result of forged deeds on foreclosed or bank owned properties. The deeds were almost always into trust and the transaction that was insured in the one from the trust to the new, the innocent purchaser.

How this scam works is as follows. First, the property is either currently being foreclosed on, or has been foreclosed on and the bank has acquired it. Often times the property at issue is “abandoned” by the homeowner leading to squatters coming to the property. Second, a special warranty deed is recorded that looks to be from an officer in the lender/bank’s office. Third, the grantee on the deed is a trust. Not a trustee of the trust, but the trust. Fourth, minimal doc stamps are then paid on the transfer.

The red flag or scam is that the grantee is a trust not the trustee of the trust. Moreover, another red flag has to do with the fact that only nominal stamps are paid for the transfer to the trust. Also, often times the notary who notarized the documents is not even a real notary.

For instance, our firm recently worked on a case where this fraud became painfully evident. Our client had fallen behind on his loan, and was in the process of being foreclosed. A short sale had been agreed upon and the parties were working towards completing that deal. However, a routine title search revealed the homeowners had deeded their property over to the “Claude Monet Trust.” The homeowners, of course, had nothing to do with that transaction, and denied ever selling it to the “Claude Monet Trust.” But that did not stop the brazen fraudsters from going so far as even filing a satisfaction of mortgage. As this was going on, squatters then appeared on the property, which further complicated matters. Fortunately, the notary who had notarized the deed was non-existent, and the doc stamps paid were improper, among other irregularities. We were able to work with the bank and get all the fraudulent papers stricken from the court file without having to file a quit title action, and we were able to complete the short sale.
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But our story is not unique to the South Florida real estate landscape. Indeed, a partnership called Presscott Rosche or Prescott Rosche, is taking advantage of Florida’s foreclosure process in a fraudulent manner too. This company has claimed more than thirty (30) houses and condos throughout South Florida by fraudulent means. This is a very troubling development to many homeowners as the company has easily passed fraudulent deeds through the court system. These deeds often times do not contain the signatures of the proper homeowners; rather they contain forged signatures.

Most of the real homeowners, who have been a victim of this scam, are often times unaware that this is happening to them. They have submitted documents called “A Notice of Non-Abandonment” claiming the homes before “God Almighty under the Great Seal of Florida, and the laws of the united stated of America.”

On one occasion, Prescott Rosche filed a deed saying Frank Lopez and his wife transferred their Kendall to their partnership. Mr. Lopez first found out about this when he returned to his homes months after vacating it to find three people living in his home. He informed the police, who arrived along with four other men who brought a purported deed to his house. Lopez was later sent an apologetic letter by Prescott Rosche along with a deed that transferred the property back to Lopez. This was one of ten (10) deeds, which where transferred from Presscott Rosche back to its original owners.

Along with Prescott Rosche many fraudulent antics, they also have many employees under fake names and with criminal pasts. For instance, one of the partnership’s agents is listed as Daya Oluz, who in actuality is Claudia Zuloaga. Zuloaga is known to be an office manager for the company. She most recently worked as a tax preparer; who was banned from submitting tax documents after it was alleged that she was orchestrating a tax fraud scheme. Another example of this is Esteban Oviedo, who used the company’s fraudulent practices to take over a home which was owned by a German couple. Oviedo was suspected of breaking into the house and changing the locks. Oviedo claimed to have a proper lease to the home and was not convicted.

Fraud seems to be involved in every aspect of Prescott Rosche and it seems as though they have continued to proceed in fraud with relative ease. They often times are acquitted from claims against them, as the court claims there is not enough evidence to show they are not true owners.

Many of these fraudsters have mastered avoiding major legal issues as they rarely show up in court to defend claims against them. Contact our firm today if you believe that you have been the victim of a fraudulent transfer of your property.

Grandmother Trumped by the Donald over a Real Estate Deal Gone Sour

trump.jpgJacqueline Goldberg, an 87-year-old grandmother was unsuccessful in her suit against Donald Trump over a failed real estate transaction. During the four years of litigation, Goldberg and her attorney aimed to dissuade others from doing business with Trump and The Trump Organization. Goldberg claims that Trump swindled her into a bait-and-switch scheme to buy condos in one of his Chicago skyscrapers.

She claims to have suffered damages up to $6 million and asserts that Trump wooed her into buying two condos for $1 million each and promising her a share of building profits along with her commitment to buy. Trump reneged on this promise once Goldberg agreed to purchase the two condos.

Goldberg and her attorney are believed to have lost this lawsuit because of the details in the contract. The contract between the two parties stated that Trump could cancel the provision which allowed Goldberg a share in the building profits at anytime he saw fit. This may seem like an unfair provision considering the circumstances, but as it turns out Goldberg is a very profitable investor herself and should have been more cautious in signing the contract.

Indeed, our firm has been very successful in litigating these issues associated with contractual details and real estate transactions. Our firm is prepared to handle many real estate related litigation claims.

Trump is known as a savvy businessman, who is very flashy at times. It is easy to believe that Trump may have fascinated her with the idea of buying these two condos and also getting a share of the building profits. However, when signing into a contract it is always a “must” to read the contract in its entirety. Please contact us today if you are in doubt over your rights in any related real estate contract or if you are attempting to purchase real estate in Florida.

Although her wishes to expose Trump may fail, she has taught us all a very valuable lesson. This case is a prime example that no matter how great the deal may be or seem to be you should always read the contract before you sign on the dotted line. Whether you are an experienced businessman or just the average Joe you need to always know what you are signing. And if you don’t, then you should contact an attorney to help you understand it.