Fla. Court (19th Jud Cir) Holds Periodic Statements Sent to Borrower Following Dismissal of Foreclosure Not Actionable Under FCCPA

The County Court of the Nineteenth Judicial Circuit in and for St. Lucie County, Florida recently dismissed a borrower’s amended complaint against a mortgage servicer alleging violations of the Florida Consumer Collection Practices Act (FCCPA) for sending mortgage statements to the borrower following involuntary dismissal, without prejudice, of a foreclosure action.

In dismissing the action with prejudice, the Court held that the statements sent by the defendant mortgage servicer were not attempts to collect a debt, and therefore not actionable under the FCCPA.

In addition, the Court held that the plaintiff borrower failed to state a cause of action because res judicata did not apply to the dismissal of the foreclosure action, the debt was not barred by the statute of limitations, and any alleged expiration of the statute of limitations would not change the balance due on the mortgage loan.  A copy of the order in Merritt v. Seterus, Inc. is available at:  Link to Order.

The predecessor mortgagee filed a foreclosure action in 2013, which was involuntarily dismissed without prejudice in September 2015 for failing to appear at trial.  Following the dismissal of the foreclosure, the successor servicer of the mortgage mailed two periodic mortgage statements to the borrower.

The borrower filed suit against the servicer alleging that the statements purportedly sought to collect amounts that were barred by the statute of limitations, and therefore supposedly violated the FCCPA, Fla. Stat. § 559.55, et seq., by claiming, attempting or threatening to enforce a debt it knew was not legitimate or asserting a legal right it knew did not exist.  Fla. Stat. § 559.72(9).  The servicer moved to dismiss for failure to state a cause of action under the FCCPA.

First, the Court considered whether or not the statements themselves even constituted debt collection under the FCCPA.

The Court acknowledged that sending periodic statements for residential mortgage loans is required by the federal Truth in Lending Act (TILA) and Regulation Z.  See 15 U.S.C. § 1638(f); 12 C.F.R. § 1026.41.  The Court held that excluding periodic statements from the reach of the FCCPA is consistent with the Consumer Financial Protection Bureau’s (CFPB) interpretation of the analogous federal statute, the federal Fair Debt Collection Practices Act (FDCPA), which regards the animating purpose of sending periodic statements as compliance with federally mandated informational disclosures, and not the collection of a debt.

The Court rejected the borrower’s argument that the inclusion of “mini-Miranda” language (“[t]his is an attempt to collect a debt.  All information will be used for that purpose,”) transformed the statement into an attempt to collect a debt, as courts throughout the country have held that such language is not probative to the animating purpose of the letter.  See e.g. Maynard v. Cannon, 401 Fed. Appx. 389, 395 (10th Cir. 2010); Lewis v. ACB Bus. Services, Inc.,135 F.3d 389, 399 (6th Cir. 1998); Gburek, 614 F.3d at 386; Goodson v. Bank of Am., NA., 600 Fed. Appx. 422, 432 (6th Cir. 2015); Muller v. Midland Funding, LLC, 14-CV-81117-KAM, 2015 WL 2412361, at *9 (S.D. Fla. May 20, 2015).

The Court noted that the FDCPA, in fact, requires the inclusion of the “mini-Miranda” disclaimer in various communications whose animating purpose is not to collect a debt.  See 15 U.S.C. 1692e(l l); Lewis, 135 F.3d at 399; Maynard, 401 Fed. Appx. at 395; Gburek, 614 F.3d at 386; Goodson, 600 Fed. Appx. at 432.

Accordingly, the Court held that the periodic statements did not attempt to collect a debt, and were not subject to the FCCPA.

Next, the Court considered the borrower’s arguments that the statements sought to collect amounts barred by res judicata and the statute of limitations.

The Court found that res judicata does not bar collection of the amounts due on the loan because: (i) res judicata does not apply to dismissals without prejudice, because such dismissals are not an adjudication on the merits (See Tilton v. Horton, 137 So. 801, 808 (Fla. 1931) and Markow v. Am. Bay Colony, Inc., 478 So. 2d 413, 414 (Fla. 3d DCA1985)), and; (ii) the doctrine of res judicata would not preclude the collection of these amounts in an acceleration and foreclosure premised on a new and different default even if the initial dismissal were with prejudice. See Singleton v. Greymar Associates, 882 So. 2d 1004, 1006 (Fla. 2004); Bartram v. US. Bank Nat. Ass’n, 41 Fla. L. Weekly S493, 2016 WL 6538647 (Fla. Nov. 3, 2016); Desylvester v. Bank of NY Mellon (Fla. App., 2017).

In addition, the Court rejected the borrower’s argument that the statements sought to collect amounts barred by the statute of limitations for mortgage foreclosure.

Primarily, the Court held that the borrower’s argument was flawed because the debt had not been accelerated, such that the statute of limitations had not begun to run.  See Locke v. State Farm Fire & Cas. Co., 509 So. 2d 1375, 1377 (Fla. 1st DCA 1987); Greene v. Bursey, 733 So.2d 1111, 1115 (Fla. 4th DCA 1999).  Even if the debt were once accelerated, the dismissal of the prior foreclosure unwound any prior acceleration, and the mortgagee is not time-barred by the statute of limitations from filing a new foreclosure which accelerates the debt.  See Bartram v. US. Bank Nat. Ass’n, 41 Fla. L. Weekly S493, 2016 WL 6538647, *1 (Fla. Nov. 3, 2016).

Lastly, the Court held that even if the statute of limitations had in fact run, it would have no effect on the content or disclosures within the periodic statement.   See Danielson v. Line, 135 Fla. 585, 185 So. 332, 333 (1938).

Because the statute of limitations is merely procedural in character, and has no bearing on the substance of the underlying contract and mortgage lien, the Court held the appropriate measure of the truthfulness of figures set forth in the statements would be governed by the Florida statute of repose, not the statute of limitations.  Id; Garrison v. Caliber Home Loans, Inc., 616CV9780RL37DCI, 2017 WL 89001, at *3 FN 19 (M.D. Fla. Jan. 10, 2017).

Accordingly, the servicer’s motion to dismiss was granted, and the borrower’s amended complaint was dismissed with prejudice.

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Christopher P. Hahn practices in Maurice Wutscher’s Commercial Litigation, Consumer Credit Litigation and Insurance Recovery and Advisory groups. Prior to joining Maurice Wutscher LLP, he served under the General Counsel at the Florida Office of Financial Regulation. He also obtained extensive experience litigating property insurance claims through all phases of discovery, motion practice and other pre-trial activities. Christopher obtained his Bachelor of Science degree in Business Administration from the University of Southern California, followed by his Juris Doctorate degree from the University of Miami School of Law. He is also a graduate of the University of Miami’s Masters of Business Administration program, completing his degree with an emphasis on finance and mergers and acquisitions.