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Fla. Court (11th Jud Cir) Holds Borrower’s Heir Could Raise Statute of Limitations Defense in Foreclosure

The Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida recently dismissed a second foreclosure complaint, filed more than five years after the initial complaint and alleging the same incident of default, as barred by the statute of limitations.

In so ruling, the Court also held that the borrower’s daughter and sole beneficiary to the property encumbered by a reverse mortgage had standing to assert the statute of limitations defense.

A copy of the opinion in Reverse Mortgage Solutions, Inc. v. Estate of Ruby Hayes is available at:  Link to Opinion.

In October 2007, a borrower entered into a “home equity conversion mortgage,” commonly known as a “reverse mortgage.”  After the borrower died in May 2008, 100 percent of her homestead property was devised to her daughter.  The then-mortgagee sued to foreclose in July 2009, alleging that the borrower’s 2008 death triggered the acceleration clause in the mortgage.  The 2009 foreclosure complaint was dismissed in 2013.

In September 2014, a new holder of the note (“mortgagee”) filed a foreclosure complaint that alleged the same date of default — the May 2008 death of the borrower — and cited the acceleration provision of the reverse mortgage as grounds for accelerating the debt.

After the borrower’s daughter was granted homestead status of the property by the Probate Circuit Court of Miami-Dade County as heir to the borrower in May 2016, she moved to dismiss the foreclosure complaint on the grounds that the suit is barred by Florida’s five-year statute of limitations.  A nonjury trial followed.

At trial, the mortgagee argued that the borrower’s daughter lacked standing to assert the statute of limitations defense, as such defense is personal in nature, and she lacked privity with the note and reverse mortgage.

Under Florida law, a “defendant may not assert a statute of limitations defense if the defendant has no relation of privity with the party who has the defense. …  However, ‘when there is privity between a person who could, if sued, plead the statute [of limitations] and the party offering to plead it,'” the party offering to plead the defense may raise it to save his or her property.

Here, the Court concluded that as the sole legal titleholder of the encumbered, homestead-protected property, the borrower’s daughter had standing to plead a statute of limitations defense.

Next, the Court examined whether or not Florida’s five-year statute of limitations applied.  As you may recall, under Florida Law, “[w]hen a mortgage declares the entire indebtedness due upon default of certain of its provisions or within a reasonable time thereafter, the statute of limitations to a foreclosure claim begins to run immediately when the default takes place.” § 95.11(2)(c), Fla. Stat. (2016).  To determine whether a second foreclosure claim amounts to a statute of limitations violation, Florida courts examine the duration between the foreclosure actions and the types of default that triggered those actions.  See Singleton v. Greymar Assocs., 882 So. 2d 1004 (Fla. 2004) [29 Fla. L. Weekly S481a]; Deutsche Bank Tr. Co. Ams. v. Beauvais, 188 So. 3d 938 (Fla. 3d DCA 2016) [41 Fla. L. Weekly D933b].

Here, the Court noted that the reverse mortgage at issue permits acceleration of the debt upon the death of the borrower.  Moreover, the Court added, “a reverse mortgage, unlike a traditional, installment loan mortgage with a monthly payment obligation, does not have successive events of default where the basis for acceleration is death of the borrower. Accordingly, the loan cannot be decelerated.”

Because both foreclosure complaints alleged the same dates of default, the Court concluded that it was “unlikely that the actions allege subsequent and different defaults as laid out in Singleton,” and that the statute of limitations applied to any subsequent foreclosure action.  Thus, because the instant, second foreclosure action was filed more than five years after the borrower’s 2008 death and date of alleged default, and the defaults in both foreclosure actions were the same, the Court held that the statute of limitations applied.

Accordingly, final judgment was entered in favor of the borrower’s daughter and against the mortgagee.

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