In 2006, nationwide foreclosure filings began a significant upward trend that peaked in 2010 with approximately 2.9 million filings that year. [i] For various reasons, some actions filed since 2006 have been dismissed by courts. The re-filing of these dismissed lawsuits may result in the raising of statute of limitations defenses by debtors. In Florida, the five (5) year statute of limitations for foreclosure actions begins to run when the mortgage loan is accelerated.[ii]. The filing of a foreclosure lawsuit constitutes acceleration of the loan.[iii] Typically, therefore, it is the filing of a foreclosure proceeding that will trigger the five (5) year statute of limitations.
Whether a subsequent foreclosure action filed more than five (5) years after the first proceeding is barred by the statute of limitations is an issue that has not yet been decided by courts in Florida. At least one Florida federal court has found that the voluntary dismissal of an earlier foreclosure action did not bar a subsequent foreclosure action based on defaults on subsequent payments that were less than five years old.[iv] Under this holding, a plaintiff would be able to file suit more than five years after the first action, but would only be entitled to make a claim for payments owed by the debtor that were less than five years old from the date of filing.[v]
The Fourth District Court of Appeal in Florida has held that the dismissal of the first foreclosure lawsuit results in de-acceleration of the loan.[vi] Arguably, under this line of reasoning, de-acceleration of the loan would result in tolling the running of the statute of limitations, since the plaintiff would no longer be demanding payment owed under the loan. This would permit the plaintiff to re-file suit as long as dismissal of the first action did not occur more than five years after the initial filing.
One lesser-known approach for addressing a statute of limitations defense asserted in response to a re-filed foreclosure action is the statute of limitations waiver found in some mortgages. An example of such a waiver is as follows:
26. Waiver of Statute of Limitations. The pleading of the statute of limitations as a defense to enforcement of this Security Instrument, or any and all obligations referred to herein or secured hereby, is hereby waived to the fullest extent permitted by applicable law.
States that have upheld similar statute of limitations waivers, including California[vii], New Jersey[viii], Vermont[ix], and Montana[x] have reasoned that the statute of limitations confers a personal right which is not protected by public policy and which may be waived.[xi] States that have found statute of limitations waivers unenforceable include New York[xii], Texas[xiii], Ohio[xiv], and Arkansas[xv]. In these states, statute of limitations waivers are seen as contrary to public policy.[xvi] Florida courts have not yet addressed statute of limitations waivers found in mortgages. Further, case law regarding the enforceability of statute of limitations waivers in general is limited.
At least one Florida appellate court has upheld a written statute of limitations agreement.[xvii] This was done by the First District Court of Appeal in the case of Pritchett v. Kerr, 354 So. 2d 972 (Fla. 1st 1978). In Pritchett, the plaintiff brought a medical malpractice claim in federal court.[xviii] The defendant failed to timely answer the complaint.[xix] Subsequently, the plaintiff and defendant entered into a stipulation pursuant to which the plaintiff agreed to waive the right to seek a default.[xx] In return, the defendant agreed waived his right to assert a statute of limitations defense in the event of dismissal of the case by the federal court.[xxi]
The federal court dismissed the suit and the plaintiff re-filed the case in state court.[xxii]In response to the state court action, the defendant moved to dismiss on the basis of the running of the statute of limitations, which the trial court granted.[xxiii] On appeal, the First DCA reversed the trial court’s ruling, holding that the lower court erred in failing to give effect to the agreement and stipulation of the parties, because “[t]he statute of limitations is an affirmative defense which can be waived.”[xxiv] The Pritchett court did not raise any public policy concerns in its analysis.[xxv] Rather, the court noted that the defendant had obtained the benefit of the plaintiff’s performance and was therefore clearly bound by the terms of their agreement.[xxvi]
While authority on whether statute of limitations waivers are enforceable is lacking in Florida, cases analyzing the enforceability of mortgage jury trial waivers are instructive, particularly where the right to a jury trial is constitutionally protected, unlike the right to assert the statute of limitations as a defense. Florida courts that have analyzed jury trial waivers have unanimously approved and enforced such waivers.[xxvii]
In all, while limited, case law in Florida supports the enforceability of statute of limitations waivers contained in mortgages, and suggests that Florida will ultimately join other jurisdictions in enforcement of such waivers. The approval of Florida courts with respect to mortgage jury trial waivers further lends support to this position. As previously noted, foreclosure filings peaked in 2010. This would make 2015 the peak year for statute of limitations issues as a result of the five-year limitations period. As these issues make their way to the appellate courts, we should see opinions enforcing limitations waivers, or at least delineating their applicability in the foreclosure context.
[i] RealtyTrac Staff, 1.4 Million U.S. Properties with Foreclosure Filings in 2013 Down 26 Percent to Lowest Annual Total Since 2007, (January 12, 2014).
[ii] Pursuant to Florida Statute section 95.11(2)(c), the five-year statute of limitations begins to run when the loan is accelerated. See Monte v. Tipton, 612 So. 2d 714, 716 (Fla. 2d DCA 1993)(Section 95.11(2)(c) accrues when optional acceleration clause is invoked).
[iii] Delandro v. America’s Mortg. Servicing, 674 So. 2d 184, 186 (Fla. 3d DCA 1996)(“The complaint in this case indicates that the acceleration took place on February 9, 1994, when the lender filed the mortgage foreclosure complaint and stated, in paragraph 11, that ‘Plaintiff declares the full amount payable under the note and mortgage to be due.’”); Parise v. Citizens Nat’l Bank, 438 So. 2d 1020, 1022 (Fla. 5th DCA 1983)(“Acceleration may be set in motion by filing a pleading in a suit on the full indebtedness.”). “Default by the makers alone [does] not accelerate the indebtedness.” Cent. Home Trust Co. v. Lippincott, 392 So. 2d 931, 933 (Fla. 5th DCA 1980).
[iv] Kaan v. Wells Fargo Bank, N.A., 2013 WL 5944074, at *3 (S.D. Fla. 2013) (“[w]hile any claims relating to individual payment defaults that are now more than five years old may be subject to the statute of limitations, each payment default that is less than five years old…created a basis for a subsequent foreclosure and/or acceleration action.”)(citing Singleton v. Greymar Assocs., 882 So. 2d 1004, 1008 (Fla. 2004) and Fla. Stat. § 95.11(2)(c)).
[v] See id.
[vi] See Olympia Mortgage Corp. v. Pugh, 774 So. 2d 863, 866 (Fla. 4th DCA 2000)(dismissal of lawsuit resulted in mortgagee not accelerating payment on the note and mortgage).
[vii] Prior to the enactment of California Code of Civil Procedure section 360.5, unlimited statute of limitations waivers were upheld as valid by California courts, including the Supreme Court of California. See Dexter v. Pierson, 1 P. 2d 435, 436 (1931); Brownrigg v. deFrees, 238 P. 714, 716 (1925); State Loan etc. Co. v. Cochran, 130 Cal. 245, 248 (1900); Wells, Fargo & Co. v. Enright, 127 Cal. 669, 673-74 (1900); McGee v. Jones, 79 Cal.App. 403, 404 (2d Cal. 1926). However, after the enactment of section 360.5, unlimited waivers were abolished for all practical purposes. Carlton Browne & Co. v. Superior Court, 210 Cal. App. 3d 35, 41 (2d Cal. 1989).
[viii] Hudson County Nat. Bank v. Simpson, 5 N.J. Super. 135, 139 (App. Div. 1950); Quick v. Corlies, 39 N.J.L. 11 (Sup. Ct. 1876).
[ix] State Trust Co. v. Sheldon, 35 A. 177 (1896).
[x] Parchen v. Chessman, 49 Mont. 326 (1914).
[xi] Brownrigg, 238 P. at 716; Sheldon, 35 A. at 177.
[xii] John J. Kassner & Co. v. New York, 415 N.Y.S.2d 785, 789 (1979).
[xiii] Squyres v. Christian, 253 S.W.2d 470, 472 (Tex. Civ. App. 1952).
[xiv] Alliance First National Bank v. Spies, 158 Ohio St. 499, 501 (1953).
[xv] First National Bank of Eastern Arkansas v. Arkansas Development Finance Authority, 44 Ark.App. 143, 146 (1994).
[xvi] See id.
[xvii] See Pritchett v. Kerr, 354 So. 2d 972 (Fla. 1st DCA 1978).
[xviii] Id. at 973.
[xix] Id.
[xx] Id.
[xxi] Id.
[xxii] Id.
[xxiii] Id.
[xxiv] Id.
[xxv] Id.
[xxvi] Id. at 974.
[xxvii] See e.g. Ladner v. AmSouth Bank, 32 So. 3d 99 (Fla. 2d DCA 2009)(affirming trial court’s enforcement of jury trial waiver contained in mortgage); C & C Wholesale, Inc. v. Fusco Management Corp. 564 So. 2d 1259 (Fla. 2d DCA 1990) (waiver of jury trial in lease enforceable); Palomares v. Ocean Bank of Miami 574 So. 2d 1159, 1160 (Fla. 3d DCA 1991)(citing Poller v. First Virginia Mortgage and Real Estate Inv. Trust, 471 So. 2d 104, 106 (Fla. 3d DCA); Credit Alliance Corp. v. Westland Mach. Co., Inc., 439 So. 2d 332 (Fla. 3d DCA 1983); Central Inv. Assoc., Inc. v. Leasing Serv. Corp., 362 So.2d 702 (Fla. 3d DCA 1978)) (rejecting argument that a contractual waiver of jury trial is “constitutionally impermissible”)).