Florida Court Reverses Foreclosure Judgment

The newly created Florida Sixth District Court of Appeals (DCA) recently reversed a final judgment of foreclosure entered in favor of the lender, NCP Bayou 2, LLC (NCP), finding the foreclosure was barred by the five-year statute of limitations codified at § 95.11(2)(C), Florida Stats Ann. (West). Maki v. NCP Bayou 2, LLC, No. 6D23-643, 2023 WL 4037628 (Fla. 6th DCA June 16, 2023).

In the case of Maki, the borrowers (the Makis) took out two loans that were both secured by mortgages. The second loan was a home equity line of credit (HELOC), and it was the primary subject of the appeal. The Makis stopped making payments on the HELOC in June 2013. Multibank 2009-1 RES-ADC Venture, LLC (Multibank) owned the HELOC at the time, and chose to accelerate the loan, so it sent a demand letter to the Makis in October 2014 demanding payment in full.

The Makis failed to comply, so in December 2014, Multibank filed a complaint for monetary damages based on non-payment of the HELOC. Notably, Multibank did not include a count to foreclose the mortgage that secured the HELOC note. On January 3, 2017, the court entered a final judgment in favor of Multibank who later assigned the judgment to NCP. The Makis failed to satisfy NCP’s money judgment and also defaulted on their first mortgage loan, so Wilmington, the holder of the first mortgage, filed a foreclosure action naming NCP as an inferior lien holder. In response, NCP filed a crossclaim against the Makis seeking to foreclose its mortgage which secured the 2017 money judgment.

The Makis responded to the crossclaim by asserting that NCP’s claim to foreclose was barred by the five-year statute of limitations since Multibank accelerated the HELOC in October 2014. The lower court disagreed, and entered a judgment of foreclosure in favor of NCP.

The Makis appealed that judgment to the Sixth DCA which found the statute of limitation ran as of October 2019, five years from date Multibank accelerated the loan by sending the demand letter to the Makis. The Court found the crossclaim for foreclosure was barred pursuant to § 95.11(2)(c).

The Court based its holding on the fact Multibank chose to “exercise its option to accelerate all future payments due” thereby triggering the five-year limitations period for foreclosing the mortgage which secured the HELOC note. The Court elaborated that there was “simply no legal authority for the proposition” that the money judgment entered in January 2017 extended the statute of limitations period for foreclosing the mortgage.

NCP moved for rehearing on that holding and relied heavily on Klondike, Inc. v. Blair, 211 So. 2d 41, 42 (Fla. 4th DCA 1968) to support its argument. NCP argued that the Sixth DCA “overlooked or misapprehended” the holding in Klondike which supported NCP’s position that the January 2017 money judgment created a “new and different obligation” which was not barred by § 95.11(2)(c) and which new debt was secured by the mortgage. NCP reasoned that the “breach of that new and different obligation did not accrue before the entry of the judgment on January 3, 2017” and the original default and acceleration of the HELOC note was inconsequential to the subsequent default of the 2017 money judgment since the HELOC note had merged into the judgment and no longer existed.

Notably, NCP included quoted text from the Klondike decision, a portion of which the Sixth DCA quoted to support its holding that the money judgment “had no effect upon the mortgage” and therefore no effect on the running of the statute of limitations. NCP pointed out that the Sixth DCA omitted a key portion of the quoted text from Klondike. The omitted portion read in pertinent part: “[T]he conclusion often reached in such cases [where a mortgage debt remains unsatisfied even after entry of a money judgment] being that the debt is not destroyed by the merger and that the mortgage secures the debt in its new form as merged in the judgment.” The quoted text appears to be spot on and may form the basis for the Sixth DCA to correct, or possibly limit its holding.

After receipt of NCP’s rehearing motion, the Sixth DCA allowed the filing of amicus curiae briefs. The Court still has not ruled on the rehearing motion so the holding in Maki is not yet binding precedent. If rehearing is denied this new precedent obviously has the potential to adversely impact the mortgage industry, a point NCP raised in the portion of its motion which sought certification of the issue to the Florida Supreme Court.