Florida Appellate Court says lender could have recovered interest accrued beyond the statute of limitations if it sought the interest in its complaint

In Grant v. Citizens Bank, N.A., 5D17-726 (Dec. 26, 2018) a Florida Appellate Court retreated from its prior rulings that a lender could not recover in a foreclosure amounts that accrued more than five years prior to the filing of the lawsuit. Nevertheless, it held that the trial court erred in awarding interest which accrued more than five years before the suit was filed because the lender did not plead it in its complaint.

The borrower executed a note secured by a mortgage in September 2005. When the borrower defaulted in May 2009, the lender accelerated the loan. The borrower did not cure, and in November 2015, the lender filed foreclosure. The action sought five years of accrued interest, together with principal and attorney’s fees. The trial court ruled in favor of the lender, and awarded interest back to the date of default, a date more than five years prior to the filing of the foreclosure. On appeal, the borrower argued the trial court erred in awarding interest that was barred by the statute of limitations and by awarding relief that was not requested in the pleadings or tried by consent.

Florida has a five-year statute of limitations for “action[s] on a contract, obligation, or liability founded on a written instrument,” or “to foreclose a mortgage.” The Florida Supreme Court had previously held that “with each subsequent default, the statute of limitations runs from the date of each new default providing the mortgagee the right, but not the obligation, to accelerate all sums then due under the note and mortgage.”

The Appellate Court retreated from prior opinions and adopted the view that when the right to accelerate the debt for non-payment is optional with the holder of the note, the statute of limitations does not run until the note is due unless the lender or holder accelerates and declares the full balance due earlier. In this case, because the promissory note allowed the lender to hold off or forbear accelerating the note upon the borrower’s default, its forbearance would not constitute a waiver or defense against the future collection of all sums due under the note.

So, while the lender could have waited until the note’s maturity date to bring its foreclosure, it was not required to do so. Instead, the lender accelerated the debt, as it was permitted to do, and filed suit. Had it requested interest from the May 2009 date of default, the lender would not have forfeited its right to all the amounts owed on the note based on the statute of limitations. Nevertheless, since the lender failed to ask for interest due from May 2009, the trial court erred in awarding interest prior to November 2010.

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