Saturday, June 18, 2016

FYI: Fla App Ct (4th DCA) Holds Borrower's "Forced-Place Insurance" Foreclosure Counterclaims Time-Barred

The District Court of Appeal of the State of Florida, Fourth District, recently affirmed the dismissal of a borrower's mortgage foreclosure counterclaims based on alleged violations of the Florida Unfair Insurance Trade Practices Act ("FUITPA") relating to supposed improper "force-placed" insurance, holding that the four-year statute of limitation barred the borrower's counterclaims as a matter of law.


A copy of the opinion is available at:  Link to Opinion


A mortgagee sued to foreclose its mortgage against a corporate borrower and its principal. The borrowers answered and counterclaimed for breach of contract and defamation.


In 2014, the borrowers filed an amended answer that included nine statutory and common law counterclaims based upon an alleged "phantom default" created when the plaintiff mortgagee's predecessor supposedly improperly purchased "force-placed" insurance on the property securing the loan and then allegedly misapplied the borrowers' payments.


The mortgagee moved to dismiss all of the counterclaims, which the trial court granted after a hearing. The borrowers appealed the dismissal of their counterclaims.


On appeal, the Fourth District first addressed whether it had jurisdiction, explaining that it has jurisdiction to review only final orders under Florida Rule of Appellate Procedure 9.030(b)(1)(A). It then found that the order dismissing the borrowers' counterclaims was not a "final order" because it did not dispose of the entire case on the merits. Instead, the mortgagee's foreclosure claim remained pending before the trial court.


The Appellate Court went on the explain that an "appellate court may exercise jurisdiction where the trial court's dismissal of a counterclaim 'adjudicates a distinct and severable cause of action.'" This, in turn, requires the court to determine whether the dismissed counterclaim was compulsory or permissive. If it finds "that a counterclaim is permissive, then the partial final judgment adjudicating the counterclaim is immediately appealable. On the other hand, if this court finds that a dismissed counterclaim is compulsory, then the order dismissing the counterclaim is 'not appealable until a final disposition of the original cause has [been] obtained on the merits.'"


The Fourth District found that seven of the borrowers' nine counterclaims were compulsory and dismissed "the appeal as to those counterclaims without prejudice for lack of jurisdiction."


The Appellate Court found that the remaining two claims based on violations of the FUITPA were permissive because they did not arise out of the "same aggregate of operative facts" as facts giving rise to the foreclosure claim. It then concluded that the order dismissing these permissive counterclaims "was a final order adjudicating distinct and severable causes of action. As such, this court has jurisdiction to reach the merits of the dismissal of these permissive counterclaims."


Turning to the merits of the appeal, the Fourth District held that "the trial court properly dismissed the Borrower's FUITPA counterclaims because they were not timely filed, reasoning that under subsection 95.11(3)(f), Florida Statutes, an action under the FUITPA must be brought within four years."


Because the operative facts giving rise to the FUITPA allegations supposedly took place from 2005 to 2008, and the borrowers did not file their FUITPA counterclaims until 2014, the claims were barred as a matter of law.


The Court affirmed trial court's dismissal of the FUITPA counterclaims.





Ralph T. Wutscher
Maurice Wutscher LLP
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