Wednesday, October 26, 2016

FYI: Fla App Ct (1st DCA) Dismisses Foreclosure Due to Trial Court's Lack of Jurisdiction

The District Court of Appeal for the First District, State of Florida, recently ordered the dismissal of a foreclosure action because it held that the trial court's jurisdiction expired prior to the entry of the judgment of foreclosure in the case.


The Appellate Court held that the trial court failed to consider whether it had jurisdiction over the action to enter judgment of foreclosure after it previously dismissed the same action. 


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


A mortgagee commenced a foreclosure action against a borrower in 2009.  The mortgagee alleged that the borrower was in default and that it was entitled to foreclose on the property as the holder of the mortgage and note. 


As you may recall, under Florida law, a party seeking to foreclose must tender the original promissory note to the trial court or seek to reestablish the lost note.  The mortgagee failed to produce the original note during discovery and the borrower sought to compel such production.  In January 2013, the trial court ordered the mortgagee to file the original note and mortgage within 30 days of the order.  The mortgagee did not comply.


In May 2013, the borrower filed his motion to dismiss the case due to the mortgagee's failure to comply with the court's order.  The trial court denied the motion, and stated that its previous order compelling the mortgagee to file the original note was still in effect.


In February 2014, the borrower filed a second motion to dismiss, again based on the mortgagee's continued failure to comply with the court's order to produce the original documents.  The trial court granted the motion to dismiss "without prejudice."  


A few days thereafter, the borrower erroneously filed and served a notice of hearing on his second motion to dismiss.  This notice did not constitute a motion for rehearing.  This mistaken "notice" did not postpone the entry of the order, revive the pendency of his second motion to dismiss, or toll the time for any challenge to the order by the mortgagee. 


There was apparently no hearing on the borrower's mistaken notice of hearing, and no transcript was contained in the record to indicate any oral motion or ruling.  In April 2014, without explanation or reference to its February 2014 order, the trial court entered a second order on the borrower's second motion to dismiss, this time denying the motion and directing the mortgagee to file an amended complaint within sixty days.


After the eventual filing of the amended complaint, which asserted a new cause of action to enforce a lost note, and upon the mortgagee's motion for summary judgment, the trial court entered summary final judgment of foreclosure in favor of the mortgagee in August 2015.  The borrower appealed.


The First District Court of Appeal exclusively analyzed the issue of jurisdiction to arrive at its decision.  The Court explained that jurisdiction over an action does not endure indefinitely and that it was an error for the trial court never to address the viability of its jurisdiction over the case after the entry of the order of dismissal in February 2014.


The Appellate Court held that the entry of the order granting the second motion to dismiss, without prejudice, but without indicating any future judicial action in that particular case, together with the lack of a future motion on the order, resulted in finality and the concomitant loss of the court's jurisdiction in this particular case. 


The First District supported its ruling by considering the Florida Rules of Civil Procedure, the history of the case at that point, and the appealable nature of that order. 


In analyzing the Florida Rules of Civil Procedure, the Appellate Court focused on the "without prejudice" language in the order.  The Court explained that "without prejudice" can indicate the trial court's intention to bring an end to the judicial labor in the matter. 


Moreover, a dismissal under rule 1.420(b) of the Florida Rules of Civil Procedure operates as an adjudication on the merits.  Thus, the First District held, a second lawsuit on the same note, mortgage, and default is barred as res judicata unless the court includes the phrase "without prejudice" in the order of dismissal. 


The First District then turned to the history of the case to support its ruling.  The February 2014 order was final and appealable as a sanction for discovery abuses.  The Court noted that Florida appellate courts have upheld orders dismissing action without prejudice as a sanction for discovery violations.  


The Appellate Court noted that the dismissal order was appealable, but the mortgagee did not appeal the order of dismissal entered in February 2014.  The Court also noted that the mortgagee did not file a motion for rehearing, appeal, or motion for relief from judgment or order, pursuant to Rule 1.540 of the Florida Rules of Civil Procedure. 


The First District held that these were the available mechanisms for challenging the order and in light of these mechanisms the time to rehear the order expired in March 2014.  The Appellate Court held that the trial court's jurisdiction to enter additional rulings is limited, and decreases as time progresses after a final, appealable order is entered by the trial court.  The Appellate Court also noted that a trial court loses jurisdiction of a case at the expiration of the time for filing a petition for rehearing. 


Consequently, the First District held, the trial court had no jurisdiction to further entertain the mortgagee's claim against the borrower on the same cause of action.


The Court concluded that the order entered in April 2014, denying the borrower's second motion to dismiss (despite the previous grant of the same motion in February 2014), and directing the mortgagee to file an amended complaint in the same case, was a nullity as was the judgment of foreclosure entered on the amended complaint. 


Accordingly, the First District reversed the trial court's judgment of foreclosure, and remanded for dismissal of the case. 




Ralph T. Wutscher
Maurice Wutscher LLP
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