Libardo Gomez v. Household Finance Corporation, III

Case: 14-14662 Date Filed: 05/12/2017 Page: 1 of 10

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
________________________

No. 14-14662
Non-Argument Calendar
________________________

D.C. Docket No. 1:13-cv-24036-MGC

LIBARDO GOMEZ,

Plaintiff - Appellant,

versus

HOUSEHOLD FINANCE CORPORATION, III,
a Delaware corporation,
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,
a Delaware corporation,
HSBC MORTGAGE SERVICES, INC.,
a Delaware corporation,
VOLT ASSET HOLDINGS TRUST XVI,

Defendants - Appellees.
 Case: 14-14662 Date Filed: 05/12/2017 Page: 2 of 10

________________________

Appeal from the United States District Court
for the Southern District of Florida
________________________

(May 12, 2017)

Before MARTIN, JULIE CARNES, and ANDERSON, Circuit Judges.

PER CURIAM:

Plaintiff Libardo Gomez appeals the dismissal of his putative class-action

complaint, in which he sought a declaration that the promissory note and mortgage

encumbering his home were unenforceable due to the running of the statute of

limitations on foreclosure proceedings. After review of the record and the

pertinent law, we AFFIRM.

BACKGROUND

In July 2005, Gomez and his wife obtained a loan from Wilmington Finance

totaling $190,000 in order to purchase a condominium in Miami, Florida.

Gomez’s monthly repayment obligations were memorialized in a promissory note

(the “Note”) that will mature on September 1, 2035, and were secured by a

mortgage on the home (the “Mortgage”). The Mortgage names Mortgage

Electronic Registration Systems, Inc. (“MERS”) as nominee for Wilmington

2
 Case: 14-14662 Date Filed: 05/12/2017 Page: 3 of 10

Finance. The Note and Mortgage were subsequently assigned to a separate entity

called Household Finance Corporation III (“Household”).

The Mortgage contains an optional acceleration clause, under which the

lender holds a right to accelerate outstanding payments in the event of default as

long as it provides the mortgagor with notice of the default and at least thirty days

to cure. In turn, the mortgagor retains a right to reinstate the Note and Mortgage

after acceleration if it meets certain conditions specified in the Mortgage, including

cure of all past payment defaults.

Gomez defaulted on the loan on November 1, 2007, by failing to make

scheduled payments. On April 2, 2008, Household initiated a foreclosure

proceeding and expressly notified Gomez that, “[b]y reason of said default,”

Household was exercising “its option to declare the entire principal balance and

accrued interest due and payable” in addition to foreclosing the Mortgage. The

court presiding over the foreclosure proceeding entered judgment in favor of

Household shortly thereafter.

After judgment was entered, but before the foreclosure process began,

Household moved the court to vacate its judgment because, according to

Household, the matter had been “resolved by the obligation being reinstated.” The

3
 Case: 14-14662 Date Filed: 05/12/2017 Page: 4 of 10

court granted the motion, dismissing the foreclosure suit without prejudice and

ordering the return of the Note and Mortgage to Household.

Roughly one year later, Household assigned the Note and Mortgage to

HSBC Mortgage Services, Inc. (“HSBC”), which ultimately assigned its interest to

an entity called Volt Asset Holdings Trust XVI (“Volt”). Gomez named MERS,

Household, HSBC, and Volt as defendants in the underlying putative class action.

Despite Gomez’s payment delinquencies since November 1, 2007, neither

Household nor any of its assignees has successfully foreclosed the mortgage.1 In

his complaint before the district court, Gomez alleged that Defendants’ failure to

re-initiate foreclosure proceedings within the five-year limitations period for such

actions has rendered the Note and Mortgage unenforceable. As such, Gomez

sought a declaratory judgment extinguishing the Note and Mortgage and quieting

title to the property. The claim is founded on Gomez’s contentions that, under

Florida law, the five-year limitations period should be measured from the date of

his initial default—or, at the latest, from the date on which the lender accelerated

1
Gomez asserts in his briefing on appeal that HSBC filed a foreclosure proceeding against
Gomez in June 2009 and that the suit was dismissed involuntarily two years later for failure to
prosecute. Gomez failed, however, to allege facts regarding this second proceeding in his
complaint, and evidence of the proceeding is not part of the record on appeal. As such, we do
not consider this proceeding in our analysis.

4
 Case: 14-14662 Date Filed: 05/12/2017 Page: 5 of 10

payment—and that the expiration of that period precludes enforcement of any

subsequent missed payments under the Note. Put differently, Gomez argues that

his lender’s failure to foreclose on the property within five years of its initial

foreclosure filing renders all future payments due under the Note and Mortgage

unenforceable.

The district court rejected Gomez’s narrow interpretation of the statute of

limitations and dismissed his complaint for failure to state a claim. See Fed. R.

Civ. P. 12(b)(6). Gomez appeals that dismissal. We review de novo, accepting the

complaint’s allegations as true and construing them in the light most favorable to

Gomez. See CSX Transp., Inc. v. Gen. Mills, Inc., 846 F.3d 1333, 1336 (11th Cir.

2017).

DISCUSSION

Gomez’s complaint sought two forms of relief: a declaration that any causes

of action under the Note and Mortgage had expired under the statute of limitations

and thus were unenforceable against Gomez and the mortgaged property; and an

order quieting title to the property in Gomez. It is undisputed that Florida law

governs Gomez’s substantive claims. Florida’s statute of limitations states that an

action to foreclose a mortgage must be commenced within five years of the date on

which the cause of action accrues. Fla. Stat. § 95.11(2)(b)–(c), § 95.031(1).

5
 Case: 14-14662 Date Filed: 05/12/2017 Page: 6 of 10

There is no dispute in this case that Household notified Gomez of its intent

to accelerate the Note at the time Household filed its foreclosure action. But

Gomez and Defendants disagree as to the effect of the foreclosure action’s

subsequent dismissal on the acceleration of the Note. Defendants argue, in line

with the district court’s conclusion below, that the voluntary dismissal of the

foreclosure action without prejudice had the effect of reinstating the obligations of

the Note and “decelerating” payments thereunder. In Defendants’ view, because

the Note was reinstated, each of Gomez’s subsequent defaults constituted separate

causes of action from which distinct five-year limitations periods must be

calculated. Thus, any defaults that occurred less than five years ago remain

enforceable under the Note and Mortgage.

Gomez contends that the dismissal did not have the effect of automatically

reinstating the Note and Mortgage, and that none of the defendant entities took

steps to decelerate payments due. Because payments under the Note were

accelerated as of the filing of the foreclosure proceeding on April 2, 2008, the

limitations period began to run at that time and covered the entire outstanding

balance on the Note. On this theory, the statute of limitations as to the entirety of

the loan expired on April 2, 2013, meaning that the Note is currently unenforceable

and the Mortgage may not be foreclosed.

6
 Case: 14-14662 Date Filed: 05/12/2017 Page: 7 of 10

The parties’ positions raise two questions of Florida law. First: Does the

dismissal of a foreclosure action in which the lender exercised its option to

accelerate the debt have the effect of “decelerating” payment obligations under the

applicable note and mortgage, thus restoring the parties’ initial contractual

relationship? And second: Do a mortgagor’s missed installment payments on a

mortgage loan constitute separate and distinct causes of action for purposes of

analyzing the statute of limitations?

The Florida Supreme Court answered both these questions in the affirmative

in Bartram v. U.S. Bank National Association, 211 So. 3d 1009 (Fla. 2016).2 The

facts before the court in Bartram were identical in several material respects to the

facts before us. Mortgagor Bartram borrowed over $650,000 to purchase a home

and secured the loan with a mortgage on the property. Id. at 1013. Bartram’s

mortgage gave the lender a right to accelerate payments upon default; in turn, the

mortgagor was empowered to reinstate the note post-acceleration once certain

2
These two questions came before the Florida Supreme Court upon certification by the Fifth
District Court of Appeals. The Supreme Court’s review remained pending at the time Gomez
filed the instant appeal. Given the relevance of Bartram to the arguments on which Gomez
based his claims, this Court held Gomez’s appeal in abeyance pending the Supreme Court’s final
decision.

7
 Case: 14-14662 Date Filed: 05/12/2017 Page: 8 of 10

conditions were met. 3 Id. at 1013–14. Bartram stopped making monthly payments

on his mortgage shortly after executing the loan. Id. at 1014. In response, the

lender initiated a foreclosure action against Bartram and exercised its option to

accelerate payments. Id. Nearly five years later, the foreclosure action was

involuntarily dismissed due to the lender’s failure to appear at a case-management

conference. Id. The lender made no subsequent efforts to reinitiate the foreclosure

action. Id. Five years after the lender’s first foreclosure filing, Bartram sought a

declaratory judgment canceling the mortgage and quieting title to his property,

arguing—as Gomez does here—that the expiration of the limitations period barred

subsequent enforcement. Id. at 1015.

The Florida Supreme Court rejected Bartram’s argument. First, it held that

“a subsequent and separate alleged default create[s] a new and independent right in

the mortgagee to accelerate payment on the note in a subsequent foreclosure

action,” thus causing a new limitations period to begin to run from the date of each

new default. Bartram, 211 So. 3d at 1019 (citing Singleton v. Greymar Assoc., 882

So. 2d 1004, 1008 (Fla. 2004)) (internal quotation marks omitted). Second, the

3
The mortgages Bartram and Gomez signed were standard residential form mortgages whose
language is substantively identical.

8
 Case: 14-14662 Date Filed: 05/12/2017 Page: 9 of 10

Court concluded that, where a note contains a reinstatement provision, dismissal of

a foreclosure action with or without prejudice has the effect of decelerating future

payment obligations, thus restoring the “installment nature” of the note. See id. at

1020–21. Therefore, in a case like Bartram’s:

the statute of limitations on the balance under the note and mortgage would
not continue to run after an involuntary dismissal, and thus the mortgagee
would not be barred by the statute of limitations from filing a successive
foreclosure action premised on a ‘separate and distinct’ default. Rather,
after the dismissal, the parties are simply placed back in the same contractual
relationship as before, where the residential mortgage remained an
installment loan, and the acceleration of the residential mortgage declared in
the unsuccessful foreclosure action is revoked.

Id. at 1019. The Court made clear that, for purposes of this analysis, it is irrelevant

whether the foreclosure suit was dismissed with or without prejudice. Id. at 1020.

Thus, under the Court’s holdings, Bartram’s lender remained free to recover

unpaid installments less than five years old, even though the lender had failed to

timely pursue foreclosure on Bartram’s first round of defaults. See id. at 1021–22.

Our primary task is to apply Gomez’s facts to the law articulated in Bartram.

In so doing, we note that the only meaningful factual distinction between Bartram

and Gomez’s respective cases is that, in the former, the lender’s foreclosure action

was dismissed involuntarily, while the suit against Gomez was dismissed

voluntarily. The analysis and express holdings of Bartram give no indication that

9
 Case: 14-14662 Date Filed: 05/12/2017 Page: 10 of 10

this distinction is significant, and it therefore does not alter our conclusion under

Gomez’s facts.4

Given the near-identical postures of this case and Bartram, we conclude that

Gomez’s complaint fails to state a claim for the declaratory relief sought because it

fails to allege that Gomez’s Note and Mortgage are not enforceable as to payment

defaults that occurred subsequent to Household’s initial foreclosure filing.

Because Gomez has failed to allege that the Note and Mortgage are unenforceable,

his pursuit of an order quieting title to the mortgaged property similarly fails. The

district court’s analysis below tracked the reasoning of Bartram and thus was

without error.

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s dismissal of

Gomez’s complaint for failure to state a claim. 5

4
Indeed, in resolving a split among appellate courts on the legal issues presented in Bartram,
the Florida Supreme Court embraced an appellate-court opinion that applied these issues to a
voluntary-dismissal fact pattern. See Bartram, 211 So. 3d at 1018 (citing Evergrene Partners,
Inc. v. Citibank, N.A., 143 So. 3d 954, 955 (Fla. 4th DCA 2014)).
5
Because we affirm on the basis of Bartram, we do not reach the alternative grounds for
dismissal Defendants raise on appeal.

10