Who would have imagined that a dismissal with prejudice would be better for a lender than a dismissal without prejudice? It is counterintuitive to say the least, but when it comes to the application of the statute of limitations defense raised in a subsequent foreclosure action, it seems that lenders (at least in the Third District) will fare better if the previous foreclosure action was dismissed with prejudice. The issue is the application of the statute of limitations in a foreclosure action and it appears that, for now, this may be resolved differently in different jurisdictions.
There are two schools of thought on the application of the statute of limitations in cases where a dismissal has been taken. The Fourth District has taken the view that when a mortgage foreclosure action is dismissed (either with or without prejudice), the Note is “de-accelerated” as a matter of law. The result of this position is that the statute of limitations does not preclude a subsequent foreclosure action based on a separate default. The Third District, however, in the recent case of Deutsche Bank Trust Company Americas v. Beauvais, 3D14-575, 2014 WL 7156961 (Fla. 3d DCA 2014), has taken the view that a critical distinction exists between a dismissal with prejudice and one that is without prejudice. A dismissal with prejudice (according to the Third District) adjudicates the alleged default in favor of the defendant(s) and invalidates the lender’s attempted acceleration. As such, dismissal with prejudice “de-accelerates” the Note as a matter of law. A dismissal without prejudice, however, is not an adjudication on the merits. Therefore, a dismissal without prejudice in the Third District does not invalidate the lender’s acceleration of the Note and the lender’s initial acceleration remains in full force and effect after the dismissal without prejudice. Thus, if the lender does not file a subsequent foreclosure action within five years of the date the Note was initially accelerated, the statute of limitations will procedurally bar the lender from prevailing on the subsequent foreclosure action. So says the Third DCA.