In a recent ruling for GMAC, on May 7, 2015, the Florida Court of Appeals for the Fifth District overturned a decision that could have spelled trouble for many lenders. Berger Firm believes this lawsuit provides an interesting look at the court systems and how they may overstep their bounds during foreclosure cases. Let’s take a look at the basics of the case to understand the Appeals Court ruling in the case of GMAC Mortgage, LLC vs. Edward Whiddon, et. al., Case No.: 2015 WL 2106230 (Fla. 5th DCA 2015).
Whiddon vs. GMAC
In December 2010, GMAC filed a foreclosure action against the Whiddon family because their mortgage payments had been unpaid for several months. Because GMAC did not follow up on this foreclosure action, the courts ruled in favor of the Whiddons and dismissed the case with prejudice in July 2012. This action meant that GMAC could not file a new foreclosure action based on the non-payment of the mortgage through this date.
GMAC Files Second Action
Several months later, March of 2013, GMAC once again filed a foreclosure action. However, thanks to a clerical error the complaint read “by failing to pay the payment due on June 1, 2010, and all subsequent payments” the Whiddons were able to state that the filing was inappropriate since the original case had been dismissed with prejudice.
After this second action, the trial court not only agreed with the Whiddons that the filing was inappropriate but in an unprecedented action they ordered the Whiddons mortgage be canceled by GMAC, in effect excusing them from more than $200,000 in debt.
Bad News for Lenders
This would have been an incredibly bad precedent for lenders. At Berger Firm, we often represent lenders who are pursuing foreclosure actions. This would in effect mean that in the event any court dates are missed and the borrower prevailed, subsequent filings would have to be error-free in order for the lender to be able to collect the monies they are owed. There are precedents in place that were laid out in other cases where the court must demonstrate the error was willful and deliberate before they can be as punitive as this court was in putting out their ruling.
Fortunately Appeals Court Overturned
While there are still possible appeal options for the Whiddons, the Court of Appeals made a very clear statement when they overturned part of the prior order by the lower court. The appellate court ruled that lenders do in fact have a right to pursue a foreclosure action once the borrower subsequently defaults in spite of prior dismissal of cases – this is excellent news for lenders. In effect, the lower court said that because a mistake was made in the filing, GMAC could not collect anything they were owed on the mortgage note even pursuant to subsequent defaults. No matter how you look at this, it is definitely punitive in nature and should not even have been contemplated by the court. The appellate court then reversed the lower court and ratified the principal that while it is true that a foreclosure action and an acceleration of the balance due based upon the same default may bar a subsequent action on that default, an acceleration and foreclosure predicated upon subsequent and different defaults present a separate and distinct issue and do not bar a subsequent action.
At Berger Firm, we believe that lenders as well as borrowers have rights and we are committed to providing competent legal assistance to those lenders who need to file foreclosure actions and other complicated real estate litigation issues. We will carefully monitor this case to see if the Whiddons file yet another appeal and let you know the outcome of said appeal.