Olympia Mortgage Corp. v. Pugh
774 So. 2d 863, 2000 WL 1899475 (2000)
Rule of Law:
Florida's two-dismissal rule (Fla. R. Civ. P. 1.420(a)) does not bar subsequent mortgage foreclosure actions when the alleged defaults occur during different time periods, because each new default constitutes a distinct cause of action, even if prior dismissed actions sought acceleration of the entire debt.
Facts:
- Theodore and Pamela Pugh had a promissory note and mortgage with Olympia Mortgage Corporation.
- Olympia filed its first mortgage foreclosure action against the Pughs on July 23, 1996, alleging a payment default date of April 1, 1995, and seeking to accelerate the entire amount due.
- Olympia filed its second mortgage foreclosure action against the Pughs on February 17, 1998, alleging a payment default date of May 1, 1995 (later stipulated to be April 1, 1995), and seeking to accelerate the entire amount due.
- After the first two actions were dismissed, Olympia applied funds held in escrow belonging to the Pughs to the payment due for April 1995.
- On October 13, 1998, Olympia filed the instant mortgage foreclosure action, alleging a payment default date of May 1, 1995.
- No payments have been made by the Pughs under the note and mortgage since April 1995.
Procedural Posture:
- Olympia Mortgage Corporation filed a first mortgage foreclosure action against Theodore and Pamela Pugh in Martin County Circuit Court.
- Olympia Mortgage Corporation voluntarily dismissed the first foreclosure action on February 16, 1998.
- Olympia Mortgage Corporation filed a second mortgage foreclosure action against the Pughs in Martin County Circuit Court.
- Olympia Mortgage Corporation voluntarily dismissed the second foreclosure action on May 28, 1998.
- Olympia Mortgage Corporation filed the instant mortgage foreclosure action against the Pughs in Martin County Circuit Court.
- The Pughs asserted Florida Rule of Civil Procedure 1.420(a), the two-dismissal rule, as an affirmative defense, arguing it precluded Olympia from obtaining a foreclosure judgment.
- The trial court, in its final judgment, applied the two-dismissal rule, holding that Olympia forfeited amounts owing from March 1995 through February 1998, but not the total balance of the mortgage, and found the Pughs defaulted on payments since March 1, 1998.
- Olympia appealed the trial court's decision to the District Court of Appeal of Florida, Fourth District.
- The Pughs cross-appealed, contending the rule barred any foreclosure actions and they should not have to make any payments.
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Issue:
Does Florida Rule of Civil Procedure 1.420(a), the two-dismissal rule, apply to bar a subsequent mortgage foreclosure action when prior actions, voluntarily dismissed, involved defaults for different time periods, even if acceleration of the entire debt was sought in the prior actions?
Opinions:
Majority - Hazouri, J.
No, the two-dismissal rule does not apply to bar a subsequent mortgage foreclosure action when the alleged defaults in prior dismissed actions occurred during different time periods, even if acceleration of the entire debt was sought. The court reasoned that for the two-dismissal rule to apply, there must be an "identity of the causes of action," meaning the facts constituting the underlying transaction and the proof required to justify the judgment sought must be the same in both suits. In the context of installment contracts like mortgages, each new default in payment creates a new and distinct cause of action. While Olympia sought to accelerate the debt in the prior actions, a voluntary dismissal effectively means that Olympia chose not to accelerate at that time, and had the case proceeded and Olympia lost, it would imply no default had occurred at that time, precluding acceleration. The first action involved defaults between April 1995 and February 1998 (dismissal date), while the second action involved defaults between April 1995 and May 1998 (dismissal date). The second action therefore required determination of additional facts (defaults between February 1998 and May 1998) that were not at issue in the first action. This difference in the facts necessary to establish a default is sufficient to prevent an identity of the causes of action, rendering the two-dismissal rule inapplicable. Consequently, there was no adjudication on the merits that would trigger res judicata to bar the current action. The court reversed the trial court's application of the rule and its forfeiture of certain amounts due.
Analysis:
This case is significant for clarifying the application of Florida's two-dismissal rule in the context of successive mortgage foreclosure actions involving installment contracts. It establishes that simply seeking acceleration in a prior, voluntarily dismissed action does not create an identity of causes of action if subsequent defaults occur. The ruling provides a crucial avenue for mortgagees to pursue new foreclosure actions based on new defaults, even after multiple voluntary dismissals, as long as the underlying factual basis for the default differs. This protects lenders from an overly broad application of the two-dismissal rule, ensuring they can still enforce their rights for ongoing breaches.
