A Foreclosure Defense: the "two dismissal rule" in Florida

If applied correctly the "two dismissal rule" stops foreclosure

Case Law
OLYMPIA MORTGAGE CORP., Appellant/Cross-Appellee, v. THEODORE D. PUGH
and PAMELA A. PUGH, his wife, Appellees/Cross-Appellants, and JOHN DOE and
JANE DOE as unknown tenants in possession, Appellees.

CASE NO. 4D00-128
COURT OF APPEAL OF FLORIDA, FOURTH DISTRICT
774 So. 2d 863; 2000 Fla. App. LEXIS 17480; 26 Fla. L. Weekly D 780
December 27, 2000, Opinion Filed

Facts: Mortgagee Y filed two successive mortgage foreclosure actions against the mortgagor A in Martin County Circuit Court, which Y voluntarily dismissed. Both mortgage foreclosure actions were based on the same promissory note and in each Y elected to accelerate payment of the entire amount due on the note and mortgage.

The first foreclosure action was filed on July 23, 1996, alleging a payment default date of April 1, 1995, and an unpaid principal of $ 124,050.97. The action was voluntarily dismissed on February 16, 1998. The second foreclosure action was filed on February 17, 1998, alleging a payment default date of May 1, 1995, and unpaid principal of $ 123,947.26. The case was voluntarily dismissed on May, 28, 1998, because Y failed to comply with certain necessary technical requirements prior to institution of the foreclosure action. A did not reinstate the loan subject to either of the two foreclosure actions.

On October 13, 1998, Y filed the instant mortgage foreclosure action against A, alleging a payment default date of May 1, 1995 and unpaid principle of $ 123,947.26. A asserted as an affirmative defense that the two dismissal rule precluded Y from obtaining a foreclosure judgment.

Issue: Whether or not Y is barred from initiating a third foreclosure action because of the "two dismissal rule".

Ruling: No. The facts at issue in each foreclosure action differed because the possible dates of default were different; therefore, the two-dismissal rule did not apply. The two-dismissal rule did not apply, as the voluntary dismissal of the second foreclosure was not an adjudication on the merits. Having found that the two dismissal rule does not apply, the dismissal of the second suit did not operate as an adjudication on the merits. Because there has not been a prior adjudication on the merits on the same cause of action, the instant foreclosure action is not barred by res judicata.

Lesson Learned: To defeat a foreclosure suit filed by mortgagee, debtor cannot just invoke a technical affirmative claim of two dismissal rule. To invoke this rule, there must be full adjudication on the merits. What debtor could have done was to renegotiate with the mortgagee a possible loan modification at the time when mortgagee was filing the first and second foreclosure suit.

Written by Kevin Levonas and Jerry L