Recently, Florida’s Third District Court of Appeal rendered its decision in Snow v. Wells Fargo Bank, N.A., holding that a lender’s issuance of a letter demanding payment on a mortgage loan did not constitute an acceleration of the loan debt, and thus did not trigger the commencement of the five year statute of limitations for mortgage foreclosure. At the core of the Court’s holding was a finding that the notice letter was not self-executing. In an effort to clarify and counterbalance the Snow decision, this article discusses the concept of self-executing legal documents and provides examples of letters that should suffice the test for self-execution.
If you have questions about contract interpretation, breaches and drafting, please contact Bernhard Law Firm at 786-871-3349 or firstname.lastname@example.org. The Court’s decision in Snow v. Wells Fargo Bank, N.A., 156 So. 3d 538 (Fla. 3d DCA 2015), can be found HERE (click for link).
The controversy that led to Snow v. Wells Fargo began in the pre-foreclosure conversations between a lender and a borrower. Before filing a foreclosure action, lenders often send mixed messages, vague statements, and letters with ambiguous provisions referencing acceleration. Years later a court must determine whether these messages, statements, and letters reflected a lender’s decision to accelerate (i.e. an exercise of its acceleration right) or simply precursors to acceleration (i.e. pre-acceleration negotiation). If a court finds that these messages, statements, or letters in fact show that the lender accelerated, and 5 years elapsed between that acceleration and the lender’s foreclosure filing, then the foreclosure may be time-barred under the statute of limitations. However, if a court finds that these messages, statements, or letters were merely pre-acceleration discussions and that the lender did not thereby accelerate, then the statute of limitations may not accrue until the lender files its foreclosure action with an allegation of acceleration in the foreclosure complaint. In Snow, the lender had sent a letter titled “notice of default” stating:
You must pay the full amount of the default on this loan by the 35th day from the date of this letter which is 01/10/2008 (or if said date falls on a Saturday, Sunday, or legal holiday, then on the first business day thereafter). If you do not pay the full amount of the default, we shall accelerate the entire sum of both principal and interest due and payable . . .
The Snow court held that this language was not sufficiently self-executing to reflect an exercise of the right to accelerate.
Inherent in the Snow decision is that courts must parse through the exact language lenders used in their pre-suit notices, letters, and telephone conversations to determine if the language suffices an acceleration, which may depend on whether the language was “self-executing” or “non-self-executing.”
This article contains: (1) a background to Snow, including the rules on mortgage acceleration and the trigger of the statute of limitations for mortgage foreclosure; (2) a discussion of what lender acts can accelerate a mortgage; (3) a comparison of self-executing and non-self-executing legal language; and (4) an analysis of factual hurdles to overcome in proving acceleration or lack thereof in court.
Background to Snow v. Wells Fargo: mortgage acceleration triggers the statute of limitations on the whole debt
The statute of limitations for an action on a written contract or foreclosure on a mortgage applies to enforcement of the note and mortgage, and Florida law provides a five-year statute of limitations for both. § 95.11(2)(b) and (c), Fla. Stat. (2014). The five-year period for foreclosure initiates when the foreclosure claim accrues against the borrower; in mortgages with acceleration clauses that accrual orccurs when the lender exercises its right to acceleration. See Deutsche Bank Trust Co. Americas v. Beauvais, 2014 WL 7156961 at *3 (Fla. 3d DCA 2014).
As held by the Third District Court of Appeal, “when a mortgage contains an optional acceleration clause, the statute of limitations commences when the lender exercises this option and invokes the acceleration clause. Id. (citing Greene v. Bursey, 733 So. 2d 1111, 1115 (Fla. 4th DCA 1999) (holding when an installment contract contains an optional acceleration clause, the statute of limitations for recovering under the contract may commence running on payments not yet due if the holder exercises its right to accelerate the total debt because of a default)); see also Spencer v. EMC Mortg. Corp., 97 So. 3d 257, 260 (Fla. 3d DCA 2012) (upholding the five-year statute of limitations in foreclosure); Central Home Trust Co. of Elizabeth v. Lippincott, 392 So. 2d 931, 933 (Fla. 5th DCA 1980).
Because acceleration triggers the statute of limitations, lenders, borrowers, and courts should be clear on what acts can accelerate a mortgage loan.
Any affirmative act can cause acceleration of a mortgage
A lender can exercise an optional acceleration clause and accrue acceleration through any affirmative act, including: (i) oral notice to the debtor, (ii) a pre-suit demand letter or some other pre-suit notice to the debtor, (iii) some other affirmative act notifying the debtor of acceleration, or (iv) the filing of a foreclosure complaint. Pici v. First Union Nat’l Bank of Fla., 621 So. 2d 732, 733 (Fla. 2d DCA 1993) (“A demand for accelerated payments can consist of written or oral notice to the debtor”); Parise v. Citizens Nat’l Bank, 438 So. 2d 1020, 1022 (Fla. 5th DCA 1983) (“Acceleration may be set in motion by filing a pleading in a suit on the full indebtedness. Or it may be activated by a demand and express notice to the debtor”); Monte v. Tipton, 612 So. 2d 714, 716 (Fla. 2d DCA 1993) (finding that lender exercised its right to accelerate through a pre-suit acceleration letter); see also River Holding Co. v. Nickel, 62 So. 2d 702, 704 (Fla. 1952) (when a lender decides to exercise its option to accelerate, such decision can be brought to the borrower in almost any manner).
Pre-suit acceleration may also be imputed where evidence reveals that letters relating to reinstatement (payment of overdue amounts) were sent to a borrower. Tompkins v. Jim Walter Homes, Inc., 656 So. 2d 963, 964 (Fla. 5th DCA 1995) (imputing pre-suit acceleration through pre-suit letter from lender attorney to borrower providing option of reinstatement by payment of past-due amounts plus fees).
Because lenders can accelerate through any affirmative act, they are often wary to accelerate too early. Thus, lenders often send notice letters with ambiguous language referencing acceleration but failing to explicitly state that the lender is exercising its option to accelerate. Courts are left to analyze whether statements in notice letters were sufficiently self-executing to suffice acceleration.
Self-executing acceleration notices
When accelerating through a written document, lenders may use various notices or clauses, including: (i) automatic clauses, (ii) self-executing documents, or (iii) absolute provisions. See, e.g., Reed v. Lincoln, 731 So. 2d 104, 106 (Fla. 5th DCA 1999). The Court should construe the acceleration provisions in a document as self-executing if the provisions lay down a sufficient guideline by means of which the general acceleration may be determined without aid of further enactment or enabling action. See Gray v. Bryant, 125 So. 2d 846, 851 (Fla. 1960) (creating the test for determine self-executing provisions under Florida law); Cook v. Merrifield, 335 So. 2d 297, 299 (Fla. 1st DCA 1976) (holding automatic acceleration provision in mortgage was self-executing). If the provision lays down a sufficient guideline for acceleration, then it is self-executing. Gray at 851 (holding a provision to be self-executing where it laid down a sufficient rule by which the number of judges to be furnished could be readily determined without enabling action from the legislature).
There is little case law in Florida analyzing self-executing and non-self-executing provisions in the mortgage foreclosure context. Most case law on self-execution discusses self-executing provisions in statutes drafted by the Florida Legislature. However, a review of these must guide Florida courts when interpreting language in notices and letters from foreclosing mortgage lenders.
Examples of provisions that Florida courts have held as self-executing in both mortgage foreclosures and other non-foreclosure contexts include:
- “Failure to pay any installments herein promptly when due shall cause the entire indebtedness to become immediately due and payable”
- “Upon default in payment . . . all notes so secured and remaining unpaid shall forthwith become due and payable notwithstanding their tenor.”
- “This amendment shall be effective on the date it is approved by the electorate.”
- “[The agreement] shall apply in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extrajudicial document for service abroad.”
- “No person shall be deprived of any right because of race, religion or physical handicap.”
 Cook v. Merrifield, 335 So. 2d 297, 299 (Fla. 1st DCA 1976) (holding mortgage provision was self-executing because when there was default, acceleration occurred automatically)
 Baader v. Walker, 153 So. 2d 51, 52–53 (Fla. 2d DCA 1963) (holding that unqualified acceleration clause became self-executing and accelerated not later than the 10-day grace period).
 Buster, 984 So. 2d 478, 485 (holding provision is self-executing and enforceable as of the date of its passage).
 Alvarado-Fernandez v. Mazoff, 151 So. 3d 8, 13 (Fla. 4th DCA 2014) (holding document self-executing in that it preempted inconsistent methods prescribed by state law in all cases to which it expressly applied).
 Schreiner v. McKenzi Tank Lines & Risk Mgmt. Servs., Inc., 408 So. 2d 711, 714 (Fla. 1st DCA 1982) (finding provision sufficiently delineated a rule by means of which the right may be determined without aid of further enactment, given that it was “quite direct”).
In contrast, a provision is non-self-executing if it does not have a sufficient guideline by means of which the general acceleration may be determined, and instead clearly requires further enactment or enabling action. See St. John Med. Plans, Inc. v. Gutman, 696 So. 2d 1294, 1295 (Fla. 3d DCA 1997). Some courts have held that as a general rule, non-self-executing documents do not confer any judicially enforceable rights whatsoever. See Alvarado-Fernandez v. Mazoff, 151 So. 3d 8, 12 (Fla. 4th DCA 2014). Examples of provisions that Florida courts have held are non-self-executing in non-foreclosure contexts include:
- “The manner of recovery and additional damages may be provided by law.”
- “Adequate provision [for education] shall be made by law.”
- “Adequate provision shall be made by law for the abatement of  pollution.”
- “Shall be subject to forfeiture  as may be provided by law.”
 Gutman, 696 So. 2d 1294, 1295 (discussing that the provision could not be implemented without some manner of recovery being established through further enactment).
 Haridopolos v. Citizens for Strong Schools, Inc., 81 So. 3d 465, 474 (Fla. 1st DCA 2011) (holding provision not self-executing because desires were not sufficiently definite to allow for enforcement without some measurable standards, given the “shall be made by law” language).
 Advisory Op. to the Governor-1996 Amendment 5 (Everglades), 706 So. 2d 278, 281 (Fla. 1997) (finding provision not self-executing given that too many policy questions remained open).
Comparing these self-executing and non-self-executing provisions, it is evident that self-executing provisions provide for a date for enactment, while non-self-executing provisions do not. Supra; see Snow v. Wells Fargo Bank, N.A., 156 So. 3d 538, 541 (Fla. 3d DCA 2015) (discussing that the notice of default letter served notice that the lender “intended, at some unspecified future date, to accelerate the debt”) (emphasis added). Thus, provisions are likely self-executing where they provide a general time for enactment, such as “immediately,” “forthwith,” “on that date,” or other similar language, and such enactment does not clearly require some further act by the Legislature or the parties. Cook, 335 So. 2d at 299; Baader, 153 So. 2d at 52–53; Buster, 984 So. 2d at 485; Mazoff, 151 So. 3d at 13; Schreiner, 408 So. 2d at 714 (Fla. 1st DCA 1982). It is also evident that the timing language need not provide a specific calendar date, but simply a sufficient guideline by which the event may be determined without aid of further enactment or enabling action. Id.; Gray, 125 So. 2d at 846.
When analyzing acceleration notices, the Court should keep in mind applicable contractual principles. For example, the fact that the right granted by a provision may be supplemented by later acts, further protecting the right or making it available, does not of itself prevent the provision from being self-executing. Fla. Hosp. Waterman, Inc. v. Buster, 984 So. 2d 478, 485 (Fla. 2008) (holding provision was self-executing despite supplemental acts further protecting right or making it available). Nor does a grace period make an acceleration provision non-self-executing. Baader v. Walker, 153 So. 2d 51, 52–53 (Fla. 2d DCA 1963) (holding that unqualified acceleration clause became self-executing and accelerated not later than the 10-day grace period). Moreover, a contractual provision that is non-self-executing can become self-executing when a demand has been made from one party and the other party has failed to pay it. Independent Fire Ins. Co. v. NCNB Nat’l Bank of Fla., 517 So. 2d 59, 65 (Fla. 1st DCA 1987). These principles apply across the judicial branch in its approach to determining whether legal provisions are self-executing. De La Mora v. Andonie, 51 So. 3d 517 n.5 (Fla. 3d DCA 2010) (holding a provision as indubitably self-executing upon application of the test provided in Gray v. Bryant).
With these principles in mind, the Court should determine whether the lender accelerated the loan through a self-executing notice letter that provided a sufficient guideline by which the acceleration could be determined without aid of further enactment or enabling action, such as:
“If the default is not cured on or before February 15, 2009, the mortgage payments will be accelerated with the full amount remaining accelerated and becoming due and payable in full at that time.”
This type of notice provides a specific time when the acceleration will occur—“at that time” i.e. at the expiration of February 15, 2009—and the basis on which it will occur—if the default is not cured on or before that expiration date. This type of notice makes no reference to implementation of acceleration by additional letters or acts, the mortgage and note should already contain definitions for acceleration and other major terms, and the lender and borrower should be the only parties to the letter or the mortgage. Any grace period in this type of letter does not make an acceleration provision non-self-executing under Florida law, and this type of letter has a single and focused purpose rather than a broad policy objective, which is emblematic of a self-executing provision. See Baader, 153 So. 2d at 52–53; Michota v. Bayfront Med. Ctr., Inc., 2005 WL 900771 at *7 (Fla. Cir. Ct. 2005) (citing In re Advisory Op. to the Atty. Gen. re Patients’ Right to Know About Adverse Med. Incidents, 880 So. 2d 617, 620 (Fla. 2004). Thus, this type of letter lays down a sufficient guideline such that the acceleration occurs without additional enactment, and the Court should construe this notice letter as self-executing for acceleration.
The Court may confirm a lender’s pre-suit acceleration in other pre-suit acts
Sometimes a lender will confirm its pre-suit acceleration through both external communications with the borrower and its internal notations relating to the loan:
- The lender’s agents may discuss the loan by telephone to confirm that it has accelerated the mortgage and would require modification or payment of the full, accelerated amount for reinstatement;
- The lender may run a title search for its foreclosure action, further confirming that it has accelerated the loan and is preparing foreclosure;
- The lender may provide a written response to the borrower’s request for verification of the reinstatement amount due in which the lender confirms that the loan has been accelerated beforehand by stating that the full accelerated amount plus interest is already due
These external and internal affirmative acts facilitate confirmation that the lender accelerated the loan before filing an initial foreclosure action.
A lender’s lack of records from over five years ago may render it impossible for the lender to factually rebut an acceleration or the statute of limitations time-bar
In today’s lending environment, most loans are transferred between banks several times. Given the practice of mortgage pooling and the effect of numerous bank implosions and buyouts, a loan may have transferred through three or more banks in the past five years. The borrower’s uniquely consistent connection to the loan and the current loan owner’s entire lack thereof renders it impossible for the current lender to factually dispute acceleration before its involvement. As the Third District stated:
It is difficult to imagine how [the lender]—which acquired the loan years after default and the filing of the first foreclosure action—could prevail against [the borrower’s] testimony of acceleration, since she seems to be the only person who has had any continuous connection to the loan.
See Spencer v. EMC Mortg. Corp., 97 So. 3d 257, 260 (Fla. 3d DCA 2012)).
Given that many foreclosing lenders have acquired the loan after default, acceleration, the filing of the first foreclosure action, and the failure and disappearance of the original lender, only the borrower will have had continuous connection to the loan, been present and in communication with the original lender, and had any personal knowledge of the events that took place five years ago. This lack of lender connection, documentation, and personal knowledge make it nearly impossible to factually rebut a borrower’s affidavit of a pre-suit acceleration.
If you have questions about contract interpretation, breaches, and drafting, please contact Bernhard Law Firm at 786-871-3349 or email@example.com