POSTED IN BANKING
It looks like standing
is the flavor of the month in foreclosure defense and the issue that lenders
need to make sure that they are addressing at trial. Two recent Florida appellate court decisions
highlight this issue.
In Michael Sorrell v. U.S. Bank National
Association, Fla. 2d DCA Case No. 2D14-3883 (Apr. 6, 2016),
Florida’s Second District Court of Appeal reversed a final judgment of
foreclosure based upon a finding that the lender’s “evidence was legally
insufficient to prove that it had standing when it filed the Complaint.”
The note that was attached to
the complaint (which was payable to the original lender, was not endorsed, and
did not include an allonge) and the mortgage that was attached to the complaint
were both in favor of the original lender. The plaintiff filed an amended
complaint with an assignment of the mortgage attached, but no additional
documents related to the note, and the borrower asserted a defense of lack of
standing.
The plaintiff then filed the
original note and mortgage and a copy of the assignment of mortgage, along with
an undated allonge, which was a separate document from and not affixed to the
note. No testimony or documentary evidence was offered at trial to
establish the date that the plaintiff acquired the note and mortgage; specifically,
that the plaintiff owned and held the note and mortgage on the date that the
case was filed. Similarly, no evidence was presented to prove when the
allonge was created, signed or attached (if it ever was) to the note.
The trial court entered final
judgment of foreclosure, but the appellate court reversed because the plaintiff
had not established that it had standing to foreclose on the date that the
complaint was filed. The lack of documentary and testamentary evidence
doomed the plaintiff’s case and the 2d DCA remanded with instructions for the
trial court to dismiss the case.
Similarly, Florida’s Fourth
District Court of Appeal reversed and remanded with instructions to enter
judgment in favor of the borrowers in Susan Elman and Bruce Elman v. U.S.
Bank, N.A., 4th DCA Case
No. 4D14-2520 (Apr. 6, 2016). In Elman, the plaintiff
sought to enforce, as the “holder”, a note with an undated special endorsement
allonge.
However, the note and the
allonge referenced different loan numbers. At trial, the plaintiff was
not able to establish the date that the allonge was affixed to the original
note and other evidence made it, at best, unclear as to who possessed the note
when the complaint was filed. The 4th DCA relied
on the proposition that a plaintiff that is seeking to enforce a note, but is
not the original payee, must “prove not only a blank or special endorsement in
its favor, but also that the endorsement was placed on the note before it filed
the original complaint.” In Elman, the appellate
court found that endorsement and allonge were undated and the evidence at trial
did not establish that the plaintiff possessed the original note with the
allonge affixed thereto as of the date that the complaint was filed.
Accordingly, the 4th DCA found that the
plaintiff failed to prove that it had standing to foreclose.
These cases and others like
them stand as a stark reminder to lenders of the importance of presenting
sufficient evidence at trial to prove that they had standing at the time that
they filed their foreclosure actions. When a lender seeks to enforce a note and
mortgage to which it is not the original payee pursuant to an undated
endorsement or allonge, it is crucial that it present evidence establishing
that it had the right to enforce that note at the time that it filed its
complaint.
David Greene is a commercial
litigation partner in Fox Rothschild’s West Palm Beach office. His
practice focuses primarily on banking litigation, real estate litigation, title
insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.
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