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Mortgage Foreclosure—Standing: Florida Appellate Court reverses trial court’s final judgment of foreclosure for lack of standing.

By gedlaw50486353, Apr 11 2016 06:22PM

The Fifth District Court of Appeal of Florida (“5th DCA”) recently reversed a trial court’s final judgment of foreclosure where Plaintiff bank failed to establish evidence it was the holder of the note prior to filing the complaint.

In May 2006, the Defendant homeowner executed a note and mortgage in the amount of $168,000. Upon defaulting on the loan, the Plaintiff, HSBC (“the Bank”), filed a complaint on April 1, 2009 to reestablish the note and foreclose the mortgage. In December 2009, the bank filed the original mortgage and the original note. The note filed at that time differed from the note attached to the complaint because it contained an undated special endorsement to HSBC from Quicken.

Throughout both discovery and pretrial motions, the homeowner continued to challenge the bank’s standing to foreclose the mortgage. At trial, the bank offered the endorsed note and mortgage into evidence without any additional testimony. The homeowner objected to the admissibility of the endorsed note, stating that it differed from the note that was attached to the complaint. The trial court overruled the homeowner’s objection and allowed the endorsed note into evidence.

Under Florida law, “a crucial element in any mortgage foreclosing proceeding is that the party seeking foreclosure demonstrate that it has standing to foreclose,” Schmidt v. Deutsche Bank, 170 So. 3d 938, 940 (Fla. 5th DCA 2015). This burden is on the party bringing the foreclosure action and must be proven by substantial competent evidence. Id. Further, a party’s standing to foreclose must be shown “at the time the lawsuit was filed.” McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). F.S. §673.2051(1) defines a special indorsement as an endorsement which is made by the holder of an instrument, whether payable to an identified person or to the bearer, and the indorsement identifies a person to whom it makes the instrument payable. An instrument which is specially indorsed becomes payable to the identified person and may be negotiated only by the indorsement of that person. Id. “The endorsement must have occurred before the filing of the complaint because it is axiomatic that standing must be shown as of the filing of the complaint.” Schmidt, 170 So. 3d at 41.

In this case, the bank attempted to show standing at trial by offering additional evidence including a loan transfer history and reference to a pooling and servicing agreement. This evidence failed to show that the bank became holder of the note through a special endorsement prior to filing the complaint. The Court held that this evidence was insufficient to show that the bank was holder of the note at the time the complaint was filed and thus ruled that the bank had failed to establish standing. Therefore, the Court reversed and remanded the case and ordered the entry of an involuntary dismissal.

See Elsman v. HSBC Bank, USA, 182 So. 3d 770, (Fla. 5th DCA, 2015). (pf)

Click here to read full opinion.

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