Court Opinion

ID: 2822369
Source: CourtListenerOpinion
Date Created: 2015-07-30 21:17:31.789488+00
Date Added: 2024-06-11T13:24:35.338529
License: Public Domain

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                              FOURTH DISTRICT

                  GARY S. SNYDER and JANE SNYDER,
                             Appellants,

                                      v.

 JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, SUCCESSOR
        TO INTEREST TO WASHINGTON MUTUAL BANK,
                        Appellee.

                               No. 4D13-4036

                               [July 29, 2015]

   Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Jeffrey E. Streitfeld, Judge; L.T. Case No. 2009CA009468
(11).

  Bruce K. Herman of The Herman Law Group, P.A., Fort Lauderdale, for
appellants.

    Joseph D. Wargo and Susan Capote of Wargo & French, LLP, Miami,
for appellee.

WARNER, J.

   This case represents another casualty of the foreclosure crisis.
Appellants appeal a final judgment of foreclosure, contending that
appellee, the plaintiff below, failed to prove its standing to foreclose on the
date the complaint was filed. Even with the indulgence of the trial court,
which allowed appellee to reopen its case three times, appellee has failed
to prove that it had standing to foreclose on the date it filed its complaint.
We thus reverse.

    On February 18, 2009, appellee JPMorgan Chase Bank, N.A. (“Chase”)
filed a foreclosure complaint against appellants in their capacities as co-
trustees of a family trust. Chase alleged that it was the current owner and
holder of a promissory note and mortgage executed by appellants in July
2007. A copy of the note and the mortgage were attached to the complaint,
identifying the lender as Washington Mutual Bank, FA (“WAMU”). The
note did not contain any endorsements or allonges. Later, Chase filed
what it identified as the original note, which contained a stamped, undated
endorsement in blank from WAMU on the signature page.

    Appellants answered the complaint raising Chase’s standing to
foreclose, alleging that Chase was not shown to be the owner of the note
or authorized to bring the foreclosure action. They also alleged that no
notice of default had been furnished in accordance with paragraph 22 of
the mortgage. In reply, Chase attached a notice of default from WAMU to
the appellants dated January 6, 2009, before the filing of the complaint.
The reply also stated that Chase was in possession of the note before the
filing of the suit.

    At trial, Chase presented a home loan research officer as its only
witness. The officer testified that Chase purchased the assets of WAMU
through the Federal Deposit Insurance Corporation (“FDIC”) in September
of 2008, and this loan was part of the purchase. Appellants objected to
this testimony, because there was no proof of the agreement between FDIC
and Chase. The trial court rejected this challenge, because the court had
presided over many cases which involved the asset purchase between
Chase and the FDIC, and the court did not believe that the documents
were needed. The officer testified that Chase had acquired the note on
September 25, 2008, but he then admitted that Chase did not have
possession of the note on September 25, 2008. At that time, the note was
being held by FDIC, and Chase did not receive the note until July 2009.
The officer testified Chase was waiting for the FDIC to complete its “due
diligence” in connection with the WAMU purchase. Then, although
appellants moved for an involuntary dismissal on the issue of standing,
the court adjourned the trial twice for Chase to provide the court with
additional evidence of standing.1

   At the continued trial, the court remarked that it did not know when
Chase obtained the right to foreclose on the mortgage and note. The
complaint alleged that Chase was the owner of the note, but the officer at
one point testified that Chase was the servicer of the loan. This conflicted
with the allegations of the complaint that Chase owned the loan. The court
denied a motion to conform the pleading to the evidence as it considered

1 Appellants claim bias of the trial court in granting these continuances to allow
for the production of additional evidence. While the court does appear to have
overstepped the bounds of neutrality in giving the appellee so many additional
chances to prove its case, over the objection of appellants, this issue was not
properly preserved.

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the amendment, objected to by appellant, as more than a technical
change.

    Then the officer testified that Chase did own the loan, and he was
confused in his prior testimony. During the continued trial, the officer
produced an affidavit from FDIC and the purchase agreement for the
WAMU assets. These showed that FDIC took over WAMU on September
25, 2008, and on the same date the purchase agreement of WAMU’s assets
by Chase was executed. Appellants argued that the purchase agreement
between FDIC and Chase did not establish standing because the
“settlement date” or “closing date” of the agreement was March 25, 2009,
after the foreclosure action was filed. But the court responded that the
agreement stated the closing date was “180 days after the bank closing” of
WAMU, and the date of this closing was not in evidence, forgetting that the
affidavit from the FDIC representative, which the court allowed into
evidence, stated that the FDIC closed WAMU on September 25, 2008.

   On the final day of trial, the officer produced screen shots of Chase’s
records showing that the loan was owned by Chase and that Chase was
not the servicer of the loan. The officer also testified that Chase had
acquired the loan from WAMU prior to the filing of suit. Earlier, Chase
admitted into evidence the notice of default letter sent by WAMU, as
evidence that it had complied with paragraph twenty-two of the mortgage
agreement. Appellants offered no evidence, and the trial court entered
final judgment of foreclosure, from which this appeal is taken.

     Appellants argue on appeal, as they did in the trial court, that appellee
Chase failed to prove its standing to foreclose by showing that it had
possession of the note on the date suit was filed. The record is clear that
it did not have possession of the note, as FDIC did not deliver the note to
Chase until July 2009. Chase, however, claims that it proved its
ownership and right to foreclose through the purchase agreement between
FDIC, WAMU, and Chase. We disagree and conclude that there is no
competent substantial evidence that Chase possessed the note at the time
it filed suit.

   Section 673.3011, Florida Statutes (2009), provides who may enforce a
negotiable instrument, such as the notes, in most foreclosure cases:

      The term “person entitled to enforce” an instrument means:

      (1) The holder of the instrument;

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      (2) A nonholder in possession of the instrument who has the
      rights of a holder; or

      (3) A person not in possession of the instrument who is
      entitled to enforce the instrument pursuant to s. 673.3091 or
      s. 673.4181(4).

      A person may be a person entitled to enforce the instrument
      even though the person is not the owner of the instrument or
      is in wrongful possession of the instrument.

“Because a promissory note is a negotiable instrument and because a
mortgage provides the security for the repayment of the note, the person
having standing to foreclose a note secured by a mortgage may be either
the holder of the note or a nonholder in possession of the note who has
the rights of a holder.” Mazine v. M & I Bank, 67 So. 3d 1129, 1131 (Fla.
1st DCA 2011). A “holder” is “[t]he person in possession of a negotiable
instrument that is payable either to bearer or to an identified person that
is the person in possession[.]” § 671.201(21)(a), Fla. Stat. (2009). In other
words, the plaintiff seeking to foreclose on a note must be in possession of
the note prior to institution of the suit, whether as the holder or having
the rights of the holder. See Lindsey v. Wells Fargo Bank, N.A., 139 So. 3d
903, 906 (Fla. 1st DCA 2013) (plaintiff in foreclosure case must prove it
held the note prior to filing foreclosure); see, e.g., Riggs v. Aurora Loan
Servs., LLC, 36 So. 3d 932 (Fla. 4th DCA 2010) (“The negotiation of the
note by its transfer of possession with a blank indorsement made Aurora
Loan the ‘holder’ of the note entitled to enforce it.”) In fact, the statute
specifically notes that a person may be entitled to enforce the note, even if
not the owner. Conversely, nothing in the statute allows an “owner” to
enforce the note without possession, except where the instrument is lost
or destroyed. See § 673.3091, Fla. Stat. (2009).

   In this case, the note in question, introduced at trial, contained a blank
endorsement, but Chase admitted that it did not have possession of the
note at the time it filed suit. Therefore, it did not prove that it was entitled
to enforce the note.

    Whether it even owned the note on the date of filing suit is questionable.
It relies on the purchase agreement between Chase, FDIC, and WAMU to
prove that it purchased this loan, but the purchase agreement has many
caveats where the Assuming Bank (Chase) could refuse to acquire assets,
thus reducing the purchase price. Moreover, FDIC had the obligation to
turn over assets (including notes) “as soon as practicable” after the Bank
Closing. And the Purchase Agreement also contains a “settlement date”

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some six months after the Bank Closing. The only evidence of when FDIC
turned over this note to Chase is that it occurred months after the filing of
the suit. To add to the confusion over who owned the note, the notice of
default was sent out, not by Chase, but by WAMU. No explanation of why
WAMU would be continuing to act on a loan that it did not own was
provided in the testimony, thus suggesting that the loan was not as yet
transferred to Chase.

   Chase relies on Stone v. BankUnited, 115 So. 3d 411 (Fla. 2d DCA
2013), in which the homeowner contended BankUnited lacked standing to
foreclose. The promissory note in question named another entity as the
lender and contained a blank endorsement from that lender. Id. at 412.
The Second District noted, “A plaintiff may prove that it has standing to
foreclose ‘through evidence of a valid assignment, proof of purchase of the
debt, or evidence of an effective transfer.’” Id. at 413 (quoting BAC Funding
Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 939 (Fla.
2d DCA 2010)). The Second District affirmed the judgment of foreclosure,
finding that testimony at the evidentiary hearing established that the
original lender was “seized and placed into receivership by the FDIC” prior
to the filing of the complaint and, “[b]y virtue of the receivership and
pursuant to a purchase assumption agreement, the new BankUnited
acquired all of the assets of [the prior entity], including the note and
mortgage in question.” Id. The court found this was competent,
substantial evidence that BankUnited owned the note through the
purchase assumption agreement.

   Stone, however, did not discuss whether BankUnited had possession of
the note at the time it filed suit. From the opinion, it would appear that it
did, since the employee who testified was an employee of both the old bank
and the new bank, and she testified that the Bank acquired all of the
assets and began collecting on the loan. We find Stone distinguishable.

    Because Chase did not prove that it had possession of the note when it
filed suit, and in fact showed that it did not have possession, it did not
prove standing. The court should have granted an involuntary dismissal,
as requested by appellants. We reverse for vacation of the final judgment
and entry of an involuntary dismissal of the foreclosure complaint.

   Reversed and remanded with directions.

LEVINE and CONNER, JJ., concur.

                            *         *        *

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Not final until disposition of timely filed motion for rehearing.

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