As the purported “servicer” of the note and mortgage, RCS was not the party to whom the debt was owed. See e.g. 24 C.F.R. §3500.2(b) (defining the act of “servicing” under the Real Estate Settlement Procedures Act as “receiving any scheduled periodic payments from a borrower pursuant to the terms of any mortgage loan…and making the payments to the owner of the loan or other third parties…pursuant to the terms of the mortgage servicing loan documents or servicing contract.”) (Bold emphasis added). Rather, RCS was the agent for the party it was “servicing” the loan on behalf of and could only foreclose the mortgage if its principal granted it authority to act. The question then turns to what burden of proof RCS was required to present at trial in order to establish this. This issue was recently addressed by the Fourth District Court of Appeal in a slightly different context. In Elston/Leetsdale, LLC v. CWCapital Asset Management, LLC, 37 Fla. L. Weekly D785b (Fla. 4th DCA April 4, 2012), CW, a servicer of a note and mortgage executed by Elston, sued Elston for foreclosure even though the mortgage and note were owned by a “securitized trust.” Id. CW then moved for, and was granted, an order to show cause why full payments should not be made during the pendency of the action. Id. Elston thereafter appealed, arguing that the “trial court erred by ordering it to make payments to CW because CW failed to properly allege standing.” Id.
action having been later ratified by Nava.” Id. (Bold emphasis added). The Kumar court explained that standing is either having, or representing one who has, a “sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy.” Id. Additionally, the Court reasoned that because Fla. R. Civ. P. 1.210(a) permits an action to be prosecuted in the name of someone other than, but acting for, the real party in interest, “where a plaintiff is either the real party in interest or maintaining the action on behalf of the real party in interest, its action cannot be terminated on that ground that it lacks standing.” Id. at 1183. Thus, the Court concluded, “Nava’s affidavits unequivocally show that Nava ratified and endorsed Kumar’s action in bringing suit on Nava’s behalf.” Id. at 1185. (Bold emphasis added). At the trial below, however, RCS failed to procure even a scintilla of evidence that its undisclosed principal ratified and endorsed RCS’s (and AHMSI’s) action in bringing suit on its behalf. In fact, when questioned regarding how AHMSI “serviced” the note and mortgage, the AHMSI witness merely replied that the company serviced through a servicing contract which the witness had not even read. [T. 63]. Even more astonishingly, RCS’s own counsel represented to the trial court that it was unable to either elicit testimony from RCS’s principal or introduce the servicing agreement which might permit RCS to bring the action on its principal’s behalf. [T. 66].
Therefore, because there was absolutely no evidence introduced at the trial that RCS’s principal joined in or ratified its act of suing in the principal’s name, RCS failed to prove it had standing to sue. Because the promissory note is not negotiable, RCS’s mere possession did not confer onto it standing to sue RCS will probably assert that its possession of the promissory note “endorsed” in blank conferred onto it standing to foreclose the mortgage citing Riggs v. Aurora Loan Services, LLC, 36 So.3d 932 (Fla. 4th DCA 2010) and its progeny. While Riggs and other appellate decisions seem to suggest that all mortgage promissory notes are negotiable instruments, see e.g. Taylor v. Deutsche Bank National Trust Company, 44 So. 3d 618, 622 (Fla. 5th DCA 2010) (providing that “a promissory note is a negotiable instrument”); Perry v. Fairbanks, 888 So. 2d 727, 727 (Fla. 5th DCA 2004) (stating that “[a] promissory note is clearly a negotiable instrument within the definition of section 673.1041(1)”), negotiability appears to be an issue which is never preserved for appeal by defending homeowners in the trial court. In fact, there are only forty-two cases decided over the past twenty years in the entire United States in which a decision was “reached on the merits” regarding the negotiability of a mortgage note. Dale A. Whitman, How Negotiability Has Fouled Up the Secondary Mortgage Market, and What to Do About it, 37 Pepp. L.