The District Court of Appeal of the State of Florida, Fourth District, recently affirmed the dismissal of a mortgage foreclosure action because the mortgagee failed to present competent, substantial evidence that it had standing to foreclose, due to lack of conformity between the name of the plaintiff mortgagee and the names in the transactional documentation by which the plaintiff mortgagee claimed an interest in the note at issue.
A copy of the opinion is available at: http://www.4dca.org/opinions/Jan.%202016/01-06-16/4D14-2430.op.pdf
A mortgagee filed a foreclosure action. The promissory note contained a special indorsement in favor of the mortgagee's predecessor in interest, as trustee. At trial, the mortgagee's witness testified that note was placed into a trust with the predecessor in interest as the first trustee and that the mortgagee became the successor trustee in April of 2006.
The court admitted into evidence an excerpt of a Pooling and Servicing Agreement ("PSA") that created the trust and showed the mortgagee's predecessor as the trustee. However, the mortgagee's witness admitted that the excerpt from the PSA did not show that the plaintiff mortgagee owned or had any other interest in the note.
Also admitted into evidence was a purchase and assumption agreement between two entities with names similar to the plaintiff mortgagee's, but not the same entity. Although the plaintiff mortgagee's witness believed the agreement reflected the plaintiff mortgagee's purchase of trust assets of the entity that served as the first trustee, including the subject loan, neither the plaintiff mortgagee nor the entity to which the note was indorsed were parties to the agreement.
Citing its decision in Murray v. HSBC Bank USA, the Appellate Court explained that "'[w]hen specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person.' … Where a bank is seeking to enforce a note which is specially indorsed to another, the bank is a nonholder in possession. … A nonholder in possession may prove its right to enforce the note through: (1) evidence of an effective transfer; (2) proof of purchase of the debt; or (3) evidence of a valid assignment." In addition, "[a] nonholder in possession must account for its possession of the instrument by proving the transaction (or series of transactions) through which it acquired the note."
The Appellate Court held that at trial, although the plaintiff mortgagee tried to prove its right to enforce the note by showing the purchase of the debt in the purchase and assumption agreement, "[t]he plaintiff's proof of purchase, however is an agreement between two entities that have no relationship to either the plaintiff or the indorsee. … The Agreement does not connect the indorsee of the note … to the plaintiff…."
Because there was no evidence of record "connecting" the indorsee to the plaintiff mortgagee, the Appellate Court concluded that "[t]he plaintiff thus failed to prove the series of transactions through which it acquired the note from the original lender" and "[f]or this reason, the [plaintiff] did not establish its standing as nonholder in possession with the rights of a holder, and the defendant's motion for involuntary dismissal was property granted."