The Lawletter Vol 38 No 5
Both state and federal courts have recently decided numerous cases addressing the issue of standing to bring a foreclosure action. Defendants to foreclosure proceedings often have few defenses, but they should closely scrutinize the ability of the plaintiff to bring the complaint if the plaintiff is allegedly an assignee of the noteholder and not the original lender. It is a fundamental requisite to a foreclosure proceeding that the party seeking foreclosure have standing to seek relief. McLean v. JP Morgan Chase Bank, N.A., 79 So. 3d 170 (Fla. Dist. Ct. App. 2012). Furthermore, standing must be established at the time the foreclosure action is filed, not by some event subsequent to discovery of a material document. Venture Holdings & Acquisitions Group, LLC v. A.I.M. Funding Group, 75 So. 3d 773 (Fla. Dist. Ct. App. 2011); see also Countrywide Home Loans, Inc. v. Taylor, 843 N.Y.S.2d 495 (Sup. Ct. 2007) (holding that a mortgagee assignee must show proof of ownership interest in the mortgage that is the subject of the foreclosure at the time of the foreclosure action and that retroactive language in the assignment document will not suffice); In re Schwartz, 366 B.R. 265 (Bankr. D. Mass. 2007) (holding that the supposed mortgagee assignee failed to establish its right to foreclose when the assignment produced in support of the stay-of-relief motion was dated after the sale).
Courts have established different standards for standing. The plaintiff must "submit the note bearing a special endorsement in favor of the plaintiff, an assignment from payee to the plaintiff or an affidavit of ownership proving its status as holder of the note." Rigby v. Wells Fargo Bank, N.A., 84 So. 3d 1195, 1196 (Fla. Dist. Ct. App. 2012). In Duke v. HSBC Mortgage Services, 79 So. 3d 778 (Fla. Dist. Ct. App. 2011), the court denied summary judgment to the assignee of a promissory note because at the time the foreclosure was filed, the complaint included as an attachment only a copy of the mortgage naming the original mortgagee as the lender, without any evidence that the note had been assigned to the plaintiff. But see Hargrow v. Wells Fargo Bank, N.A., 491 F. App'x 534 (6th Cir. 2012) (holding that where the mortgage's chain of title was properly recorded, the mortgagee's assignee had standing to foreclose under Michigan law even though there was no corresponding assignment of interest in the debt and the record chain did not show who owned the underlying note).
To the extent that the plaintiff alleges that the instrument was lost or stolen, the Uniform Commercial Code ("U.C.C.") § 3-309 governs. Under § 3-309(2), the original note need not be produced in the foreclosure action. See Atl. Nat'l Trust, LLC v. McNamee, 984 So. 2d 375 (Ala. 2007). Nevertheless, the party seeking enforcement as the assignee of a lost or stolen instrument must still demonstrate its right to enforce the instrument. See State Street Bank & Trust Co. v. Lord, 851 So. 2d 790 (Fla. Dist. Ct. App. 2003). Even if a lost instrument is proven to exist, the parties must still comply with the requirements of U.C.C. § 3-308. That section provides that if the validity of signatures is questioned or denied, the person claiming the validity of the note must establish the validity before proceeding to enforce the note. See generally Ederer v. Fisher, 183 So. 2d 39 (Fla. Dist. Ct. App. 1965).