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Ex Parte Motions to Substitute Party Plaintiff

I’m not very happy right now as I read a 2-1 decision from a three-judge panel from Florida’s Third District Court of Appeal.  The decision stems from an involuntary dismissal entered in favor of a homeowner, at trial, because the plaintiff failed to prove the requisite elements of its case.  In the words of the trial court judge, dismissal of the foreclosure case was required “as a result of Plaintiff’s failure to establish its status as the owner and holder of the applicable Note and Mortgage with standing to bring suit.”

In the appellate court, however, two judges decided the lower court erred by so ruling.  The third judge on the three-judge panel vehemently disagreed, but his opinion was relegated to a dissent. 

Oddly, the majority began its analysis of whether the plaintiff proved its case at trial by discussing an interlocutory Order which permitted the plaintiff to substitute as the plaintiff in the lawsuit.  That Order provided:

The Bank of New York Trust Company, N.A., as successor to JPMorgan Chase Bank, N.A., as trustee, is the real party in interest and proper Plaintiff in this action, and;

The Bank of New York Trust Company, N.A., as successor to JPMorgan Chase Bank, N.A., as trustee, is hereby substituted for JPMorgan Chase Bank, formerly known as Chase Manhattan, as trustee, residential funding corporation, as attorney in fact, as the proper Plaintiff in this action and the style is amended as reflected on this Order.

In the view of the majority, “because there was no denial or defense raised in defendants’ pleadings concerning this finding, the judgment under review cannot be permitted to stand for that reason alone.” 

This is an absolute bombshell, folks.  It’s a major, major trap for unsuspecting homeowners (especially those proceeding without counsel), one that the Florida courts have, perhaps unwittingly, been routinely and systematically permitting for many years.  Before I explain why that is, and what we must all do to avoid it, let’s start out by explaining why the majority’s opinion is, respectfully, misguided. 

First off, I struggle to see how the majority can confuse an interlocutory Order granting a motion to substitute party plaintiff, which does nothing more than allow the new plaintiff to bring suit, with proof that said plaintiff was the owner and holder of the Note and Mortgage and was entitled to foreclose.   This isn’t like confusing apples and oranges; this is mistaking apples and lawnmowers. 

Leave to amend is granted on a regular basis, almost as a matter of course.  When that happens, it means the plaintiff is entitled to bring suit against the defendant (and prove its case at trial).  It does NOT mean the plaintiff has proven the elements of his/her case (without proof at trial) – it only means the plaintiff can assert the claims.  To blend these two concepts together, and confuse permission to bring a claim and proof of that claim, is, frankly, quite misguided.   In fact, by my research, this is the first Florida case which in any way suggests that an Order substituting a party plaintiff not only allows the new plaintiff to bring suit, but also operates as some sort of finding that the new plaintiff is the correct plaintiff. 

Many Florida cases have explicitly rejected this sort of rationale.  For instance, there are legions of cases in the context of leave to amend which make it clear that an Order granting leave to amend does not mean the plaintiff’s claims have merit, but merely that the plaintiff is permitted to bring them.  (I’m so confident in this argument it doesn’t even need a case cite.)  Similarly, a plaintiff who has procured a money judgment and wants to collect against a different defendant (not named in the original suit) can initiate proceedings supplementary against that party pursuant to Fla. Stat. 56.29.  To do so, the plaintiff must file a motion and procure an order from the court allowing it to sue the new defendant.  When that happens, Florida courts have explained that such an Order, if granted, does not mean the plaintiff’s complaint against the new defendant has merit, only that the plaintiff is allowed to bring the suit.  See Machado v. Foreign Trade, Inc., 544 So. 2d 1061 (Fla. 3d DCA 1989).  Proving the allegations in the suit is, of course, a matter for trial. 

Here, the situation is the same.  When a party seeks to substitute in as the new plaintiff, it is only entitled to a ruling that it can bring suit (in place of the original plaintiff) – not a determination that the new plaintiff is actually the correct plaintiff, has standing, or is entitled to any relief.  Apparently, the majority concludes otherwise based on that portion of the Order which says the plaintiff is the “real party in interest and proper Plaintiff.”  In other words, as the majority would have it, the lower court concluded the new plaintiff was the correct Plaintiff when it entered that Order, even without proof at trial.  

What’s the big deal about that, you ask?  Well, it would be one thing if the Order concluding the Plaintiff was the correct Plaintiff was entered after an evidentiary hearing, where the homeowner had a chance to object, present evidence, and cross-examine the plaintiff’s witnesses.  Unfortunately, that virtually *never* happens, at least not in Florida.  Instead, Orders substituting a party plaintiff are routinely entered by Florida judges ex parte, without notice, and without hearing. 

Let’s repeat that: 

Orders substituting a party plaintiff are routinely entered by Florida judges ex parte, without notice, and without hearing.

Hence, what makes the majority’s reliance on the Order substituting plaintiff (in lieu of evidence at trial) so troubling is that said Order was undoubtedly entered without giving the homeowner a chance to be heard.   

Think about this for a minute.  This was a foreclosure case that advanced to trial.  The presiding judge thought the bank presented insufficient evidence at trial to prevail.  But two appellate judges disagreed based on an Order substituting plaintiff that was entered ex parte, without notice, and without hearing.  Hence, according to these two judges, evidence to justify foreclosure is unnecessary – the plaintiff obtained the Order of substitution, and since the Order included gratuitious fact-findings (included by the plaintiff’s attorney), the plaintiff need not present evidence at trial. 

I could blog all day long about the erroneous nature of this ruling.  In a way, that’s really not the point.  The point is this … if any judges think, rightly or wrongly, that an Order substituting party plaintiff can ever replace proof at trial, it is absolutely imperative that every Florida homeowner contest each and every motion to substitute party plaintiff.  Let’s say that again: 

Every Florida homeowner must challenge every motion to substitute party plaintiff in every foreclosure case.

After all, according to these two judges, the failure to challenge that motion can mean the plaintiff doesn’t have to present evidence at trial, and obviously we can’t let that happen. 

Given the now-obvious risk that Florida courts will accept Orders of substitution in lieu of evidence at trial, it is imperative that all Florida judges give homeowners a chance to object to all such motions and stop entering these orders ex parte, without notice, and without hearing.  In other words, it’s past time that these ex parte Orders stop being entered. 

Procedurally, there’s no way anyone could disagree.  The rule on substitution of parties is clear.  Fla.R.Civ.P. 1.260 explicitly requires a “notice of hearing” be filed along with the motion to substitute.  Where the Rule mandates a hearing, it is legal error to enter such Orders without a hearing.  See Metcalf v. Lee, 952 So. 2d 624 (Fla. 4th DCA 2007). 

Substantively, the need for a hearing is apparent.  If judges are going to use the Order of substitution in place of evidence at trial, all homeowners should be entitled to a hearing prior to such an Order being entered.  That means, of course, that all homeowners must request such a hearing and object to all motions to substitute party plaintiff.  After all, as the majority ruled, if you don’t object, you could be deemed to waive your right to complain later. 

So what should homeowners do to avoid this trap?  I see a few solutions. 

First, and perhaps most obvious – challenge the Motion to Substitute Party Plaintiff!  Make it clear, in writing, that you oppose the substitution.  Make it clear, in writing, that you want a hearing.  Force the new plaintiff to explain, in writing (and, ideally, under oath) why it is entitled to the substitution.  If the issue is that the Note/Mortgage were transferred after suit was filed, Rule 1.260 probably authorizes the substitution.  But if the issue is that the original plaintiff never had standing, and a new plaintiff is trying to cure the original plaintiff’s standing deficiencies by a motion to substitute party plaintiff, then the requested substitution should be denied.  And if the basis for the substitution is unclear, it should be denied until the plaintiff so clarifies. 

Second, even if an Order of substitution is granted, make sure the Order does not contain any sort of finding that the new Plaintiff is the “correct” Plaintiff.  By granting a substitution, all the court is doing is giving that party permission to bring a case, not making a fact-finding that the new Plaintiff has standing.  Quite frankly, I don’t think any Florida judge is intending to rule that the new Plaintiff is the “correct” Plaintiff (and need not present evidence at trial) by entering an Order substituting party plaintiff, so I think most judges will be happy to so clarify.  However, it’s obviously important that the written Order so reflect.  For instance, I’d envision something like this:

The Motion to Substitute Party Plaintiff is granted, and XYZ Plaintiff may prosecute this case in place of the original Plaintiff. In so ruling, this Court does not pass on the question of whether XYZ Plaintiff is the correct Plaintiff or has standing to foreclose; the Court is merely giving Plaintiff leave to plead a claim against Defendants. 

If the Order is worded like that, it should prevent any problems. 

Third, if an Order substituting party plaintiff is granted, I’d argue the new Plaintiff should have to file an Amended Complaint, enabling the homeowner to plead in response thereto.  After all, the majority makes it clear that the homeowner has to plead its standing defenses, and that being the case, the new plaintiff should have to plead its claims as well.  In other words, the homeowner should get to plead in response to a complaint brought by the new plaintiff (with allegations that the new plaintiff is the owner and holder of the Note and Mortgage), not be in a position of answering a Complaint brought by the original plaintiff when a new plaintiff is in place. 

Fourth, regardless of whether the presiding judge requires an Amended Complaint, all Florida homeowners should make sure they obtain leave to amend, particularly if they’ve already filed an Answer.  That way, it will be impossible for any judge to conclude the homeowner waived defenses by failing to plead them.  Obtaining leave to amend shouldn’t be difficult, either – it’s freely given, and it would have to be given if the court just allowed the substitution of a new plaintiff. 

For what it’s worth, Stopa Law Firm has been challenging Motions to Substitute Party Plaintiff – systematically, in every case – for a long time.  There are two ways to do so, i.e. by written objection (if an Order hasn’t been entered), or by a Motion to Vacate Order (if an ex parte Order was signed).  Frankly, I saw this trap coming a long time ago, and I’ve been trying to prevent it from prejudicing my clients.  It’s a touchy issue, though, one that I couldn’t imagine pro se homeowners handling without counsel. 

Before concluding, there are four other things about the majority’s ruling that really bother me which merit discussion:

1.  I am well aware of the line of cases cited by the majority for the proposition that standing is an affirmative defense which must be pled.  However, the majority overlooks the fact that the plaintiff being the “owner and holder” is an element of the plaintiff’s case, not a defense by the homeowner.  See Fla.R.Civ.P. Form 1.944.  As such, unless the homeowner admitted the plaintiff was the “owner and holder” in his/her Answer (which I highly doubt, lest the majority would have said as much), then the plaintiff proving it is the owner and holder is not something the homeowner could have waived – it’s something the plaintiff must prove at trial, like any element of a plaintiff’s case in any lawsuit.  

2.  The majority acts as if this interlocutory Order which substituted the plaintiff was set in stone and that a contrary finding was impossible.  In other words, the majority would have you believe that once the trial court signed an Order saying the plaintiff was “the real party in interest and proper Plaintiff in this action” that it could not, even in the face of evidence at trial, conclude otherwise.  Respectfully, that is simply not true.  As with any interlocutory Order, the judge had the discretion to reconsider that Order prior to the conclusion of the case.  See Fla.R.Civ.P. 1.530.  Hence, if the court conducted the trial and concluded based on the evidence presented that the plaintiff was not the correct plaintiff, nothing about the prior, interlocutory order prevented it from so ruling. 

Without mentioning it, the majority seems to rely on a legal doctrine called “law of the case.”  Under this legal principle, once an appellate court rules on an issue in a given case, the lower court is prohibited from ruling otherwise in that case.  Many lawyers cite this doctrine in support of an argument that a court cannot change its prior rulings.  However, that is not how it works.  “Law of the case” only applies when an appellate court makes a ruling, binding a lower court to that ruling; law of the case does not apply to rulings by the trial court.  Here, the lower court’s Order substituting the plaintiff, even to the extent it contained fact-findings, was not “law of the case,” so the court was free to disregard or reconsider said Order as it saw fit.  To rule otherwise is to fly in the face of years of established precedent enabling trial court judges to reconsider interlocutory orders at any time prior to entry of final judgment.   

3.  The majority characterizes the assignments of mortgage as “self-authenticating.”  Respectfully, this is a false statement of law.  A Note is self-authenticating under the UCC, as are the indorsements on a Note.  However, assignments of mortgage are not negotiable instruments, are not subject to the UCC, and are not self-authenticating.  Tellingly, the majority cites no case law otherwise, as no such case law exists.  (To the extent the majority cites Riggs, that decision discusses Notes, not assignments.

Respectfully, it is very disappointing to see such a glaring misstatement of the law in a Florida appellate decision, particularly one that touches on novel issues that have not previously been addressed.  What’s more troubling is that I can’t help but wonder if the majority cited the law in this manner because it was looking for an excuse to rule against the homeowner.  That may sound harsh, but for those who know this area of law, it is troubling to see a statement that an assignment of mortgage is self-authenticating, without any legal citations, when I know that statement is false. 

4.  The majority makes conclusory assertions that the plaintiff presented sufficient evidence to re-establish a lost note, yet it cites no facts to support such a conclusion.  This failure is particularly troubling when I read the dissent, which explains that the plaintiff had no idea when the Note was lost or who lost it. 

Florida courts are inundated with foreclosure cases.  We are all dying for insightful, detailed opinions from our appellate courts, giving us guidance on the law and how to apply the law to a given set of facts.  Respectfully, citing a statute and saying the plaintiff complied is of little value. 

Here, for instance, is the majority trying to say the plaintiff need not show when the Note was lost or who lost it?  Frankly, I have no idea, because the majority does not elaborate.  As a result, lawyers like myself and the many able trial court judges before whom I appear will continue to decide for themselves, with little direction or insight, exactly what proof is required in a foreclosure case. 

Unfortunately, this is why Florida judges have such disparate views on how to rule on such issues – we have, quite frankly, very little guidance from our appellate courts.  What’s good about this, though, is that this shows why lawyers can be so beneficial for homeowners facing foreclosure.  There is a LOT of gray area in foreclosure cases, so having a lawyer who knows the ins and outs, and can avoid falling into the traps like the one in this opinion, can make all the difference.

Mark Stopa

www.stayinmyhome.com

Posted in Main | 20 Comments »

20 Responses to Ex Parte Motions to Substitute Party Plaintiff

  1. Pingback: FL 3rd DCA Bank of New York Trust v Rodgers | Ex Parte Motions to Substitute Party Plaintiff | Foreclosure Fraud - Fighting Foreclosure Fraud by Sharing the Knowledge

  2. DAVID ROBERT says:

    Dear Mark,

    First let me applaud you for being brave enough to defend a homeowner. Now that credit defaults, securitization, bifurcation, derivatives and a host of other revelations are coming to the forefront it is going to take some time and education so that judges, sheriffs, attorneys become aware of just how fukked up the Banking system really is.

    Most attorneys have NO clue that the Bank never put any of their own skin in the game in the first place. When the Bank deposited the Note into the private side of the Bank (Direct Deposit Account) and created the money out of thin air off the signature of the alleged debtor it starts getting REAL interesting from there as the Bank then turns around and monazites and moves toward fractionalizing.

    From there it moves in the direction of “Securitization”, this is where the real “unjust enrichment” takes hold. How can the Bank who has to pledge the Note to the Sponsor who turns the Note into a Certificate who turns it over to the Depositor who bundles it with a few thousand other Notes on their way to the “Trust” where it is then offered as a stock or stock equivalent and has at that point forever lost its ability to be a Note? Top that off with the fact that the Bank gets paid they are obviously no longer the “title holder or the “real party in interest”, and as you said they have no standing and they no more own rights to that property than you or I do.

    Everything they do moving in a foreclosure is and out and out lie. How many people in a America know what the word “Mortgage” means? Well, the latin translation is pretty clear, it means “death pledge”. The Banks attorney all seem to play the same card that their client has been or will be damaged, that’s 100% horseshit. We are hearing judges say, you don’t expect to rule giving this homeowner a “free” house do you? My answer to that – – you don’t expect me to allow this court to rule in favor of the plaintiff if they do not have any evidence that they are the title holder do you? and to top it off there is evidence that the Bank was paid by the investors on Wall Street when they decided to Securitize the Note and is this honorable court going to let the Bank steal this property when they have been paid and they are not the title holder nor are they the beneficiary?

    Keep up the good fight Mark, I would be happy to discuss a couple things with you so you are completely up to speed on what transpired that day when that homeowner signed all that paperwork.

    Dave Robert
    FAS
    (888) 328-4877 ext #604

  3. Bobbi Swann says:

    Mark, I had this same thing happen in my current foreclosure with Chase. I did file an “objection to the substitution”, however, I did not request a hearing. Should I ammend that filing to include a request along with my reasons for doing so that you mention above?

    • Mark Stopa says:

      Bobbi,

      If an Order hasn’t already been entered granting the motion, then it seems like the Court is requiring a hearing.
      But I suppose an Amended Objection couldn’t hurt, huh?

      Good luck
      Mark

  4. wow says:

    The rule of thumb is question and object to everything and force the lender to enter evidence establishing its own case.

  5. Triumphant says:

    Thank you for your thoughtful insights into this decision. It’s a decision that had left me with a new and unique sense of disgust and dissappointment in the Florida judiciary.

    My over-simplified, pessimistic view on this: The “You’re not going to get a free house!!” mentality is just as prevalent in the DCA’s as it is in the Circuit Courts below, to the point of absurd results like this. Remember that this was, in fact, the SECOND action by the same (original) plaintiff on the same note and mortgage, the first of which had already been dismissed. The DCA clearly recognizes the application of Florida’s “two strikes and you’re out” rule, but here the majority was simply NOT willing to see it applied it to a foreclosure action.

  6. Joanna says:

    Mark, This was a timely blog for me. I received “Motion for Substitution” this week and have talked to Andy to file a reply. Thanks for all you do to help us.

  7. michael john says:

    the “free house” comments are why i’ve included the nature and causation of the Plaintiffs non evidence (no promissory note) in my pleadings. we are already entitled to the right of property, we already have all our property free, that’s not controversial.

    The mortgage is another kind of property right, so what, should the bank not “get their property free”? we all “get our property free”, it’s called ownership. the questions are the relative limits to each another’s rights.

    this isn’t about some ‘glitch’ in the system that will otherwise produce an inequity. As the first comment stated, the debt was monetized,; just see the Federal Reserve publication, “Modern Mooney Mechanics”. The value of the security in all it’s glory was monetized into 10’s 20’s and 100’s; and everyone got paid. case dismissed.

  8. john korman says:

    Mark have a question, can a Defendant be substituted? I have an opportunity to acquire a home in foreclosure through a Quit Claim Deed. Is there a process whereby I can become the substituted Defendant after I file this Quite Claim Deed? Or can I be joined in the action somehow? Perhaps becoming a Inter-pleader?

    You advice would be very timely…

    john

    • Mark Stopa says:

      I don’t think so, John. If title is transferred after a Lis Pendens is recorded, all subsequent purchasers take subject to the Lis Pendens.
      Were the law otherwise, then a homeowner could transfer title constantly and thwart the progress of the case by asserting the new Defendant was entitled to be joined.

      Mark

  9. Joe Testa says:

    Mark: I did filed an opposition to Bank of America’s Motion to Substitute Party Plaintiff. The court ruled on BOA’s motion ex-parte. The court was good about hearing my opposition. (The judge is a good guy). But opposition was denied. Can I bring up the standing of the new party plaintiff at trial or summary judgment?
    The basis for BOA’s motion was merger.

    • Mark Stopa says:

      Joe,

      I’d say “yes.” Just make sure the Order that was entered authorizing the substitution did not contain fact-findings.
      To illustrate, there’s a big difference between an order that lets the new plaintiff substitute in as the new plaintiff and an order that says the new plaintiff is “the correct plaintiff” and “has standing to foreclose.”
      The former is okay, the latter is not.

      Mark

  10. Jaime says:

    Mark,

    Thank you for your post. One particular bank is attempting this tactic in all of their proposed orders substituting a party plaintiff. The orders use language like “correct plaintiff”, “real party in interest”, and “Proper plaintiff”. At the hearing in Broward County, I followed your lead and the Judge agreed with me. The Bank’s order was thrown out and we used our own order, expressly stating that the Judge was not ruling on the issue of standing. I find this issue to be terribly disconcerting since the bank’s agenda is so surreptitious. Hopefully, other defense lawyers are catching on. By the way, do you have the cite for the 3d DCA case?

    Thanks again and best regards, Jaime

  11. Shelly says:

    Mark, We have been battling foreclosure for 3 years in court now and have won every case thus far because the bank hasn’t been able to provide the original loan documents or anything we have asked for. We have been paying our attorney hundreds per month to represent us and it became obvious that this was going to go on forever. We can no longer afford to pay him and have dismissed him from representing us. As soon as we did that the bank filed this…PLAINTIFF’S COMBINED MOTION FOR SUBSTITUTION OF PLAINTIFF AND MODIFICATION OF CAPTION AND MOTION FOR LEAVE TO AMEND. After reading your post about this we are really worried now and don’t know what to do. We can’t afford to just walk away at this point but we can’t afford to pay an attorney forever either while all parties drag this out. What should we do at this point? Thanks for all of your help.

  12. lisa lucas says:

    I don’t know if you are still on this blog Mark Stopa but I came across this while searching for a definition of “motion to substitute party” as I just received one for a hearing next week. I was blown away by your article (I am a journalist) and am in a house that my ex husband stole my money and pretended to pay the mortgage and now after emptying my bank accounts, stealing the car and leaving me to try and save the house (all in my name)I get this hearing notice. It says Aurora is the plaintiff but Aurora closed shop and my mortgage was sold to Nationstar.
    I don’t understand what is happening. I had been paying a lawyer hundreds a month for two years to get me a loan modification and fight any foreclosure attempts but he wasn’t doing anything and I lost my job and couldn’t keep paying him so I have just been waiting it out.
    This hearing notice has a case number on it but I have never gotten any documentation on any case related to the house or from Aurora.

    Should I go to this hearing? I read that judges grant these motions even when opposed. Do you give consultations? If so how do I reach you?
    Please help me.

    Lisa

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