The “Holder” of a Note
The term “holder,” and the phrase “holder of a Note,” has been used many thousands of times in foreclosure lawsuits throughout Florida. Banks routinely argue they’re the “holder,” so they have the right to foreclose. But what does it mean to be a “holder”?
Florida Statute 671.201(21) sets forth the definition. Essentially, there are two requirements to be a holder: (1) the foreclosure plaintiff have possession of the original Note; and (2) the Note contain an endorsement, either in blank or in the name of that plaintiff.
I think the statute is quite clear, and I’ve cited it on countless occasions, yet there are precious few Florida cases which explain what it means to be a “holder.” That’s why I was pleased to see this decision from Florida’s Fourth District Court of Appeal, which reversed a final judgment of foreclosure because:
Whether the [bank] is entitled to enforce the promissory note remains a disputed issue of material fact. In Harvey v. Deutsche Bank Nat’l Trust Co., 69 So. 3d 300, 303 (Fla. 4th DCA 2011), we explained that the person entitled to enforce a negotiable instrument such as a note is the “holder of the instrument.” (quoting 673.3011, Fla. Stat.) A “holder” is the person in possession of the instrument that is payable to bearer or to an identified person in possession. 671.201(21)(a), Fla. Stat. “Bearer” means “a person in possession of a negotiable instrument … that is payable to bearer or indorsed in blank.” 671.201(5), Fla. Stat. The note presented in these proceedings does not appear to have an endorsement in blank. Instead, the endorsement is to a specific entity, Wells Fargo, which is not the plaintiff in this case.
This is a huge, huge issue in foreclosure defense. If the Plaintiff does not have possession of the original Note, with an endorsement (either in blank or to it), then Plaintiff is not the holder as a matter of law. Plaintiff may have some other basis in which to bring a foreclosure, see Fla. Stat. 673.3011, but the traditional and most common allegation is that it is the “holder” of the Note and Mortgage.
If you’re defending a foreclosure, don’t take plaintiff’s word for it that it’s the holder. Make sure they produce the original Note and that the Note has an endorsement payable to it or in blank. If not, then the plaintiff will have to establish some other basis for a foreclosure (typically with an assignment of mortgage).