Not Just Standing – Standing at Inception
On the heels of two similar decisions just a few weeks ago, Florida’s Fourth District Court of Appeal just issued another ruling which explains the need for a bank to have standing to foreclose, not just in general terms and not just when it moves for summary judgment, but at the inception of the lawsuit. McLean v. J.P. Morgan Chase Bank, issued today out of the Fourth District, does the best job of any foreclosure case I’ve read so far, at least in Florida, of explaining the distinction.
I strongly encourage everyone to read the opinion, but I’ll summarize.
Generally, the issue of whether the bank had standing at the inception of a foreclosure case arises in one of two contexts. The first is where the bank contends it has standing to foreclose based on an Assignment of Mortgage, yet that assignment post-dates the filing of the Complaint. This was the fact pattern in McLean, and the Fourth District makes it clear that such an assignment is insufficient, particularly without proof that the actual transfer of the Note/Mortgage took place prior to the suit being filed. In other words, it’s okay for an assignment to post-date the filing of the Complaint so long as the actual transfer of the Note/Mortgage took place before suit was filed, and the bank must present evidence of that transfer to prevail.
The second and perhaps more common fact pattern is where the bank relies on an indorsement that was executed after the original Complaint was filed. (The indorsements are always undated, so how can you tell if the indorsement post-dates the Complaint? Easy – compare the Note attached to the Complaint, which often has no indorsement, to the ”original” Note filed thereafter, which usually does.) As the McLean court explained, this fact pattern also requires dismissal:
if the evidence shows the Note was indorsed to Chase after the lawsuit was filed, then Chase had no standing at the time the Complaint was filed, in which case the trial court should dismiss the instant lawsuit and Chase must file a new complaint.
In either scenario, i.e. whether the bank’s standing is based on an Assignment of Mortgage or an indorsement, the bank must present evidence that it acquired the requisite standing before it filed suit, failing which a summary judgment of foreclosure would be improper. In other words, even if the homeowner doesn’t know when the indorsement was executed, if the bank can’t/doesn’t prove when it was executed, then it cannot foreclose.
Notice how the court calls for an evidentiary hearing? In my view, the evidence from the homeowner would be simple. I’d have my client testify that the copy of the Note attached to the Complaint that he/she was served with did not have an indorsement. (This is easy – the Complaint is in the court file.) This would put the onus on the bank to prove it obtained the indorsement before filing suit even though the copy of the Note attached to the Complaint did not have that indorsement. In other words, a bank representative would have to testify when the indorsement was obtained, and trust me – that’s easier said than done.
One fascinating part of the opinion is the court’s indication that this issue can be addressed via a motion to dismiss. To illustrate, did you notice how the court kept saying the homeowner raised these arguments via motions to dismiss? Then, perhaps most tellingly, the court held:
where a mortgage foreclosure action is based on an assignment that was executed after the lawsuit was filed, the plaintiff has failed to state a cause of action. In such cases, the proper course of action is for the plaintiff to file a new Complaint.
The term ”failed to state a cause of action” is critical here. This is, quite simply, the clearest indication yet from any Florida appellate court that a plaintiff’s lack of standing at the inception of the case can be brought via a motion to dismiss.
It’s an exciting day for foreclosure defense, folks – and yet another reason to keep fighting your lawsuit.
(By the way, if you check my old blogs, here and here, for example, you’ll see I’ve been arguing “standing at inception” in foreclosure cases for years. It’s terrific to see the arguments I’ve been making for so long are being adopted by Florida’s appellate courts.)
Mark Stopawww.stayinmyhome.com
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