Stopa Law Firm is currently counsel in about 400 foreclosure cases throughout the State of Florida, so we’ve had more than our share of hearings on Motions to Dismiss.  Although there are lots of judges who systematically deny these motions even when, in my view, they are clearly meritorious, I’m happy to say there are many judges who are starting to “get it.” 

For instance, about six months ago, I had my first hearing with Judge Scaglione in Brooksville (Hernando County, Florida).  It was clear he hadn’t heard a lot of foreclosure cases, and, at the time, he openly questioned why I’d be defending a foreclosure case because, if the homeowner hadn’t paid the mortgage, that’s “all that matters” (or words to that effect).  Fast forward six months to a motion to dismiss hearing before that same judge, Judge Scaglione … this time, he obviously gave careful consideration to a Motion to Dismiss that I filed, and entered an Order granting the Motion to Dismiss in light of the Plaintiff’s lack of capacity and failure to attach the note or plead the essential terms of the note as part of its lost note count.  (After all, how can a court re-establish a document when the plaintiff fails to plead the essential terms thereof?)  I must say, it’s a pleasure to see judges like this, who had believed that homeowners couldn’t have a defense in a foreclosure case, take the time to evaluate the law and see what the homeowners’ lawyers are saying have merit. 

Of course, no judge, in my experience, is applying the law in foreclosure cases more than Judge Rondolino in St. Petersburg.  As reflected in this well-written Order, Judge Rondolino is consistently granting motions to dismiss in foreclosure cases where the law requires it.  My question is why more judges, up to this point, have been unwilling to make similar rulings.  It’s not like Judge Rondolino is the only judge getting cases with these fact patterns – the facts are typically very similar from one case to the next. 

Yes, I realize that homeowners are behind on their mortgage.  But many times, the bank induced them to go into default based on promises of a loan modification, then accelerated the balance owed, filed suit, and rejected the modification (leaving the homeowner with no choice but to defend a foreclosure suit and hope the bank will agree to a modification).  More importantly, regardless of the homeowner’s circumstances, the law must be followed.   And in my view, the law usually requires dismissal in foreclosure cases (admittedly, often with leave to amend). 

In most foreclosure cases, the Note and Mortgage attached to the Complaint were entered on behalf of an entity that is different than the Plaintiff, yet the Plaintiff conclusorily alleges itself to be the “holder” of the Note (without any ultimate facts explaining how or why that is so).  Before we evaluate the propriety of that argument vis a vis a Motion to Dismiss, let’s look at the law in other contexts (not foreclosure cases), when a plaintiff alleges something in the body of its Complaint that is inconsistent with the exhibits thereto.  (Stick with me, this will come full circle.)

In Blue Supply Corp. v. Novos Electro Mechanical, Inc., the Third District affirmed the dismissal of a complaint with prejudice, ruling:

[T]he contract attached to the complaint as well as the concession of Blue Supply’s counsel at oral argument establish that Carlos Novos was not a party to the Blue Supply/Nobox Electro Mechanical contract.  Because of this inconsistency, any claims against Novos, individually, predicated on the existence of a contract between Carlos Novos and Blue Supply must be viewed as properly dismissed. 

990 So. 2d 1157, 1159 (Fla. 3d DCA 2008).  This decision makes clear that if a plaintiff wants to allege someone is a party to a complaint, but the written contract shows otherwise, the complaint fails to state a cause of action. 

Another context where the inconsistency between an exhibit and the allegations in the body of a complaint frequently arises is when a plaintiff tries to bring a claim for fraud based on representations that are directly contrary to the language of a written agreement.  In Hillcrest Pacific Corp. v. Yamamura, for instance, the Fourth District affirmed a dismissal with prejudice where “the agreement plainly contradicts the allegations of the complaint and is fatally inconsistent with Pacific’s claim for fraudulent inducement.  Although Pacific alleges the appellees misrepresented the price of the property, the price is clearly stated in the agreement.”  727 So. 2d 1053, 1056 (Fla. 4th DCA 1999). 

With this backdrop in place, let’s look at cases where the plaintiff conclusorily alleges itself to be the “holder” of a Note and Mortgage, even in the face of exhibits attached to the Complaint in the name of another entity. 

With exceptions that typically don’t apply, see Fla. Stat. 673.3011, to sue for foreclosure, the plaintiff must be the “holder” of the Note.  See Booker v. Sarasota, Inc., 707 So. 2d 886 (Fla. 1st DCA 1998) (“to be the real party in interest on a promissory note, the plaintiff must be the holder of the note.”).  It’s easy to conclusorily allege yourself to be the “holder,” just as it’s easy to conclusorily allege fraud (as in Hillcrest) or that a defendant is a party to a contract (as in Novos).  However, as in Hillcrest and Novos, there’s more to it than that.  

“Holder” is a defined term under Florida law.  Under Fla. Stat. 671.201(21), the “holder” is “the person in possession of a negotiable instrument that is payable either to bearer or to the order of the person in possession.”  To be the “holder” when it was not the original mortgagee, (1), the Plaintiff must be “in possession” of the Note; and (2) the Note must contain an indorsement in blank or an indorsement to the Plaintiff.  Absent both of these elements, the Plaintiff is not the “holder” as a matter of law; see also Fla. Stat. 673.2011(2) (“if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder.”) . 

Any time the plaintiff brings a claim to re-establish a lost note, the plaintiff is necessarily admitting it is not in possession of the Note.  In these cases, the plaintiff cannot be the “holder” as a matter of law.  See Fla. Stat. 671.201(21).  As Judge Rondolino has repeatedly ruled, dismissal is required on this basis.  Additionally, when the Note attached to the Complaint lacks an indorsement (in blank or to Plaintiff) or contains an indorsement to a different entity, the Plaintiff is not the holder by the very definition set forth in the statute.  See id.  Again, dismissal is required.  

Time and time again, judges throughout Florida are denying motions to dismiss on these facts.  Respectfully, those rulings are wrong.  I know judges want to push foreclosure cases.  But when the Plaintiff alleges itself to the the holder of the Note in the body of the Complaint, but the exhibits to the Complaint show it is not, plaintiff fails to state a cause of action.  Any ruling to the contrary cannot be reconciled with Hillcrest and Novos, supra

Many times, plaintiffs try to cure these pleading deficiencies after the motion to dismiss is filed but without filing an Amended Complaint.  The classic example is when the plaintiff files a “Notice of Dropping Lost Note Count” or argues, at the hearing on the Motion to Dismiss that the lost note claim is being dropped.  This does not change the outcome.  First off, Florida law does not allow plaintiffs to dismiss one count of a multi-count Complaint; the only way to “drop” a lost note count is to file an Amended Complaint eliminating that count.  See Deseret Ranches of Florida, Inc. v. Bowman, 340 So. 2d 1232 (Fla. 4th DCA 1976) (“The proper method of deleting less than all counts from a pleading is amendment of the pleading pursuant ot Fla.R.Civ.P. 1.190. Appellees attempted to do the impossible when they filed a Notice of Dismissal as to one count of a two count complaint. They should have limited themselves to filing their second amended complaint according to Fla.R.Civ.P. 1.190, omitting the undesired count.”). 

Regardless, the question is not whether Plaintiff was the holder at the time of the motion to dismiss hearing – the question is whether the Plaintiff was the holder (and has inconsistent allegations as to whether it is the holder) at the time the Complaint was filed.  After all, “the plaintiff’s lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed.”  Progressive Express Ins. Co. v. McGrath Community Chiropractic, 913 So. 2d 1281, 1285 (Fla. 2d DCA 2005). 

In a situation like this, where the Complaint alleges Plaintiff to be the holder, but also alleges Plaintiff lacked possession at the time the Complaint was filed, and then asserts it has possession at the motion to dismiss hearing, some explanation is in order.  How can Plaintiff change the position alleged in its own pleading without filing an Amended Complaint?  Without any ultimate facts explaining itself?  In what other context, besides foreclosure cases, would that be permissible?  Plaintiff should be made to file an Amended Complaint, attach the Note upon which the suit was based, and allege itself to be the holder.  That’s the only way that Plaintiff’s exhibits would not be fatally inconsistent with the allegations in the body of its Complaint.  Then, as the case proceeds, Plaintiff will have to explain why it lacked possession at the outset of the case but obtained possession thereafter.  If the explanation is that Plaintiff obtained possession after filing suit, dismissal without prejudice is the proper remedy.  See id. (“if the [plaintiff] was without standing when the action was filed, the [action] was at best premature.  A new lawsuit must be filed.”). 

The analysis is the same when, on the eve of the motion to dismiss hearing, the plaintiff produces a note – the same note attached to the complaint – but this time with an indorsement in blank or an indorsement to the plaintiff.  Respectfully, if that indorsement was not on the Note attached to the original complaint, it cannot be considered for purposes of a motion to dismiss.  Since when do plaintiffs get to have the court rely on documents that are different than those attached to their complaint when adjudicating a motion to dismiss?  If Plaintiff wants the Court to consider the Note with the indorsement to it, and that indorsement was not on the Note attached to the Complaint, then Plaintiff must file an Amended Complaint with that version of the Note attached.  (Of course, as the case proceeds, Plaintiff will have to explain why the Note attached to the Complaint did not contain this indorsement, and if the evidence shows that Plaintiff obtained the indorsement after filing suit, the case must be dismissed without prejudice). 

There are many other, bona fide arguments in these Motions to Dismiss.  Respectfully, it’s time for judges to closely evaluate these arguments in the same way they adjudicate motions to dismiss in other (non-foreclosure) cases.  There is absolutely no reason to have one set of laws in foreclosure cases and another set of laws everywhere else.


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  9. Dodie says:

    So, then, what happens if the plaintiff never files an amended complaint, and never starts the process over again? Does the homeowner get the home “free and clear”?? –

  10. David C. Kanz says:

    How would the “tender rule” apply when the party asserting beneficial interest in the Note and Deed is unable to demonstrate holder/owner status and standing to initiate a foreclosure action? (i.e How does a party “collect a debt” without proof of ownership of the debt? or in most cases, based on obviously “manufactured” documents in which MERS is usually involved…..transferring ownership of a Note they never possessed or owned…..)

    Standing, the last time I looked, was a prerequisite, to prosecute any kind of litigation. It seems the law has little to do with the activities of our judicial system these days and we have become a “nation of men” and not law, particularly with regard to the foreclosure issue.

    The foreclosure fiasco in this country and the reaction of the judicial system in these matters makes one sometimes question your own sanity and logic….obviously the lenders have alot to “protect” in this fight and obviously those who hold positions in the judicial system do too….

    Excellent (and thankless) job again, Mark!

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