Supporting a Lender’s Position at Trial

by Joshua D. Miron, Esq.

A recent Florida Third District Court of Appeal case has once again brought to light what most of us who went to law school take for granted, a “person seeking to enforce an instrument conveying an interest in real property must demonstrate he has directly or indirectly acquired ownership of the instrument”.  Why is this a new or novel issue?  It isn’t, but in a time where loans are bought and sold sometimes two, three or ten times, lenders must be increasingly aware that each of their respective ducks must be in a row in order to help ensure a proper foreclosure.

Interestingly enough, the majority opinion focused on the issue of Ex-Parte Motions for Substitute Party Plaintiff, specifically that a defendant’s failure to object or otherwise respond to a motion to substitute party plaintiff waives the defense, thereby precluding an argument based upon standing at trial.  The dissent, on the other hand, took the opportunity to point out what it believed were glaring deficiencies which would have precluded judgment in favor of the bank.  

The original action was initiated in January 2005, by another lender. The sole witness to prove the lender’s ownership of the promissory note (which had been lost) and mortgage, and the default on the loan, was a manager for a separate servicing agent. The manager testified from a file they brought with to trial, but it was clear to the Court that they were not the custodian of those records, were not the servicing agent at the time of default and had no personal, first-hand knowledge of whereabouts of the original Note (the file contained neither the original note nor the original mortgage).

It is indisputable that, absent testimony from a witness with direct first-hand personal knowledge, a suit for foreclosure can not and will not succeed if the Plaintiff does not have the original Note in its possession, is unable to testify as to the transfer and last known whereabouts of the Note and is further unable to testify as to the Defendant’s alleged default. “It is apodictic there can be no cause of action to foreclose a mortgage unless we know where the paper is and that it actually represents something. There is much “sand in the gears” of our property transfer system in these times. However, we cannot bend the rules. A person seeking to enforce an instrument conveying an interest in real property must demonstrate he has directly or indirectly acquired ownership of the instrument.”  Excerpt: Judge Sheppard, J., dissenting.

If you have any questions on this matter, contact Mr. Joshua D. Miron, Esq. Josh is an associate in the Real Estate Default Group of based in the Ft. Lauderdale, Florida office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 954.740.5223 and jmiron@weltman.com.