Fed. Nat'l Mortg. Ass'n v. McFadyen

• Decision Date: 27 April 2016
• Docket Number: No. 3D15–1822.,3D15–1822.
• Citation: 194 So.3d 418
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION, Appellant, v. Victoria A. McFADYEN, et al., Appellees.
• Court: Florida District Court of Appeals

194 So.3d 418

FEDERAL NATIONAL MORTGAGE ASSOCIATION, Appellant,

v.Victoria A. McFADYEN, et al., Appellees.

No. 3D15–1822.

District Court of Appeal of Florida, Third District.

April 27, 2016.

Rehearing Denied May 31, 2016.

Kahane & Associates and H. Michael Muñiz, Plantation, for appellant.

Robert B. Goldman, (Key West), for appellee, Victoria A. McFadyen; Victoria A. McFadyen, in proper person.

Before WELLS, EMAS and LOGUE, JJ.

WELLS

, Judge.

In this action to enforce a lost promissory note and to foreclose a mortgage on real property, Federal National Mortgage Association (“Fannie Mae”) appeals from an order granting rehearing, vacating a final judgment of foreclosure entered in its favor, and entering a final judgment in the borrower's favor. The trial court granted rehearing and entered judgment in the borrower's favor, purportedly because the record failed to demonstrate that Fannie Mae had standing to bring the underlying action. We disagree and reverse with instructions to reinstate the final judgment of foreclosure. Sosa v. Safeway Premium Fin. Co., 73 So.3d 91, 116 (Fla.2011)

(“A trial court's decision as to whether a party has satisfied the standing requirement is reviewed de novo.”).

The promissory note at issue here was signed by borrower Stephen Probert on December 14, 2006. The original lender was Lehman Brothers Bank, FSB. Victoria McFadyen co-signed a mortgage with Probert to secure the loan.

On December 27, 2012, Fannie Mae filed a verified complaint against McFadyen to enforce a lost, destroyed or stolen promissory note (count I) and to foreclose the mortgage McFadyen co-signed with Probert (count II). In that sworn complaint, Fannie Mae alleged that it was the “owner and holder of [a] note and mortgage,” which it claimed to have been lost or stolen. A copy of the note was attached to the verified complaint, the last page of which clearly bears not only borrower Probert's signature but also two indorsements, one from the original lender, Lehman Brothers Bank, FSB, specifically indorsing the note to Lehman Brothers Holdings, Inc., the other an indorsement in blank by Lehman Brothers Holdings, Inc.

After initially defaulting, McFadyen was allowed to answer and in summary form raised four defenses: lack of subject matter jurisdiction, failure to join an indispensable party, lack of standing, and fraudulent assignment of mortgage:

FIRST DEFENSE

The Court lacks jurisdiction over the subject matter of this action because the original note was not attached to the complaint.

SECOND DEFENSE

The complaint fails to state a cause of action because Plaintiff failed to join an indispensable party—the estate of Stephen K. Probert who was the maker of the note who died in January of 2009.

THIRD DEFENSE

Plaintiff [Fannie Mae] lacks standing to foreclose the note and mortgage in this action.

FOURTH DEFENSE

Upon information and belief, MER'S [sic] assignment of mortgage to Aurora and Aurora's assignment to [Fannie Mae] were fraudulent.

This matter was tried on April 6, 2015, and a final judgment of foreclosure in Fannie Mae's favor was entered. Citing to the Fourth District Court of Appeal's decision in Seffar v. Residential Credit Solutions, Inc., 160 So.3d 122 (Fla. 4th DCA 2015)

, McFadyen moved for rehearing. The motion was granted with the trial court finding that Fannie Mae “did not satisfy the requirements of Fla. Stat. 673.3091 to enforce the lost, destroyed or stolen Note.” The final judgment was vacated and a final judgment in McFadyen's favor was entered. Fannie Mae appeals from that final judgment; we reverse.

The law with regard to enforcement of promissory notes is relatively straight forward. Promissory notes are, by definition, negotiable instruments which, by law, may be enforced by a holder, a nonholder in possession who has the rights of the holder, or a person not in possession who nevertheless is entitled to enforce the note:

The “person entitled to enforce” an instrument means:

(1) The holder of the instrument;

(2) A nonholder in possession of the instrument who has the rights of a holder; or

(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s. 673.3091

or s. 673.4181(4).

A person may be a person entitled to enforce the instrument even though the person is not the owner of the

instrument or is in wrongful possession of the instrument.

§ 673.3011, Fla. Stat. (2015)

.

Fannie Mae's claim below was that it was entitled to enforce the Probert promissory note although not in possession of it. It therefore had to satisfy the requirements detailed in section 673.3091 of the Florida Statutes

to prevail. See § 673.3011(3), Fla. Stat. (2015). In pertinent part, that provision requires a party seeking to enforce an instrument not in its possession to show that it was entitled to enforce the instrument at the time it was lost:

(1) A person not in possession of an instrument is entitled to enforce the instrument if:

(a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;

(b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and

(c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

(2) A person seeking enforcement of an instrument under subsection (1) must prove the terms of the instrument and the person's right to enforce the instrument. If that proof is made, s. 673.3081 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

§ 673.3091, Fla. Stat. (2015)

.

Fannie Mae was, therefore, required to demonstrate at trial that at the time the note was lost, it had the right to enforce it. The record confirms that Fannie Mae satisfied this burden.

Documents introduced without objection into evidence at trial¹ established that Aurora Loan Services, Inc., an entity which services loans for various lenders, received the Probert promissory note indorsed in blank and scanned it into Aurora's computer database on June 29, 2009.² Two days later, the original note and mortgage were sent to the Law Offices of David J. Stern, P.A., along with a bailee letter instructing the firm to institute foreclosure proceedings.³ The subsequently filed foreclosure action, while inaccurately representing that Aurora was the owner and holder of the note, ultimately was dismissed and a new servicing agent, Seterus, Inc., was retained to service this loan for Fannie Mae. By this time, however, the original note and mortgage could not be located.

In addition to this documentary evidence, Fannie Mae called Jeff Andersen, a foreclosure litigation corporate officer for Seterus, as a witness at trial. Mr. Andersen testified that Seterus was the current loan servicing agency for the Probert loan and that it had assumed that role from Aurora. According to Mr. Andersen, when Seterus took over servicing this loan, it “boarded” Aurora's records, that is, it made Aurora's records part of its own, after confirming by independent investigation that Aurora's records were accurate.⁴

Those records, as Mr. Andersen testified, confirmed that: when Aurora received the original Probert promissory note in June of 2009, it bore only two indorsements, an indorsement from the original holder to Lehman Brothers Holdings, Inc. and an indorsement in blank from Lehman Brothers Holdings, Inc.; within days of Aurora's receipt of the original note and mortgage, they were scanned into Aurora's system and then forwarded to the Law Offices of David J. Stern, P.A.; and that these originals never were returned from Stern's office to Aurora before the loan was transferred to Seterus for servicing.

Significantly, Mr. Andersen, by virtue of a power of attorney from Fannie Mae, also testified on behalf of Fannie Mae and without objection confirmed that Fannie Mae was the owner of and holder of the Probert promissory note on June 29, 2009, when it was sent to Aurora, its servicer, and scanned into Aurora's computer database. See Sosa v. U.S. Bank Nat'l Ass'n, 153 So.3d 950, 951 (Fla. 4th DCA 2014)

(recognizing that a bank witness's trial testimony “can serve the same purpose as an affidavit” in establishing that the bank was the owner of the note and mortgage before the suit was filed); see also

Fiorito v. JP Morgan Chase Bank, Nat'l Ass'n, 174 So.3d 519, 521 (Fla. 4th DCA 2015) (“A bank employee's trial testimony that the plaintiff bank owned the note before the inception of the lawsuit is sufficient to resolve the issue of standing.”).

This evidence confirms that Fannie Mae had standing to enforce the Probert promissory note when this action was brought. Because the note was indorsed in blank,⁵ Fannie Mae only had to have possession of it to be a “holder” to have standing to enforce it:

The requirement of holding a note as proof of standing derives from the Florida Uniform Commercial Code. See § 673.3011(1), Fla. Stat. (2008)

(“The term ‘person entitled to enforce’ an instrument means: the holder of the instrument[.] )” To hold a note under the Uniform Commercial Code ordinarily connotes possession of the document itself. See § 671.201(21)(a), Fla. Stat. (2008) (“ ‘Holder’ means: The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession[.]”); ...