Phan v. Deutsche Bank Nat'l Trust Co., 2D14–3364.
Decision Date | 26 February 2016 |
Docket Number | No. 2D14–3364.,2D14–3364. |
Citation | 198 So.3d 744 |
Parties | Ngoc T. PHAN, Appellant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for FIRST FRANKLIN MORTGAGE LOAN TRUST 2006–FF11, Appellee. |
Court | Florida District Court of Appeals |
Heather Cherepkai, Peter Ticktin, Josh Bleil, and Kendrick Almaguer of The Ticktin Law Group, P.A., Deerfield Beach, for Appellant.
Donna L. Eng, Michael K. Winston, and Dean A. Morande of Carlton Fields Jorden Burt, P.A., West Palm Beach, for Appellee.
LUCAS
, Judge.
Ngoc Phan appeals the final judgment of foreclosure entered in favor of Deutsche Bank. Finding no error, we affirm the judgment in all respects. We write to address one of Deutsche Bank's arguments for affirmance in order to explain the effect an agency relationship may have for proving standing in foreclosure proceedings.
Deutsche Bank initiated a foreclosure action against Ms. Phan on April 28, 2009, alleging she had failed to make her loan payments on her Pinellas County home since January 1, 2009. Ms. Phan denied the Bank's allegations and raised, as an affirmative defense, that Deutsche Bank did not have standing at the time it filed its foreclosure lawsuit.
At trial, Ms. Phan developed this defense further. She argued that Deutsche Bank lacked standing because it was not the holder of her note when it filed its complaint. The testimony presented by a Wells Fargo representative, Deborah Kavalary, confirmed that Wells Fargo had possession of Ms. Phan's original note at the time Deutsche Bank filed its lawsuit. Ms. Kavalary testified that Wells Fargo was the authorized servicer of Ms. Phan's loan. According to Ms. Phan, this evidence demonstrated Deutsche Bank's lack of standing, because Deutsche Bank did not actually possess her note at the time the foreclosure action commenced.
However, Ms. Kavalary also testified that Wells Fargo, in addition to servicing Ms. Phan's loan, was an agent of Deutsche Bank:
Ms. Phan never objected to this testimony. Nor did she dispute, either below or on appeal, Wells Fargo's assertion that it had an agency relationship with Deutsche Bank. As we will explain, that agency relationship between Wells Fargo and Deutsche Bank could expand the reach of Deutsche Bank's possession of Ms. Phan's note to include its agent, Wells Fargo's, possession.
We begin with the underlying premise of Ms. Phan's argument concerning standing. We have held that a plaintiff's standing to maintain a foreclosure cause of action must be rooted at the time it files its complaint. See, e.g., Country Place Cmty. Ass'n v. J.P. Morgan Mortg. Acquisition Corp., 51 So.3d 1176, 1179 (Fla. 2d DCA 2010)
(). In the context of mortgage foreclosure claims, a plaintiff's standing often turns on whether it was the lawful holder of a borrower's underlying promissory note. See
Wells Fargo Bank, N.A. v. Morcom, 125 So.3d 320, 321–22 (Fla. 5th DCA 2013) ( ); Dixon v. Express Equity Lending Grp., 125 So.3d 965, 967–68 (Fla. 4th DCA 2013) ( ); Lyttle v. BankUnited, 115 So.3d 425, 425–26 (Fla. 5th DCA 2013) ( ).
The requirement of holding a note as proof of standing derives from the Florida Uniform Commercial Code. See § 673.3011(1), Fla. Stat. (2008)
(). To hold a note under the Uniform Commercial Code ordinarily connotes possession of the document itself. See § 671.201(21)(a), Fla. Stat. (2008) ( ); St. Clair v. U.S. Bank Nat'l Ass'n, 173 So.3d 1045, 1046 (Fla. 2d DCA 2015).1 Thus, in order for a plaintiff to claim standing based upon a note indorsed in blank, the plaintiff must show that it had lawful possession of the original note indorsed in blank at the time the lawsuit was filed. Focht v. Wells Fargo Bank, N.A., 124 So.3d 308, 310 (Fla. 2d DCA 2013) ; McClean v. JP Morgan Chase Bank Nat'l Ass'n, 79 So.3d 170, 173 (Fla. 4th DCA 2012). Under the law, without the requisite proof of possession at the time a foreclosure action is commenced, the plaintiff's status as the holder of the note—and, hence, its authority to enforce the note in foreclosure—remains unproven, and its complaint untenable. See
In the case at bar, Ms. Phan claims that Deutsche Bank was not the holder of her note when it filed its foreclosure lawsuit because it did not possess her note at that time. Ms. Phan was correct, to a point:
Deutsche Bank did not have direct possession of her note at the time it filed its lawsuit. That alone, however, was not dispositive to the issue of its standing. While it is true that Deutsche Bank never had direct possession of the note, as we will explain next, it did have constructive possession of the note when its foreclosure complaint was filed—by virtue of its agent Wells Fargo's possession.
An agent may, within the scope of its agency, hold property on its principal's behalf. Cf. Francis Reynolds, English Private Law § 9.23, at 621 (Andrew Burrows ed., 3d ed. 2013) (“An agent may hold goods for his principal as bailee....”). In such instances, it is said that the principal, who both owns the property held by the agent and bears authority to direct the agent's actions concerning that property, has constructive possession of the property. See Deakter v. Menendez, 830 So.2d 124, 128 (Fla. 3d DCA 2002)
( ); Bush v. Belenke, 381 So.2d 315, 316 (Fla. 3d DCA 1980) ( ); see also
Locks v. N. Towne Nat'l Bank of Rockford, 115 Ill.App.3d 729, 71 Ill.Dec. 531, 451 N.E.2d 19, 21 (1983) (); Utica Nat'l.
Bank & Trust Co. v. Associated Producers Co., 622 P.2d 1061, 1065 n. 15 (Okla.1980) ().
We have not found a published Florida court decision that applies the principle of constructive possession to establish standing in the context of a residential mortgage foreclosure case. But we see no reason why such an established axiom of agency law would not be apt. Several courts from our sister states have held that a principal can establish its standing to foreclose a mortgage through its agent's possession of a promissory note. See, e.g., Midfirst Bank, SSB v. C.W. Haynes & Co., Inc., 893 F.Supp. 1304, 1314 (D.S.C.1994)
( ); In re Phillips, 491 B.R. 255, 261–62 (Bankr.D.Nev.2013) ( ); Billingsley v. Kelly, 261 Md. 116, 274 A.2d 113, 118 (1971) ( ); Lazidis v. Goidl, 564 S.W.2d 453, 455 (Tex.App.1978) ( ).
Legal commentators on the Uniform Commercial Code have reached the same conclusion: an agent's possession of property for its principal makes the principal a holder of that property. See Lary Lawrence, Lawrence's Anderson on the Uniform Commercial Code § 1–201:265 (3d ed. 2012)
( (footnotes omitted)); Restatement (Third) of Agency § 8.12
cmt. b (Am. Law Inst.2006) (...
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