Russell v. Aurora Loan Servs., LLC

• Decision Date: 24 April 2015
• Docket Number: No. 2D14–3166.,2D14–3166.
• Parties: William Craig RUSSELL, Appellant, v. AURORA LOAN SERVICES, LLC; Nationstar Mortgage, LLC; Mortgage Electronic Registration Systems, Incorporated as Nominee for First National Bank of Arizona; RL James, Inc.; and Sundial of Sanibel Condominium Association, Inc., Appellees.
• Court: Florida District Court of Appeals

163 So.3d 639

William Craig RUSSELL, Appellant

v.AURORA LOAN SERVICES, LLC; Nationstar Mortgage, LLC; Mortgage Electronic Registration Systems, Incorporated as Nominee for First National Bank of Arizona; RL James, Inc.; and Sundial of Sanibel Condominium Association, Inc., Appellees.

No. 2D14–3166.

District Court of Appeal of Florida, Second District.

April 24, 2015.

Richard Johnston, Jr. of Johnston Champeau, LLC, Fort Myers, for Appellant.

Nancy M. Wallace of Akerman LLP, Tallahassee; William P. Heller of Akerman LLP, Fort Lauderdale; and Celia C. Falzone of Akerman LLP, Jacksonville, for Appellees Aurora Loan Services, LLC and Nationstar Mortgage, LLC.

No appearance for remaining Appellees.

Opinion

BLACK, Judge.

William Russell appeals a final judgment of foreclosure entered in favor of Nationstar Mortgage, LLC (Nationstar), following a bench trial. We reverse because Nationstar failed to establish that the original plaintiff, Aurora Loan Services, LLC (Aurora), had standing to foreclose at the time Aurora filed the foreclosure complaint.

On February 25, 2011, Aurora filed a single-count, verified complaint for foreclosure. In the complaint, Aurora alleged both that it was the servicer of the loan, authorized to bring the lawsuit, and that it held the note and mortgage. Attached to the complaint were a note payable to First National Bank of Arizona with no indorsements, an allonge containing three indorsements, a mortgage naming Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for First National Bank of Arizona, and a corporate assignment of mortgage.

The assignment reflects that the mortgage was assigned from MERS as nominee for First National Bank of Arizona and its successors and assigns to Aurora on November 23, 2010, prior to the initiation of the lawsuit. The note with attached allonge contains three undated special indorsements. The first indorsement is from First National Bank of Arizona to First National Bank of Nevada. The second is from First National Bank of Nevada to Residential Funding Company, LLC. And the third indorsement is from Residential Funding Company, LLC, to Deutsche Bank Trust Company Americas as Trustee (Deutsche Bank). Deutsche Bank is not a party to the action nor was it served.

During the course of litigation Aurora moved to have Nationstar substituted as plaintiff, and the court granted the motion. Aurora attached to its motion an assignment of mortgage from Aurora to Nationstar. An amended complaint was not filed. In his answer, Mr. Russell raised standing as an affirmative defense, alleging that Aurora lacked standing to foreclose and that Nationstar, as substituted party plaintiff, also lacked standing.

A bench trial was held on June 20, 2014. Nationstar called Jose Perez as its sole witness. Mr. Perez testified that he was a default specialist for Nationstar and had previously worked in the same capacity for Aurora. The original note and mortgage were admitted into evidence along with the assignment of mortgage. However, the assignment did not purport to assign or transfer the note, and as previously observed, the note was not indorsed to Aurora nor was it indorsed in blank. See Lindsey v. Wells Fargo Bank, N.A., 139 So.3d 903, 904–05 (Fla. 1st DCA 2013) ; see also Bristol v. Wells Fargo Bank, Nat'l Ass'n, 137 So.3d 1130, 1133 (Fla. 4th DCA 2014) (disapproving the bank's argument that the assignment of mortgage, reflecting only transfer of the mortgage and not the note, supported its standing to foreclose). In addition to those documents, a limited power of attorney (POA) executed by Deutsche Bank and evidencing Nationstar's designation as loan servicer was admitted over objection. The POA identified Nationstar as the successor servicer to Aurora, which was a successor servicer to Residential Funding Company, LLC. The POA, dated August 6, 2012, does not indicate when Nationstar became the successor servicer to Aurora or when Aurora succeeded Residential Funding Company.

Mr. Russell moved for involuntary dismissal based on Aurora's and Nationstar's lack of standing. He argued that neither Aurora nor Nationstar was the holder of the note and that there was a total lack of evidence establishing Aurora's authority to bring the foreclosure action as servicer. He further argued that the best evidence of standing that Nationstar presented was the POA which was signed well after the suit was commenced and was unclear as to whether it even applied to Mr. Russell's loan.

The court did not expressly deny Mr. Russell's motion. And despite expressing concerns regarding standing, the court ultimately entered the final judgment of foreclosure in favor of Nationstar.

“A plaintiff alleging standing as a holder must prove it is a holder of the note and mortgage both as of the time of trial and also that the (original) plaintiff had standing as of the time the foreclosure complaint was filed.” Kiefert v. Nationstar Mortg., LLC, 153 So.3d 351, 352 (Fla. 1st DCA 2014). Under this theory, a plaintiff must establish more than just physical possession of the original note. If the plaintiff is not the payee of the original note, the plaintiff must also prove that the original note contains an indorsement in favor of the plaintiff (special indorsement) or an indorsement in blank. Id. at 353. In either case, the indorsement must have been made prior to the filing of the lawsuit in order to establish the plaintiff's standing. Id. A substituted plaintiff acquires only the standing of the original plaintiff. Fla. R. Civ. P. 1.260 ; Kiefert, 153 So.3d at 353 n. 4.

Here, the only note in evidence was payable to First National Bank of Arizona and specially indorsed, ultimately, to Deutsche Bank as trustee. Nationstar's witness, Mr. Perez, testified that Deutsche Bank was the holder of the note. Thus, Nationstar failed to establish that Aurora had standing to bring the foreclosure suit as a holder. See Lacombe v. Deutsche Bank Nat'l Trust Co., 149 So.3d 152, 155 (Fla. 1st DCA 2014) (“[N]one of Deutsche Bank's exhibits qualifies as an indorsement from [the note holder] to Deutsche Bank, an assignment from [the note holder] to Deutsche Bank, or an affidavit otherwise proving the plaintiff's standing to bring the foreclosure action on the note and mortgage at issue as a matter of law.”).

“In the mortgage foreclosure context, ‘standing is broader than just actual ownership of the beneficial interest...