Taoufiq Seffar v. Residential Credit Solutions, Inc.

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

TAOUFIQ SEFFAR,
Appellant,

v.

RESIDENTIAL CREDIT SOLUTIONS, INC.,
Appellee.

No. 4D13-3514

[March 25, 2015]

Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Dale Ross, Judge; L.T. Case No. CACE10025802.

David H. Charlip of Charlip Law Group, LC, Aventura, for appellant.

Raymond Hora of McCalla Raymer, LLC, Orlando, for appellee.

WARNER, J.

Appellant challenges a final judgment of foreclosure, claiming that the
court erred in denying his motion for involuntary dismissal. He claimed
that appellee did not prove standing to foreclose at the time suit was filed.
We agree that the evidence is insufficient to show the plaintiff had standing
and reverse.

Appellant executed a note and mortgage to ABN Amro Mortgage Group
(“ABN”) in 2006. In 2009, appellant received a letter from CitiMortgage
informing him that the servicing of his note and mortgage was being
transferred from CitiMortgage to Residential Credit Solutions (“RCS”). RCS
also sent a letter informing appellant of the transfer of the servicing of the
loan. When he defaulted on the mortgage, RCS sent him a notice of default
and subsequently filed suit, alleging that it had the right to enforce the
note and mortgage. Attached to the complaint was the mortgage and note
to ABN. The note was stamped “original” and did not contain any
endorsements or allonges. Also attached was an assignment of the
mortgage from the Federal Deposit Insurance Corporation (“FDIC”), as
receiver for Franklin Bank, to Mortgage Electronic Registrations Systems
(“MERS”), as nominee for RCS.
 About nine months after filing the complaint, RCS filed what it claimed
was the “original” note. Filed with this note was an undated, blank
allonge, payable to the bearer, allegedly executed by a vice president of
ABN. Nothing about the appearance of this allonge, as contained in the
appellate record, shows that it was affixed to the note with which it was
filed.

Just two weeks before the foreclosure trial, RCS moved to substitute
Bayview Loan Servicing as the plaintiff, alleging it had transferred
servicing of the loan to Bayview. The documents attached to the motion
do not mention that the ownership of the loan or mortgage was also
transferred. The trial court allowed the substitution over appellant’s
objection.

At trial, a litigation manager for Bayview testified. He was not a records
custodian for RCS or for Bayview. He was not familiar with the computer
systems that either of the prior servicers, CitiMortgage and RCS, used for
compiling information on the loan or how it was inputted into the systems.
He had no information as to whether the information on the loans was
inputted into the prior servicers’ systems correctly. He could not testify to
the truth or accuracy of RCS’s records, just that they were provided to
Bayview.

He testified that Bayview was the servicer and holder of the note. He
believed that Bayview had acquired the note through a purchase
agreement with RCS, but he had not seen the agreement, nor did he have
a copy of it. His belief that Bayview was the owner of the note under the
purchase agreement was based on “a screen shot of our capital assets
systems, which has information in regards to the status of the loan with
us.” This screen shot was not produced at trial.

As to the allonge with the blank endorsement from ABN, he did not
know when it was executed or whether the signature on it was a “wet ink”
signature or a stamp. He did not know whether the allonge was affixed to
the note prior to it being filed in the court file. He did not know if the vice
president who signed the allonge on ABN’s behalf was in the employ of
ABN in November 2009, when Bayview’s records showed that servicing of
the loan had been transferred from ABN to Franklin Bank.

The manager agreed that on January 29, 2010, when RCS mailed
appellant a notice of intent to take legal action on the note and mortgage,
RCS was not the owner and holder of the note by way of the September
30, 2009 assignment of mortgage, but testified, “[t]here may have been a
purchase agreement or some other document.” He testified that, on that

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date, “I only know that RCS was servicing. I don’t know for a fact who was
the holder of the note at the time.” While he did testify that RCS owned
the note and mortgage on the date the complaint was filed, he then
inconsistently stated that RCS had brought the suit as the servicer of the
loan, not its owner.

Although appellant moved for involuntary dismissal on the ground that
Bayview had not proved standing because it had not shown that it had the
right to enforce the note and foreclose the mortgage, the trial court rejected
this claim. It entered a final judgment of foreclosure in which it found that
Bayview was due and owing the unpaid balance of the note. This appeal
follows.

Appellant argues that Bayview failed to prove that it was the owner or
holder of the note and that it had the right to foreclose. Based upon this
confusing record, we agree that it presented no competent evidence that
RCS was the holder of the note at the time it filed suit or that it was a
nonholder in possession and entitled to enforce the note. Therefore,
Bayview failed to prove standing.

Standing of the plaintiff to foreclose on a mortgage must be established
at the time the plaintiff files suit. See McLean v. JP Morgan Chase Bank
Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). McLean set forth the
requirements that a plaintiff may prove standing in a mortgage foreclosure:

Standing may be established by either an assignment or
an equitable transfer of the mortgage prior to the filing of the
complaint. . . For example, standing may be established from
a plaintiff's status as the note holder, regardless of any
recorded assignments. . . .

If the note does not name the plaintiff as the payee, the
note must bear a special endorsement in favor of the plaintiff
or a blank endorsement. . . . Alternatively, the plaintiff may
submit evidence of an assignment from the payee to the
plaintiff . . .

Even in the absence of a valid written assignment, the mere
delivery of a note and mortgage, with intention to pass the
title, upon a proper consideration, will vest the equitable
interest in the person to whom it is so delivered.

Id. at 173 (citations and quotation marks omitted).

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 Appellant notes several deficiencies in Bayview’s proof which result in
a failure to show standing to foreclose the mortgage. First, while the note
and mortgage were originally held by ABN, the only assignment of
mortgage attached to the complaint and introduced at trial was one from
FDIC as receiver for Franklin Bank to MERS as nominee for RCS. There
is no proof of any transfer of the note or mortgage from ABN to Franklin
Bank. Second, while Bayview contends that the undated allonge supplies
the connection, as it shows a transfer payable to bearer, there was no proof
that the allonge was attached to the note, and Bayview presented no proof
of when it was executed. Finally, there was no competent evidence of what
rights Bayview acquired from RCS.

We recently addressed how a plaintiff may show it is entitled to
foreclose on a promissory note in Murray v. HSBC Bank, 40 Fla. L. Weekly
D239 (Fla. 4th DCA Jan. 21, 2015):

“Because a promissory note is a negotiable instrument and
because a mortgage provides the security for the repayment
of the note, the person having standing to foreclose a note
secured by a mortgage may be ... a nonholder in possession
of the note who has the rights of a holder.” Mazine v. M & I
Bank, 67 So. 3d 1129, 1130 (Fla. 1st DCA 2011).

A “person entitled to enforce” an instrument is: “(1) [t]he
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[ection] 673.3091 or s[ection]
673.4181(4).” § 673.3011, Fla. Stat. (2013). A “holder” is
defined as “[t]he person in possession of a negotiable
instrument that is payable either to bearer or to an identified
person that is the person in possession.” § 671.201(21)(a),
Fla. Stat. (2013). Thus, to be a holder, the instrument must
be payable to the person in possession or indorsed in blank.
See § 671.201(5), Fla. Stat. (2013).

Although, nine months after filing the complaint, RCS filed what purported
to be the original note with an allonge payable to bearer, it was undated
and there is no proof it was affixed to the promissory note. “An allonge is
a piece of paper annexed to a negotiable instrument or promissory note,
on which to write endorsements for which there is no room on the
instrument itself. Such must be so firmly affixed thereto as to become a
part thereof.” See Booker v. Sarasota, Inc., 707 So. 2d 886, 887 n.1 (Fla.
1st DCA 1998) (quoting Black’s Law Dictionary 76 (6th ed. 1990)); see also

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Isaac v. Deutsche Bank Nat’l Trust Co., 74 So. 3d 495, 496 n.1 (Fla. 4th
DCA 2011). The litigation manager did not know when the allonge was
executed, or whether it was affixed to the note prior to filing. No evidence
was presented that the allonge was executed and attached to the note prior
to the filing of the initial complaint. Indeed, RCS did not allege in the
complaint that it owned and held the mortgage. It merely alleged that it
had the right to foreclose the note and mortgage. Therefore, the allonge
provided no evidence that RCS was a “holder” at the time it filed the
complaint.

Alternatively, Bayview argues that RCS was a nonholder in possession.
However, Murray shows the fallacy of that claim. In Murray, we held that
the lender, HSBC, had not proved standing where it had alleged that it was
a nonholder in possession of the note and mortgage, because it did not
prove that each prior transfer of the note conferred the right to enforce it:

HSBC was thus left to enforce the note under section
673.3011(2) as a nonholder in possession of the instrument
with the rights of a holder. The issue then is whether HSBC
is a nonholder in possession with the rights of a holder.

Anderson v. Burson, 424 Md. 232, 35 A.3d 452 (2011), is
instructive. There, the court held that the plaintiff was a
nonholder in possession and analyzed whether it had rights
of enforcement pursuant to a Maryland statute that employs
the same language as section 673.3011, Florida Statutes.
Anderson, 35 A.3d at 462. “A transfer vests in the transferee
only the rights enjoyed by the transferor, which may include
the right to enforce [ment],” through the “shelter rule.” Id. at
461–62.

A nonholder in possession, however, cannot rely on
possession of the instrument alone as a basis to enforce it….
The transferee does not enjoy the statutorily provided
assumption of the right to enforce the instrument that
accompanies a negotiated instrument, and so the transferee
“must account for possession of the unendorsed instrument
by proving the transaction through which the transferee
acquired it.” Com. Law § 3–203 cmt. 2. If there are multiple
prior transfers, the transferee must prove each prior transfer.
Once the transferee establishes a successful transfer from a
holder, he or she acquires the enforcement rights of that holder.
See Com. Law § 3–203 cmt. 2. A transferee’s rights, however,

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 can be no greater than his or her transferor’s because those
rights are “purely derivative.”

Murray, 40 Fla. L. Weekly D239 (emphasis in original) (internal citations
omitted). Because HSBC did not offer evidence of one of the prior transfers
of the note, we held it did not prove that it was a nonholder in possession.

Similarly, in this case, Bayview did not prove that either RCS or itself
was a nonholder in possession. It never connected FDIC as receiver of
Franklin Bank, from which RCS acquired an assignment of mortgage, to
ABN, the original note holder.

As alternative proof of its “ownership” of the note and mortgage,
Bayview relied on a letter from RCS to the appellant, notifying him of the
transfer of servicing rights to RCS, and a similar one from Bayview when
it became the servicer of the loan. Neither letter addressed a right to
enforce the note. None of the servicer agreements were placed in evidence
to prove what rights either RCS or Bayview acquired under those
agreements. Finally, as to the transfer between RCS and Bayview, the
litigation manager testified that while he believed that Bayview purchased
the note and mortgage from RCS, he had never seen a purchase
agreement, and no document memorializing the purchase was entered into
evidence. Therefore, because there is a gap in the transfer of the note and
mortgage, Bayview did not prove that RCS, and subsequently Bayview,
were nonholders in possession. See Murray, 40 Fla. L. Weekly D239.
Simply stated, the evidence presented was woefully inadequate to prove
standing to foreclose. It was quite apparent from the record that Bayview’s
litigation manager did not have the requisite knowledge, nor did he
produce documentary evidence, to support the claim.

We thus reverse and direct judgment in favor of the appellant
dismissing the foreclosure on the mortgage for failure of the appellee to
prove its standing.

Reversed and remanded.

CIKLIN and GERBER, JJ., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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