DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
SUSAN ELMAN and BRUCE ELMAN,
Appellants,
v.
U.S. BANK, N.A., TRUSTEE FOR THE HOLDER OF BEAR STEARNS
ASSET BACKED SECURITIES I TRUST 2006-IM1,
Appellee.
No. 4D14-2520
[April 6, 2016]
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Donald W. Hafele, Judge; L.T. Case No.
2009CA016831(AW).
Brian Korte and Scott Wortman of Korte & Wortman, P.A., West Palm
Beach, for appellants.
Donna L. Eng, Michael K. Winston and Dean A. Morande of Carlton
Fields Jorden Burt, P.A., West Palm Beach, for appellee.
MAY, J.
The borrowers appeal a final judgment of foreclosure. They argue the
trial court erred in entering the judgment because U.S. Bank (“bank”)
failed to prove standing. We agree and reverse.
The borrowers executed a note and mortgage with Pinnacle Financial
Corporation (“Pinnacle”). The borrowers defaulted on February 1, 2009.
On May 11, 2009, the bank filed a foreclosure complaint seeking
reformation of the warranty deed and mortgage, foreclosure, and
reestablishment of the lost note. Its amended complaint dropped the
count to reestablish the note, and had a copy of the note attached to it
containing an undated special endorsement from Pinnacle to Impac
Funding Corporation (“Impac”).
The loan number on the note was 11251***. An addendum contained
an undated special endorsement allonge from Impac to the bank. The
allonge had loan number 11035*****.
The third amended complaint re-alleged the reformation counts and
foreclosure count. But the complaint now alleged that the bank was “the
holder of the Mortgage Note and Mortgage.” The borrowers filed an answer
and raised affirmative defenses. The case proceeded to trial.
At trial, the bank introduced exhibit 3, a three-page untitled document
containing many numbers and abbreviations. It contained a loan number
of 12181*****, an old loan number of 72537***, and a new servicer loan
number of 72015*****. It indicated the borrowers’ name as Elman. The
third page contained an investor loan number of 14720*** and named the
investor as “EMC PMSR BSABS 2006-IM1.”
On cross-examination, the bank’s witness could not identify the date
the allonge was affixed to the original note. She acknowledged that the
loan number on the allonge was not the same as the number on the
original note. The borrowers’ counsel highlighted page thirty-three of a
notes log that was admitted into evidence, which stated, “04/28/06
Y90/018 Z24/001 I Y SALE TO EMC PMSR BSABS 2006-IM1.” The
witness testified the log was part of the loan transfer history and indicated
that the loan was sold to EMC. The log does not mention the bank.
The witness testified that Wells Fargo Bank, N.A. (“Wells Fargo”) was
the servicer on the loan. After reviewing exhibit 3, however, the witness
testified that it did not mention the bank and the EMC abbreviation did
not stand for the bank. She did not know what EMC stood for.
On redirect, the witness explained that the pooling and servicing
agreement (“PSA”) was between EMC Mortgage Corporation as purchaser
and Wells Fargo as company. It was dated November 1, 2005, but was
unexecuted, and did not include a mortgage loan schedule indicating the
borrowers’ loan was part of the trust.
The witness then testified that the Assignment Assumption Agreement
was dated April 25, 2006. It included EMC, the bank as trustee, and Wells
Fargo. Wells Fargo agreed to service the loans and EMC assigned its rights
to the bank. However, this agreement was also unexecuted.
When the trial court expressed concern about the loan numbers not
matching, the witness testified that the loan number was from Pinnacle
and each servicer had its own loan number. The witness was unsure if
the allonge was associated with the note and mortgage. She testified that
the different numbers did not affect the mortgage because once a loan was
boarded, Wells Fargo verified all parties to the loan.
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Several months later, the trial court entered a final judgment of
foreclosure in favor of the bank. From this judgment, the borrowers
appeal.
The borrowers argue there was no evidence proving the bank had
standing to file the foreclosure complaint. They argue the bank lacked
possession of the note because Wells Fargo had possession, and the
evidence showed EMC was the note owner. They also argue the evidence
failed to prove when the endorsements or the allonge were created or
affixed.
The bank responds that the evidence proved it was in constructive
possession of the note through Wells Fargo before it filed the complaint.
The borrowers reply that the bank was required to have possession of the
note to be considered the holder and Wells Fargo had possession of the
note when the bank filed the complaint. Specifically, exhibit 3 proved EMC
was the investor and the bank had no standing to foreclose.
We have de novo review. Dixon v. Express Equity Lending Grp., LLLP,
125 So. 3d 965, 967 (Fla. 4th DCA 2013).
“[S]tanding may be established from the plaintiff’s status as the note
holder, regardless of any recorded assignments.” McLean v. JP Morgan
Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012) (citation
omitted). “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.” Id. “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 [it] 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)
(emphasis added). “Such a plaintiff must prove not only physical
possession of the original note but also, if the plaintiff is not the named
payee, possession of the original note endorsed in favor of the plaintiff or
in blank (which makes it bearer paper).” Id. at 353.
Because the bank was not the original named payee, it had to prove not
only a blank or special endorsement in its favor, but also that the
endorsement was placed on the note before it filed the original complaint.
When the bank filed the original complaint, it included a lost note count
and did not attach a copy of the note. The amended complaint attached a
copy of the note, which contained an endorsement from Pinnacle to Impac
and an allonge endorsed from Impac to the bank. But both the
endorsement and allonge were undated. It was therefore essential that the
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bank prove the endorsement occurred and the allonge was affixed prior to
filing the original complaint. See Russell v. Aurora Loan Servs., LLC, 163
So. 3d 639, 642 (Fla. 2d DCA 2015). This, it failed to do.
The bank’s witness testified that Wells Fargo possessed1 the allonge
and original note when the complaint was filed. However, exhibit 3, upon
which the witness relied, refuted her testimony. Exhibit 3 contained no
indication that the bank, or anyone else, possessed the original note with
the affixed specially endorsed allonge before the complaint was filed. And,
on cross-examination, the witness testified that she did not know the date
the allonge was affixed to the original note. The evidence showed that EMC
purchased the loan in 2006, and there was no evidence to show that EMC
transferred the note and mortgage to the bank or Wells Fargo at any point
because the PSA and Assignment Assumption Agreement were both
unexecuted. Simply put, the bank failed to prove the allonge was specially
endorsed in its favor and affixed to the original note prior to filing its
complaint. It failed to prove standing.
We therefore reverse and remand the case for entry of judgment for the
borrowers. See Murray v. HSBC Bank USA, 157 So. 3d 355, 359 (Fla. 4th
DCA 2015).
Reversed and Remanded.
DAMOORGIAN and GERBER, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
1The bank argues it constructively possessed the note through Wells Fargo. See
Caraccia v. U.S. Bank, Nat’l Ass’n, 41 Fla. L. Weekly D476, D477 (Fla. 4th DCA
Feb. 24, 2016) (finding proof of an agency relationship existed between the lender
and servicer and stating that under those circumstances “the element of
possession can be met through either actual or constructive possession”).
However, the witness’s testimony was not supported by any of the documentation
she relied upon. Even if the bank proved the element of possession through
constructive possession, it still failed to prove that the allonge was endorsed and
affixed to the original note prior to the filing of the original complaint. Balch v.
LaSalle Bank N.A., 171 So. 3d 207, 209 (Fla. 4th DCA 2015).
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