ROBERTO VIEIRA and SHAWN D. VIEIRA v. PENNYMAC CORP.

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

ROBERTO D. VIEIRA a/k/a ROBERTO VIEIRA and
SHAWN D. VIEIRA a/k/a SHAWN VIEIRA,
Appellants,

v.

PENNYMAC CORP. and
THE TIMBERS OF BOCA HOMEOWNERS ASSOCIATION, INC.,
Appellees.

No. 4D16-3430

[March 21, 2018]

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Susan R. Lubitz, Senior Judge; L.T. Case No. 50-2015-CA-
001150 AW.

Kendrick Almaguer, Thomas Eross, Jr., and Kyle M. Costello of The
Ticktin Law Group, PLLC, Deerfield Beach, for appellants.

Nancy W. Wallace of Akerman LLP, Tallahassee, and William P. Heller
and Henry H. Bolz of Akerman LLP, Fort Lauderdale, for appellee
PennyMac Corp.

CONNER, J.

Roberto D. Vieira and Shawn D. Vieira (“the Borrowers”) appeal the final
judgment of foreclosure in favor of PennyMac Corp (“PennyMac”) asserting
the trial court erred by (1) determining PennyMac had standing to enforce
a lost note, and (2) rejecting their attempt to amend pleadings to conform
to the evidence. Because we agree with the Borrowers’ first contention, we
do not address the second contention. We agree that PennyMac failed to
prove at trial that the initial plaintiff had standing to enforce the note. We
reverse the final judgment and remand for the trial court to enter judgment
in favor of the Borrowers.

Background

In January 2015, JP Morgan Chase Bank, National Association (“JP
Morgan”) filed the initial complaint in this case, seeking to foreclose on a
note and mortgage given by the Borrowers to Chase Bank USA, N.A.
(“Chase Bank”), the original lender. The complaint also sought to re-
establish the lost note secured by the mortgage. JP Morgan asserted that
although the note was lost, it was entitled to enforce the instrument
pursuant to section 673.3091, Florida Statutes (2017). Attached to the
complaint was a copy of the note and mortgage. The complaint alleged in
part that “Plaintiff will establish the terms and conditions of the subject
note in addition to its right to enforce. A lost note affidavit is attached
hereto as Exhibit ‘A.’” The body of the three-page complaint made no
reference to Chase Bank.

The lost note affidavit attached to the complaint stated, in part:

A copy of the original note and, if applicable, allonge(s) is/are
attached hereto as Exhibit A.

The copy does not display endorsements.

(emphasis added). Exhibit A attached to the lost note affidavit included a
copy of the note, but no copy of an allonge was attached.

The Borrowers eventually filed an answer, asserting that JPMorgan
lacked standing and failed to fulfill conditions precedent. Subsequently,
JP Morgan moved to substitute PennyMac as plaintiff and to change the
case style, alleging that JP Morgan assigned the mortgage to PennyMac
after the suit was filed, attaching a copy of the recorded assignment. The
assignment only transferred the mortgage and not the note. An order was
entered substituting PennyMac as the plaintiff.

At trial, PennyMac called two witnesses; one a JP Morgan employee and
the other a PennyMac employee. We summarize the testimony that is most
pertinent to disposition of this appeal.

The JP Morgan witness testified that Chase Bank was the first loan
servicer, JP Morgan was the second servicer, and PennyMac was the
current servicer. She testified that the Borrowers were given a notice of
assignment, sale and transfer of servicing rights from Chase Bank to
JPMorgan. She further testified about the process JP Morgan followed
regarding a search for a lost note. According to the witness, JPMorgan
was in possession of the note because there was an imaged copy that was
uploaded during JP Morgan’s servicing of the loan, though she did not
recall the specific date of the upload, believing it to be around 2010.
Additionally she testified that after reviewing JP Morgan’s records and
Chase Bank’s records, nothing led her to believe that the note could be

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reasonably located. She admitted that she did not know the exact date
the note was lost.

Through the JP Morgan witness, PennyMac introduced into evidence
the original lost note affidavit, a copy of which was attached to the
complaint. According to the witness, the affidavit was executed in
September 2014 (four months before the complaint was filed). Unlike the
copy of the affidavit attached to the complaint, the original affidavit had
an original allonge attached to it, stating:

This Allonge is being prepared to evidence the transfer and
assignment of ownership of that certain Mortgage Note
described above, which was executed in favor of CHASE BANK
USA, NA, to the below-named Purchaser. The original of the
Mortgage Note has been lost or misplaced by the below-named
seller. A copy of the fully-executed Mortgage Note is attached
to that certain Lost Note affidavit dated SEPTEMBER 18, 2014
executed by the Seller.

The allonge was undated and contained a signature by a JP Morgan
representative, but no signature by a Chase Bank representative. The JP
Morgan witness could not say when the allonge was executed or when it
was imaged into any system.

Through the JP Morgan witness, PennyMac also introduced into
evidence the assignment of mortgage from JP Morgan to PennyMac.

PennyMac’s witness testified that when PennyMac acquired servicing
rights, the prior servicer, JP Morgan, sent all loan records. She further
testified that the Borrowers’ loan was part of a Purchase of Servicing
Agreement (“PSA”), which governed how PennyMac serviced the loan. The
PSA indicated that the Borrowers’ loan was part of a pool of loans for which
PennyMac purchased the servicing rights from JP Morgan in January
2015.

At the conclusion of the evidence, the trial court denied the Borrowers’
motion for involuntary dismissal on the issue of standing. A final
judgment was entered against the Borrowers, after which the Borrowers
gave notice of appeal.

Analysis

The standard of review of whether the trial court’s factual findings are
legally sufficient to establish standing is a question of law subject to de
novo review. Elman v. U.S. Bank, N.A., 204 So. 3d 452, 454 (Fla. 4th DCA

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2016). A trial court’s factual findings are reviewed for competent
substantial evidence. Id. at 455; Jasser v. Saadeh, 91 So. 3d 883, 884
(Fla. 4th DCA 2012) (quoting Acoustic Innovations, Inc. v. Schafer, 976 So.
2d 1139, 1143 (Fla. 4th DCA 2008)) (reciting that judgment entered after
a nonjury trial is reviewed for competent, substantial evidence). “When
reviewing a judgment rendered after a nonjury trial, the trial court’s
findings of fact come to the appellate court with a presumption of
correctness and will not be disturbed unless they are clearly erroneous.”
State Tr. Realty, LLC v. Deutsche Bank Nat’l Tr. Co. Ams., 207 So. 3d 923,
925 (Fla. 4th DCA 2016) (quoting Stone v. BankUnited, 115 So. 3d 411,
412 (Fla. 2d DCA 2013)).

Because it was substituted as plaintiff after suit was filed, PennyMac
had to prove at trial that JP Morgan had standing when the initial
complaint was filed, as well as its own standing when the final judgment
was entered. Lamb v. Nationstar Mortg., LLC, 174 So. 3d 1039, 1040 (Fla.
4th DCA 2015). Throughout the proceedings below, the note was lost.
Thus, PennyMac had to prove standing and the right to enforce the note,
using section 673.3091, Fla. Stat. (2017). Section 673.3091(1)(a), requires
in part that “[t]he 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.”
(emphasis added).

Standing may be established by possession of the note specially
indorsed to the plaintiff or indorsed in blank. Peoples v. Sami II Tr. 2006-
AR6, 178 So. 3d 67, 69 (Fla. 4th DCA 2015); § 673.2031(1), Fla. Stat.
(2017) (“An instrument is transferred when it is delivered by a person other
than its issuer for the purpose of giving to the person receiving delivery the
right to enforce the instrument.”); § 673.2031(2), Fla. Stat. (“Transfer of an
instrument, whether or not the transfer is a negotiation, vests in the
transferee any right of the transferor to enforce the instrument, including
any right as a holder in due course . . . .”). A plaintiff may also prove
standing “through evidence of a valid assignment, proof of purchase of the
debt, or evidence of an effective transfer.” Stone, 115 So. 3d at 413
(quoting BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28
So. 3d 936, 939 (Fla. 2d DCA 2010)). That is because “if an instrument is
transferred for value and the transferee does not become a holder because
of lack of indorsement by the transferor, the transferee has a specifically
enforceable right to the unqualified indorsement of the transferor . . . .” §
673.2031(3), Fla. Stat.

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 In this case, the original lender and payee of the note was Chase Bank.
Although the parties make various arguments and counter-arguments
regarding standing, we perceive the critical issue to be whether sufficient
proof was presented at trial to show that Chase Bank transferred the note
to JP Morgan, the original plaintiff, prior to suit being filed.

The Borrowers contend on appeal that PennyMac failed to prove that
JP Morgan had standing to foreclose when it filed suit. More specifically,
the Borrowers argue that PennyMac did not produce substantial
competent evidence that JP Morgan was in possession of the allonge at the
inception of the case. They point out that the allonge was not attached to
the complaint when it was filed; instead, the allonge appeared at trial with
no dates of creation on its face. Moreover, PennyMac’s witness could not
offer evidence that the allonge was created or executed prior to the filing
of the complaint.

Additionally, the Borrowers argue there was no proof of transfer of the
note from Chase Bank to JP Morgan. The allonge did not contain an
indorsement from Chase Bank, and it was not signed by a representative
of Chase Bank. The assignment of mortgage entered into evidence only
transferred the mortgage and not the note. The Borrowers also assert that
the notice of transfer or sale of servicing rights was not an effective transfer
of the note.

Addressing the issue of standing at the inception of the suit, PennyMac
contends on appeal that it presented sufficient evidence to prove that JP
Morgan’s authority to enforce the note derived from its status as a non-
holder in possession of the note with the rights of a holder at the time of
the loss. PennyMac acknowledges that its contention is based on “multi-
tiered evidence” of transfer of the note by Chase Bank. It begins the
analysis with the assertion that the evidence showed that Chase Bank and
JP Morgan are “related entities.” PennyMac argues that the allonge
memorialized the transfer of the note from Chase Bank to JP Morgan. It
further asserts that to agree with the Borrowers’ position would require
the absurd inference that JP Morgan made a six-figure sale of the note to
PennyMac without authority from Chase Bank, a related entity that used
the same address in the public records.

Additionally, PennyMac argues that despite case law to the contrary,
the assignment of the mortgage alone, without the inclusion of the note,
bolsters the proof that JP Morgan had standing at the inception of the suit.
For this argument, PennyMac relies on section 701.01, Florida Statutes
(2017). Finally, PennyMac argues that the evidence of escrow advances
corroborate JP Morgan’s standing.

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 However, there are problems with PennyMac’s “multi-tiered evidence”
arguments. First, it is unclear in what way Chase Bank and JP Morgan
are “related entities.” No evidence was presented that JP Morgan and
Chase Bank merged or that Chase Bank was completely bought out by JP
Morgan. As we have made clear in the past, separate corporate entities,
even parent and subsidiary entities, are legally distinct entities. See
Wright v. JPMorgan Chase Bank, N.A., 169 So. 3d 251, 251–52 (Fla. 4th
DCA 2015) (noting a parent corporation and its wholly-owned subsidiary
are separate and distinct legal entities and a parent corporation cannot
exercise the rights of the subsidiary corporation); see also Houk v.
PennyMac Corp., 210 So. 3d 726, 734 (Fla. 2d DCA 2017) (noting a conflict
of allegations between affidavits and the complaint where the affidavits
alleged PennyMac Loan Services, LLC was the servicer and the complaint
alleged PennyMac Corp. was the servicer). There was no explicit testimony
or other evidence that Chase Bank sold or equitably transferred the note
to JP Morgan.

Additionally, PennyMac cites no case law in support of its argument
that the assignment of mortgage (without an assignment of the note)
bolsters the proof that JP Morgan had standing at the inception of the suit.
Instead, PennyMac cites to section 701.01, which provides:

Any mortgagee may assign and transfer any mortgage made
to her or him, and the person to whom any mortgage may be
assigned or transferred may also assign and transfer it, and
that person or her or his assigns or subsequent assignees may
lawfully have, take and pursue the same means and remedies
which the mortgagee may lawfully have, take or pursue for the
foreclosure of a mortgage and for the recovery of the money
secured thereby.

(emphases added). However, although the statute makes clear that an
assignee has the “same means and remedies the mortgagee may lawfully
have,” we have previously held that “[t]he mortgage follows the assignment
of the promissory note, but an assignment of the mortgage without an
assignment of the debt creates no right in the assignee.” Tilus v. AS Michai
LLC, 161 So. 3d 1284, 1286 (Fla. 4th DCA 2015) (citing Bristol v. Wells
Fargo Bank, Nat’l Ass’n, 137 So. 3d 1130, 1133 (Fla. 4th DCA 2014)); see
also Lamb, 174 So. 3d at 1041 (“A bank does not have standing to foreclose
where it relies on an assignment of the mortgage only.”). Therefore, we
disagree with PennyMac’s assertion that the assignment of mortgage
alone, without a transfer of the note, establishes that JP Morgan had
standing at the inception of the suit.

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 PennyMac’s argument that the allonge memorialized the transfer of the
note from Chase Bank to JP Morgan reveals the biggest flaw in PennyMac’s
contention that JP Morgan had standing at the inception of the suit. The
major stumbling block is that the allonge was signed by a representative
of JP Morgan, and there is no signature on the document by Chase Bank.
Section 673.2041, Florida Statutes (2017), clearly requires a signature by
the current note holder to constitute an indorsement and transfer of the
note to another payee or bearer. § 673.2041, Fla. Stat. (“The term
‘indorsement’ means a signature . . . for the purpose of negotiating the
instrument [or] restricting payment of the instrument.”). We have
previously said, “[t]o transfer a note, there must be an indorsement, which
itself must be ‘on [the] instrument’ or on ‘a paper affixed to the
instrument.’” Jelic v. BAC Home Loans Servicing, LP, 178 So. 3d 523, 525
(Fla. 4th DCA 2015)(second alteration in original)(emphasis
added)(quoting § 673.2041(1), Fla. Stat.).

Next, in support of its argument that evidence of escrow advances
corroborates JP Morgan’s standing, PennyMac cites Peuguero v. Bank of
America, N.A., 169 So. 3d 1198 (Fla. 4th DCA 2015), where we said that a
foreclosure plaintiff paying taxes and fees associated with the mortgaged
property prior to suit is “a noteworthy factor in determining standing, as
financial institutions are not known to incur expenses on behalf of
properties for which they do not hold an interest.” Id. at 1202. However,
our statement was in the context of facts where the lender originating the
loan signed an indorsement to Countrywide Bank, the entity which filed
the foreclosure suit. Id. at 1200. After suit was filed, Bank of America
was substituted as plaintiff on the contention that Countrywide Bank
merged into Bank of America. Id. In other words, we viewed the evidence
of advanced fees as corroboration of more direct evidence of transfer of the
note. Id. at 1202. We never held that such evidence, standing alone,
would be sufficient to establish standing. In this case, there is no other
more direct evidence of a transfer of the note for the evidence of the escrow
advances to corroborate.

Finally, the remaining testimonial and documentary “multi-tiered
evidence” discussed in PennyMac’s brief does not demonstrate that JP
Morgan had standing at the inception of the suit. As discussed above,
neither of PennyMac’s witnesses directly testified about the transfer of the
note from Chase Bank to JP Morgan. Instead, the witness testimony
referred a few times to Chase Bank and JP Morgan as “Chase entities.”
Likewise, the notice of sale and transfer of servicing rights, loan acquisition
screenshots, and lost note affidavit do not constitute direct or
circumstantial evidence of the transfer of the note from Chase Bank to JP
Morgan.

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 Although we agree with PennyMac that the evidence proved that JP
Morgan had possession of the note when the note was lost and prior to
suit being filed, PennyMac failed to prove that prior to suit, Chase Bank
had indorsed the note over to JP Morgan. Thus, we conclude that
PennyMac failed to prove that JP Morgan had standing at the inception of
the suit. Therefore, we reverse the final judgment in favor of PennyMac
and direct the trial court to enter a judgment in favor of the Borrowers.

Reversed and remanded.

WARNER and FORST, JJ., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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