Standing in foreclosure cases continues to be a hot issue in Florida’s appellate courts. It seems like a week doesn’t go by without an opinion that reminds lenders what they need to do to establish standing to foreclose a mortgage.

This week, Florida’s Fourth District Court of Appeal issued two opinions discussing foreclosure standing. Both resulted in reversal of a foreclosure judgment.

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In the first case, the lender sought to establish standing as a “holder” of the note. The Court found, however, that the lender’s evidence at trial did not establish standing at the time the complaint was filed.  Because the note was not made payable to the lender and did not contain either a special endorsement in favor of the lender or a blank endorsement, standing was not established.  A blank endorsement on the original note that was dated after the complaint was filed and an assignment dated after suit was filed were both found to be insufficient.

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In the second case, the original note was not presented at trial. The Court again found that the plaintiff failed to prove that it was the holder of the note when the complaint was filed.  The plaintiff’s failure to offer evidence as to when the allonge was attached to the note or when the endorsement occurred ultimately doomed the lender’s case.  The absence of proof that the plaintiff had possession of the note when the case was filed also prevented a finding that it was entitled to enforce it as a lost instrument.

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Florida appellate courts continue to take a hard-line view of foreclosure standing. These rulings are a reminder to lenders to “Think about the place where [your note’s] been,” but makes you “Wonder why [they] haven’t before.”


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

 

It looks like standing is the flavor of the month in foreclosure defense and the issue that lenders need to make sure that they are addressing at trial. Two recent Florida appellate court decisions highlight this issue.

Assignment of Note

In Michael Sorrell v. U.S. Bank National Association, Fla. 2d DCA Case No. 2D14-3883 (Apr. 6, 2016), Florida’s Second District Court of Appeal reversed a final judgment of foreclosure based upon a finding that the lender’s “evidence was legally insufficient to prove that it had standing when it filed the Complaint.”  The note that was attached to the complaint (which was payable to the original lender, was not endorsed, and did not include an allonge) and the mortgage that was attached to the complaint were both in favor of the original lender.  The plaintiff filed an amended complaint with an assignment of the mortgage attached, but no additional documents related to the note, and the borrower asserted a defense of lack of standing.  The plaintiff then filed the original note and mortgage and a copy of the assignment of mortgage, along with an undated allonge, which was a separate document from and not affixed to the note.  No testimony or documentary evidence was offered at trial to establish the date that the plaintiff acquired the note and mortgage; specifically, that the plaintiff owned and held the note and mortgage on the date that the case was filed.  Similarly, no evidence was presented to prove when the allonge was created, signed or attached (if it ever was) to the note.  The trial court entered final judgment of foreclosure, but the appellate court reversed because the plaintiff had not established that it had standing to foreclose on the date that the complaint was filed.  The lack of documentary and testamentary evidence doomed the plaintiff’s case and the 2d DCA remanded with instructions for the trial court to dismiss the case.

Similarly, Florida’s Fourth District Court of Appeal reversed and remanded with instructions to enter judgment in favor of the borrowers in Susan Elman and Bruce Elman v. U.S. Bank, N.A., 4th DCA Case No. 4D14-2520 (Apr. 6, 2016).  In Elman, the plaintiff sought to enforce, as the “holder”, a note with an undated special endorsement allonge.  However, the note and the allonge referenced different loan numbers.  At trial, the plaintiff was not able to establish the date that the allonge was affixed to the original note and other evidence made it, at best, unclear as to who possessed the note when the complaint was filed.  The 4th DCA relied on the proposition that a plaintiff that is seeking to enforce a note, but is not the original payee, must “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.”  In Elman, the appellate court found that endorsement and allonge were undated and the evidence at trial did not establish that the plaintiff possessed the original note with the allonge affixed thereto as of the date that the complaint was filed.  Accordingly, the 4th DCA found that the plaintiff failed to prove that it had standing to foreclose.

Trial

These cases and others like them stand as a stark reminder to lenders of the importance of presenting sufficient evidence at trial to prove that they had standing at the time that they filed their foreclosure actions. When a lender seeks to enforce a note and mortgage to which it is not the original payee pursuant to an undated endorsement or allonge, it is crucial that it present evidence establishing that it had the right to enforce that note at the time that it filed its complaint.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

Judge Lorna Schofield has agreed to stay a Fair Credit Reporting Act case until the U.S. Supreme Court issues its highly anticipated ruling in Robbins v. Spokeo, Inc. By entering a stay in Ernst v. Dish Network, LLC, S.D. N.Y. Case No. 12-Civ-8794 (LGS), the Southern District of New York joins several other courts that have agreed to put FCRA cases on hold.  Judge Schofield found that the Spokeo ruling would “likely clarify whether or not the named Plaintiffs and potential class members in [Dish Network] have Article III standing.”  The key issue in Spokeo is whether a mere violation of FCRA, without any alleged concrete harm, is sufficient to confer standing.  Judge Schofield found that the interests of the Court and the public are better served by staying Dish Network and that the potential prejudice in doing so would be minimal.

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The Southern District of New York joins U.S. District Courts from the District of New Jersey, the Northern and Eastern Districts of California, the Middle and Western Districts of Pennsylvania, and the Northern District of Ohio in deciding to take a “wait and see” approach in FCRA cases until the Supreme Court rules in Spokeo.  One notable exception is the Western District of Missouri, which denied a request for stay in Woods v. Caremark PHC, LLC, W.D. Mo. Case No. 4:15-cv-00535-SRB.  However, the Caremark court did base its decision on a case involving a Telephone Consumer Protection Act claim.

Copyright: flippo / 123RF Stock Photo
Copyright: flippo / 123RF Stock Photo

The Southern District of Florida has not addressed this specific issue yet, but if Judge Marcia Cooke’s ruling in Boise v. ACE USA, Inc., S.D. Fla. Case No. 15-Civ-21264-Cooke/Torres, is any indication, it would appear that this Court would also be receptive to staying a FCRA case until a ruling is issued in Spokeo.  Judge Cooke, after considering the anticipated brevity of the delay, the lack of prejudice to the plaintiff, and the potentially wasted time, expense and resources, stayed Boise, which involved claims under TCPA, based upon the fact that Spokeo may be dispositive of whether the plaintiff in that case has Article III standing.

The willingness of so many courts to stay FCRA (and even some TCPA) cases is just another indication of the broad impact that the Spokeo ruling is likely to have.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

Recently, the United State Eleventh Circuit Court of Appeals ruled that an Americans with Disability Act (“ADA”) Plaintiff had standing to bring his ADA access complaint as a “tester”.

Joe Houston, a Florida resident who is paralyzed and confined to a wheelchair, has filed more than 270 ADA access lawsuits both in the Southern District of Florida and the Middle District of Florida.

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Defendant Marod, the owner of a Presidente supermarket targeted by Mr. Houston, in its Motion to Dismiss argued that Houston’s professed intent to return to this particular grocery store was undermined by his filings in the other 270+ cases that he filed.  Specifically, one can only patronize so many businesses, so if Mr. Houston planned to imminently return to all the other locations identified in his other ADA access lawsuits, his plan to return to this particular business was not credible.  Furthermore, Marod argued that Mr. Houston could not demonstrate any threat of imminent discrimination since Mr. Houston lived in Broward County and this store was located 30 miles away and Mr. Houston had not indicated when his prior visits to the store had occurred or mentioned any “concrete” plans to return.

But, Mr. Houston countered with an affidavit in response to the Motion to Dismiss in which he produced a receipt purporting to show that he had shopped at this particular store.  Further, the affidavit noted that Mr. Houston regularly passed this particular grocery store in his travels because it is located only two (2) miles from, and is on the route, to the law firm that represents him in his various ADA access cases.

The district court applied a four-factor test to determine the likelihood that Mr. Houston would return to this particular store.  The four (4) factors were: (1) the proximity of the business to Plaintiff’s residence; (2) the Plaintiff’s past patronage of the business; (3) the definiteness of the Plaintiff’s plan to return; and (4) the frequency of Plaintiff’s travel near the defendant’s business.  While the district court did not question that Mr. Houston had visited this supermarket in the past and planned to do so in the future, it focused on the fact that Mr. Houston was an ADA tester.  And therefore, the district court found that because Mr. Houston was a tester, he was not a bona fide patron and further that his test visits were part of a testing campaign rather than a genuine prayer for relief by an aggrieved patron.

The Eleventh Circuit, in its review, focused on whether Mr. Houston’s tester motive and tester status deprived him of standing to sue for ADA access violations. First, the Court noted that the Supreme Court has recognized the tester standing under the Fair Housing Act.  Second, the Court also found that the fact that Mr. Houston’s motives were based on testing did not negate the fact that he had a right to the “full and equal enjoyment of the . . . facilities” of the Presidente Supermarket.  That legal right was not dependent on his motives.

Accordingly, the Eleventh Circuit found that Mr. Houston had standing to seek redress under the ADA access statutes regardless of his tester motives.  However, because Mr. Houston sought injunctive relief in his lawsuit he also had to show a real and immediate threat of future injury.  And, the Court found that the proximity of the store to his attorney’s office, the fact that he traveled by the store on a regular basis and his stated intent to return, were sufficient to show the threat of future injury.

This opinion will likely limit the ability of Florida businesses to attack a plaintiff’s standing based on tester status.  But, the Eleventh Circuit reiterated that there must be sufficient facts that show threat of future injury noting that Mr. Houston did “not live hundreds of miles away from the store with no particular reason to return.”

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Dori K. Stibolt is a senior associate with the law firm of Fox Rothschild LLP. Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims. You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.