Rogers Towers, P.A. welcomes you to its Florida Banking Law Blog! A product of the firm’s Banking and Financial Services Practice Group, the blog will serve as a convenient way for us to share our expertise in banking-related legal issues. We represent banks and other providers of financial services in a broad range of matters throughout the state of Florida. As a result of our significant experience, we will have much to share in the upcoming blog posts and we hope that you will find these posts to be informative and beneficial to you in your respective positions in the industry. We appreciate your interest in the field and in Rogers Towers, P.A., and we look forward to your comments in response to our blog.
As we have previously discussed, under Florida law, in a foreclosure action, a lender must either provide the original promissory note or, if the note was lost, stolen, or destroyed, follow the statutory procedure for reestablishing a lost note. However, as a recent decision from the Fourth District Court of Appeal highlights, if a note has been modified, it is the original modified promissory note that must be entered into evidence as the operative note.
In Rattigan v. Central Mortgage Company, the bank introduced the original promissory note in connection with its foreclosure action. The original note capped the principal balance owed. However, at trial, the testimony revealed that the loan had been modified, and a modified note had been executed which raised or eliminated the cap. The bank failed to introduce the original modified note into evidence, but, on the basis of trial testimony, obtained a foreclosure judgment for the higher principal balance.
The appellate court reversed the foreclosure judgment, holding that the bank was proceeding under a different note—the modified note—and thus violated the best evidence rule by failing to introduce the original modified note. The court held that testimony regarding the modification should not have been permitted absent the introduction of the modified note itself. Accordingly, the case was remanded for the entry of an involuntary dismissal.
This opinion serves as a reminder to lenders that where a note has been modified, the original modified note, as the operative promissory note, must be introduced or reestablished in order to proceed with foreclosure.
In Florida, a plaintiff seeking to foreclose a mortgage must have “standing” to foreclose the mortgage as of the date it files its foreclosure complaint. That is, if the plaintiff is not the original lender, it must establish that the promissory note and mortgage had been assigned to it prior to or as of the time the lawsuit was filed. Where the complaint fails to demonstrate that a purported assignee has standing to enforce the loan documents, trial courts are directed to dismiss the purported assignee’s complaint. Until recently, no Florida court had addressed whether, after a foreclosure action is dismissed for lack of standing, the same lender may bring a subsequent action based on the same default.
On January 29, 2016, in an appeal handled by Rogers Towers, P.A., the Fifth District Court of Appeal held that the same lender was not barred from bringing a subsequent action after a dismissal for lack of standing. Recognizing that the action presented an issue that did not “appear to have been previously addressed in Florida,” the Fifth DCA cited to decisions from various other jurisdictions explaining that dismissal of a foreclosure action for lack of standing is not an “adjudication on the merits” and had no effect on the underlying duties, rights, or obligations of the parties. Accordingly, even if an assignee fails to establish standing at the time it filed its first foreclosure action, it will not be barred from re-filing its complaint with sufficient evidence of standing.
 E.g., Focht v. Wells Fargo Bank, N.A., 124 So. 3d 308, 310 (Fla. 2d DCA 2013) (“[S]tanding must be established as of the time of filing the foreclosure complaint.”).
 Id. (“A plaintiff who is not the original lender may establish standing to foreclose a mortgage loan by submitting a note with a blank or special endorsement, an assignment of the note, or an affidavit otherwise proving the plaintiff’s status as the holder of the note.”)
 See Tomlinson v. GMAC Mortg., 173 So. 3d 1121, 1123 (Fla. 2d DCA 2015).
 Brown v. M & T Bank, No. 5D15-1397, 2016 WL 347183, at *1 (Fla. 5th DCA Jan. 29, 2016).
In a win for creditors, the Supreme Court of the United States has taken an expansive view of the type of fraud that will prevent a debtor from discharging his debts in bankruptcy. The Court’s decision in Husky International Electronics, Inc. v. Ritz settles a circuit split over whether the Bankruptcy Code prohibits debtors from discharging debts obtained by purposeful concealment where the debtor does not make a misrepresentation to the creditor.
The facts of Husky center on an individual who served as the director and part owner of the debtor corporation. The corporation owed the plaintiff creditor nearly $164,000. Instead of paying the debts, the director transferred large sums of cash from the corporation to other entities he controlled. The plaintiff attempted to hold the director personally liable for the corporation’s debts which resulted in the director filing for Chapter 7 bankruptcy protection.
In bankruptcy, debtors are prohibited from discharging debts “obtained by . . . false pretenses, a false representation, or actual fraud.” 11 U.S.C. § 523(a)(2)(A). The director argued that because he did not make any misrepresentations the conveyances did not rise to the level of “actual fraud.”
In reversing the Fifth Circuit, the Supreme Court noted that the phrase “actual fraud” had been added by amendment to the existing terms constituting prohibited conduct, and its meaning is not limited to the same misconduct proscribed by the other two. The Court held that actual fraud can be effectuated without an affirmative misrepresentation. The Court held that actual fraud may occur not just “when a person applying for credit adds an extra zero to her income or falsifies her employment history” but can result from the transfer of property made to evade payment.
This decision should be well received by creditors as the prohibition on discharging debt due to actual fraud applies to Chapters 7, 11, 12, and 13.