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Florida Banking Law Blog Legal developments impacting banking, finance and loan enforcement in Florida


Posted in Foreclosure

Just when you thought it was safe to bring a foreclosure lawsuit, a recent Second District Court of Appeal opinion illustrates the harsh result of lack of standing. As you recall from prior blog articles, “standing” refers to a party’s legal right to maintain a lawsuit. In the context of mortgage foreclosures, a lender’s standing can be derived from possessing the original promissory note secured by the subject mortgage. Several recent Florida cases have further held that the lender must be the note holder prior to filing the foreclosure lawsuit and that lack of standing cannot be remedied after the lawsuit is commenced. The typical result of lack of standing is the dismissal of the foreclosure action, leaving the lender to satisfy the standing requirements while frequently facing statute of limitations issues.

In Creadon v. U.S. Bank N.A., the Court considered a case that was filed by the first assignee of the original lender. The case proceeded for some time, during which time the plaintiff had filed the original promissory note with the trial court. Nearly two years after the case was filed, the note and mortgage were apparently assigned to U.S. Bank who was then substituted as plaintiff in the case and quickly prevailed on the foreclosure action after a bench trial. Standing was an issue on appeal and the Second DCA ruled that U.S. Bank had sought to prove standing by claiming it was the holder of the original note. However, since the original note was in the trial court’s possession, U.S. Bank could not have been in possession of the note and therefore did not prove standing. The trial court was reversed and the case directed to be dismissed. A harsh result indeed!

The takeaway is that, when claiming standing as the holder of the note, there is no substitute for possession of the original promissory note. As well, standing needs to be evaluated after each transfer of the instrument in question. In this case, the original plaintiff had standing but the issue arose again when U.S. Bank acquired the note and mortgage and was substituted into the case as the new plaintiff. The best practice would have been for the original plaintiff to recover possession of the original note from the trial court, assign the note and mortgage to U.S. Bank, deliver possession of the original note to U.S. Bank along with the assignment, and thereafter file a motion to substitute U.S. Bank as a plaintiff in the case. Lesson learned!