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May v. PHH Mortg. Corp.
Factual and Procedural Background
On April 11, 2008, PHH Mortgage Corporation (the bank) filed a two-count complaint against Susan M. May seeking foreclosure and an action to recover or reestablish a lost note. The complaint included a copy of the note and mortgage, which bore the name of the original lender, Bank Atlantic, and lacked endorsements or evidence of transfer to the bank. May answered, denying the bank's ownership or possession of the note. Subsequently, the bank filed a second copy of the note containing two undated endorsements, one to the bank and one blank. At trial, the bank introduced this second copy and other evidence but did not demonstrate possession of the note at the time the complaint was filed. May moved for involuntary dismissal after the bank rested, arguing the bank lacked standing at suit inception. The trial court denied the motion and entered a final judgment of foreclosure in favor of the bank. May appealed.
Legal Issues Presented
- Whether PHH Mortgage Corporation demonstrated it possessed the note at the time it filed the foreclosure complaint, thereby establishing standing.
- Whether the trial court erred in denying May's motion for involuntary dismissal based on the bank's alleged failure to prove standing at the inception of the lawsuit.
Arguments of the Parties
Appellant's Arguments
- The bank failed to prove it possessed the note at the time the complaint was filed, as the original complaint attached a note without endorsements or transfer evidence.
- The second copy of the note with endorsements was filed over seven months after the complaint and could not retroactively establish standing.
- After the bank rested, it could not introduce additional evidence to prove possession at suit inception.
- Therefore, the bank lacked standing, and the trial court should have granted an involuntary dismissal.
Appellee's Arguments
- The bank argued it could present evidence that it possessed the note before filing the lawsuit.
- However, the bank did not request to reopen its case to introduce such evidence after resting.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Capital Media, Inc. v. Haase, 639 So.2d 632, 633 (Fla. 2d DCA 1994) | Trial court must determine if plaintiff has made a prima facie case when ruling on a motion for involuntary dismissal. | The court applied this to assess whether the bank presented competent substantial evidence to establish a prima facie case. |
| State, Dep't of Health & Rehabilitative Servs. ex rel. Williams v. Thibodeaux, 547 So.2d 1243, 1244 (Fla. 2d DCA 1989) | Standard for denying a motion for involuntary dismissal requires competent substantial evidence supporting the plaintiff’s case. | The court relied on this standard to evaluate the sufficiency of the bank's evidence on standing. |
| Khan v. Bank of Am., N.A., 58 So.3d 927, 928 (Fla. 5th DCA 2011) | To have standing to foreclose, the plaintiff must prove it holds the note and mortgage. | The court emphasized that standing must be demonstrated by possession of the note and mortgage at the time the complaint was filed. |
| Focht v. Wells Fargo Bank, N.A., 124 So.3d 308, 310 (Fla. 2d DCA 2013) | Standing to foreclose may be established by submitting a note with endorsement(s), assignment, or affidavit proving holder status, but standing must exist at complaint filing. | The court held the bank failed to show possession of the endorsed note at suit inception, thus lacking standing. |
| Wolkoff v. Am. Home Mortg. Servicing, Inc., 2014 WL 2378662, 39 Fla. L. Weekly D1159 (Fla. 2d DCA May 30, 2014) | Failure to prove a prima facie case warrants dismissal. | The court cited this to support reversal and remand for involuntary dismissal due to lack of standing evidence. |
| Allard v. Al–Nayem Int'l, Inc., 59 So.3d 198, 201 (Fla. 2d DCA 2011) | Standard for involuntary dismissal and prima facie case evaluation. | Used to reinforce the conclusion that the bank did not meet its burden to prove standing. |
Court's Reasoning and Analysis
The court examined the evidence presented by the bank and found it insufficient to establish standing at the time the foreclosure complaint was filed. Although the bank attached a copy of the note and mortgage to the complaint, these documents lacked endorsements or any indication of legal transfer. The second copy of the note with endorsements was filed months later and could not retroactively establish standing. The bank's sole witness did not testify to possession of the note at suit inception or servicing of the mortgage. After the bank rested, May moved for involuntary dismissal on the basis that the bank failed to prove standing. The court referenced Florida Rule of Civil Procedure 1.420(b), which permits dismissal if the plaintiff has not made a prima facie case, and relevant case law requiring standing to be established at the time of filing. Because the bank did not present competent substantial evidence of possession of the note at the complaint’s inception, the court concluded the bank lacked standing. Consequently, the trial court erred in denying the motion for involuntary dismissal.
Holding and Implications
The court REVERSED AND REMANDED the final judgment of foreclosure and directed the trial court to enter an order of involuntary dismissal due to the bank's failure to establish standing at the time the complaint was filed.
The direct effect of this decision is the dismissal of the foreclosure action against Susan M. May. The opinion does not establish new precedent beyond reinforcing the requirement that standing must be proven at suit inception by possession of the note and mortgage.
SLEET
Reversed and remanded.
Peter Ticktin, Josh Bleil, Kendrick Almaguer and Satyen Gandhi of The Ticktin Law Group, P.A., Deerfield Beach, for Appellant. Elizabeth T. Frau and Rhonda K. Lewis of Ronald R. Wolfe and Associates, P.L., and Roberta Kohn of Roberta Kohn, P.A., Tampa, for Appellee.
Susan M. May appeals a final judgment of foreclosure entered in favor of PHH Mortgage Corporation (the bank) following a nonjury trial. May argues that the bank failed to demonstrate that it possessed the note at the time it filed the complaint. We agree. Because we hold that the bank lacked standing, we decline to address the remaining issue in this appeal.
On April 11, 2008, the bank filed a two count complaint against May for foreclosure and an action to recover or reestablish a lost note. Attached to the complaint was a copy of the note and mortgage. The note and mortgage had the name of the first mortgagor, Bank Atlantic, on the documents and did not contain an endorsement in blank or any indicia of legal transfer to the bank. May filed an answer and defenses which alleged that the bank did not own or possess the note. On December 8, 2008, the bank filed a copy of the original note and mortgage which contained two endorsements. One was an undated endorsement to the bank and the other was an undated, blank endorsement.
During trial, the bank submitted the second copy of the note into evidence. Its only witness, a senior litigation specialist, confirmed that the note was signed by May with the original lender and that there was a blank endorsement on the note. The bank also introduced into evidence the original mortgage, the payment history of the loan, and a copy of the default notice letter. The witness did not testify that the bank owned or possessed the note at the time the complaint was filed or that the bank serviced the mortgage.
At the end of the bank's case, counsel for May moved for an involuntary dismissal and argued that the bank failed to prove that it had standing at the inception of the lawsuit. May argued that the first copy of the note and mortgage attached to the complaint in April 2008 and the second copy of the note, which had a blank endorsement and was filed over seven months after the complaint, failed to prove that the bank had standing at the suit's inception. She asserted that the bank had rested and could no longer introduce evidence of when the bank came into possession of the note and mortgage. The bank responded that it could present evidence that it was in possession of the note before filing the lawsuit but did not request to reopen its case. The trial court denied May's motion and entered a final judgment of foreclosure.
Florida Rule of Civil Procedure 1.420(b) provides that “[a]fter a party seeking affirmative relief in an action tried by the court without a jury has completed the presentation of evidence, any other party may move for a dismissal on the ground that on the facts and the law the party seeking affirmative relief has shown no right to relief.” When confronted with a motion for involuntary dismissal, the trial court must determine whether or not the plaintiff has made a prima facie case. Capital Media, Inc. v. Haase, 639 So.2d 632, 633 (Fla. 2d DCA 1994). May's motion for involuntary dismissal could only have been denied if the court found that the bank presented competent substantial evidence to establish a prima facie case. State, Dep't of Health & Rehabilitative Servs. ex rel. Williams v. Thibodeaux, 547 So.2d 1243, 1244 (Fla. 2d DCA 1989).
A party seeking to foreclose on a note and mortgage must prove that it has standing to do so. To have standing to foreclose, the plaintiff must demonstrate that it holds the note and mortgage in question. See Khan v. Bank of Am., N.A., 58 So.3d 927, 928 (Fla. 5th DCA 2011). “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.” Focht v. Wells Fargo Bank, N.A., 124 So.3d 308, 310 (Fla. 2d DCA 2013). However, standing must be established at the time the complaint was filed. Id. Thus, the bank needed to introduce evidence that it was in possession of the original note with the blank endorsement at the time it filed the complaint. Id. at 310–11. The bank failed to do so; none of the evidence adduced at trial demonstrated when, if at all, the bank came into possession of the note.
The bank's failure to prove a prima facie case warrants dismissal. See Fla. R. Civ. P. 1.420(b); Wolkoff v. Am. Home Mortg. Servicing, Inc., ––– So.3d ––––, 2014 WL 2378662, 39 Fla. L. Weekly D1159 (Fla. 2d DCA May 30, 2014); Allard v. Al–Nayem Int'l, Inc., 59 So.3d 198, 201 (Fla. 2d DCA 2011). Accordingly, we reverse and remand with directions for the trial court to enter an order of involuntary dismissal.
Reversed and remanded. WALLACE, J., and RICE, ELIZABETH G., Associate Judge, Concur.
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