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Docket Number

No. 4D11–3151.

Attorney(S)

Mitchell W. Berger and Anthony J. Carriuolo of Berger Singerman, P.A., Fort Lauderdale, for appellant. Joseph E. Foster and Carrie Ann Wozniak of Akerman Senterfitt, Orlando, and Joan Levit of Akerman Senterfitt, Fort Lauderdale, for appellee.

Judges

POLEN

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Smart Summary

Elston/Leetsdale, LLC v. CWCapital Asset Management LLC — District Court of Appeal of Florida, Fourth District (2012)

Factual and Procedural Background

Elston/Leetsdale, LLC (Elston) executed a promissory note, mortgage and related security instruments to secure a loan made by First Union National Bank. First Union assigned its rights to Morgan Guaranty Trust Company of New York, which in turn assigned its rights to State Street Bank and Trust Company as Trustee for the J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2001–C1BC1 (the trust). The trust is the current owner and holder of the loan documents at issue.

CWCapital Asset Management LLC (CW), acting as special servicer for the trust, filed a verified complaint in its own name to foreclose, alleging Elston's default and acceleration of the loan. The trial court ordered Elston to show cause why payments should not be made during the pendency of the foreclosure action. Elston moved to dismiss, contending CW had not properly alleged standing. CW contended it had standing as the duly authorized special servicer. After a hearing (the transcript of which is not part of the record on appeal), the trial court entered an order requiring Elston to make monthly payments of $42,404.91 to CW during the pendency of the action. Elston appealed the non-final payment order.

Legal Issues Presented

Whether CW properly pleaded and supported standing to prosecute the foreclosure action and to obtain a payment order while the foreclosure was pending.
Whether CW was required to register as a commercial collection agency or as a licensed mortgage broker under Chapters 559 and 494, Florida Statutes.

Arguments of the Parties

Appellant's (Elston) Arguments

The trial court erred by ordering Elston to make payments to CW because CW failed to properly allege standing to pursue the foreclosure and to obtain the payment order.

Appellee's (CW) Arguments

CW argued that Elston did not furnish a sufficient record for appellate review because the transcript of the payment order show cause hearing was not included and no stipulated statement of the hearing was proposed; therefore, CW contends the order must be affirmed.
On the merits, CW argued it had standing to foreclose and to prosecute the action because it was duly authorized by the trust to act as the trust's agent and special servicer.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
FCD Dev., LLC v. S. Fla. Sports Comm., Inc., 37 So.3d 905 (Fla. 4th DCA 2010)	States that whether a party has standing is a question of law reviewed de novo.	The court invoked this case to explain standard of review for standing (de novo).
Westport Recovery Corp. v. Midas, 954 So.2d 750 (Fla. 4th DCA 2007)	Quoted in FCD Dev. regarding de novo review of standing.	Used as supporting authority for the de novo standard on standing.
Kumar Corp. v. Nopal Lines, Ltd., 462 So.2d 1178 (Fla. 3d DCA 1985)	Explains standing as having a sufficient stake and discusses real party in interest rule permitting action by one acting for the real party in interest.	The court relied on Kumar for the real party in interest rule and that an agent may sue on behalf of the real party in interest if authorized.
Sierra Club v. Morton, 405 U.S. 727 (1972)	Quoted for the general definition of standing as having a sufficient stake in a controversy.	Used as an authoritative source for the definition of standing cited in Kumar.
Mortgage Elec. Registration Sys., Inc. v. Azize, 965 So.2d 151 (Fla. 2d DCA 2007)	States that standing in mortgage foreclosure context is broader than actual ownership of the beneficial interest in the note and that Rule 1.210(a) permits actions prosecuted by someone acting for the real party in interest.	Used to explain that a plaintiff can be the real party in interest or act on behalf of the real party in interest and thereby have standing.
BAC Funding Consortium Inc. v. Jean–Jacques, 28 So.3d 936 (Fla. 2d DCA 2010)	States the proper party with standing to foreclose is the holder of the note and mortgage or the holder's representative.	Cited to support the proposition about who is the proper party to foreclose.
In re Rosenberg, 414 B.R. 826 (Bankr. S.D. Fla. 2009)	In securitization cases, a servicer may commence legal action as a party in interest only if the trustee joins or ratifies its action.	Court relied on this principle to explain circumstances where a servicer may act for the trust.
CWCapital Asset Management, LLC v. Chicago Properties, LLC, 610 F.3d 497 (7th Cir. 2010)	Holds that CW had standing as special servicer where an uncontradicted affidavit of the trustee ratified the servicer's commencement of the lawsuit and the pooling and servicing agreement was in evidence showing authority.	Used as an example where CW had standing because the trustee ratified the suit and documentary evidence showed authority; court contrasted that proof with the present case.
Juega v. Davidson, 8 So.3d 488 (Fla. 3d DCA 2009)	Reversed dismissal for lack of standing where the agent was shown by affidavit of the real party in interest to have been granted full authority and ratification to act on the principal's behalf.	Cited as a case relied upon by the trial court; used to illustrate that agent-plaintiffs may have standing when there is evidence (affidavit) of authority from the principal.
Fla. R. Civ. P. 1.210(a)	Provides that actions may be prosecuted in the name of the real party in interest, and certain representatives or authorized parties may sue in their own names without joining the beneficiary.	Applied to explain the real party in interest rule and circumstances permitting an agent to sue on behalf of the real party in interest.

Court's Reasoning and Analysis

The court began with the legal standard that whether a party has standing is a question of law reviewed de novo. It reviewed the real party in interest rule (Fla. R. Civ. P. 1.210(a)) and decisions explaining standing in the foreclosure/securitization context, noting that standing in foreclosure cases can be broader than mere ownership of the note and that an agent may prosecute an action on behalf of the real party in interest when properly authorized.

The court examined securitization-specific authorities explaining that a servicer may act for a trust only when the trustee joins or ratifies the action or when evidence (such as an affidavit of the trustee or the pooling and servicing agreement) establishes that the servicer was authorized to bring suit. The court relied on CWCapital v. Chicago Properties and Juega v. Davidson to illustrate that courts have found standing where there was uncontradicted evidence—typically an affidavit or comparable proof—from the trustee or principal ratifying the servicer/agent's authority.

Applying those principles to the record before it, the court observed that CW's verified complaint alleged CW was "duly authorized by the Trust to prosecute this action as agent and special servicer for the Trust." However, CW did not submit any evidence—such as an affidavit from the trust, the trustee's ratification, or other documents—demonstrating actual authorization. Instead, CW relied solely on its own allegations and a verification by a CW SVP. Because the cases the court relied upon showed that independent evidence of authorization by the real party in interest (the trust) was furnished in situations where standing was upheld, the court concluded CW's self-authentication was insufficient to establish standing.

The court further addressed CW's procedural argument that the absence of a hearing transcript required affirmance; the court rejected that argument, finding the issues could be decided on the merits without the transcript. Finally, the court affirmed the trial court's determination on a separate issue that CW was not required to register as a commercial collection agency or as a licensed mortgage broker under Chapters 559 and 494, Florida Statutes.

Holding and Implications

REVERSED AND REMANDED.

Holding: The court reversed the trial court's non-final payment order because CW failed to properly plead or support standing to prosecute the foreclosure action on behalf of the trust. The court remanded for further proceedings consistent with its opinion.

Implications: The direct consequence of the decision is that the payment order requiring Elston to make monthly payments of $42,404.91 to CW during the pendency of the action was reversed. The court did not establish a new rule beyond applying existing authorities: it reaffirmed that, in securitization contexts, a servicer seeking to act in its own name must provide evidence (for example, a trustee's affidavit or comparable documentation) demonstrating the servicer's authority or ratification by the trustee. The opinion also affirmed that CW was not required to register under Chapters 559 and 494; no broader precedent beyond the court's application of existing authorities was announced.

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ELSTON/LEETSDALE, LLC, a Delaware limited liability company, Appellant, v. CWCAPITAL ASSET MANAGEMENT LLC, solely in its capacity as Special Ser

POLEN

Mitchell W. Berger and Anthony J. Carriuolo of Berger Singerman, P.A., Fort Lauderdale, for appellant. Joseph E. Foster and Carrie Ann Wozniak of Akerman Senterfitt, Orlando, and Joan Levit of Akerman Senterfitt, Fort Lauderdale, for appellee.
POLEN, J.

Elston/Leetsdale, LLC (Elston) appeals the trial court's non-final order, requiring it to make payments to CWCapital Asset Management LLC, solely in its capacity as special servicer on behalf of U.S. Bank, N.A., successor to State Street Bank and Trust Company, as trustee for the Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Corp., Mortgage Pass–Through Certificates, Series 2001–C1BC1 (CW) during the pendency of the action. Because CW did not properly plead standing, we reverse.

The facts are as follows. Elston executed a promissory note as evidence of a loan made by First Union National Bank; to secure payment, Elston executed a mortgage and security agreement, along with an assignment of leases and rents. First Union assigned its rights in the loan documents to Morgan Guaranty Trust Company of New York, which then assigned its right, title and interest in the loan to State Street Bank and Trust Company, as Trustee for J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2001–C1BC1 (the trust). Presently, the trust is the current owner and holder of all the loan documents subject to this appeal.

CW, the special servicer for the trust, filed a verified complaint, in its own name, for foreclosure. The complaint alleged that Elston defaulted on the loan, and the trust elected to accelerate and declare immediately due and owing the entire unpaid principal balance together with accrued interest. In response to CW's motions, the trial court ordered Elston to show cause as to why payments should not be made during the pendency of the foreclosure action. Elston then moved to dismiss the complaint, arguing that CW failed to properly allege standing to pursue enforcement of the security instruments. CW argued that it had standing to bring the foreclosure action because it is duly authorized by the trust to do so and, as special servicer for the loan, it is entitled to take all required action to protect the interests of the trust. After a hearing, the trial court entered a payment order, requiring Elston to pay CW $42,404.91 per month during the pendency of the action. This appeal followed.

The transcript of the payment order show cause hearing is not part of the record on appeal.

Elston argues that the trial court erred by ordering it to make payments to CW because CW failed to properly allege standing. CW argues that Elston has not furnished a sufficient record for this court to review the trial court's ruling. On the merits, CW argues that, as agent and special servicer to the trust, which owns the loan documents at issue, it has standing to foreclose.

CW argues that because the payment order show cause hearing was not transcribed and because Elston has not proposed a stipulated statement of what occurred at the hearing, this court must affirm. We disagree, as the issues raised in this appeal can be decided on the merits without the transcript of the hearing.

“Whether a party is the proper party with standing to bring an action is a question of law to be reviewed de novo.” FCD Dev., LLC v. S. Fla. Sports Comm., Inc., 37 So.3d 905, 909 (Fla. 4th DCA 2010) (quoting Westport Recovery Corp. v. Midas, 954 So.2d 750, 752 (Fla. 4th DCA 2007)).

Every action may be prosecuted in the name of the real party in interest, but a personal representative, administrator, guardian, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party expressly authorized by statute may sue in that person's own name without joining the party for whose benefit the action is brought.
Fla. R. Civ. P. 1.210(a). “In its broadest sense, standing is no more than having, or representing one who has, ‘a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy.’ ” Kumar Corp. v. Nopal Lines, Ltd., 462 So.2d 1178, 1182 (Fla. 3d DCA 1985) (quoting Sierra Club v. Morton, 405 U.S. 727, 731, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972)).

In the mortgage foreclosure context, “standing is broader than just actual ownership of the beneficial interest in the note.” Mortgage Elec. Registration Sys., Inc. v. Azize, 965 So.2d 151, 153 (Fla. 2d DCA 2007). “The Florida real party in interest rule, Fla. R. Civ. P. 1.210(a), permits an action to be prosecuted in the name of someone other than, but acting for, the real party in interest.” Id. (quoting Kumar, 462 So.2d at 1183). “Thus, where a plaintiff is either the real party in interest or is maintaining the action on behalf of the real party in interest, its action cannot be terminated on the ground that it lacks standing.” Kumar, 462 So.2d at 1183.See also BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean–Jacques, 28 So.3d 936, 938 (Fla. 2d DCA 2010) (“The proper party with standing to foreclose a note and/or mortgage is the holder of the note and mortgage or the holder's representative.”).

In securitization cases, a servicer may be considered a party in interest to commence legal action as long as the trustee joins or ratifies its action. In re Rosenberg, 414 B.R. 826, 842 (Bankr.S.D.Fla.2009) (emphasis added). In CWCapital Asset Management, LLC v. Chicago Properties, LLC, 610 F.3d 497 (7th Cir.2010), the Seventh Circuit found that CW, as a special servicer to a loan, had standing to bring an action in its own name against a mortgagor and landlord for money paid by a tenant in settlement of a suit for unpaid rent. Id. at 499–500. Significantly, however, in opposition to the defendant's motion for judgment on the pleadings (based on CW's lack of standing), CW filed an affidavit of the trustee, which was not contradicted, ratifying the servicer's (CW'S) commencement of the lawsuit. Id. at 502 (emphasis added). Additionally, the pooling and servicing agreement was placed in evidence as additional evidence that CW's principal granted CW authority to enforce the debt instruments that CW neither owned nor held. Id. at 501.

In Juega v. Davidson, 8 So.3d 488 (Fla. 3d DCA 2009), relied on by the trial court, the Third District reversed an order of dismissal for lack of standing, finding that because the plaintiff was an agent who had been granted full authority to act for the real party in interest, there was no violation of rule 1.210(a). Id. at 489. However, in Juega, there was evidence in the trial court that the agent/plaintiff had been granted full authority to act on the real party in interest's behalf: The real party in interest filed an affidavit in opposition to the motion to dismiss for lack of standing, averring that Juega was pursuing the litigation for the real party in interest's benefit and ratifying all actions taken by Juega since the inception of the lawsuit. Id. at 489. Finding the affidavit filed by the real party in interest to be indistinguishable from the affidavit filed by the principal in Kumar, the Third District held that “the facts stated in [the affidavit] establish that the agent, Juega, has standing.” Id. at 490 (emphasis added).

Here, the caption of the verified complaint states that the underlying action is brought by CW “solely in its capacity as special servicer on behalf of U.S. Bank, N.A.” In the complaint, CW alleges, and verifies as true, that it “has been and is duly authorized by the Trust to prosecute this action as agent and special servicer for the Trust.” However, CW did not file any evidence, affidavits or other documents, supporting its allegation that it was authorized to prosecute the action on behalf of the trust, as was done in Kumar,Juega and Chicago Properties. Although CW's complaint is verified, it is verified by the “SVP” for CW—not by the real party in interest, the trust. CW relies on nothing more than its own allegations and affidavit to support its argument that it has standing to sue on behalf of the trust. This is insufficient evidence to prove that it is authorized to sue on the trust's behalf.

We affirm on the other issue raised by Elston, as we find that the trial court properly determined that CW was not required to register as a commercial collection agency or as a licensed mortgage broker under Chapters 559 and 494, Florida Statutes.

Reversed and Remanded. TAYLOR and HAZOURI, JJ., concur.
-------- Notes:

Elston/Leetsdale, LLC v. Cwcapital Asset Mgmt. LLC