Appellate Court Reverses State Court Ruling That Standing Is Not Transferable After Suit Is Filed

SHD Legal Group successfully prosecuted an appeal of a final judgment entered in favor of a borrower in a foreclosure action based on the bank’s alleged lack of standing.[i]  The Plaintiff filed a one count foreclosure complaint against the borrower, Glicken, and others, and attached copies of the note, allonge and mortgage to its complaint. The allonge attached to the note (and the complaint) contained a blank indorsement from the original lender.

While the foreclosure was pending, the Plaintiff Wells Fargo “assigned the mortgage and transferred possession of the note to US Bank.” The lower Court entered an order which substituted US Bank as the party plaintiff. US Bank filed the original note, allonge and mortgage with the trial Court. The note and allonge were identical to the ones attached to the complaint. The case proceeded to trial and the lower Court accepted the original note, allonge, mortgage, assignment of mortgage, demand letter and payment history into evidence. At the close of evidence, Glicken moved for an involuntary dismissal of the case based primarily on US Bank’s alleged lack of standing.

Glicken argued US Bank lacked standing at the time of trial because it failed to offer evidence that Wells Fargo assigned the note, not just the mortgage, to US Bank. The lower Court agreed with Glicken (to the extent it found US Bank lacked standing) and dismissed the bank’s foreclosure, holding:

“Standing is not transferrable and US Bank was not the holder of the note as of the date of the filing. It wasn’t the attorney enact [sic] of the — Wells Fargo. It wasn’t a successor in interest, it wasn’t purchased by, there was no way in which the two entities became one entity. There are a number of ways in which this happens, it evolves [sic] in a variety of lawsuits we see. In this case, you cannot transfer by selling the note. You cannot transfer standing. My ruling here is for the defendant.”

The lower Court entered a final judgment in favor of the borrower and SHD filed an appeal on behalf of US Bank, appealing the judgment to the Fifth District Court of Appeals (“Fifth DCA”).

The Fifth DCA reversed the ruling explaining the lower Court erred in its findings regarding standing. The Fifth DCA pointed out the note is a negotiable instrument and, once indorsed in blank, it can be transferred by possession alone, neither an assignment of the note nor evidence of an assignment is necessary if a party has actual possession of the original, endorsed note.

The Fifth DCA concluded US Bank presented sufficient evidence of its standing to foreclose when it attached the note and allonge with a blank indorsement to the complaint and then proffered the identical note and allonge at trial. “When the note with an undated blank indorsement has been attached to the original complaint, this is sufficient to prove standing provided that the plaintiff produces the original note at trial or files it with the trial court with the same indorsement and there are no subsequent contradictory indorsements.”

The Fifth DCA remanded the matter to the lower Court to enter a final judgment of foreclosure in favor of US Bank. This holding is in line with several recent district court opinions relating to standing and further solidifies quickly developing precedent on the issue.

Wilmington Sav. Fund Soc’y, FSB v. Louissaint, 212 So. 3d 473 (Fla. 5th DCA 2017)

Ortiz v. PNC Bank, Nat’l Ass’n, 188 So. 3d 923, 925 (Fla. 4th DCA 2016)

Deutsche Bank Nat’l Tr. Co. v. Applewhite, 213 So. 3d 948 (Fla. 4th DCA 2017)

Wells Fargo Bank, N.A. v. Ousley, 212 So. 3d 1056 (Fla. 1st DCA 2016)

[i] US Bank, NA, as Legal Title Trustee for Truman 2012 SC2 Title Trust v. Glicken, 2017 Fla. App. LEXIS 15541 (Fla. 5th DCA October 27, 2017).