In a recent holding, the Fourth DCA affirmed a final judgment of foreclosure and clarified its position on standing as it pertained to a substituted party plaintiff. Spicer v. Ocwen Loan Servicing, LLC.[i]   In Spicer, there was no dispute that the original plaintiff had standing because it possessed the original note, endorsed in blank, and attached a copy of the endorsed note to its complaint. However, an issue arose as to standing later in the case when the original plaintiff filed the original note with the clerk of court prior to moving to substitute the new party plaintiff, Ocwen. Although the original blankly endorsed note was in the court file and surrendered to the court at trial, the borrowers argued Ocwen failed to present sufficient evidence to establish it was a holder or a non-holder in possession at the time of judgment.

The lower Court disagreed, finding Ocwen’s evidence of standing to be sufficient:

“[The original plaintiff’s] motion to substitute Ocwen as the party plaintiff specifically referenced the Note. Since the Note was bearer paper…Ocwen proved it had possession of the endorsed in blank original note at the time of trial, by virtue of it being in the court file of the case of which it was the party plaintiff.”

The Second DCA reached the opposite conclusion in Geweye v. Ventures Trust 2013-I-H-R, [ii] finding that a substituted plaintiff “could not establish that it was the holder or non-holder in possession for purposes of standing” since the original plaintiff filed the original, blankly endorsed note with the clerk before moving to substitute the new plaintiff.  This court reached a similar conclusion in Creadon v. U.S. Bank[iii], stating: “Creadon’s original note had been filed in the registry of the court years before U.S. Bank appeared in the suit. Therefore, U.S. Bank simply could not have been holding the note or been a non-holder in possession with standing to foreclose the mortgage.”

On appeal to the Fourth DCA, the borrowers, relying on Geweye, again argued that Ocwen never “held” the note because the Clerk of Court, rather than Ocwen, had physical possession of the bearer instrument.

Ultimately, the Fourth DCA in Spicer distinguished Geweye on its facts and affirmed the lower Court’s entry of judgment for the bank. The Court noted:

“It is not entirely clear as to which basis the [Geweye] court’s ultimate holding was founded upon…However, we believe the court’s opinions[iv], viewed in their entirety, indicate the results were based upon specific facts distinct from those facts here.”

The Court then surmised that in Gewye, “the court relied upon the fact that the original plaintiff’s motion to substitute asserted only the mortgage had been assigned, as opposed to the note and mortgage.”[v] The Court explained: “Here, the original plaintiff did specifically reference the note in the motion to substitute party plaintiff…”[vi] The Court then concluded:

“The transferred standing a substituted plaintiff acquires from the original plaintiff, coupled with the presentation of the original note indorsed in blank, provides the substituted plaintiff standing to foreclose the mortgage.”

In its holding the Fourth DCA acknowledged the fact the original note was in the physical possession of the Clerk of Courts and never physically held by the substituted plaintiff before being surrendered at trial. Ostensibly, in so holding, the court found the possession issue to be immaterial for purposes of determining standing.

This holding is helpful in clarifying the Fourth DCA’s position regarding some of the nuances which arise when a substituted plaintiff enters a pending foreclosure and proceeds to judgment. It is important to note this decision is of persuasive value, but not precedential value, to the other four District Courts of Appeal. It will be interesting to see how the other district courts, especially the Second district, address similar standing issues in the future.

[i]  No. 4D16-2335, 2018 Fla. App. LEXIS 317 (Fla. 4th DCA Jan. 10, 2018)

[ii] The Court also based its holding on the fact that the substituted plaintiff failed to produce any evidence that the original plaintiff transferred the note to the substituted plaintiff, noting that the assignment attached to the motion to substitute party plaintiff only referenced a transfer of the mortgage. Geweye v. Ventures Trust 2013-I-H-R, 189 So. 3d 231, 233 (Fla. 2d DCA 2016).

[iii] Creadon v. U.S. Bank N.A., 166 So. 3d 952, 954 (Fla. 2d DCA 2015).

[iv] The Court in Spicer also distinguished the facts of Houk v. PennyMac Corp., 210 So. 3d 726 (Fla. 2d DCA 2017) finding the bank “failed to present any summary judgment evidence to show it had standing to enforce the lost note which had been specially indorsed to a different lender.”

[v] Spicer, 2018 Fla. App. LEXIS 317, at *8-9.

[vi] Spicer, 2018 Fla. App. LEXIS 317, at *9.