Case Example of Borrower Defending against Foreclosure Summary Judgment Using Plaintiff’s Proof of Being Holder of the Note
For details of the case, read: Craven-Lazarus v. Pennymac Holdings, LLC, 199 So. 3d 1029 (Fla. Dist. Ct. App. 2016).
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Victoria Craven-Lazarus bought a home after qualifying for a mortgage with JPMorgan Chase Bank (“JPMorgan”). Sadly, along with many other Florida homeowners, Ms. Craven-Lazarus’ life took some difficult financial turns and she was unable to keep current on her monthly mortgage payments to JP Morgan.
Over time, things did not get better for her. JP Morgan filed a lawsuit against her as its borrower, seeking to foreclose on her home based upon her defaulting on the mortgage.
Proof of the plaintiff being “holder of the note” must be filed with the clerk’s office alongside the complaint that initiates the Florida foreclosure action.
JP Morgan Files Foreclosure Complaint
In Florida, residential foreclosures must be done via a formal suit filed in the county where the real estate is found. We are a “judicial foreclosure” state.
So, JP Morgan filed their foreclosure action against Ms. Craven-Lazarus with a standard civil pleading (“complaint”). In the provisions of the JP Morgan complaint, the bank asserted it was “… entitled to enforce the Note as a holder in possession.”
Key here: the bank attached a copy of the note with a blank endorsement to the complaint that it filed. The complaint and the note were both filed by the clerk in the official record of the court case.
Borrower Files an Answer
Ms. Craven-Lazarus then filed a responsive pleading (“answer”) to the foreclosure lawsuit, which prevented JP Morgan from seeking an early foreclosure based on the borrower’s failure to respond.
Why? Under Florida law, if the borrower does not act fast – in a matter of weeks – after being served with the complaint, then the bank can ask the judge to go ahead and enter a “default judgment. “
Need to File an Answer to Avoid Default Judgment
In Florida, if someone is sued and ignores the lawsuit, judicial economy will allow for the plaintiff to come before the judge and ask that a “default judgment” be entered in the case. This ends the proceeding. See Rule 1.500 of the Florida Rules of Civil Procedure.
Default judgments are somewhat common in Florida foreclosure lawsuits where the borrower has walked away from the home and does not care if the bank takes it back. By ignoring any notice of the foreclosure lawsuit, a borrower almost guarantees that the foreclosure will proceed.
Substituted Plaintiff: New Bank in the Case
Time passed with the Craven-Lazarus foreclosure case pending before the Florida court. Then, PennyMac Holdings, LLC (“PennyMac”) filed a formal notice that it was substituting into the case as plaintiff. JP Morgan was out; PennyMac was in.
Substituting Parties
It is legal for a new plaintiff to replace the old one without the need for filing a new and different lawsuit. This is called “substitution of the parties” and the procedure for doing so (which includes proper, formal notice to the defendant) is found in Rule 1.260 of the Florida Rules of Civil Procedure.
New Bank Moves for Summary Judgment
PennyMac then moved for final summary judgment against Ms. Craven-Lazarus. In support of the motion, PennyMac filed several affidavits.
Important language was found in the PennyMac affidavit of its loan officer, where he stated under oath that “Plaintiff holds the promissory note for this Loan and held the note prior to the filing of this foreclosure action.”
A hearing was held on the summary judgment request. It was granted by the trial judge. So, Ms. Craven-Lazarus appealed the ruling, asserting the judge erred because she had asserted the affirmative defense regarding PennyMac’s standing as “holder of the note.”
Bank Has Burden to Prove Holder of the Note as a Matter of Law
The reviewing court considered the affidavits filed by PennyMac to support its summary judgment request. The loan officer’s affidavit stated clearly PennyMac held the note before the filing of the foreclosure lawsuit against Ms. Craven-Lazarus.
Conversely, it is clear within the formal record of the case that JP Morgan filed the lawsuit, not PennyMac. JPMorgan asserted it was the holder of the note as part of its foreclosure action. This was alleged in the complaint that started the entire proceeding against Ms. Craven-Lazarus.
PennyMac argued that JPMorgan had filed a note which contained a blank endorsement. PennyMac argued that attaching a copy of a note endorsed in blank to the complaint and filing the original note in the same condition as the copy attached to the complaint is generally sufficient to establish standing, see Ortiz v. PNC Bank, Nat’l Ass’n, 188 So.3d 923, 925 (Fla. 4th DCA 2016),
However, in the Craven-Lazarus lawsuit, this did not “neutralize the conflict” between (1) the PennyMac affidavit and (2) the allegations of the JP Morgan complaint regarding which lender held the note at the time the complaint was filed.
Reading the PennyMac affidavit, its “plain language” creates a material fact question as to who was holder of the note – JP Morgan or PennyMac – at the time that the foreclosure lawsuit was filed.
Lender Failed to Prove Right to Summary Judgment
Under Florida law, a summary judgment is appropriate only where there are no genuine issues of material fact and the lender demonstrates to the judge that it is entitled to the foreclosure judgment as a matter of law.
Matter of Law: Holder of the Note
To show that the bank is entitled to a foreclosure as a matter of law, it has to provide evidence that it has standing to foreclose as holder of the note at the time the complaint is filed with the clerk, instituting the lawsuit. McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So.3d 170, 173 (Fla. 4th DCA 2012).
It must also prove to the judge that it is the holder of the note at the time of trial (i.e., the hearing seeking the summary judgment). Peoples v. Sami II Trust 2006-AR6, 178 So.3d 67, 69 (Fla. 4th DCA 2015).
The Florida Supreme Court has been clear: a summary judgment should not be granted unless the facts are “so crystallized” that nothing remains but questions of law. Moore v. Morris, 475 So.2d 666, 668 (Fla.1985).
The lender must prove it was the holder of the note when it files the foreclosure lawsuit and when it comes before the judge asking for a judgment in the motion for summary judgment hearing. This is called its “holder status.”
In this case, there was a material issue of fact regarding holder status (standing) at the inception of suit, as the borrower asserted in her affirmative defense. There was a fact question regarding who was the holder of the note when the foreclosure lawsuit was filed: JP Morgan or PennyMac. This barred any summary judgment.
Lesson Here: A lender who sues for foreclosure must formally allege it has standing with evidence it was holder of the note and mortgage at both (1) the time that the foreclosure lawsuit was filed as well as (2) at time of trial. Failure to do so provides the borrower with a solid defense to any summary judgment filed by the lender seeking to foreclose on the home.
Florida Foreclosure Defense Lawyer Fighting Substitute Lender Foreclosure
In Florida, all too often the original home loan does not remain with the lender that negotiated the mortgage with the borrowers. There is a huge mortgage market, where banks sell their loans to other lenders. It is legal for them to do so.
It is not legal for that subsequent lender to move forward and seek a foreclosure against the residence if they lack the proper legal standing. Standing, including a challenge to “holder status” of the plaintiff, is a defense that can be asserted by the borrower who has become a defendant fighting the foreclosure in court.
This case demonstrates how the lender who files the lawsuit has the duty to prove with admissible evidence its right to come before the judge and ask for foreclosure on someone’s home or condo. If the lender, as a plaintiff, does not meet this duty, then the borrower can successfully challenge the entire proceeding.
Challenges to standing must be scrutinized both legally and factually in each foreclosure case. A Florida foreclosure defense attorney may be able to assert the “holder of the note” status has not been properly shown, and assert this as an “affirmative defense” against any foreclosure action.
The defense may be won in the trial court; sometimes, it may need to be addressed at the appellate level. For an example of how standing blocks a foreclosure after an appeal, see: Florida Foreclosure Appeal on The Issue of Standing – Victory Against Bank of America.
Having a lawyer help you when you are facing foreclosure proceedings by a substitute lender can be crucial in defending against the bank trying to take your home.
An experienced Florida real estate attorney can be much more economical than you may think. Most Florida real estate lawyers, like Larry Tolchinsky, will offer a free initial consultation to answer your questions.
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