Case Example of Foreclosure Foiled by Borrower Challenging Bank’s Right to Sue (Standing)
For details of the case, read: Cartwright v. LJL Mortg. Pool, LLC, 185 So. 3d 614 (Fla. Dist. Ct. App. 2016).
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Husband and wife Diego Cartwright and Rachel Young were anxious to grab their piece of the American Dream here in Florida, and they successfully got a mortgage to purchase their home with Accredited Home Lender, Inc. (“Accredited”). Things went well at first; then they fell behind on their monthly mortgage payments.
Borrowers Sued By Different Bank than Where They Got Their Home Loan
In October 2009, Diego and Rachel were sued in a civil lawsuit seeking foreclosure on their property. They were named as defendants; however, the plaintiff in the case was not Accredited. The named party filing the foreclosure suit against them was Arch Bay Holding, LLC-Series 2009B (“Arch Bay”).
In the official complaint, Arch Bay alleged that it was the owner and holder of the note and mortgage. As a plaintiff, Arch Bay did attach a copy of the mortgage that Diego and Rachel had signed to the filing.
No Note Attached to Arch Bay Complaint
However, the note itself was not attached. Instead, Arch Bay asserted in its complaint that the note was lost. Arch Bay’s complaint included a count to reestablish a lost note.
In South Florida, the American Dream may mean owning a condo near the ocean. Image: North Beach in Miami, Florida.
Amended Complaint: Third Plaintiff Suing for Foreclosure
Things got more complicated, plaintiff-wise. In March 2010, another party appeared in the case, asking the judge to issue an order substituting it as the plaintiff for Arch Bay. The judge granted the request, and LJL Mortgage Pool LLC (“LJL Mortgage”) was substituted as the party asking for foreclosure.
Four Complaints Filed by LJL Mortgage
Shortly thereafter, LJL Mortgage filed a First Amended Complaint of Foreclosure. In this amended pleading, it alleged it was the owner and holder of the note and mortgage. Attached to the LJL Mortgage First Amended Complaint was (1) a copy of the note and (2) an allonge with an undated blank endorsement from the original lender, Accredited.
LJL Mortgage wasn’t done. They kept changing things. After that first amended pleading, they filed another THREE amended complaints.
Attachments to LJL Mortgage’s Fourth Amended Complaint
In LJL Mortgage’s Verified Fourth Amended Complaint, the new plaintiff alleged that as of January 19, 2010, it was entitled to enforce the note as the “holder in possession.”
LJL Mortgage attached copies of (1) the note, (2) the allonge, (3) the mortgage, and (4) assignments to the complaint, all of which were executed after Arch Bay filed the original complaint.
Borrower Defenses to Foreclosure Lawsuit
In response to the attempts to foreclose on their home, Diego Cartwright took action and hired a foreclosure defense lawyer. As a defendant in the civil suit, Mr. Cartwright filed an answer, which included several “affirmative defenses” against the complaint’s attempts to foreclose.
One of Mr. Cartwright’s affirmative defenses was that the plaintiff did not have standing. He asserted that LJL Mortgage lacked standing to sue for foreclosure under Florida law.
Meanwhile, his wife did not defend against the foreclosure. After some time had passed, the trial judge issued a judicial default against Rachel Young.
This did not prevent Diego Cartwright from fighting the bank for his home. He had an independent right as a defendant to proceed in the case and defend against the foreclosure.
LJL Seeks Foreclosure Summary Judgment; Bank is Overturned on Appeal
After Mr. Cartwright filed his answer to its Amended Complaint, LJL Mortgage filed a motion for summary judgment with the court. This tactic was to end the case fast, and move forward with foreclosing on the home and taking title to the real estate.
Banks want to get summary judgments in foreclosure lawsuits because it saves them money. Rather than litigation costs in a full lawsuit, the case is over quickly. The bank gets title to its collateral fast, so it can sell the real estate and recoup the loan balance.
This procedure is allowed in all civil matters, but requests for summary judgments are quite common in Florida foreclosure actions. See Rule 1.510 of Florida Rules of Civil Procedure, which allows the lender to circumvent both the discovery process and any courtroom trial, and get an instantaneous judgment allowing foreclosure, if it can show the judge that “… the pleadings and summary judgment evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
In this case, LJL accompanied its motion for foreclosure summary judgment with supporting affidavits. Among the attachments to LJL Mortgage’s Motion for Summary Judgment were:
- An affidavit signed by LJL Mortgage’s loan servicer where he averred that the “Plaintiff had possession of the note prior to the filing of the foreclosure complaint on October 19, 2009,” and in a separate section of the affidavit, that “the note is endorsed in blank.”
- An affidavit signed by LJL Mortgage’s representative which stated the “Plaintiff holds the promissory note for this Loan.”
The trial judge heard oral arguments at the courtroom hearing on the motion, and entered a final summary judgment of foreclosure in favor of LJL Mortgage.
Mr. Cartwright appealed the judge’s decision to the reviewing court and won, with the summary judgment being reversed on appeal. The reviewing court found that after examining the case record “in the light most favorable to the non-moving party,” see Wolf v. Sam’s E., Inc., 132 So.3d 305, 307 (Fla. 4th DCA 2014), the summary judgment could not stand.
Summary judgments can be entered only when there is no genuine issue of material fact. See Rule 1.510. In this case, the borrower had demonstrated a material fact issue. See, e.g., Jaffer v. Chase Home Fin., LLC, 155 So.3d 1199, 1201 (Fla. 4th DCA 2015).
How had Diego Cartwright won his fight against LJL Mortgage? By challenging its “standing.”
Borrower’s Defense: Lack of Standing
Cartwright raised the issue of standing as an affirmative defense. Under Florida law, the plaintiff must prove that it had standing to foreclose when it filed the complaint. Vidal v. Liquidation Props., Inc., 104 So.3d 1274, 1276 (Fla. 4th DCA 2013).
What is Standing to Sue?
No one can simply go to court and file a lawsuit against someone else. Under Florida law, they have to have a legal basis for suing, and this is called “standing to sue.”
Standing is something that the plaintiff must be ready to show the court. As the Florida Supreme Court has explained, a party does not possess standing to sue unless he or she can demonstrate a direct and articulable stake in the outcome of a controversy. Brown v. Firestone, 382 So.2d 654, 662 (Fla.1980).
It is the responsibility of the party filing the complaint against a defendant to establish standing with admissible evidence. The plaintiff must be able to show it has a sufficient stake in a justiciable controversy, with a legally cognizable interest which will be affected by the outcome of the litigation. Weiss v. Johansen, 898 So.2d 1009, 1011 (Fla. 4th DCA 2005)
How the Bank Proves Up Its Standing to Sue for Foreclosure
In foreclosure lawsuits, the plaintiff can show it has standing to sue by proving up its status as the note holder, even if there are no assignments of the note on record. McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So.3d 170, 173 (Fla. 4th DCA 2012).
What Is a “Holder” Of The Note?
This is defined in Florida Statute § 671.201(21)(a) as “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.”
When LJL Mortgage was recognized by the trial judge as “substituted plaintiff” in the foreclosure lawsuit, procedurally it stood in the shoes of the previous plaintiff, Arch Bay. See Kiefert v. Nationstar Mortg., LLC, 153 So.3d 351, 353 n. 4 (Fla. 1st DCA 2014); Florida Rule of Civil Procedure 1.260.
Blank Endorsement Means More Proof is Needed
However, LJL Mortgage filed the note and allonge with a blank endorsement after the original complaint was filed. This meant that LJL Mortgage had to provide additional proof that Arch Bay was the holder of the note at the time it filed its complaint.
When a bank files an original note and allonge with an undated endorsement, then it must prove it had physical possession of the original note, endorsed in favor of the plaintiff or in blank, at the time the plaintiff filed the complaint. See Sosa v. U.S. Bank Nat’l Ass’n, 153 So.3d 950, 951 (Fla. 4th DCA 2014); Kiefert, 153 So.3d at 353
Bank Must Prove Possession of the Note
In support of its motion for foreclosure summary judgment, LJL Mortgage filed two affidavits addressing the issue of standing.
The first did not explain whether or not the note was endorsed in blank at the time Arch Bay filed the complaint. LJL Mortgage’s second summary judgment affidavit did not explain or establish that Arch Bay was in possession of the note and allonge with the blank endorsement at the time Arch Bay filed the original complaint.
Both LJL Mortgage affidavits failed to prove that its predecessor (Arch Bay) had physical possession of the original note, endorsed in favor of the plaintiff or in blank, at the time Arch Bay filed its complaint.
When Diego Cartwright challenged LJL Mortgage’s standing to sue, the affidavits used to support its motion for summary judgment were reviewed and found to be insufficient.
A plaintiff in a foreclosure case must prove that it had standing to foreclose when it filed the complaint.
Whether or not LJL Mortgage had standing to sue Mr. Cartwright and foreclose on his home was not shown by the bank. This meant that there was a genuine fact issue in the case, and there could be no speedy summary judgment for the lender.
Florida Foreclosure Defense Attorney to Help Fight Foreclosure Suit
In addition to standing to sue, there are all sorts of foreclosure defenses that may apply to someone facing a foreclosure lawsuit here in Florida. Each case is unique and must be analyzed according to its specific circumstances. Investigations will include going over all the background paperwork and the real estate records, as well as everything filed in the civil lawsuit record.
Having an experienced Florida Foreclosure Defense Lawyer to help you fight back against the bank’s attempts to foreclose on your home or condo can make all the difference.
Our offices are here to help you. For more on successfully defending against foreclosure based upon standing, see: Florida Foreclosure Appeal on The Issue of Standing Victory Against Bank of America.
Most Florida real estate lawyers, like Larry Tolchinsky, will offer a free initial consultation to answer your questions.
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