Establishing standing—the legal basis of a plaintiff’s right to bring suit—to enforce a promissory note is a critical aspect of any foreclosure action. Florida case law requires that the party seeking to foreclose have standing at the time the lawsuit is filed. This can be problematic for lenders who own notes which have been sold or assigned one or more times; if all the proper endorsements and assignments are not made prior to the filing of the lawsuit, the lender’s foreclosure action may be subject to dismissal. One recent decision, however, provides some hope for lenders in this area.
Florida’s Second District Court of Appeal recently acknowledged the concerns related to the strict requirement that lenders establish standing when the action is filed or face dismissal. In Focht v. Wells Fargo Bank, N.A., the court reversed a foreclosure judgment on the grounds that the assignment of the promissory note was dated after the inception of the lawsuit. Although the lender had the original promissory note endorsed in blank, it had originally included a count in its complaint seeking to reestablish a purportedly lost promissory note, and did not submit evidence of its possession of the original endorsed in blank when the lawsuit was filed.
The court noted that there have been a string of reversals of foreclosure judgments due to lack of standing, and, in many of those cases, the plaintiff presented proof of its standing acquired after the initial filing. In a concurring opinion, one judge noted that, if there is no dispute that the borrower received money and defaulted under the promissory note, technicalities related to standing should not be used to give the borrower a windfall when the plaintiff has acquired standing after initiation of the lawsuit.
Despite its reversal of the foreclosure judgment, considering the ongoing foreclosure crisis in this state, the Second DCA certified to the Florida Supreme Court the question of whether a lender may cure a defect in standing by providing proof of standing that was acquired after the initiation of the lawsuit. Lenders are awaiting an answer to that question from the Florida Supreme Court. Until the Court decides the issue of whether inability to prove standing can be cured after a foreclosure action has been initiated, lenders should be sure to gather and execute all necessary documents to establish standing before bringing suit.