Mortgage Servicing Fraud
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Blossom
Securitized Trust's Lost Mortgage Note Not Enforceable per UCC
Saturday, January 5, 2008 

The Florida Fourth District Court of Appeals decided an issue quite pertinent to today's foreclosure environment in the case of StateStreetBank and Trust Co, Trustee for Holders of Bear Stearns Mortgage Securities Inc. Mortgage Pass-Through Certificates, Series 1993-12 v. Harley Lord, et al., 851 So.2d 790 (Fla. 4th DCA 2003). The Court held that StateStreet could not maintain a cause of action to enforce a missing promissory note or to foreclose on the related mortgage in the absence of proof that it or its assignor ever held possession of the promissory note. Section 673.3091, Florida Statutes (2002).

StateStreet filed an action in the Circuit Court under section 71.011, Florida Statutes to reestablish the lost promissory note. The Court of Appeals upheld the lower court's decion and held that the right to enforce the lost instrument was not properly assigned to StateStreet where it was found that neither StateStreet nor its predecessor in interest possessed the note and StateStreet did not otherwise satisfy the requirements of section 673.3091, Florida Statutes (2002) which Florida's version of the UCC's article on negotiable instruments. The court noted that it was undisputed that the note was lost before the assignment to StateStreet was made.

In footnote one, the Court noted that the enforcement of lost promissory notes which are negotiable instruments is actually governed by secton 673.3091, Florida Statutes and not section 71.011 which governs enforcement of lost papers.

The Court explained that pursuant to section 90.953, Florida Statutes, (2002), Florida's code of evidence, the plaintiff in a mortgage foreclosure must present the original promissory note as a duplicate of a note is not admissible. Otherwise, the plaintiff must meet the requirements of section 673.3091, Florida Statutes to pursue enforcement. W.H. Dwoning v. First Na'tl Bank of Lake City, 81 So.2d 486 (Fla.1955), Nat'l Loan Investors, L.P. v. Joymar Assocs., 767 So.2d 549, 551 (Fla. 3d DCA 2000).

The Court further explained that although it and the Third District Court of Appeals have held that the right or enforcement of a lost note can be assigned, here there was no evidence as to who possessed the note when it was lost. See Slizyk v. Smilack, 825 So.2d 428, 430 (Fla. 4th DCA 2002), Deakter v. Menendez, 830 So.2d 124 (Fla. 3d DCA 2002). In Slizyk, the Court allowed the assignee of the note and mortgage to foreclose as the assignor of the note was in possession of the note at the time of the assignment and therefore the right to enforce the instruments was assigned to the assignee as well. In contrast, here the undisputed evidence was that the assignor never held possession of the note and therefore could not enforce the note under section 673.3091, Florida Statutes (2002). As the assignor could not enforce the lost note under section 673.3091, it had no power of enforcement which it could assign to StateStreet.

The court noted that it did not reach the question of whether Slizyk and National Loan could be applied to allow enforcement of a note if there was proof of possession by an assignor earlier than the most immediate assignor.

It should be noted that in 2004, section 673.3091(1)(a), Florida Statutes was amended to allow enforcement of an instrument if the "person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred." It is not clear that this amendment would have changed the court's decision in StateStreet.

StateStreet was later cited with approval by Dasma Investments, LLC v. Realty Associates Fund III, L.P., 459 F.Supp.2d 1294(S.D.Fla.2006) where the court held that if a party is not in possession of the original note and cannot reestablish it, the party cannot prevail in an action on the note. In Dasma, the court explained that in Florida a promissory note is a negotiable instrument and that a party suing on a promissory note, whether just on the note itself or together with a foreclose on a mortgage securing the note, must be in possession of the original of the note or reestablish the note pursuant to Fla. Stat. § 673.3091. See, Shelter Dev. Group, Inc. v. Mma of Georgia, Inc., 50 B.R. 588, 590 (Bkrtcy.S.D.Fla.1985).

StateStreet was also cited with approval in the case of In re American Equity Corporation of Pinellas, 332 B.R. 645 (M.D.Fla.2005)(Paskay, J.) where the court held that a party must comply with section 673.3091, Florida Statues in order to enforce a lost, destroyed or stolen negotiable instrument. It is noteworthy that the court found that the creditors' affidavits merely stated that the creditors had searched for the original promissory notes but were unable to find them and failed to state that the creditors ever received possession of the original promissory note.

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O -

Nice find!

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This is a very substantial ruling, simply said, "No Note, No Mortgage" 
 
I think that was the basis for the AK Supreme courts several years ago!.

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Blossom
Take note that this was a 2003 decision, forerunner to recent Ohio decisions.
Since it was posted in Florida Bankruptcy Law blog yesterday, initially I thought
Ohio "No Note, No Mortgage" movement was spreading until I saw dates:
StateStreetBank and Trust Co, Trustee for Holders of Bear Stearns Mortgage Securities Inc. Mortgage Pass-Through Certificates, Series 1993-12 v. Harley Lord, et al., 851 So.2d 790 (Fla. 4th DCA 2003)
It has since been cited in other decisions:
In re American Equity Corporation of Pinellas, 332 B.R. 645 (M.D.Fla.2005)(Paskay, J.)
http://pacer.flmb.uscourts.gov/pdf-new/62742015.pdf


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