DO THE ENDS JUSTIFY THE MEANS?
by Michael W. Leonard, Esquire
Boyle, Gentile, Leonard & Crockett, P.A.
On September 25, 2013, the Second District Court of Appeal rendered its yet-to-be published opinion dealing with a proposition of law which was once thought to be well settled and clearly understood. Focht v. Wells Fargo Bank, N.A., 2013 WL 5338048 (Fla. 2d DCA 2013). The Focht decision centered on the issue of “standing” relevant to a holder of a note and mortgage. The law of Florida had, until this decision, been quite clear. A party seeking to foreclose a mortgage must possess the note and mortgage prior to filing suit. See Country Place Cmty. Ass’n v. J.P. Morgan Acq. Corp., 51 So. 3d 1176, 1179 (Fla. 2d DCA 2010) and McLean v. J.P. Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). These two recent decisions merely reiterate what lawyers have always understood the concept of “standing” to mean in the foreclosure context. “Standing” is and has always been thought of as a defect that may not be cured by the acquisition of standing after a case has been filed. Progressive Express Ins. Co. v. McGrath Cmty. Chiropractic, 913 So. 2d 1281, 1284-85 (Fla. 2d DCA 2005); Jeff-Ray Corp. v Jacobson, 566 So. 2d 885, 886 (Fla. 4th DCA 1991).
In the Focht decision, the owner of the property executed and delivered a note and mortgage to BNC Mortgage, Inc. This loan was allegedly later transferred into a trust, in which Wells Fargo acted as the trustee. In January of 2008, Wells Fargo, as trustee, filed a foreclosure action, which included a count for a lost note. Wells Fargo, in July of 2008, filed the original note with the court and thereafter filed the assignment of the note and mortgage in September of 2008.
Ms. Focht raised lack of “standing” as an affirmative defense to the foreclosure action, arguing that the assignment filed in the action evidences that at the time the complaint was filed, Wells Fargo was not the owner of the note and mortgage and therefore had no standing to bring the claim. Wells Fargo argued that the filing of the original note evidences that it had standing. In further support of its argument that it had standing when the action was filed was the fact that the trust in which the Focht note and mortgage were held was created years before Wells Fargo filed the instant foreclosure action. The lower tribunal granted summary judgment in favor of the lender, and Ms. Focht took appeal.
The appellate court held that there was a genuine issue of material fact; that being whether Wells Fargo possessed the note and mortgage at the time the action was filed, and therefore whether Wells Fargo had standing. Despite the reversal of the lower court’s ruling, the Second District Court of Appeal has requested that the Florida Supreme Court entertain the following certified question as one of great public importance:
CAN A PLAINTIFF IN A FORECLOSURE ACTION CURE THE INABILITY TO PROVE STANDING AT THE INCEPTION OF SUIT BY PROOF THAT PLAINTIFF HAS SINCE ACQUIRED STANDING?
It is clear that the foreclosure crisis as well as the inequities of what can amount to a windfall to those who continue to live in their homes for free while contesting the foreclosure action is behind this proposed “standing” exception. In fact, as noted in the concurring opinion of Judge Altenbernd, “trial courts have been overwhelmed by foreclosure filings”. Justice Altenbernd goes on to state that although borrowers may have legitimate affirmative defenses, “the delayed production of the original note and mortgage in a case where the borrower is in default should not justify the dismissal of the legal proceedings”.
Although one can understand the reasoning behind a change in such a long-standing legal precedence, one must pause to determine if the ends justify the means. In other words, what will the effect of a change in the standing requirement be in foreclosure actions? Will it result in even greater recklessness in the lending institutional record-keeping? Will a change in the “standing” standard migrate to other areas of the law? What is the law of unintended consequences? Time will tell whether the Florida Supreme Court accepts jurisdiction of this certified question and whether the Supreme Court will tinker with the "standing" requirement.