Last month, the Fourth DCA reversed a foreclosure judgment entered in favor of US Bank finding the bank failed to offer sufficient proof of standing and failed to reestablish the lost note. Lewis v. US Bank Nat’l Ass’n, No. 4D19-942, 2020 WL 3261407, at *1 (Fla. 4th DCA June 17, 2020). In Lewis, Bank of America (“BOA”) originated the loan and then assigned it to Nationstar which assigned it to US Bank (or “the Bank”). The borrowers defaulted and US Bank filed its complaint (to foreclose and reestablish lost note), but the copy of the note it attached to its complaint was not endorsed. Although the bank attached two assignments to its complaint (one from BOA to Nationstar and a second from Nationstar to US Bank), the latter assignment only assigned the mortgage, not the note.i To further complicate matters, US Bank also filed an erroneous affidavit that “included a chart outlining the note’s transfers” that included entities that were never involved with the Lewis’ loan.ii US Bank filed a corrective assignment and two corrective affidavits and the matter proceeded to a non-jury trial.
The lower court heard testimony from the Bank’s two witnesses, one employed by BOA and Nationstar and one employed by the Bank’s servicer. The opinion did not discuss the witnesses’ testimonyiii in any detail; however, the witnesses did authenticate several documents which were admitted into evidence. The borrowers “argued the bank failed to prove who lost the note, when it was lost, and who had the right to enforce the note when it was lost” as required by § 673.3091, Fla. Stat.iv The borrowers further argued that US bank failed to prove it “directly or indirectly acquired the note from an entity with the right to enforce the note when it was lost.”v The borrowers moved for dismissal, but at the conclusion of the trial the lower court entered judgment in US Bank’s favor.
On appeal of that judgment, the Fourth DCA agreed with the borrowers that the Bank’s evidence was insufficient to support entry of judgment. The Court explained in a lost note case “[a]t a minimum…the evidence must establish who had the right to enforce the note when it was lost and how the party seeking reestablishment obtained ownership.”vi The Court pointed out that the bank’s corrective assignment of mortgage, which included an assignment of the note, post-dated the complaint so it could not establish the bank’s standing at the inception of the case. Further, the Court noted several deficiencies in the Bank’s two corrective affidavits. Firstly, the affidavits failed to include the dates the note was transferred. Secondly, the affidavits failed to attest that BOA, the last entity in possession of the note before it was lost, “was entitled to enforce the note when it was lost.”vii Thirdly, the affidavits were not based on personal knowledge, but rather only “[o]n information and belief” so they were also procedurally insufficient.viii The Fourth DCA reversed the Bank’s judgment on these grounds.
A bank’s standing to foreclose cannot be retroactively established and that lost note cases involve an additional level of proof.ix For this reason, banks and their counsel need to consider the available evidence prior to filing a lawsuit. If the note cannot be located and the copy does not reflect a proper endorsement, other proof should be gathered or created before the lawsuit is filed. The Court’s opinion does not contain any surprises and the outcome of the case likely could have been avoided with the exercise of due diligence.
i Lewis, at *1.
ii Lewis, at *1.
iii The majority of the opinion addressed the deficiencies in US Bank’s assignment and affidavits rather than the witness testimony. The Fourth DCA did note that neither witness “could fill in the missing information” necessary to establish the Bank’s standing and its right to reestablish the lost note. Lewis, at *3.
iv Lewis, at *2.
v Lewis, at *2.
vi Lewis, at *3.
vii Lewis, at *3.
viii Lewis, at *1, *3.
ix Lewis, at *3-4.