No, not the endorsementson LinkedIn, although those are important too. I'm talking about endorsements to promissory notes. Since the onset of the Great Recession, far too many of Florida's judicial decisions have come down against lenders because they did not timely or properly obtain endorsements to promissory notes when they purchased loans on the secondary market. While this may seem like a technicality, it is a critical issue as a proper endorsement (either in favor of the current lender or in blank) is required for the non-originating lender to have "standing" – the legal right to bring the lawsuit. If the lender does not have standing when the lawsuit is filed, the lawsuit may ultimately be dismissed, and as many loan documents contain prevailing party attorney fee provisions, the lender may be liable for its borrower's fees.
Despite the bevy of cases on this very issue over the past few years, the significance of endorsements still appears to be an important lesson to remember as the decisions keep coming – so far one in each of the first four months of 2014 alone, each involving a different lender.
Leading off the year, in Viola v. U.S. Bank, the current lender, who was two assignments removed from the originating lender, did not attach a copy of the promissory note to the complaint, but only later, in support of a motion for summary judgment, filed a copy with all proper endorsements. Although the court reversed the judgment based upon procedural grounds, the opinion clearly indicates the court would have reversed on the basis of standing as well, as there was no proof of "the bank's ownership of the note and mortgage prior to the filing of the complaint."
Similarly, in Zimmerman v. JPMorgan Chase Bank, the current lender attached a copy of the promissory note to its complaint, but that copy did not include any endorsements. Only later, again in support of summary judgment, was the original note filed, this time with an undated endorsement in blank. As it "failed to file any evidence establishing that Chase obtained possession of the endorsed note prior to filing the complaint", the lower court's judgment in favor of the lender was likewise reversed.
In a slightly different fact pattern, the court in Hunter v. Aurora Loan Services, LLC, overturned a judgment in Aurora's favor, as Aurora, who acquired the rights to a lost promissory note through a series of assignments, could not produce evidence to support that it had acquired the right to enforce the note prior to the date the lawsuit was filed.
Finally, in the same vein as Viola and Zimmerman, the lender's judgment was reversed in Bristol v. Wells Fargo Bank, as while the lender filed the original note with a blank endorsement at summary judgment, that was "more than two years after the complaint was filed." The court ruled that this later filing "was insufficient to prove standing at the time the complaint was filed."
As highlighted by these cases, and the long string of cases that came before them, Florida law requires that the current lender obtain all proper endorsements to or assignments of the promissory note prior to initiating its lawsuit. There is no better way to avoid a challenge on this issue than to attach a copy of the promissory note with all appropriate endorsements to the initial complaint, thus conclusively demonstrating that the current lender had the right to enforce the instrument at the time the lawsuit was filed. By adhering to that practice, there can be no question that the current lender has standing to bring the suit.
If you are interested in learning more about endorsements to promissory notes and standing, please contact Michael S. Provenzale or any member of our Creditor's Rights Group.
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