Chapter 4-4 Proving Standing Through an Indorsement

• Jurisdiction: United States

4-4 Proving Standing Through an Indorsement

A plaintiff who is not the original payee of the note has standing to foreclose if the plaintiff, before filing the complaint, possesses the note and the note is indorsed to the plaintiff specifically or in blank.²¹ An indorsement is a signature on the note for the purpose of negotiating the instrument.²² An indorsement must be made by the holder of the note.²³ A plaintiff is not required to prove the validity of a signature on an indorsement unless the defendant presents evidence which would support a finding that the signature is forged or unauthorized.²⁴ Where the plaintiff seeks to prove standing through an indorsement, evidence should be submitted to demonstrate that the indorsement on the note was made prior to the filing of the action.²⁵ It is irrelevant exactly what day the indorsement is made so long as it is on the note at the time the action is filed.²⁶ If the note or allonge reflects on its face that the indorsement occurred before the filing of the action, this is sufficient to establish standing.²⁷ Testimony that the indorsement was effectuated before the filing of the action pursuant to the routine practice of an organization is sufficient to demonstrate that an indorsement was effectuated before the filing of the action.²⁸ Evidence that the bank advanced taxes and other fees associated with the mortgaged property prior to the filing of the complaint was a noteworthy factor in determining standing to foreclose, because financial institutions are not known to incur expenses on behalf of properties for which they do not hold an interest.²⁹ Evidence that a note was indorsed in blank and in possession of the plaintiff prior to the filing of the action pursuant to the terms of a pooling and servicing agreement and mortgage loan schedule is sufficient to demonstrate standing to foreclose.³⁰

In such cases, the plaintiff should demonstrate that the pooling and servicing agreement includes the note at issue.³¹ The line of cases beginning with Deutsche Bank National Trust Co. v. Marciano³² appears to represent a shift in the way the appellate courts have examined the relevance of a pooling and servicing agreement to the plaintiff's ability to demonstrate that a note was indorsed either in blank or to the plaintiff prior to the inception of the action.³³ While several previous cases held that evidence that the note was transferred into a trust was not sufficient to demonstrate standing to foreclose, those cases generally did not examine the specific provisions of the pooling and servicing agreements which discuss the delivery and indorsement of original promissory notes (usually section 2.01).³⁴ A plaintiff is not required to identify or prove the trust on whose behalf the plaintiff acts.³⁵ Therefore, it is not necessary that a specific indorsement to the plaintiff also specify the name of the trust on whose behalf the plaintiff is bringing the action, and even where the indorsement does not name the correct trust, it will not create a defect in the bank's standing to foreclose.³⁶

Where the plaintiff has standing to foreclose through an indorsement, it is irrelevant that another party is the owner of the note.³⁷ This is because Florida's Uniform Commercial Code does not require a party to be both the holder of the note and the owner of the note to have standing to foreclose.³⁸ Accordingly, it is error for a court to require the bank to prove that it is both the owner and holder of the note.³⁹ An indorsement that is made by a person who is not the holder of the instrument is an anomalous indorsement.⁴⁰ An anomalous indorsement does not affect the manner in which the instrument may be negotiated.⁴¹ Therefore, an anomalous indorsement is insufficient to provide a party with standing to foreclose.⁴²

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Notes:

^[21] Bank of New York Mellon v. Heath, 219 So. 3d 104 (Fla. 4th DCA 2017).

^[22] Fla. Stat. § 673.2014(1).

^[23] PennyMac...