Appellant, Kenneth Elsman, appeals pro se the trial court’s final judgment of
foreclosure in favor of Appellee, HSBC Bank USA, as Trustee for MLMI 2006-AF1
(“HSBC”). Elsman argues four issues on appeal, only one of which merits discussion.
Because we find that HSBC lacked standing to foreclose, we reverse.
On May 16, 2006, Elsman executed and delivered an InterestFirst note, a
mortgage, and a Second Home Rider to Quicken Loans, Inc. (“Quicken”), for a $168,000
loan. After Elsman defaulted on the loan, HSBC filed a two-count complaint on April 1,
2009, seeking to reestablish the note and foreclose the mortgage. HSBC attached to the
initial complaint copies of its debt collection letter, the original mortgage, the second home
rider, and the note.
On December 5, 2009, HSBC filed the original mortgage and the original note,
which, unlike the copy attached to the complaint, contained an undated special
endorsement from Quicken to “HSBC Bank USA, National Association, as Trustee for the
registered holders of the Merrill Lynch Mortgage Investor’s Inc., Mortgage Pass-Through
Certificates, Series 2006-AF1.”1 Throughout the course of both discovery and motion
practice, Elsman challenged HSBC’s standing to foreclose.
On March 4, 2014, the case proceeded to trial. The only witness to testify was
Peter Killinger, a “default representative” for PHH Mortgage Services (“PHH”), the loan
servicer for HSBC. During trial, HSBC offered the endorsed note and the mortgage into
evidence, without any testimony, as self-authenticating commercial paper. Elsman
objected to the admissibility of the newly endorsed note, arguing that it differed from the
unendorsed copy attached to the complaint. The trial court overruled Elsman’s objection
and admitted the endorsed note.
The trial court sustained Elsman’s relevance objectionto the assignment from Quicken to HSBC,which postdated filing of the complaint by six
days. The trial court took judicial notice of a document referencing the pooling and
servicing agreement, which showed a September 1, 2006 creation date and referenced
the subject trust. Without objection, the trial court admitted PHH’s loan transfer history,
purporting to show a September 2006 transfer to Wells Fargo as master servicer for the
subject trust. Following the close of evidence, the parties provided written closing
arguments, and the trial court ultimately entered final judgment in favor of HSBC.
“A trial court’s decision as to whether a party has satisfied the standing requirement
is reviewed de novo.” Gorel v. Bank of New York Mellon, 165 So. 3d 44, 46 (Fla. 5th DCA
2015) (quoting Sosa v. Safeway Premium Fin. Co., 73 So. 3d 91, 116 (Fla. 2011)); see
also Wells Fargo Bank, N.A. v. Morcom, 125 So. 3d 320, 321 (Fla. 5th DCA 2013).
“A crucial element in any mortgage foreclosure proceeding is that the party seeking
foreclosure must demonstrate that it has standing to foreclose. The burden is on the party
seeking foreclosure to prove by substantial competent evidence that it has standing.”
Schmidt v. Deutsche Bank, 170 So. 3d 938, 940 (Fla. 5th DCA 2015) (citations omitted).
“[A] party’s standing is determined at the time the lawsuit was filed.” McLean v. JP Morgan
Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). This court has
Under section 673.3011, Florida Statutes (2013), a person
entitled to enforce the note and foreclose on a mortgage is the
holder of the note, a non-holder in possession of the note who
has the rights of a holder, or a person not in possession of the
note who is entitled to enforce under section 673.3091,
Gorel, 165 So. 3d at 46. “Holder” is defined as “[t]he person in possession of a negotiable
instrument that is payable either to bearer or to an identified person that is the person in
possession.” § 671.201(21), Fla. Stat. (2009).
If an indorsement is made by the holder of an instrument,
whether payable to an identified person or payable to bearer,
and the indorsement identifies a person to whom it makes the
instrument payable, it is a “special indorsement.” When
specially indorsed, an instrument becomes payable to the
identified person and may be negotiated only by the
indorsement of that person.
§ 673.2051(1), Fla. Stat. (2009). “The endorsement must have occurred before the filing
of the complaint because it is axiomatic that standing must be shown as of the filing of
the complaint.” Schmidt, 170 So. 3d at 941 (quoting Eagles Master Ass’n v. Bank of Am.,
N.A., 40 Fla. L. Weekly D1510, D1510 (Fla. 5th DCA June 26, 2015)).
In Schmidt v. Deutsche Bank, our court reversed a final judgment of foreclosure
when the appellee-bank failed to prove its standing to foreclose at the time of filing. Id. at
942. Like the appellee-bank in Schmidt, HSBC attempted to establish standing after filing
a foreclosure complaint with a reestablishment of note count that was later dropped. See
id. at 939. HSBC’s case for standing has deficiencies similar to the bank’s in Schmidt.
HSBC filed, after the complaint, an undated endorsement. The trial court denied
admission of the note assignment because it postdated the complaint. This evidence
could not prove the note’s endorsement at the time of the filing of the complaint. In order
to prove standing, the endorsement must have occurred before filing of the complaint.
See id. at 941; McLean, 79 So. 3d at 173.
At trial, HSBC attempted to prove its standing as a holder with additional evidence.
Instead of a loan purchase agreement, as in Schmidt, 170 So. 3d at 940, HSBC relied
upon a loan transfer history and reference to the pooling and servicing agreement.
Testimony about these additional documents failed to show that HSBC became the holder
of the note through a special endorsement prior to filing the complaint. For these reasons,
HSBC’s evidence failed to establish its status as the holder of the note at the time of filing
the foreclosure complaint against Elsman, and thus failed to establish standing. See id.
at 942. Therefore, we reverse and remand for entry of an order of involuntary dismissal
of the action.
REVERSED and REMANDED with INSTRUCTIONS.