CRUZ vs JPMORGAN CHASE | FL 4DCA – The PAA has caveats where JPMorgan could refuse to acquire assets and there is no record evidence that the FDIC transferred the note to JPMorgan before the complaint was filed

National Debt

national debt


Mortgage Related

Government Sponsored

Announcement Date: November 2, 2016









No. 4D14-3799

[March 23, 2016]

Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Thomas M. Lynch, IV, Judge; L.T. Case No.

Paul Alexander Bravo of P.A. Bravo, Coral Gables, and Ricardo Manuel
Corona of Corona Law Firm, Miami, for appellants.

Nancy M. Wallace of Akerman LLP, Tallahassee, William P. Heller of
Akerman LLP, Fort Lauderdale, and Kathryn B. Hoeck of Akerman LLP,
Orlando, for appellee.


The number of entities through which the note and mortgage traveled
complicates the facts. The bottom line, however, is JPMorgan Chase Bank,
National Association’s (“JPMorgan”) failure to prove standing requires a
reversal of the final judgment of foreclosure.

The borrower executed a mortgage and note in favor of Washington
Mutual Bank F.A. (“WAMU”). On March 5, 2008, the borrower quit-
claimed the property to Ottoniel Cruz and Luz Cruz (“owners”). On
September 25, 2008, the Federal Deposit Insurance Corporation (“FDIC”),
receiver for WAMU, sold substantially all assets and liabilities of WAMU to
JPMorgan through a purchase and assumption agreement (“PAA”).

Section 3.1 of the PAA reads, in part, “[T]he Assuming Bank hereby
purchases from the receiver, and the Receiver hereby sells, assigns,

transfers, conveys, and delivers to the Assuming Bank, all right, title, and
interest of the receiver in and to all of the assets (real, personal and mixed,
wherever located and however acquired) . . . of the Failed Bank.”

Section 3.2 reads, in part, “All Assets and assets of the Failed Bank
subject to an option to purchase by the Assuming Bank shall be purchased
for the amount . . . as specified on Schedule 3.2, except as otherwise may
be provided herein.” Section 3.3 reads, in part, “[T]he conveyance of all
assets . . . purchased by the Assuming Bank under this agreement shall
be made, as necessary, by Receiver’s deed or Receiver’s bill of sale.”
Section 6.2 obligates the FDIC to deliver assets, including loan documents,
“as soon as practicable on or after the date of this Agreement.”

The “Settlement Date” is defined as “the first Business Day immediately
prior to the day which is one hundred eighty (180) days after Bank Closing,
or such other date prior thereto as may be agreed upon by the Receiver
and the Assuming Bank.” Article X explains that as a condition precedent,
the parties were subject to the Receiver “having received at or before the
Bank Closing, evidence reasonably satisfactory to each of any necessary
approval, waiver, or other action by any governmental authority . . . with
respect to this Agreement.”

On December 1, 2008, the owners defaulted by failing to pay their
monthly payment. WAMU sent the default notice on January 28, 2009.
On April 29, 2009, JPMorgan filed a foreclosure action. The complaint
included a count to reestablish a lost note and a count for foreclosure of
the mortgage. JPMorgan alleged that it “owns and holds said note and
mortgage.” The lost note count stated that the note “has been lost or
destroyed and is not in the custody or control of the Plaintiff who is the
owner and holder of the subject Note and Mortgage and its whereabouts
cannot be determined.” It also stated that JPMorgan or its predecessors
were in possession of the note and were entitled to enforce it when the loss
occurred, and “[t]he loss of possession was not the result of a transfer or
a lawful seizure.”

Attached to the complaint was a copy of the mortgage, but not a copy
of the note. On October 26, 2009, JPMorgan dropped the lost note count.

On April 12, 2010, the owners filed their answer and asserted several
affirmative defenses, including lack of standing and failure to comply with
conditions precedent.

In January 2014, JPMorgan transferred its ownership interests in the
mortgage to PennyMac Corporation (“PennyMac Corp.”). On February 21,

2014, the FDIC executed an assignment of the mortgage to JPMorgan. The
assignment read, in part, “This Assignment is intended to further
memorialize the transfer that occurred by operation of law on September
25, 2008 as authorized by Section 11(d)(2)(G)(i)(II) of the Federal Deposit
Insurance Act, 12 U.S.C. § 1821(d)(2)(G)(i)(II).”

On February 21, 2014, JPMorgan then executed an assignment of
mortgage in favor of PennyMac Corp. Servicing of the loan was transferred
from JPMorgan to PennyMac Loan Services, LLC (“PennyMac Loan
Services”), which was the servicer at the time of trial. On August 1, 2014,
JPMorgan moved to substitute PennyMac Corp. as party plaintiff, but the
motion was never heard.

PennyMac Corp. allegedly discovered a week before trial that the
original note was lost. On August 22, 2014, JPMorgan moved to amend
the complaint to add a lost note count, and attached an affidavit from a
PennyMac Loan Services foreclosure operations supervisor. The trial court
denied the motion the day before the trial began.

On August 28, 2014, the case proceeded to a non-jury trial. JPMorgan
called PennyMac Loan Services’ foreclosure operations supervisor as its
witness. She testified that PennyMac Loan Services serviced the loan on
behalf of the current owner, PennyMac Corp., and JPMorgan was the prior

She did not have the original note with her because it was lost or
destroyed. The note “was lost after the complaint was filed,” but before it
acquired servicing rights. PennyMac Loan Services conducted its due
diligence, reached out to prior foreclosure counsel, and checked the court
docket to see if the original note was already filed, but it was unable to
find the original note.

The witness reviewed PennyMac Loan Services’ records, and the
original note was not transferred to anyone else or seized by anyone.
PennyMac Corp. was willing to indemnify the note maker for any claims
that might be placed because of the loss. She obtained the copy of the
note from PennyMac Loan Services’ business records, which were
uploaded by PennyMac Loan Services’ loan boarding department at the
time PennyMac Loan Services acquired servicing rights of the subject loan.

When JPMorgan attempted to move the copy of the note into evidence,
defense counsel questioned the witness, and objected to the introduction
of the copy of the note “based on the evidence rule and . . . trustworthiness
and authenticity of it.” Counsel also argued that no reestablishment count

was pending before the court and “their complaint only seeks mortgage
foreclosure and they dropped the establishment of lost mortgage note back
in I believe 2010 . . . . [T]hey are asking the Court to improperly amend
their pleadings . . . .”

JPMorgan responded that it was not asking the court to amend because
“[t]he lost note count is the count that has become tradition to put in the
complaint,” but “it is actually an evidentiary matter.” The trial court
overruled the objection and admitted the copy of the note. The court also
admitted, among other things, a copy of the PAA.

At the end of the trial, the owners moved for an involuntary dismissal,
arguing JPMorgan was required to produce the original note and failed to
comply with the conditions precedent to filing the foreclosure action. The
trial court denied the motion.

The trial court granted final judgment of foreclosure in favor of
JPMorgan. From this judgment, the owners now appeal.

The owners argue JPMorgan failed to prove it had standing to foreclose
at the case’s inception and when the trial court entered final judgment.
JPMorgan failed to attach a copy of the note to the complaint. The copy of
the note that was eventually filed had an undated blank endorsement and
JPMorgan failed to elicit testimony regarding the endorsement date.
JPMorgan also introduced an assignment of mortgage showing its rights
were transferred to PennyMac Corp. six months before trial.

JPMorgan responds that standing is determined at the time suit is filed,
not at the time of trial. The endorsement date was immaterial because it
proved ownership and did not rely on the endorsement. It was authorized
under the Florida Rules of Civil Procedure to continue the action in its
name after transferring its interest to PennyMac Corp.

The owners reply that the evidence failed to establish JPMorgan
acquired standing. The PAA did not provide for the purchase of all WAMU’s
assets, and required a separate conveyance instrument for assets actually
purchased. The PAA provided only that JPMorgan had the right to
purchase certain WAMU assets from the FDIC, but nothing shows any
property was transferred, and 12 U.S.C. § 1821 does not save JPMorgan.

This Court reviews whether a party has standing to bring an action de
novo. Dixon v. Express Equity Lending Grp., LLLP, 125 So. 3d 965, 967
(Fla. 4th DCA 2013).

“A crucial element in any mortgage foreclosure proceeding is that the
party seeking foreclosure must demonstrate that it has standing to
foreclose” when the complaint is filed. McLean v. JP Morgan Chase Bank
Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). “[S]tanding may be
established from the plaintiff’s status as the note holder, regardless of any
recorded assignments.” Id. (citation omitted). “If the note does not name
the plaintiff as the payee, the note must bear a special endorsement in
favor of the plaintiff or a blank endorsement.” Id. The plaintiff may also
show “an affidavit of ownership to prove its status as a holder of the note.”
Id.; see Sosa v. U.S. Bank Nat’l Ass’n, 153 So. 3d 950, 951 (Fla. 4th DCA

“A plaintiff alleging standing as a holder must prove it is a holder of the
note and mortgage both as of the time of trial and also that [it] had
standing as of the time the foreclosure complaint was filed.” Kiefert v.
Nationstar Mortg., LLC, 153 So. 3d 351, 352 (Fla. 1st DCA 2014) (emphasis

Such a plaintiff must prove not only physical possession of
the original note but also, if the plaintiff is not the named
payee, possession of the original note endorsed in favor of the
plaintiff or in blank (which makes it bearer paper). If the
foreclosure plaintiff is not the original, named payee, the
plaintiff must establish that the note was endorsed (either in
favor of the original plaintiff or in blank) before the filing of the
complaint in order to prove standing as a holder.

Id. at 353 (internal citations omitted). “A plaintiff’s lack of standing at the
inception of the case is not a defect that may be cured by the acquisition
of standing after the case is filed and cannot be established retroactively
by acquiring standing to file a lawsuit after the fact.” LaFrance v. U.S.
Bank Nat’l Ass’n, 141 So. 3d 754, 756 (Fla. 4th DCA 2014) (citation
omitted) (internal quotation marks omitted).

A “person entitled to enforce” an instrument is: “1) [t]he holder[1] of the
instrument; 2) [a] nonholder in possession of the instrument who has the
rights of a holder; or 3) [a] person not in possession of the instrument who
is entitled to enforce the instrument pursuant to s[ection] 673.3091 or
s[ection] 673.4181(4).” § 673.3011, Fla. Stat. (2014); see Mazine v. M & I
Bank, 67 So. 3d 1129, 1131 (Fla. 1st DCA 2011). “A person may be a

1 A “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)(a), Fla. Stat. (2014).

person entitled to enforce the instrument even though the person is not
the owner of the instrument or is in wrongful possession of the
instrument.” § 673.3011, Fla. Stat.

JPMorgan alleged that it was the note holder, but it failed to prove its
holder status at trial. JPMorgan did not attach the note to the complaint.
It introduced a copy of the note at trial, which contained an attached
allonge indicating a blank endorsement from “JP Morgan Chase Bank, NA
Successor in Interest by Purchaser from the FDIC as receiver of
Washington Mutual Bank F/K/A Washington Mutual Bank, FA.”
However, PennyMac Loan Services’ witness did not testify to when the
allonge was attached to the note or when the endorsement occurred. No
other record evidence indicated when it occurred or when JPMorgan
became the note holder. See Peoples v. Sami II Trust 2006–AR6, 178 So.
3d 67, 69–70 (Fla. 4th DCA 2015).

Although JPMorgan does not meet any of the requirements of a holder—
and does not attempt to prove it did—it argues it proved standing because
it owned the note and mortgage when it initiated the foreclosure action. It
argues the 2008 PAA and a 2014 assignment of mortgage proved
ownership. We disagree.

To prove its standing to foreclose, JPMorgan would have to prove it was
“[a] person not in possession of the instrument who is entitled to enforce
the instrument pursuant to s[ection] 673.3091 or s[ection] 673.4181(4).”
§ 673.3011(3), Fla. Stat. “[N]othing in [section 673.3011] allows an ‘owner’
to enforce the note without possession, except where the instrument is lost
or destroyed.” Snyder v. JP Morgan Chase Bank, Nat’l Ass’n, 169 So. 3d
1270, 1273 (Fla. 4th DCA 2015). Therefore, JPMorgan would have to
prove: (1) it was the owner, and (2) reestablishment of the lost note under
section 673.3091. See id.

Here, there was no proof that JPMorgan had possession of the note at
the time it filed the complaint. JPMorgan acknowledged that the note was
lost and not in its custody or control. Because the original note was never
filed with the court and there was no other evidence of possession, no
competent substantial evidence exists of possession. See id. at 1272. And,
similar to Snyder, there exists no competent substantial evidence of
ownership. The PAA has caveats where JPMorgan could refuse to acquire
assets and there is no record evidence that the FDIC transferred the note
to JPMorgan before the complaint was filed. Id. We reverse the final
judgment of foreclosure based on JPMorgan’s failure to prove standing.


FORST, J., and SCHER, ROSEMARIE, Associate Judge, concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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