Favorable Trial Court Ruling Allowing Florida Couple To Score "Free" House From Foreclosing Mortgagee Snatched Away By Appellate Court Reversal

The following facts are adapted from a recent ruling of Florida's 4th District Court of Appeal, reversing a lower court ruling in favor of a homeowner/couple facing foreclosure:

1. Homeowners borrowed $200,000 from John Haner to purchase property in 2003, and executed a mortgage and a promissory note in favor of Haner to evidence and secure the loan.
2. Subsequently, Haner died, and his estate assigned his interest in the note and mortgage, which was already in default, to one, Lizio.
3. Lizio subsequently filed a foreclosure action against Homeowners, claiming they failed to make required payments on the mortgage.
4. The trial court denied Lizio's motion for summary judgment, and this case proceeded to trial.
5. At trial, the personal representative for Haner's estate, Jeffrey Selzer, testified that the original note and mortgage were executed by Homeowners in 2003.
6. Personal rep Selzer stated that he executed an assignment of the mortgage to Lizio in October 2007; the assignment was recorded a few days later.
7. Personal rep Selzer also testified that he received the original note and mortgage from Haner prior to his death, and the mortgage presented at trial was identical to the mortgage the now-deceased Haner gave Selzer.
8. Finally, personal rep Selzer concluded from reviewing Haner's documents that Homeowner's defaulted on the note in January 2006.
9. Lizio did not testify on his own behalf. Prior to resting, Lizio offered into evidence original copies of the assignment, note, and mortgage.
10. Homeowners moved to involuntarily dismiss the case.
11. Broward County Circuit Court Judge Richard D. Eade granted Homeowners' motion, finding that the assignment of the mortgage and note to Lizio did not constitute prima facie evidence that Lizio is the current owner and holder of the mortgage and note.
12. Judge Eade dismissed Lizio's foreclosure action with prejudice, and ordered a cancellation of the lis pendens and a discharge/cancellation of the mortgage (go here, pp. 3-4 for court order).

In reversing Eade's ruling against the foreclosing mortgage holder, the appellate court applied this relatively basic rule of law to the facts in this relatively simple case (bold text is my emphasis, not in the original text):

• The party seeking foreclosure must present evidence that it owns and holds the note and mortgage in question in order to proceed with a foreclosure action. Verizzo v. Bank of N.Y., 28 So. 3d 976, 978 (Fla. 2d DCA 2010); Philogene v. ABN Amro Mortgage Group Inc., 948 So. 2d 45, 46 (Fla. 4th DCA 2006).

• Where the defendant denies that the party seeking foreclosure has an ownership interest in the mortgage, the issue of ownership becomes an issue the plaintiff must prove. Carapezza v. Pate, 143 So. 2d 346, 347 (Fla. 3d DCA 1962).

• In the present case, appellant possessed the original note, mortgage, and assignment executed by the personal representative of Haner's estate. The note was payable to the late John Haner, and the assignment granted Haner's rights under the note and mortgage to appellant. Thus, appellant "held" the note, which granted him standing to seek foreclosure of the mortgage. Mortgage Elec. Registration Sys., Inc. v. Revoredo, 955 So. 2d 33, 34 n.2 (Fla. 3d DCA 2007).

• Appellees argued that the testimony of the personal representative demonstrated only that the note and mortgage was assigned by the estate of Haner but that Selzer's testimony did not foreclose the possibility that appellant, who did not testify, may have executed a subsequent assignment of that same note and mortgage.

• Although appellees raise a point that the trial court may consider as part of appellees' defense, we find, nonetheless, that the trial court erred in granting appellees' motion for involuntary dismissal at that particular juncture. Appellant met his burden of providing a "prima facie case"; therefore we reverse and remand for further proceedings.(1)

For the ruling, see Lizio v. McCullom, No. 4D09-1149 (Fla. 4th DCA June 9, 2010).

(1) This case provides evidence that, while the ridiculous rulings of some trial judges in foreclosure actions typically seem to favor the foreclosing lenders, every once in a blue moon, a crazy ruling will sometimes improperly favor the homeowner. What Judge Eade was thinking in ruling in favor of the homeowners in this case is beyond me. Maybe Judge Eade is a good judge who simply had a bad day when making his ruling. It could also be that he slept through the trial, missing the live, in-person testimony of the personal representative (a Florida attorney) for the original, subsequently-deceased mortgage holder, who actually saw and physically handled the originals of the loan documents at issue and who personally executed the assignment of mortgage. I also suppose it's possible that Judge Eade was up for re-election, and saw a cheap opportunity to garner support from financially strapped homeowners by ruling in favor of the delinquent borrowers in this case, at a somewhat minimal risk of having his ruling appealed (keep in mind, the foreclosing lender here was not some giant, institutional lender or loan servicer using "manufactured" assignments and affidavits executed by multiple corporate hat-wearing vice presidents in far away places to make their case, and who have the wherewithal to appeal a dopey ruling like this one; the foreclosing lender here, albeit by assignment, was a private individual (possibly a real estate investor) who apparently saw an opportunity to potentially profit by purchasing a mortgage - presumably at a discount - that was already in default, from the estate of the original lender, who also was a private individual).

Rulings like this one serve only to give the apologists for the institutional mortgage lending and loan servicing industries, as well as the assembly line foreclosure mill law firms, support for claims that some judges are unfairly favoring delinquent homeowners in foreclosure actions. Trial judges should not lose sight of their sworn duty to simply apply the law and let the chips fall where they may. Based on some of the rulings that are coming down, however, that is apparently a lot easier said than done for some of our esteemed jurists.