Luiz v. Lynx Asset Services, LLC

Citations: 198 So. 3d 1102; 90 U.C.C. Rep. Serv. 2d (West) 665; 2016 Fla. App. LEXIS 12795; 2016 WL 4445941Docket: No. 4D15-558

Court: District Court of Appeal of Florida; August 24, 2016; Florida; State Appellate Court

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David Luiz appeals the trial court's Final Judgment of Foreclosure in favor of Lynx Asset Services, which he argues lacked standing at the time the lawsuit was initiated. The original plaintiff, Liquidation Properties, Inc., filed the foreclosure suit on June 9, 2009, alleging ownership of the note and mortgage but did not attach a copy of the note to its complaint. Luiz raised a lack of standing as an affirmative defense. Lynx later substituted itself as the plaintiff, claiming ownership of the note and mortgage through an assignment from Liquidation.

Lynx subsequently amended its complaint to reestablish the lost note, attaching a copy of the mortgage, the lost note, and affidavits from previous and current counsel. The most recent affidavit, signed by a vice president of Lynx, stated that Liquidation was the owner of the note at the time it was lost during a transfer between law firms. The vice president testified at trial, confirming Lynx's ownership of the loan, which it acquired from Citigroup Global Markets Realty Corp., a parent company of Liquidation. He asserted that Lynx could not locate the note, which was lost rather than seized or transferred unlawfully, and offered indemnification to Luiz should the note be found.

Luiz objected to the admission of the copy of the note into evidence, arguing that Lynx failed to prove its case regarding the note's location and loss. The court agreed with Luiz's contention regarding Lynx's standing and reversed the trial court's decision.

The witness in the case testified that a note was lost after Lynx acquired it and pointed to a lost note affidavit in the court file to support this claim. He mentioned that prior counsel had possession of the note before Lynx's purchase but lost it during the transfer to current counsel. The witness did not know when the blank indorsement was added to the note. Appellant's counsel objected, asserting that the witness could not reestablish the note since it was not in Lynx's or its attorney's possession at the time it was said to be lost; this objection was overruled, allowing the note to be reestablished. Lynx also introduced an assignment of mortgage executed after the complaint was filed, which transferred the mortgage from MERS to Liquidation, effective June 3, 2009. Lynx claimed standing based on testimony that Liquidation owned the note when the complaint was filed, arguing that Liquidation is a subsidiary of Citi from which Lynx purchased the note. Appellant countered that Lynx did not prove standing because the original complaint included a lost note count, contradicting the assertion that prior counsel had the note at the time of filing. The trial court ruled in favor of Lynx, leading to the Appellant's appeal. Appellant contends that the court erred by granting judgment to Lynx, as it did not establish standing at the time the suit was filed. Under Florida law, standing to foreclose must be established at the suit's inception, and as a substituted plaintiff, Lynx needed to prove that Liquidation had standing when it filed the original complaint. Liquidation's complaint alleged ownership of the note and that it was lost at the time of filing, so Lynx was required to demonstrate that Liquidation lost possession of the note but retained the right to enforce it at that time.

Lynx did not provide adequate evidence to establish Liquidation's standing to file a lawsuit. To demonstrate that Liquidation could enforce the note, Lynx needed to prove that Liquidation was either a holder of the note with possession or a nonholder in possession with the rights of a holder. The note had a blank indorsement, but a copy of the note was not attached to the original complaint and only became part of the record later, leaving unclear when the indorsement was made and to whom the note was payable at the time of filing. Lynx's vice president's testimony about a conversation with Liquidation’s counsel regarding possession of the note was deemed insufficient evidence of prior possession with a blank indorsement. 

The only documentation presented was a backdated assignment of mortgage, which could not confer standing as it was executed after the lawsuit was initiated. Even if proceeding under the premise that Liquidation was a nonholder in possession, Lynx would need to prove each transfer of the note, but failed to do so. A nonholder cannot enforce a note based solely on possession; they must prove the legitimacy of each transfer to establish rights of enforcement. 

Consequently, the court found that there was insufficient evidence to support Liquidation's standing as either a holder or a nonholder in possession, leading to a reversal of the final judgment of foreclosure. The court noted the absence of a lost note affidavit and highlighted inconsistencies in the vice president’s testimony compared to the allegations made in the initial complaint. Additionally, an argument regarding hearsay related to the vice president's testimony was dismissed, as it was elicited by the opposing counsel without objection.