Florida Appeals Court Holds Servicer's Verified Allegation Insufficient to Establish Standing in Foreclosure Suit

Foreclosure

On April 4, the District Court of Appeal for the Fourth District of Florida reversed a trial court decision requiring a commercial borrower to make payments to the servicer of a securitized trust pending a foreclosure action because the servicer did not properly plead standing. Elston/Leetsdale, LLC v. CWCapital Asset Management LLC, No. 4D11-3151, 2012 WL 1108531 (Fla. 4th DCA Apr. 4, 2012). In this case, the borrower executed a promissory note as evidence of a loan, and secured payment by executing a mortgage, security agreement, and an assignment of lease and rents. The lender assigned its rights to a trust company, which in turn assigned the rights to another trust, who is now the owner and holder of all the loan documents. The servicer for the trust filed a foreclosure action in its own name, alleging in the verified complaint that it was duly authorized by the trust to take all action to protect the interests of the trust. The servicer also sought continued payment pending the foreclosure action, which the trial court granted. The borrower challenged the servicer’s standing to bring suit on behalf of the trust, which the trial court rejected. The appeals court found that the servicer’s evidence in support of its standing, which was nothing more than its own allegations and affidavit, was insufficient.  Instead the court noted that in other cases in which courts found that a servicer had established standing, the trustee joined the action or ratified the servicer’s commencement of the lawsuit through an affidavit. The appellate court reversed the trial court payment order and remanded for further proceedings.