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Appellate Court Establishes Hurdle for Banks

Thousands of rulings on motions to dismiss have been issued by Florida’s trial courts without any clear stance by the appellate courts as to what it takes for a bank to state a cause of action and survive a motion to dismiss.

This may have changed with the recent decision handed down by the Second District Court of Appeal in Feltus v. U.S. Bank National.

The crucial passages of Feltus follows:

On November 18, 2009, U.S. Bank filed another copy of the Note as a supplemental exhibit to its complaint.  In contrast to the copy attached to the complaint that contained no endorsements, this copy contained two endorsements …

We view U.S. Bank’s filing of a copy of the note that it later asserted was an original note as a supplemental exhibit to its complaint to reestablish a lost note as an attempt to amend its complaint in violation of Florida Rule of Civil Procedure 1.190(a).  U.S. Bank did not seek leave of court or the consent of Feltus to amend its complaint.  A pleading filed in violation of Rule 1.190(a) is a nullity, and the controversy should be determined based on the properly filed pleadings.  See Warner-Lambert Co. v. Patrick, 428 So. 2d 718 (Fla. 4th DCA 1983).

This language is crucial. An unendorsed note is often attached to the complaint in foreclosure cases. The bank later files a note that contains an endorsement, then attempts to defeat a motion to dismiss by asking the court to consider the subsequently-filed endorsement. What I typically argue at this stage of things is that the court must limit its consideration to the “four corners” of the complaint, viz., the note attached to the original complaint, not the endorsed one filed later. The lender usually counters that its status as holder is predicated on having filed the original note, endorsed in blank.

This position, in my estimation, raises questions about whether the bank had standing in the first place. That is to say, if the bank lacked an endorsement when it filed the suit, it cannot then try to correct this deficiency with the requisite endorsement after the fact. See Progressive Express Ins. Co. v. McGrath Community Chiro., 913 So.2d 1281, 1285 (Fla. 2d DCA 2005) (“the 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.”)

It seems that Feltus builds on the Progressive case. The Second District ruled that this isn’t so much an issue of the bank lacking standing at the case’s inception. The court, according to Feltus, cannot consider the subsequently-filed note without the bank first amending its complaint. For pleading purposes, references to the note later filed with an endorsement are “a nullity.”

You can bet foreclosure defense attorneys will now cite Feltus v. U.S. Bank when arguing motions to dismiss. Without leave of court and without the consent of all defendants, pursuant to Fla.R.Civ.P. 1.190, banks shouldn’t be able to get away with amending their pleadings by subsequently filing a note that contradicts the note attached to their complaints. A bank has failed to state of cause of action when it opposes a motion to dismiss by referencing a note that’s not attached to the complaint. It either has to amend the complaint properly or suffer a dismissal without leave to amend.

Please be advised that this article does not constitute legal advice nor does it provide any basis to form an attorney-client relationship. Nothing in this article should be copied without the express permission of the author.

Mr. Hounchell has a law degree from The University of Florida College of Law and he is a principal in The Law Offices Charles A. Hounchell, P.A., in Tampa, Florida. Mr. Hounchell earned his undergraduate degree from The George Washington University in Washington D.C. and he obtained his MBA in International Management from the American Graduate School of International Management (“Thunderbird”) in Glendale, Arizona.

Mr. Hounchell is a licensed title insurance agent and a real estate agent with Smith and Associates, Inc. http://www.smithandassociates.com/; http://www.livecasanova.com/. He has lived in many different countries, including Spain, Brazil, Argentina, Mexico and Germany and he speaks Spanish and Portuguese. A significant portion of Mr. Hounchell’s law practice is concentrated on Real Estate Law. He can be reached at 813-230-3376 or charlie@flpropertylaw.com.