MARC D. BEAUMONT, Appellant,
v.
BANK OF NEW YORK MELLON, etc., Appellee.

Case No. 5D10-3471.District Court of Appeal of Florida, Fifth District.Opinion filed February 17, 2012.

Marc D. Beaumont, Port Orange, pro se.

Todd A. Armbruster of Moskowitz, Mandell, Salim & Simowitz, P.A., Fort Lauderdale, for Appellee.

PER CURIAM.

Marc D. Beaumont appeals a final summary judgment entered by the trial court on a claim to foreclose a residential mortgage and recover on a promissory note executed in connection with the mortgage. We reverse.

The final summary judgment in this case was entered in favor of Novastar Home Mortgage, Inc. (“Novastar”), a nonparty to the suit because of its prior withdrawal from the case. It is fundamental error to enter judgment in favor of a nonparty. Beseau v. Bhalani, 904 So. 2d 641 (Fla. 5th DCA 2005); Rustom v. Sparling, 685 So. 2d 90 (Fla. 4th DCA 1997). The defect, which is jurisdictional, can be raised by this Court sua sponte. Dep’t of Envtl. Prot. v. Garcia, 36 Fla. L. Weekly D1664b (Fla. 3d DCA Aug. 3, 2011).

The judgment would also have to be reversed even if entered in favor of appellee, The Bank of New York Mellon, as Successor Trustee Under Novastar Mortgage Funding Trust 2005-3 (“Mellon”). Mellon sought in the complaint to reestablish the note and recover on it. See § 673.3091, Fla. Stat. (2010). This required Mellon to show it was entitled to enforce the note when it lost the instrument, or that it directly or indirectly acquired ownership from a person who was entitled to enforce the instrument when loss of possession occurred. § 673.3091(1), Fla. Stat.^[1] Mellon failed to prove who lost the note and when it was lost, offered no proof of anyone’s right to enforce the note when it was lost, and produced no evidence of ownership, due to the transfer from Novastar to Mellon.^[2] See Duke v. HSBC Mortg. Servs., LLC, 36 Fla. L. Weekly D2569a (Fla. 4th DCA Nov. 23, 2011). The trial court was also required to address the issue of providing adequate protection to Beaumont against loss that might occur by reason of a claim by another person to enforce the instrument. § 673.3091(2), Fla. Stat. If Mellon has, in fact, found the note, it must produce it prior to judgment. Gee v. U.S. Bank Nat’l Ass’n, 72 So. 3d 211, 212 (Fla. 5th DCA 2011); Perry v. Fairbanks Capital Corp., 888 So. 2d 725, 726 (Fla. 5th DCA 2004); see also Feltus v. U.S. Bank Nat’l Ass’n, 37 Fla. L. Weekly D253a (Fla. 2d DCA Jan. 27, 2012).

Mellon also argues that Beaumont has waived the lack of “standing” to enforce the note because of the failure to assert this as an affirmative defense. Generally, the failure to raise standing as an affirmative defense operates as a waiver. Kissman v. Panizzi, 891 So. 2d 1147, 1150 (Fla. 4th DCA 2005) (holding lack of standing is an affirmative defense that must be raised by defendant and failure to raise it generally results in waiver). Standing involves the right to enforce the note and must exist when suit is filed. See, e.g., McLean v. JP Morgan Chase Bank Nat’l Ass’n, 36 Fla. L. Weekly D2728a (Fla. 4th DCA Dec. 14, 2011); Taylor v. Deutsche Bank Nat’l Trust Co., 44 So. 3d 618 (Fla. 5th DCA 2010). There is no evidence showing that Beaumont was on notice prior to the time his answer was filed that ownership of the note had been transferred from Novastar to Mellon. In fact, the claimed transfer, alleged to have occurred on the day suit was filed, was either concealed by Novastar for more than three years while it continued to pursue the action, or Novastar backdated the assignment it finally produced on July 23, 2010, as justification for substituting Mellon as plaintiff. Under these circumstances, Beaumont may raise lack of standing when suit was filed as a defense. See Boston Hides & Furs, Ltd. v. Sumitomo Bank, Ltd., 870 F. Supp. 1153, 1161 n.6 (D. Mass. 1994) (holding banks were not precluded from raising affirmative defense of fraud for first time on summary judgment in action alleging wrongful dishonor of letter of credit, where banks did not discover information suggesting fraud until almost one year of discovery). Furthermore, Mellon must prove its right to enforce the note as of the time the summary judgment is entered, even if Beaumont had waived the right to challenge the bank’s standing as of the date suit was filed. Venture Holdings & Acquis. Group, LLC v. A.I.M. Funding Group, LLC, 75 So. 3d 773 (Fla. 4th DCA 2011). Its failure to do so would require this Court to reverse the summary judgment entered on the note and mortgage, even if judgment had been entered in favor of Mellon.

REVERSED.

TORPY, PALMER and COHEN, JJ., concur.

[1] A negotiable instrument is enforceable by: (1) the holder of the instrument, (2) a nonholder in possession who has the rights of a holder, or (3) a person not in possession of the instrument who is entitled to reestablish a lost, destroyed or stolen instrument pursuant to section 673.3091, or who has paid or accepted a draft by mistake as described in section 673.4181. § 673.3011, Fla. Stat.

[2] The record contains a copy of an assignment of the note from Novastar to Mellon, but the document was never offered into “evidence,” by being attached to an affidavit for purposes of authentification. As such, it is not competent evidence of the assignment and cannot be considered in ruling on Mellon’s motion. See, e.g., Morrison v. U.S. Bank, N.A., 66 So. 3d 387, 387 (Fla. 5th DCA 2011) (reversing summary judgment of foreclosure where defendant asserted she had not received a notice of default as required by mortgage, and bank had simply filed an unauthenticated notice letter).

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H/T ForeclosureHamlet

COMMONWEALTH OF MASSACHUSETTS APPEALS COURT

NOVASTAR MORTGAGE, INC.

vs.

ELLIOT SAFFRAN

10-P-1107

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

After foreclosing on the mortgage of Elliot Saffran, and purchasing the Saffran property located at 26 Debbie Lane in Milford (property) at the foreclosure sale, the plaintiff, Novastar Mortgage, Inc. (Novastar) brought this summary process action for possession and monetary damages. [FN1] After a jury-waived trial in the District Court, judgment entered in favor of Novastar. Upon Saffran’s appeal to the Appellate Division, the judgment of summary process was affirmed. For the reasons discussed, we reverse the decision of the Appellate Division and order entry of a new decision reversing the judgment of the District Court and remanding the case to that court for further proceedings in light of U.S. Bank Natl. Assn. v. Ibanez, 458 Mass. 637 (2011), a case decided while Saffran’s appeal was pending in this court.

Saffran challenges Novastar’s title to the property, claiming that the foreclosure sale was invalid because, as alleged by Saffran, Novastar was not the holder of the mortgage at the critical stages of the foreclosure process. [FN2] The original mortgage identified Novastar as the ‘Lender’ but a separate corporation, Mortgage Electronic Registration Systems, Inc. (MERS), as mortgagee ‘solely as a nominee for Lender and Lender’s successors and assigns.’ Saffran claims that by failing to produce a valid assignment of the mortgage from MERS to Novastar at the summary process trial, Novastar failed to establish, as required by statute, that it was the ‘present holder’ of the mortgage at the time of the notice of sale and the subsequent foreclosure sale. See id. at 648, citing G. L. c. 183, § 21, and G. L. c. 244, § 14 (‘[O]nly a present holder of the mortgage is authorized to foreclose on the mortgaged property’).

The trial judge did not address this issue directly. As the Appellate Division observed, the judge implicity rejected the argument because he awarded Novastar possession. Apparently, the trial judge took the position that because Novastar produced a foreclosure deed which stated that Novastar was the present holder of the mortgage from Saffran to MERS by virtue of a conveyance, the burden was on Saffran to show that Novastar was not the mortgage holder at the time of the notice of sale and the foreclosure sale of the property. [FN3]

In summary process proceedings, it is a foreclosing entity’s burden to establish that ‘title was acquired strictly according to the power of sale provided in the mortgage . . . .’ Wayne Inv. Corp. v. Abbott, 350 Mass. 775, 775 (1966). In Ibanez, 458 Mass. at 647, the Supreme Judicial Court stated that ‘[o]ne of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose.’ Thus, as the court explained, a plaintiff that is ‘not the original mortgagee[] to whom the power of sale was granted [but] rather, claim[s] the authority to foreclose as [an] assignee’ must demonstrate that it was the assignee of the mortgage both ‘at the time of the notice of sale and the subsequent foreclosure sale.’ Id. at 648. ‘A plaintiff that cannot make this modest showing cannot justly proclaim that it was unfairly denied [relief].’ Id. at 651.

We interpret the holding in Ibanez as placing the burden to present proof of an actual assignment on the entity, here Novastar, which is claiming the right to foreclose as an assignee. Therefore, the trial judge erred by requiring Saffran to demonstrate that Novastar was not the mortgage holder at the critical stages of the foreclosure process. Accordingly, we reverse the decision of the Appellate Division and a new decision is to enter reversing the judgment of the District Court and remanding the case to that court for a new determination in light of the principles discussed in Ibanez.

So ordered.

By the Court (Kantrowitz, Mills & Vuono, JJ.),

Entered: June 10, 2011.

FN1. In June, 2006, Saffran borrowed $420,000 from Novastar and secured the loan with a mortgage on the property.

FN2. Saffran also claims that the foreclosure deed is fraudulent. However, when pressed by the trial judge, Saffran acknowledged that he had no evidence to support his claim. Accordingly, we agree with the judge’s conclusion that Saffran failed to meet his burden of demonstrating fraud on the court by clear and convincing evidence. See Rockdale Mgmt. Co. v. Shawmut Bank, N.A., 418 Mass. 596, 598-600 (1994).

FN3. The foreclosure deed had been recorded at the Worcester County registry of deeds twenty-two days after the foreclosure sale. Novastar also produced (1) the statutory foreclosure affidavit pursuant to G. L. c. 244, § 14, in which Novastar’s attorney averred that the power of sale was duly executed, see G. L. c. 244, § 15, and (2) a copy of the notice of sale, which stated that Novastar was the present holder of the subject mortgage ‘by assignment’ from MERS. Novastar did not, however, produce a copy of an assignment of the mortgage from MERS. Interestingly, Saffran has included what purports to be such an assignment in his appendix. However, because the document was not presented to the trial judge, we do not consider it.

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It Teetered, It Tottered, It Was Bound to Fall Down

This article was adapted from “Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon,” by Gretchen Morgenson, a business reporter and columnist for The New York Times, and Joshua Rosner, a managing director at the independent research consultant Graham Fisher. The book is to be published on Tuesday by Times Books.

MARC COHODES had heard the stories.

Heard how these guys would give a mortgage to anyone — even to a corpse, the joke went. How the place was run like a frat house.

You wouldn’t believe the things that go on there, his brother-in-law had told him.

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