Fla. App. Court (4th DCA) Upholds Judgment for Borrower in Foreclosure Where Mortgagee Did Not File Allonge

The District Court of Appeal of the State of Florida, Fourth District, recently affirmed a final judgment in favor of a borrower because the foreclosing mortgagee failed to file the original allonge to the note, holding that as a result the mortgagee lacked standing to foreclose.

A copy of the opinion in U.S. Bank National Assoc., etc. v. Jean Kachik is available at:  Link to Opinion.

A mortgagee sued to foreclose the mortgage, attaching copies of the promissory note and an “Endorsement and Assignment of Note” to the complaint. The endorsement was “blank.”

At trial, the mortgagee offered the original note into evidence, but only a copy of the endorsement. After briefing, the trial court entered judgment in favor of the borrower and the mortgagee appealed.

On appeal, the mortgagee argued “that the endorsement and assignment was merely an assignment for which the original document was not required.” The Appellate Court rejected this argument and agreed with the borrower that “the subject document was an allonge and, as such, [the mortgagee] was required to file the original.”

The Appellate Court explained that “'[a] promissory note is a negotiable instrument …’ [and] [w]here a document is a negotiable instrument, the best evidence rule, as codified [in § 90.953(1), Florida Statutes] requires the production of the original.” Subsection 90.953(1) provides that “[a] duplicate is admissible to the same extent as an original, unless … [t]he document or writing is a negotiable instrument …. ‘Therefore, a party who seeks to foreclose on a mortgage must produce the original note.’”

The Appellate Court explained further that an allonge is “an addition to a negotiable instrument” that must be “so firmly affixed thereto as to become a part thereof. … Although Florida’s Uniform Commercial Code does not specifically mention an allonge, the Code provides that ‘[f]or the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a party of the instrument … [under § 673.2041(1), Florida Statutes].”

The Appellate Court then reasoned that when an allonge is blank or “does not identify a specific payee[,]” it is “payable to bearer.” “If an instrument is payable to bearer, it may be negotiated by transfer of possession alone” [pursuant to § 673.2011(2), Florida Statutes].”

The Appellate Court concluded that since ‘an allonge is part of the note, and an original note is required, it follows that an original allonge is required. … “or a satisfactory reason must be given for failure to do so.”

“Because [the mortgagee] failed to produce the original allonge and did not plead a lost instrument count,” the Appellate Court affirmed the trial court’s judgment in favor of the borrower.

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Hector Lora has substantial experience in all phases of complex commercial litigation, including motion practice, written discovery, depositions, mediations, bench and jury trials, and appellate practice. For more than a decade, his practice has focused extensively on the defense of civil enforcement actions filed by the FTC, as well as real estate litigation, and contested mortgage and condominium lien foreclosures and foreclosure of security interests under UCC Article 9. Hector also has substantial experience in advising a variety of types of businesses regarding their compliance with applicable federal and state laws, including the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Controlling the Assault of Nonsolicited Pornography and Marketing Act of 2003, and Florida laws governing telephone solicitation and communication. Hector received his Juris Doctor from the Georgetown University Law Center, and his undergraduate degree with honors from the University of Florida.