Couple Holding Purchase Money Note & Mortgage Left Holding The Bag After Unwittingly Signing Negligently-Prepared Satisfaction By Closing Agent

A Florida appeals court recently let a closing agent off the hook for any potential damages caused by negilgently preparing a satisfaction of mortgage and getting the unwitting couple holding the promisssory note secured by said mortgage to sign the satisfaction.

The Court said that, because the unwitting couple "never intended to extinguish [the debtor/maker's] obligations under the note, the mistaken satisfaction of the mortgage is subject to rescission and reformation and thus the [unwitting couple] never lost the ability to collect on the note."

Accordingly, because the unwitting couple never lost the ability to collect from the debtor/maker on the note, they failed to establish injury or damage proximately caused by the closing agent's screw-up, an essential element in supporting a negligence claim against the agent.(1)

I guess the court is telling the unwitting couple that their legal gripe is primarily with the guy who owes them the money, and not the closing agent who screwed up the paperwork.(2)

For the ruling, see All Real Estate Title Services, Inc. v. Vuu, Case No. 2D09-1196 (Fla. App. 2d DCA, November 17, 2010).

(1) In reaching its conclusion, the Florida appeals court found as follows (and essentially makes the legal case that the unwitting couple should have made against the debtor/maker obligated on the promissory note; bold text is my emphasis, not in the original text):

• Cancellation or renunciation of a promissory note and release of security is ineffective if it is unintentional or procured by mistake. Gover v. Home & City Sav. Bank, 574 So. 2d 306 (Fla. 1st DCA 1991); see also § 673.6041, Fla. Stat. (2001). A court may apply equitable principles to reverse the cancellation of a mortgage satisfaction when that satisfaction is the result of mistake or inadvertence. United Serv. Corp. v. Vi-An Constr. Corp., 77 So. 2d 800, 803 (Fla. 1955); First Family Mortg. Corp. of Fla. v. White, 549 So. 2d 1049, 1050 (Fla. 3d DCA 1989). Thus, the Vuus' unintentional renunciation of the note by way of the mistaken satisfaction of mortgage did not, and could not, have extinguished their rights under the note.
  
  To support a negligence claim, the Vuus were required to show (a) the existence of a duty recognized by law requiring Boyd and All Real Estate to conform to a certain standard of conduct for the protection of others, including the Vuus; (b) a failure on the part of Boyd and All Real Estate to perform the duty; and (c) injury or damage proximately caused by such failure. See Lisanti v. City of Port Richey, 787 So. 2d 36, 37 (Fla. 2d DCA 2001); Landrum v. John Doe Pit Digger, 696 So. 2d 926, 928 (Fla. 2d DCA 1997). Because the Vuus' right to recover under the note has not been extinguished, they have failed to carry their burden of showing that they have suffered any injury from the preparation of the satisfaction of the mortgage.
  
  Accordingly, we reverse the judgment in favor of the Vuus and remand for the entry of a judgment in favor of Boyd and All Real Estate.

(2) For those wondering if there may have been possible fraud and/or collusion betwween the closing agent and the debtor/maker obligated on the promissory note against the unwitting couple, they were not issues addressed by the ruling; the ruling was silent as to whether the unwitting couple made any allegations with regard thereto.