Reminder To Florida Trial Judges On Reestablishment Of Lost Notes (Both In Foreclosure & Non-Foreclosure Debtor-Creditor Cases): No Entry Of Judgment Allowed Until Person Required To Pay On Instrument Is Adequately Protected Against Risk Of Loss Of Double Payment
A recent ruling by a Florida appeals court serves as a reminder to all trial judges presiding over debtor-creditor cases (both foreclosure and non-foreclosure cases) that, when a bankster claims to have lost the promissory note it seeks to enforce, and is able to provide sufficient evidence to prove entitlement to reestablish a lost note, a trial judge still cannot enter a final judgment in the bankster's favor without first providing adequate protection to the property owner as mandated by Fla. Sta. § 673.3091.
The protection is against the possibility that the lost note turns up in another party's hands, and that party attempts to enforce the note a second time (essentially, making the property owner pay twice).
From the ruling:
- (2) A person seeking enforcement of an instrument under subsection (1) must prove the terms of the instrument and the person's right to enforce the instrument. If that proof is made, s. 673.3081 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means. § 673.3091, Fla. Stat. (2014) (emphasis added).
As this statutory language makes clear, and contrary to the Blitches' argument here, adequate protection is not an element of the Bank's prima facie case. Instead, it is a post-proof condition of the entry of the final judgment. See Fifth Third Bank v. Alaedin & Majdi Invs., Inc., No. 8:11-CV-2206-T-17TBM, 2012 WL 1137104, at *3 (M.D. Fla. Apr. 4, 2012) (noting that after the plaintiff showed that it was entitled to enforce the note at the time it lost the note, "the Court is required to address the issue of providing adequate protection to the defaulting party against loss that might occur if a claim were brought by another party to enforce the instrument"); see also Correa v. U.S. Bank Nat'l Ass'n, 118 So. 3d 952, 956 n.2 (Fla. 2d DCA 2013) (stating that "[i]f the court is concerned that another person might attempt to enforce the original note, it may require security in favor of the payor to ensure adequate protection" (emphasis added)); Beaumont v. Bank of New York Mellon, 81 So. 3d 553, 555 (Fla. 5th DCA 2012) (after discussing the deficiencies in the bank's proof, stating "[t]he trial court was also required to address the issue of providing adequate protection to Beaumont" (emphasis added)).
Because the court's consideration of the issue of adequate protection is a condition of entering a judgment that reestablishes a lost note, its failure to provide adequate protection, or to make a finding that none is needed under the circumstances, requires reversal and remand for the court to consider the issue. See Delia v. GMAC Mortg. Corp., 161 So. 3d 554, 556 (Fla. 5th DCA 2014).
Generally this post-proof condition is satisfied through a written indemnification agreement in the final judgment, the posting of a surety bond, a letter of credit, a deposit of cash collateral with the court, or "[s]uch other security as the court may deem appropriate under the circumstances." § 702.11(1)(e), Fla. Stat. (2014).
Here, the Bank proved at the bench trial that (1) it was entitled to enforce the note when the loss of possession occurred; (2) the loss of possession was not due to a valid transfer or lawful seizure; and (3) it could no longer reasonably obtain possession of the note because it was lost while in the possession of its first law firm, which is no longer in existence. The Bank also presented evidence to establish the terms of the note and that it had the right to enforce it when it was lost. This evidence was sufficient to show that the Bank was entitled to reestablishment of the lost note.
However, the trial court made no provision for adequate protection of the Blitches in the final judgment, nor did it determine that adequate protection was unnecessary in this case. This omission requires us to reverse the final judgment and remand for further proceedings, at which the court must address the means by which the Bank must satisfy this post-proof condition.
For all those past foreclosure judgments that have been entered in "lost note" cases that ended up in a foreclosure sale, where adequate protection against the risk of double payment was neither given to the homeowner, or even addressed by the trial judge, are those foreclosure sales VOID, or are they MERELY VOIDABLE???
Since there was no foreclosure sale in this case, the point was a non-issue, and accordingly, was unnecessary to address by the court.