Third District Reverses Final Judgment of Foreclosure Entered in Favor of Homeowners

HSBC v. Buset, 43 Fla. L. Weekly D305 (Fla. 3d DCA 2018)

In Buset, the Third District reversed a foreclosure judgment entered in favor of the homeowner, and directed that judgment be entered for the bank.

In 2005, the Buset family obtained a loan from Fremont Investment & Loan. The lender packaged the note with other notes for securitization. Securitization is the process of pooling mortgages and other contractual debt for resale to third-party investors. The notes contained an undated and unsigned endorsement. Eventually, the homeowners defaulted on the loan.

At trial, the homeowners called one witness, a New York attorney named Kathleen Cully, Esq. who gave both legal and personal opinions about the note claiming that the note was not negotiable; the lender lacked standing; and the pooling agreement was violated due to an improper endorsement. The trial court relied heavily on the expert testimony and found for the homeowners. The lender appealed.

The Third District ruled that the trial court erred when Cully’s testimony regarding legal issues was admitted as expert testimony because experts should not be allowed to testify on purely questions of law. The Third District held that expert testimony is inadmissible when it concerns a question of law because the determination of legal issues should be resolved by a trial judge through assistance of counsel.

Additionally, the trial court erred in ruling that the note was not negotiable because it did not follow controlling precedent regarding negotiable instruments. For a note to become non-negotiable, the note must expressly incorporate the terms of the mortgage not just reference it. This note only referenced the mortgage, and did not apply the terms of the mortgage. Therefore, the note remained a negotiable instrument.

The trial court also erred in ruling that the lender did not having standing. The trial court determined the lender lacked standing because there was an incomplete chain of endorsements. Foreclosure cases are based on the person’s entitlement to enforce the instrument, not the ownership of the instrument. Since the note had a blank endorsement, it became bearer paper which made it negotiable by a simple transfer to the Bank. Therefore, the lender had standing to bring the foreclosure claim.

Lenders and homeowners have competing interests in foreclosure proceedings. Having the right counsel to guide you through the legal process, while making sure your rights are protected is essential. If you or someone you know need to initiate a foreclosure proceeding or be defended in such a proceeding, please contact the lawyers at Kahn & Resnik, P.L. Our lawyers proudly serve all of Florida and will fully represent your legal needs. Call us now at 954-321-0176 to set up a consultation.