Thomas Caraccia v. U.S. Bank, National Association

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA

FOURTH DISTRICT

THOMAS CARACCIA,

Appellant,

v.

U.S. BANK, NATIONAL ASSOCIATION, AS TRUSTEE FOR BANK OF

AMERICA FUNDING CORPORATION MORTGAGE PASS THROUGH

CERTIFICATES, SERIES 2006-2,

Appellee.

No. 4D15-825

[February 24, 2016]

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm

Beach County; Roger B. Colton, Judge; L.T. Case No.

502011CA014772XXXXMB.

John M. Jorgensen and Derek M. Jorgensen of Scott, Harris, Bryan,

Barra & Jorgensen, P.A., Palm Beach Gardens, for appellant.

Nancy M. Wallace of Akerman LLP, Tallahassee, William P. Heller of

Akerman LLP, Fort Lauderdale, and Celia C. Falzone of Akerman LLP,

Jacksonville, for appellee.

FORST, J.

Appellant Thomas Caraccia appeals the final judgment of foreclosure

entered in favor of Appellee U.S. Bank. Appellant argues U.S. Bank failed

to prove that it had standing to foreclose and failed to comply with the

conditions precedent to foreclose. We disagree and affirm the trial court’s

entry of judgment in favor of U.S. Bank.

Background

In 2005, Appellant executed a promissory note and mortgage in favor

of Virtual Bank in order to purchase a property in Palm Beach Gardens.

Testimony at trial established that Virtual Bank endorsed the note in

blank, making it bearer paper, before transferring possession of the note

to Bank of America. Bank of America transferred the note to U.S. Bank,

as Trustee for a pooling and servicing agreement, in 2007. Shortly before

the filing of the complaint, U.S. Bank gave physical possession of the note

back to Bank of America, this time to act as a servicer for U.S. Bank.

Appellant defaulted on his mortgage and a default letter was sent to a

PO Box in Palm Beach Gardens. U.S. Bank then filed a foreclosure action

against Appellant. Appellant raised several defenses, including lack of

standing and failure to comply with paragraph twenty-two of the mortgage,

which specifies procedures for notice in the event of a default. After a

bench trial, the trial court entered judgment in favor of U.S. Bank. This

appeal followed.

Analysis

A. Standing

“We review the sufficiency of the evidence to prove standing to bring a

foreclosure action de novo.” Sosa v. U.S. Bank Nat’l Ass’n, 153 So. 3d 950,

951 (Fla. 4th DCA 2014) (quoting Lacombe v. Deutsche Bank Nat’l Trust

Co., 149 So. 3d 152, 153 (Fla. 1st DCA 2014)).

Appellant first argues that U.S. Bank failed to show that it had standing

to foreclose. Appellant contends that, because the note was endorsed in

blank, U.S. Bank’s failure to have physical possession of the note deprived

it of standing.

“A crucial element in any mortgage foreclosure proceeding is that the

party seeking foreclosure must demonstrate that it has standing to

foreclose.” McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170,

173 (Fla. 4th DCA 2012). “[A] party’s standing is determined at the time

the lawsuit was filed.” Id.

A negotiable instrument, such as the promissory note in this case, is

enforceable by the holder, a nonholder in possession of the instrument

with the rights of a holder, or a person not in possession but entitled to

enforce it. § 673.3011, Fla. Stat. (2013). A holder is “the person in

possession of a negotiable instrument that is payable either to bearer or

to an identified person that is the person in possession.” § 671.201(21)(a),

Fla. Stat.

“[W]ith bearer notes, possession of the note is the significant core

element to be analyzed.” Rodriguez v. Wells Fargo Bank, N.A., 178 So. 3d

62, 65 (Fla. 4th DCA 2015) (Conner, J., concurring). In this case, while

U.S. Bank did not have physical possession of the note at the time of filing

the complaint, it nonetheless maintained a possessory interest in the note.

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Although Bank of America physically possessed the note as the servicer of

the loan, the meaningful interest in the promissory note still remained with

U.S. Bank. Even where a third party has physical possession of the note,

so long as the plaintiff “had the power to exercise control over it, then [the

plaintiff] had constructive possession of the note.” Deakter v. Menendez,

830 So. 2d 124, 128 (Fla. 3d DCA 2002) (citing Bush v. Belenke, 381 So.

2d 315, 316 (Fla. 3d DCA 1980) (defining constructive possession as

possession in which a person “has such control over the property that he

may deliver the possession of it, if he so desires, as for example, where an

agent holds property for his principal”)).

This case is distinguishable from Tremblay v. U.S. Bank, National Ass’n,

164 So. 3d 85 (Fla. 4th DCA 2015). In Tremblay, the foreclosing bank’s

witness testified that the servicer was the holder of the note. Though the

witness testified there was a pooling and servicing agreement between the

servicer and the bank, he acknowledged he had not seen it, and it was not

admitted into evidence. Id. at 86. Based on this testimony, we held that

the servicer was the proper party to initiate the foreclosure proceedings.

Id.

Here, on the other hand, there was no evidence that Bank of America

held the note. The witness’s testimony and other evidence made it clear

that Bank of America merely operated as the servicer of the note for U.S.

Bank. This other evidence includes the Pooling and Servicing Agreement

for Appellant’s loan, which confirmed that any loan documents a servicer

may possess are held “for and on behalf of” U.S. Bank and remain U.S.

Bank’s exclusive property. The holder/servicer relationship between U.S.

Bank and Bank of America allowed U.S. Bank to exercise control over the

note, even while Bank of America retained physical possession of the

document. Had U.S. Bank requested, it could have obtained physical

possession of the note from its agent, Bank of America. While it might

have simplified the trial court’s standing analysis for U.S. Bank to have

done so in this case, we hold that such procurement of physical possession

was ultimately unnecessary where U.S. Bank is able to show constructive

possession of the note. We emphasize that we do not hold that possession

is not necessary when bearer paper is at issue; instead we hold only that,

when an agency relationship such as that exists here is at issue, the

element of possession can be met through either actual or constructive

possession.

B. Conditions Precedent

Appellant also argues U.S. Bank failed to comply with the conditions

precedent found in paragraphs fifteen and twenty-two of the mortgage and

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paragraph seven of the note. Paragraph fifteen of the mortgage states, in

relevant part, that “The notice address shall be the Property Address

unless Borrower has designated a substitute notice address by notice to

the Lender. Borrower shall promptly notify Lender of Borrower’s change

of address.” Similarly, paragraph seven of the note requires “any notice

that must be given to me under this Note will be given by . . . mailing it

. . . to me at the Property Address above or at a different address if I give

the Note Holder a notice of my different address.”

Here, the witness testified the United States Postal Service informed

U.S. Bank that Appellant did not reside at the property address and

provided the Bank with a new address at a PO Box. Consequently, U.S.

Bank sent the default notice to this new address, rather than the property

address. Six days later, Appellant sent a letter to the Bank, which listed

Homeowner’s return address as the PO Box to which the earlier

acceleration letter had been sent.

“Absent some prejudice, the breach of a condition precedent does not

constitute a defense to the enforcement of an otherwise valid contract.”

Gorel v. Bank of N.Y. Mellon, 165 So. 3d 44, 47 (Fla. 5th DCA 2015). In

this case, the address used by U.S. Bank for the default letter was a valid

address for Appellant. Although Appellant did not personally or directly

notify the Bank of this change of address prior to the mailing of the default

letter, U.S. Bank reasonably relied on the information from the Postal

Service to ensure that Appellant actually received the notice. Had the

Postal Service’s information proven incorrect, this may have been a

different case, but Appellant’s later correspondence from this address

confirmed the accuracy of the address utilized. The failure of U.S. Bank

to send the notice to the property address did not prejudice Appellant, and

may have even benefitted him. Accordingly, we decline to reverse the trial

court’s ruling on this issue.

Conclusion

In conclusion, Appellant has failed to show that the trial court erred in

entering judgment in favor of U.S. Bank. Appellee U.S. Bank was able to

prove that it had standing to foreclose as a holder in constructive

possession of the note. Additionally, although U.S. Bank sent the default

notice to an address other than the one specified in the mortgage contract,

this error did not prejudice Appellant and is insufficient to require reversal.

The trial court’s entry of judgment is affirmed.

Affirmed.

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WARNER and TAYLOR, JJ., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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