Fourth DCA Clarifies Standards for E-Notes in Foreclosure Cases and Reminds Appellants of the Need to Preserve Arguments


Rivera v. Wells Fargo Bank, N.A., et al., Case No. 4D14-2273 (Fla. 4th DCA, April 20, 2016)*

In a recent foreclosure case that was based on an electronic promissory note (“e-note”), the borrowers raised four arguments in their appeal to Florida’s Fourth District Court of Appeal (“Fourth DCA”). The Fourth DCA decided that two of the arguments lacked merit, and it rejected the other two because they had not be raised in the trial court.

The borrowers’ overall contention was that the bank had failed to establish standing to file suit when the action was commenced. The four specific arguments against the bank’s standing were that the bank: 1) did not prove that it had possession of the e-note before filing suit; 2) did not show that the e-note contained valid signatures of the borrowers; 3) failed to prove that the previous holders of the e-note complied with its terms for transferring the e-note to subsequent holders; and (4) did not show that Fannie Mae owned the e-note and authorized the bank to pursue the foreclosure.

The Fourth DCA rejected the first and third arguments regarding the issue of standing, because those specific arguments were not raised in the trial court. The court pointed out that an argument is not cognizable on appeal unless that specific contention was previously asserted as a legal ground for an objection, exception, or motion in the lower tribunal. See Aills v. Boemi, 29 So. 3d 1105, 1108-09 (Fla. 2010). That decision serves as a reminder of the requirement of preserving arguments for appeal.
After rejecting the first and third arguments on that procedural basis, the appellate court considered the merits of the borrowers’ second and fourth arguments, regarding the sufficiency of the evidence to prove standing. The court applied a de novo standard of review, meaning that it reviewed these legal issues afresh and did not give deference to the trial court’s conclusions. Based on its de novo review, the Fourth DCA decided that the borrowers’ second and fourth arguments lacked merit.

The appellate court reasoned that the second argument lacked merit because the borrowers did not introduce any evidence in the trial court to support a finding that their electronic signatures on the e-note were forged or unauthorized. Therefore, the bank was not required to prove that their electronic signatures were valid.

The appellate court concluded that the borrowers’ fourth argument lacked merit because the bank presented competent, substantial evidence that Fannie Mae owned the e-note and authorized the bank to pursue the foreclosure. The appellate court based that conclusion on Florida’s Uniform Electronic Transactions Act and a review of the bank’s evidence in the case. The Fourth DCA concluded that the bank was the e-note’s holder and had the same rights as a holder of an equivalent record or writing under the Uniform Commercial Code because the bank proved that Fannie Mae had control of the e-note and that the bank was Fannie Mae’s designated custodian. There was also competent, substantial documentary evidence and witness testimony proving that Fannie Mae authorized the bank to pursue the foreclosure.

Thus, the Fourth DCA rejected the second and fourth arguments on the merits and affirmed the trial court’s judgment of foreclosure.

*The decision is not final until disposition of any timely-filed motion for rehearing.