Photo by Melanie Bell.

A mortgage that was “passed around like the flu” seemed to send two South Florida courts down a rabbit hole as a successor creditor with multiple predecessors tried to prove legal standing to foreclose on the property.

It was so complicated, the appellate court noted that the mortgage company's attorneys' “valiant effort” to map out the chain of ownership resulted in a labyrinth of “different types of arrows pointing in all directions.”

Plaintiffs looking to collect on a defaulted real estate debt must prove their right to do so. But by the time the suit came before Florida's Fourth District Court of Appeal, a mangled chain of ownership left judges to decipher who owned a debt that had traded at least half a dozen times on the secondary market.

“In this mortgage foreclosure case, the underlying mortgage was passed around like the flu, giving rise to a complexity of ownership that frustrated the appellee's attempts to demonstrate standing at trial,” Fourth District Judge Robert M. Gross wrote in the unanimous decision issued Wednesday with Judges Melanie G. May and Mark Klingensmith.

Court records suggest Thomas Wade Young and Joseph B. Towne of Lender Legal Services LLC in Orlando created a thorough work product—but perhaps with a level of detail that did nothing to simplify their position.

“To the answer brief, the appellee attached a chart of the ownership lineage of the
mortgage and note, with different types of arrows pointing in all directions—a valiant effort which demonstrated that the transfer history here defies pictorial representation,” Gross wrote for the appellate court.

The case pitted appellant and homeowner Marcia Supria against creditor Goshen Mortgage LLC. It involved a maze of parties that ended with Goshen substituting for the original plaintiff, Christiana Trust, a division of Wilmington Savings Fund Society FSB, as trustee for Stanwich Mortgage Loan Trust's series 2012-13.

By the time Goshen entered the picture, court records suggest the debt had changed hands at least five times. But with the sloppy documentation typical of the period of brisk trading during the last housing market collapse, it was difficult to trace clear changes in ownership.

“It's been well-known among the foreclosure bar, both on the plaintiffs bar and the defense bar, that the Fourth DCA is very strict in requiring evidence of standing,”  said McGlinchey Stafford member Manuel Farach, who was not involved in the litigation but sits on the Florida Bar's executive council for the Real Property and Business Law Sections. This case is an indication of that.”

The judicial panel found the first transfer invalid because no evidence supported the assignor's authority to give ownership of the debt to another party. The second also fell short, this time because the court saw no proof the assignor had a transferable interest. The third and fifth were both flawed, transferring the mortgage but not the promissory note.

In the end, the Fourth DCA disagreed with Broward Circuit Judge Kathleen D. Ireland, who'd sided with Goshen. It instead found the financial institution had failed to prove standing and remanded the case for a judgment in the homeowner's favor.

The ruling was a victory for foreclosure defense attorneys, but some members of the plaintiffs bar suggest such decisions do more to cool trading of real estate debt than to protect consumers.

“It appears there were some abuses at some point in the past in terms of how people were endorsing instruments,” Farach said. “I just haven't seen a lot of concrete examples or situations where this has been a problem. There've been hundreds of thousands of foreclosures in Florida. I haven't seen a single case where two people were claiming ownership of a note. If this were a huge problem then we would have seen not just one but several cases.”