Florida 4th DCA dismisses JPMorgan Chase Foreclosure Citing JPMorgan Chase Failed To Assign Mortgage & Note From JPMorgan Chase Owned Subsidiary

Last week, the Florida 4th DCA (District Court of Appeals) ruled JPMorgan Chase v. Wright (Case No. CACE09065166) that JPMorgan lacked standing to foreclose on Gainus and Cyd R. Wright because JPMorgan Chase had failed record a mortgage assignment with the Broward County Clerk of the Court and endorse the note from the originating lender, Chase Bank (which merged with JPMorgan 20 years ago) to JPMorgan Chase Bank even though Chase Bank is now a wholly owned subsidiary of JPMorgan Chase.

The ruled:

“The original lender under the note and mortgage was Chase Bank, USA, N .A. There was no evidence that the note and mortgage were ever
transferred from Chase Bank to JPMorgan Chase. Although there was testimony at trial that Chase Bank is a wholly owned subsidiary of JPMorgan Chase, “[a] parent corporation and its wholly-owned subsidiary are separate and distinct legal entities …. As a separate legal entity, a parent corporation … cannot exercise the rights of its subsidiary.” Am. Int’l Group, Inc. v. Cornerstone Bus., Inc., 872 So. 2d 333,336 (Fla. 2d DCA 2004); see also Federated Title Insurers, Inc. v. Ward, 538 So. 2d 890,891 (Fla. 4th DCA 1989). Thus, ownership of the note by subsidiary Chase Bank does not give parent corporation JPMorgan Chase the right to enforce the note, absent evidence that JPMorgan Chase acquired such a right through, for example, a purchase or servicing agreement.

JPMorgan Chase argues that it did acquire servicing rights over the loan prior to the filing of the complaint, relying on a notice of servicing transfer filed in the court file. This document is not competent evidence, however, because it was never authenticated and admitted into evidence at trial. See Wolko//v. Am. Home Mortg. Serv., Inc., 153 So. 3d 280, 281-82 (Fla. 2d DCA 2014) (“A document that was identified but never admitted into evidence as an exhibit is not competent evidence to support a judgment.”); Beaumontv. Bank.of New York Mellon, 81 So. 3d 553,555 n.2 (Fla. 5th DCA 2012) (copy of an assignment of a note in the court file was not competent evidence where it was never authenticated and offered into evidence).

We thus reverse and direct judgment in favor of the appellants, dismissing the foreclosure on the mortgage for failure of the appellee to prove its standing.”

This ruling has the potential to change the foreclosure landscape in Florida because the lenders can not claim “operation of law” when they fail to properly transfer ownership of the mortgage and note. This ruling doesn’t just affect loans originated by JPMorgan Chase owned companies. This ruling could affect most mortgages originated by World Savings Bank or Wachovia that are now owned by Wells Fargo. It can also be applied to any Countrywide mortgages that are now owned by Bank of America.

Previously Operation of Law was invoked by lenders who acquired other lending institutions like Bank of America’s acquisition of Countrywide Financial and Wells Fargo’s acquisition of Wachovia who less than a year before acquired World Savings Bank.

JPMorgan Chase attempted to invoke Operation of Law with their acquisition of Washington Mutual assets. However, state courts across the U.S. shot down the argument because they purchased certain assets of Washington Mutual through the FDIC after Washington Mutual went into FDIC receivership and had filed Chapter 11 bankruptcy.