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The Note, the Transferee and the Wardrobe

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1. The Mysterious Plaintiff
Imagine Wells Fargo Bank, N.A. as Trustee for REMIC Trust 2007-CP1 Asset-Backed Certifi-
cates, Series 2007-CP1 is suing your client for foreclosure of real property and to re-establish a
lost note pursuant to Florida Statutes §673.3091.
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The Plaintiff alleges that it is the legal and/or equitable owner and holder of the Note and Mort-
gage by virtue of an unrecorded assignment. In support of its Motion for Final Summary Judg-
ment, the Plaintiff has attached a copy of a mortgage identifying UOWNIT.COM as the Lender,
MERS as the Nominee, and your client as the Mortgagor and a Copy of a “Pick-A-Payment” Ad-
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justable Note issued by your client and payable to UOWNIT.COM without any indorsement spe-
cifically to the Trust or in blank.
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An affidavit is submitted by an individual who is employed by America’s Home Servicer attest-
ing to the amounts due and owing and that the allegations contained in the Complaint are true
and correct based upon the affiants personal knowledge of the books and records of the Plaintiff
that are kept in the ordinary course of business.
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The Note and Mortgage are dated February 21, 2007 and a search of the records maintained by
the Florida Secretary of State indicates that UOWNIT.COM has been administratively dissolved
since September 2007.
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The hearing is special set in 20 days in front of Judge Sasser.

2. Narnia
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In Florida, the person holding the mortgage must have the right to enforce the secured obligation
in order to foreclose. In the example above, the right is alleged however the attached exhibits
contradict the allegations contained in the complaint. Or do they?
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The Florida Uniform Commercial Code speaks of the transferable right of enforcement of the
secured obligation, commonly referred to as the “promissory note”. Generally, the right of en-
forcement of the promissory note is transferable only by delivery of the instrument itself to the
transferee.
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The key issue is transfer. Defense counsel must identify the circumstances surrounding the
transfer of the Note. This is important in instances where evidence exists that the note has been
transferred such as when a Trust is suing, or in instances where evidence is not readily apparent
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that the note has been transferred such as in the case of Wells Fargo Bank, N.A. suing in its own

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name, or Chase Home Finance, LLC as successor in interest to JPMorgan Chase Bank, N.A.
suing in its own name when the Note and Mortgage is titled in the name of JP Morgan Chase
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Bank, N.A. 1

In the case of a securitization scheme, the process is as follows:

The originator of the “loan” UOWNIT.COM transfers the asset to a Special Purpose Vehicle
such as the Wells Fargo Asset Acceptance Corporation at face value or at a discount. The Asset
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is then transferred to a Qualified Special Purpose Vehicle Trust such as the REMIC Trust 2007-
CP1 Asset-Backed Certificates, Series 2007-CP1 or a Records Custodian serving as Agent to the
Trust under the pooling and servicing agreement mentioned supra.
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The rights of the instrument holder are detailed in the pooling and servicing agreement that also
includes the declaration of trust. In order for the Trust to acquire rights to the instrument, the
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instrument must be Transferred. “An instrument is transferred when it is delivered by a person
other than its issuer for the purpose of giving to the person receiving delivery the right to enforce
the instrument”. F.S. §673.2031(1).

Accordingly, the instrument must have been transferred to the Trust in order for the Trust to have
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acquired rights to the instrument with or without an indorsement. Addressing the enforceability
of the instrument, F.S. §673.3011 sets forth:

The term "person entitled to enforce" an instrument means:


(1) The holder of the instrument;
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(2) A nonholder in possession of the instrument who has the rights of a


holder; or
(3) A person not in possession of the instrument who is entitled to en-
force the instrument pursuant to s. 673.3091 or s. 673.4181(4).
A person may be a person entitled to enforce the instrument even though
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the person is not the owner of the instrument or is in wrongful posses-


sion of the instrument.

To be a “holder” of an instrument, one must possess the note and the note must be payable to the
person in possession or to bearer. F.S. §671.201(21)(a) (emphasis added). The “holder” option
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is not available in the event that the note is not payable to the Plaintiff or payable to bearer.

This option is not available for Wells Fargo Bank, N.A. has affirmatively pleaded that the Note
is lost. The issue is whether Wells Fargo Bank, N.A. can equitably or legally be the holder of a
lost Note. This writer thinks that they cannot, however, it does not preclude them from enforcing
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the Note in certain circumstances to be discussed in a moment.


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See F.S. §673.3021(3)(c) because Chase Home Finance, LLC has identified themselves as a “Holder in Due
Course” in some instances.

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Let us assume however that Wells Fargo Bank, N.A. notices the court that it intends to produce
the original Note at the hearing. However, the Note is still not indorsed specifically to the Trust.
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F.S. §673.3011(2) provides that a nonholder in possession of the instrument with the rights of a
holder may enforce the note. In this instance, Wells Fargo Bank, N.A. as Trustee is a nonholder
in possession of an instrument with the rights of a holder. However, the official comments indi-
cate that this is not enough and that Wells Fargo Bank, N.A. must prove the transaction by which
they acquired the note:
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If the transferee is not a holder because the transferor did not indorse, the
transferee is nevertheless a person entitled to enforce the instrument under
section F.S. §673.3011 if the transferor was a holder at the time of transfer.
Although the transferee is not a holder, under subsection (2) the transferee
obtained the rights of the transferor as holder. F.S. §673.2031(2). Because
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the transferee’s rights are derivative of the transferor’s rights, those rights
must be proved. Because the transferee is not a holder, there is no presump-
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tion under F.S. §673.3081 that the transferee, by producing the instrument is
entitled to payment. The instrument, by its terms is not payable to the trans-
feree and the transferee must account for possession of the unindorsed in-
strument by proving the transaction through which the transferee acquired it.
Assuming that Wells Fargo Bank, N.A. cannot produce the note as it has been allegedly lost, sto-
len, or destroyed note, the code allows a Plaintiff to re-establish the lost note. F.S. §673.3091
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sets forth:

(1) A person not in possession of an instrument is entitled to enforce the


instrument if:
(a) The person seeking to enforce the instrument was entitled to enforce the
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instrument when loss of possession occurred, or has directly or indirectly


acquired ownership of the instrument from a person who was entitled to en-
force the instrument when loss of possession occurred;
(b) The loss of possession was not the result of a transfer by the person or a
lawful seizure; and
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(c) The person cannot reasonably obtain possession of the instrument be-
cause the instrument was destroyed, its whereabouts cannot be determined, or
it is in the wrongful possession of an unknown person or a person that cannot
be found or is not amenable to service of process.
(2) A person seeking enforcement of an instrument under subsection (1)
must prove the terms of the instrument and the person's right to enforce the
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instrument. If that proof is made, s. 673.3081 applies to the case as if the per-
son seeking enforcement had produced the instrument. The court may not
enter judgment in favor of the person seeking enforcement unless it finds that
the person required to pay the instrument is adequately protected against loss
that might occur by reason of a claim by another person to enforce the in-
strument. Adequate protection may be provided by any reasonable means.
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Re-establishment however is the first step, because in the above scenario, the re-established Note
will not a holder make. In the event that the UOWNIT.COM note is re-established, the Trust
will still be a nonholder in possession of the note if an only if transfer was accomplished and
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must still “prove the transaction by which it acquired the note”.

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3. Practice
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The fact remains that the Plaintiff must prove the existence of the underlying debt obligation, a
default, and that they are a person entitled to enforce the instrument.

In addition, assuming that the Plaintiff is not a holder in due course, the Defendant should raise
all defenses that would be available if the Plaintiff was enforcing a simple contract. F.S.
§673.3051(1)(b).
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Such defenses include Payment, Failure of Consideration, No Damages, and Fraud in the In-
ducement. In the event that a transferee Plaintiff exists, the circumstances surrounding the ac-
quisition of the Note are relevant not only to investigate the nonholder in possession or the rees-
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tablishment of a note that does not contain an indorsement but to establish whether contract de-
fenses exists under F.S. §673.3051(1)(b).
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When transferees are involved, the Evidence Code relating to personal knowledge of Books and
Records and Best Evidence is important. Motion’s to strike affidavits that attest to the books and
records of the original payee on the Note are important.
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Objections to Discovery that relate directly to the existence of the debt, circumstances surround-
ing the default, and the rights of the Plaintiff to enforce the note should be met immediately with
either motions to compel, fine crafted Request for Admissions, and a Motion to Strike Affidavits
submitted in support of any Motion for Summary Judgment. In addition a Motion in Limine to
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Exclude Evidence from trial should be filed once Summary Judgment is denied.

Notes.
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671.103 Supplementary general principles of law applicable.--Unless displaced by the particular provisions of this code, the principles of law
and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress,
coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.

671.201 General definitions.--Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions
contained in other chapters of this code which apply to particular chapters or parts thereof, have the meanings stated. Subject to definitions con-
tained in other chapters of this code which apply to particular chapters or parts thereof, the term:
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(21) "Holder" means:


(a) 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;

(24) "Money" means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary
unit of account established by an intergovernmental organization or by agreement between two or more countries.
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(29) "Purchase" means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other
voluntary transaction creating an interest in property.
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673.2011 Negotiation.--
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(1) The term "negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer
to a person who thereby becomes its holder.

(2) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the
instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.
History.--s. 2, ch. 92-82.

673.2031 Transfer of instrument; rights acquired by transfer.--


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(1) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery
the right to enforce the instrument.

(2) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the
instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly
or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.
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(3) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement
by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor, but negotiation of the instru-
ment does not occur until the indorsement is made.
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(4) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no
rights under this chapter and has only the rights of a partial assignee.
History.--s. 2, ch. 92-82.

673.2041 Indorsement.--
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(1) The term "indorsement" means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other
words is made on an instrument for the purpose of negotiating the instrument, restricting payment of the instrument, or incurring indorser's liabili-
ty on the instrument; but, regardless of the intent of the signer, a signature and its accompanying words is an indorsement unless the accompany-
ing words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a pur-
pose other than indorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a
part of the instrument.
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(2) The term "indorser" means a person who makes an indorsement.

(3) For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the
instrument is effective as an unqualified indorsement of the instrument.
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(4) If an instrument is payable to a holder under a name that is not the name of the holder, indorsement may be made by the holder in the name
stated in the instrument or in the holder's name or both, but signature in both names may be required by a person paying or taking the instrument
for value or collection.
History.--s. 2, ch. 92-82.

F.S. §673.3011 Person entitled to enforce instrument.--The term "person entitled to enforce" an instrument means:
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(1) The holder of the instrument;


(2) A nonholder in possession of the instrument who has the rights of a holder; or
(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s. 673.3091 or s. 673.4181(4).
A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful posses-
sion of the instrument.
History.--s. 2, ch. 92-82.
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673.3021 Holder in due course.--

(1) Subject to subsection (3) and s. 673.1061(4), the term "holder in due course" means the holder of an instrument if:
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(a) The instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so
irregular or incomplete as to call into question its authenticity; and

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(b) The holder took the instrument:
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1. For value;
2. In good faith;
3. Without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another
instrument issued as part of the same series;
4. Without notice that the instrument contains an unauthorized signature or has been altered;
5. Without notice of any claim to the instrument described in s. 673.3061; and
6. Without notice that any party has a defense or claim in recoupment described in s. 673.3051(1).

(2) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (1), but discharge
is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of
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itself constitute notice of a defense, claim in recoupment, or claim to the instrument.

(3) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in
due course of an instrument taken:

(a) By legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar proceeding;
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(b) By purchase as part of a bulk transaction not in ordinary course of business of the transferor; or
(c) As the successor in interest to an estate or other organization.
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(4) If, under s. 673.3031(1)(a), the promise of performance that is the consideration for an instrument has been partially performed, the holder
may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument equal to the value of
the partial performance divided by the value of the promised performance.

(5) If the person entitled to enforce an instrument has only a security interest in the instrument and the person obliged to pay the instrument has a
defense, claim in recoupment, or claim to the instrument that may be asserted against the person who granted the security interest, the person
entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument which, at the time of
enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.
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(6) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.

(7) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.
History.--s. 2, ch. 92-82.
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673.3031 Value and consideration.--

(1) An instrument is issued or transferred for value if:

(a) The instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;
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(b) The transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;
(c) The instrument is issued or transferred as payment of, or as security for, an antecedent claim against any person, whether or not the claim is
due;
(d) The instrument is issued or transferred in exchange for a negotiable instrument; or
(e) The instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a third party by the person taking the
instrument.
(2) The term "consideration" means any consideration sufficient to support a simple contract. The drawer or maker of an instrument has a de-
fense if the instrument is issued without consideration. If an instrument is issued for a promise of performance, the issuer has a defense to the
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extent performance of the promise is due and the promise has not been performed. If an instrument is issued for value as stated in subsection (1),
the instrument is also issued for consideration.
History.--s. 2, ch. 92-82.

673.3051 Defenses and claims in recoupment.--

(1) Except as stated in subsection (2), the right to enforce the obligation of a party to pay an instrument is subject to:
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(a) A defense of the obligor based on:


1. Infancy of the obligor to the extent it is a defense to a simple contract;
2. Duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor;
3. Fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential
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terms; or
4. Discharge of the obligor in insolvency proceedings;

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(b) A defense of the obligor stated in another section of this chapter or a defense of the obligor that would be available if the person entitled to
enforce the instrument were enforcing a right to payment under a simple contract; and
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(c) A claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the
instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument
at the time the action is brought.

(2) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in
paragraph (1)(a), but is not subject to defenses of the obligor stated in paragraph (1)(b) or claims in recoupment stated in paragraph (1)(c) against
a person other than the holder.
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(3) Except as stated in subsection (4), in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the
person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument (s. 673.3061) of another person, but the other
person's claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against
the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument
does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.

(4) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the per-
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son entitled to enforce the instrument any defense or claim in recoupment under subsection (1) that the accommodated party could assert against
the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy, and lack of legal capacity.
History.--s. 2, ch. 92-82.
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673.3091 Enforcement of lost, destroyed, or stolen instrument.--

(1) A person not in possession of an instrument is entitled to enforce the instrument if:

(a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indi-
rectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;
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(b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and

(c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be deter-
mined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
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(2) A person seeking enforcement of an instrument under subsection (1) must prove the terms of the instrument and the person's right to enforce
the instrument. If that proof is made, s. 673.3081 applies to the case as if the person seeking enforcement had produced the instrument. The court
may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately
protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by
any reasonable means.
History.--s. 2, ch. 92-82; s. 1, ch. 2004-3.
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