DEFENDANTS' W)TION_TODISMISS COMPLAINT

Defendants, (hereinaf ter " Defendants"), by and through the mldersigned comlsel, and

respectfully files with this Court DEFENDANTS' MOTION TO DISMISS COMF'LAINT,

pursuant to Fla. R Civ.. P. 1.120(a) and 1.140(b)(6), Fla. R Civ. Pro., and precedent case law,

and in support thereof states:

FACTS

I. This is an action for foreclosUre of residential real property owned by the Defend;mts.,

2. The named Plaintiff in this cau;e is AURORA LOAN SERVICES, LLC (hereinafter

" Plaintiff '). The Plaintiff initiated Ibis action when it filed its complaint on or about July 13,

2011.

3. There are, however, three fatll defects in the Plaintiffs Complaint which proves fatal to

its cause. The facts surrounding each defect are explained in detail below.

Defecl: I"-'Failure to Plead Capacity

4. To begin, while the name of the Plaintiff in the instant lawsuit is asserted in the caption of

its Complaint, nowhere in the body of Plaintiff s Complaint does the Plaintiff set off or desclibe

in any way its entity"status nor does the Plaintiff assert in what capacity does the Plaintiff

contend it may avail itself to the jurisdiction of this Court.

' the body of Plaintiff s Complaint does it assert file basis for its
5. Additionally, nowhere m

entity"existence or explain in any wa~ th.' form of the entity that presents itself before the court.

6. Therefore, the Plaintiff has failed to plead its capacity to the extent necessm7 to show the

jurisdictionof this Court. Dismissal of its Complaint is therefore warranted.

1
 7. The Plaintiff s failure to pleaj at cause of action is bundled up in: (I) its failure to plead

that it owns and holds the note and nottgage; or (2) adequately plead the requisite elements of

agency relationship betweenitself anll.he true owner of the debt.

8. With respect to ownership of the note and mortgage, it is imperative that tliis Court note

that the Plaintiff s cause of action is tIn in rem action in equity to foreclose a mortgage arld not an

in personam action at law for enfc'rcement of the note for money damages. See Sun&st

Mortgage v. Fullerton, 16 Fla. L. Weekly Supp. 1146b (6th Judicial CI.rcuit, Pinellas County,

October 2009). Due to the claim for relief, the Plaintiff must be both the owner and holder of
the

subject mortgage. See e.g yerizzo v fl_ank 9f N.Y 28 So. 3d 976, 978 (Fla. 2d DCA 2010).

9. Here, Plaintiff has specificall!' pl- ed that someone other than itself is the owrter of the note

andmortgage.

10- Moreover, Plaintif`f has failed to plead: (1) who its principal is and therefOre

acknowledgment by the principal that Plaintl.ff will act for him or her, (2) Plaintifl`s acceptmlce

of the undertaking, and (3) control by the principal over the actions of Plaintiff

11. There, because Plaintiff has 1hi.led to allege that it either owns the note or mortgage or

plead all requisite elements to establish :m agency relationship, it is has failed to state a cause of

action and its Complaint should be dismissed.

Defect III - Note is nonnegotiable

12. As an addition to, or in the alternative of, Defect II, the Complaint should be dilsmissed

because the subject note is non"negotiable and therefore Plaintiff cannot seek recourse pursuant

to Fla. Stat. h673.3011 as it appears t,, do so here.

13. Specifically, the subject note is not negotiable because it contains several instructions or
undertakings other than the payment ,)f money, to wit:
 a. The instluction that the borrower pay a late charge if the lender has not received

payment by the end of fifteen calendar days after the date payment is due in

clause 7(A);

b. The instruction that tf e lender will deliver or mail to the borrower any changes in

.
the interest rate and monthly payments in clause 4(H);

c. The obligation that the borrower to tell the lender, in writing, if borrower opts to

may prepay in clause 5;

d. The instruction that if applicable law " is finally interpreted" so that the interest

charged under the note or other loan charges exceed legal linlits, then: (1) ;my

such charge shall be leduced by the amount necessary to reduce the chm.ge to be

permitted, and (2) the lender shall refund such charges to the born,wer in clause

6;

e. The instruction that the lender send any notices that must be given to the born)wer

pursuant to the terms of the subject note by either delivering it or mailiing it by

flrst class mail in clanse 8; and

.
f. The instruction that the "t.u)rrower send any notices that must be given to thelender

pursuant to the terms of the subject note by either delivering it or mailiing it by

first classmail in clau;e 8.

14. Because the subject note is mo negotiable, Plaintiff cannot avail itself to h673, et seq. Its

Complaint should therefore bedismi!;sed.

STANDADD OF REVIEW

15. " The purpose of a motion tc dismiss is to ascertain if the plaintiff has aIleged a good

cause of action." Connollyv. Sebecc nc 89 So. 2d 482 (Fla. 1956).

3
 16. In ruling on adefendant's mc,flan to dismiss, a trial court is limited to the four comers of

the Complaint, and it must accept all tile allegations in the Complaint as true.See Lutz_ Lake
Fem

Rd. N.eighbc,rhood Gr9_up nc. v. HiJlsbQrough Coun_ty, 779 So.2d 380, 383 (Fia. 2d DCA

2000).

R
17. However, exhibits attached to a Complaint are a part of the Complaint. See B__on v._,City

of Marathon, 949 So.2d 295 (Fla 3rd DCA 2007) (" when considering a motion todismiss, a trial

court is required to consider any exhibit attached to, or incorporated in the pleading"). See also

Harry .Pepper & Asso nc. v. La mer, 247 So.2d 736 (Fla. 3rd DCA 1971) (stating [i]n

considering a motion to dismiss the triaf court was required to consider the exhibit attached

R
to and incorporated in the amendec complaint" and quoting Florida Rule o Civil___.Proced.ure_

1.130(b), providing that " [a]ny exhibit attached to a pleading shall be considered a part thereof

for all purposes").

18. As such, an exhibit attachec to a Complaint is a part of the Complaint and may be

considered when ruling on a motion to dismiss and considering exhibits attached to a Complaint

does not violate the " four comers" rule.

19. Further, exhibits attached t' ) a Complaint must agree with the allegations of the

Complaint, and where to twodo not "18_gfcc, the exhib_it_s control. See also, Ge R
Gen. Ins <o._

V. Graci, 849 So.2d 1196 (Fla. 4th DCA 2003) and Ginsberg v. Lennar FJa. Ilol__
Rd. N.

So.2d 490, 494 (Fla. 3d DCA 1991) (where exhibits contradict complaint allegations, plain

meaning of exhibits control). Hm _t & Associates V. Lasseter, 247 So.2d 736 (Fla. 3d

R
DCA 1971) and see Hit-Ap_plication 5Ws V._Hartford Life, 381 So.2d 294 (Fla. Ist DCA 1980).

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION

I. The Plaintiff s Complaint must be dismissed because of its failure to plead its
capacity to sue
4
 a. Legal Standards

t
20. " Uni'kc the pleading require;ments in the federal courts where notice pleading is the

prevailing standard, the Florida Rules of Civil Procedure require fact pleading." Ran__gel. Coutru._

v. Martin Cos 881 So. 2d 677, 680 (F]a. 5th DCA 2004).

21. " In order to state a cause of action, a complaint must allege sufficient ultimate facts to

show that the pleader is entitled to relief." Med. & Be%fits Plan v. %9, 867 So. 2d I‘J 84 (Fla.

5th DCA 2004).

22. " At the outset of a suit, litigalt:; must state their pleadings with sufficient ptuticularity for

a defense to be prepared." Horowitz Laske, 855 So. 2d 169, 173 (Fla. 5th DCA 2003) (citing

So. 2d 561 (Fla. 1988)).

23. Fla. R Civ. Pro. 1.120(a) pro`Jides that

[i]t is not necessary to aver fl e capacity of a party to sue or be sued, the authorit.y
of a party to sue or be sued in a representative capacity, or the legal existence of
an organized association of Msons that is made a party, except to !Ke extent
required to show. the -jfi-risdjmon__of the court. Bold emphasis added The
initial pleading served on behalf of a minor party shall specifically aver the age of
the minor party. When a pa_____ ,
of anmrty, the capacity oi alay.pa- rfy to sue___ur be sued, or ,the anth9r__ a
a o sue or be.sued in a __r_ t o
specific negative averment wh_ich shah includ_e_such supportinh pa____
t__ pecuKarfy within the pfca-1 's hnowleclftc, Bo/d emphasis added. t
t
24. Fla. R. Civ. Pro. 1.110(b) requires that a complaint include a " short and plain statement

of the grounds upon which the Court 's jluisdiction depends."

25. " Capacity to sue" is an absence of legal disability which would deprive a parly of the

right to come into court. 59 Am.Jw.2d Parties k 31 (1971). This is in contrast to " standing"

which requires an entity have sufficicnt 1.nterestt in the outcome of litigation to warrant the coL/rt's

5
consideration of its position. Keehn ,'__,__Jl>seph C. Macke_y and Co., 420 So.2d 398 (Fla. 4th DCA

1982).

26. The Fourth District court saic in Wittington Co_ndo-minium A s. Inc. v.~ BraemELr Ccm.,

313 So.2d 463, 466 (Fla. 4th DCA 1S75), cert. denied, 327 So.2d 31 (Fla. 1976):

.e_nt'.. ' referred to in Rule I.I20 may bcMnected

The ‘specific negative avenn`.i-
in a responsive pleading (ans‘Ner) or presumably in what nigh__ be
descflbed,_.as a " speakingmotion" whether___denominated_ a&a motion.to
.e
dismiss_a_ nlotio_il to drop improperly joined patjtjes ora motion___to Stu.ke..
_
Bold emphasis added.

27. Moreover a complaint's facial defect can be attacked appropriately for lack of capacity to

sue pursuant to Federal Rule of Cilil Procedure 9(a) (upon which Florida Rule 1.120(a) was

patterned identically) by a motion to d`Ì:smiss which can be justified under Federal Rule of (.,...]ivil
.

Procedure 12(b)(6), i.e., failure to su te a claim upon which relief can be granted. Klcbano v._

New York Produce Exchan- ge, 344 F.2d 294 (2d Cir.1965). See also 2A J. Moore & J. Lucas,

Moore's Federal Practice c.l'l- 12.07-.38 (2d ed. 1982), and 5 C. Wright & A. Miller, Federal
e
Practice and Procedure y6 1292-1295, 11360 (1969 & Supp. 1981).

28. The failure to adequately pleid capacity has been grounds for dismissals of lawsuits in

Florida state courts. See e. g. Asocim:ion de Perjudiacados v. Citibank, 770 So.. 2d 1267 (Fla. 3d

DCA 2000) (dismissing case for lack of capacity as distinguished from lack of standing).

29. Furthermore, the Comment to the Rule (2004 Version), states that " if a pmiuvoJved in_

a suit in other than bis individual cypaciWhe capac.-ity- m which be is a _pa___.e should he_

.e
_indicated in the caption and the pJead,_,ings." Bold emphasis added.

30. " The naming of an individlxaI[_ or entiW in the caption is m>t a sllfficleat
. basis~ to

`warrant inclusion in the action if the__party is. not mentioned in the body of fft-e compJaint."

6
So. 2d 1346 (Fla. 5th DCA 1986). See also Trawick's Florida.Practice and Procedure G6-2

(2004 ed.), pg. 83 (providing that " ,he_caption is not_a_ part of the plead r purp9ses of

motionsdirectedto the pleading. [h"__."e

[ caption is in the margin of the plead-ing, The margin

[h"__."e sses all of the colnponents_e _ccep!the

" utisdiction al/egatio"- n-"-").
b~nd1- " s
capt
[h"__."e caption is in the margin of the_.plead-ing, The margin $_.. _.not

[h"__."e f the pleading for purposes___of_ motions to dismiss_. as the commen__ccntent__is in"-""tfle
capt
ion fthe_ pJ__ ading. Trawi_ck's Flo_rida_Practice and Procedure h6-3 (2004 ed.), pg. 83.
[h"__."e
is in
32. Although the capacity issue is new, it is important to note that judges in circuit col.u.ts

across this State have routinely recogllized the legitimacy of the capacity argument and are

routinely granting Defendant's MotiJn to Dismiss based on these gromlds, particularly in catses

for mortgage foreclosul.es. See e.g. WBC __y. Montgome."-ry, Pinellas Case 52-2009-CA..Of 5696;

Wachovia v. Matacchiero, Pinellas Case No. 52-2009-16936-CI-13; Bolin v. HSBC, Pinellas

Case 08-005190C1-19.

33. This Court should take heed of the words of the Honorable William P. Levens, Circuit

Judge of the Thirteenth Judicial CiJ.cult, who recently ruled when confronted with a capacity

issue in a mortgage foreclosure case [hat

[t]his is a very, very simple pleading matter than can be easily corrected, but must
be correct because I~ am ~convinced_.th_at 1.120(a]j__tftepleading of__caflMity-
affd the identificati"ala in the_body__of the_C__omfllain""f itself is a.jurisdiction-re-
__"
to this matter going forward.. .,1 am simply granting the motion with[ leave to
amend to more fully and app.opu:ately comply with 1.120(a) with the explatnation[h"__."e
in the body of the Complaint tllat there be a basis. Because capacity is-""reaI__"""
Aandtha-t-needs to be specifically,pled la
my__fu_ dflment. Deutsche BaM"_National T~rustCo_ mflany v, Steiner, HllIsbc>rough [h"__."e
C uhty
[h"__."e aseisNo.
caption 08-13651
in the margin 'I-LS
of the(Hon. William P. f enenslOctober 28, 2010). -
[h"__."e
b. Argument
PT
 34. Here, while Plaintiff s name is identified in the caption of its Complaint, m>where else in

Plaintiff s pleading is its entity status or capacity pied. As a threshold matter, then, it is unclear

exactly who Plaintiff is and how it may avail itself to the jurisdiction of this Court.

35. By failing to allege the grounds upon which this Courf s jurisdiction depends, and by

failing to plead or specify in what capacity it brings the instant lawsuit, Plaintiff has riot plead

that it has the " absence of legal disability to sue."

36. Rule 1.120(a) provides for th3 specific procedures defense counsel must use to challenge

the issue of the Plaintiff s capacitl/, i.e. specific negative averment. Defendants therefore

specifically assert that Plaintiff has failed to plead any facts which identify its entity- status and

therefore it cannot claim that it has p'operly invoked the jurisdiction of this Court within the
four

comers of the Complaint.

37. Plaintiff s failure to properlr identify itself and thus plead its capacity (i.e. " XYZ,

Incorporated is a Delaware registered 'corporation properly registered as a foreign corporation

with the Florida Secretary of State") prohibits Plaintiff from asserting that it has established its

ability to invoke this Court's jurisdiction and it prevents Defendants from properly tIsserting

defenses to this action which may pJ'event this Plaintiff from maintaining this instant suit from

the outset

38. As a result, Plaintiff s complaint must be dismissed.

II. The Plaintiff s Complaillq must be dismissed because of its failure to plead a
causeof action

a. Legal Standards

I. Standing, the Real Party in Interest, and Agency Law

8
 39. Fla. R. Civ. Pro. 1.140(b)(6) ::!'rovides, in pertinent part that ‘ the following defenses may

be made by motion at the option of the pleader...failure to state a cause of actic,n...A motion

making any of these defenses shall bf! made before pleading if a further pleading is Fermitted."

40. Fla. R. Civ. Pro. 1.110(b)provides, in pertinent part, that " [a] pleading which sets forth a

claim for relief...must state a cause of action and shall contain...a sholt and plain statement of

the ultimate facts showing that the pl4mdef is entitled to relief."

41. Standing requires an entity hztve sufficient interest in the outcome of litigatiion to warrant

_s
the courf s consideration of its positic n. Keehn v. Jo__eph_,C. _ ____
Mack_ey and Co., 420 So.2d 398 (Fla.

4th DCA 1982).

42. Moreover, standing is a thre!;hoId issue. Peace,River_/Manasota Regional_ Water Supply

Authonty v. IMC Phosphates, 18 So,,3d 1079 (Fla. 2d DCA 2009); Hillsbt_gn___County v.

Florida Restaurant Ass'n, Inc., 603 So.2d 587 (Fla. 2d DCA 1992); Mil v ubli_c"ker

Industn'es Inc" 457 So.2d 1374 (Fla. 19841.

43. Standing, however, includes `lot just the notion that the paiu has a " sufficient stake" in

the outcome of the litigation but also that the party is in fact the " real party in interest." This is

the " at least equally"important requir m"_s that the claim be brought by or onliehalf of one...‘in
_ ____
whom rests, by substantive law, the claim sought to be enforced.'"_,Kumar Cor _sN_ Lj _
____
_
Ltd., 462 So. 2d 1178, 1183 (Fla. 3d DCA 1985) (citing Author's Coniment to Fla. R Cin. P.

1.210).

44. " The autholof an agent to__bind a I)rincipal may be ,real 9r it trta:y be- af!fm`_s
_ ____
Only, and members of the public acting in good faith may rely on either, unless in the case of

apparent authority the circumstances are such as to put a reasonable person on inquiry." Stiles_v.

GordonLand Co., 44 So. 2d 417, 421 (F`la. 1950) Bo/d emphasis added.

9
 45. " The existence of an agency relationship is ordinarily a question to be determilaed by a

jury in accordance with the evidence adduced at trial." OrLando Executive Park nc. v. Robbins,

433 So. 2d 491, 494 (Fla 1983).

46. An agent's " real" or " actualv authority arises out of expressed or implied manifestations

of her principal. See Taco Bell of California v. _ne, 324 So. 2d 123, 123 (Fla. 2d D'CA

1975).

47. " The essential elements of ar actual agency relationship are: (1) acknowledgment by the

principal that the agent will act for him or her, (2) the agent's acceptance of the undeWJ.ng, ;md

(3) control by the principal over the actions of the agent." Robbins v. Hess, 659 So. 2d 424, 427

(Fla. Ist DCA 1995) (citing Goldschln.iglt v. Holman, 571 So. 2d 422, 424 n.5 (Fla. 1990)).

2. Standing in Forea;losure Actions

48. " The party seehing

- forecloslire_ __Rresent _evidence that it owns and holds the note_

and mortgage in question in order tc proceed with a foreclosure action." Lizio McCullom, 36

So. 3d 927, 929 (Fla. 4th DCA 201('). See also Verizzo v. Bank of ~New ~York, 28 So. 3d 976,

978 (Fla. 2d DCA 2010)(providing that " there is a genuine issue of material fact as to whether

the Bank of New York owns and holds the note and has standing to foreclose_the mortgage.")

49. Indeed, where the defendant denies that the party seeking foreclosure has an olvnership

interest in the mortgage, the issue of ownership becomes an issue file plaintiff must prove.

48. " u Pate, 143 So.2d 346, 347 (Fla. 3d DCA 1962)
The
50. The standing requirement tlat the foreclosing party must both own imd hold the

mortgage is in accordance with Fla. F Civ. Pro. Form 1.944.

51. This -is because " {t{o grant_pil jindgment of foreclosure in favor_of the {plaintiff{,- the

trial court would have to find, among other things, .fhat the {plaintiff{__48. " The _-rtg;!!ge

10
and had performed all conditions pre2edent,i .f any to enforce the mortgage." DIs rustb_;mk

Sav. FSB, 567 So. 2d 958, 959 (Fla. 2d DCA 1990) Bo/d emphasis added.

b. Argument

52. Here, while the Plaintiff has made an allegation that it is the ho/der and'or entitled to

enforce the subject note and mortga;;e, it has failed to make any idlegation tllat it is in fact the

owner of same.

i
53. The failure of file Plaintiff to allege, in the body of its Comfi‘laint, that in addition to

holding the subject note and mortgage it also owns these instruments prohibits it l?om ;ISserting

the proper chain ofownership ofthe nstruments from their inception.

54. This distinction is important because, as noted in paragraph 8, supra, t- hi-s_ is~a cause of

i
action~ity to foreclose a mo_- gc- and not an action at ,law for en%cement 01 he_

note. Consequently, and pursuant tc' Form 1.944, Plaintiff must allege it is both the owner and

holder of the note and mortgage.

55. As ml alternative to such an Allegation, Plaintiff may allege the requisite elements of an

agency relationship between itself arid the true owner in order to state a cause of action. This,

however, Plaintiff has not done.

56. Indeed Plaintiff has failed to plead: (I) who its principal is and therefore

acknowledgment by the principal that Plaintiff will act for him or her, (2) Plaintifl`s acceptmlce

of the undertaking, and (3) control by the principal over the actions of Plaintiff.I

1 Defendants acknowledge that paragraph 3 of the Complaint alleges that Plaintiff is " the servicing agent for the
owner of the note and mortgage." Nevertheless, such an allegation without allegations necesmr to establish an
agency relationship, is therefore a mere legll amclusion that this Court may not take as true for purposes of this
motion. See Loan Co.,v. Smith, 155 So. 2d I I (FIa. Ist DCA 1963) (holding that mere legal conclusions are
fatally defective unless substantiated by sufficient allegations of ultimate fact); Phelps v. Gilbreth, 68 So. 2d
360 (F1a.
1953) (holding that allegations of legal conc]usions are of no legal effect or significance and are generally
ignored in the construction and consideration of the plezIdings of which they are a part).

i
ll
 57. Consequently, Plaintiff has Eliled to state a cause of action for mortgage foreclosure.
Its

complaint should therefore be dismissed.

III. In addition to, or as an alternative of, Argument II, Plaintiff s Complaint mlust
be dismissed because th,, subject note is not negotiable

a. LegalStandards

i. Introduction

58. Issues regarding the negotiability of a mortgage promissory note appear to be rm'Cly

brought before trial courts' attention. Therefore, both trial and appellate courts in t|lis State

generally have not had the opportuniy ID consider these issues on their merits.

59. Indeed, in a recent law revievJ article published in the Pepperdine Law Reviiew, Professor

Dale Whitman identified only forty'uvo cases decided over the past twenty yeans in r[le entire

United States in which a decision was " :cached on the men-ts" regarding the negotiability of a

mortgage note. See Dale A. Whitnlan, How N_liability_Has Fouled L the__Secondm

Mortgage Market and What to Do_About it, 37 Pepp. L Rv. 737 (2010).

60. Even more shocking, Professor Whitman identified only two of those fomr-two cases in

which a " the court provide[d] a thorough analysis of the negotiability of the note!" See Id. at

754.

61. Tracing the case law backwards in Flolida it appears that gm analysis of mortgage notes

was first articulated by the Fifth Disln'ct in American B-lis the South _v, Ro nb% 598 So.

2d 289 (Fla. 5th DCA 1992).

62. There, the Court stated that " the_ rigb__li of the- fnt-rties must _be det@mined- hy- the

character of the promissory- note. In thl.s case, the promissory note meets the requirements of

section 673.104, Florida Statutes (1991) and is thus a negotiable instrurnent." Id. at 291. Bold

emphasis added.
12
 63. Thus, the Rothenf>etg Court ,u]ticulated a crucial first step in the analysis of a mortgage

promissory note: a decision of whether the character of the note at issue is tltat of a negotiable

instrument.

64. Unfortunately, more recent appellate decisions have not mentioned this essential f1rst

step, most likely because the character of the promissory note was not questioned at the trial

court level. See e.g. Taylor v. Deutsch Bank National_.Trust CompaH 44 So. 3d 618, 622 (Fla.

5th DCA 2010) (merely providing flat " a promissory note is a negotiable instrurnent" without

any consideration as to how a prof1issory note is in fact negotiable); %s v. _ Aurora Loan

Se_-"rvices_ LLC, 36 So. 3d 932, 933 (F`la. 4th DCA 2010) (providing that " [t]he note was a

negotiable instrument subject to the provisions of Chapter 673, Florida Statutes (2008)"); %

v. Fairbanks, 888 So. 2d 725, 727 Fla. 5th DCA 2004) (stating that " [a] promissory note is

clearly a negotiable instrument within ÌIle definition of section 673.1041(1)" without providl.ng

an analysis of the statute).

65. The Second District has englged in an examination of the negotiability statute and its

‘ See interaha
application in the context of a retail installment sale contract (hereinafter " RIS(."). `

discussion regarding GMAC v. Honest \ir. Because the nature of a RISC is similar to that of a

mortgage promissory note in that bcth contracts require installment payments over a period of

time, the analysis engaged by the Secand, District in Hongst Air is applicable here.

66. In any event, when the chlm.clef of the mortgage promissory note is questioned at the

trial court level, the gratuitous assert-on that " the note is a negotiable instrument" should not be

3Lccepted at face value. Rather, courts, should first examine the note at issue to determine whether

the note at meets the strict and techni,;al definitions of " negotiable instrulnent" found in
Florida's
13
 ii. Definition of Negotiable Instrument

67. Fla. Stat. k673.1041(1) provides the statutory definition of a negotiable instrument

68. The statute begins by asserting that an instrument is negotiable if it is " an unconditional

promise or order to pay a fixed arrtoutlt of money, with or without interest or other charges

describedin the promise or order."

69. In addition, the instrument must zdso meet the three following prerequisites:

a. First, the instrument must be " payable to bearer or to order at the time it is issued or

first comes into possession of a holder." k673.1041(1)(a);

b. Second, the instrument must be " payable on demand or at a definite time."

k673.1041(1)(b); and

-
c. Third, the instrument mmt not "state any_other undertahin-"g n- rinsfructioff
__ -by- the_

Demon Drona_ising or~ ordefmg payment todo_ any act in addition to file payment of

money." k673.1041( I )(c).2

Bold emphasis added.

70. For purposes of this motion, the third prong of the defulition is of vihd importallce

because, as Professor Whitman has stated, "l`he standard note form approved by Fannie Mae Emd

Freddie Mac for use in oneto"foul"family residential loans is 1,455 words in length in three

pages without signatures, and notc; used in loans on commercial properties are cotnmo}aly

several times that size." .- r __

I G673.I()41(l )(c) does provide three exceptions to the general rule that the promise or order must not contain any
instruction or undem)kmg other than the pa)meat of money. These exceptions are: (I) an undertaking or power to
,give, maintain, or protect collateral to sectWe payment; (2) an authorization or power to the holder to confess
.iudgment orrealize or dispose of collateral; ;md (3`) a waiver of the benefit of any law intended for the advantage
or
,rotection of an obligor.
 71. Inextricably imbedded within those 1,455 words are a host of undertakings and

instructions by the person promising or ordering payment to do some act iin addition to the

payment of money.

72. By the clear statutory definition once one promise or undertaking is found, the character

of the note cannot said to be negotialble.

73. Finally, if the note is not a negotiable instrument, it is not subject to transfer or

enforcement pursuant to Fla. Stat. h6 73,, et seq.

74. Stated another way, the act of endorsing and transferring a mortgage promissory note is a

_ __ instrunlent.
nullity because endorsement and delivery only effectuates a transfer of a negut_iable

If an instrument is non-negotiable, it [nUlst be transferred pursuant to general contract law.

Si. GMAC v._ I Ionest Air and the exclusionary language of

h673.1041(1)(s!) - -

75. In GMAC v. Honest Air Conditioning .& Heat}ug-,- 1-nc., 9'33 So. 2d 34 (Fla. 2d DCA

2006), the Second District conclu(.ed that " the trial court erred in finding that the [retail

installment sales contract} was a negc,liable instrument." Id. at 35.

76. There, the Court was confronted with a RISC entered into between GMAC and Honest

Air for the purchase of an automobile. Id.

77. The Court noted that the BlSC created certain instructions or undertakings in both the

" person promising" to pay and the c .editor ordering payment, including: (1) an instruction onto

the debtor to not remove the vehicle from the United States; (2) an instruction onto the debtor to

reimburse advances made by the c7edJ.tor in payment of repair or storage bills; and (3) an

instruction onto the creditor to dispose of the collateral in certain ways following repossession.

Id. at 37.

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 78. Most notable to our _fin-rf)uses _ here, the Second District noted______that _the m_sc
ruuired the debtor to pay fees for late- f)ayment or dishonored checks. Id.

79. Ultimately, the Second District held that these obligations " bring the RISC within the

exclusionary language of section 673.1041(1)(c), which provides that a negotiable instrurnent

‘does not state any other undertaking5' in addition to the payment of money." Id.

80. The Court reasoned that this must be so because " [a] negotiable instrument should be

‘simple, certain, unconditional, and I;ubject to no contingencies. As some wliters have said, it

must be a co-urier withoutluggage." ' 1J... (citing Mason Flowers, 91 Fla. 224, 107 So. 334, 335

(Fla. 1926)).

b. Argument

81. In addition to, or in alternative of, argument II, supra, Plaintiff s Complaint must be

dismissed because the subject note is m)t a negotiable instrument. As a result, Plaintiff may not

invoke Fla. Stat. k673, et seq. in an attempt to " enforce" the note.

82. The note is not negotiable because it contains several instructions or undel.takings other

than the payment of money br Bing the note within the exclusiorutty language of

h673.1041(I )(c).

83. To begin, the purported note provides for " late charges." Such charges were considered

3bligations other than the payment cf money which rendered the IuSC in GMAC_, supra, non-

negotiable.

84. Moreover, the note also conta-~ns the following additional obligations:

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 1. The instruction that file borrower pay a late charge if the lender has not received

payment by the end af fifteen calendar days after the date payment is due in

clause 7(A);

2, The instruction that the lender will deliver or mail to the borrower any changes in

the interest rate and m,nthly payments in clause 4(H);

3. The obligation that the borrower to tell the lender, in writing, if borrower opts to

may prepay in clause !j;

4. The instruction that if applicable law " is finally interpreted" so tluit the interest

charged under the Hol e or other loan charges exceed legal limits, then: (I ) amy

such charge shall be r2duced by the amount necessary to reduce the charge to be

permitted, and (2) the lender shall refund such charges to the borrower in clause

6;

5. The instruction that th4;lender send any notices that must be given to the borrower

pursuant to the terms of the subject note by either delivering it or mailing it by

first class mail in clawe 8; and

6. The instruction that tht; borrower send any notices that must be g`l'ven to the lender

pursmrnt to the terms of the subject note by either delivering it or mailing it by

first class mail in clause 8,

85. These obligations render the purported note non-negotiable. Because the note is non-

negotiable, the Plaintiff cannot claim that it is entitled to enforce it pursuant to Fla. Stat.

3673.3011 as the holder of a negotiable instrument.

86. Therefore, Plaintiff s Complaint must be dismissed.

CONCLUSION

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