Some lenders choose not to file a claim in a probate estate, thinking that they can sue on the mortgage without filing a probate claim. Taking this approach might cost them the mortgage. A recent case provides some groundwork for defending against such a foreclosure.
In its 11/9/11 opinion Taylor v. Bayview Loan Servicing the Florida 2nd District Court of Appeal held that if a promissory note is secured by a mortgage, and if the note is assigned, then the mortgage follows the note and is automatically assigned along with the note, even if no separate assignment of mortgage is recorded.

The court cited the 1938 Florida Supreme Court case of Johns v. Gillian, 184 So. 140 (Fla. 1938), which said that “the mortgage is but an incident to the debt, the payment of which it secures, and its ownership follows the assignment of the debt.”

Therefore, logically, if the note was not assigned but instead became unenforceable due to the Florida Probate Code’s statute of limitations, would not the mortgage that follows it also become unenforceable?

The mortgage follows the note. So, if the note becomes unenforceable, does the mortgage become unenforceable? The Florida Probate Code provides a 2-year statute of limitations on creditor claims, in addition to the 3-month statute of limitations on claims by reasonably ascertainable creditors. If a lender fails to file a claim within 2 years after the death of a borrower, does the mortgage become unenforceable?

It’s not a new problem. It’s been around as long as lawsuits. It’s just more frequent now because of the huge number of lawsuits on file in Florida due to the economic calamity of the last three years that culminated in mortgage foreclosure suits being filed by “foreclosure mills” that churn out case after case so that we have tens of thousands of pending cases in Florida.

In all those cases, it’s bound to happen that some borrowers cannot be found to serve with court process in the foreclosure case. Does that mean the foreclosure cannot go forward? If it did, then all you would have to do to avoid the foreclosure would be to avoid the process server.

But, it’s not that easy. Foreclosure is what is called an “in rem” proceeding, meaning that it is against the property and not against the person. The mortgage holder can proceed with the foreclosure if it cannot find the mortgage borrower after undertaking diligent search.

Florida law allows for alternative forms of service of process, such as constructive, substituted, etc. That’s why you read notices published in newspapers stating that such-and-such is suing so-and-so in some other state. They could not find that person and are using an alternative form of process to obtain “in rem” jurisdiction over the property in the lawsuit. It’s done all over the country, not just in Florida.

So, unless the U.S. Supreme Court find this concept, which has been around for many generations, to be unconstitutional, I suspect the lenders will win. (Of course, the robosigner defense might help some borrowers undo mortgage foreclosure.)

As a Florida lawyer, it’s interesting to read on the front page of the morning newspaper about service of process and other legal concepts I thought no one else cared about. Unfortunately, if you’re the one we’re reading about, then it’s more than interesting.