Are All Mortgages Negotiable Instruments?

Before you read this article, you should read: Reestablishment of Lost Note 

A couple of weeks ago I found this answer to this foreclosure complaint which pleading states: “Verified Answer, Affirmative Defenses, Motion to Dismiss Count I, Counterclaims, Third Party Complaint, And Demand For A Jury Trial”.

Now I don’t know how you feel about the subject and I don’t know this attorney, but I can already tell that I like his style – as a consumer advocate I’m a personal fan of anyone that requests a jury trial to defend a foreclosure.  The fact is that too many homeowners get served in a foreclosure action and don’t respond.  Then, the lender goes right to default judgment.  IMO that’s a real problem because fighting back – even by doing as little as answering the complaint – throws a wrench in the fast spinning foreclosure mill wheel and by so doing may either provide the homeowner the opportunity to rework the loan through a fair and equitable loan modification or permit them to sell the property as a short sale and avoid foreclosure (remember: a short sale permits the homeowner/seller to buy again in two years whereas a foreclosure knocks them out for five-years and in Florida can result in a deficiency judgment and continued collection).

Before I get sidetracked again (sorry I’m longwinded), I want to highlight a section of this answer and with the footnote that at present I do not have an opinion as to whether this highlighted portion of the defense has any merit.  Keep in mind, the general rule in defending a foreclosure is to challenge everything, so I’m still researching the following defense.  From page four through six of the Pinkston answer:   

27. Failure to state a claim for which relief may be granted.

i. Plaintiff filed a claim to re-establish a lost note.

ii. Plaintiff claims the right to re-establish such note under Fla. Stat. §673.3091

iii. Fla. Stat. §673.3091 provides only for re-establishment of negotiable instruments as defined under Fla. Stat. §673.1041

iv. The note at issue is not a negotiable instrument as defined under §673.1041 because it does not contain an unconditional promise to pay and/or other requirements to qualify as a negotiable instrument.

v. Therefore Fla. Stat. §673.3091 does not apply to transfer or enforce the promissory note at issue in this foreclosure action.

vi. Therefore, Plaintiff has failed to state a claim for which relief may be granted.

MOTION TO DISMISS COUNT I.

Defendant moves to dismiss count I of Plaintiff’s complaint to re-establish a lost promissory note for failure to state a cause of action.

29. Florida Statutes Chapter 673 “applies to negotiable instruments.”

30. F.S. 673.1041(1)(c) defines the term “negotiable instrument” as an unconditional promise or order to pay a fixed amount of money, if the instrument does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. (emphasis added)

31. F.S. 673.1041(2) provides that “instrument” means a “negotiable instrument”.

32. The official comment to F.S. 673.1041 states that the definition of “negotiable instrument” delineates the scope of Article 3 of the Uniform Commercial Code.

33. The promissory note that the plaintiff seeks to foreclose is not a negotiable instrument under Florida law because the note is not just a promise to pay as it requires additional undertakings by the owner and holder of the note imposed pursuant to the special default loan servicing obligations that apply to this loan.  These special and highly detailed loan servicing requirements are incorporated into the subject note and serve to create uncertainty in the amount due.  As a result, the promissory note is not a negotiable instrument and not subject to reestablishment under the Uniform Commercial Code.

34. A promissory note to be negotiable, must contain an unconditional promise and there must be a specific ascertainable sum.  The uncertainty presented by the terms of the note at issue in this foreclosure defeat negotiability of the note and eliminates the possibility of the application of F.S. Chapter 673 in an action to enforce the note.  Nagel v. Cronebaugh, 782 So. 2d 436 (Fla. 5th DCA 2001), citing United Nat’l Bank of Miami v. Airport Plaza Ltd. P’ship, 537 So. 2d 608,609 (Fla. 3d DCA 1988); Thompson v. First Union, 643 So. 2d 1179 (Fla. 5th DCA 1994); See also, Bankers Trust v. 236 Beltway Investment, 865 F. Supp. 1186 (E.D. Va. 1994).

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.