Foreclosure Plaintiffs Cannot Rely Solely on Their Status as Parent Corporation
The ownership of the promissory note by a subsidiary corporation of the Plaintiff cannot alone establish standing to foreclose. In HSBC Bank USA, N.A. v. Ryan Kahan, et al., the Court granted the borrowers' motion for involuntary dismissal or directed verdict due to (1) Plaintiff's failure to establish standing at the commencement of the action; and (2) Plaintiff's inability to establish a prima facie case of foreclosure due to its failure to provide any testimony as to Plaintiff's damages. On October 8, 2012, Plaintiff HSBC Bank USA, N.A. ("HSBC Bank") commenced this residential foreclosure action. In its complaint, HSBC Bank alleged that it was the owner and holder of the subject promissory note. Attached to the complaint was a copy of an unendorsed promissory note payable to HSBC Mortgage Corp. USA ("HSBC Mortgage"). The borrowers asserted several affirmative defenses, including HSBC Bank's lack of standing. During the bench trial, HSBC Bank's only witness (an employee of its mortgage servicer) testified that HSBC Bank had standing because it was the owner of all outstanding and issued stock of HSBC Mortgage. The witness testified that HSBC Mortgage was therefore a wholly-owned subsidiary of HSBC Bank. In order to establish HSBC Bank's standing, a composite exhibit was entered into evidence that contained various corporate documents establishing the relationship between HSBC Bank and HSBC Mortgage. HSBC Bank's witness had no personal knowledge of the corporate documents or the corporate structure of either HSBC Bank or HSBC Mortgage. HSBC Bank argued it had standing by virtue of its alleged status as the parent company of a wholly-owned subsidiary. The Court stated that Florida law is clear in that "[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." Wright v. JP Morgan Chase Bank, N.A., 169 So. 3d 251 (Fla. 4th DCA 2015) (quoting Am. Int'l Group, Inc. v. Cornerstone Bus., Inc., 872 So. 2d 333, 336 (Fla. 2d DCA 2004)). Despite this, HSBC Bank put forward two documents to establish standing: (1) an Assignment and Assumption Agreement from HSBC Mortgage to HSBC Bank; and (2) a Secretary's Certificate (dated after the commencement of the action) from HSBC Mortgage indicating that HSBC Bank is the sole shareholder of HSBC Mortgage. The Court concluded that neither document could be utilized to demonstrate that HSBC Bank had standing. In addition to finding that HSBC Bank lacked standing, the Court ruled that HSBC Bank failed to offer competent substantial evidence of its damages. In its proposed final judgment, HSBC Bank sought monies for principal and interest due under the note, corporate advances, escrow advances, court costs, filing fees, and reasonable attorney's fees. Although HSBC Bank entered the borrowers' payment history into evidence, the only testimony elicited was the date of the default. The witness provided no other testimony as to damages. As such, the Court concluded that these damages could not be included in the proposed final judgment. In light of the order issued in this case, foreclosure plaintiffs need to pay special attention to the corporate relationship between the payee on the note and the plaintiff named in the complaint. Any corporate documents evidencing this relationship need to be carefully reviewed and analyzed prior to entering them into evidence. Further, foreclosure plaintiffs must establish with substantial competent evidence all damages that they are seeking; it is never enough to simply rely on a payment history that has been admitted into evidence.
Posted in: Foreclosure
Jump to Page
Arrow icon Top

Contact Us

We use cookies to improve your website experience, provide additional security, and remember you when you return to the website. This website does not respond to "Do Not Track" signals. By clicking "Accept," you agree to our use of cookies. To learn more about how we use cookies, please see our Privacy Policy.

Necessary Cookies

Necessary cookies enable core functionality such as security, network management, and accessibility. These cookies may only be disabled by changing your browser settings, but this may affect how the website functions.

Analytical Cookies

Analytical cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.