DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                                  FOURTH DISTRICT

                              FREDERIC MONNOT,
                                  Appellant,

                                         v.

     U.S. BANK, NATIONAL ASSOCIATION AS TRUSTEE RELATING TO
    CHEVY CHASE FUNDING LLC MORTGAGE BACKED CERTIFICATES
              SERIES 2007-2 and JENNIFER W. MONNOT,
                             Appellees.

                                  No. 4D14-2527

                               [February 24, 2016]

   Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward    County;   Lynn    Rosenthal,   Judge;   L.T.   Case    No.
CACE09064635(11).

     Arthur Morburger, Miami, for appellant.

  Susan B. Morrison and Lauren E. Wages of Law Office of Daniel C.
Consuegra, P.L., Tampa, for appellee, U.S. Bank.

MAY, J.

   A borrower appeals a final judgment of foreclosure. He argues the court
erred in entering the judgment because U.S. Bank, N.A., as Trustee
relating to Chevy Chase Funding, LLC, Mortgage Backed Certificates
Series 2007-2 (“bank”) failed to prove standing, and also erred in
dismissing his counterclaim alleging a Truth in Lending Act (“TILA”)1
violation. We agree and reverse.

   The borrower and Chevy Chase Bank, F.S.B. (“Chevy Chase Bank”)
executed a note and mortgage. The note provided that the annual interest
rate of 8.750% may vary, but could not exceed 19.900%. The initial
monthly payment under the note was $5,423.13, which would be the same
for the first sixty monthly payments. MERS was named the nominee for
Chevy Chase Bank.


1   Truth in Lending Act, 15 U.S.C. § 1601 et seq. (2014).
   The same day, the borrower signed and acknowledged receiving the
TILA Statement from Chevy Chase Bank. The TILA Statement noted that
the annual percentage rate (“APR”), which was subject to change, was
8.759%. It also noted 38 payments of $5,423.13 beginning on May 1,
2007, and 322 payments of $12,980.97 beginning on July 1, 2010. The
loan was a monthly adjustable rate mortgage loan that had a variable rate.

    On August 1, 2009, the borrower failed to make his monthly payment.
On December 2, 2009, U.S. Bank, NA as Trustee for CCB Libor Series
2007-2 Trust (“U.S. Bank as Trustee for CCB”) filed a complaint against
the borrower. Count I sought foreclosure of the mortgage and count II
sought to reestablish a lost note. U.S. Bank as Trustee for CCB alleged
that it held the mortgage by virtue of an assignment. It also alleged that
it “owns and holds the note and subject mortgage.” And, it alleged that
“[t]he Plaintiff, its Assignor, or its servicer, was in possession of the Note
and was entitled to enforce the Note when loss of possession occurred.”

    A copy of the note and mortgage were attached to the complaint. The
attached note was executed in favor of Chevy Chase Bank and did not
contain any endorsements. On December 11, 2009, U.S. Bank as Trustee
for CCB filed a notice of filing original note and mortgage.

    On July 22, 2010, the borrower filed an amended answer and asserted
several affirmative defenses and a counterclaim. The borrower asserted
affirmative defenses of lack of compliance with TILA and Regulation Z of
the Code of Federal Regulations2 and lack of standing. He alleged
untruthful disclosures on his finance charges and APR.

    In the borrower’s counterclaim, he alleged that the TILA Statement
failed to comply with TILA disclosure requirements because the finance
charges, monthly payments, and APR were significantly understated, as
demonstrated by an attached forensic audit report. He alleged that the
errors were apparent on the face of the TILA Statement and could be
proven inaccurate by a comparison to the note. The borrower sought offset
and recoupment damages from U.S. Bank as Trustee for CCB for fraud in
the inducement and TILA violations, among other counts. The borrower
also requested statutory damages of not less than $200 nor more than
$2,000 and actual damages.

   The borrower attached a letter explaining a report from his expert
witness. The report concluded that Chevy Chase Bank committed multiple
TILA violations in its TILA Statement. U.S. Bank as Trustee for CCB

2   12 C.F.R. § 226 (2014).

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answered the counterclaim and denied the TILA violation allegations.

   On June 23, 2010, U.S. Bank as Trustee for CCB filed a corrective
assignment of mortgage. It stated that “prior to November 20, 2009, . . .
assignor has granted, bargained, sold, assigned . . . the [subject]
mortgage,” together with the note, to the bank. However, the vice president
of MERS executed it on May 11, 2010.

   On July 6, 2010, U.S. Bank as Trustee for CCB moved to reform the
assignment of mortgage and correct scrivener’s errors in the complaint, lis
pendens, and assignment of mortgage. It argued that (1) an assignment
of mortgage was created on December 1, 2009; (2) a complaint was filed in
this case on December 2, 2009; (3) the plaintiff’s name was erroneous and
should have named the bank; (4) U.S. Bank as Trustee for CCB did not
exist; (5) the assignment of mortgage was incorrect; and (6) the intent of
the parties was to assign the mortgage to the bank because it is the owner
and holder of the note and mortgage. The court granted the motion,
reformed the assignment of mortgage, and corrected the scrivener’s errors
to name the bank.

    On April 29, 2014, the bank filed a declaration from a records custodian
for Capital One, N.A., as successor by merger to Chevy Chase Bank, N.A.,
formerly known as Chevy Chase Bank, FSB (“Capital One”). Attached were
the payment history, collection notes, and demand letters. It also filed a
second records custodian declaration from a bank records custodian, who
verified that the attached limited powers of attorney; June 1, 2007 PSA
relating to Chevy Chase Funding, LLC Mortgage Backed Certificates,
Series 2007-2; and mortgage loan schedule were within its business
records.

   The case proceeded to a two-day non-jury trial before a magistrate. The
bank requested the court take judicial notice of the merger between Chevy
Chase Bank and Capital One, the original mortgage, and the corrected
assignment of mortgage. The magistrate took notice. It then offered the
two declarations filed by the bank and their attached records into
evidence, which the magistrate admitted.

   The bank then offered a declaration from its attorney’s law firm’s
records custodian into evidence, which was admitted. The declaration and
attachments concerned the note and mortgage. The attachment was a
screenshot from the firm’s case management system, which contained one
non-blacked-out line. The line noted that the firm received the original
note and mortgage on December 6, 2009.


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   The magistrate also admitted, among other documents, the original
note and mortgage. Unlike the copy of the note attached to the complaint,
the original note contained an undated special endorsement from Chevy
Chase Bank to U.S. Bank, N.A. as Trustee.

    The bank offered the testimony of a high risk analyst for Specialized
Loan Servicing (“SLS”), which began servicing the loan in March 2010. The
analyst testified that “the original note and other documents related to
origination” are typically found within a collateral file. SLS received the
collateral file from the bank on November 27, 2009, before the suit was
filed. However, the analyst had no personal knowledge whether the
endorsed note was part of that file, even though it usually was.

   The analyst also testified that the note was part of the merger between
Chevy Chase Bank and Capital One, which she knew from a review of the
PSA. And, based on her records review, the bank obtained physical
possession of the note in June 2007. While she later testified that the
bank had the original endorsed note in its possession at the time the
complaint was filed, she admitted that she did not know the specific date
on which the note was endorsed to the bank. And, she did not check the
collateral file for the original note and had no personal knowledge of
whether the original note was in the collateral file when received by the
servicer.

   The magistrate heard the borrower’s counterclaim for the alleged TILA
violations. The bank’s counsel argued the statute of limitations had run
and only a defense of recoupment or setoff was allowed. The borrower’s
counsel argued the borrower was allowed to bring the counterclaim. The
magistrate allowed the counterclaim to proceed.

   The borrower’s expert testified that she conducted a forensic audit of
the loan using a software program. She opined that the TILA Statement
did not match the components of the note, and the payment terms in the
TILA Statement were inaccurate. She further opined that the finance
charges were understated by $4.9 million because the 8.75% interest rate
was disclosed rather than the 19.9% interest rate, which was the interest
rate cap according to the note. And, she opined the borrower was entitled
to damages of $292,848, which represented double the finance charges
the borrower paid from the note’s inception to the default date.

   The bank moved to dismiss the TILA counterclaim under 15 U.S.C. §
1640, because the expert could determine if the TILA Statement was
inaccurate only based upon a software program and not by looking at the
face of the document. The borrower’s counsel argued the motion to

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dismiss was improperly made and the face of the TILA Statement showed
violations. The magistrate reserved ruling.

   The borrower testified that he relied on the truth and accuracy of the
TILA Statement. When he discovered the inaccuracy in 2009, he stopped
making payments to “cut his damages.” The bank moved again to
involuntarily dismiss the counterclaim. The magistrate recommended
granting involuntary dismissal on the counterclaim’s fraud in the
inducement count and denying it on the TILA violation count. The
borrower voluntarily dismissed the other counts.

   The magistrate found the bank proved its foreclosure case. It then
found in favor of the bank with respect to the counterclaim. The
magistrate recommended that final judgment of foreclosure be granted in
favor of the bank, a final judgment be granted in favor of the bank on the
TILA violation counterclaim, and the fraud in the inducement
counterclaim be involuntarily dismissed. The trial court accepted the
magistrate’s recommendations, granted involuntary dismissal as to the
fraud in the inducement count, and found in favor of the bank on the TILA
violation. It then granted final judgment of foreclosure in favor of the bank.
From these judgments, the borrower now appeals.

   The borrower argues the bank was not the original lender, did not
possess the note at the case’s inception, and had an assignment of
mortgage and note under a fake name. There was no testimony regarding
when the note was endorsed.

    The bank responds that it proved standing through its documentary
and testimonial evidence that it owned and held the note at the case’s
inception. Its rights as a holder were not affected by the scrivener’s error
in the assignment of mortgage, which was later corrected.

    The borrower replies that the assignment of mortgage does not
establish standing because it was dated after the bank filed its complaint.
If, as the answer brief alleges, Capitol One was the servicer and holder of
the original note at the time suit was filed, then the bank was not the
proper plaintiff.

  We have de novo review. Dixon v. Express Equity Lending Grp., LLLP,

, 967 (Fla. 4th DCA 2013) (citation omitted).

   “[S]tanding may be established from the plaintiff’s status as the note
holder, regardless of any recorded assignments.” McLean v. JP Morgan
Chase Bank Nat’l Ass’n, 

, 173 (Fla. 4th DCA 2012) (citation

                                      5
omitted). “If the note does not name the plaintiff as the payee, the note
must bear a special endorsement in favor of the plaintiff or a blank
endorsement.” 

is an indication that equitable transfer
of the mortgage occurred prior to the assignment, dismissal of the
complaint is error, even if the assignment was executed after the complaint
was filed.” 

    “A plaintiff alleging standing as a holder must prove it is a holder of the
note and mortgage both as of the time of trial and also that [it] had
standing as of the time the foreclosure complaint was filed.” Kiefert v.
Nationstar Mortg., LLC, 

, 352 (Fla. 1st DCA 2014) (emphasis
added). “A plaintiff’s lack of standing at the inception of the case is not a
defect that may be cured by the acquisition of standing after the case is
filed and cannot be established retroactively by acquiring standing to file
a lawsuit after the fact.” LaFrance v. U.S. Bank Nat’l Ass’n, 

, 756 (Fla. 4th DCA 2014) (citation omitted) (internal quotation marks
omitted).

   Here, the bank alleged that it “owns and holds the note and subject
mortgage.” Thus, under Kiefert it had to establish it possessed either a
blank endorsed or specially endorsed note in its favor at the case’s
inception. When the bank filed its complaint, it attached a copy of the
note, which was in favor of the original lender, Chevy Chase Bank, and
contained no endorsements. The bank did not file the original note with
the undated special endorsement from Chevy Chase Bank to U.S. Bank,
N.A. as Trustee until after the complaint was filed. This alone is
insufficient to establish standing at the case’s inception. Tilus v. AS Michai
LLC, 

, 1286 (Fla. 4th DCA 2015) (citing Bristol v. Wells
Fargo Bank, Nat’l Ass’n, 

, 1132 (Fla. 4th DCA 2014)).

   The bank also argues the custodian’s declaration and attached
screenshot showing that the bank’s counsel received the original note on
December 6, 2009, shows the bank or servicer was in possession of the
note on or before December 5, 2009. However, possession on December
5, 2009 does not prove possession at the case’s inception, December 2,
2009. And, it does not prove when the original note was specially endorsed
in the bank’s favor. See Russell v. Aurora Loan Servs., LLC, 

, 642–43 (Fla. 2d DCA 2015).

   The bank next relies on its witness’s testimony to prove standing, but
this also fails. The testimony revealed that the original note is usually
found within the collateral file and the servicer received the collateral file
from the bank on November 27, 2009. The bank’s witness testified that
the bank had possession of the original endorsed note when it filed the

                                      6
complaint, based on her review of the business records. However, the
witness had no personal knowledge of whether the specially endorsed
original note was part of the collateral file because she did not review its
contents. She also did not know why the endorsed note was not attached
to the complaint nor the specific date the note was endorsed to the bank.
See Kenney v. HSBC Bank USA, Nat’l Ass’n, 

, 380 (Fla. 4th
DCA 2015).

   Last, the bank argues the PSA shows it has been the owner of the loan
since June 1, 2007, because the mortgage loan schedule shows the note
was transferred into the PSA. This also fails because “evidence that the
note was physically transferred into a trust prior to [the plaintiff] filing its
foreclosure complaint does not, by itself, establish standing.” Jarvis v.
Deutsche Bank Nat’l Trust Co., 

, 196 (Fla. 4th DCA 2015).

   The bank simply failed to prove standing because it failed to prove that
it possessed the original note endorsed in its favor prior to filing the
complaint. We therefore reverse the final judgment of foreclosure.

   The borrower next argues that in approving the magistrate’s
recommendation of involuntary dismissal of the TILA counterclaim, the
court overlooked competent substantial evidence of violations in the TILA
Statement. He argues that on the face of the TILA Statement, the payment
schedule and APR were grossly misstated. Thus, he was entitled to a
recoupment of damages that exceeded the default amount and barred
foreclosure.

   Without belaboring this point, we agree the TILA violation can be
considered in defense of any future foreclosure action. Although the
borrower was not entitled to a separate action for damages because the
statute of limitations expired, he could be entitled to an offset and
recoupment of damages against the bank’s foreclosure judgment. Kasket
v. Chase Manhattan Mortg. Corp., 

, 434–35 (Fla. 4th DCA
1997).3

   We reverse the final judgment of foreclosure based on the bank’s failure
to prove standing, and also reverse the judgment in favor of the bank on

3In Beach v. Great Western Bank, 

(Fla. 1997), our supreme court
discussed Allie v. Ionata, 

(Fla. 1987), and noted that “we held
that a counterclaim of recoupment of money damages may be asserted even
though the underlying claim itself would have been timebarred if raised as a
separate cause of action.” 

–51 (citing 

–40).

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the TILA violation counterclaim.

   Reversed.

WARNER, J., and JEFFREY DANA GILLEN, Associate Judge, concur.

                           *       *       *

   Not final until disposition of timely filed motion for rehearing.




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