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Published in Florida Daily Business Review/ALM

A recent opinion out of the Florida Fifth District Court of Appeal makes clear that the failure of a lender or its successor in interest to introduce and authenticate original promissory notes at trial may result in the claimant failing to recover judgment for money damages on those notes. However, the Fifth District also made clear that for claims on other types of contracts, including security agreements, copies are sufficient, and the original documents are not required in order to obtain judgment. Sanger v. Asher, No. 5D22-2104 (Mar. 22, 2024) (Not Yet Final).

The case concerned breach of promissory note and security agreement claims by Asher, the purchaser of a loan, against Sanger, the borrower on the loan. At trial, the parties disputed whether the notes and security agreement were originals or copies, each relying on expert testimony to prove the authenticity of the documents.

The trial court originally issued a split ruling, finding that all the instruments were copies, not originals, but while the security agreement was enforceable notwithstanding the fact it was not original, the promissory notes were not. Although the loan purchaser was given leave to assert a new claim to re-establish and enforce the promissory notes as lost instruments, the purchaser declined to do so, instead moving for a rehearing several months after the trial, claiming that the original promissory notes were inadvertently misplaced, and now that they have been located, judgment should be entered for the full amount outstanding.

Over the objection of the borrower, the trial court entered a judgment for $338,000 on the notes and security agreement, and the borrower appealed. The Fifth District affirmed in part and reversed in part.

As to the security agreement, the appellate court held that pursuant to Section 90.953, Florida Statutes, “[a] duplicate is admissible to the same extent as an original, unless: (1) [t]he document or writing is a negotiate instrument … or any other writing that evidences a right to the payment of money, [and] is not itself a security agreement.”  (emphasis in original). Id. at 4.

The Fifth District determined that, as there were no issues regarding the authenticity of the copy, the security agreement was enforceable. However, as promissory notes are textbook examples of negotiable instruments, they would not be enforceable absent the introduction at trial of the original signed documents.

The Fifth District further reversed the trial court’s order granting the loan purchaser a rehearing in order to establish the original, purportedly-misplaced promissory notes, finding that the granting of this request several months after trial was prejudicial to the borrower and “gave Asher an unjustified second bite at the apple after failing to meet his evidentiary burden at trial.”  Id. at 6.

Important Lessons and Practice Pointers for Lenders

The decision illustrates important lessons and practice pointers for lenders and their counsel: 

  • Lenders should ensure that they have the original promissory notes in their possession before filing suit, and certainly before proceeding to trial;
  • Lenders should be counseled to retain the original promissory notes in a safe location such as a safety deposit box, safe, or vault, and ensure that all promissory notes held by the lender, as negotiate instruments, are properly accounted for, and kept safe and secure;
  • If the lender believes that it may not be able to produce the original notes at trial, the lender should timely move to assert a claim to reestablish the lost instruments as provided in Sections 673.3091 and Section 702.015, Florida Statutes;
  • Unlike promissory notes, lenders may be able to prevail on claims for breach of security agreements or other contracts other than “writings that evidence a right to the payment of money” with only a copy and not an original of the agreement, so long as no genuine question is raised about the authenticity of the original;
  • Still, originals of security agreements and similar contracts should be retained and kept safe and secure just like notes, as having the original in the lender’s possession could help defeat an argument that the copy sought to be relied upon is not authentic and therefore not enforceable; and
  • If given the opportunity by the trial court to pursue a claim to reestablish lost promissory notes, a lender should carefully consider whether to pursue that claim rather than move for rehearing on an adverse trial ruling, as appellate courts may deny the right to re-litigate the underlying claims on rehearing if the allowance of the new evidence is prejudicial to the borrower party.

A lender should exercise due diligence and have all its proverbial ducks in a row and actual possession of the original promissory notes that it seeks to enforce before heading to court, as the failure to do so may result in an unfavorable result.

About Our Author

Andrew McBride has a diverse Florida-based litigation and transactional practice focused on real estate transactions, banking litigation and lending transactions, commercial litigation, association advice and litigation, bankruptcy, foreclosure, and other creditors’ rights matters. Based in Tampa, McBride is a member of the financial services team, advising banks and other distressed debt purchasers on litigation and transactions, and documenting, negotiating, and closing complex commercial real estate and loan transactions, construction loan transactions, and workouts. He litigates contracts, real property, and complex commercial law matters, as well as adversary proceedings in bankruptcy court. Andrew counsels property-owner clients through a myriad of concerns, including statutory compliance and other regulatory matters.