The case of Am. Bank of the S. v. Rothenberg, 598 So. 2d 289 (Fla. 5th DCA 1992) presented a situation of competing claims to ownership of a mortgage. A mortgage company first delivered the actual mortgage note and an assignment of note and mortgage to one party as collateral for a line of credit. Then the mortgage company sold the mortgage note and mortgage to a second party and delivered to it an assignment and a mere photocopy of the mortgage note. Before the first party recorded its assignment of note and mortgage, the second party recorded its assignment of note and mortgage. Upon the property owner's default, the second party began a foreclosure action against the property owner and also claimed priority over the first party who possessed the actual mortgage note. The second party argued that it had priority over the first party as it recorded its assignment of note and mortgage first even though the second party held the actual mortgage note.
The second party claimed priority over the first party based on Florida's recording statute which provides in part that "[n]o assignment of a mortgage upon real property or of any interest therein, shall be good or effectual in law or equity, against creditors or subsequent purchasers, for a valuable consideration, and without notice, unless the assignment is contained in a document which, in its title, indicates an assignment of mortgage and is recorded according to law." Section 701.02 (1), Florida Statutes (1991).
The court rejected the second party's argument and held that the case was governed by negotiable instrument law found in the U.C.C. and not by the recording statute. The court found that the recording statute was enacted to protect a creditor or subsequent purchaser of land who relied on a recorded satisfaction of mortgage which had actually already been assigned to another party who failed to record it. The court refused to extend the application of the recording statute to successive assignments of mortgages.
The court found that first party prevailed over the second party as it possessed a valid assignment of mortgage and was a holder in due course of the original mortgage note. See Vance v. Fields, 172 So. 2d 613 (Fla. 1965). The court held the mortgage note to be a negotiable instrument pursuant to Section 673.104, Florida Statutes (1991) and that the first party was a holder in due course which took the negotiable instrument free from all claims on the part of any person. Section 673.305, Fla. Stat. (1991).