A trial court judge suspecting fraud went too far when she refused to allow the bank to amend its foreclosure complaint after reviewing documents outside of the complaint. In its opinion reversing dismissal of the foreclosure, the First District Court of Appeal asked trial courts to liberally grant amendments in foreclosure cases.

The document at the center of controversy was an allonge, a piece of paper that was allegedly affixed to William Bohatka’s original promissory note to provide more room for subsequent endorsements.

Wells Fargo sued Bohatka to foreclose on his mortgaged property that secured his loan from Option One Mortgage Corporation. According to Wells Fargo, the allonge evinced the unconditional equitable transfer it received from Option One. The body of the complaint said that Wells Fargo was "the owner and holder of all real and beneficial interests" in the note and mortgage. Yet the copies of the mortgage and promissory note attached as exhibits showed Option One as the lender.

In Florida, documents attached to the complaint become part of the pleading. When there’s an inconsistency between the two, the attachments control. Bohatka seized on the inconsistency and moved to dismiss the complaint, alleging Wells Fargo lacked standing to sue him — only Option One could ask the court for relief because only Option One would be damaged in the event of non-payment.

At a hearing on Bohatka’s motion, Wells Fargo produced the original note and claimed the allonge established standing. Bohatka objected on the grounds that the original wasn’t part of the record and that he wasn’t given enough notice to adequately respond.

The trial court didn’t take Wells Fargo at its word, nor was it inclined to grant Bohatka’s objections. Instead, it examined the allonge and essentially made an evidentiary determination.

"There is no endorsement. There is no allonge, and there cannot be any allonge affixed before filing, so dismissal is with prejudice," Judge Marci L. Goodman wrote in her ruling. "I also suspect that this document [the allonge] was created to defeat the defendants’ motion," she continued.

Goodman granted attorney fees to Bohatka and threatened Wells Fargo and its counsel by reserving the right to refer the matter to the attorney general for investigation — eventually making good on that threat.

Wells Fargo moved to vacate the dismissal. The bank presented an affidavit stating it owned the loan, an agreement showing its trustee status and a schedule showing it was trustee over a pool containing the loan at issue.

But Goodman stood by her decision, and Wells Fargo turned to the First District Court of Appeal.

The First DCA agreed the trial court’s decision to dismiss was justified because of the contradiction Wells Fargo created, but nevertheless reversed.

The trial court, the three-judge panel held, should have given the bank the opportunity to cure defects in the initial complaint by way of amendment.

"We know of no appellate case affirming a dismissal of an initial complaint with prejudice under like circumstances; it would be a rare bird in the judicial aviary," Judge Scott Makar wrote for the panel. Makar was joined by Chief Judge Robert T. Benton and Judge William A. Van Nortwick Jr.

The panel pointed to the recent trend among Florida appellate courts, which has been to allow banks to clarify standing through amendment — to view the initial complaint as merely a starting point.

Makar acknowledged the challenges foreclosure cases have presented to trial courts. "Given the potential for fraud in post-dating addenda and other purported documents of transfer, it is laudable for courts and others to be sensitive to potential abuses," he wrote.

But uncertainty in facts isn’t tantamount to fraud. Furthermore, the trial court had before it the documents upon which the bank would likely rely for an amended complaint: the allonge, the affidavit of ownership, the pooling/servicing agreement and its schedule, and the bank’s modification agreement with the Bohatkas.

At the pleading stage, trial courts should confined themselves to the Florida evidence rules and leave the question of fraud for the trier of fact to answer.