Morroni v. Wilmington Sav. Fund Soc'y FSB

• Decision Date: 13 March 2020
• Docket Number: Case No. 2D18-2347
• Citation: 292 So.3d 514
• Parties: Henry A. MORRONI, Appellant, v. WILMINGTON SAVINGS FUND SOCIETY FSB, d/b/a Christiana Trust as Owner Trustee of the Residential Credit Opportunities Trust III; JP Morgan Chase Bank, NA, as Successor by Merger with Banc One Financial Services, Inc.; Brynwood Homeowners Association, Inc; Chelsea A. Morroni; Chloe T. Morroni; and Tristan A. Morroni, Appellees.
• Court: Florida District Court of Appeals

292 So.3d 514

Henry A. MORRONI, Appellant,

v.WILMINGTON SAVINGS FUND SOCIETY FSB, d/b/a Christiana Trust as Owner Trustee of the Residential Credit Opportunities Trust III; JP Morgan Chase Bank, NA, as Successor by Merger with Banc One Financial Services, Inc.; Brynwood Homeowners Association, Inc; Chelsea A. Morroni; Chloe T. Morroni; and Tristan A. Morroni, Appellees.

Case No. 2D18-2347

District Court of Appeal of Florida, Second District.

Opinion filed March 13, 2020

Linda K. Yerger of Yerger/Tyler PA, Naples, for Appellant.

Jennifer M. Chapkin of Chapkin Law, Boca Raton, and Matthew B. Leider of Law Offices of Mandel, Manganelli & Leider, P.A., Boca Raton, for Appellee Wilmington Savings Fund Society FSB, d/b/a Christiana Trust as Owner Trustee of the Residential Credit Opportunities Trust III.

No appearance for remaining Appellees.

SALARIO, Judge.

This is a residential mortgage foreclosure case in which Henry Morroni appeals from a final judgment of foreclosure in favor of Wilmington Savings Fund Society. He correctly argues that Wilmington failed to prove that it had standing to enforce the note the mortgage secured either at the inception of the case or at the time of judgment because it failed to prove that it had possession of the original note and accompanying allonges. We therefore reverse.

Because the facts may not make much sense without some context, it is helpful to put some basic legal principles up front. Here, the mortgage secures the repayment of a note—a negotiable instrument under article 3 of the Uniform Commercial Code, codified in chapter 673, Florida Statutes (2017). To have standing to foreclose a mortgage, one must be legally entitled to enforce the note to which it relates. See, e.g., Geweye v. Ventures Trust 2013-I-H-R, 189 So. 3d 231, 232-33 (Fla. 2d DCA 2016). There are three categories of persons entitled to enforce a note: (1) the holder of the note, (2) a nonholder in possession of the note with the rights of a holder, and (3) a person not in possession of the note who is entitled to enforce it under section 673.3091 relating to lost, stolen, or destroyed instruments or section 673.4181(4) relating to mistaken payment or acceptance. § 673.3011; see also St. Clair v. U.S. Bank Nat'l Ass'n, 173 So. 3d 1045, 1046 (Fla. 2d DCA 2015). Wilmington proceeded here, as a great many foreclosure plaintiffs do, on the theory that it was a holder.

A holder of a negotiable instrument like a note is a "person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession." § 671.201(21)(a), Fla. Stat. (2017). Where the plaintiff is not the original lender on the note, the plaintiff frequently proves that it is a holder by submitting a note with an indorsement—words and a signature made for purposes of negotiating the note—that either (1) specifically names the party seeking to enforce (a special indorsement) or (2) that does not name any person (a blank indorsement). See §§ 673.2041, .2051; Nationstar Mortg., LLC v. Johnson, 250 So. 3d 808, 810 (Fla. 2d DCA 2018) (quoting Focht v. Wells Fargo Bank, N.A., 124 So. 3d 308, 310 (Fla. 2d DCA 2013) ). When a foreclosure plaintiff asserts standing to enforce a note based on a blank indorsement, it must prove its possession of the original note bearing a blank indorsement. See Rosa v. Deutsche Bank Nat'l Tr. Co., 191 So. 3d 987, 988 (Fla. 2d DCA 2016) ; Phan v. Deutsche Bank Nat'l Tr. Co., 198 So. 3d 744, 747 (Fla. 2d DCA 2016) ; see also § 673.2051(2) (stating that a negotiable instrument indorsed in blank may be "negotiated by transfer of possession alone until specially indorsed"). The plaintiff must prove both that it had standing when the case was filed and that it has it when the judgment is entered.¹ See Dickson v. Roseville Props., LLC, 198 So. 3d 48, 50-51 (Fla. 2d DCA 2015) (citing Gonzalez v. Deutsche Bank Nat'l Tr. Co., 95 So. 3d 251, 253-54 (Fla. 2d DCA 2012) ).

With that background behind us, we turn to the facts of the case. Back in March 1998, F. Annette Morroni executed a note evidencing a $450,000 debt to HCI Mortgage, the proceeds of which were used to purchase residential real property. Ms. Morroni's obligation to repay the note was secured by a written mortgage on the property in favor of HCI Mortgage that was executed both by Ms. Morroni and by her husband, Henry Morroni.

In March 2017, Wilmington filed a complaint seeking to foreclose the mortgage and named Mr. Morroni as a defendant. (Ms. Morroni had passed away several years earlier.) Wilmington alleged that it was a trust formed under Delaware law and that it was the holder of the note and mortgage. Wilmington attached to its complaint a copy of a note executed by Ms. Morroni. The note had two allonges attached to it—the first one containing a special indorsement of the note from HCI Mortgage to First Guaranty Mortgage Corporation and a later one containing a blank indorsement by U.S. Bank Trust, N.A.² Wilmington also attached to its complaint a series of assignments transferring the mortgage, but making no mention of the note, from HCI Mortgage to First Guaranty, then from First Guaranty to Household Finance Corporation III, then from Household Finance to U.S. Bank Trust, then from U.S. Bank Trust to Morgan Stanley Mortgage Capital Holdings, LLC, and, finally, from Morgan Stanley to Wilmington.

The case proceeded in the normal course to a nonjury trial. Wilmington's theory that it possessed the original note together with an allonge containing a blank indorsement both at the beginning of the case and at trial was straightforward: It presented the trial court with what it contended were the original note and allonges, which it argued matched the copies of the note and allonges attached to the complaint. It admitted the purported originals through Michael Surowiec, an employee of a mortgage servicer. Mr. Surowiec testified, over objection, that he has seen thousands of original notes and could tell whether a note was original just by looking at it. According to Mr. Surowiec, Wilmington's note in this case was an original.

Mr. Morroni, on the other hand, presented expert testimony on the question of whether the note was an original through E'lyn Bryan, a forensic document examiner. Ms. Bryan testified that she had examined the purportedly original note and allonges using a digital microscope and various kinds of light to determine whether the documents were in fact originals. She expressed the opinion that the signature page on the note and the allonge containing the indorsement from HCI Mortgage to First Guaranty were not originals but, rather, were photocopies. Her opinion was based on markings and anomalies on the document—such as toner marks and different staple holes—that indicate that a document has been photocopied.

In addition, Ms. Bryan also compared Ms. Morroni's signature on the copy of the note attached to Wilmington's complaint with the signature on the purportedly original note brought to trial. Even though the two documents should have been identical, Ms. Morroni's signature was in a noticeably different location in relation to the signature line: On the copy of the note attached to Wilmington's complaint, Ms. Morroni's signature began flush with the signature line, but on the purportedly original complaint brought to trial, her signature protruded to the left of the signature line. The discrepancy between the signatures was undisputed at trial.

At the close of trial, arguments on a defense motion for involuntary dismissal and closing arguments were heard together. The sole issue was whether Wilmington had proved its possession of the original note and allonges so as to establish its standing. The trial court began its evaluation of that issue by explicitly stating that it wanted to rule against Mr. Morroni because "[h]e has not paid a mortgage" and therefore was "clearly not entitled to stay on this property." When Mr. Morroni's counsel objected that Wilmington could not foreclose if it failed to prove standing, the court replied that "I understand that, but that's an odd result to the situation" because Mr. Morroni "hasn't said [that he] certainly doesn't owe the money or anything like that." It later stated that Mr. Morroni "does not deserve to prevail on this thing"—presumably because of its concern that Mr. Morroni had not made payments on the mortgage debt.

The trial court considered, in regard to the evidence on whether the note was original, what it first said was Ms. Bryan's uncontradicted expert testimony but later said was contradicted "to some extent." When Mr. Morroni's counsel noted that Wilmington did not present expert testimony on whether the note and allonges were original, the trial court responded that Ms. Bryan's testimony "can be contradicted by other means." It did not say what those other means were. We know, however, that the trial court was not referring to Mr. Surowiec's testimony that he could tell the note was original by looking at it because the trial court explicitly stated that "I'm not going to accept that." Ultimately, however, the trial court must have rejected Ms. Bryan's testimony because it concluded without further elaboration that "I'm going to grant the foreclosure and convey it all to the wisdom of others." The trial court entered a final judgment consistent with that oral ruling.

In this timely appeal, Mr. Morroni argues that Wilmington failed to prove its standing at the inception of the case and at the time of judgment and focuses on the trial court's rejection of the unrebutted expert testimony of Ms. Bryan on the question of whether Wilmington possessed the original note and allonges. See, e.g., Mathis v. Nationstar Mortg., LLC, 227 So. 3d 189, 192 (Fla. 2d DCA 2017) (requiring, where allonge is at issue, production of the original note and allonge). Our...