MTGLQ Investors, L.P. v. Merrill, 1D19-2682

• Decision Date: 25 January 2021
• Docket Number: No. 1D19-2682,1D19-2682
• Citation: 312 So.3d 986
• Parties: MTGLQ INVESTORS, L.P., Appellant, v. James Collier MERRILL, Appellee.
• Court: Florida District Court of Appeals

312 So.3d 986

MTGLQ INVESTORS, L.P., Appellant,

v.James Collier MERRILL, Appellee.

No. 1D19-2682

District Court of Appeal of Florida, First District.

January 25, 2021

Rehearing Denied March 16, 2021

Nicole R. Ramirez of eXL Legal, PLLC, St. Petersburg, for Appellant.

Brian W. Hoffman and Nathan R. Jurgensen of Carver, Darden, Koretzky, Tessier, Finn, Blossman & Areaux, LLC, Pensacola, for Appellee.

Kelsey, J.

The issue before us is whether Appellant MTGLQ Investors can retrieve the original note and mortgage from the court file of a foreclosure action the trial court dismissed without a merits disposition. MTGLQ was an assignee and substituted plaintiff in that action, and moved for release of the documents, but the trial court denied the motion. We hold that on the facts presented, MTGLQ can retrieve the original note and mortgage.

I. Foreclosure Proceedings.

Appellee, the Borrower, entered into a $417,000 purchase-money mortgage and note in June 2007, securing his acquisition of a residential condominium in Pensacola. He defaulted on his payments less than two years later, failing to make the April 2009 payment or, as far as our record shows, any other payments in the nearly twelve years since. The original lender sued for foreclosure in 2009, but dismissed that proceeding without resolution.

JPMorgan Chase Bank filed the present foreclosure action in 2013, alleging a default date of April 1, 2009 and ongoing default thereafter. The complaint alleged that the Federal National Mortgage Association (FNMA) owned the note, and that JPMorgan as the loan servicer and holder was authorized to bring the foreclosure action. JPMorgan filed the original note and mortgage in 2013. The original note had an allonge with a blank indorsement.

In 2014, JPMorgan filed a verified motion to substitute FNMA as plaintiff. This motion asserted that JPMorgan had transferred to FNMA the right to enforce the subject loan, FNMA was the real party in interest, and no party would be prejudiced. Borrower did not object, and the trial court granted the motion.

In 2016, FNMA assigned to MTGLQ the mortgage and "the certain note(s) described therein." FNMA recorded the assignment. FNMA also executed a power of attorney giving MTGLQ "full power and authority" to take any action that FNMA could take with respect to "mortgage loans, deeds of trust, promissory notes and allonges."

In 2018, MTGLQ moved to substitute itself as plaintiff in the foreclosure action, attaching a copy of the recorded assignment from FNMA. Again, Borrower did not object to the substitution of plaintiff, and the trial court granted this motion.

The trial court initially scheduled trial for August 13, 2018; then continued it to December 3, 2018. MTGLQ amended its witness list five days before trial, asserting that the witnesses who would testify had changed (though the testimony would not). Although Borrower had not deposed the earlier-named witnesses, the trial court dismissed the case with prejudice after the late amendment.¹

Early in 2019, MTGLQ filed a motion and then an amended motion to retrieve from the court file the original mortgage and the original note with its allonge, citing Florida Rule of Judicial Administration 2.430(h). This rule provides that courts have ongoing authority "to release exhibits or other parts of court records that are the property of the person or party initially placing the items in the court records." MTGLQ argued that it was entitled to the original note and mortgage on two grounds. The first was its status as substituted plaintiff in the foreclosure action. The second was the September 8, 2016 assignment from FNMA reciting that it assigned the mortgage to MTGLQ "together with the certain note(s) described therein."

Borrower argued that no right to enforce the note survived this Court's dismissal of MTGLQ's appeal from the trial court's order dismissing the foreclosure action. Borrower also argued that MTGLQ could not obtain the note in any event because it was not the original plaintiff and could not establish a chain of ownership. Borrower argued that a substituted plaintiff does not necessarily own the note or have standing to enforce it.

The trial court held a telephonic hearing, and orally denied MTGLQ's motion. No court reporter recorded the hearing. MTGLQ moved for reconsideration, noting the court's oral denial.

The parties argued their positions at a second, transcribed hearing. Borrower's attorney asserted that he had located a public record in which FNMA rescinded a June 23, 2014 assignment of the mortgage (not the note) to JPMorgan. Borrower did not give MTGLQ prior notice or a copy of this document, and did not enter it into evidence—but he has included it in his appendix here. Borrower argued that to remove the original note and mortgage from the court file and give MTGLQ physical possession of them would make MTGLQ a holder in possession, thus giving MTGLQ more rights than it had during the foreclosure suit. Borrower claimed this would prejudice him. Borrower also argued that it was not necessary to remove the original note and mortgage from the court file, because "someone" who might file another foreclosure action could simply reference the filed documents.

The trial court rendered the unelaborated order on appeal, stating "Plaintiff's Motion to Return Original Loan Documents is DENIED." MTGLQ timely appealed.

II. Legal Analysis.

A. Jurisdiction and Standard of Review.

We have jurisdiction over the order denying MTGLQ's motion to remove the original note and mortgage from the court file. Fla. R. App. P. 9.130(a)(3)(C)(ii) (recognizing jurisdiction to review non-final orders determining the right to immediate possession of property). The issues raised are questions of law, for which our review is de novo. See Wells Fargo Bank, N.A. v. Ousley , 212 So. 3d 1056, 1057 (Fla. 1st DCA 2016).

B. Rights of a Substituted Plaintiff.

On appeal, MTGLQ continues to argue it has the right to obtain the original documents, either as substituted plaintiff or as assignee of the note and mortgage. MTGLQ argues it need not prove previous physical possession of the documents. Borrower acknowledges that the court can release the original documents to a substituted plaintiff that is a holder in possession, or a nonholder in possession that has the rights of a holder. Borrower argues that MTGLQ is neither of those, and that MTGLQ's status as substituted plaintiff is insufficient to authorize it to obtain the original documents from the court file. Borrower further argues that giving MTGLQ the documents will prejudice him. We reject both arguments.²

The core issue on appeal is whether an assignee that becomes a substituted plaintiff in a foreclosure action can retrieve an original note and mortgage from the court file after the court dismisses the case without entering a merits judgment. Courts have general authority to "release exhibits or other parts of court records that are the property of the person or party initially placing the items in the court records." Fla. R. Jud. Admin. 2.430(h). We conclude that MTGLQ is entitled to receive the original loan documents from the court file for several reasons.

(1) Negotiability. Significantly, notes are different from most documents in court files, because notes are negotiable instruments. See § 673.2011, Fla. Stat. (defining negotiation of instruments).³ Notes do not belong to the court, nor do they belong to the borrower. See U.S. Bank Nat'l Ass'n v. Rodriguez , 256 So. 3d 882, 884–85 (Fla. 4th DCA 2018) (recognizing that original notes remain negotiable instruments after entering court file). In Rodriguez , parties to a foreclosure action entered an agreed order to keep the note in the court file after a non-merits dismissal against the original foreclosure plaintiff. 256 So. 3d at 882. Several years later, a substituted plaintiff sought to remove the loan documents. The Fourth District held that because no judgment had cancelled the note or taken it out of the stream of commerce, "it should be returned ... if judgment is not entered in a foreclosure case, as it does not belong to the court and it remains negotiable and valuable to its holder." 256 So. 3d at 884. Here, Borrower's argument against giving MTGLQ the documents would defeat the note's negotiability, since there is no other party to the foreclosure action that could remove them for further negotiation.

Other courts also have held that foreclosure plaintiffs are entitled to remove original loan documents from the court file even without proving entitlement to foreclose. See, e.g., Santiago v. U.S. Bank Nat'l Ass'n as Tr. for Banc of Am. Funding Corp. , 257 So. 3d 1145, 1147–48 (Fla. 5th DCA 2018) ("Whether a party is entitled to foreclose the note and mortgage is not relevant to its right to have the note released from the court records."); Kajaine Estates, LLC, v. U.S. Bank Nat'l Ass'n , 198 So. 3d 1010, 1011 (Fla. 5th DCA 2016) (requiring trial court to release original note to plaintiff that had failed to prove predecessor's standing, and finding that proof of standing is "not relevant" to releasing the note). The note is property, a valuable negotiable instrument, and MTGLQ as plaintiff is entitled to remove it from the court file.

(2) Transferability and Assignment. Beyond the negotiability problem, Borrower's arguments are contrary to settled principles of transferability and the rights of transferees. The law allows assignment and transfer of both notes and mortgages. See § 701.01, Fla. Stat. (authorizing subsequent assignees and transferees of mortgages, as well as original mortgagees, to assign and transfer such mortgages, and providing that all such persons, assigns, and subsequent assignees have all lawful rights of the original mortgagee to foreclose and "for the recovery of the money secured thereby"). MTGLQ filed the assignment and power of attorney documents from FNMA, which on their face gave MTGLQ all of FNMA's rights in the mortgage...