Winchel v. PennyMac Corp.

• Decision Date: 07 July 2017
• Docket Number: Case No. 2D15–5601
• Parties: Gregory J. WINCHEL, Appellant, v. PENNYMAC CORP.; Mortgage Electronic Registration Systems, Inc., as Nominee for America's Wholesale Lender; Unknown Tenant #1 n/k/a Matt Bottorff; and Unknown Tenant #2 n/k/a Jennifer Early, Appellees.
• Court: Florida District Court of Appeals

222 So.3d 639

Gregory J. WINCHEL, Appellant,

v.PENNYMAC CORP.; Mortgage Electronic Registration Systems, Inc., as Nominee for America's Wholesale Lender; Unknown Tenant #1 n/k/a Matt Bottorff; and Unknown Tenant #2 n/k/a Jennifer Early, Appellees.

Case No. 2D15–5601

District Court of Appeal of Florida, Second District.

Opinion filed July 7, 2017.

Kenneth Eric Trent of Trent Law Office, Fort Lauderdale, for Appellant.

Nancy M. Wallace of Akerman LLP, Tallahassee; William P. Heller of Akerman LLP, Fort Lauderdale; and

Eric M. Levine of Akerman LLP, West Palm Beach, for Appellee Pennymac Corp.

No appearance for remaining Appellees.

SALARIO, Judge.

Gregory Winchel appeals from a final judgment of foreclosure in favor of PennyMac Corp. The judgment was rendered after the trial judge approved the report and recommendations of a foreclosure magistrate following a nonjury trial at which Mr. Winchel was not represented because his counsel failed to appear. Because Pennymac failed to prove its standing at the inception of the case—a matter as to which it bore the burden of proof—we are required to reverse.

This case began when JPMorgan Chase Bank filed a complaint to reestablish a lost note under which Mr. Winchel was the borrower and to foreclose a mortgage that secured his obligations under the note. It alleged that JPMorgan had the right to enforce the note, which it either had at the time the note was lost or acquired from someone else who did. It also attached copies of a note and mortgage naming America's Wholesale Lender as the lender and an assignment of the note and mortgage from Mortgage Electronic Registration Systems as nominee for America's Wholesale Lender to Countrywide Home Loans, Inc. Because those attachments did not say anything about JPMorgan, however, they did not, standing alone, bear out its allegations concerning its right to enforce the note.

Over a year later, a purported original of the note was filed. That note was identical to the copy attached to the complaint, except that it contained a blank, undated indorsement signed by Countrywide. Not long thereafter, JPMorgan filed a motion to substitute PennyMac as the plaintiff. It alleged that the note and mortgage had been transferred and assigned to PennyMac and included an attached assignment of the mortgage, but not the note, from JPMorgan to PennyMac. The motion was granted. Although the complaint was never amended to delete the claim to reestablish a lost note, it is clear that from the time PennyMac was substituted, the case proceeded on the theory that PennyMac was entitled to enforce the note not because it was entitled to do so under the lost note statute, but rather because it was either the holder of the note or a nonholder in possession of the note with the rights of a holder.¹ See § 673.3011, Fla. Stat. (2012) (defining persons entitled to enforce a negotiable instrument as a holder, a nonholder in possession with the rights of a holder, or a person not in possession entitled to enforce under the lost note or mistake statutes).

Mr. Winchel then filed an answer in which he alleged as an affirmative defense a lack of standing at the time the complaint was filed—what is commonly called a defense of "no standing at inception."² Thereafter, the trial judge entered an order referring the case to a foreclosure magistrate to conduct a nonjury trial, see Fla. R. Civ. P. 1.491, and scheduling that trial for a date and time certain.

Mr. Winchel's attorney did not appear at the trial. The court minutes reflect that the case was called at the scheduled time and again fifteen minutes later, with plans to proceed without the attorney once it was called a third time. Meanwhile, Mr. Winchel's attorney's office filed an emergency motion to continue—alleging that a member of his staff incorrectly informed the attorney of his schedule for the day of trial, that the attorney was at that moment driving across the state to the courthouse, and that the attorney was having difficulty with a low tire during the trip. It is not clear when or if the attorney made it to the courthouse that day, but when the case was called for the third time, the attorney was absent, and the magistrate denied the emergency motion to continue and conducted a nonjury trial with only PennyMac's counsel participating.

PennyMac's trial evidence consisted of the testimony of a single witness through whom three documents were admitted: (1) a limited power of attorney from JPMorgan to PennyMac giving PennyMac authority to foreclose certain mortgage loans identified in a separate loan purchase and servicing agreement, (2) an acceleration notice informing Mr. Winchel that he was in default, and (3) Mr. Winchel's loan payment history. There was, however, no evidence presented to show that JPMorgan was entitled to enforce Mr. Winchel's note at the time the complaint was filed. The original note—which was not admitted into evidence but that the magistrate recognized was in the court file—bore an undated indorsement in blank. PennyMac did not produce testimony or documents showing when JPMorgan came into possession of the note or, if it was a nonholder in possession, when it acquired the rights of a holder to enforce the note.

After the trial, the magistrate issued a report finding that PennyMac proved its case and recommending entry of a proposed final judgment of foreclosure tendered by PennyMac at trial. Mr. Winchel filed exceptions to the report and recommendations, see Fla. R. Civ. P. 1.490(i), (j); 1.491(f), arguing that the magistrate lacked authority to deny his emergency motion to continue. After a hearing, the trial judge rendered orders overruling Mr. Winchel's objections and approving the report and recommendations. A final judgment of foreclosure was separately entered.

In this timely appeal, Mr. Winchel asserts that the judgment should be reversed both because PennyMac failed to prove standing at the inception of the case and because the magistrate lacked authority to deny his emergency motion to continue. We agree that PennyMac failed to prove standing at inception and, because we reverse on that basis, do not address Mr. Winchel's argument concerning the requested continuance. On the standing issue, our review is de novo. See St. Clair v. U.S. Bank Nat'l Ass'n , 173 So.3d 1045, 1046 (Fla. 2d DCA 2015).

As defenses go, standing has become something of a legal oddity. We treat it as an affirmative defense in that the defendant must put it in play by raising it in an appropriate pleading—ordinarily, the answer.³ See Dage v. Deutsche Bank Nat'l Tr. Co. , 95 So.3d 1021, 1024 (Fla. 2d DCA 2012) ("[L]ack of standing is an affirmative defense that must be raised by the defendant and the failure to raise it generally results in waiver." (alteration in original) (quoting Phadael v. Deutsche Bank Tr. Co. Ams. , 83 So.3d 893, 895 (Fla. 4th DCA 2012) )); see also Fla. R. Civ. P. 1.110(d) (requiring that affirmative defenses be pleaded in the answer). Yet once injected into a case by a defendant's pleading, we say that it must be proved at trial by the plaintiff. See Dickson v. Roseville Props., LLC , 198 So.3d 48, 50 (Fla. 2d DCA 2015) ; May v. PHH Mortg. Corp. , 150 So.3d 247, 248 (Fla. 2d DCA 2014). Once put at issue by a defendant, then, standing becomes a part of the prima facie case that a foreclosure plaintiff must prove in order to secure a judgment. See Dhanik v. HSBC Bank USA, Nat'l Ass'n , 210 So.3d 113, 115 (Fla. 2d DCA 2016).

Because the count to reestablish a lost note fell out of the case, PennyMac's standing hinged on whether it and its predecessor in interest were the holders of Mr. Winchel's note or nonholders in possession with the rights of a holder. See § 673.3011(1), (2) ; Creadon v. U.S. Bank N.A. , 166 So.3d 952, 954 (Fla. 2d DCA 2015). PennyMac was required by law to prove standing under either theory both at the time of trial and also at the inception of the case. See Powers v. HSBC Bank USA, N.A. , 202 So.3d 121, 122–23 (Fla. 2d DCA 2016). Because PennyMac was substituted as plaintiff for JPMorgan after the complaint was filed, proof of standing at inception required proof that JPMorgan had standing when it filed the complaint. See Russell v. Aurora Loan Servs., LLC , 163 So.3d 639, 642 (Fla. 2d DCA 2015).

There was a complete absence of any such evidence here. Because no one has argued otherwise, we assume that the magistrate properly considered the purported original note in the court file. But see Heller v. Bank of Am., N.A. , 209 So.3d 641, 644 (Fla. 2d DCA 2017). That note, however, was filed after the complaint was filed, did not show that JPMorgan was the original lender, and bore an undated, blank indorsement. There was no testimony or other evidence to explain when the indorsement was placed on the note. As such, PennyMac failed entirely to show that the note had been indorsed at the time the complaint was filed or that JPMorgan was in possession of the note at that time. It thus failed entirely to prove that JPMorgan was either a holder or a nonholder in possession at the inception of the case. See Phan v. Deutsche Bank Nat'l Tr. Co. , 198 So.3d 744, 747 (Fla. 2d DCA 2016) ("Under the law, without the requisite proof of possession at the time a foreclosure action is commenced, the plaintiff's status as the holder of the note—and, hence, its authority to enforce the note in foreclosure—remains unproven, and its complaint untenable." (citing Focht v. Wells Fargo Bank, N.A. , 124 So.3d 308, 310 (Fla. 2d DCA 2013) )); Corrigan v. Bank of Am., N.A. , 189 So.3d 187, 190 (Fla. 2d DCA 2016) (en banc) ("Though Bank of America later filed the original note and mortgage along with an assignment, these documents did not establish standing at the time the original complaint was filed because the endorsement was undated and the assignment was dated after the original complaint was filed.").

There was nothing else in PennyMac's trial evidence to show that JPMorgan had standing...