Full Opinion

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED IN THE DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT HENRY A. MORRONI, ) ) Appellant, ) ) v. ) Case No. 2D18-2347 ) 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. ) ) Opinion filed March 13, 2020. Appeal from the Circuit Court for Lee County; James R. Thompson, Senior Judge. 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. -2- 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)). 1The defendant, however, bears the burden of raising standing as an issue to be tried in the case, typically by pleading it as an affirmative defense in the answer. See Winchel v. Pennymac Corp., 222 So. 3d 639, 642-43 (Fla. 2d DCA 2017). Mr. Morroni has satisfied that burden here. -3- 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. 2"An allonge is a piece of paper annexed to a negotiable instrument or promissory note, on which to write [i]ndorsements for which there is no room on the instrument itself." Purificato v. Nationstar Mortg., LLC, 182 So. 3d 821, 823 (Fla. 4th DCA 2016) (quoting Booker v. Sarasota, Inc., 707 So. 2d 886, 887 n.1 (Fla. 1st DCA 1998)). -4- 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. -5- 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 -6- 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 review is de novo. See Peters v. Bank of N.Y. Mellon, 227 So. 3d 175, 178 (Fla. 2d DCA 2017) ("Our review of a trial court's ruling regarding whether a foreclosure plaintiff has standing is de novo."). We agree with Mr. Morroni that the trial court erred in rejecting Ms. Bryan's expert testimony and that this error was the only way it could have ruled in Wilmington's favor on the standing question. Although a trial court is free to reject an unrebutted expert opinion when it decides a case, it is not free to do so arbitrarily. See Wiederhold v. Wiederhold, 696 So. 2d 923, 924 (Fla. 4th DCA 1997) ("[T]he trial court as fact-finder cannot arbitrarily reject unrebutted expert testimony."); Republic Nat'l Bank of Miami, N.A. v. Roca, 534 So. 2d 736, 738 (Fla. 3d DCA 1988) (holding that the trial court could not "arbitrarily reject unrebutted testimony" of an expert). Thus, when a trial court acting as a fact-finder renders a decision that rejects the unrebutted testimony of an expert, "it must offer a reasonable explanation for doing so, such as impeachment of the witness or conflict with other evidence." Storey v. State, 139 So. 3d 448, 449 (Fla. 2d DCA -7- 2014); see also Coday v. State, 946 So. 2d 988, 1005 (Fla. 2006) ("While we have given trial judges broad discretion in considering unrebutted expert testimony, we have always required that rejection to have a rational basis."); Wiederhold, 696 So. 2d at 924 ("[W]hile the trial court can reject unrebutted expert testimony, it must offer a reasonable explanation for doing so."). There was no reasonable explanation for the trial court's rejection of Ms. Bryan's unrebutted testimony here. Although the trial court might have pointed to Mr. Surowiec's testimony that he could tell the note was original as a potential conflict in the evidence on whether the note and allonges were original, the trial court explicitly rejected that course. It was correct to do so. Although a lay witness like Mr. Surowiec may offer an opinion on a matter that does not require special knowledge, skill, experience, or training—we express no opinion on whether this case presented such a question—such a witness must testify "as to the facts or perceptions underlying [his or her] opinion."3 Beck v. Gross, 499 So. 2d 886, 889 (Fla. 2d DCA 1986); see also § 90.701, Fla. Stat. (2018); Sajiun v. Hernandez, 226 So. 3d 875, 880 (Fla. 4th DCA 2017). Here, there was no such testimony; Mr. Surowiec just thought the note was original because he had seen lots and lots of other originals. Without any explanation of what undergirded his opinion that the note and allonges were originals, Mr. Surowiec's testimony was the lay opinion equivalent of ipse dixit and could not have afforded a reasonable basis for the trial court to have rejected Ms. Bryan's expert testimony. Cf. Mills v. Redwing Carriers, Inc., 127 So. 2d 453, 457 (Fla. 2d DCA 1961) ("Moreover, where the opinion is nothing more than 3The parties have not directed us to any precedents addressing whether a document is original may be determined without recourse to expert testimony, and we have located none. -8- the speculation of an admitted non-expert on the issue involved, to that extent it does invade the province of the jury, which is equally competent to reach such a conclusion upon the same physical facts observed by the witness and made known to the jury by exhibits and testimony."). The trial court identified nothing else—for example, contradictory evidence, impeachment, or credibility issues—that justifies its rejection of Ms. Bryan's unrebutted expert testimony that the signature page of the note and one of the allonges were not originals. Nor do we see anything in our record that does so. On the contrary, it appears from our record that the trial court rejected Ms. Bryan's testimony because it believed that because Mr. Morroni had not paid his mortgage, he should not be permitted to prevail. It should go without saying that that is not a reasonable explanation for rejecting an expert's testimony about whether a document is an original. Wilmington contends that even if it failed to prove standing by presenting the original note and allonges, it managed to prove standing anyway because it produced at trial the chain of assignments attached to its complaint, which showed that the mortgage was transferred, in the end, to U.S. Bank. But those assignments transferred only the mortgage, not the note. It is by now well established that an assignment that transfers only the mortgage and not the note is insufficient to show standing. See Verizzo v. Bank of N.Y. Mellon, 220 So. 3d 1262, 1266 (Fla. 2d DCA 2017) (citing Caballero v. U.S. Bank Nat'l Ass'n, 189 So. 3d 1044, 1046 (Fla. 2d DCA 2016)). So the assignments are unavailing as proof of standing here. Wilmington bore the burden of proving that it had standing at trial and failed to rebut expert testimony on that subject or otherwise to prove that the note and -9- allonges it tendered at trial were in fact originals. Wilmington also did not submit any evidence to establish standing by some other means. In the end, then, the evidence failed to prove that Wilmington had standing to pursue this foreclosure action either when it was filed or when judgment was entered. We reverse and remand for entry of judgment in favor of Mr. Morroni.4 See Tracey v. Wells Fargo Bank, N.A., 264 So. 3d 1152, 1168-69 (Fla. 2d DCA 2019). Reversed and remanded with instructions. NORTHCUTT and BLACK, JJ., Concur. 4We remand for entry of a judgment rather than an order of involuntary dismissal because the trial court entered its judgment after hearing a combined closing argument and argument on a motion for involuntary dismissal. We have explained that a defense motion for involuntary dismissal at the close of all the evidence in a nonjury trial—as distinguished from at the close of the plaintiff's case—is not best practice because the trial court can just as easily at that point render a judgment. See Deutsche Bank Nat'l Tr. Co. v. Kummer, 195 So. 3d 1173, 1175 n.2 (Fla. 2d DCA 2016). Consistent with that explanation, we remand for entry of a judgment, which is what we would do had no motion for involuntary dismissal been made. See Winchel, 222 So. 3d at 646 n.5. - 10 -