IN THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT IN AND FOR HERNANDO COUNTY, FLORIDA CIVIL DIVISION WELLS

FARGO BANK, N.A., SUCCESSOR BY MERGER TO WELLS FARGO HOME MORTGAGE, INC., Plaintiff,
VS.

CASE NO.: H-27-CA-2010-000067

RODGER W. MITCHELL, JACKIE D. WIITCHELL, et a/. Defendants. FINAL JUDGMENT FOR DEFENDANTS THIS CAUSE came on for a non-jury trial on February 14, 2013. Present before the court were Constantine Kalogianis, counsel for the Mitchells, and Ronald Wolfe & Associates, P.L., counsel for Plaintiff. Based on the evidence presented, the Court makes the following findings of fact and conclusions of law; 1. An unverified mortgage foreclosure complaint was filed on January 8, 2010, by Plaintiff, Wells Fargo Bank, N.A., containing two (2) counts: Count I

- mortgage

foreclosure and Count ll - "re-establishment of lost mortgage" pursuant to F.S. 71.011.

2. The complaint alleged "Plaintiff is now the holder of the Mortgage Note and Mortgage
and/or is entitled to enforce the Mortgage Note and Mortgage". 3. Attached to Plaintiff's complaint were two (2) exhibits: a copy of the note and mortgage naming Bay Lending Corp. as the lender therein. The note did not contain any endorsement or allonge. There was no assignment of mortgage attached. Assignment of the note and mortgage was not pled. Nor was ownership of the note and mortgage.
4. On December 3, 2012, Defendants, Rodger W. Mitchell and Jackie D. Mitchell

f~ledan amended answer specifically denying the signatures on the note and

pleading several affirmative defenses: lack of standing, failure to meet condition precedent and failure to state a cause of action. At trial, Plaintiff called Plaintiff's corporate representative, Robert S. Ferguson, vicepresident of loan documentation for Wells Fargo Bank, N.A., to testify in this matter. No other witnesses were called. At trial, Mr. Ferguson testified that Freddie Mac (Federal Home Loan Mortgage Corporation) is the owner of the note and mortgage. There was no evidence presented at trial that Freddie Mac gave Plaintiff the authority to proceed on its behalf herein; Plaintiff's corporate representative conceded this at trial. Nor was any evidence introduced, either by way of bailee letter or other documents or testimony at trial to show the note was transferred by delivery to its owner, Freddie Mac. Based on the evidence presented, the court finds that the promissory note at issue is a negotiable instrument as defined by F.S. 673.1041; therefore, its negotiation and transfer is subject to the terms and provisions of Florida's Uniform Commercial Code (UCC) concerning negotiable instruments, specifically, Article 3 (see Chapter 673, Florida Statutes (2012)), Article 9 (Chapter 679, Florida Statutes (2012), Chapter 702, Florida Statutes, pertaining to mortgage foreclosures, law of agency, real property law and contract law. Accordingly, the court begins it analysis of this case with section 673.301 1, Florida Statutes (2012). This statute defines "person entitled to enforce a negotiable instrument" as follows:
I

The term "person entitled to enforce" an instrument means: (1) The holder of the instrument; (2) A nonholder in possession of the instrument who has the rights of a holder; or (3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s. 673.3091 or s. 673.4181(4). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
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(Above-stated section 673.301 l(3) is not applicable as the original note has been filed.) Because the court finds the promissory note at issue is a negotiable instrument and because the mortgage provides the security for the repayment of the note, this statute leads to the conclusion that the person having standing to foreclose a note secured by a mortgage may be either the holder of the note pursuant to F.S. 673.301l ( 1 ) or a nonholder in possession of the note who has the rights of a holder pursuant to F.S. 673.301 l(2). See BAC Funding Consortium

Inc. ISAOMATIMA v. Jean-Jacques, 28 So.3d 936, 938 (Fla. 2d DCA 2010).

At the outset, in order for Plaintiff to qualify as a "holder", it must have been in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. The court finds, and Plaintiff's counsel conceded, that an allonge could be located and that Plaintiff is not a "holder" as defined by 673.3011(1) and 671.201(21)(a), Florida Statutes (2012). It is undisputed that the original promissory note filed with the court contained no indorsement, either in blank or by special indorsement, nor did the note contain an allonge firmly affixed to the note from its original lender, Bay Lending Corp., to Plaintiff. "An allonge is a piece of paper annexed to a negotiable instrument or promissory note, on which to write endorsements for which there is no room on the instrument itself. Such must be so firmly affixed thereto as to become a part thereof." See Booker v. Sarasota, Inc., 707 So.2d 886.887 (Fla. 1'' DCA 1998), quoting Black's Law Dictionary 76 (6thed. 1990); see also

Chase Home Fin., LLC v. Fequiere, 989 A.2d 606 (Conn. App. Ct 2010).
Accordingly, conceding Plaintiff was not a holder, Plaintiff proceeded to argue that Plaintiff qualified as a nonholder in possession of the note with the rights of a holder. This argument, however, for the reasons set forth herein, is problematic at best. Mr. Ferguson testified at trial that Plaintiff, Wells Fargo Bank, N.A., was the servicer of the mortgage loan at issue. Mr. Ferguson testified on cross-examination Freddie Mac was the owner of the note and mortgage. Mr. Ferguson admitted there was no power of attorney,
3

servicing agency agreement or other evidence of authority introduced by Plaintiff at trial purporting to give Plaintiff the authority to act on behalf of Freddie Mac in this matter. This is fatal to Plaintiff's claim. Notably, there was also no certificate of merger or other evidence of merger offered into evidence to demonstrate how Wells Fargo Bank became successor to Well Fargo Home Mortgage, Inc., the party described on assignment of mortgage introduced into evidence herein as well as an indorsement in blank made by Wells Fargo Home Mortgage, Inc., on the note. In addition, Plaintiff presented no evidence that the owner, Freddie Mac ever took delivery of the note by transfer as required by F.S. 673.2031(1): "An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving the person receiving delivery the right to enforce the instrument." When a payee of a note sells it to an assignee intending to transfer all of payee's rights to the note, but delivers the note to the assignee without endorsing it, the assignee will not qualify as a holder because the note is still payable to assignee but, because the transaction between the payee and the assignee qualifies as transfer, the assignee now has all of the payee's rights to enforce the note and, thereby, qualifies as the person entitled to enforce. Thus, the failure to obtain the indorsement of the payee does not prevent the person in possession of the note from being entitled to enforce it, but demonstrating that status is more difficult. This is because the person in possession of the note must also demonstrate the purpose of delivery of the note to it in order to qualify as the person entitled to enforce. See Repo/f of the Permanent Editorial Board For The Uniform Commercial Code, "Application of the Uniform Commercial Code to Selected lssues Related to Mortgage Notes", page 6 , dated November 14, 201 1, by the American Law Institute. Florida case law is scant on the issue of a nonholder in possession of an instrument with the rights of a holder. Accordingly, the court looks to other jurisdictions for guidance. The court is persuaded by the reasoning found in In Re: Kemp v. Countrywide Home Loans, Inc., 440 B.R.

624 (2010), whose facts are similar to the case at bar. In Kemp, the originator and original holder of the loan was Countrywide. Countrywide sold the note to the Bank of New York, as Trustee, who then became the new owner of the note. The sale of the note from Countrywide to Bank of New York transferred rights of enforcement to Bank of New York. Countrywide, however, retained the servicing rights on the mortgage loan on behalf of Bank of New York. The court found that as successor to the original holder, Bank of New York, would have qualified as a nonholder in possession with the rights of a holder who could enforce the note upon taking possession of the note. This was so even if the note was not indorsed by the original holder. However, the testimony was that Bank of New York never took possession of the note and the note never left the possession of Countrywide after its sale. Even though Countrywide was now seeking to'enforce the note in Kemp, the court concluded it could not do so. Because possession of the note was never transferred to Bank of New York, Bank of New York could not qualify as a nonholder in possession of the note with the rights of a holder. Because it did not qualify as a nonholder in possession with the rights of a holder, neither could its servicing agent, Countrywide, in seeking to enforce the note. The court stated that "Countrywide, as the servicer, acts only as the agent of the owner of the instrument and has no greater right to enforce the instrument than its principal. Because Bank of New York has no right to enforce the note, Countrywide, as its agent and servicer, cannot enforce the note." ld.at 634. Notably in Kemp, as in the case at bar, there was an assignment of mortgage the predated the filing of the case and which contained language "together with the bond, note or other obligation described in the mortgage". This assignment purported to assign the mortgage, together with the note, to the new owner, Bank of New York, as Trustee. Similarly, in this case, an assignment of mortgage was introduced into evidence which pre-dated the filing of the complaint purporting to assign the mortgage at issue "together with the note or notes described..." to Wells Fargo Home Mortgage, Inc. Based on Kemp, the assignment in this case

is insufficient to demonstrate a transfer of possession of the note to Freddie Mac as required by F.S. 673.2031(1). 'The assignment of mortgage herein was also insufficient to establish the purpose of giving to the person receiving delivery the right to enforce the note as required by 673.2031(1). Significantly, where there was testimony that the note and mortgage were sold to Freddie Mac, there was no evidence of an assignment of mortgage from Wells Fargo Home Mortgage, Inc. to Freddie Mac. While it is axiomatic that the mortgage follows the note and therefore, obviates the need for an assignment of mortgage in favor of Freddie Mac, Plaintiff failed to present any evidence of transfer by delivery of the note to Freddie Mac. The assignment of mortgage is governed by long-held real estate law and contract principles and does not fall within the purview of the UCC. See Rucker v. State Exchange Bank, 355 So.2d 171 (Fla. 1"' DCA 1978)("...[T]he assignment of a real estate mortgage securing a promissory note as collateral for a bank loan is not a secured transaction under Article 9 of the , UCC..."). Therefore, applying Article 3 of the UCC and the analysis in K e m ~ the lack of evidence of transfer by delivery of the note to its new owner, Freddie Mac, is fatal to

enforcement on a nonholder theory pursuant to F.S. 673.301 l(2). This is notwithstanding language of the assignment of mortgage purporting to assign the mortgage "together with the note or notes described ..." to Wells Fargo Home Mortgage, Inc. Id. at 629; F.S. 673.2031(1). Without transfer by delivery of the note to Freddie Mac, Plaintiff's, Wells Fargo Bank, N.A.'s, case herein must be dismissed because it i s unenforceable on two (2) grounds: First, upon the sale of the note and mortgage to Freddie Mac, the fact that the note was not properly endorsed to the new owner defeats the enforceability of the note as holder. Second, the fact that there was no testimony that the owner of the note, Freddie Mac, ever held possession of the note and otherwise gave Plaintiff the right to enforce the note as its agent is also fatal to its enforcement as a nonholder. It is notable that in Kemp, New Jersey's UCC provisions concerning person entitled to enforce are virtually identical to that of Florida's provisions. See F.S. 673.301 1 above.

Therefore, because there was no evidence presented that the note was transferred by delivery to Freddie Mac as a successor holder I nonholder from its predecessor and because Plaintiff did not offer any evidence of its authority to enforce the note on behalf of Freddie Mac, Plaintiff could not receive "the rights of a holder" from the nonholder I owner, Freddie Mac. Accordingly, where lack of standing was properly raised as an affirmative defense herein (see Richards v. HSBC Bank, as Trustee for PHH 2007-2 91 So.3d 233 (Fla. 5th DCA 2012);
Khan v. Bank of America, 58 So.3d 927 (Fla. 5th DCA 201 1); Gee v. U.S. Bank National Association, as Trustee, 72 So.3d 21 1 (Fla. 5" DCA 201 1); BAC Funding Consortium, Inc., v. Jean-Jacques, et. al, 28 So.3d 936 (Fla. 2ndDCA 2010)), Plaintiff lacked standing to enforce

the note and mortgage herein because (a.) Plaintiff was not a holder of the subject note at the time the complaint was filed as defined by section 673.301 l(1) and section 671.201 (21), Florida
Statutes (2012), which requires that a person be "in possession of a negotiable instrument that

is either payable to bearer or to an identified person that is the person in possession" because the note bore no indorsement or allonge in favor of Plaintiff; and (b.) there was insufficient evidence at trial to show Plaintiff qualified as a "nonholder in possession of an instrument with the rights of a holder" pursuant to section 673.3011(2), because there was no evidence of transfer by delivery of the note to Freddie Mac and no evidence that Plaintiff had any authority to act on behalf of Freddie Mac herein. Plaintiff's lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed. Progressive Exp. Ins. Co. v. McGrath
Community Chiropractic, 913 So.2d 1281 (Fla. 2 DCA 2005). "

Plaintiff cites to Taylor v. Deutsche Bank, 44 So.3d 618 (Fla. 5thDCA 2010). This case, however, is distinguishable. In Taylor, the court concluded summary judgment was proper even though Plaintiff did not qualify as a holder of the note because Plaintiff qualified as a nonholder in possession of the note with the rights of a holder due of an assignment of mortgage from Mortgage Electronic Registration Systems, Inc. (MERS) to the owner, Deutsche Bank, Plaintiff

in that case. In Taylor, the court concluded MERS had been given explicit power in the mortgage to assign its rights in the note to Plaintiff such that the court concluded Plaintiff qualified as a nonholder in possession with the rights of a holder to enforce the note. While the assignment of mortgage contained language "together with the note of obligation thereon" herein to Plaintiff, there was no evidence at trial to show that such power or authority was given to Plaintiff by the owner, Freddie Mac, to enforce the note as its agent pursuant to either (i.) the language of the mortgage instrument or (ii.) any other power of attorney, servicing agreement or other evidence presented at trial. Accordingly, Plaintiff's argument that the recorded assignment of mortgage from Bay Lending Corp. in favor of Wells Fargo Home Mortgage, Inc., is sufficient to qualify Wells Fargo Bank, N.A., as a nonholder in possession of the note with the rights of a holder fails for lack of evidence of transfer and delivery of the note to Freddie Mac as owner who could then lawfully grant Plaintiff the right to enforce the note on Freddie Mac's behalf as its agent upon default and a lack of evidence as to Plaintiff's authority to act on behalf of Freddie Mac. Additionally, Defendants have also raised the affirmative defense of failure of condition precedent due to Plaintiff's alleged failure to deliver proper notice of acceleration of the debt described in the note. The court finds, in reviewing paragraph 22 of the mortgage, as well as the acceleration letter dated November 15, 2009, introduced into evidence herein, that the language of the mortgage is clear and unambiguous and that the acceleration letter fails to comply with the mandatory notice provisions of paragraph 22 of the mortgage. See Konsulian v. Busey

Bank, N.A., 61 So.3d 1283 (Fla. 2ndDCA 201 1); Frost v. Regions Bank, 15 So.3d 905, 906 (Fla.
4th DCA 2009). Under Florida law, contracts are construed in accordance with their plain language as bargained for by the parties. See Auto-Owners Ins. Co. v. Anderson, 756 So.2d 29, 34 (Fla. 2000). Defendants have also raised the affirmative defense of failure to state a cause of action, thereby preserving it until the time of trial pursuant to Rule 1.140(h)(2), which expressly permits

Defendants, in so doing, to move for a dismissal at trial O the grounds that the complaint fails n to state a cause of action. Defendants so moved prior to trial and at close of Plaintiff's case and the court reserved ruling thereon. The court finds it significant in this case that, Freddie Mac, as the owner of the note and mortgage, was never described in the complaint; nor did Plaintiff plead that it was authorized by the owner, Freddie Mac, to bring the instant action. Every complaint to foreclose should show that it is brought in the name of the owner of the debt secured by the mortgage. See Edason v. Cent. Farmer's Trust Co., 129 So. 698, 700 (Fla. 1930); Your Construction Center v. Gross 316 So.2d 596 (Fla. 4" DCA 1975). In addition, Plaintiff pled "Plaintiff is now the holder of the Mortgage Note and Mortgage andlor is entitled to enforce the Mortgage Note and Mortgage"; at trial, however, it did not proceed on a holder theory; rather it abandoned its claim as a holder and proceeded on a claim of a nonholder in possession with the rights of a holder; the complaint, however, did not properly place Defendants on notice that Plaintiff would be proceeding on a nonholder claim at trial and, thus, Plaintiff proceeded to attempt to prove a claim that was not pled with sufficient particularity to allow Defendants to prepare a defense. Plaintiff is, thus, precluded from recovery on this essentially unpled claim. See Arky, Freed, Sfearn, Watson, Greer, Weaver & Harris, P.A. v. Bowmar Instrument Corp., 537 So.2d 561 (Fla. Sup. Ct. 1988). Therefore, the court finds that the complaint fails to state a cause of action on these grounds. Accordingly, based upon the evidence presented at trial, there is nothing contained in the record to suggests Wells Fargo Bank, N.A. was either a holder or a nonholder in possession with the rights of a holder and, therefore, a person entitled to enforce under F.S. 673.301 1 where there was no evidence Freddie Mac ever had actual or constructive possession of the promissory note at issue.

Therefore, Plaintiff has not met its burden of proof by a preponderance of the evidence and Defendants, Rodger W. Mitchell and Jackie D. Mitchell, are entitled to a final judgment in their favor. Defendants are further entitled to an award of reasonable attorney's fees and court costs of defending such action upon the filing of a timely motion. Based on the foregoing, it is thereupon ORDERED AND ADJUDGED that the Defendants' motion to involuntarily dismiss the action pursuant to Rule 1.420(b) is hereby GRANTED and this cause is dismissed without prejudice. ORDERED AND ADJUDGED that the court hereby entitles Defendants to payment of its attorney's fees and costs pursuant to 57.105(7), Florida Statutes, and reserves jurisdiction as to the appropriate amount of reasonable attorney's fees and costs to the Defendants which shall be payable to Defendants prior to the filing of any subsequent action by Plaintiff. Any re-filing of this action against Defendants shall first be conditioned upon prior payment of all attorney's fees and costs to Defendants which may be subsequently awarded herein. DONE AND ORDERED in Chambers, at Brooksville, Hernando County, Florida, on this

3% of February, 2013.
HONORABLE CARVEN ANGEL, Circuit Court Judge

CERTIFlCATE OF SERVICE

I HEREBY CERTIFY regular U.S. mail on this/ &y

t a true a of

correct copy of the foregoing was furnished via , 2013, to the following:

Robert Schneider, Esquire Brian R. Hummel, Esquire Ronald R. Wolfe 8 Associates, PL P.O. Box 25018 Tampa, Florida 33622 Attorneys for Plaintiff
/'

['~tarlett M. Miller, Esquire Mc Cumber, Daniels, Buntz, Hartig One Urban Centre 4830 West Kennedy Blvd., Suite 30 Tampa, Florida 33609 Attorney for Defendant Regions Bank d/b/a AmSouth Bank

ntine Kalogianis, Esquire LOGlANlS LAW FIRM, P.A. 8141 Bellarus Way, Suite 103 Trinity, Florida 34655 Attorney for Defendants Rodger W. Mitchell and Jackie D. Mitchell