IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FOURTH DISTRICT, 1525 PALM BEACH LAKES BLD. WEST PALM BEACH COUNTY, FLORIDA 33401

E-Copy Received Oct 30, 2014 10:18 AM IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FOURTH DISTRICT, 1525 PALM BEACH LAKES BLD. WEST PALM BEACH COUNTY, FLORIDA 33401 APPEAL NO. 4D14-1740 MANGONIA RESIDENCE I, LTD., Appellant, v. DS INVESTMENTS I, LLC Appellee. INITIAL BRIEF OF APPELLANTS FINAL APPEAL FROM THE CIRCUIT COURT FOR THE 15TH JUDICIAL CIRCUIT IN AND FOR PALM BEACH COUNTY, FLORIDA L.T. Case No. 502013 CA000903XXXMB BRADY & BRADY, P.A. Jeanne C Brady, Esq. Florida Bar No. 0997749 Frank R. Brady, Esq. Florida Bar No. 0588024 Appellant s counsel 350 Camino Gardens Blvd., Suite 300 Boca Raton, FL 33432 Phone: (561) 338-9256 email: Jeanne@bradylawfirm.biz Frank@bradylawfirm.biz

MANGONIA RESIDENCE I, LTD., ) ) Appellant, ) -vs- ) ) (SPCP GROUP V, LLC) and ) DS INVESTMENTS I, LLC ) ) Appellee. ) 4 th DCA Appeal no. 4D14-1740 L.t. Case No. 502013CA000903XXXMB PRELIMINARY STATEMENT This appeal arises from competing claims to the surplus generated by the judicial sale of a multi-family, low income residential rental property owned by Appellant, MANGONIA RESIDENCE I, LTD. ( Mangonia ), after entry of a foreclosure judgment in favor of the first priority mortgagee, SPSC Group V, LLC ( SPSC ). Mangonia is a Florida limited liability limited partnership that provides low income housing for the needy. Appellee, DS INVESTMENTS I, LLC is Florida a limited liability company referred to as DS. Citations to documents and transcripts in this record are made with the abbreviation R followed by the page assigned by the Index to Record on Appeal. References to evidence are made to the evidence exhibits and the page number of the exhibit assigned by the Index to Record on Appeal. The abbreviation e.s. means emphasis supplied. -i-

TABLE OF CONTENTS page numbers PRELIMINARY STATEMENT... i TABLE OF CONTENTS.... ii TABLE OF CITATIONS.... iii STATEMENT OF THE FACTS AND CASE... 1-9 SUMMARY OF THE ARGUMENT... 9-10 ARGUMENT... 10-22 ARGUMENT I. THE TRIAL COURT ERRED BY AWARDING THE SURPLUS TO DS BECAUSE DS FAILED TO MEET ITS EVIDENTIARY BURDEN TO PROVE ITS STATUS AS A SUBORDINATE LIENHOLDER.... 10-20 A. Standard of Review and Guiding Principles.... 10-11 B. Analysis.... 11-20 II. CONDUCTING A DULY NOTICED SUMMARY JUDGMENT HEARING AS AN EVIDENTIARY HEARING DEPRIVED MANGONIA OF FUNDAMENTAL DUE PROCESS, AND REQUIRES REVERSAL... 20-22 A. Standard of Review and Guiding Principles.... 20 B. Analysis.... 20-22 CONCLUSION... 22 CERTIFICATE OF SERVICE AND E-FILING.... 23 CERTIFICATE OF COMPLIANCE WITH RULE 9.210.... 23 -ii-

TABLE OF CITATIONS I. Case Authorities: Page Beaumont v. Bank of NY Mellon 81 So. 3d 553 (Fla. 5 th DCA 2012).... 12, 16 Bland v. Green Acres Group, LLC 12 So. 3d 822 (Fla. 4 th DCA 2009).... 19 Campbell-Settle Pressure Grouting & Gunite Co., Inc. v. David M. Abel Constuction Co. 395 So. 2d 247 (Fla. 3 rd DCA 1981)... 21 Connell v. Capital City Partners, LLC 932 So. 2d 442 (Fla. 3 rd DCA 2006)... 20 Deutsche Bank National Trust Co. v. Clarke 87 So. 3d 58 (Fla. 4 th DCA 2012).... 16 Devaney v. Solitron Devices, Inc. 564 So. 2d 1229 (Fla. 4 th DCA 1990).... 20, 21 DiSalvo v. SunTrust Mortg., Inc. 115 So.3d 438 (Fla. 2 nd DCA 2013).... 21 Hully v. Hully 653 So. 2d 1138 (Fla. 2 nd DCA 1995).... 21 Isaac v. Deutsche Bank Nat. Trust Co. 74 So. 3d 495 (Fla. 4 th DCA 2011).... 3, 15 Kiefert v. Nationstar Mortgage So. 3d, 2014 WL 5099374 (Fla. 1 st DCA Oct. 13, 2014).... 15 Leon Shaffer Golnick Advertising, Inc. v. Cedar 423 So. 2d 1015 (Fla. 4 th DCA 1982).... 19 -iii-

Mathews v. Branch Banking & Trust Co. 139 So. 3d 498 (Fla. 2 nd DCA 2014).... 10 Mazine v. M&I Bank 67 So. 3d 1129 (Fla. 1 st DCA 2011).... 18 Mills v. Barker 664 So. 2d 1054 (Fla. 2 nd DCA 1995).... 19 Orange Lake County Country Club v. Levin 645 So. 2d 60 (Fla. 5 th DCA 1994).... 21 Parker v. Dudley 527 So. 2d 240 (Fla. 5 th DCA 1988).... 12, 15, 17 Perry v. Fairbanks Capital Corp. 888 So. 2d 725 (Fla. 5 th DCA 2004).... 19 Philip Morris USA, Inc. v. Douglas 110 So. 3d 419 (Fla. 2013).... 20 Sabina v. Dahlia Corp. 650 So. 2d 96 (Fla. 2 nd DCA 1995).... 19 Second National Bank of North Miami v. G.M.T. Properties, Inc 364 So. 2d 59 (Fla. 3 rd DCA 1978)... 17 State Street Bank and Trust Co. v. Lord 851 So. 2d 790 (Fla. 4 th DCA 2003).... 12, 15 II. Statutes and Rules: Fla. Stat. 45.032... 3, 4, 9, 10, 11 Fla. Stat. 45.033... 9 Fla. Stat. 90.901... 18, 19 -iv-

Fla. Stat. 90.902... 18 Fla. Stat. 90.953... 19 Fla. Stat. 673.1041... 14, 19 Fla. Stat. 673.2011... 12, 13, 14, 17 Fla. Stat. 673.3011... 10, 11 Fla. Stat. 673.3091... 5, 11, 12, 15, 19 Fla. Stat. 702.11... 12, 13 -v-

STATEMENT OF THE CASE AND FACTS Nature of the Case: This appeal evolves from competing surplus claims after a judicial foreclosure sale. The trial court awarded all surplus to DS [R 902-903]. Mangonia is Florida limited liability limited partnership that provides low income rental housing for the needy. It was record owner for purposes of the statutory presumption that the record owner on the date of lis pendens is entitled to the surplus [R 195, 646-52 20]. By way of background, SPCP is the first priority mortgage holder who sued Mangonia to foreclose on Mangonia s multi-family, low income residential rental property located in Mangonia Park, Florida [R 1-194]. The final foreclosure judgment issued on March 3 rd, 2013 [R 249-60]. On April 29, 2013, the Clerk of Circuit Court for the 15 th Judicial Circuit conducted the foreclosure sale [R 261-63, 328, 374]. The sale resulted in a surplus of $920,837.82 over the sum of the foreclosure judgment, documentary taxes and the court registry fees [R 560]. The surplus was reduced to $892,111.97 after full satisfaction of the attorney s fee judgment in favor of SPCP about two months later [R 557-59]. DS was never an original party to the foreclosure suit. Rather, it moved intervene three days after the April 29, 2013 foreclosure sale [R 385-88] (e.s.). 1

Intervention was granted to DS on August 21 st 2013 [R 645]. In the meantime, DS moved for disbursement of the entire surplus to itself back on May 28 th, 2013 [R 427-29]. It alleged entitlement to the surplus based on its purported ownership of a promissory note secured by a mortgage recorded in O.R. Book 9065, page 1274 of the public records of Palm Beach County, Florida [R 427-29 3, 513-41]. That mortgage was given to Florida Housing Finance Agency ( Florida HFA ) by Mangonia at the same time as SPSC s first priority mortgage and was made subordinate to SPSC s mortgage [R 151-59, 160-66, 513-41, 646-658 7; DS Ex. 6 5.6] (the HFA Mortgage ). The HFA Mortgage secures payment of a promissory note from Mangonia to Florida HFA in the amount of $1,982,000 (the HFA Note ) [R 513-41, 550-56]. About two months after the Clerk s foreclosure sale on the SPSC mortgage, DS filed an Affidavit of Indebtedness and Claim to Surplus on June 26 th, 2013 [R 508-556]. DS alleged that it had purportedly acquired the HFA Mortgage and HFA Note by virtue of an assignment of mortgage and related documents that was recorded in the public records on May 6 th, 2013 (seven days after the foreclosure sale) [R 510-11, 931-32; 949-50; DS Ex. 3] (e.s.). It further alleged that the FHA Mortgage secures payment of the HFA Note, Mangonia failed to make payment owed under the HFA 2

Note and that DS is entitled to the surplus by virtue of its purported ownership of the HFA Note and HFA Mortgage [R 510-11]. The HFA Mortgage states that the right to enforce the lien arises upon failure to pay the HFA Note [R 649 10]. As a result, DS s claim to the surplus is necessarily predicated on the default and acceleration provision of the HFA Note [Id.]. There is no indorsement of the HFA Note, either in blank or to the order of any named assignee [R 921-22, 936-37, 957-58]. Nor is there any allonge 1 attached or affixed to the HFA Note [Id.]. There were three hearings on DS s and Mangonia s competing surplus claims. DS first set its surplus hearing on the court s motion calendar, at which the trial court denied DS s motion without prejudice because section 45.032 requires an evidentiary hearing to determine surplus entitlement [R 645, 922, 924-26]. DS s counsel was instructed to reschedule the surplus hearing as an evidentiary hearing [R 925-26]. A second hearing on DS s surplus motion was then set by the trial court on its November 22 nd, 2013 special set calendar [R 671]. At that hearing, DS asserted the 1 An allonge is a piece of paper firmly affixed to a negotiable instrument or promissory note, on which to write endorsements for which there is no room on the instrument itself. Isaac v. Deutsche Bank Nat. Trust Co., 74 So. 3d 495, note 1 (Fla. 4 th DCA 2011) (e.s.). 3

FHA Note and 45.032 as the basis on which it sought all surplus [R 932-33]. The court remarked that its prior order denying the motion without prejudice did not specifically state that the special set hearing had to be evidentiary [Id. pp. 935-36, 941]. Although the order itself did not say so, the Court s ore tenus ruling at the first hearing clearly indicated that an evidentiary hearing is required [R 922, 924-26]. At that second hearing, DS acknowledged that it did not have possession of the original HFA Note and asserted that it was lost. Implicitly conceding that the original HFA Note is a condition precedent to its entitlement to the surplus, DS asserted an affidavit of lost promissory note from Thomas G. Tinsley [R 659-62, 931-33]. Mr. Tinsley was the third purported holder of the HFA Note based on a purported assignment from a prior purported assignee in the line of three successive purported assignments of the HFA Note [R 935-38]. This required DS to show that Mr. Tinsley knew who lost the note and that the note s loser was entitled to enforce the note when it was lost, or that Mr. Tinsley acquired ownership of the HFA Note directly or indirectly from a person who was entitled to enforce the instrument when loss of possession occurred [Id.]. Tinsley s lost note affidavit failed to state who lost the note and when it was lost [Id.; R 661-62]. DS failed to establish, or even allege, any adequate protection of Mangonia against loss that might occur by reason of a claim 4

by some third party claiming possession and seeking to enforce the lost note [R 937]. Neither DS s counsel, its written surplus claim, the recorded assignment of the HFA Mortgage nor its related documents, made mention of any consideration paid for the purported assignment of the HFA Note to DS [R 427-29, 510-512]. Mangonia objected to the lost note affidavit and other documents offered by DS, as inadmissible hearsay at an evidentiary hearing [R 935]. Mangonia also objected on grounds that there was no written, signed endorsement of the HFA Note by the original holder (Florida HFA) either in blank or to the order of the purported first assignee (Vikar Associates) or any other named payee [R 935-38]. Nor was there any endorsement by the first purported assignee (Vikar Associates) either in blank or to the order of the second purported assignee (Thomas Tinsley) [R 935-38]. Further, there was no transfer of possession of the original HFA Note from the original holder (Florida HFA) to anyone. As Mr. Tinsley never had possession of the original HFA Note, and his lost note affidavit did not state who had possession when the note was lost, the affidavit was insufficient as a matter of law under section 673.3091 [R 646-658 8, 11-13, 15, 16; R 936-38]. The court denied DS s second motion to disburse surplus without prejudice to bring the matter up for a yet third hearing as either a summary judgment hearing or 5

an evidentiary hearing [R 673, 941-42] (e.s.). After hearing dates were cleared with all counsel, the court then entered its own order setting the third hearing on DS s motion to disburse the surplus funds, this time entitled :... for Summary Judgment on the pending competing claims... filed by DS... and by Mangonia... [R 675]. The third and last surplus hearing was conducted on April 21 st, 2014 (the April 21 st hearing ). That hearing gave rise to the order on appeal entitled: Order dated April 22 nd, 2014 Directing Clerk to Disburse Surplus Funds ( Surplus Order ) to DS [902-902]. At that April 21 st hearing, Mangonia s counsel noted that the court s order expressly set this third hearing as only a summary judgment hearing [R 956; 675]. Therefore, admission of evidentiary exhibits into evidence was inappropriate [R 956]. Over Mangonia s objection, the trial court declared that it was not a summary judgment hearing even though its order set the matter as a summary judgment hearing [R 966-67]. The court then overruled Mangonia s objections and announced that it was going to conduct the hearing as evidentiary anyway [R 675, 904-906 9, 956-57, 959, 967]. Once again implicitly conceding that the original HFA Note is a condition precedent to its entitlement to the surplus, DS submitted what it alleged to be the 6

original HFA Note and an unattached allonge of the HFA Note from Tinsley to DS (the Tinsley allonge ) [R 952-53, 954, DS Ex. 1, 2]. 2 Mangonia objected on grounds of failure to authenticate [R 956-57]. Further, there was no allonge from Florida HFA to Vikar, no allonge from Vikar to Mr. Tinsley, and no allonge from Florida HFA to Tinsley [R 956-60]. Nor did Florida HFA or Vikar indorse the HFA Note in any manner [Id.]. Consequently, Mr. Tinsley s purported allonge is a nullity because neither DS nor Tinsley showed any indorsement or allonge from Florida HFA or Vikar to Tinsley [R 936-37, 956-60]. Further, the insufficient Tinsley allonge to DS is not affixed to the original HFA Note [DS Ex. 1, 2] (e.s.). The court accepted Tinsley s purported allonge and the purported original HFA Note into evidence over objection, even though neither document was authenticated or self authenticating [R 955, 956-60]. There was zero testimony from any officer or records custodian of the original payee of the note, Florida HFA. There was only a hearsay transmittal letter from someone purporting to be counsel to Florida HFA, transmitting the purported original HFA Note to DS s counsel [R 955-60]. Further, the purported original HFA Note had no endorsement on or attached to it, either in blank or to the order of any named transferee [Id.; DS Ex. 1]. Nor was there any 2 The evidence exhibits presented at the April 21 st hearing are contained in the evidence index attached to the electronic record on Appeal. 7

allonge attached to or separate from the HFA Note from Florida HFA either in blank or to the order of any named assignee [Id.]. Further, there was no transfer of possession of the original HFA Note from Florida HFA to Vikar, or from Vikar to Tinsley or from Tinsley to DS [R 936-38, 960-61, 965-66]. Aside from the unauthenticated, inadmissible HFA Note and Tinsley s purported allonge, DS only relied on certified copies of: (a) a recorded assignment of the HFA Mortgage from Florida HFA to Vikar Associates; (b) a recorded assignment of the HFA Mortgage from Vikar Associates to Thomas G. Tinsley; and (c) a recorded assignment of the HFA Mortgage from Tinsley to DS [R 950, 955; DS Ex 3; DS Ex 4; DS Ex 5]. There was no indorsement on or attached to the purported original HFA Note tendered by DS at the April 21 st hearing [R 935-37; DS Ex. 1]. By way of deposition, Mr. Tinsley testified that he signed and delivered an allonge of the HFA Note to DS. Yet, he conversely testified that he does not have and has never seen any indorsement or allonge of the HFA Note from Vikar Associates to himself [R 707-708]. Mr. Tinsley does not have and has never seen any indorsement of the HFA Note from Florida HFA to Vikar. Nor has he ever seen any indorsement of the HFA Note in blank [Id.]. The purported original, unauthenticated HFA Note that was erroneously 8

admitted into evidence has no indorsements on it [DS Ex. 1]. In fact, there is a signed written stipulation between Mangonia and DS in which DS even stipulated that it never had possession of the original HFA Note, has no knowledge of its location or whether it contains any endorsements [R 678-80 3]. The trial court granted DS s motion, directing the Clerk to disburse the entire $892,111.97 surplus to DS [R 902-903]. Mangonia s timely rehearing motion was denied [R 904-06, 911]. This appeal timely follows [R 912-16]. SUMMARY OF THE ARGUMENT Under section 45.033(1), Florida Statutes there is a presumption that Mangonia, as record owner on the date of lis pendens, is entitled to all surplus after payment of subordinate lienholders who have timely filed a claim. DS had the burden to establish itself as a subordinate lienholder in order to qualify for a surplus award under the surplus statutes (Fla. Stat. 45.032 & 45.033). Putting aside the due process and evidentiary inadmissibility errors concerning the purported original HFA Note, DS still failed to overcome the presumption in favor of Mangonia s entitlement to this surplus due to the absence of endorsements on the purported original HFA Note. Further, the purported allonge from Tinsley to DS is a nullity, since there is no indorsement or allonge from the initial payee, Florida HFA, 9

to anyone or in blank and no indorsement of any kind from Vikar to Tinsley. Nor was there any transfer of possession of the original HFA Note by Florida HFA to Vikar or by Vikar to Tinsley. As a result, DS failed to establish that it is a subordinate lienholder under the surplus statute. It was also error for the trial court to proceed with an evidentiary hearing over objection when its own order setting that hearing did so as only a summary judgment hearing. The court itself acknowledged its mistake at the hearing, but proceeded anyway with an evidentiary hearing over objection. Even if this due process error is not dispositive of reversal, the court also erred when it admitted an unauthenticated and inadmissible purported original note. For the same reasons the court erred when it admitted the unattached and facially deficient Tinsley allonge. These errors are not harmless because due process and competent sufficient evidence are both required to support any dispositve order, including this one. Under any scenario, DS failed to prove its status as a subordinate lienholder. Consequently, DS failed to overcome the statutory presumption that Mangonia as record owner is entitled to this surplus. Reversal is required. ARGUMENT I. THE TRIAL COURT ERRED BY AWARDING THE SURPLUS TO DS BECAUSE DS FAILED TO MEET ITS EVIDENTIARY BURDEN TO PROVE ITS STATUS AS A SUBORDINATE LIENHOLDER 10

A. The Guiding Principles and Standard of Review Statutory interpretation is reviewed de novo. E.g. Mathews v. Branch Banking & Trust Co., 139 So. 3d 498 (Fla. 2 nd DCA 2014). As the trial court misinterpreted sections 45.032, 673.2011 and 673.3011, Florida Statutes, review is de novo. Id. DS specifically asserted section 45.032, Florida Statutes as the basis on which it sought the surplus [R 932-33]. The statute requires that: if any person other than the owner of record claims an interest in the surplus during the 60-day period [after the clerk issues a certificate of disbursements]... the court shall set an evidentiary hearing to determine entitlement to the surplus.... Fla. Stat. 45.032(3)(b). DS acknowledged that it did not have possession of the original HFA Note and relied, instead, on a lost note affidavit from Mr. Tinsley under Fla. Stat. section 673.3091 [R 932-33]. Mr. Tinsley is the party who they claim transferred the note to DS [Id.]. Section 673.3011 specifies who is entitled to enforce a negotiable instrument: (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). Fla. Stat. 673.3011 (West's F.S.A. 2014). B. Analysis 11

DS admitted at the November 22, 2013 hearing that it did not have possession of the original HFA Note, but claimed to be entitled to enforce the instrument pursuant to section 673.3091 based on the lost promissory note affidavit of Thomas G. Tinsley [R 932-34]. However, DS proffered no evidence of when the HFA Note was lost, who lost it or that it was validly transferred to the party who may have lost the HFA Note by someone in possession and entitled to enforce it when it was lost [R 935-37]. See State Street Bank and Trust Co. v. Lord, 851 So. 2d 790, 791 (Fla. 4 th DCA 2003) (explaining that proponent of lost note cannot enforce it where neither proponent nor predecessor in interest possessed original note and were not in possession when loss occurred). Further, there were no endorsements or transfers of possession of the original HFA Note by Florida HFA to anyone. As a result, there could be no valid transfer or assignment of this HFA Note, since section 673.2011(2) requires both an indorsement of the note and transfer of possession. Fla. Stat. 673.2011(2) (e.s.); Parker v. Dudley, 527 So. 2d 240, 242 (Fla. 5 th DCA 1988) (assignment of negotiable instrument payable to named payee or order can only be transferred by endorsement and delivery by the named payee) (e.s.). Further, DS did not furnish any evidence on the element of adequate protection of Mangonia against loss that might occur by reason of a claim by some third party 12

claiming possession and seeking to enforce the lost note [R 937-38]. See Fla. Stat. 673.3091(2); Beaumont v. Bank of NY Mellon, 81 So. 3d 553, 555 (Fla. 5 th DCA 2012) (explaining element of adequate protection against loss of original instrument). Section 702.11(1), Florida Statutes explains the concept of adequate protection under section 673.3091, stating that the following constitute reasonable means of providing adequate protection, if so found by the court: (a) A written indemnification agreement by a person reasonably believed sufficiently solvent to honor such an obligation; (b) A surety bond; (c) A letter of credit issued by a financial institution; (d) A deposit of cash collateral with the clerk of the court; or (e) Such other security as the court may deem appropriate under the circumstances. Any security given shall be on terms and in amounts set by the court, for a time period through the running of the statute of limitations for enforcement of the underlying note, and conditioned to indemnify and hold harmless the maker of the note against any loss or damage, including principal, interest, and attorney fees and costs, that might occur by reason of a claim by another person to enforce the note. Fla. Stat. 702.11(1). None of the foregoing was proffered by DS. It s motion to disburse was again denied without prejudice. At the third hearing, DS claimed to have suddenly come into possession of the 13

original HFA Note. However, the evidence tendered by DS was not competent or sufficient to demonstrate DS s subordinate lienholder status, because DS did not furnish any evidence of a valid transfer or assignment of the HFA Note in the manner prescribed by Fla. Stat. 673.2011. DS s counsel merely asserted legal argument that DS purportedly acquired the HFA Note by assignment from the third party in the line of succession of purported holders [R 930-32, 953-54]. DS s counsel also stated that he received the purported original HFA Note from Florida HFA by transmittal letter from its counsel [R 952-53]. However, there were no indorsements of the unauthenticated HFA Note, nor was there any indorsement from any predecessor in interest in the HFA Note [Id.; DS Ex. 1]. DS s counsel claimed that the assignment of HFA Mortgage and related documents satisfied DS s status as holder of the HFA Note and HFA Mortgage. Not so. The assignment was recorded on May 6 th, 2013, which is seven (7) days after the date of the foreclosure sale [Id.] (e.s.). The HFA Note is a negotiable instrument, as defined in section 673.1041: an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it (a) is payable to bearer or to order at the time it is issued or first comes into possession of a holder, (b) is payable on demand or at a definite time and ( c) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. 14

Fla. Stat. 673.1041 (West F.S.A. 2014). Assignment or transfer of the HFA Note could only be effectuated by negotiation, which means a transfer of possession, whether voluntary or involuntary, by a person other than the issuer to a person who thereby becomes its holder. Fla. Stat. 673.2011 (e.s.). If the instrument is payable to an identified person, negotiation requires transfer of possession of the instrument itself and indorsement by the holder, and if the instrument is payable to bearer, it may be negotiated by transfer of possession alone. Parker, 527 So. at 242 (e.s.). This HFA Note is payable to an identified person Florida HFA. Consequently, in order to effectuate any transfer or assignment of this HFA Note, there must be indorsement of this note and transfer of possession of the original by the named payee (Florida HFA). Id. (e.s.); Kiefert v. Nationstar Mortgage, So. 3d, 2014 WL 5099374 (Fla. 1 st DCA Oct. 13, 2014) (plaintiff must prove not only physical possession of the original note but also, if plaintiff is not the named payee, possession of the original note endorsed in favor of the plaintiff or in blank, which would make it bearer paper). Neither of those requirements were met here. The purported allonge from Tinsley to DS is unauthenticated and unattached to the HFA Note. Therefore, it is wholly insufficient to qualify as an allonge. Isaac, 74 So. 3d at 495 (allonge must be firmly affixed to promissory note) (e.s.). It is also 15

insufficient to transfer the HFA Note to DS because (a) there is no indorsement to Tinsley or in blank from any purported predecessor in interest, and (b) no possession of the original by Mr. Tinsley. State Street Bank, 851 So. 2d at 791 (lost instrument not properly assigned where neither lost note affiant nor predecessor in interest possessed note and did not otherwise satisfy requirements of section 673.3091). His lost note affidavit is insufficient as well, because it doesn t state who lost the note or when it was lost, or that he acquired ownership of the HFA Note directly or indirectly from a person who was entitled to enforce the instrument when loss of possession occurred. See Beaumont, 81 So. 3d at 555 (so requiring). As to the original HFA Note, Mr. Tinsley admitted in his deposition that he never possessed it and never saw any indorsement or allonge from his predecessor in interest (Vikar Associates) in blank or naming him as assignee [R 707-708, 935-38]. DS suddenly claimed to have the original note for the first time at the April 21 st hearing, so that it wasn t lost in the first place. However, the purported original does nothing to establish DS as a subordinate lienholder because DS failed to authenticate the purported original and it wasn t self authenticating, for the reasons described below. Further, the assignment of the HFA Mortgage doesn t cure the failure to prove a valid transfer of the HFA Note because the HFA Mortgage is not a negotiable 16

instrument, a security or any other writing that evidences a right to the payment of money. See Deutsche Bank National Trust Co. v. Clarke, 87 So. 3d 58, 61 (Fla. 4 th DCA 2012). A mortgage is but an incident to the debt which it secures, and its ownership follows the assignment of the debt. Id. (e.s.). Accordingly, for DS to establish any status as a subordinate or junior lienholder entitled to claim surplus, it had to show a valid assignment of the HFA Note in addition to the assignment of the HFA Mortgage. Since there was no endorsement of the HFA Note to a named payee or in blank and no transfer of possession to any purported assignee, there was no valid assignment of it (even if admissible). Second National Bank of North Miami v. G.M.T. Properties, Inc., 364 So. 2d 59 (Fla. 3 rd DCA 1978) (where bank took mortgage on assignment without an endorsement of mortgage note, bank not holder in due course); Fla. Stat. 673.2011; Parker, 527 So. 2d at 242. Consequently, assignment of the HFA Mortgage alone did nothing to effectuate a transfer of the HFA Note that it purportedly secures, absent both an endorsement of the promissory note itself by each purported transferee in the line of succession of purported transferees, and transfer of possession from each purported transferee to the next purported transferee. Parker. Having failed to prove indorsement and transfer of possession of the HFA Note, DS failed to establish that it is a holder or a non- 17

holder in possession with rights of a holder. In addition to the lack of indorsements of this Note being fatal to DS s status as a subordinate lienholder entitled to claim surplus, it was also error for the trial court to admit this purported original Note into evidence in the first place. DS failed to authenticate it through testimony or by showing that it met the self authenticating requirements of section 90.902, Florida Statutes [R 957-58]. See Fla. Stat. 90.901 (authentication of evidence required as condition precedent to admissibility). Those requirements are that the document must: (1) bear a seal of a court, political subdivision, or department, officer, or agency of any of them and a signature of the document s custodian attesting to the authenticity of the seal, or (2) bear a signature of an officer or employee of any entity listed in subsection (1), affixed in the officer's or employee's official capacity, or (3) be an official public record, report, or entry, or of a document authorized by law to be recorded or filed and actually recorded or filed in a public office. See Fla. Stat. 90.902. The document DS tendered as the purported original FHA Note satisfied none of the self authentication requirements. DS did not allege that the purported original promissory note was a business record of Florida HFA, nor did DS proffer any testimony or other foundation to establish it as a business record. See, e.g., Mazine v. M&I Bank, 67 So. 3d 1129, 1132 (Fla. 1 st DCA 2011). The transmittal letter from counsel for Florida HFA does not satisfy the business record exception for admissibility, as there is no testimony, certification or evidence as to its 18

status as a business record of Florida HFA. Nor does the transmittal letter otherwise cure the inadmissibility of the unauthenticated purported original HFA Note [R 956-57]. That transmittal letter is rank hearsay. Further, statements by DS s counsel regarding the purported original HFA Note do not constitute evidence, nor do any statements contained in the transmittal letter alleged to be from counsel to Florida HFA [R 957]. See, e.g., Sabina v. Dahlia Corp., 650 So. 2d 96, 99 (Fla. 2 nd DCA 1995) (citing Leon Shaffer Golnick Advertising, Inc. v. Cedar, 423 So. 2d 1015 (Fla. 4 th DCA 1982) trial court may not rely on argument by counsel to make factual determinations). The holding in Golnick Advertising is well established in this and other district courts of appeal. See Bland v. Green Acres Group, LLC, 12 So. 3d 822, 829 (Fla. 4 th DCA 2009, in dissent). That being so it was error for the trial court to accept the unauthenticated purported original HFA Note into evidence and to rely on the hearsay letter from Florida HFA s counsel or statements by DS s counsel. Sabina; Golnick Advertizing; Fla. Stat. 90.901 (authentication is condition precedent to admissibility of evidence). When a document is a negotiable instrument, a duplicate is inadmissible and the original must be produced. Fla. Stat. 90.953. A promissory note is a negotiable instrument as defined by section 673.1041. Perry v. Fairbanks Capital Corp., 888 19

So. 2d 725, 727 (Fla. 5 th DCA 2004). DS was required to either produce the original or reestablish it as a lost instrument pursuant to Fla. Stat. 673.3091, and had to authenticate the original as a condition precedent to its admissibility. Id.; Fla. Stat. 90.901; Mills v. Barker, 664 So. 2d 1054, 1057 (Fla. 2 nd DCA 1995) (extrinsic evidence of authenticity required except for documents that are self-authenticating). Consequently, under any scenario, DS failed to overcome the presumption in favor of Mangonia s surplus entitlement as record owner of the property foreclosed and sold in SPSC s foreclosure action. Reversal of the Surplus Order is required. II. CONDUCTING A DULY NOTICED SUMMARY JUDGMENT HEARING AS AN EVIDENTIARY HEARING DEPRIVED MANGONIA OF FUNDAMENTAL DUE PROCESS, AND REQUIRES REVERSAL A. Standard of Review This Court reviews a trial court's legal conclusion as to a due process error de novo. E.g. Philip Morris USA, Inc. v. Douglas, 110 So. 3d 419, 430 (Fla. 2013). B. Analysis After twice denying DS s motion to disburse without prejudice, the court set a third hearing entitled summary judgment on the pending competing claims... filed by DS... and by Mangonia... [R 675]. DS commenced that hearing by tendering documents into evidence over Mangonia s objections based on the hearing order noticed as a summary judgment hearing where evidence and testimony is 20

inadmissible altogether [R 956-57]. E.g., Devaney v. Solitron Devices, Inc., 564 So. 2d 1229 (Fla. 4 th DCA 1990) (denial of due process to expand scope of hearing and decide matters not contained in notice for hearing, requiring reversal); Connell v. Capital City Partners, LLC, 932 So. 2d 442 (Fla. 3 rd DCA 2006) (granting relief not sought by the notice of hearing or which expands scope of hearing and decides matters not noticed for hearing, violates due process); Hully v. Hully, 653 So. 2d 1138 (Fla. 2 nd DCA 1995) (due process rights violated when court heard and determined matters that were not noticed because husband not prepared, nor was he required to be prepared, to argue matters not noticed). Expanding the scope of the April 21 st hearing beyond the face of the court s order denied fundamental due process. Devaney. Mangonia s counsel was not required to be prepared to tender or argue evidence as opposed to the absence or presence of fact issues. Hully. In fact at a summary judgment hearing, testimony and unauthenticated documents are inadmissible altogether [R 935]. Orange Lake County Country Club v. Levin, 645 So. 2d 60, 62 (Fla. 5 th DCA 1994) (oral testimony is inappropriate at hearing on motion for summary judgment due to 20 day provision of Rule 1.510, citing Campbell-Settle Pressure Grouting & Gunite Co., Inc. v. David M. Abel Const. Co., 395 So. 2d 247 (Fla. 3 rd DCA 1981)). 21

Even if this due process error is not dispositive, reversal is still required because the evidence itself constitutes inadmissible hearsay. It was an abuse of discretion for the court to admit the purported original, unendorsed HFA Note and unattached Tinsley allonge into evidence because neither was authenticated. E.g., DiSalvo v. SunTrust Mortg., Inc., 115 So. 3d 438, 439 (Fla. 2 nd DCA 2013) (abuse of discretion to consider unauthenticated default letters that were not sworn to or affirmed, as they do not constitute substantial competent evidence). Further, even if the HFA Note and unattached, unauthenticated Tinsley allonge were admissible, they are still facially insufficient as a matter of law to support the Surplus Order in DS s favor absent indorsement by Florida HFA, as discussed above. Reversal is required. CONCLUSION For the reasons discussed above, this Court should reverse the Surplus Order and order that the surplus be distributed to the record owner, Mangonia. Respectfully submitted, Brady & Brady, P.A. Attorneys for the Mangonia 350 Camino Gardens Blvd., Suite 300 Boca Raton, Florida 33432 Phone: (561) 338-9256 22

By: /s/ Jeanne C Brady, Esq. Florida Bar No. 0997749 Email: jeanne@bradylawfirm.biz and /s/ Frank R. Brady, Esq. Florida Bar No. 0588024 Email: frank@bradylawfirm.biz CERTIFICATE OF SERVICE AND E-FILING I HEREBY CERTIFY that in accordance with Rule 2.516, Fla.R.Jud.Admin., this Brief has been filed electronically via edca and that a true and authentic copy has been furnished by electronic mail to David A. Kupperman, Esq., 5301 N. Federal Highway, Suite 250, Boca Raton, Florida 33487 email: dkupperman@ccalpa.com and Jerome L. Tepps, P.A., 4300 North University Drive, Suite C-102, Sunrise, Florida 33351, email: courtpapers@teppslawfirm.com, co-counsel for DS Investments; and Philip Mugavero, Esq., Assistant Palm Beach County Attorney, Litigation Section, 300 North Dixie Highway, Suite 359, West Palm Beach, Florida 33401 email: COATTYforeclosures@pbcgov.org; all this 30 th day of October, 2014. Brady & Brady, P.A. Attorneys for the Mangonia 350 Camino Gardens Blvd., Suite 300 Boca Raton, Florida 33432 Phone: (561) 338-9256 By: /s/ Jeanne C Brady, Esq. Florida Bar No. 0997749 Email: jeanne@bradylawfirm.biz CERTIFICATE OF COMPLIANCE WITH FONT REQUIREMENTS OF RULE 9.210: I hereby certify that this Answer Brief complies with Rule 9.210(a), 23

Fla.R.App.P., and is typed with times new roman 14 point font in Corel WordPerfect X6 for windows format. By: /s/ Jeanne C. Brady, Esq. Florida Bar No. 0997749 24