Learn Croatian: Film je bio čudan i iznenadili smo se. - The film was strange and we were surprised.

Both smo (are/were) and se (oneself) are clitics (short words without their own stress). Croatian has a strict order for them: verbal clitics like smo always come before the reflexive pronoun se. The only exception to this rule is the third-person clitic je, which actually comes after se.

Since clitics must be in the second position, why don't smo and se come right after i?

The conjunction i (and) connects two separate phrases, and it doesn't count as the "first position" for clitics. In the second half of the sentence, the first word that counts is the verb iznenadili, so the clitics smo and se tuck in perfectly right after it.

Why is the reflexive word se used here if the translation is "we were surprised"?

In English, you use the passive voice to say "we were surprised." In Croatian, the verb iznenaditi means "to surprise" (someone else). To say that you experienced the surprise, you use the reflexive form iznenaditi se, which literally translates more like "to surprise oneself."

Why do the past tense verbs end differently (bio vs iznenadili)?