2013 Ohio 5775
Ohio Ct. App.2013Background
- In 2007 Blythe took a $116,000 loan from Quicken Loans, secured by a mortgage naming MERS as mortgagee of record and Quicken as lender.
- The promissory note was indorsed by Quicken (undated special indorsement) “Pay To the Order of Countrywide Bank, FSB,” signed by a Quicken employee.
- The mortgage was later assigned of record by MERS to BAC Home Loans Servicing, L.P. (BAC), and BAC filed a foreclosure complaint in 2010 alleging default and acceleration.
- At summary judgment BAC produced the note (showing the special indorsement to Countrywide Bank, FSB), the mortgage, and an account statement/affidavit; BAC did not produce evidence showing it was the holder or a transferee of the note.
- The trial court granted BAC summary judgment and a decree of foreclosure; Blythe appealed, asserting BAC lacked standing because it was not the holder of the note.
- The court of appeals reversed, holding BAC failed to show it was the current holder or otherwise entitled to enforce the specially indorsed note; dismissal without prejudice was ordered for lack of standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BAC had standing/was the holder entitled to enforce the note | BAC asserted it was the holder or a nonholder in possession entitled to enforce and relied on the mortgage assignment and its affidavit/accounting | Blythe argued the note was specially indorsed to Countrywide Bank, FSB, not BAC, and BAC produced no evidence of transfer, merger, or other acquisition of Countrywide’s rights | Held: BAC did not prove it was the holder or successor; special indorsement limits enforcement to the named payee; BAC lacks standing and suit dismissed without prejudice |
| Whether a specially indorsed note can be enforced by a nonholder without proof of transfer | BAC contended ownership of the physical note is unnecessary under UCC §1303.31 and related principles | Blythe argued UCC requires negotiation/indorsement to create holder status; a special indorsement prevents enforcement by others absent proof of transfer/subrogation | Held: A nonholder in possession must show acquisition of holder’s rights (transfer, subrogation, succession); BAC failed to do so |
| Whether recorded mortgage assignment alone establishes right to foreclose absent note holder proof | BAC relied on the mortgage assignment recorded in the county as support for enforcement | Blythe argued the note controls and the current holder of the note is the real party in interest; assignment of mortgage without note transfer is insufficient | Held: The note is evidence of the debt and control of the note determines the real party in interest; mortgage assignment alone did not cure BAC’s lack of standing |
| Whether summary judgment was proper given the evidentiary record | BAC argued its affidavit and attached documents satisfied Civ.R. 56 burden | Blythe argued evidentiary deficiencies existed (no certificate of merger, no affidavit establishing transfer) and the summary-judgment record is strictly limited | Held: Summary judgment improper for BAC because it did not meet its initial burden to show no genuine issue as to holder status under Civ.R. 56 |
Key Cases Cited
- Russell v. Interim Personnel, 135 Ohio App.3d 301 (discusses materiality in summary-judgment analysis)
- Inland Refuse Transfer Co. v. Browning-Ferris Indus. of Ohio, 15 Ohio St.3d 321 (limits on court resolving ambiguities on summary judgment)
- Edgar v. Haines, 109 Ohio St. 159 (mortgage is incident to the debt; negotiation of note equitably assigns mortgage)
- Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13 (standing is jurisdictional; lack of standing at commencement requires dismissal)