2014 Ohio 4860
Ohio Ct. App.2014Background
- Rowland and Donna Huth refinanced their home with Intervale in October 2005 and later sued Intervale (and related parties) in 2009 alleging fraud, unconscionability and related claims; that prior suit was settled and Intervale was dismissed with prejudice while Countrywide was dismissed without prejudice.
- The Bank of New York Mellon (BONY), as trustee for a mortgage-backed trust, filed foreclosure in 2011 on the Huths’ October 26, 2005 note and mortgage.
- Huths asserted counterclaims in the foreclosure action asserting Intervale’s misconduct and alleging BONY took assignment with notice of those defenses; they did not allege wrongdoing by BONY itself.
- The trial court converted BONY’s 12(B)(6) motion into a summary-judgment motion, granted summary judgment to BONY on the foreclosure claim (including sua sponte entry against Huths on damages) and granted BONY summary judgment on Huths’ counterclaim based on res judicata.
- On appeal the Sixth District (Pietrykowski, J.): reversed the res judicata ground for the counterclaim (finding factual dispute over privity), but affirmed summary judgment on the counterclaim under the common-law rule that release of a primarily liable party (Intervale) releases secondary obligors; affirmed foreclosure judgment generally but reversed the sua sponte summary judgment as to damages and remanded for determination of damages.
Issues
| Issue | Plaintiff's Argument (BONY) | Defendant's Argument (Huths) | Held |
|---|---|---|---|
| Standing to challenge assignment/PSA | Huths lack standing because they aren’t parties or third-party beneficiaries of the PSA | Borrowers can challenge assignment breaches that exclude their loan from the trust | Huths lack standing to challenge assignment under the PSA (not third-party beneficiaries) |
| Res judicata/privity | Settlement/dismissal with prejudice of claims against Intervale bars same claims against BONY because assignee is in privity with assignor | BONY didn’t prove it was in privity with Intervale (disputed chain of assignment) | Trial court erred to the extent it relied on res judicata (insufficient proof of privity), but alternative common-law release rule bars the counterclaim |
| Compulsory counterclaim (Civ.R.13(A)) | Foreclosure was not barred as a compulsory counterclaim; Countrywide’s voluntary dismissal prevents any compulsory-counterclaim bar | Foreclosure should have been compulsory counterclaim in prior litigation against Countrywide | No bar: prior claims against Countrywide were voluntarily dismissed without prejudice, so Civ.R.13(A) does not bar BONY’s foreclosure |
| Sua sponte summary judgment and discovery on damages/chain-of-title | All relevant evidence was before the court, so court could enter SJ for non-moving party | Huths lacked notice and opportunity to conduct discovery and present mitigation/damages evidence | Court’s sua sponte SJ on damages prejudiced Huths; remanded to determine damages. Discovery issues about chain of title were moot as Huths lacked standing to challenge assignments |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (standard for appellate review of summary judgment)
- Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64 (elements for summary judgment)
- Norwood v. McDonald, 142 Ohio St. 299 (definition of res judicata)
- Zimmie v. Zimmie, 11 Ohio St.3d 94 (effect of voluntary dismissal under Civ.R.41(A)(1))
- Bello v. Cleveland, 106 Ohio St. 94 (common-law rule: release of primary obligor releases secondary obligors)