2015 Ohio 466
Ohio Ct. App.2015Background
- In August 2004 Grund executed a $104,000 promissory note to Novastar and a mortgage naming MERS as mortgagee; Novastar later endorsed the note to JP Morgan Chase but retained possession.
- Grund defaulted on payments beginning October 1, 2011; Bank of New York Mellon (BoNY) filed a foreclosure complaint on June 19, 2012 asserting it held the note and mortgage.
- The complaint attached the original note showing endorsement to JP Morgan and a March 21, 2012 allonge purporting to transfer the note from Novastar to BoNY; that allonge was ineffective as a negotiation because Novastar had already endorsed to JP Morgan.
- BoNY filed a recorded assignment of the mortgage from MERS to BoNY dated May 14, 2012 (which contained a naming error) and later filed an undated revised allonge (signed ~July 18, 2013) and a corrective assignment (Aug. 26, 2013) fixing the name error.
- Grund pleaded lack of standing and alleged the allonge/assignment were defective and fraudulent but produced no opposing affidavits at summary judgment; the trial court granted BoNY summary judgment and foreclosure, and the court of appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did BoNY have standing to file foreclosure when complaint was filed? | BoNY claimed it held/enforced the note and mortgage and was entitled to foreclose. | Grund argued BoNY lacked standing because the March 2012 allonge was ineffective and the later revised allonge and corrective assignment were executed after the complaint. | BoNY had standing: as a non-holder in possession with rights of a holder (via Novastar’s March 21, 2012 transfer and delivery) and alternatively as assignee of the mortgage (May 14, 2012). |
| Could an ineffective negotiation plus possession confer enforcement rights? | BoNY argued transfer plus delivery under R.C. 1303.22 vested enforcement rights even if negotiation was ineffective. | Grund argued Novastar could not transfer rights because it had already endorsed to JP Morgan and thus was not the holder when it executed the allonge. | Court held a transfer from the transferor (Novastar) plus delivery evidenced intent to give BoNY enforcement rights; BoNY was a non-holder in possession entitled to enforce. |
| Could the May 14, 2012 mortgage assignment (with a name error corrected later) confer standing? | BoNY argued the mortgage assignment (read with the corrective assignment) showed assignment effective before filing, giving standing; assignments may transfer note as well. | Grund claimed the corrected assignment was too-late and that name correction was substantive. | Court held the original assignment (with later corrective naming) was effective as of May 14, 2012; mortgage assignment conferred standing and, under Ohio law, generally transfers the note when parties intend instruments to remain together. |
| Was Grund’s unsupported allegation of forgery/fraud sufficient to resist summary judgment? | BoNY relied on authenticated loan records and an affidavit that it possessed the original note and loan history. | Grund alleged the allonge was fabricated and signatures unauthorized but submitted no affidavits or evidentiary materials. | Court held unsupported allegations in pleadings cannot defeat a properly supported summary-judgment motion; Grund failed to produce competent contrary evidence. |
Key Cases Cited
- Murphy v. Reynoldsburg, 65 Ohio St.3d 356 (summary judgment ends litigation when nothing remains to try)
- Dresher v. Burt, 75 Ohio St.3d 280 (party moving for summary judgment must first point to evidentiary materials showing absence of genuine issue)
- Leibreich v. A.J. Refrigeration, Inc., 67 Ohio St.3d 266 (summary judgment standard articulation)
- Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (standing is part of making a justiciable case)
- Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13 (standing in foreclosure: must establish interest in note or mortgage; standing is determined as of filing)