2020 Ohio 727
Ohio Ct. App.2020Background:
- Plaintiffs Christiana Trust (later substituted by MTGLQ Investors, LP) filed a 2016 foreclosure action against Daniel and Tamara Berter alleging default on a 2005 promissory note secured by a mortgage.
- The complaint initially included an allonge with multiple erroneous entries (wrong borrower name, lender, date, amount); Christiana later filed the original note with a corrected allonge and amended the complaint.
- At an August 2017 report hearing the magistrate inspected the original note and corrected allonge in court, concluded Christiana had standing, and allowed the Berters to review the instrument (they made no evidentiary offer then).
- Christiana submitted a custodian-of-record affidavit (Selene) and supporting documents showing the note, chain of assignments, and an accounting; Christiana later assigned the loan to MTGLQ and moved to substitute.
- The trial court overruled the Berters' objections to the magistrate's findings, granted summary judgment and foreclosure to MTGLQ for $103,744.46 plus interest, rejecting Berters' challenges to standing, assignment validity, HUD compliance, and accounting.
- On appeal the Berters argued (1) the magistrate hearing violated due process and (2) summary judgment was improper due to allonge errors, an allegedly invalid HUD-related assignment, failure to account for a "Save the Dream" payment, and HUD-regulation noncompliance.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Whether the magistrate's August 2017 inspection/hearing violated due process | Christiana: hearing was noticed to address Berters' standing concerns; original note was produced and Berters had opportunity to inspect and speak | Berter: report hearings are for scheduling only; they were unaware the note would be examined or that a dispositive factual finding would be made | Court: No due-process violation; magistrate warned parties the note would be produced, Berters inspected and had opportunity to object, and court acted within discretion to resolve standing issue |
| 2. Standing/validity of the note and chain of assignments (including erroneous allonge) | Christiana/MTGLQ: produced original note with corrected allonge and evidence of chain of assignments; later assigned to MTGLQ with endorsed allonge and mortgage assignment | Berter: initial allonge was incorrect and one assignment (HUD to Christiana) was invalid due to expired limited POA, so plaintiff lacked standing | Court: Summary judgment record contained corrected allonge and assignment chain; mortgagors lack standing to challenge assignments between third parties, so plaintiff had standing |
| 3. Applicability and compliance with HUD/FHA regulations before acceleration | Christiana: loan was not federally insured at default or, in any event, provided notice exceeding regulatory minimums and exceptions to face-to-face meeting apply | Berter: loan was FHA-originated and Christiana failed to comply with HUD notice and face-to-face meeting requirements before acceleration | Court: Berters produced no admissible evidence showing HUD rules applied or were violated; notice exceeded 30-day requirement and face-to-face exceptions or attempts were plausible; argument fails |
| 4. Accuracy of accounting (Save the Dream payment credit) | Christiana: custodian affidavit and payment history show amount due; no contrary evidence | Berter: Save the Dream funds paid in Jan 2014 were not credited and should reduce amount due | Court: Berters admitted funds were paid but offered no evidence that accounting omitted the credit; insufficient to create genuine issue; amount due sustained |
Key Cases Cited
- Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950) (establishes due-process notice and opportunity-to-be-heard requirements for proceedings affecting property interests)