Deutsche Bank Natl. Trust Co. v. Holden (Slip Opinion)
147 Ohio St. 3d 85
| Ohio | 2016Background
- In 2005 Glenn and Ann Holden executed a promissory note ($69,300) and a mortgage (MERS as nominee for Novastar). Deutsche Bank later purchased the loan as trustee and Chase acted as servicer.
- The Holdens defaulted; they filed Chapter 7 and the bankruptcy court discharged their personal obligation on the promissory note.
- Deutsche Bank recorded an assignment of the mortgage to itself in 2010 and filed a foreclosure action in 2011 seeking to foreclose the mortgage (not a personal judgment on the note).
- The complaint attached the note and the mortgage assignment, but the copy of the note attached lacked a dated indorsement.
- The trial court granted Deutsche Bank summary judgment and entered a decree of foreclosure; the court of appeals reversed, holding the plaintiff must own both the note and mortgage at filing and genuine issues existed about note ownership.
- The Ohio Supreme Court reversed the appellate court, holding that mortgage foreclosure and an action on the note are separate remedies and that Deutsche Bank had standing to foreclose the mortgage despite the bankruptcy discharge of the note obligation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a foreclosing plaintiff must own both the note and mortgage at filing to have standing | Deutsche Bank: owning either the note or the mortgage (or being entitled to enforce the note) suffices; the mortgage assignment gives standing to foreclose even if the note-holder cannot obtain a personal judgment due to bankruptcy discharge | Holdens: Ohio requires the plaintiff be injured (owner of the note); R.C. 1303.31 limits who may enforce the note and transfer requires physical delivery—Deutsche Bank did not prove note ownership at filing | The court held foreclosure and suit on the note are separate; a mortgagee (or its assignee) has standing to foreclose; Deutsche Bank had standing to foreclose though the personal debt was discharged. |
| Effect of bankruptcy discharge on foreclosure rights | Deutsche Bank: discharge bars a personal judgment but not foreclosure on the mortgage lien | Holdens: discharge undermines plaintiff’s injury and standing to pursue foreclosure absent ownership of the note | Held: Bankruptcy discharge eliminates personal liability but does not extinguish the mortgage lien; creditor may still foreclose if entitled to enforce the note/mortgage lien. |
| Whether post-filing acquisition of documents can cure lack of standing | Deutsche Bank: alleged it had requisite documents at filing and, in any event, mortgage assignment demonstrated interest | Holdens: relying on Schwartzwald, only possession at filing can establish standing; post-filing events cannot cure lack of standing | Held: Schwartzwald requires standing at filing, but here Deutsche Bank pleaded and demonstrated a personal stake (mortgage assignment and possession of the note) so standing existed at filing. |
| Burden at summary judgment to prove entitlement to foreclose | Deutsche Bank: satisfied burden by producing mortgage assignment, note, and default history | Holdens: disputed authenticity/chain and argued genuine issues remained about note transfer | Held: Bank met Civ.R. 56 burden; Holdens failed to produce specific facts creating a genuine issue about the bank’s right to foreclose. |
Key Cases Cited
- Schwartzwald v. Fed. Home Loan Mtge. Corp., 134 Ohio St.3d 13 (2012) (standing to sue in foreclosure must exist at time complaint filed; post-filing events cannot cure lack of standing)
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (Chapter 7 discharge extinguishes personal liability but mortgage lien survives)
- Wilborn v. Bank One Corp., 121 Ohio St.3d 546 (2009) (foreclosure proceeding enforces debt obligation; foreclosure cuts off redemption and enforces mortgage lien)
- Kernohan v. Manss, 53 Ohio St. 118 (1895) (where a promissory note is secured by mortgage, the note represents the debt)
- Carr v. Home Owners Loan Corp., 148 Ohio St. 533 (1947) (mortgagee has alternative, independent remedies on default; actions on note and mortgage are separate)
- Kerr v. Lydecker, 51 Ohio St. 240 (1894) (statute of limitations on note does not necessarily bar action on the mortgage)
- FirstMerit Bank, N.A. v. Inks, 138 Ohio St.3d 384 (2014) (mortgage conveys conditional property interest as security for debt)
- Hausman v. Dayton, 73 Ohio St.3d 671 (1995) (upon default legal title to mortgaged property passes to mortgagee as between mortgagor and mortgagee)