HSBC Bank United States, N.A. v. Ward
2017 Ohio 7315
| Ohio Ct. App. | 2017Background
- In June 2005 Anthony Ward and Pamela Thomas‑Ward purchased 33800 Harrow Court from Cynthia Turner; financing comprised a NovaStar mortgage ($259,200) and a promissory note to Turner ($64,800) secured by an unrecorded security agreement in favor of Turner.
- The NovaStar mortgage and the warranty deed were not recorded by the closing agent Unisource despite NovaStar’s instructions; NovaStar funded the loan without receiving recorded/certified return copies.
- The Wards executed a quitclaim deed back to Turner within a month; the NovaStar loan was later assigned to Ace Trust.
- Turner obtained a later mortgage from Fremont in December 2006, recorded January 2007; that Fremont mortgage was later assigned to Ellington Trust.
- Ace Trust (assignee of NovaStar) brought foreclosure seeking priority; magistrate and trial court granted summary judgment to Ellington Trust, holding Fremont’s recorded mortgage was first in time and superior to the unrecorded NovaStar mortgage.
Issues
| Issue | Plaintiff's Argument (Ace Trust) | Defendant's Argument (Ellington Trust) | Held |
|---|---|---|---|
| Whether R.C. 5301.25 (protection for purchasers with no knowledge) defeats priority of Fremont's recorded mortgage over NovaStar's unrecorded mortgage | R.C. 5301.25 applies and Fremont had actual or constructive notice of NovaStar mortgage so cannot prevail | Recorded mortgage statute R.C. 5301.23 controls; unrecorded NovaStar mortgage is ineffective against subsequent recorded mortgage regardless of purchaser notice | Court held R.C. 5301.23 governs; unrecorded mortgage ineffective as to third parties; Fremont’s recorded mortgage has priority |
| Whether equitable subrogation can give Ace Trust priority despite lack of recording | Ace Trust entitled to equitable subrogation because NovaStar was prejudiced by Unisource’s failure to record and Unisource’s negligence should not defeat NovaStar | Unrecorded mortgage is nugatory to third parties in law and equity; NovaStar was in best position to protect itself and had recourse against Unisource; equitable subrogation not available | Court held equitable subrogation unavailable; unrecorded mortgage ineffectual against third parties and Ace Trust failed as a matter of law |
| Whether genuine issues of material fact precluded summary judgment | Ace Trust contended disputed facts (notice, agency, negligence) existed precluding summary judgment | Ellington Trust argued no material factual dispute on priority; recorded mortgage wins | Court applied de novo review and found no genuine issue of material fact; summary judgment for Ellington proper |
| Whether magistrate misapplied legal standards or made clearly erroneous factual findings | Ace Trust argued misapplication of statutes and erroneous factual imputations | Ellington Trust argued correct application of recording statute and equitable principles | Court affirmed magistrate and trial court; findings and legal application upheld |
Key Cases Cited
- Zivich v. Mentor Soccer Club, 696 N.E.2d 201 (Ohio 1998) (statement of Ohio summary judgment standard)
- Grafton v. Ohio Edison Co., 671 N.E.2d 241 (Ohio 1996) (summary judgment de novo review descriptor)
- Sidle v. Maxwell, 4 Ohio St. 236 (Ohio 1854) (unrecorded instruments ineffective as to third parties until recorded)
- State v. Jones, 399 N.E.2d 1215 (Ohio 1980) (equitable subrogation requires a strong equity and clear case)
- Murphy v. Reynoldsburg, 604 N.E.2d 138 (Ohio 1992) (doubts on summary judgment resolved for nonmoving party)