HSBC Bank USA v. Sherman
2013 Ohio 4220
Ohio Ct. App.2013Background
- Sherman bought a house in 2006, executed a $405,000 note to American Broker’s Conduit (ABC) and a mortgage naming MERS as nominee; MERS assigned the mortgage to HSBC on January 26, 2011.
- Sherman defaulted in 2010; HSBC accelerated the loan and sought foreclosure and judgment on the note in February 2011.
- HSBC attached the mortgage (showing the January 26, 2011 assignment to HSBC) and a copy of the note to its complaint; the initial copy of the note showed endorsement only to Wells Fargo, but HSBC later produced a note with an endorsement in blank.
- Sherman did not dispute the amount due but argued HSBC lacked standing to prosecute the foreclosure, relying on Schwartzwald and other doctrines.
- The trial court granted summary judgment and a final decree in foreclosure; Sherman appealed, raising a single assignment of error contesting HSBC’s standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue in foreclosure | HSBC was assignee of the mortgage and entitled to enforce the note; mortgage attached to complaint established its interest | HSBC lacked the ability to enforce the note/mortgage at commencement and thus lacked standing | Court held HSBC had standing at commencement: properly assigned mortgage (filed with complaint) established HSBC’s interest and entitlement to enforce the note |
| Compliance with local rule (Loc.R. 45) | HSBC attached the assignment of mortgage bearing its name as required | Sherman argued both an assigned note and mortgage were required and HSBC’s note lacked HSBC payee designation | Court found HSBC complied: assignment of mortgage bearing HSBC’s name was attached and satisfied the rule |
| Pooling and Servicing Agreement (PSA) endorsement requirements | HSBC’s possession/endorsement issues do not affect sheriff of standing; HSBC is real party in interest | Sherman argued note not properly endorsed per PSA, so HSBC not party to pool/no enforcement right | Court rejected defendant’s challenge: Sherman not a beneficiary under PSA and lacks standing to enforce PSA terms |
| Choice of law/UCC Article (Art. 9 vs Art. 3) | HSBC treated note under Article 3 (negotiable instruments) | Sherman contended obligations made Article 9 govern (secured transaction) | Issue was waived for appeal (not raised below); court refused to apply plain-error exception |
Key Cases Cited
- Fed. Home Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13 (Ohio 2012) (establishes standing rules in foreclosure actions and that standing is determined at commencement of suit)
- Comer v. Risko, 106 Ohio St.3d 185 (Ohio 2005) (standard of review for summary judgment is de novo)
- Wells Fargo Bank, N.A. v. Byrd, 178 Ohio App.3d 285 (1st Dist. 2008) (standing determined at commencement; discussed in context of foreclosure pleadings)
- Goldfuss v. Davidson, 70 Ohio St.3d 116 (Ohio 1994) (plain-error doctrine in civil appeals is narrowly applied)