Liberty Savs. Bank, F.S.B. v. Bowie
2014 Ohio 1208
Ohio Ct. App.2014Background
- Gilbert and Sharlene Bowie executed an FHA-designated promissory note (Oct. 9, 2009) secured by a mortgage on 1132 Dietz Avenue; mortgage named MERS as nominee for Liberty Savings.
- The note bears indorsements (two marked canceled, one blank signed by Liberty Savings); the parties later executed a recorded loan modification (Aug. 16, 2012) that left unaltered HUD-related provisions.
- Liberty Savings filed foreclosure (Jan. 16, 2013) attaching copies of the note, mortgage, three mortgage assignments, and the loan modification; trial court granted summary judgment for the bank after the Bowies did not respond.
- The Bowies contested that Liberty Savings failed to comply with applicable HUD/FHA servicing regulations before acceleration: specifically, (1) whether the lender made a reasonable effort to arrange a required face-to-face meeting and (2) whether the lender sent the required certified-mail notice of default and acceleration.
- Liberty Savings relied on two affidavits from its assistant VP (Tonia Dye) asserting compliance and attaching a notice of right to cure that showed the certified-mail line blank; the bank did not submit evidence of efforts to arrange a face-to-face meeting.
- The Court of Appeals reversed summary judgment and remanded, holding genuine issues of material fact remained whether the bank complied with HUD requirements (face-to-face meeting effort and certified-mail notice). The court deemed further briefing on affidavit admissibility moot.
Issues
| Issue | Plaintiff's Argument (Liberty) | Defendant's Argument (Bowie) | Held |
|---|---|---|---|
| Whether lender complied with HUD requirement to have a face-to-face interview or make reasonable efforts to arrange one before foreclosure | Lender asserted in affidavit that all prerequisites were performed and generally claimed compliance | Borrowers argued lender produced no evidence of a face-to-face meeting or reasonable efforts to arrange one; HUD rules apply because loan is FHA-designated | Court: Genuine issue of material fact; lender failed to demonstrate absence of dispute as to meeting requirement; reversal of summary judgment |
| Whether lender sent required certified-mail notice of default and acceleration under HUD rules | Lender’s affidavit asserted a notice was mailed and attached a copy of the notice | Borrowers pointed out the attached notice had the “certified mail” line blank and affidavit stated first-class mailing, failing to show certified mailing required by HUD | Court: Genuine issue of material fact; lender did not show it sent required certified-mail notice |
| Whether HUD/FHA servicing regulations applied to the loan | Lender argued loan may not have been FHA/HUD loan at time of acceleration | Borrowers relied on the note and mortgage language (both indicating FHA/HUD applicability) and the recorded modification containing the FHA case number | Court: Loan documents themselves indicated FHA/HUD applicability; HUD regulations applied |
| Whether borrowers waived or failed to plead noncompliance with specificity under Civ.R. 9(C) | Lender contended borrowers waived challenge by general denial and did not specifically plead conditions precedent | Borrowers generally denied performance of conditions precedent and raised failure-to-satisfy statutory/contractual conditions as defenses | Court: Court declined to resolve waiver/Rule 9(C) issue because lender did not assert waiver in its summary-judgment motion; issue not decided |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (de novo review standard for summary judgment)
- Temple v. Wean United, Inc., 50 Ohio St.2d 317 (summary judgment standard and Civ.R. 56 elements)
- Dresher v. Burt, 75 Ohio St.3d 280 (party moving for summary judgment must initially show absence of genuine issue)
- Washington Mut. Bank v. Mahaffey, 154 Ohio App.3d 44 (2d Dist.) (failure to submit evidence of compliance with HUD face-to-face meeting requirement raises genuine issue)
- U.S. Bank, N.A. v. Detweiler, 191 Ohio App.3d 464 (5th Dist.) (characterizing HUD meeting requirement as condition precedent for pleading purposes)
- National City Mortg. Co. v. Richards, 182 Ohio App.3d 534 (10th Dist.) (distinguishing affirmative defenses from conditions precedent)