SRB Servicing, LLC v. McIntyre, 1:17-cv-00665

Background

In 2002 Cynthia and Stedson McIntyre executed a $125,000 promissory note and mortgage on 650 Clinton Lane, Highland Heights, Ohio, originally in favor of The Second National Bank of Warren.
The note and mortgage were transferred through mergers to Sky Bank and then Huntington National Bank; Huntington recorded an Assignment of Mortgage to SRB Servicing, LLC in 2010 and executed a Lost Note Affidavit when assigning the note to SRB in 2009.
Huntington’s Lost Note Affidavit stated Huntington never possessed the original note and believed the original was lost or destroyed; SRB relied on that affidavit and the recorded assignment to assert rights.
SRB filed two state-court foreclosure actions (2010 and 2011) that were dismissed without prejudice; SRB then filed the present federal foreclosure action in 2017. The court previously held the breach-of-note claim time-barred but foreclosure claim timely.
Defendants moved for summary judgment arguing SRB cannot show it is the holder or entitled to enforce the note (lost-note rules), cannot establish valid assignments or amounts due, and that laches bars relief. SRB moved for summary judgment asserting it is holder and entitled to foreclosure.
The district court granted defendants’ motion and denied SRB’s motion, concluding SRB failed to prove it was entitled to enforce the note under Ohio’s lost-instrument statute and thus cannot foreclose the mortgage.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether SRB is entitled to enforce the lost note under Ohio’s lost-instrument statute (R.C. § 1303.38)	SRB contends Huntington’s Lost Note Affidavit and the recorded Assignment make SRB the owner/holder entitled to enforce the note and mortgage	Huntington never possessed the original note; the affidavit admits Huntington was not in possession when loss occurred, so prerequisite to enforce is unmet; SRB stands in no better position than assignor	Held for Defendants: SRB failed to show it or its assignor possessed the note when loss occurred, so it is not entitled to enforce the note under the statute
Whether SRB may obtain foreclosure absent being entitled to enforce the note	SRB argues it seeks only foreclosure of the mortgage and not a personal judgment on the note; assignment and affidavit suffice to foreclose	Defendants argue foreclosure requires entitlement to enforce the underlying note; lost-note affidavit defeats that showing	Held for Defendants: foreclosure requires entitlement to enforce the note; SRB’s inability to meet the lost-note prerequisite bars foreclosure
Effect of prior state-court filings and statute of limitations on SRB’s remedies	SRB acknowledges breach claim is time-barred but asserts foreclosure remains available	Defendants note prior actions and argue equitable defenses and defects in chain of title/possession of the note	Held: Court reaffirmed breach claim time-barred; but foreclosure still requires enforceability of note, which SRB could not prove
Whether SRB can rely on recorded Assignment of Mortgage to establish rights to enforce the note	SRB relies on recorded assignment as evidence of transfer of rights	Defendants contend assignee takes no greater rights than assignor; recorded assignment cannot cure the lack of possession at loss	Held for Defendants: assignment cannot confer greater rights than assignor; assignment did not satisfy lost-note statute prerequisites

Key Cases Cited

Carr v. Home Owners Loan Corp., 148 Ohio St. 533 (Ohio 1947) (mortgagee may elect separate remedies on default)
Carpenter v. Longan, 83 U.S. 271 (U.S. 1872) (note and mortgage are inseparable; note is essential to mortgage)
Kernohan v. Manss, 53 Ohio St. 118 (Ohio 1895) (note, not mortgage, represents the debt)
Fannie Mae v. Hicks, 35 N.E.3d 37 (Ohio Ct. App. 2015) (liability under the note is prerequisite to enforcement of the mortgage)
Deutsche Bank Nat’l Trust Co. v. Holden, 147 Ohio St.3d 85 (Ohio 2016) (mortgagee must show it is party entitled to enforce the note to foreclose)
Wilborn v. Bank One Corp., 121 Ohio St.3d 546 (Ohio 2009) (foreclosure is enforcement of a debt obligation)