Sutton Funding L.L.C. v. Herres
2015 Ohio 3609
Ohio Ct. App.2015Background
- Sutton Funding sued Mark Herres in 2008 to foreclose a mortgage after he defaulted on a promissory note; Sutton obtained summary judgment and a foreclosure decree entered August 6, 2009. Herres unsuccessfully appealed that foreclosure (Sutton Funding v. Herres).
- Herres later filed a Civ.R. 60(B) motion asserting assignments/standing defects and that the mortgage had passed to Bank of New York Mellon Trust Co. N.A. (Mellon); Mellon was substituted as plaintiff in 2011. Herres’ 60(B) relief was denied and that denial was affirmed on appeal.
- After further proceedings, an Order of Sale issued in July 2014. Herres moved to set aside the sale (arguing defective/notarized assignments, loss of security interest via bankruptcy, and lack of standing), and alternatively sought substitution because Mellon allegedly assigned to ARLP Trust. The trial court overruled the motion.
- Sheriff’s sale occurred October 3, 2014 (record shows filing error naming Sutton but court found Mellon was successful bidder). Mellon moved to confirm the sale, assigned its bid to ARLP Trust, and the court confirmed the sale on December 8, 2014, ordered distribution and ordered cancellation of the now‐moot mortgage assignments.
- Herres appealed multiple post‑foreclosure orders (order of sale, order overruling motion to set aside, denial of consolidation, and confirmation/distribution). The Second District limited the appeal to post‑2009 orders and affirmed the trial court on all assignments of error.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether sale should be set aside because mortgage holder lost security interest after Herres’ bankruptcy | Sale should be confirmed because Sutton had standing when suit was filed and foreclosure judgment remained enforceable | Discharge in bankruptcy eliminated creditors’ security interest and barred foreclosure sale | Court: foreclosure judgment was final and enforceable; bankruptcy discharge did not defeat Mellon’s foreclosure rights; no relief granted |
| Whether Sutton (and successors) had standing to file foreclosure | Plaintiff: Sutton had standing when complaint filed; successor Mellon properly substituted | Herres: Sutton lacked recorded/valid assignment at filing; assignments were notarized improperly or defective | Court: standing already litigated and rejected in prior appeals; res judicata bars re‑litigation; standing upheld |
| Whether alleged defective/notarized mortgage assignments invalidated sale or transfers | Plaintiff: assignments and mortgage became moot after sale; cancellation of assignments in confirmation was proper | Herres: defective notarizations and chain of assignments voided transfers and warranted setting aside sale | Court: once property sold free of prior interests, assignments had no further effect; confirmation and cancellation of assignments appropriate |
| Whether trial court abused discretion by denying consolidation and by confirming sale where ARLP Trust (assignee of bid) allegedly not authorized in Ohio | Plaintiff: consolidation unnecessary and consolidation motion properly denied; confirmation proper and bid assignment to ARLP was valid for purposes of sale | Herres: consolidation should have included RMH; ARLP not registered to do business in Ohio so could not hold bid/title; court erred in confirming sale/distribution | Court: denial of consolidation not preserved by Herres and trial court did not abuse discretion; confirmation of sale not an abuse of discretion; clerical errors in returns corrected by court’s findings |
Key Cases Cited
- Sutton Funding L.L.C. v. Herres, 188 Ohio App.3d 686 (Ohio Ct. App.) (affirming foreclosure and addressing standing issues)
- Deaton v. Burney, 107 Ohio App.3d 407 (2d Dist. 1995) (explaining res judicata bars claims litigated or that could have been litigated)
- Huntington Natl. Bank v. Burch, 157 Ohio App.3d 71 (2d Dist. 2004) (trial court must confirm judicial sale if sale complies with R.C. 2329.01–2329.61)
- AAAA Enterprises, Inc. v. River Place Community Urban Redevelopment Corp., 50 Ohio St.3d 157 (1990) (defining abuse of discretion standard)
- City Loan & Savings Co. v. ? , 16 Ohio App.3d 185 (2d Dist. 1984) (standard for appellate review of consolidation denials)