ABN AMRO MORTGAGE GROUP, INC. v. MARK EVANS, ET AL.
No. 98777
Court of Appeals of Ohio, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
April 18, 2013
2013-Ohio-1557
Susan M. Gray
Susan M. Gray Attorneys and Counselors
22255 Center Ridge Road, Suite 210
Rocky River, Ohio 44116
Thomas C. Loepp
Maistros & Loepp, Ltd.
3580 Darrow Road
Stow, Ohio 44224
ATTORNEYS FOR APPELLEE
Karen M. Cadieux
David A. Wallace
Carpenter Lipps & Leland L.L.P.
280 Plaza, Suite 1300
280 North High Street
Columbus, Ohio 43215
{¶1} Defendants-appellants, Mark and Irene Evans, appeal the trial court‘s decision denying their motion for sanctions, raising two assignments of error:
[I.] The trial court erred as a matter of law and to the prejudice of Mark and Irene Evans in denying their motion to strike appellee‘s untimely memorandum in opposition to defendants’ motion for sanctions.
[II.] The trial court erred as a matter of law and the prejudice of Mark and Irene Evans in denying their motion for sanctions.
{¶2} Finding no merit to the appeal, we affirm.
Procedural History and Facts
{¶3} In August 2002, the Evanses refinanced the mortgage encumbering their property located at 27008 Pondside Point, Olmsted Falls, Ohio, by securing a loan from plaintiff-appellee, ABN AMRO Mortgage Group, Inc. (“ABN AMRO“).1 On August 7, 2002, the Evanses executed a promissory note payable to ABN AMRO in the sum of $300,700. This note was secured by a mortgage on the subject property in the same amount.
{¶4} In November 2005, the Evanses stopped making payments on the mortgage, and ABN AMRO subsequently brought a foreclosure action against them in April 2006. The Evanses answered the complaint, wherein they did not raise any affirmative defenses
{¶5} Following remand, the Evanses filed their amended answer, counterclaims, and third-party claims. ABN AMRO moved for summary judgment on both its complaint and the Evanses’ counterclaims. In July 2010, the trial court granted judgment in favor of ABN AMRO on the Evanses’ counterclaims but denied its motion as to the complaint for foreclosure, finding that a genuine issue of material fact exists as to whether ABN AMRO had standing to maintain the case. In the magistrate‘s opinion, the magistrate noted that, although evidence exists that ABN AMRO was the owner of the note and mortgage when the case was filed, there was also evidence in the record that the Federal Home Loan Mortgage Corporation (“Freddie Mac“) purchased the loan on September 6, 2002. The magistrate noted that “[w]hile it is possible that ABN AMRO was required to repurchase the loans from Freddie Mac under certain conditions, ABN
{¶6} The magistrate then subsequently granted the Evanses’ motion for a commission to take the deposition of a representative of Freddie Mac, limited to the issue of real party in interest and standing. Following the taking of the deposition, the magistrate set a new dispositive motion deadline on the issue of real party in interest and standing for November 9, 2010.
{¶7} Prior to the dispositive motion deadline, on September 29, 2010, ABN AMRO voluntarily dismissed its complaint without prejudice under
{¶8} In January 2012, following remand, the trial court set the Evanses’ motion for sanctions for a hearing on March 9, 2012. Three days prior to the hearing, ABN
{¶9} The magistrate ultimately denied the Evanses’ motion for sanctions and subsequently issued a detailed, 16-page opinion setting forth its reasoning. The trial court then adopted the magistrate‘s decision and overruled the objections filed by the Evanses. This appeal now follows.
{¶10} For ease of discussion, we will address the Evanses’ assignments of error out of order.
Motion for Sanctions
{¶11} In their second assignment of error, the Evanses contend that the trial court erred in denying their motion for sanctions pursuant to
A. Standard of Review
{¶12} The decision to grant sanctions under
{¶13} The “abuse of discretion” standard differs from a de novo standard of review because a de novo standard of review requires reversal if a reviewing court disagrees with the decision of law reached by the lower court. Fast Property Solutions, Inc. v. Jurczenko, 11th Dist. Nos. 2012-L-015 and 2012-L-016, 2013-Ohio-60, ¶ 58. Conversely, when applying an abuse of discretion standard of review, a reviewing court cannot overturn a trial court‘s decision simply because it would reach a different result. Id. Instead, “an abuse of discretion is the trial court‘s ‘failure to exercise sound, reasonable, and legal decision-making.‘” Id., citing State v. Beechler, 2d Dist. No. 09-CA-54, 2010-Ohio-1900, ¶ 62, quoting Black‘s Law Dictionary 11 (8 Ed.Rev.2004).
{¶14} We note, however, that what constitutes frivolous conduct under
B. Civ.R. 11 and R.C. 2323.51
{¶15} Ohio law provides two separate mechanisms for an aggrieved party to recover attorney fees, court costs, and other reasonable expenses arising out of frivolous conduct:
{¶16}
The signature of an attorney or pro se party constitutes a certificate by the attorney or party that the attorney or party has read the document; that to the best of the attorney‘s or party‘s knowledge, information, and belief there is good ground to support it; and that it is not interposed for delay. If a document is not signed or is signed with intent to defeat the purpose of this rule, it may be stricken as sham and false and the action may proceed as though the document had not been served. For a willful violation of this rule, an attorney or pro se party, upon motion of a party or upon the court‘s own motion, may be subjected to appropriate action, including an award to the opposing party of expenses and reasonable attorney fees incurred in bringing any motion under this rule.
{¶18}
{¶19} “Frivolous conduct” is defined under the statute, in pertinent part, as conduct that:
(ii) * * * is not warranted under existing law, cannot be supported by a good faith argument for an extension, modification, or reversal of existing law, or cannot be supported by a good faith argument for the establishment of new law.
(iii) * * * consists of allegations or other factual contentions that have no evidentiary support or, if specifically so identified, are not likely to have
evidentiary support after a reasonable opportunity for further investigation or discovery.
{¶20} In determining whether a claim itself is frivolous under the statute, the test is whether no reasonable lawyer would have brought the action in light of the existing law. Orbit Elecs., Inc. v. Helm Instrument Co., 167 Ohio App.3d 301, 2006-Ohio-2317, 855 N.E.2d 91, ¶ 47 (8th Dist.), citing Riston v. Butler, 149 Ohio App.3d 390, 397-398, 2002-Ohio-2308, 777 N.E.2d 857 (1st Dist.).
{¶21} The Evanses sought sanctions under both
{¶22} While the Evanses’ arguments appear compelling and suggest frivolous conduct, we find that they lack merit and that the trial court did not abuse its discretion in denying their motion. In this case, the critical issue is whether ABN AMRO had a good faith basis, both subjectively and objectively, to prosecute the foreclosure action. The record clearly supports the trial court‘s decision that it did, thereby rendering the award of
Standing
{¶23} A party that fails to establish an interest in a note or mortgage at the time it files suit has no standing to invoke the jurisdiction of the court. Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, ¶ 28. Further, it is fundamental to any civil action that the case be prosecuted “in the name of the real party in interest.”
Note Endorsed in Blank
{¶25} For ease of our analysis, we will first address the note endorsed in blank that was mentioned during the deposition of Freddie Mac‘s representative (David Wilson). The Evanses argue that this is the governing note and that Freddie Mac, not ABN AMRO, owned and possessed it at the time the foreclosure action was filed. The trial court rejected this argument, finding that evidence existed through affidavit testimony that ABN AMRO had possession of the note and that even Wilson‘s testimony revealed that a third-party custodian maintained the note for the benefit of ABN AMRO. We defer to the trial court‘s finding, which is supported by the record.
{¶26} And because there is evidence that ABN AMRO had possession of the note endorsed in blank at the time the lawsuit was filed, ABN AMRO would be entitled to enforce the note as a holder. See
Note Attached to the Complaint
{¶27} The note attached to the complaint was payable to ABN AMRO. With this note, ABN AMRO would be entitled to enforce it as its original payee. See
{¶28} The Evanses contend that the note attached to the complaint cannot be the governing note because the note was sold to Freddie Mac prior to the filing of the lawsuit and contained no endorsement. The trial court, however, implicitly rejected the Evanses’ arguments that this version of the note was attached in bad faith or to deceive the court. Indeed, the trial court treated this version of the note as contradictory evidence that precluded the award of summary judgment in ABN AMRO‘s favor.
{¶29} But the Evanses maintain on appeal that ABN AMRO‘s attachment of an earlier version of the note to the complaint evidences its bad faith and mandates the award of sanctions. We disagree. First, any claim of bad faith is negated by the fact that evidence exists in the record to support a finding that ABN AMRO is the real party in interest with standing to foreclose. Contrary to the Evanses’ assertion, this is not a case of an unknown entity trying to wrongly force them out of their home. ABN AMRO has been the mortgagee on the loan from its inception and has been servicing the loan, i.e., receiving payments on the loan, the entire time that the Evanses have been making them. The sale of the promissory note to Freddie Mac did not change this. Indeed, under the
{¶30} Second, the trial court presided over this very contentious case for over six years. The trial court was in the best position to ascertain the parties’ intent. And here, the trial court clearly did not find that the allegations of the complaint and supporting evidence were made in bad faith or willful disregard of
{¶31} Finally, the Evanses’ reliance on the Fifth District‘s decision in Mainsource Bank v. Winafeld, 5th Dist. No. 2008CA00001, 2008-Ohio-4441, for the proposition that sanctions are mandated in this case is misplaced. In Winafeld, the appellate court was solely reviewing the trial court‘s frivolous-conduct determination, the only issue being appealed, “not the decision to award sanctions or the amount thereof.” Id. at ¶ 18. Contrary to the Evanses’ assertion, Winafeld does not hold that sanctions are required if standing is lacking.
{¶32} Notably, even if this court had found that ABN AMRO lacked standing to bring the action, the ultimate decision to grant sanctions still rests with the trial court. Neither
{¶33} Accordingly, having agreed with the trial court that ABN AMRO had a good faith basis in prosecuting the foreclosure action, we find that the trial court did not abuse its discretion in denying the Evanses’ motion for sanctions. The second assignment of error is overruled.
Motion to Strike
{¶34} In their first assignment of error, the Evanses contend that the trial court abused its discretion in denying their motion to strike ABN AMRO‘s brief in opposition to their motion for sanctions. We disagree.
{¶35} The record reveals that the trial court initially denied ABN AMRO‘s unopposed motion for additional time to respond to the Evanses’ motion for sanctions as moot when it first denied the motion for sanctions upon a finding that it lacked jurisdiction. Upon this court‘s reversal of the trial court‘s decision in Appeal II, the case was remanded with specific instructions for the trial court to decide the merits of the Evanses’ motion for sanctions. Prior to the hearing on the motion, ABN AMRO filed its brief in opposition. Notably, ABN AMRO had not previously had the opportunity to file its brief in opposition because of the trial court‘s finding of a lack of jurisdiction.
{¶36} The Evanses argue that Loc.R. 11 imposed a seven-day deadline for filing a brief in opposition to its motion for sanctions upon the case being “reactivated” after remand. The Evanses, however, fail to cite any authority in support of this argument.
{¶37} Moreover, we cannot fault the trial court for wanting to hear both sides of the argument prior to the hearing. Indeed, the filing of the brief in opposition assists the trial court and does not unfairly prejudice the Evanses. Further, the Evanses were permitted the opportunity to file a reply brief in support of their motion for sanctions and to supplement the record following the hearing. Based on these circumstances, we simply cannot agree that the trial court abused its discretion in denying the Evanses’ motion to strike.
{¶38} The first assignment of error is overruled.
{¶39} In summary, we find that the trial court exercised sound discretion in this case by denying the Evanses’ motion to strike and their motion for sanctions.
{¶40} Judgment affirmed.
It is ordered that appellee recover from appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into execution.
MARY J. BOYLE, JUDGE
MELODY J. STEWART, A.J., and TIM McCORMACK, J., CONCUR