Armstrong v. U.S. Bank Natl. Assn.Armstrong v. U.S. Bank Natl. Assn.
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: April 12, 2023
Hilton Parker LLC and Jonathan L. Hilton for Plaintiff-Appellee,
Stites & Harbison PLLC and Andrew J. Poltorak for Defendants-Appellants.
{¶1} U.S. Bank, N.A., as trustee for the Structured Asset Securities Corporation Mortgage Loan Trust 2006-BC1 and the Structured Asset Investment Loan Trust, 2006-3 (collectively, “U.S. Bank“), appeals from the decision of the trial court denying its motion to set aside a default judgment entered in favor of plaintiff-appellee Kenneth Armstrong, a Florida homeowner. Armstrong brought a declaratory-judgment action against U.S. Bank, seeking to have the promissory note (the “note“) underlying his home mortgage declared unenforceable. Because U.S. Bank was validly served and did not appear before the trial court, the court granted a default judgment to Armstrong and found the note to be unenforceable. More than a year later, after Armstrong brought a quiet-title action in Florida to extinguish the mortgage, U.S. Bank sought relief from the judgment under
I. Factual and Procedural History
{¶2} In March 2006, Armstrong obtained a loan from BNC Mortgage, Inc., (“BNC“) for $140,000. In exchange, Armstrong executed a promissory note and granted BNC a mortgage on his home in Sarasota, Florida. Following some trading on the secondary mortgage market, the note came to be held, in trust, by U.S. Bank. In 2007, 2010, and 2014, U.S. Bank initiated foreclosure proceedings in Florida state court against Armstrong for failure to pay. U.S. Bank voluntarily dismissed the 2007 and 2010 actions.
{¶3} In 2013, during the pendency of the 2010 foreclosure action, Armstrong executed a loan-modification agreement with U.S. Bank in settlement of the default. The 2013 loan-modification agreement reaffirmed Armstrong‘s obligations under the
{¶4} The 2014 action proceeded to a bench trial in 2019. Armstrong prevailed because the court found that U.S. Bank failed to prove that the correct entity had brought suit against Armstrong.
{¶5} Following the 2019 judgment in Armstrong‘s favor, which resolved the 2014 foreclosure action, Armstrong filed a declaratory-judgment action in the Hamilton County Court of Common Pleas seeking a declaration that the note was no longer enforceable. Armstrong filed in Hamilton County because, he alleges, the note was payable to U.S. Bank at its Cincinnati address. Armstrong‘s argument centered around U.S. Bank‘s acceleration of the note in the 2010 foreclosure action and the subsequent running of Ohio‘s statute of limitations on collection of a debt.
{¶6} U.S. Bank did not answer Armstrong‘s complaint. Eventually, Armstrong filed a motion for a default judgment, which the court granted in August 2020. In November 2021, Armstrong filed an action for quiet title in the United States District Court for the Middle District of Florida, in the case numbered 8:21-cv-02648. In that action, Armstrong presented his Hamilton County judgment declaring the note to be unenforceable and sought to extinguish the mortgage securing the note.
{¶7} After U.S. Bank received notice of the Florida quiet-title action, it filed a motion in the Hamilton County declaratory-judgment case seeking to set aside the judgment under
II. First Assignment of Error
{¶8} In its first assignment of error, U.S. Bank argues that the trial court erred in determining that it was not entitled to relief under
{¶9} This court reviews a denial of a motion for relief from judgment under
{¶10} To be entitled to relief under
{¶11} Because U.S. Bank did not file its motion until more than a year after the court‘s entry of the default judgment, it cannot claim relief under
{¶12} A motion for relief under
A. Meritorious Defense
{¶13} The trial court did not address whether U.S. Bank had proffered a meritorious defense. Rather, the trial court found that neither
{¶14} Even if U.S. Bank had a meritorious defense, the trial court need not discuss it if either of the other requirements for relief under
{¶15} Because we hold that U.S. Bank has not shown entitlement to relief under
B. Civ.R. 60(B)(4): No Longer Equitable
{¶16} U.S. Bank argues that the trial court erred by finding that it had not satisfied the requirement of
{¶17} “The ‘* * * it is no longer equitable * * *’ clause of
{¶18} Wurzelbacher is the foundational case interpreting this provision. In that case, Kroeger‘s heirs-at-law, next-of-kin, and beneficiaries were parties to a will contest in the court of common pleas. Id. at syllabus. After trial on the validity of the will had begun, the parties reached a settlement agreement. Id. As a result of the settlement, the judge directed a verdict finding the will to be valid. Id. Subsequently, the probate court found that the settlement agreement was invalid because, in part, the minor beneficiaries under the will had not been represented by a guardian ad litem. Id. The court held that the probate court‘s invalidation of the settlement agreement rendered it “no longer equitable” to enforce the court of common pleas’ judgment of the will‘s validity. Id. at 93.
{¶19} More recently, the Twelfth District Court of Appeals interpreted this provision in a foreclosure case, LNV Corp. v. Edgar, 12th Dist. Butler No. CA2011-10-190, 2012-Ohio-1899. The day before trial, the bank and homeowner reached a settlement agreement to avoid foreclosure. Id. at ¶ 3. The homeowner was to execute a deed in lieu of foreclosure, and the bank would release the homeowner from personal liability on the note. Id. The trial court dismissed the foreclosure action with prejudice. Id. After more than a year passed without the homeowner‘s consummation of the agreed settlement, the bank moved for relief from the settlement entry to modify the
{¶20} U.S. Bank‘s argument is that the quiet-title action to extinguish the mortgage on the Florida property is a subsequent event that makes it no longer equitable to enforce the judgment. However, the use of the judgment to extinguish the mortgage lien that secured payment of the debt under the note, where the judgment invalidated the note, is not an unforeseeable “change in circumstances,” such as the failure of a settlement agreement to be put into effect. It is the natural next step for Armstrong once the debt secured by the mortgage was found to be unenforceable.
{¶21} U.S. Bank claims that allowing the court‘s judgment to be used to extinguish the mortgage on Armstrong‘s property would result in Armstrong‘s unjust enrichment, and that it is “no longer equitable” that the judgment should apply. We disagree. Armstrong‘s relief from his obligation to make payments on the note, which is the source of his “enrichment,” is contemporaneous with the judgment itself. See Natl. City Home Loan Servs. v. Gillette, 4th Dist. Scioto No. 05CA3027, 2006-Ohio-2881, ¶ 22 (finding that the debtor‘s enrichment occurred prior to or contemporaneously with the judgment relieving her from the responsibility to repay the loan).
{¶22} Because there has been no change in conditions here, U.S. Bank cannot obtain relief under
C. Civ.R. 60(B)(5): Fraud upon the Court
{¶23} U.S. Bank argues that it is entitled to relief under
{¶24}
{¶25} “Fraud upon the court differs from Rule 60(B)(3), fraud or misrepresentation by an adverse party. Fraud upon the court might include, for example, the bribing of a juror, not by the adverse party, but by some third person.”
{¶26} “Fraud on the court granting the default judgment must be proved by clear and convincing evidence * * *.” First Natl. Bank of Clermont Cty. v. Blanchard, 1st Dist. Clermont No. 636, 1977 Ohio App. LEXIS 8482, 4 (June 8, 1977), citing Boaz v. Hazlett, 1st Dist. Hamilton No. C-76086, 1977 Ohio App. LEXIS 8709, 4 (Mar. 16, 1977). The party alleging fraud bears the burden of proof. Kell, 1st Dist. Hamilton No. C-120665, 2013-Ohio-4223, at ¶ 44. Accord Natl. Collegiate Student Loan Trust-1 v. Payne, 10th Dist. Franklin No. 21AP-628, 2022-Ohio-2636, ¶ 18.
{¶27} ” ’ “[T]he trial court is best able to determine whether a fraud has been perpetrated upon it. Consequently, the trial court‘s determination of the issue is entitled to great weight * * *.” ’ ” Coulson, 5 Ohio St.3d at 16, 448 N.E.2d 809, quoting Coulson v. Coulson, 8th Dist. Cuyahoga No. 43996, 1982 Ohio App. LEXIS 12144, 4 (Feb. 11, 1982), quoting Hartford at 85.
{¶28} Here, U.S. Bank argues that Armstrong‘s failure to bring the 2013 loan-modification agreement to the court‘s attention amounted to fraud upon the court. Armstrong based his argument for a default judgment on the claim that the loan was accelerated on December 6, 2010, and had been accelerated since that time. Under
{¶29} In response, Armstrong contends that the loan modification was not concealed from the trial court because it was referenced in an exhibit attached to his affidavit in support of a default judgment. That exhibit was U.S. Bank‘s 2014 complaint for foreclosure, which recited in paragraph 4: “KENNETH ARMSTRONG and [his wife] executed and delivered a Home Affordable Modification Agreement (“Agreement“). This Agreement was recorded in Official Instrument Number 2014010277 [of the Public Records of SARASOTA County, Florida.]” Armstrong also argues that his trial counsel had an adequate legal basis to conclude that the loan-modification agreement was not legally relevant, and thus not making an affirmative disclosure of its existence was a matter of the attorney‘s legal analysis, rather than a misrepresentation. See U.S. Bank, N.A. v. Kapitula, 12th Dist. Clermont No. CA2012-08-058, 2013-Ohio-2638, ¶ 12 (holding that an erroneous legal argument by plaintiff bank did not amount to “fraud on the court” for purposes of
{¶30} Mindful of the “great weight” we are to afford the trial court‘s determination as to whether fraud has been perpetrated upon it, we cannot say that the trial court abused its discretion in finding that there was not clear and convincing evidence of fraud upon the court. The trial court did not err in determining that U.S.
III. Second Assignment of Error
{¶31} In its second assignment of error, U.S. Bank argues that the trial court erred by adopting as its decision the findings of fact and conclusions of law submitted by Armstrong. U.S. Bank contends that the proposed order, as adopted by the trial court, contains several erroneous findings of fact and conclusions of law.
{¶32} ”
A. Effect on Subsequent-Event Analysis
{¶33} U.S. Bank argues that the trial court‘s order misrepresented its argument regarding its claim for relief under
U.S. Bank‘s argument that the ongoing quiet title action is a “subsequent” event would essentially rewrite Rule 60(B)(4) to include nearly every judgment, as every judgment has some prospective res
judicata or collateral estoppel effects and could be introduced into other actions.
{¶34} U.S. Bank complains that it did not make the argument “that any judgment that could be used collaterally should fall into Civ.R. 60(B)(4)‘s purview.”
{¶35} However, that is not the purpose of the trial court‘s statement. The excerpt cited by U.S. Bank does not summarize the bank‘s argument. Rather, it states a legal conclusion that if the court accepted U.S. Bank‘s argument, then the result would be that any judgment subsequently used in a collateral matter would be subject to relief under the rule.
{¶36} This is a proper concern for the trial court to raise, and it accurately reflects the history of
B. Forfeiture of the Fraud-Upon-the-Court Argument
{¶37} The trial court determined that U.S. Bank had forfeited its fraud-upon-the-court argument under
{¶38} Even if this conclusion is legally erroneous, U.S. Bank has not shown prejudice from the error. The trial court analyzed the merits of U.S. Bank‘s fraud-upon-the-court argument as an alternative basis for denying its motion, and it
C. Misrepresentation Under Civ.R. 60(B)(3)
{¶39} U.S. Bank next claims that it was erroneous for the trial court to conclude that its argument about the misrepresentation, which it argued as fraud upon the court under
{¶40} Because the trial court concluded that the alleged misrepresentation did not constitute fraud upon the court, it was correct that, to the extent that Armstrong made some misrepresentation, such a misrepresentation could be considered only under
D. Reason for Omitting the Loan-Modification Agreement
{¶41} Finally, U.S. Bank argues that there is no evidence in the record to support the trial court‘s factual finding that Armstrong‘s trial counsel omitted the 2013 loan-modification agreement only because counsel believed it to be legally irrelevant.
{¶42} First, the trial court did not actually enter a factual finding that Armstrong‘s counsel failed to inform the court about the loan-modification agreement because counsel believed it was not legally relevant. The court merely recited that Armstrong had presented that argument. (“Plaintiff argued that * * *.“; “Plaintiff explained that * * *.“; “Plaintiff emphasized that * * *.“) The court‘s factual finding was: “After considering the record and the arguments of the parties, the Court finds that Plaintiff‘s former attorney did not engage in ‘fraud on the Court’ under these circumstances.”
{¶43} Second, to the extent that the court found such facts without an evidentiary basis, the error is harmless. Armstrong did not have the burden to prove
{¶44} Because we find no errors in the trial court‘s findings of fact and conclusions of law that are prejudicial to U.S. Bank, we overrule its second assignment of error.
IV. Conclusion
{¶45} For the foregoing reasons, we overrule both of U.S. Bank‘s assignments of error and affirm the judgment of the trial court.
Judgment affirmed.
BERGERON and BOCK, JJ., concur.
Please note:
The court has recorded its entry on the date of the release of this opinion.