First Fin. Bank, N.A. v. GrimesFirst Fin. Bank, N.A. v. Grimes
Dennis E. Grimes and Regina L. Grimes, 2750 Minton Road, Hamilton, Ohio 45013, defendants, pro se
Mortgage Electronic Registration Systems, Inc., P.O. Box 2026, Flint, Michigan 48501-2026, defendаnt
Americas Wholesale Lender, P.O. Box 660694, Dallas, Texas 75266-0694, defendant
Luper Neidenthal & Logan, Gregory Hall Melick and Jeffrey R. Jinkens, 50 West Broad Street, Suite 1200, Columbus, Ohio 43215, for defendant-appellant, Bank of America
O P I N I O N
HUTZEL, J.
{¶1} Defendant-appellant, Bank оf America, appeals the judgment of the Butler
{¶2} This case involves a dispute over the order of priority of liens on real property located at 2450 Minton Road, Hamilton, Ohio 45013 (“the property“). In 1998, Dennis and Regina Grimes (“the Grimes“) exeсuted a first mortgage on the property to America‘s Wholesale Lender (“America‘s Wholesale mortgage“) in the amount of $190,000. The America‘s Wholesale mortgage was recorded on December 3, 1998.
{¶3} On October 21, 2004, the Grimes executed a second mortgage in favor of First Financial Bank (“First Financial mortgage“) in the approximate amount of $188,000. The First Financial mortgage was recorded on November 8, 2004.
{¶4} In 2005, the Grimes sought to refinance аnd thus executed a third mortgage in favor of Countrywide Home Loans, Inc. (“Countrywide mortgage“) in the amount of $342,000. The Countrywide mortgage was recorded on November 30, 2005. At closing, it is undisputed that $191,211.77 was used to pay off the America‘s Wholesаle mortgage. However, the parties dispute whether a portion of the Countrywide mortgage proceeds was used to pay off the First Financial mortgage. Bank of America claims that $187,590.52 was used to pay off the First Financial mortgage, while First Financial claims there is no reliable evidence of any such transaction.
{¶5} On August 26, 2009, First Financial filed a complaint for foreclosure on its mortgage. In its complaint, First Financial named the Grimes and America‘s Wholesale as defendants. During the pendency of First Financial‘s foreclosure action, Countrywide assigned its mortgage to defendant-appellant, Bank of America. Bank of America recorded its interest on September 17, 2009.
{¶6} On February 17, 2010, Bank of America filed a motion to intervene as a
{¶7} Bank of America subsequently moved to vacate the default judgment pursuant to
{¶8} On September 9, 2010, the trial court denied Bank of America‘s motion to vacate. The trial court found the doctrine of equitable subrogation was inapplicable, and as a result, found Bank of America failed to assert a meritorious defense. See id. Instead, the trial court found the case was governed by the doctrine of lis pendens.1
{¶9} Bank of America appeals, raising three assignments of error for review. For ease of analysis, we will address Bank of America‘s assignments of error out of order.
{¶10} Assignment of Error No. 3:
{¶11} “THE TRIAL COURT ERRED IN DENYING BANK OF AMERICA‘S 60(B) MOTION FOR RELIEF, IN FINDING THAT BANK OF AMERICA HAD NO MERITORIOUS CLAIM OR DEFENSE WITH RESPECT TO THE JUDGMENT ENTERED IN FAVOR OF FIRST FINANCIAL.”
{¶12} In its third assignment of error, Bank of America argues the trial court erred
{¶13} In overruling Bank of America‘s motion to vacate, the trial court found that Bank of America‘s predecessor in interest, Countrywide, exeсuted its loan “fully aware of the [Grimes‘] obligations under the previous mortgages,” namely, the America‘s Wholesale and First Financial mortgages. Accordingly, the trial court rejected Bank of America‘s defense and instead аpplied the doctrine of lis pendens, which states that “one who acquires an interest in property which is at the time involved in litigation * * * takes subject to the judgment or decree, and is as conclusively bound by the result of the litigаtion as if he had been a party thereto from the outset.” Cook v. Mozer (1923), 108 Ohio St. 30, syllabus. However, because we find Bank of America asserted a valid
{¶14} To prevail on a motion to vacate a judgment pursuant to
{¶15}
{¶16} Subrogation generally substitutes one party in the place of anоther regarding the other‘s claim or right. Id. at ¶14, citing State, Dept. of Taxation v. Jones (1980), 61 Ohio St.2d 99. Conventional subrogation focuses upon the contractual obligations of the parties, which compel a payor-creditor to be substituted for the creditor discharged by the рayor‘s loan. Jones at 101. By contrast, legal (or equitable) subrogation arises by operation of law when one party pays a debt due by another under such circumstances that he is, in equity, entitled to the security or obligation held by thе creditor whom he has paid. Fed. Union Life Ins. Co. v. Deitsch (1934), 127 Ohio St. 505, 510.
{¶17} Equitable subrogation is, essentially, a theory of unjust enrichment. Bobie, 2009-Ohio-677 at ¶15. The doctrine of equitable subrogation serves to prevent fraud and to provide relief from mistakes. Jones, 61 Ohio St.2d at 102. A party seeking to benefit from equitable subrogation must have strong equity and a clear case. Id. Whether or not a party is entitled to equitable subrogation depends upon the facts and circumstances of each case. Id.
{¶18} The Ohio Supreme Cоurt has considered various factors when balancing the equities in equitable subrogation cases. In Jones, “the negligence of the lender was the only significant factor that [the Court] considered.” Id. at 103. See, also, ABN AMRO Mtge. Group, Inc. v. Kangah, 126 Ohio St.3d 425, 2010-Ohio-3779, ¶12. In Deitsch, the Cоurt applied equitable subrogation because “[n]o greater burden was placed on the [holder of the secondary mortgage] than [it] would have borne if the [first] mortgage * * * had not been released.” Deitsch, 127 Ohio St. at 512. In sum, the doctrine оf equitable subrogation favors parties whose negligence did not contribute to their current status, and circumstances where subordinate lenders would bear no additional burden as a result of the subrogation.
{¶19} In the case аt bar, it is undisputed that Countrywide satisfied the first mortgage on the property, which was held by America‘s Wholesale, presumably with the intention of taking the priority of that mortgage. Since the First Financial mortgage was already subject tо the America‘s Wholesale mortgage, we are unable to see how it would be harmed by giving Countrywide‘s assignee, Bank of America, priority to this extent. See TCIF REO GCM, L.L.C. v. Natl. City Bank, Cuyahoga App. No. 92447, 2009-Ohio-4040, ¶19; Deitsch, 127 Ohio St. at 512. See, also, Washington Mut. Bank, FA v. Aultman, 172 Ohio App.3d 584, 2007-Ohio-3706 (where lender opposing equitable subrogation was originally in the second lien position, and a subordinate lender sought subrogation only to the extent that it paid off the first mortgage, the equity was strong and the doctrine of equitable subrogation applied).
{¶20} However, under the current state of the record, it is impossible to determine the priority between the Bank of America and First Financial mortgages. The record is curiously unclear as to whether Countrywide satisfied and discharged the First Financial mortgage upоn closing. In fact, in its decision, the trial court admitted “[t]he record is deficient as to what actually happened to the money received at [Countrywide‘s] closing.” Under such circumstances, we fail to see how the trial court could have determined whether Bank of America‘s subrogation claim was meritorious, absent evidence as to
{¶21} Under the first scenario, we would assume Countrywide satisfied and properly discharged the First Financial mortgage. In such a case, the failure to subrogate Bank of America, as Countrywide‘s assignee, would have been the result of a mistake, rather than any negligence attributable to Countrywide. See Jones, 61 Ohio St.2d at 102; Deitsch, 127 Ohio St. at 512.
{¶22} Under the second scenario, we would assume Countrywide failed to take the actions necessary to satisfy and/or discharge the First Financial mortgage. In such a case, Countrywide‘s negligence would defeat a claim for equitable subrogation. See Genoa Banking Co. v. Tucker, 184 Ohio App.3d 303, 2009-Ohio-4918, ¶18 (“the doctrine of equitable subrogation does not apply so as to benefit parties seeking the remedy despite their own negligence in the underlying business transaction“). Under these circumstances, Bank of America would be forced to bear the consequences of Countrywide‘s negligence and it would not be entitled to equitable subrogation over the First Financial mortgage. See id. at ¶18, 23; Aurora Loan Servs., LLC v. Molter, Delaware App. No. 09 CAE 09 0086, 2010-Ohio-3704, ¶34.
{¶23} Based upon the record before us, we cannot determine which scenario this case entails. However, because we find Bank of America demonstratеd all three GTE factors, we relinquish this task to the trial court. GTE, 47 Ohio St.2d at 148. Specifically, we find Bank of America demonstrated its motion was timely and that it had a meritorious defense, at least with respect to priority over the America‘s Wholesale mortgage. Id.
{¶24} We therefore find the trial court abused its discretion in denying Bank of America‘s motion to vacate the default judgment. Upon remand, the trial court must determine whether the First Financial mortgage was satisfied and properly discharged, and if so, whether equity entitles Bank of America to first lien priority under the doctrine of equitable subrogation.
{¶25} Accordingly, Bank of America‘s third assignment of error is sustained. Because this ruling is dispositive of the matter, we decline to address Bank of America‘s remaining assignments of error. See
{¶26} The matter is reversed and remanded for further proceedings consistent with this opinion.
RINGLAND, P.J., and PIPER, J., concur.