Kormanik, Guardian v. HSBC Mtge.Kormanik, Guardian v. HSBC Mtge.
Rendered on December 18, 2012
Michael L. Miller, for appellee Kormanik.
The Law Offices of John D. Clunk, Co., L.P.A., Jason A. Whitacre and Laura C. Infante, for appellant.
APPEAL from the Franklin County Court of Common Pleas, Probate Division
BRYANT, J.
{¶1} Defendant-appellant, HSBC Mortgage Corporation (“HSBC“), appeals from the December 8, 2011 judgment of the Franklin County Court of Common Pleas, Probate Division, adopting the magistrate‘s decision that (1) denied HSBC‘s Motion for Relief from Judgment and (2) concluded the company lacked standing to challenge subsequent
I. Facts and Procedural History
{¶2} On January 30, 2006, Sigrid P. Haley obtained a loan for the purchase of real property in Columbus, Ohio. Haley signed a note promising to repay the loan and secured the note with a mortgage to Mortgage Electronic Registration Systems, Inc. (“MERS“), as nominee for HSBC.
A. Complaint to Sell Real Estate
{¶3} Plaintiff-appellee, Paul S. Kormanik, was appointed guardian of the person and the estate of Haley on August 11, 2010. The next day, Kormanik filed against Haley, MERS, and HSBC in the Franklin County Court of Common Pleas, Probate Division, a “Complaint of Guardian to Sell Real Estate.” The complaint sought permission to sell Haley‘s interest in the Columbus property acquired in 2006. HSBC received a copy of the complaint via certified mail on August 18, 2010, and MERS received a copy via certified mail on August 20, 2010. Both parties failed to respond. During this time period, MERS executed an Assignment of Mortgage, assigning its interest in the property to HSBC.
{¶4} On September 22, 2010, Kormanik moved for default judgment against both parties based on their failure to file an answer or otherwise defend the action; the probate court granted the motion on the same day. On September 23, 2010, a Franklin County appraiser appraised the property at $40,000. After receiving the аppraisal, the probate court issued an “Order of Sale” to Kormanik on October 29, 2010, instructing him to proceed with the sale of the subject property “appraised at $40,000.00, on the following terms: at private sale cash at closing for not less than the appraised value or at public sale for not less than two-thirds of the appraised value.”
{¶5} Pursuant to the order, Kormanik sold the property at public sale on December 4, 2010 for $27,483.70, and the probаte court filed a journal entry confirming the sale on December 8, 2010. On December 16, 2010, the court granted Kormanik‘s application for release and satisfaction of the mortgage and lien HSBC held. The court filed an entry on January 10, 2011 allocating the sale‘s proceeds and ordering distribution.
B. Foreclosure Action
{¶7} On January 11, 2011, the common pleas court dismissed the foreclosure action because the probate court had obtained prior jurisdiction.
C. Motion for Relief from Default Judgment
{¶8} On January 14, 2011, HSBC filed in the probate court a combined motion seeking to set aside the September 22, 2010 default judgment pursuant to
{¶9} The trial court referred the matter to a magistrate for an evidentiаry hearing. Applying the three-pronged “GTE test” to HSBC‘s
{¶10} HSBC filed objections to the magistrate‘s decision; Kormanik responded to HSBC‘s objections. By a December 8, 2011 entry, the probate court overruled HSBC‘s objections and adopted the magistrate‘s decision. The court concluded the magistrate properly determined HSBC was not entitled to relief under
II. Assignments of Error
{¶11} HSBC appeals, assigning the following errors:
First Assignment of Error
THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT FOUND THAT, BECAUSE IT HAD NOT YET SUCCEEDED IN SETTING ASIDE THE DEFAULT JUDGMENT, HSBC LACKED STANDING TO ATTACK ANY SUBSEQUENT ENTRIES OR ORDER AND FURTHER WHEN IT REFUSED TO ADDRESS ANY OF THE GLARING STATUTORY VIOLATIONS BY THE RECEIVER IN SELLING THE REAL ESTATE.
Second Assignment of Error
THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT FOUND THAT HSBC FAILED TO MAKE A DEMONSTRATION OF EXCUSABLE NEGLECT UNDER
CIV.R. 60(B)(1) IN SUPPORT OF ITS MOTION FOR RELIEF FROM JUDGMENT.Third Assignment of Error
THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT FAILED TO APPLY THE APPROPRIATE STANDARD AND LAW TO HSBC‘S ARGUMENT FOR EQUITABLE RELIEF UNDER
CIV.R. 60(B)(5) .
For ease of discussion, we address appellant‘s assignments of error out of order.
III. Transcript of Magistrate‘s Hearing
{¶12} HSBC did not submit to the trial court with its objections a transcript of the magistrate‘s hearing or an affidavit of the evidence. A party challenging a magistrate‘s
{¶13} HSBC filed the necessary transcript with its notice of appeal to this court. An appellate court, however, limits its review to the trial court‘s record, the assignments of error and oral argument, unless waived.
IV. Second and Third Assignments of Error - Civ.R. 60(B) Motion for Relief
{¶14} HSBC‘s second and third assigned errors together contend the trial court erred in denying HSBC‘s
{¶15} In order to prevail on a motion for relief from judgment under
A. Grounds for Relief under Civ.R. 60(B)(1) and (5)
{¶16} HSBC‘s appeal centers on its contention that the probate court erred in finding the company is not entitled to relief pursuant to
1. Excusable Neglect Under Civ.R. 60(B)(1)
{¶17} HSBC‘s second assignment of error claims the trial court abused its discretion in concluding the company failed to set forth a factual basis for excusable neglect pursuant to
{¶18} According to the magistrate‘s factual findings, an HSBC employee in the Depew, New York office signed for the complaint via certified mail service on August 18, 2010. Indeed, HSBC acknowledges it received service of the complaint in accordance with the civil rules but the complaint was not forwarded to the appropriate individual or individuals. It nonetheless asserts that the circumstances “satisfied the test set forth by the Tenth District Court of Appeals for the demonstration of excusable neglect as the result of corporate delay.” (Appellant‘s Brief, at 1, 13.)
{¶19} Although “the failure to plead or respond after admittedly receiving a copy of a complaint is generally not excusable neglect,” a motion for relief from default judgment, depending on the facts, ” ‘may be granted on the basis of excusable neglect when service is properly made on a corporation but a corporate employee fails to forward the summons and complaint to the appropriate person.’ ” LaSalle Natl. Bank v. Mesas, 9th Dist. No. 02CA008028, 2002-Ohio-6117, ¶ 13; Bowling v. Grange Mut. Cas. Co., 10th Dist. No. 05AP-51, 2005-Ohio-5924, ¶ 43, quoting Hopkins v. Quality Chevrolet, Inc., 79 Ohio App.3d 578, 582 (4th Dist.1992). Even so, “a party‘s failure to submit a summons or any legal process to the responsible person is not automatically excusable neglect.” Bowling, citing T.S. Expediting Servs., Inc. v. Mexican Industries, Inc., 6th Dist. No. WD-01-060, 2002-Ohio-2268 (determining that, where the defendаnt company was properly served but argued the person who received service did not notify appropriate company officials, neglect was inexcusable since no operative facts were offered to justify inaction).
{¶20} As HSBC acknowledges, Ohio case law “has developed a two-part test for determining whether internal corporate errors should be legally excused.” Bowling at ¶ 44. A party must present circumstances ” ‘sufficient to show (1) that there is a set procedure to be followed in the corporate hierarchy for dealing with legal process, and (2) that such procedure was, inadvertently, not followed until such time as a default judgment had already been entered against the corporate defendant.’ ” Perry at 324, quoting Hopkins at 583.
{¶21} Here, the only evidence HSBC proffered to address the circumstances surrounding the complaint‘s receipt and processing was the affidavit and testimony of Foreclosure Manager and Vice-President of its Brandon, Florida office, Maria Vadney. The magistrate found, pursuant to Vadney‘s testimony, that HSBC decided in August 2010 “to centralize foreclosure files to the Brandon, Florida office due to the experience of that staff,” and Vadney accordingly executed an assignment of mortgage on August 18, 2010 “for the purpose of transferring the mortgage on the subject property from HSBC‘s Depew, N.Y. office to HSBC‘s Brandon, Florida offiсe.” (Magistrate‘s Decision, at 4.) The magistrate further found that “[d]espite executing the Assignment, Ms. Vadney testified that she had no personal knowledge of the facts and circumstances involving this case.” (Magistrate‘s Decision, at 5.)
{¶22} The magistrate determined the proffered evidence to be lacking, as “[a]side for [sic] generally asserting that HSBC has an internal procedure for the handling of receipt of summons company wide, Ms. Vadney could offer no insight into what the procedure and process is, and in what ways the procedure was not followed.” (Magistrate‘s Decision, at 4.) The magistrate further noted that Vadney “was unable to
{¶23} Measuring the magistrate‘s findings of fact against the standard articulated in Perry, the probate court concluded Vadney‘s testimony failed to provide any information regarding the procedures followed in HSBC‘s corporate hierarchy to handle summons and complaints, beyond the bare assertion that procedures existed. Further, because she had “no knowledge of the facts and circumstances surrounding the receipt of the summons in this case,” Vadney did not, and could not, say whether employees followed the usual procedure here or whether the appropriate person in the corporate hierarchy ever received the summons and complaint. (Decision and Entry, at 7.) Observing that Vadney‘s testimony only established that HSBC “transferred its mortgage in the subject property from one office to another, at the same timе that service of the Complaint was accomplished,” the probate court concluded HSBC did not set forth facts with sufficient specificity to demonstrate excusable neglect pursuant to the applicable standard. (Decision and Entry, at 7.)
{¶24} The probate court properly applied the relevant law to the magistrate‘s findings of fact. “Where the movant alleges inadvertence and excusable neglect as grounds for relief from judgment under
{¶25} Although HSBC submitted its employee‘s affidavit in an attempt to meet its burden, that employee had no knowledge of the circumstances surrounding the subject complaint‘s reсeipt. HSBC‘s evidence neither explained what its typical processes
{¶26} On appeal, HSBC cites several cases where a defendant corporation filed a motion for relief from judgment; HSBC claims the cases set forth “the standard which HSBC has clearly met.” (Appellant‘s brief, at 12.) See Hopkins at 582-83; Beck-Durell Creative Dept., Inc. v. Imaging Power, Inc., 10th Dist. No. 02AP-281, 2002-Ohio-5908. The cases are distinguishable and, in fact, highlight the weakness of HSBC‘s evidence.
{¶27} In each of the cases, the defendant corporation‘s motion included the affidavits of officers and employees who not only could attest to the circumstances surrounding the summons’ and complaint‘s delay in reaching the appropriate person, but also could explain how a breakdown in the established procedure prevented the documents from reaching that person. Unlike the corporations in the cases it cites, HSBC set forth no operative facts sufficient to demonstrate it had an accepted procedure to be followed in the corporate hierarchy for dealing with legal process, or that such procedure was not followed and resulted in the complaint‘s delay in reaching the proper party in charge of legal matters. Accordingly, the probate court properly determined the facts, as the magistrate found, were insufficient to suggest HSBC‘s inaction was the result of excusable neglect.
{¶28} Accordingly, HSBC‘s second assignment of error is overruled.
2. Equitable Relief Under Civ.R. 60(B)(5)
{¶29} HSBC‘s third assignment of errоr claims the probate court should have granted its motion pursuant to
{¶30}
{¶31} Although HSBC contends the probate court “summarily dismiss[ed]” its
{¶32} The probate court‘s holding adheres to the “well established” principle “that the ‘other reason’ clause of
{¶34} HSBC nonetheless contends that not only is its holding a lien on the property a meritorious defense in accordance with the first prong of the GTE test, the lien itself obligаted the probate court to find in HSBC‘s favor pursuant to
{¶35} Unlike Aurora, the present matter involves no controversy surrounding respective “first liens” on the property; nor does the probate court‘s decision here, unlike that in Aurora, contain unsupported assumptions that the lien holder‘s evidence challenges. Moreover, unlike Aurora, where one of the lien holders filed its motion for relief two and one-half months befоre the scheduled sheriff‘s sale, here the probate court had to consider the post-sale interests of a third-party purchaser and of the Ward, and do so within the context of a sale that the court concluded HSBC could have prevented. The record demonstrates the probate court considered HSBC‘s evidence establishing its valid interest in the property but reasonably determined other equitable factors counseled against HSBC‘s motion dеspite HSBC‘s mortgage and note.
{¶36} The probate court‘s decision properly and adequately considered HSBC‘s
B. Timeliness
{¶37} The requirements for
V. First Assignment of Error - Standing
{¶38} HSBC‘s first assignment of error contends the probate court erred when it determined HSBC did not have standing to challenge the validity of the entries and orders filed after default judgment.
{¶39} HSBC‘s brief does not provide any argument advancing its contention that it retained standing after default judgment; nor does the brief set forth any “reasons in support of the contentions” or “citations to the authorities, statutes, and parts of the record on which appellant relies,” as
{¶40} The probate court decided that once default judgment was entered against HSBC, its “interest in the property ceased unless and until HSBC was successful in setting aside the judgment against it.” (Decision and Entry, at 5.) Since HSBC was not successful in setting aside the default judgment, the probate court concluded HSBC was no longer a party in interest when the subjeсt entries and orders were issued and therefore lacked standing to challenge those entries and orders. Because the probate court did not abuse its discretion in denying HSBC‘s
{¶41} The doctrine of standing requires a litigant to be in the proper position to assert a claim or seek judicial enforcement of a duty or right. Irwin Mtge. Corp. v. DuPee, 12th Dist. No. CA2011-08-144, 2012-Ohio-1594, ¶ 13, citing Black‘s Law Dictionary 1442 (8th Ed.2004). The burden is on HSBC to establish it “has a present interest in the subject matter of the litigation and that [it] has been prejudiced.” In re Guardianship of Love, 19 Ohio St.2d 111, 113 (1969); Tschantz v. Ferguson, 49 Ohio App.3d 9, 13 (10th Dist.1989).
{¶42} In its September 22, 2010 entry granting default judgment, the probate court authorized Kormanik to sell “the entire interest in the real estate * * * free of the claims, interest and liens” of HSBC. The sale was completed and money distributed as of
{¶43} Accordingly, HSBC‘s first assignment of error is overruled.
VI. Disposition
{¶44} Having overruled HSBC‘s first, second, and third assignments of error, we affirm the judgment of the Franklin County Court of Common Pleas, Probate Division.
Judgment affirmed.
KLATT and FRENCH, JJ., concur.