OPINION AND ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT OF MARY L. MILLER, PERRYSBURG MARKETPLACE CO., PERRYSBURG LAND DEVELOPMENT INC., BARKAN & ROBON AND MARVIN A. ROBON, GRANTING MIF REALTY L.P.’S MOTION FOR SUMMARY JUDGMENT, AND GRANTING DECLARATORY JUDGMENT IN FAVOR OF MIF REALTY L.P.
This matter is before the Court on defendant MIF Realty L.P.’s (“MIF”) motion for summary judgment against Mary L. Miller (“Miller”) on Miller’s adversary complaint to determine the validity, priority and extent of MIF’s mortgages, assignment of rents and assignment of leases against a leasehold on certain real property which the debtor-in-possession, Perrysburg Marketplace Company “PMC”), has leased from Miller. PMC and Miller have filed cross motions for summary judgment seeking to void MIF’s interest in the leasehold mortgages. Likewise, Barkan & Robon (“B & R”) and Marvin A. Robon (“Robon”), PMC’s former attorneys, and Perrysburg Land Development, Inc. (“Land”), a corporation owned by PMC’s principal Joseph Swolsky (“Swolsky”), have filed cross motions seeking to void MIF’s interest in the leasehold mortgages. Alternatively, Miller’s adversary complaint seeks a ruling that her fee interest in the real estate *151 is senior in priority to MIF’s mortgages on the leasehold, notwithstanding Miller’s execution of subordination agreements in favor of MIF’s predecessor in interest in 1983 and 1984.
MIF also seeks summary judgment on its counterclaims and cross claims against PMC, B & R, Robon and Land for a declaratory judgment that MIF’s mortgages have first priority against the real estate, that a promissory note executed in conjunction with the leasehold mortgages is valid, and that the assignments of leases and rents are valid and enforceable. MIF further seeks an order permitting it to sell the real estate in satisfaction of the mortgages.
The Court finds that the motions for summary judgment of PMC, Miller, Land, B & R and Robon are not well taken and should be denied. The Court further finds that MIF’s motion for summary judgment is well taken and should be granted, except to the extent that MIF seeks an order permitting it to sell the real estate in satisfaction of the mortgages without obtaining relief from stay and abandonment with regard to the real estate.
POSITIONS OF THE PARTIES
PMC, Miller, Land, B & R and Robon offer several arguments in support of their position that MIF’s mortgages on PMC’s leasehold estate are void. First, they argue that the mortgages are void because MIF’s predecessor in interest, the RTC, lost the original promissory note executed by PMC. Second, they argue that PMC’s obligation to MIF under the lost note and mortgages was extinguished by a bond trustee’s repayment of certain bonds issued by Wood County, Ohio in a transaction related to PMC’s execution of the note and mortgages. Third, they argue that MIF’s action on the note and mortgages is precluded by a prior action by the RTC against PMC for servicing, administrative and standby loan commitment fees, which the RTC prosecuted in its capacity as receiver and conservator for the former Freedom Federal Savings and Loan Association. Fourth, they argue that the Court should deny enforcement of the lost note and mortgages because of MIF’s alleged champerty.
Miller argues that the mortgages should not be enforced because they were not properly witnessed, because the mortgage executed in 1983 improperly sought to convey a mortgage in fee simple rather than a mortgage in PMC’s leasehold, and because the mortgage executed in 1984 was without consideration. Further, Miller argues that the subordination agreements which she executed in 1983 and 1984 should not be enforced because they were ambiguous, and because MIF’s predecessor in interest allegedly breached its obligations under the subordination agreements.
Not surprisingly, MIF argues that the lost note should be enforced and that its mortgages represent the first and best liens on PMC’s leasehold interest. MIF further argues that the subordination agreements are unambiguous and should be enforced according to their terms.
FACTS
On August 8,1980, Miller executed a forty-five year ground lease of undeveloped farmland in favor of S & W Land Company. S & W Land Company subsequently assigned the lease to PMC.
The Note, the Leasehold Mortgages and the Related Assignments of Rents, Assignments of Leases and Subordinations
In order to finance the construction of the Perrysburg Marketplace Shopping Center in Perrysburg Township, Ohio (the “Marketplace”), PMC executed a ten-year note in the amount of $2,200,000.00 in favor of Freedom 1 (the “Note”). See Swolsky Deposition, at p. 35. In its answer to MIF’s cross claim, PMC admits “that it executed a commitment letter dated April 13, 1983 and a promissory note”. Docket No. 12, Answer of Perrysburg Marketplace Co. To Cross Claim of MIF Realty, L.P., at p. 1, para. 2. To secure the Note, PMC granted Freedom 1 a leasehold mortgage on four parcels of real estate on April 13,1983 (the “1983 Mortgage”). Docket No. 12, Answer of Perrysburg Marketplace Co. To Cross claim of MIF Realty, L.P., at p. 2, para. 3. Freedom 1 recorded the 1983 Mortgage on April 14, 1983. PMC *152 also executed an assignment of rents and an assignment of leases to secure the Note.
Swolsky acknowledges that Freedom 1 paid PMC $2,200,000.00.
According to the affidavit of Michael D. Saad, the primary attorney representing Freedom 1 at the time of the loan transaction between Freedom 1 and PMC, “it was a requirement of [Freedom 1] to have the fee interest subordinated to [Freedom l’s] mortgage in order to make the loan to [PMC]”. Motion of MIF for Summary Judgment, Exhibit 4, Affidavit of Michael D. Saad (hereinafter “Saad Aff”), at pp. 3-4, para. 9. On April 12, 1983, Miller subordinated her interest in the real estate to the 1983 Mortgage (the “1983 Subordination”). The 1983 Subordination sets forth the fact that Freedom 1 was loaning PMC a principal amount of $2,200,000.00. The 1983 Subordination further states that:
[Miller] does hereby intentionally waive, relinquish and subordinate the priority and superpriority of her ownership interest in Premises in favor of the [1983 Mortgage] (an executed copy of which is attached hereto). [Miller] understands that [Freedom 1] is acting in reliance upon and in consideration of this waiver, relinquishment and subordination; specific loans are being and will be made, and as part and parcel thereof, specific monetary and other obligations are being made and will be entered into by third parties which would not be made or entered into but for such reliance upon this waiver, relinquishment and subordination. [Miller] further acknowledges that the fee simple ownership of the Premises has, by this instrument, been subordinated to the [1983 Mortgage].
1983 Subordination, at pp. 1-2, para. 1. Freedom 1 recorded the 1983 Subordination on April 14,1983.
In June, 1984, PMC sought to draw the balance of the $2,200,000.00 construction loan, in excess of $1,340,000.00, despite the fact that PMC had failed to meet certain requirements for disbursement of the funds required by the construction loan documents. As a condition precedent to Freedom l’s disbursement of the balance of the $2,200,-0000.00 construction loan, in excess of $1,340,000.00, Freedom 1 required PMC to execute an additional leasehold mortgage (the “1984 Mortgage”). MIF’s Motion for Summary Judgment, Exhibit l.A. § 5.01, p. 4; Docket No. 12, Answer of Perrysburg Marketplace Co. To Cross claim of MIF Realty, L.P., at p. 2, para. 4. The 1984 Mortgage covers the parcels of land where the Kroger and K-Mart stores are presently located (the “K Parcels”). Freedom 1 recorded the 1984 Mortgage on May 17,1984.
In connection with the 1984 Mortgage, Miller executed a “Leasehold Mortgage Consent and Estoppel Certificate and Subordination Agreement” (the 1984 Subordination”). The language of the 1984 Subordination parallels that of the 1983 Subordination in all material respects. Leasehold Mortgage Consent And Estoppel Certificate And Subordination Agreement, at p. 1, para. 4. According to Saad, “[i]t was the requirement of [Freedom 1] to have the fee interest subordinated to [Freedom l’s] mortgage in order for [Freedom 1] to advance in 1984 the unadvanced portion of the construction loan.” Saad Aff., at p. 4, para. 10. Freedom 1 recorded the 1984 Subordination on June 22, 1984. Stipulation of Facts, at p. 3, para. 11.
Miller benefited from subordinating her fee interest to the 1983 Mortgage by receiving increased ground rent. PMC’s rent obligation rose from $12,000.00 annually to $7,972.50 per month after construction of the Marketplace. Stipulation of Facts, at p. 3, para. 10.
In June of 1984, Freedom 1 sold the Note to Nassau Savings and Loan Association (“Nassau 1”).
In conjunction with the sale of the Note, Freedom 1 assigned the 1983 Mortgage and the 1984 Mortgage (collectively, the “Mortgages”) to Nassau 1, along with the related assignments of rents (the “Rent Assignments”) and assignments of leases (the “Lease Assignments”), and the subordination agreements (the “Subordinations”). See MIF’s Motion for Summary Judgment, Exhibit l.G. (Assignment of 1983 Mortgage); Exhibit l.H. (Assignment of Assignment of Leases and Rents); Exhibit 1.1. (Assignment of 1984 Mortgage and Assignment of Leases *153 and Rents); MIF has provided the Affidavit of Thomas J. Moskal (“Moskal”), who served as Senior Vice President/Chief Lending Officer of Nassau 1 from November, 1984 through March, 1991. MIF’s Motion for Summary Judgment, Exhibit 6, First Affidavit of Thomas J. Moskal (“First TJM Aff.”). Moskal’s affidavit incorporates copies of the Assignment and Assumption Agreement between Freedom 1 and Nassau 1 and the Whole Loan Sale And Servicing Agreement between Freedom 1 and Nassau 1. First TJM Aff., at pp. 2-3, para. 6-7.
On February 15, 1990, the Office of Thrift Supervision (“OTS”) appointed the Resolution Trust Corporation (“RTC”) as receiver for Freedom 1. MIF’s Motion for Summary Judgment, Exhibit l.T. The RTC was subsequently appointed conservator for Freedom Savings and Loan Association, F.A (“Freedom 2”), a newly formed entity which took over Freedom l’s assets. MIF’s Motion for Summary Judgment, Exhibit l.U.
On March 8, 1990, the OTS appointed the RTC as receiver for Nassau 1. MIF’s Motion for Summary Judgment, Exhibit l.V. RTC was appointed conservator of a newly formed entity, Nassau Federal Savings and Loan Association (“Nassau 2”), which took over Nassau l’s assets. MIF’s Motion for Summary Judgment, Exhibit I.W.; Exhibit 6, Affidavit of Thomas J. Moskal, at p. 2, para. 2.
On June 30, 1993, the RTC, acting in its capacity as conservator for Nassau 2, sold its interest in PMC’s obligation to MIF. On the same date, the RTC assigned the Mortgages, the Rent Assignments, the Lease Assignments and the Subordinations to MIF. See MIF’s Motion for Summary Judgment, Exhibit l.L.
On July 1, 1993, several months prior to MIF’s filing of a state court foreclosure suit against PMC, Miller and PMC executed a document entitled “Release and Cancellation of Subordination Agreement” which purported to cancel the 1983 Subordination.
In a separate adversary proceeding within this bankruptcy case, PMC has alleged that its July 15,1993 assignment of the leases for the K Parcels to Land represents a fraudulent conveyance. See MIF’s Response to Motions for Summary Judgment of B & R and Land, Exhibit 13.B, Complaint, at Count III, para. 41-44.
On November 10, 1993, PMC filed a chapter 11 petition in the United States Bankruptcy Court for the Middle District of Pennsylvania which case was subsequently transferred to this Court.
Wood County, Ohio’s Issuance of Bonds and the Certifícate of Deposit Owned by the Bond Trustee for. the Benefit of the Bondholders
In connection with PMC’s execution of the Note and the 1983 Mortgage in favor of Freedom 1, Wood County, Ohio (‘Wood County”) issued $2,200,000.00 in Lender-Assisted Economic Development Revenue Bonds (the “bonds”) in order to provide PMC with a favorable interest rate. An underwriter sold the bonds as a tax-exempt investment.
The bond trustee, BaneOhio National Bank nka National City Bank, Columbus (“NCB”), deposited the bond proceeds at Freedom 1 which issued a certificate of deposit (“CD”) in favor of the bondholders. The CD served as security for the bonds. In May, 1984, Nassau 1 assumed Freedom l’s liability to the bondholders and issued a CD to replace the CD previously issued by Freedom 1. MIF Motion for Summary Judgment, Exhibit 3, Affidavit of Ellen E. Wiseman, at p. 3, para. 9 (hereinafter “EEW Aff.”), and at p. 4, para. 10, EEW Aff., Exhibit C, Certificate of Deposit; see MIF’s Motion for Summary Judgment, Exhibit 6, First Affidavit of Thomas J. Moskal, at pp. 2-3, para. 5-7 (hereinafter “TJM Aff.), and attached Exhibits A and B. After the RTC became the conservator for the assets and liabilities of Nassau 2, Sovereign Bank (“Sovereign”) acquired certain of Nassau 2’s assets and liabilities and assumed Nassau 2’s liability on the CD. EEW Aff. at p. 4, para. 13.
In the instant adversary proceeding, PMC, Robon, B & R, Miller and Land argue that the bond trustee’s April 1, 1993 payment of bonds from the proceeds of a CD held for the benefit of the bondholders extinguished PMC’s obligation on the Note and Mortgages notwithstanding PMC’s admission that it did *154 not purchase the CD and that it did not pay the bondholders or the Note. See Deposition of Joseph Swolsky, at p. 31, at p. 33, and at pp. 44-45.
Glendon Pratt, an attorney who has served as bond counsel “on several hundred bond transactions involving the issuance of Municipal Bonds”, performed a review of the documents underlying the issuance of the bonds for purposes of the instant adversary proceeding. Motion of MIF for Summary Judgment, Exhibit 2, Affidavit of Glendon B. Pratt. Based on his review of the bond transaction, Pratt states that:
[t]he payment of the bonds when they matured on April 1, 1993 from the proceeds of the CD and the various bond funds referenced in Article IV of the Indenture of Trust in no way relieved [PMC] from its obligations under the April 13, 1983 promissory note and related security agreements. Rather, the payment of the bonds at maturity was to be made primarily from the funds received as a result of the $2.2 million CD becoming due. [PMC] remained obligated to satisfy its obligations under the April 13, 1983 promissory note and related security agreements.
Motion of MIF for Summary Judgment, Exhibit 2, Affidavit of Glendon B. Pratt, at p. 5, para. 10.
Ellen Wiseman, an employee of NCB’s Trust Department since 1982, and the person primarily responsible for NCB’s trusteeship, states that she explained to PMC’s principal Joseph Swolsky (“Swolsky”) in the late 1980’s that the proceeds from the CD would be used to pay the bondholders rather than the Note. EEW Aff., at pp. 6-7, para. 18.
Richard Spoor (“Spoor”), who served as bond counsel in connection with PMC’s financing of the Marketplace, stated in his deposition that the repayment of the CD did not extinguish PMC’s obligation on the Note. MIF’s Motion for Summary Judgment, Exhibit 1.0, at pp. 46-47; see also B & R’s Reply Brief, Exhibit A, Spoor’s Affidavit, at p. 3, para. 7 (stating that Spoor believed that the Note was enforceable “assuming there [were] not other defenses or irregularities”).
In his deposition, Swolsky stated that he did not know if he had examined any of the documents associated with the bond financing. Swolsky Deposition, at p. 24. He testified that “I really don’t understand exactly the flow of dollars and the transaction, period. I wasn’t involved in the negotiation of the financing at ah”. Swolsky Deposition, at p. 25, line 24—p. 26, line 3. In addition, he stated that he “[didn’t] feel competent to evaluate the bond documents”. Swolsky Deposition, at p. 48. Swolsky further stated that he “had no understanding about the CD account”. Swolsky Deposition, at p. 37-38. Indeed, he stated that, prior to NCB’s payment of the bondholders, he had no idea what source of funds would be used to pay the bondholders. Swolsky Deposition, at pp. 61-62.
Freedom 2’s Retained Right to Servicing, Administrative and Standby Loan Commitment Fees on the Note, and the RTC’s Suit on Behalf of Freedom 2 Which Resulted in a Judgment Against PMC for Servicing, Administrative and Standby Loan Commitment Fees
Although Freedom 1 sold the Note and assigned the Mortgages to Nassau 1 in June of 1984, Freedom 1 retained the right to collect servicing and administrative fees. Freedom 1 also retained the right to collect standby loan commitment fees which PMC had previously agreed to pay pursuant to an April 13, 1983 standby commitment letter. See MIF’s Motion for Summary Judgment, Exhibit 1. A, Affidavit of Michael Saad, at § 5.01.
In March, 1991, because of “certain problems with the servicing of the loan by [Freedom 2]”, Freedom 2 transferred the servicing rights for the Note to Nassau 2. However, Freedom 2 retained the right to collect approximately $54,254.17 in past due servicing, administrative and standby loan commitment fees owed by PMC. TJM Aff., at p. 3.
On August 22,1991, the RTC, in its capacity as conservator for Freedom 2, sued PMC in the Court of Common Pleas of Franklin County, Ohio seeking to collect the servicing, administrative and standby commitment fees which PMC owed to Freedom 2. See Stipulation of Facts, Exhibit 10, at p. 3, Complaint *155 filed by RTC as Conservator and Receiver for Nassau 2. PMC removed this suit to the United States District Court for the Southern District of Ohio, Eastern Division. In November, 1992, the United States District Court (“District Court”) granted judgment in favor of the RTC, acting on behalf of Freedom 2 (the “Judgment”). See Stipulation of Facts, Exhibit 12, Judgment Entry, at pp. 2-3, para. 10 (granting RTC, as receiver for Freedom 2, judgment against PMC and other related parties).
Prior to removal of the RTC’s action to federal court, B & R represented to the Court of Common Pleas of Franklin County that the RTC’s actions in seeking to collect unpaid servicing, administration, and standby commitment fees owed to Freedom 2 were in derogation of Nassau 2’s rights. See MIF Exhibit F at p. 4, Deposition of Marvin A. Robon, at p. 18, and MIF Exhibit F at p. 9, Creditor’s Exhibit 15 at p. 3.
MIF’s Evidence In Support of Its Claim Under the Lost Note
The RTC, while acting as conservator for Nassau 2, admittedly lost the Note. PMC acknowledges that it never repaid the Note, Swolsky Deposition at pp. 44-47, which had an approximate principal balance of $1,900,-000.00 as of February, 1992. Swolsky Deposition at p. 44-45. PMC, Miller, Land, B & R and Robon contend that RTC’s loss of the note invalidates MIF’s claim under the Note and Mortgages.
In asserting its claim under the lost note, MIF has presented Saad’s affidavit which incoiporates what he has identified as a true and accurate copy of the Note. Saad Aff., Exhibit A. Further, Moskal’s affidavit incorporates what he has identified as a true and accurate copy of the Note.
The Court’s comparison of the copy of the note appended to Saad’s affidavit, the copy of the note appended to Moskal’s affidavit and the copy of the note appended to Miller’s adversary complaint as Exhibit J indicates that the three copies of the note are the same except that the copies attached to Miller’s complaint and to Moskal’s affidavit indicate that the note was endorsed to Nasau Savings and Loan Association without recourse.
In a supplemental affidavit (hereinafter “Second TJM Aff.”), Moskal states that “the original promissory note was in the possession of [Nassau 1] at the time the RTC was appointed as Conservator of [Nassau 1]. MIF’s Response in Opposition to B & R and Land’s Motions for Summary Judgment, Exhibit 15, Second TJM Affidavit, at p. 2, para. 15. Moskal further states that “[t]o the best of [his] knowledge and belief, the original promissory note remained in the RTC’s possession, as conservator for [Nassau 2], at least through April or May of 1991 when [he] left [Nassau 2].” Second TJM Affidavit, at pp. 2-3, para. 5.
The affidavit of Deborah A. Bacon (“Bacon Aff.”), the asset manager in charge of MIF’s PMC account, provides a copy of a “Lost Note Affidavit” which MIF received from Nassau 2 when it purchased PMC’s obligation from Nassau 2. MIF’s Motion for Summary Judgment, Exhibit 7. The Lost Note Affidavit states that, although the RTC made a diligent search, the RTC was unable to determine the whereabouts of the Note. The Lost Note Affidavit further represents that the Note has not been “discharged, satisfied, sold, assigned, transferred, hypothecated or encumbered”. Bacon Aff., Exhibit A, Lost Note Affidavit, p. 2, para. 6.
The parties agree that PMC’s default in repaying the Note occurred no later than February, 1992. See Affidavit of Joseph H. Swolsky, at p. 3, para. 9.
According to Bacon’s uncontroverted affidavit, the balance due on the Note totaled $2,373,308.51 on October 21,1993.
B & R’s Argument that MIF’s Attempt to Collect on the Note is Champertous
B & R, Miller and PMC have argued that MIF’s attempt to collect on the Note and Mortgages constitutes champerty. In opposition, MIF has provided the affidavit of Randolph Hirsch (“Hirsch”), a former employee of General Electric Capital Corporation (“GECC”). MIF’s Motion for Summary Judgment, Exhibit 8, Affidavit of Randolph Hirsch (hereinafter “Hirsch Aff.”). Hirsch’s affidavit describes MIF’s organizational structure and MIF’s interest in the instant litigation.
*156 GECC is one of the principals of MIF Gen-Par L.P., an entity which owns 75% of MIF. As its name indicates, MIF Gen-Par L.P. serves as MIF’s general partner. Hirsch Aff., at p. 2.
MIF’s principals formed MIF in order to purchase a pool of loans with a. face value of $1 billion dollars from the RTC. Hirsch Aff. at p. 2-3. MIF purchased loans which “were almost exclusively promissory notes, mortgages and related security documents on commercial properties.” Hirsch Aff. at p. 5, para. 12.
MIF paid the RTC 37.5% of the cash value for assets purchased and executed promissory notes in favor of the RTC for 50% of the purchase price.
Specifically addressing B & R’s allegations of champerty, Hirsch states that MIF:
did not, and does not, have a contract with the RTC to institute or continue litigation or other collection proceedings in consideration for MIF Realty L.P. receiving part of the proceeds thereof if the outcome of litigation or other collection activities is favorable. MIF Realty L.P. did not buy lawsuits from the RTC.
The equity holders of MIF Gen-Par L.P. have a direct and very significant financial stake in the outcome of the resolution of the assets sold to MIF Realty by the RTC. The equity holders of MIF Gen-Par L.P. invested approximately $170,000,000 into the partnership to purchase the assets. A substantial number of assets have been resolved through either discounted payoffs by borrowers, foreclosure or other negotiated settlements. However, MIF Realty, L.P., alone, not its partners individually, has the right to collect on the assets, such as notes and mortgages, purchased from the RTC. In other words, MIF Realty L.P. has an actual and significant interest in such collection efforts, including any litigation, relating to those assets. MIF Realty L.P. is not a stranger to the above-captioned lawsuit and it is paying only its own expenses in asserting its interest in the note and mortgage at issue therein.
Hirsch Aff., at pp. 5-6, para. 12-13.
In support of their allegations of champerty, Land and B & R have provided a copy of a page from the sale documents executed by the RTC and MIF entitled “Appendix H— RTC Valuation and Methodology for Portfolio Sales Commercial Mortgages and Real Estate Owned”. B & R and Land’s Reply Brief in Support of Motion for Summary Judgment, Second Affidavit of Marvin A. Robon, Exhibit B, Attachment A. Contrary to the allegations of Land and B & R, however, this document does not set forth an agreement between the RTC and MIF for the RTC’s payment of MIF’s legal fees. Rather, the document describes one aspect of the methodology used by the RTC to value the properties purchased by MIF.
STANDARD FOR SUMMARY JUDGMENT
Summary judgement is appropriate where there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law.
Valot v. Southeast Local School District Board of Education,
APPLICATION OF STANDARD FOR SUMMARY JUDGMENT
JURISDICTION
This Court has jurisdiction to determine the nature, priority and extent of MIF’s interest in the leasehold mortgages conveyed *157 by PMC to MIF’s predecessor in interest pursuant to 28 U.S.C. § 157(b)(2)(A), (B) and (C).
B & R’S ARGUMENT THAT THE PRIOR JUDGMENT BARS MIF FROM ASSERTING A CLAIM IN THE INSTANT BANKRUPTCY CASE
The Court rejects B & R’s argument that the Judgment precludes MIF from asserting a claim in the instant bankruptcy case based on the Note and Mortgages.
B & R argues that while the federal law of res judicata generally applies in determining the preclusive effect of a prior federal proceeding, see
J.Z.G. Resources, Inc. v. Shelby Ins. Co.,
WHETHER MIF CAN RECOVER ON THE LOST NOTE
The Court must apply state law in determining whether MIF can assert its claim under the lost note.
Federal Deposit Ins. Corp. v. Houde,
The Court finds that former Ohio Rev.Code § 1303.77 applies in determining whether MIF can recover on the lost Note. In other words, presently enacted § 1303.38 which became effective on August 19, 1994, should not be applied retroactively. Applying § 1303.38 to transactions and events arising prior to its enactment could impair MIF’s right to enforce the lost note.
See Public Citizen, Inc. v. First Nat’l Bank In Fairmont,
MIF must establish its entitlement to recover under the lost note by the preponderance of the evidence.
Household Finance Corp. v. Johnson,
Here, as in
Culkar v. Fanter,
the Court finds that MIF has presented sufficient evidence to establish its claim under the lost note.
Culkar v. Fanter,
Moskal’s affidavits establish that the RTC, MIF’s predecessor in interest, once possessed the original note.
See Staats v. Hamrick,
unpublished,
Further, Bacon’s affidavit has established that the Note was lost by the RTC.
See Diebold v. Drach,
Contrary to the allegations of PMC, Miller, Land B & R and Robon, the testimony of MIF’s former employee Morgan Scott (“Scott”) in the state court foreclosure proceeding has not created a genuine issue of material fact on the issue of whether MIF can recover under the lost note. Scott erroneously testified that MIF possessed the original note. Even if the Court could accept the argument that Scott lied to the state court in the foreclosure proceeding, the fact remains that MIF has not relied on Scott’s testimony in order to establish its claim under the lost note. The parties do not dispute the fact that one of MIF’s predecessors in *159 interest lost the note. Therefore, Scott’s credibility is not an issue in this adversary proceeding.
WHETHER MIF CAN RECOVER UNDER THE MORTGAGES
Even if MIF was precluded from recovering on the lost note under Ohio Rev.Code § 1303.77, the Court finds that MIF has presented sufficient evidence to recover under the Mortgages under Ohio law.
New England Savings Bank v. Bedford Realty,
In Ohio, the right to judgment on a note and the right to foreclose on a related mortgage represent two separate causes of action.
Metropolitan Life Ins. Co. v. Triskett Illinois, Inc.,
It is axiomatic that “[t]he mortgage secures the indebtedness itself, not the written evidence of it.”
New England Savings Bank v. Bedford Realty Corp.,
[t]he purpose of a mortgage is to secure the payment of a debt. No change in the form of evidence, or the mode or time of payment, not amounting to actual payment of the debt, or an express release, will operate to discharge the mortgage.
Riegel v. Belt,
MIF has established its right to recover under the Mortgages. Swolsky freely admits that PMC received $2,200,000.00 from Freedom 1 and that PMC ceased making payments on the mortgage debt in February, 1992 when PMC owed approximately $1,900,-000.00 on the Mortgages. MIF’s predecessor in interest recorded the Mortgages over ten years ago and no genuine issue of material fact has arisen as to the authenticity of the Mortgages. Further, MIF has presented evidence of the chain of assignments of the Mortgages from Freedom 1 to MIF.
Furthermore, the Court rejects the arguments raised by PMC, Miller, Land, B & R and Robon as to the validity of the Mortgages.
First, Miller argues that the 1983 Mortgage is invalid because it purportedly sought to convey a mortgage in fee simple while PMC only possessed a leasehold estate. However, the plain language on the first page of the 1983 Mortgage indicates that PMC possessed a leasehold estate at the time that it executed the 1983 Mortgage. Moreover, the Court agrees with MIF that, in circumstances where a leasehold mortga *160 gor purports to grant a mortgage in a fee simple interest, such conveyance must be construed as a leasehold mortgage. See Ohio Rev.Code § 5301.02; Ohio Rev.Code § 5302.04.
Second, the Court rejects Miller’s argument that the 1984 Mortgage was invalid because it was improperly witnessed. The affidavit of Kim Werner establishes that the 1984 Mortgage was witnessed by two persons.
Third, the facts establish that Freedom 1 provided consideration for the 1984 Mortgage by advancing additional construction loan funds to PMC. PMC’s preexisting debt to Freedom 1 also provided consideration for the 1984 Mortgage.
Pease Co. v. Huntington Nat. Bank,
WHETHER THE PAYMENT TO THE BONDHOLDERS FROM THE PROCEEDS OF THE SOVEREIGN BANK CD EXTINGUISHED PMC’S OBLIGATION ON THE NOTE
The Court’s review of the affidavits of Pratt and Wiseman, and the deposition testimony and affidavit of Spoor has convinced the Court that Sovereign Bank’s payment to the bondholders did not extinguish PMC’s obligation under the Note. In his deposition, Swolsky testified that he did not understand the bond transaction from its inception. The Court has disregarded Swolsky’s subsequent affidavit, which contradicts his earlier deposition testimony, in the absence of any explanation as to why his testimony has changed since the time of the deposition.
Aparicio v. Norfolk & Western Ry. Co.,
MILLER’S ARGUMENT THAT THE SUBORDINATION AGREEMENTS ARE INEFFECTIVE
The Court agrees with MIF that the Sub-ordinations are unambiguous and should be enforced according to their terms.
Section 510(a) of title 11 provides that:
[a] subordination agreement is enforceable in a case under this title to the same extent that such agreement is enforceable under applicable nonbankruptcy law.
11 U.S.C. § 510(a).
“A subordination agreement is to be interpreted in accordance with ordinary contract principles____ When the contract is unambiguous, the parties rights are governed exclusively by the contract.”
In re General Homes Corp., FGMC,
The Court finds that there was adequate consideration for the Subordinations. The funds which Freedom 1 loaned to PMC clearly benefited Miller’s reversionary interest in the premises.
In re Cliff’s Ridge Skiing Corp.,
Moreover, the Court finds that Miller was estopped from “releas[ing] and canceling]” the Subordinations.
See Republic
*161
National Life Ins. Co. v. Lorraine Realty Corp.,
Contrary to Miller’s argument, the Subordinations did not make her a surety for MIF.
Lebs Partnership Ltd. v. Northwestern Mutual Life Ins. Co.,
unpublished,
WHETHER MIF’S PROSECUTION OF THE INSTANT ACTION CONSTITUTES CHAMPERTY
Despite the allegations raised by B & R, Miller and PMC to the contrary, MIF’s prosecution of its secured claim against PMC does not represent champerty.
See Reece v. Kyle,
Finally, the Court concludes that MIF has perfected its interest in the rents and leases by its filing in the county recorder’s office.
In re Miller,
In light of the foregoing, it is therefore
ORDERED that MIF Realty L.P.’s motion for summary judgment be, and it hereby is, granted except to the extent that MIF seeks foreclosure of its liens. It is further
ORDERED that the liens of MIF Realty, L.P. as set forth in the 1983 Mortgage and the 1984 Mortgage be, and they hereby are, declared to be the first and best liens on the real estate described in said mortgages. It is further
ORDERED that MIF Realty L.P. be, and it hereby is, entitled to collect, retain, use and enjoy the rents, income and profits from the real estate described in the 1983 Mortgage and the 1984 Mortgage. It is further
ORDERED that the motions for summary judgment of plaintiff Mary Miller, and defendants PMC, Barkan & Robon, Marvin A. Robon, Trustee, and Perrysburg Land Development, Inc. be, and they hereby are, denied.