Residential Funding Co., L.L.C. v. ThorneResidential Funding Co., L.L.C. v. Thorne
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Rebecca R. Shrader, for appellee.
George R. Smith, Jr., for appellant.
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COSME, J.
{¶ 1} Defendant-appellant, Gary T. Thorne (“Thorne“) appeals from a decision of the Lucas County Common Pleas Court that granted summary judgment in favor of plaintiff-appellee, Residential Funding Company, LLC (“Residential“), and the motion to dismiss in favor of third-party defendant-appellee, Cardinal Mortgage Services of Ohio,
I. BACKGROUND
{¶ 2} On June 20, 2003, Thorne signed and executed a “Mortgage Brokerage Contract” (“Brokerage Contract“) with Cardinal. Pursuant to this Brokerage Contract, Cardinal agreed to procure a mortgage loan commitment on a parcel of residential property Thorne owned. Thorne agreed to pay a mortgage brokerage fee, including the actual costs of the procured loan, to Cardinal. Contemporaneous with the brokerage contract, the parties executed the “Mortgage Loan Origination Agreement” (“Origination Agreement“), in which they set out the nature of their relationship as well as the terms of Cardinal‘s compensatiоn. The Origination Agreement provided:
{¶ 3} “SECTION 2. OUR [Cardinal‘s] COMPENSATION. The lenders whose loan products we distribute generally provide their loan products to us at a wholesale rate.
{¶ 4} “* The retail price we offer you - your interest rate, total points and fees - will include our compensation.
{¶ 5} “* In some cases, we may be paid all of our compensation by either you or the lender.
{¶ 6} “* Alternatively, we may be paid a portion of our compensation by both you and the lender. For example, in some cases, if you would rather pay а lower interest rate, you may pay higher up-front points and fees.
{¶ 8} “* * *
{¶ 9} “By signing below, the mortgage loan originator and mortgage loan applicant(s) acknowledge receipt of a signed copy of this agreement.
{¶ 10} “* * *.”
{¶ 11} On July 29, 2003, Thorne closed on a loan procured by Cardinal through Regions Bank (Residential‘s predecеssor in interest), to refinance the mortgage on the property by executing a note and mortgage.
{¶ 12} Thorne acknowledged that during closing he did not read the documents, relying solely on the loan officer‘s representations of the terms of the loan documents. Thorne does not recall receiving a full set of the copies he signed at closing. While Thorne admits that he received a copy of the “Notice of Right to Cancel” he insists that he did not receive the “Good Faith Estimate or Itemization of Amount Financed” (“Gоod Faith Estimate“).
{¶ 13} The note and mortgage identifying Thorne as the borrower and Regions Bank as the lender contained an adjustable rate. By May 9, 2008, Thorne had defaulted on the note and mortgage. Thorne failed to cure after he was given written notice of default and an opportunity to bring his payments current. The note was accelerated, making the full amount of principal and interest due. On December 2, 2008, Residential
{¶ 14} A сomplaint in foreclosure was filed by Residential on December 9, 2008. Relevant to Thorne‘s arguments is the fact that a copy of the note was not attached to the complaint because it had been misplaced and could not be found at the time of filing. At no time prior to the filing of the complaint did Thorne attempt to rescind.
{¶ 15} On January 28, 2009, Thorne filed an answer and counterclaim. Thorne alleges that Regions Bank, in concert with Cardinal, understated the cost of the loan and failed to disclose the particular terms of the agreement between Regions Bank and Cardinal whereby Cardinal charged Thorne a higher rate than what Regions Bank was offering. The counterclaim alleged that the mortgage loan transaction was subject to the Truth-in-Lending Act,
{¶ 16} Also on January 28, 2009, Thorne filed a third-party complaint against Cardinal, alleging that Cardinal had committed violations of the Ohio Mortgage Broker‘s Act,
{¶ 17} On April 13, 2009, Cardinal filed a motion to dismiss asserting that Thorne had failed to state a claim upon which relief can be granted. On June 18, 2009, Residential filed a motion for summary judgment with supporting affidavits. On November 23, 2009, the trial court granted summary judgment in favor of Residential and granted Cardinal‘s request for dismissal from the lawsuit. This appeal followed.
II. STANDARD OF REVIEW
{¶ 18} The claims involving Residential were decided in the trial court by summary judgment, which under
{¶ 20} As to Cardinal, “[a] motion to dismiss for failure to state a claim upon which relief can be granted is procedural and tests the sufficiency of the complaint.” State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs. (1992), 65 Ohio St.3d 545, 548. When ruling on a
{¶ 21} When reviewing a judgment entry granting a
III. STANDING
{¶ 22} In his first assignment of error, Thorne maintains that:
{¶ 24} Thorne contends that Residential was not the real party in interest at the time it filed its complaint in foreclosure and therefore, the trial court lacked subject matter jurisdiction over this cause of action.
{¶ 25} We disagree.
{¶ 26} Thorne does not dispute that Residential was the holder and owner of the note and mortgage at the time Residential filed for summary judgment. Rather, Thorne contends that when Residential filed its complaint on December 9, 2008, it was not the real party in interest and lacked capacity to sue because it did not have possession of the note.
{¶ 27} Thorne argues that standing is based on the “facts existing at the time the complaint is filed.” In re Foreclosure Cases (Dec. 27, 2007), S.D.Ohio Nos. 07-cv-166, et. al. Thorne relies on Everhome Mtge. Co. v. Rowland, 10th Dist. No. 07AP-615, 2008-Ohio-1282, ¶ 12, which stated:
{¶ 28} “In foreclosure actions, the real party in interest is the current holder of the note and mortgage. * * * A party who fails to establish itself as the current holder is not entitled to judgment as a matter of law.” (Citations omitted.)
{¶ 29}
{¶ 30} Applying
{¶ 31} In this case, there was uncontradicted evidence that Residential was the holder of Thorne‘s mortgagе. The assignment of mortgage from Regions to Residential executed one week prior to the filing of the complaint, on December 2, 2008, was recorded on December 10, 2008. In addition, the affidavit filed in support of Residential‘s motion for summary judgment reflected that Residential‘s loan servicing
{¶ 32} Accordingly, we find Thorne‘s first assignment of error is not well-taken.
IV. TILA VIOLATIONS
{¶ 33} In his second assignment of error, Thorne maintains that:
{¶ 34} “The trial court erred in finding Thorne‘s TILA damages claims were barred by the one year statue of limitations and that no TILA violation occurred.”
{¶ 35} Thorne asserts that
{¶ 36} While we agree that Thorne‘s TILA counterclaim is a recoupment and it is not barred by the one-year statute of limitation, we nonetheless find that no TILA violations occurred.
{¶ 37} At the outset, the trial court was correct in holding that Thorne‘s time for bringing a TILA claim for damages (in an original action) was one year from the date of
{¶ 38} However, the trial court did nоt consider whether Thorne could assert the right to damages as a matter of defense by recoupment or set-off in a collection action brought by the lender even after the one year is up (since Thorne had asserted the defense of
{¶ 39} According to Beach v. Ocwen Federal Bank (1998), 523 U.S. 410, 118 S.Ct. 1408, 140 L.Ed.2d 566, a TILA damages claim may be raised by the defendant by way of recoupment to the creditor‘s suit on the debt, regardless оf the one year statute of limitations. Prior to Beach, Ohio courts similarly held that a TILA counterclaim arising out of the same transaction as the claim (the loan agreement) was not barred by the one year statute of limitations since it was a recoupment. TILA rescission, however, is not available by recoupment after the expiration of the three year period of
{¶ 40} Thorne‘s recoupment claim is premised on his allegation that Residential failed to make disclosures required by TILA. As such, Thorne claims that he is entitled to reduce Residential‘s claim by the amount of his actual and statutory damages.
{¶ 41} We conclude that Thorne‘s TILA counterclaim is a recoupment because it arises out of the same transaction аs Residential‘s claim, i.e. the promissory note. The counterclaim of recoupment is not barred by the one-year statute of limitations. Continental Acceptance Corp. v. Rivera (1976), 50 Ohio App.2d 338, 344.
{¶ 42} Nevertheless, we conclude that the trial court properly granted summary judgment to Residential because no TILA violations occurred. We agree that Thorne was fully informed of his right to rescind even though he had received only one Rescission Notice. “TILA does not require perfect notice; rather, it requires a clear and conspicuous notice of rescission rights.” Contimortgage Corp. v. Delawder (July 30, 2001), 4th Dist. No. 00CA28, citing Smith v. Highland Bank (C.A.11, 1997), 108 F.3d 1325, 1327; Veale v. Citibank, F.S.B. (C.A.11, 1996), 85 F.3d 577, 580; In re Porter, (C.A.3, 1992), 961 F.2d 1066, 1076. Cf. Buick v. World Savings Bank (E.D.CA.2008), 637 F.Supp.2d 765 (technicаl violations result in liability to the creditor). See Semar v. Platte Valley Fed. Sav. & Loan Ass‘n (C.A.9, 1986), 791 F.2d 699, 704.
{¶ 43} As to the Good Faith estimate and the claim of an inaccurate truth in lending disclosure, the trial court concluded that Thorne was fully aware of the existence of the yield spread premium. Thorne was provided with a copy of the Origination
{¶ 44} Because we find that Thorne did receive a copy of the Rescission Notice Form and was fully apprised of the existence of the yield spread premium, we conclude that no violations of TILA occurred. Accordingly, Thorne‘s second assignment of error is not well-taken.
V. FRAUD CLAIM
{¶ 45} In his third assignment of error, Thorne maintains that:
{¶ 46} “The trial court erred in finding Thorne‘s fraud claim was barred by the statute of limitations.”
{¶ 47} Thorne argues that the trial court erred in concluding thаt Thorne‘s affirmative defense of fraud was barred by the applicable statute of limitations. Thorne insists that his “fraud claim has a different and much wider focus that [sic] a simple RESPA claim,” because “the issue in this case is whether the reference on the HUD [Settlement Statement] to ‘Broker Fee Paid by Lender’ was sufficient to put a reasonable person on notice of the possibility of fraud.” (Bracketed material added.)
{¶ 48} We disagree.
{¶ 49} In his answer, Thorne asserted an affirmative defense of fraud, claiming that Regions understated the costs of the loan, and in return for Cardinal‘s delivery of a
{¶ 50} A yield-spread premium occurs when a broker causes a borrower to accept an interest rate higher than the rate a lender is willing to offer. In return, the broker receives a payment frоm the lender (usually a percentage of the difference), sometimes without the knowledge or consent of the borrower. McClendon v. Challenge Financial Investors Corp. (Mar. 9, 2009), N.D.Ohio No. 1:08CV1189.
{¶ 51} In his counterclaim, Thorne alleged that in addition to his fraud and TILA claim, the loan transaction was also covered by
{¶ 52} In its decision, the trial court relied upon Mills v. Equicredit Corp. (E.D.Mich.2004), 294 F.Supp.2d 903, and Anderson v. Wells Fargo Home Mtge., Inc. (W.D.Wash.2003), 259 F.Supp.2d 1143, in concluding that the plaintiff was not entitled to equitable relief because the yield spread premium was disclosed and there was no “affirmative misrepresentation which prevented Plaintiffs from discovering their RESPA сause of action.” The trial court relied on Mills and Anderson to the extent that disclosure of the yield spread premium in the mortgage closing documents is sufficient to trigger the running of the limitations period. The trial court did not decide whether equitable tolling applied to Thorne‘s RESPA claim because it concluded that the yield spread premium had
{¶ 53} Equitable tolling applies to a statute of limitations period when inequitable circumstances prevent a plaintiff from suing before the statutory period runs. In cases of fraudulent concealment, the statute of limitations can be tolled when the plaintiff demonstrates that “the defendant took affirmative steps to conceal the plaintiff‘s cause of action” and “the plaintiff could not have discovered the cause of action despite exercising due diligence.” Jarrett v. Kassel (C.A.6, 1992), 972 F.2d 1415, 1423.
{¶ 54} Concluding that the yiеld spread premium had been disclosed, the trial court in this case rejected Thorne‘s claim that he “was an unwitting party to a separate agreement reached by Regions and Cardinal outside of closing.” The reference on the HUD settlement statement to the yield spread premium eliminated any argument that Residential or Cardinal took “affirmative steps to conceal” its existence.
{¶ 55} Thorne asserts that his claim is still not barred by the statute of limitations because the fraud could not have been discovered at сlosing by a reasonable person. Thorne complains that he did not know what a yield spread premium was, or the various terms used to describe this form of compensation to the mortgage broker, and did not realize what he was actually paying for the loan.
{¶ 56} Under
{¶ 57} In this case, the yield spread premium was specifically disclosed in the HUD settlement statement that Thorne signed at closing on June 20, 2003. The HUD settlement statement is intended to inform borrowers of the fees that they are paying in the loan transaction. See Mills v. Equicredit Corp., 294 F.Supp.2d at 908. In additiоn to this form, the Origination Agreement and the Business Contract operated to disclose to Thorne that he would either pay a brokerage fee to Cardinal or Residential could pay that fee on Thorne‘s behalf in exchange for charging a higher rate. Thorne could have discovered this indirect fee by exercising due diligence in reading the forms. Ignash v. First Serv. Fed. Credit Union, 10th Dist. No. 01AP-1326, 2002-Ohio-4395, ¶ 15; Evans v. Rudy-Luther Toyota, Inc. (D.Minn.1999), 39 F.Supp.2d 1177, 1184; Hughes v. Cardinal Fed. Sav. & Loan Assn. (S.D.Ohio 1983), 566 F.Supp. 834, 838.
VI. “ATTESTED” DOCUMENTS
{¶ 59} In his fourth assignment of error, Thorne maintains that:
{¶ 60} “The trial court erred in considering documents on summary judgment the delivery of which was ‘attestеd’ to by affiants who had no personal knowledge of delivery and were not competent to testify with regard thereto.”
{¶ 61} We disagree.
{¶ 62} We begin our review of Thorne‘s fourth assignment of error by noting that Thorne has failed to comply with
{¶ 63} Pursuant to
{¶ 65} Thorne suggests that Ugwuadu‘s affidavit did not comport with
{¶ 66}
{¶ 67} ”
{¶ 69} Ugwuadu‘s affidavit clearly refers to business records kept in the ordinary course of GMAC‘s regularly conducted business activity. It was clearly GMAC‘s practice to generate and maintain records relating to mortgages and promissory notes it held on behalf of Residential. As a result, the statements in Ugwuadu‘s affidavit were based on admissible evidence, namely GMAC‘s business records. See
{¶ 70} As for the argument that Ugwuadu‘s affidavit was not based on personal knowledge, an affiant‘s mere assertion that he has personal knowledge of the facts asserted in an affidavit can satisfy the personal knowledge requirement of
{¶ 72} Accordingly, we conclude that Thorne‘s fourth assignment of error is not well-taken.
VII. CARDINAL MORTGAGE
{¶ 73} In his fifth assignment of error, Thorne maintains that:
{¶ 74} “The trial court erred in finding Thorne‘s claims against Cardinal Mortgage were barred by the statute of limitations and dismissing Thorne‘s third-party complaint.”
{¶ 75} We disagree.
{¶ 76} Thorne‘s third-party complaint alleges that: (1) Cardinal and Regions Bank engaged in fraud when they misrepresented to Thorne the true cost of his loan; (2) Cardinal violated the Ohio Mortgage Broker‘s Act when it failed to provide Thorne with a Mortgage Loan Origination Disclosure Statement and Good Faith Estimate of closing costs; and (3) Cardinal and Regions conspired to commit fraud upon Thorne when they concealed the yield spread premium.
{¶ 78} The gist of the third-party complaint as it pertains to Thorne‘s fifth assignment of error was that Residential and Cardinal together misrepresented to Thorne the cost of his loan when it intentionally concealed the yield spread premium.
{¶ 79} In Ohio, a cause of action for fraud must be brought within four years after the fraud was or should have been discоvered.
{¶ 80} Consistent with our review of appellant‘s third assignment of error, we find that Thorne could have discovered the alleged fraud, either actually or constructively, on
{¶ 81} Accordingly, Thorne‘s fifth assignment of error is not well-taken.
VIII. CONCLUSION
{¶ 82} We conclude that Thorne has not еstablished that any genuine issues of material fact exist which would show: (1) Residential was not the real party in interest; (2) Thorne is entitled to recoupment; (3) the fraud claim against Residential was not barred by the statute of limitations; and (4) Ugwuadu‘s affidavit was not made on personal knowledge. We further conclude that the factual allegations set forth in the complaint require a finding that Thorne‘s fraud claim against Cardinal was barred by the statute of limitations.
{¶ 83} On consideration whereof, the court finds that substantial justice has been done the party complaining and the judgment of the Lucas County Common Pleas Court is affirmed. Appellant is ordered to pay the costs of this appeal pursuant to
JUDGMENT AFFIRMED.
A certified copy of this entry shall constitute the mandate pursuant to
Arlene Singer, J. _______________________________ JUDGE
Thomas J. Osowik, P.J. _______________________________
Keila D. Cosme, J. JUDGE CONCUR. _______________________________ JUDGE
This decision is subject to further editing by the Supreme Court of Ohio‘s Reporter of Decisions. Parties interested in viewing the final reported version are advised to visit the Ohio Supreme Court‘s web site at: http://www.sconet.state.oh.us/rod/newpdf/?source=6.