SECRETARY OF VETERANS AFFAIRS v. DONALD L. ANDERSON, ET AL.
No. 99957
Court of Appeals of Ohio, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
August 14, 2014
2014-Ohio-3493
Keough, J., Rocco, P.J., and Kilbane, J.
Civil Appeal from the Cuyahoga County Court of Common Pleas, Case No. CV-12-774154
JUDGMENT: AFFIRMED
ATTORNEY FOR APPELLANTS
James R. Douglass
James R. Douglass Co., L.P.A.
P.O. Box 6031040
Cleveland, Ohio 44103
ATTORNEYS FOR APPELLEE SECRETARY OF VETERANS AFFAIRS
Brett A. Housley
Rachel M. Kuhn
Reimer, Arnovitz, Chernek & Jeffrey
30455 Solon Road
Solon, Ohio 44139
FOR MIDLAND FUNDING L.L.C.
Midland Funding, L.L.C.
8875 Aero Drive, Suite 200
San Diego, California 92123
ATTORNEY FOR STATE OF OHIO DEPARTMENT OF TAXATION
Sherry M. Phillips
Assistant Attorney General
Collections Enforcement
150 East Gay Street, 21st Floor
Columbus, Ohio 43215
ATTORNEY FOR UNITED STATES OF AMERICA
David A. Ruiz
Assistant U.S. Attorney
801 West Superior Avenue, Suite 400
Cleveland, Ohio 44113
KATHLEEN ANN KEOUGH, J.:
I. Factual History and Procedural Background
{¶2} On October 1, 1997, Anderson and his then-wife executed a promissory note in the amount of $145,850 in favor of Norwest Mortgage, Inc. for their residential property in Strongsville, Ohio. The note was secured by a mortgage. The note was subsequently modified two times, resulting in a principal balance of $179,050. The note and mortgage were assigned to the Secretary.
{¶3} On June 19, 2012, the Secretary filed an amended complаint for foreclosure against Anderson and other necessary parties relating to the Andersons’ alleged nonpayment of the note. The amended complaint asserted that the Secretary was the holder of the note, that the Andersons had defaulted under the terms of the note and mortgage, and that $179,050 plus interest at 4% per annum from February 1, 2008 was due and owing on the note. The amended complaint further alleged that the Secretary had complied with all conditions precedent as set forth in the note, loan modification agreements, and mortgage before filing its complaint in foreclosure.
{¶4} Anderson filed a two-paragraph answer to the amended complaint in which he denied the Secretary‘s allegations. He did not raise any affirmative defenses in his answer, nor did he assert that the Secretary had not complied with the conditions precedent to foreclosure.
{¶5} The matter was referred to a magistrate, who subsequently granted default judgment to the Secretary against all non-answering parties, including Anderson‘s ex-wife. The Secretary then moved for summary judgment. The affidavit of Therese Pfullmann, an employee of Residential Credit Solution, a loan servicer for the Secretary, was attached to the motiоn for summary judgment. Anderson filed a two-paragraph “answer” to the Secretary‘s motion in which he objected to Pfullmann‘s affidavit, arguing that it was “hearsay third-party circumstantial evidence.”
{¶6} The magistrate subsequently issued a decision granting the Secretary‘s
II. Analysis
A. Final, Appealable Order
{¶7} In his first assignment of error, Anderson contends that the trial court‘s judgment is not final for appeal or execution because the trial court simply adopted the magistrate‘s decision, instead of entering its own judgment.
{¶8} When the court adopts, rejects, or modifies a magistrate‘s decision, it must also enter a judgment.
{¶9} The trial court in this case did exactly that. On April 23, 2013, the trial court issued a journal entry overruling Anderson‘s objections to the magistrate‘s decision. Then, on May 3, 2013, the trial court issued a judgment entry in which it adopted the magistrate‘s decision and specifically addressed all the issues submitted to the court: it granted summary judgment in favor of the Secretary against Anderson; it granted default judgment in favor of the Secretary against the other named defendants; it granted judgment in favor of the Secretary against Anderson in the amount of $179,050 plus interest at the rate of 4% per annum from February 1, 2008; it ordered that unless this sum plus costs, taxes, and interest was paid within three days of the judgment, the premises were to be sold; and it ordered how the proceeds of the sale were to be distributed.
{¶10} The trial court‘s judgment did not merely incorporate the magistrate‘s decision; it was a separate judgment entry that contained a clear pronouncement of the court‘s judgment and a statement of the relief granted by the court. Accordingly, the first assignment of error is overruled.
B. Conditions Precedent
{¶11} In his second assignment of error, Anderson contends that the trial court erred in granting summary judgment to the Secretary absent any evidence that the Secretary had satisfied the conditions precedent to foreclosure. Specifically, Anderson argues that government-insured loans, such as the note and mortgage at issue in this case, are subject to federal regulations that establish conditions precedent to initiating a foreclosure action, and that the affidavit in support of the Secretary‘s motion for summary judgment failed
{¶12} The Secretary concedes that the federal regulations set forth in
{¶13} Before we address the waiver issue, we note that there is disagreement among Ohio‘s appellate districts whether the federal regulations regarding accelerating the balance of a note and initiating foreclosure proceedings on federally-insured loans create conditions precedent or provide affirmative defenses. Recently, in Wells Fargo Bank, N.A. v. Goebel, 2014-Ohio-472, 6 N.E.3d 1220, the Second District addressed the condition-precedent/affirmative-defense issue and held that a bank‘s failure to comply with federal regulations regarding notice to the mortgagor prior to initiating a foreclosure action could be raised as an affirmative defense. Shortly after Goebel, however, the Seventh District held that compliance with federal housing regulations regarding foreclosure is more properly characterized as a condition precedent in foreclosure litigation. PNC Mtge. v. Garland, 7th Dist. Mahoning No. 12 MA 222, 2014-Ohio-1173, ¶ 25.
{¶14} Other districts have likewise disagreed as to whether federal regulations regarding foreclosure are conditions precedent or affirmative defenses to foreclosure. Compare U.S. Bank v. Detweiler, 191 Ohio App.3d 464, 2010-Ohiо-6408, 946 N.E.2d 777 (5th Dist.) (HUD regulations regarding default and acceleration of federally-insured note and mortgage are conditions precedent); LaSalle Bank, N.A. v. Kelly, 9th Dist. Medina No. 09CA0067-M, 2010-Ohio-2668, ¶ 13-14 (“[W]here the note or mortgage instrument requires prior notice, the provision of this notice is a condition precedent that must be demonstrated by the moving party under
The distinction is important because each carries with it a different burden for pleading and summary judgment practice. For example, if compliance with [federal housing] regulations is a condition precedent, the bank must generally aver in its complaint that it has complied with all conditions precedent, the borrower then has a reciprocal burden to alleged with specificity and partiсularity how the bank failed to comply.
Civ.R. 9(C) . In a motion for summary judgment, the bank would then bear the burden of establishing the absence of any issue of material fact on the issue of whether it complied with the specific HUD regulation. * * *Alternatively, if compliance is deemed an affirmative defense, the bank has no pleading burden in its complaint; the borrower must generally allege non-compliance as an affirmative defense in its answer. And on summary judgment, the bank has no burden to discuss compliаnce with HUD regulations in its motion, whereas the borrower bears the burden of proving its affirmative defense
via the brief in opposition to summary judgment. * * * (Emphasis sic).
{¶15} This court has held that a term in a mortgage such as one requiring prior notice of default or acceleration to the mortgagor is a condition precedent subject to the requirements of
{¶16}
{¶17} In paragraph one of his complaint, the Secretary averred that “it has сomplied with all conditions precendent as set forth in the note, loan modification agreements, and mortgage.” In his answer, Anderson generally denied all the allegations of the complaint, but made no specific reference to the Secretary‘s alleged non-compliance with the federal regulations regarding foreclosure of federally-insured loans. Thus, Anderson did not comply with
{¶18} Because Anderson‘s answer was insufficient to put the Secretary‘s compliance with the federal regulations regarding foreclosure of federally-insured loans at issue in the case, the Secretary hаd no burden in his motion for summary judgment to establish the absence of a material question of fact regarding his compliance with the regulations. Accordingly, the trial court did not err in granting summary judgment, and the second assignment of error is overruled.
C. The Evidence Supporting the Motion for Summary Judgment
{¶19} In his third assignment of error, Anderson contends that the trial court erred in granting summary judgment because the Secretary failed to demonstrate that he was entitled to foreclosure.
{¶20}
{¶21} In оrder to properly support a motion for summary judgment in a foreclosure action, the bank must produce or identify in the record evidentiary-quality material demonstrating: (1) that it is the holder of the note, which is secured by a mortgage, or that it is otherwise entitled to enforce the instrument; (2) that the mortgagor is in default; (3) that all conditions precedent have been met; and (4) the amount of the principal and interest due. HSBC Bank USA, N.A. v. Surrarrer, 8th Dist. Cuyahoga No. 100039, 2013-Ohio-5594, ¶ 16.
{¶22} Once a moving party satisfies its burden,
{¶23} The Secretary appended to his motion for summary judgment the affidavit of Pfullmann, who averred that she had personal knowledge of Anderson‘s account, and had rеviewed Residential Credit Solution‘s records relating to his account, which showed a note executed by Donald and Sharon Anderson secured by a mortgage that was modified twice. Pfullmann further averred that the Andersons had defaulted under the terms of the promissory note and mortgage, and the amount due was $179,050 plus interest of 4% per annum from February 1, 2008. In addition, Pfullmann averred that “true and exact copies” of the note, loan modification agreement, mortgage, and assignment of mortgage were attached as exhibits A, B, C, and D to the affidavit. Finally, she averred that Residential Credit Solution was the servicer for the note and mortgage and was authorized to act on behalf of the Secretary, who was the holder of the note.
{¶24} In light of Pfullmann‘s affidavit, the Secretary satisfied his burden of showing that there was no genuine issue of material fact in rеgard to the allegations of the amended complaint for foreclosure. Anderson‘s two-paragraph response to the motion for summary judgment, in which he merely objected to Pfullmann‘s affidavit as hearsay, failed to meet his reciprocal burden of setting forth specific facts demonstrating that genuine triable issues remained to be litigated. Therefore, the trial court properly granted summary judgment in favor of the Secretary.
{¶26} Similarly, Anderson‘s objection that the relevant documents were not attached to Pfullmann‘s affidavit for the trial court‘s consideration is without merit. The affidavit specifically stated that true and exact copies of the note, loan modification agreement, mortgage, and assignment of mortgage were attached as exhibits A, B, C, and D to the affidavit. Our review of the record demonstrates that the documents were indeed attached to Pfullmann‘s affidavit.
{¶27} The record reflects that the Secretary submitted proper evidentiary materials to support his motion for summary judgment. Anderson failed to meet his reciprocal burden to establish any genuine issue of material fact. Accordingly, thе trial court properly granted summary judgment. The third assignment of error is therefore overruled.
D. The “Double-Dismissal Rule”
{¶28} In his fourth assignment of error, Anderson asserts that the trial court should have dismissed the complaint as barred by res judicata under the “double-dismissal rule” stated in
{¶29}
Anderson‘s argument fails.
{¶30} First, the affirmative defense of res judicata is waived if not raised in a responsive pleading. Jim‘s Steak House, Inc. v. Cleveland, 81 Ohio St.3d 18, 20-21, 688 N.E.2d 506 (1998). Anderson raised no affirmative defenses in his answer to the Secretary‘s amended complaint and, therefore, waived any argument regarding res judicata.
{¶31} More importantly, the “double-dismissаl rule” does not apply to this action. The record reflects that there were two prior foreclosure cases against Anderson that were voluntarily dismissed by the plaintiff. In the first case, Wells Fargo Bank v. Anderson, Cuyahoga C.P. No. CV-06-582255 (June 28, 2006), Wells Fargo sought recovery of $138,649.84 in principal, plus interest at 8% per annum from August 1, 2005. In the second case, Secy. of Veterans Affairs v. Anderson, Cuyahoga C.P. No. CV-08-670154 (June 11, 2010), the Secretary claimed $179,050 in principal owed, plus interest at 4% per annum from February 1, 2008.
{¶32} The “double-dismissal rule” applies to actions, including foreclosure actions, when the same plaintiff files a third complaint that asserts the same cause of action as that dismissed in the first and second complaints. U.S. Bank Natl. Assn. v. Gullotta, 120 Ohio St.3d 399, 2008-Ohio-6268, 899 N.E.2d 987, ¶ 24-25. Here, although there were two prior foreclosure cases, the claims in each case were different: they involved different rates of interest and different amounts of prinсipal owed. Moreover, the plaintiffs were not the same: the first case was brought by Wells Fargo Bank, the second by the Secretary. Accordingly, the voluntary dismissal by the Secretary in Case No. CV-08-670154 was not a second dismissal of the same claim under
{¶33} Anderson‘s fourth assignment of error is therefore overruled.
{¶34} Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
KATHLEEN ANN KEOUGH, JUDGE
KENNETH A. ROCCO, P.J., and
MARY EILEEN KILBANE, J., CONCUR