U.S. Bank, N.A. v. CoffeyU.S. Bank, N.A. v. Coffey
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Kimberlee S. Rohr, for appellant.
Daniel McGookey, Kathryn M. Eyster, and Lauren McGookey, for appellee.
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YARBROUGH, J.
I. INTRODUCTION
{¶ 1} Appellant U.S. Bank appeals the judgment of the Erie County Court of Common Pleas which dismissed appellant‘s complaint without prejudice and also denied
A. Facts and Procedural Background
{¶ 2} On February 28, 2007, appellee Amelia Coffey executed a note in the amount of $62,026 payable to the American Eagle Mortgage Corporation (“American Eagle“) at a rate of 5.75 percent. To secure the note, Coffey also executed a mortgage in the amount of $62,026 to Mortgage Electronic Registration Systems, Inc. (“MERS“), as nominee for American Eagle for a property located in Sandusky, Ohio. The mortgage was recorded on February 28, 2007, in the office of the Erie County Recorder. The transfer of the mortgage from MERS to U.S. Bank was executed on June 28, 2010, and subsequently recorded on July 6, 2010. The note and mortgage identify the loan as a federally insured loan subject to the regulations of the United States Department of Housing and Urban Development.
{¶ 3} On June 30, 2010, U.S. Bank filed a complaint in foreclosure against Coffey based on Coffey‘s payment default under the terms of the note and mortgage. In its complaint, U.S. Bank pleaded that it was the holder of both the note and the mortgage, but only attached a copy of the original mortgage document. This document did not indicate that U.S. Bank was the current assignee of the mortgage. Eventually, on July 19, 2010, U.S. Bank filed a “notice of filing of note” to which a copy of the note was attached. The note in question was originally given to American Eagle and contained a specific indorsement to U.S. Bank. Thereafter, U.S. Bank indorsed the note in blank. On
{¶ 4} Coffey eventually filed an answer on September 2, 2010, asserting a general denial, nine affirmative defenses, a jury demand, and a motion to dismiss. On October 5, 2010, U.S. Bank filed a motion for summary judgment, which included an affidavit of Kim Stewart, the assistant vice president of U.S. Bank. In her affidavit, Stewart asserted that as the assistant vice president she “has the custody of the accounts of said company, including the account of Amelia L. Coffey aka Amelia Coffey, defendant herein.” Stewart also asserted that U.S. Bank “is the holder of the note and mortgage which are the subject of the within foreclosure action.”
{¶ 5} On January 25, 2011, Coffey filed a “motion to dismiss or, in the alternative, motion for summary judgment” and a memorandum in opposition to U.S. Bank‘s motion for summary judgment. Her motion alleged that U.S. Bank‘s complaint must be dismissed because U.S. Bank did not allege that it “owned” the note and mortgage. Coffey did not otherwise produce any evidence in support of her motion for summary judgment.
{¶ 6} In response, on February 11, 2011, U.S. Bank filed a reply in support of its motion for summary judgment and in opposition to Coffey‘s motion to dismiss. On March 2, 2011, the trial court granted Coffey‘s “motion to dismiss or, in the alternative, motion for summary judgment.” The judgment stated that U.S. Bank failed to “* * *
B. Assignments of Error
{¶ 7} U.S. Bank raises two assignments of error:
Assignment of Error No. 1: The trial court erred by granting Coffey‘s Motion to Dismiss, or in the alternative, Motion for Summary Judgment, based on U.S. Bank‘s failure to allege in its Complaint that it is the owner of the subject Note.
Assignment of Error No. 2: The trial court erred by denying U.S. Bank‘s Motion for Summary Judgment where U.S. Bank sufficiently established that it was entitled to a judgment and decree in foreclosure as the holder of the subject note.
II. ANALYSIS
A. Coffey‘s Motion to Dismiss
{¶ 8} We must initially determine whether the trial court dismissed U.S. Bank‘s complaint pursuant to
{¶ 9} As the trial court‘s judgment was a dismissal without prejudice as described by
{¶ 10} Although the trial court dismissed U.S. Bank‘s complaint without prejudice, it has already determined that U.S. Bank cannot refile its complaint unless it avers and demonstrates that U.S. Bank is both the holder and owner of the note. As will be discussed, U.S. Bank is not required to make such a showing. Therefore, even though U.S. Bank‘s complaint was dismissed without prejudice, the trial court‘s judgment effectively precludes U.S. Bank from refiling its complaint and constitutes a final and appealable order reviewable on appeal.
{¶ 11} We review an order granting a
{¶ 12} In her motion to dismiss, Coffey argued that U.S. Bank failed to establish itself as the real party in interest entitled to enforce the note and foreclose on the mortgage. Coffey pointed out that U.S. Bank failed to attach a copy of the note to its complaint and also failed to attach an assignment indicating its interest in the mortgage. Therefore, she concludes that U.S. Bank lacked standing to sue because it was not a holder and “owner” of the note, and accordingly not a real party in interest.
{¶ 13} Capacity to sue or be sued is an issue properly raised by a
{¶ 14} Applying
{¶ 16} A “person entitled to enforce” an instrument means any of the following persons: (1) The holder of the instrument, (2) A non-holder in possession of the instrument who has the rights of the holder, (3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 1303.38 or division (D) of section 1303.58 of the Revised Code.
{¶ 17} More specifically, under
- if the instrument is payable to bearer, a person who is in possession of the instrument;
- if the instrument is payable to an identified person, the identified person when in possession of the instrument. (Emphasis added.)
{¶ 18} In its complaint, U.S. Bank pleaded, “Plaintiff is the holder of a note, a copy of which is unavailable.” Despite Coffey‘s assertion, U.S. Bank was not additionally required to plead that it was the “owner” of the note and mortgage in its
Ownership rights in instruments may be determined by principles of the law of property, independent of Article 3, which do not depend upon whether the instrument was transferred under Section 3-203. Moreover, a person who has an ownership right in an instrument might not be a person entitled to enforce the instrument. For example, suppose X is the owner and holder of an instrument payable to X. X sells the instrument to Y but is unable to deliver immediate possession to Y. Instead, X signs a document conveying all of X‘s right, title, and interest in the instrument to Y. Although the document may be effective to give Y a claim to ownership of the instrument, Y is not a person entitled to enforce the instrument until Y obtains possession of the instrument. No transfer of the instrument occurs under Section 3-203(a) until it is delivered to Y. (Emphasis added.)
{¶ 19} As indicated by the previous example, an assertion of ownership rights does not indicate that a plaintiff is entitled to enforce an instrument. Conversely, “[a] person may be ‘entitled to enforce’ [an] instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.”
{¶ 20} In support of her position, Coffey directs our attention to an unreported Florida trial court case. In BAC Home Loan Servicing v. Stentz, Fla. 6th Cir. Civ. Div. J4 No. 51-2009-CA-7656-ES (Dec. 1, 2010), the trial court held that “[p]laintiff must specifically plead and identify both the owner and holder of the note and mortgage. It is not enough for Plaintiff to only plead that it holds the note and mortgage * * *. Plaintiff must ultimately prove ownership as well.” We find no support for this proposition in Ohio law. Nevertheless, we understand Coffey‘s confusion. For example, in U.S. Bank v. Richards, 189 Ohio App.3d 276, 2010-Ohio-3981, 938 N.E. 2d 74, ¶ 13 (9th Dist.), the Ninth District Court of Appeals initially reiterated, “‘In foreclosure actions, the real party in interest is the current holder of the note and mortgage.‘” (Citations omitted.) In finding that U.S. Bank failed to have the promissory note admitted into evidence in support of its motion for summary judgment, and that the mortgage assignment did not occur until after the complaint was filed, the court eventually held that “U.S. Bank failed to establish for purposes of summary judgment that it was the owner and holder of the note and mortgage * * *.” Id. at ¶ 20. It appears that the Ninth District Court of Appeals used the word “owner” to signify that U.S. Bank was not the assignee of the mortgage at the time the complaint was filed. See also U.S. Bank v. Marcino, 181 Ohio App.3d 328, 2009-Ohio-1178, 908 N.E.2d 1032, ¶ 32, 49, 54 (7th Dist.) (using the words “holder” and “owner” interchangeably). Nevertheless, because a promissory note is transferred through the process of negotiation, ownership is not a requirement for enforcement of the note. See
{¶ 21} Here, U.S. Bank pleaded that it is the holder of the note which is secured by the mortgage at issue thereby indicating U.S. Bank‘s interest in the mortgage. Under
{¶ 22} Accordingly, U.S. Bank‘s first assignment of error is well-taken.
B. U.S. Bank‘s Motion for Summary Judgment
{¶ 23} Ordinarily, a trial court‘s order denying appellant‘s motion for summary judgment is not a final appealable order. State ex rel. Overmeyer v. Walinski, 8 Ohio St.2d 23, 23, 222 N.E.2d 312 (1966). However, “a trial court‘s denial of a motion for summary judgment is reviewable on appeal by the movant from a subsequent adverse final judgment.” Balson v. Dodds, 62 Ohio St.2d 287, 289, 405 N.E.2d 293 (1980). See also Sagenich v. Erie Ins. Group, 11th Dist. No. 2003-T-0144, 2003-Ohio-6767, ¶ 3 (the denial of a motion for summary judgment is always reviewable on appeal following a
{¶ 24} When reviewing a trial court‘s summary judgment decision, the appellate court conducts a de novo review. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). Summary judgment will be granted when there are no genuine issues of material fact, and when construing the evidence most strongly in favor of the nonmoving party, reasonable minds can only conclude that the moving party is entitled to judgment as a matter of law. Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 67, 375 N.E.2d 46 (1978).
{¶ 25} On a motion for summary judgment, the moving party has the burden of demonstrating that no genuine issue of material fact exists. Dresher v. Burt, 75 Ohio St.3d 280, 292, 662 N.E.2d 264 (1996). The moving party must point to some evidence in the record of the type listed in
{¶ 26} In order to properly support a motion for summary judgment in a foreclosure action, a plaintiff must present evidentiary-quality materials showing: (1) The movant is the holder of the note and mortgage, or is a party entitled to enforce the instrument; (2) if the mover is not the original mortgagee, the chain of assignments and transfers; (3) the mortgager is in default; (4) all conditions precedent have been met; and (5) the amount of principal and interest due. Jackson, 5th Dist. No. 2010-CA-00291, 2011-Ohio-3202, at ¶ 40-45.
{¶ 27} U.S. Bank was required to prove that it is the current holder of the note and mortgage in order to establish itself as the real party in interest. See Greene, 6th Dist. No. E-10-006, 2011-Ohio-1976, at ¶ 13. This is necessarily so because the failure to prove itself as the real party in interest creates a genuine issue of material fact that precludes summary judgment. First Union Natl. Bank v. Hufford, 146 Ohio App.3d 673, 679-680, 767 N.E.2d 1206 (3d Dist.2001).
{¶ 28} Attached to its motion for summary judgment, U.S. Bank submitted the Stewart affidavit. In this affidavit, Stewart averred that: (1) she has custody of the accounts of U.S. Bank, including Coffey‘s account, (2) the records of the accounts of the company are compiled at or near the time of occurrence of each event by persons with knowledge of said events, (3) the records are kept in the course of U.S. Bank‘s regularly conducted business activity, and (4) it is the regular practice to keep such records related
{¶ 29} In determining the sufficiency of Stewart‘s affidavit, we turn to the requirements set forth by
{¶ 30} After reviewing the submitted evidence, we find that the assignment of mortgage submitted as “Exhibit C” does not constitute proper evidentiary material upon which the court can rely in determining that U.S. Bank has standing to foreclose on the note and mortgage. Stewart‘s affidavit states, “A copy of the Assignment, which
{¶ 31} Nevertheless, “whenever a promissory note is secured by a mortgage, the note constitutes the evidence of the debt and the mortgage is mere incident to the obligation.” Marcino, 181 Ohio App.3d 328, 2009-Ohio-1178, 908 N.E.2d 1032, ¶ 52, citing Edgar v. Haines, 109 Ohio St. 159, 164, 141 N.E. 837 (1923). Thus, a transfer of a note secured by a mortgage also acts as an equitable assignment of the mortgage, even though the mortgage is not assigned or delivered. Kuck v. Sommers, 59 Ohio Law Abs. 400, 100 N.E.2d 68, 75 (3d Dist.1950). Also, “‘[s]ubsection (g) [of U.C.C. 9-203] codifies the common law rule that a transfer of an obligation secured by a security interest or other lien on personal or real property also transfers the security interest or lien.‘” Marcino at ¶ 53, quoting Official Comment 9 to U.C.C. 9-203. Under these circumstances, we must determine whether U.S. Bank is entitled to enforce the note against Coffey, and thereafter assert its right to foreclose on the mortgage.
{¶ 33} “Negotiation” is a particular type of transfer. Specifically, “negotiation” means “a voluntary or involuntary transfer of possession of an instrument by a person other than the issuer to a person who by the transfer becomes the holder of the instrument.”
{¶ 34} In this case, the note contains the following two indorsements: (1) “PAY TO THE ORDER OF U.S. BANK N.A. WITHOUT RECOURSE. THIS 28th DAY OF February5 [ILLEGIBLE SIGNATURE] [by] THE AMERICAN EAGLE MORTGAGE
{¶ 35}
{¶ 36} In her affidavit, Stewart specifically states, “True and accurate reproductions of the originals as they exist in Plaintiff‘s files are attached hereto as Exhibits ‘A’ and ‘B.‘” The note is attached as “Exhibit A.” Under this description, U.S. Bank is a holder of the note and mortgage because it is able to demonstrate possession of the note which secures the mortgage. See also Marcino, 181 Ohio App.3d 328, 2009-Ohio-1178, 908 N.E.2d 1032, at ¶ 51 (finding this exact language sufficient to evince actual possession of a note in the form of bearer paper). As a holder, U.S. Bank is a person entitled to enforce the note. See
{¶ 37} However, we find that U.S. Bank has not sufficiently established that any conditions precedent have been satisfied.
Where a cause of action is contingent upon the satisfaction of some condition precedent,
Civ.R. 9(C) requires the plaintiff to plead that the condition has been satisfied, and permits the plaintiff to aver generally that any conditions precedent to recovery have been satisfied, rather than requiring plaintiff to detail specifically how each condition precedent has been satisfied. In contrast to the liberal pleading standard for a party alleging the satisfaction of conditions precedent, a party denying performance or occurrence of a condition precedent must do so specifically and with particularity.Civ.R. 9(C) . A general denial of performance of conditions precedent is not sufficient to place performance of a condition precedent in issue. * * * The effect of the failure to deny conditions precedent in the manner provided byCiv.R. 9(C) is that they are deemed admitted.
{¶ 38} “Where, however, a cause of action is contingent upon the satisfaction of some condition precedent, and the plaintiff fails to allege, even generally, that the condition has been satisfied, ‘[a] defending party may raise the defense of failure to state a claim upon which relief can be granted as late as the trial on the merits * * *.” MERS, Inc. v. Vascik, 6th Dist. No. L-09-1129, 2010-Ohio-4707, ¶ 17, quoting Natl. City Mtge. Co. v. Richards, 182 Ohio App.3d 534, 2009-Ohio-2556, ¶ 24 (10th Dist.).
{¶ 40} Nevertheless, we note that,
“a party seeking summary judgment always bears the initial responsibility of informing the [trial] court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,” which it believes demonstrate the absence of a genuine issue of material fact. Dresher, 75 Ohio St.3d at 288, quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
“[T]he burden on the moving party may be discharged by ‘showing‘-that is, pointing out to the [trial] court-that there is an absence” of a genuine issue of material fact. Dresher at 289-290, quoting Celotex at 325. Thus, because U.S. Bank made no mention of possible admissions in the pleadings in its motion for summary judgment, the question of whether the purported general denial constituted an admission by Coffey is not before us. With respect to the record
before the trial court, U.S. Bank pointed only to Stewart‘s affidavit. In her affidavit, Stewart did not address the issue of whether U.S. Bank satisfied all conditions precedent accordance with the mortgage agreement. Thus, U.S. Bank failed to meet its initial Dresher burden of pointing to portions of the record that show the absence of a genuine issue of material fact. Dresher at 292-293.
{¶ 41} Furthermore, our de novo review reveals that U.S. Bank has also failed to prove that there is no genuine issue of material fact as to the amount of principal and interest due. In its complaint, U.S. Bank pleaded that Coffey owes “$60,154.16, together with interest at the rate of 5.7500% per year from June 1, 2009 * * *.” Coffey generally denied this allegation. In its motion for summary judgment, U.S. Bank was required to support its motion by pointing to some evidence in the record of the type listed in
{¶ 42} Because there remain genuine issues of material fact, U.S. Bank is not entitled to summary judgment as a matter of law.
{¶ 43} Accordingly, U.S. Bank‘s second assignment of error is not well-taken.
III. CONCLUSION
{¶ 44} In conclusion, we reverse judgment of the Erie Court of Common Pleas which dismissed U.S. Bank‘s complaint but affirm the trial court‘s judgment denying
{¶ 45} U.S. Bank and Coffey are ordered to pay one-half the costs of this appeal pursuant to App.R. 24.
Judgment affirmed, in part, and reversed, in part.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.Loc.App.R. 4.
Mark L. Pietrykowski, J. _______________________________
JUDGE
Thomas J. Osowik, J. _______________________________
Stephen A. Yarbrough, 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.