Case Information
*1
[Cite as
Wells Fargo Bank, N.A. v. Goebel
,
IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT MONTGOMERY COUNTY
WELLS FARGO BANK, N.A. :
: Appellate Case No. 25745 Plaintiff-Appellee :
: Trial Court Case No. 12-CV-5363 v. :
:
NICKLAS S. GOEBEL, et al. : (Civil Appeal from
: (Common Pleas Court) Defendants-Appellants :
:
. . . . . . . . . . .
O P I N I O N
Rendered on the 7th day of February, 2014.
. . . . . . . . . . .
SCOTT A. KING, Atty. Reg. #0037582, and JESSICA E. SALISBURY, Atty. Reg. #0085038, Thompson Hine LLP, Austin Landing I, 10050 Innovation Drive, Suite 400, Miamisburg, Ohio 44122
Attorney for Plaintiff-Appellee, Wells Fargo Bank, NA MARC E. DANN, Atty. Reg. #0039425, GRACE M. DOBERDRUK, Atty. Reg. #0085547, DANIEL M. SOLAR, Atty. Reg. #0085632, and JIM M. DOUGLASS, Atty. Reg. #0022085, Dann, Doberdruk & Harshman, 4600 Prospect Avenue, Cleveland, Ohio 44103
Attorneys for Defendant-Appellant, Nicklas S. Goebel and Ashley Powell MATHIAS H. HECK, JR., by DOUGLAS TROUT, Atty. Reg. #0072027, Montgomery County Prosecutor’s Office, Appellate Division, Montgomery County Courts Building, P.O. Box 972, 301 West Third Street, Dayton, Ohio 45422
Attorney for Defendant-Appellee, Montgomery County Treasurer
. . . . . . . . . . . . .
HALL, J.,
{¶ 1} Nicklas S. Goebel appeals from the trial court’s entry of summary judgment against him on plaintiff-appellee Wells Fargo Bank’s complaint for judgment on a note and foreclosure on a mortgage. Goebel advances two assignments of error on appeal. First, he contends the trial
court erred in entering a judgment entry and decree of foreclosure where Wells Fargo has not obtained a judgment against all parties with an interest in the subject property. Second, he claims the trial court erred in entering summary judgment against him where genuine issues of material fact exist for trial. The record reflects that Goebel and co-defendant Ashley Powell borrowed money
from Southern Ohio Mortgage, LLC, to purchase a home in Centerville, Ohio. Goebel and Powell executed a note in the amount of $147,283. To secure repayment, they executed a mortgage against the home. Southern Ohio Mortgage later endorsed the note in favor of Wells Fargo, which endorsed the note in blank. Southern Ohio Mortgage also assigned the mortgage to Wells Fargo. Thereafter, Goebel and Powell became delinquent on the note. Wells Fargo filed the present action against them in July 2012, seeking a judgment on the note and a decree of foreclosure. In January 2013, Wells Fargo moved for summary judgment against Goebel and Powell. Wells Fargo subsequently withdrew the motion with regard to Powell when a question arose as to whether the correct person had been served with the complaint. The trial court then granted Wells Fargo’s summary judgment motion as to Goebel. It entered judgment against Goebel on the note and issued a decree foreclosing “the equity of redemption of any and all defendants and all persons claiming under and through them” and authorizing a sheriff’s sale of the home. The ruling contained Civ.R. 54(B) certification. (Doc. #50). This appeal by Goebel followed.
{¶ 4}
In his first assignment of error, Goebel contends the trial court erred in entering a
judgment entry and decree of foreclosure where Wells Fargo has not obtained a judgment against
co-defendant Powell. Goebel reasons that “without obtaining judgment against all titleholders of
the subject property and all parties to the subject note and mortgage, there cannot be a decree of
foreclosure with provisions authorizing the sale of the subject property.”
We find Goebel’s argument to be persuasive with respect to the decree of
foreclosure. The note Goebel and Powell executed made them jointly and severally liable for the
money they borrowed. (Doc. #38 at Exh. A). We see no reason why the trial court could not enter
judgment separately against Goebel on the note.
See, e.g., Ohio Sav. Bank v. Virden
, 9th Dist.
Summit No. 17885,
foreclosure action.
Western Mortgage & Realty Co. v. Bouquett
, 2d Dist. Montgomery No.
15441,
existed about proper service of process, she remains a defendant below and a renewed summary judgment motion is pending against her. Implicit in the requirement to join all persons with an interest in the property to a foreclosure action is a concomitant requirement to obtain a judgment that forecloses their right of redemption before authorizing a sheriff’s sale. Here the trial court’s judgment entry and decree of foreclosure extinguishes the equity of redemption held by “all defendants.” But Wells Fargo has not yet properly obtained such relief against Powell, who has not yet had her day in court. The fact that Powell is a necessary party to this action demonstrates that she has a right to participate in the proceeding before the trial court can foreclose her equity of redemption and authorize a sheriff’s sale of her home. Accordingly, we hold that the trial court erred in entering a decree of foreclosure against all defendants that authorized a sheriff’s sale of the subject real estate. The first assignment of error is sustained. In his second assignment of error, Goebel claims summary judgment was
improper because genuine issues of material fact exist for trial. Specifically, he argues that factual disputes exist regarding (1) Wells Fargo’s standing to seek foreclosure and (2) Wells Fargo’s compliance with the face-to-face interview requirement of 24 C.F.R. §203.604, which Goebel claims is a condition precedent to foreclosure. With regard to standing, Goebel advances several arguments. First, he challenges
the sufficiency of a summary judgment affidavit by Wells Fargo vice president Amanda Weatherly. He contends she (1) failed to aver familiarity with the compiling and retrieval of loan-related records at issue and (2) failed adequately to establish default on the note and the amount owed. Second, Goebel contends a genuine issue of material fact exists as to Wells Fargo’s entitlement to enforce the note and mortgage when it filed its complaint. Specifically, he challenges the validity of the assignment of the mortgage to Wells Fargo. He also claims Wells Fargo did not establish possession of the note when it filed its complaint. He points out that the note was endorsed from Southern Ohio Mortgage to Wells Fargo and then endorsed in blank by Wells Fargo. Goebel observes that both endorsements were made by the same person. He questions that person’s authority to execute two endorsements. Finally, Goebel claims the existence of an endorsement in blank by Wells Fargo suggests negotiation of the note to another entity. We are unpersuaded that any of the foregoing arguments preclude summary
judgment. We see no material defect in Weatherly’s affidavit. She averred that her affidavit was
based on her review of the pertinent loan documents and her personal knowledge of how they are
“kept and maintained.” (Doc. #38). Contrary to Goebel’s argument, we are unconvinced that
Weatherly had to use the words “complied and retrieved” as opposed to “kept and maintained.”
We also believe Weatherly adequately established Goebel’s default on the note. She averred that
he was in default and identified the amount due. Nothing more was required. “An affidavit
stating the loan is in default is sufficient for purposes of Civ.R. 56 in the absence of evidence
controverting those averments.”
Bank One, N.A. v. Swartz
, 9th Dist. Lorain No. 03CA008308,
Wells Fargo’s standing. The note, which had been endorsed in blank, was in Wells Fargo’s
possession before it commenced the present action. Therefore, Wells Fargo was a holder of the
note with a right to enforce it.
See Bank of New York Mellon v. Baird
, 2d Dist. Clark No.
2012-CA-28,
of the mortgage, Wells Fargo indisputably held the note secured by the mortgage when it filed its
complaint. That being so, Wells Fargo was not even required to have the mortgage formally
assigned to it. Ohio courts have recognized that the mortgage automatically follows the note it
secures.
See
,
e.g.
,
Bank of New York Mellon v. Loudermilk
, 5th Dist. Fairfield No. 2012-CA-30,
face-to-face interview requirement of 24 C.F.R. §203.604. With some exceptions, this regulation 8 obligates a lender to attempt an in-person meeting with a borrower. Goebel argues that Wells Fargo was required to demonstrate compliance with the regulation, or the applicability of an exception, as a condition precedent to maintaining the present action. Because Wells Fargo’s summary judgment motion and accompanying evidence failed to address the regulation, Goebel asserts that the bank failed to meet its burden. Therefore, he contends the trial court erred in finding Wells Fargo entitled to a decree of foreclosure. [1] In response, Wells Fargo asserts that non-compliance with 24 C.F.R. §203.604 is
an affirmative defense on which Goebel bore the burden of proof. Wells Fargo claims Goebel’s affidavit opposing summary judgment failed to demonstrate a genuine issue of material fact as to the bank’s non-compliance with the regulation. Therefore, Wells Fargo argues that the trial court properly entered summary judgment in its favor and issued a decree of foreclosure. Controversy over whether the regulation at issue imposes a condition precedent on a lender or creates an affirmative defense for a borrower has been recognized often. Seldom, however, has an Ohio court actually and necessarily decided the issue. See Ohio Consumer Law, §29.11, FHA-insured loans—Non-compliance as defense to foreclosure (“In line with HUD’s clear regulation, Ohio appellate courts have consistently held that lenders cannot obtain a foreclosure judgment without complying with FHA regulations; however, the appellate districts have employed different legal analyses to reach this conclusion. * * * Many courts have simply not analyzed the distinction between defenses and conditions precedent in holding that non-complying lenders could not proceed with foreclosure.”). This court has addressed 24 C.F.R. §203.604 at least twice. Neither time did it
explicitly resolve the condition-precedent-versus-affirmative-defense issue. In
Washington Mut.
Bank v. Mahaffey
, 154 Ohio App.3d 44,
defense, then the trial court did not err. This is so because Goebel failed to create a genuine issue
of material fact as to Wells Fargo’s non-compliance with the regulation. In an affidavit opposing
summary judgment, Goebel averred “[u]pon information and belief” that Wells Fargo had a
branch office within 200 miles of his home.
[2]
(Doc. #43). He also averred that he “d[id] not
recall” having a face-to-face meeting with anyone from Wells Fargo. (
Id
.). Averments made
11 “upon information and belief” are not indicative of personal knowledge and are insufficient to
create a genuine issue of material fact.
Insurance Co. of North America v. Mall Builders, Inc
., 2d
Dist. Montgomery No. 7756, 1982 WL 3840 (Oct. 28, 1982);
State ex rel. Anderson v. Obetz
,
10th Dist. Franklin No. 06AP-1030,
precedent or provides an affirmative defense. “Whereas an affirmative defense is separate from
the merits of the plaintiff’s cause of action and bars recovery even when the plaintiff has
established a prima facie case, a condition precedent is directly tied to the merits of the plaintiff’s
cause of action, which is itself contingent upon satisfaction of the condition.”
National City
Mortg. Co. v. Richards
, 182 Ohio App.3d 534,
“concerning [the borrower’s] equitable defense alleging the bank’s failure to comply with [24 C.F.R. §203.604] * * * .” (Emphasis added). Mahaffey at ¶ 2 and ¶ 53. Admittedly, Mahaffey did not explicitly address the possibility that 24 C.F.R. §203.604 might create a condition precedent rather than an affirmative defense. Nevertheless, we believe Mahaffey’s holding correctly identified non-compliance as an equitable “defense” to foreclosure. In discussing the regulation’s face-to-face interview requirement, this court reasoned:
* * *
[I]f a lender's failure either to have a face-to-face interview, or to
make a reasonable effort to arrange the interview, within the first three months of
default is deemed to preclude the lender from ever bringing a foreclosure action,
the regulation would have too much force.
A commonsense construction of the
regulation is that it requires, subject to the exceptions contained in division (c)(2),
those carrying higher credit risks. * * * Thus, the regulations do not control directly the relationship between the mortgagor and mortgagee
and may not be invoked by the mortgagor as a sword in an offensive cause of action against the mortgagee.”). On the other hand, many
courts have held that a borrower may raise the loan-servicing requirements defensively, as a shield, when a non-compliant lender attempts to
foreclose. See Ohio Consumer Law, §29.11, FHA-insured loans—Non-compliance as defense to foreclosure (“In line with HUD’s clear
regulation, Ohio appellate courts have consistently held that lenders cannot obtain a foreclosure judgment without complying with FHA
regulations; however, the appellate districts have employed different legal analyses to reach this conclusion.”); see also GMAC Mortg. of
Pennsylvania v. Gray, 10th Dist. Franklin No. 91 AP-650,
that a lender either have a face-to-face interview or make a reasonable effort to arrange the interview before bringing a foreclosure action, and that the mortgagee is urged, by the regulation, to have the interview, or to make a reasonable effort to arrange the interview, within the three-month default period. We find support for this construction in Section 203.606(a), which provides:
“Before initiating foreclosure, the mortgagee must ensure that all servicing requirements of this subpart have been met. The mortgagee may not commence foreclosure for a monetary default unless at least three full monthly installments due under the mortgage are unpaid after application of any partial payments that may have been accepted but not yet applied to the mortgage account. * * *”
Thus, the scheme of the regulation is that a lender may not commence foreclosure until at least three full monthly installments are due but unpaid, and the lender, before initiating foreclosure, must ensure that the servicing requirements have been met, including the face-to-face interview requirement. It would be inconsistent with Section 203.606(a) to allow a lender to commence foreclosure after three full months of default, without having complied with the face-to-face interview requirements of Section 203.604(b). Although it would not be inconsistent with 203.606(a) to construe Section 203.604(b) to forever bar a foreclosure action when the lender has failed to comply with the face-to-face interview requirement during the first three months of default, we conclude that a construction to that effect would be unduly harsh to lenders[.] (Emphasis added) Mahaffey at ¶ 22-24. Construing 24 C.F.R. §203.604 as an equitable affirmative defense, rather than a
condition precedent, is consistent with avoiding the “unduly harsh” scenario this court
recognized in
Mahaffey
. In reaching this conclusion, we note that “actions in foreclosure arise in
equity.”
Wells Fargo Bank v. Young
, 2d Dist. Darke No. 2009 CA 12,
responsibility of the court to weigh the equitable considerations[.]”
Gorsuch Homes, Inc. v.
Wooten
,
affirmative defense to foreclosure, we also recognize “the law disfavors conditions precedent[.]”
Evans, Mechwart, Hambleton & Tilton, Inc. v. Triad Architects, Ltd.
, 196 Ohio App.3d 784,
16 In relevant part, 24 C.F.R. §203.500 states: “It is the intent of the Department [of
Housing and Urban Development] that no mortgagee shall commence foreclosure * * * until the
requirements of this subpart have been followed.”
[5]
Similarly, 24 C.F.R. §203.606(a) provides:
“Before initiating foreclosure, the mortgagee must ensure that all servicing requirements of this
subpart have been met.”
[6]
This language has the force and effect of law because it has been
codified in the Code of Federal Regulations.
CitiMortgage, Inc. v. Carpenter
, 2d Dist.
Montgomery No. 24741,
conclusion contrary
to ours.
In one of
few opinions actually deciding
the
condition-precedent-versus-affirmative-defense issue, the Stark County Court of Appeals in
U.S.
Bank v. Detweiler
,
It has been held that a term in a mortgage such as one requiring prior
notice of a default or acceleration to the mortgagor is not an affirmative defense
but rather a condition precedent.
LaSalle Bank v. Kelly
, Medina App. No.
09CA0067-M,
Id. at ¶ 52-53.
{¶ 27} Having reviewed Detweiler , we are unpersuaded by its cursory examination of the issue before us. We therefore decline to follow the Fifth District’s approach. For the reasons set forth above, we conclude that 24 C.F.R. §203.604 imposes no impediment to foreclosure by Wells Fargo. This is so because Goebel failed to create a genuine issue of material fact on his affirmative defense regarding the bank’s alleged non-compliance with the face-to-face interview requirement. The trial court’s judgment is affirmed in part and reversed in part. The judgment
is affirmed insofar as the trial court entered judgment against Goebel on the note and for foreclosure. The judgment is reversed insofar as the trial court foreclosed the equity of redemption of Defendant Ashley Powell and authorized a sheriff’s sale. The cause is remanded for further proceedings.
. . . . . . . . . . . . .
DONOVAN and WELBAUM, JJ., concur.
Copies mailed to:
Scott A. King
Jessica E. Salisbury
Marc E. Dann
Daniel M. Solar
James M. Douglass
Grace M. Doberdruk
Mathias H. Heck
Douglas Trout
Hon. Timothy N. O’Connell
Notes
[1] Although we already have found the decree of foreclosure improper based on Ashley Powell’s unresolved right of redemption, we note that Wells Fargo currently has an identical summary judgment motion pending against her. If Wells Fargo obtains summary judgment against Powell, as it did against Goebel, the affirmative-defense -versus-condition-precedent issue with regard to 24 C.F.R. §203.604 likely will be before us once again. Therefore, judicial economy favors addressing the issue now.
[2] If there is no office within 200 miles of a borrower’s residence, a lender need not attempt a face-to-face interview.
[3] A fair argument could be made that a violation of 24 C.F.R. §203.604 does not directly benefit Goebel at all and that the
loan-servicing requirements contained in the Code of Federal Regulations enure to the benefit of the federal government, which insures the
loans. The parties present this case to us to decide whether the “servicing defense” is an affirmative defense or condition precedent.
Consequently we do not decide whether the regulations are at all applicable. It is clear that a borrower has no private cause of action for a
violation of 24 C.F.R. §203.604 or other loan-servicing requirements. See, e.g., Nat. Mortg. Ass'n v. LeCrone,
[4] One problem with failing to satisfy the face-to-face interview requirement, or all of the numerous other loan-servicing obligations in subpart C of 24 C.F.R. Part 203, each of which, following Appellant’s logic, would become a condition precedent (203.606(a) applies to “all servicing requirements of this subpart”), is that many of the regulations impose a deadline for a lender to act. Once a particular deadline has expired, the particular servicing requirement would forever prevent foreclosure. For example, 24 C.F.R. §203.604 obligates a lender to attempt a face-to-face interview with a borrower “before three full monthly installments due on the mortgage are unpaid.” It is unclear how a lender ever could comply with this requirement after three monthly payments become due. Months later, when the borrower raises the servicing defense, the borrower is even further behind and the window of opportunity is closed. As this court recognized in Mahaffey, a strict reading of 24 C.F.R. §203.604 permanently could bar a foreclosure action where the face-to-face interview requirement is not timely satisfied. We agree with Mahaffey that such a result seems “unduly harsh” and inequitable.
[5] Both 24 C.F.R. §203.500 and 24 C.F.R. §203.604 are contained in Subpart C of Part 203.
[6] The face-to-face interview requirement of 24 C.F.R. §203.604 is one of the servicing requirements contained in Subpart C of Part 203.