Paul Cheatham IRA v. Huntington Natl. Bank ( 2017 )


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  • [Cite as Paul Cheatham IRA v. Huntington Natl. Bank, 2017-Ohio-9234.]
    IN THE COURT OF APPEALS OF OHIO
    SIXTH APPELLATE DISTRICT
    LUCAS COUNTY
    Paul Cheatham IRA                                       Court of Appeals No. L-16-1292
    Appellant                                       Trial Court No. CI0201502696
    v.
    The Huntington National Bank                            DECISION AND JUDGMENT
    Appellee                                        Decided: December 22, 2017
    *****
    Ronald R. Parry, for appellant.
    J. Philip Calabrese, Jay A. Yurkiw, Robert W. Trafford and
    Ryan L. Graham, for appellee.
    *****
    JENSEN, P.J.
    {¶ 1} This is an appeal from the judgment of the Lucas County Court of Common
    Pleas, denying appellant’s, Paul Cheatham IRA, motion to certify a class. For the reasons
    that follow, we reverse.
    I. Facts and Procedural Background
    {¶ 2} The facts for purposes of this appeal are not in dispute. On May 19, 2015,
    appellant filed this class action lawsuit against appellee, The Huntington National Bank,
    on behalf of itself and other bondholders who invested funds into a municipal bond issue
    described as “$6,590,000 COUNTY OF LUCAS OHIO HOSPITAL FACILITIES
    REFUNDING REVENUE (NON-TAXABLE) BONDS, SERIES 1998 (VILLA NORTH
    PROJECT) CUSIP 54309 BP6, 549309 BQ4, 549309 BR2, 549309 BS0.” The
    complaint alleged that Lucas County was the technical obligor on the bonds for tax
    purposes, but in reality, Foundation for the Elderly, Inc. (“Foundation”) was the obligor
    and lessee of the Villa North nursing home project. Appellee served as the trustee for the
    bondholders and as lessor of the project pursuant to a Trust Indenture entered into
    between appellee and Lucas County.
    {¶ 3} Sometime before June 2003, Foundation went into default, and West Toledo
    Healthcare became the substitute obligor. By December 2003, Benchmark Healthcare of
    Toledo, Inc. (“Benchmark”) had become the obligor in place of West Toledo Healthcare,
    and had defaulted on the bond payments. Notably, appellee provided notices to the
    bondholders of the defaults and changes in obligors. In May 2004, Benchmark filed for
    reorganization under Chapter 11 of the Bankruptcy Code, and in December 2007, filed its
    First Amended Plan of Reorganization. After the bondholders voted in favor of the plan,
    the bankruptcy court approved the plan. Relevant here, appellant began purchasing these
    2.
    bonds for a fraction of the face value on November 3, 2003, and continued to purchase
    them through June 7, 2007.
    {¶ 4} By July 2009, Benchmark had failed to implement the amended
    reorganization plan. Thus, the bankruptcy was dismissed, and appellee filed a
    foreclosure action against Benchmark. In November 2014, the Villa North project was
    sold and a final distribution was made to the bondholders. In the final distribution, the
    bondholders only received approximately $350,000 of the $6,590,000 initial bond issue.
    {¶ 5} Within the class action complaint, appellant asserted claims for breach of
    fiduciary duty, breach of trust under R.C. 5801.01 et seq., negligence, breach of contract,
    and liability for mismanagement of the Villa North nursing home project. In general,
    appellant alleged that appellee “did virtually nothing to protect the interest of the
    Bondholders, while collecting substantial sums of Bondholder money as its
    compensation.” Upon motion of appellee, the trial court dismissed all of the claims
    except the breach of contract claim as being barred by the statute of limitations.
    {¶ 6} Thereafter, appellant moved to certify a class on the remaining breach of
    contract claim, describing the class as “All persons or entities who own bonds.” Appellee
    opposed the motion for class certification, arguing, inter alia, that appellant had not
    satisfied the requirement under Civ.R. 23(B)(3) that, “the questions of law or fact
    common to class members predominate over any questions affecting only individual
    members, and that a class action is superior to other available methods for fairly and
    efficiently adjudicating the controversy.” In particular, appellee argued that the class is
    3.
    comprised of bondholders who purchased the bonds at different times and after different
    key events. Thus, the facts, evidence, and related legal issues of liability would differ
    among class members based on when the members acquired the bonds, or whether the
    members approved the bankruptcy reorganization plan. Appellant, on the other hand,
    argued that the issue of whether appellee breached the Trust Indenture was common to all
    current bondholders because under R.C. 1308.16(A), “[A] purchaser of a certificated or
    uncertificated security acquires all rights in the security that the transferor had or had
    power to transfer.” Appellant concluded, therefore, that the right to sue for breach of
    contract that was held by bondholders at the time of the breach transferred to subsequent
    purchasers of the bonds.
    {¶ 7} On November 16, 2016, the trial court entered its judgment denying
    appellant’s motion to certify a class. The trial court reasoned that the term “rights in the
    security” under R.C. 1308.16(A) does not include a claim against a third party for breach
    of contract, such as appellant’s claim in the current action. Consequently, because
    appellant has alleged numerous breaches over a significant period of time, and because
    the claims do not transfer to subsequent purchasers, different class members would have
    different potential damages and would emphasize different potential breaches. Therefore,
    the trial court determined that appellant had not satisfied the requirement under Civ.R.
    23(B)(3). Further, because the trial court found the predominance issue in Civ.R.
    23(B)(3) to be determinative, it did not consider any of the other Civ.R. 23 requirements
    for bringing a class action.
    4.
    II. Assignment of Error
    {¶ 8} Appellant has timely appealed the trial court’s November 16, 2016
    judgment, asserting one assignment of error for our review:
    1. The trial court incorrectly interpreted the provisions of R.C.
    1308.16(A) (§ 8-302 of the Uniform Commercial Code (UCC)) in ruling
    that the transferors’ right to file a lawsuit was not one of the rights that was
    transferred when a municipal bond (an investment security) was acquired
    by the transferee, the Plaintiff-Appellant.
    III. Analysis
    {¶ 9} We review the trial court’s decision in determining whether a class action
    may be maintained for an abuse of discretion. State ex rel. Davis v. Pub. Emps.
    Retirement Bd., 
    111 Ohio St. 3d 118
    , 2006-Ohio-5339, 
    855 N.E.2d 444
    , ¶ 18. An abuse
    of discretion connotes that the trial court’s attitude was unreasonable, arbitrary, or
    unconscionable. Blakemore v. Blakemore, 
    5 Ohio St. 3d 217
    , 219, 
    450 N.E.2d 1140
    (1983).
    {¶ 10} “[A]ppellate courts overwhelmingly, if not universally, give trial courts
    broad discretion in deciding whether to certify a class.” Davis at ¶ 18, quoting Hamilton
    v. Ohio Savs. Bank, 
    82 Ohio St. 3d 67
    , 70, 
    694 N.E.2d 442
    (1998). “[T]he
    appropriateness of applying the abuse-of-discretion standard in reviewing class action
    determinations is grounded not in credibility assessment, but in the trial court’s special
    expertise and familiarity with case-management problems and its inherent power to
    5.
    manage its own docket.” 
    Id. “Therefore, ‘while
    a trial court’s determination concerning
    class certification is subject to appellate review on an abuse-of-discretion standard, due
    deference must be given to the trial court’s decision’ and any ‘finding of abuse of
    discretion, particularly if the trial court has refused to certify, should be made
    cautiously.’” 
    Id., quoting Marks
    v. C.P. Chem. Co., 
    31 Ohio St. 3d 200
    , 201, 
    509 N.E.2d 1249
    (1987).
    {¶ 11} The Ohio Supreme Court has recognized seven requirements that must be
    satisfied before an action may be maintained as a class action under Civ.R. 23:
    (1) an identifiable class must exist and the definition of the class must be
    unambiguous; (2) the named representatives must be members of the class;
    (3) the class must be so numerous that joinder of all members is
    impracticable; (4) there must be questions of law or fact common to the
    class; (5) the claims or defenses of the representative parties must be typical
    of the claims or defenses of the class; (6) the representative parties must
    fairly and adequately protect the interests of the class; and (7) one of the
    three Civ.R. 23(B) requirements must be met. Hamilton at 71, 
    694 N.E.2d 442
    , citing Civ.R. 23(A) and (B).
    {¶ 12} Here, the trial court’s decision, and this appeal, focuses on whether
    appellant has satisfied Civ.R. 23(B)(3), which provides,
    6.
    A class action may be maintained if Civ.R. 23(A) is satisfied, and if:
    ***
    (3) the court finds that the questions of law or fact common to class
    members predominate over any questions affecting only individual
    members, and that a class action is superior to other available methods for
    fairly and efficiently adjudicating the controversy. The matters pertinent to
    these findings include:
    (a) the class members’ interests in individually controlling the
    prosecution or defense of separate actions;
    (b) the extent and nature of any litigation concerning the controversy
    already begun by or against class members;
    (c) the desirability or undesirability of concentrating the litigation of
    the claims in the particular forum; and
    (d) the likely difficulties in managing a class action.
    {¶ 13} In its appellate brief, appellant frames the issue we must decide as “whether
    the purchaser of a bond acquires causes of action that arose, under the terms of a Trust
    Indenture, prior to the time that the bondholder acquired the bonds.” Appellant
    acknowledges that if we determine that a subsequent purchaser does not acquire those
    causes of action, then certification of the class is not appropriate. However, appellant
    takes the position that the subsequent purchaser of a bond does acquire the cause of
    action pursuant to R.C. 1308.16, which is Ohio’s version of U.C.C. § 8-302.
    7.
    {¶ 14} R.C. 1308.16 provides, in its entirety,
    (A) Except as otherwise provided in divisions (B) and (C) of this
    section, a purchaser of a certificated or uncertificated security acquires all
    rights in the security that the transferor had or had power to transfer.
    (B) A purchaser of a limited interest acquires rights only to the
    extent of the interest purchased.
    (C) A purchaser of a certificated security who as a previous holder
    had notice of an adverse claim does not improve its position by taking from
    a protected purchaser.
    {¶ 15} Appellant argues that his claim against appellee is a “right in the security”
    because the Trust Indenture explains that the trust is to be executed “for the equal and
    proportionate benefit, security and protection of all present and future holders and owners
    of the Bonds issued or to be issued under and secured by this Indenture.” The trial court,
    recognizing that this is an issue of first impression, disagreed. In reaching its decision,
    the trial court relied on the reasoning set forth in Consol. Edison, Inc. v. Northeast Util.,
    
    318 F. Supp. 2d 181
    (S.D.N.Y.2004), rev’d on other grounds, Consol. Edison, Inc. v.
    Northeast Util., 
    426 F.3d 524
    (2d Cir.2005).
    {¶ 16} In Consolidated Edison, the dispute arose over a failed merger between
    Consolidated Edison, Inc. (“Con Ed”) and Northeast Utilities (“NU”). As part of the
    agreement, Con Ed agreed to purchase all outstanding shares of NU at a substantial
    premium over the market price. Shortly before the merger was completed, though, Con
    8.
    Ed announced that it would not proceed. Con Ed then filed an action seeking a
    declaratory judgment that it had no obligations under the merger agreement. NU
    counterclaimed, arguing that Con Ed repudiated and breached the agreement. NU sought
    to recover, in part, the “lost premium” on behalf of its current and future shareholders as
    third-party beneficiaries to the merger agreement. Robert Rimkoski intervened as a
    defendant and filed a claim against Con Ed, also seeking to recover the lost premium due
    to Con Ed’s breach of the merger agreement. Rimkoski sought to represent a class of
    similarly situated individuals who owned shares of NU on March 5, 2001, the date of the
    alleged breach. The question before the court was whether “the third-party beneficiary
    claim belong[s] to those who held NU shares at the time of Con Ed’s alleged breach on
    March 5, 2001, * * * or to those who are holding NU shares at the time that a judgment
    against Con Ed is entered, collected, or distributed.” 
    Id. at 183.
    More specifically,
    “Where shareholders are third-party beneficiaries of a contract between the corporate
    issuer of the stock and a third party, is the right to sue that third party for breach of the
    contract automatically transferred to a subsequent purchaser of the stock?” 
    Id. {¶ 17}
    NU argued, as appellant does here, that the stock-related contract claims
    against third parties were automatically assigned to subsequent purchasers of the stock by
    virtue of New York’s version of U.C.C. § 8-302(a), which is identical to R.C.
    1308.16(A). The trial court rejected this argument, finding that the legislative history and
    structure of the U.C.C. “confirm that § 8-302(a), rather than defining what rights are in
    the security, involves the mechanism for transferring rights and applies primarily to
    9.
    disputes over the quality of title and the competing ownership rights passed from
    transferor to transferee.” 
    Id. at 188.
    The court concluded that,
    Section 8-302 does not define “rights in a security” or codify a rule
    assigning to purchasers any claim accrued while possessing the security.
    The provision simply provides that whatever “rights in the security” are,
    they are automatically transferred to a purchaser unless (a) the transferor
    did not own or control them, (b) the purchase was for a limited interest, or
    (c) the purchaser is a prior holder with notice of an adverse claim taking
    from a protected purchaser. 
    Id. at 189-190.
    {¶ 18} Having concluded that U.C.C. § 8-302 automatically conveys only the
    “rights in the security,” the trial court then determined that the “rights in the security” do
    not include the rights of “third-party beneficiaries arising out of agreements separate from
    the contract embodied in the security.” 
    Id. at 190.
    This is where we find Consolidated
    Edison to be distinguishable.
    {¶ 19} Whereas the parties in Consolidated Edison were bringing counterclaims
    against a separate and unrelated company based on its purported breach of an agreement
    with the company that issued the shares, here, appellant is bringing a claim against the
    trustee for the bondholders based on a breach of the Trust Indenture. The Trust Indenture
    is part of the “bond proceedings.” R.C. 140.01(J) (“‘Bond proceedings’ means one or
    more ordinances, resolutions, trust agreements, indentures, and other agreements or
    documents, and amendments and supplements to the foregoing, or any combination
    10.
    thereof, authorizing or providing for the terms, including any variable interest rates, and
    conditions applicable to, or providing for the security of, obligations and the provisions
    contained in such obligations.”); see also R.C. 140.06(I) (“Such obligations may be
    secured additionally by a trust agreement or indenture between the public hospital agency
    and a corporate trustee which may be any trust company or bank * * *. Any such
    agreement or indenture may contain, as part thereof, any of the bond proceedings, * * *
    and other provisions which are customary or appropriate in an agreement or indenture of
    such type, including but not limited to: * * * (3) The rights and remedies of the holders
    of obligations and of the trustee, and provisions for protecting and enforcing them
    * * *.”). Thus, a claim for breach of the Trust Indenture arises out of the contract with
    the bondholders, and is therefore properly considered a “right in the security” that passes
    to a subsequent purchaser under R.C. 1308.16(A).
    {¶ 20} Appellee argues that this result improperly transforms R.C. 1308.16(A) to
    provide for the automatic transfer of all rights “related to” the security or “accrued while
    possessing” the security, and cites two cases for the proposition that ownership of a
    security does not automatically result in an assignment of any claims. We find the cases
    cited by appellee to be inapposite.
    {¶ 21} In In re Nucorp Energy Secs. Litigation, 
    772 F.2d 1486
    (9th Cir.1985), the
    plaintiffs (the Phelps Committee) brought an action against the indenture trustee, raising
    a federal claim for breach of trust under the Trust Indenture Act, as well as state-law
    claims for breach of fiduciary duty, willful misconduct, fraud and deceit, and negligence.
    11.
    The action was related to a class action brought by parties who purchased debentures
    between October 1, 1981, and January 20, 1982. In the class action, the class argued that
    the indenture trustee knew that the disclosure documents accompanying the debenture
    issue were misleading. The Phelps Committee represents purchasers who bought the
    debentures from class members after January 20, 1982. In bringing its action, the Phelps
    Committee argued that it automatically acquired the sellers’ causes of action when it
    purchased the debentures from the class members. Thus, the issue before the court was
    “whether, under federal or state law, the direct purchasers’ rights were automatically
    transferred to the subsequent purchasers.” 
    Id. at 1488.
    {¶ 22} As it pertains to the federal claim for breach of trust under the Trust
    Indenture Act, the Ninth Circuit held that federal law applied to the assignability of such
    claims, and under federal law, there was no remedy for “subsequent purchasers to whom
    no misrepresentations were made directly or indirectly and to whom no statutorily
    provided cause of action was expressly assigned.” 
    Id. at 1490.
    As to the assignment of
    the state-law claims, the court found that New York law applied, and under that law, the
    state-law claims were not automatically transferred. In so holding, the Ninth Circuit
    agreed with the rationale that “[i]f causes of action were automatically transferred,
    defendants could be subject to double liability, and the transferees would recover
    damages even though they had suffered no injury, while the injured transferors would
    recover nothing.” 
    Id. at 1493.
    12.
    {¶ 23} Likewise in Bluebird Partners, L.P. v. First Fid. Bank, N.A., 
    85 F.3d 970
    ,
    971 (2d Cir.1996), the Second Circuit affirmed the trial court’s holding that “[A]
    bondholder’s claim under the [Trust Indenture Act] against an indenture trustee is not
    automatically assigned to a subsequent purchaser of the bond.”
    {¶ 24} However, Nucorp and Bluebird both involved claims under the Trust
    Indenture Act, which is not relevant here. Further, neither Nucorp or Bluebird considered
    U.C.C. § 8-302 to determine whether a claim for breach of the Trust Indenture Act was a
    “right in the security.” Finally, to the extent that Nucorp addressed attendant state-law
    claims against the indenture trustee, we note that those claims sounded in tort, not in
    contract for breach of the trust indenture agreement. Thus, we do not find Nucorp or
    Bluebird relevant to resolving the issue before us.
    {¶ 25} Instead, we find this case to be more closely analogous to R.A. Mackie &
    Co., L.P. v. PetroCorp Inc., 
    329 F. Supp. 2d 477
    (S.D.N.Y.2004), which was decided by
    the same court that decided Consolidated Edison. In R.A. Mackie, the plaintiffs were
    secondary purchasers of warrant certificates that were issued pursuant to a Warrant
    Agreement between Southern Mineral Corporation and American Stock Transfer and
    Trust Company. Southern Mineral Corporation ultimately was purchased by and merged
    into PetroCorp. Thereafter, plaintiffs filed a suit against PetroCorp, asserting, inter alia,
    two contract claims for breach of the Warrant Agreement, where the breach occurred
    prior to the plaintiffs acquiring the warrants. Relevant here, PetroCorp asserted as an
    13.
    affirmative defense that the right to bring claims for breach of the Warrant Agreement
    was not transferred with the warrants when the plaintiffs purchased them.
    {¶ 26} Relying on Texas’ version of U.C.C. 8-302(a), the trial court rejected
    PetroCorp’s argument. Specifically, the trial court noted that the claim was asserted
    against the successor-in-interest to the issuer of the warrants, and was based on the
    warrant agreement. The court found that “[t]he Warrants are a contract between
    PetroCorp and the Warrant holders that provide rights through the terms of the Warrant
    Certificate and the Warrant Agreement. The Warrant holders’ rights in the Warrants
    ‘thus include the rights against the issuer [here, PetroCorp] under the contract embodied
    in the security [here, the Warrant Agreement] as supplemented by federal and state law.’”
    
    Id. at 507,
    quoting Consolidated 
    Edison, 318 F. Supp. 2d at 192
    . Therefore, the court held
    that the plaintiffs’ claim for breach of the warranty agreement was a “right in the
    security” that automatically transferred with the purchase of the warrant. 
    Id. {¶ 27}
    Similarly, in the case before us, appellant’s cause of action arises from a
    breach of the Trust Indenture, which is part of the contract with the bondholders.
    Appellee argues that R.A. Mackie is distinguishable because in that case the cause of
    action was against the issuer, not the indenture trustee. However, we do not find that
    distinction to be meaningful since the basis for the claim is grounded in the same
    instrument that is part of the contract with the bondholders. Appellee’s position leads to
    the incongruous result that breach of the trust indenture by an issuer is a “right in the
    security,” but breach of the same trust indenture by the trustee is not. Therefore, we hold
    14.
    that a contract claim for breach of the Trust Indenture, whether asserted against the
    trustee or the obligor, arises out of the contract with the bondholders and is thus a “right
    in the security” that automatically transfers to subsequent purchasers pursuant to R.C.
    1308.16(A).
    {¶ 28} Accordingly, appellant’s assignment of error is well-taken.
    IV. Other Civ.R. 23 Requirements
    {¶ 29} In addition to arguing in opposition to appellant’s assignment of error,
    appellee argues that class certification under Civ.R. 23 is still not appropriate as appellant
    has failed to satisfy the other requirements of that rule. However, because the trial court
    based its determination solely on Civ.R. 23(B)(3), and did not consider any of the other
    requirements, we decline to rule on those issues for the first time on appeal. “If we were
    to reach issues that had not been addressed by the trial court in the first instance, we
    would be usurping the role of the trial court and exceed[ing] our authority on appeal.”
    Catalanotto v. Byrd, 9th Dist. Summit No. 27824, 2016-Ohio-2815, ¶ 12, quoting State v.
    M.D., 9th Dist. Lorain No. 14CA010657, 2015-Ohio-4003, ¶ 7. Therefore, we must
    remand the matter to the trial court to consider the remaining Civ.R. 23 requirements.
    V. Conclusion
    {¶ 30} For the foregoing reasons, the judgment of the Lucas County Court of
    Common Pleas is reversed. The matter is remanded to the trial court to consider the
    15.
    remaining Civ.R. 23 requirements for class certification and for further proceedings
    consistent with this decision. Appellee is ordered to pay the costs of this appeal pursuant
    to App.R. 24.
    Judgment reversed.
    A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
    See also 6th Dist.Loc.App.R. 4.
    Thomas J. Osowik, J.                             _______________________________
    JUDGE
    James D. Jensen, P.J.
    CONCUR.                                          ________________________________
    JUDGE
    Christine E. Mayle, J.                           ________________________________
    CONCURS AND                                                  JUDGE
    WRITES SEPARATELY.
    MAYLE, J.
    {¶ 31} I concur with the majority’s conclusion that, when appellant purchased the
    bonds at issue, it acquired “all rights in the security that the transferor had or had power
    to transfer” under R.C. 1308.16(A) and, in this case, such “rights” included accrued
    claims against appellee for breach of the Trust Indenture. The majority bases its
    16.
    conclusion on R.C. 140.01(J) and (I), which provide that a trust indenture is a part of the
    “bond proceedings,” and therefore a “right” that passed to appellant under R.C.
    1308.16(A). In my view, while that demonstrates that a bondholder has standing to sue
    under a trust indenture, it does not answer the ultimate question of whether a bondholder
    has standing to sue for prior breaches of that agreement. I believe that the answer to that
    question depends upon the precise terms of the particular “security” at issue.
    {¶ 32} A case from the Supreme Court of California, National Reserve Co. v.
    Metropolitan Trust Co., 
    17 Cal. 2d 827
    , 
    112 P.2d 598
    (1941), is instructive here, and has
    been cited with approval by at least one Ohio court. See 17 Mile, L.L.C. v. Kruzel, 8th
    Dist. Cuyahoga No. 99358, 2013-Ohio-3005, ¶ 13 (citing the rule announced by National
    Reserve when considering whether the assignment of “all rights” to a lease agreement
    included the right to accrued claims for past rent).
    {¶ 33} In National Reserve, the Metropolitan Trust Company of California, as
    trustee, and the National Thrift Corporation of America, as trustor, entered into a written
    trust agreement under which the Trust Company was to hold in trust a fund as security for
    the bonds, contracts, certificates, and annuity agreements that the Thrift Company would
    sell as investments. Ward Esplin purchased a participation certificate from the Thrift
    Company, and then later assigned “all of his right, title, and interest” in the participation
    certificate to the Reserve Company. The Reserve Company later instituted an action
    against the Trust Company, on its behalf and on behalf of all other holders of such
    contracts and certificates, seeking recovery for various breaches of the trust agreement
    17.
    that occurred before the assignment. The court considered whether Esplin’s assignment
    of “all * * * right title and interest” in the participation certificate to the Reserve
    Company included the right to sue for a prior breach of the trust agreement.
    {¶ 34} The court first recognized that “[i]n determining what rights or interests
    pass under an assignment, the intention of the parties as manifested in the instrument is
    controlling.” Natl. Res. at 832. The court then stated the following rule, based on its
    review of case law across various states:
    Unless an assignment specifically or impliedly designates them,
    accrued causes of action arising out of an assigned contract, whether ex
    contractu or ex delicto, do not pass under the assignment as incidental to
    the contract if they can be asserted by the assignor independently of his
    continued ownership of the contract and are not essential to a continued
    enforcement of the contract.
    If, however, an accrued cause of action cannot be asserted apart from
    the contract out of which it arises or is essential to a complete and adequate
    enforcement of the contract, it passes with an assignment of the contract as
    an incident thereof. (Citations omitted.) 
    Id. at 833.
    {¶ 35} The National Reserve court then examined the language of the trust
    indenture at issue and determined that the accrued breach-of-contract claims were
    transferred with the participation certificate to the plaintiff-assignee. The court offered
    the following reasoning:
    18.
    The trust indenture, upon which the present action is based,
    specifically provides that ownership of a certificate secured by the
    agreement is a condition precedent to the maintenance of a cause of action
    for violation of a covenant contained therein. The assertion of the cause of
    action is thus dependent upon ownership of the certificate. All right, title
    and interest in such certificate has been assigned to plaintiff. Only by
    virtue of its transfer to the plaintiff could the cause of action continue to
    exist. 
    Id. at 833-834.
    {¶ 36} Interestingly, in the case relied upon by the majority, R.A. Mackie & Co.,
    L.P. v. PetroCorp Inc., 
    329 F. Supp. 2d 477
    (S.D.N.Y.2004), although the court found that
    the breach-of-contract claim was a “right in the security” that automatically transferred
    with the purchase of the warrant under Texas’s version of U.C.C. 8-302(a) by
    distinguishing the court’s prior decision in Consolidated Edison, Inc. v. Northeast
    Utilities, 
    318 F. Supp. 2d 181
    (S.D.N.Y.2004), the court went on to recognize that the
    language of the specific warranty agreement at issue was also “significant.” R.A. Mackie
    at 507. The court stated:
    Significantly, the Warrant Agreement provides that “all covenants,
    conditions, stipulations, promises, and agreements in this Agreement
    contained shall be for the sole and exclusive benefit of the parties hereto
    and their successor and the holders of the Warrant Certificates.” That
    provision also limits to the “parties hereto and the holders of the Warrant
    19.
    Certificates any right, remedy, or claim under or by reason of this
    Agreement * * *.” The Warrant Agreement thus authorizes holders of the
    Warrants, without limitation, to maintain a legal proceeding for breach of
    that Agreement. (Citations omitted.) 
    Id. at 507-508.
    {¶ 37} The R.A. Mackie court then concluded that “[n]either the Warrant
    Agreement itself nor § 8.302 of the Texas UCC prevents the plaintiffs from bringing
    claims against PetroCorp as successor-in-interest to Southern Mineral based on Warrants
    that were purchased after the date of the breach of the Warrant Agreement.” 
    Id. at 508.
    {¶ 38} I believe R.A. Mackie could have framed the issue better: rather than
    asking whether a contract “prevents” an assignee from asserting an accrued cause of
    action, the court should have asked whether the accrued cause of action “can be asserted
    by the assignor independently of his continued ownership of the contract and [is] not
    essential to a continued enforcement of the contract.” Natl. 
    Res., 17 Cal. 2d at 833
    , 
    112 P.2d 598
    ; 17 Mile, 8th Dist. Cuyahoga No. 99358, 2013-Ohio-3005, at ¶13. If R.A.
    Mackie had applied that standard, I believe it would have reached the same result because
    only “holders of the Warrant Certificates” had a right to make claims under the
    agreement―thus, a claim for breach of the Warrant Agreement could not be asserted by
    the assignor independently of his continued ownership of the contract.
    {¶ 39} In this case, the Trust Indenture contains language that is analogous to the
    contracts in both National Reserve and R.A. Mackie and, in my view, demonstrates that
    the breach-of-contract claims against appellee were transferred with the bonds.
    20.
    {¶ 40} The general provisions for the bonds at issue state that they “are issued
    under a Trust Indenture dated as of July 1, 1998, between the Issuer and the Trustee (the
    ‘Indenture’),” and further provide that
    [t]he Holder of this Bond shall have no right to enforce the provisions of
    the Indenture or to institute action to enforce the covenants therein, or to
    take any action with respect to any event of default thereunder, or to
    institute, appear in or defend any suit or other proceeding with respect
    thereto, except as provided in the Indenture.” (Emphasis added.)
    Thus, we must look to the Trust Indenture to determine what “rights” can be transferred
    to bondholders under 1308.16(A).
    {¶ 41} Section 11.03 of the Trust Indenture provides the following:
    Limitation of Rights. With the exception of rights herein expressly
    conferred, nothing expressed or mentioned in or to be implied from this
    Indenture or the Bonds is intended or shall be construed to give to any
    person other than the parties hereto, the Lessee, and the Bondholders any
    legal or equitable right, remedy or claim under or in respect to this
    Indenture or any covenants, conditions and provisions herein contained;
    this Indenture and all of the covenants, conditions and provisions hereof
    being intended to be and being for the sole and exclusive benefit of the
    parties hereto, the Lessee and the Bondholders as herein provided.
    (Emphasis added.)
    21.
    {¶ 42} The Trust Indenture defines “Bondholder” to mean “as to any Bond, the
    person in whose name such Bond is registered on the Bond Register.” Thus, similar to
    the securities at issue in National Reserve and R.A. Mackie, actual ownership of the bond
    “is a condition precedent to the maintenance of a cause of action” and “[o]nly by virtue of
    its transfer to the plaintiff could the cause of action continue to exist.” Natl. 
    Res., 17 Cal. 2d at 833
    -834, 
    112 P.2d 827
    . Any breach-of-contract claims under the trust
    indenture therefore transfer with the bond to subsequent bondholders because such claims
    cannot be asserted apart from the contract out of which they arise and are essential to the
    complete enforcement of the Trust Indenture.
    {¶ 43} For these reasons, I concur with the majority’s conclusion that the
    judgment of the Lucas County Court of Common Pleas should be reversed and the matter
    remanded to the trial court to consider the remaining Civ.R. 23 requirements for class
    certification.
    22.