Huntington Natl. Bank v. Filippi , 2015 Ohio 3096 ( 2015 )

[Cite as Huntington Natl. Bank v. Filippi, 2015-Ohio-3096.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
UNION COUNTY
THE HUNTINGTON NATIONAL BANK,
PLAINTIFF-APPELLEE,
CASE NO. 14-15-03
v.
LORIE FILIPPI,
DEFENDANT-APPELLANT,
-and- OPINION
TREASURER OF UNION COUNTY, ET AL.,
DEFENDANTS-APPELLEES.
Appeal from Union County Common Pleas Court
Trial Court No. 2013-CV-0073
Judgment Affirmed
Date of Decision: August 3, 2015
APPEARANCES:
Thomas M. Tyack for Appellant
Darryl E. Gormley and Rachel M. Kuhn for Appellee
Case No. 14-15-03
ROGERS, P.J.
{¶1} Defendant-Appellant, Lorie Filippi (“Lorie”), appeals the judgment of
the Court of Common Pleas of Union County, which granted Plaintiff-Appellee’s,
the Huntington National Bank’s (“Huntington”), motion for summary judgment.
On appeal, Lorie argues that the trial court erred: (1) in finding that the failure of
Huntington to comply with federal regulations promulgated by the Department of
Housing and Urban Development (“HUD”) was an affirmative defense as opposed
to a condition precedent; and (2) by granting Huntington’s motion for summary
judgment. For the reasons that follow, we affirm the trial court’s judgment.
{¶2} On June 16, 2005, Lorie and Joseph Filippi (“Joseph”) (collectively
“the Filippis”) executed a promissory note (“the Note”) with Dominion Homes
Financial Services (“Dominion Homes”) for a loan in the amount of $237,200.
The last page of the Note bears an endorsement from Dominion Homes to
Huntington, reading “pay to the order of the Huntington National Bank without
recourse.” (Docket No. 1, Exhibit A, p. 2). The Note was secured by a mortgage
(“Mortgage”) encumbering property located at 614 Kentucky Circle, Marysville,
Ohio (“Property”).
{¶3} On March 15, 2013, Huntington filed a complaint for foreclosure. In
its complaint, Huntington alleged that it was the holder of the Note; that it was the
holder of the Mortgage; that the Filippis were in default of payment of the Note
-2-
Case No. 14-15-03
and Mortgage securing the same; and, that a balance of $210,070.78, plus interest
remained outstanding on the Note. Attached to the complaint was a copy of the
Note, Mortgage, and a mortgage assignment. Huntington requested judgment
against the Filippis for the outstanding balance on the Note, plus interest, and that
the trial court order the sale of the Property.
{¶4} On March 28, 2013, Lorie filed her answer.1 She generally denied the
allegations in the complaint and also asserted two defenses. She first claimed that
Huntington failed to state a claim upon which relief may be granted. Lorie then
alleged that Huntington “failed to comply with the regulations pronounced by the
Secretary of Housing and Urban Development as to actions which must be taken
prior to initiating any foreclosure action. By reason thereof, this action may not
proceed.” (Docket No. 44, p. 2).
{¶5} Huntington filed a motion for summary judgment on January 6, 2014,
arguing that there were no genuine issues of material fact and that it was entitled
to judgment as a matter of law. In support of its motion for summary judgment,
Huntington attached a copy of the Note, Mortgage, and mortgage assignment. In
addition to the foregoing documents, Huntington filed an affidavit of one of its
employees, Michael Mantilla. In his affidavit, Mantilla, a litigation specialist,
attested that Huntington holds the Note, that the copies of the Note and Mortgage
1
We note that only Lorie filed an answer. At some point in between the execution of the Note and the
foreclosure, Lorie and Joseph divorced. As part of the divorce settlement, Lorie received the Property,
which was their marital home. Joseph never filed an answer and default judgment was later entered against
him.
-3-
Case No. 14-15-03
are true and accurate copies of the original instruments, and that the Filippis are in
default and owe a principal sum of $210,070.78 plus interest.
{¶6} On April 24, 2014, Lorie filed a memorandum in opposition to
Huntington’s motion for summary judgment. Lorie argued that the trial court
should deny Huntington’s motion as it failed to comply with HUD regulations.
Specifically, Lorie alleged that Huntington was obligated to have a “face to face
meeting [with Lorie] before filing for foreclosure.” (Docket No. 94, p. 2). Lorie
further asserted that Huntington never met with her before it filed its complaint.
In support of her memorandum, Lorie attached her affidavit where she attested
that at no time was she provided with a face to face meeting with Huntington
before the filing of the foreclosure complaint. (Docket No. 95).
{¶7} On May 21, 2014, Huntington filed a reply to Lorie’s memorandum in
opposition. Huntington argued that Lorie failed to plead with specificity or
particularity the denial of a condition precedent or affirmative defense as required
by Civ.R. 9(C). By failing to plead the condition precedent with specificity and
particularity, Huntington argued that it was deemed admitted.
{¶8} Huntington filed a request for ruling on October 17, 2014. The trial
court filed its judgment entry granting summary judgment in favor of Huntington
on December 31, 2014.
{¶9} It is from this judgment that Lorie appeals, presenting the following
assignments of error for our review.
-4-
Case No. 14-15-03
Assignment of Error No. I
THE TRIAL COURT ERRED IN RULING THAT THE
FAILURE OF THE FINANCIAL INSTITUTION TO
COMPLY WITH HUD REGULATION FOUND IN C.F.R. §
203.64 WAS [AN] AFFIRMATIVE DEFENSE AS OPPOSED
TO A CONDITION PRECEDENT TO MAINTAINING A
FORECLOSURE ACTION.
Assignment of Error No. II
THE TRIAL COURT ERRED GRANTING [SIC] SUMMARY
JUDGMENT TO PLAINTIFF, WHEN DEFENDANT
ESTABLISHED EVIDENCE, [SIC] PLAINTIFF FAILED TO
COMPLY WITH THE HUD REGULATION AS TO
GRANTING FACE-TO-FACE MEETING WITH HER AS AN
OBLIGOR ON THE NOTE AS MANDATED BY THE HUD
REGULATIONS.
Assignment of Error No. I
{¶10} In her first assignment of error, Lorie argues that the trial court erred
in finding that HUD regulations are an affirmative defense rather than a condition
precedent. We agree.
Condition Precedent or Affirmative Defense
{¶11} Both parties agree that Lorie’s loan and mortgage were subject to
HUD regulations. On appeal, Lorie argues that Huntington did not comply with
24 C.F.R. § 203.604, which states:
(b) The mortgagee must have a face-to-face interview with the
mortgagor, or make a reasonable effort to arrange such a meeting,
before three full monthly installments due on the mortgage are
unpaid. If default occurs in a repayment plan arranged other than
during a personal interview, the mortgagee must have a face-to-face
meeting with the mortgagor, or make a reasonable attempt to arrange
-5-
Case No. 14-15-03
such a meeting within 30 days after such default and at least 30 days
before foreclosure is commenced, or at least 30 days before
assignment is requested if the mortgage is insured on Hawaiian
home land pursuant to section 247 or Indian land pursuant to section
248 or if assignment is requested under § 203.350(d) for mortgages
authorized by section 203(q) of the National Housing Act.
(c) A face-to-face meeting is not required if:
(1) The mortgagor does not reside in the mortgaged property,
(2) The mortgaged property is not within 200 miles of the
mortgagee, its servicer, or a branch office of either,
(3) The mortgagor has clearly indicated that he will not cooperate
in the interview,
(4) A repayment plan consistent with the mortgagor's
circumstances is entered into to bring the mortgagor's account
current thus making a meeting unnecessary, and payments
thereunder are current, or
(5) A reasonable effort to arrange a meeting is unsuccessful.
(d) A reasonable effort to arrange a face-to-face meeting with the
mortgagor shall consist at a minimum of one letter sent to the
mortgagor certified by the Postal Service as having been dispatched.
Such a reasonable effort to arrange a face-to-face meeting shall also
include at least one trip to see the mortgagor at the mortgaged
property, unless the mortgaged property is more than 200 miles from
the mortgagee, its servicer, or a branch office of either, or it is
known that the mortgagor is not residing in the mortgaged property.
Lorie argues that the HUD regulations create a condition precedent, whereas
Huntington contends that the failure to comply with the HUD regulations is an
affirmative defense. Such a difference is important as “an affirmative defense is
separate from the merits of the plaintiff’s cause of action and bars recovery even
-6-
Case No. 14-15-03
when the plaintiff has established a prima facie case, [while] 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.” Natl. City Mtge. Co. v. Richards,
182 Ohio App.3d 534, 2009-Ohio-2556, ¶ 20 (10th Dist.). Affirmative defenses
and condition precedents each carry a different burden for pleading and summary
judgment purposes. PNC Mtge. v. Garland, 7th Dist. Mahoning No. 12 MA 222,
2014-Ohio-1173, ¶ 23.
{¶12} If compliance with the HUD regulations is a condition precedent,
then “the bank must generally aver in its complaint that it has complied with all
conditions precedent, the borrower then has a reciprocal burden to allege with
specificity and particularity how the bank failed to comply.” Id., citing Civ.R.
9(C). Thus, in a motion for summary judgment, the bank has the burden to
establish the absence of any material fact on the issue of whether it complied with
a specific HUD regulation. Garland at ¶ 23, citing Dresher v. Burt, 75 Ohio St.3d
280, 294 (1996). “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.” Garland at ¶ 24.
On summary judgment, the bank has no burden to discuss compliance with HUD
regulations. Instead, the borrower has the burden of proving his or her affirmative
defense in the brief in opposition to summary judgment. Id., citing Wells Fargo
Bank, N.A., v. Goebel, 2d Dist. Montgomery No. 25745, 2014-Ohio-472, ¶ 16.
-7-
Case No. 14-15-03
{¶13} This is a matter of first impression for this district.2 However,
several other Ohio courts of appeals have recently decided this issue. The Fifth
and Seventh Districts have expressly held that compliance with HUD regulations
is a condition precedent, whereas the Second District has held that a bank’s failure
to comply with HUD regulations is an affirmative defense. Compare Garland at ¶
27; and U.S. Bank, N.A. v. Detweiler, 191 Ohio App.3d 464, 2010-Ohio-6408, ¶
54-57 (5th Dist.) with Goebel at ¶ 23-25.
{¶14} In Goebel, the Second District Court of Appeals found that
noncompliance with HUD regulations is an affirmative defense, in part, because
the law disfavors conditions precedent. Id. at ¶ 24. The court recognized that
“courts will avoid construing a provision as a condition precedent unless the intent
to create such a condition is obvious.” Id., citing Rudd v. Online Resources, Inc.,
2d Dist. Montgomery No. 17500, 1999 WL 397351, *7 (June 18, 1999).
However, we find that there is a clear intent to make the face-to-face meeting
requirement of 24 C.F.R. § 203.604 a condition precedent to foreclosure.
Specifically, we find the following reasoning from the Seventh District Court of
Appeals to be persuasive.
2
Although rudimentary, we feel obligated to explain that the State of Ohio is divided into 12 judicial court
of appeals districts. See Article IV, section 3, Ohio Constitution; R.C. 2501.01. In her brief, Appellant
argued, multiple times, that this court should “re-examine the position it took in Wells Fargo [Bank, N.A. v.
Goebel, 2d Dist. Montgomery No. 25745, 2014-Ohio-472].” (Appellant’s Br., p. 8); see also (id. at p. 9).
Appellant filed her appeal in the Third District Court of Appeals, not the Second District Court of Appeals.
While opinions of our sister district courts may be persuasive, they are not binding on this court. We have
no authority to re-examine or overrule an opinion issued by a different district, although we may certainly
disagree with its legal reasoning and outcome.
-8-
Case No. 14-15-03
[T]he overall regulatory scheme enacted by HUD must be
considered. Importantly, 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.” As to specific regulatory
language pertinent to this appeal * * * 24 C.F.R. 203.604(b) * * *
provides: “The mortgagee must have a face-to-face interview with
the mortgagor, or make a reasonable effort to arrange such a
meeting, before three full monthly installments due on the mortgage
are unpaid. * * *.” Subsection (c) goes on to provide several
exceptions to the face-to-face meeting requirement. * * *
These regulations evince HUD's clear intent that banks must comply
with the face-to-face interview * * * before commencing foreclosure
actions. In other words, a bank's foreclosure action is contingent
upon satisfaction of these regulations and is therefore a condition
precedent.
(Emphasis added.) Garland, 2014-Ohio-1173, ¶ 26-27.
{¶15} Also of importance, many Ohio courts have held that “ ‘[w]here prior
notice of default and/or acceleration is required by a provision in a note or
mortgage instrument, the provision of notice is a condition precedent,’ and subject
to the requirements of Civ.R. 9(C).” Richards, 2009-Ohio-2556, ¶ 21, quoting
First Financial Bank v. Doellman, 12th Dist. Butler No. CA2006-02-029, 2007-
Ohio-222, ¶ 20; see also Huntington Bank v. Popovec, 7th Dist. Belmont No. 12
MA 119, 2013-Ohio-4363, ¶ 15. We find that compliance with the HUD
regulations is analogous to compliance with the notice requirements in Richards,
Doellman, and Popovec. Accord Garland at ¶ 28.
-9-
Case No. 14-15-03
{¶16} For the aforementioned reasons, we find that compliance with HUD
regulations is a condition precedent and is subject to the pleading requirements of
Civ.R. 9(C).
{¶17} Accordingly, we sustain Lorie’s first assignment of error.
Assignment of Error No. II
{¶18} In her second assignment of error, Lorie contends that the trial court
erred in granting summary judgment in favor of Huntington. Lorie argues that
there is a genuine issue of material fact as to whether Huntington complied with
the applicable HUD regulations. Specifically, Lorie avers that she was never
afforded a face-to-face meeting with Huntington before the foreclosure complaint
was filed, and thus, the foreclosure cannot proceed. We disagree.
Standard of Review
{¶19} An appellate court reviews a summary judgment order de novo.
Hillyer v. State Farm Mut. Auto. Ins. Co., 131 Ohio App.3d 172, 175 (8th
Dist.1999). Accordingly, a reviewing court will not reverse an otherwise correct
judgment merely because the lower court utilized different or erroneous reasons as
the basis for its determination. Diamond Wine & Spirits, Inc. v. Dayton
Heidelberg Distrib. Co., Inc., 148 Ohio App.3d 596, 2002-Ohio-3932, ¶ 25 (3d
Dist.), citing State ex rel. Cassels v. Dayton City School Dist. Bd. of Edn., 69 Ohio
St.3d 217, 222 (1994). Summary judgment is appropriate when, looking at the
evidence as a whole: (1) there is no genuine issue as to any material fact, and (2)
-10-
Case No. 14-15-03
the moving party is entitled to judgment as a matter of law. Civ.R. 56(C). In
conducting this analysis the court must determine “that reasonable minds can
come to but one conclusion and that conclusion is adverse to the party against
whom the motion for summary judgment is made, [the nonmoving] party being
entitled to have the evidence or stipulation construed most strongly in the
[nonmoving] party’s favor.” Id. If any doubts exist, the issue must be resolved in
favor of the nonmoving party. Murphy v. City of Reynoldsburg, 65 Ohio St.3d
356, 358-359 (1992).
{¶20} The party moving for summary judgment has the initial burden of
producing some evidence which demonstrates the lack of a genuine issue of
material fact. Dresher, 75 Ohio St.3d at 292. In doing so, the moving party is not
required to produce any affirmative evidence, but must identify those portions of
the record which affirmatively support his argument. Id. at 292. The nonmoving
party must then rebut with specific facts showing the existence of a genuine triable
issue; he may not rest on the mere allegations or denials of his pleadings. Id.;
Civ.R. 56(E).
Waiver
{¶21} Although we found that compliance with HUD regulations is a
condition precedent, Huntington argues that Lorie has waived this argument by
failing to plead it with particularity in her answer. Under Civ.R. 9(C), “In
pleading the performance or occurrence of conditions precedent, it is sufficient to
-11-
Case No. 14-15-03
aver generally that all conditions precedent have been performed or have
occurred.” However, “A denial of performance or occurrence shall be made
specifically and with particularity.” (Emphasis added.) Id. If conditions
precedent are not denied in the manner outlined by Civ.R. 9(C), then they are
deemed admitted. Garland, 2014-Ohio-1173, ¶ 32.
{¶22} Here, Huntington’s complaint generally alleged compliance with all
conditions precedent. See (Docket No. 2, p. 4). This was sufficient under Civ.R.
9(C) to shift the burden to Lorie to show noncompliance with specific HUD
regulations. In her answer, Lorie’s allegations regarding noncompliance with
HUD regulations were general in nature, and she failed to cite to any specific
regulation:
THIRD DEFENSE
Defendant avers that Plaintiff has failed to comply with the
regulations pronounced by the Secretary of Housing and Urban
Development as to actions which must be taken prior to initiating
any foreclosure action. By reason thereof, this action may not
proceed.
(Docket No. 44, p. 2).
{¶23} We find that Lorie failed to state, with the specificity required by
Civ.R. 9(C), which HUD regulations Huntington failed to comply with before it
filed its foreclosure complaint. Similarly in Garland, in her answer, the defendant
generally alleged that the bank “failed to comply with the regulations issued by the
Secretary of Housing and Urban Development in order to require immediate
-12-
Case No. 14-15-03
payment in full and plaintiff failed to comply with HUD regulations prior to the
acceleration of the promissory note.” 2014-Ohio-1173, ¶ 34. The court found that
the defendant failed to “state with the specificity required by Civ.R. 9(C),
precisely which HUD regulations PNC Mortgage failed to comply with before
filing the instant foreclosure action.” Id. at ¶ 35.
{¶24} “[T]he effect of the failure to deny conditions precedent in the
manner provided by in Civ.R. 9(C) is that they are deemed admitted.” Wells
Fargo Bank v. Ramsey, 7th Dist. Mahoning No. 13 MA 138, 2015-Ohio-2107, ¶
24, citing Garland at ¶ 32-35; Civ.R. 8(D). As a result, Lorie was barred from
later contesting Huntington’s alleged noncompliance in her brief in opposition to
Huntington’s motion for summary judgment, and now on appeal. Since Lorie
waived the issue of noncompliance, the trial court did not err in granting summary
judgment in favor of Huntington.
{¶25} Accordingly, we overrule Lorie’s second assignment of error.
{¶26} In conclusion, we find that compliance with HUD regulations is a
condition precedent to initiating a foreclosure action. In holding otherwise, the
trial court erred. However, we find that the trial court correctly granted
Huntington’s motion for summary judgment since Lorie waived the argument by
failing to comply with Civ.R. 9(C). Therefore, although the reasoning of the trial
court was flawed, the outcome was correct, and we affirm the judgment of the trial
court based upon different grounds. See In re Estate of Dorothy Mason, 3d Dist.
-13-
Case No. 14-15-03
Hancock No. 5-04-01, 2004-Ohio-5644, ¶ 34; see also State v. Rubes, 11th Dist.
Portage No. 2012-P-0009, 2012-Ohio-4100, ¶ 33 (reviewing courts affirm and
reverse judgments, not reasons).
{¶27} Having found no error prejudicial to Lorie in the particulars assigned
and argued, we affirm the trial court’s decision.
Judgment Affirmed
SHAW and WILLAMOWSKI, J.J., concur.
/hlo
-14-