Bank of New York Melon Corp. v. Erickson , 2017 Ohio 599 ( 2017 )

[Cite as Bank of New York Melon Corp. v. Erickson, 2017-Ohio-599.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
THE BANK OF NEW YORK MELLON :
CORPORATION AS TRUSTEE FOR :
SPECIALTY UNDERWRITING AND :
RESIDENTIAL FINANCE TRUST, :
SERIES 2005-BC4 : JUDGES:
:
: Hon. Patricia A. Delaney, P.J.
Plaintiff-Appellee : Hon. W. Scott Gwin, J.
: Hon. William B. Hoffman, J.
-vs- :
: Case No. 2016CA00155
:
TAMI M. ERICKSON, ET AL. :
:
:
Defendants-Appellants : OPINION
CHARACTER OF PROCEEDING: Appeal from the Stark County Court of
Common Pleas, Case No.
2015CV00215
JUDGMENT: AFFIRMED
DATE OF JUDGMENT ENTRY: February 13, 2017
APPEARANCES:
For Plaintiff-Appellee: For Defendants-Appellants:
JAMES W. SANDY BRIAN D. FLICK
25550 Chagrin Blvd., Suite 406 MARC E. DANN
Cleveland, OH 44122 P.O. Box 6031040
Cleveland, OH 44103
Stark County, Case No. 2016CA00155 2
Delaney, P.J.
{¶1} Defendant-Appellant Tami M. Erickson appeals the July 13, 2016 judgment
entry of the Stark County Court of Common Pleas.
FACTS AND PROCEDURAL HISTORY
The Loan
{¶2} On June 2, 2005, Defendant-Appellant Tami M. Erickson executed an
Adjustable Rate Note in the principal amount of $225,000 in favor of MILA, Inc. The Note
contained a blank endorsement. The same day, Erickson executed a Mortgage granting
Mortgage Electronic Registration Systems, Inc. (“MERS”), its successors and assigns, a
security interest in the property located in Canton, Ohio.
Terms of the Adjustable Rate Note
{¶3} The terms of the Note require Erickson as Borrower to make a monthly
payment on the first of the month, beginning on August 1, 2005. The Note states if the
Borrower fails to pay the full amount of each monthly payment on the date it is due, the
Borrower is in default. Under the terms of the Note, however, a default does not equate
to automatic acceleration. The Note provides “Notice of Default”:
If I [Borrower] am in default, the Note Holder may send me a written notice
telling me that if I do not pay the overdue amount by a certain date, the Note
Holder may require me to pay immediately the full amount of Principal which
has not been paid and all the interest that I owe on that amount. That date
must be at least 30 days after the date on which the notice is mailed to me
or delivered by other means.
Stark County, Case No. 2016CA00155 3
If the Borrower is in default and the Note Holder does not require the Borrower to pay in
full, the terms of the Note provide the Note Holder with the right to require immediate full
payment if the Borrower is in default at a later time.
Assignments of the Note and Mortgage
{¶4} On February 13, 2008, MERS assigned the Mortgage to the Bank of New
York Trust Company, N.A., as successor Trustee to JPMorgan Chase Bank, National
Association, as original Trustee for the MLM1SURF Trust Series 2005-BC4. In May 2013,
the Mortgage was assigned to The Bank of New York Mellon Successor to JPMorgan
Chase Bank as Trustee in Trust for Registered Holders of Specialty Underwriting and
Residential Finance Trust Mortgage Loan Asset-Backed Certificates, Series 2005BC-4.
Plaintiff-Appellee The Bank of New York Mellon Corporation as Trustee for Specialty
Underwriting and Residential Finance Trust, Series 2005-BC4 (“Bank of New York”) is
now in possession of the original Mortgage. There was no formal assignment of the
Mortgage from the previous mortgage holder to Bank of New York.
{¶5} The Note executed by Erickson was endorsed in blank. Before November
16, 2009, a previous iteration of Bank of New York acquired possession of the Note. The
original document, however, could not be located.
Erickson’s Default
{¶6} Erickson failed to make a mortgage payment on May 1, 2008. She did not
make any mortgage payments thereafter.
{¶7} Erickson filed a Chapter 7 Bankruptcy case. She was granted a discharge
of the mortgage debt on February 10, 2010 and the case was terminated on April 13,
2010.
Stark County, Case No. 2016CA00155 4
{¶8} On April 16, 2014, the mortgage loan servicer sent Erickson a letter via first
class mail notifying her she was in default under the terms and conditions of the Note and
Mortgage. The servicer stated Erickson must pay the default amount of $129,373.48 by
May 21, 2014 to cure the default. The letter further stated that failure to pay the default
amount could result in acceleration of the sums secured by the Note, foreclosure
proceedings, and sale of the property.
{¶9} Erickson did not cure the default. Bank of New York then accelerated the
unpaid principal balance of the mortgage loan in the amount of $219,875.35 plus interest.
Complaint in Foreclosure
{¶10} On January 28, 2015, Bank of New York filed a complaint in foreclosure
against Erickson. Bank of New York sought the unpaid sum of $219,875.35 plus interest
at a variable rate from April 1, 2008. Bank of New York did not seek to hold Erickson
personally liable on the Note because her liability was discharged in bankruptcy. In
support of its complaint in foreclosure, Bank of New York attached an Affidavit of Lost
Note, stating that Bank of New York had acquired possession of the Note, but the Note
was now either destroyed or lost.
{¶11} Erickson requested mediation, but mediation was unsuccessful. After the
filing of various motions by the parties, Bank of New York filed its motion for summary
judgment. Erickson filed a cross-motion for summary judgment. In her cross-motion for
summary judgment, Erickson argued Bank of New York was not entitled to enforce the
Note because the Affidavit of Lost Note did not comply with R.C. 1303.38. Erickson further
argued the trial court was without jurisdiction to consider the complaint in foreclosure
because the statute of limitations to enforce the Note was expired.
Stark County, Case No. 2016CA00155 5
{¶12} On July 13, 2016, the trial court granted Bank of New York’s motion for
summary judgment and denied Erickson’s cross-motion for summary judgment. It is from
this judgment Erickson now appeals.
ASSIGNMENTS OF ERROR
{¶13} Erickson raises two Assignments of Error:
{¶14} “I. THE TRIAL COURT ERRED IN FINDING THE STATUTE OF
LIMITATIONS UNDER R.C. § 1303.16(A) DID NOT APPLY.
{¶15} “II. THE TRIAL COURT ERRED IN FINDING THE APPELLEE WAS
ENTITLED TO FORECLOSE ON THE MORTGAGE UNDER HOLDEN, JACKSON AND
FILLMORE.”
ANALYSIS
Standard of Review
{¶16} Erickson argues in both Assignments of Error that the trial court erred in
granting summary judgment in favor of Bank of New York. We refer to Civ.R. 56(C) in
reviewing a motion for summary judgment which provides, in pertinent part:
Summary judgment shall be rendered forthwith if the pleading, depositions,
answers to interrogatories, written admissions, affidavits, transcripts of
evidence in the pending case and written stipulations of fact, if any, timely
filed in the action, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of law.* *
* A summary judgment shall not be rendered unless it appears from such
evidence or stipulation and only from the evidence or stipulation, that
reasonable minds can come to but one conclusion and that conclusion is
Stark County, Case No. 2016CA00155 6
adverse to the party against whom the motion for summary judgment is
made, such party being entitled to have the evidence or stipulation
construed most strongly in the party's favor.
{¶17} The moving party bears the initial responsibility of informing the trial court
of the basis for the motion, and identifying those portions of the record before the trial
court, which demonstrate the absence of a genuine issue of fact on a material element of
the nonmoving party's claim. Dresher v. Burt, 75 Ohio St. 3d 280, 292, 662 N.E.2d 264
(1996). The nonmoving party then has a reciprocal burden of specificity and cannot rest
on the allegations or denials in the pleadings, but must set forth “specific facts” by the
means listed in Civ.R. 56(C) showing that a “triable issue of fact” exists. Mitseff v.
Wheeler, 38 Ohio St. 3d 112, 115, 526 N.E.2d 798, 801 (1988).
{¶18} Pursuant to the above rule, a trial court may not enter summary judgment if
it appears a material fact is genuinely disputed. Vahila v. Hall, 77 Ohio St. 3d 421, 429,
674 N.E.2d 1164 (1997), citing Dresher v. Burt, 75 Ohio St. 3d 280, 662 N.E.2d 264
(1996).
I. Statute of Limitations
{¶19} Erickson argues in her first Assignment of Error that the complaint in
foreclosure, filed on January 28, 2015, was filed after the expiration of the six-year statute
of limitations pursuant to R.C. 1303.16(A). We disagree.
{¶20} R.C. 1303.16(A) states that “an action to enforce the obligation of a party to
pay a note payable at a definite time shall be brought * * * within six years after the
accelerated due date.” R.C. 1303.16 codifies Uniform Commercial Code §3-118 in Ohio.
Bank of New York Mellon v. DePizzo, 2015-Ohio-4026, 42 N.E.3d 1218, ¶ 16 (11th Dist.).
Stark County, Case No. 2016CA00155 7
Erickson contends the statute of limitations began to run on April 1, 2008, the date Bank
of New York states Erickson defaulted on the loan.
{¶21} A borrower in foreclosure raised the identical argument before the Eighth
District Court of Appeals in Bank of New York Mellon Trust Co., N.A. v. Unger, 8th Dist.
Cuyahoga No. 101598, 2015-Ohio-769. In Unger, the borrower missed a payment on his
mortgage loan in January 2007. Bank of New York provided the borrower a notice of
default in April 2007. The borrower did not cure the default. Bank of New York filed a
complaint in foreclosure on March 11, 2013. The borrower contended the complaint was
filed outside the statute of limitations because the accelerated due date on the mortgage
loan was January 2007. The Eighth District held there was no Civ.R. 56 evidence to
support the borrower’s claim that “defaulting on the monthly payment automatically
resulted in the entire amount being immediately accelerated * * *.” Id. at ¶ 9. “Defaulting
on the monthly obligation is not the same as accelerating the due date of the entire
balance unless the note provides for such an occurrence.” Id. at ¶ 10. The terms of the
note and mortgage did not provide for automatic acceleration. Id. The evidence in Unger
showed the borrower had the option of curing the default by remitting the missing monthly
payments in order to put the account in good standing. Id. Pursuant to the terms of the
letter notifying the borrower of the default, “it was only upon their failure to cure the default
that the entire balance owed on the note was accelerated.” Id.
{¶22} In the present case, the Note contains an acceleration clause, but it does
not provide for automatic acceleration upon default. The Note provides “Notice of Default”:
If I [Borrower] am in default, the Note Holder may send me a written notice
telling me that if I do not pay the overdue amount by a certain date, the Note
Stark County, Case No. 2016CA00155 8
Holder may require me to pay immediately the full amount of Principal which
has not been paid and all the interest that I owe on that amount. That date
must be at least 30 days after the date on which the notice is mailed to me
or delivered by other means.
The mortgage servicer notified Erickson of her default on April 16, 2014. The servicer
stated Erickson must pay the default amount of $129,373.48 by May 21, 2014 to cure the
default. The letter further stated that failure to pay the default amount could result in
acceleration of the sums secured by the Note, foreclosure proceedings, and sale of the
property. Erickson did not cure the default by May 21, 2014.
{¶23} Statute of Limitations is an affirmative defense. Civ.R. 8(C). Erickson failed
to provide Civ.R. 56 evidence that the mortgage loan was accelerated earlier than May
2014. Therefore, reasonable minds could only conclude the complaint in foreclosure was
filed within the statute of limitations period.
{¶24} Erickson’s first Assignment of Error is overruled.
II. Affidavit of Lost Note
{¶25} In her second Assignment of Error, Erickson contends Bank of New York
failed to establish it was entitled to foreclose on the Note and Mortgage. Erickson states
that Bank of New York failed to establish it was the holder of the Note through its Affidavit
of Lost Note.
{¶26} In support of its complaint in foreclosure and motion for summary judgment,
Bank of New York attached an “Affidavit of Lost Note” to comply with the requirements of
R.C. 1303.38. R.C. 1303.38, which is captioned “Enforcement of lost, destroyed, or stolen
instrument”, states as follows:
Stark County, Case No. 2016CA00155 9
(A) A person not in possession of an instrument is entitled to enforce the
instrument if all of the following apply:
(1) The person was in possession of the instrument and entitled to enforce
it when loss of possession occurred.
(2) The loss of possession was not the result of a transfer by the person or
a lawful seizure.
(3) The person cannot reasonably obtain possession of the instrument
because the instrument was destroyed, its whereabouts cannot be
determined, or it is in the wrongful possession of an unknown person or a
person that cannot be found or is not amenable to service of process.
(B) A person seeking enforcement of an instrument under division (A) of
this section must prove the terms of the instrument and the person's right
to enforce the instrument. If that proof is made, divisions (A) and (B) of
section 1303.36 of the Revised Code applies to the case as if the person
seeking enforcement had produced the instrument. The court may not enter
judgment in favor of the person seeking enforcement unless it finds that the
person required to pay the instrument is adequately protected against loss
that might occur by reason of a claim by another person to enforce the
instrument. Adequate protection for the person required to pay the
instrument may be provided by any reasonable means.
{¶27} The burden of proof to recover on a lost note is by a preponderance of the
evidence. In re Perrysburg Marketplace Co., 208 B.R. 148 (Bankr.N.D.Ohio 1997). Fifth
Stark County, Case No. 2016CA00155 10
Third Mtge. Co. v. Fillmore, 5th Dist. Delaware No. 12 CAE 04 0030, 2013-Ohio-312, ¶¶
36-42.
{¶28} Bank of New York attached an “Affidavit of Lost Note” to its complaint in
foreclosure and motion for summary judgment. Attached to the affidavit was a copy of the
Note that Bank of New York alleged was lost. The affidavit stated that according to the
business records of the mortgage servicer, the original Note was lost:
4. I [employee of Bank of America, N.A., Bank of New York’s prior mortgage
servicer] have personal knowledge that BANA’s lost note procedures were
followed in determining that the Note has been lost and that a good faith
effort was made to locate the lost note in accordance with such procedures.
5. Based on BANA’s business records, BANA, or its predecessor (as
servicer or by merger) or the custodian, acquired possession of the Note on
or before November 16, 2009.
6. On information and belief, after due diligence, possession of the note
cannot be reasonably be obtained because the Note was destroyed, its
whereabouts cannot be determined, or it is in the wrongful possession of
an unknown person.
7. Based on BANA’s business records, the loss of possession of the Note
is not the result of a rightful transfer or a lawful seizure of the Note.
{¶29} Upon review of the Affidavit of Lost Note, we find Bank of New York
sufficiently established that although the original Note could not be located, the summary
judgment burden must be shifted to Erickson to set forth specific facts demonstrating a
genuine issue of material fact for trial. See Vahila v. Hall, 77 Ohio St. 3d 421, 429, 674
Stark County, Case No. 2016CA00155 11
N.E.2d 1164 (1997). Erickson argues the Affidavit of Lost Note fails to establish by a
preponderance of the evidence that Bank of New York was in possession of the Note and
was entitled to enforce the Note when the loss of possession occurred. R.C.
1303.38(A)(1). Erickson, however, has not supplied any Civ.R. 56 evidence in response
that would contradict the information supplied in the Affidavit of Lost Note or that would
show any issue of material fact in dispute. Flagstar Bank F.S.B. v. Diehl, 5th Dist. Ashland
No. 09 COA 034, 2010-Ohio-2860, ¶ 25.
{¶30} Erickson’s second Assignment of Error is overruled.
CONCLUSION
{¶31} The judgment of the Stark County Court of Common Pleas is affirmed.
By: Delaney, P.J.,
Gwin, J. and
Hoffman, J., concur.