LNV Corp. v. Kempffer , 2020 Ohio 4527 ( 2020 )

[Cite as LNV Corp. v. Kempffer, 2020-Ohio-4527.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
GEAUGA COUNTY, OHIO
LNV CORPORATION, : OPINION
Plaintiff-Appellee, :
CASE NO. 2019-G-0232
- vs - :
BARBARA R. KEMPFFER, et al., :
Defendants-Appellants. :
Civil Appeal from the Geauga County Court of Common Pleas, Case No. 2019 F 000329.
Judgment: Affirmed.
Darryl E. Gormley, Reimer, Arnovitz, Chernek & Jeffrey Co., P.O. Box 39696, 30455
Solon Road, Solon, OH 44139; Kyle E. Timken, Ann Marie Johnson, Angela D. Kirk,
Matthew J. Richardson, Matthew P. Curry, Michael E. Carleton, Melissa N. Hamble and
Jacqueline M. Wirtz, Manley Deas Kochalski, LLC, P.O. Box 165028, Columbus, OH
43216 (For Plaintiff-Appellee).
Grace M. Doberdruk, Law Office of Grace M. Doberdruk, 2000 Auburn Drive, One
Chagrin Highlands, Suite 200, Beachwood, OH 44122 (For Defendants-Appellants).
CYNTHIA WESTCOTT RICE, J.
{¶1} Appellants, Barbara and Timothy Kempffer, appeal the November 8, 2019
Judgment Entry of the Geauga County Court of Common Pleas granting summary
judgment for appellee and foreclosing on certain property. For the reasons stated herein,
the judgment is affirmed.
{¶2} On August 29, 2007, appellants, husband and wife, signed a promissory
note (the “Note”) in the amount of $137,000.00 secured by certain property, Parcel No.
10-062010 (the “Property”), as evidenced by a mortgage, signed the same day (the
“Mortgage”). The initial lender was National City Mortgage, a division of National City
Bank; in 2010, both the Note and Mortgage (collectively, the “Loan”) were assigned to
appellee, LNV Corporation (“LNV”). The Loan is serviced by MGC Mortgage Corporation,
Inc. (“MGC”). On October 5, 2015, after appellants had apparently defaulted, appellants
signed a Loan Modification Agreement (the “Modification Agreement”) with appellee in
which appellants expressly “waived and released any defense * * * to any and all acts,
omissions or events occurring prior to the execution of this agreement.”
{¶3} In May 2016, appellants again defaulted on the Loan. On May 13, 2016,
MGC sent Barbara Kempffer a Notice of Default, giving her until June 22, 2016 to cure.
Appellants subsequently made a partial payment in an amount insufficient to cure the
default, as MGC notified them in a letter dated June 7, 2016. After appellants failed to
cure, MGC sent appellants a Notice of Acceleration on July 7, 2016.
{¶4} Thereafter, however, MGC sent appellants a second Notice of Default dated
August 15, 2016 and purported to give appellants until September 24, 2016 to cure.
Appellants again sent a partial payment, which MGC returned in a letter dated August 24,
2016, stating “we are returning your funds because we have accelerated your loan and
the payment received is insufficient to pay what is owed on the loan or, if applicable,
reinstate the loan pursuant to the Notice of Acceleration previously sent to you.”
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{¶5} LNV filed a complaint in foreclosure action against them on April 12, 2019
and moved for summary judgment on August 15, 2019, which the court ultimately granted.
Appellants now appeal, assigning three errors for our review.
{¶6} As each appellee relates to the trial court’s award of summary judgment,
we shall first set forth the proper standard for our analysis. Appellate courts review
summary judgment decisions de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d, 102,
105 (1996). Summary judgment should only be granted “if the pleadings, depositions,
answers to interrogatories, written admissions, affidavits, transcripts of evidence, 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.” Civ.R. 56(C).
{¶7} To support a motion for summary judgment in a foreclosure action, “a
plaintiff must present evidentiary-quality materials showing: (1) the movant is the holder
of the Note and Mortgage, or is a party entitled to enforce it; (2) if the movant is not the
original mortgagee, the chain of assignments and transfers; (3) the mortgagor is in
default; (4) all conditions precedent have been met; and (5) the amount of principal and
interest due.” Citizens Bank, N.A., v. Duchene, 11th Dist. Trumbull No. 2018-T-0085,
2019-Ohio-2972, ¶10, citing JPMorgan Chase Bank, Nat’l Assn. v. Blank, 11th Dist.
Ashtabula No. 2013-A-0060 2014-Ohio-4135, ¶14.
{¶8} The party moving for summary judgment bears the initial responsibility of
showing there is no triable issue of fact. Morris v. Ohio Cas. Ins. Co., 35 Ohio St. 3d 45,
47 (1988). If the moving party does not meet its initial burden, then no duty arises on the
part of the nonmoving party. Id. If, however, the moving party meets this burden, the
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responsibility shifts to the nonmoving party to show a triable issue of fact. Id.; Dresher v.
Burt, 75 Ohio St. 3d 280 (1996). The nonmoving party must show evidence beyond mere
allegations. Civ.R. 56(E); Morris, supra. All questions must be resolved in favor of the
nonmoving party. Grafton, supra.
{¶9} Appellants’ first assignment of error states:
{¶10} The trial court erred by granting appellee LNV Corporation’s motion
for summary judgment when all conditions precedent to foreclosure
were not satisfied.
{¶11} Under this assignment of error, appellants argue that appellee failed to send
compliant notices of default and acceleration prior to accelerating the Loan and filing this
action. Particularly, appellants claim error in that the first Notice of Default, dated May
13, 2016, was not provided in appellee’s initial motion for summary judgment, but was
only provided in its reply to appellants’ opposition and supplemental affidavits. Thus,
appellants argued, the court erred in considering this notice in deciding the motion for
summary judgment.
{¶12} Ignoring, then, what they purport to be an improperly considered notice of
default dated May 13, 2016, appellants argue that the August 15, 2016 notice of default,
as was attached to appellee’s initial motion for summary judgment, was insufficient to
establish that the condition precedent had been met prior to filing this action. Particularly,
appellants argue that the August 15, 2016 letter gave them until September 24, 2016 to
pay, but appellee returned their August 2016 payment stating “[w]e are returning your
funds because we have accelerated your loan and the payment received is insufficient to
pay what is owed on the loan….”
{¶13} Further, appellants argue the July 7, 2016 Notice of Acceleration failed to
meet the requirements of Paragraph 22 of the Mortgage. They also assert error in that
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the July 7, 2016 notice stated they “may” have the right to cure, instead of unequivocally
stating they have the right to cure. In support, appellants cite Fed. Natl. Mtge. Assn. v.
Marroquin, 477 Mass. 82, 89-90 (2017). Finally, appellants argue that the purported
notice of acceleration was deficient for having been sent only to Barbara, and not Timothy,
though both appellants are considered borrowers.
{¶14} Paragraph 22 of the Mortgage sets forth the requirements for notice prior to
acceleration. Particularly, it requires appellee, prior to acceleration, to give appellants
notice of:
{¶15} (a) the default; (b) the action required to cure the default; (c) a date,
not less than 30 days from the date the notice is given to Borrower,
by which the default must be cured; and (d) that failure to cure the
default on or before the date specified in the notice may result in
acceleration of the sums secured by this Security Instrument,
foreclosure by judicial proceeding and sale of the Property. The
notice shall further inform Borrower of the right to reinstate after
acceleration and the right to assert in the foreclosure proceeding the
non-existence of a default or any other defense of Borrower to
acceleration and foreclosure.
{¶16} Appellee asserts that the letters dated May 13, 2016 and August 15, 2016
by MGC meet these requirements. Appellants argue appellee inappropriately attempted
to introduce new evidence and argument in its reply to appellants’ opposition to the motion
for summary judgment. This court, however, has held that an affidavit submitted with a
reply brief seeking to clarify a matter previously raised did not constitute a new argument.
Deutsche Bank Natl. Tr. Co. v. Ayers, 11th Dist. Portage No. 2019-P-0094, 2020-Ohio-
1332, ¶48. Here, in appellee’s initial motion for summary judgment, they asserted that all
conditions precedent, including proper notice, had been met prior to filing the complaint
in foreclosure. While appellee did not provide the May 13, 2016 notice of default in the
initial motion, they provided the August 15, 2016 notice of default; when appellants filed
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their reply and objected, appellee supplemented their motion and included the May 13,
2016 notice of default. This was not a new argument, however, as appellee was not
stating for the first time in their reply that they met all conditions precedent, and the trial
court did not err in considering it.
{¶17} Furthermore, “when a new argument is raised in a reply, the proper
procedure is to strike the reply or, alternatively, to allow the opposing party to file a
surreply.” Id. at ¶49, citing Hicks v. Cadle Co., 11th Dist. Trumbull No. 2014-T-0103,
2016-Ohio-4728, ¶18. Appellants failed to move to strike or for leave for file a surreply,
and, thus, any objection to the consideration of such evidence has been waived. See
Ayers, supra, at ¶50; Lewis Potts, Ltd. v. Zordich, 11th Dist. Trumbull No. 2018-T-0028,
2018-Ohio-5341, ¶42.
{¶18} Accordingly, we find no error on the part of the trial court for considering the
May 13, 2016 notice of default. Moreover, upon review of the record, we find that the
May 13, 2016 and August 15, 2016 notices were not deficient; both notices orderly and
specifically provided the information required by Paragraph 22 of the Mortgage.
{¶19} In the remainder of their arguments, appellants ignore the May 13, 2016
notice of acceleration. Appellants contend that the August 15, 2016 notice gave them
until September 24, 2016 to cure, but their returned payment notice, dated August 24,
2016, stated the loan had already been accelerated. In this regard, appellants argue that
appellee prematurely accelerated the Loan.
{¶20} The May 13, 2016 notice stated appellants had until June 22, 2016 to cure,
by paying in full the amount passed due. That notice stated that partial payments may
be applied or held in suspense but will not be construed as a cure or waiver of appellee’s
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rights. Appellee provided exhibits to show that appellants did not cure their default by
June 22, 2016, but made a partial payment on June 7, 2016, which was unapplied to their
balance owed. Appellants failed to cure. Thus, on July 7, 2016, appellee sent appellants
a Notice of Acceleration, notifying them the Loan was accelerated as the default had not
been cured.
{¶21} Appellee explains the second notice of default stating, “[t]he only reasons
that MGC sent these letters on two separate occasions were that the borrowers’ partial
payment of $1500 on June 16, 2016 was sufficient to advance the due date for their
mortgage loan one month, from April 2016 to May 2016 and further MGC evidently acted
out of an abundance of caution.” It notes that neither the Mortgage nor Ohio law required
multiple notices of default if the borrower fails to cure after the first notice; accordingly, it
argues, it had the right to accelerate on June 22, 2016, and properly did so as evidenced
in its July 7, 2016 notice.
{¶22} We agree; while the second notice of default may have stated appellants
had until September 24, 2016 to cure, appellants had already been notified that the Loan
had been accelerated. Moreover, appellants did not at any point before or after
September 24, 2016 cure the default but only provided a partial payment that, according
to the terms of the Mortgage, appellee had the right to return. Appellee was within its
right to accelerate the Loan as it did in July 2016 and gave appellants multiple
opportunities to cure before filing the action in foreclosure in April 2019.
{¶23} Appellants also argue the July 7, 2016 Notice of Acceleration did not meet
the requirements of Paragraph 22 of the Mortgage. This argument is without merit; the
July 7, 2016 notice did not have to meet the requirements of Paragraph 22 as those
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requirements govern the required notices of default prior to acceleration, which appellee
complied with in its May 13, 2016 notice of default.
{¶24} Appellants also argue the July 7, 2016 notice of acceleration was flawed
because it stated that appellants “may” have the right to reinstate after acceleration,
instead of unequivocally stating that right, citing Marroquin. In Marroquin, the Supreme
Judicial Court of Massachusetts held that use of the word “may,” as opposed to
unequivocal language, failed to strictly comply with the terms of the mortgage, thus
rendering the notice insufficient. This court has recently rejected this argument, stating:
{¶25} In addition to being nonbinding, we find Marroquin to be inapposite.
Unlike in Ohio, Massachusetts permits foreclosure of mortgages by
the exercise of a “power of sale” without “judicial oversight.” See id.
at 86, 74 N.E.3d 592. Because of that “substantial power,” the lender
must “strictly comply with the terms of a mortgage.” See id.
Apparently, the case on which Marroquin relies was decided by a
bare majority and has not been followed outside of Massachusetts
other than in Alabama. See Aubee v. Selene Fin., LP, D.R.I. No. 19-
37WES, 2019 WL 7282019, *5 (Dec. 27, 2019). Ayers, supra, at
¶87.
{¶26} Finally, appellants’ argument that Timothy Kempffer did not receive notice
prior to acceleration is without merit. Paragraph 15 of the Mortgage states that “[n]otice
to any one Borrower shall constitute notice to all Borrowers unless Applicable Law
expressly requires otherwise.” As appellants do not dispute that Barbara Kempffer
received the May 13, 2016 and August 15, 2016 notices, any argument that appellee
failed to meet a condition precedent in regard to notice to Timothy is without merit.
{¶27} Accordingly, appellants’ first assignment of error is without merit.
{¶28} The second assignment of error states:
{¶29} The trial court erred by granting summary judgment when material
issues of fact remained for trial[.]
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{¶30} Under this assignment of error, appellants challenge the validity of the chain
of mortgage assignments. However, the record shows that appellants signed a Loan
Modification Agreement in which they expressly “waived and released any defense * * *
to any and all acts, omissions or events occurring prior to the execution of this agreement”
and which expressly named appellee as the lender. Appellee also notes that a few weeks
before the case at bar the same trial court ruled that appellee was current holder of the
borrowers’ note and mortgage and attached a copy of that judgment entry to its motion
for summary judgment. Appellants challenge this argument by arguing they were not
made parties to that action.
{¶31} Preliminarily, we note that appellants were not necessary parties to the prior
action. As this court has previously held, borrowers do not have standing to challenge
mortgage assignments unless they are affected by the assignment. U.S. Bank Nat’l Assn.
v. Blank, 11th Dist. Ashtabula No. 2014-A-0036, 2015-Ohio-1687, ¶12. Here, appellants
do not argue that they were in any way affected by the assignment, nor is there any
evidence to support such a claim.
{¶32} The trial court found that there was a mutual mistake in the execution and
recording of the intervening assignment of mortgage to U.S. Bank; that this intervening
assignment was never the intention of the parties; that recording is void; and that appellee
was the current holder.
{¶33} Appellants expressly waived any and all defenses from actions or omissions
occurring prior to the signing of the Loan Modification Agreement. The purported
discrepancies that appellants point to occurred prior to the signing of the Loan
Modification Agreement. Furthermore, the trial court had previously adjudicated the
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matter of whether appellee was the owner of this particular loan and found that it was.
For the trial court to find otherwise in this case would be to directly contradict its own prior
holding. Accordingly, we cannot agree there was a question of material fact as to whether
appellee was the owner of the Loan and entitled to bring this action.
{¶34} Accordingly, appellants’ second assignment of error is without merit.
{¶35} Appellants’ third assignment of error states:
{¶36} The trial court erred by granting appellee’s motion for summary
judgment because the affidavit of Victoria Wolff was not made on
personal knowledge[.]
{¶37} Appellants argue that Victoria Wolff’s affidavit was insufficient because she
was relying on records from other services and she did not state that she had personal
knowledge of the record-keeping systems of any servicer other than MGC Mortgage
Corporation, Inc. In support, appellants cite Bank of New York Mellon v. Roulston, 8th
Dist. Cuyahoga No. 104908, 2017-Ohio-8400. Appellants assert particular error in that
without personal knowledge, the affiant could not authenticate when appellee obtained
possession of the original note, where the note was stored, or whether the note had been
transferred. These arguments, however, attempt to question whether appellee was a
party entitled to enforce this Loan, a matter which, as discussed under the second
assignment of error, appellants waived in the Loan Modification Agreement.
{¶38} They also argue that the affiant claimed appellee had possession of the
original note on August 21, 2009, but the mortgage was not assigned to appellee until
January 6, 2010; the affiant based her knowledge on a letter from Dovenmuehe
Mortgage, Inc. (“DMI”) in April 2017 that the note will be sent to appellants’ attorneys; and
that there were no properly authenticated records attached to the affidavit to establish
custody of the original note.
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{¶39} Pursuant to Civ.R. 56(E), in a motion for summary judgment “[s]upporting
and opposing affidavits shall be made on personal knowledge, shall set forth such facts
as would be admissible in evidence, and shall show affirmatively that the affiant is
competent to testify to the matters stated in the affidavit.” Id. “‘[The] mere assertion of
personal knowledge satisfies the personal knowledge requirement of Civ.R. 56(E) if the
nature of the facts in the affidavit combined with the identity of the affiant create a
reasonable inference that the affiant has personal knowledge of the facts in the affidavit.’”
Ayers, supra, at ¶53, quoting Merlo, at ¶25.
{¶40} “[T]he witness must be sufficiently familiar with the operation of the business
and with the circumstances of the record’s preparation and maintenance that he or she
can reasonably testify, on the basis of this knowledge, that the record is what it purports
to be and that it was made in the ordinary course of business.” Ayers, supra, at ¶54.
However, there is no requirement that the affiant have firsthand knowledge of the
transaction giving rise to the record. Id.
{¶41} This court recently addressed the application of Roulston to similar
circumstances in Ayers. There, this court noted that this court has not adopted the
Roulston holding and that the Eighth District subsequently narrowed its Roulston holding.
Instead, this court has consistently held that “an employee of a loan servicer had the
requisite personal knowledge about the material for which he averred by stating his
personal knowledge was based on his position and that he personally reviewed the loan
servicer’s regularly kept business records.” See Ayers, at ¶57; Portage Cty. Commrs. v.
O'Neil, 11th Dist. Portage No. 2013-P-0066, 2015-Ohio-808, ¶17-18; U.S. Bank Natl.
Assn. v. Martz, 11th Dist. Portage No. 2013-P-0028, 2013-Ohio-4555, ¶25.
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{¶42} Furthermore, in both the original and supplemental affidavits, Ms. Wolff
expressly attested to having “personal knowledge of and [being] familiar with the record
keeping system of LNV Corporation and MGC.” While the answers to interrogatories had
previously shown that DMI was MGC’s subservicer, in her supplemental affidavit, Ms.
Wolff clarified that she also has personal knowledge of how records are kept and
maintained by MGC’s subservicer, DMI. She also stated she had access to and reviewed
appellants’ Loan records, which she attested were made “at or near the time of the event
and by or from information transmitted from a person with knowledge.” Additionally, she
testified that she “personally reviewed and independently verified the accuracy of the
factual information included in this affidavit through my review of the aforementioned
business records.” She attested that true and accurate copies were attached to her
affidavit, that appellants were in default, and the amount of default.
{¶43} Thus, appellee presented sufficient evidence to create a reasonable
inference that Ms. Wolff’s affidavit was based on personal knowledge and the burden
shifted to appellants to present evidence demonstrating the affidavit was not based on
personal knowledge. Appellants did not meet this burden but merely stated in a
conclusory fashion that Ms. Wolff did not have personal knowledge and that the affidavits
contradicted one another.
{¶44} No contradiction is apparent from the record. Ms. Wolff expressly stated
her affidavit was based on personal knowledge. She attached copies of the business
records to which she refers to her affidavits, and attested the records were “true and
accurate copies” of the originals. Accordingly, appellants’ third assignment of error is
without merit.
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{¶45} In light of the foregoing, the judgment of the Geauga County Court of
Common Pleas is affirmed.
TIMOTHY P. CANNON, P.J., concurs,
THOMAS R. WRIGHT, J., concurs in judgment only.
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