Bank of New York v. Baird , 2012 Ohio 4975 ( 2012 )

[Cite as Bank of New York v. Baird, 2012-Ohio-4975.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
CLARK COUNTY
THE BANK OF NEW YORK MELLON, :
fka The Bank of New York, as Trustee : Appellate Case No. 2012-CA-28
for the Certificateholders of the CWABS :
Inc., Asset-Backed Certificates, : Trial Court Case No. 11-CV-878
Series 2006-10 :
:
Plaintiff-Appellee :
: (Civil Appeal from
v. : (Common Pleas Court)
:
JEFFREY D. BAIRD, et al. :
:
Defendant-Appellant :
:
...........
OPINION
Rendered on the 26th day of October, 2012.
...........
JAMES S. WERTHEIM, Atty. Reg. #0029464, and MARIA CANDACE BURNETTE, Atty.
Reg. #0088507, McGlinchey Stafford PLLC, 25550 Chagrin Boulevard, Suite 406, Cleveland,
Ohio 44122-4640
Attorneys for Plaintiff-Appellee, The Bank of New York Mellon
MARC E. DANN, Atty. Reg. #0039425, and GRACE DOBERDRUK, Atty. Reg. #0085547,
Dann, Doberdruk & Wellen LLC, 4600 Prospect Avenue, Cleveland, Ohio 44103
Attorneys for Defendant-Appellant, Jeffrey D. Baird
.............
HALL, J.
{¶ 1} Jeffrey Baird appeals from an order denying his Civ.R. 60(B)(3) motion to
vacate a final judgment of foreclosure and denying his Civ.R. 12(B)(1) motion to dismiss for
lack of subject-matter jurisdiction. Finding no error, we affirm.
I. The Facts
{¶ 2} In May 2006, Baird bought a house with a loan from Countrywide Home
Loans, Inc. He signed a promissory note in favor of Countrywide. And as security for the loan,
Baird also signed a mortgage agreement in favor of Mortgage Electronic Registration
Systems, Inc. (MERS), who was acting as Countrywide’s nominee. In August 2011, MERS
assigned the mortgage to Appellee, The Bank of New York Mellon, as Trustee for the
Certificateholders of the CWABS Inc., Asset-Backed Certificates, Series 2006-10. The
following month, the Bank, as Trustee, brought a foreclosure action against Baird. The Bank’s
complaint alleges that Baird owes $59,877.91 plus interest on the loan. The Bank sought
judgment on the loan for this amount and sought an order of foreclosure.
{¶ 3} Attached to the Bank’s complaint are the promissory note and the mortgage
agreement. The mortgage agreement states that it was recorded in Clark County in May 2006.
Also attached is a signed and notarized document that purportedly assigned the mortgage to
the Bank. This assignment-of-mortgage document states that it was recorded in Clark County
in August 2011. The final relevant attachment is a preliminary judicial report issued by a title
insurance company in August 2011. A schedule attached to the report states that in August
2011 Baird’s mortgage was assigned to the Bank by the just-mentioned
assignment-of-mortgage document. The Bank also separately filed the preliminary judicial
report and schedules.
3
{¶ 4} Although he was served with the complaint, Baird did not respond.
{¶ 5} In December 2011, the Bank filed the title insurance company’s final judicial
report. The Bank also filed the assignment-of-mortgage document attached to the complaint.
Lastly, the Bank filed an affidavit averring that Baird was in default of his loan and stating the
exact amount he then owed. The Bank then moved for default judgment.
{¶ 6} Near the end of January 2012, the trial court sustained the Bank’s motion. The
court found that Baird had been served with a summons and the complaint and had not filed
an answer or any other responsive pleading. The court entered judgment for the Bank on the
note, and entered an order of foreclosure.
{¶ 7} Baird did not appeal the judgment or the order.
{¶ 8} About eight weeks later, Baird moved to vacate the foreclosure judgment
under Civ.R. 60(B)(3) and to dismiss the Bank’s complaint under Civ.R. 12(B)(1) for lack of
subject-matter jurisdiction.1 The trial court overruled the motion.
{¶ 9} Baird appealed.
{¶ 10} Baird assigns two errors to the trial court. First, he alleges that the court erred
by overruling his Civ.R. 60(B) motion without holding a hearing. Second, Baird alleges that
the trial court erred by overruling his Civ.R. 12(B)(1) motion to dismiss.
II. The Civ.R. 60(B) Motion
{¶ 11} A trial court’s decision on a Civ. R. 60(B) motion is reviewed for an abuse of
discretion. Wells Fargo Bank, N.A. v. Brandle, 2d Dist. Champaign No. 2012-CA-0002,
2012-Ohio-3492, ¶ 10. “‘Abuse of discretion’ has been defined as an attitude that is
1
Baird also moved to stay the sheriff’s sale of his house.
4
unreasonable, arbitrary or unconscionable. * * * A decision is unreasonable if there is no
sound reasoning process that would support that decision. It is not enough that the reviewing
court, were it deciding the issue de novo, would not have found that reasoning process to be
persuasive, perhaps in view of countervailing reasoning processes that would support a
contrary result.” (Emphasis sic.) AAAA Enterprises, Inc v. River Place Community Urban
Redevelopment Corp., 50 Ohio St.3d 157, 161, 553 N.E.2d 597 (1990).
{¶ 12} Baird argues, as he did in his motions, that he has a meritorious defense to
foreclosure and is entitled to relief from judgment. He contends that the Bank failed to submit
sufficient evidence that it owns his note or mortgage. Baird gives two primary reasons for this
contention. One reason is that the promissory note attached to the Bank’s complaint is not
indorsed. Baird asserts that Countrywide’s indorsement is necessary for the Bank to be the
proper owner. The other reason has to do with a June 1, 2006 Pooling and Servicing
Agreement (PSA) in which CWABS, Inc., is identified as Depositor; Countrywide Home
Loans, Inc., is identified as Seller;2 and The Bank of New York is identified as Trustee.3
Under the PSA, Countrywide apparently sold Baird’s note, apparently in a bulk transaction
with many, many others, to CWABS, Inc., of which the Bank is Trustee. The PSA defines
“closing date” as June 30, 2006.4 Baird asserts that this is the date by which promissory notes
must have been transferred. Because his mortgage was assigned later, in August 2011, says
2
Also identified as sellers are Park Monaco Inc. and Park Sienna LLC.
3
The PSA is publically available. Pooling and Servicing Agreement for Asset-Backed Certificates, Series 2006-10 (June 1, 2006),
available at https://www.sec.gov/Archives/edgar/data/1365987/000090514806005204/efc6-1971_5903346exh41.txt (accessed Oct. 10, 2012).
Countrywide Home Loans Servicing LP is identified as Servicer.
4
PSA at 24.
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Baird, the Bank cannot own it. Baird says that, by submitting the documents that it did, the
Bank committed a fraud on the court.
{¶ 13} It follows, Baird argues, that the Bank failed to establish that it is the real
party in interest, so it lacked standing to bring the foreclosure action. Also, because the Bank
does not own his note or mortgage, Baird contends, there is no justiciable controversy
between them. Therefore, he says, the trial court lacked subject-matter jurisdiction.
{¶ 14} Baird’s argument fails to recognize that the promissory note and the mortgage
are separate items which, although related, are not interchangeable. A mortgage is a security
interest in real property that secures the repayment of a promissory note. Federal courts have
said that PSAs concern mortgage loans not mortgages. E.g., Smith v. Litton Loan Servicing,
LP, E.D.Mich. No. 10-14700, 2012 WL 1444636, *1 (April 26, 2012) (saying that the PSA in
this case “established a schedule for the assignment of mortgage loans to the trust * * * [but]
did not similarly restrict the assignment of mortgages”); Lamb v. Wells Fargo Bank, NA,
N.D.Tex. No. 3:12-CV-00680-L, 2012 WL 1888152, *5 (May 24, 2012) (saying that the PSA
in this case “relate[d] to the selection of mortgage loans for inclusion in the trust and the
assignment of mortgage loans, not mortgages” (Emphasis sic.)). The same is true here. Based
on the PSA’s definition of “mortgage loans,” it appears that only promissory notes (called
mortgage loans in the PSA) were transferred, and this was done without regard to the
mortgages securing those loans:
Mortgage Loans: Such of the mortgage loans transferred and assigned to the
Trustee pursuant to the provisions hereof and any Subsequent Transfer
Agreement as from time to time are held as part of the Trust Fund (including
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any REO Property), the mortgage loans so held being identified in the
Mortgage Loan Schedule, notwithstanding foreclosure or other acquisition of
title of the related Mortgaged Property. * * *5
{¶ 15} Accordingly, the PSA did not restrict MERS’s authority, as Countrywide’s
nominee, to assign Baird’s mortgage. Compare Lamb at *5 (saying that the PSA “d[id] not
affect MERS’s authority as nominee and beneficiary of the lender under the Deed of Trust to
sell, transfer, assign or foreclose on the property at issue”), citing Litton Loan at *1 (saying the
same thing with respect to the plaintiff’s argument that the trustee was not entitled to foreclose
on his mortgage because the mortgage assignment occurred after the PSA’s “cut-off date”).
{¶ 16} Based on the evidence submitted by the Bank, MERS properly assigned
Baird’s mortgage to the Bank. The Bank, then, is the owner of the mortgage.
{¶ 17} Turning to the promissory note, Baird is correct that the copy of the note
attached to the Bank’s complaint is not indorsed. But any error arising from this fact is not
reversible. The Bank attached to its memorandum opposing Baird’s motion to vacate a copy
of the note that is indorsed.6 This copy of the note contains the following blank indorsement
stamped on the note’s last page:
PAY TO THE ORDER OF
_____________________
WITHOUT RECOURSE
5
(Emphasis added.) PSA at 40.
6
In its opposition memorandum, the Bank says that if the trial court holds an evidentiary hearing, it will present an authenticated
copy of the indorsed note.
7
COUNTRYWIDE HOME LOANS, INC.
BY [signature]
David A. Spector
Managing Director
{¶ 18} Baird’s note was therefore properly negotiated to the Bank. Accord R.C.
1303.25(B) (saying that a blank indorsement means that the instrument “may be negotiated by
transfer of possession alone”). And the Bank became the note’s holder. Accord R.C.
1303.21(A) (saying that the transferee of a negotiation “becomes the holder of the
instrument”). As the holder, the Bank is entitled to enforce it. Accord R.C. 1303.31(A)(1)
(saying that “[t]he holder of the instrument” is a “person entitled to enforce” it).
{¶ 19} Baird did not answer the complaint or otherwise challenge the lack of
indorsement on the copy of the note in the first instance. If he had, the bank would have
undoubtedly presented the indorsed copy of the note earlier. Given the evidence presented, it
was not unreasonable for the trial court to overrule Baird’s Civ.R. 60(B) motion without
holding an evidentiary hearing.
III. The Civ.R. 12(B)(1) Motion
{¶ 20} The second assignment of error argues that the trial court lacked
subject-matter jurisdiction over the action. Baird contends that, because the Bank does not
own his note or mortgage, there is no justiciable controversy between them. Therefore, he
concludes, the trial court lacked subject-matter jurisdiction.
{¶ 21} “The ‘subject matter jurisdiction of a court is a court’s power to hear and
decide a case upon its merits.’” JP Morgan Chase Bank, N.A. v. Brown, 2d Dist. Montgomery
8
Nos. 21853, 22359, 2008-Ohio-200, ¶ 42, quoting Morrison v. Steiner, 32 Ohio St.2d 86, 290
N.E.2d 841 (1972), paragraph one of the syllabus. “To be justiciable, a controversy must be
grounded on a present dispute * * *.” (Citation omitted.) Kincaid v. Erie Ins. Co., 128 Ohio
St. 3d 322, 2010-Ohio-6036, 944 N.E.2d 207, ¶ 17. And “[t]o have standing, a party must
have a personal stake in the outcome of [such] a legal controversy.” (Citation omitted.) Id. at ¶
9. “[A] lack of standing does not deprive a court of subject matter jurisdiction.” Brandle at ¶
20; accord JPMorgan Chase Bank Tr. v. Murphy, 2d Dist. Montgomery No. 23927,
2010-Ohio-5285, ¶ 19 (“[W]e have previously held, * * * ‘[t]he issue of lack of standing
“challenges the capacity of a party to bring an action, not the subject matter jurisdiction of the
court.“ ‘ ”), quoting Countrywide Home Loans v. Swayne, 2d Dist. Greene No. 2009 CA 65,
2010-Ohio-3903, ¶ 29.
{¶ 22} By statute, “[t]he court of common pleas has original jurisdiction in all civil
cases in which the sum or matter in dispute exceeds the exclusive original jurisdiction of
county courts * * *.” R.C. 2305.01. While Baird claims that the trial court lacked
subject-matter jurisdiction, his argument does not raise any doubt as to the trial court’s
jurisdiction over this foreclosure action.
IV. Procedural Problems
{¶ 23} Even aside from the merits, the trial court’s judgment-order should be
affirmed for any one of several procedural reasons.
{¶ 24} One, the Civ.R. 60(B) motion was not the proper method to raise Baird’s
arguments. Baird argues that the trial court should have held a hearing on the ownership
question. This assignment of error merely alleges that the trial court erred. Compare
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Miamisburg Motel v. Huntington Natl. Bank, 88 Ohio App.3d 117, 129, 623 N.E.2d 163 (2d
Dist.1993) (saying the same in response to the argument that the trial court should have
vacated a default judgment because it failed to hold a hearing on the amount of default
damages, and to the argument that the trial court should have vacated the judgment because it
was based on a complaint that failed to state a claim). Regardless of the argument’s merits,
Baird should have made it in a timely appeal.
{¶ 25} “Civ.R. 60(B) relief is not a substitute for a timely appeal.” GMAC Mortgage,
L.L.C. v. Herring, 189 Ohio App.3d 200, 2010-Ohio-3650, 937 N.E.2d (2d Dist.), ¶ 35, citing
State ex rel. Martin v. Ohio Adult Parole Auth., 124 Ohio St.3d 63, 2009-Ohio-6164, 918
N.E.2d 1005, ¶ 1; see Miamisburg Motel at 129 (“A Civ.R. 60(B)(5) motion for relief from
judgment may not be used as a substitute for a direct appeal from the judgment challenged * *
*.”). Any error committed by the trial court in foreclosing on a mortgage without sufficient
evidence can be raised in a direct appeal of the foreclosure judgment. Compare Herring at ¶
35 (saying the same when the plaintiff failed to attach the correct mortgage to its foreclosure
complaint).
{¶ 26} Two, Baird’s remedy for the Bank’s alleged failure to submit sufficient
evidence of its ownership was a motion for a more definite statement under Civ.R. 12(E). See
id. at ¶ 47-50. The Bank’s complaint alleged that it held the promissory note and also the
mortgage securing the loan. The attached note and mortgage contained only Countrywide’s
name, though the assignment-of-mortgage document and the preliminary judicial report
suggested that the note and mortgage had been transferred to the bank. If Baird believed that
the attachments rendered the complaint’s ownership allegations vague or ambiguous, he
10
should have moved for a more definite statement on the matter. Compare id. at ¶ 50.
{¶ 27} Third, Baird waived the standing issue by not raising it timely. Standing is
not a jurisdictional issue. Mid-State Trust IX v. Davis, 2d Dist. Champaign No. 07-CA-31,
2008-Ohio-1985, ¶ 56. “Accordingly, the issue of standing or the ‘real-party-in-interest’
defense is waived if not timely asserted.” (Citation omitted.) Id. Baird could have raised the
standing issue well before the default judgment was entered. He has not explained why he
failed to file an answer. The court found that Baird had been served with a summons and the
complaint. Baird does not assert otherwise. Baird had the complaint; he presumably had the
attachments to the complaint. The indorsement missing from the promissory note and the date
that the mortgage was purportedly transferred to the bank would have been apparent on the
face of the attachments. All of the issues raised in his Civ.R. 60(B) and 12(B)(1) motions
could have been identified and raised before judgment in a responsive pleading. Compare
GMAC Mortgage at ¶ 43.
{¶ 28} Finally, Baird never asked for a hearing. A trial court “[i]s not obligated to
conduct an evidentiary hearing * * * [when the movant] d[oes] not request such a hearing.”
Greenhorn v. Bud’s Auto., 2d Dist. Greene No. 2002-CA-67, 2003-Ohio-1261, ¶ 11; accord
JP Morgan Chase Bank, N.A. v. Brown, 2d Dist. Montgomery Nos. 21853, 22359,
2008-Ohio-200, ¶ 44 (holding that a magistrate did not err by ruling on the defendant’s Civ.R.
60(B) motion without holding an evidentiary hearing because the defendant did not request a
hearing on the motion).
{¶ 29} We have said that a defendant in a foreclosure action who has been properly
served with the complaint may not sit on his rights. Herring at ¶ 50. He is “required to
11
respond to the complaint, either by filing an answer or by challenging the allegations in the
complaint by motion, such as a motion to dismiss, pursuant to Civ.R. 12(B), a motion for a
more definite statement under Civ.R. 12(E), or a motion to strike, pursuant to Civ.R. 12(F).”
Id. Baird cannot now raise rights he voluntarily relinquished by failing to respond to the
complaint.
{¶ 30} The first and second assignments of error are overruled.
{¶ 31} The trial court’s judgment is affirmed.
.............
GRADY, P.J., and DONOVAN, J., concur.
Copies mailed to:
James S. Wertheim
Maria Candace Burnette
Marc E. Dann
Grace Doberdruk
Joseph T. Chapman
William D. Hoffman
Kyle E. Timken
Hon. Douglas M. Rastatter