Waterfall Victoria Master Fund 2008 1 v. Rittenhouse , 111 N.E.3d 883 ( 2018 )

[Cite as Waterfall Victoria Master Fund 2008 1 v. Rittenhouse, 2018-Ohio-1791.]
COURT OF APPEALS
DELAWARE COUNTY, OHIO
FIFTH APPELLATE DISTRICT
WATERFALL VICTORIA MASTER : JUDGES:
FUND 2008 1 :
:
: Hon. William B. Hoffman, P.J.
Plaintiff-Appellee : Hon. Patricia A. Delaney, J.
: Hon. Craig R. Baldwin, J.
-vs- :
: Case No. 17 CAE 10 0069
:
JEFFERY (JEFFREY) M. :
RITTENHOUSE :
:
:
Defendant-Appellant : OPINION
CHARACTER OF PROCEEDING: Appeal from the Delaware County Court
of Common Pleas, Case No. 14 CV E
11 817
JUDGMENT: AFFIRMED
DATE OF JUDGMENT ENTRY: May 4, 2018
APPEARANCES:
For Plaintiff-Appellee: For Defendant-Appellant:
SUSANA E. LYKINS BRIAN D. FLICK
1771 W. Diehl Rd., Suite 120 MARC E. DANN
Naperville, IL 60563 WILLIAM BEHRENS
P.O. Box 6031040
Cleveland, OH 44103
Delaware County, Case No. 17 CAE 10 0069 2
Delaney, J.
{¶1} Defendant-Appellant Jeffery (Jeffrey) M. Rittenhouse appeals the
September 6, 2017 judgment entry of the Delaware County Court of Common Pleas.
FACTS AND PROCEDURAL HISTORY
{¶2} On April 28, 2006, Defendant-Appellee Jeffery (Jeffrey) M. Rittenhouse
executed an Adjustable Rate Note in favor of Sunset Mortgage Company, LP in the
original principal sum of $414,000.00. The Note was secured by a Mortgage to the
Mortgage Electronic Registration Systems, Inc. as nominee for Sunset Mortgage
Company, LP on property located in Galena, Ohio. The Mortgage was assigned to
Defendant-Appellee Waterfall Victoria Master Fund 2008-1 Grantor Trust, Series B. The
Note was endorsed in blank and transferred to Waterfall Victoria Master Fund.
{¶3} Rittenhouse failed to make payments pursuant to the terms of the Note and
Mortgage. On November 12, 2014, Waterfall Victoria Master Fund filed a complaint in
foreclosure against Rittenhouse and other defendants in the Delaware County Court of
Common Pleas. On January 26, 2015, Rittenhouse filed an answer, counterclaim, and
third party complaint. Rittenhouse voluntarily dismissed his third party complaint. The trial
court dismissed Rittenhouse’s counterclaims on September 22, 2015.
{¶4} On November 9, 2015, Waterfall Victoria Master Fund filed a motion for
summary judgment. The trial court granted the motion on December 30, 2015. The trial
court granted the Decree in Foreclosure on December 30, 2015.
{¶5} Rittenhouse filed an appeal of the Decree in Foreclosure with the Fifth
District Court of Appeals, Case No. 16 CAE 01 0004. On March 23, 2016, Rittenhouse
Delaware County, Case No. 17 CAE 10 0069 3
filed a Notice of Bankruptcy Stay. The court stayed the appeal during the pendency of the
bankruptcy action.
{¶6} The Bankruptcy Court dismissed Rittenhouse’s bankruptcy petition on
February 2, 2017. On February 8, 2017, Waterfall Victoria Master Fund filed a motion to
reinstate the appeal. We granted the motion on February 28, 2017.
{¶7} We dismissed Rittenhouse’s appeal on April 24, 2017 for want of
prosecution pursuant to App.R. 18(C).
{¶8} On July 12, 2017, Rittenhouse filed a motion to vacate the December 30,
2015 judgment entry granting the motion for summary judgment and Decree in
Foreclosure. Rittenhouse argued the judgment entry should be vacated pursuant to
Civ.R. 60(B)(3) and 60(B)(5) because Waterfall Victoria Master Fund was not the real
party in interest when the trial court granted the Decree in Foreclosure. Rittenhouse
stated that on September 23, 2015, Waterfall Victoria Master Fund 2008-1 Grantor Trust,
Series B assigned the Mortgage to Waterfall Victoria Depositor II, LLC. The assignment
of Mortgage was recorded on December 3, 2015. On September 24, 2015, Waterfall
Victoria Depositor II, LLC assigned the Mortgage to Waterfall Victoria Grantor Trust II,
Series G. The assignment of the Mortgage was recorded on December 3, 2015.
{¶9} Waterfall Victoria Master Fund responded to the motion and argued it was
permitted to proceed in the case pursuant to Civ.R. 25(C). It further argued Rittenhouse’s
motion was not filed in a reasonable time and failed to raise a meritorious defense to
foreclosure.
{¶10} On September 6, 2017, the trial court denied Rittenhouse’s motion to
vacate.
Delaware County, Case No. 17 CAE 10 0069 4
{¶11} It is from this decision Rittenhouse now appeals.
ASSIGNMENT OF ERROR
{¶12} Rittenhouse raises one Assignment of Error:
{¶13} “THE TRIAL COURT ERRED BY DENYING APPELLANT’S MOTION FOR
RELIEF FROM JUDGMENT PURSUANT TO CIV.R. 60(B)(3) AND/OR CIV.R. 60(B)(5).”
ANALYSIS
{¶14} Rittenhouse contends the trial court erred in denying his Civ.R. 60(B)
motion for relief from judgment. We disagree.
{¶15} A motion for relief from judgment under Civ.R. 60(B) lies in the trial court's
sound discretion. Griffey v. Rajan, 33 Ohio St.3d 75 (1987). In order to find an abuse of
that discretion, we must determine the trial court's decision was unreasonable, arbitrary
or unconscionable and not merely an error of law or judgment. Blakemore v. Blakemore, 5
Ohio St.3d 217 (1983). Rittenhouse bases his motion on 60(B)(3) and 60(B)(5). In GTE
Automatic Electric Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146 (1976), paragraph two
of the syllabus, the Supreme Court of Ohio held the following:
To prevail on a motion brought under Civ.R. 60(B), the movant must
demonstrate that: (1) the party has a meritorious defense or claim to present
if relief is granted; (2) the party is entitled to relief under one of the grounds
stated in Civ.R. 60(B)(1) through (5); and (3) the motion is made within a
reasonable time, and, where the grounds of relief are Civ.R. 60(B)(1), (2) or
(3), not more than one year after the judgment, order or proceeding was
entered or taken.
Delaware County, Case No. 17 CAE 10 0069 5
Civ.R. 60(B)(3)
{¶16} Rittenhouse contends Waterfall Victoria Master Fund acted fraudulently as
to the identity of the owner of the Mortgage. On September 23, 2015, Waterfall Victoria
Master Fund assigned the Mortgage to Waterfall Victoria Depositor II, LLC. On
September 24, 2015, Waterfall Victoria Depositor II, LLC assigned the Mortgage to
Waterfall Victoria Grantor Trust II, Series G. The assignments were recorded on
December 3, 2015. On December 30, 2015, the trial court issued the Decree in
Foreclosure. Rittenhouse states that Waterfall Victoria Master Fund proceeded with the
action even though it was no longer the real party in interest on December 3, 2015.
{¶17} Civ.R. 60(B)(3) considers “fraud (whether heretofore denominated intrinsic
or extrinsic), misrepresentation or other misconduct of an adverse party; * * *.” The fraud
or misconduct contemplated by Civ.R. 60(B)(3) is fraud or misconduct on the part of the
adverse party in obtaining the judgment by preventing the losing party from fully and fairly
presenting his defense, not fraud or misconduct which in itself would have amounted to
a claim or defense in the case. PNC Bank, Natl. Assn. v. Botts, 10th Dist. No. 12AP–256,
2012–Ohio–5383, ¶ 15 citing State Alarm, Inc. v. Riley Indus. Servs., 8th Dist. Cuyahoga
No. 92760, 2010–Ohio–900, ¶ 21; First Merit Bank, N.A. v. Crouse, 9th Dist. Lorain No.
06CA008946, 2007–Ohio–2440, ¶ 32; and LaSalle Natl. Bank v. Mesas, 9th Dist. Lorain
No. 02CA008028, 2002–Ohio–6117, ¶ 15.
{¶18} The Ohio Supreme Court in Bank of Am., N.A. v. Kuchta, 141 Ohio St.3d
75, 2014-Ohio-4275, 21 N.E.3d 1040, analyzed a motion for relief from judgment based
on an allegation of fraud in a foreclosure proceeding. The appellants argued they were
entitled to relief from judgment pursuant to Civ.R. 60(B)(3) because the mortgagee lacked
Delaware County, Case No. 17 CAE 10 0069 6
standing at the time it filed its action in foreclosure. Prosecuting the foreclosure without
standing, the appellants argued, was a fraudulent act entitling the appellants to relief from
the foreclosure judgment. The Court examined whether Civ.R. 60(B)(3) applied to the
appellants’ claims. It stated that, “fraud, misrepresentation, or other misconduct
contemplated by Civ.R. 60(B)(3) refers to deceit or other unconscionable conduct
committed by a party to obtain a judgment and does not refer to conduct that would have
been a defense to or claim in the case itself.” (Citations omitted.) Id. at ¶ 13. The Court
analyzed the appellants argument:
The Kuchtas have not alleged that Bank of America committed intrinsic
fraud, such as attaching a materially false affidavit to its motion for summary
judgment. See Smith v. Asbell, 4th Dist. Scioto No. 03CA2897, 2005-Ohio-
2310, 2005 WL 1111630 (motion to vacate judgment properly granted when
plaintiff attached fraudulent affidavit to complaint to prevent statute-of-
limitations defense). And there is no allegation of extrinsic fraud, such as
persuading the Kuchtas not to defend their case by falsely promising to
voluntarily dismiss the action. See United States v. Throckmorton, 98 U.S.
61, 65–66, 25 L.Ed. 93 (1878).
Id. at ¶ 14.
{¶19} Rittenhouse does not argue Waterfall Victoria Master Fund committed
intrinsic or extrinsic fraud. Nor does Rittenhouse argue that Waterfall Victoria Master Fund
lacked standing to file the foreclosure complaint. Rittenhouse claims that on December
3, 2015, Waterfall Victoria Master Fund was no longer the real party in interest pursuant
to Civ.R. 17(A) because it transferred the mortgage interest during the foreclosure
Delaware County, Case No. 17 CAE 10 0069 7
proceedings. Rittenhouse argues that because Waterfall Victoria Master Fund was no
longer the real party in interest, it was obligated to move for a substitution of parties and
the failure of Waterfall Victoria Master Fund to substitute the real party in interest
establishes his entitlement to relief due to fraud or misconduct and a meritorious defense
to the underlying foreclosure.
{¶20} Civ.R. 17(A) states that, “every action shall be prosecuted in the name of
the real party in interest.” Civ.R. 17(A) provides for several methods of ensuring that the
real party in interest prosecutes the case. Dater v. Charles H. Dater Found., Inc., 166
Ohio App.3d 839, 2006-Ohio-2479, 853 N.E.2d 699 (1st Dist.), ¶¶ 10-11. It permits
ratification, joinder, or substitution. Id. Civ.R. 25 governs the process of substitution, and
it specifies when substitution of a party may occur. It allows substitution only in the case
of death, incompetency, or “transfer of interest.” Id. quoting Krischbaum v. Dillon, 58 Ohio
St.3d 58, 71, 567 N.E.2d 1291 (1991); Boedeker v. Rogers, 140 Ohio App.3d 11, 19–20,
746 N.E.2d 625 (2000). Civ.R. 25(C) provides that “[i]n case of any transfer of interest,
the action may be continued by or against the original party, unless the court upon motion
directs the person to whom the interest is transferred to be substituted in the action or
joined with the original party.” Because Civ.R. 25(C) provides that the proceedings may
be continued by or against the original party, “[t]he rule does not require that a substitution
of parties be made.” Midwest Business Capital v. RFS Pyramid Mgt., 11th Dist. Trumbull
No. 2011-T-0030, 2011-Ohio-6214, ¶ 23 quoting Krischbaum, supra. Rather, the decision
to substitute a party or parties is a matter within the trial court's discretion. Id. citing Mtge.
Electronic Registration Sys., Inc. v. Vascik, 6th Dist. No. L–09–1129, 2010–Ohio–4707,
at ¶ 35; see, also, Alrichs v. Tri–Tex Corp., 41 Ohio App.3d 207, 210, 534 N.E.2d 1231Delaware County, Case No. 17 CAE 10 0069 8
(1st Dist.1987). If a court determines a transfer of interest has occurred, it may substitute
parties pursuant to Civ.R. 25(C). Id. citing Dater v. Charles H. Dater Found., Inc., 166
Ohio App.3d 839, 2006–Ohio–2479, 853 N.E.2d 699, ¶ 11 (1st Dist.).
{¶21} In this case, Waterfall Victoria Master Fund was the holder of the Note and
Mortgage when it filed the foreclosure action on November 12, 2014. It had proper
standing to invoke the jurisdiction of the trial court. Before the trial court granted summary
judgment, Waterfall Victoria Master Fund transferred its mortgage interest. Civ.R. 25(C)
provides that the proceedings may be continued by or against the original party — the
rule does not require that a substitution of parties be made. Waterfall Victoria Master Fund
was permitted to continue the proceedings as the original party even though it made a
transfer of interests. The trial court did not abuse its discretion to find that the choice of
Waterfall Victoria Master Fund to continue with the proceedings as the original party was
not a fraud upon Rittenhouse or the trial court as stated in Civ.R. 60(B)(3). The failure of
Waterfall Victoria Master Fund to file a motion to substitute parties did not establish
Rittenhouse’s entitlement to relief due to fraud or misconduct and a meritorious defense
to the underlying foreclosure
Civ.R. 60(B)(5)
{¶22} Rittenhouse next argues the trial court should vacate the judgment pursuant
to Civ.R. 60(B)(5). Civ.R. 60(B)(5) allows the trial court to relieve a party from a final
judgment for “any other reason justifying relief from the judgment.” Civ.R. 60(B)(5)
operates as a catch-all provision and “reflects ‘the inherent power of a court to relieve a
person from the unjust operation of a judgment.’ “ Maggiore v. Barensfeld, 5th Dist. Stark
No.2011CA00180, 2012–Ohio–2909, ¶ 35 citing Dutton v. Potroos, 5th Dist. Stark
Delaware County, Case No. 17 CAE 10 0069 9
No.2010CA00318, 2011–Ohio–3646, at ¶ 49. It is reserved for “extraordinary and unusual
case [s],” Myers v. Myers, 9th Dist. Summit No. 22393, 2005–Ohio–3800, at ¶ 14, and “is
not a substitute for the enumerated grounds for relief from judgment [.]” Id.{¶23} We do not find this case presents an extraordinary or unusual circumstance
to relieve Rittenhouse of the foreclosure judgment. As stated above, the Rules of Civil
Procedure permitted Waterfall Victoria Master Fund to proceed with the action after it had
transferred its mortgage interests.
{¶24} Accordingly, the sole Assignment of Error of Rittenhouse is overruled.
CONCLUSION
{¶25} The judgment of the Delaware County Court of Common Pleas is affirmed.
By: Delaney, J.,
Hoffman, P.J. and
Baldwin, J., concur.