U.S. Bank Natl. Assn. v. Robinson , 2020 Ohio 32 ( 2020 )

[Cite as U.S. Bank Natl. Assn. v. Robinson, 2020-Ohio-32.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
U.S. BANK NATIONAL ASSOCIATION, :
Plaintiff-Appellee, :
No. 108526
v. :
TERRENCE ROBINSON, ET AL., :
Defendants-Appellants. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: January 9, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-15-841611
Appearances:
McGlinchey Stafford, and James W. Sandy, for appellee.
John Wood, for appellants.
KATHLEEN ANN KEOUGH, J.:
Defendants-appellants, Terrence and Kelene Robinson (collectively
“the Robinsons”) appeal the trial court’s decision granting a decree of foreclosure in
favor of U.S. Bank National Association, as Trustee for the Holders of the Specialty
Underwriting and Residential Finance Trust Mortgage Loan Asset-Backed
Certificates, Series 2007-BCI (“U.S. Bank”). For the reasons that follow, we affirm
the trial court’s decision.
In 2006, Terrence Robinson (“Terrence”) executed a note in the
amount of $368,000 in favor of FMF Capital, L.L.C. (“FMF Capital”) to secure funds
used to purchase property located on Tinkers Valley Drive in Glenwillow, Ohio. The
Note contains an allonge with an endorsement in blank from FMF Capital.
In order to secure payment on the note, the Robinsons jointly
executed a mortgage in favor of Mortgage Electronic Registration Systems, Inc.
(“MERS”) as mortgagee and nominee for FMF Capital, and its successors and
assigns. The mortgage was recorded on October 4, 2006. On July 24, 2007, MERS,
as nominee for FMF Capital, its successors and assigns, assigned the mortgage to
U.S. Bank, National Association as Trustee for the MLMI SURF Trust Series, 2007-
BC1 (“original assignment”). On May 23, 2014, a corrective assignment was
executed by MERS as nominee for FMF Capital, its successors and assigns, to U.S.
Bank (“corrective assignment”). The corrective assignment provides that it was
“being recorded to clarify the full name of the assignee” on the original assignment.
In 2015, U.S. Bank initiated a foreclosure action against the
Robinsons alleging that Terrence had defaulted under the terms of the note and
failed to make monthly mortgage payments. Due to the default, U.S. Bank alleged
that it was entitled to foreclose on its mortgage interest. Because Terrence’s
obligation on the note was discharged through a 2008 bankruptcy, U.S. Bank did
not seek a personal monetary judgment against Terrence. Nevertheless, the trial
court granted summary judgment in favor of the Robinsons finding that any action
on the note, including foreclosure on the mortgage, was time-barred.
U.S. Bank appealed this decision contending that enforcing the debt
obligation under the note and foreclosing on the property are separate and distinct
causes of action. U.S. Bank v. Robinson, 8th Dist. Cuyahoga No. 105067, 2019-
Ohio-5585 (“Robinson I”). This court agreed, concluding that U.S. Bank can
maintain an action in equity to enforce its mortgage lien on the Robinsons’ real
property for the unsatisfied debt. Id. at ¶ 13. “U.S. Bank is entitled to maintain an
action in foreclosure to secure its interest as the mortgagee — upon default, ‘legal
title to the mortgaged property passes to the mortgagee as between the mortgagor
and mortgagee.’” Id. at ¶ 8, quoting Deutsche Bank Natl. Trust Co. v. Holden, 147
Ohio St. 3d 85, 2016-Ohio-4603, 60 N.E.3d 1243, ¶ 23. Additionally, this court
stated that whether the Note was discharged in bankruptcy or barred by the relevant
statute-of-limitations period to pursue a judgment on the note had no effect on
whether U.S. Bank could foreclose on the mortgage. Robinson I at ¶ 8, 11.
Accordingly, this court reversed the trial court’s decision and remanded the matter
for further proceedings.
On remand, a magistrate conducted a bench trial on U.S. Bank’s
foreclosure action and subsequently issued a decision in favor of U.S. Bank’s claim.
The Robinsons filed timely objections. The trial court denied the objections,
adopted the magistrate’s decision, and entered judgment in favor of U.S. Bank on its
mortgage interest and ordering a decree of foreclosure. The proceedings were
stayed pending appeal.
The Robinsons now appeal contending in their sole assignment of
error that “the trial court erred in finding that [the Robinsons were] liable for a
default on the [m]ortgage.”
I. Standard of Review
In reviewing a civil appeal from a bench trial, this court applies a
“manifest weight standard of review.” Benton Village Condominium Owners Assn.
v. Bridge, 8th Dist. Cuyahoga No. 106892, 2018-Ohio-4896, ¶ 13. A reviewing court
“will not reverse the judgment as being against the manifest weight of the evidence
if some competent, credible evidence supports all the essential elements of the case.”
Huntington Natl. Bank v. Miller, 10th Dist. Franklin No. 14AP-586, 2016-Ohio-
5860, ¶ 13, citing C.E. Morris v. Foley Constr. Co., 54 Ohio St. 2d 279, 280, 376
N.E.2d 578 (1978). Further, “[i]n determining whether a civil judgment is against
the manifest weight of the evidence, an appellate court is guided by a presumption
that the findings of the trial court are correct.” Id., citing Seasons Coal Co., Inc. v.
Cleveland, 10 Ohio St. 3d 77, 80, 461 N.E.2d 1273 (1984).
II. Law of the Case
In Robinson I, this court held that although Terrence’s personal
obligation under the note was discharged through a bankruptcy proceeding, U.S.
Bank could maintain an action to enforce its mortgage lien on the property for the
unsatisfied debt. Robinson I, 8th Dist. Cuyahoga No. 105067, 2017-Ohio-5585, ¶ 13.
This court also specifically concluded that any statute of limitations prohibiting
enforcement of the note had no application on enforcing the mortgage lien on the
property. Id. at ¶ 11. Accordingly, the law of the case is that U.S. Bank may pursue
its foreclosure action against the Robinsons. Any argument raised in this appeal by
the Robinsons on this issue is barred by res judicata. The only issue that is left to be
decided is whether the trial court’s decision granting U.S. Bank a decree of
foreclosure on the Robinsons property is against the manifest weight of the
evidence.
III. Foreclosure
In a foreclosure action, the plaintiff is required to prove at trial (1) that
it was either the holder of the note and mortgage or a party entitled to enforce those
instruments; (2) the chain of assignments and transfers; (3) that the mortgagor was
in default under the terms of the loan; (4) that all conditions had been met; and (5)
the amount due. Deutsche Bank Natl. Trust Co. v. Najar, 8th Dist. Cuyahoga No.
98502, 2013-Ohio-1657, ¶ 62.
A. Consideration of the Note
The crux of this appeal centers around the idea that because
Terrence’s obligation under the note has been discharged and no judgment can be
rendered on the note, “it would seem that no claim upon the Mortgage remains,”
unless “the mortgage sets forth independent grounds for a money judgment.”
(Appellants’ Brief, p. 12). Essentially, the Robinsons contend that U.S. Bank cannot
use a default on the note as grounds to foreclose on the mortgage. Their argument
is without merit.
As previously addressed, the law of the case is that U.S. Bank can
maintain an action in equity to enforce its mortgage lien on the property despite
Terrence’s obligation under the note being discharged in bankruptcy. Robinson I.
Moreover, the Ohio Supreme Court held, when considering facts
virtually identical to those in this case, that an action on a note and an action on a
mortgage are separate and distinct remedies a lender can pursue as a result of a
borrower’s default. Holden, 147 Ohio St. 3d 85, 2016-Ohio-4603, 60 N.E.3d 1243,
at paragraph one of the syllabus. Because these actions are separate and distinct,
even if one instrument is unenforceable, the lender can still pursue a judgment on
the other. Id. at ¶ 25. In fact,
[w]hen debt on a promissory note secured by a mortgage has been
discharged by a bankruptcy court, the holder of the note may not
pursue collection against the maker of the note; however, the holder of
the mortgage has standing to foreclose on the property and to collect
the deficiency on the note from the foreclosure sale of the property.
Id. at paragraph two of the syllabus.
Accordingly, and contrary to the Robinsons’ second issue raised on
appeal, Terrence’s bankruptcy discharge of the note obligation did not extinguish
the Robinsons’ obligation on the mortgage lien that U.S. Bank held on the secured
property. Even when an action on the note is barred, in order to foreclose on the
mortgage, the lender must still establish it was the entity entitled to enforce the note
secured by the mortgage, a default, and the amount due on the note. Holden at ¶ 26,
28. And generally, the promissory note is the primary evidence of the debt and the
borrower’s history of payments is evidence of the amount due. Holden at id.
Accordingly, while no personal judgment may be entered against the maker of the
note, the note is still relevant to determine the amount due to the holder of the
mortgage. Holden at ¶ 35.
B. Privity
The Robinsons also assert that U.S. Bank was not a party to enforce
the note or mortgage. Specifically, the Robinsons contend that U.S. Bank was
required to establish contractual privity with the original lender and provide proof
of a chain of title in order to establish that it had an interest in the note and to
foreclose on the mortgage. This exact argument was raised and rejected in Bank of
Am. v. Rogers, 8th Dist. Cuyahoga No. 107464, 2019-Ohio-1443. In Rogers, this
court stated:
Ohio courts have held that “by virtue of its possession of the note
endorsed in blank,” a bank “was the holder of the note and entitled to
enforce the note under Ohio law.” Najar at [8th Dist. Cuyahoga No.
98502, 2013-Ohio-1657, ¶ 62]. Here, [the bank] was the holder of the
note, and the note was endorsed in blank, thereby empowering it to
enforce the note.
Rogers at ¶ 17, citing R.C. 1303.25 and Nationstar Mtge. LLC v. Payne, 2017-Ohio-
513, 85 N.E.3d 249, ¶ 1 (10th Dist.).
Nevertheless, the Robinsons contend that this decision is in conflict
with our decision in Everbank v. Katz, 8th Dist. Cuyahoga No. 100603, 2014-Ohio-
4080. We disagree, finding that Katz is easily distinguishable because the note in
Katz was not endorsed in blank, which required the bank to prove chain of title to
show it validly obtained the note.
In this case, U.S. Bank produced at trial the original note, endorsed
in blank, meaning that anyone who possessed it was a “holder” of the note. And
being in possession of a note endorsed in blank, U.S. Bank was automatically an
entity entitled to enforce the note. See R.C. 1303.25(B). Accordingly, U.S. Bank was
not required to establish contractual privity with the original lender in order to
enforce the note and foreclose on the mortgage.
C. The Assignments
The final issue the Robinsons raised on appeal involves whether U.S.
Bank presented admissible evidence that it is a valid assignee of the mortgage.
Specifically, they contend that the trial court should not have permitted evidence of
the assignments due to a discovery violation, and that the assignments that were
presented were invalid.
First, “[i]t is settled in this appellate district that a mortgagor lacks
standing to challenge the assignment of his mortgage directly if the mortgagor is
neither a party to, nor a third-party beneficiary of, the assignment contract.” Bank
of New York Mellon v. Froimson, 8th Dist. Cuyahoga No. 99443, 2013-Ohio-5574,
¶ 17, citing Bank of New York Mellon Trust Co. v. Unger, 8th Dist. Cuyahoga No.
97315, 2012-Ohio-1950, ¶ 35. This is because “the assignment does not alter the
borrower’s obligations under the note or mortgage.” Deutsche Bank Trust Co. of
Ams. v. Jones, 8th Dist. Cuyahoga No. 105778, 2018-Ohio-587, ¶ 30.
In this case, the Robinsons are not parties to or third-party
beneficiaries of the assignment and the assignment does not alter any of the
Robinsons’ obligations. Much like in Jones, “the default exposed [them] to the
foreclosure action regardless of the identity of the plaintiff who may prosecute such
action.” Jones at ¶ 31. The Robinsons attempt to create standing by alleging that
the assignments were fraudulent. However, no evidence was presented supporting
this allegation. Accordingly, the Robinsons lack standing to challenge the validity of
the assignments.
And considering the merits despite the Robinsons’ lack of standing,
the trial court’s decision finding that U.S. Bank proved it was the assignee of the
mortgage was not against the manifest weight of the evidence. Alan Blunt, Senior
Principal of Litigation, Assistant Vice President for Mr. Cooper f.k.a. Nationstar
Mortgage L.L.C., who is the servicing agent for U.S. Bank, testified that U.S. Bank
was the current mortgagee of record under a corrective assignment. He stated that
MERS, as nominee for FMF Capital assigned the Mortgage to U.S. Bank National
Association as Trustee for MLMI SURF Trust Series 2007-BCI. On May 23, 2014,
U.S. Bank was named in a corrective assignment, which was “being recorded to
clarify the full name of the assignee on the Assignment Recorded 7/24/2007
#200707240323.” Accordingly, the corrective assignment proves that U.S. Bank
possessed the mortgage at the time the foreclosure complaint was filed.
Nevertheless, the Robinsons contend that the corrective assignment
was invalid because it named an entirely different entity from that in the original
assignment. In support, the Robinsons assert that because U.S. Bank named the
original assignee as a defendant to the action, it is “apparent” that the two entities
were distinct, and the corrective assignment was not being used to merely clarify the
full name of the assignee in the original assignment. We disagree. The record
reveals that the original assignee was named as a party defendant in the foreclosure
action because it may have had an interest in the secured property pursuant to an
assignment of a different mortgage recorded on October 4, 2006, in Instrument
Number 200610040119. See Paragraph 7 of the Complaint and Preliminary Judicial
Report filed December 2, 2015.
The Robinsons also contend that the corrective assignment was
invalid because FMF Capital, the original lender, was no longer in existence at the
time the corrective assignment was executed. We disagree.
It cannot be disputed that the mortgage clearly identifies MERS as
“nominee for Lender and Lender’s successors and assigns,” and “is the mortgagee
under this Security Instrument.” Under well-settled Ohio law, MERS has the
authority to assign a mortgage when that mortgage designates MERS as both
nominee and mortgagee. See Bank of New York Mellon v. Argo, 5th Dist. Richland
No. 14CA59, 2015-Ohio-268, ¶ 19. Accordingly, MERS had the right and ability to
assign the mortgage to U.S. Bank.
MERS’s authority renders the fact that FMF Capital was no longer in
existence at the time of the assignment to U.S. Bank “legally irrelevant.” See Slorp
v. Lerner, Sampson & Rothfuss, E.D.Ohio. No. 2:12-CV-498, 2017 U.S. Dist. LEXIS
94938 (July 19, 2016) (Courts have uniformly held that ”it is legally irrelevant
whether the originating lender was out of existence at the time MERS assigned the
mortgage.”), citing Ghuman v. Wells Fargo Bank, N.A., 989 F. Supp. 2d 994, 1001
(E.D.Ca. 2013) (“the fact Lender became defunct did not strip MERS’s authority to
act under the Deed of Trust”); Handfield v. Wells Fargo Bank, N.A., N.D.Ga No. 12-
cv-01080, 2013 U.S. Dist. LEXIS 55594, 6 (Jan. 23, 2013) (“This Court is unaware
of any legal authority that would invalidate the assignment from MERS to Wells
Fargo, simply because Utah Financial, the original lender, was defunct.”); Kiah v.
Aurora Loan Servs., L.L.C., D.Mass. No. 10-40161-FDS, 2010 U.S. Dist. LEXIS
121252, 4 (Mar. 4, 2011) (“dissolution would not prevent its successors and assigns
from seeking transfer of the mortgage from MERS”). Accordingly, the Robinsons’
argument fails.
Even if the corrective assignment were invalid, the fact that U.S. Bank
was the holder of the note endorsed in blank means that U.S. Bank also had an
equitable assignment of the mortgage. “The physical transfer of the note endorsed
in blank, which the mortgage secures, constitutes an equitable assignment of the
mortgage, regardless of whether the mortgage is actually (or validly) assigned or
delivered.” Najar, 8th Dist. Cuyahoga No. 98502, 2013-Ohio-1657, at ¶ 65.
Finally, the Robinsons contend that the trial court abused its
discretion in admitting evidence of the assignments because U.S. Bank violated
Civ.R. 26 by failing to completely answer or supplement its answer to the Robinsons’
interrogatories. At issue is the response to the Robinsons’ interrogatory requesting
U.S. Bank to “identify every entity that has or has had an interest in the Mortgage,
including any trust, and including any claimed equitable assignment of mortgage or
claimed assignment by operation of law, and the date thereof.” U.S. Bank responded
that the information sought was irrelevant but answered that the mortgage was
assigned to U.S. Bank prior to the filing of the complaint.
In this case, even assuming that U.S. Bank somehow violated Civ.R.
26 by not fully answering the interrogatory or supplementing its response, the
Robinsons suffered no prejudice. The information sought by the Robinsons existed
in the record prior to trial by virtue of the Preliminary Judicial Report that was filed
on December 3, 2015, with subsequent updated reports filed thereafter. The report
contains all relevant information regarding the secured property, including how the
Robinsons acquired title to the property, tax liabilities, and all old and current liens
in the form of mortgages and assignments. Accordingly, it was not an abuse of
discretion to allow U.S. Bank to provide evidence of the assignments because the
record already contained such information.
IV. Conclusion
The record before this court demonstrates that the weight of the
evidence supports the trial court’s decision in granting U.S. Bank a decree of
foreclosure on the Robinsons’ real property. U.S. Bank presented the original note
at trial, and Mr. Blunt testified that U.S. Bank, through its servicer, is in possession
of the note and was in possession of the note at the time the foreclosure action was
filed. The note is endorsed in blank, making it payable to bearer. Accordingly, U.S.
Bank is the holder of the note and mortgage and, thus, is a party entitled to enforce
the mortgage.
U.S. Bank also provided a corrective assignment of mortgage
evidencing it is the assignee of the mortgage. Accordingly, U.S. Bank has
demonstrated it has an equitable assignment of the mortgage. U.S. Bank further
demonstrated that the Robinsons are in default of the terms of the mortgage because
Terrence did not pay according to the terms of the Note and therefore also breached
the terms and covenants of the mortgage. Mr. Blunt testified to the amounts due to
U.S. Bank and that it complied with the conditions precedent as set forth in the Note
and mortgage. Accordingly, a decree of foreclosure was properly granted; the
assignment of error is overruled.
Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
KATHLEEN ANN KEOUGH, JUDGE
MARY J. BOYLE, P.J., and
MICHELLE J. SHEEHAN, J., CONCUR