First Fin. Bank, N.A. v. Cooper

[Cite as First Fin. Bank, N.A. v. Cooper, 2016-Ohio-3523.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
FIRST FINANCIAL BANK, N.A., : APPEAL NO. C-150664
TRIAL NO. A-1500091
Plaintiff-Appellee, :
vs. :
O P I N I O N.
DOUGLAS J. COOPER, :
Defendant-Appellant. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed in Part, Reversed in Part, and Cause
Remanded
Date of Judgment Entry on Appeal: June 22, 2016
Lange, Quill & Powers, PLC, and John E. Lange, for Plaintiff-Appellee,
The Blessing Law Firm and David S. Blessing, for Defendant-Appellant.
OHIO FIRST DISTRICT COURT OF APPEALS
FISCHER, Presiding Judge.
{¶1} Defendant-appellant Douglas Cooper appeals from a judgment of the
Hamilton County Court of Common Pleas requiring him to pay plaintiff-appellee
First Financial Bank, N.A., (“First Financial”) $61,408.19 plus interest and costs for
breach of a promissory note. Because we determine that a genuine issue of material
fact exists with regard to whether First Financial mitigated its monetary damages, we
reverse that portion of the trial court’s judgment and remand the cause for further
proceedings. We affirm the remainder of the trial court’s judgment.
{¶2} In 2006, Cooper assisted his daughter in buying a home on Eustis
Court in Hamilton County, Ohio, through First Financial (formerly Peoples
Community Bank). Cooper and his daughter cosigned a promissory note in the
amount of $112,000. Cooper’s daughter lived in the Eustis Court home for
approximately two years, and then moved out of state. Instead of selling the
property, Cooper’s daughter rented the property to tenants, and Cooper continued to
make the note payments.
{¶3} In September 2009, Hamilton County filed a foreclosure action against
Cooper, his daughter, and his wife, for delinquent real-estate taxes in the amount of
$7,242.87. It named the Coopers as defendants, as well as First Financial’s
predecessor Peoples Community Bank. The Coopers never answered or otherwise
responded to the foreclosure complaint. First Financial filed an answer stating that
it was the holder of a promissory note secured by the Eustis Court property, and that
$106,435.41 with interest remained due and owing on the note. Without opposition
from the Coopers, Hamilton County obtained a default judgment of foreclosure, and
the property was sold at a sheriff’s sale to First Financial for $50,000. In May 2011,
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OHIO FIRST DISTRICT COURT OF APPEALS
First Financial filed a motion for distribution of the excess sale proceeds, claiming
that $118,212.42 was still owed under the promissory note.
{¶4} In January 2015, First Financial filed a complaint against Cooper for
breach of the promissory note. First Financial alleged that Cooper had failed to
make monthly payments due under the note since September 2010, and alleged that
$61,408.19 plus interest remained unpaid under the note. Cooper answered First
Financial’s complaint and asserted several affirmative defenses, including failure to
mitigate damages and res judicata, and Cooper filed a counterclaim for fraud.
Cooper alleged that he did not know about the foreclosure of the Eustis Court
property because service of the summons and complaint had been sent to him, his
wife, and his daughter at the Eustis Court property, where they did not reside.
Cooper alleged that First Financial had knowledge of the Coopers’ residential address
because of their ongoing banking relationship, but that First Financial made no
attempt to notify them of the pending foreclosure.
{¶5} First Financial filed a motion for summary judgment on its claim for
breach of the promissory note and on Cooper’s fraud counterclaim. First Financial
supported its motion with an affidavit from a retail collections manager, who averred
that Cooper had defaulted under the note by failing to make monthly payments since
September 2010. Cooper responded with his own motion for summary judgment
and memorandum in opposition. Cooper filed an affidavit in which he detailed that
he had been a longtime customer of Peoples Community Bank, and now First
Financial. Cooper had started his own business in 2009, and had received a business
loan from First Financial in April 2010, during the pendency of the foreclosure
lawsuit.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶6} According to Cooper’s affidavit, no one at First Financial discussed the
foreclosure lawsuit with him until he tried to make a monthly payment under the
note in either September or October 2010, and First Financial refused to take the
payment. At that point, First Financial informed Cooper that he no longer owned the
property. Cooper stated that he offered to purchase the property back from First
Financial for $103,825.23, plus costs and fees of $11,871.21, and he attached a copy
of his written offer to the affidavit. According to Cooper, First Financial rejected his
offer.
{¶7} Cooper also attached to his affidavit an email from a First Financial
branch manager, Donna Farrell, in which Farrell discusses the Eustis Court property
with what appears to be another First Financial employee. In the email, Farrell
stated that Cooper is a valuable client who holds personal deposit and loan accounts
with First Financial, as well as a commercial checking account, loan, and credit card.
Farrell indicated that Cooper wanted to buy back the property, and that he wanted to
finance the purchase through First Financial. Farrell acknowledged that First
Financial had a policy “prohibiting us from financing the purchase of our REO
properties[,]” but she wondered whether First Financial would reconsider this policy
in light of this “unique situation.”
{¶8} The trial court granted summary judgment in favor of First Financial
on all claims and entered judgment against Cooper for $61,408.19 plus interest and
costs. Cooper has appealed.
{¶9} At the outset, we note that our standard of review of a summary-
judgment ruling under Civ.R. 56(C) is de novo. Schmidt v. Village of Newtown, 1st
Dist. Hamilton No. C-110470, 2012-Ohio-890, ¶ 6. Summary judgment is proper
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OHIO FIRST DISTRICT COURT OF APPEALS
only where no genuine issues of material fact remain, the moving party is entitled to
judgment as a matter of law, and it appears from the evidence that reasonable minds
can come to but one conclusion, and with the evidence construed most strongly in
favor of the nonmoving party, that conclusion is adverse to that party. Id., citing
Temple v. Wean United, Inc., 50 Ohio St. 2d 317, 327, 364 N.E.2d 267 (1977).
{¶10} In his first assignment of error, Cooper argues that the trial court erred
in granting summary judgment to First Financial because its cause of action was
barred under res judicata.
{¶11} Under the doctrine of res judicata, “a valid final judgment rendered
upon the merits bars all subsequent actions based upon any claim arising out of the
transaction or occurrence that was the subject matter of the previous action.” Grava
v. Parkman Twp., 73 Ohio St. 3d 379, 653 N.E.2d 226 (1995), syllabus. “Res judicata
requires a plaintiff to present every ground for relief in the first action or be forever
barred from asserting it.” State ex rel. Robinson v. Huron Cty. Court of Common
Pleas, 143 Ohio St. 3d 127, 2015-Ohio-1553, 34 N.E.3d 903, ¶ 8.
{¶12} In arguing that First Financial’s suit is barred by res judicata, Cooper
relies on U.S. Bank, N.A. v. Gullotta, 120 Ohio St. 3d 399, 2008-Ohio-6268, 899
N.E.2d 987. The facts of Gullotta are wholly distinguishable. In Gullotta, the Ohio
Supreme Court considered whether each missed payment under a promissory note
constituted a new claim, and thus exempted successive actions from the rules of
voluntary dismissals under Civ.R. 41(A)(1). In Gullotta, the bank had voluntarily
dismissed its first two actions against the debtor for breach of a promissory note and
mortgage, and then filed a third action against the debtor based upon the same note,
mortgage, and default. The bank argued that the third action was not barred by res
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OHIO FIRST DISTRICT COURT OF APPEALS
judicata because it sought relief in the form of interest only. The court held that once
the bank had invoked the acceleration clause of a contract, the debtor had an
obligation to pay the entire balance of the note, and the bank could not treat each
missed payment as a separate claim. The court held that res judicata applied to bar
the bank’s third cause of action.
{¶13} By contrast, this case presents the issue of whether a mortgagee named
as a defendant in a foreclosure action because of its interest in the subject property
must bring its claims against a mortgagor, also named as defendant in the same
foreclosure action, or be barred by res judicata from bringing later claims. This issue
was decided by the Ninth Appellate District in Fifth Third Bank v. Hopkins, 177 Ohio
App.3d 114, 2008-Ohio-2959, 894 N.E.2d 65 (9th Dist.).
{¶14} In Hopkins, Andrew Hopkins executed a promissory note and
mortgage with Fifth Third Bank, and subsequently executed an equity line of credit,
along with his wife, secured by the same property. Approximately four years later,
another mortgage company filed a foreclosure action against the Hopkinses for
defaulting on a promissory note secured by the same property. The foreclosure
complaint named Fifth Third Bank as a defendant as well. Neither the Hopkinses
nor Fifth Third Bank filed answers in the foreclosure action, and the mortgage
company obtained a default judgment. Fifth Third Bank then filed a complaint for
money damages against the Hopkinses. The Hopkinses answered Fifth Third Bank’s
complaint, raising res judicata as an affirmative defense. The trial court entered
judgment in favor of Fifth Third Bank, and the Hopkinses appealed the res judicata
issue. The appellate court determined that the prior foreclosure lawsuit did not bar
Fifth Third Bank’s lawsuit for money damages because the Hopkinses and Fifth
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OHIO FIRST DISTRICT COURT OF APPEALS
Third Bank were codefendants in the foreclosure lawsuit—not adversarial parties—
and thus any claim that Fifth Third Bank may have had against the Hopkinses at that
time would have been a permissive cross-claim under Civ.R. 13(G). The appellate
court also rejected the Hopkinses’ argument that res judicata applied because the
remedies in the prior foreclosure action and the instant action were identical. The
appellate court reasoned that a note and mortgage are separate instruments, and
“even when a mortgage is incorporated into a promissory note, the note remains
independent of the mortgage and is a separate, enforceable contract between the
parties.” Id. at ¶ 16. Hopkins was relied upon by the Second Appellate District in a
similar case, SunTrust Bank v. Wagshul, 2d Dist. Montgomery No. 25567, 2013-
Ohio-3931.
{¶15} Cooper argues that Hopkins and Wagshul are distinguishable because
in those cases the defendant banks never answered or sought any type of relief in the
foreclosure actions, and, in this case, First Financial answered and received proceeds
from the foreclosure sale. The amount of proceeds First Financial received from the
foreclosure sale is relevant to any damages calculation in this action by First
Financial against Cooper on the note, but the receipt of proceeds does not act as a
complete bar to any action against Cooper. Even though First Financial participated
in the first lawsuit and sought proceeds from the sale, First Financial did not pursue
any judgment against Cooper at that time, nor was it required to do so. See
Hopkins; Wagshul.
{¶16} As a result, we agree with the trial court that First Financial’s action
against Cooper to recover under the promissory note was not barred by the doctrine
of res judicata. We overrule the first assignment of error.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶17} We will address Cooper’s third assignment of error next, in which he
argues that the trial court erred in granting summary judgment in favor of First
Financial on his fraud counterclaim. Cooper’s counterclaim alleges that First
Financial had a duty to disclose its knowledge of Cooper’s residential address in the
foreclosure action, and that the court and the parties in that action justifiably relied
on First Financial’s failure to disclose.
{¶18} Fraud requires proof of
(a) a representation or, where there is a duty to disclose, concealment
of a fact, (b) which is material to the transaction at hand, (c) made
falsely, or with such utter disregard and recklessness as to whether it is
true or false that knowledge may be inferred, (d) with the intent of
misleading another into relying upon it, (e) justifiable reliance upon
the representation or concealment, and (f) a resulting injury
proximately caused by the reliance.
Gator Dev. Corp. v. VHH, Ltd., 1st Dist. Hamilton No. C-080193, 2009-Ohio-1802, ¶
26, quoting Burr v. Stark Cty. Bd. of Commrs., 23 Ohio St. 3d 69, 491 N.E.2d 1101
(1986), paragraph two of the syllabus.
{¶19} The first element of fraud by concealment requires proof of a duty to
disclose. Cooper argues that First Financial had a duty to disclose Cooper’s
residential address to the court at commencement of the foreclosure proceedings
because First Financial had actual knowledge of Cooper’s address, and, as a claimant
in the foreclosure action, First Financial should have served its filings on Cooper at
his residential address.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶20} Cooper has cited no authority for the proposition that a defendant-
mortgagee in a foreclosure action has a duty to disclose the residential address of a
codefendant-mortgagor to the court and plaintiff, nor could we locate any such
authority. Therefore, we determine that Cooper has not shown that First Financial
breached a legal duty owed to him, and the trial court properly entered summary
judgment in favor of First Financial on Cooper’s fraud counterclaim.
{¶21} We overrule Cooper’s third assignment of error.
{¶22} In his second assignment of error, Cooper argues that the trial court
erred in granting summary judgment in favor of First Financial on Cooper’s
affirmative defense of failure to mitigate damages.
{¶23} Under Ohio law, the injured party in a breach-of-contract action has a
duty to mitigate damages, meaning that the injured party cannot recover damages
“that it could have prevented by ‘reasonable affirmative action.’ ” Four Seasons
Environmental, Inc. v. Westfield Cos., 93 Ohio App. 3d 157, 159, 638 N.E.2d 91 (1st
Dist.1994), quoting F. Ents. v. Kentucky Fried Chicken Corp., 47 Ohio St. 2d 154, 351
N.E.2d 121 (1976), paragraph three of the syllabus. An injured party need only use
“reasonable, practical care and diligence, not extraordinary measures to avoid
excessive damages.” Provident Bank v. Barnhart, 3 Ohio App. 3d 316, 320, 445
N.E.2d 746 (1st Dist.1982). The failure to mitigate damages is an affirmative
defense, meaning that the burden of proof lies with the breaching party. Jindal
Builders & Restoration Corp. v. Brown & Cris, 1st Dist. Hamilton Nos. C-970029
and C-970050, 1997 Ohio App. LEXIS 4768, *3 (Oct. 31, 1997). Whether an injured
party used reasonable care to avoid damages presents a question of fact. Pinnacle
Mgt. v. Smith, 12th Dist. Butler No. CA2003-12-327, 2004-Ohio-6928, ¶ 12.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶24} Cooper argues that First Financial failed to mitigate its damages in
part by rejecting his offer to purchase the property from First Financial for
$103,825.23, after Cooper learned that he no longer owned the property. First
Financial rejected Cooper’s offer because Cooper needed financing in order to
purchase the property, and First Financial has a “policy not to finance the purchase
of its REO properties.” First Financial contends that it did mitigate its damages by
bidding on the property at the sheriff’s sale, nearly four times the amount that was
owed to Hamilton County for delinquent taxes.
{¶25} First Financial’s action in repurchasing the property may have
mitigated its damages, but that ignores the question of whether First Financial acted
reasonably in rejecting Cooper’s offer to repay. Because the record shows that
Cooper had been current on all of his note payments until completion of the tax
foreclosure, when First Financial rejected Cooper’s payment and Cooper discovered
he no longer owned the property, a question of fact exists as to whether First
Financial acted reasonably in rejecting Cooper’s offer to repurchase the property.
{¶26} Because a fact issue remains as to whether First Financial failed to
mitigate its damages, summary judgment on this issue was not proper. We sustain
Cooper’s second assignment of error.
{¶27} In conclusion, we affirm that portion of the trial court’s judgment
entered in favor of First Financial on Cooper’s fraud counterclaim. We reverse the
portion of the trial court’s judgment awarding damages in favor of First Financial,
because an issue of fact remains as to whether First Financial mitigated its damages,
and the cause is remanded for further proceedings consistent with this opinion.
Judgment affirmed in part, reversed in part, and cause remanded.
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OHIO FIRST DISTRICT COURT OF APPEALS
CUNNINGHAM and STAUTBERG, JJ., concur.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
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