Wood v. Fillinger

[Cite as Wood v. Fillinger, 2014-Ohio-1842.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 100464
JOHN WOOD
PLAINTIFF-APPELLANT
vs.
JUDY FILLINGER, ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
AFFIRMED IN PART;
REMANDED IN PART
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-09-713348
BEFORE: S. Gallagher, P.J., E.A. Gallagher, J., and E.T. Gallagher, J.
RELEASED AND JOURNALIZED: May 1, 2014
ATTORNEY FOR APPELLANT
John Wood, pro se
281 Corning Drive
Bratenahl, OH 44108
ATTORNEYS FOR APPELLEES
Daniel C. Gibson
Nelson M. Reid
Bricker & Eckler L.L.P.
100 South Third Street
Columbus, OH 43215
Also listed:
Judy Fillinger, pro se
12614 Britton Drive
Cleveland, OH 44120
SEAN C. GALLAGHER, P.J.:
{¶1} In this foreclosure action, appellant John Wood appeals from various rulings
issued by the trial court that denied Wood’s initial motion for default judgment, granted a
motion to intervene, and granted summary judgment in favor of the intervenor. For the
reasons stated herein, we affirm the judgment of the trial court in relation to the assigned
errors. However, we sua sponte remand the matter to the trial court to vacate the default
judgment that was eventually rendered against RBC Mortgage Company and to enter an
order dismissing RBC from the action because it was not a real party in interest.
{¶2} On September 12, 2009, appellant loaned Judy Fillinger $110,000 on a
promissory note that was secured by a mortgage on Fillinger’s property located at 3718
Ingleside Road in Shaker Heights (“the property”). On December 18, 2009, appellant
filed a foreclosure action against Fillinger, alleging a default on the note. The complaint
also named defendant RBC Mortgage Company (“RBC”) as having an interest in the
property.
{¶3} The preliminary judicial report that was attached to the complaint reflected
that the mortgage from Fillinger to Wood was filed on September 15, 2009. It also listed
a mortgage that had been previously recorded on July 9, 2004, between Fillinger and
MERS. That mortgage designated MERS, as nominee for the lender RBC, as the
mortgagee. The mortgage secured repayment on a promissory note in the original
principal amount of $139,000 between RBC and Fillinger.
{¶4} Appellant filed a motion for default judgment on February 11, 2010.
Following a hearing, the court magistrate denied the motion. The magistrate determined
that appellant had failed to name all necessary parties to the case, including the current
holder of the first mortgage and the unknown spouse of defendant Judy Fillinger.
Thereafter, upon appellant’s request, the magistrate issued findings of fact and
conclusions of law on September 2, 2010. The magistrate recognized that the
preliminary judicial report had listed a mortgage recorded on July 9, 2004, from Fillinger
to “[MERS] as nominee for RBC Mortgage Company.” Appellant requested findings of
fact. The magistrate determined that RBC was not a proper party to the action and that
MERS had a legal interest in the property and was a necessary party to the action.
Further, the magistrate indicated that none of the documents in the record reflected
Fillinger’s marital status and that the naming of an unknown spouse was necessary.
{¶5} Also on September 2, 2010, Chase Home Finance L.L.C. (“Chase”) filed a
motion to intervene as a party defendant and to file an answer, cross-claim and
counterclaim.1 Chase asserted that it held a valid lien on the property by virtue of a valid
mortgage and assignment of mortgage, copies of which were attached to its motion. The
assignment of mortgage was made from MERS, as nominee for RBC, to Chase on or
about August 18, 2010, and recorded on August 24, 2010. The trial court granted the
motion to intervene.
1
JPMorgan Chase Bank, National Association is the successor by merger to Chase Home
Finance L.L.C.
{¶6} Thereafter, on September 27, 2010, the trial court overruled appellant’s
objection to the magistrate’s decision and noted that it had recently granted Chase’s
motion to intervene.
{¶7} Fillinger filed a pro se answer to Chase’s counterclaim and filed a
counterclaim against Chase. Appellant filed an amended complaint on October 25, 2010,
which included a claim of fraud against Chase and MERS.
{¶8} After further proceedings in the matter, Chase filed a motion for summary
judgment on March 29, 2012. Chase presented evidence, including documents and a
supporting affidavit, showing the assignment of the mortgage from MERS to Chase and
establishing it as the holder of the note, which is endorsed in blank, and servicer for the
loan. Chase also presented evidence of Fillinger’s default and the amount due and
owing. Chase further refuted the claims raised against it in the action.
{¶9} Appellant filed a response and filed new motions for default judgment.
Default judgment was granted against RBC and Fillinger.
{¶10} On April 26, 2013, the magistrate issued a decision granting summary
judgment to Chase. The trial court overruled objections, adopted the magistrate’s
decision, and entered judgment in favor of Chase on August 30, 2013. This appeal
followed.
{¶11} Under his first assignment of error, appellant claims the trial court erred in
denying his motion for default judgment of February 11, 2010. The record reflects that
the trial court ultimately granted default judgment against RBC and Fillinger. Because
disposition of the issues presented under the assignment of error would not result in any
meaningful relief since default judgment has already been rendered, this assignment of
error is moot, and we need not address the issues raised thereunder. Nonetheless, to the
extent that the trial court ultimately granted default judgment against RBC, we sua sponte
find that plain error occurred because RBC was not a real party in interest to the action.2
“In foreclosure actions, the real party in interest is the current holder of the note and
mortgage.” U.S. Bank, N.A. v. Richards, 189 Ohio App. 3d 276, 2010-Ohio-3981, 938
N.E.2d 74, ¶ 13 (9th Dist.), quoting Everhome Mtge. Co. v. Rowland, 10th Dist. Franklin
No. 07AP-615, 2008-Ohio-1282, ¶ 12. Therefore, we remand the matter to the trial court
to vacate the default judgment against RBC and issue an order dismissing RBC from the
action.
{¶12} Under his second assignment of error, appellant claims the trial court erred
in finding Chase received a mortgage from Fillinger in 2004 instead of 2010. The
argument is based upon a statement in the magistrate’s decision, which was adopted by
the court, that indicated Fillinger executed and delivered a mortgage to Chase, rather than
RBC, in 2004. Appellant concedes that this was likely a clerical error. While the trial
court misstated the facts in this regard, we find any error was harmless.
While appellate review is generally confined to the assignments of error
2
raised on appeal, it is within our discretion to sua sponte notice plain error under
exceptional circumstances. See Rose v. Cochran, 2d Dist. Montgomery No. 25498,
2013-Ohio-3755, ¶ 40; Civ.R. 52. Allowing default judgment to stand against RBC
would be a manifest injustice because it is not a real party in interest to the case.
{¶13} The record clearly reflects that Chase acquired the mortgage, which had
been filed with the recorder in 2004, by assignment on August 18, 2010. The trial court
recognized the assignment in its decision. Appellant’s second assignment of error is
overruled.
{¶14} Under his third assignment of error, appellant claims the trial court erred in
allowing Chase to intervene and to enforce a mortgage it obtained during lis pendens.
Appellant argues that the only previously recorded mortgage to him on the property was
the 2004 mortgage between Fillinger and MERS, as nominee for RBC. He erroneously
argues that the doctrine of lis pendens should apply to bar Chase from intervening in the
action because Chase’s interest, via the assignment of the mortgage, was obtained after
the commencement of the action.
{¶15} The doctrine of lis pendens is codified in R.C. 2703.26 and provides as
follows:
When a complaint is filed, the action is pending so as to charge a third
persons [sic] with notice of its pendency. While pending, no interest can
be acquired by third persons in the subject of the action, as against the
plaintiff’s title.
“The general intent and effect of the doctrine of lis pendens is to charge third persons
with notice of the pendency of an action, and to make any interest acquired by such third
persons subject to the outcome and judgment or decree of the pending lawsuit.”
Nationstar Mtge., L.L.C. v. Kereszturi, 11th Dist. Trumbull No. 2013-T-0065,
2013-Ohio-5849, ¶ 7, quoting Irwin Mtge. Corp. v. Dupee, 197 Ohio App. 3d 117,
2012-Ohio-1594, 966 N.E.2d 315, ¶ 9 (12th Dist.). Lis pendens does not prevent a party,
who obtains an interest in a property after a foreclosure complaint is filed against such
property, from intervening in the action to protect their interest in the property.
Nationstar at ¶ 8.
{¶16} The issues raised by appellant in this appeal appear to be nothing more than
an attempt to extinguish a superior lien on the property. Pursuant to R.C. 5301.23,
mortgages take effect in the order of their presentation to the recorder for record and the
mortgage recorded first in time obtains priority. ABN AMRO Mtge. Group, Inc. v.
Kangah, 126 Ohio St. 3d 425, 2010-Ohio-3779, 934 N.E.2d 924, ¶ 7. In this matter, the
mortgage between Fillinger, as mortgagor, and MERS, as nominee for RBC, as
mortgagee, was the first mortgage lien on the property. The first mortgage lien remained
a superior lien on the property and was not extinguished by MERS’s involvement or the
assignment to Chase.
{¶17} The purpose of recording mortgages and other encumbrances on property is
to give notice to bona fide purchasers of the mortgage holder’s lien. Pursuant to R.C.
5301.25, before an instrument conveying or encumbering real property is recorded, it
shall be deemed fraudulent as against subsequent bona fide purchasers who are without
knowledge or notice. By recording a mortgage, the lienholder may claim that all
subsequent purchasers of the property have been constructively notified of the lien. The
recorded mortgage also protects the lienholder by giving the lienholder priority of interest
in the secured property. See, e.g., Swallie v. Rousenberg, 190 Ohio App. 3d 473,
2010-Ohio-4573, 942 N.E.2d 1109 (7th Dist.). R.C. 5301.25 has no effect on a
mortgagor’s payment obligation to the mortgagee, whether or not the mortgage was
recorded. Daniely v. Accredited Home Lenders, 8th Dist. Cuyahoga No. 99208,
2013-Ohio-4373, ¶ 12.
{¶18} Here, appellant seemingly argues that a default by RBC should have
extinguished the superior lien on the property and left Chase without any mortgage
interest to assert. Like the trial court, we will not disregard that appellant had notice of a
superior lien held by MERS, as nominee for RBC, yet he failed to bring MERS into the
case. Further, to suggest that appellant’s interest in the property somehow trumps the
original recorded interest of RBC, which was subsequently assigned to Chase, would
violate principles of equity law.
{¶19} Because MERS was designated as both the nominee for the lender and the
mortgagee, it had the authority to assign the mortgage. Amir Jamal Tauwab v.
Huntington Bank, 8th Dist. Cuyahoga No. 96996, 2012-Ohio-923, ¶ 8. MERS exercised
this authority and assigned the mortgage to Chase. The record also reflects that Chase is
the holder of the note, which was endorsed in blank.
{¶20} By virtue of the assignment, Chase held the first mortgage lien on the
property and was the real party in interest in the action. The assignment of the mortgage
“shall transfer not only the lien of the mortgage but also all interest in the land described
in the mortgage.” R.C. 5301.31. The purpose of the recording of the assignment was
simply to provide notice to all interested in the mortgaged premises of the right of the
assignee in the mortgage.
{¶21} Pursuant to Civ.R. 24(A)(2), intervention in an action shall be permitted
upon timely application
when the applicant claims an interest relating to the property or transaction
that is the subject of the action and the applicant is so situated that the
disposition of the action may as a practical matter impair or impede the
applicant’s ability to protect that interest, unless the applicant’s interest is
adequately represented by existing parties.
Because Chase held an interest in the property subject to the foreclosure action and the
requirements for intervention were satisfied, the trial court did not err in allowing Chase
to intervene. Appellant’s third assignment of error is overruled.
{¶22} Judgment affirmed in part and remanded in part with instructions for the
trial court to vacate the entry of default judgment against RBC and dismiss RBC from the
action.
It is ordered that appellees recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the common
pleas 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.
SEAN C. GALLAGHER, PRESIDING JUDGE
EILEEN A. GALLAGHER, J., and
EILEEN T. GALLAGHER, J., CONCUR