SRMOF 2009-1 Trust v. Lewis

[Cite as SRMOF 2009-1 Trust v. Lewis, 2014-Ohio-71.]
IN THE COURT OF APPEALS
TWELFTH APPELLATE DISTRICT OF OHIO
BUTLER COUNTY
SRMOF 2009-1 TRUST, :
CASE NOS. CA2012-11-239
Plaintiff-Appellee, : CA2013-05-068
: OPINION
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:
SHARI LEWIS, et al., :
Defendants-Appellant. :
CIVIL APPEAL FROM BUTLER COUNTY COURT OF COMMON PLEAS
Case No. CR2011-08-3073
Reisenfeld & Associates, Rebecca N. Algenio, 3962 Red Bank Road, Cincinnati, Ohio 45227,
for plaintiff-appellee
Andrew M. Engel, 7071 Corporate Way, Suite 201, Centerville, Ohio 45459, for defendant-
appellant, Shari Lewis
Michael T. Gmoser, Butler County Prosecuting Attorney, Government Services Center, 315
High Street, 11th Floor, Hamilton, Ohio 45011, for defendant, Butler County Treasurer
M. POWELL, J.
{¶ 1} Defendant-appellant, Shari Lewis, appeals two decisions of the Butler County
Court of Common Pleas in favor of plaintiff-appellee, SRMOF 2009-1 Trust (Trust). Lewis
appeals the trial court's decision (1) granting summary judgment and a decree of foreclosure
in favor of the Trust, and (2) denying Lewis' motion to vacate that judgment. For the reasons
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discussed below, we affirm the decisions of the trial court.
{¶ 2} On November 21, 2001, Lewis executed a promissory note in favor of First
Union Mortgage Corporation (First Union) in the principal amount of $141,600.00, with
interest of 7.00 percent per annum to purchase a home in Trenton, Ohio. The note was
secured by a mortgage on the property. The mortgage was assigned multiple times, and
ultimately it was assigned to the Trust on August 24, 2011.
{¶ 3} The Trust filed a complaint in foreclosure against Lewis on August 31, 2011. In
the complaint, the Trust alleged that it was the holder of the note and mortgage on the
subject property. Attached to the complaint was a copy of the originally executed note
between Lewis and First Union. The note was endorsed in blank by First Union. Also
attached to the complaint were copies of the recorded mortgage and several recorded
assignments of the mortgage. The mortgage and subsequent assignments indicate that the
mortgage was originally granted to Mortgage Electronic Registration Systems, Inc. (MERS)
as nominee for First Union. On June 9, 2011, MERS, as nominee for First Union, assigned
its interest in the mortgage to Wells Fargo Bank, N.A. (Wells Fargo), as successor by merger
to Wachovia Bank, N.A. (Wachovia). On August 8, 2011, Wells Fargo assigned its interest in
the mortgage to Selene Finance LP (Selene Finance). Selene Finance in turn assigned the
mortgage to the Trust on August 24, 2011.
{¶ 4} On October 12, 2011, the Trust filed a motion for summary judgment. Before
Lewis responded to the motion and during the course of discovery, she requested to inspect
the original note. On July 19, 2012, the trial court ordered the Trust to present the original
note "on the record as soon as Plaintiff has physical possession of it." According to the
record, the original note could not be located, and therefore, on July 27, 2012, the Trust filed
a "Notice of Filing Lost Note Affidavit." The Lost Note Affidavit and Indemnification
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Agreement (Lost Note Affidavit) was executed by Wells Fargo and indicated that the
originally executed note had been lost, destroyed, or was missing and as a result, Wells
Fargo transferred to Selene Finance a certified copy of the note in lieu of the original. The
certified copy of the note contained an allonge endorsed in blank by Wells Fargo. The Trust
then filed an "amended motion for summary judgment" based on the Lost Note Affidavit. In
this motion, the Trust asserted that "Plaintiff is the holder of the Note via the Lost Note
Affidavit and blank indorsement from Wells Fargo Bank, N.A., successor by merger to
Wachovia Bank, N.A., formerly known as First Union National Bank, and is thus entitled to
enforce the Note."
{¶ 5} On August 28, 2012, the Trust withdrew its amended motion for summary
judgment "on the grounds that the original Note has been located and Plaintiff wants to stand
on its original Motion for Summary Judgment." Ultimately, the trial court granted the Trust's
motion for summary judgment. In its decision granting the motion for summary judgment, the
trial court noted that the original note and mortgage were presented in court for inspection by
Lewis where she admitted the signatures on the documents were hers. The trial court "took
judicial notice of the original Note and Mortgage and further noted that the Note contained a
blank endorsement and that Plaintiff was the holder of this bearer paper by virtue of its
possession of that Note."
{¶ 6} Thereafter, on October 31, 2012, the trial court filed the In rem Judgment Entry
and Decree of Foreclosure ordering the sale of the property. In the judgment entry, the trial
court ordered the Trust to be paid "the sum of $125,683.50 plus interest at the rate of
7.00000 percent per annum from April 1, 2010, together will all expenses and costs" from the
proceeds of the sale of the property. Lewis appealed the trial court's October 31, 2012
judgment entry and the decision to grant summary judgment in favor of the Trust.
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{¶ 7} On February 1, 2013, Lewis filed two motions. In the trial court, Lewis filed a
motion to vacate judgment requesting the trial court vacate its In Rem Judgment Entry and
Decree of Foreclosure entered on October 31, 2012, as well as the court's decision granting
the Trust's motion for summary judgment entered on October 19, 2012. In her motion to
vacate judgment, Lewis asserted the Trust did not have standing to prosecute this claim
based on the Supreme Court's October 31, 2012 decision in Fed. Loan Mtg. Corp. v.
Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017. Also on February 1, Lewis filed a motion
in this court requesting the appeal to be remanded to the trial court for consideration of her
motion to vacate judgment. This court granted Lewis' motion. Ultimately, however, the trial
court denied Lewis' motion to vacate judgment. Lewis also appealed this decision by the trial
court.
{¶ 8} There are two decisions on appeal before this court: (1) the trial court's decision
to grant summary judgment and a decree of foreclosure, and (2) the trial court's decision to
deny Lewis' motion to vacate. This court consolidated the two cases sua sponte. Lewis
asserts two assignments of error for our review.
{¶ 9} Assignment of Error No. 1:
{¶ 10} THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT TO
SRMOF [2009-1 TRUST].
{¶ 11} In her first assignment of error, Lewis argues the trial court erred in granting
summary judgment to the Trust because the Trust did not have standing under the note at
the time the complaint was filed. Lewis also contends that the trial court's judgment entry
and decree of foreclosure was not a final appealable order.
{¶ 12} In challenging the Trust's standing, Lewis first contends that the Trust only
received an interest in the note after the complaint was filed when the original note was
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located and endorsed over to the Trust. Lewis further argues that the Trust may not rely on
the Lost Note Affidavit as the basis for an interest in the note at the time the complaint was
filed as the Lost Note Affidavit failed to meet the requirements of R.C. 1303.38. Finally,
Lewis contends that the assignment of the mortgage alone was insufficient to confer standing
to the Trust.
{¶ 13} "Standing is a preliminary inquiry that must be made before a trial court may
consider the merits of a legal claim." Bank of New York Mellon v. Blouse, 12th Dist. Fayette
No. CA2013-02-002, 2013-Ohio-4537, ¶ 5, quoting Kincaid v. Erie Ins. Co., 128 Ohio St.3d
322, 2010-Ohio-6036, ¶ 9. Whether standing exits is a question of law that an appellate
court reviews de novo. Fifth Third Mtge. Co. v. Bell, 12th Dist. Madison No. CA2013-02-003,
2013-Ohio-3678, ¶ 13.
{¶ 14} Recently, the Supreme Court of Ohio addressed the issue of standing in a
foreclosure action. Federal Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13,
2012-Ohio-5017. In Schwartzwald, the Court determined the plaintiff lacked standing to
invoke the jurisdiction of the common pleas court because "it failed to establish an interest in
the note or mortgage at the time it filed suit." Blouse at ¶ 8, quoting Schwartzwald at ¶ 28.
"It is an elementary concept of law that a party lacks standing to invoke the jurisdiction of the
court unless he has, in an individual or representative capacity, some real interest in the
subject matter of the action." (Emphasis sic.) Schwartzwald at ¶ 22. Accordingly, the court
found that a plaintiff must have standing at the time the complaint is filed and the lack of
standing cannot be cured by "receipt of an assignment of the claim or by substitution of the
real party in interest" pursuant to Civ.R. 17(A). Id. at ¶ 26, ¶ 41.
{¶ 15} Based on the decision in Schwartzwald, this court has determined: "[A] party
may establish that it is the real party in interest with standing to invoke the jurisdiction of the
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common pleas court when, 'at the time it files its complaint of foreclosure, it either (1) has
had a mortgage assigned or (2) is the holder of the note.'" (Emphasis sic.) Bank of New
York Mellon v. Burke, 12th Dist. Butler No. CA2012-12-245, 2013-Ohio-2860, ¶ 13, appeal
not accepted, 11/20/2013 Case Announcements, 2013-Ohio-5096; BAC Home Loans, LP v.
Mapp, 12th Dist. Butler No. CA2013-01-001, 2013-Ohio-2968, ¶ 14; JPMorgan Chase Bank,
NA v. Carroll, 12th Dist. Clinton No. CA2013-04-010, 2013-Ohio-5273, ¶ 15. See also
Schwartzwald at ¶ 28; Self Help Ventures Fund v. Jones, 11th Dist. Ashtabula No. 2012-A-
0014, 2013-Ohio-868, ¶ 17. In reaching this decision, we noted, the Ohio Supreme Court's
"deliberate decision to use the disjunctive word 'or' as opposed to the conjunctive word 'and'
when discussing the interest [plaintiff] was required to establish at the time it filed the
complaint" is significant. Burke at ¶ 13, quoting CitiMortgage, Inc. v. Patterson, 8th Dist.
Cuyahoga No. 98360, 2012-Ohio-5894, ¶ 21.
{¶ 16} While we note that the dissent raises legitimate concerns regarding the
necessary requirements to establish standing, this Court, along with the Eighth, Eleventh,
Tenth, Seventh, and Sixth Districts have all found that the plain language of Schwartzwald
only requires a plaintiff to establish an interest in the note or mortgage at the time the suit is
filed. Bank of New York Mellon v. Burke, 12th Dist. Butler No. CA2012-12-245, 2013-Ohio-
2860, ¶ 13; CitiMortgage, Inc. v. Patterson, 8th Dist. Cuyahoga No. 98360, 2012-Ohio-5894,
¶ 21; Fed. Home Loan Mtg. Corp. v. Koch, 11th Dist. Geauga No. 2012-G-3084, 2013-Ohio-
4423, ¶ 24; U.S. Bank Natl. Assn. v. Gray, 10th Dist. Franklin No. 12AP-953, 2013-Ohio-
3340, ¶ 27; CitiMortgage, Inc. v. Loncar, 7th Dist. Mahoning No. 11 MA 174, 2013-Ohio-
2959, ¶ 15; Bank of New York Mellon v. Matthews, 6th Dist. Fulton No. F-12-008, 2013-Ohio-
1707, ¶ 11. Until the Supreme Court overrules these cases, we will continue to apply the
interpretation of Schwartzwald that this court announced in Burke. Moreover, although a
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plaintiff may establish standing by showing an interest in the note or the mortgage, this is not
to say that a plaintiff never has to show an interest in both the note and the mortgage. As
mentioned above, standing is only a preliminary inquiry that must be made before a trial court
may consider the merits of the claim. Blouse at ¶ 5. Once a plaintiff has demonstrated
standing and therefore invoked the jurisdiction of the common pleas court, in order to be
entitled to judgment in a foreclosure action, the plaintiff must indeed prove it is the current
holder of the note and mortgage, as well as, default, the amount owed, execution and
delivery of the note and mortgage, and valid recording of the mortgage. See BAC Home
Loans Serv., L.P. v. Kolenich, 194 Ohio App.3d 777, 2011-Ohio-3345, ¶ 17 (12th Dist.).
{¶ 17} In the present case, even assuming Lewis' arguments with regard to the note
and her challenges to the Lost Note Affidavit are true, we find the Trust established it had
standing at the time the complaint was filed by way of the assignment of the mortgage. The
mortgage and subsequent assignments attached to the complaint indicate that the Trust had
the mortgage assigned to it on August 24, 2011. The mortgage was originally granted to
MERS as nominee for First Union. On June 9, 2011, MERS, as nominee for First Union,
assigned its interest in the mortgage to Wells Fargo, as successor by merger to Wachovia.
On August 8, 2011, Wells Fargo assigned its interest in the mortgage to Selene Finance.
Selene Finance in turn assigned the mortgage to the Trust on August 24, 2011. Accordingly,
the Trust held the mortgage as it was assigned to the Trust seven days before the complaint
was filed in this case. Contrary to Lewis' assertions, the mortgage alone was sufficient to
establish the Trust had standing to prosecute this foreclosure action.
{¶ 18} Lewis also asserts within her first assignment of error that the trial court's failure
to specify the dollar amount owed in late charges, advancements, maintenance, and costs
rendered the judgment indefinite and therefore not a final appealable order. Lewis further
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contends that the trial court's failure to completely determine the amount owed to the Trust in
the judgment entry prevented her from exercising her right of redemption. The judgment
entry by the trial court ordered, "$125,683.50 plus interest at the rate of 7.00000 percent per
annum from April 1, 2010 together with late charges, advances for the protection and
maintenance of the property and costs" to be paid to the Trust from the proceeds of the
Sheriff's sale.
{¶ 19} This court has previously considered similar judgment entries which failed to
include the specific amount awarded for advancements related to real estate taxes,
insurance premiums, and property protection and has concluded that the failure to include
such expenses within a judgment entry does not prevent the judgment from being final and
appealable. Washington Mut. Bank, F.A. v. Wallace, 194 Ohio App.3d 549, 2011-Ohio-4174,
¶ 49 (12th Dist.), rev'd on other grounds, 134 Ohio St.3d 359, 2012-Ohio-5495.1 Moreover,
the failure to include specific amounts for these types of advancements does not interfere
with the mortgagor's right of redemption. Id. at ¶ 45, 49. These additional amounts for late
charges, maintenance, and advancements made on behalf of the mortgagor are continuously
accruing through the date of the sheriff's sale. Third Fed. S. & L. Assn. of Cleveland v.
Farno, 12th Dist. Warren No. CA2012-04-028, 2012-Ohio-5245, ¶ 14; First Horizon Loans v.
Sims, 12th Dist. Warren No. CA2009-08-117, 2010-Ohio-847, ¶ 25. As a result, "'[i]t would
be beyond reason to hold a trial court or magistrate to a standard that insists they state a
definite sum of redemption,' and that '[a]s long as the redemption value of a foreclosed
property is ascertainable through normal diligence, the value, as stated by a finder of fact, will
1. The Supreme Court recently determined that a conflict exists on the following issue: "Whether a judgment
decree in foreclosure is a final appealable order if it includes as part of the recoverable damages amounts
advanced by the mortgagee for inspections, appraisals, property protection and maintenance, but does not
include specific itemization of those amounts in the judgment." CitiMortgage, Inc. v. Roznowski, 02/06/2013
Case Announcements, 2013-Ohio-347. Until the Supreme Court announces its decision in Roznowski, we will
follow our prior precedent established in Wallace.
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be upheld.'" Wallace at ¶ 48, quoting Huntington Natl. Bank v. Shanker, 8th Dist. Cuyahoga
No. 72707, 1998 WL 269091, * 2 (May 21, 1998).
{¶ 20} Accordingly, based on this court's previous decisions in Wallace and Sims, we
find no merit to the arguments advanced by Lewis.
{¶ 21} Based on the foregoing, Lewis' first assignment of error is overruled.
{¶ 22} Assignment of Error No. 2:
{¶ 23} THE TRIAL COURT ERRED IN OVERRULING APPELLANT'S MOTION TO
VACATE JUDGMENT.
{¶ 24} In her second assignment of error, Lewis challenges the trial court's decision to
overrule her motion to vacate judgment again arguing that the Trust lacked standing at the
time of the filing of the complaint. Lewis asserts the trial court did not have jurisdiction over
the foreclosure proceeding as the Trust did not have standing. As discussed above, the
Trust had standing by way of the assignment of the mortgage. See Bank of New York Mellon
v. Burke, 12th Dist. Butler No. CA2012-12-245, 2013-Ohio-2860, ¶ 13. The trial court
therefore had jurisdiction over the foreclosure proceeding and properly denied Lewis' motion
to vacate the judgment. See Schwartzwald at ¶ 22.
{¶ 25} Lewis' second assignment of error is overruled.
{¶ 26} Judgment affirmed.
PIPER, J., concurs.
RINGLAND, P.J., dissents.
RINGLAND, P.J., dissenting.
{¶ 27} I respectfully dissent from the majority's decision as the evidence in the record
failed to establish that the Trust had an interest in both the note and the mortgage at the time
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it filed the complaint. Accordingly, I would hold that the Trust failed to demonstrate standing
at the commencement of this foreclosure action and remand the matter to the trial court with
instructions to dismiss the complaint pursuant to the Supreme Court of Ohio's decision in
Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶ 40.
{¶ 28} Although the majority cites Schwartzwald for the proposition that a plaintiff may
establish standing in a foreclosure action by demonstrating that it has had the mortgage
assigned or is the holder of the note, I find that this is an incorrect interpretation of law and
the Supreme Court's decision Schwartzwald. Furthermore, I note there is a conflict among
the districts regarding the interpretation of the necessary requirements to establish standing
pursuant to Schwartwald. Compare Bank of New York Mellon v. Burke, 12th Dist. Butler No.
CA2012-12-245, 2013-Ohio-2860, ¶ 13 (finding that standing may be established by
evidence that the plaintiff is the holder of the note or the mortgage) with BAC Home Loans
Servicing, LP v. McFerren, 9th Dist. Summit No. 26384, 2013-Ohio-3228, ¶ 13 (holding a
plaintiff must be the holder of the note and mortgage at the time it initiates the action in order
to have standing); see also CitiMortgage, Inc. v. Patterson, 8th Dist. Cuyahoga No. 98360,
2012-Ohio-5894, ¶ 21 (holding that a plaintiff may establish standing by evidence that it has
had a mortgage assigned or is the holder of the note); Fed. Home Loan Mtg. Corp. v. Koch,
11th Dist. Geauga No. 2012-G-3084, 2013-Ohio-4423, ¶ 24 (holding that in order to establish
standing a plaintiff must demonstrate an interest in the note or mortgage); HSBC Bank USA
v. Sherman, 1st Dist. Hamilton No. C-120302, 2013-Ohio-4220, ¶ 16, 18 (rejecting the
interpretation that a party may establish standing by showing either it is the assignee of the
mortgage or that it is the holder of the note). Therefore, I urge the Supreme Court to provide
courts of this state with the necessary guidance on this issue.
{¶ 29} As noted by the majority, the Supreme Court of Ohio in Schwartzwald
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determined that a plaintiff in a foreclosure action must have standing at the time the
complaint is filed in order to invoke the jurisdiction of the common pleas court. Id. at ¶ 24-25.
"It is an elementary concept of law that a party lacks standing to invoke the jurisdiction of the
court unless he has, in an individual or representative capacity, some real interest in the
subject matter of the action." (Emphasis sic.) Id. at ¶ 22. Moreover, the Court found that a
lack of standing cannot be cured by "post-filing events" that supply standing. Id. at ¶ 26. The
lack of standing "cannot be cured by receipt of an assignment of the claim or by substitution
of the real party in interest." Id. at ¶ 41. In Schwartzwald, the record did not establish that
the plaintiff/bank was the holder of the note or mortgage when it filed the complaint. Id. at ¶
28. As such, the bank "concede[d] that there was no evidence it suffered any injury at the
time it commenced th[e] foreclosure action." Id. at ¶ 28. Thus, because the bank "failed to
establish an interest in the note or mortgage at the time it filed suit, it had no standing to
invoke the jurisdiction of the common pleas court." Id. Where I diverge with the majority is
its reliance on this statement to support the proposition that a party may establish standing by
showing either that it is an assignee of the mortgage or the holder of the note. See Burke at
¶ 13.
{¶ 30} As an initial matter, from a review of the facts of Schwartzwald and the issue
presented before the court, it is apparent that the court did not intend to determine whether
standing in a foreclosure action may be demonstrated by either the note or the mortgage
alone. This specific question was not considered or even before the court. Rather, the
precise issue before the court was whether: "In a mortgage foreclosure action, the lack of
standing or real party in interest defect can be cured by the assignment of the mortgage prior
to judgment." In addition, the trial court's reference to "or" resulted merely from the facts of
the case and was not intended to be a statement of law. See Schwartzwald at ¶ 28. As
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mentioned above, the bank conceded that it did not have an interest in the note or the
mortgage when the complaint was filed. Rather, it was a month after the complaint was filed
that the note and mortgage were assigned to the bank. Schwartzwald at ¶ 10. Accordingly,
the court's statement that the bank "failed to establish an interest in the note or the
mortgage" must be read in the context of the entire opinion and facts of the case.
{¶ 31} Furthermore, this court's holding that the mortgage alone is sufficient to
evidence an injury, and therefore demonstrate standing, is contrary to the fundamental
requirement of standing and long-standing foreclosure precedent. As explained in
Schwartzwald, the fundamental requirement of standing is that the party bringing the action is
actually the party who has suffered the injury. See Schwartzwald at ¶ 24. In addition, a long-
standing foreclosure principle is that "the note and mortgage are inseparable; the former as
essential, the latter as an incident." Carpenter v. Longan, 83 U.S. 271, 274, 21 L.Ed. 313(1873). "An assignment of the note carries the mortgage with it, while an assignment of the
[mortgage] alone is a nullity." Id. Accordingly, a party who only has the mortgage but no
note has not suffered any injury given that bare possession of the mortgage does not endow
its possessor with any enforceable right absent possession of the note. McFerren at ¶ 12;
see also Restatement of the Law 3d, Property, Mortgages, Section 5.4(e), at 385 (1996) ("[I]n
general a mortgage is unenforeceable if it is held by one who has no right to enforce the
secured obligation"). While it is possible for an entity to assign a mortgage but not transfer
the note, the practical effect of such a transaction is that it would be "impossible to foreclose
the mortgage, unless the transferee is also made an agent or trustee of the transferor * * *."
Restatement, Section 5.4(c), at 384; see also Christopher L. Peterson, Two Faces:
Demystifying the Mortgage Electronic Registration Systems' Land Title Theory, 53 Wm. &
Mary L.Rev. 111, 119 (2011), fn. 34 (referencing cases from multiple jurisdictions finding that
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the note and mortgage are inseparable and that the assignment of a mortgage alone is a
nullity). Given that a note and mortgage are inseparable and that a party who merely holds
the mortgage suffers no injury, I do not believe the Supreme Court intended to imply that
possession of the mortgage alone is sufficient to establish standing. See McFerren at ¶ 12.
{¶ 32} Based on the foregoing, I would conclude that Schwartzwald did not overturn
long-standing precedent. In order to establish standing in a foreclosure action, a plaintiff
must demonstrate, through evidence in the record, that it had an interest in both the note and
the mortgage at the time it filed the complaint.
{¶ 33} In the present case, as noted by the majority, the Trust demonstrated it had an
interest in the mortgage prior to the filing of the complaint by attaching the mortgage and the
subsequent assignments of the mortgage to the complaint. These documents demonstrated
the chain of title from the originating entity, MERS, as nominee for First Union, and finally
ending with the assignment to the Trust. The note, however, is more problematic.
{¶ 34} From my review of the record, there is a lack of evidence which demonstrates
that the Trust obtained an interest in the note prior to the filing of the complaint in this case.
First, the Trust was not a holder of the note when the complaint was filed as it was not in
possession of the note. See R.C. 1301.01(T)(1)(a) and R.C. 1303.25(B) (A holder includes a
person in possession of an instrument payable to bearer). The Trust obtained possession of
the original note, endorsed in blank, almost a year after the filing of the complaint when Wells
Fargo located the original note and endorsed it over to the Trust. Therefore, at this time, the
Trust became a holder as it was in possession of bearer paper. However, this constitutes a
post-filing event which cannot be the basis for the Trust's standing in this case. See
Schwartzwald at ¶ 26. Accordingly, in order to demonstrate standing, the Trust was required
to demonstrate that it had an interest in the note and was entitled to enforce the note by way
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of the Lost Note Affidavit.
{¶ 35} R.C. 1303.38 indeed permits a person who is not in possession of an
instrument to still enforce a note that has been lost, destroyed, or stolen.2 Although the Trust
is not the entity which lost the note, I find that an assignee of a promissory note that was not
in possession of the note at the time it was misplaced, lost, or destroyed may still enforce the
note pursuant to R.C. 1303.38 if, before the assignment, the assignor was entitled to enforce
the note. See Atlantic National Trust, LLC v. McNamee, 984 So.2d 375 (Ala.2007).
Consequently, the Trust's ability to enforce the note at the time the complaint was filed, turns
on whether the Lost Note Affidavit met the requirements under R.C. 1303.38.
{¶ 36} As noted by Lewis, the Lost Note Affidavit executed by Wells Fargo failed to
aver that it was in possession and entitled to enforce the note at the time it was lost. See
R.C 1303.38(A)(1). However, the failure to include this specific averment was not necessarily
fatal to the affidavit. If the combined allegations in the affidavit along with the certified copy
of the originally executed note would have indicated that Wells Fargo was indeed the holder,
this would have been sufficient to establish the requirements under R.C. 1303.38 (A)(1). See
EquiCredit Corp. of Am. v. Provo, 6th Dist. Lucas No. L-03-1217, 2006-Ohio-3981 (finding
that the combined allegations in the affidavits by the plaintiff bank met the requirements of
2. Under R.C. 1303.38:
(A) A person who is not in possession of an instrument is entitled to enforce the
instrument if all of the following apply:
(1) The person was in possession of the instrument and entitled to enforce it when
loss of possession occurred.
(2) The loss of possession was not the result of a transfer by the person or a lawful
seizure.
(3) The person cannot reasonably obtain possession of the instrument because the
instrument was destroyed, its whereabouts cannot be determined, or it is in the
wrongful possession of an unknown person or a person that cannot be found or is
not amendable to service.
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R.C. 1303.38 (A)(1) as the allegations demonstrated it was the holder, and therefore by
definition, in possession and entitled to enforce the instrument). In the present case,
although Wells Fargo attached a certified copy of a note endorsed in blank, this was
insufficient to demonstrate its holder status as one must be also be in possession of a note
endorsed in blank to be the holder. There is some indication that First Union may have
merged into Wells Fargo and therefore Wells Fargo essentially stood in the shoes of First
Union and would arguably be entitled to enforce the note. See Acordia of Ohio, L.L.C. v.
Fishel, 133 Ohio St.3d 356, 2012-Ohio-4648, ¶ 7 ("[T]he absorbed company becomes a part
of the resulting company following merger [and] the merged company has the ability to
enforce * * * agreements as if the resulting company had stepped in the shoes of the
absorbed company"). However, the Trust failed to provide merger documents or other
properly authenticated evidence of the merger of these entities. As a result, there is simply a
lack of evidence to indicate that Wells Fargo effectively transferred its interest in the lost note
to Selene Finance as the affidavit failed to meet the requirements under R.C. 1303.38.
{¶ 37} Moreover, even if the affidavit was sufficient under R.C. 1303.38, the Lost Note
Affidavit executed by Wells Fargo was in favor of Selene Finance. There is nothing in the
record which indicates when or if Selene Finance transferred this Lost Note Affidavit and
therefore the ability to enforce the note, over to the Trust. The trial court found that the same
day the Lost Note Affidavit was executed in favor of Selene Finance, it was placed in the
Trust. Beyond the fact that the Lost Note Affidavit was found in the business records of the
Trust, there is simply no evidence in the record to support this conclusion.
{¶ 38} Based on the foregoing, the evidence in the record failed to establish that the
Trust had an interest in the note at the time it filed the complaint. As the Trust did not have
an interest in both the note and mortgage, it did not have standing to invoke the jurisdiction of
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the common pleas court. Therefore, as indicated above, I would have remanded the matter
to the trial court with instructions to dismiss the complaint pursuant to the Supreme Court of
Ohio's decision in Schwartzwald.
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