Bank of New York Mellon v. Floyd

[Cite as Bank of New York Mellon v. Floyd, 2021-Ohio-3736.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
BANK OF NEW YORK MELLON, :
Plaintiff-Appellee, :
No. 110248
v. :
DORIS M. FLOYD, ET AL., :
Defendants-Appellants. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: October 21, 2021
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-19-922817
Appearances:
Reimer Law Co. and Mike L. Wiery, for appellee.
Willie Floyd and Doris Floyd, pro se.
ANITA LASTER MAYS, P.J.:
{¶ 1} Defendants-appellants, Doris M. Floyd and Willie Floyd (the
“Floyds”), appeal from the trial court’s January 21, 2021 judgment adopting the
magistrate’s decision and ordering a decree of foreclosure in favor of plaintiff-
appellee Bank of New York Mellon (“BONYM” or the “bank”). For the reasons that
follow, we affirm.
Factual and Procedural History
{¶ 2} The record demonstrates that in 2006, the Floyds executed an
adjustable rate note in favor of America’s Wholesale Lender in the amount of
$50,850 in order to finance the purchase of property located on Eldamere Avenue
in Cleveland. Along with the execution of the note, the Floyds also executed and
delivered to Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee
for America’s Wholesale Lender, a mortgage granting it the first and best lien on the
property. The mortgage was recorded in January 2006 in the Cuyahoga County
Recorder’s Office. The note and mortgage were subsequently transferred and
assigned to BONYM that was memorialized by an assignment of mortgage recorded
in October 2009 in the Cuyahoga County Recorder’s Office.
{¶ 3} In December 2009, the note and mortgage were modified by a loan-
modification agreement that was recorded in November 2011 in the Cuyahoga
County Recorder’s Office. BONYM contends that the Floyds defaulted under the
note, loan-modification agreement, and mortgage by failing to make payments due
for October 1, 2010, and any subsequent payments. As such, the bank issued a notice
of default to the Floyds in July 2013 and again in July 2014. The default was not
cured, and BONYM filed the within foreclosure proceedings in March 2015.
{¶ 4} In April 2015, the Floyds filed a motion for summary judgment that
the bank opposed. In September 2015, BONYM sought leave to file an amended
complaint that was unopposed and granted. In November 2015, the trial court
denied the Floyds’ motion for summary judgment, and the bank filed its first
amended complaint.
{¶ 5} In December 2015, the Floyds filed an answer, counterclaims, and a
motion to dismiss the complaint. The bank opposed the Floyds’ motion to dismiss,
and filed its own motion to dismiss the Floyds’ counterclaims. The Floyds then filed
a motion for leave to file an amended answer and counterclaims with the joinder of
an additional party on March 29, 2016, that BONYM opposed. In August 2016, the
trial court denied the Floyds’ motion to dismiss the bank’s complaint, and in
September 2016, the court denied the Floyds’ motion to file an amended answer and
counterclaims with the joinder of an additional party. Also in September 2016, the
trial court granted BONYM’s motion to dismiss the Floyds’ first set of counterclaims.
{¶ 6} In July 2017, the bank sought leave to file a second amended
complaint that the trial court granted; the bank’s second amended complaint was
filed in January 2018. In February 2018, the Floyds filed a motion to dismiss the
second amended complaint; the motion was denied. The Floyds then filed a second
amended answer and counterclaims in November 2018. The bank moved to strike
or dismiss the second set of counterclaims. The Floyds filed a motion to file their
second set of counterclaims out of time, and a motion for leave to reply to the bank’s
motion to strike or dismiss. The trial court granted the Floyds’ request to file out of
time, denied the bank’s motion to dismiss, and denied the Floyds’ motion for leave
to reply as moot.
{¶ 7} BONYM then filed a renewed motion to dismiss the Floyds’ second
set of counterclaims; the Floyds opposed the motion. The trial court granted the
bank’s motion to dismiss second set of counterclaims. The Floyds filed a motion for
reconsideration that the trial court denied. In May 2019, the Floyds filed their
second motion for summary judgment that the bank opposed. The trial court denied
the Floyds’ second motion for summary judgment in August 2019.
{¶ 8} BONYM moved for summary judgment in June 2019; the Floyds
opposed. In August 2019, the magistrate issued his decision granting the bank’s
motion for summary judgment. The Floyds filed objections to the magistrate’s
decision. The trial court overruled the Floyds’ objections in January 2021, and
issued an order adopting the magistrate’s decision and decree of foreclosure in
January 2021. The Floyds now appeal, raising the following six assignments of error
for our review:
ASSIGNMENT OF ERROR NO. 1: The trial court erred to the prejudice
of the appellants in adopting the magistrate’s decision and granting the
appellee’s motion for summary judgment when numerous issues of fact
exist as to who the real party in interest is. The trial court failed to
construe the evidence most favorably toward the appellants.
ASSIGNMENT OF ERROR NO. 2: The trial court erred in denying
appellants’ motion for summary judgment. The appellants have
established by admissible evidence that BNYM is not entitled to enforce
the note and mortgage and the court erred in allowing BNYM to use
manipulated documents to obtain summary judgment.
ASSIGNMENT OF ERROR NO. 3: The trial court erred by relying on
the affidavit of Laura Hovis filed in support of appellee’s motion for
summary judgment. The trial court erred by failing to strike the
affidavit as impermissible hearsay or in the alternative failing to strike
Exhibits A1-A9 and sustaining appellants’ motion for summary
judgment.
ASSIGNMENT OF ERROR NO. 4: The trial court erred to the
prejudice of the appellants in awarding [summary judgment] when
BNYM failed to prove the amount of principal and interest due on the
mortgage and not granting summary judgment to the appellants.
ASSIGNMENT OF ERROR NO. 5: The trial court erred in failing to
consider appellants’ affirmative defenses of unclean hands, and judicial
estoppel. Appellants’ [summary judgment] motion should have been
sustained.
ASSIGNMENT OF ERROR NO. 6: The trial court erred to the
prejudice of the appellants in dismissing our counterclaims.
{¶ 9} Further facts will be discussed under the assignments of error.
Law and Analysis
{¶ 10} Appellate review of an order granting summary judgment is de novo.
Pursuant to Civ.R. 56(C), the party seeking summary judgment must prove that (1)
there is no genuine issue of material fact; (2) they are entitled to judgment as a
matter of law; and (3) reasonable minds can come to but one conclusion and that
conclusion is adverse to the nonmoving party.
{¶ 11} In a foreclosure action, the plaintiff is required to prove (1) 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) the mortgagor was in
default under the terms of the loan; (4) 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.
BONYM’s Standing
{¶ 12} In their first assignment of error, the Floyds contend that “the trial
court’s decision is against the manifest weight of the evidence regarding the plaintiff
being holder of the note and mortgage.” According to the Floyds, both BONYM and
BAC Home Loan Servicing (“BAC”) are purporting to be the holders of the mortgage
and loan.
{¶ 13} We initially note that the Floyds cite to previous proceedings
regarding the subject property. Specifically, a foreclosure case was filed in 2009 in
Cuyahoga County C.P. No. CV-09-706593, and again in 2012 in Cuyahoga County
C.P. No. CV-12-778979. In the 2009 case, BONYM obtained default judgment
against the Floyds. The default judgment was later vacated by the bank, and the trial
court dismissed the case without prejudice. The 2012 case was also dismissed
without prejudice.
{¶ 14} In their motion for summary judgment, the Floyds attempted to rely
on the prior proceedings; they also cite the prior proceedings now on appeal. For
example, they contend that “[d]uring the same time BONYM possessed a default
judgment, BAC sent three letters dated May 2010, September 2010, and February
2012, attempting to collect on the loan and threatening us with foreclosure.”
{¶ 15} Generally, a trial court may not take judicial notice of prior
proceedings in the court; rather, it may only take judicial notice of prior proceedings
in the immediate case. D & B Immobilization Corp. v. Dues, 122 Ohio App.3d 50,
53, 701 N.E.2d 32 (8th Dist.1997). The rationale for this holding is that if a court
takes notice of a prior proceeding, the appellate court cannot review whether the
trial court correctly interpreted the prior case because the record of the prior case is
not before the appellate court. Id.{¶ 16} Further, a dismissal without prejudice, which was the case for both
prior foreclosure cases, has the effect of placing the parties back in the position that
they held prior to the commencement of the action. Zimmie v. Zimmie, 11 Ohio
St.3d 94, 464 N.E.2d 142 (1984), paragraph two of the syllabus. A dismissal without
prejudice has the effect of dissolving all rulings preceding the entry of dismissal.
DeVille Photography, Inc. v. Bowers, 169 Ohio St. 267, 272, 159 N.E.2d 443 (1959).
Therefore, the parties are permitted to litigate claims as if no previous suit had been
commenced. Id.{¶ 17} In light of the above, we disregard the Floyds’ arguments relating to
the 2009 and 2012 foreclosure actions.
{¶ 18} We do consider issues the Floyds raise about the versions of the note
that were before the trial court in this case; the record demonstrates that there were
two versions. The first version of the note contains both a blank endorsement and a
specialty endorsement to BONYM via an allonge (see original Mar. 20, 2015
complaint, Exhibit A). The second version of the note contains the same blank
endorsement that the first version contained, but the allonge containing the
specialty endorsement is no longer affixed to the note (see Jan. 25, 2018 second
amended complaint, Exhibit A). The bank offers the following explanation for the
versions:
When BONYM’s Counsel received the referral for the subject Loan, it
was provided a copy of the Note that contained both the blank
endorsement and an affixed Allonge that contained a specialty
endorsement. When the appellants served BONYM with Discovery
Requests, BONYM’s counsel took custody of the original note to permit
for appellants to inspect the original note. Upon review of the Original
Note, BONYM’s counsel discovered that at that time no Allonge
containing the specialty endorsement was affixed to the Note. This
discovery necessitated the Second Amended Complaint in order to
plead the current and correct version of the Note.
BONYM’s brief, pg. 6-7.
{¶ 19} This court has previously held that “[t]he mere fact that there were
two different copies of the note in the record — one with endorsements and one
without — does not mandate a finding that one of the notes was ‘unauthentic’ or
otherwise preclude summary judgment.” Najar, 8th Dist. Cuyahoga No. 98502,
2013-Ohio-1657, at ¶ 59, citing United States Bank, N.A. v. Adams, 6th Dist. Erie
No. E-11-070, 2012-Ohio-6253, ¶ 19-20. In foreclosure cases, standing exists where
a party either has a mortgage assignment or is the holder of the note at the time the
complaint is filed. CitiMortgage, Inc. v. Patterson, 2012-Ohio-5894, 984 N.E.2d
392, ¶ 21 (8th Dist.). In this case, BONYM has met its burden of proof with regard
to standing because it had both the mortgage assignment and was the holder of the
note at the time the complaint was filed.
{¶ 20} Both versions of the note contain a blank endorsement and there was
evidence before the trial court that BONYM had been in possession of the original
note since January 2006. Specifically, in support of its motion for summary
judgment, the bank attached Exhibit A-3, “Possession Statement of Ditech Financial
LLC,” that indicated that BONYM obtained possession of the subject note on
January 17, 2006. The specialty endorsement on the allonge (that endorsed the
bank) was merely a reinforcement that BONYM was the intended recipient of the
note, in addition to the bank’s possession of the note containing the blank
endorsement. Thus, BONYM was the party entitled to enforce the note by being the
party in possession of the note with a blank endorsement. The allonge was removed
from the note since it was apparently redundant to the blank endorsement.
{¶ 21} The removal of the allonge to the original note did not create an issue
of material fact. Upon discovery of the present condition of the original note,
BONYM amended its complaint to plead a current and correct version of the original
note. Therefore, there was no genuine issue of material fact as to the different
versions of the note.
{¶ 22} We also find that there was no genuine issue of material fact created
by the loan modification. According to the Floyds, BONYM was not entitled to
enforce the loan modification because the loan modification identified BAC as the
lender. A careful review of the record shows that BAC was a loan servicer, not the
lender. Other loan servicers were used as well throughout the life of the loan (the
other servicers were Countrywide Home Loans Servicing, L.P.; Bank of America,
N.A.; Green Tree Services, L.L.C.; Ditech Financial, L.L.C.; and Carrington
Mortgage Services, L.L.C. (“Carrington”)). But BONYM has been the holder of the
note for almost the entire span of the subject loan (i.e., since Jan. 17, 2006).
{¶ 23} The Floyds also take issue with the fact that BONYM’s original
complaint contained two assignments of mortgage. The first was from MERS as
nominee for America’s Wholesale Lender and its successors, and assigned to
BONYM. The second assignment of mortgage was a corrective assignment from
MERS as nominee for America’s Wholesale Lender to BONYM. The corrective
assignment of mortgage had a note that expressly stated, “This corrective
assignment is to correct the assignor name on the assignment of mortgage
previously recorded on January 17, 2006 as Instrument No. 200601170038 of
Cuyahoga County Records.” The only change in the assignor name between the two
assignments of mortgage was that the first assignment included “its successors and
assigns” whereas the second assignment of mortgage did not.
{¶ 24} As mentioned in the procedural history, in September 2015, BONYM
sought leave to file an amended complaint. The leave, unopposed by the Floyds and
granted by the trial court, was so that the correct assignment of mortgage could be
pled.
{¶ 25} On November 12, 2015, BONYM filed its first amended complaint
that only included the first assignment of mortgage containing the “its successors
and assigns” notation for the assignor; it removed the superfluous corrective
assignment of mortgage because it was never necessary to assign the mortgage in
the first place. Upon careful review of the mortgage, we find that it indicates in
several places that “MERS is a separate corporation that is acting solely as a nominee
for Lender and Lender’s successors and assigns”; “Lender is America’s Wholesale
Lender”; and “Borrower does hereby mortgage, grant and convey to MERS (solely
as nominee for Lender and Lender’s successors and assigns) and to the successors
and assigns of MERS the following described property * * *.” Thus, the record
contains sufficient evidence to demonstrate that BONYM was validly assigned the
mortgage.
{¶ 26} Moreover, because BONYM was in possession of the blank endorsed
note, it was the equitable assignee of the mortgage. See Najar, 8th Dist. Cuyahoga
No. 98502, 2013-Ohio-1657, at ¶ 65, citing U.S. Bank N.A. v. Marino, 181 Ohio
App.3d 328, 2009-0hio-1178, 908 N.E.2d 1032, ¶ 52 (7th Dist.) (“Even if the
assignment of mortgage from Argent to Deutsche Bank was invalid, Deutsche Bank
would still be entitled to enforce the mortgage because under Ohio law, the mortgage
‘follows the note’ it secures.”).
{¶ 27} In light of the above, the first assignment of error is overruled.
BONYM’s Documentation in Support of Summary Judgment
{¶ 28} In their second assignment of error, the Floyds contend that BONYM
relied on “manipulated documents” to obtain summary judgment. They argue that
the trial court should have considered documentation presented in the dismissed
2009 and 2012 foreclosure cases. But as already discussed, those cases were not
before the trial court and cannot be part of our consideration here.
{¶ 29} The relevant documentation in this case, as set forth in the affidavit
submitted by BONYM, established the following:
BONYM’s records contain a Note executed by Doris M. Floyd and
Willie L. Floyd htta1 Willie Lee Floyd in the amount of $50,850.00. The
Note is endorsed to BONYM in blank. At some time between when the
Note was executed by the Borrowers on January 6, 2006 and January
17, 2006, David A. Spector, Managing Director for Countrywide Home
1In terms of real estate transactions, “htta” means “having taken title as.”
Loans, Inc. doing business as America’s Wholesale Lender executed a
blank indorsement. The Note was then transferred to BONYM, who
has been in possession of the blank indorsed Note since January 17,
2006. Reimer Law Co. has been in custody of the original Note on
behalf of the holder, BONYM, from December 5, 2016 and as of the date
of this Affidavit.
(Citations to exhibits omitted.) Affidavit of Laura Hovis (“Hovis affidavit”), ¶ 6,
submitted in support of BONYM’s motion for summary judgment.
{¶ 30} The above averment and the corresponding documentation attached
to the bank’s summary judgment motion were sufficient evidence to establish that
BONYM was the holder of the original note, with standing to enforce it. Likewise,
for the reasons already discussed, there was sufficient evidence of a proper mortgage
assignment to BONYM.
{¶ 31} In light of the above, the second assignment of error is overruled.
Hovis’s Affidavit
{¶ 32} The Floyds’ third assignment of error challenges Hovis’s affidavit and
the accompanying exhibits she referred to. According to the Floyds, Hovis lacked
personal knowledge of the matters she averred to, and the accompanying
documentation referred to in her affidavit was inadmissible hearsay. Hovis, a
default document senior analyst with Carrington, averred in relevant part as follows:
1. I am employed by Carrington Mortgage Services, LLC (“Carrington”)
as a(n) Default Document, Sr. Analyst, and am authorized to execute
this affidavit on behalf of Carrington, as servicer for The Bank of New
York Mellon fka The Bank of New York as trustee for the certificate
holders CWABS Inc., asset backed certificates, Series 2006-5
(“BONYM”). The statements made in this Affidavit are based on my
personal knowledge.
2. I am over the age of 18 and competent to testify as to the matters
contained herein.
***
4. In the regular performance of my job functions in my position, I am
familiar with business records maintained by Bank of America, N.A.,
Green Tree Servicing, LLC, Ditech and Carrington for the purpose of
servicing mortgage loans on behalf of BONYM. These records (which
include data compilations, electronically imaged documents, and
others) are made at or near the time by, or from information provided
by, persons with knowledge of the activity and transactions reflected in
such records, and are kept in the course of business activity conducted
regularly by Carrington. Further, I am familiar with Carrington’s
business records maintained by Carrington which incorporate the
records of their predecessors in interest, and the prior servicers of this
mortgage loan, which are maintained and relied upon the regular
course of business by Carrington. It is the regular practice of
Carrington’s mortgage servicing business to make these records and
rely on the records from prior servicers, which are incorporated,
maintained, and relied upon in the ordinary course of business.
5. BONYM’s business records that relate to the Borrowers’ loan that I
reviewed and relied upon for the statements made in this Affidavit
include but are not limited to the Note, Certificate of Fictitious Name
Registration, Note Possession Statement, Loan Modification
Agreement, Mortgage, Assignment of Mortgage, Demand Letters,
Payment History, and Carrington’s electronic servicing system. True
and exact copies of the Note (Ex. “A-l”), Certificate of Fictitious Name
Registration (Ex. “A-2”), Note Possession Statement (Ex. “A-3”), Loan
Modification Agreement (Ex. “A-4”), Mortgage (Ex. “A-5”),
Assignment of Mortgage (Ex. “A-6”), 2013 Demand Letter (Ex. “A-7”),
2014 Demand Letter (Ex. “A-8”), and Payment History (Ex. “A-9”), are
attached hereto and incorporated herein by reference.
6. BONYM’s records contain a Note executed by Doris M. Floyd and
Willie L. Floyd htta Willie Lee Floyd in the amount of $50,850.00. The
Note is endorsed to BONYM in blank (See, Ex. A-l.) At some time
between when the Note was executed by the Borrowers on January 6,
2006 and January 17, 2006, David A. Spector, Managing Director for
Countrywide Home Loans, Inc. doing business as America’s Wholesale
Lender (See, Ex. A-2), executed a blank endorsement (See, Ex. A-l).
The Note was then transferred to BONYM, who has been in possession
of the blank endorsed Note since January 17, 2006 (See, Ex. A-3).
Reimer Law Co. has been in custody of the original Note on behalf of
the holder, BONYM, from December 5, 2016 and as of the date of this
Affidavit.
7. BONYM’s records also reflect that the Note is secured by a Mortgage
on the real property located at 15506 Eldamere Ave., Cleveland, Ohio
44128. The Mortgage was recorded in the Public Records of Cuyahoga
County, Ohio as Instrument No. 200601170038. The Mortgage was
assigned to BONYM prior to the filing of the Complaint. (See, Ex. A-5,
A-6.).
8. BONYM’s records also contain a Loan Modification Agreement
dated December 28, 2009. The Loan Modification Agreement was
recorded in the Public Records of Cuyahoga County, Ohio on
November 4, 2011 as Instrument No. 201111040173. (See, Ex. A-4.).
9. Borrowers have defaulted under the terms of the Note, Loan
Modification, and Mortgage by failing to submit the payment due
October 1, 2010 and subsequent installments. On July 23, 2013, Ditech
on behalf of BONYM caused a Notice of Right to Cure Default to be sent
via First Class Mail to the Borrower[s] at their notice address * * * See,
Ex. “A-7”). Further, Ditech on behalf of BONYM issued a second Notice
of Right to Cure Default on July 30, 2014 (See, Ex. uA-8”). The
Borrowers’ default in payment on the Note, Loan Modification and
Mortgage has not been cured, and Ditech on behalf of BONYM has
accelerated the Note payments making the entire balance due and
owing in accordance with the terms of the.
10. The balance due on the Loan as of June 12, 2019 is the principal
sum of $56,359.74 plus interest at 8.42% per annum from September
1, 2010, plus sums advanced for taxes, insurance, property
preservation, and amounts otherwise expended. (See, Ex. “A-9”).
{¶ 33} Pursuant to Civ.R. 56(E), supporting and opposing affidavits shall:
(1) be made on personal knowledge, (2) set forth such facts as would be admissible
in evidence, and (3) show affirmatively that the affiant is competent to testify to the
matters stated in the affidavit. Olverson v. Butler, 45 Ohio App.2d 9, 340 N.E.2d
436 (10th Dist.1975); Civ.R. 56(E). “Personal knowledge” is “knowledge gained
through firsthand observation or experience, as distinguished from a belief based on
what someone else has said.” Bonacorsi v. Wheeling & Lake Erie Ry. Co., 95 Ohio
St.3d 314, 2002-Ohio-2220, 767 N.E.2d 707, ¶ 26.
{¶ 34} “In foreclosure actions, the affidavit of a loan servicing agent
employee with personal knowledge provides sufficient evidentiary support for
summary judgment in favor of the mortgagee.” Fifth Third Mtge. Co. v. Salahuddin,
10th Dist. Franklin No. 13AP-945, 2014-Ohio-3304, ¶ 15 (affidavit of bank’s loan
servicer was sufficient for purposes of summary judgment when he averred that the
bank had been in possession of the original note since its origination and that the
defendant was in default under the terms of the note and mortgage due to a failure
to make the required payments), citing Regions Bank v. Seimer, 10th Dist. Franklin
No. 13AP-542, 2014-Ohio-95, ¶ 19 (noting that several appellate courts have found
that, in a foreclosure action, the affidavit of a loan servicing agent employee with
personal knowledge provides sufficient evidentiary support for summary judgment
in favor of the mortgagee); Bank of New York Mellon v. Putman, 12th Dist. Butler
No. CA2012-12-267, 2014-Ohio-1796, ¶ 12 (finding that a review of the case law
reveals that affidavits from servicing agents are routinely used to support a motion
for summary judgment in a foreclosure action); Chase Home, L.L.C. v. Dougherty,
10th Dist. Franklin No. 12AP-546, 2013-Ohio-1464; Deutsche Bank Natl. Trust Co.
v. Germano, 11th Dist. Portage No. 2012-P-0024, 2012-Ohio-5833; Deutsche Bank
Natl. Trust Co. v. Ingle, 8th Dist. Cuyahoga No. 92487, 2009-Ohio-3886, ¶ 18
(affidavit of bank’s loan servicing agent sufficient to show bank was the real party in
interest), and Bank of New York v. Dobbs, 5th Dist. Knox No. 2009-CA-000002,
2009-Ohio-4742, ¶ 40 (affidavit of loan servicing agent, even though not employed
by bank, sufficient to provide authentication of documents).
{¶ 35} Here, Hovis testified that she had personal knowledge of the matters
to which she averred, and, as an employee of the loan servicing agent for the bank,
she was in the position to have such knowledge. Therefore, for these reasons, we
reject the Floyds’ argument that the trial court should have stricken Hovis’s affidavit
because she lacked the requisite personal knowledge.
{¶ 36} We also reject the Floyds’ argument that the attached documentation
to Hovis’s affidavit constituted inadmissible hearsay. Rather, the documents
constituted an exception to the hearsay prohibition as records of regularly
conducted activity pursuant to Evid.R. 803(6). Hearsay is any statement, other than
one which is made by the declarant at trial that is offered in evidence to prove the
truth of the matter asserted. Evid.R. 801(C). Under Evid.R. 802, hearsay is
inadmissible unless it falls within an exception provided by the rules of evidence.
Evid.R. 803(6) provides an exception to the hearsay rule for business records of
regularly conducted activity that is defined as follows:
Records of regularly conducted activity. A memorandum, report,
record, or data compilation, in any form, of acts, events, or conditions,
made at or near the time by, or from information transmitted by, a
person with knowledge, if kept in the course of a regularly conducted
business activity, and if it was the regular practice of that business
activity to make the memorandum, report, record, or data compilation,
all as shown by the testimony of the custodian or other qualified
witness or as provided by Rule 901(B)(10), unless the source of
information or the method or circumstances of preparation indicate
lack of trustworthiness. The term “business” as used in this paragraph
includes business, institution, association, profession, occupation, and
calling of every kind, whether or not conducted for profit.
{¶ 37} Thus, to qualify for the business records exception, a record must
meet the following criteria (1) the record must be one recorded regularly in a
regularly conducted activity, (2) a person with knowledge of the act, event, or
condition recorded must have made the record, (3) it must have been recorded at or
near the time of the act, event, or condition, and (4) the party who seeks to introduce
the record must lay a foundation through testimony of the record custodian or some
other qualified witness. State v. Davis, 116 Ohio St.3d 404, 2008-Ohio-2, 880
N.E.2d 31, ¶ 171. Even when these prerequisites are met, however, the trial court
may exclude a record “if ‘the source of information or the method or circumstances
of preparation indicate [a] lack of trustworthiness.’” Id., quoting Evid.R. 803(6). A
trial court abuses its discretion when it admits a business record in the absence of
an adequate foundation to establish admissibility under Evid.R. 803(6).
{¶ 38} Evid.R. 901 governs authentication or identification of evidence. It
states, “[t]he requirement of authentication or identification as a condition
precedent to admissibility is satisfied by evidence sufficient to support a finding that
the matter in question is what its proponent claims.” Evid.R. 901(A). Evid.R.
901(B)(1) provides that the testimony of a witness with knowledge, who testifies that
a matter is what it is claimed to be, conforms with the requirements of Evid.R. 901.
Thus, “‘any competent witness who has knowledge that a matter is what its
proponent claims may testify to such pertinent facts, thereby establishing, in whole
or in part, the foundation for identification.’” TPI Asset Mgt. v. Conrad-Eiford, 193
Ohio App.3d 38, 2011-Ohio-1405, 950 N.E.2d 1018, ¶ 13 (2d Dist.), quoting
Weissenberger’s Ohio Evidence Treatise, Section 901.2 (2010). Thus, verification
of documents attached to an affidavit supporting or opposing a motion for summary
judgment is generally satisfied by an appropriate averment in the affidavit itself, for
example, that “such copies are true copies and reproductions.” State ex rel.
Corrigan v. Seminatore, 66 Ohio St.2d 459, 467, 423 N.E.2d 105 (1981).
{¶ 39} There exists competent authority that a loan servicing agent may
properly authenticate copies of business records. The affidavit of the bank’s loan-
servicing agent provides a sufficient foundation for the admissibility of the relevant
loan documents as business records under Evid.R. 803(6). Najar, 8th Dist.
Cuyahoga No. 98502, 2013-Ohio-1657, ¶ 39; Fifth Third Mtge. Co. v. Bell, 12th Dist.
Madison No. CA2013-02-003, 2013-Ohio-3678, ¶ 28 (loan servicing agent’s
affidavit properly authenticated the attached documents, including the note and
mortgage); U.S. Bank, N.A. v. Martin, 7th Dist. Mahoning No. 13 MA 107, 2014-
Ohio-3874, ¶ 34 (summary judgment affidavit of loan servicer’s employee was
sufficient to authenticate notice of intent to accelerate where affidavit stated that the
copy of the notice of intent to accelerate was a true and accurate copy of notice);
Regions Bank v. Seimer, 10th Dist. Franklin No. 13AP-542, 2014-Ohio-95, ¶ 19,
citing Dobbs, 5th Dist. Knox No. 2009-CA-000002, 2009-Ohio-4742, at ¶ 40 (even
though not employed by the bank, affidavit of bank’s loan servicing agent was
sufficient to authenticate documents). It is clear that a witness providing the
foundation for a recorded business activity need not have firsthand knowledge of
the transaction. Najar at id., citing U.S. Bank N.A. v. Wilkens, 8th Dist. Cuyahoga
No. 96617, 2012-Ohio-1038, ¶ 46, citing Moore v. Vandemark Co., Inc., 12th Dist.
Clermont No. CA2003-07-063, 2004-Ohio-4313, ¶ 18.
{¶ 40} In light of the above, we find that Hovis properly authenticated the
copies of the business records attached to her affidavit. For all of the reasons
discussed, we find the trial court did not err when it relied upon Hovis’s affidavit in
rendering summary judgment in favor of BOYNM. Therefore, the third assignment
of error is overruled.
Charges
{¶ 41} In their fourth assignment of error, the Floyds challenge a $414.88
charge dated June 21, 2010, and a $3,000 charge dated April 28, 2010. Although
the Floyds did raise issues as to the payment histories authenticated in BONYM’s
affidavit, they did not raise any challenge to the above-mentioned charges at the
trial-court level. It is well established that an appellant cannot raise any new issues
for the first time on appeal; the failure to raise an issue at the trial-court level waives
it on appeal. First Horizon Home Loan Corp. v. Roberts, 8th Dist. Cuyahoga No.
92367, 2010-Ohio-60, ¶ 10.
{¶ 42} For the reasons set forth above, the fourth assignment of error is
overruled.
Unclean Hands and Judicial Estoppel
{¶ 43} In their fifth assignment of error, the Floyds contend that the trial
court erred by not considering their affirmative defenses of unclean hands and
judicial estoppel.
{¶ 44} In regard to judicial estoppel, that can apply to prevent a party from
taking a position in an action that is inconsistent with a position taken by the party
in a prior judicial proceeding. See Fish v. Bd. of Commrs., 13 Ohio St.2d 99, 102,
234 N.E.2d 590 (1968). However, judicial estoppel only applies where the position
was accepted by the court. Greer-Burger v. Temesi, 116 Ohio St.3d 324, 2007-Ohio-
6442, 879 N.E.2d 174, ¶ 25.
{¶ 45} The Floyds contend that the bank was estopped from raising
arguments in this case because they were allegedly inconsistent to arguments it
made in the 2009 and 2012 foreclosure cases. As previously discussed, the dismissal
without prejudice of those cases operates as if the cases had never been filed. Thus,
those issues were not properly before the trial court in this case and there was no
error in the court declining to address them.
{¶ 46} As it relates to their claim of unclean hands, the Floyds raised it as
both an affirmative defense and a counterclaim. In September 2016, the trial court
dismissed the Floyds’ first set of counterclaims that included a claim for unclean
hands for failure to state a claim for which relief could be granted. Their second set
of counterclaims that dealt with the same set of issues that they allege created
unclean hands, was also dismissed for failure to state a claim for which relief could
be granted on July 12, 2019.
{¶ 47} We review rulings on Civ.R. 12(B)(6) motions to dismiss under a de
novo standard. “A motion to dismiss for failure to state a claim upon which relief
can be granted is procedural and tests the sufficiency of the complaint. * * * Under
a de novo analysis, we must accept all factual allegations of the complaint as true
and all reasonable inferences must be drawn in favor of the nonmoving party.”
NorthPoint Props. v. Petticord, 179 Ohio App.3d 342, 2008-Ohio-5996, 901 N.E.2d
869, ¶ 11 (8th Dist.). “For a trial court to grant a motion to dismiss for failure to state
a claim upon which relief can be granted, it must appear ‘beyond doubt from the
complaint that the plaintiff can prove no set of facts entitling her [or him] to relief.’”
Graham v. Lakewood, 2018-Ohio-1850, 113 N.E.3d 44, ¶ 47 (8th Dist.), quoting
Grey v. Walgreen Co., 197 Ohio App.3d 418, 2018-Ohio-6167, 967 N.E.2d 1249, ¶ 3
(8th Dist.).
{¶ 48} Under the doctrine of unclean hands, “one who seeks equity must do
equity.” State ex rel. DeWine v. Shadyside Party Ctr., 7th Dist. Belmont No. 13 BE
26, 2014-Ohio-2357, 13 N.E.3d 684, ¶ 29, citing Basil v. Vincello, 50 Ohio St.3d 185,
553 N.E.2d 602 (1990). The doctrine of unclean hands requires that the party
invoking equity “‘not be guilty of reprehensible conduct’” regarding the subject
matter of the action. Id., quoting Basil. A foreclosure action is equitable in nature.
Buckeye Retirement Co. L.L.C. v. Walling, 7th Dist. Mahoning No. 05 MA 119,
2006-Ohio-7059, ¶ 16. “‘[T]he unclean hands doctrine should not be imposed where
a party has legal remedies available to address an opposing party’s asserted
misconduct.’” Deutsche Bank Natl. Trust Co. v. Pevarski, 187 Ohio App.3d 455,
2010-Ohio-785, 932 N.E.2d 887, ¶ 24, (4th Dist.), quoting Safranek v. Safranek,
8th Dist. Cuyahoga No. 80413, 2002-Ohio-5066.
{¶ 49} The crux of the Floyds’ argument is that BONYM failed to timely
dismiss the 2009 foreclosure case after the Floyds entered into the loan
modification. Under the loan modification, the Floyds “promise[d] to make
monthly payments of principal and interest of $456.64 beginning on the 1st day of
February, 2010.” A review of the Floyds’ payment history demonstrates that they
were not timely in making their payments under the loan modification. They made
sporadic payments, some being made in March 2010, then June 2010, then October
2010.
{¶ 50} Moreover, the Floyds had legal remedies that they could have pursued
in the 2009 foreclosure action, such as opposing the bank’s motion for default
judgment, or moving to vacate the default judgment. But regardless of their claims
of impropriety in the 2009 foreclosure action, the default judgment was eventually
vacated and the case was dismissed. Likewise, the 2012 foreclosure action was
dismissed.
{¶ 51} On this record, the fifth assignment of error is overruled.
Other Counterclaims
{¶ 52} The sixth and final assignment of error challenges the dismissal of the
remainder of the Floyds’ counterclaims that were for (1) violating the Federal Debt
Collection Practices Act (“FDCPA” or “the Act”); (2) intentional infliction of
emotional distress based on breach of contract; (3) slander of title; (4) quiet title; (5)
punitive damages; and (6) declaratory judgment. For the reasons set forth below,
we find that the trial court properly dismissed the claims.
FDCPA
{¶ 53} The Act involves restrictions against false or misleading
representations regarding mortgage debt and the collection thereof. The general
proscription provides that “[a] debt collector may not use any false, deceptive, or
misleading representation or means in connection with the collection of any debt.”
15 U.S.C. 1692e.
{¶ 54} The purpose of the FDCPA is to “eliminate abusive debt collection
practices by debt collectors”; it is distinguishable in its application to creditors. 15
U.S.C. 1692. A debt collector refers to “any business the principal purpose of which
is the collection of any debts * * *.” A creditor, on the other hand, refers to an entity
that “offers or extends credit creating a debt or to whom a debt is owed.”
{¶ 55} The Floyds’ counterclaim failed as a matter of law. It is well
established that creditors and mortgage service companies are not “debt collectors”
and are not subject to liability under the FDCPA. RBS Citizens, N.A. v. Zigdon, 8th
Dist. Cuyahoga No. 93945, 2010-Ohio-3511, ¶ 41, citing Scott v. Wells Fargo Home
Mtge. Inc., 326 F.Supp.2d 709 (E.D.Va.2003); see also Montgomery v. Huntington
Bank, 346 F.3d 693, 699 (6th Cir.2003). Thus, BONYM is not subject to the FDCPA
because it is not a debt collector as envisioned by the Act.
Intentional Infliction of Emotional Distress
{¶ 56} The intentional infliction of emotional distress occurs when “one
who by extreme and outrageous conduct intentionally or recklessly causes serious
emotional distress to another.” Yeager v. Local Union 20, 6 Ohio St.3d 369, 453
N.E.2d 666 (1983), abrogated on other grounds, Welling v. Weinfeld, 113 Ohio
St.3d 464, 2007-Ohio-2451, 866 N.E.2d 1051. To prevail on such a claim, the Floyds
would have had to prove that: (1) BONYM either intended to cause emotional
distress, or knew or should have known that its conduct would result in serious
emotional distress to the Floyds; (2) BONYM’s conduct was so extreme and
outrageous as to go beyond all possible bounds of decency and was such that it can
be considered utterly intolerable in a civilized community; (3) the bank’s actions
proximately caused psychological injury to the Floyds; and (4) the Floyds suffered
serious emotional distress of a nature no reasonable person could be expected to
endure. Rhoades v. Chase Bank, 10th Dist. Franklin No. 10AP-469, 2010-Ohio-
6537, ¶ 15.
{¶ 57} The Ohio Supreme Court has described “serious emotional distress”
as “emotional injury which is both severe and debilitating.” Paugh v. Hanks, 6 Ohio
St.3d 72, 78, 451 N.E.2d 759 (1983). Although the Floyds alleged that they suffered
with issues such as sleeplessness, stress, and elevated blood pressure, none of the
allegations in their counterclaims rose to the level of severe and debilitating. On this
record, their claim of intentional emotional distress failed as a matter of law.
Slander of Title
{¶ 58} Slander of title is a tort action “against one who falsely and
maliciously defames title to property and causes some special pecuniary damages or
loss.” Acme Constr. Co. v. Continental Natl. Indemn. Co., 8th Dist. Cuyahoga No.
81402, 2003-Ohio-434, ¶ 46. To succeed on a claim for slander of title, the claimant
must prove the following “(1) there was a publication of a slanderous statement
disparaging claimant’s title; (2) the statement was false; (3) the statement was made
with malice or made with reckless disregard of its falsity; and (4) the statement
caused actual or special damages.” Green v. Lemarr, 139 Ohio App.3d 414, 430-
431, 744 N.E.2d 212 (2d Dist.2000).
{¶ 59} In their slander of title claim, the Floyds alleged that the bank was
“claiming we were in default in September 1, 2010. Plaintiff’s payment records
reflect payments from September 2010.” BONYM’s amended complaint, alleges
that “there is due and unpaid thereon the sum of $56,359.74 plus interest at the rate
of 8.42% per annum from September 1, 2010.” Thus, according to the complaint,
the default began in October 1, 2010, and that interest is due from September 1,
2010.
{¶ 60} Moreover, the lien on the Floyds’ title is the mortgage. The Floyds are
not contending that they did not agree to mortgage the property. The record
demonstrates that there was no false statement as to the mortgage or the assignment
of mortgage. Neither the mortgage or the assignment of mortgage caused the Floyds
damages. BONYM was the real party in interest entitled to judgment on the note
and the mortgage, the Floyds are parties to the note and the mortgage, and there
was a default in payments under those agreements. There simply was no evidence
that BONYM published untruthful allegations that the Floyds were in default of their
mortgage. Thus, the Floyds’ slander of title claim failed as a matter of law.
Quiet Title
{¶ 61} “An action for quiet title permits a person in possession of real
property to bring an action against a person who claims an adverse interest for the
purpose of determining such adverse interest.” R.C. 5303.01. Quiet title actions are
generally used to remove a cloud on one’s title to real property and are considered
equitable in nature. Maasen v. Zopff, 12th Dist. Warren Nos. 98-10-135, 98-10-138,
and 98-12-153, 1999 Ohio App. LEXIS 3422, 11 (July 26, 1999); W.C. McBride, Inc.
v. Murphy, 111 Ohio St. 443, 447, 145 N.E. 855 (1924). “‘A cloud on the title to
property is an outstanding claim or encumbrance which, if valid, would affect or
impair the title of the owner of a particular estate, and on its face has that effect, but
can be shown by extrinsic proof to be invalid or inapplicable to the estate in
question.’” (Citation omitted.) Gasper v. Bank of Am., N.A., 9th Dist. Medina No.
17CA0091-M, 2019-Ohio-1150, ¶ 31.
{¶ 62} The existence of defenses to a foreclosure action do not render the
mortgage itself an invalid encumbrance on the property, but rather only potentially
affect a plaintiff’s ability to foreclose on the mortgage at a particular time. This court
explained that point in Bank of N.Y. Mellon Trust Co., N.A. v. Unger, 8th Dist.
Cuyahoga No. 97315, 2012-Ohio-1950.
{¶ 63} In Unger, the bank sued the borrowers for a default on a note and
foreclosure under a mortgage. The borrowers filed a counterclaim seeking to quiet
title on the grounds that the assignments of the note and mortgage were invalid. The
borrowers alleged that the fraudulent assignments constituted a cloud on their title.
In upholding the trial court’s ruling that the borrowers had not set forth a valid quiet
title action, this court explained as follows:
The [borrowers] alternatively argue they are entitled to quiet title under
R.C. 5303.01 because they are in possession of real estate, and Mellon
claims an “adverse interest” in the property. The [borrowers] claim
Mellon and certain other parties engaged or failed to engage in various
activities that nullified the mortgage assignments and the mortgage.
They are seeking to set aside the mortgage assignments and mortgage
as a result of these activities, but they are unable to do so under R.C.
5303.01.
The mortgage assignments transferred the right to foreclose on the
[borrowers’] property upon default of the note, from SouthStar, to
Bank of New York, to Mellon. The [borrowers] voluntarily signed the
mortgage, and agreed to a lien on their property as security for
repayment of the note. The mortgage was properly recorded with the
Cuyahoga County Recorder’s Office. “A mortgage is * * * nothing more
than a lien on the premises, the purpose of which is to put other lien
holders on notice that there is a prior claim on the premises.” R.C.
5301.233; GMAC Mtge. Corp. v. McElroy, 5th Dist. Stark No. 2004-
CA-00380, 2005-Ohio-2837, ¶ 16. * * *. The mortgage is not a “cloud”
on the [borrowers’ title], and neither are the mortgage assignments.
The [borrowers] are not, therefore, entitled to “quiet title” against
Mellon under R.C. 5303.01.
Id. at ¶ 36-37.
{¶ 64} The Floyds are not alleging that they did not voluntarily grant the
mortgage to secure repayment of the note or that the mortgage was not properly
recorded. They seek to quiet title based on allegations that BONYM is not in
possession of the note and did not satisfy certain conditions precedent.
{¶ 65} Assuming the Floyds could successfully prevail on these defenses, this
would only hinder the bank’s ability to pursue foreclosure, but would not void the
mortgage. The mortgage would remain a valid encumbrance on the property to be
pursued by the actual holder of the note or by the bank at a future date upon
satisfying the conditions precedent. The purpose of a quiet title action is to remove
a cloud on a title. As explained by this court in Unger, a validly entered into and
properly recorded mortgage is not a “cloud” on a title. As there are no allegations
challenging the validity of the mortgage, just BOYNM’s ability to enforce the terms
of the mortgage, the Floyds’ counterclaim failed to state a claim for which relief may
be granted.
Punitive Damages
{¶ 66} Pursuant to statute, a plaintiff must be awarded some measure of
compensatory damages to receive punitive damages. See R.C. 2315.21(C)(1) and (2)
(allowing punitive damages only when (1) the defendant acted with either malice or
aggravated or egregious fraud and (2) the trier of fact awards the plaintiff
compensatory damages). See Malone v. Courtyard by Marriott L.P., 74 Ohio St.3d
440, 447, 659 N.E.2d 1242 (1996) (“As we have held time and again, punitive
damages may not be awarded when a jury fails to award compensatory damages.”).
The compensatory-damages requirement prevents plaintiffs from bringing cases
solely for an award of punitive damages; they are not independent remedies.
“Punitive damages are awarded as punishment for causing compensable harm and
as a deterrent against similar action in the future. No civil cause of action in this
state may be maintained simply for punitive damages.” Bishop v. Grdina, 20 Ohio
St.3d 26, 28, 485 N.E.2d 704 (1985); see also Moskovitz v. Mt. Sinai Med. Ctr., 69
Ohio St.3d 638, 650, 635 N.E.2d 331 (1994) (“[P]unitive damages are awarded as a
mere incident of the cause of action in which they are sought. * * * Thus,
compensable harm stemming from a cognizable cause of action must be shown to
exist before punitive damages can be considered.”).
{¶ 67} The Floyds contend that they should be awarded punitive damages
for their FDCPA, intentional infliction of emotional distress, and slander of title
claims. However, as discussed above, those claims were properly dismissed.
Because a prerequisite for punitive damages is that compensatory damages must
first be awarded, the Floyds’ claim for punitive damages was barred.
Declaratory Judgment
{¶ 68} Although there was no specific declaratory judgment count in their
counterclaims, the Floyds requested the trial court “to enter its judgment against
Plaintiff declaring the Mortgage, null and void, canceling the Mortgage of record;
quieting title to the property purportedly owned by Plaintiff and against Defendant
and all person claiming under Defendant.” For all the reasons discussed above, the
Floyds’ request was without merit.
{¶ 69} The sixth assignment of error is overruled.
Conclusion
{¶ 70} The trial court did not err in overruling the Floyds’ objections to the
magistrate’s decision and adopting the magistrate’s decision granting judgment in
favor of BONYM because there were no genuine issues of material fact left for the
trial court to determine. Our de novo review of the record demonstrates that
BONYM presented the appropriate documentation to establish that (1) it is the
holder of the note and loan modification; (2) it is the assignee of the mortgage; (3)
the Floyds are in default under same; (4) that all conditions precedent have been
met; and (5) the amount owed under the note, mortgage, and loan modification
agreement.
{¶ 71} Judgment affirmed.
It is ordered that appellee recover from appellants 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.
ANITA LASTER MAYS, PRESIDING JUDGE
LARRY A. JONES, SR., J.,* and
MARY EILEEN KILBANE, J., CONCUR
* Judge Larry A. Jones, Sr., concurred in this Journal Entry and Opinion prior to his
death on October 7, 2021.
(The Ohio Constitution requires the concurrence of at least two judges when
rendering a decision of a court of appeals. Therefore, this announcement of decision
is in compliance with constitutional requirements. See State v. Pembaur, 69 Ohio
St.2d 110, 430 N.E.2d 1331 (1982).)