MorEquity, Inc. v. Gombita

• Decision Date: 06 December 2018
• Docket Number: No. 106594,106594
• Citation: 2018 Ohio 4860,125 N.E.3d 300
• Parties: MOREQUITY, INC., Plaintiff-Appellee v. Anthony R. GOMBITA, et al., Defendants-Appellants
• Court: Ohio Court of Appeals

125 N.E.3d 300

2018 Ohio 4860

MOREQUITY, INC., Plaintiff-Appellee

v.Anthony R. GOMBITA, et al., Defendants-Appellants

No. 106594

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

RELEASED AND JOURNALIZED: December 6, 2018

A. Clifford Thornton, PDC Building, # 305, 3659 Green Road, Beachwood, Ohio 44122, ATTORNEY FOR APPELLANTS.

Jessica Wilson, Reimer Law Co., P.O. Box 39696, 30455 Solon Road, Solon, Ohio 44139, James W. Sandy, McGlinchey Stafford, P.L.L.C., 3401 Tuttle Road, Suite 200, Cleveland, Ohio 44122, ATTORNEYS FOR APPELLEE.

C/O John F. Kukura III, Statutory Agent, 88 East Broad Street, Suite 1800, Columbus, Ohio 43215, For Ohio Homeowner Assistance, L.L.C.

BEFORE: E.T. Gallagher, J., E.A. Gallagher, A.J., and Jones, J.

JOURNAL ENTRY AND OPINION

EILEEN T. GALLAGHER, J.:

{¶ 1} Defendants-appellants, Anthony Gombita, et al. ("appellants"), appeal from the trial court's judgment granting summary judgment and a decree of foreclosure in favor of plaintiff-appellee, MorEquity, Inc. Appellants raise the following assignments of error:

1. The trial court erred to the prejudice of appellants by granting appellee's motion for summary judgment even though appellee failed to prove that it satisfied all conditions precedent mandated by the National Housing Act of 1934 ( 12 U.S.C. 1701 et seq. ) and 42 U.S.C. 3534(a).

2. Reviewing appellee's motion for summary judgment de novo, the record is clear and convincing that the trial court erred to the prejudice of appellants by granting the appellee's motion for summary judgment.

3. The trial court erred to the prejudice of appellants by granting appellee's motion for summary judgment based upon the presence of genuine issues of material fact regarding appellee's failure to provide sufficient evidence of entitlement to foreclosure and damages.

{¶ 2} After careful review of the record and relevant case law, we affirm the trial court's judgment.

I. Procedural and Factual History

{¶ 3} On January 22, 2004, appellants executed a note payable to Wilmington Finance, a division of AIG Federal Savings Bank in the principal amount of $140,000. To secure payment of the note, appellants executed a mortgage on real property located in Euclid, Ohio (the "property") in favor of Wilmington Finance, a division of AIG Federal Savings Bank (the "mortgage"). The mortgage was recorded in the Cuyahoga County Recorder's Office on January 27, 2004.

{¶ 4} The note contains an undated allonge, which specifically endorses the note from Wilmington Finance to MorEquity. A second allonge attached to the note contains an endorsement in blank that is signed by a representative of MorEquity. On January 29, 2004, Wilmington Finance assigned the mortgage to MorEquity. The assignment of the mortgage was recorded on June 18, 2004.

{¶ 5} On January 21, 2012, appellants entered into a Home Affordable Modification Agreement. The agreement modified certain terms of the loan and reflected an unpaid principal balance of $132,870.82.

{¶ 6} On March 17, 2017, MorEquity commenced this foreclosure action as a result of appellants' default under the terms of the note and mortgage due to nonpayment. The complaint did not seek a personal judgment against appellants because the note was discharged in bankruptcy proceedings. Rather, MorEquity sought to enforce its security interest and recover from the sale of the property the remaining principal amount due. Appellants filed an answer and raised numerous defenses.

{¶ 7} On August 9, 2017, MorEquity filed a motion for summary judgment. MorEquity asserted that "as provided in the Note and Mortgage, Plaintiff has an absolute legal right, upon default, to accelerate and call due the balance due thereon." Attached to its motion was the affidavit of Yvonne Aguirre, a document execution specialist at Nationstar Mortgage L.L.C. ("Nationstar"). Aguirre averred that (1) Nationstar is the authorized loan servicer for MorEquity, Inc.; (2) she has personal knowledge of the facts set forth in her affidavit based upon a review of Nationstar's business records and her knowledge of Nationstar's procedures for creating those records; (3) MorEquity had possession of the note when the foreclosure complaint was filed; (4) appellants had defaulted on the note; (5) Nationstar mailed appellants a letter on October 29, 2015, that notified them of the default and their right to cure; (6) the appellants failed to cure the default; and (7) appellants owed $115,457.78 on the principal balance, plus interest, as of August 1, 2015. Attached to Aguirre's affidavit were verified and authenticated copies of the note, the mortgage, assignments of the mortgage, the loan modification agreement, the demand letter and notice of acceleration sent to appellants, and appellants' payment history.

{¶ 8} On September 8, 2017, appellants filed a brief in opposition to summary judgment, arguing that MorEquity (1) failed to comply with U.S. Department of Housing and Urban Development ("HUD") regulations prior to initiating the foreclosure action, (2) failed to present sufficient evidence that it had standing to enforce the note and mortgage, and (3) failed to submit any specific evidence of compensable damages.

{¶ 9} On October 18, 2017, a magistrate granted MorEquity's motion for summary judgment and issued a decision with findings of fact and conclusions of law. The magistrate's decision provides, in relevant part:

There is no genuine issue as to any material fact, and that reasonable minds can come to but one conclusion which is adverse to the Defendants, Anthony R. Gombita and Rhonda Gombita, and that Plaintiff is entitled to judgment as a matter of law, and therefore Plaintiff's motion for summary judgment is granted.

{¶ 10} On November 1, 2017, appellants filed objections to the magistrate's decision. On November 13, 2017, the trial court denied the appellants' objections and adopted the magistrate's decision granting summary judgment in favor of MorEquity.

{¶ 11} Appellants now appeal the trial court's judgment.

II. Law and Analysis

A. Standard of Review

{¶ 12} Under Civ.R. 56, summary judgment is appropriate when (1) no genuine issue as to any material fact exists, (2) the party moving for summary judgment is entitled to judgment as a matter of law and (3) viewing the evidence most strongly in favor of the nonmoving party, reasonable minds can reach only one conclusion that is adverse to the nonmoving party.

{¶ 13} On a motion for summary judgment, the moving party carries an initial burden of identifying specific facts in the record that demonstrate its entitlement to summary judgment. Dresher v. Burt , 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264 (1996). If the moving party fails to meet this burden, summary judgment is not appropriate; if the moving party meets this burden, the nonmoving party has the reciprocal burden to point to evidence of specific facts in the record demonstrating the existence of a genuine issue of material fact for trial. Id. at 293, 662 N.E.2d 264. Summary judgment is appropriate if the nonmoving party fails to meet this burden. Id.

{¶ 14} To prevail on a motion for summary judgment in a foreclosure action, the plaintiff must prove (1) that the plaintiff is the holder of the note and mortgage or is otherwise entitled to enforce the instrument; (2) if the plaintiff is not the original mortgagee, the chain of assignments and transfers; (3) that the mortgagor is in default; (4) that all conditions precedent have been met; and (5) the amount of principal and interest due. Bank of N.Y. Mellon v. Walker , 8th Dist. Cuyahoga, 2017-Ohio-535, 78 N.E.3d 930, ¶ 30 ; Deutsche Bank Natl. Trust Co. v. Najar , 8th Dist. Cuyahoga No. 98502, 2013-Ohio-1657, 2013 WL 1791372, ¶ 17.

B. Conditions Precedent

{¶ 15} In their first assignment of error, appellants argue MorEquity did not prove that it satisfied all conditions precedent mandated by the National Housing Act of 1934 ( 12 U.S.C. 1701 et seq. ) and 42 U.S.C. 3534(a). Specifically, appellants contend that MorEquity failed to conduct a face-to-face meeting with them before commencing this foreclosure action as required under 24 C.F.R. 203.604(b).

{¶ 16} The Federal Housing Administration ("FHA") provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. Congress created the FHA with the passage of the National Housing Act of 1934, and the FHA became a part of HUD in 1965. 42 U.S.C. 3534(a) (2012). HUD promulgated regulations pertaining to FHA-insured mortgages pursuant to its authority conferred by Congress. 12 U.S.C. 1701 et seq. (2012).

{¶ 17} Loans governed by or incorporating HUD regulations must comply with 24 C.F.R. 203.604(b). Fannie Mae v. Herren , 8th Dist. Cuyahoga, 2017-Ohio-8401, 99 N.E.3d 1071, ¶ 39 ; Bank of Am. v. Allen , 8th Dist. Cuyahoga No. 105473, 2017-Ohio-7726, 2017 WL 4177022, ¶ 19. The regulation provides, in relevant part:

The mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid. If default occurs in a repayment plan arranged other than during a personal interview, the mortgagee must have a face-to-face meeting with the mortgagor, or make a reasonable attempt to arrange such a meeting within 30 days after such default and at least 30 days before foreclosure is commenced[.]

Id.

{¶ 18} This court has previously held that when federal regulations relating to default and acceleration of loans are incorporated into the terms of a note and mortgage, compliance with those regulations are conditions precedent to foreclosure.

Bank of Am., N.A. v. Michko , 8th Dist. Cuyahoga No. 101513, 2015-Ohio-3137, 2015 WL 4660060, ¶ 18, citing Secy. of Veterans Affairs v. Anderson , 8th Dist. Cuyahoga, 2014-Ohio-3493, 17 N.E.3d 1202, ¶ 15. Thus, "if the terms of the note and mortgage subject it to HUD regulations regarding default and acceleration, then a homeowner may use...