Mtge. Elec. Registrations Sys. v. Mullins

• Decision Date: 05 May 2005
• Docket Number: No. 04CA40.,04CA40.
• Citation: 2005 Ohio 2303,161 Ohio App.3d 12,829 N.E.2d 326
• Parties: MORTGAGE ELECTRONIC REGISTRATIONS SYSTEMS, Appellee, v. MULLINS, Appellant, et al. Mullins, Appellant, v. Title First Agency, Inc., et al., Appellees.
• Court: Ohio Supreme Court

829 N.E.2d 326

161 Ohio App.3d 12

2005-Ohio-2303

MORTGAGE ELECTRONIC REGISTRATIONS SYSTEMS, Appellee, v. MULLINS, Appellant, et al.

Mullins, Appellant, v. Title First Agency, Inc., et al., Appellees.

No. 04CA40.

Court of Appeals of Ohio, Fourth District, Athens County.

Decided May 5, 2005.

COPYRIGHT MATERIAL OMITTED

Adam J. Baker, Columbus, for appellants.

Buckley King, L.P.A., and Philip L. Judy, Columbus, for appellee Title First Agency, Inc.

PETER B. ABELE, Presiding Judge.

{¶ 1} This is an appeal from an Athens County Common Pleas Court judgment that ordered the foreclosure of a mortgage and sale of property owned by Jerry M. Mullins, defendant below and appellant herein.¹

{¶ 2} Appellant assigns the following error for review:

The trial court erred in granting Title First's motion for summary judgment dated January 28, 2004 and MERS' motion for summary judgment dated August 30, 2004. Both decisions were based upon appellant's bankruptcy failing to list the appellant's claim against Title First and MERS.

{¶ 3} In February 1999, appellant borrowed $145,800 from United Companies Lending Corporation ("United"). In return, he executed a promissory note and agreed to repay that sum plus 10.49% interest over a 30-year period. As security for that debt, he executed an open-end mortgage that granted United a mortgage interest in his real property at 4745 Baker Road, New Marshfield. There have been various mesne assignments of the note and mortgage over the years, and since that time, the instruments have been held by numerous parties.

{¶ 4} In 2000, appellant defaulted on the loan. EMC Mortgage Corporation ("EMC"), the holder of the note at that time, commenced a foreclosure action (case No. 00CI351) and alleged that appellant was in default of payment and that the mortgage covenants had become absolute. EMC requested a $125,568.45 judgment against appellant plus interest as well as a determination that it had the first and best lien on the premises and that the lien be foreclosed and the property sold at a sheriff's sale with the proceeds to satisfy that lien.

{¶ 5} On January 25, 2001, appellant filed a Chapter 7 bankruptcy in federal court and triggered the Section 362(a), Title 11, U.S.Code automatic-stay provisions. The United States Bankruptcy Court later vacated the stay and allowed EMC to proceed with the foreclosure action. On November 7, 2001, EMC filed a summary judgment motion and contended that no question existed that the note was in default and that it was entitled to foreclosure of the mortgage.²

{¶ 6} On January 29, 2002, the trial court granted judgment for EMC and ordered foreclosure of the mortgage and sale of the property. Appellant then filed a pro se "motion for summary judgment" on March 12, 2002. Appellant argued, inter alia, that the trial court's summary judgment was erroneous because he had been discharged in bankruptcy and a personal judgment could not be entered against him. The trial court vacated its previous judgment and order of sale until the situation could be sorted out.

{¶ 7} In the spring of 2002, appellant retained counsel, who entered an appearance in case No. 00CI351 and commenced a new action (case No. 02CI154) against Title First Agency, Inc. ("Title First"), defendant below and appellee herein, and EMC.³ He alleged that (1) the loan with United was intended to finance the construction of an addition to his home, (2) he entered into an escrow agreement whereby Title First deposited funds on his behalf in an escrow account, (3) he used loan proceeds from that account for several months to finance the construction, (4) on May 17, 1999, Title First paid in excess of $16,000 to a payee who had no connection to any of the parties or to the construction project, (5) appellant did not receive that money, (6) without that money, he could not pay to complete the construction and the house was left in such a state that it suffered damage, and (7) he was so concerned about being defrauded that he stopped making payments on his mortgage. Based on these allegations, appellant asserted no fewer than nine counts against Title First and EMC and sought $1,000,000 in compensatory damages and $1,000,000 in punitive damages from each defendant. Title First and EMC both denied liability and asserted a variety of defenses. Subsequently, the trial court consolidated the two cases for review and disposition.

{¶ 8} On June 27, 2002, appellant filed a memorandum opposing EMC's original motion for summary judgment and argued that no genuine issues of material fact existed as to whether EMC was the holder of the note and whether it had standing to bring an action for default. Given these questions, as well as appellant's concerns expressed in his pro se pleadings as to the amount due on the note, the trial court overruled EMC's motion.

{¶ 9} On August 8, 2003, Title First requested summary judgment on appellant's claims. In particular, Title First argued that appellant's action was barred by res judicata because if he had a claim for wrongful disbursement of money in the escrow account, he should have pursued that claim in the bankruptcy case. Thus, because appellant did not pursue a claim, and was ultimately discharged, Title First argued that his claims were barred by the doctrine of res judicata. Appellant, however, argued that Title First could not invoke res judicata because it was neither a party to his bankruptcy nor in privity with anyone who was a party.

{¶ 10} On January 2, 2004, MERS⁴ requested summary judgment and contended that whatever claim appellant may have had against Title First for the wrongful disbursement of the loan proceeds, that claim had nothing to do with his mortgagee, who had complied with its duties under the terms of the mortgage. Moreover, MERS argued that it did not violate federal bankruptcy law by pursuing foreclosure because the only remedy it sought was recovery on its security interest and not a deficiency judgment. Finally, MERS relied on David Johnson's affidavit that appellant was in default on the mortgage and that the balance due was in excess of $127,000.⁵

{¶ 11} On January 8, 2004, the trial court announced that it would stay any decision on summary judgment until the parties briefed a federal bankruptcy issue that had arisen during the court's own research. Specifically, the court was concerned that appellant's claims in case No. 02CI154 became part of his bankruptcy estate once he filed Chapter 7 and could either be abandoned or pursued by the estate but did not revert to him after discharge so that he could pursue them in a court of law. The court directed the parties to brief whether appellant had listed these million-dollar claims as assets and, if not, whether they could now be pursued after his discharge.

{¶ 12} Title First filed its brief on January 22, 2004, and argued that any claims appellant had for wrongful disbursement of the loan proceeds belonged to the bankruptcy estate and only the trustee had standing to assert them. Title First also pointed out that appellant had not listed those claims on his schedule of assets filed in the bankruptcy court and thus could not argue that the trustee had knowingly abandoned them for him to pursue. The next day, appellant filed his brief and argued that the bankruptcy trustee had abandoned the assets (claims) or at least declined to pursue them.⁶ Thus, he argued, the claims had been abandoned, and he was free to pursue them in court.

{¶ 13} On January 28, 2004, the trial court granted Title First summary judgment and held that any claims appellant had against Title First were assets of the bankruptcy estate and could be pursued only by the trustee unless they had been abandoned. Although appellant submitted an affidavit from his attorney stating that they were abandoned, the court did not find it persuasive because the affidavit (and letters incorporated therein) addressed only the alleged wrongful disbursement of loan proceeds that gave rise to his alleged claims. The trial court noted that the evidence did not address the actual multimillion-dollar claims themselves. Thus, the court entered judgment in favor of Title First on the claims in case No. 02CI154.

{¶ 14} On August 30, 2004, the trial court likewise granted summary judgment to MERS in case No. 00CI351. The court held (1) that appellant was in default of his loan and that MERS was entitled to foreclose its security interest, (2) that MERS did not violate bankruptcy law as to appellant's discharge because it sought only to foreclose on the mortgage rather than to collect on any deficiency judgment, and (3) that MERS did not violate the Real Estate Settlement Procedures Act ("RESPA"), Section 2605, Title 12, U.S. Code, by failing to notify appellant that his note and mortgage had been assigned.

{¶ 15} Pursuant to that decision, on September 29, 2004, the trial court issued a judgment of foreclosure and held that MERS had the first and best lien on the premises, that appellant was in default of his obligations under the loan, and that the mortgage covenants had become absolute. The court directed the property be sold at a sheriff's sale and the proceeds be applied to reduce the amount of the loan. This appeal followed.

I

{¶ 16} Before we address the merits of the assignment of error, we first address some jurisdictional and procedural issues. To begin, courts of appeals in this state have jurisdiction to review the final orders of inferior courts within their district. Section 3(B)(2), Article IV of the Ohio Constitution; R.C. 2501.02. A final, appealable order is, inter alia, one that affects a substantial right and either determines the action or is entered in a special proceeding. R.C. 2505.02(B)(1) and (2).

{¶ 17} Further, whenever multiple claims or multiple parties appear in an action, Civ.R. 54(B) also must be considered. In re Berman (1990), 69 Ohio App.3d 324, 328, 590 N.E.2d 809; see, also, Karr v. JLH of...