U.S. Bank Nat'l Ass'n v. George

• Decision Date: 03 December 2015
• Docket Number: No. 14AP–817.,14AP–817.
• Parties: U.S. BANK NATIONAL ASSOCIATION, as Trustee, Successor in Interest to Wachovia Bank, National Association as Trustee for Wells Fargo Asset Securities Corporation, Mortgage Pass–Through Certificates, Series 2003–D, Plaintiff–Appellee, v. Douglas K. GEORGE et al., Defendants–Appellants, Westbury Homeowners' Association, Inc. et al., Defendants–Appellees.
• Court: Ohio Court of Appeals

50 N.E.3d 1049

U.S. BANK NATIONAL ASSOCIATION, as Trustee, Successor in Interest to Wachovia Bank, National Association as Trustee for Wells Fargo Asset Securities Corporation, Mortgage Pass–Through Certificates, Series 2003–D, Plaintiff–Appellee

v. Douglas K. GEORGE et al., Defendants–AppellantsWestbury Homeowners' Association, Inc. et al., Defendants–Appellees.

No. 14AP–817.

Court of Appeals of Ohio, Tenth District, Franklin County.

Dec. 3, 2015.

Thompson Hine LLP, Scott A. King and Terry W. Posey, Jr., for appellee.

McGookey Law Offices, LLC, Daniel L. McGookey and Kathryn M. Eyster, for appellants.

BRUNNER, J.

{¶ 1} On October 19, 2012, plaintiff-appellee, U.S. Bank, National Association (“U.S. Bank”), as trustee, successor in interest to Wachovia Bank, National Association (“Wachovia”), as trustee for the Wells Fargo Asset Securities Corporation, mortgage pass-through certificates, series 2003–D (the “trust”), filed this action against defendants-appellants Douglas K. and Robin A. George, for the balance due on a promissory note, and to foreclose a mortgage against 7511 Windsor Drive, Dublin, Ohio 43016, which secured repayment of the note. The Franklin County Court of Common Pleas granted summary judgment for appellee, and in a single assignment of error appellants state:

The trial court erred in granting U.S. Bank's Motion for Summary Judgment.

I. Facts and Procedural History

{¶ 2} On August 8, 2002, appellants executed the note and mortgage in favor of M/I Financial Corp. (“M/I Financial”). Douglas George lost a well-compensated position of employment, and foreclosure proceedings were filed but terminated upon a loan modification agreement. Appellants again suffered financial difficulties, and the current action was filed.

{¶ 3} Attached to the complaint were copies of a note, a mortgage and three assignments of the mortgage. The note in favor of M/I Financial contained two indorsements and an allonge. The first indorsement was to Wells Fargo Home Mortgage, Inc., and the second to Wachovia, “AS Trustee under the pooling and servicing agreement dated * * * February 26, 2003.” (Complaint, exhibit A, 5.) The allonge endorsed the note to U.S. Bank as “successor in interest to Wachovia Bank * * * as trustee, by Wells Fargo Bank, N.A. its attorney in fact.” (Emphasis deleted.) (Complaint, exhibit A, 6.) Appellants assert that appellee failed to establish that Wells Fargo Bank, N.A. was entitled to execute the allonge, and disputes U.S. Bank as the holder of the note.

{¶ 4} The mortgage copy attached to the complaint was given to M/I Financial. Two separate documents purported to assign the mortgage from M/I Financial to Wells Fargo Home Mortgage, Inc., on August 8, 2002. The third assignment was made to U.S. Bank on September 17, 2009 by “Wells Fargo Bank, N.A. successor by merger to Wells Fargo Home Mortgage, Inc.” (Complaint, exhibit E.) Appellants argue that there was no proof that Wells Fargo Bank had authority to assign the mortgage on behalf of Wells Fargo Home Mortgage, Inc., six years after the trust's closing date.

{¶ 5} On April 12, 2013, appellee filed an amended complaint also attaching the loan modification agreement, and on September 25, 2013 filed its motion for summary judgment. U.S. Bank submitted the September 12, 2013 affidavit of Megan A. Jones, Wells Fargo Bank, N.A. vice president loan documentation, in which Jones stated: “At the time of the filing of the complaint * * * and to date,” U.S. Bank “directly or through an agent, has been in possession of the Promissory Note.” (Sept. 25, 2013 Motion for Summary Judgment, Jones Affidavit, ¶ 5.) Jones further stated in her affidavit that the last payment was received on April 20, 2012, and Wells Fargo applied it to the December 2011 payment date. The account was “due and owing for the 01/01/2012 payment with interest running from 12/01/2011.” (Jones Affidavit, ¶ 6.) In addition, Jones stated in her affidavit that “[a]ccording to Wells Fargo's business records, no subsequent payments to bring the loan current have been made and the default on the loan has not been cured.” (Jones Affidavit, ¶ 7.) Jones then stated that the loan had been accelerated, making the entire balance due. She identified the total amount due as $293,297.89: $261,694.38 in principal, $12,639.53 in accrued interest, $3,302.88 in hazard insurance disbursements, $15,401.10 in tax disbursements, and $265.00 for property inspections. Interest was accruing at $19.02 per day.

{¶ 6} With Jones' affidavit, appellee included a copy of the purported note that is not identical to the note attached to the complaint and the amended complaint, along with copies of the mortgage and three assignments, an October 23, 2011 letter from the Wells Fargo Home Mortgage Default Management Department expounding appellants' default, and account data. In her affidavit, Jones attested to this documentation by stating: “Attached as exhibits hereto are copies of the Note with any applicable indorsements and the Mortgage with any applicable Assignments, a payment history and the demand letter, redacted solely to protect any private, personal, financial information.” (Jones Affidavit, ¶ 9.)

{¶ 7} The copy of the note attached to Jones' affidavit contained the first indorsement by M/I Financial to Wells Fargo Home Mortgage, Inc., but omitted the further indorsement to Wachovia and the allonge bearing the indorsement to U.S. Bank. Attempting to correct the discrepancy, on October 21, 2013, appellee filed a “motion to incorporate” in which its counsel averred that “through inadvertence¹ a full copy of the Promissory Note, which was attached to the Complaint, was not attached to Plaintiff's Motion for Summary Judgment.” Appellee requested an order incorporating the full copy. While counsel has stated that the full copy was attached to the motion, we have not found this attachment in the record. The motion to incorporate was granted the same day it was filed, and over appellants' opposition, the trial court granted appellee's motion for summary judgment.

II. Standard of Review

{¶ 8} To be entitled to summary judgment the moving party must demonstrate: “(1) there is no genuine issue of material fact, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds can come to but one conclusion when viewing the evidence most strongly in favor of the non-moving party and that conclusion is adverse to the non-moving party.” UAP–Columbus JV326132 v. Young, 10th Dist. No. 14AP–422, 2014-Ohio-4590, 2014 WL 5306856, ¶ 11, citing Hudson v. Petrosurance, Inc., 127 Ohio St.3d 54, 2010-Ohio-4505, 936 N.E.2d 481, ¶ 29, and Sinnott v. Aqua–Chem, Inc., 116 Ohio St.3d 158, 2007-Ohio-5584, 876 N.E.2d 1217, ¶ 29. Our review of the trial court's ruling on the motion for summary judgment is de novo. Hudson at ¶ 29. The appellate court conducts an independent review, without deference to the trial court's determination. Young at ¶ 11, citing Zurz v. 770 W. Broad AGA, L.L.C., 192 Ohio App.3d 521, 2011-Ohio-832, 949 N.E.2d 595, ¶ 5 (10th Dist.), and White v. Westfall, 183 Ohio App.3d 807, 2009-Ohio-4490, 919 N.E.2d 227, ¶ 6 (10th Dist.).

III. Appellee's Standing to Enforce the Note/Sufficiency of Affidavit on Motion for Summary Judgment

{¶ 9} The parties do not dispute the note at issue being negotiable under R.C. 1303.03(A), and therefore governed by R.C. Chapter 1303, Ohio's version of Article 3 of the Uniform Commercial Code. See Young at ¶ 27; Bank of Am., N.A. v. Pasqualone, 10th Dist. No. 13AP–87, 2013-Ohio-5795, 2013 WL 6869954, ¶ 29–30. R.C. 1303.31(A) identifies the following “persons” entitled to enforce a negotiable instrument:

(1) The holder of the instrument;

(2) A nonholder in possession of the instrument who has the rights of a holder;

(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 1303.38 or division (D) of section 1303.58 of the Revised Code.

According to R.C. 1301.01(T)(1)(a) and (b) (Repealed),² which was in effect when the note was made, the “ ‘[h]older’ with respect to a negotiable instrument means either of the following: (a) If the instrument is payable to the bearer, a person who is in possession of the instrument; (b) If the instrument is payable to an identified person, the identified person when in possession of the instrument.” A party commencing litigation must have standing to sue in order to invoke the jurisdiction of the common pleas court. Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, ¶ 20.

A. Distinguishing between Appellee's Claims on the Note and the Mortgage

{¶ 10} Because the trial court granted summary judgment on both the note and the mortgage, it is worthwhile to examine the differences between the available remedies arising from each to the person entitled to enforce them. Appellee claims to be both a holder of the note on which a default occurred and the person entitled to enforce the note, in addition to having an interest in the mortgage on the date it filed its claims under the note and for foreclosure.³ Fannie Mae v. Hicks, 8th Dist., 2015-Ohio-1955, 35 N.E.3d 37, ¶ 32–33, is instructive:

A foreclosure proceeding is the enforcement of a debt obligation. Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306, 906 N.E.2d 396. As a result, foreclosure in Ohio is a two-step process. First Knox Natl. Bank v. Peterson, 5th Dist. Knox No. 08CA28, 2009-Ohio-5096, 2009 WL 3086583, ¶ 18. Only after the court determines liability on the underlying obligation can it proceed to the foreclosure analysis under the mortgage. Id. Thus, a determination of liability under the note is a prerequisite to enforcement of the mortgage itself because a mortgage is but an incident to the debt it secures. Kernohan v. Manss, 53 Ohio St. 118, 133, 41 N.E. 258 (1895). As stated by the United States Supreme Court, “[t]he note and the mortgage are inseparable; the former essential, the

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