U.S. Bank Nat'l Ass'n v. Courthouse Crossing Acquisitions, LLC

• Decision Date: 22 December 2017
• Docket Number: No. 27648,27648
• Citation: 101 N.E.3d 1243,2017 Ohio 9231
• Parties: U.S. BANK NATIONAL ASSOCIATION, as Trustee FOR the REGISTERED HOLDERS OF GE COMMERCIAL MORTGAGE CORPORATION, COMMERCIAL MORTGAGE PASS–THROUGH CERTIFICATES, SERIES 2006–C1, Acting By and Through its Special Servicer, LNR Partners, LLC, Plaintiff–Appellee v. COURTHOUSE CROSSING ACQUISITIONS, LLC, et al., Defendants–Appellants
• Court: Ohio Court of Appeals

101 N.E.3d 1243

2017 Ohio 9231

U.S. BANK NATIONAL ASSOCIATION, as Trustee FOR the REGISTERED HOLDERS OF GE COMMERCIAL MORTGAGE CORPORATION, COMMERCIAL MORTGAGE PASS–THROUGH CERTIFICATES, SERIES 2006–C1, Acting By and Through its Special Servicer, LNR Partners, LLC, Plaintiff–Appellee

v.COURTHOUSE CROSSING ACQUISITIONS, LLC, et al., Defendants–Appellants

No. 27648

Court of Appeals of Ohio, Second District, Montgomery County.

Rendered on December 22, 2017

JAMES P. BOTTI, Atty. Reg. No. 0023051, and JARED M. KLAUS, Atty. Reg. No. 0087780, 41 South High Street, Suite 3100, Columbus, Ohio 43215, Attorneys for Plaintiff–Appellee

TAMI HART KIRBY, Atty. Reg. No. 0078473, 1 South Main Street, Suite 1600, Dayton, Ohio 45402, Attorney for Plaintiff–Appellee

ROBERT R. KRACHT, Atty. Reg. No. 0025574, CHARLES J. PAWLUKIEWICZ, Atty. Reg. No. 0011499, and NICHOLAS R. OLESKI, Atty. Reg. No. 0095808, 101 West Prospect Avenue, Suite 1800, Cleveland, Ohio 44115, Attorneys for Defendants–Appellants

OPINION

WELBAUM, J.

{¶ 1} In this case, Defendants–Appellants, Courthouse Crossing Acquisitions, LLC and Schon C.C. Holdings (collectively, "Crossing") appeal from a summary judgment rendered in favor of Plaintiff–Appellee, U.S. Bank National Association, as Trustee for the Registered Holders of GE Commercial Mortgage Corporation, Commercial Mortgage Passthrough Certificates, Series 2006–C1, acting by and through Its Special Servicer, LNR Partners, LLC ("U.S. Bank"). Crossing contends that the trial court erred in granting summary judgment in favor of U.S. Bank because there are genuine issues of material fact concerning whether U.S. Bank is the holder of a promissory note, and with respect to how the original lender transferred the note to U.S. Bank.

{¶ 2} We conclude that the trial court did not err in rendering summary judgment in favor of U.S. Bank. There were no genuine issues of material fact concerning whether the bank was the holder of the promissory note, or how the original lender transferred the note. In addition, Crossing was precluded from asserting alleged failure to comply with a services and pooling agreement that purportedly involved the note, because Crossing was a third party to the agreement. Accordingly, the judgment of the trial court will be affirmed.

I. Facts and Course of Proceedings

{¶ 3} In October 2016, U.S. Bank filed a foreclosure action against Courthouse Crossing Acquisition, LLC, Schon C.C. Holding, and the Montgomery County Treasurer. The complaint alleged that U.S. Bank held a $12,700,000 promissory note that Crossing had signed, as well as a mortgage and security agreement on premises located at 10 North Ludlow Street, Dayton, Ohio. In addition, the complaint alleged that U.S. Bank owned security interests in Crossing's personal property due to UCC–1 financing statements filed with the State of Ohio and Montgomery County, Ohio.

{¶ 4} U.S. Bank also filed a motion for appointment of a receiver, which was granted in November 2016. Crossing has also appealed that decision. See U.S. Bank National Assn. v. Courthouse Crossing Acquisitions LLC , 2d Dist. Montgomery No. 27331, 2017 WL 6550470.

{¶ 5} In November 2016, Crossing filed a motion to dismiss the complaint, based on alleged lack of jurisdiction. The trial court overruled this motion in January 2017. Subsequently, U.S. Bank filed a motion for summary judgment in March 2017. The motion was supported by the affidavit of Dmitry Sulsky, asset manager of LNR Partners, which was the special servicer for the loan held by U.S. Bank. On April 5, 2017, the trial court granted Crossing's motion for an extension of time under Civ.R. 56(F), and extended the time for responding to May 22, 2017. Crossing filed a brief in response to the summary judgment motion on May 22, 2017. The brief was supported by the affidavit of Crossing's counsel, who identified various documents obtained in discovery as well as excerpts from a form 8–K that had been filed with the Securities and Exchange Commission ("SEC").

{¶ 6} In mid-June 2017, the trial court granted U.S. Bank's Motion for Summary Judgment. The court then filed a judgment entry issuing a foreclosure decree on July 29, 2017. This appeal followed.

II. Alleged Error in Rendering Summary Judgment

{¶ 7} Crossing's sole assignment of error states that:

The Trial Court Erred as a Matter of Law When It Granted U.S. Bank's Motion for Summary Judgment.

{¶ 8} Under this assignment of error, Crossing contends that the trial court erred in rending summary judgment in favor of U.S. Bank because there were genuine issues of material fact concerning whether U.S. Bank is a holder of the Crossing promissory note. Crossing's argument is based on the existence of a Pooling and Servicing Agreement ("PSA") that pertained to the Series 2006–C1 Trust ("Trust").

{¶ 9} According to Crossing, the PSA required the Depositor (identified as GE Commercial Mortgage Corporation, or "GE") to assign various loans, including Crossing's loan, to the Trust. Crossing further notes that an entity called German American Capital Corporation ("GACC") "purportedly" sold Crossing's loan to GE. Crossing states that U.S. Bank failed to produce any evidence that the original lender, Deutsche Bank Mortgage Capital, LLC ("Deutsche"), sold its rights in the note and mortgage to GACC, so that GACC then had rights to sell to GE. Based on these alleged facts, Crossing argues that there are genuine issues of material fact concerning the chain of title. The trial court rejected this argument, noting that Crossing was not a party to the assignments of the notes and mortgage, and lacked standing to challenge their validity.

{¶ 10} "A trial court may grant a moving party summary judgment pursuant to Civ. R. 56 if there are no genuine issues of material fact remaining to be litigated, the moving party is entitled to judgment as a matter of law, and reasonable minds can come to only one conclusion, and that conclusion is adverse to the nonmoving party, who is entitled to have the evidence construed most strongly in his favor." Smith v. Five Rivers MetroParks , 134 Ohio App.3d 754, 760, 732 N.E.2d 422 (2d Dist.1999), citing Harless v. Willis Day Warehousing Co. , 54 Ohio St.2d 64, 375 N.E.2d 46 (1978). "We review decisions granting summary judgment de novo, which means that we apply the same standards as the trial court." (Citations omitted.) GNFH, Inc. v. W. Am. Ins. Co. , 172 Ohio App.3d 127, 2007-Ohio-2722, 873 N.E.2d 345, ¶ 16 (2d Dist.).

{¶ 11} When a mortgagor defaults, a mortgagee "may elect among separate and independent remedies to collect the debt secured by a mortgage." (Citations omitted.) Deutsche Bank Natl. Tr. Co. v. Holden , 147 Ohio St.3d 85, 2016-Ohio-4603, 60 N.E.3d 1243, ¶ 21. These remedies include: (1) suits seeking personal judgments against mortgagors to recover amounts due on promissory notes, without resorting to the property that has been mortgaged; (2) actions to enforce mortgages, which are for the mortgagee's excusive benefit and for those claiming under the mortgagee; and (3) "based on the property interest created by the mortgagor's default on the mortgage, the mortgagee may bring a foreclosure action to cut off the mortgagor's right of redemption, determine the existence and extent of the mortgage lien, and have the mortgaged property sold for its satisfaction." (Citations omitted.) Id. at ¶ 22–24.

{¶ 12} The case before us involves the third remedy, which is a foreclosure action asking that the property be sold. However, a " ‘foreclosure proceeding is the enforcement of a debt obligation,’ * * * and the debt is established by the note." Id. at ¶ 27, quoting Wilborn v. Bank One Corp. , 121 Ohio St.3d 546, 2009-Ohio-306, 906 N.E.2d 396, at ¶ 17. In Holden , the court concluded that a bank could proceed in foreclosure against a debtor who had been discharged from any obligation on a promissory note in bankruptcy proceedings, so long as the bank could prove that "it is the party entitled to enforce the note—regardless of whether it can obtain a personal judgment on it against the [obligors]." Holden at ¶ 27.

{¶ 13} " ‘To properly support a motion for summary judgment in a foreclosure action, a plaintiff must present evidentiary-quality materials showing: (1) the movant is the holder of the note and mortgage, or is a party entitled to enforce the instrument; (2) if the movant is not the original mortgagee, the chain of assignments and transfers; (3) the mortgagor is in default; (4) all conditions precedent have been met; and (5) the amount of principal and interest due.’ " Nationstar Mtge., L.L.C. v. West , 2d Dist. Montgomery Nos. 25813, 2014-Ohio-735, 2014 WL 820008, ¶ 16, quoting Wright–Patt Credit Union, Inc. v. Byington , 6th Dist. Erie No. E-12-002, 2013-Ohio-3963, 2013 WL 5211503, ¶ 10. (Other citations omitted.)

{¶ 14} U.S. Bank presented such materials, by authenticating the various documents attached to the complaint. The promissory note, which is dated February 23, 2006, was originally entered into by Deutsche and Crossing. It required Crossing to pay Deutsche and Deutsche's "successors and/or assigns" $12,700,000. Doc. # 51, March 20, 2017 Sulsky Affidavit, Ex. 1, Promissory Note, p. 1. The payments were to be made in various installments, with the balance of the "principal sum and all accrued and unpaid interest" to be paid on March 1, 2016. Id.

{¶ 15} The promissory note also referenced an open-end leasehold mortgage and security agreement which was being used to secure the obligations evidenced in the promissory note. Id. at p. 2. Consistently, the mortgage and security agreement referenced the promissory note. See Sulsky Affidavit, ¶ 6–7 and Ex. 2 attached to the affidavit, p. 2.

{¶ 16} Another Sulsky affidavit, attached to U.S. Bank's motion for appointment of a receiver, stated that U.S. Bank was the owner and holder of the promissory note, the mortgage and security agreement, and an assignment of rents and leases that were attached to the...