Opinion
C.A. No. 17CA011223
09-28-2018
HUNTINGTON NATIONAL BANK Appellant v. ROSALIE A. ANDERSON, et al. Appellee
APPEARANCES: SCOTT A. KING and TERRY W. POSEY, JR., Attorneys at Law, for Appellant. EDWARD F. HERMAN, Attorney at Law, for Appellee.
APPEAL FROM JUDGMENT ENTERED IN THE COURT OF COMMON PLEAS COUNTY OF LORAIN, OHIO
CASE No. 16CV190291
DECISION AND JOURNAL ENTRY
CARR, Judge.
{¶1} Plaintiff-Appellant Huntington National Bank ("Huntington") appeals from the judgment of the Lorain County Court of Common Pleas. This Court reverses.
I.
{¶2} In February 2009, Defendant-Appellee Rosalie Anderson signed an $181,319 note in favor of Huntington for certain real property located on Stonegate Circle in North Ridgeville ("the Property"). The FHA-insured loan was secured by a mortgage on the Property in favor of Mortgage Electronic Registration Systems, Inc., as nominee for Huntington. In 2012, the mortgage was assigned to Huntington.
{¶3} On August 19, 2016, Huntington filed a complaint in foreclosure with reformation against Ms. Anderson and other Defendants. Therein, Huntington sought reformation of the mortgage deed, alleging that it contained a scrivener's error. In addition, Huntington alleged that it was the holder of, and/or entitled to enforce, the note and mortgage, that there had been a default under the terms of the note and mortgage, that Huntington had satisfied all conditions precedent, and that $168,936.43 plus interest was due and owing. However, due to a bankruptcy filing by Ms. Anderson, Huntington was not seeking a personal judgment against Ms. Anderson, and instead was seeking to proceed in rem.
{¶4} Ms. Anderson answered the complaint. Ms. Anderson specifically denied that Huntington complied with all conditions precedent. She denied that Huntington had complied with the requirements of section 6(B) of the note and 9 of the mortgage. Ms. Anderson denied that Huntington sent the certified letter and made the property visit "both in order to arrange a face-to-face meeting with [Ms.] Anderson, at all, or, alternatively, within the time strictures set forth in the regulatory basis of this requirement found at 24 C.F.R. 203.604."
{¶5} Huntington sought leave to file an amended complaint, which was ultimately granted. In the amended complaint, Huntington included language indicating the original note was lost. Additionally, unlike the copy of the note attached to the complaint, the copy of the note attached to the amended complaint included a blank endorsement.
{¶6} Ms. Anderson then filed a motion to dismiss the amended complaint for failure to state a claim upon which relief may be granted. The magistrate denied the motion, and Ms. Anderson filed a motion to set aside the ruling of the magistrate. The trial court denied the motion to set aside.
{¶7} Ms. Anderson answered the amended complaint asserting that, aside from her included response to the new allegations, she stood "on her original Answer, including, but not limited to, its specific and particular denials of [Huntington's] satisfaction of the conditions precedent to foreclosure[.]"
{¶8} Huntington filed a motion for summary judgment, which included an affidavit and several accompanying documents, including copies of the note, mortgage, and assignment. Notably, section 6(B) of the note provides that the "Note does not authorize acceleration when not permitted by the HUD regulations." In similar fashion, section 9(d) of the mortgage states that the security instrument "does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary."
{¶9} Huntington maintained that it was the holder of the note and assignee of the mortgage, that Ms. Anderson was in default by failing to make payments due from September 1, 2015, and that all conditions precedent under the note and mortgage had been met. Additionally, it asserted it was entitled to reformation of the mortgage deed.
{¶10} Huntington asserted that, because it sent a letter via certified mail and made multiple property visits, it complied with the face-to-face meeting requirements of 24 C.F.R. 203.604. See 24 C.F.R. 203.604(b), (c)(5), (d). Additionally, it argued that, because Ms. Anderson failed to submit loss mitigation documents for review in the past six years, it was clear that Ms. Anderson would not cooperate in the interview, which is an exception to the face-to-face meeting requirement. See 24 C.F.R. 203.604(c)(3). Huntington asserted that its failure to send the letter or conduct the visits in the time frame outlined in the regulations was not dispositive and maintained that it should be allowed to proceed to foreclosure because it complied with the regulations prior to filing its complaint.
{¶11} Ms. Anderson opposed the motion asserting Huntington was not entitled to judgment because it did not satisfy all conditions precedent as it did not comply with 24 C.F.R. 203.604 in the time frame provided for in the regulation nor did it satisfy an exception. Additionally, Ms. Anderson moved to strike a portion of the affidavit submitted by Huntington which related to Ms. Anderson's loss mitigation efforts. Huntington filed a reply brief.
{¶12} The trial court ultimately concluded that Huntington failed to comply with 24 C.F.R. 203.604 in the time provided for by the regulation. Specifically, the trial court found that Huntington "failed to 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 went unpaid." (Emphasis omitted.) The trial court then denied Huntington's motion for summary judgment and dismissed the complaint without prejudice.
{¶13} Huntington has appealed, raising two assignments of error for our review.
II.
{¶14} Before addressing the merits, we pause to note a procedural irregularity. Only Huntington moved for summary judgment, yet, the trial court, instead of entering judgment in Huntington's favor or finding genuine issues of material fact remained for trial, entered a judgment of dismissal in favor of a nonmoving party, i.e. Ms. Anderson. See Bank of Am., N.A. v. Edwards, 9th Dist. Lorain Nos. 15CA010848, 15CA010851, 2017-Ohio-4343, ¶ 8; but see State ex rel. J.J. Detweiler Ents., Inc. v. Warner, 103 Ohio St.3d 99, 2004 -Ohio-4659, ¶ 13 ("While Civ.R. 56 does not ordinarily authorize courts to enter summary judgment in favor of a non-moving party, * * * an entry of summary judgment against the moving party does not prejudice his due process rights where all relevant evidence is before the court, no genuine issue as to any material fact exists, and the non-moving party is entitled to judgment as a matter of law.") (Internal quotations and citation omitted.). However, because neither party has raised this as an issue, we decline to further address it. See id. To the extent that we have not addressed this or any other issue, our decision should not be read as endorsement of the proceedings below.
ASSIGNMENT OF ERROR I
THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT.
{¶15} Huntington argues in its first assignment of error that the trial court erred in dismissing the complaint. Huntington argues that its failure to comply with the timelines in 24 C.F.R. 203.604 should not bar its foreclosure action because, even though its compliance was untimely, it complied with the substantive requirements prior to initiating the foreclosure action. Additionally, Huntington argues that, because Ms. Anderson obtained a discharge in bankruptcy, the regulations were no longer applicable.
{¶16} While the trial court technically dismissed the complaint without prejudice, it did so in the context of a motion for summary judgment, and, in essence, effectively awarded summary judgment to Ms. Anderson, at least with respect to Huntington's claims seeking foreclosure. See Fifth Third Mtge. Co. v. Berman, 10th Dist. Franklin No. 15AP-394, 2015-Ohio-4466, ¶ 13.
{¶17} This Court reviews an award of summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105 (1996). This Court applies the same standard as the trial court, viewing the facts in the case in the light most favorable to the non-moving party and resolving any doubt in favor of the non-moving party. Viock v. Stowe-Woodward Co., 13 Ohio App.3d 7, 12 (6th Dist.1983).
{¶18} Pursuant to Civ.R. 56(C), summary judgment is proper if:
(1) No genuine issue as to any material fact remains to be litigated; (2) the moving party is entitled to judgment as a matter of law; and (3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing such evidence most strongly in favor of the party against whom the motion for summary judgment is made, that conclusion is adverse to that party.Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327 (1977).
{¶19} The party moving for summary judgment bears the initial burden of informing the trial court of the basis for the motion and pointing to parts of the record that show the absence of a genuine issue of material fact. Dresher v. Burt, 75 Ohio St.3d 280, 292-293 (1996). Specifically, the moving party must support the motion by pointing to some evidence in the record of the type listed in Civ.R. 56(C). Id. Once a moving party satisfies its burden of supporting its motion for summary judgment with acceptable evidence pursuant to Civ.R. 56(C), Civ.R. 56(E) provides that the non-moving party may not rest upon the mere allegations or denials of the moving party's pleadings. Id. at 293. Rather, the non-moving party has a reciprocal burden of responding by setting forth specific facts, demonstrating that a "genuine triable issue" exists to be litigated at trial. State ex rel. Zimmerman v. Tompkins, 75 Ohio St.3d 447, 449 (1996).
{¶20} We will dispose of Huntington's latter argument first. Huntington did not argue below that the regulations were inapplicable in light of Ms. Anderson's discharge in bankruptcy. This Court has held on multiple occasions that "[a]rguments that were not raised in the trial court cannot be raised for the first time on appeal." JPMorgan Chase Bank, N.A. v. Burden, 9th Dist. Summit No. 27104, 2014-Ohio-2746, ¶ 12. Accordingly, this Court will not address this argument.
{¶21} Huntington's primary argument is that, given the entire scheme of the federal regulations, because Huntington complied with the substantive components of C.F.R. 24 203.604 before filing for foreclosure, it should be allowed to proceed with its foreclosure complaint. While in the trial court Huntington additionally argued that the exception to the face-to-face meeting requirement found in 24 C.F.R. 203.604(c)(3) applied to the facts of the case, it has not developed a similar argument on appeal and that issue will not be addressed.
{¶22} Huntington's affidavit in support of its motion for summary judgment stated that Ms. Anderson defaulted by failing to make payments due September 1, 2015 and that she failed to make any subsequent installments. The affiant further averred that on May 11, 2016, Huntington caused a "Face-to-Face Letter" to be mailed to Ms. Anderson via certified mail to the Property, and that on May 12, 2016, and May 15, 2016, an agent of Huntington went to the Property to attempt to arrange a face-to-face meeting but no one was present. The agent left the face-to-face documents at the Property, taping them to the door on both visits. On May 19, 2016, an agent made contact with a relative of Ms. Anderson at the Property. The relative accepted the face-to-face documents and advised the agent that he would give the sealed envelope containing the documents to Ms. Anderson.
{¶23} This Court has concluded that "where compliance with HUD regulations is required by a note and mortgage, such compliance is a condition precedent to bringing a foreclosure action." Wells Fargo Bank, N.A. v. Awadallah, 9th Dist. Summit No. 27413, 2015-Ohio-3753, ¶ 21.
{¶24} 24 C.F.R. 203.604 provides in relevant part:
(b) 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, or at least 30 days before assignment is requested if the mortgage is insured on Hawaiian home land pursuant to section 247 or Indian land pursuant to section 248 or if assignment is requested under § 203.350(d) for mortgages authorized by section 203(q) of the National Housing Act.
(c) A face-to-face meeting is not required if:
(1) The mortgagor does not reside in the mortgaged property,
(2) The mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either,
(3) The mortgagor has clearly indicated that he will not cooperate in the interview,
(4) A repayment plan consistent with the mortgagor's circumstances is entered into to bring the mortgagor's account current thus making a meeting unnecessary, and payments thereunder are current, or
(5) A reasonable effort to arrange a meeting is unsuccessful.
(d) A reasonable effort to arrange a face-to-face meeting with the mortgagor shall consist at a minimum of one letter sent to the mortgagor certified by the Postal Service as having been dispatched. Such a reasonable effort to arrange a face-to-face meeting shall also include at least one trip to see the mortgagor at the mortgaged property, unless the mortgaged property is more than 200 miles from the mortgagee, its servicer, or a branch office of either, or it is known that the mortgagor is not residing in the mortgaged property.
{¶25} Huntington has never argued that it conducted a face-to-face meeting with Ms. Anderson. Instead, it argues that it made a reasonable effort to arrange such a meeting as defined by 24 C.F.R. 203.604(d). Nonetheless, it is undisputed that Huntington did not make a reasonable effort in the time frame outlined in 24 C.F.R. 203.604(b). Because Huntington failed to meet the timing requirements of 24 C.F.R. 203.604(b), the trial court dismissed the complaint.
{¶26} Huntington points to decisions from the Seventh, Fifth, and Second District Courts of Appeals in support of its arguments. It notes that the Seventh District concluded that "the obligation to perform the conditions is mandatory but the specific time deadlines are 'aspirational.'" Bank of Am. v. Bobovyik, 7th Dist. Columbiana No. 13 CO 54, 2014-Ohio-5499, ¶ 35, quoting PNC Mtge. v. Garland, 7th Dist. Mahoning No. 12 MA 222, 2014-Ohio-1173, ¶ 30. Huntington argues that to hold it to the timing requirements would be unduly harsh and would be inconsistent with the administrative scheme.
{¶27} This Court was presented with a similar set of facts in Edwards. Therein, we noted that the lender also failed to comport with 24 C.F.R. 203.604 in the time frame provided by the regulation. See Edwards, 2017-Ohio-4343, ¶ 29. However, in that case we did not need to resolve whether the timing requirements of the regulation were aspirational or mandatory because the lender in Edwards failed to submit evidence that it sent the required letter by certified mail. See id. at ¶ 30. Thus, we held that, even if the deadline contained in the regulation was merely aspirational, the lender never demonstrated that it ever complied with the regulation. See id.
{¶28} Here, Huntington presented evidence that it did comply with the substance of the regulation. That evidence was not contested by Ms. Anderson. Thus, the only question is whether Huntington's failure to comply with the regulation in the timeframe outlined therein bars its foreclosure action for failure to comply with a condition precedent.
{¶29} Huntington specifically points to 24 C.F.R. 203.606(a) and notes that it provides that, "[b]efore initiating foreclosure, the mortgagee must ensure that all servicing requirements of this subpart have been met." One of those subparts is 24 C.F.R. 203.604, the regulation at issue before us.
{¶30} While this Court has never before expressly concluded that the timing requirement in 24 C.F.R. 203.604(b) is not mandatory, implicitly we have done so in a prior appeal. In Liberty Sav. Bank, F.S.B. v. Bowie, 9th Dist. Summit No. 27126, 2014-Ohio-1208, this Court examined whether the trial court erred in concluding that a genuine issue of material fact did not remain with respect to whether the lender complied with the federal regulations. Id. at ¶ 4. We began the discussion by pointing to 24 C.F.R. 203.606(a). Id. at ¶ 8. We stated that, "'[b]efore initiating foreclosure, the mortgagee must ensure that all servicing requirements of this subpart have been met.'" Id., quoting 24 C.F.R. 606(a). When we turned to examining 24 C.F.R. 203.604(b) and what was required under it, we incorporated the language from 24 C.F.R. 203.606(b) into the analysis. See Bowie at ¶ 8. We concluded that, "[o]ne such servicing requirement of the applicable subpart is that the 'mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting' prior to initiating the foreclosure unless one of the stated exceptions applies." (Emphasis added.) Id., quoting 24 C.F.R. 203.604(b). Even though 24 C.F.R. 203.604(b) includes its own timing requirement, we nonetheless relied on the language in 24 C.F.R. 203.606(a) to determine when the requirements of 24 C.F.R. 203.604(b) had to be met. Given the foregoing, this Court has already concluded that the requirements of 24 C.F.R. 203.604(b) must be met "prior to initiating the foreclosure." Id. We note that this position is consistent with the position held by the Seventh and Second District Courts of Appeals. See Bobovyik, 2014-Ohio-5499, at ¶ 38-39; Washington Mut. Bank v. Mahaffey, 154 Ohio App.3d. 44, 2003-Ohio-4422, ¶ 22 (2d Dist.).
{¶31} Given the foregoing, we can only conclude that the trial court erred in dismissing the complaint based upon Huntington's failure to comply with the timing requirements in 24 C.F.R. 203.604(b). Huntington's first assignment of error is sustained.
ASSIGNMENT OF ERROR II
THE TRIAL COURT ERRED IN FAILING TO ENTER SUMMARY JUDGMENT FOR THE HUNTINGTON NATIONAL BANK.
{¶32} Huntington argues in its second assignment of error that the trial court erred in failing to enter summary judgment for it on its claims. Here, the trial court did not review the merits of Huntington's claims in light of its conclusion that Huntington failed to comply with a condition precedent. This Court is a reviewing court and its role is not to decide matters in the first instance. See Catalanotto v. Byrd, 9th Dist. Summit No. 27824, 2016-Ohio-2815, ¶ 12. Accordingly, we must remand the matter to the trial court for it to consider the merits of Huntington's summary judgment arguments. Huntington's second assignment of error is sustained to that limited extent.
III.
{¶33} Huntington's assignments of error are sustained to the extent discussed above. The judgment of the Lorain County Court of Common Pleas is reversed and this matter is remanded for proceedings consistent with this opinion.
Judgment reversed, and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common Pleas, County of Lorain, State of Ohio, to carry this judgment into execution. A certified copy of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellee.
/s/_________
DONNA J. CARR
FOR THE COURT SCHAFER, P. J.
TEODOSIO, J.
CONCUR.
APPEARANCES:
SCOTT A. KING and TERRY W. POSEY, JR., Attorneys at Law, for Appellant. EDWARD F. HERMAN, Attorney at Law, for Appellee.