Opinion
No. 106099
04-12-2018
MID AMERICA MORTGAGE, INC. PLAINTIFF-APPELLEE v. JOHN SCOTT IV, ET AL. DEFENDANTS [Appeal by Nichelle Scott, Defendant-Appellant]
ATTORNEY FOR APPELLANT Robert C. Brooks II 1893 East 82nd Street Cleveland, Ohio 44103 ATTORNEYS FOR APPELLEE For Mid America Mortgage, Inc. Christian E. Niklas Kim M. Hammond Suzana Kukovec-Krasnicki Keith D. Weiner & Associates Co., L.P.A. 75 Public Square, 4th Floor Cleveland, Ohio 44113 John Scott, pro se 66 Grand Street Bedford, Ohio 44146 Janice M. Matteo, pro se 6500 Gaines Ferry Road, Apt. K6 Flowery Branch, Georgia 30542 Jane Doe, unkown spouse, if any, of Janice M. Matteo, pro se 6500 Gaines Ferry Road, Apt. K6 Flowery Branch, Georgia 30542
JOURNAL ENTRY AND OPINION JUDGMENT: AFFIRMED Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-16-864226 BEFORE: S. Gallagher, J., E.A. Gallagher, A.J., and McCormack, J.
ATTORNEY FOR APPELLANT
Robert C. Brooks II
1893 East 82nd Street
Cleveland, Ohio 44103
ATTORNEYS FOR APPELLEE
For Mid America Mortgage, Inc. Christian E. Niklas
Kim M. Hammond
Suzana Kukovec-Krasnicki
Keith D. Weiner & Associates Co., L.P.A.
75 Public Square, 4th Floor
Cleveland, Ohio 44113 John Scott, pro se
66 Grand Street
Bedford, Ohio 44146 Janice M. Matteo, pro se
6500 Gaines Ferry Road, Apt. K6
Flowery Branch, Georgia 30542 Jane Doe, unkown spouse, if any, of
Janice M. Matteo, pro se
6500 Gaines Ferry Road, Apt. K6
Flowery Branch, Georgia 30542 SEAN C. GALLAGHER, J.:
{¶1} Nichelle Scott, the ex-wife of the borrower John Scott IV, appeals the decree of foreclosure entered in part upon the default judgment against John on all claims (based on both the note and mortgage) and in part upon summary judgment against Nichelle on the foreclosure claims. We affirm.
{¶2} In 2014, John agreed to pay the principal sum of $109,971 plus interest at 4.25 percent per year to Mid America Mortgage, Inc., d.b.a. Schmidt Mortgage Company ("Mid America"). As part of the transaction, Nichelle signed the mortgage instrument that granted Mortgage Electronic Registration System, Inc. ("MERS"), as nominee for Mid America, a prioritized lien on the divorced couple's residential property. Her signature was required under R.C. 5301.04, which provides that a "deed, mortgage, or lease of any interest of a married person in real property shall be signed, acknowledged, and certified as provided in" R.C. 5301.01 (in turn providing that any mortgage interest shall be signed by the mortgagor). Mid America, at all times, held the note. The mortgage was assigned from MERS to Mid America two months before the foreclosure action was commenced and after John defaulted under the terms of the note.
{¶3} John defaulted in the foreclosure action, and judgment was entered against him upon Mid America's claims. Nichelle, however, attempted to challenge the foreclosure, claiming that Mid America lacked standing to proceed, amongst other defenses John failed to advance on his own behalf. The trial court, upon summary judgment under Civ.R. 56, entered a decree of foreclosure and ordered the sale of the property. Nichelle sought a stay of that final judgment. This court granted the stay, but conditioned it on Nichelle posting a bond. No bond was posted, and the sale proceeded. Despite the failure to post the bond as ordered by this court, the trial court held the motion to confirm the sale in abeyance pending this appeal. In effect, Nichelle has obtained a stay over the confirmation of the sale.
{¶4} On this point, Nichelle claimed that the trial court lacked jurisdiction to confirm the sale in light of the appeal perfected on the final judgment of foreclosure. Her claim is not supported by any relevant legal analysis and, in fact, contradicts the weight of authority on this topic. The decree of foreclosure is a final appealable order, and the confirmation of sale is separate and distinct, in the nature of proceedings to aid in execution. Countrywide Home Loans Servicing, L.P. v. Nichpor, 136 Ohio St.3d 55, 2013-Ohio-2083, 990 N.E.2d 565, ¶ 6, quoting Triple F Invests. v. Pacific Fin. Servs., Inc., 11th Dist. Portage No. 2000-P-0090, 2001 Ohio App. LEXIS 2484, 3 (June 2, 2001). The two judgments are separately appealable. CitiMortgage, Inc. v. Roznowski, 139 Ohio St.3d 299, 2014-Ohio-1984, 11 N.E.3d 1140, ¶ 35. Unless the decree of foreclosure is stayed, the trial court has jurisdiction to proceed on the confirmation of sale. "The filing of a notice of appeal does not completely divest a trial court of jurisdiction over a case; rather, 'a trial court retains all jurisdiction which does not conflict with the jurisdiction of the appellate court.'" Chase Manhattan Mtge. Corp. v. Urquhart, 12th Dist. Butler Nos. CA2004-04-098 and CA2004-10-271, 2005-Ohio-4627, ¶ 28, quoting Hagood v. Gail, 105 Ohio App.3d 780, 784, 664 N.E.2d 1373 (1995), citing Yee v. Erie Cty. Sheriff's Dept., 51 Ohio St.3d 43, 44, 553 N.E.2d 1354 (1990). Despite a pending appeal, a trial court retains jurisdiction to enforce the final judgment and initiate proceedings in support of that judgment. Id. Nichelle's opposition to the sale confirmation was not based on the law nor any colorable extension of the law.
{¶5} Nevertheless, most of Nichelle's appellate arguments focus on Mid America's right to enforce the note to which Nichelle is not a party and are contrary to the final judgment entered against John, in which Mid America was deemed the party entitled to enforce the note and mortgage.
{¶6} "An action at law on a promissory note to collect a mortgage debt is separate and distinct from an action in equity to enforce the mortgage lien on the property." Deutsche Bank Natl. Trust Co. v. Holden, 147 Ohio St.3d 85, 2016-Ohio-4603, 60 N.E.3d 1243, ¶ 35. "The person entitled to enforce the note pursuant to R.C. 1303.31 has standing to seek a personal judgment against the promisor on that obligation, while the mortgagee or its successor and assign has standing to foreclose on the mortgage." Id. "A mortgage[, however,] is nothing more than a lien on the premises, the purpose of which is to put other lien holders on notice that there is a prior claim on the premises." Bank of New York Mellon Trust Co., N.A. v. Unger, 8th Dist. Cuyahoga No. 97315, 2012-Ohio-1950, ¶ 37, citing R.C. 5301.233; GMAC Mtge. Corp. v. McElroy, 5th Dist. Stark No. 2004-CA-00380, 2005-Ohio-2837, ¶ 16; R.C. 5301.01(B)(1)(b); Wells Fargo Bank v. Schwartz, 8th Dist. Cuyahoga No. 96641, 2012-Ohio-917. In this case, Mid America was both the holder of the note and the mortgage at the time the foreclosure action was filed.
{¶7} The only instrument that Nichelle was privy to was the mortgage instrument. According to the unambiguous terms within the security instrument, however, Nichelle executed the document "only to mortgage, grant and convey" her interest in the property. She further agreed that Mid America and John could forbear or make any accommodations with regard to the terms contained within the document without her consent. "Common words appearing in a written instrument will_be given their ordinary meaning unless manifest absurdity results, or unless some other meaning is clearly evidenced from the face or overall contents of the instrument." Alexander v. Buckeye Pipeline Co., 53 Ohio St.2d 241, 245, 374 N.E.2d 146 (1978). Thus, according to the terms of the mortgage instrument, Nichelle's only interest in this transaction is the surplus after foreclosure. Jackson v. Moissis, 2017-Ohio-1000, 87 N.E.3d 591, ¶ 16 (11th Dist.) (nonborrowing spouse's interest only extends to the surplus after the purchase money has been repaid).
{¶8} Ohio recognizes the "general prohibition on a litigant's raising another person's legal rights." Unger at ¶ 31, citing Allen v. Wright, 468 U.S. 737, 750, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). Nichelle's agreement to allow John to encumber her interest in the residential property does not entitle her to advance any defenses to the enforcement of the note that John as the debtor could have raised. She is not standing in John's shoes. Nichelle has a separate and distinct interest in the transaction.
{¶9} Nichelle is challenging Mid America's standing to prosecute the foreclosure action, the chain of assignments of the mortgage, the lack of additional discovery to determine whether Mid America had standing to proceed with the foreclosure, and whether Mid America met the conditions precedent to commencing the foreclosure action against John. Nichelle, therefore, is presenting arguments that John could have advanced, but did not. Thus far, Nichelle's interest in the foreclosure action was limited to preserving her half interest in the mortgaged property, which was inferior to the security interest pledged to the mortgagee. In light of her acknowledgment and acceptance of Mid America's prioritized lien, she could only advance claims with respect to the surplus following the foreclosure.
{¶10} John was obligated to pay the loan, and he defaulted. He did not contest the foreclosure action — an act well within his rights legally and contractually with Mid America. The judgment on the note stands. 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." Fannie Mae v. Hicks, 2015-Ohio-1955, 35 N.E.3d 37, ¶ 32 (8th Dist.), citing Kernohan v. Manss, 53 Ohio St. 118, 133, 41 N.E. 258 (1895). Nichelle cannot contest this determination; she is not a party to the note, nor is she obligated under the same. Further, the judgment against John is final and unassailable given his indifference to the outcome — he has not appealed or otherwise challenged the judgment. Nichelle's signature on the mortgage instrument merely demonstrated her acceptance of Mid America's lien on the property, which was co-titled in her name after the lien was acknowledged.
{¶11} However, committing her interest in the property to satisfaction of the mortgage did not transform her position into that of the debtor with the ability to assert the contractual and statutory rights arising from the note and mortgage. The terms of the mortgage instrument provided otherwise. Nichelle signed the document to pledge her interest in the mortgaged property as satisfaction of the debt and permitted John to forebear any term under the note and mortgage without Nichelle's consent.
{¶12} To recognize otherwise would open the door to two inequitable situations. It would encourage creditors to reassess the common proposition that a nonborrowing, co-mortgagor is not liable for the debt under the note — if the nonborrowing co-mortgagor is entitled to raise the abandoned defenses of the debtor that only arise under the terms of the note and mortgage, then a creditor in turn should be permitted to enforce the debt obligation on the nonborrowing spouse under those same terms. It would also permit the nonborrowing spouse to prevent the sale of the property meant to indemnify the debtor, leaving the borrowing spouse in the position of being financially responsible for the property without the benefit of using the property to mitigate the damages.
{¶13} The nonborrowing spouse in Nichelle's position is limited in a foreclosure action to seeking a partition of the property to secure the nonborrowing spouse's interest in the property, had she not pledged her interest in satisfaction of the debt. See, e.g., Mtge. Electronic Registration Sys. v. Kaehne, 11th Dist. Portage No. 2007-P-0033, 2008-Ohio-4051, ¶ 23. In exchange for not being bound to the debt under the note, the nonborrowing spouse cedes the right to raise defenses to the foreclosure action the debtor could have raised. Otherwise the nonborrowing spouse could obtain all the benefits granted under the note and mortgage without incurring the liability. One cannot avail oneself of the favorable provisions of a contract at the same time as disavowing any negative obligations arising thereunder.
{¶14} This is not to suggest that the nonborrowing spouse wishing to retain possession of the home is without remedies. Nichelle could have exercised an equitable right to pay the balance on the note if she wished to retain the property — thus relieving John of the burden to satisfy the judgment entered against him. Id. at ¶ 25; Hausman v. Dayton, 73 Ohio St.3d 671, 676, 1995-Ohio-277, 653 N.E.2d 1190 (mortgagor's right to redeem is absolute and exercisable at any time before the confirmation of sale).
{¶15} Absent the co-mortgagor invoking the equitable right to redeem, John is entitled to use the property as satisfaction of the debt. The right of action of a legal holder of a note (money judgment) is independent of the remedy (foreclosure) because a foreclosure proceeding "'is in the nature of a proceeding in rem to enforce certain security specially set apart for the indemnity of the holder of the note.'" (Emphasis added.) U.S. Bank Natl. Assn. v. George, 2015-Ohio-4957, 50 N.E.3d 1049, ¶ 12 (10th Dist.), quoting BAC Home Loans Servicing, LP v. Mowery Properties, Ltd., 10th Dist. Franklin No. 10AP-396, 2011-Ohio-1596. The debtor, upon default, is entitled to use the encumbered property as indemnification up to the full value of the debt owed. Nichelle agreed to as much by signing the mortgage instrument pledging her interest in the property as satisfaction of John's debt. Nichelle cannot intervene and prevent the foreclosure from proceeding — John is entitled under the terms of the note and mortgage to permit the mortgagee to sell the property in partial or complete satisfaction of the debt.
{¶16} Nichelle, as the nonborrowing spouse, cannot prevent that occurrence by raising defenses John specifically abandoned in favor of permitting Mid America to enforce the note and the mortgage. If we concluded otherwise, we would be permitting the nonborrowing spouse to potentially retain possession of the property, thereby forcing the borrowing spouse to be responsible for the entire debt without the benefit of selling the property, which is meant to mitigate the damages from the debtor's breach.
{¶17} "A mortgage may be enforced only by a person who is entitled to enforce the obligation the mortgage secures." Hicks, 2015-Ohio-1955, 35 N.E.3d 37, at ¶ 33, citing Restatement of the Law 3d, Property: Mortgages, Section 5.4(C) (1997), and In Re Dorsey, 6th Cir. No. 13-8036, 2014 Bankr. LEXIS 875 (Mar. 7, 2014). On the other side of that coin, a debtor is not obligated to challenge a foreclosure action and may use the property as satisfaction of the outstanding debt. In this case, Mid America, through the judgment entered against the debtor upon the note, is the party entitled to enforce the obligation the mortgage secures. John was entitled to permit Mid America to foreclose on the property as satisfaction of the debt, in order to avoid the full impact of the monetary judgment entered against his interest. Nichelle cannot intercede because of the unambiguous language contained in the mortgage instrument.
{¶18} On this point, the law on dower is instructive. Although Nichelle is the titled co-owner of the property, that interest is subservient to Mid America's security interest based on the mortgage instrument Nichelle executed. Had the property not been co-titled in her name, her interest would be the same: she would have a half interest in the property during the life of the borrowing spouse. See, e.g., SFJV 2005, L.L.C. v. Ream, 187 Ohio App.3d 715, 2010-Ohio-1615, 933 N.E.2d 819, ¶ 34 (12th Dist.). "The law is well-settled that, when a married person conveys a mortgage or interest in property that is held in the name of that spouse only, the mortgage will not be effective against the non-title holding spouse's dower interest unless that spouse has also signed the mortgage or document conveying the interest." GE Credit Union v. Medow, 2016-Ohio-3266, 54 N.E.3d 1281, ¶ 10_ (1st Dist.), citing Std. Fed. Bank v. Staff, 168 Ohio App.3d 14, 2006-Ohio-3601, 857 N.E.2d 1245, ¶ 21 (1st Dist.). Dower is simply "'an interest in real estate intended to protect a non-title holding spouse.'" Id. at ¶ 7, quoting Staff at ¶ 16.
{¶19} In foreclosure proceedings, the nonborrowing spouse is entitled to receive the present value of her dower interest following the foreclosure of the property if the spouse is not a signatory to the mortgage instrument. Id. at ¶ 8. This is generally achieved through partitioning the property, for the nonborrowing spouse can only challenge or preserve claims with respect to her interest. It is for this reason that nonborrowing spouses are required to sign the mortgage instrument pledging their interest as satisfaction of the debt incurred for the purpose of purchasing the property. R.C. 5301.04. Having pledged her interest as satisfaction of the debt, Nichelle's interest in this foreclosure action is limited to the valuation of the property that exceeds the outstanding debt. Moissis, 2017-Ohio-1000, 87 N.E.3d 591, at ¶ 16.
{¶20} Nichelle as the nonborrowing co-mortgagor cannot challenge Mid America's right to enforce the note or proceed to a foreclosure sale because John as the debtor defaulted on both those claims. John has the legal and contractual right to permit Mid America to enforce the note and cause the sale of the property in satisfaction of his debt. Nichelle pledged her interest in the property for this purpose and has not challenged any aspect of her contractual agreement or her priority over her ownership interest in the property. As a matter of law, Mid America was entitled to the decree of foreclosure. We affirm.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the common pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. SEAN C. GALLAGHER, JUDGE EILEEN A. GALLAGHER, A.J., and
TIM McCORMACK, J., CONCUR