Opinion
C. A. 29670
06-30-2023
CARRINGTON MORTGAGE SERVICES, LLC Appellees v. JOSHUA S. MCCLAIN, ET AL. Appellant
DAVID T. BRADY, Attorney for Appellee ANDREW J. GERLING & JACOB R. DATTILO, Attorneys for Appellant
(Civil Appeal from Common Pleas Court) Trial Court Case No. 2018 CV 5080
DAVID T. BRADY, Attorney for Appellee
ANDREW J. GERLING & JACOB R. DATTILO, Attorneys for Appellant
OPINION
EPLEY, J.
{¶ 1} Joshua S. McClain appeals from a judgment and decree of foreclosure in favor of Carrington Mortgage Services, LLC. He claims that the trial court erred in granting summary judgment to Carrington because Carrington had failed to establish its entitlement to enforce the note and residential mortgage. McClain also asserts that the grant of foreclosure was inequitable. For the following reasons, the trial court's judgment will be affirmed.
I. Facts and Procedural History
{¶ 2} On July 2, 2009, McClain purchased the residential property located at 2352 Miami Village Drive in Miamisburg. He financed the purchase with a loan from Bank of America, N.A. ("BANA") in the amount of $191,468.
{¶ 3} On September 24, 2010, McClain refinanced his home, borrowing $191,495 from BANA. McClain signed a note in that amount and executed a mortgage to Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for BANA, to secure payment. Kristin McClain, Joshua's spouse, signed the mortgage for the sole purpose of releasing dower. A satisfaction of mortgage for the July 2, 2009 mortgage loan was recorded on November 1, 2010.
{¶ 4} Carrington became the owner and servicer of the September 24, 2010 loan in late 2016. At that point, McClain was behind on his payments, but Carrington did not consider him to be in default. McClain defaulted on his obligations under the note and mortgage in early 2017. On March 9, 2017, Carrington sent McClain a notice of intent to foreclose, informing him that he was in default because the monthly payment due on or after February 1, 2017, had not been received. McClain did not make further payments on the loan.
{¶ 5} The loan was sold to Everbank on May 2, 2017. Carrington continued to service the loan. The note was endorsed in blank by a senior vice president of BANA, and Carrington states that its custodian, U.S. Bank, has been in possession of the note since June 2017. On July 12, 2018, MERS, as nominee for BANA, assigned the mortgage to Carrington.
{¶ 6} Approximately three months after the assignment of mortgage, Carrington filed a foreclosure complaint against McClain, alleging that he had defaulted on the note and mortgage. It sought a monetary judgment in the amount of $170.920.22, plus interest and additional costs, foreclosure of the mortgage, and the sale of the property. McClain filed an answer, disputing the amount of the debt and raising several defenses.
{¶ 7} Carrington moved for summary judgment on June 11, 2019. It asserted that there were no genuine issues of material fact that McClain had signed the note and mortgage, that he had not made payments on the loan since January 1, 2017, and that Carrington had accelerated the balance due to his failure to pay. Carrington provided the affidavit of Laura Hovis, a default document senior analyst for Carrington, who had reviewed the company's business records. Hovis described when the note and mortgage had been executed, that "Plaintiffs custodian is in possession of the original promissory note," that McClain had failed to make payments due for February 1, 2017 and was in default, the amount due and owing, and when a notice of default had been sent to McClain. Copies of the note, mortgage (with the assignment of mortgage), McClain's payment history, and Carrington's notice of default were attached to and authenticated by the affidavit.
{¶ 8} The trial court granted McClain an extension of time to respond, but it entered a judgment and decree of foreclosure before the new deadline had passed. On appeal from that judgment, we agreed with McClain that the trial court had prejudicially erred in entering summary judgment against him after explicitly granting him additional time to respond. Carrington Mtge. Servs., LLC v. McClain, 2d Dist. Montgomery No. 28456, 2020-Ohio-206. We therefore reversed the judgment and remanded for further proceedings.
{¶ 9} Upon remand, the trial court initially indicated that the pending summary judgment motion would be deemed submitted on March 2, 2020. However, for various reasons, the case was stayed, and McClain did not file a memorandum in opposition to the summary judgment motion until June 25, 2021.
{¶ 10} McClain's opposition memorandum focused on the contradictory information he received from Carrington prior to the filing of the foreclosure action and in response to discovery requests. He asserted that Carrington had failed to establish that it was the holder of the note or had the right to enforce it. McClain further argued that granting foreclosure was inequitable, because the documents provided by Carrington in response to his requests for information failed to establish that it was entitled to collect mortgage payments from him. McClain attached 14 exhibits to his opposition memorandum, including an affidavit by McClain, copies of notices he had received from Carrington, the satisfaction of mortgage for his July 2, 2009 mortgage, copies of correspondence he had sent requesting validation of his loan, copies of the responses he had received (with attachments), the deposition transcript for Rosemary Martin (senior case manager for Carrington), and a copy of post-deposition correspondence from his attorney to Carrington's counsel.
{¶ 11} Carrington filed a reply brief, emphasizing that it was entitled to enforce the note. It reiterated that the undisputed testimony showed that U.S. Bank possessed the note as Carrington's custodian.
{¶ 12} On September 30, 2021, the trial court sustained the motion for summary judgment. McClain appealed that decision, but we dismissed the appeal for lack of a final appealable order, as the court's decision was not a decree of foreclosure. Carrington Mtge. Servs. LLC v. McClain, 2d Dist. Montgomery No. 29286 (Decision & Final Judgment Entry, Jan. 27, 2022). The trial court entered its judgment and decree of foreclosure on December 2, 2022. McClain now appeals from that judgment.
{¶ 13} The Miami Village Drive property has since been sold. However, we find that the sale has no bearing on this appeal. We have held that an appeal from a judgment and decree of foreclosure is not moot, despite the sale of the property, because the homeowner may still obtain relief in the form of restitution from the judgment creditor under R.C. 2923.45 and R.C. 2325.03. Chase Manhattan Mtge. Corp. v. Locker, 2d Dist. Montgomery No. 19904, 2003-Ohio-6665. But see, e.g., Bankers Tr Co. of California v. Tutin, 9th Dist. Summit No. 24329, 2009-Ohio-1333, ¶ 11.
II. Summary Judgment Standard
{¶ 14} Pursuant to Civ.R. 56(C), summary judgment is proper when (1) there is no genuine issue as to any material fact, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds, after construing the evidence most strongly in favor of the nonmoving party, can only conclude adversely to that party. Zivich v. Mentor Soccer Club, Inc., 82 Ohio St.3d 367, 369-370, 696 N.E.2d 201 (1998). The moving party carries the initial burden of affirmatively demonstrating that no genuine issue of material fact remains to be litigated. Mitseff v. Wheeler, 38 Ohio St.3d 112, 115, 526 N.E.2d 798 (1988). To this end, the movant must be able to point to evidentiary materials of the type listed in Civ.R. 56(C) that a court is to consider in rendering summary judgment. Dresher v. Burt, 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264 (1996). The substantive law of the claim or claims being litigated determines whether a fact is "material." Perrin v. Cincinnati Ins. Co., 2020-Ohio-1405, 153 N.E.3d 832, ¶ 29 (2d Dist.).
{¶ 15} Once the moving party satisfies its burden, the nonmoving party may not rest upon the mere allegations or denials of the party's pleadings. Dresher at 293; Civ.R. 56(E). Rather, the burden then shifts to the nonmoving party to respond, with affidavits or as otherwise permitted by Civ.R. 56, setting forth specific facts that show that there is a genuine issue of material fact for trial. Dresher at 293. Throughout, the evidence must be construed in favor of the nonmoving party. Id.
{¶ 16} We review the trial court's ruling on a motion for summary judgment de novo. Schroeder v. Henness, 2d Dist. Miami No. 2012-CA-18, 2013-Ohio-2767, ¶ 42. De novo review means that this court uses the same standard that the trial court should have used, and we examine all the Civ.R. 56 evidence, without deference to the trial court, to determine whether, as a matter of law, no genuine issues exist for trial. Ward v. Bond, 2d Dist. Champaign No. 2015-CA-2, 2015-Ohio-4297, ¶ 8.
III. Carrington's Entitlement to Enforce the Note and Mortgage
{¶ 17} In his first assignment of error, McClain asserts that Carrington did not establish that it was entitled to enforce the note and mortgage. McClain argues that Horvis's and Martin's evidence did not support such a finding and that the trial court erred in finding that Carrington was in possession of the note through a custodian.
{¶ 18} To prevail on a motion for summary judgment in a foreclosure action, the plaintiff must prove: (1) it is the holder of the note and the mortgage, or is a party entitled to enforce them; (2) if the plaintiff 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. E.g., Wells Fargo Bank, N.A. v. Mears, 2d Dist. Montgomery No. 27995, 2019-Ohio-242, ¶ 18; U.S. Home Ownership, LLC v. Young, 2018-Ohio-1059, 109 N.E.3d 681, ¶ 7 (2d Dist.). McClain's argument relates to the first and second elements of a foreclosure claim.
{¶ 19} The Ohio Supreme Court has made clear that a "creditor seeking to foreclose on the mortgage must prove that it was the person or entity entitled to enforce the note secured by the mortgage." Deutsche Bank Natl. Trust Co. v. Holden, 147 Ohio St.3d 85, 2016-Ohio-4603, 60 N.E.3d 1243, ¶ 26. "R.C. 1303.31(A) identifies three classes of persons who are "entitled to enforce" an instrument, such as a note: (1) the holder of the instrument, (2) a nonholder in possession of the instrument who has the rights of a holder, and (3) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to R.C. 1303.38 or R.C. 1303.58(D)." Wells Fargo Bank, N.A. v. TIC Acropolis, LLC, 2d Dist. Greene No. 2015-CA-32, 2016-Ohio-142, ¶ 29. The term "holder" includes a "person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession." R.C. 1301.201 (B)(21)(a).
{¶ 20} Ohio's Uniform Commercial Code does not define "possession." However, Ohio appellate courts have interpreted the term to include constructive possession. E.g., Deutsche Bank Natl. Tr. Co. v. Talliere, 2023-Ohio-75, 205 N.E.3d 756, ¶ 21 (8th Dist.); Fed. Natl. Mtge. Assn. v. McFerren, 9th Dist. Summit No. 28814, 2018-Ohio-5319, ¶ 21; U.S. Bank Natl. Assn. v. Gray, 10th Dist. Franklin No. 12AP-953, 2013-Ohio-3340, ¶ 25; Freedom Mtge. Corp. v. Vitale, 5th Dist. Tuscarawas No. 2013 AP 08 0037, 2014-Ohio-1549, ¶ 16; U.S. Bank, Natl. Assn. v. Zokle, 6th Dist. Erie No. E-13-033, 2014-Ohio-636, ¶ 24. Under these principles, "a person is a holder of a negotiable instrument, and entitled to enforce the instrument, when the instrument is in the physical possession of his or her agent." Gray at ¶ 25. Stated differently, "[i]n situations where the holder's agent is in physical possession of the note, the holder may still enforce the note based upon constructive possession of the note." McFerren at ¶ 21.
{¶ 21} A person may be a "person entitled to enforce" the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument. R.C. 1303.31 (B). "Sometimes the person entitled to enforce the note and the owner of the note are one and the same. Sometimes they are not." Nationstar Mtge., LLC. v. West, 2d Dist. Montgomery No. 25813, 2014-Ohio-735, ¶ 29, quoting Bank of Am., N.A. v. Pasqualone, 10th Dist. Franklin No. 13AP-87, 2013-Ohio-5795, ¶ 23. "[T]he question of ownership of a note is not the debtor's concern." Id. at ¶ 31, quoting Pasqualone at ¶ 25.
{¶ 22} In this case, Carrington provided an authenticated copy of the note, which was a bearer instrument. Because BANA had endorsed the note in blank, any entity in possession of the note would be the holder of the note. See Bank of Am., N.A. v. Miller, 194 Ohio App.3d 307, 2011-Ohio-1403, 956 N.E.2d 319, ¶ 27 (2d Dist.).
{¶ 23} In its answers to McClain's interrogatories, Carrington stated that BANA and Carrington were the only persons to ever have possession of the note. McClain Ex. K, p. 11. Hovis and Martin made sworn statements that Carrington's custodian was in possession of the original promissory note. Hovis Aff, ¶ 4; Martin Depo. 65-66. Martin elaborated that, after June 1, 2017, U.S. Bank held the original note in its vault as custodian pursuant to "an agreement that Carrington and Everbank have with U.S. Bank holding the - the actual physical document." Martin Depo. 66. Martin had not seen the agreement with U.S. Bank, explaining that she did not "generally see documents like that. That is handled by other departments." Martin Depo. 66-67. Although Martin testified that she had not seen the agreement and did not "know of any documents," Martin Depo. 69, she did not say that no agreement existed. Rather, she repeatedly testified that U.S. Bank was Carrington's custodian and that from 2017 until two weeks before her deposition, the note was with U.S. Bank in its custodial vault. Martin Depo. 69. She indicated that U.S. Bank had released the original note to Carrington so that Martin could bring it to her deposition. Martin Depo. 68-69.
{¶ 24} McClain emphasizes that Carrington never provided a copy of the custodial agreement during discovery and refused to respond to discovery requests about its custodial arrangement, if any. McClain's recourse for these alleged failures was to file a motion under Civ.R. 37. At this juncture, we must focus on the evidence presented in support of and in opposition to the summary judgment motion.
{¶ 25} Construing the evidence in McClain's favor, Hovis's and Martin's evidence demonstrated that U.S. Bank held the original note for Carrington as its custodian, and because U.S. Bank was acting as Carrington's agent, Carrington was entitled to enforce the note. The fact that Martin had never seen the custodian agreement did not create an issue of fact regarding the existence of the agreement. Carrington's evidence further showed that it had had constructive possession of the note since June 2017, prior to the filing of the complaint in 2018. McClain offered no evidence showing that a genuine issue of material fact existed. Accordingly, the trial court did not err in granting summary judgment to Carrington.
{¶ 26} McClain's first assignment of error is overruled.
IV. Equitability of Foreclosure
{¶ 27} In his second assignment of error, McClain claims that the entry of a judgment and decree of foreclosure was inequitable. He argues that Carrington had repeatedly provided inaccurate and conflicting information in response to his requests for validation of the loan. He asserts that Carrington failed to establish that it was entitled to receive mortgage payments from him, making foreclosure unjust.
{¶ 28} "Under Ohio law, an action in foreclosure is an equitable action." Wells Fargo Bank, N.A. v. Doe(s), 2d Dist. Montgomery No. 29686, 2023-Ohio-1405, ¶ 12, citing Natl. City Bank, NE v. Abdalla, 131 Ohio App.3d 204, 210, 722 N.E.2d 130 (7th Dist. 1999). "[B]ecause foreclosure is equitable relief, 'the simple assertion of the elements of foreclosure does not require, as a matter of law, the remedy of foreclosure.'" Wells Fargo Fin. Ohio 1, Inc. v. Robinson, 2d Dist. Champaign No. 2016-CA-23, 2017-Ohio-2888, ¶ 19, quoting PHH Mtge. Corp. v. Barker, 190 Ohio App.3d 71, 2010-Ohio-5061, 940 N.E.2d 662, ¶ 35 (3d Dist.), quoting First Natl. Bank of Am. v. Pendergrass, 6th Dist. Erie No. E-08-048, 2009-Ohio-3208, ¶ 22.
{¶ 29} Much of McClain's evidence in opposition to summary judgment concerned his communications with Carrington about the transfers of his loan. In his affidavit, McClain stated that he began receiving phone calls from Carrington on his cell phone, demanding that he send mortgage payments. At this point, McClain had not heard of Carrington and had not received anything in writing from the company. McClain Ex. A.
{¶ 30} On December 7, 2016, Carrington sent McClain a "notice of sale of ownership of mortgage loan." McClain Ex. B. This notice indicated that his September 24, 2010 loan had been sold to a new creditor in October 2016, and that he should send payment to the servicer, which was different from the new creditor. Page 2 of the notice indicated that the servicer for the loan was Carrington. The notice provided the Carrington loan number and referenced the BANA loan number, but it did not expressly reference BANA.
{¶ 31} Five days later, Carrington sent a "notice of servicing transfer." The notice provided the BANA and Carrington loan numbers and indicated that BANA would not be the loan servicer after October 1, 2016, and instead, Carrington would be the loan servicer. McClain Ex. C. The notice included how to make payments by telephone (with a fee) or online (without a fee).
{¶ 32} Following the receipt of these notices, McClain researched public records held by the Montgomery County Recorder's Office and found no record of any sales, assignments, or transfers of his mortgage. He stated in his affidavit that he feared that Carrington might be attempting to collect on the satisfied July 2, 2009 mortgage. He then sent correspondence to Carrington, BANA, and MERS, seeking clarification as to the ownership of the note and mortgage and whom he should pay. McClain Ex. E-H.
{¶ 33} On May 18, 2017, Carrington sent another "notice of sale of ownership of mortgage loan." This notice indicated that the September 24, 2010 loan had been sold on May 2, 2017. The loan number remained the same, and Carrington was the servicer. The new creditor was identified as Everbank. McClain Ex. I.
{¶ 34} Carrington responded to McClain's requests for information on May 30, 2017. It indicated that the loan was evidenced by a note dated July 2, 2009, and the loan was currently owned by Everbank. Carrington stated that it was the current servicer of the loan. Carrington enclosed copies of (1) the July 2, 2009 note; (3) McClain's application for the September 24, 2010 refinance loan; (3) disclosure documents; (4) McClain's account history; and (5) the September 24, 2010 mortgage. McClain Ex. J.
{¶ 35} McClain stated in his affidavit that he continued to have "serious concerns about Carrington's ability to demand payment from me." McClain Ex. A, ¶ 11. He sent additional letters to Carrington and BANA requesting information, including after the litigation commenced.
{¶ 36} In Carrington's February 2019 response to McClain's December 7, 2018 letter, Carrington indicated that the loan at issue had originated on September 24, 2010, with BANA as the original lender. McClain Ex. N. It also identified the various transfers of the note and mortgage and the notices sent to him. The attachments to Carrington's response included, among other documents, (1) the 2010 note and mortgage, (2) a November 10, 2016 notice from BANA to McClain stating that servicing of his loan would transfer to Carrington on December 2, 2016, and (3) a notice from Carrington dated December 16, 2016, stating that its prior notices had misstated the transfer date as October 2, 2016, and that the actual transfer date was December 2, 2016.
{¶ 37} On appeal, McClain argues that, in granting a judgment and decree of foreclosure, the trial court disregarded Carrington's "confusing and contradictory communication" to him and its "evasiveness in validating the owner of the Note and the chain of transfers and assignments." McClain also reiterates his assertion that Carrington cannot establish its right to enforce the note.
{¶ 38} On the record before us, the trial court did not abuse its discretion in granting a judgment and decree of foreclosure to Carrington. Carrington's evidence showed that McClain had been in default as of February 2017. McClain offered no evidence that he attempted to make any additional payments or took any other action to address the default. In addition, Carrington presented evidence that it has had constructive possession of the note since June 2017, permitting it to enforce the note. The trial court could have reasonably concluded that these considerations strongly favored granting a foreclosure judgment to Carrington.
{¶ 39} As for the communications regarding the loan, McClain's evidence shows that BANA notified him in November 2016 that the loan would be transferred to Carrington. In December 2016, Carrington appropriately sent McClain notices that his mortgage loan had been sold to Carrington. The December 7, 2016 notice referred to the September 24, 2010 loan, and it provided, among other information, the property address and loan numbers, both former and new. Soon thereafter, Carrington separately notified McClain that it was the new servicer of the loan, replacing BANA. Although these two notices referenced the wrong transfer date, Carrington sent an additional notice correcting this error.
{¶ 40} McClain points to the following paragraph in the December 7, 2016 notice:
** NOTE: The new creditor is not the servicer of your loan. The servicer (identified below) acts on behalf of the new creditor to handle the ongoing administration of your loan, including the collection of mortgage payments. Please continue to send your mortgage payments as directed by the servicer, and NOT to the new creditor. * * *(Emphasis sic.) This paragraph explained, in general terms, the difference between a servicer and a creditor; it did not address the specific sale of ownership. Page 2 of the notice provided the loan-specific information about the new creditor (Carrington) and new servicer (Carrington). The trial court could have reasonably concluded that nothing in the notices rendered foreclosure inequitable.
{¶ 41} McClain also points to Carrington's May 30, 2017 response to his request for validation of the debt. McClain Ex. J. As part of its reply, Carrington indicated that the July 2, 2009 note - not the September 24, 2010 note - evidenced the loan, and it enclosed a copy of the 2009 note. However, the other documentation it provided - the loan application, payment history, open-ended mortgage - all related to the September 24, 2010 loan. While the reference to and attachment of the July 2009 note in the May 2017 response could have created some confusion, the trial court reasonably found that this did not warrant denying foreclosure several years later. In short, we cannot conclude that the trial court abused its discretion when it granted a judgment and decree of foreclosure against McClain.
{¶ 42} McClain's second assignment of error is overruled.
V. Conclusion
{¶ 43} The trial court's judgment will be affirmed.
WELBAUM, P.J. and LEWIS, J., concur.