Opinion
CASE NO. 13 MA 138
05-27-2015
WELLS FARGO BANK, NA, PLAINTIFF-APPELLEE, v. KIRA RAMSEY, ET AL., DEFENDANTS-APPELLANTS.
APPEARANCES: For Plaintiff-Appellee Attorney Scott A. King Attorney Terry W. Posey, Jr. 10050 Innovation Drive, Suite 400 Miamisburg, Ohio 45342 For Defendant-Appellant Attorney Bruce M. Broyles 5815 Market Street, Suite 2 Boardman, Ohio 44512
OPINION CHARACTER OF PROCEEDINGS: Civil Appeal from Court of Common Pleas of Mahoning County, Ohio Case No. 2011CV03279 JUDGMENT: Affirmed APPEARANCES:
For Plaintiff-Appellee
Attorney Scott A. King
Attorney Terry W. Posey, Jr.
10050 Innovation Drive, Suite 400
Miamisburg, Ohio 45342
For Defendant-Appellant Attorney Bruce M. Broyles
5815 Market Street, Suite 2
Boardman, Ohio 44512
JUDGES: Hon. Gene Donofrio
Hon. Cheryl L. Waite
Hon. Mary DeGenaro
DONOFRIO, P.J.
{¶1} Plaintiffs-appellants Kira S. Ramsey and Jeffrey A. Ramsey appeal the judgment of the Mahoning County Common Pleas Court adopting a magistrate's bench-trial decision in favor of defendant-appellee Wells Fargo Bank, N.A. in its foreclosure action.
{¶2} In 2007, the Ramseys signed a note for $115,783 and executed a corresponding mortgage on 8937 Duck Creek, Salem, OH 44460 with Wells Fargo. The Ramseys defaulted and Wells Fargo filed for foreclosure on October 6, 2011. Wells Fargo's complaint specifically alleged, "Plaintiff has complied with all conditions precedent and has declared the entire balance due and payable." (10/06/2011 Complaint, ¶ 5.)
{¶3} Initially, the Ramseys did not respond and Wells Fargo moved for default judgment. However, the trial court allowed the Ramseys to file a late answer and, accordingly, denied Wells Fargo's default judgment motion. In their answer, the Ramseys alleged:
Defendants say that Plaintiff did not provide the proper notice of default and/or acceleration required by the Promissory Note and the Mortgage and that Plaintiff is not entitled to a judgment on the entire balance of the promissory note or to a decree of foreclosure of the entire mortgage.(03/28/2012 Answer, ¶¶ 9-10.)
Defendants say that plaintiff failed to comply with all the regulations of the Secretary prior to accelerating the balance due and prior to filing the complaint for foreclosure. * * *
{¶4} Wells Fargo moved for summary judgment on July 30, 2012. It attached an affidavit as to the default and the amount due. The affidavit also authenticated the attached note, mortgage, and notice of default/acceleration.
{¶5} On August 17, 2012, the Ramseys filed a brief in opposition to Wells Fargo's summary judgment motion. Because the Ramseys' loan was insured by the Federal Housing Administration, it was subject to Federal Regulations promulgated by the Department of Housing and Urban Development (HUD). If the Ramsey's failed to make payments, their note and mortgage required compliance with applicable HUD regulations before Wells Fargo could require immediate payment in full or "accelerate" the loan.
{¶6} In their brief in opposition to Wells Fargo's summary judgment motion, the Ramsey's argued that Wells Fargo failed to fulfill three conditions precedent to foreclosure. First, they argued that the notice of default/acceleration failed to set forth a specific dollar amount. Second, they argued that Wells Fargo had failed to conduct a face-to-face meeting in violation of HUD regulations and supported this assertion with an affidavit executed by Kira Ramsey. Third, they argued that Kira Ramsey's affidavit raised an issue of whether Wells Fargo made a "legitimate" effort to evaluate the Ramseys for loss mitigation, claiming that Wells Fargo had not made any response to their efforts to submit financial documents.
{¶7} Wells Fargo responded with a reply to the Ramseys' memorandum in opposition to summary judgment on September 13, 2012. First, concerning the Ramseys' argument that the notice of default/acceleration failed to provide a specific dollar amount that must be paid, Wells Fargo pointed out that the letter identified an amount of $1,996.53 that was necessary to avoid acceleration. Wells Fargo pointed out that the amount needed to bring the loan current included interest that continued to accumulate the longer the Ramseys failed to make a payment, and therefore could not be calculated in advance in the absence of knowledge of when, if ever, the Ramseys would submit a payment. Second, as for the face-to-face meeting, Wells Fargo contended that it sent the Ramseys a letter attempting to arrange such a meeting on June 22, 2011, and that the Ramseys never responded. Wells Fargo attached a copy of the letter to its reply in addition to an affidavit authenticating the letter. And third, Wells Fargo maintained that it had complied with HUD requirements for loss mitigation evaluation. In support, Wells Fargo pointed to the July 9, 2011 notice of default/acceleration wherein Wells Fargo offered the Ramseys a face-to- face meeting, the August 10, 2011 letter where Wells Fargo offered the Ramseys the services of a "Home Preservation Specialist," and collection notes evidencing Wells Fargo's numerous unanswered phone calls to the Ramseys.
{¶8} Following a hearing on the matter, the magistrate filed a decision on October 19, 2012, overruling Wells Fargo's summary judgment motion. Based upon what he perceived as conflicting affidavits, the magistrate found that genuine issues of material fact existed concerning Wells Fargo's compliance with all applicable loss mitigation regulations and whether it advised the Ramseys to default on the mortgage in order to obtain loss mitigation assistance.
{¶9} The matter proceeded to a bench trial before the magistrate on May 23, 2013. Following the trial, each of the parties submitted post-trial briefs. In its post-trial brief, Wells Fargo cited to and attached selected pages presumably taken from the transcript of the May 23, 2013 trial. The Ramseys filed a motion objecting to and seeking to have the trial court strike the portions of the trial transcript that Wells Fargo had attached to its post-trial brief.
{¶10} In a decision filed July 3, 2013, the magistrate overruled the Ramseys' motion to strike. The magistrate also entered judgment in favor of Wells Fargo finding that the Ramseys in their answer had failed to deny the performance or occurrence of conditions precedent with sufficient specificity and particularity as required by Civ.R. 9(C). Their failure to do so, the magistrate concluded, resulted in their admission of Wells Fargo's compliance. The magistrate also found that Wells Fargo had not "caused, urged or otherwise encouraged" the Ramseys to default and that their default was a voluntary decision based on their alleged financial hardship.
{¶11} The Ramseys filed objections to the magistrate's decision essentially arguing that Wells Fargo had not complied with HUD regulations, and Wells Fargo responded. In a decision filed August 6, 2013, the trial court adopted the magistrate's decision and entered judgment and decree in foreclosure on August 13, 2013. This appeal followed.
{¶12} The Ramseys raise two assignments of error. Before reaching those assigned errors, Wells Fargo has raised an issue which we will address preliminarily. Wells Fargo notes that while the Ramseys' appellate brief refers to portions of the May 23, 2013 trial transcript, the Ramseys did not obtain and file the transcript either in the trial court or in this court. Wells Fargo's argument in this regard is interesting in that it had attached select pages from the trial transcript and made reference thereto in its post-trial brief. And then it argued against the Ramseys' motion to strike the attached portions.
{¶13} The civil rules do not directly address whether a litigant can rely on only select pages of the trial transcript. As it regards matters proceeding before a magistrate, some guidance can be found in Civ.R. 53(D)(3)(b) which addresses objections to a magistrate's decision. There, it provides that "[a]n objection to a factual finding * * * shall be supported by a transcript of all the evidence submitted to the magistrate relevant to that finding * * *." (Emphasis added.) Civ.R. 53(D)(3)(b)(iii). As indicated, while that provision provides that a party objecting to a magistrate's decision submit a transcript of all the evidence, it later qualifies that requirement by explaining that the party must submit the evidence relevant to the factual finding to which the party is objecting to.
{¶14} In this case, however, the appellate rules provide more pertinent guidance. Pursuant to App.R. 9(B)(6)(j), the transcript must be certified by the court reporter as correct and state whether it is a complete or partial transcript of proceedings, and, if partial, indicate the parts included and the parts excluded. Here, Wells Fargo attached only select pages and did not include a certification. Thus, this court cannot consider any portions of the purported trial transcript in the course of our appellate review of this case.
{¶15} Nonetheless, under the facts and circumstances of this case, if Wells Fargo's attachment of only select pages of the trial transcript to its post-trial brief is considered error, it can be characterized, at most, as only harmless error. Civ.R. 61. The magistrate's entry of judgment in favor of Wells Fargo was based principally, as a matter of law, on his conclusion that the Ramseys had failed to deny the performance or occurrence of conditions precedent with sufficient specificity and particularity as required by Civ.R. 9(C). The select pages of the trial transcript which Wells Fargo attached to its post-trial brief concerned only disputed factual matters unrelated to the sufficiency of the contents of the Ramseys' answer. Therefore, they could not have contributed to the magistrate's decision and were, thus, inconsequential.
{¶16} Turning to the Ramseys' assignments of error, they raise two assignments of error.
{¶17} The Ramseys first assignment of error states:
The trial court erred in finding that Appellants waived the defense that Appellee failed to comply with the conditions precedent to the acceleration of the debt and the filing of the foreclosure complaint.
{¶18} The parties do not dispute that the Ramseys' loan and mortgage were subject to HUD regulations. Paragraph 9(d) of the mortgage stated:
Regulations of HUD Secretary. In many circumstances regulations issued by the Secretary will limit Lender's rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Agreement does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary.
{¶19} On appeal, the Ramseys contend that Wells Fargo did not comply with HUD regulations, particularly 24 C.F.R. 203.604 (Contact with the mortgagor) which requires a face-to-face interview, 24 C.F.R. 203.605 (Loss mitigation performance) and 203.501 (Loss mitigation) setting forth loss mitigation evaluation requirements, and 24 C.F.R. 203.471 (Special forbearance) and 203.614 (Special forbearance), before it sued them for foreclosure. This court has held that a foreclosing bank's compliance with such regulations is a condition precedent, subject to the pleading requirements of Civ.R. 9(C). PNC Mtge. v. Garland, 7th Dist. No. 12 MA 222, 2014- Ohio-1173, ¶ 31.
{¶20} Civ.R. 9(C) provides: "In pleading the performance or occurrence of conditions precedent, it is sufficient to aver generally that all conditions precedent have been performed or have occurred." By contrast, "[a] denial of performance or occurrence shall be made specifically and with particularity." (Emphasis added.) Id. Conditions precedent that are not denied in the manner provided by Civ.R. 9(C) are deemed admitted. Fifth Third Mtge. Co. v. Orebaugh, 12th Dist. No. CA2012-08-153, 2013-Ohio-1730, ¶ 29, citing First Financial Bank v. Doellman, 12th Dist. No. CA2006-02-029, 2007-Ohio-222, ¶ 2; see also Civ.R. 8(D); Huntington v. Popovec, 7th Dist. No. 12 MA 119, 2013-Ohio-4363, ¶ 15.
{¶21} Here, Wells Fargo's complaint specifically alleged, "Plaintiff has complied with all conditions precedent and has declared the entire balance due and payable." (10/06/2011 Complaint, ¶ 5.) This was sufficient under Civ.R. 9(C) to shift the burden to the Ramseys to assert non-compliance with specific HUD regulations. Garland at ¶ 33.
{¶22} In their answer, the Ramseys' allegations regarding non-compliance with HUD regulations were general in nature, failing to cite to any specific regulations:
Defendants say that Plaintiff did not provide the proper notice of default and/or acceleration required by the Promissory Note and the Mortgage and that Plaintiff is not entitled to a judgment on the entire balance of the promissory note or to a decree of foreclosure of the entire mortgage.(03/28/2012 Answer, ¶¶ 9-10.)
Defendants say that plaintiff failed to comply with all the regulations of the Secretary prior to accelerating the balance due and prior to filing the complaint for foreclosure. * * *
{¶23} In PNC Mtge. v. Garland, 7th Dist. No. 12 MA 222, 2014-Ohio-1173, this court evaluated the sufficiency of very similar language contained in a borrower's answer to a foreclosure complaint:
11. Plaintiff failed to comply with the regulations issued by the Secretary of Housing and Urban Development in order to require immediate payment in full and Plaintiff failed to comply with HUD regulations prior to acceleration of the amounts due under the promissory note.Id. at ¶ 34.
12. Plaintiff failed to comply with the regulations issued by the Secretary of Housing and Urban Development in order to require immediate payment in full and Plaintiff failed to comply with HUD regulations prior to acceleration of the amounts due under the mortgage.
{¶24} Like the borrower in Garland, the Ramseys here failed to state with the specificity required by Civ.R. 9(C) precisely which HUD regulations Wells Fargo failed to comply with before it filed the foreclosure action. As indicated, the effect of the failure to deny conditions precedent in the manner provided by Civ.R. 9(C) is that they are deemed admitted. Garland at ¶ 32. Thus, the effect of the Ramsey's failure to state with specificity was that it was deemed admitted by them that Wells Fargo had complied will all conditions precedent, including the HUD regulations. Garland at ¶¶ 32-35; see also Civ.R. 8(D). And, consequently, they were barred from later contesting Wells Fargo's alleged noncompliance. Garland at ¶ 35, citing Satterfield v. Adams Cty./Ohio Valley School Dist., 4th Dist. No. 95CA611, 1996 WL 655789, *5 (Nov. 6, 1996) (where defendant failed to specifically deny performance of a condition precedent in its answer pursuant to Civ.R. 9(C) compliance was deemed admitted and defendant could not subsequently raise the issue on appeal) and Huntington v. Popovec, 7th Dist. No. 12 MA 119, 2013-Ohio-4363, ¶ 16 (homeowner was barred from contesting bank's performance of conditions precedent where she failed to file an answer.)
{¶25} Lastly, under this assignment of error, the Ramseys argue that it was Wells Fargo that waived their failure to state with the specificity required by Civ.R. 9(C) precisely which HUD regulations Wells Fargo failed to comply with before filing the foreclosure action. They argue that the issue of Wells Fargo's compliance with the HUD regulations was tried to the trial court by consent and that their pleadings should be amended to conform with the evidence presented at that trial pursuant to Civ.R. 15(B).
{¶26} This court's holding in Garland precludes this argument as well. As this court held in Garland, a borrower's failure to state with the specificity required by Civ.R. 9(C) precisely which HUD regulations the lender allegedly failed to comply with before filing the foreclosure action results in the borrower's waiver from later contesting the alleged noncompliance because it is deemed admitted by the borrower that the lender had complied with the HUD regulations . Therefore, the fact that the magistrate here unnecessarily heard evidence on the issue of Wells Fargo's compliance with the HUD regulations is inconsequential.
{¶27} Furthermore, the Ramseys did not comply with Civ.R. 15(B)'s requirements:
When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment.
{¶28} "Although issues not raised in the pleadings may be treated as if they had been raised in the pleadings when tried by express or implied consent of the parties, Civ.R. 15(B) requires that the amendment must be requested by motion." (Emphasis added.) Mahone v. Conrad, 8th Dist. No. 81204, 2003-Ohio-874, ¶ 15. Here, there is no indication that the Ramseys moved to amend the pleadings to conform to the evidence. Therefore, the trial court was not required to afford relief that was not sought.
{¶29} Accordingly, the Ramseys' first assignment of error is without merit.
{¶30} The Ramseys' second assignment of error states:
The trial court's decision is against the manifest weight of the evidence.
{¶31} The Ramseys argue that the magistrate's decision and the trial court's adoption of it were against the manifest weight of the evidence because the evidence showed that Wells Fargo accelerated the loan while they were still being evaluated for loss mitigation. In support, the Ramseys cite this court's decision in Wells Fargo Bank, N.A. v. Aey, 7th Dist. No. 12 MA 178, 2013-Ohio-5381.
{¶32} In Aey, this court observed:
Both the note and mortgage provide that it is not only the right to foreclose that will be affected by the non-compliance but also the right to accelerate and require immediate payment that will be affected. We also note that if a loss mitigation evaluation is required, then the right to accelerate (which required full payment) and then obtain a judgment based upon that acceleration would not arise until after the evaluation is complete since a successful loss mitigation can include reinstatement options, which necessarily preclude a judgment for the entire balance. Under such circumstances, when reversing summary judgment due to a genuine issue of material fact regarding compliance with HUD regulations, we shall not permit the entry of summary judgment on the note to stand.Id. at ¶ 58.
{¶33} At trial, a witness for Wells Fargo testified about a demand letter that was sent from Wells Fargo to the Ramseys dated June 5, 2011, informing the Ramseys that they had 30 days to cure the default prior to acceleration of the note and mortgage. (Tr. 28-29.) So, the Ramseys had until July 5, 2011, to send certified funds to Wells Fargo to cure the default. (Tr. 30.) The Ramseys argue that the magistrate's decision and the trial court's adoption of it were against the manifest weight of the evidence because that same witness testified that the collection notes on the Ramseys' account reflected an entry on August 8, 2011, indicating that the Ramseys were denied for a loan modification program due to their debt to income ratio. (Tr. 77.)
{¶34} The Ramseys argument under this assignment of error is precluded by the conclusion proposed under their first assignment of error. As indicated under their first assignment of error, because the Ramseys failed to state with the specificity required by Civ.R. 9(C) precisely which HUD regulations Wells Fargo allegedly failed to comply with before filing the foreclosure action, they were barred, as a matter of law, from later contesting the alleged noncompliance. Therefore, this court's Aey decision is not controlling.
{¶35} Even if this court were able to reach the substantive merits of the Ramseys argument herein, it would still fail. As indicated, Wells Fargo sent the Ramseys a demand letter June 5, 2011, giving them 30 days to cure the default prior to acceleration of the note and mortgage. However, the August 8, 2011 entry in the collection notes on the Ramseys' loan account referenced by them in their argument herein concerned a secondary review of their account. The witness the Ramseys are referring to also testified about a repayment plan that Wells Fargo offered the Ramseys when they first defaulted. The witness testified that Wells Fargo offered the Ramseys a repayment plan on June 15, 2011, and that they had rejected the offer. (Tr. 42, 75-76.) Thus, Wells Fargo did offer the Ramseys a reinstatement option prior to accelerating the loan and seeking foreclosure.
{¶36} Accordingly, the Ramseys' second assignment of error is without merit.
{¶37} The judgment of the trial court is affirmed. Waite, J., concurs. DeGenaro, J., concurs.