ohio foreclosures

8/9/2019 Ohio Foreclosures

1/13

UPDATE: OHIO FORECLOSURE CASES: LENDERS BEWARE

By Stephen R. Buchenroth and Gretchen D. Jeffries

In our previous article, two foreclosure cases from the United Stated Distr

Court for the Northern District of Ohio were discussed because of the stir they cre

among some real estate lawyers: In re Foreclosure Cases, 2007 WL 3232430(N.D.Ohio, Oct. 31, 2007) andIn re Foreclosure Actions, 2007 WL 4034554 (N.D

Nov. 14, 2007) (collectively, the Northern District Foreclosure Cases). The cou

both cases dismissed complaints to foreclose on mortgages because the plaintiff le

failed to submit to the court a copy of the assignment of the note and mortgageevidencing the plaintiffs status as holder of the note and mortgagee under the mo

One Ohio case that was decided contemporaneously with the Northern DisForeclosure Cases but not discussed in the previous comment was In re ForeclosuCases, 521 F.Supp.2d 650 (S.D. Ohio, 2007). This decision from Judge Thomas

of United Stated District Court for the Southern District further bolstered the deciissued by Judge Christopher A. Boyko and Judge Kathleen McDonald OMalley.

In re Foreclosure Cases involved 27 foreclosure actions filed in the South

District of Ohio, in which the court questioned whether the plaintiff lenders had stwhen the foreclosure complaint was filed and whether the court had subject matte

jurisdiction to hear the cases at the time the foreclosure complaint was filed. 521

F.Supp.2d at 652. In a sentiment that would be echoed through subsequent decisithe Southern District of Ohio, Judge Rose stated:

this Court has the responsibility to assure itself that the foreclosure plain

have standing and that subject-matter-jurisdiction requirements are met at

the complaint is filed. Even without the concerns raised by the documentsplaintiffs have filed, there is reason to question the existence of standing a

jurisdictional amount. See Katherine M. Porter,Misbehavior and Mistake

Bankruptcy Mortgage Claims 3-4 (November 6, 2007), University of IowaCollege of Law Legal Studies Research Paper Series Available at SSRN: h

ssrn. com/ abstract- 1027961 ([H]ome mortgage lenders often disobey thand overreach in calculating the mortgage obligations of consumers.... Ma

the overcharges and unreliable calculations ... raise the specter of poorrecordkeeping, failure to comply with consumer protection laws, and mass

consistent overcharging.) Id at 654.


2/13

Judge Rose went on to acknowledge:

This Court is well aware that entities who hold valid notes are entitled to rtimely payments in accordance with the notes. And, if they do not receive payments, the entities have the right to seek foreclosure on the accompany

mortgages. However, with regard the enforcement of standing and other

jurisdictional requirements pertaining to foreclosure actions, this Court is iagreement with Judge Christopher A. Boyko of the United States District

for the Northern District of Ohio who recently stressed that the judicial int

of the United States District Court is Priceless. Id at 655.

Judge Rose decided four more cases in the month of November 2007, all of which

the same holding from the above referenced case and provided the plaintiff lender

days to set forth that the plaintiff lender had standing and the court had jurisdictiontime the foreclosure complaint was filed. HBC Bank USA v. Rayford, 2007 WL 4

(S.D.Ohio, November 21, 2007) (To show standing in a foreclosure action, the pla

must show that it is the holder of the note and the mortgage at the time the complafiled.)MidFirst Bank v. Davenport,2007 WL 4246271 (S.D.Ohio, November 29,

NovaStar Mortg., Inc. v. Grooms,2007 WL 4190796 (S.D.Ohio, November 21, 2

NovaStar Mortg., Inc. v. Riley, 2007 WL 4190802 (S.D.Ohio, November 21, 2007

Since the Northern District Foreclosure Cases and Judge Roses decisions

Southern District of Ohio, little in the foreclosure arena has changed in the federa

courts in Ohio. However, in the aftermath, some pundits have questioned whethecases would have been dismissed had the complaints been filed in state court. Of

whether in federal or state court, standing of the plaintiff to file suit is paramount.order to satisfy standing requirements in Ohio state court, a party must establish th

the real party in interest. State ex rel. Tubbs Jones v. Suster(1998), 84 Ohio St.3d

(If a party is not the real party in interest, the party lacks standing to prosecute theaction).

Several Ohio appellate court decisions decided prior to the federal court dediscussed above appear to give the foreclosing lender some latitude in not attachin

assignment documents to the complaint. Nevertheless, it seems relatively clear thbefore it is entitled to judgment the plaintiff lender must be able to prove holder st

the note and mortgage.

A 2007 case from an Ohio appellate court addresses the question as to whe

ownership of the note and mortgage at the time of the filing of the complaint is es


3/13

mortgage holder, not plaintiff lender. Id at 462. Plaintiff lender responded that Crequires only a short and plain statement of the relief sought and so its statement t

the current owner of the note and mortgage must be taken as true. Id. In responseplaintiff lender filed a motion for summary judgment declaring that because defenproperty owner defaulted on the loan, plaintiff lender was entitled to acceleration

loan and foreclosure. Id at 463. Lender plaintiff attached the affidavit of its vice-

president stating that the affiant had personal knowledge of the account, which waher supervision, that the account was in default and that the copies of the note and

mortgage were true and accurate copies. Id. Defendant property owner argued tha

exhibits show Check 'n Go as the mortgage holder and that the affidavit does not s

how or when plaintiff lender obtained the note and mortgage. Id. Defendant propowner attached exhibits from the county recorder's office showing an assignment

note and mortgage to The Provident Bank (assignment in March 2001, recorded in

2001) and to Long Beach Mortgage Company (recorded in July 2001), and statingthe recorder's office had no evidence of the assignment to plaintiff lender. Id.

The appellate court reversed the trial courts granting of a summary judgment plaintiff lender; however, the reason for the reversal was not because the plaintiff

failed to establish that it was the real party in interest. The Court explained:

Appellant cites cases that require a lawsuit to be brought in the name of thparty in interest. Appellant argues that the record does not show [plaintiff

lender]'s interest in the note and mortgageAs long as a set of facts consi

with the complaint would allow plaintiff recovery, the court shall not granmotion to dismiss.Beretta at 5. Here, [plaintiff lender]'s complaint state

is the owner and holder of the promissory note and mortgage. It is wellestablished that the real party in interest in such a case is the current

noteholder/mortgage holder, which, due to the possibility of assignment, c

different from the original holder. See Conrad v. Rarey (1931), 125 Ohio 331-332, 181 N.E. 444. See, also, 1970 Staff Note to Civ.R. 17(A). Under

aforestated premises behind motions to dismiss, we must thus presume tha

plaintiff lender's statement is true. If this statement is presumed true, then lender is considered to be the real party in interest for purposes of the pretr

motion to dismiss stage of the proceedings. As such, the trial court correctrefused to grant the motion to dismiss at a time before the allegations of th

complaint were required to be proven. Accordingly, this assignment of erroverruled. Id at 463-64.

However, the court did find that defendant property owners evidence that she


4/13

mortgage to two different companies in 2001 and noted that she found no showing assignment to [plaintiff lender]. She began receiving notices from

entirely different entity seeking to collect on the mortgage during the courthe proceedings, further confusing the issue of the real party in interest. [Plender] submitted an affidavitmerely stating that the account is under th

supervision of the affiant and the account is in default. The affidavit did no

mention how, when, or whether [plaintiff lender] was assigned the mortganote. The trial court's grant of summary judgment and denial of the right to

third-party complaint defeated the purpose of Civ.R. 17(A). That is, [defen

property owner] is not protected from multiple judgments on the same sub

matter, and she may be precluded from asserting various counterclaims du judgment. Id at 467.

Another Ohio decision did permit an assignment post-filing of the compladeterminate in establishing that the lender plaintiff was the real person in interest.

of New York v. Stuart,2007 WL 936706 (Ohio App. 9 Dist., March 30, 2007). De

property owners appealed the trial courts award of summary judgment to plaintifaverring that plaintiff lender was not a party in interest at the time the complaint w

and that the assignment from America's Wholesale Lender to plaintiff lender, whi

reduced to writing and filed in the trial court after plaintiff lender filed its compla

foreclosure, was an insufficient means of advising the court and the parties that [plender] was a party in interest. Id at *1. The appellate court disagreed, affirming

courts summary judgment on behalf of plaintiff lender. Id. The court stated that

action will not be dismissed [for lack of standing to prosecute the action] until areasonable time has been allowed for the real party in interest to ratify the

commencement of the action or to be either joined or substituted as a party. Id aThe court further explained:

In their memorandum opposing [defendant property owners] motion forsummary judgment, [defendant property owners] argued that [plaintiff len

not have a valid assignment of their mortgage when [plaintiff lender] filed

complaint. [Defendant property owners] also pointed out the fact that theassignment from America's Wholesale Lender to [plaintiff lender] had an

effective date of more than five months after [plaintiff lender] filed its comfor foreclosurethis Court has found case law to support appellee's claim

filing the assignment with the trial court before judgment was entered wassufficient to alert the court and appellants that [plaintiff lender] was the re

in interest. (citations omitted)In the present matter, [defendant property

have failed to show that they were prejudiced by the assignment. In additi


5/13

Ohio appellate cases clearly reject that assignments made after the trial court hearsuffice to establish the plaintiff lender as the real property in interest. DLJ Mtge.

Inc. v. Parsons,2008 WL 697400 (Ohio App. 7 Dist., Mar 13, 2008). The appellinDLJ Mtge. Capital compared the case at hand to Washington Mutual (discussedearlier) and said:

There is no document, on the record, showing an assignment to [plaintiff lThe only evidence on the record of an assignment to [plaintiff lender] is th

affidavit of Jon Menz. However, the affidavit fails to mention how, when,

whether [plaintiff lender] was assigned the mortgage and note. As in Wash

Mutual and First Union, the evidence in this case likewise did not establis[plaintiff lender] is the owner of the note and mortgage. Attached to appel

appellate brief is a copy of an assignment of the note and mortgage from O

Servicing LP to [plaintiff lender]. The file stamp on the assignment showwas recorded on February 22, 2007. But the trial court granted summary ju

on November 22, 2006. Although this assignment appears to establish [pla

lender]as the party in interest, there is no evidence of this assignment on threcord. In fact, evidence of this assignment could not have existed at the t

court granted summary judgment because it had not yet occurred. Hence, follows that the issue of whether [plaintiff lender] held a valid and secured

after Olympus assigned the mortgage could not have been determined. Id

The appellate court found that the trial court should have denied summary

judgment because a genuine issue of material fact existed as to whether or not plalender was the real party in interest since there was no evidence on the record of th

assignment. See alsoEverhome Mtge. Co. v. Rowland,2008 WL 747698 (Ohio ADist., Mar. 20, 2008) (Court found that it could not consider a lender plaintiffs ev

introduced on appeal of an assignment post-filing of the foreclosure complaint in

establish that lender plaintiff was the holder of the note and mortgage because areviewing court cannot add matter to the record before it which was not part of the

courts proceedings.)

While not yet the subject of reported appellate decisions, numerous Ohio t

courts, forced with a growing docket of foreclosure cases and organized efforts bynumerous public officials to deal with what is being referred to as Ohios foreclo

crisis, including the Governor, the Attorney General, the Chief Justice and the OState Bar Association, are dismissing or refusing to proceed with foreclosure actio

the plaintiff does not attach a copy of the documents showing holder status of the

and mortgage.


6/13

Due to the dramatic increase of foreclosure actions filed and the number ofiled by parties other than the original mortgagee and note holder, the judg

the common pleas court general division have determined that when aforeclosure case is filed the use of a Certificate of Readiness is necessary tthat substantial justice be done and to ensure judicial efficiency. Current

circumstances also require a modification of the time in which to file the

Preliminary Judicial Report, shortening the time to file such preliminary jureport from sixty days after filing the complaint to contemporaneous with

filing of plaintiffs complaint.

The Order amended the rules of practice and procedure of the court to incothe new timing of the filing of the Preliminary Judicial Report, which serves as ev

of the state of the record title of the real property, and the requirement of a Certific

Readiness, which serves to demonstrate that the plaintiff is the real party in interethe matter is ready to proceed against all necessary parties.

The Certificate of Readiness requires counsel for the plaintiff to certify, amother things, that: (i) should the plaintiff be different from the designated owner o

original note and mortgage due to an assignment, copies of that assignment, andintervening assignments of such note and mortgage are attached to the complaint,

similarly reflected within the preliminary judicial report; (ii) should the plaintiff bdifferent from the designated owner of the original note and mortgage due to a nam

change or corporate merger, copies of said name change or merger are attached to

complaint, or an affidavit attesting to the name change or merger along with the dthe name change or merger is also attached to the complaint; and (iii) all such

assignments, name changes, or corporate mergers referred to above, and which aron the preliminary judicial report, bear a date prior to the filing date of the compla

this matter. The form of certificate of readiness can be seen here.

The Northern District Foreclosure Cases and subsequent cases have cause

not just in Ohio. We are beginning to see the ripple effects in other jurisdictions.

effects are evident inIn re Nosek,2008 WL 1899845 (Bkrtcy.D.Mass., Apr. 25, 2which the Bankruptcy Court awarded Rule 9011 sanctions against the lender for f

representing that it was the holder of the note and mortgage, when the lender had note and mortgage five days after closing. The court found:

Throughout most of these proceedings, Ameriquest and its attorneys repre

that Ameriquest was the "holder" of the note of the note and

mortgageUnfortunately the parties' confusion and lack of knowledge, or


7/13

who do not service the mortgage do not have standing to pursue motions for other actions arising from the mortgage obligation. Schwartz, 366 B.R.

The Court has had to expend time and resources, as have debtors alreadyburdened in their attempts to pay their mortgages, because of the carelessnthose in the residential mortgage industry and the bombast this Court and o

have encountered when calling them on their shortcomings.In re ForeclosCases,2007 WL 3232430 at *3, n. 1. Id at *3-4.

The court went on to find the lenders actions sanctionable despite the lenders lac

intent to mislead the property owner and the court:

Virtually all of parties argue that there was no intent to mislead the Court.

Because the standard to be applied is an objective one, the Court may quic

dispatch this argument. Intent is irrelevant. The argument that the assignmthe note and mortgage was a matter of public record and therefore the Deb

knew or should have known of Norwest's identity is relevant but disingenu

indeed even arrogant, since many of these same parties asserting this positallege they had no way of knowing about the assignment. They seek to bin

Debtor to one standard and themselves to a much lower one[This Court]not tolerate a lender's or servicer's disregard for the rules that govern litiga

including contested matters, in the federal courts. It is the creditor's responto keep a borrower and the Court informed as to who owns the note and m

and is servicing the loan, not the borrower's or the Court's responsibility to

out the truth. Id at *5.

The judicial admonishment of lenders with sloppy housekeeping persists. likely to see more and more ripples outside of Ohio as the number of foreclosures

continues to increase.

******************

Stephen R. Buchenroth is a partner in the Columbus office of Vorys, Sater, SeymoPease LLP and a former head of the firms real estate and commercial practice gr

is a former Chairman of the Real Property Section of the Ohio State Bar Associatia member of the American College of Real Estate Lawyers. Gretchen Jeffries is a

associate in the Columbus office of Vorys, Sater, Seymour and Pease LLP and a mof its commercial and real estate group. Ms. Jeffries is a graduate of The Ohio Sta

University and The University of Texas School of Law.


8/13


9/13


10/13


11/13


12/13


13/13

ohio foreclosures

Documents