[Cite as Fed. Home Loan Mtge. Corp. v. Schwartzwald , 194Ohio App.3d 644, 2011-Ohio-2681.]

IN THE COURT OF APPEALS FOR GREENE COUNTY, OHIO

FEDERAL HOME LOAN MORTGAGE : CORP., Appellee, : C.A. CASE NO. 2010 CA 41

v. : T.C. NO. 09CV4380 SCHWARTZWALD et al., : (Civil appeal from Common Pleas Court) Appellants. :

:

. . . . . . . . . . O P I N I O N

Rendered on the 3 rd day of June , 2011.

. . . . . . . . . . Scott A. King, and Terry W. Posey Jr., for appellee.

Andrew M. Engel, for appellants.

. . . . . . . . . . F ROELICH , J. {¶ 1} Duane and Julie Schwartzwald appeal from a judgment of the Greene County Court of Common Pleas, which granted summary judgment to the Federal Home Loan Mortgage Corporation (“Freddie Mac”), deni ed the Schwartzwalds’ cross-motion for summary judgment, and entered a judg ment and decree of foreclosure. {¶ 2} The Schwartzwalds claim that Freddie Mac did not establish that it was the holder of the note and assignee of the mortga ge, that Freddie Mac lacked standing to2 institute the foreclosure action, and that the tr ial court should not have granted Freddie Mac the equitable relief of foreclos ure due to unclean hands. For the following reasons, the trial court’s judgment will be affirmed.

I {¶ 3} In November 2006, Duane and Julie Sc hwartzwald purchased the property located at 2202 East Spring Valley Painters Road in Xenia, Ohio. To finance the purchase, they executed a note in favor of Legacy Mo rtgage in the amount of $251,250 and signed a mortgage granting Legacy Mortgage a security interest in the property. {¶ 4} According to Julie Schwartzwald’s a ffidavit in response to Freddie Mac’s summary-judgment motion, the couple began to have concerns during the summer of 2008 that Mr. Schwartzwald might be laid o ff from his employment. The Schwartzwalds contacted Wells Fargo regarding their loan. (Mrs. Schwartzwald di d not indicate whether Wells Fargo was contacted as the loan servicer or the owner of the note.) Mr. Schwartzwald obtained a new job in Indiana in September 2008, and they placed their home on the market. By early 2009, they could no long er afford the mortgage payments, and they spoke to Wells Fargo about a loan modification or a short sale of the property. In April 2009, the Schwartzwalds had a buyer for a short sa le of the property; the closing was set for June 2009 to allow Wells Fargo sufficient time to review the proposed sale. Mrs. Schwartzwald repeatedly spoke with We lls Fargo representatives and received no indications that the request for a short sale would be denied. {¶ 5} On April 15, 2009, Freddie Mac filed a for eclosure action, alleging that it was the holder of a note, that the note was secure d by a mortgage, and that the Schwartzwalds3 had defaulted on the note and mortgage. 1 Freddie Mac sought judgment on the note in the amount of $245,085.18, with interest at the rate of 6.25 percent, as well as any court costs

and advances. Freddie Mac also sought a finding that the mortgage was a valid first lien upon the real estate and an order that the mo rtgage be foreclosed and the property sold. {¶ 6} Freddie Mac attached to the complaint as Exhibit A a purported copy of the mortgage. The mortgage identified the Schwartzwalds as the borrowers and Legacy Mortgage as the lender. The mortgage was recorded on December 4, 2006. A legal description of the property was attached to the complaint as Exhibit B. No copy of the note was attached; although the comp laint alleged that Freddie M ac was the holder of the note, Freddie Mac further alleged that “a copy of [the note] is currently unavailable.” {¶ 7} On April 24, 2009, Freddie Mac filed a “N otice of Filing of Note,” which attached a purported copy of the note signed by the Schwartzwalds. The note reflected that the Schwartzwalds, as borrowers, agreed to pay $251,250 to Legacy Mortgage, the lender. The note established a 30-year term, to be repa id with interest at a rate of 6.25 percent. Payments were to be made to Wells Fargo Home Mortgage, the loan servicer. The final page was blank except for two stamped appa rent indorsements. The first stated:

“Without Recourse “ Pay to the Order of “Wells Fargo Bank, N.A.” The indorsement was signed by Joan M. Mills, Vice President. The second stated:

1 Freddie Mac also named the Greene County Treasurer, the Ohio Department of Job and Family Services (“ODJFS”), and Wells Fargo Bank as party-defendants due to the possibility that those parties may claim an interest in the property. ODJFS subsequently indicated that it had no interest in the property.4 “Pay to the Order of

“ * * * “Wells Fargo Bank, N.A.

“Without Recourse “Legacy Mortgage” This indorsement was signed by Lynette Hanson, Vice President. 2 {¶ 8} On June 17, 2009, Freddie Mac filed a “Notice of Filing Assignment of Mortgage.” The notice attached an assignme nt of mortgage, dated May 15, 2009 (after the complaint was filed), and r ecorded on May 27, 2009, which tran sferred the Schwartzwalds’ mortgage from Wells Fargo Bank to Freddie Mac. {¶ 9} On July 6, 2009, Freddie Mac moved fo r a default judgment against the

Schwartzwalds. The trial cour t denied the motion, because “[a]n examination of the file in this action reveals that the mortgage file d with the Greene Count y Recorder’s Office on December 4, 2006, in Volume 2648, Page 149 was recorded with an incorrect legal description.” The court granted leave to Freddi e Mac to file an amended complaint in order to add a count for reforming the mortgage to match the legal descri ption approved by the Greene County Tax Map Department. Freddie Mac subsequently file d an approved legal description, but indicated that it did not need to amend the complaint. {¶ 10} According to Mrs. Schwartzwald, in September 2009, the Schwartzwalds received a letter from Wells Fargo denying their request for a short sale. Mrs.

Schwartzwald stated in her a ffidavit, “At no time prior to th e receipt of the letter denying

2 The stamped name is difficult to read, but it appears the last name is “Hanson.”5 approval of the short sale did Wells Fargo ever give me the impression that my short sale request would be denied. * * * It was only when we received the Court’s Judgment Entry of September 29, 2009 [denying the motion for default judgment], did I realize that I had been misled by Wells Fargo.” {¶ 11} In October 2009, the Schwartzwalds moved to file an answer out of time. The motion was supported by an affidavit by Ju lie Schwartzwald, desc ribing Wells Fargo’s dilatory conduct in addr essing the Schwartzwald s’ request that Wells Fargo approve a short sale of their property and sta ting that Wells Fargo had told the Schwartzwalds “don’t worry

about” the foreclosure action. The Schwartzwa lds also attached a proposed answer, which asserted a general denial and raised several defenses, including that Freddie Mac lacked standing, was not the real party in interest, and had “unclean hands.” {¶ 12} Freddie Mac renewed its motions for default judgment and, separately, moved for summary judgment. Freddie M ac’s summary-judgment motion was supported by an affidavit by Xee Moua, Vice President of Loan Documentation for Wells Fargo, the servicing agent. {¶ 13} On December 2, 2009, the trial court notifie d the parties that “[a] review of the file in this action reveals an item missing and needed in order to issue a decision on the Motion for Default Judgment filed by Plainti ff on July 6, 2009.” The court ordered Freddie Mac to file, within 30 days, “the assignment that evidences the transfer of the original mortgage from Legacy Mortgage to its a ssignee and any subsequent assignments.” {¶ 14} On December 14, Freddie Mac filed two assignments of mortgage: (1) from Legacy Mortgage to Wells Fargo, dated November 27, 2006, and (2) from Wells Fargo to6 Freddie Mac, dated May 15, 2009. On the same date (December 14), the court filed an agreed entry granting leave to the Schwartzwalds to file an untimely answer. Freddie Mac withdrew its pending motion for summary judgment. The answer was filed on December 18, 2009. {¶ 15} In February 2010, Freddie Mac filed a new motion for summary judgment, supported by an affidavit from Herman John Kennerty, Vice President of Loan Documentation for Wells Fargo, the servicing agen t. Kennerty stated that he had custody of the Schwartzwalds’ account, that the records we re compiled near the time of occurrence by persons with knowledge of the events, that the records were kept in the course of Wells Fargo’s regularly conducted busin ess, and that it was the regular practice to keep such

records. {¶ 16} Kennerty further averred, “Plaintiff is the holder of the note and mortgage which are the subject of the within foreclosur e action,” and he authen ticated copies of the original note and mortgage, which were attached. Kennerty also authenticated an assignment of the mortgage from Wells Fargo to Freddie Mac, which “accounts for

documented evidence that Plaintiff is the holde r of the note and mortgage * * *.” Kennerty stated that the note and mortgage were in de fault, that payment was due for January 1, 2009, and all subsequent payments, and that plaintiff had elected to accelerate the balance. Finally, Kennerty indicated that the princi pal balance of $245,085.18 was due with interest from December 1, 2008, at a rate of 6.25 percent per annum, as well as advancements for taxes, insurance, and other expenses. {¶ 17} The Schwartzwalds opposed Freddie Mac’s summary-judgment motion on7 several grounds. First, they claimed that Fr eddie Mac had not established that it was the holder of the note and the mortgagee by a ssignment. They emphasized that the note attached to Kennerty’s affidavit did not cont ain any indorsements on the note itself or any allonges. Similarly, the Schwartzwalds argued that Kennerty’s affidavit did not explain “what right, if any, Wells Fargo bank had to assign the mortgage. On the face of the documents attached to Mr. Kennerty’s affidavit, Legacy Mortgage is still the mortgagee under the Mortgage.” {¶ 18} Second, the Schwartzwald s claimed that Kennert y’s affidavit did not establish the amount that was due, because “all Mr. Kennerty can accomplish through his affidavit is to authenticate business records, and establish them as such for purposes of hearsay exclusion. He cannot simply testif y to the content of those records.” The

Schwartzwalds further claimed that because Freddie Mac did not hold the note and mortgage, it lacked standing to prosecute the case. Finally, the Schwartzwalds argued that Freddie Mac’s conduct, through its servicing agent, constitu ted unclean hands and barred relief in foreclosure; they supported this ar gument with Julie Schw artzwald’s affidavit describing her interactions with Wells Fargo regarding the proposed short sale of the property. {¶ 19} In addition to opposing Freddie Mac’ s motion, the Schwartzwalds sought summary judgment on the ground that Freddie Mac lacked standing to prosecute its claim. They argued that the trial court should dis miss the action without pr ejudice on that basis. {¶ 20} Freddie Mac responded to the Sc hwartzwalds’ opposition memorandum, stating that it was the holder of the note via a blank indorsement affixed to the back of the8 note. It stated that it was assigned the mortgage, as indicated in its assignments filed on December 14, 2009, as Exhibit A to the notice of filing assignment of the mortgage chain. Freddie Mac further argued that Kennerty’s affi davit did not violate the hearsay rule, that it implicitly established Kennerty’s personal knowledge, and that th e affidavit was sufficient to

establish the Schwartzwalds’ default. Although Freddie Mac argued that it need not produce the loan history to support its motion for summary judgment, it provided a copy of the Schwartzwalds’ payment history as an attachment to a supplemental affidavit from Jennifer Payne, Vice President of Loan Do cumentation. As to the Schwartzwalds’ unclean-hands argument, Freddie Mac stated that it was permitted to advance its own interests and to enforce its contractual rights. {¶ 21} The court scheduled a hearing before a magistrate for April 1, 2010, on the cross-motions for summary judgment. The reco rd does not contain a transcript of that hearing, and it is unclear from the record what occurred. {¶ 22} In April 6, 2010, Freddie Mac again filed an assignment of mortgage chain. {¶ 23} On June 1, 2010, the trial court grante d Freddie Mac’s motion for summary judgment and denied the Schw artzwalds’ motion for summary judgment. The trial court found that the allegations contai ned in Freddie Mac’s complain t and the affidavit in support of its summary-judgment motion were true and that the Schw artzwalds had defaulted on the note and mortgage. The court entered j udgment on the note in the amount of $245,085.18, plus interest and advancements, and ordered that the equity of redemption be foreclosed and the property sold. The court did not address the various le gal arguments raised by the parties.9 {¶ 24} The Schwartzwalds appeal from the trial court’s judgment, claiming that the trial court erred in granting Freddie Mac’s motion for summary judgment and in denying their motion for summary judgment.

II {¶ 25} We begin with the Schwartzwalds’ cl aim that the trial court should have denied Freddie Mac’s summary-judgment moti on. The Schwartzwalds state that Freddie Mac, in relying on Kennerty’s affidavit, failed to meet its burden of proof for four reasons. First, they claim that Freddie Mac failed to establish that it was the holder of the note. Second, they argue that Freddie Mac lacked standing to ins titute the foreclosure action. Third, they contend that genuine issues of material fact existed as to whether Freddie Mac had unclean hands. Finally, the Schwartzwalds assert that Kenne rty did not aver that he had reviewed their account, did not attach the loan-payment hist ory, and provided only legal

conclusions. {¶ 26} Summary judgment should be granted onl y if no genuine issue of material fact exists, the moving party is entitled to judgment as a matter of law, and reasonable minds can come to but one conclusion, which is a dverse to the nonmoving party. Civ.R. 56; Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.2d 64, 66. An appellate court reviews summary judgments de novo, meanin g that we review such judgments independently and without deference to the trial c ourt’s determinations. Koos v. Cent. Ohio Cellular, Inc. (1994), 94 Ohio App.3d 579, 588. {¶ 27} Upon a motion for summary judgment, the moving party bears the initial burden of showing that no genuine issue of material fact exists for trial. Dresher v. Burt10 (1996), 75 Ohio St.3d 280, 292-293. Once the m oving party satisfies its burden, the nonmoving party may not rest upon th e mere allegations or denial s of that party’s pleadings. Id.; Civ.R. 56(E). Rather, the burden then shifts to the nonmoving party to respond, with affidavits or as otherwise pe rmitted by Civ.R. 56, setting forth sp ecific facts that show that there is a genuine issue of mate rial fact for trial. Id. Throughout, the evidence must be

construed in favor of th e nonmoving party. Id. {¶ 28} With that standard in mind, we turn to the Schwartzwalds’ arguments.

A. Kennerty’s Affidavit {¶ 29} Civ.R. 56(C) provides: “Su mmary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulati ons of fact, if any, timely file d in the action, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. No evidence or stipulation may be considered except as stated in this rule.” Although courts are ge nerally confined to the types of evidence identified in Civ.R. 56(C) in ruling on a summary-judgment motion, th e trial court may cons ider other types of evidence if there is no objection on th at basis by the opposing party. State ex rel. Gilmour Realty, Inc. v. Mayfield Hts ., 122 Ohio St.3d 260, 2009-Ohio-2871, ¶ 17. {¶ 30} Civ.R. 56(E) sets forth the requirement s for affidavits. It states that supporting and opposing affidavits “shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated in the affidavit. Sworn or certified copies of all papers or parts of papers referre d to in an affidavit shall be attached to or served with the11 affidavit.” Civ.R. 56(E). “The requirement of Civ.R. 56(E) that sworn or certified copies of all papers referred to in the affidavit be attached is satisfied by attaching the papers to the affidavit, coupled with a statement therei n that such copies are true copies and reproductions.” State ex rel. Corrigan v. Seminatore (1981), 66 Ohio St.2d 459, 467;

Cincinnati Bar Assn. v. Newman , 124 Ohio St.3d 505, 2010-Ohio-928, ¶ 7. {¶ 31} In filing its motion for summary judgment in February 2010 (having withdrawn its previous motion), Freddie Mac relied upon Kennerty’ s affidavit and the exhibits attached thereto. Kennerty’s affida vit does not state that he had reviewed the

documents in the Schwartzwalds’ account. However, personal knowle dge may be inferred

from the contents of an affidavit. Bush v. Dictaphone Corp ., Franklin App. No. 00AP1117, 2003-Ohio-883, ¶ 73; CitiMortgage, Inc. v. Potvin , Stark App. No. 2010CA112, 2010-Ohio-6561, ¶ 45; Beneficial Mtge. Co. v. Grover (June 2, 1983), Seneca App. No. 13-82-41. Although Kennerty’s affidavit is terse, the information regarding the Schwartzwalds’ account coupled with Kennerty’s statement that he had custody of the

Schwartzwalds’ account was sufficient to de monstrate personal knowledge of the account’s

contents. 3 And at no point during the summary-judg ment procedure did the Schwartzwalds

claim that the account in formation was incorrect. {¶ 32} Kennerty’s affidavit further stated that an accurate reproduction of the mortgage was attached to the affidavit as Exhibit B and that “[a] copy of the Assignment,

3 In a footnote in their reply brief, the Schwartzwalds state that Kennerty was a “robo-signer” of documents for Wells Fargo. Citing a May 2010 deposition of Kennerty posted on http://stopforeclosurefraud.com/depositions/, they assert that Kennerty routinely signed 50 to 150 documents per day and verified only the date on the document before signing. While this information may be true and raises other issues, it is not properly before us; it was not raised in the trial court and cannot be considered on appeal of the summary judgment.12 which accounts for documented evidence that th e Plaintiff is the holder of the note and mortgage * * * is attached hereto as Exhibit C.” The mortgage attached to Kennerty’s affidavit indicated that the Schwartzwalds executed a mortgage in favor of Legacy Mortgage. Exhibit C indicated that the mortgage was later assigned to Freddie Mac by Wells Fargo. Kennerty did not refer to or att ach the assignment from Legacy Mortgage to Wells Fargo, dated November 27, 2006, which woul d evidence Wells Fargo’s right to assign the mortgage. {¶ 33} Nevertheless, the trial court did not err in considering the entire mortgage chain. The assignments of mortgage from Legacy to Wells Fargo and from Wells Fargo to

Freddie Mac were filed with the trial court, at the cour t’s request, on December 14, 2009. The assignments had been notarized and were self-authenticating. Evid.R. 902(8). The Schwartzwalds did not object to or contest the accuracy of those assignments. The assignment-of-mortgage chain was again f iled on April 6, 2010, after the hearing on the cross-motions for summary judgment , without any apparent objection.

B. Freddie Mac’s Right to Enforce the Note {¶ 34} We turn to whether Freddie Mac me t its burden on summary judgment of showing that it was the holder of the note and the assignee of the mortgage. Freddie Mac argues that even if it were not the holder of the Schwartzwalds’ note, it was a nonholder in possession of the instrument with the rights of a holder. Thus, Freddie Mac argues that it

was entitled to enforce the note and mo rtgage in this foreclosure action. {¶ 35} R.C. 1303.31(A) identifies three classe s of persons who are “entitled to enforce” an instrument, such as a note: (1) the holder of th e instrument, (2) a nonholder in13 possession of the instrument who has the righ ts 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). {¶ 36} With respect to negotiable instruments, “holder” means either: {¶ 37} “(a) If the instrument is payable to bearer, a person who is in possession of the instrument; {¶ 38} “(b) If the instrument is payable to an identified person, the identified person when in possession of the instrument.” R.C. 1301.01(T)(1). {¶ 39} “An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.” R.C. 1303.22(A). Th e transfer of an instrument vests in the transferee any right of the transferor to enforce the instrument. R.C. 1303.22(B). {¶ 40} “Negotiation” is a particular type of transfer. Specifically, “negotiation” means “a voluntary or involuntary transfer of possession of an instrument by a person other than the issuer to a person who by the transfer becomes the holder of the instrument.” R.C. 1303.21(A). “Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation re quires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.” R.C. 1303.21(B). {¶ 41} Here, Kennerty stated that Freddie Mac was the “holder” of the Schwartzwalds’ note and mortgage and that “accu rate reproductions of the originals as they exist in Plaintiff’s files are attached hereto * * *.” The note attached to Kennerty’s affidavit14 indicated that the Schwartzwald s executed a note in favor of Legacy Mortgage in the amount of $251,250. However, nothing on the note refl ected that the note was subsequently negotiated by Legacy Mortgage. There ar e no indorsements on the note and the copy

attached to the affidavit did not include an allonge. Thus, although Freddie Mac is apparently now in possession of the note, the l ack of indorsements suggests that Freddie Mac received the note through transfer, but not nego tiation. Accordingly, the note, on its face, contradicts Kennerty’s statement that Fre ddie Mac was the “holder” of the note. {¶ 42} Even if we were to consider the alleged allonge, which was attached to the copy of the note filed in April 2009, the final pa ge is insufficient to prove that Freddie Mac was the holder of the note. The final page is blank, other than two indorsements. There is nothing that identifies the page as an allonge, nor does the page identify the note to which that page was allegedly affixed. And the two stamped indorsements app ear to be in reverse order. The first indorsement appears to be a blank indorsement from Wells Fargo to Freddie Mac, and the second appears to be an indorsement from Legacy Mortgage to Wells Fargo. Neither of the indorsements is dated. {¶ 43} We addressed a similar occurrence in HSBC Bank USA, N.A. v. Thompson , Montgomery App. No. 23761, 2010-Ohio-4158, as follows: {¶ 44} “The first allonge is endorsed from Delta to ‘blank,’ and the second allonge is endorsed from Fidelity to De lta. If the endorsement 4 in blank were intende d to be effective, the endorsement from Fidelity to Delta should have preceded th e endorsement from Delta to ‘blank’ because the original promissory note is made payable to Fi delity, not to Delta.

4 The Uniform Commercial Code uses “indorsement,” the alternate spelling.15 Delta would have had no power to endorse the note before receiving the note and an endorsement from Fidelity. {¶ 45} “HSBC contends that the order of the allonges is immaterial, while Thompson claims that the order is critical. At the oral argument of this appeal, HSBC appeared to be arguing that the order of all onges would never be material. This is easily refuted by the example of two allonges, one containing an assignment from the original holder of the note to A, and the other containi ng an assignment from the original holder of the note to B. Whichever allonge was firs t would determine whether the note had been effectively assigned to A, or to B. {¶ 46} “Thompson contends that because the la st-named endorsement is made to Delta, Delta was the proper holde r of the note when this action was filed, since the prior,

first-named endorsement was from an entity other than the current holder of the note. In Adams v. Madison Realty & Development, Inc . (C.A.3, 1988), 853 F.2d 163, the Third Circuit Court of Appeals stressed that from the maker’s standpoint: {¶ 47} “ ‘[I]t becomes essential to establish that the person who demands payment of a negotiable note, or to whom payment is made , is the duly qualified holder. Otherwise, the obligor is exposed to the risk of double paymen t, or at least to the expense of litigation incurred to prevent duplicative satisfaction of the instrument. These risks provide makers with a recognizable interest in demanding proof of the chain of title.’ Id. at 168. {¶ 48} “The Third Circuit Court of Appeals further observed that: {¶ 49} “ ‘Financial institutions, noted for insisting on their customers’ compliance with numerous ritualistic formalities, are not sympathetic petitioners in urging relaxation of16 an elementary business practice. It is a tenet of commercial law that “[h]oldership and the potential for becoming holders in due course should only be accorded to transferees that observe the historic protocol.” ’ [ Adams ], 853 F.2d at 169 (citation omitted). {¶ 50} “* * * {¶ 51} “Because the last allonge endorses the note to Delta, and no further endorsement to HSBC was provide d, the trial court did not err in concluding that HSBC was not the holder of the note when the litiga tion was commenced against Thompson.” (Footnote added.) Thompson, 2010-Ohio-4158, at ¶ 69-76. {¶ 52} In this case, the first indorsement wa s by Wells Fargo, which (as far as the record demonstrates) did not hold the note when the indorse ment was made. The second indorsement was from Legacy Mortgage to We lls Fargo. Because there is no subsequent indorsement from Wells Fargo, th e alleged allonge does not esta blish that Freddie Mac was

ever the holder of the note. {¶ 53} Freddie Mac claims that the assignments of mortgage from Legacy Mortgage to Wells Fargo and from Wells Fargo to Freddie Mac are sufficient to establish its right to

enforce the note as a nonholder in possession. Freddie Mac cites Bank of New York v.

Dobbs , Knox App. No. 2009-CA-2, 2009-Ohio- 4742, and Section 5.4 of the Third Restatement of Property (Mortgages), arguing that the assignment of a mortgage is sufficient to establish the transfer of the note, and vice versa. {¶ 54} In Dobbs , the Fifth District noted, “In Ohio it has been held that transfer of the note implies transfer of the mortgage. * * * ‘Where a note secured by a mortgage is transferred so as to vest the legal title to the note in the transferee, such transfer operates as17 an equitable assignment of the mortgage, ev en though the mortgage is not assigned or

delivered.’ ” Dobbs , 2009-Ohio-4742, at ¶ 29-30. Dobbs extended that rationale, holding that the assignment of a mortgage, without an express transfer of the note, was also sufficient to transfer both the mortgage and the note, if the record indicated that the parties intended to transfer both. Id. at ¶ 31. {¶ 55} The assignment of mortgage from Legacy to Wells Fargo assigned, sold, and transferred all of Legacy’s “rights, title and interest in and to a certain mortgage/deed of trust to secure the debt executed by Duane Schwartzwald and Julie O. Schwartzwald.” The assignment from Wells Fargo to Freddie Mac stated that Wells Fargo “does hereby sell, assign, transfer, and set over until Federal Home Loan Mortgage Corporation [the Schwartzwalds’ mortgage] * * *, together with the Promissory Note secured thereby and referred to therein; and all su ms of money due and to become due thereon, and secured by the following real estate * * *.” In additi on, although the indorsements on the allonge to the note are inadequate to constitu te negotiation under the UCC, the indorsements involved the

same entities that were involved in the mortgage assignment s and thus suggest that Legacy and Wells Fargo intended to tr ansfer ownership of the note and mortgage together. {¶ 56} In our view, the assignments reflect the intent of Legacy and Wells Fargo to convey both the mortgage and the note, along w ith the attendant right to enforce the note. We therefore conclude that Freddie Mac, as assignee of the Schwartzwalds’ mortgage, was entitled to bring a foreclosure action, due to th e Schwartzwalds’ default, as a nonholder in possession with a right to enforce the note.

C. Standing to Bring Foreclosure Action18 {¶ 57} The Schwartzwalds further claim that Freddie Mac lacked standing to prosecute the case, because it did not establish that it held the note or was the mortgagee by assignment at the time the complaint was filed. {¶ 58} “Standing is a preliminary inquiry that must be made be fore a court may consider the merits of a legal claim. It is an issue of law, so we review the issue de novo. To have standing, a party must have a personal stake in the outcome of a legal controversy with an adversary. This holding is based upon the prin ciple that ‘it is the duty of every judicial

tribunal to decide actual contr oversies between partie s legitimately affected by specific facts and to render judgments which can be carried into effect. It has become settled judicial responsibility for courts to refrain from giving opinions on abstract propositions and to avoid the imposition by judgment of prematur e declarations or advice upon potential

controversies.’ Fortner v. Thomas (1970), 22 Ohio St.2d 13, 14, 51 O.O.2d 35, 257 N.E.2d

371. * * * {¶ 59} “An actual controversy is a genuine dis pute between adverse parties. It is more than a disagreement; the parties must have adverse legal interests.” (Citations omitted.) Kincaid v. Erie Ins. Co. , 128 Ohio St.3d 322, 2010-Ohio-6036, ¶ 9-10. {¶ 60} Common-law standing is similar to Civ.R. 17(A)’s real-party-in-interest requirement. The phrase “real party in interest” means “ ‘one who has a real interest in the subject matter of the litigation, and not merely an interest in the action itself, i.e., one who is directly benefitted or injured by the outcome of the case.’ ” (Emphasis sic.) Countrywide Home Loans, Inc. v. Swayne , Greene App. No. 2009 CA 65, 2010-Ohio-3903, ¶ 28, quoting Shealy v. Campbell (1985), 20 Ohio St.3d 23, 24. Ind eed, one who has standing by19 possessing a “personal stake” in a lawsuit undoubtedly also has a “real inte rest in the subject matter of the litigation.” {¶ 61} The parties disagree on whether standi ng must be established when the complaint is filed. Freddie Mac asserts that standing is not jurisdictional and that the lack of standing may be cured, c onsistent with Civ.R. 17, which states: “No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real pa rty in interest. Such ra tification, joinder, or

substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.” Freddie Mac contends that it was permitted to cure any standing defect prior to judgment and th at it had done so by having a separately executed assignment of mortgage (assigning the mortgage from Wells Fargo to Freddie Mac) recorded before the filing for and granting of judgment. {¶ 62} In contrast, the Schwartzwa lds contend that standing and real-party-in-interest status are not synonymous. They assert that the plaintiff must be the real party in interest (consistent with Civ.R. 17) when judgment is en tered, but standing is a threshold matter that must exist at the time the complaint is filed. In short, the Schwartzwalds view standing as a jurisdictional prerequis ite, i.e., that “[s]tanding to sue is part of the common understanding of what it takes to make a justiciable case.” Steel Co. v. Citizens for a Better Environment (1998), 523 U.S. 83, 102, 118 S.Ct. 1003, 140 L.Ed.2d 210. {¶ 63} Some Ohio appellate districts have held, as Freddie Mac claims, that the lack of ownership of a mortgage or note at the time a complaint is filed does not preclude20 judgment in favor of the plaintiff, so long as the plaintiff is the ow ner of the note and/or assignee of the mortgage at the time the summary judgment is entered. See LaSalle Bank

Natl. Assn. v. Street , Licking App. No. 08 CA 60, 2009-Ohio-1855 (affirming judgment for bank as the “real party in interest” when the assignment of the mortgage and the note occurred one week after the complaint was filed); Bank of New York v. Stuart , Lorain App. No. 06 CA 8953, 2007-Ohio-1483, at ¶ 12-13 (plaintiff-l ender was real party in interest for foreclosure even though it was assigned mort gage five months af ter complaint filed); Wachovia Bank v. Cipriano, Guernsey App. No. 09CA007A, 2009-Ohio-5470, ¶ 36. {¶ 64} Other districts have taken a different view, requiring the plaintiff to own the note and the mortgage at the time that the complaint is filed. See Wells Fargo Bank v.

Jordan , Cuyahoga App. No. 91675, 2009-Ohio-1092 (hol ding that Civ.R. 17(A) does not apply unless a plaintiff has standi ng in the first place to invoke the jurisdiction of the court); Wells Fargo Bank, N.A. v. Byrd , 178 Ohio App.3d 285, 2008-Ohio-4603, ¶ 24 (plaintiff could not cure lack of real-party-in-interest status at the time the complaint was filed by its subsequent acquisition of the note and mortgage). {¶ 65} We have yet to take a position on this issue, and the Supreme Court of Ohio has accepted this issue for review in U.S. Bank, N.A. v. Duvall , 128 Ohio St.3d 1443, 2011-Ohio-1618, 944 N.E.2d 693. {¶ 66} The term “jurisdiction” is used in se veral contexts. “ ‘Jurisdiction’ means ‘the courts’ statutory or constitutional power to adjudicate the case.’ The term encompasses jurisdiction over the subject matter and over th e person. * * * It is a ‘condition precedent to the court’s ability to hear the case. If a court acts without jurisdiction, then any21 proclamation by that court is void.’ {¶ 67} “The term ‘jurisdiction’ is also used wh en referring to a court’s exercise of its jurisdiction over a particular case. The third category of jurisdiction [i.e., jurisdiction over the particular case] encompasses the trial court’s authority to determine a specific case

within that class of cases that is within its subject matter jurisdiction.” (Citations omitted.) Pratts v. Hurley , 102 Ohio St.3d 81, 2004-Ohio-1980, ¶ 11-12. {¶ 68} “Jurisdiction over a particular case is an elusive concept, defined best by example. A common pleas court is a court of general jurisdiction and has subject matter jurisdiction over crimes committed by an adult. Nevertheless, where the common pleas court fails to strictly comply with procedures in a capital case, such as the failure to utilize a statutorily mandated three judge panel, it is an improper exercise of jurisdiction over the case. Id., syllabus.” T.M. v. J.H. , Lucas App. Nos. L-10-1014, L-10-1034, 2011-Ohio-283, ¶ 66. {¶ 69} “Although a court may have subject ma tter jurisdiction over an action, if a claim is asserted by one who is not the real part y in interest, then the party lacks standing to prosecute the action. The lack of standing ma y be cured by substituting the proper party so that a court otherwise having subject matter jurisdiction may proceed to adjudicate the matter. Civ.R. 17. Unlike lack of subject ma tter jurisdiction, other affirmative defenses can be waived. Lack of standing challenges the capacity of a party to bring an action, not the subject matter jurisdiction of the court.” (Citations and footnote omitted.) State ex rel.

Jones v. Suster (1998), 84 Ohio St.3d 70, 77. 5

5 We acknowledge that Suster has been distinguished in certain foreclosure cases. See, e.g., MERS22 {¶ 70} If there is no jurisdiction in the court, then the judgment is void and can be challenged at any time. One could speculate on the effect of a holding that any judgment and decree of foreclosure ever granted wherein it can be shown that the mortgagee did not, at the time of the initial complaint, have standing and thus was not the real party in interest,

results in the court’s not having jurisdiction. {¶ 71} The distinction is between lacking jurisdiction and improperly exercising the jurisdiction conferred on it. If a court improperly exercises its jurisdiction by granting foreclosure to a plaintiff l acking standing, the judgment would not be void but, rather, voidable on appeal. {¶ 72} This appears to be why Civ.R. 17 allo ws amendment. The 1970 Staff Notes to the Rule give the example of an adminis trator who sues, in good faith, but under an invalid appointment or a bankrupt who sues without the trust ee’s permission. In each case, the plaintiff is given the opportunity to ame nd the pleadings, and the court is given the opportunity to exercise its jurisdiction. {¶ 73} Lenders may “feel” that debtors should not avoid their debts or maintain the security they pledged only because a paperwor k chain was not completed prior to the filing of a complaint; borrowers may “believe” that before their homes can be taken from them, a creditor must punctiliously comply with the “ritu alistic formalities” to which they (the title owners) have been held almost since the “m emory of man runneth not to the contrary.” {¶ 74} The objective is for a court to be presented with a real controversy between parties actually affected by its outcome (i.e., “have a personal stake in the outcome of a legal

v. Mosley , Cuyahoga App. No. 93170, 2010-Ohio-2886.23 controversy with an adversary,” Kincaid , 128 Ohio St.3d 322, 2010-Ohio-6036). Permitting supplemental or amended filings, pursuant to Civ.R. 17(A), allows th e court to properly exercise its jurisdiction and resolve the controversy on its merits. {¶ 75} Thus, in our view, the required analysis is the one put forth by Freddie Mac, i.e., that the lack of standing or a real-party-in-interest defect can be cured by the assignment of the mortgage prior to judgment. To hold ot herwise would elevate lack of standing to a jurisdictional defect, a position that the Oh io Supreme Court has thus far rejected. {¶ 76} It is undisputed that Freddie Mac ha d been assigned the Schwartzwalds’ mortgage and was in possession of the note prior to the filing for and granting of summary judgment. Accordingly, the trial court did not err in implicitly rejecting the Schwartzwalds’ standing argument.

D. Doctrine of Unclean Hands {¶ 77} Finally, the Schwartzwalds claim that they raised a genuine issue of material fact as to whether Wells Fargo had “unclean hands.” They state that Wells Fargo, as servicing agent for Freddie Mac, induced the Schwartzwalds into marketing their property, but failed to act in good faith when presented with an offer for a short sale. They claim that Wells Fargo prevented them “from limiting or eliminating their liability to Freddie Mac.” {¶ 78} “The maxim, ‘he who comes into equity must come with clean hands,’ requires only that the [party invoking equity] must not be guilty of reprehensible conduct with respect to the subject matter of [the] suit.” Marinaro v. Major Indoor Soccer League (1991), 81 Ohio App.3d 42, 45, citing Kinner v. Lake Shore & M.S. Ry. Co. (1904), 69 Ohio St. 339, paragraph one of the sy llabus. “For the doctrine of unclean hands to apply, the24 party against whom it is asserted must be at fault in relation to the other party and in relation to the transaction upon which the claims are based.” Fiore v. Larger , Montgomery App. No. 22949, 2009-Ohio-5408, ¶ 31, citing Trott v. Trott (Mar. 14, 2002)k, Franklin App. No. 01AP-852, 2002 WL 392286. {¶ 79} In her affidavit, Julie Schwartzwald stated that Wells Fargo encouraged the Schwartzwalds to pursue a s hort sale of their property. 6 She asserted that upon notification to Wells Fargo that they had a buyer, Wells Fargo acted in a dilatory manner in reviewing the Schwartzwalds’ request for approval of their short sale and led them to believe that the

short sale would be a pproved. The request for a short sa le was denied in September 2009, more than 120 days afte r the request was made. {¶ 80} Even accepting Mrs. Schwartzwald’s alle gations as true, we cannot conclude

that Freddie Mac had unclean hands that woul d preclude this foreclosure action. Once the Schwartzwalds defaulted on their note and the balance was accelerated, the lender was entitled to pursue a foreclosure action against them. See Gaul v. Olympia Fitness Ctr., Inc

. (1993), 88 Ohio App.3d 310, 315. “A lender’s decision to enforce its contract rights is not

considered an act of ‘bad faith.’ ” Id. at 320. Well Fargo’s inefficiency, incompetence, or disregard for its customers and the public notwithstanding, Wells Fargo was under no obligation to approve the Schwar tzwalds’ short sale request. {¶ 81} There is no indication that Wells Fargo led the Schwartzwalds to believe that they were not required to make mortgage paym ents while their request for approval of the short sale was pending. And to the extent that Wells Fargo told the Schwartzwalds not to

6 By definition, a short sale involves a purchase price less than the amount owed to the lender.25 worry about the foreclosure acti on that had been filed, any prej udice that might have resulted from those statements was negated by the trial court’s granting of the Schwartzwalds’ motion to file an answer out of time. No other prejudice is alleged by the Schwartzwalds. {¶ 82} The trial court did not err in granting Freddie Mac’s motion for summary judgment.

III {¶ 83} The Schwartzwalds also claim that the trial court should ha ve granted their cross-motion for summary judgment due to Freddi e Mac’s failure to establish standing. In light of our reasoning regarding Freddie Mac’ s motion for summary judgment, this argument

is not well taken.

IV {¶ 84} The uncertainty regarding standing and real party in interest, if not obvious from this opinion, is inherent in the Ohio S upreme Court’s recognizing a conflict among the districts. The Schwartzwalds are urged to join in the Supreme Court case.

V {¶ 85} The assignment of error is overruled. {¶ 86} The trial court’s judgment is affirmed. . . . . . .Judgment affirmed.

G RADY , P.J., and F AIN , J., concur.