Court Opinion

ID: 4245489
Source: CourtListenerOpinion
Date Created: 2018-02-15 18:21:37.445075+00
Date Added: 2024-06-11T14:43:40.621958
License: Public Domain

[Cite as Deutsche Bank Trust Co. of Ams. v. Jones, 2018-Ohio-587.]

                    Court of Appeals of Ohio
                               EIGHTH APPELLATE DISTRICT
                                  COUNTY OF CUYAHOGA

                              JOURNAL ENTRY AND OPINION
                                      No. 105778

         DEUTSCHE BANK TRUST CO. OF AMERICAS
                                                           PLAINTIFF-APPELLEE

                                                    vs.

                             DAVID W. JONES, ET AL.
                                                           DEFENDANTS-APPELLANTS

                                           JUDGMENT:
                                            AFFIRMED

                                     Civil Appeal from the
                            Cuyahoga County Court of Common Pleas
                                   Case No. CV-16-866003

             BEFORE:          Blackmon, J., S. Gallagher, P.J., and Celebrezze, J.

             RELEASED AND JOURNALIZED: February 15, 2018
                                                     -i-
ATTORNEY FOR APPELLANTS

Sam Thomas, III, Esq.
Sam Thomas, III Esq. & Associates
17325 Euclid Avenue, Suite 4083
Euclid, Ohio 44112

ATTORNEYS FOR APPELLEE DEUTSCHE BANK COMPANY AMERICAS, AS
TRUSTEE FOR RESIDENTIAL ACCREDIT LOANS, INC., MORTGAGE
ASSET-BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-QS9

Ted A. Humbert
Charles V. Gasior
Ashley E. Mueller
Jason A. Whitacre
Clunk, Paisley, Hoose Co., L.P.A.
4500 Courthouse Blvd., Suite 400
Stow, Ohio 44224
PATRICIA ANN BLACKMON, J.:

       {¶1} Appellants David Jones (“Jones”) and Caroline Jones (collectively referred

to as “the Joneses”) appeal the trial court’s judgment granting foreclosure in favor of

appellee Deutsche Bank Trust Co. of Americas (“Deutsche Bank”). The Joneses assign

the following three errors for our review:

       I. The trial court erred to the prejudice of [the Joneses] by granting
       [Deutsche Bank’s] motion for summary judgment even though [Deutsche
       Bank] failed to prove that it satisfied all conditions precedent mandated by
       the National Housing Act of 1934 (912 U.S.C.1701 et seq.) and 42 U.S.C.

       II. Reviewing [Deutsche Bank’s] motion for summary judgment de novo,
       the record is clear and convincing that the trial court erred to the prejudice
       of [the Joneses] by granting [Deutsche Bank’s] motion for summary
       judgment.

       III. The trial court erred to the prejudice of [the Joneses] by granting

       [Deutsche Bank’s] motion for summary judgment based                upon the

       existence of genuine issues of material fact regarding [Deutsche Bank’s]

       failure to provide sufficient evidence of entitlement to foreclosure and/or

       damages.

       {¶2} Having reviewed the record and relevant law, we affirm the trial court’s

decision. The apposite facts follow.

       {¶3} On May 23, 2006, the Joneses purchased a multifamily property located on

Glenmont Road in Cleveland. Jones signed a note payable to First Magnus Financial

Corporation (“First Magnus”) for $150,000. The record indicates that an allonge payable

to the order of Deutsche Bank as Trustee (“Deutsche Bank Trustee”) for Residential

Accredit Loans, Inc. (“RALI”) was attached to the note. The Joneses also executed a
mortgage in favor of Mortgage Electronic Registration Systems, Inc. (“MERS”) acting

solely as nominee for First Magnus. On August 29, 2012, the mortgage was assigned

from First Magnus to Deutsche Bank Trust Co. (“Deutsche Bank Trust”) as trustee for

Residential Accredit Loans, Inc. (“RALI”), and duly recorded. Later, in April 2016, the

mortgage was assigned from Deutsche Bank Trust to Deutsche Bank, and duly recorded.

       {¶4} On July 11, 2016, Deutsche Bank filed a complaint for foreclosure and

other equitable relief, alleging that due to nonpayment, the loan balance of $142,475 had

accelerated.   Deutsche Bank also alleged that all conditions precedent to seeking

foreclosure were satisfied.

       {¶5} On January 30, 2017, Deutsche Bank filed a motion for summary judgment,

supported by the copies of the mortgage, note endorsements and assignments, and an

affidavit from Deutsche Bank Trust’s loan service officer, Jesse Rosenthal (“Rosenthal”).

 Rosenthal averred that the last payment on the loan was received in 2012, and the

balance of $142,475 was now due. In opposition, the Joneses argued that Deutsche Bank

failed to comply with conditions precedent to seeking foreclosure under regulations

promulgated by the United States Department of Housing and Urban Development

(“HUD”). The Joneses also alleged that Deutsche Bank lacked standing to enforce the

note and mortgage, and that there was insufficient evidence demonstrating nonpayment.

       {¶6} On March 23, 2017, the magistrate issued a decision granting Deutsche

Bank summary judgment. No objections were filed, and on April 14, 2017, the trial

court adopted the magistrate’s decision.

                                 Conditions Precedent
       {¶7} In the first assigned error, the Joneses argue that Deutsche Bank did not

satisfy conditions precedent to filing its foreclosure action because it failed to conduct a

face-to-face meeting with them as required under HUD regulations, set forth in 24 C.F.R.

203.604(b).

       {¶8} Loans governed by or incorporating HUD regulations must comply with 24

C.F.R. 203.604(b). Fed. Natl. Mtge. Assn. v. Herren, 8th Dist. Cuyahoga No. 105088,

2017-Ohio-8401, ¶ 39;       Bank of Am. v. Allen, 8th Dist. Cuyahoga No. 105473,

2017-Ohio-7726, ¶ 19. In relevant part, these regulations state:

       The mortgagee must have a face-to-face interview with the mortgagor, or

       make a reasonable effort to arrange such a meeting, before three full

       monthly installments due on the mortgage are unpaid. If default occurs in

       a repayment plan arranged other than during a personal interview, the

       mortgagee must have a face-to-face meeting with the mortgagor, or make a

       reasonable attempt to arrange such a meeting within 30 days after such

       default and at least 30 days before foreclosure is commenced[.]

       {¶9} The Joneses argue that because their mortgage document states, “Fannie

Mae/Freddie Mac UNIFORM INSTRUMENT WITH MERS,” the HUD regulations

were incorporated into the terms of the mortgage. However, the documents do not

specifically incorporate the HUD regulations or otherwise reference any regulations

promulgated by the Secretary of Housing and Urban Development.              Moreover, the

mortgage also contains designated “NON-UNIFORM COVENANTS” that advise the

Borrower that in the event of a default, he shall have 30 days to cure the default, and the
failure to cure within that time period may result in acceleration of all sums due and

foreclosure.   These non-uniform covenants do not require a face-to-face meeting or

otherwise incorporate the requirements of the HUD regulations. Therefore, the record

does not demonstrate that the loan was governed by HUD. As this court explained in

Herren:

       The Herrens’ loan was not a loan governed by federal regulations
       promulgated by the Department of Housing and Urban Development for
       Federal Housing Authority insured loans that the Herrens cite to in support.
        Further, an in-person interview is not required under the terms of the note.
       Therefore, any impact of the loan servicer or Fannie Mae’s failure to live up
       to its own internal rules does not impact its right to foreclose. The
       relationship of the parties is governed by the note in this case, which does
       not require satisfaction of any of the provisions on which the Herrens rely.

       {¶10} In short, the Joneses have not demonstrated that the HUD regulations have

been incorporated into their note or mortgage. BAC Home Loans Serv., LP v. Taylor, 9th

Dist. Summit No. 26423, 2013-Ohio-355 (note incorporated regulations of the Secretary

of Housing and Urban Development). Accordingly, this assigned error is without merit.

                               Entitlement to Foreclosure

       {¶11}    In the second and third assigned errors, the Joneses argued that the

affidavit of Deutsche Bank’s loan servicing officer was insufficient to demonstrate that

Deutsche Bank was entitled to foreclosure and damages as set forth in its motion for

summary judgment.      The Joneses complained that the officer was without personal

knowledge and relied upon hearsay.

       {¶12} Appellate review of granting summary judgment is de novo. Pursuant to

Civ.R. 56(C), the party seeking summary judgment must prove that (1) there is no

genuine issue of material fact; (2) they are entitled to judgment as a matter of law; and (3)
reasonable minds can come to but one conclusion and that conclusion is adverse to the

nonmoving party.

        {¶13} To support summary judgment motions, “sworn or certified” documents

may be submitted, accompanied by an affidavit, which “shall be made on personal

knowledge, shall set forth 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.”

Civ.R. 56(E).

        {¶14} Once the movant satisfies this burden, the opposing party “may not rest

upon the mere allegations or denials of the party’s pleadings, but the party’s response, by

affidavit or as otherwise provided in this rule, must set forth specific facts showing that

there is a genuine issue for trial.” Id.

        {¶15} In order to prevail on a motion for summary judgment in a foreclosure

action, the plaintiff must prove:

        (1) that the plaintiff is the holder of the note and mortgage, or is a party
        entitled to enforce the instrument; (2) if the plaintiff is not the original
        mortgagee, the chain of assignments and transfers; (3) that the mortgagor is
        in default; (4) that all conditions precedent have been met; and (5) the
        amount of principal and interest due.

Deutsche Bank Natl. Trust Co. v. Najar, 8th Dist. Cuyahoga No. 98502, 2013-Ohio-1657,

¶ 17.

        {¶16} In Najar, this court explained:

        Unless controverted by other evidence, a specific averment that an affidavit
        pertaining to business is made upon personal knowledge of the affiant
        satisfies the Civ.R. 56(E) requirement that affidavits both in support or in
        opposition to motions for summary judgment show that the affiant is
        competent to testify to the matters stated.
Id. at ¶ 20, quoting Bank One, N.A. v. Swartz, 9th Dist. Lorain No. 03CA008308,

2004-Ohio-1986, ¶ 14.

       {¶17} An affiant testifying as to mortgage payment records must have personal

knowledge of the record-keeping system in which the documents were maintained. See

Bank of New York Mellon v. Roulston, 8th Dist. Cuyahoga No. 104908, 2017-Ohio-8400,

¶ 16. The witness must show that he or she is sufficiently familiar with the operation of

the business and with the circumstances of the preparation, maintenance, and retrieval of

the record in order to reasonably testify on the basis of this knowledge that the record is

what it purports to be, and was made in the ordinary course of business. Id. at ¶ 17.

Personal knowledge can be shown where the affiant’s job responsibilities provide

personal knowledge of the record-keeping practices of the bank and the loan and payment

history of the borrower. Bank of Am., N.A. v. Calloway, 2016-Ohio-7959, 74 N.E.3d

843, ¶ 20 (8th Dist.); Wilmington Trust N.A. v. Boydston, 8th Dist. Cuyahoga No. 105009,

2017-Ohio-5816, ¶ 14 (personal knowledge can be reasonably inferred based on the

affiant’s position and other facts contained in the affidavit).

       {¶18} This court has held that business records are admissible even though the

bank’s affiant reviewed but did not create the records showing default. RBS Citizens,

N.A. v. Zigdon, 8th Dist. Cuyahoga No. 93945, 2010-Ohio-3511.               Accord Najar

(servicer of borrower’s loan competent to testify regarding the content of documents in

borrower’s loan file with which he was personally familiar).

       {¶19} In rejecting the claim that the affiant was simply testifying based upon her

review of hearsay business records, this court in Boyston concluded that the documents
the affiant had reviewed and attached to his affidavit (the note, mortgage, mortgage

assignments, the payment history for the loan, and the bank’s letter advising the defendant

of the loan default), were either not hearsay or were excepted from the hearsay rule of

inadmissibility. This court explained:

       [T]he Mortgage, the Mortgage Assignments, and the statements contained
       therein are excepted from the hearsay rule under Evid.R. 803(14) and (15)
       as records of documents affecting an interest in property and statements in
       documents affecting an interest in property.

       ***
       Vieau testified that as part of her job duties, she was familiar with the
       records relating to Boydston’s loan, the records were made at or near the
       time of the event described in the record by a person with knowledge, the
       records were made and kept in the ordinary course of Nationstar’s regularly
       conducted business activity, and she had personally reviewed them. She
       also authenticated the documents.

Id. at ¶ 16, 20, quoting Wells Fargo Bank Natl. Assn. v. Maxfield, 12th Dist. Butler No.

CA2016-05-089, 2016-Ohio-8102. See also Nationstar Mtge., L.L.C. v. Wagener, 8th

Dist. Cuyahoga No. 101280, 2015-Ohio-1289, ¶ 26.

       {¶20} In this matter, loan servicing officer Rosenthal averred that he has personal

knowledge of the facts and matters set forth in the affidavit offered in support of

Deutsche Bank’s motion for summary judgment.            He averred that in the regular

performance of his job functions, he reviews business records related to the servicing of

the mortgage loan at issue, and that these records are maintained in the regular course of

business. Rosenthal authenticated the note, mortgage, and assignments, attesting that

they are true and accurate.   He also authenticated attached payment records detailing all

payments and demonstrating that the Joneses’ last payment was applied to the May 2012

installment of the mortgage. Rosenthal averred that the Joneses were advised in August
2012 that the loan was in default, accelerating the unpaid balance of $142,475. This

sufficiently demonstrated his personal knowledge of the relevant business records,

including the note, mortgage, mortgage assignments, and the payment history for the

loan. Rosenthal was competent to testify to the occurrence of default, acceleration of

the note, and damages. Moreover, in their brief in opposition, the Joneses did not present

any evidence demonstrating payment, miscalculation, or other lack of default or right to

accelerate.

         {¶21} In accordance with the foregoing, the Joneses’ assigned errors challenging

Deutsche Bank’s evidence in support of its motion for summary judgment are without

merit.

                                         Standing

         {¶22}   The Joneses also argue that Deutsche Bank lacks standing to file for

foreclosure. They complain that the allonge to the note is undated and was not properly

affixed.

         {¶23}   A party commencing litigation must have standing to sue in order to

invoke the jurisdiction of the common pleas court. Fed. Home Loan Mtge. Corp. v.

Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, ¶ 38. At

the time of commencement of the suit, a plaintiff must have “a personal stake in the

outcome of the controversy and have suffered some concrete injury that is capable of

resolution by the court.” U.S. Bank, N.A. v. Matthews, 8th Dist. Cuyahoga No. 105011,

2017-Ohio-4075, ¶ 28, quoting Bank of Am., N.A. v. Adams, 8th Dist. Cuyahoga No.

101056, 2015-Ohio-675, ¶ 7.
      {¶24} As explained in Herren,

      Under Ohio’s version of the Uniform Commercial Code (“UCC”), one
      entitled to enforce an instrument is any of the following:

      (1) The holder of the instrument;

      (2) A nonholder in possession of the instrument who has the
                  rights of a holder;

      (3) A person not in possession of the instrument who is entitled to enforce
      the instrument pursuant to Section 1303.38 [dealing with lost or destroyed
      instruments] or division (D) of section 1303.58 of the Revised Code
      [dealing with mistaken payments].

      R.C. 1303.31(A).       A party can become the holder of a negotiable

      instrument by specific endorsement to an identified payee or by holding the

      negotiable instrument while it is indorsed in blank. R.C. 1303.25(A)-(B).

      {¶25} Deutsche Bank asserted that it was a holder of the note signed by the

Joneses through negotiation. “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.” Herren, citing R.C. 1303.21(A). If “an

instrument is payable to an identified person, negotiation requires transfer of possession

of the instrument and its indorsement of the note by the holder.”         Id.     When an

instrument is negotiated, the transferee becomes a holder with the right to enforce the

instrument. R.C. l303.31(A)(1).

      {¶26}     “An allonge is defined as ‘[a] slip of paper sometimes attached to a

negotiable instrument for the purpose of receiving further indorsements when the original

paper is filled with indorsements.’”       HSBC Bank USA v. Thompson, 2d Dist.
Montgomery No. 23761, 2010-Ohio-4158, ¶ 56, citing Chase Home Fin., L.L.C. v.

Fequiere, 119 Conn.App. 570, 577, 989 A.2d 606 (2010), fn. 7; Wells Fargo Bank, N.A.

v. Byers, 10th Dist. Franklin No. 13AP-767, 2014-Ohio-3303. The Thompson court

discussed the meaning of attachment of an allonge to a note and discussed various

caselaw finding the stapling of the allonge to the note to be sufficient.

       {¶27}    Moreover, there is no requirement that indorsements on a negotiable

instrument be dated. Byers at ¶ 21, citing Wells Fargo Bank, N.A. v. Roehrenbeck, 5th

Dist. Licking No. 13 CA 29, 2013-Ohio-5498, ¶ 15.

       {¶28} In this matter, the complaint demonstrated that the Joneses signed a note

payable to First Magnus and an allonge payable to the order of Deutsche Bank as

Trustee for RALI was also attached to the note. The Joneses also executed a mortgage in

favor of MERS as nominee for First Magnus. The mortgage was assigned from First

Magnus to Deutsche Bank Trust as trustee for RALI, and duly recorded. The mortgage

was later assigned from Deutsche Bank Trust to Deutsche Bank.         Deutsche Bank is also

in possession of the mortgage and note.         From the foregoing, the trial court could

properly conclude that Deutsche Bank had standing in this matter. See Deutsche Bank

Natl. Trust Co. v. Ingle, 8th Dist. Cuyahoga No. 92487, 2009-Ohio-3886, ¶ 18 (affidavit

of the bank’s loan servicing agent, along with other supporting documents, including

allonge of note, sufficient to show the bank was the real party in interest). Deutsche Bank

Natl. Trust Co. v. Sexton, 12th Dist. Butler No. CA2009-11-288, 2010-Ohio-4802, ¶ 13

(Deutsche Bank had standing where its assignments and allonge indicating that the note
was payable to the order of Deutsche Bank). See also U.S. Bank Assn. v. Stallman, 8th

Dist. Cuyahoga No. 102732, 2016-Ohio-22, ¶ 20-22.

      {¶29} The Joneses also argued below that Deutsche Bank lacked standing due to

various claimed defects in the endorsements involving MERS, First Magnus, and

Deutsche Bank Trust.

      {¶30} In Bank of New York Mellon Trust Co. v. Unger, 8th Dist. Cuyahoga No.

97315, 2012-Ohio-1950, we held that a borrower does not have standing to challenge the

validity of an assignment of the mortgage because the borrower is not a party to the

assignment. Id. at ¶ 35. The reason for this conclusion is that the assignment does not

alter the borrower’s obligations under the note or mortgage. Id. See also Nationstar

Mtge. L.L.C. v. Dimasi, 8th Dist. Cuyahoga No. 102985, 2016-Ohio-3057, ¶ 16;

Macintosh Farms Community Assn. v. Baker, 8th Dist. Cuyahoga No. 102820,

2015-Ohio-5263.

      {¶31} Like in Unger, the Joneses were not a party to the assignment of the

mortgage; therefore, they lack standing to challenge its validity. The assignment does

not alter their responsibilities and obligations under the note or mortgage. The default

exposed them to the foreclosure action regardless of the identity of the plaintiff who may

prosecute such action. Moreover, because Deutsche Bank has possession of the note, it

has standing to bring the foreclosure action. Citimortgage Corp. v. Patterson, 8th Dist.

Cuyahoga No. 98360, 2012-Ohio-5894, ¶ 21.         Moreover, other courts have rejected

challenges to MERS, as well as to the pooling and servicing and placements in trust as

raised herein.   See Bank of New York Mellon v. Antes, 11th Dist. Trumbull No.
2014-T-0028, 2014-Ohio-5474; Deutsche Bank v. Traxler, 9th Dist. Lorain No.

09CA0009739, 2010-Ohio-3940; U.S. Bank Natl. Assn. v. Perdeau, 6th Dist. Lucas No.

L-13-1226, 2014-Ohio-5818. Accordingly, this assigned error lacks merit.

      {¶32} Judgment affirmed.

      It is ordered that appellee recover from appellants costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate be sent to the Cuyahoga County Common Pleas

Court to carry this judgment into execution.

      A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure.

PATRICIA ANN BLACKMON, JUDGE

SEAN C. GALLAGHER, P.J., and
FRANK D. CELEBREZZE, JR., J., CONCUR