Court Opinion

ID: 9882426
Source: CourtListenerOpinion
Date Created: 2023-10-05 22:09:38.716893+00
Date Added: 2024-06-11T15:00:53.710754
License: Public Domain

[Cite as Cincinnati v. PE Alms Hill Realty, L.L.C., 2023-Ohio-2784.]

                            IN THE COURT OF APPEALS
                   FIRST APPELLATE DISTRICT OF OHIO
                             HAMILTON COUNTY, OHIO

 CITY OF CINCINNATI, et al.,                        :         APPEAL NO. C-220503
                                                              TRIAL NOS. A-1500883
          Plaintiffs,                                                    A-1602970
                                                    :                    A-1602971
    and
                                          :
 U.S. BANK NATIONAL ASSOCIATION,                              O P I N I O N.
 AS TRUSTEE FOR THE BENEFIT OF
 THE HOLDERS OF COMM 2014-UBS3 :
 MORTGAGE TRUST COMMERCIAL
 MORTGAGE           PASS     THROUGH
 CERTIFICATES, acting by and through :
 its Special Servicer, LNR Partners, LLC,
                                          :
     and

 WILMINGTON TRUST, NATIONAL :
 ASSOCIATION, AS TRUSTEE FOR
 THE BENEFIT OF THE HOLDERS OF
                                       :
 COMM 2014-LC17 MORTGAGE TRUST
 COMMERCIAL MORTGAGE PASS-
 THROUGH CERTIFICATE, acting by :
 and through its Special Servicer, LNR
 Partners, LLC,
                                       :
       Plaintiffs-Appellees,
                                                    :
    vs.

 PE ALMS HILL REALTY LLC, et al.,                   :

       Defendants,
                                                    :
    and
                                                    :
 CHAIM PURETZ,

      Defendant Appellant.                          :
                   OHIO FIRST DISTRICT COURT OF APPEALS

Civil Appeal From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Affirmed

Date of Judgment Entry on Appeal: August 11, 2023

Porter, Wright, Morris & Arthur, LLP, Terry W. Posey, Jr., Tami Hart Kirby, Emma
W. Walton, and Susan K. Cliffel, for Plaintiffs-Appellees,

Wong Fleming P.C., Daniel C. Fleming, Hennis Rothstein and Ellis LLP, and Steven
M. Rothstein, for Defendant-Appellant.

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                     OHIO FIRST DISTRICT COURT OF APPEALS

KINSLEY, Judge.

       {¶1}   Defendant-appellant Chaim Puretz guaranteed loans for several

corporate entities that owned and managed residential rental properties. When those

properties were declared public nuisances, Puretz was ultimately held individually

liable for recourse on the loans. This was because, in executing the loan guarantees,

Puretz agreed to “springing recourse liability” if the building ownership companies

defended themselves in any legal action against the banks, and the companies had

done so in a number of ways over time. On appeal, Puretz seeks to undo the individual

liability he agreed to on the basis of what he argues were two procedural missteps by

the court below.

       {¶2}   Puretz raises two assignments of error. First, he argues that the trial

court erred in awarding summary judgment to plaintiffs-appellees U.S. Bank National

Association, as Trustee for the Benefit of the Holders of Comm 2014-UBS3 Mortgage

Trust Commercial Mortgage Pass-Through Certificates (“U.S. Bank”) and Wilmington

Trust, National Association, as Trustee for the Benefit of the Holders of Comm 2014-

LC17 Mortgage Trust Commercial Mortgage Pass-Through Certificates (“Wilmington

Trust”) on their complaints for breach of guaranty obligations. Second, he contends

that the trial court violated his due process rights in the way that it executed summary

judgment. The trial court initially awarded summary judgment to U.S. Bank and

Wilmington Trust as to liability only and scheduled a trial as to damages. But when

an evidentiary issue arose that postponed the trial, the trial court reconsidered its

earlier decision and issued a new ruling that awarded the banks summary judgment

as to both liability and damages. Puretz claims his surprise about this outcome

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                     OHIO FIRST DISTRICT COURT OF APPEALS

amounts to a constitutional violation. Finding both of these arguments to be without

merit, we affirm the trial court’s judgment.

                        Factual and Procedural Background

       {¶3}   The procedural history of this case is lengthy and complicated. We

summarize it as succinctly as possible.

                              1. The Guaranties are Executed

       {¶4}   In April of 2014, a $14,310,000 loan was issued to PE Alms Hill Realty

LLC, PE Reids Valley View Realty LLC, PE Shelton Gardens Realty LLC, and PE Lima

Club West Realty LLC (collectively the “Alms Borrowers”). Except for PE Lima Club

West Realty LLC, which was located in Allen County, Ohio, each of these borrowing

entities was a limited liability company that owned apartment projects in Hamilton

County, Ohio. U.S. Bank is the current holder of a promissory note, mortgage, and

loan agreement that were executed at the time that the loan was issued. The mortgage

secured the Alms Borrowers’ obligations and encumbered the various apartment

projects.

       {¶5}   In September of 2014, a $5,300,000 loan was issued to PE Entowne

Manor Realty LLC, PE Burton Realty LLC, PE Founders Home Realty LLC, and PE

Georgia Morris Realty LLC (collectively “Entowne Borrowers”). Each of the Entowne

Borrowers were limited liability companies owning apartment projects in Hamilton

County. Wilmington Trust is the current holder of the promissory note, mortgage, and

loan agreement for these loans. The mortgage encumbered the apartment projects

owned by the Entowne Borrowers.

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                        OHIO FIRST DISTRICT COURT OF APPEALS

       {¶6}    Puretz, who was the owner of either direct or indirect interests in each

of the borrowing entities, executed a guaranty of recourse obligations for each loan.

Each guaranty stated that the lender “is not willing to make the Loan, or otherwise

extend credit, to Borrower unless Guarantor unconditionally guarantees the payment

and performance to Lender of the Guaranteed Obligations (as herein defined).”

       {¶7}    The guaranties set forth Puretz’s obligations as guarantor, providing in

Section 1.1(a) that:

       Guarantor hereby irrevocably and unconditionally guarantees to Lender

       and its successors and assigns the payment and performance of the

       Guaranteed Obligations (as defined below) as and when the same shall

       be due and payable, whether by lapse of time, by acceleration of

       maturity    or    otherwise.    Guarantor    hereby    irrevocably   and

       unconditionally covenants and agrees that it is liable for the Guaranteed

       Obligations as a primary obligor.

       {¶8}    The term “Guaranteed Obligations” was defined as “(i) Borrower’s

Recourse Liabilities, (ii) from and after the date that any Springing Recourse Event

Occurs, payment and performance of all of the Obligations, and (iii) the obligation, on

a primary basis, to comply with, or to cause compliance with, the requirements of

Section 4.34 of the Loan Agreement.”

       {¶9}    Both the referenced “Borrowers’ Recourse Liabilities” and “Springing

Recourse Event” were set forth in Section 10.1 of the parties’ loan agreements. This

section first provided that the lenders shall not bring an action seeking a monetary

judgment against the borrowers, but that they “may bring a foreclosure action, an

action for specific performance or any other appropriate action or proceeding to

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                     OHIO FIRST DISTRICT COURT OF APPEALS

enable Lender to enforce and realize upon its interest under the Note * * *.” Section

10.1 of the loan agreement added that this provision shall not:

       constitute a waiver of the right of Lender to enforce the liability and

       obligation of Borrowers, by money judgment or otherwise, to the extent

       of any loss, damage, cost, expense, liability, claim or other obligation

       incurred by Lender (including attorneys’ fees and costs reasonably

       incurred) arising out of or in connection with the following (all such

       liability and obligation of Borrowers for any or all of the following being

       referred to herein as “Borrowers’ Recourse Liabilities”):

       (i) fraud, willful misconduct, misrepresentation or failure to disclose a

       material fact by or on behalf of any Borrower, Guarantor, any Affiliate

       of any Borrower or Guarantor, or any of their respective agents or

       representatives in connection with the Loan, including by reason of any

       claim under the Racketeer Influenced and Corrupt Organizations Act

       (RICO);

                                        *   * *

       (iii) wrongful removal or destruction of any portion of any Property or

       damage to any Property caused by willful misconduct or gross

       negligence;

       (iv) any physical waste of any of the Properties;

                                       *    *   *

       (vii) failure to pay charges for labor or materials or other charges that

       can create Liens on any portion of any Property;

                                       *    *   *

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                      OHIO FIRST DISTRICT COURT OF APPEALS

       (ix) the failure to pay Taxes or transfer taxes;

                                         *   *   *

       (xiii) any cost or expense incurred by Lender in connection with the

       enforcement of its rights and remedies hereunder or any other Loan

       Document;

       {¶10} Section 10.1 of the loan agreements also set forth multiple springing

recourse events, each of which would trigger Puretz’s obligations under the guaranties,

including, as relevant to this appeal:

       if Guarantor (or any Person comprising Guarantor), any Borrower or

       any Affiliate of any Borrower, in connection with any enforcement

       action or exercise or assertion of any right or remedy by or on behalf of

       Lender under or in connection with the Guaranty, the Note, the

       Mortgages or any other Loan Document, seeks a defense, judicial

       intervention or injunctive or other equitable relief of any kind, or asserts

       in a pleading filed in connection with a judicial proceeding any defense

       against Lender or any right in connection with any security for the Loan.

                                   2. The Nuisance Action

       {¶11} In February 2015, in the case numbered A-1500883, the city of

Cincinnati filed a public nuisance complaint alleging that various apartment projects

in the Cincinnati area, including those owned by the Alms Borrowers and the Entowne

Borrowers, were a menace to public health, welfare, or safety; were structurally unsafe;

and had been the subject of numerous health, fire, and building code violations. The

complaint sought injunctive and declaratory relief, as well as the appointment of a

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                     OHIO FIRST DISTRICT COURT OF APPEALS

receiver. Both U.S. Bank and Wilmington Trust were named as defendants due to the

mortgage interests they held in the named apartment projects.

       {¶12} U.S. Bank and Wilmington Trust filed a joint motion for the

appointment of a receiver. Each also filed a third-party complaint for foreclosure,

asserting that the Alms and Entowne Borrowers had breached the note and loan

agreement described above and seeking to foreclose on the mortgages. In response,

the Alms and Entowne Borrowers opposed the motion for the appointment of a

receiver and filed answers asserting various affirmative defenses.

       {¶13} In January 2016, the trial court found both that the properties

constituted a public nuisance and that the owners had failed to abate the nuisance and,

in February 2016, granted the motion to appoint a receiver. The receivership order

encompassed all the Alms and Entowne Borrowers, with the exception of PE Lima

Club West Realty LLC. That borrower was made subject to the receivership order in

April 2016.

       {¶14} Both U.S. Bank and Wilmington Trust filed motions for summary

judgment on their complaints for foreclosure against the Alms and Entowne

Borrowers. While those motions were pending, the trial court granted the receiver’s

motion to sell the receivership properties. On April 2, 2019, the receiver filed notice

that all receivership properties were sold.

       {¶15} On March 2, 2020, the trial court granted summary judgment to U.S.

Bank and Wilmington Trust on their foreclosure complaints. With respect to the

award of summary judgment to Wilmington Trust, the trial court found that the

Entowne Borrowers failed to pay the accelerated balance of the note after declaration

of default and that the Entowne Borrowers had committed additional acts of default

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                      OHIO FIRST DISTRICT COURT OF APPEALS

by failing to notify Wilmington Trust both of a management change and the city’s

nuisance lawsuit. The trial court made the same findings of default with respect to the

Alms Borrowers when granting summary judgment to U.S. Bank, additionally finding

default based on the recording of a mechanic’s lien against one of the properties.

                          3. Complaints for Breach of Guaranties

       {¶16} The actions taken by the Alms and Entowne Borrowers in the nuisance

and foreclosure actions led to U.S. Bank and Wilmington Trust seeking to enforce the

guaranties executed by Puretz.

       {¶17} In May of 2016, in the case numbered A-1602970, U.S. Bank filed a

complaint for breach of guaranty against Puretz. Wilmington Trust likewise filed a

complaint for breach of guaranty against Puretz in the case numbered A-1602971.

Upon the motion of U.S. Bank and Wilmington Trust, these two cases were

consolidated with the nuisance action in the case numbered A-1500883.

       {¶18} The complaints each asserted two counts for breach of guaranty, one

based on a springing recourse event and the second based on the borrowers’ waste of

the property and failure to pay taxes. As to the first count, the complaint alleged that

the actions taken by the Alms and Entowne Borrowers in the public nuisance action,

including their opposition to the appointment of a receiver and their answers to the

complaints for foreclosure, were defenses to an enforcement action or to the assertion

of a right by the lenders that constituted a springing recourse event rendering the loans

fully recourse. According to the assertions in the complaint, once the loan became

fully recourse, Puretz became unconditionally liable for the entire unpaid balance of

the loan pursuant to the terms of the guaranty. The balance due on each loan,

including interest, fees, and costs, was set forth in the complaints. As to the second

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                         OHIO FIRST DISTRICT COURT OF APPEALS

count for breach of guaranty, the complaints asserted that Puretz was liable on the

guaranties because the borrowing entities had failed to pay real estate taxes and had

physical waste of the properties, resulting in them being declared public nuisances.

          {¶19} In December 2019, U.S. Bank and Wilmington Trust moved for partial

summary judgment on count one of their respective complaints against Puretz

individually. Accompanying each motion for summary judgment was an affidavit from

Leah Solomon, an Asset Manager with LNR Partners, LLC (“LNR”), the Special

Servicer of the notes held by U.S. Bank and Wilmington Trust.1

          {¶20} On September 15, 2020, the trial court issued an entry granting the

partial motions for summary judgment.             The court first referenced its previous

determination that the Alms and Entowne Borrowers had breached their contract with

the lenders and that the lenders had been granted summary judgment on those claims.

It then held that Puretz had entered into binding contracts with U.S. Bank and

Wilmington Trust and that those entities were damaged by Puretz’s breach. The trial

court rejected Puretz’s arguments that the guaranties were unconscionable and that

various provisions of the guaranties were in conflict.

          {¶21} After granting summary judgment on the issue of liability, the trial court

scheduled a hearing on damages before a magistrate. The damages hearing was

stopped in progress when the magistrate ordered briefing on the admissibility of

exhibits prepared by Solomon, who was scheduled to be a witness for U.S. Bank and

Wilmington Trust. Puretz contended that these exhibits contained inadmissible

hearsay, while the lenders argued that the documents were admissible under Evid.R.

803(6) as adoptive business records. The magistrate ultimately concluded that the

1   These affidavits are discussed in detail later in this opinion.

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                      OHIO FIRST DISTRICT COURT OF APPEALS

exhibits qualified as adoptive business records pursuant to Evid.R. 803(6), and Puretz

filed objections to this decision.

       {¶22} While Puretz’s objections were pending, the trial court sua sponte

granted summary judgment on all claims to U.S. Bank and Wilmington Trust. In so

doing, the court determined that no genuine issues of material fact existed regarding

damages. With respect to U.S. Bank, the trial court’s entry awarded damages as

follows:

       In the principal sum of $13,204,587.45, plus accrued and unpaid

       interest in the amount of $2,851,146.06, plus late charges in the amount

       of $43,028.64, plus inspection fees incurred by Plaintiff and not

       reimbursed by the Borrowers in the amount of $495.00, plus interest

       on the unpaid principal balance of the Note commencing November 1,

       2019 at the default rate of $3,825.66 per day, plus attorneys’ fees and

       costs expended; plus the Prepayment Fee (as defined in the Loan

       Agreement) in the amount of $2,057,443.33, plus the Liquidated

       Damages Amount (as defined in the Loan Agreement) in the amount of

       $153,340.93, plus administrative and processing fees in the amount of

       $3,375.00.

       {¶23} As for Wilmington Trust, it was awarded damages:

       In the principal sum of $5,094,717.69, plus accrued and unpaid interest

       in the amount of $2,034,182.23, plus taxes, title and other fees (other

       than attorneys’ fees) paid, advanced or otherwise incurred by Plaintiff

       and not reimbursed by the Borrowers in the amount of $649,686.34,

       plus late charges in the amount of $2,364.84, plus the Prepayment Fee

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                     OHIO FIRST DISTRICT COURT OF APPEALS

       and the Liquidated Damages Amount aggregating $720,236.80, plus

       administrative, processing and special servicing fees in the aggregate

       amount of $50,868.91, plus interest on the unpaid principal balance of

       the Note commencing November 1, 2019 at the default rate of $1,429.35

       per day, plus attorneys’ fees and costs expended.

       {¶24} Puretz now appeals from the trial court’s entry granting summary

judgment to U.S. Bank and Wilmington Trust on their claims for breach of guaranty.

                    Summary Judgment on Breach of Guaranty

       {¶25} In his first assignment of error, Puretz argues that the trial court’s grant

of summary judgment was in error because U.S. Bank and Wilmington Trust failed to

establish by competent credible evidence both a default by Puretz and damages and

because genuine issues of material fact remain as to both liability and damages.

       {¶26} We review a trial court’s grant of summary judgment de novo. Collett

v. Sharkey, 1st Dist. Hamilton No. C-200446, 2021-Ohio-2823, ¶ 8. “Summary

judgment is appropriately granted when there exists no genuine issue of material fact,

the party moving for summary judgment is entitled to judgment as a matter of law,

and the evidence, when viewed in favor of the nonmoving party, permits only one

reasonable conclusion that is adverse to that party.” Id., citing State ex rel. Howard

v. Ferreri, 70 Ohio St.3d 587, 589, 639 N.E.2d 1189 (1994).

       {¶27} Section 6.3 of the guaranties provides that the guaranties and related

loan documents are to be governed by New York law. Under our conflict-of-laws

principles, we apply New York substantive law per the terms of the parties’ contract,

but Ohio procedural law, as Ohio is the relevant forum state. See Nationwide Mut.

Fire Ins. Co. v. Rose, 9th Dist. Lorain No. 05CA008814, 2007-Ohio-1216, ¶ 7.

                                              12
                     OHIO FIRST DISTRICT COURT OF APPEALS

       {¶28} To establish a claim for breach of contract under New York Law, a

plaintiff must show the existence of a contract, the plaintiff’s performance, the

defendant’s breach of contractual obligations, and resulting damages. 34-06-73, LLC

v. Seneca Ins. Co., 39 N.Y.3d 44, 52, 198 N.E.3d 1282, 178 N.Y.S.3d 1 (2022).

       {¶29} Puretz does not dispute the existence of the two guaranties that he

executed with U.S. Bank and Wilmington Trust or the lenders’ performance under

those guaranties. While his arguments on appeal are somewhat disjointed, he seems

to focus his challenges on the admissibility of the evidence supporting the lenders’

motions for summary judgment and whether the guaranties were either

unconscionable or ambiguous.

                                    1. Evid.R. 803(6)

       {¶30} We deal with Puretz’s evidentiary argument first. He contends that the

evidence relied upon by the lenders to prove his default—Solomon’s affidavits—lacked

personal knowledge and referred to exhibits that were inadmissible under Evid.R.

803(6).

       {¶31} To properly consider this argument, we review in detail the information

in Solomon’s affidavits. Included in the affidavits were the following statements,

relevant portions of which we emphasize below:

       I am over the age of 18, I am duly authorized to make this Affidavit, and

       I make this Affidavit of my own personal knowledge. I am an

       Asset Manager of LNR Partners, LLC (“LNR”), which is a Special

       Servicer of securitized commercial real estate loans as described more

       fully below. I have been employed with LNR as an Asset Manager since

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                        OHIO FIRST DISTRICT COURT OF APPEALS

        May 3, 2004. I have handled hundreds of securitized commercial loans

        during my tenure with LNR.

                                            *   *   *

        In the regular performance of my job functions as an Asset Manager, I

        am responsible for the handling/administration of securitized

        commercial real estate loans. When certain specified events occur with

        respect to one of these securitized commercial real estate loans, such as

        a default by the borrower under the loan documents, servicing of the

        loan is transferred from the Master Servicer to the Special Servicer.

        When servicing of one of these loans is transferred to a Special Servicer

        such as LNR, the loan is assigned to an Asset Manager such as me. At

        that time we familiarize ourselves with the loan documents

        and records in connection with the loan, and become the person

        responsible for the day-to-day handling/administration of the loan,

        including but not limited to communicating with the borrower and

        making decisions on behalf of the lender.

        LNR is the Special Servicer of the securitized commercial real estate

        loan (the “Loan”) evidenced by the Note (as “Note” is defined below)

        held by Plaintiff Wilmington Trust * * *.2

        The Loan was transferred to LNR for special servicing on or about

        October 20, 2015 * * *. Upon that transfer to LNR, I was assigned as the

        Asset Manager with primary responsibility for the servicing of the Loan

        on behalf of Plaintiff.

2 This opinion quotes from the affidavit Solomon submitted on behalf of Wilmington Trust.   The
affidavit submitted on behalf of U.S. Bank contains similar language.

                                                    14
              OHIO FIRST DISTRICT COURT OF APPEALS

Consistent with the regular performance of my functions as an asset

manager, I familiarized myself with the Loan after it was

transferred to LNR for special servicing. That process included,

among other things, reviewing (a) the loan documents associated with

the loan, (b) the Third Amended Complaint the City of Cincinnati filed

in this case against three of the Borrowers * * *, (c) LNR’s records in

connection with the Loan, and (d) records relating to the Loan that the

Master Servicer provided to LNR as part of the ordinary course of

business operations between and among LNR and the Master Servicer.

Since the Loan was transferred to LNR for special servicing in October

of 2015, I have been the person with primary responsibility for handling

the Loan on behalf of Plaintiff and LNR. Accordingly, I am familiar with

the business records that LNR maintains for purposes of servicing this

Loan.   Based on my knowledge of LNR’s business practices, the

information and data entries in LNR’s records (which include data

compilations, electronic image documents and others) are records that

were made at the time of the events and conditions they describe, by

persons at LNR who have first-hand knowledge of those events and

conditions or from information provided by persons at LNR with such

first-hand knowledge.    These records are maintained in the

ordinary course of LNR’s business. * * * All of the exhibits

identified   herein     and    attached    to   this   Affidavit    are

maintained in the ordinary course of LNR’s business. I have

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                       OHIO FIRST DISTRICT COURT OF APPEALS

       personally reviewed and am familiar with all of the exhibits

       identified herein and attached to this Affidavit.

       {¶32} Soloman’s affidavits further detailed the parties to the respective loans

and the actions that constituted the borrowers’ defaults under the loans, including the

borrowers’ failure to inform the lenders of the nuisance action filed by the city of

Cincinnati.   The affidavits explained that the borrowers’ defaults on the loan

agreements resulted in the lenders’ acceleration of the maturity of the notes, which the

borrowers’ failed to make payment on in full. A copy of the letter notifying borrowers

of the acceleration was referenced in and attached to Solomon’s affidavits.

       {¶33} Solomon explained the public nuisance lawsuit in her affidavits and

stated that, after certain properties were found to be a public nuisance, they were sold

by a receiver, and the proceeds of the sales were applied to the unpaid balance of the

loans. The affidavits further discussed Solomon’s role in tracking payments under the

loans, stating that:

       I routinely review information and records relating to both amounts

       paid and amounts owed under the loans for which I am asset manager,

       including the Loan. Although the Master Servicer is responsible for

       receiving and tracking payments due on the Loan, I or other LNR

       employees whom I supervise, direct the Master Servicer regarding the

       application of such funds, and have done so with respect to the Loan.

The affidavits also referenced and attached the following documents: the transaction

history of the loans, the payoff statements reflecting the borrowers’ indebtedness, and

LNR’s records supporting the calculations in the payoff statements. When referencing

the transaction history, Solomon stated that it was “generated for this Loan at my

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                     OHIO FIRST DISTRICT COURT OF APPEALS

discretion. I have relied upon the accuracy of the Transaction History in the making

of this affidavit.” As for the referenced payoff statements, Solomon stated that they

were “made at or near the time [they were] dated, [are] based on information obtained

from the Transaction History and the Statement Backup, and [were] transmitted by a

person with first-hand knowledge of the information contained therein.”             She

additionally stated that these documents were “used and kept in the course of LNR’s

regularly-conducted business activity” and that it “is the regular practice of LNR to

maintain and keep such records.”

       {¶34} Solomon additionally identified the software used to track the loan

payments and described the procedure used to apply a payment and create a record.

She then detailed the amounts due and owing under the respective loans.

       {¶35} Puretz argues that Soloman’s affidavits were inadmissible under Evid.R.

803(6).

       {¶36} First, Puretz appears to suggest that Soloman lacks sufficient personal

knowledge to be reliable, but we reject that argument. Each affidavit clearly set forth

Solomon’s responsibilities as an asset manager with LNR and her familiarity with not

only the loan documents and related records received from the Master Servicer, but

with the public nuisance litigation as well. Soloman also states multiple times that she

has personal knowledge of the information she relays.         The affidavits therefore

sufficiently detail Solomon’s history with managing the loan balances in this case to

convince us that her statements were made with sufficient personal knowledge.

       {¶37} We next turn to Puretz’s argument that the affidavits rely on documents

inadmissible under Evid.R. 803(6). Evid.R. 803(6) provides that the following is not

excluded by the hearsay rule even though the declarant is available as a witness:

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                     OHIO FIRST DISTRICT COURT OF APPEALS

       A memorandum, report, record, or data compilation, in any form, of

       acts, events, or conditions, made at or near the time by, or from

       information transmitted by, a person with knowledge, if kept in the

       course of a regularly conducted business activity, and if it was the

       regular practice of that business activity to make the memorandum,

       report, record, or data compilation, all as shown by the testimony of the

       custodian or other qualified witness or as provided by Rule 901(B)(10),

       unless the source of information or the method or circumstances of

       preparation indicate lack of trustworthiness.

       {¶38} If hearsay is to be admitted under the business-record exception set

forth in Evid.R. 803(6), the record must meet the following qualifications: “(1) it must

have been kept in the regular course of business; (2) it must stem from a source who

had personal knowledge of the acts, events, or conditions; (3) it must have been

recorded at or near the time of the transaction; and (4) a foundation must be

established by the testimony of either the custodian of the record or some other

qualified person.” In re Z., 1st Dist. Hamilton No. C-190026, 2019-Ohio-1617, ¶ 12.

       {¶39} A document may be admitted as a business record even when the entity

admitting the document is not its maker “provided that the other requirements of

Evid.R. 803(6) are met, and the circumstances indicate that the records are

trustworthy.” Great Seneca Fin. v. Felty, 170 Ohio App.3d 737, 2006-Ohio-6618, 869

N.E.2d 30, ¶ 14 (1st Dist.). The “[t]rustworthiness of a record is suggested by the

profferer’s incorporation into its own records and reliance on it.” HSBC Bank USA,

N.A. v. Gill, 2019-Ohio-2814, 139 N.E.3d 1277, ¶ 9 (1st Dist.), quoting U.S. Bank, N.A.

                                              18
                     OHIO FIRST DISTRICT COURT OF APPEALS

v. Christmas, 2d Dist. Montgomery No. 26695, 2016-Ohio-236, ¶ 18, vacated on other

grounds, 146 Ohio St. 3d 1468, 2016-Ohio-5108, 54 N.E.3d 1267.

       {¶40} As explained in the affidavits, the attached records were kept in the

regular course of LNR’s business and, upon the transfer of a loan from a Master

Servicer, were incorporated into LNR’s own records. The documents were made at the

time of the events or conditions described therein by a person with first-hand

knowledge or from information provided by persons at LNR with such first-hand

knowledge, and Solomon’s affidavits set forth a sufficient foundation for the admission

of these records. Further, nothing in the record suggests that these documents are not

trustworthy. To the contrary, LNR’s use of the documents in its regularly-conducted

business activity—managing and administering the loans—provides support for the

trustworthiness of the documents. See id. at ¶ 9.

       {¶41} Puretz additionally contends that the documents were inadmissible

because they were prepared solely in anticipation of litigation and not for a legitimate

business purpose. This contention is not borne out in the record. Rather, Solomon’s

affidavits established that the documents were used in LNR’s regular processing and

management of the loans.        We therefore hold that Soloman’s affidavits were

admissible under Evid.R. 803(6), and the trial court did not err in considering them

at the summary judgment stage.

                      2. Additional Evidentiary Challenges

       {¶42} While his arguments to us were less than precise, Puretz raised a

number of additional evidentiary challenges related to the summary judgment stage,

none of which are persuasive.

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                      OHIO FIRST DISTRICT COURT OF APPEALS

       {¶43} For example, in his reply brief, Puretz advanced the argument that the

reliance on the adoptive business records in this situation violates his constitutional

right to confrontation under the Sixth Amendment. First, pursuant to Loc.App.R.

16.1(C), a reply brief shall be confined to a rebuttal of the appellee’s brief, rather than

serve as a vehicle to raise new arguments. Second, even if this court were to consider

the argument, we would find it to border on frivolous, as the Confrontation Clause is

not plainly applicable to civil cases. See U.S. Const. amend. VI (“In all criminal

prosecutions, the accused shall enjoy the right * * * to be confronted by the witnesses

against him.”) (Emphasis added.); Masterson v. Brody, 8th Dist. Cuyahoga No.

111043, 2022-Ohio-3429, ¶ 64 (“The Confrontation Clause of the Sixth Amendment,

however, is not applicable to civil cases.”).

       {¶44} Puretz also argues that U.S. Bank and Wilmington Trust relied on

affidavits from Juan Perez that also contained inadmissible hearsay. This argument

is simply incorrect and misstates the record. The lenders relied on the affidavits from

Perez in support of their motions for summary judgment in the foreclosure actions

against the Alms and Entowne Borrowers, not in support of the motion for summary

judgment against Puretz.

       {¶45} We accordingly find no error in the trial court’s consideration of the

evidence submitted by U.S. Bank and Wilmington Trust when considering the motions

for summary judgment.

                           3. Unconscionability and Ambiguity

       {¶46} Puretz next argues that summary judgment was inappropriate because

genuine issues of material fact exist as to whether both the language of the guaranties

and the circumstances surrounding the execution of the guaranties rendered them

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                     OHIO FIRST DISTRICT COURT OF APPEALS

unconscionable and because certain provisions of the guaranties are ambiguous and

conflict with provisions in the related loan documents.

                                A. Unconscionability

       {¶47} We first consider Puretz’s unconscionability argument.                 The

unconscionability of a contract is an affirmative defense.        Frenchtown Square

Partnership v. Nick Ents. Inc., 11th Dist. Trumbull No. 2020-T-0038, 2021-Ohio-663,

¶ 10, quoting Defoe v. Schoen Builders, LLC, 6th Dist. Wood No. WD-18-031, 2019-

Ohio-2255, ¶ 40. U.S. Bank and Wilmington Trust argue that Puretz has waived this

defense by failing to assert it in his answer. In considering this procedural argument,

we apply Ohio law.      See Nationwide Mut. Fire Ins. Co., 9th Dist. Lorain No.

05CA008814, 2007-Ohio-1216, ¶ 7.

       {¶48} Under Ohio law, other than the defenses set forth in Civ.R. 12(B), which

do not include the defense of unconscionability, an affirmative defense is waived if not

asserted in an answer. Id.; Brown v. Village of Lincoln Heights, 195 Ohio App.3d 149,

2011-Ohio-3551, 958 N.E.2d 1280, ¶ 10 (1st Dist.).

       {¶49} Puretz did not assert the defense of unconscionability in his answer to

U.S. Bank and Wilmington Trust’s complaints. Having failed to do so, he has waived

that defense, and we therefore do not consider his argument on appeal.

                                     B. Ambiguity

       {¶50} Puretz next argues that genuine issues of material fact exist as to

whether the guaranties were ambiguous.         He contends that the clauses in the

guaranties rendering his obligations fully recourse upon the occurrence of a springing

recourse event, specifically the assertion by either himself or a borrower of a defense

                                              21
                     OHIO FIRST DISTRICT COURT OF APPEALS

against a lender, conflict with a section in the loan documents authorizing him to

assert a compulsory counterclaim.

       {¶51} We need not reach the merits of this argument because Puretz, in the

execution of the guaranties, contractually waived his right to challenge the guaranties

on this ground. As noted by U.S. Bank and Wilmington Trust, the following sections

of the guaranties prohibit Puretz from raising this challenge:

       Section 1.3   Guaranteed Obligations Not Reduced by Offset.           The

       Guaranteed Obligations and the liabilities and obligations of Guarantor

       to Lender hereunder shall not be reduced, discharged or released

       because or by reason of any existing or future offset, claim or defense of

       Borrower or any other party against Lender or against payment of the

       Guaranteed Obligations, whether such offset, claim or defense arises in

       connection with the Guaranteed Obligations (or the transactions

       creating the Guaranteed Obligations) or otherwise.

                                             ***

       Section 2.10 Offset. Any existing or future right of offset, claim or

       defense of borrower against Lender, or any other party, or against

       payment of the Guaranteed Obligations, whether such right of offset,

       claim or defense arises in connection with the Guaranteed Obligations

       (or the transactions creating the Guaranteed Obligations) or otherwise.

                                           ***

       Section 3.6 Proceedings; Enforceability. * * * Neither this Guaranty nor

       any other Loan Document to which Guarantor is a party is subject to

       any right of rescission, set-off, counterclaim or defense by Guarantor,

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                     OHIO FIRST DISTRICT COURT OF APPEALS

       including the defense of usury, nor would the operation of any of the

       terms of this Guaranty or such other Loan Documents, or the exercise

       of any right hereunder or thereunder, render this Guaranty or such

       other Loan Documents unenforceable * * *.

       {¶52} In addition to these provisions, Section 2.4 of the guaranties provides

that Puretz’s obligations were not “released, diminished, impaired, reduced or

adversely affected” by:

       The invalidity, illegality or unenforceability of all or any part of the

       Guaranteed Obligations or any document or agreement executed in

       connection with the Guaranteed Obligations for any reason whatsoever,

       including, without limitation, the fact that * * * (v) the Borrower has

       valid defenses, claims or offsets (whether at law, in equity or by

       agreement) which render the Guaranteed Obligations wholly or

       partially uncollectible from Borrower, (vi) the creation, performance or

       repayment of the Guaranteed Obligations (or the execution, delivery

       and performance of any document or instrument representing part of

       the Guaranteed Obligations or executed in connection with the

       Guaranteed Obligations or given to secure the repayment of the

       Guaranteed Obligations) is illegal, uncollectible or unenforceable * * *.

       {¶53} These provisions plainly state that Puretz has waived his right to assert

any defense against enforcement of the guaranties. Provisions such as these have a

similar effect to that of a cognovit note and are generally permissible under the law.

“Guaranties that contain language obligating the guarantor to payment without

recourse to any defenses or counterclaims, i.e., guaranties that are ‘absolute and

                                              23
                     OHIO FIRST DISTRICT COURT OF APPEALS

unconditional,’ have been consistently upheld by New York courts.” Cooperatieve

Centrale Raiffeisen-Boerenleenbank, B.A., “Rabobank Intl.,” N.Y. Branch v. Navarro,

25 N.Y.3d 485, 493, 36 N.E.3d 80, 15 N.Y.S.3d 277 (2015).

       {¶54} We accordingly find that, based on the provisions set forth above, Puretz

is prohibited from challenging the guaranties on the grounds that they are ambiguous.

And had Puretz not waived his unconscionability argument by failing to assert it in his

answer, these provisions would have barred that argument as well.

  4. No Genuine Issues of Material Fact as to Puretz’s Breach of Guaranties and
                              Resulting Damages

       {¶55} Puretz next argues that U.S. Bank and Wilmington Trust failed to

establish that he breached the guaranties. We are not persuaded. Puretz’s liability on

the guaranties was triggered after the PE Lima Club West Realty and Alms Borrowers

breached the loan agreements. The record clearly demonstrates that the borrowers

committed such a breach by, among other actions, failing to give U.S. Bank and

Wilmington Trust notice of the public nuisance action. The trial court found as such

when entering judgment in favor of the lenders on their foreclosure claims against the

Alms and Entowne Borrowers. Following their breach, the borrowers were notified

that the lenders were accelerating the balance of the loan.

       {¶56} At that point, per the terms of the guaranties, Puretz became fully liable

for his guaranteed obligations upon the occurrence of a springing recourse event. As

set forth above, one springing recourse event specified in the guaranties was:

       if Guarantor (or any Person comprising Guarantor), any Borrower or

       any Affiliate of any Borrower, in connection with any enforcement

       action or exercise or assertion of any right or remedy by or on behalf of

                                              24
                      OHIO FIRST DISTRICT COURT OF APPEALS

       Lender under or in connection with the Guaranty, the Note, the

       Mortgages or any other Loan Document, seeks a defense, judicial

       intervention or injunctive or other equitable relief of any kind, or asserts

       in a pleading filed in connection with a judicial proceeding any defense

       against Lender or any right in connection with any security for the Loan.

       {¶57} In plain language, this provision states that should Puretz or any of the

Alms or Entowne Borrowers assert a defense in any judicial proceeding involving the

guaranties, notes, mortgages, or loan documents, Puretz would become fully liable for

the unpaid balance of the notes.

       {¶58} In the foreclosure action brought by U.S. Bank and Wilmington Trust

against the Alms and Entowne Borrowers, those borrowers did just that. They

asserted various affirmative defenses in their responsive complaints, opposed the

appointment of a receiver, and opposed the lenders’ motions for summary judgment.

In fact, the occurrence of these events was reflected in the trial court’s own docket,

where the borrowers filed their answers and their memorandums in opposition to the

appointment of a receiver and to the lenders’ motions for summary judgment. See

Indus. Risk Insurers v. Lorenz Equip. Co., 69 Ohio St.3d 576, 580, 635 N.E.2d 14

(1994) (“It is axiomatic that a trial court may take judicial notice of its own docket.”);

Schrock Rd. Mkts., Inc. v. Sun Life Assur. Co. of Canada, 5th Dist. Delaware No.

11CAE020015, 2011-Ohio-4087, ¶ 24 (“A trial court can take judicial notice of the

court’s docket.”). As a result, no genuine issues of material fact exist as to the

occurrence of these springing recourse events.

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                     OHIO FIRST DISTRICT COURT OF APPEALS

       {¶59} Puretz’s failure to pay the remaining balance of the note upon the

occurrence of these springing recourse events resulted in his breach of the guaranties,

and no issue of material fact exists regarding this breach.

       {¶60} Nor do any genuine issues of material fact exist as to the resulting

damages suffered by U.S. Bank and Wilmington Trust following Puretz’s breach.

These damages were sufficiently set forth in Solomon’s affidavits, which we have found

to be admissible.

       {¶61} Having found that no genuine issues of material fact exist, we hold that

the trial court did not err in granting summary judgment to U.S. Bank and Wilmington

Trust. Puretz’s first assignment of error is thus overruled.

                              No Due Process Violation

       {¶62} In his second assignment of error, Puretz argues that the trial court’s

sua sponte order violated his due process rights by denying him the opportunity to be

heard before the trial court granted summary judgment in full.

       {¶63} “Due process under the Ohio and United States Constitutions demands

that the right to notice and an opportunity to be heard must be granted at a meaningful

time and in a meaningful manner where the state seeks to infringe a protected liberty

or property interest.” State v. Hacker, Slip Opinion No. 2023-Ohio-2535, ¶ 35,

quoting State v. Hochhausler, 76 Ohio St.3d 455, 459, 668 N.E.2d 457 (1996).

       {¶64} While conceding that the trial court had the authority to reconsider its

earlier, non-final judgment, see Hamilton Ins. Servs. v. Nationwide Ins. Co., 5th Dist.

Richland No. 03-CA-6, 2003-Ohio-4482, ¶ 18, Puretz contends that his due process

rights were violated when the trial court did so without first allowing him the

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                      OHIO FIRST DISTRICT COURT OF APPEALS

opportunity to be heard on the issue of damages. Following our review of the record,

we find no procedural due process violation.

       {¶65} Puretz had a full and complete opportunity to be heard as to both the

liability and damages issues raised in the summary judgment motions when he filed

responsive memoranda. To the extent he wanted to explore Soloman’s testimony via

a deposition, he had more than a year to do so prior to the issuance of the trial court’s

final summary judgment order. Any delay in failing to do so falls on the shoulders of

Puretz, not the trial court.

       {¶66} Puretz further complains that he did not have the chance to challenge

Soloman in court, but trial courts are not required to hold a hearing on a motion for

summary judgment.        Capital One Bank (U.S.A.), N.A. v. McCladdie, 8th Dist.

Cuyahoga No. 111289, 2022-Ohio-4082, ¶ 25.

       {¶67} Puretz also argues that the trial court was required under Civ.R.

53(D)(4)(d) to rule on his objections to the magistrate’s decision, and that the court’s

failure to do so was a “jurisdictional defect that renders the judgment invalid.” He

contends that in the absence of a ruling on the objections, the order appealed from is

not final and appealable.      Puretz’s argument is somewhat disingenuous, as he

nonetheless appealed the trial court’s order and did not make any mention of a lack of

finality in his initial brief. In fact, he raised this issue for the first time in his reply

brief, in contravention of Loc.App.R. 16.1(C). We nevertheless consider this argument

because this court is required to determine our own jurisdiction to hear an appeal.

       {¶68} Puretz is correct that Civ.R. 53(D)(4)(d) requires a trial court to rule on

pending objections to a magistrate’s decision. But we must look at this rule in context.

In its entirety, Civ.R. 53(D)(4), which is titled “Action of court on magistrate’s decision

                                                27
                        OHIO FIRST DISTRICT COURT OF APPEALS

and on any objections to magistrate’s decision; Entry of judgment or interim order by

court” provides that:

       (a) Action of court required. A magistrate’s decision is not effective

       unless adopted by the court.

       (b) Action on magistrates decision. Whether or not objections are timely

       filed, a court may adopt or reject a magistrate’s decision in whole or in

       part, with or without modification. A court may hear a previously-

       referred matter, take additional evidence, or return a matter to a

       magistrate.

       (c) If no objections are filed. If no timely objections are filed, the court

       may adopt a magistrate’s decision, unless it determines that there is an

       error of law or other defect evident on the face of the magistrate’s

       decision.

       (d) Action on objections. If one or more objections to a magistrate’s

       decision are timely filed, the court shall rule on those objections. In

       ruling on objections, the court shall undertake an independent review

       as to the objected matters to ascertain that the magistrate has properly

       determined the factual issues and appropriately applied the law. Before

       so ruling, the court may hear additional evidence but may refuse to do

       so unless the objecting party demonstrates that the party could not, with

       reasonable diligence, have produced that evidence for consideration by

       the magistrate.

       {¶69} Civ.R. 53(D)(4) contemplates that a trial court will take further action

on a magistrate’s decision, either by adopting or rejecting that decision in whole or

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                      OHIO FIRST DISTRICT COURT OF APPEALS

part, with or without modification. It is for this reason that Civ.R. 53(D)(4)(A)

provides that the magistrate’s decision is not effective unless adopted by the trial court.

Here, the trial court’s reconsideration of its earlier ruling on summary judgment

obviated its need to take any further action on the magistrate’s decision, as well as its

need to rule on the pending objections. The entry on reconsideration essentially, for

all relevant purposes, rendered the issue that was the subject of the objections moot.

       {¶70} Further, this court has recognized that “[a] trial court’s failure to comply

with Civ.R. 53 constitutes grounds for reversal only if the appellant shows the alleged

error has merit and the error worked to the prejudice of the appellant.” Hoffman v.

Hoffman, 1st Dist. Hamilton Nos. C-170640 and C-170641, 2018-Ohio-3029, ¶ 5,

quoting In re Estate of Hughes, 94 Ohio App.3d 551, 554, 641 N.E.2d 248 (9th

Dist.1994). Here, Puretz suffered no prejudice or harm from the trial court’s failure to

rule on the objections, as we have already determined in our resolution of the first

assignment of error that Solomon’s affidavits and the referenced exhibits were

admissible. For these reasons, the trial court’s failure to rule on the objections to the

magistrate’s decision did not render the entry being appealed non-final.

       {¶71} We therefore hold that Puretz was not deprived of notice or of an

opportunity to be heard on the issue of damages, and we overrule the second

assignment of error. The judgment of the trial court is accordingly affirmed.

                                                                      Judgment affirmed.

BERGERON, P.J., and WINKLER, J., concur.

Please note:
       The court has recorded its own entry on the date of the release of this opinion.

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