Court Opinion

ID: 2777841
Source: CourtListenerOpinion
Date Created: 2015-02-09 14:04:49.923133+00
Date Added: 2024-06-11T11:28:06.725469
License: Public Domain

[Cite as Bank of New York Mellon v. Grund, 2015-Ohio-466.]

                                  IN THE COURT OF APPEALS

                              ELEVENTH APPELLATE DISTRICT

                                       LAKE COUNTY, OHIO

THE BANK OF NEW YORK MELLON,                          :      OPINION
SUCCESSOR IN INTEREST TO
JPMORGAN CHASE BANK, AS                               :
TRUSTEE FOR THE REGISTERED                                   CASE NO. 2014-L-025
HOLDERS OF NOVASTAR MORTGAGE                          :
FUNDING TRUST, SERIES 2004-3
NOVASTAR HOME EQUITY LOAN                             :
ASSET-BACKED CERTIFICATES,
SERIES 2004-3,                                        :

                 Plaintiff-Appellee,                  :

        - vs -                                        :

LOUIS F. GRUND, JR., et al.,                          :

                 Defendant-Appellant.                 :

Civil Appeal from the Lake County Court of Common Pleas, Case No. 12 CF 001669.

Judgment: Affirmed.

James S. Wertheim and Kimberly Y. Smith Rivera, McGlinchey Stafford, PLLC, 25550
Chagrin Boulevard, Suite 406, Cleveland, OH 44122-4640 (For Plaintiff-Appellee).

Dennis M. Callahan, 7665 Mentor Avenue, PMB #203, Mentor, OH                  44060 (For
Defendant-Appellant).

CYNTHIA WESTCOTT RICE, J.

        {¶1}     Appellant, Louis F. Grund, Jr., appeals the judgment of the Lake County

Court of Common Pleas granting appellee, The Bank of New York Mellon, Successor in

Interest to JP Morgan Chase Bank, As Trustee For the Registered Holders of Novastar
Mortgage Funding Trust, Series 2004-3 Novastar Home Equity Loan Asset-Backed

Certificates Series 2004-3 (“The Bank of New York”)’s motion for summary judgment on

its complaint for foreclosure against appellant. At issue is whether The Bank of New

York had standing when it filed this action. For the reasons that follow, we affirm.

       {¶2}   In August 2004, appellant obtained a mortgage loan from Novastar

Mortgage, Inc. to purchase a home in Willoughby, Ohio. On August 11, 2004, appellant

signed a note in favor of Novastar in the amount of $104,000. On that same date, in

order to secure the note, appellant signed a mortgage in favor of Mortgage Electronic

Registration Systems, Inc. (“MERS”), acting as nominee or agent of Novastar.

       {¶3}   Subsequently, Novastar endorsed the note in favor of JP Morgan Chase

Bank, while Novastar retained possession of the note.

       {¶4}   Appellant failed to make any of the monthly payments due on the note and

mortgage on and after October 1, 2011. On December 16, 2011, appellant was notified

of his default and the acceleration of the amount owed under the note.

       {¶5}   Thereafter, on March 21, 2012, Novastar executed an “allonge,” i.e., a

separate endorsement instrument, transferring the note to The Bank of New York. The

allonge was ineffective as a negotiation since Novastar, the original lender, had already

endorsed the note to JP Morgan Chase Bank. Thus, any subsequent endorsement

would have to be made by JP Morgan Chase Bank.

       {¶6}   With respect to the mortgage, on May 14, 2012, MERS, the original

mortgagee, assigned the mortgage to The Bank of New York.                The assignment

contained an error in The Bank of New York’s name, incorrectly indicating that The

Bank of New York was the “successor in interest to” JP Morgan Chase Bank, when, in

                                            2
fact, it was the “successor trustee of” JP Morgan Chase Bank. The mortgage was duly

recorded on May 30, 2012.

       {¶7}   On June 19, 2012, The Bank of New York filed a complaint in foreclosure

against appellant, alleging that he was in default on the note and mortgage in the

amount of $95,000; that all conditions precedent were met; and that the balance due

was accelerated. A copy of the note in favor of Novastar was attached to the complaint

containing the endorsement to JP Morgan Chase Bank along with the March 21, 2012

allonge transferring the note to The Bank of New York. A copy of the mortgage in favor

of MERS was also attached to the complaint along with a copy of the May 14, 2012

assignment of the mortgage from MERS to The Bank of New York.

       {¶8}   Appellant filed an answer, admitting he signed the note and mortgage.

The answer included an affirmative defense alleging that The Bank of New York lacked

standing.

       {¶9}   Subsequently, JP Morgan Chase Bank transferred the note via a revised

allonge to the Bank of New York. While the revised allonge was undated, it was signed

on or about July 18, 2013. This revised allonge was necessary because the original

allonge purported to transfer the note directly from Novastar to The Bank of New York.

Since the note had already been endorsed by Novastar to JP Morgan Chase Bank, the

transfer to The Bank of New York had to be made by JP Morgan Chase Bank, not

Novastar, in order to complete the note’s chain of title.

       {¶10} On July 18, 2013, The Bank of New York filed a notice of filing the revised

allonge.

                                             3
       {¶11} Thereafter, on August 26, 2013, MERS executed a Corrective Assignment

of Mortgage to correct the error in The Bank of New York’s name that appeared in the

May 14, 2012 assignment of the mortgage. The Corrective Assignment did not change

the identity of the assignee; rather, it merely corrected its name to indicate that The

Bank of New York was the “successor trustee,” not the “successor in interest” to JP

Morgan Chase Bank.

       {¶12} On October 7, 2013, The Bank of New York filed a “motion to substitute

the plaintiff.” The motion did not, however, seek to substitute a party (as provided for in

Civ.R. 25), but, rather, sought to correct The Bank of New York’s name as it appeared

on the assignment of mortgage.

       {¶13} The Bank of New York subsequently filed a motion for summary judgment.

In support of its motion, The Bank of New York attached the affidavit of Stephen Lee,

who stated he was employed by The Bank of New York’s servicing agent.                   He

authenticated the records pertaining to appellant’s mortgage loan, which were attached

to his affidavit. He stated that the last payment appellant made on his mortgage loan

was two years ago in October, 2011; that appellant was in default by failing to pay his

monthly payments when due; that The Bank of New York had accelerated all amounts

owed under the loan in compliance with the terms of the note and mortgage; and that

appellant owes $95,000 plus interest. Appellant filed a brief in opposition, but did not

file any countervailing affidavits or other Civ.R. 56 evidentiary materials in support. The

trial court entered judgment on February 3, 2014, granting The Bank of New York’s

motion for summary judgment; entering judgment in favor of The Bank of New York in

the amount of $95,000; and issuing a decree in foreclosure.

                                            4
      {¶14} Appellant appeals the court’s judgment, asserting two assignments of

error. Because they are related, they are considered together. They allege:

      {¶15} “[1.] The trial court committed prejudicial error in granting Plaintiff-Appellee

The Bank of New York Mellon’s motion for summary judgment where lack of standing

and a fraudulent allonge to the promissory note had been raised as affirmative

defenses, and more than a year after the complaint was filed, plaintiff-appellee

introduced a new undated allonge by way of simply filing a ‘notice.’

      {¶16} “[2.] The trial court committed prejudicial error in granting Plaintiff-Appellee

Bank of New York Mellon’s motion for summary judgment where lack of standing and a

faulty assignment of mortgage had been raised as affirmative defenses, and more than

a year after the complaint was filed, plaintiff-appellee introduced a new assignment of

mortgage by way of a misleading motion to substitute a new party plaintiff.”

      {¶17} Summary judgment is a procedural device intended to terminate litigation

and to avoid trial when there is nothing to try. Murphy v. Reynoldsburg, 65 Ohio St. 3d
356, 358 (1992). Summary judgment is proper when: (1) there is no genuine issue of

material fact; (2) the moving party is 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, that party being entitled to have the evidence construed most

strongly in his favor. Civ.R. 56(C); Leibreich v. A.J. Refrigeration, Inc., 67 Ohio St. 3d
266, 268 (1993).

      {¶18} The party seeking summary judgment on the ground that the nonmoving

party cannot prove his claim bears the initial burden of informing the trial court of the

basis for the motion and of identifying those portions of the record that demonstrate the

                                            5
absence of a genuine issue of material fact on the essential elements of the nonmoving

party’s claim. Dresher v. Burt, 75 Ohio St. 3d 280, 292 (1996).

      {¶19} The moving party must point to some evidence of the type listed in Civ.R.

56(C) that affirmatively demonstrates that the nonmoving party has no evidence to

support his claim. Dresher, supra, at 293.

      {¶20} If this initial burden is not met, the motion for summary judgment must be

denied. Id. However, if the moving party meets his initial burden, the nonmoving party

must then produce competent evidence showing there is a genuine issue for trial.

Civ.R. 56(E).   When a motion for summary judgment is made and supported as

provided in Civ.R. 56, the adverse party may not rest upon the mere allegations or

denials of his pleadings. The adverse party’s response must set forth specific facts by

affidavit or as otherwise provided by Civ.R. 56, showing that there is a genuine issue for

trial. Id. If the adverse party does not so respond, summary judgment, if appropriate,

shall be entered against him. Id.

      {¶21} Since a trial court’s decision ruling on a motion for summary judgment

involves only questions of law, we conduct a de novo review of the judgment. DiSanto

v. Safeco Ins. of Am., 168 Ohio App. 3d 649, 2006-Ohio-4940, ¶41 (11th Dist.).

      {¶22} In Ohio, courts of common pleas have jurisdiction over justiciable matters.

Ohio Constitution, Article IV, Section 4(B). “Standing 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, 523 U.S. 83, 102 (1998). Standing involves a determination of

whether a party has alleged a personal stake in the outcome of the controversy to

ensure the dispute will be presented in an adversarial context. Mortgage Elec.

                                             6
Registration Sys., Inc. v. Petry, 11th Dist. Portage No. 2008-P-0016, 2008-Ohio-5323,

¶18.

       {¶23} In a mortgage foreclosure action, the mortgage lender must establish an

interest in the promissory note or the mortgage in order to have standing to invoke the

jurisdiction of the common pleas court. Fed. Home Loan Mortg. Corp. v. Schwartzwald,

134 Ohio St. 3d 13, 2012-Ohio-5017, ¶28. Further, because standing is required to

invoke the trial court’s jurisdiction, standing is determined as of the filing of the

complaint.    Id. at ¶24. This court has repeatedly followed these holdings in

Schwartzwald. Fed. Home Loan Mortg. Corp. v. Rufo, 11th Dist. Ashtabula No. 2012-A-

0011, 2012-Ohio-5930, ¶18 (overruled in part on other grounds in CitiMortgage, Inc. v.

Oates, 11th Dist. Trumbull No. 2013-T-0011, 2013-Ohio-5077, ¶19); JPMorgan Chase

Bank, N.A. v. Blank, 11th Dist. Ashtabula No. 2013-A-0060, 2014-Ohio-4135, ¶17; Bank

of N.Y. Mellon v. Veccia, 11th Dist. Trumbull No. 2013-T-0101, 2014-Ohio-2711, ¶10.

Accord CitiMortgage, Inc. v. Patterson, 8th Dist. Cuyahoga No. 98360, 2012-Ohio-5894,

¶21. “The requirement of an ‘interest’ can be met by showing an assignment of either

the note or mortgage.” Fed. Home Loan Mtge. Corp. v. Koch, 11th Dist. Geauga No.

2012-G-3084, 2013-Ohio-4423, ¶24.

       {¶24} The Supreme Court of Ohio recently clarified its holding in Schwartzwald

in Bank of America, N.A. v. Kuchta, __Ohio St.3d __, 2014-Ohio-4275. In Kuchta, the

Court held that, while standing is a jurisdictional requirement in that a party’s lack of

standing will prevent him from invoking the court’s jurisdiction over his action, a party’s

ability to invoke the court’s jurisdiction involves the court’s jurisdiction over a particular

case, not subject-matter jurisdiction. Id. at ¶22.

                                              7
      {¶25} Whether standing exists is a matter of law that we review de novo. Bank

of Am., NA v. Barber, 11th Dist. Lake No. 2013-L-014, 2013-Ohio-4103, ¶19.

      {¶26} Appellant argues the trial court erred in relying on the revised allonge to

transfer the note to The Bank of New York because, as he alleged in his answer, the

allonge was “unlawfully fabricated” and endorsed by one who lacked authority to sign it.

As a result, he argues The Bank of New York did not hold the note when the complaint

was filed and thus did not have standing.        However, a party cannot rest on the

allegations of his pleadings in summary judgment proceedings. Civ.R. 56(E). Because

appellant failed to present any affidavits or other Civ.R. 56(C) evidentiary materials in

support of these allegations in his answer, the allegations are insufficient to avoid

summary judgment.

      {¶27} However, The Bank of New York concedes that the original allonge, dated

March 21, 2012, attached to the note purporting to transfer it from Novastar, the original

lender, to The Bank of New York was ineffective as a negotiation because the note itself

shows an endorsement by Novastar to JP Morgan Chase Bank. Thus, any subsequent

negotiation of the note was required to be made by JP Morgan Chase Bank, not

Novastar.    Such a transfer was made via a revised allonge, pursuant to which JP

Morgan Chase Bank transferred the note to The Bank of New York. However, as

appellant correctly argues, this revised allonge is not dated. The only evidence of its

date is that it was filed in the trial court on July 18, 2013, one year after the complaint

was filed.   This court has stated that every assignment in the chain of title of a

promissory note must be proved. Premier Capital, LLC v. Baker, 11th Dist. Portage No.

2011-P-0041, 2012-Ohio-2834, ¶39. Because there is no evidence the revised allonge

                                            8
was executed before the complaint was filed, The Bank of New York could not rely on it

to give it standing as a holder of the note.

       {¶28} The Bank of New York’s Standing as a Non-Holder in Possession of

the Note

       {¶29} However, this is not the end of the analysis. R.C. 1303.31 provides in

pertinent part:

       {¶30} (A) “Person entitled to enforce” an instrument means any of the

              following persons:

       {¶31} (1) The holder of the instrument; [or]

       {¶32} (2) A non holder in possession of the instrument who has the rights

              of a holder * * *.

       {¶33} Further, R.C. 1303.22(A) provides: “An instrument is transferred when it is

delivered by a person other than its [maker] for the purpose of giving to the person

receiving delivery the right to enforce the instrument.”      Moreover, “[t]ransfer of an

instrument, whether or not the transfer is a negotiation, vests in the transferee any right

of the transferor to enforce the instrument * * *.” R.C. 1303.22(B).

       {¶34} A “holder” is “[t]he person in possession of a negotiable instrument that is

payable either to bearer or to an identified person that is the person in possession.”

R.C. 1301.201(B)(21).

       {¶35} The Second District in LaSalle Bank Natl. Assn. v. Brown, 2d Dist.

Montgomery No. 25822, 2014-Ohio-3261, stated, “a person need not be a ‘holder’ of the

instrument in order to be entitled to enforce it. Instead, a person can be a non-holder in

possession of the instrument who has the rights of a holder. This status can be

                                               9
bestowed in various ways.” Id. at ¶36. By way of explanation, the Second District in

Brown quoted In re Veal, 450 B.R. 897 (Bankr.9th Dist.Ariz. 2011), as follows:

           {¶36} [A] person becomes a nonholder in possession if the physical

                 delivery of the note to that person constitutes a “transfer” but not a

                 “negotiation.” * * * Under the UCC, a “transfer” of a negotiable

                 instrument “vests in the transferee any right of the transferor to

                 enforce the instrument.” UCC § 3-203(b). As a result, if a holder

                 transfers the note to another person by a process not involving an

                 Article 3 negotiation * * * that other person (the transferee) obtains

                 from the holder the right to enforce the note even if no negotiation

                 takes place and, thus, the transferee does not become an Article 3

                 “holder.” Brown, supra at ¶36, quoting Veal at 911.

       {¶37} To further explain the point, the Second District in Brown quoted Fifth

Third Mtge. Co. v. Bell, 12th Dist. Madison No. CA2013-02-003, 2013-Ohio-3678, as

follows:

           {¶38} An instrument is transferred when it is delivered by a person, other

                 than the [maker], for the purpose of giving the person receiving the

                 delivery the right to enforce. R.C. 1303.22(A). If the transferee is

                 not a holder because the transferor did not endorse, the transferee

                 is nevertheless a person entitled to enforce the instrument if the

                 transferor was a holder at the time of transfer. R.C. 1303.22(B);

                 R.C. 1303.22 cmt. 2.

                                              10
       {¶39} [Fifth Third’s] allegations that it was in possession of a note and

             entitled to enforce it, combined with the copy of the unendorsed

             note,   at     the   very   minimum,     demonstrated      that   [Fifth

             Third] was entitled to enforce as a nonholder in possession. See

             R.C. 1303.22(B) * * *. The note attached to the complaint was

             payable to State Savings Bank. Therefore, State Savings Bank

             was the initial holder because the note was payable to it as an

             identified person. R.C. 1303.25(A). The fact that [Fifth Third] was

             in possession of the unendorsed note along with language used in

             the mortgage and the assignment of the mortgage showed a chain

             of custody and indicated that State Savings Bank or some other

             person transferred the note to [Fifth Third] with the intent that [Fifth

             Third] be entitled to enforce the note. Bell [the defendant

             mortgagor] never challenged [Fifth Third’s] possession of this

             unendorsed note. Based on these facts, [Fifth Third] had an

             interest in the note as a non-holder in possession. Brown at ¶37,

             quoting Bell at ¶20-22.

      {¶40} Here, Mr. Lee stated in his affidavit that at the time of the filing of the

complaint and continuously since, The Bank of New York has been in possession of the

original promissory note.    Moreover, appellant never challenged The Bank of New

York’s possession of the note. Further, the note was endorsed by Novastar to The Bank

of New York on March 21, 2012, when Novastar was still the holder of the note. The

March 21, 2012 allonge (which was incorporated into the note) states that the allonge

                                           11
transfers the note from “the present Owner and Holder of the Note, NOVASTAR

MORTGAGE, INC. (‘Transferor’) as of [March 21, 2012]. As a result of said transfer,

NOVASTAR MORTGAGE, INC. has no further interest in the Note.” The problem with

the purported negotiation from Novastar to The Bank of New York is that the note was

previously endorsed by Novastar to JP Morgan Chase Bank. Thus, the March 21, 2012

endorsement from Novastar to The Bank of New York by allonge was ineffective as a

negotiation. However, Novastar’s transfer of the note to The Bank of New York via the

March 21, 2012 allonge coupled with Novastar’s delivery of the note to The Bank of

New York evidenced Novastar’s intent to give The Bank of New York the right to

enforce it. As a result, pursuant to R.C. 1303.22(B), The Bank of New York was a non-

holder in possession with the right to enforce the note as of March 21, 2012, and thus

had standing when it filed the complaint two months later.

       {¶41} The Bank of New York’s Standing as the Mortgage Holder

       {¶42} In any event, even if the note was not transferred to The Bank of New

York when the complaint was filed, The Bank of New York had standing because the

mortgage was assigned to it on May 14, 2012, one month before the complaint was

filed. Appellant argues the mortgage did not confer standing on The Bank of New York

because the revised assignment correcting The Bank of New York’s name was

executed after the complaint was filed.     However, appellant cites no case law holding

that a party cannot correct its name on a mortgage assignment. In fact, Ohio case law

supports the opposition conclusion. In Wells Fargo Bank NA v. Arlington, 5th Dist.

Delaware No. 13CAE030016, 2013-Ohio-4659, the name of the assignor was corrected

after the complaint was filed. The Fifth District stated:

                                             12
        {¶43} On March 20, 2007, MERS assigned the Mortgage to Wells Fargo.

               The original Assignment of Mortgage stated, “Mortgage Electronic

               Registration Systems, Inc. * * * does hereby sell, assign, transfer

               and set over unto Wells Fargo Bank, N.A. * * * a certain mortgage

               from Dean E. Arlington * * *.” * * * [Wells Fargo filed its complaint in

               foreclosure on January 11, 2008.] On July 20, 2010, Wells Fargo

               executed a corrective Assignment of Mortgage * * *. The correction

               changed the name of the assignor to: “Mortgage Electronic

               Registration Systems, Inc., as nominee for Taylor, Bean &

               Whitaker Mortgage Corp., its successors and assigns.”

               ***

       {¶44}   A reading of the Mortgage and the Assignment of Mortgage shows

               that MERS, as nominee for TBW, assigned the Mortgage to Wells

               Fargo prior to the filing of the complaint in foreclosure. (Emphasis

               added.) Id. at ¶32, ¶34.

       {¶45} It is worth noting that appellant concedes in his brief, “There wasn’t a new

plaintiff. The original plaintiff and the substitute plaintiff were the same, The Bank of

New York Mellon.” Although the Bank of New York inartfully referred to its motion to

correct its name as a “motion to substitute the plaintiff,” appellant concedes the motion

did not substitute another party for the original plaintiff, but simply corrected The Bank of

New York’s name.

       {¶46} Applying the Fifth District’s rationale in Arlington, supra, to the facts of this

case, the mortgage, the May 14, 2012 mortgage assignment, and the August 26, 2013

                                             13
corrected assignment, when read together, show that MERS assigned the mortgage to

The Bank of New York under its corrected name, effective May 14, 2012. Because The

Bank of New York held the mortgage one month before the filing of the complaint, it had

standing to file this action.

       {¶47} The Bank of New York’s Standing Based on The Assignment of the

Mortgage To The Bank

       {¶48} Further, MERS’ assignment of the mortgage to The Bank of New York on

May 14, 2012, was sufficient to transfer both the mortgage and the note. Bank of New

York v. Dobbs, 5th Dist. Knox No. 2009-CA-000002, 2009-Ohio-4742, ¶28. In Dobbs,

the Fifth District stated:

        {¶49} The Restatement [III, Property (Mortgages)] asserts as its

                essential premise * * * that it is nearly always sensible to keep the

                mortgage and the [note] it secures in the hands of the same party.

                This is because in a practical sense separating the mortgage from

                the [note] destroys the efficacy of the mortgage, and the note

                becomes      unsecured.   The     Restatement   concedes   on   rare

                occasions a mortgagee will disassociate the [note] from the

                mortgage, but courts should reach this result only upon evidence

                that the parties to the transfer agreed. Far more commonly, the

                intent is to keep the rights combined * * *. Thus, the Restatement

                [provides] that transfer of the [note] also transfers the mortgage

                and vice versa. Section 5.4(b) [provides] “Except as otherwise

                required by the Uniform Commercial Code, a transfer of a

                                             14
               mortgage also transfers the [note] the mortgage secures unless

               the parties to the transfer agree otherwise.” Thus, [the note]

               follows the mortgage if the record indicates the parties so

               intended. (Emphasis added.) Dobbs, supra, at ¶28. (Emphasis

               added.)

        {¶50} The Fifth District in Dobbs held that the assignment of a mortgage, without

an express transfer of the note, is sufficient to transfer both the mortgage and the note,

if the record indicates that the parties intended to transfer both. Id. at ¶31.

        {¶51} Here, the mortgage provides that it secures to the Lender, Novastar, the

performance of appellant’s agreements under the promissory note. Further, the note

provides that the mortgage, dated the same date as the note, protects the holder of the

note from loss that might result if appellant does not keep the promises made in the

note.

        {¶52} In addressing the provisions in the note and mortgage at issue in Dobbs,

supra, which are virtually identical to those at issue here, the Fifth District held:

"Because the note refers to the mortgage and the mortgage, in turn, refers to the note,

we find a clear intent by the parties to keep the note and mortgage together, rather than

transferring the mortgage alone." Id. at ¶36.

        {¶53} We therefore hold that the instant note and mortgage evidenced the

parties’ intent to keep the instruments together. Thus, the assignment of the mortgage

to The Bank of New York on May 14, 2012, even without an express transfer of the

note, was sufficient to transfer both the mortgage and the note. Thus, The Bank of New

                                              15
York had an interest in the note and mortgage before filing the complaint. It therefore

had standing, pursuant to Schwartzwald, supra, to file this foreclosure action.

      {¶54} Based on the foregoing analysis, the trial court did not err in granting

summary judgment in favor of The Bank of New York.

      {¶55} For the reasons stated in this opinion, the assignments of error lack merit.

It is the order and judgment of this court that the judgment of the Lake County Court of

Common Pleas is affirmed.

COLLEEN MARY O’TOOLE, concurs in judgment only,

DIANE V. GRENDELL, J., concurs with a Concurring Opinion.

                              _______________________

DIANE V. GRENDELL, J., concurs with a Concurring Opinion.

      {¶56} I concur in the majority’s decision, affirming the judgment of the trial court,

and its holding that the Bank of New York Mellon had standing in this matter. I write

separately to expand upon and clarify one important issue regarding how the Bank

acquired standing.

      {¶57} In this case, the majority concludes that, although the March 21, 2012

allonge which purported to transfer Novastar’s interest in the note to the Bank of New

York was ineffective as a negotiation, the transfer of the note via the allonge coupled

with its delivery evidenced Novastar’s intent to give the Bank of New York the right to

enforce the note. While I agree with the proposition that a non-holder, who has not

                                           16
obtained holder status due to an ineffective negotiation, may be permitted to enforce the

note, certain conditions must be met for a party to become entitled to enforce.

       {¶58} Importantly, the transfer of the note under such circumstances must be

from a holder, as is outlined by the majority. Supra at ¶ 36-38; R.C. 1303.22. Thus,

Novastar was required to be a holder at the time it transferred possession of the note to

the Bank of New York. This is a logical application of the law, since holding otherwise

would allow a party to transfer a note in which it does not hold an interest.

       {¶59} With this in mind, it is important to thoroughly consider whether Novastar

was the holder at the time of the transfer to the Bank of New York. As to this critical

issue, the majority states only that Novastar was the holder of the note on March 21,

2012, at the time of the allonge, relying solely on Novastar’s statement in the allonge

that it “transfers the note from ‘the present Owner and Holder of the Note, NOVASTAR

MORTGAGE, INC.’” Supra at ¶ 40. The fact that Novastar claimed to be the holder in

the allonge is, alone, insufficient to establish that it actually was the holder.

       {¶60} This is especially true given the facts of this case, where Novastar

endorsed the note to another party, JP Morgan, previously and then still claimed to be

the holder at the time it endorsed the note to the Bank of New York. The holder is “[t]he

person in possession of a negotiable instrument that is payable either to bearer or to an

identified person that is the person in possession.” R.C. 1301.201(B)(21)(a). Here, the

note was neither payable to bearer, since it had been endorsed to JP Morgan, nor was

it payable to the party in possession, Novastar.

       {¶61} However, it is still appropriate to find that Novastar could grant the rights

of a holder to the Bank of New York. Novastar claimed at the summary judgment stage

                                              17
to always have been the holder of the note, with JP Morgan having been a trustee.

Grund admitted in his motion for summary judgment that Novastar never transferred

possession of the mortgage to JP Morgan and that he was unaware of where the note is

located. He does not claim that it was in the possession of JP Morgan. If the note was

not given to JP Morgan, the note would not have been properly negotiated and

Novastar would presumably remain the holder, in the absence of any evidence that it

was acting as JP Morgan’s agent. See R.C. 1303.21(A); U.S. Bank Natl. Assn. v. Gray,

10th Dist. Franklin No. 12AP-953, 2013-Ohio-3340, ¶ 25, citing UCC Official Comment,

Section 3-201, Comment 1 (1990) (“[n]egotiation always requires a change in

possession of the instrument because nobody can be a holder without possessing the

instrument, either directly or through an agent”) (emphasis omitted).

      {¶62} With the foregoing clarification, I concur in the majority’s judgment.

                                           18