Lender Not Entitled To Foreclosure Judgment Due To Failure To Prove Promissory Note Ownership, Says Ohio Appeals Court

In Ohio, the Akron Beacon Journal reports:

• The state attorney general's office is looking for new ways to slow foreclosures in court, hoping a recent Ohio appellate court decision will help in those efforts. [... Ohio Attorney General's Office representative Tom] Winters said the office was encouraged by a March 20 decision by the 10th District Court of Appeals in Columbus and is looking for similar cases.

• "That ruling was the first time that a court in Ohio has held that a mortgage company must prove that it still holds the mortgage to the home before it can proceed with a foreclosure," Winters said. "That's consistent with what the federal courts have done, and that's encouraging."

***

• "If we can slow the filings down and educate the homeowners on how they can negotiate to stay in their homes, then you have a better chance of resolving this stuff," Winters said. "It's not going to work for everybody, but right now nothing's been working for anybody, and that's the problem."

For more, see Ohio looking for new ways to slow foreclosures in court.

For the decision of of Ohio Court of Appeals, see Everhome Mtge. Co. v. Rowland, 2008-Ohio-1282; (Case #07AP-615; 3-20-08).

Editorial Note:

A quick reading of this case reveals that the Ohio trial judge originally hearing the foreclosure case ruled against the homeowner and held that the foreclosing lender didn't need to prove ownership or show how it came to be the holder of the mortgage. The homeowner subsequently filed an appeal of this ruling. Upon considering the appeal, the Ohio appeals court ruled that the trial judge's decision was in error and, accordingly, reversed the original ruling. Among other things, this case:

1. illustrates the fact that trial judges will make incorrect decisions from time to time, and
2. reflects the importance of being represented by an attorney who is ready, willing and able to file an appeal to seek a reversal of an incorrect decision. Had the attorney not known enough to file an appeal, the homeowner would have been stuck having to follow an incorrect ruling (and probably wouldn't have realized that the judge's ruling was wrong).

------------------

The following excerpts from the Ohio appeals court reflects its position on this issue:

• {¶11} "Every action shall be prosecuted in the name of the real party in interest." Civ.R. 17(A). A real party in interest is one who is directly benefited or injured by the outcome of the case. Shealy v. Campbell (1985), 20 Ohio St.3d 23, 24. The purpose behind the real-party-in-interest requirement is " 'to enable the defendant to avail himself of evidence and defenses that the defendant has against the real party in interest, and to assure him finality of the judgment, and that he will be protected against another suit brought by the real party at interest on the same matter.' " Id. at 24-25, quoting In re Highland Holiday Subdivision (1971), 27 Ohio App.2d 237, 240.

• {¶12} In foreclosure actions, the real party in interest is the current holder of the note and mortgage. Chase Manhattan Mtge. Corp. v. Smith, Hamilton App. No. C-061069, 2007-Ohio-5874, at ¶18; Kramer v. Millott (Sept. 23, 1994, Erie App. No. E-94-5 (because the plaintiff did not prove that she was the holder of the note and mortgage, she did not establish herself as a real party in interest). A party who fails to establish itself as the current holder is not entitled to judgment as a matter of law. First Union Natl. Bank v. Hufford (2001), 146 Ohio App.3d 673, 677, 679-680. Thus, in Hufford, the Third District Court of Appeals reversed a grant of summary judgment where a purported mortgagee failed to produce sufficient evidence explaining or demonstrating its right to the note and mortgage at issue. In that case, the record contained only "inferences and bald assertions" and no "clear statement or documentation" proving that the original holder of the note and mortgage transferred its interest to the appellee. Id. at 678. The failure to prove who was the real party in interest created a genuine issue of material fact that precluded summary judgment. Id. at 679-680.

• {¶13} Similarly, in Washington Mut. Bank, F.A. v. Green (2004), 156 Ohio App.3d 461, the Seventh District Court of Appeals reversed the trial court's finding of summary judgment where the plaintiff failed to prove that it was the holder of the note and mortgage. There, the defendant executed a note and mortgage in favor of Check 'n Go Mortgage Services, not Washington Mutual Bank, F.A. Although Washington Mutual Bank, F.A. submitted an affidavit alleging an interest in the note and mortgage, it did not state how or when it acquired that interest. Id. at 467. The court concluded that this lack of evidence defeated the purpose of Civ.R. 17(A) by exposing the defendant to the danger that multiple "holders" would seek foreclosure based upon the same note and mortgage. Id.

• {¶14} In the case at bar, the note and mortgage identify TrustCorp—not Everhome—as the lender. Therefore, Everhome needed to present the trial court with other evidence to prove its status as the current holder of the note and mortgage. To accomplish this, Everhome relied upon the affidavit testimony of Becky North, an Everhome officer. In her affidavit, North stated that "the copies of the Promissory Note and Mortgage Deed attached to Plaintiff's Complaint are true and accurate copies of the original instruments held by Plaintiff." (Emphasis in the original.) Beyond this tangential reference, North's affidavit contains no further averments regarding Everhome's interest in the note and mortgage.

• {¶15} We conclude that North's testimony is insufficient to establish that Everhome is the current holder of the note. First, Everhome failed to attach the note to its complaint. Thus, North's statement does not prove anything with regard to the note, much less that Everhome currently holds the note. Second, North does not specify how or when Everhome became the holder of the note and mortgage. Without evidence demonstrating the circumstances under which it received an interest in the note and mortgage, Everhome cannot establish itself as the holder.

• {¶16} Lacking the necessary evidence in the trial court record, Everhome attempts to introduce that evidence on appeal. In its brief, Everhome alleges that TrustCorp assigned to it TrustCorp's interest in the note and mortgage on April 19, 2007. Although evidence of an assignment would establish Everhome's status as the current holder of the note and mortgage, we cannot consider Everhome's belated allegation that an assignment occurred. See State v. Ishmail (1978), 54 Ohio St.2d 402, paragraph one of the syllabus ("A reviewing court cannot add matter to the record before it, which was not a part of the trial court's proceedings, and then decide the appeal on the basis of the new matter.").

Representing the homeowner in this case was Adam R. Todd of Dinsmore & Shohl, LLP.

.

---------------------

For other posts that reference the failure some mortgage lenders and their attorneys of filing madatory loan documents when starting foreclosures, Go Here , Go Here and Go Here.

For a consumer video devoted to the subject of making mortgage lenders produce the mandatory paperwork when filing a foreclosure action, see Fight Foreclosure: Make ‘Em Produce The Note!. missing mortgage foreclosure docs beta