[Cite as 2010-CRE Venture, LLC v. Costanzo, 2011-Ohio-3530.]
COURT OF APPEALS DELAWARE COUNTY, OHIO FIFTH APPELLATE DISTRICT
2010-1 CRE VENTURE, LLC JUDGES: Hon. Patricia A. Delaney, P. J. Plaintiff-Appellee Hon. Sheila G. Farmer, J. Hon. John W. Wise, J. -vs- Case No. 11 CAE 01 003 MICHAEL D. COSTANZO
Defendant-Appellant OPINION
CHARACTER OF PROCEEDING: Civil Appeal from the Court of Common Pleas, Case No. 10 CVH 12 1781
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: July 14, 2011
APPEARANCES:
For Plaintiff-Appellee For Defendant-Appellant
ZACHARY D. PRENDERGAST STEPHEN D. MARTIN GRAYDON HEAD & RITCHEY LLP MANOS, MARTIN, PERGRAM 1900 Fifth Third Center & DIETZ CO., LPA 511 Walnut Street, P. O. Box 6464 50 North Sandusky Street Cincinnati, Ohio 45202 Delaware, Ohio 43015-1926 Delaware County, Case No. 11 CAE 01 003 2
Wise, J.
{¶1} This is an appeal by Defendant-Appellant Michael D. Costanzo from the
December 14, 2010, Judgment Entry of the Delaware County Common Pleas Court
entering judgment in favor of Plaintiff-Appellee 2010-1 CRE Venture LLC.
STATEMENT OF THE FACTS AND CASE
{¶2} This case arose out of an action for a breach of a commercial promissory
note. The relevant facts are as follows:
{¶3} On September 20, 2002, Appellant Michael D. Costanzo executed a
Cognovit Promissory Note in favor of The Home Savings and Loan Company of
Youngstown, Ohio ("Home Savings”). Home Savings then negotiated the Note to First
Bank of Beverly Hills, F.S.B. ("FBBH") by virtue of an Assignment of Mortgage. Then,
the Federal Deposit Insurance Corporation ("FDIC"), as the Receiver for FBBH,
negotiated the Note to Appellee 2010-1 CRE Venture, LLC by virtue of an Allonge.
{¶4} Costanzo defaulted on the Note, and currently owes CRE Venture over
$1.7 million. As a result of this default, CRE Venture accelerated the Note and on
December 10, 2010, CRE Venture filed a Complaint on Cognovit Promissory Note
against Costanzo. In the Complaint, CRE Venture prayed for a money judgment against
Costanzo for breach of the Cognovit Promissory Note. Appellee attached a copy of the
Note, with the Assignment and the Allonge, to its Complaint, marked as Exhibit A.
{¶5} At the same time, CRE Venture also filed an Answer and Confession of
Judgment and a Motion to Enter Judgment on the Plaintiff’s Complaint. Attached to the
Motion was a supporting Affidavit of Ed Dailey, the managing member of 2010-CRE
Venture, LLC. Delaware County, Case No. 11 CAE 01 0003 3
{¶6} Along with these pleadings, CRE Venture also filed the original copy of the
Note, which was docketed on December 14, 2010, and is currently on file of the
Delaware County Clerk's Office.
{¶7} By Judgment Entry filed December 14, 2010, the trial court granted
judgment on Appellee’s Complaint.
{¶8} Appellant now appeals, assigning the following error for review:
ASSIGNMENT OF ERROR
{¶9} “I. THE TRIAL COURT COMMITTED PREJUDICIAL ERROR, AS A
MATTER OF LAW, BY ENTERING A JUDGMENT IN FAVOR OF APPELLEE.”
I.
{¶10} In his sole assignment of error, Appellant argues that Appellee 2010-1
CRE Venture, LLC is not the real party in interest and did not have standing to bring this
action to enforce the Note. We disagree.
{¶11} Appellant argues that Home Savings and Loan Company of Youngstown
is the holder of the Cognovit Promissory Note which is the subject of this appeal, and
that Appellee has failed to provide any evidence that the Note was endorsed1 to 2010-1
CRE Venture, LLC by Home Savings.
{¶12} R.C. §1303.31 identifies three classes of persons who are “entitled to
enforce” an instrument, such as a note:
{¶13} “(A) “Person entitled to enforce” an instrument means any of the following
persons:
{¶14} “(1) The holder of the instrument;
1 The Uniform Commercial Code uses “indorsement,” the alternate spelling. Delaware County, Case No. 11 CAE 01 0003 4
{¶15} “(2) A non-holder in possession of the instrument who has the rights of a
holder;
{¶16} “(3) A person not in possession of the instrument who is entitled to enforce
the instrument pursuant to Section 1303.38 or division (D) of section 1303.58 of the
Revised Code.
{¶17} “(B) A person may be a “person entitled to enforce” the instrument even
though the person is not the owner of the instrument or is in wrongful possession of the
instrument.”
{¶18} With respect to negotiable instruments, “holder” means either:
{¶19} “(a) If the instrument is payable to bearer, a person who is in possession
of the instrument;
{¶20} “(b) If the instrument is payable to an identified person, the identified
person when in possession of the instrument.” R.C. §1301.01(T)(1).
{¶21} “An instrument is transferred when it is delivered by a person other than its
issuer for the purpose of giving to the person receiving delivery the right to enforce the
instrument.” R.C. §1303.22(A). The transfer of an instrument vests in the transferee any
right of the transferor to enforce the instrument. R.C. §1303.22(B).
{¶22} “Negotiation” is a particular type of transfer. Specifically, “negotiation”
means “a voluntary or involuntary transfer of possession of an instrument by a person
other than the issuer to a person who by the transfer becomes the holder of the
instrument.” R.C. §1303.21(A). “Except for negotiation by a remitter, if an instrument is
payable to an identified person, negotiation requires transfer of possession of the Delaware County, Case No. 11 CAE 01 0003 5
instrument and its indorsement by the holder. If an instrument is payable to bearer, it
may be negotiated by transfer of possession alone.” R.C. §1303.21(B).
{¶23} In the case sub judice, we find that Appellee was the holder of the note as
it had “possession” of the original Note as evidenced by its filing with the Delaware
County Clerk’s office, and that such note was “negotiated” to Appellee by virtue of the
endorsements in the form of an Assignment and an Allonge attached to the Note.
{¶24} We therefore find that Appellee CRE Venture had standing to bring this
action as a “person entitled to enforce” pursuant to R.C. §1303.01.
{¶25} In Bank of New York v. Dobbs, Knox App. No. 2009-CA-2, 2009-Ohio-
4742, this Court held that the assignment of a mortgage is sufficient to establish the
transfer of the note, and vice versa, stating:
{¶26} “In Ohio it has been held that transfer of the note implies transfer of the
mortgage. In Lasalle Bank National Association v. Street, Licking App. No. 08CA60,
2009-Ohio-1855, this Court stated:
{¶27} “Where a note secured by a mortgage is transferred so as to vest the legal
title to the note in the transferee, such transfer operates as an equitable assignment of
the mortgage, even though the mortgage is not assigned or delivered. Kuck v. Sommers
(1950), 59 Ohio Law Abs. 400, 100 N.E.2d 68, 75. Furthermore, Ohio courts have
recognized that technical noncompliance with Civ.R. 56 authentication procedures is not
prejudicial if the authenticity of the supporting documents is not called into question.
See Insurance Outlet Agency, Inc. v. American Medical Sec., Inc., Licking App. No. 01
CA 118, 2002-Ohio-4268, paragraph 13, citing Knowlton v. Knowlton Co. (1983), 10
Ohio App.3d 82,
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[Cite as 2010-CRE Venture, LLC v. Costanzo, 2011-Ohio-3530.]
COURT OF APPEALS DELAWARE COUNTY, OHIO FIFTH APPELLATE DISTRICT
2010-1 CRE VENTURE, LLC JUDGES: Hon. Patricia A. Delaney, P. J. Plaintiff-Appellee Hon. Sheila G. Farmer, J. Hon. John W. Wise, J. -vs- Case No. 11 CAE 01 003 MICHAEL D. COSTANZO
Defendant-Appellant OPINION
CHARACTER OF PROCEEDING: Civil Appeal from the Court of Common Pleas, Case No. 10 CVH 12 1781
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: July 14, 2011
APPEARANCES:
For Plaintiff-Appellee For Defendant-Appellant
ZACHARY D. PRENDERGAST STEPHEN D. MARTIN GRAYDON HEAD & RITCHEY LLP MANOS, MARTIN, PERGRAM 1900 Fifth Third Center & DIETZ CO., LPA 511 Walnut Street, P. O. Box 6464 50 North Sandusky Street Cincinnati, Ohio 45202 Delaware, Ohio 43015-1926 Delaware County, Case No. 11 CAE 01 003 2
Wise, J.
{¶1} This is an appeal by Defendant-Appellant Michael D. Costanzo from the
December 14, 2010, Judgment Entry of the Delaware County Common Pleas Court
entering judgment in favor of Plaintiff-Appellee 2010-1 CRE Venture LLC.
STATEMENT OF THE FACTS AND CASE
{¶2} This case arose out of an action for a breach of a commercial promissory
note. The relevant facts are as follows:
{¶3} On September 20, 2002, Appellant Michael D. Costanzo executed a
Cognovit Promissory Note in favor of The Home Savings and Loan Company of
Youngstown, Ohio ("Home Savings”). Home Savings then negotiated the Note to First
Bank of Beverly Hills, F.S.B. ("FBBH") by virtue of an Assignment of Mortgage. Then,
the Federal Deposit Insurance Corporation ("FDIC"), as the Receiver for FBBH,
negotiated the Note to Appellee 2010-1 CRE Venture, LLC by virtue of an Allonge.
{¶4} Costanzo defaulted on the Note, and currently owes CRE Venture over
$1.7 million. As a result of this default, CRE Venture accelerated the Note and on
December 10, 2010, CRE Venture filed a Complaint on Cognovit Promissory Note
against Costanzo. In the Complaint, CRE Venture prayed for a money judgment against
Costanzo for breach of the Cognovit Promissory Note. Appellee attached a copy of the
Note, with the Assignment and the Allonge, to its Complaint, marked as Exhibit A.
{¶5} At the same time, CRE Venture also filed an Answer and Confession of
Judgment and a Motion to Enter Judgment on the Plaintiff’s Complaint. Attached to the
Motion was a supporting Affidavit of Ed Dailey, the managing member of 2010-CRE
Venture, LLC. Delaware County, Case No. 11 CAE 01 0003 3
{¶6} Along with these pleadings, CRE Venture also filed the original copy of the
Note, which was docketed on December 14, 2010, and is currently on file of the
Delaware County Clerk's Office.
{¶7} By Judgment Entry filed December 14, 2010, the trial court granted
judgment on Appellee’s Complaint.
{¶8} Appellant now appeals, assigning the following error for review:
ASSIGNMENT OF ERROR
{¶9} “I. THE TRIAL COURT COMMITTED PREJUDICIAL ERROR, AS A
MATTER OF LAW, BY ENTERING A JUDGMENT IN FAVOR OF APPELLEE.”
I.
{¶10} In his sole assignment of error, Appellant argues that Appellee 2010-1
CRE Venture, LLC is not the real party in interest and did not have standing to bring this
action to enforce the Note. We disagree.
{¶11} Appellant argues that Home Savings and Loan Company of Youngstown
is the holder of the Cognovit Promissory Note which is the subject of this appeal, and
that Appellee has failed to provide any evidence that the Note was endorsed1 to 2010-1
CRE Venture, LLC by Home Savings.
{¶12} R.C. §1303.31 identifies three classes of persons who are “entitled to
enforce” an instrument, such as a note:
{¶13} “(A) “Person entitled to enforce” an instrument means any of the following
persons:
{¶14} “(1) The holder of the instrument;
1 The Uniform Commercial Code uses “indorsement,” the alternate spelling. Delaware County, Case No. 11 CAE 01 0003 4
{¶15} “(2) A non-holder in possession of the instrument who has the rights of a
holder;
{¶16} “(3) A person not in possession of the instrument who is entitled to enforce
the instrument pursuant to Section 1303.38 or division (D) of section 1303.58 of the
Revised Code.
{¶17} “(B) A person may be a “person entitled to enforce” the instrument even
though the person is not the owner of the instrument or is in wrongful possession of the
instrument.”
{¶18} With respect to negotiable instruments, “holder” means either:
{¶19} “(a) If the instrument is payable to bearer, a person who is in possession
of the instrument;
{¶20} “(b) If the instrument is payable to an identified person, the identified
person when in possession of the instrument.” R.C. §1301.01(T)(1).
{¶21} “An instrument is transferred when it is delivered by a person other than its
issuer for the purpose of giving to the person receiving delivery the right to enforce the
instrument.” R.C. §1303.22(A). The transfer of an instrument vests in the transferee any
right of the transferor to enforce the instrument. R.C. §1303.22(B).
{¶22} “Negotiation” is a particular type of transfer. Specifically, “negotiation”
means “a voluntary or involuntary transfer of possession of an instrument by a person
other than the issuer to a person who by the transfer becomes the holder of the
instrument.” R.C. §1303.21(A). “Except for negotiation by a remitter, if an instrument is
payable to an identified person, negotiation requires transfer of possession of the Delaware County, Case No. 11 CAE 01 0003 5
instrument and its indorsement by the holder. If an instrument is payable to bearer, it
may be negotiated by transfer of possession alone.” R.C. §1303.21(B).
{¶23} In the case sub judice, we find that Appellee was the holder of the note as
it had “possession” of the original Note as evidenced by its filing with the Delaware
County Clerk’s office, and that such note was “negotiated” to Appellee by virtue of the
endorsements in the form of an Assignment and an Allonge attached to the Note.
{¶24} We therefore find that Appellee CRE Venture had standing to bring this
action as a “person entitled to enforce” pursuant to R.C. §1303.01.
{¶25} In Bank of New York v. Dobbs, Knox App. No. 2009-CA-2, 2009-Ohio-
4742, this Court held that the assignment of a mortgage is sufficient to establish the
transfer of the note, and vice versa, stating:
{¶26} “In Ohio it has been held that transfer of the note implies transfer of the
mortgage. In Lasalle Bank National Association v. Street, Licking App. No. 08CA60,
2009-Ohio-1855, this Court stated:
{¶27} “Where a note secured by a mortgage is transferred so as to vest the legal
title to the note in the transferee, such transfer operates as an equitable assignment of
the mortgage, even though the mortgage is not assigned or delivered. Kuck v. Sommers
(1950), 59 Ohio Law Abs. 400, 100 N.E.2d 68, 75. Furthermore, Ohio courts have
recognized that technical noncompliance with Civ.R. 56 authentication procedures is not
prejudicial if the authenticity of the supporting documents is not called into question.
See Insurance Outlet Agency, Inc. v. American Medical Sec., Inc., Licking App. No. 01
CA 118, 2002-Ohio-4268, paragraph 13, citing Knowlton v. Knowlton Co. (1983), 10
Ohio App.3d 82, 460 N.E.2d 632; International Brotherhood of Electrical Workers v. Delaware County, Case No. 11 CAE 01 0003 6
Smith (1992), 76 Ohio App.3d 652, 602 N.E.2d 782; In re: Foreclosure of Liens (Feb. 9,
2000), Harrison App. No. 96-489-CA. In the case sub judice, Appellants did not
expressly contradict the evidence of ownership via their memorandum contra or
affidavit; as such, we hold Appellants' “real party in interest” argument must fail. Cf.
Provident Bank v. Taylor, Delaware App.No. 04CAE05042, 2005-Ohio-2573, paragraph
17.” Street, at paragraph 28.
{¶28} “Particularly given the present state of banking and financing it makes little
sense not to apply this reasoning to transfers of mortgages without express transfer of
the note, where the record indicates it was the intention of the parties to transfer both.”
{¶29} Next, Appellant argues that the Complaint in this case does not expressly
state that the Allonge was affixed to the Cognovit Promissory Note in this case. We find
this argument to be without merit.
{¶30} Upon reviewing the record, we find that the Assignment of Interest to the
Mortgage to First Bank of Beverly Hills, F.S.B., and the Allonge to 2010-1 CRE Venture,
LLC were “affixed” and/or attached to the Cognovit Promissory Note which was
attached to the Complaint when it was filed with the Delaware County Common Pleas
Court. We further note, although we do not find such to be a requirement, that Appellee
stated “[a] copy of the Note with the Assignment and Allonge are attached as Exhibit A”
at the end of paragraph 1 in its Complaint.
{¶31} Finally, Appellant argues that Appellee only received a “beneficial interest
in the Note or Notes” through the “Assignment of Interest to Mortgage”, rather than all of
Home Savings’ interest in the Cognovit Promissory Note. Delaware County, Case No. 11 CAE 01 0003 7
{¶32} Appellee provides no further explanation, through case law or otherwise,
to support this argument. Upon review, we find this argument to be without merit.
{¶33} Appellant’s sole assignment of error is overruled.
{¶34} For the foregoing reasons, the judgment of the Court of Common Pleas of
Delaware County , Ohio, is affirmed.
By: Wise, J.
Delaney, P. J., and
Farmer, J., concur.
___________________________________
JUDGES JWW/d 0628 Delaware County, Case No. 11 CAE 01 003 8
IN THE COURT OF APPEALS FOR DELAWARE COUNTY, OHIO FIFTH APPELLATE DISTRICT
2010-1 CRE VENTURE, LLC : : Plaintiff-Appellee : : -vs- : JUDGMENT ENTRY : MICHAEL D. COSTANZO : : Defendant-Appellant : Case No. 11 CAE 01 003
For the reasons stated in our accompanying Memorandum-Opinion, the
judgment of the Court of Common Pleas of Delaware County, Ohio, is affirmed.
Costs assessed to Appellant.
JUDGES