Bank of New York v. Baird

2012 Ohio 4975

• Court: Ohio Court of Appeals
• Decided: October 26, 2012
• Docket: 2012-CA-28
• Status: Published

Opinion

[Cite as Bank of New York v. Baird, 2012-Ohio-4975.]

IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT CLARK COUNTY

THE BANK OF NEW YORK MELLON, : fka The Bank of New York, as Trustee : Appellate Case No. 2012-CA-28 for the Certificateholders of the CWABS : Inc., Asset-Backed Certificates, : Trial Court Case No. 11-CV-878 Series 2006-10 : : Plaintiff-Appellee : : (Civil Appeal from v. : (Common Pleas Court) : JEFFREY D. BAIRD, et al. : : Defendant-Appellant : : ...........

OPINION

Rendered on the 26th day of October, 2012.

...........

JAMES S. WERTHEIM, Atty. Reg. #0029464, and MARIA CANDACE BURNETTE, Atty. Reg. #0088507, McGlinchey Stafford PLLC, 25550 Chagrin Boulevard, Suite 406, Cleveland, Ohio 44122-4640 Attorneys for Plaintiff-Appellee, The Bank of New York Mellon

MARC E. DANN, Atty. Reg. #0039425, and GRACE DOBERDRUK, Atty. Reg. #0085547, Dann, Doberdruk & Wellen LLC, 4600 Prospect Avenue, Cleveland, Ohio 44103 Attorneys for Defendant-Appellant, Jeffrey D. Baird

............. HALL, J.

{¶ 1} Jeffrey Baird appeals from an order denying his Civ.R. 60(B)(3) motion to

vacate a final judgment of foreclosure and denying his Civ.R. 12(B)(1) motion to dismiss for

lack of subject-matter jurisdiction. Finding no error, we affirm.

I. The Facts

{¶ 2} In May 2006, Baird bought a house with a loan from Countrywide Home

Loans, Inc. He signed a promissory note in favor of Countrywide. And as security for the loan,

Baird also signed a mortgage agreement in favor of Mortgage Electronic Registration

Systems, Inc. (MERS), who was acting as Countrywide’s nominee. In August 2011, MERS

assigned the mortgage to Appellee, The Bank of New York Mellon, as Trustee for the

Certificateholders of the CWABS Inc., Asset-Backed Certificates, Series 2006-10. The

following month, the Bank, as Trustee, brought a foreclosure action against Baird. The Bank’s

complaint alleges that Baird owes $59,877.91 plus interest on the loan. The Bank sought

judgment on the loan for this amount and sought an order of foreclosure.

{¶ 3} Attached to the Bank’s complaint are the promissory note and the mortgage

agreement. The mortgage agreement states that it was recorded in Clark County in May 2006.

Also attached is a signed and notarized document that purportedly assigned the mortgage to

the Bank. This assignment-of-mortgage document states that it was recorded in Clark County

in August 2011. The final relevant attachment is a preliminary judicial report issued by a title

insurance company in August 2011. A schedule attached to the report states that in August

2011 Baird’s mortgage was assigned to the Bank by the just-mentioned

assignment-of-mortgage document. The Bank also separately filed the preliminary judicial

report and schedules. 3

{¶ 4} Although he was served with the complaint, Baird did not respond.

{¶ 5} In December 2011, the Bank filed the title insurance company’s final judicial

report. The Bank also filed the assignment-of-mortgage document attached to the complaint.

Lastly, the Bank filed an affidavit averring that Baird was in default of his loan and stating the

exact amount he then owed. The Bank then moved for default judgment.

{¶ 6} Near the end of January 2012, the trial court sustained the Bank’s motion. The

court found that Baird had been served with a summons and the complaint and had not filed

an answer or any other responsive pleading. The court entered judgment for the Bank on the

note, and entered an order of foreclosure.

{¶ 7} Baird did not appeal the judgment or the order.

{¶ 8} About eight weeks later, Baird moved to vacate the foreclosure judgment

under Civ.R. 60(B)(3) and to dismiss the Bank’s complaint under Civ.R. 12(B)(1) for lack of

subject-matter jurisdiction.1 The trial court overruled the motion.

{¶ 9} Baird appealed.

{¶ 10} Baird assigns two errors to the trial court. First, he alleges that the court erred

by overruling his Civ.R. 60(B) motion without holding a hearing. Second, Baird alleges that

the trial court erred by overruling his Civ.R. 12(B)(1) motion to dismiss.

II. The Civ.R. 60(B) Motion

{¶ 11} A trial court’s decision on a Civ. R. 60(B) motion is reviewed for an abuse of

discretion. Wells Fargo Bank, N.A. v. Brandle, 2d Dist. Champaign No. 2012-CA-0002,

2012-Ohio-3492, ¶ 10. “‘Abuse of discretion’ has been defined as an attitude that is

1 Baird also moved to stay the sheriff’s sale of his house. 4

unreasonable, arbitrary or unconscionable. * * * A decision is unreasonable if there is no

sound reasoning process that would support that decision. It is not enough that the reviewing

court, were it deciding the issue de novo, would not have found that reasoning process to be

persuasive, perhaps in view of countervailing reasoning processes that would support a

contrary result.” (Emphasis sic.) AAAA Enterprises, Inc v. River Place Community Urban

Redevelopment Corp., 50 Ohio St.3d 157, 161, 553 N.E.2d 597 (1990).

{¶ 12} Baird argues, as he did in his motions, that he has a meritorious defense to

foreclosure and is entitled to relief from judgment. He contends that the Bank failed to submit

sufficient evidence that it owns his note or mortgage. Baird gives two primary reasons for this

contention. One reason is that the promissory note attached to the Bank’s complaint is not

indorsed. Baird asserts that Countrywide’s indorsement is necessary for the Bank to be the

proper owner. The other reason has to do with a June 1, 2006 Pooling and Servicing

Agreement (PSA) in which CWABS, Inc., is identified as Depositor; Countrywide Home

Loans, Inc., is identified as Seller;2 and The Bank of New York is identified as Trustee.3

Under the PSA, Countrywide apparently sold Baird’s note, apparently in a bulk transaction

with many, many others, to CWABS, Inc., of which the Bank is Trustee. The PSA defines

“closing date” as June 30, 2006.4 Baird asserts that this is the date by which promissory notes

must have been transferred. Because his mortgage was assigned later, in August 2011, says

2 Also identified as sellers are Park Monaco Inc. and Park Sienna LLC. 3 The PSA is publically available. Pooling and Servicing Agreement for Asset-Backed Certificates, Series 2006-10 (June 1, 2006), available at https://www.sec.gov/Archives/edgar/data/1365987/000090514806005204/efc6-1971_5903346exh41.txt (accessed Oct. 10, 2012). Countrywide Home Loans Servicing LP is identified as Servicer. 4 PSA at 24. 5

Baird, the Bank cannot own it. Baird says that, by submitting the documents that it did, the

Bank committed a fraud on the court.

{¶ 13} It follows, Baird argues, that the Bank failed to establish that it is the real

party in interest, so it lacked standing to bring the foreclosure action. Also, because the Bank

does not own his note or mortgage, Baird contends, there is no justiciable controversy

between them. Therefore, he says, the trial court lacked subject-matter jurisdiction.

{¶ 14} Baird’s argument fails to recognize that the promissory note and the mortgage

are separate items which, although related, are not interchangeable. A mortgage is a security

interest in real property that secures the repayment of a promissory note. Federal courts have

said that PSAs concern mortgage loans not mortgages. E.g., Smith v. Litton Loan Servicing,

LP, E.D.Mich. No. 10-14700, 2012 WL 1444636, *1 (April 26, 2012) (saying that the PSA in

this case “established a schedule for the assignment of mortgage loans to the trust * * * [but]

did not similarly restrict the assignment of mortgages”); Lamb v. Wells Fargo Bank, NA,

N.D.Tex. No. 3:12-CV-00680-L, 2012 WL 1888152, *5 (May 24, 2012) (saying that the PSA

in this case “relate[d] to the selection of mortgage loans for inclusion in the trust and the

assignment of mortgage loans, not mortgages” (Emphasis sic.)). The same is true here. Based

on the PSA’s definition of “mortgage loans,” it appears that only promissory notes (called

mortgage loans in the PSA) were transferred, and this was done without regard to the

mortgages securing those loans:

Mortgage Loans: Such of the mortgage loans transferred and assigned to the

Trustee pursuant to the provisions hereof and any Subsequent Transfer

Agreement as from time to time are held as part of the Trust Fund (including 6

any REO Property), the mortgage loans so held being identified in the

Mortgage Loan Schedule, notwithstanding foreclosure or other acquisition of

title of the related Mortgaged Property. * * *5

{¶ 15} Accordingly, the PSA did not restrict MERS’s authority, as Countrywide’s

nominee, to assign Baird’s mortgage. Compare Lamb at *5 (saying that the PSA “d[id] not

affect MERS’s authority as nominee and beneficiary of the lender under the Deed of Trust to

sell, transfer, assign or foreclose on the property at issue”), citing Litton Loan at *1 (saying the

same thing with respect to the plaintiff’s argument that the trustee was not entitled to foreclose

on his mortgage because the mortgage assignment occurred after the PSA’s “cut-off date”).

{¶ 16} Based on the evidence submitted by the Bank, MERS properly assigned

Baird’s mortgage to the Bank. The Bank, then, is the owner of the mortgage.

{¶ 17} Turning to the promissory note, Baird is correct that the copy of the note

attached to the Bank’s complaint is not indorsed. But any error arising from this fact is not

reversible. The Bank attached to its memorandum opposing Baird’s motion to vacate a copy

of the note that is indorsed.6 This copy of the note contains the following blank indorsement

stamped on the note’s last page:

PAY TO THE ORDER OF

_____________________

WITHOUT RECOURSE

5 (Emphasis added.) PSA at 40. 6 In its opposition memorandum, the Bank says that if the trial court holds an evidentiary hearing, it will present an authenticated copy of the indorsed note. 7

COUNTRYWIDE HOME LOANS, INC.

BY [signature]

David A. Spector

Managing Director

{¶ 18} Baird’s note was therefore properly negotiated to the Bank. Accord R.C.

1303.25(B) (saying that a blank indorsement means that the instrument “may be negotiated by

transfer of possession alone”). And the Bank became the note’s holder. Accord R.C.

1303.21(A) (saying that the transferee of a negotiation “becomes the holder of the

instrument”). As the holder, the Bank is entitled to enforce it. Accord R.C. 1303.31(A)(1)

(saying that “[t]he holder of the instrument” is a “person entitled to enforce” it).

{¶ 19} Baird did not answer the complaint or otherwise challenge the lack of

indorsement on the copy of the note in the first instance. If he had, the bank would have

undoubtedly presented the indorsed copy of the note earlier. Given the evidence presented, it

was not unreasonable for the trial court to overrule Baird’s Civ.R. 60(B) motion without

holding an evidentiary hearing.

III. The Civ.R. 12(B)(1) Motion

{¶ 20} The second assignment of error argues that the trial court lacked

subject-matter jurisdiction over the action. Baird contends that, because the Bank does not

own his note or mortgage, there is no justiciable controversy between them. Therefore, he

concludes, the trial court lacked subject-matter jurisdiction.

{¶ 21} “The ‘subject matter jurisdiction of a court is a court’s power to hear and

decide a case upon its merits.’” JP Morgan Chase Bank, N.A. v. Brown, 2d Dist. Montgomery 8

Nos. 21853, 22359, 2008-Ohio-200, ¶ 42, quoting Morrison v. Steiner, 32 Ohio St.2d 86, 290

N.E.2d 841 (1972), paragraph one of the syllabus. “To be justiciable, a controversy must be

grounded on a present dispute * * *.” (Citation omitted.) Kincaid v. Erie Ins. Co., 128 Ohio

St. 3d 322, 2010-Ohio-6036, 944 N.E.2d 207, ¶ 17. And “[t]o have standing, a party must

have a personal stake in the outcome of [such] a legal controversy.” (Citation omitted.) Id. at ¶

9. “[A] lack of standing does not deprive a court of subject matter jurisdiction.” Brandle at ¶

20; accord JPMorgan Chase Bank Tr. v. Murphy, 2d Dist. Montgomery No. 23927,

2010-Ohio-5285, ¶ 19 (“[W]e have previously held, * * * ‘[t]he issue of lack of standing

“challenges the capacity of a party to bring an action, not the subject matter jurisdiction of the

court.“ ‘ ”), quoting Countrywide Home Loans v. Swayne, 2d Dist. Greene No. 2009 CA 65,

2010-Ohio-3903, ¶ 29.

{¶ 22} By statute, “[t]he court of common pleas has original jurisdiction in all civil

cases in which the sum or matter in dispute exceeds the exclusive original jurisdiction of

county courts * * *.” R.C. 2305.01. While Baird claims that the trial court lacked

subject-matter jurisdiction, his argument does not raise any doubt as to the trial court’s

jurisdiction over this foreclosure action.

IV. Procedural Problems

{¶ 23} Even aside from the merits, the trial court’s judgment-order should be

affirmed for any one of several procedural reasons.

{¶ 24} One, the Civ.R. 60(B) motion was not the proper method to raise Baird’s

arguments. Baird argues that the trial court should have held a hearing on the ownership

question. This assignment of error merely alleges that the trial court erred. Compare 9

Miamisburg Motel v. Huntington Natl. Bank, 88 Ohio App.3d 117, 129, 623 N.E.2d 163 (2d

Dist.1993) (saying the same in response to the argument that the trial court should have

vacated a default judgment because it failed to hold a hearing on the amount of default

damages, and to the argument that the trial court should have vacated the judgment because it

was based on a complaint that failed to state a claim). Regardless of the argument’s merits,

Baird should have made it in a timely appeal.

{¶ 25} “Civ.R. 60(B) relief is not a substitute for a timely appeal.” GMAC Mortgage,

L.L.C. v. Herring, 189 Ohio App.3d 200, 2010-Ohio-3650, 937 N.E.2d (2d Dist.), ¶ 35, citing

State ex rel. Martin v. Ohio Adult Parole Auth., 124 Ohio St.3d 63, 2009-Ohio-6164, 918

N.E.2d 1005, ¶ 1; see Miamisburg Motel at 129 (“A Civ.R. 60(B)(5) motion for relief from

judgment may not be used as a substitute for a direct appeal from the judgment challenged * *

*.”). Any error committed by the trial court in foreclosing on a mortgage without sufficient

evidence can be raised in a direct appeal of the foreclosure judgment. Compare Herring at ¶

35 (saying the same when the plaintiff failed to attach the correct mortgage to its foreclosure

complaint).

{¶ 26} Two, Baird’s remedy for the Bank’s alleged failure to submit sufficient

evidence of its ownership was a motion for a more definite statement under Civ.R. 12(E). See

id. at ¶ 47-50. The Bank’s complaint alleged that it held the promissory note and also the

mortgage securing the loan. The attached note and mortgage contained only Countrywide’s

name, though the assignment-of-mortgage document and the preliminary judicial report

suggested that the note and mortgage had been transferred to the bank. If Baird believed that

the attachments rendered the complaint’s ownership allegations vague or ambiguous, he 10

should have moved for a more definite statement on the matter. Compare id. at ¶ 50.

{¶ 27} Third, Baird waived the standing issue by not raising it timely. Standing is

not a jurisdictional issue. Mid-State Trust IX v. Davis, 2d Dist. Champaign No. 07-CA-31,

2008-Ohio-1985, ¶ 56. “Accordingly, the issue of standing or the ‘real-party-in-interest’

defense is waived if not timely asserted.” (Citation omitted.) Id. Baird could have raised the

standing issue well before the default judgment was entered. He has not explained why he

failed to file an answer. The court found that Baird had been served with a summons and the

complaint. Baird does not assert otherwise. Baird had the complaint; he presumably had the

attachments to the complaint. The indorsement missing from the promissory note and the date

that the mortgage was purportedly transferred to the bank would have been apparent on the

face of the attachments. All of the issues raised in his Civ.R. 60(B) and 12(B)(1) motions

could have been identified and raised before judgment in a responsive pleading. Compare

GMAC Mortgage at ¶ 43.

{¶ 28} Finally, Baird never asked for a hearing. A trial court “[i]s not obligated to

conduct an evidentiary hearing * * * [when the movant] d[oes] not request such a hearing.”

Greenhorn v. Bud’s Auto., 2d Dist. Greene No. 2002-CA-67, 2003-Ohio-1261, ¶ 11; accord

JP Morgan Chase Bank, N.A. v. Brown, 2d Dist. Montgomery Nos. 21853, 22359,

2008-Ohio-200, ¶ 44 (holding that a magistrate did not err by ruling on the defendant’s Civ.R.

60(B) motion without holding an evidentiary hearing because the defendant did not request a

hearing on the motion).

{¶ 29} We have said that a defendant in a foreclosure action who has been properly

served with the complaint may not sit on his rights. Herring at ¶ 50. He is “required to 11

respond to the complaint, either by filing an answer or by challenging the allegations in the

complaint by motion, such as a motion to dismiss, pursuant to Civ.R. 12(B), a motion for a

more definite statement under Civ.R. 12(E), or a motion to strike, pursuant to Civ.R. 12(F).”

Id. Baird cannot now raise rights he voluntarily relinquished by failing to respond to the

complaint.

{¶ 30} The first and second assignments of error are overruled.

{¶ 31} The trial court’s judgment is affirmed.

.............

GRADY, P.J., and DONOVAN, J., concur.

Copies mailed to:

James S. Wertheim Maria Candace Burnette Marc E. Dann Grace Doberdruk Joseph T. Chapman William D. Hoffman Kyle E. Timken Hon. Douglas M. Rastatter