Deutsche Bank National Trust Co. v. Boswell

949 N.E.2d 96, 192 Ohio App. 3d 374
CourtOhio Court of Appeals
DecidedFebruary 16, 2011
DocketNo. C-100379
StatusPublished
Cited by9 cases

This text of 949 N.E.2d 96 (Deutsche Bank National Trust Co. v. Boswell) is published on Counsel Stack Legal Research, covering Ohio Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Deutsche Bank National Trust Co. v. Boswell, 949 N.E.2d 96, 192 Ohio App. 3d 374 (Ohio Ct. App. 2011).

Opinion

Dinkelacker, Presiding Judge.

{¶ 1} Defendant-appellant, L’Karron Freeman, appeals the trial court’s decision granting summary judgment in favor of plaintiff-appellee, Deutsche Bank National Trust Company. The court found that Freeman’s judgment lien on one-half of the property owned by defendants Alter and Lynder Boswell was junior to Deutsche Bank’s mortgage lien on the same property. We find some merit in Freeman’s sole assignment of error. Consequently, we affirm the trial court’s judgment in part and reverse it in part.

I. Facts and Procedure

{¶ 2} On August 29, 2005, Deutsche Bank filed a complaint in which it sought to foreclose on property the Boswells owned at 840 Oak Street, in Hamilton County. Freeman was one of several parties named as defendants because of their potential interests in the property.

{¶ 3} The record shows that the following series of events had occurred in this case:

{¶ 4} On June 4, 2004, Freeman filed a complaint against Alter Boswell seeking to recover damages for personal injury.

[377]*377{¶ 5} On December 10, 2004, Freeman obtained a $75,000 default judgment against Alter Boswell.

{¶ 6} On December 17, 2004, Alter Boswell signed a quitclaim deed giving his wife, Lynder Boswell, a one-half interest in the Oak Street property. He also executed a mortgage on the property to New Century Mortgage Company, Deutsche Bank’s predecessor in interest.

{¶ 7} On December 29, 2004, Freeman recorded his certificate of judgment lien against Alter Boswell.

{¶ 8} On January 14, 2005, the mortgage and deed were recorded.

{¶ 9} Deutsche Bank filed a motion for summary judgment in which it contended that Freeman’s lien was invalid. It also argued that Freeman’s lien was junior to its mortgage under the doctrine of equitable subrogation. A magistrate originally concluded that Freeman’s lien was invalid because the underlying judgment against Alter Boswell was void for lack of service. He recommended that the trial court grant Deutsche Bank’s motion for summary judgment.

{¶ 10} Freeman objected to the magistrate’s decision. The trial court found that the documents supporting Deutsche Bank’s motion for summary judgment did not show that service was defective. It sustained Freeman’s objections, rejected the magistrate’s decision in its entirety, and returned the case to the magistrate for further action.

{¶ 11} Deutsche Bank again filed a motion for summary judgment against Freeman in which it argued that Freeman’s underlying judgment was void for lack of service. The magistrate found that void judgments could be collaterally attacked only by a party to the judgment, and, therefore, that Deutsche Bank lacked standing to attack the underlying judgment.

{¶ 12} The magistrate also rejected Freeman’s argument that Alter Boswell’s transfer of a one-half interest in the property to his wife was fraudulent. He found that Freeman’s lien attached only to Alter Boswell’s one-half interest in the property.

{¶ 13} Finally, the magistrate found that Deutsche Bank’s mortgage lien was senior to Freeman’s lien under the doctrine of equitable subrogation. He recommended that the trial court grant Deutsche Bank’s motion for summary judgment.

{¶ 14} Both parties objected to the magistrate’s decision. The trial court overruled all the objections, adopted the magistrate’s decision, and granted Deutsche Bank’s motion for summary judgment. Subsequently, the court ordered a foreclosure on the property. It stated that Freeman’s lien was valid but [378]*378that it was junior to Deutsche Bank’s lien and attached only to Alter Boswell’s one-half interest in the property. This appeal followed.

{¶ 15} In his sole assignment of error, Freeman contends that the trial court erred in determining that his lien was junior to Deutsche Bank’s lien and that his lien attached only to Alter Boswell’s one-half interest in the property. He argues that the doctrine of equitable subrogation did not apply and that Alter Boswell’s transfer of one-half of his interest in the property was fraudulent. We agree that the trial court erred in applying the doctrine of equitable subrogation.

II. Equitable Subrogation

{¶ 16} Under Ohio law, a lien recorded first has priority over a lien recorded later in time.1 Freeman filed his certificate of judgment and created his lien on December 29, 2004.2 New Century recorded its mortgage and created its lien on January 14, 2005.3 Consequently, under the general rule, Freeman’s lien would have had priority over Deutsche Bank’s.

{¶ 17} An exception to the general rule of “first in time, first in right” is the doctrine of equitable subrogation.4 Equitable subrogation “arises by operation of law when one having a liability or right or a fiduciary relation in the premises pays a debt due by another under such circumstances that he is in equity entitled to the security or obligation held by the creditor whom he has paid.”5

{¶ 18} The application of equitable subrogation depends on the facts and circumstances of each case. To claim equitable subrogation, a party’s equity must be strong and its case clear.6 A party is not entitled to equitable [379]*379subrogation if that party is negligent in its business transactions or has failed to act according to ordinary and reasonable business practices.7

{¶ 19} The trial court found in this case that New Century had “exercised due diligence” when checking the property records at the time the note and mortgage were executed. Freeman had filed his complaint and had obtained his judgment long before the Boswells executed the mortgage. Yet, Deutsche Bank presented no evidence to excuse and offered no explanation for its predecessor’s failure to discover the judgment, which was a public record. Thus, the trial court’s finding of due diligence was not supported by competent, credible evidence, and it was, therefore, against the manifest weight of the evidence.8

{¶ 20} The trial court also found that four weeks was “not an unreasonable amount of time to record an executed mortgage.” Again, Deutsche Bank presented no evidence to show why New Century had waited over a month to record the mortgage and note. It also presented no evidence showing that waiting a month was an ordinary and reasonable business practice. Since no competent, credible evidence existed to support that finding, it was also against the manifest weight of the evidence.

{¶ 21} Deutsche Bank bore the burden to show that it was entitled to equitable subrogation, which is the exception, not the rule. It failed to show that New Century, its predecessor, had not been negligent in its business transactions or that it had acted according to ordinary and reasonable business practices. Deutsche Bank would not have been seeking equitable subrogation but for New Century’s negligence in failing to timely record its mortgage. The equities in the case did not “clearly favor” Deutsche Bank.9

{¶ 22} Consequently, we hold that the trial court erred in finding that the doctrine of equitable subrogation applied and that Deutsche Bank’s mortgage was senior to Freeman’s judgment lien.

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Bluebook (online)
949 N.E.2d 96, 192 Ohio App. 3d 374, Counsel Stack Legal Research, https://law.counselstack.com/opinion/deutsche-bank-national-trust-co-v-boswell-ohioctapp-2011.