FCDB LBPL 2008-1 Trust v. Remely

2013 Ohio 4960

• Court: Ohio Court of Appeals
• Decided: November 12, 2013
• Docket: 2012-G-3098
• Status: Published

Opinion

[Cite as FCDB LBPL 2008-1 Trust v. Remely, 2013-Ohio-4960.]

IN THE COURT OF APPEALS

ELEVENTH APPELLATE DISTRICT

GEAUGA COUNTY, OHIO

FCDB LBPL 2008-1 TRUST, : OPINION

Plaintiff-Appellee, : CASE NO. 2012-G-3098 - vs - :

CELENE REMELY, et al., :

Defendants-Appellants. :

Civil Appeal from the Geauga County Court of Common Pleas, Case No. 11F000835.

Judgment: Affirmed.

S. Scott Martin and Bill L. Purtell, Lerner, Sampson & Rothfuss, 120 East Fourth Street, Suite 800, P.O. Box 5480, Cincinnati, OH 45202 (For Plaintiff-Appellee).

Wendy S. Rosett, 16781 Chagrin Boulevard, Suite 304, Shaker Heights, OH 44120 (For Defendants-Appellants).

TIMOTHY P. CANNON, P.J.

{¶1} Appellants, Celene and Roger Remely, appeal the judgment of the

Geauga County Court of Common Pleas granting appellee, FCDB LBPL 2008-1 Trust’s,

motion for default judgment. On appeal, this court must determine whether the trial

court abused its discretion in denying appellants’ motion for leave to file an answer

instanter and in granting appellee’s motion for default judgment. Based on the following

reasons, we affirm the judgment of the trial court. {¶2} Appellee filed a complaint in foreclosure on August 5, 2011, based upon

default in payment on a note and mortgage executed by appellants. Service of the

summons and complaint was perfected on August 12, 2011. On September 2, 2011,

appellants filed a pro se motion for extension of time to file a responsive pleading, as

appellants desired to secure legal counsel before filing an answer. The trial court

granted appellants an extension until September 30, 2011. On October 31, 2011,

appellants, then represented by counsel, filed an answer. This answer was

subsequently stricken from the record as it was filed after the September 30, 2011

deadline.

{¶3} On December 28, 2011, appellee moved for default judgment. On

January 6, 2012, appellants filed a motion for leave to plead instanter. The trial court

set both appellants’ motion for leave and appellee’s motion for default judgment for

hearing on March 12, 2012. That entry stated:

The Plaintiff does not object to the Court’s granting of the Defendant’s Motion for Leave to File an Answer Instanter so long as the Defendants participate timely and in good faith with a mediation procedure. The Defendants must provide the information necessary for the Plaintiff to make a meaningful decision as to whether or not a negotiated resolution of the matter can be accomplished. This includes completion of its financial packet that it routinely provides homeowners in a work-out situation.

The Defendants are willing to cooperate and wish to enter into the agreement. Both parties thereupon agreed that the case be referred to mediation and stayed. The stay is conditioned upon the Defendants cooperating with the mediation procedure and providing timely information, as aforesaid. Providing that they do so, the Motion for Leave to File an Answer Instanter will be granted.

{¶4} On May 24, 2012, the trial court issued a judgment finding the case not

appropriate for mediation, as appellants failed “to cooperate with mediation procedures

2 and [failed] to provide information.” The trial court denied appellants’ request for

mediation and leave to file an answer.

{¶5} Subsequently, the trial court issued a judgment on June 4, 2012, granting

appellants 21 days to respond to appellee’s motion for default judgment. That order

indicated the court may enter an order without an oral hearing.

{¶6} On June 26, 2012, appellants filed a “motion for leave to file a brief in

opposition to plaintiff’s motion for default, instanter.” The trial court granted appellants’

motion. In that brief, appellants argued that although an answer had not been formally

filed, they had not “failed to plead or otherwise defend,” and therefore, a default

judgment was not appropriate.

{¶7} The trial court granted appellee’s motion for default judgment. In its July

16, 2012 judgment entry, the trial court outlined the history of the instant case noting

that appellants had not filed a timely answer despite being granted an extension. The

trial court indicated that both appellee’s motion for default judgment and appellants’

motion for leave to plead were heard on March 12, 2012. “On the same day the Court

entered an order which premised the granting of leave to answer upon Defendant

‘cooperating with the mediation procedure and providing timely information.’” Yet,

appellants failed to cooperate with the mediation process, as verified by the affidavit of

Christopher Horn, the Geauga County Common Pleas Court Foreclosure Mediator.

Consequently, the trial court granted appellee’s motion for default judgment.

{¶8} The matter was stayed pending appeal.

{¶9} On appeal, appellants assign the following errors:

[1.] The trial court erred to the prejudice of Appellants and abused its discretion by denying Appellants’ Motion for Leave to Plead

3 Instanter, striking their Answer from the Record, and granting Default Judgment in favor of Appellee, particularly without the benefit of a full evidentiary hearing.

[2.] The Record is clear and convincing that the trial court erred and abused its discretion by granting Appellee’s Motion for Default on the Foreclosure Complaint.

{¶10} We address appellants’ assigned errors in a consolidated fashion.

Appellants first argue the trial court erred by denying their motion for leave to plead

instanter. A trial court is granted discretion in permitting a party to file a pleading

outside of the time guidelines as set forth in the Civil Rules. Civ.R. 6(B)(2) allows for an

extension of time to file a late pleading within the trial court’s discretion “upon motion

made after the expiration of the specified period * * * where the failure to act was the

result of excusable neglect.”

{¶11} Here, appellants, acting pro se, requested an extension of time to file an

answer, which was granted. Therefore, appellants had until September 30, 2011, to

answer or otherwise plead. It is undisputed that appellants failed to timely file their

answer or responsive pleading. In fact, it was not until October 31, 2011, that

appellants, then represented by counsel, attempted to file their answer. At the time of

filing, appellants did not file a written motion setting forth grounds of excusable neglect

for not filing their answer by the extended deadline of September 30, 2011. Civ.R.

6(B)(2).

{¶12} Thereafter, appellants filed a motion for leave to answer instanter. In that

motion, appellants made the conclusory statement that they “can show excusable

neglect.” Even though appellants failed to set forth any facts indicative of excusable

neglect in their motion, the trial court, after a hearing, conditioned the granting of their

4 motion on appellants’ cooperation with the mediation process. Appellants voluntarily

agreed to cooperate and engage in mediation as a condition for granting their motion for

leave to answer instanter. As a result, the trial court, as agreed to by the parties, was in

a position to monitor the mediation process.

{¶13} As demonstrated by the record, appellants failed to provide timely financial

disclosures, despite the trial court’s reminder to appellants’ attorney that the required

financial disclosures had not been received by the court.

{¶14} Based on the circumstances of this case and the fact that a Civ.R. 6(B)

determination lies within the trial court’s sound discretion, we cannot say the trial court

erred in denying appellants’ motion for leave to plead instanter. It was within the trial

court’s discretion to deny the motion, and we find such a conclusion was not an abuse

of discretion.

{¶15} Next, appellants argue it was error for the trial court to grant appellee’s

motion for default judgment without first holding a full evidentiary hearing. The record,

however, demonstrates that appellants received both notice and a hearing on appellee’s

default judgment motion.

{¶16} Here, appellee does not dispute the fact that appellants made an

appearance, as contemplated by Civ.R. 55, which provides, in pertinent part:

When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, the party entitled to a judgment by default shall apply in writing or orally to the court therefor * * *. If the party against whom judgment by default is sought has appeared in the action, he (or, if appearing by representative, his representative) shall be served with written notice of the application for judgment at least seven days prior to the hearing on such application.

5 {¶17} As appellants made an appearance in the instant action, notice and a

hearing were required prior to granting default judgment. Civ.R. 55(A). As evidenced

by the trial court’s order of January 12, 2012, appellants were advised that a hearing on

appellee’s motion for default judgment was set for March 12, 2012, at 9:00 a.m. The

record further reflects, contrary to appellants’ assertion, that a hearing on appellee’s

default judgment motion took place on said date. Appellants, however, have failed to

provide this court with a transcript of those proceedings.

{¶18} On appeal, appellants also attack the allegations of appellee’s complaint,

stating, inter alia, that appellee has failed to assert it was the real party in interest and

that appellee does not have standing or has not possessed the required authority, title,

interests, and/or rights. Challenges to the substance of a plaintiff’s complaint on appeal

from a trial court’s granting of default judgment are procedurally precluded. “A

defendant’s right to force a plaintiff to prove his or her claim depends on the defendant’s

compliance with the Civil Rules and the timely filing of an answer to the complaint.

Otherwise, the sanctions for noncompliance would lose their deterrent effect.” Davis v.

Immediate Medical Serv., Inc., 80 Ohio St.3d 10, 15 (1997).

{¶19} Despite appellants’ arguments regarding the substance of appellee’s

complaint, appellee attached to its complaint both the mortgage and the applicable

assignments to establish standing to sue. See Fed. Home Loan Mtge. Corp. v.

Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶38-39. (“Standing is required to

invoke the jurisdiction of the common pleas court. * * * Accordingly, a litigant cannot

pursuant to Civ.R. 17(A) cure the lack of standing after commencement of the action by

6 obtaining an interest in the subject of the litigation and substituting itself as the real party

in interest.”)

{¶20} Appellants argued below, and now argue on appeal, that appellee is not

the holder of the note and therefore lacks standing. Appellee was required to establish

that it is the current holder of the note or mortgage in order to establish itself as the real

party in interest. Federal Home Loan Mtge. Corp. v. Rufo, 983 N.E.2d 406, 2012-Ohio-

5930, ¶18 (11th Dist.).

{¶21} Here, appellee established that it was the holder of the note and mortgage

prior to the complaint being filed. See Schwartzwald, supra (holding that standing is

required to present a justiciable controversy and is a jurisdictional requirement). The

holder of an instrument is a “person entitled to enforce” the instrument under R.C.

1303.31. R.C. 1301.201(B)(21)(a) defines a holder of a negotiable instrument as “[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.”

{¶22} The note at issue was bearer paper; therefore, “it may be negotiated by

transfer of possession alone.” R.C. 1303.21(B). Appellee also attached to the

complaint copies of the note and mortgage, as well as a copy of the recorded

Assignment of Mortgage from Home Savings to appellee, executed July 27, 2009, and

recorded three days thereafter.

{¶23} Thus, appellee was presumptively entitled to invoke the jurisdiction of the

common pleas court as the real party in interest.

{¶24} Appellants’ assignments of error are without merit. The judgment of the

Geauga County Court of Common Pleas is hereby affirmed.

7 THOMAS R. WRIGHT, J., concurs,

COLLEEN MARY O’TOOLE, J., dissents with a Dissenting Opinion.

____________________

COLLEEN MARY O’TOOLE, J., dissents with a Dissenting Opinion.

{¶25} The trial court conditioned granting appellants’ motion for leave to answer

instanter upon them cooperating in the mediation process. After the mediator reported

appellants’ failure to cooperate, the trial court denied appellants’ motion for leave to

answer instanter. Subsequently the trial court granted appellee’s motion for default

judgment.

{¶26} In response to Ohio’s foreclosure crisis, the General Assembly granted

trial courts discretionary power to require parties to a foreclosure to participate in

mediation. R.C. 2323.06 provides, “In an action for the foreclosure of a mortgage, the

court may at any stage in the action require the mortgagor and the mortgagee to

participate in mediation * * * [.]” (Emphasis added.) Nowhere in the statute does it state

that a court also has the power to require that participants waive confidentiality of the

mediation process.

{¶27} The majority implies that by agreeing to the conditions of mediation,

appellants waived the confidentiality of mediation communications under R.C. 2710.06.

However, the trial court’s power to require that parties participate under R.C. 2323.06

necessarily means the parties have no ability to agree or disagree with a mediation

order. How is a party to register their disagreement with the conditions of mediation

when they have no ability to disagree with the decision ordering mediation? The

8 majority decision implies that as parties can be required to participate in mediation, they

can also be required to accept additional conditions imposed by a court—including

waiver of confidentiality.

{¶28} While R.C. 2323.06 grants trial courts the power to require parties to

participate in mediation, R.C. 2710.06(A) specifically prohibits a mediator from making

“a report, assessment, evaluation, recommendation, finding, or other communication

regarding mediation to a court * * *.” And R.C. 2710.06(C) states that communications

made in violation of division (A) “shall not be considered by a court * * *.” The statutory

language regarding waiver of mediation privilege is contained in R.C. 2710.04.

Specifically, R.C. 2710.04(A) states that the privilege “* * * may be waived in a record or

orally during a proceeding if it is expressly waived * * *.” (Emphasis added.) As a

general rule, specific statutes prevail over general statutes. R.C. 1.51; State ex rel.

Slagle v. Rogers, 103 Ohio St.3d 89, 2004-Ohio-4354, ¶14.

{¶29} The March 12, 2012 order of the trial court outlines that if appellants

cooperated with the mediation procedures and provided timely information, that the

motion for leave to answer instanter would be granted. What this order does not

contain is any record of an express waiver of confidentiality by any party.

{¶30} The Ohio General Assembly adopted the Uniform Mediation Act in R.C.

Chapter 2710. R.C. 2710.02(A)(1) states that the provisions of the act are applicable to

situations in which the parties to a civil action have been either referred to mediation by

a court order or required to engage in mediation by a court rule.

{¶31} In addition to setting forth provisions governing whether communications

made during the mediation process are privileged, R.C. Chapter 2710 delineates rules

9 which expressly limit the substance of a mediator’s report. Specifically, R.C. 2710.06(A)

prohibits a mediator from making “a report, assessment, evaluation, recommendation,

finding, or other communication regarding a mediation” to the court that may ultimately

have to dispose of the underlying dispute in the case. In regard to possible items which

may be discussed in a mediator’s report, subsection (B) of that statute provides:

{¶32} “(B) A mediator may disclose any of the following:

{¶33} “(1) Whether the mediation occurred or has terminated, whether a

settlement was reached, and attendance.”

{¶34} In applying this provision, this court has consistently held that the statute

does not permit a mediator to inform the trial court of the behavior of a party during the

course of a mediation. JPMorgan Chase Bank, N.A. v. Hunter, 11th Dist. Portage No.

2011-P-0063, 2012-Ohio-5222, ¶20; Anthony v. Andrews, 11th Dist. Portage No. 2008-

P-0091, 2009-Ohio-6378, ¶5. In Anthony, this court reversed the imposition of

sanctions, holding that the trial court had erred in basing its decision upon a

communication from the mediator. Id. at ¶23. In addition to concluding that trial

counsel’s statement to the mediator was privileged under R.C. 2710.03, this court

expressly held that the substance of the statement could not be conveyed to the trial

court through a written report from the mediator. Id. at ¶22. Citing R.C. 2710.06(C), this

court indicated that, while the mediator could disclose to the trial court that the

mediation was terminated, he could not disclose the reason why no settlement had

been reached. Id.

{¶35} The trial court in this matter may have intended that appellants waive

confidentiality of the mediation process in order to obtain the benefit of having their

10 motion for leave to answer instanter granted. Regardless, R.C. 2710.04(A) clearly

requires that such waiver be made expressly and not inferred from the conduct of the

parties. Without an express waiver, the communication from the mediator to the trial

court was in violation of the statute.

{¶36} The trial court based its decision to deny appellants’ motion for leave to

answer instanter on an improper communication from the mediator. The subsequent

granting of appellee’s motion for default judgment flowed directly from the denial of

appellants’ motion for leave to answer instanter. I would reverse the granting of the

motion for default judgment and remand this matter to the trial court for further

proceedings.

{¶37} Thus, I respectfully dissent.