HSBC Bank USA, Natl. Assn. v. Banks

2022 Ohio 3044

• Court: Ohio Court of Appeals
• Decided: September 1, 2022
• Docket: 111241
• Status: Published

Opinion

[Cite as HSBC Bank USA, Natl. Assn. v. Banks, 2022-Ohio-3044.]

COURT OF APPEALS OF OHIO

EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

HSBC BANK USA, NATIONAL ASSOCIATION, :

Plaintiff-Appellee, : No. 111241 v. :

ANDERSON BANKS, ET AL. :

Defendants-Appellants. :

JOURNAL ENTRY AND OPINION

JUDGMENT: AFFIRMED RELEASED AND JOURNALIZED: September 1, 2022

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-15-856169

Appearances:

McGlinchey Stafford and Stefanie L. Deka, for appellee.

Wendy S. Rosett, for appellant.

CORNELIUS J. O’SULLIVAN, JR., J.:

Defendant-appellant Anderson Banks (“appellant”) appeals from the

trial court’s February 1, 2022 decree of confirmation of sale entered in this

foreclosure case filed in 2015 by plaintiff-appellee HSBC Bank USA, National Association (“appellee”). After a thorough review of the facts and pertinent law, we

affirm the trial court’s judgment.

Factual and Procedural Background

Appellee initiated this foreclosure action in December 2015. In its

complaint, appellee alleged that it was the party entitled to enforce the note and

foreclose on the mortgage entered into by appellant for the real property located at

29049 Harvard Road, Orange, Ohio.1 The record demonstrates that the original

loan was modified by a Home Affordable Modification Program (“HAMP”)

agreement, effective April 1, 2015. Appellee’s complaint alleged that appellant

defaulted on the loan for payment due on April 1, 2015, and all subsequent

payments.

Appellant failed to answer appellee’s complaint and appellee filed a

motion for default judgment. On February 17, 2016, the trial court set a default

hearing for March 10, 2016. Appellee sent a notice of the hearing to appellant. The

hearing went forward on March 10, and appellant’s son appeared on appellant’s

behalf. The trial court denied appellee’s motion for default judgment as it related to

appellant and referred the case to mediation. The parties participated in mediation

but were unable to reach a settlement and a magistrate granted appellee’s motion

for default judgment on January 20, 2017. On January 31, 2017, the trial court

1The unknown spouse, if any, of appellant and CIT Bank were also named as defendants. adopted the magistrate’s decision and issued a final decree of foreclosure. Appellant

neither appealed the trial court’s judgment nor sought a stay of the judgment.

Appellee’s judgment notwithstanding, the parties engaged in

settlement negotiations that, along with bankruptcy stays, resulted in the prescribed

sheriff’s sale being cancelled 11 times. The parties’ settlement efforts were

unsuccessful, however, and the sheriff’s sale ultimately occurred on December 6,

2021, six years after the case was initiated.

On December 21, 2021, appellant filed an “emergency motion to stay

confirmation of sale.” In his motion, appellant alleged that confirmation of the sale

would be in violation of 12 C.F.R. 1024.41, which governs loss mitigation procedures.

The trial court denied appellant’s motion on January 31, 2022, and confirmed the

sale on February 1, 2022. Appellant raises the following assignment of error for our

review:

The trial court erred to the prejudice of the Appellant by entering the Decree of Confirmation confirming the Sheriff’s Sale or, in the alternative, not staying confirmation of the Sheriff’s Sale because such was unreasonable, arbitrary, and capricious due to failures to comply with statutory and common law requirements.

Law and Analysis

Appellant alleges the following in this appeal: (1) despite him providing

a “complete loss mitigation request via email on September 15, 2021,” the trial court

granted appellee’s motion for default judgment “without a notice, warning or

hearing”; (2) appellee failed to abide by the regulations set forth in 12 C.F.R. 1024.41;

(3) appellee was barred under the doctrine of promissory estoppel from executing the sheriff’s sale and confirming same; (4) appellee had unclean hands in this case;

(5) appellant “was not given proper and reasonable opportunity to object to the

appraisal”; and (6) the appraisal was not conducted according to law.

Standard of Review

Appellant contends that the trial court abused its discretion in

confirming the sale. In order to find an abuse of discretion, we must determine the

trial court’s decision was unreasonable, arbitrary, or unconscionable and not merely

an error of law or judgment. Blakemore v. Blakemore, 5 Ohio St.3d 217, 219, 450

N.E.2d 1140 (1983).

With the exception of the alleged violations of 12 C.F.R. 1024.41, the

grounds upon which appellant bases his request to reverse the confirmation of sale

were not raised at the trial-court level. “[W]hen a sale is confirmed, ‘all irregularities

are cured after the sale is made and confirmed,’ including ‘all such irregularities,

misconduct, and unfairness in the making of the sale, departures from the

provisions of the decree of sale, and errors in the decree and the proceedings under

it.’” U.S. Bank, N.A. v. Sanders, 2017-Ohio-1160, 88 N.E.3d 445, ¶ 22 (8th Dist.),

quoting Third Fed. S. & L. Assn. of Cleveland v. Rains, 8th Dist. Cuyahoga

No. 98592, 2012-Ohio-5708, ¶ 11. Thus, “[a]t best, a party appealing a sale

confirmation who did not raise objections to it in the trial court could obtain only

‘plain error’ review of the sale confirmation.” Sanders at id., quoting Wells Fargo

Home Mtge. v. Chun, 8th Dist. Cuyahoga No. 101722, 2015-Ohio-1827, ¶ 8. Notice of plain error is not favored and is only taken in extremely rare cases. Sanders at

id., citing Chun at id.

Further, the Ohio Supreme Court has recognized that “two judgments

are appealable in foreclosure actions: the order of foreclosure and sale and the order

of confirmation of sale.” CitiMortgage, Inc. v. Roznowski, 139 Ohio St.3d 299,

2014-Ohio-1984, 11 N.E.3d 1140, ¶ 35.

The order of foreclosure determines the extent of each lienholder’s interest, sets forth the priority of the liens, and determines the other rights and responsibilities of each party in the action. On appeal from the order of foreclosure, the parties may challenge the court’s decision to grant the decree of foreclosure. Once the order of foreclosure is final and the appeals process has been completed, all rights and responsibilities of the parties have been determined and can no longer be challenged.

Id. at ¶ 39.

On the other hand,

[t]he confirmation process is an ancillary one in which the issues present are limited to whether the sale proceedings conformed to law. Because of this limited nature of the confirmation proceedings, the parties have a limited right to appeal the confirmation. For example, on appeal of the order confirming the sale, the parties may challenge the confirmation of the sale itself, including computation of the final total owed by the mortgagor, accrued interest, and actual amounts advanced by the mortgagee for inspections, appraisals, property protection, and maintenance. The issues appealed from confirmation are wholly distinct from the issues appealed from the order of foreclosure. In other words, if the parties appeal the confirmation proceedings, they do not get a second bite of the apple, but a first bite of a different fruit.

Id. at ¶ 40.

In the case at hand, the trial court issued a final decree of foreclosure

on January 31, 2017. Appellant did not appeal from that judgment. Thus, the issues he now raises relative to the final decree of foreclosure are waived. Nonetheless, we

briefly consider them and find them to be without merit.

Default Judgment

Appellant contends that his due process rights were violated because

he “was not given a full opportunity to be heard on the matter or otherwise plead on

the merits prior to the trial court entering default judgment against [him].” The

record belies appellant’s contention.

Appellant failed to answer appellee’s complaint and appellee filed a

motion for default judgment. On February 17, 2016, the trial court set a default

hearing for March 10, 2016. Appellee sent a notice of the hearing to appellant. The

hearing went forward on March 10, and appellant’s son appeared on appellant’s

behalf. The trial court granted appellee’s motion for default judgment as it related

to all nonanswering defendants, with the exception of appellant and referred

appellant and appellee to mediation — a clear indication that appellant was afforded

the opportunity to be heard.

The parties participated in mediation, but it was unsuccessful, and a

magistrate granted appellee’s motion for default judgment on January 20, 2017. On

January 31, 2017, the trial court adopted the magistrate’s decision.

The mere fact that a representative made an appearance on appellant’s

behalf in the case is not dispositive of whether a default judgment was justified. A

party who has appeared in a civil action can still be subject to a default judgment if

he or she has otherwise failed to defend the case and received proper notice of the default judgment motion. See Rotatori, Bender, Gragel, Stoper, & Alexander,

L.P.A. v. Signer, 8th Dist. Cuyahoga No. 86454, 2006-Ohio-1354, ¶ 12-15.

Appellant contends that he was denied a full opportunity to be heard

prior to the trial court entering default judgment against him. However, in making

this assertion, he has not contested the following: (1) at the outset of the action, he

was served with a copy of appellee’s foreclosure complaint; (2) he did not file an

answer to the complaint throughout the entire pendency of the action; (3) in filing

its motion for a default judgment, appellee attached a proof of service stating that a

copy of the motion was mailed to appellant; (4) a copy of the trial court’s judgment

scheduling the default motion for a hearing was also mailed to appellant; and (5)

notices of both the motion and judgment were given more than 14 days before the

date of the hearing.

On this record we find no merit to appellant’s challenge relating to the

trial court granting appellee’s motion for default judgment.

12 C.F.R. 1024.41

12 C.F.R. 1024.41 is the federal regulation governing loss mitigation

procedures in foreclosure actions and provides in relevant part as follows:

(g) Prohibition on foreclosure sale. If a borrower submits a complete loss mitigation application after a servicer has made the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process but more than 37 days before a foreclosure sale, a servicer shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale, unless:

(1) The servicer has sent the borrower a notice pursuant to paragraph (c)(1)(ii) of this section that the borrower is not eligible for any loss mitigation option and the appeal process in paragraph (h) of this section is not applicable, the borrower has not requested an appeal within the applicable time period for requesting an appeal, or the borrower’s appeal has been denied;

(2) The borrower rejects all loss mitigation options offered by the servicer; or

(3) The borrower fails to perform under an agreement on a loss mitigation option.

12 C.F.R. 1024.41(g).

Appellant contends that the final sale violated 12 C.F.R. 1024.41(g)

because he submitted a complete loss mitigation report on September 15, 2021.

Appellant cites three exhibits attached to his emergency motion to stay confirmation

of sale as proof of his completed loss mitigation report. These exhibits are not proof

that appellant timely submitted a completed loss mitigation report. The first exhibit

shows that an email from an address ostensibly belonging to appellant was sent to

“ss@mortgagefamily.com” on September 16, 2021. The second exhibit is a “fax log”

for a specific fax number and shows that a fax consisting of 12 pages was sent from

that number by appellant on September 16, 2021, to another number, which is the

fax number for “Mortgage Service Center.” The third exhibit is an email from

“loansolutioncenter.com” to appellant, the sum and substance of which reads: “This

notice is to inform you changes have been made to your application for assistance.”

None of the exhibits demonstrate that appellant submitted a

completed loss mitigation application. However, attached to appellee’s complaint

was the HAMP loan modification that appellant executed in March 2015, and was

effective April 1, 2015. Appellee alleged in its complaint that the HAMP loan was offered to appellant after he submitted a complete loss mitigation application, and

he has been in default since the loan’s April 1, 2015 effective date. See Complaint,

¶ 5 and Exhibit B to Complaint.

Thus, under 12 C.F.R. 1024.41(g)(3), appellant failed “to perform

under an agreement on a loss mitigation option” and appellee did not violate the

federal statute in pursuing foreclosure.

Promissory Estoppel and Unclean Hands

Promissory estoppel is an affirmative defense. McCarthy, Lebit,

Crystal & Haiman Co., L.P.A. v. First Union Mgt., Inc., 87 Ohio App.3d 613, 624,

622 N.E.2d 1093 (8th Dist.1993). The doctrine of unclean hands is also an

affirmative defense. Beneficial Fin. 1, Inc. v. Edwards, 7th Dist. Mahoning No. 13

MA 106, 2014-Ohio-5514, ¶ 17. “An affirmative defense must be raised in the

pleadings or in an amendment to the pleading, or it is waived.” Sharp v. Miller,

2018-Ohio-4740, 114 N.E.3d 1285, ¶ 37 (7th Dist.). Appellant did not file an answer

and assert these affirmative defenses at the trial-court level. It is well established

that arguments a party fails to raise in the trial-court cannot be considered for the

first time on appeal. Cawley JV, L.L.C. v. Wall St. Recycling L.L.C., 2015-Ohio-

1846, 35 N.E.3d 30, ¶ 17 (8th Dist.).

Appellant has waived consideration of any argument on appeal

relative to promissory estoppel and unclean hands because he failed to raise the

issues in the trial court. Appraisal

Appellant contends that he “was not given proper and reasonable

opportunity to object to the appraisal.” Appellant also contends that the appraisal

was not conducted according to law because the appraiser failed to view the interior

of the premise.

The record demonstrates that appellant had ample opportunity to

object to the appraisal. The appraisal was completed on November 2, 2021, and filed

with the trial court the following day, November 3, 2021. The notice of the sale was

docketed on November 8, 2021. The sale occurred on December 6, 2021. Appellant

therefore had over one month to object to the appraisal and failed to do so. This

court has held that a party who fails to object to an appraisal prior to the sale of

property to be foreclosed on waives appellate review of the appraisal. CitiMortgage,

Inc. v. Hoge, 8th Dist. Cuyahoga No. 98597, 2013-Ohio-698, ¶ 10; Polivchak v.

Polivchak Co., 8th Dist. Cuyahoga No. 99560, 2013-Ohio-4918, ¶ 15.

In regard to appellant’s allegation that an interior view of the premises

did not occur, this court has held that an appraiser’s failure to view the inside of the

premises will be a deviation from the statutory terms2 “only when ‘the condition of

the house may have an impact on the value of the real estate.’” Hoge at ¶ 9, quoting

Old Kent Mtge. Co. v. Stancik, 8th Dist. Cuyahoga No. 80548, 2002-Ohio-3436,

¶ 11. Appellant bears the burden to show prejudice from an alleged failure to view

2 R.C. 2329.17, governing foreclosure appraisals, states that an appraiser shall appraise property “upon actual view.” R.C. 2329.17(A). the interior of the premises prior to issuing the appraisal. Hoge at id., citing Old

Kent Mtge. Co. at id. “‘Naked assertions’ of a failure to view the interior of the

premises prior to appraisal will not show that the appraisal itself is invalid.” Hoge

at id., quoting United Cos. Lending v. Greenberg, 8th Dist. Cuyahoga No. 80803,

2002-Ohio-4919, ¶ 11.

Appellant’s contention regarding the alleged lack of an interior view of

the premises is nothing more than a “naked assertion.” He has offered no evidence

that the interior condition of the home would have impacted the appraised value to

his prejudice.

In light of the above, we find no error, plain or otherwise, nor do we

find that the trial court’s judgment confirming the sale in this case was

unreasonable, arbitrary, or unconscionable. Appellant’s sole assignment of error is

overruled.

Judgment affirmed.

It is ordered that appellee recover from appellant costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate be sent to the common pleas court to carry

this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27

of the Rules of Appellate Procedure.

______________________________ CORNELIUS J. O’SULLIVAN, JR., JUDGE

FRANK DANIEL CELEBREZZE, III, P.J., and EMANUELLA D. GROVES, J., CONCUR