U.S. Bank Natl. Assn. v. Minnillo

2012 Ohio 5188

• Court: Ohio Court of Appeals
• Decided: November 8, 2012
• Docket: 98593
• Status: Published

Opinion

[Cite as U.S. Bank Natl. Assn. v. Minnillo, 2012-Ohio-5188.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 98593

U.S. BANK NATIONAL ASSN., ETC. PLAINTIFF-APPELLEE

vs.

MICHAEL A. MINNILLO, ET AL. DEFENDANTS-APPELLANTS

JUDGMENT: AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-778795

BEFORE: Jones, J., Blackmon, A.J., and S. Gallagher, J.

RELEASED AND JOURNALIZED: November 8, 2012 ATTORNEY FOR APPELLANTS

James R. Douglass James R. Douglass Co., LPA 20521 Chagrin Blvd. Suite D Shaker Heights, Ohio 44122

ATTORNEYS FOR APPELLEES

Nathaniel R. Sinn Douglas M. Eppler Ziegler Metzger LLP 925 Euclid Avenue Suite 2020 Cleveland, Ohio 44115 LARRY A. JONES, SR., J.:

{¶1} This case came to be heard upon the accelerated calendar pursuant to App.R.

11.1 and Loc.R. 11.1.

{¶2} Defendants-appellants, Michael and Deborah Minnillo, appeal from the trial

court’s judgment granting the motion to appoint a receiver made by plaintiff-appellee, U.S.

Bank National Association, as Trustee for Lehman Brothers Small Balance Commercial

Mortgage Pass-Through Certificates, Series 2007-3 (“U.S. Bank” or “the bank”). We

affirm.

{¶3} In March 2012, U.S. Bank initiated this action against the Minnillos to

foreclose upon investment property they own on Murray Hill Road in Cleveland. The

bank’s complaint alleges the following. In March 2007, GreenPoint Mortgage Funding,

Inc. made a commercial loan to and for the benefit of Michael Minnillo. The loan was

evidenced by a promissory note dated March 28, 2007, issued by Michael Minnillo to

GreenPoint. The note was endorsed by GreenPoint to Aurora Bank, FSB, f.k.a. Lehman

Brothers Bank, FSB (“Aurora Bank”), and was further endorsed pursuant to a March 28,

2007 allonge made by Aurora Bank to U.S. Bank. Thus, the complaint alleges that U.S.

Bank is the owner and holder of the note.

{¶4} The complaint further alleges that Michael Minnillo failed to make the

payments on the note, which is a defaulting event under the terms of the mortgage. U.S.

Bank, by and through its loan servicer Aurora Bank, accelerated the note and declared the entire balance of principal, interest, and other charges due and immediately payable.

{¶5} U.S. Bank alleges in its complaint that the note is secured by a mortgage

issued by the Minnillos, as mortgagors, in favor of GreenPoint, as mortgagee. The

mortgage was filed in the official records of Cuyahoga County on March 30, 2007. The

Murray Hill property is the mortgaged property.

{¶6} The complaint alleges that under the terms of the mortgage, the Minnillos

assigned to GreenPoint all of their interest in the leases, rents, issues, and profits arising

from or relating to the mortgaged property. In April 2007, GreenPoint assigned its rights,

title, and interest to the mortgage to Aurora Bank. The assignment was filed on February

24, 2012. In November 2007, Aurora Bank assigned its right, title, and interest in the

mortgage to U.S. Bank. The assignment was recorded on February 24, 2012.

{¶7} U.S. Bank states in its complaint that it appointed Aurora Bank as a servicer to

the loan and as its attorney-in-fact for the purpose of performing acts and executing

documents necessary for, among other things, foreclosing on the mortgage and collecting

upon the note.

{¶8} The bank alleges that under the terms of the mortgage it is authorized,

in event of default and without regard to the adequacy of the security for the Note, without regard to the Minnillos’ solvency, and without prior notice to the Minnillos, to have a receiver appointed by the Court, for the purpose of managing and operating the Mortgaged Property and collecting the rents and revenues arising from the use, enjoyment and occupancy of the Mortgaged Property.

Complaint, ¶ 24. {¶9} Thus, contemporaneously with the filing of its complaint, U.S. Bank also filed

a motion to appoint a receiver. In support of its motion, the bank filed the affidavit of

Michelle Rish, a special assets officer of Aurora Bank. Rish averred that she had

“personal knowledge of the matters contained in [the] Affidavit and * * * of the records

pertaining to the documents referred to * * * [and that the records were] maintained in the

ordinary course of business.” Rish further averred to the facts recited above from the

bank’s complaint.

{¶10} The Minnillos opposed the bank’s motion to appoint a receiver. The

Minnillos stated that prior to this action being filed, they “came to have concern that things

were just not right with their mortgage.” They contended that after being unable to

obtain a satisfactory explanation addressing their concerns, they hired a company named

TILA Solutions to perform an audit to determine to whom they should be making their

mortgage payments. According to the Minnillos, the audit revealed that the “claim of

Plaintiff that it is the owner and holder of the subject promissory note is dubious, at best.”

The Minnillos claimed that, on the bank’s part, “no one with personal knowledge came

forward with any evidence whatsoever that the trust is the holder of the note and

mortgage.”

{¶11} The trial court granted the bank’s motion to appoint a receiver. The court

found that the note had been assigned, as alleged by the bank in its complaint, and that the

bank is the owner of the note. The court found that Michael Minnillo has defaulted on

the note. The court further found that the note is secured by a mortgage issued by the Minnillos and that the mortgage encumbers the Murray Hill Road property. The court

also found that the mortgage had been assigned as alleged by the bank in its complaint.

“In accordance with the terms of the Note and the Mortgage, and pursuant to Ohio Revised

Code Section 2735.01,” the trial court granted U.S. Bank’s motion for a receiver. The

Minnillos assign the following errors for our review:

I. The court abused its discretion in appointing a receiver.

II. The court erred when it appointed a receiver upon the motion of plaintiff-appellee that failed to demonstrate it was the holder of th[e] subject mortgage note.

II. Law and Analysis

{¶12} The appointment of a receiver is an extraordinary remedy. Malloy v. Malloy

Color Lab, Inc., 63 Ohio App.3d 434, 437, 579 N.E.2d 248 (10th Dist.1989). Therefore,

the party requesting the receivership must show by clear and convincing evidence that the

appointment is necessary for the preservation of the complainant’s rights. Id. Clear and

convincing evidence is that “measure or degree of proof which is more than a mere

‘preponderance of the evidence,’ but not to the extent of such certainty as is required

‘beyond a reasonable doubt’ in criminal cases, and which will provide in the mind of the

trier of facts a firm belief or conviction as to the facts sought to be established.” Cross v.

Ledford, 161 Ohio St. 469, 120 N.E.2d 118 (1954), paragraph three of the syllabus. We

review a trial court’s decision to appoint a receiver for an abuse of discretion. The

Huntington Natl. Bank v. Prospect Park LLC, 8th Dist. No. 96218, 2011-Ohio-5391, ¶ 9.

{¶13} In their first assignment of error, the Minnillos contend that the trial court abused its discretion in granting the bank’s motion to appoint a receiver because the

requirements under R.C. 2735.01 were not met. That section provides in relevant part as

follows:

A receiver may be appointed by * * * the court of common pleas or a judge thereof in his county * * * in causes pending in such court * * * in the following cases:

***

(B) In an action by a mortgagee, for the foreclosure of his mortgage and sale of the mortgaged property, when it appears that the mortgaged property is in danger of being lost, removed, or materially injured, or that the condition of the mortgage has not been performed, and the property is probably insufficient to discharge the mortgage debt.

{¶14} The Minnillos contend that “[t]here is no evidence in the record that the

mortgaged property is in danger of being lost, removed or materially injured, or that the

condition of the mortgage has not been performed, and the property is probably

insufficient to discharge the mortgage deed.” [sic] But the trial court’s decision to

appoint a receiver was not based solely on R.C. Chapter 2735. Rather, the court granted

the bank’s motion “[i]n accordance with the terms of the Note and the Mortgage, and

pursuant to Ohio Revised Code Section 2735.01.” (Emphasis added.) The terms of the

mortgage referenced by the trial court are as follows:

[I]f an Event of Default has occurred and is continuing, regardless of the adequacy of Lender’s security, without regard to Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all actions set forth in the preceding sentence.1 If Lender elects to seek appointment of a receiver for

1 The preceding sentence provides in part that the Lender may “[e]nter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its the Mortgaged Property at any time after an Event of Default has occurred or is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.

(Emphasis sic.)

{¶15} In a case with a similar provision in a mortgage, this court held that the

provision was “evidence that [the defaulting party] had consented to the appointment of a

receiver upon the incidence of default [and] [u]nder such circumstances, a trial court does

not abuse its discretion in appointing a receiver.” Huntington Bank, supra, at ¶ 13. This

court recognized the precedent establishing that provisions in mortgages for the

appointment of a receiver without notice waive the requirements set forth in R.C. 2735.01.

Id. at ¶ 11, citing Harajli Mtge. & Invest., Inc. v. A&M Invest. Strategies, Inc., 167 Ohio

App.3d 546, 2006-Ohio-3052, 855 N.E.2d 1262 (6th Dist.).

{¶16} The Minnillos contend that Huntington Bank is distinguishable from this

case. According to the Minnillos, the dispute in Huntington Bank was “over who

should be appointed receiver, not the propriety of the appointment of a receiver.”

(Emphasis sic.) That characterization is not entirely accurate. In Huntington Bank,

after the plaintiffs, who sought to foreclose on the defendants’ property, filed a motion to

appoint a receiver, the defendants filed a response, in which they requested that the current

property manager be appointed as the receiver. The court granted the plaintiffs’ motion

for a receiver, but appointed someone other than who the defendants had requested.

discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property * * *.” {¶17} On appeal, the defendants raised seven assignments of error, all of which

related to the propriety of the appointment. See id. at ¶ 6. As such, this court

addressed the propriety of the appointment. See id. at ¶ 7-11. After addressing the

propriety of the appointment, this court stated: “We also note that in its response, [the

defendants] did not object to the appointment of a receiver, but instead requested that the

current property manager be retained as the receiver.” Id. at ¶ 12. Thus, the Minnillos’

contention that Huntington Bank is distinguishable from this case, because it concerned

who was appointed, but not the propriety of the appointment, is unpersuasive.

{¶18} The Minnillos next claim that Huntington Bank is distinguishable from this

case because there was a verified complaint there, as opposed to here where there is “only”

the affidavit of a “third party totally lacking any personal knowledge.” For our purposes,

the fact that the allegations in Huntington Bank were charged in a verified complaint, and

the allegations here were averred to in an affidavit, is a distinction without a difference.

By definition, an affidavit is “a statement that the affiant has sworn to be truthful, and

made under penalty of perjury.” State v. Calhoun, 86 Ohio St.3d 279, 284,

1999-Ohio-102, 714 N.E.2d 905.

{¶19} Rish, the affiant in support of the bank’s motion for a receiver, averred that

she was “a special assets officer of Aurora Bank,” and that she had “personal knowledge

of the matters contained in [the] Affidavit and * * * of the records pertaining to the

documents referred to * * * [and that the records were] maintained in the ordinary course

of business.” Thus, the quality of the evidence presented in Huntington Bank and in this

case are not distinguishable. {¶20} In light of the above, Huntington Bank is not materially distinguishable from

this case. Rather, it is on point and controlling. Thus, under the authority of Huntington

Bank, the Minnillos consented to the appointment of a receiver upon default under the

note. The trial court did not abuse its discretion by so appointing a receiver. The first

assignment of error is therefore overruled.

{¶21} In its second assignment of error, the Minnillos contend that the trial court

erred in appointing a receiver because U.S. Bank failed to demonstrate that it is the holder

of the mortgage note. According to the Minnillos, the bank “failed to even allege or

produce any evidence whatsoever that it is in fact the Trustee for Lehman Brothers Small

Balance Commercial Pass-Through Certificates, Series 2007-3.” The Minnillos further

contend that “there is no document attached to Plaintiff’s Complaint that would even tend

to indicate U.S. Bank’s status as Trustee for what appears to be a securitized trust.” We

disagree.

{¶22} In its complaint, the bank alleges that it, “as Trustee for Lehman Brothers

Small Balance Commercial Mortgage Pass-Through Certificates Series 2007-3 * * * is the

owner and holder of that certain Promissory Note dated March 28, 2007.” Complaint, ¶

2. Attached to its complaint is the “Allonge to Promissory Note dated March 28, 2007 *

* * From Aurora Bank FSB, Formerly Known as Lehman Brothers Bank, FSB.” The

allonge provides: “Pay to the order of U.S. Bank National Association, as trustee for

Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, Series

2007-3, without recourse.”

{¶23} On this record, the Minnillos’ contention is not well taken and their second assignment of error is therefore overruled.

{¶24} Judgment affirmed.

It is ordered that appellee recover of appellants costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the Cuyahoga

County Court of Common Pleas 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.

LARRY A. JONES, SR., JUDGE

PATRICIA ANN BLACKMON, A.J., CONCURS; SEAN C. GALLAGHER, J., CONCURS IN JUDGMENT ONLY

SEAN C. GALLAGHER, J., CONCURRING IN JUDGMENT ONLY:

{¶25} I concur in judgment only with the majority decision. I write separately

because I believe the best practice would have been for the trial court to hold a hearing on

the request to appoint a receiver, particularly where the receiver requested is working hand

in hand with the purported creditor and there are viable concerns as to who is the true

holder of the note and mortgage.

{¶26} Nevertheless, because a motion to dismiss this action based on standing has

not been made, and the terms of this note and mortgage authorize the appointment a receiver, as discussed by the majority, the trial court’s decision is arguably compliant with

this court’s precedent in Huntington Bank, 8th Dist. No. 96218, 2011-Ohio-5391.

{¶27} I have concerns because the appointment of a receiver is an extraordinary

remedy. While the majority points out that the terms of the note and mortgage authorized

the appointment of a receiver in the event of a default, that provision presumably is

enforceable only by the holder of the note and mortgage.

{¶28} The Minnillos offered an audit authored by a company named TILA

Solutions that revealed the “claim of the Plaintiff that it is the owner and holder of the

subject promissory note is dubious at best.” Despite the absence of a motion to dismiss

the action on the grounds that U.S. Bank may not be the real party in interest, I still believe

there were enough red flags in this transaction such that the better course would have been

to hold a hearing.