Wells Fargo Bank, N.A. v. Freed

2012 Ohio 5941

• Court: Ohio Court of Appeals
• Decided: December 17, 2012
• Docket: 5-12-01
• Status: Published

Opinion

[Cite as Wells Fargo Bank, N.A. v. Freed, 2012-Ohio-5941.]

IN THE COURT OF APPEALS OF OHIO THIRD APPELLATE DISTRICT HANCOCK COUNTY

WELLS FARGO BANK NA,

PLAINTIFF-APPELLEE, CASE NO. 5-12-01

v.

TERRY L. FREED, ET AL., OPINION

DEFENDANTS-APPELLANTS.

Appeal from Hancock County Common Pleas Court Trial Court No. 2009 F 189

Judgment Affirmed

Date of Decision: December 17, 2012

APPEARANCES:

Rick L. Brunner, Patrick M. Quinn and Elizabeth A. Mote for Appellants

James S. Wertheim and Rose Marie L. Fiore for Appellee Case No. 5-12-01

ROGERS, J.

{¶1} Defendants-Appellants, Terry Freed and Taletha Freed (collectively,

“the Freeds”), appeal the judgment of the Court of Common Pleas of Hancock

County granting a foreclosure decree in favor of Plaintiff-Appellee, Wells Fargo

Bank, N.A., as Trustee (“Trustee”),1 that entitled it to recover the full amount due

and owing under the Freeds’ note. On appeal, the Freeds argue since Trustee has

not demonstrated that it is a holder or nonholder in possession with rights of a

holder, it has no standing to prosecute this action. The Freeds also claim that it

was erroneous for the trial court to enter judgment for the amount due and payable

under the note. For the following reasons, we affirm the judgment of the trial

court.

{¶2} On April 24, 2007, the Freeds executed a promissory note in the

amount of $308,000 (“Note”) in favor of Option One Mortgage Corp. (“OOMC”).

The Freeds executed and delivered to OOMC a mortgage (“Mortgage”) on their

residential property as security for the Note and Mortgage. In March 2009,

Trustee initiated a foreclosure action against the Freeds for being in default on the

Note. To show its legal entitlement to enforce the Note, Trustee offered the

1 The full name of Defendant-Appellee is Wells Fargo, N.A., as Trustee for Option One Mortgage Loan Trust 2007-6 Asset-Backed Certificates, Series 2007-6.

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following documents: (1) the allonge to the Note2; (2) a Pooling and Servicing

Agreement (“PSA”); (3) a Mortgage Loan Purchase Agreement between OOMC,

as seller, and Option One Mortgage Acceptance Corporation (“OOMAC”), as

buyer (“the Agreement”); (4) an Assignment of Mortgage (“the Assignment”); and

(5) a Power of Attorney (“POA”).

{¶3} The allonge suffered from various irregularities. It was undated and

was signed by an unidentified person. Further, the allonge purportedly showed

negotiation from OOMC to “Wells Fargo, N.A.” and not Trustee. The Freeds

focused on these irregularities, as well as purported flaws in the other documents,

in opposing Trustee’s attempt to enforce the Note.

{¶4} The trial court denied the parties’ respective motions for summary

judgment.3 The case then proceeded to a bench trial on November 14, 2011. At

trial, the following evidence was admitted.

{¶5} On direct examination, Roger Kistler testified that he was the Vice

President of the Records and Collateral Management Department for American

Home Mortgage Servicing, Inc. (“AHMSI”). AHMSI is the current servicer of the

2 An allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” Black’s Law Dictionary 88 (9th Ed.2009). The former version of the Uniform Commercial Code only allowed allonges where the original instrument no longer had sufficient space for indorsements. Id. However, under Ohio’s current version of the Uniform Commercial Code, an allonge is valid even if the original instrument has sufficient space for indorsements. See R.C. 1303.24(A)(2). 3 There were numerous filings, and motions for summary judgment, at the trial level on behalf of both parties.

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Freeds’ loan. Kistler testified that he was authorized to speak on behalf of Trustee

pursuant to the PSA and via the POA from Trustee.4

{¶6} According to Kistler, OOMC was the initial lender and servicer of the

Freeds’ loan. It used Trustee as its warehouse bank custodian. In April 2008,

AHMSI purchased the right to service the Freeds’ loan. As the successor servicer,

AHMSI was familiar with the practice of OOMC in its management of original

collateral files.

{¶7} As to the allonge, Kistler’s testimony included the following facts. He

stated that the allonge was in the collateral file as of May 30, 2007, the date on

which the trust custodian must have received the file. Further, OOMC’s practice

was to maintain the documents associated with the loan in a manila folder with

metal brackets to physically attach the documents to the folder. When given the

original collateral file, Kistler indicated that the allonge was directly behind the

Note in the file, secured by metal brackets to the file folder, and that when holding

the folder up, neither the Note nor the allonge fell out.

{¶8} Kistler then provided the following testimony regarding the import of

the PSA. In effect, Kistler maintained that the PSA demonstrated both the transfer

of the Freeds’ loan into the trust that Trustee administers and Trustee’s resulting

ability to enforce the Note. The PSA was dated May 1, 2007, which was the

4 Joint Exhibit Five is a copy of the Limited Power of Attorney entered into June 8, 2009 by Wells Fargo appointing AHMSI as its attorney-in-fact.

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“cutoff date,” and it identified May 30, 2007 as the “closing date.” Trial Tr., p.

37. The “closing date” was the final date that all loans either had to be included or

withdrawn on the mortgage loan schedule attached to the PSA.

{¶9} The PSA listed OOMAC as the depositor, which was the “entity that

collects all of the mortgage loans from the different originators or established

trusts to act as the conduit for the loans to flow into the trust.” Id. at 38.

Meanwhile, OOMC was listed as the servicer, and Trustee was listed as the trustee

of Option One Mortgage Loan Trust 2007-6 Asset-Backed Certificates, Series

2007-6. The PSA was signed by virtue of electronic signatures.

{¶10} OOMAC did not own the rights to the Freeds’ Note on May 1, 2007.

However, it did receive the rights to the Note upon the May 17, 2007 execution of

the Agreement, which showed that OOMC transferred the Freeds’ Note to

OOMAC. According to the terms of the PSA, OOMAC then transferred the Note

into the trust. As a result, Kistler testified that the Note was identified in the

PSA’s mortgage loan schedule as being deposited into the trust. The copy of the

PSA’s mortgage loan schedule that was admitted into evidence was mostly

redacted. But, the non-redacted parts identify the Note and its position in the trust.

Indeed, the schedule includes multiple references to the Freeds’ loan. See Joint

Exhibit 6, p. 263, 306, 350, 393, 480, 522, 567, 610, 697.

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{¶11} As suggested in Kistler’s testimony, the PSA’s terms indicate that

upon the deposit of the loans into the trust, Trustee is empowered to act for the

benefit of the trustors. Section 2.01 of the PSA states, in relevant part, the

following:

[OOMAC] . . . does hereby transfer, assign, set over and otherwise convey in trust to the Trustee without recourse for the benefit of the [trustors] all the right, title and interest of [OOMAC], including any security interest therein for the benefit of [OOMAC], in and to (i) each Mortgage Loan identified on the Mortgage Loan Schedule, including the related Cut-Off Date and all collections in respect of interest and principal due after the Cut-Off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in any insurance policies in respect of the Mortgage Loans; (iv) the rights of [OOMAC] under the Mortgage Loan Purchase Agreement; (v) all other assets included or to be included in the Trust Fund; . . . and (vii) all proceeds of any of the foregoing. Such assignment includes all interest and principal due and collected by [OOMAC] or [OOMC] after the Cut-off date with respect to the Mortgage Loans. Joint Exhibit 6, p. 28.

{¶12} After discussing the PSA, Kistler stated the following regarding the

physical possession of the Note:

Q: After the loan is deposited into the trust, what happens to physical possession of the original note?

A: Physical possession of the original note is transferred either from the company, the originator’s warehouse bank custodian to the trust custodian, or if those are the same, in the same companies, then the file is physically moved off of the originator warehouse’s bank line shelf on to a shelf that is designated specifically for this trust.

Q: And that is what happened in this case?

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A: That’s what happened in this case, yes. Trial Tr., p. 40-41.

While Kistler could not state the exact date on which the trust custodian received

physical custody of the Note, he said that if the Note was not in the trust

custodian’s physical custody, there would be a business record to that effect.

Since no such business record existed, Kistler said that the custodian would have

certainly received physical custody of the Note by May 30, 2007, and that the

allonge would have been with the collateral file at that time.

{¶13} Regarding the Assignment, Kistler testified that the purpose of a

mortgage assignment is “to put the world on notice as to who has the authority to

enforce the terms of the note and mortgage.” Id. at 43. The Assignment

purportedly transferred the interest of AHMSI, “as successor-in-interest to Option

One Mortgage Corporation” to Trustee. Joint Exhibit 3. It was executed on

March 12, 2009, but it identified February 27, 2009 as the Assignment’s effective

date. Kistler indicated that AHMSI never owned the Note. He also admitted that

the signatures on the Assignment, although the same name, were different from

the signatures on another unrelated mortgage assignment. Further, Kistler stated

that the Assignment was immaterial because Trustee has the authority to enforce

the Note and Mortgage due to the PSA.

{¶14} On cross examination, Kistler recalled that in his deposition he stated

that he became familiar with the collateral file in the two previous weeks and that

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he did not have personal knowledge of the collateral file’s location or condition in

2007, 2009, or 2010. He also testified that he did not have personal knowledge

that the allonge was affixed to the Note in 2007. Further, there was a letter from

AHMSI to the Freeds dated June 3, 2010, stating that AHMSI was “unable to

provide the date when Option One Mortgage Loan Trust took over the loan.”

Defendants’ Exhibit 1.

{¶15} James Brantley, a Senior Foreclosure Mediation Specialist with

AHMSI, testified regarding the amount due on the Freeds’ loan. He testified that

the Freeds’ loan was in default, with the first missed payment occurring in

December 2008. No subsequent payments were made. He indicated that the total

outstanding balance due on the Note was $389,378.42.

{¶16} The Freeds challenged the outstanding balance because the principal

balance purportedly included an erroneous $2,900.00 prepayment penalty from the

payoff of the Freeds’ previous loan. The following evidence was admitted

regarding the inclusion of this amount in the principal balance. OOMC was the

originator of the Freeds’ loan, which resulted from the refinancing of a previous

loan that was also held by OOMC. OOMC added a $2,900.00 prepayment penalty

for this refinancing since it paid off the previous loan. However, OOMC’s policy

was to waive this fee in such situations. As a result, Sand Canyon Corporation

(“Sand Canyon”), which took over OOMC’s origination business, offered a

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$2,900.00 reimbursement to the Freeds in a letter dated March 11, 2009.

Meanwhile, at trial, Trustee read into the record the following portion of Terry

Freed’s deposition regarding the prepayment penalty:

[At closing,] I said that [the $2,900.00 penalty] shouldn’t be on there, and I said there is also some charges here, and a good faith estimate, that were not to be charged on what you told me would be charged. There were some extra brokerage fees and things like that, and I said, you can’t do this. And they said, well, we’ll take them off. We won’t take the [$]2900 off, but they took the brokerage fees off . . . . Trial Tr., p. 119.

{¶17} In December 2011, the trial court entered judgment against the

Freeds in the foreclosure action. The trial court found that Trustee was either a

holder or a nonholder in possession with the rights of a holder, that the Note and

Mortgage were transferred to Trustee through the PSA, that the allonge was

affixed to the Note, and that the Note was transferred to Trustee by OOMC, a

holder. It also found that as of November 1, 2008, the Freeds were in default on

the Note. Consequently, the trial court awarded judgment to Trustee in the

amount of $389,378.42.5

{¶18} It is from this judgment that the Freeds appeal, presenting the

following assignments of error for review.

5 This amount includes an unpaid principal balance of $306,711.34, delinquent interest of $59,972.46, escrow advances for real estate taxes of $9,087.06, late charges of $1,823.01, and recoverable corporate advances of $11,784.55.

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Assignment of Error No. I

THE TRIAL COURT ERRED IN ENTERING A DECREE IN FORECLOSURE BASED UPON FINDINGS THAT APPELLEE HAD STANDING TO FORECLOSE BECAUSE AT A MINIMUM, A FORECLOSURE PLAINTIFF MUST DEMONSTRATE NEGOTIATION OF THE NOTE AND/OR ASSIGNMENT OF RECORD OF THE MORTGAGE.

Assignment of Error No. II

THE TRIAL COURT ERRED IN ENTERING A DECREE IN FORECLOSURE WHERE APPELLEE FAILED TO PROVIDE COMPETENT EVIDENCE THAT IT IS A NONHOLDER IN POSSESSION WITH THE RIGHTS OF A HOLDER, AND THERE IS NO EVIDENCE OF PROPER TRANSFER BY A HOLDER FOR THE PURPOSE OF GIVING APPELLEE THE RIGHT TO ENFORCE THE NOTE.

Assignment of Error No. III

THE TRIAL COURT ERRED IN ENFORCING THE AMOUNT APPELLEE ASSERTED AS DUE AND PAYABLE UNDER THE NOTE AS OF NOVEMBER 3, 2011.

{¶19} Due to the nature of the first and second assignments of error, we

elect to address them together.

Assignments of Error Nos. I & II

{¶20} In their first and second assignments of error, the Freeds challenge

Trustee’s standing to prosecute this foreclosure action. Essentially, the Freeds

base their contention on the following: (1) that Trustee is not the real party interest

because it failed to show that it is either a holder or a nonholder in possession with

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the rights of a holder; (2) that Trustee does not have physical possession of the

loan documents; and (3) that the loan documents feature various defects that

render them invalid. We agree in part and disagree in part, but find no reversible

error in the trial court’s judgment.

Standing in Foreclosure Actions

{¶21} “Standing is a threshold question for the court to decide in order for

it to proceed to adjudicate the action.” State ex rel. Jones v. Suster, 84 Ohio St.3d

70, 77 (1998). Standing here is intertwined with Civ.R. 17(A)’s requirement that

every action “be prosecuted in the name of the real party in interest.” Civ.R.

17(A); see also First Union Natl. Bank v. Hufford, 146 Ohio App.3d 673, 677 (3d

Dist. 2001) (“A party who has failed to establish itself as a real party in interest

lacks standing to invoke the jurisdiction of the court and is not entitled to

judgment as a matter of law.”). To decide whether this requirement is satisfied,

“courts must look to the substantive law creating the right being sued upon to see

if the action has been initiated by the party possessing the substantive right to

relief.” Shealey v. Campbell, 20 Ohio St.3d 23, 25 (1985). We apply de novo

review to a trial court’s finding that standing exists. Portage Cty. Bd. Of Commrs.

v. City of Akron, 109 Ohio St.3d 106, 2006-Ohio-954, ¶ 90; see also League of

Latin Am. Citizens v. Kasich, 10th Dist. No. 10AP-639, 2012-Ohio-947, ¶ 26

(surveying Ohio courts’ treatment of standing issues as questions of law subject to

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de novo review). “When determining a question of law de novo, this [c]ourt may

substitute, without deference, its judgment for that of the trial court.” Groll

Furniture Co. v. Epps, 3d Dist. No. 9-09-13, 2009-Ohio-3533, ¶ 9.

Holder Analysis

{¶22} Generally, in foreclosure actions, the real party in interest is the

current holder of the note and the mortgage. Wells Fargo Bank, N.A. v. Sessley,

10th Dist. No. 09AP-178, 2010-Ohio-2902, ¶ 11. “Promissory notes are

negotiable and may be transferred to someone other than the issuer.” HSBC Bank

USA v. Thompson, 2d Dist. No. 23761, 2010-Ohio-4158, ¶ 45. After negotiation,

an entity is a holder “[i]f the instrument is payable to an identified person [and] the

identified person [is] in possession of the instrument.” R.C. 1301.01(T)(1)(b),

repealed in Am.H.B. No. 9, 2011 Ohio Laws.6

{¶23} Trustee has brought this action as “Trustee” of the Mortgage and the

Note. A trust is a fiduciary relationship whereby one party retains a property

interest for the benefit of another. See, e.g., Hill v. Irons, 160 Ohio St. 21, 26

(1953). “Because a trustee is both a representative and an individual, ‘the capacity

[in which the trustee sues] must be clear and the distinction between the two

different capacities must be maintained.’” UAP Columbus JV 326132 v. Young, 6 House Bill No. 9 (“H.B. 9”), effective June 29, 2011, repealed R.C. 1301.01. H.B. 9 “amended the provisions of R.C. 1301.01 and renumbered the section so that it now appears at 1301.201.” Flagstar Bank, F.S.B. v. Richison, 3d Dist. No. 14-12-01, 2012-Ohio-3198, fn. 1. This matter implicates transactions predating H.B. 9’s effective date so we apply former R.C. 1301.01 here. Id. However, “[w]e note that the R.C. 1301.201(B)(21)(a) definition of ‘holder’ is substantially similar to the R.C. 1301.01(T)(1)(a), (b) definition of holder.” Id.

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10th Dist. No. 11AP-926, 2012-Ohio-2471, ¶ 16, quoting MacAlpin v. Van

Voorhis, 11th Dist. No. 8-176 (Sept. 28, 1981).

{¶24} Here, Trustee did not make its trust designation clear. OOMC did

negotiate and transfer the Note via an indorsement on the allonge. But, the allonge

identifies the transferee as “Wells Fargo Bank, N.A.,” which is an entirely

different entity than “Wells Fargo, N.A., as Trustee for Option One Mortgage

Loan Trust 2007-6 Asset-Backed Certificates, Series 2007-6.” As a result, Trustee

is not the named payee of the Note, rendering Trustee incapable of being the

holder of the Note and Mortgage.

{¶25} We also note that the allonge was not properly affixed to the Note in

this matter. The record reflects that the allonge was merely attached to the file

folder and not to the Note itself. Indeed, Kistler admitted that he had no personal

knowledge as to whether the allonge was properly affixed to the Note. Under

Ohio’s version of the UCC, the allonge’s lack of attachment to the Note is a fatal

defect as it relates to Trustee’s holder status. See Thompson, 2010-Ohio-4158, at ¶

66 (“[T]he [allonge] must be affixed to the instrument in order for the signatures to

be considered part of the instrument.”).

{¶26} Moreover, Trustee cannot rely on the Assignment as a proper basis to

establish holder status. It is axiomatic that an assignor may only transfer the rights

which it holds. See, e.g., Union Bank Co. v. North Carolina Furniture Express,

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L.L.C., 189 Ohio App.3d 538, 2010-Ohio-4176, ¶ 15 (3d Dist.) (“[T]he assignor

can give only the interest currently held by the assignor.”). AHMSI, the purported

assignor here, is merely the servicer of the Freeds’ loan. As Kistler admitted on

cross-examination, AHMSI has never owned the Freeds’ loan. Further, AHMSI

did not present any evidence to show it actually was the successor-in-interest to

OOMC. Even if there was such evidence, the record reflects that two years before

the Assignment’s execution, OOMC had transferred the Note to OOMAC,

meaning that OOMC had no ownership interest in the Freeds’ loan at the time of

the Assignment’s execution. As such, AHMSI, as OOMC’s purported successor,

could not transfer ownership rights to Trustee via the Assignment.

{¶27} Due to the allonge’s failure to identify Trustee, its lack of proper

attachment to the Note, and the Assignment’s deficiencies, it was erroneous for the

trial court to find that Trustee had standing to bring this action as a holder.

Nonholder in Possession with Rights of a Holder Analysis

{¶28} However, Trustee’s inability to show holder status does not

necessarily defeat its claim of standing to enforce this action. Under Ohio law,

nonholders in possession with the rights of holders also have standing to bring

foreclosure actions. See, e.g., Mtge. Electronic Registration Sys., Inc. v. Vasick,

6th Dist. No. L-09-1129, 2010-Ohio-4707, ¶ 33. A nonholder in possession has

the rights of a holder where the transferee delivered the instrument for the purpose

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of vesting the right to enforce it in the recipient. See R.C. 1303.22(A) and

1303.31. As such, nonholder in possession with rights of a holder status exists

where the evidence shows that the transferee of the instrument intended to hand

over the right to enforce the instrument.

{¶29} The evidence in the record reflects that such intent existed here. The

central document in this matter is the PSA. The PSA governs a trust in which

OOMAC deposited a large number of loans. After acquiring the Note from

OOMC, as evidenced in the Agreement, OOMAC then deposited the Note into the

trust, which subjected it to the PSA’s terms. The PSA explicitly transfers all rights

to the deposited notes to Trustee: “[OOMAC] . . . does hereby transfer, assign, set

over and otherwise convey in trust to the Trustee without recourse for the benefit

of the [trustors] all the right, title and interest of [OOMAC], including any

security interest therein for the benefit of [OOMAC].” (Emphasis added.) Joint

Exhibit 6, p. 28. This broad assignment manifestly shows an intent that Trustee

have the ability to enforce the loans deposited in the Trust, including the Note.

{¶30} In light of this evidence, the trial court’s judgment that Trustee was a

nonholder in possession with the rights of a holder is not erroneous.

{¶31} The Freeds question the existence of intent by pointing out defects in

the documents relating to their loan, including the allonge, the Assignment, and

the POA. While these defects are glaring, they do not defeat the import of these

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documents as it relates to the parties’ intent that Trustee have the authority to

enforce the Note and the Mortgage. Consequently, the defects in the documents

do not preclude a finding that Trustee is a nonholder in possession with the rights

of a holder.

Possession of the Note and Mortgage

{¶32} The Freeds also question the trial court’s finding that Trustee has

physical possession of the original loan documents. In foreclosure bench trials, a

trial court’s factual findings are entitled to deference and are only disturbed upon a

showing that the findings are against the manifest weight of the evidence. See,

e.g., Bradford v. B&P Wrecking Co., 171 Ohio App.3d 616, 2007-Ohio-1732, ¶ 25

(6th Dist.). Further, “[i]t is beyond well-established that appellate courts must

generally refrain from second-guessing trial court decisions regarding credibility.”

Powell v. Vanlandingham, 4th Dist. No. 10CA24, 2011-Ohio-3208, ¶ 36; see also

Bradford at ¶ 65 (rejecting appeal of foreclosure decree partly based on argument

that trial witness was not credible).

{¶33} Our review of the record shows that there is sufficient evidence to

support the trial court’s finding in this regard. Kistler testified that Trustee

receives physical possession of original loan documents, like those involving the

Freeds’ loan, as a matter of routine practice upon the closing of a transaction. He

also indicated that if the Freeds’ loan documents were not transferred to the trust

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custodian, there would have been a business record to that effect. In light of our

deferential review, we decline to second-guess the trial court’s weighing of the

Kistler’s credibility and find that the trial court’s judgment was not erroneous in

this regard.

{¶34} In sum, although the trial court erroneously concluded that Trustee is

the holder of the Note and Mortgage, we find that such error was not prejudicial

because the record shows that Trustee was a nonholder in possession with the

rights of a holder. Consequently, Trustee is the real party in interest and was able

to bring this action. Further, we find that the alleged defects in the Freeds’ loan

documents are immaterial and do not effect Trustee’s status as a nonholder in

possession with the rights of a holder.

{¶35} Accordingly, we overrule the Freeds’ first and second assignments of

error.

{¶36} In their third assignment of error, the Freeds argue that the trial court

erred in enforcing the amount of $389,378.42 that was purportedly due and

payable under the Note. The basis for the Freeds’ contention is that $2,900.00 was

erroneously charged at closing as a prepayment penalty and that the inclusion of

this amount in the principal balance has rendered the amount of interest charged

incorrect. We disagree.

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{¶37} Ohio courts treat promissory notes as contracts, meaning that the

precepts of contract law govern their interpretation. See, e.g., Edward A. Kemmler

Mem. Found. v. 691/733 East Dublin-Granville Rd. Co., 62 Ohio St.3d 494, 499

(1992). “The fundamental purpose of contract interpretation is to determine and

carry out the intention of the parties, and the intention of the parties is presumed to

lie in the language used [in the instrument].” Heritage Court, L.L.C. v. Merritt,

187 Ohio App.3d 117, 2010-Ohio-1711, ¶ 14 (3d Dist.). The terms of the

instrument must “be given their ordinary meaning unless manifest absurdity

results, or unless some other meaning is clearly evidenced from the face or overall

contents of the instrument.” Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d

241 (1978), paragraphs one and two of the syllabus, superseded by statute on other

grounds as stated in Great Invest. Properties, L.L.C. v. Bentley, 3d Dist. No. 9-09-

36, 2010-Ohio-981, ¶ 13. Further, “‘[i]f a contract is clear and unambiguous, then

its interpretation is a matter of law and there is no issue of fact to be determined.’”

Barhorst, Inc. v. Hanson Pipe & Prods. Ohio, Inc., 169 Ohio App.3d 778, 2006-

Ohio-6858, ¶ 10 (3d Dist.), quoting Inland Refuse Transfer Co. v. Browning-Ferris

Industries of Ohio, Inc., 15 Ohio St.2d 321, 322 (1984).

{¶38} Here, the record reveals that the Freeds signed the Note after Terry

Freed inquired as to the $2,900.00 penalty’s inclusion in the principal balance.

The lender’s representative indicated that the penalty was included and that it

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could not be removed. After learning this, the Freeds signed the Note knowing

that the balance included the penalty.

{¶39} There is evidence indicating that OOMC’s successor, Sand Canyon,

admitted that the penalty should not have been included in the Note balance.

However, Sand Canyon made this admission in 2011, nearly two years after the

PSA was executed and the loan was transferred to Trustee. Further, Sand Canyon

offered a reimbursement of the penalty to resolve the Freeds’ complaint.7 This

evidence discloses that the Freeds’ quarrel over the inclusion of the penalty and

the resulting effect on the amount due and owing on their loan is not with Trustee

but rather with Sand Canyon.

{¶40} More importantly, this evidence does not overcome the Freeds’

action of signing the Note with full knowledge that it included the $2,900.00

penalty in the principal balance. In light of this, the Freeds cannot now seek to

undo the contract that they willingly entered. Thus, we find that the trial court did

not err when it ordered the Freeds to pay the full amount due on the Note,

including the $2,900.00 penalty.

{¶41} Accordingly, we overrule the Freeds’ third assignment of error.

7 There is no evidence in the record whether the Freeds have accepted the reimbursement offer. However, the Freeds’ trial counsel indicated that they had not accepted the offer.

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{¶42} Having found no prejudicial error herein, in the particulars assigned

and argued, we affirm the trial court’s judgment.

SHAW, P.J. and WILLAMOWSKI, J., concur.

/jlr

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