[Cite as BAC Home Loans Servicing, L.P. v. Blythe,

.] STATE OF OHIO, COLUMBIANA COUNTY

IN THE COURT OF APPEALS

SEVENTH DISTRICT

BAC HOME LOANS SERVICING, L.P. ) CASE NO.

fka COUNTRYWIDE HOME LOANS ) SERVICING L.P. ) ) PLAINTIFF-APPELLEE ) ) VS. ) OPINION ) WALTER J. BLYTHE, et al. ) ) DEFENDANTS-APPELLANTS )

CHARACTER OF PROCEEDINGS: Civil Appeal from the Court of Common Pleas of Columbiana County, Ohio Case No. 2010 CV 802

JUDGMENT: Reversed. Complaint Dismissed.

APPEARANCES:

For Plaintiff-Appellee: Atty. Monica Levine Lacks Atty. James S. Wertheim McGlinchey Stafford PLLC 25550 Chagrin Boulevard, Suite 406 Cleveland, Ohio 44122

For Defendants-Appellants: Atty. Michael J. Roth 200 N. Main Street Minerva, Ohio 44657

JUDGES:

Hon. Cheryl L. Waite Hon. Gene Donofrio Hon. Mary DeGenaro Dated: December 16, 2013 [Cite as BAC Home Loans Servicing, L.P. v. Blythe,

.] WAITE, J.

{¶1} Appellant Walter J. Blythe appeals the Columbiana County Common

Pleas Court’s decision granting summary judgment in favor of Appellee, BAC Home

Loans Servicing, L.P., in a foreclosure action. Appellant challenges the trial court’s

finding that Appellee had standing to foreclose in the absence of evidence that

Appellee was the holder of the note creating the obligation. Appellant relies on the

material submitted by Appellee in support of this claim. Because the copy of the note

filed by Appellee is specifically indorsed to Countrywide Bank, FSB, not Appellee,

and there is nothing to indicate otherwise, Appellee has failed to demonstrate that it

has standing to accelerate the note and foreclose the mortgage. The judgment of the

trial court is reversed and the suit dismissed for lack of standing.

Statement of Facts

{¶2} On May 2, 2007 Appellant financed the purchase of a house located at

32282 Wooddale Dr., Hanoverton, Ohio, 44423 with a loan issued by Quicken Loans

Inc. Appellant signed a promissory note as the sole obligor in the amount of

$116,000.00. The note named the lender, Quicken Loans Inc., as the sole obligee.

The promissory note was transferred by Quicken Loans Inc. in an undated special

indorsement on page three of the note. The indorsement reads “WITHOUT

RECOURSE Pay To the Order of Countrywide Bank, FSB” and was signed by Scott

Johnson, capture manager for Quicken Loans, Inc. (1/27/12 Status Aff., Exh. A.)

{¶3} The note was secured by a mortgage on the Wooddale property

granted by Appellant to Mortgage Electronic Registration Systems, Inc. (“MERS”) as

mortgagee “acting solely as a nominee for Lender and Lender’s successors and -2-

assigns.” (9/1/10 Complaint, Exh. B, Mortgage, p. 1.) Quicken Loans Inc. is

identified in the mortgage as the lender. (9/1/10 Complaint, Exh. B, Mortgage, p. 2.)

The mortgage was recorded in Columbiana County on either June 11 or August 11,

2007; the copy provided by Appellee is not clear. The mortgage, without reference to

the note, appears to have been assigned by MERS “as nominee for Quicken Loans,

Inc.” to BAC Home Loans Servicing, LP, on March 22, 2010. (9/1/10 Complaint,

Assignment.) The assignment was prepared by Lerner, Sampson, and Rothfuss,

executed in Cincinnati, Ohio, and recorded in Columbiana County on either March 26

or March 28, 2010 (copy provided by Appellee is unclear).

{¶4} Appellee alleges that the account is due and owing from October 1,

2009, in the amount of $116,000.00, with interest accruing at the amount specified in

the note from October of 2009. The accounting provided by Appellee reflects

payment by the homeowner every month between the June, 2007 origination of the

loan and October of 2009, when payment was apparently made for the month in

which the default is alleged to have occurred. The accounting provided by Appellee

reflects a zero balance for each month of the documented life of the loan. Appellee

alleged default under the terms of the mortgage but does not specify nonpayment or

otherwise identify the default that gave rise to acceleration and foreclosure.

Procedural History

{¶5} Appellee filed this foreclosure action in Columbiana County on

September 1, 2010. The complaint was served via certified mail on or about

September 14, 2010 and completed on September 17, 2010. On September 30, -3-

2010, Appellant filed a timely answer to the complaint denying all allegations in the

complaint, alleging as a defense that Appellee had failed to state a claim on which

relief could be granted, and asserting his right to equitable redemption. The matter

was then referred to mediation.

{¶6} Appellee moved for summary judgment, without leave and well beyond

the dispositive motion’s deadline, on January 27, 2012. On that same date Appellee

separately filed an affidavit of status of account and military affidavit and a second

military affidavit. (1/27/12 Status Aff.) It is unclear, but one or both of these may be

the “Affidavit Supporting Plaintiff’s Motion for Summary Judgment” mentioned in

Appellee’s motion. (Motion for Summary Judgment, p. 2) The status of account

affidavit was executed in Texas by Gregory Higeons, an Assistant Vice President of

BAC Home Loan Servicing, LP. He does not specify a date of default, but states

generally that the account is due “from the date of default” in the amount of

$116,000.00 “together with interest thereon” “at the rate specified in the note.”

(1/27/12 Status Aff., ¶3.) Copies of the note, mortgage, and an accounting are

attached to the affidavit but are not referenced in or incorporated by the affidavit.

(1/27/12 Status Aff.) Appellee’s complaint and Appellant’s brief both suggest that

Appellant has filed personal bankruptcy. No evidence of bankruptcy or discharge

appears in the record.

{¶7} Appellant filed a response in opposition to summary judgment and a

motion to strike the summary judgment motion which was filed without leave in

violation of the trial court’s dispositive motion schedule. In opposition, Appellant -4-

argued that Appellee lacked standing to foreclose and was not the real party in

interest due to the absence of evidence in the record showing a transfer of interest in

the note to Appellee. Appellee did not respond. The trial court overruled the motion

to strike and granted Appellee’s motion for summary judgment on February 17, 2012.

Final judgment granting summary judgment and a decree in foreclosure was entered

on February 24, 2012. Appellant filed a timely appeal of both orders. Appellant

sought a stay of execution, which the trial court conditioned on a supersedeas bond

of $50,000.00. It is unclear whether bond has been posted and no order granting a

stay appears in the record.

Argument and Law

Assignment of Error

THE TRIAL COURT ERRED IN GRANTING PLAINTIFF-APPELLEE’S

MOTION FOR SUMMARY JUDGMENT AS GENUINE ISSUES OF

MATERIAL FACT EXISTED AS TO WHETHER THE PLAINTIFF-

APPELLEE IS THE CORRECT PARTY IN INTEREST AND HAD

STANDING TO BRING THE FORECLOSURE ACTION.

{¶8} Appellant contends that the trial court erred in deciding to grant

summary judgment to Appellee because it lacked standing to foreclose. Summary

judgment is governed by Civ.R. 56(C), which states:

Summary judgment shall be rendered forthwith if the pleadings,

depositions, answers to interrogatories, written admissions, affidavits,

transcripts of evidence, and written stipulations of fact, if any, timely -5-

filed in the action, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as a

matter of law. No evidence or stipulation may be considered except as

stated in this rule. A summary judgment shall not be rendered unless it

appears from the evidence or stipulation, and only from the evidence or

stipulation, that reasonable minds can come to but one conclusion and

that conclusion is adverse to the party against whom the motion for

summary judgment is made, that party being entitled to have the

evidence or stipulation construed most strongly in the party's favor.

A fact is material if it affects the outcome of the case under the applicable substantive

law. Russell v. Interim Personnel, Inc.,

,

(1999). A court may not resolve ambiguities in the evidence presented and is strictly

limited to the evidence or stipulation in the record. Civ.R. 56(C); Inland Refuse

Transfer Co. v. Browning-Ferris Industries of Ohio, Inc.,

,

(1984).

{¶9} The party seeking summary judgment bears the initial burden of

informing the trial court of the basis of the motion and identifying the portions of the

record which demonstrate the absence of a genuine issue of fact on a material

element of the non-moving party's claim. Drescher, supra. Once the moving party

meets its initial burden, the burden shifts to the non-moving party to set forth specific

facts demonstrating a genuine issue of material fact does exist. Id. The non-moving

party may not rest upon the allegations and denials in the pleadings, but instead -6-

must submit some evidentiary material showing a genuine dispute over material

facts. Henkle v. Henkle,

,

(1991). However,

even a complete failure to respond to a motion for summary judgment does not, by

itself, warrant that the motion be granted. Morris v. Ohio Cas. Ins. Co.,

,

(1988). In every case, a trial court's analysis must focus on

whether the movant has satisfied the initial burden to show that reasonable minds

could only conclude that the case should be decided against the nonmoving party.

Only where the movant has discharged this burden does the court move on to

address whether the nonmovant has met its reciprocal burden of establishing that a

genuine issue remains for trial.

A trial court should not enter a summary

judgment if it appears that a material fact is genuinely disputed, or if, construing the

allegations most favorably towards the non-moving party, reasonable minds could

draw different conclusions from the undisputed facts. Houndshell v. American States

Ins. Co.,

,

(1981).

{¶10} Appellant relies on Ohio’s version of Article 3 of the Uniform

Commercial Code, including R.C. 1303.21(B), in support of his argument that

Appellee failed to satisfy its burden to establish standing. R.C. 1303 governs

commercial paper, which includes the note that creates the obligation at issue. R.C.

1303.02, R.C. 1303.03(A), (B), (E)(1). R.C. 1303.21 defines “negotiation” as the

“voluntary or involuntary transfer of possession of an instrument by a person other

than the issuer to a person who by transfer becomes the holder of the instrument.”

R.C. 1303.21(A). -7-

{¶11} Under the same section, “if an instrument is payable to an identified

person [or entity], negotiation requires transfer of possession of the instrument and its

indorsement by the holder. If an instrument is payable to bearer, it may be

negotiated by transfer of possession alone.” R.C. 1303.21(B). Indorsement under

the code “means a signature, other than that of a signer as maker * * * that alone or

accompanied by other words is made on an instrument for any of the following

purposes: (a) [t]o negotiate the instrument.” R.C. 1303.24(A)(1).

{¶12} An indorsement that identifies the person or entity “to whom it makes

the instrument payable” is a special indorsement. R.C. 1303.25(A). “An instrument,

when specially indorsed, becomes payable to the identified person and may be

negotiated only by the indorsement of that person.” R.C. 1303.25(A). A special

indorsement exists in opposition to a blank indorsement, which does not identify a

payee, and instead makes the instrument “payable to bearer” and negotiable “by

transfer of possession alone until specially indorsed.” R.C. 1303.25(B).

{¶13} Appellee claims that ownership of the note is not necessary to enforce

the agreement. While Appellee is correct that R.C. 1303.31(B) allows a person who

is not the owner of the instrument or is in wrongful possession of the instrument to

enforce the instrument, the special indorsement on this note precludes enforcement

by any party other than the named entity. R.C. 1303.25.

{¶14} Appellee argues that it is the “holder” of the instrument. The term

“holder” has specific legal significance in this context and is defined by R.C. 1303.32,

which regulates that the holder must satisfy the applicable requirements included in -8-

that section. The first requirement is that the instrument is “issued or negotiated to

the holder.” R.C. 1303.32(A)(1).

{¶15} The note at issue here was originally payable to Quicken Loans, Inc.,

and was transferred (negotiated) by special indorsement, to Countrywide Bank, FSB.

Appellee, BAC Home Loan Servicing, LP is not Countrywide Bank, FSB. The record

from the trial court does not contain any evidentiary material suggesting that Appellee

is transferee or successor in interest of Countrywide Bank, FSB. For the first time on

appeal, Appellee asserts that we “may take judicial notice” that “Countrywide Bank,

FSB was converted to a national banking association under the title of Countrywide

Bank, N.A. and immediately thereafter merged with Bank of America, N.A.”

(Appellee’s Brf., p. 4.) If Appellee were correct and we could take judicial notice of

such facts, they would not be sufficient to establish Appellee’s alleged standing as

the holder of the note.

{¶16} As we have recently noted, “[a] corporate name is a very precise term”

and for this reason even “minor variations in the spelling and punctuation of a

corporate name” can have dispositive legal significance. CitiMortgage v. Foster,

. Appellee, BAC Home Loan Servicing, LP is not Bank of

America, N.A. The two are demonstrably separate corporate entities; one is a limited

partnership, and the other is a national association; that is, a federally regulated

bank. Appellee’s claim that it has holder status by virtue of the merger of two

corporate entities other than itself is meritless. -9-

{¶17} Appellee’s assertion that it is a nonholder in possession and entitled to

enforce is similarly mistaken. As the official comment to R.C. 1303.31/UCC 3-301

indicates, a nonholder in possession must establish that it has “acquired rights of a

holder by subrogation,” by transfer, is a successor to a holder, or “otherwise acquires

the holder’s rights.” (UCC 3-301, official comment 1990, R.C. 1303.31.) To

demonstrate status as a nonholder in possession of specially indorsed commercial

paper, Appellee would have to demonstrate the transfer or acquisition of the paper.

Nothing in this record establishes the transfer or acquisition of Countrywide Bank

FSB’s right to the note by any means. Even if Bank of America, N.A., and not

Appellee, BAC Home Loan Servicing, LP, had filed suit with the exact copy of the

note filed in this instance, Bank of America, N.A. would be required to produce Civ.R.

56 evidence of the transaction, merger, or mergers that gave rise to an interest in the

subject note.

{¶18} At summary judgment, unlike trial, the material a court may consider is

strictly limited: “[n]o evidence or stipulation may be considered except as stated in

this rule.” Civ.R. 56(C). The material explicitly allowed by the rule includes only

“pleadings, depositions, answers to interrogatories, written admissions, affidavits,

transcripts of evidence, and written stipulations of fact.” Civ.R. 56(C). “The proper

method for introducing evidentiary materials not specifically authorized by Civ.R.

56(C) is to incorporate them by reference into a properly framed affidavit.” Citibank v.

McGee, 7th Dist. No. 11 MA 158,

; Civ.R. 56(E). The absence

of a properly framed affidavit requires us to exclude material, even copies of -10-

government records, where that material has not been properly placed in the record.

CitiMortgage v.

(stating that a copy of a bank’s corporate

registration was not properly before the court and “not evidence to support summary

judgment” because “Appellee did not reference its corporate registration in an

affidavit.”) No certificate of merger or mergers evidencing a relationship between

Countrywide Bank FSB and any other entity appears in this record. The evidence in

the record does not support the right of any party other than Countrywide Bank FSB

to enforce the subject note. Unlike the note produced by CitiMortgage in Foster, the

note Appellee seeks to enforce is not bearer paper. Appellee cannot overcome the

multiple evidentiary deficiencies in this record with a copy of a specifically indorsed

instrument.

{¶19} We note that:

For nearly a century, Ohio courts have held that whenever a promissory

note is secured by a mortgage, the note constitutes the evidence of the

debt and the mortgage is a mere incident to the obligation. Edgar v.

Haines (1923), 109 Ohio St.159, 164,

. Therefore, the

negotiation of a note operates as an equitable assignment of the

mortgage, even though the mortgage is not assigned or delivered.

Kuck v. Sommers (1950),

,

.

U.S. Bank Nat’l. Assn. v. Marcino,

,

,

. The note in this instance, unlike the note in Marcino, is not bearer

paper: it is payable to a specific entity and Appellee is not that entity. Countrywide -11-

Bank FSB, not Appellee, is the holder of the note filed in this action. “The current

holder of the note and mortgage is the real party in interest in foreclosure actions.”

Id. at ¶32. “Where a party fails to establish itself as the current holder of the note and

mortgage, summary judgment is inappropriate.” Id.

{¶20} “[S]tanding to sue is part of the common understanding of what it takes

to make a justiciable case.” Fed. Home Loan Mtge. Corp. v. Schwartzwald,

,

,

, ¶21, quoting Steel Co. v. Citizens for a

Better Environment,

,

,

(1998).

“[S]tanding is a ‘jurisdictional requirement * * * [i]t is an elementary concept of law

that a party lacks standing to invoke the jurisdiction of the court unless he has, in an

individual or representative capacity, some real interest in the subject matter of the

action.” (Emphasis sic.) Id. at ¶22. “[T]he issue of standing, inasmuch as it is

jurisdictional in nature, may be raised at any time during the pendency of the

proceedings.” Id. “The lack of standing at the commencement of a foreclosure

action requires dismissal of the complaint; however, that dismissal is not an

adjudication on the merits and is therefore without prejudice.” Id. at ¶40. Appellee is

not the holder entitled to enforce the subject note and fails to meet the jurisdictional

requirements to file suit. Due to Appellee’s lack of standing, Appellant’s assignment

of error is sustained, the judgment of the trial court reversed, and the complaint is

dismissed without prejudice.

Conclusion -12-

{¶21} Appellee has not established that it is the current holder of the note and

mortgage that are the subject of this action, hence, Appellee does not have standing

to file suit. Appellant’s single assignment of error is sustained and, under

Schwartzwald, the judgment of the trial court is reversed. The complaint is hereby

dismissed without prejudice. All costs are taxed to Appellee.

Donofrio, J., concurs.

DeGenaro, P.J., concurs.