Sutton Funding L.L.C. v. Herres , 2015 Ohio 3609 ( 2015 )

[Cite as Sutton Funding L.L.C. v. Herres, 2015-Ohio-3609.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
SUTTON FUNDING LLC :
:
Plaintiff-Appellee : C.A. CASE NO. 26530
:
v. : T.C. NO. 08CV1268
:
MARK HERRES, et al. : (Civil appeal from
: Common Pleas Court)
Defendant-Appellant :
:
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OPINION
Rendered on the ___4th___ day of ___September___, 2015.
...........
KIMBERLY Y. SMITH RIVERA, Atty, Reg. No. 0066849, 25550 Chagrin Blvd., Suite 406,
Cleveland, Ohio 44122
Attorney for Plaintiff-Appellee
MARY K. C. SOTER, Atty. Reg. No. 0007696, 5518 N. Main Street, Dayton, Ohio 45415
Attorney for Defendant-Appellant
.............
DONOVAN, J.
{¶ 1} This matter is before the Court on the Notice of Appeal of Mark Herres, filed
December 22, 2014. Herres’ Notice of Appeal is addressed to several court orders,
namely an August 6, 2009 Judgment and Decree in Foreclosure; an August 5, 2014
Order of Sale; an August 27, 2014 Decision and Entry Overruling Defendant’s Motion to
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Set Aside Order of Sale and Motion to Order Substitution; a September 11, 2014
Decision, Order and Entry Overruling Joint Motion to Consolidate Cases; and a
December 8, 2014 Judgment Entry Confirming Sheriff’s Sale and Ordering Distribution.
On March 18, 2015, this Court issued a Decision and Entry finding that the 2009
Judgment and Decree in Foreclosure was final and appealable when entered on August
6, 2009, and that this Court affirmed the foreclosure decision on Herres’ appeal in Sutton
Funding, L.L.C. v. Herres, 188 Ohio App.3d 686, 2010-Ohio-3645, 936 N.E.2d 574 (2d
Dist.). This Court limited the scope of Herres’ appeal to the other orders on appeal,
excluding the August 6, 2009 order.
{¶ 2} We note that on March 25, 2015, this Court issued a Decision and Entry
denying the January 21, 2015 motion of Appellee, Substituted-Plaintiff The Bank of New
York Mellon Trust Company, National Association as Grantor Trustee of the Protium
Master Grantor Trust (“Mellon”) to supplement the record on appeal herein with the
docket and journal entries pre-dating the August 6, 2009 Judgment and Decree in
Foreclosure. This Court noted that, pursuant to “standard practice, the summary of
docket for the purpose of the record in the current appeal begins with journal entries
following the last appeal. In this case, the summary of docket and journal entries begins
on October 3, 2013.” After noting its March 18, 2015 Decision and Entry, this Court
concluded that the “record is proper in its current state.”
{¶ 3} By way of background, Sutton Funding L.L.C. (“Sutton”) commenced this
action on February 5, 2008, by filing a Complaint in Foreclosure against Herres and
various other defendants, asserting that Herres defaulted on a promissory note held by
Sutton, and that Sutton held a mortgage given by Herres to secure payment on the note.
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On May 1, 2008, Herres filed an answer and a counterclaim for fraud. The trial court
dismissed the counterclaim for fraud on December 10, 2008, on Sutton’s motion to
dismiss. On May 15, 2009, Sutton filed a motion for summary judgment. The trial court
sustained the motion for summary judgment on July 24, 2009, and this Court affirmed the
trial court’s decisions dismissing Herres’ counterclaim and granting summary judgment in
favor of Sutton on August 6, 2010. Sutton Funding L.L.C. v. Herres, 188 Ohio App.3d
686, 2010-Ohio-3645, 936 N.E.2d 574 (2d Dist.). This Court noted that Herres “waived
any challenge to [Sutton’s] standing for purposes of this appeal.” Id., ¶ 41. This Court
further noted that Herres filed a motion for relief from judgment which was pending in the
trial court and found that “[w]hether [Sutton] was, in fact, the real party in interest when it
filed its complaint is a matter that the trial court may address in ruling on Herres’ Civ.R.
60(B) motion.” Id., ¶ 42.
{¶ 4} In his December 3, 2009, motion for relief from judgment, Herres asserted in
branch one that Sutton “is not now the owner of the mortgage” and that the mortgage had
been transferred to Mellon. In branch two, Herres sought sanctions against Sutton and
counsel for Sutton, and in branch three, Herres sought relief from the judgment of
foreclosure. The trial court overruled branches one and two of the motion on November
10, 2010, and set the third branch for a hearing pursuant to Civ.R. 60(B). On July 29,
2011, Sutton filed a “Motion to Substitute Party Plaintiff,” attached to which is an
assignment of the mortgage from Sutton to Mellon, dated June 30, 2011. The
assignment indicates that it was recorded on July 11, 2011. Mellon was substituted as
plaintiff on August 3, 2011.
{¶ 5} After multiple continuances, the trial court denied Herres’ request for relief
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from judgment, and this Court affirmed that decision on August 1, 2013. Bank of New
York Mellon Trust Co. N.A. v. Herres, 2d Dist. Montgomery No. 25890, 2014-Ohio-1539(“Mellon”). Therein, this Court concluded that “Sutton had standing when it filed the
complaint against Herres, and that the trial court, therefore, had jurisdiction over the
foreclosure action.” Id., ¶ 31. This Court noted that “the judgment and decree in
foreclosure became final after Herres failed to appeal the decision we issued in August
2010,” and accordingly, “Sutton, and its successor, Mellon were entitled to have the
property sold at auction, and to hold Herres personally liable for the deficiency between
the amount of the judgment and the proceeds of the sale. The fact that Herres was
discharged from personal liability for the debt in bankruptcy did not affect Mellon’s
judgment in foreclosure and its attendant right to sell the property.” Id., ¶ 41. Finally, this
Court determined that “Herres failed to establish that the foreclosure judgment had been
discharged [in bankruptcy], or that he had a meritorious defense to present.” Id., ¶ 45.
{¶ 6} An Order of Sale was issued on July 11, 2014, after Herres’ second appeal,
and on July 18, 2014, Herres filed a motion to set aside the order of sale, or alternatively
for an order of substitution since, Herres asserted, Mellon assigned its interest in the
property to ARLP Trust. Attached to the motion is an assignment of the mortgage, dated
September 27, 2013, from Mellon to ARLP Trust. The assignment reflects that it was
recorded on November 13, 2013. Also attached is a copy of a mortgage of Mortgage
Electronic Registration Systems, Inc. (“MERS”), as nominee for Equifirst Corporation, and
the assignment thereof to Sutton, dated February 12, 2008, which indicates that it was
recorded on February 27, 2008. Finally, the assignment of the mortgage from Sutton to
Mellon is attached. The trial court overruled the motion to set aside the order of sale on
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August 27, 2014, without analysis.
{¶ 7} On September 10, 2014, Mellon and ARLP Trust filed a joint motion to
consolidate the underlying action with a separate action filed against ARLP Trust by RMH
Investments and Technology L.L.C. (“RMH”). The motion provided as follows in part:
Consolidation is appropriate under Loc.R. 1.19(II)(A)(1)(e) and
Civ.R. 42 because both of these actions involve (or involved and already
disposed of) the same allegations of standing relating to the same
mortgage and the same promissory note, and each seek a judgment
affecting title to the same real property.
***
According to [RMH], Plaintiff in the latter 2014 case, Defendant
Herres transferred the subject property to RMH. RMH alleges that Herres’
2013 bankruptcy somehow affects standing to foreclose, and seeks to quiet
title to the property in its name. Because standing was already,
repeatedly, and finally determined by Judge O’Connell and the Second
District Court of Appeals in the former case, RMH’s allegations are barred
by both lis pendens and res judicata.
Because Judge O’Connell has already considered and decided the
very issues asserted in the action pending before Judge Tucker, the latter
action should be consolidated with the former.
{¶ 8} In overruling the joint motion to consolidate on September 11, 2014, the trial
court determined as follows:
After duly considering the matter, the Court does not find Plaintiff’s
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motion well-taken. A final appealable order was filed in case number
08-CV-1268 on August 1, 2013. An appeal was filed as to this decision,
and the decision was affirmed by the Second District Court of Appeals on
April 11, 2014. The property is currently set for sheriff sale and the motion
to set aside this sale has been overruled. The Court does not find that
consolidation is appropriate.
{¶ 9} On October 3, 2014 a “Return of Sheriff on Writ for Alias Order of Sale” was
filed which provides that on that date, the property at issue was sold to “Plaintiff, Sutton
Funding LLC.” On December 4, 2014, Mellon filed a motion to confirm the sheriff’s sale.
On the same date, an “Assignment of Bid” was filed that provides: “For value received,
Substituted-Plaintiff does hereby sell, assign, transfer and set over unto ARLP Trust * * *
all its rights, title and interest in and to his bid at Sheriff’s sale of real estate held in the
above-captioned case, in which it was the successful bidder.” On December 8, 2014,
the trial court confirmed the sale as follows:
This matter came on to be heard upon the Motion of
Substituted-Plaintiff, and on the return of the Sheriff of his proceedings and
sale made under former Order of this court on October 3, 2014; that the
Substituted-Plaintiff was the successful bidder at the Sheriff’s Sale and has
subsequently assigned its bid to ARLP Trust, and upon careful examination
by the Court of the proceedings of said Sheriff being satisfied that the same
have been made in all respects in conformity to the law, and the Orders of
this court; it is hereby ordered that the proceedings and sale be, and are
hereby approved and confirmed.
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IT IS THERREFORE ORDERED, ADJUDGED AND DECREED
THAT THE Sheriff convey to the assignee, ARLP Trust * * *(hereinafter
purchaser) by deed according to law, the property so sold * * *; and a writ of
possession is hereby awarded to put the said purchaser, in possession of
the premises.
And the Court, coming now to distribute the proceeds of said sale
amounting to $110,000.00, [it] is ordered that the Sheriff out of the money in
his hands pay:
***
SIXTH: To the Substituted-Plaintiff, [Mellon] the sum of $105,892.74 to
apply against the Judgment heretobefore rendered.
***
The Court further orders the Clerk to issue a cancellation of the
Mortgage of Mortgage Electronic Registration Systems, Inc. “MERS” as
nominee for Equifirst Corporation (a copy of the legal description is
attached hereto as Exhibit A) recorded in Instrument 07-042973, and the
assignment thereof to Plaintiff, Sutton Funding LLC, recorded in Instrument
08-013561, and the assignment thereof to Substituted-Plaintiff, [Mellon],
recorded in Instrument 11-039843, and the invalid assignment thereof to
ARLP Trust, recorded in Instrument 2013-00079399 * * *.
{¶ 10} Herres asserts six assignments of error herein. We will initially consider his
first, third and fourth assignments of error together. They are as follows:
THE COURT ERRED IN PERMITTING THE SHERIFF’S SALE TO
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TAKE PLACE BECAUSE THE MORTGAGE HOLDER NO LONGER HAD
A SECURITY INTEREST IN THE REAL PROPERTY.
And,
THE COURT ERRED IN PERMITTING THE SHERIFF’S SALE OF
THE REAL PROPERTY BECAUSE THE PLAINTIFF-APPELLEE,
SUTTON FUNDING, DID NOT HAVE STANDING TO FILE THE
FORECLOSURE ACTION.
And,
THE COURT ERRED IN PERMITTING THE SHERIFF’S SALE OF
THE REAL PROPERTY BECAUSE THE ASSIGNMENTS OF THE
MORTGAGE WERE NOT PROPERLY NOTARIZED.
{¶ 11} In his first assigned error, Herres asserts that Mellon and Sutton were
creditors in his bankruptcy action in the Southern District of Ohio, Western Division, and
that when he “obtained his discharge [in bankruptcy] [Mellon] and [Sutton] lost their
security interest in the real property * * * and had no right to pursue a foreclosure action.”
In his third assigned error, Herres asserts that Sutton lacked standing to file the complaint
in foreclosure because, at the time the foreclosure action commenced, Sutton “had not
received or recorded an assignment of the mortgage. The assignment was signed, but
not notarized, on February 12, 2008.” In his fourth assignment of error, Herres asserts
that the “original mortgage in favor of [MERS] was never notarized. The assignment
does not contain a notary clause or signature.” Herres asserts that if the assignment of
mortgage from MERS was defective, “then all future assignments of that mortgage were
also defective.”
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{¶ 12} These assignment of error are addressed to the August 6, 2009 Judgment
and Decree in Foreclosure and are contrary to this Court’s order. As noted above, this
Court considered and rejected Herres’ arguments addressed to Sutton’s and Mellon’s
standing in Mellon. Id., ¶ 41. Herres’ arguments regarding the allegedly defective
mortgage and assignments thereof are further barred by the doctrine of res judicata,
which “bars all claims that were litigated in a prior action as well as all claims which might
have been litigated in that action. * * *.” Deaton v. Burney, 107 Ohio App.3d 407,
669.N.E.2d 1 (2d Dist. 1995). Herres’ first, third, and fourth assigned errors are
accordingly overruled.
{¶ 13} We will next consider Herres’ second and sixth assignments of error
together. They are as follows:
THE COURT ERRED IN CANCELLING ASSIGNMENTS IN
JUDGMENT ENTRY CONFIRMING SALE AND ORDERING
DISTRIBUTION FILED DEC. 8, 2014,
And,
THE COURT ERRED IN PERMITTING THE SHERIFF’S SALE TO
TAKE PLACE WHEN ARLP TRUST WAS THE ALLEGED HOLDER OF
THE MORTGAGE BECAUSE ALRP TRUST WAS NOT REGISTERED
WITH THE SECRETARY OF STATE OF OHIO AND WAS NOT
AUTHORIZED TO CONDUCT BUSINESS IN OHIO.
{¶ 14} Herres asserts as follows in his second assigned error:
The substituted Plaintiff filed a Motion after the Sheriff’s Sale had
already taken place, requesting that the Court issue a cancellation of the
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mortgage of Mortgage Electronic Systems, Inc. and the assignment thereof
to Plaintiff, Sutton Funding LLC, and the assignment thereof to substituted
plaintiff [Mellon] and the invalid assignment thereof to ARLP Trust.
The Court granted this Motion and ordered the Clerk to issue a
cancellation of all of those mortgages and assignments of mortgage,
without giving Defendant Appellant a chance to object.
The Plaintiff-Appellees acting in concert, have changed the Plaintiff
in this case from one corporation to another, without having the proper
assignments of the mortgage recorded. All of the assignments of the
mortgage were filed at the same time on November 13, 2013, including the
BANK OF NEW YORK MELLON, SUTTON FUNDING, EQUIFIRST, and
ALRP. All of those assignments were attached to the ALRP assignment of
mortgage. The original mortgage in favor of MORTGAGE ELECTRONIC
FILING was never notarized. An affidavit stated that on June 13, 2011 a
notary had notarized an assignment which had not been notarized and was
recorded with the BANK OF NEW YORK MELLON assignment of
mortgage. (sic)
Tyler Kayler, the attorney who represented the Defendant-Appellant
in the lower court case, asked the trial court to substitute the proper party in
interest, ALRP TRUST, LLC, but the lower court denied this motion.
At the Sheriff’s Sale, SUTTON FUNDING purchased the real
property.
The Common Pleas Court Judge does not have authority to issue
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cancellations of mortgages or assignments of mortgage after the Sheriff’s
sale has already been concluded, without giving the Defendant-Appellant
any opportunity to object to same. Failure to properly record an
assignment of mortgage by Plaintiff-Appellees cannot be cured by the filing
of an order by a common pleas judge.
***
The assignments of mortgage which were ordered to be filed by the
Clerk did not take effect until they were delivered to the recorder for record.
The order by Judge O’Connell did not relieve the assignor or assignee of
the real property from the duty set forth in [R.C.] 5301.231.
Plaintiff-Appellant succeeded in getting the Common Pleas Court to
make major decisions on cancelling the assignments of mortgage in order
to correct its own errors in the case, after the Sheriff’s Sale had been
concluded. The Court appears to be acting favorably toward
Plaintiff-Appellees and negatively toward Defendant-Appellant, prejudicing
the rights of the Defendant-Appellant. The lower court was aware of the
fact that RMH INVESTMENTS had filed a Complaint against ARLP in the
Common Pleas Court of Montgomery County, Ohio. The motion of the
Plaintiff-Appellees referred to the assignment of the mortgage to ALRP as
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“All properly executed mortgages shall be recorded in the office of the county recorder of
the county in which the mortgaged premises are situated and shall take effect at the time
they are delivered to the recorder for record. If two or more mortgages pertaining to the
same premises are presented for record on the same day, they shall take effect in the
order of their presentation. The first mortgage presented shall be the first recorded, and
the first mortgage recorded shall have preference.” R.C. 5301.23(A).
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“ . . . the invalid assignment thereof to ARLP Trust.” Counsel for
Defendant-Appellant believes that the Plaintiff-Appellees intentionally
asked the court to order the cancellation of the assignment of mortgage to
ARLP in order to avoid having damages assessed against ALRP in the
lawsuit which had been filed by RMH INVESTMENTS.
{¶ 15} Herres asserts as follows in its sixth assignment of error:
The Judgment Entry Confirming Sheriff’s Sale and Ordering
Distribution states that the Substituted–Plaintiff (Sutton Funding LLC) was
the successful bidder at the Sheriff’s Sale and has subsequently assigned
its bid to ALRP Trust. ALRP TRUST is a Delaware Statutory Trust which
has failed to register[] with the State of Ohio as an entity authorized to do
business in the State of Ohio.
***
Counsel for Defendant-Appellant believes that the counsel for
Plaintiffs-Appellees referred to the assignment to ALRP TRUST as the
“invalid assignment thereof to ARLP Trust.” Counsel for
Defendant-Appellant believes that the Plaintiff-Appellees asked the Court to
cancel this assignment because they knew that ALRP Trust was not
authorized to do business in the State of Ohio.
The Judgment Entry Confirming Sheriff’s Sale and Ordering
Distribution states that the distribution of proceeds shall be to the
Substituted Plaintiff, [Mellon]. The actual substituted Plaintiff listed in the
caption of the case was Sutton Funding, LLC. It appears that the counsel
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for Defendant-Appellees did not actually know who the correct entity was
that should be paid the proceeds of sale.
{¶ 16} As this Court has noted:
The trial court must confirm the sale of property if the sale is made in
conformity with R.C. 2329.01 to 2329.61. R.C. 2329.31. Specifically, R.C.
2329.31 provides that “[u]pon the return of any writ of execution for the
satisfaction of which lands and tenements have been sold, on careful
examination of the proceedings of the officer making the sale, if the court of
common pleas finds that the sale was made, in all respects, in conformity
with sections 2329.01 to 2329.61, inclusive, of the Revised Code, it shall
direct the clerk of the court of common pleas to make an entry on the journal
that the court is satisfied of the legality of such sale, and that the officer
make to the purchaser a deed for the lands and tenements.”
Huntington Natl. Bank v. Burch, 157 Ohio App.3d 71, 2004-Ohio-2046, 809 N.E.2d 55, ¶
15 (2d Dist.).
{¶ 17} A trial court's decision whether to confirm or refuse a judicial sale will not be
reversed by a reviewing court absent an abuse of discretion. National Union Fire Ins. Co.
v. Hall, 2d Dist. Montgomery No. 19331, 2003–Ohio–462, ¶ 12; Wells Fargo Bank, N.A.
v. Fortner, 2d Dist. Montgomery No. 26010, 2014-Ohio-2212, ¶ 8. “ ‘Abuse of discretion’
has been defined as an attitude that is unreasonable, arbitrary, or unconscionable. * * * A
decision is unreasonable if there is no sound reasoning process that would support that
decision. AAAA Enterprises, Inc. v. River Place Community Urban Redevelopment Corp.,
50 Ohio St.3d 157, 553 N.E.2d 597 (1990) * * *.” Bohme v. Bohme, 2d Dist. Montgomery
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No. 26021, 2015-Ohio-339, ¶ 11.
{¶ 18} These assignments of error appear, at least in part, to be addressed to the
order confirming the sale. We initially note that the trial court indicated that the sale of
the property was made in conformity to law. Regarding Herres’ assertion that Sutton
purchased the property at sheriff’s sale, we conclude that the “Return of Sheriff on Writ for
Alias Order of Sale,” which indicates that “Plaintiff, SUTTON FUNDING LLC,” bought the
property, contains a clerical error, and that Mellon, as substituted plaintiff, purchased the
property, sought confirmation of the sale from the Court, and assigned its interest in its
successful bid to ARLP. This conclusion is confirmed by the confirmation of sale which
provides that the “Substituted-Plaintiff was the successful bidder at the Sheriff’s Sale and
has subsequently assigned its bid to ARLP Trust.”
{¶ 19} We further note that Herres mischaracterizes the record in asserting that
Mellon filed a motion requesting that the court cancel “assignments” after the sheriff’s
sale. Rather, Mellon requested that the sale be confirmed after it was the successful
bidder. Regarding the “invalid assignment” to ARLP, we note that the foreclosure
decree, which ordered the property “sold, free of the interests of all parties,” divested
Mellon of an interest in the mortgage to assign to ARLP pending the sale of the property.
As Mellon asserts, once “the property sold at sheriff’s sale, the mortgage and
assignments were of no further force or effect, and cancellation of them in the order
confirming sale was appropriate.” Finally, Herres’ “belief” that Mellon sought
cancellation of the assignment to ARLP “in order to avoid having damages assessed
against ALRP in the lawsuit which had been filed by RMH INVESTMENTS” is merely
speculative and irrelevant to this appeal.
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{¶ 20} An abuse of discretion is not demonstrated, thus, we cannot find that the
trial court erred in confirming the sale of the property. Herres’ second and sixth assigned
errors are overruled.
{¶ 21} Finally, Herres’ fifth assignment of error is as follows:
THE COURT ERRED IN OVERRULING THE JOINT MOTION TO
CONSOLIDATE CASES FILED SEPTEMBER 11, 2014.
{¶ 22} Herres asserts as follows:
The Joint Motion to Consolidate Cases would have brought RMH
INVESTMENTS & TECHNOLOGY, LLC into the case. * * * [T]he court had
actual knowledge of the fact that MARK HERRES had transferred the title to
the real property which is the subject of this action to RMH INVESTMENTS
& TECNOLOGY, LLC. The Court chose to proceed with the foreclosure in
spite of the fact that the Court had actual knowledge that an owner of the
property with a recorded deed had been left out of the case. * * *
Counsel for Defendant-Appellant believes that the Court ordered the
Plaintiff-Appellees to have another title search run prior to the Sheriff’s sale,
and counsel for Defendant-Appellant believes that they did not have the title
search run but instead used an old title search from years before.
***
{¶ 23} We review the denial of a motion to consolidate for an abuse of discretion.
See City Loan & Savings Co., 16 Ohio App.3d 185, 475 N.E.2d 154 (2d Dist. 1984).
Herres did not seek consolidation of the cases before the trial court; Mellon and ARLP did
so. Herres has not preserved error in this regard. Furthermore, there is no basis in the
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record before us to conclude that RMH held an interest in the property, for the reasons set
forth in the trial court’s decision overruling the joint motion to consolidate, namely that the
decision of the trial court overruling Herres’ motion for relief from judgment was affirmed
on appeal by this court in Mellon, the property was set for sale, and the motion to set aside
the sale had been overruled. Finally, Herres’ assertions are again without support in the
record. There being no abuse of discretion in the trial court’s decision denying the motion
to consolidate, Herres’ fifth assignment of error is overruled.
{¶ 24} Having overruled Herres’ assignments of error, the judgment of the trial
court is affirmed.
..........
FAIN, J. and WELBAUM, J., concur.
Copies mailed to:
Kimberly Y. Smith Rivera
Mary K. C. Soter
Hon. Timothy N. O’Connell