Default Litigation Case Law Update For Ohio, Indiana, Kentucky And Michigan

Common litigation issues which a creditor may face involve issues of standing, whether a lien is a valid lien and challenges to the affidavits used to support judgment.  In the past month there have been several decisions on these topics which may affect creditors and their servicers.  Below is an update on recent cases involving these issues:

Notice of Defaults and the effect of a prior foreclosure

Recently, in U.S. Home Ownership, L.L.C. v. Collin L. Young, 2018-Ohio-1059, the 2nd District reversed a Trial Court’s decision which granted judgment to a creditor.  At issue were the notice of default and the affidavit in support of judgment.  When moving for a judgment in Ohio on a foreclosure action, the plaintiff must establish by evidentiary quality materials which establish the following:

  1. The Plaintiff is the Holder of the note and mortgage or is a party entitled to enforce the instrument, this can include:
    • The Holder,
    • A Non-Holder in possession who has the rights of a Holder,
    • A person not in possession but who is entitled to enforce the instrument pursuant to §1303.38 (Lost or Destroyed Instruments)
  2. That the chain of assignments, transfers, endorsements is correct,
  3. That the account is in default pursuant to the terms of the instrument(s),
  4. That all conditions precedent have been met, and
  5. Verify to the court the amount of principal and interest that is due.

Most residential mortgages require a notice of default be sent prior to the acceleration of the account and as such the notice of default is a condition precedent to filing a foreclosure.  A condition precedent is an action which the plaintiff must perform prior to filing a foreclosure complaint, the failure to do so will result in the dismissal of a foreclosure action.  In this action, the Notice of Default had 2 errors.  First, the notice was not sent by the lender/mortgagee that initiated the foreclosure.  Rather, the notice was sent by a prior entity, which was no longer the mortgagee or holder of the note at the time the foreclosure was filed and thus the Court determined that the notice was not proper because the plaintiff did not itself or through an agent fulfill the condition precedent.  In addition, the court noted a second issue that in the instances where a mortgagee issues a notice of default, commences a foreclosure and then dismisses the action, the mortgagee, or its successor in interest must send a new notice of default prior to initiating a new foreclosure.

On the same day, in Ocwen Loan Servicing, L.L.C. v. Malish, 2018-Ohio-1059, the 2nd District clarified its rule for adopting business records in mortgage-foreclosure cases.  The 2nd District has held that a court may admit a document as a business record even when the proffering party is not the maker of the document if other requirements of the rules of evidence have been met and the circumstances suggest that the record is trustworthy.  Trustworthy has been identified to be if the profferer has incorporated the records into its own records and has relied upon them.  Thus, when an account is transferred from one entity to another, and the new holder is going to affirm in an affidavit as to those prior records, it’s important that the affiant be able to affirm that the records were made at or near the time by, or from information transmitted by a person with knowledge and that the records were kept in the ordinary course of business.  It is also important that the new holder incorporated those prior records in the ordinary course of business and has relied upon those records in the ordinary course of business.

Valid Liens and Ohio’s Curative Statute

On April 17, 2018, in Wells Fargo Fin. Ohio 1, Inc. v. Doe(s), 2018-Ohio-1472, the 10th District remanded a matter back to the Trial Court to review a previous Trial Court’s Decision that a mortgage lien was not a valid lien due to a defect in the acknowledgment clause as well as the use of an undefined term within the mortgage.  The significance of this decision is that had the Trial Court’s Decision stood, then the creditor/plaintiff would not have been able to foreclosure the mortgage.

At issue was Ohio’s new curative statute R.C. 5301.07(C) which became effective April 6, 2017.  Prior to this amendment, an instrument conveying an interest in real estate that had a defective acknowledgment clause would be cured by operation of law after it had been record of more than 21 years.  The issue on remand for the Trial Court to consider is whether the new statute which cures this default by operation of law and thus the mortgage is a valid lien upon the real estate.

If you have any questions or would like to discuss this or other default related matters in Ohio, Indiana, Kentucky or Michigan.  Please feel free to reach out to me at dacox@woodlamping.com.

This entry was posted in News.
  • About the Author

    Daniel A. Cox

    Daniel A. Cox is a Partner with the Cincinnati based law firm of Wood + Lamping LLP.  He manages the Default Litigation Group which handles accounts in Ohio, Indiana, Michigan and Kentucky.  The majority of his practice focuses on assisting clients to manage their commercial and residential Default Litigation and Default related matters including Foreclosure, Bankruptcy, Forfeiture, Evictions, Appeals, Code Violations, Lender Liability Litigation, Loss Mitigation, Mediations, Best Practices and Risk Management.  He focuses on providing consultation and risk analysis which reduces costs per account while minimizing risk and protects his client’s interests.

  • Contact Us

    Wood + Lamping LLP

    600 Vine Street Suite 2500
    Cincinnati, OH 45202
    513-852-6000 main
    513-852-6087 fax