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JP Morgan Chase Bank as Trustee v. Wells Fargo Financial Leasing

December 8, 2008


CHARACTER OF PROCEEDINGS: Appeal from Common Pleas Court.

The opinion of the court was delivered by: Shaw, P.J.


JUDGMENT: Judgment reversed and cause remanded.

{¶1} Defendant-Appellant Wells Fargo Financial Leasing, Inc., ("Wells Fargo") as assignee of Telmark, LLC, appeals from the April 10, 2008 Judgment Entry of the Court of Common Pleas of Logan County, Ohio granting JP Morgan Chase Bank's ("Chase") motion for relief from judgment.

{¶2} On or about February 9, 2004 Carol Dewine executed a note in favor of Southstar Funding, LLC (Chase's predecessor in interest) in the amount of $171,000. To secure payment of this note, Carol and Daniel Dewine executed a mortgage in favor of Mortgage Electronic Registration Systems, Inc. (acting as nominee for Southstar Funding, LLC) securing real estate located at 9086 Prince Road in Lakeview, Ohio. This mortgage was filed in the Logan County Recorder's Office on February 18, 2004. The loan from Southstar Funding, LLC was used to pay off a prior mortgage from R.E. Becker Builders in the amount of $164,988.79.

{¶3} On November 23, 2005 Chase filed a complaint in the Logan County Court of Common Pleas against numerous defendants, including the Dewines and Telmark, LLC seeking judgment on its note, seeking foreclosure of the property located at 9086 Prince Road, and asserting first lien on the subject real property. However, in its complaint, Chase stated that Telmark, LLC "may have a claim to or an interest in or lien upon the virtue of a Certificate of Judgment, filed for record on February 6, 2004" but that "upon information and belief, it is Plaintiff's contention that said Certificate of Judgment has been fully satisfied, but not released of record."

{¶4} On December 16, 2005 Wells Fargo (as assignee of Telmark, LLC), filed an answer and cross claim wherein Wells Fargo asserted that it had a priority lien on the subject property over the mortgage of Chase and that its debt remained unpaid. On April 10, 2006 Wells Fargo filed a motion for default judgment. In an assignment notice dated April 12, 2006, the trial court set this matter for hearing on May 2, 2006.

{¶5} On May 25, 2006 the trial court entered a Judgment Entry/Decree of Foreclosure wherein the trial court granted Wells Fargo judgment against the Dewines and ordered foreclosure of the property located at 9086 Prince Road. Additionally, the trial court determined that Wells Fargo's judgment lien, as filed on February 6, 2004 with the Logan County Recorder's Office, was the first and best lien on the subject property.

{¶6} Subsequent to the trial court's May 25, 2006 Judgment Entry, the Dewines filed for Chapter 13 bankruptcy protection in the U.S. Bankruptcy Court, Southern District of Ohio. On February 27, 2007 the trial court entered a stay of proceedings in the instant case pursuant to the bankruptcy stay. Although this case was reactivated on June 19, 2007 the Dewines filed a second bankruptcy case, again requiring the instant case to be stayed. On December 10, 2007 Wells Fargo filed a notice of abandonment of property from the bankrupt estate and right to proceed with foreclosure. On December 28, 2007 the trial court filed a Judgment Entry reactivating the instant case. Also on December 28, 2007 Wells Fargo also filed a praecipe for alias order of sale of the property located at 9086 Lakeview Road, and an order of sale was issued to the Sheriff of Logan County. The Sheriff's sale was scheduled to be held on February 28, 2008.

{¶7} On February 14, 2008 Chase filed a motion for relief from judgment pursuant to Rule 60(B) of the Ohio Rules of Civil Procedure. In its memorandum in support of said motion, Chase alleged that the May 25, 2006 Judgment Entry was never circulated for review and approval, rather it was "merely submitted to the court and copies sent to the parties or their attorneys." Additionally, Chase alleged that the finding that Wells Fargo's judgment lien was in first lien position was never adjudicated by the court and there was no trial or evidentiary hearing held to determine lien priority. Specifically, Chase sought to have the default judgment rendered in Wells Fargo's favor vacated, and requested that the trial court find that Chase was in first lien position on the subject real estate property. On March 20, 2008 Wells Fargo filed a response to Chase's motion.

{¶8} On April 10, 2008 the trial court issued a Judgment Entry granting Chase's motion for relief from judgment. In its Judgment Entry, the court determined that it had failed to provide notice of the May 2, 2006 hearing on Wells Fargo's motion for default judgment to Chase's trial counsel. Specifically, the trial court stated as follows:

The Court correctly concluded that the plaintiff, having otherwise entered an appearance, was entitled to a notice of the default hearing. An assignment was made and notices sent by ordinary mail for a hearing on May 2, 2006 at 8:30 a.m. The notice, however, was not sent to Plaintiff's counsel of record, but it was sent to Karl H. Schneider.*fn1 Plaintiff, therefore did not receive a proper notice of the default hearing. The Court stenographer has no record of any evidence being taken.

The Court concludes that all of the requisites of Rule 60(B) have been met. Plaintiff has an arguable claim and the motion was timely filed as not to cause any prejudice. The Court finds under Rule 60(B)(5) that the lack of proper notice of the default hearing is a reason justifying relief from judgment. It is therefore ORDERED, DECREED and ADJUDGED that the Court's order finding Wells Fargo had first ...

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