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U.S. Bank National Association v. Gray

Court of Appeals of Ohio, Tenth District

July 30, 2013

U.S. Bank National Association, as Trustee For the Holders of the First Franklin Mortgage Loan Trust Pass-Through Certificates, Series 2005-FF3, Plaintiff-Appellee,
v.
Paul G. Gray et al., Defendants-Appellants.

APPEAL from the Franklin County Court of Common Pleas C.P.C. No. 10CVE-01-4953

Cartpenter Lipps & LeLand LLP, David A. Wallace and Karen M. Cadieux, for appellee.

Doucet & Associates, Inc., Gregory A. Wetzel and Troy J. Doucet, for appellants.

DECISION

KLATT, P.J.

{¶ 1} Defendants-appellants, Paul G. and Connie M. Gray, [1] appeal a judgment of the Franklin County Court of Common Pleas in favor of plaintiff-appellee, U.S. Bank National Association, as Trustee For the Holders of the First Franklin Mortgage Loan Trust Pass-Through Certificates, Series 2005-FF3 ("US Bank"). For the following reasons, we affirm.

{¶ 2} In 2005, the Grays purchased a house from M/I Homes, Inc. At the January 20, 2005 closing, Paul Gray executed an adjustable-rate note in the amount of $246, 750 in favor of First Franklin, a Division of National City Bank of Indiana ("First Franklin Division"). Both Paul and Connie Gray executed a mortgage to secure the note. First Franklin Division recorded the mortgage with the Franklin County Recorder's Office.

{¶ 3} Paul Gray's loan was pooled with other loans and transferred to a trust, which sold the consolidated debt as securities. The trust was structured so that U.S. Bank would serve as trustee and hold the mortgage loans conveyed to the trust. To accomplish the transfer of Paul Gray's note to U.S. Bank, First Franklin Division indorsed the note to First Franklin Financial Corporation ("First Franklin Corporation") in or around March 2005. Soon thereafter, First Franklin Corporation indorsed the note in blank. The note then was then physically transferred to a custodian selected by U.S. Bank.

{¶ 4} Unfortunately, First Franklin Division botched the transfer of the Grays' mortgage to the trust. On January 25, 2005, First Franklin Corporation assigned the mortgage to U.S. Bank. At the time it made the assignment, First Franklin Division-not First Franklin Corporation-was the holder of the mortgage. The purported assignment, therefore, did not accomplish anything. On March 22, 2005, First Franklin Division assigned the mortgage to First Franklin Corporation. The mortgage then joined the note in the custodian's care, even though no assignment to U.S. Bank had occurred.

{¶ 5} Beginning early 2009, Paul Gray fell behind on his loan payments and the Grays stopped remitting their property taxes. The servicing agent for Paul Gray's loan, Select Portfolio Servicing, Inc. ("SPS"), paid the Grays' property taxes and added the amounts advanced to the total amount that Paul Gray owed. Paul Gray last made a loan payment on April 27, 2010. In a letter dated July 13, 2010, SPS notified Paul Gray that he had defaulted on his payment obligations, and that he could cure the default by paying $9, 474.34 within 30 days. Paul Gray did not make the $9, 474.34 payment.

{¶ 6} On October 12, 2010, U.S. Bank filed this foreclosure action against the Grays. The complaint alleged that U.S. Bank was the holder of the Grays' note and mortgage. However, the copy of the note attached to the complaint did not include any indorsements. The copy of the mortgage attached to the complaint included only the January 25, 2005 assignment from First Franklin Corporation to U.S. Bank.

{¶ 7} US Bank moved for summary judgment. In response, the Grays argued that genuine questions of material fact remained regarding whether U.S. Bank was the holder of the Grays' note and mortgage. The trial court agreed with the Grays, and it denied U.S. Bank summary judgment.

{¶ 8} At a bench trial, U.S. Bank produced a copy of the note that included First Franklin Division's indorsement to First Franklin Corporation and First Franklin Corporation's indorsement in blank. U.S. Bank contended that it was the holder of the note because it possessed the note. With regard to the mortgage, U.S. Bank acknowledged that no valid written assignment to U.S. Bank existed. Nevertheless, U.S. Bank contended that it was the holder of the Grays' mortgage through equitable assignment.

{¶ 9} In its findings of fact and conclusions of law, the trial court found that U.S. Bank was the holder of the Grays' note and mortgage. The trial court also found that Paul Gray had defaulted on the note, and that no defenses asserted by the Grays prevented foreclosure or reduced the amount owed. On October 16, 2012, the trial court issued a judgment decree in foreclosure.

{¶ 10} The Grays appeal from the October 16, 2012 judgment, and they assign the following errors:

1. The trial court erred when it found SPS had authority to testify on U.S. Bank's behalf.
2. The trial court erred when it held Plaintiff had an interest in the subject property upon ...

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