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HSBC Mortgage Services, Inc. v. Watson

Court of Appeals of Ohio, Third District, Paulding

February 27, 2017

HSBC MORTGAGE SERVICES, INC., PLAINTIFF-APPELLEE,
v.
PAMELA J. WATSON, ET AL., DEFENDANTS-APPELLANTS.

         Appeal from Paulding County Common Pleas Court Trial Court No. CI-12-178

         Judgment Affirmed

          George C. Rogers for Appellants

          Jessica M. Wilson for Appellee

          OPINION

          WILLAMOWSKI, J.

         {¶1} Defendants-appellants Pamela J. Watson ("Watson"), also known as Pamela J. Lambert, and William L. Lambert ("Lambert") jointly appeal the judgment of the Paulding County Court of Common Pleas for denying Watson's motion for the imposition of sanctions against opposing counsel and for allowing the plaintiff-appellee, U.S. Bank Trust, N.A., ("U.S. Bank") to be substituted as party plaintiff in place of HSBC Mortgage Services, Inc. ("HSBC"). For the reasons set forth below, the judgment of the trial court is affirmed.

         {¶2} On November 24, 2004, Watson signed a promissory note under which she promised to pay HSBC $79, 500.00 plus interest in monthly payments. Doc. 1. This note was secured by a mortgage on real property. Id. Watson stopped making payments on the note in April of 2011. Doc. 27. On August 22, 2012, the original plaintiff in this action, HSBC, filed a complaint in foreclosure against Watson and Lambert. Doc. 1. On April 29, 2013, HSBC submitted a motion for summary judgment with a copy of the mortgage agreement. Doc. 27. Watson then served HSBC with requests for admissions on May 24, 2013. Doc. 31. The trial court set July 23, 2013, as the final cutoff date for discovery. Doc. 30.

         {¶3} HSBC, however, did not reply to the discovery requests by the deadline established by the court. Doc. 37. Consequently, Watson's requests for admission were deemed admitted. Doc. 37. One of these admissions states that "HSBC does not have possession of the original note." Doc. 31. Another states that "neither Melissa D. Clearly [the person allegedly authorized to assign the mortgage] nor Mortgage Electronic Registration Systems, Inc. sought or received permission from the Bankruptcy Trustee for Accredited Home Lenders, Inc. to execute the assignment of [Watson's] mortgage [to HSBC]." Doc. 31. On August 2, 2013, Watson used these admissions to oppose HSBC's earlier motion for summary judgment and submitted her own motion for summary judgment. Doc. 32. HSBC responded by filing a motion to withdraw the requests for admissions deemed admitted. Doc. 37. On February 12, 2014, the trial court granted HSBC's motion to withdraw admissions deemed admitted on the same day that it granted HSBC's motion for summary judgment. Doc. 39. The trial court then denied Watson's motion for summary judgment. Id.

         {¶4} Watson and Lambert then filed an appeal with this court. Id. On January 26, 2015, we reversed the trial court. HSBC Mtge. Servs., Inc. v. Watson, 3d Dist. Paulding No. 11-14-03, 2015-Ohio-221, ¶ 6. A trial court has the discretion to "permit withdrawal of an admission if it will aid in presenting the merits of the case and the party who obtained the admission fails to demonstrate that withdrawal would prejudice him in maintaining his action." Id. at ¶ 18, quoting State ex rel. Davila v. Bucyrus, 194 Ohio App.3d 325, 956 N.E.2d 332, 2011-Ohio-1731, ¶ 22 (3d Dist). Since the time for discovery had closed at the time HSBC's motion to withdraw was submitted, Watson was able to demonstrate to the trial court that she would have been prejudiced if the admissions were withdrawn and discovery was not reopened. Id. at ¶ 29. Because the trial court did not reopen discovery, we determined that the trial court erred when it permitted HSBC to withdraw their admissions. Id. When considered, the content of HSBC's admissions was sufficient to defeat HSBC's motion for summary judgment. Id. at ¶ 27. Thus, the trial court's rulings on both HSBC's and Watson's motions for summary judgment needed to be reconsidered. Id. . at ¶ 35. We then remanded the case for further proceedings. Id. at ¶ 30, 37.

         {¶5} Following the remand, on March 13, 2015, HSBC submitted a motion for substitution of plaintiff, alleging that U.S. Bank had been assigned Watson's mortgage on January 6, 2015, and was now the real party in interest. Doc. 51. Attached to the motion was a copy of the mortgage assignment, which included a limited power of attorney that purportedly authorized the transfer of Watson's mortgage to U.S. Bank. Id. HSBC, however, included the wrong power of attorney document. Doc. 58. The limited power of attorney HSBC submitted was incorrect and had expired. Id.

         {¶6} On April 23, 2015, Watson responded with a motion opposing HSBC's motion to substitute plaintiff. Doc. 55. Relying upon HSBC's admission that they did not possess the original note, Watson argued that neither HSBC nor U.S. Bank could be real parties in interest as HSBC had nothing to transfer to U.S. Bank that would justify a substitution of plaintiff in this case. Id. Further, Watson pointed to the incorrect limited power of attorney and also asserted this document could not establish U.S. Bank as a real party in interest since the expired document did not reference Watson's mortgage and could not, therefore, assign the mortgage from HSBC to U.S. Bank. Id. Watson's motion to oppose HSBC's motion to substitute plaintiff was accompanied by a motion to impose sanctions for frivolous conduct under R.C. 2323.51. Id. In response, HSBC admitted that they had "inadvertently attached" the incorrect power of attorney but contested the appropriateness of sanctions in this situation. Doc. 58. HSBC also included a copy of the correct limited power of attorney document in this filing. Id.

         {¶7} On February 29, 2016, Watson filed a motion for summary judgment. Doc. 65. On May 27, 2016, the trial court issued an order that granted HSBC's motion to substitute plaintiff. Doc. 67. The court determined that the defendants did not have standing to challenge the validity of the assignment as Watson was "not a party to the assignment between HSBC and U.S. Bank." Id. On June 13, 2016, Watson and Lambert submitted a motion to reconsider the court's decision to allow U.S. Bank to be substituted for HSBC as plaintiff Doc. 69. The court then set June 24, 2016, as the date for the parties to have a hearing on frivolous conduct sanctions. Id. At the hearing, HSBC argued that Watson's motion for summary judgment should be denied so that discovery could be reopened. Doc. 75. The court declined to reopen discovery, deemed the admissions of HSBC admitted, and granted Watson's motion for summary judgment. Id.

         {¶8} In the final judgment, the court also addressed the defendants' motion to reconsider the May 27, 2016 journal entry granting HSBC's motion to substitute plaintiff and Watson's motion for R.C. 2323.51 sanctions. Doc. 55, 75. The court declined to reverse the order granting HSBC's motion to substitute plaintiff. Doc. 75. Since the alleged frivolous conduct arose from HSBC's motion to substitute plaintiff, the court overruled Watson's motion for sanctions because such a decision would be inconsistent with the court's order granting HSBC's motion to substitute plaintiff. Doc. 75. On appeal, appellants raise two assignments of error.

         First ...


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