Preview
ELECTRONICALLY FILED
COURT OF COMMON PLEAS
Wednesday, February 10, 2010 3:38:08 PM
CASE NUMBER: 2007 CV 09571 Docket ID: 14784165
GREGORY A BRUSH
CLERK OF COURTS MONTGOMERY COUNTY OHIO
IN THE COMMON PLEAS COURT OF MONTGOMERY COUNTY, OHIO
CIVIL DIVISION
Court
U.S. BANK N.A. as Trustee, CASE NO. 07 CV 9571
Plaintiff(s), JUDGE CONNIE S. PRICE
Pleas
MAGISTRATE DAVID H. FUCHSMAN
-vs-
WESLEY A. QUINN et al., MAGISTRATE'S DECISIO (1)
Common
SETTIG A HEARIG O THE ISSUE
Defendant(s). OF OTICE OF DEFAULT AD
General Division
OPPORTUITY TO CURE FOR
MARCH 22, 2010 AT 10:30 A.M. AD (2)
DEYIG PLAITIFF’S MOTIO TO
LIFT STAY OF SALE
County
_______________________________________________________________________________________
TO: Honorable COIE S. PRICE
Montgomery
FROM: Magistrate DAVID H. FUCHSMA
This matter is currently before the undersigned Magistrate pursuant to Rule 53 of the
Ohio Rules of Civil Procedure and a specific order of reference filed by the Court on February 9,
2009. Currently before the Magistrate is the Motion and Memorandum in Support for Relief from
Default Judgment and Order of Sale, filed by Defendants Wesley A. Quinn and Marion L. Quinn on
December 18, 2008. Also before the Magistrate is Plaintiff U.S. Bank’s Motion to Lift Stay of Sale,
filed December 24, 2009. These matters are now ready for decision.
For the reasons discussed herein, the Magistrate sets this case for a hearing on the issue of
notice and opportunity to cure on March 22, 2010 at 10:30 a.m., holding Defendants’ Motion for
Relief in abeyance until conclusion of the hearing. Furthermore, Plaintiff’s Motion to Lift Stay of
Sale is denied.
I. Procedural History and Findings of Fact
On February 28, 2006 Wesley A. Quinn executed an Adjustable Rate Note in the amount
of $80,750.00 in favor of New Century Mortgage Corporation (“New Century”).1 The Note was
secured by a Mortgage on the property located at 7 Oak Street, Trotwood, Ohio. The Mortgage was
executed by Wesley A. Quinn and Marion L. Quinn (his wife) on February 28, 2006.2 The
Mortgage was recorded by the Montgomery County Recorder on March 7, 2006.3 New Century is
not a party to this action.4
Plaintiff U.S. Bank National Association as Trustee for the Structured Securities
Corporation Mortgage Loan Trust, 2006-NC1 (“U.S. Bank”), claims that New Century transferred
the Note and Mortgage to Plaintiff in June of 2006 as part of a bulk transaction.5
On November 14, 2007, Plaintiff U.S. Bank filed a Complaint in Foreclosure against Wesley
Quinn and Marion Quinn based upon the Note and Mortgage between the Quinns and New
Century.6 U.S. Bank alleges that it is the “holder and owner of [the] note” as of the date of filing of
the Complaint. However, the Note attached to the Complaint is payable to New Century and does
not contain an indorsement or other evidence of negotiation.
Defendant Wesley Quinn and Defendant Marion Quinn were served with a copy of the
complaint via certified mail on November 15, 2007.7
More than two months after the filing of the Complaint, on January 17, 2008, New Century
formally assigned the mortgage to Plaintiff.8 Notably, the Assignment states, in pertinent part:
1
See Exhibit A to Plaintiff’s Complaint.
2
See Exhibit B to Plaintiff’s Complaint.
3
Id.
4
Id.
5
See generally Plaintiff’s October 25, 2009 Notice of Filing Securities and Exchange Commission Form 8K etc. and
attached documents. See also, Exhibit 2 to Defendants’ Motion for Relief.
6
Specifically, Plaintiff’s Complaint in Foreclosure stated “Plaintiff is the holder and owner of a note, a copy of which is
attached hereto as Exhibit ‘A’. By reason of default under the terms of the note and the mortgage securing same,
plaintiff has declared the debt evidenced by said note due, and there is due thereon from the defendant Wesley A.
Quinn, $80,125.16, together with interest at the rate of 6.8750% per year from December 1, 2006, plus court costs,
advances, and other charges, as allowed by law.”
7
See Docket.
8
See Defendant’s Exhibit 5 to Motion and Memorandum in Support for Relief from Default Judgment and Order of
Sale.
2
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, New Century Mortgage
Corporation, by Wells Fargo Bank, N.A. as attorney in fact…, does hereby sell, assign,
transfer and set over unto U.S. Bank National Association, as Trustee for the Structured
Asset Securities Corporation Mortgage Loan Trust, 2006-NC1…a certain mortgage from
Wesley Quinn and Marion L. Quinn, husband and wife to New Century Mortgage
Corporation, dated February 28, 2006, recorded April 7, 2006, in Volume Microfiche
Number 06-030777, in the office of the Montgomery County Recorder, together with the
Promissory Note secured thereby and referred to therein; and all sums of money due and to
become due thereon and secured by the [subject property]. (Emphasis added.)
According to the Montgomery County Recorder’s stamp thereon, the Assignment of Mortgage was
not recorded until February 1, 2008.9
On January 31, 2008, Plaintiff filed a Motion for Default Judgment against Defendants
Wesley Quinn [and] Marion Quinn.10 On February 11, 2008, the Court entered a judgment and
decree in foreclosure against Defendants Wesley and Marion Quinn with respect to the subject
property, finding “that the allegations contained in the Complaint are true and that there is due and
owing to the plaintiff, from the defendant Wesley A. Quinn, upon the subject Note, the principal
balance of $80,125.16, for which amount judgment is hereby rendered in favor of the plaintiff, with
interest at the rate of 6.8750 percent per annum from December 1, 2006, together with advances for
taxes, insurance and otherwise expended, plus costs.”11
On March 1, 2009, the Court ordered the property to be sold.
On December 18, 2009, Defendants Wesley Quinn and Marion Quinn, by counsel, filed
9
The Magistrate notes that Plaintiff claims to have acquired the subject Note and Mortgage in June 2006. In support of
this claim, on October 26, 2009, Plaintiff filed unauthenticated copies of what appear to be (1) a Securities and
Exchange Commission Form 8K by SASCO Mortgage Loan Trust, 2006-NC1 Reported June 22, 2006, (2) portions of a
certain Trust Agreement, dated June 1, 2006 for the SASCO Mortgage Loan Trust, 2006-NC1, (3) the Mortgage Loan
Sale and Assignment Agreement dated June 1, 2006 for SASCO Mortgage Loan Trust 2006-NC1, (4) a Securitization
Subservicing Agreement for SASCO Mortgage Loan Trust 2006-NC1, and (5) a Redacted Mortgage Loan Schedule to
Securitization Subservicing Agreement for SASCO Mortgage Loan Trust 2006-NC1. The Redacted Mortgage Loan
Schedule references the subject property. Defendants do not contest the authenticity of these documents and, in fact,
produced similarly unauthenticated SEC documents in support of their Motion for Relief. Therefore, although not
properly authenticated, the Magistrate considers same.
10
The Motion also sought default judgment against Chase Home Finance LLC, successor by Merger to Chase
Manhattan Mortgage Corporation successor by merger to Chase Mortgage Company. To date, Chase Home Finance
LLC has failed to respond to Plaintiff’s Complaint or otherwise appear in this action.Additionally, on January 31,
2008, Plaintiff filed the affidavit of Thomas Westmoreland, the Vice President of Loan Documentation with Wells
Fargo Bank, N.A., servicing agent for U.S. Bank National Association, as Trustee for the Structured Asset Securities
Corporation Mortgage Loan Trust, 2006-NC1. Mr. Westmoreland authenticated an attached payment history for Mr.
Quinn’s account, evidencing a balance due of $80,125.16.
3
their Motion and Memorandum in Support for Relief from Default Judgment and Order of Sale.
The Quinns argue that the Court should vacate the Default Judgment and Decree in Foreclosure, as
well as the Order of Sale because:
(1) Plaintiff does not have standing to bring this action; (2) Plaintiff as Trustee violated the
Trust when it acquired the Quinns’ mortgage; and (3) Plaintiff violated the plain language of
the Note when it failed to provide the Quinns notice of default and a thirty day opportunity
to cure the alleged $571.01 default before filing the foreclosure action.12
Attached as Defendants’ Exhibit 1 is an unsigned copy of the Adjustable Rate Note. Attached as
Defendants’ Exhibit 2 is what appears to be a printout from the SEC website (unauthenticated),
entitled “Prospectus Supplement $1,191,290,000 (Approximate) Structured Asset Securities
Corporation Mortgage Pass-Through Certificates, Series 2006-NC1.” Lehman Brothers Holdings,
Inc. is listed as “sponsor and seller;” Structured Asset Securities Corporation Mortgage Loan Trust
2006-NC1 is listed as “issuing entity;” Aurora Loan Services, LLC is listed as “master servicer;”
and Structured Assert Securities Corporation is listed as “depositor.” Defendants’ Exhibit 3 appears
to be a portion of the Trust document, also not authenticated by affidavit or otherwise.13
Defendants’ Exhibit 4 appears to be another portion of the Trust document, not
authenticated by affidavit or otherwise. Defendants’ Exhibit 5 is a copy of the Assignment of
Mortgage, dated January 17, 2008 and recorded February 1, 2008. Finally, Defendants’ Exhibit 5 is
an affidavit of Defendant Wesley Quinn, who affirms that he has “read the Motion and
Memorandum in Support of Default Judgment and order of sale [sic] and verify the allegations
contained therein regarding I [sic] or my wife are true and accurate.”
On January 6, 2009, the Court set a submission date of January 27, 2009 for Defendants’
Motion and Memorandum. At Plaintiff’s request, Plaintiff was granted an extension of time, up to
and including January 31, 2009, to respond to Defendants’ Motion.
11
Judgment was also entered against Defendant Chase Home Finance, LLC, with respect to its claim to the subject
property.
12
Motion and Memorandum in Support of Relief from Default Judgment and Order of Sale, p.1.
13
Again, although some of the documents attached to Defendants’ Motion for Relief are not properly authenticated, the
Magistrate considers same, as Plaintiff voiced no objection and produced similarly unauthenticated documents.
4
On January 28, 2009, Plaintiff, by counsel, filed its Memoranda Contra Defendants’ Motion
to Vacate Judgment and Decree in Foreclosure and Order of Sale. Plaintiff claims that Defendants
are not entitled to relief under Rule 60(B) of the Ohio Rules of Civil Procedure because (1) they
have not demonstrated “excusable neglect,” and (2) they have not set forth a meritorious defense.
Plaintiff claims that the documents filed by Defendant establish that Plaintiff was, in fact, the real
party in interest as of the date of the filing of the complaint. Plaintiff claims that it was not required
to file an assignment of mortgage with the Complaint under Rule 10(D) of the Ohio Rules of Civil
Procedure. Plaintiff claims that Defendants waived any requirement for notice of default and
acceleration. Specifically, Plaintiff argued that the Note did not require written notice of default
prior to commencement of foreclosure proceedings. Nonetheless, Plaintiff claims that Notice was
sent to Defendant Wesley Quinn on April 30, 2007. Attached to Plaintiff’s Memoranda was a letter
from ASC to Wesley Quinn dated April 30, 2007, which gives notice of default on the subject note
and opportunity to cure. The letter is not authenticated by affidavit and contradicts the affidavit of
Mr. Quinn.14 Finally, Plaintiff argued that Defendants’ Motion and Memorandum seeking relief
from the judgment and order of sale was not filed within a reasonable time and should therefore be
denied.
On February 4, 2009, Defendants’ filed a Response to Plaintiff’s Memorandum Contra.
Defendants argue that the Assignment of Mortgage, which was executed after the filing of
Plaintiff’s Complaint, suggests that Plaintiff was not the real party in interest at the time of the filing
of the Complaint. Additionally, Defendants argue that they have complied with all requirements of
Rule 60(B) of the Ohio Rules of Civil Procedure.
14
Plaintiff cites the Affidavit of Mr. Westmoreland regarding the default and the amount due. However, Mr.
Westmoreland does not authenticate the alleged notice of default and opportunity to cure. Nonetheless, as Defendants
do not object to the authenticity of the letter, the Magistrate considers same, consistent with his consideration of other
unauthenticated documents filed by both parties. Mr. Quinn affirms that counsel’s statements in the Motion for Relief
are true.Counsel argues that Plaintiff failed to affirmatively show that notice and opportunity to cure had been given
and implied that no notice or opportunity to cure was received by the Quinns.
5
On February 4, 2009, Defendants filed a Motion for Immediate Stay of Foreclosure and
Order for Sale, arguing that the Sheriff’s sale set for February 27, 2009 should not be allowed to
proceed until the Quinns’ Motion for Relief from Default Judgment has been ruled upon.
On February 9, 2009, the matter was referred to the undersigned Magistrate and set for a
telephone status conference. During this telephone conference, the Magistrate indicated to the
parties that additional evidence regarding when Plaintiff acquired the Note and Mortgage would be
helpful.
On February 17, 2009, Plaintiff filed a Notice of Filing Note with Endorsement. Plaintiff
states that Count 1 of its Complaint references the Note, “however a copy [of the note] was not
attached as an exhibit.”15 Attached to the notice was a different copy of the Note, which contained
an indorsement in blank by New Century. The indorsement by New Century was not dated. The
Magistrate notes that an identical copy of the note without indoresment was attached to the
Complaint in Foreclosure.16
On February 25, 2009, the undersigned Magistrate issued an entry staying the Sheriff’s sale,
followed on February 27, 2009 by an entry withdrawing the property from Sheriff’s sale.
On October 26, 2009, Plaintiff filed its Brief as to Real Party in Interest, arguing that it is the
real party in interest because the indorsement of the note and transfer of possession to Plaintiff gave
Plaintiff an equitable interest in the Mortgage. However, the Magistrate notes that Plaintiff filed no
affidavit or other evidence to suggest that it was in possession of the endorsed in blank note on the
date of the filing of the Complaint.
15
This statement is incorrect. A copy of the unendorsed (and non-negotiated) Note was attached to Plaintiff’s
Complaint.
16
The indorsement stamp reads:
Pay to the order of, without recourse
_______________________
New Century Mortgage Corporation
By: x
Steve Nage
V.P. Records Management
6
On October 26, 2009, Plaintiff filed a Notice of Filing Securities and Exchange Commission
Form 8K and Trust Agreement for the Structured Asset Securities Corporation (SASCO) Mortgage
Loan Trust 2006 NC1; Mortgage Loan Sale and Assignment Agreement for SASCO Mortgage
Loan Trust 2006 NC1; Securitization Subservicing Agreement for SASCO Mortgage Loan Trust
2006 NC1; and Redacted Loan Schedule to Securitization Subservicing Agreement.17
After requesting and receiving additional time in which to respond to Plaintiff’s Brief, on
November 18, 2009, Defendants filed their Response to Plaintiff’s Brief as to Real Party in Interest.
Defendants argue that Plaintiff’s filings suggest that Plaintiff was not in possession of the indorsed
note at the time of the filing of the Complaint and was therefore not the real party in interest.
On December 24, 2009, Plaintiff filed an Affidavit of Bailee of Original Master Custodial
File. Plaintiff’s counsel, Deanna C. Stoutenborough, averred as follows:
1. Affiant is over the age of 21 and testifies herein from her personal knowledge;
2. Affiant was licensed in November 1998 by the Ohio Supreme Court to practice law
in the State of Ohio under Bar Registration No. 0069761. Affiant is a Member in good
standing with the Bar;
3. Affiant is trial counsel for Plaintiff in the within action….
4. Affiant, additionally has been designated Bailee of the Original Custodial File by
Plaintiff’s designated Custodial Agent, Deutsche Bank National Trust Company, and by the
designated Master Servicer for Plaintiff, Wells Fargo Bank, N.A., pursuant to a Bailee Letter
dated December 14, 2009;
5. Affiant, as Bailee of the Plaintiff’s designated Custodial Agent and designated
Master Servicer, has physical possession and custody, under bailment from and for the
benefit of Plaintiff, of the Custodial Agent’s Master Custodial File containing the operative
original loan documents for the subject loan to defendants herein, Wesley A. Quinn and
Marion L. Quinn (“Defendants”).
6. The original Master Custodial File in Affiant-Bailee’s possession and custody
contains the original Adjustable Rate Note, and together with the Adjustable Rate Rider to
Note, dated February 28, 2006 in the amount of $80,750 given by defendant herein, Wesley
A. Quinn, as sole obligor, to New Century Mortgage Corporation as evidence of his promise
to repay a loan he obtained from New Century Mortgage Corporation in this same amount.
The Adjustable Rate Promissory Note and Adjustable Rate Rider to Note in Affiant-Bailee’s
possession and custody, bear the signature, in blue ink, of defendant, Wesley A. Quinn.
7. The original Adjustable Rate Note in Affiant-Bailee’s possession and custody
executed by defendant, Wesley A. Quinn, also bears the blue-ink endorsement stamp of
New Century Mortgage Corporate, executed by Steve Nagy, its Vice President of Records
Management.
17
Again, although not properly authenticated, Defendants having voiced no objection, the Magistrate considers these
documents.
7
8. The original Master Custodial File in Affiant-Bailee’s possession and custody
contains the original Adjustable Rate Mortgage in the amount of $80,750, and together with
the Adjustable Rate Rider and separate Prepayment Rider to the Mortgage, dated February
28, 2006. Each of pages 1 through 13 and page 15 of the Mortgage bear the initials, in blue
ink, “WAQ” and “MLQ”. Page 14 of the Mortgage contains the signatures, in blue ink, of
“Wesley A. Quinn” and “Marion L. Quinn” as the “Borrower[s]”. Pages 1 and 2 of the
Adjustable Rate Rider to the Mortgage dated February 28, 2006 in the amount of $80,750
bear the initials, in blue ink, “WAQ” and “MLQ”. Page 3 of the Adjustable Rate Rider to
the Mortgage contains the signatures, in blue ink, of “Wesley A. Quinn” and “Marion L.
Quinn” as the “Borrower[s]”. The Prepayment Rider to the Mortgage dated February 28,
2006 given by Defendants, which is a single-page document, bears the signatures, in blue
ink, of “Wesley A. Quinn” and “Marion L. Quinn”.
9. The original Master Custodial File in Affiant-Bailee’s possession and custody
contains the original Corporation Assignment of Mortgage from New Century Mortgage
Corporation executed, in blank, by Steve Nagy, its V.P. Records Management, on March 3,
2006.
10. Per the document custody records that are part of the original Master Custodial File,
the Note and Mortgage executed and delivered by Defendants were sold on “sold_date:
3/22/2006” to “investor_name: LEHMAN”, who thereafter sold the subject loan to
Structured Asset Securities Corporation, the Depositor to Trust.
11. The original Master Custodial File in Affiant-Bailee’s possession and custody
contains, additionally, the final Lender’s Title Insurance Policy issued by Ticor Title
Insurance Company relative to the subject mortgage loan to defendant Wesley A. Quinn,
which policy is assigned No. 71107-71999023, effective April 7, 2006 at 10:24 a.m.; Title
Insurance Commitment, designated Commitment No. 200600179; and certified true, but
unrecorded, copies of the Mortgage and with Riders.
12. Affiant states that a true and exact copy of the Bailee Letter executed by Affiant is
attached hereto as Exhibit “A”. Affiant further states that true and exact copies of the
entirety of the Master Custodial File are attached hereto as Exhibit “B”. Upon the Court’s
instruction, Affiant-Bailee agrees to deliver to the court for its inspection and review—
within the physical presence of the Bailee, the original Master Custodial File.
Interestingly, the Affidavit of Ms. Stoutenborough does not set forth the date on which Plaintiff
came into possession of the note that is indorsed in blank.
On December 24, 2009, Plaintiff filed a Motion to Lift Stay of Sale, arguing that Plaintiff
has established “beyond dispute that it acquired the Note and Mortgage that are the subject to this
foreclosure action by negotiation and transfer prior to commencement of these foreclosure
proceedings.”
On January 15, 2009, Defendants filed a Response to Plaintiff’s Motion to Lift Stay of Sale.
Defendants argued that Plaintiff failed to prove that it had standing at the time the foreclosure action
was filed. Defendants request that the Court deny Plaintiff’s Motion to Lift the Stay of Sale, grant
8
the Quinn’s relief under Civil Rule 60(B) and dismiss the case.
These matters having been fully briefed by the Parties, the Magistrate now issues his
Decision.
II. Conclusions of Law
A. Defendants have met their burden under Rule 60(B) of the Ohio Rules of Civil
Procedure to show (1) excusable neglect and (2) that their Motion was made
within a reasonable time. However, a hearing is required to determine whether
Defendants have presented a “meritorious defense” regarding notice and
opportunity to cure.
Rule 55(B) of the Ohio Rules of Civil Procedure provides: “[i]f a judgment by default has
been entered, the court may set it aside in accordance with Rule 60(B).” Rule 60(B) of the Ohio
Rules of Civil Procedure provides, in relevant part, as follows:
On motion and upon such terms as are just, the court may relieve a party or his legal
representative from a final judgment, order, or proceeding for the following reasons:
(1) mistake, inadvertence or excusable neglect;
(2) newly discovered evidence which by due diligence could not have been
discovered in time to move for a new trial under Rule 59(B);
(3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation
or other misconduct of an adverse party;
(4) the judgment has been satisfied, released or discharged, or a prior judgment upon
which it is based has been reversed or otherwise vacated, or it is no longer
equitable that the judgment should have prospective application; or
(5) any other reason justifying relief from the judgment.
The motion shall be made within a reasonable time, and for reasons (1), (2) and (3) not more
than one year after the judgment order or proceeding was entered or taken. A motion under
this subdivision (B) does not affect the finality of a judgment or suspend its operation.
In order to prevail on a motion for relief for judgment pursuant to Rule 60(B), the movant must
demonstrate (1) that he is entitled to relief under one of the grounds stated in Civ. R. 60(B)(1)
through (5); (2) that he has a meritorious claim or defense; and (3) that his motion or relief is made
within a reasonable time.18
Defendants argue that they are entitled to relief from the default judgment. First, they assert
that they have meritorious defenses to the action—i.e. Plaintiff’s alleged lack of standing, Plaintiff’s
alleged violation of the trust, and Plaintiff’s alleged failure to provide notice of default and
9
opportunity to cure to Defendants. Second, they assert that their neglect in failing to answer the
Complaint was excusable. Third, they assert that their Motion to Vacate has been filed within a
reasonable time. For the reasons discussed herein, the Magistrate agrees that Defendants’ neglect in
failing to answer the Complaint was excusable and that Defendants’ Motion for Relief was made
within a reasonable time. However, the Magistrate concludes that Defendants have failed to raise a
meritorious defense with respect to the issues of whether Plaintiff is (and, at all relevant times, was)
a real party in interest and Plaintiff’s alleged violation of the trust. A hearing is necessary to
determine whether Defendants have asserted a meritorious defense regarding notice of default and
opportunity to cure.
1. Excusable eglect
The Magistrate concludes that Defendants’ failure to respond to Plaintiff’s Complaint in
Foreclosure was due to excusable neglect. Upon receiving notice of the suit, the Quinns negotiated
with the loan servicer, but, due to lack of sophistication and knowledge of the court systems, failed
to appear in the foreclosure action.19 Immediately upon learning of their potential defenses to the
Complaint in Foreclosure, the Defendants filed this motion.20 The Magistrate notes that Plaintiff
does not dispute Defendants’ claim that Plaintiff continued to negotiate with Defendants while at
the same time proceeding with the foreclosure action. While Plaintiff was well within its right to
proceed with the foreclosure action, the Magistrate understands how its parallel continued
negotiation with unsophisticated borrowers would reasonably lead such borrowers to conclude that
filing an answer to the complaint was not necessary.
2. Reasonable Time
The Magistrate concludes that Defendants’ Motion to Vacate was filed within a reasonable
time. The Defendants’ Motion was filed not later than one year from entry of the default
judgment and, given the factors discussed herein such as the continued negotiations between the
18
See e.g. GTE Automatic Electric, Inc. v. ARC Industries (1976) 47 Ohio St. 2d 146, paragraph 2 of the syllabus.
19
See Affidavit of Defendant Wesley Quinn and p. 8 of Plaintiff’s Motion.
10
parties, the relative lack of sophistication of the Defendants, and the timely filing of the motion by
the Defendants upon learning of their possible defenses, the Magistrate finds that the Motion was
filed within a reasonable time.
3. Meritorious Defenses
For the reasons discussed herein, the Magistrate concludes that Defendants have not
presented a meritorious defense on the issues of (1) whether Plaintiff has standing to bring suit, i.e.
whether Plaintiff was the real party in interest at the time the Complaint was filed, and (2) whether
Plaintiff, as Trustee, violated the Trust when it acquired the Quinns’ mortgage. However, the
Magistrate determines that a hearing is required to determine whether Defendants’ have presented a
meritorious defense on the issue of notice of default and opportunity to cure. The Magistrate
expounds on these conclusions in greater detail below.
B. Because Plaintiff has shown that it was the real party in interest at the time the
Complaint was filed, Defendants do not raise a meritorious defense on the issue
of Plaintiff’s standing to bring suit on the subject ote and Mortgage.
Civ. R. 17(A) states that “[e]very action shall be prosecuted in the name of the real party in
interest….No action shall be dismissed on the ground that it is not prosecuted in the name of the
real party in interest until a reasonable time has been allowed after objection for ratification of
commencement of the action by, or joinder or substitution of, the real party in interest. Such
ratification, joinder, or substitution shall have the same effect as if the action had been commenced
in the name of the real party in interest.”21 A party lacks standing to invoke the jurisdiction of the
court unless he has, in an individual or representative capacity, some real interest in the subject
matter of the action.22 A person lacking any right or protected interest may not invoke the
20
Id. at 8-9.
21
Civ. R. 17(A). See also, Wells Fargo Bank N.A. v. Jordan, (2009 8th Dist.) 2009 Ohio 1092, paragraph 20 of the
syllabus.
22
Jordan at paragraph 21 of the syllabus (citing State ex rel Dallman v. Court of Common Pleas, (1973) 35 Ohio St. 2d
176.
11
jurisdiction of a court.23 In foreclosure actions, the real party in interest is the current holder of the
note and mortgage. Chase Manhattan Mortgage Corp. v. Smith, Hamilton App. No C-061069,
2007-Ohio-5874 at P18 (emphasis added).24
In Wells Fargo Bank, N.A. v. Byrd, the Court of Appeals for the First Appellate District in
Hamilton County, Ohio held that “in a foreclosure action, a bank that is not the mortgagee when suit
is filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage.”25
The Byrd Court’s holding was followed by the Jordan Court in the Eighth Appellate District,
Cuyahoga County, Ohio.26 Accordingly, the Magistrate considers whether Plaintiff U.S. Bank was
a real party in interest at the time suit was filed and a “mortgagee” of the mortgage at the time suit
was filed, even though formal assignment of the mortgage and negotiation and indorsement of the
note more likely than not did not occur until after the Complaint was filed.
1. Possession of an indorsed in blank note at the time of the filing of the
complaint is sufficient to demonstrate that Plaintiff was a real party in
interest at the time of the filing of the complaint even though formal
assignment of the mortgage did not occur until after the Complaint was
filed. However, Plaintiff failed to prove by a preponderance of the evidence
that it was in possession of the negotiated note (i.e. the note that was
indorsed in blank) at the time the Complaint was filed.
a. A “holder” of the ote at the time a Complaint is filed has an
equitable ownership interest in the Mortgage and is a real party in
interest at the time of filing.
Article 3 of the Uniform Commercial Code (“UCC”), codified at RC §1303.01 et seq.,
governs the creation, transfer, and enforceability of negotiable instruments, including promissory
notes secured by mortgages on real estate.27 Therefore, Article 3 of the UCC is applicable to the
dispute at bar.
23
Id. citing Northland Ins. Co. v. Illuminating Co., 11th Dist. Nos. 2002-A-0058 and 2002-A-0066, 2004 Ohio 1529 at
P17.
24
See also U.S. Bank v. Marcino, (7th Dist. 2009) 181 Ohio App. 3d 328 at **P32 of the syllabus (“The current holder
of the note and mortgage is the real party in interest in foreclosure actions.
Where a party fails to establish itself as the
current holder of the note and mortgage, summary judgment is inappropriate.”)
25
Wells Fargo Bank, N.A. v. Byrd, (1st Dist. 2008) 2008 Ohio 4603, paragraph 15 of the syllabus.
26
Wells Fargo Bank, N.A. v. Jordan (2009 8th Dist.) 2009 Ohio 1092.
27
Id.
12
When an instrument, such as the note herein, is negotiated, the person to whom it is
negotiated becomes is “holder.”28 “When an instrument is endorsed in blank, the instrument
becomes payable to bearer and may be negotiated by transfer of possession alone until specifically
indorsed.”29 The holder of an instrument is entitled to enforce its terms.30
The note at issue herein was originally order paper, payable to New Century Mortgage
Corporation. However, at some point, New Century indorsed the note, in blank, and delivered
possession to Plaintiff U.S. Bank. Upon taking possession of the indorsed note, Plaintiff became a
holder of the instrument and therefore entitled to enforce it. If Plaintiff was in possession of the
indorsed in blank note at the time of the filing of the complaint, then Plaintiff, as a “holder,” was the
real party in interest at that time.
In Ohio, the assignment of a debt operates in equity as an assignment of the mortgage.31 69
Ohio Jur. 3d Mortgages, Section 461, states in pertinent part:
Because a mortgage is merely an incident of the debt that it is given to secure, the
assignment of the debt operates in equity as an assignment of the mortgage. In accordance
with this principle, when a promissory note secured by a mortgage is transferred, as by
indorsement, so as to vest the legal title to the note in the transferee, the transfer operates as
an equitable assignment of the mortgage, even though the mortgage is not delivered or is
delivered without indorsement or assignment. The assignee may foreclose the mortgage, for
instance. The mortgagee, and all claiming under it, hold the mortgaged property in trust for
the holder of the notes.
In the case at bar, when Plaintiff became the “holder” of the note (upon bank endorsement
and transfer of physical possession to Plaintiff by New Century), Plaintiff also became an equitable
owner of the Mortgage upon such negotiation of the note. If Plaintiff became the holder of the note
before the Complaint herein was filed, Plaintiff is a real party in interest and Defendants’ motion
28
R.C. §1303.21(A).
29
R.C. §1303.25(B).
30
R.C. §1303.31(A)(1).
31
See e.g. Kuck v. Sommers (1950) 59 Ohio L. Abs. 400, 100 N.E. 2d 68 (“Where a note secured by a mortgage is
transferred, as by enforcement, so as to vest the legal title to the note in the transferee, such transfer operates as an
equitable assignment of the mortgage, even though the mortgage is not assigned or delivered.”); Edgar v. Haines (1923)
109 Ohio St. 159, 141 N.E. 837 (“A mortgage is to properly separate and distinct from the note which it secures, but, on
the other hand, the mortgage security is an incident of the debt which it is given to secure, and, in the absence of a
specific agreement to the contrary, passes to the assignee or transferee of such debt.”)
13
should be overruled. However, the Magistrate finds that Plaintiff failed to prove by a preponderance
of the evidence that it was a holder of the note at the time the Complaint was filed.
b. Plaintiff failed to prove by a preponderance of the evidence that it
was a “holder” of the note at the time the Complaint was filed.
Plaintiff was in possession of both the unendorsed note and unassigned mortgage at the time
the Complaint was filed. However, there is no direct evidence of the time at which Plaintiff came
into possession of negotiated (i.e. indorsed in blank) note. Ms.
Preview
ELECTRONICALLY FILED COURT OF COMMON PLEAS Wednesday, February 10, 2010 3:38:08 PM CASE NUMBER: 2007 CV 09571 Docket ID: 14784165 GREGORY A BRUSH CLERK OF COURTS MONTGOMERY COUNTY OHIO IN THE COMMON PLEAS COURT OF MONTGOMERY COUNTY, OHIO CIVIL DIVISION Court U.S. BANK N.A. as Trustee, CASE NO. 07 CV 9571 Plaintiff(s), JUDGE CONNIE S. PRICE Pleas MAGISTRATE DAVID H. FUCHSMAN -vs- WESLEY A. QUINN et al., MAGISTRATE'S DECISIO (1) Common SETTIG A HEARIG O THE ISSUE Defendant(s). OF OTICE OF DEFAULT AD General Division OPPORTUITY TO CURE FOR MARCH 22, 2010 AT 10:30 A.M. AD (2) DEYIG PLAITIFF’S MOTIO TO LIFT STAY OF SALE County _______________________________________________________________________________________ TO: Honorable COIE S. PRICE Montgomery FROM: Magistrate DAVID H. FUCHSMA This matter is currently before the undersigned Magistrate pursuant to Rule 53 of the Ohio Rules of Civil Procedure and a specific order of reference filed by the Court on February 9, 2009. Currently before the Magistrate is the Motion and Memorandum in Support for Relief from Default Judgment and Order of Sale, filed by Defendants Wesley A. Quinn and Marion L. Quinn on December 18, 2008. Also before the Magistrate is Plaintiff U.S. Bank’s Motion to Lift Stay of Sale, filed December 24, 2009. These matters are now ready for decision. For the reasons discussed herein, the Magistrate sets this case for a hearing on the issue of notice and opportunity to cure on March 22, 2010 at 10:30 a.m., holding Defendants’ Motion for Relief in abeyance until conclusion of the hearing. Furthermore, Plaintiff’s Motion to Lift Stay of Sale is denied. I. Procedural History and Findings of Fact On February 28, 2006 Wesley A. Quinn executed an Adjustable Rate Note in the amount of $80,750.00 in favor of New Century Mortgage Corporation (“New Century”).1 The Note was secured by a Mortgage on the property located at 7 Oak Street, Trotwood, Ohio. The Mortgage was executed by Wesley A. Quinn and Marion L. Quinn (his wife) on February 28, 2006.2 The Mortgage was recorded by the Montgomery County Recorder on March 7, 2006.3 New Century is not a party to this action.4 Plaintiff U.S. Bank National Association as Trustee for the Structured Securities Corporation Mortgage Loan Trust, 2006-NC1 (“U.S. Bank”), claims that New Century transferred the Note and Mortgage to Plaintiff in June of 2006 as part of a bulk transaction.5 On November 14, 2007, Plaintiff U.S. Bank filed a Complaint in Foreclosure against Wesley Quinn and Marion Quinn based upon the Note and Mortgage between the Quinns and New Century.6 U.S. Bank alleges that it is the “holder and owner of [the] note” as of the date of filing of the Complaint. However, the Note attached to the Complaint is payable to New Century and does not contain an indorsement or other evidence of negotiation. Defendant Wesley Quinn and Defendant Marion Quinn were served with a copy of the complaint via certified mail on November 15, 2007.7 More than two months after the filing of the Complaint, on January 17, 2008, New Century formally assigned the mortgage to Plaintiff.8 Notably, the Assignment states, in pertinent part: 1 See Exhibit A to Plaintiff’s Complaint. 2 See Exhibit B to Plaintiff’s Complaint. 3 Id. 4 Id. 5 See generally Plaintiff’s October 25, 2009 Notice of Filing Securities and Exchange Commission Form 8K etc. and attached documents. See also, Exhibit 2 to Defendants’ Motion for Relief. 6 Specifically, Plaintiff’s Complaint in Foreclosure stated “Plaintiff is the holder and owner of a note, a copy of which is attached hereto as Exhibit ‘A’. By reason of default under the terms of the note and the mortgage securing same, plaintiff has declared the debt evidenced by said note due, and there is due thereon from the defendant Wesley A. Quinn, $80,125.16, together with interest at the rate of 6.8750% per year from December 1, 2006, plus court costs, advances, and other charges, as allowed by law.” 7 See Docket. 8 See Defendant’s Exhibit 5 to Motion and Memorandum in Support for Relief from Default Judgment and Order of Sale. 2 KNOW ALL MEN BY THESE PRESENTS, that the undersigned, New Century Mortgage Corporation, by Wells Fargo Bank, N.A. as attorney in fact…, does hereby sell, assign, transfer and set over unto U.S. Bank National Association, as Trustee for the Structured Asset Securities Corporation Mortgage Loan Trust, 2006-NC1…a certain mortgage from Wesley Quinn and Marion L. Quinn, husband and wife to New Century Mortgage Corporation, dated February 28, 2006, recorded April 7, 2006, in Volume Microfiche Number 06-030777, in the office of the Montgomery County Recorder, together with the Promissory Note secured thereby and referred to therein; and all sums of money due and to become due thereon and secured by the [subject property]. (Emphasis added.) According to the Montgomery County Recorder’s stamp thereon, the Assignment of Mortgage was not recorded until February 1, 2008.9 On January 31, 2008, Plaintiff filed a Motion for Default Judgment against Defendants Wesley Quinn [and] Marion Quinn.10 On February 11, 2008, the Court entered a judgment and decree in foreclosure against Defendants Wesley and Marion Quinn with respect to the subject property, finding “that the allegations contained in the Complaint are true and that there is due and owing to the plaintiff, from the defendant Wesley A. Quinn, upon the subject Note, the principal balance of $80,125.16, for which amount judgment is hereby rendered in favor of the plaintiff, with interest at the rate of 6.8750 percent per annum from December 1, 2006, together with advances for taxes, insurance and otherwise expended, plus costs.”11 On March 1, 2009, the Court ordered the property to be sold. On December 18, 2009, Defendants Wesley Quinn and Marion Quinn, by counsel, filed 9 The Magistrate notes that Plaintiff claims to have acquired the subject Note and Mortgage in June 2006. In support of this claim, on October 26, 2009, Plaintiff filed unauthenticated copies of what appear to be (1) a Securities and Exchange Commission Form 8K by SASCO Mortgage Loan Trust, 2006-NC1 Reported June 22, 2006, (2) portions of a certain Trust Agreement, dated June 1, 2006 for the SASCO Mortgage Loan Trust, 2006-NC1, (3) the Mortgage Loan Sale and Assignment Agreement dated June 1, 2006 for SASCO Mortgage Loan Trust 2006-NC1, (4) a Securitization Subservicing Agreement for SASCO Mortgage Loan Trust 2006-NC1, and (5) a Redacted Mortgage Loan Schedule to Securitization Subservicing Agreement for SASCO Mortgage Loan Trust 2006-NC1. The Redacted Mortgage Loan Schedule references the subject property. Defendants do not contest the authenticity of these documents and, in fact, produced similarly unauthenticated SEC documents in support of their Motion for Relief. Therefore, although not properly authenticated, the Magistrate considers same. 10 The Motion also sought default judgment against Chase Home Finance LLC, successor by Merger to Chase Manhattan Mortgage Corporation successor by merger to Chase Mortgage Company. To date, Chase Home Finance LLC has failed to respond to Plaintiff’s Complaint or otherwise appear in this action.Additionally, on January 31, 2008, Plaintiff filed the affidavit of Thomas Westmoreland, the Vice President of Loan Documentation with Wells Fargo Bank, N.A., servicing agent for U.S. Bank National Association, as Trustee for the Structured Asset Securities Corporation Mortgage Loan Trust, 2006-NC1. Mr. Westmoreland authenticated an attached payment history for Mr. Quinn’s account, evidencing a balance due of $80,125.16. 3 their Motion and Memorandum in Support for Relief from Default Judgment and Order of Sale. The Quinns argue that the Court should vacate the Default Judgment and Decree in Foreclosure, as well as the Order of Sale because: (1) Plaintiff does not have standing to bring this action; (2) Plaintiff as Trustee violated the Trust when it acquired the Quinns’ mortgage; and (3) Plaintiff violated the plain language of the Note when it failed to provide the Quinns notice of default and a thirty day opportunity to cure the alleged $571.01 default before filing the foreclosure action.12 Attached as Defendants’ Exhibit 1 is an unsigned copy of the Adjustable Rate Note. Attached as Defendants’ Exhibit 2 is what appears to be a printout from the SEC website (unauthenticated), entitled “Prospectus Supplement $1,191,290,000 (Approximate) Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-NC1.” Lehman Brothers Holdings, Inc. is listed as “sponsor and seller;” Structured Asset Securities Corporation Mortgage Loan Trust 2006-NC1 is listed as “issuing entity;” Aurora Loan Services, LLC is listed as “master servicer;” and Structured Assert Securities Corporation is listed as “depositor.” Defendants’ Exhibit 3 appears to be a portion of the Trust document, also not authenticated by affidavit or otherwise.13 Defendants’ Exhibit 4 appears to be another portion of the Trust document, not authenticated by affidavit or otherwise. Defendants’ Exhibit 5 is a copy of the Assignment of Mortgage, dated January 17, 2008 and recorded February 1, 2008. Finally, Defendants’ Exhibit 5 is an affidavit of Defendant Wesley Quinn, who affirms that he has “read the Motion and Memorandum in Support of Default Judgment and order of sale [sic] and verify the allegations contained therein regarding I [sic] or my wife are true and accurate.” On January 6, 2009, the Court set a submission date of January 27, 2009 for Defendants’ Motion and Memorandum. At Plaintiff’s request, Plaintiff was granted an extension of time, up to and including January 31, 2009, to respond to Defendants’ Motion. 11 Judgment was also entered against Defendant Chase Home Finance, LLC, with respect to its claim to the subject property. 12 Motion and Memorandum in Support of Relief from Default Judgment and Order of Sale, p.1. 13 Again, although some of the documents attached to Defendants’ Motion for Relief are not properly authenticated, the Magistrate considers same, as Plaintiff voiced no objection and produced similarly unauthenticated documents. 4 On January 28, 2009, Plaintiff, by counsel, filed its Memoranda Contra Defendants’ Motion to Vacate Judgment and Decree in Foreclosure and Order of Sale. Plaintiff claims that Defendants are not entitled to relief under Rule 60(B) of the Ohio Rules of Civil Procedure because (1) they have not demonstrated “excusable neglect,” and (2) they have not set forth a meritorious defense. Plaintiff claims that the documents filed by Defendant establish that Plaintiff was, in fact, the real party in interest as of the date of the filing of the complaint. Plaintiff claims that it was not required to file an assignment of mortgage with the Complaint under Rule 10(D) of the Ohio Rules of Civil Procedure. Plaintiff claims that Defendants waived any requirement for notice of default and acceleration. Specifically, Plaintiff argued that the Note did not require written notice of default prior to commencement of foreclosure proceedings. Nonetheless, Plaintiff claims that Notice was sent to Defendant Wesley Quinn on April 30, 2007. Attached to Plaintiff’s Memoranda was a letter from ASC to Wesley Quinn dated April 30, 2007, which gives notice of default on the subject note and opportunity to cure. The letter is not authenticated by affidavit and contradicts the affidavit of Mr. Quinn.14 Finally, Plaintiff argued that Defendants’ Motion and Memorandum seeking relief from the judgment and order of sale was not filed within a reasonable time and should therefore be denied. On February 4, 2009, Defendants’ filed a Response to Plaintiff’s Memorandum Contra. Defendants argue that the Assignment of Mortgage, which was executed after the filing of Plaintiff’s Complaint, suggests that Plaintiff was not the real party in interest at the time of the filing of the Complaint. Additionally, Defendants argue that they have complied with all requirements of Rule 60(B) of the Ohio Rules of Civil Procedure. 14 Plaintiff cites the Affidavit of Mr. Westmoreland regarding the default and the amount due. However, Mr. Westmoreland does not authenticate the alleged notice of default and opportunity to cure. Nonetheless, as Defendants do not object to the authenticity of the letter, the Magistrate considers same, consistent with his consideration of other unauthenticated documents filed by both parties. Mr. Quinn affirms that counsel’s statements in the Motion for Relief are true.Counsel argues that Plaintiff failed to affirmatively show that notice and opportunity to cure had been given and implied that no notice or opportunity to cure was received by the Quinns. 5 On February 4, 2009, Defendants filed a Motion for Immediate Stay of Foreclosure and Order for Sale, arguing that the Sheriff’s sale set for February 27, 2009 should not be allowed to proceed until the Quinns’ Motion for Relief from Default Judgment has been ruled upon. On February 9, 2009, the matter was referred to the undersigned Magistrate and set for a telephone status conference. During this telephone conference, the Magistrate indicated to the parties that additional evidence regarding when Plaintiff acquired the Note and Mortgage would be helpful. On February 17, 2009, Plaintiff filed a Notice of Filing Note with Endorsement. Plaintiff states that Count 1 of its Complaint references the Note, “however a copy [of the note] was not attached as an exhibit.”15 Attached to the notice was a different copy of the Note, which contained an indorsement in blank by New Century. The indorsement by New Century was not dated. The Magistrate notes that an identical copy of the note without indoresment was attached to the Complaint in Foreclosure.16 On February 25, 2009, the undersigned Magistrate issued an entry staying the Sheriff’s sale, followed on February 27, 2009 by an entry withdrawing the property from Sheriff’s sale. On October 26, 2009, Plaintiff filed its Brief as to Real Party in Interest, arguing that it is the real party in interest because the indorsement of the note and transfer of possession to Plaintiff gave Plaintiff an equitable interest in the Mortgage. However, the Magistrate notes that Plaintiff filed no affidavit or other evidence to suggest that it was in possession of the endorsed in blank note on the date of the filing of the Complaint. 15 This statement is incorrect. A copy of the unendorsed (and non-negotiated) Note was attached to Plaintiff’s Complaint. 16 The indorsement stamp reads: Pay to the order of, without recourse _______________________ New Century Mortgage Corporation By: x Steve Nage V.P. Records Management 6 On October 26, 2009, Plaintiff filed a Notice of Filing Securities and Exchange Commission Form 8K and Trust Agreement for the Structured Asset Securities Corporation (SASCO) Mortgage Loan Trust 2006 NC1; Mortgage Loan Sale and Assignment Agreement for SASCO Mortgage Loan Trust 2006 NC1; Securitization Subservicing Agreement for SASCO Mortgage Loan Trust 2006 NC1; and Redacted Loan Schedule to Securitization Subservicing Agreement.17 After requesting and receiving additional time in which to respond to Plaintiff’s Brief, on November 18, 2009, Defendants filed their Response to Plaintiff’s Brief as to Real Party in Interest. Defendants argue that Plaintiff’s filings suggest that Plaintiff was not in possession of the indorsed note at the time of the filing of the Complaint and was therefore not the real party in interest. On December 24, 2009, Plaintiff filed an Affidavit of Bailee of Original Master Custodial File. Plaintiff’s counsel, Deanna C. Stoutenborough, averred as follows: 1. Affiant is over the age of 21 and testifies herein from her personal knowledge; 2. Affiant was licensed in November 1998 by the Ohio Supreme Court to practice law in the State of Ohio under Bar Registration No. 0069761. Affiant is a Member in good standing with the Bar; 3. Affiant is trial counsel for Plaintiff in the within action…. 4. Affiant, additionally has been designated Bailee of the Original Custodial File by Plaintiff’s designated Custodial Agent, Deutsche Bank National Trust Company, and by the designated Master Servicer for Plaintiff, Wells Fargo Bank, N.A., pursuant to a Bailee Letter dated December 14, 2009; 5. Affiant, as Bailee of the Plaintiff’s designated Custodial Agent and designated Master Servicer, has physical possession and custody, under bailment from and for the benefit of Plaintiff, of the Custodial Agent’s Master Custodial File containing the operative original loan documents for the subject loan to defendants herein, Wesley A. Quinn and Marion L. Quinn (“Defendants”). 6. The original Master Custodial File in Affiant-Bailee’s possession and custody contains the original Adjustable Rate Note, and together with the Adjustable Rate Rider to Note, dated February 28, 2006 in the amount of $80,750 given by defendant herein, Wesley A. Quinn, as sole obligor, to New Century Mortgage Corporation as evidence of his promise to repay a loan he obtained from New Century Mortgage Corporation in this same amount. The Adjustable Rate Promissory Note and Adjustable Rate Rider to Note in Affiant-Bailee’s possession and custody, bear the signature, in blue ink, of defendant, Wesley A. Quinn. 7. The original Adjustable Rate Note in Affiant-Bailee’s possession and custody executed by defendant, Wesley A. Quinn, also bears the blue-ink endorsement stamp of New Century Mortgage Corporate, executed by Steve Nagy, its Vice President of Records Management. 17 Again, although not properly authenticated, Defendants having voiced no objection, the Magistrate considers these documents. 7 8. The original Master Custodial File in Affiant-Bailee’s possession and custody contains the original Adjustable Rate Mortgage in the amount of $80,750, and together with the Adjustable Rate Rider and separate Prepayment Rider to the Mortgage, dated February 28, 2006. Each of pages 1 through 13 and page 15 of the Mortgage bear the initials, in blue ink, “WAQ” and “MLQ”. Page 14 of the Mortgage contains the signatures, in blue ink, of “Wesley A. Quinn” and “Marion L. Quinn” as the “Borrower[s]”. Pages 1 and 2 of the Adjustable Rate Rider to the Mortgage dated February 28, 2006 in the amount of $80,750 bear the initials, in blue ink, “WAQ” and “MLQ”. Page 3 of the Adjustable Rate Rider to the Mortgage contains the signatures, in blue ink, of “Wesley A. Quinn” and “Marion L. Quinn” as the “Borrower[s]”. The Prepayment Rider to the Mortgage dated February 28, 2006 given by Defendants, which is a single-page document, bears the signatures, in blue ink, of “Wesley A. Quinn” and “Marion L. Quinn”. 9. The original Master Custodial File in Affiant-Bailee’s possession and custody contains the original Corporation Assignment of Mortgage from New Century Mortgage Corporation executed, in blank, by Steve Nagy, its V.P. Records Management, on March 3, 2006. 10. Per the document custody records that are part of the original Master Custodial File, the Note and Mortgage executed and delivered by Defendants were sold on “sold_date: 3/22/2006” to “investor_name: LEHMAN”, who thereafter sold the subject loan to Structured Asset Securities Corporation, the Depositor to Trust. 11. The original Master Custodial File in Affiant-Bailee’s possession and custody contains, additionally, the final Lender’s Title Insurance Policy issued by Ticor Title Insurance Company relative to the subject mortgage loan to defendant Wesley A. Quinn, which policy is assigned No. 71107-71999023, effective April 7, 2006 at 10:24 a.m.; Title Insurance Commitment, designated Commitment No. 200600179; and certified true, but unrecorded, copies of the Mortgage and with Riders. 12. Affiant states that a true and exact copy of the Bailee Letter executed by Affiant is attached hereto as Exhibit “A”. Affiant further states that true and exact copies of the entirety of the Master Custodial File are attached hereto as Exhibit “B”. Upon the Court’s instruction, Affiant-Bailee agrees to deliver to the court for its inspection and review— within the physical presence of the Bailee, the original Master Custodial File. Interestingly, the Affidavit of Ms. Stoutenborough does not set forth the date on which Plaintiff came into possession of the note that is indorsed in blank. On December 24, 2009, Plaintiff filed a Motion to Lift Stay of Sale, arguing that Plaintiff has established “beyond dispute that it acquired the Note and Mortgage that are the subject to this foreclosure action by negotiation and transfer prior to commencement of these foreclosure proceedings.” On January 15, 2009, Defendants filed a Response to Plaintiff’s Motion to Lift Stay of Sale. Defendants argued that Plaintiff failed to prove that it had standing at the time the foreclosure action was filed. Defendants request that the Court deny Plaintiff’s Motion to Lift the Stay of Sale, grant 8 the Quinn’s relief under Civil Rule 60(B) and dismiss the case. These matters having been fully briefed by the Parties, the Magistrate now issues his Decision. II. Conclusions of Law A. Defendants have met their burden under Rule 60(B) of the Ohio Rules of Civil Procedure to show (1) excusable neglect and (2) that their Motion was made within a reasonable time. However, a hearing is required to determine whether Defendants have presented a “meritorious defense” regarding notice and opportunity to cure. Rule 55(B) of the Ohio Rules of Civil Procedure provides: “[i]f a judgment by default has been entered, the court may set it aside in accordance with Rule 60(B).” Rule 60(B) of the Ohio Rules of Civil Procedure provides, in relevant part, as follows: On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(B); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party; (4) the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (5) any other reason justifying relief from the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2) and (3) not more than one year after the judgment order or proceeding was entered or taken. A motion under this subdivision (B) does not affect the finality of a judgment or suspend its operation. In order to prevail on a motion for relief for judgment pursuant to Rule 60(B), the movant must demonstrate (1) that he is entitled to relief under one of the grounds stated in Civ. R. 60(B)(1) through (5); (2) that he has a meritorious claim or defense; and (3) that his motion or relief is made within a reasonable time.18 Defendants argue that they are entitled to relief from the default judgment. First, they assert that they have meritorious defenses to the action—i.e. Plaintiff’s alleged lack of standing, Plaintiff’s alleged violation of the trust, and Plaintiff’s alleged failure to provide notice of default and 9 opportunity to cure to Defendants. Second, they assert that their neglect in failing to answer the Complaint was excusable. Third, they assert that their Motion to Vacate has been filed within a reasonable time. For the reasons discussed herein, the Magistrate agrees that Defendants’ neglect in failing to answer the Complaint was excusable and that Defendants’ Motion for Relief was made within a reasonable time. However, the Magistrate concludes that Defendants have failed to raise a meritorious defense with respect to the issues of whether Plaintiff is (and, at all relevant times, was) a real party in interest and Plaintiff’s alleged violation of the trust. A hearing is necessary to determine whether Defendants have asserted a meritorious defense regarding notice of default and opportunity to cure. 1. Excusable eglect The Magistrate concludes that Defendants’ failure to respond to Plaintiff’s Complaint in Foreclosure was due to excusable neglect. Upon receiving notice of the suit, the Quinns negotiated with the loan servicer, but, due to lack of sophistication and knowledge of the court systems, failed to appear in the foreclosure action.19 Immediately upon learning of their potential defenses to the Complaint in Foreclosure, the Defendants filed this motion.20 The Magistrate notes that Plaintiff does not dispute Defendants’ claim that Plaintiff continued to negotiate with Defendants while at the same time proceeding with the foreclosure action. While Plaintiff was well within its right to proceed with the foreclosure action, the Magistrate understands how its parallel continued negotiation with unsophisticated borrowers would reasonably lead such borrowers to conclude that filing an answer to the complaint was not necessary. 2. Reasonable Time The Magistrate concludes that Defendants’ Motion to Vacate was filed within a reasonable time. The Defendants’ Motion was filed not later than one year from entry of the default judgment and, given the factors discussed herein such as the continued negotiations between the 18 See e.g. GTE Automatic Electric, Inc. v. ARC Industries (1976) 47 Ohio St. 2d 146, paragraph 2 of the syllabus. 19 See Affidavit of Defendant Wesley Quinn and p. 8 of Plaintiff’s Motion. 10 parties, the relative lack of sophistication of the Defendants, and the timely filing of the motion by the Defendants upon learning of their possible defenses, the Magistrate finds that the Motion was filed within a reasonable time. 3. Meritorious Defenses For the reasons discussed herein, the Magistrate concludes that Defendants have not presented a meritorious defense on the issues of (1) whether Plaintiff has standing to bring suit, i.e. whether Plaintiff was the real party in interest at the time the Complaint was filed, and (2) whether Plaintiff, as Trustee, violated the Trust when it acquired the Quinns’ mortgage. However, the Magistrate determines that a hearing is required to determine whether Defendants’ have presented a meritorious defense on the issue of notice of default and opportunity to cure. The Magistrate expounds on these conclusions in greater detail below. B. Because Plaintiff has shown that it was the real party in interest at the time the Complaint was filed, Defendants do not raise a meritorious defense on the issue of Plaintiff’s standing to bring suit on the subject ote and Mortgage. Civ. R. 17(A) states that “[e]very action shall be prosecuted in the name of the real party in interest….No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest. Such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.”21 A party lacks standing to invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the subject matter of the action.22 A person lacking any right or protected interest may not invoke the 20 Id. at 8-9. 21 Civ. R. 17(A). See also, Wells Fargo Bank N.A. v. Jordan, (2009 8th Dist.) 2009 Ohio 1092, paragraph 20 of the syllabus. 22 Jordan at paragraph 21 of the syllabus (citing State ex rel Dallman v. Court of Common Pleas, (1973) 35 Ohio St. 2d 176. 11 jurisdiction of a court.23 In foreclosure actions, the real party in interest is the current holder of the note and mortgage. Chase Manhattan Mortgage Corp. v. Smith, Hamilton App. No C-061069, 2007-Ohio-5874 at P18 (emphasis added).24 In Wells Fargo Bank, N.A. v. Byrd, the Court of Appeals for the First Appellate District in Hamilton County, Ohio held that “in a foreclosure action, a bank that is not the mortgagee when suit is filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage.”25 The Byrd Court’s holding was followed by the Jordan Court in the Eighth Appellate District, Cuyahoga County, Ohio.26 Accordingly, the Magistrate considers whether Plaintiff U.S. Bank was a real party in interest at the time suit was filed and a “mortgagee” of the mortgage at the time suit was filed, even though formal assignment of the mortgage and negotiation and indorsement of the note more likely than not did not occur until after the Complaint was filed. 1. Possession of an indorsed in blank note at the time of the filing of the complaint is sufficient to demonstrate that Plaintiff was a real party in interest at the time of the filing of the complaint even though formal assignment of the mortgage did not occur until after the Complaint was filed. However, Plaintiff failed to prove by a preponderance of the evidence that it was in possession of the negotiated note (i.e. the note that was indorsed in blank) at the time the Complaint was filed. a. A “holder” of the ote at the time a Complaint is filed has an equitable ownership interest in the Mortgage and is a real party in interest at the time of filing. Article 3 of the Uniform Commercial Code (“UCC”), codified at RC §1303.01 et seq., governs the creation, transfer, and enforceability of negotiable instruments, including promissory notes secured by mortgages on real estate.27 Therefore, Article 3 of the UCC is applicable to the dispute at bar. 23 Id. citing Northland Ins. Co. v. Illuminating Co., 11th Dist. Nos. 2002-A-0058 and 2002-A-0066, 2004 Ohio 1529 at P17. 24 See also U.S. Bank v. Marcino, (7th Dist. 2009) 181 Ohio App. 3d 328 at **P32 of the syllabus (“The current holder of the note and mortgage is the real party in interest in foreclosure actions. Where a party fails to establish itself as the current holder of the note and mortgage, summary judgment is inappropriate.”) 25 Wells Fargo Bank, N.A. v. Byrd, (1st Dist. 2008) 2008 Ohio 4603, paragraph 15 of the syllabus. 26 Wells Fargo Bank, N.A. v. Jordan (2009 8th Dist.) 2009 Ohio 1092. 27 Id. 12 When an instrument, such as the note herein, is negotiated, the person to whom it is negotiated becomes is “holder.”28 “When an instrument is endorsed in blank, the instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specifically indorsed.”29 The holder of an instrument is entitled to enforce its terms.30 The note at issue herein was originally order paper, payable to New Century Mortgage Corporation. However, at some point, New Century indorsed the note, in blank, and delivered possession to Plaintiff U.S. Bank. Upon taking possession of the indorsed note, Plaintiff became a holder of the instrument and therefore entitled to enforce it. If Plaintiff was in possession of the indorsed in blank note at the time of the filing of the complaint, then Plaintiff, as a “holder,” was the real party in interest at that time. In Ohio, the assignment of a debt operates in equity as an assignment of the mortgage.31 69 Ohio Jur. 3d Mortgages, Section 461, states in pertinent part: Because a mortgage is merely an incident of the debt that it is given to secure, the assignment of the debt operates in equity as an assignment of the mortgage. In accordance with this principle, when a promissory note secured by a mortgage is transferred, as by indorsement, so as to vest the legal title to the note in the transferee, the transfer operates as an equitable assignment of the mortgage, even though the mortgage is not delivered or is delivered without indorsement or assignment. The assignee may foreclose the mortgage, for instance. The mortgagee, and all claiming under it, hold the mortgaged property in trust for the holder of the notes. In the case at bar, when Plaintiff became the “holder” of the note (upon bank endorsement and transfer of physical possession to Plaintiff by New Century), Plaintiff also became an equitable owner of the Mortgage upon such negotiation of the note. If Plaintiff became the holder of the note before the Complaint herein was filed, Plaintiff is a real party in interest and Defendants’ motion 28 R.C. §1303.21(A). 29 R.C. §1303.25(B). 30 R.C. §1303.31(A)(1). 31 See e.g. Kuck v. Sommers (1950) 59 Ohio L. Abs. 400, 100 N.E. 2d 68 (“Where a note secured by a mortgage is transferred, as by enforcement, so as to vest the legal title to the note in the transferee, such transfer operates as an equitable assignment of the mortgage, even though the mortgage is not assigned or delivered.”); Edgar v. Haines (1923) 109 Ohio St. 159, 141 N.E. 837 (“A mortgage is to properly separate and distinct from the note which it secures, but, on the other hand, the mortgage security is an incident of the debt which it is given to secure, and, in the absence of a specific agreement to the contrary, passes to the assignee or transferee of such debt.”) 13 should be overruled. However, the Magistrate finds that Plaintiff failed to prove by a preponderance of the evidence that it was a holder of the note at the time the Complaint was filed. b. Plaintiff failed to prove by a preponderance of the evidence that it was a “holder” of the note at the time the Complaint was filed. Plaintiff was in possession of both the unendorsed note and unassigned mortgage at the time the Complaint was filed. However, there is no direct evidence of the time at which Plaintiff came into possession of negotiated (i.e. indorsed in blank) note. Ms.