Residential Funding Co. v. Thorne

973 N.E.2d 294

2012 -Ohio- 2552

RESIDENTIAL FUNDING COMPANY, LLC, Appellee

v.Gary T. THORNE, et al., Appellant.

No. L–11–1131.

Court of Appeals of Ohio, Sixth District, Lucas County.

June 8, 2012.

Jeffrey A. Lipps, David A. Wallace, Barton R. Keyes and Joel E. Sechler, Columbus, for appellee.

George R. Smith, Jr., for appellant.

YARBROUGH, J.

{¶ 1} This is an appeal from the judgment of the Lucas County Court of Common Pleas, denying appellant Gary T. Thorne's various post-judgment motions in the foreclosure action against him. Upon consideration of the assignments of error, we affirm, in part, and reverse, in part.

I. Background

{¶ 2} This is Thorne's second appeal in this foreclosure case. In Residential Funding Co., LLC v. Thorne, 6th Dist. No. L–09–1324, 2010-Ohio-4271, 2010 WL 3516785 (“Thorne I ”), Thorne challenged the trial court's award of summary judgment in favor of appellee Residential Funding Company, LLC (“Residential”) on its complaint for foreclosure and on Thorne's counterclaim for an alleged violation of the Truth in Lending Act (“TILA”). Residential's motion for summary judgment was supported by affidavits from Kenneth Ugwuadu and Jeffrey Stephan that (1) authenticated the attached note and mortgage documents, including the document assigning the mortgage to Residential,¹ (2) stated that Residential was the possessor and owner of the note, and (3) averred that appellant defaulted on the note, and that the accelerated amount due was $181,786.83 plus interest.

{¶ 3} In his first appeal, Thorne argued that Residential was not the holder and party entitled to enforce the note and mortgage at the time it filed its complaint. Id. at ¶ 26. We rejected Thorne's argumenton the grounds that the assignment of the mortgage occurred prior to the filing of the complaint.

{¶ 4} We next rejected Thorne's arguments relating to his TILA counterclaim, holding that based on the contents of the mortgage documents attached to the affidavits, Thorne received sufficient disclosure under TILA. Based on those same facts, we also held that Thorne's affirmative defense of fraud was without merit because it was barred by the statute of limitations since he should have discovered the purported fraud at the time he signed the documents in 2003.

{¶ 5} As a separate assignment of error, Thorne challenged the validity of the Ugwuadu affidavit, arguing that it did not comport with Civ.R. 56(E). Specifically, Thorne claimed that Ugwuadu's assertion that Residential had custody of the note and mortgage was not based on personal knowledge. Finding no merit to this argument, we held that Ugwuadu's statement that he had personal knowledge, combined with his employment at GMAC Mortgage, LLC (“GMAC”) ² and the nature of the facts asserted in his affidavit, “created a reasonable inference that Ugwuadu did in fact have personal knowledge that GMAC was currently holding the note and the mortgage on behalf of Residential.” Noting that Thorne “presented no evidence to refute this claim,” we concluded that his assignment of error was not well-taken. Id. at ¶ 71.

{¶ 6} Finally, Thorne challenged the trial court's dismissal, pursuant to Civ.R. 12(B)(6), of his third-party complaint against Cardinal Mortgage Services of Ohio, Inc. (“Cardinal”). The third-party complaint alleged counts of fraud, civil conspiracy, and violation of the Ohio Mortgage Broker's Act based on purported non-disclosure of documents relating to the mortgage transaction and to the payment of a yield spread premium. For the same reasons as in our rejection of Thorne's affirmative defense of fraud, we held that these claims were barred by the statute of limitations. Accordingly, finding this and the other assignments of error not well-taken, we affirmed the judgment of the trial court.

{¶ 7} Thorne I was issued on September 10, 2010. On November 10, 2010, Thorne filed a Civ.R. 60(B) motion for relief from judgment and a Civ.R. 56(G) motion for an award of attorney's fees and costs. In support of these motions, Thorne alleged the affidavits submitted by Residential in support of its motion for summary judgment were fraudulently signed by “robo-signers.” ³ Thorne attached to his motion a copy of an October 6, 2010 press release from the Ohio Attorney General's office regarding the filing of a lawsuit against GMAC. The lawsuit accuses GMAC of “filing fraudulent affidavits to mislead courts in hundreds of Ohio foreclosures.” The press release detailed that “[t]he fraud came to light after a GMAC employee, Jefferey [sic] Stephan of Sellersville, Pa., testified in a foreclosure case out of Maine that from 2006 to 2010, he signed thousands of affidavits without verifying the content.” Thorne also attached uncertified copies from the referenced Maine foreclosure case, Fed. Natl. Mtge. Assn. v. Bradbury,⁴ of (1) an unpublished September 24, 2010 order that imposed sanctions under Maine's equivalent of Civ.R. 56(G) based on GMAC's document signing practice, and (2) the defendant-mortgagor's memorandum in support of her motion for sanctions.

{¶ 8} Subsequently, and without a hearing, the trial court denied both of Thorne's motions. As it relates to the Civ.R. 60(B) motion, the trial court found that Thorne failed to demonstrate a meritorious defense because he did not suggest or establish that he was not in default of the mortgage, and because his claims of fraud were barred by the doctrine of issue preclusion. Further, the trial court found that Thorne presented no evidence in the form of operative facts to establish that the affidavits were fraudulent in this case.

{¶ 9} Thorne now appeals from this judgment, raising the following four assignments of error:

1. THE TRIAL COURT ABUSED ITS DISCRETION IN OVERRULING THORNE'S MOTION FOR RELIEF FROM JUDGMENT WITHOUT CONDUCTING AN EVIDENTIARY HEARING.

2. THE TRIAL COURT ERRED IN OVERRULING THORNE'S MOTION FOR RELIEF FROM JUDGMENT AS TO BOTH RESIDENTIAL AND CARDINAL MORTGAGE AS THERE WAS AMPLE EVIDENCE THE AFFIDAVITS OF ROBO–SIGNERS UGWUADU AND STEPHAN SUBMITTED BY RESIDENTIAL IN SUPPORT OF SUMMARY JUDGMENT WERE FRAUDULENT, THORNE'S MOTION WAS TIMELY AND HE HAD A MERITORIOUS CLAIM OR DEFENSE.

3. THE TRAIL [sic] COURT ERRED IN APPLYING RES JUDICATA AND COLLATERAL ESTOPPEL AS A BAR TO THORNE'S MOTION TO VACATE JUDGMENT.

4. THE TRAIL [sic] COURT ERRED IN FINDING THAT THORNE HAD FAILED TO SUBMIT COMPETENT EVIDENCE THAT THE AFFIDAVITS OF ROBO–SIGNERS UGWUADU AND STEPHAN WERE SUBMITTED IN BAD FAITH AND IN OVERRULING THORNE'S MOTION FOR SANCTIONS UNDER OHIO R. CIV. P. RULE 56(G).

II. Analysis

A. Motion for Relief from Judgment

{¶ 10} Thorne's first three assignments of error pertain to his motion for relief from judgment. For ease of discussion, they will be addressed out of order.

1. Collateral Estoppel does not Apply

{¶ 11} In his third assignment, Thorne argues that the trial court erred in applying res judicata and collateral estoppel as a bar to his motion to vacate judgment.

In Ohio, “[t]he doctrine of res judicata encompasses the two related concepts of claim preclusion, also known as res judicata or estoppel by judgment, and issue preclusion, also known as collateral estoppel.” “Claim preclusion prevents subsequent actions, by the same parties or their privies, based upon any claim arising out of a transaction that was the subject matter of a previous action,” whereas issue preclusion, or collateral estoppel, “precludes the relitigation, in a second action, of an issue that had been actually and necessarily litigated and determined in a prior action that was based on a different cause of action.” (Internal citations omitted.) State ex rel. Nickoli v. Erie MetroParks, 124 Ohio St.3d 449, 2010-Ohio-606, 923 N.E.2d 588, ¶ 21.

{¶ 12} Here, the trial court found that Thorne's fraud claims, both those arising from the submission of the allegedly fraudulent affidavits, and those arising from the activities of Residential and Cardinal (i.e., allegedly failing to provide the appropriate disclosures and inform appellant of the yield spread premium) were barred by the doctrine of collateral estoppel since those issues had been actually and necessarily decided.

{¶ 13} As an initial matter, we must clarify the multiple claims and assertions of fraud in these proceedings. As an affirmative defense to the foreclosure action, Thorne asserted fraud on the part of Residential in the form of concealing material terms and costs of the loan, which he claimed rendered the loan unenforceable. Similarly, Thorne initiated a third-party complaint against Cardinal based on fraud in the form of failing to disclose the true costs of the loan, in particular the yield spread premium. In response to these claims, Residential and Cardinal argued that the assertion of fraud was barred by the applicable four-year statute of limitations. Based on the mortgage documents attached to the Ugwuadu and Stephan affidavits, the trial court found that Thorne should have been aware of the alleged fraud as of 2003. Thus, because the foreclosure proceedings did not commence until 2008, the trial court found, and this court affirmed, that the fraud claims were outside of the statute of limitations.

{¶ 14} In contrast, as grounds for Civ.R. 60(B) relief, Thorne now asserts fraud in the submission of the Ugwuadu and Stephan affidavits based on the revelation that GMAC's policy and practice was to have employees sign thousands of affidavits without knowledge or verification of their contents. It is this assertion of fraud, and not the assertion relating to his affirmative defense and third-party complaint, that we must analyze for application of res judicata principles. The question we must answer is whether collateral estoppel prevents Thorne from arguing in his Civ.R. 60(B) motion that the Ugwuadu and Stephan affidavits are fraudulent. We hold that it does not.

{¶ 15} The trial court found that in our decision in Thorne I we “determined that no evidence supported fraud...