^3•.. ,.

IN THE SUPREME COURT OF OHIO

U.S. BANK, N.A., as Trustee for RASC` * CASE NO. 2013-10782006-EMX7, ^

^Plaintiff-Appellee, ^

^^^^^^^^^

On Appeal for the Wood County Courtof Appeals, Sixth Appellate Districtvs.

BRIAN S. ARMSTRONG, et al.,

Defendants-Appellants.

Court of Appeals Case No. WD-12-031

RESPONSE OF PLAINTIFF-APPELLEEU.S. BANK, N,A., AS TRUSTEE FOR RASC 2006-EMX7TO MEMORANDUM IN SUPPORT OF JURISDICTION

Scott A. King (#0037582) (COUNSEL OFRECORD)Nicholas W. Myles (#0083973)THOMPSON HINE LLPAustin Landing I10050 Innovation DriveSuite 400Miamisburg, Ohio 45342Telephone: (937) 443-6560Facsimile: (937) 443-6830Scott.KingCt^'Thompsonhine.comNicholas.Myles(4-Thompsonhine.com

Counsel for Plaintiff Appcllee, C.S Bank,National flssociation, as 7rustee for RASC2006-E-,VIX7

George C. Rogers (#0014107)6884 State Rt. 110Napoleon, Ohio 43545Telephone: (419) 748-8041georgerogers4321 !a^ginail.com

Counsel fnr Defendunt-Appellants Brian andAmy Ai-ntstrong

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TABLE OF CONTENTS

TABLE OF CONTENTS ...................................................... . ................................................ ii

RESPONSE TO EXPLANATION OF WHY THIS CASE IS OF PUBLICOR GREAT GENERAL INTEREST ....... .......... .................. ............ ..............,..........................1

STATEMENT OF THE CASE ........................................................... ......................................... 2

STATEMENT OF THE FACTS .................................................................................................. 2

RESPONSE TO APPELLANTS' PROPOSITIONS OF LAW. ................ ............................... 7

A. R.C. 1329.10(B) is not at isstie........ .....................,.........,.. 7

B. The Mortgage Assignment was irrelevant. ............................................................. $

CONCLUSION . ......... .. ........ ......... ... . ...... . . . ....... .. ......... ...., . ...........................10

CERTIFICATE OF SERVICE ........................ ..................... ................ ..................................... 12

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I2ESPONSE TO EXPLANATION OF WHY THIS CASE ISOF PUBLIC OR GREAT GENERAL INTEREST

Defendants Brian and Amy Armstrong (the "Armstrongs") are seeking to have this Court

review a run of the mill summary judgment in a foreclosure action. Although their

Memorandum tries to present the issues in a way designed to appear novel and important, the

facts demonstrate a different reality.

While the Memorandum asserts that the Court needs to determine whether the National

Bank Act ("NBA") or Office of the Comptroller of the Currency ("OCC") regulations preempt

the requirement of R.C. 1329,10(B) to register a fictitious name before a bank files a legal action,

that issue has nothing to do with this case: U.S. Bank, N.A. ("U.S. Bank"), is the plaintiff in this

case and did not bring the foreclosure action in a fictitious name. While U.S. Bank's servicer

sent the Armstrongs a notice of default using a fictitious name, R.C. 1329.10(B) has nothing to

do servicing a note and mortgage, much less a notice of default.

The Memorandum's standing arguments fare no better. The Memorandum raises the

issue of whether a mortgage can be assigned by a mortgage holder in bankruptcy without the

permission of the bankruptcy trustee, but that too has nothing to do with this case. The

mortgagee in this case was Mortgage Electronic Registrations Systems ("MERS"), and MERS

has not filed for bankruptcy.

Finally, the lower courts have uniformly held that a borrower cannot challenge an

assignment of mortgage, and the evidence was undisputed that U.S. Bank was in possession of

the specifically indorsed Note at the time of filing the Complaint, and U.S. Bank authenticated

the specifically indorsed Note on summary judgment. Nothing in this case presents a question of

great general or public interest. There is no reason for the Court to accept jurisdiction.

STATEMENT OF THE CASE

On July 8, 2011, U.S. Bank as Trustee for RASC 2006-EMX7 ("Trust") filed this action

against the Armstrongs seeking the balance due on a Note and to foreclose a Mortgage against

113 Genson Drive, Haskins, Ohio 43525 ("Property") which secured its repayment.

After the Trial Court denied their Motion to Dismiss the Complaint, on September 21,

2011, the Armstrongs filed an Answer and CountercIaim, on November 1, 2011, an Amended

Counterclaim, and on December 2, 2011, a Second Amended Answer and Counterclaim

("SAC'"). On December 14, 2012, U.S. Bank filed a Motion to Dismiss the SAC.

On January 20, 2012, the Court dismissed the SAC and ordered the Armstrongs to file a

third Amended Answer. On Februarv 2, 2012, the Armstrongs did so,

On March 13, 2012, the Armstrongs filed a Motion for Summary Judgment. On April

20, 2012, U.S. Bank filed a Cross-Motion for Summary Judgment. On June 5, 2012, the Court

denied the Armstrongs' Motion for Summary Judgment and granted summary judgment in favor

of U.S. Bank,

On June 28, 2012, the Armstrongs filed a Notice of Appeal. On May 24, 2013, the Sixth

District Court of Appeals affirmed the 'I'rial Court's decision.

STATEMENT OF THE FACTS

On June 23, 2006, the Armstrongs executed a Note in favor of Mortgage Lenders

Network ("MLN"). MLN indorsed the Note to Emax Financial Group, LLC ("Emax"). On July

20, 2006, Emax executed an allonge, indorsing the Note to Residential Funding Corporation

("RFC"), RFC subsequently indorsed the Note to U.S. Bank.

On June 23, 2006, to secure payment of the Note, the Armstrongs executed a:Vlortgage in

favor of MERS, as nominee for MLN and its successors, The Mortgage was recorded on .lulv

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11, 2006. On April 4, 2008, MERS, as nominee i:or MLN, executed a Notice ofAssignznent of

Mortgage ("First Mortgage Assignment") to "U.S. Bank, National Association, as Trustee." On

April 14, 2008, the First Mortgage Assignment was recorded.

On December 3, 2008, the Armstrongs executed a Loan Modification with Wells Fargo

Bank, N.A. ("Wells Fargo") dba America's Servicing Company ("ASC"), as a servicer for the

Trust.

On May 9, 2011, MERS, as nominee for MLN, executed a second Notice of Assignment

of Mortgage to "U.S. Bank, National Association, as Trustee for RASC 2006-EMX7" ("Second

Mortgage Assignment"), specifying the name of the 1'rust. The Second Mortgage Assignment

was recorded on May 12, 2011.

On July 8, 2011, U.S. Bank filed the Complaint to recover the balance due on the Note

and to foreclose the Mortgage: Attached to the Complaint was a copy of the Note indorsed by

MLN to Emax, a copy of the allonge from Emax to RFC, which contained an indorsement from

RFC to U.S. Bank, the Mortgage, and the Loan Modification.

On Ttily 29, 2011, the Armstrongs filed a Motion to Dismiss, arguing that U.S. Bank did

not have standing. On September 15, 2011, the Trial Court denied the Motion to Dismiss,

holding that U.S. Bank was the proper plaintiff because it was the holder of the Note through a

specific indorsement, that the Mortgage followed the Note, and that Wells Fargo, as an agent of

U.S. Bank, was permitted to modify the loan,

On September 21, 2011, the Armstrongs filed an Answer and Counterclaim, on

November 1, 2011, an Amended Answer and Counterclaim, and on December 2, 2011, the

Armstrongs filed the SAC. The SAC asserted that U.S. Bank lacked standing because the Loan

Modification designated Wells Fargo as the lender, the Trust did not make a filing with the

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Secretary of State under R.C. Chapter 1747, only the certificate holders of a REMIC trust are the

real parties in interest, and the indorsement on the Note tvas not authenticated or countersigned

as (supposedly) required by R.C. 1701.67. The SAC further alleged that the Mortgage

Assignments were invalid because the persons who executed them were not properly appointed

as officers of MERS and because the bankruptcy trustee for MLN did not authorize them to

assign the Mortgage, that the Armstrongs were not provided with a notice of default, and that

because of their own bankruptcy, the. Armstrongs were not personally liable on the Note. The

SAC also sought a declaratory judgment that the Armstrongs' defenses were viable, On

December 14, 2012, U.S. Bank filed a Motion to Dismiss the SAC.

On January 19, 2012, the Trial Court dismissed the SAC, holding that the Armstrongs'

"claims" were in reality nothing but a series of affirmative defenses, and that a counterclaim

seeking a declaratory judgment as to the validity of affirmative defenses was improper. The

Trial Court granted the Armstrongs leave to file an amended answer to use the allegations of the

Counterclaim as affirmative defenses. On February 2, 2012, the Armstrongs filed the Third

Arnended Answer.

On March 13, 2012, the Armstrongs filed a motion for summary judgment, arguing that

U.S. Bank was without standing to enforce the Note because the Loan Modification altered the

Note and identified Wells Fargo as the lender, that both Wells Fargo and the Trust failed to

register with the Ohio Secretary of State, and that the Mortgage Assignments were invalid

because they were made by MERS subsequent to MLN's bankruptcy and without the bankruptcy

trustee's a.pproval, and were executed by an individual withotit proper authority.

On April 20, 2012, U.S. Bank filed a memorandum in opposition to the Armstrongs'

motion for summary judgment and a cross-motion for summary judgment. The U.S. Bank

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Nlotion for Summary Judgment demonstrated that U.S. Bank is the party entitled to enforce the

Note and foreclose the Mortgage because it held the Note through a specific indorsement. The

Motion also explained that Wells Fargo was the servicing agent for U.S. Bank and had authority

to execute the Loan Modification, and that the Loan Modification did not alter U.S. Bank's right

to enforce the Note. The U.S. Bank Motion also showed the Note was transferred by MLN prior

to its bankruptcy, that the Armstrongs lacked standing to challenge the Mortgage Assignments,

and that any deficiency in the Mortgage Assignments is irrelevant because the negotiation of the

Note to U.S. Bank operated as an equitable assignment of the Mor-tgage. The Motion explained

that whether Wells Fargo registered with the Ohio Secretary of State is irrelevant as Wells Fargo

is not a party to this case and that U.S. Bank need not register with the Ohio Secretary of State

because it is a national bank.

Attached to the U.S. Bank Motion for Summary Judgment was the affidavit of Megan

Thompson ("`I'hompson Aff."), authenticating the Note, the allonge to the Note, Mortgage,

Mortgage Assignments, Loan Modification, Notice of Default and Acceleration sent to the

Armstrongs, and payment history.

On May 30, 2012, the Court denied the Armstrongs' Motion for Summary Judgment and

entered summary judgment in favor of U.S. Bank on the Note and Mortgage. The Court noted

that MLN indorsed the Note to F;max, and that 1;max indorsed the Note to RFC on July 20, 2006,

prior to MLN's bankruptcy. The Court also found that the Armstrongs were without standing to

challenge the Mortgage Assignments, and that in any event the evidence submitted by the

Armstrongs to challenge them was inadequate.

The Court held that the plaintiff in this case was U.S. Bank, that as a national bank, U.S.

Bank did not have to register with the Ohio Secretary of State, and that the Thompson Aff.

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established that there is no genuine issue of material facts as to the Note and Mortgage or the

balance due. On June 12, 2012, the Court entered judgment on the Note and a decree in

foreclosure.

The Sixth District Court of Appeals affirmed. US. Bank v. Armstrong, 6th Dist. No.

2011CV05$0, 2013-Ohio-2130. The Sixth District held that U.S. Bank demonstrated standing at

the ti.meof filing the Complaint pursuant to the requirements ofFed. Home Loajz Mortg. C'orp. u.

Sclrwartztiiiald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, that U.S. Bank

established in its Motion for Summary Judgment that Wells Fargo was the servicer for U.S. Bank

and had authority to enter into the Loan Modification on behalf of U.S. Bank, that the plaintiff in

this case was U.S. Bank, and that as a national bank, U,S. Bank was not required to register with

the Ohio Secretary of State. Id., at 14-15.

The Sixth District also found that the Armstrongs were without standing to challenge the

Mortgage Assignments to U.S. Bank, and, in any event, any defects in the Mortgage

Assignments were irrelevant because the negotiation of the Note to U.S. Bank automatically

transferred the Mortgage and gave U.S. Bank standing. Id., at 1: 16.

Appellants' Proposition of Law No. I

R.C. 1329.10(B), the requirement of a person doing business in Ohio under atrade name or fictitious name to file with the Secretary of State, as a conditionprecedent to filing a cause of action in Ohio courts, is not preempted by the NBAor OCC regulations adopted pursuant to the NBA.

Appellants' Proposition of Law No. II

The standard form Multi-state Balloon Note (Adjustable Rate) paragraph 7(C)Notiec of Default, requires the noteholder to send a 30 day advance written noticeof acceleration due to default. A notice sent in an unfiled fictitious name fails toqualify as the required notice.

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Anpellants' Proposition of Law No. III

When the recorded mortgage holder files for bankruptcy, the nominee of suchmortgage holder no longer has authority to assign such mortgage without theconsent of the Trustee appointed by the I3ankruptcy Court.

RESPONSE TO APPELLANTS' PROPOSITIONS OF LAW

Putting aside their substance, none of the Propositions of Law proffered by the

Memorandum affect the outcome of this case. Rather, this appeal is merely the Arznstrongs'

attempt to have this Court correct what the Armstrongs asserted were errors made by the Trial

Court and a unanimous panel of the Sixth District. That is not the function of this Court.

Brzughman v. State Farm 1Lfiut: Auto. Ins. Co., 88 Ohio St.3d 480, 492, 727 N.E.2d 1265 (2000)

(Cook, J. concurring) ("According to Section 2, Article IV of the Ohio Constitution, this court

sits to settle the law, not to settle cases"), Even if the propositions were correct (and as discussed

below, they are not), there is no reason for this Court to accept jurisdiction.

A. R.C. 1329.__ 1_0^__I3^ is not at issue.

The Armstrongs' First Proposition of Law argues that Wells Fargo, doing business as

"America's Servicing Company," was required by R.C. 1329.1O(B) to register that fictitious

name with the Secretary of State prior to filing this action, that R.C. 1329.1 Q(B) is not preempted

by the NBA or OCC regulations, and that, because the ietitious name is not registered, the

action should have been dismissed. The Second Proposition of Law contends that the notice of

default provided to the Armstrongs was faulty because it was sent under the unregistered

fictitiousraame of "America's Servicing Company." Neither has merit.

R.C. 1329.10(B) provides: "No person doing business under a trade name or fictitious

name shall commence or maintain an action in the trade name or f^ctitiUtis name in any court in

this state or on account of any contracts made or transactions had in the trade name or fictitious

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name until it has first complied with section 1329.01 of the Revised Code." R.C. 1329.01 in turn

provides for the registration of a trade or fictitious name with the Secretary of State. See

Buckeye Foods v. Cuyahoga County Bd of Revision, 78 Ohio St.3d 459, 461, 678 N.E.2d 917

(1997),

But in this case U.S. Bank - not Wells Fargo - filed the Complaint. Whether America's

Servicing Company is an unregistered fictitious name of Wells Fargo is irrelevant.

The Second Proposition of Law fares no better. First, it is substantively incorrect: R.C.

1329.10(B) only forbids legal actions brought under an unt•egistered fictitious name, and does

speak to notices of default or their efficacy. Were there any question as to whether the statute

applied, the definition of "legal action" ends it, as a "legaI action" is a "civil or criminal judicial

proceeding," Terry v, Wright, 6th Dist. No. OT-04-037, 2005-Ohio-2942,Ji!,( 23-24.

Second, and in any event, the Note requires the "Note Holder" to send a written notice of

default, as servicer for U.S. Bank, Wells Fargo sent the notice, and there is no dispute that it

complied with the Mortgage.

Finally, as both lower courts unaniinously held, US. Bank is a national bank and the law

does not require a national bank to register with any state to make or collect on loans. Charter

One Bank v. Tutin, 8th Dist. No. 8808 1, 2007-Ohio-999, !?J( 16-17; Citibank, NA v. Eckrneyer,

1 lth Dist. No. 2008-P-0069, 2009-Ohio-2435, 1i39.

Neither the First and Second Propositions of Law have any effect on the outcome of this

case. The Court should not take jurisdiction.

B. 'Fhe Mortgage Assignment was irrelevant,

The Third Proposition of Law asserts that a mortgage assignment executed by a party in

bankruptcy without authority of the bankruptcy trustee is invalid. The threshold problem with

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this theory is that it once again has no bearing on the outcome of this case. The mortgagee in

this case was MERS, and MERS has not filedfor bankruptcy. This Proposition of Law is not

pertinent to this case.

The second problem is that as applied to this case, the Proposition simply ignores more

than a century of Ohio law. For more than 100 years, Ohio courts have held that the right to

enforce a mortgage is based on being the person Entit}edto enforce the note whose payment

which it secures, regardless of whether there is a separate assignnient of the mortgage. ^.%^, aS'.

Bank N.A. v. Mcrr°cino, 181 Ohio App.3d 328, 336, 2009-Ohio-I 178, 908 N.E.2d 1032 (7th

Dist.); CitiMortgage, Inc. v. Patter^san, 8th Dist. No. 98360, 2012-Ohio,5894,21-22.

This Court's 130 year-old decision in Kernohan v. A!fanss, 53 Ohio St. 118, 41 N.E. 258

(1895), is an excellent illustration. In Kernohan, Martin executed notes and a mortgage in favor

of McGill. McGill recorded the mortgage with the recorder, Id., at 133. McGill transferred the

original mortgage to Kernohan, along with forged copies of the notes. Id. McGill then

transferred the original notes to Manss. Id. Martin died, his estate sold the land through probate,

with Kernohan (who now had the original mortgage) and Manss (who now had the original

notes) each claiming the proceeds. This Court held that Manss, as the holder of the original

notes, had the right to the proceeds, even though Kernohan had possession of the original

mortgage, and even though McGill was the recorded mortgagee. "[A] transfer of the note by the

owner so as to vest legal title in the indorsee will carry with it equitable ownership of the

mortgage." Ict., at 133.

The U,C.C. adopted these common law principles. Official Comment 9 to R.C.

1309.203. Lower courts continue to follow these rules: "Where a note secured by a mortgage is

transferred, as by endorsement, so as to vest the legal title to the note in the transferee, such

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transfer operates as an equitable assignment of the mortgage, even though the mortgage is not

assigned or delivered." Kuck v. SonvneNs, 59 Ohio Law Abs. 400, 100 N.E.2d 68, 75 (1950).

Succinctly, security follows the debt, and, as against the mortgagot•, the party entitled to enforce

the note has the right to enforce the mortgage. Marcino, 181 Ohio App.3d at 336; Cent. Morig.

Co. v. TVebster, 5th Dist. No. 2011 CA00242, 2012-Ohio-4478; La,'cclle Bank Nat'l Ass'n v.

Street, 5th Dist. No. 08CA60, 2009-Ohio-1855, ¶¶ 32-36; Bank of,'V, Y, v, Dobbs, 5th Dist. No.

2009-CA-000002, 2009-Ohio-4742, ¶¶ 29-30; Deutsche Bank Nat 'l Trust Co. v. llansen, 5th

Dist. No. 2010 CA 00001, 2011-Ohio-1223, ¶¶ 46-47.

Here, the Note, a copy of which was attached to the Complaint and to the Motion for

Summary Judgment, contained a specific indorsement to U.S. Bank. As the holder of the Note,

U.S. Bank was the party entitled to enforce the Mortgage, even if there had never been a separate

assignment of the Martgage. Marcino, 181 Ohio App.3d at 336; Manss, 53 Ohio St. 118. The

supposed invalidity of the Mortgage Assignments are just not relevant to this case.

Again, even if the Court accepted this case and adopted the Armstrongs' Third

Proposition of Law, it would have no impact on the outcome. The Court should decline

jurisdiction.

CONCLUSION

This a run of the mill foreclost.are. U.S. Bank - not Wells Fargo - is the party entitled to

enforce the Note and filed the foreclosure action, and whether Wells Fargo registered its

tictitious name with the Secretary of State is irrelevant. In any event, the law is clear that as a

national bank, U.S. Bank may make arid collect loans without registering in every state.

As the holder of the Note, U.S. Bank had standing to enforce the Note and Mortgage.

MLN's bankruptcy subsequent to its transfer of the Note had no impact on this issue.

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I'here is no issue of great or general public interest. There is no reason for this Court to

accept jurisdiction.

Respectfully Submitted,

Scott A. King (#0037582)Nicholas W. Myles (#0083973)'I'HOMPSON HINE I,LPAustin Landing I10050 Innovation DriveSuite 400Miamisburg, Ohio 45342'I'elephone: (937) 443 -6560Facsimile: (937) 443-6635Email: Scott. Kings'a^Thornpsonhine.com

Nicholas.Myles;a,ThoMsonhine.eom

Attornevs f'or Plaintiff Appellee U S. I3ank,National Association, as TNZastee f'oi° RASC200t1-ENV7

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CERTIFICATE OF SERVICE

I hereby certify that on August 2, 2013, I served a copy of the foregoing document by

ordinary U.S. Mail, postage prepaid, upon:

Mary L. Mack, Esq.Paul A. Dobson, Esq.Wood County Prosecutor's OfficeOne Courthouse SquareBowling Green, OH 43402

George C. Rogers, Esq,6884 State Rt. 110Napoleon, OH 43545

cott A. ICing

745880.?

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