CadleRock Joint Venture, L.P. v. Burnley

[Cite as CadleRock Joint Venture, L.P. v. Burnley, 2016-Ohio-147.]

IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
HURON COUNTY

Cadlerock Joint Venture, L.P. Court of Appeals No. H-15-001

Appellee Trial Court No. CVH 2013 0914

v.

Clifford Burnley DECISION AND JUDGMENT

Appellant Decided: January 15, 2016

*****

Clifford Burnley, pro se.

*****

JENSEN, P.J.

{¶ 1} This is an appeal from a judgment of the Huron County Court of Common

Pleas which granted summary judgment to plaintiff-appellee CadleRock Joint Venture,

LP, in its action against defendant-appellant Clifford Burnley. For the reasons that

follow, we affirm the decision of the trial court.
 {¶ 2} In 2006, Clifford Burnley executed a promissory note in the sum of $46,700,

secured by a second mortgage1 on property in Douglasville, Georgia. Within a short

period of time, Burnley defaulted on the note. The first mortgage holder caused the

property to be sold at foreclosure on May 6, 2008, after which title to the property was

transferred to the first mortgage holder.

{¶ 3} On November 15, 2013, CadleRock Joint Venture, L.P. (“CadleRock”), filed

a complaint in the court below alleging that it is entitled to enforce the note under R.C.

1303.31. Attached to the complaint as Exhibit A is a copy of a note dated March 3, 2006

between the original lender, SouthStar Funding, LLC (“SouthStar”) and Burnley.

Affixed to the note is a copy of an allonge which transferred the note from SouthStar to

GMAC Mortgage, LLC (“GMAC”). Attached to the complaint as Exhibit B is a copy of

a Bill of Sale executed by GMAC and referencing an Unsecured Mortgage Note Sale

Agreement in which GMAC sells, assigns, and conveys to CadleRock “all right, title and

interest” in 1599 unsecured mortgage notes “described in Exhibit A.” However, no

exhibits were attached to the Bill of Sale.

{¶ 4} Burnley, pro se, filed an answer acknowledging the existence of a 2006

promissory note payable to SouthStar. However, he claimed “no knowledge as to

whether the Note presented was a true and exact copy.”

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No mortgage documents are found in the file. However, the note attached to the
complaint bears the following notation at its foot: “GEORGIA - SECOND MORTGAGE
- 1/80 – FNMA/FHLMC UNIFORM INSTRUMENT.” The note also provides, at
paragraph 5, “In addition to the protections given to the Note Holder under this Note, a
Security Deed, dated March 03, 2006, protects the Note Holder from possible losses
which might result if I do not keep the promises which I make in this Note.”

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 {¶ 5} Burnley filed six motions to dismiss from December 18, 2013, through

January 30, 2014, asserting and reasserting numerous arguments. He also filed numerous

affirmative defenses. Sometime thereafter, Burnley retained counsel. On April 17, 2017,

counsel filed a “Supplemental Motion to Dismiss” asserting lack of subject matter

jurisdiction and failure to state a claim upon which relief can be granted.

{¶ 6} On May 9, 2014, CadleRock moved and was granted authority to file an

amended complaint. In count one of its amended complaint, CadleRock once again

claimed that it is a person entitled to enforce the note under R.C. 1303.31. CadleRock

asserted that SouthStar endorsed the note to GMAC by virtue of the allonge affixed to the

note and that GMAC then sold, transferred and assigned the note to CadleRock.

CadleRock further asserted that GMAC endorsed the note to it by virtue of a second

allonge affixed to the note. However, the note attached to the amended complaint as

exhibit A does not include the allonge attached to the original complaint from SouthStar

to GMAC. Rather, it includes only an allonge from GMAC, through its limited power of

attorney, to CadleRock.

{¶ 7} On May 15, 2014, CadleRock filed a motion for summary judgment based

solely on the fact that Burnley did not reply to requests for admissions it served on

Burney before the amended complaint was filed. No allonges were affixed to the note

attached to and incorporated in the requests for admissions.

{¶ 8} On June 5, 2014, Burnley filed a motion to dismiss citing Fed. Home Loan

Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, at ¶

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40, for the proposition that a “lack of standing at the commencement of a foreclosure

action requires dismissal of the complaint.” Burnley argued that because the note

attached to the amended complaint did not include an allonge transferring the note from

SouthStar to GMAC, the break in the chain of title defeated any claim that CadleRock

had standing to maintain the proceedings. In response, CadleRock acknowledged that it

inadvertently failed to include the first of two allonges, but argued that it should be

allowed to correct the error by supplement.

{¶ 9} On August 14, 2014, Burnley filed a response to the motion for summary

judgment citing Schwartzwald for the proposition that “standing is to be determined as of

the commencement of suit.” Id. at ¶ 24. He argued that CadleRock’s motion for

summary judgment concerned unanswered requests for admission referencing a version

of the note attached to the original complaint and that said note failed to demonstrate

CadleRock has a “legal right to claim an interest in or to otherwise enforce” the note. As

such, Burnley asserted, any admission made to the note attached to the original complaint

was moot because a different version of the note was filed with the amended complaint.

{¶ 10} A hearing on CadleRock’s motion for summary judgment was held on

August 27, 2014. Pamela Hudy, an account officer at CadleRock, testified that

CadleRock purchased a pool of loans on December 2, 2008. She further testified that

CadleRock was in possession of the original note – including two allonges – on the day

the complaint was filed. After the hearing concluded, the trial court issued an order

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requiring CadleRock file a reply to Burnley’s response in opposition and requiring

Burnley to file a response to CadleRock’s reply.

{¶ 11} On December 22, 2014, upon consideration of CadleRock’s motion and

supporting memorandum, the pleadings, affidavits, Burnley’s response in opposition,

CadleRock’s reply, Burnley’s second response in opposition, and Pamela Hudy’s

testimony, the trial court granted judgment in favor of CadleRock finding that “at all

relevant and necessary times, [CadleRock] possessed the necessary standing as a holder

of the note.”

{¶ 12} Appellant, pro se, now challenges that judgment through the following

assignments of error:

I. The trial court erred in granting the Appellee a Summary

Judgment without the requisite evidentiary evidence to support it. The

Appellee failed to demonstrate a valid, unbroken chain of assignment in the

original complaint or the amended complaint. There was no evidentiary

quality evidence presented to establish principal and interest due.

II. The trial court erred in denying the Appellant’s Supplemental

Motion to Dismiss on the Original Complaint for lack of standing. This

motion was filed on 4/17/2014. The Appellant failed to establish a valid

chain of assignment in the original complaint. The Bill of Sale did not

mention a specific account. The original complaint stated the alleged note

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 was “assigned, transferred” and not negotiated as required by law

(complaint at ¶5).

III. The trial court erred in denying the Appellant’s Motion to

Dismiss on the Amended Complaint for lack of standing. This motion was

filed on 6/5/2014. The Appellant failed to establish a valid chain of

assignment. The allonge Cadlerock Inc. indorsed to the Appellee was

improper as no evidence was presented in the amended complaint to

demonstrate the Cadlerock Inc. had any legitimate interest in the note.

There was also no explanation as to how Homecoming Financial and their

alleged Power of Attorney had any relevance to the transaction involving

the Appellant’s alleged note.

IV. The trial court erred in allowing erroneous admissions filed by

the Appellee to be entered into evidence (Plaintiff/Appellees’ Motion for

Summary Judgment Exhibit A). These admissions failed to include a copy

of the note and deed as stated in the Appellee’s Discovery instructions and

in admission requests numbered 11 and 12. Additionally, these admission

requests contained questions that effectively denied the Appellant his right

to due process (Discovery filed as exhibit A in Appellees’ Motion for

Summary Judgment). These admission requests were allegedly mailed

prior to the filing of the Amended complaint, but then used as evidence

after the Appellee filed the amended complaint. The alleged documentation

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 with the note had changed substantially with the Amended complaint.

These admission requests also asked questions for which a response had

already been filed in the original complaint as well as additional affirmative

defenses filed on 1/3/2014, 1/23/2014, and 1/28/2014.

First Assignment of Error

{¶ 13} In his first assignment of error, Burnley argues the trial court erred in

granting summary judgment to CadleRock. In support of this argument, Burnley first

asserts that CadleRock “failed to demonstrate a valid, unbroken chain of assignment” of

the note. Second, Burnley asserts there was insufficient evidence to establish principal

and interest due.

{¶ 14} Appellate review of a trial court’s grant of summary judgment is de novo.

Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996).

Accordingly, we review the trial court’s grant of summary judgment independently and

without deference to the trial court’s determination. Brown v. Scioto Cty. Bd. of

Commrs., 87 Ohio App.3d 704, 711, 622 N.E.2d 1153 (4th Dist.1993). Summary

judgment will be granted only when there remains no genuine issue of material fact and,

when construing the evidence most strongly in favor of the nonmoving party, reasonable

minds can only conclude that the moving party is entitled to judgment as a matter of law.

Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 66, 375 N.E.2d 46 (1978).

The burden of showing that no genuine issue of material fact exists falls upon the party

who moves for summary judgment. Dresher v. Burt, 75 Ohio St.3d 280, 294, 662 N.E.2d

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264 (1996). However, once the movant supports his or her motion with appropriate

evidentiary materials, the nonmoving party “may not rest upon the mere allegations or

denials of the party’s pleadings, but the party’s response, by affidavit or as otherwise

provided in this rule, must set forth specific facts showing that there is a genuine issue for

trial.” Civ.R. 56(E).

{¶ 15} The first issue before us under this assignment of error is whether

Cadlerock is, in fact, a person entitled to enforce the promissory note. Under the Ohio

Revised Code, a “person entitled to enforce” an instrument means any of the following:

“(1) The holder of the instrument; (2) A nonholder in possession of the instrument who

has the rights of a holder; [or] (3) A person not in possession of the instrument who is

entitled to enforce the instrument pursuant to Section 1303.38 or division (D) of section

1303.58 of the Revised Code.” R.C. 1303.31(A).

{¶ 16} CadleRock asserts that the evidentiary materials attached to its September

17, 2014 reply to Burnley’s memorandum in opposition demonstrate there are no genuine

issues of material fact regarding its status as “holder” of the note. We disagree.

{¶ 17} With respect to a negotiable instrument, a “holder” means, “[t]he person in

possession of a negotiable instrument that is payable either to bearer or to an identified

person that is the person in possession.” R.C. 1301.201(B)(21)(a). “Determining

whether a plaintiff-creditor is a holder requires physical examination not only of the face

of the note but also of any indorsements.” Bank of Am., N.A. v. Pasqualone, 10th Dist.

Franklin No. 13AP-87, 2013-Ohio-5795, ¶ 32.

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 {¶ 18} The note attached to CadleRock’s September 17, 2014 reply to defendant’s

memorandum in opposition to summary judgment as Exhibit A-1 includes two allonges.

The undated allonge wherein SouthStar endorses the note to GMAC, and an allonge

dated July 31, 2009, which purports to endorse the note from GMAC to CadleRock. The

July 31, 2009 allonge provides, in relevant part, as follows:

Reference is made to that certain Note, dated March 3, 2006, from

Clifford Burnley to SouthStar Funding, LLC in the original principal

amount of $46.700.00. It is intended that this Allonge be attached to the

Note.

Pay to the order of CADLEROCK JOINT VENTURE, L.P., without

recourse.

Executed this 31st day of July, 2009, but effective as of November

19, 2008.

GMAC MORTGAGE, LLC

BY: HOMECOMINGS FINANCIAL, LLC, BY CADLEROCK

JOINT VENTURE, L.P., BY CADLEROCK, INC., ITS GENERAL

PARTNER, ITS ATTONEY IN FACT, BY LIMITED POWER OF

ATTORNEY DATED JANUARY 12, 2009, BUT EFFECTIVE AS OF

NOVEMBER 19, 2008 AND RECORDED ON JANUARY 21, 2009

WITH THE TRUMBULL COUNTY RECORDER, OHIO UNDER

INSTRUMENT NO. 200901210001182.

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The January 12, 2009 limited power of attorney states: “Homecomings Financial, LLC,

for itself and for those entities listed on Schedule A (collectively “Assignor”) hereby

appoints CADLEROCK JOINT VENTURE, L. P. * * * as its attorney- in-fact to act in

the name, place and stead of the Assignor * * *.” In turn, Schedule A lists 22 entities

including GMAC.

{¶ 19} “A power of attorney is a written instrument authorizing an agent to

perform specific acts on behalf of its principal.” Testa v. Roberts, 44 Ohio App.3d 161,

164, 542 N.E.2d 654 (6th Dist.1988) (citation omitted). There is insufficient

documentation admitted in this matter to demonstrate whether or how Homecomings

Financial, LLC, had the authority to appoint CadleRock as attorney-in-fact for GMAC.

Therefore, the limited power of attorney is invalid and the July 31, 2009 allonge is

ineffective as a negotiation. Thus, the trial court erred when it held CadleRock was a

holder of the note. This error is harmless, however, as we find merit in CadleRock’s

alternate argument that it has standing to sue as a non-holder in possession who has the

right to enforce the Note.

{¶ 20} In LaSalle Bank Natl. Assn. v. Brown, 2014-Ohio-3261, 17 N.E.3d 81 (2d

Dist.), the Second District Court of Appeals stated, “a person need not be a ‘holder’ of

the instrument in order to be entitled to enforce it. Instead, a person can be a non-holder

in possession of the instrument who has the rights of a holder.” Id. at ¶ 36. The Second

District explained:

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 [A] person becomes a nonholder in possession if the physical

delivery of the note to that person constitutes a “transfer” but not a

“negotiation.” * * * Under the UCC, a “transfer” of a negotiable instrument

“vests in the transferee any right of the transferor to enforce the

instrument.” UCC § 3-203(b). As a result, if a holder transfers the note to

another person by a process not involving an Article 3 negotiation * * * that

other person (the transferee) obtains from the holder the right to enforce the

note even if no negotiation takes place and, thus, the transferee does not

become an Article 3 “holder.” Brown at ¶ 36, quoting In re Veal, 450 B.R.

897, 911 (9th Dist.Ariz. BAP 2011).

{¶ 21} In the case before us, CadleRock asserts that it had possession of the note

on the day the complaint was filed. It further asserts that it obtained the right to enforce

the note by transfer pursuant to the November 19, 2008 unsecured mortgage note sale

agreement between GMAC and CadleRock. Section 3.1 of the loan sale agreement

provides:

Transfer of Unsecured Mortgage Notes. The Unsecured Mortgage

Notes shall be transferred and assigned pursuant to the Bill of Sale * * *

which Bill of Sale shall sell, transfer, assign, set-over, quitclaim and convey

to Buyer all right, title and interest of Owner in and to each of the

Unsecured Mortgage Notes Schedule attached hereto * * *.

In turn, the December 23, 2015 bill of sale provides:

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 FOR VALUE RECEIVED and pursuant to the terms and conditions

of that certain Unsecured Mortgage Note Sale Agreement dated November

19, 2008, made by and between [GMAC] and [CadleRock], [GMAC] does

hereby sell, assign and convey to [CadleRock], its successors and assigns,

all right, title and interest of [GMAC] in and to those certain Unsecured

Mortgage Notes described in Exhibit A delivered and made a part hereof

for all purposes, totaling 1599 Unsecured Mortgage Notes with an

aggregate principal balance of $90,647,991.31.

The bill of sale’s exhibit A includes the property address referenced in the note. Viewing

this evidence in a light most favorable to the non-moving party, reasonable minds can

only conclude that while not a “holder,” CadleRock is a nonholder in possession of the

instrument who has the rights of a holder. See R.C. 1303.31(A)(2). Burnley’s first

argument under his first assignment of error is not well taken.

{¶ 22} In his second argument under his first assignment of error, Burnley asserts

that there was insufficient evidence to establish principal and interest due. We disagree.

{¶ 23} As stated above, the party moving for summary judgment “bears the initial

burden of informing the trial court of the basis for the motion, and of identifying those

portions of the record that demonstrate the absence of a genuine issue of material fact on

the essential element(s) of the nonmoving party’s claim.” Dresher, 75 Ohio St.3d at 294,

662 N.E.2d 264. “[T]he nonmoving party then has a reciprocal burden outline in Civ.R.

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56(E) to set forth specific facts showing that there is a genuine issue for trial and, if the

nomovant does not so respond, summary judgment, if appropriate, shall be entered

against the nonmoving party.” Id.

{¶ 24} CadleRock, in its September 17, 2014 reply brief, presented the affidavit of

Pam Hurdy, an account officer. In her affidavit, Ms. Hurdy stated, “[a]s of August 27,

2014, the total amount which is due and owing under the Note is $89,948.18 which

consists of principal in the amount of $46, 570.26, unpaid interest in the amount of

$41,544.80 and late fees in the amount of $1,833.12.” Burnley presented no argument or

evidence contrary to Ms. Hurdy’s affidavit. Thus, when construing the evidence most

strongly in favor of the nonmoving party, reasonable minds can only conclude that the

moving party is entitled to judgment as a matter of law. Accordingly, Burnley’s second

argument under his first assignment of error is not well taken.

Second and Third Assignments of Error

{¶ 25} In his second and third assignments of error, Burnley cites Schwartzwald,

134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, for the proposition that the trial

court erred in denying his motions to dismiss because both the complaint and the

amended complaint failed to establish CadleRock had an interest in the promissory note

sufficient to invoke the jurisdiction of the trial court. We find no merit in these

arguments.

{¶ 26} Recently, in Wells Fargo Bank, N.A. v. Horn, 142 Ohio St.3d 416, 2015-

Ohio-1484, 31 N.E.3d 637, the Supreme Court of Ohio determined that a plaintiff in a

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foreclosure complaint need only “set forth a short and plain statement” of the claim

showing it is the real party in interest and entitled to a decree of foreclosure. Id. at ¶ 18.

The Horn Court explained that although “the plaintiff in a foreclosure action must have

standing at the time suit is commenced, proof of standing may be submitted subsequent

to the filing of the complaint.” Id. at syllabus.

{¶ 27} We believe the decision in Horn, a foreclosure action, also applies to

plaintiffs in actions seeking judgment on promissory notes. To that end, in order to

defeat the motions to dismiss, CadleRock was required only to set forth a short and plain

statement showing it is the real party in interest and entitled to enforce the note. Here,

CadleRock met the short and plain statement requirement when it alleged that it was a

person entitled to enforce the note pursuant to R.C. 1303.31. Consequently, Burnley’s

second and third assignments of error are not well taken.

Fourth Assignment of Error

{¶ 28} In his fourth assignment of error, Burnley contends the trial court erred by

allowing “erroneous admissions” to be entered into evidence in support of CadleRock’s

motion for summary judgment. Specifically, Burnley asserts that although the

unanswered requests for admissions referenced an “attached note,” no note was actually

attached to the requests for admissions.

{¶ 29} We agree that it would have been erroneous for the trial court to rely on

unanswered requests for admissions referencing and relying upon the opposing party’s

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responses to an “attached note” when, arguably, either no copy of the note or an

incomplete copy of the note was attached to the requests for admissions.

{¶ 30} However, we find no evidence that the trial court relied upon the

unanswered requests for admissions when it found in favor of CadleRock. Because the

trial court held an evidentiary hearing on the motion for summary judgment and then

further ordered the parties to brief the matter post-hearing, we conclude that the trial

court did not rely on the unanswered requests for admissions in granting CadleRock’s

motion for summary judgment. For this reason, Burnley’s fourth assignment of error is

not well taken.

Conclusion

{¶ 31} For the reasons set forth above, the judgment of the Huron County Court of

Common Pleas is affirmed. It is ordered that appellant pay the court costs of this appeal

pursuant to App.R. 24.

Judgment affirmed.

A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.

Arlene Singer, J. _______________________________
JUDGE
Thomas J. Osowik, J.
_______________________________
James D. Jensen, P.J. JUDGE
CONCUR.
_______________________________
JUDGE

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 This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.sconet.state.oh.us/rod/newpdf/?source=6.

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