U.S. Bank Trust, N.A. v. Watson

[Cite as U.S. Bank Trust, N.A. v. Watson, 2020-Ohio-3412.]

IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
PAULDING COUNTY

U.S. BANK TRUST, N.A., AS
TRUSTEE FOR LSF9 MASTER
PARTICIPATION TRUST,

PLAINTIFF-APPELLEE, CASE NO. 11-19-09

v.

PAMELA J. WATSON, AKA
PAMELA J. LAMBERT ET AL., OPINION

DEFENDANTS-APPELLANTS.

Appeal from Paulding County Common Pleas Court
Trial Court No. CI 16 167

Judgment Affirmed

Date of Decision: June 22, 2020

APPEARANCES:

George C. Rogers for Appellants

Robert C. Folland and David J. Dirisamer for Appellee
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PRESTON, J.

{¶1} Defendants-appellants, Pamela J. Watson, now known as Pamela J.

Lambert (“Pamela”), and William L. Lambert (“William”) (collectively the

“Watsons”),1 appeal the February 9, 2018 and October 9, 2019 judgments of the

Paulding County Court of Common Pleas denying their motions for summary

judgment and for sanctions against plaintiff-appellee, U.S. Bank Trust, N.A., as

trustee for LSF9 Master Participation Trust (“U.S. Bank”), and granting U.S. Bank’s

motion for summary judgment. For the reasons that follow, we affirm.

{¶2} This appeal, the third appeal brought by the Watsons in relation to the

subject matter of this case, stems from U.S. Bank’s efforts to foreclose on their

property in Oakwood, Paulding County, Ohio. The factual background and lengthy

procedural history of this case are discussed in detail in the Watsons’ previous two

appeals. See HSBC Mtge. Servs., Inc. v. Watson, 3d Dist. Paulding No. 11-14-03,

2015-Ohio-221 (“Watson I”); HSBC Mtge. Servs., Inc. v. Watson, 3d Dist. Paulding

No. 11-16-03, 2017-Ohio-680 (“Watson II”). Thus, we will restate the history of

this dispute only to the extent required to frame the issues presented in the instant

appeal.

{¶3} On November 24, 2004, Pamela allegedly signed a promissory note in

which she agreed to repay Accredited Home Lenders, Inc. (“Accredited”) the sum

1
In this opinion, we refer to Pamela and William as the Watsons rather than as the Lamberts because
throughout their appellate brief, Pamela and William refer to themselves as the Watsons.

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of $79,500 plus interest in monthly installments. (Doc. No. 1, Ex. A). The note was

secured by a mortgage on real property in Oakwood, Paulding County, Ohio. (Doc.

No. 1, Ex. B). In the mortgage, Accredited designated Mortgage Electronic

Registration Systems, Inc. (“MERS”) as its nominee. (Id.). Pamela purportedly

stopped making payments on the note on April 1, 2011, sometime after which the

note and mortgage were allegedly assigned and transferred to HSBC Mortgage

Services, Inc. (“HSBC”). (Doc. No. 36, Exs. A-4, A-8). See Watson II at ¶ 2.

{¶4} On August 22, 2012, HSBC filed a complaint for foreclosure against

the Watsons and the Paulding County Treasurer (the “first foreclosure”). Watson I

at ¶ 2. In late April 2013, HSBC filed a motion for summary judgment. Id. at ¶ 4.

Following HSBC’s motion for summary judgment, the trial court established a

discovery cutoff date of June 21, 2013. Id. at ¶ 5. On May 24, 2013, the Watsons

served discovery requests on HSBC, including requests for admissions. Id. at ¶ 6.

One of these requests for admissions asked HSBC to admit that “HSBC does not

have possession of the original note * * *.” Id. at ¶ 10. Another requested that

HSBC admit that neither the person allegedly authorized to assign the mortgage to

HSBC “nor [MERS] sought or received permission from the Bankruptcy Trustee

for [Accredited] to execute the assignment of [the Watsons’] mortgage [to HSBC].”

Watson II at ¶ 3. On June 28, 2013, the trial court granted HSBC’s motion for

additional time to respond to the Watsons’ discovery requests and ordered that

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HSBC respond to the Watsons’ requests by July 23, 2013. Watson I at ¶ 7. Yet,

despite this extension, HSBC failed to respond to the Watsons’ discovery requests

by July 23, 2013. Id. at ¶ 9.

{¶5} On August 2, 2013, the Watsons filed a memorandum in opposition to

HSBC’s motion for summary judgment as well as their own motion for summary

judgment. Watson I, 2015-Ohio-221, at ¶ 10. To support their motion for summary

judgment, the Watsons relied on the requests for admissions they propounded to

HSBC, which were deemed admitted by HSBC’s failure to timely respond. Id. See

Civ.R. 36(A)(1). On August 30, 2013, HSBC filed a combined reply brief in support

of its motion for summary judgment and memorandum in opposition to the

Watsons’ motion for summary judgment. Watson I at ¶ 12. HSBC also filed a

“Civ.R. 36(B) motion to withdraw requests for admission deemed admitted.” Id.

On September 12, 2013, the Watsons filed their reply brief in support of their motion

for summary judgment as well as a response to HSBC’s motion to withdraw its

admissions. Id. at ¶ 13.

{¶6} On February 12, 2014, the trial court issued an order granting HSBC’s

motion to withdraw its admissions, granting HSBC’s motion for summary

judgment, and denying the Watsons’ motion for summary judgment. Id. at ¶ 14.

On April 18, 2014, the trial court issued a decree of foreclosure in favor of HSBC

and ordered that the Watsons’ property be sold. Id. at ¶ 15. The Watsons

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subsequently appealed, arguing that the trial court erred by granting HSBC’s motion

to withdraw its deemed admissions and by granting HSBC’s motion for summary

judgment.

{¶7} On January 26, 2015, this court reversed the judgment of the trial court.

Id. at ¶ 38. Specifically, we concluded that “the trial court abused its discretion by

granting HSBC’s motion to withdraw its admissions without allowing [the Watsons]

to conduct additional discovery.” Id. at ¶ 35. With respect to the trial court’s rulings

on the parties’ motions for summary judgment, we held that because the trial court’s

rulings “were based on its erroneous discovery order granting HSBC’s motion to

withdraw its admissions,” “ruling on either party’s motion for summary judgment

was premature.” Id. Accordingly, we remanded the matter to the trial court with

the observation that the trial court could “proceed in any number of ways, including,

for example, reopening discovery, allowing additional motions concerning

discovery, and allowing the resubmission of motions for summary judgment.” Id.

at ¶ 37.

{¶8} On remand, HSBC filed a motion for substitution of plaintiff, in which

it stated that U.S. Bank had been assigned the mortgage on January 6, 2015 and that

U.S. Bank was thus the real party in interest. Watson II, 2017-Ohio-680, at ¶ 5. On

April 23, 2015, the Watsons filed a memorandum in opposition to HSBC’s motion

for substitution of plaintiff. Id. at ¶ 6. In their memorandum in opposition, the

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Watsons, “[r]elying upon HSBC’s admission that [it] did not possess the original

note, * * * argued that neither HSBC nor U.S. Bank could be real parties in interest

as HSBC had nothing to transfer to U.S. Bank that would justify a substitution of

plaintiff * * *.” Id. Nevertheless, the trial court ultimately granted HSBC’s motion

to substitute U.S. Bank as plaintiff. Id. at ¶ 7.

{¶9} On the same day that the Watsons filed their memorandum in

opposition to HSBC’s motion for substitution of plaintiff, they also filed a motion

for R.C. 2323.51 sanctions against HSBC. Id. at ¶ 6. In addition, on February 29,

2016, the Watsons filed a motion for summary judgment. Id. at ¶ 7. Finally, on

June 13, 2016, the Watsons submitted a motion asking the trial court to reconsider

its decision to allow the substitution of U.S. Bank as plaintiff. Id. A hearing on all

three motions was set for June 24, 2016. Id.

{¶10} At the hearing, HSBC and U.S. Bank argued that the Watsons’ motion

for summary judgment should be denied to allow for the reopening of discovery.

See id. at ¶ 7. However, in a July 5, 2016 judgment, the trial court “declined to

reopen discovery, deemed the admissions of HSBC admitted, * * * granted [the

Watsons’] motion for summary judgment,” and dismissed the first foreclosure. Id.

(See Doc. No. 16, Ex. 10). In addition, the trial court rejected the Watsons’ request

to reconsider its ruling allowing U.S. Bank to be substituted as plaintiff, and “[s]ince

the alleged frivolous conduct arose from HSBC’s motion to substitute plaintiff,” the

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trial court denied the Watsons’ motion for sanctions on grounds that granting the

motion would be inconsistent with the affirmation of its decision permitting the

substitution. Watson II at ¶ 8. Although U.S. Bank and the Watsons both appealed

from the trial court’s judgment, U.S. Bank subsequently dismissed its appeal. (See

Doc. No. 16, Exs. 11, 12). In their second appeal, the Watsons argued that the trial

court erred by permitting U.S. Bank to be substituted as plaintiff and by denying

their motion for sanctions.

{¶11} On February 27, 2017, this court affirmed the trial court’s judgment.

Watson II, 2017-Ohio-680, at ¶ 18. First, we concluded that the Watsons were not

prejudiced by the substitution of U.S. Bank as plaintiff. Id. at ¶ 11. We observed

that, “[i]f anything, [the order substituting U.S. Bank as plaintiff] is more likely to

operate in [the Watsons’] favor as the substitution of U.S. Bank for HSBC binds

U.S. Bank to the summary judgment order that disposed of [the first foreclosure].”

Id. Furthermore, we held that the trial court did not abuse its discretion by denying

the Watsons’ motion for sanctions under R.C. 2323.51. Id. at ¶ 17. We concluded

that, even assuming that HSBC’s actions amounted to frivolous conduct, the

Watsons were not adversely affected parties who were eligible for an award of costs,

fees, and other expenses under R.C. 2323.51. Id. at ¶ 16-17. We justified this

conclusion, in part, by noting that “HSBC and U.S. Bank would both be barred by

res judicata from filing this exact same claim a second time * * *.” Id. at ¶ 17.

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{¶12} Meanwhile, on November 17, 2016, while the appeal in Watson II was

pending, U.S. Bank refiled the complaint for foreclosure against the Watsons (the

“second foreclosure”). (Doc. No. 1). On December 5, 2016, the Watsons filed their

answer to U.S. Bank’s complaint. (Doc. No. 7). That same day, the Watsons filed

a combined motion for summary judgment and motion for R.C. 2323.51 sanctions.

(Doc. No. 8). In their combined motion, the Watsons argue that they are entitled to

summary judgment because the doctrine of res judicata precludes U.S. Bank from

“asserting the same previously dismissed claim based on the same asserted

documents.” (Id.). In addition, the Watsons argue that “[t]he refiling of the lawsuit

four months after it was previously dismissed on summary judgment and after an

appeal of such prior judgment was abandoned is absolutely and objectively frivolous

pursuant to R.C. 2323.51.” (Id.).

{¶13} On January 3, 2017, U.S. Bank filed a memorandum in opposition to

the Watsons’ motion for summary judgment and a memorandum in opposition to

the Watsons’ motion for sanctions. (Doc. Nos. 14, 15). On January 11, 2017, the

Watsons filed their reply brief in support of their motion for summary judgment,

along with exhibits in support of their motions for summary judgment and for

sanctions. (Doc. No. 16). In addition, on July 11, 2017, the Watsons provided the

trial court with a copy of our decision in Watson II and suggested that our decision

in Watson II prevents U.S. Bank from disputing that it is barred from bringing the

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second foreclosure. (Doc. No. 22). On February 9, 2018, the trial court denied both

the Watsons’ motion for summary judgment and their motion for sanctions. (Doc.

No. 23).

{¶14} On March 19, 2018, the Watsons filed a motion asking the trial court

to modify or supplement its February 9, 2018 judgment entry. (Doc. No. 27). In

their motion, the Watsons requested that the trial court explicitly address the

doctrine of res judicata and explain why the doctrine of res judicata does not bar

U.S. Bank from maintaining the second foreclosure. (Id.). On March 23, 2018,

U.S. Bank filed a memorandum in opposition to the Watsons’ motion to modify or

supplement. (Doc. No. 29). On April 5, 2018, the Watsons filed their reply brief in

support of their motion to modify or supplement. (Doc. No. 30). On June 14, 2018,

the trial court issued an entry in which it clarified the rationale for its conclusion

that the second foreclosure is not barred by the doctrine of res judicata. (Doc. No.

31).

{¶15} On January 22, 2019, U.S. Bank filed a motion for summary judgment.

(Doc. No. 36). On May 30, 2019, the Watsons filed their memorandum in

opposition to U.S. Bank’s motion for summary judgment. (Doc. No. 45). That

same day, the Watsons filed a second motion for summary judgment and a second

motion for sanctions under R.C. 2323.51. (Doc. No. 46). In their second motion

for summary judgment, the Watsons reassert their argument that they are entitled to

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summary judgment based on the doctrine of res judicata, and they further argue that

summary judgment in their favor is appropriate because U.S. Bank does not, and

will never, present admissible evidence sufficient to support its claim. (Id.); (See

Doc. No. 49). On June 13, 2019, U.S. Bank filed a combined reply brief in support

of its motion for summary judgment and memorandum in opposition to the

Watsons’ second motion for summary judgment and second motion for sanctions.

(Doc. No. 48). On June 28, 2019, the Watsons filed their reply brief in support of

their second motion for summary judgment and second motion for sanctions. (Doc.

No. 49).

{¶16} On October 8, 2019, the trial court granted U.S. Bank’s motion for

summary judgment, denied the Watsons’ second motion for summary judgment,

and denied their second motion for sanctions. (Doc. No. 50). Consequently, the

trial court issued a decree of foreclosure in favor of U.S. Bank and ordered that the

Watsons’ property be sold. (Id.).

{¶17} On November 5, 2019, the Watsons filed a notice of appeal. (Doc.

No. 51). They raise three assignments of error for our review. For ease of

discussion, we begin by considering the Watsons’ first and second assignments of

error together, followed by their third assignment of error.

Assignment of Error No. I

The trial court erred in its judgment entry of Feb. 9, 2018 and in
Oct. 9, 2019 [sic] in denying the Watsons’ motion for summary

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judgment that asserted U.S. Bank’s complaint was barred by the
doctrine of res judicata.

Assignment of Error No. II

The trial court erred in its Oct. 9, 2019 judgment entry in denying
the Watsons’ motion for summary judgment and granting U.S.
Bank’s motion for summary judgment when discovery was
closed, the facts were undisputed, and the complaint failed to state
a cause of action and the evidence failed to support the complaint.

{¶18} In their first and second assignments of error, the Watsons argue that

the trial court erred by denying their motions for summary judgment and by granting

U.S. Bank’s motion for summary judgment. Specifically, in their first assignment

of error, the Watsons argue that the trial court should have granted their motions for

summary judgment because the doctrine of res judicata precludes U.S. Bank from

bringing the second foreclosure and from relitigating issues that were resolved

against it in the first foreclosure. In their second assignment of error, the Watsons

argue that the trial court erred by granting U.S. Bank’s motion for summary

judgment and by denying their second motion for summary judgment because the

affidavit U.S. Bank submitted in support of its motion was not made by someone

with personal knowledge sufficient to authenticate documents such as the

promissory note, mortgage, and notice of default, photocopies of which were

attached to the affidavit and used by U.S. Bank to prove its claim. They also contend

that the averments in the affidavit were not based on the affiant’s personal

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knowledge. Finally, the Watsons take issue with U.S. Bank’s evidence establishing

the chain of assignments from the original lender and mortgagee to U.S. Bank.

{¶19} We review a decision to grant summary judgment de novo. Doe v.

Shaffer, 90 Ohio St.3d 388, 390 (2000). “De novo review is independent and

without deference to the trial court’s determination.” ISHA, Inc. v. Risser, 3d Dist.

Allen No. 1-12-47, 2013-Ohio-2149, ¶ 25, citing Costner Consulting Co. v. U.S.

Bancorp, 195 Ohio App.3d 477, 2011-Ohio-3822, ¶ 10 (10th Dist.). Summary

judgment is proper where there is no genuine issue of material fact, the moving party

is entitled to judgment as a matter of law, and reasonable minds can reach but one

conclusion when viewing the evidence in favor of the non-moving party, and the

conclusion is adverse to the non-moving party. Civ.R. 56(C); State ex rel. Cassels

v. Dayton City School Dist. Bd. of Edn., 69 Ohio St.3d 217, 219 (1994).

{¶20} “The party moving for summary judgment has the initial burden of

producing some evidence which demonstrates the lack of a genuine issue of material

fact.” Carnes v. Siferd, 3d Dist. Allen No. 1-10-88, 2011-Ohio-4467, ¶ 13, citing

Dresher v. Burt, 75 Ohio St.3d 280, 292 (1996). “In doing so, the moving party is

not required to produce any affirmative evidence, but must identify those portions

of the record which affirmatively support his argument.” Id., citing Dresher at 292.

“The nonmoving party must then rebut with specific facts showing the existence of

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a genuine triable issue; he may not rest on the mere allegations or denials of his

pleadings.” Id., citing Dresher at 292 and Civ.R. 56(E).

{¶21} Material facts are those facts “‘that might affect the outcome of the

suit under the governing law.’” Turner v. Turner, 67 Ohio St.3d 337, 340 (1993),

quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505 (1986).

“Whether a genuine issue exists is answered by the following inquiry: [d]oes the

evidence present ‘a sufficient disagreement to require submission to a jury’ or is it

‘so one-sided that one party must prevail as a matter of law[?]’” Id., quoting

Anderson at 251-252.

{¶22} We begin with the Watsons’ first assignment of error, in which they

argue that the trial court erred by denying their motions for summary judgment

because, contrary to the trial court’s conclusion, the doctrine of res judicata

precludes U.S. Bank from bringing the second foreclosure and from relitigating

certain issues that U.S. Bank must resolve in its favor to prevail on its claim. 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.”’” Crown Chrysler Jeep, Inc. v.

Boulware, 10th Dist. Franklin No. 15AP-162, 2015-Ohio-5084, ¶ 18, quoting State

ex rel. Schachter v. Ohio Pub. Emps. Retirement Bd., 121 Ohio St.3d 526, 2009-

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Ohio-1704, ¶ 27, quoting O’Nesti v. DeBartolo Realty Corp., 113 Ohio St.3d 59,

2007-Ohio-1102, ¶ 6. Both concepts are in play in this case.

{¶23} Claim preclusion, the first type of 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.’” Id., quoting Schachter

at ¶ 27. “‘The previous action is conclusive for all claims that were or that could

have been litigated in the first action.’” Id., quoting Schachter at ¶ 27. The Supreme

Court of Ohio has identified four conditions that must be present for claim

preclusion to apply:

(1) there is a final, valid decision on the merits by a court of

competent jurisdiction; (2) the second action involves the same parties

or their privies as the first; (3) the second action raises claims that

were or could have been litigated in the first action; and (4) the second

action arises out of the transaction or occurrence that was the subject

matter of the previous action.

State ex rel. Dept. of Edn. v. Ministerial Day Care, 8th Dist. Cuyahoga No. 103685,

2016-Ohio-8485, ¶ 14, citing Portage Cty. Bd. of Commrs. v. Akron, 109 Ohio St.3d

106, 2006-Ohio-954, ¶ 84, quoting Hapgood v. Warren, 127 F.3d 490, 493 (6th

Cir.1997) (construing Grava v. Parkman Twp., 73 Ohio St.3d 379 (1995)). For

purposes of claim preclusion, a “transaction” has been defined as a “‘common

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nucleus of operative facts.’” Grava at 382, quoting 1 Restatement of the Law 2d,

Judgments, Section 24, Comment b (1982).

{¶24} On the other hand, issue preclusion, the second type of preclusion,

“serves to prevent relitigation of any fact or point that was determined by a court of

competent jurisdiction in a previous action between the same parties or their

privies.” O’Nesti at ¶ 7, citing Fort Frye Teachers Assn., OEA/NEA v. State Emp.

Relations Bd., 81 Ohio St.3d 392, 395 (1998). “Issue preclusion applies even if the

causes of action differ.” Id., citing Fort Frye at 395. Issue preclusion prevents the

relitigation of an issue where (1) the party against whom issue preclusion is asserted

was a party or is in privity with a party to a prior action; (2) the prior action ended

in a final judgment on the merits following a full and fair opportunity to litigate the

issue; (3) the issue was actually litigated and determined and necessary to the

judgment in the prior action; and (4) the issue sought to be precluded is identical to

the issue decided in the prior action. See State ex rel. Davis v. Pub. Emp. Retirement

Bd., 120 Ohio St.3d 386, 2008-Ohio-6254, ¶ 27-28, quoting Fort Frye at 395; Ginn

v. Stonecreek Dental Care, 12th Dist. Fayette No. CA2016-10-014, 2017-Ohio-

4370, ¶ 24, citing Balboa Ins. Co. v. S.S.D. Distrib. Sys., 109 Ohio App.3d 523, 527

(12th Dist.1996); Wilson v. Semco, Inc., 152 Ohio App.3d 75, 2002-Ohio-4695, ¶

17 (3d Dist.), quoting Monahan v. Eagle Picher Indus., Inc., 21 Ohio App.3d 179,

180-181 (1st Dist.1984).

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{¶25} Before addressing the merits of the Watsons’ first assignment of error,

we feel that we must clarify their arguments. Throughout their filings in the trial

court and in their appellate brief, the Watsons regularly refer to the doctrine of res

judicata. However, they never differentiate between claim preclusion and issue

preclusion or specify in any given instance whether they are arguing for the

application of claim preclusion or whether they are arguing for the application of

issue preclusion. Yet, after reviewing the Watsons’ appellate arguments in light of

the arguments they made at the trial-court level, it is evident that they rely to some

extent on both types of preclusion. Although they do not themselves outline their

arguments in the following manner, we believe that the Watsons are in substance

making three separate arguments based on claim preclusion and issue preclusion.

{¶26} First, the Watsons repeatedly invoke this court’s discussion of res

judicata in Watson II and insist that our statement that U.S. Bank “would * * * be

barred * * * from filing [the] exact claim a second time” was “necessary to the

analysis and result reached” in Watson II. (See Appellants’ Brief at 6-7, 10-11);

(See Doc. Nos. 22, 30). As a result, the Watsons seem to contend that issue

preclusion bars U.S. Bank from relitigating the issue of whether claim preclusion

prevents it from filing and maintaining the second foreclosure. Second, the Watsons

expressly assert that, irrespective of our decision in Watson II, the trial court’s July

5, 2016 judgment dismissing the first foreclosure was a final adjudication on the

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merits that itself operates to preclude U.S. Bank from bringing the second

foreclosure. (See Appellants’ Brief at 6, 11); (See Doc. Nos. 7, 8, 16, 30). Finally,

the Watsons seem to suggest that the matters deemed admitted in the first

foreclosure, specifically those matters related to HSBC’s and U.S. Bank’s

possession of the promissory note and the validity of earlier mortgage assignments,

remain conclusively established for purposes of the second foreclosure. (See

Appellants’ Brief at 6-7); (See Doc. Nos. 27, 46, 49). Thus, the Watsons appear to

argue that issue preclusion prohibits U.S. Bank from relitigating the subject matter

of the deemed admissions and that they are entitled to judgment as a matter of law

because U.S. Bank is unable to relitigate these issues. We examine each of these

arguments in turn, beginning with the argument that our decision in Watson II

prevents U.S. Bank from challenging the Watsons’ contention that claim preclusion

bars the second foreclosure.

{¶27} In Watson II, we reviewed two issues stemming from the trial court’s

July 5, 2016 judgment in the first foreclosure. However, the only part of Watson II

relevant to the present case is our analysis of the trial court’s decision to deny the

Watsons’ motion for R.C. 2323.51 sanctions. In the trial court, the Watsons argued

that sanctions should be imposed against HSBC because HSBC engaged in frivolous

conduct by moving to substitute U.S. Bank as plaintiff. (See Doc. No. 16, Exs. 5,

6, 7, 10). After reaffirming its decision to allow U.S. Bank to be substituted as

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plaintiff for HSBC, the trial court denied the Watsons’ motion for sanctions,

concluding that it could not “grant [HSBC’s] motion for substitution and call it

frivolous at the same time.” (Doc. No. 16, Ex. 10). In its July 5, 2016 judgment

denying the Watsons’ motion for sanctions, the trial court did not reach the question

of whether the Watsons were adversely affected by HSBC’s conduct. (See id.). See

R.C. 2323.51(B)(1) (a party must be adversely affected by frivolous conduct to be

entitled to an award of costs, fees, and other expenses).

{¶28} On appeal, we affirmed the trial court’s judgment denying the

Watsons’ motion for sanctions. Watson II, 2017-Ohio-680, at ¶ 17-18. We

acknowledged that “[s]ince the trial court found that HSBC did not engage in

frivolous conduct, it did not proceed to make a determination for the record as to

whether [the Watsons were parties] adversely affected by frivolous conduct.” Id. at

¶ 14. However, rather than limiting our review to a determination of whether the

trial court correctly concluded that HSBC did not engage in frivolous conduct by

moving to substitute U.S. Bank as plaintiff, we held that “[e]ven * * * assum[ing]

that HSBC’s actions amounted to frivolous conduct, [the Watsons were not]

adversely affected part[ies] that [were] eligible for an award of sanctions for

frivolous conduct.” Id. at ¶ 17. In reaching this conclusion, we observed that Civ.R.

17 and Civ.R. 25, the rules relating to the real-party-in-interest requirement and the

substitution of parties, exist, among other reasons, to assure the defendant that he

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“‘will be protected against another suit brought by the real party [in] interest on the

same matter.’” Id. at ¶ 15, quoting Argent Mtge. Co. v. Ciemins, 8th Dist. Cuyahoga

No. 90698, 2008-Ohio-5994, ¶ 10, quoting Shealy v. Campbell, 20 Ohio St.3d 23

(1985). In our view, the Watsons were not adversely affected by HSBC’s motion

for substitution in part because their interest in being protected from successive suits

based on the same claim for foreclosure was not impaired by the substitution of U.S.

Bank as plaintiff. Specifically, we held:

[B]ringing in U.S. Bank was not going to expose [the Watsons] to the

risk of enduring another suit on this same matter. HSBC and U.S.

Bank would both be barred by res judicata from filing this exact claim

a second time as HSBC was bound by the assignment [of its interest

to U.S. Bank], which effectively admitted that [it is] no longer a real

party in interest, and U.S. Bank was bound by HSBC’s admission that

it did not have the promissory note.

Id. at ¶ 16.

{¶29} Following our decision in Watson II, U.S. Bank filed an application

for reconsideration in this court in which U.S. Bank asked us to reconsider our

statement that it would be barred by res judicata from filing an identical claim for

foreclosure against the Watsons. (See Doc. No. 22). Following briefing on the

issues presented in U.S. Bank’s application, we denied U.S. Bank’s application for

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reconsideration. (See id.). There is no indication in the record that U.S. Bank further

appealed to the Supreme Court of Ohio from our decision in Watson II.

{¶30} After reviewing our decision in Watson II and considering the unique

circumstances of this case, we conclude that issue preclusion does not prevent U.S.

Bank from litigating the issue of whether claim preclusion bars it from maintaining

the second foreclosure. As indicated above, issue preclusion applies only when the

party against whom issue preclusion is asserted had a full and fair opportunity to

litigate the issue in the prior action and when the issue was actually litigated in the

prior action. We believe that, under the peculiar facts of this case, U.S. Bank was

not afforded a full opportunity in the first foreclosure to litigate the claim-preclusive

effect of the first foreclosure on subsequent foreclosure actions and that the issue

was not actually litigated.

{¶31} First, as far as we can discern from the record, the question of whether

the first foreclosure precludes the refiling of an identical claim for foreclosure in a

subsequent foreclosure action was not briefed, passed on, or even mentioned at any

time prior to the issuance of our opinion in Watson II. It does not appear that the

Watsons supported their motion for summary judgment or their motion for sanctions

in the first foreclosure with an argument related to claim preclusion; nor does it

appear that U.S. Bank opposed the Watsons’ motions or supported its own motions

in the first foreclosure with such an argument. In addition, in its July 5, 2016

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judgment, the trial court did not make any determinations with respect to the claim-

preclusive effect of the first foreclosure. This is hardly surprising given that we

used the supposedly claim-preclusive effect of the first foreclosure to support our

conclusion that the Watsons were not adversely affected by U.S. Bank’s substitution

as plaintiff—an issue that the trial court never reached. Finally, there is no

indication that the issue was raised in the parties’ appellate briefs informing our

decision in Watson II. Thus, our determination in Watson II of the issue of the

claim-preclusive effect of the first foreclosure does not appear to be the product of

any actual litigation of the issue.

{¶32} Furthermore, given the distinctive circumstances of this case, U.S.

Bank was not afforded, and in fact could not have been afforded, an opportunity to

obtain regular appellate review of our determination of the issue of the claim-

preclusive effect of the first foreclosure. In the average case, the issue of the claim-

preclusive effect of a prior final judgment is determined in the first instance at the

trial-court level. In many cases, the party who receives an unfavorable decision on

the issue of claim preclusion may then appeal the trial court’s determination to a

court of appeals, and in most instances, the court of appeals must entertain the

party’s appeal. If the issue of claim preclusion is resolved adversely to the party by

the court of appeals, the party may apply for reconsideration of the appellate court’s

decision. Finally, if the party’s application for reconsideration is denied or if the

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issue of claim preclusion is decided against the party even after reconsideration, the

party may petition the Supreme Court of Ohio for review, and aside from a few

exceptions, the Supreme Court of Ohio has discretion to accept or reject the party’s

petition for review.

{¶33} Yet, this case is not the average case. In this case, as far as we can tell,

the issue of the claim-preclusive effect of the first foreclosure was determined for

the first time in our opinion in Watson II. As a result, U.S. Bank was deprived of

the opportunity to utilize the entire array of options for appellate review normally

available to parties who are adversely affected by decisions relating to the

applicability of claim preclusion. U.S. Bank’s only options were to ask this court

to reconsider our decision in Watson II and to petition the Supreme Court of Ohio

for review. However, both options have their limitations. In deciding whether to

accept applications for reconsideration, we conduct a type of review that is much

more limited and specialized than the review we perform when reviewing many trial

court errors in the first instance. In addition, unlike most of the cases that are

presented to the courts of appeals for review, the Supreme Court of Ohio likely

would not have been required to entertain an appeal by U.S. Bank of our decision

in Watson II. Therefore, the procedures available to U.S. Bank in this particular

case would not have been suitable substitutes for the ordinary procedures, i.e., an

initial determination of the issue of claim preclusion and the option of an appeal as

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of right, only then followed by an application for reconsideration or further appeal.

U.S. Bank may have had some opportunity to litigate the issue of claim preclusion

by filing an application for reconsideration and an appeal to the Supreme Court of

Ohio. However, even if U.S. Bank had taken advantage of both procedures, under

the facts of this case, U.S. Bank would never have had a full opportunity to litigate

the issue. For this reason, and for the reasons detailed in the three preceding

paragraphs, we conclude that our decision in Watson II does not bar U.S. Bank from

litigating the issue of the claim-preclusive effect of the first foreclosure. Thus, to

the extent that the Watsons based their motions for summary judgment on the issue-

preclusive effect of our decision in Watson II, the trial court did not err by denying

their motions.

{¶34} Having concluded that our decision in Watson II does not prevent U.S.

Bank from litigating the issue of the claim-preclusive effect of the first foreclosure,

we now consider whether the trial court’s July 5, 2016 judgment in the first

foreclosure bars U.S. Bank from maintaining the second foreclosure. In its February

9, 2018 judgment denying the Watsons’ first motion for summary judgment, the

trial court did not specifically address the claim-preclusive effect of the July 5, 2016

judgment. (See Doc. No. 23). However, in the trial court’s June 14, 2018 journal

entry in which it further clarified its decision to deny the Watsons’ first motion for

summary judgment, the trial court explained that the second foreclosure “is not the

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exact same claim as [the first foreclosure] as four additional years of non-payment

are alleged to have occurred in [the second foreclosure]. [U.S. Bank] is not barred

* * * by the doctrine of res judicata as the present cause of action has not been

litigated.” (Doc. No. 31).

{¶35} We conclude that the trial court did not err by holding that the doctrine

of claim preclusion does not prevent U.S. Bank from bringing the second

foreclosure, albeit for different reasons than offered by the trial court. Contrary to

the trial court’s assertion in its June 14, 2018 journal entry, the claim in the second

foreclosure is identical to the claim in the first foreclosure despite the four additional

years of alleged nonpayment. In the second foreclosure, U.S. Bank is demanding

the same principal payment, $74,111.16, as it (and HSBC) demanded in the first

foreclosure. (Doc. No. 1); (Doc. No. 16, Ex. 1). Furthermore, in the second

foreclosure, U.S. Bank is using the same alleged default date as was used in the first

foreclosure. (Doc. No. 1); (Doc. No. 16, Ex. 1). Though additional payments have

purportedly been missed, the claim in the second foreclosure arises from the same

set of operative facts as the claim in the first foreclosure—that is, Pamela’s alleged

failure to make her April 2011 mortgage payment and the consequent acceleration

of the entire principal balance of her loan. See U.S. Bank Natl. Assn. v. Gullotta,

120 Ohio St.3d 399, 2008-Ohio-6268, ¶ 27-29, 31, 36 (concluding that a bank’s

third complaint for foreclosure was barred by claim preclusion, despite the fact that

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the third complaint was amended to use a different start date for the collection of

interest, because the complaint “still arose from [the] original default, when the

entire principal balance became due”). It is therefore the same claim. As a result,

in concluding that claim preclusion does not bar the second foreclosure because the

claim in the second foreclosure is not the same as the claim in the first foreclosure,

the trial court erred.

{¶36} Nevertheless, “[a] reviewing court will not reverse a correct judgment

merely because a trial court relied on an erroneous reason as the basis for its

determination.” Hassey v. Columbus, 10th Dist. Franklin No. 17AP-726, 2018-

Ohio-3958, ¶ 33, citing Joyce v. Gen. Motors Corp., 49 Ohio St.3d 93, 96 (1990)

and Reid v. Plainsboro Partners, III, 10th Dist. Franklin No. 09AP-442, 2010-Ohio-

4373, ¶ 20. In its July 5, 2016 judgment in the first foreclosure, the trial court

“consider[ed] the admissions deemed admitted, specifically that the note * * * is

endorsed in blank and that [U.S. Bank] is not in possession of the note.” (Doc. No.

16, Ex. 10). After holding that U.S. Bank would need to prove its possession of the

note indorsed in blank to prevail in the first foreclosure and that U.S. Bank could

not meet this burden due to the deemed admissions, the trial court granted the

Watsons’ motion for summary judgment and dismissed U.S. Bank’s complaint.

(Id.).

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{¶37} While the trial court did not explicitly state that it was dismissing the

first foreclosure because U.S. Bank could not prove that it had standing, given that

the court’s judgment was based entirely on U.S. Bank’s inability to prove possession

of the promissory note, the only fair reading of the trial court’s judgment is that it

dismissed the first foreclosure on standing grounds. See generally Fed. Home Loan

Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶ 20-39 (holding

that, in a foreclosure action, a party does not have standing to invoke the jurisdiction

of a common pleas court unless it can establish that it had an interest in the note or

mortgage at the time suit was filed). In a foreclosure action, a dismissal for lack of

standing does not involve an adjudication on the underlying indebtedness and has

“no effect on the underlying duties, rights, or obligations of the parties.” Id. at ¶ 40.

Furthermore, “the dismissal of an action because one of the parties is not a real party

in interest or does not have standing is not a dismissal on the merits for purposes of

res judicata.” State ex rel. Coles v. Granville, 116 Ohio St.3d 231, 2007-Ohio-6057,

¶ 51. Because the trial court’s July 5, 2016 dismissal was not an adjudication on the

merits, claim preclusion does not bar U.S. Bank from bringing the second

foreclosure. See Douglas v. Williams, 9th Dist. Summit No. 27459, 2015-Ohio-

1721, ¶ 5; U.S. Bank Natl. Assn. v. Perry, 8th Dist. Cuyahoga No. 99608, 2013-

Ohio-3814, ¶ 12 (“Because the dismissal was without prejudice, U.S. Bank can

refile the [foreclosure] action when it has uncontroverted evidence of its standing.”).

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Therefore, although the trial court’s reasons were incorrect, the trial court did not

err by concluding that claim preclusion does not bar U.S. Bank from bringing the

second foreclosure. Accordingly, to the extent that the Watsons based their motions

for summary judgment on the claim-preclusive effect of the first foreclosure, the

trial court did not err by denying their motions.

{¶38} Finally, we consider whether the trial court erred by determining that

U.S. Bank is not precluded in the second foreclosure from litigating the matters

deemed admitted in the first foreclosure. In denying the Watsons’ first motion for

summary judgment, the trial court held that “the admission that [U.S. Bank] did not

have the note was for [the first foreclosure] action only” and that U.S. Bank “is not

bound by [its] admission in [the first foreclosure].” (Doc. No. 23). The Watsons

contend that the trial court erroneously credited U.S. Bank’s “simplistic argument *

* * that judicial admissions are limited to the case in which they are made, and are

not binding in a new case,” an argument that the Watsons concede “is true, but a

misdirection.” (Appellants’ Brief at 6). The Watsons argue that, in this case,

preclusion arises not by operation of the deemed admissions alone, but “from the

final judgment that occurred as a result of the evidence in the first case,” “from the

failure to pursue an appeal taken from said judgment,” and “from the failure to

appeal the denial of [the application for reconsideration] * * *.” (Id. at 6-7).

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{¶39} The Watsons’ arguments are without merit. Under Civ.R. 36(A), “[a]

party may serve upon any other party a written request for the admission, for

purposes of the pending action only, of the truth of any matters within the scope of

Civ.R. 26(B) set forth in the request, that relate to statements or opinions of fact or

of the application of law to fact * * *.” “Any matter admitted under [Civ.R. 36] is

conclusively established unless the court on motion permits withdrawal or

amendment of the admission.” Civ.R. 36(B). However, “[a]ny admission made by

a party under this rule is for the purpose of the pending action only and is not an

admission by the party for any other purpose nor may it be used against the party in

any other proceeding.” Id.

{¶40} Although the text of Civ.R. 36 suggests that matters admitted in one

action are not given issue-preclusive effect in a subsequent action, we have been

unable to locate any Ohio state court decisions squarely addressing this issue. The

few cases that we have found that deal with the attempted use of Civ.R. 36

admissions in subsequent actions did not arise, as this case does, out of

circumstances in which a matter is deemed admitted in one action, a judgment is

entered in that action solely on the basis of the admitted matter, and a party seeks to

litigate the subject matter of the deemed admission in a second action. Moreover,

the courts that have examined the conclusiveness of Civ.R. 36 admissions in

subsequent actions have not done so through the lens of issue preclusion.

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Nevertheless, after examining Civ.R. 36, precedent of the Supreme Court of Ohio,

and other relevant case law, we believe that Civ.R. 36 admissions should not be

granted issue-preclusive effect in subsequent actions because issues established by

Civ.R. 36 admissions are not “actually litigated.”

{¶41} In State ex rel. Davis v. Public Employees Retirement Board, the

Supreme Court of Ohio reviewed the Tenth District Court of Appeals’s conclusion

that a prior decision of the Supreme Court of Ohio “did not collaterally estop

appellees’ claims that they were public employees when they worked for [the

Franklin County Public Defender’s Office (“FCPDO”)]” because, in the prior case,

the court “did not actually litigate and determine” FCPDO’s status as a public

employer after it was incorporated as a nonprofit organization in 1984. 120 Ohio

St.3d 386, 2008-Ohio-6254, at ¶ 29. The court observed that, “[i]n effect, the

claimants’ failure to raise or contest the issue [of FCPDO’s postincorporation status]

in [the prior case] * * * was tantamount to a stipulation in those cases that FCPDO

was a private employer after its incorporation in 1984,” and it quoted the

Restatement’s position that an issue is not actually litigated “‘if it is the subject of a

stipulation between the parties.’” Id. at ¶ 35, quoting 1 Restatement of the Law 2d,

Judgments, Section 27, Comment e (1982). The court also cited to one of its

previous cases, in which it suggested that matters established by stipulation in earlier

actions are not subject to issue preclusion. Id., citing Consolo v. Cleveland, 103

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Ohio St.3d 362, 2004-Ohio-5389, ¶ 9 (holding that a stipulation in a prior action

that a union was a collective-bargaining representative did not collaterally estop a

group of appellees from asserting that the union is not their exclusive bargaining

representative). Ultimately, the court concluded that the claimants in Davis were

not barred from litigating FCPDO’s postincorporation status because that issue had

not been “actually decided” in earlier cases. Id. at ¶ 36. However, the court stopped

short of stating plainly that issue preclusion did not apply because issues established

by stipulation are not “actually litigated.” See id.

{¶42} While the court in Davis did not hold, in so many words, that matters

stipulated to in previous actions are not “actually litigated” for purposes of issue

preclusion, the court’s opinion can be fairly construed as supporting this

proposition. And though the court in Davis did not consider whether matters

admitted under Civ.R. 36 are “actually litigated” or even reference Civ.R. 36, we

think that this proposition is equally valid with respect to admissions made under

Civ.R. 36. First, Civ.R. 36 admissions function very similarly to stipulations. See

In re Cassidy, 892 F.2d 637, 640 (7th Cir.1990), fn. 1 (analogizing deemed

admissions to stipulations). Indeed, the Staff Notes to Civ.R. 36 provide that “Rule

36 admissions are not evidentiary admissions such as admissions against interest,

but are more in the nature of stipulations.” 1970 Staff Note, Civ.R. 36. Moreover,

the section of the Restatement that the court quoted with apparent approval in Davis

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also provides that an issue is not actually litigated “if it is raised in an allegation by

one party and is admitted by the other before evidence on the issue is adduced at

trial * * *.” 1 Restatement, Section 27, Comment e.

{¶43} Furthermore, at least one court has relied on Davis, along with federal

authority, to conclude that, under Ohio law, matters deemed admitted under Civ.R.

36 in a prior action are not subject to issue preclusion in a subsequent action. In re

Somogye, Bankr.N.D.Ohio No. 18-30927, 2018 WL 5810447 (Nov. 5, 2018). The

question in Somogye was the same as in the instant case: “whether a judgment based

on admissions under [Civ.R. 36], as opposed to the admissions themselves, can be

used in a later proceeding to preclude litigation of the factual issues admitted.” Id.

at *5. The court noted that in the federal cases it reviewed, the courts “uniformly

held that a judgment based on admissions under [Fed.R.Civ.P. 36] (or its counterpart

under federal Tax Court Rule 90(f)) does not have issue preclusive effect in a later

proceeding.” Id. at *5-6 (collecting cases). The court then proceeded to examine

Davis, concluding:

While the Ohio Supreme Court has not addressed the issue preclusive

effect of a judgment based on deemed admissions under [Civ.R. 36],

to the extent that such admissions can be considered a type of

stipulation * * *, Davis lends strong support for concluding that the

Ohio Supreme Court would find that factual findings in a prior

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judgment based upon deemed admissions were not “actually

litigated.”

Id. at *7. Finally, the court expressed its belief that the Supreme Court of Ohio

would reach the same result by “simply giving effect to the stated limitation in

[Civ.R. 36]” that deemed admissions are conclusive only for purposes of the action

in which they are made. Id.

{¶44} Accordingly, based on the weight of authority, we conclude that issue

preclusion does not bar U.S. Bank from relitigating the matters that were deemed

admitted in the first foreclosure and served as the basis of the trial court’s July 5,

2016 judgment dismissing the first foreclosure. As a result, to the extent that the

Watsons based their motions for summary judgment on the issue-preclusive effect

of the matters deemed admitted in the first foreclosure, the trial court did not err by

denying their motions. Further, as explained above, neither claim preclusion nor

issue preclusion otherwise bars U.S. Bank from bringing the second foreclosure.

Accordingly, we conclude that the trial court did not err by denying the Watsons’

first motion for summary judgment or by denying their second motion for summary

judgment insofar as their second motion for summary judgment is based on the

applicability of claim preclusion and issue preclusion.

{¶45} Next, we consider the Watsons’ second assignment of error, in which

they argue that the trial court erred by granting U.S. Bank’s motion for summary

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judgment and denying their second motion for summary judgment. In their second

assignment of error, the Watsons propose that the trial court erred by denying their

second motion for summary judgment for the exact same reason that it erred by

granting U.S. Bank’s motion for summary judgment. They argue that the trial court

should have granted their second motion for summary judgment and denied U.S.

Bank’s motion for summary judgment because U.S. Bank did not and cannot

produce admissible evidence to prove its claim.

{¶46} In support of its motion for summary judgment, U.S. Bank submitted

the affidavit of Melinda Patterson (“Patterson”), an officer of U.S. Bank’s loan

servicer, Caliber Home Loans, Inc. (“Caliber”). (Doc. No. 31). The following

documents are attached to Patterson’s affidavit: a photocopy of a promissory note

signed and initialed by a Pamela J. Watson, as well as an allonge to the note which

is indorsed in blank; a photocopy of a mortgage signed and initialed by a Pamela J.

Watson; a photocopy of a corporate assignment of mortgage indicating that the

mortgage was assigned by MERS, as nominee for Accredited, to HSBC; a

photocopy of a limited power of attorney authorizing Caliber to take all reasonable

steps to complete the assignment of mortgages from a number of sellers, including

HSBC, to LSF9 Mortgage Holdings, LLC; a photocopy of an assignment of

mortgage and note purporting to assign the mortgage and note from HSBC to U.S.

Bank as trustee for LSF9 Master Participation Trust; a copy of a computer

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spreadsheet purporting to depict the history of payments on the note and showing

an outstanding principal balance of $74,111.16 as of March 1, 2011; and a

communication dated October 14, 2011, which is titled “Notice of Right to Cure

Default.” (Doc. No. 31, Exs. A-1, A-3, A-4, A-5, A-6, A-7, A-8). In her affidavit,

Patterson avers that U.S. Bank “had possession of the original blank indorsed Note

at the time the Complaint was filed * * * and continues to have possession of the

original Note.” (Doc. No. 31). She also asserts that U.S. Bank “is the current

assignee of the Mortgage and was the assignee of the Mortgage at the time of the

filing of the Complaint,” that Pamela defaulted on the note, that Pamela’s default

has not been cured, that all conditions precedent have been complied with, and that

$74,111.16, plus interest, is owing as of March 1, 2011. (Id.).

{¶47} The Watsons argue that the averments in Patterson’s affidavit and the

documents attached to the affidavit are not competent summary judgment evidence.

Specifically, the Watsons note that Patterson’s affidavit “was made solely as an

officer of [Caliber].” (Appellants’ Brief at 7). They argue that Patterson is not an

officer or employee “of [HSBC] that can authenticate the documents submitted by

U.S. Bank * * * as required by Civ.R. 56 and Evid.R. 801, 802, and 803(6).” (Id.).

The Watsons conclude that Patterson’s affidavit was “not [made] on personal

knowledge, or as [a] custodian[] of business records of [Accredited], or [HSBC] and

do[es] not provide any admissibility or evidentiary support” for most of the exhibits

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attached thereto. (Id. at 9). Thus, they contend that the documents attached to

Patterson’s affidavit are not admissible under the business-records exception to the

hearsay rule. See Evid.R. 803(6).

{¶48} The Watsons’ argument is without merit. This court has previously

considered and rejected arguments like the one raised by the Watsons. See Secy. of

Veterans Affairs v. Leonhardt, 3d Dist. Crawford No. 3-14-04, 2015-Ohio-931, ¶

40-60. Other courts have also rejected similar arguments. As explained by the

Second District Court of Appeals, in mortgage-foreclosure cases,

“a court may admit a document as a business record [under Evid.R.

803(6)] even when the proffering party is not the maker of the

document, if the other requirements of Evid.R. 803(6) are met and the

circumstances suggest that the record is trustworthy.” U.S. Bank, N.A.

v. Christmas, 2d Dist. Montgomery No. 26695, 2016-Ohio-236, ¶ 18,

vacated on other grounds, 146 Ohio St.3d 1468, 2016-Ohio-5108, 54

N.E.3d 1267, citing Great Seneca Financial v. Felty, 170 Ohio

App.3d 737, 2006-Ohio-6618, 869 N.E.2d 30, ¶ 14 (1st Dist.); Secy.

of Veterans Affairs v. Leonhardt, 2015-Ohio-931, 29 N.E.3d 1, ¶ 57

(3d Dist.); State Farm Mut. Auto. Ins. Co. v. Anders, 197 Ohio App.3d

22, 2012-Ohio-824, 965 N.E.2d 1056, ¶ 24 (10th Dist.).

“Trustworthiness of a record is suggested by the profferer’s

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incorporation into its own records and reliance on it.” Christmas,

2016-Ohio-236, ¶ 18, citing Leonhardt at ¶ 58. “Because ‘if

information is sufficiently trustworthy that a business is willing to rely

on it in making business decisions, the courts should be willing to rely

on that information as well.’” Id., quoting Quill v. Albert M. Higley

Co., 2014-Ohio-5821, 26 N.E.3d 1187, ¶ 44 (5th Dist.) (referring to

this as the rationale behind the business-records exception), citing

1980 Staff Note, Evid.R. 803(6).

Ocwen Loan Servicing, LLC v. Malish, 2d Dist. Montgomery No. 27532, 2018-

Ohio-1056, ¶ 23. In Leonhardt, we explained why business records maintained by

mortgage servicers, consisting in part of documents originally generated and

maintained by other entities, are particularly trustworthy:

Because of the nature of the mortgage industry, many mortgage

lenders rely on mortgage servicers to handle the daily functions of

mortgages. Similarly, the mortgage servicer may change throughout

the life of the loan. Considering the business relationship between the

mortgage lender and the mortgage servicer, as well as amongst

successor mortgage servicers, these entities rely on the underlying

loan records for accuracy in conducting ordinary business functions—

that is, the mortgage servicers are under a business duty to the

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mortgage lender to be accurate and successor mortgage servicers rely

on the records of prior mortgage servicers for accuracy in servicing

the loan.

Id. at ¶ 59.

{¶49} In her affidavit, Patterson states that she is authorized to execute the

affidavit on behalf of U.S. Bank in her capacity as an “authorized officer” of Caliber

and that “[i]n the regular performance of [her] job functions, [she has] personal

knowledge obtained through a review of the business records maintained by Caliber

for the purpose of servicing mortgage loans.” (Doc. No. 31). She states that her job

responsibilities include “reviewing the internal record-keeping systems of Caliber,”

“reviewing the loan document,” and “ensuring completeness and accuracy of the

loan documents and loan histories.” (Id.). Patterson’s affidavit also states that

Caliber’s business records are made “at or near the time of the occurrence of the

matters,” “recorded by persons with knowledge of the information in the business

record, or from information transmitted by persons with knowledge,” “kept in the

course of Caliber’s regularly conducted business activities,” and “created by Caliber

as a regular practice.” (Id.). See Evid.R. 803(6). The affidavit further provides that

“Caliber’s records incorporate the records of their predecessors in interest, and the

prior servicers of this mortgage loan, * * * which are maintained and relied upon

[in] the regular course of business by Caliber.” (Doc. No. 31). Finally, the affidavit

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provides that it was made “from a review of those business records and from

[Patterson’s] knowledge of how said records are created and maintained,” that the

documents attached to the affidavit were copied from the business records Patterson

reviewed prior to making the affidavit, and that the documents attached to the

affidavit are true and accurate copies of the original business records. (Id.).

{¶50} Based on the averments in her affidavit, Patterson is a person qualified

to authenticate Caliber’s business records pursuant to Evid.R. 803(6) because the

statements in her affidavit show that she “is sufficiently familiar with [Caliber’s]

business operations and the preparation, maintenance, and retrieval of [Pamela’s]

loan documents” to reasonably attest that “the records are what they purport to be

and that they were made in the ordinary course of business.” Leonhardt at ¶ 51,

citing Pyles v. Midwest Neurosurgeons, 3d Dist. Allen No. 1-98-41, 1999 WL

152886, *5 (Feb. 18, 1999) and Anders at ¶ 15. See Secy. of Veterans Affairs v.

Anderson, 8th Dist. Cuyahoga No. 99957, 2014-Ohio-3493, ¶ 25 (“Employees of

servicing agents are competent to testify in foreclosure actions regarding loans they

service.”). Furthermore, Patterson’s affidavit establishes that Caliber’s business

records satisfy the requirements of Evid.R. 803(6) and that the documents attached

to the affidavit, which Patterson reviewed before making the affidavit, are part of

Caliber’s business records.

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{¶51} Moreover, Patterson’s statement that Caliber’s records incorporate the

records of its predecessors and that Caliber maintains and relies on its predecessors

records in the regular course of business indicates that Caliber deems its

predecessors’ records to be trustworthy, and we have found no reason to doubt the

trustworthiness of the source of the information in Caliber’s records or the

circumstances of their preparation. See Malish, 2018-Ohio-1056, at ¶ 25.

Therefore, the documents attached to Patterson’s affidavit are properly

authenticated and admissible under Evid.R. 803(6), and the averments in Patterson’s

affidavit, made after she reviewed Caliber’s business records, are properly based on

Patterson’s personal knowledge of the facts contained in Caliber’s authenticated

business records. See id.; U.S. Bank, N.A. v. Stocks, 2d Dist. Montgomery No.

27400, 2017-Ohio-8108, ¶ 61 (“‘That an affiant relies on business records for her

facts does not mean that the facts are not based on personal knowledge.’”), quoting

Bibbs v. Cinergy Corp., 1st Dist. Hamilton No. C-010390, 2002 WL 537628, *2

(Apr. 12, 2002); PNC Mtge. v. Krynicki, 7th Dist. Mahoning No. 15 MA 0194,

2017-Ohio-808, ¶ 9-11, 13-15. Accordingly, we reject the Watsons’ argument that

U.S. Bank fails to support its motion for summary judgment with competent

evidence. As we have rejected the Watsons’ challenge to the admissibility of U.S.

Bank’s summary judgment evidence, we conclude that the trial court did not err by

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denying the Watsons’ second motion for summary judgment or by refusing to deny

U.S. Bank’s motion for summary judgment for lack of competent evidence.

{¶52} Nonetheless, while we have concluded that U.S. Bank supports its

motion for summary judgment with competent evidence, U.S. Bank must still show

that there are no genuine issues of material fact with respect to the essential elements

of its claim and that it is entitled to judgment as a matter of law. When moving for

summary judgment in a foreclosure action, the plaintiff must present evidentiary-

quality materials demonstrating:

“(1) the movant is the holder of the note and mortgage, or is a party

entitled to enforce the instrument; (2) if the movant is not the original

mortgagee, the chain of assignments and transfers; (3) the mortgagor

is in default; (4) all conditions precedent have been met; and (5) the

amount of principal and interest due.”

Bank of New York Mellon v. Bridge, 9th Dist. Summit No. 28461, 2017-Ohio-7686,

¶ 10, quoting Bank of Am., N.A. v. Edwards, 9th Dist. Lorain Nos. 15CA010848 and

15CA010851, 2017-Ohio-4343, ¶ 10. We conclude that U.S. Bank has carried its

initial burden of demonstrating the absence of genuine issues of material fact with

respect to each of these five elements.

{¶53} First, Patterson’s statement that U.S. Bank was in possession of the

note allegedly signed by Pamela when it filed the second foreclosure, her statement

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that U.S. Bank is still in possession of the note, and the photocopies of the note and

the allonge containing a blank indorsement demonstrate that U.S. Bank had standing

to file the second foreclosure and is the holder of the note. “When an instrument is

indorsed in blank, the instrument becomes payable to bearer and may be negotiated

by transfer of possession alone until specially indorsed.” R.C. 1303.25(B). A

“holder” includes a person who is in possession of an instrument payable to bearer.

R.C. 1301.201(B)(21)(a); Watson I, 2015-Ohio-221, at ¶ 25, quoting BAC Home

Loans Servicing, L.P. v. Haas, 3d Dist. Marion No. 9-13-40, 2014-Ohio-438, ¶ 27.

Therefore, by offering evidence that it was in possession of the note, which is

indorsed in blank, at the time it filed the second foreclosure and that it remains in

possession of the note, U.S. Bank has presented evidence sufficient to establish that

it had standing to bring the second foreclosure and that it is the holder of the note.

{¶54} In addition, the photocopies of the mortgage and note allegedly

executed by Pamela, the various assignments, and the power of attorney document,

along with Patterson’s averments that U.S. Bank was the assignee of the mortgage

when it filed the second foreclosure and that it is the current assignee, are sufficient

to bolster U.S. Bank’s standing to bring the second foreclosure, to establish its status

as holder of the mortgage, and to demonstrate the chain of assignments and transfers

culminating in its acquisition of the mortgage and note. Nonetheless, the Watsons

contend that U.S. Bank’s evidence fails to establish a complete, valid chain of

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transfers. They argue that U.S. Bank’s documents do “not contain [a] listing of the

mortgage loans referred to in the limited power of attorney” and that its documents

“certainly do[] not establish that a mortgage loan of [Pamela] was included in such

power of attorney.” (Appellants’ Brief at 8). The Watsons attempt to portray their

argument as a challenge to U.S. Bank’s assertion that it is actually the assignee of

the mortgage. (See id. at 9) (citing two cases allegedly dealing with the “issue of

missing documents which would show the specific mortgage loan was transferred”

and the “lack of chain of title by failure to provide documents of a specific obligation

being transferred or assigned”).

{¶55} Regardless of the way that the Watsons style their argument, by

disputing that the mortgage allegedly signed by Pamela was one of the mortgages

that Caliber was authorized to assign, but failing to account for the copy of the

recorded assignment between HSBC and U.S. Bank, it is clear that the Watsons are

challenging whether the mortgage was validly assigned to U.S. Bank rather than

challenging whether it was actually assigned. Yet, under the facts of this case, the

Watsons lack standing to challenge the validity of the assignment from HSBC to

U.S. Bank. Christiana Trust v. Berter, 12th Dist. Butler No. CA2019-07-109, 2020-

Ohio-727, ¶ 33, quoting MidFirst Bank v. Wallace, 12th Dist. Warren No. CA2013-

07-053, 2014-Ohio-4525, ¶ 14 (“‘[W]hen a debtor or mortgagor is neither a party

to, nor a third-party beneficiary of, the assignment of a mortgage, the debtor or

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mortgagor lacks standing to challenge the validity of the mortgage assignment

between an assignor and an assignee.’”); Chase Home Fin., L.L.C. v. Heft, 3d Dist.

Logan Nos. 8-10-14 and 8-11-16, 2012-Ohio-876, ¶ 37. Because the Watsons do

not otherwise contest that the mortgage was actually assigned to U.S. Bank, their

arguments do not alter our conclusion that U.S. Bank has further shown that it had

standing to bring the second foreclosure, established its status as holder of the

mortgage, and demonstrated the chain of assignments.

{¶56} Furthermore, by providing Patterson’s sworn statement that the note

is in default, her recitation of the amount of principal and interest due, a copy of the

computer spreadsheet documenting the payment history on the note, and a copy of

the default notice letter, U.S. Bank has shown that the note is in default and

evidenced the amount of principal and interest due. Generally, “an affidavit

establishing a loan is in default is sufficient to demonstrate entitlement to summary

judgment where there is no evidence controverting the affiant’s averments.” Fifth

Third Mtge. Co. v. Fantine, 5th Dist. Fairfield No. 15-CA-5, 2015-Ohio-4260, ¶ 21,

citing Cent. Mtge. Co. v. Elia, 9th Dist. Summit No. 25505, 2011-Ohio-3188, ¶ 7.

Moreover, courts have held that “‘an averment of outstanding indebtedness made in

the affidavit of a[n] * * * officer with personal knowledge of the debtor’s account

is sufficient to establish the amount due and owing on the note, unless the debtor

refutes the averred indebtedness with evidence that a different amount is owed.’”

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Id. at ¶ 27, quoting JPMorgan Chase Bank, N.A. v. Salazar, 6th Dist. Lucas No. L-

13-1038, 2014-Ohio-1002, ¶ 13 and citing Natl. City Bank v. TAB Holdings, Ltd.,

6th Dist. Erie No. E-10-060, 2011-Ohio-3715, ¶ 12. In addition, because copies of

the documents that Patterson relied on to inform her averments were attached to her

affidavit, her averments concerning default and the principal and interest due can be

properly considered in determining whether U.S. Bank demonstrated that the note

is in default and established the amount of principal and interest due. See HSBC

Bank USA, Natl. Assn. v. Webb, 10th Dist. Franklin No. 16AP-845, 2017-Ohio-

9285, ¶ 15-17. Thus, U.S. Bank’s evidence is sufficient to meet its initial burden of

showing that the note is in default and of demonstrating the amount of principal and

interest due.

{¶57} Finally, we are satisfied that there is no genuine issue of material fact

with respect to whether all conditions precedent have been met. U.S. Bank contends

that Patterson’s averments and the “Notice of Right to Cure Default” letter, which,

under the terms of the mortgage, was required to be sent prior to accelerating the

loan and filing for foreclosure, are sufficient to demonstrate that all conditions

precedent have been met. However, even assuming that this evidence does not show

that all conditions precedent have been satisfied, based on our review of the parties’

pleadings, we find it to be beyond argument that all conditions precedent have been

met.

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{¶58} In paragraph one of its complaint, U.S. Bank averred generally that it

has “complied with all conditions precedent as set forth in the note and mortgage.”

(Doc. No. 1). U.S. Bank’s pleading is permissible under Civ.R. 9(C), which

provides that “[i]n pleading the performance or occurrence of conditions precedent,

it is sufficient to aver generally that all conditions precedent have been performed

or have occurred.” In contrast, the denial of the performance or occurrence of

conditions precedent “shall be made specifically and with particularity.” Civ.R.

9(C). The performance of conditions precedent is deemed admitted “when [a] party

fail[s] to deny that the conditions precedent had been satisfied with the specificity

required by Civ.R. 9(C).” Bank of Am., N.A. v. Calloway, 8th Dist. Cuyahoga No.

103622, 2016-Ohio-7959, ¶ 19, citing Bank of Am., N.A. v. Michko, 8th Dist.

Cuyahoga No. 101513, 2015-Ohio-3137, ¶ 20-21; U.S. Bank Natl. Assn. v. Stanze,

2d Dist. Montgomery No. 25554, 2013-Ohio-2474, ¶ 13-14, quoting Lewis v. Wal-

Mart, Inc., 10th Dist. Franklin No. 93AP-121, 1993 WL 310411, *3 (Aug. 12,

1993). Here, in their answer, the Watsons generally denied paragraphs one through

four of U.S. Bank’s complaint. (Doc. No. 7). Therefore, because the Watsons failed

to deny the performance of conditions precedent specifically and with particularity

as required by Civ.R. 9(C), the performance of all conditions precedent is deemed

admitted for purposes of this action.

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{¶59} Aside from their challenge to the validity of the assignment of the

mortgage and note from HSBC to U.S. Bank, which we addressed above, the

Watsons do not seriously dispute any of the material facts of this case or offer any

evidence contradicting U.S. Bank’s evidence. The Watsons present no evidence

suggesting that Pamela did not sign the note and mortgage attached to U.S. Bank’s

motion for summary judgment. The Watsons present no evidence suggesting that

U.S. Bank is not the holder of the note or that the mortgage was not in fact assigned

to U.S. Bank. The Watsons present no evidence suggesting that Pamela is not in

default of her obligations under the note. The Watsons do not assert that a different

amount of principal and interest is due, and while their noncompliance with Civ.R.

9(C) would likely frustrate any effort to prove that there are conditions precedent

that have not been met, they do not argue that there are conditions precedent that

have not been performed. The Watsons have simply failed to rebut with specific

facts showing that there are any genuine issues for trial.

{¶60} For these reasons, we conclude that there are no genuine issues of

material fact with respect to any of the elements of U.S. Bank’s claim and that U.S.

Bank is entitled to judgment as a matter of law. Accordingly, we conclude that the

trial court did not err by granting U.S. Bank’s motion for summary judgment.

{¶61} The Watsons’ first and second assignments of error are overruled.

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Assignment of Error No. III

The trial court erred in failing to consider and to award sanctions
pursuant to R.C. 2323.51.

{¶62} In their third assignment of error, the Watsons argue that the trial court

erred by failing to grant either of their motions for sanctions. Specifically, the

Watsons argue that U.S. Bank engaged in frivolous conduct because existing law

did not support its decision to file the second foreclosure and it did not have a good

faith argument for changing existing law. (Appellants’ Brief at 9-11). Concerning

the “existing law,” the Watsons claim that “it must have been crystal clear to U.S.

Bank and its counsel after its motion to reconsider the res judicata portion of

[Watson II] was denied * * * that res judicata barred the complaint in this case * *

*.” (Id. at 10). Thus, they contend, “[a]ll the conduct of U.S. Bank and its counsel

in refusing to dismiss the second complaint and in resisting the summary dismissal

of such complaint was not only frivolous, but knowingly frivolous.” (Id.).

Moreover, the Watsons argue that “U.S. Bank and its counsel acted frivolously in

multiple areas when its * * * complaint [in the second foreclosure] failed to allege

that * * * Pamela * * * signed or otherwise made the note and mortgage or that she

was in default of said note and mortgage.” (Id.). Finally, the Watsons argue

generally that U.S. Bank acted frivolously because it did not support its motion for

summary judgment with competent evidence or provide evidence going to all the

elements of its claim. (Id. at 10-11).

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{¶63} R.C. 2323.51 is one of two mechanisms provided by Ohio law “for an

aggrieved party to recover attorney fees, court costs, and other reasonable expenses

arising out of frivolous conduct * * *.” Reddy v. Singh, 3d Dist. Marion No. 9-14-

29, 2015-Ohio-1180, ¶ 69, citing ABN AMRO Mtge. Group, Inc. v. Evans, 8th Dist.

Cuyahoga No. 98777, 2013-Ohio-1557, ¶ 15, citing Sigmon v. S.W. Gen. Health

Ctr., 8th Dist. Cuyahoga No. 88276, 2007-Ohio-2117, ¶ 14. Under R.C. 2323.51,

“at any time not more than thirty days after the entry of final judgment in a civil

action or appeal, any party adversely affected by frivolous conduct may file a motion

for an award of court costs, reasonable attorney’s fees, and other reasonable

expenses incurred in connection with the civil action or appeal.” R.C.

2323.51(B)(1). R.C. 2323.51(A)(2), which defines frivolous conduct, provides in

pertinent part:

(2) “Frivolous conduct” means * * *:

(a) Conduct of an inmate or other party to a civil action, of an inmate

who has filed an appeal of the type described in [R.C.

2323.51(A)(1)(b)], or of the inmate’s or other party’s counsel of

record that satisfies any of the following:

(i) It obviously serves merely to harass or maliciously injure

another party to the civil action or appeal or is for another improper

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purpose, including, but not limited to, causing unnecessary delay or a

needless increase in the cost of litigation.

(ii) It is not warranted under existing law, cannot be supported by a

good faith argument for an extension, modification, or reversal of

existing law, or cannot be supported by a good faith argument for the

establishment of new law.

(iii) The conduct consists of allegations or other factual contentions

that have no evidentiary support or, if specifically so identified, are

not likely to have evidentiary support after a reasonable opportunity

for further investigation or discovery.

(iv) The conduct consists of denials or factual contentions that are

not warranted by the evidence or, if specifically so identified, are not

reasonably based on a lack of information or belief.

R.C. 2323.51(A)(2)(a)(i)-(iv). “Frivolous conduct, as contemplated by R.C.

2323.51(A)(2)(a), is judged under an objective, rather than a subjective, standard *

* * and must involve egregious conduct.” State ex rel. DiFranco v. S. Euclid, 144

Ohio St.3d 571, 2015-Ohio-4915, ¶ 15, citing State ex rel. Striker v. Cline, 130 Ohio

St.3d 214, 2011-Ohio-5350, ¶ 21. “In determining whether a claim itself is frivolous

under the statute, the test is whether no reasonable lawyer would have brought the

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action in light of the existing law.” Reddy at ¶ 71, citing Orbit Electronics, Inc. v.

Helm Instrument Co., Inc., 167 Ohio App.3d 301, 2006-Ohio-2317, ¶ 49 (8th Dist.).

{¶64} “‘“[N]o single standard of review applies in R.C. 2323.51 cases.”’”

Id. at ¶ 67, quoting Namenyi v. Tomasello, 2d Dist. Greene No. 2013-CA-75, 2014-

Ohio-4509, ¶ 19, quoting Wiltberger v. Davis, 110 Ohio App.3d 46, 51 (10th

Dist.1996). “When the question regarding what constitutes frivolous conduct calls

for a legal determination, such as whether a claim is warranted under existing law,

an appellate court is to review the frivolous conduct determination de novo, without

deference to the trial court’s decision.” Id., citing Natl. Check Bur. v. Patel, 2d Dist.

Montgomery No. 21051, 2005-Ohio-6679, ¶ 10. “‘In contrast, if there is no disputed

issue of law and the question is factual, we apply an abuse of discretion standard of

review.’” Id., quoting Riverview Health Inst., L.L.C. v. Kral, 8th Dist. Cuyahoga

No. 24931, 2012-Ohio-3502, ¶ 33, citing Natl. Check Bur. at ¶ 11. Likewise, the

ultimate decision whether to award sanctions under R.C. 2323.51 will not be

reversed absent a showing of an abuse of discretion. DiFranco at ¶ 13, quoting

State ex rel. Bell v. Madison Cty. Bd. of Commrs., 139 Ohio St.3d 106, 2014-Ohio-

1564, ¶ 10, citing Striker at ¶ 11. An abuse of discretion suggests the trial court’s

decision is unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5

Ohio St.3d 217, 219 (1983).

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{¶65} In its February 9, 2018 judgment denying the Watsons’ first motion

for sanctions, the trial court found that U.S. Bank “was justified in the filing of the

new, albeit nearly identical, complaint in which the previous admissions deemed

admitted were not an issue.” (Doc. No. 23). Consequently, the trial court concluded

that U.S. Bank “committed no frivolous conduct” and denied the Watsons’ first

motion for sanctions. (Id.). Although the trial court did not make any findings of

fact with respect to its denial of the Watsons’ second motion for sanctions, the

Watsons’ second motion for sanctions was based on the same res judicata argument

as its first motion for sanctions as well as arguments relating to supposed defects in

U.S. Bank’s summary-judgment evidence. (Doc. Nos. 46, 49, 50).

{¶66} In light of our resolution of the Watsons’ first and second assignments

of error, we conclude that the trial court did not err by holding that U.S. Bank did

not engage in frivolous conduct. As explained in our discussion of the Watsons’

first assignment of error, U.S. Bank is not barred either by claim preclusion or by

issue preclusion from maintaining the second foreclosure or from litigating issues

critical to succeeding on its claim. Therefore, we cannot conclude that U.S. Bank’s

claim is frivolous because existing law supports that the claim could be brought and

litigated by a reasonable lawyer. Furthermore, in our examination of the Watsons’

second assignment of error, we concluded that U.S. Bank supported its motion for

summary judgment with evidentiary-quality materials, that U.S. Bank demonstrated

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the absence of any genuine issues of material fact concerning the elements of its

claim, that the Watsons failed to rebut U.S. Bank’s showing, and that U.S. Bank is

entitled to judgment as a matter of law. Thus, because we have already necessarily

rejected the Watsons’ arguments relating to the quality and sufficiency of U.S.

Bank’s allegations and evidence, we cannot now hold that U.S. Bank conducted this

litigation in a frivolous manner. In sum, as we agree with the trial court that U.S.

Bank did not engage in frivolous conduct, we conclude that the trial court did not

abuse its discretion by denying the Watsons’ motions for sanctions under R.C.

2323.51.

{¶67} The Watsons’ third assignment of error is overruled.

{¶68} Having found no error prejudicial to the appellants herein in the

particulars assigned and argued, we affirm the judgment of the trial court.

Judgment Affirmed

WILLAMOWSKI and ZIMMERMAN, J.J., concur.

/jlr

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