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IN THE COURT OF COMMON PLEAS CUYAHOGA COLINTY, OHIO

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REO PROPERTIES CORP.,

Plaintiff,

) ) )

CASE NO. 66663

ruDGE EILEEN T. GALLAGHER MAGISTRATE STEPHEN M. BUCHA III

i ;il !'.1 A l0,ULt , . i. tr1: .., : r\i:,, uo^i :i:l I ,,._, i,4iiui:A C[ili; l.r.
^E* .:

vs.

) THOMAS E. JEFFERS, et al,

) ) ) ) )

MAGISTRATE'S DECISION

Defendants.

This cause came on for trial before the Magistrate on August 26,2011.
Considering the evidence and testimony introduced at the trial, the parties' stipulations
and the parties' post-trial briefs, the magistrate makes the following flndings of fact and

conclusions of 1aw.

I. Findings of Fact

1.

Defendant Thomas Jeffers owns a parcel of property located at 6310 Big Creek Parkway, Parma Hts., Ohio and known as P.P.N. 473-12-006 ("the property").

2.

On June 8,2006, Thomas Jeffers executed a note in the sum of $204,736,00 in

favor of New Century Mortgage Corporation ("the note"). This note is endorsed
in blank by New Century Mortgage Corporation.

3. To secure the payment of this note, also on June 8, 2006, Thomas Jeffers executed
a

mortgage in favor of New Century Mortgage Corporation ("the mortgage").

Thomas Jeffers's spouse, Stephanie Jeffers, also executed this mortgage to subject
her dower rights in the property to the mortgage. The mortgage was filed for

record on June 15,2006, and recorded at AFN 200606150977 ofthe Counff

Records.
4.

New Century Mortgage Corporation assigned the mortgage to plaintiffREO

Properties Corp. ("REO") on April 2,2007 ("the mortgage assignment"). This
assignment was filed for record on February 8, 2008, and recorded at AFN

200802080521 of the County Records. The mortgage assignment also purports to assign the note. Strangely, recorded along with the rnortgage assignment is an allonge that also purports to assign the note to

REO. The original

note was

produced at the trial of this matter. The original note does not contain this

allongel.
5.

Late in 2006, the Jeffers began experiencing financial difficulties. Thomas Jeffers
contacted New Century Mortgage Corporation to request a loan modification to
lor,ver the monthly payment on the note and

mortgage. Thomas Jeffers claims he

was told that unless he defaulted on the loan, no loan modification was possible.

Eariy in 2407, the Jeffers stopped making payments on the note and mortgage.
6.

Prior to April i5, 2008, Ocwen serviced the note and mortgage. As the servicer
Ocwen collected the monthly payrnents and communicated rvith defendants Jeffers concerning the status of the note and mortgage.

7.

On July 23,2007,Ocwen sent a letter to Thomas Jeffers concerning his default. Notr.vithstanding the mortgage assignment to REO dated April 2,2007, this letter

an allonge is to add endorsements to a negotiable instrument. HSBC Bank LISA, N.A. v. Thompson, (September 3,2010), Montgomery App. No. 23761, unreported. An allonge that is not affixed to the negotiable instrument does not serve to transfer the negotiable instrument. See Id.; In re Weisband, (Bkr. D. Ariz.2010),427 B.R. 13, 19. Since the allonge to REO that was recorded with the mortgage assigrunent is not affixed to the original note it is of no effect and ivill not be corisidered irr ihe magistrate's

' The purpose of

analysis of standing. See Id.

identifies the "creditor" regarding the note and mortgage as "DB Structured
Products, Inc."

8.

The servicer of the note and mortgage changed to Green Tree Servicing LLC

("Green Tree") on April 1 5, 2008. At the trial of this matter, Josh Degneau, Director of Specialty Services for Green Tree ("Degneau") testified on behalf of

REO. Regarding the above letter, Degneau

stated that he had not seen any

records indicating that DB Structured Products, Inc. was the owner of the loan. He fuither testified that DB Structured Products, Inc. and REO were different but related entities, and that the identification of DB Structured Products, Inc. as

"creditor" in the above letter "could have been

mistake."

9.

REO introduced several limited powers of attomey it claims gives Green Tree

authority to service the note and mortgage. The powers of attorney in effect from May 6,2008, to February 20,2009, and from February 21,2009, to October
1,

2009, are executed by REO and contain no reference to DB Stmctured Products,

Inc.

The polvers of attorney in effect from October 1,2009, to April 1,2010,

3 1,

from April 1,2010, to December

2010, and from January 1, 201 1 , to

December 31,2011, are also executed by REO. These three po'"vers of attorney,
hor,vever, include a cover sheet not present on the earlier two powers of attorney.

These cover sheets all provide:

LIMITED POWER OF ATTORNEY

TO FROM DATED DEAL GREEN TREE SERVICING LLC RBO Pronerties Cornoration 3n7t10 DB Structured Product,Inc. (DBSP)

No testimony was provided as to the meaning of the term "deal" in these

coversheets.
10. On November 18,2009, Green Tree sent Thomas Jeffers a letter a change in ownership of this

informing him of

loan. This letter provides:

Dear Valued Customer:

RE: DB Structured Products, Inc. Mortgage

Loan Account

Number: 890048945

On September 29,2009, the creditor that is the owner of your above-referenced mortgage loan changed from DB Structured Products, Inc. to Green Tree SerVertis Acquisition LLC. and then immediately changed to U.S. Bank National Association ('U.S. Bank'), not in its individual capacity, but solely as trustee for SerVertis REO Pass-Through Trust I ('the Creditor)[sic]. U.S. Bank may be reached at 1-800-03 4-6802, or write them at U. S. Bank Corporate Trust Services, 60 Livingston Avenue, EP-MN-WS3D. St. Paul, Minnesota, 551A7-2292.
The transfer of the ownership of your loan will be tormally recorded in the real property records of the count,v in rvhich your mortgage was originally recorded. A copy of the agreement pursuant to which the loan was transferred to the new owner is maintained at Green Tree Servicing LLC ('Green Tree'), 300 Landmark Towers, 345 St. Peter Street, St. Paul, MN 55102-1637. This notice does not change the address where you send your mortgage loan payments. Sincerely,
Green Tree
11. Regarding the above letter, Degneau testified on cross-examination:

a. .

. [H]ave you ever seen these three entities [DB Structured Products, Inc., Green Tree SerVertis Acquisition LLC and U.S. Bank National Association, not in its individual capacity, but solely as trustee for SerVertis REO Pass-Through Trust I] Iisted as owners [of the note and mortgage] or having been owners in a succession?
. . . Green Tree services the loan for a group that's identified as SerVertis so its kind of an internal . . . classification.

A. Not listed as owners

Q. SerVertis

is a trust is it not?

A. It's not necessarily a trust. It's sort of an investment

Q.
loans]?

group. . . . in [a] pool [of

So that investment group owns the notes and mortgages

A. In the pool yes.

. . . But as far as in this case actually being the owner of record [given] the status of the account at the time of conversion it was a business decision not to change the owner of record at the time because the action has already been started. IBV the magistrate] Is this loan nor,v owned by SerVertis?

Q.

A. The owner of record is REO Properties

Q. I understand

Co.p.

the owner of record . . . I want to know rvho owns it

now. . .?

A.

Green Tree services the loan for SerVertis who in a pool of loans purchased [the subject loan] . . . and Green'Iree services for them now. REO Properties is still the record owner.

Q. I understand that. I want to know who is the actual owner and according
to this [letter of November 18, 2009], it's SerVertis Trust, is that accurate?

A.

Well based on this I don't think I can say yes to that because based on this it says 'the transfer of the ownership of your loan will be formally recorded in the real property records of the county in which your morlgage was originally recorded'. It was not recorded as SerVertis Pass-Through
Trust.

On redirect examination Degneau testified lurther:

Q.

Can you tell the Court why ownership was not changed from REO Properties to any other entity? . . .

A.

There's a legal action in place and the decision rvas made to . . . not change the owner of record until . . the situationwas resolved. It's my assumption that after the action . . . there will be a new recording.
the present time there has been no internal assignment or anything that has been done to transfer ownership?

Q. At

A.
12.

No, there has been no other internal transfers at all.

No other entities other than Ocwen, Green Tree and REO have attempted to
collect this debt from the Jeffers.

3. After falling delinquent, the Jeffers

made numerous attempts to secure a loan

modification, f,rrst from New Century Mortgage Corporation, then from Ocwen.
Just as the servicing of the note and mortgage was about to change from Ocwen to

Green Tree, Ocwen sent a proposed loan modification to the Jeffers ("the

modification"). The modification

appears to have capitalized the Jeffers' missed

payments, increasing the principal balance of the loan to $232,132.00, and lowered the interest rate of the note from 9.85% per annuln, variable, to 6.00 per affrum,
Yo

fixed.

The modification called for

a three-month trial period.

During this trial period, the Jeffers were required to rnake one payment of
$4,519.00 on or before March 18, 2008, and two payments of $1,389.00, on May

1,2008, and June 1,2008" If these payments were made, the Jeffers were
required to make ongoing monthly payments of $1,389.00 until the loan was paid. The modification also provides:

BY EXECUTING THIS MODIFICATION, YOU FOREVER IRREVOCABLY WAIVE AND RELINQUISH ANY CLAIMS, ACTIONS OR CAUSES OF ACTION, STATUTE OF LIMITATIONS OR OTHER DEFENSES, COLINTERCLAIMS OR SETOFFS OF ANY KIND V/HICH EXIST AS OF THE DATE OF THIS MODIFICATION, WHETHER KNOWN OR UNKNOWN, WHICH YOU MAY NOW OR HEREAFTER ASSERT IN CONNECTION WITH THE MAKING, CLOSING, ADMINISTRATION, COLLECTION OR THE ENFORCEMENT BY OCWEN OF THE LOAN DOCUMENTS, THIS MODIFICATION OR ANY OTHER RELATED AGREEMENTS.

BY EXECUTING THIS MODIFICATION, YOU IRREVOCABLY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COU{TERCLAIM ARISING OUT OF OR RELATING TO THIS N4ODIFICATION ANY RELATED AGREEMENTS OR DOCUMENTS OR TRANSACTIONS CONTEMPLATED IN THIS MODIFICATION.
14. Thomas Jeffers executed this modification on

April

14, 2008, and sent in the first

payment of $4,519.00 to Ocrven.

15. By the time Ocwen received the payment, servicing of the note and mortgage had

transferred to Green Tree. The payment was forward to Green Tree. Even though the modification calls for the first payment to be tnade on or before March 18, 2008, Green Tree accepted and applied the payment.
16. The modification has a signature line for Ocwen. No representative of Ocwen or

Green Tree executed the modification.

17. Because Thomas Jeffers never received a copy of the loan modification executed

by Ocwen or Green Tree and, as a result of the servicing change, he was confused
about where to send further payments, Jeffers did not send the additional trial period payments.
18. Thomas Jeffers contacted Green Tree to address these trvo issues and claims he

was told not to make any payments until the status of the loan modification was

clarified.
19. Before Thomas Jeflers received any clarification concerning the loan

modification, on July 31,2008, REO filed the present case seeking to foreclose
the note and mortgage.

20.Inresponse, the Jeffers filed numerous counterclaims. At the trial of this matter,
the Jeffers dismissed all counterclaims save the Jeffers' claim of

unconscionability. The unconscionability claim is based upon Thomas Jeffers's

allegations that New Century and REO, through its servicing agents, instructed

him to cease making payments on the note and mortgage on various occasions
and then later filed this foreclosure case.

II. Opinion
A. Standing

All

cases must be prosecuted in the name

of the real party in interest. Civ.R.

17(A). The real party in interest in a foreclosure case is one who holds both the debt and
the security, i.e. both the note and the mortgage. Deutsche Bank Nationql Trust Co.
v.

Triplett, (February 3,2011), Cuyahoga App. No. 94924, unreported see also HSBC Bank
USA v. Thompson, (September 3,2010), Montgomery App. No. 2376t,unreported

(Where assignee of mortgage and assignee of note are two different entities, the assignee

of mortgage is not the real party in interest to assert claim for foreclosure of the
mortgage); Curry & Durham, Ohio Real Property Law & Practice (5th Ed. 1996) Section 17-5(a) (To have the rights of the original mortgagee, an assignee must receive the debt
as

well

as the

security). The plaintiff must be the "owner" of the note and mortgage

when the case is filed to have standing to file the case. Wells Fargo Bank N.A. v. Jordan,

(March 12,2009), Cuyahoga App. No. 91675,unreported. A lender seeking foreciosure

has the burden of proving

it

has standing and all other essential elements of its case by

the preponderance of the evidence. See Montgomery v. Mosley, (August

24,1990),pike

App. No. 448, unreported.

The term "owner" for the purposes of standing has not been expressly defined by

the Cuyahoga County Court of Appeals.

1. "Owner"

Based Upon Post-lordun Practice

"Owner" for the purposes of standing does not necessarily mean assignee of
record. If the plaintiff is able to provide evidence that the loan in question was
transferred to the plaintiff at some point prior to the filing of the case, standing is present.

See Bank One, N.A. v.

Dillon, (April 27,2005), Lorain App. No. 04CA008571,

unreported (Failure to record mortgage assignment has no effect on its validity between
the parties to the assignment or the authority of the assignee to enforce the mortgage via

fbreclosure). The Cuyahoga County Court of Common Pleas has routinely determined
standing and "ownership" of a note and mortgage based upon documents outside of the

county records such as pooling and servicing agreements. This broad concept

of

ownership may be best summ arizedby Black's Law Dictionary's definition of "owner" - "One rvho has the right to possess, use, and convey something." Black's Law

Dictionary, (7th ed. 1999) i 130.

To prove standing, REO has submitted the recorded assignment of the mortgage to REO, which also purports to assign the note. This assignment was executed before the
case was

filed. No subsequent

assignments were recorded. No specific endorsements

appear on the note transfening

it to an entity other than REO. In the absence of other

evidence, this would be sufhcient to establish standing.

Evidence exists, however, that an entity other than REO owned the note and
rnortgage at the time the case was

filed.

The letter from Ocwen to Thomas Jeffers dated

after the mortgage assignment but before the case was filed identifies the "creditor" as

DB Structured Products, Inc., not REO. A creditor is defined as, "One to whom

a debt is

owed; . . . A person or entity with a definite clam against another, esp. a claim that is
capable of adjustment and

liquidation." Black's Law Dictionary,

(7th ed. 1999)

375. A

letter sent to Thomas Jeffers from Green Tree on November 18,2009, after the case was

filed, states, "On September 29,2009, the creditor that is the owner of your abovereferenced mortgage loan changed from DB Structured Products, Inc. to Green Tree

SerVertis Acquisition LLC. and then immediately changed to U.S. Bank National Association ('U.S. Bank'), not in its individual capacify, but solely as trustee for SerVertis REO Pass-Through Trust I ('the Creditor)."

From these letters, one can conclude that the servicers ofthe subject loan use the
term "owner" and "creditor" interchangeably. Moreover, one can conclude that the
various parties described in the letter of November 18, 2009, were owners of the loan
because these parties freely conveyed their interests in the

loan. See Black's Law

Dictionary, (7th ed. 1999) 1130. Moreover, these letters and the powers of attorney
submitted by REO indicate that DB Structured Products Inc. had or has some interest in this loan. REO points to the fact that record ownership of the mortgage is in REO as a basis

for standing. Its clear from Degneau's testirnony that record ownership of the mortgage
was not determinative of the true owner of the loan. He testified that the true ownership

of loan at this time is not in REO, but rather, an entity he identified as the SerVertis
investment trust and that "a business decision" was made not to transfer the mortgage

of

record because of this pending litigation. Thus, the fact that record ownership is in REO
does not foreclose the possibility that some other entity such as

DB Structured Products,

Inc. actually owned the note and mortgage rvhen the case was filed. REO also points to the Jeffers testimony that no other entity other than REO,
Ocwen and Green Tree attempted to enforce the note and mortgage as evidence that no other entity ou,ns the note and morlgage. Based upon the letter from Green Tree to Thomas Jeffers dated November 18, 2009, despite the ownership changes detailed therein, Green Tree remained the servicer of the

loan. As long as Green Tree remained

10

the servicer, all efforts to enforce the note and mortgage would likely be made by Green
Tree, regardless of the

owner.

Thus, the fact that only Green Tree and REO attempted

to enforce the note and mortgage is not necessarily indicative of REO's ownership of the
note and mortgage.

REO cites Pinney v. Merchqnts' National Bank of Defiance, (1904),71 Ohio St.
173 and Wagner v. Bank One, Athens, (December 20, 1995), Gallia App. No. 95CA7,

unreported, in support of its arguments related to standing. Each of these cases involved
an assignee of a mortgage who failed to record the mortgage assignment. As a

consequence, the assignee's predecessor, not the assignee, wasjoined in the foreclosure
case and

failed to answer the foreclosure complaint. The assignee's mortgage was

extinguished by the sheriff s sale of the property. In each case, it was held that if the
assignee does not record the assignment and thus is not named as a party to the

foreclosure case, he is bound by the decree of foreclosure to the same extent as the named party assign or , Pinney v. Merchants ' National Bank of Defiance,
7

I Ohio St. at 1 84;

Wagner v. Bank One, Athens, (December 20,1995), Gallia App. No. 95CAl, unreported.

It is unclear how these

cases support REO's claimed

standing. At issue is REO's

right to assert the note and mortgage. The rights of an assignee who failed to record his
assignment are not at issue. Thus, Pinney and Wagner are not relevant to the issue standing in this case.

of

Considering all of the evidence submitted by the parties concerning standing, it is more likely than not that the "owner" of the note and mortgage was DB Structured
Products Inc. from some time before the Ocwen letter of July 23,2007, to September 29,

2009. Thus, despite the recorded assignment to REO, REO has failed to prove that it was

11

the owner of the note and mortgage at the time the case was filed on July 31, 2008, and
has failed to meet its burden of proof concerning standing.
See

Montgomery v. Mosley,

(August 24,1990), Pike App. No. 448, unreported; Wells Fargo Bank N.A. v. Jordan,

(March 12,2009), Cuyahoga App. No. 91675,unreported.

2. ttOwner"

Based Upon UCC

Prior to the decisionin Jordan, this court looked to Ohio's version of the Uniform
Commercial Code ("UCC"), R.C. Sec. 1303.01 et seq., to determine whether the party
seeking foreclosure was entitled to enforce the subject promissory

note. It is unclear

whether the Court of Appeals concept of "owner" as set forth in Jordan encompasses one who is entitled to enforce the negotiable instrument under the UCC. Neither party in this
case addressed REO's

ability to enforce the subject promissory note under the UCC.

Nevertheless, even if the concept of "owner" under Jordan encompasses one with the

ability to enforce the note under the UCC, REO has failed to prove that it is entitled to
enforce the note.

R.C. 1303.31 states:

(A) "Person entitled to enforce" an instrument means any of the following

persons:

(1) The holder of the instrument;

(2) A nonholder in possession of the instrument who has the rights of a holder; (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.

a. Holder

t2

One cannot become a holder of a negotiable instrument without the instrument

having been negotiated to him. Vitols v. Citizens Banking Co., (6th Cir. 1993), 10 F.3d

1227,1235 (applying Ohio law).

R.C. Sec. 1303.21 provides:

(A) "Negotiation" means a voluntary or involuntary transfer of possession of an instrument by a person other than the issuer to a person who by the transfer becomes the holder of the instrument. (B) . . . if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement2 by the holder. If an instrument is payable to bearer, it may be negotiated by
transfer of possession alone.

In this case, the note in question is endorsed in blank. Thus, REO would have
been the holder of the note and entitled to enforce the note at the time the case was

filed
v.

only

if it possessed

the note when the case was filed. See R.C. Sec.

03 .2 1 (B)

; Vitols

Citizens Banking Co., 10 F .3d at 1235. The original note was produced at trial. Off the record, REO's counsel indicated that the note came from "the vault". The location or the owner of the vault was not

disclosed. There is no direct testimony regarding who was in actual possession of the
note either at the time of

filing of the

case or at the time of

trial.

Degneau, an employee

of Green Tree, testified that he was familiar with the note and was able to identify it.
Based on this testimony,

it is likely that Green Tree

possessed the note as servicing agent

on behalf of the parly for whom it was servicing. As detailed above, it is more likely than not that Green Tree was servicing this loan for DB Structured Products, Inc., not REO, when this case was filed. Therefore, at that time, Green Tree possessed the note as agent 'Ohio's version of the UCC, like the originai, uses the spelling of "indorsement" with an "i" rather than the more commonly seen "e" or "endorsement". The magistrate will use the common spelling in this opinion and spell indorsement rvith an "e", unless quoting the statr_lte.

13

of DB Structured Products, Inc. REO was not in possession of the note when the case
was

filed. Consequently, REO

has filed to prove it was the "holder" of the note when the
See

case was filed and was

not aparty who is entitled to enforce the note as a holder.

Id.;

R.C. Sec.1303.31.
b. Nonholder

in Possession Who Has the Rights of a Holder

1 states that a nonholder

Pat (A)(2) of R.C. Sec. 1 3 03.3

with the rights of

a holder

in possession of the negotiable instrument may enforce

it. A "nonholder in possession"

includes a person that acquired the rights of a holder by subrogation or who is the legal
successor entity to the holder. See Uniform Commercial Code, Official Comments, Sec.

3-301. In may be, by virtue of the mortgage

assignment that also purported to assign the

note to REO, that REO is a nonholder with the rights of a holder. In order to be entitled

to enforce

a note pursuant

to R.C. Sec. 1303.31(AX2), the nonholder must not only have

the rights of a holder but must also possess the note. As detailed above, Green Tree
possessed the note as agent of

DB Structured Products, Inc. when the case was filed and

REO has failed to prove it rvas in possession of the note at that time. Accordingly, REO
has failed to prove it was a nonholder with rights of a holder in possession of the note

when the case was filed and was not a party who is entitled to enforce the note as a nonholder in possession under R.C. 1303.31(AX2).

c. A Person Not in Possession Who is Entitled to Enforce the Instrument

R.C. Sec.1303.31(AX3) applies in situations where the negotiable instrument is
lost or where payment was made or accepted by mistake. See R.C. Sec.1303.38; R.C. Sec.1303.58. Neither situation is applicable to this case. Accordingly, REO is not entitled to enforce the note under this section.

t4

B.

Consequences of Lack of Standing

Since REO has not proved that it is entitled to enforce the note under R.C. Sec.
13

03 .3 1 ,

if the concept of owner

as set forth in Jordan encompasses one who is entitled

to enforce the note pursuant to Ohio's version of the UCC, REO has failed to prove it has
standing under this section.

In this county, standing is considered to

be

jurisdiction al. See Mortgage

Electronic Registration systems, Inc. v. Mosley, (June 24,2010), Cuyahoga App. No.
93170, unreported; see also see Freedom Mortgage corp. v. Perry, (June 23, 20lr), Cuyahoga App. No. 95834, unreported. If the plaintiff is not the owner of the note and mortgage at the time the case is filed, it cannot invoke the jurisdiction of the Court3. Id. Thus, the appropriate action by the Court where a party fails to prove standing is not a decision on the merits, but rather, a dismissal without prejudice. See Freedom Mortgage

Corp. v. Perry, (June 23, 2011), cuyahoga App. no. 95834, unreported. Accordingly, REO's complaint is dismissed without prejudice. See Id.

C. The Jeffers's Counterclaim

l. Jurisdiction
The Jeffers have asserted a counterclaim under R.c. Sec. 1345.01 et seq. alleging that New Century and REo through its servicing agents committed an unconscionable act by instructing Thomas Jeffers to not make payments on the note and moftgage on various occasions. Given that plaintiff has failed to properly invoke the

In most other counties, standing in foreclosure cases is not considered jurisdiction al. See JpMorgan Chase Bank Trustee v. Murphy, (October 29,2010), Montgomery App. No. 23927, unreported (The issue of lack of standing "challenges the capacity of a party to bring an action, not the subject matter jurisdiction of the court"); See also Federal Home Loan Mortgage Corp. v. Schwartzwald, (June 3,2010),Greene App.
No. 2010 CA 41, rinreported.

l5

jurisdiction of the court, it is necessary to determine the Court's jurisdiction to consider

the Jeffers's counterclaim before addressing the merits of said claim.

A trial court has jurisdiction over a counterclaim filed in

a foreclosure case where

plaintiff failed to demonstrate standing if the counterclaim can be adjudicated

independently from the complai*. See Citimortgage v. Slack, (February 10,2011),
Cuyahoga App. No. 94899, unreported. In Slack, the defendants filed a counterclaim

alleging breach of contract, fraud, and misrepresentation arising from a forbearance

agreement entered in relation to an earlier foreclosure case.

Plaintiff s complaint was

dismissed for lack of standing. The trial court also dismissed the counterclaim because "the jurisdiction of the court was never invoked and any judgment rendered in [the] case,

including any judgments on counterclaims, would be a nullity." The Court of Appeals

held that the counterclaim could be adjudicated independently from the complaint. 1d
Thus, the Court had jurisdiction to consider the counterclaim despite the dismissal of the

complaint for lack of standing and committed reversible error by dismissing the counterclaim. Id. Likewise, in this case, the Jeffers's claim for unconscionability can be adjudicated
independently from the complaint. Thus, the Court has jurisdiction to consider this

claim despite the dismissal of the complaint for lack of standing. See Id.

2. Unconscionability
R.C. Sec. 1345.031 provides in relevant part:

No supplier shall commit an unconscionable act or practice concerning a consumer transaction in connection with a residential mortgage. Such an unconscionable act or practice by a supplier violates this section whether it occurs before, during, or after the transaction.

(A)

16

For purposes of division (A) of this section, the following acts or practices of a supplier in connection with such a transaction are unconscionable: (6) Recommending or encouraging a consumer to default on a mortgage or any consumer transaction or revolving credit loan agreement; . . . R.C. Sec. 1345.01 defines a "supplier" as a person engaged "in the business

(B)

of

effecting or soliciting consumer transactions." Further, in relation to R.C. Sec. 1345.031

"supplier" includes the assignee of

a supplier

if the act complained of was committed by

the assignee or if the assignee is affiliated by common control with the seller of the loan
at the time of such assignment.

R.C. Sec. 1345.09 provides: For a violation of Chapter 1345. of the Revised Code, a consumer has a cause of action and is entitled to relief as follows:

(A) Where the violation was anactprohibited by section. . . 1345.031 of the Revised Code, the consumer may, in an individual action, rescind the transaction or recover the consumer's actual economic damages plus an amount not exceeding five thousand dollars in noneconomic damages.
(B) where the violation was an act or practice declared to be deceptive or unconscionable by rule adopted under division (BX2) of section 1345.05 of the Revised code before the consumer transaction on which the action is based, or an act or practice determined by a court of this state to violate section 1345.02,1345.03, or 1345.031 of the Revised Code and committed after the decision containing the determination has been made available for public inspection under division (AX3) of section 1345.05 of the Revised Code, the consumer may rescind the transaction or recover, but not in a class action, three times the amount of the consumer's actual economic damages or two hundred dollars, whichever is greater, plus an amount not exceeding five thousand dollars in noneconomic damages or recover damages or other appropriate relief in a class action under Civil Rule 23, as amended.

(F) The court may award to the prevailing party areasonable attorney's fee limited to the work reasonably performed, if either of the following apply:

t7

(1) The consumer complaining of the act or practice that violated this chapter has brought or maintained an action that is groundless, and the consumer filed or maintained the action in bad faith; (2) The supplier has knowingly committed an act or practice that violates this chapter.

(G) As used in this section,"acttJal economic damages" means damages for direct, incidental, or consequential pecuniary losses resulting from a violation of Chapter 1345. of the Revised Code and does not include damages for noneconomic loss as defined in section 2315.18 of the Revised Code.

a. Damages Pursuant to R.C. Sec. 1345.09(4) The Jeffers produced no testimony concerning damages, economic or otherwise,

suffered as the result of REO's alleged unconscionable acts. In their post trial brief, the
Jeffers claim that the amount claimed by REO on the note and mortgage is the measure

of

his damages. This sum is the measure of Thomas Jeffers's obligation to the owner of this
loan, not a measure of damages. The Jeffers also claim their "non-economic damages are a minimum of

$5,000.00." How the Jeffers arrive

at this figure is unclear. There is

no evidence in the record of non-economic damages. The Jeffers also claim they have incurred attorney's fees as the result of REO's unconscionable acts. While the Jeffers
have certainly incurred attorney's fees in this case, they neither produced evidence

of

these fees nor expert testimony in support of any claimed fees. Thus, the Jeffers have

failed to prove that they are entitled to damages under R.C. Sec. 1345.09(A) for economic or non-economic loss as the result of REO's alleged unconscionable acts.

b.

Damages Pursuant to R.C. Sec. 1345.09(8)

Moreover, the Jeffers have not submitted any evidence that demonstrates REO
has committed an act or practice declared to be deceptive or unconscionable by rule

18

adopted under R.C. Sec. 1345.05(8) or by a court of this

state. Thus, the Jeffers have

failed to show that they are entitled to statutory damages pursuant to R.C. Sec. 1345.09(B). see Lewis v. ACB Business services, ftc., (S.D. ohio 1996), 911 F.Supp. 290,295 (Applying R.C. 1345.01 et seq.).
Consequently, assuming that REO is a supplier under R.C. 1345.01 et seq. and that the acts complained of by the Jeffers were unconscionable, the Jeffers have failed to prove any damages resulting therefrom and have failed to meet their burden of proof. See

Id. at 295-296. Therefore, judgment must be rendered in favor of REO on this claim.
See Id.

c. Attorney's Fees Pursuant to R.C. Sec. 1345.09(F)

R.C. Sec.1345.09(F) allows the recovery of attorney's fees by "the prevailing

party" under limited circumstances. The Jeffers have not prevailed on this claim and are
not entitled to attorney's fees under this section. D. Motion In Limine

In conjunction with their post-trial brief, the Jeffers have moved to exclude the
testimony of Donald McFadden, one of REO's witnesses, because REO's witness list was

filed

a day late and was not served on the

Jeffers' counsel until the day before the triala.

A motion in limine is rendered moot by the dismissal of the claims to which the
challenged testimony relates. Brodnax v. Green Credit Service, (1997),1 18 Ohio App.3d 881, 894. Since

plaintiffs claims have been dismissed

and Donald McFadden's

testimony was offered in support of these claims, the Jeffers's renewed motion in limine is moot. See Id.

This mcrtion was made o|rll; d,.iring the trial and wes denied because th^ Jlrrvrr lleru lrut ---:..-r:^^r r^-. LrrL raff.." PrsJurrtusu uy the delay in identising this wihress.

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III.

Ruling

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the

complaint of plaintiff REO Properties Corporation is dismissed without prejudice.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that judgment is

rendered in favor of

plaintiff REO Properties Corporation against Thomas Jeffers and

Stephanie Jeffers on the Jeffers's counterclaim.

IT IS SO ORDERED

S#. n E-tL::
STEPHEN M. BUCHA III, MAGISTRATE

A party shall not assign as effor on appeal the Court's adoption of any finding of fact or conclusion of law unless the party timely and specifically objects to that finding or conclusion as required by Civ.R. 53(DX3).

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CERTIFICATE OF SER\'ICE

Mr. David Demers Attorney atLaty Three North High Street P. O. Box 714 New'Albany, Ohio 43054 Mr. Benjamin D. Camahan Attorney at Law 5910 Landerbrook Drive Suite 200 Cleveland, Ohio 44124 Mr. Harry J. Depietro Attorney at Law 7 West Liberty Street Girard, Ohio 44420
State of Ohio Bureau of Worker's Compensation 30 West Spring Street Columbus, Ohio 43215

Mr. Kenneth A. Blech Attorney atLaw

10850 Pearl Road, Suite D-3 Strongsville, Ohio 44136

Copies of the foregoing has been sent by ordinary U. S. Mail by the Clerk of Court to the fbllowing parties or their counsel of record: Copies mailed by the Clerk of Courls on