[Cite as Liberty Savs. Bank, F.S.B. v. Bowie, 2014-Ohio-1208.]


STATE OF OHIO                     )                        IN THE COURT OF APPEALS
                                  )ss:                     NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT                  )

LIBERTY SAVINGS BANK, F.S.B.                               C.A. No.   27126

        Appellee

        v.                                                 APPEAL FROM JUDGMENT
                                                           ENTERED IN THE
GILBERT C. BOWIE, aka                                      COURT OF COMMON PLEAS
Gilbert Bowie, et al.                                      COUNTY OF SUMMIT, OHIO
                                                           CASE No.   CV 2013 01 0379
        Appellants

                                 DECISION AND JOURNAL ENTRY

Dated: March 26, 2014



        HENSAL, Presiding Judge.

        {¶1}     Appellants, Gilbert C. Bowie and Sharlene Bowie, appeal from the judgment of

the Summit County Court of Common Pleas. For the following reasons, this Court reverses.

                                                      I.

        {¶2}     On October 9, 2009, Mr. Bowie executed a promissory note in favor of Liberty

Savings Bank, F.S.B. for the property located at 1132 Dietz Avenue in Akron, Ohio. The note

was secured by a mortgage on the property executed by both Mr. and Mrs. Bowie in favor of

Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for Liberty Savings. The

mortgage was assigned three separate times between MERS and Liberty Savings over the course

of approximately one year. The last assignment from MERS to Liberty Savings was recorded on

November 20, 2012. The note has two indorsements marked “cancel[led]” and a third blank

indorsement signed by Liberty Savings. In addition, Mr. Bowie and Liberty Savings executed a
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loan modification agreement that was recorded on August 16, 2012, which altered the repayment

terms of the note but left the remaining terms “unchanged.”

       {¶3}    On January 16, 2013, Liberty Savings filed a complaint for foreclosure against the

Bowies, NPCS, Inc. and Fleetwood Properties, LLC. Liberty Savings attached to its complaint

copies of the promissory note, mortgage, three mortgage assignments and the loan modification

agreement.    The Bowies filed an answer that asserted several “defenses and affirmative

defenses.”    The trial court entered default judgment against NPCS, Inc. and Fleetwood

Properties, LLC. Liberty Savings filed a motion for summary judgment, which the trial court

granted after the Bowies failed to file a response in opposition. The Bowies now appeal the

entry of summary judgment to Liberty Savings and raise two assignments of error for this

Court’s review.

                                               II.

                                 ASSIGNMENT OF ERROR I

       THE TRIAL COURT ERRED WHEN IT GRANTED SUMMARY JUDGMENT
       TO THE BANK, AS THERE WAS A GENUINE ISSUE OF MATERIAL FACT
       WHETHER THE BANK PROVIDED THE PROPER NOTICES OF DEFAULT
       PRIOR TO ACCELERATION AND FOR A FACE-TO-FACE MEETING, AS
       REQUIRED BY APPLICABLE FEDERAL LAW FOR AN FHA MORTGAGE.

       {¶4}    In their first assignment of error, the Bowies argue that the trial court erred in

granting summary judgment to Liberty Savings as a genuine issue of material fact remained as to

whether Liberty Savings complied with all applicable federal regulations issued by the Secretary

of Housing and Urban Development (HUD). This Court agrees.

       {¶5}    An appellate court reviews an award of summary judgment de novo. Grafton v.

Ohio Edison Co., 77 Ohio St.3d 102, 105 (1996). “We apply the same standard as the trial court,

viewing the facts in the case in the light most favorable to the non-moving party and resolving
                                                3


any doubt in favor of the non-moving party.” Garner v. Robart, 9th Dist. Summit No. 25427,

2011–Ohio–1519, ¶ 8. Pursuant to Civil Rule 56(C), summary judgment is proper if:

       (1) No genuine issue as to any material fact remains to be litigated; (2) the
       moving party is entitled to judgment as a matter of law; and (3) it appears from
       the evidence that reasonable minds can come to but one conclusion, and viewing
       such evidence most strongly in favor of the party against whom the motion for
       summary judgment is made, that conclusion is adverse to that party.

Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327 (1977). The movant must specifically

identify the portions of the record that demonstrate an absence of a genuine issue of material

fact. Dresher v. Burt, 75 Ohio St.3d 280, 293 (1996). If the movant satisfies this initial burden,

the nonmoving party has a reciprocal burden to point to specific facts that show a genuine issue

of material fact for trial. Id. The nonmoving party must identify some evidence that establishes

a genuine issue of material fact, and may not rely upon the allegations and denials in the

pleadings. Sheperd v. City of Akron, 9th Dist. Summit No. 26266, 2012–Ohio–4695, ¶ 10.

“However, even if the non-moving party does not respond, summary judgment may be granted

only if the movant has satisfied the prerequisites to summary judgment.” CitiMortgage, Inc. v.

Firestone, 9th Dist. Summit No. 25959, 2012-Ohio-2044, ¶ 10. See also Civ.R. 56(E) (“If the

[non-moving] party does not * * * respond, summary judgment, if appropriate, shall be entered

against the party.”) (Emphasis added.)

       {¶6}    The Bowies argue that the subject note and mortgage were insured by the Federal

Housing Administration (FHA), which required that Liberty Savings comply with certain federal

HUD regulations prior to initiating the foreclosure action.    Specifically, the Bowies maintain

that Liberty Savings neither made a reasonable effort to arrange a face-to-face meeting with them

nor sent a proper notice of default and acceleration by certified mail prior to filing the

foreclosure case.
                                                 4


          {¶7}   In support of its motion for summary judgment, Liberty Savings attached two

affidavits from Tonia Dye, its assistant vice president. She averred that the copies of the note,

loan modification agreement and mortgage attached to the complaint were true and accurate

copies of the original instruments. Ms. Dye testified in her first affidavit that “all of the

prerequisites required under the note and mortgage necessary to accelerate the balance due * * *

have been performed.” In her second affidavit, she averred that a “[n]otice of [right] to [c]ure

[d]efault” was sent to Mr. Bowie via first class mail. Ms. Dye’s second affidavit appended a

“true and accurate copy” of the notice, which contained a line labeled “[c]ertified [m]ail” that

was blank.

          {¶8}   Under Section 203.606(a) of Title 24 of the Code of Federal Regulations,

“[b]efore initiating foreclosure, the mortgagee must ensure that all servicing requirements of this

subpart have been met.” One such servicing requirement of the applicable subpart is that the

“mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort

to arrange such a meeting” prior to initiating the foreclosure unless one of the stated exceptions

applies. 24 C.F.R. 203.604(b). This Court has previously held that the failure of a mortgagee to

submit evidentiary materials in support of its motion for summary judgment that demonstrates it

satisfied the HUD requirement to either have a face-to-face meeting or make “reasonable efforts”

to arrange such a meeting raises a genuine issue of material fact that precludes summary

judgment. BAC Home Loans Servicing, LP v. Taylor, 9th Dist. Summit No. 26423, 2013-Ohio-

355, ¶ 22, citing Washington Mut. Bank v. Mahaffey, 154 Ohio App.3d 44, 2003-Ohio-4422 (2d

Dist.).

          {¶9}   Other than Ms. Dye’s conclusory statement that “all of the prerequisites required

under the note and mortgage * * * [were] performed,” Liberty Savings submitted no evidence in
                                                5


support of its motion for summary judgment that it complied with the meeting requirement. It

maintains that there was no evidence that the loan was either a FHA or HUD loan, or subject to

24 C.F.R. 203.604(b) at the time of acceleration and default. However, the only copies of the

note and mortgage in the record, which Liberty Savings attested were “true and accurate copies”

of the originals, indicated both that it was an FHA loan and subject to HUD regulations. The

note indicates that it is a “[m]ultistate FHA [f]ixed [r]ate [n]ote.” Section 6(B) of the note

provides that:

        If Borrower defaults by failing to pay in full any monthly payment, then Lender
        may, except as limited by regulations of the Secretary in the case of payment
        defaults, require immediate payment in full of the principal balance remaining due
        and all accrued interest. * * * In many circumstances regulations issued by the
        Secretary will limit Lender’s rights to require immediate payment in full in the
        case of payment defaults. This Note does not authorize acceleration when not
        permitted by HUD regulations. As used in this Note, “Secretary” means the
        Secretary of Housing and Urban Development or his or her designee.

While the parties agreed to modify the payment terms of the note, the loan modification

agreement indicates that the note and mortgage remain unchanged unless specifically altered by

the agreement. The agreement does not include any terms that alter Section 6(B) of the original

note.

        {¶10} The Bowies’ mortgage indicates that it is an “Ohio FHA [m]ortgage.”            The

mortgage contains the following provision:

        Regulations of HUD Secretary.

        In many circumstances regulations issued by the Secretary will limit Lender’s
        rights, in the case of payment defaults, to require immediate payment in full and
        foreclose if not paid. This Security Instrument does not authorize acceleration or
        foreclosure if not permitted by regulations of the Secretary.

The FHA case number is redacted on both the note and mortgage, while the loan modification

agreement does contain the case number. Accordingly, we reject Liberty Savings’ argument as
                                                 6


the loan documents themselves demonstrate that it is an FHA loan and is subject to HUD

regulations.

       {¶11} Liberty Savings further argues that the Bowies waived the right to challenge its

alleged noncompliance with the face-to-face meeting requirement as such a requirement is a

condition precedent to the contract, which they were required to deny with specificity and

particularity under Civil Rule 9(C). Rule 9(C) provides that: “In pleading the performance or

occurrence of conditions precedent, it is sufficient to aver generally that all conditions precedent

have been performed or have occurred. A denial of performance or occurrence shall be made

specifically and with particularity.” Liberty Savings pleaded in its complaint that, “it ha[d]

performed all of the conditions precedent required to be performed by it.” In their answer, the

Bowies “den[ied] that [Liberty Savings] ha[d] performed all required conditions precedent.”

They further pleaded as a “[d]efense[ ]/[a]ffirmative [d]efense[ ]” that Liberty Savings “failed to

satisfy all statutory and contractual conditions precedent to foreclosure.”

       {¶12} Ohio appellate districts are divided on the issue of whether the face-to-face

meeting requirement under 24 C.F.R. 203.604(b) is a condition precedent that must be

specifically denied under Civil Rule 9(C) or an affirmative defense that may be generally

pleaded under Civil Rule 8(C). The Fifth District has held that the requirement to have a face-

to-face meeting under 24 C.F.R. 203.604(b) is a condition precedent that must be specifically

denied under Rule 9(C). U.S. Bank, N.A. v. Detweiler, 191 Ohio App.3d 464, 2010-Ohio-6408, ¶

52 (5th Dist.); see also Wells Fargo Bank, N.A. v. Gerst, 5th Dist. Delaware No. 13 CAE 05

0042, 2014-Ohio-80, ¶ 23 (reaffirming Detweiler).         The Second District has held that the

meeting requirement provides an affirmative defense. Wells Fargo Bank, N.A. v. Goebel, 2d

Dist. Montgomery No. 25745, 2014-Ohio-472, ¶ 20. How the requirement is characterized
                                                7


makes a difference in the proceedings since “an affirmative defense is separate from the merits

of the plaintiff’s cause of action and bars recovery even when the plaintiff has established a

prima facie case, [while] a condition precedent is directly tied to the merits of the plaintiff’s

cause of action, which is itself contingent upon satisfaction of the condition.” Id., quoting

National City Mortg. Co. v. Richards, 182 Ohio App.3d 534, 2009-Ohio-2556, ¶ 20 (10th Dist.).

This Court declined to address the issue in the Taylor case. Taylor, 2013-Ohio-355, at ¶ 17

(“Further, in the absence of any argument that the Taylors waived their right to argue

noncompliance with HUD regulations, this Court need not consider whether the defense is

properly treated as an affirmative defense or condition precedent for pleading purposes.”)

       {¶13} While Liberty Savings has argued that the Bowies waived their argument by not

pleading their defense with specificity, this Court need not address the issue because Liberty

Savings failed to raise the issue in its motion for summary judgment. See Wells Fargo Bank,

N.A. v. Beirne, 9th Dist. Medina No. 09CA0103-M, 2011-Ohio-6678, ¶ 15. In Beirne, the

foreclosing lender argued that the borrowers waived their right to challenge the lack of a notice

of acceleration because they failed to deny the performance of a condition precedent with

particularity under Rule 9(C). We concluded that, “[b]ecause Wells Fargo made no mention of

possible admissions in the pleadings in its motion for summary judgment, the question of

whether the purported general denial constituted an admission by the Beirnes is not before us.”

Id. Just as in Beirne, Liberty Savings made no argument in its summary judgment motion that

the Bowies admitted or waived their face-to-face meeting requirement defense. Accordingly,

this Court will not address the question of whether the Bowies admitted or waived that Liberty

Savings satisfied the requirement of a face-to-face meeting. See also U.S. Bank, N.A. v. Coffey,

6th Dist. Erie No. E-11-026, 2012-Ohio-721, ¶ 40.
                                                8


       {¶14} We turn next to the Bowies’ argument that there is a genuine issue of material fact

as to whether Liberty Savings complied with an applicable HUD regulation that requires the

lender to send a written notice of default and acceleration to the borrower. Under 24 C.F.R.

201.50(b), a foreclosing lender must provide the borrower with a written notice sent via certified

mail that the loan is in default and that the balance will be accelerated. Ms. Dye’s second

affidavit appended to Liberty Savings’ motion for summary judgment averred that a “[n]otice of

[r]ight to [c]ure [d]efault]” was mailed to Mr. Bowie via first class mail and attached a purported

copy of the notice. The notice contained a line labeled “[c]ertified [m]ail” that was left blank.

Based on the evidence offered by Liberty Savings in support of its motion for summary

judgment, which suggests that the notice was sent via first class mail and not certified mail, this

Court concludes that it failed to demonstrate the absence of a genuine issue of material fact on

the issue of whether it provided the Bowies adequate notice under 24 C.F.R. 201.50(b).

       {¶15} Liberty Savings failed to meet its initial burden under Dresher to demonstrate the

absence of a genuine issue of material fact as to whether it complied with all applicable HUD

regulations. Accordingly, the Bowies’ first assignment of error is sustained.

                                 ASSIGNMENT OF ERROR II

       THE TRIAL COURT ERRED WHEN IT GRANTED SUMMARY JUDGMENT
       TO THE BANK WHEN THE BANK’S AFFIDAVIT WAS NOT ADMISSIBLE
       AND DID NOT PROPERLY AUTHENTICATE THE DOCUMENTS RELIED
       UPON BY THE BANK.

       {¶16} In their second assignment of error, the Bowies argue that Ms. Dye’s affidavit,

which Liberty Savings relied on in support of its motion for summary judgment, was not based

on personal knowledge and failed to authenticate the documentation attached to the affidavit by

laying the proper foundation. In light of our resolution of the Bowies’ first assignment of error,

their argument is moot. This Court, therefore, declines to address it. App.R. 12(A)(1)(c).
                                                 9


                                                III.

       {¶17} The Bowies’ first assignment of error is sustained and their second assignment of

error is moot. The judgment of the Summit County Court of Common Pleas is reversed and the

cause is remanded for further proceedings consistent with the foregoing opinion.

                                                                              Judgment reversed,
                                                                             and cause remanded.




       There were reasonable grounds for this appeal.

       We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy

of this journal entry shall constitute the mandate, pursuant to App.R. 27.

       Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the

period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is

instructed to mail a notice of entry of this judgment to the parties and to make a notation of the

mailing in the docket, pursuant to App.R. 30.

       Costs taxed to Appellee.




                                                       JENNIFER HENSAL
                                                       FOR THE COURT



CARR, J.
WHITMORE, J.
CONCUR.
                                          10


APPEARANCES:

MARK E. OWENS and RONALD L. CAPPELLAZZO, Attorneys at Law, for Appellants.

ERIC T. DEIGHTON, Attorney at Law, for Appellee.
