[Cite as MRF Ohio One, L.L.C. v. Kerby, 2016-Ohio-7021.]



                          STATE OF OHIO, MAHONING COUNTY
                                IN THE COURT OF APPEALS
                                      SEVENTH DISTRICT

MRF OHIO ONE, LLC                                    )
                                                     )
        PLAINTIFF-APPELLEE                           )
                                                     )           CASE NO. 15 MA 0051
VS.                                                  )
                                                     )                  OPINION
CHRISTOPHER P. KERBY, et al.                         )
                                                     )
        DEFENDANTS-APPELLANTS                        )

CHARACTER OF PROCEEDINGS:                            Civil Appeal from the Court of Common
                                                     Pleas of Mahoning County, Ohio
                                                     Case No. 2012 CV 1175

JUDGMENT:                                            Reversed and remanded.

APPEARANCES:
For Plaintiff-Appellee                               Attorney Benjamin Carnahan
                                                     Attorney Hunter Cavell
                                                     25700 Science Park Drive, Suite 250
                                                     Cleveland, Ohio 44122

For Defendants-Appellants                            Attorney Thomas Michaels
                                                     839 Southwestern Run
                                                     Youngstown, Ohio 44514

JUDGES:

Hon. Mary DeGenaro
Hon. Gene Donofrio
Hon. Cheryl L. Waite


                                                     Dated: September 23, 2016
[Cite as MRF Ohio One, L.L.C. v. Kerby, 2016-Ohio-7021.]
DeGENARO, J.

        {¶1}    Defendants-Appellants, Christopher and Mary Kerby, appeal the trial
court's summary judgment and foreclosure decree in favor of MRF Ohio One, LLC.
Although MRF complied with the face-to-face meeting requirement, it failed to comply
with the notice of default requirement. Accordingly, the judgment of the trial court is
reversed and the matter remanded for further proceedings.
                                Facts and Procedural History
        {¶2}    Prior to MRF, two other entities held an interest in the Kerbys'
residence. Originally, a promissory note was executed in favor of Countywide which
was secured by an open-end Federal Housing Administration mortgage. The second
lender was Bank of America (BoA), which initiated foreclosure proceedings, alleging
the note was in default and attached the note and mortgage to the complaint. BoA
stated that it had "performed all of the conditions precedent required to be performed
by it." The Kerbys answered with a general denial and asserted several affirmative
defenses, but did not allege any defense or claim regarding HUD regulations.
        {¶3}    MRF was substituted as the plaintiff after BoA sold the note and
mortgage. In early 2015 MRF filed motions for default and summary judgment
referencing the affidavit of Mary Maguire, an authorized agent of the loan servicer for
MRF. Maguire averred that MRF held the note and mortgage, the principle balance
and interest rate, that the last payment was received in 2009, and that MRF complied
with all the applicable terms of the note and mortgage when accelerating the loan.
        {¶4}    The Kerbys opposed summary judgment arguing that prior to the
foreclosure being filed, they were never contacted by the lender to arrange a face-to-
face interview, nor did they receive notice of default pursuant to HUD regulations.
The trial court granted summary judgment in favor of MRF.
                                      Summary Judgment
        {¶5}    When reviewing a trial court's decision to grant summary judgment, an
appellate court review is de novo. Parenti v. Goodyear Tire & Rubber Co., 66 Ohio
App.3d 826, 829, 586 N.E.2d 1121 (9th Dist.1990). Summary judgment will be
granted when the movant demonstrates, viewing the evidence most strongly in favor
                                                                                   -2-


of the nonmovant, that reasonable minds can find no genuine issue of material and
the moving party is entitled to judgment as a matter of law. Doe v. Shaffer, 90 Ohio
St.3d 388, 390, 2000-Ohio-186, 738 N.E.2d 1243. A fact is material when it affects
the outcome of the suit under the applicable substantive law. Russell v. Interim
Personnel, Inc., 135 Ohio App.3d 301, 304, 733 N.E.2d 1186 (6th Dist.1999).
       {¶6}   The party seeking summary judgment must produce some facts that
suggest a reasonable fact-finder could rule in its favor. Brewer v. Cleveland Bd. of
Edn., 122 Ohio App.3d 378, 386, 701 N.E.2d 1023 (8th Dist.1997). The movant
bears the initial burden of demonstrating the record contains no issues of genuine
material fact, and the nonmoving party has a reciprocal specificity burden; mere
allegations or denials are insufficient. Civ.R. 56; Dresher v. Burt, 75 Ohio St.3d 280,
1996-Ohio-107, 662 N.E.2d 264.
       {¶7}   The Kerbys assert there are genuine issues of material fact concerning
compliance with certain HUD regulations prior to initiating the foreclosure.
Specifically, that BoA failed to attempt to arrange a face-to-face meeting with them
and failed to properly notify them of default prior to filing the foreclosure. See, e.g., 24
C.F.R. 203.604 and 24 C.F.R. 203.606 respectively. The Kerbys claims that the
affidavit filed in opposition to summary judgment creates genuine issues of material
fact on these issues. MRF counters that summary judgment was properly granted as
the Kerbys failed to answer the complaint with specificity.
       {¶8}   The Note provides the following with regard to default:

        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. Lender may
        choose not to exercise this option without waiving its rights in the event
        of any subsequent default. 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
                                                                        -3-


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.

{¶9}   Similarly the Mortgage provides the following:

9. Grounds for Acceleration of Debt.

(a) Default. Lender may, except as limited by regulations issued by the
Secretary, in the case of payment defaults, require immediate payment
in full of all sums secured by this Security Instrument if:

(i) Borrower defaults by failing to pay in full any monthly payment
required by this Security Instrument prior to or on the due date of the
next monthly payment, or

(ii) Borrower defaults by failing, for a period of thirty days, to perform
any other obligations contained in this Security Instrument.

       *   *    *   *

(d) 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.


               24 U.S.C § 203.604(b) - Face-to-Face Meeting
{¶10} In the first of two assignments of error, the Kerbys assert:

A genuine issue of fact exists as to whether Bank of America complied
with the face-to-face meeting requirement contained in 24 U.S.C §
                                                                               -4-


      203.604(b) prior to filing a foreclosure action against defendant-
      appellant.

      {¶11} C.F.R. 24 § 203.604(b) provides in relevant part:

      The mortgagee must have a face-to-face interview with the mortgagor,
      or make a reasonable effort to arrange such a meeting, before three full
      monthly installments due on the mortgage are unpaid. If default occurs
      in a repayment plan arranged other than during a personal interview,
      the mortgagee must have a face-to-face meeting with the mortgagor, or
      make a reasonable attempt to arrange such a meeting within 30 days
      after such default and at least 30 days before foreclosure is
      commenced.

      {¶12} The Kerbys contend they were not offered a face-to-face interview prior
to the foreclosure being filed. MRF contends the Kerbys waived this argument by
failing to plead it with particularity in the answer. We recently considered this
argument in PNC Mortgage v. Garland, 7th Dist. No 12 MA 222, 2014-Ohio-1173:

      Having determined that 24 C.F.R. 203.604 and 203.605 create
      conditions precedent to foreclosure, we turn to PNC Mortgage's
      assertion that Garland waived her 24 C.F.R. 203.604 arguments by
      failing to plead them with particularity in her Answer. Civ.R. 9(C)
      provides: "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." By contrast, "[a] denial of
      performance or occurrence shall be made specifically and with
      particularity." (Emphasis added.) Id. Conditions precedent that are not
      denied in the manner provided by Civ.R. 9(C) are deemed admitted.
      Fifth Third Mtge. Co. v. Orebaugh, 12th Dist. No. CA2012–08–153,
      2013–Ohio–1730, ¶ 29, citing First Financial Bank v. Doellman, 12th
                                                                         -5-


Dist. No. CA2006–02–029, 2007–Ohio–222, ¶ 2; see also Civ.R. 8(D);
Huntington v. Popovec, 7th Dist. No. 12 MA 119, 2013–Ohio–4363, ¶
15.

Here, PNC Mortgage alleged in its Complaint that "it has satisfied all
conditions precedent pursuant to the Promissory Note[,]" and that it
"has satisfied all conditions precedent pursuant to the Mortgage." This
is sufficient under Civ.R. 9(C) to shift the burden to Garland to assert
non-compliance with specific HUD regulations.

In her Answer, Garland's allegations regarding non-compliance with
HUD regulations were general in nature; she did not cite to any specific
regulations:

11. Plaintiff failed to comply with the regulations issued by the Secretary
of Housing and Urban Development in order to require immediate
payment in full and Plaintiff failed to comply with HUD regulations prior
to acceleration of the amounts due under the promissory note.

12. Plaintiff failed to comply with the regulations issued by the Secretary
of Housing and Urban Development in order to require immediate
payment in full and Plaintiff failed to comply with HUD regulations prior
to acceleration of the amounts due under the mortgage.

Because Garland failed to state with the specificity required by Civ.R.
9(C), precisely which HUD regulations PNC Mortgage failed to comply
with before filing the instant foreclosure action, she was barred from
later contesting the noncompliance in her brief in opposition to
summary judgment, and consequently, now on appeal. See, e.g.,
Satterfield v. Adams Cty./Ohio Valley School Dist., 4th Dist. No.
95CA611, 1996 WL 655789, *5 (Nov. 6, 1996) (where defendant failed
                                                                                -6-


       to specifically deny performance of a condition precedent in its answer
       pursuant to Civ.R. 9(C) compliance was deemed admitted and
       defendant could not subsequently raise the issue on appeal.) See also
       Huntington, supra at ¶ 16 (homeowner was barred from contesting
       bank's performance of conditions precedent where she failed to file an
       answer.)

PNC Mortgage, ¶ 32-35.
       {¶13} The complaint filed against the Kerbys stated that the lender had
"performed all of the conditions precedent required to be performed by it." Pursuant
to PNC Mortgage, this is sufficient under Civ.R. 9(C) to shift the burden to the Kerbys
to specifically assert non-compliance with particular HUD regulations. The Kerbys'
answer is less specific than the answer in PNC Mortgage; there is no mention of
HUD, 24 C.F.R. 203.604 or a face-to face meeting. The Kerbys' reliance on Wells
Fargo Bank v. Aey is misplaced, having been rejected in PNC Mortgage: "Recently,
in Wells Fargo Bank, N.A., v. Aey, 7th Dist. No. 12MA178, 2013–Ohio–5381, this
court held that 24 C.F.R. 203.604 and 203.605 could be used 'defensively' in a
foreclosure action, but did not have to reach the issue of whether those HUD
regulations were conditions precedent or affirmative defenses to foreclosure. Id. at ¶
37–38." PNC Mortgage at ¶ 22.
       {¶14} The Kerbys failed to state with the specificity required by Civ.R. 9(C)
precisely which HUD regulations the lender failed to comply with. Thus, they were
barred from later contesting this purported noncompliance in the trial court and on
appeal. Accordingly, their first assignment of error is waived.
                     24 U.S.C. § 203.606(a) – Notice of Default
       {¶15} In the second of two assignments of error, the Kerbys assert:

       A genuine issue of fact exists as to whether Bank of America complied
       with the pre-foreclosure requirements contained in 24 U.S.C § 203.606
       (a) prior to filling a foreclosure action against defendant-appellant.
                                                                                 -7-


       {¶16} The Kerbys argue the lender failed to establish that it complied with 24
C.F.R. 203.606(a), requiring the bank to notify them of default and their intent to
foreclose unless the default is cured. While the Kerbys did not specifically cite the
code section, they asserted in their answer as a defense that the bank failed to follow
the necessary notice procedures set forth in the mortgage before filing the
foreclosure complaint. Accordingly, the Civ.R. 9(C) specificity requirement has been
met by the Kerbys. Based upon a similar pleading, we reached the same conclusion
in Bank of America, N.A. v. Staples, 7th Dist. No. 14 MA 109, 2015-Ohio-2094, ¶ 57.
       {¶17} MRF contends that their general assertion that they have complied with
all the terms of the note and the mortgage is enough. However, as MRF aptly points
out in their brief, "multiple courts have held when confronted with the notice-of-default
issue, a foreclosing lender need not meet the impossible burden of actually proving
that a defendant actually received the notice of default. Rather, all a lender must
demonstrate is that it sent the required notice."
       {¶18} MRF relies on Bank of America, N.A. v. Curtin, 2014-Ohio-5379, 24
N.E.3d 1217, but this case is distinguishable for two reasons. First, it does not involve
an FHA mortgage, and as such, was not subject to federal regulations regarding
notice. Id. ¶ 23. Second, in Curtin the evidence that notice was sent by the lender
was uncontradicted and the notice provisions were deemed satisfied.
       {¶19} Here, at no point in this litigation has it been specifically plead that any
type of notice of default had been provided to the Kerbys. Nor has any evidence
thereof been filed with the trial court by the lender, attached either to the complaint or
the motion for summary judgment. In the answer and in opposition to summary
judgment the Kerbys specifically asserted that notice was not provided. MRF has
failed to dispel that disputed fact by submitting evidence that notice of some kind was
sent. Accordingly, the Kerbys' second assignment of error is meritorious.
       {¶20} In sum, although the Kerbys have waived their argument with respect to
any purported failure to comply with the face-to-face requirement, they have
preserved the purported error and raised a genuine issue of the material fact of
                                                                            -8-


whether the required notice of default was sent. Because MRF failed to provide
evidence that it had provided notice, the trial court erred in granting summary
judgment. Accordingly, the judgment of the trial court is reversed, and the matter is
remanded for further proceedings.

Donofrio, P. J., concurs.

Waite, J., concurs.
