IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Bank One, Columbus, NA,
:
Plaintiff-Appellee,
:
No. 0
2AP-1266
(C.P.C. No. 99CVE-03-2292)
v.
:
(REGULAR CALENDAR)
Ernest Jude et al.,
:
Defendants-Appellees,
:
(Provident Consumer Financial Services,
:
Intervenor Defendant-Appellant). :
City of Columbus,
:
Plaintiff-Appellee,
:
No.
02AP-1268
(M.C. No. 2001 EVH 060036)
v.
:
(REGULAR CA
LENDAR)
Ernest Jude et al.,
:
Defendants-Appellees,
:
Provident Consumer Financial Services,
:
Defendant-Appellant.
:
O P I N I O N
Rendered on June 26, 2003
Edward M. Kochalski, for appellee Bank One, Columbus,
NA.
Robert B. Holman, for appellant Provident Consumer
Financial Services.
________________________________________________
APPEALS from the Franklin County Court of Common Pl eas
and the Franklin County Municipal Court, Environmen tal
Division.
Nos. 02AP-1266 & 02AP-1268
2
PETREE, P.J.
{¶1}
In this consolidated appeal, Provident Consumer Financial Services
(“Provident”) appeals from a judgment of the Frankl in County Municipal Court,
Environmental Division, which denied its motion for summary judgment. Because we find
Provident is entitled to equitable subrogation, we reverse and remand.
{¶2}
According to a joint stipulation of facts and the r ecord, by deed filed June 1,
1973, in Franklin County, Ernest and Saralee Jude ( “the Judes”) acquired title to 99 South
Terrace Avenue in Columbus, Ohio. That same day, a mortgage in favor of the Galbreath
Mortgage Company with a principal amount of $15,700 was filed in the Franklin County
Recorder’s Office. The Galbreath mortgage was late r assigned to Boatmen’s Bank.
{¶3}
In 1990, the Judes executed a second mortgage on th e property to secure
a revolving line of credit from Bank One in the amo unt of $17,000; in December 1990, this
mortgage was properly filed in the county recorder’ s office. Later, in 1991, the Judes
executed another mortgage in favor of Bank One to s ecure a revolving line of credit in the
amount of $25,000; this mortgage also was properly filed in the county recorder’s office.
Both the 1990 Bank One mortgage and the 1991 Bank O ne mortgage shared the same
account number.
{¶4}
In February 1997, the Judes sought to refinance the ir mortgage debt
through Equity One Mortgage. On February 4, 1997, Bank One sent via facsimile a letter
to Chelsea Title Agency of Columbus, Inc., with who m Equity One Mortgage apparently
worked, that specified the Judes’ account with Bank One had been satisfied, and Bank
One had submitted necessary documentation for the l ien to be removed. On that same
date, Bank One also sent via facsimile a home equit y loan payoff statement to the title
company that listed a payoff amount of $25,436.95 p lus a per diem rate. This payoff
statement contained an advisement that “until Bank One receives written authorization
from the borrower(s) to close out this line of cred it account, we will not release any
existing liens”; however, this payoff statement did not indicate whether Bank One had
received a release of lien authorization, even thou gh the payoff statement had provisions
for Bank One to specify affirmatively or negatively whether Bank One had received a
release of lien authorization from the Judes. Indee d, at the time this payoff statement was
Nos. 02AP-1266 & 02AP-1268
3
forwarded by Bank One, the Judes had not executed a written request to close the Bank
One account. Consequently, Bank One did not release its 1991 mortgage on the
property, and the Judes continued to use the 1991 m ortgage’s equity line of credit.
{¶5}
On February 5, 1997, the Judes executed a mortgage in favor of Equity
One Mortgage in the principal amount of $44,000; th is mortgage was filed in the county
recorder’s office on February 13, 1997. Although t he filed mortgage correctly listed the
street address of the property, the legal descripti on of the property incorrectly described
the property as situated in Muskingum County. Equi ty One Mortgage later assigned its
mortgage to Provident. Proceeds from Equity One Mo rtgage’s mortgage were used to
extinguish the first mortgage held by Boatmen’s Ban k and the 1990 Bank One mortgage.
{¶6}
In September 1998, the Judes defaulted on payments to Bank One. Later,
in December 1998, the Judes reportedly filed for Ch apter 7 bankruptcy; subsequently, the
bankruptcy trustee reportedly abandoned all interes t in the property. According to the
environmental court, as a result of the bankruptcy proceedings that concluded in April
1999, the Judes were discharged of their obligation s to Bank One and Provident.
{¶7}
Subsequently, on March 19, 1999, in case No. 02AP-1 266, Bank One
brought a foreclosure action against the Judes in t he Franklin County Common Pleas
Court. On September 24, 1999, the common pleas cou rt issued a foreclosure judgment
decree and ordered the property to be sold. Later, on February 16, 2000, the common
pleas court confirmed an order of sale and ordered distribution of the proceeds.
However, on March 28, 2000, Provident moved to inte rvene and vacate the sale and,
over Bank One’s objections, the common pleas court granted Provident’s motions.
{¶8}
On July 9, 2001, Provident filed a cross-claim agai nst Bank One and the
defendants named in Bank One’s foreclosure action; in this cross-claim, Provident
alleged it had priority over all other liens. On J anuary 31, 2002, Provident moved for
summary judgment and contended, as a matter of law, its mortgage had priority based on
the doctrine of equitable subrogation and equitable estoppel.
{¶9}
On February 15, 2001, during the pendency of the fo reclosure action, in
case No. 02AP-1268, the city of Columbus filed a co mplaint in the Franklin County
Municipal Court, Environmental Division, against th e Judes, Bank One, Provident, and
Nos. 02AP-1266 & 02AP-1268
4
other defendants, because the Judes allegedly failed to maintain their property in
compliance with city ordinances, thereby creating a public nuisance.
{¶10}
Subsequently, Provident successfully moved both the environmental court
and the common pleas court to consolidate case No. 02AP-1266 with case No. 02AP-
1268 so that later proceedings would be held before the environmental court. Following
the consolidation, the environmental court denied Provident’s motion for summary
judgment, which Provident earlier had filed in comm on pleas court. Later, on October 17,
2002, the environmental court filed a permanent inj unction and order in which it
determined Bank One’s lien had priority over Provid ent’s lien, denying Provident’s cross-
claim. The environmental court also ordered the ci ty of Columbus to withhold any code
enforcement action against Bank One as long as Bank One preserved the property from
deterioration and proceeded with its foreclosure ac tion.
{¶11}
From the environmental court’s October 17, 2002 or der, Provident timely
appeals. Prior to oral argument in this appeal, th is court sua sponte consolidated case
Nos. 02AP-1266 and 02AP-1268 because the cases invo lved similar parties and issues.
{¶12}
In this appeal, Provident assigns the following two assignments of error:
{¶13}
“[1.] The trial court erred in denying Provident’s Motion for Summary
Judgment on the issue of equitable subrogation.
{¶14}
“[2.] The trial court erred in denying Provident’s motion for summary
judgment on the issue of equitable estoppel.”
{¶15}
As a preliminary matter, although not raised by the parties, we consider
whether the environmental court’s October 17, 2002 order that is captioned “Permanent
Injunction and Order” constitutes a judgment entry and a final appealable order. See
General Acc. Ins. Co. v. Ins. Co. of N. America (1989), 44 Ohio St.3d 17, 20 (“[i]t is well-
established that an order must be final before it c an reviewed by an appellate court. If an
order is not final, then an appellate court has no
jurisdiction”). See, also, R.C.
2505.02(B)(1) (an order is a final order when it “a ffects a substantial right in an action that
in effect determines the action and prevents a judg ment”).
{¶16}
“For an order to determine the action and prevent a judgment for the party
appealing, it must dispose of the whole merits of t he cause or some separate and distinct
branch thereof and leave nothing for the determinat ion of the court.” Hamilton Cty. Bd. of
Nos. 02AP-1266 & 02AP-1268
5
Mental Retardation & Developmental Disabilities v. Professionals Guild of Ohio (1989), 46
Ohio St.3d 147, 153. Here, although not captioned a s a “judgment entry,” the
environmental court’s order, which expressly specif ied it was a final appealable order,
determined the priority of Bank One’s 1991 mortgage and Provident’s mortgage, thereby
wholly resolving the priority dispute between Bank One and Provident. Moreover, by
specifying the order was final and appealable, the environmental court noted its intention
to effect a termination of the litigation concernin g the parties’ priority dispute. See Peters
v. Arbaugh (1976), 50 Ohio App.2d 30, 32 (concluding the civil rules do not require a
judgment to be written in any particular form, exce pt as required by Civ.R. 54, and a
judgment entry must disclose a court’s present inte ntion to terminate the parties’ dispute).
Moreover, even if Civ.R. 54(B) language be required , its absence is not fatal. See
General Acc. Ins. Co. , at 21 (“absence of Civ.R. 54(B) language will not r ender an
otherwise final order not final”). Finally, althoug h the record from the common pleas court
does not contain a final judgment entry, under thes e circumstances, we do not find this
omission prevents our review based on the common pl eas court’s intention to have the
matter consolidated in the environmental court. Th erefore, based on the foregoing, we
find the environmental court’s October 17, 2002 ord er constitutes a final judgment and is
ripe for appellate review.
{¶17}
Appellate review of summary judgment motions is con ducted under a de
novo standard. First Union Natl. Bank v. Harmon , Franklin App. No. 02AP-77, 2002-
Ohio-4446, at ¶14, citing Helton v. Scioto Cty. Bd. of Commrs. (1997), 123 Ohio App.3d
158, 162, appeal not allowed (1998), 81 Ohio St.3d 1432. Summary judgment is proper
when a movant for summary judgment demonstrates: (1 ) no genuine issue of material
fact exists; (2) the movant is entitled to judgment as a matter of law; and (3) reasonable
minds could come to but one conclusion and that con clusion is adverse to the party
against whom the motion for summary judgment is mad e, that party being entitled to have
the evidence most strongly construed in its favor. Civ.R. 56; State ex rel. Grady v. State
Emp. Relations Bd. (1997), 78 Ohio St.3d 181, 183.
{¶18}
Under Civ.R. 56(C), a movant bears the initial burd en of informing the trial
court of the basis for the motion and identifying t hose portions of the record
demonstrating the absence of a material fact. Dresher v. Burt (1996), 75 Ohio St.3d 280,
Nos. 02AP-1266 & 02AP-1268
6
293. Once a movant discharges its initial burden, s ummary judgment is appropriate if the
nonmoving party does not respond, by affidavit or a s otherwise provided in Civ.R. 56, with
specific facts showing that a genuine issue exists for trial. Dresher at 293; Vahila v. Hall
(1997), 77 Ohio St.3d 421, 430; Civ.R. 56(E).
{¶19}
Provident’s first assignment of error asserts the t rial court erred because it
failed to apply the doctrine of equitable subrogati on. Provident contends its mortgage was
intended to be a first and best lien on the Judes’ property and, because Bank One’s
mortgages were filed after Boatmen’s mortgage, Bank One had no expectation that its
mortgages would have first priority. Therefore, ac cording to Provident, if Bank One’s lien
were deemed to have priority, Bank One would be unj ustly enriched.
{¶20}
Conversely, Bank One contends Provident, as an expe rienced provider of
mortgage services, should have required the Judes t o close the existing line of credit on
the same property that Provident sought to encumber . Because it did not, Bank One
contends Provident should not be granted equitable relief. See Bank of New York v. Fifth
Third Bank of Cent. Ohio (Jan. 30, 2002), Delaware App. No. 01 CAE 03005 (“ ‘[w]hen
the secured party does not protect its own interest by ensuring that the first loan is
canceled before extending credit, this Court will n ot invoke equity to compensate for
shortcomings easily avoided’ ”).
{¶21}
Under R.C. 5301.23(A), “the first mortgage recorded shall have preference”
over subsequently recorded mortgages. See, also, First Union Natl. Bank at ¶16.
However, the doctrine of equitable subrogation can defeat this statutory principle of first in
time, first in right. First Union Natl. Bank at ¶17.
{¶22}
As this court noted in First Union Natl. Bank :
{¶23}
“* * * ‘Equitable subrogation arises only by opera tion of law when one
having a liability or right * * * in the property p ays a debt due by another under such
circumstances that he is, in equity, entitled to th e security or obligation held by the creditor
who he has paid.’ * * * ‘Equitable subrogation is e ssentially a theory of unjust enrichment.’
* * * ‘ “[E]quity in the granting of relief by subr ogation is largely concerned with * * * the
prevention of frauds and relief against mistakes, a nd it is correctly stated that the right to it
depends upon the facts and circumstances of each pa rticular case.’ ” * * * ‘ “In order to
Nos. 02AP-1266 & 02AP-1268
7
entitle one to subrogation, his equity must be stro ng and his case clear.’ ” Id. at ¶17
(Citations omitted.)
{¶24}
Here, Bank One took its mortgages in 1990 and 1991 subject to a prior
mortgage. Therefore, Bank One’s mortgages were at best second and third in priority.
Moreover, the parties have stipulated the Judes sou ght a loan from Equity One Mortgage
with the purpose of refinancing their existing mort gage debt, presumably with the intention
to extinguish prior liens so that Equity One Mortga ge would maintain a first mortgage lien
on the property. Joint Stipulations filed Sept. 24, 2002, at 2, ¶7. Under these
circumstances, we conclude this cause of action is similar to our precedents of First
Union Natl. Bank and Fed. Home Loan Mtge. Corp. v. Moore (Sept. 27, 1990), Franklin
App. No. 90AP-546, dismissed (1991), 57 Ohio St.3d 719, in which, after determining
other mortgage lien holders did not bargain for or even expect a first lien position, this
court applied the doctrine of equitable subrogation . See Fed. Home Loan Mtge. Corp.
(concluding lender who did not bargain for or expec t a first lien position would cause an
unearned windfall for lender); First Union Natl. Bank at ¶21. Moreover, the Judes’
refinancing of their home in 1997 through Equity On e Mortgage does not change the fact
Bank One expected its mortgages to be subordinate t o another lender. See First Union
Natl. Bank at ¶21.
{¶25}
Furthermore, even assuming Provident’s title agent acted negligently by
failing to inquire whether Bank One received writte n authorization from the Judes to close
their revolving line of credit that was secured by the 1991 mortgage, any alleged
negligence by Provident’s title agent is immaterial because Bank One was not misled or
injured because Bank One did not bargain for or eve n expect a first lien position. See
Fed. Home Loan Mtge. Corp. (concluding any negligence by title company was
immaterial as no one changed position in reliance o n the mistake and there was no
prejudice to subsequent intervening rights). Ther efore, under these circumstances, for
Bank One to be granted first lien position would cr eate an unearned financial windfall.
See Fed. Home Loan Mtge. Corp. ; First Union Natl. Bank at ¶21.
{¶26}
Additionally, we are unpersuaded by Bank One’s cont ention this case is
similar to Bank of New York , supra, and therefore we should not invoke equity.
In this
case, we acknowledge there is some similarity with Bank of New York because: (1) the
Nos. 02AP-1266 & 02AP-1268
8
case concerns a lender’s failure to protect its int erest by ensuring a first loan is canceled
before extending credit; and (2) the lender’s payof f statement included notice that a
borrower’s written request to close the account was required. However, this case is
factually distinguishable from Bank of New York because here Bank One sent additional
correspondence to the title agency that specified t he Judes’ account was satisfied, the
account was closed, and Bank One had submitted nece ssary documents to remove the
lien from the property. Because the 1990 and 1991 B ank One mortgages had the same
account number, this correspondence, which specifie d the account had been closed and
necessary documentation had been sent to remove the lien, arguably could have created
confusion for the title company. Accordingly, we fi nd Bank of New York inapposite to this
case.
{¶27}
Consequently, under the facts of this case and cons istent with our own
precedents, we find Provident’s equity is strong an d clear, and we find application of the
doctrine of equitable subrogation is warranted. Und er these circumstances, if Bank One
were to advance to first priority position, this wo uld cause Bank One to receive an
unearned windfall. Accordingly, we find Provident’s mortgage should be given priority
over Bank One’s 1991 mortgage, and we sustain Provi dent’s first assignment of error.
{¶28}
Having sustained Provident’s first assignment of er ror, Provident’s second
assignment of error is rendered moot and, therefore , we do not consider it here.
{¶29}
Accordingly, having sustained Provident’s first assignment of error and
found moot Provident’s second assignment of error, we therefore reverse the judgment of
the Franklin County Municipal Court, Environmental Division, and remand this cause to
that court for further proceedings in accordance wi th law and consistent with this opinion.
Judgment reversed and cause remanded.
BRYANT and TYACK, JJ., concur.
__________________