U.S. Bank Trust National Association found itself on the losing side of a legal battle in Cuyahoga County, Ohio. The Eighth Appellate District Court of Appeals affirmed a lower court’s decision, effectively blocking the bank’s attempt to foreclose on a property. The core issue revolved around a prior tax foreclosure action that wiped out the bank’s mortgage.
The Background: A Property, a Mortgage, and Unpaid Taxes
In 2002, John G. Wittman bought a property on Oxford Road in Cleveland, Ohio, and took out a mortgage to finance the purchase. Years later, in 2017, the mortgage was assigned to U.S. Bank Trust National Association as Trustee of American Homeowner Preservation Trust Series 2015A+.
In 2018, the Cuyahoga County Treasurer initiated a foreclosure action against Wittman due to unpaid real estate taxes. This “Tax Foreclosure” is at the heart of the current dispute. The bank argues that it should have been properly named and served in the Tax Foreclosure.
The Tax Foreclosure ultimately led to the property being transferred to the Cuyahoga County Land Reutilization Corporation (CCLRC). Bivens and Eckles then purchased the property in 2020.
In 2023, U.S. Bank filed a new lawsuit, seeking to foreclose on its mortgage. The bank named Wittman, Bivens, Eckles, and others as defendants. Bivens and Eckles, along with MERS (Mortgage Electronic Registration Systems, Inc.), argued that the bank’s claim was invalid because the prior tax foreclosure had already extinguished the mortgage.
The Bank’s Arguments: Lack of Notice and Improper Service
U.S. Bank argued that the Tax Foreclosure was flawed because the bank, as the current mortgage holder, wasn’t properly named or served. The bank claimed that the entity named in the Tax Foreclosure was “U.S. Bank National Association,” which had an address in Cincinnati, Ohio. The bank, however, argued that the correct entity was “U.S. Bank Trust National Association,” with an address in Chicago, Illinois. Therefore, they argued that the BOR (Board of Revision) in the tax case did not have the jurisdiction to cancel the bank’s mortgage.
The bank presented an affidavit from Jorge Newbery, the Chief Executive Officer of AHP Servicing L.L.C., the servicing agent for the bank. Newbery stated that the two entities, U.S. Bank National Association and U.S. Bank Trust National Association, were separate and that the bank had not received notice of the Tax Foreclosure.
The Court’s Decision: Tax Foreclosure Trumps the Bank’s Claim
The appellate court sided with the lower court, denying the bank’s motion for summary judgment and granting summary judgment to the appellees (MERS and Bivens and Eckles). The court’s reasoning centered on the nature of tax foreclosure actions and the consequences of the prior Tax Foreclosure.
The court emphasized that tax foreclosure actions are “in rem” proceedings, meaning they focus on the property itself, not just the individual property owner. Under Ohio law, specifically R.C. 323.73(G) and 323.74(D), the BOR can order a property transferred to a county land reutilization corporation, free and clear of all liens and encumbrances. In this case, the adjudication of the Tax Foreclosure explicitly stated that the property’s title would be “incontestable” and free of all liens.
The court acknowledged that the bank should have been properly named and served in the Tax Foreclosure. However, because the Tax Foreclosure resulted in the property being transferred to the CCLRC free and clear of all liens, the bank’s mortgage was extinguished.
The court also noted that the bank could potentially pursue a claim against the Treasurer for failing to properly name it in the Tax Foreclosure but that the current foreclosure action was not the correct avenue.
The Newbery Affidavit: A Critical Weakness
The court also scrutinized the Newbery affidavit, which the bank relied upon to support its arguments. The court found that while the affidavit demonstrated Newbery’s knowledge about the loan, it did not explain how he obtained the knowledge of the bank’s corporate structure. The court said that it could not simply infer that Newbery, as the CEO of the servicing agent, had personal knowledge of the separate entities and identities of the two banks, especially since he did not offer any other source or reason for his claimed knowledge.
The Outcome: Bank’s Foreclosure Attempt Fails
The court’s decision means that U.S. Bank cannot foreclose on the property. The prior tax foreclosure, and the subsequent transfer of the property to Bivens and Eckles, effectively wiped out the bank’s mortgage. The court affirmed the lower court’s ruling, ending the bank’s claims to the property.