Alert

Ohio Appeals Court Finds Credence to “Show Me the Note” Theory in Foreclosure

July 23, 2024

On June 21, 2024, the Ohio Second Appellate District reversed a trial court decision granting plaintiff summary judgment in a residential foreclosure action, finding that a competing lienholder’s discovery request for production of an original copy of the promissory note should have been made available for inspection prior to filing a dispositive motion.

Background

The plaintiff filed a foreclosure action in March 2023, and named a tax lienholder as a defendant. During the course of discovery, the tax lienholder requested — and was never given access to — original copies of the note and allonges that the plaintiff sought judgment on. The tax lienholder ultimately filed a motion to compel production of these documents, and while that issue was being briefed, the plaintiff moved for summary judgment. In response, the tax lienholder sought to stay the motion pending discovery. However, the trial court ruled that the motion to stay was moot because the tax lienholder had submitted an opposition to plaintiff’s motion for summary judgment. Thereafter, the trial court granted plaintiff’s dispositive motion and entered a judgment entry and decree of foreclosure.

Arguments on Appeal

The tax lienholder appealed and argued that: (1) the trial court erred in granting summary judgment to plaintiff because the plaintiff failed to produce the original note during the course of discovery; and (2) as a result of this failure to produce the original note upon request, plaintiff was not entitled to summary judgment because it did not produce “‘evidentiary-quality materials’ showing that a judgment of foreclosure was warranted.”

Appellate Court’s Decision

On appeal, the Second Appellate District reversed the trial court and found that it abused its discretion by not compelling the plaintiff to produce a copy of the original note prior to ruling on its motion for summary judgment. The Court further rejected plaintiff’s assertion that it had complied with all conditions precedent prior to filing the foreclosure action, resting largely on its finding that the tax lienholder should have been given the opportunity to review the original note and present additional evidence as to plaintiff’s status as holder of the note.

Considerations from King

King resurrects, at least partially, the “show me the note” defense often raised by borrowers in residential foreclosure actions. These defenses rarely succeed. However, as illustrated by King, a competing lienholder may have a better argument than a borrower in a mortgage foreclosure as to why the original note must be produced prior to judgment.