Appellate Court Affirms Trial Court Ruling in Lost Promissory Note Case

Ohio’s Fourth District Court of Appeals recently ruled in favor of the mortgagee in a foreclosure action on two key issues:

• Whether the mortgagee could enforce a lost note
• Whether the business records of prior servicers were admissible over the borrower’s hearsay objection

The Saunders Case

‍In the Saunders case, the appellate court affirmed the trial court’s order granting the mortgagee’s summary judgment motion even though the promissory note had been lost. The borrower claimed that the mortgagee was required to produce specific evidence as to who had lost the note and when it happened, but the appellate court found that Ohio law doesn’t require that.

Instead, in order to discharge the mortgagee’s initial burden in moving for summary judgment, the mortgagee was merely required to produce admissible evidence that it possessed the note when it was lost. This is consistent with the express terms of the lost note statute under the Uniform Commercial Code.

As a result, when the borrower failed to produce any summary judgment evidence to rebut what was produced by the mortgagee, the Court of Appeals ruled that summary judgment in favor of the mortgagee was proper.

Furthermore, the appellate court agreed with the trial court that the business records of prior servicers were admissible over the borrower’s hearsay objection. The appellate court agreed that prior servicer records were as reliable as the mortgagee’s business records provided that the mortgagee had testified that the records were incorporated within the mortgagee’s own records. They must also be relied upon in the ordinary course of business.

‍Implications for Mortgagees

‍In ruling this way, the Fourth District Court of Appeals has joined all but two of the Ohio appellate district courts in permitting servicers to admit prior servicer business records into evidence. The Ninth District Court of Appeals is the only Ohio appellate court to deny admissibility of prior servicer business records, while the Eleventh District Court of Appeals has yet to engage the issue in a specific case.

As a result of the Saunders case, it will be easier for Manley Deas Kochalski, LLC clients to enforce lost notes and admit prior servicer business records into evidence.