IN THE SIJPREME COURT OF OHIO

U.S. BANK NATIONAL ASSOCIATION AS TRUSTEE FOR STRUCTURED ASSETSECURITIES CORPORATION MORTGAGE PASS-TFIROUGH CERTIFICATES, 2006-

GEL2 C/O WELLS FARGO BANK, N.A., PLAINTIFF-APPELLANT

v.

THE BANK OF KEN'fUCKY, INC., DEFENDANT-APPELLEE.

T'HE SUPREME COURT OF OHIO CASE NUMBER

APPEAL FROM TIIE HAMILTON COUNTY COURT OF APPEALS,FIRST APPELLATE DISTRIC"I'

MEMORANDUM IN SUPPORf OF JURISDICTIONOF PLAINTIFF-APPELLANT IJ.S. BANK NATIONAL ASSOCIATION AS TRUSTEE FOR

STRUCT'URED ASSET SECURITIES CORPORATION MORTGAGE PASS-THROUGHCERTIFICATES, 2006-GEL2 C/O WELLS FARGO BANK, N.A.

FILED ON BEHALF OF PLAINTIFF-APPELLANT U.S. BANK NATIONAL ASSOCIATIONAS TRUSTEE FOR STRUCTURED ASSET SECURITIES CORPORATION MORTGAGE

PASS-THROUGH CER'I'IFICATES, 2006-GEL2 C/O WELLS FARGO BANK, N.A.

Michael J. Sikora III (0069512)(Counsel of Record)Maria Mariano Guthrie (0068049)`^Aim M. Johnson (Ge7G'G0)^Lee R. Schroeder (0075358)Sikora Law LLC8532 Mentor AvenueMentor, Ohio 44060(440) 266-7777 (tcicpho A6f "i "'(440) 266-7778 (facsimite)'Co-eounsel for Plaintiff-AppellantU.S. Bank National Assdeiation i

James Papakirk (0063862)(Counsel of Record)Todd J. Flagel (0066976)Benjaniin M. Rodriguez (0079289)Flagel & Papakirk, LLC10300 Alliance Road, Suite 520Cincinnati, Ohio 45242(513) 984-8111 (telephone)(513) 984-8118 (facsimile)Counsel for Defendant-AppelleeThe Bank of Kentucky, Inc.

IN THE SUPREME COURT OF OHIO

U.S. BANKNATIONAL ASSOCIA'TION, :On Appeal from the Hamilton County Court

Plaintiff-Appellant of Appeals, First Appellate District

V.

THE BANK OF KENTUCKY, et al.,

Defendant-Appellee.

Court of AppealsCase Number C090221

MEMORANDUM IN SUPPORT OF JURISDICTIONOF PLAINTIFF-APPELLANT U.S. BANK NATIONAL ASSOCIATION

AS TRUSTEE FOR STRIJCTURED ASSET SECURITIES CORPORATIONMORTGAGE PASS-TI3ROUGH CERTIFICATES, 2006-GEL2 C/O WELLS FARGO

BANK, N.A.

Michael J. Sikora III (0069512)(Cowisel of Record)Maria Mariano Guthrie (0068049)Ann M.Johnson(0077660)Lee R. Schroeder (0075358)Sikora Law LLC8532 Mentor AvenueMentor, Ohio 44060(440) 266-7777 (telephone)(440) 266-7778 (facsimile)Co-cowisel for Defendant-AppellantU.S. Bank National Association

James Papakirk (0063862)(Counsel of Record)Todd J. Flagel (0066976)Benjainin M. Rodriguez (0079289)Flagel & Papakirk, LLC10300 Alliance Road, Suite 520Cincinnati, Ohio 45242(513) 984-8111 (telephone)(513)) 984-8] 18 (facsimile)Counsel for Defendant-AppelleeThe Bank of Kentucky, Inc.

TABLE OF CONTENTSPAGE

EXPLANATION OF WHY THIS CASE IS A CASE OF PUBLIC ORGREAT GENERAL INTEREST ....................................................................................................1

S'I'A"I'EMENT OF THE CASE AND FACTS ................................................................................3

ARGUMF,N`I' IN SUPPORT OF PROPOSI'I'IONS OF LAW .......................................................6

Proposition of Law No. I: The assignee of a mortgage stands in theshoes of the assignor of that mortgage and succeeds to all of therights and remedies possessed by the assignor of that mortgage,including its lack of actual knowledge ................................................................................6

Proposition of' Law No. II: The doctrine of equitable subrogationapplies when a prior lien is satisfied with loau proceeds and (1) theparty asserting the doctrine intended to hold the first and best lien,and (2) the competing lienholder had the expectation that itsinterest would be junior at the time that it received its interest ...........................................9

CONCLUSION .................................... ........................................... .............................................. 11

CER1'IFICATE OF SF,RVICE .............................................. .............. .......................................... 13

APPENDIX ...... ........................................................................................................ Appendix Pae;e

Judgment Entry of the Hamilton County Court of Appeals(December 23, 2009) ...........................................................................................................1

ii

EXPLANATION OF WHY THIS CASE IS A CASE OF PUBLICOR GREAT GENERAL IN"1'EREST

This case concems whether parties may freely assign notes and niortgages in Oliio,

including all of the rights and remedies explicitly and impliedly embodied within those

commercial paper instruments.

If the Judgment Entry ("the Entry") that was issued on December 23, 2009 by the First

District Court of Appeals ("the Court of Appeals") stands, the long-standing ability to freely

assign notes aud mortgages will be undermined.

Specifically, in this case, a mortgagee ("the Assignor") assigned a mortgage to an

assignee ("the Assignee" or "U.S. Bank"). It is undisputed that the Assignor did not have actual

knowledge of the competing lien at the tiine that the Assignor provided the loan and received the

mortgage. The First District Court of Appeals ("the Court of Appeals") erroneously failed to

apply a long-standing mortgage-related doctrine in favor of the Assignee because of certain

alleged knowledge of the Assienee at the time of the assignment.

The Entry disrupts long-standing Ohio law that holds that the assignee of a mortgage

stands in the exact saine position as the assignor, succeeding to all of the rights and remedies of

the assignor in the assigned instrument. As a result of the Entry, prospective assignees will be

reluctant to accept assignnents of mortgages in Ohio, because of the inability to receive the

explicit and implied rights that accompany those mortgages under Ohio law. In the absence of a

predictable and stable secondary market for commercial paper in Ohio, the flow of capital into

Ohio in exchange for security interests in real property will diminish, fmlher deepening Ohio's

economic recession. Once prospective assignees of mortgages understand that they cannot

acquire all of the explicit and implied rights that the assignors of mortgages possessed,

prospective assignees will spend their investment dollars elsewhere.

I

Additionally, the Entry ignores this Court's precedent dating from 1896, which holds that

actual knowledge of any party is not relevant in determining whether the doctrine of eqititable

subrogation should be applied in this case. Specifically, the Entry declined to apply the doctrine

of equitable subrogation in favor of the Assignee, because the Assignee had actual knowledge of

the competing lien when the Assignor assigned the subject mortgage to the Assignee.

The doctrine of equitable subrogation is of public and great general interest because

courts throughout Ohio are interpreting differently, sometimes in contravention of this Court's

view, whether actual knowledge is not relevant, which lack of knowledge is consistent with the

majority view throughout the country. Despite the fact that this Court held in as early as 1896

that actual knowledge of the competing lien was irrelevant to application of the doctrine of

equitable subrogation, several Ohio intermediate appellate courts (including the Court of

Appeals) have held that actual knowledge of the competing lien precludes application of the

doctrine of equitable subrogation. Refusing to apply equitable subrogation in cases iuvolving

actual knowledge only benefits conipeting lienholders that never baigained for or expected a first

lien position. This resulting windfall in favor of competing lienholders conies at the expense of

Ohio borrowers, who will necessarily have to face increased flnancing costs in a competitive

marketplace due to losses that will be suffered by lenders and third party service providers

throughout Ohio.

In fact, this Court has recently accepted two (2) other appeals involving.application of the

doctrine of equitable subrogation, one (1) of which is pending before this Court. See ABN

AMRO Mtge. GrB., Inc. v. Kangah, 180 Ohio App.3d 689, 2009-Ohio-359, conflict certified at

121 Ohio St.3d 1471, 2009-Ohio-2045, 905 N.E.2d 652; Wash. Mut. Bank v. Aultman, 172 Ohio

App.3d 584, 2007-Ohio-3706, 876 N.E.2d 617, conflict certified at 115 Ohio St.3d 1471, 2007-

2

Ohio-5735, 875 N.E.2d 626, appeal not accepted for discretionary review at 115 Ohio St.3d

1476, 2007-Ohio-5735, 875 N.E.2d 629, appeal dismissed upon appellant's application for

dismissal at 116 Ohio St3d 1419, 2007-Ohio-6378, 877 N.E.2d 305.

The Entry precluded application of the doctrine of equitable subrogation due to alleged

actual knowledge of the competing lien, which is addressed within Proposition of Law No. 11.

Additionally, the Entry determined that actual knowledge of the competing lien was present,

because the Assignee had actual knowledge of the competing lien at the time of the assignment,

which is addressed in Proposition of Law No. I. Both of these actions witbin the Entry are

erroneous and independently and collectively support this Court exercising its discretionary

jurisdiction to consider this Appeal, so that Ohio courts may correctly determine cases involving

mortgage interests in real property.

STATEMEN"I' OF THE. CASE AND FACTS

This case involves the foreclosure interests in real estate commonly known as 11590 Mill

Road in Cincinnati, Ohio 45240 bearing Pernranent Parcel Number 591-0020-0332-00 ("the

Property"). Through a general warranty deed dated October 13, 1999 and recorded on

November 17, 1999 in the IIaniilton County Records, IIeather Wells ("Wells") acquired title to

the Property from Jaines R. Jennings.

On July 23, 2002, Wells and Steven Minger ("Minger") granted a Mortgage encumbering

the Property to ABN AMRO Mortgage Group, Inc. in the aniount of one hundred forty-four

thousand dollars ($144,000.00) ("the ABN Mortgage"). The ABN Mortgage was recorded on

October 3, 2002 in the Hamilton County Records.

On September 9, 2002, Wells and Minger granted a second Mortgage encumbering the

Property to U.S. Bank National Association in the amowit of eighteen thousand dollars

3

($18,000.00) ("the Prior (J.S. Bank Mortgage"). The Prior U.S. Bank Mortgage was recorded on

November 13, 2002 in the Hamilton County Records.

On July 7, 2005, after obtaining judgment on a business debt, Defendant-Appellee The

Bank of Kentucky, Inc. ("Appellee") filed a Certificate of Judgment in its favor against David A.

Lockwood, Jill M. Lockwood, Heather A. Minger, and Steven J. Minger in the amount of two

million seven hundred thousand eiglit hundred and 52/100 dollars ($2,700,800.52), which was

memorialized as Instrument Number CJ05007686 ("the Certificate"). Apparently, the debt was

pursued under a personal guaranty of Heather Minger for a commercial loan made by Appellee

to another party. That loan was not secured in any way by the Property. At that time, title to the

Property was held in the name of IIeather Wells. Consequently, the Certificate was not filed

within the chain of title to the Property.

Subseqnently, Defendant Kim Nguyen ("Nguyen") contracted to purchase the Property

from Wells for the amount of one hundred ninety-three thousaud and 00/100 dollars

($193,000.00). h1 order to fund the purchase of the Property, Nguyen obtained a loan from

People's Choice Home Loan, Inc. ("People's Choice"). In return, Ngtiyen executed an

Adjustable Rate Note in the amount of one hundred eiglity-threc thousand three hundred fifty

dollars ($183,350.00) ("the Note"). The proceeds of the Note satisfied the ABN Mortgage in the

amount of one hundred twenty-three thousand five htmdred seventy-eight and 55/100 dollars

($123,578.55). The proceeds of the Note also satisfied the Prior U.S. Bank Mortgage in the

amount of fifteen thousand four hundred two and 67/100 dollars ($15,402.67). And, the

proceeds of the Note satisfied outstanding real property taxes in the amount of two thousand

seven hundred ten and 28/100 dollars ($2,710.28). On or about November 8, 2005, Wells and

Minger conveyed the Property to Nguyen by a General Warranty Deed recorded on November

4

17, 2005 in the Hamilton County Records. A title agency performed certain services, including

the retention of an independent contractor to perform a title examination, but the Certificate was

not uncovered in that examination, because Appellee did not ensure that the Certificate was filed

within the chain of title to the Property.

On November 7, 2005, Nguyen granted a Mortgage encumbering the Property to

Mortgage Electronic Registration Systenis, Inc. as Nominee for People's Choice in the amount

of one hundred eighty-three thousand three hundred fifty dollars ($183,350.00) ("the U.S. Bank

Mortgage"). The U.S. Bank Mortgage was recorded on November 17, 2005 in the Hamilton

County Records.

On June 20, 2007, the [J.S. Bank Mortgage was assigned to U.S. Bank through an

Assignment of Mortgage recorded on June 26, 2007 in the IIamilton County Records.

On March 3, 2009, the Trial Court issued a Final Entry Granting and Denying Cross-

motions for Summary Judgment granting the Motion for Sumniary Judgment filed by Appellee

and denying the Cross-motion for Summary Judgment filed by U.S. Baiik on the issue of priority

of liens.

On December 23, 2009, the Court of Appeals issued the Entry, which held that U.S.

Bank's alleged actual knowledge of the Certificates at the time that the U S. Bank Mortgage was

assigned to U.S. Bank precluded U.S. Bank from application of the doctrine of equitable

subrogation.

5

ARGUMENT IN SUPPORT OF PROPOSI"I'IONS OF LAW

Proposition of Law No. I: The assignee of a inortgage stands inthe shoes of the assignor of that mortgage and succeeds to all ofthe rights and remedies possessed by the assignor of thatmortgage, including its lack of actual knowledge.

The assignee of a mortgage stands in the exact same position as the assignor-no better

and no worse, EMC Mtge. Corp. v. Jenkins, 164 Ohio App.3d 240, 2005-Ohio-5799, 841 N.E.2d

855, at 1120, citing Siebert v. Columbus & Pranklin County Metro. Park Dist. (Dec. 28, 2000),

Tenth Dist. No. OOAP-583, 2000 WL 1877585, at *3, citing Interstate Ins. Exchange v_ Wagstaff

(1945), 144 Ohio St. 457, 460, 59 N.E.2d 373. An assignee of a mortgage succeeds to all ot'the

rights and reniedies of the assignor of the mortgage. Siebert, 2000 WL 1877585, at *3, citing

Wagstaff; 144 Ohio St. at 460. One of the rights and remedies that the holder of a mortgage may

assert, in appropriate cases, is the doctrine of equitable subrogation. See, e.g., State v. Jones

(1980), 61 Ohio St.2d 99, 399 N.E.2d 1215, 15 0.O.3d 132; Fed Union Life Ins. Co. v. Deitsch

(1934), 127 Ohio St. 505, 189 N.E. 440, 39 Ohio Law Rep. 653; Union Trust C'o_ v. Lessovitz

(1930), 122 Ohio St. 406, 171 N.E. 849, 8 Ohio Law Abs. 336, 32 Ohio Law Rep. 77; Miller v.

Stark (1900), 61 Ohio St. 413, 56 N.E. 11, 43 W.L.B. 116; Joyce v. Dauntz (1896), 55 Ohio St.

538, 45 N.E. 900, 37 W.L.B. 69.

Certain intermediate Ohio appellate courts have, as explained below, held that application

of the doctrine of equitable subrogation is precluded when the party asserting application of the

doctrine of equitable subrogafion had actual knowledge of the competing lien at the time that the

mortgage was granted. See, e.g., Morequity, Inc. v. Fifth Third Bank, First Dist. No. C-080824.

2009-Ohio-2735, at ¶¶ 6, 16; Wash. tLlut. Bank v. Aultman, 2007-Ohio-3706, ¶¶ 4, 35; Fed. Natl.

Mtge. Assoc, v. Webb, 2006-Ohio-3574, at ¶¶ 1, 43; Wash, Mut. Bank v. Hopkins, 1'enth Dist.

No. 07AP-320, 2007-Ohio-7008, at ¶¶ 2, 20. 1'his has come to be known in Ohio as "the

6

Moderate View" of the doctrine of equitable subrogation. See Kuehnle & Levy, Baldwin's Ohio

Practice Ohio Real Estate Law (2008), Section 34:11.50; Kangah, 2009-Ohio-359, at ¶¶18-21.

As explained in detail below, this Court's precedent dating froin 1896 has recognized that actual

knowledge does not preclude application of the doctrine of equitable subrogation, because

"subrogation *** is not affected by notice of the [competing lien when the interest was

obtained]" See Joyce, 55 Ohio St. 538, at paragraph tlu•ee (3) of the syllabus. Moreover, a party

"need not be ignorant" of the competing lien in order for the doctrine of equitable subrogation to

apply. Joyce, 55 Ohio at 548.

However, the Court of Appeals applied the Moderate View if tge doctrine of equitable

subrogation. In the Entry, the Cotu-t of Appeals erroneously deprived U.S. Bank of the right to

assert application of the doctrine of equitable subrogation, and its basis for doing so was U.S.

Bank's actual knowledge of the Certificate. Even applying the Moderate View, the Court of

Appeals should have focused on the Assignor's lack of actual knowledge of the Certificate when

the U.S. Bank Mortgage was granted to the Assignor. Ohio intermediate appellate courts that

have applied the Moderate View of the doctrine of equitable subrogation have consistently

applied the axiomatic principle that when there is an assigmnent of a mortgage and the assignee

asserts application of the doctrine of equitable subrogation, the point in time when the mortgage

was granted to the assignor is the point in time that is evaluated for purposes of detertnining

whether there was actual knowledge of the competirig lien. Morequity, 2009-Ohio-2735, at ¶¶ 6,

16; Aultrnan, 2007-Ohio-3706, ¶¶ 4, 35; Webb, 2006-Ohio-3574, at ¶¶ 1, 43; Hopkins, 2007-

Ohio-7008, at ¶¶ 2, 20. These holdings are consistent with Ohio law that recognizes that an

assignee stands in no better and no worse position than its assignor.

7

In the Entry, this Court found that U.S. Bank allegedly had actual knowledge of the

competing lien at the time of the assil!nment of the U.S. Bank Mortgage to U.S. Bank. (See the

Entiy pp. 6, 7-8.) In doing so, the Court of Appeals disregarded Ohio law of assignments.

However, as explained above, the real question under the Moderate View of the doctrine of

equitable subrogation is whether the mortgagee that received the mortgage had actual knowledge

of the competing lien at the time that the U.S. Bank Mortgage was granted, due to long-standing,

uniform Ohio precedent that assignees succeed to all of the rights and remedies of their

assignors. Morequiry, 2009-Ohio-2735, at ¶¶ 6, 16; Webb, 2006-Ohio-3574, at ¶¶ 1, 43;

Hopkins, 2007-Ohio-7008, at 11112, 20. See, also, Siebert, 2000 WL 1877585, at *3, citing

Wagstaff, 144 Ohio St. at 460.

The Record amply demonstrates that the assignor of the U.S. Bank Mortgage to U.S.

Bank did not have actual knowledge of the competing lien when the U.S. Bank Mortgage was

granted to the Assignor. This fact, critical umder the Moderate View that the Court of Appeals

applied, has never been disputed.

Therefore, the Entry upsets long-standing precedent of this Court regarding the ability to

assign a mortgage, including all of the rights and remedies associated with the mortgage. The

Entry will therefore lead to the practical inability to freely assign mortgages in Ohio. 'The Entry

may also effectively preclude the assigiiment of other rights and remedies in Ohio. This

tmfortunate liolding will harm the secondary market, which will inevitably reduce lending and

the availability of credit to Ohio borrowers.

This Court should exercise its jurisdiction in this case and hold that the assignee of a

mortgage stands in the shoes of the assignor of that mortgage and succeeds to all ot' the rights

8

and remedies possessed by the assignor of that mortgage, including the assignor's lack of actual

knowledge of a competing lien.

Proposition of Law No. II: The doctrine of equitablesubrogation applies when a prior lien is satisfied with loanproceeds and (1) the party asserting the doctrine intended tohold the first and best lien, and (2) the competing lienholderhad the expectation that its interest would be junior at the timethat it received its interest.

The Entry states that "a party that has actual knowledge of a prior, competing lien cannot

be protected through the doctrine of equitable subrogation." (See the Entry p. 8.) This statement

exemplifies this Court of Appeals's adoption of what has come to be known as the Moderate

View of the doctrine of equitable subrogation. The Couit of Appeals should have followed the

Traditional View of the doctrine of equitable subrogation, because the Moderate View is at odds

with well-established precedent of this Court. See Joyce, 55 Ohio St. 538 at paragraph three (3)

of the syllabus and 548. See, also, Kangah, 2009-Ohio-359, at ¶21; Wash. Mut. Bank v.

Auliman, Second Dist. No. 2006 CA 25, 2007-Ohio-3706; Cadle Co. No. 2 v. Rendezvous Realry

(Sep. 2, 1993), Eighth Dist. Nos. 63565, 63724, 1993 WI, 335444; TCIF REO GCM, LLC v.

Natl. City Bank, Eighth Dist. No. 92447, 2009-Ohio-4040. The Moderate View is also at odds

with the majority view of the doctrine of equitable subrogation throughout the country. See

Grant S. Nelson and Dale A. Whitman, Adopting Restatement Mortgage Subrogation Principles:

Savings Billions of Dollars for Refinancing Homeowners; Restatement of the Law 3d,

Mortgages, (1997), Section 7.6 Subrogation.

The Moderate View of the doctrine of equitable subrogation differs fi•om the Traditional

View of the doctrine of equitable subrogation, because, under the Moderate View, the doctrine

does not apply if the party asserting the doctrine had knowledge of the competing lien and failed

to take adequate steps to protect its interest. See Keybank v. Adams, Tenth Dist. No. 02AP-1293,

9

2003-Ohio-6651, at ¶20; YVells Fargo Bank v. Dupler, Fifth Dist. No. 06 CA 26, 2007-Ohio-

3497; Fifth Third Bank v. Lorance, Twelfth Dist. No. CA2006-10-4217; Huntington Natl. Bank

v. Allgier, Sixth Dist. No. WD-07-061, 2008-Ohio-1289; Old Republic Title Ins. Co, v. Fifth

Third Bank, First Dist. No. 070567, 2008-Ohio-2059, appeal not allowed at 119 Ohio St.3d

1475, 2008-Ohio-491 1; Ford Homes v. Bobie, Twelfth Dist. No. CA2008-09-220, 2009-Ohio-

677. See, also, Wash. Mut. Bank v. Chiappetta (N.D. Ohio 2008), 584 F. Supp.2d 961.

'1'he Traditional View of the doctrine of equitable subrogation is easy to apply, and the

prerequisite and two (2) critical elements limits application of the doctrine to an extremely small

percentage of disputes in which multiple liens encunrber the same property. Several Ohio

intemiediate appellate courts have applied the Traditional View of the doctrine of equitable

subrogation, in extremely well-reasoned decisions, because of its workability and flexibility.

Kangah, 2009-Ohio-359, at ¶21; Aultman, 2007-Ohio-3706; Cadle Co. No. 2, 1993 WL 335444;

TCIF, 2009-Ohio-4040. See, also, Fed Home Loan Mtge. Corp, v. Moore (Sep. 27, 1990),

Tenth Dist. No. 90-AP-546, 1990 WL 140556.

The Traditional View of equitable subrogation should be applied, because it represents

the well-settled law of Ohio, and it promotes consistency, reliability, and ease of application.

Any other result allows competing lienholders, such as Appellee, to receive a windfall that will

inevitably result in losses to lenders and third party service providers that will necessarily be

passed on to Ohio borrowers in the fonn of increased financing costs. The only party that

benefits from application of the Moderate View is the competing lienholder that never bargained

for or expected a first lien position. And, competing lieiilrolders are left in no worse position

after application of equitable subrogation, because the doctrine limits the subrogation to amount

of the prior liens satisfied that unquesfionably had priority over the eompeting lien.

10

Therefore, the Court sbould accept jurisdiction over this case and hold that the doctrine of

equitable subrogation should apply when a prior lien is satisfied witli loan proceeds and (1) the

party asserting the doctrine intended to hold the first and best lien, and (2) the competing

lienholder had the expectation that its interest would be junior at the time that it received its

interest.

CONCLUSION

For the reasons explained above, this case involves matters of public and great general

interest that significantly affects real property transactions in Ohio. The Court should accept

jurisdiction over this case and hold that assignees of moitgages in Ohio succeed to all of the

rights and remedies of the assignors of those mortgages. Otherwise, the secondary market for

commercial paper arising from real property transactions will be stunted, which will limit the

availability of credit to Ohio borrowers at a time when lending is essential to improve the

economy. Moreover, this Court should accept jurisdiction over this case to thold that the

doctrine of equitable subrogation applies when a prior lien is satisfied, and the pai-ty asserting the

doctrine intended to hold the first lien, and the competing lienholder expected that its interest

would be junior. Otherwise, Ohio law will promote windfalls to competing lienholders at the

expense of Ohio borrowers who will ultimately 1pay for those windfalls to lienholders that never

bargained for a first in position in the form of increased financing costs that would ultimately

result if the Traditional View of the doctrine of equitable subrogation is no longer the law o1'

Ohio.

Respectfully submitted,

SIKORA LAW LLC

Michael J. Sikora III (006 51 )Maria Mariano Gutlirie (0 049)Arm M. Johnson (0077660)Lee R. Schroeder (0075358)8532 Mentor AvenueMentor, Ohio 44060(440) 266-7777 (telephone)(440) 266-7778 (facsimile)Co-counsel for Plaintiff-AppellantU.S. BankNational Association

12

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the foregoing Memorandum in Support of

.lurisdiction of Plaintiff-Appellant U.S. Bank National Association, as Trustee for Structured

Asset Securities Corporation Mortgage Pass-through Certificates, 2006-GEL2 c/o Wells Fargo

Bank, N.A. was served by ordinary U.S. mail this 8th day of February, 2010, upon the following:

James PapakirkTodd J. Flagel

Benjamin RodriguezFlagel & Papakirk, LLC

10300 Alliance Road, Suite 520Cincarnati, Ohio 45242

Counsel for Defendant-Appellee The Bank of Kentueky, Inc.

Kim Nguyen12015 Springdale Lake DriveCincinnati, Ohio 45246-1504

Jolm Doe, name unknown, occupant11590 Mill Road

Cincinnati, Ohio 45240

Jamie Doe, name unknown, spouse of Kim Nguyen12015 Springdale Lake DriveCincimrati, Olvo 45246-1504

Amy K. KaufinanAssistant Attorney General

Collections Enforcement Section150 East Gay Street, 21$` FloorColumbus, Ohio 43215-5148

Counsel for Defendant State of Ohio

Cynthia M. FischerMia L. Conner

Lerner, Sampson & Rothfuss, L.P.A.P.O. Box 5480

Cincinnati, Ohio 45201-5480Co-counsel for Plaintiff-Appellant U.S. Bank National Association

13

Michael J. Sikoia Ill (0069512)Co-comisel for Plaintiff-AppeU.S. Bank National Association

14

APPENDIX

Page

Judgment Entry of the Hamilton County Cour-t of Appeals(December 23, 2009) ....................................................................................................................... I

15

IN THE COURT OF APPEALS

FIRST APPELLATE DISTRICT OF OHIO

HAMILTON COUNTY, OHIO

U.S. BANK NATIONAL ASSOCIATION, APPEAL NO. C-0900221as Trustee for Structured Asset Securities TRIAL NOS. A-o705404Corporation Mortgage Pass-Through A-0900366Certificates, 20o6-GEL2 c/o Wells FargoBank, NA., JUDGMI?NTEN'TRY.

Plaintiff-Appellant,

VS.

KIM NGUYEN,

JAMIE DOE, name unknown, spouse ofKim Nguyen,

and

STATE OF OHIO, c/o Ohio AttorneyGeneral,

Defendants,

and

THE BANK OF KENTUCKY, INC.,

Defendant-Appellee

ENTUEDDEC 2 3 zo09

We consider this appeal on the accelerated calendar, and this judgment entry

is not an opinion of the court.1

On October 13, 1999, Heather Wells acquired the property located at 11590

Mill Road, Cincinnati, by way of a general warranty deed. This deed, which listed the

I See S.Ct.R.Rep.Op. 3(A), App.R. u.i(E), and Loc.R. 12.

OHIO FIRST DISTRICT COURT OF APPEALS

grantee as "Heather Wells," was recorded in Hamilton County on November 17,

1999.

On July 23, 2002, Heather Minger (formerly known as I3eather Wells) and

Steven Minger granted a mortgage on the property at 11590 Mill Road to ABN AMRO

in exchange for a loan of $144,000. On September 9, 2002, the two granted a second

mortgage to U.S. Bank in exchange for a loan of'$18,ooo. The ABN AMRO mortgage

was recorded on October 3, 2002, and the U.S. Bank mortgage was recorded on

November 13, 2002. Both mortgages were recorded in Hamilton County.

Nearly three years later, on July 7, 2005, the defendant-appellee, the Bank of

Kentucky, filed a certificate of judgment in its favor against Iieather A. Minger,

Steven Minger, and others in the amount of $2,700,800.52. The certificate was filed

in Hamilton County, and the name "Heather Wells" appeared nowhere on the

certificate (Hamilton C.P. No. CJo5007686).

On November 8, 2qo5, Heather Minger and Steven Minger conveyed the

property located at 11590 Mill Road to Kim Nguyen ("Nguyen") by way of a general

warranty deed. The deed listed "Heather Minger, fka Heather Wells, and Steven

Minger, husband and wife" as the grantors. Nguyen borrowed $183,350 of the

$193,ooo purchase price and granted a mortgage in the, borrowed amount to

Mortgage Electronic Registration Systems, Inc. ("MERS"), the nominee for the

lender. A title search for the property was conducted by a third party, but the Bank of

Kentucky's certificate of judgment filed in July 2005 was not discovered. A portion of

the purchase price received by the Mingers was used to pay off the two mortgages

filed in 2002 (the ABN AMRO and U.S. Bank mortgages). Both the general warranty

deed conveying the property to Nguyen and the mortgage granted to MERS were

filed in Hamilton County on November 17, 2005.

urC ^32009

ENI'ERED2

OIllo FIRS'r DISTRICT COURT OF APPEALS

Subsequently, on June i9, 2oo7, U.S. Bank National Association ("U.S.

Bank") initiated foreclosure proceedings against Nguyen (I-Iamilton C.P. No. A-

0705404). Presumably, U.S. Bank had discovered the Bank of Kentucky's July 2005

certificate of judgment prior to filing suit, because the Bank of Kentucky was listed as

a co-defendant in the initial complaint. One day later, on June 20, 2007, MERS

assigned its mortgage to U.S. Bank, which recorded its assigned interest in Hamilton

County on June 26, 2007. Although the case numbered A-o7o5404 was never

dismissed, U.S. Bank refiled its foreclosure complaint against Nguyen on January 14,

2009 (Hamilton C.P. No. A-o900366), and the Bank of Kentucky was again listed as

a co-defendant. The two cases were then consolidated.

U.S. Bank and the Bank of Kentucky filed competing motions for summary

judgment, each asserting tfiat its own lien was superior to the other's lien. The trial

court granted the Bank of Kentucky's motion and overruled U.S. Bank's motion,

holding that the Bank of Kentucky's certificate of judgment filed in July 2005 was

superior to U.S. Bank's mortgage, which was obtained through assignment in June

2007. U.S. Bank now appeals, asserting two assignments of error.

Civ.R. 56(C) states that before summary. judgment is granted, it must be

determined that (i) there exists no genuine issue of any material fact; (2) the moving

party is entitled to judgment as a matter of law; and (3) from the evidence it appears

that reasonable minds can come to but one conclusion, and with the evidence vicwed

most strongly in favor of the nonmoving party, that conclusion is adverse to the

nonmoving party.2 Further, questions of law are subject to a de novo standard of

review.3

2State ex ret. Cassefs v. Dayton City School Dist. Bd, ofEdn. (1994), 69 Ohio St.3d 2i7, 2ig, 631N.E,2d i5o.3 0hio Bell Te^^t1992), 64 Ohio St.3d 145,147,593 N.E.2d 286.

3

OHIO FIRST DiSTRICT COURT OF APPEALS

In its first assignment of error, U.S. Bank asserts that the trial court erred

when it granted the Bank of Kentucky's motion for summary judgment. It reasons

that the Bank of Kentucky's certificate of judgment never attached to the property

because the property was titled in a name ("I•leather Wells") that did not match the

name listed on the certificate ("Heather A. Minger"). Because the certificate of

judgment never perfected, the certificate never became a legitimate lien on the

prope"rty, and the Bank of Kentucky had no interest in the property.4

Alternatively, U.S. Bank asserts that even if one were to assume that the Bank

of Kentucky's ce1-tificate of judgment did attach to the property, U.S. Bank had

attained the status of a bona fide mortgagee. A bona fide mortgagee takes its interest

free and dear of any competing interest, provided that the mortgagee has given value

and is without notice, actual or constructive, of any competing interests.5 U.S. Bank

claims that it met both of these requirements when it obtained the assignment of the

mortgage, and thus, that its interest in the property was superior to the Bank of

Kentucky's certificate of judgment.

Both arguments U.S. Bank presents in its first assignment of error fail. First,

the Bank of Kentucky's certificate of judgment attached to the property when it was

filed on July 7, 2005. R.C. 2329.02 states that a judicial lien is created the moment it

is filed with the clerk of courts "upon lands and tenements of each judgment debtor".

This is not a case where Heather Wells and Heather Minger are two different

persons; it is undisputed that Heather Wells and Heather Minger are one and the

same. Therefore, based upon the plain langqage of the statute, and because Heather

4 See, gcnerally, Kay Gee Produce Co. v. Satent (1997), 120 Ohio App.3d 529, 532, 698 N.E,2d485; Reed v, Hardtnan, 2005-Ohio-4394.5 Wayne B1dg. & Loan Co. v. Yarborough (1967), 11 Ohio St.2d 195, 200, 228 N.E.2d 841, citingMiner v. Wa[lace (184}l, to Ohio 4o3.

ENTEREDDEC ^ 3 2009

4

OIIIo FIRST DISTRICT COURT OF APPEALS

WeIls is the same person as Heather Minger, a lien was created by statute the

moment the certificate of judgment was filed with the clerk of courts.

To further this point, we note that a federal bankruptcy court, when

confronted with the same problem of conflicting names on a deed and a certificate of

judgment, applied Ohio law and held, "The law in Ohio is quite clear that when a

certificate of judgment is filed with the office of the clerk of the commbn pleas, a lien

is immediately created upon the lands of the judgment debtor."6 The court

continued, "Significantly, [R.C. 2329.o2] does not say that the certificate of judgment

will be a licn on all real estate in the name of the debtor; instead, the statute is simply

concerned with land and tenements of the debtor. There is nothing in the statute to

indicate that the technicalities of record title should be controlling in determining

the effect of a certificate of judgment. Nor does the statute require the judgment

creditor to affix other names used by the debtor."7We agree with the reasoning of the

bankruptcy court and hold that the Bank of Kentucky's certificate of judgment

attaehed when it was filed.

In addition, U.S. Bank's reliance on Kay Gee Produce Co. v. Salem8 is

misplaced. In that case, the judgment creditor listed,a nickname on the lien, not the

debtor's correct name.9 A diligent title search could not have discovered the lien due

to the use of the nickname.10 In the• case at bar, a diligent title search did in fact

discover the Bank of Kentucky's certificate of judgment, as the initial complaint, as

well as the naming of the Bank of Kentucky as a co-defendant, demonstrates.

6In re Ilafeez (iggi), 133 $.R. 419, 421, citing l'yler Refrigeration Equip. Co. v. Stonick (ig8i), 3Ohio App. gd 167, 16g, 444 N.E.2d 43.7 Id. (Emphasis sic.)"(ig97),12o Ohio App.3d 529, 698 N.E.2d 485.9 Id. at 531.- Id. at 532•

ENTER-EDDEC 2 3 2009 5

OHIo FIRST DISTRICT COURT OF APPEALS

We also reject U.S. Bank's argument that it should have been considered a

bona fide mortgagee. As we have previously mentioned, a bona fide mortgagee takes

its interest free and clear of any competing interests provided that it has given value

and has no actual or constructive knowledge of any competing interests.,'

Upon review of the record, it appears that U.S. Bank had both actual and

constructive notice of the Bank of Kentucky's interest. The act of filing a certificate of

judgment automatically provides constructive notice to all of the existence of a lien.12

Thus, at the very least, U.S. Bank had constructive notice of the Bank of Kentucky's

interest when the certificate of judgment was fifed on Juiy 7, 2oo5. But not only did

U.S. Bank have constructive notice of a competing lien, it likely had actual notice as

well. U.S. Bank filed the initial foreclosure complaint against Nguyan (and co-

defendant the Bank of Kentucky) on June i9, ?oo7. In the complaint, U.S. Bank

listed most of the pertinent details regarding the Bank of Kentucky's certificate of

judgment, including the names of judgment debtors, the case number, and the date

and location of filing. However, U.S. Bank did not obtain an interest in the property

until MERS had assigned the mortgage to it on June 20, 2007, one day after the

filing of U.S. Bank's complaint. It cettainly appears from this sequence that U.S.

Bank had actual, knowledge of a competing lien when it obtained its interest in the

property. Thus, U.S. Bank cannot claim that it was a bona fide moltgagee.

Because the Bank of Kentucky's interest in the property attached at the time it

filed its certificate. of judgment, which was prior to U.S. Bank's acquisition of its

mortgage interest, thus making the Bank of Kentucky first in time, and because U.S.

11 Wayne Bldg . & Loan Co, v. Yarborough (1967), 11 Ohio St.2d 195, 200, 228 N.E.2d 841, citingMiner v. Watlace (1841), io Ohio 403.1 2Standard Hardware & Supply Co. v. Bolen (1996),115 Ohio App.3d 579, 582, 685 N.E.2d 1264.

MEREDDEC 2 3 2009

OHIO FIRST DISTRICT COURT OF APPEALS

Bank was not a bona fide mortgagee, we overrule U.S. Bank's first assignment of

error.

In its second assignment of error, U.S. Bank argues that because it had

satisfied two prior liens that had priority over the Bank of Kentucky's certificate of

judgment (the July 23, 20o2, ABN AMRO mortgage and the September 9, 2002, U.S.

Bank mortgage), and because it intended to hold the first and best lien on the

propeity, the doctrine of equitable subrogation should have been applied by the trial

court to give its assignment priority over the Bank of Kentucky's certificate of

judgment.

We have previously held that "equitable subrogation 'arises by operation of

law when one having a liability or right or a fiduciary relation in the premises pays a

debt due by another under such circumstances that he is in equity entitled to the

security or obligation held by the creditor whom he has paid.' "13 To claim equitable

subrogation, "a party must demonstrate that its equity is strong and its case is clear.

A party is not entitled to equitable subrogation if that party has failed to act in

accordance with ordinary and reasonable business practices to establish priority."14

Also, in this appellate district, one cannot claim protection under equitable

subrogation if ithad actual knowledge of a prior lien.'s

We have overruled U.S. Bank's first assignment of error in part because it

appeared to have actual knowledge of the Bank of Kentucky's competing lien. We

also overrule its second assignment of error for the same reason. We fail to see how

U.S. Bank could rtoi have had actual knowledge of the Bank of Kentucky's certificate

of judgment when it filed the original foreclosure complaint on June 19, 2007, one

13 Old Republic Natt. Title Ins. Co. v. F1fth Third Bank, ist Dist. No. C-07o567, 2008-Ohio-2059,at 1112; accord Federal Union Life Ins. Co. v. Deitsch (r934), 127 Ohio St. 505, 510, 189 N.E. 440.See, also, Morequity, Inc. v. Ffth Third Bank, ist Dist, No. C-o8o824, 20o9-Ohio-2735, at ¶12.9 Morequity, Inc., supra, at ¶r3. See, also, Old Republic Natt. T(tte Ins. Co., supra, at ¶12 and 13.I5 Morequity, Inc., supra, at 1116.

ENTEREDDEC 2 3 2009

OIilo F1RST DISTRICT COURT OF APPEALS

day before it obtained its interest in the property through the assignment from

MERS. Again, a party that has actual knowledge of a prior, competing lien cannot be

protected through the doctrine of equitable subrogation.

Both of U.S. Bank's assignments of error are overruled. Therefore, we affirm

the trial court's judgment.

A certified copy of this judgment entry is the mandate, which shall be sent to

the trial court under App.R. 27. Costs shall be taxed under App.R. 24.

HENDON, P.J., SUNDERMANN and MALLORY, JJ.

To the Clerk:Enter upon the Journal of the C

per order of the CourtPresidirig'Judge

ENTEREDDEC 2 3 2009

8