IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO NAVY PORTFOLIO ALPHA, LLC ) CASE NO. CV 14 825363 ) ) JUDGE JOHN P. O DONNELL Plaintiff, ) ) JOURNAL ENTRY DENYING ) THE DEFENDANT'S MOTION FOR vs. ) SUMMARY JUDGMENT, DEFERRING ) A RULING ON THE PLAINTIFF'S NATHAN ZAREMBA ) MOTION FOR SUMMARY ) JUDGMENT AND STAYING THE Defendant. ) CASE John P. O'Donnell, J.: This is a lawsuit by a lender's successor to recover on a personal guaranty of a loan after the borrower's default. Each party has filed motions for summary judgment and they are fully briefed. This entry follows. The loan and the foreclosure case On March 4, 2008, Midtown Associates, LLC borrowed $3,475,000 from the Home Savings and Loan Company of Youngstown. Defendant Nathan Zaremba personally guaranteed the note. As security for the note the lender was given a mortgage on property at 3634 and 3636 Euclid Avenue in Cleveland. The note was eventually assigned to the predecessor of the plaintiff in this case, Navy Portfolio, LLC. Midtown Associates defaulted on the loan and Navy Portfolio, LLC filed a foreclosure action as case number CV 13 803333 in the Cuyahoga County Court of Common Pleas. Midtown Associates and Nathan Zaremba were the primary defendants in that lawsuit.
The foreclosure case was settled on March 26 2013. By the settlement agreement Midtown Associates and Nathan Zaremba consented to a judgment against Midtown Associates in the foreclosure case. The settlement agreement further provided that: Nothing contained herein shall affect Lender's right to pursue a deficiency judgment against [Midtown Associates] and/or [Nathan Zaremba] in the event that a sale of the Mortgaged Property, following foreclosure of the Mortgage or otherwise, does not result in full payment of the indebtedness. The consent judgment was for $3,222,202.44 plus interest at an annual rate of 5.8% beginning February 27, 2013. That judgment was entered on October 29, 2013, against Midtown Associates only. The agreed judgment foreclosed Nathan Zaremba's interest in the mortgaged property but stipulated that "no monetary judgment is rendered against defendant [Nathan] Zaremba in favor of plaintiff Navy Portfolio, LLC at this time." Navy Portfolio, LLC assigned its interest in the judgment to the plaintiff here, Navy Portfolio Alpha, LLC, on March 18, 2014. The property was sold by the Cuyahoga County Sheriff on March 24, 2014, for $1,666,667, leaving a deficiency judgment in the amount of $1,555,535.44. The complaint in this lawsuit Navy Portfolio Alpha, LLC then filed the complaint in this case on April 15, 2014. The complaint contains a single cause of action against Nathan Zaremba on his personal guaranty of the original loan to Midtown Associates. The plaintiff is seeking the amount of the deficiency judgment. The motions for summary judgment Navy Portfolio Alpha, LLC argues in its motion for summary judgment that the settlement agreement gives it the right to pursue a judgment against Nathan Zaremba personally if the mortgaged property is sold for less than the judgment amount. That happened and 2
therefore, according to the plaintiff, "[t]he unambiguous language of the Settlement Agreement, which is incorporated into the Foreclosure Judgment, now permits Navy Alpha to seek and pursue a deficiency judgment against Zaremba." Plaintiff's motion for summary judgment, page 5. Zaremba has moved for summary judgment on the basis of res judicata. In support, he argues that the parties agreed to defer the claim in case number 803333 for a judgment against Zaremba on the personal guaranty until after the sheriff's sale, but that after the sale was made "rather than pursue the deficiency claim in that case [it] was dismissed with prejudice." Defendant's mtn. for summary judgment, p. 2. According to Zaremba, that dismissal with prejudice bars this lawsuit. Since the defendant's contention, if meritorious, would prevent the plaintiff from succeeding on the merits I will address the claim of res judicata before considering the merits of the plaintiff's claim for summary judgment. Law and analysis A valid, final judgment rendered upon the merits bars all subsequent actions based upon any claim arising out of the transaction or occurrence that was the subject matter of the previous action. Grava v. Parkman Twp., 73 Ohio St. 3d 379 (1995), syllabus. There is no question that a claim against Nathan Zaremba on the personal guaranty was filed as count three of the foreclosure lawsuit, and it can't be debated that this case too is based upon the personal guaranty. The only thing left to be answered is whether the foreclosure judgment in case number 803333 is a valid, final judgment on the merits of the personal guaranty claim against Zaremba. Under Rule 54(A) of the Ohio Rules of Civil Procedure a judgment includes any order from which an appeal lies under section 2505.02 of the Ohio Revised Code. R.C. 2505.02(B)(1) provides that an order is final when it affects a substantial right in an action that in effect 3
determines the action and prevents a judgment. When a lawsuit includes more than one claim for relief, any order which adjudicates fewer than all of the claims or the rights and liabilities of fewer than all the parties shall not terminate the action. Civ. R. 54(B). The lawsuit in case number 803333 included causes of action for breach of contract (the cognovit note) against Midtown Associates, for unjust enrichment against Midtown Associates, for breach of the personal guaranty of Midtown's obligations against Nathan Zaremba, and for foreclosure on the mortgage given by Midtown Associates. The elements of the foreclosure cause of action that Navy Portfolio, LLC had to prove in case number 803333 are: (1) Navy Portfolio, LLC is the holder of the note and mortgage, or is a party entitled to enforce the instrument; (2) if Navy Portfolio, LLC is not the original mortgagee, the chain of assignments and transfers; (3) Midtown Associates is in default; (4) all conditions precedent have been met; and (5) the amount of principal and interest due. Hancock Fed. Credit Union v. Coppus, Third District App. No. 13-15-19, 2015-Ohio-5312, 17. All of those elements were addressed in the foreclosure judgment in that case. The court recited the history of assignments giving Navy Portfolio, LLC standing to sue (pages 2 and 3 of the magistrate's decision incorporated into the judgment, and page 2 of the judgment) and found that Midtown Associates was in default (pps. 2 and 3 of the magistrate's decision). The court impliedly determined that conditions precedent were satisfied and entered a monetary judgment, with interest, against Midtown Associates (p. 2 of the judgment). Because all of the elements of the foreclosure cause of action were established the entry was final on at least that cause of action in the complaint. By including a monetary judgment against Midtown Associates the entry was also final on the breach of contract cause of action. But it was explicitly not final on the cause of action on 4
Zaremba's personal guaranty. First, the provision in the settlement agreement excepting from settlement the claim on the personal guaranty is incorporated into the judgment entry. Second, the entry itself notes that no judgment is entered against Zaremba personally "at this time." Since the only basis for a judgment against Zaremba personally was the guaranty, this is a clear acknowledgment that the judgment was not final on that cause of action. Last, page 3 of the entry contained the Civil Rule 54(B) language that there is no just reason for delay. That verbiage only has meaning when a court enters a "final judgment as to one or more but fewer than all of the claims or parties" and it would not have been included if the entry was resolving all claims against all parties. The judgment entry in the foreclosure case may have been a final appealable order on the foreclosure cause of action and, for the purpose of this case, I will assume that it was. But the entry did not address Navy Portfolio, LLC's cause of action against Zaremba on the personal guaranty and was therefore not final on that claim. As a result, Navy Portfolio Alpha, LLC's claim on the personal guaranty in this case is not barred by the doctrine of res judicata. That brings me to the merits of the plaintiff's motion for summary judgment. The plaintiff's complaint avers that Midtown Associates, LLC is a judgment debtor of Navy Portfolio, LLC by virtue of the judgment in case number 803333 and that Navy Portfolio Alpha, LLC has succeeded to Navy Portfolio, LLC's rights in the judgment, of which $1,555,535.44 remains owing. Based on that, the complaint alleges that "[t]herefore, Zaremba now is liable to Navy Alpha" for the unpaid portion of the judgment. Other than a passing reference to Zaremba as "the guarantor of the indebtedness owed to Navy Portfolio, LLC" in paragraph 5, the complaint alleges no facts namely, the existence and terms of the written personal guaranty justifying a judgment against Zaremba for Midtown 5
Associates, LLC's contractual obligation. The complaint does allege that Zaremba agreed that the plaintiff could "pursue a deficiency judgment against him" (complaint, 10) but that would not amount to an admission of the merits of such a claim. Moreover, the statute of frauds at R.C. 1335.05 requires that a promise to pay the debt of another be in writing, and no such writing (presumably the personal guaranty that was attached to the complaint in case number 803333) was attached to the complaint in this case. The plaintiff's motion for summary judgment does not correct the complaint's omissions. It does not include a copy of the personal guaranty. Instead, the plaintiff argues that Zaremba consented by the settlement agreement to a deficiency judgment against him personally, citing to the provision that nothing in the settlement "shall affect [the plaintiff's] right to pursue a deficiency judgment against" Zaremba. Pltf's mtn. for summary judgment, p. 4. But Zaremba's agreement that the settlement did not preclude Navy Portfolio, LLC or its successor from pursuing a judgment against him personally is a far cry from consenting to such a judgment. But instead of pointing out the plaintiff's lapses in pleading and motion practice the defendant not only overlooked them by failing to file a motion for a more definite statement but cured them by making the written personal guaranty part of the record as Exhibit 1 to its motion for summary judgment. By that guaranty, Zaremba personally guaranteed the "full and prompt payment and performance" of the loan to Midtown Associates, LLC. On the evidence of record, there is no genuine issue of material fact that $1,555,535.44 is still due on the note from Midtown Associates, LLC to the original lender and that Zaremba personally guaranteed payment of that amount. I therefore conclude that the plaintiff's motion for summary judgment should be granted and Navy Portfolio Alpha, LLC is entitled to a judgment against defendant Nathan Zaremba in 6
the amount of $1,555,535.44 with interest at the rate of 5.8% per year beginning on February 27, 2013, and court costs. And yet... Jurisdictional priorty I am not prepared to grant the plaintiff's motion and enter that judgment. I have concluded here that the plaintiff's claim on the personal guaranty was not adjudicated by the judgment entry in case number 803333. A review of the docket in that case shows that since the judgment there has been: an order of sale, a hearing to approve the commercial appraisers' fees, the original plaintiff's notice of its assignment of the judgment to Navy Portfolio Alpha, LLC, a sheriff's sale, an assignment of the winning bid at the sheriff's sale, and a confirmation of the sale. Conspicuously absent from the docket is any evidence that the causes of action for unjust enrichment and on the personal guaranty have been adjudicated. Hence, the complaint in this case is effectively redundant of pending count three on the complaint in case number 803333. Under the jurisdictional priority rule, the general rule is that when the jurisdiction of two Ohio courts is invoked concerning the same subject matter, the tribunal whose power was first invoked acquires jurisdiction, to the exclusion of all other tribunals, to adjudicate the matter. State ex rel. Judson v. Spahr, 33 Ohio St. 3d 111, 113 (1987). A cursory search has not led me to any cases addressing the question of whether the jurisdictional priority rule applies where the same case is pending before two judges of the same court, as is the case here. Yet I can think of no reason why it shouldn't apply by analogy since the possibility of inconsistent judgments in two different courts is the same with two different judges of the same court. I therefore order that proceedings in this case be stayed pending a final 7
judgment by dismissal or otherwise in case number 803333. This case will be returned to the active docket only upon notice from the parties, or one of them, of such a final judgment. IT IS SO ORDERED: January 5, 2016 Judge John P O Donnell Date SERVICE A copy of this journal entry was sent by email on January 5, 2016, to the following: Stephen V. Cheatem, Esq. cheatham@buckleyking.com Coleson R. Braham, Esq. braham@buckleyking.com Attorneys for the plaintiff Daniel F. Lindner, Esq. daniel@justuslawyers.com Attorney for the defendant Judge John P. O Donnell 8