MEMORANDUM IN SUPPORT OF JURISDICTIONOF APPELLANTS, BARBARA J. AND ALFRED LUFT

IN THE SUPREME COURT OF OHIO 875

ZUKERMAN DAIKER & LEARCO. L.P.A.

APPELLEE

ON APPEAL FROM THE CUYAFIOGACOUNTY COURT OF APPEALS,EIGHTH APPELLATE DISTRICTAPPELLATE DISTRICT

BARBARA J. AND ALFRED LUFT . COURT OF APPEALSCASE NO. CA.91892

APPELLANTS

MEMORANDUM IN SUPPRT OF JURISDICTIONOF APPELLANTS, BARBARA J. AND ALFRED LUFT

Richard L. McNellie (0032130)Eric T. Deighton (0071456)Carlisle, McNellie, Rini,Kramer & Ulrich Co., L.P.A.24755 Chagrin BoulevardBeachwood, Ohio 44122Phone: (216) 360-7200Fax: (216) 360-7210Couusel for AppellantsAlfred and Barbara Luft

COUNSEL FOR APPELLEES

Henry J. Geha (0081713)Robert B Weltman (0008230)323 Lakeside Ave. WestSuite 200Cleveland, Ohio 44113(216) 685-1040Attorney for Appellee,Rotatori, Bender, GragelStoper & Alexander Co. L.P.A.

David G. Finley (0003489)Diana Verhas (0080721)45 W. Prospect Ave., #1650-GCleveland, Ohio 44115

(216) 574-4814Attorneys for Appellee

TABLE OF CONTENTS

Pa¢eEXPLANATION OF WHY THIS CASE IS A CASE OF PUBLIC OR GREATGENERAL INTEREST AND INVOVLES A SUBSTANTIALCONSTITUTIONAL QUESTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

STATEMENT OF THE CASE AND FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

ARGUMENT IN SUPPORT OF PROPOSITION OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Proposition of Law No. I: The promissory note itself is the primary evidence of the debt.And once the note is produced, the presumption is that the face value of the note is due.Therefore the burden of proving that some other amount is due under the note would beon any party claiming payment ..........:............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5

Proposition of Law No. II: Due process and Ohio Rule of Civil Procedure 8(C) mandatethat a party need not defend against a claim of "payment" unless said claim is affirmativelyplead ....................................................................................7

CONCLUSION ............... .................................................8

PROOF OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..9

Apps. PageAPPENDIX

Opinion of the Cuyahoga County Court of Appeals ( March 31, 2009) 18

Common Pleas Court Order Adopting the Magistrates Decision 1

Magistrates Decision(May 16, 2008) 12

EXPLANATION OF WHY THIS CASE IS A CASE OF PUBLIC OR GREAT GENERALINTEREST AND INCLUDES A SUBSTANTIAL CONSTITUTIONAL OUESTION

This cause presents two critical issues that will need to be determined: (1) what burden

does a defendant lien holder have when he asserts a lien in response to a marshalling of liens

claim filed in a foreclosure action; and (2) does the constitutional requirements of due process

protect a claimant from having to respond to a defense or claim that is not plead.

In this case, the Court of Appeals held that in a marshalling of liens action a defendant

lien holder bears the burden of proving that its lien has not been paid. The Court of Appeals

further ruled that in a marshalling of liens action the defendant lien holder bears that burden even

when no other party has asserted a claim that the defendant lien holder has received payment on

its lien.

The decision of the Court of Appeals is a threat to every secured creditor including the

State of Ohio and the United States of America both of which entities have liens on thousands of

properties in this state. By its ruling, the Court of Appeals undermines the legislative intent

behind the adoption of Ohio Rule of Civil Procedure 8(C); ignores 100 years worth of Ohio Case

Law; and, creates its own unsupported view of the burden of proof in marshalling of liens

claims. Moreover, the Court of Appeals decision establishes the illogical and untenable rule that

a lien holder in a foreclosure case bears the impossible burden of proving the negative

proposition of a lack of payment. These unprecedented burdens placed on Ohio lien holders

offend the plain language of the Ohio Rules of Civil. Procedure and the principles of due process

expressed in the Ohio Constitution. They urgently need correction by this Court.

This decision impacts nearly every foreclosure action filed in Ohio, and therefore touches

the lives of tens of thousands of citizens in the state. The integrity of record title is profoundly

denigrated by a holding that lien holders bear the nearly impossible burden of proving that their

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liens have not been satisfied. This burden is nearly impossible to meet because it requires proof

of a negative proposition.

The Appellate Court's decision creates a burden of proof for lien holders that, is

tantamount to requiring a seller in a house-sale dispute to bear the burden of proving that there

was no amendment to the house-sale contract, whereby the seller agreed to sell his house for

only one dollar. Admittedly, the above scenario is ridiculous. And it is elementary that the

burden of proof in the above scenerio should be on the party asserting the existence of the

amendment to the house-sale contract. But it is equally ridiculous in a marshalling of liens case

to place the burden of proving the non-existence of a payment on the lien holder instead of on

the party asserting that payment was made on a lien.

If the Appellate Court's decision undermines the fundamental principle that a lien upon

real property is presumed valid once recorded, and the burden of proof is placed upon the one

challenging the validity of the lien. If it is allowed to stand, such a rule would force a trial to be

held on every uncontested foreclosure action as each lien holder would bear the evidentiary

burden of proving the non-existence of payment.

Apart from these foreclosure law considerations, which make this case one of great

public interest, the decision of the Court of Appeals has broad general significance. The

decision of the Court of Appeals sets a precedent that would obliviate Ohio Civil Rule of Civil

Procedure 8(C)'s requirement that a claim of payment be affirmatively plead. But if this rule

were extrapolated, parties to a legal action would bear the burden of disproving opposing parties

potential defenses even if said defenses are never raised. The result of this rule would be

preposterous. Ohio's already overwhelmed court system would become forever bogged down

a,

with parties attempting to provide evidence combating phantom claims and defenses even when

default judgment is appropriate, such as in this case.

Not surprisingly, the conclusion of the Court of Appeals is contrary both to the Ohio

Rules of Civil Procedure and to all legal authority. Courts throughout this state as well as the rest

of the country have endorsed the proposition that "payment" is a defense that must be plead or it

is waived.

Finally, this case involves a substantial constitutional question. The decision offends

Ohio's constitutional principal of due process by forcing a lien holder to defend against claims

by which they have no notice and no meaningful opportunity to respond.

In summary, this case puts in issue the essence of a marshalling of liens claim, thereby

affecting the majority of the foreclosure actions filed in Ohio. To promote the purposes and

preserve the integrity of Ohio Rule of Civil Procedure 8(C) as well as the constitutional principle

of due process; to assure uniformity in foreclosure actions; and, to remove uncertainty as to the

responsibility a lien holder must undertake to defend his lien against phantom attacks, this court

must grant jurisdiction to hear this case and review the erroneous and dangerous decision of the

Court of Appeals.

STATEMENT OF THE CASE AND FACTS

The case arises from the law fnm of Appellee, Zukerman, Daiker & Lear Co., L.P.A.'s

attempt to collect on a $24,791.03 judgment it obtained against Julie Luft Signer. This judgment

was certified as a lien and filed for record in Cuyahoga County on February 14, 2006, at which

time said lien attached to all property owned by Julie Luft Signer in Cuyahoga County. Ten

years earlier, Julie Luft Signer's parents executed a deed transferring a one-half interest in their

property to her. Zukerman, Daiker & Lear Co., L.P.A.'s judgment lien attached to Julie Luft

3,

Signer's one-half interest in her parent's property once its judgment lien was certified in 2006.

But, four years before the Zukerman lien attached to the subject property, Julie Luft Signer had

executed a note and granted a mortgage to her father, Appellant, Alfred Luft, encumbering that

same one-half interest in the subject property that Mr. Luft and his wife and previously granted

to Julie Luft Signer. In 2007, Zukerman, Daiker & Lear Co., L.P.A. filed a complaint for

foreclosure of Julie Luft Signer's one-half interest in her parent's property and demanded that all

liens on the property be marshaled and their priority determined according to law.

Neither in Zukerman, Daiker & Lear Co., L.P.A's complaint nor in any answering lien

holder's responsive pleading was any allegation made that the note Julie Luft Signer gave to

Appellant, Alfred Luft had been paid or that Alfred Luft's mortgage was fraudulent or should be

set aside or considered invalid. Nor did Julie Luft Signer herself deny the validity of Alfred

Luft's note or mortgage or allege that the note had been paid.

And Alfred Luft in his Answer and Cross-Claim asserted that his mortgage is a good and

valid lien on the property. The trial court recognized that the other parties failed to assert claims

against Alfred Luft in its entry denying a Motion in Limine filed by Alfred Luft, holding that

since no party plead a claim of fraud, Alfred's attempt to preclude evidence relating to the

amount due on his note, was denied as moot.

Despite the fact that Alfred Luft's note was produced and stipulated to by all parties

present at trial, the trial court placed the burden of disproving payment on Alfred Luft finding

that one could not conclude that it was more likely than not that a balance remains due on the

note and mortgage. The trial court set aside Alfred Luft's mortgage to the benefit of Plaintiff and

the other lienholders.

11

The Appellant, Alfred Luft, appealed to the Cuyahoga County Court of Appeals. The

Court of Appeals affirmed the judgment of the Court of Common Pleas and found that: (1) in a

marshalling of liens case, the burden of proving that the lien remains unpaid is on the answering

party lien holder; and (2) evidence of payment may be considered by a trial court even if no

party has plead "payment" as a claim or defense.

The Court of Appeals erred in ruling that a claim of "payment" can be used by one lien

holder to avoid other liens without having to atlirmatively make a claim of payment. The Court

of Appeals also erred in placing the burden of disproving payment on an answering lien holder in

a marshaling of liens action.

In support of its position on these issues, the Appellant presents, the following argument.

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW

Proposition of Law No. 1: The promissory note itself is the primary evidence of the

debt. And once the note is produced, the presumption is that the face value of the note is

due. Therefore the burden of proving that some other amount is due would be on any party

claiming payment.

Cuyahoga County Common Pleas Court Local Rule 24(C) requires that a Preliminary

Judicial Report be filed in all foreclosure cases. The Preliminary Judicial Report filed in this

case clearly details the recording dates of each party's lien on the Property. In a marshalling of

liens action, such as this instant case, the burden is on the party claiming a priority different than

the priority established by the recording date of that party's interest to prove priority by clear and

convincing evidence. Licker v. Green (1909), 17 Ohio C.C. (N.S.) 49. The trial court lightly

dismissed the authority of Licker v. Green, in a footnote, stating that the parties arrayed against

Appellant, Alfred Luft, in this instant case claim that his mortgage is unenforceable because it is

a sham or it has been paid and are not contesting the record priority of the liens. But as

explained above, no such claims of sham, fraud or payment were plead by any party.

A note is a unilateral instrument containing an express and absolute promise of the signer

to pay to a specified person or order, or bearer, a definite sum of money at a specified time.

Black's Law Dictionary 1210 (4`s ed. 1957). In order to establish an underlying debt secured by

a mortgage, one need only produce the note. The note itself is evidence that the amount of the

debt owed by Signer to Alfred Luft is $35,000.00 with interest at the rate of 8.00% per annum

due and payable in full on maturity. The Eighth District Court of Appeals recently

acknowledged this Court's earlier holding that a promissory note itself is the primary evidence of

the debt. Midland Title Security Inc. v. Carlson Id. at 683 citing to Washer v. Tontar (1934), 128

Ohio St. 111, 113. Once the note is produced the presumption is that the face value of the note is

due, but that presumption can be rebutted by proof of payment. Buck v. Coblentz (1934), 18 Ohio

Law Abs. 1. Buck v. Coblentz makes clear that a prima facie case for judgment on the note is

made once the signature on the note is admitted. Id at 3. The parties stipulated at the beginning

of the trial that Signer executed the note. Buck v. Coblentz makes clear that once the signature is

admitted the burden of going forward with the evidence shifts to that party trying to avoid

enforcement of the note. Id. So the parties arrayed against Alfred in this case would bear the

burden of proving payment of the note.

Additionally, once a note matures and becomes due, if it remains in the possession of the

payee there is a presumption that the note remains unpaid, otherwise the note would have been

returned to the maker. Regas v. Coston (1951), 64 Ohio Law Abs. 181. This presumption can

also be rebutted by evidence of payment. In this case, the note was stipulated to by all parties at

trial and introduced into evidence. Alfred Luft retains possession of the note. But no party set

up an affirmative claim of payment. Therefore, there is a presumption that the amount or

"extent" of the debt secured by Alfred's mortgage was the face amount of the note, $35,000.00

with interest at the rate of 8.00% per annum due and payable in full on maturity. Yet the trial

court and the appellate court erred by placing a higher burden on Appellant, Alfred Luft to prove

that he had not received payment on the note.

Proposition of Law No. II: Due process and Ohio Rule of Civil Procedure 8(C)

mandate that a party need not defend against a claim of "payment" unless said claim is

affirmatively plead.

The minimum dictates of due process are notice of a claim against a party and a

meaningful opportunity to be heard when a property right, such as Alfred's mortgage is at stake.

Plain Dealer Publishing Co, v. Floyd (2006), 111 Ohio St.3d 56; State v. Edwards (1952), 157

Ohio St. 175. Alfred had no notice of the claim of payment and no reason to believe that he

would be forced at trial to bear the burden of proving the negative proposition that payments

were not made. Alfred was not given a meaningful opportunity to be heard as to the issue of

payment. Thus the dictates of due process have not been met in this case.

Clearly any claim that payments have been made on a note is an affirmative claim and

the burden of proving the claim that payments have been made rests upon the party making such

a claim. Masser v. Johnson (1958), 108 Ohio App. 419. Payment is an affirmative defense and

must be proved by the defendant. Wolf Automotive v. Rally Auto Parts, Inc. (1994), 95 Ohio

App.3d 130; Ohio Rule of Civil Procedure 8. And Ohio Revised Code 1303.06(B) makes clear

that unless the validity of the signatures on an instrument are in questions, a party producing an

instrument and proving the right to enforce it is entitled to payment unless the defendant proves a

defense or right to recoupment. The parties stipulated to the validity of the signature on the note

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and Alfred's right to enforce it, so it should not be Alfred's burden to disprove the defense of

payment.

CONCLUSION

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

interest and a substantial constitutional question. The Appellant requests that this Court accept

"jurisdiction" in this case so that the important issues presented will be reviewed on the merits.

Respectfully submitted,

Counsel for Appellants,Barbara J. and Alfred Luft

0'

CERTIFICATE OF SERVICE

I hereby certify that a copy of the Notice of Appeal of Appellants was served via US Mailthis day of May, 2009 upon:

Ms. Julie Luft Signer5 Brandywine SquareEuclid, Ohio 44143

John Doe, unknown spouse ofJulie Luft Signer5 Brandywine SquareEuclid, Ohio 44143

John Doe, unknown spouse ofBarbara J. Luft2367 Beachwood Blvd.Beachwood, Ohio 44122

Ms. Diana VerhasAttorney at Law45 W. Prospect Avenue #1650-GCleveland, Ohio 44115

Mr. David G. FinleyAttorney at Law45 W. Prospect Avenue #1650-GCleveland, Ohio 44115

Citibank NA South Dakota701 E. 60`" Street NorthSioux Falls, SD 57104

Mr. Anthony J. GuintaAttorney at LawJustice Center - Courts Tower1200 Ontario StreetCleveland, Ohio 44113

Mr. Henry J. GehaAttorney at Law323 Lakeside Place Suite 200Cleveland, Ohio 44113

Mr. Robert B. WeltmanAttorney at Law323 Lakeside Place Suite 200Cleveland, Ohio 44113

Ms. Megan J. CorsiAttorney at Law1370 Ontario Street Suite 748Cleveland, Ohio 44113

Ms. Kimberly M. SutterAttorney at Law55 Public Square Suite 1400Cleveland, Ohio 44113

EL E, RINI,Kt4MER & , CO., L.P.A.By: Richard L. McNellie (0032130)By: Eric T. Deighton (0071456)

qi

MAP 3 1 2009

(ffaur# uf Appea1's uf (94iaEIGHTH APPELLATE DISTRICT

COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINIONNo. 91892

ZUKERMAN, DAIKER & LEAR CO., L.P.A.

PLAINTIFF-APPELLEE

vs.

JULIE LUFT SIGNER, ET AL.

DEFENDANTS-APPELLANTS

JUDGMENT:AFFIRMED

Civil Appeal from theCuyahoga County Court of Common Pleas

Case No. CV-619960

BEFORE: Boyle, J., Cooney, A.J., and Gallagher, J.

RELEASED: March 5, 2009

JOURNALIZED: MAR 3 1 2009 ----CA08091892 56761295

^ II'^'I'III' ^IIII I'III'^I'I II'll II^I' I^I'I'lll I^I'

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ATTORNEYS FOR APPELLANTS

For Alfred & Barbara J. Luft

Richard L. McNellieEric T. DeightonCarlisle, McNellie, Rini, Kramer & Ulrich Co., L.P.A.24755 Chagrin BoulevardSuite 200Beachwood, Ohio 44122-5690

ATTORNEYS FOR APPELLEES

For Zukerman, Daiker & Lear Co.

David G. FinleyDiana Verhas45 W. Prospect AvenueSuite 1650-GHCleveland, Ohio 44115

For Citibank NA South Dakota

Citibank NA South Dakota, Pro Se701 East 60th Street, NorthSioux Falls, South Dakota 57104

For Cuyahoga County Treasurer

William D. MasonCuyahoga County ProsecutorBY: Anthony GiuntaAssistant Prosecuting AttorneyThe Justice Center1200 Ontario StreetCleveland, Ohio 44113

vb `9 6 7 8 Ptl0 8 7f3

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John Doe, unknown spouse of Barbara J. Luft2367 Beachwood BoulevardBeachwood, Ohio 44122

John Doe, unknown spouse of Julie Luft Signer15 Brandywine SquareEuclid, Ohio 44143

For Georgetown of the Highlands Condominium

Kimberly M. SutterOtt & Associates Co., L.P.A.55 Public SquareSuite 1400Cleveland, Ohio 44113-1954

For. Rotatori, Bender, Gragel, Stoper & Alexander Co., L.P.A.

Henry J. Geha IIIRobert B. WeltmanWeltman, Weinberg & Reis Co.Lakeside Place, Suite 200323 Lakeside Avenue, WestCleveland, Ohio 44113

For Julie Luft Signer

Julie Luft Signer, Pro Se2505 Deborah RoadBeachwood, Ohio 44122

ui@ 6 7 8 V 8 7 9

For Standard & Corsi Co., L.P.A.

Megan J. CorsiStanard & Corsi Co., L.P.A.1370 Ontario StreetSuite 748Cleveland, Ohio 44113

FILED AND Jf3URNALIZEDPER APP. B. 22(E)

MAR 31 2009GgPLD E. FUER'ST

CLERKaf THE CdURT OF APPEALS

SY ^ 3^ ^ DEP.

ANNOIINCEMENT OF DECISIONPER APP. R. 22(=1, 22(il) AND 26(A)

REPEiVED

MAR 5 - 2009

I HIM II^III IIIIi ^^^^l Mil 11111 lolI imi III III

GERALDE.FUERSTCLERK Cf ru"^p p APPEALSBY DEp.

N.B. This entry is an announcement of the court's decision. See App.R. 22(B) and26(A); Loc.App.R. 22. This decision will be journalized and will become the judgmentand order of the court pursuant to App.R. 22(C) unless a motion for reconsiderationwith supporting brief, per App.R. 26(A), is filed within. ten (10) days of theannouncement of the court's decision. The time period for review by the SupremeCourt of Ohio shall begin to run upon.the journalization of this court's announcementof decision by the clerk per App.R. 22(C). See, also, S.Ct. Prac.R. II, Section 2(A)(1).

E9678 P.0088O

MARY J. BOYLE, J.:

Defendants-appellants, Barbara J. and Alfred Luft ("the Lufts"), appeal

from ajudgment of the trial court adopting a magistrate's decision in its entirety

and granting judgment accordingly. For the following reasons, we affirm.

In March 2007, plaintiff-appellee, Zukerman, Daiker & Lear Co. L.P.A.

("Zukerman") filed a complaint for foreclosure and other equitable relief aggainst

defendants Julie Luft Signer ("Signer"), the Lufts, Georgetown Condominium

Association ("Georgetown"), and the Cuyahoga County Treasurer ("Treasurer").

Zukerman alleged that it had obtained a judgment against Signer for the sum

of $29,791.03 plus interest and costs, and that it was the holder of a judgment

lien for such amount, which was attached to Signer's property located at 15

Brandywine Square, Euclid, Ohio. It demanded that the property be foreclosed

and that all liens be marshalled and their priority determined according to law.

Zukerman later amended its complaint and added Rotatori, Bender, Gragel,

Stoper & Alexander Co., L.P.A. ("Rotatori"), Citibank NA (South Dakota)

("Citibank"), and Standard & Corsi Co., L.P.A. ("Corsi") as new party defendants.

Corsi, Rotatori, the Treasurer, Georgetown, and the Lufts filed answers and

cross-claims.

The case was referred to a magistrate, who held a bench trial on March 3,

2008. The magistrate made the following findings of fact:

,V 4% a 6 78 ; mo 0 8 8 1

"1. *** Prior to July of 1996, the property was owned by defendant Alfred

Luft and his wife, defendant Barbara J. Luft. In July of 1996, Alfred Luft and

Barbara Luft executed a deed transferring Alfred Luft's one-half interest in the

subject property to their daughter, defendant Julie Luft Signer ***.

"2. On August 1, 2002, Julie Luft Signer executed a promissory note

payable to Alfred Luft in the sum of $35,000.00 with interest at the rate of 8.00%

per annum (hereinafter `the Luft promissory note'). The interest and principal

were due and payable on or before July 31, 2007. This note recites that it was

given `for value received.'

"3. To secure this promissory note, on September 19, 2002, Julie Luft

Signer granted a mortgage in the sum of $35,000.00 in favor of Alfred Luft

encumbering her one-half interest in the subject property (hereinafter `the Luft

mortgage'). This mortgage was filed for record on September 20, 2002, and

recorded at AFN 200209201284.

"4. Alfred Luftand Barbara Luft testified that the note and mortgage were

given in consideration for payment of Julie Luft Signer's debts and living

expenses incurred after her separation from her husband and as part of her

divorce proceeding. With the exception of cancelled checks totaling $700.00,

neither Alfred Luft nor Barbara Luft could produce any receipts or cancelled

checks reflecting the payinent of these expenses.

vah 6 7 6 P3 0 8 8 2

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"5. Alfred Luft and Barbara Luft further testified that they never received

any payment related to the Luft mortgage or promissory note. Further, Alfred

Luft has never made a demand for payment of the Luft promissory note.

"6. The subject property has been leased from time to tixne during the

relevant time period. An undisclosed amount of rental payments have been

made to Barbara Luft. The Lufts claim that these payments were not applied

to the Luft promissory note.

"7. In early August 2005, a check in the sum of $54,053.13 made payable

to Julie Luft Signer was endorsed to Barbara Luft and cashed by Barbara Luft

on August 10, 2005. The Lufts claim that this sum was not applied to the Luft

promissory note.

"8. Defendant [Rotatori] holds a judgment lien on the one-half interest of

Julie Luft Signer. This lien was filed for record on November 19, 2004, and

recorded at JL-04-227691 of the County's Judgment Lien Docket. There is due

on this lien the sum of $33,895.28 plus interest thereon at the rate of 10.00% per

annum from May 21, 2007.

"9. Plaintiff [Zukerman] holds a judgment lien on the one-half interest of

Julie Luft Signer. This lien was filed for record on February 14, 2006, and

recorded at JL-06-256861 of the County's Judgment Lien Docket. There is due

YE0678 P00883

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on this lien the sum of $29,791.03 plus interest thereon at the rate of 6.00% per

annum from January 26, 2006, plus costs of $25.00.

"10. Defendant [Corsi] holds a judgment lien on the one-half interest of

Julie Luft Signer. The lien was filed for record on October 23, 2006, and

recorded at JL-06-276788 of the County's Judgment Lien Docket. There is due

on this lien the sum of $7,717.86 plus interest thereon at the rate of 10.00% per

annum from June 7, 2006, plus costs of $106.00:"

The magistrate held that "a party asserting a lien in response to a

marshalling of liens claim has the burden of proving the balance due on his lien

at trial" and determined that "Alfred Luft failed to meet that burden in this

case." The magistrate determined that because Alfred Luft failed to prove a

balance due on his note and mortgage, he was not entitled to payment upon the

marshalling of liens.

The Lufts raised timely objections to the magistrate's decision based upon

Civ.R. 53. The trial court overruled the Lufts' objections and adopted the

magistrate's decision in its entirety. The trial court ordered that Signer's one-

half interest in the property be foreclosed and that the funds first be distributed

to the Treasurer and then to the lienholders who met their burden: Rotatori,

Zukerman, and Corsi. It is from this judgment that the Lufts appeal, raising

four assignments of error for our review:

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"[1] The trial court abused its discretion by depriving

Defendant/Appellant, Alfred Luft of a valuable interest in property without due

probess of law.

"[2.] The trial court abused its discretion placing the burden of proof upon

Defendant/Appellant, Alfred Luft, to prove that his note, which is secured by his

mortgage, was not satisfied by payment.

"[3] The trial court abused its discretion in its determination that monies

given to Defendant/Appellant, Barbara J. Luft, by Defendant Julie Luft Signer

should have been credited as payment of the note held by Defendant/Appellant,

Alfred Luft.

"[4.] The trial court abused its discretion in its finding that the testimony

of Defendants/Appellants Barbara J. Luft and Alfred Luft was unsupported."

Civ.R. 53 and Transcript or Affidavit

The record reveals that, while the Lufts timely obj ected to the magistrate's

decision, they did not provide a transcript for the trial court's review. There is

no indication that the Lufts requested a transcript be prepared for the trial

court, nor is there any indication that the Lufts submitted an affidavit regarding

the evidence upon which they based their objections or that they sought leave to

supplement their objections with a transcript or affidavit at a later date.

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Under Civ.R. 53, any "objection to a factual finding, whether or not

specifically designated as a finding of fact under Civ.R. 53(D)(3)(a)(ii), shall be

supported by a transcript of all the evidence submitted to the magistrate

relevant to that finding or an affidavit of that evidence if a transcript is not

available." Civ.R. 53(D)(3)(b)(iii).

In State ex rel. Duncan v. Chippewa Twp. Trustees, 73 Ohio St.3d 728,

1995-Ohio-272, the Ohio Supreme Court set forth our standard of review in this

situation: "When a party objecting to a referee's report has failed to provide the

trial court with the evidence and documents by which the court could make a

finding independent of the report, appellate review of the court's findings is

limited to whether the trial court abused its discretion in adopting the referee's

report, and the appellate court is precluded from considering the transcript of

the hearing submitted with the appellate record. *** In other words, an appeal

under these circumstances can be reviewed by the appellate court to determine

whether the trial court's application of the law to its factual findings constituted

an abuse of discretion." (Internal citations omitted.) Id. at 730. The term

"abuse of discretion" connotes more than an error in law or judgment; it implies

that the court's attitude is unreasonable, arbitrary, or unconscionable.

Blakemore v. Blakemore (1990), 53 Ohio St.3d 161, 169.

1610 678 Pb'O 8 P36

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A.review of the record on appeal reveals that a transcript was filed with

the trial court onAugust 12, 2008, after the trial court adopted and approved the

magistrate's decision and after the Lufts filed their notice of appeal to this court.

The transcript was filed in this court on August 25, 2008. Thus, to the extent

that the Lufts rely on testimony from the hearing that was not before the trial

court in ruling. on the Lufts' objections to the magistrate's decision, their

arguments must fail. Duncan at 730; see, also, State v. Ishmail (1978), 54 Ohio

St.2d 402, paragraph one of the syllabus.

Nonetheless, the Lufts' main contention is that the trial court abused its

discretion in adopting the magistrate's legal conclusion; namely, that in a

marshalling of liens case, the burden of proving the balance due on the lien is on

the party asserting the lien. For the following reasons, we disagree.

Burden of Proof

In their first assignment of error, the Lufts argue that Alfred Luft had no

notice or "reasonto believe that he would be forced to bear the burden of proving

the negative proposition that payments were not made." In their second

assignment of error, they argue that the trial court erred by placing the burden

of payment on Alfred Luft. Since these two assignments are interrelated, we will

address them together.

^^LQ tr) 78 F30 887

_g-

Regarding the burden-of-proof issue, the magistrate found that "[t]here is

a surprising lack of authority concerning the burden of proof in marshalling of

liens claim." The magistrate explained that "[o]rdinarily, one who asserts a

claim has the burden of proving that claim." But, he pointed out that

"[m] arshalling of liens, however, is a unique claim. A marshalling of liens claim

is asserted by a lien claimant in a foreclosure case whereby all other lien

claimants must assert their interests in the property or be barred from asserting

them in the future. The Court then has the duty to ascertain the nature and

extent of all liens and pay them out of the proceeds of sheriff's sale according to

their priority. *** Thus, marshalling of liens is a claim by the plaintiff against

a creditor defendantupon which the creditor defendant, not the plaintiff, receives

payment." (Emphasis sic and internal citations omitted.)

Describing the difficult concept, the magistrate explained: "Placing the

burden of proof on the parties contesting the balance due on a lien could

conceivably result in an absurd situation where two conflicting burdens of proof

exist regarding payment of liens in foreclosure cases. A lien claimant who has

asserted a cross-claim for foreclosure or money judgment on his mortgage and

promissory note may be denied recovery on this cross-claim because of a failure

to introduce sufficient evidence to prove an outstanding balance. Nevertheless,

if the burden of proof regarding a marshalling of liens claim is on those

&8878 PG 0 888

-9-

contesting the balance due on a lien, this same lienholder may be paid on his lien

pursuant to the marshalling of liens claim because adverse lien claimants are

unable to provide evidence that the balance was paid. In other words, the cross-

claiming lienholder loses because he cannot meet his burden of establishing the

lien amount but, at the same time, wins because adverse lien claimants cannot

meet their burden contesting this lien in regard to the marshalling of liens

claim."

The magistrate concluded that "[t]he present case further illustrates the

sensibility of placing the burden of proof regarding the balance due on the party

seeking payment. If the burden of proof is on the other lien claimants, shoddy

or incomplete bookkeeping could preclude other lien claimants from contesting

the amount due on the lien simply because no evidence exists upon which to base

a challenge. Accordingly, the magistrate finds that a party asserting a lien in

response to a marshalling of liens claim has the burden of proving the balance

due on his lien at trial. Alfred Luft has failed to meet that burden."

The Lufts argue that the magistrate's reasoning was flawed and that the

magistrate placed the burden on the wrong party. Relying on Midland.Title Sec.

Inc. v. Carlson, 171 Ohio App.3d 678, 2007-Ohio-1980, they contend that Alfred

Luft's note and the mortgage securing the note were stipulated to and that was

sufficient to prove the existence of the debt. In 1Vlidland, this court distinguished

40678 PG0889

-10-

between a note and a mortgage, stating that a "promissory note is the primary

evidence of the debt, and the mortgage on the real estate is merely the security

for the payment of the note." The similarities of the facts and law in Midland

to the issues in this case, however, end there. Therefore, we find Midland to be

completely inapposite to this case.

The Lufts further maintain that the burden of proof of payment should be

on the party asserting that payment was made and thus, "the parties arrayed

against Alfred in this case would bear the burden of proving payment of the

note." In support of this argument, the Lufts rely heavily on a 1934 case, Buck

v. Coblentz, 18 Ohio Law Abs. 1. After reviewing Buck, however, we find the

Lufts' reliance on this case to be misplaced.

InBuck, the plaintiff brought an action upon a promissory note against the

maker of the note. The defendant-maker denied the execution of the note,

claimed that the signature on the note was forged, and averred that there was

no consideration for the note. The trial court held that plaintiff was entitled to

the full amount of the note, plus interest. The appellate court affirmed, holding

in part that "a promissory note regular on its face when introduced into evidence

for all purposes, establishes a prima facie case against the person whose name

appears on it as maker unless under the pleadings there is an issue as to the

genuineness of the signature." Thus, in Buck, it was an action against a maker

V,bW678 P30090

-11-

of a note upon a demand for payment of the note. In such a case, the burden is

not upon the holder of the note to prove lack of payment, but on the maker to

plead and prove payment as an affirmative defense.. See Civ.R. 8(C).

The reasoning in Buck, however, does not extend to the facts of the case

sub judice -a inarshalling of liens claim with competing liens. Here, the holder

.of the note and mortgage securing the note is not demanding payment from the

maker of the note - in this case his daughter - but rather, is attempting to show

that his daughter never paid him in order to preclude a forced sale of the

property securing the note.' The Lufts argue that they could never prove a

negative payment. They maintain that the court should take into account that

they are an elderly couple who do not keep accounting records such as a business

would.

If this court were to adopt the Lufts' reasoning, however, then family

members could loan money to each other to avoid paying other debts or to avoid

foreclosure of property. It is our view that if family members loan money to each

other with the expectation that the loan will be repaid, then it should be

incumbent upon the holder of the note to keep such accounting records.

'The Lufts filed a cross-claim against Rotatori, but not Signer. They attemptedto do so on February 29, 2008, but the magistrate denied them leave to amend theircomplaint because trial was set for March 3, 2008.

V^jt.t; 67 8 %08 9 1

-12-

If a bank filed a foreclosure against a debtor claiming that the debtor had

never made payments on his or her mortgage, but did not show proof of want of

payments or balance due, courts would not foreclose on the debtor's property.

In fact, the same burden that the trial court placed on the Lufts in this case also

applied to the other creditor-defendants. If Rotatori or Corsi had not proven

what balance was due upon their liens, they would not have been entitled to

receive distribution of funds upon sale of the property (just as Citibank and

Georgetown were not entitled to distribution of funds because they did not meet

their burden). We see no reason why the same standard should not be applied

to intra-family loans.

Accordingly, we find no abuse of discretion in the trial court's adoption of

the magistrate's well-reasoned decision. The Lufts' first and second assignments

of error are overruled.

In their third assignment of error, the Lufts argue that the trial court

erred when it applied the $54,053.13 that was received by Barbara Luft from

Signer, to Alfred Luft's $35,000 note. The Lufts maintain that "the defense of

payment was never plead by any party," and that "there was no evidence

whatsoever to indicate that Alfred, the payee on this note, received a penny of

the money from Signer's check to Barbara, the rents or any other source."

V-oqlO 6 7 ^^^-b 0 8 9 2

-13-

According to the magistrate's findings, the Lufts could not explain what

the $54,053.13 (Barbara) received from Signer was used for, except to say that

it was used-for- other- debts -Signer owed them, not the $35,000 note. The

magistrate found the Lufts' testimony was self-serving, not supported by any

documentary evidence, and lacked credibility. Moreover, the magistrate never

"applied" the $54,053.13 to Alfred's note, but stated that the $54,053.13, in

addition to other unexplained sums received by Barbara Luft, may have

"satisfied the obligation of the Luft note and mortgage." This was just one

factor, out of many, which led the magistrate to conclude that the Lufts did not

meet their burden of showing that there was a balance remaining on the note.

Accordingly, the Lufts' third assignment of error is overruled.

In their fourth assignment of error, the Lufts challenge the trial court's,

adoption of the magistrate's credibility assessments and factual findings. As we

stated previously, the Lufts failed to timely file a transcript of the proceedings

with the trial court and, thus, the trial court was required to accept the

magistrate's credibility assessments and factual findings. Therefore, the Lufts'

fourth assignment of error is overruled.

Having overruled the Lufts' four assignments of error, we affirm the

judgment of the Cuyahoga County Court of Common Pleas.

It is or.dered that appellees recover from appellants costs herein taxed.

'I°TiM0673 .?G3893

-14-

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate be sent to said court to carry this

judgnient into execution.

A certified copy of this entry shall constitute the mandate pursuant to

Rule 27 of the Rules of Appellate Procedure.

COLLEEN CONWAY COONEY, A.J.SEAN C. GALLAGHER, J., CONCU

^^L^^57u P00894

05/13/2009 16:09 216-443-3631 CUY COUNTY CLK CUUKi

iIitil 11111111111I111I1d^^^^^111n^^^^^^^^^^^11 1111152616476

IN THE COURT OF COMMON PLEASCUYAHOGA COUNTY, OHIO

ZUKERMAN DAIKER & LEAR CO. L.P.A.Plainti^fT-'

Case No: CV-07-619960

Judge: TIMOTHY J MCGINTY

JUL1R LUFT SIGNER ET ALDefendant

83 DISP.COURT TRIAL - FINAL

JOURNAL ENTRY

ORDER OVERRULING OBJECTIONS AND ADOPTING MAGISTRAT.E'S DECISION. OSJ FINAL

Judge Signature ^ DateCPSBI

- 8307/18/2008

Page I of I

05/13/2009 16:09 216-443-3631 CUY CUUN I Y I:LK I:UUK I

IN THE COURT OF COMMON PLEASCUYAHOGA COUNTY, OIi,IO

ZUKERMAN, DAIKER & LEAR CO.,L.P,A.,

Plaintiff,

V3.

JULIE LUFT SIGNER, etc., et al„

Defendants.

CASE NO. 619960JUDGE TIMOTHY J. McGINTYMAGISTRATE STEPHEN ,M. BUCHA II;

OR,IIER OVERRULINGOBJECTIONS AND ADOPTING

MAGISTRATE'S DECISIONForeclosure of the One-HalfInterest of Julie Luft Si:gner

This cause is before the Court an the parties' objeetions to the magistrate's decision

of May 16, 2008. The objections are overruled. The Court adopts the magistrate's

decision attached hereto and incorporated herein in its entirety.

IT IS TI-IEREFORE ORDERED, ADJUDGED AND DECREED that judgment is

rendered in favor of plaintiff Zukerman, Daiker & Lear Co., L.P.A. on its claims for

foreclosure.

IT IS FURTHER ORDERED, ADJT.JDGED AND DECREED that that unless the

sums found due in the magistrate's decision, together with the costs of this action, be fully

paid within three days of this order, the equity of redemption and the rights of all defendants

in the one-half interest of defendant .iulie Luft Siener in the premises described in the

magistrate's decision will be foreclosed and the one-half interest of defendant Ju ie Luft

Signer in the subject property will be sold; that upon issuance of a Fraccipe for Order of Sale

by plaintiffs attomey, the Clerk of Court must issue an Order of Sale to the Sheriff

commanding him to appraise, advertise in a paper of general oirculation within the County,

05/13/2009 16:09 216-443-3631 GUY GUUNiY cLK UUUrc

and sell the one-half interest of defendant Julie X.uft Sizner in the subject premises as upon

execution and according to law, free and clear of the interest of all parties to this action.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED, that in the event the

order of sale is returned by the Sheriff unexecuted, subsequent ordets o.'Fsale shall issue in

accordance with appraisal instructions in the Praecipe.

Coming now to distribute the proceeds of the Sheriffs Sale, it is ordered that the Sheriff,

out of the funds in his hands, pay:

1. The costs herein, including the sum of $420.00 payable to plaintifffor the judicial reports filed herein which is hereby taxed as costs;

2. To the Treasurer of Cuyahoga County, the unpaid taxes, assessments,interest and penalties due and payable on said premises;

3. To defendant Rotatori, Bender, Gragel, Stoper & Alexander Co.L.P.A. the sum of $33,895.28 plus interest thereon at the rate of10.00% per annum from May 21, 2007;

4. To plaintiff Zukerman, Daiker & Lear Co., L.P.A. the sum of$29,791.03 plus interest thereon at the rate of 6,00% per anstum from.ian,uary 26, 2006, plus costs of S25.00;

5. To defendant Stanard & Corsi Co. L.P.A. the sum of $7,717.86 plusinterest thereon at the rate of 10.00% per annum from June 7, 2006,plus costs of $106.00.

6. The balance, if any, to be held by the Sheriff pending further order ofthe Court.

IT IS FURTHLR ORDERED, ADJUDGED AND DECREED, that after said sale has

been confirmed, the Sheriff is order to convey to the purchaser Julie Luft Signer's one-half

interest in said real property and that a Writ of Possession of said property be issued.

IT IS FURTHER ORDERED, A.DJUDGED AND DECREED, that since defendant

Rotatori, Bender, Gragel, Stoper & Alexander Co. L.P.A. is the first and best lien holder on

the one-half interest of Julie Luft Signer should defendant Rotatori, Bender, Gragel, Stoper &

05/13/2009 16:09 216-443-3631 C:uY UUUNIY U^K ^uurc

Alexander Co. L.P,A, be the successful bidder at Sheriffs Sale, the deposit required under

Loca] Rule 27 is hereby waived. In the event that plaintiff is the successful bidder at the

Sheriffs Sale the amount of deposits made herein by plaintiff and the cost of the judicial

reports shall be deducted from the total amount of Court costs otherwise payable herein.

IT IS FURTFTER ORDERED, ADJUDGED AND DECREED that pursuant to Civ.R.

54(B), there is no just reason for delay.

IT IS SO ORDERED

^TIMOTHY J. Mb6NTY^MDGP:

RECEIVED FOR FILING

JUL 2 3 2008E. FUIRST

Br

05/13/2009 16:09 216-443-3631UUY UUUN I Y l.Ll\ l,uurt

IN THE COURT OF COMMON PLEASCUYAHOGA COUNTY, OHIO

ZUKERMAN, DA•IICER & LEAR CO.,L.P.A.,

Plaintiff,

vs.

JUL.TE LUFT SIGNER, etc., et a1.,

Defendants.

2009 1Hr i b A fl: Ob

i Uc l;ST_.i!.!.!J E.G00'f5

CASENO. 619960_' :•!) ,1 ', ':•. ,,;! I YJUDGE TIMOTHY J. McG1NTYMAGISTRATE STEPHBN M. BUCHA III

MAG)STRATE'S DECISIONForeclosure of the One-HalfInterest of Julie Luft Signer

This cause came on for trial on March 3, 2008. Having considered all of the

testiraony, the parties' stipulations, evidence subrnitted at trial, and the parties' post trial

briefs, the Magistrate makes the following findings of fact and conclusions of law.

1. Findings of Fact

1. The property that is the subject of this case is fuUy described in Exxhibit "A"

attached hereto and is also known as 15 Brandywine Square, Euclid, Ohio and

Perrnanent Parcel Number 649-30-876C (hereinafter "the subject property"), Prior

to July of 1996, the property was owned by defendant Alfred Luft and 7tis wife,

defendant Barbara J. I,uft. In July of 1996, Alfred Luft and Barbara Luft

executed a deed transferring Alfred Luft's one-half interest in the subject property

to their daughter, defendant Julie Luft Signer, aka Julie Robin Luft, aka Julie Luft

(hereinafter "Julie Luft Signer").

2. On August 1, 2002, Julie Luft Signer exeauted a promissory note payable to

Alfred Luft in the sum of $35,000.00 with interest at the rate of 8.00°/n per annunt

05/13/2009 16:09 216-443-3631 CUY COUNIY cLK cuUKi

(hereinafter "the Luft promissory note"). The interest and principal were due

and payable on or before July 31, 2007. This note recites that it was given "for

value received."

3. To secure this promissory note, on. September 19, 2002, Julie Luft Signer granted

a mortgage in the sum of $35,000.00 in favor of Alfred Luft encumberingher

one-half interest in the subject property (hereinafter "the Luft mortgage"}. This

mortgage was filed for record on September 20, 2002, and recorded at AFN

200209201284.

4, Alfred Luft and Barbara Luft testified that the note and mortgage were given in

consideration for payment of Julie Luft Signer's debts and living expenses

incurred after her separation from her husband and as part of her divorce

proceeding. With the exception of canceled checks totaling $700.00, neither

Alfred Luf.} nor Barbara Luft could produce any receipts or cancelled checks

reflecting the payment of these expenses,

5. Alfred Luft and Barbara Luft further testified that they never received any

payrnent related to the Luft mortgage or promissory note. Further, Alfred Luft

has never made a demand for paymertt of the Luft promissory note,

6. The subject property has been leased from time to time during the relevant time

period. An undisclosed amount of rental payments have been made to Barbara

Luft. The Lufts claim that these payments were not applied to the Luft

promissory note.

7. In early August 2005, a check in the sum of $54,053.13 made payable to Julie

Luft Signer was endorsed to Barbara Luft and cashed. by Barbara Luft on August

.

05(13(2009 16:09 216-443-3631 CUY CUUNIY I:LK cuurci

10, 2005. The Lufts claim that this sum was not applied to the Luft promissory

note.

8. Defendant Rotatori, Bender, t3tagel, Stoper & Alexander Co. L.P.A. holds a

judgment lien on the one-half interest of Julie Luft Signer. This lien was filed for

record on November 19, 2004, and recorded at JL-04-227691 of the Counfy's

Judgment Lien Docket. There is due on this lien, the sum of $33,895.28 plus

interest thereon at the rate of 10.00% per annum from May 21, 2007.

9. Plaintiff Zukerman, Daiker & Lear Co., L.P.A. holds a judgment lien on the one-

half interest of Julie LuR Signer. This lien was filed for record on February 14,

2006, and recorded at JL-06-256861 of the County's Judgment Lien Docket.

There is due on this lien the sum of $29,791.03 plus interest thereon at the rate of

6.009'o per annum from January 26, 2006, plus costs of $25.00.

10. Defendant Stanard & Corsi Co. L.P.A. holds a judgment lien on the one-half

interest of Julie Luft Signer. This lien was filed for record on October 23, 2006,

and reeorded at JL-06-276788 of the County's Judgment Lien Docket. There is

due on this lien the sum of $7,717.86 plus interest thereon at the rate of 10.00%

per annum from June ?, 2006, plus costs of $106,00.

II. Conclusions of Law

A. The Luft Note & Mortgage

Because of the nature and quality of the evidence produced at trial, the decision in

this case turns upon the burden of proof and presumptions, Ordinarily, one who asserts a

claim has the burden of proving that claim. Marshalling of liens, however, is a unique

claim. A marshalling of liens claim is asserted by a lien claimant in a foreclosure case

whereby all other lien, claimants must assert their interests in the property or be barred

05/13/2009 16:09 216-443-3631CUY CUUN I Y ULK Uuurt

thom asserting tJaern in the ,future Th,e Court then has the duty to ascertain the nature

and extent afah liens and pay thettt out of the proceeds of sheriff's sale according to theirpriority. See Carr v. .Flome OwnsrsLoan Corp., (1947), 148 Ohio St. 533, 539. Thus,

marshalling of liens is a claim by the plaintiff against a creditor defendant upon which the

creditor defendant, not the plaintiff, receives payment,

There is a surprising lack of authority concerning the burden of proof in

marshalling of liens claims'. In cases other that those involving marshaliing of liens,

when orac claims payment the overwhelming weight of authority places the burden of

proof on the party seeking payment. See eg, Buck v. CoElentz, ( 1934), 18 Ohio Law Abs.

1, 6 (Burden is on the party seeking enforcetnent of a promissory note to prove

entitlement to payment under the note); Cole Associates, Ltd v. Lockhart, (1964), 2 Ohio

App.2d 372, 378 (Patty asscrting an action on account has a duty to prove entitlement to

payment); Canton Hardware Co. v. Ha11er, (1944), 142 Ohio St. 541, 544 (The

ptuohaser has burden of proving damages under a claim of seller's breach of warranty);

Lower v. Ehrhart, (1954), 72 Ohio Law Abs. 487, 489 (Burden of proof upon one

claiming breach of contract to prove the existence of the contract and damages arising

from its breach); Sedar v, Knowlton Construction Co., (1990), 49 Ohio St.3d 193, 198

(Party claiming negligence has burden of proving damages resulting from the claimed

negligence). Moreover, if a lien claimant joined on a marshalling of liens claim asserts a

' Defendant Rotatori, Bender, Gragol, Stoper & Alexander Co. L.P.A. cites Licker v. Green, (1909), 17

Ohio C.C. (N.S.) 49 as authority for the burden ofproof in a marshaiting of liens claim. This easc holds

that the burden is on the party claiming a priority different than the priority established by the recording

date of that party's interest to prove that priority by clear and convincing evidence. Licker v. Graen is

concereed solely with the relative priority of liens, not the balance due on the iiens. In the present case,the parties arrayed against Atfred Luft ctaim that his mortgage is unenforceable because it is a sham or

because it has been paid. tn either ir^ssa»ce, the question is not whetber Alfred Luit's mertgage has adiffercnt priority thmr its recording date but, ratltcr, whether it exists as an enforceable interest. As a

consequence, Lieker v. Crreen is distinguishable from the issue under consideratien.

05/13/2009 16:09 216-443-3631 CUY COUNTY CLK CUUKi

cross-claim o£his own for foreclosure, the burden of proof is clearly upon that lien holder

to prove its balance due. See Montgomery v. Mosley, (August 24, 1990), Pike App. No.

448, unreported; See also Berner v. Diamond, (1947), 48 Ohio Law A.bs. 505, 508.

Placing the burden of proof on the parties contesting the balance due on a lien

could conceivably result in an absurd situatiorx where two conflicting burdens of proof

exist regarding payment of liens in foreclosure cases. A lien claimant who has asserted a

cross-claim for foreclosure or money judgment on his rnortgage and promissory note may

be denied recovery on this cross-claim because of a failure to intraduce sufficient

evidence to prove an outstanding balance. Nevertheless, if the burden of proof regarding

a marshalling of liens claim is on those contesting the balanoe dua on a lien, this same

lien holder naay be paid on his lien pursuant to the marshalling of liens claim because

adverse lien claimants are unable to provide evidence that the balance was paid. In other

words, the cross-claiming lien holder loses because he cannot meet his burden of

establishing the lien amount but, at the same time, vrins because adverse lien claimants

cannot meet their burden contesting this lien in regard to the marshalling of liens claim.

The present case fitrtlter illustrates the sensibility of placing the burden of proof

regarding the balance due on the party seeldng payment. I£ the burden of proof is on other

lien claimants, shoddy or incomplete bookkeeping could preclude other lien claimants from

contesting the amount due on the lien simply because no evidence exists upon which to

base a challenge. Accord'zngly, the magistrate finds that a party asserting a lien in response

to a marshalling of liens claim has the burden of proving the balance due on his lien at trial.

Alfred Luft has failed to meet that burden in this case.

The testimony of the Lufts was self-serving and not supported by any documentary

evidence. During their testimony, ihe Lufts often looked to each other and to their counsel

05/13/2009 16:09 216-443-3631CUY CUUNIY I:LK uuurci

as to how to answer questions posed by the other parties in this case. Thus, said testimony

lacks credibility. Further, the testimony in this case makes clear that Barbara Luft handled

the finances of the Luft household. A payment made to Barbara Luft very well could have

been intended to pay an obligation owned to Alfred Luft2, An unknown amount of rental

income was derived from the property and was received and retained by Barbara Luft. As

a one-half owner of the subject property, Julie Luft Signer is entitled to one-half of these

rents. See Cohen v. Cohen, (1952), 157 Ohio St. 503, 510. Further, a check in the

amount of $54,053.13 was received by Barbara Luft from Julie Luft Signer in August of

2005. It may be that these payments satisfied the obligation of the Luft note and mortgage.

The Lufts claim that these sums were used to pay debts other than the Luft note and

mortgage owed by Julie Luft Signer to Alfred and Barbara Luft. The Lufts presented no

records detailing how these payments were applied to Julie Luft Signer's debts.

1'hus, based on the testimony presented, one cannot conclude that it is more likely

than not that a balance remains due on the note and mortgage. Accordingly, Alfred Luft

has failed to meet his burden of proof regarding the balance due on his note and mortgage.

A mortgage is an incident to the debt secured thereby. See Kernohan v. Manss,

(1895), 53 Ohio St_ 118; Moore v. Burnet, (1842), 11 Ohio 334; Tremayner v. Breakstone,

(1946), 33 Ohio Op. 104, 106; Curry & Durham, Ohio Real Property Law & Practice (5th

Ed. 1996) Section 17-1(d), Mortgages, Obligations Secured, If one seeking payment on a

mortgage cannot prove the existence of the underlying debt, a mortgage securing that debt

a For an example of the entangled namre of Alfred and Barbara Luft's fmances, one need only look topurported consideration for the Luft note and martgage. The Lufts claim that their payment of Julie LuftSigner's debts was the consideration for this note and mortgage. It appears that at least some of thesepayinents, a$300.00 payment dated January 2S, 2002, and a$400.00 payment datcd May 22, 2002, weremade by Barbara Luft.

05/13/2009 16:09 216-443-3631 CUY CUUNIY GLK UUUKI

ceases to be enforceable as an encumbrance on the property secured. See Moore v. Burnet,

(1842), 11 Ohio 334 ("A mortgage lives and dies with the debt; satisfaction destroys it").

Since Alfred Luft has failed to prove a balan,ce due on his note and mortgage, he is not

entitled to payment of his mortgage on plainti.ff s marshalling of liens claim. See Id.

Tbe parties opposed to Alfred Luft also argue that the Luft note and mortgage were

granted without consideration. When an executed promissory note recites in its body that

consideration was given for its execution, a presumption arises that the note is supported by

consideration. See Lupo v. Reisner, (1927), 5 Ohio Law Abs. 650, 651. The burden than

shifts to one challenging the validity of the note to prove lack of consideration. See Id.

In the present case the note in question recites that it was given "for value

received." Accordingly, it is presumed that consideration was given for this note. See Id.

The only testimony presented at trial was that of Alfred and Barbara Luft. As discussed

above, this testimony was less than credible and cannot be used to prove lack of

consideration or anything else. Further, if the uote was granted for consideration, the

mortgage securing said note was likewise granted for consideration. Accordingly, the

parties claiming that the Luft note and mortgage were granted without consideration have

failed to meet their burden of proof.

'1'he parties opposing Alfred Luft also contend that the payments made by the

Lufts that purportedly serve as the underlying consideration for the Luft note were gifts.

Thus, these parties argue, these payments cannot serve as r..onsideration for the Luft note.

The requisite e]ements of a valid inter vivos gift include: (1) intent on the part of tha donor

to make an immediate gift of particular property to the donee and to part with dominion

and control over the subject of the gift; (2) deLivery of the subject of the gift; and (3)

acceptance of the gift. Ervin v. Ervin, (October 16, 2006), Adams App. No. 06CA822,

05/13/2009 16:09 216-443-3631 UUY UUUN I Y I.LN ^UUrt i

unreported. Normally, when a gift is alleged, the burden is on the one claiming the

existence of a gift to prove it by clear and convincing evidence. Filkins v, SchN+artz, (March

24, 2008), Allen App. No. 1-07-73, unreported. However, when it is a family member w.ho

claims to be the recipient, the burden is reversed, as there is a rebuttable presumption of a

gift, Id.

In the present case, any presumption that the payments made by the Lufts on

behalf of.lulie Luft Signer were gilRs is rebutted by the execution of the promissory note by

Julic Luft Signer promising payment. Accordingly, the argument that the payment of.lulie

Luft Signer's expenses was a gift is without merit.

H. Georgetown of the Highlands and Citibank Liens

As discussed above, a lien claimant joined in a foreclosure case upon a

marshalling of liens claim has the burden of proving the nature and extent of his lien.

Defendant Georgetown of the HSghlands has ftled an answer herein claiming a lien on the

subject property. Said defendant did not appear at trial and did not present any evidence as

to the nature of amount of its lien. Defendant Citibank N.A. South Dakota has not filed an

answer herein, did not appear at the trial and did not present any evidence as to the nature

or the amount of its lien. Accordingly, defendants Georgetown of the Highlands and

Citibank N.A. South Dakota have failed to meet their burden of proof and are barred from

asserting a claim upon the one-half interest of Julie Luft Signer in the subject property.

C. Foreclosure of Plaintitt's Lien

Plaintiff has a valid lien on the one-half interest of Julie Luft Signer in the subject

property and this lien remains unpaid. Aocordingly, plaintiff is entitted to forecJose this

one-half interest. See Feinstefn v. Rodgers, (1981), 2 Ohio App.3d 96, 98.

05/13/2009 16:09 216-443-3631 CUY UUUNIY cLK UUUMI

1>tx. Ruling

IT IS THEREFORE ORDERED, AD,TCTDGED AND DECREED that judgment is

rendered in .favor of plaintiff Zukernxan, Daiker & Lear Cc,, L.P,A. on its claims for

foreclosure.

IT IS FURTHER ORDERED, ADJUDGED AND DBCRI;ED that that unless the

sums bereinabove found due, together with the costs of this action, be fully paid within three

days of the Court's adoption of this decision, the equity of redemption and the rights of all

defendants in the one-half interest of defendant Julie Luft SSigner in the premises described

above will be foreclosed and the one-half interesY of defendant Julie Luft Signer in the

subject property will be sold; that upon issuance of a Praecipe for Order of Sale by plaintiff s

attorney, the Clerk of Court must issue an Order of Sale to the Sheriff commanding him to

appraise, advertise in a paper of general circulation within the County, and sell the onehal

interest of defendant Julie Luft Signer in the subject premises as upon execution and

according to law, free and clear of the in.terest of all parties to this action.

IT IS FURTHER ORDERED, A17JUDGED AND DECREED, that in the event the

order of sale is returned by the Sheriff unexecuted, subsequent orders of sale shall issue in

accordance with appraisal instructions in the Praecipe.

Coming now to distribute the proceeds of the Sheriffs Sale, it is ordered that the Sheriff,

out of the funds in his hands, pay:

1. The costs herein, including the suno, of $420.00 payable to plaintifffor the judicial reports filed herein which is hereby taxed as costs;

2, To the Treasurer of Cuyahoga County, the unpaid taxes, assessments,interest and penalties due and payable on said premises;

3. To defendant Rotatori, Bender, Gragel, Stoper & Alexander Co.

05/13/2009 16:09 216-443-3631 Uuv uuurv v U^K ^uuR

L.P.A. the sum of $33,895.28 plus interest thereon at the rate of10.00% per annum from May 21, 2007;

4. To plaintiff Zukerman, Daiker & Lear Co., L.P.A. the sum of$29,791.03 plus interest thereon at the rate of 6.00°!o per an.aum fromJanuary 26, 2006, plus costs of $25.00;

5. To defendant Stanard & Corsi Co. L.P.A. the sum of $7,717.86 plusinterest thereon at the rate of 10.00% per annum from June 7, 2006,plus costs of $106.00.

6. The balance, if any, to be held by the Sheriff pending further order ofthe Court.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED, that after said sale has

been confirmed, the Sheriff is order to convey to the purchaser Julie Luft Signer's one-half

interest in said real property and that a Writ of Possession of said property be issued.

IT IS FURTHER ORDERED, ADJLIDGED AND DECREED, that since defendant

Rotatori, Bender, Gragel, Stoper & Alexander Co. L.P.A. is the first and best lien holder on

the one-half interest of Julie Luft Signer should defertdant Rotatori, Bender, Gragel, Stoper &

Alexander Co. L.P.A. be the successful bidder at Sheriffs Sale, the deposit required under

Loaal Rule 27 is hereby waived. In the event that plaintiff is the successful bidder at the

SherifPs Sale the arnount of deposits made herein by plaintiff and the cost of the judicial

reports shall be deducted from the total amount of Court costs otherwise payable herein.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that pursuant to Civ.R.

54(B), there is no just reason for delay.

IT IS SO ORDERED

STEPHEN M. BUCHA Ill, MAGISTRATE

A party shall not assign as error on appeal the Court's adoption of any finding of fact orconclusion of law unless the pany timely and s,pecifacally objects to that finding orconclusion as required by Civ.R. 53(D)(3).

05/13/2009 16:09 216-443-3631^ n .

UUY I+UIJIY I Y 4L1\ `^I\ I

DESCRIPTrOrr or z,ANn

5IT'[TATE+D IlV TFiE CITY OF EUCLID, COUNTY OF CUYAHOA, AND ST'ATEOF OHIO: AND KNO WN AS BEING UNIT NO. 5. SN B[]SLAfNG NO. 15BR4NDI'WIlVE SQUARE, TOG$TF3BR WTTH THE UNDIVIDED PERCENTAGEINTEREST IN THE CO1vIMON AREAS AND FACII:TTTES PERTr•1II^INCITIiERETO,IN GEORGETOWAi OF Tf1L HTCrkTLANDS'CONDOMiNTUM BE1NG APART OF OSJOINAL EUCLID TOWNSHIP LOT NO. 58, IN TRACT N'O, 11, ASESTABL(SHl?D BY THE DECI,ARAT]ON AND BYLAWS FOR SAiDCONDOM'1N1YJIvZ;Et'ECORDEJ7IN VOLUME 84-1919, PAGES 2 ET SEQ. OFCU'YAHOGA COUNTY DEED R.'ECORDS, AND AS SHOWN BY DR4WWGS.ttECORDED IN VOLUMB 49, PAGES 82 ET. SEQ. OF CUl'AHOG,4 COUNTYCONDOAMqtUM IvIAF RECORDS, BE TkiE SANSE MOlt13 OR LESS,I3UTSUBJECT TO ALL LEGAL IIiIUHWA'YS,

PERMANENT PARCEL NO. 649-30•876C

J?ROPER'CY ADp1tESS; 15 B,RA,N,DYWIIVH SQUA,RE, EUCLID, OH 44143

05113I2009 16:09 216-443-3631 GUY UUUN I Y ULFC GUUK I

CER'I'IFICA`I'E OF SERVxCE

Ms. Julie Luft Signer5 Brandywine SquareEuclid, Ohio 44143

Johu Doe, unknown spouse ofJulie Luft Signer5 Brandywine SquareEuclid, Ohio 44143

John Doe, unknown spouse ofBarbara J. Luft2367 Beachwood Blvd.Beachwood, Ohio 44122

Ms. Diana VerhasAttorney at Law45 W. Prospect Avenue #1650-0Cleveland, Ohio 44115

Mr. David G. FinleyAttorney at Law45 W, Prospect Avenue #1650-0Cleveland, Obio 44115

Mr. Richard L. McNellieAttomey at Law24755 Chagrin Blvd., Suite 200Beachwood, Ohio 44122-4531

Mr. Anthony J. GiuntaAttomey at LawJustice Center - Courts Tower1200 Ontario StreetCleveland, Ohio 44113

Mr. Henry J. GehaAttorney at Law323 Lakeside Place, Suite 200Cleveland, Ohio 441 13

Mr. Robert B. WeltmanAttorney at Law323 Lakeside Place, Suite 200Cleveland, Ohio 44113

Ms. Megan J. CorsiAttorney at Law1370 Ontario Street, Suite 748Cleveland, Ohio 44113

Ms. Kimberly M. SutterAttorney at Law55 Public Square, Suitc 1400Cleveland, Ohio 44113

Citibank NA South Dakota701 E. 60`M Sireet NorthSioux Falls, SD 57104

Copies of the foregoing has been sent by ordinary U. S. Mail by the Clerk of Court to

the following parties or their counsel of record: Copies mailed by the Clerk of Courts on