COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 69097 HUNTINGTON NATIONAL BANK : : Plaintiff-appellee : : JOURNAL ENTRY -vs- : AND : OPINION HOWARD H. SHANKER, ET AL. : : Defendants-appellants : : DATE OF ANNOUNCEMENT OF DECISION: FEBRUARY 22, 1996 CHARACTER OF PROCEEDING: Civil appeal from Court of Common Pleas Case No. CV-232290 JUDGMENT: Affirmed. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellee: For Defendants-Appellants: LARRY R. ROTHENBERG, ESQ. SCOTT H. KAHN, ESQ. WELTMAN, WEINBERG & REISS ROBERT R. KRACHT, ESQ. 323 Lakeside Avenue - West MCINTYRE, KAHN & KRUSE Cleveland, Ohio 44113 1301 East Ninth Street, #1200 Cleveland, Ohio 44114 - 2 - DYKE, J.: 1 Defendants-appellants Howard and Carol Shanker ("appellants") appeal a summary judgment granted in favor of plaintiff-appellee Huntington National Bank ("HNB") in its foreclosure action. Appellants claim that the trial court erred in granting summary judgment because a federal court judgment bars HNB's action pursuant to the doctrines of res judicata and collateral estoppel. Appellants further claim that summary judgment was improper because questions of fact remain with respect to the balance due on the promissory note secured by the mortgage. Upon review, we find appellants' assignments of error to be devoid of merit. Hence, we affirm the judgment of the trial court. On December 30, 1988 Howard and Carol R. Shanker (the "Shankers") executed a promissory note in favor of HNB for $600,000 and secured same by granting a mortgage to Huntington Mortgage 2 Company ("HMC"). On the same day, HMC assigned the note and 3 mortgage to HNB and such assignment was duly recorded. On May 4, 1990 Human Services Plaza Partnership and Howard Shanker ("HSPP and H. Shanker) filed an action in federal court against HNB, HMC and 1 L&M Properties Company ("L&M"), a lienholder, was also named as a co-defendant. We find the instant judgment entry constitutes a final appealable order despite its silence with respect L&M as the trial court indicated therein that there was no just reason for delay. 2 Appellants mortgaged property owned at 1825 East 18th Street. 3 Exhibit C, HNB's motion for summary judgment. - 3 - the Huntington Company alleging violations of Section 1972, Title 12, U.S. Code, the Bank Holding Company Act Amendments of 1970 and breach of contract, fraud in inducement, estoppel and negligence. (Human Serv. Plaza Partnership v. Huntington Natl. Bank, Case No. 1:90 CV 0811) On December 12, 1991 HMC filed an action against the Shankers in the Court of Common Pleas for default on the note which matured on June 30, 1991 and secured a cognovit judgment for $496,186.70 plus interest. (C.C.P. Case No. 223378) On May 1, 1992 the Shankers filed a "motion for relief from judgment" and/or a "motion to vacate void judgment" arguing that the state court lacked subject matter jurisdiction to render judgment as the $600,000 promissory note was part of a failed, three-stage real estate financing transaction which was the subject of HSPP and H. Shanker's federal lawsuit. On May 1, 1992 the trial court granted the Shankers' motion and vacated judgment finding that jurisdiction belonged in federal court. HMC appealed the ruling to this court in appellate Case No. 63706. On May 18, 1992 HNB filed the instant foreclosure action. (C.C.P. Case No. 232290) Without filing an answer, appellants moved to dismiss reiterating their contention that pendency of the federal action precluded the Court of Common Pleas from exercising subject matter jurisdiction over HNB's foreclosure action. The court granted appellants' motion without opinion on September 4, 1992 and HNB appealed in appellate Case No. 64413. The appeals were consolidated and in Huntington Mtge. Co. v. Shanker (1993), 92 - 4 - Ohio App.3d 144 this court dismissed HMC's cognovit judgment appeal 4 for lack of standing and reversed the dismissal of HNB's 5 foreclosure action finding that HNB's quasi in rem action and HSPP and H. Shanker's strictly in personam action did not have "substantially the same purpose" and that since the federal court action did not require possession or control over the mortgaged property to provide the relief sought, a state court could exercise jurisdiction over the foreclosure action. Id. 150-155. Noting that the exercise of pendent jurisdiction is a doctrine of discretion, not of plaintiff's right, this court remanded HNB's foreclosure action having found affirmative evidence in the federal record to support its finding that the court had "yet to exercise" its pendent jurisdiction to hear the state law claims. Id. 154, 155. On remand appellants filed a second motion to dismiss the instant foreclosure action arguing, not that pendency, but that 4 The Honorable Donald Nugent writing for this court held that since HMC had assigned the mortgage to HNB on December 30, 1988 it was not the real party of interest and therefore had no standing to pursue the appeal. 5 A foreclosure of real property allows the court of common pleas to order the sale of the property and to prioritize any and all liens asserted against the property. See, Gaul v. Leeper (July 15, 1993), Cuyahoga App. No. 63222, unreported. (Additional citations omitted) As such, a foreclosure action is a quasi in rem proceeding and invokes the court's quasi in rem jurisdiction. See, Freeman v. Alderson (1886), 119 U.S. 185, 7 S.Ct. 165 and Pennoyer v. Neff (1877), 95 U.S. 714, 24 L.Ed. 565. Huntington at 153, 154. - 5 - final judgment in Human Serv., supra, collaterally estopped HNB from bringing same. The trial court overruled the motion and appellants answered HNB's complaint admitting execution of the promissory note. On January 23, 1995 HNB filed its motion for summary judgment attaching appellants' admission of execution, proof of assignment and the default and remedy provisions of the note. The trial court granted HNB's motion and the instant appeal followed. I THE TRIAL COURT ERRED IN GRANTING HNB'S MOTION FOR SUMMARY JUDGMENT WHERE IT WAS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW IN THAT THE FEDERAL COURT JUDGMENT OPERATES AS RES JUDICATA PRECLUDING HNB FROM MAINTAINING AN ACTION AGAINST SHANKER ON THE MORTGAGE. In their first assignment of error, appellants claim that a statement made by Judge Cleary in the common pleas court opinion which vacated HMC's cognovit judgment proves that the federal court exercised pendent jurisdiction over the note and that when the federal court rendered final judgment, such judgment operated to collaterally estop HNB from bringing a separate action on the mortgage. Appellants contend that since res judicata applies to an action on the note, it also applies to an action on the mortgage. Appellants' arguments fail for the following reasons: First, as stated previously, the exercise of pendent jurisdiction is discretionary with the federal court. See, Huntington, supra. at pg. 154 citing United Mine Workers of Am. v. Gibbs (1966), 383 U.S. 715, 726. Hence, any statement made by - 6 - Judge Cleary cannot and does not effectuate an exercise of pendent 6 jurisdiction by the federal court. Second, there is no identity of parties with respect to the two state court actions as the plaintiff in the cognovit judgment action was HMC and the plaintiff in the instant action is HNB. Hence, any rulings Judge Cleary made with respect to HMC in the cognovit action have no effect upon HNB in the instant foreclosure action. Moreover, in Huntington, supra, Judge Nugent specifically found that the federal court had yet to exercise pendent jurisdiction over HSPP and Shanker's state law claims and that it declined to issue a temporary restraining order they filed to enjoin HNB from asserting its own state claims as indicated by the following: ... there is nothing in the record to indicate that the federal court has exercised its discretion and accepted pendent jurisdiction over the state law claims asserted by Shanker in his complaint before that court. To the contrary, the record before this court indicates that the federal court has yet to exercise such pendent jurisdiction. Although the federal court indicated, at a hearing on Shanker's motion for a temporary restraining order, that it would likely exercise its pendent jurisdiction to hear the state law claims should it overrule HNB's motion for summary judgment on the federal claims, the record before this court does not demonstrate that it has yet done so. Rather, the federal court declined to issue a TRO enjoining HNB from asserting its own state claims. Accordingly, the common pleas court below is the court which first assumed jurisdiction of the subject property in question. (Underlined for emphasis) Id., at 154, 155. 6 In erroneously holding that jurisdiction belonged in federal court, Judge Cleary concluded her opinion by stating that "... this matter is referred to Federal Court." (Underlined for emphasis.) Appellants cite no authority to support their contention that such referral has any legal effect or confers subject matter jurisdiction over the note to the federal court. - 7 - While appellants argue that the federal court ultimately did exercise pendent jurisdiction over HSPP and H. Shanker's state law claims which included a breach of contract claim arguably involving the note, we find such purported compulsory counterclaim/collateral estoppel argument to fail as the note had not matured at the time 7 HNB answered the federal complaint. Hence, HNB had no counterclaim to assert. See, Civ.R. 13(A). Also, our review of the federal court's final judgment entry indicates that it is 8 silent with respect to the $600,000 note and associated mortgage. Dispositive of the issue sub judice is the following excerpt from this court's opinion in Huntington: ...[i]t is settled that where the judgment sought is strictly in personam, both the state court and the federal court, having concurrent jurisdiction, may proceed with the litigation at least until judgment is obtained in one of them which may be set up as res judicata in the other. On the other hand, if the two suits are in rem, or quasi in rem, so that the court, or its officer, has possession or must have control of the property which is the subject of the litigation in order to proceed with the cause and grant the relief sought the jurisdiction of the one court must yield to that of the other. We have said that the principle applicable to both federal and state courts that the court first assuming jurisdiction over property may maintain and exercise that jurisdiction to the exclusion of the other, is not restricted to cases where property has been actually seized under judicial process before a second suit is instituted, but applies as well where suits are 7 HSPP and H. Shanker filed their federal action on May 4, 1990. The promissory note at issue was not scheduled to mature until nearly one year later to wit, June 30, 1991. 8 Appellants admit that HNB never amended its answer to assert a counterclaim for the note and mortgage in the federal action. On the contrary HNB filed the discreet matter of collecting upon the defaulted cognovit note in state court. - 8 - brought to marshal assets, administer trusts, or liquidate estates, and in suits of a similar nature where, to give effect to its jurisdiction, the court must control the property. (Underlined for emphasis.) Id., at 152, 153 citing Princess Lida v. Thompson (1939), 305 U.S. 456, 565-467. HSPP and H. Shanker's federal action did not require the federal court to exercise jurisdiction over the res. Hence, the trial court was the first court to exercise jurisdiction over the mortgaged property and was permitted to do so to the exclusion of the federal court as there was no evidence that the federal court exercised pendent jurisdiction over the note and mortgage and no evidence that it attempted to enjoin HNB from 9 proceeding with its foreclosure action in state court. Appellants' first assignment of error is overruled. II THE TRIAL COURT ERRED AS A MATTER OF LAW IN GRANTING SUMMARY JUDGMENT IN FAVOR OF HNB WHERE THE DOCUMENTARY EVIDENCE PRESENTED DEMONSTRATED THAT A GENUINE ISSUE OF MATERIAL FACT EXISTED PRECLUDING THE ENTRY OF SUMMARY JUDGMENT IN HNB'S FAVOR. In their second assignment of error, appellants claim that HNB had a duty to provide them with information regarding the calcula- tion of its "prime rate" and that HNB's failure to do so created an issue of fact with respect to the correct balance due and owing on the promissory note. Appellants' argument is unpersuasive. 9 For a full discussion of the law regarding concurrent and pendent jurisdiction as it applies to the facts of this case, see, Huntington, supra, citing Efros v. Nationwide Corp. (1984), 12 Ohio St.3d 191, State ex rel. Phillips v. Polcar (1977), 50 Ohio St.2d 279 and Princess Lida v. Thompson (1939), 305 U.S. 456. - 9 - "Generally, the setting of interest rates and the duty to notify the debtor of changes in interest rates are governed solely by the written contract." There is no duty concerning interest rates imposed by law, either common-law or statutory law. See, Schwartz v. Bank One, Portsmouth, N.A. (1992), 84 Ohio App.3d 806, 811. The promissory note which appellants signed and which HNB attached to its motion for summary judgment states at Paragraph I that interest shall be: " ... at a rate which shall be the prime rate of the Huntington National Bank from time to time in effect plus one percent (1%). Each change in the said Prime Rate shall, without notice, automatically and immediately change the rate of interest due hereon. Interest shall be calculated using a 360 day year based upon the actual number of days outstanding. Said interest shall be due and payable in monthly installments beginning on the first day of February 1989, and continuing on the first day of each and every month thereafter until the obligation evidenced hereby has been paid in full. After maturity, whether such maturity occurs by lapse of time or acceleration, interest shall be due and payable at a rate which shall be four percent (4%) per annum above the said Prime Rate in effect on the date of such maturity and shall continue as a variable rate of interest until paid in full. Paragraph II states: "Prime Rate" as used herein shall mean the interest rate established by the Huntington National Bank, from time to time based upon its consideration of economic, money market, business and competitive factors, and is not necessarily the Bank's most favored or lowest rate. The record demonstrates that pursuant to appellants' request, HNB provided extensive, chronological information regarding various change dates and interest rate changes. (See, Exhibit G, Shankers' - 10 - Brief in Opposition) Appellants nevertheless demanded an internal analysis of the economic, monetary, business and competitive factors by which HNB established its prime rate. Under Schwartz, supra, such explanation is not required to set forth a prima facie case for default and acceleration of the balance due and owing. Appellants' second assignment of error is overruled. Appellants' have failed to create genuine issues of material fact with respect to whether the federal court exercised its discretionary, pendent jurisdiction over the note and mortgage at issue. Appellants have also failed to create genuine issue of material fact with respect to the agreed upon calculation of the balance due and owing on the note. See, Civ.R. 56(E). Hence, reasonable minds can come to but one conclusion and that is that final judgment rendered in Human Serv., supra, does not bar the instant foreclosure action. Accordingly, the trial court did not err in granting summary judgment to HNB as a matter of law. Judgment of the trial court is affirmed. It is so ordered. - 11 - It is ordered that appellee recover of appellants its costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. PORTER, P.J., AND MCMONAGLE, J., CONCUR ANN DYKE JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announce- ment of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journalization, .