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A promissory note is a contract, and rules of contract interpretation apply to the interpretation of promissory notes. It is well-established that every contract has an implied covenant of good faith and fair dealing that requires not only honesty but also reasonableness in the enforcement of the contract. Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party. Bad faith may consist of inaction, or may be the abuse of a power to specify terms, or interference with or failure to cooperate in the other party's performance. "Good faith" is a compact reference to an implied undertaking not to take opportunistic advantage in a way that could have not been contemplated at the time of drafting, and which therefore was not resolved explicitly by the parties. Relatedly, where the obligations arising under a contract have attached, and subsequent thereto one party without the consent of the other does some act or makes some new arrangement which prevents the carrying out of the contract according to its terms, he cannot avail himself of this conduct to avoid his liability to the other party.
In 2003, appellee Andrew Ramsey purchased real estate for use as a rental property. He executed a promissory note payable to Coldwell Banker and used the funds to finance the real estate purchase. The note was secured by a mortgage in favor of Coldwell Banker. After the closing, Ramsey deeded the property to Precision. PHH subsequently became the holder of the note and mortgage. Ramsey made timely monthly payments until August 2009, at which time he attempted to pay his monthly mortgage through a "pay now" link on PHH's website, referred to as "Speedpay," as he had been doing for six years. However, when he attempted to do so on August 3, 2009, he received an error message informing him that his payment could not be processed. He tried again on August 6 and 10 but received the same error message. On August 13, 2009, Ramsey tried to pay online again via Speedpay, and this attempt appeared successful, but he did not receive a confirmation number. Ramsey telephoned the Coldwell Banker help line and was told this his payment would be "pushed" through the system, and he was given a confirmation number for his August 2009 payment. On August 16, 2009, PHH sent a notice to Ramsey informing him that his payment was late. Ramsey again telephoned the help line and was told that the website was having problems but his payment would be processed. On September 3, 2009, Ramsey went to PHH's website to make his September payment, and he realized that his August 2009 payment had still not been credited. He attempted to make an online payment via Speedpay and received an error message. Ramsey telephoned Coldwell Banker and explained the circumstances. The representative told him that his payment would be processed, but the late payment would be reported to credit bureaus, and there was no one else who could help him. Ramsey insisted on speaking to another customer service representative who had the authority to help him, but the help line representative refused and hung up the phone. On September 8, 2009, PHH issued appellee a notice of intent to foreclose. On September 9, 2009, ç traveled to Coldwell Banker's physical office to make payments but he was told by representatives that the office did not accept payments. Ramsey contacted the real estate agent who sold him the house and the agent gave him the name of a Coldwell Banker representative. Ramsey spoke to the representative but the representative never contacted him again as to a solution. On September 10, 2009, Ramsey mailed a payment for August and September 2009 to Coldwell Banker, with an explanation of the circumstances, but the payment was never processed or returned to him. On October 5, 2009, Ramsey mailed to Coldwell Banker a payment for October and November 2009, along with an explanation of the circumstances, but the payment was never processed or returned. He made no attempt at payments after December 2009.
On November 10, 2009, PHH filed a complaint in foreclosure against Ramsey, as well as several others. PHH later added Precision as a defendant. On April 27, 2011, PHH filed a motion for summary judgment, which the trial court granted. Appellee appealed, and the Supreme Court reversed the trial court's decision in PHH Mtge. Corp. v. Ramsey, 10th Dist. No. 11AP-559, 2012-Ohio-672 ("Ramsey I"), finding there existed genuine issues of material fact regarding whether appellee defaulted in his payment of the note. On remand, the matter was heard before a magistrate pursuant to a bench trial. On July 17, 2013, the magistrate filed a decision, in which the magistrate denied PHH foreclosure and awarded Ramsey judgment for $1,550. PHH filed objections to the magistrate's decision. On October 2, 2013, the trial court overruled the objections. On January 17, 2014, the trial court issued a nunc pro tunc judgment related to the October 2, 2013 judgment.
Did Ramsey’s attempts to pay through Speedpay constitute tender of payment of the mortgage?
PHH fails to directly address the basis relied upon by the trial court to find that no default occurred here; that is, that PHH waived any claim that appellee did not have the contractual right to make his payments electronically by accepting electronic payments from appellee for six years without objection, and PHH waived strict performance of the due date term by accepting appellee's payments after the due date on many prior occasions. In the present case, PHH was not reasonable in its enforcement of the promissory note. Despite PHH's attempt to portray the Speedpay website as an unrelated entity for which it could bear no responsibility, PHH, through its predecessor, explicitly agreed to permit its mortgage customers to pay their mortgages using the service. By permitting and, in fact, encouraging, its customers to pay their mortgages online by providing a Speedpay link on the predecessor's own website, PHH gave its customers a justified expectation that the Speedpay system would work properly. Here, it obviously did not work as intended and expected, and PHH, through its predecessor, explicitly assured appellee that his payment would be credited through the Speedpay system. PHH's actions here demonstrate a genuine failure to cooperate with appellee to make sure his mortgage payment would be properly credited. It is difficult to imagine anything more that appellee could have done, given the circumstances and past dealings between the parties as to how payments were handled and credited. Furthermore, although it is beyond dispute that the actual promissory note did not contain an explicit provision for payments via the internet, it did indicate that the borrower could make a payment "at a different place if required by the Note Holder." Likewise, although it could be disputed whether an online payment via Speedpay technically met the requirement of Section 1 of the note that payment be made in "cash, check or money order," for PHH to rely upon this provision, while at the same time encouraging borrowers to pay their mortgages through a link on their own website, violates the covenant of good faith by taking "opportunistic advantage in a way that could have not been contemplated at the time of drafting." By unilaterally offering Speedpay as a service to appellee, PHH offered appellee a new arrangement to make payments that prevented appellee from explicitly carrying out the terms of the contract in this instance, and PHH cannot now claim that appellee should have never relied on Speedpay. On these bases, the trial court was correct in ruling that PHH waived any argument that appellee did not have the contractual right to make his payments electronically because it accepted electronic payments from appellee for six years without objection. Even if the contract did not explicitly permit electronic payments, PHH accepted Speedpay as a form of payment from appellee from the commencement of the loan and never disputed that this was a valid form of payment.