## Facts

- Denise and Robert Barker executed a $34,200 note and mortgage in December 2005, requiring 360 monthly payments.
- The Barkers missed the payment due May 1, 2007 and entered default after Denise Barker became ill.
- Denise Barker contacted the lender seeking help and was directed to a loss-mitigation process and provided materials for a “workout option to avoid foreclosure.”
- The Barkers submitted the completed loss-mitigation packet on August 17, 2007.
- Around that period, the lender sent mixed communications, including default notices and a new coupon book reflecting a higher monthly payment without clear explanation.
- Believing the loan had been reinstated, the Barkers resumed making the higher monthly payments shown in the new coupon book.
- The lender’s local branch accepted the Barkers’ payments for months.
- The lender asserted that its corporate office issued refund checks and letters maintaining the loan remained in default, but the Barkers testified they did not receive them and there was no showing the checks were cashed.
- The mortgage was transferred to PHH Mortgage Corporation, which filed a foreclosure action in the trial court.
- The trial court denied PHH’s motion for summary judgment, held a trial, and entered judgment for the Barkers by reinstating the note and mortgage rather than ordering foreclosure.
- PHH appealed, arguing it was entitled to foreclose based on the default.

## Issues

1. Whether a mortgagee is entitled to foreclosure as a matter of law based solely on the borrower’s default, regardless of subsequent lender conduct and borrower reliance.
2. Whether a trial court, sitting in equity in a foreclosure action, may deny foreclosure and instead reinstate the note and mortgage under the circumstances.

## Decision

- The appellate court affirmed the judgment for the Barkers.
- The court held that foreclosure is an equitable remedy and is subject to equitable considerations arising after default.
- The court concluded competent, credible evidence supported the trial court’s finding that the lender’s conduct and the parties’ course of dealing made foreclosure inequitable.
- The court upheld reinstatement as a permissible equitable remedy within the trial court’s authority.

## Legal Principles

- Foreclosure is an equitable remedy; a trial court may consider equitable defenses and the parties’ conduct after default.
- A lender’s acceptance of post-default payments and communications suggesting reinstatement or modification may support denial of foreclosure where the borrower reasonably relies on that conduct.
- Appellate review gives substantial deference to the trial court’s fact-finding and credibility determinations when supported by competent, credible evidence.
- A trial court may craft equitable relief short of foreclosure, including reinstatement, when consistent with the evidence and the parties’ course of dealing.

## Conclusion

The court affirmed denial of foreclosure and reinstatement of the mortgage because, in light of the lender’s post-default conduct, acceptance of payments, and the borrower’s reasonable reliance amid conflicting communications, foreclosure would have been inequitable.


PHH Mortg. Corp. v. Barker, 940 N.E.2d 662 (Ohio Ct. App. 2010)