SELF HELP VENTURES FUND v. LOIS J. JONES, et al.
CASE NO. 2012-A-0014
IN THE COURT OF APPEALS ELEVENTH APPELLATE DISTRICT ASHTABULA COUNTY, OHIO
March 4, 2013
2013-Ohio-868
CYNTHIA WESTCOTT RICE, J.
Civil Appeal from the Ashtabula County Court of Common Pleas, Case No. 2010 CV 00521. Judgment: Reversed and remanded.
OPINION
Civil Appeal from the Ashtabula County Court of Common Pleas, Case No. 2010 CV 00521.
Judgment: Reversed and remanded.
Nicholas D. Donnermeyer and Kimberlee S. Rohr, Lerner, Sampson & Rothfuss, 120 East Fourth Street, Suite 800, Cincinnati, OH 45201-5480 (For Plaintiff-Appellee).
Anne M. Reese, Legal Aid Society of Cleveland, 121 East Walnut Street, Jefferson, OH 44047, and Philip D. Althouse, Legal Aid Society of Cleveland, 1530 West River Road, Suite 301, Elyria, OH 44035 (For Defendant-Appellant).
CYNTHIA WESTCOTT RICE, J.
{1} Appellant, Lois J. Jones, appeals the summary judgment of foreclosure entered in favor of Appellee, Self Help Ventures Fund (“Self Help“), by the Ashtabula County Court of Common Pleas. At issue is whether Self Help‘s lack of standing when it filed this mortgage foreclosure action could be cured by the assignment of the mortgage and promissory note to it prior to the entry of final judgment. For the reasons
{2} On June 26, 2007, appellant purchased a home in Conneaut, Ohio. Appellant applied for and received a residential home loan from Sky Bank in the amount of $61,100. In return for the loan, appellant executed a promissory note in that amount in favor of Sky Bank. In order to secure the loan, appellant executed a mortgage in favor of Sky Bank. Later in 2007, Sky Bank merged into Huntington National Bank.
{3} Subsequently, appellant defaulted on the note, and the amount owed was accelerated. On May 10, 2010, Self Help filed this action against appellant. Self Help alleged it was the holder of the note on which appellant defaulted. Self Help attached copies of the note and mortgage to the complaint; however, both instruments showed Sky Bank, rather than Self Help, as the creditor.
{4} Some two months later, on June 30, 2010, Huntington National Bank, as “successor by merger to Sky Bank,” assigned the note and mortgage to Self Help.
{5} On August 9, 2010, appellant filed an answer denying the material allegations of the complaint and asserting various affirmative defenses, including Self Help‘s alleged lack of standing.
{6} On December 29, 2010, Self Help filed a motion for summary judgment against appellant. In support of said motion, Self Help filed the June 30, 2010 assignment of the note and mortgage from Huntington to Self Help.
{7} In further support of its summary-judgment motion, Self Help filed the affidavit of Dawn Adams, an officer of Self Help‘s servicing agent. Ms. Adams stated that Self Help is the holder of the instant promissory note and mortgage as a result of the foregoing assignment from Huntington to Self Help. She stated that appellant is in
{8} In further support of its motion for summary judgment, Self Help filed the Sky Bank/Huntington merger documents demonstrating that in 2007 Sky Bank merged into Huntington National Bank.
{9} Appellant filed a brief in opposition to Self Help‘s motion for summary judgment and a cross motion for summary judgment, arguing that Self Help lacked standing. However, appellant did not dispute she defaulted on the note.
{10} On March 7, 2012, the trial court entered summary judgment and a decree in foreclosure against appellant, implicitly finding that Self Help had standing.
{11} A sheriff‘s sale was scheduled for July 18, 2012. On June 27, 2012, appellant filed a motion to stay execution of the order of sale pending appeal, which the trial court granted.
{12} Appellant now appeals, asserting two assignments of error. For her first assigned error, appellant alleges:
{13} “The trial court erred as a matter of law by granting Summary Judgment to the Appellee where the Appellee had no ownership interest in the note or the mortgage on the date the Complaint was filed, which is a fatal standing defect that cannot be cured by subsequent assignment of the note and mortgage.”
{14} “Subject matter jurisdiction is a court‘s power to hear and decide a case on the merits ***.” Morrison v. Steiner, 32 Ohio St.2d 86 (1972), paragraph one of the syllabus. “Because subject-matter jurisdiction goes to the power of the court to adjudicate the merits of a case, it can never be waived and may be challenged at any
{15} In Ohio, courts of common pleas have subject-matter jurisdiction over justiciable matters.
{16} “Standing to sue is part of the common sense understanding of what it takes to make a justiciable case.” Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 102 (1998). Standing involves a determination of whether a party has alleged a personal stake in the outcome of the controversy to ensure the dispute will be presented in an adversarial context. Mortgage Elec. Registration Sys. v. Petry, 11th Dist. No. 2008-P-0016, 2008-Ohio-5323, ¶18. A personal stake requires an injury to the plaintiff. Id. The Supreme Court of Ohio has held that standing is jurisdictional in nature. State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, 35 Ohio St.2d 176, 179 (1973).
{17} In the context of a mortgage foreclosure action, the mortgage holder must establish an interest in the mortgage or promissory note in order to have standing to invoke the jurisdiction of the common pleas court. Fed. Home Loan Mortg. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶28.
{18} Whether standing exists is a matter of law that is reviewed de novo. Cuyahoga Cty. Bd. of Commrs. v. State, 112 Ohio St.3d 59, 2006-Ohio-6499, ¶23.
{19} Standing is similar to the requirement in
{20} In contrast to standing, which is jurisdictional,
{21} Under her first assigned error, appellant argues that because Self Help did not hold the note or mortgage when it filed the complaint, it lacked standing, and this defect could not be cured after the complaint was filed. She thus argues that standing is jurisdictional and could not be acquired after the complaint was filed.
{22} In contrast, Self Help argues that, although it did not hold the note or mortgage when it filed its complaint, it acquired standing when it became the holder of these instruments after the complaint was filed. It therefore argues that standing is not jurisdictional and could be acquired before the entry of final judgment.
{23} Thus, the issue before us is whether Self Help was required to have standing at the time it filed this action or whether its lack of standing was cured by the assignment of the mortgage and note to it after the action was filed but before final judgment was entered.
{24} The Supreme Court of Ohio recently addressed the identical issue before us in Schwartzwald, supra. In Schwartzwald, the Supreme Court held that standing is required to present a justiciable controversy and is a jurisdictional requirement. Id. at ¶21-22. The Court held that, because standing is required to invoke the trial court‘s jurisdiction, standing is determined as of the filing of the complaint. Id. at ¶24. Further, the Court held that a mortgage holder cannot rely on events occurring after the complaint is filed to establish standing. Id. at ¶26. Thus, the plaintiff cannot rely on
{25} This court followed the Supreme Court‘s holding in Schwartzwald, supra, in Federal Home Loan Mortgage Corp. v. Rufo, 11th Dist. No. 2012-A-0011, 2012-Ohio-5930, ¶44, and overruled this court‘s prior holding in, inter alia, Everhome Mortg. Co. v. Behrens, 11th Dist. No. 2011-L-128, 2012-Ohio-1454, ¶12, 16, that standing is not jurisdictional.
{26} Thus, pursuant to Schwartzwald, standing is jurisdictional. As a result, Self Help was required to establish an interest in the note or mortgage when it filed this action in order to have standing to invoke the jurisdiction of the trial court.
{27} We therefore hold that, pursuant to Schwartzwald, supra, and Rufo, supra, because Self Help did not hold the note or mortgage when it filed the complaint, it did not have standing to bring this foreclosure action against appellant. As a result, the trial court erred in granting summary judgment in favor of Self Help because it was not
{28} For her second assignment of error, appellant alleges:
{29} “The trial court erred to the prejudice of the Appellant by granting Summary Judgment where the Appellee failed to sustain its burden to prove that it had standing to sue by providing evidence that it had both (1) possession of an indorsed note and (2) ownership of the mortgage on the date the Complaint was filed.”
{30} Having sustained appellant‘s first assignment of error, we find her second assigned error to be moot. However, a court may rule on an otherwise moot case “where the issues raised are ‘capable of repetition, yet evading review.‘” State ex rel. Beacon Journal Publishing Co. v. Donaldson, 63 Ohio St.3d 173, 175 (1992), quoting State ex rel. Plain Dealer Publishing Co. v. Barnes, 38 Ohio St.3d 165 (1988), paragraph one of the syllabus. Because the issues raised by appellant‘s second assignment of error are likely to be reasserted on the re-filing of this action, we shall address them.
{31} First, appellant argues that in order to have standing to sue on the note in this case, Self Help was required to prove it was the holder of the note by negotiation, pursuant to
{32}
{33} A “holder” is a person in possession of a note that is payable either to bearer or to an identified person.
{34} “An instrument is transferred when it is delivered * * * for the purpose of giving to the person receiving delivery the right to enforce the instrument.”
{35} “Negotiation” is a particular type of transfer. “Negotiation” means “a transfer of possession of an instrument * * * to a person who by the transfer becomes the holder of the instrument.”
{36} Further, “[t]ransfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument.” (Emphasis added.)
{37} A “nonholder” is one in possession of the instrument who acquired it by some method of transfer other than negotiation. Official Comment 2 to
{38} In this case, the note attached to the complaint is payable to an identified entity, Sky Bank. Thus, only Sky Bank could have negotiated the subject note by transferring the note and endorsing it to a specific person or to “bearer.”
{39} However, Huntington, which acquired the note and mortgage from Sky Bank by way of merger, transferred both instruments by assignment to Self Help. Ohio Appellate Districts have repeatedly held that a note can be transferred by assignment. For example, in Bank of New York v. Dobbs, 5th Dist. No. 2009-CA-000002, 2009-Ohio-4742, the Fifth District held that the assignment of a mortgage, without an express transfer of the note, is sufficient to transfer both the mortgage and the note, if the record indicates that the parties intended to transfer both. Id. at ¶31. This court cited Dobbs with approval and followed its holding in Rufo, supra, at ¶44.
{40} Further, in Deutsche Bank Nat‘l Trust Co. v. Gardner, 8th Dist. No. 92916, 2010-Ohio-663, the Eighth District held that, while the unendorsed note was insufficient to show that the transferee was a “holder” of the note, the assignment of the note and mortgage to the transferee demonstrated that the transferor transferred and assigned to the transferee all of its rights to the note. Id. at ¶22. The Eighth District further held that in these circumstances, the trial court could find that the transferee had the rights of a holder of the note with the right to enforce payment thereon. Id. Additionally, in United States Bank, N.A. v. Higgins, 2d Dist. No. 24963, 2012-Ohio-4086, the Second District held that the assignment of the mortgage, in circumstances indicating the transferor intended to transfer the note with the mortgage, was sufficient to demonstrate that the transferee had the rights of a holder of the note. Id. at ¶22.
{41} In light of the foregoing authority, we conclude that the assignment at issue here was effective to transfer the note from Huntington to Self Help and that Self Help has the rights of a holder with the right to enforce the note.
{42} Second, appellant argues that the Huntington/Sky Bank merger documents could not be considered on summary judgment because they were not authenticated as required by
{43} For the reasons stated in this opinion, it is the judgment and order of this court that the judgment of the Ashtabula County Court of Common Pleas is reversed, and this matter is remanded for the trial court to dismiss this action without prejudice.
TIMOTHY P. CANNON, P.J., concurs,
DIANE V. GRENDELL, J., dissents with a Dissenting Opinion.
DIANE V. GRENDELL, J., dissents with a Dissenting Opinion.
{44} I dissent from the majority‘s opinion, reversing the trial court‘s decision, which entered judgment in favor of the plaintiff, Self Help Ventures. Since a plaintiff who becomes a holder of a note or mortgage after the filing of a complaint should be
{45} The majority correctly cites to the Ohio Supreme Court‘s decision in Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, for the proposition that a plaintiff in a foreclosure action must hold the mortgage or note at the time of the filing of the complaint and not obtain the mortgage during the course of the proceedings. However, I disagree with the conclusion that the standing issues related to such matters are not curable during the course of the proceedings, prior to the entry of final judgment.
{46} Under the application of Schwartzwald, the inability to cure the standing deficiency creates various problems and obstacles for both plaintiffs and the court system. Such a holding is contrary to the interests of judicial economy and efficiency. The importance of judicial economy has been recognized by the courts in various contexts. See Painesville City Local Schools Bd. of Edn. v. Ohio Assn. of Pub. School Emps., 11th Dist. No. 2005-L-100, 2006-Ohio-3645, ¶ 15 (noting the importance of speedy resolutions to conflicts to foster judicial economy by “unburdening crowded court dockets“) (citation omitted); F.O.E., Inc. v. Energex Oil & Gas Corp., 4th Dist. No. 86 CA 19, 1987 Ohio App. LEXIS 9233, *6 (Sept. 29, 1987) (emphasizing that certain civil rules serve the purposes of “convenience *** speed, and judicial economy“). Under Schwartzwald, a case must be dismissed without prejudice when a plaintiff does not have standing at the time the action was filed, but becomes the holder of the note or mortgage at a future time during the course of the proceedings. This conclusion requires the refiling of the complaint and new responsive filings as well, all of which require additional consideration by the court, thereby creating an ineffective use of court
{47} The better course for dealing with scenarios in which the plaintiff becomes a holder of the note and mortgage after the filing of a complaint was that followed by the Ohio Supreme Court in State ex rel. Jones v. Suster, 84 Ohio St.3d 70, 701 N.E.2d 1002 (1998). In that case, the court stated the following: “Although a court may have subject matter jurisdiction over an action, if a claim is asserted by one who is not the real party in interest, then the party lacks standing to prosecute the action. The lack of standing may be cured by substituting the proper party so that a court otherwise having subject matter jurisdiction may proceed to adjudicate the matter.” Id. at 77, citing
{48} Although
{49} Further, such a standing deficiency can be easily cured without harm to the defendant. See Deutsche Bank Natl. Trust Co. v. Traxler, 9th Dist. No. 09CA009739, 2010-Ohio-3940, ¶ 11 (noting that a bank obtaining an assignment after the filing of a lawsuit could cure a standing defect when the assignment is produced “in sufficient time to apprise the litigants and the court that the bank is the real party in interest“). The party who obtains the mortgage during the proceedings could merely ratify its interest in the action by filing appropriate evidence of its status as holder of the mortgage and note, without having to refile the action. The same legal and factual issues would generally still be present.
{50} In the present matter, Self Help was assigned the mortgage on June 30, 2010, approximately a month and a half after the Complaint was filed. Jones was aware of this by August, since she attached the assignment document to her Answer filed on August 9, 2010. Thus, it cannot be argued that she was prejudiced or not given a chance to respond properly, since she was aware of the owner of the note and mortgage at the time she filed the Answer. This further supports the contention that it is
{51} Further, in her second assignment of error, Jones argues that Self Help “failed to sustain its burden to prove that it had standing to sue by providing evidence that it had both (1) possession of an indorsed note and (2) ownership of the mortgage on the date the Complaint was filed.” Jones argues that there was no acceptable evidence under
{52} Based on the foregoing, I respectfully dissent and would affirm the decision of the court below, granting summary judgment on the foreclosure action in favor of Self Help.