178 Ohio App. 3d 285 | Ohio Ct. App. | 2008
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *287 {¶ 1} Since plaintiff-appellant Wells Fargo was not a real party in interest at the time it filed suit in this foreclosure action, the trial court properly dismissed the case. But the dismissal should have been without prejudice. Further, the trial court lacked authority to sanction counsel by requiring counsel to adhere to additional pleading requirements in future cases.
{¶ 3} Wells Fargo filed a motion seeking summary judgment. Attached to the motion for summary judgment was an "Assignment of Note and Mortgage" that acknowledged that WMC had sold, assigned, transferred, and set over the mortgage deed and promissory note to Wells Fargo. The assignment was dated March 2, 2007 — over a month after the complaint had been filed.
{¶ 4} The case was referred to a magistrate who entered summary judgment for Wells Fargo. The trial court sustained the Byrds' subsequent objections to that decision. The trial court then took two additional steps not requested by the Byrds: (1) it dismissed the case with prejudice and (2) it ordered the law firm representing Wells Fargo, appellant Law Offices of John D. Clunk Co., L.P.A., to submit "proof that their client is, in fact, a real party in interest at the time of the filing" of any future foreclosure complaints that the firm might file.
{¶ 5} Wells Fargo requested findings of fact and conclusions of law. In response, the trial court issued an entry titled "Findings of Fact, Conclusions of Law, and Amended Judgment Entry," in which it said that the dismissal was "not a dismissal on the merits." The trial court explained the Clunk firm's future *288 obligations to the court by stating that "at the time of the filing of a foreclosure action, [the Clunk firm must] file documentation showing that their client is the real party in interest as of the date of the filing of the lawsuit."
{¶ 6} Both Wells Fargo and the Clunk firm have appealed. Wells Fargo argues that (1) the trial court erred in dismissing the case with prejudice on jurisdictional grounds, (2) the trial court erred in dismissing the case without notice, (3) the trial court should have adopted the decision of the magistrate granting its motion for summary judgment, (4) the trial court misapplied Civ. R. 17, (5) the trial court lacked authority to convert its original dismissal with prejudice to a dismissal without prejudice, and (6) the trial court improperly used its subsequent entry to modify the substance of its prior decision. The Clunk firm argues, in two assignments of error, that the trial court improperly sanctioned it.
{¶ 8} Civ. R. 17(A) says that "[e]very action shall be prosecuted in the name of the real party in interest. * * * No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest. Such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest."
{¶ 9} A party lacks standing to invoke the jurisdiction of a court unless he has, in an individual or a representative capacity, some real interest in the subject matter of the action.1 The Eleventh Appellate District has held that "Civ. R. 17 is not applicable when the plaintiff is not the proper party to bring the case and, thus, does not have standing to do so. A person lacking any right or interest to protect may not invoke the jurisdiction of a court."2 The court also noted that "Civ. R. 17(A) was not applicable `unless the plaintiff had standing to invoke the jurisdiction of the court in the first place, either in an individual or representative capacity, with some real interest in the subject matter.' Civ. R. 17 only applies if *289 the action is commenced by one who is sui juris or the proper party to bring the action."3
{¶ 10} The Twelfth Appellate District agrees. In 2007, the court held that "[t]he `real party in interest is generally considered to be the person who can discharge the claim on which the suit is brought * * * [or] is the party who, by substantive law, possesses the right to be enforced.'"4 Unless a party has some real interest in the subject matter of the action, that party will lack standing to invoke the jurisdiction of the court. The court concluded that "[i]n a breach of contract claim, only a party to the contract or an intended third-party beneficiary of the contract may bring an action on a contract in Ohio."5
{¶ 11} Such a rule would seem to be in the spirit of Civ. R. 17, which only allows a plaintiff to cure a real-party-in-interest problem by (1) showing that the real party in interest has ratified the commencement of the action, or (2) joining or substituting the real party in interest.6
{¶ 12} Since WMC was not joined or substituted in this case, the only argument Wells Fargo could have made was that WMC had ratified its actions. Ratification is a way that an agent can bind a principal.7 But ratification will not apply when the actor is not acting as the agent of the principal.8
{¶ 13} In this case, Wells Fargo admitted to the trial court that it was not the real party in interest when the suit was filed. Wells Fargo filed suit on its own behalf and acquired the mortgage from WMC later. It was not acting as WMC's agent. There was no evidence that WMC had "ratified" the commencement of the action — only that it had sold the mortgage to Wells Fargo. None of the documents indicated that WMC even knew about this case. For ratification *290 to occur, the ratifying party must know what actions it is ratifying.9 While Wells Fargo repeatedly argued that ratification had occurred, it seemed to be confused as to which party had to ratify. Below, it argued that "Plaintiff, being a real party in interest, did ratify the commencement of this action * * *." But Civ. R. 17 makes clear that it was WMC, not Wells Fargo, that had to ratify the commencement of the action.
{¶ 14} Wells Fargo has found one decision that holds to the contrary. In Bank of New York v.Stuart, 10 the Ninth Appellate District held that a bank that had filed a foreclosure action could cure a real-party-in-interest problem by subsequently obtaining the mortgage.11 But the only authority for this holding was two federal cases from 1966 and 1979. And the two cases are distinguishable. In the first case, the plaintiff was the one who had done all the work that was the subject of the litigation, and the "real party in interest" was "a mere `straw man' throughout."12 In the second case, the plaintiff was already a party in his own right and was assigned the claims of another plaintiff.13
{¶ 15} We find instructive a more recent federal case addressing the application of the rule (but in the context of a statute of limitations).14 In that case, the party suing did not have a claim at the time suit was filed but received an assignment of the claim after it had commenced the litigation. The court held that "[Civ. R.] 17(a) does not apply to a situation where a party with no cause of action files a lawsuit to toll the statute of limitations and later obtains a cause of action through assignment."15 In that case, the court concluded that "B K's assignment to the Wulffs of its claim against CMA cannot ratify the Wulffs' commencement of suit on a claim which theretofore did not exist."16 *291
{¶ 16} In light of the foregoing authority, we must respectfully disagree with the Ninth Appellate District. We hold that in a foreclosure action, a bank that was not the mortgagee when suit was filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage. Wells Fargo's third, fourth, and sixth assignments of error are overruled.
{¶ 19} But the trial court dismissed this case with prejudice. While it attempted to correct this with a subsequent entry, a trial court is without *292 jurisdiction to modify an order dismissing a cause with prejudice to one without prejudice, unless the requirements of Civ. R. 60 are met.21
{¶ 20} In this case, the requirements of Civ. R. 60 were not met, and, therefore, the trial court could not have changed its final decision from a dismissal with prejudice to one without prejudice. We sustain Wells Fargo's first and fifth assignments of error. But since the case should have been dismissed without prejudice, we modify the decision of the trial court from a dismissal with prejudice to a dismissal without prejudice. Wells Fargo, now a proper party to initiate a foreclosure action against the Byrds, is free to do so.
{¶ 22} There is no authority for what the trial court did. The Byrds did not seek sanctions, there was no notice of the possibility that this firm would be sanctioned, and there was no hearing on sanctions. The trial court did not limit the sanction to this case but sanctioned the firm for all of its future conduct. In essence, the trial court crafted an additional pleading requirement that would apply only to one law firm. Apart from the vexatious-litigator statute, there is no authority that would allow a trial court to impose additional pleading requirements on an individual — let alone a law firm — in future litigation. The Byrds have cited no such authority and, in fact, have not addressed these assignments of error in their brief. We sustain the law firm's two assignments of error.
{¶ 24} The trial court lacked authority to order the Clunk firm, upon the filing of future foreclosure complaints, to present additional documentation demonstrating that its clients are the real parties in interest. *293
{¶ 25} The judgment of the trial court is affirmed in part as modified with respect to dismissal of the action, and reversed in part with respect to the imposition of sanctions.
Judgment accordingly.
HILDEBRANDT, P.J., and CUNNINGHAM, J., concur.