LaSalle Bank Natl. Assn. v. Brown , 2014 Ohio 3261 ( 2014 )

[Cite as LaSalle Bank Natl. Assn. v. Brown, 2014-Ohio-3261.]
IN THE COURT OF APPEALS FOR MONTGOMERY COUNTY, OHIO
LASALLE BANK NATIONAL :
ASSOCIATION
Plaintiff-Appellee : C.A. CASE NO. 25822
v. : T.C. NO. 08CV6242
CHARLES BROWN, et al. : (Civil appeal from
Common Pleas Court)
Defendant-Appellant :
:
..........
OPINION
Rendered on the 25th day of July, 2014.
..........
JASON A. WHITACRE, Atty. Reg. No. 0077330 and ASHLEY E. MUELLER, Atty. Reg.
No. 0084931, 4500 Courthouse Blvd., Suite 400, Stow, Ohio 44224
Attorneys for Plaintiff-Appellee
ANDREW M. ENGEL, Atty. Reg. No. 0047371, 7071 Corporate Way, Suite 201,
Centerville, Ohio 45459
Attorney for Defendant-Appellant Tina DiGiorgio
..........
WELBAUM, J.
{¶ 1} Appellant, Tina DiGiorgio, appeals from a trial court decision overruling
her motion to vacate. In the motion, DiGiorgio asked the trial court to vacate an entry
confirming her purchase of real property located at 5031 Heather Way, Huber Heights, Ohio.
{¶ 2} DiGiorgio contends that the trial court erred in overruling the motion to
vacate, because she had standing to challenge the validity of the court’s prior judgment of
foreclosure. DiGiorgio also contends that her challenge to the foreclosure judgment and
sale were not barred by caveat emptor. Finally, DiGiorgio contends that the
Plaintiff-Appellee, LaSalle Bank National Association, as Trustee for the Merrill Lynch
Mortgage Investors Trust, Mortgage Loan Asset Backed Certificate, Series 2006-FF1
(“LaSalle”) lacked standing to sue.
{¶ 3} We conclude that the trial court did not err in overruling the motion to
vacate. DiGiorgio lacks standing to appeal the decision on the motion to vacate, because she
failed to file a motion to intervene in the trial court pursuant to Civ.R. 24(C). Furthermore,
DiGiorgio cannot collaterally attack the foreclosure judgment as a nonparty because the bank
that originally filed the action had standing to sue. The bank was the owner of the note and
mortgage, and was entitled to enforce the note as a nonholder in possession of the
instrument. Even if DiGiorgio has standing to appeal, her claim is barred by caveat emptor,
as any defects in title or in the court proceedings were of public record and could have been
discovered prior to the judicial sale. Finally, assuming for purposes of argument that the
bank lacked standing when the foreclosure action was initially filed, the judgment would be
only voidable, not void. However, DiGiorgio did not file a motion to intervene, nor did she
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file a motion to set the judgment aside under Civ.R. 60(B). Accordingly, the judgment of
the trial court will be affirmed.
I. Facts and Course of Proceedings
{¶ 4} In July 2008, LaSalle filed the underlying action in foreclosure against
Charles and Rosalie Brown (“the Browns”), and others, alleging that LaSalle was owed
$156,746.51 on a promissory note that was in default. LaSalle stated that it currently could
not find the note in its file. However, LaSalle did attach a copy of a mortgage for the
premises at 5031 Heather Way, Huber Heights, Ohio. The mortgage was dated November
21, 2003, and granted the Lender, First Financial Corporation (“First Financial”), a security
interest in the Heather Way property. The mortgage also referred to the promissory note
that the Browns had signed the same day.
{¶ 5} In October 2008, the Browns filed a motion to dismiss, or in the alternative
for a more definite statement, based on the fact that the note was not attached to the
complaint. In response, LaSalle filed several documents, including an assignment of the
note and mortgage from First Financial to LaSalle. The assignment was executed on
September 21, 2008, and had been sent to the Montgomery County Recorder’s Office to be
recorded. LaSalle also included copies of the Browns’ loan account history and a copy of
the adjustable rate note that the Browns had signed.
{¶ 6} On October 31, 2008, the trial court concluded that LaSalle had fulfilled its
obligations under Civ.R. 10(D), and overruled the motion to dismiss. Subsequently, in
November 2008, the Browns filed an answer, a counterclaim against LaSalle for alleged
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damage to the property, and a cross-claim against First Financial. In their answer, the
Browns raised standing and the lack of a real party in interest as a defense. See Doc. #51, p.
3.
{¶ 7} In February 2010, LaSalle filed a motion for summary judgment. Attached
to the motion was the affidavit of Michael Brandi, a loan services specialist with Home Loan
Services, Inc., the duly authorized mortgage loan servicing agent for LaSalle and for the
Browns’ account. In the affidavit, Brandi stated, based on personal knowledge and access
to the business records for the account, that, when the suit was filed, LaSalle was the owner
and holder of the promissory note and corresponding mortgage executed by Charles Brown.
Brandi also attached copies of the note and mortgage to his affidavit. The Browns did not
respond to the motion for summary judgment, nor did they, thereafter, challenge the content
of the affidavit.
{¶ 8} The Browns subsequently dismissed their counterclaim with prejudice on
August 11, 2010. In addition, they voluntarily dismissed their cross-claim. Then, on
August 23, 2010, the Browns, First Franklin, and LaSalle filed a document entitled “Consent
Entry, Decree of Foreclosure and Order of Sale with Waiver of Deficiency.” See Doc.# 93.
In the Consent Entry, the parties consented to the following:
(a) a default of obligations under promissory note ("Note") dated November
21, 2003 payable by Charles Brown; (b) foreclose the lien of Mortgage of the
same date securing the Note obligations with the real estate described below
(the "Property"); and (c) require that all parties set forth their claims to the
Property or be barred. Doc. #93, p. 1.
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{¶ 9} The agreed entry also stated that:
The Court finds that all necessary parties have been properly served
and are before the Court. The Court finds that Plaintiff filed its Complaint
against the Browns in their capacity as obligors on the Note as the Property
mortgagors, and against the remaining Defendants as persons with possible
interests in the Property. Upon consideration thereof, the Court finds no
genuine issue as to any material fact and finds that Plaintiff is entitled to a
Judgment Entry, Decree of Foreclosure and Order of Sale. (Emphasis sic.).
Id. at p. 1.
{¶ 10} The court, therefore, ordered that the amount owed to LaSalle under the
note was $156,746.51, plus interest at a rate of 10.25% per year from June 1, 2007, and that
the note was secured by the mortgage held by LaSalle. The court further found that the
conditions of the mortgage were broken, and that LaSalle was entitled to have the equity of
redemption foreclosed. In addition, the court stated that if the sums owed were not fully
paid within three days, the equity of redemption would be foreclosed, and an order of sale to
the sheriff would issue. Finally, the court ordered that after sale, and upon confirmation, the
assets would be distributed, first, for payment of court costs and second, for unpaid taxes and
assessments. The balance, if any, would be given to LaSalle for payment of the
$156,746.51, plus interest that was owed. The Browns did not pay the amounts owed
within three days, and no appeal was taken from the foreclosure order.
{¶ 11} Sheriff’s sales were scheduled several times and were cancelled at
LaSalle’s request. In November 2012, the property was sold at public auction to Tina
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DiGiorgio for the sum of $164,000, and a judgment entry was filed in December 2012,
confirming the sale and ordering distribution. At that time, the court ordered the sheriff to
convey the deed and a writ of possession to DiGiorgio, and cancelled the mortgages on the
property. No appeal was taken from the order confirming the sale. A writ of restitution
was then granted to DiGiorgio in January 2013.
{¶ 12} In February 2013, a motion for permission to intervene was filed by Charles
and Brandi Stoll, who claimed they had been tenants at 5031 Heather Way since April 2012,
pursuant to a rental agreement with Charles Brown. The Stolls attached a rental agreement,
indicating that Brown had been renting the premises to them on a month-to-month basis
since April 2012, for $1,000 per month. The trial court overruled the motion to intervene in
February 2013.
{¶ 13} In May 2013, which was more than six months after the sheriff’s sale,
DiGiorgio filed a motion to vacate the entry confirming the sale. After the trial court
overruled the motion to vacate, DiGiorgio appealed from the order overruling her motion.
II. Did the Trial Court Err in Denying the Motion to Vacate the Judgment?
{¶ 14} DiGiorgio’s sole assignment of error states that:
The Trial Court Erred in Denying Appellant’s Motion to Vacate
Judgment.
{¶ 15} Under this assignment of error, DiGiorgio raises three major points. We
will address each point separately.
A. Standing to Contest the Validity of the Consent Entry
[Cite as LaSalle Bank Natl. Assn. v. Brown, 2014-Ohio-3261.]
{¶ 16} DiGiorgio’s first argument is that she had standing to challenge the validity
of the consent entry ordering foreclosure. This entry was filed in August 2010, almost three
years before DiGiorgio filed the motion to vacate.
{¶ 17} The trial court concluded that DiGiorgio lacked standing because she was
not a party to the action and was not a real party in interest to the foreclosure. In this
regard, the trial court noted that DiGiorgio had purchased the property at a sheriff’s sale, and
her interest was limited to the property and possession of such, but did not extend to the
foreclosure action. In contrast, DiGiorgio argues that even if she is a stranger to the action,
she can collaterally attack a judgment that was entered without jurisdiction. In responding
to DiGiorgio’s arguments, LaSalle first contends that DiGiorgio lacks standing to appeal
because she failed to file a motion to intervene in the underlying action.
{¶ 18} Civ.R. 24(C) outlines procedures to be followed by persons who wish to
intervene in actions, and provides that:
A person desiring to intervene shall serve a motion to intervene upon
the parties as provided in Civ.R. 5. The motion and any supporting
memorandum shall state the grounds for intervention and shall be
accompanied by a pleading, as defined in Civ.R. 7(A), setting forth the claim
or defense for which intervention is sought.
{¶ 19} Intervention can be either as of right, pursuant to Civ.R. 24(A), or
permissive, pursuant to Civ.R. 24(B). With respect to intervention as of right, Civ.R. 24(A)
states that:
Upon timely application anyone shall be permitted to intervene in an
action: (1) when a statute of this state confers an unconditional right to
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intervene; or (2) when the applicant claims an interest relating to the property
or transaction that is the subject of the action and the applicant is so situated
that the disposition of the action may as a practical matter impair or impede
the applicant's ability to protect that interest, unless the applicant's interest is
adequately represented by existing parties.
{¶ 20} We have previously held that “[f]ollowing the confirmation of a sheriff's
sale, the purchaser has a vested interest in the property.” Foreclosure of Liens for
Delinquent Taxes v. Parcels of Land encumbered with Delinquent Tax Liens, 2d Dist. Clark
No. 2002-CA-99, 2003-Ohio-1760, ¶ 12, citing Ohio Sav. Bank v. Ambrose, 56 Ohio St.3d
53, 55, 563 N.E.2d 1388 (1990). “This is so because the title to property legally passes
upon confirmation of the sale.” Id. (Citation omitted.) We have also observed that:
“Where a person is the highest bidder at a sheriff's sale, and as such is duly
declared to be the purchaser, and refuses, without cause, to fulfill his
contract, he may be proceeded against in the same suit, he having become a
party thereto by the purchase made, and, upon due notice and hearing, the
court may order a resale and order the defaulting purchaser to pay the
expenses arising from his noncompletion of the purchase, and also any
deficiency in price in the resale * * *, or the sale may be confirmed and the
purchaser may be proceeded against by suit to recover the purchase price.”
Ford Consumer Finance Co., Inc. v. Johnson, 2d Dist. Montgomery No.
20767, 2005-Ohio-4735, ¶ 31, quoting Barclays American/Mortg. Corp. v.
Evans, 118 Ohio App.3d 128, 691 N.E.2d 1144 (2d Dist.1997), which in turn
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cited Union Trust Co. v. Monroe, 34 Ohio App. 47, 170 N.E. 369 (9th
Dist.1930).
{¶ 21} The action in Monroe was a charge in contempt for failure to pay for the
property. Id. at 48. If purchasers are entitled to be brought before the court for purposes of
enforcing a sale, logic dictates that the same individuals would be entitled to become parties
for purposes of defending their interest in the property. As a result, DiGiorgio would have
been a person permitted to intervene in the action as of right under Civ.R. 24(A). However,
DiGiorgio did not file a request to intervene; she merely filed a motion to vacate the sale.
{¶ 22} The Tenth District Court of Appeals has held that:
“To have standing to appeal, a person must either have been a party to
the case or have attempted to intervene as a party.” Lopez v. Veitran, 1st
Dist. No. C-110511, 2012-Ohio-1216, ¶ 10 * * * “Merely appearing in a
proceeding and presenting an argument does not make a person a party to an
action with a right to appeal.” Lopez at ¶ 10, citing In re Adoption of T.B.S.,
4th Dist. No. 07CA3139, 2007-Ohio-3559, ¶ 7 * * *. (Citation omitted.)
PHH Mtge. Corp. v. Therrien, 10th Dist. Franklin No. 12AP-312,
2012-Ohio-5307, ¶ 8.
{¶ 23} In Therrien, the individual attempting to appeal was identified in the
caption of the complaint as a trustee for a trust that had been named as a defendant. The
trustee actually participated pro se in the action for nearly a year, and then retained an
attorney, who received leave to file an answer and counterclaim on the trustee’s behalf. Id.
at ¶ 2-3. Subsequently, the trial court struck the answer and counterclaim because the
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trustee was not personally a party to the foreclosure action and lacked standing to assert
claims on his own behalf. Id. at ¶ 5. After the trial court granted summary judgment in
favor of the bank that had requested foreclosure, the trustee appealed, contending among
other things, that the trial court had erred in granting the motion to strike his answer and
counterclaim. Id. at ¶ 6. As was noted, the court of appeals dismissed the appeal because
the trustee did not move to intervene under Civ.R. 24, and lacked standing to appeal.
Therrien at ¶ 8.
{¶ 24} Applying the same reasoning here would mean that DiGiorgio lacks
standing to prosecute this appeal, because she failed to file a motion to intervene in the trial
court. Compare Sky Bank v. Mamone, 182 Ohio App.3d 323, 2009-Ohio-2265, 912 N.E.2d
668 (8th Dist.), where the purchaser at a sheriff’s sale filed both a motion to intervene and a
motion to vacate the sheriff’s sale. Id. at ¶ 10. While not conceding that she lacks
standing, DiGiorgio notes in her reply brief that she did not need to file a motion to
intervene, because a “void” judgment can be collaterally attacked even by strangers to an
action.
{¶ 25} A collateral attack is “ ‘an attempt to defeat the operation of a judgment, in
a proceeding where some new right derived from or through the judgment is involved.’ ”
Fawn Lake Apts. v. Cuyahoga Cty. Bd. of Revision, 85 Ohio St.3d 609, 611, 710 N.E.2d 681(1999), quoting Kingsborough v. Tousley, 56 Ohio St. 450, 458, 47 N.E. 541 (1897).
“Collateral attacks on judgments conceivably can be mounted in either the court that issued
the judgment or in a different court, as they involve any new ‘proceeding’ not encompassed
within the proceeding in which the original judgment was entered.” Ohio Pyro, Inc. v. Ohio
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Dept. of Commerce, 115 Ohio St.3d 375, 2007-Ohio-5024, 875 N.E.2d 550, ¶ 20.
{¶ 26} In Ohio Pyro, the Supreme Court of Ohio stressed that:
In our jurisprudence, there is a firm and longstanding principle that
final judgments are meant to be just that – final. Therefore, subject to only
rare exceptions, direct attacks, i.e., appeals, by parties to the litigation, are the
primary way that a civil judgment is challenged. For these reasons, it
necessarily follows that collateral or indirect attacks are disfavored and that
they will succeed only in certain very limited situations. (Citations omitted.)
Ohio Pyro at ¶ 22.
{¶ 27} After making these comments, the Supreme Court of Ohio went on to
observe that:
This court has determined that the reasons for disfavoring collateral
attacks do not apply in two principal circumstances – when the issuing court
lacked jurisdiction or when the order was the product of fraud (or of conduct
in the nature of fraud). See Coe [v. Erb], 59 Ohio St. [259,] at 271, 52 N.E.
640 [1898] (strangers to a judgment are permitted to attack the judgment
based on “fraud and want of jurisdiction”). See also Lewis v. Reed (1927),
117 Ohio St. 152, 159, 157 N.E. 897 (absent an invalid or void judgment or
fraud in the procurement of the judgment, a valid judgment cannot be
collaterally attacked). Id. at ¶ 23.
{¶ 28} According to DiGiorgio, the case before us falls within such an exception,
because the trial court allegedly lacked subject-matter jurisdiction over the case under
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Federal Home Loan Mortg. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017,
979 N.E.2d 1214, and the original consent judgment of foreclosure, therefore, was void.
{¶ 29} We generally review issues of subject-matter jurisdiction de novo, unless
the jurisdictional issue involves factual disputes. See, e.g., Yu v. Zhang, 175 Ohio App.3d
83, 2008-Ohio-400, 885 N.E.2d 278, ¶ 16 (2d Dist.). In the case before us, the issue
appears to be one solely of law.
{¶ 30} In Schwartzwald, a bank instituted foreclosure proceedings before receiving
assignment of the note and mortgage securing the defendant’s loan. Id. at ¶ 2. The bank
received the assignment during suit, but the Supreme Court of Ohio held that a “lack of
standing at the commencement of a foreclosure action requires dismissal of the complaint *
* *.” Id. at ¶ 40. The court also held that “a lack of standing at the outset of litigation
cannot be cured by receipt of an assignment of the claim or by substitution of the real party
in interest.” Id. at ¶ 41.
{¶ 31} We subsequently cited Schwartzwald in a situation where a bank had been
granted a default judgment of foreclosure. BAC Home Loans Servicing LP v. Busby, 2d
Dist. Montgomery No. 25510, 2013-Ohio-1919, ¶ 6. In a motion filed more than two years
after the default judgment, the defendants asserted that the judgment was void because the
bank was not the real party in interest and lacked standing. Id. at ¶ 10. In discussing the
standing issue, we noted the following statement in Schwartzwald that:
“Standing is required to invoke the jurisdiction of the common pleas
court. Pursuant to Civ.R. 82, the Rules of Civil Procedure do not extend the
jurisdiction of the courts of this state, and a common pleas court cannot
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substitute a real party in interest for another party if no party with standing
has invoked its jurisdiction in the first instance.” Id. at ¶ 18, quoting
Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, at
¶ 38.
{¶ 32} We then cited a decision from the Eleventh District Court of Appeals for
the following proposition: “because standing concerns the subject matter jurisdiction of the
court, standing is an issue that cannot be waived and may be raised at any time, even after
judgment.” Busby at ¶ 19, citing BAC Home Loans Servicing, L.P. v. Meister, 11th Dist.
Lake No.2012-L-042, 2013-Ohio-873, ¶ 6. (Other citation omitted.) Based on this
proposition, we noted that “ ‘If a trial court lacks subject matter jurisdiction to render a
judgment, the order is void ab initio and may be vacated by the court's inherent power, even
without the filing of a Civ.R. 60(B) motion.’ ” (Citations omitted.) Id. We ultimately
decided that the default judgment was not void because the documents attached to the
complaint were facially valid. Id. at ¶ 22. We also rejected the defendant’s claims under
Civ.R. 60(B). Id. at ¶ 23-34.
{¶ 33} However, neither Schwartzwald nor Busby applies to the case before us.
Although the Browns’ promissory note was not attached to the complaint because LaSalle
could not locate it at the time of filing, the note was later located and was produced for the
court. Furthermore, the uncontested affidavit that LaSalle filed states that LaSalle was the
owner of the note when the complaint was filed. The affidavit also states that LaSalle’s
“acquisition of the Note and Mortgage” was “ratified and confirmed” by the assignments
that were recorded. Plaintiff’s Motion for Summary Judgment, Doc. # 84, Brandi Affidavit,
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p. 3. The assignments in question were the assignment of the note and mortgage from First
Franklin to National City Bank of Indiana, and the assignment of the note and mortgage
from National City Bank of Indiana to LaSalle. Id. For something to be “ratified,” it
must already exist.
{¶ 34} We have previously held that Schwartzwald does not apply, and a party is
not required to show that it owned a note at the time a foreclosure is filed, where the party
has a right to enforce the note and mortgage. Nationstar Mtge., L.L.C. v. West, 2d Dist.
Montgomery Nos. 25813, 25837, 2014-Ohio-735, ¶ 26.
{¶ 35} R.C. 1303.31(A) includes the following as persons who are entitled to
enforce a negotiable instrument:
(1) The holder of the instrument;
(2) A nonholder in possession of the instrument who has the rights of
a holder;
(3) A person not in possession of the instrument who is entitled to
enforce the instrument pursuant to Section 1303.38 or division (D) of section
1303.58 of the Revised Code.
{¶ 36} Thus a person need not be a “holder” of the instrument in order to be
entitled to enforce it. Instead, a person can be a nonholder in possession of the instrument
who has the rights of a holder. This status can be bestowed in various ways. As was noted
in the case of In re Veal, 450 B.R. 897 (Bankr.9th Dist.Ariz. 2011):
Non-UCC law can bestow this type of status; such law may, for
example, recognize various classes of successors in interest such as subrogees
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or administrators of decedent's estates. See Comment to UCC § 3–301.
More commonly, however, a person becomes a nonholder in possession if the
physical delivery of the note to that person constitutes a “transfer” but not a
“negotiation.” Compare UCC § 3-201 (definition of negotiation) with UCC
§ 3-203(a) (definition of transfer). Under the UCC, a “transfer” of a
negotiable instrument “vests in the transferee any right of the transferor to
enforce the instrument.” UCC § 3–203(b). As a result, if a holder transfers
the note to another person by a process not involving an Article 3 negotiation
– such as a sale of notes in bulk without individual indorsement of each note
– that other person (the transferee) obtains from the holder the right to
enforce the note even if no negotiation takes place and, thus, the transferee
does not become an Article 3 “holder.” See Comment 1 to UCC § 3-203. Id.
at 911.
{¶ 37} A similar situation occurred in Fifth Third Mtge. Co. v. Bell, 12th Dist.
Madison No. CA2013-02-003, 2013-Ohio-3678. In that case, the court of appeals
concluded that the plaintiff had established its interest in a note for purposes of standing.
Specifically, the court noted that:
An instrument is transferred when it is delivered by a person, other
than the issuer, for the purpose of giving the person receiving the delivery the
right to enforce. R.C. 1303.22(A). If the transferee is not a holder because
the transferor did not endorse, the transferee is nevertheless a person entitled
to enforce the instrument if the transferor was a holder at the time of transfer.
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R.C. 1303.22(B); R.C. 1303.22 cmt. 2.
FTMC's [the bank’s] allegations that it was in possession of a note
and entitled to enforce it, combined with the copy of the unendorsed note, at
the very minimum, demonstrated that FTMC was entitled to enforce as a
nonholder in possession. See R.C. 1303 .22(B); Deutsche Bank Natl. Trust
Co. v. Gardner, 8th Dist. Cuyahoga No. 92916, 2010-Ohio-663, ¶ 18-22.
The note attached to the complaint was payable to State Savings Bank.
Therefore, State Savings Bank was the initial holder because the note was
payable to it as an identified person. R.C. 1303.25(A). The fact that FTMC
was in possession of the unendorsed note along with language used in the
mortgage and the assignment of the mortgage showed a chain of custody and
indicated that State Savings Bank or some other person transferred the note to
FTMC with the intent that FTMC be entitled to enforce the note. Bell [the
defendant mortgagor] never challenged FTMC's possession of this
unendorsed note. Based on these facts, FTMC had an interest in the note as
a nonholder in possession.
FTMC's status as a nonholder in possession established its interest in
the note for the purposes of standing. (Footnote omitted.) Bell at ¶ 20-22.
{¶ 38} In the case before us, LaSalle attached the mortgage to the complaint and
indicated that it was currently unable to locate the note. This did not mean that LaSalle
lacked proper possession of the note for purposes of initiating a lawsuit; it simply meant that
LaSalle had misplaced the note. In addition, the mortgage that LaSalle did attach
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specifically referred to the note.
{¶ 39} LaSalle later located the note and produced it for the court. LaSalle also
filed evidence that it owned the note at the time suit was filed, and that the assignments of
the note and mortgage ratified and confirmed LaSalle’s prior acquisition of the note.
Furthermore, the Browns agreed in the consent entry to the foreclosure and LaSalle’s
entitlement to judgment on the note and mortgage. Under the circumstances, LaSalle
established that it had standing as a nonholder in possession of the note.
{¶ 40} Accordingly, Schwartzwald and Busby do not apply, and there is no basis
for concluding that the judgment was “void” and subject to collateral attack.
B. Caveat Emptor
{¶ 41} DiGiorgio’s second argument relates to the trial court’s conclusion that
even if DiGiorgio had standing, she assumed the risk of a problem with the title and must
complete the sale. According to DiGiorgio, if an underlying judgment is void, any
execution issuing from the judgment is also void.
{¶ 42} Because we have previously concluded that the underlying judgment of
foreclosure was not void, the execution issuing from the judgment was not void and cannot
be set aside, other than through properly recognized methods. However, even if this were
otherwise, we agree with the trial court that DiGiorgio is precluded from recovery because
she could have discovered any alleged defects if she had examined the public records prior
to sale. We note that the “defect” raised by DiGiorgio was that the judgment was void
under Schwartzwald. See Motion to Vacate, Doc. #144, p. 2.
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{¶ 43} “The doctrine of caveat emptor precludes recovery in an action by the
purchaser for a structural defect in real estate where (1) the condition complained of is open
to observation or discoverable upon reasonable inspection, (2) the purchaser had the
unimpeded opportunity to examine the premises, and (3) there is no fraud on the part of the
vendor.” (Citation omitted.) Layman v. Binns, 35 Ohio St.3d 176, 519 N.E.2d 642 (1988),
syllabus.
{¶ 44} “Under the first part of the doctrine of caveat emptor, buyers are
responsible for the discovery of patent defects that are observable and discoverable by an
ordinarily prudent purchaser upon reasonable inspection.” Northpoint Properties v.
Charter One Bank, 8th Dist. Cuyahoga No. 94020, 2011-Ohio-2512, ¶ 53, citing Tipton v.
Nuzum, 84 Ohio App.3d 33, 38, 616 N.E.2d 265 (9th Dist.1992). “ ‘ “A purchaser of real
estate has the duty to use diligence in inspecting the property before buying it. The
principle of caveat emptor applies to sales of real estate relative to conditions open to
observation where those conditions are discoverable and the purchaser has the opportunity
for investigation and determination without concealment or hindrance by the vendor.” ’ ”
Id., quoting Johnston v. Faith Baptist Church, Inc., 3d Dist. Allen No. 1-87-14, 1989 WL
43017 (Apr. 26, 1989). (Other citation omitted.)
{¶ 45} Although this doctrine is typically applied to physical conditions of a
property, courts have also held that a party has no right to rely on alleged oral
misrepresentations regarding the status of a property’s title, where the title to the property is
of public record. See Finomore v. Epstein, 18 Ohio App.3d 88, 91, 481 N.E.2d 1193 (8th
Dist.1984) (holding that “[s]ince all of the adversities regarding title to the properties were
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of public record and therefore easily discoverable, appellee had no right to rely upon any
alleged oral misrepresentations”).
{¶ 46} The Supreme Court of Ohio has also held that “[t]he rule of caveat emptor,
applicable to judicial sales, does not charge a purchaser at such sale with knowledge of the
existence of an instrument conveying the real estate, or a part thereof, where the instrument
has not been recorded or filed for record in the office of the recorder, and where the holder
of the same has taken no step to put one on notice of its existence.” Weir v. Snider Saw
Mill Co., 88 Ohio St. 424, 103 N.E. 133 (1913), paragraph two of the syllabus.
{¶ 47} Thus, under this doctrine, a purchaser of real estate at a judicial sale will be
charged with knowledge of an alleged defect in title where the conditions are of public
record and are easily discoverable by the purchaser. In the case before us, any defects in
title or in the court proceedings were of public record and could have been discovered by
DiGiorgio prior to the judicial sale. Accordingly, we find no merit in DiGiorgio’s second
argument.
C. Standing Under Schwartzwald
{¶ 48} DiGiorgio’s final argument is that the facts of the case before us are very
similar to those in Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214,
and that, as a result, LaSalle lacked standing to sue. In response, LaSalle contends that the
judgment entry in the case below was procured by consent, and that any error has been
waived.
{¶ 49} In view of our prior discussion, DiGiorgio’s argument is without merit. We
20
have already concluded that Schwartzwald does not apply to the case before us. However,
even if Schwartzwald did apply, we do not agree that the trial court lacked jurisdiction over
the action.
{¶ 50} As an initial matter, we note that our jurisdictional comments in Busby
were dicta, because they were not necessary to the decision. In Busby, the documents
attached to the complaint were facially valid and were sufficient to establish standing.
Busby, 2d Dist. Montgomery No. 25510, 2013-Ohio-1919, at ¶ 21-22. As a result, there
would have been no basis for concluding that the trial court lacked jurisdiction, whether the
judgment were void or merely voidable.
{¶ 51} We made similar remarks about jurisdiction in PNC Bank, N.A. v. Weaver,
2d Dist. Montgomery No. 25627, 2013-Ohio-2765, ¶ 17, and in CitiMortgage, Inc. v.
Draper, 2d Dist. Clark No. 2012 CA 78, 2013-Ohio-2927, ¶ 13-14. Again, however, our
comments in these cases were dicta, because they were not necessary to the decisions. In
Weaver, we noted that the defendants were not challenging the bank’s standing. Instead,
they cited “to Schwartzwald to emphasize that financial institutions should be held ‘to the
same standards as everyone else in seeking judgments.’ ” Weaver at ¶ 18. Similarly, in
Draper, the defendants “did not claim that CitiMortgage did not hold the note and mortgage,
that they did not default on the note, and that they did not owe the amount claimed by
CitiMortgage.” Draper at ¶ 22.
{¶ 52} Furthermore, Busby was issued without the benefit of Countrywide Home
Loans Servicing v. Nichpor, 136 Ohio St.3d 55, 2013-Ohio-2083, 990 N.E.2d 565, which
was decided a few weeks after Busby was issued. In Nichpor, a bank obtained a default
21
judgment against the borrowers, and sold the property to a third party at a sheriff’s sale. Id.
at ¶ 2. The bank then filed a notice of voluntary dismissal under Civ.R. 41(A), and the trial
court dismissed the matter, declaring all pending motions moot. Id. Subsequently, the
bank refiled the action and received a grant of summary judgment, which the borrowers
appealed.
{¶ 53} On appeal, the Supreme Court stressed that “ ‘[r]egardless of whatever else
may be said of a default judgment, it is a judgment. It is as good as any other judgment. It is
a final determination of the rights of the parties.’ ” (Emphasis sic.) Id. at ¶ 5, quoting
GTE Automatic Elec., Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146, 149-150, 351 N.E.2d
113 (1976). This is similar to the statement made about consent judgments in Ohio Pyro,
which indicated that a consent judgment is “ ‘as effective as if the merits had been litigated’
and is ‘just as enforceable as any other validly entered judgment * * *.’ ” Ohio Pryo, 115
Ohio St.3d 375, 2007-Ohio-5024, 875 N.E.2d 550, at ¶ 24, quoting Gilbraith v. Hixson, 32
Ohio St.3d 127, 129, 512 N.E.2d 956 (1987).
{¶ 54} In Nichpor, the Supreme Court of Ohio stated as follows:
That this default judgment occurred within a foreclosure proceeding
does not make the judgment any less final. All that remained in this case
were administrative matters finalizing the result of the sheriff's sale and
giving the mortgagors the opportunity to exercise their equitable right of
redemption. These actions can be classified as proceedings to aid in
execution of the judgment.
***
[Cite as LaSalle Bank Natl. Assn. v. Brown, 2014-Ohio-3261.]
To * * * grant a lender the right to dismiss an action after a trial court
has issued what it has indicated was a final judgment would lead to the
untenable result that an unhappy lender could simply wait until after the
sheriff's sale has occurred, decide that the sale price was too low, and then
dismiss the case in order to get a second bite at the apple. This flies in the
face of the general policy that judicial sales have a certain degree of finality.
Nichpor at ¶ 6-7, citing Ambrose, 56 Ohio St.3d at 55, 563 N.E.2d 1388.
{¶ 55} The same reasoning applies to buyers at judicial sales, who may become
dissatisfied with their purchase and attempt to set the sale aside, based on the alleged
“voidness” of a judgment rendered against other parties. Such an outcome is particularly
troubling in situations like the present, where the parties, including the defaulting borrowers,
agreed to the judgment of foreclosure and order of sale.
{¶ 56} In Nichpor, the Supreme Court of Ohio went on to hold that:
[A]fter a judgment entry grants a decree of foreclosure and order of sale, the
foreclosure action cannot be dismissed pursuant to Civ.R. 41(A)(1)(a),
because that rule pertains only to the voluntary dismissal of a pending case.
(Emphasis added.) Id. at ¶ 8.
{¶ 57} The clear implication is that a case is no longer pending after the
foreclosure judgment. We also note that in addition to Schwartzwald, Busby relied on the
Eleventh District Court of Appeals’ decision in Meister, 11th Dist. Lake No.2012-L-042,
2013-Ohio-873. Meister, in turn, relied on the Eleventh District’s prior decision in Fed.
Home Loan Mtge. Corp. v. Rufo, 86 Ohio App.3d 42, 2012-Ohio-5930, 983 N.E.2d 406(11th Dist.). Meister at ¶ 9. However, the Eleventh District Court of Appeals has changed
23
course and no longer takes the position expressed in Meister and Rufo.
{¶ 58} Specifically, the Eleventh District Court of Appeals has subsequently
overruled Rufo’s holding on the jurisdictional issue. See HSBC Bank USA, Natl. Assn. v.
Bailey, 11th Dist. Trumbull No. 2012-T-0086, 2014-Ohio-246, ¶ 29. In this regard, Bailey
cited the court’s recent decision in CitiMortgage, Inc. v. Oates, 11th Dist. Trumbull
No.2013-T0011, 2013-Ohio-5077, ¶ 19, which had held that it is “ ‘incorrect to equate
standing with subject matter jurisdiction.’ ” Bailey at ¶ 29.
{¶ 59} In Bailey, the Eleventh District Court of Appeals also extensively discussed
the fact that a lack of standing does not equate with a court’s lack of subject-matter
jurisdiction. The parties in Bailey had entered into a consent judgment of foreclosure in a
situation where the bank did not have an assignment of the note and mortgage when it filed
suit. Id. at ¶ 2, 4, and 15. This is similar to the situation before us, with the exception
that LaSalle owned the note and had standing as a party entitled to enforce the note.
{¶ 60} About a year and a half after the consent judgment, one of the parties in
Bailey filed a motion for relief from judgment, but the motion was denied. Id. at ¶ 7 and 9.
On appeal, the Eleventh District Court of Appeals held that the Civ.R. 60(B) motion was
untimely. Id. at ¶ 19. However, the appellate court also rejected the argument that the
bank’s lack of standing rendered the agreed entry void ab initio, which would have allowed
the trial court to vacate the judgment under its inherent powers. Id. at ¶ 20-21.
{¶ 61} In rejecting this argument, the appellate court first relied on the decision of
the Supreme Court of Ohio in Pratts v. Hurley, 102 Ohio St.3d 81, 2004-Ohio-1980, 806
N.E.2d 992, which had “recognized ‘a distinction between a court that lacks subject-matter
24
jurisdiction over a case and a court that improperly exercises that subject-matter jurisdiction
once conferred upon it.’ ” Id. at ¶ 22, quoting Pratts at ¶ 10.
{¶ 62} In Pratts, the Supreme Court of Ohio stated that:
“Jurisdiction” means “the courts’ statutory or constitutional power to
adjudicate the case.” (Emphasis omitted.) Steel Co. v. Citizens for a
Better Environment (1998), 523 U.S. 83, 89, 118 S.Ct. 1003, 140 L.Ed.2d
210; Morrison v. Steiner (1972), 32 Ohio St.2d 86, 87, 61 O.O.2d 335, 290
N.E.2d 841, paragraph one of the syllabus. The term encompasses
jurisdiction over the subject matter and over the person. State v. Parker, 95
Ohio St.3d 524, 2002–Ohio–2833, 769 N.E.2d 846, ¶ 22 (Cook, J.,
dissenting). 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 time. United States v. Cotton (2002), 535 U.S. 625, 630,
122 S.Ct. 1781, 152 L.Ed.2d 860; State ex rel. Tubbs Jones v. Suster (1998),
84 Ohio St.3d 70, 75, 701 N.E.2d 1002. It is a “condition precedent to the
court's ability to hear the case. If a court acts without jurisdiction, then any
proclamation by that court is void.” Id.; Patton v. Diemer (1988), 35 Ohio
St.3d 68, 518 N.E.2d 941, paragraph three of the syllabus.
The term “jurisdiction” is also used when referring to a court's
exercise of its jurisdiction over a particular case. See State v. Parker, 95
Ohio St.3d 524, 2002-Ohio-2833, 769 N.E.2d 846, ¶ 20 (Cook, J.,
dissenting); State v. Swiger (1998), 125 Ohio App.3d 456, 462, 708 N.E.2d
25
1033. “ ‘The third category of jurisdiction [i.e., jurisdiction over the
particular case] encompasses the trial court's authority to determine a specific
case within that class of cases that is within its subject matter jurisdiction. It
is only when the trial court lacks subject matter jurisdiction that its judgment
is void; lack of jurisdiction over the particular case merely renders the
judgment voidable.’ ” Parker at ¶ 22 (Cook, J., dissenting), quoting Swiger,
125 Ohio App.3d at 462, 708 N.E.2d 1033. “Once a tribunal has jurisdiction
over both the subject matter of an action and the parties to it, ‘* * * the right
to hear and determine is perfect; and the decision of every question thereafter
arising is but the exercise of the jurisdiction thus conferred * * *.’ ” State ex
rel. Pizza v. Rayford (1992), 62 Ohio St.3d 382, 384, 582 N.E.2d 992,
quoting Sheldon's Lessee v. Newton (1854), 3 Ohio St. 494, 499. Pratts,
102 Ohio St.3d 81, 2004-Ohio-1980, 806 N.E.2d 992, at ¶ 11-12.
{¶ 63} After quoting from Pratts, the Eleventh District Court of Appeals noted in
Bailey that:
In Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13,
2012-Ohio-5017, 979 N.E.2d 1214, the Ohio Supreme Court held that
“standing to sue is required to invoke the jurisdiction of the common pleas
court,” id. at ¶ 24, 979 N.E.2d 1214, but it did not state that the common
pleas court lacked subject-matter jurisdiction where a party lacked standing to
sue. The fact that HSBC Bank improperly invoked that jurisdiction by
lacking the requisite standing to initiate the foreclosure action, i.e., it was not
26
assigned the note and mortgage prior to the filing of the complaint, merely
rendered the lower court's judgment voidable, not void ab initio. State v.
Filiaggi, 86 Ohio St.3d 230, 240, 714 N.E.2d 867 (1999) (“[w]here it is
apparent from the allegations that the matter alleged is within the class of
cases in which a particular court has been empowered to act, jurisdiction is
present[;][a]ny subsequent error in the proceedings is only error in the
‘exercise of jurisdiction,’ as distinguished from the want of jurisdiction in the
first instance”) (citation omitted). Bailey, 11th Dist. Trumbull No.
2012-T-0086, 2014-Ohio-246, at ¶ 25.
{¶ 64} In this regard, the Eleventh District also relied on a prior decision of the
Tenth District Court of Appeals, which had “explained the distinction by analyzing a party's
lack of standing to initiate a lawsuit in the context of a case's justiciability.” Id. at ¶ 26,
citing Deutsche Bank Natl. Trust Co. v. Finney, 10th Dist. Franklin Nos. 13AP-198 and
13AP-373, 2013-Ohio-4884. In Finney, the Tenth District Court of Appeals noted that
“[j]usticiability does not confer subject-matter jurisdiction.” Id. at ¶ 23. When explaining
this point, the Tenth District Court of Appeals reasoned that:
Rather, we recognize that subject-matter jurisdiction is not dependent
upon the justiciability of any particular case. The fact that a case is
justiciable does not necessarily mean that a particular court has subject-matter
jurisdiction over it, e.g, a case brought in a municipal court in Ohio that
exceeds the monetary jurisdiction limits set by statute or a case brought in the
Court of Claims that does not name the State of Ohio as a defendant.
27
Similarly, a court may have jurisdiction over the subject-matter of a case and
yet not be empowered to adjudicate it to final judgment for reasons particular
to that case, including the lack of standing of the plaintiff. Where an action is
brought by a plaintiff who lacks standing, the action is not justiciable because
it fails to present a case or controversy between the parties before it. See
State ex rel. Keller v. Columbus, 164 Ohio App.3d 648, 843 N.E.2d 838,
2005-Ohio-6500, ¶ 19 (10th Dist.) (“ ‘For a cause to be justiciable, there must
exist a real controversy presenting issues which are ripe for judicial
resolution and which will have a direct and immediate impact on the parties.’
” (Citations omitted.)). But the court's lack of “jurisdiction,” i.e., its ability
to properly resolve a particular action due to the lack of a real case or
controversy between the parties, does not mean that the court lacked
subject-matter jurisdiction over the case. Finney at ¶ 24.
{¶ 65} The Tenth District Court of Appeals thus held that while the trial court had
inherent authority to vacate void judgments, the court had correctly refused to exercise this
authority, because the judgment was not void. Id. at ¶ 26.
{¶ 66} In addition to relying on the Tenth District’s analysis in Finney, the
Eleventh District Court of Appeals relied on Nichpor, which was decided after
Schwartzwald. In this regard, the Eleventh District Court of Appeals stated that:
On the issue of raising a challenge to a party's standing, the court in
Schwartzwald stated that “the issue of standing, inasmuch as it is
jurisdictional in nature, may be raised at any time during the pendency of the
28
proceedings.” (Citation omitted.) Schwartzwald at ¶ 22, 979 N.E.2d 1214.
The key words are “during the pendency of the proceedings.” The Supreme
Court has emphasized that, after a judgment entry grants a decree of
foreclosure and order of sale, the case is no longer pending. Countrywide
Home Loans Servicing, L.P. v. Nichpor, 136 Ohio St.3d 55, 2013-Ohio-2083,
990 N.E.2d 565, syllabus. Once the decree of foreclosure becomes final, all
that remains in the case are “administrative matters finalizing the result of the
sheriff's sale and giving the mortgagors the opportunity to exercise their
equitable right of redemption[,] * * * actions * * * classified as proceedings
to aid in execution of the judgment.” Bailey, 11th Dist. Trumbull No.
2012-T-0086, 2014-Ohio-246, at ¶ 28, quoting Nichpor at ¶ 6.
{¶ 67} Accordingly, the Eleventh District Court of Appeals concluded that the
underlying case was no longer pending and that in order to challenge the judgment, the party
seeking relief would have to satisfy the timeliness requirements in Civ.R. 60(B). Id. at
¶ 30. This is consistent with the approach used in Mamone, 182 Ohio App.3d 323,
2009-Ohio-2265, 912 N.E.2d 668. In Mamone, the Tenth District Court of Appeals held
that because foreclosure orders and orders of confirmation are final appealable orders:
An order of confirmation thus becomes “dispositive as to the
propriety of the sale and the sale confirmation procedures unless properly
vacated by the trial court pursuant to Civ.R. 60(B).” (Emphasis added.)
Triple F Invests. [v. Pacific Fin. Servs., Inc. 11th Dist, Portage App. No.
2000-P-0090, 2001 WL 589343 (June 2, 2001)], supra. This court too has
29
determined that a trial court may review an order confirming a sheriff's sale
only if its jurisdiction is invoked by means of Civ.R. 60(B). Rokakis v.
Snipes (Mar. 4, 1999), Cuyahoga App. No. 73938, 1999 WL 126943.
Mamone at ¶ 26.
{¶ 68} The logic used in these cases is persuasive. Under the decisions in Pratts,
Schwartzwald, and Nichpor, the consent judgment that was filed in 2010 became final when
no party appealed from the judgment, and the case was no longer pending. Thus, the issue
of standing could no longer be raised, except in a Civ.R. 60(B) motion, which was not filed.
Even if LaSalle lacked standing at the time the action was filed, the trial court’s inability to
properly resolve the particular action before it, due to a lack of a real case or controversy
between the parties, rendered the judgment voidable, rather than void, and the judgment
could not be set aside on the basis of a collateral attack by a non-party. It could only be
attacked by a properly filed Civ.R. 60(B) motion. In this regard, we stress that in addition
to its decision in Nichpor, the Supreme Court of Ohio, after Schwartzwald, has continued to
characterize standing as involving a lack of capacity, rather than a lack of subject-matter
jurisdiction.
{¶ 69} For example, in Groveport Madison Local Schools Bd. of Edn. v. Franklin
Cty. Bd. of Revision, 137 Ohio St.3d 266, 2013-Ohio-4627, 998 N.E.2d 1132, the Supreme
Court of Ohio made the following observations:
The BOE argues that the issue of the trust's standing is separate and
distinct from the BOR's subject-matter jurisdiction and that standing is not at
issue here because the BTA addressed only subject-matter jurisdiction.
30
Subject-matter jurisdiction refers to the statutory or constitutional authority to
adjudicate a case. Pratts v. Hurley, 102 Ohio St.3d 81, 2004-Ohio-1980,
806 N.E.2d 992, ¶ 11. Lack of standing, on the other hand, challenges a
party's capacity to bring an action, not the subject-matter jurisdiction of the
tribunal. State ex rel. Tubbs Jones v. Suster, 84 Ohio St.3d 70, 77, 701
N.E.2d 1002 (1998). (Emphasis added.) Groveport Madison at ¶ 25.
{¶ 70} Although the Supreme Court of Ohio went on to note that the legislature
had “incorporated the requirement for standing into the jurisdictional requirements for filing
a valuation complaint,” id., this observation has no bearing on the situation before us. The
important point is that the court, after Schwartzwald, has employed the approach to standing
and jurisdiction that the Tenth and Eleventh Districts have adopted.
{¶ 71} In Finney, the Tenth District Court of Appeals noted that the Supreme
Court of Ohio had certified a conflict between the Tenth District’s prior decision in PNC
Bank, N.A. v. Botts, 10th Dist. Franklin No. 12AP-256, 2012-Ohio-5383, and the decision of
the Ninth District Court of Appeals in Bank of America, N.A. v. Kuchta, 9th Dist. Medina
No. 12CA-25-M, 2012-Ohio-5562 Finney, 10th Dist. Franklin Nos. 13AP-198 and
13AP-373, 2013-Ohio-4884, at ¶ 7-8 and 25. Perhaps at some point, the Supreme Court of
Ohio will clarify its preferred approach on jurisdiction and standing.
{¶ 72} Accordingly, even if LaSalle lacked standing to bring suit when it filed the
complaint, any lack of standing would have rendered the judgment voidable rather than
void, and would not have permitted collateral attack. Furthermore, the proper avenue in
this situation would have been to file a motion to intervene, followed by a Civ.R. 60(B)
31
motion, which was not done.
{¶ 73} Based on the preceding discussion, DiGiorgio’s sole assignment of error is
overruled.
III. Conclusion
{¶ 74} DiGiorgio’s sole assignment of error having been overruled, the judgment
of the trial court is affirmed.
..........
HALL, J., concurs.
DONOVAN, J., dissenting:
{¶ 75} I disagree. In my view, conspicuously absent is any documentation,
assignment, merger or otherwise, supporting Plaintiff’s status as a real party in interest.
LaSalle conceded: “Plaintiff’s Assignment of Mortgage may not have been executed and
sent for recording until several months after the Complaint was filed.”
{¶ 76} DiGiorgio asserted that after the sale of the property was confirmed, she
“learned that the title to the property is completely unmarketable and uninsurable because of
jurisdictional defects in the proceedings. Specifically, because it appears from the record of
this case that [LaSalle] did not possess any interest in either the promissory note or the
mortgage,” pursuant to Schwartzwald. DiGiorgio, in my view, correctly asserted that
LaSalle “lacked standing and therefore failed to invoke the jurisdiction of this court. Thus
all resulting orders in this case are void.” In other words, this case was never commenced,
no judgment was ever entered, and the sale of the property failed to terminate any of the
32
defendants’ rights in the property. DiGiorgio averred that she has not been able to complete
the financing to finalize the purchase. Apparently, the lender’s title insurer will not issue a
title insurance policy.
{¶ 77} Furthermore, DiGiorgio, in my view, has standing to contest the validity of
the Consent Entry. She acknowledges that, while collateral attacks on judgments are
strongly disfavored, “it has long been recognized that a judgment may always be attacked if
it was issued by a court without jurisdiction,” in reliance upon Ohio Pyro, Inc., and Coe v.
Erb. In Ohio Pyro, the Ohio Supreme Court defined a collateral attack on a judgment as “‘an
attempt to defeat the operation of a judgment, in a proceeding where some new right derived
from or through the judgment is involved.’” Id., ¶ 16. (Citations omitted). The Ohio Pyro
Court further noted that a collateral attack is “‘an attempt to undermine a judgment through
a judicial proceeding in which the ground of the proceeding (or a defense in the
proceeding) is that the judgment is ineffective. * * * .’” Id., ¶ 17, quoting Black’s Law
Dictionary 278 (8th Ed. 2004).
{¶ 78} In Ohio Pyro, Safety 4th Fireworks Inc, Ohio Pyro’s competitor, sued the
Fire Marshal in the Jefferson County Court of Common Pleas, in 1999, regarding a
moratorium on requests for the issuance of wholesaler licenses, in an attempt to relocate into
a county where Ohio Pyro operated a fireworks wholesale company. Id. ¶ 3. Ohio Pyro
attempted to intervene in the suit, and the trial court denied the motion to intervene. Id., ¶ 5.
“Safety 4th and the Fire Marshall reached an agreement to settle the litigation. On June 6,
2001, the Jefferson County Court of Common Pleas journalized an agreed order submitted
by the parties ‘as a full and final settlement of any and all claims.’” Id., ¶ 6. In 2004, Ohio
33
Pyro filed a complaint for declaratory judgment and injunctive relief in the Fayette County
Court of Common Pleas, alleging that it learned that Safety 4th was relocating to Fayette
County. Id., ¶ 9. The court granted Ohio’s Pyro’s request for a preliminary injunction, and
in a motion to dismiss, the Fire Marshall and Safety 4th argued that Ohio Pyro’s suit was an
“impermissible collateral attack” on the judgment issued by the Jefferson County Court of
Common Pleas. Id., ¶ 12. Ohio Pyro filed a motion for summary judgment, which was
granted, and the decision was affirmed on appeal. Id., ¶ 13 - 14.
{¶ 79} After noting, based upon Coe, that “strangers to a judgment are permitted
to attack the judgment based upon ‘fraud and want of jurisdiction,’” the Ohio Supreme
Court determined that Ohio Pyro’s action in Fayette County was not based upon fraud or
lack of jurisdiction and, “unless other qualifying considerations are present, if this action is
indeed a collateral attack” on the 2001 judgment, it is improper, and “the trial court should
have granted the motions to dismiss of the Fire Marshall and Safety First.” Id., ¶ 23. The
Court further determined that although the 2001 judgment was issued pursuant to the
parties’ agreement, it was “entitled to the presumption of finality that the doctrine
disfavoring collateral attacks affords to a valid judgment.” Id., ¶ 24.
{¶ 80} In Coe, D.S. Erb sued “one Hendrickson and others, including the plaintiff
in error, Irvin T.Coe.” Id., 259. Erb recovered a judgment against Hendrickson, which
was not journalized but subsequently entered nunc pro tunc, after Hendrickson conveyed
real property to Coe. Id. At issue was whether the judgment in favor of Erb created a lien
on the property of Coe, who purchased the property from Hendrickson before the judgment
was journalized, without knowledge thereof. Id., 261. The Supreme Court of Ohio
34
determined: “It has appeared by the authorities cited that two principal grounds on which
collateral attack by strangers has been permitted are fraud and want of jurisdiction.” Id.,
271. The court concluded as follows:
* * * [I]n order to create a lien as of the first day of the term, there
must be an entry of judgment on the journal during the term; that the entry
made in this case after the term was unauthorized, and worked a fraud upon
the plaintiff in error; that the judgment, as it appears of record, does not
conclude his rights; and that, not being a privy as respects the action then
pending, he could not maintain a direct action to review the judgment, and
therefore has the right to challenge its effect on his property in the case at bar.
Id., 277.
{¶ 81} DiGiorgio further correctly relies upon jurisprudence in which this Court
“has previously recognized that once a judicial sale is confirmed, the purchaser has a vested
interest in the case and has standing to appeal,” in reliance upon Abroms v. Synergy Building
Systems, 2d Dist. Montgomery No. 23944, 2011-Ohio-2180. Therein, Hillard and Janet
Abroms sued the seller of real property, Synergy Development Ltd., and its vice president,
Barnett, due to a mold infestation. Id., ¶ 11. The trial court dismissed the breach of contract
claims and granted summary judgment to Synergy and Barnett on February 22, 2010. Id., ¶
17. This Court noted that the Abromses’ complaint was filed on January 10, 2008, after a
foreclosure action was initiated in May 2007, concerning the building, and after a sheriff’s
sale occurred in December 2007. Id., ¶ 47. The building was bought by Park National
Bank. Id. The court in the foreclosure case confirmed the sale subsequent to the filing of
35
the Abromses’ complaint. Id., ¶ 48.
{¶ 82} At issue on appeal was “whether the trial court erred in finding there was no
genuine issue of material fact that the Abromses did not have standing on February 22,
2010; that is, did they still have a personal stake in the outcome of the litigation.” Id., ¶ 54.
This Court determined that the Abromses owned the property at the time their complaint
was filed, “with a statutory right to redemption”, since the sale of the property had not been
confirmed, and since the buyer of foreclosed property “has no vested right in the property
until the sale is confirmed.” In other words, “the Abromses had standing on January 10,
2008, to file an action for damages to the property.” Id., ¶ 52-53.
{¶ 83} In my view, DiGiorgio did not assume “the risk of a problem with the title”
such that she must complete the sale. She argues that the underlying judgment is void and
that “any execution issuing from the judgment is also void,” in reliance upon The Lincoln
Tavern, Inc. v. Snader, 165 Ohio St. 61, 133 N.E.2d 606 (1956). Therein, the Snaders, who
resided in New Mexico, filed a motion to vacate a default judgment terminating their lease.
Id. at 62. The property was subsequently sold at sheriff’s sale. Id. The Snaders sought to
have title quieted in them “on the ground that such judgment is invalid for the reason that
the affidavits for service by publication are false and that the service was never completed.”
Id. The trial court in relevant part refused to vacate the sale of the property, concluding that
“said judgment and sale of the said real estate is not void but voidable.” Id. at 63. The
Snaders appealed, and the appellate court dismissed the appeal for lack of a final order. Id.
The Ohio Supreme Court determined at syllabus that “a judgment rendered upon such faulty
service is void ab initio,” and “a sale of real property pursuant to such judgment is invalid
36
and will be set aside even though such property is in the hands of a third person who is a
purchaser in good faith.” In my view, the doctrine of caveat emptor does not apply to
Digiorgio’s purchase of the property since, as in Snader (albeit, therein, based upon faulty
service), the sale itself was invalid.
{¶ 84} DiGiorgio is correct that the matter herein is analogous to Schwartzwald.
After noting that the plaintiff filed suit prior to obtaining an assignment of the note and
mortgage securing the Schwartzwalds’ loan, the Supreme Court determined as follows:
The Ohio Constitution provides in Article IV, Section 4(B): “The
courts of common pleas and divisions thereof shall have such original
jurisdiction over all justiciable matters and such powers of review of
proceedings of administrative officers and agencies as may be provided by
law.” (Emphasis added.)
In Cleveland v. Shaker Hts., 30 Ohio St.3d 49, 51, 507 N.E.2d 323(1987), we stated:
“ ‘Whether a party has a sufficient stake in an
otherwise justiciable controversy to obtain judicial resolution
of that controversy is what has traditionally been referred to as
the question of standing to sue. Where the party does not rely
on any specific statute authorizing invocation of the judicial
process, the question of standing depends on whether the party
has alleged * * * a “personal stake in the outcome of the
controversy.” ’ ”
37
***
We recognized that standing is a “jurisdictional requirement” in
State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, 35 Ohio St.2d
176, 179, 298 N.E.2d 515 (1973), and we stated: “It is an elementary concept
of law that a party lacks standing to invoke the jurisdiction of the court unless
he has, in an individual or representative capacity, some real interest in the
subject matter of the action.” (Emphasis added.) See also New Boston Coke
Corp. v. Tyler, 32 Ohio St.3d 216, 218, 513 N.E.2d 302 (1987) (“the issue of
standing, inasmuch as it is jurisdictional in nature, may be raised at any time
during the pendency of the proceedings.”); Steinglass & Scarselli, The Ohio
State Constitution: A Reference Guide 180 (2004) (noting that the
jurisdiction of the common pleas court is limited to justiciable matters).
And recently, in Kincaid v. Erie Ins. Co., 128 Ohio St.3d 322,
2010-Ohio-6036, 944 N.E.2d 207, we affirmed the dismissal of a complaint
for lack of standing when it had been filed before the claimant had suffered
any injury. There, Kincaid asserted claims that his insurer had breached the
insurance contract by failing to pay expenses covered by the policy; however,
he had never presented a claim for reimbursement to the insurer. We
concluded that Kincaid lacked standing to assert the cause of action,
explaining, “Until Erie refuses to pay a claim for a loss, Kincaid has suffered
no actual damages for breach of contract, the parties do not have adverse
legal interests, and there is no justiciable controversy.” Id. at ¶ 13.
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Because standing to sue is required to invoke the jurisdiction of the
common pleas court, “standing is to be determined as of the commencement
of suit.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570-“571, 112 S.Ct.
2130, 119 L.Ed.2d 351 (1992), fn. 5; * * *.
Further, invoking the jurisdiction of the court “depends on the state of
things at the time of the action brought,” Mullan v. Torrance, 22 U.S. 537,
539, 9 Wheat. 537, 6 L.Ed. 154 (1824), and the Supreme Court has observed
that “[t]he state of things and the originally alleged state of things are not
synonymous; demonstration that the original allegations were false will
defeat jurisdiction.” Rockwell Internatl. Corp. v. United States, 549 U.S.
457, 473, 127 S.Ct. 1397, 167 L.Ed.2d 190 (2007).
Thus, “[p]ost-filing events that supply standing that did not exist on
filing may be disregarded, denying standing despite a showing of sufficient
present injury caused by the challenged acts and capable of judicial redress.”
13A Wright, Miller & Cooper, Federal Practice and Procedure 9, Section
3531 (2008); * * * .
This principle accords with decisions from other states holding that
standing is determined as of the filing of the complaint. See, e.g., Deutsche
Bank Natl. Trust v. Brumbaugh, 2012 OK 3, 270 P.3d 151, ¶ 11 (“If Deutsche
Bank became a person entitled to enforce the note as either a holder or
nonholder in possession who has the rights of a holder after the foreclosure
action was filed, then the case may be dismissed without prejudice * * *”
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[emphasis added] ); U.S. Bank Natl. Assn. v. Kimball, 190 Vt. 210, 2011 VT
81, 27 A.3d 1087, ¶ 14 (“U.S. Bank was required to show that at the time the
complaint was filed it possessed the original note either made payable to
bearer with a blank endorsement or made payable to order with an
endorsement specifically to U.S. Bank” [emphasis added] ); Mtge. Electronic
Registration Sys., Inc. v. Saunders, 2010 ME 79, 2 A.3d 289, ¶ 15 (“Without
possession of or any interest in the note, MERS lacked standing to institute
foreclosure proceedings and could not invoke the jurisdiction of our trial
courts” [emphasis added] ); RMS Residential Properties, L.L.C. v. Miller,
303 Conn. 224, 229, 232, 32 A.3d 307 (2011), quoting Hiland v. Ives, 28
Conn.Supp. 243, 245, 257 A.2d 822 (1966) (explaining that “‘[s]tanding is
the legal right to set judicial machinery in motion’” and holding that the
plaintiff had standing because it proved ownership of the note and mortgage
at the time it commenced foreclosure action); McLean v. JP Morgan Chase
Bank Natl. Assn., 79 So.3d 170, 173 (Fla.App.2012) (“the plaintiff must
prove that it had standing to foreclose when the complaint was filed”); see
also Burley v. Douglas, 26 So.3d 1013, 1019 (Miss.2009), quoting Lujan v.
Defenders of Wildlife, 504 U.S. 555, 571, 112 S.Ct. 2130, 119 L.Ed.2d 351(1992), fn. 5 (“‘standing is to be determined as of the commencement of
suit’”); In re 2007 Administration of Appropriations of Waters of the
Niobrara, 278 Neb. 137, 145, 768 N.W.2d 420 (2009) (“only a party that has
standing may invoke the jurisdiction of a court or tribunal. And the junior
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appropriators did not lose standing if they possessed it under the facts
existing when they commenced the litigation” [footnote omitted] ).
Here, Federal Home Loan concedes that there is no evidence that it
had suffered any injury at the time it commenced this foreclosure action.
Thus, because it failed to establish an interest in the note or mortgage at the
time it filed suit, it had no standing to invoke the jurisdiction of the common
pleas court. Id., ¶ 20-28.
The Schwartzwald Court concluded that the “lack of standing at the commencement of a
foreclosure action requires dismissal of the complaint; however, that dismissal is not an
adjudication on the merits and therefore is without prejudice. * * * .” Id., ¶ 40.
{¶ 85} LaSalle erroneously suggests that “Civ.R. 24(C) sets forth a mandatory
procedure for a party seeking intervention,” and that DiGiorgio failed to comply with the
rule. LaSalle directs our attention to State ex rel. Jones v. Wilson, 48 Ohio St.2d 349, 358
N.E.2d 605 (1976). Therein, the State sought a writ of mandamus in the court of appeals to
order the trial court to re-sentence Phillip Gardner. Id., 349. After the writ was granted,
Gardner appealed, and his appeal was dismissed since “Gardner, not being a party to the
cause in the Court of Appeals and not having attempted to intervene as a party in that court,
is without capacity to appeal.” Id. In my view, DiGiorgio did not have a vested interest in
the property until the sale was confirmed, and we disagree with LaSalle that she was
required to attempt to intervene pursuant to Civ.R. 24(C).
{¶ 86} LaSalle asserts that even if DiGiorgio could challenge the consent entry,
“her arguments are (in substance) akin to those made by the defendant in Bish Construction
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Inc. v. Wickham, 3d Dist. Seneca No. 13-12-16, 2013-Ohio-421.” Therein, the Wickhams
appealed the denial of their Civ.R. 60(B) motion for relief from a consent judgment and
foreclosure decree on their property. Id., ¶ 1. They asserted, pursuant to Civ.R. 60(B)(5),
that a fraud had been perpetrated upon the court. Id. The Wickhams signed a note in
2004, secured by a mortgage which was granted by Mortgage Electronic Registration
Systems, Inc. (“MERS”), as nominee for the lender, Full Spectrum Lending, Inc. (“Full
Spectrum”). Id., ¶ 2. The mortgage was later assigned, on July 18, 2008, to the Bank of
New York (“BONY”), and recorded on July 30, 2008. Id. On January 31, 2008, Bish
Construction, Inc. (“Bish”) sought foreclosure of a mechanics lien on the Wickhams’
property, and it named Full Spectrum and Mers as defendants. Id., ¶ 3. “On July 30, 2008,
BONY filed an amended answer and cross-claim. BONY filed as Trustee for the
Certificate holders CWABS, Inc., Asset-Backed Certificates, Series 2004-10 as successor by
merger to assignment to MERS. “ Id., ¶ 4. BONY argued that the Wickhams were in
default since 2007. Id. “BONY sought to have the Mortgage foreclosed and the property
sold at sheriff’s sale.” Id., ¶ 4.
{¶ 87} A consent journal entry of judgment was issued regarding Bish’s complaint
against the Wickhams in September, 2008, Bish was dismissed from the action, and the
issues relevant on appeal involved BONY’s cross-claim against the Wickhams. Id., ¶ 5.
The Wickhams entered into a Consent Judgment with BONY which provided that BONY
was entitled to a judgment and decree on its cross-claim, and that “BONY would agree to
not execute on the Consent Judgment for sixty days, for the purposes of circulating an
updated loan modification agreement, with terms previously negotiated.” Id., ¶ 6.
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{¶ 88} The Wickhams subsequently filed for bankruptcy, the trial court accordingly
stayed proceedings, and “the Wickhams received a discharge of their obligations, thereby
extinguishing their personal liability for any potential deficiency balance.” Id., ¶ 7. BONY
filed a motion to reactivate the matter to proceed with execution of its judgment, the court
granted the motion, and the property was scheduled to be sold. Id., ¶ 8. Before the sale,
the Wickhams filed their Civ. R. 60(B) motion along with a motion to dismiss. Id.
According to the Wickhams, BONY “perpetrated a fraud upon the court” because it “didn’t
own the note at the time of the filing of the cross-claim and lacked standing to bring its
complaint and obtain a valid judgment.” The trial court denied the Wickhams’ Civ.R.
60(B) motion. Id., ¶ 11.
{¶ 89} The Third District noted that Schwartzwald was decided after oral
arguments and determined as follows:
The Wickhams filed a notice of supplemental authority, claiming that
their case should also have been dismissed because there was no assignment
of the Mortgage to BONY at the time the complaint was filed against the
Wickhams. However, we find that Schwartzwald is not applicable to the facts
in this case. Although the original complaint by Bish Construction was filed
while MERS was still the real party in interest on the Mortgage, BONY’s
amended answer and cross complaint, filed on July 30, 2008 was filed after
the assignment of Mortgage was executed on July 18, 2008. Wickham, ¶ 22.
The court noted in a footnote that “even before BONY obtained permission from the court to
file its amended cross-claim, the original cross-claim was filed July 21, 2008, also after the
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execution of the assignment of mortgage.” Id., fn.1. LaSalle asserts that “the fact that the
standing argument [asserted in Wickham] did not result in automatic dismissal of the
lender’s claims is fatal to DiGiorgio’s arguments.” I disagree with LaSalle’s assertion that
Wickham is fatal to DiGiorgio’s argument, since it is clear that the mortgage in Wickham
was assigned to BONY prior to the filing of its cross-claim against the Wickhams.
{¶ 90} I recognize that on February 14, 2014, LaSalle filed Appellee’s Notice of
Filing Supplemental Authority, attached to which is Bailey. Therein, the court noted that
“the Ohio Supreme Court has certified a conflict on the following question: ‘When a
defendant fails to appeal from a trial court’s judgment in a foreclosure action, can a lack of
standing be raised as part of a motion for relief from judgment?’ Bank of Am., N.A. v.
Kuchta, 135 Ohio St.3d 1430, 2013-Ohio-1857, 986 N.E.2d 1020.” Id., ¶ 17. I note that
oral argument in Kutcha occurred on January 8, 2014. I agree with the dissenting view
articulated in Bailey, concluding that “this court should follow the Ohio Supreme Court’s
decision” in Schwartzwald. Id., ¶ 37. The dissenting opinion concluded that, “pursuant to
Schwartzwald, standing is jurisdictional. As a result, HSBC was required to have an
interest in the note or mortgage when it filed this action in order to have standing to invoke
the trial court’s jurisdiction.” Id., ¶ 48.
{¶ 91} As this Court recently noted in Busby, at ¶ 16, quoting Kincaid: “Standing is a
preliminary inquiry that must be made before a court may consider the merits of a legal claim. It
is an issue of law, so we review the issue de novo.” I am of the view that the decision of the
Eleventh District in Bailey, upon which LaSalle relies, is in conflict with this Court’s decision
in Busby, in which this Court said,“in the past, the Supreme Court of Ohio held that a ‘[l]ack of
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standing challenges the capacity of a party to bring an action, not the subject matter jurisdiction
of the court’ * * *, [and that] a standing or real party in interest defense to a foreclosure action
was considered waived, if not timely asserted.” Id., ¶ 17. This Court further noted, however,
citing Schwartzwald, that “[r]ecently, in the context of a mortgage foreclosure action, the Ohio
Supreme Court held that standing is jurisdictional and is determined when a lawsuit is
commenced.” Id., ¶ 18 (emphasis added). This Court determined that the “supreme court made
clear that post-suit events cannot be considered to determine standing, and a lack of standing
cannot be ‘cured’ by use of Civ.R. 17 (real party in interest) or other civil rules.” Id. This Court
concluded, “because standing is a jurisdictional requirement, the complaint must be dismissed if
standing is lacking [Schwartzwald, ¶ 40].” Id., ¶ 19. Furthermore, “standing concerns the
subject matter jurisdiction of the court,” and “cannot be waived and may be raised at any time,
even after judgment. * * * .” Id. “‘If a trial court lacks subject matter jurisdiction to render a
judgment, the order is void ab initio and may be vacated by the court’s inherent power, even
without the filing of a Civ.R. 60(B) motion.’” * * * Id., ¶ 19. This Court found that “the
documents attached to BAC’s complaint were sufficient to establish standing to file its
foreclosure action.” Id., ¶ 21.
{¶ 92} In my view, it is clear from the record herein that unlike the lender in Busby,
LaSalle lacked standing to invoke the jurisdiction of the trial court; it filed its complaint against
the Browns on July 7, 2008, and the assignment of mortgage and note was executed on
September 21, 2008. I would decline to follow the Eleventh District’s rationale as set forth in
Bailey, and I would adhere to our interpretation of Schwartzwald1 as set forth in Busby. I would
1
As recently as June 10, 2014, the Ohio Supreme Court cited to
45
find that the trial court lacked subject matter jurisdiction to render judgment, and that the
foreclosure decree is void ab initio.
{¶ 93} Accordingly, I would reverse.
..........
Copies mailed to:
Jason A. Whitacre
Ashley E. Mueller
Andrew M. Engel
Hon. Gregory F. Singer
Schwartzwald, noting “if a common pleas court proceeds in an action in which the
plaintiff lacks standing, the court violates Article IV of the Ohio Constitution. Article
IV requires justiciability, and justiciability requires standing.” ProgressOhio.org, Inc.
v. JobsOhio, Slip Opinion No. 2014-Ohio-2382, ¶ 11.