Chemical Bank, N.A. v. Krawczyk

[Cite as Chemical Bank, N.A. v. Krawczyk, 2013-Ohio-3614.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 98263
CHEMICAL BANK, N.A.
PLAINTIFF-APPELLEE
vs.
FRANK A. KRAWCZYK, ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-700783
BEFORE: Stewart, A.J., Boyle, J., and Kilbane, J.
RELEASED AND JOURNALIZED: August 22, 2013
ATTORNEYS FOR APPELLANT
Daniel L. McGookey
Lauren McGookey
Kathryn M. Eyster
McGookey Law Offices, L.L.C.
225 Meigs Street
Sandusky, OH 44870
ATTORNEYS FOR APPELLEE CHEMICAL BANK, N.A.
Chris E. Manolis
Phillip C. Barragate
Ashlyn Heider
Shapiro, Van Ess, Phillips & Barragate, L.L.P.
4805 Montgomery Road, Suite 320
Norwood, OH 45212
FOR APPELLEE CITIBANK, N.A.
Citibank, N.A.
111 Wall Street, 5th Floor
Zone 2
New York, NY 10043
ATTORNEYS FOR APPELLEE UNITED STATES OF AMERICA
Steven M. Dettelbach
United States Attorney
Northern District of Ohio
BY: Kent W. Penhallurick
Assistant United States Attorney
U.S. Courthouse, Suite 400
801 West Superior Avenue
Cleveland, OH 44113
ATTORNEYS FOR APPELLEE STATE OF OHIO, DEPARTMENT OF
TAXATION
Mike DeWine
Ohio Attorney General
BY: Nicole R. Randall
Assistant Attorney General
150 East Gay Street, 21st Floor
Columbus, OH 43215
MELODY J. STEWART, A.J.:
{¶1} Frank Krawczyk appeals from the denial of his motion to vacate a decree of
foreclosure entered in favor of Chemical Bank. We affirm the decision of the trial court.
{¶2} On December 14, 1999, Frank Krawczyk purchased a home in North
Royalton, Ohio, and entered into a mortgage agreement with Republic Bank, secured by
mortgages on a parcel located on West 130th Street in North Royalton, and a parcel
located on Bunts Road in Lakewood. Krawczyk also signed an adjustable rate note in
the amount of $202,500 payable to the order of Republic Bank. In April 2007, Chemical
Bank bought Republic Bank.
{¶3} On August 5, 2009, Chemical Bank filed a complaint in foreclosure, alleging
that it was the owner and holder of the promissory note following the July 29, 2009
assignment and transfer of the note from Republic Bank, that Krawczyk was in default of
his payment obligations under the note, and that the entire principal of $180,444.90 plus
interest was due. A copy of the July 29, 2009 assignment, which transferred both the
mortgage and the promissory note to Chemical Bank, was appended as an exhibit to
Chemical Bank’s complaint. A copy of the Republic Bank note, with no endorsement,
and a copy of the mortgage agreement were also appended to the complaint.
{¶4} On December 10, 2009, Chemical Bank filed a motion for summary judgment
in which it presented evidence that Krawczyk was in default of paying the loan and that
the entire principal was therefore due. Chemical Bank attached copies of the unendorsed
note and the July 29, 2009 assignment of the note that was filed with the county prior to
the filing of the complaint. Chemical Bank also submitted an affidavit from an officer of
its mortgage servicing agent, PHH Mortgage Corporation.
{¶5} On February 25, 2010, the foreclosure magistrate determined that Chemical
Bank’s motion for summary judgment was properly supported and recommended that the
court grant the motion. The trial court adopted this decision on March 25, 2010.
{¶6} On May 25, 2010, Krawczyk filed a motion for relief from judgment under
Civ.R. 60(B)(5), arguing that Chemical Bank lacked standing because the Republic Bank
note was not endorsed, Chemical Bank did not establish that it is the holder of the note
and mortgage, and did not establish that it is entitled to enforce the note. Chemical Bank
opposed the motion, and the trial court scheduled a hearing for May 4, 2011.1 At the
hearing, Krawczyk argued, in relevant part, that the evidence filed by Chemical Bank was
insufficient to establish its standing to file the foreclosure action, and therefore, it was not
entitled to summary judgment.
{¶7} On January 4, 2012, the magistrate issued a decision denying the motion for
relief from judgment. The magistrate noted:
In this case, the record contains an assignment instrument that was dated
and filed to the public record prior to the filing date of the complaint. The
terms of the assignment purport to transfer both the note and the mortgage
to plaintiff. These are the same facts that were presented in [Deutsche
Bank Natl. Trust Co. v.] Gardner [8th Dist. Cuyahoga No. 92916,
2010-Ohio-663]. Further, as in the Gardner case, there is other evidence in
the record to support this court’s judgment, notably the affidavit submitted
A bankruptcy stay was issued from June 23, 2010, to October 4, 2010.
1
with plaintiff’s summary judgment motion, which states that plaintiff held
the note and mortgage.
{¶8} Krawczyk now appeals and assigns as error for our review: The trial court
erred in denying Mr. Krawczyk’s motion for relief from judgment.
{¶9} Krawczyk insists that he is entitled to relief from judgment under Civ.R.
60(B)(5) because Chemical Bank is not the owner of the promissory note and mortgage,
is not the holder of the promissory note and mortgage, is not entitled to act on behalf of
the owner, and is not the real party in interest. However, Krawczyk’s appeal fails for the
reasons that follow.
{¶10} First, it is clear that Krawczyk is attempting to use a motion for relief from
judgment as a substitute for a timely appeal. Furthermore, the trial court was presented
with sufficient evidence to demonstrate that Chemical Bank is the real party in interest
with standing to foreclose.
{¶11} More background on the procedural history of the case helps to highlight the
first point. When Chemical Bank filed its complaint against Krawczyk, the bank sued
him in his personal capacity and in the capacity of managing trustee of a trust estate. The
complaint also named as defendants the state of Ohio Department of Taxation, the United
States of America, and Citibank N.A., Trustee. The docket indicates that all defendants
were successfully served approximately two weeks later; that the state of Ohio and the
United States timely filed answers to the complaint; and that Citibank N.A. and
Krawczyk, in either capacity, did not file answers.
{¶12} On December 1, 2009, Chemical Bank moved for default judgment on all
nonanswering parties: Citibank N.A. and Krawczyk in both capacities. Krawczyk, in
his individual capacity filed two separate pleadings on December 7, 2009: a motion to
dismiss, and an objection to Chemical Bank’s motion for default judgment. The motion
to dismiss challenged, among other things, Chemical Bank’s standing as the real party in
interest in addition to its status as the holder of Krawczyk’s promissory note.
Krawczyk’s objection to the motion for default argued that he submitted a payment that
was refused and again challenged Chemical Bank’s status as a holder of the note.
Krawczyk also stated that he filed an answer to the complaint on September 14, 2009, and
that a copy was given to the trial judge.2 When Chemical Bank moved for summary
judgment against Krawczyk on December 10, 2009, the motion was unopposed.
{¶13} When the court scheduled a hearing on the motion for default judgment, it
held in abeyance the other motions pending before it. After the hearing, the magistrate
issued three separate decisions on February 25, 2010. The first decision denied
Krawczyk’s motion to dismiss, the second granted the bank’s motion for summary
judgment, and the third granted default against the nonanswering parties (Citibank N.A.
As previously noted, the docket does not indicate that an answer was filed on Krawczyk’s
2
behalf. The sole docket entry for September 14, 2009, indicates that a support affidavit of someone
named Denny Ray Hardin was filed on that date and also a copy was sent to the trial judge in late
August 2009. The document has as its subject “Fraud of Claims” and lists Frank A. Krawczyk as
the principal of an account with PHH Mortgage Corporation. The document is otherwise
incomprehensible relative to this case. However, the transcript of the May 4, 2011 hearing before
the magistrate on the motion for relief indicates that the trial court treated Krawczyk’s objection to the
motion for default judgment as an untimely filed answer and apparently accepted it.
and Krawczyk in his capacity as estate trustee). The default did not include Krawczyk
individually because the magistrate specifically stated, “DEFAULT HEARING HELD.
* * * DEFENDANTS FRANK A. KRAWCZYK, U.S.A., AND STATE OF OHIO
DEPT. OF TAXATION FILED ANSWERS. REMAINING DEFENDANTS FAILED
TO FILE A RESPONSIVE PLEADING OR APPEAR FOR HEARING.”
{¶14} On March 1, 2010, Krawczyk moved the court to set aside the default
judgment. This motion was denied on March 4, 2010, because default judgment was not
entered against Krawczyk. The court adopted the magistrate’s decisions by separate
order on March 25, 2010, and included Civ.R. 54(B) language that there was “no just
cause for delay.”
{¶15} Krawczyk did not appeal the trial court’s March 25 order. Instead, on April
12, 2010, he filed an untimely objection to the magistrate’s decision on the bank’s motion
for summary judgment. The bank filed a reply to Krawczyk’s objection, however, the
court never addressed the matter because a final order had been entered.
{¶16} On May 25, 2010, a notice of appearance of counsel was filed on behalf of
Krawczyk in both of his capacities, along with the motion that is the subject of this
appeal. As previously noted, the motion challenged the evidence presented by the bank
that demonstrated it was entitled to bring this action against Krawczyk and thus
challenged the trial court’s jurisdiction to decide the matter. These challenges, however,
needed to be made by appealing the trial court’s March 25, 2010 decision. That decision
was a final, appealable order. Having missed the deadline for filing a direct appeal,
Krawczyk is attempting to bootstrap the issues raised below via the motion for relief from
judgment.
{¶17} It is well-established that Civ.R. 60(B) cannot be used as a substitute for an
appeal. See Doe v. Trumbull Cty. Children & Family Servs. Bd., 28 Ohio St.3d 128, 502
N.E.2d 605 (1986), paragraph two of the syllabus. Once the trial court rendered
summary judgment in favor of Chemical Bank, Krawczyk’s recourse was to challenge the
trial court’s judgment by way of appeal. On this basis alone, the court properly refused
to grant relief from judgment. And at the May 4, 2011 hearing on the motion, the
magistrate alluded to the same, stating that:
[F]inal judgment was entered on March 25, 2010, by the Court which
adopted the magistrate’s decision. That adoption order is a final order.
Then we have — the next thing we have of significance on the docket is on
April 12, 2010, defendant, Frank Krawczyk, filed an objection to the
magistrate’s decision to grant summary judgment; and nothing was done
with that because a final order had already been put on on February — on
March 25, 2010, a couple weeks earlier. So an objection to the
magistrate’s decision at that point would be meaningless because the Court
had already entered a final judgment and defendant’s relief from a final
judgment is to timely file and appeal. That’s the primary form of relief
anyway.
(Emphasis added.)
{¶18} In spite of the fact that Krawczyk missed the opportunity to appeal the trial
court’s March 25, 2010 final order, he nonetheless argues that Chemical Bank lacked
standing to foreclose against him because the bank did not own the note and the mortgage
and was therefore not the real party in interest. This argument was raised and decided
below.
{¶19} The issue of standing that Krawczyk argues is an affirmative defense issue.
It does not deprive the court of jurisdiction over the case such that the issue could be
raised at anytime. There is no assertion that Krawczyk ever waived the issue of
standing, but that he fully and fairly litigated the matter during the proceedings in the
foreclosure action.
{¶20} Krawczyk first raised the issue of standing in his motion to dismiss and
raised it again in his objection to the bank’s motion for default judgment. In the motion
to dismiss, Krawczyk states in pertinent part:
FIRST:
The summons does not identify the real party in interest according to Ohio
Rules of Civil Procedure rule [sic] 17a.
SECOND:
The Assignment of the Note and Mortgage is a fraud as it has not been
registered with the Cuyahoga County Recorders [sic] office and thus fails as
evidence for the complaint. The failure of the assignment leads to a lack
of standing in law as stated in the following case: MBNA America Ban/c
[sic] N.A. v. Nelson, 133777/06, 2007 NY [sic] Slip Op 51200U: 2007
N.Y. Misc. LEXIS 4317 (N.Y. Civ. Ct. May 24, 2007). * * *
THIRD:
The complaint in itself fails in it’s [sic] essence due to the fact that
it is without affidavit and proper evidence in hand.
{¶21} Krawczyk’s objection to the motion for default argued in relevant part that
he has “been misled as to who the holder in due course of the said Promissory note is and
requests the court to have the Plaintiff provide the original Promissory note so that [he]
can ascertain as to the validity of the Plaintiff’s claim for Money Judgment, Foreclosure
and Relief.”
{¶22} Krawczyk’s arguments — the same ones he argues in his 60(B) motion for
relief from judgment — were rejected by the trial court. To the extent Krawczyk
believed the trial court erred by doing so, his remedy was to appeal the court’s March 25,
2010 final order. His failure to do so bars his arguments under the doctrine of res
judicata: the issue of standing was litigated and adjudicated in the underlying action.
See First Internet Bank of Indiana v. Equine Transp. Acceptance Co., 5th Dist. Stark No.
2011CA00094, 2011-Ohio-5804, ¶ 21 (appellant’s arguments are barred as res judicata as
they were capable of being raised on direct appeal and a Civ.R. 60(B) motion cannot be
used as a substitute for a direct appeal).
{¶23} This case is not analogous to the Supreme Court of Ohio’s decision in Fed.
Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979
N.E.2d 1214, where the court held that a party who files a foreclosure action must have
standing to sue at the time the complaint is filed. In that case, the bank instituted a
foreclosure action against the property owner before the bank became the real party in
interest. The bank was subsequently assigned the rights to foreclose. Federal Home
conceded that it was not a “person entitled to enforce the note” as of the date the
complaint was filed, but claimed that it later became a “person entitled to enforce the
note” as a “nonholder in possession of the instrument who has the rights of a holder.”
The Supreme Court rejected that contention and held that Federal Home’s standing had to
be established as of the commencement of suit.
{¶24} In the case at bar, Chemical Bank established that it had standing to
commence this action against Krawczyk when it filed the lawsuit. Unlike the bank in
Schwartzwald, Chemical Bank established that it was the owner of the note and mortgage
at the time of filing by attaching to its complaint: a copy of the Republic Bank note, a
copy of the mortgage agreement, and a copy of the July 29, 2009 assignment from
Republic Bank that transferred both the mortgage and the promissory note to Chemical
Bank. These items clearly demonstrated to the court that Chemical Bank had standing to
file the action against Krawczyk. Any challenge Krawczyk makes regarding the
legitimacy or the sufficiency of the documents is an affirmative defense to be considered
by the trial court and does not deprive the trial court of jurisdiction to decide the case.
{¶25} I agree with the concurring opinion in this case that Schwartzwald makes
clear that if a party lacks standing at the time it files suit, there is no justiciable
controversy and the trial court is without jurisdiction to decide the matter. But as the
trial court in this case determined, Chemical Bank’s standing as a jurisdictional
impediment is not an issue in this case, let alone one that can be raised repeatedly to the
trial court whenever a ruling on the matter is unfavorable. To hold otherwise would
abandon well-established jurisprudence regarding appellate review and would not
promote judicial economy.
{¶26} With this analysis, I do not take the position that standing as a jurisdictional
impediment can never be properly raised in a motion for relief from judgment. And as
the concurring opinion notes, the Supreme Court may well decide this issue in the near
future. Simply put, I believe our jurisprudence requires a party to directly appeal an
adverse ruling against him when he has raised an issue in the trial court and had a full and
fair opportunity to litigate the matter. In this case, Krawczyk is using a Civ.R. 60(B)
motion as a substitute for a timely appeal or to contest the merits of the underlying
judgment: neither of which should be permitted.
{¶27} Unlike the bank in Schwartzwald, Chemical Bank attached to its complaint
all of the necessary paperwork to show its standing to invoke the jurisdiction of the court.
Also, unlike in Schwartzwald, the assignment of the note and mortgage from Republic
Bank to Chemical Bank was clearly made before the foreclosure action was filed.
Krawczyk had every right to challenge the authenticity or the credibility of Chemical
Bank’s documents, but those mere challenges are not proof that the bank lacked standing
and they certainly do not rise to the level of divesting the court of jurisdiction. Like the
court noted in Schwartzwald, quoting the U.S. Supreme Court, “invoking the jurisdiction
of the court ‘depends on the state of things at the time of the action brought,’”
Schwartzwald at ¶ 25, quoting Mollan v. Torrance, 22 U.S. 537, 539, 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.” Id. at ¶ 25, citing Rockwell Internatl. Corp. v.
United States, 549 U.S. 457, 473, 127 S.Ct. 1397, 167 L.Ed.2d 190 (2007).
{¶28} Krawczyk did not prove that the paperwork Chemical Bank attached to its
complaint was fraudulent or insufficient to demonstrate standing. The trial court
determined that the bank had standing, and Krawczyk’s mere assertion that the bank did
not have standing does not make this case analogous to Schwartzwald.
{¶29} The doctrine of res judicata should bar this subsequent consideration of
Krawczyk’s claims. He did not timely appeal the trial court’s ruling that decided the
issue of standing. The often quoted phrase that “the issue of standing can be raised at
anytime”3 does not equate to “the issue of standing can be raised many times” or multiple
times. This is exactly the situation in this case. Krawczyk raised the issue in the trial
court. The trial court ruled against him. He did not appeal. He goes back to the trial
court and raises the issue again couched in terms of a Civ.R. 60(B) motion. The trial
court again rules against him. He appeals the decision. This court rules against him.
Can he somehow go back to the trial court to ask for consideration of the issue again by
some other means? If so and the ruling is unfavorable, it stands to reason that he would
be able to appeal that decision too. As unreasonable as this may sound, the Eleventh
District Court of Appeals recently addressed a similar scenario.
{¶30} In Waterfall Victoria Master Fund Ltd. v. Yeager, 11th Dist. Lake No.
2012-L-071, 2013-Ohio-3206, a highly-divided court concluded that the trial court
properly denied relief from a default judgment to appellants who were the defendants in a
foreclosure action. Similar to the case at bar, the appellants in Yeager argued that the
plaintiff did not have an interest in the note and mortgage and therefore lacked standing to
This phrase, as quoted in Schwartzwald, actually states that “the issue of standing is, and
3
always has been a ‘jurisdictional requirement’ that can be raised at anytime during pendency of the
proceedings.” Id. at ¶ 22 (emphasis added).
bring the action against them. Notable in Yeager is the fact that, after default judgment
was rendered against the property owners, the judgment was affirmed on appeal and the
property was sold at sheriff’s sale. The property owners filed a motion to stay the
confirmation of sale along with the motion for relief from judgment. The trial court
denied the Civ.R. 60(B) motion and confirmed the sale.4 Id. at ¶ 5.
{¶31} In any event, even if we were to not find that Krawczyk is attempting to use
his motion for relief as a substitute for an appeal, he has failed to allege any grounds that
entitle him to relief under Civ.R. 60(B).
{¶32} Civ.R. 60(B) governs motions for relief from judgment and provides in part:
On motion and upon such terms as are just, the court may relieve a party or
his legal representative from a final judgment, order or proceeding for the
following reasons: (1) mistake, inadvertence, surprise or excusable neglect;
(2) newly discovered evidence which by due diligence could not have been
discovered in time to move for a new trial under Rule 59(B); (3) fraud
(whether heretofore denominated intrinsic or extrinsic), misrepresentation
or other misconduct of an adverse party; (4) the judgment has been
satisfied, released or discharged, or a prior judgment upon which it is based
has been reversed or otherwise vacated, or it is no longer equitable that the
judgment should have prospective application; or (5) any other reason
justifying relief from the judgment. * * *
{¶33} In order to prevail on a Civ.R. 60(B) motion, the movant must demonstrate
that:
(1) the party has a meritorious defense or claim to present if relief is
granted; (2) the party is entitled to relief under one of the grounds stated in
The lead opinion in Yeager affirms the decision based on a Civ.R. 60(B) analysis, the
4
concurring-in-judgment-only opinion affirms based on res judicata, and the dissent would reverse the
trial court’s decision and allow the appellants the opportunity to challenge the assignment of the note
and/or mortgage.
Civ.R. 60(B)(1) through (5); and (3) the motion is made within a reasonable
time, and, where the grounds of relief are Civ.R. 60(B)(1), (2), or (3), not
more than one year after the judgment, order or proceeding was entered or
taken.
GTE Automatic Elec., Inc. v. ARC Indus., Inc., 47 Ohio St.2d 146, 351 N.E.2d
113 (1976), paragraph two of the syllabus.
{¶34} In the case at bar, there is no dispute that Krawczyk’s motion for relief from
judgment was timely filed. However, Krawczyk cannot establish grounds for relief or
that he has a meritorious defense.
{¶35} Although a claim that a bank lacked standing to commence its foreclosure
action may be a basis for relief from judgment pursuant to Civ.R. 60(B)(5), Wells Fargo
Bank, N.A. v. Brandle, 2d Dist. Champaign No. 2012CA0002, 2012-Ohio-3492, ¶ 18, as
previously noted, Krawczyk made this argument to the trial court and the court rejected it.
He had a full and fair opportunity to present his defense, therefore, he is not entitled to
relief under Civ.R. 60(B).
{¶36} For his meritorious defense, Krawczyk argues that Chemical Bank was not
entitled to summary judgment because it did not demonstrate its standing to obtain
foreclosure. In Wachovia Bank v. Jackson, 5th Dist. Stark No. 2010-CA-00291,
2011-Ohio-3203, the court held that in order to properly support a motion for summary
judgment in a foreclosure action, a plaintiff must present evidentiary-quality materials
showing: (1) The movant is the holder of the note and mortgage, or is a party entitled to
enforce the instrument; 5 (2) if the movant is not the original mortgagee, the chain of
assignments and transfers; (3) the mortgager is in default; (4) all conditions precedent
have been met; and (5) the amount of principal and interest due. In Wachovia Bank, the
court reversed an award of summary judgment where the bank’s affiant did not establish
her personal knowledge of the transaction: the affiant identified the mortgage and the note
as accurate copies of the originals, but did not identify any other documents; and did not
properly authenticate the documents submitted to the court. Id. at ¶ 40-58.
{¶37} In this case, the note was payable to Republic Bank and was never endorsed
to Chemical Bank or endorsed in blank. However, the trial court properly concluded that
this matter was governed by this court’s decision in Deutsche Bank, 8th Dist. Cuyahoga
No. 92916, 2010-Ohio-663. In that case, this court observed that the note was not
endorsed so it was insufficient to show that the transferee was a “holder” of the note, but
the evidence of record demonstrated that the assignment of the note and mortgage
transferred and assigned to the transferee all of its rights to the note. Id. at ¶ 22. We
stated:
“Under Ohio law, the right to enforce a note cannot be assigned — instead,
the note must be negotiated in accord with Ohio’s version of the Uniform
Commercial Code.” See Ohio Rev. Code § 1301.01 et seq. and § 1303.01
et seq.; see also U.C.C. Article 3. An attempt to assign a note creates a
R.C. 1303.31(B) provides that a “person entitled to enforce” a negotiable instrument includes:
5
(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 even though the person is not the owner of the
instrument or is in wrongful possession of the instrument.
claim to ownership, but does not transfer the right to enforce the note. In
re Wells (N.D.Ohio 2009), 407 B.R. 873.
In this case, an unendorsed copy of the note was offered. Therefore, the
note itself was insufficient to show that Deutsche Bank was a “holder” of
the note. However, the court could consider extrinsic evidence in the
record to determine whether Argent transferred the note to Deutsche Bank.
See F.D.I.C. v. Cutler (Conn.Super.,1997), 18 Conn.L.Rptr. 640, 1997
Conn.Super. LEXIS 126. Here the assignment of the note and mortgage to
Deutsche Bank, together with the servicing of the documents on behalf of
Deutsche Bank, demonstrated that Argent transferred and assigned to
Deutsche Bank all of its rights and privileges to the note. Also, Padilla
testified that Deutsche Bank was the holder of the note and mortgage.
Upon this record, the trial court could properly conclude that Deutsche
Bank was the holder of the note with the right to enforce payment thereon.
Id. at ¶ 21-22.
{¶38} Similar to the court in Deutsche Bank, the trial court was presented with
ample evidence to demonstrate that Chemical Bank is the real party in interest with
standing to foreclose. Attached to Chemical Bank’s complaint were copies of the note,
the mortgage, and the assignment of the note and mortgage from Republic Bank to
Chemical Bank dated July 29, 2009. The same items were attached to Chemical Bank’s
motion for summary judgment along with the affidavit of Tracy Johnson submitted to
establish other elements of the foreclosure claim. These items were sufficient to show
that Chemical Bank is the holder of the note. Although the assignment of the note and
mortgage does not state that Republic Bank transfers “all of its rights and privileges” in
the note as the assignment stated in Deutsche Bank, the assignment from Republic Bank
states that Chemical Bank is transferred and assigned the “Mortgage Deed” and the
“Promissory Note” and “all sums of money due and to become due thereon.” This
language was sufficient to establish Chemical Bank’s standing.
{¶39} Judgment affirmed.
It is ordered that appellee recover of appellant its costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the Cuyahoga
County Court of Common Pleas to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
MELODY J. STEWART, ADMINISTRATIVE
JUDGE
MARY J. BOYLE, J., CONCURS IN JUDGMENT ONLY
WITH SEPARATE OPINION;
MARY EILEEN KILBANE, J., DISSENTS WITH
SEPARATE OPINION
MARY J. BOYLE, J., CONCURRING IN JUDGMENT ONLY:
{¶40} I agree with the lead opinion that the trial court’s judgment should be
affirmed because Chemical Bank established that it had standing to bring the foreclosure
action at the commencement of the suit. I write separately, however, to express my
disagreement with the majority’s assessment of Civ.R. 60(B), res judicata, and the issue
of standing in the wake of Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d
13, 2012-Ohio-5017, 979 N.E.2d 1214.
{¶41} It is my view that Schwartzwald makes clear that the issue of standing is,
and always has been, a “jurisdictional requirement” that can be raised at anytime — even
post-judgment, and even if the issue of standing had been previously raised. This is
because if a party lacks standing, it has no personal stake in the outcome of the
controversy. If a party has no personal stake in the outcome of the controversy, then
there is no justiciable controversy. If there is no justiciable controversy, then the
common pleas court lacks subject matter jurisdiction over the case. See Ohio
Constitution, Article IV, Section 4(B).
{¶42} The lead opinion cites to a very recent and “highly-divided” decision of the
Eleventh Appellate District, Waterfall Victoria Master Fund Ltd. v. Yeager, 11th Dist.
Lake No. 2012-L-071, 2013-Ohio-3206. The facts in Yeager are similar to the facts in
the present case.
{¶43} The lower court in Yeager granted the bank default judgment ordering
foreclosure of appellants’ property. On direct appeal, appellants argued that the bank
lacked standing. See Waterfall Victoria Master Fund Ltd. v. Yeager, 11th Dist. Lake No.
2011-L-025, 2012-Ohio-124. In a pre-Schwartzwald decision, the Eleventh District
affirmed the trial court’s default judgment. See id. Appellants then moved to vacate the
trial court’s default judgment in a Civ.R. 60(B) motion, arguing that the bank had no
interest in the note and mortgage, and therefore, had no standing to bring the suit. The
trial court denied the appellants’ Civ.R. 60(B) motion, from which appellants again
appealed.
{¶44} In the Yeagers’ appeal from the trial court’s denial of their Civ.R. 60(B)
motion, Judge Timothy Cannon explained:
A brief history of the law in this area is warranted given that the
issue of standing in the context of a mortgage foreclosure action has
developed significantly since the parties filed their briefs in this appeal.
Previously, the Ohio Supreme Court, in the plurality opinion of State ex rel.
Jones v. Suster, 84 Ohio St.3d 70, 701 N.E.2d 1002 (1998), indicated that
standing is not jurisdictional, explaining that, pursuant to Civ.R. 17, “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. Relying on this proposition, this court held standing to
not be jurisdictional, but rather an affirmative defense that can be waived if
not timely asserted. Aurora Loan Servs., LLC v. Cart, 11th Dist. No.
2009-A-0026, 2010-Ohio-1157; Waterfall Victoria Master Fund Ltd. v.
Yeager, 11th Dist. No. 2011-L-025, 2012-Ohio-124; Everhome Mtge. Co. v.
Behrens, 11th Dist. No. 2011-L-128, 2012-Ohio-1454; Bank of New York
Mellon Trust Co., N.A. v. Shaffer, 11th Dist. No. 2011-G-3051,
2012-Ohio-3638.
After the parties filed their briefs in this case, however, the Ohio
Supreme Court released [Schwartzwald], wherein it criticized Jones and
held that standing is jurisdictional. Id. at ¶ 22, ¶ 29. As it is a
jurisdictional requirement, the Supreme Court concluded that standing must
be determined as of the commencement of the suit. Id. at ¶ 24. It further
emphasized that Civ.R. 17(A), requiring actions to be prosecuted in the
name of the real party in interest, does not address standing but instead
merely concerns proper party joinder. Id. at ¶ 33. Thus, “a lack of
standing at the outset of litigation cannot [subsequently] be cured by receipt
of an assignment of the claim or by substitution of the real party in interest.”
Id. at ¶ 41 (emphasis added). We recently had occasion to evaluate the
import of Schwartzwald as applied to the prior holdings of this court. In
Fed. Home Loan Mtge. Corp. v. Rufo, 11th Dist. No. 2012-A-0011,
2012-Ohio-5930, we expressly overruled the holdings in Cart, supra;
Yeager, supra; Behrens, supra; and Shaffer, supra, to the extent they were
inconsistent with Schwartzwald. Id. at ¶ 29.
Here, appellee argues that appellants are barred by res judicata
because they previously argued this matter before this court in Yeager,
supra. This is something of a procedural double-edged sword for
appellants. In recognizing this court’s previous decision in Yeager,
appellants go to great pains to characterize their argument as not relating to
standing or “the correctness of the assignment,” but rather appellee’s
“authority to act” to foreclose upon the real property. However, if we were
to accept this characterization, likely made in an effort to avoid the holding
in Yeager, then appellants’ argument would indeed be barred by res judicata
because this is an argument that could have and should have been raised in
their direct appeal. Rather, we find appellants are raising the issue of
standing, as they contend appellee had no interest in the note or mortgage
and therefore had no authority to bring the action. As set forth above, the
law has changed, and following the dictates of the Ohio Supreme Court, we
now hold standing to be a jurisdictional requirement. See Rufo, supra. As
the lack of jurisdiction is an issue that cannot be waived and may be raised
at any time, res judicata does not bar the arguments before this court.
Byard v. Byler, 74 Ohio St.3d 294, 296, 658 N.E.2d 735 (1996); see also
Mulby v. Poptic, 8th Dist. No. 98324, 2012-Ohio-5731, ¶ 10. As this
court’s previous decision in Yeager was released before Schwartzwald and
overruled in part in Rufo, the law-of-the-case doctrine similarly does not bar
us from considering this argument. See Hopkins v. Dyer, 104 Ohio St.3d
461, 2004-Ohio-6769, 820 N.E.2d 329, ¶ 15.
Yeager, 11th Dist. Lake No. 2012-L-071, 2013-Ohio-3206, at ¶ 14-16.
{¶45} After setting forth his reasoning, Judge Cannon affirmed the trial court’s
denial of appellants’ Civ.R. 60(B) motion, concluding that the bank established that it had
been assigned the note and mortgage prior to bringing the foreclosure action. Id. at ¶
17-18. Therefore, the bank had standing at the commencement of the suit. I fully agree
with Judge Timothy Cannon’s well-reasoned opinion in Yeager.
{¶46} Similarly, the Second District, which like the Eleventh District had
previously held that standing was an affirmative defense that could be waived if not
raised because it was not a jurisdictional impediment, has changed its course in light of
the Ohio Supreme Court’s decision in Schwartzwald. In BAC Home Loans Servicing
L.P. v. Busby, 2d Dist. Montgomery No. 25510, 2013-Ohio-1919, the Second District
explained:
In the past, the Supreme Court of Ohio held that a “[l]ack of standing
challenges the capacity of a party to bring an action, not the subject matter
jurisdiction of the court.” (Citations and footnote omitted.) [Suster, 84
Ohio St.3d at 77]. Accordingly, a standing or real party in interest defense
to a foreclosure was considered waived, if not timely asserted. Mid-State
Trust IX v. Davis, 2d Dist. No. 07-CA-31, 2008-Ohio-1985, ¶ 56.
Recently, 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. [Schwartzwald, 134 Ohio St.3d at ¶ 24]. The
supreme court made clear that post-suit events cannot be considered to
determine standing, and lack of standing cannot be “cured” by use of Civ.R.
17 (real party in interest) or other civil rules. The supreme court stated:
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
substitute a real party in interest for another party if no party with standing
has invoked its jurisdiction in the first instance. Schwartzwald at ¶ 38.
Because standing is a jurisdictional requirement, the complaint must
be dismissed if standing is lacking. [Schwartzwald] at ¶ 40. Moreover,
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. BAC Home Loans Servicing, L.P. v. Meister, 11th
Dist. No. 2012-L-042, 2013-Ohio-873, ¶ 6, citing Byard v. Byler, 74 Ohio
St.3d 294, 296, 658 N.E.2d 735 (1996). “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.” State v. Wilfong, 2d Dist. No. 2000-CA-75, 2001 Ohio
App. LEXIS 1195, *2 (Mar. 16, 2001). See BJ Bldg. Co., L.L.C. v. LBJ
Linden Co., L.L.C., 2d Dist. No. 21005, 2005-Ohio-6825, ¶ 20.
Id. at ¶ 17-19.
{¶47} Thus, I agree with the dissent that it was proper for Krawczyk to raise the
issue of standing under Civ.R. 60(B)(5) — even though he had previously raised the
issue. This is because if the bank lacked standing at the commencement of the
foreclosure action, then the trial court lacked jurisdiction over the case and any judgment
issued by the trial court would be void. But it is my view that, just as in Yeager,
Krawczyk failed to establish that he had a meritorious defense because the record
indicates that the bank had standing at the commencement of the foreclosure action.
Thus, for this reason, I disagree with the dissent and would affirm the trial court’s
judgment denying Krawczyk’s Civ.R. 60(B) motion. See also GMAC Mtge., L.L.C. v.
Coleff, 8th Dist. Cuyahoga No. 98917, 2013-Ohio-2462; Mulby v. Poptic, 8th Dist.
Cuyahoga No. 98324, 2012-Ohio-5731 (where two separate, unanimous panels of this
court, with this writer authoring Coleff, held that standing could be raised in a Civ.R.
60(B) motion in the wake of Schwartzwald, even though in both cases, the appellants
failed to directly appeal the trial court’s judgment entry of foreclosure and instead moved
to vacate the judgment under Civ.R. 60(B)).
{¶48} Finally, I would just note that the Ohio Supreme Court has certified a
conflict between the Ninth and Tenth Districts 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?” See Bank of Am. v.
Kuchta, 135 Ohio St.3d 1430, 2013-Ohio-1857. Although not directly on point, the
outcome of this case will likely shed light on some of these issues.
MARY EILEEN KILBANE, J., DISSENTING:
{¶49} I respectfully dissent. I would find that defendant-appellant, Frank
Krawczyk, established each of the requirements for relief from judgment. Accordingly, I
would reverse and remand.
{¶50} In 1999, Frank Krawczyk entered into a mortgage agreement with Republic
Bank and signed an adjustable rate note in the amount of $202,500 payable to the order of
Republic Bank. On August 5, 2009, Chemical Bank filed a complaint for foreclosure,
alleging that it was the owner and holder of the promissory note following the assignment
and transfer of the note from Republic Bank. An unendorsed copy of the Republic Bank
note was appended to the complaint.
{¶51} In support of its motion for summary judgment, Chemical Bank attached a
copy of the unendorsed note, the July 29, 2009 assignment of the note, and an affidavit
from an officer of its mortgage servicing agent, PHH Mortgage Corporation, which
provided in relevant part as follows:
3. That the copies of the Promissory Note and Mortgage Deed attached
to Plaintiff’s Complaint are true and accurate copies of the original
instruments held by Plaintiff;
***
5. That * * * there is presently due and owing an unpaid principal
balance of $180,444.90, with interest thereon[.]
{¶52} Although the majority has determined that Krawczyk’s motion for relief
from judgment was an improper substitute for an untimely appeal, Civ.R. 60(B) is a
remedial measure and should be liberally construed. Colley v. Bazell, 64 Ohio St.2d 243,
248, 416 N.E.2d 605 (1980). Moreover, I would find that the three requirements for
relief under Civ.R. 60(B) and as set forth in GTE Automatic Elec. are met herein. Id., 47
Ohio St.2d 146, 351 N.E.2d 113, paragraph two of the syllabus.
{¶53} With regard to the first requirement, timeliness, Chemical Bank does not
challenge this aspect of the motion. As to the second requirement, grounds for relief
under Civ.R. 60(B)(1)-(5), a claim that a bank lacked standing to commence its
foreclosure action may be a basis for relief from judgment pursuant to Civ.R. 60(B)(5).
Wells Fargo Bank, N., 2d Dist. Champaign No. 2012CA0002, 2012-Ohio-3492, ¶ 18.
{¶54} As to the third requirement, a meritorious defense, Krawczyk argued that
Chemical Bank was not entitled to summary judgment because it did not demonstrate its
standing to obtain foreclosure. To properly support a motion for summary judgment in a
foreclosure action, the movant must show: (1) that it is the holder of the note and
mortgage, or is a party entitled to enforce the instrument under R.C. 1303.31(B); (2) if the
movant is not the original mortgagee, the chain of assignments and transfers; (3) the
mortgager is in default; (4) all conditions precedent have been met; and (5) the amount of
principal and interest due. Wachovia Bank, 5th Dist. Stark No. 2010-CA-00291,
2011-Ohio-3203. In that case, the court reversed an award of summary judgment where
the bank’s affiant did not establish her personal knowledge of the transaction; the affiant
identified the mortgage and the note as accurate copies of the originals, but did not
identify any other documents; and did not properly authenticate the documents submitted
to the court. Id. at ¶ 40-45.
{¶55} In this matter, the note was payable to Republic Bank and was never
endorsed to Chemical Bank or endorsed in blank, so it is undisputed that Chemical Bank
is not a holder of the instrument. As to whether Chemical Bank is a nonholder in
possession with the rights of a holder under R.C. 1303.22(A) and 1303.31, the majority
relies upon Deutsche Bank, 8th Dist. Cuyahoga No. 92916, 2010-Ohio-663. I find this
matter distinguishable from that case, insofar as in Deutsche Bank this court held:
An attempt to assign a note creates a claim to ownership, but does not
transfer the right to enforce the note. In re Wells (N.D.Ohio 2009), 407
B.R. 873.
In this case, an unendorsed copy of the note was offered. Therefore, the
note itself was insufficient to show that Deutsche Bank was a “holder” of
the note. However, the court could consider extrinsic evidence in the
record to determine whether Argent transferred the note to Deutsche Bank.
See F.D.I.C. v. Cutler (Conn.Super.,1997), 18 Conn.L.Rptr. 640, 1997
Conn.Super. LEXIS 126. Here the assignment of the note and mortgage to
Deutsche Bank, together with the servicing of the documents on behalf of
Deutsche Bank, demonstrated that Argent transferred and assigned to
Deutsche Bank all of its rights and privileges to the note. Also, Padilla
testified that Deutsche Bank was the holder of the note and mortgage.
Upon this record, the trial court could properly conclude that Deutsche
Bank was the holder of the note with the right to enforce payment thereon.
Id. at ¶ 21-22.
{¶56} Here, however, the plain language of the assignment did not transfer “all of
its rights and privileges” in the note to Chemical Bank, as was the case in Deutsche Bank.
In addition, Chemical Bank’s evidentiary materials did not establish that the affiant had
personal knowledge regarding the assignment of the note and mortgage, the affidavit did
not authenticate the assignment and did not indicate that Republic Bank transferred and
assigned to Chemical Bank all of its rights and privileges to the notes. Accord Wachovia
Bank, 5th Dist. Stark No. 2010-CA-00291, 2011-Ohio-3203 (averments in affidavit were
insufficient); First Union Natl. Bank v. Hufford, 146 Ohio App.3d 673, 2001-Ohio-2271,
767 N.E.2d 1206 (3d Dist.) (averments in affidavit were insufficient); U.S. Bank Natl.
Assoc. v. Perry, 8th Dist. Cuyahoga No. 94757, 2010-Ohio-6171 (averments in affidavit
were insufficient).
{¶57} I would conclude that Krawczyk established each of the requirements for
relief from judgment under Civ.R. 60(B).