The Ohio Court of Appeals, Tenth District, recently upheld the lower court's denial of a borrower's motions under Ohio Rules 60(B) and 12(B)(1) challenging a mortgage foreclosure action based on an allegedly improper assignment of the mortgage.
In so ruling, the Court held that: (1) borrower lacked standing to challenge the mortgage assignment as he was not a party to the assignment or the applicable Pooling and Servicing Agreement, was indisputably in default on his loan, and had suffered no injury as a result of the assignment; and (2) his 12(B)(1) motion to dismiss was not the proper method for challenging the mortgagee's standing to foreclose, as such a motion pertains to a court's subject matter jurisdiction and not to a party's standing.
A copy of the opinion is available at: http://www.sconet.state.oh.us/rod/docs/pdf/10/2013/2013-ohio-1636.pdf.
Several years after defendant borrower ("Borrower") obtained a home mortgage loan from a mortgage lender, the lender assigned the mortgage to plaintiff bank, as trustee of a pool of securitized mortgages ("Loan Owner"). Loan Owner subsequently filed a foreclosure action against Borrower after he defaulted on the loan, attaching various documents to the complaint including the relevant assignment of mortgage to Loan Owner. The assignment referenced a Pooling and Servicing Agreement ("PSA") that was dated a few months after the loan transaction.
Borrower failed to answer or otherwise respond to the foreclosure complaint. Accordingly, Loan Owner moved for default judgment, which the lower court granted. The court entered judgment for Loan Owner on the note and entered an order of foreclosure and sale. Borrower did not appeal the judgment or the order.
About two months before the scheduled foreclosure sale, Borrower filed a motion for relief from judgment under Ohio Civ.R. 60(B) ("60(B) motion"), seeking to vacate the default judgment and order of foreclosure. Borrower also filed a motion to stay the foreclosure sale, which the court granted.
The lower court subsequently granted Borrower's 60(B) motion, vacating the earlier judgment and order. However, Borrower then notified the court that he had failed to serve Loan Owner with his 60(B) motion. Loan Owner thus moved to set aside the order granting Borrower's 60(B) motion. The lower court granted Loan Owner's motion, and granted Loan Owner leave to file a response to the 60(B) motion. Borrower later filed a motion to dismiss Loan Owner's foreclosure complaint under Ohio Civ.R. 12(B)(1).
Without holding a hearing, the lower court ruled against Borrower on his 60(B) motion and on his 12(B)(1) motion to dismiss. Borrower appealed. The appellate court affirmed.
As you may recall, in order to prevail on a Ohio Civ.R. 60(B) motion, similar to an Fed. R. Civ. P. 60(b) motion, the moving party must demonstrate: (1) a meritorious defense or claim; (2) entitlement to relief under one of the grounds listed in 60(B), such as mistake or fraud; and (3) the timeliness of the motion. See Ohio Civ. R. 60(B); GTE Automatic Elec., Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146 (1976).
In addition, Ohio Civ.R. 12(B)(1) -- similar to Fed. R. Civ. P. 12(b)(1) -- provides for dismissal of a complaint for lack of subject matter jurisdiction. See Ohio Civ.R. 12(B)(1).
In rejecting Borrower's assertions that (1) he had a meritorious defense in that Loan Owner lacked standing because the assignment of the mortgage to Loan Owner was invalid, as it had allegedly been "robo-signed" and violated the terms of the PSA and (2) that a hearing on his 60(B) motion would have provided him the opportunity to challenge the foreclosure, the Appellate Court noted in part that as a non-party to the PSA, Borrower lacked standing to challenge the assignment under the terms of the PSA.
Additionally, relying on a prior decision reached after the lower court entered judgment in this case, the Appellate Court concluded that Borrower lacked standing to challenge the validity of the assignment of the mortgage because he was not a party to the assignment. See LSF6 Mercury REO Investments Trust Series 2008-1 c/o Vericrest Fin., Inc. v. Locke, 10th Dist. No. 11AP-757, 2012 Ohio-4499. See also Bank of New York Mellon Trust Co. v. Unger, 8th Dist. No. 97315, 2012-Ohio-1950; Bridge v. Aames Capital Corp., Case No. 1:09 CV 2947 (N.D. Ohio 2010).
In so ruling, the Appellate Court noted that there was no dispute between Loan Owner and the original lender as to whether the note and mortgage were properly assigned, and that Borrower was the only party challenging the assignment's validity. Further, stressing that the mortgage assignment did not alter Borrower's obligations under the note and mortgage, and that he was indisputably in default on his loan, the Appellate Court pointed out that Loan Owner filed the foreclosure action because of the default, not because of the mortgage assignment, and that Borrower had thus suffered no injury as a result of the assignment.
Moreover, Appellate Court held that Borrower's 60(B) motion alleged fraud of a type that should have been presented as a claim or defense in the underlying foreclosure action. See PNC Bank, N. A. v. Botts, 10th Dist. No. 12AP-256, 2012 Ohio-5383, ¶15 (explaining that "[t]he fraud or misconduct contemplated by Civ.R. 60(B)(3) is fraud or misconduct on the part of the adverse party in obtaining the judgment by preventing the losing party from fully and fairly presenting his defense, not fraud or misconduct which in itself would have amounted to a claim or defense in the case.") .
With respect to Borrower's contention that the trial court improperly denied his 12(B)(1) motion to dismiss the foreclosure complaint because Loan Owner failed to establish that it had standing to foreclose, the Appellate Court distinguished a party's standing from a court's subject matter jurisdiction, and observed that a plaintiff's lack of standing does not deprive a court of subject matter jurisdiction, as standing depends on party's personal stake in the outcome of litigation and subject matter jurisdiction concerns a court's power to hear a case on the merits. Thus, ruling that the Civ.R. 12(B)(1) motion was not the proper vehicle for challenging Loan Owner's standing, the Appellate Court affirmed on this basis as well.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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