Third Fed. S. & L. Assn. of Cleveland v. Rains , 2013 Ohio 4602 ( 2013 )

[Cite as Third Fed. S. & L. Assn. of Cleveland v. Rains, 2013-Ohio-4602.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 99650
THIRD FEDERAL SAVINGS & LOAN
ASSOCIATION OF CLEVELAND
PLAINTIFF-APPELLEE
vs.
JEAN BALDWIN RAINS, ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-742680
BEFORE: Kilbane, J., Rocco, P.J., and McCormack, J.
RELEASED AND JOURNALIZED: October 17, 2013
ATTORNEY FOR APPELLANTS
James R. Douglass
James R. Douglass Co., L.P.A.
4600 Prospect Avenue
Cleveland, Ohio 44103
ATTORNEYS FOR APPELLEE
Eric T. Deighton
Richard J. Feuerman
Carlisle, McNellie, Rini, Kramer & Ulrich
24755 Chagrin Boulevard, Suite 200
Cleveland, Ohio 44122
MARY EILEEN KILBANE, J.:
{¶1} Defendant-appellant, Jean Baldwin Rains (“Rains”), appeals the trial
court’s decision denying her motion to vacate void judgment. For the reasons set forth
below, we affirm.
{¶2} The instant appeal arises from a foreclosure complaint filed in December
2010 by plaintiff-appellee, Third Federal Savings and Loan Association of Cleveland
(“Third Federal”), against Rains. In the complaint, Third Federal alleged that it is the
owner and holder of two promissory notes (Note A and Note B) and two mortgages
executed by Rains, and that Rains is in default on both notes. Third Federal sought to
foreclose on the property and sought to recover the unpaid balance on Note A in the
amount of $209,748.34 and on Note B in the amount of $199,818.95. Copies of both
notes and mortgages were attached to the complaint. In response, Rains, pro se, filed an
answer and counterclaim. Rains’s counterclaim was dismissed in February 2011.
{¶3} The matter proceeded to an evidentiary hearing before a magistrate in June
2011. Third Federal then moved for summary judgment in July 2011. Rains filed a pro
se brief in opposition to the motion. In her brief in opposition, Rains argued that Third
Federal did not have standing to initiate the foreclosure action because Note A was
endorsed in blank.
{¶4} In August 2011, the magistrate granted summary judgment to Third Federal
and issued a decision with specific findings as to the rights and liabilities of the parties.
Rains did not file any objections to the magistrate’s decision. In September 2011, the
trial court adopted the magistrate’s order, granted Third Federal’s motion for summary
judgment, entered judgment for Third Federal in the amount of $209,748.34, and entered
an order of foreclosure.
{¶5} In October 2011, Rains appealed the trial court’s order of foreclosure in
Third Fed. S. & L. Assn. of Cleveland v. Rains, 8th Dist. Cuyahoga No. 97433 (“Rains
I”). This court granted her motion to stay the sheriff’s sale pending the appeal. In
February 2012, however, Rains filed a motion to voluntarily dismiss her appeal. We
granted her motion, and the appeal was dismissed.
{¶6} In June 2012, the foreclosed property was sold at sheriff’s sale pursuant to
the trial court’s September 2011 order of foreclosure. The same month, the trial court
issued a confirmation of sale, from which Rains appealed in Third Fed. S. & L. Assn. of
Cleveland v. Rains, 8th Dist. Cuyahoga No. 98592, 2012-Ohio-5708 (“Rains II”). In this
appeal, Rains argued that the trial court erred in entering a confirmation of sale based on
an earlier order of foreclosure that was not final and appealable. We found that “Rains’s
voluntary dismissal [of the prior appeal] prevented this court from addressing the issue
she now raises.” Id. at ¶ 9. We also noted that Rains’s failure to seek a stay has
rendered her appeal of the confirmation of sale moot because the property has been sold
and the deed has been recorded — the order of confirmation has been carried out to its
fullest extent. Id. at ¶ 13.
{¶7} Then in January 2013, Rains (through counsel) filed an “emergency motion
to vacate writ of possession and to vacate void judgment” and requested a hearing.
Rains asked the trial court to vacate the judgments it granted in September 2011 and
March 2012 confirming the sale of the property. Rains relying on Fed. Home Loan
Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214,
argued that Third Federal did not have standing at the time its complaint was filed. 1
Rains attached an affidavit in support of the motion, in which she averred that Third
Federal employees told her that Third Federal sold the mortgage to Fannie Mae in 2003
and since that time, Third Federal operated as the loan servicer for Fannie Mae. She
attached copies of printouts from Fannie Mae’s website. She further averred that, during
the hearing with the magistrate, Third Federal offered a verison of Note A that was
different from the one it attached to the complaint. This version “contained an
endorsement to a ‘blank line’ that [was] not present on the note attached to the
complaint.” As a result, Rains argued that Third Federal did not have standing to enforce
Note A, and thus, failed to invoke the jurisdiction of the trial court. The trial court
1 The Schwartzwald court reviewed whether “[i]n a mortgage foreclosure
action, the lack of standing or a real party interest defect can be cured by the
assignment of the mortgage prior to judgment.” Id., 134 Ohio St.3d at 17,
2012-Ohio-5017, 979 N.E.2d 1214, ¶ 19. In Schwartzwald, plaintiff-Federal Home
Loan conceded there was no evidence that it had suffered any injury at the time it
commenced this foreclosure action. The court concluded that 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. at ¶ 28. In
dismissing Federal Home Loan’s foreclosure action against the Schwartzwalds
without prejudice, the court stated: “It is fundamental that a party commencing
litigation must have standing to sue in order to present a justiciable controversy
and invoke the jurisdiction of the common pleas court. Civ.R. 17(A) does not
change this principle, and 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.
denied the motion, stating that Rains “failed to present sufficient grounds for relief from
judgment.”
{¶8} It is from this order that Rains now appeals, raising the following single
assignment of error for review.
Assignment of Error
The court erred when it denied [Rains’s] common law motion to vacate
judgment without hearing when the uncontroverted record demonstrates
that [Third Federal] was a servicer and not the party entitled to enforce the
subject note when suit was filed.
{¶9} In the sole assignment of error, Rains claims that Third Federal does not
have standing to enforce Note A. Just as in her motion to vacate, on appeal she states
that Third Federal employees told her that Third Federal sold the mortgage to Fannie Mae
in 2003 and since then, Third Federal has operated as the loan servicer for Fannie Mae.
As a result, she maintains that Third Federal lacked the ability to invoke the trial court’s
subject matter jurisdiction.
{¶10} In Bank of New York Mellon Trust Co., N.A., v. Hentley, 8th Dist. Cuyahoga
No. 99252, 2013-Ohio-3150, this court recently addressed a similar situation in which the
defendant filed the same “emergency motion to vacate writ of possession and to vacate
void judgment,” asserting that when the bank filed the action, it was not a real party in
interest, and therefore, the bank lacked the ability to invoke the trial court’s subject matter
jurisdiction. Id. at ¶ 17. The trial court denied the motion, and the defendant filed a
motion for reconsideration. The trial court also denied this motion, and the defendant
appealed. On appeal, we found that the documents the bank filed with the court showed
that at the time the bank filed the action it was the current “Note Holder.” Id. at ¶ 25.
{¶11} We relied on a previous decision from this court, CitiMortgage v. Patterson,
8th Dist. Cuyahoga No. 98360, 2012-Ohio-5894, 984 N.E.2d 392, ¶ 21-22, discretionary
appeal not allowed, 135 Ohio St.3d 1414, 2013-Ohio-1622, 986 N.E.2d 30, where we
held:
In our view, Schwartzwald * * * stands for the proposition that a party may
establish its interest in the suit, and therefore, have standing to invoke the
jurisdiction of the court when, at the time it files its complaint of
foreclosure, it either (1) has had a mortgage assigned or (2) is the holder of
the note.
***
Here, the record reflects that, unlike the plaintiffs in Schwartzwald * * *,
CitiMortgage was the holder of the note at the time it filed the foreclosure
action on September 20, 2006, based on CitiMortgage’s possession of the
bearer paper that secured the defendants’ mortgage. * * * As a holder,
CitiMortgage was entitled to enforce the note, and thereby had a real
interest in the subject matter of the instant foreclosure action. See R.C.
1303.31(A)(1).
{¶12} The facts in the instant case necessitate the same result. 2 Here, Third
Federal demonstrated it was the “real party in interest” at the time it filed the complaint
2We note that Rains could have challenged standing when she filed her first
appeal in Rains I, but she voluntarily dismissed her appeal. The property was
then sold at sheriff’s sale and the trial court issued a confirmation of sale. Rains
appealed the confirmation order in Rains II. In this appeal, Rains argued that the
trial court erred in entering a confirmation of sale based on an earlier order of
foreclosure that was not final and appealable. We found that “Rains’s voluntary
dismissal [of the prior appeal] prevented this court from addressing the issue she
now raises.” Id. at ¶ 9. We also noted that Rains’s failure to seek a stay has
rendered her appeal of the confirmation of sale moot because the property has been
when it attached an unendorsed copy of Note A made payable to Third Federal. This
demonstrates that at the time Third Federal filed the action it was the current note holder.
{¶13} Moreover, Third Federal continued to have standing, even if we were to
consider the“endorsed in blank” version of Note A Rains attached to her brief in
opposition to summary judgment and her motion to vacate a void judgment. Under R.C.
1303.25(B), when an instrument is endorsed in blank, the instrument becomes payable to
the bearer and may be negotiated by transfer of possession alone. 3 The affidavit of
James Adamcik, legal analyst for Third Federal, that was attached to its motion for
summary judgment establishes that Third Federal is and was, prior to the filing of its
complaint, in possession of both Notes A and B.
{¶14} Based on the foregoing, Third Federal lawfully invoked the trial court’s
jurisdiction. Therefore, the trial court properly denied Rains’s motion to vacate a void
judgment. See Hentley, 8th Dist. Cuyahoga No. 99252, 2013-Ohio-3150, at ¶ 26, citing
Deutsche Bank Natl. Trust Co. v. Ingle, 8th Dist. Cuyahoga No. 92487, 2009-Ohio-3886,
¶ 18; United States Bank N.A. v. Higgins, 2d Dist. Montgomery No. 24963,
sold and the deed has been recorded — the order of confirmation has been carried
out to its fullest extent. Id. at ¶ 13. Notably, she did not argue that Third Federal
lacked standing even though she had argued it in her brief in opposition to Third
Federal’s motion for summary judgment.
3Pursuant to R.C. 1303.25(B) a “‘[b]lank indorsement’ means an instrument
that is made by the holder of the instrument and that is not a special indorsement.
When an instrument is indorsed in blank, the instrument becomes payable to
bearer and may be negotiated by transfer of possession alone until specially
indorsed.”
2012-Ohio-4086, ¶ 21; Deutsche Bank Natl. Trust Co. v. Doucet, 10th Dist. Franklin No.
07AP-453, 2008-Ohio-589, ¶ 11-12.
{¶15} Accordingly, the sole assignment of error is overruled.
{¶16} Judgment is affirmed.
It is ordered that appellee recover from appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court 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.
MARY EILEEN KILBANE, JUDGE
KENNETH A. ROCCO, P.J., and
TIM McCORMACK, J., CONCUR