Quantum Servicing Corp. v. Haugabrook , 2013 Ohio 3516 ( 2013 )

[Cite as Quantum Servicing Corp. v. Haugabrook, 2013-Ohio-3516.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
QUANTUM SERVICING CORP. C.A. No. 26542
Appellee
v. APPEAL FROM JUDGMENT
ENTERED IN THE
RUSSELL T. HAUGABROOK, JR., et al. COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellant CASE No. CV 09-01-0521
DECISION AND JOURNAL ENTRY
Dated: August 14, 2013
HENSAL, Judge.
{¶1} Appellant, Russell T. Haugabrook, Jr., appeals from the judgment of the Summit
County Court of Common Pleas. This Court reverses and remands this matter to the trial court
for the complaint to be dismissed.
I.
{¶2} On September 28, 2006, Haugabrook executed a promissory note for $328,500.00
in favor of Novastar Mortgage, Inc. for the property located at 480 Preserve Lane in Macedonia,
Ohio. The note was secured by a mortgage on the property in favor of Mortgage Electronic
Registration Systems, Inc. (“MERS”) as a nominee for Novastar.
{¶3} Quantum Servicing Corp. filed a complaint for foreclosure on January 21, 2009.
The complaint named as defendants Haugabrook, Jane Doe, the unknown spouse of Haugabrook,
and Roberto M. Gaines, who held a mortgage on the subject property in the amount of
$18,250.00. On March 3, 2009, Quantum filed a motion to substitute Real Estate Mortgage
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Network, Inc. (“REMN”) as the party plaintiff. Quantum attached an assignment to the motion
that demonstrated Quantum transferred the note and mortgage to REMN on February 10, 2009.
On March 4, 2009, the trial court granted Quantum’s motion to substitute. REMN subsequently
moved for default judgment against all the defendants after none of them filed a responsive
pleading to the complaint or otherwise appeared in the action. The trial court granted the motion
for default judgment and entered a decree of foreclosure on March 20, 2009. The property was
scheduled for sheriff’s sale several times, but stayed each time due to bankruptcy filings by
Haugabrook.
{¶4} On May 26, 2011, Haugabrook filed a motion to vacate the default judgment and
decree of foreclosure. Thereafter, on June 21, 2011, the case was again stayed due to
Haugabrook filing bankruptcy. On August 9, 2011, REMN assigned the note and mortgage to
Silar Distressed Real Estate Fund-I, LP. Silar obtained an order from the bankruptcy court
granting it relief from the automatic stay. On February 15, 2012, REMN filed a motion to
substitute Silar as the party plaintiff in the foreclosure action. The trial court granted REMN’s
motion on February 24, 2012. The trial court issued a judgment entry on June 12, 2012, that
denied Haugabrook’s motion to vacate.
{¶5} Haugabrook filed a timely notice of appeal, and sets forth one assignment of error
for this Court’s review.
II.
ASSIGNMENT OF ERROR I
THE TRIAL COURT ABUSED ITS DISCRETION IN NOT GRANTING
HOMEOWNER’S MOTION TO VACATE VOID JUDGMENT WHEN
FORECLOSING LENDER HAD NO STATUTORY RIGHT TO ENFORCE A
PROMISSORY NOTE AND THEREFORE BROUGHT A NON-JUSTICIABLE
CLAIM WHICH FAILED TO INVOKE THE COURT’S SUBJECT MATTER
JURISDICTION.
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{¶6} Haugabrook argues that the trial court erred in denying his motion to vacate as
neither Quantum nor Silar proved it was the legal holder of the promissory note. Because neither
entity could establish that it was either a holder or a non-holder in possession of the note,
according to Haugabrook, the trial court did not have subject matter jurisdiction over the matter
as the foreclosure claim was not justiciable.
{¶7} This Court first notes that both Silar and Haugabrook argue that the trial court’s
denial of the motion to vacate should be reviewed under an abuse of discretion standard.
However, because Haugabrook argues that Quantum did not have standing to file the foreclosure
complaint, and, therefore, that the trial court lacked jurisdiction over the matter, he presents a
legal question that this Court reviews de novo. Thomas v. Bldg. Dept. of Barberton, 9th Dist.
Summit No. 25628, 2011-Ohio-4493, ¶ 6. See also FirstMerit Bank v. Wood, 9th Dist. Lorain
No. 09CA009586, 2010-Ohio-1339, ¶ 5, quoting Eisel v. Austin, 9th Dist. Lorain No.
09CA009653, 2010-Ohio-816, ¶ 8 (“Challenges to a * * * court’s jurisdiction present [a]
question[ ] of law and are reviewed by this Court de novo.”)
{¶8} Civil Rule 17(A) provides that “[e]very action shall be prosecuted in the name of
the real party in interest.” The real party in interest in a foreclosure action “is the current holder
of the note and mortgage.” Wells Fargo Bank N.A. v. Horn, 9th Dist. Lorain No. 12CA010230,
2013-Ohio-2374, ¶ 10, quoting U.S. Bank, N.A. v. Richards, 189 Ohio App.3d 276, 2010-Ohio-
3981, ¶ 13 (9th Dist.). Rule 17(A) is not applicable, however, “‘unless the plaintiff has standing
to invoke the jurisdiction of the court in the first place.’” Horn at ¶ 10, quoting Wells Fargo
Bank, N.A. v. Jordan, 8th Dist. Cuyahoga No. 91675, 2009-Ohio-1092, ¶ 21. The issue of
standing does not challenge a court’s subject matter jurisdiction, which is defined as “a court’s
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power to hear and decide a case upon its merits.” Deutsche Bank Natl. Trust Co. v. Whiteman,
10th Dist. Franklin No. 12AP-536, 2013-Ohio-1636, ¶ 27, quoting JP Morgan Chase Bank, N.A.
v. Brown, 2d Dist. Montgomery Nos. 21853, 22359, 2008-Ohio-200, ¶ 42. See also BAC Home
Loans Servicing, L.P. v. Cromwell, 9th Dist. Summit No. 25755, 2011-Ohio-6413, ¶ 8.
{¶9} The Ohio Supreme Court recently stated that:
Whether a party has a sufficient stake in an otherwise justiciable 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.
(Internal quotations omitted.) Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13,
2012-Ohio-5017, ¶ 21, quoting Cleveland v. Shaker Hts., 30 Ohio St.3d 49, 51 (1987). Whether
the plaintiff has standing to bring the action is a jurisdictional matter that is determined at the
time of the filing of the complaint. Id. at ¶ 25. “[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.” Id. at ¶ 38. If a plaintiff lacks standing at the filing of the complaint, the matter must
be dismissed without prejudice. Id. at ¶ 40.
{¶10} In the present case, the trial court found that the “Plaintiff” had standing as the
real party in interest. It is unclear from the judgment entry whether the trial court found that
Quantum (as the original plaintiff) or Silar (as the current plaintiff) had standing. Because the
relevant inquiry is whether Quantum had standing at the time it filed its foreclosure complaint,
this Court will limit its inquiry to that question accordingly.
{¶11} Quantum attached to its foreclosure complaint: (1) the promissory note between
Haugabrook and Novastar, which does not include any indorsements; (2) the mortgage securing
the note with MERS as the nominee for Novastar listed as the mortgagee, (3) an assignment of
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the note and mortgage from MERS as the nominee for Novastar to Avelo Mortgage, L.L.C. and
(4) an affidavit of fact relating to title that was recorded on January 13, 2009, prior to the filing
of the complaint. The affidavit of fact relating to title is signed by Joe Caravetta, vice president
of Quantum, who averred that Avelo assigned the mortgage to Quantum, “but [that] the written
memorialization of that assignment was lost due to inadvertence and was never recorded in the
records of Summit County, Ohio.” He averred that he was unable to locate Avelo so as to obtain
another copy of the original assignment. Mr. Caravetta did not aver that Avelo assigned the note
to Quantum, although he stated in the affidavit that Quantum was “currently the actual holder of
the aforementioned Note and Mortgage.” While the affidavit stated that the subject note and
mortgage are attached to the document as exhibits, the copy of the affidavit attached to the
complaint does not include the attachments. The recording information on the affidavit indicates
that it is a 30-page document, but only the first four pages, which are comprised of the affidavit
and legal description, were provided when it was included as an exhibit to the complaint.
{¶12} Silar argues that Quantum was the holder of the note via a blank indorsement. It
acknowledges in its appellate brief that the copy of the note attached to the complaint did not
contain an indorsement. Silar maintains, however, that the trial court could take judicial notice
of the attachments to the affidavit of fact, which purports to include a copy of the note with a
blank indorsement. However, this Court need not determine whether the trial court could take
judicial notice of the affidavit of fact’s attendant attachments as there is no evidence from the
judgment entry denying Haugabrook’s motion to vacate that the trial court did so in the first
instance.
{¶13} Based on this Court’s review of the record, there is no evidence that Quantum had
standing to file its foreclosure complaint. While Quantum attached to the complaint an
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assignment of the note and mortgage from MERS as the nominee for Novastar to Avelo
Mortgage, L.L.C., there is no evidence in the trial court’s record that the note was ever indorsed
from Novastar to MERS or that MERS became a holder through proper assignment of a note
indorsed in blank. Therefore, the trial court erred in denying Haugabrook’s motion to vacate the
void judgment. In accordance with the Ohio Supreme Court’s decision in Schwartzwald, this
Court sustains Haugabrook’s assignment of error and orders the trial court to dismiss the
complaint without prejudice.
III.
{¶14} Haugabrook’s assignment of error is sustained. The judgment of the Summit
County Court of Common Pleas is reversed and the cause is remanded for further proceedings
consistent with this decision.
Judgment reversed,
and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
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Costs taxed to Appellee.
JENNIFER HENSAL
FOR THE COURT
BELFANCE, P. J.
CARR, J.
CONCUR.
APPEARANCES:
EDWARD F. HERMAN, Attorney at Law, for Appellant.
KIMBERLEE S. ROHR, Attorney at Law, for Appellee.