HSBC Bank USA, Natl. Assn. v. Bailey , 2014 Ohio 246 ( 2014 )

[Cite as HSBC Bank USA, Natl. Assn. v. Bailey, 2014-Ohio-246.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
TRUMBULL COUNTY, OHIO
HSBC BANK USA, NATIONAL : OPINION
ASSOCIATION, AS TRUSTEE FOR
HOME EQUITY LOAN TRUST SERIES :
ACE2004-HE3, CASE NO. 2012-T-0086
:
Plaintiff-Appellee,
:
- vs -
:
BARBARA BAILEY, et al.,
:
Defendants,
:
VICTORIA GUNTHER,
:
Defendant-Appellant.
:
Civil Appeal from the Trumbull County Court of Common Pleas, Case No. 2007 CV
00905.
Judgment: Affirmed.
Scott A. King, Thompson Hine, LLP, Austin Landing 1, 10050 Innovation Drive, Suite
400, Dayton, OH 45342 and Anita L. Maddix, Cynthia M. Fischer and Elizabeth A.
Carullo, Lerner, Sampson & Rothfuss, L.P.A., 120 East Fourth Street, Suite 800, P.O.
Box 5480, Cincinnati, OH 45201 (For Plaintiff-Appellee).
Grace M. Doberdruk and Daniel M. Solar, Doberdruk & Harshman Law Office, 4600
Prospect Avenue, Cleveland, OH 44103 (For Defendant-Appellant, Victoria Gunther).
DIANE V. GRENDELL, J.
{¶1} Defendant-appellant, Victoria Gunther, appeals the judgment of the
Trumbull County Court of Common Pleas, denying her 60(B) Motion for Relief from
Judgment and Supplemental Motion to Vacate or Alternative Judgment [sic], seeking
relief from an Agreed Entry Granting Judgment and Decree in Foreclosure. The issue
before this court is whether a party is entitled to relief from a judgment of foreclosure,
where the motion for relief was not timely filed and was based on facts known to the
party prior to the entry of the judgment of foreclosure. For the following reasons, we
affirm the decision of the court below.
{¶2} On April 5, 2007, plaintiff-appellee, HSBC Bank USA, National
Association, filed a Complaint in Foreclosure against Barbara Bailey (mortgagor),
Victoria Gunther (titleholder of the subject property), the Trumbull County Treasurer,
and various John Doe defendants.
{¶3} According to an affidavit submitted by Gunther, Barbara Bailey died on
July 20, 2009.
{¶4} On July 28, 2009, an Agreed Entry Granting Judgment and Decree in
Foreclosure was issued by the trial court.
{¶5} On November 19, 2009, Gunther filed a Motion to Vacate Foreclosure
Sale.
{¶6} On July 27, 2010, the trial court denied Gunther’s Motion.
{¶7} On January 20, 2011, Gunther filed a 60(B) Motion for Relief from
Judgment.
{¶8} On February 7, 2011, Gunther filed a Supplemental Motion to Vacate or
Alternative Judgment.
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{¶9} On September 19, 2012, the trial court denied Gunther’s Motion for Relief
from Judgment.
{¶10} On October 18, 2012, Gunther filed a Notice of Appeal. On appeal,
Gunther raises the following assignment of error:
{¶11} “[1.] The trial court erred by denying appellant’s motion to vacate when
appellee lacked standing to obtain judgment.”
{¶12} “To prevail on a motion brought under Civ.R. 60(B), 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 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 Industries, Inc., 47 Ohio St.2d 146, 351 N.E.2d 113 (1976), paragraph two of the
syllabus.
{¶13} Gunther argues that she “has a meritorious defense to foreclosure
because Appellee HSBC did not have an interest in the note or her mortgage at the time
of filing the complaint and had no legal right to foreclose.” Appellant’s brief at 5.
{¶14} Gunther’s argument is barred by the doctrine of res judicata. Under the
doctrine of res judicata, “[a] valid, final judgment rendered upon the merits bars all
subsequent actions based upon any claim arising out of the transaction or occurrence
that was the subject matter of the previous action.” Grava v. Parkman Twp., 73 Ohio
St.3d 379, 653 N.E.2d 226 (1995), syllabus. “It has long been the law of Ohio that ‘an
existing final judgment or decree between the parties to litigation is conclusive as to all
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claims which were or might have been litigated in a first lawsuit.’” (Citation omitted.)
(Emphasis deleted.) Natl. Amusements, Inc. v. Springdale, 53 Ohio St.3d 60, 62, 558
N.E.2d 1178 (1990). The doctrine of res judicata applies to motions made pursuant to
Civil Rule 60(B). Coulson v. Coulson, 5 Ohio St.3d 12, 17, 448 N.E.2d 809 (1983).
{¶15} In the present case, HSBC Bank pled in its complaint that it was “the
holder and owner of a note,” and the “holder of a mortgage.” In her Answer, Gunther
disputed whether HSBC Bank was “the true and lawful owner/holder of the Promissory
Note * * * and Mortgage Deed,” raising the claim that it “lack[ed] standing to maintain
this action in foreclosure.” In response, HSBC Bank submitted evidence that it was
assigned the mortgage and promissory note on July 2, 2007, and that the assignment
was recorded with the Trumbull County Recorder on July 9, 2007.
{¶16} In the subsequent Agreed Entry Granting Foreclosure, the trial court found
that HSBC Bank was the holder of the note secured by the mortgage and ordered
Gunther’s equity of redemption foreclosed and the subject property sold at sheriff’s sale.
The July 28, 2009 Agreed Entry constituted a valid, final judgment on the merits of the
foreclosure. Gunther did not appeal this Entry. Under the doctrine of res judicata, she
is barred from raising the issue of HSBC Bank’s standing, as that claim has been raised
and settled. A Civil Rule 60(B) motion “may not be used as a substitute for a timely
appeal or to accommodate a party by extending the normal period for appeal.” Steadley
v. Montanya, 67 Ohio St.2d 297, 299, 423 N.E.2d 851 (1981); Doe v. Trumbull Cty.
Children Servs. Bd., 28 Ohio St.3d 128, 502 N.E.2d 605 (1986), paragraph two of the
syllabus; Wells Fargo Bank NA v. Arlington, 5th Dist. Delaware No. 13CAE30016, 2013-
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Ohio-4659, ¶ 41 (“Arlington’s time to appeal the issue of standing was through direct
appeal of the decree in foreclosure”).
{¶17} We note 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. Oral argument in Kuchta occurred on January 8, 2014.
{¶18} Assuming, arguendo, the Ohio Supreme Court were to answer the
certified question in the affirmative, the denial of Gunther’s Motion for Relief must still be
affirmed.
{¶19} As noted above, a Civil Rule 60(B) motion must be brought within a
reasonable time and/or within one year of the judgment sought to be vacated. In the
present case, the issue of HSBC Bank’s standing was litigated during the course of the
underlying foreclosure, during which the details of the assignment of the note and
mortgage to HSBC Bank became known. Gunther’s Motion for Relief was filed on
January 20, 2011, over a year after the July 28, 2009 Agreed Entry. Accordingly, the
Motion was not timely filed.
{¶20} Gunther counters that HSBC Bank’s lack of standing at the time the
Complaint was filed renders the Agreed Entry void ab initio, and, therefore, “this court
has inherent authority to vacate the judgment regardless of whether the requirements
under Civil Rule 60(B) are satisfied.” Appellant’s brief at 14. Gunther’s argument rests
on the supposition that a party’s lack of standing is the equivalent of a trial court lacking
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subject matter jurisdiction. See Patton v. Diemer, 35 Ohio St.3d 68, 518 N.E.2d 941(1988), paragraph three of the syllabus.
{¶21} Contrary to Gunther’s position, a party’s lack of standing at the time a
complaint is filed does not equate with the trial court’s lack of subject matter jurisdiction.
{¶22} The Ohio Supreme Court has recognized “a distinction between a court
that lacks subject-matter jurisdiction over a case and a court that improperly exercises
that subject-matter jurisdiction once conferred upon it.” Pratts v. Hurley, 102 Ohio St.3d
81, 2004-Ohio-1980, 806 N.E.2d 992, ¶ 10.
{¶23} “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. * * *
{¶24} The term “jurisdiction” is also used when referring to a court’s
exercise of its jurisdiction over a particular case. See State v.
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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 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.
Id. at ¶ 11-12.
{¶25} 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, 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 assigned
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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).
{¶26} The Tenth District Court of Appeals has explained the distinction by
analyzing a party’s lack of standing to initiate a lawsuit in the context of a case’s
justiciability:
{¶27} [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. * * * 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.
Deutsche Bank Natl. Trust Co. v. Finney, 10th Dist. Franklin Nos. 13AP-198 and 13AP-
373, 2013-Ohio-4884, ¶ 24.
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{¶28} 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 proceedings.” (Citation
omitted.) Schwartzwald at ¶ 22. 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.” Id. at ¶ 6.
{¶29} Gunther cites to this court’s decision in Fed. Home Loan Mtge. Corp. v.
Rufo, 11th Dist. Ashtabula No. 2012-A-0011, 2012-Ohio-5930, 983 N.E.2d 406, in
support of her position. This court, however, subsequently overruled Rufo with respect
to the jurisdictional issue. CitiMortgage, Inc. v. Oates, 11th Dist. Trumbull No. 2013-T-
0011, 2013-Ohio-5077, ¶ 19 (“it was incorrect to equate standing with subject matter
jurisdiction”). This court now acknowledges that “the sole similarity of standing and
subject matter jurisdiction is that the initial challenge to each requirement can be made
at any time while the underlying case is pending.” Id.{¶30} In the present matter, the underlying case is no longer pending. In order
to challenge the final judgment, it was necessary for Gunther to satisfy the timeliness
requirements of Civil Rule 60(B).
{¶31} The sole assignment of error is without merit.
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{¶32} For the foregoing reasons, the judgment of the Trumbull County Court of
Common Pleas, denying Gunther’s Motion for Relief, is affirmed. Costs to be taxed
against appellant.
TIMOTHY P. CANNON, P.J., concurs,
COLLEEN MARY O’TOOLE, J., dissents with a Dissenting Opinion.
________________________________
COLLEEN MARY O’TOOLE, J., dissents with a Dissenting Opinion.
{¶33} Because I believe the trial court’s judgment should be reversed and
remanded, I respectfully dissent.
{¶34} In her sole assignment of error, appellant argues that the trial court erred
in denying her motion because HSBC lacked standing to obtain judgment.
{¶35} HSBC asserts that the trial court did not err because appellant’s
supplemental motion is barred by res judicata, was an improper substitute for an
appeal, was untimely, and there was no “newly discovered evidence” to support a
Civ.R. 60(B)(2) motion. In addition, HSBC submitted two cases as supplemental
authority that it relied on during oral arguments, finding that courts had subject matter
jurisdiction to hear and decide original matters: Dwyer v. Thompson Twp. Volunteer Fire
Dept., 11th Dist. Geauga No. 1397, 1988 Ohio App. LEXIS 3643 (Sept. 9, 1988); and
Mantho v. Bd. of Liquor Control, 162 Ohio St. 37 (1954).
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{¶36} This writer notes, however, that neither supplemental case cited by HSBC
involved a mortgage foreclosure action, which is the subject of the instant matter.
Dwyer, a case from 1988, involved a position dismissal regarding a township volunteer
fire department and a board of trustees. Mantho, a case from 1954, involved the
issuance or renewal of liquor permits regarding the Board of Liquor Control.
{¶37} For the reasons that follow, this court should follow the Ohio Supreme
Court’s decision in Fed. Home Loan Mortg. Corp. v. Schwartzwald, 134 Ohio St.3d 13,
2012-Ohio-5017, involving a mortgage foreclosure action, and I agree with appellant
that HSBC lacked standing to obtain judgment.
{¶38} I agree with this court’s position in Fed. Home Loan Mtge. Corp. v. Rufo,
11th Dist. Ashtabula No. 2012-A-0011, 2012-Ohio-5930, ¶15-21, holding:
{¶39} “‘Subject matter jurisdiction is a court’s power to hear and decide a case
on the merits.’ Morrison v. Steiner, 32 Ohio St.2d 86 * * * (1972), paragraph one of the
syllabus. ‘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.’ Pratts v. Hurley, 102 Ohio St.3d 81, 2004-Ohio-1980, ¶11 * * *. When the trial
court lacks subject matter jurisdiction, its final judgment is void. Id. at ¶12.
{¶40} “In Ohio, courts of common pleas have subject matter jurisdiction over
justiciable matters. Ohio Constitution, Article IV, Section 4(B).
{¶41} “* * *
{¶42} “In the context of a mortgage foreclosure action, the mortgage holder must
establish an interest in the mortgage or promissory note in order to have standing to
invoke the jurisdiction of the common pleas court. * * * Schwartzwald, [supra], ¶28 * * *.
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{¶43} “Whether standing exists is a matter of law that is reviewed de novo.
Cuyahoga Cty. Bd. of Commrs. v. State, 112 Ohio St.3d 59, 2006-Ohio-6499, ¶23 * * *.
{¶44} “Standing is similar to the requirement in Civ.R. 17(A) that every action
‘shall be prosecuted in the name of the real party in interest.’ The real party in interest
is one who has a real interest in the subject matter of the litigation, and not merely an
interest in the action itself, i.e., ‘“one who is directly benefitted or injured by the outcome
of the case.”’ Midwest Business Capital v. RFS Pyramid Management, LLC, 11th Dist.
No. 2011-T-0030, 2011-Ohio-6214, ¶19, quoting Shealy v. Campbell, 20 Ohio St.3d 23,
24 * * * (1985). * * *
{¶45} “In contrast to standing, which is jurisdictional, Civ.R. 17(A) is considered
procedural and is waived if not specifically pled. Travelers Indemn. Co. v. R.L. Smith
Co., 11th Dist. No. 2000-L-014, 2001 Ohio App. LEXIS 1750, *8 (Apr. 13, 2001).”
(Emphasis sic.) (Parallel citations omitted.)
{¶46} In this case, the issue before us is whether HSBC was required to have
standing at the time it filed this action or whether its lack of standing was cured pursuant
to Civ.R. 17(A) by the assignment of the note and mortgage after the action was filed
but before final judgment was entered.
{¶47} As stated, the Ohio Supreme Court addressed the identical issue before
us in Schwartzwald, supra. In that case, the Court held that standing is required to
present a justiciable controversy and is a jurisdictional requirement. Id. at ¶21-22. The
Court held that since standing is required to invoke the trial court’s jurisdiction, standing
is determined as of the filing of the complaint. Id. at ¶24. The Court also held that a
mortgage holder cannot rely on events occurring after the complaint is filed to establish
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standing. Id. at ¶26. Thus, the plaintiff cannot rely on Civ.R. 17(A) to cure its lack of
standing by obtaining an interest in the subject of the litigation after the action is filed
and substituting itself as the real party in interest. Id. at ¶36. The Court further held that
when the evidence demonstrates the mortgage lender lacked standing when the
foreclosure action was filed, the action must be dismissed without prejudice. Id. at ¶40.
(Emphasis added.)
{¶48} Therefore, 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. Because HSBC
failed to establish that it held the note or mortgage before filing the complaint, it did not
have standing to bring this foreclosure action. Accordingly, the trial court erred in
denying appellant’s “Supplemental Motion to Vacate or Alternative Judgment,” as a
motion to vacate a void judgment need not comply with the requirements of Civ.R.
60(B). See Falk v. Wachs, 116 Ohio App.3d 716, 721 (9th Dist.1996). This writer
would order the trial court to dismiss the complaint without prejudice.
{¶49} For the foregoing reasons, I believe appellant’s sole assignment of error is
well-taken. Thus, I would reverse the trial court’s judgment and remand the matter for
further proceedings. I dissent.
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