Ohio Supremes: Standing-Lacking Lender Has No Authority To Foreclose; Status Cannot Be Remedied Post-Filing; Suit Requires Dismissal, But Not A Judgment On The Merits

In Columbus, Ohio, Court News Ohio reports:

• The Supreme Court of Ohio ruled [Wednesday] that a party’s standing to initiate a mortgage foreclosure lawsuit is determined on the date the complaint is filed in court, and a party that lacked standing at the time a suit was filed cannot remedy that defect by receiving assignment of a mortgage and promissory note after the filing of the foreclosure action but prior to the entry of judgment.
  
  Applying that analysis to a Greene County case, the court dismissed a decree of foreclosure granted to the Federal Home Loan Mortgage Corporation (FHLMA) against the home of Duane and Julie Schwartzwald of Xenia because FHLMA did not have standing as an actual party in interest at the time it filed the foreclosure action.
  
  The court’s 7-0 decision, authored by Justice Terrence O’Donnell, reversed a decision of the Second District Court of Appeals.

***

• Writing for a unanimous court in [Wednesday]’s decision, Justice O’Donnell explained that in order to invoke the jurisdiction of a trial court, a party initiating a lawsuit must have “in an individual or representative capacity, some real interest in the subject matter of the action.”
  
  Justice O’Donnell wrote: “We recognized that standing is a ‘jurisdictional requirement’ in State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, (1973), and we stated: ‘It is an elementary concept of law that a party lacks standing to invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the subject matter of the action.’ ... And recently, in Kincaid v. Erie Ins. Co., (2010), we affirmed the dismissal of a complaint for lack of standing when it had been filed before the claimant had suffered any injury.”
  
  Citing the U.S. Supreme Court’s 1992 holding in Lujan v. Defenders of Wildlife that “standing is to be determined as of the commencement of suit,” and state court decisions supporting that same conclusion from Oklahoma, Vermont, Maine, Connecticut, Florida, Mississippi, and Nebraska,(1) Justice O’Donnell pointed out that in this case “Federal Home Loan concedes that there is no evidence that it had suffered any injury at the time it commenced this foreclosure action. Thus, 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.”
  
  The justices rejected the Second District’s finding that FHLMA’s lack of initial standing to sue had been remedied by the assignment of the Schwartzwald’s mortgage and promissory note from Wells Fargo to FHLMA after the foreclosure action had been filed.
  
  Justice O’Donnell wrote that Ohio Civil Rule 17(A) allows an authorized representative of a real party in interest, such as the executor or administrator of an estate, the trustee of a trust, or a party with a shared contractual interest in disputed property to initiate a lawsuit on behalf of the real party in interest, but does not “allow a party with no personal stake in a controversy to file a claim on behalf of a third party, obtain the cause of action by assignment, and then have the assignment relate back to commencement of the action.”
  
  Noting that its dismissal of FHLMA’s April 2009 complaint based on lack of standing was not a judgment on the merits of the case, and did not preclude the pursuit of a future foreclosure action, the court concluded: “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.”
  
  “Here, it is undisputed that Federal Home Loan did not have standing at the time it commenced this foreclosure action, and therefore it failed to invoke the jurisdiction of the court of common pleas. Accordingly, the judgment of the court of appeals is reversed and the cause is dismissed.”

For the story, see Supreme Court Holds Foreclosure Action Void If Party Filing Suit Did So Before Becoming Actual Party in Interest (Assignment of Note After Suit Filed Does Not Cure Lack of Standing).

For the ruling, see Fed. Home Loan Mtge. Corp. v. Schwartzwald, Slip Opinion No. 2012-Ohio-5017 (Ohio October 31, 2012).

See also, The Columbus Dispatch: High court limits foreclosure filings (Ohio justices rule lender must have paperwork in order, in its possession before taking a home).

(1) For the cases:

• Oklahoma: Deutsche Bank Natl. Trust v. Brumbaugh, 2012 OK 3, 270 P.3d 151 (Ok. 2012);
• Vermont: U.S.Bank Natl. Assn. v. Kimball, 190 Vt. 210, 2011 VT 81, 27 A.3d 1087 (Vt. 2011);
• Maine: Mtge. Electronic Registration Sys., Inc. v. Saunders, 2010 ME 79, 2 A.3d 287 (Me. 2010);
• Connecticut: RMS Residential Properties, L.L.C. v. Miller, 303 Conn. 224, 229, 232, 32 A.3d 309 (Conn. 2011);
• Florida: McLean v. JP Morgan Chase Bank Natl. Assn., 79 So.3d 170 (Fla.App. 4th DCA, 2012);
• Mississippi: Burley v. Douglas, 26 So.3d 1013 (Miss.2009); and
• Nebraska: In re 2007 Administration of Appropriations of Water of the Niobrara, 278 Neb. 137, 768 N.W.2d 420 (Neb. 2009).