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The Ohio Supreme Court “Forecloses” on Collateral Attacks to StandingPDF
Greg Brunton and Allison Thomas
Following the 2008 housing collapse, Ohio Appellate courts have considered whether a plaintiff bank is a “real party in interest” to a foreclosure action several times. Generally, a bank is a real party in interest if it is the original mortgagee or if it holds an interest by assignment. However, the issue is quickly complicated where, at the time a foreclosure action is filed, the bank is not a real party in interest.
This was the case in a recent Ohio Supreme Court decision, Bank of America, N.A. v. Kuchta, 141 Ohio St.3d 75 (Dec. 2014). In the underlying foreclosure action, Bank of America was not the real party in interest at the time it filed suit; indeed, Wells Fargo did not assign the mortgage to Bank of America until nine days after the complaint was filed.
Although the pro se defendants, George and Bridget Kutcha, raised an affirmative defense challenging the Bank’s standing in their answer, they did not respond to Bank of America’s motion for summary judgment and did not appeal the trial court’s granting of that motion. Instead, the Kutchas collaterally attacked Bank of America’s standing in a Rule 60(B) motion for relief from judgment. In response, Bank of America argued the Kutchas had waived their right to challenge standing.
The case reached the Ohio Supreme Court by way of the following certified conflict: 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? Addressing each of the Kutchas’ arguments in turn, the Court replied, “no.”
First, the Court considered the Kutchas’ argument that they were entitled to relief from judgment under Rule 60(b)(3), which allows relief from judgment where there is fraud, misrepresentation, or misconduct by the adverse party. The Kutchas argued Bank of America committed fraud when it brought the complaint because it was not the holder of the mortgage at the time. However, the Court disagreed. The Court acknowledged the Kutchas’ argument would have been a meritorious defense to Bank of America’s claims if timely raised, but Bank of America had not committed fraud.
Next, the Kutchas argued the lower court’s judgment was void because the trial court did not have subject matter jurisdiction since Bank of America did not have standing when the complaint was filed. The Kutchas relied on the well-established rule that a challenge to a court’s subject matter jurisdiction can be raised at any time and is never waived. However, the Court rejected this argument as well.
The Court held a plaintiff’s lack of standing does not necessarily deprive a court of subject matter jurisdiction. Rather, a court’s subject matter jurisdiction is simply the court’s inherent authority to hear a particular type of case, so Bank of America’s alleged lack of standing had no effect on the trial court’s subject matter jurisdiction to hear foreclosure cases generally. Thus, the Court concluded the trial court’s judgment was not void. In short, the majority found the Kutchas’ failure to appeal an adverse decision barred their ability to obtain relief through a post-judgment motion alleging lack of standing.
This decision highlights the growing reluctance of courts to set aside foreclosure entries and a trend for courts to bring finality to the foreclosure process. Do not hesitate to contact a member of the Commercial Litigation Practice Group if you have questions about the decision, would like a copy of it, or have a general foreclosure or appellate procedure law question.
This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.
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