With the crash of the housing market, courts have been flooded with foreclosure actions. These foreclosures ultimately result in lenders holding title to numerous properties that are vacant and vulnerable. The properties typically become vandalized and any value the properties possessed prior to foreclosure are reduced or negated in their entirety. This has spurned additional lawsuits against the lenders claiming that the vandalized properties constitute a public nuisance. Many of these lawsuits have been pursued by non-profit community development organizations.
In one such lawsuit, the Cleveland Housing Renewal Project (“CHRP”) filed a lawsuit against Wells Fargo alleging that Wells Fargo owned various foreclosed properties that were a public nuisance. CHRP requested that the court declare the properties a public nuisance under both statutory and common law authority and require Wells Fargo to abate the nuisance by bringing the properties up to applicable housing and building code. CHRP also sought to preclude Wells Fargo from the purchasing additional properties at foreclosure sales and the selling them without bringing the properties in compliance with housing and building codes.
The municipal housing court found that the properties were a public nuisance and ordered Wells Fargo to bring all properties up to the minimum code standards. The court further restricted Wells Fargo from selling the foreclosed properties for less than $40,000 without prior approval from the court.
After the issuance of the court’s decision, Wells Fargo filed an appeal arguing that the municipal housing court did not have jurisdiction over common law claims of public nuisance and that CHRP did not have standing to assert public nuisance claims because it did not suffer an injury different than that suffered by the general public.
In deciding whether the municipal housing court possessed jurisdiction over the claims in the first place, the Eighth District Court of Appeals held that statutory claims of public nuisance brought under R.C. 3767.41 are properly within the exclusive jurisdiction of the housing court. As to common law claims of public nuisance, the court held that as long as the claims do not exceed the monetary jurisdiction of the municipal, municipal housing courts possess jurisdiction to consider common law public nuisance claims. Thus, the appellate court found that the trial court had jurisdiction over both the statutory and the common law claims of public nuisance.
As to CHRP’s standing to bring the public nuisance claims, the court emphasized the general rule “that a private individual lacks standing to pursue a public nuisance.” As with most general rules, there is an exception wherein a private individual possess standing to pursue a public nuisance claim.
In order for a private individual to fall within the exception, he or she must demonstrate that he or she “suffered an injury or damage that was not incurred by the general public.” In other words, the injury suffered by the individual must be different that that suffered by the general public. The court held that to meet this standard the individual must demonstrate that the damage he or she incurred was different in kind rather than just different in degree to the injury suffered by the public.
Applying these principals to CHRP, the court found that CHRP lacked standing to assert the public nuisance claims. The court recognized that “the general public has an interest in ensuring that properties are maintained in a safe and habitable condition.” The court, however, held that more is required to establish standing on the part of individual citizens. Thus, the court stated that CHRP, as a private citizen, must establish an injury different than that suffered by the public at large in order to establish standing to assert the public nuisance claims.
The court proceeded to find that CHRP lacked standing because it had admitted in previous filings in the case that it did not “have a direct injury in fact” and that the injury suffered by CHRP was “not distinct from the injury to the public at large.” The court, therefore, overruled the housing court’s decision against Wells Fargo.
In practice, any lender faced with a public nuisance claim must be cognizant of the party who is bringing the claim. If the party is a private citizen, including non-profit community organizations, such party must allege and demonstrate that it has suffered an injury separate than that suffered by the public at large. It is not sufficient to demonstrate that the degree of the injury is different – the injury itself must be separate and distinct. Otherwise, the party pursing the public nuisance claim does not have standing to pursue the claim and the claims would be subject to dismissal.
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