Page 32 - 2018 October Bar Journal

BarJournal REAL ESTATE LAW

JULY/AUGUST 2015
fEaTUrE Six years later: revisiting and distilling

Schwartzwald and its Progeny

Examining Creditors’ Standing in Foreclosure

Actions and Challenges Thereto

BY RICHARD J. SYKORA

hile not the most this meant that creditors were now required clarified Schwartzwald in Deutsche Bank
glamorous legal to submit evidence of their standing at the Natl. Trust Co. v. Holden, 2016-Ohio-4603.
concept, for creditors pleading stage. Further, if plaintiff did not In Holden, the Court held that an action for
c o m m e nc i n g have the requisite standing at complaint personal judgment against the promisor
w foreclosure actions, filing, any post-complaint remediation obligated on the promissory note is a
examining standing is fundamental. In 2012, efforts, pursuant to Civ.R.17(A), could not separate and distinct action from an action
the Ohio Supreme Court issued a landmark cure the litigant’s lack of standing. Thus, to enforce the mortgage lien. Reviewing the
decision with respect to foreclosure actions: post-Schwartzwald, Plaintiff’s status as the pertinent facts of Holden, plaintiff attached
Fed. Home Loan Mtge. Corp. v. Schwartzwald, holder of the promissory note and assignee copies of the promissory note, mortgage,
2012-Ohio-5017. The Court in Schwartzwald of the mortgage became a standard issue at and applicable assignments of mortgage
held that standing is a jurisdictional complaint filing. to its complaint. Due to the defendants’
requirement, and the ability to invoke the In 2015, the Ohio Supreme Court, in Wells discharge through bankruptcy, the plaintiff
jurisdiction of the court is to be determined Fargo Bank, N.A. v. Horn, 2015-Ohio-1484, was only able to proceed for foreclosure
at the outset of the suit. As a practical matter, clarified Schwartzwald. The Horn Court of the mortgage, and not for the personal
held that while standing is determined at judgment under the note. Plaintiff moved
the time the suit is commenced, plaintiff for, and the trial court granted summary
may supply proof of standing subsequent judgment to plaintiff. The trial court found
Niki Z. Schwartz to the initial filing. Under the facts of Horn, plaintiff was the holder of the note and
Wells Fargo Bank, N.A. attached a copy of
assignee of the mortgage, and thus had
Mediator/Arbitrator the promissory note endorsed in blank, and standing to foreclose the mortgage. On
a copy of the mortgage in favor of Norwest appeal, the Ninth District Court of Appeals
Mortgage. The borrower filed an answer held that only the current holder of both
contesting Wells Fargo’s standing. In support the note and the mortgage can bring the
of its summary judgment motion, Wells foreclosure action. The court concluded
Fargo included an affidavit, name change, that there was a genuine issue of material
and merger documents. The trial court issued fact regarding whether the plaintiff owned
judgment in favor of Wells Fargo. On appeal, the note when it commenced the action, thus
the Ninth District Court of Appeals reversed the trial court decision was reversed. Again
the trial court, holding that a foreclosing appealed, the Ohio Supreme Court noted that
plaintiff must attach evidence of standing an action for personal judgment on the note
to its complaint. Wells Fargo appealed the and an action to enforce mortgage covenants
Ninth District decision to the Ohio Supreme are separate and distinct remedies. As the
“If he can settle Court. Accepted on discretionary appeal, plaintiff established itself as the valid assignee,
and was only seeking to enforce the mortgage
the Court clarified that while standing is to
a prison riot, be determined as of the commencement of against the property, the Court determined
this precluded a dismissal for lack of standing
the suit, proof of standing may be submitted
he can settle subsequent thereto. For creditors, the Horn and reinstated the judgment of the trial court.
anything!” decision preserved the legal maxim of notice- Practically applying Holden, a creditor should
evidence entitlement to enforce the note or
pleading in Ohio. Further, it protected the
right of foreclosing plaintiffs to aver standing mortgage at the time of initial pleading in
at the pleading stage with supporting conjunction with the remedy it seeks. Pleading
216-696-7100 documents evidencing its right to enforce in this manner will preclude dismissal for lack
of standing.
nzs.adr@gmail.com the note and mortgage. Proof of standing, In Bank of Am., N.A. v. Kuchta, 2014-
however, can be provided prior to judgment.
In 2016, the Ohio Supreme Court further Ohio-4275, the Ohio Supreme Court
32 | Cleveland Metropolitan Bar Journal clemetrobar.org