[Cite as Self Help Ventures Fund v. Jones,

.]

IN THE COURT OF APPEALS

ELEVENTH APPELLATE DISTRICT

ASHTABULA COUNTY, OHIO

SELF HELP VENTURES FUND, : OPINION

Plaintiff-Appellee, : CASE NO. 2012-A-0014 - vs - :

LOIS J. JONES, et al., :

Defendant-Appellant. :

Civil Appeal from the Ashtabula County Court of Common Pleas, Case No. 2010 CV 00521.

Judgment: Reversed and remanded.

Nicholas D. Donnermeyer and Kimberlee S. Rohr, Lerner, Sampson & Rothfuss, 120 East Fourth Street, Suite 800, Cincinnati, OH 45201-5480 (For Plaintiff-Appellee).

Anne M. Reese, Legal Aid Society of Cleveland, 121 East Walnut Street, Jefferson, OH 44047, and Philip D. Althouse, Legal Aid Society of Cleveland, 1530 West River Road, Suite 301, Elyria, OH 44035 (For Defendant-Appellant).

CYNTHIA WESTCOTT RICE, J.

{¶1} Appellant, Lois J. Jones, appeals the summary judgment of foreclosure

entered in favor of Appellee, Self Help Ventures Fund (“Self Help”), by the Ashtabula

County Court of Common Pleas. At issue is whether Self Help’s lack of standing when

it filed this mortgage foreclosure action could be cured by the assignment of the

mortgage and promissory note to it prior to the entry of final judgment. For the reasons that follow, the trial court’s judgment is reversed, and this matter is remanded for the

trial court to dismiss the complaint without prejudice.

{¶2} On June 26, 2007, appellant purchased a home in Conneaut, Ohio.

Appellant applied for and received a residential home loan from Sky Bank in the amount

of $61,100. In return for the loan, appellant executed a promissory note in that amount

in favor of Sky Bank. In order to secure the loan, appellant executed a mortgage in

favor of Sky Bank. Later in 2007, Sky Bank merged into Huntington National Bank.

{¶3} Subsequently, appellant defaulted on the note, and the amount owed was

accelerated. On May 10, 2010, Self Help filed this action against appellant. Self Help

alleged it was the holder of the note on which appellant defaulted. Self Help attached

copies of the note and mortgage to the complaint; however, both instruments showed

Sky Bank, rather than Self Help, as the creditor.

{¶4} Some two months later, on June 30, 2010, Huntington National Bank, as

“successor by merger to Sky Bank,” assigned the note and mortgage to Self Help.

{¶5} On August 9, 2010, appellant filed an answer denying the material

allegations of the complaint and asserting various affirmative defenses, including Self

Help’s alleged lack of standing.

{¶6} On December 29, 2010, Self Help filed a motion for summary judgment

against appellant. In support of said motion, Self Help filed the June 30, 2010

assignment of the note and mortgage from Huntington to Self Help.

{¶7} In further support of its summary-judgment motion, Self Help filed the

affidavit of Dawn Adams, an officer of Self Help’s servicing agent. Ms. Adams stated

that Self Help is the holder of the instant promissory note and mortgage as a result of

the foregoing assignment from Huntington to Self Help. She stated that appellant is in

2 default on the note and mortgage and that the amount owed on the account had been

accelerated, making the entire balance of $59,653.80 due. Ms. Adams authenticated

the note and mortgage.

{¶8} In further support of its motion for summary judgment, Self Help filed the

Sky Bank/Huntington merger documents demonstrating that in 2007 Sky Bank merged

into Huntington National Bank.

{¶9} Appellant filed a brief in opposition to Self Help’s motion for summary

judgment and a cross motion for summary judgment, arguing that Self Help lacked

standing. However, appellant did not dispute she defaulted on the note.

{¶10} On March 7, 2012, the trial court entered summary judgment and a decree

in foreclosure against appellant, implicitly finding that Self Help had standing.

{¶11} A sheriff’s sale was scheduled for July 18, 2012. On June 27, 2012,

appellant filed a motion to stay execution of the order of sale pending appeal, which the

trial court granted.

{¶12} Appellant now appeals, asserting two assignments of error. For her first

assigned error, appellant alleges:

{¶13} “The trial court erred as a matter of law by granting Summary Judgment to

the Appellee where the Appellee had no ownership interest in the note or the mortgage

on the date the Complaint was filed, which is a fatal standing defect that cannot be

cured by subsequent assignment of the note and mortgage.”

{¶14} “Subject matter jurisdiction is a court’s power to hear and decide a case

on the merits * * *.” Morrison v. Steiner,

(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

3 time.” Pratts v. Hurley,

,

, ¶11. When the trial court

lacks subject-matter jurisdiction, its final judgment is void. Id. at ¶12.

{¶15} In Ohio, courts of common pleas have subject-matter jurisdiction over

justiciable matters. Ohio Constitution, Article IV, Section 4(B).

{¶16} “Standing to sue is part of the common sense understanding of what it

takes to make a justiciable case.” Steel Co. v. Citizens for a Better Environment,

(1998). Standing involves a determination of whether a party has alleged

a personal stake in the outcome of the controversy to ensure the dispute will be

presented in an adversarial context. Mortgage Elec. Registration Sys. v. Petry, 11th

Dist. No. 2008-P-0016,

. A personal stake requires an injury to the

plaintiff.

The Supreme Court of Ohio has held that standing is jurisdictional in

nature. State ex rel. Dallman v. Franklin Cty. Court of Common Pleas,

(1973).

{¶17} 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. Fed. Home Loan Mortg. Corp. v.

Schwartzwald,

,

.

{¶18} Whether standing exists is a matter of law that is reviewed de novo.

Cuyahoga Cty. Bd. of Commrs. v. State,

,

, ¶23.

{¶19} 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.

4 No. 2011-T-0030,

, ¶19, quoting Shealy v. Campbell,

(1985). Where the action has not been initiated by the real party in interest, Civ.R.

17(A) provides that no action shall be dismissed on the ground that it is not prosecuted

in the name of the real party in interest until a reasonable time has been allowed after

objection for joinder or substitution of the real party in interest. Civ.R. 17 allows a

representative of the real party in interest to file an action and to later be substituted by

the real party in interest as long as the representative plaintiff also had standing in his

own right to file the action. Schwarzwald, supra, at ¶37-44. The real-party-in-interest

rule concerns only proper party joinder, not standing. Id. at ¶33.

{¶20} 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,

, *8 (Apr. 13, 2001).

{¶21} Under her first assigned error, appellant argues that because Self Help did

not hold the note or mortgage when it filed the complaint, it lacked standing, and this

defect could not be cured after the complaint was filed. She thus argues that standing

is jurisdictional and could not be acquired after the complaint was filed.

{¶22} In contrast, Self Help argues that, although it did not hold the note or

mortgage when it filed its complaint, it acquired standing when it became the holder of

these instruments after the complaint was filed. It therefore argues that standing is not

jurisdictional and could be acquired before the entry of final judgment.

{¶23} Thus, the issue before us is whether Self Help was required to have

standing at the time it filed this action or whether its lack of standing was cured by the

assignment of the mortgage and note to it after the action was filed but before final

judgment was entered.

5 {¶24} The Supreme Court of Ohio recently addressed the identical issue before

us in

In Schwartzwald, the Supreme Court held that standing is

required to present a justiciable controversy and is a jurisdictional requirement. Id. at

¶21-22. The Court held that, because standing is required to invoke the trial court’s

jurisdiction, standing is determined as of the filing of the complaint. Id. at ¶24. Further,

the Court held that a mortgage holder cannot rely on events occurring after the

complaint is filed to establish 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. Finally, the Court 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.

{¶25} This court followed the Supreme Court’s holding in

in Federal Home Loan Mortgage Corp. v. Rufo, 11th Dist. No. 2012-A-0011, 2012-Ohio-

5930, ¶44, and overruled this court’s prior holding in, inter alia, Everhome Mortg. Co. v.

Behrens, 11th Dist. No. 2011-L-128,

, ¶12, 16, that standing is not

jurisdictional.

{¶26} Thus, pursuant to Schwartzwald, standing is jurisdictional. As a result,

Self Help was required to establish an interest in the note or mortgage when it filed this

action in order to have standing to invoke the jurisdiction of the trial court.

{¶27} We therefore hold that, pursuant to

and Rufo, supra,

because Self Help did not hold the note or mortgage when it filed the complaint, it did

not have standing to bring this foreclosure action against appellant. As a result, the trial

court erred in granting summary judgment in favor of Self Help because it was not

6 entitled to judgment as a matter of law. We sustain appellant’s first assignment of error,

reverse the court’s summary judgment in favor of Self Help, and order the trial court to

dismiss the complaint without prejudice.

{¶28} For her second assignment of error, appellant alleges:

{¶29} “The trial court erred to the prejudice of the Appellant by granting

Summary Judgment where the Appellee failed to sustain its burden to prove that it had

standing to sue by providing evidence that it had both (1) possession of an indorsed

note and (2) ownership of the mortgage on the date the Complaint was filed.”

{¶30} Having sustained appellant’s first assignment of error, we find her second

assigned error to be moot. However, a court may rule on an otherwise moot case

“where the issues raised are ‘capable of repetition, yet evading review.’” State ex rel.

Beacon Journal Publishing Co. v. Donaldson,

(1992), quoting

State ex rel. Plain Dealer Publishing Co. v. Barnes,

(1988),

paragraph one of the syllabus. Because the issues raised by appellant’s second

assignment of error are likely to be reasserted on the re-filing of this action, we shall

address them.

{¶31} First, appellant argues that in order to have standing to sue on the note in

this case, Self Help was required to prove it was the holder of the note by negotiation,

pursuant to R.C. 1303.31. Without citing any authority in support, she argues a note

cannot be transferred by assignment, as it was in this case. We do not agree.

{¶32} R.C. 1303.31(A) identifies three classes of persons who are “entitled to

enforce” an instrument, such as a note. As pertinent here, they include: (1) the “holder”

of the note, and (2) a “nonholder” in possession of the note who has the rights of a

holder.

7 {¶33} A “holder” is a person in possession of a note that is payable either to

bearer or to an identified person. R.C. 1301.01(T)(1), renumbered June 29, 2011 as

R.C. 1301.201(B)(21).

{¶34} “An instrument is transferred when it is delivered * * * for the purpose of

giving to the person receiving delivery the right to enforce the instrument.” R.C.

1303.22(A). The transfer of an instrument vests in the transferee any right of the

transferor to enforce the instrument. R.C. 1303.22(B).

{¶35} “Negotiation” is a particular type of transfer. “Negotiation” means “a * * *

transfer of possession of an instrument * * * to a person who by the transfer becomes

the holder of the instrument.” R.C. 1303.21(A). “[I]f an instrument is payable to an

identified person, negotiation requires transfer of possession of the instrument and its

indorsement by the holder. If an instrument is payable to bearer, it may be negotiated

by transfer of possession alone.” R.C. 1303.21(B). Thus, in order for a person to

become a “holder” of a note, it must have been transferred to him by negotiation.

{¶36} Further, “[t]ransfer of an instrument, whether or not the transfer is a

negotiation, vests in the transferee any right of the transferor to enforce the instrument.”

(Emphasis added.) R.C. 1303.22(B). Thus, contrary to appellant’s argument, a note

can be transferred by a method other than negotiation.

{¶37} A “nonholder” is one in possession of the instrument who acquired it by

some method of transfer other than negotiation. Official Comment 2 to R.C. 1303.22. A

nonholder is entitled to enforce the instrument if the transferor was a holder at the time

of transfer.

Although the transferee is not a “holder,” he has the rights of the

transferor as holder pursuant to R.C. 1303.22(B).

8 {¶38} In this case, the note attached to the complaint is payable to an identified

entity, Sky Bank. Thus, only Sky Bank could have negotiated the subject note by

transferring the note and endorsing it to a specific person or to “bearer.”

{¶39} However, Huntington, which acquired the note and mortgage from Sky

Bank by way of merger, transferred both instruments by assignment to Self Help. Ohio

Appellate Districts have repeatedly held that a note can be transferred by assignment.

For example, in Bank of New York v. Dobbs, 5th Dist. No. 2009-CA-000002, 2009-Ohio-

4742, the Fifth District held that the assignment of a mortgage, without an express

transfer of the note, is sufficient to transfer both the mortgage and the note, if the record

indicates that the parties intended to transfer both. Id. at ¶31. This court cited Dobbs

with approval and followed its holding in Rufo, supra, at ¶44.

{¶40} Further, in Deutsche Bank Nat’l Trust Co. v. Gardner, 8th Dist. No. 92916,

, the Eighth District held that, while the unendorsed note was insufficient

to show that the transferee was a “holder” of the note, the assignment of the note and

mortgage to the transferee demonstrated that the transferor transferred and assigned to

the transferee all of its rights to the note. Id. at ¶22. The Eighth District further held that

in these circumstances, the trial court could find that the transferee had the rights of a

holder of the note with the right to enforce payment thereon. Id. Additionally, in United

States Bank, N.A. v. Higgins, 2d Dist. No. 24963,

, the Second District

held that the assignment of the mortgage, in circumstances indicating the transferor

intended to transfer the note with the mortgage, was sufficient to demonstrate that the

transferee had the rights of a holder of the note. Id. at ¶22.

9 {¶41} In light of the foregoing authority, we conclude that the assignment at

issue here was effective to transfer the note from Huntington to Self Help and that Self

Help has the rights of a holder with the right to enforce the note.

{¶42} Second, appellant argues that the Huntington/Sky Bank merger

documents could not be considered on summary judgment because they were not

authenticated as required by Civ.R 56(C). The merger documents are pertinent to the

issue of whether Huntington, as successor by merger to Sky Bank, acquired the

mortgage from Sky Bank and was authorized to assign it to Self Help. Self Help

conceded below that the merger documents were not authenticated, and simply argued

it was not required to authenticate them on summary judgment. However, pursuant to

Civ.R. 56(C), Self Help is incorrect. Because the merger documents were not

authenticated, they could not be considered on summary judgment.

{¶43} For the reasons stated in this opinion, it is the judgment and order of this

court that the judgment of the Ashtabula County Court of Common Pleas is reversed,

and this matter is remanded for the trial court to dismiss this action without prejudice.

TIMOTHY P. CANNON, P.J., concurs,

DIANE V. GRENDELL, J., dissents with a Dissenting Opinion.

______________

DIANE V. GRENDELL, J., dissents with a Dissenting Opinion.

{¶44} I dissent from the majority’s opinion, reversing the trial court’s decision,

which entered judgment in favor of the plaintiff, Self Help Ventures. Since a plaintiff

who becomes a holder of a note or mortgage after the filing of a complaint should be

10 given the opportunity to cure deficiencies related to standing, dismissal of Self Help’s

Complaint in this matter is unwarranted.

{¶45} The majority correctly cites to the Ohio Supreme Court’s decision in Fed.

Home Loan Mtge. Corp. v. Schwartzwald,

,

,

, for the proposition that a plaintiff in a foreclosure action must hold the

mortgage or note at the time of the filing of the complaint and not obtain the mortgage

during the course of the proceedings. However, I disagree with the conclusion that the

standing issues related to such matters are not curable during the course of the

proceedings, prior to the entry of final judgment.

{¶46} Under the application of Schwartzwald, the inability to cure the standing

deficiency creates various problems and obstacles for both plaintiffs and the court

system. Such a holding is contrary to the interests of judicial economy and efficiency.

The importance of judicial economy has been recognized by the courts in various

contexts. See Painesville City Local Schools Bd. of Edn. v. Ohio Assn. of Pub. School

Emps., 11th Dist. No. 2005-L-100,

(noting the importance of

speedy resolutions to conflicts to foster judicial economy by “unburdening crowded court

dockets”) (citation omitted); F.O.E., Inc. v. Energex Oil & Gas Corp., 4th Dist. No. 86 CA

19,

, *6 (Sept. 29, 1987) (emphasizing that certain civil

rules serve the purposes of “convenience * * * speed, and judicial economy”). Under

Schwartzwald, a case must be dismissed without prejudice when a plaintiff does not

have standing at the time the action was filed, but becomes the holder of the note or

mortgage at a future time during the course of the proceedings. This conclusion

requires the refiling of the complaint and new responsive filings as well, all of which

require additional consideration by the court, thereby creating an ineffective use of court

11 resources. This process will further extend the amount of time required to resolve the

underlying foreclosure action and prohibits the administration of timely justice for all

involved parties.

{¶47} The better course for dealing with scenarios in which the plaintiff becomes

a holder of the note and mortgage after the filing of a complaint was that followed by the

Ohio Supreme Court in State ex rel. Jones v. Suster,

,

(1998). In that case, the court stated the following: “Although a court may have

subject matter jurisdiction over an action, if a claim is asserted by one who is not the

real party in interest, then the party lacks standing to prosecute the action. The lack of

standing may be cured by substituting the proper party so that a court otherwise having

subject matter jurisdiction may proceed to adjudicate the matter.”

, citing Civ.R.

17 (“[n]o action shall be dismissed on the ground that it is not prosecuted in the name of

the real party in interest until a reasonable time has been allowed after objection for

ratification of commencement of the action by, or joinder or substitution of, the real party

in interest). In applying Civ.R. 17, it has been noted that curing deficiencies during the

course of proceedings is a favorable way to remedy the failure to properly determine the

issue of interest in litigation prior to the filing of a complaint. See Kinder v. Zuzak, 11th

Dist. No. 2008-L-167,

, ¶ 21 (giving a plaintiff a reasonable opportunity

to cure a deficiency by stating the proper parties in interest has “‘the same effect as if

the action had been commenced in the name of the real party in interest’”) (citation

omitted).

{¶48} Although Civ.R. 17 addresses real parties in interest, it has been applied

in the past as justification for allowing standing to be cured during the course of the

litigation as well.

(noting that a “[l]ack of standing challenges the capacity

12 of a party to bring an action, not the subject matter jurisdiction of the court”); Travelers

Indemn. Co. v. R. L. Smith Co., 11th Dist. No. 2000-L-014,

,

*7 (Apr. 13, 2001) (if a party lacks standing, the action should not be dismissed until

reasonable time has been allowed for the party to ratify the commencement of the

action). It is a logical and sensible conclusion that if an action that has not initially been

filed in the name of a party who has an interest in the litigation can be cured, a person

without standing at the time of the complaint should also be given the opportunity to

cure the defect. This is consistent with the aforementioned principles of judicial

economy and expediting the legal process.

{¶49} Further, such a standing deficiency can be easily cured without harm to

the defendant. See Deutsche Bank Natl. Trust Co. v. Traxler, 9th Dist. No.

09CA009739,

, ¶ 11 (noting that a bank obtaining an assignment after

the filing of a lawsuit could cure a standing defect when the assignment is produced “in

sufficient time to apprise the litigants and the court that the bank is the real party in

interest”). The party who obtains the mortgage during the proceedings could merely

ratify its interest in the action by filing appropriate evidence of its status as holder of the

mortgage and note, without having to refile the action. The same legal and factual

issues would generally still be present.

{¶50} In the present matter, Self Help was assigned the mortgage on June 30,

2010, approximately a month and a half after the Complaint was filed. Jones was

aware of this by August, since she attached the assignment document to her Answer

filed on August 9, 2010. Thus, it cannot be argued that she was prejudiced or not given

a chance to respond properly, since she was aware of the owner of the note and

mortgage at the time she filed the Answer. This further supports the contention that it is

13 unnecessary to dismiss the Complaint simply for the purposes of refiling and beginning

the litigation process anew, creating additional expenses for the parties on both sides

with little benefit. While it has been noted that “[i]f there is no attempt at cure, then the

action should be dismissed,” Self Help in this matter did submit a Notice of Filing of

Assignment of Mortgage in this matter, clarifying that it had both standing and was a

real party in interest. Kinder,

, at ¶ 22.

{¶51} Further, in her second assignment of error, Jones argues that Self Help

“failed to sustain its burden to prove that it had standing to sue by providing evidence

that it had both (1) possession of an indorsed note and (2) ownership of the mortgage

on the date the Complaint was filed.” Jones argues that there was no acceptable

evidence under Civ.R. 56(C) and (E) presented “to establish [that Self Help] had

standing to sue on the date the complaint was filed.” Again, she appears to be simply

arguing that appropriate documents of the transfer of the mortgage and note must have

been filed and possession transferred prior to the filing of the Complaint. However, as

outlined above, this defect is curable. Further, Self Help submitted an affidavit of Dawn

Adams, Vice President of Default Servicing, filed simultaneously with its Motion for

Summary Judgment, asserting that certain attached business records, including the

note, mortgage, and assignment of the mortgage from Huntington National Bank/Sky

Bank to Self Help on June 30, 2010, were records kept in the course of regularly

conducted business activity and that they were true and accurate copies of the

documents. This should be sufficient to cure the defect and allow the court below to

rule on the merits of the foreclosure action.

14 {¶52} Based on the foregoing, I respectfully dissent and would affirm the

decision of the court below, granting summary judgment on the foreclosure action in

favor of Self Help.

15