IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
ASHTABULA COUNTY, OHIO
SELF HELP VENTURES FUND,
Plaintiff-Appellee,
– 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
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, 32 Ohio St.2d 86 (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
time.” Pratts v. Hurley, 102 Ohio St.3d 81, 2004-Ohio-1980, ¶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, 523
U.S. 83, 102 (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, 2008-Ohio-5323, ¶18. A personal stake requires an injury to the
plaintiff. Id. The Supreme Court of Ohio has held that standing is jurisdictional in
nature. State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, 35 Ohio St.2d
176, 179 (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, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶28.
{¶18} Whether standing exists is a matter of law that is reviewed de novo.
Cuyahoga Cty. Bd. of Commrs. v. State, 112 Ohio St.3d 59, 2006-Ohio-6499, ¶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.
No. 2011-T-0030, 2011-Ohio-6214, ¶19, quoting Shealy v. Campbell, 20 Ohio St.3d 23,
24 (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, 2001 Ohio App. LEXIS 1750, *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.
{¶24} The Supreme Court of Ohio recently addressed the identical issue before
us in Schwartzwald, supra. 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 Schwartzwald, supra,
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, 2012-Ohio-1454, ¶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 Schwartzwald, supra, 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
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, 63 Ohio St.3d 173, 175 (1992), quoting
State ex rel. Plain Dealer Publishing Co. v. Barnes, 38 Ohio St.3d 165 (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.
{¶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. Id. Although the transferee is not a “holder,” he has the rights of the
transferor as holder pursuant to R.C. 1303.22(B). Id.
{¶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,
2010-Ohio-663, 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, 2012-Ohio-4086, 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.
{¶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.
