In a decision that will hearten commercial lawyers, on April 23, 2013, Ohio’s Court of Appeals for the Tenth Appellate District relied on lack of standing to reject a mortgagor’s attempt to avoid the consequences of his undisputed payment default by accusing the mortgagee, which was the assignee of his note mortgage, of lacking standing and using robo-signers. See Deutsch Bank National Trust Company, as Trustee for Argent Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2006-M1 c/o American Home Mortgaging Servicing, Inc. v. John Whiteman, 10th Dist. No. 12 AP-536, 2013-Ohio-1636. In so doing, the court followed other Ohio state and federal courts in holding that a debtor/ mortgagor lacks standing to challenge the validity of assignments from the original creditor/ mortgagee.
Plaintiff Deutsch Bank National Trust Company, as Trustee for Argent Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2006-M1 c/o American Home Mortgaging Servicing, Inc. (the "Bank") was the assignee of a note and mortgage from John Whiteman ("Whiteman") to Argent Mortgage Company, LLC ("Argent"). Five years after the note and mortgage were assigned to the Bank, Whiteman defaulted in payment on the note securing the mortgage and the Bank filed a foreclosure action against him.
When Whiteman failed to answer the complaint, the Bank obtained a default judgment and scheduled a sheriff’s sale. Before the sale was held, Whiteman filed a motion for relief from the default judgment under Ohio Civil Rule 60(B); the motion was granted in no small part because Whiteman did not serve the motion on the Bank. After Whiteman notified the court that he had not served the motion on the Bank, the Bank successfully moved to vacate the order granting Whiteman’s 60(B) motion, which was then fully briefed and denied without a hearing, as was Whiteman’s motion to dismiss under Ohio Civil Rule 12(B)(1).
On appeal, Whiteman asserted that the trial court abused its discretion in denying his 60(B) motion without a hearing and erred in denying his 12(B)(1) motion to dismiss because there was no justiciable controversy between himself and the Bank.
The Tenth Appellate District rejected both assignments of error. Whiteman alleged that his "meritorious defense" under Civil Rule 60(B) and the three-pronged test set forth in GTE Automatic Electric v. ARC Industries, 47 Ohio St.2d 146 (1976) was that the Bank was not the owner and holder of the note and mortgage when it filed the foreclosure complaint, and that it submitted fraudulent proof of ownership when it filed the complaint. He further claimed that had he been granted a hearing, he could have challenged the authenticity of the Bank’s documentation.
The Appellate Court rejected Whiteman’s challenge based on his lack of standing, holding that "because a debtor is not a party to the assignment of the note and mortgage, the debtor lacks standing to change their validity" {¶17}, citing LSF6 Mercury REO Invests. Trust Series 2008-1 c/o Vericrest Fin., inc. v. Locke, 10th Dist. No. 11AP-757, 2012-Ohio-4499, Bank of New York Mellon Trust Co. v. Unger, 8th Dist. No. 97315, 2012-Ohio-1950 and Bridge v. Aames Capital Corp., Case No. 1:09 CV 2947 (N.D. Ohio 2010).
The Court further observed that the allegedly "invalid mortgage assignments did not alter the homeowners’ obligations under the note and mortgage" {¶18}. Notably, Argent, the original creditor/ mortgagee and the Bank, the assignee/ foreclosing creditor/ mortgagee did not dispute the validity of the assignment between them; in addition, Whiteman’s payment default was undisputed.
The appellate court also affirmed the trial court’s denial of Whiteman’s Civil Rule 60(B) motion on procedural grounds. Whiteman alleged that because the Bank did not own that note and mortgage when it filed the foreclosure, it commitment fraud justifying relief from judgment under Civil Rule 60(B)(3). However, the appellate court distinguished between fraud that prevents the losing party, here Whiteman, from fully and fairly presenting his claim or defense, which does justify relief under Civil Rule 60(B)(3), and fraud that actually serves as the basis for a claim or defense, which does not justify relief from judgment. Here, there was no allegation that the Bank prevented Whiteman from fully and fairly presenting his claim or defense. Whiteman defaulted, plain and simple. He could have, but did not, answer the complaint. Because the Bank did not prevent Whiteman from presenting his fraud defense, he was not entitled to relief under Civil Rule 60(B).
The appellate court also rejected Whiteman’s claim that, due to the allegedly invalid assignment, the trial court lack of subject matter jurisdiction and therefore erred in denying his motion to dismiss under Civil Rule 12(B)(1), holding that a lack of standing does not deprive a court of subject matter jurisdiction.
The Bank was represented by Matthew J. Richardson of Manley Deas Kochalski, LLC; Whiteman was represented by Marc E. Dann and Grace Doberdruk of Dann, Doberdruk and Harshman, LLC.
