Bank of Am., N.A. v. Kuchta

• Decision Date: 08 October 2014
• Docket Number: No. 2013–0304.,2013–0304.
• Citation: 141 Ohio St.3d 75,2014 Ohio 4275,21 N.E.3d 1040
• Parties: BANK OF AMERICA, N.A., Appellant, v. KUCHTA et al., Appellees.
• Court: Ohio Supreme Court

141 Ohio St.3d 75

21 N.E.3d 1040

2014 Ohio 4275

BANK OF AMERICA, N.A., Appellant,

v.KUCHTA et al., Appellees.

No. 2013–0304.

Supreme Court of Ohio.

Submitted Jan. 8, 2014.

Decided Oct. 8, 2014.

Thompson Hine, L.L.P., Scott A. King, and Terry W. Posey Jr., Dayton, for appellant.

Dann, Doberdruk & Harshman, Grace M. Doberdruk, Marc E. Dann, Daniel M. Solar, Cleveland, and James R. Douglass, for appellees.

Andrew M. Engel Co., L.P.A., and Andrew M. Engel ; and Mills, Mills, Fiely & Lucas, L.L.C., and John Sherrod, urging affirmance for amici curiae Joseph and Lori LaPierre.

Ohio Poverty Law Center, L.L.C., and Linda Cook; Southeastern Ohio Legal Services and Peggy P. Lee; Legal Aid Society of Southwest Ohio, L.L.C., and Noel M. Morgan, Columbus; Advocates for Basic Legal Equality, Inc., and Andrew D. Neuhauser, urging affirmance for amici curiae Ohio Poverty Law Center, L.L.C., Southeastern Ohio Legal Services, Legal Aid Society of Southwest Ohio, L.L.C., and Advocates for Basic Legal Equality, Inc.

O'CONNOR, C.J.

{¶ 1} In this appeal, we are asked to resolve a conflict regarding a party's ability to collaterally attack a judgment in a foreclosure action by asserting the issue of standing in a Civ.R. 60(B) motion for relief from judgment. For the reasons that follow, we conclude that a Civ.R. 60(B) motion cannot be used as a substitute for a timely appeal from the judgment in foreclosure on the issue of standing. We therefore reverse the decision of the Ninth District Court of Appeals.

RELEVANT BACKGROUND

{¶ 2} On December 19, 2002, defendants-appellees, George and Bridget Kuchta ("the Kuchtas"), executed a promissory note in favor of Wells Fargo Home Mortgage, Inc., and entered into a residential mortgage agreement with Wells Fargo to secure repayment of the note. On June 1, 2010, plaintiff-appellant, Bank of America, N.A., filed a complaint in foreclosure against the Kuchtas, attaching a copy of the original note and mortgage. Bank of America claimed to be the holder of the note and assignee of the mortgage. The Kuchtas filed a pro se answer, in which they challenged the standing of Bank of America to proceed with the complaint, arguing that there was no proof that their mortgage had been assigned to Bank of America.

{¶ 3} On August 10, 2010, Bank of America moved for summary judgment, attaching affidavits in support and a "Notice of Filing Assignment of Mortgage." The attached assignment document memorialized Wells Fargo's transfer of ownership of the Kuchtas' note and mortgage to Bank of America. It was signed on June 10, 2010, and recorded on June 23, 2010. The Kuchtas did not respond to the summary-judgment motion.

{¶ 4} After unsuccessful attempts to facilitate a settlement between the parties, during which time the Kuchtas retained counsel, the trial court granted summary judgment to Bank of America and entered a decree of foreclosure in its favor in June 2011. The Kuchtas did not appeal the judgment. On September 7, 2011, the trial court scheduled a sheriff's sale of the foreclosed property for September 29, 2011.

{¶ 5} On September 23, 2011, the Kuchtas moved to vacate the summary judgment and decree of foreclosure pursuant to Civ.R. 60(B)(3), which allows a judgment to be set aside if it has been obtained by "fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party." In their motion, the Kuchtas argued, in effect, that Bank of America lacked standing to commence the action because the bank did not prove ownership of the note and because the mortgage assignment was fatally flawed. They argued that they had a meritorious defense against the action due to this failure of proof. The Kuchtas further argued that the bank had committed fraud by falsely claiming to be the owner of the note and mortgage when it filed the foreclosure action. The trial court denied the motion, and the Kuchtas appealed.

{¶ 6} The Ninth District reversed the trial court's decision based on its interpretation of this court's decision in Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214, which was announced while the Kuchtas' appeal was pending. The Ninth District held that standing is a jurisdictional matter and that Bank of America's alleged lack of standing, if proven, would warrant relief from judgment. Accordingly, the Ninth District remanded the cause to the trial court for application of Schwartzwald .

{¶ 7} The Ninth District granted Bank of America's motion to certify a conflict, holding that its judgment conflicted with the judgment of the Tenth District in PNC Bank, N.A. v. Botts, 10th Dist. Franklin No. 12AP–256, 2012-Ohio-5383, 2012 WL 5868891. In Botts, the Tenth District held that a mortgagee's lack of standing does not destroy the subject-matter jurisdiction of a court, id. at ¶ 22, and fraud in establishing standing is not the type of fraud contemplated by Civ.R. 60(B)(3). The Botts court noted that the standing issue should have been raised in prior pleadings or in a timely appeal from the judgment, not in a Civ.R. 60(B) motion. Id. at ¶ 18–19. We recognized that a conflict exists on the following certified question: "When a defendant fails to appeal from a trial court's judgment in a foreclosure action, can a lack of standing be raised as part of a motion for a relief from judgment?" 135 Ohio St.3d 1430, 2013-Ohio-1857, 986 N.E.2d 1020.

{¶ 8} We answer the certified question in the negative and hold that the doctrine of res judicata applies to bar a party from asserting lack of standing in a motion for relief from judgment. We therefore reverse the judgment of the Ninth District Court of Appeals.

ANALYSIS

{¶ 9} The defendants-appellees in both Botts and the present case argued that their judgments in foreclosure should be vacated due to lack of standing under two different areas of the law: the Rules of Civil Procedure and common-law jurisprudence related to jurisdiction. We will address these two arguments in turn.

Motion for Relief from Judgment under the Rules of Civil Procedure

{¶ 10} Civ.R. 60(B) provides:

On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons: * * * (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party * * *.

{¶ 11} To succeed on a motion for relief from judgment under Civ.R. 60(B), a movant must establish (1) a meritorious defense or claim to present, in the event that relief from judgment is granted, (2) entitlement to relief under one of the provisions in Civ.R. 60(B)(1) through (5), and (3) compliance with the rule's time requirements. GTE Automatic Elec., Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146, 351 N.E.2d 113 (1976), at paragraph two of the syllabus. The timing of the Kuchtas' motion is not at issue, and it is undisputed that a mortgagee's lack of standing to bring an action in foreclosure, if established, would constitute a meritorious defense to the action. Our focus, then, is only on the second prong of the GTE standard, which the Kuchtas attempted to establish solely under Civ.R. 60(B)(3).

{¶ 12} The Kuchtas argued below that the bank's lack of standing at the time of filing its action in foreclosure both established their entitlement to relief due to fraud or misconduct and established a meritorious defense to the underlying action. We find this position to be without merit.

{¶ 13} We agree with the widely held view, expressed by the Tenth District in Botts , that the fraud, misrepresentation, or other misconduct contemplated by Civ.R. 60(B)(3) refers to deceit or other unconscionable conduct committed by a party to obtain a judgment and does not refer to conduct that would have been a defense to or claim in the case itself. Botts at ¶ 15; GMAC Mtge., L.L.C. v. Herring, 189 Ohio App.3d 200, 2010-Ohio-3650, 937 N.E.2d 1077, ¶ 31 (2d Dist.) ; First Merit Bank, N.A. v. Crouse, 9th Dist. Lorain No. 06CA008946, 2007-Ohio-2440, 2007 WL 1461173, ¶ 32 ; Wells Fargo Fin. Leasing, Inc. v. Gilliland, 4th Dist. Scioto No. 03CA2916, 2004-Ohio-1755, 2004 WL 734558, ¶ 19 ; Tower Mgt. Co. v. Barnes, 8th Dist. Cuyahoga No. 51030, 1986 WL 8623, *3.

{¶ 14} The Kuchtas have not alleged that Bank of America committed intrinsic fraud, such as attaching a materially false affidavit to its motion for summary judgment. See Smith v. Asbell, 4th Dist. Scioto No. 03CA2897, 2005-Ohio-2310, 2005 WL 1111630 (motion to vacate judgment properly granted when plaintiff attached fraudulent affidavit to complaint to prevent statute-of-limitations defense). And there is no allegation of extrinsic fraud, such as persuading the Kuchtas not to defend their case by falsely promising to voluntarily dismiss the action. See United States v. Throckmorton, 98 U.S. 61, 65–66, 25 L.Ed. 93 (1878). The bank's alleged lack of standing did not prevent the Kuchtas from appearing and presenting a full defense, including lack of standing. Accordingly, Bank of America's lack of standing, if the bank did in fact lack standing, did not establish the Kuchtas' entitlement to relief due to fraud under Civ.R. 60(B)(3).

{¶ 15} Further, because the issue of standing could have been and in fact was raised during the foreclosure proceedings, res judicata prevents the Kuchtas from using the issue to establish entitlement to relief. Ohio's Civ.R. 60(B) is substantially equivalent to Fed.R.Civ.P. 60(b), which codified the centuries-old "rule of equity to the effect that under certain circumstances, one of which is after-discovered fraud, relief will be granted against judgments" regardless of their finality. Hazel–Atlas Glass Co. v. Hartford–Empire Co., 322 U.S. 238, 244, 64 S.Ct. 997, 88 L.Ed. 1250 (1944). Civ.R. 60(B) exists to resolve injustices that are so great that they demand a departure from the strict constraints of res judicata. Id. However, the...