Update: On October 8, 2014, the Supreme Court of Ohio handed down a merit decision in this case. Read the analysis here.
Read the analysis of the oral argument in this case here.
On January 8, 2014, the Supreme Court of Ohio will hear oral argument in the case of Bank of American, N.A. v. George M. Kuchta, et al., 2013-0304. At issue in this case is whether defendants can bring a lack of standing challenge in a post-judgment motion without having appealed the judgment. This case comes to the Supreme Court of Ohio by way of certified question.
On December 19, 2002, the defendants-appellees, George and Bridget Kuchta, took out a mortgage on their home for the principal amount of $650,000. The original mortgage loan was made through Wells Fargo bank and the Kuchtas executed a promissory note made payable to Wells Fargo.
On June 1, 2010, Bank of America, the plaintiff-appellant, filed a complaint of foreclosure against the Kuchtas claiming it was the holder of the promissory note and assignee of the mortgage. In response, the Kuchtas filed an answer on July 2, 2010, stating that there was no proof in the complaint that the mortgage had been assigned to Bank of America. It was undisputed that Bank of America was not assigned the mortgage until nine days after the complaint was filed.
On August 10, 2010, Bank of America filed a motion for summary judgment seeking the balance due on the note and to foreclose the mortgage. On June 27, 2011, the trial court granted the motion and entered judgment in favor of Bank of America; the Kuchtas did not appeal the judgment. After filing a motion to stay a sheriff’s sale, the Kuchtas filed a Civ. R. 60(B) motion to vacate the judgment of foreclosure. The Kuchtas argued that the Bank was neither the owner nor assignee of the note and mortgage at the time the complaint was filed, and therefore the final judgment should be vacated.
On September 29, 2011 (pre-Schwartzwald) the trial court denied the 60(B) motion to vacate after finding that the Kuchtas did not present a meritorious defense of fraud. The case was subsequently delayed due to bankruptcy but was re-activated on March 26, 2013. The Ninth District Court of Appeals reversed the trial court’s denial of the motion to vacate, finding that the 60(B) motion contained operative facts warranting relief from judgment pursuant to the Supreme Court of Ohio’s recent decision in Schwartzwald. With its decision, the Ninth District certified the question at issue: “When a defendant fails to appeal from a trial court’s judgment, can a lack of standing be raised as a part of a motion for relief from judgment?”
Fed. Home Loan Mortg. Corp. v. Schwartzwald, 134 Ohio St.3d 13 (2012) (a plaintiff’s standing is to be determined as of the filing of the complaint and is a jurisdictional requirement necessary to invoke the subject matter jurisdiction of the court). (Read the blog’s analysis of this decision here.)
PNC Bank, Nat’l Ass’n v. Botts, 2012-Ohio-5383 (10th dist.) (plaintiff’s lack of standing cannot be raised in a post-default-judgment motion to dismiss or a motion to set aside the judgment).
Bank of America’s Argument
Bank of America argues that although the Kuchtas raised standing in their answer, they did not raise the issue in opposition to the Bank’s summary judgment motion, nor did they appeal the trial court’s adverse ruling. Thus, they cannot now re-raise a lack of standing in their 60(B) motion to vacate the judgment of foreclosure.
First, the Bank distinguishes the present case from Schwartzwald by pointing out the procedural dissimilarities. Specifically, the defendants in Schwartzwald never filed a motion to vacate but instead filed a timely appeal.
Second, the Bank argues that the doctrine of res judicata precludes the Kuchtas from using a motion to vacate to re-litigate an issue that was already in controversy. Pursuant to R.C. 2323.07, a common pleas court has subject matter jurisdiction over foreclosure actions, so a court’s implicit finding of jurisdiction is subject to res judicata. If the trial court was wrong in entering final judgment because the Bank had no standing, the Kuchtas should have appealed that judgment.
Allowing the Kuchtas to re-raise standing would allow defendants to hide the defense in their “back pocket,” and would give defendants a second attack if they first lose on other defense theories.
Lastly, the Bank argues that allowing the Kuchtas to re-raise standing would allow a party who participated in litigation to extend the time for filing an appeal by using a post-judgment motion. A post judgment motion cannot be used as a substitute for an appeal.
First, the Kuchtas argue that res judicata does not bar them from filing a post-judgment challenge to a lack of jurisdiction because they cannot consent to subject matter jurisdiction and subject matter jurisdiction can never be waived. Furthermore, any judgment that is rendered without subject matter jurisdiction is void ab initio, and has no legal effect whatsoever. Res judicata cannot attach to such a judgment.
Second, the Kuchtas argues that the court is a gatekeeper and must vacate a judgment when it becomes aware of a lack of subject matter jurisdiction, regardless of when or how the court becomes aware. Therefore, it is irrelevant that the Kuchtas re-raised a lack of standing defense as part of a post-judgment motion.
Lastly, the Kuchtas argue that the public policy concerns raised by the Bank cannot be afforded greater weight than the Ohio Constitution and the limits of subject matter jurisdiction. Furthermore, the Kuchtas argue that no one has a vested right or interest in a judgment that is void so there can be no public policy consideration that affords finality to an interest that does not exist.
Bank of America’s Proposed Propositions of Law in Response to the Certified Question
1. Res judicata bars a defendant who participated in litigation from using a post-judgment motion to contest standing.
2. When a party who participated in litigation could have raised an issue as part of a direct appeal but did not do so, that party cannot extend the time for filing an appeal by using that issue as a basis for a motion for relief from judgment.
Amicus Briefs in support of the Kuchtas
The Advocates for Basic Legal Equality, Community Legal Aid Services, Legal Aid of Western Ohio, Legal Aid of Society of Cleveland, Legal Aid Society of Columbus, Legal Aid Society of Southwest Ohio, ProSeniors, and Southeastern Ohio Legal Services filed a single brief in support of the Kuchtas.
In the brief, the amici first argue that the Ohio Supreme Court’s case law states that (1) the lack of standing is a jurisdictional defect that cannot be waived and can be raised at any time; (2) if a court lacks jurisdiction, then the judgment is void, and a void judgment is a nullity; and (3) the power to vacate void judgments comes from a court’s inherent powers, not procedural rules. Second, the amici argue that public policy favors a homeowner’s ability to raise the lack of jurisdiction at any time.
In addition, two Ohio homeowners in foreclosure proceedings, Joseph and Loria LaPierre, filed an amicus in support of the Kuchtas. In their brief, the LaPierres similarly argue that the doctrine of res judicata is only applicable when there is subject matter jurisdiction and that the ability to raise subject matter jurisdiction cannot be waived.
Student Contributor: Cameron Downer