Update: On April 22, 2015, the Supreme Court of Ohio handed down a merit decision in this case. Read the analysis here.
Read an analysis of the oral argument here.
On January 14, 2015, the Supreme Court of Ohio will hear oral argument in the case of Wells Fargo Bank, N.A. v. Brian T. Horn, et. al., 2013-1534. The issue in this case is whether Fed. Home Loan Mtge. Corp. v. Schwartzwald requires a plaintiff to attach evidence of standing to the complaint, or whether it is proper for plaintiffs to clarify standing through sufficient evidence provided at a later stage of the litigation.
In November 1993, appellee Brian Horn and his wife executed a promissory note in the principle amount of $49,323 in favor of Norwest Mortgage, Inc. (Norwest). To secure repayment of the Note, the Horns also executed a Mortgage in favor of Norwest.
Norwest endorsed the Note in blank. In 2000, Norwest changed its name to Wells Fargo Home Mortgage, Inc. (WFHMI); WFHMI eventually merged into appellant Wells Fargo in October 2004.
On April 19, 2010, Wells Fargo filed to begin foreclosure proceedings. Attached to the complaint was a copy of the Note indorsed in blank, and a copy of the Mortgage. The complaint described Wells Fargo as the holder of the note and the corporate “successor by merger to [WFHMI], fka [Norwest].” There were no documents from the Ohio Secretary of State attached showing the mergers and name changes.
In July 2010, Wells Fargo filed a motion for summary judgment. The following September, Horn was granted leave to file an answer instanter. In his answer, one of Horn’s allegations was that Wells Fargo “may not be the real party in interest and lack standing to bring said claim against Defendant.” Wells Fargo filed an amended motion for summary judgment in April 2011 that contained the affidavit of Adam Seeman. Seeman testified he had personally reviewed the books and records of Wells Fargo and determined Wells Fargo to be the current holder of the Note and the Mortgage. The affidavit also described the series of mergers and name changes. The magistrate held that Wells Fargo was entitled to summary judgment. The trial court adopted the magistrate’s finding and issued a decree of foreclosure.
Horn appealed pro se, but did not raise the issue of standing. The Ninth District Court of Appeals reversed, deciding sua sponte that Wells Fargo had failed to demonstrate standing under Schwartzwald because it had not attached “documents evidencing a merger or name change” to the complaint. The appeals court ordered the case be dismissed without prejudice.
Key Statutes and Precedent
Civ.R. 10(D) requires attachment to the pleading of a copy of the written account or any other written instrument when a claim or defense is founded on those documents.
Fed. Home Loan Mtge. Corp. v. Schwartzwald, 2012-Ohio-5017. (Standing is required to invoke the jurisdiction of the common pleas court, and it is determined as of the filing of the complaint.)
Wells Fargo v. Burrows, 2012-Ohio-5995 (9th Dist.)(A plaintiff must attach documents evidencing the right to enforce both the note and the mortgage to the complaint to show standing, or be subject to dismissal.)
Deutsche Bank Natl. Trust Co. v. Najar, 2013-Ohio-1657 (8th Dist.) (While standing must be proven to have existed at the time of the filing of the complaint, the attachments to the complaint are not dispositive. Also adopted in the Tenth and Twelfth Districts.)
HSBC Bank USA, N.A. v. Sherman, 2013-Ohio-4220 (1st Dist.)(Determination of standing should be made based on attachments to a complaint, but standing in a foreclosure action can be established by showing the right to enforce either the note or mortgage. Also adopted in the Second, Fifth, Eleventh, and Twelfth Districts.)
Fletcher v. University Hospitals of Cleveland, 2008-Ohio-5379. (Civ.R. 10(D)(1)’s language does not require attached evidence to establish the adequacy of a complaint; failure to attach required evidence is properly addressed in a motion for a more definite statement under Civ.R. 12(E))
Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (To survive a motion for summary judgment for lack of standing, a party must set forth by affidavit or other evidence specific facts to support its claim.)
Wells Fargo’s Arguments
Post-Schwartzwald, courts of appeals have struggled to determine what documents a plaintiff must provide to show standing to bring a foreclosure action, and at what stage of the proceedings. Wells Fargo’s argument starts with a quick overview of how Schwartzwald has been interpreted by the lower courts.
The Ninth District determined in Burrows that a plaintiff must attach documents evidencing a right to enforce both the note and mortgage to the complaint to show standing, or the case is subject to dismissal.
Three district courts of appeals have held that attachments to the complaint are not dispositive; if such attachments do not clarify standing at the time the complaint is filed, the plaintiff has an opportunity later in the proceeding to provide additional clarifying evidence of standing. This interpretation was applied by the Eighth District in Najar.
Three district courts of appeals have held that standing can be established by showing a right to enforce either a promissory note or a mortgage. This specific issue will be addressed in February when the Court hears argument in SRMOF 2009-1 Trust v. Shari Lewis.
Wells Fargo argues the Ninth District’s interpretation of Schwartzwald is incorrect because a plaintiff is not required to attach to the complaint all of the evidence upon which it will rely to show standing. Citing Fletcher, Wells Fargo argues allegations of facts within the complaint are sufficient to show the plaintiff has standing. Failure to attach all of the documents underpinning that right can be rectified by a motion for a more definite statement under Civ.R. 12(E). Turning to Lujan, often cited by the Supreme Court and the lower courts as Schwartzwald has evolved, Wells Fargo argues the time to prove standing by presentation of evidence is with a motion for summary judgment or at trial, when a plaintiff can no longer stand on “mere allegations.”
In this case, Wells Fargo attached the Note and the Mortgage to the complaint; what was lacking was proof that it had a right to enforce the Note and Mortgage because of the mergers. Once Wells Fargo knew it needed to provide this proof, it did so through Seeman’s affidavit. Wells Fargo wants a determination that the proper relief for failure to provide sufficient evidence with the complaint is not dismissal, but the chance to provide the evidence during the summary judgment phase of proceedings after a motion for a more definite statement.
Horn appeared pro se in front of the Ninth District Court of Appeals, and also filed his own brief at the Supreme Court of Ohio. Horn’s brief mirrored the argument he made to the Ninth District, and did not address the issue in front of the court. Horn has since retained the lawyer who provided the amicus brief in Schwartzwald, who will argue the case on Horn’s behalf. The Supreme Court declined to reopen briefing; Horn’s argument cannot be previewed from the brief, but must await oral argument.
Wells Fargo’s Proposed Proposition of Law
A plaintiff is not required to attach to the complaint all of the evidence upon which it will rely to show standing.
Student Contributor: Rebecca Campbell