Guest Post: Standing and Subject Matter Jurisdiction in Ohio Foreclosure Actions: A Third Way?

Professor Bettman’s Introduction to Guest Post

The Supreme Court of Ohio has now addressed the interplay between standing and subject matter jurisdiction in the context of foreclosure cases in both Federal Home Loan Mortgage Corp. v. Schwartzwald and Bank of America v. Kuchta. (Read the analysis of these cases here and here.) I asked my friend and former law school colleague Adam Steinman, an eminently talented civil procedure professor now teaching at the University of Alabama School of Law, if he would comment on the court’s take on standing in these cases, and he has provided this very thought provoking post.

Guest Post: Standing and Subject Matter Jurisdiction in Ohio Foreclosure Actions: A Third Way?

Author: Adam Steinman, University of Alabama School of Law

It’s great to have the chance to make a guest appearance on Legally Speaking Ohio. I’m several years out from my stint in the Buckeye State, but I’ll never forget my time as one of Professor Bettman’s colleagues on the U.C. law faculty. So when she spotlights a case as “a field day for civil procedure geeks,” well, who can resist?

That case, of course, is Bank of America v. Kuchta—a 5-to-2 Supreme Court of Ohio decision rejecting the attempt of two homeowners to collaterally attack a foreclosure judgment against them on the theory that the bank lacked standing in the initial action. Whether a bank has standing to bring a foreclosure action is an especially important issue in light of the Supreme Court of Ohio’s 2012 decision in Federal Home Loan Mortgage Corp. v. Schwartzwald, which held that the bank’s standing must be determined at the time the complaint is filed. Because “standing is a jurisdictional requirement,” Schwartzwald ¶ 22, the court found that a bank cannot cure a lack of standing after filing, such as by obtaining an assignment of the note/mortgage: “post-filing events that supply standing that did not exist on filing may be disregarded, denying standing despite a showing of sufficient present injury caused by the challenged acts and capable of judicial redress.” Id. ¶ 26.

In essence, the issue in Kuchta was whether defendants in a foreclosure action could make the Schwartzwald argument in a collateral attack on the initial judgment, such as by a motion for relief from judgment under Ohio Rule 60(B). The court’s answer is no: “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.” Kuchta ¶ 1. I’ll confess at the outset that I’m not an expert in Ohio civil procedure, so what I’ll offer here are just a few thoughts about the case, in part from the perspective of how federal courts might address some of these issues.

A crucial part of the Kuchta majority’s reasoning is that a lack of standing under Schwartzwald does not deprive the court of subject-matter jurisdiction. Even in the federal system, of course, standing is not necessarily a subject-matter jurisdiction requirement. For example, the U.S. Supreme Court has distinguished between Article III standing (which is jurisdictional) and other kinds of standing, sometimes called “prudential” or “statutory” standing (which are not jurisdictional). See, e.g., Lexmark International v. Static Control Components. But the distinction we see in the federal system can’t explain Kuchta’s treatment of standing in the Schwartzwald context, because Schwartzwald explicitly stated that the lack of standing was a jurisdictional issue. That was the reason Schwartzwald required the bank to have standing at the time the action was commenced.

How does Kuchta get around this problem? Chief Justice O’Connor writes: “Standing is certainly a jurisdictional requirement; a party’s lack of standing vitiates the party’s ability to invoke the jurisdiction of a court—even a court of competent subject-matter jurisdiction—over the party’s attempted action. But an inquiry into a party’s ability to invoke a court’s jurisdiction speaks to jurisdiction over a particular case, not subject-matter jurisdiction.” ¶ 22 (citations omitted).

Thus, Kuchta asserts that there is a difference between a court’s “jurisdiction over a particular case” and “subject-matter jurisdiction.” Where does the notion of “jurisdiction over a particular case” come from? Kuchta cited Pratts v. Hurley, a 2004 case stating that “[t]he term ‘jurisdiction’ is also used when referring to a court’s exercise of its jurisdiction over a particular case.” To support that proposition, Pratts quoted the dissenting opinion in State v. Parker, a 2002 criminal case. In the Parker dissent, then-Justice Cook wrote: “[T]he term ‘jurisdiction’ encompasses at least three distinct concepts: (1) subject matter jurisdiction, (2) jurisdiction over the person, and (3) jurisdiction over the particular case. The third category of jurisdiction encompasses the trial court’s authority to determine a specific case within that class of cases that is within its subject matter jurisdiction. It is only when the trial court lacks subject matter jurisdiction that its judgment is void; lack of jurisdiction over the particular case merely renders the judgment voidable.”

The authorities Justice Cook cited were state court cases from Indiana, Michigan, and Virginia, as well as the court of appeals opinion that the Parker majority had just reversed.

I’m curious how much of a role this third form of jurisdiction plays in Ohio (or in other states like those cited in the Parker dissent quoted above). To be sure, the federal system recognizes that “jurisdiction” is “a word of many, too many, meanings.” E.g., Steel Co. v. Citizens for a Better Environment. But when federal courts struggle with this concept, the choice is framed as whether to recognize that a particular requirement is, or is not, jurisdictional—not whether a jurisdictional requirement should be deemed one of “subject-matter jurisdiction” or one of “jurisdiction over the particular case.”

Even if one accepts the third form of jurisdiction recognized in Kuchta, placing Schwartzwald in that category seems questionable. In declaring that the bank’s lack of standing was, indeed, a jurisdictional issue, Schwartzwald cited numerous federal authorities—all of which were addressing matters of federal subject-matter jurisdiction. See Schwartzwald ¶¶ 25-26 (citing and quoting Supreme Court decisions in Rockwell International v. United States and Grupo Dataflux v. Atlas Global Group, as well as the Wright & Miller treatise on Federal Practice & Procedure).

All this said, the Kuctha majority is still the majority. So in Ohio, it seems, standing is a jurisdictional issue but not a subject-matter-jurisdictional issue. It will be interesting to see whether this aspect of Kuchta will have broader ramifications.

 

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7 Responses to Guest Post: Standing and Subject Matter Jurisdiction in Ohio Foreclosure Actions: A Third Way?

  1. Jeff Nye says:

    I think this is a really strange decision, and this distinction between “subject-matter jurisdiction” and “jurisdiction over the particular case” seems beyond strained.

    The Supreme Court briefly discussed void judgments and voidable judgments, but so far as I can tell this issue wasn’t really briefed by the parties below. The motion for relief from judgment was based on (and the Supreme Court cites only) Rule 60(B)(3)–the homeowners had argued that the plaintiff engaged in fraud by filing the case when it didn’t own the note and mortgage. I wonder if they might have had more success arguing 60(B)(4), which provides for relief if the judgment is void. Maybe not, but I also wouldn’t be surprised to see someone try to produce a different result through that subdivision.

    • Andy Engel says:

      If you look at prior case law on the definition of subject matter jurisdiction (Morrison v. Steiner, for instance) the distinction is more than confusing.

      As for using a different provision of 60(B), I don’t think it would work. The Court’s reasoning was fragmented on this point. At one point, it discussed only 60(B)(3). At another, it didn’t seem to limit its decision to that provision. It did, however, cover the void/voidable distinction. It did so to make it clear that the lack of standing does not void a judgment because it does not implicate subject matter jurisdiction. Therefore, a common law motion is not available. It then held that a lack of standing is not a basis for relief under Rule 60(B). It could, however, theoretically provide the meritorious defense should another basis for relief be present.

  2. Andy Engel says:

    I have often thought that the analysis in Pratts v. Hurley was misguided. To me, the idea of the “wrongful exercise of jurisdiction” is nothing more than a fancy label for judicial error. I’ve thought that the primary consideration should focus on the nature of the statutory requirement at issue. Is the three-judge requirement a restriction on the power of the court to proceed in capital cases, or is it a procedural safeguard designed solely for the benefit of the accused? The former would deprive the court of the legislative grant of power to act. The latter would be a personal right subject to waiver.

    Moreover, a close reading of Pratts reveals a critical distinction with the situation presented in Kuchta. At paragraph 13 of Pratts, the court cites to Art. IV, sec. 4(B) of Ohio’s Constitution and notes that there was no assertion that the criminal case was not properly filed in the common pleas court. To me, that language indicates that the common pleas court’s jurisdiction was properly invoked through the commencement of the case. The same cannot be said in Kuchta.

    A court can certainly exercise its jurisdiction improperly, but to call that a form of jurisdiction needlessly complicates the issue. It is what it is – an error subject to correction on appeal.

  3. Stupendous Man - Defender of Liberty, Foe of Tyranny says:

    The legal and linguistic gymnastics some courts are engaging in continues to amaze me. Some of this stuff just isn’t that hard to understand. The issue of standing is among the easy ones.

    Ohio has an “open courts doctrine” expressed in § 16 of the Ohio Constitution, which states:

    All courts shall be open, and every
    person, for an injury done him in his
    land, goods, person, or reputation, shall
    have remedy by due course of law, and
    shall have justice administered without
    denial or delay.

    The words are precise, and limited: if you’ve been injured we (the courts) will help you obtain remedy. Because the words are precise, and limited, anything else is excluded (expressio unius exclusio altatius). If you haven’t been injured the courts will not help you. This is sensible.

    Consider this alternative: My neighbor has not injured me in my land, goods, person, or reputation, but I want to sue him for $5000 for injuries I have not sustained, and I want you (the courts) to help me obtain those monies.

    Arguing anything outside of the clearly expressed meanings of § 16 is meritless.

    • Andy Engel says:

      The provision you quote is in Ohio’s Bill of Rights and is read so ensure the people’s access to the courts for redress. It both preserves the right and prevents Ohio’s government from infringing on the right.

      The constitutional provision at issue in Schwartzwald and Kuchta is Art. IV, sec. 4(B), which creates common pleas courts and defines their power.

      Nonetheless, the Open Courts provision does not suggest that those without injury have a right to access the courts.

  4. Richard Davet says:

    The Ohio Constitution provides in Article IV, Section 4(B): “The courts of common pleas and divisions thereof shall have such original jurisdiction over all justiciable matters and such powers of review of proceedings of administrative officers and agencies as may be provided by law”. The SCO ruled in Schwartzwald that standing must be determined at the time a suit is commenced, the court holds that a plaintiff without an interest in a note or mortgage at the time it filed a foreclosure action did not cure the lack of standing by subsequently obtaining an interest in the subject of the litigation.

    In Kuchta, there has never been a “justiciable matter” before the court.

    What we see here is the courts trying to make sense out of nonsense. Perhaps that is why the the scholars call the the GSE Business Model “fatally flawed”. That same business model has hijacked the mortgage industry over the past 20 years and no one wants to face that fact. Trying to create a dispensation for banks lacking standing against foreclosure victims has dire consequences.

  5. Richard Davet says:

    I would hope that Ohio courts (an elsewhere) would come to realize that to divorce words from their original meanings, you end up in an endless loop of doublespeak.

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