You are viewing a free summary from Descrybe.ai. For citation and good law / bad law checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.

Chemical Bank, N.A. v. Krawczyk

Citation: 2013 Ohio 3614Docket: 98263

Court: Ohio Court of Appeals; August 22, 2013; Ohio; State Appellate Court

Original Court Document: View Document

EnglishEspañolSimplified EnglishEspañol Fácil
Frank Krawczyk's appeal stems from the denial of his motion to vacate a foreclosure decree in favor of Chemical Bank. Krawczyk had purchased a home in 1999 and entered into a mortgage agreement with Republic Bank, which Chemical Bank later acquired in 2007. In August 2009, Chemical Bank initiated foreclosure proceedings, claiming ownership of Krawczyk's promissory note following an assignment from Republic Bank. The bank asserted that Krawczyk was in default and owed $180,444.90.

Chemical Bank filed for summary judgment in December 2009, providing evidence of Krawczyk's default, including the unendorsed note and assignment documentation. A foreclosure magistrate recommended granting the summary judgment, which the trial court adopted in March 2010. In May 2010, Krawczyk filed a motion for relief from judgment, contending that Chemical Bank lacked standing due to the unendorsed note and failure to prove it was the holder entitled to enforce the note. The trial court scheduled a hearing for May 2011, where Krawczyk maintained that Chemical Bank's evidence was insufficient to establish its standing. The appellate court affirmed the trial court's decision.

On January 4, 2012, the magistrate denied Krawczyk's motion for relief from judgment, noting that an assignment instrument transferring the note and mortgage to Chemical Bank had been filed prior to the complaint's filing date. The magistrate referenced a similar case, Deutsche Bank Natl. Trust Co. v. Gardner, and highlighted the affidavit supporting Chemical Bank's claim to hold the note and mortgage. Krawczyk appealed, arguing that Chemical Bank lacked ownership and standing to act on the note. The appeal was deemed unsuccessful, as the court determined Krawczyk was improperly using the relief motion as a substitute for a timely appeal. The court found sufficient evidence indicating Chemical Bank was the real party in interest. The procedural history revealed that Chemical Bank had named Krawczyk in both personal and trustee capacities in its complaint, and while other defendants responded, Krawczyk and Citibank N.A. did not file answers. Chemical Bank subsequently sought a default judgment against them. Krawczyk attempted to contest this with motions challenging Chemical Bank's standing and claimed to have submitted a payment that was refused. However, his motion was unopposed when Chemical Bank moved for summary judgment.

The court initially scheduled a hearing on a motion for default judgment, pausing other pending motions. Following the hearing, on February 25, 2010, the magistrate issued three rulings: Krawczyk's motion to dismiss was denied, the bank's motion for summary judgment was granted, and a default was entered against Citibank N.A. The docket did not show an answer filed for Krawczyk, although a support affidavit related to "Fraud of Claims" was submitted on September 14, 2009, mentioning Krawczyk as the principal of an account with PHH Mortgage Corporation, which was deemed unrelated to this case. At a later hearing on May 4, 2011, the court considered Krawczyk’s objection to the default judgment as an untimely filed answer.

On March 1, 2010, Krawczyk sought to set aside the default judgment, which was denied on March 4, 2010, as no judgment had been entered against him. The court adopted the magistrate’s decisions on March 25, 2010, affirming there was "no just cause for delay." Krawczyk did not appeal this order but filed an untimely objection to the magistrate's summary judgment decision on April 12, 2010. The bank replied, but the court did not consider it due to the prior final order.

On May 25, 2010, Krawczyk's counsel filed a notice of appearance and challenged the bank's evidence regarding its standing to sue, claiming the trial court lacked jurisdiction. However, these challenges should have been made through an appeal of the March 25, 2010 decision, which was final and appealable. Civ.R. 60(B) cannot replace an appeal, as established in Doe v. Trumbull County Children, Family Services Board. The court stated that Krawczyk's only recourse after the summary judgment in favor of Chemical Bank was to appeal. The magistrate noted that Krawczyk's April 12 objection was meaningless since a final judgment was already in place, and timely appeal was the proper relief.

Despite missing the appeal deadline, Krawczyk contended that Chemical Bank lacked standing to foreclose as it was not the real party in interest, an argument that had already been addressed in the lower court.

Krawczyk's standing argument is classified as an affirmative defense, which does not affect the court's jurisdiction and can be raised at any time. He did not waive this issue but actively litigated it during the foreclosure proceedings. Krawczyk first introduced the standing issue in his motion to dismiss, asserting that the summons failed to identify the real party in interest, the Assignment of the Note and Mortgage was fraudulent due to lack of registration with the Cuyahoga County Recorder's office, and that the complaint lacked proper evidence. In his objection to the bank's motion for default judgment, he contended he was misled about the holder of the Promissory note and requested the original note to verify the Plaintiff’s claims.

The trial court rejected Krawczyk’s arguments, which he later included in his motion for relief from judgment. His failure to appeal the trial court's final order bars his claims under the doctrine of res judicata, as the standing issue had been previously litigated. The case is distinguished from the Supreme Court of Ohio’s ruling in Fed. Home Loan Mtge. Corp. v. Schwartzwald, where a party lacked standing at the commencement of the foreclosure action. In contrast, Chemical Bank demonstrated it had standing at the time of filing by attaching relevant documentation to its complaint, including the note, mortgage agreement, and assignment of rights. Krawczyk's challenges to the legitimacy of these documents are deemed affirmative defenses and do not impact the trial court's jurisdiction.

A party's lack of standing at the time of filing suit results in no justiciable controversy, leading to the trial court's lack of jurisdiction. In this case, Chemical Bank's standing was appropriately established with necessary documentation attached to its complaint, and the assignment of the note and mortgage occurred before the foreclosure action. The opposing party, Krawczyk, had the opportunity to challenge the bank's documents but failed to prove any fraudulent or insufficient claims regarding standing, which means the trial court's ruling in favor of Chemical Bank stands.

Krawczyk's use of a Civ.R. 60(B) motion to contest the standing issue instead of a direct appeal is improper, as he did not timely appeal the initial ruling. The principle of res judicata applies, preventing repeated attempts to raise the same standing issue after an unfavorable ruling. The notion that standing can be raised anytime does not mean it can be raised multiple times. Krawczyk’s repetitive challenges, framed differently, do not warrant further consideration by the trial court. This situation mirrors a recent case addressed by the Eleventh District Court of Appeals, emphasizing that once an issue has been ruled upon, it should not be revisited through various motions.

In **Waterfall Victoria Master Fund Ltd. v. Yeager**, the court upheld the trial court's denial of a motion for relief from a default judgment in a foreclosure case. The appellants argued that the plaintiff lacked standing due to an alleged lack of interest in the note and mortgage. After the default judgment was affirmed and the property was sold, the property owners sought to stay the sale and move for relief from judgment under Civ.R. 60(B), which was denied.

Civ.R. 60(B) allows relief from judgment for specific reasons, including mistake, newly discovered evidence, fraud, or other justifiable reasons. To succeed, the movant must show a meritorious defense, entitlement to relief under the specified grounds, and that the motion was filed within a reasonable time, generally within one year for certain grounds.

While Krawczyk’s motion was timely, he failed to demonstrate a valid basis for relief or a meritorious defense. Although a claim regarding a bank's standing could justify relief, Krawczyk had already presented this argument, which was rejected by the trial court. Furthermore, he contended that Chemical Bank could not obtain summary judgment without proving its standing, citing a precedent that required evidentiary support for such a motion. The court had previously reversed a summary judgment due to insufficient evidence regarding the affiant's knowledge and document authentication.

The note in question was originally payable to Republic Bank and was not endorsed to Chemical Bank or blank endorsed. The trial court concluded that the case was governed by precedents established in Deutsche Bank, where it was determined that an unendorsed note does not suffice to establish the transferee as a "holder." However, the assignment of the note and mortgage to the transferee can demonstrate the transfer of rights. Under Ohio law, enforcement rights cannot be assigned; they must be negotiated according to the Uniform Commercial Code. The evidence presented, including the assignment of the note and mortgage to Deutsche Bank, along with testimony from Padilla, established that Deutsche Bank was the holder with the right to enforce the note. 

In the case of Chemical Bank, the trial court found sufficient evidence to confirm that it was the real party in interest with standing to foreclose. Chemical Bank attached the relevant note, mortgage, and assignment from Republic Bank in its complaint and summary judgment motion, along with an affidavit corroborating its claims. Although the language of the assignment did not explicitly transfer "all rights and privileges," it sufficiently indicated that Chemical Bank received the "Mortgage Deed," "Promissory Note," and all sums due, thus establishing its standing. The judgment was affirmed, with orders for costs to be taxed to the appellant and a directive for execution of the judgment to the Cuyahoga County Court of Common Pleas. Judge Mary J. Boyle concurred with the judgment but expressed disagreement regarding certain legal assessments, while Judge Mary Eileen Kilbane dissented.

Schwartzwald establishes that standing is a jurisdictional requirement that can be asserted at any time, including after a judgment and regardless of previous assertions. A lack of standing means a party has no personal stake in the controversy, leading to the absence of a justiciable issue and consequently, a lack of subject matter jurisdiction in common pleas court, as indicated in Ohio Constitution, Article IV, Section 4(B). The excerpt references a recent divided decision, Waterfall Victoria Master Fund Ltd. v. Yeager, where appellants contended the bank lacked standing to foreclose. In prior decisions, the Eleventh District had ruled that standing was not jurisdictional, but rather an affirmative defense that could be waived. However, following the Ohio Supreme Court's ruling in Schwartzwald, which criticized earlier interpretations and reaffirmed that standing is indeed jurisdictional, the court stipulated that standing must be assessed at the suit's commencement. The court clarified that Civ.R. 17(A) concerns the proper party and does not rectify a standing deficiency. Consequently, the Eleventh District overruled its prior inconsistent decisions, affirming the mandate that standing issues cannot be cured post-initiation of litigation.

Appellee contends that appellants are precluded from raising their argument by res judicata due to their prior case, Yeager, wherein they could have addressed the issue of appellee’s authority to foreclose. Appellants attempt to frame their argument around appellee’s authority rather than standing, but if this framing is accepted, their argument would indeed be barred since it could have been raised in their earlier appeal. The court clarifies that appellants are, in fact, questioning standing—claiming appellee lacked an interest in the mortgage note and thus the authority to act. Recent legal developments, particularly from the Ohio Supreme Court, classify standing as a jurisdictional requirement that cannot be waived and can be raised at any time, allowing appellants' arguments to proceed without being barred by res judicata.

The dissenting opinion supports that Krawczyk is justified in raising the standing issue under Civ.R. 60(B)(5) despite having previously done so, since a lack of standing at the outset renders the trial court’s jurisdiction void. However, the dissenting judge believes Krawczyk did not demonstrate a meritorious defense, as evidence suggests the bank had standing when the foreclosure action began. Therefore, the dissenting judge would reverse the trial court's denial of Krawczyk’s motion.

Additionally, it is noted that a conflict has been certified by the Ohio Supreme Court regarding whether a lack of standing can be addressed in a motion for relief from judgment when an appeal from a foreclosure judgment is not filed, as highlighted in Bank of Am. v. Kuchta. Krawczyk entered into a mortgage with Republic Bank in 1999, and Chemical Bank initiated foreclosure proceedings in 2009, claiming ownership of the note following its assignment from Republic Bank. Supporting documents attached to Chemical Bank's motion for summary judgment included an unendorsed copy of the note and relevant assignments.

Copies of the Promissory Note and Mortgage Deed attached to the Plaintiff's Complaint are confirmed as true and accurate representations of the originals held by the Plaintiff. The outstanding principal balance owed is $180,444.90, plus interest. The court acknowledges that Krawczyk's motion for relief from judgment, although deemed an improper substitute for a late appeal, should be liberally construed under Civ.R. 60(B), a remedial measure. The three requirements for relief under Civ.R. 60(B) are deemed satisfied: (1) Timeliness is not contested by Chemical Bank; (2) Grounds for relief include a claim that the bank lacked standing for its foreclosure action; (3) A meritorious defense is established, as Krawczyk asserts that Chemical Bank failed to demonstrate its standing to pursue foreclosure, which requires proof of being the holder of the note and mortgage or having the right to enforce it, along with evidence of default and compliance with all conditions precedent. 

The court references prior case law indicating that insufficient documentation, such as an unendorsed note, fails to establish a bank as a "holder." Unlike Deutsche Bank, where evidence supported the transfer of rights, here the assignment to Chemical Bank does not convey all rights to the note, and the evidentiary materials lack proper authentication and personal knowledge of the affiant regarding the assignment. Thus, Krawczyk has met the necessary requirements for relief from judgment under Civ.R. 60(B).