IN THE SUPREME COURT OF OHIO

Transcription

1 ORlGINAL IN THE SUPREME COURT OF OHIO BANK OF NEW YORK, AS TRUSTEE FOR * Case No THE CERTIFICATEHOLDERS CWALT, INC. ALTERNATIVE LOAN TRUST T1, * MORTGAGE PASSTHROUGH On Appeal from the Clermont CERTIFICATES SERIES T1 * County Court of Appeals, Twelfth Appellate District Court of Appellee * Appeals Case No. CA vs- JAMES BLANTON, ET AL. Appellant. * * * MOTION TO RECONSIDER DEC CLERK OF COURT REME COURT OF OHIO Now comes Appellant, James Blanton, through counsel, and pursuant to Sup.Ct. Prac. R moves this Court to reconsider its judgment entry of December 5, 2012 dismissing this appeal as improvidently allowed. This Court accepted Appellant's discretionary appeal and, as it had with several other appeals on this issue, stayed briefing in the matter pending decision in Federal National MoNtggge Corp. v. Schwartzwald, Case No As the Court is aware, it decided Schwartzwald on October 31, On December 5th, the Court addressed the cases being held for Schwartzwald. Of the cases in which the homeowner was the appellant, the Court reversed and remanded all of the cases for application of Schwartzwald, except this case. Appellant asks that the Court reconsider its dismissal of this appeal. Appellant has also filed in this case a Motion to Stay Execution Pending Appeal. DEC ` CLERK OF COt1RT SUPREME GCURT (J,- OHIO

2 BACKGROUND AND FACTS The facts of this Court are more complicated than those of Schwartzwald, and the procedural posture of the case is far more complex. This appeal arises from a denial of a motion to vacate the judgment of the trial court. Appellant attacked the trial court's judgment as being void for lack of jurisdiction because Appellee lacked standing to institute the suit. The Court of Appeals treated Appellant's motion as one under Civ. R.60(B), instead of a common law motion to attack a void judgment. The trial court viewed the issue as on of "real party in interest" rather than a question of standing. Decision and Order, T.R. 2/14/2011. In ruling on the motion to vacate, the trial court performed no analysis, but rather relied on its prior decision granting summary judgment. In that prior decision, the trial court concluded that Plaintiff was the real party in interest to prosecute the case. Decision & Order, p.8, T.R. 7/1/09. And when the trial court granted summary judgment, it did so based on Plaintiffs Second Amended Complaint. Decision & Order, p.1, T.R.7/1/09. When Plaintiff filed its initial complaint, it asserted that it was the "owner and holder" of the note. Complaint, 9, T.R. 3/25/08. But the Note attached to the Complaint was payable to America's Wholesale Lender and had not been endorsed. The lack of endorsement means that the Plaintiff was not the "holder" of the Note. The Mortgage in this case was originally granted to Mortgage Electronic Registration Systems, Inc. ("MERS"), as "nominee" for America's Wholesale Lender. Id. On March 14, 2008, MERS executed an Assignment of Mortgage to the Plaintiff. That Assignment of Mortgage purports to transfer both the Mortgage and the Note. For reasons discussed below, the Assignment of Mortgage was wholly ineffective to transfer any interest in either Note or the

3 Mortgage.. In Support of its Motion for Summary Judgment, the Plaintiff introduced a copy of the Pooling and Servicing Agreement ("PSA") under which it allegedly became the owner of the Note and Mortgage. Plaintiffs Motion for Summary Judgment, T.R. 4/10/09. For reasons set forth below, any transfer of an interest in the Note and Mortgage through the PSA was ineffective to confer standing on Plaintiff. It is from these facts that the trial court apparently found that Appellee herein was the "real party in interest." Bank of New York v. Blanton, 2012-Ohio-1597, 6 (12th Dist. No. CA ) ARGUMENT Appellant does not ask the Court to rule on the factual and legal issues presented in this case. He merely suggests that given the complexity of the case, and the fact that both the trial court and court of appeals applied the wrong law to the case, the Court should remand this matter to the trial court for application of Schwartzwald. A. The Court of Appeals Applied a Standard that This Court Rejected in Schwartzwald. Of the cases that this Court reversed and remanded for application of Schwartzwald was Washington Mutual Bank, F.A. v. Wallace, Slip Opinion No Ohio That case originated in Warren County in the Twelfth Appellate District, the same district from which this case is appealed. In its decision in this case, the Court of Appeals applied its earlier decision in Wallace: Blanton's argument on appeal rests on the premise that standing is a jurisdictional issue. Because Blanton asserts that standing is jurisdictional, he presumes that the

4 issue of whether Bank of New York has standing may be properly raised at any time. However, we have held that the issue of standing is not jurisdictional, but rather procedural. Washington Mut. Bank, F.A. v. Wallace, 194 Ohio App.3d 549, 2011-Ohio-4174 (12th Dist.); Robbins v. Warren, 12th Dist. No. CA , 1996 WL (May 6, 1996). See also State ex rel. Tubbs Jones v. Suster, 84 Ohio St.3d 70 (1998); BAC Home Loans Servicing, L.P. v. Cromwell, 9th Dist. No , 2011-Ohio Because a lack of standing does not implicate jurisdiction, the trial court's initial decision granting summary judgment in favor of Bank of New York is not void, but merely voidable. See State v. Fischer, 128 Ohio St.3d 92, 2010-Ohio-6238, 6; Eisenberg v. Peyton, 56 Ohio App.2d 144, 148 (8th Dist.1978); Huebner v. Scott, 12th Dist. No. CA , 1992 WL , *2 (Nov. 23, 1992). Clermont CA Accordingly, the trial court's initial decision regarding summary judgment is valid and binding and may not be collaterally attacked except under the provisions of Civ.R. 60(B). Huebner at *2. Any issues appealed from the trial court's decision denying Blanton's motion to vacate void summary judgment falling outside of the parameters of Civ.R. 60(B) are barred by res judicata as they could have been raised on direct appeal. Id. Consequently, in order for Blanton to possibly be entitled to relief, we must construe his motion to vacate void summary judgment as a Civ.R. 60(B) motion. Blanton, supra 11. Therefore, it is apparent that the trial court and the Court of Appeals evaluated this case under the wrong legal standard and without the benefit of the decision in Schwartzwald. B. Plaintiff Has Never Been The Holder of The Note. In this case, Appellant has also challenged the Plaintiffs standing to institute this action. Specifically, Blanton argues that Appellee was not the hyoler of the Note and therefore lacked the requisite standing to invoke the jurisdiction of the trial court. Therefore, Appellant believes the outcome of this case is controlled by this Court's decision in Schwartzwald. In this case, Plaintiff asserted two possible bases for its standing in this case. One of those bases was its status as the "holder" of the note. But it is not possible for Plaintiff to be the "holder" of the Note. R.C (21) defines "Holder" as "[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person

5 in possession..." Thus, to be a holder, the person must by (1) in possession (2) or of the note payable to the person, either directly or through endorsement. Therefore, because the Note is not payble to Plaintiff and contains no endorsements to show that the Note was negotiated under R.C Further, there was no evidence presented to ther trial court that Plaintiff was ever in possession of the Note. Thus, as a basis to support standing, Plaintiffs reliance on "holder" status was incorrect. C. The Assignment of the Mortgage By MERS Did Not Convey Any Right to Institute This Case. The trial court and the Court of Appeals noted that the Mortgage was assigned to Plaintiff prior to the commencement of this action. On its face, the Assignment of Mortgage appears to grant to Plaintiff a present right to enforce the Mortgage. Moreover, the Assignment of Mortgage purports to transfer the Note along with the Mortgage. But the Assignment of Mortgage is nothing more than the illusion of the transfer of rights. In reality, it conveyed nothing to Plaintiff. "The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity." Carpenter v. Longan, 83 U.S. 271, 274, 21 L.Ed. 313 (1873). This Court has stated: "Being but an incident of the debt, the mortgage remains, until foreclosure or possession taken, in the nature of a chose in action. Where given to secure notes, it has no determinate value apart from the notes, and, as distinct from them, is not a fit subject of assignment." Kernohan v. Manss, 53 Ohio St. 118, 133, 41 N.E. 258 (Ohio 1895). In other words, a person may not bring suit on a mortgage alone. Suit on a mortgage may only be commenced with or after suit on the note which it secures. In this case, MERS could not have filed this lawsuit in its own name. It could not have

6 filed suit on the mortgage alone because the mortgage is wholly incident to the debt it secures - the Note. And MERS was never a party to the Note. The Note is, and always has been, payable to America's Wholesale Lender. For that reason, neither could the assignment of the Mortgage from MERS to the Plaintiff transfer any right to the Note itself. In re Agard, 444 B.R. 231, (Bkrtcy.E.D.N.Y. 2011). It is axiomatic that a person may only transfer such rights as he himself possesses. An assignment of the mortgage by one who may not enforce the mortgage, cannot transfer any enforceable rights. D. An "Owner" Does Not Have Standing to Enforce a Note. To bring suit to enforce a negotiable instrument in Ohio, the plaintiff must be a person entitled to enforce the note. R.C identifies three classes of persons who are entitled to enforce negotiable instruments: (A)"Person entitled to enforce" an instrument means any of the following persons: (1) The holder of the instrument; (2) A nonholder in possession of the instrument who has the rights of a holder; (3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to section or division (D) of section of the Revised Code. (B) A person may be a "person entitled to enforce" the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument. This statute does not identify the "owner" as a person entitled to enforce the note. Indeed, subsection (B) implies that owner status has nothing to do with the ability to enforce a note. The trial court concluded that Plaitniff was the owner of the Note in this case by virute of the PSA. But the PSA did not render the Plaintiff a "person entitled to enforce" the Note. Only a party to a contract, or a third-party beneficiary, may sue to enforce the contract. Grant Thornton v. Windsor House, Inc. (1991), 57 Ohio St.3d 158, 161, 566 N.E.2d 1220;

7 Heskett v. Van Horn Title Agency, Inc., 2006-Ohio-6900, Franklin App. No. 06AP-549, 14; Grothaus v. Warner, 2008-Ohio-6683, Franklin App. No. 08AP ; Caruso v. Natl. City Mtge. Co., 2010-Ohio-1878, 187 Ohio App.3d 329 (Hamilton Co. 2010) 23. Village of Arlington Heights v. Metropolitan, 429 U.S. 252, 263, 97 S.Ct. 555, 50 L.Ed.2d 450 (1977)(stating " In the ordinary case, a party is denied standing to assert the rights of third persons."); Secretary ofstate ofmaryland v. Joseph H. Munson Co., Inc., 467 U.S. 947, 955, 104 S.Ct. 2839, 81 L.Ed.2d 786 (1984). The PSA did not make Plaitniff a party to the Note or Mortgage. That can only be done under the provisions of Ohio law. In a breach of contract case, it is the contractual right to performance that is being vindicated. Only such a person has standing to sue. Ancillary interests in contract do not provide standing to sue. As to negotiable instruments, the General Assembly has stated who may sue to enforce a negotiable instrument. The "owner" of the instrument is not such a person. Only those persons specifically identified by statute may sue to enforce a note. This Court referenced this distinction in Schwartzwald, when it cited to Cleveland v. Shaker Hts., 30 Ohio St.3d 49, 51, 507 N.E.2d 323 (1987), in which it stated: Where the party does not rely on any specific statute authorizing invocation of the judicial process, the question of standing depends on whether the party has alleged * * * a"personal stake in the outcome of the controversy." '" In this case, it is a statute that provides the basis for a person to invoke the jurisdiction of the court. Only certain people are entitled to enforce a negotiable instrument - those people and no one else. Without possession of a legally enforceble right, Plaintiff lacked standing to sue, and there was no justiciable matter before the Clermont County Common Pleas Court.

8 k^ CONCLUSION The facts of this case are more nuanced than those presented to the Court in Schwartzwald. And Appellant does not ask the Court to determine the specific legal issues which these facts raise. However, given the reality that both the trial court and the Court of Appeals applied legal standards that were expressly rejected by Schwartzwald, fairness dictates that Appellant's case be decided under the proper standard. For the foregoing reasons, Appellant James Blanton requests that the Court reconsider its dismissal of this appeal, reverse the decision of the Court of Appeals and remand this case to the Clermont COunty COmmon Pleas Court for application of Schwartzwald. Respectfully submitted, Andrew M. Engel ( ) ANDREW M. ENGEL CO., L.P.A Corporate Way, Suite 201 Centerville, OH (937) Fax: (937) Attorney for Appellant CERTIFICATE OF SERVICE I certify that a copy of the foregoing was served by ordinary mail this 15th day of December 2012 upon Edward Kochalski, Esq., Manley, Deas & Kochalski, LLC, P.O. Box , Columbus, OH An rew M. Engel