IN RE: Foreclosure Cases

CASE NO. NO.1:07CV2282, 07CV2532, 07CV2560, 07CV2602, 07CV2631, 07CV2638, 07CV2681, 07CV2695, 07CV2920, 07CV2930, 07CV2949, 07CV2950, 07CV3000, 07CV3029

CASE: 07-cv-02282-CAB

Fourteen pending foreclosure cases were brought before the district court of the Northern District of Ohio by the Plaintiff-lenders invoking its diversity jurisdiction¹. The Court issued an Order requiring submission of an executed Assignment to show and prove that the Plaintiff was the holder and owner of the note and mortgage as of the date of filing of the complaint. In its amendment of the Order, Court further required the plaintiff to submit an affidavit alleging therein that Plaintiff is the original mortgage holder, or as an assignee, trustee or successor-in-interest. Thereafter, the Court judiciously heard the parties’ arguments.

The issue to be resolved by the Court was: Whether or not the documentary evidence submitted by the plaintiff, as trustee for securitized pools of mortgages on behalf of the mortgage investors is sufficient to establish its ownership of the note and mortgage. Corollary to this issue is, whether or not the plaintiff can establish legal standing to invoke the diversity jurisdiction of the federal court.

The Court in addressing the first issue scrutinized the documentary evidence submitted by the plaintiff. It observed that the affidavits it required to be submitted averred that the Plaintiff is the owner of the note and mortgage but as for the Assignments, none was mentioned about the ownership of the Plaintiff. Instead, what was mentioned was the intention of the plaintiff-lenders to transfer the title, interest and all rights in the mortgage upon receipt of a specified consideration and a note to the Plaintiff named in the Foreclosure complaint caption. Moreover, these assignments were prepared by plaintiffs’ counsel and therefore belie the claim of ownership as of the filing of the complaint.

Pursuant to Ohio law, all matters that involve real property must be in writing and in cases of assignment, the assignee is only entitled to receive distribution from the sale of said real property if such interest is recorded in accordance with the requirements of law.

Anent the issue of legal standing, the Court ruled that the Plaintiffs failed to establish their standing. It clarified that before a party can invoke diversity jurisdiction, three constitutional requirements, i.e. proof of injury in fact, causation and redressability. In other words, plaintiff must show that he personally suffered some injury. Moreover, he must establish that he is the proper party, that the suit is the proper mode to obtain relief.

Plaintiffs failed to prove all of these elements by reason of its premature filing of the action. The Court ordered the dismissal of the fourteen foreclosure cases without prejudice.

¹ Kenneth M. Lapine, in his commentary in LEXISNEXIS, explained that there is a trend to file foreclosure cases in federal courts most especially in northeast Ohio because of the clogging of state courts due to already pending foreclosure cases and federal courts are more efficient in the disposition of cases. Moreover, most of the parties in foreclosure cases are domiciled in states other than Ohio; therefore there is diversity of citizenship jurisdiction.

Written by Kevin Levonas and Giselle G.