January 2, 2013
by David E. Johnson
Lerner, Sampson & Rothfuss – USFN Member (Kentucky, Ohio)
In light of the recent trend in foreclosure defense to challenge a plaintiff lender’s standing to sue, some important decisions out of Kentucky’s appellate courts bear significantly on this issue.
The most important recent Kentucky case on standing arose in the domestic relations context. In the seminal opinion of Harrison v. Leach, 323 S.W.3d 702 (2010), the Kentucky Supreme Court addressed the law of standing at its most fundamental level. The court began by reaffirming its earlier definition of standing as the requirement for a party to “have a judicially recognizable interest in the subject matter of the suit.” Id. at 705. It then considered whether standing was a matter of subject matter jurisdiction, concluding that because Kentucky circuit courts are courts of general jurisdiction empowered to hear “this kind of case,” the court’s subject matter jurisdiction was not implicated.
The court said that “the concepts of standing and subject matter jurisdiction are distinct. Since a lack of standing does not deprive a trial court of subject matter jurisdiction, a party’s failure to raise timely his or her opponent’s lack of standing may be construed as a waiver. Since standing may be waived, an appellate court errs by injecting it into a case on its own motion.” Id. at 709. Further, the court stated elsewhere that “lack of standing is a defense which must be timely raised or else will be deemed waived.” Id. at 708. The practical consequence of this ruling is that since standing is a defense, it is by definition not an element of a plaintiff’s cause of action. In other words, a plaintiff has no legal burden to prove standing if this defense is not raised.
Another important recent case is Stevenson v. Bank of America, 359 S.W.3d 466 (2011), which considered whether a lender had standing where the assignment of mortgage to it was executed and recorded after the filing of the foreclosure. During the foreclosure the lender produced the original blank-endorsed note for inspection, thus proving possession. The court cited UCC section 3-201(2) and held that “[c]ontrary to Stevenson’s contention, the assignment of mortgage was not the document which transferred enforcement rights on the note to BAC, and the date of its execution is immaterial to the case at bar.” Id. at 470.
On both of these issues, in light of the recent decision in Wallace v. Washington Mutual Bank, Case No. 10-3694 (6th Cir. June 26, 2012), it remains the best practice to ensure that the lender’s standing is fully documented when a foreclosure complaint is filed.
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