Mtge. Bank Corp. v. WWIO, Ltd. , 2016 Ohio 7069 ( 2016 )

[Cite as Mtge. Bank Corp. v. WWIO, Ltd., 2016-Ohio-7069.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
The Mortgage Bank Corp., :
Plaintiff-Appellee, :
No. 16AP-44
v. : (C.P.C. No. 10CV-11714)
WWIO, Ltd., : (REGULAR CALENDAR)
Defendant-Appellant, :
George A. Ikimis et al., :
Defendants-Appellees. :
D E C I S I O N
Rendered on September 29, 2016
On brief: Onda, LaBuhn, Rankin & Boggs Co., LPA,
Timothy S. Rankin, and Gregory A. Goetz, for appellant.
Argued: Timothy S. Rankin.
On brief: Gillett Law Office, LLC, and Gary A. Gillett, for
appellee Soroush Firouzmandi. Argued: Gary A. Gillett.
APPEAL from the Franklin County Court of Common Pleas
DORRIAN, P.J.
{¶ 1} Defendant/cross-claim plaintiff-appellant, WWIO, Ltd. ("appellant"),
appeals from a judgment of the Franklin County Court of Common Pleas sustaining
objections to a magistrate's decision filed by defendant/cross-claim defendant-appellee,
Soroush Firouzmandi ("appellee"), and holding that a default judgment entered against
appellee was void for lack of service. For the reasons that follow, we affirm.
I. Facts and Procedural History
{¶ 2} This appeal arises from a foreclosure action that was filed in the Franklin
County Court of Common Pleas on August 10, 2010 by The Mortgage Bank Corp., a.k.a.
No. 16AP-44 2
The Mortgage Banc ("Mortgage Banc"). The foreclosure complaint asserted that appellant
and George A. Ikimis executed a promissory note promising to pay $60,000 to Mortgage
Banc, and that the note was secured by a mortgage on property located at 1258 E.
Livingston Avenue, Columbus, Ohio ("1258 E. Livingston"). The foreclosure complaint
named appellee as a defendant, asserting that he might claim a lien on 1258 E. Livingston
based on a land contract between appellant and appellee. The foreclosure complaint was
served at appellee's residence and was received by his wife, Shahin Efati ("Efati").
Appellee later admitted he received a copy of the foreclosure complaint and did not file an
answer.
{¶ 3} On September 20, 2010, appellant filed an answer to the foreclosure
complaint and a cross-claim against appellee, asserting that appellee entered into a land
contract with appellant on August 11, 2006 for the purchase of 1258 E. Livingston for
$59,547.46. The cross-claim asserted that appellee breached the land contract and sought
to foreclose on appellee's interest in 1258 E. Livingston. A copy of the answer and cross-
claim complaint was sent to appellee at his residential address by certified mail. The
record includes a return receipt signed by Efati indicating that the certified mail
containing the answer and cross-claim complaint was delivered to appellee's residential
address on September 25, 2010. Appellee did not file an answer to the cross-claim; on
November 24, 2010, appellant moved for default judgment against appellee on the cross-
claim. The court granted appellant's motion and entered a default judgment against
appellee on the cross-claim on May 10, 2011. Appellant then filed a motion for a damages
hearing on June 8, 2011 to determine the amount of damages owed on the cross-claim.
The trial court referred the matter to a magistrate, who conducted a hearing on
November 18, 2011, and subsequently issued a decision on December 2, 2011, holding that
appellant was entitled to recover damages of $62,050.47 from appellee. Appellee did not
appear at the damages hearing. No objections to the magistrate's damages decision were
filed and, on January 4, 2012, the trial court adopted the magistrate's decision.
{¶ 4} On May 16, 2012, appellee filed a motion to vacate the default judgment on
the cross-claim, arguing that although Efati signed for the certified mail containing
appellant's answer and cross-claim, she did not understand the documents or bring them
to appellee's attention. Appellee asserted that because he did not receive the cross-claim,
there was no service on him and, therefore, the default judgment against him was void.
No. 16AP-44 3
The trial court referred the motion to vacate to a magistrate and a hearing was held on
June 28, 2012.
{¶ 5} At the hearing, Efati testified that she was born in Iran and moved to the
United States in 1992. She testified her native language was Farsi and that she could
speak very little English and could not read English. Efati testified she suffered from
depression and anxiety and that she took medication for these conditions. She stated she
suffered from headaches and confusion as a result of her conditions and her medication.
With respect to receipt of the couple's mail, Efati testified that she retrieves the mail from
the mailbox at their home and that she also obtains certified mail from the post office.
Efati stated that she would generally throw away advertisements received in the mail but
keep important pieces of mail. However, she also testified there were times when she
would bring all the mail into the house and then throw it away, as well as times when she
would pick up the mail and leave it all in the car, and then later throw it all away when
cleaning out her car. Efati acknowledged that her signature appeared on the return
receipt for the certified mailing containing the answer and cross-claim, but did not
specifically recall receiving that mailing.
{¶ 6} Appellee also testified at the hearing, stating that, like his wife, he was born
in Iran and moved to the United States in 1992. He indicated that his native language was
Farsi and that although he could speak English, he could not read English well. Appellee
testified that he operated a tire installation business located at 1266 E. Livingston Avenue,
Columbus, Ohio. Appellee stated that the property at 1258 E. Livingston was adjacent to
his business. He explained that although the house located at 1258 E. Livingston had
been vacant most of the time, individuals had used that house as a base for breaking into
his business. Appellee testified that in order to stop this activity, he entered into a land
installment contract with Ikimis for the purchase of 1258 E. Livingston. Appellee testified
that he received a copy of the foreclosure complaint filed by Mortgage Banc, but stated he
did not hire an attorney or file a response because a representative from Mortgage Banc
told him he was only named in the complaint because of his interest in the land
installment contract. Appellee denied receiving the answer and cross-claim filed by
appellant and stated that Efati never told him she received it.
{¶ 7} Appellee also testified regarding Efati's mental and emotional conditions, as
well as the fact that she was sometimes confused and forgetful. Appellee testified that
No. 16AP-44 4
Efati sometimes misplaced or threw away important mail. He testified that his brother
once sent a check that he never received, and that he had paid penalties on his credit cards
due to lost statements at least three times. Appellee testified that after Mortgage Banc
acquired 1258 E. Livingston at the sheriff's sale following the foreclosure, he purchased
the property from Mortgage Banc for $25,000. The record indicated that appellee
acquired 1258 E. Livingston from Mortgage Banc on August 13, 2011.
{¶ 8} Following the hearing, the magistrate issued a decision denying the motion
to vacate. The magistrate concluded that the return receipt that Efati signed for the
certified mailing containing the answer and cross-claim created a presumption of valid
service on appellee. The magistrate held that the testimony of appellee and Efati did not
rebut this presumption of valid service. The magistrate further held that, with respect to
Civ.R. 60(B), appellee failed to show excusable neglect and failed to file the motion within
a reasonable time.
{¶ 9} Appellee filed objections to the magistrate's decision, asserting that the
magistrate ignored or failed to sufficiently consider certain facts and that the magistrate
erred by applying the Civ.R. 60(B) standard to appellee's motion. The trial court
sustained some of appellee's objections, holding that appellee had sufficiently overcome
the presumption of valid service and that the default judgment was void for lack of
jurisdiction due to the lack of valid service. The trial court also held that because the
default judgment was challenged as void for lack of service, the requirements of Civ.R.
60(B) were not implicated.
II. Assignment of Error
{¶ 10} Appellant appeals and assigns the following single assignment of error for
our review:
THE TRIAL COURT ERRED IN SUSTAINING APPELLEE'S
OBJECTIONS TO THE MAGISTRATE'S DECISION AND
VACATING THE ENTRY OF DEFAULT JUDGMENT.
III. Discussion
{¶ 11} Appellant's sole assignment of error sets forth two primary arguments.
First, appellant argues the trial court erred by analyzing appellee's claim of lack of actual
service of the cross-claim on him as a jurisdictional matter, and concluding that the
default judgment was void, rather than analyzing the claim under the standard for a
motion for relief from judgment under Civ.R. 60(B). Second, appellant asserts that if the
No. 16AP-44 5
alleged lack of actual service on appellee was a jurisdictional issue, the trial court erred by
concluding that appellee had overcome the presumption of valid service arising from
service of the cross-claim by certified mail pursuant to Civ.R. 4.1(A)(1)(a).
A. Standard of Review
{¶ 12} Each of appellant's primary arguments is subject to a different standard of
review. Appellant's first argument turns on a question of law—whether service was
complete when Efati signed for the certified mail containing the cross-claim, thus giving
the trial court personal jurisdiction over appellee, or whether this created a rebuttable
presumption of service. We review questions of law de novo. See Nationwide Mut. Fire
Ins. Co. v. Guman Bros. Farm, 73 Ohio St. 3d 107, 108 (1995) ("Unlike determinations of
fact which are given great deference, questions of law are reviewed by a court de novo.").
Moreover, this argument addresses the trial court's conclusion that the default judgment
was void due to lack of personal jurisdiction over appellee, which is also an issue subject
to de novo review. See Kauffman Racing Equip., L.L.C. v. Roberts, 126 Ohio St. 3d 81,
2010-Ohio-2551, ¶ 27 ("Personal jurisdiction is a question of law that appellate courts
review de novo."). Appellant's second argument contends the trial court erred by
sustaining some of appellee's objections to the magistrate's decision and by rejecting the
magistrate's decision. When objections are filed, a trial court engages in a de novo review
of a magistrate's decision. McNeilan v. Ohio State Univ. Med. Ctr., 10th Dist. No. 10AP-
472, 2011-Ohio-678, ¶ 19. However, an appellate court generally reviews a trial court's
adoption or denial of a magistrate's decision for abuse of discretion. Brunetto v. Curtis,
10th Dist. No. 10AP-799, 2011-Ohio-1610, ¶ 10. We will consider each of appellant's
arguments in turn.
B. Service of the cross-claim and personal jurisdiction
{¶ 13} Appellant argues the trial court erred by concluding that the default
judgment was void for lack of personal jurisdiction due to lack of service of the cross-
claim on appellee. The trial court found that Efati's admission that she signed the return
receipt for the certified mailing containing the cross-claim created a rebuttable
presumption of valid service, citing this court's decision in TCC Mgt., Inc. v. Clapp, 10th
Dist. No. 05AP-42, 2005-Ohio-4357. The trial court then concluded that the testimony
and evidence presented at the hearing before the magistrate was credible and rebutted the
presumption of valid service. Appellant argues that service by certified mail under Civ.R.
No. 16AP-44 6
4.1(A)(1)(a) was complete when Efati signed for the certified mailing containing the cross-
claim. Appellant asserts the trial court had jurisdiction over appellee based on service
made in compliance with Civ.R. 4.1(A)(1)(a), and the question of whether appellee had
actual notice of the cross-claim should have been analyzed within the context of a motion
for relief from judgment under Civ.R. 60(B).
{¶ 14} Civ.R. 4.1(A)(1)(a) provides that service of process may be made by certified
or express mail, "[e]videnced by return receipt signed by any person." This court
addressed the validity of service by certified mail under that rule in Clapp:
Civ.R. 4.1 outlines the methods for obtaining service of process
within this state, including service via certified mail. Pursuant
to Civ.R. 4.1(A), service of process via certified mail is
evidenced by a return receipt signed by any person. Civ.R.
4.1(A) does not require that delivery is restricted to the
defendant or to a person authorized to receive service of
process on the defendant's behalf. When service is attempted
by certified mail, a signed receipt returned to the sender
establishes a prima facie case of delivery to the addressee.
Valid service of process is presumed when any person at the
defendant's address received the certified mail envelope,
whether or not the recipient is the defendant's agent.
***
However, the presumption of valid service that arises from
appellant's compliance with the civil rules is rebuttable by
sufficient evidence demonstrating non-service. Ohio courts,
including this court, have repeatedly considered claims of
failed service even where service was mailed to the correct
address.
(Citations omitted.) Id. at ¶ 11, 13.
{¶ 15} In Clapp, the plaintiff filed a complaint against both Mr. and Mrs. Clapp.
The clerk of courts mailed a summons and copy of the complaint to each of the Clapps
individually via certified mail at their address. Mr. Clapp signed the return receipts for
both certified mail envelopes. Neither Mr. nor Mrs. Clapp filed an answer, and the trial
court granted default judgment against both of them. Id. at ¶ 2. Mrs. Clapp later filed a
motion to set aside the default judgment against her, arguing that the plaintiff failed to
perfect service on her. Id. at ¶ 4. She submitted an affidavit stating that she never
received service of summons or a copy of the complaint and had no knowledge of the case
until her employer notified her that her wages had been garnished. Id. She also
No. 16AP-44 7
submitted an affidavit from Mr. Clapp, indicating that he was Mrs. Clapp's estranged
husband and that, although he signed for the certified mail envelope addressed to Mrs.
Clapp, he did not open the envelope or give it to Mrs. Clapp. Id. at ¶ 6. The trial court
granted Mrs. Clapp's motion to set aside the default judgment. Id. at ¶ 7.
{¶ 16} On appeal, the plaintiff argued that because the summons and complaint
was sent to Mrs. Clapp's address by certified mail and because Mr. Clapp received and
signed for it, the trial court had personal jurisdiction over Mrs. Clapp and it was irrelevant
whether she had actually received the summons and complaint. Id. at ¶ 13. Pursuant to
the reasoning set forth above, this court rejected that argument. The court concluded that
the unchallenged affidavits submitted by Mrs. Clapp overcame the presumption of valid
service on her. The court concluded that "[i]n the absence of valid service, the trial court
had no personal jurisdiction over [Mrs. Clapp]. Therefore, the default judgment entered
against [her] was void, and the trial court did not abuse its discretion in granting [her]
motion to set aside that judgment." Id. at ¶ 16. In subsequent decisions, this court has
continued to refer to the rebuttable presumption of service arising from service by
certified mail in compliance with Civ.R. 4.1(A)(1)(a). See, e.g., Adams, Babner & Gitlitz,
LLC v. Tartan Dev. Co. (West), LLC, 10th Dist. No. 12AP-729, 2013-Ohio-1573, ¶ 10;
Green v. Huntley, 10th Dist. No. 09AP-652, 2010-Ohio-1024, ¶ 16.
{¶ 17} Appellant claims that Clapp and other decisions from this court conflict
with decisions from the Supreme Court of Ohio holding that there is no rebuttable
presumption once a plaintiff obtains service under Civ.R. 4.1(A)(1)(a). Appellant cites the
Supreme Court's decision in Castellano v. Kosydar, 42 Ohio St. 2d 107 (1975). In that
case, a taxpayer filed a petition for reassessment of a sales tax assessment, but the tax
commissioner dismissed the petition because the taxpayer failed to file it within 30 days
of the service of notice of the original assessment. Id. at 107. The record indicated that
the assessment had been sent to the taxpayer's home by certified mail and signed for by
his wife. Id. The taxpayer claimed that he left the state prior to the date of delivery and
did not receive the notice of assessment until he returned, ten days after it had been
delivered. Id. On appeal, the Supreme Court affirmed the order dismissing the taxpayer's
petition for reassessment. The court noted that service by certified mail under the Rules
of Civil Procedure did not require actual service upon the party receiving the notice, "but
is effective upon certified delivery." Id. at 110. The court concluded that, accordingly, the
No. 16AP-44 8
period for the taxpayer to file an appeal of the sales tax assessment began upon service by
certified mail. Id. at 111. Appellant also refers to Mitchell v. Mitchell, 64 Ohio St. 2d 49
(1980), which applied Castellano in the context of service by certified mail outside the
state. Appellant also cites decisions from this court issued prior to Clapp, and decisions
from other appellate districts relying on Castellano.
{¶ 18} As appellee notes, Castellano was factually distinguishable from the present
case because it involved a statutory time limit for filing an administrative appeal of a tax
assessment, rather than a default judgment. Moreover, in a recent decision applying
Castellano, the Supreme Court held that certified mail creates a rebuttable presumption
of valid service. Gaston v. Medina Cty. Bd. of Revision, 133 Ohio St. 3d 18, 2012-Ohio-
3872, ¶ 13. In Gaston, a property owner sought to reverse an increase in his residential
property taxes. One of the issues the property owner raised on appeal was a claim that he
was not properly served with notice of a board of revision hearing where the county
auditor presented a comparable sale study to support the reappraisal that resulted in the
tax increase. The hearing notice was sent by certified mail; there was a return receipt that
lacked a delivery date but contained the name of the person who signed for delivery of the
notice. Id. at ¶ 5. The property owner asserted that he did not remember receiving any
notice of a hearing and that he was not aware of the hearing. Id. In its analysis of this
claim, the Supreme Court stated that "[u]nder Castellano, when the record shows timely
certified mailing of the administrative order and also shows receipt by a proper person at
the taxpayer's address, the service is presumed valid—with the result that the taxpayer
must shoulder the burden to rebut by presenting 'sufficient evidence demonstrating non-
service.' " (Citations omitted.) Id. at ¶ 13. The court further clarified, in a footnote, "[i]n
this case, we hold that the presumption of valid service is rebuttable." (Citation omitted.)
Id. at ¶ 18, fn. 2. Ultimately, in Gaston, the court concluded that the taxpayer failed to
rebut the presumption of valid service. Id. at ¶ 19-21.
{¶ 19} As a result of the Supreme Court's recognition of a rebuttable presumption
of valid service in Gaston, we conclude that Castellano and the other cases cited by
appellant do not require us to overrule Clapp and our other similar decisions. Moreover,
we note that each of the decisions from this court and from other courts of appeals cited in
support of appellant's argument were decided prior to Gaston. Accordingly, we reject
appellant's argument and conclude that the trial court did not err by concluding that
No. 16AP-44 9
service of the cross-claim in this case created a rebuttable presumption of valid service on
appellee.
C. Rejection of the magistrate's decision
{¶ 20} Having concluded the trial court did not err in applying a rebuttable
presumption of service, we turn to the question of whether the trial court abused its
discretion by rejecting the magistrate's decision and concluding that appellee had
rebutted the presumption of valid service in this case. As explained above, a trial court
engages in a de novo review of a magistrate's decision when objections are filed; however,
we apply an abuse of discretion standard when reviewing a trial court order adopting or
denying a magistrate's decision. An abuse of discretion occurs where a trial court's
determination is "unreasonable, arbitrary or unconscionable." Blakemore v. Blakemore,
5 Ohio St. 3d 217, 219 (1983). In conducting its review, "the trial court has the authority to
determine whether the magistrate's findings of fact are sufficient to support the
conclusions of law made, and to reach a different legal conclusion as long as that
conclusion is supported by the magistrate's findings of fact." Washington v. Ohio Dept. of
Rehab. & Corr., 10th Dist. No. 10AP-136, 2010-Ohio-4323, ¶ 12.
{¶ 21} The magistrate concluded that appellee had failed to rebut the presumption
of service. The magistrate noted that Efati admitted her signature appeared on the
certified mail receipt. The magistrate also relied on Efati's testimony that she usually set
aside for her husband any mail that looked important and did not appear to be an
advertisement, along with Efati's admission on cross-examination that the cross-claim did
not look like an advertisement. The magistrate found that both Efati and appellee only
recalled a few occasions when Efati threw away mail other than advertisements. The
magistrate concluded that this testimony established that Efati's usual practice was to give
mail that did not appear to be advertisements to appellee and that it was more probable
that she followed this usual practice when she received the certified mailing containing
the cross-claim. The magistrate found appellee's testimony that he was unaware of the
cross-claim until well after the final default judgment was entered to be not credible,
concluding that it would have required appellee to not receive several other mailings
containing filings related to the case.
{¶ 22} Appellee filed multiple objections to the magistrate's decision and the trial
court ultimately rejected the magistrate's decision after sustaining several of these
No. 16AP-44 10
objections. Appellee argued that the magistrate failed to sufficiently consider testimony
regarding Efati's mental and emotional conditions as an explanation for appellee's failure
to receive the certified mailing containing the cross-claim. The trial court sustained this
objection, holding that appellee presented sufficient evidence regarding his wife's
conditions to explain why he may not have received mail sent to his home. The trial court
noted that the magistrate's decision acknowledged Efati's mental condition and her
testimony that she had thrown mail away a couple times. However, the trial court found
that the testimony regarding Efati's condition and the times that she had discarded mail
was more extensive than the magistrate's decision indicated. In addition to testifying that
there were a couple times she had thrown all the mail into the trash, Efati also testified
that there were times she picked up the mail and left it in her car, and then later threw it
all away when cleaning out the car. The trial court also cited appellee's testimony that he
had to make late-payment penalties on his credit cards at least three times due to lost or
discarded mail, and that he failed to receive a check mailed by his brother. The court
concluded that the evidence demonstrated there were more than two times that Efati
either discarded or misplaced mail. The trial court also noted that both Efati and appellee
testified that the medication Efati took to treat her depression made her confused and
forgetful. Based on this evidence, the trial court found it credible that Efati may have
received and signed for the certified mailing containing the cross-claim but failed to give it
to appellee.
{¶ 23} Appellee also claimed that the magistrate ignored the fact that appellee
subsequently repurchased the property following the foreclosure and sheriff's sale.
Appellee asserted that this fact supported his claim that he was unaware of the cross-
claim against him, because he would not have repurchased the property only to have it
become an asset subject to attachment under the cross-claim. The trial court noted that
the cross-claim was filed on September 20, 2010, and that default judgment against
appellee on the cross-claim was granted on May 10, 2011. Appellee repurchased the
property from Mortgage Banc on August 13, 2011. The trial court further noted that the
damages hearing on the default judgment against appellee occurred on November 18,
2011. The trial court concluded that appellee's argument that he would not have
repurchased the property had he known of the cross-claim was logical and that the
evidence supported appellee's assertion.
No. 16AP-44 11
{¶ 24} In this case, after reviewing the magistrate's findings of fact and the
evidence presented at the hearing, the trial court reached a different conclusion than the
magistrate on several key issues. The trial court concluded that the testimony from Efati
and appellee presented at the hearing was credible and sufficient to rebut the
presumption of valid service. The trial court expressly cited the testimony on which it
relied and explained why that testimony supported its conclusion. Under the
circumstances presented in this case, we cannot conclude that the trial court abused its
discretion by sustaining appellee's objections and rejecting the magistrate's decision.
{¶ 25} Accordingly, we overrule appellant's sole assignment of error.
IV. Conclusion
{¶ 26} For the foregoing reasons, we overrule appellant's sole assignment of error
and affirm the judgment of the Franklin County Court of Common Pleas.
Judgment affirmed.
TYACK and HORTON, JJ., concur.