Farmer v. PNC Bank, N.A. ( 2017 )

[Cite as Farmer v. PNC Bank, N.A., 2017-Ohio-4203.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
DEVIN A. FARMER :
:
Plaintiff-Appellee : Appellate Case No. 27149
:
v. : Trial Court Case No. 2015-CV-1877
:
PNC BANK, N.A., et al. : (Civil Appeal from
: Common Pleas Court)
Defendants-Appellees :
:
and :
:
JOSEPH KISTNER :
:
Defendant-Appellant :
...........
OPINION
Rendered on the 9th day of June, 2017.
...........
ANDREW M. ENGEL, Atty. Reg. No. 0047371, THOMAS W. KENDO, JR., Atty. Reg. No.
0058548, 7925 Paragon Road, Centerville, Ohio 45459
Attorneys for Defendant/Cross-Claimant/Appellant-Joseph Kistner
H. TOBY SCHISLER, Atty. Reg. No. 0068306, 255 East Fifth Street, Suite 1900,
Cincinnati, Ohio 45202
Attorney for Defendant/Cross-Claimant/Appellee – PNC Bank, N.A.
.............
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WELBAUM, J.
{¶ 1} Defendant/Cross-Claimant/Appellant, Joseph Kistner, appeals from a trial
court judgment granting a motion for sanctions and judgment filed by Defendant/Cross-
Claimant/Appellee, PNC Bank, N.A. (“PNC”). Kistner contends that the trial court erred
in granting judgment against him, in assessing damages against him, and in dismissing
his cross-claims against PNC.
{¶ 2} We conclude that the trial court erred in failing to provide Kistner with a
reasonable opportunity to be heard regarding the motion for sanctions, which resulted in
a default judgment against Kistner, an award of damages against Kistner, and dismissal
of Kistner’s cross-claims against PNC. As a result, the judgment of the trial court will be
reversed, and this cause will be remanded for further proceedings.
I. Facts and Course of Proceedings
{¶ 3} In April 2015, Devin Farmer filed a complaint against Joseph Kistner, PNC,
Samuel Whitaker, and Martha Kline. The complaint was based on Famer’s purchase of
a property located on Olson Drive in Kettering, Ohio. Kistner had previously owned the
property and had granted a mortgage in 2005 to National City Bank, a division of National
City Mortgage of Indiana. The complaint alleged that PNC was the successor by
assignment to National City Mortgage and a stakeholder.
{¶ 4} According to the complaint, National City had assigned the mortgage to
Mortgage Electronic Registration System (“MERS”) in 2006, and MERS had then
assigned Kistner’s mortgage to Watermark Financial Partners (“Watermark”) in August
2011. In late September 2011, PNC filed a foreclosure action against Kistner in
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Montgomery County Common Pleas Court (Case No. 2011-CV-07060), but the case was
dismissed for lack of standing in August 2012. Shortly after the dismissal, Samuel
Whitaker signed a release of the mortgage, as nominee for Watermark, and the release
was filed in Montgomery County, Ohio, property records on August 15, 2012.
{¶ 5} The complaint further alleged that Watermark was not doing business in
August 2012, that Whitaker was not affiliated with Watermark, and that Kistner had
fraudulently obtained the release. Kline was the individual who had notarized Whitaker’s
signature on the release.
{¶ 6} According to the complaint, Kistner then executed and delivered a general
warranty deed to Farmer for the Olson Drive property on December 31, 2012. Kistner
received more than $70,000 for the sale of the property, but did not remit any money to
PNC or anyone else, to satisfy the mortgage. Farmer’s general warranty deed for the
property was filed on January 1, 2013.
{¶ 7} In the complaint, Farmer asked for a declaration of her rights in the property
and a determination of her rights as a bona fide purchaser. She also asked for damages
from Kistner for breach of the warranty covenants, and for damages from Kistner,
Whitaker, and Kline for fraudulent conduct in connection with the release.
{¶ 8} In May 2015, PNC filed an answer in which it stated that it was a successor
by assignment from National City Mortgage. PNC denied that it had authorized any
release, and denied that Farmer’s alleged status as a bona fide purchaser should have
an effect on its mortgage. In addition, PNC filed cross-claims for contribution and
indemnity against Kistner, Whitaker, and Kline, to the extent that any liability were found
against PNC, or if any determination of rights negatively affected PNC’s mortgage.
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{¶ 9} Kistner filed a pro se answer to the complaint, as well as a cross-claim
against PNC. The cross-claim alleged fraud and concealment in connection with the
2011 foreclosure action PNC had filed; fraud, unclean hands, and concealment regarding
the various assignments of the mortgage since 2005; violation of public policy by MERS
(which was not a party); and estoppel and laches with respect to assignments of the
mortgage, including a “Corrective Assignment” executed by a nominee for PNC and filed
in the Montgomery County, Ohio, property records on February 15, 2013. PNC filed an
answer to the cross-claim in June 2015, and asserted various affirmative defenses.
{¶ 10} Between June and September 2015, Kistner, Kline, and Whitaker engaged
in various actions that hindered discovery. In early June 2015, the trial court set a
telephone scheduling conference for June 24, 2015. After Kistner’s co-defendant, Kline,
moved for summary judgment based on the fact that she had never met Kistner and had
simply notarized Whitaker’s signature, Kistner filed a motion to continue the scheduling
conference until the trial court ruled on the summary judgment motion, even though the
motion had nothing to do with the claims against him.
{¶ 11} Both Farmer and PNC then filed motions under Civ.R. 56(F), asserting that
discovery was needed before they could reply to the pending motions.1 On July 10,
2015, the trial court granted the Civ.R. 56(F) motions, stressing that discovery was
needed, and that an “uncorroborated, self-serving affidavit” was “deemed insufficient to
establish the absence of any genuine issue of material fact where the opposing parties
1 “Pending motions” refers to the fact that Whitaker had also filed a motion for summary
judgment on June 23, 2015, claiming his actions were merely ministerial as a notary
public, and were at Kistner’s direction. Whitaker additionally took various actions to
hinder discovery.
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have not yet been afforded an opportunity to explore the underlying facts through
discovery.” (Emphasis sic.) Docket Summary, Case No. 26911, Doc. #47, p. 6.2 On
the same day, the court also denied Whitaker’s motion for an extension of time to respond
to discovery until after the court had ruled on all pending motions. The court again
stressed that the defendants were required to submit to discovery before Farmer and
PNC had to respond to summary judgment motions. In addition, this entry mentioned
potential sanctions for failure to provide discovery. Id. at Doc. #46, p. 7.
{¶ 12} In the meantime, Farmer had filed notices to take depositions of Kistner,
Kline, and Whitaker. The notices were filed on June 24, 2015, and the depositions were
set for July 22, 2015. Thus, Kistner had nearly a month’s notice of his deposition.
{¶ 13} On July 13, 2015, Kistner filed a motion for partial summary judgment based
only on general assertions that he did not do anything wrong and lacked fraudulent intent.
The following day, Farmer filed a Civ.R. 56(F) motion, which was granted by the court on
July 30, 2015. Kistner also had filed a motion for a protective order on July 17, 2015,
asking the court to stay discovery until it had ruled on all pending motions. Farmer
responded on July 20, 2017, noting that counsel had received a letter from Kistner on
2 The citation to Case No. 26911 refers to a prior appeal in this case, which involved two
trial court orders. One order was filed on October 13, 2015, and the other was filed on
October 15, 2015. We dismissed Kistner’s appeal from the October 13, 2015 order
because Kistner failed to timely appeal. See Farmer v. PNC Bank, National Assn., 2d
Dist. Montgomery No. 26911, pp. 8-9 (Mar. 31, 2016) (Farmer I). We also dismissed
Kistner’s appeal from the October 15, 2015 order for lack of a final appealable order. Id.
at pp. 9-10. After the case was remanded, the trial court filed an entry resolving the
remaining claims, and Kistner appealed from that final order. This resulted in the appeal
that is now before us (Case No. 27149). In the current appeal, the clerk filed a new
summary of docket and journal entries and papers. However, the new docket summary
begins with Doc. #1, and contains only matters filed in the trial court after the case was
originally appealed. As a result, there are two sets of docket and journal entries.
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July 17, 2015, which asked that the July 22 deposition be moved from Columbus to
Dayton. Notably, Kistner did not object to having his deposition taken. Counsel then
accommodated Kistner by moving the deposition to Dayton. In addition, Farmer noted
that the court had previously rejected the position that Kistner was taking about discovery
being delayed until after the court had ruled on pending motions.
{¶ 14} On July 22, 2015, Farmer filed a supplemental response, informing the court
that Kistner had agreed to be deposed on August 6, 2015, in Dayton. Farmer again
asked the court to deny Kistner’s motion for a protective order. The court denied
Kistner’s motion for a protective order on July 27, 2015, and stressed again that discovery
must proceed. As was noted, on July 30, 2015, the court granted Farmer’s Civ.R. 56(F)
motion for an extension of time to reply to Kistner’s motion for summary judgment. In
this decision, the court emphasized that any delays in discovery were attributable to the
defendants other than PNC, and reiterated its prior remark about uncorroborated, self-
serving affidavits. Docket Summary, Case No. 26911, Doc. #67, p. 6.
{¶ 15} Farmer then filed a motion to compel discovery from Kistner on August 13,
2015. In the motion, Farmer stated that Kistner had appeared on August 6 for his
deposition, but after being questioned for two hours, Kistner asked for counsel and
stopped responding to questions. The deposition was adjourned and was to be
reconvened after Kistner obtained counsel. However, despite efforts by Farmer to
resolve the issue, Kistner had not provided Farmer with information about counsel. On
August 21, 2015, Farmer filed a supplement to the motion to compel, noting that Kistner
had not retained counsel. In fact, Kistner had sent a fax indicating that he had decided
to continue with discovery and would likely retain counsel for trial.
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{¶ 16} Farmer stressed that this “change of heart” did not justify Kistner’s refusal
to answer questions at his deposition. In addition, Farmer commented that the parties
would incur additional time and travel expenses when the deposition was reconvened.
As a result, Farmer asked for fees and costs, and also asked the court to grant the motion
to compel to prevent this type of delay from occurring again.
{¶ 17} On August 25, 2015, Farmer filed a third notice of deposition, requiring
Kistner to appear for a deposition on September 3, 2015, in Dayton, Ohio. Kistner then
filed a notice that he would not be available on that date, and asked for another protective
order. In a response filed on September 1, 2015, counsel for Farmer indicated that
Kistner had not called to request a different date, and was, therefore, not entitled to relief
under Civ.R. 26(C). Nonetheless, counsel stated that the deposition would be
rescheduled because Kistner would not likely appear.
{¶ 18} On September 1, 2015, the trial court referred the matter to a magistrate for
purposes of discovery. The court also granted Farmer’s motion to compel discovery and
denied Kistner’s motion for protective order. At this point, the court ordered Kistner to
appear for deposition at a time to be determined by the magistrate at a scheduling
conference to be held on September 10, 2015. In its decision, the court stated that given
the contentious history surrounding Kistner’s deposition, the deposition should go forward
under the court’s strict supervision. The court further stated that the magistrate would
oversee the remainder of the continued deposition. Kistner was also ordered to pay
Farmer reasonable costs, including attorney fees, for obtaining the order.
{¶ 19} Finally, the court stated that:
Defendant Kistner is further cautioned that failure to timely and
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completely comply with all terms of this Order WILL result in the imposition
of additional sanctions in accordance with Civ.R. 37(B), which may include
but are not limited to the issuance of an Order holding that the facts alleged
in Plaintiff’s complaint as against Defendant Kistner shall be taken as
established for the purposes of this action, refusing to allow Defendant
Kistner to oppose Plaintiff’s claims or to support his own defenses to those
claims, prohibiting Defendant Kistner from introducing certain evidence,
striking out Defendant Kistner’s answer or parts thereof, and/or rendering a
judgment by default against Defendant Kistner, as well as being held in
contempt of this Court and required to pay Plaintiff’s additional reasonable
expenses, including attorney fees.
(Emphasis sic.) Docket Summary, Case No. 26911, Doc. #80, pp. 13-14.
{¶ 20} Subsequently, on September 18, 2015, Kistner filed a motion to continue
the deposition scheduled for September 21, 2015 before the magistrate, because he had
not been able to obtain counsel. Farmer then filed a motion for sanctions on September
24, 2015. In the motion, Farmer indicated that Kistner’s motion was filed very late in
the day on the Friday before the Monday that the deposition was scheduled. The motion
alleged that all parties, including Kistner, appeared on Monday, September 21, 2015,
before the magistrate, who heard the motion for continuance.3 According to Farmer,
Kistner repeatedly told the magistrate that he was unsure how to proceed, and the
3 No transcript of this hearing is in the record. Therefore, any description of comments
made during the hearing are allegations, only. Farmer’s counsel did file an affidavit,
stating only that she had attended a deposition on September 21, 2015, which turned into
a continuance hearing, and outlined a few questions she would have asked Kistner.
PNC did not file any affidavit with its motion for sanctions.
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magistrate advised Kistner that he could answer questions or risk sanctions for failing to
do so. Kistner refused to answer when the magistrate asked if he were refusing to
proceed. After about 30 minutes, the magistrate stated that he would consider Kistner’s
position as a refusal to answer deposition questions, and asked for oral motions. At that
point, Farmer and PNC orally moved for judgment and for an order dismissing all claims
or defenses that Kistner had interposed. The hearing was then adjourned. Again, the
recounting of these matters is based on allegations only, since the transcript is not in the
record.
{¶ 21} PNC filed a response to Farmer’s motion for sanctions, agreeing with the
motion, but clarifying that to the extent any relief was ordered that would impair PNC’s
status as the first and best lienholder, that issue would have to be resolved. On October
5, 2015, PNC also filed its own motion for sanctions and judgment against Kistner, and
incorporated the statement of facts in Farmer’s motion. PNC further stated that during
the deposition on August 6, 2015, Kistner admitted that he had no permission from PNC,
or anyone related to the mortgage, to record the purported release of the mortgage. In
addition, Kistner admitted that he still owed money on the mortgage and that he did not
pay PNC any of the sale proceeds that he had received.
{¶ 22} On October 5, 2015, the trial court granted Farmer’s motion for sanctions,
struck Kistner’s pro se answer and cross-claim, and entered judgment in favor of Farmer
against Kistner. The court directed Farmer to file a proposed final judgment entry, which
was filed and signed by the court on October 13, 2015. The court also granted PNC’s
motion for sanctions on October 8, 2015. At that time, the court entered judgment in
PNC’s favor on its cross-claim against Kistner and on the cross-claim that Kistner had
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filed against PNC. The court directed PNC to file a proposed judgment entry, which was
filed and signed by the court, apparently on the same day, on October 15, 2015.
{¶ 23} On October 15, 2015, Farmer dismissed her claims against Whitaker under
Civ.R. 41(A), without prejudice.4 Kistner then filed a notice of appeal from the October
13 and 15, 2015 judgments on November 13, 2015. This appeal was docketed as Case
No. 26911 in our court. As noted previously, we dismissed the appeal in its entirety on
March 31, 2016. Farmer I, 2d Dist. Montgomery No. 26911 (Mar. 31, 2016).
{¶ 24} We concluded that the notice of appeal was untimely with respect to the
October 13, 2015 judgment, which contained a Civ.R. 54(B) certification and was a final
appealable order on that date. Id. at pp. 8-9. However, we also concluded that the
judgment of October 15 was not a final appealable order because it lacked a Civ.R. 54(B)
certification, and PNC’s cross-claims against Whitaker and Kline were still pending in the
trial court. Id. at pp. 9-10.
{¶ 25} After remand, the trial court filed a decision on May 20, 2016, addressing
our concerns. The court noted that Farmer made no direct claim against PNC, and that
the issue of PNC’s liability had been fully resolved in PNC’s favor, with no liability having
been assessed against PNC. Therefore, the court concluded that PNC’s claims against
Whitaker and Kline had been rendered moot by the judgment in PNC’s favor, and
dismissed those claims as moot. On June 15, 2016, Kistner timely appealed from the
court’s decision.
4Farmer had previously filed a Civ.R. 41(A) dismissal of her claims against Kline on
August 21, 2015.
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II. Did the Trial Court Err in Granting Judgment Against Kistner?
{¶ 26} Kistner’s First Assignment of Error states that:
The Trial Court Erred in Granting Judgment Against Appellant.
{¶ 27} Under this assignment of error, Kistner argues that the trial court erred by
entering judgment against him without providing him with notice and an opportunity to be
heard.
{¶ 28} Civ.R. 37(B)(1) provides, in pertinent part, that:
If a party or a party's officer, director, or managing agent or a witness
designated under Civ.R. 30(B)(5) or Civ.R. 31(A) fails to obey an order to
provide or permit discovery, including an order made under Civ.R. 35 or
Civ.R. 37(A), the court may issue further just orders. They may include the
following:
***
(b) Prohibiting the disobedient party from supporting or opposing
designated claims or defenses, or from introducing designated matters in
evidence;
(c) Striking pleadings in whole or in part;
***
(e) Dismissing the action or proceeding in whole or in part;
(f) Rendering a default judgment against the disobedient party * * *.
{¶ 29} Trial courts have sound discretion in deciding what sanctions to impose
under Civ.R. 37(B). Quonset Hut, Inc. v. Ford Motor Co., 80 Ohio St.3d 46, 47-48, 684
N.E.2d 319 (1997). An abuse of discretion occurs when “the court’s attitude is
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‘unreasonable, arbitrary or unconscionable.’ ” Blakemore v. Blakemore, 5 Ohio St.3d
217, 219, 450 N.E.2d 1140 (1983), quoting State v. Adams, 62 Ohio St.2d 151, 157, 404
N.E.2d 144 (1980). (Other citations omitted.) Dismissal is a harsh sanction, and “should
be reserved for cases when a party's conduct falls substantially below what is reasonable
under the circumstances, evidences a complete disregard for the judicial system or the
rights of the opposing party, or when the failure to comply with discovery orders is due to
willfulness or bad faith.” (Citations omitted.) Foley v. Nussbaum, 2d Dist. Montgomery
No. 24572, 2011-Ohio-6701, ¶ 20.
{¶ 30} In Ohio Furniture Co. v. Mindala, 22 Ohio St.3d 99, 488 N.E.2d 881 (1986),
the Supreme Court of Ohio considered whether the trial court had erred in dismissing an
appellant’s action with prejudice for failing to comply with discovery orders. Id. at 101.
The court first noted that Civ.R. 41(B)(1) permits dismissal of actions for failure to comply
with court orders, “ ‘after notice to the plaintiff’s counsel.’ ” (Emphasis sic.) Id., quoting
Civ.R. 41(B)(1). The court then held that “the notice requirement of Civ.R. 41(B)(1)
applies to all dismissals with prejudice, including those entered pursuant to Civ.R.
37(B)(2)(c) for failure to comply with discovery orders. A dismissal on the merits is a
harsh remedy that calls for the due process guarantee of prior notice.” Id.
{¶ 31} The court stressed that “[n]otice of intention to dismiss with prejudice gives
the non-complying party one last chance to obey the court order in full. The moving party
should not be allowed to circumvent this protection by simply framing his motion in terms
of a Civ.R. 37 sanction. Nor should a trial court on its own motion dismiss on the merits
without prior notice.” Id.
{¶ 32} Subsequently, in Quonset, the Supreme Court of Ohio stated that “[f]or
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purposes of Civ.R. 41(B)(1), counsel has notice of an impending dismissal with prejudice
for failure to comply with a discovery order when counsel has been informed that
dismissal is a possibility and has had a reasonable opportunity to defend against
dismissal.” Quonset, 80 Ohio St.3d 46, 684 N.E.2d 319, at syllabus.
{¶ 33} In Hillabrand v. Drypers Corp., 87 Ohio St.3d 517, 721 N.E.2d 1029 (2000),
the Supreme Court of Ohio explained that “[a] ‘reasonable opportunity to defend against
dismissal’ under Quonset contemplates that a trial court allow the party opposing
dismissal the opportunity to respond at least within the time frame allowed by the
procedural rules of the court.” Id. at 519-520. In Hillabrand, the local rules of court
provided a 14-day time frame for responding to motions. Id. at 519. However, instead
of allowing time for a response, the trial court granted the motion for sanctions two days
after it was filed and on the same day the offending party had received the motion from
the filing party. Id. As a result, the Supreme Court of Ohio reversed the dismissal and
remanded the case for further proceedings. Id. at 520.
{¶ 34} In Baker v. Edmonds, 2d Dist. Clark No. 2002-CA-17, 2003-Ohio-1030, we
held that the notice requirement in Civ.R. 41(B)(1) did not apply, because the case
involved issuance of a default judgment as a sanction for the defendant’s failure to appear
for a deposition, rather than a dismissal. Id. at ¶ 21. We concluded, as a result, that
Ohio Furniture (and by implication, its progeny), did not apply. Id.5 We then stated that
5 In contrast, other cases, including one in our own district, have held that “since proper
notice is a prerequisite to any dismissal, it is, by analogy, a prerequisite to any default
judgment.” Gunton Corp. v. Architectural Concepts, 8th Dist. Cuyahoga No. 89725,
2008-Ohio-693, ¶ 7, citing LaRiche v. Delisio, 8th Dist. Cuyahoga No. 77352, 2000 WL
1754023 (Nov. 30, 2000). Accord Huntington Natl. Bank v. Zeune, 10th Dist. Franklin
No. 08AP-1020, 2009-Ohio-3482, which noted that “ ‘[t]he granting of default judgment is
an equally harsh remedy [as dismissal] and requires the same due process guarantee of
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“arguably,” Civ.R. 55(A) requires “some sort of notice before a judgment of default is
entered against” * * * “a defendant against whom a default judgment is sought as a
discovery sanction.” Id. at ¶ 22. However, we concluded that we did not need to decide
the issue because the trial court’s order provided the defendant with notice of its intent to
enter default as a discovery sanction. Id. at ¶ 23.6 In Associated Business Inv. Corp. v.
CTI Communications Inc., 2d Dist. Montgomery No. 19211, 2002-Ohio-6385, we also
held that “implied notice” satisfied due process, where the trial court’s order required the
defendants to produce requested discovery and stated only that “ ‘[f]ailure to comply in
good faith with any provision of this Order may result in the award of further sanctions as
provided for in Civil Rule 37(B).’ ” Id. at ¶ 6 and 23.
{¶ 35} In view of our prior authority, we conclude that the notice of potential default
prior notice as dismissal.’ ” Id. at ¶ 23, while discussing Ohio Furniture, 22 Ohio St.3d at
101, 488 N.E.2d 881, and Hillabrand, 87 Ohio St.3d at 518, 721 N.E.2d 1029. (Other
citations omitted.) See also Dayton Modulars, Inc. v. Dayton View Community Dev.
Corp., 2d Dist. Montgomery No. 20894, 2005-Ohio-6257, ¶ 9 (observing that “ ‘[t]he
granting of a default judgment requires the due process guarantee of prior notice,’
including those entered for failure to comply with discovery orders.”) (Citation omitted.)
However, we do not need to resolve any potential conflict between our comments in Baker
and Dayton Modulars. Even if Kistner had proper notice of the possibility of default, that
would not preclude a finding that the trial court failed to provide him with a reasonable
opportunity to defend the motion for sanctions.
6 We note that other courts have held that when default judgment is rendered as a Civ.R.
37(D) sanction, the trial court must give a party a seven day notice of hearing on the
motion for default judgment, required by Civ.R. 55(A), prior to entering judgment. See,
e.g., Cunningham v. Garruto, 101 Ohio App.3d 656, 660, 656 N.E.2d 392 (3d Dist.1995);
Amtrust N. Am., Inc. v. Novus Credit Sols., Inc., 8th Dist. Cuyahoga No. 97499, 2012-
Ohio-4272, ¶ 15-19; Gray v. Newman, 8th Dist. Cuyahoga No. 89549, 2008-Ohio-1076,
¶ 15 (seven days’ notice of hearing on motion for default judgment is required). Again,
we need not resolve any potential conflict. Under any standard, Kistner had appropriate
prior notice that dismissal was a potential sanction. Furthermore, Baker did not rely on
whether or not the notice requirements in Civ.R. 55(A) applied; the default judgment was
reversed because the trial court abused its discretion by failing to conduct a sufficient
inquiry on the merits. Baker, 2d Dist. Clark No. 2002-CA-17, 2003-Ohio-1030, at ¶ 27.
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was sufficient to comply with due process. Our notice was less definite than the notice
in Baker, where the court definitively said it would grant a default judgment if the
defendant failed to appear for his deposition. Baker at ¶ 4. In contrast, the notice here
stated that sanctions would be imposed, but only listed several possible sanctions, some
of which were less severe than a default. However, the notice approved in Associated
Business was even less specific.
{¶ 36} Although the court’s notice of potential sanctions was sufficient to alert
Kistner of the possibility of default or dismissal, a separate issue exists concerning
whether Kistner had a reasonable opportunity to respond to the motion for sanctions. In
Bank One, NA v. Wesley, 2d Dist. Montgomery No. 20259, 2004-Ohio-6051, a trial court
granted a default judgment against the defendants and dismissed their counterclaim
without allowing them the 14-day period that former Montgomery County Common Pleas
Court Loc.R. 2.05(II)(B)(2) allotted for responding to a motion for sanctions. Id. at ¶ 1.
We held that this was prejudicial error. Id. at ¶ 13-21. In particular, we relied on the
Hillabrand decision. Id. at ¶ 1, 16-17, and 21, citing Hillabrand, 87 Ohio St.3d 517, 721
N.E.2d 1029. To the same effect is Chrysler Credit Corp. v. Tackett, 2d Dist. Clark No.
2881, 1992 WL 180139, *4 (July 20, 1992) (reversing a default judgment imposed under
Civ.R. 37(D), where the trial court violated its own rules by issuing a ruling without giving
the opposing party time to respond to a motion for sanctions).
{¶ 37} The current rule, Loc.R.2.05(B)(2)(b) of the Court of Common Pleas of
Montgomery County, General Division, provides that all memoranda opposing a motion
shall “be filed and served within 14 days from the date on which the motion was served.
If no memorandum is filed within this time limit, the motion may be decided forthwith.” In
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this case, PNC’s motion for sanctions and judgment was filed on October 5, 2015, and
the court’s decision was filed only three days later, on October 8, 2015.
{¶ 38} By failing to give Kistner time to respond before granting the motion for
sanctions and request for default judgment, the trial court violated its own rules.
Furthermore, the court’s decision referred to events that allegedly occurred during a
hearing at which the court was not present; instead, a magistrate conducted the hearing.
The magistrate did not issue a decision, and no transcript of the hearing was filed. As a
result, the court could not possibly have known exactly what transpired at the hearing,
other than that a continuance was discussed. The court appears to have relied on mainly
unverified statements of counsel, which Kistner was not given a chance to rebut. These
actions prejudiced Kistner.
{¶ 39} As we noted in Wesley, “[t]he determination of what sanction to impose
upon a party as a result of its failure to comply with discovery is confided to the sound
discretion of the trial court. Due process requires that both parties have an opportunity
to present arguments addressed to the trial court's exercise of this discretion before it
makes a decision. By making the decision to impose the extreme sanction of default
judgment before the time had run out under the trial court's own local rule, the trial court
deprived the [defendants] of their opportunity to attempt to persuade the trial court that a
lesser sanction was warranted in this case.” Wesley at ¶ 21.
{¶ 40} Accordingly, the First Assignment of Error is sustained.
III. Did the Trial Court Err in Assessing Damages Against Kistner?
{¶ 41} Kistner’s Second Assignment of Error states that:
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The Trial Court Erred in Assessing Damages Against Kistner.
{¶ 42} Under this assignment of error, Kistner argues that the trial court erred in
awarding damages to PNC because PNC’s cross-claim against him was only for
contribution and/or indemnification. In addition, Kistner contends that the trial court erred
in awarding damages because the court was required to hold a hearing on damages.
PNC argues, in response, that even if the trial court erred, any error was harmless
because the judgment PNC obtained simply imposes an obligation that already exists
due to the judgment that Farmer obtained. Specifically, the damages award to Farmer
of $193,986.38 is the same amount that was later awarded to PNC. In addition, PNC
argues that Kistner has already admitted fraud.
{¶ 43} Because this case is being reversed and remanded, this assignment of error
is moot. On remand, the trial court may or may not decide to impose judgment for the
alleged violation of the sanctions. Nonetheless, a few observations are in order.
{¶ 44} As a preliminary matter, PNC failed to submit any documentation to the trial
court to support the judgment that was entered. Specifically, PNC’s motion for sanctions
did not include any factual materials or affidavits. Farmer’s previously filed motion for
sanctions did include a transcript of Kistner’s deposition, a copy of a settlement statement,
and a dated copy of a $70,683.61 check made out to Kistner from Partners Land Title
Company. The check was dated December 31, 2012.7
{¶ 45} In his deposition, Kistner admitted that he originally had a mortgage with
7 This evidence might have been appropriate as no objection was entered by Kistner.
However, the trial court also granted Farmer’s motion for sanctions without allowing
Kistner the response time required by Loc.R. 2.05(B)(2)(b) of the Court of Common Pleas
of Montgomery County, General Division. In addition, none of this evidence pertained to
PNC’s claim, as PNC’s mortgage was released at the time of the closing.
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National City Mortgage, a division of National City Bank of Indiana (not PNC), in the
amount of $119,700, that was recorded on June 14, 2005. He admitted preparing a
release of this mortgage, and further admitted that he had not paid off the mortgage when
he asked Whitaker to sign the mortgage release as nominee for Watermark. No
testimony was elicited as to the amount of the mortgage when it was released. Kistner
also testified that he asked Whitaker to record the release, and that Whitaker had
delivered the recorded original back to him. These were the sole facts before the trial
court when it granted judgment.
{¶ 46} Typically, once a default judgment has been granted, a trial court will
schedule a hearing on damages. See, e.g., Dayton Modulars, 2d Dist. Montgomery No.
20894, 2005-Ohio-6257, at ¶ 1 (trial court granted default judgment for discovery violation
and scheduled damages hearing); Goodpaster v. Banker, 1st Dist. Hamilton No. C-
150031, 2016-Ohio-1077, ¶ 16 (stating that “even though a party is in default, the plaintiff
must still prove his damages and the trial court must ascertain what damages are
appropriate”).
{¶ 47} In Goodpaster, the court of appeals concluded that a default judgment had
been properly awarded against the defendant for noncompliance with discovery. Id. at
¶ 15. However, the court reversed the damages that had been awarded against the
defendant and found that the trial court had not engaged in a sound reasoning process.
Id. at ¶ 17-18. In particular, the court of appeals commented that:
While the trial court has discretion in determining the measure of the
damages, and the method of proof of those damages, that discretion is not
unlimited. Even if a defendant is in default, he has a right to appear at the
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damages hearing, to object to the introduction of evidence that is improper,
and to participate in the hearing to minimize the damages. The denial of
this right is error.
Goodpaster at ¶ 17.
{¶ 48} In situations involving liquidated damages, an evidentiary hearing on
damages may not be required. Hull v. Clem D's Auto Sales, 2d Dist. Darke No. 2011-
CA-6, 2012-Ohio-629, ¶ 7. “ ‘However, when the judgment is not liquidated, or only
partially liquidated, it is reversible error for the trial court to enter a default judgment
without holding a hearing on the damages issue.’ ” Id., quoting Mid-American
Acceptance Co. v. Reedy, 11th Dist. Lake No. 89-L-140072, 1990 WL 94816, *2 (June
29, 1990). (Other citations omitted.). Where no documented factual materials have
been presented to the trial court, there is no way to ascertain if the damages awarded
were liquidated, partially liquidated, or appropriate.
{¶ 49} We also express some confusion about the state of the claims in this case.
As was noted above, PNC was named in this action as a stakeholder, and the complaint
does not contain any specific claims against PNC. Count One of the Complaint asks for
a declaration of Farmer’s rights under the deed and a determination of her rights as a
bona fide purchaser for value of the property. The remaining claims in the complaint
(breach of warranty, fraud, and revocation of notary commission and damages) do not
contain any allegations about PNC, and the prayer for relief asks for damages only
against Kistner, Whitaker, and Kline, not against PNC.
{¶ 50} PNC did not assert a counterclaim against Farmer. In response to
paragraphs 21, 22, and 23 of the complaint, which discuss Farmer’s request for a
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declaration of her rights under the deed and a determination of her rights as a bona fide
purchaser for value, PNC stated that these allegations called for legal conclusions. PNC
also denied that any declaration of rights, or determination that Farmer was a bona fide
purchaser, would release or negatively affect PNC’s mortgage on the property.
{¶ 51} PNC’s cross-claim against Kistner, Kline, and Whitaker states that “[t]o the
extent any liability is found against PNC, or to the extent any determination of rights
negatively affects PNC’s Mortgage or interest in the Property, which PNC expressly
denies, such outcome was exclusively, solely, and proximately caused by the conduct of
co-defendants Kistner, Whitaker, and Kline.” Docket Summary, Case No. 26911, Doc.
# 15, p. 9. PNC, therefore, asked for contribution or indemnity from these defendants to
the extent PNC would be found liable or if any determination of rights negatively affected
PNC’s mortgage or interest in the property. Id.{¶ 52} The October 13, 2015 judgment that Farmer received is now final, based
on Kistner’s failure to timely appeal, as well as PNC’s failure to appeal. In the judgment
entry filed on October 13, 2015, the trial court declared that the August 2012 release was
fraudulent as to Farmer, that Farmer was the bona fide purchaser for value of the Olson
Drive property, and that Farmer had been damaged in the amount due to PNC on the
subject mortgage. The court, therefore, entered judgment in favor of Farmer in the
amount of $193,896.38.
{¶ 53} “The purpose of recording mortgages and other encumbrances on property
is to give notice to bona fide purchasers of the mortgage holder's lien.” (Citations omitted.)
Acacia on the Green Condo. Assn., Inc. v. Jefferson, 2016-Ohio-386, 47 N.E.3d 207, ¶
25 (8th Dist.). The law is well-established that “a bona fide purchaser for value is bound
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by an encumbrance upon land only if he has constructive or actual knowledge of the
encumbrance.” Tiller v. Hinton, 19 Ohio St.3d 66, 68, 482 N.E.2d 946 (1985), citing R.C.
5301.25. Because PNC did not appeal the finding that Farmer was a bona fide
purchaser, Farmer may not be bound by PNC’s mortgage.
{¶ 54} The judgment entry rendered in PNC’s favor stated that the release filed by
Kistner was fraudulent and void. In addition, the entry stated that PNC’s mortgage was
the first and best lien on the premises, and gave PNC judgment against Kistner in the
amount of $193,896.38. However, “a purchaser of real estate who acquires the legal
title in good faith for a valuable consideration without notice of an existing equity takes
the property free from such equity.” Shaker Corlett Land Co. v. Cleveland, 139 Ohio St.
536, 41 N.E.2d 243 (1942), paragraph three of the syllabus. Accord Mollohan v. Court
Dev., Inc., 9th Dist. Lorain No. 03CA008361, 2004-Ohio-2118, ¶ 19, abrogated on other
grounds, Internatl. Bd. of Electrical Workers, Local Union No. 8 v. Vaughn Industries,
L.L.C., 116 Ohio St.3d 335, 2007-Ohio-6439, 879 N.E.2d 187; Montgomery Cty.
Treasurer v. Gray, 2d Dist. Montgomery No. 20254, 2004-Ohio-2729, ¶ 13. As a result,
the trial court’s judgment that PNC’s mortgage is the first and best lien on the premises
is inconsistent with the fact that Farmer was a bona fide purchaser of the property.8
{¶ 55} Even though PNC’s mortgage may not have been valid as to the premises,
8 From this perspective, the money judgment awarded to Farmer appears to be
inconsistent with the finding that Farmer was a bona-fide purchaser of the property. As
was noted, “a purchaser of real estate who acquires the legal title in good faith for a
valuable consideration without notice of an existing equity takes the property free from
such equity.” Shaker Corlett Land Co. v. Cleveland, 139 Ohio St. 536, 41 N.E.2d 243,
at paragraph three of the syllabus. If Farmer took the property free from PNC’s equity,
Farmer would not appear to have been damaged in the amount due PNC on the
mortgage. However, PNC did not appeal the trial court’s decision in favor of Farmer.
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that does not mean that PNC could not still recover on the mortgage or a promissory note.
“In Ohio, the ‘failure or success of recording an instrument has no effect on its validity as
between the parties to that instrument.’ ” Acacia, 2016-Ohio-386, 47 N.E.3d 207, at ¶ 21,
quoting Bank of New York Mellon Trust Co, N.A. v. Loudermilk, 5th Dist. Fairfield No.
2012-CA-30, 2013-Ohio-2296, ¶ 29.
{¶ 56} “[U]pon a mortgagor's default, the mortgagee may elect among separate
and independent remedies to collect the debt secured by a mortgage.” (Citations
omitted.) Deutsche Bank Natl. Trust Co. v. Holden, 147 Ohio St.3d 85, 2016-Ohio-4603,
60 N.E.3d 1243, ¶ 21. “First, the mortgagee may seek a personal judgment against the
mortgagor to recover the amount due on the promissory note, without resort to the
mortgaged property.” (Citations omitted.) Id. at ¶ 22. This right to enforce a
promissory note includes “the holder, a nonholder in possession with the rights of a
holder, or a person entitled to enforce a lost or dishonored instrument as provided by
statute.” Id., citing R.C. 1303.31.
{¶ 57} A second remedy is to bring an action to enforce the mortgage and take
possession of the property, and the third remedy is for the mortgagee to “bring a
foreclosure action to cut off the mortgagor's right of redemption, determine the existence
and extent of the mortgage lien, and have the mortgaged property sold for its satisfaction.”
(Citations omitted.) Id. at ¶ 23-24. These are “ ‘separate and distinct remedies’ ” * * *
and “ ‘the bar of the note or other instrument secured by mortgage does not necessarily
bar an action on the mortgage.’ ” (Citations omitted). Id. at ¶ 25. For example, in
Holden, the Supreme Court of Ohio concluded that a bank could proceed in foreclosure
against the debtor’s property, even though the debtor’s personal liability for the note had
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been discharged in bankruptcy. Id. at ¶ 26-28. The converse would also be true, i.e.,
even if an action against the premises is precluded, a bank could still proceed against the
debtor on the note and mortgage. Whether this was done in the trial court is
questionable.
{¶ 58} As was noted, PNC filed a cross-claim against Kistner for contribution
and/or indemnification. “[A] contribution action concerns the obligation to pay a
proportionate share of a joint obligation owed to an injured party.” (Citation omitted.)
Ohio Cas. Ins. Co. v. Allied Tech. Servs., Inc., 9th Dist. Lorain No. 13CA010376, 2014-
Ohio-748, ¶ 10. There was no indication in the trial court that PNC was liable for any
proportion of any obligation owed to Farmer.
{¶ 59} In contrast, “[t]he rule of indemnity provides that ‘where a person is
chargeable with another's wrongful act and pays damages to the injured party as a result
thereof, he has a right of indemnity from the person committing the wrongful act, the party
paying the damages being only secondarily liable; whereas, the person committing the
wrongful act is primarily liable.’ ” Satterfield v. St. Elizabeth Health Ctr., 159 Ohio App.3d
616, 2005-Ohio-710, 824 N.E.2d 1047, ¶ 11 (7th Dist.), quoting Travelers Indem. Co. v.
Trowbridge, 41 Ohio St.2d 11, 14, 321 N.E.2d 787 (1975).9
9
Travelers was overruled on other grounds in Motorists Mut. Ins. Co. v. Huron Rd. Hosp.,
73 Ohio St.3d 391, 653 N.E.2d 235 (1995), paragraph one of the syllabus. In Motorists,
the court noted that there was no right to contribution among tortfeasors when Travelers
was decided. As a result, Travelers constructed an equitable stopgap to allow recovery
in a situation that, in essence, involved concurrent tortfeasors and an indivisible injury,
rather than an indemnity situation. Id. at 394-395. Motorists held that the correct
statement of the law in this context would be that “[w]hen a medical provider's negligent
treatment of bodily injuries caused by a tortfeasor results in further injury or aggravation
of the original injury, R.C. 2307.31 creates a right of contribution between the tortfeasor
and the medical provider as to indivisible injuries.” Id. at 395.
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{¶ 60} “Indemnity shifts the entire loss from one who has been compelled to make
payment to the plaintiff to another who is deemed responsible for reimbursing the full
amount. The right to indemnity exists when the relationship between the parties requires
one to bear the loss for the other. This right may arise from common law, contract, or in
some cases, statutes.” (Citation omitted.) Blair v. Mann, 4th Dist. Lawrence No.
98CA35, 1999 WL 228265, *1 (Apr. 8, 1999).
{¶ 61} PNC was not found liable, either secondarily or jointly, and did not pay any
damages to Farmer, and the basis for the judgment of damages is unclear. However,
since the record is incomplete, we express no opinion on what damages might be
awarded in the event of a default judgment. This is a matter to be decided by the trial
court in the first instance, assuming that PNC’s request for a default judgment on its cross-
claim is granted on remand.
{¶ 62} Based on the preceding discussion, the Second Assignment of Error is
overruled, as moot.
IV. Did the Trial Court Err in Dismissing Kistner’s Cross-Claims?
{¶ 63} Kistner’s Third Assignment of Error states that:
The Trial Court Erred in Dismissing Kistner’s Cross-Claims.
{¶ 64} Under this assignment of error, Kistner contends that the trial court erred
in dismissing his cross-claims against PNC, because PNC never sought discovery from
him. Kistner also argues that the trial court never gave him notice of its intent to dismiss
his cross-claims under Civ.R. 41(B)(1) for failure to provide discovery. PNC has not
responded directly to these arguments. Instead, PNC argues, as it did in connection with
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the Second Assignment of Error, that the judgment merely imposes an obligation that
Kistner already owes to Farmer, and that the outcome would have been the same
regardless of the route taken, because Kistner had admitted to fraud during his
deposition.
{¶ 65} It is true that the decision ordering Kistner to appear for deposition and
outlining the consequences if he failed to appear did not specifically mention dismissal of
Kistner’s cross-claims. Instead, the decision mentioned sanctions that mainly pertained
to the plaintiff’s action, such as refusing to allow Kistner to oppose the plaintiff’s claims or
support his defenses to those claims. Docket Summary, Case No. 26911, Doc. # 80, pp.
13-14. However, just like Farmer, PNC was pursuing discovery. Specifically, the
transcript filed with the trial court indicates that PNC appeared at Kistner’s original
deposition on August 6, 2015. However, before PNC had a chance to ask any questions,
Kistner terminated the deposition. Docket Summary, Case No. 26911, Doc. # 87, Ex. A,
pp. 3 and 42-43. At that time, PNC reserved its right to seek sanctions. Id. at p. 43.
{¶ 66} PNC did not file a motion to compel after the deposition, perhaps concluding
a separate motion would be unnecessary, since Farmer filed a motion asking the court to
compel Kistner to appear for deposition. The trial court then issued its order to compel,
and warned Kistner of potential sanctions. Although the court did not specifically
mention dismissal of Kistner’s cross-claims against PNC, the court’s notice of potential
sanctions was sufficient under Baker, 2d Dist. Clark No. 2002-CA-17, 2003-Ohio-1030,
and Associated Business, 2d Dist. Montgomery No. 19211, 2002-Ohio-6385. The trial
court informed Kistner that if he failed to comply with the order compelling discovery that
he would be subject to sanctions under Civ.R. 37(B), including, but not limited to, the
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sanctions described in the order. Dismissal of Kistner’s cross-claims against PNC was
a potential sanction under Civ.R. 37(B)(1)(e), and Kistner had appropriate notice.
{¶ 67} After Kistner failed to comply with the discovery order, PNC filed its own
motion for sanctions, and joined in Farmer’s previously-filed motion for sanctions. As
was noted, the trial court did not err in failing to give Kistner notice of the potential
sanctions; it erred by violating a court rule and by failing to give Kistner a reasonable
opportunity to be heard with respect to the motion for sanctions. See Hillabrand, 87 Ohio
St.3d at 518, 721 N.E.2d 1029 (noting that under Civ.R. 41(B)(1), “dismissal with
prejudice is proper only when ‘counsel has been informed that dismissal is a possibility
and has had a reasonable opportunity to defend against dismissal’ ”). (Emphasis sic.)
{¶ 68} Furthermore, we disagree with PNC’s assertion that the judgment should
be affirmed either because Farmer obtained a judgment, or because the same outcome
would have resulted anyway. PNC and Farmer are not the same party, and there is no
indication that PNC was assigned Farmer’s rights. Their interests were also opposed
with respect to the issue of whether Farmer was a bona fide purchaser of the property.
{¶ 69} In addition, rules of procedure, court rules, and restriction of appellate
review exist for good reasons, including the need to provide all litigants with due process
and a chance to fully litigate claims. For this reason, when we review the record, we are
confined to matters raised in the trial court. See, e.g., Wallace v. Mantych Metalworking,
189 Ohio App.3d 25, 2010-Ohio-3765, 937 N.E.2d 177, ¶ 10 (2d Dist.); Ratchford v.
Proprietors' Ins. Co., 47 Ohio St.3d 1, 4, 546 N.E.2d 1299 (1989). Notably, PNC did not
file a motion for summary judgment in the trial court. In fact, PNC did not even file factual
materials in support of the damages judgment. Accordingly, we see no merit in PNC’s
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argument.
{¶ 70} In light of the preceding discussion, the Third Assignment of Error is
sustained.
V. Conclusion
{¶ 71} The First and Third Assignments of Error having been sustained, and the
Second Assignment of Error having been overruled as moot, the judgment of the trial
court is reversed, and this cause is remanded for further proceedings.
.............
DONOVAN, J. and FROELICH, J., concur.
Copies mailed to:
Andrew M. Engel
Thomas W. Kendo, Jr.
H. Toby Schisler
Amelia Bower
Christopher Sove
Michael Burdge
Hon. Mary Lynn Wiseman