Governors Place Condominium Owners Assn., Inc. v. Unknown Heirs of Polson

[Cite as Governors Place Condominium Owners Assn., Inc. v. Unknown Heirs of Polson, 2017-Ohio-885.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
GOVERNORS PLACE CONDOMINIUM : OPINION
OWNERS ASSOCIATION, INC.,
:
Plaintiff,
: CASE NO. 2016-L-070
- vs -
:
THE UNKNOWN HEIRS, DEVISEES,
LEGATEES, EXECUTORS, :
ADMINISTRATORS, SPOUSES AND
ASSIGNS AND THE UNKNOWN :
GUARDIANS OF MINOR AND/OR
INCOMPETENT HEIRS OF :
BARBARA J. POLSON, et al.,
:
Defendants,
:
LINDA L. MEKUS, et al.,
:
Defendant-Appellant,
:
U.S. BANK NATIONAL ASSOCIATION,
AS TRUSTEE FOR THE HOLDERS OF :
THE CSFB MORTGAGE SECURITIES,
CORP., ADJUSTABLE RATE :
MORTGAGE TRUST 2005-8,
ADJUSTABLE RATE MORTGAGE- :
BACKED PASS-THROUGH
CERTIFICATES, SERIES 2005-8, :
Defendant-Appellee. :
Civil Appeal from the Lake County Court of Common Pleas, Case No. 2013 CF 002265.
Judgment: Reversed and remanded.
Thomas J. Sacerich, Sacerich, O’Leary & Field, 8302 Yellowbrick Road, Mentor, OH
44060-4960 (For Defendant-Appellant).
James W. Sandy, McGlinchey Stafford, PLLC, 25550 Chagrin Boulevard, Suite 406,
Cleveland, OH 44122-4640 (For Defendant-Appellee).
TIMOTHY P. CANNON, J.
{¶1} This is an appeal from a judgment entry of the Lake County Court of
Common Pleas ordering the distribution of remaining proceeds from a confirmed sale of
foreclosed property. For the following reasons, the trial court’s judgment is reversed,
and the matter is remanded for further proceedings.
{¶2} The record reflects that Barbara J. Polson owned a condominium unit in
Mentor, Ohio, prior to her death in 2011. It appears from the preliminary judicial report,
and as alleged in the complaint, that title to the condominium unit vested in Mrs.
Polson’s daughters, Linda L. Mekus and Diane M. Miller, via a transfer on death deed.
{¶3} This foreclosure action was instituted on October 18, 2013, by Governors
Place Condominium Owners Association, Inc. (“Governors Place”). Governors Place
sought to foreclose on a certificate of lien recorded against the condominium unit for
unpaid maintenance fees, common expenses, and assessments, which it alleged was
second only to real estate taxes and prior recorded liens. The defendants named in the
complaint were the record owners (Mekus and Miller) and their unknown spouses, if
any; the unknown spouse of Mrs. Polson, if any; the unknown heirs, devisees, legatees,
executors, administrators, spouses and assigns of Mrs. Polson; the unknown guardians
of minor and/or incompetent heirs of Mrs. Polson; the Lake County Treasurer; Mortgage
Electronic Registration Systems, Inc., as nominee for Countrywide Home Loans, Inc.
(“MERS”); and U.S. Bank National Association, as trustee for the holders of the CSFB
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Mortgage Securities, Corp., Adjustable Rate Mortgage Trust 2005-8, Adjustable Rate
Mortgage Backed Pass-Through Certificates, Series 2005-8 (“U.S. Bank”).
{¶4} The Preliminary Judicial Report attached to the complaint indicates a
mortgage was assigned from MERS to U.S. Bank and recorded on July 5, 2011. The
Final Judicial Report indicates the mortgage was assigned to Nationstar Mortgage LLC
(“Nationstar”) and recorded on October 17, 2013, one day prior to the filing of the
complaint.
{¶5} On June 25, 2014, Governors Place filed a motion to substitute Nationstar
in place of U.S. Bank as a party-defendant. The trial court granted this motion on July
7, 2014.
{¶6} On October 2, 2014, Governors Place filed a motion for default judgment
against the defendants (with the exception of the Lake County Treasurer) for failure to
plead or otherwise defend against the action. Attached to the motion was an affidavit of
account, submitted by the managing agent for Governors Place.
{¶7} The trial court issued a judgment entry on October 17, 2014, granting
default judgment against the record owners (Mekus and Miller) and their unknown
spouses; against Nationstar and MERS; and against the unknown spouse, unknown
heirs, devisees, legatees, executors, administrators, spouses and assigns and unknown
guardians of minor and/or incompetent heirs of Mrs. Polson. The trial court stated these
defendants, by reason of their default, “are forever barred from asserting any right, title,
or interest in the premises described herein.”
{¶8} The trial court also found that Governors Place had good and valid liens
on the property, subject only to the Lake County Treasurer’s good and valid lien. The
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trial court entered a decree of foreclosure on the condominium unit and set forth the
order of priority for the proceeds once the sale of the property was complete. No appeal
was taken from this order.
{¶9} An order of sale was issued on January 12, 2015, and the condominium
unit was appraised at $135,000. Notice of a sheriff’s sale was issued on March 24,
2015, and the property was sold to a private third party on April 13, 2015, for $103,000.
{¶10} On May 26, 2015, Nationstar filed a motion to substitute U.S. Bank as a
party-defendant. Nationstar attached to its motion a “Corporate Assignment of
Mortgage,” dated March 19, 2015, which stated “the assignment is being recorded to
correct the assignee name in the assignment recorded 07/05/2011.” Nationstar
asserted that U.S. Bank is the actual holder of the note and mortgage, as was originally
alleged in the complaint. The trial court granted the motion to substitute and stated,
“[t]his Order shall be nunc pro tunc and all other Orders shall remain in full force and
effect.”
{¶11} U.S. Bank filed a “stipulated motion for leave to file answer instanter,” in
which it stated that, “[d]espite reasonable diligence, Substitute Defendant was unable to
retrieve its records regarding its interest herein in sufficient time to allow it to file its
answer timely.” The trial court granted U.S. Bank leave to file its answer instanter on
May 28, 2015.
{¶12} In its answer, U.S. Bank asserted it was entitled to enforce a certain
promissory note, a copy of which was attached, in the sum of $68,761.93 plus interest.
It also stated “that by agreement of the parties hereto, that Plaintiff [Governors Place]
shall take its distribution of the proceeds of the judicial sale that occurred on April 13,
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2015 before the Substitute Defendant.” U.S. Bank did not file a cross-claim against the
other named defendants. In addition, there was no indication of any agreement
between U.S. Bank and any of the other defendants regarding the distribution of the
proceeds.
{¶13} Governors Place filed a motion to confirm sale on June 18, 2015. The trial
court approved and confirmed the sale in an August 11, 2015 judgment entry. It also
ordered the Clerk of Courts to cause satisfaction and cancellation of the mortgage to
U.S. Bank, the mortgage to MERS, and the lien by Governors Place. The trial court
further ordered the Lake County Sheriff to distribute the proceeds of the sale as follows:
FIRST: To the Clerk of Courts, the sum of $4442.12 for the
costs herein * * *;
SECOND: To the Lake County Treasurer the sum of $2,591.28
for real estate taxes, penalties, and assessments * * *;
THIRD: To the Sheriff, the sum of $128.00 for Deed and
Poundage;
FOURTH: To the Auditor, the sum of $412.00 for transfer tax
and conveyance fee;
FIFTH: To the Recorder, the sum of $28.00 for recording the
Deed;
The balance to be held by the Sheriff pending further order of the
Court.
{¶14} On September 9, 2015, the Clerk of Courts released and satisfied the
mortgage to U.S. Bank, the mortgage to MERS, and the lien by Governors Place.
{¶15} On September 10, 2015, Governors Place filed a “motion for supplemental
order of distribution” for its valid lien on the premises. On October 20, 2015, the trial
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court entered a supplemental order of distribution, in which it ordered the Sheriff to
distribute the remaining funds as follows:
SIXTH: The Sheriff shall pay to [Governors Place] the sum of
$15,552.09 on its valid certificate of lien.
SEVENTH: The balance, if any, shall be held by Sheriff pending
further order.
{¶16} On May 17, 2016, Attorney Thomas J. Sacerich, on behalf of the unknown
heirs of Barbara J. Polson, filed a motion to distribute the balance of the funds. The
motion asserted that Mrs. Polson’s estate, “as the owner of the property on the date of
the Sheriff’s sale, is entitled to the balance of the proceeds presently being held by the
Sheriff.” On May 20, 2016, U.S. Bank objected and filed its own motion to release the
proceeds. In its motion, U.S. Bank asserted “it is the first lien holder on the subject
premises. Pursuant to the attached Affidavit in Support of Judgment, [U.S. Bank] is
currently owed the amount of $76,313.61. As such, [U.S. Bank] requests that this
Honorable Court issue an order to the Lake County Clerk of Courts instructing it to
release the funds in the amount of $76,313.61 to [U.S. Bank].”
{¶17} The trial court issued a judgment entry on June 3, 2016, ordering
distribution of the remaining proceeds. It stated, in pertinent part:
The property at issue sold for $103,000. To date, $23,153.49 of the
sale proceeds were distributed. The sum of $79,846.51 remains for
further distribution.
U.S. Bank established based on the affidavit of Jesslyn Williams, a
document Execution Specialist at Nationstar Mortgage, L.L.C., loan
service for U.S. Bank, that it is owed $76,313.61 on the note and
mortgage of Polson.
Based on the preliminary judicial title report and the answer of U.S.
Bank subordinating its interest to Governors Place, the order of
priority for the distribution of the remaining $79,846.51 is as follows:
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SEVENTH: To U.S. Bank, the sum of $76,313.61;
EIGHTH: The balance, to the Heirs, in care of their counsel,
Thomas J. Sacerich, less any costs determined by the
clerk of court due.
{¶18} It is this entry that is currently before us on appeal. Only one assignment
of error has been raised for our review:
{¶19} “The trial court erred in ordering the remaining proceeds from the
foreclosure sale disbursed to US Bank National Association, as US Bank National
Association had no interest in the proceeds.”
{¶20} A foreclosure decree “determines that damages have occurred and sets
forth the parties’ rights and liabilities as they are related to those damages”; the order
confirming the property sale “sets forth the specific damage amount and distributes the
funds accordingly.” CitiMortgage, Inc. v. Roznowski, 139 Ohio St. 3d 299, 2014-Ohio-
1984, ¶24.
{¶21} The issue before us is whether the trial court erred by distributing funds to
U.S. Bank after the confirmation of sale when the trial court had not determined in the
foreclosure decree that U.S. Bank had any right to those funds. We review this matter
de novo. See Cty. Savs. Bank v. Argonne Bldg. Ltd. Partnership, 3d Dist. Allen No. 1-
92-94, 1993 WL 74844, *2 (Mar. 12, 1993), citing Conneaut Bldg. & Loan Co. v. Felch,
100 Ohio App. 52, 54 (7th Dist.1955) (holding a trial court has no discretion in
distributing proceeds because they take the place of the sold property).
{¶22} The trial court’s October 17, 2014 judgment awarded a decree of
foreclosure; found that Governors Place and the Lake County Treasurer had valid liens
and ordered their priority; and found the remaining defendants were in default and
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forever barred from asserting any right, title, or interest in the premises. At the time of
the entry, Nationstar had been substituted as a party-defendant in place of U.S. Bank.
Subsequently, U.S. Bank was substituted as a party-defendant in place of Nationstar.
The substitution order stated, “[t]his Order shall be nunc pro tunc and all other Orders
shall remain in full force and effect.” The effect of the substitution order on the
foreclosure decree was, therefore, that U.S. Bank was in default and forever barred
from asserting any right, title, or interest in the premises.
{¶23} The foreclosure decree was a final, appealable order because it set forth
the rights of all lienholders. CitiMortgage, supra, at ¶39. “Accordingly, if an individual or
entity believes that the order of foreclosure fails to accurately reflect an interest in the
property, the proper means to challenge the court’s determination is by appealing the
order of foreclosure.” Id. at ¶38. Otherwise, although a motion for relief from judgment
cannot be used as a substitute for an appeal, “‘Civ.R. 60(B) provides the exclusive
means for a trial court to vacate a final judgment’” if the proper criteria is set forth. Fed.
Natl. Mtge. Assn. v. Day, 158 Ohio App. 3d 349, 2004-Ohio-4514, ¶21 (2d Dist.), quoting
Soc. Natl. Bank v. Repasky, 7th Dist. Mahoning No. 99 C.A. 193, 2000 WL 1486767, *3
(Sept. 21, 2000) (citations omitted). Either way, “the proper time to challenge the
existence and extent of mortgage liens is in the foreclosure action.” Id. at ¶15 (citation
omitted).
{¶24} Nationstar did not appeal the order prior to U.S. Bank’s substitution. U.S.
Bank could not have appealed the foreclosure decree because it was not a party at the
time the judgment was entered. U.S. Bank was subsequently granted leave to file an
answer instanter. The filing of this answer did not have the effect of vacating the decree
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of foreclosure. U.S. Bank did not file a cross-claim or otherwise attempt to prosecute its
claim against the co-defendants. Thus, U.S. Bank’s sole remedy to obtain relief from
the default judgment entered against it in the foreclosure action was a Civ.R. 60(B)
motion.
{¶25} U.S. Bank did not file a Civ.R. 60(B) motion. Instead, U.S. Bank filed a
motion for distribution of proceeds from the sale. The amount claimed by U.S. Bank in
this motion had never been reduced to judgment. While it claimed it had a first lien on
the property, the record is clear that almost eight months prior, the Clerk of Courts,
pursuant to the trial court’s foreclosure decree and order confirming sale, released U.S.
Bank’s mortgage on September 9, 2015.
{¶26} The trial court issued an order stating U.S. Bank established that it is
owed money on the note and mortgage based on the affidavit U.S. Bank attached to its
motion for distribution of proceeds. By issuing this order, the trial court “improperly
attempted to alter the effect of the previous foreclosure judgment, which should have
been appealed or been the subject of a Civ.R. 60(B) motion.” Day, supra, at ¶29.
{¶27} Because the trial court improperly modified the final and appealable
foreclosure decree, the trial court did not have authority to distribute any proceeds of the
sale to U.S. Bank. We must determine, however, whether a remedy exists, as the
property has been sold and the proceeds have been distributed.
{¶28} Generally, when a judgment has been satisfied and a stay has not been
obtained, “‘the individual subject matter of the case is no longer under the control of the
court and the court cannot afford relief to the parties to the action.’” Art’s Rental Equip.,
Inc. v. Bear Creek Constr., LLC, 1st Dist. Hamilton Nos. C-110544, et seq., 2012-Ohio-
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5371, ¶9 (collecting cases), quoting Bankers Trust Co. of California, N.A. v. Tutin, 9th
Dist. Summit No. 24329, 2009-Ohio-1333, ¶16.
{¶29} Some courts have carved out narrow exceptions to this precedent,
recognizing that even where a stay was not obtained, “R.C. 2329.45 preserves the
remedy of restitution, even after the property has been sold at sheriff’s sale and the
proceeds distributed.” U.S. Bank Natl. Assn. v. Mobile Assoc. Natl. Network Sys., Inc.,
195 Ohio App. 3d 699, 2011-Ohio-5284, ¶19 (10th Dist.), citing LaSalle Bank Natl. Assn.
v. Murray, 179 Ohio App. 3d 432, 2008-Ohio-6097 (7th Dist.); Ameriquest Mtge. Co. v.
Wilson, 11th Dist. Ashtabula No. 2006-A-0032, 2007-Ohio-2576; and Chase Manhattan
Mtge. Corp. v. Locker, 2d Dist. Montgomery No. 19904, 2003-Ohio-6665. See also
Everhome Mtge. Co. v. Baker, 10th Dist. Franklin No. 10AP-534, 2011-Ohio-3303, ¶13,
citing Ameriquest, supra, at ¶19 (“the case is not moot because the court is not without
power to offer a remedy”).
{¶30} In Ameriquest, this court held that restitution was appropriate where the
debtor filed for a stay, but was unsuccessful due to his inability to post a supersedeas
bond. Ameriquest, supra, at ¶19, citing Chase Manhattan, supra, at ¶44. The Sixth
District Court of Appeals has also held that satisfaction of the judgment under those
circumstances is involuntary, and therefore the appeal is not moot. MIF Realty L.P. v.
K.E.J. Corp., 6th Dist. Wood No. 94WD059, 1995 WL 311365, *2 (May 19, 1995). In
Everhome, the Tenth District addressed the mootness doctrine and stated: “It is a
suspect argument to assert that a void, voidable, or merely erroneous judgment might
evade appellate review simply because it was rendered rapidly, completely, and without
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notice. * * * [S]uch a holding would allow no recourse in a case in which a foreclosure
action proceeded, completely in error[.]” Everhome, supra, at ¶14.
{¶31} We have already determined that the trial court erred in distributing funds
to U.S. Bank. Therefore, in the interest of justice, we find that satisfaction of the
judgment was involuntary, despite the fact that no stay was obtained. The appeal is not
moot, as a viable remedy is available in the form of restitution.
{¶32} The assignment of error is with merit.
{¶33} “A remand to the trial court reinstates the matter on the docket, and the
lower court ‘is required to proceed from the point at which the error occurred.’” Mentor
Lumber & Supply Co. v. Victor, 11th Dist. Lake No. 91-L-083, 1992 WL 86527, *1 (Mar.
31, 1992), quoting Armstrong v. Marathon Oil Co., 32 Ohio St. 3d 397, 418 (1987).
Here, the error occurred when the trial court issued its June 3, 2016 judgment ordering
distribution of the remaining proceeds to U.S. Bank. On remand, the parties should be
returned to the status quo that existed before the June 3, 2016 order was entered.
{¶34} For the reasons stated above, the judgment of the Lake County Court of
Common Pleas is reversed. This matter is remanded for further proceedings consistent
with this opinion.
CYNTHIA WESTCOTT RICE, P.J.,
DIANE V. GRENDELL, J.,
concur.
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