Villas at E. Pointe Condominium Assn. v. Strawser

[Cite as Villas at E. Pointe Condominium Assn. v. Strawser, 2019-Ohio-3554.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Villas at East Pointe :
Condominium Association,
:
Plaintiff-Appellee,
:
v. No. 18AP-823
: (C.P.C. No. 16CV-222)
Melissa L. Strawser et al.,
: (REGULAR CALENDAR)
Defendants-Appellees,
:
Carrington Mortgage Services, LLC,
:
Defendant-Appellant.
:
D E C I S I O N
Rendered on September 3, 2019
On brief: Graydon, Head & Ritchey LLP, and Kara A.
Czanik, for appellant. Argued: Jeffrey M. Hendricks.
APPEAL from the Franklin County Court of Common Pleas
BEATTY BLUNT, J.
{¶ 1} Defendant-appellant Carrington Mortgage Services, LLC ("Carrington")
appeals from a decision of the Franklin County Court of Common Pleas denying
Carrington's motion for distribution of sale proceeds. Because we determine the trial court
erred in failing to consider whether to exercise its inherent discretion, we reverse and
remand.
I. BACKGROUND
{¶ 2} The Villas at East Pointe Condominium Association ("East Pointe") initiated
this foreclosure action against defendant-appellee Melissa L. Strawser pursuant to a lien
for unpaid condominium dues on January 8, 2016. The complaint involved Strawser's
property at 81 Villa Pointe Drive in Columbus, Ohio ("property"). The complaint named
No. 18AP-823 2
Carrington as a defendant because Carrington held the first mortgage on the property.
Carrington's lien was senior to East Pointe's lien.
{¶ 3} Carrington was served with the complaint via certified mail on January 19,
2016 but failed to answer. Strawser was also served and likewise failed to answer. On
October 11, 2016, East Pointe filed a motion for default judgment against all parties, seeking
both default and a "bar to any equitable interest" those parties may have had in the
property. The trial court granted the motion and issued the judgment entry of foreclosure
on October 31, 2016 ("judgment entry"). The judgment entry noted that Carrington had
been served and failed to answer. It further explicitly stated "IT IS THEREFORE
ORDERED ADJUDGED AND DECREED that all claims of [Carrington], having failed to
appear herein, be and the same are hereby forever barred against the premises * * *."
{¶ 4} An investor purchased the property at the July 7, 2017 sheriff's sale. The
September 6, 2017 confirmation entry followed. The confirmation entry relevantly ordered
the clerk to deem as satisfied and cancel Carrington's mortgage. The confirmation entry
further directed the clerk to retain the $67,121 balance pending further court order. The
confirmation entry's certificate of service indicated it was submitted to Carrington via
ordinary mail.
{¶ 5} Carrington filed a Civ.R. 60(B) motion on November 30, 2017, two months
after the confirmation entry lodged. Therein, Carrington noted the account was current at
the time the foreclosure case began. Carrington further alleged Strawser, the borrower,
owed Carrington $95,104.39 plus interest at the rate of 4.375 percent from June 2017 due
to her default on the note for the property. Carrington next asserted relief was proper under
the "catch-all" provision found in Civ.R. 60(B)(5), because Carrington was simply moving
to protect its interest in its lien and the funds left over after confirmation. (Def.'s Mot. at
5.) Carrington argued no prejudice would result should its motion be granted, as the clerk's
costs, the property's taxes, and East Pointe's condominium dues had all been paid.
Carrington continued by summarily stating its motion was filed within a reasonable time,
even though the judgment entry was lodged more than one year prior. Carrington failed
to offer any explanation for the delay. No opposition was filed.
{¶ 6} The trial court denied Carrington's Civ.R. 60(B) motion on February 26,
2018. It held Carrington had alleged a meritorious defense via Carrington's status as the
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note and mortgage holder for the property. The trial court, however, disagreed with
Carrington's contention that the $67,121 funds left over from confirmation were sufficient
to invoke Civ.R. 60(B)(5), holding instead that the stated reason—the mere existence of the
funds—was not "extraordinary" and did not shift the matter into the requisite "unusual
case" realm. (Feb. 26, 2018 Entry at 3.) Lastly, the court rejected Carrington's
unsubstantiated claim that the motion was timely, noting that the motion was filed more
than one year after the judgment entry lodged and provided no reason for the delay. As
such, the trial court denied Carrington's Civ.R. 60(B) motion.
{¶ 7} Two months later, Carrington filed its motion for distribution of sale
proceeds in order to partially satisfy the mortgage's $95,104.39 balance, arguing that equity
demanded such a result. In support of its motion, Carrington provided the affidavit of
Elizabeth Ostermann, a vice president at Carrington. Carrington attached Strawser's note,
amended note, mortgage, mortgage assignments, notice of default, FHA face-to-face letter,
and payment history to Ostermann's affidavit. The amended note was for $105,287.93 at
4.375 percent interest for a new 30-year term and was dated May 18, 2012, almost 4 years
after the original note's date. That indicated Strawser previously defaulted on the note
before this foreclosure was initiated.
{¶ 8} Next, Carrington directed the trial court's attention to two cases in support of
its requested relief. The first was Mueller v. Petri, 1st Dist. No. C-74692 (Nov. 3, 1975).
Carrington also cited to Stidham v. Wallace, 12th Dist. No. CA2012-10-022, 2013-Ohio-
2640. According to Carrington, both of those cases held a first lienholder had an "equitable
right to have its lien satisfied despite not initially appearing." (Apr. 11, 2018 Mot. for
Distribution of Sale Proceeds.)
{¶ 9} Carrington's motion further acknowledged the judgment entry in this case
prevented it from enforcing the mortgage. But, Carrington argued that entry did not
prohibit it from enforcing the note. In support, Carrington cited to Ostermann's affidavit
establishing its noteholder status, the borrower's default, and the amount due on the note.
Carrington asserted the trial court's decision denying its Civ.R. 60(B) motion did not
preclude the distribution it now sought because the confirmation entry noted that the
remaining funds were to be held pending further court order.
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{¶ 10} The trial court's September 27, 2018 decision denying Carrington's motion
for distribution finds none of Carrington's grounds in support persuasive. Carrington's
present appeal focuses only on that decision.
II. ASSIGNMENT OF ERROR AND STANDARD OF REVIEW
{¶ 11} Carrington presents the following single assignment for our review:
The trial court erred in denying Carrington's motion for
distribution and failing to distribute excess proceeds from the
foreclosure sale to Carrington.
{¶ 12} The underlying matter is a foreclosure action. "A foreclosure action is a civil
action in equity." Third Fed. S. & L. Assn. of Cleveland v. Strong, 10th Dist. No. 14AP-902,
2015-Ohio-3009, ¶ 13, citing WesBanco Bank, Inc. v. Ettayem, 10th Dist. No. 14AP-452,
2015-Ohio-1230, ¶ 28, citing Chem. Bank v. Neman, 52 Ohio St. 3d 204, 210 (1990). We
review equitable claims for an abuse of discretion. Sandusky Properties v. Aveni, 15 Ohio
St.3d 273, 274-75 (1984). "An abuse of discretion connotes more than an error of law or
judgment; rather, it implies that the court has acted either unreasonably, unconscionably,
or arbitrarily." Strong at ¶ 13, citing Blakemore v. Blakemore, 5 Ohio St. 3d 217, 219 (1983).
III. ANALYSIS
{¶ 13} The trial court denied Carrington's motion for distribution on two grounds.
First, the trial court found Carrington's argument that Carrington was entitled to the excess
proceeds based on equitable grounds unpersuasive because Carrington's request for the
money was based on a note, and was therefore a legal, not an equitable, claim. Second, the
trial court held the judgment entry's plain language barred all claims against the property.
As such, the trial court treated Carrington's motion as one against the property and denied
the motion. Because we find an abuse of discretion present in both bases, we sustain
Carrington's single assignment of error and reverse.
A. The judgment entry does not preclude Carrington's requested relief
{¶ 14} We address the trial court's reasons for denying the motion out of order for
analytical fluidity. As noted above, the trial court's second ground for denying Carrington's
motion for distribution is that the judgment entry ordered "all" of Carrington's claims
"against the premises" barred. (Sept. 27, 2018 Decision at 2.) Carrington, however, is not
attempting to proceed against the property. Nor could it. The judgment entry clearly struck
No. 18AP-823 5
Carrington's lien on the property. As a result, Carrington argues it is moving forward
against Strawser based on her alleged default on the note.
{¶ 15} In this instance, we note that in foreclosure cases "the first part of [the
mortgagee's] action, concerning the note, is brought according to law and is based in
contract * * *." U.S. Bank Natl. Assn. v. George, 10th Dist. No. 14AP-817, 2015-Ohio-4957,
¶ 11. The second part is the action on the mortgage which is equitable. Hence, a foreclosure
"involves a legal action against the maker of a note who has defaulted on payments" and an
"equitable action on the mortgage to force a sale of the property based on the lender's
secured position." (Emphasis added.) Deutsche Bank Natl. Trust Co. v. Holden, 147 Ohio
St.3d 85, 2016-Ohio-4603, ¶ 5. According to Holden, Carrington is proceeding against
Strawser based on the note and not against the property for the mortgage. Because the
judgment entry prevents only claims against the property, we find that the trial court erred
in holding that the judgment entry barred Carrington's claim against Strawser premised on
the note.
B. The trial court had discretion to utilize equity to consider Carrington's
motion
{¶ 16} We turn next to the trial court's primary holding that Carrington has no
equitable right to the funds because Carrington's relief sounds in contract, not in equity.
Carrington argues that holding is incorrect under two separate cases, and after due
consideration, we agree.
{¶ 17} Carrington first directs our attention to Mueller. The Mueller plaintiff sued
defendant homeowners to collect on a judgment. Cincinnati Savings Association ("CSA")
was named as a defendant due to its previously recorded mortgage on the property. CSA
failed to answer and the trial court entered a default judgment against CSA. The property
sold at sheriff's sale. CSA then filed a motion to correct the amount owed to it on the
confirmation entry. The trial court granted CSA's motion in the interest of equity. The
appellate court affirmed, stating that CSA had an equitable right to have its lien satisfied
out of the sale of the property, even though CSA had failed to file a timely answer. In
Mueller, the appellate court specifically held:
By virtue of the recorded mortgage, the appellee, Cincinnati
Savings Association, as a holder of a first lien on the premises
possessed an equitable right to have the lien satisfied out of the
judicial sale of the property, even though appellant argues that
No. 18AP-823 6
Cincinnati Savings Association did not file a timely answer and
should be forever barred from setting up its lien. * * *
Cincinnati Savings Association having its lien on the premises
in question is entitled to have the proper amount due it listed
in the proceedings.
Hence, the appeals court found the presence of, and applied, principles of equity to affirm
the trial court's granting CSA's motion to afford CSA full relief despite CSA's default.
{¶ 18} Mueller parallels the facts present here. Both Carrington and CSA failed to
answer. The two were mortgage holders that each had their mortgages deemed satisfied
via default. Neither mortgagee contested the amount due. Carrington and CSA each sought
relief post-confirmation on the note. Despite these significant similarities, the trial court
declined to apply principles of equity when ruling on Carrington's motion, choosing instead
to deem the matter completely legal in nature. Because we find Mueller's facts mirror this
case and we find Mueller's logic compelling, we hold that principles of equity exist in this
instance separate and apart from the equity found in mortgage claims such that the trial
court could have exercised its discretion and elected to grant Carrington's motion. Thus,
because the trial court did not realize equity was present and available to grant Carrington's
requested relief, and therefore failed to even consider exercising its discretion, we find the
court erred when considering Carrington's motion pursuant only to legal principles.
{¶ 19} Our conclusion in this regard is supported further by Carrington's reliance
upon Stidham v. Wallace, 12th Dist. No. CA2012-10-022, 2013-Ohio-2640. In that case,
the county treasurer instituted a foreclosure action against the Wallaces for an unpaid
sewage assessment. Citibank held the first mortgage lien on the property and was therefore
named as a defendant. Despite being served, Citibank did not answer. The trial court
granted the treasurer judgment, but did not enter default against Citibank. The resultant
sheriff's sale was confirmed.
{¶ 20} Citibank lodged a motion for distribution of the surplus proceeds to partially
satisfy its mortgage five months later. The trial court granted the motion, and the appeals
court affirmed that decision, holding "[i]n the interest of equity, Citibank is entitled to the
amount remaining on its recorded mortgage from the proceeds of the sheriff's sale and the
trial court retains jurisdiction to release funds." (Emphasis added.) Stidham at ¶ 11.
{¶ 21} Hence, we conclude the italicized Stidham language supports a trial court's
decision to exercise its discretion by distributing funds to a mortgage holder even when, as
No. 18AP-823 7
here, the mortgage has been released, because Carrington provided evidence via
Ostermann's affidavit that Carrington is entitled to enforce the note.
{¶ 22} Our adherence to Mueller and Stidham also serves to remove the inherent
arbitrariness found within the decision. To illustrate, the trial court carefully separated the
note claim from the mortgage claim when discussing the equitable analysis in that section
of its decision. (Sept. 27, 2018 Decision at 1-2.) But yet, in interpreting the effect of the
judgment entry on Carrington's requested relief, the trial court treated the note and
mortgage claims as one when holding that the judgment entry barred "all claims" "against
the premises." (Sept. 27, 2018 Decision at 2.) Our decision today therefore negates that
inconsistency by establishing that principles of equity apply under the circumstances
presented herein to note-driven, legal claims in foreclosure matters.
{¶ 23} For the reasons stated above, we apply Mueller and Stidham in reaching our
conclusion that the trial court erred in failing to consider whether to exercise its inherent
discretion in considering Carrington's motion for distribution of sale proceeds. We
therefore reverse the decision, and we remand the matter for the trial court to exercise its
discretionary authority over the surplus funds and determine the merit of Carrington's
claim to an equitable lien. On remand, we note the record indicates that Strawser was not
served in conformance with R.C. 2329.44, which addresses notice to mortgagors of excess
foreclosure sale proceeds.1
1 The section in R.C. 2329.44 pertinently provides:
(A) On a sale made pursuant to this chapter, if the officer who makes the
sale receives from the sale more money than is necessary to satisfy the writ
of execution, with interest and costs, the officer who made the sale shall
deliver any balance remaining after satisfying the writ of execution, with
interest and costs, to the clerk of the court that issued the writ of execution.
The clerk then shall do one of the following:
(1) If the balance is one hundred dollars or more, send to the judgment
debtor whose property was the subject of the sale a notice that indicates the
amount of the balance, informs the judgment debtor that the judgment
debtor is entitled to receive the balance, and sets forth the procedure that
the judgment debtor is required to follow to obtain the balance. This notice
shall be sent to the judgment debtor at the address of the judgment debtor
in the caption on the judgment or at any different address the judgment
debtor may have provided, by certified mail, return receipt requested, within
ninety days after the sale. If the certified mail envelope is returned with an
endorsement showing failure or refusal of delivery, the clerk immediately
shall send the judgment debtor, at the address of the judgment debtor in the
caption on the judgment or any different address the judgment debtor may
No. 18AP-823 8
IV. CONCLUSION
{¶ 24} Having found that the trial court erred in failing to consider whether to
exercise its discretion in reviewing Carrington's motion, we sustain Carrington's single
assignment of error, and reverse the decision of the Franklin County Court of Common
Pleas and remand for proceedings in conformance with this decision.
Judgment reversed and cause remanded.
SADLER and NELSON, JJ., concur.
have provided, a similar notice by ordinary mail. If the ordinary mail
envelope is returned for any reason, the clerk immediately shall give a
similar notice to the judgment debtor by an advertisement in a newspaper
published in and of general circulation in the county, which advertisement
shall run at least once. The advertisement shall include the case number, the
name of the judgment debtor, and information on how to contact the clerk.
If the balance remains unclaimed for ninety days following the first date of
publication, the clerk shall dispose of the balance in the same manner as
unclaimed money is disposed of under sections 2335.34 and 2335.35 of the
Revised Code.