The Supreme Court of Ohio recently held that, although a foreclosure decree did not specify certain amounts of outstanding liens due and owing upon the property, it nevertheless was a final, appealable order that left no issues remaining to be determined as to the rights and liabilities of the parties.
The Ohio Supreme Court further noted that it was not required to adhere to the law-of-the-case-doctrine that was the basis for the appellate court's contrary ruling pursuant to its prior determination that foreclosure decree was not a final appealable order.
A copy of the opinion is available at: Link to Opinion
In October 2013, proceedings were initiated against husband and wife borrowers ("Borrowers") to foreclose three promissory notes secured by three mortgages upon Borrowers' property. Upon agreement of the parties, in May 2014, judgment was entered in favor of the mortgagee ("Mortgagee") and against Borrowers.
After a bankruptcy petition filed by Borrowers which automatically stayed the foreclosure proceedings was eventually dismissed, summary judgment was entered in the Mortgagee's favor in December 2015. The foreclosure decree, entered on January 12, 2016 declared Borrowers liable for the total amount of principal on the three loans and ordered sale of the property with priority of proceeds as follows: a county tax lien (in an unspecified amount), the three foreclosed mortgages upon the property, and a lien interest (in an unspecified amount) due to a third party ("Third Party Lienholder") pursuant to certificate.
Borrowers appealed the foreclosure decree. Although the trial court granted the Borrowers' request to stay the court's foreclosure judgment, the appellate court denied their request to waive the appellate bond requirement. After Borrowers failed to post the required bond, a sheriff's sale took place on February 26, 2016 where the property was purchased by the Mortgagee.
Before confirmation of the sale, the appellate court dismissed the appeal for lack of a final, appealable order because the foreclosure decree did not state the amounts due on the liens held by the county treasurer and third-party lienholder. Thereafter on remand, the trial court granted the Mortgagee's motion to confirm sale and delivery of the property to Mortgagee and ordered distribution of proceeds.
The Borrowers appealed again, arguing that the argument that the trial court erred in issuing the confirmation order because the underlying foreclosure decree was not a final appealable order (the "Second Appeal"). The appellate court agreed, and reversed the confirmation of the sale, concluding that the law-of-the-case doctrine required adherence to its earlier determination that the foreclosure decree was not a final appealable order.
Upon the Mortgagee's motion for reconsideration, the appellate court denied reconsideration of its determination that the trial court lacked authority to confirm the sheriff's sale due to the nonfinality of the foreclosure decree, but granted reconsideration with respect to its remand instructions vacating the confirmation of sale order. Because Mortgagee had already conveyed the property to third parties, the trial court was instructed to vacate the confirmation order and to determine possessory interests of the parties pending confirmation of a new sale, rather than return the deed to the Borrowers.
The Supreme Court of Ohio accepted Mortgagee's instant, discretionary appeal to consider two propositions of law: (i) whether a sheriff's sale can be confirmed even if the underlying foreclosure decree was a nonfinal order, and; (ii) whether a foreclosure decree which determines liability and the amount due the first mortgagor and leaves the remaining amounts to mechanical calculation is a final order subject to execution.
As you may recall, Ohio law dictates that foreclosure actions proceed in two stages, both of which end in a final appealable judgment: the order of foreclosure and the confirmation of sale. CitiMortgage, Inc. v. Roznowski, 139 Ohio St.3d 299, 2014-Ohio-1984, 11 N.E. 3d 1140.
The order of foreclosure determining lienholder priority and ordering a sheriff sale may be challenged on appeal, but once the foreclosure decree is final and upon completion of the appeals process, the rights and responsibilities of the parties under the foreclosure decree may no longer be challenged. Id.
The confirmation of sale is an ancillary proceeding limited to whether the sheriff's sale conformed to law, and an appeal of the order confirming the sale and dispersing proceeds is reviewed for an abuse of discretion, and limited to challenging the order itself and issues related to the confirmation proceedings — i.e. computation of final amounts due, accrued interest, corporate advances, etc. Id.; Ohio Savs. Bank v. Ambrose, 56 Ohio St. 3d 53, 55, 563 N.E. 2d 1388 (1990).
First, the Supreme Court reviewed whether the law-of-the-case doctrine required it to adhere to the prior appellate decision that the foreclosure decree was not a final appealable order. Although the appellate court correctly concluded that the doctrine precluded its reexamination of the nonfinality of the foreclosure decree, the Supreme Court noted it is not bound by prior decisions of a lower court, and thus, declined to apply the law-of-the-case doctrine here in order to address the merits with respect to the finality of the foreclosure decree. Ohio Constitution, Art. IV, Section 2(B)(2)(e).
Although the appellate court concluded that the foreclosure decree's failure to state the amounts of the county tax and third-party liens rendered it a nonfinal nonappealable order, and that the trial court lacked authority to execute the foreclosure decree to order and confirm the sale of the property, the Supreme Court's holding in Roznowski led to a different conclusion.
In Roznowski, the foreclosure decree included future expenses to be incurred by the bank in its damage award, but did not specify these amounts. Nevertheless, the Supreme Court held that it was a final, appealable order that fully set forth the parties' responsibilities, leaving only "the trial court to perform the ministerial task of calculating the final amounts that would arise during confirmation proceedings." Roznowski at par. 20.
Similarly here, the Court could not state with certainty the accrued taxes due at the time of the foreclosure decree, as this amount will likely change — and in fact, did by the time the court entered the confirmation of sale. The Court reasoned that "No judgment of foreclosure and sale would ever be final if we required courts to compute taxes and all future costs as a prerequisite for finality," and those amounts may later be challenged by appealing the confirmation of sale. Id. Moreover, the decree was final and left no questions as to the rights of the Third-Party Lienholder because it referenced the recorded certificate of judgment which includes the amount of the judgment and costs. Ohio R.C. 2329.02.
The Supreme Court also rebuffed the appellate court's reliance on Marion Prod. Credit Assn. v. Cochran, 40 Ohio St.3d 265, 270, 533 N.E.2d 325 (1988), for the proposition that a trial court errs in allowing the foreclosure and sale of property before all the claims and counterclaims in a foreclosure action have been resolved.
Here, no claims were pending when the trial court entered its foreclosure decree, as the Borrowers counterclaims were dismissed some eighteen months prior. Although the county treasurer asserted a cross claim under state code concerning its unpaid tax liens, the Supreme Court concluded that the foreclosure decree fully adjudicated the county's claims by declaring its tax lien priority as superior to all other lienholders.
Because the order of foreclosure determined the extent of each lienholder's interest, set out the priority of the liens, and determined the rights and no issues remaining to be determined as to the rights and liabilities of the parties, the Supreme Court concluded that the foreclosure decree was a final appealable order, and reversed the judgment of the appellate court and reinstated the confirmation of sale.
Ralph T. Wutscher
Maurice Wutscher LLP
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