The Supreme Court of Ohio recently upheld the dismissal of a mortgagee's writ of mandamus actions seeking to avoid transfers of REO and mortgaged property to county land banks for unpaid taxes, holding that the mortgagee should have pursued other available remedies in state court.
A copy of the opinion is available at: Link to Opinion
A mortgagee (Bank) was the mortgagee for or owned as REO three different properties each in different counties in Ohio (Properties).
In 2017 one of the counties filed a complaint with the County Board of Revision seeking to enforce a $4,020.28 tax lien by foreclosing on one of the Properties. The Board of Revision held a hearing, the Bank did not appear at the hearing, and was declared to be in default under R.C. 323.69(D)(1). The Board entered a foreclosure order that the Bank's equity of redemption was extinguished upon the expiration of the 28-day alternative redemption period under R.C. 323.65(J) and 323.78. Ultimately, the Board ordered the Sherriff to transfer the property to the County Land Reutilization Corporation and a new deed effecting the transfer was issued in January of 2018.
In 2020, the Bank filed a Writ of Mandamus in an Ohio appellate court alleging that the direct transfer of the property to the county land bank constituted a taking of its private property under Article I, Section 19 of the Ohio Constitution and the Fifth and U.S. Constitution. The appellate court granted the county's motion to dismiss because the Bank had other adequate remedies at law. The Bank appealed to the Supreme Court of Ohio.
In June 2017, a different Ohio county filed a complaint with the Board of Revision seeking to enforce a $1,498.69 tax lien by foreclosing on one of the properties within its county limits. In September 2017, the property was assigned to the Bank. In October of 2017, the Board held a hearing, the Bank did not appear and an order was entered that all parties equity of redemption was extinguished and the property was transferred to another entity.
In February of 2021, the Bank filed a writ of mandamus in a different Ohio appellate court alleging that the direct transfer of the property to the county land bank constituted a taking of its private property under Article I, Section 19 of the Ohio Constitution and the Fifth and U.S. Constitution. This appellate court also granted the county's motion to dismiss holding the Bank lacked standing, and that the Bank had a separate remedy at law through appealing the board's judgment. The Bank appealed to the Supreme Court of Ohio.
The third property was located in a different county. In December of 2016, that county filed a complaint with the Board of Revision seeking to enforce a $7,267.27 tax lien by foreclosing on the property. A hearing was held and no one appeared on behalf of the mortgagee. The Board entered an order of foreclosure that all party's equity of redemption be extinguished. In April of 2017, the deed was transferred to the county. In 2018, the mortgage was assigned to the Bank.
On appeal to the Ohio Supreme Court, the cases involving the various counties were consolidated. The Ohio Supreme Court first noted that, in order to state a claim for a mandamus on appeal, the claimant must show by clear and convincing evidence (1) that it has a clear legal right to appropriation proceedings, (2) that the counties have a clear legal duty to commence the proceedings, and (3) that it lacks an adequate remedy in the ordinary course of the law. State ex rel. New Wen, Inc. v. Marchbanks, 159 Ohio St.3d 15, 2020- Ohio-63, 146 N.E.3d 545, ¶ 15.
The counties argued that the Bank lacked standing in two of the cases because the Bank did not own the mortgages when the takings allegedly occurred. However, although the mortgage assignment in one of the counties was recorded in November 2017, it was executed in September 2017 — a month before the board of revision's adjudication of foreclosure. Therefore, the Bank owned the mortgage for the subject property at the time of the alleged taking. See Sidle v. Maxwell, 4 Ohio St. 236, 241 (1854). Therefore, the Supreme Court held that the Bank had standing in that county's case.
However, the Bank did not dispute that it did not own the mortgage for the second county property at the time of the taking. Therefore, the Supreme Court of Ohio confirmed that the right to compensation belongs to whoever held the security interest in the property when the taking occurred. See Danforth v. United States, 308 U.S. 271, 284, 60 S.Ct. 231, 84 L.Ed. 240 (1939). Accordingly, the Supreme Court of Ohio held that the Bank lacked standing in the second county case.
The counties argued that Bank's writs of mandamus were properly dismissed because the Bank had adequate remedies, such as an appeal, in the ordinary course of the law. Although the Bank argued that the available remedies in the ordinary course of the law would not have provided it with complete relief, because a court could not have conducted an appropriation proceeding in each of these three cases, the Supreme Court of Ohio disagreed and relied upon prior Ohio precedent. See State ex rel. Kerns v. Simmers, 153 Ohio St.3d 103, 2018-Ohio-256, 101 N.E.3d 430.
In Kern, the Supreme Court of Ohio did not issue a writ of mandamus, because an appeal to the common pleas court was an adequate remedy at law. The Court reached the same conclusion here and even noted the specific remedies afforded to the Bank listed below:
* Under R.C. 323.69(B)(1), the Bank could have redeemed the properties (and protected any security interests it had in the properties) by paying what was due on the tax liens.
* Under R.C. 323.691(A)(1), In one of the county cases, the Bank could have requested a transfer of the proceedings to the common pleas court in order to preserve its security interest of record in the land.
* In another of the county cases, the Bank had an absolute right to have that case transferred to the common pleas court. See R.C. 323.69(B)(2) and 323.70(B).
* Lastly, under R.C. 323.79, the Bank could have appealed the boards' adjudications of foreclosure to the common pleas courts in both cases.
Accordingly, Supreme Court of Ohio affirmed that the Bank lacked standing in one of the county cases, and also affirmed the judgments in the remaining cases because the Bank had an adequate remedy in the ordinary course of the law.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Admitted to practice law in Illinois
Alabama | California | Florida | Illinois | Massachusetts | New Jersey | New York | Ohio | Pennsylvania | Tennessee | Texas | Washington, DC
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at: