FYI: Ohio Sup Ct Rejects Mortgagee's Writ of Mandamus Challenges to County Tax Sales

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.

 

Standing

 

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.

 

Remedies

 

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, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: 1st Cir Holds New York Choice of Law Clause Did Not Bar Massachusetts 93A Claim

The U.S. Court of Appeals for the First Circuit recently reversed the dismissal of a putative class action complaint for unfair and deceptive business practices under Massachusetts' Chapter 93A, holding that the action was not barred by a New York choice of law provision in the contract at issue.

 

A copy of the opinion is available at:  Link to Opinion

 

In his putative class action complaint, the plaintiff asserted a single count for violation of Mass. Gen. Laws ch. 93A. Specifically, the plaintiff alleged that the defendant obfuscated information regarding the sales of his and other similarly situated authors' published books by providing them with incorrect and otherwise confusing reports and then refusing to provide straightforward responses to inquiries.

 

The plaintiff author asserted that, had he been provided clear and accurate information, it would have been revealed to him that the defendant publisher was not paying the full amount of royalties due. The plaintiff author sought declaratory and injunctive relief requiring the defendant publisher to disclose its royalty calculation methods and provide reasonable disclosures of royalty-related information.

 

The trial court granted the defendant publisher's motion to dismiss, concluding that the choice of law clause in its publishing agreement, mandating that all disputes be resolved according to New York law, barred the assertion of a claim arising only under Massachusetts law. The plaintiff author timely appealed.

 

The choice of law clause at issue read, in pertinent part, that "[t]his Agreement shall be construed and governed according to the laws of the State of New York." The plaintiff author argued that this clause was too narrow to govern his claim because it directed only that the "Agreement . . . be construed and governed" in accordance with the laws of New York. His claim, he said, was not about how the agreement should be construed or governed but instead about the defendant publisher's allegedly unfair and deceptive reporting practices.

 

The First Circuit determined that the clause at issue was equivalent to the clause considered by the Massachusetts Supreme Judicial Court ("SJC") in Jacobson v. Mailboxes Etc. U.S.A., Inc., 646 N.E.2d 741 (Mass. 1995), which stated that the agreement was "to be construed under and governed by the laws of the State of California." Id. at 743.

 

Notably, the SJC ruled in Jacobson that this narrow clause did not preclude or govern Chapter 93A claims. Id. at 746 n.9. The SJC reasoned that because "[t]he agreement does not state that the rights of the parties are to be governed by California law but only that the agreement is to be governed and construed by California law[,] [t]he choice of law clause does not purport to bar the application of G.L. c. 93A to the parties' dealings in Massachusetts." Id.

 

The clause at issue in this case stated only that "[t]his Agreement shall be construed and governed" according to New York law and, as observed by the First Circuit, did not otherwise select any state's law as governing the parties' rights and obligations created by statute. Therefore, in light of the SJC's opinion in Jacobson, the First Circuit held that the agreement did not suggest that New York law was to govern the adjudication of the author's claim that the defendant publisher breached a statutory duty imposed by Massachusetts law.

 

The defendant publisher argued that it was impossible to resolve the class action claim without construing the publishing agreement, but the First Circuit was not convinced. The Court determined that if the publisher deceived the author in its reporting of what royalties were due under the contract as construed under New York law, nothing in the contract would dictate the choice of law to be applied in determining whether that alleged deception was actionable, not as a breach of contract, but as a violation of Chapter 93A. See Dinan v. Alpha Networks, Inc., 764 F.3d 64, 68 (1st Cir. 2014). The Court therefore concluded that the Chapter 93A claim was not precluded by the narrow choice of law clause.

 

Lastly, the First Circuit declined the parties' invitation to rule on whether the author's complaint otherwise stated a claim under Chapter 93A. See Singleton v. Wulff, 428 U.S. 106, 121 (1976).

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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