Fifth Third Mortg. Co. v. McElroy

• Decision Date: 12 January 2023
• Docket Number: 111569
• Citation: 2023 Ohio 76
• Parties: FIFTH THIRD MORTGAGE COMPANY, Plaintiff, v. BRYON K. MCELROY, Defendant-Appellant.
• Court: Ohio Court of Appeals

2023-Ohio-76

FIFTH THIRD MORTGAGE COMPANY, Plaintiff, v. BRYON K. MCELROY, Defendant-Appellant.

No. 111569

Court of Appeals of Ohio, Eighth District, Cuyahoga

January 12, 2023

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-18-904789

Appearances:

Bellinger & Donahue and Kerry M. Donahue, for appellant.

Mitchell L. Alperin, for appellee Scott M. Muharsky.

JOURNAL ENTRY AND OPINION

MARY EILEEN KILBANE, JUDGE

{¶ 1} Defendant-appellant Bryon^[1] K. McElroy ("McElroy") filed an appeal from the trial court's order that denied his motion for distribution of excess funds and granted the motion for distribution of excess funds of defendant-appellee Scott M. Muharsky d.b.a. Scott's Restoration Services ("Muharsky"). For the following reasons, we reverse and remand.

Factual and Procedural History

{¶ 2} On August 28, 1995, Michael J. Weist ("Weist") acquired title to the real property located at 1974 East 221st Street, Euclid, Ohio. On February 7, 2003, pursuant to a loan Weist obtained on the real property, he executed a promissory note ("Note") secured by a mortgage in favor of Fifth Third Mortgage Company ("Fifth Third"). On March 5, 2003, Weist conveyed the real property to himself and McElroy, with rights of survivorship. On December 17, 2016, Weist died and his interest in the property vested with McElroy.

{¶ 3} On October 3, 2018, Fifth Third filed a foreclosure complaint against McElroy and his Jane Doe wife Weist; Asset Acceptance, LLC; Richard P. Wahl ("Wahl"); Portfolio Recovery Associates, LLC; the city of Euclid's Department of Taxation; and Muharsky. Fifth Third alleged the note and mortgage were in default and declared the entire balance due and payable. Fifth Third sought a finding of default on the note; a finding that the mortgage was a valid and subsisting lien on the property, subject to other liens that had priority over the mortgage; and an order of foreclosure.

{¶ 4} Attached to the complaint was a preliminary judicial report dated September 21, 2018, that was a guarantee of record title presented for the use and benefit of the parties to the lawsuit and the purchaser at the judicial sale. The preliminary judicial report listed the following liabilities against the property: the Fifth Third mortgage; certificates of judgment against McElroy and in favor of Wahl, Portfolio Recovery Associates, LLC, and the city of Euclid's Department of Taxation; a mechanics' lien in favor of Muharsky against Weist and McElroy; a certificate of judgment in favor of Asset Acceptance, LLC against Weist; and a terminated bankruptcy matter on behalf of McElroy.

{¶ 5} On October 12, 2018, Wahl filed an answer to Fifth Third's complaint and a cross-claim against McElroy pursuant to the judgment lien Wahl obtained against the property. On November 30, 2018, Muharsky filed an answer to Fifth Third's complaint and a cross-claim against McElroy. Muharsky's cross-claim alleged he had an interest in the subject real property pursuant to a judgment lien filed on June 11, 2014, with the Cuyahoga County Fiscal Officer as Instrument Number 201406110569. While Muharsky classified his interest as a judgment lien in his answer and cross-claim, the preliminary judicial report and Muharsky's subsequent motion for distribution characterized his interest as a mechanics' lien. Muharsky's lien stemmed from his alleged lease of a furnace to McElroy and Weist that was repossessed prior to the filing of Fifth Third's foreclosure complaint. Muharsky further alleged that its lien had not been satisfied and McElroy owed Muharsky the sum of $26,701.82, plus interest and costs from June 11, 2014. Muharsky requested that the court grant priority to his lien from the proceeds obtained from the foreclosure sale and that the judgment lien be adjudged a valid lien.

{¶ 6} On May 1, 2019, McElroy filed a motion for leave to plead or otherwise respond to Fifth Third's complaint; McElroy did not request leave to plead to the cross-claims filed by Wahl and Muharsky. The trial court granted McElroy's motion for leave to plead, and on May 13, 2019, McElroy filed answers to Fifth Third's complaint, Muharsky's cross-claim, and Wahl's cross-claim.

{¶ 7} On July 16, 2019, Fifth Third filed a motion for summary judgment against McElroy. On the same date, Fifth Third filed a motion for default judgment against Asset Acceptance LLC, Portfolio Recovery Associates, LLC, and the city of Euclid's Department of Taxation. On August 16, 2019, the magistrate granted Fifth Third's unopposed motion for summary judgment and Fifth Third's motion for default judgment. On August 19, 2019, the magistrate issued a decision that ordered the sale of the real property at a sheriffs sale and distribution of the sale proceeds in the following order: the clerk of courts in payment of the judicial report, Cuyahoga County Treasurer for taxes, Fifth Third in satisfaction of the Note, and the balance, if any, to be held by the clerk of courts pending further order. The magistrate's decision found that any right, title, interest, or lien held by Wahl and Muharsky was inferior and subsequent to Fifth Third's lien. No findings were made as to Wahl and Muharsky's right, title, interest, or lien except to note that the alleged interests were ordered transferred to the proceeds derived from the sheriffs sale.

{¶ 8} On September 19, 2019, the trial court adopted the magistrate's decisions on the motion for summary judgment and motion for default judgment as well as the magistrate's August 19, 2019 decision thereby granting foreclosure on the real property. The trial court's journal entry stated Wahl and Muharsky's interests would be determined at a later date.

{¶ 9} On November 4, 2019, the real property sold at a sheriffs sale. On November 22, 2019, the trial court issued a judgment entry that amended the order of distribution and found Fifth Third was also entitled to receive payment on advances made to preserve the property before the balance, if any, was held by the clerk of courts until further court order. Approximately nine months later, on September 2, 2020, the trial court issued a journal entry titled "decree of confirmation" that approved the sheriffs sale and directed the sheriff to execute and deliver a good and sufficient deed to the purchaser. Additionally, the order stated that following payment of Fifth Third's mortgage and advance payments, clerk costs, sheriff fees, and taxes, the excess funds in the amount of $58,689.13 were to be returned to the clerk of courts pending further order from the court.

{¶ 10} On September 4, 2020, Wahl filed a motion that sought distribution of $33,384.89 in payment of his judgment lien against McElroy. The trial court granted Wahl's unopposed motion on October 5, 2020.

{¶ 11} On July 1, 2021, McElroy filed a motion for distribution that requested the court distribute the excess funds to him. Pursuant to an August 16, 2021 journal entry, the trial court notified all parties of McElroy's request for distribution of the remaining excess funds and instructed all parties with an alleged interest in the excess funds to submit a motion of distribution on or before August 25, 2021. On August 23, 2021, Muharsky filed a motion seeking distribution of the excess funds to him in the amount of $26,701.82, plus interest and costs, in satisfaction of his mechanics' lien. On September 9, 2021, McElroy filed a brief in opposition to Muharsky's motion for distribution.

{¶ 12} On March 7, 2022, McElroy filed a notice of intent to file a writ of mandamus with this court. The notice of intent argued that McElroy was entitled to the excess funds, the monies were owing to McElroy since July 1, 2021, and Muharsky's claim was meritless. On March 22, 2022, the trial court granted Muharsky's motion for distribution of excess funds and denied McElroy's motion for distribution.

{¶ 13} On March 23, 2022, McElroy filed a motion to stay disbursement of the excess funds pending a ruling from this court; on the same date, the trial court granted the motion to stay. McElroy filed a timely appeal on March 28, 2022.^[2]

{¶ 14} In his appeal, McElroy presented, verbatim, these nine assignments of error:

Assignment of Error I: It was error for the court to award excess funds from the judicial sale of defendant Byron McElroy's home, to Scott Muharsky an unproven purported lienholder.

Assignment of Error II: It was error to find that defendant Muharsky had proven the existence or proper amount of his mechanics lien to the court.

Assignment of Error III: It was error to find the mechanics lien was properly perfected by Muharsky or that any judgment on that lien was ever taken.

Assignment of Error IV: The lien was never perfected for reasons including that it was not timely served upon appellant homeowner as is required for the lien to have affect (Burden of proof on lien claimant).

Assignment of Error V: It was error to deny the disbursement of the excess funds from the sale of his home to the rightful claimant of those funds being homeowner Byron McElroy.

Assignment of Error VI: It was a denial of constitutional due process to take defendant-appellants proceeds of sale without any determination of existence of a lawful mechanics lien.

Assignment of Error VII: The taking of proceeds belonging to defendant-appellant was a state taking of property without compensation in violation of the constitutional rights of defendant-appellant.

Assignment of Error VIII: It was error to not have an accounting of payments and/or credits applied or not applied to the purported lien.

Assignment of Error IX: It was error not to recognize that the mechanics lien expired or was not properly perfected or adjudicated.

Legal Analysis

{¶ 15} We review a...