Foreclosure of Liens for Delinquent Taxes, In re

• Decision Date: 11 May 1992
• Docket Number: No. 2821,2821
• Citation: 607 N.E.2d 1160,79 Ohio App.3d 766
• Parties: In re FORECLOSURE OF LIENS FOR DELINQUENT TAXES.
• Court: Ohio Court of Appeals

Page 766

79 Ohio App.3d 766

607 N.E.2d 1160

In re FORECLOSURE OF LIENS FOR DELINQUENT TAXES.

No. 2821.

Court of Appeals of Ohio, Second District, Clark County.

Decided May 11, 1992.

Bonnie Conrad, Asst. Pros. Atty., Springfield, for appellee.

Steven D. Miles, Dayton, for appellant.

FAIN, Presiding Judge.

Defendant-appellant ITT Financial Services ("ITT") appeals from the trial court's denial of its motion to vacate a sale of real property sold at a sheriff's sale following an in rem foreclosure proceeding.

ITT contends that because it holds a mortgage lien upon the property sold and it did not receive notice of the date and place of sale in accordance with local custom, it was denied due process of law in violation of the Ohio and United States Constitutions. ITT further contends that the trial court abused its discretion when it set a hearing date on ITT's motion to vacate the sale just five days after the notice of the hearing was filed and mailed to ITT.

We conclude that ITT, as a lien holder, was denied due process of law in violation of Section 16, Article I of the Ohio Constitution and the Fourteenth Amendment to the United States Constitution when the property on which it held a lien was sold without notice to ITT of the date and place of sale. We also conclude that the trial court abused its discretion when it held a hearing on ITT's motion to vacate the sale without providing ITT with notice of the hearing in accordance with Civ.R. 6(D). Therefore, the judgment of the trial court is reversed, and this cause is remanded with instructions to vacate the sale of the property.

I

The Clark County Treasurer filed an in rem foreclosure proceeding in May 1990 against Norman and Thelma Swaney with respect to real estate located at 207 N. Western Avenue, in Springfield. The Swaneys defaulted in paying their real estate taxes and in payments required by a recorded first mortgage to ITT. ITT was made a party to the action. ITT filed an answer and cross-complaint against the Swaneys. The county received a judgment of foreclosure for the taxes, assessments, penalties and interest owed. The trial court, with ITT's written approval, entered an order for the sale of the property. A confirmation of the sale was ultimately entered by the trial court.

ITT argues that, in accordance with prevailing and accepted practice, it wrote to the county's attorney requesting notice of the tax sale date. ITT claims that it never received notice of the sale date.

Upon learning, in December 1990, that the property had been sold at a sheriff's sale in October, ITT filed a motion to vacate the sale. A hearing was scheduled by the trial court on ITT's motion; however, ITT did not receive notice of this hearing until after the hearing had occurred. From the trial court's decision denying ITT's motion to vacate the sale, ITT appeals.

II

ITT's first assignment of error is as follows:

"The trial court erred in failing to set aside the sheriff sale when a first mortgagee or its counsel was not sent notice of the sale date."

ITT, the mortgagee, contends that because it did not receive notice of the sale date for the property, it was denied due process of law. A mortgagee has a legally protected property interest and is entitled, under the Due Process Clause of the Fourteenth Amendment, to actual notice reasonably calculated, under all of the circumstances, to apprise him of a pending tax sale and to afford him the opportunity to take appropriate action to protect his interests. Mennonite Bd. of Missions v. Adams (1983), 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180; Miller Reeder Co. v. Farmers State Bank (Ind.App.1989), 545 N.E.2d 593; Macaron v. Assoc. Capital Serv. Corp. (App.1987), 105 N.M. 380, 733 P.2d 11; Hernandez v. Haberle (1990), 160 A.D.2d 1049, 553 N.Y.S.2d 883. In Ohio, it has been held that a judicial lien holder is entitled to personal notice of the sale of real property by the Due Process Clause of the United States Constitution. Central Trust Co., N.A. v. Spencer (1987), 41 Ohio App.3d 237, 535 N.E.2d 347.

The United States Supreme Court in Mennonite held:

"Notice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interest of any party, * * * if its name and address are reasonably ascertainable. Furthermore, a mortgagee's knowledge of delinquency in the payment of taxes is not equivalent to notice that a tax sale is pending." Id., 462 U.S. at 800, 103 S.Ct. at 2712, 77 L.Ed.2d at 188.

A mortgagee is required to receive actual notice of a tax sale unless the mortgagee's address is not reasonably identifiable. Constitutional due process is implicated any time an action occurs that affects a property interest protected by the Due Process Clause of the United States Constitution.

Clark County asserts that the Mennonite and Central Trust holdings require only that a mortgagee receive notice of the pendency of proceedings regarding specific property and does not require that a mortgagee who has notice of the pendency of foreclosure proceedings must be given notice of the time and place of sale. The decree of foreclosure, which was approved by ITT, and the praecipe for order of sale were filed on the same date by the trial court. Because ITT was on notice that the property would be sold in the future, Clark County argues that it had no further duty to inform ITT of the date of sale. Relying on Myers v. Duibley (1952), 94 Ohio App. 228, 51 O.O. 393, 114 N.E.2d 832, Clark County claims that ITT had a duty to contact the court, sheriff or newspaper or to locate court records to obtain knowledge of the time and place of sale.

Although the lien holder in Myers argued that it could have bid on the property to protect its interest had it had notice of the time and place of the sale, it did not expressly invoke the Due Process Clause in connection with this argument. ¹ To the extent that Myers by implication stands for the proposition that a lien holder has no due process right to notice of the time and place of a foreclosure sale, we would note that it was decided in 1952, that the scope of rights under the Due Process Clause has been considerably extended since 1952, and we overrule Myers to that extent.

In Mennonite, it was held that a mortgagee's knowledge of delinquency in the payment of taxes is not equivalent to notice that a tax sale is pending because notice by publication, by posting or given to the property owner is not designed to reach those who have a substantial interest in the property. Mennonite, supra, 462 U.S. at 797-801, 103 S.Ct. at 2711-2712, 77 L.Ed.2d at 186-189.

In the case before us, the fact that ITT knew that the sale of the subject property would take place some time in the future is not equivalent to notice of the time and place of sale. As a party to the foreclosure action, ITT's address was ascertainable.

Lack of notice to ITT adversely affected its ability to protect its interests. ITT did not have an opportunity to observe the sale, to verify that the statutory requirements were met, or to bid on the property to protect its interest. The value of ITT's...