State ex rel. U.S. Bank Trust National Association v. Cuyahoga County

• Decision Date: 19 July 2021
• Docket Number: 110297
• Court: Ohio Court of Appeals
• Parties: STATE EX REL., U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE OF AMERICAN HOMEOWNER PRESERVATION TRUST SERIES, 2015A+, Relator, v. CUYAHOGA COUNTY, OHIO Respondent.

2021-Ohio-2524

STATE EX REL., U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE OF AMERICAN HOMEOWNER PRESERVATION TRUST SERIES, 2015A+, Relator, v. CUYAHOGA COUNTY, OHIO Respondent.

No. 110297

Court of Appeals of Ohio, Eighth District, Cuyahoga

July 19, 2021

Writ of Mandamus Motion No. 545845 Order No. 547581.

Andrew M. Engel and Marc D. Dann, Advocate Attorneys, LLP, for relator.

Michael C. O'Malley, Cuyahoga County Prosecuting Attorney, and Janeane R. Cappara and Adam D. Jutte, Assistant Prosecuting Attorneys, for respondent.

Roetzel & Andress, LPA, and Stephen W. Funk, for respondent.

JOURNAL ENTRY AND OPINION

EMANUELLA D. GROVES, J.:

{¶ 1} Relator, U.S. Bank Trust, N.A., as trustee of American Homeowner Preservation Trust Series 2015A+ ("US Bank"), seeks a writ of mandamus directing respondent Cuyahoga County, Ohio, to institute appropriation proceedings pursuant to RC. Chapter 163 for the taking of U.S. Bank's interest in a property that was the subject of foreclosure proceedings for vacant or abandoned land before the Cuyahoga County Board of Revision ("BOR"). These proceedings ultimately resulted in the subject property being transferred to the Cuyahoga County Land Bank (the "Land Bank"), a land reutilization corporation established by the Cuyahoga County Treasurer and authorized by the Cuyahoga County Board of Commissioners pursuant to RC 1724.10. Relator claims that the transfer of the subject property to the Land Bank without public sale constitutes a taking of relator's property interest without just compensation. For the reasons that follow, we dismiss the complaint.

Factual and Procedural History

{¶ 2} US Bank filed a complaint for writ of mandamus on February 12, 2021. It alleged that it had an interest in a certain real property by virtue of a 2007 note and mortgage executed by Richard Kurman, the owner of record, in the amount of $52, 500. Attachments to the complaint include a 2014 recorded assignment of mortgage indicating that Biltmore Funding L.L.C. ("Biltmore") received all rights, title, and interest in the mortgage executed by Kurman. A further assignment evidences that Biltmore assigned its interest in the mortgage to 3 Star Properties, L.L.C. on August 31, 2017. This assignment was not recorded until November 13, 2017. A third assignment, also recorded November 13, 2017, showed that 3 Star Properties, L.L.C. assigned its interest in the mortgage to U.S. Bank on September 6, 2017.

{¶ 3} On June 28, 2017, a complaint was filed subjecting the property to a tax lien foreclosure proceeding before the BOR. In that foreclosure action, relator's predecessor in interest, Biltmore, was named as a defendant. Apart from the complaint, Biltmore was also served with a notice of hearing on September 13, 2017. The notice, in large, bold type, informed the defendants that their interest in the subject property could be extinguished and strongly encouraged them to participate in the hearing scheduled for October 11, 2017. U.S. Bank does not allege that service was not properly made, but only states that Biltmore did not take part in the tax foreclosure action, even though it was named as a party and was informed by the complaint that its interest in the property could be extinguished. An adjudication of foreclosure, filed October 16, 2017, indicates that unless a party paid the amount due in the action, the property would be transferred to the Land Bank free and clear of all liens without public auction. There is no indication in the instant complaint that Biltmore or anyone else redeemed the property by paying the amount due for taxes, penalties, and interest. The property was ultimately transferred to the Land Bank free and clear of U.S. Bank's lien and other encumbrances.

{¶ 4} US Bank now asserts, more than three years later, that the appraised value of the property at the time of the foreclosure action, $22, 300, was more than the then delinquent real estate taxes, penalties, and interest, $6, 804.07, such that the transfer of the property without sale constituted a taking of its property. U.S. Bank claims that the transfer of the property to the Land Bank deprived it of its interest without just compensation, whether through the extinguishment of its interest in the property as a result of the mortgage lien or through its contractual right to any proceeds owed to Kurman as a result of any condemnation or appropriation action. As a result, relator now seeks to compel respondent to initiate proceedings to compensate relator for the interest that was improperly extinguished by the transfer of the subject property to the Land Bank without holding a public auction and without paying compensation for any excess in value.

{¶5} The federal district court for the Northern District of Ohio has outlined the statutory procedures at issue here that provides for the transfer of property to a county land reutilization corporation without regard to whether the amount of taxes owed exceeds the fair market value of the property:

[U]nder the relevant statutes, a property owner has been granted a statutory right of redemption, which terminates upon the filing of the confirmation of sale for abandoned land sold at public auction pursuant to [Section] 323.73 of the Revised Code, or upon the filing of the county board of revision's order to the sheriff to transfer the abandoned land to an electing subdivision, such as a county land reutilization corporation, under Sections 323.73(G) or 323.74 of the Revised Code. See [R.C.] 323.76. If the County Treasurer invokes the alternative redemption period under section [R.C.] 323.78, however, then [R.C.] 323.65(J) provides that the property owner shall have an additional twenty [sic] (28) days after the Order of Foreclosure to exercise the statutory right of redemption. See [R.C.] 323.65(J). Thus, for "abandoned" lands ordered transferred under [R.C.] 323.78, the statute provides the property owner or other interested party with an additional 28-day period to redeem their interest in the property by paying their taxes before any direct transfer of land to an electing subdivision can occur. See [R.C.] 323.78. If the property owner does not exercise the statutory right of redemption, however, then [R.C.] 323.76(C)(2) provides that any common law or statutory right of redemption shall terminate "upon the expiration of such alternative redemption period." Id.

In this regard, this statutory right to transfer tax delinquent land to an "electing subdivision" under [R.C.] 323.78 is only applicable to "abandoned" lands, as defined by [R.C.] 323.65(A). A property owner can prevent the direct transfer of land under [R.C.] 323.78 by showing that the land is not abandoned, by paying the outstanding taxes and impositions (or entering into a payment plan), or by exercising their statutory right of redemption before the expiration of the 28-day alternative redemption period. But, if the property is "abandoned land" and the property owner fails to pay the outstanding taxes owed before the expiration of the 28-day alternative redemption period, then [R.C.]

323.78 provides that "* * * any statutory or common law right of redemption in the parcel by its owner shall be forever terminated after the expiration of the alternative redemption period and that the parcel shall be transferred by deed directly to the requesting municipal corporation, township, county, school district, community development corporation, or county land reutilization corporation without appraisal and without a sale, free and clear of all impositions and any other liens on the property, which shall be deemed forever satisfied and discharged." Id. Moreover, [R.C.] 323.78 provides that "[t]he court or board of revision shall order such a transfer regardless of whether the value of the taxes, assessments, penalties, interest, and other charges due on the parcel, and the costs of the action, exceed the fair market value of the parcel," and that "[n]o further act of confirmation or other order shall be required for such a transfer, or for the extinguishment of any statutory or common law right of redemption." Id. Thus, once a foreclosure order has been issued and the 28-day alternative redemption period has expired, then the property owner loses all right, title or interest in the abandoned, tax delinquent property. See [R.C.] 323.76(C)(2) and [R.C.] 323.78.

Finally, the statutory scheme provides an aggrieved party with the right to file an administrative appeal of a final order of foreclosure under Chapters 2505 and 2506 of the Revised Code. See [R.C.] 323.79 ("Any party to any proceeding instituted pursuant to sections 323.65 to 323.79of the Revised Code who is aggrieved in any of the proceedings of the county board of revision under those sections may file an appeal in the court of common pleas pursuant to Chapters 2505 and 2506 of the Revised Code upon a final order of foreclosure and forfeiture by the board"). An administrative appeal under [R.C.] 323.79 differs from a traditional [R.C. Chapter] 2506 appeal, however, because the appeal under [R.C.] 323.79 "shall proceed as an appeal de novo and may include issues raised or adjudicated in the proceedings before the county board of revision, as well as other issues that are raised for the first time on appeal and that are pertinent to the abandoned land that is the subject of those proceedings." Id. Thus, [R.C] 323.79 appears to allow an aggrieved party to file new, constitutional claims arising from the tax foreclosure proceedings.

(Emphasis deleted.) Harrison v. Montgomery Cty., 482 F.Supp.3d 652, 656-658 (S.D.Ohio 2020), overruled on other grounds, Harrison v. Montgomery Cty., 997 F.3d 643 (6th Cir.2021).

Law and Analysis

{¶ 6} This case is before the court on respondent's ...