Union Bank Co. v. Brumbaugh

• Decision Date: 10 February 1982
• Docket Number: No. 81-173,81-173
• Citation: 431 N.E.2d 1020,69 Ohio St.2d 202,23 O.O.3d 219
• Parties: , 23 O.O.3d 219 The UNION BANK CO., Appellee, v. BRUMBAUGH, Appellant.
• Court: Ohio Supreme Court

Page 202

69 Ohio St.2d 202

431 N.E.2d 1020, 23 O.O.3d 219

The UNION BANK CO., Appellee, v. BRUMBAUGH, Appellant.

No. 81-173.

Supreme Court of Ohio.

Feb. 10, 1982.

Syllabus by the Court

The Due Process Clause of the Fourteenth Amendment does not require that the mortgagor in a foreclosure proceeding must be afforded a hearing prior to the confirmation of sale where the trial court has complied with all of the statutory requirements contained in R.C. 2329.01 to 2329.61, inclusive. The granting of such a hearing lies within the sound discretion of the trial court.

Jessie I. Brumbaugh, appellant herein, executed a promissory note in the amount of $155,000 with The Union Bank Company, appellee herein. The note provided that interest was to be 9.5 percent per annum from February 3, 1978, and that the bank could, at its option, establish a higher or lower rate (variable interest rate) upon giving appellant 30 days written notice. The note also provided that in case of default, the entire principal sum, at the option of the holder, was due and payable. To secure the note, appellant executed and delivered to the bank her mortgage on land she owned in Wood County.

Appellant defaulted on the loan, and the bank initiated the within action seeking to foreclose her mortgage. Appellant entered into a consent judgment with the bank that provided for foreclosure and order of sale by the sheriff of Wood County. The consent judgment granted the bank $155,000 with interest at 9.5 percent per annum from February 3, 1978.

The sheriff of Wood County appointed three disinterested free-holders to appraise appellant's real estate and to report their appraisals pursuant to R.C. 2329.17. ¹ The appraisers valued the property at $197,000. Notification of the appraisal was published in a newspaper of general circulation for three consecutive weeks in compliance with R.C. 2329.23, ² 2329.24, ³ 2329.26 ⁴ and 2329.27. ⁵

At the time of the advertisement of the sheriff's sale, the bank moved to correct "nunc pro tunc" the journal entry granting it $155,000 with 9.5 percent interest. The bank sought to increase the interest rate to 11.5 percent from February 3, 1979. Appellant opposed the motion; however, the trial court granted it.

Appellant's land was sold for $201,000. Thereafter, appellant filed a motion and memorandum in opposition to confirmation of foreclosure. Attached to her motion was an appraisal from one broker who valued the real estate at $319,200. Appellant requested an oral hearing so she could present evidence that the amount of the sale was inadequate. The request for oral hearing was denied. Pursuant to R.C. 2329.31, ⁶ the trial court then examined the proceedings of the sale, found them to be in conformity with the law and ordered the sale be approved and confirmed.

Upon appeal, the Court of Appeals, with slight modification in the distribution of the funds, affirmed.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Robenalt, Daley, Balyeat & Leahy, John F. Robenalt and William B. Balyeat, Lima, for appellee.

Donald V. Wood, Jr., Co., L. P. A., and Donald V. Wood, Jr., Findlay, for appellant.

PATTON, Justice.

This case presents two issues for our determination. The first is whether the trial court erred when it corrected "nunc pro tunc" its journal entry granting the bank 9.5 percent interest so that interest at 11.5 percent would begin to run from February 3, 1979. The second issue is whether appellant was entitled to an oral hearing prior to the trial court's confirmation of the sale.

I.

The note executed by appellant provided for interest at 9.5 percent per annum unless the bank, with 30 days prior written notice, decided to raise the interest. There is no indication in the record that the bank gave appellant 30 days notice. In addition, the bank prayed for 9.5 percent interest in its complaint. Indeed, it was not until almost five months after the trial court signed the order providing for foreclosure that the bank moved to increase the interest. The Court of Appeals found the trial court's order increasing the interest to be correct, rationalizing that by entering into a consent entry, appellant had bound herself to an agreement where the bank could, at its option, increase the interest rate. The appellate court's decision was in error for two reasons. First, the bank did not comply with a stipulation in the note providing that 30 days notice be given. Second, appellant consented to an entry that provided for 9.5 percent interest, not an entry in which the bank could unilaterally amend the interest rate.

Accordingly, the bank is only entitled to 9.5 percent interest per annum from February 3, 1978. The judgment of the Court of Appeals is reversed as to this issue.

II.

The second issue is whether appellant was entitled to a hearing prior to the confirmation of the sale so that she could present evidence the sale price was inadequate.

The trial court found appellant was not entitled to a hearing, citing Local Rule 5(C)(1) of the Court of Common Pleas of Wood County. That rule provides that a motion for confirmation of sale "shall normally be considered ex parte in nature." Appellant maintains that despite the provisions of Local Rule 5(C)(1), she was entitled to a hearing pursuant to Citizens Loan & Savings Co., v. Stone (1965), 1 Ohio App.2d 551, 206 N.E.2d 17. ⁷ Citizens Loan & Savings Co. held that the debtor in that case was entitled to a hearing prior to the confirmation of sale to demonstrate he had redeemed the property. We find Citizens Loan & Savings Co. is not dispositive of the case at bar because it was decided prior to the enactment of the Ohio Rules of Civil Procedure, which specifically provided the trial courts the authority to enact local rules.

The Civil Rules became effective July 1, 1970. They were intended to supersede all laws in conflict with them. Section 5(B), Article IV, Ohio Constitution. ⁸ Civ.R. 7(B)(2) provides that a " * * * court may make provision by rule or order for the submission and determination of motions without oral hearing upon brief written statements of reasons in support and opposition." The Court of Common Pleas of Wood County has by rule specifically made provision for the hearing ex parte of the motion for confirmation of sale. Pursuant to the Ohio Constitution, Local Rule 5(C)(1) superseded Citizens Loan & Savings Co., supra.

Local Rule 5(C)(1) does not mandate that in every case no hearing shall be held. It vests within the trial court discretion in determining whether to conduct a hearing. In this regard, it comports fully with Civ.R. 7(B)(2), which states the court may make provision for the submission of motions without oral hearing. The issue then is whether the trial court abused its discretion in denying appellant a hearing. We find it did not.

In her motion opposing the confirmation of foreclosure, appellant maintained that her property was to be sold for an inadequate amount. Attached to her motion, she submitted the appraisal of one broker, who stated the property was worth $319,200. Appellant requested an oral hearing, which request was denied. We find the trial court did not abuse its discretion in denying her request. R.C. 2329.17 provides that the property is to be appraised by three disinterested freeholders who are residents of the county where the lands are situated. The appraisers are to be impartial. There is no evidence appellant's appraiser was a resident of Wood County or that he was disinterested. To the contrary, on this latter point, he was her agent and could hardly be considered impartial.

In addition to her contention that a hearing in her case was mandated by Citizens Loan & Savings Co., appellant argues that her due process rights as guaranteed by the Fifth and Fourteenth Amendments to the United States Constitution have been violated. We disagree.

Procedural due process requires that when the government takes a property interest, there must be notice and a hearing afforded the aggrieved party. Goldberg v. Kelly (1970), 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287. In Goldberg, the court held that recipients of welfare benefits were entitled to notice and a hearing prior to the termination of welfare benefits because an eligible recipient may be deprived of the very means by which to live. Any countervailing governmental interest in conserving fiscal and administrative burdens was clearly outweighed by the recipient's interests. ⁹

Six years after its decision in Goldberg, the United States Supreme Court, in Mathews v. Eldridge (1976), 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18, considered whether the initial termination of disability benefits without an evidentiary hearing violated due process. The court found it did and distinguished Goldberg by finding, 397 U.S. at page 340, 96 S.Ct. at page 905, that disability benefits, unlike welfare benefits, were not based upon financial need. In addition, the court, at page 335, 96 S.Ct. at page 903, set forth three factors to be considered in determining whether an aggrieved party's due process rights have been violated. First, the court must examine the private interest that will be affected by the official action. Second, the court must look at the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards. Finally, the court must reflect upon the government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. In applying these dictates to the case at bar, we find the procedures in this case fully comport with due process.

II A.

First, we consider the private interest that will be affected by the court's action. Appellant's interest in her property is indeed significant. However, as explained below, her interests were...