Villas at E. Pointe Condo. Ass'n v. Strawser

• Decision Date: 03 September 2019
• Docket Number: No. 18AP-823,18AP-823
• Citation: 142 N.E.3d 1200,2019 Ohio 3554
• Parties: VILLAS AT EAST POINTE CONDOMINIUM ASSOCIATION, Plaintiff-Appellee, v. Melissa L. STRAWSER et al., Defendants-Appellees, Carrington Mortgage Services, LLC, Defendant-Appellant.
• Court: Ohio Court of Appeals

142 N.E.3d 1200

2019 Ohio 3554

VILLAS AT EAST POINTE CONDOMINIUM ASSOCIATION, Plaintiff-Appellee,

v. Melissa L. STRAWSER et al., Defendants-Appellees,Carrington Mortgage Services, LLC, Defendant-Appellant.

No. 18AP-823

Court of Appeals of Ohio, Tenth District, Franklin County.

Rendered on September 3, 2019

On brief: Graydon, Head & Ritchey LLP, and Kara A. Czanik, West Chester, for appellant. Argued: Jeffrey M. Hendricks, Cincinnati.

DECISION

BEATTY BLUNT, J.

{¶ 1} Defendant-appellant Carrington Mortgage Services, LLC ("Carrington") appeals from a decision of the Franklin County Court of Common Pleas denying Carrington's motion for distribution of sale proceeds. Because we determine the trial court erred in failing to consider whether to exercise its inherent discretion, we reverse and remand.

I. BACKGROUND

{¶ 2} The Villas at East Pointe Condominium Association ("East Pointe") initiated this foreclosure action against defendant-appellee Melissa L. Strawser pursuant to a lien for unpaid condominium dues on January 8, 2016. The complaint involved Strawser's property at 81 Villa Pointe Drive in Columbus, Ohio ("property"). The complaint named Carrington as a defendant because Carrington held the first mortgage on the property. Carrington's lien was senior to East Pointe's lien.

{¶ 3} Carrington was served with the complaint via certified mail on January 19, 2016 but failed to answer. Strawser was also served and likewise failed to answer. On October 11, 2016, East Pointe filed a motion for default judgment against all parties, seeking both default and a "bar to any equitable interest" those parties may have had in the property. The trial court granted the motion and issued the judgment entry of foreclosure on October 31, 2016 ("judgment entry"). The judgment entry noted that Carrington had been served and failed to answer. It further explicitly stated "IT IS THEREFORE ORDERED ADJUDGED AND DECREED that all claims of [Carrington], having failed to appear herein, be and the same are hereby forever barred against the premises * * *."

{¶ 4} An investor purchased the property at the July 7, 2017 sheriff's sale. The September 6, 2017 confirmation entry followed. The confirmation entry relevantly ordered the clerk to deem as satisfied and cancel Carrington's mortgage. The confirmation entry further directed the clerk to retain the $67,121 balance pending further court order. The confirmation entry's certificate of service indicated it was submitted to Carrington via ordinary mail.

{¶ 5} Carrington filed a Civ.R. 60(B) motion on November 30, 2017, two months after the confirmation entry lodged. Therein, Carrington noted the account was current at the time the foreclosure case began. Carrington further alleged Strawser, the borrower, owed Carrington $95,104.39 plus interest at the rate of 4.375 percent from June 2017 due to her default on the note for the property. Carrington next asserted relief was proper under the "catch-all" provision found in Civ.R. 60(B)(5), because Carrington was simply moving to protect its interest in its lien and the funds left over after confirmation. (Def.'s Mot. at 5.) Carrington argued no prejudice would result should its motion be granted, as the clerk's costs, the property's taxes, and East Pointe's condominium dues had all been paid. Carrington continued by summarily stating its motion was filed within a reasonable time, even though the judgment entry was lodged more than one year prior. Carrington failed to offer any explanation for the delay. No opposition was filed.

{¶ 6} The trial court denied Carrington's Civ.R. 60(B) motion on February 26, 2018. It held Carrington had alleged a meritorious defense via Carrington's status as the note and mortgage holder for the property. The trial court, however, disagreed with Carrington's contention that the $67,121 funds left over from confirmation were sufficient to invoke Civ.R. 60(B)(5), holding instead that the stated reason—the mere existence of the funds—was not "extraordinary" and did not shift the matter into the requisite "unusual case" realm. (Feb. 26, 2018 Entry at 3.) Lastly, the court rejected Carrington's unsubstantiated claim that the motion was timely, noting that the motion was filed more than one year after the judgment entry lodged and provided no reason for the delay. As such, the trial court denied Carrington's Civ.R. 60(B) motion.

{¶ 7} Two months later, Carrington filed its motion for distribution of sale proceeds in order to partially satisfy the mortgage's $95,104.39 balance, arguing that equity demanded such a result. In support of its motion, Carrington provided the affidavit of Elizabeth Ostermann, a vice president at Carrington. Carrington attached Strawser's note, amended note, mortgage, mortgage assignments, notice of default, FHA face-to-face letter, and payment history to Ostermann's affidavit. The amended note was for $105,287.93 at 4.375 percent interest for a new 30-year term and was dated May 18, 2012, almost 4 years after the original note's date. That indicated Strawser previously defaulted on the note before this foreclosure was initiated.

{¶ 8} Next, Carrington directed the trial court's attention to two cases in support of its requested relief. The first was Mueller v. Petri , 1st Dist. No. C-74692, 1975 WL 182122 (Nov. 3, 1975). Carrington also cited to Stidham v. Wallace , 12th Dist. No. CA2012-10-022, 2013-Ohio-2640, 2013 WL 3227270. According to Carrington, both of those cases held a first lienholder had an "equitable right to have its lien satisfied despite not initially appearing." (Apr. 11, 2018 Mot. for Distribution of Sale Proceeds.)

{¶ 9} Carrington's motion further acknowledged the judgment entry in this case prevented it from enforcing the mortgage. But, Carrington argued that entry did not prohibit it from enforcing the note.

In support, Carrington cited to Ostermann's affidavit establishing its noteholder status, the borrower's default, and the amount due on the note. Carrington asserted the trial court's decision denying its Civ.R. 60(B) motion did not preclude the distribution it now sought because the confirmation entry noted that the remaining funds were to be held pending further court order.

{¶ 10} The trial court's September 27, 2018 decision denying Carrington's motion for distribution finds none of Carrington's grounds in support persuasive. Carrington's present appeal focuses only on that decision.

II. ASSIGNMENT OF ERROR AND STANDARD OF REVIEW

{¶ 11} Carrington presents the following single assignment for our review:

The trial court erred in denying Carrington's motion for distribution and failing to distribute excess proceeds from the foreclosure sale to Carrington.

{¶ 12} The underlying matter is a foreclosure action. "A foreclosure action is a civil action in equity." Third Fed. S. & L. Assn. of Cleveland v. Strong , 10th Dist. No. 14AP-902, 2015-Ohio-3009, 2015 WL 4556718, ¶ 13, citing WesBanco Bank, Inc. v. Ettayem , 10th Dist. No. 14AP-452, 2015-Ohio-1230, 2015 WL 1432551, ¶ 28, citing Chem. Bank v. Neman , 52 Ohio St.3d 204, 210, 556 N.E.2d 490 (1990). We review equitable claims for an abuse of discretion. Sandusky Properties v. Aveni , 15 Ohio St.3d 273, 274-75, 473 N.E.2d 798 (1984). "An abuse of discretion connotes more than an error of law or judgment; rather, it implies that the court has acted either unreasonably, unconscionably, or arbitrarily." Strong at ¶ 13, citing Blakemore v. Blakemore , 5 Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983).

III. ANALYSIS

{¶ 13} The trial court denied Carrington's motion for distribution on two grounds. First, the trial court found Carrington's argument that Carrington was entitled to the excess proceeds based on equitable grounds unpersuasive because Carrington's request for the money was based on a note, and was therefore a legal, not an equitable, claim. Second, the trial court held the judgment entry's plain language barred all claims against the property. As such, the trial court treated Carrington's motion as one against the property and denied the motion. Because we find an abuse of discretion present in both bases, we sustain Carrington's single assignment of error and reverse.

A. The judgment entry does not preclude Carrington's requested relief

{¶ 14} We address the trial court's reasons for denying the motion out of order for analytical fluidity. As noted above, the trial court's second ground for denying Carrington's motion for distribution is that the judgment entry ordered "all" of Carrington's claims "against the premises" barred. (Sept. 27, 2018 Decision at 2.) Carrington, however, is not attempting to proceed against the property. Nor could it. The judgment entry clearly struck Carrington's lien on the property. As a result, Carrington argues it is moving forward against Strawser based on her alleged default on the note.

{¶ 15} In this instance, we note that in foreclosure cases "the first part of [the mortgagee's] action, concerning the note, is brought according to law and is based in contract * * *." U.S. Bank Natl. Assn. v. George , 10th Dist., 2015-Ohio-4957, 50 N.E.3d 1049, ¶ 11. The second part is the action on the mortgage which is equitable. Hence, a foreclosure "involves a legal action against the maker of a note who has defaulted on payments" and an "equitable action on the mortgage to force a sale of the property based on the lender's secured position." (Emphasis added.) Deutsche Bank Natl. Trust Co. v. Holden , 147 Ohio St.3d 85, 2016-Ohio-4603, 60 N.E.3d 1243, ¶ 5. According to Holden, Carrington is proceeding against Strawser based on the note and not against the property for the mortgage. Because the judgment entry prevents only claims against the property, we find that the trial court erred in holding that the judgment entry barred Carrington's claim against Strawser premised on the note.

B. The trial court had discretion to utilize equity to consider Carrington's motion

{¶ 16} We turn next to the trial court's primary...