IN THE COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO
JAMES ROKAKIS, AS TREASURER ) CASE NOS.: CV 10 729690 and
) CV 10 729846
Plaintiff, )
)
)
vs. ) JOURNAL ENTRY
)
CIRCLE DEVELOPMENT )
GROUP, INC., et al. )
)
Defendants. )
SUMMARY
These consolidated cases are administrative appeals by the mortgagee (Park View
Federal Savings Bank in case number 729690) and fee owner (Circle Development Group, Inc.,
in case number 729846) of a Solon property that was ordered by the Cuyahoga County Board
of Revision to be transferred directly to the Cuyahoga County Land Reutilization Corporation
because of an unpaid property tax bill. The appellants particularly Park View
1
claim the
board violated the direct transfer statute by ignoring its liens and transferring an $887,000
parcel to the Land Bank to satisfy a $37,889.90 tax lien.
FORECLOSURES, TAX FORECLOSURES AND THE LAND BANK
A mortgage is security for a debt.
2
The borrower is the mortgagor and the lender is the
mortgagee. When the borrower defaults on the repayment of the debt the mortgagee can file an
action for foreclosure. The same applies where property taxes are delinquent. In that situation,
known as a tax foreclosure, the county treasurer is the plaintiff. Foreclosure is an equitable
1
2
Hausman v. Dayton (1995), 3 Ohio St.3d 671, 679.
2
cause of action and is usually accompanied by a cause of action for a money judgment in the
amount of unpaid taxes or the note secured by the mortgage.
3
An ordinary successful
foreclosure lawsuit includes pleadings, discovery and, in most cases, a dispositive motion since
there are often no genuine issues of material fact. Upon entering a judgment of foreclosure, a
court typically identifies the amount due, forecloses (i.e., cuts off or excludes) the equity of
redemption (usually providing the mortgagor with a three day grace period to redeem the
property), and orders the property to be sold by sheriff's sale, pursuant to the procedures set
forth in Ohio Revised Code chapter 2329 (governing execution against property).
4
property by paying off the balance due.
5
That right is not extinguished until three days after a
court decree of foreclosure.
6
Any time during the proceedings to that point the mortgagor can
property owner also has a statutory right of redemption: R. C. section 2329.33 provides that the
owner may redeem the property after a sale, but before it is confirmed by the court, by
depositing the amount of the money judgment plus interest.
feature of a foreclosure lawsui
to protect the interests of the mortgagor-debtor while, at the same time, ensuring that the
secured creditors receive payment for unpaid debts.
7
Consistent with these interests, the
procedures spelled out in R.C. chapter 2329 are designed to obtain the maximum amount of
3
See, e.g., Metropolitan Life Ins. Co. v. Triskett Illinois, Inc. (1994), 97 Ohio App.3d 228, 234.
4
Wells Fargo Bank, N.A. v. Young, 2011-Ohio-122, 2d Dist. App. No. 2009 CA 12, ¶ 29.
5
Abroms v. Synergy Building Systems, 2011-Ohio-2180, 2d Dist. App. No. 23944, ¶ 50.
6
Id., ¶ 49.
7
Wells Fargo Bank, N.A., supra, ¶ 30.
3
money from the foreclosure sale.
8
Toward that end, R. C. §2329.20 provides that property
cannot be sold for less than two-thirds of its appraised value. Once it is sold, unpaid taxes are
satisfied first and the remaining proceeds are distributed among the lienholders according to
their priority.
It is commonly acknowledged that the number of foreclosure actions in the country
generally and Ohio specifically rose precipitously during the last several years. Cuyahoga
County itself has been described as the epicenter of the foreclosure crisis.
9
One of the maladies
to come from that crisis is a substantial increase in the number of properties abandoned by
owners who, owing more than their property was worth and unable to pay their taxes and
sale. When properties are abandoned and fall into a state of desuetude they tend to blight the
whole neighborhood, particularly where they are concentrated in densely developed areas. The
blight is exacerbated by the time it takes to litigate the foreclosure lawsuit and conduct a
As one way to remedy this problem, the Ohio legislature made changes to hasten the
disposition of tax foreclosure cases. First, in 2006, House Bill 294 allowed tax foreclosure
proceedings on distressed properties to proceed administratively, before a county board of
revision, instead of judicially. Then, effective in early 2009, Senate Bill 353, known as the
land bank bill, became law. The provisions of the bill related to tax foreclosures are found at
R.C. §§323.65 through 323.78.
The statute allows a tax lien on abandoned land to be foreclosed through proceedings
8
Id.
9
Understandi
Policy Discussion Papers, Volume 25, January 2009, p. 1.
4
treasurer, a tax certificate holder or county land bank.
10
To be considered abandoned the
property must be unoccupied and delinquent on real estate taxes.
11
The Ohio Rules of Civil
service and notice.
12
But the board is free to follow the civil rules or may promulgate its own.
13
Upon a decree of foreclosure the board of revision may order the property transferred without
14
However, the law protects the interests of owners and lienholders in several ways. R.C.
§§323.69(B)(2) and 323.70(B) require the board to dismiss the complaint upon request by the
owner within 20 days of service of the complaint, even without good cause. Thereafter, the tax
lien foreclosure can only proceed judicially, i.e.
o
but before a confirmation of the sale or transfer, by paying the overdue taxes.
15
Most notably, a
lienholder, to preserve its security interest, may have the action dismissed at any time before
confirmation of sale or transfer by producing evidence that the impositions
16
do not exceed the
fair market value of the land.
17
That provision is corroborative of a legislative intent that direct
transfers to land banks are meant for situations where the property is worth less than the taxes
owed and no private economic interests will be impaired by the transfer.
10
on
corporation.
11
R.C. 323.65(A).
12
R.C. 323.69(C).
13
Id.
14
R.C. 323.73(G) and 323.74(D).
15
R.C. 323.69(B)(1) and 323.76.
16
R.C. 323.65(F):
ficate holder, applicable and permissible costs of the prosecuting attorney of a county, and
other permissible charges against abandoned land.
17
R.C. 323.72(C).
5
Finally, likely because of the glut of foreclosures here, the statute includes a section
applicable only to Cuyahoga County. R.C. §323.78 gives the complainant in a tax foreclosure
period is defined at R.C. 323.65 as follows:
for unpaid delinquent taxes. . .means forty-five days after an adjudication of foreclosure
of the parcel is journalized by a court or county board of revision having jurisdiction
over the foreclosure proceedings. Upon the expiration of the alternative redemption
period, the right and equity of redemption of any owner or party shall terminate without
further order of the court or board of revision. (Emphasis added.)
Under this section the right of redemption terminates 45 days after the entry of
opportunity to redeem. Presumably because the alternative redemption period is inimical to the
interests of an owner or lienholder, R.C. §323.78 mandates: 1) that the complaint explicitly
invoke the alternative redemption period and 2) that any notice of final hearing must describe
the alternative redemption period and its effect.
STATEMENT OF FACTS
The property at 7365 Royal Port Rush Drive was transferred by a deed to the Circle
Development Group, Inc. that was recorded on September 16, 2005. At the same time, Park
View recorded a $660,000 open-end mortgage in its favor. Park View then recorded another
open-end mortgage, this one for $100,000, on September 29, 2008.
18
In the meantime, Circle stopped paying real estate tax and the Cuyahoga County
Treasurer, James Rokakis,
19
commenced a tax foreclosure proceeding under R. C. §323.65 et
18
etween the two
Park View mortgages.
19
Since then, Cuyahoga County has changed to an executive form of government and the separate office of
substituted as the nominal plaintiff in these cases.
6
seq. before the Cuyahoga County Board of Revision on May 20, 2009. The preliminary
judicial report filed with that complaint shows unpaid taxes of $16,511.32 on a market value of
$550,100.00 and the complaint did not invoke the alternative redemption period.
Park View received service of the complaint and filed a pleading on July 29. Circle
never filed a responsive pleading or otherwise participated in the proceedings before the board
of revision. On August 10, the city of Solon filed an affidavit disclaiming its priority interest
under R.C. §5722.02 to purchase the land through its land reutilization program, making the
property eligible for transfer to the county land bank.
A final hearing was first set for October 23, 2009. The notice of that hearing did not
include any mention of the R.C. §323.78 al
complaint did not seek that remedy. The notice did include a warning that if the impositions
bank without sua sponte.
20
After two
more continuances the hearing was ultimately held on April 9, 2010. Meanwhile, on January
26, 2010, the treasurer filed an amended complaint identical in all respects to the original
complaint except that it included among the remedies sought the alternative right of
redemption. There is no evidence in the record that the board granted leave to file an amended
complaint and Park View never filed a response to the amended complaint. The board never
issued a notice of hearing that included the language required by R.C. §323.78(A) that upon
foreclosure and after the expiration of the alternative redemption period the property could be
transferred to a land bank free of Park Vi
20
The first continuance demonstrates a pitfall of using one form for all occasions. The record includes an order of
s own motion
7
After the final hearing, which Park View did not attend, the board on April 12
board found that the alternative right of redemption applied and that the property qualified for
direct transfer to a land bank without appraisal or a public auction despite a supplemental final
judicial report showing impositions of $37,889.90 on a market value of $887,000.00.
Consistent with its decision at the final hearing, the board simultaneously journalized an
recorded on June 8, 2010.
21
appeal Park View claims, among other things, that:
1)
2) ring was defective for not complying with R.C.
323.78 by omitting reference to the alternative right of redemption.
here.
22
LAW AND ANALYSIS
Timeliness of the appeal
As an initial matter, the treasurer and the land bank argue that the common pleas court
is without jurisdiction to consider these appeals because Park View and Circle Development
filed them too late.
R.C. §323.79 provides, in pertinent part:
21
The administrative record does not contain evidence of when the deed was delivered to the land bank, although
However, that affidavit cannot be considered on appeal. See R.C. §2506.03.
22
R.C. 323.79.
8
323.79 Appeal by aggrieved party in court of common pleas.
Any party to any proceeding instituted pursuant to sections 323.65 to 323.79 . . .
who is aggrieved . . . may file an appeal in the court of common pleas . . . upon a
final order of foreclosure and forfeiture by the board. A final order of
foreclosure and forfeiture occurs upon confirmation of any . . . transfer to a . . .
county land reutilization corporation . . .
An appeal shall be filed not later than fourteen days after the date on which the
order of confirmation of . . . transfer to a . . . county land reutilization
corporation . . . is filed with and journalized by the clerk of court. The court
does not have jurisdiction to hear any appeal filed after the expiration of that
fourteen-day period. (Emphasis added.)
The treasurer and the land bank argue that the appeal time began on April 12 the date
of the foreclosure adjudication and order to the sheriff to transfer the parcel and ran out on
April 12 order cannot constitute a final order because the transfer could not be confirmed until
the expiration of the alternative redemption period.
If the April 12 adjudication and order constitutes a confirmation of transfer, then the 45-
day redemption period is illusory since there would be no interest to redeem, the transfer to the
land bank having been confirmed. Because the alternative redemption period has to have
meaning, the adjudication of foreclosure cannot include a confirmation of transfer and is thus
- -
23
is
unavailing because it misses the point by focusing on when the right to redemption begins and
ends. It is agreed that under R.C. §323.78 the right of redemption is extinguished 45 days after
the adjudication of foreclosure, but that has nothing to do with the confirmation of transfer,
which is the event that begins the appeal time.
23
9
It appears that the board of revision created the uncertainty by using a process that is
bureaucratic in the most pejorative sense. The board issued two one-size-fits-all check-the-box
orders at the same time instead of first adjudicating the foreclosure with an order to the sheriff
to transfer and then, after waiting 45 days to allow for the possibility of redemption, to make a
separate entry confirming the order of transfer and ordering the sheriff to issue a deed. While it
might be easier for the board to push through a single generic form and then forget about the
case, common sense, not to mention due process, dictates that the transfer cannot be confirmed
until the 45-day redemption period ends.
So neither the adjudication of foreclosure nor the order to the sheriff to transfer the
parcel constitutes an order of confirmation of transfer to the land bank and the 14-day appeal
time did not start on April 12. This still leaves three possibilities for when the appeal time did
start. The first is 45 days from April 12, i.e., the expiration of the redemption period. Second
is June 8, the date the deed was recorded. Last, there is an argument that the appeal time has
yet to begin beca
24
Until the board of revision adopts a procedure using a separate order of confirmation,
the date of recordation will have to suffice. To use the end of the 45-day redemption period
would require actual knowledge by an aggrieved party about whether the property was
redeemed without a reliable way to know that since the statute does not call for the fact of
redemption to be docketed. To find that the appeal time never started would mean the
dismissal of these cases for lack of a final appealable order and leave the property, and every
other similar piece of real estate in the county, in legal limbo. But the date of recordation is the
24
R.C. 323.79.
10
first date of notice to the public that the transfer ordered on April 12 was finally
consummated.
25
Having found that the 14-day statutory appeal period began on June 8, 2010, the court
finds that the appeals of Park View (filed June 18) and Circle Development (filed June 21) are
timely.
The amended complaint
in the amended complaint filed January 26, about ten weeks before the final hearing. Although
the treasurer claims to have made an oral motion on October 23, 2009, for leave to amend the
complaint to add a remedy under the alternative redemption period,
26
there is no journal entry
that such a motion was made, much less granted.
While it is true that the rules of civil procedure are not applicable to the proceedings of
the board, there is no evidence that the board has adopted any rules of procedure as encouraged
by R.C. §323.66. This void means that board proceedings are not conducted under any
consistent, identifiable rules. The absence of any standard procedures leaves the board with
unlimited discretion, and that can lead to unfairness because the parties have no idea what they
need to do to vindicate their rights even if, unlike Park View, they do attend a hearing.
As the land bank
27
Because the board has not adopted any rules of procedure, particularly regarding
pleadings, it should be held to the strict terms of the authorizing statute. That statute, at R.C.
25
26
27
11
28
nowhere does it mention the possibility of an amended complaint. Indeed, the
by R.C.
§323.70(B) requesting a dismissal of the complaint, or to the answer in which only limited
issues could be raised described in R.C. §323.72(A). As a result, the board abused its
discretion by ordering a remedy not prayed for in the only pleading allowed under its minimal
procedural rules.
This matters because, under the original complaint, Park View, knowing that the
property would be sold at a public auction since the statute prohibits a direct transfer by the
board of revision under those circumstances where the alternative redemption period has not
Park View should have been able to rely on the board to follow the last sentence of R.C.
riod in its
is set forth at R.C. §323.78 as follows:
(A)ny notice of final hearing shall include, that upon foreclosure of the parcel, the
equity of redemption in any parcel by its owner shall be forever terminated after the
expiration of the alternative redemption period, that the parcel thereafter may be sold at
the parcel may, by order of the court or board of revision, be transferred directly to a
municipal corporation, township, county, school district, 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.
(Emphasis added.)
28
R.C. 323.69(c).
12
This statute does not give the board of revision the discretion to ignore its imperative,
and for good reason, since it is only by this notice that a lienholder would learn that, even
the property directly to a land bank without the protection afforded to that lienholder by a
notice of final hearing the board sent includes an advisement that the
ncy and its
decision not to attend a hearing; a decision, by the way, which is not uncommon in a judicial
foreclosure setting where a court will protect the interests of the owner and lienholders
regardless of how much or little they participate in the litigation.
CONCLUSION
The board of revision decided the case before it on an amended complaint that is not
authorized by the statute governing tax foreclosures before the board and in the absence of any
rules of procedure that allow an amended complaint. The board also failed to comply with the
provision of R.C. §323.78 requiring a notice of final hearing that describes the availability of
the alternative redemption period as a remedy and the possibility that the property will be
ordered directly transferred, free and clear of all liens, to a land bank. These were abuses of the
To undo the abuse of discretion the parties should be returned to where they were
before the error was made. That point is October 23, 2009, just before the board continued the
final hearing on the complaint.
Therefore, pursuant to R.C. §2506.04, the court hereby vacates all of the board of
reclosure and the
13
order to the sheriff of direct transfer. The court further orders that the amended complaint be
revision to be adjudicated in accordance with all applicable statutes.
Finally, because the adjudication of foreclosure is vacated, the court finds that the deed
from the sheriff to the Cuyahoga County Land Reutilization Corporation, recorded June 16,
2008 as instrument number 201006080284, is void and of no legal effect. The office of the
fiscal officer of Cuyahoga County is ordered to record, without fee, a time-stamped copy of this
journal entry in connection with permanent parcel number 956-33-017 upon presentation by
Park View, Circle Development, or any other interested party.
IT IS SO ORDERED:
____________________________ Date: ____________________
14
SERVICE
A copy of this journal entry was sent by e-mail, this ______ day of October, 2011, to
the following:
Robert W. McIntyre, Esq.
Isis C. Filipek, Esq.
Attorneys for the CCLRC
Judith Miles, Esq.
Attorney for the Treasurer
Jose C. Feliciano, Esq.
Attorney for Park View
Rebecca J. Castell, Esq.
Attorney for Circle Development Group, Inc.
____________________________
