by Larry R. Rothenberg, Esq.
In a prior advisory, we reported a procedure created by a trial judge in Darke County, a rural county in western Ohio, whereby the judge was routinely ordering properties with pending foreclosures to be conveyed by a commissioner’s deed directly to the mortgage holders, without judicial sales, despite the mortgage holders’ objections. On January 14, 2011, the Court of Appeals issued a decision overturning that procedure.
In Wells Fargo Bank v. Young, 2011-Ohio-122, the plaintiff filed a foreclosure and when the borrower failed to file an answer, the plaintiff filed a motion for default judgment. Instead of granting the motion and ordering the usual sheriff’s sale as requested by the plaintiff, the trial judge issued a notice to all parties to appear and show cause as to why the property should not simply be conveyed to the plaintiff without a judicial sale. Over the objection of the plaintiff, and despite testimony from a top real estate law expert and a representative of a national title insurance company that such a conveyance by commissioner’s deed could result in a clouded title and title insurance claims, the trial judge ordered the conveyance by commissioner’s deed to the plaintiff, and the plaintiff appealed.
In its decision, the Court of Appeals reviewed the historical background of mortgages and foreclosures, and the statutory procedures currently in effect for foreclosures in Ohio. The Court of Appeals decided that although a foreclosure is generally recognized to be an equitable proceeding, and although Ohio has a statute authorizing a sale by a master commissioner in limited circumstances, those circumstances were not present in this case, and therefore, the trial court did not have authority to circumvent a judicial sale of the foreclosed property.
The Court of Appeals stated that it was not unsympathetic to the concerns of the trial court in trying to provide a quicker and less costly approach to foreclosure issues, but that the only issue was whether the remedy attempted by the trial court was authorized by existing law.
Quoting a prior decision, the Court of Appeals stated: “It is this rule of law that creates, protects, and guarantees the continued existence of a civilized society. When established law is contorted to fix individual situations, rather than being applied firmly and consistently, what then remains is the will of an autocrat which changes from day-to-day and place-to-place. In equitable matters, a Court has considerable discretion in attempting to fashion a fair and just remedy. But this discretion cannot flout or override specific statutory mandates. The wisdom and efficacy of existing constitutional laws is a matter for the legislature.”
Although the Court of Appeals’ decision is only binding within its six-county district, it would be appropriate for all courts to accept its guidance and refrain from “fixing” the foreclosure problem by contorting established law.
If you have any questions on this matter, please contact Mr. Larry R. Rothenberg, Esq. Larry is the partner-in-charge of the Cleveland real estate and foreclosure department of Weltman, Weinberg & Reis Co., LPA (WWR). He is the author of the Ohio Jurisdictional Section within the treatise, “The Law of Distressed Real Estate”, and was a contributing author to “Ohio Foreclosures, What You Need To Know Now”, published by The West Group. He can be reached at 216.685.1135 or firstname.lastname@example.org.