Title: Galt Alloys, Inc. v. KeyBank Natl. Assn.

State: ohio

Issuer: Ohio Supreme Court

Document:

GALT ALLOYS, INC. ET AL., APPELLANTS, v. KEYBANK NATIONAL ASSOCIATION, F.K.A. 
SOCIETY NATIONAL BANK, SUCCESSOR BY MERGER WITH AMERITRUST COMPANY 
NATIONAL ASSOCIATION, APPELLEE. 
[Cite as Galt Alloys, Inc. v. KeyBank Natl. Assn. (1999), ___ Ohio St.3d ___.] 
Execution against property — Foreclosure proceedings — Due process 
requirements for persons whose property interests are jeopardized by the 
filing of legal proceedings — Notice by publication only is insufficient to 
satisfy due process, when — Party to foreclosure proceeding served with 
process in compliance with the Civil Rules need not be given additional 
specific notice of the date, time, and place of the sheriff’s sale, when. 
1. 
Due process requires that persons whose property interests are jeopardized by 
the filing of legal proceedings be given notice reasonably calculated, under all 
the circumstances, to apprise those persons of the pendency of the action and 
afford them an opportunity to present their objections.  (Mullane v. Cent. 
Hanover Bank & Trust Co. [1950], 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865, 
followed.) 
2. 
Due process requires that notice of foreclosure proceedings be given to all 
persons whose interests are jeopardized by those proceedings, and notice by 
publication only is insufficient to satisfy due process when the address of that 
party or interested person is known or easily ascertainable.  (Cent. Trust Co., 
N.A. v. Jensen [1993], 67 Ohio St.3d 140, 616 N.E.2d 873, followed.) 
3. 
Where a party to a foreclosure proceeding has been served with process in 
compliance with the Civil Rules and has thereby been provided an opportunity 
to answer and appear to protect his or her interests in connection with a 
foreclosure sale, but has neither answered nor appeared, due process does not 
require that the party be given additional specific notice of the date, time, and 
place of the sheriff’s sale. 
 
2
(Nos. 98-437 and 98-499 — Submitted January 12, 1999 — Decided April 28, 
1999.) 
CERTIFIED by and APPEAL from the Court of Appeals for Stark County, No. 
1997CA00264. 
 
Appellants, Galt Alloys, Inc. and Dewalt Properties Inc., initiated this 
foreclosure action on July 15, 1996, by filing a complaint in the Court of Common 
Pleas of Stark County, alleging that they held judgment liens covering property 
located at 4641 12th Street, N.W., in the city of Canton, Ohio.  They alleged that the 
liens resulted from certificates of judgment they had filed documenting judgments in 
the amounts of $43,000 and $8,000 obtained by them, respectively, against the owner 
of the property. 
 
Plaintiffs-appellants named as defendants the property owner and Ameritrust 
Company National Association (succeeded in interest by appellee KeyBank National 
Association, hereinafter referred to as “KeyBank”).  Appellants alleged that KeyBank 
might “have, or claim to have, some interest in, or lien upon, the Realty” and attached 
to the complaint a preliminary judicial report in compliance with Loc.R. 24 of the 
Stark County Court of Common Pleas.  That report reflected a recorded mortgage 
deed from the owner of the property to KeyBank, dated May 12, 1987, securing an 
original loan amount of $40,800.  Appellants also named as defendants the Stark 
County Treasurer and two other lenders, GE Capital Consumer Card Company and 
Household Finance Corporation (which had filed certificates of judgment predating 
those filed by appellants).  Appellants sought an order that would (1) foreclose their 
judgment liens, (2) require the defendants to set up their respective claims, (3) 
marshal all liens, and (4) order sale of the property, with the proceeds applied to 
satisfy all liens according to their lien priority. 
 
KeyBank was served a copy of the complaint by certified mail on July 17, 
1996.  KeyBank did not, however, answer the complaint. 
 
3
 
The county treasurer’s answer claimed a first lien and demanded first payment 
from the proceeds of any sale of the property. 
 
On August 28, 1996, the trial court ordered appellants to complete service of 
process and/or file an appropriate motion for default judgment, together with a 
proposed decree of foreclosure, by September 13, 1996, upon pain of dismissal for 
want of prosecution.  The clerk of courts mailed a copy of this order to KeyBank on 
August 29, 1996. 
 
Thereafter, appellants filed a motion for default judgment against the property 
owner and GE Capital Consumer Card Co.  Appellants did not seek a default 
judgment against KeyBank, nor was KeyBank mentioned in appellants’ motion. 
 
On September 12, 1996, Household Finance sought leave to file an answer and 
cross-claim instanter, which was granted. 
 
Also, on September 12, the court issued an assignment notice, advising that the 
action had been “set for a non-jury trial on September 30, 1996, at 8:30 a.m. on a 
standby basis for the entire week” and giving notice that “the court will expect the 
remaining parties to work out the lien order and provide the court with an appropriate 
decree of foreclosure prior to the assigned trial date.”  KeyBank received a copy of 
this notice by certified mail on September 17, 1996. 
 
On September 30, 1996, the court entered judgment of foreclosure, which, 
inter alia, directed the sheriff to sell the property.  The judgment decree established 
that KeyBank had “failed to file a responsive pleading or motion in this cause, but 
may have a valid and subsisting lien  * * * by virtue of a certain Mortgage Deed.”  It 
further ordered that proceeds of the sale be used to pay the judgment lienholders 
“subject to the interest, if any, of [KeyBank], which interest, if any, shall be 
established by [KeyBank] by a preponderance of evidence within fourteen (14) days 
after the date of the Sheriff’s sale of the premises.”  (Emphasis added in part.)  The 
clerk of court notified all parties, including KeyBank, that “an entry which may be a 
 
4
final appealable order has been filed with the clerk of the common pleas court on 
9/30/96.” 
 
Thereafter the county sheriff proceeded to sell the property in accordance with 
statute.  The property was appraised at $75,000.  The pending sale of the property 
was advertised in The [Canton] Repository for five consecutive Thursdays.  The 
sheriff sold the property on February 3, 1997 for $69,000. 
 
On February 7, 1997, appellants’ counsel filed a certificate of service which 
represented that, on February 5, “all parties or their attorneys of record” had been 
served a copy of a proposed order of confirmation and distribution confirming the 
foreclosure sale. 
 
On February 12, 1997, the court entered an order of confirmation and 
distribution in accord with the proposed order served by appellants’ counsel.  The 
order stated, inter alia, that KeyBank had “failed to file a responsive pleading or 
motion in this cause, and, pursuant to this Court’s Judgment Decree in Foreclosure 
entered on September 30, 1996 has fourteen days within which to establish by a 
preponderance of the evidence the amount, if any, owed [KeyBank] by the Defendant 
[property owner].”  The court further found that KeyBank had “failed to prove its 
entitlement to any of the proceeds by a preponderance of the evidence” and ordered 
that KeyBank receive none of the proceeds of the foreclosure sale. 
 
On February 27, 1997, the court amended its distribution order, nunc pro tunc 
as of February 12, increasing the amount to be distributed to the county treasurer 
from $542 to $641.  Appellants’ counsel served a copy of the amended order “on all 
parties or their attorneys of record.” 
 
On March 7, 1997, a second amended order of distribution was filed, nunc pro 
tunc as of February 12, to provide for distributions to the clerk of courts for court 
costs, and to the county treasurer for transfer taxes. 
 
5
 
Four months later, on July 7, 1997, KeyBank appeared in the trial court for the 
first time.  It filed a motion to vacate the order of confirmation filed February 12, the 
amended order of confirmation and distribution filed February 27, and the sheriff’s 
sale held on February 5.  KeyBank attached to its motion an affidavit of a bank 
officer, asserting that, to the best of his knowledge, KeyBank had never been served 
with prior notice that the property was scheduled to be sold on February 5, and that 
KeyBank did not know that the sheriff’s sale had been scheduled for February 5 until 
after the sale had taken place.  KeyBank, relying on our holding in Cent. Trust Co., 
N.A. v. Jensen (1993), 67 Ohio St.3d 140, 616 N.E.2d 873, asserted that it had been 
denied due process and that the trial court’s orders should therefore be vacated, “by 
virtue of the fact that [KeyBank] never received actual notice of the Sheriff’s sale.”  
The trial court denied KeyBank’s motion. 
 
The court of appeals reversed the judgment of the trial court.  It remanded the 
cause and ordered vacation of the final order of confirmation and distribution, as 
amended, and vacation of the sale of the property.  It further certified that its 
judgment conflicted with judgments from the Tenth and Eleventh Appellate Districts. 
 
This cause is now before this court upon determination that a conflict exists 
and pursuant to the allowance of a discretionary appeal. 
__________________ 
 
Brouse & McDowell, Jeffrey T. Heintz and Christopher F. Swing, for 
appellants. 
 
Carlisle, McNellie & Rini, Richard L. McNellie and Phyllis A. Ulrich, for 
appellee. 
__________________ 
 
MOYER, C.J.  The court of appeals has framed the issue in conflict as being 
“[whether] actual notice of the date, time, and location of a sheriff’s sale [must] be 
afforded to a defaulting defendant in a foreclosure action.”  Similarly, KeyBank 
 
6
proffers as its proposition of law that “[a]ctual notice of the date, time, and location 
of a sheriff’s sale must be afforded to every party to a foreclosure sale and to each 
party having an interest therein, including a defaulting defendant in a foreclosure 
action.” 
 
In determining the issue certified to us, we turn to the landmark case of 
Mullane v. Cent. Hanover Bank & Trust Co. (1950), 339 U.S. 306, 70 S.Ct. 652, 94 
L.Ed. 865. Mullane recognized that “[a]n elementary and fundamental requirement of 
due process in any proceeding which is to be accorded finality is notice reasonably 
calculated, under all the circumstances, to apprise interested parties of the pendency 
of the action and afford them an opportunity to present their objections.”  (Emphasis 
added.)  Mullane, 339 U.S. at 314, 70 S.Ct. at 657, 94 L.Ed. at 873. 
 
In a subsequent United States Supreme Court case, Mennonite Bd. of Missions 
v. Adams (1983), 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180, the court addressed 
the question of the adequacy of notice to a mortgagee of the impending tax sale of 
property.  The court there again held that notice of “a proceeding  * * * adversely 
affect[ing] the  * * * property interests of any party” is constitutionally required to be 
attempted.  (Emphasis added.)  Mennonite at 798-800, 103 S.Ct. at 2711-2712, 77 
L.Ed.2d at 187-188. 
 
Notably, in Mennonite, the mortgagee had not been joined as a party to the tax 
sale proceedings, and, in fact, knew nothing of the institution of those proceedings 
until over two years had passed from the date of the sale.  When its opinion is 
carefully read, it is apparent that the court in Mennonite imposed a notice 
requirement as to the pendency of a potential tax sale and not necessarily to the date, 
time, and place of the tax sale itself. 
 
We therefore hold, in accord with Mullane and Mennonite, that due process 
requires that persons whose property interests are jeopardized by the filing of legal 
proceedings be given notice reasonably calculated, under all the circumstances, to 
 
7
apprise those persons of the pendency of the action and afford them an opportunity to 
present their objections. 
 
In Weigner v. City of New York (C.A.2, 1988), 852 F.2d 646, the owner of 
property against whom tax foreclosure proceedings had been instituted claimed that 
she had been denied due process because she had never been informed of entry of a 
judgment of foreclosure or of the imminent lapse of her remedies of mandatory and 
discretionary release. 
 
The court concluded, in accord with Mullane, that due process required notice 
only of the pendency of the action so as to afford the property owner an opportunity 
to respond.  The court held that the city was obligated to provide notice that was 
reasonably calculated to inform interested parties that the foreclosure action had been 
initiated and to apprise them of the availability of the redemption and release 
remedies.  However, “[o]nce the City sent this notice, it was not required to send 
additional notices as each step in the foreclosure proceeding was completed or when 
each of the available remedies was about to lapse.”  Id. at 652. 
 
Similarly, in United States v. Williams (N.D.Ohio 1998), 82 A.F.T.R.2d (RIA) 
6970, the federal district court refused to set aside a marshal sale of real property that 
had been ordered pursuant to foreclosure of federal tax liens.  The defendants, the 
former owners, claimed that they had been denied due process because they had not 
been provided notice of the date and time of the sale of the property.  They had, 
however, received personal notice of the filing of a motion for summary judgment 
requesting an order of foreclosure, as well as personal notice of the government’s 
motion for order of sale.  The court noted that the defendants clearly had had an 
opportunity to oppose these motions.  In addition, the defendants had received a copy 
of the court’s order of sale, containing notice of the fact that the property would be 
advertised for sale for four weeks in a local newspaper.  The defendants had thus 
been afforded due process. 
 
8
 
In the case at bar, KeyBank had ample opportunity to participate and be heard 
in order to protect its interests, as had the parties in Weigner and Williams.  Upon 
being named a defendant and properly served with process, KeyBank failed to 
answer the complaint in a timely manner, or otherwise appear.  Despite the receipt of 
notices, by direct mail, of the progress of the foreclosure action, KeyBank took no 
action to protect its own interests until months after title to the property had vested in 
a new owner, who acquired title by virtue of the sheriff’s sale. 
 
In ordering that the sheriff’s sale in the case at bar be vacated, the court of 
appeals relied on Cent. Trust Co., N.A. v. Jensen (1993), 67 Ohio St.3d 140, 616 
N.E.2d 873.  We follow Jensen and hold that due process requires that notice of 
foreclosure proceedings be given to all persons whose interests are jeopardized by 
those proceedings, and notice by publication only is insufficient to satisfy due 
process when the address of that party or interested person is known or easily 
ascertainable. 
 
The case before us is, however, distinguishable from Jensen.  In that case, 
Jerry Maxwell, a successful bidder at a sheriff’s sale, placed ten percent of the 
purchase price, or $19,200, with the sheriff as a deposit, but failed to produce the 
remaining purchase price within the allotted time.  The property was ordered resold.  
The subsequent sheriff’s sale was advertised by publication, but Maxwell did not 
personally receive notice of the date, time, or place of the sale.  Unlike KeyBank, 
Maxwell had never been served with process or joined as a party to the underlying 
foreclosure action. 
 
We held that Maxwell’s property interest was created by his deposit of a 
$19,200 down payment.  We recognized that his property interest triggered a due 
process requirement that he be provided constitutionally adequate notice of the later 
sale because his property interest stood in jeopardy were the property to be sold at a 
 
9
lower price than Maxwell had originally agreed to pay.  Under the facts of that case, 
we held that notice by publication was insufficient. 
 
In this case, unlike in Jensen, KeyBank does not assert that, had it known of 
the date, time, and place of the sheriff’s sale, it would have appeared or taken steps to 
assure that the property was sold at a higher price than was in fact obtained.  Indeed, 
KeyBank had little economic incentive to do so, as its mortgage lien had priority over 
the judicial liens held by appellants and other judgment creditors.  KeyBank’s interest 
could have been fully satisfied from the proceeds of the sale had KeyBank merely 
appeared and claimed its interest in the time granted it by the court. 
 
In the case at bar, it was not the sale, but the foreclosure action itself, and more 
specifically, the potential that the court might enter an order of distribution omitting 
KeyBank’s interest, that jeopardized KeyBank’s interest.  KeyBank received full and 
repeated notice of the proceedings and had ample opportunity to appear and be heard 
in opposition to such an order, and yet it did not appear. 
 
It is true that the trial court in this case set forth a deadline of fourteen days 
from the date of the sheriff’s sale for KeyBank to appear and establish the amount of 
its interest.  It is also true that, prior to the expiration of the fourteen-day period, the 
court ordered that KeyBank receive none of the proceeds of the sale.  Despite these 
facts, we reject the argument that KeyBank was prejudiced by not having first 
received specific notice of the time, date, and place of the sheriff’s sale. 
 
The court acknowledged in its February 12 entry that KeyBank “has fourteen 
days within which to establish * * * the amount, if any” of its interest.  (Emphasis 
added.)  Moreover, the record demonstrates that the trial court subsequently entered 
two nunc pro tunc orders, on February 27 and March 7, adjusting the distribution 
amounts. 
 
In view of the use of the present tense in the judgment decree and the court’s 
entry of two nunc pro tunc orders adjusting the distribution amounts, it is reasonable 
 
10
to assume that, had KeyBank appeared within the fourteen-day period and asserted 
its interest, the court would have considered that interest.  KeyBank has not asserted 
that it did not receive actual notice of the sale of the property prior to expiration of 
the fourteen-day period ordered by the court.  KeyBank, however, remained silent.  
Under the facts of this case, we find no prejudice to KeyBank. 
 
We therefore reject KeyBank’s proposition of law insofar as it implies that 
actual notice to every party of the date, time, and location of a sheriff’s sale is, in 
every foreclosure case, a constitutionally required element of due process, and 
resolve the certified issue with a qualified negative.  Actual notice of the date, time, 
and location of a sheriff’s sale need not necessarily be given to every defaulting 
defendant in a foreclosure sale.  Instead, we hold that where a party to a foreclosure 
proceeding has been served with process in compliance with the Civil Rules and has 
thereby been provided an opportunity to answer and appear to protect his or her 
interests in connection with a foreclosure sale, but has neither answered nor 
appeared, due process does not require that the party be given additional specific 
notice of the date, time, and place of the sheriff’s sale. 
 
We find no deprivation of due process in this case.  For the foregoing reasons, 
the judgment of the court of appeals is reversed, and the judgment of the trial court is 
reinstated. 
Judgment reversed. 
 
DOUGLAS, J.D. SWEENEY, PFEIFER, COOK and LUNDBERG STRATTON, JJ., 
concur. 
 
F.E. SWEENEY, J., dissents and would affirm the judgment of the court of 
appeals. 
 
JAMES D. SWEENEY, J., of the Eighth Appellate District, sitting for RESNICK, J.