Court Opinion

ID: 2693829
Source: CourtListenerOpinion
Date Created: 2014-08-01 22:06:58.889108+00
Date Added: 2024-06-11T12:32:40.475952
License: Public Domain

[Cite as Fifth Third Bank v. Dayton Lodge Ltd. Liab. Co., 2012-Ohio-3387.]

          IN THE COURT OF APPEALS FOR MONTGOMERY COUNTY, OHIO

FIFTH THIRD BANK                                        :

        Plaintiff-Appellee                              :            C.A. CASE NO.        24843

v.                                                      :            T.C. NO.       07CV2432

DAYTON LODGE LIMITED LIABILITY                          :            (Civil appeal from
COMPANY, et al.                                                      Common Pleas Court)

        Defendants-Appellees                            :

and

SALAM SAID SHAJA                                        :

        Defendant-Appellant
                                                     :
                                             ..........

                                            OPINION

                         Rendered on the         27th       day of           July      , 2012.

                                             ..........

LAWRENCE T. BURICK, Atty. Reg. No. 0010404 and CHRISTINE M. COOPER, Atty.
Reg. No. 0079160, Austin Landing I, 10050 Innovation Drive, Suite 400, Dayton, Ohio
45342
      Attorneys for Plaintiff-Appellee

JOSEPH C. LUCAS, Atty. Reg. No. 0081336 and KELLY A. BENNINGTON, Atty. Reg.
No. 0082277, 7015 Corporate Way, Suite 200, Centerville, Ohio 45459
       Attorneys for Defendant-Appellant Salam Said Shaja
                                                                                          2

                                        ..........

CUNNINGHAM, J. (by assignment)

               {¶ 1} Salam Said Shaja, the purchaser of the foreclosed property in a

foreclosure action, appeals from a judgment of the Montgomery County Court of Common

Pleas, which denied his motion to set aside the sheriff’s sale. The trial court construed

Shaja’s motion as a Civ.R. 60(B) motion for relief from judgment.

       {¶ 2}    For the following reasons, the trial court’s judgment will be affirmed.

                            I. Factual and Procedural History

               {¶ 3} Dayton Lodge Limited Liability Company operated the Dayton

Executive Hotel, located at 2401 Needmore Road in Dayton. At various times, Dayton

Lodge obtained commercial loans from Fifth Third Bank, totaling approximately $3.75

million. The notes were secured by mortgages on the hotel property, including assignments

of rents and leases. Jamal Garmo, a member of Dayton Lodge, signed a guaranty agreement

regarding a 2003 commercial loan in the amount of approximately $3.25 million. Dayton

Lodge had also signed a third party collateral agreement and mortgage to secure a

commercial loan to a third party in the amount of $975,000.

       {¶ 4}    In March 2007, Fifth Third Bank filed a foreclosure complaint against

Dayton Lodge, Jamal Garmo, and others, alleging that it was the holder of the 2003 note,

that the note was secured by a mortgage, and that Dayton Lodge had defaulted on the note

and mortgage. Fifth Third Bank stated that Dayton Lodge owed $2,817,616, including the

outstanding principal, accrued interest, late charges and other charges. Fifth Third sought

judgment on the note and requested that the mortgage be foreclosed and that the property be
                                                                                          3

sold. Fifth Third also asked for possession of Dayton Lodge’s collateral, for payment by

Garmo in accordance with his guaranty, and for attorney fees and court costs.

       {¶ 5}    Contemporaneous with the filing of its complaint, Fifth Third filed a motion

for the appointment of a receiver “to take exclusive and complete possession, custody and

control” of the property and to operate the hotel business. On April 11, 2007, the court

issued an agreed order appointing a receiver. However, the receivership did not become

effective until February 8, 2008, when the receiver filed his “Receiver’s Oath and Notice of

Filing Bond.”

       {¶ 6}    On April 2, 2008, the trial court issued a final judgment and decree of

foreclosure in favor of Fifth Third. The judgment included a monetary judgment against

Dayton Lodge on the 2003 note, a monetary judgment against Garmo on the guaranty, and

an order foreclosing the equity of redemption and ordering the sale of the property, if the

amounts due to the bank and costs were not paid by a certain date. An auction was

attempted in April 2008 with an auctioneer who advertised nationally. Although there were

several spectators, there were no bidders, and the auction was cancelled. Upon motion by

Fifth Third, the court then authorized the appointment of Bambeck Auctioneers, Inc. to

conduct a public auction of the property.

       {¶ 7}    The receiver filed interim reports for the property for the months of

February, March, April, and May 2008. The interim report for April indicated that the

“hotel was closed on April 29, 2008. The hotel was secured and Buckeye Glass & Block

boarded up the windows on the first floor. The shuttle vans were towed to storage and all

rooms were inspected and inventoried.”
                                                                                               4

       {¶ 8}    On August 7, 2008, Shaja purchased the property at the public auction for

$1,150,000 and paid the required deposit of $115,000. Dayton Lodge objected to the sale,

arguing that the appraisers of the property were not qualified and that the receiver had

allowed the property to deteriorate, which depressed the sale price of the property.1 One

month later, Fifth Third moved for confirmation of the sale.

       {¶ 9}    In February 2009, prior to any ruling on Dayton Lodge’s objections to the

sale and Fifth Third’s motion to confirm the sale, the trial court “conditionally dismissed”

the case, “without prejudice until such time as a final dismissal entry with prejudice is filed,”

based on a report that the parties had settled the case. Several months later, the receiver

moved to close the receivership; that motion was opposed by Dayton Lodge due to pending

criminal charges against Dayton Lodge’s controller based on the receiver’s alleged failure to

maintain the fire suppression system at the hotel.

       {¶ 10}    In November 2009, Fifth Third informed the court that Dayton Lodge and

the bank had entered into an agreed order to confirm the sale, and the bank moved for the

court to enter that order. Dayton Lodge opposed the motion arguing, in part, that the

purchaser of the property (Shaja) would not accept the property until fire code issues had

been resolved. Ultimately, on February 4, 2011, the trial court confirmed the sale of the

property.

            1
           Dayton Lodge had previously objected to the appraisers’ valuation. In
   separate filings, Dayton Lodge provided affidavits from commercial realtor Terry
   Baltes, who indicated that he believed the property value to be at least
   $2,500,000, and from William A. Fehse, controller for Dayton Lodge, who
   provided a November 2007 appraisal by Fifth Third Bank with a value of
   $2,100,000.
                                                                                              5

       {¶ 11}    Shaja subsequently moved for an order to set aside the sheriff’s sale. Shaja

argued that the property had “lost much of its value as a result of the inaction of Plaintiff

Fifth Third Bank * * * and its receiver, William D. Hoffman * * * during a 30 month delay

in filing the confirmation entry.”     Shaja argued that the receiver had failed to rectify

problems with the ceiling and leaking water and standing water in the basement, which led

to black mold issues and continued deterioration of the property. Shaja further argued that,

because the hotel had not been operated as a hotel for more than two years and because of

the amount of damage to the property, the Harrison Township Zoning Code would no longer

allow the property to be used as a hotel as a “nonconforming use.” Shaja claimed that he

did not have standing in the action until the confirmation of sale, and that, in the interest of

“equity and justice,” he should be relieved from his obligation to buy the property. Shaja

asked the court to vacate the confirmation of sale.

       {¶ 12} Fifth Third opposed the motion, arguing that a motion to set aside the

sheriff’s sale was barred by res judicata. The bank further asserted that, even if the motion

were construed as a Civ.R. 60(B) motion, it failed to satisfy any of the requirements for such

a motion. In his reply memorandum, Shaja responded that he had a meritorious defense to

the judgment due to the receiver’s misconduct, that his motion was timely, and that the

bank’s willful conduct had caused damage to the property, which he could not have

discovered earlier due to lack of access to the property. Shaja claimed that he was entitled

to relief under Civ.R. 60(B)(2), (3), and (5).

       {¶ 13} The trial court construed Shaja’s motion as a motion for relief from

judgment, pursuant to Civ.R. 60(B), and denied the motion without a hearing. The court
                                                                                           6

found that the motion was timely filed, and it made “a preliminary finding that there are

operative facts as to the conduct of the Bank and Receiver, as contained in the Receiver’s

reports, that would give rise to a meritorious defense.” The court noted that there was “an

issue in this case whether the Bank/Receiver’s conduct post-sale was deliberate and whether

it devalued the property.”

       {¶ 14} The court further found, however, the Shaja had not demonstrated that he

was entitled to relief under one of the grounds set forth in Civ.R. 60(B).          The court

reasoned:

               Purchaser must demonstrate he is entitled to relief under one of the

       grounds stated in Civ. R. 60(B[)]. Bank contends Purchaser has not alleged

       he was unaware of damage to the property until after confirmation, or that he

       was denied access to the premises such that relief from judgment could be

       warranted because of newly discovered evidence under Civ. R. 60(B)(2).

       Bank contends Purchaser has not alleged fraud or misconduct incident to

       obtaining the judgment sufficient to satisfy the requirement under Civ. R.

       60(B)(3).   Moreover, Bank contends Purchaser could have intervened to

       protect his interest in the property after the sale but before confirmation, and

       therefore he is not entitled to relief from judgment under Civ. R. 60(B)(5).

       By contrast, Purchaser argues that he was denied access to the premises

       following the sale, and that the Receiver’s reports did not go into explicit

       detail regarding damage to the premises, and these facts warrant relief under

       Civ. R. 60(B)(2), (3) and (5).
                                                                                     7

       As noted above, upon sale of the property, Purchaser had standing to

appear and move to protect his interest in the property, or to move to

intervene in the action. From the time of the sale on May 29, 2008 [sic], to

the order of confirmation on February 4, 2011, the Purchaser did not move to

intervene or appear to protect his interest in the property. Purchaser argues

he was denied access to the premises, as demonstrated by the correspondence

attached to his original motion. The attachments to the motion include a

notice of violation to the Ohio Fire Code, concerning a damaged door, issued

in the form of a letter from the Harrison Township Fire Department, Fire

Prevention Bureau, to the attorney for the Bank, and a notice of property

maintenance violation, concerning graffiti, issued by a Harrison Township

Code Enforcement Officer in the form of a letter directed to the debtor. The

Court finds these documents insufficient to support Purchaser’s claim that he

was denied access to the premises. Even if Purchaser was denied access to

the premises, such does not excuse him for failing to appear and protect his

interest in the property or to move to intervene in this action, the remedies

suggested by the relevant authorities. Therefore, the Court finds that a denial

of access to the premises, or insufficient detail in the Receiver’s reports, did

not absolve the Purchaser of his responsibility to assert his right to protect his

interest in the property in this action, such that these allegations do not

warrant relief under Civ. R. 60(B).        The Court further finds that the

Receiver’s alleged misconduct was not made incident to obtaining the order
                                                                                               8

       of confirmation, but is rather in the nature of misconduct upon which a claim

       could be based.

               Nothing in this Rule 60(B) decision should be construed as either

       expanding or restricting Purchaser[‘s] rights, if any, as the rightful owner of

       the property, to seek legal redress against Bank and Receiver for their conduct

       subsequent to the sale, as the Purchaser’s deed “relates back to and passes

       title as of the date of the sale.” * * *

(Internal citations omitted.)

       {¶ 15} Shaja appeals from the trial court’s denial of his motion to set aside the sale

of the property.

                                                  II.

       {¶ 16} Shaja’s sole assignment of error states:

       THE TRIAL COURT ABUSED ITS DISCRETION IN FINDING THAT

       APPELLANT WAS PRECLUDED FROM BRINGING A MOTION TO

       VACATE UNDER CIV.R. 60(B) BECAUSE APPELLANT DID NOT

       INTERVENE PRIOR TO THE CONFIRMATION OF THE SHERIFF’S

       SALE.

       {¶ 17} In his assignment of error, Shaja claims that the trial court abused its

discretion when it found that he was precluded from seeking relief under Civ.R. 60(B),

because he failed to protect his interest in the property prior to the confirmation of sale.

       {¶ 18} As an initial matter, we agree with the trial court that Shaja’s motion was

properly construed as a motion for relief from judgment, pursuant to Civ.R. 60(B). A
                                                                                                9

foreclosure action is a two-step process, the first part of which ends with the judgment and

decree of foreclosure, which is a final appealable order. E.g., Mid-State Trust IX v. Davis,

2d Dist. Champaign No. 07-CA-31, 2008-Ohio-1985, ¶ 23. The second part of the process

involves the sale of the property, culminating in a confirmation of sale and dispersal of the

proceeds. See id. at ¶ 24-25. An order confirming the sale of the property is also a final

appealable order. Id. at ¶ 26.

          {¶ 19}   At the time Shaja filed his motion to set aside the sheriff’s sale, the trial

court had entered a judgment and decree of foreclosure in favor of Fifth Third and an order

confirming the sale of the property to Shaja. At that juncture, the order of confirmation

could be challenged only by way of appeal or through a motion for relief from judgment,

pursuant to Civ.R. 60(B). The trial court did not have jurisdiction to reconsider its decision

to confirm the sale. E.g., Tucker v. Pope, 2d Dist. Miami No. 2009 CA 30, 2010-Ohio-995,

¶ 25 (“The Ohio Rules of Civil Procedure do not provide for a motion for reconsideration of

a final order. Therefore, any order that a trial court enters on a motion for reconsideration is

a legal nullity.”); Pitts v. Ohio Dept. Of Transp., 67 Ohio St.2d 378, 423 N.E.2d 1105

(1981).

          {¶ 20}   Civ.R. 60(B) permits trial courts to relieve parties from a final judgment for

the following reasons: (1) “mistake, inadvertence, surprise or excusable neglect,” (2) newly

discovered evidence, (3) fraud, misrepresentation or other misconduct of an adverse party,

(4) the judgment has been satisfied, released or discharged, or (5) any other reason justifying

relief from the judgment. To prevail on a Civ.R. 60(B) motion, the movant must show that

(1) he has a meritorious defense or claim to present if relief were granted; (2) he is entitled to
                                                                                           10

relief under one of the grounds stated in Civ.R. 60(B)(1) through (5), and (3) his motion is

timely. GTE Automatic Elec., Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146, 351 N.E.2d

113 (1976), paragraph two of the syllabus. All three elements must be established, and “the

test is not fulfilled if any one of the requirements is not met.” Strack v. Pelton, 70 Ohio

St.3d 172, 174, 637 N.E.2d 914 (1994).

       {¶ 21}     We review the trial court’s denial of Shaja’s motion for an abuse of

discretion.     The term “abuse of discretion” implies that the court’s attitude was

unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5 Ohio St.3d 217, 450

N.E.2d 1140 (1983).

       {¶ 22} Shaja argues that the trial court denied his motion to set aside the sheriff’s

sale without examining the requirements of Civ.R. 60(B)(1)-(5). He further claims that the

trial court denied his motion based on its conclusion that the “failure to move or intervene

pre-confirmation absolutely precludes intervention post-confirmation.” Shaja interprets the

trial court’s decision to hold, based on “relevant authorities,” that the failure to intervene

“automatically precludes” relief under Civ.R. 60(B).

       {¶ 23} We disagree with Shaja’s reading of the trial court’s decision. Although the

trial court did not reference Civ.R. 60(B)(3), it specifically found that “the Receiver’s

alleged misconduct was not made incident to obtaining the order of confirmation, but is

rather in the nature of misconduct upon which a claim could be based.” The trial court also

separately addressed the arguments raised by Shaja under Civ.R. 60(B)(2) and (B)(5), and

concluded that, under the facts of this case, his failure to intervene and protect his rights

precluded relief under Civ.R. 60(B). The trial court’s reference to “relevant authorities”
                                                                                             11

was not for the proposition that a buyer is required to intervene prior to confirmation but,

rather, that a buyer may move to intervene in the action prior to confirmation in order to

protect his or her interest in the property. We, therefore, turn to the three grounds for relief

raised by Shaja.

       {¶ 24} Civ.R. 60(B)(2) permits relief from judgment when there is “[n]ewly

discovered evidence which by due diligence could not have been discovered in time to move

for a new trial under Rule 59(B).” It is unclear whether Civ.R. 60(B)(2) is applicable, given

that the confirmation of sale was not issued after an evidentiary proceeding.

       {¶ 25} Assuming that Civ.R. 60(B)(2) is applicable, Shaja has argued that he was

not aware of the full extent of the damage to the premises until after the confirmation of sale,

because his agents were not allowed onto the premises. Accepting, for sake of argument,

that Shaja was denied access to the building and that the full extent of the damage was newly

discovered, Shaja was still required to demonstrate that he could not have discovered the

new evidence earlier through due diligence.

       {¶ 26}      Shaja was aware at the time of the auction that the hotel had been closed.

The receiver’s report prior to the auction specifically stated that the hotel ceased to operate

on April 29, 2008. Through the exercise of due diligence, Shaja could have discovered the

zoning requirements for the property, that the hotel was operating as a non-conforming use,

and that certain conditions had to be met, such as the reopening of the hotel within a certain

time period, in order to continue to operate the property as a hotel.

       {¶ 27} As to the condition of the property, Shaja also did not establish that he could

not have discovered the extent of the damage to the property through due diligence. Shaja
                                                                                            12

was provided an opportunity to view the property prior to the August 2008 auction. The

receiver had filed an initial inspection report for the property in March 2008, which

described the deteriorated condition of the building and parking lot prior to the auction. For

example, the report stated:

       Many of the rooms are in poor condition. The entire southern wing is shut

       down as many rooms have damage to the ceiling and missing furniture. The

       second floor on the western wing is shut down due to leaks in the ceiling.

       The parking lot has deteriorated and several holes have developed in the areas

       where the drains are located.

Exhibit B to the initial inventory report provided a detailed summary of the property’s poor

condition at the time of the initial inspection. The parties filed several affidavits following

the auction, which reiterated the deteriorated condition of the property at the time of the

auction.

       {¶ 28} . The receiver also filed several interim reports prior to the auction, which

indicated anticipated repairs to the building and contained detailed financial statements

showing the expenses incurred. Although the receiver did not file interim reports following

the auction, the record reflects that Dayton Lodge opposed the sale of the property on the

ground that the receiver had allowed waste of the property, and Dayton Lodge later objected

to the closing of the receivership estate due to the receiver’s alleged failure to maintain the

fire suppression system, leading to criminal charges against Dayton Lodge’s controller and,

later, the receiver. The July 2009 settlement agreement between Fifth Third and Dayton

Lodge references an insurance claim related to the basement.
                                                                                             13

       {¶ 29}    The record does not reflect that full extent of the damage to the property, as

described by Shaja in his motion to set aside the sheriff’s sale, or the causes of the increased

deterioration described by Shaja. However, the record does reflect allegations of waste

during the lengthy receivership, and there is nothing to demonstrate that Shaja took any

action to investigate these claims and to protect his interest in the property during the two

and a half year period between the auction and the trial court’s confirmation of the sale.

       {¶ 30} It is undisputed that Shaja did not have a vested interest in the property until

the sale was confirmed by the trial court. Ohio Sav. Bank v. Ambrose, 56 Ohio St.3d 53,

563 N.E.2d 1388 (1990). However, purchasers of foreclosed properties have “the right to

intervene and participate to protect their interests incident to the sale” prior to confirmation

by the trial court. Mid-American National Bank v. Heiges, 6th Dist. Ottawa No. 94OT025,

1994 WL 645780 (Nov. 18, 1994); see also Franklin Cty. Treasurer v. Kafele, 10th Dist.

Franklin No. 05AP-252, 2005-Ohio-6618, ¶ 8. In this case, the trial court did not abuse its

discretion in determining that Shaja sat on his rights and failed to exercise due diligence

when he failed to intervene in the action prior to the confirmation of sale.

       {¶ 31} Civ.R. 60(B)(3) addresses fraud, misrepresentation or other misconduct by

an adverse party. “[T]he fraud or misconduct referred to in Civ.R. 60(B)(3) is fraud or

misconduct relating to the obtaining of the judgment, rather than fraud or misconduct upon

which a claim or defense is based.” Fifth Third Bank of W. Ohio v. Thorn, 2d Dist. Miami

No. 93-CA-19, 1994 WL 53833, *4 (Feb. 23, 1994); see also GMAC Mortgage, L.L.C. v.

Herring, 189 Ohio App.3d 200, 2010-Ohio-3650, 937 N.E.2d 1077, ¶ 31 (2d Dist.).

       {¶ 32} Shaja alleged in his motion that the receiver denied him access to the hotel
                                                                                            14

property and that the receiver and Fifth Third did not report on the full extent of the damages

to the premises, all of which suggested misconduct by the bank and the receiver. However,

Shaja does not claim that the parties fraudulently induced the purchase of the property at the

time of the sale. And, the trial court’s decision on whether to confirm the sale “involves

only decisions on whether a sale has been conducted in accordance with R.C. 2329.01

through R.C. 2329.61. This includes issues such as whether the public-notice requirements

in R.C. 2329.26 were followed and whether the sale price was at least two-thirds of the

land's appraised value, as required by R.C. 2320.20.”          (Citations omitted.)   Federal

National Mortgage Association v. Day, 158 Ohio App.3d 349, 2004-Ohio-4514, 815 N.E.2d

730, ¶ 16. Shaja acknowledged in his reply memorandum to the trial court that the sheriff’s

sale was conducted according to law. While Shaja may have a claim against the original

property owner, the bank, and/or the receiver for excessive damage to the property after the

sale, such a claim does not fall within Civ.R. 60(B)(3).

       {¶ 33}    Civ.R. 60(B)(5) permits relief “for any other reason justifying relief from

the judgment.” The Ohio Supreme Court has held that “Civ.R. 60(B)(5) is intended as a

‘catch-all’ provision reflecting the inherent power of a court to relieve a person from the

unjust operation of a judgment, but it is not to be used as a substitute for any of the other

more specific provisions of Civ.R. 60(B).” Caruso-Ciresi, Inc. v. Lohman, 5 Ohio St.3d 64,

448 N.E.2d 1365 (1983), paragraph one of the syllabus. Accordingly, Civ.R. 60(B)(5) is

“only to be used in an extraordinary and unusual case when the interests of justice warrants

it.” Adomeit v. Baltimore, 39 Ohio App.2d 97, 105, 316 N.E.2d 469 (8th Dist.1974).

       {¶ 34} The trial court found that Civ.R. 60(B) relief was not warranted, because
                                                                                             15

Shaja failed “to appear and protect his interest in the property or to move to intervene in this

action, the remedies suggested by the relevant authorities.”           As discussed above, the

property was in poor condition at the time of the auction. For example, a report by Kevin

Berry, Director of Hotel Operations for Trigild (the company hired by the receiver to manage

Dayton Lodge’s hotel), indicated numerous defects in the building in February 2008. They

included, among other things, that the windows showed signs of moisture, water was visibly

dripping from the ceiling outside numerous rooms (numerous rooms were blocked off due to

the roof leaking and one entire corridor was ruined), the ceiling in seven guest rooms had

fallen, the entire north wing was shut down due to damage to the ceiling and missing

furniture, the second floor of the west wing was shut down due to leaks in the ceiling, water

heaters were not working, numerous heating and air conditioning units were broken,

plumbing pipes were broken, the security system did not work, and many electrical outlets

were old and broken. (See Fifth Third’s affidavits in support of its motion for confirmation

of sale, 10/3/2008). The receiver’s interim reports did not reflect that substantial repairs

had been made, and the record reflects that there were allegations of waste. Given the

lengthy delay between the August 2008 auction and the February 2011 confirmation of sale,

the trial court did not abuse its discretion in determining that Shaja should have taken some

action, prior to the confirmation of sale, to protect his interest in the property.

        {¶ 35} The trial court did not abuse its discretion in concluding that Shaja failed to

demonstrate his entitlement to relief under Civ.R. 60(B).           The assignment of error is

overruled.

                                                III.
                                                                                        16

       {¶ 36} The trial court’s judgment will be affirmed.

                                       ..........

GRADY, P.J. and FAIN, J., concur.

(Hon. Penelope R. Cunningham, First District Court of Appeals, sitting by assignment of the
Chief Justice of the Supreme Court of Ohio).

Copies mailed to:

Lawrence T. Burick
Christine M. Cooper
Joseph C. Lucas
Kelly A. Bennington
Mark J. Sheriff
Thomas M. Green
Jared A. Wagner
Donald W. Jordan
Joseph G. Strines
George B. Patricoff
Lucas C. Ward
Hon. Gregory F. Singer