Court Opinion

ID: 4911432
Source: CourtListenerOpinion
Date Created: 2021-09-16 14:23:16.367534+00
Date Added: 2024-06-11T08:13:32.265820
License: Public Domain

[Cite as Cuyahoga Cty. Treasurer v. Berger Properties of Ohio L.L.C., 2021-Ohio-3204.]

                           COURT OF APPEALS OF OHIO

                          EIGHTH APPELLATE DISTRICT
                             COUNTY OF CUYAHOGA

TREASURER OF CUYAHOGA COUNTY, :
OHIO,
                                   :
         Plaintiff,
                                   :                                    No. 110233
         v.
                                   :
BERGER PROPERTIES OF OHIO, L.L.C.,
                                   :
         Defendant-Appellant,
                                   :
and
                                   :
CHESAPEAKE BANK,
                                   :
         Defendant-Appellee.

                            JOURNAL ENTRY AND OPINION

             JUDGMENT: AFFIRMED
             RELEASED AND JOURNALIZED: September 16, 2021

         Civil Appeal from the Cuyahoga County Court of Common Pleas
                             Case No. CV-18-908428

                                        Appearances:

             Miller, Canfield, Paddock and Stone, P.L.C., Nancy A.
             Valentine, and Scott R. Lesser, for appellee.

             McCarthy, Lebit, Crystal & Liffman Co., L.P.A., and
             Nicholas R. Oleski, for appellant.
MICHELLE J. SHEEHAN, J.:

               Appellant, Berger Properties of Ohio, L.L.C. (hereinafter “Berger

Properties”), appeals the trial court’s judgment distributing funds from a foreclosure

sale to appellee, Chesapeake Bank. Although Chesapeake Bank did not enter an

appearance in this foreclosure action until after the sheriff’s sale, the trial court was

within its discretion to award Chesapeake Bank funds where it held a judgment

against Berger Properties.

FACTS AND PROCEDURAL HISTORY

              In 2012, Berger Properties was the record owner of 1851 King James

Pkwy., Westlake, Ohio (“the Property”).          Berger Properties obtained a loan

amounting to approximately $7.9 million from Chesapeake Bank, secured in part by

a mortgage and lien on the Property. In 2013, Berger Properties defaulted on the

loan, and Chesapeake Bank obtained a judgment against Berger Properties and

other defendants in the Circuit Court of Gloucester County, Virginia.               That

judgment, in excess of $7.8 million, was filed pursuant to R.C. 2329.022 in

Chesapeake      Bank     v.   Alternatives     Unlimited,     Inc.,   Cuyahoga      C.P.

No. CV-14-820354.

              In April 2018, the treasurer of Cuyahoga County (hereinafter “the

Treasurer”) filed a tax foreclosure on the Property. After being served with the

complaint, Chesapeake Bank did not answer or otherwise respond. In November

2019, the trial court ordered the Property to be sold. On December 2, 2019, the

Property sold for $86,000. Thereafter the trial court ordered that $21,741.69 be
distributed to the Treasurer and $1,484.67 be distributed as costs and fees. The trial

court did not finalize the case and instructed the clerk to hold any remaining funds.

The Treasurer later moved for supplemental distribution of funds, which motion

was granted by the trial court.

              In April 2020, Stuart Berger filed a motion for disbursement of funds

on behalf of Berger Properties. That motion was stricken and later refiled by an

attorney representing Berger Properties. On October 23, 2020, Chesapeake Bank

filed an objection to the motion for distribution and moved the trial court to

distribute any remaining funds to it. Chesapeake Bank filed an affidavit with the

trial court noting that it had filed its judgment and stating more than $1.6 million

was still owed.

              The trial court scheduled further briefing, noting “Chesapeake Bank

did not answer the complaint in this case. As a consequence, Chesapeake Bank’s

lien was extinguished at the time of confirmation of sale.” Chesapeake Bank filed a

supplemental brief, arguing that although the lien was extinguished, its claim was

not. Berger Properties responded, arguing that because Chesapeake Bank had failed

to join the case prior to the sale, its right to any proceeds was extinguished.

              The trial court denied Berger Properties’ motion to distribute, granted

Chesapeake Bank’s motion, and ordered the remaining funds in the amount of

$61,786.62 to be distributed to Chesapeake Bank. In its order, the trial court noted

that Chesapeake Bank no longer held a security interest in the Property, but found:
      The Cuyahoga County Court of Appeals has held in similar
      circumstances that a party who no longer holds a security interest in
      the property or proceeds of sale may attach the proceeds of a sheriff’s
      sale if that party has or is entitled to a judgment against the former
      owner and the former owner is otherwise entitled to the sale proceeds.
      W. Chateau Condo. Unit Owners Assn. v. Zanders, (March 25, 2004),
      Cuyahoga App. No. 83298, 2004-Ohio-1450, ¶ 12.

LAW AND ARGUMENT

A. Assignment of Error

              Berger Properties presents one assignment of error, which reads:

      The trial court erred by denying Appellant Berger Properties of Ohio,
      LLC’s motion for distribution of sale proceeds and granting Appellee
      Chesapeake Bank’s motion for distribution.

              Berger Properties makes two arguments in support of its assignment

of error: (1) the trial court erred by refusing to honor its demand for payment of

excess funds from a sheriff’s sale as mandated by R.C. 2923.44, and (2) that equity

does not provide for the distribution of the excess funds to Chesapeake Bank where

it did not answer the complaint or otherwise exercise the rights on its lien until after

the lien was extinguished. Chesapeake Bank argues that although the lien was

extinguished by the sheriff’s sale, its claim and judgment against Berger Properties

was properly recognized and the trial court did not err in distributing the funds.

B.    The Trial Court Properly Distributed the Remaining Funds to Chesapeake
      Bank

1. Standard of Review

              We review a court’s decision in a foreclosure action for an abuse of

discretion. Villas at E. Pointe Condominium Assn. v. Strawser, 2019-Ohio-3554,
142 N.E.3d 1200, ¶ 12 (10th Dist.). “[T]he 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). “A decision is unreasonable

if there is no sound reasoning process that would support that decision.” AAAA

Ents., Inc. v. River Place Community Urban Redevelopment Corp., 50 Ohio St.3d

157, 161, 553 N.E.2d 597 (1990).

2.    The Trial Court Was Not Mandated to Distribute Excess Funds Pursuant to
      R.C. 2923.44

               Berger Properties argues that the trial court was mandated to

distribute the excess funds pursuant to R.C. 2329.44. Chesapeake Bank argues that

R.C. 2329.44 does not apply to this case, but that R.C. Chapter 5721 applies as it is

specific to tax foreclosure proceedings. R.C. 2329.44 provides that, after a sheriff’s

sale, if excess funds remain, the clerk is to give notice of the funds to the judgment

debtor and upon demand and satisfaction of costs “shall pay the balance to the

judgment debtor or the judgment debtor’s legal representatives.”             Similarly,

R.C. 5721.20 provides that 60 days after a sale, if funds remain, the owner may

demand the excess and the treasurer “shall pay such excess to the owner.”

              At issue in this case is not the duty of a clerk under R.C. 2923.44 or a

treasurer under R.C. 5721.20 to distribute funds, but the authority of the trial court

to determine the distribution of the funds after a sheriff’s sale. Here, the trial court

ordered the clerk to maintain the funds and had not finalized the case. This court

has found it proper for a trial court to hold excess money in a foreclosure action and
distribute the money to parties after the sale. W. Chateau Condominium Unit

Owners Assn. v. Zanders, 8th Dist. Cuyahoga No. 83298, 2004-Ohio-1450; see also

Strawser, 2019-Ohio-3554, 142 N.E.3d 1200; Stidham v. Wallace, 12th Dist.

Madison No. CA2o12-1o-022, 2o13-Ohio-2640.              As such, Berger Properties’

argument that R.C. 2923.44 controls the trial court’s distribution of funds is not well

taken.

3.       The Trial Court May Distribute Funds to Parties With a Valid Judgment

               Berger Properties argues that the trial court could not distribute the

excess funds because (1) any lien on the Property held by Chesapeake Bank was

extinguished when the sale occurred, and (2) equity does not allow for a party who

does not enter a foreclosure action to collect funds after a sale occurs.

                As to Berger Properties’ first argument, the trial court relied on

Zanders for authority to order the distribution of funds to Chesapeake Bank. In

Zanders, a condominium association filed a lien against property and thereafter

instituted a foreclosure action. Id. at ¶ 1-2. After the sheriff’s sale, the condominium

association filed a second lien seeking fees that had accrued since the action was

filed and a motion for distribution of funds asking the court to distribute funds

claimed in both liens. The trial court denied the motion in part, awarding only the

fees sought in the first lien. Id. at ¶ 5. This court reversed that decision and found

the trial court erred because the condominium association could enforce a personal

judgment, even though its lien was extinguished. Id. at ¶ 11-12. Accordingly, the

trial court’s determination that “a party who no longer holds a security interest in
the property or proceeds of sale may attach the proceeds of a sheriff’s sale if that

party has or is entitled to a judgment against the former owner and the former owner

is otherwise entitled to the sale proceeds” was not error.

              Berger Properties next argues that the trial court should not have

distributed any money to Chesapeake Bank because it did not enter the action until

after the sale. We note that the better practice would be for a lienholder to answer

the complaint in foreclosure to preserve its lien. However, “‘it is a well-settled rule

of practice that in foreclosure actions claims may be brought in or filed up to the

time of distribution, and may share in the proceeds according to priority.’” Stidham

v. Wallace, 12th Dist. Madison No. CA2012-10-022, 2013-Ohio-2640, ¶ 9, quoting

Farmers S. &. L. Co. v. Robison, 7th Dist. Mahoning No. 75 C.A. 39, 1976 Ohio App.

LEXIS 6137 (Feb. 11, 1976). Similarly, in Strawser, a condominium association filed

a foreclosure action to recoup monies owed on a property. Strawser, 2019-Ohio-

3554, 142 N.E.3d 1200. After the sheriff’s sale, the mortgage holder entered the case

by filing a motion for distribution of the excess funds. Id. at ¶ 7-10. The appellate

court found that the trial court had discretion to consider equitable interests in

distributing excess funds. Id. at ¶ 23.

              In this case, although Chesapeake Bank did not enter the foreclosure

action until after the sheriff’s sale, the trial court could distribute funds based upon

a valid judgment or claim. Because Chesapeake Bank filed a judgment with the

court, it was within the court’s discretion to distribute the excess funds to
Chesapeake Bank based upon that judgment and we cannot say its order to do so

was an abuse of discretion.

              Berger Properties’ assignment of error is not well taken.

CONCLUSION

              Although Chesapeake Bank failed to join the foreclosure action in

which it held a lien, it had filed a judgment against Berger Properties. Because a

party with a valid judgment or claim may join a foreclosure action after the sale, the

trial court did not abuse its discretion in this case by distributing excess funds to

Chesapeake Bank.

              Judgment affirmed.

      It is ordered that appellee recover of appellant costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate issue out of this court directing the

common pleas court to carry this judgment into execution.

      A certified copy of this entry shall constitute the mandate pursuant to Rule 27

of the Rules of Appellate Procedure.

__________________________
MICHELLE J. SHEEHAN, JUDGE

ANITA LASTER MAYS, P.J., and
LARRY A. JONES, SR., J., CONCUR