Court Opinion

ID: 2706717
Source: CourtListenerOpinion
Date Created: 2014-08-05 13:18:16.814542+00
Date Added: 2024-06-11T12:56:35.639348
License: Public Domain

[Cite as Luper Neidenthal & Logan v. Albany Station, L.L.C., 2014-Ohio-2906.]

                             IN THE COURT OF APPEALS OF OHIO

                                  TENTH APPELLATE DISTRICT

Luper Neidenthal & Logan, A                         :
Legal Professional Association,
                                                    :
                Plaintiff-Appellee,
                                                    :
v.                                                                       No. 13AP-651
                                                    :             (C.P.C. No. 12CVE-291)
Albany Station, LLC et al.,
                                                    :            (REGULAR CALENDAR)
                Defendants-Appellees,
                                                    :
Tolliver & Curl Paving Contractors, Inc.,
                                                    :
                Defendant-Appellant.
                                                    :

                                        D E C I S I O N

                                     Rendered on June 30, 2014

                Luper Neidenthal & Logan, Melissa A. Izenson, and
                Frederick M. Luper, for plaintiff-appellee.

                Gallagher & Kavinsky, LPA, and Michael R. Szolosi, Jr., for
                defendant-appellee JCCN Investments, LP.

                Marc K. Fagin, for appellant.

                  APPEAL from the Franklin County Court of Common Pleas.

T. BRYANT, J.
        {¶ 1} Defendant-appellant, Tolliver & Curl Paving Contractors, Inc., appeals from
a judgment of the Franklin County Court of Common Pleas in a foreclosure action
brought by plaintiff-appellee, Luper Neidenthal & Logan, A Legal Professional
Association. We previously denied a motion to dismiss the appeal for lack of a final
No. 13AP-651                                                                                 2

appealable order, and the matter is now before us on the merits. Luper Neidenthal &
Logan v. Albany Station, LLC, 10th Dist. No. 13AP-651 (Nov. 5, 2013) (memorandum
decision).
       {¶ 2} Luper Neidenthal began this case with a complaint in foreclosure against
Albany Station, LLC, an entity formed for the purpose of undertaking a never completed
residential condominium project. The complaint alleged that, in order to secure an
account owed for legal services, Luper Neidenthal obtained from Albany Station a
mortgage lien on certain parcels of development property. The complaint also named as
defendants several competing lienholders. Defendant-appellee JCCN Investments, LP,
was an initial investor in the Albany Station project and held a judgment lien against the
property based upon a cognovit note given by Albany Station.              Defendant-appellee
Lawrence J. Gross, an attorney, also held a judgment lien. Tolliver, which had performed
paving work on the defunct project, held a judgment lien after pursuing collection of the
unpaid paving contract. In addition, the Franklin County Treasurer held a presumed lien
for unpaid taxes.
       {¶ 3} Albany Station did not file an answer. Tolliver filed an answer contesting
the validity of the legal fees underlying the Luper Neidenthal lien and otherwise
contesting the priority of liens on the subject property. On January 22, 2013, pursuant to
a partial agreement between the parties, the trial court entered a decree of foreclosure
granting default judgment against Albany Station in favor of Luper Neidenthal, ordering
sale of the property, and reserving the order of priority of all liens for later determination.
Litigation continued among the lienholders concerning the validity and priority of the
parties' respective liens. On June 13, 2013, the trial court disposed of cross-motions for
summary judgment. The court granted summary judgment in favor of Luper Neidenthal
and JCCN, denied summary judgment sought by Tolliver, and set lien priority in strict
compliance with the chronology of lien filings by the various parties: first in priority, the
statutorily superior lien held by the Franklin County Treasurer for unpaid taxes, second in
priority, Luper Neidenthal's recorded mortgage of December 10, 2008 with a principal
amount of $20,000, third in priority, a certificate of judgment lien filed by JCCN in the
amount of $185,356 plus interest, recorded on February 17, 2010, fourth in priority,
Tolliver's certificate of judgment lien in the amount of $13,668.19 plus interest, filed on
No. 13AP-651                                                                               3

February 9, 2011, and finally, a certificate of judgment lien filed by Gross on December 15,
2011 in the amount of $40,000 plus interest.
        {¶ 4} Tolliver has appealed and brings the following two assignments of error:
               [I.] THE TRIAL COURT ERRED IN GRANTING SUMMARY
               JUDGMENT TO APPELLEES, LUPER NEIDENTHAL &
               LOGAN, LPA AND JCCN INVESTMENTS, LP.

               [II.] THE TRIAL COURT ERRED BY FAILING TO GRANT
               SUMMARY JUDGMENT TO APPELLANT, TOLLIVER &
               CURL PAVING CONTRACTORS, INC.

        {¶ 5} Both of Tolliver's assignments of error consider the grant or denial of the
parties' cross-motions for summary judgment in the trial court.           We consider the
assignments of error together under the standard of review in such cases. Civ.R. 56(C)
provides that summary judgment may be granted only when there remains no genuine
issue of material fact, the moving party is entitled to judgment as a matter of law, and
reasonable minds can come to but one conclusion, that conclusion being adverse to the
party opposing the motion. Tokles & Son, Inc. v. Midwestern Indemn. Co., 65 Ohio St. 3d
621, 629 (1992), citing Harless v. Willis Day Warehousing Co., 54 Ohio St. 2d 64 (1978).
Additionally, a moving party cannot discharge its burden under Civ.R. 56 simply by
making conclusory assertions that the non-moving party has no evidence to prove its case.
Dresher v. Burt, 75 Ohio St. 3d 280, 293 (1996). Rather, the moving party must point to
some evidence that affirmatively demonstrates that the non-moving party has no evidence
to support each element of the stated claims. Id. An appellate court's review of summary
judgment is de novo. Koos v. Cent. Ohio Cellular, Inc., 94 Ohio App. 3d 579, 588 (8th
Dist.1994); Bard v. Soc. Natl. Bank, 10th Dist. No. 97APE11-1497 (Sept. 10, 1998). Thus,
we conduct an independent review of the record and stand in the shoes of the trial court.
Jones v. Shelly Co., 106 Ohio App. 3d 440, 445 (5th Dist.1995). As such, we have the
authority to overrule a trial court's judgment if the record does not support any of the
grounds raised by the movant, even if the trial court failed to consider those grounds.
Bard.
        {¶ 6} Tolliver's first argument with respect to both assignments of error is that the
trial court failed to issue a written opinion presenting the legal analysis and undisputed
No. 13AP-651                                                                                4

material facts of the case and that we must, at a minimum, reverse and remand with a
mandate for the trial court to issue an explanatory decision providing the rationale for
summary judgment. However, since our review is de novo, the absence of an explanatory
decision from the trial court neither impedes our review nor precludes affirmance of the
trial court because we may ultimately do so on grounds other than those relied on by the
court. See, generally, Fred Sigel Co., L.P.A. v. Arter & Hadden, 8th Dist. No. 71440
(July 31, 1997), citing Brown v. Scioto Cty. Bd. of Commrs., 87 Ohio App. 3d 704, 711 (4th
Dist.1993).
       {¶ 7} Tolliver next argues that it may invoke the doctrine of equitable subrogation
in order to improve its standing among the competing lienholders. While the doctrine of
equitable subrogation does serve under some circumstances to reshuffle the relative
priority of lienholders, it is not applicable on the present facts.
       {¶ 8} Pursuant to R.C. 5301.23(A), the general rule of priority among lienholders
is that of "first in time, first in right." The first mortgage recorded, therefore, shall have
preference over subsequently recorded mortgages in chronological order. Under this rule,
Tolliver stands third in line among recorded liens and fourth when considering the
statutorily superior tax lien. Equitable subrogation stands as a narrow exception to the
strict chronological precedence imposed by statute.
       {¶ 9} The doctrine of equitable subrogation " 'arises by operation of law when one
having a liability or right * * * in the premises pays a debt due by another under such
circumstances that he is in equity entitled to the security or obligation held by the creditor
whom he has paid.' " State Dept. of Taxation v. Jones, 61 Ohio St. 2d 99, 102 (1980),
quoting Fed. Union Life Ins. Co. v. Deitsch, 127 Ohio St. 505, 510 (1934). The doctrine
typically applies to improve the lien precedence of a subsequent lender who paid off an
existing first mortgage and, thus, can equitably step into the shoes of that original primary
lender. See, generally, Washington Mut. Bank v. Loveland, 10th Dist. No. 04AP-920,
2005-Ohio-1542; Bank One Columbus, NA v. Jude, 10th Dist. No. 02AP-1266, 2003-
Ohio-3343.
       {¶ 10} The present facts do not allow application of the doctrine of equitable
subrogation. There is no assertion or evidence that Tolliver paid a debt initially owed to a
No. 13AP-651                                                                               5

lienholder with higher precedence and could equitably step into such a lienholder's shoes.
This is not an equitable subrogation case.
       {¶ 11} Tolliver next argues that it may contest the validity of debts owed by Albany
Station that underlie the liens held by the two senior lienholders, JCCN and Luper
Neidenthal, and that there remains a genuine issue of material fact as to the validity of
those debts and the liens they support. The trial court in effect abrogated the discussion
on this question when it held that Tolliver lacked any standing whatsoever to challenge
the validity of these debts because Tolliver was not a party to the financial transactions or
instruments that formed the basis for these, and Albany Station had through default
conceded the validity of the debts. For this proposition, the court cited our decision in
LSF6 Mercury REO Invests. Trust Series 2008-1 v. Locke, 10th Dist. No. 11AP-757, 2012-
Ohio-4499, appeal not accepted, 134 Ohio St. 3d 1470, 2013-Ohio-553.
       {¶ 12} Locke is in fact not applicable to the present facts, both on its face and
because we subsequently took the opportunity to severely limit the impact of the holding
in that case. See Bank of Am. v. Pasqualone, 10th Dist. No. 13AP-87, 2013-Ohio-5795.
       {¶ 13} Locke concerned an attempt by a mortgage borrower to contest the
assignment of his note from the original lender to a successor creditor, who then brought
a foreclosure action against the borrower. We held that "because the debtor is not a party
to the assignment of the mortgage, [the debtor] lacks standing to challenge its validity."
(Emphasis added.) Id. at ¶ 28; see also Deutsche Bank Natl. Trust. Co. v. Whiteman, 10th
Dist. No. 12AP-536, 2013-Ohio-1636; JPMorgan Chase Bank, N.A. v. Romine, 10th Dist.
No. 13AP-58, 2013-Ohio-4212, ¶ 13. On its face, therefore, Locke does not concern a
challenge to the validity of an underlying debt, but only the debtor's standing to attack the
validity of a subsequent assignment of the creditor's rights. Moreover, in Pasqualone, we
explicitly limited Locke and held that when defending a mortgage foreclosure action "a
debtor may challenge the assignment of a note (by negotiation or transfer) if such
challenge fits the criteria of a denial, defense or claim in recoupment as outlined in R.C.
1303.36 or 1303.35."    Pasqualone at ¶ 35. Even when broadly read, Locke would not
apply to the present facts and even less so in light of the limited reading of Locke imposed
in Pasqualone.
No. 13AP-651                                                                               6

       {¶ 14} Even in the absence of an absolute bar, pursuant to Locke, against any
attempted attack on the validity of the competing liens, Ohio law places severe restrictions
upon Tolliver's efforts to do so. Because the liens of the two superior lienholders are
founded upon obligations of somewhat differing nature, we will address the law governing
each in turn.
       {¶ 15} Tolliver's attack on the validity of JCCN's lien represents a collateral attack
upon the cognovit note judgment underlying the lien. A collateral attack is an attempt to
defeat the operation of a prior judgment brought in a later proceeding where some new
right derived from the judgment is involved. Black v. Aristech Chem. Co., 4th Dist. No.
07CA3155, 2008-Ohio-7038, ¶ 14. The law of Ohio strongly disfavors collateral attacks
upon a final judgment; collateral attack is not inherently improper, but is strongly
disfavored, as direct appeals are the primary way to challenge a judgment. Ohio Pyro, Inc.
v. Ohio Dept. of Commerce, 115 Ohio St. 3d 375, 2007-Ohio-5024, ¶ 23; Coe v. Erb, 59
Ohio St. 259, 271 (1898); Deutsche Bank Natl. Trust Co. v. Boswell, 192 Ohio App. 3d 374,
2011-Ohio-673, ¶ 24 (1st Dist.) "[T]here is a firm and longstanding principle that final
judgments are meant to be just that—final." Ohio Pyro at ¶ 22, citing Kingsborough v.
Tousley, 56 Ohio St. 450, 458 (1897). "[A] judgment is considered 'valid' (even if it might
perhaps have been flawed in its resolution of the merits of the case) and is generally not
subject to collateral attack" if the judgment was not procured by fraud and the issuing
court had jurisdiction. Id. at ¶ 25. "[A] collateral attack on a judgment is really an attack
on the integrity of the judgment rather than its merits." Mickey v. Rokakis, 8th Dist. No.
97053, 2012-Ohio-273, ¶ 9, citing Ohio Pyro.
       {¶ 16} Nonetheless, strangers to a judgment may collaterally attack that judgment
based upon fraud or want of jurisdiction. Ohio Pyro at ¶ 19, 23. In a proceeding where a
new right is based upon operation of the former judgment, not only the parties to the
original action but others affected by application of the judgment have standing to bring a
collateral attack on these very limited grounds. Black at ¶ 15, citing Horn v. Childers, 116
Ohio App. 175, 179 (4th Dist.1959). In the present case, Tolliver's rights as a lienholder
are affected by the judgment invoked by JCCN, and Tolliver has standing to collaterally
attack that judgment.
No. 13AP-651                                                                              7

       {¶ 17} Tolliver asserts that, as an initial investor in the development project, JCCN
should be treated as an equity holder rather than holder of a note because otherwise
Albany Station would have been almost entirely uncapitalized. For this proposition,
Tolliver relies on bankruptcy cases addressing the relative standing of creditors to a
bankruptcy estate. See, e.g., In re Shubh Hotels Pittsburgh LLC, 476 B.R. 181 (Bankr.
W.D.Pa.2012) (analyzing factors under which lenders may be reclassified as equity
investors and subordinated to other creditors). While we do not reject out of hand the
possibility that such bankruptcy rules might be applied by analogy to reorder competing
mortgage liens, we find that in the present case Tolliver presents no evidence that
supports the existence of fraud on the part of JCCN in obtaining its judgment, nor that the
investment structure of Albany Station amounted to fraud. The collateral attack upon
JCCN's judgment therefore fails, and the trial court did not err in finding that there
remained no genuine issue of material fact as to the validity of JCCN's lien priority.
       {¶ 18} With respect to Luper Neidenthal's lien based upon a statement of account,
Tolliver asserts that summary judgment was improper because Tolliver pointed to, inter
alia, evidence of billing practices that indicated that much of the legal work underlying
Luper Neidenthal's bills was performed not on behalf of Albany Station but on behalf of
that company's two principals personally. Moreover, Tolliver asserts some of this work
was performed either prior to the time when Albany Station became a de jure entity or
after the time when Albany Station ceased commercial activity and had any need for legal
services.
       {¶ 19} In an action to marshal liens, the creditor bears the burden of
demonstrating that the account is owed and has not been paid. Zukerman, Daiker & Lear
Co., L.P.A. v. Signer, 186 Ohio App. 3d 686, 2009-Ohio-968, ¶ 34 (8th Dist.). Other
creditors are thereby given the opportunity to contest competing liens and assert their
superior rights to the collateral even where the primary obligor does not contest a
particular debt in order to favor that creditor. Id. In Zukerman, for example, a mortgage
lien was based on a debt owed to a family member, and competing lienholders disputed
that it was valid or unpaid. While the present case is not a statutory action to marshal
liens, as was the case in Zukerman, the same considerations apply to allow lienholders to
No. 13AP-651                                                                             8

contest the primacy of a superior lien that is allegedly the result of a collusive or
fraudulent obligation.
      {¶ 20} With its initial motion for summary judgment, Luper Neidenthal submitted
a statement of account showing that by 2010 Luper Neidenthal had written off legal fees
in excess of the $20,000 amount secured by the mortgage.           Frederick M. Luper, a
principal with the firm, submitted an affidavit regarding the nature of the services
provided to Albany Station. Subsequently, the trial court permitted Luper Neidenthal to
supplement the evidence considered in support of summary judgment with certain
redacted client invoices and the affidavit of Melissa A. Izenson, an attorney employed by
the firm, authenticating the account records. Tolliver could answer only with speculative
assertions regarding the timing of the legal services at issue and the extent to which they
might not have benefitted a moribund enterprise. Tolliver is not entitled to the inference
that an insolvent company has no need for legal counsel, nor that pre-incorporation fees
incurred by the promoters of a business entity may never be attributed to the entity once
it is formally created.   The trial court, therefore, did not err in granting summary
judgment in favor of Luper Niedenthal.
      {¶ 21} In accordance with the foregoing, the trial court did not err in granting
summary judgment in favor of appellees Luper Neidenthal and JCCN. Appellant Tolliver
& Curl Paving Contractors, Inc.'s two assignments of error are overruled, and the
judgment of the Franklin County Court of Common Pleas is affirmed.
                                                                         Judgment affirmed.

                            KLATT and CONNOR, JJ., concur.

               T. BRYANT, J., retired of the Third Appellate District,
               assigned to active duty under authority of the Ohio
               Constitution, Article IV, Section 6(C).

                             _______________________