REAL PROPERTY Upending the Status Quo: The Problem with Sponaugle

Upending the Status Quo: The Problem with Sponaugle

On June 27, 2019, the Ohio Supreme Court in Farmers State Bank v. Sponaugle1 may have overturned decades of case precedent in foreclosure law and more alarmingly the ancient rules on what may and may not be raised on appeal.

The facts are simple enough. The plaintiff initiated the foreclosure action in the Darke County Common Pleas Court in 2013 for non-payment of a mortgage secured by the defendant owner’s real property.2 By an agreed entry, the trial court entered a decree of foreclosure in 2014 in favor of the plaintiff and awarded it the amount of $236,378.89 plus interest; however, if the owner paid $120,000 on or before August 23, 2014, the plaintiff would dismiss the action.3 The owner failed to do so and, after a bankruptcy action, the trial court granted summary judgment in the plaintiff’s favor towards the end of 2015. 4

But then the procedural history gets messy. On January 12, 2016, the trial court entered a decree of foreclosure in the plaintiff’s favor; however, the entry did not include amounts for the county treasurer’s lien for real property taxes or a calculation of the amount to which the holder of a certificate of judgment was entitled.5 The owner timely filed an appeal and received a stay of execution; however, they failed to file a bond to enforce the stay, so the real property went to a sheriff’s sale on February 26, 2016.6 After the sheriff’s sale but before confirmation of the same, the Second District issued an order to show cause as to why the appeal should not be dismissed for the lack of a final, appealable order.7 On April 18, 2016, the Second District dismissed the defendant owners’ appeal because the order at issue was not final and appealable because it lacked calculated damages related to the county treasurer’s and certificate holder’s claims.8 On April 21, 2016, the trial court confirmed the sheriff’s sale, and the owner filed a timely appeal.9

On appeal, the owner argued that the trial court should not have confirmed the sheriff’s sale because it was executed pursuant to an order that was not final and appealable.10 The Second District first concluded that the law-of-the-case doctrine precluded any argument as to whether the decree of foreclosure was actually final and appealable.11 It noted that the plaintiff failed to file any memorandum in response to its show cause order and did not appeal its decision to the Ohio Supreme Court.12 The Second District also concluded that, even if the plaintiff had done otherwise, the trial court’s January 12, 2016 entry did not include amounts of damages to which the

By Jonathan F. Hung Esq.. Chair Real Property Green & Green, Lawyers jfhung@green-law.com | 937.224.3333

county treasurer and the certificate holder were entitled and should not have issued an order of sale.13 Citing to a copious body of case law from all Ohio districts, the Second District further concluded that, at the time of the sale, there were claims to be adjudicated, and therefore that the January 16, 2016 entry was not final and appealable. 14

The Ohio Supreme Court disagreed. Glossing over the fact that no party appealed the Second District’s opinion to dismiss the owner’s first appeal,15 it went on to conclude that the January 16, 2016 decree of foreclosure was final and appealable because it determined the rights and obligations of all parties, including the county treasurer’s and the certificate holder’s.16

continued on page 23

ENDNOTES: 1157 Ohio St. 3d 151, 2019-Ohio-2518. 2Id., ¶ 5. 3Id., ¶ 6. 4Id. 5Id., ¶¶ 7-9. 6Id., ¶ 10. 7Id., ¶ 11. 8Farmers State Bank v. Sponaugle, 2d Dist. No. 16CA000002 (Apr. 18, 2016). 92019-Ohio-2518, ¶ 14. 10Farmers State Bank v. Sponaugle, 2d Dist. No. 2016-CA-4, 2017Ohio-4322, ¶ 13. 11Id., ¶ 16-18. 12Id., ¶ 18. 13Id., ¶¶ 20-30. 14 Id. 152019-Ohio-2518, ¶¶ 21-26. 16Id.,¶¶ 28-32.

REAL PROPERTY: Upending the Status Quo: The Problem with Sponaugle continued from page 22

Following its prior opinion in CitiMortgage, Inc. v. Roznowski, the Court found that the amounts owed to each interest holder was “ministerial” and easily calculable.17 The Court also found that because the foreclosure decree made reference to the county treasurer’s statutory rights to recover real property taxes and the judgment held by the certificate holder, it had in fact ruled upon the parties’ rights and obligations and that the absence of a money figure did mean the decree was not final and appealable.18 “Liability is fully and finally established when the court issues the foreclosure decree and all that remains is mathematics, with the court plugging in final amounts due after the property has been sold at a sheriff’s sale.”19

The decision leaves many questions. R.C. 2323.07, which governs executions on property, requires that an order of foreclosure not only determine the rights and responsibilities of all parties but also the extent to their interest in the property.20 But what is the extent of a party’s interest in property if the amount to which they are entitled has not been reduced to a number? According to the Ohio Supreme Court, a party’s easily calculable amount of damages may be challenged at the second stage of a foreclosure action, which is the sale’s confirmation. But case law clearly limits an owner’s issues on such an appeal to whether a sale follows statutory procedure. Finally, as raised in Justice DeWine’s concurring opinion, the Ohio Supreme Court paid little attention to the fact that no party timely-appealed the Second District’s prior decision regarding whether the foreclosure decree was final and appealable. But does that not mean that such decision cannot be collaterally attacked, which the Ohio Supreme Court essentially permitted?

Ultimately, the Sponaugle opinion seems to raise more issues than it solves and upsets existing precedent. Whether the Ohio Supreme Court clarifies or narrows its opinion is yet to be seen.

ENDNOTES: 17 139 Ohio St.3d 299, 2014-Ohio-1984, 11 N.E.3d 1140. 182019-Ohio-2518, ¶ 32. 19Id. 20Id., ¶ 18.

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