Am. Tax Funding, L.L.C. v. Archon Realty Co.

2012 Ohio 5530

• Court: Ohio Court of Appeals
• Decided: November 30, 2012
• Docket: 25096
• Status: Published

Opinion

[Cite as Am. Tax Funding, L.L.C. v. Archon Realty Co., 2012-Ohio-5530.]

IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT MONTGOMERY COUNTY

AMERICAN TAX FUNDING, LLC : : Appellate Case No. 25096 Plaintiff-Appellee : : Trial Court Case No. 08-CV-9938 v. : : ARCHON REALTY COMPANY, et al. : (Civil Appeal from : (Common Pleas Court) Defendant-Appellants : : ...........

OPINION

Rendered on the 30th day of November, 2012.

...........

DAVID S. ANTHONY, Atty. Reg. #0074431, Anthony & Zomoida, LLC, 1000 West Wallings Road, Suite A, Broadview Heights, Ohio 44147 Attorney for Plaintiff-Appellee

RICHARD A. BOUCHER, Atty. Reg. #0033614, JULIA C. KOLBER, Atty. Reg. 0078855, and LAUREN E. GRANT, Atty. Reg. #0087315, Boucher & Boucher Co., LPA, 12 West Monument Avenue, Suite 200, Dayton, Ohio 45402 Attorneys for Defendant-Appellants

.............

FAIN, J.

{¶ 1} Defendant-appellant Archon Realty Company appeals from an order of the the

trial court forfeiting real property subject to a tax lien foreclosure decree to plaintiff-appellee 2

American Tax Funding, LLC, after two attempted sheriff’s sales resulted in no bidders.

Archon argues that the trial court abused its discretion by failing to order the four contiguous

parcels comprising the property to be offered separately for sale. Archon also argues that the

forfeiture is inequitable because the property is worth substantially more than the tax liens,

and that the forfeiture results in an unjust enrichment to American Tax Funding.

{¶ 2} We agree with American Tax Funding that Archon has forfeited an argument

that the trial court should have exercised its discretion, under R.C. 2323.07, to order the

parcels to be offered separately for sale, as a result of Archon’s neither having requested that

the parcels be offered separately for sale, nor having objected to the trial court’s original order

that they be sold together.

{¶ 3} We also agree with American Tax Funding that the trial court did not err by

ordering the forfeiture. By ordering the forfeiture, the trial court was complying with the

mandate of R.C. 5721.40 that property be forfeited to the holder of a tax certificate when two

attempted sheriff’s sales result in no bidders. Also, the decree of foreclosure, from which no

appeal was taken, provided that in the event of the failure to sell the property after two

attempted sales, the property was to be forfeited to American Tax Funding, and no appeal was

taken from the foreclosure decree. Also, no argument was made in the trial court that the

forfeiture constituted unjust enrichment.

{¶ 4} Accordingly, the judgment of the trial court is Affirmed.

I. The Course of Proceedings

{¶ 5} Four contiguous parcels of real estate, owned by Archon, were subject to tax 3

delinquencies. American Tax Funding purchased a number of tax certificates corresponding

to the tax liens on the property. It brought this action to foreclose on the property.

{¶ 6} In September, 2009, a judgment of foreclosure was rendered in various

principal amounts, totaling $95,887.75, running from various dates, and with various rates of

interest, together with fees and costs. The order directed that the Montgomery County Sheriff

should sell the property, “without appraisal,” “for not less than the amount due [American Tax

Funding] * * * .” The order directed that if no bids were made “equal to at least the amount

due [American Tax Funding],” the Sheriff should offer the property for sale at the second date

specified in the advertisement of sale.

{¶ 7} Finally, the judgment of foreclosure provided “that, if the Certificate Parcels is

[sic] not sold after being offered at two sales, [American Tax Funding] shall prepare and

submit to the Court an Entry directing the Certificate Parcels be forfeited to [American Tax

Funding] pursuant to R.C. 5721.40.” No appeal was taken from the judgment of foreclosure.

{¶ 8} In late October 2009, pursuant to a praecipe filed by American Tax Funding, a

writ of sale was filed in the trial court ordering the sale of:

* * * the following described Estate, to-wit:

ALL PROPERTIES TO BE SOLD TOGETHER

1255 KEOWEE, DAYTON, OHIO 45404

1301 KEOWEE, DAYTON, OHIO 45404

1235 KEOWEE, DAYTON, OHIO 45404

501 E. HELENA, DAYTON, OHIO 45404

SEE ATTACHED LEGAL DESCRIPTION [Cite as Am. Tax Funding, L.L.C. v. Archon Realty Co., 2012-Ohio-5530.] (Bolding in original.)

{¶ 9} Archon did not object to the writ of sale.

{¶ 10} The Sheriff offered the property for sale on January 7, 2010, and there were no

bids. Pursuant to the notice of sale, the Sheriff offered the property for sale again on

February 4, 2010. Again, there were no bidders.

{¶ 11} American Tax Funding moved for the forfeiture of the property to it. Archon

opposed the motion, contending that it had not been served with notice of the time and place

of sale. Archon also contended that “the fair market value of the certificate parcels far

exceeds the value of the Tax Certificates and would result in a manifestly unjust and

inequitable forfeiture.” Archon did not argue that the parcels should be separately offered for

sale. In response, American Tax Funding withdrew its motion for forfeiture, and put on a

new praecipe for sale.

{¶ 12} A new writ of sale was issued.

{¶ 13} At some point, American Tax Funding became aware that the trial court had

already put on an order transferring the property to ATFH Real Property, LLC, which had

been recorded, and was therefore preventing the sale of the property. American Tax Funding

moved the trial court to vacate the transfer of the properties, and the trial court granted the

motion and ordered the transfer vacated.

{¶ 14} Once again, the Sheriff offered the property for sale on May 5, 2011, and there

were no bidders. Pursuant to the new advertisement of sale, the property was again offered

for sale on June 2, 2011, and again there were no bidders.

{¶ 15} Following these unsuccessful attempts to sell the property, American Tax

Funding again moved for an order forfeiting the property. Archon again opposed the motion, 5

arguing, for the first time, that the trial court should have exercised its discretion under R.C.

2323.07 to order the property subdivided into parcels to be separately offered for sale.

Archon again argued that the forfeiture would “result in a manifestly unjust and inequitable

forfeiture,” because the “fair market value of the certificate parcels far exceeds the value of the

Tax Certificates[.]”

{¶ 16} In its reply memorandum, American Tax Funding pointed out to the trial court

that Archon, in opposing American Tax Funding’s first motion for forfeiture, did not argue

that the trial court should have ordered, or should in the future order, that the property be

subdivided into parcels and offered separately for sale.

{¶ 17} On February 24, 2012, the trial court granted American Tax Funding’s motion

for forfeiture of the property, and ordered the property transferred to ATFH Real Property,

LLC, to whom American Tax Funding had, after the filing of the complaint, assigned its

interest in the property. From the order of forfeiture, Archon appeals.

II. Archon, Having Both Failed to Object to the Earlier Two Attempts to Sell the

Property as One Parcel, and Having Failed to Request that the Property be Subdivided

into Parcels to be Offered Separately for Sale, Has Forfeited any Argument that the

Trial Court Abused its Discretion by Failing to Order the Property to be Subdivided into

Parcels to be Offered Separately for Sale

{¶ 18} Archon’s First Assignment of Error is as follows:

THE TRIAL COURT ERRED IN SUSTAINING APPELLEE’S MOTION

FOR FORFEITURE BECAUSE A SALE OF THE REAL ESTATE AS SEPARATE 6

PARCELS WAS NEVER ATTEMPTED.

{¶ 19} Archon relies upon R.C. 2323,07, which provides, in pertinent part, as

follows:

When a mortgage is foreclosed or a specific lien enforced, a sale of the

property, or a transfer of property pursuant to sections 323.28, 323.65 to 323.78, and

5721.19 of the Revised Code, shall be ordered by the court having jurisdiction or the

county board of revision with jurisdiction pursuant to section 323.66 of the Revised

Code.

When the real property to be sold is in one or more tracts, the court may order

the officer who makes the sale to subdivide, appraise, and sell them in parcels, or sell

any one of the tracts as a whole.

{¶ 20} Archon acknowledges that it never requested that the trial court exercise its

discretion, under this statute, to order the property sold in separate parcels, but contends that

the trial court nevertheless abused its discretion by failing to do so, “to prevent an injustice to

[Archon] or the host of other creditors affected by forfeiture.” Archon argues that the sale of

one of the parcels “could have generated enough money to pay off the total tax delinquency

owed on all four parcels of real estate,” and that “[p]lacing all of the properties in one bundle

inherently creates a burden on potential buyers to manage three more properties than necessary

for their own business needs[.]”

{¶ 21} For its part, American Tax Funding, besides arguing that it was incumbent

upon Archon to have requested the trial court to exercise its discretion to subdivide the

property for sale, argues in its brief that “[t]he parcels collectively make up a single 7

commercially developed area,” and that “[t]hese parcels cannot stand alone and be sold as

separate and distinct parcels.”

{¶ 22} We agree with American Tax Funding that the trial court, in the absence of

any request to do so, did not abuse its discretion when it failed to subdivide the property to be

sold. Archon would place upon the trial court the burden of recognizing that the sale of the

property as four separate parcels was commercially feasible, a fact American Tax Funding

disputes, and that the sale of just one of the parcels would likely satisfy the tax liens upon all

four. In our view, this places too great a burden upon the trial court. Surely Archon, the

owner of the property, was in a better position than the trial court to have made these

determinations, and having made them, to have recommended the subdivision to the trial

court. Presumably, American Tax Funding would have disputed the commercial practicality

of the subdivision, and the trial court, in an adversary proceeding, could have determined that

issue.

{¶ 23} Finally, Archon argues that it did request separate sales of the four parcels, in

its memorandum in opposition to the second motion for forfeiture. 1 As American Tax

Funding points out, however, by this time the Sheriff had already offered the property for sale

twice (actually four times, counting the aborted first two offers for sale), with no bidders,

triggering the mandatory forfeiture proceedings under R.C. 5721.40. At that point, the trial

court no longer had discretion. See Part III, below.

{¶ 24} Archon’s First Assignment of Error is overruled.

1 Archon did not request separate sales of the four parcels in its memorandum in opposition to American Tax Funding’s first motion for forfeiture, which American Tax Funding subsequently withdrew. 8

III. Regardless of Any Resulting Inequity, the Trial Court Did Not Err

by Following the Mandate of R.C. 5721.40 and its Own, Final Judgment of Foreclosure,

and Ordering the Forfeiture of the Property Following

Two Attempts to Sell the Property without any Bidders

{¶ 25} Archon’s Second Assignment of Error is as follows:

FOR FORFEITURE BECAUSE THE VALUE OF THE REAL ESTATE IS SEVEN

TIMES THE AMOUNT OWED ON THE TAX DELINQUENCY AND A

FORFEITURE OF THE REAL ESTATE WOULD BE INEQUITABLE AND

RESULT IN UNJUST ENRICHMENT TO APPELLEE

{¶ 26} R.C. 5721.40 provides, in pertinent part, as follows:

If any tax certificate parcel is twice offered for sale pursuant to section 5721.39

of the Revised Code and remains unsold for want of bidders, the officer who

conducted the sales shall certify to the court or board of revision that the parcel

remains unsold after two sales. The court or board of revision, by entry, shall order the

parcel forfeited to the certificate holder who filed the request for foreclosure or notice

of intent to foreclose under section 5721.37 of the Revised Code. The clerk of the

court shall certify copies of the court's order to the county treasurer. The county

treasurer shall notify the certificate holder by ordinary and certified mail, return receipt

requested, that the parcel remains unsold, and shall instruct the certificate holder of the

manner in which the holder shall obtain the deed to the parcel. The officer who 9

conducted the sales shall prepare and record the deed conveying title to the parcel to

the certificate holder.

***

Upon transfer of the deed to the certificate holder under this section, all right,

title, claim, and interest in the certificate parcel are transferred to and vested in the

certificate holder. The title to the parcel is incontestable in the certificate holder and is

free and clear of all liens and encumbrances, except the following:

(A) A federal tax lien, notice of which was properly filed in accordance with

section 317.09 of the Revised Code prior to the date that the foreclosure proceeding

was instituted under section 5721.37 of the Revised Code and which was foreclosed in

accordance with 28 U.S.C. 2410(c);

(B) Easements and covenants of record running with the land that were created

prior to the time the taxes or assessments, for the nonpayment of which a tax certificate

was issued, became due and payable.

(Italics added.)

{¶ 27} As can be seen from the portion of the statute italicized above, the trial court

is mandated by the statute to order the property forfeited to the holder of the tax certificate

when the sale of the property fails twice for lack of bidders. The trial court has no discretion

in the matter.

{¶ 28} Archon argues that the forfeiture of the property under the statute is

inequitable and constitutes unjust enrichment.

{¶ 29} We are aware of no authority for the proposition that a trial court may ignore a 10

statutory mandate on the ground that it would produce an inequitable result, and Archon has

cited no authority for that proposition. If the forfeiture mandate of R.C. 5721.40 produces

inequitable results, this is something to bring to the attention of the Ohio General Assembly,

which has authority to amend the statute.

{¶ 30} Furthermore, besides following the statutory mandate, the trial court was also

following the final judgment of foreclosure that it had already rendered in this case. That

judgment, in its concluding paragraph, expressly provided that upon a second failure of the

property to sell, American Tax Funding “shall prepare and submit to the Court an Entry

directing the Certificate Parcels be forfeited to [American Tax Funding] pursuant to R.C.

5721.40.” Archon did not appeal from this judgment. Therefore, it cannot now complain

that the property should not have been forfeited.

{¶ 31} Finally, Archon argues that the forfeiture of the property works an unjust

enrichment. Besides suffering from the same infirmities noted above for the argument of

inequitability, this argument was not made in the trial court, and has therefore been forfeited

on appeal.

{¶ 32} In HAD Ents. v. Galloway, 192 Ohio App.3d 133, 2011-Ohio-57, 948 N.E.2d

473, ¶ 16 (4th Dist.), a case cited by Archon, the court held that there was no cause of action

for unjust enrichment, because there was no contractual relationship, either express or implied,

between the parties. In the case before us, there was no contractual relationship, express or

implied, between American Tax Funding and Archon.

{¶ 33} In Gaier v. Midwestern Group, 76 Ohio App.3d 334, 338-339, 601 N.E.2d

624 (2d Dist. 1991), another case cited by Archon, we recognized that a cause of action for 11

unjust enrichment might lie even in the absence of a contractual relationship between the

parties if the actions of the party claiming unjust enrichment produced both a detriment to that

party and a benefit to the other party, “under circumstances in which it would be inequitable to

permit the person benefited [sic] to retain the full value thereof without some compensation to

the person producing the benefit.” We held that the substantial detriment to the party

claiming unjust enrichment had to be “causally connected to a substantial benefit to the [the

other party].” Id.

{¶ 34} In the case before us, Archon claims that the substantial detriment to it

consisted of its purchase and subsequent improvement of the properties, which benefitted

American Tax Funding. Even if Archon’s purchase and subsequent improvement of the

properties could be seen as a “substantial detriment” to it, we see no causal connection

between those actions and the alleged subsequent benefit to American Tax Funding of

receiving, through forfeiture, property of a value substantially in excess of the amount of the

tax liens it purchased. When Archon purchased the property, and subsequently placed

improvements upon the property, it was not benefitting American Tax Funding, which at that

time had no relationship to the property. It was only through the independent intervening acts

of: (1) the failure to pay taxes, resulting in tax liens on the property; (2) American Tax

Funding’s purchase of the tax certificates; and (3) the failure of the property to attract any

bidders at two sheriff’s sales, that a benefit to American Tax Funding was arguably created.

These independent intervening acts destroyed any proximate causal relationship between the

alleged detriment to Archon and the alleged benefit to American Tax Funding.

{¶ 35} Archon’s Second Assignment of Error is overruled. 12

IV. Conclusion

{¶ 36} Both of Archon’s assignments of error having been overruled, the judgment of

the trial court is Affirmed.

DONOVAN and FROELICH, JJ., concur.

Copies mailed to:

David S. Anthony Richard A. Boucher Julia C. Kolber Lauren E. Grant Hon. Gregory F. Singer