Beneficial Ohio, Inc. v. Ellis

902 N.E.2d 452, 121 Ohio St. 3d 89
CourtOhio Supreme Court
DecidedFebruary 3, 2009
DocketNo. 2007-1455
StatusPublished
Cited by6 cases

This text of 902 N.E.2d 452 (Beneficial Ohio, Inc. v. Ellis) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Beneficial Ohio, Inc. v. Ellis, 902 N.E.2d 452, 121 Ohio St. 3d 89 (Ohio 2009).

Opinions

Pfeifer, J.

{¶ 1} The question before us in this case is whether service upon one defendant in a multidefendant lawsuit is sufficient to consider the action “pending” for purposes of the doctrine of lis pendens, as codified in former R.C. 2703.26. We hold that pursuant to former R.C. 2703.26, once service has been made upon one defendant in a multidefendant lawsuit, the action is “pending” so as to charge third persons with notice of its pendency.

Factual and Procedural Background

{¶ 2} Edna M. Jarman owned real property described as lots 54, 55, 56, 57, 58, and 61 of the Ira B. Mackey plat in Vienna Township. Some time before December 30, 1998, Jarman’s son Dale Ellis asked Jarman to give him lot 61. After Jarman agreed, Ellis fraudulently had a quitclaim deed prepared that conveyed all six of the lots to him. Jarman executed that deed on December 30, 1998, and then Ellis recorded it.

{¶ 3} On or about January 19, 1999, Ellis mortgaged all the lots to Bank One for a loan of $25,500; that mortgage was recorded on February 8, 1999. On or about February 22, 2001, Ellis again mortgaged all the lots to Bank One for a loan of $45,000; that mortgage was recorded on March 7, 2001. In May 2001, Jarman discovered Ellis’s fraud and filed a lawsuit in Trumbull County Court of Common Pleas requesting that the court set aside the fraudulently conveyed deeds to lots 54, 55, 56, 57, and 58, and that those lots be returned to her. She named both Ellis and Bank One as defendants. Bank One was served with the summons and complaint on June 4, 2001. Ellis was served on July 26, 2001.

[90]*90{¶ 4} On or about July 24, 2001, prior to being served, Ellis obtained a loan from appellant, Beneficial Ohio, Inc. (“Beneficial”), again mortgaging all six lots. The loan was for $64,699.43, which Ellis used to pay off the Bank One mortgages. The Beneficial mortgage was recorded in the office of the Trumbull County Recorder on July 25, 2001.

{¶ 5} On October 26, 2001, a default judgment was entered against Ellis in Jarman’s suit, setting aside the conveyance of lots 54, 55, 56, 57, and 58 to Ellis and restoring ownership of them to Jarman. The judgment entry was recorded in the Trumbull County Recorder’s Office on November 6, 2001.

{¶ 6} Jarman died on September 20, 2003. Ellis defaulted on his mortgage with Beneficial, and on February 3, 2004, Beneficial filed the present foreclosure action, seeking to foreclose on the fraudulently conveyed lots owned by Jarman’s estate, as well as on lot 61, owned by Ellis. On August 20, 2004, Beneficial amended its complaint to add Jarman’s other children and heirs, Sandra and Robert Ellis, as new party defendants.

{¶ 7} Randil J. Rudloff answered the complaint as the executor of the estate, denying that Ellis had had any ownership interest in or right to mortgage the fraudulently conveyed lots.

{¶ 8} On July 19, 2004, Beneficial moved for summary judgment on the issue of the validity and priority of its liens on the property. Appellees, Rudloff and Sandra and Robert Ellis, opposed the motion and filed their own summary judgment motion on the grounds that Beneficial’s mortgage on the fraudulently conveyed lots was invalid due to the doctrine of lis pendens. By that doctrine, generally, someone who acquires an interest in property that is the subject of litigation is as bound by the result of the litigation as if he had been a party to it himself.

{¶ 9} The trial court ruled in favor of Beneficial, holding that lis pendens was inapplicable:

{¶ 10} “[T]he lis pendens doctrine does not apply to invalidate a lien until the defendant from whom the lien holder acquired his interest in property receives service of process in an action. Since Beneficial’s mortgage on the Property was recorded one day before Defendant, Dale Ellis received service of process in the Jarman v. Ellis case, lis pendens did not attach to Beneficial’s lien.”

{¶ 11} An appeal followed. The appellate court reversed the judgment of the trial court. The court held that pursuant to R.C. 2703.26, service of the complaint upon either defendant in Jarman’s fraudulent-conveyance case — and in this case Bank One was served before Dale Ellis mortgaged the property to Beneficial — was sufficient to trigger lis pendens protections.

[91]*91{¶ 12} Beneficial has appealed that ruling to this court. The cause is before this court upon the allowance of a discretionary appeal.

Law and Analysis

{¶ 13} In addressing lis pendens in Cook v. Mozer (1923), 108 Ohio St. 30, 36, 140 N.E. 590, this court asked the question, “What is this doctrine?” The court’s answer remains relevant to establish the common-law background of lis pendens, and we thus offer this refresher:

{¶ 14} “ ‘The general rule is that one not a party to a suit is not affected by the judgment. The exception is that one who acquires an interest in property which is at that time involved in litigation in a court having jurisdiction of the subject-matter and of the person of the one from whom the interests are acquired, from a party to the proceeding, takes subject to the judgment or decree, and is as conclusively bound by the result of the litigation as if he had been a party thereto from the outset. This is so irrespective of whether he has been made a party to the proceeding, or had actual notice of the pendency of the proceeding, and even where there was no possibility of his having had notice of the pendency of the litigation. It is immaterial that a purchaser was a bona fide purchaser and for a valuable consideration. While there is no doubt whether lis pendens has the effect of constructive notice, it is almost universally held that strictly speaking the doctrine of lis pendens is not founded upon notice but upon reasons of public policy founded upon necessity. For practical purposes, however, it is immaterial whether the doctrine of Us pendens be considered as based on constructive notice or on public policy. It has been said that it is essential to the existence of a valid and effective Us pendens that three elements be present: (1) The property must be of a character to be subject to the rule; (2) the court must have jurisdiction both of the person and the res; and (3) the property or res involved must be sufficiently described in the pleadings. It may be added that the litigation must be about some specific thing that must be necessarily affected by the termination of the suit.’ ” Cook, 108 Ohio St. at 36-37, 140 N.E. 590, quoting 25 Cyc. 1450.

{¶ 15} The doctrine of lis pendens was codified in Ohio in 1853, R.S. 5055, 52 Ohio Laws 69 (Section 78), and the version of the statute that was in effect at all pertinent times in this case, former R.C. 2703.26, distilled the doctrine into two simple sentences:

{¶ 16} “When summons has been served or publication made, the action is pending so as to charge third person [sic] with notice of its pendency. While pending, no interest can be acquired by third persons in the subject of the action, as against plaintiffs title.” 1953 H.B. No. 1, effective October 1,1953.

{¶ 17} Former R.C. 2307.26 determines the issue before us. The question is whether the action pending against Bank One regarding the Jarman property at [92]*92the time Ellis executed the mortgage with Beneficial operated to prevent Beneficial from acquiring an interest in the property against Jarman’s title.

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Cite This Page — Counsel Stack

Bluebook (online)
902 N.E.2d 452, 121 Ohio St. 3d 89, Counsel Stack Legal Research, https://law.counselstack.com/opinion/beneficial-ohio-inc-v-ellis-ohio-2009.