Clinton v. Home Invest. Fund

2020 Ohio 4555

• Court: Ohio Court of Appeals
• Decided: September 23, 2020
• Docket: C-190646
• Status: Published

Opinion

[Cite as Clinton v. Home Invest. Fund, 2020-Ohio-4555.] IN THE COURT OF APPEALS FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO

PATRICK D. CLINTON, : APPEAL NO. C-190646 TRIAL NO. A-1801700 and :

ALICIA K. CLINTON, : O P I N I O N.

Plaintiffs-Appellees, :

vs. :

HOME INVESTMENT FUND V, LP, : Successor in Interest to Mortgage Electronic Registration Systems, Inc., : as Nominee for The Huntington National Bank, :

Defendant/Third-Party Plaintiff- : Appellant,

and :

UNION SAVINGS BANK, :

Third-Party Defendant-Appellee, :

JIHAD KASSEM, :

Third-Party Defendant. :

Civil Appeal From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Appeal Dismissed

Date of Judgment Entry on Appeal: September 23, 2020

Sikora Law LLC, Richard T. Craven, George H. Carr and Michael R. Neiman, for Plaintiffs-Appellees Patrick D. Clinton and Alicia K. Clinton, OHIO FIRST DISTRICT COURT OF APPEALS

Wood & Lamping LLP and C.J. Schmidt, for Defendant/Third-Party Plaintiff- Appellant Home Investment Fund V, LP,

Strauss Troy Co., LPA, C. Richard Colvin and Alex S. Rodger, for Third-Party Defendant-Appellee Union Savings Bank.

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C ROUSE , Judge.

{¶1} Currently pending before this court is defendant/third-party plaintiff-

appellant Home Investment Fund V, LP’s, (“HIFV”) appeal from the trial court’s

grant of summary judgment in favor of plaintiffs-appellees Patrick and Alicia

Clinton. This appeal centers around real property located at 4417 Floral Avenue,

Norwood, Ohio. During the pendency of this appeal, the Clintons sold the property

to Ashley Chase and Scott Harvey (the “Purchasers”), who are not parties to this

appeal. The Clintons and third-party defendant-appellee Union Savings Bank

moved this court to dismiss the appeal as moot since neither the Clintons nor Union

Savings Bank continue to have any interest in the subject property. HIFV agrees that

the Clintons and Union Savings Bank should be dismissed, but they argue that this

appeal is not moot based on the doctrine of lis pendens. Having considered the

arguments of the parties, we find that this appeal must be dismissed as moot for the

reasons set forth below.

I.

{¶1} On January 24, 2008, Jihad Kassem executed and delivered to The

Huntington National Bank a promissory note in the amount of $190,000. As security

for payment on the note, Kassem executed a mortgage on real property located at 4417

Floral Avenue, Norwood, Ohio. The mortgage designated Huntington Bank as the

lender and Mortgage Electronic Registration Systems, Inc., (“MERS”) (solely as

nominee for the lender) as the mortgagee. Kassem eventually defaulted on the note.

{¶2} Kassem also defaulted on his property-tax obligations. In December

2015, Adair Asset Management, LLC, (“Adair”) which had acquired the property-tax

certificates, filed a foreclosure action against Kassem. Adair sought a sale of the

subject property and payment in the first-priority-lien position. The complaint

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named as defendants Jihad Kassem, the unknown spouse of Jihad Kassem, the

Hamilton County treasurer, and Huntington Bank. MERS was not named as a

defendant in the action. Although named as a defendant, Huntington Bank did not

respond to the complaint.

{¶3} On March 24, 2016, the trial court entered judgment in favor of Adair

and adjudicated Huntington Bank as being in default. The court entered a decree of

foreclosure and confirmed a sheriff’s sale of the property. On September 6, 2016, the

court ordered a distribution of the sale proceeds and extinguished Huntington

Bank’s mortgage on the property.

{¶4} On January 2, 2018, MERS assigned its interest in Huntington Bank’s

mortgage to HIFV. On March 29, 2018, Carole Kassem, the purchaser of the subject

property, initiated a quiet-title action against MERS. After the complaint was filed,

Carole sold the property to Patrick and Alicia Clinton. The Clintons executed a

promissory note and mortgage in favor of Union Savings Bank to purchase the

property. The Clintons promptly substituted as plaintiffs in the quiet-title action.

{¶5} On July 5, 2018, HIFV, as the successor in interest to MERS, filed an

answer in the quiet-title action. HIFV also asserted a counterclaim against the

Clintons and filed a third-party complaint against Union Savings Bank for

foreclosure. HIFV argued that because MERS was not named as a defendant in the

tax-foreclosure case, the Huntington Bank mortgage remained a valid lien on the

subject property despite the trial court’s order.

{¶6} The parties filed cross-motions for summary judgment on September

11 and 12, 2019. Following extensive briefing from the parties and the submission of

numerous exhibits, the trial court determined that MERS was not a necessary party

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to the tax-foreclosure case. On November 1, 2019, the court entered judgment

quieting title in favor of the Clintons and Union Savings Bank.

{¶7} On November 7, 2019, HIFV filed a notice of appeal. HIFV did not file for

a stay of execution and did not post a supersedeas bond. During the pendency of this

appeal, the Clintons sold the subject property to the Purchasers. As a result of the sale,

the Clintons satisfied their obligations to Union Savings Bank, and Union Savings Bank

released its mortgage on the property. The Clintons and Union Savings Bank

subsequently moved to dismiss the appeal as moot. HIFV opposed the motion and filed

a cross-motion to dismiss, arguing that the Clintons and Union Savings Bank should be

dismissed as parties but the appeal should not be dismissed due to the doctrine of lis

pendens.

II.

{¶1} Lis pendens is a common-law legal doctrine that literally means “a

pending lawsuit.” Cincinnati ex rel. Ritter v. Cincinnati Reds, L.L.C., 150 Ohio App.3d

728, 2002-Ohio-7078, 782 N.E.2d 1225, ¶ 30 (1st Dist.). “It means that the filing of a

lawsuit concerning specific property gives notice to others of the claim alleged in the

lawsuit and that a purchaser of the property may take the property subject to the

outcome of the lawsuit.” Id.

{¶2} R.C. 2703.26 codifies the doctrine of lis pendens. R.C. 2703.26 provides:

“When a complaint is filed, the action is pending so as to charge a third person with

notice of its pendency. While pending, no interest can be acquired by third persons in

the subject of the action, as against the plaintiff’s title.”

{¶3} Lis pendens is a procedural device designed to protect the status quo of

the litigants’ interest in the subject property while an action is pending. A.P.W.O., Inc. v.

Toebben, Ltd., 1st Dist. Hamilton No. C-920147, 1993 WL 323395, *1 (Aug. 25, 1993);

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Katz v. Banning, 84 Ohio App.3d 543, 617 N.E.2d 729 (10th Dist.1992); Irwin Mtge.

Corp. v. DuPee, 197 Ohio App.3d 117, 2012-Ohio-1594, 966 N.E.2d 315, ¶ 9 (12th Dist.).

“If applicable, it does not prevent persons from transacting an interest in the property

subject to litigation. Any conveyed interest, however, becomes subject to the outcome of

the pending litigation.” Cincinnati ex rel. Ritter at ¶ 31.

{¶4} Lis pendens operates only while the action is pending. R.C. 2703.26

provides that an action begins pending “[w]hen a complaint is filed.” However, R.C.

2703.26 does not provide for a terminating event. The Clintons and Union Savings

Bank contend that lis pendens terminated when the trial court entered summary

judgment in their favor. They claim that lis pendens does not continue on appeal

unless and until the losing party obtains a stay and posts a supersedeas bond. On the

other hand, HIFV contends that lis pendens automatically continues on appeal and

does not terminate until all of the legal proceedings concerning the subject property

have concluded. It argues that it is unnecessary to file a stay.

{¶5} The Clintons and Union Savings Bank argue that we should follow our

precedent in A.P.W.O., Inc. v. Toebben, Ltd., and dismiss the case as moot.

{¶6} In A.P.W.O., Inc., the plaintiff property owners filed an action against

tenant A.P.W.O. seeking a declaration that a lease involving the subject property was

void. The trial court ruled in favor of the plaintiffs, finding the lease void. A.P.W.O.

appealed the judgment, but did not obtain a stay of execution or post a supersedeas

bond. During the pendency of the appeal, the plaintiffs sold the subject property to

Toebben. A.P.W.O. subsequently brought a damages action against Toebben for breach

of lease. The trial court granted summary judgment in favor of Toebben, finding that

the effectiveness of the declaratory judgment was not properly stayed pending appeal.

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{¶7} On appeal of the damages action, this court effectively held that lis

pendens terminates upon a final judgment in the trial court. This court reasoned that lis

pendens is a procedural doctrine, and therefore, is superseded by App.R. 7 and Civ.R.

62. A.P.W.O., Inc., 1st Dist. Hamilton No. C-920147, 1993 WL 323395, at *1.

Accordingly, a party must seek a stay of judgment pending appeal in order to reinvoke lis

pendens and protect its interest in the underlying property.

{¶8} HIFV argues that we should decline to follow the decision in A.P.W.O.,

Inc., because it concerned a lease dispute, and unlike HIFV’s mortgage, the lease was not

recorded in the Hamilton County records. Thus, HIFV argues that A.P.W.O., Inc., does

not address the issue of eliminating a recorded interest in real estate, and is inapplicable.

HIFV contends that we should instead follow the Fifth District case of Sayer v. Epler,

5th Dist. Licking Nos. 00CA76 and 00CA85, 2001 WL 815507 (Jul. 9, 2001).

{¶9} In Sayer, the plaintiff-administrator filed an action seeking a declaration

that the subject property was included in the probate estate. The trial court dismissed

the action and the defendant sold the property. The plaintiff subsequently filed a notice

of appeal. On appeal, the Fifth District reversed and remanded the case to the trial

court. The trial court again dismissed the action on the grounds that the purchasers of

the property obtained their interest in the property without notice of the lawsuit, and

therefore, were bona fide purchasers. The trial court concluded that the doctrine of lis

pendens could not be invoked to provide constructive notice because the plaintiff failed

to obtain a stay or post a bond prior to filing the appeal.

{¶10} The Fifth District reversed, holding that the doctrine of lis pendens

applied to prevent the purchasers from claiming bona-fide-purchaser status. The Fifth

District found that the purchasers had been served with the summons and complaint

prior to the sale, and that the appeal was pending at the time of closing. Therefore, the

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Fifth District concluded that the purchasers knew claims were pending against the

property and that the plaintiff’s failure to obtain a stay did not give the purchasers the

right to rely upon the trial court’s judgment.

{¶11} The dissent concluded that the doctrine of lis pendens did not apply. The

dissent agreed with the purchasers’ reliance on A.P.W.O., Inc. However, instead of

relying on the interplay of R.C. 2703.26 and App.R. 7, the dissent ultimately relied on

the finality of the trial court’s judgment. The dissent found that the original action had

been finally determined by the trial court and that the trial court’s judgment was

effective upon its filing. Therefore, the dissent concluded that the judgment was fully

enforceable absent a stay of execution and the purchasers had a right to rely upon the

finality of the judgment.

{¶12} We find A.P.W.O., Inc., to be applicable to this case. As discussed above,

Ohio courts have universally held that lis pendens is a procedural doctrine, and thus,

R.C. 2703.26 is a procedural statute. A.P.W.O., Inc., made clear that “[a]s a procedural

statute, it has been superseded by App.R. 7 and Civ.R. 62.” A.P.W.O., Inc. at *1, citing

Article IV, Section 5(B), Ohio Constitution. Therefore, the trial court’s November 1,

2019 judgment in this case was effective upon its filing and fully enforceable until stayed

or reversed on appeal. HIFV never obtained a stay of execution or posted a supersedeas

bond in order to reinvoke lis pendens. Accordingly, when the subject property was sold

to purchasers who are not parties to this appeal, the appeal became moot and must be

dismissed.

Appeal dismissed.

Z AYAS , P.J., and M YERS , J., concur.

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Please note: The court has recorded its own entry on the date of the release of this opinion.