Fin. Freedom Acquisition, L.L.C. v. Heirs of Thomas

2012 Ohio 3845

• Court: Ohio Court of Appeals
• Decided: August 24, 2012
• Docket: 25047
• Status: Published

Opinion

[Cite as Fin. Freedom Acquisition, L.L.C. v. Heirs of Thomas, 2012-Ohio-3845.]

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

FINANCIAL FREEDOM ACQUISITION : LLC : Appellate Case No. 25047 : Plaintiff-Appellee : Trial Court Case No. 2010-CV-7941 : v. : : THE UNKNOWN HEIRS OF : (Civil Appeal from THELMA V. THOMAS, et al. : (Common Pleas Court) : Defendant-Appellant : : ...........

OPINION

Rendered on the 24th day of August, 2012.

...........

BILL L. PURTELL, Atty. Reg. #0075250, Lerner, Sampson & Rothfuss, 120 East Fourth Street, Suite 800, Cincinnati, Ohio 45202 Attorney for Plaintiff-Appellee, Financial Freedom Acquisition LLC

RONALD D. KEENER, Atty. Reg. #0002145, 125 West Main Street, New Lebanon, Ohio 45345 Attorney for Defendant-Appellant, Leslie Thomas

MATHIAS H. HECK, JR., by GEORGE PATRICOFF, Atty. Reg. #0024506, Montgomery County Prosecutor’s Office, Appellate Division, Montgomery County Courts Building, P.O. Box 972, 301 West Third Street, Dayton, Ohio 45422 Attorney for Defendant-Appellee, Montgomery County Treasurer

............. 2

WILLAMOWSKI, J. (Sitting by Assignment)

{¶ 1} Appellant Leslie R. Thomas (“Thomas”) brings this appeal from the

judgment of the Court of Common Pleas of Montgomery County. For the reasons set forth

below, the judgment is reversed.

{¶ 2} On December 8, 2006, Thelma V. Thomas (“Thelma”) obtained a home

equity conversion loan from Financial Freedom Senior Funding Corporation. This loan was

later assigned to Appellee Financial Freedom Acquisition LLC (“FFA”). At the time of the

mortgage, the real estate was owned solely by Thelma. However, the documents were signed

on her behalf by her power of attorney, Thomas. The power of attorney and the mortgage

were recorded on December 18, 2006, in the Montgomery County Recorder’s Office.

{¶ 3} On December 9, 2009, Thelma passed away. No probate estate was opened

at that time, but was subsequently commenced on August 23, 2011. Thomas was appointed

executor of the estate.

{¶ 4} On October 5, 2010, FFA filed a complaint in foreclosure and for

reformation of the mortgage. FFA named “The Unknown Heirs, Devisees, Legatees,

Executors, Administrators, Spouses and Assigns and the Unknown Guardians of Minor and/or

Incompetent Heirs of Thelma V. Thomas” as one of the defendants. The address was listed as

unknown. Thus, FFA sought service via publication. On January 18, 2011, FFA filed a

motion for default judgment. This motion was granted by the trial court on January 27, 2011.

An order of sale was filed and issued to the sheriff on February 24, 2011, and the sale was

scheduled for May 20, 2011. 3

{¶ 5} On May 9, 2011, Thomas filed a Civil Rule 60(B) motion to set aside the verdict.

Thomas filed an affidavit stating that he was an heir of Thelma and that his identity had been

known at the time the complaint was filed by FFA. In support of this claim, Thomas alleged that

he had made repeated contact with FFA through its various agents and that FFA was aware of his

current address. Thus, Thomas claimed that he was not properly served. On that same day

Thomas also filed a motion to set aside the upcoming sheriff’s sale. FFA filed its response to

both motions on May 13, 2011. On May 19, 2011, the trial court granted the motion and

cancelled the sale. However, the sheriff’s sale went forward on May 20, 2011, and the real

property was purchased by FFA, even though FFA knew that the sale had been cancelled by the

court. On January 3, 2012, the trial court filed a confirmation of sale. The writ of restitution

was filed on January 31, 2012. On February 22, 2012, Thomas filed his notice of appeal and

raises the following assignments of error.

First Assignment of Error

THE COURT BELOW INCORRECTLY ENTERED THE JUDGMENT ENTRY

AND FORECLOSURE DECREE ON JANUARY 27, 2011.

Second Assignment of Error

THE COURT BELOW ERRED IN NOT RULING UPON AND NOT

ADDRESSING THE TIMELY FILED RULE 60(B) MOTION FILED BY

[THOMAS] ON MAY 9, 2011.

Third Assignment of Error

THE COURT BELOW ERRED IN FILING THE ORDER CONFIRMING SALE

ORDERING DEED AND DISTRIBUTION WITHOUT HAVING FIRST

RULED UPON THE RULE 60(B) MOTION AND WITHOUT HAVING FIRST 4

ORDER[ED] THAT THE SALE OF THE PROPERTY BE RESCHEDULED

AND RE-ADVERTISED.

Fourth Assignment of Error

THE COURT BELOW ERRED IN NOT SETTING ASIDE THE ORDER

CONFIRMING SALE AND ORDERING DEED AND DISTRIBUTION SINCE

SAID ORDER HAD BEEN FILED WITHOUT NOTICE TO [THOMAS’]

COUNSEL; WITHOUT MOTION; AND WITHOUT HAVING PREVIOUSLY

RULED ON PENDING ISSUES BEFORE THE COURT.

Fifth Assignment of Error

THE ORDER GRANTING JUDGMENT AND DECREE OF FORECLOSURE

IS DEFECTIVE, THERE NOT BEING PROPER SERVICE UPON [THOMAS]

AS REQUIRED BY THE OHIO RULES OF CIVIL PROCEDURE; WHICH

FACTS WERE SET FORTH TO THE COURT IN THE RULE 60(B) MOTION

FILED MAY 9, 2011.

In the interests of clarity, the assignments of error will be addressed out of order.

{¶ 6} In the fifth assignment of error, Thomas claims that the trial court erred by

granting the motion for default judgment when he was not properly served. The question of

service is governed by Ohio Civil Rules 3 and 15.

(A) Commencement. A civil action is commenced by filing a complaint with

the court, if service is obtained within one year from such filing upon a named

defendant, or upon an incorrectly named defendant whose name is later corrected

pursuant to Civ.R. 15(C), or upon a defendant identified by a fictitious name

whose name is later corrected pursuant to Civ.R. 15(D). 5

Civ.R. 3(A).

(D) Amendments where name of party unknown. When the plaintiff does not

know the name of a defendant, that defendant may be designated in a pleading or

proceeding by any name and description. When the name is discovered, the

pleading or proceeding must be amended accordingly. The plaintiff, in such case,

must aver in the complaint the fact that he could not discover the name. The

summons must contain the words “name unknown,” and a copy thereof must be

served personally upon the defendant.

Civ.R. 15(D). The Ohio Supreme Court has addressed how these rules are to be applied.

According to its unambiguous language, Civ.R. 15(D) provides that a plaintiff

may designate a defendant in a complaint by any name and description when the

plaintiff does not know the name of that party. Thus Civ.R. 15(D) does not

permit a plaintiff to designate a defendant by a fictitious name when the plaintiff

actually knows the name of that defendant. Further, when a plaintiff designates a

defendant by a fictitious name, Civ.R. 15(D) requires that the plaintiff provide a

description of the defendant in the pleadings and aver in the complaint the fact

that the plaintiff could not discover the name. The rule also directs that the

summons contain the words “name unknown” and be personally served on the

defendant.

Erwin v. Bryan, 125 Ohio St.3d 519, 2010-Ohio-2202, 929 N.E.2d 1019, ¶23.

{¶ 7} In Erwin, the Ohio Supreme Court held that when a plaintiff either knows or

should know the identity of the opposing party, the plaintiff may not list the defendant as

unknown. Id. at ¶40. 6

{¶ 8} Here, FFA filed its complaint alleging that it did not know the identities of any of

the heirs of Thelma. However, the affidavit filed by Thomas in support of his motion affirmed

that he had resided at the real estate in question since 1986. The affidavit stated that FFA had

sent correspondence to Thelma’s estate at that address and that he had responded to the

correspondence by sending paperwork back to its agent in Texas. In addition, the appraiser for

FFA had been to the property and spoken with Thomas. At that time, Thomas personally

advised the appraiser that he was the heir of Thelma and provided the appraiser with his name

and address. A general principle of agency is that a “ ‘principal is chargeable with and bound by

the knowledge of or notice to his agent received by the agent in due course of his employment,

with reference to matters to which his authority extends * * *.' ” State, ex rel. Nicodemus v.

Industrial Commission, 5 Ohio St.3d 58, 60, 448 N.E.2d 1360 (1983) (citation omitted). The

knowledge or notice to the agent is imputed to the principal regardless of whether the agent has,

in fact, communicated his knowledge to his principal. First National Bank v. Burns, 88 Ohio St.

434, 103 N.E. 93 (1913). This evidence is not disputed by FFA. There is no question that FFA

either knew or should have known the identity of Thomas. Thus, Thomas was not an unknown

heir, was not listed on the complaint, and did not receive any service.

{¶ 9} The next question is what the effect is when service is not perfected. The

Supreme Court of Ohio addressed this issue in LaNeve v. Atlas Recycling, Inc., 119 Ohio St.3d

324, 2008-Ohio-3921, 894 N.E.2d 25.

[T]he issue presented in this case is one of a failure to perfect service, which

ultimately affects whether a court has personal jurisdiction over a defendant. The

obligation to perfect service of process is placed only on the plaintiff, and the lack

of jurisdiction arising from want of, or defects in, process or in the service thereof 7

is ground for reversal. Gliozzo v. Univ. Urologists of Cleveland, Inc., 114 Ohio

St.3d 141, 2007-Ohio-3762 * * * (discussing the plaintiff’s obligation to perfect

service); Ohio Elec. Ry. Co. v. United States Express Co. (1922), 105 Ohio St. 331

* * * (discussing the effect of the failure to obtain service). Similarly, it is an

established principle that actual knowledge of a lawsuit’s filing and lack of

prejudice resulting from the use of a legally insufficient method of service do not

excuse a plaintiff’s failure to comply with the Civil Rules. Maryhew v. Yova

(1984), 11 Ohio St.3d 154 * * *; Haley v. Hanna (1915), 93 Ohio St. 49 * * *.

LaNeve, supra at ¶22.

{¶ 10} The result of failing to perfect service is that the action is not commenced. Id. at

¶24. Like the plaintiff in LaNeve, FFA claims that its mistake is nonprejudicial because Thomas

should have known and does not have the money to resolve the issue anyway. These arguments

are irrelevant because the Supreme Court of Ohio has made it very clear that the plaintiff has the

sole burden of perfecting service. If service is not perfected, the trial court lacks personal

jurisdiction over the defendant and the action is not commenced. Thomas’ Civ.R. 60(B) motion

alleged that service was not perfected on him. At the conclusion of the case, the trial court had

not ruled on this motion. When a trial court has not ruled on a motion prior to the conclusion of

the case, the motion is deemed overruled. Thornton v. Conrad, 194 Ohio App.3d 34,

2011-Ohio-3590, 954 N.E.2d 666 (8th Dist.). Since the motion was not ruled upon, the trial

court is deemed to have overruled it. Thus, this court has the jurisdiction to review that

judgment. A review of the record shows that FFA did not perfect service on Thomas because he

was not an unknown heir, but was a known heir. The result is that the action was not 8

commenced. Therefore, the judgment of the trial court granting default judgment and all

judgments stemming from that judgment are void.

{¶ 11} This court also notes that FFA is the only party injured by this ruling. FFA is the

one that erred in drafting the complaint. FFA is the party that purchased the real estate knowing

that the sale had been cancelled by the court. If it has suffered additional injury, it has only itself

to blame. The fifth assignment of error is sustained.

{¶ 12} Having found that the trial court lacked jurisdiction to grant the order of

foreclosure, the remaining assignments of error are moot. Thus, they will not be addressed.

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

FAIN and FROELICH, JJ., concur.

(Hon. John R. Willamowski, Third District Court of Appeals, sitting by assignment of the Chief Justice of the Supreme Court of Ohio).

Copies mailed to:

Bill L. Purtell Ronald D. Keener Mathias H. Heck / George Patricoff Hon. Dennis J. Adkins

Case Name: Financial Freedom Acquisition LLC v. The Unknown Heirs of Thelma V. Thomas, et al. Case No: Montgomery App. No. 25047 Panel: Fain, Froelich, Willamowski Author: John R. Willamowski Summary: