[Cite as First Place Bank v. Hersh Constr., Inc., 2011-Ohio-1790.]
COURT OF APPEALS STARK COUNTY, OHIO FIFTH APPELLATE DISTRICT
: JUDGES: FIRST PLACE BANK : Julie A. Edwards, P.J. : William G. Hoffman, J. Plaintiff-Appellee : Patricia A. Delaney, J. : -vs- : Case No. 2010CA00074 : : HERSH CONSTRUCTION, INC, et al. : OPINION
Defendant-Appellant
CHARACTER OF PROCEEDING: Civil Appeal from Stark County Court of Common Pleas Case No. 2009-CV-00745
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: April 11, 2011
APPEARANCES:
For Plaintiff-Appellee For Defendant-Appellant
DAVID A. FREEBURG JEROME W. COOK McFadden & Freeburg Co., L.P.A. ERIN K. WALSH 1370 Ontario Street, Suite 600 McDonald Hopkins LLC Cleveland, Ohio 44113 600 Superior Avenue, E., Suite 2100 Cleveland, Ohio 44114-2653
DAVID J. WOLFE, JR. 185 East Market Street Warren, Ohio 44481-1102 [Cite as First Place Bank v. Hersh Constr., Inc., 2011-Ohio-1790.]
Edwards, P.J.
{¶1} Defendant-appellant, Ohio Farmers Insurance Company, appeals from the
March 5, 2010, and March 12, 2010, Judgment Entries of the Stark County Court of
Common Pleas.
STATEMENT OF THE FACTS AND CASE
{¶2} On or about May 5, 2004, Northern Valley Contractors, Inc. executed a
contract with Danbury Glen Estates, Inc. Pursuant to the terms of the contract, Northern
Valley agreed to provide construction-related services for a private construction project
which was known as Danbury Glen Estates Subdivision. Northern Valley specifically
contracted to develop the streets and sanitary sewer system for the subdivision.
{¶3} On July 15, 2004, Danbury Glen Estates, Inc., through its President, John
Hershberger, executed an open end mortgage and security agreement with Fifth Third
Bank, the mortgagee. The mortgage stated that the borrower was indebted to Fifth Third
Bank pursuant to “the Construction Loan and Security Agreement of even date
herewith, by and between Borrower and Bank…” The mortgage was recorded in the
Stark County Recorder’s Office on July 29, 2004, at 2:23 p.m. and was assigned
Instrument No. 200407290054653.
{¶4} On July 29, 2004, at 2:23 p.m., a Notice of Commencement under R.C.
Section 1311.04 was recorded in the Stark County Recorder’s Office as Instrument
20047290054658. John Hershberger, the President of Danbury Glen Estates, had
signed the same on July 15, 2004. The Notice of Commencement stated, in relevant
part, as follows: “Brief description of the improvements to be performed upon the
property containing sufficient specificity to permit lien claimants to identify the Stark County App. Case No. 2010CA00074 3
improvement: Development of 96 acres to be known as Phases I and II of Danbury
Glen Estates Subdivision located in Hartville, Stark County, Ohio.”
{¶5} Subsequently, on or about March 6, 2006, Danbury Glen Estates, Inc.
conveyed 24 lots to Hersh Construction, Inc. To finance the purchase of the lots, Hersh
Construction obtained a loan from appellee First Place Bank in the amount of
$1,293,840.00. As security for the loan, Hersh Construction executed and delivered to
appellee First Place Bank a mortgage interest in the lots. Such mortgage was recorded
in the Stark County Recorder’s Office on March 6, 2006. From the proceeds of the
note, appellee First Place Bank paid off the Fifth Third Bank mortgage from Danbury
Glen Estates, Inc.
{¶6} On February 28, 2007, Northern Valley Contractor’s Inc., which had
continued performing work on the Danbury Glen Subdivision project, filed a mechanic’s
lien. The lien was later assigned to appellant Ohio Farmers Insurance Company.
{¶7} On August 15, 2008, Danbury Glen Estates, Inc. filed a complaint against
Northern Valley Contractor’s Inc., (Stark County Common Pleas Court Case No. 2008
CV 03574) challenging the validity of the mechanic’s lien. A Stipulated Judgment Entry
was filed in such case on May 6, 2009. The Stipulated Judgment Entry stated, in
relevant part, as follows:
{¶8} “2. The Ohio Rules of Civil Procedure 36 Admissions provided by Danbury
Glen Estates, Inc., Danbury Glen Estates, LLC, and Hersh Construction, Inc., in
response to the Joint Request for Admissions propounded to each Defendant by
Northern Valley Contractors, Inc. (‘NVC’) and Defendant/Counterclaimant Ohio Farmers
are incorporated herein by reference as factual stipulations, as if fully set forth herein, Stark County App. Case No. 2010CA00074 4
(the ‘Factual Stipulations’). These admissions have been contemporaneously filed with
the Court as part of the record of this case and in support of this Stipulated Judgment
Entry.
{¶9} “3. Plaintiffs Danbury Glen Estates, Inc., Danbury Glen Estates, LLC, and
Hersh Construction, Inc. stipulate that these Factual Stipulations shall be binding upon
them, their successors and assigns, in any other proceeding and hereby waive any Rule
36(B) objections to the contrary.
{¶10} “4. Plaintiffs Danbury Glen Estates, Inc., Danbury Glenn Estates, LLC, and
Hersh Construction, Inc. stipulate that Defendant/Counterclaimant Ohio Farmers may
file this Stipulated Judgment in any other proceeding as res judicata concerning the
Factual Stipulations and the matters of the debt owed by the parties as set forth herein
and relevant to the validity of Defendant NVC’s Mechanic’s Lien (see below) and Ohio
Farmers’ rights thereunder.
{¶11} “6. The Mechanic’s Lien, recorded in the name of NVC on February 28,
2007, as Stark County Instrument No. 200702280010773, is declared to be a valid and
subsisting lien upon all of the land described therein (the ‘Mechanic’s Lien’). The
effective date of the Mechanic’s Lien is July 29, 2004, 2:23:10 P.M., the time and when
the Notice of Commencement was recorded as Stark County Recorder’s Instrument No.
200407290054658. Ohio Farmers is hereby declared the sole owner of the Mechanic’s
Lien.”
{¶12} Thereafter, on February 23, 2009, appellee First Place Bank filed a
complaint in foreclosure, seeking, in part, to foreclose on its mortgage. Appellee First
Place, in its complaint, alleged that it held the first and best lien on 19 lots of real Stark County App. Case No. 2010CA00074 5
property located in the Danbury Glen Estates Subdivision. After its Motion to Intervene
was granted, appellant Ohio Farmers Insurance Company, on April 17, 2009, filed an
answer and affirmative defenses. Appellant, in its affirmative defenses, alleged that its
“Mechanic’s Lien was timely recorded and served pursuant to Ohio R.C. [Section]
1311.06 and [Section] 1311.07, and its effective date related back to the date of the
recording of the Notice of Commencement, which was July 29, 2004. Thus, Ohio
Farmer’s Mechanic’s Lien constitutes the first and best lien on the real property with
priority over all other liens that are the subjects of Plaintiff’s Complaint.”
{¶13} Appellant Ohio Farmer Insurance Company filed a Motion for Summary
Judgment on February 17, 2010. Appellant, in its motion, argued that its mechanic’s lien
was a valid and subsisting first and best lien on the property. On the same day, appellee
First Place Bank filed a Motion for Summary Judgment arguing, in part, that its
mortgage was entitled to priority.
{¶14} Pursuant to a Judgment Entry filed on March 5, 2010, the trial court
granted appellee’s Motion for Summary Judgment while overruling that filed by
appellant. The trial court held that that the mortgage held by appellee was superior to
the mechanic’s lien held by appellant. A Judgment Entry and Decree in Foreclosure
was filed on March 12, 2010.
{¶15} Appellant now raises the following assignments of error on appeal:
{¶16} “I. THE TRIAL COURT ERRED WHEN IT DENIED APPELLANT OHIO
FARMERS INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT AND
FAILED TO CONFER PRIORITY TO APPELLANT’S OHIO R.C. §1311.13(F). Stark County App. Case No. 2010CA00074 6
{¶17} “II. THE TRIAL COURT IMPROPERLY GRANTED SUMMARY
JUDGMENT TO APPELLEE FIRST PLACE BANK WHEN IT DETERMINED THAT
APPELLEE’S MORTGAGE WAS ENTITLED TO PRIORITY OVER APPELLANT’S
MECHANIC’S LIEN PURSUANT TO OHIO R.C. §1311.14.
{¶18} “III. THE TRIAL COURT ERRORNEOUSLY (SIC) ASSIGNED A JUNIOR
PRIORITY STATUS TO APPELLANT’S MECHANIC’S LIEN AND A SENIOR, FIRST
AND BEST LIEN PRIORITY TO FIRST PLACE’S MORTGAGE IN THE MARCH 12,
2010 JUDGMENT ENTRY AND DECREE OF FORECLOSURE.”
I, II
{¶19} Appellant, in its first and second assignments of error, argues that the trial
court erred when it overruled appellant’s Motion for Summary Judgment and granted
summary judgment to appellee, holding that appellee’s mortgage was entitled to priority
over appellant’s mechanic’s lien pursuant to R.C. 1311.14. We disagree.
{¶20} Summary judgment proceedings present the appellate court with the
unique opportunity of reviewing the evidence in the same manner as the trial court.
Smiddy v. The Wedding Party, Inc. (1987), 30 Ohio St.3d 35, 36, 506 N.E.2d 212. As
such, we must refer to Civ.R. 56 which provides, in pertinent part: “* * * Summary
judgment shall be rendered forthwith if the pleadings, depositions, answers to
interrogatories, written admissions, affidavits, transcripts of evidence in the pending
case and written stipulations of fact, if any, timely filed in the action, show that there is
no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law. * * * A summary judgment shall not be rendered unless it
appears from such evidence or stipulation and only therefrom, that reasonable minds Stark County App. Case No. 2010CA00074 7
can come to but one conclusion and that conclusion is adverse to the party against
whom the motion for summary judgment is made, such party being entitled to have the
evidence or stipulation construed most strongly in the party's favor. * * * ”
{¶21} Pursuant to the above rule, a trial court may not enter a summary
judgment if it appears a material fact is genuinely disputed. The party moving for
summary judgment bears the initial burden of informing the trial court of the basis for its
motion and identifying those portions of the record that demonstrate the absence of a
genuine issue of material fact. The moving party may not make a conclusory assertion
that the non-moving party has no evidence to prove its case. The moving party must
specifically point to some evidence which demonstrates the non-moving party cannot
support its claim. If the moving party satisfies this requirement, the burden shifts to the
non-moving party to set forth specific facts demonstrating there is a genuine issue of
material fact for trial. Vahila v. Hall, 77 Ohio St.3d 421, 429, 1997-Ohio-259, 674 N.E.2d
1164, citing Dresher v. Burt, 75 Ohio St.3d 280, 1996-Ohio-107, 662 N.E.2d 264.
{¶22} At issue in the case sub judice is whether or not appellant Ohio Farmer’s
Insurance Company mechanic’s lien has priority over the mortgage lien held by
appellee First Place Mortgage.
{¶23} Appellant, in his brief, argues that R.C. 1311.13(A)(2) applies and that the
trial court erred in failing to confer priority to appellant’s mechanic’s lien “as mandated
by Ohio R.C. 1311.13(F).”
{¶24} R.C. 1311.13(A)(2) states as follows: “(2) Except as provided in division
(A)(3) of this section, liens under sections 1311.01 to 1311.22 of the Revised Code for
labor or work performed or materials furnished after the recording of a notice of Stark County App. Case No. 2010CA00074 8
commencement pursuant to section 1311.04 of the Revised Code are effective from the
date of the recording of the notice of commencement.” In turn, R.C. 1311.13(F)
provides that “[l]iens which have an effective date described in division (A)(2) of this
section shall be preferred to all other titles, liens, or encumbrances which may attach to
or upon such improvement or to or upon the land upon which it is situated, which either
are given or recorded subsequent to the recording of the notice of commencement.”
Thus, if R.C. 1311.13(A)(2) applied, the mechanic’s lien, with effective date of July 29,
2004, (the date the Notice of Commencement was filed) would have priority over the
mortgage lien held by appellee First Place Mortgage, which was recorded on March 6,
2006.
{¶25} Appellee’s position is that R.C. 1311.14, not R.C. 1311.13 applies in the
case sub judice. Where a mortgagee substantially adheres to the provisions of R.C.
1311.14, it serves to negate R.C. 1311.13, and give priority to an after-recorded
mortgagee. Highland Sav. Ass'n. v. Clinton Constr. Co. (June 28, 1976), Clinton County
App. No. 311, 1976 WL 189219. See also Barr v. Masterpiece Homes (July 21, 1994),
Cuyahoga App. No. 65835, 1994 WL 385998. See also R.C. 1311.14(C) which states
that ‘[t]his section, as to mortgages contemplated by this section controls over all other
sections of the Revised Code relating to mechanic’s … and all liens that can be had
under this chapter.” R.C. 1311.14, the construction mortgage statute, thus controls
when a construction mortgage is at issue.
{¶26} R.C. 1311.14, the construction mortgage statute, gives a construction
mortgage priority over mechanic's liens although the mortgage was recorded Stark County App. Case No. 2010CA00074 9
subsequent to the effective date of the mechanic's liens. Guernsey Bank v. Milano
Sports Enters, LLC, 177 Ohio App.3d 314, 2008-Ohio-2420, 894 N.E.2d 715.
{¶27} R.C. 1311.14(A) states as follows: “Except as provided in this section, the
lien of a mortgage given in whole or in part to improve real estate, or to pay off prior
encumbrances thereon, or both, the proceeds of which are actually used in the
improvement in the manner contemplated in sections 1311.02 and 1311.03 of the
Revised Code, or to pay off prior encumbrances, or both, and which mortgage contains
therein the correct name and address of the mortgagee, together with a covenant
between the mortgagor and mortgagee authorizing the mortgagee to do all things
provided to be done by the mortgagee under this section, shall be prior to all
mechanic's, material supplier's, and similar liens and all liens provided for in this chapter
that are filed for record after the improvement mortgage is filed for record, to the extent
that the proceeds thereof are used and applied for the purposes of and pursuant to this
section. Such mortgage is a lien on the premises therein described from the time it is
filed for record for the full amount that is ultimately and actually paid out under the
mortgage, regardless of the time when the money secured thereby is advanced.”
(Emphasis added). While appellant contends that R.C. 1311.14 “contemplates that only
mortgages given towards the completion of improvements are entitle to priority,” as
noted by appellee, the language in R.C. 1311.14 allows mortgages which pay off prior
encumbrances to obtain priority over after recorded mechanic’s liens.
{¶28} As noted by the court in Guernsey, “Thus, a mortgage used to finance
improvements or pay off prior encumbrances in compliance with R.C. 1311.14 has Stark County App. Case No. 2010CA00074 10
priority over any mechanic's liens, even if the mortgage is filed after the first visible work
or labor is performed or the first materials are furnished.” Id at paragraph 57.
{¶29} In the case sub judice, appellee First Place’s Mortgage was recorded on
March 6, 2006, whereas appellant’s mechanic’s lien was filed for record on February 28,
2007. Appellee First Place’s Mortgage was, therefore, filed for record prior to the
mechanic’s lien. Appellant argues that the mechanic’s lien, however, had an effective
date of July 29, 2004.
{¶30} Appellant claims that we must determine whether or not appellee Fifth
Third Bank’s mortgage or appellant’s mechanic’s lien was filed for record first.1
Appellant contends that even if appellee First Place Mortgage was entitled to R.C.
1311.14 priority, “it could only be superior to Ohio Farmer’s Mechanic’s Lien if the prior
encumbrance (i.e., the Fifth Third Mortgage) was recorded earlier than the NOC [Notice
of Commencement].” Assuming arguendo that this is a relevant consideration, we shall
address which was filed first. The Fifth Third Bank mortgage was recorded in the Stark
County Recorder’s Office on July 29, 2004 at 2:23 p.m. and was assigned Instrument
No. 200407290054653. The Notice of Commencement upon which the mechanic’s lien
is based was filed on July 29, 2004 at 2:23 p.m. and was recorded in the Stark County
Recorder’s Office as Instrument 20047290054658, which is a higher number.
{¶31} R.C. 317.12 states, in relevant part, as follows: “Upon the presentation of
a deed or other instrument of writing for record, the county recorder shall indorse
thereon the date, the precise time of its presentation, and a file number. Such file
numbering shall be consecutive and in the order in which the instrument of writing is
1 We note that appellant, at the oral argument in this case, conceded that if we would find that the Fifth Third Bank Mortgage was filed first, appellant would lose his appeal. Stark County App. Case No. 2010CA00074 11
received for record, except financing statements, which shall have a separate series of
file numbers and be filed separately, as provided by sections 1309.501 to 1309.527 of
the Revised Code.” (Emphasis added). R.C. 317.13 provides, in relevant part, as
follows: “(A) Except as otherwise provided in division (B) of this section, the county
recorder shall record in the proper record, in legible handwriting, typewriting, or printing,
or by any authorized photographic or electronic process, all deeds, mortgages, plats, or
other instruments of writing that are required or authorized by the Revised Code to be
recorded and that are presented to the recorder for that purpose. The recorder shall
record the instruments in regular succession, according to the priority of presentation,
and shall enter the file number at the beginning of the record. On the record of each
instrument, the recorder shall record the date and precise time the instrument was
presented for record.”
{¶32} Pursuant to such sections, “the county recorder has the ministerial duty of
recording instruments in regular succession, according to the priority of presentation,
giving each instrument a file or transaction number, awarded in consecutive order, and
noting the date and precise time the instrument was presented for record.” Ohio
Attorney General Opinion 99-014 at 7.
{¶33} “Ohio law does not make either the time stamp or the file or transaction
number placed on an instrument presented for record pursuant to RC 317.12 and
317.13 conclusive for purposes of determining priorities among recorded instruments.”
Id. As noted by Ohio Attorney General under the statutes, it appears that, if the date and
time on two or more instruments are the same, the one with the lower transaction
number will have been stamped first. As a general principle, the information endorsed Stark County App. Case No. 2010CA00074 12
by the recorder may be considered prima facie evidence of the time and order of filing.
Should a controversy arise in a particular case, however, the parties may be permitted
to present evidence to show that the “instruments were in fact presented for filing at a
different time or in a different order than is reflected in the date and time stamps or the
transaction numbers given the instruments by the county recorder pursuant to R.C.
317.12 and R.C. 317.13.” Id. at 6-7.
{¶34} As is stated above, the Fifth Third mortgage was recorded in the Stark
County Recorder’s Office on July 29, 2004, at 2:23 p.m. and was assigned Instrument
No. 200407290054653 and, on the same date and at the same time, the Notice of
Commencement was recorded in the Stark County Recorder’s Office as Instrument
20047290054658. Thus, the Fifth Third Mortgage was filed first. Appellant has not
presented any evidence “that the instruments were in fact presented for filing at a
different time or in a different order.” We find, therefore, that the Fifth Third mortgage
was a “prior encumbrance” on the property that was filed prior to the mechanic’s lien.
{¶35} The question thus becomes whether or not appellee First Place’s
mortgage was used to pay off a “prior encumbrance.”
{¶36} In the case sub judice, the undisputed evidence shows that $1,245,650.00
of appellee First Place Bank’s mortgage was used to pay off the Fifth Third Bank
mortgage. The HUD-1 Settlement statement for appellee First Place’s mortgage, which
is attached to appellee’s Motion for Summary Judgment as Exhibit P, and the Loan
Payoff from Fifth Third, which is attached to appellee’s Motion for Summary Judgment
as Exhibit Q, show that $1,245,650.00 of the First Place mortgage was used to pay-off
the Fifth Third mortgage. As noted by the trial court, appellant failed to present any Stark County App. Case No. 2010CA00074 13
evidence that such pay off did not occur. The Fifth Third Bank mortgage was a
construction loan against the subject property. As is stated above, the mortgage
specifically stated on its face the borrower was indebted to Fifth Third Bank pursuant to
“the Construction Loan and Security Agreement…” On the Notice of Commencement,
Fifth Third Bank is identified as providing financing for improvements to the Danbury
Glen Estates project.
{¶37} Based on the foregoing, we find that the Fifth Third Bank mortgage was a
prior encumbrance on the property and was also filed prior to the mechanic’s lien and
that appellee First Place Bank mortgage was used to pay off the same. We further find
that, therefore, the trial court did not err in holding that appellee First Place Bank’s
mortgage had priority over appellant’s mechanic’s lien and in granting summary
judgment in favor of appellee while overruling appellant’s Motion for Summary
Judgment.
{¶38} In short, upon our review of the record, we find that the trial court did not
err in granting summary judgment in favor of appellee First Place Bank. We concur with
the trial court that the record establishes that appellee has met the requirements set
forth in R.C. 1311.14 and is entitled to the benefit of R.C. 1311.14 and that its mortgage
takes priority over appellant’s mechanic’s lien.
{¶39} Appellant’s first and second assignments of error are, therefore, overruled.
III
{¶40} Appellant, in its third assignment of error, argues that the trial court erred,
in its March 12, 2010 Judgment Entry and Decree of Foreclosure, in assigning a junior Stark County App. Case No. 2010CA00074 14
priority status to appellant’s mechanic’s lien and a senior, first and best lien priority to
appellee’s mortgage.
{¶41} This Court, in addressing appellant’s first and second assignments of
error, held that the trial court did not err in holding that appellee’s mortgage had priority
over appellant’s mechanic’s lien. We find, therefore, that the trial court did not err when,
in its March 12, 2010 Judgment Entry and Decree of Foreclosure, it assigned a lower
priority status to appellant’s mechanic’s lien.
{¶42} Appellant’s third assignment of error is, therefore, overruled.
{¶43} Accordingly, the judgment of the Stark County Court of Common Pleas is
affirmed.
By: Edwards, P.J.
Hoffman, J. and
Delaney, J. concur
______________________________
JUDGES
JAE/d1015 [Cite as First Place Bank v. Hersh Constr., Inc., 2011-Ohio-1790.]
IN THE COURT OF APPEALS FOR STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
FIRST PLACE BANK : : Plaintiff-Appellee : : : -vs- : JUDGMENT ENTRY : HERSH CONSTRUCTION, INC., et al. : : Defendant-Appellant : CASE NO. 2010CA00074
For the reasons stated in our accompanying Memorandum-Opinion on file, the
judgment of the Stark County Court of Common Pleas is affirmed. Costs assessed to
appellant.
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