Imagine purchasing a brand new home, only to discover it has a persistent rotten egg smell. On top of that, your new appliances mysteriously stop working and the home’s copper wiring turns black. It sounds like a nightmare, but for those in Florida and other southern states whose homes contain defective Chinese drywall, it is reality.
Although
Ohio’s Ninth District Court of Appeals dismissed an appeal from a foreclosure judgment in March after ruling that the disbursement of sheriff sale proceeds rendered the appeal moot. In Bankers Trust Company of California v. Tutin, 2009 Ohio 1333 (9th Dist. Ct. App. 2009), Bankers Trust filed a complaint for foreclosure against Barry
A tenant always prefers an SNDA so that if the landlord’s lender forecloses, the lender will have to respect the tenant’s lease. But if the landlord files bankruptcy, or if the lender causes the landlord to file bankruptcy, the landlord can reject the tenant’s lease anyway thereby subjecting the tenant to the very risk it
In U.S. Bank National Association v. Gullotta, 120 Ohio St 3d 399, the Ohio Supreme Court decided that multiple actions under the same note and mortgage are subject to the two-dismissal rule and res judicata preclusion. The decision could have far-reaching implications for lenders seeking to workout loans with troubled borrowers.
The history of the case is important to understanding its impact. In June 2003, Giuseppe Gullotta entered into a note and mortgage with MILA, Inc., which assigned the note to U.S. Bank. In April 2004, U.S. Bank filed a foreclosure complaint for the total principal due on the note, plus interest from November 1, 2003. It voluntarily dismissed this complaint in June 2004. In September 2004, U.S. Bank filed a second identical complaint, except with interest running from December 1, 2003, which it also voluntarily dismissed in March 2005. In October 2005, U.S. Bank filed a third foreclosure complaint on Gullotta’s note and mortgage. After Gullotta filed a motion to dismiss, U.S. Bank amended its complaint to seek interest only from April 1, 2005 (the first missed payment date after its second dismissal).
Ohio Civil Procedure Rules state that “a notice of dismissal operates as an adjudication on the merits of any claim that the plaintiff has once dismissed in any court.” A second dismissal is with prejudice and res judicata preclusion takes effect. Under a res judicata analysis, any claim “arising out of the transaction or occurrence that was the subject matter of the previous action” is barred.
The Court held that each missed payment under the same note and mortgage does not give rise to a new claim, and therefore U.S. Bank’s two earlier dismissals precluded a third action. It premised this holding on four critical facts: 1) the underlying note and mortgage never changed, 2) the bank accelerated the payment upon initial default and demanded the same principal payment in every complaint, 3) Gullotta never made another payment after his initial default, and 4) U.S. Bank never reinstated the loan.
Continue Reading Ohio Lenders Precluded from Bringing Third Complaint on Same Note
How low will they go?
Bending to market pressures, Cuyahoga County Auditor Frank Russo recently announced that the County’s 2009 valuation update will likely result in significant decreases in the County’s assessed value of residential homes – with an 8% average reduction across the County.
The media reports note that the State intends to compare Mr. Russo’s proposed values to the actual sales figures from each community and will ultimately approve new fair market values likely between 92% to 94% of the fair market value. The State’s suggestion of a 6% to 8% discount off of the appraised fair market value is really aimed at those properties that have not been recently sold. This “discount” should not be applicable to those non-residential properties where there was a recent arm’s length sale of the property.
School districts (when the sale exceeds the current assessed value) and property owners (when the sale is below the assessed value) actively seek adjustment of the market value of the non-residential properties to an amount equal to the purchase price. The Ohio Supreme Court has held that the purchase price paid in an arm’s length sale is the best indication of the fair market value of real property.
The Auditor’s decision to seek an 8% average reduction in value comes at the close of the property tax complaint filing season which ended March 31. In Cuyahoga County alone, a reported 17,000 decrease complaints were filed at the Cuyahoga County Board of Revision with respect to the 2008 tax year. Compared to the record 10,000 decrease filings last year with respect to the 2007 tax year, the 2008 “off-year” filings (the last year of the 2006-2008 triennium) are extremely notable.
Two foreclosure related bills of great interest to both borrowers and lenders were introduced in the Ohio House of Representatives in February but are moving slowly, if at all, through the legislative process. One of the bills is too bold to have a serious shot at getting signed by Governor Strickland, but the other is modest enough that it may pass.
House Bill 3, the more sweeping of the two, has languished in the Housing and Urban Revitalization Committee. At a very basic level, the bill would:
1. Impose a six-month foreclosure moratorium, during which a court could not hear or issue judgment on a foreclosure complaint. The moratorium loses a bit of its teeth, however, as a mortgagee an petition the court to proceed with the action if a borrower is more than thirty days late on a payment during the moratorium.
2. Establish new filing requirements for residential foreclosure complaints, including certain notices to be given to borrowers by loan servicers, a statement of mortgage information (including the identity of the note holder), an appraisal, and a $1,500 filing fee.
3. Allow common pleas judges to modify mortgage terms, including principal amount, in residential foreclosures if the judge determines the modification would benefit both parties.
4. Require mortgage loan servicers to register with the state and be subject to extensive regulation and oversight.
5. Establish a loan modification program, run by the Director of Commerce, which would allow borrowers to modify loans when a modification would result in a greater recovery to the lender than a foreclosure.
The drastic nature of HB 3, particularly the mortgage modification provisions, has led to strenuous opposition and even promises of constitutional challenges (and here) should it pass. While the bill as a whole likely won’t move much further, it wouldn’t be surprising to see small pieces of it come up for a vote. If any significant portion of HB 3 passes, lenders will be faced with sharply increased mortgage-related operating costs. They would need to quickly develop processes to determine which distressed properties are eligible for the moratorium bypass and whether the $1500 filing fee makes a workout preferable to foreclosure on a given property.
Effective June 1, 2009 all residential properties (single family homes, condominium units and buildings with up to four units) in Cook County, Illinois will become subject to the amendments to the Illinois Notary Public Act contained in Illinois Public Act 095-0988 (the "Act") in an effort to combat mortgage fraud in Illinois residential real estate transactions.