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 Tutin, alleging Tutin defaulted on a mortgage note on property in Peninsula, Ohio. The complaint was amended to add Tutin’s former wife, Laura Lynch, because she held a life estate in the property. The trial court ruled that Bankers Trust’s mortgage had priority over Lynch’s life estate. Lynch appealed the ruling twice, but each was dismissed because the court had not entered a final, appealable order. During these two appeals, Lynch obtained a stay of the trial court’s judgment preventing disbursement of the sale proceeds. After dismissal of the second appeal, however, the stay expired and the sheriff disbursed the proceeds to Bankers Trust. Lynch then appealed the trial court’s final order and its failure to order Bankers Trust to return the sale funds.
The Court of Appeals followed what it described as a “well-established principle of law” and dismissed Lynch’s appeal as moot. It pointed to Ohio cases holding that satisfaction of a judgment renders an appeal from that judgment moot. Here, satisfaction of the judgment took the form of the sheriff releasing the foreclosure sale receipts. The court did not address the difference between this type of “bureaucratic” judgment satisfaction and judgment satisfaction voluntarily given by a private party.
As the court noted, but found unpersuasive, several recent Ohio appellate decisions preserved a remedy for appellants after foreclosure sale proceeds were distributed. See e.g. LaSalle Bank v. Murray. The contrary cases focused on Ohio Revised Code 2329.45, which states: “If a [foreclosure judgment] is reversed, such reversal shall not…affect the title of the purchaser. In such case restitution must be made by the judgment creditor of the money for which such lands…were sold.” [emphasis added] The Bankers Trust court found that these decisions improperly extended 2329.45 to post-disbursement situations, and held that the statute only addresses situations where a stay has prevented disbursement of sale funds. This argument seems to belie the explicit language of 2329.45, however, which refers to restitution by a judgment creditor, who could only hold proceeds following distribution from the sheriff.
Whether or not the Bankers Trust decision is upheld on appeal (questionable given the case law and 2329.45) should be of great interest to mortgage lenders. If the decision endures, lenders may point to a clear end-goal of disbursement, rather than concerning themselves with the outcome of subsequent appeals.