Fannie Mae v. Hicks

[Cite as Fannie Mae v. Hicks, 2016-Ohio-8484.]
[Please see vacated opinion at 2016-7483.]

Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION
No. 103804

FANNIE MAE
PLAINTIFF-APPELLANT

vs.

LYNDA L. HICKS, ET AL.
DEFENDANTS-APPELLEES

JUDGMENT:
REVERSED AND REMANDED

Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-11-746293

BEFORE: Stewart, J., Keough, P.J., and Boyle, J.

RELEASED AND JOURNALIZED: December 29, 2016
ATTORNEYS FOR APPELLANT

John E. Codrea
David B. Bokor
Matthew P. Curry
Matthew J. Richardson
Justin M. Ritch
Manley, Deas & Kochalski, L.L.C.
P.O. Box 165028
Columbus, OH 43216

ATTORNEYS FOR APPELLEE

John Wood
281 Corning Drive
Bratenahl, OH 44108

Stephen D. Williger
Thompson & Hine, L.L.P.
3900 Key Center
127 Public Square
Cleveland, OH 44114

Also Listed:

Unknown spouse of Lynda L. Hicks, pro se
1244 Adams Street
Fairborn, OH 45324
ON RECONSIDERATION1

MELODY J. STEWART, J.:

{¶1} Plaintiff-appellant Federal National Mortgage Association (“Fannie Mae”)

appeals a trial court order that simultaneously denied its Civ.R. 60(B)(4) motion to vacate

a foreclosure sale while requiring that it pay $110,000 in restitution to defendant-appellee

Lynda Hicks pursuant to R.C. 2329.45. For the reasons that follow, we reverse the

decision of the trial court.

{¶2} The facts of this case involve a prior appeal, Fannie Mae v. Hicks,

2015-Ohio-1955, 35 N.E.3d 37 (8th Dist.). In that case, Hicks executed loan documents

(a note and mortgage) with All American Home Lending, Inc. in 2004 to finance the

purchase of a home in the city of Shaker Heights. All American later assigned the

mortgage to Chase Manhattan Mortgage Corporation. When Hicks failed to make

payments on the note, Chase Manhattan accelerated the loan and assigned the mortgage to

Fannie Mae.

{¶3} Fannie Mae brought a foreclosure action against Hicks. In the complaint,

Fannie Mae alleged that it was assigned the subject mortgage and was a “person entitled

to enforce the note.” Fannie Mae attached copies of the note and mortgage to the

The original announcement of decision, Fannie Mae v. Hicks, 8th Dist. Cuyahoga No.
1

103804, 2016-Ohio-7483, released October 27, 2016, is hereby vacated. This opinion, issued upon
reconsideration, is the court’s journalized decision in this appeal. See App.R. 22(C); see also
S.Ct.Prac.R. 7.01.
complaint, along with an allonge containing a special endorsement of the note from Chase

Manhattan to Fannie Mae. During the course of litigation, Fannie Mae amended its

complaint twice to reflect the fact that the original note executed by Hicks in favor of All

American was lost by Chase Manhattan before it was purchased by Fannie Mae. Despite

this irregularity, Fannie Mae moved for summary judgment in the foreclosure action. In

its motion for summary judgment, Fannie Mae conceded that it was not entitled to enforce

the lost note under R.C. 1308.38, but nevertheless argued that it was entitled to foreclose

on the property by virtue of the mortgage assignment alone. Hicks filed a motion for

summary judgment arguing that she was entitled to judgment as a matter of law because

Fannie Mae conceded it could not enforce the note and the ability to enforce the note is a

prerequisite to establishing one’s right to foreclose. The trial court granted Fannie Mae’s

motion and denied Hicks’s motion. Hicks appealed.

{¶4} On appeal, this court concluded that the assignment of the mortgage alone

was insufficient to sustain an action in foreclosure and that Fannie Mae must also be a

person entitled to enforce the note in order to foreclose on the property.2 The panel of

this court further concluded that Chase Manhattan retained authority to enforce the note

as the last party in possession of the note before it was lost. The grant of summary

judgment in favor of Fannie Mae was reversed, and the case remanded to the trial court

with instructions to enter summary judgment in favor of Hicks.

The Ohio Supreme Court recently affirmed this point of law in Deutsche Bank Natl. Trust
2

Co. v. Holden, 147 Ohio St.3d 85, 2016-Ohio-4603, 60 N.E.3d 1243, ¶ 27.
 {¶5} While the resolution of the appeal was pending in this court, the trial court

proceeded with the foreclosure sale. In December 2014, Fannie Mae purchased the

property for a $110,000 credit bid3 and the sale was confirmed. Hicks neither requested

a stay of the confirmation proceedings nor appealed the confirmation order to this court.

However, Hicks did move the trial court for a stay of the distribution of the sale proceeds

pending our decision on the foreclosure action. The court denied the motion, and Hicks

did not seek any further stays. This court issued its decision in May 2015. One week

after the decision, Fannie Mae was issued the deed to the property. The deed was

recorded on June 12, 2015.

{¶6} Following the release of this court’s decision, Hicks filed a proposed

judgment entry with the trial court that sought to have the court order Fannie Mae to pay

her restitution in the amount of $110,000, the foreclosure purchase price of the property,

pursuant to R.C. 2329.45, and dismiss the foreclosure action with prejudice. Fannie Mae

opposed the proposed order and asked the court to vacate the confirmation of sale and

deed pursuant to Civ.R. 60(B)(4), which allows a court to vacate a judgment when “the

judgment has been satisfied, released or discharged, or a prior judgment upon which it is

based has been reversed or otherwise vacated, or it is no longer equitable that the

judgment should have prospective application.” In its Civ.R. 60(B) motion for relief

A credit bid allows a secured judgment creditor to bid on property up to the amount of the
3

debt owed, in lieu of making a cash bid. See, e.g., Benchmark Bank v. Weaver, Franklin C.P. No.
13 CV 011809, 2014 Ohio Misc. LEXIS 9815 (June 2, 2014); see In Re Philadelphia Newspapers,
L.L.C., 599 F.3d 298 (3d Cir.2010).
from judgment, Fannie Mae emphasized that the balance of equities required the court to

vacate the confirmation of sale so that Fannie Mae can return title of the property to

Hicks, rather than order restitution in the amount of the purchase price, because the latter

remedy would result in a windfall to Hicks. Additionally, Fannie Mae argued that an

order of restitution was improper under R.C. 2329.45 because Hicks failed to meet the

requirements of the statute that, according to Fannie Mae, requires that the property be

unrecoverable and that Hicks had previously obtained a stay of the distribution of

proceeds.

{¶7} Hicks opposed Fannie Mae’s motion for relief from judgment. Her

opposition brief argued that the plain language of R.C. 2325.03 and 2329.45 prevents

Fannie Mae from returning title, and that the correct remedy in situations where property

is sold pending appeal and the judgment is reversed is to order restitution.

{¶8} After considering both sides of the argument, the trial court issued an order

denying Fannie Mae’s Civ.R. 60(B)(4) motion and further ordered that Fannie Mae pay

Hicks $110,000 in restitution in accordance with R.C. 2329.45.

{¶9} In the appeal now before us, Fannie Mae raises two assignments of error: 1)

that the court erred by denying its Civ.R. 60(B)(4) motion to vacate the confirmation of

sale and deed; and 2) that the court erred as a matter of law, or in the alternative, abused

its discretion by ordering Fannie Mae to pay $110,000 in restitution to Hicks. We find

merit to Fannie Mae’s position, but for reasons different than those it argues. Because

the assignments of error are interrelated, we address them together.
 {¶10} R.C. 2325.03 states that:

The title to property, which title is the subject of a final judgment or order

sought to be vacated, modified, or set aside by any type of proceeding or

attack and which title has, by, in consequence of, or in reliance upon the

final judgment or order, passed to a purchaser in good faith, shall not be

affected by the proceeding or attack; nor shall the title to property that is

sold before judgment under an attachment be affected by the proceeding or

attack. “Purchaser in good faith,” as used in this section, includes a

purchaser at a duly confirmed judicial sale.

This section does not apply if in the proceeding resulting in the judgment or

order sought to be vacated, modified, or set aside, the person then holding

the title in question was not lawfully served with process or notice, as

required by the law or Civil Rules applicable to the proceeding.

{¶11} R.C. 2329.45 states:

If a judgment in satisfaction of which lands or tenements are sold is
reversed on appeal, such reversal shall not defeat or affect the title of the
purchaser. In such case restitution in an amount equal to the money for
which such lands or tenements were sold, with interest from the day of sale,
must be made by the judgment creditor. In ordering restitution, the court
shall take into consideration all persons who lost an interest in the property
by reason of the judgment and sale and the order of the priority of those
interests.

{¶12} R.C. 2325.03 and 2329.45 evidence a general predisposition to favor and

protect purchasers who have obtained title to property through judicial foreclosure sales.

Pursuant to R.C. 2325.03, title to property remains with a good faith purchaser despite
attempts after final judgment, to set aside, vacate or modify a judgment under which the

property was purchased. 4 Moor v. Parsons, 98 Ohio St. 233, 120 N.E. 305 (1918)

(explaining former analogous statute G.C. 11633); see also Civ.R. 60(B) (staff notes

contained in the commentary). Similarly, R.C. 2329.45 protects purchasers from losing

title, or from title otherwise being affected, by the reversal of a foreclosure judgment on

appeal, while also providing a remedy in the form of restitution to the former, aggrieved

title holder. By their nature, the statutes are shields, not swords. Their intent is to

safeguard a purchaser’s title from legal attack so that potential purchasers are not

dissuaded from investing in foreclosed properties for fear of losing their investment.

See, e.g., Moor at 244-245.

{¶13} Hicks argues that R.C. 2325.03 specifically prohibits title from being set

aside or affected by an attack on a final order conferring title and therefore contends that

Fannie Mae cannot convey title back to her through a Civ.R. 60(B) motion to vacate the

confirmation order. Accordingly, Hicks maintains that her only remedy is restitution

under R.C. 2329.45. Although a plain reading of the statutes seemingly supports

Hicks’s interpretation, this case is distinguishable from most cases discussing the

protections and remedies of R.C. 2325.03 and 2329.45 because Fannie Mae is both the

The R.C. Chapter 2325 is titled “relief after judgment.” Although now repealed, former
4

section R.C. 2325.01 set forth a list of grounds for vacation of a voidable judgment. Civ.R.
60(B)(commentary). Courts had formerly interpreted R.C. 2325.03 as a limitation on a party’s right
to proceed under R.C. 2325.01. See Stewart v. Kellough, 104 Ohio St. 347 (1922), syllabus
(interpreting former analogous statute). Civ.R. 60(B) now provides the process and grounds for
seeking relief after judgment. Accordingly, it follows that R.C. 2325.03 serves as a limit on motions
to vacate foreclosure judgments under Civ.R. 60(B).
foreclosing plaintiff and the purchaser of the property. As such, neither statute applies in

this instance.

{¶14} In Cent. Natl. Bank v. Great Lakes Distilleries, Inc., 8th Dist. Cuyahoga

No. 16905, 1939 Ohio Misc. LEXIS 1169 (Jan. 20, 1939), this court concluded that G.C.

11702, the former analogous statute with identical relevant language to R.C. 2329.45,

“has no application whatsoever” when the plaintiff in a foreclosure action purchases the

property at judicial sale, because the plaintiff “does not stand in the position of a

stranger.” Id. at 5, citing Hubbell v. Admrs. and Heirs of Broadwell, 8 OHIO 120, 1837

Ohio LEXIS 63 (1837); McBain v. McBain, 15 Ohio St. 337 (1864); Ins. Co. v. Sampson,

38 Ohio St. 672 (1883). This court further stated,

[The] statutory provision [(G.C. 11702, former R.C. 2329.45)] is not
effective under the facts in this case to preclude a reversal of the judgment
entered in the trial court from operating to set aside, vacate and nullify
everything done under and in pursuance of said judgment; we therefore
conclude that the sale made under the first decree of foreclosure was
vacated when the judgment, upon the authority of which the sale was made,
was reversed by the Court of Appeals, which judgment of the Court of
Appeals was not thereafter reversed or modified by the Supreme Court.

Great Lakes Distilleries.

{¶15} Consequently, Great Lakes Distilleries sets forth three conclusions relevant

to the present appeal. First, that the former R.C. 2329.45 operates to protect the title of a

third-party purchaser, not a party purchaser, where the judicial sale occurs prior to the

reversal of a foreclosure order. Second, that the former R.C. 2329.45 does not operate

to provide restitution to the defendant-debtor when the purchaser is not a third party.
And finally, that reversal of a foreclosure order in such instances operates, as a matter of

law, to set aside, vacate, and nullify the sale of the property.

{¶16} Great Lakes Distilleries has not been overruled by the Ohio Supreme

Court nor has any subsequent legislative action clarified the terms of R.C. 2329.45 to

require an alternate interpretation. Accordingly, we find the holding in Great Lakes

Distilleries, that R.C. 2329.45 applies only to third-party purchasers, persuasive in this

case.5 Indeed, this court’s decision in Great Lakes Distilleries was not created out of

In her motion for reconsideration, Hicks challenges this court’s reliance on Great Lakes
5

Distilleries, an unreported case from 1939. Hicks argues that pursuant to R.C. 2503.20, this court
has no authority to recognize or sanction unreported opinions. The import of R.C. 2503.20 has been
a topic of conversation over the years. See e.g., State v. George, 50 Ohio App.2d 297, 307, 362
N.E.2d 1223 (10th Dist.1977); Shaw, The Legal Significance of the Unpublished Court of Appeals
Opinion in Ohio, 6 Cap.U.L.Rev. 393 (1977); Black, Unavailing Ohio’s Hidden Court, 16 Akron
L.Rev. 3 (1982). From those discussions, it appears that the purpose of the statute was to ensure
the limited publication of unofficial reports and/or to ensure that parties and the court had ready
access to all relevant cases that the court may rely on in making its decision. See id. According to
the Tenth District, access to opinions was thought to be ensured when only officially reported
opinions (those reported by the Supreme Court of Ohio) were used. See George at 309.
Nevertheless, over the years the Supreme Court and District Courts have consistently relied upon and
cited to unreported cases in their opinions. See id; Shaw; Black. Because of this, there developed
somewhat of a consensus that the statutory prohibition on the use of unreported cases is more
directory than mandatory. Id. Moreover, traditional legal principles dictate that appellate courts
should follow their precedent unless there is a valid legal reason for deviating from or reversing
precedent. George at 309.
Thus, because Great Lakes Distilleries is factually identical to this case, relies on reported
Ohio Supreme Court cases that support its legal conclusions, and the parties have offered us no legal
basis on why we should not rely on the case, we are of the opinion that we have not abridged the
dictates of R.C. 2503.20 in citing Great Lakes Distilleries as legal authority for our holding. Our
decision on this point is all the more supported by the fact that the case was hardly inaccessible or
difficult to find. The case is cited in Ohio Jurisprudence 3d and other Ohio property law treatises,
when discussing R.C. 2329.45 and its lineage. These treatises are available to the public in print and
electronic form. Great Lakes Distilleries is also readily available and discoverable through Lexis
and other online legal research tools. Accordingly, the presumed legislative intent behind the
whole cloth as the cases cited support the position of the court. See McBain at 349-350

(when discussing applicability of former R.C. 2329.45 to a party purchaser, the court

stated “[t]he rule, that a reversal of the judgment does not affect the title of the purchaser,

does not aid the case, because that rule applies only to a purchase by a stranger.”).

Although in her motion for reconsideration Hicks distinguishes McBain on grounds that it

involved the reversal of a confirmation of sale rather than the reversal of the judgment in

foreclosure, the court’s statements with regard to R.C. 2329.45 are quite clear — the

statute does not apply to party purchasers. Moreover, the court discusses the distinction

between a reversal of a judgment in foreclosure and the confirmation order, by stating

that “the former goes to the general authority of the officer to make a sale, while the latter

is the evidence of the fact that the particular sale was legally made.” Id. The court went

on to conclude that even if the purchaser had not been a plaintiff, that reversal of the

confirmation of sale nullifies the order so that, legally speaking, no title has passed to the

purchaser through the deed. Id. at 349. It is therefore reasonable to draw the

conclusion, as this court did in 1939, that if a party purchases the property, and the

judgment in foreclosure is reversed (which is the order that confers authority upon the

sheriff to make the sale, see McBain at 349) then it follows that there is no authority to

enactment of the statute, which is to ensure that participants have access to relevant cases, also was
not abridged in this instance.
Additionally, more recent decisions from other districts have also interpreted R.C. 2329.45 as
protecting the title of a third-party purchaser. See, e.g., Bankers Trust Co. of Cal., N.A. v. Tutin, 9th
Dist. Summit No. 24329, 2009-Ohio-1333, ¶ 15.
sell the property or transfer the deed. In such cases, everything that comes after the

foreclosure judgment, is a nullity. Accord Great Lakes Distilleries.

{¶17} Nearly two decades after its decision in McBain, 15 Ohio St. 337, the Ohio

Supreme Court again confirmed its position that former R.C. 2503.45 does not apply to

party purchasers, when it stated:

In a case of a sale of property to a stranger, a subsequent reversal of the
judgment does not divest the purchaser’s title. Rev. Stat. § 5409. But this
statutory rule, which applies only to purchases by strangers, when the
judgment is reversed, does not apply to a mortgagee who is a party, nor
where the order of sale or confirmation is reversed. In such cases, the rule is
as stated in McBain’s case.

Sampson, 38 Ohio St. 672, 676. Not surprisingly, Sampson is also cited by the court in

Great Lakes Distilleries.

{¶18} Regardless of the clear support found in McBain and Sampson, Hicks

would have this court focus exclusively on the third case cited in Great Lakes Distilleries,

8th Dist. Cuyahoga No. 16905, 1939 Ohio Misc. LEXIS 1169; Hubbell, 8 OHIO 120. In

her reconsideration motion, Hicks argues that Hubbell does not stand for the proposition

that R.C. 2329.45 applies only to third-party purchasers, but shows that the court looks to

the equities of the case and each parties’ relative culpability in the action, before

determining whether title remains with the purchaser and the restitution remedy applies.

We agree with Hicks’s interpretation of Hubbell. However, in doing so, we must point

out that Hicks ignores Hubbell’s ultimate disposition which is that the court found former

R.C. 2329.45 did not apply to protect the party purchaser’s title in that case, and that the

Hubbell opinion was issued approximately 30 years before McBain, and 50 years before
Sampson. Although, McBain and Sampson did not explicitly overrule Hubbell, they

clearly state that R.C. 2329.45 does not apply to party purchasers. It may be that McBain

and Sampson implicitly overruled Hubbell, or it may be that the earlier case simply

established some of the basic principals surrounding the statute and McBain and Sampson

expounded upon those principles. 6 Either way, we find that the later-in-time cases

support the conclusion of this court in Great Lakes Distilleries and should control the

outcome of this case.

{¶19} Accordingly, we find that the court erred as a matter of law by not vacating

the foreclosure sale and by ordering Fannie Mae to pay Hicks $110,000 in restitution.

This court’s reversal of the foreclosure order served to nullify the foreclosure sale and

confirmation order. See Great Lakes Distilleries, 8th Dist. Cuyahoga No. 16905, 1939

Ohio Misc. LEXIS 1169, at 5. Consequently, we reverse the trial court’s order of

restitution and the denial of Fannie Mae’s Civ.R. 60(B) motion. On remand, the trial

court is instructed to vacate the confirmation of sale, order the deed to the property be

returned to Hicks, and enter judgment in favor of Hicks on the foreclosure action,

pursuant to this court’s order in Hicks, 2015-Ohio-1955, 35 N.E.3d 37.

Indeed the principles established in Hubbell may still be important upon the reversal of a
6

judgment in foreclosure when there is a party purchaser, but the intervening rights of third-parties
would be hurt by the inapplicability of R.C. 2329.45 and the divestment of the purchaser’s title. See,
e.g., McBride & Murphy v. Longworth, 14 Ohio St.349 (1863) at paragraph one of the syllabus. It
should also be noted however, that the Longworth decision interprets the holding in Hubbell as
follows: “[t]he court held in [Hubbell] that the mortgagee was to be regarded as a party merely, and
not as a purchaser within the meaning of the statute.” Id. at 351.
 {¶20} Judgment reversed and remanded to the trial court for further proceedings

consistent with this opinion.

It is ordered that appellant recover of appellee the costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the common

pleas court to carry this judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure.

______________________________________________
MELODY J. STEWART, JUDGE

KATHLEEN ANN KEOUGH, P.J., and
MARY J. BOYLE, J., CONCUR