Summary
In Union Bank Co. v. Brumbaugh (1982), 69 Ohio St.2d 202, 208, 23 O.O.3d 219, 223, 431 N.E.2d 1020, 1025, we recognized that "[t]here is no statutory dictate that a hearing be held [after a sheriff's sale]."
Summary of this case from State ex rel. Midwest Pride IV, Inc. v. PontiousOpinion
No. 81-173
Decided February 10, 1982.
Real property — Foreclosure — Sale of lands — Hearing prior to confirmation of sale — Not required by Due Process Clause.
The Due Process Clause of the Fourteenth Amendment does not require that the mortgagor in a foreclosure proceeding must be afforded a hearing prior to the confirmation of sale where the trial court has complied with all of the statutory requirements contained in R.C. 2329.01 to 2329.61, inclusive. The granting of such a hearing lies within the sound discretion of the trial court.
APPEAL from the Court of Appeals for Wood County.
Jessie I. Brumbaugh, appellant herein, executed a promissory note in the amount of $155,000 with The Union Bank Company, appellee herein. The note provided that interest was to be 9.5 percent per annum from February 3, 1978, and that the bank could, at its option, establish a higher or lower rate (variable interest rate) upon giving appellant 30 days written notice. The note also provided that in case of default, the entire principal sum, at the option of the holder, was due and payable. To secure the note, appellant executed and delivered to the bank her mortgage on land she owned in Wood County.
Appellant defaulted on the loan, and the bank initiated the within action seeking to foreclose her mortgage. Appellant entered into a consent judgment with the bank that provided for foreclosure and order of sale by the sheriff of Wood County. The consent judgment granted the bank $155,000 with interest at 9.5 percent per annum from February 3, 1978.
The sheriff of Wood County appointed three disinterested free-holders to appraise appellant's real estate and to report their appraisals pursuant to R.C. 2329.17. The appraisers valued the property at $197,000. Notification of the appraisal was published in a newspaper of general circulation for three consecutive weeks in compliance with R.C. 2329.23, 2329.24, 2329.26 and 2329.27.
R.C. 2329.17 provides: "When execution is levied upon lands and tenements, the officer who makes the levy shall call an inquest of three disinterested freeholders, residents of the county where the lands taken in execution are situated, and administer to them an oath impartially to appraise the property so levied upon, upon actual view. They forthwith shall return to such officer, under their hands, an estimate of the real value of the property in money."
R.C. 2329.23 provides: "All notices and advertisements for the sale of lands and tenements located in a municipal corporation, made by virtue of the proceedings in a court of record therein, in addition to a description of such lands and tenements, shall contain the street number of the buildings erected on the lands, or the street number of the lots offered for sale. If no such number exists, then the notice or advertisement must contain the name of the street or road upon which such lands and tenements are located, together with the names of the streets or road immediately north and south or east and west of such lands and tenements that cross or intersect the street or road upon which they are located."
R.C. 2329.24 provides: "All notices and advertisements for the sale of lands and tenements located in a township and not within the limits of a municipal corporation, which are made by virtue of proceedings in a court of record therein, must contain the name of the township in which the lands and tenements are located."
R.C. 2329.26 provides: "Lands and tenements taken in execution shall not be sold until the officer taking them gives public notice of the time and place of sale, for at least thirty days before the day of sale, by advertisement in a newspaper published in and of general circulation in the county. The court ordering sale may, in the order of sale, designate the newspaper in which such notice shall be published."
R.C. 2329.27 provides: "When the advertisement provided for in section 2329.26 of the Revised Code, is made in a newspaper published weekly, it is sufficient to insert it for three consecutive weeks. If there are both a daily and weekly edition of the paper selected, and the circulation of the daily in the county exceeds that of the weekly, or if the lands and tenements taken in execution are situated in a city, and there are published both a daily and weekly edition of the paper selected, and the circulation of the daily in such city exceeds that of the weekly, it is sufficient to publish the advertisement in the daily once a week for three consecutive weeks before the day of sale, each insertion to be on the same day of the week. The expense of such publication in a daily shall not exceed the cost of publishing it in a weekly. All sales made without such advertisement shall be set aside, on motion, by the court to which the execution is returnable."
At the time of the advertisement of the sheriff's sale, the bank moved to correct "nunc pro tunc" the journal entry granting it $155,000 with 9.5 percent interest. The bank sought to increase the interest rate to 11.5 percent from February 3, 1979. Appellant opposed the motion; however, the trial court granted it.
Appellant's land was sold for $201,000. Thereafter, appellant filed a motion and memorandum in opposition to confirmation of foreclosure. Attached to her motion was an appraisal from one broker who valued the real estate at $319,200. Appellant requested an oral hearing so she could present evidence that the amount of the sale was inadequate. The request for oral hearing was denied. Pursuant to R.C. 2329.31, the trial court then examined the proceedings of the sale, found them to be in conformity with the law and ordered the sale be approved and confirmed.
R.C. 2329.31 provides: "Upon the return of any writ of execution for the satisfaction of which lands and tenements have been sold, on careful examination of the proceedings of the officer making the sale, if the court of common pleas finds that the sale was made, in all respects in conformity with sections 2329.01 to 2329.61, inclusive, of the Revised Code, it shall direct the clerk of the court of common pleas to make an entry on the journal that the court is satisfied of the legality of such sale, and that the officer make to the purchaser a deed for the lands and tenements."
Upon appeal, the Court of Appeals, with slight modification in the distribution of the funds, affirmed.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Messrs. Robenalt, Daley, Balyeat Leahy, Mr. John F. Robenalt and Mr. William B. Balyeat, for appellee.
Donald V. Wood, Jr., Co., L.P.A., and Mr. Donald V. Wood, Jr., for appellant.
This case presents two issues for our determination. The first is whether the trial court erred when it corrected "nunc pro tunc" its journal entry granting the bank 9.5 percent interest so that interest at 11.5 percent would begin to run from February 3, 1979. The second issue is whether appellant was entitled to an oral hearing prior to the trial court's confirmation of the sale.
I.
The note executed by appellant provided for interest at 9.5 percent per annum unless the bank, with 30 days prior written notice, decided to raise the interest. There is no indication in the record that the bank gave appellant 30 days notice. In addition, the bank prayed for 9.5 percent interest in its complaint. Indeed, it was not until almost five months after the trial court signed the order providing for foreclosure that the bank moved to increase the interest. The Court of Appeals found the trial court's order increasing the interest to be correct, rationalizing that by entering into a consent entry, appellant had bound herself to an agreement where the bank could, at its option, increase the interest rate. The appellate court's decision was in error for two reasons. First, the bank did not comply with a stipulation in the note providing that 30 days notice be given. Second, appellant consented to an entry that provided for 9.5 percent interest, not an entry in which the bank could unilaterally amend the interest rate.
Accordingly, the bank is only entitled to 9.5 percent interest per annum from February 3, 1978. The judgment of the Court of Appeals is reversed as to this issue.
II.
The second issue is whether appellant was entitled to a hearing prior to the confirmation of the sale so that she could present evidence the sale price was inadequate.
The trial court found appellant was not entitled to a hearing, citing Local Rule 5(C)(1) of the Court of Common Pleas of Wood County. That rule provides that a motion for confirmation of sale "shall normally be considered ex parte in nature." Appellant maintains that despite the provisions of Local Rule 5(C)(1), she was entitled to a hearing pursuant to Citizens Loan Savings Co., v. Stone (1965), 1 Ohio App.2d 551. Citizens Loan Savings Co. held that the debtor in that case was entitled to a hearing prior to the confirmation of sale to demonstrate he had redeemed the property. We find Citizens Loan Savings Co. is not dispositive of the case at bar because it was decided prior to the enactment of the Ohio Rules of Civil Procedure, which specifically provided the trial courts the authority to enact local rules.
Citizens Loan Savings Co. relied upon Reed v. Radigan (1884), 42 Ohio St. 292, which stated that at the confirmation of sale all parties, including the purchaser, may be heard. See also, Ohio Life Ins. Trust Co. v. Goodin (1860), 10 Ohio St. 566.
The Civil Rules became effective July 1, 1970. They were intended to supersede all laws in conflict with them. Section 5(B), Article IV, Ohio Constitution. Civ. R. 7(B)(2) provides that a " * * * court may make provision by rule or order for the submission and determination of motions without oral hearing upon brief written statements of reasons in support and opposition." The Court of Common Pleas of Wood County has by rule specifically made provision for the hearing ex parte of the motion for confirmation of sale. Pursuant to the Ohio Constitution, Local Rule 5(C)(1) superseded Citizens Loan Savings Co., supra.
Section 5(B), Article IV of the Ohio Constitution provides in part:
" * * * All laws in conflict with such rules shall be of no further force or effect after such rules have taken effect."
Local Rule 5(C)(1) does not mandate that in every case no hearing shall be held. It vests within the trial court discretion in determining whether to conduct a hearing. In this regard, it comports fully with Civ. R. 7(B)(2), which states the court may make provision for the submission of motions without oral hearing. The issue then is whether the trial court abused its discretion in denying appellant a hearing. We find it did not.
In her motion opposing the confirmation of foreclosure, appellant maintained that her property was to be sold for an inadequate amount. Attached to her motion, she submitted the appraisal of one broker, who stated the property was worth $319,200. Appellant requested an oral hearing, which request was denied. We find the trial court did not abuse its discretion in denying her request. R.C. 2329.17 provides that the property is to be appraised by three disinterested freeholders who are residents of the county where the lands are situated. The appraisers are to be impartial. There is no evidence appellant's appraiser was a resident of Wood County or that he was disinterested. To the contrary, on this latter point, he was her agent and could hardly be considered impartial.
In addition to her contention that a hearing in her case was mandated by Citizens Loan Savings Co., appellant argues that her due process rights as guaranteed by the Fifth and Fourteenth Amendments to the United States Constitution have been violated. We disagree.
Procedural due process requires that when the government takes a property interest, there must be notice and a hearing afforded the aggrieved party. Goldberg v. Kelly (1970), 397 U.S. 254. In Goldberg, the court held that recipients of welfare benefits were entitled to notice and a hearing prior to the termination of welfare benefits because an eligible recipient may be deprived of the very means by which to live. Any countervailing governmental interest in conserving fiscal and administrative burdens was clearly outweighed by the recipient's interests.
Prior to its decision in Goldberg, the United States Supreme Court held in Sniadach v. Family Finance Corp. (1969), 395 U.S. 337, that Wisconsin's prejudgment garnishment procedures which temporarily froze a garnishee's wages pending trial violated the principles of due process insofar as the garnishee was not afforded an opportunity to be heard or to tender any defenses. Likewise, in a post Goldberg decision the court found that the prejudgment statutes that denied the possessor a prior opportunity to be heard worked a deprivation of property without procedural due process. Fuentes v. Shevin (1972), 407 U.S. 67. See also, North Georgia Finishing, Inc. v. Di-Chem, Inc. (1975), 419 U.S. 601.
Six years after its decision in Goldberg, the United States Supreme Court, in Mathews v. Eldridge (1976), 424 U.S. 319, considered whether the initial termination of disability benefits without an evidentiary hearing violated due process. The court found it did not and distinguished Goldberg by finding, at page 340, that disability benefits, unlike welfare benefits, were not based upon financial need. In addition, the court, at page 335, set forth three factors to be considered in determining whether an aggrieved party's due process rights have been violated. First, the court must examine the private interest that will be affected by the official action. Second, the court must look at the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards. Finally, the court must reflect upon the government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. In applying these dictates to the case at bar, we find the procedures in this case fully comport with due process.
II A.
First, we consider the private interest that will be affected by the court's action. Appellant's interest in her property is indeed significant. However, as explained below, her interests were adequately protected by statute.
II B.
The second factor to be considered is the risk of an erroneous deprivation and the probable value of additional safeguards. The potential risk to appellant can indeed be significant. However, the probable value of any additional safeguards is virtually nonexistent. The statutory scheme for foreclosure proceedings is designed to protect the interest of the mortgagor. R.C. Chapter 2329 governs the procedures for executing against property. R.C. 2329.17 provides that when execution is levied upon lands, the officer who makes the levy must call an inquest of three disinterested freeholders who are residents of the county where the lands taken are situated. The appraisers must swear to impartially appraise the property and then return an estimate of the real value of the property. Thereafter, the officer must give public notice of the time and place of sale for at least 30 days before the sale by advertisement in a newspaper published in and of general circulation in the county. R.C. 2329.26. The land cannot be sold for less than two thirds of the appraised value. R.C. 2329.20. There is no statutory dictate that a hearing be held at this time. If the court, after examining the proceedings taken by the officers, finds the sale was made in conformance with R.C. 2329.01 to 2329.61, inclusive, it shall confirm the sale. R.C. 2329.31. Where the trial court abuses its discretion in confirming the sale, a reviewing court will reverse that decision. See Laub v. Warren Guar. Title Mtg. Co. (1936), 54 Ohio App. 457, 468; Lake Shore Saw Mill Lumber Co. v. Cleveland Realization Co. (1919), 11 Ohio App. 387, 388.
In light of the procedural safeguards of R.C. Chapter 2329 which were adhered to in this case, we find appellant's interests were adequately protected.
II C.
The final factor to be considered is the governmental interest involved, including the fiscal and administrative burdens. To hold that a hearing must be held prior to every confirmation of sale would result in a duplication of state effort where the court, in effect, would also have to appraise the property, a duty specifically delegated by statute to three disinterested freeholders. The statutes concerning foreclosures were specifically designed to avoid this outcome and to assure that a fair appraisal was made.
The rationale used by the United States Supreme Court in Mathews, supra, has been reiterated in Monmouth Medical Center v. Harris (C.A. 3, 1981), 646 F.2d 74; Keeler v. Joy (C.A. 2, 1981), 641 F.2d 1044; Himmler v. Califano (C.A. 6, 1979), 611 F.2d 137; Town Court Nursing Center, Inc. v. Beal (C.A. 3, 1978), 586 F.2d 266. We find Mathews to be controlling in the instant case and hold that due process does not require one must be afforded a hearing prior to the confirmation of sale in a foreclosure proceeding. The decision to conduct a hearing lies within the sound discretion of the trial court.
Accordingly, the judgment of the Court of Appeals is affirmed as to the second issue herein.
The judgment of the Court of Appeals is reversed in part and affirmed in part.
Judgment affirmed in part and reversed in part.
CELEBREZZE, C.J., W. BROWN, SWEENEY, LOCHER, HOLMES and KRUPANSKY, JJ., concur.
PATTON, J., of the Eight Appellate District, sitting for C. BROWN, J.