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Can I Recover Excess Proceeds From A Foreclosure Sale? – Financial Services


Ohio

Claim to excess funds in foreclosure

Treasurer of Cuyahoga County v. Unknown Heirs of
Nancy Weisner
, 8th Dist. Cuyahoga, 2022-Ohio-2668

In this appeal, the Eighth Appellate District considered who is
entitled to excess sale proceeds; another mortgagee (who never
appeared or answered in the case) or the borrower? Here, the Eighth
Appellate District affirmed the trial court’s decision which
distributed excess proceeds from the foreclosure of real property
to the borrower’s estate.

The Bullet Point: The word “mortgage”
encompasses a promissory note and a security instrument; the
security instrument typically collateralizes real property as
security for payment of the note. A creditor seeking to enforce a
mortgage agreement has several remedies available. “Upon
breach of condition of the mortgage agreement, a mortgagee has
concurrent remedies. It may, at its option, sue in equity to
foreclose, or sue at law directly on the note; or, bring an action
in ejectment.” ‘”An action at law on a promissory
note to collect a mortgage debt is separate and distinct from an
action in equity to enforce the mortgage lien on the
property.'” A junior lienholder is entitled to sale
proceeds when it has appeared in an action and asserted its
interest.

Conversely, a junior lienholder who has defaulted is not
entitled to share in any proceeds realized from the foreclosure
sale because its default can be construed as a disclaimer of
interest in the property. Even then, however, the junior lienholder
may be able to enforce the debt through a separate lawsuit against
the borrower. The moral of the story? If you are named as a party
in a foreclosure action and wish to collect sale proceeds, promptly
respond to the complaint and assert your interest.

Standing to sue on Contract

Breen v. Group Management Servs., Inc., 8th
Dist. Cuyahoga, 2022-Ohio-2689.

In this appeal, the Eighth Appellate District affirmed the trial
court’s decision to dismiss a breach of contract claim on the
basis that the plaintiff failed to establish its standing to sue
under the contract.

The Bullet Point:

“It is well established that before an Ohio court can
consider the merits of a legal claim, the person seeking relief
must establish standing to sue.” “An action brought by a
party that lacks standing will be dismissed.” To
establish standing, a party must show they suffered “(1) an
injury that is (2) fairly traceable to the appellees’ allegedly
unlawful conduct, and (3) likely to be redressed by the requested
relief.”

Where there are no allegations that a plaintiff is a party to a
contract or a third party intended beneficiary to a contract, a
court does not err in dismissing the complaint for lack of
standing.

Excessive Interest under Mortgage Loan Act

Forsythe Finance, LLC v. Seibert, et al., 1st
Dist. Hamilton, 2022-Ohio-2798.

The First Appellate District reversed the trial court’s
decision to dismiss various counterclaims and third-party claims
for failure to state a claim, finding that the borrowers had
adequately plead claims under Ohio’s Ohio Mortgage Loan Act
(OMLA) and Credit Services Organization Act (CSOA).

The Bullet Point: This opinion thoroughly
explores the relationship between the OMLA and CSOA. Under the
OMLA, registrants are authorized to offer unsecured loans (not to
exceed $5,000) with “unlimited” interest rates. Despite
this, the OMLA did subject registrants to another law that capped
interest rates at 21 % of the unpaid principal balance on a loan,
not to exceed 25%. According to the First Appellate District,
registrants began to circumvent this interest rate cap by utilizing
credit services organizations (CSOs) under the CSOA, which places
no cap on the fees charged by CSOs. The court explained the
intersection between these two laws: “[t]he CSOA specifically
excludes organizations that make or collect loans and licensed
mortgage brokers. By law, MLA registrants cannot be CSOs, and CSOs
cannot be MLA registrants. Under what certain lenders dubbed the
“CSO model,” the setup goes like this: the lender (NCP)
registers under the MLA so that it can advertise and collect on the
loan. But because that opens it up to interest limitations they
prefer to avoid, the MLA registrant partners with a CSO to
“assist” the consumer in obtaining the loan. The MLA
registrant can only charge 25 percent interest on its loan portion.
The CSO, however, can and does charge fees far exceeding 25 percent
interest.”

According to the court, this exact arrangement occurred in this
case. When the borrowers defaulted on the loan and were sued by the
assignee of the contract, they filed third-party complaints against
the MLA registrant and the CSO for violations of the OMLA and CSOA,
among other claims. While the trial court dismissed the claims, the
First District reversed. In so ruling, the court noted that the fee
charged by the CSO was “murky” and could be considered
principal or interest under the OMLA and, depending on how
classified, could be a prohibited charge under the statute. The
court found that the OMLA was applicable, noting that the loans
themselves indicated as much. The court also found that the
borrowers had to plead plausible claims for violation of the Ohio
Consumer Sales Practices Act, noting that the record was
“devoid” of any evidence that the CSO provided an actual
service to the borrowers and that the borrowers could repay the
loan.

Implied-in-fact contract

Jones v. BPO/RICO Manufacturing, Inc., 9th
Dist. Medina No. 2022-Ohio-2715.

In this case, the Ninth Appellate District affirmed the trial
court’s summary judgment decision finding no implied-in-fact
contract existed between the parties.

The Bullet Point:

“An implied-in-fact contract hinges upon proof of all of
the elements of a contract.” The elements are “an offer,
acceptance, contractual capacity, consideration (the bargained for
legal benefit and/or detriment), a manifestation of mutual assent
and legality of object and of consideration.” “An
implied-in-fact contract diverges from an express contract in the
form of proof that is required to establish each contractual
element.” “In express contracts, assent to the terms of
the contract is actually expressed in the form of an offer and an
acceptance.” “On the other hand, in implied-in-fact
contracts the parties’ meeting of the minds is shown by the
surrounding circumstances, including the conduct and declarations
of the parties, that make it inferable that the contract exists as
a matter of tacit understanding.”

Florida

Orders Issuing Temporary Injunctions

SPC Fortebello, LLC v.
Catuogno
, No. 5D21-2513 (Fla. 5th DCA August 5,
2022)

The Fifth District concluded that a trial court’s order
granting a motion for a temporary injunction failed to comply with
the requirements of Florida Rule of Civil Procedure 1.610(c).

The Bullet Point: Under Florida Rule of Civil
Procedure 1.640(c), a trial court’s order granting a temporary
injunction must include specific findings on each of the elements
necessary for issuance of an injunction: (1) a likelihood of
irreparable harm; (2) the unavailability of an adequate legal
remedy; (3) a substantial likelihood of succeeding on the merits;
and (4) considerations of the public interest support the entry of
the injunction. Conclusory statements that the required elements
have been established are insufficient to satisfy this requirement.
In this case, the trial court made numerous factual findings but
failed to relate those findings to the four elements in the order.
Accordingly, the order was reversed.

Venue Transfer Based on Forum Non
Conveniens

At Home Auto Glass, LLC v.
Mendota Insurance Company
, No. 5D21-2052 (Fla. 5th DCA August
12, 2022)

The Fifth District concluded that the trial court abused its
discretion in transferring venue based on forum non
conveniens
.

The Bullet Point: When a forum non
conveniens
challenge is raised, the parties must submit
affidavits or other evidence that will shed light on the issues of
the convenience of the parties and witnesses and the interest of
justice. If the venue is proper in more than one place, the
plaintiff’s selection will not be disturbed absent evidence
that the chosen venue is either not proper or substantially
inconvenient.

In this case, the appellee sought a venue transfer based on
forum non conveniens, arguing the current venue was
inconvenient for its key witness and that the venue should be
transferred in the interest of justice to avoid imposing jury duty
on an uninvolved community. The appellee’s motion to transfer
was unsworn; it presented no evidence by way of affidavits,
deposition, or live testimony at the hearing; and it did not file
any pre-hearing affidavits or sworn evidence in support of its
motion. In contrast, the appellant filed an affidavit opposing the
motion to transfer and explaining its witnesses would not be
inconvenienced by the litigation remaining in its current
venue.

At issue in this appeal was whether the trial court abused its
discretion by granting the appellee’s motion to transfer venue.
The Fifth District concluded that it did. The Fifth Districted
reasoned that absent evidence showing that a witness would be
inconvenienced by the venue remaining in its current location or
how the interest of justice would otherwise be served by a venue
transfer, it is an abuse of discretion to transfer venue based on
forum non conveniens. In summary, the Fifth District
reversed the other transferring venue because the appellant failed
to meet its burden to establish the basis to transfer venue based
on forum non convenient.

Trees as Part of Realty

Kim v. Galasso, No. 2D20-3313 (Fla. 2nd DCA
August 3, 2022)

The Fourth District concluded that the trial court properly
entered summary judgment based on a ruling that trees planted on
land were part of the real estate.

The Bullet Point: As a general rule, trees
planted in the land are considered part of the realty. Any contract
taking the trees out of that general rule must clearly show the
parties intended the trees to be personal property and must satisfy
the statute of frauds.

In this case, the parties disputed ownership of over $1 million
worth of palm trees that were planted on land. The trees at issue
were planted on the property in late 2004 or early 2005 by the
appellant, and the trees continued growing there in 2011 when the
property was sold to the appellees. The appellees claimed the trees
were part of the real estate and that they took ownership of the
trees as a result of the land purchase. The appellant claimed he
was the owner of the trees, and the trees were intended to be
excluded from the realty as personal property. However, the only
written document memorializing that intention was created in 2011,
after the trees were planted, and it did not contain two witness
signatures.

At issue in this appeal was whether the trial court erred in
granting summary judgment in favor of the appellees. The Fourth
District concluded it did not. The Fourth District reasoned that
the trees were part of the realty, and the only contract
memorializing the agreement that the trees were intended as
personal property did not satisfy the statute of frauds because it
did not contain two witness signatures. Therefore, it was not
legally sufficient to grant ownership of the trees. Accordingly,
the Fourth District affirmed the entry of summary judgment.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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