FIFTH THIRD BANK v. DAYTON LODGE LIMITED LIABILITY COMPANY, et al.
C.A. CASE NO. 24843
IN THE COURT OF APPEALS FOR MONTGOMERY COUNTY, OHIO
July 27, 2012
2012-Ohio-3387
T.C. NO. 07CV2432; (Civil appeal from Common Pleas Court)
Attorneys for Plaintiff-Appellee
JOSEPH C. LUCAS, Atty. Reg. No. 0081336 and KELLY A. BENNINGTON, Atty. Reg. No. 0082277, 7015 Corporate Way, Suite 200, Centerville, Ohio 45459
Attorneys for Defendant-Appellant Salam Said Shaja
OPINION
{¶ 1} Salam Said Shaja, the purchaser of the foreclosed property in a foreclosure action, appeals from a judgment of the Montgomery County Court of Common Pleas, which denied his motion to set aside the sheriff‘s sale. The trial court construed Shaja‘s motion as a
{¶ 2} For the following reasons, the trial court‘s judgment will be affirmed.
I. Factual and Procedural History
{¶ 3} Daytоn Lodge Limited Liability Company operated the Dayton Executive Hotel, located at 2401 Needmore Road in Dayton. At various times, Dayton Lodge obtained commercial loans from Fifth Third Bank, totaling approximately $3.75 million. The notes were secured by mortgages on the hotel property, including assignments of rents and leases. Jamal Garmo, a member of Dayton Lodge, signed a guaranty agreement regarding a 2003 commercial loan in the amount of аpproximately $3.25 million. Dayton Lodge had also signed a third party collateral agreement and mortgage to secure a commercial loan to a third party in the amount of $975,000.
{¶ 4} In March 2007, Fifth Third Bank filed a foreclosure complaint against Dayton Lodge, Jamal Garmo, and others, alleging that it was the holder of the 2003 note, that the note was secured by a mortgage, and that Dayton Lodge had defaulted on the note and mortgage. Fifth Third Bank stated that Daytоn Lodge owed $2,817,616, including the outstanding principal, accrued interest, late charges and other charges. Fifth Third sought judgment on the note and requested that the mortgage be foreclosed and that the property be
{¶ 5} Contemporaneous with the filing of its complaint, Fifth Third filed a motion for the appointment of a receiver “to take exclusive and complete possession, custody and control” of the property and to operate the hotel business. On April 11, 2007, the court issued an agreed order appointing a receiver. However, the receivership did not become effective until February 8, 2008, when the receiver filed his “Receiver‘s Oath and Notice of Filing Bond.”
{¶ 6} On April 2, 2008, the trial court issued a final judgment and decree of fоreclosure in favor of Fifth Third. The judgment included a monetary judgment against Dayton Lodge on the 2003 note, a monetary judgment against Garmo on the guaranty, and an order foreclosing the equity of redemption and ordering the sale of the property, if the amounts due to the bank and costs were not paid by a certain date. An auction was attempted in April 2008 with an auctioneer who advertised nationally. Although there were several spectators, therе were no bidders, and the auction was cancelled. Upon motion by Fifth Third, the court then authorized the appointment of Bambeck Auctioneers, Inc. to conduct a public auction of the property.
{¶ 7} The receiver filed interim reports for the property for the months of February, March, April, and May 2008. The interim report for April indicated that the “hotel was closed on April 29, 2008. The hotel was secured and Buckeye Glass & Block boarded up the windows on the first floor. The shuttle vans were towed to storage and all rooms were inspected and inventoried.”
{¶ 9} In February 2009, prior to any ruling on Dayton Lodge‘s objections to the sale and Fifth Third‘s motion to confirm the sale, the trial court “conditionally dismissed” the case, “without prejudice until such time as a final dismissal entry with prejudice is filed,” based on a report that the parties had settled the case. Several months later, the receiver moved to close the receivership; that motion was оpposed by Dayton Lodge due to pending criminal charges against Dayton Lodge‘s controller based on the receiver‘s alleged failure to maintain the fire suppression system at the hotel.
{¶ 10} In November 2009, Fifth Third informed the court that Dayton Lodge and the bank had entered into an agreed order to confirm the sale, and the bank moved for the court to enter that order. Dayton Lodge opposed the motion arguing, in part, that the purchaser of the property (Shaja) would not accept the property until fire code issues had been resolved. Ultimately, on February 4, 2011, the trial court confirmed the sale of the property.
{¶ 12} Fifth Third opposed the motion, arguing that a motion to set aside the sheriff‘s sale was barred by res judicata. The bank further asserted that, even if the motion were construed as а
{¶ 13} The trial court construed Shaja‘s motion as a motion for relief from judgment, pursuant to
{¶ 14} The court further found, however, the Shaja had not demonstrated that he was entitled to relief under one of the grounds set forth in
Purchaser must demonstrate he is entitled to relief under one of the grounds stated in
Civ. R. 60(B[)] . Bank contends Purchaser has not alleged he was unaware of damage to the property until after confirmation, or that he was denied access to the premises such that relief from judgment could be warranted because of newly discovered evidence underCiv. R. 60(B)(2) . Bank contends Purchaser has not alleged fraud or misconduct incident to obtaining the judgment sufficient to satisfy the requirement underCiv. R. 60(B)(3) . Moreover, Bank contends Purchaser could have intervened to protect his interest in the property after the sale but before confirmation, and therefore he is not entitled to relief from judgment underCiv. R. 60(B)(5) . By contrast, Purchaser argues that he was denied access to the premises follоwing the sale, and that the Receiver‘s reports did not go into explicit detail regarding damage to the premises, and these facts warrant relief underCiv. R. 60(B)(2) ,(3) and(5) .
As noted above, upon sale of the property, Purchaser had standing to appear and move to protect his interest in the property, or to move to intervene in the action. From the time of the sale on May 29, 2008 [sic], to the order of confirmation on February 4, 2011, the Purchaser did not move tо intervene or appear to protect his interest in the property. Purchaser argues he was denied access to the premises, as demonstrated by the correspondence attached to his original motion. The attachments to the motion include a notice of violation to the Ohio Fire Code, concerning a damaged door, issued in the form of a letter from the Harrison Township Fire Department, Fire Prevention Bureau, to the attorney for the Bank, and a notice of property maintenance violation, concerning graffiti, issued by a Harrison Township Code Enforcement Officer in the form of a letter directed to the debtor. The Court finds these documents insufficient to support Purchaser‘s claim that he was denied access to the premises. Even if Purchaser was denied access to the premises, such does not excuse him for failing to appear and protect his interest in the property or to move to intervene in this action, the remedies suggested by the relevant authorities. Therefore, the Court finds that a denial of access to the premises, or insufficient detail in the Receiver‘s reports, did not absolve the Purchaser of his responsibility to assert his right to protect his interest in the property in this action, such that these allegations do not warrant relief under Civ. R. 60(B) . The Court further finds that the Receiver‘s alleged misconduct wаs not made incident to obtaining the orderof confirmation, but is rather in the nature of misconduct upon which a claim could be based. Nothing in this Rule 60(B) decision should be construed as either expanding or restricting Purchaser[‘s] rights, if any, as the rightful owner of the property, to seek legal redress against Bank and Receiver for their conduct subsequent to the sale, as the Purchaser‘s deed “relates back to and passes title as of the date of the sale.” * * *
(Internal citations omitted.)
{¶ 15} Shajа appeals from the trial court‘s denial of his motion to set aside the sale of the property.
II.
{¶ 16} Shaja‘s sole assignment of error states:
THE TRIAL COURT ABUSED ITS DISCRETION IN FINDING THAT APPELLANT WAS PRECLUDED FROM BRINGING A MOTION TO VACATE UNDER
CIV.R. 60(B) BECAUSE APPELLANT DID NOT INTERVENE PRIOR TO THE CONFIRMATION OF THE SHERIFF‘S SALE.
{¶ 17} In his assignment of error, Shaja claims that the trial court abused its discretion when it found that he was precluded from seeking relief under
{¶ 18} As an initial matter, we agree with the trial court that Shaja‘s motion was properly construed as a motion for reliеf from judgment, pursuant to
{¶ 19} At the time Shaja filed his motion to set aside the sheriff‘s sale, the trial court had entered a judgment and decree of foreclosure in favor of Fifth Third and an order confirming the sale of the property to Shaja. At that juncture, the order of confirmation could be challenged only by way of appeal or through a motion for relief from judgment, pursuant to
{¶ 20}
{¶ 21} We review the trial court‘s denial of Shaja‘s motion for an abuse of discretion. The term “abuse of discretion” implies that the court‘s attitude was unreasonable, arbitrary, or unconscionable. Blakemore v. Blakemore, 5 Ohio St.3d 217, 450 N.E.2d 1140 (1983).
{¶ 22} Shaja argues that the trial court denied his motion to set aside the sheriff‘s sale without examining the requirements of
{¶ 23} We disagree with Shaja‘s reading of the trial court‘s decision. Although the trial court did not reference
{¶ 24}
{¶ 25} Assuming that
{¶ 26} Shaja was aware at the time of the auction that the hotel had been closed. The receiver‘s report prior to the auction specifically stated that the hotel ceased to operate on April 29, 2008. Through the exercise of due diligence, Shaja could have discovered the zoning requirements for the property, that the hotel was operating as a non-conforming use, and that certain conditions had to be met, such as the reopening of the hotel within a certain time period, in order to continue to operate the property as a hotel.
{¶ 27} As to the condition of the property, Shaja also did not еstablish that he could not have discovered the extent of the damage to the property through due diligence. Shaja
Many of the rooms arе in poor condition. The entire southern wing is shut down as many rooms have damage to the ceiling and missing furniture. The second floor on the western wing is shut down due to leaks in the ceiling. The parking lot has deteriorated and several holes have developed in the areas where the drains are located.
Exhibit B to the initial inventory report provided a detailed summary of the property‘s poor condition at the time of the initial inspection. The partiеs filed several affidavits following the auction, which reiterated the deteriorated condition of the property at the time of the auction.
{¶ 28} . The receiver also filed several interim reports prior to the auction, which indicated anticipated repairs to the building and contained detailed financial statements showing the expenses incurred. Although the receiver did not file interim reports following the auction, the record reflects thаt Dayton Lodge opposed the sale of the property on the ground that the receiver had allowed waste of the property, and Dayton Lodge later objected to the closing of the receivership estate due to the receiver‘s alleged failure to maintain the fire suppression system, leading to criminal charges against Dayton Lodge‘s controller and, later, the receiver. The July 2009 settlement agreement between Fifth Third аnd Dayton Lodge references an insurance claim related to the basement.
{¶ 30} It is undisputed that Shaja did not have a vested interest in the property until the sale was confirmed by the trial court. Ohio Sav. Bank v. Ambrose, 56 Ohio St.3d 53, 563 N.E.2d 1388 (1990). However, purchasers of foreclosed properties have “the right to intervene and participate to protect their interеsts incident to the sale” prior to confirmation by the trial court. Mid-American National Bank v. Heiges, 6th Dist. Ottawa No. 94OT025, 1994 WL 645780 (Nov. 18, 1994); see also Franklin Cty. Treasurer v. Kafele, 10th Dist. Franklin No. 05AP-252, 2005-Ohio-6618, ¶ 8. In this case, the trial court did not abuse its discretion in determining that Shaja sat on his rights and failed to exercise due diligence when he failed to intervene in the action prior to the confirmation of sale.
{¶ 31}
{¶ 32} Shaja alleged in his motion that the receiver denied him access to the hotel
{¶ 33}
{¶ 34} The trial court found that
{¶ 35} The trial court did not abuse its discretion in concluding that Shaja failed to demonstrate his entitlement to relief under
III.
GRADY, P.J. and FAIN, J., concur.
(Hon. Penelope R. Cunninghаm, First District Court of Appeals, sitting by assignment of the Chief Justice of the Supreme Court of Ohio).
Copies mailed to:
Lawrence T. Burick
Christine M. Cooper
Joseph C. Lucas
Kelly A. Bennington
Mark J. Sheriff
Thomas M. Green
Jared A. Wagner
Donald W. Jordan
Joseph G. Strines
George B. Patricoff
Lucas C. Ward
Hon. Gregory F. Singer