The Ohio Supreme Court, in the recent case of Countrywide Home Loans Servicing, L.P. v. Nichpor, 2013–Ohio–2083, recently issued an opinion affecting a foreclosing lender’s ability to voluntarily dismiss a lawsuit after a trial court orders real estate to be sold in a sheriff’s sale. This decision will affect the way lenders handle foreclosure actions, because lenders cannot dismiss a foreclosure if the lender is disappointed in the sale price of the property at the sheriff sale. Further, it is common for lenders and borrowers in foreclosure to negotiate for a potential loan modification on the property. Parties to a foreclosure need to be aware that negotiating a loan modification will be more difficult, since the foreclosure action cannot be dismissed after the order for sheriff’s sale has been entered by a trial court.
The Nichpor case arose when, on February 27, 2009, Countrywide Home Loans Servicing, L.P. filed a complaint-in-foreclosure against the Nichpors. The trial court granted judgment in favor of Countrywide on May 18, 2009, which included language making it a final judgment. Subsequently, the trial court ordered a sheriff’s sale, which later occurred on July 1, 2010, and the property was purchased by a third party. On July 12, 2010, Countrywide filed a notice of voluntary dismissal under Civil Rule 41(A). This rule allows a party asserting a claim to voluntarily dismiss their claim prior to trial. On August 3, 2010, the trial court dismissed the matter.
Countrywide re-filed the complaint on July 16, 2010. The trial court again granted judgment in favor of Countrywide on August 5, 2011. The Nichpors appealed to the Sixth District Court of Appeals, which affirmed the trial court’s decision. That decision was appealed to the Ohio Supreme Court on the following issue: “whether a foreclosure action, in which a judgment of foreclosure has, in fact, been issued, can be dissolved in its entirety prior to confirmation of sale, with the filing of a voluntary dismissal, filed by a party.” The Ohio Supreme Court, in accepting jurisdiction over this appeal, recognized that there were conflicting decisions in the lower courts in Ohio.
Ultimately, the Ohio Supreme Court ruled that, after a judgment entry grants a decree of foreclosure and an order of sale, a foreclosure action cannot be voluntarily dismissed by a party. The rules relating to voluntary dismissal only relate to pending cases. The Court reasoned that once a judgment entry grants a decree of foreclosure and an order of sale the case is no longer “pending,” so it cannot be voluntarily dismissed.
The Ohio Supreme Court recognized that if a party was permitted to voluntarily dismiss the action after the sheriff’s sale is ordered and completed, then an unhappy lender could simply wait until after the sheriff’s sale, determine that the sale price was too low, and then dismiss the case in order to get a “second bite at the apple.” The Court concluded that this directly contradicted the general policy that judicial sales have a certain degree of finality.
While this recent decision sets forth a reasoned application of the Civil Rules, it is necessary that lenders in foreclosure actions are aware of this decision and recognize its impact when handling foreclosure actions. This decision will inevitably impact the strategy and timeline for foreclosure negotiations, since once there is a judgment entry granting foreclosure and an order of sale, the foreclosure action cannot be voluntarily dismissed.
If you have any questions regarding this decision or property foreclosures in general or any other question regarding creditor’s rights and liabilities, please feel free to call one of our Finance and Creditor Rights and Liabilities Practice Group Members.
