OHIO COURT DENIES BANK REIMBURSEMENT FOR MULTIPLE ADVANCES TO PROTECT MORTGAGED PROPERTY BECAUSE BANK FAILED TO TIMELY FILE MOTION

Earlier this month, Ohio’s Eighth District Court of Appeals affirmed an order entered in a foreclosure case wherein the lower court denied, based solely on its untimeliness, a mortgagee’s motion for reimbursement for various advances made to protect and maintain mortgaged property on which Fidelity held the note and mortgage. Fid. Bank, N.A. v. Unknown Heirs of Bowyer, 2023-Ohio-611, (Ohio Ct. App. March 2, 2023).

In Bowyer, the mortgagee, Fidelity Bank, obtained a judgment of foreclosure (Judgment) in September 2020 and the clerk scheduled a sale for September 27, 2021.ⁱ The Judgment required the parties to file any “motions for reimbursement of advances pursuant to R.C. 5301.233 within 21 days from the sale,” making the deadline October 18, 2021. No one filed a motion for reimbursement and the trial court confirmed the sale on December 21, 2021.ⁱⁱ After making all disbursements from the sale proceeds, there remained a $27,196.20 surplus.

Nearly five months after the court-imposed 21-day deadline, Fidelity filed a motion for reimbursement pursuant to R.C. 5301.233 seeking $25,995.53 for advances made for taxes, insurance, property preservation costs, property maintenance costs, court costs, and late fees.ⁱⁱⁱ The lower court denied the motion as untimely noting that the sheriff’s sale had already been confirmed. Fidelity appealed that decision claiming the lower court abused its discretion by denying Fidelity’s motion for reimbursement.

On appeal, Fidelity argued that the 21-day deadline was arbitrary and contrary to R.C. 2329.44 which provided that demand for surplus funds could be made up to 90-days after receiving notice of the availability of excess sale proceeds.^iv In rejecting this argument the Court found the 21-day time period to be sufficient and reasonable and pointed out the 90-day deadline in R.C. 2329.44 pertained only to judgment debtors or defendant creditors/lienholders, it was not applicable to mortgagee lenders.^v

Similarly, the Court rejected Fidelity’s argument that the lower court’s order was “contrary to equity” because Fidelity failed to raise that issue below and because Fidelity again relied on case law that pertained to judgment debtors, not lender mortgagees.^vi The Court concluded that Fidelity failed to demonstrate denial of its untimely motion was “unreasonable, arbitrary, or unconscionable” especially given the fact Fidelity failed to explain why it did not timely file the motion in the first place.^vii This result is unfortunate and costly, but it could have easily been avoided by the timely filing of a simple motion for reimbursement.