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Real Estate - Notice by Website Publication in Ohio Foreclosure Actions

Tuesday, June 5, 2012

By Eric J. Becker, Baker Hostetler

Introduction


The Ohio Supreme Court will soon determine whether a county sheriff may notify an interested party to a foreclosure action of an impending sheriff's sale by directing the party to monitor a website for sale information, even when the party's address is ascertainable.1 The court's prior decision in Central Trust Co. v. Jensen clearly holds that interested parties are entitled to receive actual notice in this circumstance.2 However, in PHH Mortgage Corp. v. Prater, in which oral argument was recently held, advancements in technology and the reliability of websites may prompt the court to significantly modify Jensen by approving the use of websites to notify parties of the date, time, and location of an impending sale.

Prater originated from a foreclosure complaint filed in Clermont County, Ohio, by PHH Mortgage Corporation; Plaintiff-PHH Mortgage received a favorable final judgment before the trial court.3 Several attempts were made at scheduling a sale date for the subject property before a fourth and final date was set.4 For the purpose of mailing notice of the date, time, and location of the sale, the Sheriff's office had Plaintiff's counsel's address on file.5 However, prior to scheduling the final sale, the Sheriff's office instituted a new policy whereby it discontinued mailing actual notice of sale information (i.e. date, time, and location) to interested parties or their counsel.6 Instead, the Sheriff's office began placing this information on a website and mailed a notice containing only instructions to monitor the website for all sale information.7 The subject property then sold at Sheriff's sale on April 6, 2010, and PHH Mortgage missed the sale claiming that it did not receive actual notice of the date, time, and location of sale.8 PHH Mortgage then filed a Motion to Set Aside the Sheriff's Sale, which was denied by the trial court and affirmed by Ohio's Twelfth District Court of Appeals.9

Due Process Requires Actual Notice


The Ohio Supreme Court's anticipated opinion in Prater is certain to implicate the court's pre-Internet decision in Central Trust Co. v. Jensen.10 The certified question in Jensen was “whether a party to a foreclosure action or a person with an interest in the foreclosure sale is entitled to actual notice by mail where his address is known or whether the Ohio statutory requirement of notice by publication is sufficient to satisfy due process.”11 The Jensen court adopted the rationale and holdings of two seminal U.S. Supreme Court cases: Mullane v. Central Hanover Bank & Trust Co. and Mennonite Bd. of Missions v. Adams.12 “The principle running through these cases is that notice at least by mail is a constitutional prerequisite to a proceeding that adversely affects a property interest where the interest holder's address is known or easily ascertainable.”13 In Mennonite, the U.S. Supreme Court found that a mortgagee has a substantial property interest deserving of constitutional safeguards.14 As such, due process mandates that a mortgagee receive direct and actual notice of a proceeding that may adversely affect the mortgagee's property interest.15

Following Mullane and Mennonite, the Jensen court noted that the requirements of procedural due process depend on a reasonable balance between the property interest in jeopardy and the state's interest in efficiency and finality in proceedings.16 However, the Ohio Supreme Court opined that “[w]hen a party's address is known or easily ascertainable and the cost of notice is little more than that of a first-class stamp, the balance will almost always favor notice by mail over publication.”17 As such, Jensen has been interpreted as forbidding the use of constrictive notice via publication as a means of communicating the date, time, and location of a sheriff's sale to interested parties.18

Advancements in Technology – Websites


Despite the holding in Jensen, Ohio's Twelfth District Court of Appeals concluded that sending written notification directing PHH Mortgage to access the Sheriff's office website to ascertain the date, time, and location of the impending Sheriff's sale was not akin to receiving notice by publication. Instead, the Twelfth District reasoned that because the task of opening and reading a website is no more burdensome or less reliable than the act of opening and reading a letter, posting the sale information on the Sheriff's website satisfied the minimum requirements of due process articulated in Mennonite and Jensen.19

The Twelfth District explained that the Sheriff's use of a website was consistent with Mennonite and Jensen because both cases allow for notice to be sent “by mail, or by other means equally reliable.”20 Using this standard, the Twelfth District reasoned that websites have become a reliable means of transmitting information, and that as technology advances so too must the standards of due process.21 Moreover, because the Sheriff's office mailed notice to Plaintiff's counsel stating that sale information would be available on the website, the appeals court found that Plaintiff was not notified purely by publication. Instead, the appellate court held that the Sheriff's instructions to monitor a website equated to actual notice because it was as reliable as mailing a letter.22 However, in a 2008 Opinion the Ohio Attorney General's Office found that notice by publication via a website is invalid because websites do not meet the statutory requirements governing notice by publication under R.C. 7.10 to 7.12.23

Conclusion


Prater modernizes a decades-old debate concerning actual notice and notice by publication. While before that debate was between mailed notice and newspapers, Prater invites the court to resolve the same debate within the context of new forms of electronic communication. With the recession lingering on, state and local officials are resorting to advancements in technology and electronic resources in order to provide the same services despite shrinking budgets. The broadening implementation of e-filing within courts indicates that the legal profession is beginning to incorporate new forms of technology in certain legal proceedings. Moreover, with the prominence of the internet, many rely on websites as a cost-effective means of communicating and accessing important information. The question that Prater may resolve is whether these new forms of technology comport with the established constitutional standards of due process in the course of proceedings affecting the property interest of a party.

Eric Becker is currently a member of the Baker Hostetler team working on the investigations and litigations as Counsel to the court-appointed SIPA Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC. Prior to joining Baker Hostetler, Eric served as a litigation law clerk for a Cleveland law firm where he worked on a variety of litigation and creditors' rights matters. During law school, Eric was a member of the Cleveland-Marshall Moot Court Team and the Journal of Law and Health.

Disclaimer

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