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Banking & Finance Law Report

Ohio Supreme Court to Hear Oral Arguments Regarding Adequacy of “Website Notice” of Sheriff Sales

Posted in Real Estate

On May 23, the Ohio Supreme Court will hear oral arguments in an appeal by PHH Mortgage Corporation that concerns whether a sheriff’s website can provide constitutionally sufficient notice of the date, time, and location of a sheriff’s sale of foreclosed property. Real estate lenders of all sorts will be interested in the outcome which has important implications for foreclosure proceedings.

Nearly two decades ago, in Central Trust Co. v. Jensen, 67 Ohio St.3d 140 (1993), the Supreme Court held that notice by mail or other “equally reliable” means is a constitutional prerequisite to a proceeding that adversely affects a party’s property interests, when the interest holder’s address is known or easily ascertainable. The PHH Mortgage Corp. case tests that principle in the Internet age.

In PHH Mortgage, the mortgage company (“PHH”) filed a foreclosure action in April 2008, and the trial court’s final judgment in favor of the company was entered the following September. The property was then to be sold through the Clermont County Sheriff’s Office. On three occasions in 2009, the order of sale was withdrawn. On each of these occasions, PHH was notified by mail of the date and time for the sale. The trial court scheduled a fourth sale for April 2010. But PHH did not receive notice by mail of this sale, because at some point before then the sheriff’s office (due to budget constraints) had stopped sending notice by mail of upcoming sales, and began publishing the sale dates on its website. So, even though PHH intended to bid on the property at the sale, it did not receive notice by mail of the sale, and the property sold for an amount substantially less than the debt owed to PHH and far below what it intended to bid.

The Clermont County Court of Appeals determined that counsel for PHH was notified that he would need to check the sheriff’s website for future sale dates, and that “notice by website is, at the very least, equally reliable to notice by mail.” The court of appeals thus concluded that the requirements of due process and Central Trust had been satisfied and refused to set aside the sale.

PHH contends that the court of appeals’ decision effectively overturns Central Trust and approves a method of notice – what PHH calls “constructive notice by website” – that is more akin to notice by publication, rather than actual notice. PHH also notes that the General Assembly amended R.C. 2329.26 and .27 after Central Trust to require that written notice of the date, time, and place of an execution sale be given to parties in a foreclosure action.

The appeal has attracted the participation of several Legal Aid organizations across the State who have aligned themselves with PHH and contend that “constructive internet notice” is not “equally reliable” as actual written notice, given that many Ohioans in rural and low-income communities have limited access to the Internet. Stay tuned to this blog for updates on the decision in this appeal.