On September 6, 2012, the Supreme Court handed down a merit decision in this case. Read the analysis of that decision here.
Read the analysis of the oral argument in this case here.
On May 23, 2012, the Supreme Court of Ohio will hear oral argument in the case of PHH Mortgage v. Prater, 2011-1526. The first issue in this case is whether, under principles of due process constructive notice by publication to a party with a property interest in a foreclosure proceeding is sufficient when that party’s address is known or easily ascertainable. The second issue is whether providing a written notification directing an interested party to monitor a website for the date, time, and location of a Sheriff’s sale constitutes adequate constructive notice by publication.
PHH Mortgage Corporation filed a foreclosure action against Michael S. Prater. When the primary defendants failed to respond or file an answer to the complaint, the trial court granted PHH a default judgment and a decree of foreclosure. The subject real property was scheduled to be sold at a sheriff’s sale three times, but each time, at the request of PHH Mortgage, the order of sale was withdrawn one day before the property was to be sold. PHH Mortgage received written notice by ordinary mail of each of these scheduled sales.
By the time of the fourth rescheduled sale of the property, the sheriff’s office had instituted a new policy whereby each sale date would be made available via the sheriff’s office website; notice of this policy change was sent to all attorneys involved with foreclosure sales pending in Clermont County.The property was ultimately sold at this fourth sale to defendant-appellee Scott A. Wolf, at an amount substantially less than what was owed to PHH, and far below what PHH would have bid on the property. PHH filed a motion to set aside the sale, asserting that PHH had not been provided actual notice of the date, time, and location of the sale as required. The Clermont County Court of Common Pleas denied the motion to set aside, and PHH appealed to the Twelfth District Court of Appeals, which affirmed in a split decision.
The Supreme Court of Ohio accepted PHH Mortgage’s appeal in order to determine (1) the sufficiency of constructive notice by publication to a party with a property interest in a foreclosure proceeding when that party’s address is known or easily ascertainable, and (2) whether providing a written notification directing an interested party to a website for the date, time, and location of a sheriff’s sale constitutes constructive notice by publication.
PHH first argues that due process was violated, as a party to a foreclosure action is entitled to receive actual notice by mail when its name and address is known. Citing Central Trust Co. v. Jensen, PHH asserts that both the Ohio Supreme Court and the United States Supreme Court have rejected the notion that notice by publication is a reliable means of notifying interested parties of their rights. Technological progress, PHH argues, has done nothing to change the minimum constitutional protections requiring actual notice; because the nature of a website posting is a publication, it is constructive, rather than actual, notice, and therefore insufficient to communicate the date, time, and place of a foreclosure sale to an interested party. Website postings, insofar as they are a form of publication notice, cannot be the sole form of notice when a party’s address is known.
Furthermore, PHH argues that the enactment of a policy change that infringes upon an individual’s rights and privileges unnecessarily, such as the shift to notice by publication via the sheriff’s website, is unconstitutional and contrary to public policy, especially when less intrusive alternatives are available. PHH suggests that the harm to the private interests at stake is too great to be worth the convenience to the Sheriff’s Office of the use of notice by website. Additionally, the policy shift from the Sheriff’s Office was not the result of legislative action, but a unilateral assumption of authority.
PHH argues that although it was notified of the Sheriff’s policy change, it did not receive actual notice as due process requires. Because website notice is not as reliable as written notice by mail, it should be precluded by due process requirements. The Supreme Court of Ohio recognized in Central Trust that when a party’s address is known, the method of notice must be at least as reliable as ordinary mail. Therefore, if actual written notice of the date, time, and location of the sale was not provided as required by O.R.C. 2329.26(A)(1)(a), the sale should be set aside, as required by O.R.C. 2329.27(B)(1).
In an Amicus Brief filed by Advocates for Basic Legal Equality and a number of Legal Aid groups, in favor of PHH, the Amici argue that notifying parties via the internet will undermine the integrity of the judicial process; such notice will adversely affect low income Ohioans who lack access to internet, or the skills and resources necessary to use the internet. Additionally, the Amici argue that actual notice is always preferable to constructive notice; for these public policy reasons, the Amici ask that the court find in favor of PHH and set aside the sale.
Wolf, the defendant who bought the property at the foreclosure sale, argues that the Sheriff Office’s actions were reasonably calculated to provide PHH with the necessary sale information and therefore did not violate due process. Wolf emphasizes that the type of notice is not mandated by due process, only that the notice must be reasonably calculated to actually inform the party of the proceeding. As to the sufficiency of the notice, Wolf points out that the trial court specifically found that because counsel for PHH was mailed written notice of the change in the policy, PHH had the opportunity to learn the details of the sale from the website. According to Wolf, PHH received actual notice of the foreclosure sale but failed to act on it.
Student Contributor: Elizabeth Chesnut