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Ohio Supreme Court Reverses Approval of Second Foreclosure After Bank Dismisses First - Countrywide Home Loans Servicing v. Nichpor

June 13, 2013

Vincent Howard and our Ontario foreclosure defense lawyers were interested to see an unusual foreclosure decision out of Ohio. In Countrywide Home Loans Servicing v. Nichpor, Countrywide filed a foreclosure complaint in Ohio state court, but then dismissed it voluntarily after the property sold at a sheriff's sale. Countrywide then filed another foreclosure complaint, leading Michael and Joanne Nichpor to oppose the new foreclosure on res judicata grounds--that is, they claimed the issue had already been decided. The trial court granted the order of foreclosure and the Ohio appeals court affirmed, saying plaintiffs may end a foreclosure case without prejudice any time before an order is entered confirming a sheriff's sale. The Ohio Supreme Court disagreed, finding that voluntary dismissal is not possible after a court enters judgment on the underlying note.

Countrywide started the foreclosure against the Nichpors in February of 2009 and was granted a judgment in May. That judgment included language saying "there is no just reason for delay." The home was sold at auction on July 1 and purchased by third party Jennifer Reichert. On July 12, Countrywide filed a notice of voluntary dismissal of the foreclosure, which was granted. Countrywide later re-filed the foreclosure complaint. The opinion doesn't discuss whether the issue was litigated in trial court, but the foreclosure was ultimately granted again. Appellants appealed this decision to the Sixth District Court of Appeal in Ohio, which affirmed the decision to grant another foreclosure, but certified a conflict with another state appeals court on whether a foreclosure can be voluntarily dismissed after judgment of foreclosure but before confirmation of a foreclosure sale.

The Ohio Supreme Court first noted that Ohio's rule for when a case may be dismissed refers to the start of trial--but no trial was held in this or many other foreclosure cases. Caselaw says that in the case of a default judgment like this, an order of default judgment means trial has started and that the matter has proceeded to a final judgment. A default judgment is a final (and appealable) order, the court said, even in the context of a foreclosure. Thus, the high court concluded that a case can't be dismissed after a default judgment. To do otherwise, as the Sixth District did, the court said, would lead to an undesirable situation in which lenders would be free to dismiss foreclosures every time they got less money than they have liked at a foreclosure sale. They could then re-file the foreclosure for "a second bite at the apple," which the high court found would contradict the general policy in favor of finality in judicial sales. For those reasons, it reversed and remanded the case.

This opinion is too short to include information about how the rights of the Nichpors and Reichert will be affected by this decision. But Vincent Howard and our Costa Mesa foreclosure defense attorneys agree strongly with the Ohio court--which ruled unanimously--that it's unwise to permit foreclosing banks or loan servicers to manipulate the judicial system by dismissing cases whenever they don't like the result they got. This doesn't just implicate the rights of purchasers like Reichert. Borrowers who are trying to hold on to their homes have also been subjected to this behavior, such as the series of Florida cases involving voluntary dismissal of foreclosures with fatal legal flaws. Vincent Howard and our Corona foreclosure defense lawyers don't believe borrowers get this kind of second chance (or sometimes even a first chance), and oppose stacking the deck against them further.

Based in Orange County, Howard Law, P.C., represents clients throughout California who are fighting to hold on to their homes. If you'd like to tell us your story and discuss how we can help, send us an email today or call toll-free at 1-800-872-5925.

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