Merit Decision: “Due Process Means More than the Easiest and Cheapest Way.” PHH Mtge. Corp. v. Prater.

On September 6, 2012, the Supreme Court of Ohio handed down a merit decision in PHH Mtge. Corp. v. Prater, 2012-Ohio-3931.  In a unanimous opinion authored by Justice Stratton, the Court held that when a party’s address is known or easily discovered, notice to a party with an interest in a foreclosure action by letter directing that party’s lawyer to the sheriff’s website fails to meet due process.

Case Background

In April of 2008, PHH filed a foreclosure action against Michael Prater.  Later, a default judgment was entered against Prater. This property was scheduled to be sold at sheriff’s sale, but was rescheduled three times at PHH’s request.  The notice of the third scheduled sale included a letter from the sheriff, informing the recipient that after December 31, 2009, the sheriff’s office would no longer send actual notice of property sales to lawyers, but would instead provide this notice on the sheriff’s website. The sheriff’s office sent notice of this policy change to all lawyers with pending foreclosures in Clermont County.

The Prater property was scheduled for a fourth sale on April 6, 2010. Counsel for PHH did not appear at the final sale.  The Prater property was sold to Scott Wolf, now an intervenor in the case.

PHH moved to set the sale aside on the ground that it had not received written notice of the date, time and place of the sale.  The trial court denied the motion.  The Twelfth District Court of Appeals upheld the denial, in a split decision.

Threshold Issue

As a threshold matter in the case, the Court noted that although the policy involved here only applied to lawyers, since lawyers are agents for parties to cases, as a practical matter notice to the lawyer is notice to the party, and the Court uses the terms interchangeably.

Civil Procedure 101

OK—remember Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306?  Justice Stratton led off the Ohio Supreme Court’s analysis with it. Mullane held that

“[a]n elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.”

Ohio precedent—Cent. Trust Co. N.A. v. Jensen.

Justice Stratton noted that Ohio already has precedent on this subject. The syllabus of  Cent.Trust Co. N.A. v. Jensen,  is “Notice only by publication to a party to a foreclosure sale or to a person having an interest therein is insufficient to satisfy due process when the address of that party or interested person is known or easily ascertainable.”

Justice Stratton added that the Court had already rejected the same argument that Wolf was raising in this case, and had also held that just being sophisticated doesn’t impose a duty to keep on looking for notice in the newspaper (back when people read them) that should be expected to arrive in the mail.

At oral argument Wolf had argued that PHH’s lawyer did receive actual notice from the sheriff’s office that the details of the sheriff’s sale could be found on its website.  The high court disagreed with this characterization, finding that what the lawyer received was notice in the change in the procedure of how notice would be given, not notice of the particulars of the sale.  “Wolf is confusing notice of the change in procedure with actual notice,” wrote Stratton.

The Due Process Problem with Wolf’s Position

Wolf argued that unlike traditional newspaper publication, the notice letter was sent to counsel, and specifically directed him as to the site of the information. He also argued that the sheriff’s website was far more accessible than a newspaper, and that in this case PHH’s lawyer knew that a fourth sale date would be scheduled.

While acknowledging that many of Wolf’s assertions might be true, they missed the point, Stratton wrote, because the new internet notice shifts the burden of notification from the sheriff’s office to the interested party, and requires that party to dig out the information.  This burden-shifting is inappropriate and too onerous under the circumstances. Due process requires more.

And All of Us Don’t Have High Speed Internet Access

Justice Stratton threw in some statistics from the U.S. Department of Commerce showing that last year 32 percent of households didn’t have the internet at home.  Rural households and old folks are less likely to be connected.

 A Disclaimer

Here’s  a bit of a backpeddle in the case:

“While we are not holding that mail is the only form of notice that would satisfy due process in this instance, we are holding that under the facts of this case, requiring a party to look at a website to find notice of the date, time, and location of a sheriff’s sale is insufficient.”

To what is the Court leaving the door open?

Email notification, possibly, something Judge Powell suggested in his dissent in the court of appeals decision, and Justice Cupp asked about at oral argument of this case. This of course would require a local or state rule change, which the Court clearly is not opposing here.

Conclusion

“Constructive notice through the Internet, which is more akin to notice by publication in a newspaper, is simply not sufficient or reasonably calculated to provide actual notice to all nondefaulting parties.”

 Best Line in the Decision

It actually comes from Judge Powell, in his dissent in the court of appeals opinion—“Due process means more than the easiest and cheapest way.” My procedure colleagues are no doubt applauding.

Case syllabus

Constructive notice by publication to a party with a property interest in a foreclosure proceeding via a sheriff’s office website is insufficient to constitute due process when that party’s address is known or easily ascertainable.

Concluding Observations

After the argument I predicted that this looked like a clear win for PHH on the specifics of the case, and that the rationale was likely to be the extra burden of having to go and “ferret out” the information, as Chief Justice O’Connor put it. The burden-shifting issue was the key line of questioning at argument.  Justices Stratton, Lanzinger, and the Chief all asked about it.  In fact, this unanimous decision really included the concerns all justices asked about at argument.  The Chief and Justice O’Donnell had asked how this case was different from Central Trust. Almost everyone pressed on the comparison to newspaper notice.  Justice Stratton had worried about the availability of internet access.  There’s no doubt that some day newspaper notice will be replaced, but due process requirements must be met in doing so.

This entry was posted in Merit Decisions, Ohio Supreme Court Watch and tagged , , , , . Bookmark the permalink.

One Response to Merit Decision: “Due Process Means More than the Easiest and Cheapest Way.” PHH Mtge. Corp. v. Prater.

  1. Andy Engel says:

    It was no mystery how the Court would hold in this case. When the Poverty Law Center files an amicus brief in support of a lender, clearly something is wrong.

Leave a Reply

Your email address will not be published. Required fields are marked *