Buying real estate improved by an existing building is in itself a legally intricate undertaking. However, new construction and renovation introduce a whole new level of complexity, difficulty, legal complication and financial risk.

This blog entry explores just one of those categories of added risk in the construction and renovation arena: mechanics liens. This article also is not the definitive, all-encompassing explanation of the Ohio mechanics lien statute (it has a multitude intricacies).  Rather, we provide herein three (or four) simple steps to assure that the extraordinary “muscle” added by mechanics lien claims is not applied against you as a property owner.

General risks of real estate investing

In short, real estate investing is not for amateurs or the faint of heart.  Many of the entries on this blog explore how to avoid pitfalls associated with real property acquisitions involving existing improvements, such as issues relating to matters of title, tax, physical defects in the property and improvements (and seller fraud relating to the same), zoning, land use and other regulatory hurdles,  and seller fraud in financial misrepresentations, just to name a few.

Additional risks inherent in new construction and building renovation

However, taking raw land or a developed lot (the difference being built roadways, utilities, addressing zoning and full subdivision) and building a new structure, or renovating an existing structure, are fraught with a host of added risks: Proper planning and design, zoning and land use restrictions, utility access, building code permitting and inspections, selecting an honest and qualified contractor who has a corral of qualified subcontractors, materialmen and laborers.  The list of added complexities associated with adding improvements to real estate is almost endless.  Properly executing a construction project from beginning to end is difficult.  That difficulty today is enhanced by the lack of availability of skilled labor and subcontractors, increasing pricing and drawing into the field entirely unqualified, untrained and unsupervised laborers.

The special risks associated with mechanics lien

One of the biggest legal challenges is protecting property owners and lenders against mechanics liens from contractors, subcontractors, materialmen and laborers on the project.

What is a mechanics lien?

Mechanics liens (not at all for what we think of as “mechanics” in normal parlance) are purely creatures of statute, meaning they don’t exist as a matter of contract nor are they common law rights.  Rather, R.C. §1311.011 (one- and two-family residential dwellings) (addressed partially in this blog entry)  and R.C §1311.02 (commercial properties) provide statutory lien rights to unpaid contractors, subcontractors, laborers and materialmen.  All of these rights are strictly limited in time, amount and circumstances allowed by statute.

These statutes provide a tremendously powerful tool for these parties to assure payment from the property owner, secured firmly by the equity in the property, so long as their claim is narrowly allowed under the statute, and those rights will not extend beyond the statute. (The effective date of priority of liens as against mortgages and other lien holders is yet another a matter not addressed in this entry.)

These lien rights can transcend the contractual obligations of the property owner, meaning an owner can in fact owe money to someone with whom he has no contract at all (the owner may never have known their name or that they did work on his job, or supplied materials to his job).  An owner can, under some circumstances, owe money to a subcontractor, materialman or laborer even though he already has paid everything he owes to the general contractor (this principle applies to commercial projects only).   These can be jarring revelations to an unsuspecting property owner who has not taken the simple steps in this blog entry to protect himself from mechanics liens.  In other words, unaddressed, this is dangerous territory for a property owner making improvements to his property.

Three simple steps an owner can employ to protect himself from mechanics liens

Again, the Ohio mechanic’s lien statutes are tremendously involved, and this blog entry is not attempting to explore the many intricacies in that statute.  That’s for another day.  Rather, this article offers a few simple steps that a property owner undertaking a construction project can employ to avoid the potential of financially and legally catastrophic consequences from liens sinking a project or ruining the finances of a property owner.

  1. Pay no more to the contractor than the true value of work actually completed as of the draw, and perhaps less.  In some ways, this step is self-explanatory. As a construction project progresses, the owner should take great care to pay the contractor only for the value to the owner and the project of the work finished at the time of payment. In a reverse analysis, the owner should always have enough money left in his construction budget to finish the job if the contractor walks away after the most recent payment.  Now, estimating these two amounts (the value of work completed and remaining cost to complete) is tricky, and the owner should realize that the contractor — knowing the construction costs and business better than him — is in a superior position to estimate this, but relying on the contractor’s “word” is equally risky.  So, this step requires the owner to have a good understanding of the real cost of each stage of the work.  It also requires assuring the work completed at each stage is code compliant, contract compliant, and of good quality and workmanship.  Beyond this step, many owners will require “retainage” of an addition 10-20% from the “actual value of the improvements to date” to assure there is always enough left in the construction budget to complete the project.  This retainage is then paid at the end of the project (usually upon issuance of a certificate of occupancy, “substantial completion” as certified by the architect or some other objective metric).
  2. Affidavits of full payment. As each installment (or “draw”) of the construction budget is paid to the general contractor, the general contractor should provide an affidavit — a sworn statement, the falsity of which is a felony and the basis for a civil fraud claim– of what he is owed, and critically, the names of each subcontractor, materialman, and laborer, and the amounts owed at that stage to each.  In good practice, that “master affidavit” is then also accompanied by further affidavits from each subcontractor, materialman and laborer as to the amounts they are owed at that point in the project.
  3. Joint checks.  Then, the owner should cut joint checks to (a) the contractor and (b) each subcontractor, materialman and laborer, to assure that the amounts they themselves swear are due and owing are in fact paid in full.  These joint checks should track the sworn statements in the various affidavits.

If a property owner on a project follows these three simple steps, the risk of a mechanics lien is limited to (a) those subcontractors, materialmen and laborers not listed on the affidavits (falsely) and (b) only those claims for additional work arising from the most recent payment.

Beyond these three simple steps, a one-to-two family residential property owner is also protected from liens of subcontractors, materialmen, and laborers to the extent that he has paid the general contractor in full, or is limited only to the amounts owed under the master contract to the general contractor.  That statutory principle is more fully explored here.

  • Lien waivers.  A drastic fourth protection that can be employed by a property owner is to allow no contractor, subcontractor, materialman or laborer to step foot on the job or to supply materials to the job unless they have signed in advance a lien waiver, saying (a) in the case of the contractor, they will look only to the contract (and the courts in a typical collection action) to assure payment and (b) in the case of subcontractors, materialman and laborers, saying they will look only to the general contractor for payment, not to the owner and not to a lien against the property.  These lien waivers, heavy-handed and unusual as they may be, are legally effective.

So, there is much much more, legally and business-wise to being successful in the execution of a of residential or commercial construction project, and so much more of a winding path in the Ohio mechanics lien statutes, but these three (or four) simple steps can change the dynamics of a construction project strongly in favor of the property owner.

For assistance with mechanics lien issues or other legal challenges relating to new construction, feel free to contact me at 513.943.6655.

While the real estate market seems to have slowed slightly, our title company, Ivy Pointe Title, continues to close a record-breaking number of transactions. Perhaps due to challenges that buyers are facing in making competitive offers and having those offers accepted, our firm has also noticed an uptick in the number of (actual or attempted) contract terminations prior to closing – this phenomenon, when unjustified under the terms of the contract, is often referred to as an “anticipatory repudiation.”

An anticipatory repudiation is “‘a repudiation of the promisor’s contractual duty before the time fixed for performance has arrived.’” Sunesis Trucking Co. v. Thistledown Racetrack, L.L.C., 2014-Ohio-3333, ¶ 29 (8th Dist. 2014), quoting McDonald v. Bedford Datsun, 59 Ohio App.3d 38, 40, 570 N.E.2d 299 (8th Dist.1989). For example, if you have a contract to sell your property to a buyer, and the buyer backs out three days before the closing for any reason not justified under the terms of the contract – or for no reason at all – an anticipatory repudiation of the contract has likely occurred. It is akin to a breach of the contract; however, because it occurs before “the time fixed for performance” (i.e., the closing), it is considered “anticipatory.”

Remedies

“If an anticipatory breach of contract is found to occur, the injured party has the option of (1) terminating the contract and suing the breaching party immediately, or (2) continuing the contract and suing the breaching party for damages after the time for performance has passed.” Sunesis, at ¶ 33, citing 18 Ohio Jurisprudence 3d Contracts, Section 238 (2011). It is worth noting that the “repudiation” must be unequivocal. If you are unsure whether a party’s statement amounts to a repudiation or whether they intend to still fulfill their obligations under the contract, you should seek “adequate assurances” as to whether they intend to comply.

An anticipatory repudiation may stem from a buyer submitting offers on multiple listings to increase the odds of one of their offers being accepted (certainly plausible in this market) or a seller receiving a higher back-up offer and having remorse over having accepted a previous, lower offer. In either event, the non-repudiating party has a right to enforce the contract or sue for their damages. For instance, in the above hypothetical, the seller could re-list the property and, if the property sells for lower than the contract price with the original buyer, sue for the difference.

Affidavit of Title

An additional mechanism that is often helpful for a buyer (where the seller repudiates) is an affidavit of title. Pursuant to Ohio R.C. 5301.252, a person having an interest in real estate by virtue of a contract may assert his or her interests via an affidavit recorded in the real property records. This effectively encumbers the real estate such that most title companies will not close a transaction on the property while the affidavit is pending. In other words, it prevents the seller from being able to sell the property to someone else where you have a valid and enforceable contract to purchase that same property – it forces them to “deal with” you and your contractual interest in the property. Importantly, the affidavit of title has various technical requirements and, if containing any untrue statements, could serve as the basis for a slander of title claim. Therefore, it is important to consult with an experienced attorney before utilizing this mechanism to make sure that it is properly prepared and recorded.

If you would like to know more about your rights relative to a real estate contract, please don’t hesitate to contact us. We would be happy to meet with you and explore your options.

 

On September 29, 2021, the First District Court of Appeals issued a decision in CUC Properties, Inc. v. smartLink Ventures, Inc., Case No. C-210003 which will have a far reaching and substantial impact upon cases in the State of Ohio in which default judgment was obtained as a result of service by the US Postal Service during the COVID-19 pandemic.

At issue in CUC Properties v. smartLink was the service of Summons and Complaint by the US Postal Service.  In that action, smartLink disputed that it received service of the Complaint as provided under Civ. R. 4.1 where the USPS noted “Covid 19” or “C19” on the return receipts delivered to smartLink and its registered agent.  As a result of their failure to file an Answer, CUC Properties obtained judgment by default against them.  smartLink appealed, asserting that the notation “Covid 19” or “C19” did not amount to service as provided under the Civil Rules.

The Court agreed, holding that,

The Covid-19 pandemic certainly demanded innovation and flexibility, and courts around the state (and country) admirably exhibited great creativity in keeping the courthouse doors open while also ensuring public safety. The challenging nature of the pandemic aside, we simply cannot dispense with the rules and due process protections. This is particularly so when the record contains no indication that service was otherwise validly achieved. On this record, therefore we hold that a notation of “Covid 19” or “C19”  does not constitute a valid signature under Civ. R. 4.1(A).

This decision, undoubtedly, will have far reaching effects upon the finality of default judgments granted in Ohio courts during the course of the pandemic where the USPS chose to use a notation of “Covid 19” or “C19” in place of having the individual at the address personally sign for the mail from the Court.

 

The Basics

As a basic principle, every citizen in the United States (and even non-citizens) are entitled to due process under the law. In simpler terms, everyone has the right to have their legal disputes treated fairly based on established laws and principles. With certain exceptions, this includes a right to bring an action in court to hold accountable those who have committed a wrong.

So what are those exceptions, and what do they mean?

One of the most notable exceptions to the right of a person to have their matter heard in court is where the parties have agreed to a process known as “arbitration.” Arbitration is “a method of dispute resolution involving one or more neutral third parties who are [usually] agreed to by the disputing parties and whose decision is binding.”  Black’s Law Dictionary 119 (9th ed. 2009). Practically speaking, arbitrators are usually practicing or retired attorneys and/or judges who essentially serve as the trier of fact in an expedited proceeding held in lieu of a court trial. Arbitration can be particularly appealing to large companies that often face high volumes of threatened or actual legal claims for a multitude of reasons – for one, arbitration is generally more expedient and cost effective than in-court litigation. Employers frequently require them as a condition of employment so that various employment claims are handled confidentially.

Why wouldn’t everyone want to participate in arbitration?

Another reason that large companies, such as banks, credit card companies, and other financial institutions, may push arbitration is that it is a significantly more favorable forum for – you guessed it – those companies. Other significant disadvantages for the “Average Joe” consumer in arbitration are: (a) these arbitration clauses often disallow class actions or certain elements of damages, i.e., “punitive” damages, (b) arbitration usually limits the parties’ discovery rights – for example, the consumer may not be able to depose witnesses or seek the production of documents that could help them prove their claims and (c) arbitration is frequently required to be confidential, prohibiting a public discussion of the facts and outcome of the proceeding.

What if I don’t want to be forced into arbitration?

Over the past several decades, the law has been very favorable to companies seeking to force customers/consumers into arbitration. Southland Corp. v. Keating, 465 U.S. 1, 11 (1984) (noting “a national policy favoring arbitration”). However, there has recently been a palpable shift in these principles, especially in Ohio and the Sixth Circuit.

Arbitration Case Law

In March 2021, the Sixth Circuit overturned an Eastern District of Tennessee case wherein the District Court granted a bank’s motion to dismiss litigation filed in court and compel arbitration. See generally, Sevier County Schs. Fed. Credit Union v. Branch Banking & Trust Co., 990 F.3d 470 (6th Cir. 2021). In that case, the bank (after a series of mergers) sent out a new agreement that contained new or updated terms and stated that, by continuing to maintain an account with the bank, the accountholders agreed to those new terms – in other words, continuing to do business with the bank constituted acceptance of the new terms. The new terms included, inter alia, a binding arbitration provision and a waiver of class actions. Id., at 473. The District Court found that, by continuing to do business with the bank, the plaintiffs had accepted such terms and, therefore, must pursue their claims via arbitration. See generally, id. But the Sixth Circuit disagreed. Id.

In rendering its decision, the Sixth Circuit found that determining the existence of a valid arbitration agreement is a question of state-law contract principles. Id., at 475. That is, what are the elements required to create a contract under state law, and were those elements met. Under Tennessee contract law (which is analogous to Ohio contract law), the formation of a contract requires consideration and mutual assent. Id., at 476. Mutual assent can only be found where there is a “meeting of the minds,” meaning “Did both sides assent to be bound by the terms of the contract?” Id. The Sixth Circuit in Sevier County found no mutual assent and, specifically, noted that mere “silence or inaction” is insufficient to bind a party to an arbitration provision. See id., at 477, quoting its prior decision in Lee v. Red Lobster Inns of America, Inc., 92 F. App’x 158, 162 (6th Cir. 2004) (“The flaw in the district court’s analysis is that it places the burden on the [consumers] to . . . object to a company’s unilaterally adopted arbitration policy or risk being found to have agreed to it. This is not how contracts are formed.”).

Ohio courts have begun following suit, even citing directly to Sevier County. On August 5, 2021, the Eighth District Court of Appeals rendered its decision in Gibbs v. Firefighters Community Credit Union, 2021-Ohio-2679, affirming the lower court’s decision denying a defendant’s motion to stay the action pending arbitration. In Gibbs, plaintiffs filed a class action lawsuit, and the defendant credit union moved to compel arbitration, arguing that plaintiffs agreed to a change in the terms and conditions of their account agreements, including an “Arbitration and Waiver of Class Action Relief provision,” by failing to opt out. Id. at ¶¶ 2-3. The credit union purportedly sent notice of these changes to account holders via email, and the email stated that an account holder’s continued use of defendant’s banking services indicated assent to the updated terms. Id. at ¶¶ 3-4. The credit union maintained that because plaintiffs never opted out of the provision, it became effective and controlled the matter. Id. at ¶ 3. However, nothing in the content of the email informed the account holders of the Arbitration and Waiver of Class Action Relief provision or the ability to opt out – this information was, instead, included in an attachment to the email.  Id. at ¶ 5.

Like the court in Sevier County, the Eighth District in Gibbs relied on Ohio contract law principles governing the formation of contracts and found that the credit union failed to meet its burden of establishing the existence of an agreement to arbitrate. Id. at ¶¶ 14, 18. The court held that there was no “meeting of the minds” between plaintiff and the credit union as to the arbitration provision because the content of the email notice gave no indication that the changes involved the addition of the arbitration provision. Id. at ¶¶ 16-17. Instead, “[t]he Plaintiffs were thus lulled into not giving a thought to the unilateral addition of the arbitration provision . . .” Id. at ¶ 17, quoting Sevier County, 990 F.3d at 481.

Take Action

If you wish to pursue claims that the other party maintains are subject to an arbitration provision, and you do not wish to participate in arbitration, you may have some options. For instance, if you dispute the existence or validity of an arbitration clause, Ohio statute provides a process by which you can assert such dispute. See R.C. 2711.03(B) (“If the making of the arbitration agreement or the failure to perform it is in issue in a petition filed under division (A) of this section, the court shall proceed summarily to the trial of that issue.”). That is, if you dispute that an arbitration agreement exists, you may be entitled to have a court determine that threshold issue before the underlying claims proceeds.

We Want to Help

We recently had a case where a financial institution argued that our client’s claims, filed in state court, were subject to an arbitration agreement and, therefore, moved the court to dismiss our claims and compel arbitration. We disputed that our client had ever received proper notice of any arbitration agreement, much less agreed to the same, under facts very similar to the Sevier County and Gibbs cases discussed above (ironically, the financial institution had previously cited to the District Court case in Sevier County, yet failed to notify the Court when it was overturned by the Sixth Circuit). We moved for a trial under R.C. 2711.03(B), which was granted. After an unsuccessful interlocutory appeal by the financial institution and nearly eighteen months of litigation and discovery on this limited arbitration issue, the financial institution eventually agreed to withdraw its motion to compel arbitration.

While it is not always an easy road, we are passionate about protecting our clients’ rights, including the right to have their claims heard in the proper forum. Unfortunately, consumers are too often “railroaded” by big companies with deep pockets in the litigation process, and it is our desire to make sure every client has access to the tools necessary to hold these companies accountable for their conduct. As is evident from our recent case and the long and arduous battle it took to keep our client’s claims in state court where they belong, we don’t say this lightly – we live it every day in our practice.

If you are considering bringing a claim or have concerns regarding whether an arbitration agreement may apply, we can help you evaluate those questions and explore your options.

Please contact Casey Jones (513.943.5673) if we can help with your litigation or arbitration dispute.

This firm and the firm of Markovits, Stock & DeMarco have undertaken a complex piece of real estate class action litigation against Build Realty, First Title, George Triantafillou and many others involving hundreds of victims. After many years and much discovery and motion work, the Motion for Class Certification has finally been fully briefed for Judge Douglas Cole. Many of our readers are following that litigation and check in for updates.

Attached are the following pleadings relating to that motion:

We would expect (but cannot assure) a decision on this motion sometime before the end of 2021 and then will advise prospective class members thereafter.  In the meantime, if you have questions, please contact attorney Chris Finney at 513.943.6655.

In business and personal commercial dispute resolution, clients come to us who either have been sued by someone and need a defense, or have been wronged by someone and desire to pursue that claim in court. For both, litigation should involve, among other factors, a risk versus reward analysis.

If you pay us “X” in legal fees and “Y” for expenses, will you obtain a better outcome than settling on even unfavorable terms (as a defendant) or walking away from a claim (as a plaintiff)?

Unfortunately, litigation is always a “bad option” for a host of reasons:

  • The simple math of the cost of getting the matter before a Judge for resolution.
  • The unpredictability of result. Even the best cases (from a defense or prosecution standpoint) are never as clear to a judge or jury as they are to you, and in many cases your attorney, who takes the role of being an advocate who believes in your case and in you.
  • When you bring a claim, will the defendant bring a counterclaim that you will need to defend? This is very frequently the path of litigation.
  • Related to the foregoing, rarely are cases as one-sided as the client tells us in the initial meeting. There frequently is one stray witness, one stray e-mail, one stray fact that does not make our client look exactly like Snow White when the case goes to trial.
  • Litigation disrupts personal life and business affairs. It is messy, time-consuming, distracting to family, neighbors, friends, clients and employees, who may need to testify at trial, gather voluminous documents, and be otherwise be distracted from life and business priorities.
  • Litigation has “collateral damage” associated with it: Bad publicity, disruption of partnership affairs, or alienating client and vendor relationships. Years ago, I had a client involved in litigation who was informed after years of study and volunteer activity that he could not serve as a deacon in his church because of his litigation. Another had his name plastered on the front page of the newspaper. A third was told by his bank to do business elsewhere.
  • In the middle of litigation can be business failure, death, divorce, insolvency, transfers of assets, etc.  In other words, just because someone appears to have assets that can be seized when a case is commenced, does not mean the assets will be there to collect after three or five years of fighting.

So, the important question for the client is: Is this fight worth these costs, distractions and risks to you?

I say the words “risk” and “reward” and very frequently, I wonder if clients only hear the word “reward.” I wonder if they really thoroughly assess the costs and risks involved in being in a courtroom.

Often, before a case is initiated, clients tell me it is the “principal” of the case, and more power to anyone in our society who acts out of principal. But just as frequently, after bills mount for three months, six months or a year, they would be happy just to settle for the legal fees they have incurred to that point, taking them back to where they started with our firm.  In the rear view mirror, the principal pales in comparison to the cost.  But the other party has spent the same or more in legal fees to get to that point, and is not interested in spending or conceding more on a settlement.

So, when I say litigation is  a “bad option,” I mean it. But the question is whether it is worse than the other options of defending a frivolous case or walking way from a meritorious case that — for a host of reasons — needs to be pursued.

What is a case really worth? As I recall, now-deceased Federal Judge Arthur Spiegel from Cincinnati encouraged litigants in his courtroom to look at a case this way:

  • As a Plaintiff, if you won, how much really will you collect?
  • And then what is your anticipated percentage chance of winning at trial?
  • If your collectible damages are $400,000 and you have a 75% chance of prevailing (no case is a 100% winner), the case has a settlement value of $300,000.
  • And then off of that comes the legal fees,  time and expense of moving forward with trials and appeals.
  • The same analysis applies to the defense side of a case.

I encourage litigants to make this analysis before they incur $100,000 or more in legal fees and suffer the other adverse consequences of litigation. Unfortunately, rare is the case — exceedingly rare — when both the Plaintiff and the Defendant are both willing to have that discussion before engaging in the mutually assured destruction that litigation almost always becomes.

But from your side, be sure to perform your risk-reward analysis before litigation commences or proceeds too far.

“A mortgage is a conveyance of property to secure the performance of some obligation, which is designed to come void upon due performance thereof.”[1] The Ohio Revised Code characterizes mortgages as “liens.”[2] Mortgage liens are only applicable to real property, as with the land and the buildings attached to it.

Mortgagors (the party granting the mortgage) tend to grant mortgages to secure payment of money from the mortgagee (the party granting a loan in consideration for the mortgage).[3] The instrument evidencing the debt secured by the mortgage is generally referred to as a “note.” However, mortgagors may grant mortgages to secure the performance of other obligations, like an environmental indemnification.

Notes and mortgages, as contracts, are negotiable by the parties to them. As such, notes and mortgages include all sorts of obligations and remedies. That said, there are three basic remedies that a mortgagee can pursue to enforce the note and mortgage.[4] Mortgages can pursue all three of the following remedies at the same time or separately.[5] However, in doing so, a mortgagee must keep in mind the different statute of limitations periods for each remedy.

(1) An action on the debt secured by the mortgage (the note).

When a mortgagee brings an action on the debt secured by the mortgage, the mortgagee is bringing an action for a personal judgment debt evidenced by the note against the mortgagor (or any other maker of the note, even if they did not sign the mortgage).[6]

In Ohio, written instruments, such as notes, have a six-year statute of limitations, running from the due date(s) or, if applicable, the date the debt is accelerated.[7] When the statute of limitations runs on the note, the mortgagee can still go after the mortgagor with a foreclosure action, as the statute of limitations on the mortgage is longer. The statute of limitations for the foreclosure does not run by virtue of the statute of limitations on the note running.[8]

(2) An action to foreclose on the mortgaged property.

When a mortgagee brings an action to foreclose on the mortgaged property, the mortgagee is attempting to secure the mortgagee’s conditional interest (conditional on mortgagor default) in the property.[9] If the mortgagee succeeds here, the mortgagee will have superior title to the property than that of the mortgagor.[10] The go-to remedy for mortgagees is that of an action to foreclose on the mortgaged property.[11]

In Ohio, foreclosure actions have an eight-year statute of limitations, running from the date that the breach occurred.[12] The statute of limitations for foreclosures was changed from fifteen years to eight years on September 28, 2012.[13] For breaches that occurred before September 28, 2012, the statute of limitations runs at the end of the fifteen-year period from the breach or September 27, 2020, whichever is earlier.[14]

(3) An action of ejectment against the occupier of the mortgaged property.[15]

When a mortgagee brings an action of ejectment against the occupier of the mortgaged property, the mortgagee is attempting to take possession of the property.[16] In doing this, the mortgagee is taking advantage of the mortgagee’s superior title to the property to that of the mortgagor. [17]

In Ohio, ejectment actions have a twenty-one-year statute of limitations, running from the date that the mortgage becomes due.[18]

The aforementioned information regarding the statute of limitations does not apply to the mortgage itself. A mortgage, that is unsatisfied or unreleased of record, remains in effect for twenty-one-years from the date of the mortgage or twenty-one-years from the date of the maturity date (if any), whichever is later.[19] This, however, deals more with the purchasing of encumbered property free from the prior mortgage, and the mortgagee’s ability to enforce a prior mortgage against purchaser.

If you, as a mortgagee, have a mortgagor in default and want to enforce the note, mortgage, or both, call the Finney Law Firm today!

[1] Barnets, Inc. v. Johnson, Case No. CA2004-02-005, 2005 Ohio App. LEXIS 703, *8 (Ohio App. 12th Dist. Feb. 22, 2005), citing Brown v. First Nat. Bank, 44 Ohio St. 269, 274 (1886).

[2] Barnets, at *8.

[3] Barnets. at *9.

[4] Barnets, at *9.

[5] Barnets, at *9.

[6] United States Bank Nat’l Ass’n v. O’Malley, 150 N.E.3d 532 (Ohio App. 8th Dist. Dec. 26, 2019).

[7] ORC Section 1303.16.

[8] O’Malley, at 532.

[9] O’Malley, at 532.

[10] Search Mgmt. L.L.C. v. Fillinger, 2020 Ohio App. LEXIS 1966, *1.

[11] Barnets, at *9.

[12] ORC Section 2305.06.

[13]Ohio Real Property Law and Practice § 19.10 (2020).

[14] Ohio Real Property Law and Practice § 19.10 (2020)

[15] Barnets, at *9.

[16] Fillinger, at *1.

[17] Fillinger, at *1.

[18] Cont’l W. Reserve v. Island Dev. Corp., 1997 Ohio App. LEXIS 962, *1.

[19] ORC Section 5301.30.

Debtors that anticipate being subject to a judgment might fraudulently transfer their assets in an attempt to hide those assets from their creditors. This issue might even exist after the creditor obtains a judgment against the debtor. Just because a debtor might do this, does not mean that creditors are out of luck. 

Ohio’s Uniform Fraudulent Transfer Act, under ORC Chapter 1336, creates rights for creditors to set aside fraudulent transfers by debtors. The point of these rights is to do away with fraudulent transfers that “prevent a creditor from obtaining satisfaction of an underlying debt.” 

There are four general causes of action under ORC Chapter 1336. A fraudulent transfer, as the one described above, would likely fall under the cause of action provided by ORC Section 1336.04(A)(1). To succeed on such a claim, the creditor must prove that there was a transfer of an asset with actual intent to defraud, hinder, or delay present or future creditors. A creditor may prove “actual intent” through the use of circumstantial evidence. Types of circumstantial evidence, or badges, are listed in ORC Section 1336.04(B). 

If a creditor fraudulently transfers assets, ORC Section 1336.08 generally allows creditors to sue the transferees (i.e., parties that received the fraudulent transfers). The creditor can sue any of the transferees for the value of the transferred property, subject to certain defenses.” That is not to say that a creditor would be required to sue every single transferee. The only “necessary party would be the transferee (or participant for whose benefit the transaction was made) from whom recovery is sought.” The statute is written as such because in most fraudulent transfer cases, “the debtor is judgment-proof and the transfer was made to hide the property from the creditor.” 

ORC Section 1336.07 addresses creditor remedies, which include:

  1. an avoidance of the transfer; 
  2. an attachment or garnishment against the asset transferred or other property of the debtor;
  3. an injunction against further disposition of the asset transferred or other property of the debtor;
  4. an appointment of a receiver to take charge of the asset transferred; or
  5. any other relief that the circumstances of the case may require.”

Punitive damages may also be awarded. However, ORC Section 2315.21(C) states that punitive damages are not recoverable unless: 

  1. the actions or omissions of that debtor demonstrate malice or aggravated or egregious fraud, and 
  2. the trier of fact has made a determination of the total compensatory damages recoverable by the creditor from that debtor.

Attorneys’ fees may also be awarded. However, there is not an automatic award of attorney fees for those who prevail under ORC Section 1336. The creditor “may only recover reasonable attorney fees” when punitive damages are awarded.

So, if you are a creditor chasing a debtor who is actively fraudulently transferring assets to hide them from you, it might be time to call an attorney with the Finney Law Firm. 

Contact Jennings Kleeman at 513.797.2858 for assistance with a fraudulent transfer claim.

Contractors, laborers, and materialmen tend to run into issues receiving payment for their work on certain projects. A terrific way for contractors, laborers, and materialmen to guard against not getting paid is to attach a Mechanic’s Lien to the property on which the contractors, laborers, and materialmen performed their work. From an extremely general point of view, to perfect a Mechanic’s Lien, contractors, laborers, and materialmen must file an “Affidavit for Mechanic’s Lien,” with the recorder’s office in the county where the property is located.

It is key to remember that there are time limits that must be adhered to on the front end and back end of filing an Affidavit for Mechanic’s Lien.

The Front End

When it comes to the front end, the time limit will vary based on the type of project.

If the Mechanic’s Lien is associated with a residential property, like a family home or condominium, then a contractor, laborer, or materialman claiming a Mechanic’s Lien has sixty (60) days from the date that the last labor was performed, or material was provided by the contractor, laborer, or materialman.[1]

If a Mechanic’s Lien is associated with oil or gas wells or facilities, then a contractor, laborer, or materialman claiming a Mechanic’s Lien has one hundred and twenty (120) days from the date that the last labor was performed, or material was provided by the contractor, laborer, or materialman.[2]

For all other Mechanic’s Liens, a contractor, laborer, or materialman claiming a Mechanic’s Lien has one seventy-five (75) days from the date that the last labor was performed, or material was provided by the contractor, laborer, or materialman.[3]

The Back End

ORC Section 1311.13 deals with attachment of liens, continuance, and priority. ORC Section 1311.13(C) states that Mechanic’s Liens, under sections 1311.01 to 1311.24, continue for six years after the Affidavit for Mechanic’s Lien is filed with the county recorder, as required by ORC Section 1311. If a cause of action based on a Mechanic’s Lien is brought within the six years, then the Mechanic’s Lien will continue “in force until final adjudication thereof.”

If a cause of action based on a Mechanic’s Lien is not brought within the six-year period, then the rights associated with the Mechanic’s Lien are extinguished.[4] Thus, there is a six-year statute of limitations to bring a cause of action based on a Mechanic’s Lien.[5] Furthermore, “the statutory scheme for the filing and enforcement of [M]echanic’s [L]iens does not provide for the tolling or expansion of designated statutory time limits.”[6]

If you have a Mechanic’s Lien and need to act, please feel free to reach out to the Finney Law Firm, before it is too late!

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[1] ORC Ann. 1311.06(B)(1).

[2] ORC Ann. 1311.06(B)(2).

[3] ORC Ann. 1311.06(B)(2).

[4] Banner Constr. Co. v. Koester, 2000 Ohio App. LEXIS 1313, *1.

[5] Id.

[6] Id.