Theft of Equity by Foreclosure? Ohio County Given the Nod by U.S. Supreme Court

U.S. Supreme Court declines to hear case over Cuyahoga County’s foreclosure process

Ohio county’s illegal tax foreclosure robs property owner and taxpayers

MAR 29, 2021 | REPUBLISHED BY LIT: MAR 30, 2021

CLEVELAND, Ohio — The U.S. Supreme Court on Monday refused to hear a case at the center of a longstanding legal fight over how Cuyahoga County handles the foreclosures of certain properties.

Attorneys for Elliott Feltner petitioned the high court to examine whether the county’s process of foreclosing on properties and transferring them to a county land bank is constitutional.

The Supreme Court’s decision ends a case that focused on a 2006 Ohio law enacted to speed the foreclosure process on shuttered buildings. Other legal challenges are pending.

Instead of having the properties go up for a sheriff’s auction, as is customary, the law allows a county’s board of revision to transfer them to a land bank, even if the properties’ values far exceed the amount of taxes owed.

Feltner’s case involved his father-in-law’s former automotive body shop in Cleveland’s Collinwood neighborhood.

It was valued at $144,500, but the back taxes were $65,189.

In 2017, the county board of revision sent him multiple notices and a summons. It began proceedings in which the board transferred the property to the Cuyahoga County Land Reutilization Corp., or the county’s land bank. The land bank later resold the property.

Attorney Marc Dann and constitutional lawyers stressed that the county violated Feltner’s rights because it failed to provide him with any compensation, or the difference between the property’s value and the taxes owed.

Dann said Feltner deserved being paid for what was rightfully his.

Attorneys for the Pacific Legal Foundation also represent Feltner.

They have said that the government can take a property to collect unpaid taxes,

“but taking more than it is owed is legalized home-equity theft.”

The Ohio Supreme Court denied Feltner’s arguments on procedural grounds in May. Dann later took the case to the U.S. Supreme Court.

In court documents, the county claimed that it had a right to transfer the properties based on its taxing authority. Attorneys for the county also said that the former property owners could have stopped the foreclosure process by paying their taxes, entering a payment plan or appealing the issue.

The county said in documents that the former owners had “lost all right, title and interest in the foreclosed properties” once the properties became subject to foreclosure proceedings. In a statement in July, the county prosecutor’s office said, “Ohio’s foreclosure system does not violate the constitutional rights of delinquent taxpayers.”

On Monday, the county hailed the Supreme Court’s decision as a win.

“We have felt through all of the challenges that this is a legal process,” said Ron O’Leary, the administrator for the board of revision. “There are multiple opportunities for taxpayers to pay taxes in full or be placed on a payment plan. The [county] treasurer’s office is always willing to work with a taxpayer.”

Dann said the issue is not over. He has filed similar cases involving the foreclosure process in U.S. District Court in Cleveland and in Montgomery County. Those cases are pending.

“The Supreme Court did not take this case now, but that doesn’t mean this issue won’t come up again [there],” Dann said.

In July, U.S. District Judge James Gwin refused to throw out the case of Tarrify Properties, which sued over a parcel of land it owned on Miles Avenue in Cleveland.

Tarrify owed $18,638 in back taxes on land valued at more than $176,800.

Gwin said Ohio courts

“have long recognized that property owners retain an equitable right to the surplus value of their property after tax liabilities. [Former property owners] have an equitable right to this value.”