Court News Ohio
Court News Ohio
Court News Ohio

Tuesday, Feb. 13, 2018

Electronic Classroom of Tomorrow, Jeremy Aker, et al. v. Ohio Department of Education, Case no. 2017-0913
Tenth District Court of Appeals (Franklin County

Union Carbide Corporation et al. v. Bobby Turner et al., Case no. 2017-0004
Eighth District Court of Appeals (Cuyahoga County)

State of Ohio v. Demetrius Jackson, Case no. 2017-0145
Eighth District Court of Appeals (Cuyahoga County)

The Bank of New York Mellon v. Susan L. Rhiel, trustee, Case no. 2017-0870
Bankruptcy Appellate Panel, Sixth U.S. Circuit Court of Appeals

Can State Use Student Participation Data to Calculate Funding for Online School?

Electronic Classroom of Tomorrow, Jeremy Aker, et al. v. Ohio Department of Education, Case no. 2017-0913
Tenth District Court of Appeals (Franklin County


  • Is the Ohio Department of Education barred by R.C. 3314.08 from imposing a durational standard of student participation to determine the funding for an online community school?
  • If the law permitted the department to base funding on student participation, did the department fail to follow the required procedures for issuing guidelines on how participation is to be measured and documented?

In 1997, Ohio enacted new laws permitting community schools which are public schools that don’t operate under the direct control of a public school district. Community schools, also known as charter schools, receive funding from the state, but unlike public school districts, cannot levy local taxes or directly receive funds from local tax levies. The laws include R.C. 3314.08, which established a funding calculation for community schools based on the “enrollment” of students. The state provides money for a student to the community school and deduct state aid from the public school district the student left to attend a community school.

The Electronic Classroom of Tomorrow (ECOT) began operation in 2000 as an online community school (e-school). It was the state’s first e-school. It doesn’t have traditional school buildings where students attend class, but rather provides kindergarten through twelfth-grade education to students across the state through computers provided to students. The students can log onto ECOT’s online educational content. Additionally, ECOT offers various non-computer-based learning opportunities, such as field trips, that students could use to complete their course requirements.

During the 2015-2016 school year, ECOT enrolled about 15,000 students. When the school began operation, the Ohio Department of Education (ODE) initiated a review of the full-time equivalency (FTE) of students attending online schools. Because ECOT students were not sitting in classrooms, the state had to determine what measurement was required to accurately calculate ECOT’s FTE for funding purposes. The department and ECOT negotiated the terms of a compliance contract that took effect in 2003. The funding agreement measured the enrollment of the students at the beginning of the school year and required ECOT to offer at least 920 hours of “learning opportunities” to each student during the course of a school year. From 2003 until 2015, the department provided funding to ECOT based on its reported enrollment. The documentation that indicated the number of students enrolled for the entire school year and those that withdrew by either dropping out or transferring to another school.

The department conducts thorough FTE reviews of community school funding every five years. ECOT’s enrollment was reviewed in 2016. At the time, the department indicated that in addition to documentation about enrollment, it wanted to verify actual “student participation” in learning opportunities to calculate funding.

ECOT sought a court injunction, attempting to block the department from demanding the durational data that students logged into the system and records of participation in educational activities. When the legal action failed, the department determined that, based on the data provided by ECOT, the school inflated its enrollment and was required to repay the state. The law requires a “clawback” when overfunding occurs. The clawback doesn’t seek repayment from the school, but rather reduces the amount of funding provided in future years.

ECOT appealed the decision to the Franklin County Common Pleas Court, which ruled that R.C. 3314.08 permitted the department to seek and use the student participation data to determine funding. The Tenth District Court of Appeals affirmed the decision, and ECOT appealed to the Ohio Supreme Court. ECOT made several arguments as to why the lower court decisions should be reversed. But the Court agreed only to hear a challenge based on the school’s argument that R.C. 3314.08 doesn’t allow the state to base funding on e-school student participation.

Student Participation Not a Factor in Funding, ECOT Argues
ECOT points to R.C. 3314.08(B) and (C) to note that the law requires the department to develop rules for deducting money from a public school district to pay to a community school that enrolls a student from the district. The law adopts a “money follows the child” principle, which ECOT asserts the Supreme Court has affirmed in other cases. ECOT notes the law doesn’t treat eschools any differently than traditional “brick and mortar” community schools for funding purposes.

ECOT explains that R.C. 3314.08(H)(2) describes how the department is allowed to “adjust” funding for community schools when the record reflects a student wasn’t enrolled for the entire school year. The statute defines “learning opportunities” as “both classroom-based and non-classroom-based learning opportunities and shall be in compliance with criteria and documentation requirements for student participation which shall be established by the department.” The section then states the department “shall” fund or adjust funding for community schools based on the school’s proof that the student is enrolled and “commenced participation” in learning activities. ODE can reduce funding based on documentation of withdrawal, which can include ceasing to participate in learning opportunities. ECOT maintains that nothing in the section permits the state to base funding on documentation of the exact number of hours students participated in learning opportunities.

The lower courts have agreed with the department that a section of R.C. 3314.08(H)(3) gives the state the right to measure student participation. The section states the department determines a student’s percentage of FTE based on the percentage of learning opportunities offered by the community school to that student, and the total learning opportunities offered by the community school to a student who attends for the school’s entire school year. The statute then states: “However, no internet- or computer-based community school shall be credited for any time a student spends participating in learning opportunities beyond ten hours within any period of twenty-four consecutive hours. Whether it reports hours or days of learning opportunities, each community school shall offer not less than nine hundred twenty hours of learning opportunities during the school year.”

ECOT argues the formula in this section bases the funding on enrollment and sets up a formula to ensure an e-school spreads its learning opportunities over the course of a school calendar year. It argues the 10-hour student participation sentence ensures a student’s work is spread out over time, and isn’t an indication that the state can use participation to calculate funding. It argues the first sentence establishes that funding is based on the “offering” of learning opportunities, and if a student is offered less than a full year’s worth — because the student left the e-school before the end of the school year — then funding can be reduced.

“Had the legislature intended to make this formula contingent upon a student’s ‘participation’ in or ‘completion’ of learning opportunities, it could have easily done so. Instead, it expressly chose to make the pertinent FTE formula contingent only upon the percentage of opportunities offered to a particular student,” ECOT states in its brief.

State Provided No Guidance on Participation, School Maintains
ECOT also maintains that while the Court has asked it to focus its arguments only on the statute, the Court needs to consider the argument that the department failed to follow the necessary rules for establishing student participation guidelines. ECOT argues the department never provided “criteria and documentation requirements for student participation” as required by the law. If the department did provide guidelines, those guidelines weren’t drafted by following the state’s rule-making procedures, ECOT asserts. Because the department didn’t follow the procedure, the rules couldn’t be applied to e-schools, ECOT concludes and the department’s funding decision isn’t legal.

Student Participation Always a Factor in Funding, Department Asserts
The education department maintains that under ECOT’s interpretation of the law, an online school would receive a full year of funding for each student as long as the student logged into the ECOT platform for a few minutes at least once every 30 days — even if the student didn’t access a single educational opportunity. The department counters that the provision in R.C. 3314.08(H)(3) limiting credit for student participation leads to the conclusion that to earn funding, the school must demonstrate students participated in the learning opportunities that were offered.

The department explained the funding language for computer-based schools was enacted because e-schools don’t have the “visual feedback loop” that a traditional school relies on to determine participation. A traditional school teacher can observe and document which students attended and participated in learning activities while that connection between teacher and student is harder to measure online.

The department notes that in the earlier years it assumed through its reviews of ECOT that the school was documenting student participation and didn’t ask for records until it received information that student work wasn’t being tracked. It argues that since 2010, it published manual describing how it would calculate FTE and that it may ask an e-school for durational records. The department notes the ECOT’s superintendent admitted during the trial that he was aware ODE had the ability to use student participation data.

“Perhaps ODE should have begun seeking such records sooner than it did, but it acted promptly upon learning of the problem. In not acting sooner, ODE certainly did not grant ECOT some kind of permanent and irrevocable license to continue fleecing Ohio’s taxpayers and shortchanging its students of an education,” the department’s brief states.  

The department argues that since the law states an e-school cannot be credited for more than 10 hours of participation in a day, then duration of student participation for less than 10 hours is something the schools should get credit for when calculating funding. Participation is then part of the calculation for funding, and the state has the right to seek proof from the schools that students participated in learning opportunities, the department asserts.

The department also argues that ECOT is misleading in pointing to provisions of the law that mandate the state “shall” pay for students enrolled in the schools. The department counters that it agrees the state is “obligated” to pay a community school for enrolling a student, but this case is about “how much” the state must pay per student, and it is not obligated to pay a full school years’ worth of funding to ECOT for students the school cannot prove attended for the year.

Rule-Making Unnecessary, Department Asserts
The department argues that ECOT raises a number of issues the Supreme Court hasn’t agreed to consider in this case, including the claim that ODE was required to proceed through a formal rule-making process to seek the durational records. The department argues that since it has the authority to assess participation under the plain language of the statute, it doesn’t need to formally draft rules to use the information to allocate funding.

Friend-of-the-Court Briefs
Several amicus curiae briefs supporting the positions of both parties has been submitted. The Ohio Coalition for Quality Education filed a brief in support of ECOT, and a joint brief in support of ECOT was submitted by Akron Digital Academy, Newark Digital Academy, Phoenix Academy Community School, and Quaker Digital Academy. Five former members of the Ohio General Assembly, all Republicans who were involved in the enactment of community school legislation, filed a brief supporting ECOT.

A brief supporting the ODE was filed by current members of the Ohio Senate and House Democratic Caucuses.

Dan Trevas

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing the Electronic Classroom of Tomorrow, Jeremy Aker, et al.: Marion Little, 614.365.9900

Representing the Ohio Department of Education is special counsel appointed by the Ohio Attorney General: Douglas Cole, 614.481.0900

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Must Lung Cancer Victim Provide Medical Proof of Nonsmoking Status to File Asbestos Injury Lawsuit?

Union Carbide Corporation et al. v. Bobby Turner et al., Case no. 2017-0004
Eighth District Court of Appeals (Cuyahoga County)


  • When the smoking habits of a person with lung cancer who claims the cancer is asbestos-related are in dispute, must the person provide a report from a “competent medical authority” demonstrating the person is a non-smoker in order to move forward with an asbestos-related lawsuit?
  • May a trial court determine by the weight of the evidence whether the person with lung cancer is a “smoker” as defined in R.C.2307.91(DD), and decide if additional evidence must be submitted before the case moves forward?

In 2004, the Ohio General Assembly enacted House Bill 292 to develop a comprehensive method for handling personal injury lawsuits based on asbestos-related diseases. The law established guidelines to allow lawsuits from those with actual asbestos injuries to move forward immediately and to defer cases of those who have yet to experience symptoms. The law also developed separate tracks for cases from those suffering from lung cancer. Those with no history of smoking could immediately proceed with their cases, while those with a history of smoking must establish, with medical reports, that the lung cancer was caused by asbestos, not smoking, before proceeding.

In April 2013, Bobby Turner was diagnosed with lung cancer, and he and his wife filed a lawsuit against Union Carbide and others, alleging his lung cancer was caused by his exposure to asbestos when he was a drywall finisher in the 1960s and ‘70s. Citing R.C. 2307.93, Union Carbide requested the trial court to “administratively dismiss” Turner’s case because he failed to submit the prima facie evidence required by R.C. 2307.92 to pursue his claim. Those sections of the Ohio Revised Code require a person who is deemed to be a smoker to present a report from a competent medical authority that the cancer is related to asbestos exposure.

Rather than file a medical report, Turner countered that in 1956 he smoked about one cigar a month and has been a nonsmoker since 1957. He provided the court some of his medical records where it was documented that he wasn’t a smoker. Union Carbide presented other records by his treating physicians that reported he still smokes cigars. Union Carbide also provided depositions of Turner’s general physician, who believed Turner to be a cigar smoker, and a record from his treating pulmonologist stating that he smoked.

Turner contested the information provided by the company and submitted the testimony of friends and family who maintained he wasn’t a smoker.

The trial court denied Union Carbide’s motion, which the company appealed to the Eighth District. The company argued that unless Turner could prove through a written report by a competent medical authority that he was a nonsmoker, he couldn’t proceed with his asbestos claim. However, the Eighth District affirmed the trial court’s decision, and the company appealed to the Supreme Court, which agreed to hear the case.

Company Says Law Requires Doctor, Not Judge, to Label Person a Smoker
Union Carbide argues the Eighth District and the trial court misinterpret R.C. 2307.91(DD) and how it relates to the procedures for filing an asbestos lawsuit are stated in R.C. 2307.92 and R.C. 2307.93. “Smoker” is defined in R.C. 2307.91(DD) as “a person who has smoked the equivalent of one-pack year, as specified in the written report of a competent medical authority pursuant to sections 2307.92 and 2307.93 of the Revised Code, during the last fifteen years.” The company argues that R.C. 2307.92(C)(1)(a) applies to Turner because he was a smoker with lung cancer. If so, the law requires that he provide a second assessment that includes “a diagnosis by a competent medical authority that the exposed person has primary lung cancer and that exposure to asbestos is a substantial contributing factor to that cancer.”

The company explains the definition of “smoker” was developed so that not everyone who smoked tobacco is classified as smoker. Those who have smoked a minimum amount of tobacco over the years aren’t delayed in their ability to file a lawsuit. When there is a dispute, as in Turner’s case, as to whether the person should be classified as a smoker, Union Carbide maintains that only the written report of a competent medical provider can be used to make that determination. The company argues that the Eighth District disputes that interpretation and improperly gives a trial court judge the discretion to determine the person’s smoking status.

“The plain meaning of this provision requires plaintiffs, when evidence indicates they have smoked within the last fifteen years, to prove they have not smoked a sufficient amount to be classified as a ‘smoker’ by presenting ‘a written report of a competent medical authority,’ or, in other words, a report from a physician who has actually treated the plaintiffs,” Union Carbide’s brief states.

The company argues that if Turner wasn’t a smoker, the issue could be easily resolved by having one of his treating doctors provide a written report to the court that he wasn’t a smoker, and the case could proceed on its merits. If he is deemed a smoker, then he has to comply with R.C. 2307.92(C)(1)(a) by filing a report from his doctor.  Turner then must submit a second report that includes a “diagnosis” that the cancer is related to asbestos exposure, the company concludes.

The company maintains the Eighth District ruling gives trial judges too much discretion in allowing asbestos cases to move forward and would open the door to thousands more cases to proceed without properly establishing a link be lung cancer and asbestos exposure.

Company Misinterprets Statute, Worker Maintains
Turner argues that the trial court and Eighth District followed the plain language of the law, and that the report of a medical authority is only necessary if a trial court determines the person is a smoker. Turner maintains that the law allows the trial court to evaluate the evidence regarding the person’s smoking habit. He suggests the Eighth District delivered a “narrowly tailored opinion” that held the factual determination of whether one is a smoker is exclusively a decision for the court. If the court determines the person is a smoker, then the person is required to provide a diagnosis from the medical authority that asbestos was substantial contribution factor to the lung cancer.

Turner also suggests that Union Carbide’s interpretation of the law could lead to absurd results. He notes in his case, eight witnesses testified that he wasn’t a smoker, and several of his medical records indicate his physicians listed him as a nonsmoker. However, under the company’s interpretation, if one doctor delivered a report that labeled Turner a smoker, it would negate all the other evidence presented in court contradicting the doctor’s assessment.

Friend-of-the-Court Brief
An amicus curiae brief supporting Union Carbide’s position has been submitted jointly by the Ohio Manufacturers’ Association, the Ohio Alliance for Civil Justice, and the Ohio Council of Retail Merchants.

- Dan Trevas

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing Union Carbide Corporation, et al.: Richard Schuster, 614.464.6400

Representing Bobby Turner, et al.: Christopher Hickey, 216.712.7452

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Must Social Workers Advise Defendants of Miranda Rights During Jail Interviews?

State of Ohio v. Demetrius Jackson, Case no. 2017-0145
Eighth District Court of Appeals (Cuyahoga County)

ISSUE: Does a social worker’s duty to cooperate and share information about child abuse or neglect with law enforcement make the social worker an agent of law enforcement requiring the social worker to read Miranda warnings to a criminal defendant?

On Aug. 5, 2015, Demetrius Jackson was arrested when a 14-year-old identified as C.H. told family and police that Jackson had raped and choked her. C.H. had been babysitting at her adult sister’s house while another adult sister and Jackson were there.

When Jackson was detained in jail, a detective from the Cleveland Police Department visited. The detective informed Jackson of his Miranda rights, and Jackson refused to speak with him. A few days later, Holly Mack, a social worker for the Cuyahoga County Division of Children and Family Services, went to the jail to talk with Jackson. The division assigns a social worker to interview alleged perpetrators when it receives allegations of abuse or neglect of children.

At Jackson’s bench trial, Mack testified. She said she tells the people she interviews in jail that anything they say can be used by the courts and that it is up to them whether they want to continue with the interview. Mack stated that Jackson told her that he and C.H. had consensual oral sex and C.H. demanded money afterward. Mack reported Jackson’s account through the division’s computer system to her supervisor.

Jackson responded at his trial that he didn’t know C.H. was under 18, that she propositioned him, and that he never choked her.

The trial court found Jackson guilty of rape, gross sexual imposition, and kidnapping. Jackson was sentenced to 11 years in prison.

Appeals Court Overturns Conviction
Jackson appealed to the Eighth District Court of Appeals, which reversed his conviction. The court ruled that Jackson’s protection against self-incrimination in the U.S. Constitution’s Fifth Amendment was violated because Mack acted as an agent of law enforcement and failed to give the Miranda warnings. Jackson’s Sixth Amendment right to counsel was also violated, the Eighth District stated.

The Cuyahoga County Prosecutor's Office appealed the decision to the Ohio Supreme Court, which accepted the case.

Basic Principle of Miranda
Quoting the U.S. Supreme Court’s 1966 decision in Miranda v. Arizona, the prosecutor explains that “the prosecution may not use statements ... stemming from custodial interrogation of the defendant unless it demonstrates the use of procedural safeguards effective to secure the privilege against self-incrimination.” Both sides agree that, when the social worker interviewed Jackson in jail, he was in custody facing criminal charges and the social worker didn’t read him the Miranda rights, the prosecutor notes.

Social Workers Aren’t Law Enforcement Agents, State Argues
The prosecutor contends that social workers aren’t law enforcement officers or agents of law enforcement. The prosecutor disputes the Eighth District’s conclusion that a social worker’s duty in Ohio to report certain information to law enforcement (in R.C. 2151.421) makes the social worker an agent of law enforcement. Noting that a social worker doesn’t have the power to arrest anyone or the duty to enforce laws, the prosecutor’s brief states that “a social worker’s duty to provide police with any information obtained from the interview does not establish, without more, that the social worker is acting at the ‘direction, control, or behest’ of law enforcement.”  

The prosecutor argues for courts to look at a mix of factors to determine whether a social worker acts as an agent of law enforcement and points to four states that take this approach. Some of the factors might be whether the police arrange for the social worker to conduct an interview, whether the police are present during the interview, or whether the police direct the social worker to ask certain questions, the prosecutor notes, adding that none of this conduct took place in this case.

The prosecutor also cites the U.S. Supreme Court’s decision in Ohio v. Clark (2015), which involved a teacher and the right to confront witnesses, as embodied in the Sixth Amendment to the U.S. Constitution. In Clark, the U.S. Supreme Court ruled that the mandatory duty in state law for some people to report information to police doesn’t transform a private citizen into a law enforcement agent. The Eighth District’s ruling to the contrary “cannot survive Clark,” the prosecutor wrote.

Interviews of alleged perpetrators by social workers serve important interests unrelated to law enforcement, the prosecutor asserts, because the interviews allow social workers to identify unfounded accusations, to keep the process from becoming one-sided, and to make timely decisions that protect children.

Miranda is stretched beyond recognition when it is read to require social workers to carry and use a card containing an advisement of a criminal defendant’s rights,” the prosecutor argues.

The record shows that Mack didn’t act at the “direction, control, or behest” of law enforcement, the prosecutor maintains. Instead, the prosecutor states, Jackson made voluntary statements to a non-law enforcement official in a situation where his constitutional rights weren’t implicated.

Social Workers Are Part of Law Enforcement Investigations, Jackson Counters
Jackson notes that Mack was part of the family services division’s special unit that collaborated with law enforcement in the investigation and prosecution of crimes against children. Mack was an employee of the state and skilled at interviewing alleged perpetrators of crimes against children, Jackson adds.

R.C. 2151.421 requires the division’s investigation to be made in cooperation with the law enforcement agency and states that the division must submit a written report of the investigation to law enforcement. Because this cooperation is mandated, Jackson contends that social workers employed by the government and functioning as part of an investigative team of the state must comply with the requirements of Miranda.

“It is impossible to ignore the close connection between neglect and abuse investigations conducted by children services’ agencies and criminal investigations conducted by law enforcement agencies,” Jackson’s brief states. “The investigations conducted by law enforcement agencies often run parallel to or result from investigations conducted by children services’ agencies.”

He cites the U.S. Supreme Court’s decision in Mathis v. United States (1968), which involved an IRS agent who interviewed a defendant about a tax matter unrelated to the offense for which the defendant was in jail. The investigation led to a criminal prosecution. The Supreme Court concluded that IRS agents must administer Miranda warnings to a person interviewed while in custody, Jackson states. Social workers conducting interviews of defendants in jail should be treated no differently, he argues.

In contrast to cases mentioned by the prosecutor, Jackson points to the states that have ruled Miranda requirements apply to social workers employed by children services agencies. Those decisions view these social workers as state actors with interests adverse to those of the defendant and found that social workers often work closely with law enforcement and that social worker investigations frequently lead to criminal prosecutions, Jackson maintains.

“[I]t would severely undermine the constitutional rights of the accused and the mandate of the Supreme Court of the United States in Miranda, supra, if this Court were to ignore this important relationship between the agency and law enforcement and allow the state to circumvent Miranda by not requiring agency social worker/investigators, like the one who interrogated [Jackson], to give the warnings required by Miranda before conducting custodial interrogations of alleged perpetrators,” the brief states.

Jackson concludes that a ruling requiring social workers to advise defendants of their Miranda rights wouldn’t interfere with the efforts of social service or law enforcement agencies to investigate crimes against children and to protect the public.

- Kathleen Maloney

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing the State of Ohio from the Cuyahoga County Prosecutor’s Office: Anthony Miranda, 216.443.7416

Representing Demetrius Jackson: Jonathan Garver, 216.391.1112

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Does Spouse Who Signs Mortgage, But Isn’t Listed as Borrower, Transfer Her Property Interest to Lender?

The Bank of New York Mellon v. Susan L. Rhiel, trustee, Case no. 2017-0870
Bankruptcy Appellate Panel, Sixth U.S. Circuit Court of Appeals


  • Is an individual who is not identified in the body of a mortgage, but who signs and initials the mortgage, a mortgagor of his or her interest?
  • Is mortgage paperwork completed as described above invalid as a matter of law such that outside evidence is not admissible to determine the individual’s intent by signing the mortgage?

Vodrick L. Perry and Marcy L. Perry bought a house in Reynoldsburg in 2005. They took out a mortgage jointly, and the deed to the property was recorded. The mortgage listed both Perrys as borrowers, and each signed the mortgage and initialed the pages.

In February 2007, Vodrick Perry refinanced the mortgage. He signed a promissory note, which promises to repay the loan, but Marcy Perry didn’t sign it. Vodrick Perry applied for the loan to America’s Wholesale Lender. The application included his information, it stated that he was married, and only he signed it. The new mortgage identifies Vodrick Perry as the borrower for the loan. At the closing, both Vodrick and Marcy Perry signed the mortgage paperwork and initialed the pages.

Couple Files for Bankruptcy
The Perrys started bankruptcy proceedings in federal court in September 2014, and Susan L. Rhiel was appointed as the trustee for the bankruptcy. The Bank of New York Mellon was the current holder of the note and the mortgage on the home. Rhiel asked the bankruptcy court for a declaration that Marcy Perry’s interest in the property (one half) wasn’t implicated by the second loan secured to refinance the mortgage. Finding that the mortgage for the refinancing was ambiguous, the bankruptcy judge determined that extrinsic evidence was needed to determine each spouse’s intent and rights.

After a trial, the bankruptcy court ruled in favor of the Bank of New York Mellon, and trustee Rhiel appealed to the Bankruptcy Appellate Panel of the Sixth U.S. Circuit Court of Appeals. The federal court’s panel determined that it needed direction regarding Ohio law to decide the case.

Federal Court Seeks Guidance
The Ohio Supreme Court has discretion to answer questions about state law presented to it by federal courts. The panel submitted two questions, stating that federal bankruptcy courts in Ohio and various state courts of appeals have ruled differently on these issues. The Supreme Court agreed to consider the questions. Rhiel’s appeal with the bankruptcy panel remains pending.

Bank Argues Wife’s Signature Transferred Her Interest in Property to Lender
The Bank of New York Mellon contends that R.C. 5301.01, effective April 6, 2017, resolves the questions from the federal bankruptcy court. The statute “cures defects” in a mortgage when a borrower’s name isn’t included in the body of the mortgage documents, the bank’s brief argues.

The law provides that a defect in a mortgage is removed if the mortgage is on record for more than four years from the date of its recording. One of the listed defects is “[t]he name of the person with an interest in the real property does not appear in the granting clause of the instrument, but the person signed the instrument without limitation.” The statute applies retroactively, as permitted by the state’s constitution, unless it affects “any accrued substantive right or vested rights.”

Because Marcy Perry signed the mortgage, the bank maintains that the statute states that she mortgaged her interest in the property to the lender unless the documents noted that she signed for some other reason.

The bank also points to decisions from the Second District Court of Appeals (SFJV 2005 v. Ream, 2010) and the Eleventh District Court of Appeals (Mortgage Electronic Registration Systems, Inc. v. Kaehne, 2008) to support its position. In the bank’s view, the courts in those cases determined that when a person signs a mortgage, that person grants their interest in the property to the lender.

The bank states that Marcy Perry didn’t need to be listed as a borrower in the refinancing documents for her interest to be implicated in the bankruptcy matter. She mortgaged her interest in the property to the lender when she signed and initialed the new mortgage, the bank concludes.

Trustee Maintains Husband Was Sole Borrower for Mortgage
Rhiel, the bankruptcy trustee, notes that the mortgage lists only Vodrick Perry as “Borrower.” She adds that Marcy Perry’s name doesn’t appear anywhere in the body of the mortgage documents and there was no preprinted signature line with her name on the signature page, as there was for her husband.

The mortgage documents are clear and unambiguous, and no additional evidence is needed to clarify the meaning of the contract created by the mortgage, she states. The lender’s failure to include Marcy Perry in the mortgage’s definition of borrower establishes that the mortgage doesn’t affect her one-half interest in the property, Rhiel maintains. Marcy Perry’s handprinted name and her signature don’t change the explicit terms of the mortgage, in Rhiel’s view.

Rhiel relies on Kindt v. ABN AMRO Mrtg. Group (2007), referred to as In re Wallace, a case from the U.S. Bankruptcy Court in the Southern District of Ohio, the same court where the Perrys’ case was first considered. This decision and other federal bankruptcy rulings in Ohio have concluded that a person not properly named in a mortgage can’t be found to have transferred his or her interest in a property to the lender, Rhiel explains. Being a signatory to the mortgage without being referenced as a borrower anywhere in the mortgage documents isn’t legally sufficient to affect Marcy Perry’s interest in the property, Rhiel argues.

“Like so many other bankruptcy proceedings that have involved mortgages taken out in the midst of what is now known as the Great Recession, the case at hand concerns what can charitably be referred to as sloppy documentation drafted by the lender, signed by the borrowers with little knowledge of what they were signing, that violated longstanding requirements of contract and real estate law,” Rhiel’s brief states.

She notes that the April 2017 amendments to R.C. 5301.01 added the mortgage granting clause defect and changed the time frame for removing defects from 21 years to 4 years. Although the legislative changes may apply to future cases, they don’t apply in this case, Rhiel contends, because she became trustee on Sept. 5, 2014. Applying the law retroactively would infringe on her vested rights as trustee, violating the legislature's expressed intent in the statute, she concludes.

- Kathleen Maloney

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing the Bank of New York Mellon: Amelia Bower, 614.629.3004

Representing Susan L. Rhiel, trustee: Jeffrey Levinson, 216.514.4935

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These informal previews are prepared by the Supreme Court's Office of Public Information to provide the news media and other interested persons with a brief overview of the legal issues and arguments advanced by the parties in upcoming cases scheduled for oral argument. The previews are not part of the case record, and are not considered by the Court during its deliberations.

Parties interested in receiving additional information are encouraged to review the case file available in the Supreme Court Clerk's Office (614.387.9530), or to contact counsel of record.