The city settled for $4,014 and cut the mortgage holder out entirely
An Ohio appeals court ruled that a mortgage holder cannot be locked out of an eminent domain case just because an earlier foreclosure fell apart.
The Tenth Appellate District reversed a Franklin County trial court on November 5, finding that Wiltshire Capital Partners still had the right to assert its mortgage interest in property the City of Columbus was taking for a sidewalk project - even though Wiltshire’s prior foreclosure had been dismissed years earlier.
In 2021, Columbus filed to appropriate two small parcels in Clinton Township for the Hudson Street Sidewalks Project. Wiltshire was listed as holding a mortgage of record. The fee simple owner was Ohio Wholesale Auto Sales, LLC.
That should have been straightforward. It was not.
Back in 2017, Wiltshire had filed a foreclosure complaint against the same property but never served the defendants - except the Franklin County Treasurer. After six months without service, the trial court dismissed the case under Ohio Civil Rule 41(B)(1) for failure to prosecute.
When the eminent domain proceeding came around, Ohio Wholesale Auto Sales argued Wiltshire’s mortgage interest was dead - barred by res judicata, the doctrine that stops parties from relitigating decided claims. The trial court agreed and shut Wiltshire out. It also refused to consider Wiltshire’s brief after Wiltshire filed six days late.
With Wiltshire sidelined, the court approved a settlement between Columbus and Ohio Wholesale Auto Sales, vesting title in the city for $4,014 and cutting the mortgage holder out entirely.
The appeals court disagreed. The central question: did the 2017 dismissal count as a ruling on the merits, or was it simply procedural?
The court held that when a case is dismissed because the plaintiff never served the defendants, the dismissal is not on the merits - regardless of how the trial court labels it. Since Wiltshire never served Ohio Wholesale Auto Sales in the foreclosure, the dismissal could not bar its claims.
The court was clear about what it did not decide. It made no finding on whether Wiltshire actually holds a valid mortgage interest. That question goes back to the trial court on remand.
For mortgage holders and servicing teams, the practical signal is direct: a foreclosure that collapses because service was never perfected does not erase your lien. If that property later lands in an eminent domain proceeding, your mortgage interest still has a seat at the table.
