COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 68012 VICTORIA MORTGAGE CORP. : : Plaintiff-appellant : : JOURNAL ENTRY -vs- : AND : OPINION ERMA WILLIAMS : : Defendant-appellee : : DATE OF ANNOUNCEMENT : OF DECISION : APRIL 25, 1996 CHARACTER OF PROCEEDING : Civil appeal from Cleveland Municipal Court : Case No. 93-CVG-09260 JUDGMENT : Reversed and final judgment entered for appellant. DATE OF JOURNALIZATION : APPEARANCES: FOR PLAINTIFF-APPELLANT: FOR DEFENDANT-APPELLEE: Dennis Reimer, Esq. Marsha Rucker, Esq. John D. Clunk, Esq. 5715 Woodland Avenue Dennis Reimer Co., L.P.A. Cleveland, Ohio 44104 9806 Ravenna Road Twinsburg, Ohio 44087 Robert H. Bonthius, Jr., Esq. Peter M. Iskin, Esq. 1223 West Sixth Street Cleveland, Ohio 44113 -3- HARPER, J.: Plaintiff-appellant, Victoria Mortgage Corporation ("Victoria"), appeals from the dismissal of its forcible entry and detainer action against defendant-appellee, Erma Williams, by the Cleveland Municipal Court. A careful review of the record compels reversal. As set forth in the Referee's Report and Recommendation, Williams moved into the premises located at 1736-38 Catalpa Avenue, Cleveland, Ohio ("the premises") prior to November 1993. She and the owner of the premises orally agreed to a month-to-month tenancy. The U.S. Secretary of Veterans Affairs ("the Secretary") purchased the premises on November 22, 1993 at a sheriff's sale. Williams was not named a party in the foreclosure action. The Secretary subsequently transferred its interest in the premises to appellant. Appellant served Williams with a R.C. 1923.04 three-day notice to vacate the premises on or about March 21, 1994. Appellant filed its forcible entry and detainer action in the trial court on April 28, 1994 when Williams failed to vacate the premises. The matter proceeded to hearing before the referee on May 19, 1994. The referee issued her report and recommendation on July 28, 1994. The referee framed the issue before the trial court as whether an oral, month-to-month tenancy between the previous owner of the premises and a tenant who is not named in the foreclosure -4- action, survives the foreclosure action. Moreover, does the survival of the month-to-month tenancy then require the purchaser of the premises at a sheriff's sale to terminate the tenant's rental agreement with a notice served under R.C. 5321.17 prior to serving a R.C. 1923.04 notice. Williams presented the case of Nationsbanc Mortgage Corp. v. Pinkney (Oct. 29, 1993), Cuyahoga Cty. M.C. No. 93-CVG-14002, unreported, in support of her position that appellant failed to adequately serve her with a notice to vacate the premises when it merely complied with R.C. 1923.04. In this case, the Cleveland Municipal Court held that when a defendant is not named in a foreclosure action, the plaintiff who purchased the property at a sheriff's sale, takes the property subject to the defendant's written lease with the prior owner. The plaintiff in Pinkney was thus required to terminate the tenancy according to its terms before serving a R.C. 1923.04 notice to vacate the premises. The referee in the present case initially determined that there was no rational basis not to apply the Pinkney holding to the facts before her even though the defendant in Pinkney was a federally subsidized tenant with a written lease agreement. The referee explained that the same public policy concerns underlying Pinkney relate to the present case, i.e., "the burden that a contrary decision would impose upon a tenant who believes that she is occupying the premises pursuant to a rental agreement, is often unaware of the foreclosure action, and is usually in a more restrictive financial position than the purchaser." -5- Based upon the foregoing, since appellant failed to comply with R.C. 5321.17 regarding the notice required to terminate a month-to-month tenancy, before serving a R.C. 1923.04 notice, appellant's R.C. 1923.04 notice was premature. The referee thus recommended that the trial court dismiss appellant's forcible entry and detainer action. Appellant filed objections to the referee's report and recommendation on August 10, 1994. It submitted that the referee's analysis was contrary to the laws of the state of Ohio concerning the requisite notice to terminate Williams' tenancy. The trial court overruled appellant's objections and affirmed the referee's report and recommendation on September 8, 1994. This appeal followed with appellant claiming as error: I. THE COURT ERRED IN HOLDING THAT AN ORAL MONTH-TO- MONTH RENTAL AGREEMENT BETWEEN A PREVIOUS OWNER OF THE REAL ESTATE AND THE OCCUPANT SURVIVES THE FORECLOSURE SALE WHEN THE OCCUPANT WAS NOT A DEFENDANT IN THE FORECLOSURE ACTION. (Record, page 4) II. THE COURT ERRED IN HOLDING THAT APPELLANT, A PURCHASER AT SHERIFF'S SALE, AS A CONDITION PRECEDENT TO A FORCIBLE ENTRY AND DETAINER ACTION, NEEDED TO COMPLY WITH R.C. SECTION 5321.17. (Record, page 4) III. THE COURT ERRED IN DISMISSING THE FORCIBLE ENTRY AND DETAINER ACTION OF THE PLAINTIFF. (Record, page 4) The rule in a majority of jurisdictions regarding the survival of a lessee's rights when the lessee is not joined in a foreclosure action is that the lessee does not lose her right to possession or quiet enjoyment. A judicial sale is treated as a reversion which is subject to the lease, and the purchaser acquires the rights and -6- duties of the mortgagor thereby becoming the new lessor. 1 American Law of Property (1952), Section 3.49. In Hembree v. Mid-America Fed. S. & L. Assn. (1989), 64 Ohio App.3d 144, the Montgomery County Court of Appeals noted this majority view, but nonetheless recognized that the state of Ohio adopted the opposite view in New York Life Ins. Co. v. Simplex Products Corp. (1939), 135 Ohio St. 501. Hembree, 153; see, also, Star Bank v. Bakony (July 22, 1991), Butler App. No. CA90-06-110, unreported. The Supreme Court of Ohio held as follows in Simplex: *** [T]he sale upon foreclosure having terminated the estate of the mortgagor, the lease, being subsequent and subordinate to the mortgage, was also terminated. The purchaser, therefore, could not have obtained any reversionary rights of the mortgagor and there could have been no privity of contract or estate between the tenant and the purchaser at the sale upon foreclosure. *** *** It is our conclusion that the rights and obligations of the tenant under the lease did not extend beyond, but on the contrary, terminated with, the estate of the mortgagor. Both were extinguished by the sale of the premises upon foreclosure. Simplex, 504-50. See, also, Hausman v. Dayton (1995), 73 Ohio St.3d 671 (excepting title between the mortgagor and mortgagee, title remains in the mortgagor after default until the mortgagee forecloses on the mortgage and the sale is consummated, the mortgagee recovers possession of the property by ejectment proceedings, or the mortgagee otherwise extinguishes the right of the mortgagor to redeem). The Hembree court then considered whether a purchaser's knowledge of the presence of the tenant destroys the applicability -7- of the Simplex holding when the tenant is not named in the foreclosure action. The court concluded that if the tenant's underlying right is cut off at foreclosure, failure to join the tenant in the foreclosure action is of no consequence. Hembree, 154. The court explained: *** We agree with the analysis in [Prudential Ins. Co. v.] Bull Market [(C.P. Ohio 1979), 66 Ohio Misc. 9] that the rights of possession and quiet enjoyment conveyed through the lease are personal rights; their existence derives from the lessor's title, and they are personal rights; their existence derived from the lessor's title, and they are extinguished upon the foreclosure of that title and the interests incident to it. Absent authorization or consent by the mortgagee to execute the lease, a purchaser at judicial sale will not take subject to it. Cassilly v. Rhodes (1843), 12 Ohio 88. The lease will then be subject to a mortgage which, as here, has priority over it. Davis v. Boyajian, Inc., supra [(C.P.1967), 11 Ohio Misc. 97]. Id., 154-155. See Transamerica Financial Services v. Isabell (Jan. 20, 1993), Lorain App. No. 92CA005354, unreported. In the present case, Williams' rights of possession of the premises were junior in time to the mortgage, and were extinguished upon the judicial sale of the premises. Simplex. The oral month- to-month tenancy lease between Williams and the prior owner fails to protect Williams from appellant's forcible entry and detainer action. Hembree. Williams advances numerous policy arguments as to why Pinkney and the majority rule should control this case, and require an affirmance of the dismissal of the forcible entry and detainer action for failure to comply with R.C. Chapter 5321 notice requirements. No matter how persuasive these arguments may be, as -8- noted by the Hembree court, this court is constrained to apply the holding of Simplex under the doctrine of stare decisis. Trial courts and intermediate courts of appeal are charged with accepting and enforcing the law as promulgated by the Supreme Court of Ohio, not changing, modifying or ignoring it. We are "bound by and must follow decisions of the Ohio Supreme Court." Thacker v. Bd. of Trustees of Ohio State Univ. (1971), 31 Ohio App.2d 17. Appellant's first assignment of error is sustained. In appellant's second assignment of error, it asserts that it properly served Williams with a R.C. 1923.04 notice to vacate the premises since the judicial sale extinguished the tenancy. Appellant proceeds to argue in its third assignment of error that the trial court thus erred in dismissing the forcible entry and detainer action. We will address these two assignments of error simultaneously because they are interrelated. R.C. 1923.04 provides: (A) Except as provided in division (B) of this section, a party desiring to commence an action under this [forcible entry and detainer] chapter shall notify the adverse party to leave the premises, for the possession of which the action is about to be brought, three or more days before beginning the action, by certified mail, return receipt requested, or by handing a written copy of the notice to the defendant in person, or by leaving it at his usual place of abode or at the premises from which the defendant is sought to be evicted. Every notice given under this section by a landlord to recover residential premises shall contain the following language printed or written in a conspicuous manner: "You are being asked to leave the premises. If you do not leave, an eviction action may be initiated against you. If you are in doubt regarding your legal -9- rights and obligations as a tenant, it is recommended that you seek legal assistance." (B) The service of notice pursuant to section 5313.06 of the Revised Code constitutes compliance with the notice requirement of division (A) of this section. The service of notice required by division (C) of section 5321.17 of the Revised Code constitutes compliance with the notice requirement of division (A) of this section. R.C. 5321.17 in turn governs the termination of periodic tenancies. Specifically, R.C. 5321.17(B) requires a landlord to provide notice to a month-to-month tenant at least thirty days prior to the periodic rental date in order to terminate the tenancy. As correctly noted by appellant herein, a tenant is a "person entitled under a rental agreement to the use and occupancy of residential premises to the exclusion of others." R.C. 5321.01(A). Since Williams was not a "tenant" as defined in R.C. 5321.01(A) when appellant served the R.C. 1923.04 notice to vacate the premises, appellant was not required to follow the notice requirement of R.C. 5321.17(B). See Hembree (foreclosure action extinguished tenant's right to possession); Admr. of Veterans Affairs v. Jackson (1987), 41 Ohio App.3d 274 (R.C. 5321.17 does not apply when landlord-tenant relationship not in existence). The trial court, therefore, erred in concluding that R.C. 5321.17(B) required appellant to serve Williams with a thirty-day notice to vacate the premises. The court consequently also erred in dismissing appellant's forcible entry and detainer action based upon this alleged error in service. -10- Appellant's second and third assignments of error are sustained. Judgment reversed and final judgment is entered in favor of appellant, Victoria Mortgage Corporation, pursuant to App.R. 12(B). -11- It is ordered that appellant recover of appellee costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Cleveland Municipal Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. DAVID T. MATIA, J., AND *AUGUST PRYATEL, J., CONCUR PRESIDING JUDGE SARA J. HARPER *Judge August Pryatel, retired from the Eighth District Court of Appeals, sitting by assignment. N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journalization, at which .