FirstMerit Bank, N.A. v. Ashland Lakes, L.L.C. , 2012 Ohio 549 ( 2012 )

[Cite as FirstMerit Bank, N.A. v. Ashland Lakes, L.L.C., 2012-Ohio-549.]
COURT OF APPEALS
ASHLAND COUNTY, OHIO
FIFTH APPELLATE DISTRICT
FIRSTMERIT BANK, N.A. JUDGES:
Hon. Patricia A. Delaney, P.J.
Plaintiff-Appellee Hon. W. Scott Gwin, J.
Hon. William B. Hoffman, J.
-vs-
Case No. 11-COA-017
ASHLAND LAKES, LLC, ET AL.
Defendant-Appellant OPINION
CHARACTER OF PROCEEDING: Appeal from the Ashland County Court of
Common Pleas, Case No. 09-CFR-022
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: February 10, 2012
APPEARANCES:
For Plaintiff-Appellee For Defendant-Appellant
BRETT A. WALL SCOTT H. KAHN
PATRICK T. LEWIS GREGORY J. OCHOCKI
SARA L. WITT The Galleria & Towers at Erieview
Baker & Hostetler LLP McIntyre, Kahn & Kruse Co., L.P.A.
PNC Center 1301 East Ninth Street, Suite 2200
1900 East Ninth Street, Suite 3200 Cleveland, Ohio 44114
Cleveland, Ohio 44114-3482
Ashland County, Case No. 11-COA-017 2
Hoffman, J.
(¶1) Defendants-appellants Ashland Lakes, LLC, et al. appeal the June 3, 2011
Judgment Entry entered by the Ashland County Court of Common Pleas, which granted
plaintiff-appellee First Merit Bank’s motions for orders confirming the sheriff sale of two
tracts of land.
STATEMENT OF THE FACTS AND CASE
(¶2) On or about June 25, 2005, Appellants Ashland Lakes, Daniel E. Inks, and
David J. Slyman (hereinafter referred to collectively as “Ashland Lakes” and individually
as “Inks” and “Slyman”) executed a promissory note in favor of First Merit Bank (“the
Bank”). The Note was secured by a mortgage on approximately one hundred thirty
acres of real property located in Ashland County, Ohio (“the Property”).
(¶3) On January 12, 2009, the Bank filed a complaint in foreclosure against
Appellants, seeking to foreclose on its mortgage interest in the Property. The Bank
entered into three separate agreements with Ashland Lakes over the 2009 calendar
year: First Standstill Agreement dated February 6, 2009; Second Standstill Agreement
dated June 12, 2009; and Forbearance Agreement dated December 12, 2009.
Pursuant to the 2009 agreements, the Bank agreed to forbear from exercising its rights
and remedies under the loan documents. Ashland Lakes defaulted under the 2009
agreements by failing to repay the Note in full by June 30, 2010.
(¶4) The trial court entered a decree of foreclosure on August 20, 2010, which
ordered the Property be sold at public auction. Via Judgment Entry filed November 11,
2010, the trial court appointed David Bambeck, a licensed auctioneer, to conduct the
auctions. The trial court also authorized the sale of the Property as five separate
Ashland County, Case No. 11-COA-017 3
parcels. Bambeck obtained three freeholder evaluations of the Property, and scheduled
the auction for December 15, 2010.
(¶5) On December 14, 2010, Ashland Lakes filed a petition for bankruptcy in
the U.S. Bankruptcy Court, Northern District of Ohio. The Bank moved to dismiss the
bankruptcy action, asserting such was filed in bad faith, to hinder and delay the Bank’s
collection efforts. Ashland Lakes consented to the dismissal of the bankruptcy matter.
The bankruptcy court entered an agreed order of dismissal on January 6, 2011.
Bambeck subsequently rescheduled the auction for March 9, 2011.
(¶6) On January 7, 2011, Inks and Slyman met with Thomas P. Krumel, Senior
Vice President in the Managed Assets Department of the Bank, to discuss potential
avenues to resolve Ashland Lake’s indebtedness. Inks outlined a potential solution,
which included a combined cash payment with $1,000,000 in debt financing and
additional monies from the partial sale of the Property. Inks also sought the full release
of all of the guarantors’ liability, Inks, Slyman, and their respective spouses. The Bank
agreed to consider the proposal, however, the parties did not reach an agreement on
that day. The Bank requested a binding commitment letter from the proposed lender as
well as other proof the proposed transaction was viable.
(¶7) On February 14, 2011, Inks e-mailed Krumel a commitment letter from
Westfield Bank to finance a portion of the funds Ashland Lakes needed to meet the
Bank’s requirements. Westfield Bank set forth a number of contingencies in its
commitment letter, including an appraisal, environmental review, payment of delinquent
taxes, and funding of $550,000 in escrow and reserves. The commitment letter expired
Ashland County, Case No. 11-COA-017 4
on February 23, 2011. Krumel suggested Ashland Lakes purchase the appraisal
completed by Aaron C. Wright.
(¶8) The parties had no further contacted until March 3, 2011, when Inks once
again telephoned Krumel, seeking to negotiate a deal to stop the auction. Krumel
verbally outlined the basic terms for such a deal, which included a $200,000 deposit and
the payment of $9,000 for the Wright appraisal. Pursuant to Inks’ request, Krumel
issued a term sheet which set forth the broad terms and conditions upon which the
Bank might agree to cancel the auction. The term sheet expressly conditioned the
cancellation of the auction on the execution of a written forbearance agreement.
Krumel e-mailed a draft forbearance agreement on March 7, 2011, which reflected not
only the terms and conditions set forth in the term sheet, but also additional terms and
conditions. The draft agreement required Ashland Lakes to make the $200,000 deposit
and pay the $9,000 appraisal fee by the close of business that day.
(¶9) During a telephone conversation on March 7, 2011, Inks informed Krumel
he was unsure he could pay the full $209,000, and asked if the Bank would accept
$150,000. Krumel advised Inks to continue to try to raise the full amount, but indicated
the Bank would consider accepting the $150,000 payment as well as the $9,000
appraisal fee. Later that day, Inks delivered a letter to Krumel, setting forth objections to
the draft forbearance agreement and requesting several substantive changes. Krumel
rejected Ashland Lakes’ request to defer payment of the appraisal fee as well as its
demand the Bank represent and warrant the appraisal.
(¶10) The following day, March 8, 2011, Inks and Krumel spoke on the
telephone on at least two occasions. Krumel expressed to Inks his belief Inks’ plan was
Ashland County, Case No. 11-COA-017 5
not viable, and also indicated he doubted a forbearance deal could be negotiated and
completed in time to cancel the auction. Inks insisted he would have $150,000 later that
day. Inks tried several times throughout the day to contact Krumel, however, Krumel
was unavailable until approximately 3 p.m. Krumel subsequently telephoned Inks, and
told Inks it was too late for the Bank to cancel the auction. Krumel suggested Inks bid
on the property at the auction.
(¶11) The auction proceeded as scheduled with four of the five parcels of the
Property sold. On March 25, 2011, the Bank filed two motions for orders confirming the
sales and distribution of the sales proceeds. On April 7, 2011, Ashland Lakes filed its
Supplement Motion to Set Aside the Sheriff’s Sale, Opposition to First Merit’s Motion to
Confirm Sheriff’s Sale and Request for Evidentiary Hearing. Ashland Lakes objected to
the confirmation of the sales, asserting the freeholder valuations used in the auction
were defective, and the auction was barred by a verbal forbearance agreement between
the Bank and Ashland Lakes.
(¶12) Via Judgment Entry filed April 15, 2011, the trial court found Ashland
Lakes’ assertion the auction was barred lacked merit as Ashland Lake had “failed to
establish that any forbearance agreement precluding the sale was ever consummated
by the parties.” The trial court further found a hearing on the legal sufficiency of the
appraisals was appropriate and scheduled the same for April 25, 2011. Via Judgment
Entry filed June 3, 2011, the trial court found the freeholder appraisal was in substantial
conformity with statutory requirements, and Ashland Lakes had “failed to establish, by
clear and convincing evidence, that the freeholder appraisal [was] in error.” The trial
court confirmed the sale of the Property and ordered distribution of the sales proceeds.
Ashland County, Case No. 11-COA-017 6
(¶13) It is from the April 15, 2011 Judgment Entry and the June 3, 2011
Judgment Entry Ashland Lakes appeals, raising as error:
(¶14) “I. WHETHER THE TRIAL COURT ERRED IN DENYING
DEFENDANT/APPELLANT ASHLAND LAKES, LLC’S ‘AMENDED MOTION TO STAY
CONFIRMATION’ AND/OR ‘SUPPLEMENT [SIC] MOTION TO SET ASIDE MARCH 9,
2011 SHERIFF’S SALE, OPPOSITION TO FIRSTMERIT’S MOTION TO CONFIRM
SHERIFF’S SALE AND REQUEST FOR HEARING’ WITHOUT CONDUCTING AN
EVIDENTIARY HEARING, IN THAT SAID MOTIONS WERE PREMISED ON AN ORAL
SETTLEMENT REACHED BY AND BETWEEN THE PARTIES.
(¶15) “II. WHETHER THE TRIAL COURT ERRED IN GRANTING
PLAINTIFF/APPELLEE FIRSTMERIT BANK, N.A.’S MOTION FOR ORDERS
CONFIRMING SALE WHEN THE APPRAISALS CONDUCTED IN CONNECTION
WITH THE SALES WERE PROCEDURALLY AND SUBSTANTIVELY DEFECTIVE
AND BIASED.”
I
(¶16) In the first assignment of error, Ashland Lakes contends because the
parties had entered into a forbearance agreement, the trial court erred in confirming the
sheriff’s sale without holding an evidentiary hearing pursuant to Rulli v. Fan Co., 79
Ohio St.3d 374, 683 N.E.2d 337, 1997-Ohio-380.
(¶17) In Rulli, the Ohio Supreme Court held a trial court erred by enforcing a
purported settlement agreement between the parties without first conducting an
evidentiary hearing where there was a legitimate dispute between the parties as to the
existence of the settlement agreement. Id. at 377. The Rulli Court stated:
Ashland County, Case No. 11-COA-017 7
(¶18) Where parties dispute the meaning or
existence of a settlement agreement, a court may not
force an agreement upon the parties. To do so would
be to deny the parties' right to control the litigation,
and to implicitly adopt (or explicitly, as the trial court
did here) the interpretation of one party, rather than
enter judgment based upon a mutual agreement.
(Emphasis added). Id.
(¶19) Unlike the situation in Rulli, the trial court herein refused to enforce what
Ashland Lakes purported to be an enforceable, oral settlement agreement between the
parties, after finding the parties had never actually reached a settlement agreement.
(¶20) In his Affidavit, Thomas Krumel averred, on March 4, 2011, he provided
Inks with a term sheet which outlined the general terms and conditions upon which the
Bank would agree to cancel the auction. The term sheet expressly required the parties
enter into a written forbearance agreement before the Bank would agree to forbear from
exercising its rights. Krumel e-mailed Inks a copy of a draft forbearance agreement on
March 7, 2011. Inks responded with a counteroffer which included six substantive
changes to the draft agreement. Krumel advised Inks the Bank would not defer the
payment of the appraisal fee nor include warranty provisions.
(¶21) In his Affidavit, Daniel Inks sets forth his account of the attempts he made
to reach a forbearance agreement with the Bank. Inks indicates he provided Krumel
with written objections to the agreement. Attached to Inks’ Affidavit is a copy of those
objections.
Ashland County, Case No. 11-COA-017 8
(¶22) Inks’ Affidavit does not establish the parties ever reached a meeting of the
minds as to all the terms. In fact, Inks states the March 4, 2011 term sheet contained a
“new $200,000 deposit requirement along with other terms which had never been
discussed.” Affidavit of Daniel E. Inks at para. 15. Based upon the evidence, we find
the trial court correctly found a settlement agreement did not exist between the parties.
In the absence of such a legitimate factual dispute, the trial court was not required to
conduct an evidentiary hearing. Mack v. Polson Rubber Co. (1984), 14 Ohio St.3d 34,
syllabus.
(¶23) Ashland Lakes’ first assignment of error is overruled.
II
(¶24) In the second assignment of error, Ashland Lakes maintains the trial court
abused its discretion by confirming the sheriff’s sale as the appraisals completed in
connection therewith were procedurally and substantively defective.
(¶25) To set aside an appraisement, a movant must demonstrate by clear and
convincing evidence not only that the appraisement was in error, but also that the
movant was prejudiced thereby. Conseco Fin. ServicingCorp. v. Taylor, Ashland App.
No. 01 COA 1442, 2002-Ohio-2504. Clear and convincing evidence has been defined
as that measure of proof which is more than a mere preponderance of the evidence but
less than the extent of certainty required in establishing proof beyond a reasonable
doubt in criminal cases. Cincinnati Bar Assn. v. Massengale (1991), 58 Ohio St.3d 121,
122, 568 N.E.2d 1222. The decision as to whether the appraisement should be set
aside because it is in error is within the discretion of the trial court. Ohio Sav. Bank v.
Ambrose (1990), 56 Ohio St.3d 53, 55, 563 N.E.2d 1388. In order to find an abuse of
Ashland County, Case No. 11-COA-017 9
discretion, we must determine that the trial court's decision was unreasonable, arbitrary
or unconscionable and not merely an error of law or judgment. Blakemore v. Blakemore
(1983), 5 Ohio St.3d 217, 219, 450 N.E.2d 1140.
(¶26) Ashland Lakes contends the appraisals were defective for three reasons.
First, Ashland Lakes submits the freeholders who conducted the appraisals did not take
the oath required by R.C. 2329.17(A). Next, Ashland Lakes argues the freeholders did
not view a majority of the property. Finally, Ashland Lakes contends the freeholders did
not have special professional qualifications which were necessary due to the unique
nature of the property.
(¶27) R.C. 2329.17, which governs the appraisal process performed in
preparation for a mortgage foreclosure sale, provides, in pertinent part:
(¶28) (A) When execution is levied upon lands and
tenements, the officer who makes the levy shall call
an inquest of three disinterested freeholders,
residents of the county where the lands taken in
execution are situated, and administer to them an
oath impartially to appraise the property so levied
upon, upon actual view. They forthwith shall return to
such officer, under their hands, an estimate of the real
value of the property in money. R.C. 2329.17(A).
(¶29) We find Ashland Lakes has not established it was prejudiced as a result of
the auctioneer’s failure to administer oaths to the freeholders who appraised the
Property. Further, the three freeholders subsequently testified under oath at the hearing
Ashland County, Case No. 11-COA-017 10
or through deposition testimony they conducted an impartial appraisal of the Property.
For a similar result, see, Cardinal Fed. S. & L. v. Michaels Bldg Co., Summit App. No.
13518, 13584, 1988 WL 87291 (Aug. 17, 1988)(no error in trial court’s refusal to set
aside the freeholder appraisals as the individuals were disinterested parties, and each
subsequently testified under oath his appraisal was his independent opinion).
(¶30) We now turn to Ashland Lakes’ assertion the freeholders failed to satisfy
the “actual view” requirement of R.C. 2329.17(A). In Old Kent Mortgage Co. v. Stancik,
Cuyahoga App. No. 80548, 2002-Ohio-3436, the Eight District Court of Appeals
addressed the validity of a sheriff’s sale where the appraisers did not conduct an “actual
view” of the building’s interior. The Old Kent Court discussed the abundant, yet
inconsistent case law on the issue, and found:
(¶31) To the extent the appraisers' failure to view the
inside of the premises is a deviation from the terms of
R.C. 2329.17, the authority suggests the sale be set
aside only when the condition of the house may have
an impact on the value of the real estate. To prevail,
the appellant must show that he was prejudiced by
the alleged failure of the appraisers to enter the house
on the property at issue and view the interior before
appraising the property. Id. at para. 11 (Citation
omitted).
(¶32) Upon review of the record, we find Ashland Lakes has failed to show it
was prejudiced by the freeholders’ failure to view the entire Property. The freeholders
Ashland County, Case No. 11-COA-017 11
viewed the interior of a number of offices and units within the triplexes, as well as two
single-family homes on the Property. Further, Ashland Lakes has failed to establish it
was prejudiced by the freeholders’ failure to walk the entire 130 acres of the Property.
There is no evidence had the freeholders’ estimates of value would have changed had
they done so. Further, R.C. 2329.17 does not require an appraiser to conduct a pace
by pace walk of the Property.
(¶33) With respect to Ashland Lakes’ position the appraisers needed
professional qualifications due to the unique nature of the property, we find such
requirement is not found in R.C. 2329.17. R.C. 2329.17(A) merely requires the persons
valuing a property for judicial sale be disinterested; own property in the county; and
reside in the county. The freeholders in the instant action met those requirements. Any
lack of qualifications on the part of the freeholder would go to the weight given to their
valuation. Such does not invalidate the appraisal.
(¶34) Ashland Lakes’ second assignment of error is overruled.
(¶35) The judgment of the Ashland County Court of Common Pleas is affirmed.
By: Hoffman, J.
Delaney, P.J. and
Gwin, J. concur s/ William B. Hoffman _________________
HON. WILLIAM B. HOFFMAN
s/ Patricia A. Delaney _________________
HON. PATRICIA A. DELANEY
s/ W. Scott Gwin _____________________
HON. W. SCOTT GWIN
Ashland County, Case No. 11-COA-017 12
IN THE COURT OF APPEALS FOR ASHLAND COUNTY, OHIO
FIFTH APPELLATE DISTRICT
FIRSTMERIT BANK, N.A. :
:
Plaintiff-Appellee :
:
-vs- : JUDGMENT ENTRY
:
ASHLAND LAKES, LLC, ET AL. :
:
Defendant-Appellant : Case No. 11-COA-017
For the reasons stated in our accompanying Opinion, the judgment of the
Ashland County Court of Common Pleas is affirmed. Costs to Appellants.
s/ William B. Hoffman _________________
HON. WILLIAM B. HOFFMAN
s/ Patricia A. Delaney _________________
HON. PATRICIA A. DELANEY
s/ W. Scott Gwin_____________________
HON. W. SCOTT GWIN