Allason v. Gailey , 189 Ohio App. 3d 491 ( 2010 )

[Cite as Allason v. Gailey, 189 Ohio App.3d 491, 2010-Ohio-4952.]
STATE OF OHIO, COLUMBIANA COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
ALLASON, )
) CASE NO. 09 CO 26APPELLEE, )
)
v. ) OPINION
)
GAILEY, )
)
APPELLANT, et al. )
CHARACTER OF PROCEEDINGS: Civil Appeal from Common Pleas
Court, Case No. 09 CV 440.
JUDGMENT: Reversed.
APPEARANCES:
Stacey & Powers Co., L.P.A., and David P. Powers, for appellee.
Donald P. Leone, for appellant.
JUDGES:
Hon. Mary DeGenaro
Hon. Joseph J. Vukovich
Hon. Cheryl L. Waite
Dated: September 30, 2010
DEGENARO, Judge.
-2-
{¶ 1} This timely appeal comes for consideration upon the record in the trial court,
the parties' briefs, and their oral argument before this court. Defendant-appellant, Tina
Cole, n.k.a. Tina Cole Gailey, appeals the judgment of the Columbiana County Court of
Common Pleas that granted judgment to plaintiff-appellee, Kathy Allason, and dismissed
Gailey's counterclaim in this declaratory-judgment action regarding the distribution of fire-
insurance proceeds between parties to a land-installment contract. On appeal, Gailey
argues that the trial court erred in its division of the insurance proceeds. She also asserts
that the trial court erroneously dismissed her counterclaim regarding Allason's alleged
breach of the contract. Gailey also takes issue with Allason's failure to join Gailey's
husband, Robert, as a party to the suit.
{¶ 2} Upon review, Gailey waived the defense of failure to join her husband as a
necessary party to the action. However, Gailey is correct that the trial court's decision
regarding the division of the fire-insurance proceeds is against the manifest weight of the
evidence. There is no competent, credible evidence supporting the court's decision to
award $91,069.53 of the proceeds—an amount equal to the purchase-price balance—to
Allason. Allason failed to prove how her security interest would have been impaired by
Gailey's proposal to use $45,000 of the proceeds to purchase a new modular home as a
replacement and put it on a foundation on the property. To the contrary, the evidence
Allason set forth regarding the trailer's value demonstrates that her interest would actually
have been enhanced by Gailey's proposal. Further, the trial court's decision erroneously
accelerated Gailey's performance under the contract, because it did not contain an
acceleration clause. Gailey, as equitable owner of the property, was entitled to retain the
-3-
balance of the insurance proceeds.
{¶ 3} Since it is a legal impossibility to place the parties in the position they would
have been had the trial court made the correct decision, we look to equitable principles to
fashion a remedy. Accordingly, we reverse the decision of the trial court and enter
judgment in the amount of $45,000 in favor of Gailey. Gailey's second assignment of error
is rendered moot based on our resolution of the first assignment of error.
Facts and Procedural History
{¶ 4} In September 2007, Allason, as vendor, by a land-installment contract, sold to
Gailey, as vendee, a 3.145-acre tract of real estate in Columbiana County with some
outbuildings upon which a recently renovated double-wide trailer was situated. The
contract was drafted by Allason's real-estate agent and her attorney. Pursuant to the
contract, Gailey agreed to pay $105,000 for the property and the trailer. Gailey provided a
$13,000 down payment, and the $92,000 balance with interest at 6 percent per year was
payable in monthly installments of $551.59. The contract specified that a balloon payment
for the full unpaid balance would become due on October 15, 2009. There was no
acceleration clause.
{¶ 5} The contract also provides:
{¶ 6} "Vendee shall provide and maintain fire and extended insurance coverage for
the improvements on the property, in an amount not less than the purchase price balance,
in companies satisfactory to the Vendor, with loss payable to Vendor and Vendee, as their
interest [sic] appear.
{¶ 7} “* * *
-4-
{¶ 8} "Vendee is responsible for all maintenance and repairs on said property and
Vendee agrees to keep said property in good condition."
{¶ 9} Gailey initially continued the existing insurance policy that Allason had taken
out for the trailer. However, on October 31, 2008, Gailey, along with her husband, Robert,
who was not party to the contract and whom Gailey had married in the interim, took out an
insurance policy with American Modern Select Insurance Company. This policy listed
Allason as a lienholder. Included in this policy was comprehensive replacement coverage
for the trailer in the amount of $95,000.
{¶ 10} In January 2009, the mobile home was completely destroyed by fire.
American Modern determined that there was a total loss of structure and tendered a check
in the amount of $95,000—the policy limit. American Modern also issued a separate
check for over $40,000 to Gailey and her husband to cover their personal-property losses,
i.e., the contents of the trailer, and living expenses. Those funds are not in dispute in this
case. This disputed $95,000 check for the structure loss was made out jointly to Allason,
Gailey, and Gailey's husband, Robert.
{¶ 11} From the beginning, the parties could not agree about the proper disposition
of the $95,000 insurance proceeds. It was Allason's understanding based on the terms of
the contract that she was entitled to receive the purchase-price balance from the insurance
proceeds and that Gailey was entitled to the remainder. Allason contended that if Gailey
wanted a replacement trailer she must use her own funds or obtain her own financing to
rebuild. Gailey believed she was entitled to use the proceeds to purchase a comparable
replacement trailer and that she was entitled to retain any remaining funds. Gailey found a
-5-
replacement modular home for $27,000 and entered into a purchase agreement with a
dealer; however, Allason refused to endorse the insurance check and Gailey was unable to
obtain bank financing to purchase the replacement herself. Gailey testified that she
planned to put the replacement dwelling on a foundation and put a basement under it,
which would bring the total replacement cost to $45,000. Gailey stated that this option was
proposed to Allason and that she planned to title the replacement dwelling in Allason's
name until the contract balance was paid in full. Gailey planned to retain the remaining
$50,000 in insurance proceeds until the October 15, 2009 balloon-payment date, at which
time she would pay that amount to Allason and obtain a bank loan and mortgage to pay the
remaining amount owed on the contract.
{¶ 12} Allason, however, demanded an immediate payoff of the purchase-price
balance, upon receipt of which she agreed to transfer the real estate (without a
replacement dwelling) to Gailey free and clear of all liens, except for current real-estate and
mobile-home taxes, which were Gailey's responsibility under the contract. It is undisputed
that as of June 11, 2009, the balance due on the contract was $90,787.76 with interest
continuing to accrue at the rate of $14.83 per day.
{¶ 13} Gailey continued to make payments to Allason under the terms of the
contract even after the trailer was destroyed by fire, and she and her husband lived in a
small camper on the property. Gailey was late making payments several times, which
prompted Allason's counsel to send a letter demanding payment. However, each time
Gailey made the required monthly payment, which Allason accepted.
{¶ 14} On April 17, 2009, Allason filed a declaratory-judgment action in the
-6-
Columbiana County Court of Common Pleas to resolve the issue of the proper division of
the insurance money. American Modern and Gailey were named as defendants.
American Modern subsequently deposited the disputed $95,000 in insurance proceeds
with the court and was dismissed as a party to the case.
{¶ 15} On May 8, 2009, Gailey filed an answer, counterclaim, and request for
injunctive relief. Gailey's counterclaim alleged that Allason breached the contract by not
endorsing the insurance-proceeds check to Gailey to allow her to replace the trailer. She
also contended that Allason breached the contract by demanding full payment before
October 15, 2009, the date the final balloon payment was due.
{¶ 16} The matter came for a bench trial on June 11, 2009. Allason and Gailey
testified. The land contract, insurance contract, and other relevant documents were
admitted without objection. Both sides filed trial briefs with the court. In a June 30, 2009
judgment entry, the trial court issued a decision in Allason's favor and dismissed Gailey's
counterclaim. Specifically, the court ordered as follows:
{¶ 17} "In accordance with this judgment the Court orders that the monies being
held in deposit in this case by the Columbiana County Clerk of Courts be dispersed [sic] by
the Clerk as follows:
{¶ 18} "a) The sum of $91,069.53 payable to Kathy Allason and Attorney David
Powers and mailed to Attorney David Powers at 20 South Main Street, Columbiana, Ohio
44408.
{¶ 19} "b) Any and all remaining monies in the hands of the Clerk including any
interest which might have been accrued during the time said monies are [sic] on deposit
-7-
shall be paid less the court costs of this case, shall be payable to Tina Gailey and Attorney
Donald Leone at 24 West Boardman Street, Youngstown, Ohio 44503." (Emphasis sic.)
{¶ 20} Gailey filed a motion to stay execution of judgment pending appeal with the
trial court on July 2, 2009, which the trial court overruled, because the funds had already
been disbursed by the clerk's office on June 30, 2009, the same day final judgment was
issued.
{¶ 21} On July 7, 2009, Gailey filed a request for findings of fact and conclusions of
law and a motion for new trial. The court issued a judgment entry on July 20, 2009,
deferring a ruling on the motion for new trial pending the filing of findings of fact and
conclusions of law as requested. Both parties were granted leave to file proposed findings
of fact and conclusions of law. Allason filed hers on July 23, 2009. Instead of doing the
same and waiting for the trial court to issue its own findings of fact and conclusions of law,
Gailey filed a notice of appeal with this court on July 29, 2009.
{¶ 22} Gailey requested a stay of execution of judgment pending appeal with this
court on August 26, 2009, which Allason opposed. On September 16, 2009, this court
granted a partial stay ordering that $29,000 in insurance proceeds remain in escrow
pending appeal. This court ordered Allason to deposit $29,000 with the Clerk of Courts
within seven days.
{¶ 23} A docket check revealed that Allason never deposited the funds with the
clerk's office. During oral arguments, Allason's counsel represented that he was unaware
that his client had not complied. Show-cause proceedings are pending separately before
this court.
-8-
Allocation of Insurance Proceeds
{¶ 24} In Gailey's first of three assignments of error, she asserts:
{¶ 25} "That the trial court's judgment awarding Plaintiff/Appellee the proceeds of
fire insurance policy to pay off the balance on land installment contract before due date,
and when the contract was not in default was contrary to law and against the manifest
weight of the evidence."
{¶ 26} R.C. 2721.10 provides: "When an action or proceeding in which declaratory
relief is sought under this chapter involves the determination of an issue of fact, that issue
may be tried and determined in the same manner as issues of fact are tried and
determined in other civil actions in the court in which the action or proceeding is pending."
Hence, with regard to factual issues, an appellate court's "inquiry * * * involves whether the
trial court's judgment was against the manifest weight of the evidence." Blair v. McDonagh,
177 Ohio App.3d 262, 2008-Ohio-3698, 894 N.E.2d 377, ¶ 56. "Judgments supported by
some competent, credible evidence going to all the essential elements of the case will not
be reversed by a reviewing court as being against the manifest weight of the evidence.”
C.E. Morris Co. v. Foley Constr. Co. (1978), 54 Ohio St.2d 279, 280, 376 N.E.2d 578.
{¶ 27} On June 30, 2009, the trial court found that "the amount due on the purchase
price balance at any one time defines the interest of the seller in the land contract with the
difference between the balance due and the original purchase price defining the interest of
the buyer." The trial court thus awarded Allason $91,069.53 of the proceeds, which was
equal to the purchase-price balance at the time of judgment, relying in part upon the
following language from the contract:
-9-
{¶ 28} "Vendee shall provide and maintain fire and extended insurance coverage for
the improvements on the property, in an amount not less than the purchase price balance,
in companies satisfactory to the Vendor, with loss payable to Vendor and Vendee, as their
interest [sic] appear."
{¶ 29} The trial court entered its order despite the facts that the contract provided
that the final balloon payment was not due until October 15, 2009, and that there was no
acceleration clause.
{¶ 30} Allason urges this court to uphold the trial court's determination. She notes
that in dealing with a mortgagee-mortgagor relationship, the phrase "as their interests
appear," or the like, is a term of art that means that in the event of loss, the insurance
proceeds are used to pay off the remaining mortgage indebtedness. See AmeriTrust Co.
Natl. Assn. v. W. Am. Ins. Co. (1987), 37 Ohio App.3d 182, 183, 525 N.E.2d 491; Couch
on Insurance (3d Ed.), Section 65:17. Allason advocates that the land-contract vendor-
vendee relationship is analogous or at least similar enough that the meaning of such a
loss-payable clause should be the same in a land-installment-contract situation. Allason
points to the fact that she was listed as a lienholder in the insurance contract, just as a
mortgagee would be. Allason further notes that "Ohio courts have analogized the seller's
retention of legal title to the property as a lien 'similar to a mortgage for the unpaid
purchase price; the title is kept as security for the debt.'" Wood v. Donohue (1999), 136
Ohio App.3d 336, 339, 736 N.E.2d 556, quoting Flint v. Holbrook (1992), 80 Ohio App.3d
21, 28, 608 N.E.2d 809, and citing cases. Thus, Allason argues that this court should treat
the loss-payable clause in the land contract the same way it would in a mortgage situation.
- 10 -
{¶ 31} Gailey counters that land contracts are inherently different from mortgages,
especially in this case when, unlike in the typical mortgage, there is no acceleration clause.
Gailey also argues that equity dictates that the trailer should be rebuilt. Further, she
asserts that there is no competent, credible evidence supporting the trial court's
$91,069.53 award, since Allason failed to demonstrate how her security interest was
impaired by Gailey's proposed replacement. We agree.
{¶ 32} First, the language of the loss-payable clause, which states that in the event
of a fire a "loss [is] payable to Vendor and Vendee, as their interest [sic] appear," is
ambiguous. If a contract, or a term in a contract, is reasonably susceptible to more than
one meaning, then it is ambiguous and extrinsic evidence of reasonableness or intent can
be employed. Steubenville v. Jefferson Cty., 7th Dist. No. 07 JE 51, 2008-Ohio-5053, at ¶
22. The trial court correctly recognized that this case hinged in large part on the
interpretation of the loss-payable clause and permitted parol evidence regarding the
meaning of the provision. Allason testified that she understood the loss-payable clause to
mean she was entitled to receive the balance of the purchase price from the insurance
proceeds. To the contrary, it was Gailey's understanding that she was entitled to a
replacement trailer and to retain any excess insurance proceeds.
{¶ 33} It is a long-standing rule of contract construction that ambiguous contracts
are construed against the drafter. Handel's Ent., Inc. v. Wood, 7th Dist. Nos. 04 MA 238
and 05 MA 70, 2005-Ohio-6922, at ¶ 104, citing Graham v. Drydock Coal Co. (1996), 76
Ohio St.3d 311, 314, 667 N.E.2d 949. Because the contract was drafted by Allason, the
- 11 -
general principle dictates that the loss-payable clause should be construed against Allason
and in favor of Gailey.
{¶ 34} Moreover, Kulich v. Troppe (Apr. 8, 1992), 9th Dist. No. 15260, which
involves the allocation of fire-insurance proceeds between parties to a land contract,
supports Gailey's position that she was entitled to use the funds to replace the dwelling and
retain any excess. Allason argues that Kulich is factually distinguishable because the
contract in that case included an express provision that the vendee was required to keep
the property "in good condition and state of repair" and that in the event of a fire,
"insurance proceeds shall be utilized to restore and repair the Premises." Id. at *1.
However, the contract here likewise contains a provision obligating Gailey to keep the
premises in good repair, stating specifically that "Vendee is responsible for all maintenance
and repairs on said property and Vendee agrees to keep said property in good condition."
That the Kulich contract also contained a more specific provision regarding rebuilding in the
event of fire, while the contract here does not, is an immaterial distinction, since both
contracts contained a more general duty for the vendees to keep the property in good
repair.
{¶ 35} In Kulich, fire damaged a house that was subject to a land-installment
contract, rendering it uninhabitable. As in this case, the contract in Kulich required the
vendees to maintain fire insurance on the dwelling, with both parties named as insured "as
their interests appear." Kulich at *1. In that case, after the fire, the insurance company
adjusted the loss at $21,764.47. The vendees then spent approximately $8,000 to repair
the house. In a subsequent legal proceeding, the vendors argued that the vendees' repairs
- 12 -
were inadequate and that the vendors were entitled to the remaining insurance proceeds.
The trial court ordered the excess insurance funds split equally between the parties. On
appeal, the Ninth District reversed, first noting that "by the plain terms of the land contract,
each was to be insured only 'as their interests appear' and not necessarily in precisely
equal proportions. As a result, the Vendors were entitled to a share of the fire insurance
proceeds only to the extent that they carried their burden by proving that their security
interest had been impaired." Id.
{¶ 36} The court in Kulich concluded that there was no evidence in the record to
sustain the trial court's determination that the house was not restored to its prior condition,
since the "Vendors failed to submit a single exhibit which would allow the court to compare
the condition of the house before the fire with the state of the house after the repairs. No
appraisals or testimony was offered by Vendors, or anyone else, specifying a value
difference. * * * At no time during the course of the hearing did the Vendors explain, let
alone prove by a preponderance of the evidence, how and to what extent their interests
had diminished despite the Purchasers' repairs." Id. Thus, the court concluded that
absent any evidence of impairment of their security interest, the vendors had no claim to
the fire insurance proceeds, and that "[c]onsistent with the standards of equity, the
Purchasers are entitled to any amounts remaining after repairs." Id. at *3.
{¶ 37} Similarly, Allason failed to prove how her security interest would be impaired
if the destroyed trailer was replaced with a modular home purchased and installed on a
foundation with a basement at a cost of $45,000. When asked on redirect how her security
interest would be impaired, Allason's answer was stricken as speculative:
- 13 -
{¶ 38} "Q. Okay. If you - - if they put a home on this property that is valued at less
than $95,000, do you believe that your security interest in this property would be impaired?
{¶ 39} "A. Yes I do, because if they can't get a loan now, they're not going to get one
in October.
{¶ 40} "MR. LEONE. Object to speculation.
{¶ 41} "THE COURT: Sustained."
{¶ 42} When asked earlier at trial to place a separate value on the trailer, Allason
was unable to do so:
{¶ 43} "Q: And what was your estimated value of that stand-alone doublewide?
{¶ 44} "A. I had no estimated value of the stand-alone doublewide. I sold it as a
whole. I had the -- when I hired the real estate agent, to represent me, she made a
comparative market analysis, which Mr. Powers has, showing the other homes in the area
comparable to that home, and I priced the home accordingly."
{¶ 45} And the only evidence Allason provided as to the trailer's value was that she
purchased it for $5,000, and spent $20,000 in materials and $10,000 in her own labor to
renovate it. Thus, even using this rather speculative total of $35,000 as the value,
Allason's security interest would not be impaired by Gailey's proposal to spend $45,000 to
replace the dwelling, it would be improved. First, Gailey testified that the replacement
trailer would be titled in Allason’s name. Second, had Gailey failed to make the balloon
payment on October 15, 2009, Allason would retain possession of the parcel with a
replacement trailer worth $10,000 more than when the parties entered into the contract.
That the insurance company adjusted the loss at the policy limits of $95,000 does not
- 14 -
demonstrate the value of the trailer as it sat before the fire. Rather, that amount was the
policy maximum intended to cover comprehensive replacement costs in the event of the
structure's total destruction, which occurred in this case.
{¶ 46} The record is devoid of any competent, credible evidence supporting the trial
court's decision to award $91,069.53 of the proceeds to Allason, and therefore that
determination is against the manifest weight of the evidence. The court should have
permitted Gailey to use $45,000 of the funds to purchase a replacement and put it on a
foundation as she proposed. That way, had Gailey failed to make the balloon payment in
October 2009, or otherwise defaulted on the contract, Allason would have been able to
recover—either through forfeiture or foreclosure proceedings, depending on the
percentage of the purchase price that had been paid by Gailey at that point in time—both
the land and the replacement dwelling. In that event, both parties would have received
what they bargained for under the contract. By contrast, through the trial court's resolution
of the case, Allason was permitted to receive the full purchase price under the contract,
without providing what she promised therein, i.e., land and a dwelling.
{¶ 47} Further, like the vendees in Kulich, Gailey should have been permitted to
retain the excess insurance proceeds. "The longstanding rule is that the equitable owner
of the estate bears all risks but enjoys all benefits that may accrue." Kulich, 1992 WL
74208, at *2, citing Gilbert v. Port (1876), 28 Ohio St. 276, 293; Whitacre v. Hoffman
(1947), 50 Ohio Law Abs. 493, 498; United States v. Big Value Supermarkets, Inc. (C.A.6,
1990), 898 F.2d 493, 497. See also Wood, 136 Ohio App.3d at 341.
{¶ 48} Our determination that Gailey was entitled to the remaining insurance
- 15 -
proceeds rests upon the fact that the contract does not contain an acceleration clause,
meaning Gailey was not obligated to pay the purchase price balance in full until October
15, 2009. Pursuant to the contract, Gailey was only obligated to make the monthly
payments to Allason, which she had continued to do even after the fire. On October 15,
2009, Gailey could have used the remaining insurance proceeds to pay the balance due
under the contract.
{¶ 49} However, since that date has passed, and the trial court's judgment had the
effect of terminating the contract prematurely, we cannot put the parties back in the
position that they would have been had the trial court made the correct decision. When a
legal remedy is impossible or incomplete, courts may look to equity to fashion a remedy.
"It is a familiar maxim that equity treats as done what ought to be done." Kulich at *2, citing
Geiger v. Bitzer (1909), 80 Ohio St. 65, 73-74, 88 N.E. 134. "The function of equity is to
supplement the law where it is insufficient, moderating the unjust results that would follow
from the unbending application of the law." Discover Bank v. Owens, 129 Ohio Misc.2d 71,
2004-Ohio-7333, 822 N.E.2d 869, at ¶ 20, citing Salem Iron Co. v. Hyland (1906), 74 Ohio
St. 160, 77 N.E. 751. "'In equitable matters, the court has considerable discretion in
attempting to fashion a fair and just remedy.' Winchell v. Burch (1996), 116 Ohio App.3d
555, 561, 688 N.E.2d 1053, 1057. It has the power to fashion any remedy necessary and
appropriate to do justice in a particular case." McDonald & Co. Sec., Inc., Gradison Div. v.
Alzheimer's Disease & Related Disorders Assn., Inc. (2000), 140 Ohio App.3d 358, 366,
747 N.E.2d 843.
{¶ 50} "Equity may be invoked to prevent injustice or unfairness. Courts of equity
- 16 -
will assist the wronged party on the ground of fraud, imposition, or unconscionable
advantage if there has been great inequality in the bargain. Wagner v. Hummel (1937), 25
Ohio L.Abs. 400. To prevent a court of equity from exercising jurisdiction, it is not enough
that there be a remedy at law; the remedy itself must be plain, adequate, and complete.
Salem Iron Co. v. Hyland (1906), 74 Ohio St. 160, 77 N.E. 751; Gannon v. Perk (1975), 47
Ohio App.2d 125, 1 O.O.3d 233, 352 N.E.2d 606, reversed in part and affirmed in part on
other grounds (1976), 46 Ohio St.2d 301, 75 O.O.2d 358, 348 N.E.2d 342. An adequate
remedy at law is one that affords relief with reference to the matter in controversy and is
appropriate to the particular circumstances of the case. Mt. Vernon v. Berman & Reed
(1919), 100 Ohio St. 1, 125 N.E. 116; Brissel v. State (1912), 87 Ohio St. 154, 100 N.E.
348." Discover Bank at ¶ 21.
{¶ 51} In this case, the trial court's decision to award Allason the purchase-price
balance from the insurance proceeds, thereby improperly accelerating the contract, leaves
Gailey with an inadequate legal remedy. Further, although governed by statute, land-
installments contracts are equitable in nature. Upon execution, the vendee is deemed the
equitable owner, because “the exchange is considered to have already taken place even
though the contract is in fact executory.” Kulich, 1992 WL 74208, at *2. Keeping the
aforementioned equitable principles in mind, we award judgment to Gailey for $45,000,
which is the amount she sought to purchase a replacement trailer and place it on a
foundation with a basement. Accordingly, Gailey's first assignment of error is meritorious.
Gailey's Counterclaim
{¶ 52} In her second assignment of error, Gailey asserts:
- 17 -
{¶ 53} "That the trial court's judgment that Plaintiff-Appellee's refusal to cash the
insurance proceeds check and replace Defendant/Appellants [sic] primary residence was
not a breach of the land installment contract between the parties was contrary to law and
against the manifest weight of the evidence."
{¶ 54} In her counterclaim, Gailey alleged that Allason breached the land-installment
contract by failing to endorse the insurance-proceeds check, thereby preventing
replacement of the trailer, and by demanding full payment of the contract balance well in
advance of the October 15, 2009 payoff date. Gailey sought breach-of-contract damages,
including the return of her $13,000 down payment.
{¶ 55} The resolution of this assignment of error is largely dependent on the
resolution of the first assignment of error. That is, determining whether Allason’s actions
constituted a breach of the contract depends on the interpretation of the loss-payable
clause. As discussed, the trial court erroneously concluded that the loss-payable clause
meant that Allason was entitled to receive the purchase-price balance from the fire-
insurance proceeds. Had the trial court reached the correct decision, then it should have
correspondingly found a breach of the contract.
{¶ 56} To succeed on a breach-of-contract claim, a plaintiff must show the existence
of a valid contract, performance by one party, breach by another party, and damages or
loss to the performing party. See Lucio v. Safe Auto Ins. Co., 183 Ohio App.3d 849, 2009-
Ohio-4816, 919 N.E.2d 260, ¶ 23. "'Breach,' as applied to contracts is defined as a failure
without legal excuse to perform any promise which forms a whole or part of a contract,
including the refusal of a party to recognize the existence of the contract or the doing of
- 18 -
something inconsistent with its existence." Hanna v. Groom, 10th Dist. No. 07AP-502,
2008-Ohio-765, at ¶ 14, quoting Natl. City Bank of Cleveland v. Erskine & Sons (1953),
158 Ohio St. 450, 110 N.E.2d 598, paragraph one of the syllabus.
{¶ 57} Here, the existence of a valid contract is not at issue. And although Allason
argues on appeal that Gailey failed to perform under the contract by making the monthly
payments as agreed, the record unequivocally demonstrates that Gailey ultimately made
all payments, even after the fire destroyed the trailer. Further, Allason's refusal to cash the
insurance-proceeds check to replace the trailer and her demand of payment before the
October 15, 2009 balloon-payment date constitute a breach of the land-installment
contract. Gailey contracted to purchase both a trailer and a parcel of land and agreed to
pay by installments, with a final balloon payment due on October 15, 2009. By preventing
the replacement of the trailer and demanding full payment without legal excuse to do so,
Allason breached the contract. Gailey suffered damages in that she did not receive the
benefit of her bargain; she agreed to pay $105,000 for land and a trailer, and in the end,
received only the land.
{¶ 58} However, Gailey's damages were facilitated by the trial court’s erroneous
decision. That is, the court's ruling in this case had the effect of accelerating the contract
and prematurely ordering payment of the balance and transfer of the deed to Gailey. As
we explained in the context of the first assignment of error, it is impossible to put the
parties back in the position they would have been had the trial court made the correct
decision. Further, several of Gailey's requested remedies for the breach, namely rescission
of the contract and refund of her down payment, are no longer feasible in light of the trial
- 19 -
court's ruling. Insofar as we have crafted an equitable remedy, as outlined above, to
compensate Gailey for her loss, the second assignment of error is moot.
Joinder of Necessary Parties
{¶ 59} In her third and final assignment of error, Gailey asserts:
{¶ 60} "That Plaintiff/Appellee's failure to join Robert L Gailey as a
Defendant/Appellant in a lawsuit, to adjudicate his right to proceeds of insurance was
contrary to law as he was necessary and indispensable party because he was co-owner of
the insurance policy and co-payee under the insurance check."
{¶ 61} Here Gailey claims that the trial court erred by failing to join Gailey's husband
Robert to the action as a necessary and indispensable party pursuant to Civ.R. 19(A) or
19.1(A). Robert was not a party to the land-installment contract, but was listed as an
"additional insured" in the insurance policy with American Modern. The $95,000 check for
the loss of the mobile-home structure was made out to Gailey, Allason, and Robert jointly.
{¶ 62} Civ.R. 19.1(A) and 19(A) concern compulsory and permissive joinder,
respectively, and both expressly provide that the failure to timely assert the defense
pursuant to Civ.R. 12(G) or 12(H) constitutes a waiver thereof. Under Civ.R. 12(H)(2), a
defense of failure to join an indispensable party under Civ.R. 19 may be made in "any
pleading permitted or ordered by Civ.R. 7(A), by motion for judgment on the pleadings, or
at trial on the merits." Civ.R. 12(H)(2). However, "a party waives this defense when it fails
to take affirmative action to prosecute it." Nationwide Mut. Fire Ins. Co. v. Logan, 12th
Dist. No. CA2005-07-206, 2006-Ohio-2512, at ¶ 33. Thus, "merely raising the defense in
an answer without further affirmative action to prosecute the raised defense results in a
- 20 -
waiver of [the] defense." Id. at ¶ 24, quoting and adopting Mihalic v. Figuero (May 26,
1988), 8th Dist. No. 53921.
{¶ 63} In this case, although Gailey raised failure to join necessary parties as a
generic defense in her answer, she failed to take any further action on the claim.
Accordingly, this defense is waived. Moreover, as Allason points out, there is no prejudice
in the failure to join Robert Gailey. He may have had an insurable interest in the personal
property within the mobile home, but a separate check was issued for those losses. Any
claim to a portion of the disputed insurance proceeds at issue is by virtue of his marriage to
Gailey, which occurred after the execution of the land-installment contract. The interests of
Gailey and her husband are aligned, and therefore even if the failure-to-join defense was
not waived, there is no reversible error. Accordingly, Gailey's third assignment of error is
meritless.
Conclusion
{¶ 64} In sum, Gailey waived the defense of failure to join her husband as a
necessary party to the action. Gailey is correct that the trial court's decision regarding the
division of the fire-insurance proceeds is against the manifest weight of the evidence and
contrary to law. There is no competent, credible evidence supporting the court's decision
to award $91,069.53 of the proceeds—an amount equal to the purchase-price balance—to
Allason. Allason failed to prove how her security interest would have been impaired by
Gailey's proposal to use $45,000 of the proceeds to purchase a new modular home as a
replacement and put it on a foundation on the property. Further, the trial court's decision
erroneously accelerated Gailey's performance under the contract, because the contract
- 21 -
contained no acceleration clause. Gailey, as equitable owner of the property, was entitled
to retain the balance of the insurance proceeds until the final payoff date specified in the
contract. Since it is a legal impossibility to place the parties in the position they would have
been had the trial court made the correct decision, we look to equitable principles to
fashion a remedy. Accordingly, we reverse the decision of the trial court and enter
judgment in the amount of $45,000 in favor of Gailey. Gailey's second assignment of error
is rendered moot based on our resolution of the first assignment of error.
Judgment reversed.
VUKOVICH, P.J., and W AITE, J., concur.