Case Summaries

REAL ESTATE CASES

Equitable subrogation does not apply to benefit party that failed to discover mortgage interest.    

IndyMac Bank, FSB v. Bridges (10^th Dist. 2006), 169 Ohio App. 3d 389.  A property owner, Key, granted a mortgage in favor of International Mortgage on January 12, 2000. Key then granted a balloon mortgage in favor of Goss on January 25, 2000, which was re-recorded on February 17, 2000. In January 2001, Key sold the property to her son, Bridges. Bridges granted a mortgage in favor of IndyMac on February 7, 2001. At the closing, the closing agent disbursed funds to International Mortgage to pay off the first mortgage loan, and the remaining amounts were distributed to Key.  Goss did not receive any proceeds from the sale, apparently because IndyMac's title examiner failed to discover his mortgage.

Bridges subsequently defaulted on the loan, and IndyMac received the entire proceeds from the sheriff's sale.  After the trial court confirmed the sale, Goss sought to set aside the order of distribution. IndyMac argued that since Goss originally bargained for second mortgage position, he remained in the same position and therefore suffered no prejudice by application of the doctrine of equitable subrogation.  The trial court agreed. The court of appeals reversed, and held that equitable subrogation was not applicable in the circumstances because the fact that Goss did not receive any distribution from the sale was due to IndyMac’s title examiner's error.  IndyMac was in the best position to discover Goss's mortgage interest at the time of the sale, and it failed to do so. Therefore, the equities were not in IndyMac's favor.

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Intent to claim title not required to establish adverse possession.

Evanich v. Bridge, 9^th Dist. No. 05 CA 008824, 2007 Ohio 1349. Bridge appealed the trial court’s determination that his neighbor, Evanich, adversely possessed his property because the trial court did not require the Evanich to prove intent to claim title. The appellate court rejected this argument and held that the doctrine of adverse possession protects one who has honestly entered and held possession in the belief that the land was his own, as well as one who knowingly appropriates the land of others for  the purpose of acquiring title.

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The tenant sought a declaratory judgment that the lessor could not terminate her tenancy if she complied with two settlement agreements. The trial court granted the tenant's summary judgment motion, and the lessor appealed.

Regency Plaza, LLC v. Morantz, 2007 Ohio 2594 (Ohio Ct. App. 2007).  Appellant lessor sought a declaratory judgment in the Franklin County Court of Common Pleas (Ohio) that appellee tenant's lease was not indefinitely renewable by her and that the lessor could terminate it on 30 days notice. The tenant sought a declaratory judgment that the lessor could not terminate her tenancy if she complied with two settlement agreements. The trial court granted the tenant's summary judgment motion, and the lessor appealed.  The parties entered into two settlements. The appellate court held the first agreed not to terminate the tenancy unless one of three events made the lease void. Neither the lease or settlement gave the tenant all rights to terminate the tenancy, so no perpetual lease was created, and this did not make the lease terminable at the lessor's will. A presumption that a lease at the will of one party was at the will of both did not apply because the parties' intent was clearly stated. A provision that the lease was void on a change in ownership was not triggered on the property's transfer to the lessors' partnership or limited liability company, as (1) they agreed the transfer to the partnership did not void the first settlement, (2) a lessor said neither transfer was done to avoid the settlements, and (3) the lessors controlled all entities with title to the property. If the lease was defectively executed, under R.C. § 5301.01, it created an equitable leasehold, as it was treated as enforceable despite any deficiencies. The second settlement agreed the lease was in full force and effect. The first settlement leased no interest in realty, so it did not have to comply with § 5301.01.  The trial court's judgment was affirmed.

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Appellant lessees sought review of the judgment of the Lake County Common Pleas Court (Ohio), which awarded judgment to appellee lessor for holdover rentals and other expenses as compensatory damages along with attorney fees as the result of the lessees' failure to vacate the leased premises upon the conclusion of the lease.

Brunswick Ltd. P'ship v. Feudo, 2007 Ohio 2163 (Ohio Ct. App. 2007).  Appellant lessees sought review of the judgment of the Lake County Common Pleas Court (Ohio), which awarded judgment to appellee lessor for holdover rentals and other expenses as compensatory damages along with attorney fees as the result of the lessees' failure to vacate the leased premises upon the conclusion of the lease.  The lessees entered into a five-year lease with the lessor. Although attempts were made to renew the lease at a stated rental of $ 1,900 per month, the parties were unable to reach an agreement. After the expiration of the lease, the lessees remained in the rental premises for four months, during which time they paid $ 2,206 per month to the lessor. The lessor, then, filed suit against the lessees. The trial court found that, pursuant to a provision in the parties' lease, the lessor was owed double rent for the four months of holding over. On appeal, the lessees contended that the trial court erred by ignoring binding precedent holding that a "hold over" clause providing for double rent was unconscionable and unenforceable. However, the court reviewed the precedent cited by the lessees and concluded that the case did not support the argument that holdover provisions containing double-rent terms were illegal; instead, the decision accepted the legality of such a provision as long as it bore some relation to the landlord's actual damages. The court concluded that a double-rent provision for a holdover tenant in a commercial lease was not, without more, an illegal penalty provision.  The court affirmed the judgment of the trial court.

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The Stark County Court of Common Pleas (Ohio) granted the bank's motion for summary judgment and entered a decree in foreclosure and reformation. The parents appealed.

JP Morgan Chase Bank, NA v. Qualls, 170 Ohio App. 3d 128 (Ohio Ct. App. 2007).  Plaintiff bank filed a complaint against defendant property owners (a son and his parents) seeking foreclosure, deed reformation, and quiet title. It sought to have the deed reformed to transfer the parents' entire interest in the property to the son, who was the sole debtor. The Stark County Court of Common Pleas (Ohio) granted the bank's motion for summary judgment and entered a decree in foreclosure and reformation. The parents appealed.  The parents argued that the trial court erred in granting summary judgment to the bank, including reformation of the deed, and erred in denying their motion for partial summary judgment. The appellate court held that the trial court erred in granting summary judgment. The trial court found that the deed contained a scrivener's error and that the parents had intended to convey the entire property to the son, rather than a one-third undivided interest. As the record stood, the deed transferred to the son an undivided one-third interest only, and the note and mortgage identified him as the sole borrower based upon the pledge of that undivided one-third interest. Although the bank might be entitled to equitable relief and/or recovery from a third party after resolving the factual issues, the current extent of the record under a summary judgment standard was insufficient to support the trial court's "finding" of scrivener's error. Construing the evidence in favor of the non-moving party required a reversal on the issue of the clear language of the deed and mortgage.  The judgment of the trial court was reversed and the cause was remanded.

 

 

CONSTRUCTION CASES

 

Removal of the scaffolding and the installation of guardrail not “active participation” under Cafferkey.

 

Rockett v. Newark Builders Supply, Inc. (5^th Dist. 2006), 169 Ohio App. 3d 379.  Arrow Home Services, LLC was constructing a residential home, and hired Newark Builders Supply, Inc., to perform drywall work. Newark hired independent contractors, Rockett and Hastings to sand the drywall. Rockett, fell to the basement floor and died. His father filed a complaint claiming negligence and wrongful death.  He argued that Arrow and Newark owed his son a duty because the removal of scaffolding and a guardrail constituted "active participation."  The trial court disagreed and granted summary judgment in favor of Arrow and Newark.  The appellate court affirmed finding that removal of the guardrail and installation of the scaffolding by the subcontractor and the removal of the scaffolding and the installation of the guardrail by the general contractor, as well as the absence of defendants on the job site on the day of the incident, did not equate to "active participation." Specifically, there was no evidence the general contractor directed any of the activity of the independent contractors or that it gave or denied permission for critical acts that led to the injury.

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No unjust enrichment where property owner entitled to maintenance pursuant to lease agreement.

 

Am. R.R. Constr. v. Columbiana County Port Auth., 7^th Dist. No. 06 CO 14, 2007, 2007 Ohio 1568.  The Columbiana County Port Authority owned a railroad right of way.  It leased the right to operate the railway to a railway operator. The Port Authority made improvements to the line and the operator agreed to maintain the track. When a train derailed, the operator entered into a verbal agreement with American Railroad to repair the tracks. American Railroad was not paid for work performed because of the operator's bankruptcy. American Railroad then billed the Port Authority, which refused to pay. American Railroad filed suit for unjust enrichment and the trial court entered judgment in favor of the Port Authority. The court of appeals upheld the trial court's determination that the Port Authority was not unjustly enriched by the work performed by American Railroad.  The Port Authority did not enter into the contract with American Railroad, and it did not receive a benefit to which it was not entitled, based on the operator's lease obligations to maintain the track. The court held it would not have been equitable to hold the Port Authority liable for the operator's obligation.

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Appellants, an oil and gas producer and its parent company, sued appellees, a landowner, a contractor, and an insurer, in the Franklin County Court of Common Pleas (Ohio) for negligence.

 

Ohio Energy Assets, Inc. v. Grange Ins., 2007 Ohio 2732 (Ohio Ct. App. 2007).  Appellants, an oil and gas producer and its parent company, sued appellees, a landowner, a contractor, and an insurer, in the Franklin County Court of Common Pleas (Ohio) for negligence. The trial court granted summary judgment in favor of the landowner, and appellants sought review.  The landowner hired the contractor to clear a creek on the landowner's property without telling the contractor the producer's pipeline ran under the creek. The contractor ruptured the pipeline. The appellate court held the producer's claim that injury was foreseeable ignored the contractor's possible common law duty to independently find the pipeline, if he was an excavator. The landowner could assume the contractor would observe any such duty, so a reasonable, prudent person would not anticipate the landowner's silence would lead to injury to the pipelines, as a reasonable, prudent person would expect an excavator's performance of his duty would prevent such injury. Absent a foreseeable injury, the landowner owed the producer no duty. Conflict on whether the contractor was an excavator created a genuine fact issue, so it was error to grant summary judgment. The producer was not an invitee to whom the landowner owed a duty because only the contractor was invited onto the property and exposed to a danger while there, but because the landowner could owe a duty to the producer based on the foreseeability of the injuries, summary judgment was improper.  The trial court's judgment was reversed, and the matter was remanded to the trial court.

 

 

FEATURE ARTICLES

LOT DEVELOPERS USING COMPLETED CONTRACT METHOD SHOULD EXERCISE CAUTION

By: David Kern and Andrew W. Bernat

 

 

OSHA's Multiemployer Worksite Policy Declared Invalid

 

By: Tod T. Morrow