Opinion
21 MA 0075
12-29-2022
THE MONEY SOURCE, INC., Plaintiff-Appellant, v. WALTER L. HANDWORK, et. al., Defendant-Appellee.
Atty. Gregory A. Stout and Atty. John R. Tarter, Reisenfeld & Associates, LPA, LLC, for Plaintiff-Appellant Atty. Jay C. Blackstone, WPA Memorial Building, for Defendant-Appellee.
Civil Appeal from the Court of Common Pleas of Mahoning County, Ohio Case No. 2019 CV 2617
Atty. Gregory A. Stout and Atty. John R. Tarter, Reisenfeld & Associates, LPA, LLC, for Plaintiff-Appellant
Atty. Jay C. Blackstone, WPA Memorial Building, for Defendant-Appellee.
BEFORE: Cheryl L. Waite, Carol Ann Robb, David A. D'Apolito, Judges.
OPINION AND JUDGMENT ENTRY
WAITE, J.
{¶1} Appellant The Money Source, Inc. appeals a June 30, 2021 judgment entry of the Mahoning County Court of Common Pleas granting Appellee Walter L. Handwork's motion to enforce a settlement agreement. Appellant argues that the document signed by Appellee was merely a draft for the sole purpose of allowing him to obtain financing to purchase the property at issue. Even so, Appellant argues that it did not sign the document, thus the document does not comply with the statute of frauds. For the reasons provided, Appellant's argument regarding the statute of frauds has merit, rendering the remaining arguments moot. As such, the judgment of the trial court is reversed and remanded for the purpose of continuing the foreclosure proceeding.
Factual and Procedural History
{¶2} On November 20, 2018, Paul L. Handwork executed a promissory note in the amount of $193,000 in favor of New Day, Inc. The note was secured by the subject property at 11674 Green Beaver Road in Canfield. The note and mortgage were later assigned to Appellant. The loan was underwritten by the United States Veterans Administration ("VA").
{¶3} Approximately three weeks after signing the note, Paul died and his son (Appellee) obtained the property as successor in real estate. Appellee allegedly incurred unspecified costs maintaining the property after his father's death. In February of 2019, Appellee defaulted on the loan. On December 31, 2019, Appellant filed a foreclosure complaint. Apparently as the sole heir, Appellee was later added as a defendant. Appellee did not contest the complaint but filed a counterclaim seeking reimbursement for the costs he claimed were incurred to restore the property.
{¶4} The parties entered settlement negotiations. At an April 16, 2020 status conference, the parties agreed to seek appraisals for purposes of completing a short sale. Appellant's appraiser valued the property at $154,000 and Appellee's appraiser valued it at $131,000. For purposes of the settlement, the parties agreed to use Appellant's appraisal. The parties determined that the short sale payoff amount necessary to satisfy the interests of the VA was $129,437. These figures were listed in an email from Appellant's counsel to Appellee's counsel.
{¶5} The parties negotiated their settlement largely through emails. The first was sent from Appellant's counsel to Appellee's counsel. In relevant part, it states: "Jay: let me know your thoughts on the attached. We had some delays on my end. As to [Appellee's] lender, will the agreement satisfy their concerns? The agreement requires the foreclosure to be dismissed." (3/1/21 Stipulation, Exh. A, p. 1.) The email had two attachments consisting of a proposed dismissal entry and a settlement agreement. The attachment on the email names the latter document "Handwork_settlement_agreement.doc."
{¶6} Appellee's counsel responded:
Good news. The bank has agreed to go forward with the financing based upon the Settlement Agreement. I have attached a copy with [Appellee's] signature. Could you please have [Appellant] sign this asap so that [Appellee] can get it back to his bank by Thursday. He has an interest rate locked in until then, and he'll also have to restart the application process if this isn't in by Thursday.(3/1/21 Stipulation, Exh. A, p. 1.)
{¶7} Appellant's counsel responded on July 23, 2020: "I'm still working to get you the countersigned agreement back today." (3/1/21 Stipulation, Exh. A, p. 2.) However, six days later Appellant's counsel sent another email stating: "we have a small hiccup. The paperwork [VA mortgage assistance application] that we sent over on May 8th, does need completed before we can move forward. How quickly can your client get it completed? If you need me to resend, let me know." (3/1/21 Stipulation, Exh. A, p. 2.)
{¶8} A week later, on July 30, 2020, Appellee's counsel responded with an email expressing some confusion as to why Appellee would need to file the paperwork as he did not intend to secure financing through the VA: "I have it, but should it be filled out on behalf of the actual borrower - Paul Handwork - [Appellee's] deceased father? It would seem strange for [Appellee] himself to have to provide so much confidential financial information [to the VA] when he is getting his financing somewhere else." (3/1/21 Stipulation, Exh. A, p. 3.) It does not appear that Appellant's counsel answered this question.
{¶9} Appellee's counsel later sent an email with the completed application attached. Then, on September 28, 2020, Appellant's counsel learned that the VA would not approve the short sale. In an email, he stated: "It was confirmed to me last week that the short payoff plan is not going to work. The issue being that the VA can't approve/finalize the deal by virtue of the way your client held/took title from his parent(s). I can explain by phone." (3/1/21 Stipulation, Exh. A, p. 8.)
{¶10} Instead of exploring other relief options as suggested by Appellant, Appellee opted to file a motion to enforce the settlement agreement. In Appellee's February 8, 2021 motion, he argued that he accepted Appellant's offer of a short sale by signing the settlement agreement and relied on an assertion from Appellant's counsel that he was in the process of securing Appellant's signature. In reliance on this, he began expending money to improve and repair the residence.
{¶11} During the negotiations, which largely took place at the height of the COVID-19 pandemic, the CARES Act implemented by the United States government placed a moratorium on foreclosures and the matter was stayed. After filing the motion to enforce the settlement agreement, Appellee filed a motion to lift the stay which Appellant opposed. The magistrate ruled that while the CARES Act prevented Appellant from prosecuting a foreclosure action, it did not prohibit the parties from entering into or enforcing a settlement agreement. See 5/13/21 J.E.
{¶12} On June 2, 2021, the magistrate determined that the settlement agreement attached to Appellant's email constituted an offer and Appellee's return of the signed document represented an acceptance of that offer. The magistrate determined that the statute of frauds was not an issue as Appellant was obligated to sign the document because it extended an offer that was accepted. The court also determined that Appellee expended funds on repairs and improvements in reliance on his belief that a final agreement had been reached. Appellant filed objections to the magistrate's decision, asserting that the magistrate erroneously determined: that the document constituted an offer of a final settlement agreement, that Appellee had established detrimental reliance, and that the "contract" was not within the statute of frauds. On June 30, 2021, the trial court adopted the magistrate's decision. It is from this entry that Appellant timely appeals.
{¶13} Because Appellant's third assignment of error is dispositive, it will be addressed first. We note that, although Appellee's response brief mentions four assignments of error, Appellant's brief only raises three assignments, and this matter does not involve a cross appeal. It appears from the substance of Appellee's additional argument that it is intended as a response to Appellant's first assignment of error.
Standard of Review
{¶14} A bifurcated standard of review exists where a party seeks to enforce a settlement agreement. Wehr v. Petraglia, 2016-Ohio-3126, 65 N.E.3d 242 ¶ 17 (7th Dist.). Where a question of law is present, an appellate court must determine whether the trial court applied the correct legal standard and properly construed the law. Id., citing Continental W. Condominium Unit Owners Assn. v. Howard E. Ferguson, Inc., 74 Ohio St.3d 501, 502, 660 N.E.2d 431 (1996). However, where a question of fact or evidentiary issue is present, an appellate court must look to whether sufficient evidence supports the trial court's findings. Id., citing Chirchiglia v. Ohio Bur. of Workers' Comp., 138 Ohio App.3d 676, 679, 742 N.E.2d 180 (7th Dist.2000).
ASSIGNMENT OF ERROR NO. 3
THE TRIAL COURT ERRED WHEN IT ENFORCED AN AGREEMENT THAT DOES NOT COMPLY WITH THE STATUTE OF FRAUDS.
{¶15} This appeal generally addresses whether the agreement reached between counsel for the two parties amounted to an enforceable settlement agreement. However, in order to constitute an enforceable agreement, the parties must satisfy certain requirements above and beyond merely reaching agreement on the terms of the proposal. This assignment of error addresses one of those requirements, the statute of frauds. In its most simple terms, the statute of frauds requires certain agreements and contracts to be written and signed at least by the party to be charged.
{¶16} Appellant argues that it did not sign the document and Appellee's signature, alone, is insufficient to comply with the statute of frauds. In response, Appellee contends that since he accepted Appellant's offer Appellant was required to sign the document and cannot escape its obligation to abide by the agreement merely because it chooses not to sign.
{¶17} The statute of frauds is described within R.C. 13305.05 which provides that:
No action shall be brought whereby to charge the defendant, upon a special promise, to answer for the debt, default, or miscarriage of another person; nor to charge an executor or administrator upon a special promise to answer damages out of his own estate; nor to charge a person upon an agreement made upon consideration of marriage, or upon a contract or sale of lands, tenements, or hereditaments, or interest in or concerning them, or upon an agreement that is not to be performed within one year from the making thereof; unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or some other person thereunto by him or her lawfully authorized.
{¶18} While the parties debate the trial court's assertion that Appellant is bound to sign the agreement because it represents a binding contract, neither address an Ohio Supreme Court case that appears to be determinative on this issue, FirstMerit Bank, N.A. v. Inks, 138 Ohio St.3d 384, 2014-Ohio-789, 7 N.E.3d 1150.
{¶19} Before addressing FirstMerit, our analysis begins by recognizing that the specific contract at issue is a settlement agreement. "A settlement agreement is a contract designed to terminate a claim by preventing or ending litigation and is valid and enforceable by either party." Jones v. Mellinger, 7th Dist. Columbiana No. 13 CO 11, 2014-Ohio-722, ¶ 24, citing Continental W. Condominium Unit Owners Assn. v. Howard E. Ferguson, Inc., 74 Ohio St.3d 501, 502, 660 N.E.2d 431 (1995).
{¶20} Although contract law is generally applicable to settlement agreements, there are some variances and nuances. For instance, the Ohio Supreme Court has held that while "[i]t is preferable that a settlement be memorialized in writing[,]" "an oral settlement agreement may be enforceable if there is sufficient particularity to form a binding contract." Kostelnik v. Helper, 96 Ohio St.3d 1, 2002-Ohio-2985, 770 N.E.2d 58, ¶ 15, citing Pawlowski v. Pawlowski, 83 Ohio App.3d 794, 798-799, 615 N.E.2d 1071 (10th Dist. 1992); Spercel v. Sterling Industries, Inc., 31 Ohio St.2d 36, 39, 285 N.E.2d 324 (1972).
{¶21} This Court has acknowledged that settlement agreements need not be in writing if certain requirements are met. However, we have cautioned that none of these cases involved realty. Id. at ¶ 38. The FirstMerit Court addressed this very issue one month after Jones was released.
{¶22} The pertinent facts of FirstMerit are as follows. After a foreclosure sale, the homeowners moved for relief pursuant to Civ.R. 60(B) asserting that they had entered into an oral agreement where FirstMerit agreed to release them from their financial obligations. In their motion, the homeowners sought to enforce the settlement agreement.
{¶23} The FirstMerit Court explained "that while a mortgage is a lien for a debt, it also is a conveyance of property that passes the property conditionally to the mortgagee as well as a transfer of property as security for the debt." Id. at ¶ 23, citing Holmes v. Gardner, 50 Ohio St. 167, 176, 33 N.E. 644 (1893); United States v. Fisher, 6 U.S. 358, 2 L.Ed. 304 (1805); and Conard v. Ins. Co., 26 U.S. 386, 7 L.Ed. 189 (1828). This means that, "an agreement to release lands from the effect of a mortgage is an agreement for the transfer of real property and thus falls within the Statute of Frauds." Id. at ¶ 24, citing Douglas Co. v. Gatts, 8 Ohio App.3d 186, 187, 456 N.E.2d 841 (11th Dist.1982). Based on this premise, the Court held that even if the oral agreement before the Court constituted a settlement agreement, the agreement raised the statute of frauds and was governed by R.C. 1335.05. Id. at ¶ 25.
{¶24} An exception to this rule has been recognized where "partial performance of an oral contract to sell real estate can be sufficient to remove the contract from the statute of frauds." Hutson v. Meyers, 5th Dist. Delaware No. 21 CAE 08 0040, 2022-Ohio-1622, ¶ 32, citing Delfino v. Paul Davies Chevrolet, Inc., 2 Ohio St.2d 282, 287, 209 N.E.2d 194 (1965). To successfully assert partial performance, "the asserting party must have undertaken acts that 'changed his position to his detriment and make it impossible or impractical to place the parties in status quo.'" Id. citing, Delfino at 283. The "asserting party" must show: 1) evidence of a change in who possesses the land; 2) payment of all or part of the consideration for the land; and 3) improvements, alterations, or repairs on the land. Id., citing Bear v. Troyer, 5th Dist. Guernsey No. 15 CA 17, 2016-Ohio-3363, ¶ 33.
{¶25} We note that the above elements include the word "and," not "or." Thus, all three elements must be established in order to show partial performance. Here, Appellee concedes that he did not possess the land nor did he pay consideration for the property. As to improvements, alterations, and repairs, while the trial court decided that Appellee had made certain expenditures to repair the land, there is no actual evidence as to how much money he spent or what improvements or repairs he made. The only evidence reflecting expenditures made after the parties reached agreement is limited to three lines within Appellee's motion to enforce the settlement agreement:
Also, with his financing approved, and having signed the settlement agreement on July 21st, [Appellee] thereafter personally upgraded the property and restored it to a habitable condition after it had been vacant for more than a year and a half. His efforts required considerable time, effort, and expense, which he undertook in reliance on [Appellant] fulfilling its obligations under the settlement agreement.
[Appellee's] efforts to upgrade and improve the property have undoubtedly enhanced its value.(1/25/21 Motion to Enforce, p. 5.)
{¶26} We note that Appellant's counsel informed Appellee's counsel on July 23, 2020 that he was trying to get the settlement agreement signed. Six days later, Appellant's counsel informed Appellee's counsel that there was a problem and that certain paperwork needed to be completed "before we can move forward." Thus, Appellee was, or should have been, on notice on that date, July 29th, that the agreement was not final.
{¶27} Appellee also argues that he obtained a loan in reliance on the agreement. However, the evidence shows that Appellee could not obtain his loan until the litigation had produced a final settlement agreement. As the agreement had not been signed by both parties, it appears doubtful that the loan proceeds had been disbursed, and there is no evidence of disbursement. Also, in a July 21, 2020 email, Appellee's counsel informed Appellant's counsel that he was required to return the signed agreement to his lender by Thursday to lock in his rate and to avoid being forced to restart the application process. Clearly, he did not return the signed document to his lender within that time period. This record then reflects that Appellee's loan was never finalized.
{¶28} In summation, since this settlement agreement involves the transfer of real property the statute of frauds applies, and the party charged under the agreement (Appellant) must sign it in order for it to constitute a valid, binding agreement. Because Appellant did not sign the document, it is not valid or enforceable. Further, because Appellee has not met any of the three elements of partial performance, he cannot assert that exception in order to overcome the statute of frauds in this case.
{¶29} As such, Appellant's third assignment of error has merit and is sustained.
ASSIGNMENT OF ERROR NO. 1
THE TRIAL COURT ERRED WHEN IT ENFORCED A SETTLEMENT
ASSIGNMENT OF ERROR NO. 2
THE TRIAL COURT ERRED WHEN IT FOUND "DETRIMENTAL RELIANCE."
{¶30} Appellant argues that the document Appellee purports is a final settlement agreement was merely a draft. Even so, Appellant urges that Appellee failed to satisfy a condition precedent, to obtain VA approval, which negated an essential term of the agreement.
{¶31} Appellee responds by arguing that Appellant never referred to the agreement as a draft and Appellant's counsel informed him that he would try to obtain Appellant's signature the day he returned his signed document. Appellee also argues that VA approval was only a condition of his assumption of the loan, which he did not seek.
{¶32} Due to our resolution of Appellant's third assignment of error, these remaining assignments of error are moot.
Conclusion
{¶33} Appellant argues that the document at issue was merely a draft to allow Appellee to facilitate his loan process. Even if it were intended as a final settlement, Appellant contends that it does not comply with the statute of frauds as Appellant did not sign the document. For the reasons provided, Appellant's argument regarding the statute of frauds has merit, rendering the remaining arguments moot. As such, the judgment of the trial court is reversed and remanded for the purpose of continuing the foreclosure proceeding.
Robb, J., concurs.
D'Apolito, J., concurs.
For the reasons stated in the Opinion rendered herein, Appellant's third assignment of error is sustained and its remaining assignments are moot. It is the final judgment and order of this Court that the judgment of the Court of Common Pleas of Mahoning County, Ohio, is reversed. We hereby remand this matter to the trial court for further proceedings according to law and consistent with this Court's Opinion. Costs to be taxed against the Appellee.
A certified copy of this opinion and judgment entry shall constitute the mandate in this case pursuant to Rule 27 of the Rules of Appellate Procedure. It is ordered that a certified copy be sent by the clerk to the trial court to carry this judgment into execution.
NOTICE TO COUNSEL
This document constitutes a final judgment entry.