Snowville Subdivision Joint Venture Phase I v. Home Sav. & Loan of Youngstown

2012 Ohio 1342

SNOWVILLE SUBDIVISION JOINT VENTUREPHASE I, ET AL. PLAINTIFFS-APPELLANTS

v.HOME SAVINGS AND LOAN OF YOUNGSTOWN, OHIO DEFENDANT-APPELLEE

No. 96675

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

Dated: March 29, 2012

JOURNAL ENTRY AND OPINION

JUDGMENT:

AFFIRMED IN PART; REVERSED

IN PART, AND REMANDED

Civil Appeal from the

Cuyahoga County Court of Common Pleas

Case No. CV-742470

BEFORE: Celebrezze, P.J., Keough, J., and Kilbane, J.

RELEASED AND JOURNALIZED: March 29, 2012

ATTORNEYS FOR APPELLANTS

Anthony R. Vacanti

David D. Drechsler

John P. Slagter

Buckingham, Doolittle & Burroughs, L.L.P.

ATTORNEYS FOR APPELLEE

Brad A. Sobolewski

Francis Floriano Goins

Ulmer & Berne, L.L.P.

Thomas M. Gacse

FRANK D. CELEBREZZE, JR., P.J.:

{¶1} Appellants include Snowville Subdivision Joint Venture Phase I ("Snowville"), South Brecksville Development Company ("SBDC"), Queenswood Developers, Inc. ("Queenswood"), Infinity Development of Ohio, Ltd. ("Infinity"), Parkview Financial Group, LLC, Anne Ream, Thomas Ream, Paul Ream, Robert Ream, and Richard Puzzitiello. They seek reversal of the dismissal of their complaint against Home Savings and Loan of Youngstown, Ohio ("HSLY"). Appellants argue that the trial court failed to properly apply the Civ.R. 12(B)(6) standard to their complaint. After a thorough review of the record and law, we affirm in part and reverse in part the decision of the trial court.

I. Factual and Procedural History

{¶2} Snowville and SBDC, the "Signing Appellants," entered into a construction loan agreement ("Loan Agreement") with HSLY on November 21, 2006, to fund the development of the "Woodlands of Snowville Subdivision" project in Brecksville, Ohio. SBDC and the remaining appellants, except Puzzitiello, were guarantors of the loan. The entirely new subdivision would consist of 54 lots in Phase I and an additional 64 lots in a future Phase II plan. The Loan Agreement called for appellants to complete construction of the Phase I improvements within one year of the date of the agreement. Theimprovements included installation of utilities, roads, an off-site sanitary sewer facility, and any other improvements necessary to construct single family homes on the site.

{¶3} By November 21, 2007, the improvements were not complete but appellants continued to develop the site. HSLY continued to authorize draws as work was completed up to the date of maturity of the loan on November 21, 2009. After the balance became due, HSLY sent a letter to Snowville in December informing them that they were in default and that it was requesting payment of the entire balance. HSLY also executed cognovit note provisions in the Loan Agreement and obtained judgments against the guaranteeing appellants in March 2010.

{¶4} Prior to the maturity date of the loan, appellants attempted to exercise a one-year extension as set forth in the Loan Agreement. Section 4 of the agreement allowed for two one-year extensions of the maturity date upon written notice received 30 days before the expiration of the loan accompanied by the payment of a fee equal to one-quarter percent of the outstanding balance. On October 19, 2009, appellants sent an extension notice to HSLY, but did not submit payment until November 12, 2009. The extension provision also required that appellants not be in default of the Loan Agreement at the time of the extension.

{¶5} HSLY and Snowville also executed a sanitary sewer construction agreement ("Sewer Agreement") with the city of Brecksville (the "City") in November 2009. HSLY acknowledged that it held funds in an escrow account for Snowville to draw uponto fund the construction of a sanitary sewer system for the development. The City agreed to contribute $400,000 to build the facility.

{¶6} After HSLY obtained cognovit judgments, appellants brought suit against HSLY for breach of the Loan Agreement, breach of good faith, negligent misrepresentation, promissory estoppel, and breach of the Sewer Agreement. HSLY filed a motion to dismiss, arguing that appellants could show no set of facts entitling them to relief. On April 11, 2011, the trial court granted HSLY's motion to dismiss, finding that appellants were in breach of the agreement since the 2007 completion date and had made no payments on the loan since the maturity date. Appellants then filed the instant appeal, listing one error for review:

The trial court erred when it dismissed Appellants' Complaint for failure to state a claim upon which relief may be granted under Rule 12(b)(6) [sic] despite Appellants adequately setting forth factual allegations that support the claims contained in the Complaint and despite the trial court's obligation to presume the facts as alleged to be true.

II. Law and Analysis

A. Motion to Dismiss for Failure to State a Claim

{¶7} A motion to dismiss for failure to state a claim upon which relief can be granted is procedural and tests the sufficiency of the complaint. State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 605 N.E.2d 378 (1992). It is well settled that "when a party files a motion to dismiss for failure to state a claim, all factual allegations of the complaint must be taken as true and all reasonable inferences must be drawn in favor of the nonmoving party." Byrd v. Faber, 57 Ohio St.3d 56, 60, 565 N.E.2d 584 (1991).

{¶8} While the factual allegations of the complaint are taken as true, "[u]nsupported conclusions of a complaint are not considered admitted * * * and are not sufficient to withstand a motion to dismiss." State ex rel. Hickman v. Capots, 45 Ohio St.3d 324, 544 N.E.2d 639 (1989). In light of these guidelines, in order for a court to grant a motion to dismiss for failure to state a claim, it must appear "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." O'Brien v. Univ. Community Tenants Union, 42 Ohio St.2d 242, 245, 327 N.E.2d 753 (1975).

{¶9} This analysis was shifted by recent Supreme Court decisions addressing the federal notice pleading standard in Fed.Civ.R. 8, upon which Ohio's Civ.R. 8 pleading requirement is based. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 149, 173L.Ed.2d 868 (2009). The Court held that bald legal conclusions did not constitute a well-pled complaint. In order to survive a motion to dismiss, the complaint must offer factual support for the legal conclusions drawn within. Iqbal at 1949. These holdings are similar to the rule enunciated in Capots, cited above. But the shift lies in the level of certainty of the complaint. Based on the above Ohio case law, plaintiffs must only show some set of facts that would entitle them to relief. O'Brien at 245.

{¶10} The Supreme Court has clarified the federal notice pleading standard — to survive a motion to dismiss, sufficient facts beyond a mere speculative level must be pled. Twombly at 555. A de novo standard of review applies to decisions on motions predicated on Civ.R. 12(B)(6). NorthPoint Properties v. Petticord, 179 Ohio App.3d 342, 2008-Ohio-5996, 901 N.E.2d 869, ¶ 11 (8th Dist.). A de novo standard of review affords no deference to the trial court's decision, and we independently review the record. Gilchrist v. Gonsor, 8th Dist. No. 88609, 2007-Ohio-3903, ¶ 16.

i. Breach of Contract

{¶11} Appellants argue that they sufficiently set forth a cause of action against HSLY for breach of contract as to the Loan Agreement. "[T]o prove a breach of contract, a plaintiff must establish the existence and terms of a contract, the plaintiff's performance of the contract, the defendant's breach of the contract, and damage or loss to the plaintiff." Samadder v. DMF of Ohio, Inc., 154 Ohio App.3d 770, 2003-Ohio-5340, 798 N.E.2d 1141, ¶ 27 (10th Dist.), citing Powell v. Grant Med. Ctr., 148 Ohio App.3d 1, 2002-Ohio-443, 771 N.E.2d 874, ¶ 27 (10th Dist.).

{¶12} In their complaint, appellants alleged that HSLY breached the contract because the maturity date of the loan was extended and, through acquiescence or waiver, HSLY agreed to extend the construction completion date. Appellants also allege that HSLY breached the Sewer Agreement because it no longer held funds for appellants to complete construction of a sanitary sewer system for one year from the date the Sewer Agreement was executed.

{¶13} HSLY argues that a waiver provision contained in Section 14 of the Loan Agreement indicates that any waiver must be in writing to be effective and any action or inaction on its part did not waive any rights it had under the agreement. The Loan Agreement contains a traditional anti-waiver clause that states:

No waiver of any Event of Default shall extend to or affect any subsequent Event of Default or shall impair any rights, remedies and/or powers available to lender. No single or partial exercise of any right, remedy or power shall preclude other or further exercise thereof by [HSLY].

The Loan Agreement also contains a waiver clause that requires appellants to obtain advance written permission should they fail to meet a condition. This provision states:

Any of the acts that [the Signing Appellants are] required to do or prohibited from doing by any of the provisions of this Agreement may, notwithstanding such provisions, be omitted or done, as the case may be, only if [HSLY] by an instrument in writing, has given [HSLY's] prior consent thereto.

{¶14} This court has recently held that written waiver provisions are valid and enforceable in Ohio. "Ohio law is very clear that a contract that expressly provides that it may not be amended, modified, or waived except in writing executed by the parties is not subject to oral modification." Kelley v. Ferraro, 188 Ohio App.3d 734,2010-Ohio-2771, 936 N.E.2d 986, ¶ 39 (8th Dist.), citing Freeman-McCown v. Cuyahoga Metro. Hous. Auth., 8th Dist. Nos. 77182 and 77380, 2000 WL 1594090 (Oct. 26, 2000); Rosepark Properties, Ltd. v....