B&J Resources, L.L.C. v. 28925 Lorain Inc.
2017 Ohio 7248
Ohio Ct. App.2017Background
- B&H Resources (through Bougebrayel) contracted to buy a gas-station property; Resource Title National acted as escrow/settlement and performed the title/proration using the county "last available tax duplicate."
- The seller had ongoing board-of-revision tax appeals claiming the 2007 $1.1M purchase price was artificially inflated; appeals were resolved adversely to seller before closing but the full adverse valuation had not been reflected on the tax duplicate used at closing.
- At closing Resource National prorated taxes based on the last available tax duplicate and withheld $64,520.60 from seller proceeds; a post-closing valuation adjustment produced additional tax liabilities for B&H totaling roughly $109,000.
- B&H sued Resource National for breach of contract, breach of implied good-faith duty, negligence, and negligent misrepresentation for failing to disclose the pending tax appeals; Resource National counterclaimed for contractual indemnity of its litigation costs.
- Trial court granted summary judgment for Resource National on B&H’s claims and for B&H on Resource National’s indemnity counterclaim; both parties appealed.
- Appellate court reviewed (1) whether Resource National breached contract or owed tort duties beyond contract, and (2) whether the escrow indemnity clauses obligated B&H to pay Resource National’s litigation costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Resource National breach the contract by failing to disclose pending board-of-revision appeals affecting taxes? | B&H: escrow/title agent had duty to disclose pending tax appeals and not just rely on duplicate; omission violated contract and implied good-faith duty. | Resource National: contract expressly required prorations based on the last available tax duplicate; it complied and had no contractual duty to do more. | Court: No breach as a matter of law — agent used last available tax duplicate as required; no implied term overrides the written covenant. |
| Did Resource National owe tort (negligence) duties independent of the contract? | B&H: even if contractually limited, Resource National negligently failed to investigate and inform B&H of tax appeals. | Resource National: negligence claims are barred by economic-loss doctrine and no breach of professional standard occurred. | Court: Negligence and negligent-misrepresentation claims fail — barred by economic-loss rule and no evidence of breach of standard of care or affirmative false statement. |
| Was negligent misrepresentation made by omission of pending appeals? | B&H: omission amounted to misleading information causing reliance. | Resource National: no affirmative false statement; only used public tax duplicate. | Court: Negligent misrepresentation requires an affirmative falsehood; omission insufficient. |
| Do indemnity clauses in the escrow conditions require B&H to reimburse Resource National’s litigation costs? | Resource National: indemnity provisions broadly permit recovery of attorney fees and costs when agent must respond to court action without fault. | B&H: indemnity clauses apply to escrow/settlement-agent acts (e.g., termination/withholding) not to title-related claims; they do not create wholesale indemnity. | Court: Indemnity clauses are context-specific and do not cover the title-based claims here; no recovery of litigation costs under those sections. |
Key Cases Cited
- Ed Schory & Sons v. Francis, 75 Ohio St.3d 433 (Ohio 1996) (explains implied duty of good faith and limits on its application)
- Kham & Nate’s Shoes No. 2, Inc. v. First Bank of Whiting, 908 F.2d 1351 (7th Cir.) (contract parties may enforce terms even if harsh; discusses opportunistic advantage)
- Hamilton Ins. Servs. v. Nationwide Ins. Cos., 86 Ohio St.3d 270 (Ohio 1999) (no implied covenants when written contract covers the matter)
- Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc., 106 Ohio St.3d 412 (Ohio 2005) (economic-loss doctrine bars tort recovery for purely contractual duties)
- Delman v. Cleveland Heights, 41 Ohio St.3d 1 (Ohio 1988) (elements of negligent misrepresentation)
- Safeco Ins. Co. of Am. v. White, 122 Ohio St.3d 562 (Ohio 2009) (breach of duty of care is essential element of negligence)