2025 Ohio 2920
Ohio2025Background
- Raymond Schneider co-owned the Keller Group, which was managed by Harold Sosna, who also owned and managed other related companies.
- In 2018, Huntington National Bank agreed to lend approximately $77 million to entities managed by Sosna and Schneider, contingent on personal guarantees from Schneider, Sosna, and Faye Sosna.
- Schneider signed a guaranty agreement accepting personal liability for the full loan, later reaffirming his guaranty.
- Premier, the main management company, began experiencing financial trouble, including loan defaults and check-kiting by Sosna, who was later convicted of bank fraud.
- When the loan defaulted, Huntington demanded payment from Schneider under the guaranty; Schneider claimed he was fraudulently induced due to undisclosed risks related to Sosna's financial condition.
- The trial court granted summary judgment for Huntington, but the First District Court of Appeals reversed, finding a possible duty to disclose under the "doctrine of increased risk."
Issues
| Issue | Plaintiff's (Schneider's) Argument | Defendant's (Huntington's) Argument | Held |
|---|---|---|---|
| Does a creditor have a duty to disclose facts that materially increase a surety's risk? | Huntington had access to material facts unknown to Schneider and should have disclosed them, per the "doctrine of increased risk." | Ohio law does not impose such a disclosure duty in arm's-length contracts unless there is a special relationship. | No duty to disclose unless special trust/confidence exists; doctrine of increased risk not adopted. |
| Should the trial court's summary judgment for Huntington be reinstated? | No, as factual questions remain about nondisclosure and inducement. | Yes, because Schneider waived defenses and no duty to disclose existed. | Summary judgment for Huntington reinstated. |
Key Cases Cited
- Blon v. Bank One, Akron, N.A., 35 Ohio St.3d 98 (Ohio 1988) (no duty to disclose material facts in arm's-length business transactions unless special trust/confidence)
- Groob v. KeyBank, 108 Ohio St.3d 348 (Ohio 2006) (no fiduciary duty to borrower absent special repose or trust)
- Umbaugh Pole Bldg. Co., Inc. v. Scott, 58 Ohio St.2d 282 (Ohio 1979) (no duty to disclose in arm's-length business transactions)
- Nottingdale Homeowners’ Assn., Inc. v. Darby, 33 Ohio St.3d 32 (Ohio 1987) (enforceability of freely-entered contracts)
- Ullmann v. May, 147 Ohio St. 468 (Ohio 1947) (courts uphold voluntary contracts absent fraud)