2017 Ohio 344
Ohio Ct. App.2017Background
- In June 2006 Columbian Bank agreed to make a construction loan up to $8.6 million to South Bass Island Resort, Ltd. (SBIR); the commitment required a “100% joint and several” cognovit unconditional guaranty from Cecil Weatherspoon, John C. Tomberlin, and 250 Centre, Ltd.
- Tomberlin signed an "Unconditional Cognovit Guaranty" dated June 8, 2006 (his signature notarized), while the loan documents and note were dated June 14, 2006; Tomberlin also completed a Patriot Act form and received $350,000 from the closing HUD statement.
- SBIR defaulted and made no payments; Columbian Bank (and later Multibank, its successor) sued SBIR and the guarantors; Tomberlin contested that his June 8 guaranty did not apply to the June 14 loan.
- After summary-judgment rulings disposing of claims against the other defendants, the trial court held a two-day bench trial limited to whether Tomberlin had guaranteed the loan and whether the guaranty barred a jury trial; Tomberlin presented no witnesses at trial.
- The trial court concluded, by a preponderance of the evidence, that Tomberlin intended to guarantee the June 14 loan and entered judgment for Multibank for about $20.6 million plus ongoing charges; Tomberlin appealed.
Issues
| Issue | Plaintiff's Argument (Multibank) | Defendant's Argument (Tomberlin) | Held |
|---|---|---|---|
| Whether the guaranty’s jury-waiver is enforceable | Guaranty contains clear, irrevocable jury-waiver covering actions "arising out of or relating to any of the loan documents." | Waiver invalid because no loan documents existed when guaranty was signed and waiver cannot cover a different/new loan. | Waiver enforceable; court properly struck jury demand. |
| Whether Tomberlin’s June 8 guaranty covers the June 14 loan (liability) | Documents, emails, conduct (signed guaranty, Patriot Act form, HUD payment) show intent that Tomberlin guaranteed the loan; guaranty read with loan docs is ambiguous and extrinsic evidence supports coverage. | Guaranty expressly references a June 8 loan; loan at issue dated June 14 so guaranty does not apply; strict construction of guaranties required. | Trial court’s finding that Tomberlin guaranteed the June 14 loan is not against manifest weight; judgment affirmed. |
| Whether reformation was required and applicable | No reformation was necessary; court interpreted ambiguous contract with extrinsic evidence to ascertain intent. | Court improperly reformed/altered the guaranty without fraud or mutual mistake and without clear-and-convincing proof. | Court did not reform the contract; it interpreted ambiguous writings; defendant’s argument rejected. |
| Whether summary judgment on defendants’ counterclaims (fraud/breach for failure to disburse full $8.6M) was improper | Loan was a multiple-advance construction loan; disbursements were contingent on progress. No genuine issue of material fact that disbursements complied with loan agreement. | Bank may have engaged in "paper loan" practices or lacked funds; disputed facts precluded summary judgment. | Summary judgment proper: contingent draws and absence of evidence that draws were improperly withheld make alleged bank misconduct immaterial. |
Key Cases Cited
- Eastley v. Volkman, 132 Ohio St.3d 328 (Ohio 2012) (standard for manifest-weight review and appellate deference to factfinder)
- Sunoco, Inc. (R&M) v. Toledo Edison Co., 129 Ohio St.3d 397 (Ohio 2011) (contract interpretation focuses on parties’ intent and plain meaning)
- Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216 (Ohio 2003) (definition of contract ambiguity as a matter of law)
- Foster Wheeler Enviresponse v. Franklin Cty. Convention Facilities Auth., 78 Ohio St.3d 353 (Ohio 1997) (multiple writings executed as part of same transaction are read together)
- Kelly v. Med. Life Ins. Co., 31 Ohio St.3d 130 (Ohio 1987) (use of extrinsic evidence when contract language is ambiguous)
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (Ohio 1996) (standard of review for summary judgment)
- Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64 (Ohio 1978) (summary-judgment standard)