2014 Ohio 5550
Ohio Ct. App.2014Background
- Monty Realty borrowed $3,000,000 in 2006; loan secured by a mortgage on Cornerstone Plaza and required monthly reserve deposits for taxes, TI, etc.
- Column assigned the loan to a Trust; Key was master servicer for performing loans and LNR was special servicer for nonperforming loans.
- In late 2011 Monty asked Key about a modification; Key told Monty LNR handled modifications but would only receive the loan if it became delinquent. Monty missed payments (Nov. and Dec. 2011) and intentionally defaulted to prompt transfer to LNR.
- LNR received servicing in March 2012, requested financials and a modification proposal, but ultimately listed and sold the loan in July 2012; Zapata bought the loan and later accelerated and foreclosed.
- Monty sued LNR/Trust claiming promissory estoppel, breach of duty of good faith (R.C. 1301.09/1301.14), and claims over reserve funds (conversion/unjust enrichment/etc.). Trial court granted summary judgment for appellees; this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reserve-account claims (conversion, unjust enrichment, etc.) | Trust improperly retained reserve funds after sale and Monty is entitled to return of reserves | Mortgage allowed lender to apply reserves after default and assignor/assignee arrangements at sale; Zapata agreed to credit amount to loan balance | Judgment for defendants — Monty had no contractual right to reserves until full repayment and suffered no harm because assignee credited the reserve amount |
| Promissory estoppel (promise to "work with" to restructure) | Key/LNR represented they would work with Monty post-default; Monty relied and intentionally defaulted | No clear, unambiguous promise was made; communications were at most ambiguous requests for information and the loan documents required written modifications | Judgment for defendants — no clear & unambiguous promise; reliance was unreasonable or not causative of injury |
| Reasonableness of reliance / causation of injury | Monty would have avoided foreclosure if informed or if LNR had negotiated in good faith | Loan documents required written modification; Monty was already in default (Nov. payment) before relying; Montgomery’s affidavit is conclusory | Judgment for defendants — reliance not reasonable/causal; late November payment did not cure the default; self-serving affidavits insufficient |
| Breach of duty of good faith (R.C. 1301.09/1301.14) | LNR abused its discretion by marketing/selling the loan while soliciting documentation, breaching implied duty of good faith | Sale/exercise of contractual rights was permitted; no specific contractual duty was breached by LNR/Trust | Judgment for defendants — good-faith statute does not create independent cause of action; no breach of a specific contractual obligation shown |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (summary judgment reviewed de novo)
- Dresher v. Burt, 75 Ohio St.3d 280 (party moving for summary judgment must set forth specific facts showing entitlement)
- McCroskey v. State, 8 Ohio St.3d 29 (promissory estoppel elements and Restatement §90)
- Karnes v. Doctors Hosp., 51 Ohio St.3d 139 (discussing promissory estoppel in Ohio)
- Dailey v. Craigmyle & Son Farms, LLC, 177 Ohio App.3d 439 (promissory estoppel — definition of promise and requirement of clarity)