AMERICAN SERVICING CORP., PLAINTIFF-APPELLANT, v. RONALD E. WANNEMACHER, DEFENDANT-APPELLEE.
CASE NO. 12-14-01
IN THE COURT OF APPEALS OF OHIO THIRD APPELLATE DISTRICT PUTNAM COUNTY
September 15, 2014
2014-Ohio-3984
Judgment Affirmed
APPEARANCES:
Kurt A. Dauterman for Appellant
Gregory J. Hermiller for Appellee
{¶1} Plaintiff-appellant, American Servicing Corporation (“American Servicing“), appeals the December 20, 2013 judgment of the Putnam County Municipal Court denying its requests for forcible entry and detainer and damages. For the reasons that follow, we affirm.
{¶2} On March 6, 2013, American Servicing entered into a contract with defendant-appellee, Ronald E. Wannemacher (“Wannemacher“), regarding property located at 145 Truax Road in Cloverdale, Ohio (“the property“). (Doc. No 1).1 Under the terms of the contract, Wannemacher agreed to pay American Servicing $244.87 per month (“the rent“) for 36 months. (Id. at 4, 6). American Servicing calculated Wannermacher‘s payments “at a $22,800.00 purchase price, amortized over 180 payments with an interest rate of 9.99%.” (Id. at 4). The contract noted that an amortization schedule was attached.2 (See id.). Wannemacher‘s payments were due on or before the first of each month to American Servicing in the care of Timothy M. Runion (“Runion“), American Servicing‘s owner, and were subject to a $50.00 late penalty if paid after the fifth day of the month. (Id.). Wannemacher was responsible for all repairs and maintenance of the interior and exterior of the property, required to maintain
{¶3} The contract offered Wannemacher the option to purchase the property for $22,800.00 during its term and included a prepayment penalty provision.3 (Id. at 5). Otherwise, the contract stated that “at the end of the 36 month term of this Lease, [Wannemacher] is required to make a balloon payment of Twenty Thousand Four Hundred Ninety Nine Dollars and eighty one cents ($20,499.81).” (Emphasis added.) (Id.). If Wannemacher paid all of the rent payments and the balloon payment, American Servicing agreed to convey the property to Wannemacher by general warranty deed. (Id.). If Wannemacher was unable to pay the balloon payment, American Servicing had the right “to reenter and repossess the premises” and terminate “the lease.” (Id.).
{¶4} Wannemacher timely remitted his payments for April, May, June, and July 2013. (Doc. No. 8). (See also Nov. 18, 2013 Tr. at 49). Wannemacher timely remitted his payment for August 2013 (“August payment“); however, American Servicing returned the August payment to Wannemacher on August 13,
{¶5} Wannemacher testified that he remitted his next payment (“September payment“) on September 2, 2013.4 (Nov. 18, 2013 Tr. at 24). Because Wannemacher‘s August payment was more than 30 days late by that time, American Servicing determined that Wannemacher was in breach of the contract. (Id. at 55). As a result, American Servicing rejected Wannemacher‘s September payment, and Runion personally posted a “Termination of Lease & Notice to Leave the Premises” notice (“the notice“) on the front door of the property on September 5, 2013. (Id. at 53, 55). The notice stated that Wannemacher‘s “lease” of the property was terminated as of September 11, 2013 because Wannemacher failed to remit the August payment in the time specified by the contract. (Doc. No. 1). The notice further indicated that Wannemacher was to vacate the premises by September 11, 2013 or American Servicing would pursue an eviction action against him. (Id. at 13).
{¶6} On September 23, 2013, American Servicing filed a complaint for forcible entry and detainer and damages. (Id. at 1). The trial court held a
{¶7} At the hearing, Wannemacher testified that he confirmed with his bank on August 15, 2013 that the August payment was returned for insufficient funds, after receiving a notice in the mail on August 14, 2013. (Id. at 18-19). After confirming the returned check, Wannemacher testified that he called Runion to inform him of the returned check and to inquire how to cure the deficiency. (Id.). Specifically, Wannemacher testified that he offered to write Runion another check, present him with a cashier‘s check, personally deliver cash to him, or represent the returned check. (Id.). According to Wannemacher, Runion told him that he would represent the returned check to his bank. (Id.). Wannemacher testified that because he did not hear anything more from Runion, he assumed the matter was cured, and he proceeded by remitting the September payment. (Id.).
{¶8} Runion testified that he did not recall receiving a phone call or voicemail message from Wannemacher on August 15, 2013 because it was a stressful time for him due to a close friend‘s illness and subsequent death. (Id. at 55). However, phone records included in the record reflect that a phone call between Wannemacher and Runion occurred on August 15, 2013 and lasted for approximately three minutes. (Id. at 59). (See also Doc. No. 8). More
{¶9} At the hearing, Runion also testified regarding Wannemacher‘s interest in the property. Without any further explanation, he stated, “The lease was filed so [Wannemacher] would have one position.” (Id. at 63).6 Runion also testified that if Wannemacher made all of his payments and the balloon payment, he would own the property. (Id. at 64).
{¶10} Wannemacher offered testimony regarding his impression as to his interest in the property. Wannemacher testified that he signed the contract on the advice of legal counsel, and indicated that he understood the contract to mean that the property would be leased back to him, he would make payments for three years to bolster his credit so that he could qualify for a loan to make the balloon
{¶11} On December 20, 2013, the trial court concluded in a judgment entry that the contract between the parties constituted a land installment contract, not a lease with an option to purchase and that
{¶12} American Servicing filed its notice of appeal on January 17, 2014. (Doc. No. 10). American Servicing raises two assignments of error for our review. For ease of our discussion, we will address American Servicing‘s assignments of error together.
Assignment of Error No. I
The parties stipulated to the admission of the written agreement and such was referred to as a “Lease” and when stipulated on the record by both parties, there is no ambiguity.
Assignment of Error No. II
The lease with the option to purchase is not a land sale contract since the option to purchase the property was not mandatory, but an option of Appellee, thus the court had jurisdiction to
{¶13} In its first assignment of error, American Servicing argues that the parties stipulated at the November 18, 2013 hearing that the contract was a lease with an option to purchase, not a land installment contract. In its second assignment of error, American Servicing argues that the trial court erred in concluding the contract was a land installment contract and dismissing its complaint. Specifically, American Servicing argues in both of its assignments of error that the trial court‘s conclusion that the contract was a land installment contract was contrary to the parties’ stipulation and contrary to law.
{¶14} “With regard to reviewing the language of any contract, ‘[t]he cardinal purpose for judicial examination of any written instrument is to ascertain and give effect to the intent of the parties.‘” Reinhart v. Fostoria Plumbing, Heating & Elec. Supply, Inc., 3d Dist. Seneca No. 13-10-08, 2010-Ohio-4825, ¶ 16, quoting Foster Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth., 78 Ohio St.3d 353, 361 (1997). “Courts presume that the intent of the parties to a contract resides in the language they chose to employ in the contract.” Judson v. Lyendecker, 10th Dist. Franklin No. 12AP-615, 2013-Ohio-1060, ¶ 12, citing Kelly v. Med. Life Ins. Co., 31 Ohio St.3d 130 (1987), paragraph one of the syllabus. “If a contract is clear and unambiguous, then its interpretation is a matter of law and there is no issue of fact to be determined.”
{¶15} “However, if the contract is ambiguous, ascertaining the parties’ intent constitutes a question of fact.” Fadelsak v. Hagley, 4th Dist. Lawrence No. 02CA41, 2003-Ohio-3413, ¶ 9, citing Crane Hollow, Inc. v. Marathon Ashland Pipeline, LLC, 138 Ohio App.3d 57, 74 (4th Dist.2000). “We will not reverse a factual finding of the trial court so long as some competent, credible evidence supports it.” Id., citing C.E. Morris Co. v. Foley Constr. Co., 54 Ohio St.2d 279 (1974), syllabus.
{¶16} “To determine whether an agreement is a land installment contract or a lease with an option to purchase, a court must analyze the intent of the parties at the time they executed the agreement.” Judson at ¶ 12, citing Fadelsak at ¶ 10, Hubbard v. Dillingham, 12th Dist. Butler No. CA2002-02-045, 2003-Ohio-1443, ¶ 11 and Riverside Builders, Inc. v. Bowers, 10th Dist. Franklin No. 89AP-834, 1990 WL 75433, *4 (June 7, 1990). If the court is unable to ascertain the parties’ intent from the four corners of the document, “the court may also consider the
{¶17} The Revised Code defines a land installment contract as:
an executory agreement which by its terms is not required to be fully performed by one or more of the parties to the agreement within one year of the date of the agreement and under which the vendor agrees to convey title in real property located in this state to the vendee and the vendee agrees to pay the purchase price in installment payments, while the vendor retains title to the property as security for the vendee‘s obligation. Option contracts for the purchase of real property are not land installment contracts.
{¶18} By contrast, “Ohio courts have defined a ‘lease’ as ‘a conveyance of an estate in real property for a limited term, with conditions attached, in consideration of rent.‘” Fadelsak at ¶ 11, quoting Cuyahoga Metro. Hous. Auth. v. Watkins, 23 Ohio App.3d 20, 23 (8th Dist.1984) and Jones v. Keck, 79 Ohio App. 549, 552 (5th Dist.1946). And Ohio courts have defined “[a]n option contract for the purchase of real property [as] an agreement wherein the legal titleholder of the
{¶19} “The distinction, then, between a land [installment] contract and a lease with an option to purchase is that the land [installment] contract conveys a present ownership interest in realty, while the lease conveys an interest less than ownership.” Id. at ¶ 11, quoting Riverside Builders, 1990 WL 75433, at *4 (“[A]n option to purchase property when coupled with a lease conveys a present interest in the realty which may be redeemed upon execution of the option.“).
{¶20} American Servicing argues that the contract was clearly and unambiguously a lease with an option to purchase. Specifically, American Servicing argues that the parties’ intent for the contract to be a lease with an option to purchase was established by the parties’ stipulation as such, and the trial court‘s characterization of the contract as a lease. American Servicing‘s assertion
{¶21} Here, the parties stipulated that the contract contained the terms it contained to avoid prolonged testimony regarding the contents of the contract. In other words, the parties did not stipulate that the contract was a lease with an option to purchase as opposed to a land installment contract. See Village of Oakwood v. Makar, 11 Ohio App.3d 46, 50 (8th Dist.1983) (stipulation merely indicated that the bills were the ones actually sent, not as to the amount of reasonable attorney fees). The transcript of the hearing reveals the following exchange in response to American Servicing‘s counsel‘s direct examination of Wannemacher regarding the contents of the contract:
| [Trial Court]: | Can we just stipulate to the lease? Is there any objection to the lease agreement [Wannemacher‘s counsel]? |
| [Wannemacher‘s Counsel]: | No. |
| [Trial Court]: | [American Servicing‘s counsel], is there any reason not just to stipulate to the terms of the lease agreement? |
| [American Servicing‘s Counsel]: | That‘s fine. |
| [Trial Court]: | Okay. If you want to make a point about something in there, that‘s fine, but otherwise, can you just stipulate to the admission of the lease and then all of his contact[?] |
| [American Servicing‘s Counsel]: | Sure, and I will move to a more pointed more direct question, Your Honor. |
| [Trial Court]: | Very well. The lease will be admitted into the record upon stipulation of the parties. |
(Nov. 18, 2013 Tr. at 22-23).
{¶22} Also, American Servicing argues that the trial court sustained its objection to Wannemacher‘s characterization of the contract as a “loan,” and
| [Wannemacher‘s Counsel]: | What was your understanding of the agreement as to what it was? |
| [Wannemacher]: | Well, it was supposed to lease the property back to me, and then after three years then I would have to make this payment of $22,800 [sic] more than I actually got after all that, but that would help build up my credit so I could get the money for the loan. |
| [Wannemacher‘s Counsel]: | So this money was loaned to you? |
| [American Servicing‘s Counsel]: | Objection. Your Honor, we have a lease agreement here. The agreement‘s already been admitted into the record. I mean the agreement speaks for itself. |
| [Trial Court]: | I will sustain the objection to the effect, [Wannemacher‘s counsel], that the characterization of a loan I don‘t believe is accurate given the fact it is a lease with terms. |
| [Wannemacher‘s Counsel]: | Okay. I will ask another question. Why is there an interest rate on this lease agreement, to your understanding? |
| [Wannemacher]: | Well, I never really thought about it. I guess it seems like a loan to me, whether they call it a lease or a loan. |
(Id. at 87-88).
{¶23} Taken in the context of Wannemacher‘s counsel‘s line of questioning, it is apparent from the record that Wannemacher‘s counsel was attempting to elicit testimony from Wannemacher regarding his understanding of the intent of the parties at the time the contract was executed. The fact that the trial court sustained American Servicing‘s counsel‘s objection to Wannemacher‘s
{¶24} Consequently, we reject American Servicing‘s argument that the parties stipulated that the contract was a lease with an option to purchase and the trial court characterized it as such. We also reject American Servicing‘s argument that the contract was clearly and unambiguously a lease with an option to purchase. Rather, we apply a de novo standard of review and conclude that the four corners of the contract clearly and unambiguously indicate that the parties intended a land installment contract as defined under
{¶25} First, we note that some courts apply a six-factor test supplied by the Fourth District to ascertain the intent of the parties. See Fadelsak, 2003-Ohio-3413, at ¶ 10, citing In re D.W.E. Screws Products, Inc., 157 B.R. 326, 330 (Bankr.S.D.Ohio 1993) and Hubbard, 2003-Ohio-1443, at ¶ 11. However, the statute unambiguously defines a land installment contract. See
{¶26} From the plain language of the contract, we discern that the parties intended a land installment contract because the contract comports with the definition of a land installment contract, as it is defined by the statute. See
{¶27} The contract is titled “Lease Agreement with Option to Purchase;” however, its caption is not dispositive of its meaning. See Fadelsak at ¶ 12 (finding that the parties intended a land installment contract even though the agreement was captioned “Lease with Option to Purchase“); Anderson v. Ballard, 6th Dist. Lucas No. L-10-1007, 2010-Ohio-3926, ¶ 42 (“The fact that an agreement is titled ‘Option to Purchase,’ however, does not necessarily make it so.“).
{¶28} Rather, the language employed in the body of the contract demonstrates that the parties intended a land installment contract. First, the contract was an executory agreement that was not required to be fully performed
{¶29} Irrespective of the above, American Servicing argues that the contract was an option contract, which by the statute‘s definition is not a land installment contract. See
{¶30} Therefore, the four corners of the contract clearly and unambiguously indicate that the parties intended a land installment contract because the contract comports with the definition of a land installment contract under the statute. See
{¶31} As we stated above, because the statute is dispositive that the parties intended a land installment contract, it is unnecessary to address any other court-created measures for ascertaining the parties’ intent. Nevertheless, even assuming the statute was ambiguous and in need of construction, application of the Fadelsak factors also demonstrates that the parties intended a land installment contract. Those factors are: “(1) the characterization of the document; (2) the lessee‘s rights at the end of the lease term; (3) the application of rent to the purchase price; (4) the responsibility for payments for repairs, utilities, and taxes; (5) the nonexistence of a financing statement; and (6) whether an option to purchase existed.” Fadelsak, 2003-Ohio-3413, at ¶ 12.
{¶32} Here, the first Fadelsak factor—the contract‘s characterization—is the only factor that indicates the parties intended a lease with an option to purchase. As we noted above, while the contract is captioned, “Lease Agreement
{¶33} The second and sixth Fadelsak factors indicate that the parties intended a land installment contract because the contract obligated Wannemacher to make payments for 36 months and required him to remit the balance of the purchase price as a balloon payment at the end of the contract term to gain ownership of the property. See Fadelsak at ¶ 12 (“The agreement obligates the Fadelsaks to make rent payments for two hundred forty months, and implies that the Fadelsaks would gain ownership of the property upon the end of the lease term.“). Therefore, because under the contract Wannemacher would be vested with ownership after making the 36 installment payments and the balloon payment at the end of the contract term, the factor regarding Wannemacher‘s rights at the end of the contract term demonstrates that the parties intended a land installment
{¶34} The third Fadelsak factor also indicates that the parties intended a land installment contract because the contract applied Wannemacher‘s rent to the purchase price based on the amortization schedule purportedly attached to the contract. Compare Fadelsak at ¶ 12 (contract was considered land installment contract because, in part, it applied all rent paid to the purchase price). See also Black‘s Law Dictionary 103 (10th Ed.2014) (defining amortization schedule as “[a] schedule of periodic payments of interest and principle owed on a debt obligation; specif. [sic], a loan schedule showing both the amount of principal and interest that is due at regular intervals over the loan term and the remaining unpaid principal balance after each scheduled payment is made“).
{¶35} Finally, the fourth Fadelsak factor indicates the parties intended a land installment contract because the contract treated Wannemacher as the property owner since it required him to be responsible for all interior and exterior maintenance and repairs of the property, taxes, and insurance. See Fadelsak at ¶ 12 (contract considered land installment contract because it, in part, treated the
{¶36} Moreover, assuming the intent of the parties was not clear from the contract and looking beyond the statutory definition of land installment contract under
{¶37} Next, we hold that the trial court did not err in dismissing American Servicing‘s complaint after determining that the contract was a land installment
{¶38} ”
If the contract has been in effect for less than five years, in addition to any other remedies provided by law and after the expiration of the periods prescribed by sections 5313.05 and 5313.06 of the Revised Code, if the vendee is still in default of any payment the vendor may bring an action for forfeiture of the vendee‘s rights in the land installment contract and for restitution of his property under Chapter
1923 of the Revised Code. When bringing the action under Chapter 1923 of the Revised Code, the vendor complies with the notice requirement of division (A) of section 1923.04 of the Revised Code by serving notice pursuant to section 5313.06 of the Revised Code. The court may also grant any other claim arising out of the contract. R.C. 5313.08.
{¶39} Therefore, to maintain a forfeiture action under
{¶40}
When the vendee of a land installment contract defaults in payment, forfeiture of the interest of the vendee under the contract may be enforced only after the expiration of thirty days from the date of the default. A vendee in default may, prior to the expiration of the thirty-day period, avoid the forfeiture of his interest under the contract by making all payments currently due under the contract and by paying any fees or charges for which he is liable under the
contract. If such payments are made within the thirty-day period, forfeiture of the interest of the vendee shall not be enforced.
Following expiration of the period of time provided in section 5313.05 of the Revised Code, forfeiture of the interest of a vendee in default under a land installment contract shall be initiated by the vendor or by his successor in interest, by serving or causing to be served on the vendee or his successor in interest, if known to the vendor or his successor in interest, a written notice which:
(A) Reasonably identifies the contract and describes the property covered by it;
(B) Specifies the terms and conditions of the contract which have not been complied with;
(C) Notifies the vendee that the contract will stand forfeited unless the vendee performs the terms and conditions of the contract within ten days of the completed service of notice and notifies the vendee to leave the premises.
Such notice shall be served by the vendor or his successor in interest by handing a written copy of the notice to the vendee or his successor in interest in person, or by leaving it at his usual place of
abode or at the property which is the subject of the contract or by registered or certified mail by mailing to the last known address of the vendee or his successor in interest.
{¶41} “Moreover, [
(A) Except as provided in division (B) or (C) of this section, a party desiring to commence an action under this chapter shall notify the adverse party to leave the premises, for the possession of which the action is about to be brought, three or more days before beginning the action, by certified mail, return receipt requested, or by handing a written copy of the notice to the defendant in person, or by leaving it at the defendant‘s usual place of abode or at the premises from which the defendant is sought to be evicted.
Every notice given under this section by a landlord to recover residential premises shall contain the following language printed or written in a conspicuous manner: “You are being asked to leave the premises. If you do not leave, an eviction action may be initiated
against you. If you are in doubt regarding your legal rights and obligations as a tenant, it is recommended that you seek legal assistance.”
(B) The service of notice pursuant to section 5313.06 of the Revised Code constitutes compliance with the notice requirement of division (A) of this section.
* * *
{¶42} American Servicing‘s complaint for forcible entry and detainer and damages did not comply with
{¶44} We note that the trial court also concluded, based on American Servicing‘s noncompliance with
{¶45} Therefore, American Servicing‘s assignments of error are overruled.
Judgment Affirmed
ROGERS and SHAW, J.J., concur.
/jlr