BOULDER CAPITAL GROUP, INC. v. PHILLIP W. LAWSON, dba LAWSONS EAST MAIN MARATHON
Appellate Case No. 2014-CA-58
IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT CLARK COUNTY
December 30, 2014
2014-Ohio-5797
HALL, J.
Trial Court Case No. 09-CV-07; Civil Appeal from Common Pleas Court
Rendered on the 30th day of December, 2014.
MATTHEW G. BURG, Atty. Reg. #0072556, Weltman, Weinberg & Reis Co., L.P.A., Lakeside Place, Suite 200, 323 West Lakeside Avenue, Cleveland, Ohio 44113 Attorney for Plaintiff-Appellee
RICHARD J. DONOVAN, Atty. Reg. #0060900, R.J. Donovan Co., L.P.A., 571 High Street, Suite 22, Worthington, Ohio 43085-4132 Attorney for Defendant-Appellant
{2} Lawson advances seven assignments of error. First, he contends the trial court erred in holding a damages hearing without giving him adequate notice. Second, he claims the trial court erred in prematurely sustaining Boulder Capital‘s motion to continue the damages hearing. Third, he asserts that the trial court erred in finding Boulder Capital entitled to summary judgment on the issue of liability where the applicable statute of limitation had expired. Fourth, he argues that the trial court erred in finding Boulder Capital entitled to summary judgment on the issue of liability where an accord and satisfaction had occurred. Fifth, he maintains that the trial court erred in finding Boulder Capital entitled to summary judgment on the issue of liability where Boulder Capital failed to mitigate its damages. Sixth, he contends the trial court erred in overruling his own motion for summary judgment. Seventh, he claims the trial court erred in denying his motion to compel responses to discovery requests and for attorney fees in connection with the motion.
{3} The record reflects that Boulder Capital entered into a finance lease with Lawson in January 2000. The lease provided for Lawson to rent car-wash equipment from Boulder Capital, which owned the equipment. The lease obligated Lawson to make monthly payments of $3,351.09 for an initial period of sixty months. Absent termination by either party, the lease was subject to an automatic extension thereafter.
{4} On January 5, 2009, Boulder Capital filed a complaint alleging that Lawson had breached the lease agreement and that he owed $301,710.68 including interest. Lawson filed an
{5} In his first assignment of error, Lawson contends the trial court erred in holding the damages hearing on September 21, 2012 without giving him notice that the hearing had been reset to that date. He claims that this lack of notice deprived him of the opportunity to attend and violated
{6} The record reflects that the damages hearing originally had been set for September 5, 2012. On September 7, 2012, Boulder Capital served Lawson by ordinary mail with
{7} In support of his argument, Lawson cites
{8} Here Lawson knew shortly after September 7, 2012 that Boulder Capital was
{9} While taking the actions suggested by Boulder Capital may have been prudent, we are unpersuaded that Lawson‘s counsel was obligated to do so. The obligation to provide reasonable notice of the rescheduled damages hearing rested with the trial court. Certainly, failing to give Lawson‘s counsel either actual notice or constructive notice via its online docket as late as September 20, 2012 would not constitute reasonable notice of the September 21, 2012 hearing. We reach the same conclusion even if we assume, arguendo, that notice of the rescheduled hearing was available online immediately after the trial court‘s entry was journalized on September 18, 2012. Although parties are expected to keep themselves informed about the progress of their case, we do not believe they should be expected to monitor a trial court‘s online
{10} Our resolution of Lawson‘s first assignment of error renders moot his second assignment of error, which asserts that the trial court prematurely sustained Boulder Capital‘s motion to continue the damages hearing before his time to respond had expired. Accordingly, the second assignment of error is overruled as moot.
{11} In his third assignment of error, Lawson claims the trial court erred in finding Boulder Capital entitled to summary judgment on the issue of liability where the applicable statute of limitation had expired. Lawson contends Boulder Capital‘s cause of action for default under the lease accrued in December 2004 when he missed a required payment. As a result, he argues that Boulder Capital‘s January 5, 2009 lawsuit was time barred under either Ohio‘s four-year statute of limitation for an action alleging default under a lease contract or Colorado‘s three-year statute of limitation for the same type of action. See
{12} To resolve the statute-of-limitation issue, we must identify the applicable law and determine when the alleged default occurred. Section 5.9 of the parties’ lease agreement provides that it shall be governed by Colorado law. Nevertheless, that choice-of-law provision applies to substantive law, not procedural issues such as the statute of limitation. See, e.g., Unifund CCR Partners v. Childs, 2d Dist. Montgomery No. 23161, 2010-Ohio-746, ¶ 13-16. “Absent an express statement that the parties intended another state‘s statute of limitations to apply, the procedural law of the forum governs time restrictions on an action for breach[.]” Id. at ¶ 15, quoting Cole v. Mileti, 133 F.3d 433, 437 (6th Cir.1998). Here the parties’ lease agreement does not expressly state that Colorado‘s statute of limitation applies. Therefore, we look to Ohio law to determine the applicable limitation period. As both parties recognize, the pertinent Ohio statute is
{13} The record reflects that Lawson stopped making his monthly lease payments to Boulder Capital beginning in November 2004. He did not make any payments until August 2005, when he remitted a payment that satisfied the full amount due for November 2004 and part of the amount due for December 2004.3 Because the August 2005 payment did not satisfy the full amount due for December 2004, Lawson argues that the December 2004 default was never cured. Therefore, he identifies December 2004 as the date of default and maintains that the statute of limitation began running at that time.
{14} Lawson‘s analysis oversimplifies the issue. The record reveals that two types of alleged default exist: (1) default based on Lawson‘s failure to make his monthly rent payments and (2) default based on Lawson‘s unauthorized disposition of the car-wash equipment.4 Lawson‘s alleged failure to make the rent payments constituted an “event of default” under
{15} With regard to the first type of default—failure to make the monthly rent payments—a second issue arises, to wit: whether each missed installment payment gave rise to a separate cause of action for default with its own statute of limitation. “‘The general rule regarding loans repayable in installments is that each default in payment may give rise to a separate cause of action.‘” (Citation omitted) U.S. Bank Natl. Assn. v. Gullotta, 120 Ohio St.3d 399, 2008-Ohio-6268, 899 N.E.2d 987, ¶ 30. “Thus, a breach of an installment contract by non-payment does not constitute a breach of the entire contract. The parties to the note may avoid the operation of this rule by including an acceleration clause in the agreement.” Id. When an acceleration clause is invoked, “a breach constitutes a breach of the entire contract.” Id. at ¶ 31. Upon acceleration, a contract becomes indivisible and the obligation to pay each installment merges into one obligation to pay the entire balance owed. Id.
{16} Here section 4.2 of the parties’ lease gave Boulder Capital numerous optional remedies if an event of default occurred. With regard to non-payment of rent, Boulder Capital could, among other things, (1) seek to recover all accrued but unpaid amounts payable under the lease or (2) cancel the lease and seek to recover either all unaccrued amounts payable or the fair market value of the equipment. Exercising the latter option effectively would accelerate the debt and obligate Lawson to pay the full lease balance (or the value of the equipment). We note, however, that section 4.2 did not make acceleration automatic or mandatory upon an event of default. Rather, it gave Boulder Capital the option to accelerate the debt. Cf. RCK Inv. Co. v. Centerville Land Investments Ltd, 2d Dist. Montgomery No. 7804, 1982 WL 3828, at *2 (Oct. 20, 1982) (“We conclude that the provision for acceleration was not automatic or self executing. Acceleration did not and could not take place until the holder exercised the option. At the moment when the check was tendered for the payment due February 1, 1981 the total debt was not due and did not become due unless the subsequent rejection of the check and subsequent announcement of the exercise of the option created a retroactive right to accelerate the entire debt.“); Rueckel v. Lombards, Inc., 10th Dist. Franklin No. 79AP-42, 1979 WL 209114, at *3 (June 14, 1979) (distinguishing between an “optional acceleration provision” and an “automatic acceleration clause“). Until Boulder Capital exercised its option to accelerate the debt, each monthly default in Lawson‘s installment payments gave rise to a separate cause of action with its own statute of limitation.
{17} Although the parties have not specifically addressed the foregoing issue, we find nothing in the record indicating that Boulder Capital exercised its right to accelerate the debt before June 12, 2007. On that date, Boulder Capital representative Anna Sheahan sent Lawson a letter declaring the lease in default and demanding full payment of the debt. (Doc. #9 at Exh. 2). Prior to that time, however, we see no evidence that the provision for acceleration had been exercised. In any event, as of June 12, 2007, Lawson‘s obligation to pay each monthly installment merged into an obligation to pay the entire balance. When Boulder Capital later filed suit on January 5, 2009, at most one of those monthly installments fell outside
{18} We reach the same conclusion, albeit with less elaboration, regarding the second
{19} Finally, we must consider the applicability and impact, if any, of
{20} A Colorado statute,
{21} In the present case, we conclude that Boulder Capital‘s action against Lawson fits within the scope of
{22} In his fourth assignment of error, Lawson argues that the trial court erred in finding Boulder Capital entitled to summary judgment on the issue of liability where an accord and satisfaction had occurred.
{23} “An accord is a contract between a debtor and a creditor in which the creditor‘s claim is settled in exchange for a sum of money other than that which is allegedly due. Satisfaction is the performance of that contract.” Allen v. R.G. Indus. Supply, 66 Ohio St.3d 229, 231, 611 N.E.2d 794 (1993). Accord and satisfaction is available as a defense only when a genuine dispute exists as to the amount of a debt. Id. Here Lawson claims he and his son provided affidavits establishing the existence of an oral accord entered into with Lance Munson, an agent of Boulder Capital. Lawson asserts that the agreement obligated him to make a final payment of $6,106.54 and to return the car-wash equipment to Boulder Capital upon being provided with return instructions. In exchange, Boulder Capital would accept the payment and the equipment in full satisfaction of Lawson‘s obligation under the finance lease. Lawson claims he satisfied his part of the agreement by making the payment and standing ready to return the equipment. According to Lawson‘s affidavits, Boulder Capital never provided him with
{24} In the proceedings below, Lawson briefed the accord-and-satisfaction issue under both Ohio and Colorado law. (See Doc. #20 at 38-43). Although the parties’ lease agreement makes Colorado substantive law applicable, we agree with Lawson that the result is the same under the law of either state. We disagree with him, however, insofar as he contends a genuine issue of material fact exists on his accord-and-satisfaction affirmative defense.
{25} Colorado and Ohio have adopted their own versions of a 1990 revision to Article 3 of the Uniform Commercial Code that specifically addresses the creation of an accord and satisfaction by use of a negotiable instrument such as a check. In particular, both states “have statutes modeled after Uniform Commercial Code Section 3-311 (‘U.C.C.‘); both generally permit a debtor who complies with certain requirements to tender a check to a creditor for less than the amount claimed in full satisfaction of a disputed [or] unliquidated claim.” Nexus Communications, Inc. v. Qwest Communications Corp., 193 Ohio App.3d 599, 2011-Ohio-1759, 953 N.E.2d 340, ¶ 49 (10th Dist.), citing U.C.C. Section 3-311(a);
{27} In his fifth assignment of error, Lawson maintains that the trial court erred in finding Boulder Capital entitled to summary judgment on the issue of liability where it failed to mitigate its damages.
{28} Lawson asserts that, even without regard to any alleged accord and satisfaction, “Boulder Capital foreclosed itself from recovering the balance of payments under the lease” by failing to provide him with an address where the car-wash equipment could be returned. (Appellant‘s brief at 24). If we assume for present purposes that Lawson is correct, his assignment of error lacks merit. It does not follow that the trial court erred in granting Boulder Capital summary judgment on the issue of liability due to an alleged failure to mitigate damages. By definition, a failure by Boulder Capital to mitigate damages might impact the damages
{29} In his sixth assignment of error, Lawson contends the trial court erred in overruling his own motion for summary judgment. Specifically, he claims the trial court should have entered summary judgment for him based on the statute of limitation expiring, an accord and satisfaction existing, and mitigation of damages not occurring.
{30} We find Lawson‘s argument unpersuasive. In our analysis above, we concluded that the statute of limitation had not expired, that Lawson‘s accord-and-satisfaction defense failed as a matter of law, and that Boulder Capital‘s alleged failure to mitigate damages did not preclude a finding of liability for default under the finance lease. In light of these determinations,
{31} In his seventh assignment of error, Lawson claims the trial court erred in denying his motion to compel responses to discovery requests and for attorney fees in connection with the motion
{32} The record reflects that Lawson filed his motion on June 18, 2012, seeking to compel responses to interrogatories and document-production requests. (Doc. #21). Although Boulder Capital already had responded to the discovery requests, Lawson asserted its responses were inadequate. Boulder Capital opposed the motion and also supplemented its responses. (Doc. #27). In a July 12, 2012 reply memorandum, Lawson argued that the responses remained inadequate. (Doc. #28). Thereafter, on July 26, 2012, both parties moved for summary judgment. (Doc. #31, 32). As set forth above, the trial court ultimately sustained Boulder Capital‘s motion. The trial court never expressly ruled on Lawson‘s motion to compel.
{33} On appeal, Lawson claims the trial court‘s implicit denial of the motion to compel when entering summary judgment against him constituted an abuse of discretion. We disagree. Notably, Lawson did not file a
{34} Nor can Lawson show that he was prejudiced by the trial court‘s implicit denial of his motion to compel. His failure to invoke
{35} In opposition to the foregoing analysis, Lawson cites this court‘s opinion in Maguire v. National City Bank, 2d Dist. Montgomery No. 23140, 2009-Ohio-4405, for the proposition that he was not required to seek relief under
{36} Based on the analysis set forth above, the judgment of the Clark County Common Pleas Court is affirmed in part and reversed in part. Specifically, the judgment is affirmed on the issue of Lawson‘s liability to Boulder Capital for default under the parties’ finance lease. The judgment is reversed, however, on the issue of damages. The trial court‘s damages award is vacated, and the cause is remanded for the limited purpose of a new damages hearing with adequate prior notice to both parties.
FAIN, J. and WELBAUM, J., concur.
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Matthew G. Burg
Richard J. Donovan
Hon. Richard J. O‘Neill