Peto v. RuschakPeto v. Ruschak
HENSAL, Presiding Judge.
{¶1} John Peto appeals an order of the Stow Municipal Court that ordered him to pay $11,280 in attorney‘s fees to Jim Ruschak and Progressive Realty Associates of Ohio, Inc. For the following reasons, this Court reverses.
I.
{¶2} In June 2013, Brett Slagle agreed to buy a house from Mr. Peto for $130,000. After they signed a Residential Purchase Agreement, Mr. Slagle was unable to obtain financing for the sale. He asked Mr. Peto to renegotiate the sales price, but Mr. Peto refused, so Mr. Slagle stopped payment on the check he had given to his realtor, Mr. Ruschak, for his earnest money payment. Although Mr. Peto was able to find another buyer for the property, he filed a complaint against Mr. Slagle, seeking to collect the earnest money as well as the amount he had spent on repairs that Mr. Slagle required him to make. Mr. Peto also brought claims against Mr.
{¶3} The case proceeded before a magistrate, who found that there was no contract between Mr. Slagle and Mr. Peto because they did not have a meeting of the minds about the amount of the financing Mr. Slagle would obtain. Mr. Peto objected to the decision, but the municipal court overruled his objections, agreeing that the parties had never had an agreement. Mr. Peto appealed, but this Court dismissed the appeal after he did not file a brief. Mr. Ruschak and Progressive Realty subsequently moved for an award of attorneys’ fees under
II.
ASSIGNMENT OF ERROR I
THE TRIAL COURT ERRED WHEN IT APPLIED THE WRONG LEGAL STANDARD WHEN IT AWARDED SANCTIONS UNDER RULE 11 WHEN THERE WAS NO FACTUAL FINDING OR EVIDENCE OF BAD FAITH.
ASSIGNMENT OF ERROR II
THE TRIAL COURT ERRED WHEN IT APPLIED THE WRONG LEGAL STANDARD TO CONCLUDE THAT THERE WAS A VIOLATION UNDER
ASSIGNMENT OF ERROR III
THE TRIAL COURT ERRED WHEN IT AWARDED SANCTIONS UNDER
ASSIGNMENT OF ERROR IV
THE TRIAL COURT ERRED WHEN IT FOUND THERE WERE NO GOOD GROUNDS TO SUPPORT SELLER‘S OBJECTIONS TO THE MAGISTRATE‘S REPORT, AND THAT THE OBJECTIONS WERE NOT WARRANTED UNDER LAW.
ASSIGNMENT OF ERROR V
THE TRIAL COURT ERRED IN REACHING ITS UNSUPPORTED FINDING THAT PLAINTIFF-APPELLANT FILED THE COMPLAINT TO HARASS THE RELATOR AND BUYER, WHEN THE COMPLAINT WAS TO SECURE PAYMENT OF EARNEST MONEY AS STIPULATED IN THE PARTIES’ CONTRACT.
{¶4} Mr. Peto argues that the trial court incorrectly granted Mr. Ruschak‘s and Progressive Realty‘s motion for sanctions. In their motion, Mr. Ruschak and Progressive Realty sought payment of their attorney‘s fees under
{¶5} Under Rule 11, the signature of an attorney or pro se party on a pleading certifies that the signer has read the document, that to the best of his knowledge, information, and belief there is good ground to support it, and that it is not interposed for delay. P.N. Gilcrest Ltd. Partnership v. Doylestown Family Practice, Inc., 9th Dist. Wayne No. 10CA0035, 2011-Ohio-2990, ¶ 31. “If a document is not signed or is signed with intent to defeat the purpose of this rule, it may be stricken as sham and false and the action may proceed as though the document had not been served.”
{¶6}
{¶7} This Court‘s standard of review on an appeal of an award of sanctions depends on the part of the analysis at issue. The trial court‘s factual findings will not be overturned if they are supported by competent, credible evidence. S & S Computer Systems, Inc. v. Peng, 9th Dist. Summit No. 20889, 2002-Ohio-2905, ¶ 9. We review questions of law, such as whether a claim is warranted under existing law, de novo. Jefferson v. Creveling, 9th Dist. Summit No. 24206, 2009-Ohio-1214, ¶ 16. Finally, we review the trial court‘s decision whether to impose sanctions for improper conduct under an abuse of discretion standard. Gilcrest at ¶ 29.
{¶8} Mr. Peto argues that the municipal court applied the wrong legal standards when it evaluated the motion for sanctions under
{¶9} Mr. Peto next argues that the municipal court incorrectly found that he violated Rule 11 and
{¶10} Although Mr. Peto and his attorney may not have prosecuted his claims successfully, we cannot say that they were not “warranted under existing law” or could not be “supported by a good faith argument for an extension, modification, or reversal of existing law.”
{¶11} Anchor and Riolo are distinguishable from the facts of this case. In Anchor, the purchase agreement indicated that, if Mr. Jones was unable to obtain a loan commitment, the agreement would be null and void. Anchor at * 1. This Court, therefore, agreed with the trial court that the fact that the parties had failed “to fill in the amount to be financed manifested a lack of intention by the parties.” Id. at *2. Similarly, in Riolo, there was language in a letter of intent that made the purchase “subject to financing.” Riolo at ¶ 10. This Court determined that, because the terms of the financing were not included in the letter, it could not constitute a purchase agreement because it omitted an essential term.
{¶12} The purchase agreement that Mr. Peto and Mr. Slagle signed contained two provisions regarding financing. The first indicated that there was a “Mortgage loan to be obtained by Buyer” and indicated that the amount was “TBD.” The second was entitled “Financing” and provided:
Buyer shall make a written application for the above mortgage loan and provide documentation to Seller of said application within 5 days and shall obtain a
commitment for that loan no later than 25 days after acceptance of this offer. At the Seller‘s written election, if, despite Buyer‘s good faith efforts, that commitment has not been obtained, this Agreement shall be null and void. Upon signing of a mutual release by Seller and Buyer, the earnest money deposit shall be returned to the Buyer without any further liability of either party to the other or to the Brokers and their agents.
Unlike the contracts at issue in Anchor and Riolo, there was no language in the purchase agreement that made it contingent on Mr. Slagle securing a mortgage loan. At most, the agreement gave Mr. Peto the ability to void the contract if Mr. Slagle failed to obtain financing. See Clarke v. Hartley, 7 Ohio App.3d 147, 149 (8th Dist.1982). In Ohio, the general rule is that the performance of a condition precedent may be waived by the party to whom the benefit of the condition runs. Sharp v. Andisman, 9th Dist. Summit Nos. 24999, 25002, 2010-Ohio-4452, ¶ 28. We also note that, because Mr. Slagle drafted the document, even if the language regarding financing is ambiguous, it must be construed in Mr. Peto‘s favor. Graham v. Drydock Coal Co., 76 Ohio St.3d 311, 314 (1996) (“[A] contract is to be construed against the party who drew it.“); Mosley v. Gault, 9th Dist. Summit No. 8527, 1977 WL 199084, *2 (Nov. 30, 1977).
{¶13} Because the terms of the Residential Purchase Agreement regarding financing merely gave Mr. Peto the ability to void the agreement, a right that he could waive, we conclude that Mr. Peto had at least a good faith argument that those terms were not essential to the agreement. See Alligood v. Procter & Gamble Co., 72 Ohio App.3d 309, 311 (1st Dist.1991) (explaining that the essential terms of a contract include “the identity of the parties to be bound, the subject matter of the contract, consideration, a quantity term, and a price term.“). We also note that, in his objection to the magistrate‘s decision, Mr. Peto cited McGee v. Tobin, 7th Dist. Mahoning No. 04 MA 98, 2005-Ohio-2119. In McGee, the Seventh District Court of Appeals held that the “essential terms” of a purchase agreement did not include the “terms of payment.” Id. at ¶ 24, 25. Although the municipal court distinguished McGee as a statute of frauds case, it
{¶14} Regarding Mr. Peto‘s fraud claims, the trial court wrote that Mr. Peto did not present any evidence of fraud at the small claims hearing. Mr. Peto argues that he had a valid constructive fraud claim against Mr. Ruschak because Mr. Ruschak owed him a legal or equitable duty to deposit his earnest money check in an escrow account. We do not have a copy of the small claims hearing transcript, however, so we must presume that the trial court‘s statement about Mr. Peto‘s failure to present any evidence of fraud is correct. Knapp v. Edwards Laboratories, 61 Ohio St.2d 197, 199 (1980). We also note that Mr. Peto did not contest the magistrate‘s determination that he failed to plead fraud properly in his complaint. See
{¶15} Regarding Mr. Peto‘s alleged failure to present any evidence of damages on his breach of contract claim, we note that, as Mr. Peto argued in his objection to the magistrate‘s decision, the purchase agreement contained an addendum providing that, if Mr. Slagle failed to consummate the sale, he was entitled to receive Mr. Slagle‘s earnest money as liquidated damages. See Cochran v. Schwartz, 120 Ohio App.3d 59, 61-62 (2d Dist.1997). In Cochran, the Second District Court of Appeals upheld a provision allowing the sellers to retain the buyer‘s earnest money as liquidated damages for the buyer‘s breach of contract. Accordingly, even if Mr. Peto abandoned his effort to recover for the repairs he made to the property that Mr. Slagle
{¶16} Regarding Mr. Peto‘s claims against Mr. Ruschak and Progressive Realty, Mr. Peto argued to the trial court that they owed him a fiduciary duty to not only accept the earnest money check that Mr. Slagle delivered to them, but also deposit it in an escrow account. The municipal court rejected his argument because of the lack of a valid purchase agreement and because, even if Mr. Ruschak and Progressive violated a fiduciary duty, Mr. Peto failed to show damages. As previously discussed, it was reasonable for Mr. Peto to argue that the amount that Mr. Slagle would obtain in financing was not an essential term of the Residential Purchase Agreement. In addition, because his damage claim was based on his belief that he was entitled to the earnest money as liquidated damages, he did not have to provide additional evidence of damages. We also note that there is case law supporting Mr. Peto‘s fiduciary duty claim. See Richard T. Kiko Agency, Inc. v. Ohio Dept. of Commerce, 48 Ohio St.3d 74, 76 (1989); Depugh v. Ohio Dept. of Commerce, 128 Ohio App.3d 528, 534 (4th Dist.1998). Although Mr. Ruschak and Progressive Realty contend that Mr. Peto failed to argue those cases to the magistrate, the question on the motion for sanctions was whether Mr. Peto willfully violated
{¶17} Upon review of the record, we conclude that, just because Mr. Peto lost at trial on his breach of contract and breach of fiduciary duty claims does not mean that he willfully violated Rule 11 or engaged in frivolous conduct under
III.
{¶18} Mr. Peto‘s assignments of error are sustained in part and overruled in part. The judgment of the Stow Municipal Court is reversed, and this matter is remanded for further proceedings consistent with this decision.
Judgment reversed, and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Stow Municipal Court, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellees.
JENNIFER HENSAL
FOR THE COURT
CARR, J. CONCURRING IN PART, AND DISSENTING IN PART.
{¶19} I would also reverse the trial court‘s award of sanctions on the fraud claim.
APPEARANCES:
JUNE E. RICKEY, Attorney at Law, for Appellant.
JAMES T. STIMLER, Attorney at Law, for Appellees.