ZAPATA REAL ESTATE L.L.C. v. MONTY REALTY LTD., ET AL.
No. 101171
Court of Appeals of Ohio, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
December 18, 2014
2014-Ohio-5550
JOURNAL ENTRY AND OPINION; JUDGMENT: AFFIRMED; Civil Appeal from the Cuyahoga County Court of Common Pleas, Case No. CV-12-789988
Robert J. Dubyak
Anthony J. Trzaska
Dubyak Nelson L.L.C.
6501 Parkland Blvd., Suite 230
Cleveland, Ohio 44124
Craig W. Relman
James S. Schoen
Craig Relman Co., L.P.A.
23811 Chagrin Blvd., Suite 160
Cleveland, Ohio 44122
ATTORNEYS FOR APPELLEES
For LNR Partner, L.L.C., et al.
Bradley J. Barmen
Mannion & Gray Co., L.P.A.
1375 E. 9th St., Suite 1600
Cleveland, Ohio 44114
For Cuyahoga County Treasurer
Timothy J. McGinty
Cuyahoga County Prosecutor
BY: Judith Miles
Assistant County Prosecutor
Justice Center, Courts Tower
1200 Ontario Street
Cleveland, Ohio 44113
For Zapata Real Estate, L.L.C.
Aaron H. Bulloff
Daniel P. Hinkel
Kevin M. Hinkel
Dean M. Rooney
Kadish, Hinkel & Weibel
1360 East 9th Street
Suite 400
Cleveland, Ohio 44114
{¶1} In this dispute related to a foreclosure action, third-party plaintiffs-appellants Monty Realty, Ltd. (“Monty“) and Florence A. Montgomery (collectively, “appellants“) appeal from the decision of the trial court granting summary judgment in favor of third-party defendants-appellees LNR Partners, L.L.C. (“LNR“) and Wells Fargo Bank, N.A., as trustee for the registered holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2006-C5 (the “Trust“) (collectively, “appellees“) on appellants’ claims of promissory estoppel, breach of the duty of good faith and various other claims related to the Trust‘s allegedly improper retention of reserve funds. Appellants contend that genuine issues of material fact exist as to each of their claims and that the trial court, therefore, erred in granting summary judgment in appellees’ favor. Finding no merit to the appeal, we affirm the trial cоurt‘s judgment.
Factual Background
{¶2} On August 10, 2006, Monty executed a commercial promissory note (the “note“) in favor of Column Financial, Inc. (“Column“) in connection with a $3,000,000 loan it received from Column. The note was secured by an open-end mortgage and security agreement (the “mortgage“) encumbering Cornerstone Plaza, a shopping center in North Olmsted, Ohio (“Cornerstone” or the “property“), an assignment of leases and rents and an indemnity and guaranty agreement executed by Florence Montgomery.1 The note had an initial interest rate of 6.23% per annum and required Monty to make monthly principal and interest payments on or before the 11th day of each month, beginning September 11, 2009 and continuing through and
{¶3} In April 2008, Column assigned and transferred all of its rights and interest in the loan documents to the Trust. KeyCorр Real Estate Capital Markets, Inc. (“Key“) was the master servicer for the Trust, responsible for the day-to-day servicing of loans that were current, and LNR served as the special servicer for the Trust, acting on behalf of the Trust to resolve nonperforming loans.
{¶4} Sometime in late 2010 — before Monty missed any loan payments — Mark Montgomery (“Montgomery“), Monty‘s “authorized representative,”3 contacted LNR to inquire whether it would consider restructuring the loan. Montgomery testified that he could not recall with whom he spoke, only that it was a “short phone call” and that he was “referred back to Key.” Monty had no further communications with LNR until the spring of 2012.
{¶5} In November 2011, Monty initiated discussions with Key regarding a possible modification of the loan. Montgomery testified that, in early November 2011, he had a series of telephone conversations with Gail Smith (“Smith“), an account manager for Key, during which he inquired whether the loan could be modified. He testified that Smith informed him that LNR
We spoke recently about the financial strains we are experiencing with the high vacancy and delinquent tenants. You suggested I explain the current situation with hopes that we could seek some relief on the terms of our mortgage.
As you know, last year the center ended with a loss of $39,685, from net operations. This year we estimate the loss will grow to $45,000. We will not be able to continue making up the loss from other operations for much longer.
Needless to say, the value of the commercial real estate market has been hard hit and CornerStone is no exception. It is not our intention to abandon the center but prefer to workout a mutually acceptable modification of the terms of our note.
We are requesting the following modifications:
1. Reduction of the ceiling cap for TILC from $55,000. to the current escrow balance, estimate at $30,000. This would reduce the monthly payment by $916.67.
2. Reduction of interest rate from 6.23% to 4.0%.
{¶6} On November 11, 2011, Smith responded to Montgomery stating, in relevant part:
I received a response from the Special Servicer [i.e., LNR] regarding your request. At this point, the Special Servicer is not recommending a transfer to them based on the current information provided to them. If you feel that future payments of this loan is in jeopardy due to your circumstances, I can recommend transfer for imminent default, but because you are current with your payments, the Special Servicer does not feel it necessary to transfer at this time.
Please be advise[d] that a transfer to the Special Servicer does not guarantee that they will work with you at the terms you are requesting. If there is away [sic] you
can make it work under the current terms of the Note, it is advisable to continue to do so; however, if you foresee not be [sic] able to make the debt service payment due to the current circumstances, please let me know and I will recommend the transfer. (Emphasis sic.)
{¶7} Montgomery testified that although Key never explicitly told Monty to default, he interpreted Smith‘s statement that the loan could not be transferred to LNR while the loan was current to mean that Monty should default on the loan and that LNR would then look at restructuring the loan. As Montgomery testified:
Q. Okay. Did Gail Smith or anybody else actually tell you if you default LNR or anybody else will do any specific action?
A. She said in not only the email, but in our phone conversation you‘re current they will not allow me to transfer it to LNR unless you become delinquent.
Q. So she tells you there‘s nothing we can do while it‘s current, right?
A. Yes.
Q. And you take that to mean then I should default?
A. Yes.
Q. She never told you to do that, did she?
A. She strongly indicated it.
Q. By sending you an email that says while you‘re current there‘s nothing that we can do?
A. Correct. And when I had a phone conversation with her, I said, I‘m shocked that I can‘t at least explore the possibility. She said that‘s just how they do it.
Q. Is it your position that Gail Smith specifically told you if and when you defaulted, LNR will modify your loan?
A. She never said they would modify it, no.
Q. Okay. She said they couldn‘t do anything until — or while you were current.
A. Correct.
Q. And you took that to mean if you default, then they‘ll do somеthing, right?
A. That they would look at it, yes.
{¶8} Montgomery testified that no one “ever promised to do anything other than look at” a possible restructuring of the note. He further testified that neither Key nor LNR ever made any representations to Monty (either before or after Monty‘s default) regarding what LNR would do (or would not do) as part of that process. Montgomery confirmed that the only representations LNR made prior to Monty‘s default were those it allegedly made to and through Smith, i.e., that while the loan was current, there was nothing that could be done to restructure the loan.
{¶9} Under section 1.4 of the note, the failure to pay any sum payable under the note on or before the due date constitutes an “[e]vent of [d]efault.” Upon the occurrence of an event of default, the lender has a right to accelerate the entire indebtedness — i.e., all sums advanced or accrued under the note and all unpaid interest “shall, at the option of Lender, and without notice to Borrower, at once become due and payable and may be сollected forthwith, whether or not there has been a prior demand for payment and regardless of the stipulated Maturity Date.” Section 2.1 of the note further provides, in relevant part:
No failure to accelerate the debt evidenced hereby after an Event of Default, acceptance of a partial or past due payment, or indulgences granted from time to time shall be construed (i) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of the Lender thereafter to insist upon strict compliance of the terms of
this Note, or (ii) to prevent the exercise of such right of acceleration or any other right granted hereunder * * *. No extension of the time for the payment of this Note or any installment due hereunder, made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part unless Lender agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
The mortgage contains similar provisions.
{¶10} While communicating with Key regarding a possible loan restructuring, Monty failed to timely make the monthly loan payment due on November 11, 2011 — an event of default under the note and mortgage. Monty claims that this “technical default” resulted from a tenant‘s check having been returned for insufficient funds. A month later, Monty forwarded a check for the November 11, 2011 loan payment. Key received the check on December 14, 2011 and applied it to the November payment.
{¶11} Montgomery testified that Monty “intentionally” failed to make the loan payment due December 11, 2011, as well as other payments on the note when due, “in the hopes” that Key would transfer the loan to LNR. In March 2012, the loan was transferred from Key to LNR. On March 21, 2012, LNR sent a notice of transfer of servicing to Monty thаt explained the transfer of servicing from Key to LNR and stated, among other things, that LNR “look[ed] forward to a successful working relationship” with Monty.
{¶12} Shortly after Monty received the March 21, 2012 notice of transfer, Montgomery received a telephone call from Daniel Motha (“Motha“), an asset manager for LNR. Motha introduced himself and advised Montgomery that he would be forwarding a pre-negotiation letter for Monty to sign and a list of items LNR needed from Monty. On April 2, 2012, Motha sent Monty the pre-negotiation letter along with the list of documents Monty was to provide “in
{¶13} Over the next several months, LNR had the property appraised and used the financial documentation and information submitted by Monty to obtain opinions of value of the property from two brokers. On June 1, 2012, Motha sent an email to Montgomery advising Monty that Motha had not yet received its offer to modify the loan. Monty submitted an offer three days later, on June 4, 2012.
{¶14} LNR never responded to Monty‘s offer to restructure the loan. Instead, Motha testified that he decided to recommend that the loan be marketed for sale. He testified that his decision was based on Monty‘s missed payments, the default status of the loan, the fact the property was “so far underwater” and his conclusion that Monty was unable, at that time, to come up with sufficient funds to pay down part of the loan, as required, to get a modification approved. Based on Motha‘s recommendation, the loan was listed for sale. Although Motha testified that, in his mind, once the loan was listed for sale, any negotiations involving a possible restructuring were over, he testified that he did not advise Monty that the loan would not be restructured and would be sold. Monty did not learn that its request to restructure the loan had been denied and that the loan had bеen listed for sale until after the loan was sold.
{¶15} In July 2012, the loan was sold on an auction website to Thomas Bodnar for $1,485,000. Bodnar thereafter assigned all of his rights, title, interest, duties and obligations under the purchase agreement with the Trust to Zapata Real Estate, L.L.C. (“Zapata“), and, effective August 3, 2012, the Trust assigned all of its rights, title and interest in the mortgage and assignment of leases and rents to Zapata. Prior to the sale of the loan to Zapata, Key held the reserve funds collected from Monty in a deposit account, maintained with an affiliate of Key, for
{¶16} On August 22, 2012, Zapata sent a letter to Monty confirming Monty‘s payment defaults under the note and mortgage, stating that the outstanding principal balance due on the note was, therefore, accelerated and demanding immediate payment in full of all past due amounts. A day later, Zapata filed an action for judgment on the note and to foreclose on the mortgage.
{¶17} On December 7, 2012, appellants filed their answer, a counterclaim and a third-party complaint against Key and LNR. In their third-party complaint, appellants asserted claims of fraud, negligent/intentional misrepresentation, promissory estoppel, bad faith lending and civil conspiracy against Key and LNR, alleging that they had induced Monty to default on the loan and had misrepresented that they would work with Monty to restructure the loan upon default. In their combined answer to Zapata‘s second amended complaint, counterclaim and third-party complaint filed on May 16, 2013, appellants added claims of conversion, unjust enrichment, equitable restitution, constructive trust and money had and received against Key, based on Key‘s allegedly improper withholding of funds in Monty‘s reserve account following the sale of the loan to Zapata.
{¶18} On September 26, 2013, LNR and Key filed a motion for summary judgment on the claims asserted in appellants’ third-party complaint. Appellants did not immediately respond to the motion for summary judgment. Instead, on November 19, 2013, Monty filed an amended third-party complaint, modifying the claims asserted against LNR (i.e., dismissing the
{¶19} On January 15, 2014, appellees filed a renewed motion for summary judgment based on the claims asserted in appellants’ amended third-party complaint. Appellees supported their motion with copies of excerpts from the note and mortgage and the agreements relating to the sale of the loan to Zapata, copies of communications between Monty and Key and Monty and LNR related to the loan, Montgomery‘s deposition testimony related to his communications with Key and LNR and affidavits from Smith and Bodnar regarding the disposition of the reserve funds.
{¶20} Appellants filed their opposition on January 29, 2014. Appellants’ opposition to summary judgment was supported by copies of email communications between Montgomery and
{¶21} On February 24, 2014, the trial court granted summary judgment in favor of appellees on the claims asserted in the amended third-party complaint. Appellants timely appealed the trial court‘s order on summary judgment, raising the following assignment of error for review:
The trial court erred and abused its discretion when it granted summary judgment in favor of Third-Party Defendants/Appellees LNR Partners, LLC * * * and Wells Fargo Bank, N.A., as trustee for the registered holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2006-C5 * * * because genuine issues of material fact exist regarding Appellees’ actions and representations to Defendants/Third-Party Plaintiffs/Appellants Monty Realty Ltd. and Florence A. Montgomery (collectively, “Monty“), related to the Loan Documents, which preclude summary judgment on Monty‘s claims in its Amended Third-Party Complaint.
Summary Judgment Standard
{¶22} We review summary judgment rulings de novo, applying the same standard as the trial court. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). We accord no deference to the trial court‘s decision and independently review the record to determine whether summary judgment is appropriate.
{¶23} Pursuant to
{¶24} On a motion for summary judgment, the moving party carries an initial burden of setting forth evidence of specific facts that demonstrate its entitlement to summary judgment. Dresher v. Burt, 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264 (1996). The moving party cannot discharge its burden simply by making conclusory assertions that the nonmoving party cannot prove its case; it must point to specific evidence in the record that demonstrates that the nonmoving party has insufficient evidence to support its claims. If the moving party fails to meet this burden, summary judgment is not appropriate; if the moving party meets this burden, summary judgment is appropriate only if the nonmoving party fails to evidence of specific facts establishing the existence of a genuine issue of material fact for trial. Id. at 293.
Evidentiary Requirements
{¶25} As an initial matter, we note that a number of the evidentiary materials submitted by the parties in support of their summary judgment filings do not comply with
{¶26} These requirements were not met with respect to many of the summary judgment materials submitted by the parties in this case. For example, the original, complete transcripts of the depositions of Daniel Motha and Mark Montgomery were not filed with the court and the copies of the portions of the transcripts attached to the parties’ summary judgment filings did not include signatures of the deponents, any indication that the deponents had waived signature or any certification of the transcripts by the court reporter. Likewise, a number of the documents relied upon by the parties were not properly authenticated and the affidavits of Mark Montgomery and Thomas Bodnar did not identify the roles or positions they held in the entities on whose behalf they offered the affidavits and did not otherwise explain the basis of their
{¶27} However, since neither party objected to the form of the evidence submitted by the other, it could be considered by the trial court in ruling on appellees’ motion for summary judgment within the court‘s discretion. See, e.g., Dzambasow, 2005-Ohio-6719 at ¶ 27 (“[I]f the opposing party fails to object to improperly introduced evidentiary materials, the trial court may, in its sound discretion, consider those materials in ruling on the summary judgment motion.“), quoting Christe v. GMS Mgt. Co., Inc., 124 Ohio App.3d 84, 90, 705 N.E.2d 691 (9th Dist.1997); Papadelis v. First Am. Sav. Bank, 112 Ohio App.3d 576, 579, 679 N.E.2d 356 (8th Dist.1996) (“When ruling on a motion for summary judgment, a trial court may consider documents other than those specified in
Claims Related to the Reserve Account
{¶28} Turning to the merits, appellants first argue that because there is no dispute that the Trust retained control over the reserve funds and did not return those funds to Monty after the loan was sold to Zapata in July 2012, the trial court improperly granted summary judgment in favor of the Trust on the Reserve Account Claims. We disagree.
{¶29} Section 1.8(a) of the mortgage provides, in relevant part:
If an Event of Default shall occur, then Lender may, without notice or demand on Borrower, at its option: (A) withdraw any or all of the funds (including without limitation, interest) then remaining in the Reserves and apply the same, after deducting all costs and expenses of safekeeping, collection and delivery (including, but not limited to, attorneys’ fees, costs and expenses) to the indebtedness evidenced by the Note or any other obligations of Borrower under the Loan Documents in such manner as Lender shall deem apрropriate in its sole discretion, and the excess, if any, shall be paid to Borrower * * *.
Section 1.8(b) of the mortgage further provides, in relevant part:
Upon assignment of this Mortgage by Lender, any funds in the Reserves shall be turned over to the assignee and any responsibility of Lender, as assignor, with respect thereto shall terminate. The Reserves shall not, unless otherwise explicitly required by applicable law, be or be deemed to be escrow or trust funds, but, at Lender‘s option and in Lender‘s discretion, may either be held in a separate account or be commingled by Lender with the general funds of Lender. Upon full payment of the indebtedness secured hereby in accordance with its terms * * * or at such earlier time as Lender may elect, the balance in the Reserves then in Lender‘s possession shall be paid over to Borrower and no other party shall have any right or claim thereto.
{¶30} Accordingly, under the terms of the mortgage, after Monty defaulted, the lender, i.e., first the Trust and then Zapata by assignment from the Trust, had the right to withdraw the balance remaining in the reserve account and to apply those funds to reduce Monty‘s indebtedness under the note (or any other obligations under the loan documents).
{¶31} An essential element of each of Monty‘s Reserve Account Claims is Monty‘s alleged right to receive the balance of the funds in the reserve account. Under the terms of the mortgage, Monty has a right to the balance of the reserves only “[u]pon full payment of the indebtedness secured [by the mortgage] in accordance with its terms.” It is, however, undisputed that Monty owes Zapata more than $3 million dollars pursuant to loan documents and has not made “full payment of the indebtedness” under the note “in accordance with its terms,” as necessary to trigger the requirement under the mortgage that “the balance in the Reserves then in Lender‘s possession * * * be paid over to Borrower.” Monty, therefore, has not met its
Promissory Estoppel
{¶32} Appellants likewise contend that the trial court erred in entering summary judgment in favor of appellees on their promissory estoppel claim. Appellants maintain that they presented sufficient evidence to create a genuine issue of material fact as to each element of their promissory estoppеl claim. Once again, we disagree.
{¶33} Appellants’ promissory estoppel claim is based on a series of alleged representations by or on behalf of LNR that LNR would attempt to restructure the loan. Appellants allege that in November 2011, Key and LNR (acting on behalf of the Trust) together
{¶34} Promissory estoppel is an equitable doctrine for enforcing promises that are reasonably relied upon. Rucker v. Everen Secs., Inc., 102 Ohio St.3d 1247, 2004-Ohio-3719, 811 N.E.2d 1141, ¶ 6, citing Karnes v. Doctors Hosp., 51 Ohio St.3d 139, 142, 555 N.E.2d 280 (1990). It has been summarized as follows:
“A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.”
McCroskey v. State, 8 Ohio St.3d 29, 30, 456 N.E.2d 1204 (1983), quoting Restatement of the Law 2d, Contracts, Section 90 (1973).
{¶35} To prevail on a claim for promissory estoppel, a party must establish four elements: (1) there must be a clear and unambiguous promise, (2) the party to whom the promise was made must rely on it, (3) the reliance must be reasonable and foreseeable and (4) the party relying on
{¶36} The “clear and unambiguous promise” necessary to support a claim of promissory estoppel “is one that the promisor would expect to induce reliance.” Moellering Indus., Inc. v. Nalagatla, 12th Dist. Warren No. CA2012-10-104, 2013-Ohio-3995, ¶ 15, citing McCroskey at 30. It is “not satisfied by vague or ambiguous references.” Id., quoting Hitchcock Dev. Co. v. Husted, 12th Dist. Warren No. CA2009-04-043, 2009-Ohio-4459, ¶ 24. Based on our review of the record, it is apparent that there were no promises made by LNR related to the restructuring of the loan that LNR should have reasonably expected would induce reliance by Monty. Moellering at ¶ 25 (where bank‘s statements were ambiguous and contractor‘s reliance “was seemingly based on assumptions and conjectures,” bank could not have expected that its statements would have induced reliance).
{¶37} Appellants do not identify any specific representation allegedly made by or on behalf of LNR at any time in which LNR committed itself to engage in a loan restructuring process with Monty. Although appellants argue that “the record is replete with evidence that [a]ppellees represented to Monty that LNR would work with Monty post-default” and that this “creates a genuine issue of material fact as to the promises [a]ppellees made,” the evidence appellants cite in support of this claim tells a different story. With respect to the representations allegedly made by LNR pre-default, appellants identify: (1) Smith‘s November 17, 2011 email to Montgomery indicating that LNR is not recommending a transfer of the loan to special servicing because the loan is current and (2) Montgomery‘s deposition testimony regarding his communications with Key prior to Monty‘s default. With respect to the representations allegedly made by LNR post-default, Monty points to: (1) the statement in the March 21, 2012
{¶38} None оf this evidence, whether considered in isolation or together, evidences any promise by or on behalf of appellees that LNR would “work with Monty to restructure the loan” if Monty defaulted or that LNR would continue to work with Monty throughout the restructuring process following Monty‘s default. Although Montgomery testified that he took Smith‘s statements to mean that if Monty defaulted, LNR “would look at” a possible restructuring of the loan, and that he took Motha‘s requests for documentation and information after LNR‘s default to mean that the loan was in the process of being restructured, Montgomery‘s subjective interpretation of his communications and interactions with Key and LNR does not transform those communications and interactions into a commitment by LNR to work with Monty throughout the loan restructuring process to restructure the loan. Because Monty has not shown that Key or LNR ever promised Monty that LNR would, in fact, “work with Monty to restructure the loan” (or pointed to any evidence showing a genuine issue of fact to be litigated regarding the existence of such a promise), the trial court did not err in entering summary judgment on appellants’ promissory estoppel claim.
{¶39} Even if the evidence identified by appellants could be reasonably construed to constitute a representation by LNR that it would “work with Monty to restructure the loan,” such
{¶40} Even assuming LNR promised to “work with Monty to restructure the loan,” what does it mean for a lender to agree to “work with” a borrower to “restructure” a loan? There is no dispute that LNR “worked with” Monty in the sense that it requested and received documentation and information from Monty, including an offer for a proposed loan modification, related to a possible restructuring of the loan. Monty offers no evidence contradicting Motha‘s testimony that he reviewed the information and materials submitted by Monty and made the decision to recommend the sale of the loan only after determining that the property was “so far underwater” and that Monty was unable, at that time, to come up with sufficient funds to pay down part of the loan as necessary to get a modification approved. Monty, however, apparently contends that “working with Monty to restructure the loan” required something more. Given that there is no dispute that LNR did not promise to restructure the loan, what that “something more” is, however, remains unclear. Where, as hеre, an alleged promise is sufficiently vague or ambiguous that the parties do not have a clear understanding that a commitment has been made
Reasonable Reliance and Resulting Injury
{¶41} To prevail on their promissory estoppel claim, appellants must also establish that Monty reasonably relied upon LNR‘s alleged promise to work with Monty to restructure the loan and was injured as a result of its reliance on this alleged promise. Even if we were to find that LNR made the alleged promise and that the alleged promise was sufficiently clear and unambiguous to give rise to a claim of promissory estoppel, we would still conclude that summary judgment is appropriate because there is no genuine issue of material fact that Monty did not reasonably rely on LNR‘s alleged promise to “work with” Monty to “restructure the loan” and no evidence that Monty‘s claimed injury resulted from its reliance on that alleged promise.
{¶42} The injury Monty claims to have sustained as a result of its reliance on LNR‘s representations is the loss of the Cornerstone property in the pending foreclosure action.
{¶43} Appellees presented evidence of numerous references in the loan documents making it clear that Monty could not rely on oral representations from Key or LNR purporting to modify the loan documents unless those representations were reduced to writing and signed by the parties. The March 21, 2012 notice of transfer of servicing similarly stated:
No modification of the Loan Documents and no other agreement or understanding of any nature shall be deemed to have been entered into by or be binding on Lender or Special Servicer unless and until Lender and Borrower have reached agreement on all issues, and such entire agreemеnt shall have been reduced to a written document that expressly states that it modifies the Loan Documents and is duly executed by Lender, Borrower and any guarantor of the Loan. Oral agreements, emails, memoranda of meetings, summaries of proposed terms, etc., shall have no effect whatsoever and shall not be binding on Lender or Special Servicer.
{¶44} Monty argues that these provisions are irrelevant because the promise that forms the basis of appellants’ promissory estoppel claim is that LNR “would work with Monty toward restructuring the loan” not that appellees would, in fact, modify the terms of the loan. However, even if they do not, per se, preclude Monty‘s argument, they reveal the very tenuous nature of the promise on which Monty allegedly relied.
{¶45} As Monty concedes, there was no guarantee that the loan would be restructured if it defaulted. By intentionally defaulting, Monty was banking on the possibility that LNR might thereafter agree to restructure the loan in a way that was favorable to Monty.
{¶46} Furthermore, it is undisputed that, by the time it “intentionally” missed the December 2011 payment, Monty had already defaulted on the loan based on its failure to timely make the November 2011 loan payment — a default that had nothing to do with its reliance on any representations allegedly made by Key or LNR. Monty attempts to create an issue of fact as to the timing of its default by arguing that the November 2011 default was merely “technical” and was cured when Monty submitted (and appellees accepted) a loan payment on December 14, 2011. Monty, however, cites to no evidence in the record or any authority supporting this contention. Neither the note nor mortgage provides that an event of default can be cured by the borrower submitting, and the lender accepting, a late payment. Because Monty was already in default when it “intentionally” failed to make the December 2011 payment, it cannot be said that Monty detrimentally relied on Key or LNR‘s representations in defaulting on the loan.
{¶47} We reach the same conclusion, albeit fоr a different reason, with respect to Monty‘s contention that it lost the property as a result of its reasonable reliance on representations made by LNR after Monty defaulted on the loan. The only “evidence” appellants offer in support of this contention is a handful of conclusory assertions in Montgomery‘s affidavit that if LNR had not promised to work with Monty throughout the loan restructuring process or had otherwise notified Monty that Monty‘s offer to restructure the loan had been rejected, Monty would have presented another offer, approached investors, secured funds to rework the loan, cured its default, purchased the loan at the sale or otherwise “done what it took to maintain ownership of the property.” However, an affidavit submitted on summary judgment must contain more than conclusory assertions to create a genuine issue of material fact for trial:
“Generally, a party‘s unsupported and self-serving assertions, offered by way of affidavit, standing alone and without corroborаting materials under
Civ.R. 56 , will not be sufficient to demonstrate material issues of fact. Otherwise, a party could avoid summary judgment under all circumstances solely by simply submitting such a self-serving affidavit containing nothing more than bare contradictions of the evidence offered by the moving party.”
Davis v. Cleveland, 8th Dist. Cuyahoga No. 83665, 2004-Ohio-6621, ¶ 23, quoting Bell v. Beightler, 10th Dist. Franklin No. 02AP-569, 2003-Ohio-88, ¶ 33.
{¶48} Because Montgomery‘s conclusory statements were unsupported by any facts or evidence, Montgomery‘s affidavit does not create a genuine issue of fact as to whether Monty‘s loss resulted from its alleged reliance on any promise to work with Monty to restructure the loan. The trial court, therefore, properly entered summary judgment in favor of appellees on appellants’ promissory estoppel claim.6
Breach of Duty of Good Faith
{¶49} Monty also contends that the trial court erred in entering summary judgment on its claim for breach of the duty of good faith under former
A term providing that one party or his successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or “when he deems himself insecure” or in words of similar import shall be construed to mean that he shall have power to do so only if he in good faith believes that the prospect of payment or performance is impaired. The burden of
establishing lack of good faith is on the party against whom the power has been exercised.
{¶50} In this case, it is undisputed that neither LNR nor the Trust ever accelerated payment, accelerated performance or required collateral or additional collateral from Monty. As Monty repeatedly acknowledges, it was Zapata who accelerated the principal balance of the note in August 2012. Accordingly, Monty cannot meet its burden of establishing that appellees breached a duty of good faith under former
{¶51} We reach the same conclusion with respect to Monty‘s claim that appellees breached the duty of good faith under
{¶52} Monty‘s claim for breach of the duty of good faith under
{¶53} Appellees maintain that under Ohio law, there is no claim for breach of the duty of good faith without a breach of some term of the pаrties’ contract and that the trial court properly entered summary judgment on appellants’ “bad faith” claim because appellants have not alleged — much less established — any breach of contract. Appellants respond that a breach of the duty of good faith in and of itself constitutes a breach of contract and that they are not required to identify a separate breach of contract in order to defeat summary judgment on a claim for breach of the duty of good faith.
{¶54} The Official Comment to
This section sets forth a basic principle running throughout this Act. The principle involved is that in commercial transactions good faith is required in the performance and enforcement of all agreements or duties. * * * This section does not support an independent cause of action for failure to perform or enforce in good faith. Rather, this section means that a failure to perform or enforce, in good faith, a specific duty or obligation under the contract, constitutes a breach of that contract or makes unavailable, under the particular circumstances, a remedial right or power. This distinction makes it clear that the doctrine of good faith merely directs a court towards interpreting contracts within the commercial context in which they are created, performed, and enforced, and does not create a separate duty of fairness and reasonableness which can be independently breached.
(Emphasis added.)
{¶55} Appellants have not identified any “specific duty or obligation” under the loan documents that appellees allegedly “fail[ed] to perform or enforce.” There is no claim that the loan documents required appellees to notify Monty that they had decided to sell, rather than restructure, the loan. It is well established in Ohio that a lender does not act in “bad faith” when it decides to exеrcise its contract rights. Snowville Subdivision Joint Venture Phase I, v. Home S. & L. of Youngstown, 8th Dist. Cuyahoga No. 96675, 2012-Ohio-1342, ¶ 26; see also Banc Liquidating Co. v. Ameritrust, 86 Ohio App.3d 646, 649, 621 N.E.2d 760 (8th Dist.1993). As
{¶56} Based on the record before us, we find that appellants cannot establish essential elements of each of their claims. Summary judgment was, therefore, appropriate, and Monty‘s assignment of error is overruled.
{¶57} Judgment affirmed.
It is ordered that appellees recover from appellants the costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
EILEEN A. GALLAGHER, PRESIDING JUDGE
MARY EILEEN KILBANE, J., and
PATRICIA A. BLACKMON, J., CONCUR
Notes
(Emphasis sic.) Monty does not dispute that the Trust had the right under the loan documents to sell the loan without prior notice to Monty, irrespective of this provision in the pre-negotiation letter.Lender reserves its right to take all such actions as it deems appropriate to protect its interest in the Loan and to collect the debt thereunder, including, without limitation, seeking foreclosure and/or reconveyance of its security under the Loan Documents, and the sale of the Loan to a third party without further notice or demand. Accordingly, participation in the Loan Communications shall not prevent the Lender from marketing, selling, assigning, transferring, setting over or conveying its right, title and interest in and to the Loan and any and all related security instruments that secure the indebtedness and or [sic] obligations secured by the Mortgage at any time and without prior notice to the Borrower or its representatives.