Case Title: FirstMerit Bank, N.A. v. Inks

Citation: 2014-Ohio-789

Docket Number: 2013-0091

State: ohio

Court: Ohio Supreme Court

Date: 2014-03-06T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
FirstMerit Bank, N.A. v. Inks, Slip Opinion No. 2014-Ohio-789.] 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
SLIP OPINION NO. 2014-OHIO-789 
FIRSTMERIT BANK, N.A., APPELLANT, v. INKS ET AL., APPELLEES. 
[Until this opinion appears in the Ohio Official Reports advance sheets,  
it may be cited as FirstMerit Bank, N.A. v. Inks,  
Slip Opinion No. 2014-Ohio-789.] 
Statute of frauds—R.C. 1335.06—Foreclosure—Defense—Oral forbearance 
agreement. 
(Nos. 2013-0091 and 2013-0203—Submitted December 10, 2013—Decided 
March 4, 2014.) 
CERTIFIED by and APPEAL from the Court of Appeals for Summit County,  
Nos. 25980 and 26182, 2012-Ohio-5155. 
____________________ 
 
O’DONNELL, J. 
{¶ 1} We accepted a conflict certified to us by the Ninth District Court of 
Appeals on the following question: “Whether Section 1335.05 of the Ohio 
Revised Code prohibits a party from raising as a defense that the parties to a 
contract involving an interest in land orally agreed to modify the terms of their 
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agreement.”  FirstMerit Bank v. Inks, 135 Ohio St.3d 1410, 2013-Ohio-1622, 986 
N.E.2d 28. 
{¶ 2} We also accepted a discretionary appeal filed by FirstMerit Bank 
on the following proposition of law: “A party cannot use Civ.R. 60(B) to enforce 
an alleged oral forbearance agreement when the statute of frauds would prohibit 
that party from enforcing the same agreement through a complaint or 
counterclaim.”  We consolidated the certified conflict with the discretionary 
appeal for purposes of resolution.  Id. 
{¶ 3} After reviewing the matter, we answer the certified question in the 
affirmative and conclude that a party cannot assert an oral agreement pertaining to 
an interest in land in an effort to defeat a judgment entered pursuant to a written 
contract.  Accordingly, we reverse the judgment of the appellate court and 
reinstate the judgment of the trial court. 
Factual Background and Procedural History 
{¶ 4} On June 27, 2005, Ashland Lakes, L.L.C., Daniel Inks, and David 
Slyman borrowed $3,500,000 from FirstMerit Bank, N.A., and executed a 
promissory note in favor of FirstMerit secured by a mortgage on several parcels 
of real estate aggregating approximately 130 acres of land located at Silverstone 
Lake in Ashland County and the personal guaranties of Daniel and Deborah Inks 
and David and Jacqueline Slyman.  Both the note and the personal guaranties 
contained cognovit provisions authorizing confession of judgment. 
{¶ 5} Ashland Lakes, Inks, and Slyman defaulted on the promissory 
note, and FirstMerit initiated foreclosure proceedings in January 2009.  The 
parties subsequently entered into two successive written standstill agreements and 
a third written forbearance agreement in an effort to resolve the deficiency and 
avoid foreclosure.  Each contained cognovit provisions authorizing confession of 
judgment and further provided: “No amendment, modification, rescission, waiver 
or release of any provision of this Agreement shall be effective unless the same 
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shall be in writing and signed by the parties hereto.”  When those agreements 
expired, the common pleas court entered a decree in foreclosure and appointed a 
private auctioneer, who scheduled a property auction for March 9, 2011. 
{¶ 6} In January 2011, Inks and Slyman met with Thomas Krumel, a 
senior vice president at FirstMerit in charge of the Ashland Lakes loan, regarding 
the terms upon which FirstMerit would release its mortgage and the balance of 
any deficiencies. 
{¶ 7} On Friday, March 4, 2011, FirstMerit sent Inks a term sheet setting 
forth conditions for cancellation of the scheduled March 9, 2011 auction.  Those 
terms required that FirstMerit receive a $200,000 deposit and $9,000 appraisal fee 
by March 7, 2011; upon execution of a forbearance agreement and receipt of the 
payment, FirstMerit would cancel the auction and stand still from exercising its 
rights and remedies for 45 days.  Additionally, the term sheet provided that upon 
receipt of various payments by specified dates, FirstMerit would release the 
mortgage upon the properties and deliver either a covenant not to sue or a release 
of any remaining obligations due under the loan.  The document also stated in 
bold print that “until such time that FirstMerit executes a written agreement 
providing for forbearance * * * there is no forbearance granted.” 
{¶ 8} Inks claims that he orally informed Krumel on March 7, 2011, that 
he could raise only $150,000 for the deposit and that Krumel stated that $150,000 
was “doable.”  Krumel, however, maintains that he responded only that FirstMerit 
might consider a lower deposit if Inks could not raise the $200,000.  Following 
that conversation, Krumel sent a draft forbearance agreement to Inks that 
provided for a $200,000 deposit.  In response, Inks sent Krumel a letter with 
written objections to the agreement, including a reference to delivering $150,000 
the next day. 
{¶ 9} Inks and Krumel spoke on the morning of March 8, 2011, 
regarding the $150,000 payment.  Inks maintains that he attempted to contact 
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Krumel with the payment details later that day but that Krumel returned his call at 
the close of business and informed him that it was too late to make the payment 
and that the property would proceed to sale.  On March 9, 2011, the properties 
were sold at auction. 
{¶ 10} The sale of the properties resulted in a deficiency, and therefore 
FirstMerit subsequently obtained a cognovit judgment for $3,337,467.15 plus 
interest, costs, and attorney fees against the Inkses and Slymans on the cognovit 
provisions of their personal guaranties and the written forbearance agreement. 
{¶ 11} The Inkses and Slymans then moved for relief from judgment 
pursuant to Civ.R. 60(B), asserting as a defense that they had reached an oral 
settlement agreement with FirstMerit and that FirstMerit had agreed to cease all 
legal proceedings and release them from all obligations owed to FirstMerit.  They 
also requested leave to file their own answer along with a counterclaim “seeking 
to enforce performance of the settlement agreement and to recover damages.”  
The trial court denied the motion, determining, inter alia, that the statute of frauds 
barred their defense. 
{¶ 12} On appeal, the Ninth District recognized that R.C. 1335.05 
provides that “ ‘[n]o action shall be brought * * * upon a contract or sale of lands 
* * * unless the agreement upon which such action is brought * * * is in 
writing,’ ” and held: “[T]he Slymans and Inkses did not attempt to ‘bring an 
action’ against FirstMerit, they merely raised the oral forbearance agreement as a 
defense to FirstMerit’s action against them.  Accordingly, the trial court 
incorrectly concluded that their defense was barred under the statute of frauds.”  
2012-Ohio-5155, ¶ 22.  Thus, the appellate court reversed the judgment of the 
trial court and remanded the cause for further proceeding. 
{¶ 13} On appeal to this court, FirstMerit asserts that R.C. 1335.05 bars 
the enforcement of oral agreements concerning an interest in land regardless of 
the procedural mechanism a party uses to try to enforce such agreements, that a 
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Civ.R. 60(B) motion seeking to vacate a judgment and assert a counterclaim 
constitutes an action within the meaning of the statute of frauds, and that 
historically, courts have applied the statute of frauds to bar both civil actions and 
defenses seeking to enforce oral agreements within the statute’s reach.  It also 
argues that the appellate court’s holding vitiates the statute of frauds, leads to the 
absurd result of allowing an unenforceable oral agreement to undo a judgment, 
and undermines settled transactions by creating uncertainty as to when an 
enforceable agreement is reached. 
{¶ 14} In response, the Inkses and Slymans assert that the term “action,” 
as used in R.C. 1335.05 and 1335.02(B), means the filing of a civil lawsuit and 
does not include defenses raised in an action.  And they urge that if the term 
“action” is ambiguous, then R.C. 1335.05 should be read in pari materia with R.C. 
2307.01, which provides a definition of “action.”  Using that definition, they 
maintain that a Civ.R. 60(B) motion is not an action and thus a Civ.R. 60(B) 
motion raising an oral agreement as a defense is not barred by the statute of 
frauds.  They also note that the conflict case, Nicolozakes v. Deryk Gabriel 
Tangeman Irrevocable Trust, 10th Dist. Franklin No. 00AP-7, 2000 WL 1877521 
(Dec. 26, 2000), relied on Marion Prod. Credit Assn. v. Cochran, 40 Ohio St.3d 
265, 533 N.E.2d 325 (1988), which we later recognized as a parol evidence case 
in Galmish v. Cicchini, 90 Ohio St.3d 22, 29, 734 N.E.2d 782 (2000), fn 2.  
Finally, they maintain that the agreement reached between Ashland Lakes and 
FirstMerit is an enforceable oral settlement agreement. 
{¶ 15} Thus, the issue is whether a party can assert an oral agreement 
involving an interest in land as a defense in a Civ.R. 60(B) motion for relief from 
judgment. 
 
 
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Law and Analysis 
The Statute of Frauds 
{¶ 16} Ohio’s statute of frauds, R.C. 1335.05, provides: “No action shall 
be brought whereby to charge the defendant * * * upon a contract or sale of lands 
* * * or interest in or concerning them * * * unless the agreement upon which 
such action is brought, or some memorandum or note thereof, is in writing and 
signed by the party to be charged therewith * * *.”  (Emphasis added.)   
{¶ 17} The question of whether the statute of frauds precludes a defendant 
from asserting an oral agreement as a defense to an action has been resolved for 
more than 150 years by virtue of our decision in Finch v. Finch, 10 Ohio St. 501 
(1860).  There, a widow filed a petition for dower, but the sons of the decedent 
asserted in their answer that she had entered into an oral antenuptial agreement in 
which she agreed to “release and relinquish all right, title, and claim” to the 
decedent’s estate.  Id. at 502-503.  The widow filed a motion to strike the sons’ 
answer on the basis that the agreement fell within the statute of frauds and thus 
constituted no defense to the action.  Id. at 505.  In response, the sons argued that 
the statute of frauds “only provides that ‘no action shall be brought whereby to 
charge the defendant, upon any agreement upon consideration of marriage,’ such 
agreement may be available as a defense, though it could not be as the foundation 
of an action upon it.”  Id. at 507.  In analyzing this argument, we stated that 
“[s]uch a distinction, however, so far as we know, has never been recognized; but, 
on the contrary, it has been held that a statute, in language identical with ours, 
renders agreements within it equally available whether in the defense or the 
prosecution of an action.”  Id., citing Browne, Treatise on the Construction of the 
Statute of Frauds, Section 131 (1857), and Comes v. Lamson, 16 Conn. 246 
(1844). 
{¶ 18} Similarly, in Reinheimer v. Carter, 31 Ohio St. 579, 579-580 
(1877), the Carters sued on a promissory note and mortgage, and Reinheimer 
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denied liability in his answer, relying on an oral agreement allegedly entered into 
with Mrs. Carter.  The Carters claimed that Reinheimer failed to state facts 
sufficient to constitute a defense.  Id.  Specifically, we addressed Reinheimer’s 
failure to allege that the agreement, which could not be performed within a year, 
was in writing as required by the statute of frauds.  Id. at 586.  We affirmed the 
judgment in favor of the Carters and held at paragraph two of the syllabus: 
“Where a defense to an action is founded on an agreement not to be performed 
within a year, the answer must show that such agreement was in writing.” 
{¶ 19} Courts in other jurisdictions have also long recognized that “a 
contract within the condemnation of the [statute of frauds] ‘can not be made the 
ground of a defense, any more than of a demand; that the obligation of the 
plaintiff to perform it is no more available to the defendant in the former case than 
the obligation of the defendant to perform it would be to the plaintiff in the latter 
case.’ ” Wheeler v. Frankenthal & Bro., 78 Ill. 124, 126 (1875), quoting Browne 
at Section 131, and citing Comes, 16 Conn. 246, Scotten v. Brown, 4 Del. 324 
(Super.Ct.1845), King v. Welcome, 71 Mass. 41 (1857); Payson v. West, Walker 
515 (Miss.1832), Sennett v. Johnson, 9 Pa. 335 (1848), Finch, 10 Ohio 507, and 
Scott v. Brush, 26 Mich. 418 (1873); Bernier v. Cabot Mfg. Co., 71 Me. 506, 510 
(1880). 
{¶ 20} Moreover, as we explained in Olympic Holding Co., L.L.C. v. ACE 
Ltd., 122 Ohio St.3d 89, 2009-Ohio-2057, 909 N.E.2d 93, at ¶ 32, citing Hummel 
v. Hummel, 133 Ohio St. 520, 14 N.E.2d 923 (1938), paragraph one of the 
syllabus, “[a]greements that do not comply with the statute of frauds are 
unenforceable.”  Thus, oral agreements that pertain to matters covered by the 
statute of frauds cannot be enforced as either a claim or defense.  See Tague v. 
Hayward, 25 Ind. 427, 429-430 (1865) (“as the contract was not in writing and 
signed by the mother, and was not to be performed within a year, no action could 
be maintained to enforce it * * *.  To allow the defendant to avail himself of it as 
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a defense would be enforcing it in his favor while the same right is denied to the 
other party, thus defeating the very object of the statute”);  McGinnis v. 
Fernandes, 126 Ill. 228, 232, 19 N.E. 44 (1888) (“The well-settled rule of the law 
is that a verbal contract within the condemnation of the statute of frauds cannot be 
enforced in any way, either directly or indirectly, and cannot be made either the 
ground of a demand or the ground of a defense”); Terry v. Terry, 264 Ky. 625, 95 
S.W.2d 282, 285 (1936) (noting that generally, “contracts which are within the 
statute of frauds can no more be made the basis of a defense than the subject of an 
original action, if the result is an indirect enforcement of the contract”). 
{¶ 21} In addition, this sentiment is expressed in the Restatement of the 
Law 2d, Contracts, Section 138 (1981), which provides: “Where a contract within 
the Statute of Frauds is not enforceable against the party to be charged by an 
action against him, it is not enforceable by a set-off or counterclaim in an action 
brought by him, or as a defense to a claim by him.”  (Emphasis added.)   
{¶ 22} Thus, we adhere to the well-established principle that the statute of 
frauds bars a party from enforcing an oral agreement falling within the statute in 
either the prosecution or defense of an action.  Here, by asserting the oral 
agreement as a defense pursuant to Civ.R. 60(B) and requesting leave to file a 
counterclaim to enforce the agreement and recover damages, the Inkses and 
Slymans seek enforcement of that oral agreement.  Thus, we must also consider 
whether that oral agreement falls within the coverage of R.C. 1335.05 as an 
agreement pertaining to an interest in land. 
Interest in Land 
{¶ 23} We have long held that “a mortgage is a conveyance within the 
statute of frauds and perjuries.”  Webb’s Admr. v. Roff, 9 Ohio St. 430 (1859), 
paragraph one of the syllabus;  see also Holmes v. Gardner, 50 Ohio St. 167, 176, 
33 N.E. 644 (1893).  We have explained that while a mortgage is a lien for a debt, 
it also is a conveyance of property that passes the property conditionally to the 
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mortgagee as well as a transfer of property as security for the debt.  Holmes at 
176, quoting United States v. Fisher, 6 U.S. 358, 2 L.Ed. 304 (1805), and Conard 
v. Ins. Co., 26 U.S. 386, 7 L.Ed. 189 (1828). 
{¶ 24} Similarly, as the Supreme Court of Alabama recognized in Casey 
v. Travelers Ins. Co., 585 So.2d 1361, 1363 (Ala.1991), “an agreement to release 
lands from the effect of a mortgage is an agreement for the transfer of real 
property and thus falls within the Statute of Frauds.”  See also Douglas Co. v. 
Gatts, 8 Ohio App.3d 186, 187, 456 N.E.2d 841 (11th Dist.1982) (“an oral 
agreement to release or discharge a mortgage is within the Statute of Frauds”). 
{¶ 25} Here, the alleged oral agreement between Inks and FirstMerit does 
pertain to an interest in land, because it involves the terms upon which FirstMerit 
allegedly agreed to release the mortgage.  As such, even if it is characterized as a 
settlement agreement, it falls within R.C. 1335.05.  See Sherman v. Haines, 73 
Ohio St.3d 125, 129, 652 N.E.2d 698 (1995) (reinstating the trial court’s 
judgment denying plaintiffs leave to file an amended complaint alleging breach of 
an oral agreement falling within R.C. 1335.05, which plaintiffs asserted was a 
settlement agreement, because “[h]aving been entirely oral, the agreement 
violated R.C. 1335.05”).  Because there is no evidence that this agreement is in 
writing or is signed by FirstMerit, it does not comply with R.C. 1335.05 and is 
unenforceable. 
{¶ 26} Thus, because this oral agreement falls within the statute of frauds, 
the Inkses and Slymans are precluded from asserting it as a defense in support of 
their motion for relief from judgment. 
Conclusion 
{¶ 27} Having determined that the oral agreement in this case is covered 
by R.C. 1335.05, after applying our longstanding precedent, we conclude that the 
Inkses and Slymans are precluded from raising it as a defense in a motion for 
relief from judgment.  Therefore, we reverse the judgment of the Ninth District 
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and reinstate the trial court’s decision denying the Inkses and Slymans’ Civ.R. 
60(B) motion for relief from judgment. 
Judgment reversed. 
O’CONNOR, C.J., and PFEIFER, LANZINGER, KENNEDY, FRENCH, and 
O’NEILL, JJ., concur. 
____________________ 
 
Kahn & Kruse Co. L.P.A., Scott H. Kahn, and Gregory J. Ochocki, for 
appellees. 
 
Baker & Hostetler, L.L.P., Thomas D. Warren, Brett A. Wall, Patrick T. 
Lewis, and Dustin M. Dow, for appellant. 
 
Vorys, Sater, Seymour & Pease, L.L.P., John J. Kulewicz, and Jeffery E. 
Smith; and Jeffrey D. Quayle, urging reversal for amicus curiae, Ohio Bankers 
League. 
_________________________