Case Title: Community First Bank & Trust v. Dafoe

Citation: 2006-Ohio-1503

Docket Number: 20031913

State: ohio

Court: Ohio Supreme Court

Date: 2006-04-12T00:00:00Z

Document:
[Cite as Community First Bank & Trust v. Dafoe, 108 Ohio St.3d 472, 2006-Ohio-1503.] 
 
 
COMMUNITY FIRST BANK & TRUST, APPELLANT, v. DAFOE ET AL., APPELLEES. 
[Cite as Community First Bank & Trust v. Dafoe,  
108 Ohio St.3d 472, 2006-Ohio-1503.] 
Final appealable orders — Former R.C. 2505.02 — Court order staying an 
action, including an action against a party that is not bankrupt, pending 
the determination of a party’s bankruptcy is not an order denying a 
provisional remedy and is therefore not a final order subject to appeal. 
(No. 2003-1913 – Submitted February 16, 2005 – Decided April 12, 2006.) 
CERTIFIED by the Court of Appeals for Van Wert County, No. 15-03-04. 
_________________ 
PFEIFER, J. 
Factual and Procedural Background 
{¶ 1} This case arises out the attempt of appellant, Community First 
Bank & Trust (“Community”), to collect on personal guarantees entered into by 
appellees Kenneth Dafoe, Heather Dafoe, and Derek Dafoe, and a pledge of 
security by appellee Teisha Douglass (“the guarantors”).  On June 21, 1996, the 
guarantors executed guarantees and pledged their personal real estate as collateral 
for a promissory note executed by Tendasoft, Inc., that same day. Two days 
earlier, Community’s predecessor in interest, Van Wert National Bank, had 
written a letter to three of the guarantors making certain representations regarding 
how it would proceed should a default occur:   
{¶ 2} “As part of the consideration of renewing the equipment loan and 
extending the terms and conditions of said loan, Van Wert National Bank hereby 
acknowledges and agrees, that in the event of default on the note dated June 21, 
1996, Van Wert National Bank will make reasonable effort to first liquidate the 
pledged equipment that was given to secure said loan.  In the event there is still a 
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deficiency remaining after the liquidation of said equipment, Van Wert National 
Bank would then pursue the liquidation of pledged real estate and personal 
guarantees.” 
{¶ 3} On June 2, 1998, Tendasoft renewed its promissory note, and the 
guarantors renewed their guarantees. 
{¶ 4} On February 14, 2002, with Tendasoft allegedly in default on the 
promissory note, Community filed suit against the guarantors and others to 
recover the balance due on the note.  On March 14, 2002, the guarantors moved to 
dismiss Community’s complaint because the guarantees at issue had been 
conditioned on Community’s making reasonable efforts to collect the debt owed 
to it by Tendasoft by liquidating the pledged equipment before pursuing the 
personal guarantees.  In an April 29, 2002 entry, the trial court agreed, finding 
that the guarantors had established, through the June 19, 1996 letter, which the 
court admitted as parol evidence, that Community was required to exercise a 
“reasonable effort” to first liquidate Tendasoft’s assets before pursuing the 
guarantors.  Community then amended its complaint, adding Tendasoft as a 
defendant, on May 28, 2002. 
{¶ 5} On June 24, 2002, Tendasoft filed a motion to stay with the trial 
court on the basis that it had filed a Chapter 11 bankruptcy petition on June 21, 
2002, in the United States District Court, Northern District of Ohio, Bankruptcy 
Division.  On June 26, 2002, the trial court ordered a stay on all matters in the 
case, based upon Tendasoft’s bankruptcy filing.  On July 24, 2002, Community 
moved the trial court for permission to pursue its claims against the guarantors 
only, arguing that it could use no further “reasonable efforts” to pursue collection 
against Tendasoft once Tendasoft had filed for bankruptcy.  On September 18, 
2002, Community filed a proof of claim in Tendasoft’s bankruptcy action, 
asserting a security interest in certain Tendasoft property.  On October 1, 2002, 
the court found that filing to be in furtherance of the requirements to make 
January Term, 2006 
3 
“reasonable efforts” to pursue Tendasoft’s assets but denied Community’s motion 
to pursue the guarantors.  The court found that the success or failure of 
Community’s “reasonable efforts” to liquidate the pledged equipment would be 
unknown until the bankruptcy court ruled on Community’s proof of claim.  The 
court therefore ordered the matter “further stayed as to all parties pending the 
allowance or disallowance of the plaintiff’s Proof [of] Claim and approval or 
disapproval by the bankruptcy court of the liquidation of the pledged equipment 
to pay the debt owed to the plaintiff.” 
{¶ 6} Despite the trial court’s stay, on March 10, 2003, Community filed 
a notice of appeal to the Third District Court of Appeals.  Community alleged that 
the trial court had erred in (1) finding that the 1996 letter was valid parol evidence 
and that the letter required Community to pursue the assets of Tendasoft before 
pursuing the guarantors and (2) finding that Community had not made reasonable 
efforts to pursue Tendasoft’s assets. 
{¶ 7} On August 20, 2003, the appellate court sua sponte determined that 
the appeal should be dismissed for want of jurisdiction, finding that the trial 
court’s issuance of a stay was not a final appealable order.  The court held that 
pursuant to R.C. 2505.02, “the [trial] court’s order staying the action, including 
the claims against non-bankrupt parties, pending determination of the bankruptcy 
of another party is not an order denying a provisional remedy and, thus, not a final 
order subject to appeal.” 
{¶ 8} The appellate court noted in its decision that it was not persuaded 
by the conclusion of the Sixth District Court of Appeals decision in Sorg v. 
Montgomery Ward & Co., Inc. (Dec. 17, 1998), Erie App. No. E-98-057, 1998 
WL 904945.  Sorg held that staying a court action is an ancillary proceeding akin 
to granting a preliminary injunction under R.C. 2505.02(B)(4). 
{¶ 9} On September 2, 2003, Community filed a motion to certify a 
conflict with the Third District Court of Appeals based upon that court’s 
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disagreement with the Sixth District Court of Appeals decision in Sorg.  The court 
granted the motion to certify a conflict, submitting the following question to this 
court: 
{¶ 10} “Is a court’s order staying an action, including the claims against 
nonbankrupt parties, pending determination of the bankruptcy of another party a 
final order subject to appeal under R.C. 2505.02[?]” 
Law and Analysis 
{¶ 11} We answer the question of the court of appeals in the negative.  A 
court’s order staying an action, including the claims against nonbankrupt parties, 
pending determination of the bankruptcy of another party, is not a final order 
subject to appeal under R.C. 2505.02.R.C. 
{¶ 12} R.C. 2505.02(B) states what actions by trial courts constitute final 
appealable orders: 
{¶ 13} “(B) An order is a final order that may be reviewed, affirmed, 
modified, or reversed, with or without retrial, when it is one of the following: 
{¶ 14} “(1) An order that affects a substantial right in an action that in 
effect determines the action and prevents a judgment; 
{¶ 15} “(2) An order that affects a substantial right made in a special 
proceeding or upon a summary application in an action after judgment; 
{¶ 16} “(3) An order that vacates or sets aside a judgment or grants a new 
trial;  
{¶ 17} “(4) An order that grants or denies a provisional remedy and to 
which both of the following apply: 
{¶ 18} “(a) The order in effect determines the action with respect to the 
provisional remedy and prevents a judgment in the action in favor of the 
appealing party with respect to the provisional remedy. 
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5 
{¶ 19} “(b) The appealing party would not be afforded a meaningful or 
effective remedy by an appeal following final judgment as to all proceedings, 
issues, claims, and parties in the action.” 
{¶ 20} The issue in this case is whether the trial court’s stay implicates 
R.C. 2505.02(B)(4), which makes certain provisional remedies final appealable 
orders.  The term “provisional remedy” is defined in former R.C. 2505.02(A)(3), 
Am.Sub.H.B. No. 349, 147 Ohio laws, Part II, 3277, the version that was in effect 
in 2002, when the suit was filed: 
{¶ 21} “(3) ‘Provisional remedy’ means a proceeding ancillary to an 
action, including, but not limited to, a proceeding for a preliminary injunction, 
attachment, discovery of privileged matter, or suppression of evidence.” 
{¶ 22} This court has opined on the appealability of stays pursuant to 
earlier versions of R.C. 2505.02. In Stewart v. Midwestern Indemn. Co. (1989), 45 
Ohio St.3d 124, 543 N.E.2d 1200, and Bellaire City Schools Bd. of Edn. v. Paxton 
(1979), 59 Ohio St.2d 65, 13 O.O.3d 58, 391 N.E.2d 1021, this court held that a 
stay pending arbitration is not final and appealable.  However, after those cases 
were decided, the General Assembly enacted R.C. 2711.02(C), which specifically 
makes an order “that grants or denies a stay of a trial of any action pending 
arbitration” a final appealable order. 
{¶ 23} Likewise, before the amendment of R.C. 2505.02, this court had 
held that the granting of a preliminary injunction is an action for injunctive relief 
and is not a final appealable order. State ex rel. Tollis v. Cuyahoga Cty. Court of 
Appeals (1988), 40 Ohio St.3d 145, 148, 532 N.E.2d 727.  The current R.C. 
2505.02(B)(4) changed the law in this regard and makes other provisional 
remedies reviewable as well. 
{¶ 24} The key to our determination is whether a stay should be 
considered an ancillary proceeding pursuant to former R.C. 2505.02(A)(3), 147 
Ohio Laws, Part II, 3277.  “Ancillary” is not defined in R.C. 2505.02, but this 
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court has held that as used in former R.C. 2505.02(A)(3), “ ‘[a]n ancillary 
proceeding is one that is attendant upon or aids another proceeding.’ ” State v. 
Muncie (2001), 91 Ohio St.3d 440, 449, 746 N.E.2d 1092, quoting Bishop v. 
Dresser Industries (1999), 134 Ohio App.3d 321, 324, 730 N.E.2d 1079.  Citing 
Sorg, the Muncie court quoted the Black’s Law Dictionary definition of 
“ancillary” as “ ‘aiding; attendant upon; describing a proceeding attendant upon 
or which aids another proceeding considered as principal.  Auxiliary or 
subordinate.’ ” Id. at 449, 746 N.E.2d 1092, quoting Black’s Law Dictionary (5th 
Ed.1979) 78. 
{¶ 25} In Muncie, this court found that a forced-medication order that had 
been issued by the trial court in an effort to restore a defendant’s competency to 
stand trial constituted a final appealable order.  Muncie looked at other types of 
proceedings that this court had found to be ancillary to the main action.  The court 
noted that in Forest City Invest. Co. v. Haas (1924), 110 Ohio St. 188, 192, 143 
N.E. 549, the appointment of a receiver was deemed “ ‘ancillary to the main 
action.’ ”  Muncie, 91 Ohio St.3d at 449, 746 N.E.2d 1092.  This court wrote that 
the appointment of a receiver, for instance, “aids the principal proceeding – the 
underlying litigation – for the receiver conserves the interests of litigants with 
respect to property that is in the custody of the court during the course of that 
principal litigation.” (Emphasis deleted.)  Id., citing Forest, 110 Ohio St. at 192-
193, 143 N.E. 549.  This court also noted in Muncie, quoting Lincoln Tavern, Inc. 
v. Snader (1956), 165 Ohio St. 61, 68, 59 O.O. 74, 133 N.E.2d 606, that “ ‘an 
attachment is a provisional remedy; an ancillary proceeding which must be 
appended to a principal action and whose very validity must necessarily depend 
upon the validity of the commencement of the principal action.’ ” 
{¶ 26} We agree that the appointment of a receiver, attachment, and a 
judgment ordering medication constitute ancillary proceedings.  They are all 
separate procedures tied to a main action, acting in furtherance of the main action, 
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but with their own lives.  Though owing their existence to the underlying action, 
they are definable offshoots from the main action.  A stay is not an offshoot of the 
main action; it is the main action postponed. 
{¶ 27} However, Sorg held that “a proceeding to stay a court action as to 
non-bankrupt parties pending determination of the bankruptcy of a separate party 
is a ‘proceeding ancillary to an action’ pursuant to [former] R.C. 2505.02(A)(3).  
Such a proceeding is akin to a preliminary injunction (a specifically listed 
‘provisional remedy’) in its effect.” Sorg, Erie App.No. E-98-057. 
{¶ 28} We disagree with Sorg’s characterization of the kinship between a 
preliminary injunction and a stay.  The most obvious difference between a stay 
and a preliminary injunction is that in seeking a preliminary injunction, the 
movant seeks an equitable remedy, albeit an impermanent one.  Whereas a stay 
ceases activity on a case, a preliminary injunction proceeding is parallel, 
expedited, and separate from the main action.  A preliminary injunction aids the 
main action by ensuring that a judgment in the main action will be meaningful.  
R.C. 2727.02 provides: 
{¶ 29} “A temporary order may be granted restraining an act when it 
appears by the petition that the plaintiff is entitled to the relief demanded, and 
such relief, or any part of it, consists in restraining the commission or continuance 
of such act, the commission or continuance of which, during the litigation, would 
produce great or irreparable injury to the plaintiff, or when, during the litigation, it 
appears that the defendant is doing, threatens or is about to do, or is procuring or 
permitting to be done, such act in violation of the plaintiff’s rights respecting the 
subject of the action, and tending to render the judgment ineffectual.” 
{¶ 30} Through a preliminary injunction, a party seeks to restrain certain 
acts of another party. Civ.R. 65(D).  A preliminary-injunction proceeding is a 
separate matter from the trial on the merits, though “the court may order the trial 
of the action on the merits to be advanced and consolidated with the hearing of 
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the application.” Civ.R. 65(B)(2).  Since it provides a provisional remedy, no 
preliminary injunction is operative “until the party obtaining it gives a bond 
executed by sufficient surety * * * to secure to the party enjoined the damages he 
may sustain, if it is finally decided that the order of injunction should not have 
been granted.” Civ.R. 65(C).  A preliminary injunction proceeding is a proceeding 
requiring its own evidence, a proceeding with its own life. Civ.R. 65(B). 
{¶ 31} A stay pending determination of the bankruptcy of another party is 
not a separate proceeding, but a halting of proceedings.  It provides no party a 
remedy, not even a temporary one.  It is of a different character from the 
appointment of a receiver, an attachment, a forced-medication order, or a 
preliminary injunction.  It does not further the main action.  We therefore find that 
the imposition of a stay pending the determination of the bankruptcy of a party it 
is not an ancillary proceeding pursuant to former R.C. 2505.02(A)(3). 
{¶ 32} Accordingly, we find that a court’s order staying an action, 
including the claims against nonbankrupt parties, pending determination of the 
bankruptcy of another party, is not a final order subject to appeal under former 
R.C. 2505.02. 
Judgment affirmed. 
 
MOYER, C.J., RESNICK, O’CONNOR and O’DONNELL, JJ., concur. 
 
LUNDBERG STRATTON and LANZINGER, JJ., dissent. 
 
 
 
LANZINGER, J., dissenting. 
{¶ 33} I disagree with the majority’s holding that a court’s stay of an 
action pending determination of bankruptcy is not a final appealable order under 
R.C. 2505.02(B)(4).  Here, the appellate court found that such an order did not 
deny a provisional remedy, and the majority agrees, stating that a stay cannot be 
considered an ancillary proceeding because it is not a proceeding “with its own 
__________________
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life.”  To the contrary, the granting of such an order does provide a provisional 
remedy within the contemplation of R.C. 2505.02(B)(4). 
{¶ 34} The General Assembly expressly defined “provisional remedy” in 
R.C. 2505.02(A)(3) as “a proceeding ancillary to an action, including, but not 
limited to, a proceeding for a preliminary injunction, attachment, discovery of 
privileged matter, suppression of evidence * * *.”  (Emphasis added.)  In rejecting 
the characterization of a stay as similar in effect to a preliminary injunction and 
thus “ancillary,” the majority distinguishes it by stating that a stay “is not an 
offshoot of the main action” but rather the “main action postponed” or a mere 
“halting of proceedings.”  A stay, however, need not be considered identical to a 
preliminary injunction to be considered a provisional remedy. 
{¶ 35} We approved the definition of “ancillary” used in Sorg v. 
Montgomery Ward & Co., Inc. (Dec. 17, 1998), Erie App. No. E-98-057, 1998 
WL 904945, as something “ ‘ “attendant upon or which aids another proceeding 
considered as principal.” ’ ”  State v. Muncie (2001), 91 Ohio St.3d 440, 449, 746 
N.E.2d 1092, quoting Sorg, *3, quoting Black’s Law Dictionary (5th Ed.1979) 78.  
We have also described a “provisional remedy” as a “remedy other than a claim 
for relief.”  State ex rel. Butler Cty. Children Servs. Bd. v. Sage (2002), 95 Ohio 
St. 3d 23, 25, 764 N.E.2d 1027.  Thus, we have held that final appealable orders 
include forced-medication orders, Muncie, 91 Ohio St.3d at 449, 746 N.E.2d 
1092, and appointments of a receiver. Forest City Invest. Co. v. Haas (1924), 110 
Ohio St. 188, 192, 143 N.E. 549.  In my view, by filing a motion for stay based on 
Tendasoft’s bankruptcy, the guarantors also sought a provisional remedy, one that 
would aid them in the underlying collection case.  The trial court’s decision to 
deny Community First Bank & Trust the opportunity to pursue the nonbankrupt 
guarantors on their personal guarantees is ancillary to Community’s underlying 
substantive claims. 
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{¶ 36} The majority also concludes that the nonbankrupt guarantors did 
not receive a “remedy.”  To the contrary, they have received the benefit of 
Tendasoft’s filing of a Chapter 11 bankruptcy petition as of June 26, 2002, when 
the trial court ordered all matters, including the claims against them as guarantors, 
stayed.  Although denial of the stay would have allowed the action to progress 
and would have provided the guarantors full remedy on appeal after the continued 
litigation is completed, the granting of, or refusal to lift, the stay is different.  
When a stay is granted, the objecting party has no remedy until possibly years 
later.  Litigation is stopped, and when an appeal finally occurs, a holding that the 
stay should not have been granted or should not have been continued months or 
years earlier will be, as Sorg noted, “a hollow victory.”  Sorg, Erie App. No. E-
98-057, 1998 WL 904945, *3.  See, also, Cleveland v. Zakaib (Oct. 12, 2000), 
Cuyahoga App. Nos. 76928, 76929, and 76930, 2000 WL 1513736 (denial of 
motion for stay is not a final appealable order, as party challenging denial of a 
stay can obtain a meaningful and effective remedy in an appeal following a final 
judgment, unlike a party seeking to appeal the granting of a stay).  Tendasoft’s 
bankruptcy may take years to complete, and in the meantime, Community may be 
harmed by the delay and thus will not have a meaningful or effective remedy if 
forced to wait to proceed against the guarantors. 
{¶ 37} R.C. 2505.02(B) states, “An order is a final order that may be 
reviewed, affirmed, modified, or reversed, with or without retrial, when it is one 
of the following:  
{¶ 38} “* * * 
{¶ 39} 
“(4) An order that grants or denies a provisional remedy and to 
which both of the following apply: 
{¶ 40} “(a) The order in effect determines the action with respect to the 
provisional remedy and prevents a judgment in the action in favor of the 
appealing party with respect to the provisional remedy. 
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{¶ 41} “(b) The appealing party would not be afforded a meaningful or 
effective remedy by an appeal following final judgment as to all proceedings, 
issues, claims, and parties in the action.” 
{¶ 42} The trial court’s order granting the nonbankrupt guarantors a stay 
does determine the action with respect to the stay’s filing and prevents 
Community from obtaining a favorable judgment on it.  R.C. 2505.02(B)(4)(a).  
Furthermore, Community does not have a meaningful or effective remedy if it is 
prohibited from appealing the stay until after the conclusion of Tendasoft’s 
bankruptcy.  R.C. 2505.02(B)(4)(b).  I respectfully dissent and would hold that a 
court’s order staying an action, including the claims against nonbankrupt parties, 
pending determination of the bankruptcy of another party is a final appealable 
order under R.C. 2505.02(B)(4).  I would reverse the appellate court’s decision 
and remand the cause to that court for consideration of the substantive 
assignments of error. 
 
LUNDBERG STRATTON, J., concurs in the foregoing dissenting opinion. 
__________________ 
 
Faulkner, Garmhausen, Keister & Shenk, James R. Shenk, and Bryan A. 
Niemeyer, for appellant. 
______________________