Title: Ed Schory & Sons, Inc. v. Soc. Natl. Bank

State: ohio

Issuer: Ohio Supreme Court

Document:

Ed Schory & Sons, Inc. et al., Appellees, v. Francis et al., Appellees and Cross-
Appellants; Society National Bank et al., Appellants and Cross-Appellees. 
[Cite as Ed Schory & Sons, Inc. v. Soc. Natl. Bank (1996), ___ Ohio St.3d ___.] 
Debtor and creditor -- Advice given by creditor to debtor in a 
commercial context in which the parties deal at arm’s length is 
insufficient to create a fiduciary relationship. 
 
--- 
Advice given by a creditor to a debtor in a commercial context in which the 
parties deal at arm’s length, each protecting his or her respective 
interests, is insufficient to create a fiduciary relationship.  (Umbaugh 
Pole Bldg. Co. v. Scott [1979], 58 Ohio St.2d 282, 12 O.O.3d 279, 390 
N.E.2d 320, followed.) 
--- 
 
(No. 94-2201 -- Submitted January 23, 1996 -- Decided April 24, 1996.) 
 
APPEAL and CROSS-APPEAL from the Court of Appeals for Stark County, 
No. 9474. 
 
2
 
This appeal and cross-appeal arise from various defaults on certain 
obligations owed by appellees and cross-appellants, Frank P. Francis 
(“Francis”) and Francis General Construction, Inc. (“FGC”) to appellees Robert 
G. Schory, Jr. (“Schory”) and Ed Schory & Sons, Inc. (“Schory & Sons”) and 
obligations owed by Francis and FGC to appellant and cross-appellee, Society 
National Bank (“Society”).  Francis is the president and owner of FGC, and 
Schory is the president of Schory & Sons. 
North Whipple Avenue Mall Project 
 
In 1988, Schory and Francis decided to construct a strip mall on North 
Whipple Avenue in North Canton, Ohio.  Schory and Francis had previously 
entered into a partnership for the purpose of developing certain real estate in 
the Summit County area.  The North Whipple Avenue mall was financed 
through the Central Trust Company (“Central Trust”).  Francis was the general 
contractor for the project. 
 
While working on the North Whipple Avenue mall, Francis was also 
involved in a multiphase condominium development referred to as the 
 
3
Sherbrook development (“Sherbrook”).  Schory was not involved in  
Sherbrook.  During the construction of the North Whipple Avenue mall, 
Francis took certain funds applicable to that project and applied them to the 
Sherbrook development.  Francis falsified various lien releases to obtain the 
money. 
 
As a result of the misappropriation of certain funds, Schory and Schory 
& Sons sued Francis and FGC in the Stark County Court of Common Pleas.  
Thereafter, the parties entered into a settlement agreement, and, pursuant to the 
agreement, Francis, individually and on behalf of FGC, signed a cognovit note 
in the amount of $130,000.  The note was secured by certain mortgage deeds.  
Francis and FGC eventually defaulted on their obligations contained in the 
note, and a judgment was obtained against them.  The parties then entered into 
an amended settlement agreement.  In this agreement, Francis and FGC agreed 
to pay certain sums to Schory and Schory & Sons.  In return, Schory and 
Schory & Sons agreed not to institute a foreclosure action against Francis and 
FGC.  The amended agreement also included a letter, dated May 1, 1991, 
 
4
which was attached to the agreement as an exhibit.  In the letter, Francis 
admitted that he had “fraudulently misappropriated” certain funds involving the 
partnership arrangement. 
 
However, Francis and FGC failed to abide by the terms of this new 
agreement.  They have again defaulted on certain payments owed to Schory and 
Schory & Sons. 
Sherbrook Development 
 
As stated above, while Francis was associated with Schory, Francis was 
also involved in the Sherbrook development.  During the summer of 1988, 
Francis approached Society to obtain financing for his proposed multiphase 
development.  Francis met with a commercial real estate loan officer for 
Society, H. Michael Crowl.  Francis had dealt with Crowl on prior occasions 
involving other projects.  They discussed various aspects of the development.  
Francis explained to Crowl that Sherbrook would involve approximately 
twelve separate buildings comprising thirty-six to forty-two units, that he 
would need “in the area of $2.5 to $3 million,” and that the development would 
 
5
take two to three years to complete.  Francis elected to divide Sherbrook into 
separate phases for purposes of financing and completion. 
 
After discussing the project with Crowl, Francis submitted an application 
to Society’s Loan Committee.  In the application, Francis requested loans for 
the first phase of the development.  Specifically, he requested an acquisition 
and development loan (“A&D loan”), a loan for the construction of a three-unit 
building, and a loan for the construction of a four-unit building.  The two 
requested construction loans were separate from each other and from the A&D 
loan.  The committee approved the loans, and Society sent Francis a 
commitment letter dated October 5, 1988.  In the letter, Society indicated to 
Francis that future construction loans regarding additional phases of the 
development would not automatically be forthcoming.  Society set forth 
various requirements for the approved loans, and it also described in the letter 
certain contingencies and requirements necessary for consideration of future 
construction loans.  Francis signed the letter, agreeing to its terms and 
conditions.   
 
6
 
Pursuant to the commitment, Francis and FGC, on November 4, 1988, 
entered into certain written agreements with Society.  It appears that each 
construction loan approved by Society and received by Francis involved the 
execution of a promissory note, a construction loan agreement, and a mortgage 
deed or deeds to secure the indebtedness.1  Francis completed construction of 
the first phase (buildings one and two) of the development in 1989. 
 
Francis also obtained loans from Society for the construction of other 
buildings.  These buildings (three, four, five and six) involved different phases 
of the project.  It appears that the procedure for obtaining the construction 
loans for these buildings was the same as that utilized in the initial phase of the 
project:  Francis would apply for a construction loan, the committee would 
review the request, and, upon approval, Society would send Francis a 
commitment letter to sign; Francis would then enter into written agreements 
with Society, i.e., a construction loan agreement and a promissory note for each 
construction loan.  The loan agreements and notes set forth the terms and 
conditions of each loan.  Each loan was secured by a mortgage deed.  
 
7
 
In June 1990, Francis requested financing from Society to construct 
another phase of the project (buildings seven and eight).  Society sent Francis a 
commitment letter dated September 26, 1990, which he signed.  On October 5, 
1990, Francis, on behalf of FGC, entered into a construction loan agreement 
with Society.  Francis signed a promissory note in connection with this loan 
individually and on behalf of FGC. 
 
Francis ran out of money during this phase of the project.  After 
discussing the situation with Society, a “Loan Modification Agreement” was 
prepared by the bank.  However, because the agreement contained a provision 
releasing Society from certain potential liabilities, Francis did not sign the 
agreement.  
 
In 1991, appellant and cross-appellee, Kurt L. Reiber, became involved 
in the financial dealings of Sherbrook.  Reiber is employed by Society as a 
senior vice president and manager of the Commercial Banking Division.  In 
August 1991, Reiber, Crowl, Francis and another individual met to discuss the 
possibility of completing the development.  According to Reiber, at this 
 
8
meeting he explained to Francis that “the terms offered to FGC, Inc. for the 
prior loans would not be the terms and conditions for the loans for additional 
buildings or phases, that the presale requirements which were reduced to 
writing for the earlier loans were requirements only for those loans and that 
new and additional requirements would be made for phase V loans, and that the 
terms of the loan for phase V of the project would be set forth in a commitment 
letter which would be issued subsequent to this meeting.” 
 
Following the August 1991 meeting, Reiber sent Francis a letter dated 
August 14, 1991.  In the letter, Society offered Francis a loan in the amount of 
$400,000.  The terms and conditions of this loan were different from the terms 
of the other loans.  Francis declined to accept the loan.  Sherbrook was not 
completed, and Francis and FGC defaulted on various obligations owed to 
Society. 
Legal Proceedings 
 
On September 5, 1991, Schory & Sons filed a foreclosure action against 
Francis and FGC in the court of common pleas.  In the complaint, Schory & 
 
9
Sons named as defendants Francis, FGC, Society, and others believed to have 
an interest in certain mortgage deeds held by Schory & Sons.  Society filed an 
answer and a cross-claim against Francis and FGC, asserting its respective 
interests in the properties in question. 
 
On December 4, 1991, Francis and FGC filed an answer and a 
counterclaim against Schory & Sons and a third-party complaint against 
Schory.  In the counterclaim and third-party complaint, Francis and FGC 
alleged that “[u]nder threat of foreclosure and other serious economic 
consequences,” Schory & Sons and Schory had compelled Francis to sign an 
apology letter “confessing to fraudulent misapplication of funds in connection 
with certain partnerships.”  Francis and FGC further alleged that the contents of 
the letter were false and that it had been improperly disseminated to various 
individuals.  In this regard, Francis and FGC set forth claims for economic 
duress, defamation, malicious prosecution and intentional infliction of severe 
emotional distress. 
 
10
 
Also on December 4, 1991, Francis and FGC filed an answer and a 
cross-claim against Society and a third-party complaint against Reiber.  In this 
cross-claim and third-party complaint, Francis and FGC alleged, essentially, 
that Society had agreed to finance the entire development under specified terms 
and conditions, that these terms and conditions had been agreed upon prior to 
or around the time of the disbursements of the A&D loan and the initial two 
construction loans, and that Society had failed to abide by the agreed-upon 
“basic terms” and conditions when disbursing additional construction loans.  
Francis and FGC also averred that at the time Society agreed to finance the 
development Society was aware that Francis owned various real estate 
properties not associated with Sherbrook, and that the success of Sherbrook 
depended upon prompt disbursements of the construction loans.  Francis and 
FGC further charged that Society nevertheless failed to disburse certain loans 
in a prompt fashion, and, as Sherbrook progressed, required Francis, at times, 
to reduce his overall indebtedness and liquidate certain properties not 
associated with the development.  Based on these allegations, Francis and FGC 
 
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set forth claims for, among other things, breach of contract, promissory 
estoppel, fraud (which the parties now treat as a claim of negligent 
misrepresentation), breach of an implied duty of good faith, breach of a 
fiduciary relationship, and intentional and/or negligent infliction of severe 
emotional distress. 
 
On April 30, 1993, the court dismissed the claims against Reiber.  On 
August 6, 1993, the trial court granted motions for summary judgment in favor 
of Schory & Sons, Schory, and Society.  On August 30, 1994, the Court of 
Appeals for Stark County affirmed the judgment of the trial court in part and 
reversed it in part.  From that judgment, Society and Reiber appealed.  Francis 
and FGC cross-appealed. 
 
This cause is now before this court upon the allowance of a discretionary 
appeal and cross-appeal. 
 
Baker, Meekison & Dublikar, Jack R. Baker and Gregory A. Beck, for 
appellees Robert Schory and Schory & Sons, Inc.. 
 
12
 
Thomas & Boles, Stephen G. Thomas and Gretchen A. Hirschauer, for 
appellees and cross-appellants, Francis and FGC. 
 
Day, Ketterer, Raley, Wright & Rybolt, Louis A. Boettler, John A. 
Murphy, Jr. and Cari Fusco Evans, for appellants and cross-appellees. 
 
DOUGLAS, J.     The court of appeals affirmed the trial court’s judgment 
granting summary judgment in favor of Schory & Sons and Schory on all 
claims asserted against them by Francis and FGC.  The court also affirmed the 
portion of the trial court’s judgment granting summary judgment in favor of 
Society and Reiber with respect to all contract-based claims advanced against 
them by Francis and FGC, finding that these claims were barred by the Statute 
of Frauds or the parol evidence rule.  However, the court of appeals held that 
the trial court had erred in granting summary judgment in favor of Society and 
Reiber and against Francis and FGC on the claims of negligent 
misrepresentation, breach of an implied duty of good faith, breach of a 
fiduciary relationship, and intentional and/or negligent infliction of severe 
emotional distress. 
 
13
 
Society and Reiber have appealed certain issues to this court, and Francis 
and FGC have filed a cross-appeal with respect to other issues.  For the sake of 
convenience, and where applicable, we will hereinafter refer to Society and 
Reiber collectively as Society, and refer to Francis and FGC collectively as 
Francis.  Further, we will use “Schory” to refer to both Schory & Sons and 
Robert G. Schory, Jr.   
I 
Society and Francis 
 
The parties involved in this appeal and cross-appeal have set forth an 
array of issues for our consideration.  Francis contends that material issues of 
fact exist as to whether Society breached a contract to finance the entire 
Sherbrook development.  Francis claims that the facts of this particular case 
warrant a finding that such a contract was entered into between the parties, and 
that the contract was not subject to, or, alternatively, not barred by the Statute 
of Frauds.  Francis also requests that we affirm the judgment of the court of 
appeals regarding the claims for negligent misrepresentation, breach of an 
 
14
implied duty of good faith, breach of a fiduciary relationship, and intentional 
and/or negligent infliction of severe emotional distress. 
 
Society, on the other hand, suggests that many, if not all, of the claims 
asserted by Francis are merely improper attempts to seek enforcement of 
certain alleged oral statements.  Society contends that it did not enter into a 
contract with Francis to finance the entire project but, rather, that the 
development was divided into separate phases for purposes of completion and 
financing.  Society also asserts that Francis’s “attempt to enforce the alleged 
oral agreements which are contradicted by subsequent written loan agreements 
is prohibited by the Statute of Frauds and parol evidence rule.” 
A 
Breach of Contract 
 
In Ohio, the Statute of Frauds is embodied in R.C. Chapter 1335.  At 
issue here are R.C. 1335.04 and 1335.05.  These statutes state, respectively, in 
part, that: 
 
15
 
“No lease, estate, or interest, either of freehold or term of years, or any 
uncertain interest of, in, or out of lands, tenements, or hereditaments, shall be 
assigned or granted except by deed, or note in writing, signed by the party 
assigning or granting it * * *.” 
 
“No action shall be brought whereby to charge * * * a person * * * upon 
a contract or sale of lands, tenements, or hereditaments, or interest in or 
concerning them, or upon an agreement that is not to be performed within one 
year from the making thereof; 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 or some other person thereunto by him or her 
lawfully authorized.”  (Emphasis added.)  
 
R.C. 1335.05 clearly requires that “no action shall be brought” regarding 
an “interest in or concerning” land unless the agreement upon which the action 
is based is in writing and signed by the defendant.  See Marion Prod. Credit 
Assn. v. Cochran (1988), 40 Ohio St.3d 265, 273, 533 N.E.2d 325, 333. The 
record in the case at bar does not contain any writing signed by Society which 
 
16
evidences that Society agreed to finance the entire development.  Rather, the 
record reveals that the parties entered into a series of separate written 
agreements, involving different phases of the development.  Francis had sought 
financing from Society for a multiphase development.   
 
In this case, Francis met initially with Crowl and they discussed various 
aspects of the project.  Francis explained to Crowl that the development would 
consist of numerous buildings, and that it would take between two and three 
years to complete.  A formal application regarding the first phase of the 
development was submitted to Society.  In the application, Francis requested an 
A & D loan and two separate construction loans.  The committee approved the 
requests, and Society sent Francis a commitment letter.  In the letter, Society 
informed Francis that it had approved the loans.  The letter also included 
various terms and conditions that would be applicable to those particular loans.  
Additionally, in the letter, Society explained to Francis that “[a]t least two of 
the three condominiums must be sold before any consideration for another 
construction loan will be given.”  (Emphasis added.)  Francis signed the letter, 
 
17
agreeing to the terms set forth therein.  Thereafter, Francis and Society closed 
the loans and, in doing so, the parties entered into various written agreements, 
i.e., construction loan agreements and promissory notes which refer to certain 
mortgages.  This procedure was apparently repeated each time Francis 
constructed additional buildings involving different phases of the development. 
 
Indeed, the record belies Francis’s contention that Society agreed to 
finance the entire project.  Instead, it is evident that the parties intended to 
divide the project into phases for purposes of completion and financing.  The 
parties entered into a series of written agreements.  In this regard, Society could 
not have breached a contract to finance the entire development because such a 
contract simply did not exist.  Even if it did exist as alleged by Francis, it was 
not in writing and signed by Society.  Thus, Francis’s breach of contract action 
is barred by the Statute of Frauds. 
B 
Promissory Estoppel and Negligent Misrepresentation 
 
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Francis also claims that he is entitled to relief under the equitable 
doctrine of promissory estoppel and the tort of negligent misrepresentation.  
This court has adopted the doctrine of promissory estoppel as set forth in the 
Restatement of the Law 2d, Contracts (1981), Section 90.  See McCroskey v. 
State (1983), 8 Ohio St.3d 29, 8 OBR 339, 456 N.E.2d 1204.  Further, we also 
recognize the tort of negligent misrepresentation.  See Hadden View Invest. Co. 
v. Coopers & Lybrand (1982), 70 Ohio St.2d 154, 156, 24 O.O.3d 268, 269, 
436 N.E.2d 212, 214.  See, also, Gutter v. Dow Jones, Inc. (1986), 22 Ohio 
St.3d 286, 22 OBR 457, 490 N.E.2d 898.  However, we find that these claims 
are barred by the parol evidence rule. 
 
“The Parol Evidence Rule was developed centuries ago to protect the 
integrity of written contracts.”  Shanker, Judicial Misuses of the Word Fraud to 
Defeat the Parol Evidence Rule and the Statute of Frauds (With Some Cheers 
and Jeers for the Ohio Supreme Court) (1989), 23 Akron L.Rev. 2.  The parol 
evidence rule is a rule of substantive law that prohibits a party who has entered 
into a written contract from contradicting the terms of the contract with 
 
19
evidence of alleged or actual agreements.  Id.  “When two parties have made a 
contract and have expressed it in a writing to which they have both assented as 
the complete and accurate integration of that contract, evidence, whether parol 
or otherwise, of antecedent understandings and negotiations will not be 
admitted for the purpose of varying or contradicting the writing.”  3 Corbin, 
Corbin on Contracts (1960) 357, Section 573.  See, also, Charles A. Burton, 
Inc. v. Durkee (1952), 158 Ohio St. 313, 49 O.O. 174, 109 N.E.2d 265. 
 
As is apparent from the foregoing, the parol evidence rule will not be 
overcome by merely alleging that a statement or agreement made prior to an 
unambiguous written contract is different from that which is contained in the 
contract.  Stated differently, “an oral agreement cannot be enforced in 
preference to a signed writing which pertains to exactly the same subject 
matter, yet has different terms.”  Marion, supra, 40 Ohio St.3d 265, 533 N.E.2d 
325, paragraph three of the syllabus. 
 
In the case before us, Francis has indeed proffered evidence extrinsic to 
the various applicable written agreements entered into with Society, and 
 
20
accordingly the parol evidence rule is applicable.  A review of the alleged oral 
promises at issue, compared to the various written agreements signed by 
Francis, establishes that the terms of the alleged oral agreements pertain to the 
very same subject matter as the terms of the written agreements -- the financing 
of Sherbrook. 
 
In his affidavit, Francis stated:  “He [Crowl] confirmed the available 
interest rates, that financing would be available for the whole project at 75 
percent of appraised value, and that my personal properties would not need to 
be sold as a condition of loans to my corporation.  * * *  On numerous 
occasions, Mike Crowl told me that he would be able to process loans 
promptly, certainly within 30 days from approval and title to closing, and that 
when he was unable do so, it was because loan approvals were delayed in 
Cleveland after Society Bank of Eastern Ohio N.A. was merged into Society 
Bank of Cleveland in 1989.  * * *  Based on these offers and my prior 
agreement with Mike Crowl, I requested a loan in late March, 1989 of 
$390,000 to finance construction of Phase II A.  Although I had presold units 
 
21
in Phase II A in reliance upon prompt loan approvals, that loan was not 
approved until August 30, 1989.  * * *  I have been lead [sic. led] to believe by 
Mike Crowl that regional officials in Cleveland knew of the local policies, 
based upon which Canton had committed to finance the Sherbrook project, but 
that the officials in Cleveland refused to honor the commitments made to me.” 
 
These alleged representations made by Society to Francis were 
antecedent to the various applicable written agreements entered into between 
the parties.  Prior to obtaining the actual loan proceeds, Francis would sign a 
commitment letter, and the parties would then execute a construction loan 
agreement and promissory note for each loan.  These written agreements set 
forth the terms of, and conditions for, each respective loan, as well as the 
obligations and liabilities of the parties.  Specifically, each promissory note set 
forth the amount advanced for each loan, and that interest for each loan would 
be calculated from the date of the note at a floating rate equal to one and one-
half percent in excess of the prime rate.  Each construction loan agreement also 
set forth the amount advanced and, additionally, stated that “Society shall have 
 
22
no liability or obligation whatsoever in connection with said improvements or 
the construction or completion thereof or work performed thereon, nor shall it 
have any obligation except to advance the Loan proceeds as herein agreed.”  
Moreover, each construction loan provided that “Society may establish 
additional requirements prior to disbursements,” and that “Society or its 
counsel shall be entitled, from time to time, to establish additional requirements 
or to require the execution of additional documents * * *.”  Further, each 
construction loan provided that “[t]he Loan proceeds shall be debited to 
Owner’s Loan upon the date of each disbursement * * *.” 
 
The parol statements alleged by Francis involve precisely the same 
subject matter as the various applicable written agreements.  As was aptly 
stated by former Chief Justice Taft in Dice v. Akron, Canton & Youngstown 
RR. Co. (1951), 155 Ohio St. 185, 191, 44 O.O. 162, 164, 98 N.E.2d 301, 304, 
reversed on other grounds (1952), 342 U.S. 359, 72 S.Ct. 312, 96 L.Ed. 398:  
 
“A person of ordinary mind cannot say that he was misled into signing a 
paper which was different from what he intended to sign when he could have 
 
23
known the truth by merely looking when he signed.  * * *  If this were 
permitted, contracts would not be worth the paper on which they are written.  If 
a person can read and is not prevented from reading what he signs, he alone is 
responsible for his omission to read what he signs.” 
 
Accordingly, we believe that summary judgment was properly granted by 
the trial court in favor of Society on Francis’s claims for promissory estoppel 
and negligent misrepresentation. 
C 
Fiduciary Relationship 
 
Francis also contends that genuine issues of material fact exist whether a 
fiduciary relationship existed between the parties and whether Society breached 
this relationship.  We disagree. 
 
The term “fiduciary relationship” has been defined by this court as a 
relationship “in which special confidence and trust is reposed in the integrity 
and fidelity of another and there is a resulting position of superiority or 
influence, acquired by virtue of this special trust.”  In re Termination of 
 
24
Employment of Pratt (1974), 40 Ohio St.2d 107, 115, 69 O.O.2d 512, 517, 321 
N.E.2d 603, 609.  In considering this issue in the context of a debtor and 
creditor relationship, this court held, in Umbaugh Pole Bldg. Co. v. Scott 
(1979), 58 Ohio St.2d 282, 12 O.O.3d 279, 390 N.E.2d 320, paragraph one of 
the syllabus, that:  “The relationship of debtor and creditor without more is not 
a fiduciary relationship.  A fiduciary relationship may be created out of an 
informal relationship, but this is done only when both parties understand that a 
special trust or confidence has been reposed.”  (Emphasis added.)  See, also, 
Blon v. Bank One, Akron, N.A. (1988), 35 Ohio St.3d 98, 519 N.E.2d 363, 
paragraph two of the syllabus. 
 
In Umbaugh, a credit association loaned money to the Scotts for the 
purpose of expanding their hog operation.  The association took a security 
interest in the Scotts’ hogs and certain equipment and a mortgage on the 
Scotts’s real estate.  During the term of the loan, the Scotts contracted for 
certain buildings to be constructed that were not the subject of any loan 
agreement made with the lender, but were items the Scotts had hoped the 
 
25
association would advance funds for in the future.  The association gave advice 
and counseling to the Scotts relative to their farming business, including 
suggesting that the Scotts liquidate some of their assets so that they would be 
able to make payments on their home and maintain a scaled-down farming 
operation.  The lender later advised the Scotts to sell their farm equipment and 
hogs covered by the security agreement.  The parties agreed to use a particular 
auctioneer to conduct the sale.  Following the filing of a foreclosure action by 
another creditor, the Scotts sued the association, asserting that the association 
had established for them a line of credit.  In considering whether the giving of 
advice by a creditor to a debtor can transform an arm’s-length transaction into 
one involving a fiduciary relationship, we held that: 
 
“***But here the offering and giving of advice was insufficient to create 
a fiduciary relationship.  While the advice was given in a congenial atmosphere 
and in a sincere effort to help the Scotts prosper, nevertheless, the advice was 
given by an institutional lender in a commercial context in which the parties 
 
26
dealt at arms length, each protecting his own interest.”  Id., 58 Ohio St.2d at 
287, 12 O.O.3d at 282, 390 N.E.2d at 323. 
 
As can be gleaned, this court’s holding in Umbaugh, stands for the 
proposition that advice given by a credit to a debtor in a commercial context in 
which the parties deal at arm’s length, each protecting his or her respective 
interests, is insufficient to create a fiduciary relationship.  In the case before us, 
Francis has failed to demonstrate that Society was not acting solely in its own 
interest.  In fact, the record indicates that Society, at all times, acted to protect 
its own interest, and “neither party had, nor could have had, a reasonable 
expectation that the creditor [Society] would act solely or primarily on behalf 
of the debtor [Francis].”  Id. 
 
Furthermore, Francis was an experienced developer.  Francis testified 
that he had been in the construction and building business for twenty years, that 
he had been involved in “thousands” of loans, and that he had built numerous 
residential dwellings and commercial buildings.  Francis was obviously aware 
of the risks associated with a multiphase development such as Sherbrook and, 
 
27
specifically, what could happen if units in such a development did not sell as 
fast as expected. 
 
In light of the foregoing, we find that a fiduciary relationship did not 
exist between the parties.  Therefore, summary judgment was properly entered 
by the trial court in favor of Society on Francis’ claim for breach of a fiduciary 
relationship. 
D 
Bad Faith 
 
Pleading further in the cross-claim and third-party complaint against 
Society, Francis also asserted that Society acted in bad faith and breached its 
obligation of good faith, thereby damaging Francis.   
 
Francis did not allege that Society breached the explicit terms of the 
written agreements.  Society’s decision to enforce the written agreements 
cannot be considered an act of bad faith.  Indeed, Society had every right to 
seek judgment on the various obligations owed to it by Francis and to foreclose 
on its security.  As the Seventh Circuit Court of Appeals stated in Kham & 
 
28
Nate’s Shoes No.2, Inc. v. First Bank of Whiting (C.A.7, 1990), 908 F.2d 
1351,1357-1358: 
 
“Firms that have negotiated contracts are entitled to enforce them to the 
letter, even to the great discomfort of their trading partners, without being 
mulcted for lack of ‘good faith.’  Although courts often refer to the obligation 
of good faith that exists in every contractual relation, * * * this is not an 
invitation to the court to decide whether one party ought to have exercised 
privileges expressly reserved in the document.  ‘Good faith’ is a compact 
reference to an implied undertaking not to take opportunistic advantage in a 
way that could not have been contemplated at the time of drafting, and which 
therefore was not resolved explicitly by the parties. 
 
“* * * 
 
“Although Bank’s decision left Debtor scratching for other courses of 
credit, Bank did not create Debtor’s need for funds, and it was not contractually 
obliged to satisfy its customer’s desires.  The Bank was entitled to advance its 
own interests, and it did not need to put the interests of Debtor * * * first.  To 
 
29
the extent K.M.C., Inc. v. Irving Trust Co., 757 F.2d 752, 759-63 (6th 
Cir.1986), holds that a bank must loan more money or give more advance 
notice of termination than its contract requires, we respectfully disagree.  First 
Bank of Whiting is not an eleemosynary institution.  It need not throw good 
money after bad, even if other persons would catch the lucre.  See, also, 
Bennco Liquidating Co. v. Ameritrust Co. Natl. Assn. (1993), 86 Ohio App.3d 
646, 621 N.E.2d 760; and Metro. Life Ins. Co. v. Triskett Illinois, Inc. (1994), 
97 Ohio App.3d 228, 646 N.E.2d 528. 
 
It is undisputed that Society fully performed its obligations under the 
various written agreements.  In fact, when Francis ran out of money during the 
construction of buildings seven and eight, Society offered to lend Francis 
additional funds.  Society, however, was under no obligation to make this offer.  
Society did nothing more than stand on its right to require payment of Francis’s 
contractual obligations.  Thus, we find that Francis’s claim for breach of an 
implied duty of good faith was properly dismissed by the trial court. 
E 
 
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Emotional Distress 
 
Finally, Francis alleges that Society’s actions constitute intentional 
and/or negligent infliction of severe emotional distress.  However, in light of 
our findings above, we reject Francis’s argument that genuine issues of 
material fact exist with respect to these claims.  These claims are wholly 
unsupported by the record.  Further, there simply is no basis to find that Francis 
endured the type of mental anguish and suffering subject to judicial redress. 
II 
Schory and Francis 
 
The claims asserted by Francis in his counterclaim and third-party 
complaint against Schory are premised upon the May 1, 1991 letter, which was 
part of the amended settlement agreement between the parties.  The letter, 
addressed to Schory and signed by Francis, stated: 
 
“I am sincerely sorry for all the grief and aggravation I have caused you 
and your family.  I acknowledge by this letter that I fraudulently 
misappropriated the sum of $370,000.00 from the Arlington General 
 
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Partnership on the Arlington Road and Whipple Avenue Projects.  This was 
done by knowingly misrepresenting the construction expenses of Francis 
General Construction, Inc.  I regret any problems which I may have caused 
your family and your business.  I also apologize for filing the counterclaim and 
calling the police.” 
A 
Defamation 
 
After receiving the May 1, 1991 letter from Francis, Schory showed the 
letter to certain individuals.  Francis admits to writing and signing the letter 
but, curiously, claims that the contents of the letter are false.  Francis asserts 
that the amount misappropriated from the partnership was actually less than 
$370,000.  Therefore, somewhat disingenuously, Francis urges that a genuine 
issue of fact exists as to whether the letter was false and defamatory. 
 
However, the matter at issue is not the amount that was actually taken by 
Francis but, rather, whether Francis misappropriated certain funds from the 
 
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partnership.  Francis admitted that he improperly took funds belonging to the 
partnership. 
 
In Ohio, truth is a complete defense to a claim for defamation.  R.C. 
2739.02 states:  “In an action for a libel or a slander, the defendant may allege 
and prove the truth of the matter charged as defamatory.  Proof of the truth 
thereof shall be considered a complete defense.  In all such actions any 
mitigating circumstances may be proved to reduce damages.”  (Emphasis 
added.)  See, also, Shifflet v. Thomson Newspapers, Inc. (1982), 69 Ohio St.2d 
179, 183, 23 O.O.3d 205, 207, 431 N.E.2d 1014, 1017 (“Since truth is always a 
defense in any action for libel or slander, appellants’ claim on these grounds 
must fail.”  [Footnote omitted.]). 
 
In considering the letter at issue, the court of appeals held that 
“[s]ummary judgment was properly granted on the issue of ‘truth.’”  We agree 
with the findings of the trial court and the court of appeals that the truth of the 
letter negated the alleged libel claim set forth by Francis.  Thus, we find that 
Schory was entitled to summary judgment pursuant to Civ.R. 56. 
 
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B 
Malicious Prosecution 
 
Francis also set forth a claim for malicious civil prosecution.  Francis, 
however, has since elected to reclassify the claim as one for abuse of process.  
In any event, we find that both claims lack merit. 
 
Schory had every right to file a foreclosure action against Francis.  Prior 
to filing this action, the parties were involved in ongoing legal proceedings that 
eventually led to an initial settlement between the parties.  Francis agreed to 
pay Schory $130,000.  Francis, however, defaulted on payments owed, and 
Schory obtained a judgment against Francis.  The parties then entered into an 
amended settlement agreement.  In this new agreement, Schory agreed not to 
institute a foreclosure action if Francis remained current on certain negotiated 
payments.  As additional consideration for this new arrangement/agreement, 
Francis signed the May 1, 1991 letter.  However, Francis failed to abide by the 
terms of the new agreement, defaulting on payments owed to Schory. 
 
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Clearly, the actions of Schory did not constitute malicious prosecution or 
abuse of process.  Even if Schory’s ulterior purpose in requesting that Francis 
write the May 1, 1991 letter was to prevent Francis from being able to 
discharge the debt owed to Schory in a bankruptcy proceeding, that purpose 
was entirely proper.  The letter was incorporated into the settlement agreement.  
Francis was not coerced to write the letter.  We believe the court of appeals was 
absolutely correct in concluding that Francis was “‘the architect of his own 
continuous mortification.’” 
 
Therefore, we find that summary judgment was properly granted in favor 
of Schory on these claims.  Furthermore, we also find that summary judgment 
was properly granted in favor of Schory on Francis’s claim for intentional 
infliction of severe emotional distress. 
III 
Conclusion 
 
Keeping in mind the principles set forth in Civ.R. 56, we find that 
Society (and Reiber) and Schory (and Shory & Sons) are entitled to summary 
 
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judgment on all claims asserted against them by Francis.  The judgment of the 
court of appeals is affirmed in part and reversed in part. 
 
 
 
 
 
 
 
Judgment affirmed in part 
 
 
 
 
 
 
 
and reversed in part. 
 
MOYER, C.J., SLABY, O’DONNELL, F.E. SWEENEY, PFEIFER and COOK, JJ., 
concur. 
 
LYNN C. SLABY, J., of the Ninth Appellate District, sitting for WRIGHT, J. 
 
TERRENCE O’DONNELL, J., of the Eighth Appellate District, sitting for 
Resnick, J. 
 
 
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FOOTNOTE: 
1 
While there may also have been an A&D loan to Francis, there are no 
documents in the record with regard to it.