Court Opinion

ID: 2699239
Source: CourtListenerOpinion
Date Created: 2014-08-04 18:01:54.788257+00
Date Added: 2024-06-11T12:17:28.609251
License: Public Domain

[Cite as Stump Hill Farm, Inc. v. PFC Lamont Hill Mem. Army Navy Garrison 2003, Inc., 2012-Ohio-4475.]

                                      COURT OF APPEALS
                                     STARK COUNTY, OHIO
                                  FIFTH APPELLATE DISTRICT

STUMP HILL FARM, INC.                               :     JUDGES:
                                                    :
                                                    :     Hon. Patricia A. Delaney, P.J.
       Plaintiff-Appellee                           :     Hon. W. Scott Gwin, J.
                                                    :     Hon. William B. Hoffman, J.
-vs-                                                :
                                                    :
PFC LAMONT HILL MEMORIAL                            :
ARMY NAVY GARRISON 2003, INC.,                      :
ET AL.                                              :
                                                    :     Case No. 2011CA00207
                                                    :
       Defendants-Appellees                         :
                                                    :
-vs-                                                :
                                                    :
TIMOTHY T. RHODES                                   :
                                                    :
       Defendant-Appellant                          :     OPINION

CHARACTER OF PROCEEDING:                                Appeal from the Stark County Court of
                                                        Common Pleas, Case No. 2010CV01186

JUDGMENT:                                               AFFIRMED

DATE OF JUDGMENT ENTRY:                                 September 24, 2012

APPEARANCES:

For Appellant Timothy T. Rhodes:                          For Appellee Stump Hill Farm, Inc.:

WILLIAM WALKER, JR.                                       JOHN L. JUERGENSEN
P.O. Box 192                                              6545 Market Ave. N.
Massillon, OH 44648-0192                                  North Canton, OH 44721
Delaney, P.J.

      {¶1} Defendant-Appellant Timothy T. Rhodes appeals the December 16, 2010

judgment entry granting summary judgment in favor of Plaintiff-Appellee Stump Hill

Farm, Inc. and the August 23, 2011 judgment entry awarding Stump Hill damages

against Rhodes.

                      FACTS AND PROCEDURAL HISTORY

      {¶2} In September of 2003, Defendant PFC Lamont Hill Memorial Army Navy

Garrison 2003, Inc. (“PFC”) entered into a land contract style purchase agreement

with Bambini Company, LLC for real estate located at 4713 Castlebar, NW, Canton,

Ohio. PFC paid Bambini a $5,000 deposit and agreed to pay $2,500 per month for

three years. At the end of the three years, there was a $500,000 balloon payment.

      {¶3} In October 2006, Plaintiff-Appellee Stump Hill Farm, Inc. purchased the

Castlebar property from Bambini and PFC assigned its rights to the Castlebar property

to Stump Hill. Z&G Funding, LLC financed the sale of the Castlebar property. PFC

entered into a five-year commercial lease agreement with Stump Hill for the Castlebar

property. The sum of the lease was $210,000 or $42,000 per year and PFC was

required to pay $3,500 per month through October 2011 per the terms of the lease

agreement.

      {¶4} On or about October 1, 2006, Defendants George Bell, Harry Kotigades,

Appellant Timothy Rhodes, and Harold Young (“Guarantors”) executed and delivered

to Stump Hill a Guaranty Agreement whereby the principal officers of PFC personally

guaranteed the payment and performance of the lease agreement between Stump Hill

and PFC.
        {¶5} Stump Hill filed a forcible entry and detainer action against PFC on

September 17, 2008 due to PFC’s failure to pay the property taxes under the terms of

the lease agreement. At that time, Stump Hill terminated the lease and locked PFC

out of the Castlebar property. By judgment entry dated October 1, 2008, the Stark

County Court of Common Pleas denied Stump Hill’s forcible entry and detainer action

and permitted PFC to re-enter the property. Until September 2009, PFC continued to

operate the Castlebar property.

        {¶6} PFC stopped paying rent, utilities, and taxes to Stump Hill in December

2008.

        {¶7} In April 2009, PFC agreed to increase the monthly rental payment to

$5,500 per month, through the end of the lease agreement.

        {¶8} PFC abandoned the Castlebar property in September 2009.

        {¶9} Stump Hill filed a suit for damages for breach of the lease agreement

against PFC and the Guarantors, based on the Guaranty Agreement, with the Stark

County Court of Common Pleas on March 22, 2010. Appellant Timothy Rhodes and

the other Guarantors filed answers to the complaint. Stump Hill filed a motion for

default judgment against PFC on May 10, 2010. The trial court granted the motion for

default judgment on May 13, 2010 and awarded damages against PFC in the amount

of $212,309.75.

        {¶10} PFC filed for bankruptcy protection under Chapter 11 in August 2010.

        {¶11} On November 15, 2010, Stump Hill and the Guarantors filed motions for

summary judgment.
      {¶12} On December 17, 2010, Stump Hill and the current Board of Trustees of

PFC executed a Settlement Agreement and General Release with respect to the

issues raised by Stump Hill in the Chapter 11 bankruptcy.       In Section 11 of the

Settlement Agreement, Stump Hill released and discharged the current Board of

Trustees of PFC from personal liability.    The Settlement Agreement and General

Release is silent as to the corporate liability of PFC or the pre-existing Guaranty

Agreement.

      {¶13} The trial court granted Stump Hill’s motion for partial summary judgment

and denied the Guarantors’ motions for summary judgment on December 16, 2010.

The judgment found there was no genuine issue of material fact that the terms of the

Guaranty Agreement stated the Guarantors unconditionally guaranteed payment of

the rent, taxes, utilities, and attorney fees if PFC breached the terms of the lease

agreement by non-payment of the same. Because PFC breached the terms of the

lease agreement, the Guarantors were liable for all amounts owed under the lease

agreement. The trial court set the matter for a damages hearing.

      {¶14} Pursuant to a damages hearing, the trial court issued its findings of fact

and conclusions of law on August 23, 2011. The trial court again reviewed the terms

of the Guaranty Agreement and found the Guarantors liable for full payment of all

indebtedness of PFC to Stump Hill. Based on the evidence presented, the trial court

concluded the Guarantors were liable for $179,119.32 under the lease agreement,

$89,559.64 in attorney fees, and $350 in costs.

      {¶15} Defendant-Appellant Timothy Rhodes filed his notice of appeal and

raises the following arguments.
                             ASSIGNMENTS OF ERROR

      {¶16} Rhodes raises three Assignments of Error:

      {¶17} “I. THE TRIAL COURT ERRED AS A MATTER OF LAW BY ENTERING

JUDGMENT AGAINST RHODES AS A SURETY WHO WAS SECONDARILY LIABLE

AS A GUARANTOR AFTER APPELLEE HAD ALREADY RELEASED THE

PRINCIPAL OBLIGOR FROM LIABILITY.

      {¶18} “II. THE TRIAL COURT ERRED AS A MATTER OF LAW BY GRANTING

APPELLEES SUMMARY JUDGMENT BECAUSE THERE ARE GENUINE ISSUES

OF MATERIAL FACT AS TO WHETHER AN ENFORCEABLE GUARANTEE

AGREEMENT WAS FORMED.

      {¶19} “III. THE TRIAL COURT ERRED AS A MATTER OF LAW BY

GRANTING APPELLEES SUMMARY JUDGMENT BECAUSE THERE ARE GENUINE

ISSUES OF MATERIAL FACTS AS TO WHETHER APPELLANT’S ALLEGED

OBLIGATIONS AS A GUARANTOR WERE EXTINGUISHED WHEN APPELLEE

TERMINATED THE UNDERLYING LEASE.”

                                      ANALYSIS

                                           I.

      {¶20} Rhodes argues in his first Assignment of Error that because Stump Hill

entered into the December 17, 2010 Settlement Agreement and General Release, this

discharge of liability thereby discharged the liability of the Guarantors as to the debt.

Based on the terms of the Settlement Agreement and General Release and the

Guaranty Agreement, we disagree.
       {¶21} In support of his argument, Rhodes refers this Court to our decision in

Dressler Properties, Inc. v. Ohio Heart Care, Inc., 5th Dist. No. 2004CA00231, 2005-

Ohio-1069. In that case, we held the discharge of the principal obligor precludes

collection against the guarantor of the debt. Id. at ¶13. The issues in the present

case, however, are not resolved by the holding of Dressler Properties, Inc. The terms

of the Settlement Agreement and General Release and Guaranty Agreement present

differing factual circumstances precluding relief from liability as found in Dressler

Properties, Inc.

       {¶22} The principal obligor in this case is PFC, as tenant under the lease

agreement between Stump Hill and PFC. In order for Dressler Properties, Inc. to

apply to this case, there must be a discharge of PFC from its obligations to pay its

debts. We have reviewed the Settlement Agreement and General Release. We find

the Settlement Agreement does not release or discharge from liability the corporate

entity known as “PFC Lamont Hill Memorial Army Navy Garrison 2003, Inc.”

       {¶23} Section II of the Settlement Agreement entitled “RELEASE” states:

             (a) Stump Hill, for itself and its parent corporations * * * do hereby

       release and forever discharge each and every individual listed in on

       Exhibit “A” from any and all existing charges, complaints, claims,

       liabilities, controversies, damages, actions, causes of action, suits,

       rights, demands, costs, lawsuits, debts and expenses of any nature

       whatsoever which have arisen since the beginning of the World,

       including, but not limited to, all claims alleged or that could have been
      alleged   in   the   aforementioned   Stark   County   Case    [Case   No.

      2010CV01186] and Chapter 11 bankruptcy filing. * * *.

             (b) The individuals listed on Exhibit “A”, * * * do hereby release

      and forever discharge Stump Hill from any and all existing charges,

      complaints, claims, liabilities, controversies, damages, actions, causes of

      action, suits, rights, demands, costs, lawsuits, debts and expenses of

      any nature whatsoever which have arisen since the beginning of the

      World, including, but not limited to, all claims alleged or that could have

      been alleged in the aforementioned Stark County Case [Case No.

      2010CV01186] and Chapter 11 bankruptcy filing. * * *.

      {¶24} Exhibit “A” states the names of the officers of PFC as of December 17,

2010: Commander, Steve W. Tomko; Sr. Vice Commander, Joseph H. Pacusta; Jr.

Vice Commander, Stanley Schutok; Paymaster, Bernard Puchajda; Adjutant, Michael

E. Connors; Judge Advocate, John A. Turoozy; Chaplain, Steve Pruchnicki; Officer of

the Day, Nathan Gobel; Office of the Watch, Barry Jacobson; Patriotic Instructor, Greg

Morris; and Historian, Keith E. Panek.

      {¶25} PFC, as principal obligor for the debt, was never discharged from its

liability by the Settlement Agreement and General Release. The trial court granted

Stump Hill default judgment against PFC on May 13, 2010, awarding damages in the

amount of $212,309.75.

      {¶26} The terms of the Guaranty Agreement also permit Stump Hill to pursue

the debt incurred by PFC against the Guarantors, regardless of the Settlement

Agreement and General Release. The Guaranty Agreement states in pertinent part:
       [Stump Hill] is authorized, without notice or demand and without affecting

       the liability of either of the Guarantors from time to time to * * * (e) settle,

       release, compromise, collect, or otherwise liquidate the Indebtedness

       and any security or collateral in any manner without affecting or

       impairing the obligations of the [Guarantors].

       {¶27} We find no error for the trial court to find the Settlement Agreement and

General Release did not discharge the liability of PFC and it did not discharge the

liability of the Guarantors.

       {¶28} Rhodes’s first Assignment of Error is overruled.

                   SUMMARY JUDGMENT STANDARD OF REVIEW

       {¶29} Rhodes’s next two Assignments of Error relate to the December 16,

2010 judgment entry granting summary judgment in favor of Stump Hill. We first

discuss the appropriate standard of review for the related Assignments. We review a

summary judgment de novo and without deference to the trial court's determination.

When an appellate court reviews a trial court's disposition of a summary judgment

motion, it applies the same standard of review as the trial court and conducts an

independent review, without deference to the trial court's determination. We must

affirm the trial court's judgment if any grounds the movant raised in the trial court

support it. Westbrook v. Swiatek, 5th Dist. No. 09CAE09–0083, 2011-Ohio-781, ¶ 43.

       {¶30} Pursuant to Civ.R. 56(C), summary judgment “shall be rendered forthwith

if the pleadings, depositions, answers to interrogatories, written admissions, affidavits,

transcripts of evidence, and written stipulations of fact, if any, timely filed in the action,
show that there is no genuine issue as to any material fact and that the moving party

is entitled to summary judgment as a matter of law.”

       {¶31} The moving party bears the initial responsibility of informing the trial

court of the basis for the motion, and identifying those portions of the record before the

trial court, which demonstrate the absence of a genuine issue of fact on a material

element of the nonmoving party's claim. Dresher v. Burt, 75 Ohio St.3d 280, 292, 662

N.E.2d 264 (1996). The nonmoving party then has a reciprocal burden of specificity

and cannot rest on the allegations or denials in the pleadings, but must set forth

“specific facts” by the means listed in Civ.R. 56(C) showing that a “triable issue of fact”

exists. Mitseff v. Wheeler, 38 Ohio St.3d 112, 115, 526 N.E.2d 798, 801 (1988).

                                            II.

       {¶32} Rhodes argues in his second Assignment of Error the trial court erred in

finding that the Guaranty Agreement was a valid contract. We disagree.

       {¶33} The elements of a contract include the following: an offer, an

acceptance, contractual capacity, consideration (the bargained-for legal benefit or

detriment), a manifestation of mutual assent, and legality of object and of

consideration. Altek Environmental Serv. Co. v. Harris, 5th Dist. No. 2008CA00138,

2009-Ohio-2011, ¶ 19, citing Kostelnik v. Helper, 96 Ohio St.3d 1, 770 N.E.2d 58,

2002-Ohio-2985, ¶ 16.

       {¶34} Rhodes argues his affidavit submitted in response to the motion for

summary judgment creates a genuine issue of material fact as to whether there was a

valid offer and acceptance on behalf of the Guarantors to enter into the Guaranty

Agreement with Stump Hill. Rhodes states in his affidavit that Z&G Funding, LLC,
presented him and the Guarantors with the Guaranty Agreement. Z&G Funding, LLC

would not finance the sale of the Castlebar property from Bambini to Stump Hill

without the Guaranty Agreement. Rhodes stated he felt he had to sign the Guaranty

Agreement or PFC would lose the property to Bambini. (Affidavit of Timothy Rhodes).

       {¶35} Stump Hill presented the affidavit of Cynthia Huntsman, President of

Stump Hill. She stated that she wanted a personal guaranty from the primary officers

of PFC (the Guarantors) to ensure that PFC would pay the monthly mortgage to

Stump Hill, which would in turn be paid to Z&G Funding, LLC.

       {¶36} Based on the reading of these affidavits, this Court cannot find there was

no meeting of the minds of the parties to the Guaranty Agreement as to the intent of

the Guaranty Agreement to secure financing for the sale of the Castlebar property.

Without the Guaranty Agreement from the primary PFC officers, PFC would not obtain

financing on the sale of the Castlebar property. Rhodes argues, however, he did not

intend to guarantee PFC’s performance under the lease agreement.

       {¶37} Stump Hill refers this Court to Amerisourcebergen Drug Corp. v.

Hallmark Pharmacies, Inc., 10th Dist. 05AP-1250, 2006-Ohio-2746, where the Tenth

District Court of Appeals explored a similar factual pattern where a guarantor argued

she did not intend to personally guaranty a corporate debt when she signed a credit

application. The court reviewed the language of the personal guaranty under the law

of contract construction:

             The construction of written contracts is a matter of law. Alexander

       v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241, 7 O.O.3d 403, 374

       N.E.2d 146, paragraph one of the syllabus. “The purpose of contract
construction is to discover and effectuate the intent of the parties, and the

intent of the parties is presumed to reside in the language they chose to

use in the agreement.” McConnell v. Hunt Sports Ent. (1999), 132 Ohio

App.3d 657, 675, 725 N.E.2d 1193, citing Graham v. Drydock Coal Co.

(1996), 76 Ohio St.3d 311, 313, 667 N.E.2d 949. If a contract is clear and

unambiguous, there is no issue of fact to be determined, and the court

cannot create a new contract by finding an intent not expressed in the

clear language employed by the parties. Inland Refuse Transfer Co. v.

Browning-Ferris Industries of Ohio, Inc. (1984), 15 Ohio St.3d 321, 322,

15 OBR 448, 474 N.E.2d 271; Alexander, supra, at 246.

      Only where the language of a contract is unclear or ambiguous or

when the circumstances surrounding the agreement invest the language

of the contract with a special meaning, will extrinsic evidence be

considered in an effort to give effect to the parties' intentions. Shifrin v.

Forest City Ent., Inc. (1992), 64 Ohio St .3d 635, 597 N.E.2d 499,

syllabus. These principles apply to contracts of guaranty in the same

manner in which they apply to other contracts. Fifth Third Bank v. Jarrell,

10th Dist. No. 04AP-358, 2005-Ohio-1260, ¶ 12. “A guarantor is bound

only by the precise words of his or her contract, but this rule does not

entitle the guarantor ‘to demand an unfair and strained interpretation of

those words' in order that the guarantor may be released from the

obligation that was assumed.” Ibid., quoting Morgan v. Boyer (1883), 39

Ohio St. 324, 326.
      Upon review of the contract at issue, we agree with the trial court's

finding that the language of the personal guaranty is clear and

unambiguous. Thus, the intent of the parties is evident therein, and we will

not go beyond the terms in order to find ambiguity where it does not exist.

Appellant agreed to “personally and unconditionally” guarantee “each and

every obligation to [appellee] incurred by [Hallmark] until paid.” By their

ordinary meaning, these words indicate that appellant agreed to pay in full

all debts that Hallmark thereafter became obligated to pay to appellee.

The language of the guaranty contains no conditions precedent; no words

of temporal, numerical or other limitation; and no reservation of rights. The

guaranty is full and unconditional.

      Appellant asks this court to disregard this clear language and find

the existence of a genuine issue of material fact based upon her self-

serving statement that she did not intend to personally guarantee

Hallmark's debts to appellee.         But, “[c]ourts must presume that the

language of a contract between competent persons accurately reflects the

intentions of the parties.” Fairway Manor, Inc. v. Bd. of Commrs. (1988),

36 Ohio St.3d 85, 87, 521 N.E.2d 818, citing Kelly v. Medical Life Ins. Co.

(1987), 31 Ohio St.3d 130, 31 OBR 289, 509 N.E.2d 411, paragraph one

of the syllabus. “The purpose of this presumption is to protect a right

considered basic in our society: the right to freely contract. A necessary

means of preserving this right is the long-standing tradition of judicial

reluctance to reform or rescind a contract absent a compelling reason to
       do so.” Ibid. Appellant's unilateral mistake is not a compelling reason to

       rewrite this contract. “A unilateral mistake by a guarantor as to the nature

       of his obligation may not relieve him from his guaranty contract.” Campco

       Distributors, Inc. v. Fries (1987), 42 Ohio App.3d 200, 537 N.E.2d 661,

       paragraph two of the syllabus.

Id. at ¶11-14.

       {¶38} We likewise review the language of the Guaranty Agreement to

determine whether the language of the Guaranty Agreement is clear and

unambiguous to give evidence of the parties’ intent. The Guaranty Agreement states:

       The Guarantors jointly and severally unconditionally guarantee the full

       and prompt payment when due, whether at maturity or earlier (by reason

       of acceleration) and at all times thereafter, of all Indebtedness of [PFC]

       to [Stump Hill], and the [Guarantors] further agree to pay all costs and

       expenses including, without limitation, all court costs and attorney fees

       and expenses paid or incurred in endeavoring to collect all or any part of

       the Indebtedness from, or in prosecuting any action against, [PFC] or

       one or more of the Guarantors.

       {¶39} We find the language of the Guaranty Agreement is clear and

unambiguous to reflect the intention of the parties that the Guarantors would

unconditionally guaranty the indebtedness of PFC to Stump Hill.

       {¶40} Rhodes next argues there is a genuine issue of material fact as to

whether the Guaranty Agreement was supported by consideration. The facts in this

case do not support Rhodes’s contention.
      {¶41} In 2003, PFC leased the Castlebar property from Bambini with a

$500,000 balloon payment at the end of the three-year term.        In 2006, PFC was

unable to meet the financial obligation for the balloon payment and entered into a

financial arrangement with Stump Hill, financed by Z&G Funding, LLC, to purchase the

property from Bambini. As stated by Rhodes’s affidavit above, he understood that if

he did not enter into the Guaranty Agreement, the sale of the Castlebar property

would fail and Bambini would reclaim the property. We find there is evidence in the

record to show reasonable minds could only conclude the Guaranty Agreement was

supported by consideration.

      {¶42} Rhodes’s second Assignment of Error is overruled.

                                         III.

      {¶43} Rhodes contends in his third Assignment of Error that when Stump Hill

and PFC modified the rental payment in April 2009, this was a termination of the

original lease between PFC and Stump Hill, thereby terminating the Guaranty

Agreement. We disagree.

      {¶44} The Guaranty Agreement states:

      [Stump Hill] is authorized, without notice or demand and without affecting

      the liability of either of the Guarantors from time to time to (a) renew,

      extend, accelerate or otherwise change the time of payment of, or other

      terms relating to, the Indebtedness, or otherwise modify, amend or

      change the terms of the Term Agreement, the Lease, or any other

      agreement, document or instrument now or hereafter executed by [PFC]
      and delivered to [Stump Hill] * * * in any manner without affecting or

      impairing the obligations of the [Guarantors].

      {¶45} Pursuant to the language of the Guaranty Agreement, there is no

genuine issue of material fact that Stump Hill and PFC could change the terms of the

lease agreement through an increase the monthly rental payment without notice or

consent of the Guarantors. Further, a change in terms of the lease agreement is

binding upon the Guarantors pursuant to the above-cited language of the Guaranty

Agreement.

      {¶46} Rhodes’s third Assignment of Error is overruled.

                                   CONCLUSION

      {¶47} The three Assignments of Error presented by Defendant-Appellant

Timothy T. Rhodes are overruled.

      {¶48} The judgment of the Stark County Court of Common Pleas is affirmed.

By: Delaney, P.J.

Gwin, J. and

Hoffman, J. concur.

                                       HON. PATRICIA A. DELANEY

                                       HON. W. SCOTT GWIN

                                       HON. WILLIAM B. HOFFMAN

PAD:kgb
                    IN THE COURT OF APPEALS FOR STARK COUNTY, OHIO
                              FIFTH APPELLATE DISTRICT

STUMP HILL FARM, INC.                      :
                                           :
                                           :
       Plaintiff-Appellee                  :
                                           :
-vs-                                       :
                                           :   JUDGMENT ENTRY
PFC LAMONT HILL MEMORIAL                   :
ARMY NAVY GARRISON 2003, INC.,             :
ET AL.                                     :   CASE NO. 2011CA00207
                                           :
                                           :
       Defendants-Appellees                :
                                           :
-vs-                                       :
                                           :
TIMOTHY T. RHODES                          :
                                           :
       Defendant-Appellant                 :

       For the reasons stated in our accompanying Opinion on file, the judgment of the

Stark County Court of Common Pleas is affirmed. Costs assessed to Appellant.

                                        HON. PATRICIA A. DELANEY

                                        HON. W. SCOTT GWIN

                                        HON. WILLIAM B. HOFFMAN