Multibank 2009-1 CML-ADC Venture, L.L.C. v. S. Bass Island Resort, Ltd.

Citation: 2017 Ohio 344Docket: E-15-061

Court: Ohio Court of Appeals; January 26, 2017; Ohio; State Appellate Court

Original Court Document: View Document

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Dr. John C. Tomberlin appeals a judgment from the Erie County Court of Common Pleas, which determined he personally guaranteed a loan of up to $8.6 million from Columbian Bank and Trust Company to South Bass Island Resort, Ltd. The court awarded Multibank 2009-1 CML-ADC Venture, LLC (the successor in interest to Columbian Bank) a total of $20,576,899.91, along with ongoing interest, taxes, assessments, insurance, attorney fees, and costs. 

Key facts include the loan's conditionality on guarantees from Tomberlin and others, with a targeted closing date that was expedited to June 15, 2006. Draft documents for an "Unconditional Cognovit Guaranty" were exchanged among attorneys, with Tomberlin's signed and notarized guaranty dated June 8, 2006. Despite a delay in receiving finalized documents, the loan was disbursed on June 15, 2006, after additional required forms were submitted. The loan was structured to be disbursed in multiple advances, with a term ending on December 15, 2007. The loan agreement included joint and several guarantees from Tomberlin and others, and it is undisputed that South Bass Island Resort defaulted on the loan, with no payments made by the trial date.

On August 13, 2008, Columbian initiated a lawsuit against defendants SBIR, Cecil Weatherspoon, 250 Centre, Ltd., and an appellant. In response, the defendants filed an answer on March 26, 2009, asserting counterclaims for fraud and breach of contract, alleging that Columbian misrepresented the fund disbursement and failed to provide the full $8.6 million. After extensive litigation, the parties submitted cross-motions for summary judgment. The defendants sought partial summary judgment, arguing the guaranties were unenforceable, while Columbian sought summary judgment on its claims and the defendants' counterclaims.

On November 16, 2011, the trial court denied the defendants' motion and granted summary judgment in favor of Columbian against SBIR, Weatherspoon, and 250 Centre, awarding $7,849,093.30 plus additional costs. The court also dismissed the defendants' counterclaims with prejudice. However, it found genuine issues of material fact precluding summary judgment against the appellant, particularly regarding the nature of the loans and the parties' intentions, and scheduled a bench trial for these issues.

After delays, a two-day bench trial occurred on March 18 and 19, 2014. Columbian presented two witnesses, while the appellant did not call any witnesses. On September 2, 2015, the court ruled in favor of Columbian, confirming that the appellant guaranteed the loan and awarding $20,576,899.91 plus additional costs.

The appellant timely appealed both the September 2, 2015, and November 16, 2011 judgments, raising three assignments of error: (I) challenging the trial court's ruling on the waiver of a jury trial; (II) asserting that the verdict was against the manifest weight of the evidence; and (III) contesting the summary judgment granted to Columbian amidst genuine issues of material fact regarding the alleged breach of contract. Regarding the first error, the appellant argued that when he signed the guaranty, no loan documents existed, thus questioning the applicability of the waiver. The court disagreed with this argument.

Ohio courts enforce contractual jury waivers when the waiver terms are clear and unambiguous, as established in *MidAm Bank v. Dolin*. In this case, the appellant waived his right to a jury trial concerning any actions related to loan documents, which were created at the time of the waiver. Despite the appellant's claim that no loan documents existed when the waiver was executed, the summary judgment record contradicts this. The appellant's liability is tied to the guaranty that included the jury trial waiver, leading the court to conclude that it did not err in denying the jury demand and proceeding with a bench trial.

In the appellant's second assignment of error, he contests the trial court's judgment regarding his liability under the June 8, 2006 guaranty, arguing it is against the manifest weight of the evidence and legally insufficient. Appellate review applies the manifest weight standard, which requires weighing evidence and assessing witness credibility to determine if the trial court's decision resulted in a miscarriage of justice. The appellant's signature on the guaranty is undisputed, and there was no fraud or duress involved.

The appellant raises five sub-assignments of error regarding the guaranty’s interpretation and enforceability: (1) a guarantor’s liability must adhere strictly to the contract's terms; (2) grounds for reformation require fraud or mutual mistake, which were not found; (3) Columbian Bank's prior knowledge of the guaranty before loan disbursement does not affect liability; (4) a lack of affirmative rejection of the guaranty does not imply acceptance; and (5) the commitment letter did not specify a "Cognovit Unconditional Guarantee," suggesting a different type of guaranty was intended.

Ultimately, the appellant argues that since the loan was dated June 14, 2006, and the guaranty is dated June 8, 2006, he cannot be held liable for guaranteeing a loan executed on a later date, asserting that the terms of the guaranty are clear and unambiguous.

When interpreting a contract, the intent of the parties is paramount, and the contract should be examined as a whole, with the language presumed to reflect that intent. Courts prioritize the plain meaning of contract terms unless a different meaning is evident. A contract is deemed unambiguous if it has a definitive legal meaning. The appellant's argument wrongly isolates the guaranty, as all related writings in the same transaction must be considered together to ascertain intent. In this case, ambiguity exists regarding whether the appellant's guaranty pertains solely to a loan dated June 8, 2006, necessitating the examination of extrinsic evidence to clarify intent.

Evidence presented by the appellee, including the loan commitment letter and note, indicated that the appellant was required to guarantee the loan. Testimony and correspondence suggested there was a singular loan, which the appellant was guaranteeing. Furthermore, the appellant signed the "Unconditional Cognovit Guaranty" prior to the loan closing and benefited financially from the loan. In contrast, the appellant failed to provide evidence to support his claim of not intending to guarantee the loan.

The appellant contended that the court misapplied the law regarding conditions precedent and claimed that Columbian Bank might have waived the guaranty requirement. However, the appellee’s responsibility was to demonstrate the intention behind the guaranty, which was satisfactorily established through documentation. The burden was not on the appellee to disprove the appellant's theory of waiver. Therefore, the trial court's determination that the appellant intended to guarantee the June 14, 2006 loan was supported by the evidence and the appellant's arguments were deemed unmeritorious.

Appellant contends that the trial court improperly reformed a contract due to a lack of evidence for fraud or mutual mistake. However, the court clarified that it interpreted an ambiguous provision rather than reformed the contract, emphasizing that the contract was unambiguous and required interpretation to reflect the parties' intent. Thus, appellant's argument lacks merit.

In subsequent sub-assignments of error, appellant argues he did not intend to guarantee a loan dated June 14, 2006, citing that the guaranty he signed was for an earlier loan and that he did not sign the guaranty for the June 14 loan. He further discusses the distinctions between "suretyship" and "guaranty," suggesting that discrepancies regarding the type of agreement may indicate the bank's lack of intention for him to guarantee the loan. The trial court, having reviewed the evidence, concluded otherwise, affirming that appellant's claims were unfounded.

In his third assignment of error, appellant challenges the trial court's summary judgment favoring the appellee regarding allegations of fraud and breach of contract related to the bank's failure to disburse the full loan amount. The standard for summary judgment requires no genuine issues of material fact and entitlement to judgment as a matter of law. Appellant argues a genuine issue exists regarding the bank's financial capability to fulfill the loan, referencing Rengel’s affidavit, who was also trial counsel for the defendants.

On November 16, 2011, the trial court ruled that the issue at hand was a "non-issue," clarifying that the loan in question was a "bridge loan" with a maximum amount of $8.6 million, of which not all funds were to be initially released. Further disbursements were contingent upon project progress and approval from Columbian Bank. The loan agreement stipulated that funds would be released in multiple advances based on the completion and inspection of the property. Columbian Bank disbursed $7,849,093.30, which primarily covered the installation of a water line, with no additional construction completed. The appellant did not contest the court's finding that the failure to release further funds did not affect the project's outcome, as there was no substantial evidence of requests for additional draws that were denied. Consequently, the court found the appellant's third assignment of error unpersuasive. The Erie County Court of Common Pleas judgment was affirmed, with the appellant ordered to bear the costs of the appeal. The decision is subject to editing by the Ohio Supreme Court’s Reporter of Decisions.