Community First Bank & Trust v. Dafoe

844 N.E.2d 825, 108 Ohio St. 3d 472
CourtOhio Supreme Court
DecidedApril 12, 2006
DocketNo. 2003-1913
StatusPublished
Cited by30 cases

This text of 844 N.E.2d 825 (Community First Bank & Trust v. Dafoe) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Community First Bank & Trust v. Dafoe, 844 N.E.2d 825, 108 Ohio St. 3d 472 (Ohio 2006).

Opinions

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 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 [473]*473it 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 “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 plaintiffs 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.”

[474]*474{¶ 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 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.

{¶ 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.
{¶ 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. [475]*475H.B. No.

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Bluebook (online)
844 N.E.2d 825, 108 Ohio St. 3d 472, Counsel Stack Legal Research, https://law.counselstack.com/opinion/community-first-bank-trust-v-dafoe-ohio-2006.