[Cite as Home S. & L. Co. of Youngstown, Ohio v. Norfolk S. Ry. Co., 2012-Ohio-1634.]
Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION No. 96878
THE HOME SAVINGS & LOAN COMPANY OF YOUNGSTOWN, OHIO PLAINTIFF-APPELLANT
vs.
NORFOLK SOUTHERN RAILWAY COMPANY
DEFENDANT-APPELLEE
JUDGMENT: REVERSED AND REMANDED
Civil Appeal from the Cuyahoga County Common Pleas Court Case No. CV-714634
BEFORE: Boyle, P.J., Sweeney, J., and Keough, J.
RELEASED AND JOURNALIZED: April 12, 2012 2
ATTORNEYS FOR APPELLANT
Jerry R. Krzys Richard J. Thomas Henderson, Covington, Messenger, Newman & Thomas Co., L.P.A. 6 Federal Plaza Center, Suite 1300 Youngstown, Ohio 44503
ATTORNEYS FOR APPELLEE
Timothy T. Brick Colleen A. Mountcastle Joseph J. Santoro Gallagher Sharp 6th Floor Bulkley Building 1501 Euclid Avenue Cleveland, Ohio 44115 3
MARY J. BOYLE, P.J.:
{¶1} Plaintiff-appellant, The Home Savings & Loan Company of Youngstown,
Ohio (“Home Savings”), appeals from a trial court judgment denying its partial motion
for summary judgment on liability and granting summary judgment to defendant-appellee,
Norfolk Southern Railway Company (“Norfolk Southern”). Home Savings raises one
assignment of error for our review, namely, that the trial court erred in granting summary
judgment to Norfolk Southern and denying its motion. We find merit to the appeal, and
reverse and remand for a hearing on the amount of damages that Norfolk Southern should
pay Home Savings for anticipatorily breaching their agreement.
Procedural History and Factual Background
{¶2} In March 2008, Home Savings and Norfolk Southern entered into an
Agreement to Assign Bid in Foreclosure Sale (“Agreement”). In it, Home Savings
agreed to “credit bid” for property sold at a sheriff’s sale “known as Permanent Parcel
Nos. 784-13-001 and 812-01-003 (collectively ‘the Property’).” If Home Savings was
the successful bidder, then it promised to assign its bid to Norfolk Southern for $600,000.
The Agreement further described the Property as:
{¶3} “[T]he Property is the subject of a foreclosure action in the Court of
Common Pleas, Cuyahoga County, Ohio, known as Case No. CV 06 585410, entitled
‘Plymouth Park Tax Services, LLC v. Divine Management, Inc., et al.’ (the ‘Foreclosure
Action’)[.]” 4
{¶4} The Foreclosure Action was a tax lien foreclosure action filed in February
2006 by Plymouth Park Tax Services (“Plymouth Park”) against, among others, Divine
Management Company (“Divine”) for two parcels of land; PPNs 784-13-001 and
812-01-003. The preliminary judicial report (“PJR”) prepared by Chicago Title Agency
and incorporated into Plymouth Park’s complaint, however, incorrectly described PPN
812-01-003 as encompassing the land contained not only in PPN 812-01-003, but also the
land contained in PPNs 812-01-002 and 784-13-002 (the incorrect legal description did
not explicitly list these parcel numbers; it just included their legal descriptions). Home
Savings was listed as a defendant in the Foreclosure Action because it had a mortgage
interest in the Divine parcels as security for loans it issued to Divine in 2003.
{¶5} The incorrect legal description in the Foreclosure Action was not
discovered until June 2008, three months after Home Savings and Norfolk Southern
entered into their Agreement. That June, an attorney for Carnegie Company (who was a
defendant in the foreclosure action as well because it also had an interest in the Divine
parcels) sent an email to Robert Fulton, Home Savings’ attorney, stating that the legal
description of the Property in the Foreclosure Action “covers vastly more [than] just
PPNs 812-[01]-003 and 784-13-001.” As a result, Carnegie’s attorney sent the legal
description to U.S. Title Agency to investigate the issue.
{¶6} In late July 2008, Fulton received an email from an agent at U.S. Title
explaining that the legal description in the Foreclosure Action for PPN 812-01-003 5
needed to be amended to remove the legal descriptions of the extra parcels. In early
August 2008, the trial court in the Foreclosure Action granted Carnegie’s motion to
modify the decree of foreclosure and amend the praecipe (order of sale) to correct the
legal description of PPN 812-01-003. Fulton sent copies of these documents modifying
the legal description of PPN 812-01-003 to George Pofok, Norfolk Southern’s real estate
agent, in September 2008, stating “[t]his should not affect our agreement, which refers to
the property simply by permanent parcel number.”
{¶7} In November 2008, Norfolk Southern sent a letter to Home Savings
indicating that it was no longer interested in purchasing the Property “due to the extended
period of time which [had] passed without any foreclosure sale having occurred.” A
month later, Norfolk Southern sent a second letter to Home Savings formally rescinding
the Agreement due to a “misunderstanding of fact” between the parties at the time they
entered into the contract. Specifically, Norfolk Southern stated, “[i]t is clear that at the
time Norfolk Southern and [Home Savings] signed the [Agreement], both parties believed
that Parcel No. 812-01-003 was much larger than the corrected description.”1
{¶8} Home Savings brought an action for breach of contract against Norfolk
Southern in January 2010, alleging that Norfolk Southern had anticipatorily breached the
Agreement. Both parties moved for summary judgment. Norfolk Southern claimed
More facts will be set forth as needed in the argument and analysis section of this appeal. 1 6
that it and Home Savings were materially mistaken as to the size and boundaries of the
Property that was subject to the Agreement. Home Savings moved for partial summary
judgment as to liability on its breach of contract claim, and requested a hearing on
damages.
{¶9} The trial court granted Norfolk Southern’s motion for summary judgment
and denied Home Savings’ motion. It is from this judgment that Home Savings appeals,
arguing that the trial court erred in doing so.
Standard of Review
{¶10} Summary judgment motions are to be resolved in light of the dictates of
Civ.R. 56. This rule was reaffirmed by State ex rel. Zimmerman v. Tompkins, 75 Ohio
St.3d 447, 448, 663 N.E.2d 639 (1996):
Civ.R. 56(C) provides that before summary judgment may be granted, it must be determined that (1) no genuine issue as to any material fact remains to be litigated, (2) the moving party is entitled to judgment as a matter of law, and (3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing such evidence most strongly in favor of the nonmoving party, that conclusion is adverse to the party against whom the motion for summary judgment is made. State ex rel. Parsons v. Fleming, 68 Ohio St.3d 509, 511, 628 N.E.2d 1377 (1994), citing Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327, 364 N.E.2d 267 (1977).
{¶11} As an appellate court reviewing summary judgment motions, we must stand
in the shoes of the trial court and review summary judgments by the same standard and
evidence as the trial court. Smiddy v. The Wedding Party, Inc., 30 Ohio St.3d 35, 506
N.E.2d 212 (1987). 7
Parol Evidence Rule
{¶12} The main issue presented in this appeal is whether there was a mutual
mistake as to a material part of the Agreement between Home Savings and Norfolk
Southern, such that Norfolk Southern was entitled to rescind the Agreement. The trial
court relied on extrinsic evidence to find that the parties were mistaken as to the size and
boundaries of the Property when they entered into the Agreement. Home Savings
contends that the trial court erred when it considered extrinsic evidence because the
contract is unambiguous on its face.
{¶13} The parol evidence rule excludes extrinsic evidence “because it cannot serve
to prove what the agreement was, this being determined as a matter of law to be the
writing itself.” Galmish v. Cicchini, 90 Ohio St.3d 22, 27, 734 N.E.2d 782 (2000),
quoting 11 Williston on Contracts (4 Ed.1999) 569-570, Section 33:4. The principal
purpose of the parol evidence rule is to protect the integrity of written contracts. Ed
Schory & Sons, Inc. v. Soc. Natl. Bank, 75 Ohio St.3d 433, 440, 662 N.E.2d 1074 (1996).
By prohibiting evidence outside the four corners of the agreement, the rule seeks to
ensure the stability, predictability, and enforceability of finalized written instruments.
Id.
{¶14} But in this case, Norfolk Southern maintains that there was a mutual mistake
as to a material part of the contract. A mutual mistake of fact results in a lack of a
meeting of the minds. Robert’s Auto Ctr., Inc. v. Helmick, 9th Dist. No. 21073, 8
2003-Ohio-640, ¶ 31, fn. 1. It “calls into question the very existence of the contract,”
Reitz v. West, 9th Dist. No. 19865, 2000 WL 1226617, *6 (Aug. 30, 2000). Therefore,
parol evidence is admissible to demonstrate a mutual mistake. City Life Dev., Inc. v.
Praxus Group, Inc., 8th Dist. No. 88221, 2007-Ohio-2114, ¶ 35.
{¶15} Accordingly, we find that the trial court did not err when it considered
extrinsic evidence to determine whether a mutual mistake existed. We must now consider
the evidence de novo to determine whether there was a mutual mistake as to the size and
boundaries of the Property subject to the Agreement.
Mutual Mistake
{¶16} In Reilley v. Richards, 69 Ohio St.3d 352, 352-353, 632 N.E.2d 507 (1994),
the Ohio Supreme Court explained:
[T]he doctrine of mutual mistake is a ground for the rescission of a contract under certain circumstances. In Irwin v. Wilson, 45 Ohio St. 426, 15 N.E. 209 (1887), [this court] held that a buyer is entitled to rescission of a real estate purchase contract where there is a mutual mistake as to a material part of the contract and where the complaining party is not negligent in failing to discover the mistake. A mistake is material to a contract when it is “a mistake * * * as to a basic assumption on which the contract was made [that] has a material effect on the agreed exchange of performances.” 1 Restatement of the Law 2d, Contracts, Section 152(1) (1981). Thus, the intention of the parties must have been frustrated by the mutual mistake.
{¶17} When determining whether there was a mutual mistake, the trial court must
review the parol evidence to determine if there was a meeting of the minds as to a
material part of the contract. City Life Dev. at ¶ 35. Such extrinsic evidence may 9
include (1) the circumstances surrounding the parties at the time the contract was made,
(2) the objectives the parties intended to accomplish by entering into the contract, and (3)
any acts by the parties that demonstrate the construction they gave to their agreement.
{¶18} It is the complaining party’s burden to establish by clear and convincing
evidence that a mutual mistake exists. See Quintella v. Smith, 5th Dist. No.
1999CA00237, 2000 WL 873852, *1-2 (June 12, 2000). The following case law
demonstrates what is required to establish mutual mistake.
{¶19} In Reilly, 69 Ohio St.3d 352, 632 N.E.2d 507, the Ohio Supreme Court held
that a mutual mistake existed as to a material part of the purchase contract, entitling the
buyer to rescind the contract. Id. at 352. The buyer purchased property intending to
build a family home. After the parties signed the purchase contract, the buyer
discovered that more than half of the property was located in a “flood hazard area.”
Neither the buyer nor the seller knew that the property was in a flood zone at the time
they entered into the contract. Other evidence established that it was illegal to build in
the floodway or within 20 feet of the boundaries of it, and that while building might be
permitted elsewhere on the property, it depended on the impact to the stream. Further,
because of the flood zone, the builder said he would not build on the property because he
could not warrant the property for one year, consistent with standard building practice.
The Ohio Supreme Court concluded that “lack of knowledge that a significant portion of 10
the lot is located in a floodway is a mistake of fact of both parties that goes to the
character of the property such that it severely frustrates the appellant’s ability to build a
home on the property.” Id. at 353. The Ohio Supreme Court further concluded that the
buyer was not negligent for not hiring engineers to discover the flood plain (the buyer had
the property inspected, but the flood plain could not have been discovered by simply
looking at the property). Id. at 354.
{¶20} In Thomas v. Ohio Power Co., 7th Dist. No. 06CA840, 2007-Ohio-5350,
the Thomases granted an easement to Ohio Power Company so that Ohio Power could
supply power to the Thomases’ new neighbors. In reliance on the easement, Ohio Power
cleared many trees that grew on the Thomases’ property. After this occurred, Ohio
Power discovered that the neighbor’s home was not located within its service area; it was
located within Carroll Rural Electric Power’s service area. Ohio Power attempted to but
was not successful in obtaining permission from Carroll Rural Electric to provide service
to that area. The Seventh District held that both parties “expected that Ohio Power
would be able to provide electric power to the neighbor when the parties entered into the
contract,” and as such, a mutual mistake existed that frustrated the purpose of the
contract. Id. at ¶ 35. The court also explained that “Ohio Power, rather than the
Thomases, was in the best position to know this mistaken fact when the parties entered
into the contract.” Id. at ¶ 38.
{¶21} In its summary judgment motion, Norfolk Southern first argued that the 11
evidence established as a matter of law that a mutual mistake existed because of the
incorrect legal description of the Property in the Foreclosure Action (which if the
evidence supports it, would mean they believed they were getting the four Divine parcels,
not the just the two that were explicitly listed). Norfolk Southern then argued in its
summary judgment motion that it “believed that the Assignment Agreement included all
of the Divine parcels based on past negotiations and its own investigation.” We will
address these arguments separately.
Incorrect Legal Description
{¶22} Norfolk Southern argued that a mutual mistake of fact existed as to the size
and boundaries of the Property subject to the Agreement because “Home Savings
mistakenly relied on the legal description of the Property filed in the Foreclosure Action,
which encompassed all four Divine Parcels.” Norfolk Southern maintains to this court
that it was Home Savings’ reliance on the incorrect legal description “where a
fundamental misunderstanding arose between Home Savings and Norfolk Southern.”
Although Norfolk Southern acknowledges that Home Savings did not even know about
the incorrect legal description until June 2008 — three months after the Agreement was
signed — it still claims that Home Savings continued to rely on this incorrect legal
description prior to, throughout, and after negotiations with Norfolk Southern. It is
because of Home Savings’ reliance on the incorrect legal description that Norfolk
Southern contends led both parties to be mistaken as to what Property was included in the 12
Agreement.
{¶23} Home Savings does not deny that the legal description in the Foreclosure
Action was incorrect or that it blindly adopted the incorrect description and used it in its
pleadings in the Foreclosure Action. But Home Savings counters that it was never
mistaken as to what Property was included in the Agreement — the two parcels, PPNs
784-13-001 and 812-01-003, that were subject to the foreclosure action and explicitly
listed in the Agreement. Home Savings contends that the incorrect legal description in
the Foreclosure Action is irrelevant to the Agreement because the Agreement defined the
Property by PPNs, without any reference to the Property’s location, size, or boundaries.
{¶24} Home Savings further maintains that the evidence Norfolk Southern pointed
to in its summary judgment motion regarding mutual mistake due to incorrect legal
description establishes that neither Fulton (Home Savings’ attorney who negotiated the
Agreement with Norfolk Southern) nor Paul Rhodes (assistant vice president at Home
Savings who signed the Agreement) were mistaken as to what Property was included in
the Agreement.
{¶25} Fulton testified repeatedly in his deposition that he did not understand legal
descriptions of property or know how to read them because he is “not a title man.” He
explained that when he was talking to George Pofok, Norfolk Southern’s outside real
estate agent, about purchasing the Property, he “wasn’t thinking in terms of legal
descriptions, [he] was thinking that the Property was the parcels that were included in the 13
foreclosure.” When asked when he sent the Agreement to Pofok whether he understood
that the legal description of the Property was what was contained in the PJR, Fulton
replied,
I didn’t really have any understanding about the legal description. That’s why I chose parcel numbers to identify the Property, because, as I’ve said two or three times, I’m not a title expert and I don’t even know how to read a legal description and understand it clearly, so I just chose parcel numbers to describe the property.
{¶26} When Rhodes was asked in his deposition what his understanding was of the
legal description for PPN 812-01-003 at the time he executed the Agreement on behalf of
Home Savings, he replied, “that was what was involved in the description of the parcel
numbers * * * in the Foreclosure Action. I didn’t do a survey or do a metes and bounds
or anything on it.” Norfolk Southern claims Rhodes’s answer means that “at the time of
execution, [Rhodes] believed the property subject to the [Agreement] included all of the
property that was described in the filings submitted to the court in the Foreclosure
Action.” We disagree with Norfolk Southern’s interpretation of Rhodes’s response.
Rhodes explained several times in his deposition that he understood the Agreement to
include the property that was subject to the foreclosure. But earlier in his deposition,
Rhodes testified that he did not even know about the incorrect legal description until it
was discovered later by Carnegie. And Norfolk Southern does not even dispute the fact
that no one at Home Savings knew about the incorrect legal description until June 2008.
{¶27} In its motion for summary judgment, Norfolk Southern did not point to any 14
other evidence in the record — besides Fulton’s and Rhodes’s testimony — showing
that it or Home Savings’ relied on the incorrect legal description leading to a mutual
mistake in the Agreement.
Past Negotiations
{¶28} Norfolk Southern also argued in its summary judgment motion that it
“believed that the Assignment Agreement included all of the Divine Parcels based on past
negotiations and its own investigation.” All of the Divine parcels included the two
parcels explicitly listed in the Agreement, and the two whose legal descriptions were
incorrectly included in the legal description of PPN 812-01-003 in the Foreclosure
Action.
{¶29} At the outset, we note that Norfolk Southern further argues on appeal that it
also believed from past negotiations that the Agreement included the remaining four
Carnegie parcels as well as the four Divine parcels, for a total of eight parcels of land.
But Norfolk Southern did not argue this to the trial court in its summary judgment
motion; it only discussed the four Carnegie parcels in relation to its assertion that it was
not negligent in discovering the mistake, but not in relation to its mutual mistake
argument. An argument not raised to the trial court cannot be raised for the first time on
appeal. Burden v. Lucchese, 3d Dist. No. 1-09-36, 2010-Ohio-3363, ¶ 7.2
Even if we were to address Norfolk Southern’s argument that the Agreement also included 2
the four Carnegie parcels, it has no merit. Although one could reasonably entertain the argument that past negotiations led to a mutual mistake in the Agreement regarding the four Divine parcels 15
{¶30} Regarding Norfolk Southern’s argument that based on past negotiations it
believed that it would receive the four Divine parcels in the Agreement, Norfolk Southern
points to a series of July 2007 emails from Bob Fulton (Home Savings’ attorney) to
George Pofok (Norfolk Southern’s outside real estate agent) and Jerry Causey (Norfolk
Southern’s in-house real estate attorney).
{¶31} Specifically, on July 25, 2007, Fulton sent the following email to Pofok
proposing the deal:
[Norfolk Southern] will commit to purchase the entire property without the lot split, for the sum of $600,000.00. The property will be sold at sheriff’s sale as soon as procedurally feasible, most likely by mid October, free of all liens. Home Savings will bid at the sheriff’s sale up to the total of its payoff, plus taxes, costs, and an agreed upon amount of $150,000 to be paid to Carnegie out of the sale of the proceeds. Home Savings will assign its bid to [Norfolk Southern] for the sum of $600,000.00[.]
{¶32} After quoting Fulton’s email, Norfolk Southern states to this court,
“Importantly, at the time Mr. Fulton wrote this email, he was still mistakenly relying on
the PJR’s incorrect legal description, which subjected all four of the Divine Parcels to the
foreclosure action.” But again, this was 2007 — long before Home Savings knew of the
incorrect legal description (an undisputed fact). Thus, we fail to see how Home Savings
(which we will do here), one could not logically extend that argument that it led to a mutual mistake regarding the four Carnegie parcels as well. To do so would be pushing all rational boundaries. Even if Norfolk Southern executives, real estate managers, and attorneys believed — unilaterally after negotiations — that the Agreement contained eight parcels of land, when they saw that the Agreement only listed the two parcels, they should have at least raised questions at that point before signing it. 16
could be “relying” on it.
{¶33} Norfolk Southern then points to several internal emails between its own
executives — emails between Robert Siik (group manager of assets and services) and
John Foley (Norfolk Southern’s internal real estate manager for the Cleveland territory),
as well as emails between these same Norfolk Southern executives and Pofok,
questioning what property this “deal” encompassed. Siik, after receiving a draft of the
Agreement listing only the two parcels, asked Foley, “would $600,000 get us ALL of the
remaining ‘Carnegie-Divine’ property east of the 10 acres we already own?” Foley
responded “yes.”
{¶34} But again, Foley worked for Norfolk Southern; this was a communication
between Foley and Siik. This does not establish that Home Savings was mistaken.
Indeed, there are no emails from Norfolk Southern to Home Savings expressing any
confusion as to how many parcels Norfolk Southern would be receiving in the deal. And
Norfolk Southern’s unilateral belief (i.e., mistake) does not equate to a mutual mistake.
{¶35} Norfolk Southern next points to a July 27, 2007 email from Jerry Causey
(Norfolk Southern’s in-house real estate attorney) to Fulton, asking him to “clarify a few
matters” regarding Fulton’s July 25, 2007 email to Pofok proposing the deal. See
Fulton’s email, supra. Causey asked Fulton:
In your email, you state that the property will be sold at sheriff’s sale “free of all liens.” I understand that there are several liens, including tax liens that have been sold to Plymouth Tax Service (?), which amount to over $100K, a CEI lien which amounts to over $65K, a water bill lien and an option/right of first refusal agreement belonging to 17
Carnegie Properties. What will occur with these encumbrances? We are currently having our title work updated to make sure there are no other problems that have arisen.
You also state that Home Savings will bid up to the total of its payoff, plus taxes, costs and $150K to be paid to Carnegie. Will the $600K from NS cover all these costs? What is the amount of the payoff, taxes and costs? What is the purpose of the payment to Carnegie? (Emphasis added to highlight what Norfolk Southern stresses in its argument here.)
{¶36} Fulton replied, explaining that Home Savings’ payoff, taxes, costs, and “carve out to
Carnegie,” amounted to $962,303.70. Fulton explained that regardless of that amount, Norfolk
Southern’s payment would be $600,000. Fulton then stated — and this is the one email and one
sentence that Norfolk Southern places so much emphasis on to claim that Home Savings was mistaken
as to the boundaries and size of the Property: “The carve out to Carnegie is to settle the right of first
refusal/lot split issues and permit the sale to go forward as quickly as feasible.”
{¶37} To understand the “lot split issue,” more background information is
necessary. In 2005, Norfolk Southern decided to expand its transportation “intermodal”
facility, or its “staging lot,” where containers are unloaded from a train and placed in a
staging area to await further transportation by truck. With that purpose in mind, Norfolk
Southern entered into a Purchase Option contract with Carnegie to purchase eight parcels
of land for $1,250,000 amounting to approximately 16 acres. Norfolk Southern later
learned, however, that Carnegie did not own two of the eight parcels; Divine did. And to
complicate matters further, Norfolk Southern also learned that Divine owned two adjacent
parcels that were in foreclosure. Despite these complications, Norfolk Southern opted to
purchase two of the Carnegie parcels (that were subject to the Purchase Option) 18
amounting to ten acres in late 2005.
{¶38} To further add to the complexity of the issues, Norfolk Southern also
discovered that a dilapidated apartment complex straddled one of the Divine parcels that
was subject to the Purchase Option Agreement with Carnegie (although the record is not
entirely clear as to how, Carnegie had an interest in the Divine parcels) and one of the
Divine parcels that was not subject to the Purchase Option Agreement with Carnegie (this
parcel was one of the two subject to the foreclosure action — PPN 784-13-001). Norfolk
Southern intended to demolish any buildings that were on the land it purchased so that it
could expand its “intermodal” facility. And it could not obviously demolish half of a
building.
{¶39} Thus, to purchase the remaining parcels from Carnegie under the Purchase
Option, the parcel with part of the apartment complex — that was subject to the Purchase
Option — needed to be split (meaning the parcel that was not subject to the Purchase
Option became larger and wholly contained the apartment building). After the lot split,
Norfolk Southern would then be purchasing a parcel that became smaller and did not
contain any part of the building. The other possibility to effectuate its purpose was that
Norfolk Southern could also purchase the parcel that contained the other half of the
apartment complex (the one not subject to the Purchase Option, but subject to the
foreclosure action).
{¶40} Norfolk Southern first attempted to obtain approval for the lot split from the 19
cities of Bedford and Maple Heights, as the properties also bordered both cities (as if the
matter were not complicated enough). Maple Heights ultimately approved the lot split,
but Bedford did not. In late 2006, Norfolk Southern entered into three-party negotiations
with Carnegie and Home Savings to try to purchase all of the property, including the six
remaining parcels subject to the Purchase Option (four owned by Carnegie and two
owned by Divine), as well as the two Divine parcels subject to the foreclosure action
(eight parcels of land total). But the three-party negotiations fell apart and the Purchase
Option expired on December 31, 2006.
{¶41} Norfolk Southern maintains that because of Fulton’s answer, “[t]he Norfolk
Southern Representatives reasonably interpreted this statement to have its apparent
meaning — that no lot split would be necessary because Norfolk Southern would receive
all four Divine Parcels.” They further claim, “Norfolk Southern logically interpreted Mr.
Fulton’s proposal to include all four Divine Parcels because all four Divine Parcels had
to be included to settle the lot split issue.” (Emphasis is Norfolk Southern’s.)
{¶42} But after reviewing the convoluted background of this case, this court does
not agree with Norfolk Southern that the “apparent meaning” of Fulton’s response to
Causey’s question was that “no lot split would be necessary because Norfolk Southern
would receive all four Divine Parcels.” Indeed, Fulton’s email proposal to Pofok was
that the property Norfolk Southern was purchasing “will be sold at sheriff’s sale as soon
as procedurally possible[.]” And the final written agreement spells out in detail that 20
Home Savings “is the owner and holder of two (2) mortgages against certain real property
* * * known as Permanent Parcel Nos. 784-13-001 and 812-01-003 (collectively ‘the
Property’).” The Agreement further states “the Property is the subject of a foreclosure
action” and it spells out that Home Savings would bid on the Property at the sheriff’s sale.
Home Savings was not offering to bid on four parcels of land. And despite the
incorrect legal description, only two parcels of land were subject to foreclosure, not four.
(See discussion infra regarding “Other Evidence Supporting Lack of Mutual Mistake.”)
{¶43} Moreover, even assuming that Norfolk Southern representatives were
reasonable in interpreting Fulton’s response to mean that they would be receiving the four
Divine parcels, this does not create a question of fact as to mutual mistake. It may create
a question of fact as to unilateral mistake or as to other claims against Home Savings (if
Fulton was attempting to intentionally mislead Norfolk Southern representatives), but not
mutual mistake. There is simply no evidence that Home Savings was mistaken as to the
amount of land that was included in the agreement.
{¶44} In sum, Norfolk Southern has not put forth any evidence establishing that
either party — it or Home Savings — ever mistakenly believed that the Property actually
included the extra parcels of land as incorrectly described in the foreclosure action.
Home Savings blindly copying the legal description in its filings in the foreclosure action
does not establish that it ever believed the Property included all of the land described.
Norfolk Southern’s Remaining Arguments 21
A. Listing the Property by PPNs is not Determinative
{¶45} Norfolk Southern argues that “even if the Agreement had only described the
Property by PPNs, listing the PPNs is in no way determinative, or even relevant, to
whether Home Savings was mistaken as to the size and dimensions of the land
encompassed by those PPNs.” (Emphasis is Norfolk Southern’s.) Norfolk Southern
states:
For example, imagine two parties contract for the sale of land located at 123 Tory Ave, but both parties mistakenly believe that the land includes “x” amount of acres, when in reality it only includes “y” amount of acres. When the parties’ mistake is realized, the simple fact that the parties identified the land by address is irrelevant to whether there was a meeting of the minds. The selling party may not opportunistically ignore its own mistake and claim that whatever land is actually encompassed by the property’s address is the land the buyer is required to purchase.
{¶46} In support of its hypothetical, Norfolk Southern cites to Thomas,
2007-Ohio-5350, in support (we discussed the facts of this case supra). But in its
example, as well as in Thomas, the party seeking to rescind the purchase agreement
established that there was a mutual mistake regarding the property. In Norfolk
Southern’s hypothetical, “both parties mistakenly believe that the land includes ‘x’
amount of acres, when in reality it only includes ‘y’ amount of acres.” (Emphasis
added.) Likewise, in Thomas, the Seventh District held that there was a mutual mistake
because both parties “expected that Ohio Power would be able to provide electric power
to the neighbor when the parties entered into the contract. This was a mistaken belief
and that mistake frustrates the purpose of the contract.” Id. at ¶ 35. 22
{¶47} But in the present case, Norfolk Southern has not established that a mutual
mistake existed at the time the parties entered into the Agreement. Specifically, Norfolk
Southern has not established that both parties, it and Home Savings, understood the
Agreement that listed two parcels to actually include four, or even eight parcels of land.
And significantly, this is not analogous to Thomas, where one party was in a better
position to know what land that was actually included. Indeed, Norfolk Southern had
highly experienced real estate attorneys and agents involved in the negotiations and
reviewing this Agreement, namely, its own outside real estate agent (Pofok), its own
in-house real estate attorney (Foley), and its own real estate manager (Causey).
B. Reliance on Outside Title Company
{¶48} Norfolk Southern also argues that it hired Chicago Title Company to review
the Agreement before it signed it and confirm what property it would be receiving.
Norfolk Southern claims that even the title company confirmed that it was getting the four
Divine parcels. But notably, Chicago Title was the exact title company — used by
Plymouth Park in the Foreclosure Action — that got the legal description wrong in the
first place. Thus, Norfolk Southern may have legal redress against Chicago Title, but not
Home Savings.
C. Windfall Argument
{¶49} Norfolk Southern further argues that Home Savings “attempts to convert the
parties’ mutual mistake into a potential windfall.” Because the Property (i.e., the two 23
parcels of land) only appraised and sold for $98,000 at the sheriff’s sale in December
2008, Norfolk Southern claims that is evidence that it would have never agreed to pay
$600,000 for property that essentially amounted to two acres of land, and was appraised
and sold for $98,000 in December 2008. This argument is moot, however, because we
have concluded that no mutual mistake exists. Nonetheless we will briefly address it.
{¶50} Home Savings specifically points to evidence in the record that directly
refutes Norfolk Southern’s assertion. For example, a November 2006 email from Pofok
to Norfolk representatives (Causey, Siik, and Foley) that states, “I spoke with the lender
for Divine Management and he told me if he got +/- $500K they could convince Divine
Management to sell the property and we wouldn’t need a lot split and could close ASAP.
The site totals 2.1187 acres.” The two parcels subject to the foreclosure action amounted
to 2.1 acres.
{¶51} When Foley reviewed Pofok’s email, he handwrote on the printed copy of
the email, “$235,993.76 per ac.” Pofok testified in his deposition that when he wrote the
email, he believed the 2.1187 acres referred to PPNs 812-01-003 and 784-13-001 — the
two parcels listed in the Agreement and subject to the foreclosure action. Replying to
Pofok’s email regarding the “+/- $500K,” Causey states, “very interesting,” and asks Siik,
“Rob — Is this something we would consider? Do we have that kind of money
budgeted? Note the per acre price is $235,993.76 not taking into consideration the 24
improvements.” To Pofok, Causey asks, “George — Do you think the lender/Divine
Management would accept less?”
{¶52} Although “+/- $500K” does not equal $600,000, it is certainly far more than
$98,000. Thus, Norfolk Southern’s argument is without merit.
Other Evidence Supporting Lack of Mutual Mistake
{¶53} We further note that Plymouth Park was the owner and holder of two tax
certificates, one for PPN 784-13-001 and one for PPN 812-01-003, due to tax
delinquencies on the parcels. The tax certificates at issue here were purchased under
R.C. 5721.33 and therefore were governed by R.C. 5721.37(A)(1). That section
provides in relevant part that
a certificate holder * * * may file with the county treasurer * * * a notice of intent to foreclose, * * * provided the certificate parcel has not been redeemed * * * and at least one certificate respecting the certificate parcel, held by the certificate holder filing the request for foreclosure or notice of intent to foreclose and eligible to be enforced through a foreclosure proceeding, has not been voided * * *[.]
{¶54} R.C. 5721.35(A) further provides that “the tax certificate vests in the
certificate holder the first lien previously held by the state * * *, superior to all other liens
and encumbrances upon the parcel described in the tax certificate * * * , in the amount of
the certificate redemption price * * *.”
{¶55} Plymouth Park’s Foreclosure Action explicitly stated that it applied to
“Cuyahoga County Auditor’s Permanent Parcel No. 784-13-001 and Permanent Parcel
No. 812-01-003.” Plymouth Park did not own tax certificates for the other two parcels 25
incorrectly included in the legal description of PPN 812-01-003. Although the legal
description in the PJR filed with the Foreclosure Action incorrectly described PPN
812-01-003, that does not mean that more property was subject to foreclosure.
Plymouth Park could not foreclose on property for which it had no interest. Nor did the
improper legal description invalidate the Foreclosure Action in any way. See Plymouth
Park Tax Servs., LLC v. Natl. Apt. Complex, 8th Dist. No. 94145, 2010-Ohio-4356 (this
court upheld the trial court’s judgment granting decree of foreclosure in a tax lien
foreclosure action despite the fact that the tax certificates contained an incorrect legal
description of the property). Thus, the incorrect legal description in the PJR here had no
bearing on the Agreement between Home Savings and Norfolk Southern.
{¶56} We conclude that Home Savings established as a matter of law that it was
not mistaken as to the size and boundaries of the Property in the Agreement, i.e., it
consisted of the two parcels plainly listed in the Agreement. Accordingly, we conclude
that the trial court erred when it granted Norfolk Southern’s summary judgment motion
and denied Home Savings’ motion.
{¶57} Home Savings’ assignment of error is sustained.
{¶58} Judgment reversed and remanded for a hearing on the damages Home
Savings is entitled to as a result of Norfolk Southern’s breach of contract.
It is ordered that appellant recover from appellee costs herein taxed.
The court finds there were reasonable grounds for this appeal. 26
It is ordered that a special mandate be sent to said court to carry this judgment into
execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
MARY J. BOYLE, PRESIDING JUDGE
JAMES J. SWEENEY, J., and KATHLEEN ANN KEOUGH, J., CONCUR