Portage Community Bank v. Fazio

2017 Ohio 5774

• Court: Ohio Court of Appeals
• Decided: July 10, 2017
• Docket: 2016-P-0056
• Status: Published

Opinion

[Cite as Portage Community Bank v. Fazio, 2017-Ohio-5774.]

IN THE COURT OF APPEALS

ELEVENTH APPELLATE DISTRICT

PORTAGE COUNTY, OHIO

PORTAGE COMMUNITY BANK, : OPINION

Plaintiff-Appellee, : CASE NO. 2016-P-0056 - vs - :

VINCENT FAZIO, JR., et al., :

Defendants, :

FAIRMOUNT PROPERTIES, L.L.C., :

Defendant-Appellee, :

PUB PROPERTIES, L.L.C., :

Defendant-Appellant. :

Civil Appeal from the Portage County Court of Common Pleas. Case No. 2015 CV 00038.

Judgment: Affirmed.

William D. Lentz, Lentz, Noble & Heavner, LLC, 228 West Main Street, P.O. Box 248, Ravenna, OH 44266 (For Plaintiff-Appellee).

Mark S. Fusco and David M. Kroh, Walter & Haverfield, LLP, The Tower at Erieview, 1301 East Ninth Street, Suite 3500, Cleveland, OH 44114 (For Defendant-Appellee).

Jeffrey J. Fanger and John F. McIntyre, Fanger and Associates LLC, 36 Alpha Park, Highland Heights, OH 44143 (For Defendant-Appellant). TIMOTHY P. CANNON, J.

{¶1} A notice of appeal was filed on behalf of appellant, Pub Properties, L.L.C.,

from the August 12, 2016 judgment of the Portage County Court of Common Pleas,

which granted appellee, Portage Community Bank’s (“PCB”), motion for summary

judgment and default judgment and also issued a decree in foreclosure. Although Pub

Properties’ appellate brief notes it was filed on behalf of other defendants, no notice of

appeal was filed for any other defendant-appellant. For the following reasons, the trial

court’s judgment is affirmed.

{¶2} On January 27, 2006, Vincent Fazio, Jr., who appears to have been an

agent of Pub Properties and Pub Acquisition, L.L.C., executed and delivered a note

(“Note #1”) to PCB in the amount of $472,000 to finance the purchase of commercial

real estate. Pub Acquisition signed a guaranty agreement, guaranteeing Fazio’s

performance of all obligations under the note. Fazio secured payment of the note with a

first mortgage on the real property located at 114 Erie St., Kent, Ohio 44240 and 211

Franklin Ave., Kent, Ohio 44240. On May 16, 2006, Fazio transferred his interest in

those properties to Pub Acquisition.

{¶3} On March 19, 2010, Pub Acquisition executed and delivered a note (“Note

#2”) to PCB in the amount of $142,500. Pub Properties signed a guaranty agreement

and secured the note by a mortgage deed, conveying to PCB in fee simple the

aforementioned real property.

{¶4} On January 16, 2015, PCB filed a complaint in foreclosure, alleging that

Fazio and Pub Acquisition had defaulted under the terms of their notes. The complaint

named the following parties as defendants: Vincent Fazio, Jr.; unknown spouse of

Vincent Fazio, Jr.; Mugs and Jugs Real Estate Co., LLC; Pub Acquisition, L.L.C.; Pub

2 Properties, L.L.C.; Tax Ease Ohio, L.L.C.; Joe Hand Promotions, Inc.; Fairmount

Properties, L.L.C.; Bethany Allen; and unknown tenant at 211 Franklin Avenue, Kent,

Ohio 44240, later determined to be Club Ramella, L.L.C. The complaint alleged

$517,634.49 was owed on Note #1, and $136,109.45 was owed on Note #2.

{¶5} Appellee, Fairmount Properties, L.L.C., filed an answer on February 23,

2015, admitting an interest in the properties subject to foreclosure by virtue of a January

27, 2014 purchase agreement between Fairmount Properties and Pub Properties.

Fairmount Properties stated it held an equitable lien against the properties in the

amount of $35,000.

{¶6} Pub Properties, Fazio, and Pub Acquisition filed an answer instanter with

leave of court on April 7, 2015. They denied default on the notes and asserted the

affirmative defenses of failure to state a cause of action and equitable estoppel.

{¶7} On May 4, 2015, Club Ramella filed a motion to dismiss for failure to join a

necessary party. The motion stated that Club Ramella was the unknown tenant at 211

Franklin Ave. listed in the complaint. The motion alleged PCB failed to join Fanger

Enterprises, LLC, dba Ramella Pizzeria ( “Fanger Enterprises”), a tenant at 114 Erie St.,

as a party to the action. PCB subsequently filed a motion to join Fanger Enterprises

and Club Ramella as parties, which was granted on May 14, 2015.

{¶8} Fanger Enterprises and Club Ramella filed a joint answer on December 3,

2015. They denied the allegations in the complaint and asserted several affirmative

defenses, including failure to mitigate damages.

{¶9} PCB filed a motion for summary judgment and default judgment on March

11, 2016. The motion requested summary judgment against Fazio, Pub Properties, and

Pub Acquisition. PCB asserted it was the holder of the notes and mortgage deeds, the

3 notes were in default for non-payment, and it was entitled to have the real estate sold

and have judgment paid from the proceeds of the sale. PCB attached several exhibits

to its motion, including the notes and mortgage agreements and the affidavit of an

employee with knowledge about the notes and mortgages at issue. The motion also

requested default judgment against the unknown spouse of Vincent Fazio, Jr., Bethany

Allen, unknown tenant, and Tax Ease Ohio.

{¶10} Pub Properties, Fazio, and Pub Acquisition did not file a brief in opposition

to the summary judgment motion.

{¶11} On May 6, 2016, Fanger Enterprises and Club Ramella filed a response in

opposition to PCB’s motion for summary judgment. They argued the motion should be

denied because of PCB’s failure to mitigate damages. They alleged PCB had

numerous opportunities to mitigate damages by selling the notes on the subject

properties or permitting the sale of the subject properties. The response alleged Jeffrey

Fanger and another individual had inquired about purchasing the notes or real

properties, but that PCB had refused those offers. Attached to the response was an

affidavit from Jeffrey Fanger and copies of e-mails containing the offers to buy the notes

or properties and PCB’s denials of those offers.

{¶12} PCB filed a reply to Fanger Enterprises and Club Ramella’s response in

opposition on May 20, 2016. PCB asserted that Fanger Enterprises and Club Ramella,

as objecting tenants, were not obligated to PCB on the notes, either as primary obligors

or guarantors, and that neither party owned the real estate subject to foreclosure. PCB

argued, therefore, that failure to mitigate damages was not an appropriate defense for

Fanger Enterprises and Club Ramella to raise.

4 {¶13} The trial court entered judgment on August 12, 2016, granting PCB’s

motion for summary judgment and default judgment. The judgment also granted a

decree in foreclosure. The court rendered judgment in favor of PCB against Pub

Properties in the amount of $517,634.49, plus interest; and against Pub Properties and

Pub Acquisition, jointly and severally, in the amount of $136,109.45, plus interest, and

$41,019.60 for advancements of funds to satisfy tax liens, reasonable attorney fees,

costs of the title examinations and update, and other costs under its notes and security

agreement. No personal judgment was rendered against Fazio because he was

granted a discharge in Chapter 7 Bankruptcy on November 10, 2015.

{¶14} Pub Properties filed a timely notice of appeal from the August 12, 2016

judgment on September 9, 2016. On the same date, Pub Properties filed a motion for

reconsideration and to set aside the court’s August 12, 2016 judgment in the trial court.

{¶15} On October 31, 2016, in this court, Pub Properties filed a motion to

remand for a ruling on the motion for reconsideration. This court granted Pub

Properties’ motion to remand, construing the motion for reconsideration as a Civ.R.

60(B) motion to vacate a final judgment. On remand, the trial court also construed the

motion for reconsideration as a Civ.R. 60(B) motion. The trial court denied the motion

on December 14, 2016.

{¶16} On appeal, Pub Properties asserts two assignments of error:

[1.] The trial court committed prejudicial error in granting Plaintiff- Appellee, Portage Community Bank’s motion for summary judgment, motion for default judgment and decree in foreclosure as genuine issues of material fact existed regarding Plaintiff-Appellee Portage Community Bank’s failure to mitigate its damages precluding the granting of summary judgment.

[2.] The trial court committed prejudicial error on remand in denying Defendant-Appellant Pub Properties, LLC’s motion for

5 reconsideration, which it considered as a Civ. Rule 60(B) motion, as Defendant-Appellant demonstrated the existence of a meritorious defense, that Defendant-Appellant Pub Properties, LLC was entitled to relief under multiple sections of Civ. Rule 60(B)(1)- (5) and the motion was timely filed.

{¶17} Pursuant to R.C. 2505.22 and Local Rule 16(C), Fairmount Properties has

assigned two cross-assignments of error:

[1.] The trial court by denying Defendant-Appellant Pub Properties, LLC’s Motion for Reconsideration, it must be presumed that by issuing the final judgment, the trial court exhibited its intent to completely dispose of the case, including all pending motions and thus specifically overruling Pub Properties’ Motion for Leave to File an Amended Answer and Crossclaim.

[2.] The Court of Appeal should disregard any and all errors not assigned and separately argued in the brief by the Defendant- Appellant Pub Properties, LLC.

{¶18} In its first assignment of error, Pub Properties argues the trial court

committed error in granting PCB’s motion for summary judgment when Pub Properties,

Fanger Enterprises, and Club Ramella demonstrated a genuine issue of material fact

regarding PCB’s failure to mitigate damages. In response, PCB asserts Pub Properties

waived the defense of failure to mitigate damages when it failed to include it as an

affirmative defense in its pleadings. PCB further asserts that Pub Properties failed to

file a brief in opposition to the motion for summary judgment. PCB argues Pub

Properties cannot rely on Fanger Enterprises and Club Ramella’s affirmative defense

and response in opposition to summary judgment because neither Fanger Enterprises

nor Club Ramella own the properties at issue.

{¶19} Summary judgment is proper when

(1) [n]o 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

6 strongly in favor of the party against whom the motion for summary judgment is made, that conclusion is adverse to that party.

Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327 (1977), citing Civ.R. 56(C).

{¶20} “[T]he 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 [e.g., pleadings, depositions, answers to interrogatories, etc.] 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 (1996), citing Civ.R.

56(C) and Celotex Corp. v. Catrett, 477 U.S. 317, 323-324 (1986). If the moving party

satisfies this burden, the nonmoving party has the burden to provide evidence

demonstrating a genuine issue of material fact, pursuant to Civ.R. 56(E). Id. at 293.

{¶21} On appeal, we review a trial court’s entry of summary judgment de novo,

i.e., “independently and without deference to the trial court’s determination.” Brown v.

Cty. Commrs. of Scioto Cty., 87 Ohio App.3d 704, 711 (4th Dist.1993) (citation omitted);

see also Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105 (1996).

{¶22} Failure to mitigate damages is an affirmative defense that is waived if it is

not raised in a party’s pleading. Windsor v. Riback, 11th Dist. Geauga Nos. 2007-G-

2775 & 2007-G-2781, 2008-Ohio-2005, ¶57. Pub Properties therefore waived the

affirmative defense of failure to mitigate damages because it was not raised in Pub

Properties’ answer.

{¶23} Furthermore, Pub Properties cannot rely on Fanger Enterprises and Club

Ramella’s affirmative defenses and response in opposition to summary judgment.

Fanger Enterprises and Club Ramella were named as parties in the foreclosure action

because they were tenants occupying the properties subject to foreclosure. As tenants,

7 they had an interest in the property and were considered necessary parties. See

Hembree v. Mid-America Fed. S. & L. Assn., 64 Ohio App.3d 144, 152 (2d Dist.1989)

(the holder of a right or interest in the property that attached subsequent to the

mortgage is a “necessary party” in order to foreclose and convey his right or interest).

However, Fanger Enterprises and Club Ramella could not assert an affirmative defense

to PCB’s claim that Pub Properties defaulted on the notes because Fanger Enterprises

and Club Ramella were not parties to the notes or mortgage agreements between Pub

Properties and PCB.

{¶24} “‘Only a party to a contract or an intended third-party beneficiary of a

contract may bring an action on a contract in Ohio.’” Citimortgage, Inc. v. Carpenter, 2d

Dist. Montgomery No. 24741, 2012-Ohio-1428, ¶14, quoting Grant Thornton v. Windsor

House, Inc., 57 Ohio St.3d 158, 161 (1991). As the Second Appellate District explained

generally about affirmative defenses in contract actions,

[a]n affirmative defense, like a cause of action, is a claim of right. In a cause of action, the claim of right is a claim to relief; in an affirmative defense, the claim of right is the avoidance of liability under another’s claim to relief. It follows then, that a party seeking to assert an affirmative defense under a contract must either be a party to the contract or an intended third-party beneficiary of a contract.

Id. at ¶15.

{¶25} Here, Fanger Enterprises and Club Ramella were not parties to or third-

party beneficiaries of the notes or mortgage agreements with PCB. Additionally, Fanger

Enterprises and Club Ramella were not liable to PCB on the notes when Pub Properties

defaulted. Therefore, Fanger Enterprises and Club Ramella could not raise a defense

to liability where it was never alleged that Fanger Enterprises and Club Ramella were

liable on the notes. Pub Properties failed to assert the affirmative defense of failure to

8 mitigate damages and failed to file a brief in opposition to PCB’s motion to summary

judgment. It cannot now rely on the fact that two parties not liable on the notes raised

the affirmative defense.

{¶26} Pub Properties’ first assignment of error is without merit.

{¶27} In its second assignment of error, Pub Properties argues the trial court

erred in denying its motion for reconsideration, construed as a Civ.R. 60(B) motion,

because Pub Properties met the requirements of Civ.R. 60(B) under GTE Automatic

Elec., Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146 (1976), paragraph two of the

syllabus. PCB asserts that any argument with regard to the Civ.R. 60(B) motion is not

properly before this court because Pub Properties has not filed a timely appeal from the

trial court’s December 14, 2016 judgment entry, which denied that motion.

{¶28} In order for an appeal to be timely, a party must file a notice of appeal

within 30 days of the entry of judgment. App.R. 4(A)(1). If an appellant fails to file a

notice of appeal within 30 days from the entry of judgment, then the appeal from that

order is untimely and is a jurisdictional bar to review in an appellate court. See App.R.

3(A).

{¶29} Here, Pub Properties initially filed an appeal from the trial court’s August

12, 2016 judgment, granting PCB’s motion for summary judgment. Subsequently, Pub

Properties filed a motion for reconsideration, construed as a Civ.R. 60(B) motion, in the

trial court. The trial court was able to consider that motion while the initial appeal was

pending because the matter was remanded by this court. See Howard v. Catholic

Social Services, 70 Ohio St.3d 141, 147 (1994) (citations omitted) (an appeal divests

the trial court of its jurisdiction to consider a Civ.R. 60(B) motion unless the reviewing

court confers jurisdiction by remanding the matter to the trial court for consideration

9 while the appeal is pending). The trial court’s December 14, 2016 judgment denying the

Civ.R. 60(B) motion was a final, appealable order. See Colley v. Bazell, 64 Ohio St.2d

243, 245 (1980) (“it is well settled that a judgment denying a motion for relief from

judgment filed pursuant to Civ.R. 60(B) is itself a final appealable order”). Pub

Properties failed to timely appeal from that judgment. Therefore, any arguments

pertaining to the trial court’s denial of the Civ.R. 60(B) motion are not properly before

this court.

{¶30} Pub Properties’ second assignment of error is overruled.

{¶31} The judgment of the Portage County Court of Common Pleas is affirmed.

Pursuant to R.C. 2505.22, because we have affirmed the trial court’s judgment we will

not address the cross-assignments of error raised by Fairmount Properties. See Hicks

v. Cadle Co., 11th Dist. Trumbull No. 2014-T-0103, 2016-Ohio-4728, ¶32.

DIANE V. GRENDELL, J.,

THOMAS R. WRIGHT, J.,

concur.