Busler v. D & H Mfg., Inc.

• Decision Date: 16 June 1992
• Docket Number: No. 91AP-1175,91AP-1175
• Court: Ohio Court of Appeals
• Parties: BUSLER et al., Appellants, v. D & H MANUFACTURING, INC. et al., Appellees. *

Page 385

81 Ohio App.3d 385

611 N.E.2d 352

BUSLER et al., Appellants, v. D & H MANUFACTURING, INC. et al., Appellees. ^*

No. 91AP-1175.

Court of Appeals of Ohio, Tenth District, Franklin County.

Decided June 16, 1992.

Robert N. Black, Jr. Co., L.P.A., and Robert N. Black, Jr., Columbus, for appellants.

Campbell, Hornbeck, Chilcoat & Veatch and Daniel F. Ryan, Columbus, for appellees.

PETREE, Judge.

Plaintiff Lewis Busler ¹ appeals from the Franklin County Court of Common Pleas, which granted summary judgment against him on the basis of the Statute of Frauds and the parol evidence rule. On appeal, plaintiff presents the following assignments of error:

"I. The trial court erred in finding that there were no genuine issues of material fact.

"II. The trial court erred in granting summary judgment in favor of defendant."

Plaintiff Lewis Busler assigned all of his right, title, and interest in a contract to purchase the stock of a privately held, close corporation called "D & H Manufacturing, Inc." ("D & H") to his longtime business associate, defendant Cassius Sisler. In return, Sisler agreed to indemnify Busler for about $876,000 in bank loans that the two men borrowed to finance the D & H acquisition. ²

In this action, Busler maintains that, as additional consideration for the assignment, defendants also orally promised to convey D & H's land and building to him and pay him periodic rent for its use. He contends that he took part in the acquisition of D & H as a partner with Sisler and was represented in the transaction by Sisler's attorney, defendant David L. Chilcoat. Busler further alleges that Sisler and Chilcoat conspired to fraudulently induce him to sign the assignment in reliance on their oral promise to convey the real estate to him. In addition, he insists that they never paid or intended to pay the rents as promised. After the assignment, Busler worked for nine months managing the operations of D & H without pay, but the real estate was never transferred, despite Busler's repeated demands. Busler therefore seeks rescission of the assignment, money damages, or restitution from defendants. ³

Considering defendants' motion for summary judgment and the conflicting evidence on whether an oral promise to convey real estate was made, a referee of the common pleas court found that plaintiff was precluded from pursuing any claims for the D & H real estate by virtue of the Statute of Frauds and the parol evidence rule. The trial court adopted the referee's report and recommendation and granted summary judgment to defendants.

The question presented by the assignments of error in this appeal is whether the trial court erred in granting summary judgment to defendants on the basis of the Statute of Frauds or the parol evidence rule.

I

The Statute of Frauds provides that a contract to transfer an interest in land must be evidenced by some writing signed by the party to be charged. ⁴ "This statute serves to ensure that transactions involving a transfer of realty interests are commemorated with sufficient solemnity. A signed writing provides greater assurance that the parties and the public can reliably know when such a transaction occurs. It supports the public policy favoring clarity in determining real estate interests and discourages indefinite or fraudulent claims about such interests." N. Coast Cookies, Inc. v. Sweet Temptations, Inc. (1984), 16 Ohio App.3d 342, 348, 16 OBR 391, 398, 476 N.E.2d 388, 395.

In Marion Prod. Credit Assn. v. Cochran (1988), 40 Ohio St.3d 265, 533 N.E.2d 325, the Supreme Court of Ohio addressed the issue of whether a fraudulent inducement claim could overcome a Statute of Frauds defense. The plaintiffs in that case mortgaged their farm to a bank by signing a written agreement. When the bank foreclosed, the plaintiffs claimed that the bank had also orally agreed, contrary to the terms of the signed agreement, that the mortgage would be released when plaintiffs' son sold his crop. In light of the bank's representations, the plaintiffs asserted various contract and tort theories to vitiate the signed agreement, including fraud, fraud in the inducement, deceit, wrongful inducement, reformation, promissory estoppel, restitution, and part performance. However, the Supreme Court rejected these theories and enforced the agreement as it was written. While the court recognized the equitable principle that the Statute of Frauds may not be interposed in furtherance of fraud, the court nevertheless held that a fraudulent inducement claim cannot be made out by asserting that the wrongful inducement was a promise falling within the scope of the signed agreement but which was not ultimately contained in it. ⁵

Although the allegations in the present case resemble those made in Marion, that case is not controlling, as the referee found. For, in this case, plaintiff presented evidence of a signed acknowledgement which may satisfy the Statute of Frauds.

Plaintiff filed a copy of a handwritten letter with the trial court that appears to be signed by Sisler. ⁶ In this undated letter, Sisler angrily wrote to Busler and told him that D & H was no longer Sisler's responsibility because he felt that Busler should not have told other people about Busler's "future involvement in certain real estate." Apparently, defendant Sisler felt this breach of secrecy would have a negative impact on the D & H transaction, the union, and future business.

Any signed memorandum is sufficient to satisfy the Statute of Frauds so long as it (1) identifies the subject matter of the agreement, (2) establishes that a contract has been made, and (3) states the essential terms with reasonable certainty. N. Coast Cookies, Inc., supra, 16 Ohio App.3d at 349, 16 OBR at 398, 476 N.E.2d at 396, citing 1 Restatement of the Law 2d, Contracts (1981) 336, Section 131. The memorandum may be written after the alleged oral promise occurred. See McGilvery v. Shadel (1949), 87 Ohio App. 345, 43 O.O. 74, 95 N.E.2d 1. It does not have to be a formal memorial of the agreement. Rather, a signed acknowledgement of an oral promise can qualify as a memorandum which satisfies the statute, even if the acknowledgement repudiates the oral promise. Restatement, supra, at 347, Section 133, Illustration 4.

Here, the letter signed by Sisler, although ambiguous, appears to acknowledge that Busler was to be involved in the real estate of D & H. Considering the circumstances and the tenor of the letter, this language suggests that Sisler meant a transfer of the D & H real estate to Busler. Defendants have not submitted any evidence for summary judgment purposes to establish that Sisler was referring to some other real estate or some other involvement with it. Consequently, a genuine issue of material fact exists as to whether Sisler acknowledged an oral promise to transfer the D & H real estate.

II

Another basis for the trial court's grant of summary judgement was the parol evidence rule. This misnamed and often misunderstood rule is not really a rule of evidence but instead is a rule of substantive law designed to protect the integrity of final, written agreements. Charles A. Burton, Inc. v. Durkee (1952), 158 Ohio St. 313, 49 O.O. 174, 109 N.E.2d 265, paragraph one of the syllabus. If contracting parties integrate their negotiations and promises into an unambiguous, final, written agreement, then evidence of prior or contemporaneous negotiations, understandings, promises, representations, or the like pertaining to the terms of the final agreement are generally excluded from consideration by the court. Id. at paragraph two of the syllabus; Yoder v. Columbus & S. Elec. Co. (1974), 39 Ohio App.2d 113, 68 O.O.2d 288, 316 N.E.2d 477. This rule is not confined to excluding merely parol communications; it excludes contrary written communications as well.

Notwithstanding, many Ohio cases have held that a party may offer evidence of prior or contemporaneous representations to prove fraud in the execution or inducement of an agreement. See, e.g., Stegawski v. Cleveland Anesthesia Group, Inc. (1987), 37 Ohio App.3d 78, 84, 523 N.E.2d 902, 908. Indeed, without such evidence it would be difficult if not impossible to prove fraud. However, it is important to realize that the law has not allowed parties to prove fraud by claiming that the inducement to enter into an agreement was a promise within the scope of the integrated agreement but which was not ultimately included in it. Id. at 84, 523 N.E.2d at 908; AmeriTrust Co. v. Murray (1984), 20 Ohio App.3d 333, 335, 20 OBR 436, 438, 486 N.E.2d 180, 183. Hence, if there is a binding and integrated agreement, then evidence of prior or contemporaneous representations is not admissible to contradict the unambiguous, express terms of the writing. Restatement, supra, at 136, Section 215.

Although the assignment in the present case appears to be integrated, plaintiff may be able to avoid the operation of the parol evidence rule in this case on the theory that there was no consideration supporting the assignment. For if there was no consideration given by Sisler to Busler for the rights to the D & H stock, then there was no binding contract and the parol evidence rule would not apply.

Plaintiff's argument on this point is that the indemnification language contained in the assignment was not legal consideration because Sisler was already obligated to indemnify and hold Busler harmless under existing principles of partnership law. To support this argument, plaintiff relies on one of the few cases on this...