Eagle Realty Invs., Inc. v. Dumon

• Decision Date: 18 November 2022
• Docket Number: S. C-220087,C-220109,C-220111
• Citation: 201 N.E.3d 963
• Parties: EAGLE REALTY INVESTMENTS, INC., Frontage Lodging Investor Holdings, Inc., and Vail Hotel Holdings ESHV, LLC, Plaintiffs-Appellees, v. Peter G. DUMON, Graham L. Hershman, Julie A. Dumon, Michael S. Payne, Helmut A. Horn, and Julie A. Dumon, as Trustee of the Julie A. Dumon Trust Dated March 24, 2006, Defendants-Appellants.
• Court: Ohio Court of Appeals

201 N.E.3d 963

EAGLE REALTY INVESTMENTS, INC., Frontage Lodging Investor Holdings, Inc., and Vail Hotel Holdings ESHV, LLC, Plaintiffs-Appellees,

v.Peter G. DUMON, Graham L. Hershman, Julie A. Dumon, Michael S. Payne, Helmut A. Horn, and Julie A. Dumon, as Trustee of the Julie A. Dumon Trust Dated March 24, 2006, Defendants-Appellants.

NOS. C-220087

C-220109

C-220111

Court of Appeals of Ohio, First District, Hamilton County.

Date of Judgment Entry on Appeal: November 18, 2022

Vorys, Sater, Seymour, & Peas LLP, Emily E. St. Cyr, David F. Hine and Eric W. Richardson, Cincinnati, for Plaintiffs-Appellees.

Lindhorst & Dreidame Co., LPA, Bradley McPeek and Michael F. Lyon, Cincinnati, for Defendants-Appellants Peter Dumon and Julie Dumon, Individually and As Trustee of the Julie A. Dumon Trust Dated March 24, 2006.

Hahn Loesner & Parks, LLP, Daniel A. DeMarco, Christopher B. Wick and Andrew Y. Schiefer, Cleveland, for Defendants-Appellants Graham Hershman, Michael Payne, and Helmut Horn.

OPINION.

Bock, Judge.

{¶1} Defendants-appellants Peter Dumon and Julie Dumon, individually and in her capacity as a trustee of the Julie A. Dumon Trust (collectively "Dumons"), and defendants-appellants Graham Hershman, Michael Payne, and Helmut Horn (collectively "Non-Dumons") challenge the trial court's judgment in favor of plaintiffs-appellees Eagle Realty Investments, Inc., ("Eagle") Frontage Lodging Investor Holdings, LLC, ("Frontage") and Vail Hotel Holdings ESHC, LLC, ("Vail Hotel Holdings") (collectively "Beneficiaries"). For the following reasons, we affirm the trial court's judgment in part, but reverse the trial court's award of attorney fees and remand the case for further proceedings.

I. Facts and Procedure

{¶2} This appeal is the product of a failed attempt to develop a luxury hotel in Vail, Colorado. While the Dumons and Non-Dumons were experienced developers and managers in the hospitality industry, they lacked funding. Eagle and Frontage had capital. So, the Dumons and Non-Dumons entered a joint venture with Eagle and Frontage to form Vail Hotel Holdings. The parties signed an "Operating Agreement" to memorialize the joint-venture agreement, which identified Peter Dumon's LLC as the managing member of the project. This dispute centers on another agreement—a "Guaranty of Completion, Budgets Cash Flow and Other Matters" ("Guaranty"), which was created to induce the Beneficiaries to sign the "Operating Agreement."

{¶3} The Guaranty's introductory recital provides that Vail Hotel Holdings "shall enter into a Construction Contract with Haselden Construction, LLC, a Colorado limited liability company (the "Contractor "), which Construction Contract shall be a ‘costs plus’ contract subject to a guaranteed maximum price" ("Haselden Recital").

{¶4} Relevant here, in Section 2.1 of the Guaranty the Dumons and Non-Dumons "unconditionally and absolutely guarantee[d]" certain obligations:

(a) except as may be excused by an event of Force Majeure, Completion of the Project on or before the date that is twenty (20) months following the Construction Loan Closing ("Completion Date ") in accordance with the requirements of the Plans and Specs, the Operating Agreement, and the Construction Loan documents and in compliance with any and all applicable laws and requirements of all government authorities having jurisdiction over the project, free and clear of all liens, claims, encumbrances and rights of others (other than liens created by the Construction Loan documents and real estate taxes not yet due and payable);

(b) the timely payment of all costs of Completion * * * for an amount equal to or less than Thirty-Three Million, Nine Hundred Ninety-Seven Thousand Six Hundred Ninety-four Dollars ($33,997,694) (without using any of the funds of the Company to pay the amount, if any, by which the total of such costs exceeds the Guaranteed Maximum Price);

* * *

(h) the payment on demand of all Enforcement Costs (as hereinafter defined).

"Enforcement Costs " mean all costs incurred by Beneficiaries under Section 6 as well as reasonable attorneys’ and paralegals’ fees, including the cost of inside attorneys and paralegals, costs and expenses and all court costs and costs of appeal actually incurred by Beneficiaries in collecting any amount due Beneficiaries under this Guaranty or in prosecuting any action against Guarantors with respect to all or any part of the Guaranty Obligations.

{¶5} In 2016, the Dumons and Non-Dumons signed a "Reaffirmation of Guaranty" ("Reaffirmation") to "reaffirm their respective obligations under the Guaranty" to induce Eagle and Frontage to explore potential transactions related to their interests in Vail Hotel Holdings. Specifically, the Dumons and Non-Dumons "acknowledge[d] and agree[d] that all of the terms, conditions, waivers, consents, and covenants in the Guaranty remain unaltered and in full force and effect, and that the Guaranty is a legal, valid and binding obligation."

{¶6} But the development stalled and in 2019 the Beneficiaries sued the Dumons and Non-Dumons, alleging a breach of the Guaranty and requesting damages and attorney fees. Following two hearings, the trial court granted the Beneficiaries’ summary-judgment motion and awarded $9,905,199.77 in damages, plus prejudgment interest and attorney fees. The trial court determined that the Guaranty was valid, enforceable, and unambiguous, and that the Dumons and Non-Dumons breached the agreement by failing to perform their obligations under the Guaranty. In addition, the trial court found the request for attorney fees reasonable. Relevant here, the trial court denied as moot the Non-Dumons’ motion to amend their answer to include the nonoccurrence of a condition precedent as a defense. Furthermore, the trial court denied the Dumons’ motion to strike an affidavit submitted to the court by the Beneficiaries in support of their request for attorney fees.

{¶7} The Dumons and Non-Dumons filed appeals, which we consolidated.

II. Law and Analysis

{¶8} The Dumons challenge the trial court's judgment in two assignments of error. For their part, the Non-Dumons raise three assignments of error. For clarity and ease of analysis, we consider some arguments together. We review the trial court's grant of summary judgment de novo.

Wsb Rehab. Servs., Inc. v. Cent. Accounting Sys., Inc., 1st Dist. Hamilton Nos. C-210454 and C-210467, 2022-Ohio-2160, 2022 WL 2287017, ¶ 22. Summary judgment is proper if there are no issues of material fact, and, construing the evidence most strongly in favor of the nonmoving party, the moving party is entitled to judgment as a matter of law. Civ.R. 56(C).

The Guaranty

{¶9} The trial court's entry of summary judgment in favor of the Beneficiaries was proper if 1.) a valid contract existed, 2.) the Dumons and Non-Dumons failed to perform when performance was due, and 3.) the Beneficiaries suffered damages or losses as a result. Gilman v. Physna , LLC, 1st Dist. Hamilton No. C-200457, 2021-Ohio-3575, 2021 WL 4592512, ¶ 17, citing Lucarell v. Nationwide Mut. Ins. Co. , 152 Ohio St.3d 453, 2018-Ohio-15, 97 N.E.3d 458, ¶ 41. "Where the facts are undisputed and the only question to be resolved is whether a breach of contract occurred, a question of law exists for the court to decide." Stephan Business Ents., Inc. v. Lamar Outdoor Advertising Co. , 1st Dist. Hamilton No. C-070373, 2008-Ohio-954, 2008 WL 612267, ¶ 16.

1. Conditions Precedent

{¶10} In their first assignment of error, the Dumons raise an issue of contract interpretation, arguing that the nonoccurrence of an alleged condition precedent excused their obligations under the Guaranty. The Non-Dumons argue the same in their first assignment of error. We review the meaning of a contract de novo. Groen v. Children's Hosp. Med. Ctr. , 2012-Ohio-2815, 972 N.E.2d 648, ¶ 19 (1st Dist.).

{¶11} The Dumons and Non-Dumons maintain that the plain and unambiguous language of the Haselden Recital, which provided that Vail Hotel Holdings "shall enter into a Construction Contract with Haselden Construction, LLC, a Colorado limited liability company," constituted a condition precedent. In a contract, a condition precedent "is an act or event that must occur before performance obligations arise." Gilman at ¶ 19, citing Transtar Elec., Inc. v. A.E.M. Elec. Servs. Corp., 140 Ohio St.3d 193, 2014-Ohio-3095, 16 N.E.3d 645, ¶ 22. The nonoccurrence of a condition precedent "excuses performance under the contract and is a defense to a breach-of-contract claim." Id. The parties agree that a construction contract with Haselden never materialized. The Dumons and Non-Dumons contend that their obligations under the Guaranty were never triggered because Haselden was never involved in the project.

{¶12} In contract law, conditions precedent are disfavored and "will not be found unless the agreement plainly shows an intent to the contrary." City of Westlake v. VWS, Inc., 8th Dist. Cuyahoga No. 100180, 2014-Ohio-1833, 2014 WL 1775899, ¶ 24, quoting Campbell v. George J. Igel & Co., 2013-Ohio-3584, 3 N.E.3d 219 ¶ 13 (4th Dist.). Any interpretation of the Haselden Recital must "give effect to the intent of the parties." Transtar at ¶ 9. To determine the parties’ intent, we consider " ‘the language of a particular provision, the language of an entire agreement, or the subject matter of an agreement.’ " Campbell at ¶ 13, quoting Adkins v. Bratcher , 4th Dist. Washington No. 07CA55, 2009-Ohio-42, 2009 WL 44822, ¶ 32, quoting Hiatt v. Giles , 2d Dist. Darke No. 1662, 2005-Ohio-6536, 2005 WL 3346172, ¶ 23. As always, we are instructed to avoid any interpretation of a contract that would render terms or provisions superfluous or meaningless. See Bates v. Bates , 7th Dist. Noble No. 21 No. 0482, 2022-Ohio-1055, 2022 WL 967392, ¶ 38, citing Fifth Third Mtge. Co. v. Rankin , 4th Dist. Pickaway No. 10CA45, 2011-Ohio-2757, 2011 WL 2206629, ¶ 24, citing Capital City Community Urban Redev. Corp. v. City of Columbus , 10th Dist. Franklin No....