Natl. City Bank v. Welch

• Decision Date: 29 June 2010
• Docket Number: No. 09AP-1203.,09AP-1203.
• Citation: 2010 -Ohio- 2981,936 N.E.2d 539
• Parties: NATIONAL CITY BANK, Appellee, v. WELCH, Admn., et al., Appellants.
• Court: Ohio Court of Appeals

936 N.E.2d 539

2010 -Ohio- 2981

NATIONAL CITY BANK, Appellee,

v.WELCH, Admn., et al., Appellants.

No. 09AP-1203.

Court of Appeals of Ohio,

Tenth District, Franklin County.

Decided June 29, 2010.

Weltman, Weinberg & Reis Co., L.P.A., Stephen A. Santangelo, and Angela Coriell, Columbus, for appellee.

Joseph Colburn, Jr., Columbus, for appellant Mary Welch.

Ron O'Brien, Franklin County Prosecuting Attorney, and Adria Fields, Assistant Prosecuting Attorney, for appellant Franklin County Treasurer.

Charles Bendig, for appellant Tarry Gullett.

TYACK, Presiding Judge.

*643 {¶ 1} Appellant Tarry Gullett appeals from the Franklin County Court of Common Pleas decision granting summary judgment to appellee, National City Bank, in this foreclosure action. Gullett is not the mortgagor and, in fact, has no present possessory interest in the real property at issue. However, the recorded deed to the property contains a restriction grantingGullett a right of first refusal (a.k.a. preemptive right) to purchase the property from her deceased relative's estate. The mortgagor, Bob Spriggs, took title to the property in 1998, when it was deeded to him by his late mother's estate. The deed stated that if Spriggs ever decided to sell the family home, his siblings would have the right to purchase it-either from Spriggs, or his estate, in the event of his death-for $20,590.31. Spriggs subsequently took a loan against the property from appellee, National City Bank, and then died prior to paying off the mortgage. The bank filed an action in foreclosure against Spriggs's estate, and, having notice of the deed restriction, joined the members of the class of which Gullett is a member. Until the foreclosure action, Gullett had no knowledge of her interest in the property, but upon learning of her right to purchase, she tendered the specified amount to the bank. The bank, however, refused to sell to Gullett.

{¶ 2} Gullett filed a counterclaim against the bank, and the parties filed cross-motions for summary judgment. The trial court granted judgment for the bank on the basis that the deed language granted Gullett a right to purchase the property only from Spriggs or his estate-i.e., not the bank or some third party-and that a sale by a creditor did not trigger Gullett's preemptive rights. At issue here is whether a mortgagee with notice of a deed restriction that grants a third party some future interest in the real property is bound by the language in the *644 deed. Based on the reasoning that follows, we answer this question in the affirmative, and reverse the decision of the trial court.

{¶ 3} Although the facts of this case are not in dispute, it is necessary to review them so that we may fully understand the legal issues. Gullett and Spriggs were children of Mary Grambo. When Mary died, her estate deeded the family home known as 3903 Curtis Avenue, Grove City, Ohio, to Bob Spriggs and his wife Sally. The Spriggs took title to the property on May 13, 1998, and the deed was recorded with the Franklin County Recorder containing the following restriction:

In the event that the subject premises are not sold prior to the death of both grantees, the then surviving children of Mary H. Grambo shall have the right of first refusal to purchase the subject premises from the estate or estates of grantees, with the sale price for the subject premises to be an amount equal to the sum of $20,590.31 plus the amount of interest paid by the grantees on the loan obtained in order to purchase the subject premises.

{¶ 4} In 2001, the Spriggs took a loan for $58,000 from National City Bank, using the property as collateral. Nothing in the restriction precluded placement of a mortgage on the property. They gave a mortgage to the bank and took a mortgage deed, which was also recorded. The mortgage deed was properly recorded, specifically including the above deed restriction.

{¶ 5} The Spriggses purportedly made payments on the mortgage for a while, but eventually defaulted. Sally Spriggs died on September 7, 2006, and her interest in the property was conveyed to Spriggs. Spriggs then died on August 27, 2008. Shortly thereafter, Gullett learned of Spriggs's death, and her preemptive right to purchase, at which time she notified the estate's administrators that she would be exercising her preemptive right to purchase the property. Gullett also gave notice to her siblings (the remaining surviving children of Mary Grambo) of her desire to purchase the property. None of the other class members expressed interest in obtaining the property or asked to be included in the transaction.

{¶ 6} The bank filed its foreclosure action on November 5, 2008, alleging that they were entitled to foreclose on the property as a result of Spriggs's note being in default. Gullett filed a counterclaim for specific performance, as well as for damages for the bank's alleged tortious interference with a business relationship.

{¶ 7} On cross-motions for summary judgment, the trial court ruled that Gullett's preemptive right to purchase the property had not yet ripened, because neither Spriggs nor his estate had offered the property for sale. The court also ruled that the deed language did not permit Gullett to purchase the property from someone other than Spriggs or his estate. On Gullett's tort claim, the trial court also ruled in favor of the bank. That decision is not at issue in this appeal.

*645 {¶ 8} When a trial court grants summary judgment, we review that decision de novo, using the same standard that the trial court used. See, e.g., Grafton v. Ohio Edison Co. (1996), 77 Ohio St.3d 102, 105, 671 N.E.2d 241; Brewer v. Cleveland Bd. of Edn. (1997), 122 Ohio App.3d 378, 383, 701 N.E.2d 1023. This de novo standard of review in effect provides for a new trial by this court of the legal issues in the case, and in our review of the legal issues, we are required to give no deference whatsoever to the trial court's decision. See Hicks v. Leffler (1997), 119 Ohio App.3d 424, 427, 695 N.E.2d 777, citing Midwest Specialties, Inc. v. Firestone Tire & Rubber Co. (1988), 42 Ohio App.3d 6, 8, 536 N.E.2d 411.

{¶ 9} The summary judgment criteria are set forth in Civ.R. 56(C), which provides that summary judgment may not be granted unless (1) there are no material facts at issue or in dispute, (2) the moving party is entitled to judgment as a matter of law, and (3) based on the evidence, viewing that evidence and the inferences drawn therefrom in a light most favorable to the opposing party, reasonable minds can come to only one conclusion-that conclusion being adverse to the nonmoving party. Zivich v. Mentor Soccer Club, Inc. (1998), 82 Ohio St.3d 367, 369-370, 696 N.E.2d 201.

{¶ 10} Summary judgment must not be granted unless the movant sufficiently demonstrates the absence of any genuine issue of material fact. Hicks. And if reasonable minds could arrive at differing conclusions from the evidence in the case, the court must overrule the motion for summary judgment. Hounshell v. Am. States Ins. Co. (1981), 67 Ohio St.2d 427, 433, 21 O.O.3d 267, 424 N.E.2d 311. In cases in which the facts are not in dispute, summary judgment may be rendered where the pleadings and legal arguments of the party seeking summary judgment clearly establish that the nonmoving party has no legally cognizable cause of action. Dresher v. Burt (1996), 75 Ohio St.3d 280, 297-298, 662 N.E.2d 264.

{¶ 11} Appellant presents two assignments of error for our consideration:

First assignment of error:

The trial court erred in failing to declare as a matter of law that upon the banks foreclosure, defendant Tarry Gullett had the absolute right to purchase the property for the stipulated amount of $20,590.31, ordering the plaintiff bank and the defendant estate, to sell the property to the defendant Gullett for that amount.

Second assignment of error:

The trial court erred in failing to declare that since the bank's deed specifically included the first refusal in its legal description, the doctrine of estoppel prevented the plaintiff bank from denying the enforceability of the right of firstrefusal to purchase the property for the stipulated amount of $20,590.31.

*646 {¶ 12} The sole issue before us is whether the bank is bound by the language in the deed, which purports to grant appellant an absolute right to purchase the property. The assignments of error being interrelated, we will address them together.

{¶ 13} A right of first refusal is a preemptive right that gives the holder of the right the first opportunity to purchase property when it is offered for sale. Four Howards, Ltd. v. J & F Wenz Rd. Invest., L.L.C., 179 Ohio App.3d 399, 2008-Ohio-6174, 902 N.E.2d 63, ¶ 59. Preemptive rights differ from purchase options in that the holder of an option to purchase has a right to compel the sale of the property, whereas the holder of a preemptive right does not have the option to purchase the property until the property is offered for sale. See id.; see also Beder v. Cleveland Browns, Inc. (1998), 129 Ohio App.3d 188, 195, 717 N.E.2d 716. A purchase option is commonly referred to as a unilateral contract because it binds one party without binding the other. Four Howards, citing Bahner's Auto Parts v. Bahner (July 23, 1998), 4th Dist. No. 97CA-2538, 1998 WL 470494. Although based in contract, a right of first refusal is usually memorialized in the deed to the property, so it acts as a type of deed restriction or restrictive covenant. See, e.g., Treinen v. Kollasch-Schlueter, 179 Ohio App.3d 527, 2008-Ohio-5986, 902 N.E.2d 998, ¶ 4, 5 (discussing whether the right of first refusal at issue violated the rule against perpetuities); Schafer v. Deszcz (1997), 120 Ohio App.3d 410, 414, 698 N.E.2d 60 (noting that the majority of jurisdictions that have addressed the issue have concluded that preemptive rights are a property interest, rather than a contractual obligation) citing Ferrero Constr. Co. v. Dennis Rourke Corp. (1988), 311 Md. 560, 536 A.2d...