Sheet Metal Workers Natl. Pension Fund v. Bryden House Ltd. Partnership

• Decision Date: 29 September 1998
• Docket Number: No. 97APE11-1513.,97APE11-1513.
• Citation: 130 Ohio App.3d 132,719 NE 2d 646
• Parties: SHEET METAL WORKERS NATIONAL PENSION FUND et al., Appellees, v. BRYDEN HOUSE LIMITED PARTNERSHIP et al., Appellants.
• Court: Ohio Court of Appeals

130 Ohio App.3d 132

719 NE 2d 646

SHEET METAL WORKERS NATIONAL PENSION FUND et al., Appellees, v. BRYDEN HOUSE LIMITED PARTNERSHIP et al., Appellants.

No. 97APE11-1513.

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

Decided September 29, 1998.

COPYRIGHT MATERIAL OMITTED

Leonard S. Sigall and Steven D. Stone, for appellees Sheet Metal Workers National Pension Fund et al.

Carlile, Potchen & Murphy, Laurence E. Sturtz and David M. Karr, for appellants.

PETREE, Judge.

This action arises out of the claims of plaintiffs, Sheet Metal Workers National Pension Fund ("Sheet Metal"), a jointly trusted employee benefit plan, Arthur Moore, Matthew Hernandez, Jr., Alan J. Chernak, Clinton O. Gowan, Jr., Ronald Palmerick, and Bruce Stockwell, trustees of Sheet Metal ("trustees"), against defendants, Bryden House Limited Partnership ("Bryden House"), Bryden House Corporation, Building Trades Minority Development Partnership, Inc., and Building Trades Minority Development Corporation, general partners of Bryden House, to recover guaranty fees allegedly owed plaintiffs under the terms of a guaranty fee agreement ("fee agreement") executed by the parties in May 1993.

On May 5, 1993, defendants entered into a "Development and Construction Loan Agreement" ("loan agreement") with Provident Bank ("Provident") wherein Provident agreed to lend defendants $6.9 million for the renovation of the former St. Ann's Hospital located at 1555 Bryden Road, Columbus, Ohio. The proceeds of the Provident loan were to be used for the construction of a low income, elderly housing project with attendant commercial/retail space. The project qualified for extensive tax credits.

Plaintiffs agreed to guaranty the loan. In consideration for plaintiffs' guaranty, defendants agreed to pay a monitoring fee of $3,000 per month and an initial credit enhancement fee of $28,750 per month "for the period beginning May 5, 1993 and ending at the earlier of (a) the date * * * Sheet Metal no longer has liability to The Provident Bank for the repayment of the Loan pursuant to the Guaranty; and (b) the date The Provident Bank loan is paid in full." These terms were embodied in a written fee agreement executed by the parties in May 1993.

In accordance with the May 1993 fee agreement, plaintiffs executed and delivered to Provident an unconditional guaranty of the $6.9 million loan. Plaintiffs maintained the guaranty until November 1994, when permanent financing was obtained for the project. Defendants paid the monthly monitoring and initial credit enhancement fees until January 1994, at which time defendants refused to make any further payments.

On February 8, 1996, plaintiffs filed an action against defendants to recover the monthly monitoring and initial credit enhancement fees allegedly owed from January through October 1994 under the terms of the fee agreement executed in May 1993.

After a trial to the bench, the court, by judgment entry dated October 16, 1997, awarded judgment to plaintiffs in the amount of $317,500 ($31,750 per month in monitoring fees and initial credit enhancement fees for ten months January through October 1994), together with prejudgment interest in the amount of $104,387.33 through September 30, 1997, for a total judgment of $421,887.33, continuing with prejudgment interest in the amount of $86.99 per diem and postjudgment interest at ten percent per annum. Defendants have timely appealed the trial court's judgment, advancing the following three assignments of error:

"I. The trial court erred by excluding under the parol evidence rule appellants' testimonial and documentary evidence of the loan agreement, signed by all parties at the loan closing, which directly conflicted with the terms of the fee agreement.

"II. The trial court erred by excluding under the parol evidence rule appellants' testimonial and documentary evidence of a post-closing novation or modification of the fee agreement.

"III. The trial court abused its discretion and ruled against the manifest weight of the evidence by finding that the appellants did not sign the fee agreement under economic duress."

By the first assignment of error, defendants contend that the trial court erred by excluding, under the parol evidence rule, extrinsic documentary and testimonial evidence that, according to defendants, conclusively demonstrated that the fee agreement did not reflect the actual agreement between the parties regarding the amount of guaranty fees owed by defendants.

According to this evidence, on January 22, 1992, Edward I. Williams, acting on behalf of plaintiffs, sent a "Letter of Intent" to defendants setting forth plaintiffs' intentions regarding their proposed guaranty of the construction loan agreement between defendants and Provident. The terms of the "Letter of Intent" required payment by defendants of a monthly monitoring fee as well as a monthly credit enhancement fee out of the proceeds of the construction loan until the Provident loan was paid off and plaintiffs' guaranty was released by Provident. The "Letter of Intent" was signed by both parties, although it contained language indicating that the letter "is not intended to be binding on the parties."

In December 1992, Ed Carlough, President of Sheet Metal, orally committed to guaranty the Provident loan as of January 2, 1993. Construction on the project was commenced in January 1993 based on Carlough's oral commitment. In order for the project to qualify for the tax credits, the project had to be completed by December 1993. Carlough's approval was later confirmed in writing by letter dated March 9, 1993.

According to testimony offered by Robert Schilling, President of Bryden House Corporation, and Nicholas Montell, a general partner of Bryden House, plaintiffs and defendants agreed from the inception of the project that the guaranty fees were to come out of the construction loan proceeds and were to be paid from the date of closing through December 1993. Defendants also offered into evidence a construction schedule prepared by defendants' accountants, dated May 3, 1993, that contained a line item entitled "SMW National Pension Fund Fees," which, according to defendants, capped the guaranty fees owed to plaintiffs at $348,717.

At the closing on May 5, 1993, defendants entered into the loan agreement, which memorialized both Provident's agreement to loan defendants $6.9 million for the construction of the project and plaintiffs' agreement to guaranty the loan. The loan agreement was signed by all pertinent parties. Included as part of the loan agreement was Exhibit D, a "Construction Disbursement Budget," which listed aggregate construction period guarantor fees as $348,717.

In addition to the loan agreement, closing documentation included the fee agreement, which, as previously noted, obligated defendants to pay monthly guaranty fees totaling $31,750 from the date of closing until the Provident loan was paid off and plaintiffs were released from the guaranty. Although the fee agreement referred to the loan agreement, the fee agreement did not contain language limiting fees to be paid from construction loan proceeds, nor did it contain language capping fees at $348,717.

Schilling testified that during the closing, he expressed his concern to Williams that the fee agreement was inconsistent with the loan agreement. Both he and Montell admitted at trial that they understood the terms of the fee agreement to mean that defendants would be obligated to pay plaintiffs $31,750 per month until the Provident loan was paid off at the end of October 1994 or until plaintiffs no longer had liability to Provident for repayment of the loan. Schilling asked Williams to change the fee agreement to comport with the loan agreement, which limited the fees to be paid out of the construction loan proceeds and capped fees at $348,717. Both Schilling and Montell testified that Williams indicated that he was not authorized to make such a material change to the fee agreement without the approval of Carlough. He also stated that it would take weeks to get the fee agreement corrected. Williams told Schilling and Montell that defendants would just have to "trust him" that defendants would not be obligated for any fees over those set forth in the loan agreement. According to Schilling, based on Williams's assurances, defendants signed the fee agreement. Defendants did not make a formal written request that the fee agreement be changed to comport with the loan agreement.

The testimony of Montell and Schilling regarding the discussions held between them and Williams at the May 5, 1993 closing was generally corroborated by Steve Mershon, the attorney who represented defendants at the closing. Mershon testified that Schilling told him that he was unwilling to sign a fee agreement that did not contain the previously agreed-upon cap of fees. Mershon told Williams that defendants were unwilling to sign the fee agreement if fee payments were required beyond what was expressed in the loan agreement. Williams told Mershon that he wanted to discuss the proposed change in the fee agreement with Carlough and the trustees before signing any change to the agreement. According to Mershon, Williams orally agreed that defendants would not be obligated to pay any more fees than those stated in the loan agreement, that plaintiffs were committed to the project, and that Mershon would just have to "trust him."

Mershon relayed this information to defendants and told them to sign the fee agreement only if they were willing to trust Williams. Based on Mershon's advice and Williams's assurances, Schilling signed the fee agreement on behalf of defendants even though defendants were aware that the fee agreement was inconsistent with the loan agreement. The fee agreement was not signed by Carlough until May 23, 1993. The parties did not discuss changing the fee agreement during the interim period between May 5 and May 23, 1993.

The...