Thirty-Four Corp. v. Sixty-Seven Corp.

• Decision Date: 31 December 1984
• Docket Number: No. 84-313,THIRTY-FOUR,SIXTY-SEVEN,84-313
• Citation: 474 N.E.2d 295,15 OBR 472,15 Ohio St.3d 350
• Parties: , 15 O.B.R. 472 CORPORATION, Appellee, v.CORPORATION, Appellant.
• Court: Ohio Supreme Court

Page 350

15 Ohio St.3d 350

474 N.E.2d 295, 15 O.B.R. 472

THIRTY-FOUR CORPORATION, Appellee, v. SIXTY-SEVEN CORPORATION, Appellant.

No. 84-313.

Supreme Court of Ohio.

Dec. 31, 1984.

Syllabus by the Court

1. Upon a clear showing of special circumstances, the defense of laches may be asserted prior to the expiration of the statute of limitations.

2. Delay in asserting a right does not of itself constitute laches, and in order to successfully invoke the equitable doctrine of laches it must be shown that the person for whose benefit the doctrine will operate has been materially prejudiced by the delay of the person asserting his claim. (Smith v. Smith (1959), 168 Ohio St. 447, 156 N.E.2d 113 , paragraph three of the syllabus, followed.)

Plaintiff-appellee, Thirty-Four Corporation, is an Ohio corporation engaged in the real estate business, and is solely owned and operated by A. Patrick "Pat" Tonti. Defendant-appellant, Sixty-Seven Corporation, is also an Ohio corporation engaged in the business of real estate. Appellant was owned by Alfred E. Tonti, the father of A. Patrick Tonti, until his death in 1972. The stock in appellant is currently owned by the Estate of Alfred Tonti.

The corporations involved in the instant lawsuit are but two of many corporations owned by the Tonti family in the city of Columbus. The record indicates that there were numerous intercorporate and personal borrowings made between the various family corporations. In the usual case, these intercorporate transactions were made by Alfred or Patrick Tonti by drawing on the various checking accounts maintained by the Tonti family, and were recorded on ledger cards by the family bookkeepers.

Every few years various members of the Tonti family would meet together to settle the debts and credits among themselves and the corporations owned by them. These meetings are referred to as "round robins."

On September 15, 1964, Alfred Tonti, as president of appellant, signed a note for $200,000 at six percent interest payable to the appellee corporation, one year from the date of the note. This note was secured by a mortgage executed simultaneously on property owned by the appellant. The mortgage was recorded almost one year later.

On September 14, 1979, appellee filed this action in the common pleas court seeking to foreclose on the note and mortgage signed in 1964. Appellant defended the foreclosure on the grounds of, inter alia, laches and accord and satisfaction. At the same time, appellant also counterclaimed for slander of title, contending that it was forced to pay additional title insurance premiums, attorney fees, and property taxes due to appellee's assertion of its mortgage.

The matter was assigned to a referee who recommended that title to the property be cleared and the mortgage be cancelled of record. The referee further recommended that the appellant be awarded damages in the amount of $88,926.25 on the counterclaim. On September 15, 1982, the trial court adopted the referee's report and recommendations, and the same was recorded on the court's journal entry. The trial court held that there was an "accord and satisfaction" on the note and mortgage at the 1966 round robin meeting which was evidenced by a check for $24,000 written by appellant to appellee with a notation on the deposit ticket: "67 [corporation] pay all loans '64 and '65." The trial court also held that the equitable doctrine of laches barred enforcement on the note and mortgage.

The court of appeals reversed the trial court in a split decision. The appellate court held that the factual findings of the trial court did not support a finding of an accord and satisfaction or laches. The dissenting judge opined that the trial court was correct in finding an accord and satisfaction but agreed with the majority that laches was not appropriate to the defense of this case.

The cause is now before this court upon the allowance of a motion to certify the record.

Zacks, Luper & Wolinetz Co., L.P.A., Stanley L. Myers and Mark S. Miller, Columbus, for appellee.

Cameron & Belskis Co., L.P.A., J. Gary Coffman, Kozich & Hvizdos and John D. Hvizdos, Columbus, for appellant.

SWEENEY, Justice.

The defendant-appellant contends that the court of appeals did not properly carry out its duty under App.R. 12 because it refused to consider whether the judgment below could be supported on any basis other than the reasons given by the trial court. Apparently, appellant is arguing that the appellate court should have affirmed the trial court's judgment on the basis of a failure of consideration, even though it found that laches and accord and satisfaction were not supported by the record. ¹ The plaintiff-appellee counters that the appellant is estopped from raising the issue of failure of consideration, since it failed to cross-appeal the question at the appellate level below.

Appellee's argument on this point is well-taken. Sound appellate advocacy would seem to dictate that if a prevailing party at the trial level was of the belief that the facts and circumstances surrounding his or her cause compelled a different or alternate rule of law to uphold the trial court's decision, the wisest course to follow would be to cross-appeal that issue upon the adverse party's appeal of the trial court's judgment. Although appellant raised the defense of failure of consideration at the trial level, it raised no such defense on cross-appeal before the court of appeals. This being the case, the issue was not properly presented to the appellate court for its consideration and, therefore, the issue should not be reviewed by this court since the same was not considered or decided by the court of appeals. See F. Enterprises v. Kentucky Fried Chicken Corp. (1976), 47 Ohio St.2d 154, 351 N.E.2d 121 ; and State v. Williams (1977), 51 Ohio St.2d 112, 364 N.E.2d 1364 .

With respect to the issue of laches, appellant contends that if an action is brought within the statute of limitations, the doctrine of laches may operate as a bar to the action if special circumstances exist. Appellee argues that laches is no defense at law when an action is brought within the statutory period governing the commencement of that action. ²

In Van DeRyt v. Van DeRyt (1966), 6 Ohio St.2d 31, 215 N.E.2d 698 , this court ruled that in an appropriate case, the doctrine of laches is available to a defending party even though the proceeding is commenced within the relevant statute of limitations.

It has also been stated that:

" * * * Even though the period allowed by the statute of limitations to bring a foreclosure action may not have expired, * * * a court of equity may refuse to permit a foreclosure because of the very great and unreasonable delay in commencing such a proceeding, or because there are circumstances in connection with the delay which would make a foreclosure inequitable." 37 Ohio Jurisprudence 2d (1959) 542, Mortgages, Section 349.

We agree with the court of appeals that laches may still operate as a bar to the enforcement of a claim even though the delay in enforcing the claim is less than the statutory period. Therefore, we hold that upon a clear showing of special circumstances, the defense of laches may be asserted prior to the expiration of the statute of limitations.

If we were to adopt appellee's argument in this realm, there could never be a laches defense in cases where a statute of limitations governs the time within which an action may be brought, regardless of any potential inequities. If laches cannot be raised in the proper case where the pertinent statute of limitations has not expired, it certainly could not be raised after the limitation period expired, because the limitation period itself would otherwise bar the action in any event.

Having determined that laches is an available defense prior to the expiration of a statute of limitations, our inquiry turns to whether the facts in the case sub judice warrant a finding of laches on the part of appellee.

The trial court held that appellee is barred by the doctrine of laches because of the following circumstances: first, appellee has taken contradictory positions with respect to the...