Westwinds Development Corp. v. Outcalt, 2009 Ohio 2948 (Ohio App. 6/19/2009), No. 2008-G-2863.

• Decision Date: 19 June 2009
• Docket Number: No. 2008-G-2863.
• Citation: 2009 Ohio 2948
• Parties: Westwinds Development Corp., et al., Plaintiffs-Appellants, v. Jon Outcalt, et al., Defendants-Appellees.
• Court: Ohio Court of Appeals

Page 1

2009 Ohio 2948

Westwinds Development Corp., et al., Plaintiffs-Appellants, v. Jon Outcalt, et al., Defendants-Appellees.

No. 2008-G-2863.

Court of Appeals of Ohio, Eleventh District, Geauga County.

June 19, 2009.

Civil Appeal from the Geauga County Court of Common Pleas, Case No. 07 M 000767.

Affirmed.

Harold Pollock, Harold Pollock Co., L.P.A., 5900 Harper Road, #107, Solon, OH 44139 (For Plaintiffs-Appellants).

Timothy G. Warner, and Wesley P. Lambert, Speith, Bell, McCurdy & Newell Co., L.P.A., 925 Euclid Avenue, #2000, Cleveland, OH 44115, and Robert P. Duvin, Littler, Mendelson, P.C., 1100 Superior Avenue, 20th Floor, Cleveland, OH 44114 (For Defendants-Appellees).

OPINION

CYNTHIA WESTCOTT RICE, J.

{¶1} Appellants, Westwinds Development Corp. ("the seller"), Westwinds Building Corp. ("the builder"), and their sole owner, appellant, Michael Healey, appeal the judgment of the Geauga County Court of Common Pleas granting the motion for judgment on the pleadings filed by appellees, Jon Outcalt and his wife Jane Outcalt ("the buyers"). At issue is whether appellants' claims pursuant to a purchase agreement between the seller and the buyers are barred by the doctrine of merger by deed. For the reasons that follow, we affirm.

{¶2} On February 20, 2004, the buyers entered a purchase agreement with the seller, a real estate developer, to purchase sublot four in a residential subdivision owned by the seller in Pepper Pike, Ohio.

{¶3} Pursuant to the purchase agreement, the buyers agreed to purchase the undeveloped sublot for $550,000. The agreement recited it was the parties' intent that the buyers would enter a contract with the seller's affiliate the builder, a general contractor, to build a residence on the property. The contract provided that "[d]uring the period prior to Closing," the buyers would negotiate with [the builder] in an "effort to agree upon a construction contract." The closing was to take place on the first of the following to occur: July 1, 2004 or 14 days after the buyers entered a construction contract with the builder.

{¶4} The contract provided that if on or before seven days prior to closing, the buyers and the builder had not entered a construction contract, "either party shall have the right to terminate this Agreement by notice to the other."

{¶5} Shortly after entering the purchase agreement, the buyers began the construction process. They retained an architect to prepare plans and specifications for the residence. They cleared trees, excavated the garage foundation, hired a landscape architect, and paid the seller $30,000 for pre-construction management services. Although numerous drafts of a construction contract between the buyers and the builder were exchanged, they had not reached an agreement by the closing date, July 1, 2004. Despite this fact, the seller proceeded with the sale, which closed on March 17, 2005. The buyers paid the purchase price of $550,000, and the seller transferred the property to them by deed. After the closing of the sale, the buyers and the builder continued to negotiate a construction contract.

{¶6} In October 2005, the relationship between the buyers and the seller began to deteriorate. On May 26, 2006, the seller asked the buyers to sell sublot four back to it; however, the parties were unable to agree to a price. Ultimately, the buyers did not enter a construction contract with the builder, and they sold their lot to a third party.

{¶7} On July 23, 2007, appellants filed a complaint in the trial court against the buyers alleging: the buyers breached the purchase agreement by failing to enter a construction contract with the builder (count one); the buyers breached an implied covenant of good faith by not entering a construction contract with the builder (count two); fraud (count three); and intentional interference with contracts and/or business opportunities (count four). Appellants prayed for damages in excess of $25,000.

{¶8} In October 2007, the buyers filed their answer and counterclaims and a motion for judgment on the pleadings. Appellants filed their reply to the counterclaims and their opposition to the buyers' motion.

{¶9} On December 19, 2007, the trial court entered judgment granting the buyers' motion in part. The court found that the seller agreed to sell the lot to the buyers. It was the parties' intent that the buyers would negotiate a contract to be entered in the future with the builder to build a residence on the property. However, the buyers did not enter a construction contract with the builder. The court found that either party had the right to terminate the contract. However, the seller did not exercise its right to terminate the contract, and instead allowed the sale to close on March 17, 2005. The trial court found that the seller waived its right to cancel the contract or assert a breach of contract by allowing the sale to close, knowing the buyers had not entered a construction contract with the builder. The court further found the parties' stated intent that the buyers would enter an agreement with the builder to construct their residence was an unenforceable agreement to agree.

{¶10} The trial court dismissed appellants' fraud claim because the parties' negotiations concerning the sale of the property were incorporated into a complete written purchase agreement, and the seller was not entitled to rely on any prior, inconsistent oral representations. The court found that the parties' obligations under the purchase agreement merged with the conveyance. The court also found that by proceeding with the sale, the seller waived any right to assert a breach of the purchase agreement.

{¶11} The court found appellants' contract-interference claim failed because the seller did not allege any contract was breached by a third party.

{¶12} The court dismissed all claims asserted by the builder and Michael Healey on the ground that they were neither parties to the purchase agreement nor intended beneficiaries.

{¶13} The court found the only claim that survived the buyers' motion was the seller's claim for business interference. The case proceeded on this claim until September 12, 2008, when the court entered an order, on agreement of the parties, dismissing with prejudice this remaining claim. The court made a finding that there was no just reason for delay under Civ.R. 54(B), thereby rendering its December 19, 2007 judgment a final order. The court stayed the proceedings on the buyers' counterclaims pending appeal.

{¶14} Appellants appeal the trial court's judgment asserting five assignments of error. For clarity of analysis, we consider the assignments of error out of order. For their first assigned error, appellants allege:

{¶15} "THE TRIAL COURT ERRED IN GRANTING APPELLEES JUDGMENT ON THE PLEADINGS WHERE THE PLEADINGS WERE NOT CLOSED, DISCOVERY NOT COMPLETED, THE EVIDENCE WAS NOT FULLY DEVELOPED, AND WHERE GENUINE ISSUES OF FACT PRECLUDED THE GRANTING OF SAID MOTION."

{¶16} As noted supra, the trial court dismissed the claims of the builder and Healey on the ground that they were neither parties to the purchase agreement nor intended beneficiaries. Appellants have not assigned as error the trial court's dismissal of these claims. As a result, their dismissal is not properly before us and cannot be considered on appeal. App.R. 16(A)(3) and (7); Schwab v. Delphi Packard Elec. Sys., 11th Dist. No. 2002-T-0081, 2003-Ohio-4868, at ¶14.

{¶17} However, even if appellants had assigned as error the dismissal of the builder and Healey's claims, such challenge would lack merit. In Ohio, only a party to a contract or an intended third-party beneficiary may bring an action on a contract. Matheny v. Ohio Bancorp (Dec. 30, 1994), 11th Dist. No. 94-T-5022, 1994 Ohio App. LEXIS 6007, *10. For a third-party beneficiary to be an intended beneficiary, the contract must have been entered into by the parties directly or primarily for the benefit of that person. Hines v. Amole (1982), 4 Ohio App.3d 263, 268, citing Cleveland Metal Roofing & Ceiling Co. v. Gaspard (1914), 89 Ohio St. 185. If the third party merely receives an incidental or an indirect benefit, this is not sufficient to provide it with a cause of action. Hill v. Sonitrol of Southwestern Ohio, Inc. (1988), 36 Ohio St.3d 36, 40.

{¶18} Courts look to the language of a contract to determine whether the contract was made for the direct or incidental benefit of a third party. Lin v. Gatehouse Constr. Co. (1992), 84 Ohio App.3d 96, 100.

{¶19} Appellants failed to allege any facts in their complaint to support an argument that the builder or Michael Healey was an intended third party beneficiary of the purchase agreement. As a result, there is no set of facts that would have entitled either the builder or Healey to relief. See Sony Elecs. v. Grass Valley Group, 1st Dist. Nos. C-010133, C-010423, 2002-Ohio-1614, 2002 Ohio App. LEXIS 1304, *13. In Sony Elecs., the court held that for an alleged third party beneficiary to maintain a claim as such, it must have alleged facts indicating that the contracting parties entered into the contract directly or primarily for its benefit. Id. at *11-*12.

{¶20} In Sony, the court held that a provision in a contract to construct a football stadium requiring Sony electronic parts be installed in the production-control room, did not make Sony a third party beneficiary. Likewise, here, although the proposed builder was designated in the purchase agreement, that did not make it a third party beneficiary.

{¶21} We therefore hold the trial court did not err in finding that neither the builder nor Healey was an intended third-party beneficiary.

{¶22} Turning now to appellants' first assignment of error, a motion for judgment on the pleadings is the same as a motion to dismiss filed after the pleadings are closed and raises only questions of law. The pleadings must be construed in a light most favorable to the party against whom the...