Zipkin v. FirstMerit Bank N.A.
| Decision Date | 29 July 2021 |
| Docket Number | No. 109501,109501 |
| Citation | 176 N.E.3d 86 |
| Parties | Lewis A. ZIPKIN, et al., Plaintiffs-Appellees/Cross-Appellants, v. FIRSTMERIT BANK N.A., Defendant-Appellant/Cross-Appellee. |
| Court | Ohio Court of Appeals |
Burkes Law, L.L.C., and John F. Burke, III, Cleveland, for appellees/cross-appellants.
Giffen & Kaminski, L.L.C., Kerin Lyn Kaminski and Melissa A. Laubenthal, Cleveland, for appellant/cross-appellee.
JOURNAL ENTRY AND OPINION
{¶1} Defendant-appellant/cross-appellee, FirstMerit Bank N.A. ("First Merit"), appeals the trial court's decision in favor of plaintiffs-appellees/cross-appellants, Lewis A. Zipkin ("Zipkin") as trustee of the Lewis A. Zipkin Revocable Trust ("the Revocable Trust") on its breach of contract claim alleging that FirstMerit improperly converted funds belonging to the Revocable Trust to satisfy an undisputed debt Zipkin, as guarantor, owed the bank.1 Zipkin cross-appeals the trial court's decision in favor of the bank on his remaining claims. For the reasons that follow, we affirm in part, reverse in part, and remand the trial court's decision.
{¶2} On January 4, 2018, Zipkin, in his individual capacity, and as trustee of the Revocable Trust, refiled a complaint against FirstMerit, alleging claims of breach of contract, promissory estoppel, conversion, and breach of covenant of good faith, and fair dealing. Zipkin sought to recover $187,960.83 that FirstMerit removed from two accounts to satisfy a default on a loan, that Zipkin was the guarantor. On March 6, 2018, FirstMerit filed its answer to Zipkin's complaint and generally denied the material allegations therein.
{¶3} On August 1, 2018, FirstMerit filed a motion for summary judgment. On August 15, 2018, Zipkin filed a motion for partial summary judgment, both in his individual capacity and as trustee of the Revocable Trust. On February 19, 2019, the trial court denied the parties’ respective motions. On December 5, 2019, the trial court conducted a bench trial to determine whether FirstMerit's set off against the account held in the Revocable Trust was proper.
{¶4} At the trial, the following facts were established through the testimony of three witnesses, namely: 1) Zipkin, in his individual capacity and as Trustee; 2) Venera Izant ("Izant"), Citizens’ former employee, who functioned in the capacity as a personal banker to Zipkin at the time of the loan; and 3) Christine Knab ("Knab"), FirstMerit's current employee, who handled matters relating to the loan since 2012.
{¶5} In the early 1970s, Zipkin, an attorney and real estate developer, formed a trust for estate planning purposes and to purchase property located at 1854 Coventry Road in Cleveland Heights, Ohio ("the Coventry Property"). Over the years, the trust acquired additional properties. In 1991, the original trust instrument was destroyed in a fire. A restatement of the trust agreement, dated July 13, 2013, was presented as plaintiff's exhibit No. 25. Zipkin was also a long-standing customer of Citizens Bank ("Citizens"), that later merged with FirstMerit. The banking relationship included numerous loans and mortgages spanning several decades, as well as personal, business, and trust accounts.
{¶6} In May 2008, Citizens loaned $200,000 to 1854 Coventry Salad, Inc. ("Coventry Salad"), a nonparty to this action, under the terms of a promissory note ("the 2008 Note"), executed by Tom Bruhn ("Bruhn"), the president of Coventry Salad and a commercial guaranty ("the 2008 Guaranty") executed by Zipkin. At the time, Zipkin separately agreed to subordinate to Citizens any claim that he might have against Bruhn. The purpose of the loan was to establish the Bodega Restaurant ("Bodega").
{¶7} The 2008 Note did not set a final maturity date but, rather only required monthly payments of accrued interest and stated that the loan must be paid off immediately on the bank's demand. The loan listed Zipkin and Bruhn as guarantors and stated that the loan was secured by Bodega's business assets and a real estate mortgage on Zipkin's property located on Euclid Heights Boulevard, Cleveland Heights, Ohio, otherwise known as the Brantley Building.
{¶8} In June 2009, Coventry Salad executed a change in the terms of the agreement that increased the interest rate of the 2008 Note. Later in January 2012, Coventry Salad executed a new promissory note ("the 2012 Note"), and Zipkin executed a new commercial guaranty ("the 2012 Guaranty"). The 2012 Note set a maturity date, interest rate, principal payments calling for 11 installments of $2,334.94 and a final balloon payment of $186,297.63, due on January 23, 2013. The 2012 Note listed Zipkin, Bruhn, as well as Zipkin's company, Brantley Inc., as guarantors, and the Brantley Building as collateral.
{¶9} In addition, the 2012 Guaranty contained a "Right of Setoff" provision, that stated in pertinent part as follows:
To the extent permitted by applicable law, Lender reserves a right of setoff in all Guarantor's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Guarantor holds jointly with someone else and all accounts Guarantor may open in the future. However, this does not include any IRA or Keough accounts, or any trust accounts for which setoff would be prohibited by law. The Guarantor authorizes Lender, to the extent permitted by applicable law, to hold these funds if there is a default, and Lender may apply the funds in these accounts to pay what Guarantor owes under the terms of this Guaranty.
{¶10} Coventry Salad made the 11 monthly installments required under the 2012 Note, but it failed to make the final balloon payment of $186,297.63. As a result, on February 18, 2013, Citizens sent Zipkin a letter demanding that he honor the 2012 Guaranty and pay the 2012 Note in the principal amount of $197,944.74.
{¶11} On March 5, 2013, when Coventry Salad failed to make the balloon payment, Citizens exercised the right to setoff, under the 2012 Guaranty. Citizens set off $38,440.20, from account number 4534145596, held in Zipkin's name and $149,520.63, from account number 4534145604, held in the name of the Revocable Trust.
{¶12} Following the trial, the trial court issued a written opinion finding in favor of the Revocable Trust on the breach of contract claim and in favor of FirstMerit on the remaining claims.
{¶13} FirstMerit now appeals, assigning the following errors for review:
{¶14} Zipkin, in his individual capacity, and as trustee of the Revocable Trust, cross-appeals and assigns the following errors for our review:
{¶15} In the first assigned error, FirstMerit argues that the trial court erred by not applying R.C. 5805.06 to find that the assets of the revocable trust were subject to the claims of creditors.
{¶16} When reviewing questions of statutory interpretation, our standard of review is de novo. Burnell v. Cleveland Mun. School Dist. Bd. of Edn. , 8th Dist., 2018-Ohio-4609, 114 N.E.3d 1274, ¶ 19, citing Elec. Classroom of Tomorrow v. Ohio Dept. of Edn. , 154 Ohio St.3d 584, 2018-Ohio-3126, 118 N.E.3d 907, ¶ 11. A court's main objective when interpreting a statute is to determine and give effect to the legislative intent. Gracetech Inc. v. Perez , 2020-Ohio-3595, 154 N.E.3d 1123, ¶ 14 (8th Dist.), citing State ex rel. Solomon v. Bd. of Trustees of the Police & Firemen's Disability & Pension Fund , 72 Ohio St.3d 62, 65, 647 N.E.2d 486 (1995). We first look to the language of the statute itself to determine the intent of the General Assembly. Id ., citing Stewart v. Trumbull Cty. Bd. of Elections , 34 Ohio St.2d 129, 130, 296 N.E.2d 676 (1973). When a statute's meaning is clear and unambiguous, we apply the statute as written. Gracetech at id. , citing Provident Bank v. Wood , 36 Ohio St.2d 101, 105-106, 304 N.E.2d 378 (1973).
{¶17} The trial court's opinion stated in pertinent part that:
[FirstMerit] breached the 2012 Guaranty in two ways. First, it setoff an account that was not held by a guarantor or jointly with a guarantor of the underlying loan. Second, it setoff a trust account for which setoff would be prohibited by law.
{¶18} FirstMerit contends that R.C. 5805.06 controls and permits the setoff at issue. We now examine this claim.
{¶19} R.C. 5805.06 provides in pertinent part as follows:
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...written. Gracetech at id. , citing Provident Bank v. Wood , 36 Ohio St.2d 101, 105-106, 304 N.E.2d 378 (1973). Zipkin v. FirstMerit Bank, N.A. , 2021-Ohio-2583, 176 N.E.3d 86, ¶ 16 (8th Dist.).{¶ 12} Furthermore, under R.C. 2901.04, "sections of the Revised Code defining offenses or penalti......