COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 59317 NICHOLAS R. ROMAN, ET AL. : : : PLAINTIFFS-APPELLEES : JOURNAL ENTRY : v. : AND : GENERAL TITLE AGENCY, INC. : OPINION : : DEFENDANT-APPELLANT : : and : : FOURTH COAST PROPERTIES, ET AL. : : DEFENDANTS : DATE OF ANNOUNCEMENT OF DECISION: OCTOBER 24, 1991 CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court, Case No. 161019. JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiffs-appellees: Bruce J. Lowe, Esq., Calfee, Halter & Griswold, 1800 Society Building, Cleveland, Ohio, 44114; For Defendant-appellant: Connie M. Wymer, Esq., Weston, Hurd, Fallon, Paisley & Howley, 2500 Terminal Tower, Cleveland, Ohio, 44113-2241; For Defendants: James L. Reed, Esq., Chattman, Garfield, Friedlander & Paul, 6200 Rockside Road, Cleveland, Ohio, 44131. -2- SWEENEY, JAMES D., J.: Defendant-appellant General Title Agency, Inc. ("GTA") appeals from the trial court judgment in favor of plaintiffs- appellees Nicholas and Mary Roman ("Roman"). For the reasons adduced below, we affirm. A review of the record reveals that on February 4, 1986, Roman filed a complaint in foreclosure on a mortgage against, among others, Fourth Coast Properties, Fourth Coast Properties, Inc., North Coast Nautilus, Inc., Michael Grdina and Thomas Cadwell ("Fourth Coast"). The Fourth Coast defendants were the mortgagors of the property. See Cuyahoga County Court of Common Pleas, Case No. 104580. Following negotiation, Roman and Fourth Coast reached an agreement for settlement of the foreclosure action on June 7, 1988. This agreement was reduced to writing in the form of an "Agreed Judgment Entry," which provides in pertinent part the following: IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the Complaint of Plaintiffs is dismissed without prejudice and the Counterclaims of Defendants, Fourth Coast Properties, Fourth Coast Properties, Inc., North Coast Nautilus Inc., Michael F. Grdina and Thomas A. Cadwell, hereinafter called "Mortgagors", are hereby dismissed without prejudice. This settlement and dismissal are subject to the following terms and conditions, the failure of which shall be grounds for relief from this Judgment: 1. Mortgagors shall pay the sum of Three Hundred Fifty Thousand Dollars -3- ($350,000.00) in cash or the equivalent to Plaintiffs immediately upon the Settlement Date and in any event prior to the entry of this Judgment. The Settlement Date shall be June 7, 1988. 2. Mortgagors shall, within ten (10) days of the Settlement Date, deliver to Plaintiffs a Promissory Note in the sum of Seventy-Five Thousand Dollars ($75,000.00) plus interest at the rate of eight (8) percent per year, with the principal and remaining interest due in twenty-four (24) months, but payments required on interest only in the sum of Five Hundred Dollars ($500.00) per month during the twenty-four (24) month term of the Note. Such Note, in order to secure the principal payment thereof, shall provide for a bank guarantee, or a payment bond if Mortgagors choose, either of which is acknowledged to be satisfactory to the Plaintiffs. The Promissory Note shall also provide that the entire amount of principal and interest is due upon the sale of the property by Mortgagors. In addition, and to secure payment of all interest due under this Note, Mortgagors shall arrange for a guarantor bank to make all payments of interest required thereunder directly to Plaintiffs. While it may be done through separate banks, both the principal and the interest of the Promissory Note shall be secured by acceptable bank guarantees, which acceptance shall not be unreasonably withheld by Plaintiffs. Additional terms for the protection of Plaintiffs, including the personal guarantee of the Mortgagors and a Mortgage on the subject 21200 Euclid Avenue property, shall be arranged for the interim period between the Settlement Date and the securing of the bank guarantees of principal and interest on the Promissory Note. 3. Upon full performance of all promises and agreements set forth herein, which shall as aforesaid be accomplished within ten days of the Settlement Date, Plaintiffs shall deliver a full and complete release of any and all claims that they may have against all Defendants, and Mortgagors -4- shall deliver a full and complete release of any and all claims that they may have against the Plaintiffs, and the Complaint and all Counterclaims shall thereupon be dismissed with prejudice. 4. Upon the execution of this agreement, Plaintiffs shall surrender the original Promissory Note dated September 24, 1984, execute a Satisfaction of Mortgage in favor of Defendant, Fourth Coast Properties, and cause said Satisfaction of Mortgage to be delivered to Mortgagors' designated escrow agent. The original signed Counterpart of this Judgment Entry, which shall serve as escrow instructions, shall also be delivered to said escrow agent along with any additional instructions as Plaintiffs may desire that are consistent with the foregoing, with the express instruction that upon payment of the aforementioned Three Hundred Fifty Thousand Dollars ($350,000.00) to Plaintiffs, said escrow agent shall cause the Satisfaction of Mortgage to be recorded with the Cuyahoga County Recorder. (Emphasis added.) This agreed entry was signed and approved by counsel for Roman and Fourth Coast. By letter dated June 7, 1988, counsel for Roman provided the following confirmations and instructions to GTA, who was acting as the escrow agent: 1. The Agreed Judgment Entry has been executed by the undersigned Counsel for Plaintiffs (copy enclosed) and forwarded to Counsel for Mortgagors for his execution and delivery to you. 2. In accordance with our Settlement Agreement, the Agreed Judgment Entry may not be filed with the Court until (a) the indicated $350,000.00 cash payment is delivered to Plaintiffs or the undersigned as Plaintiffs' representatives and (b) the Mortgagors have also delivered to Plaintiffs or the undersigned as Plaintiffs' -5- representatives the fully executed Promissory Note required by the Agreed Judgment Entry and in the form prepared and approved by the undersigned Counsel for Plaintiffs (copy to be forwarded under separate cover). 3. Plaintiffs have executed the Satisfaction of Mortgage (instrument bearing date of September 24, 1984 and being Land Title Registration No. 373034) and we will deliver same in exchange for the subject $350,000.00 cash payment referenced above. If you have any questions, please contact the undersigned immediately. It is our contemplation and understanding that the refinancing and transfer of title which will permit the settlement will now go forward upon receipt of this letter and referenced enclosures, such that the referenced cash proceeds for Plaintiffs will be available tomorrow. Very truly yours, Terence J. Clark (Emphasis added.) The promissory note, dated June 7, 1988, in the amount of $75,000 provides: PROMISSORY NOTE $75,000.00 June 7, 1988 Twenty-four (24) months after date, for value received the undersigned, hereinafter "Makers", agree to pay to the order of Nicholas M. Roman and Mary I. Roman, hereinafter "Payees" at 7073 Gates Mills Boulevard, Gates Mills, Ohio, 44040, the sum of Seventy-Five Thousand Dollars ($75,000.00) plus interest at the rate of eight percent (8%) per annum, compounded annually. During the term of this Note, payments of interest only in the sum of Five Hundred Dollars ($500.00) ("fixed interest") shall be required to be paid on the 10th day of each and every month, beginning on the 10th day of -6- July, 1988. The entire principal balance, plus any unpaid interest up to the eight percent (8%) rate ("remaining interest"), shall be due and payable on the 10th day of June, 1990. GUARANTEE OF PAYMENTS Makers shall arrange for and instruct a guarantor bank to make all payments of fixed interest required hereunder directly to Payees. In addition, as described hereinbelow under "security of Note", Makers are required within ten (10) days hereof to secure the guarantee of principal and remaining interest by an acceptable financial institution. LATE CHARGES There shall be a Fifty Dollar ($50.00) penalty for any payment made after the 25th day of each and every month that it is due and payable. PRE-PAYMENT This Note may be prepaid in whole or in part at any time or from time to time without premium or penalty. DEFAULT Any holder hereof without notice to anyone may declare the entire debt due upon failure to provide the Security as described hereinbelow or after thirty (30) days continuous default in the payment of any installment of principal or interest. Upon such declaration, the entire debt shall be immediately due and payable. This Note is given in consideration of the purchase of real property located at 21200 Euclid Avenue, Euclid, Ohio. If the property is sold or transferred without the prior written consent of Nicholas M. Roman and Mary I. Roman, they may, at their option, declare all sums due under this Note to be immediately due and payable. -7- SECURITY OF NOTE This Note, including all payments of principal and interest provided for hereunder, is to be secured (the "Security") by a payment bond or bank guarantee to be provided by Makers to Payees within ten (10) days following the date of this Note. Failure by Makers to provide said payment bond or bank guarantee as provided for herein shall constitute an immediate default in the terms of this Note, whereupon Payees may, at their option, declare all sums due under this Note to be immediately due and payable. the following provisions shall apply only until such time as a guarantee of payment is affixed hereto by a financial institution: This Note is further secured by a Mortgage, given by Makers to Payees bearing the same date as this Note, upon certain property in the City of Euclid, County of Cuyahoga and the State of Ohio located at 21200 Euclid Avenue. When the aforesaid guarantee of payment by a financial institution is affixed hereto, such security interest shall be extinguished and Payees shall cause a Satisfaction of Mortgage to be recorded with the Cuyahoga County Recorder. However, if said guarantee is provided prior to the recordation of the mortgage instrument, the instrument shall be returned to Makers and destroyed. PERSONAL GUARANTEES The personal guarantees of Michael F. Grdina and Thomas A. Caldwell (sic) shall be executed hereon, effective the date above first written. Said guarantees shall have effect only until such time as payment of this Note is guaranteed by a financial institution. FOURTH COAST PROPERTIES, an Ohio General Partnership, by its General Partners: Fourth Coast Properties, Inc. By: Michael F. Grdina /s/ -8- Michael F. Grdina, President Fourth Coast Nautilus, Inc. By: Thomas A. Cadwell /s/ Thomas A. Cadwell, President Payment Guaranteed: Michael F. Grdina /s/ Michael F. Grdina Thomas A. Cadwell /s/ Thomas A. Cadwell Payment Guaranteed: (by financial institution) Date: (Emphasis added.) There is no question that Roman received the $350,000 in cash, that Fourth Coast has paid every monthly interest payment of $500 on the note, and that no guarantee on the note from a financial institution was provided Roman. GTA, on August 24, 1988, filed the agreed judgment entry, thereby dismissing the foreclosure suit without prejudice. Journal, Vol. 1075, page 421. On December 1, 1988, Roman filed its complaint in the present case, naming the Fourth Coast parties and GTA as parties defendant. On count one, Roman sought specific performance in compelling the Fourth Coast defendants to deliver a bank guarantee under the note, with costs and attorneys fees for such enforcement. On count two, Roman sought a default on the terms -9- of the note, and the full balance of principal and interest due and owing on the note. On count three, Roman sought relief against GTA alleging that GTA breached its escrow instructions. By breaching its escrow instructions, Roman alleged that they were forced "to incur the additional cost and expense of" the present action "to enforce and compel performance of the settlement." Complaint, at paragraph 15. The present case was tried to the bench on September 25 and 26, 1989. Nicholas Roman testified on behalf of plaintiffs' case. Mr. Roman stated that the financial guarantee was a vital provision of the settlement, and that the foreclosure suit was to be left pending until all conditions of the settlement were completed. If the terms of the settlement had not gone through, he would proceed with the foreclosure. The plaintiffs also submitted excerpts from the deposition of Thomas Cadwell. Although the journal of the trial court indicates that Mr. Cadwell's deposition was filed with the court on September 22, 1989, the deposition transcript is not in the appellate record. Defendant Fourth Coast produced the testimony of Mr. Kurt Treu and Mr. Alexander Ruggie. Mr. Treu, a branch sales manager at Bank One of Cleveland, testified that he and Mr. Cadwell had discussed the idea of a financial guarantee on the note, but the bank declined the proposition because it was not in their lending posture. Mr. Ruggie, an owner of a small local property and -10- casualty insurance company, testified that he and Mr. Cadwell had spoken about a financial guarantee bond several times. Mr. Ruggie detailed the necessary personal finances required to secure such a bond and the fact that Mr. Cadwell never provided a personal financial statement. Without a financial statement, obtaining a bond is impossible. GTA produced the testimony of Mr. Marvin Ritzenberg, the president of GTA. Mr. Ritzenberg testified that the agreed judgment entry and satisfaction of mortgage was filed by his firm without checking to see if a financial guarantee was provided by Fourth Coast. He stated that GTA would not close a transaction without first filing the agreed judgment entry and dismissing the foreclosure action. He also stated that his firm's search of the court's journal indicated that the foreclosure action had been dismissed without prejudice for want of prosecution on November 9, 1987. Journal, Vol. 995, page 604. Had GTA read the actual order rather than relying on the status form entry, GTA would have found that the court gave notice of its intent to dismiss for failure to prosecute. The journal entry was therefore in error since the case was never dismissed on November 9, 1987. The court found in favor of plaintiffs, finding that GTA breached its obligation to plaintiffs by dismissing the foreclosure action without having been provided with a financial guarantee on the promissory note. The entry of judgment provides in pertinent part: -11- 1. Judgment is entered in favor of Plaintiffs Nicholas M. Roman and Mary I. Roman and against Defendants Fourth Coast Properties, Fourth Coast Properties, Inc., North Coast Nautilus, Inc., Michael F. Grdina and Thomas A. Cadwell (collectively, the "Fourth Coast Defendants"), jointly and severally, on the Promissory Note, dated June 7, 1988, attached as Exhibit B to Plaintiffs' Complaint, in the amount of Seventy-Five Thousand Dollars ($75,000.00), plus unpaid interest thereon at the rate of eight percent (8%) per annum. 2. Judgment is further entered in favor of Plaintiffs and against the Fourth Coast Defendants, jointly and severally, specifically ordering and directing said Defendants, and each of them, to provide to Plaintiffs within thirty (30) days from the date of this Entry the bank guaranty or payment bond required by the aforementioned promissory note and by the Agreed Judgment Entry attached to Plaintiffs' Complaint as Exhibit A. Said bank guaranty or payment bond shall ensure that, if by June 7, 1990, the Fourth Coast Defendants, or any of them, have not caused payment to be made of all or any portion o the Seventy-Five Thousand Dollars ($75,000.00) principal amount of said note and any accrued interest thereon, such guarantor bank or surety shall make immediate payment of all unpaid amounts to Plaintiffs. The judgment provided for in Paragraph 1 hereof against the individual Defendants, Thomas A. Cadwell and Michael F. Grdina, will be marked satisfied and released at such time as the bank guaranty or payment bond required by this Entry has been provided; and, if the required bank guaranty or payment bond is provided within the thirty-day period pursuant to this Order, Plaintiffs shall refrain from initiating or pursuing execution proceedings on said judgment against any or all of the Fourth Coast Defendants during the period from the time of provision of said guaranty or bond through June 7, 1990. In the event that the Fourth Coast Defendants, or any of them, fail to obtain and provide such bank guaranty or payment bond within the thirty-day period as -12- ordered herein, the Plaintiffs will be entitled immediately to pursue the enforcement of this Order for equitable relief. 3. Judgment is hereby further entered in the form of declaratory relief in favor of Plaintiffs and against Defendant General Title Agency, Inc. ("General Title"). In the event that the Fourth Coast Defendants fail to provide the bank guaranty or payment bond required in Paragraph 2 hereof within thirty (30) days as directed by this Order, and in the event and to the extent that the Fourth Coast Defendants, or any of them, fail to pay the balance owed on the promissory note and judgment thereon entered in Paragraph 1 of this Order, then the Plaintiffs, upon proof of the deficiency existing as of June 7, 1990, in the payment of the promissory note and judgment entered thereon, shall be entitled to recover the amount of said deficiency as damages against Defendant General Title. If the bank guaranty or payment bond is provided by the Fourth Coast Defendants, or any of them, within the thirty-day time period, as directed by this Order, then General Title shall be released from all liability to the Plaintiffs imposed pursuant to this Order. 4. Judgment is further entered that the costs of this action are hereby taxed against the Defendants. IT IS SO ORDERED. Journal, Vol. 1205, page 629-632, journalized November 22, 1989. At the request of GTA, Findings of Fact and Conclusions of Law were issued by the trial court on January 29, 1990. This appeal, by GTA, raising three assignments of error, followed. I THE TRIAL COURT ERRED IN RULING THAT GENERAL TITLE BREACHED ITS ESCROW INSTRUCTIONS. -13- On the outset of our analysis, it must be noted that this court is guided in its review by language contained in Karches v. Cincinnati (1988), 38 Ohio St. 3d 12, where, at page 19, the court states: In reviewing the court's judgment we are guided by the principle that judgments supported by competent, credible evidence going to all the material elements of the case must not be reversed, as being against the manifest weight of the evidence. C. E. Morris Co. v. Foley Construction Co. (1978), 54 Ohio St. 2d 279, 8 O.O. 3d 261, 376 N.W. 2d 578. Every reasonable presumption must be made in favor of the judgment and the findings of facts. Seasons Coal Co. v. Cleveland (1984), 10 Ohio St. 3d 77, 10 OBR 408, 461 N.E. 2d 1273. Finally, if the evidence is susceptible of more than one construction, we must give it that interpretation which is consistent with the verdict and judgment, most favorable to sustaining the trial court's verdict and judgment. Seasons Coal Co., supra; Gates v. Bd. of Edn. of River Local School Dist. (1967), 11 Ohio St. 2d 83, 40 O.O. 2d 91, 228 N.E. 2d 198; Ross v. Ross (1980), 64 Ohio St. 2d 203, 204, 18 O.O. 3d 414, 415, 414 N.E. 2d 426, 428. See, also, Govang v. City of Cleveland (Mar. 2, 1989), Cuyahoga App. No. 55061, unreported, at p. 3-4. We are also mindful that the duty of an escrow agent is "to carry out the terms of the agreement as intended by the parties." Pippin v. Kern-Ward Bldg. Co. (Cuyahoga, 1982), 8 Ohio App. 3d 196, 198. Having reviewed the testimony before the trial court, as well as the agreed judgment entry, promissory note and letter of counsel for Roman, we conclude that there was sufficient -14- competent, credible evidence from which the court could conclude that GTA had not followed its escrow instructions. Assignment overruled. II THE TRIAL COURT ERRED IN GRANTING ROMAN'S MOTION TO AMEND THE PLEADINGS TO CONFORM TO THE EVIDENCE. This court stated the following in Yanda v. Consolidated Mgmt. Inc. (August 16, 1990), Cuyahoga App. No. 57268, unreported, at pages 7-8: Pleadings may be amended to conform to the evidence pursuant to Civ. R. 15(B), which provides in pertinent part: "When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment. Failure to amend as provided herein does not affect the result of the trial of these issues." In Northfield Park Associates v. Northeast Ohio Harness (1987), 36 Ohio App. 3d 14, this court held: "The decision to grant or deny a Civ. R. 15(B) motion to amend pleadings to conform to the evidence is within the sound discretion of the trial court. Such discretion will not be disturbed in the absence of 'gross abuse' by the trial court." Id. at 24; (citations omitted). Roman motioned the court to amend its complaint by way of seeking a declaratory judgment against GTA, making GTA liable for any unpaid amount on the note when the note comes due in the -15- event Fourth Coast fails to obtain a financial guarantee. R. 186-190. The basis for the amendment is the testimony of Mr. Ritzenberg, the president of GTA, who was called on behalf of GTA and was extensively examined by the parties. Prior to Mr. Ritzenberg's testimony, Roman only sought from GTA fees for legal services incurred in the present action. Following his testimony, it became clear that GTA recognized there was a problem with its ability to carry out the escrow instructions as delivered by the parties, chose not to seek clarification of the instructions from the parties, and did, in fact, breach the escrow instructions by dismissing the action without having received a financial guarantee on the promissory note. These actions by GTA directly contributed to the Romans' inability to attempt to assure collectibility from Fourth Coast in the form of a financial guarantee on the note. The Romans were prevented from going forward with the foreclosure or attempting to have Fourth Coast comply with the terms of security prior to dismissing the foreclosure case. We find no abuse of discretion in permitting the amendment of the pleadings. Assignment overruled. III THE TRIAL COURT ERRED WHEN IT RULED THAT GENERAL TITLE MUST ACT AS A SURETY ON THE PROMISSORY NOTE. Appellant argues in this assignment that an improper measure of damages was applied by the court to the detriment of GTA. Specifically, GTA argues that the filing of the entry without the -16- financial guarantee did not alter Roman's ultimate position because no matter what GTA did, to wit, file or not file the judgment entry, Roman had to seek a remedy from the court to force Fourth Coast to honor the terms of their end of the agreement. This argument overlooks the fact that but for GTA's negligence in not following the escrow instructions, and not seeking clarification of a known impossible condition in its instructions prior to filing the agreed judgment entry, the Romans would not necessarily have had to return to court to compel settlement pursuant to the terms of the agreement. Had GTA sought clarification of its instructions prior to filing the agreed judgment entry, the Romans could have taken steps to assure collectibility from Fourth Coast, either by further negotiation with Fourth Coast or pursuing the pending foreclosure action to its ultimate conclusion on Roman's mortgage lien. the negligent act of GTA in filing the agreed judgment entry without a financial guarantee on the note precluded the assurance of collectibility sought by Roman. The damages suffered by Roman, as a result of GTA's actions, equals that sum of money under the note which are found not forthcoming from Fourth Coast. Assignment overruled. Judgment affirmed. -17- It is ordered that appellees recover of appellant their costs herein taxed. The court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. DAVID T. MATIA, P.J., and NAHRA, J., CONCUR. JAMES D. SWEENEY JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journalization, at which time it will become the judgment and order of the court and time period for review will begin to run. .