COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NOS. 70346, 70373, 70513 THE CADLE COMPANY II, INC. : : Plaintiff-appellant : : JOURNAL ENTRY -vs- : AND : OPINION BYRAM BYNES, ET AL. : : Defendants-appellees : : DATE OF ANNOUNCEMENT OF DECISION: JANUARY 30, 1997 CHARACTER OF PROCEEDING: Civil appeal from Court of Common Pleas Case No. CV-268778 JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellant: For Defendants-Appellees: ROBERT B. WELTMAN, ESQ. PETER ONYSKO, ESQ. DONALD A. MAUSAR, ESQ. 1208 Standard Building WELTMAN, WEINBERG & ASSOC. 1370 Ontario Street Lakeside Place Cleveland, Ohio 44113 323 Lakeside Ave., West Cleveland, Ohio 44113 STANLEY L. KAMMER, ESQ. 1208 Standard Building Cleveland, Ohio 44113 JAMES M. HANDELMAN, ESQ. 23611 Chagrin Blvd., #220 Beachwood, Ohio 44122 - 2 - DYKE, J.: Plaintiff the Cadle Company II, Inc. (hereafter referred to as "Cadle II") and defendant Roosevelt McCants (hereafter referred to as "McCants") appeal from the judgment rendered in favor of defendant Byram Bynes in an action filed by Cadle II for recovery upon a promissory note. Defendant Bynes also appeals, challenging the same judgment. For the reasons set forth below, we affirm. On April 12, 1994, Cadle II filed this action against Bynes and McCants seeking recovery upon a promissory note executed by McCants and allegedly assumed by Bynes. McCants denied liability and filed a cross-claim against Bynes in which he maintained that Bynes had assumed payment on the note. Bynes denied liability, maintaining that there was a failure of consideration supporting the alleged assumption of the note. He also asserted a counterclaim against Cadle II and a cross-claim against McCants in which he alleged that the agreement containing the assumption of the note was fraudulently obtained. The matter proceeded to a bench trial on January 23, 1996. The evidence revealed that in November 24, 1978, Roosevelt McCants and Lovia McCants executed a note and purchase money mortgage with Quincy Savings and Loan Co. for property located at 4474 East 131st Street in Garfield Heights, Ohio. The McCantses divorced in the following year but title to the subject property remained in both of their names. - 3 - By 1982, the mortgage account was in arrears and Quincy Savings, later known as Cleveland Community Savings Company, initiated foreclosure proceedings. The McCantses then deeded the property to Cleveland Community Savings Company. This deed was in turn recorded by the County Recorder in November, 1984. According to Mr. McCants, the deed was tendered "in lieu of foreclosure" and he understood this transaction to extinguish his ownership interest in the property and to relieve him of further liability in the matter. (Tr. 125, 142-143). Indeed, in 1985 and 1986 McCants filed voluntary petitions for relief under Chapter 13 of the United States Code and did not list Quincy Savings and Loan Co., Cleveland Community Savings Company or the FSLIC as creditors, and did not list the East 131st Street property as an asset. Similarly, Lovia McCants filed a voluntary petition for relief under Chapter 13 of the United States Code and did not list these creditors or this property. In addition, the record reveals that the foreclosure proceedings were apparently held in abeyance following the McCantses tender of this deed. October 27, 1983, the Federal Savings and Loan Insurance Corporation (hereafter referred to as "FSLIC") was appointed as the receiver for Cleveland Community Savings Company. On July 1, 1986, the FSLIC and Cadle II entered into a sale contract for mortgage loans. Pursuant to this agreement, the FSLIC transferred its interest in the McCantses' note to Cadle II. Cadle II subsequently notified McCants that it had purchased the note and - 4 - that payments should be sent to Cadle II. Thereafter, representatives of Cadle II informed McCants that the property would be foreclosed upon if payments were not made. Mr. McCants made two payments of $500. Cadle II sent McCants correspondence to further "negotiations or settlement" then urged him to find a buyer for the property who would assume payment on the note (Tr. 86, 132) and helped compute the price for which the property should sell in order to fully repay the note. Mr. McCants subsequently entered into a contract with defendant Byram Bynes and signed a total of three agreements with him. In a hand written agreement, dated November 21, 1987, Bynes agreed to purchase the subject property from Mr. McCants for the gross amount of $26,500, with $2,500 of this sum to be paid directly to McCants and monthly payments of $341 payable to Cadle II. This agreement further indicated that Cadle II would pay principle, interest, taxes and insurance upon the property from these monthly payments. A second agreement was also executed that day. This typewritten document appears to have been signed by both Mr. McCants and Mrs. McCants but Bynes denied that Mrs. McCants was present. In this document, Bynes agreed to purchase the property from both Mr. and Mrs. McCants under the same terms but reduced the monthly payments to Cadle II from $341 to $325. The third agreement was a land installment contract between Mr. McCants and Bynes. In relevant part, this document provided: The Vendor agrees to furnish, as soon as the same can reasonbly be procured, an abstract or guarantee of - 5 - title, statement of title, title insurance, or such other evidence of title as is in accordance with the prevailng custom in the area where the property is located, which said evidence shall show a marketable title to the said property, free and clear from all encumbrances, except: A First Mortgage to The Cadle Company II, Inc. in the amount of $24,000.00, which the Vendee Assumes and Agrees to Pay, by this Contractual Document and in accordance with the above stipulated Monthly Terms and Interest Rate. The Monthly Payment of $325.00 shall include Principal, Interest, Taxes and Insurance. Bynes further established that the parties signed this agreement in blank as McCants indicated that he did not have the time to complete the documents before their execution, and that he and his attorney would complete them later to contain the same terms as the other documents. Thus, according to Bynes, the additional language containing the mortgage assumption was added after Bynes signed it, and without Bynes' approval. Moreover, Bynes testified that he did not meet the notary of this document, was never given a copy of the document until after litigation had been filed, and this document was never recorded in the office of the county recorder as required by R.C. 5301.25. Bynes paid Mr. McCants $2,500 as required under the agreements and made payments to Cadle II until December 1990. He also paid for insurance for the property. In 1991, Bynes attempted to convert the land contract into a deed and obtained financing for the purchase of the property from First Federal Savings Bank. According to Bynes, he paid into escrow all money required of him - 6 - in order to finance the purchase, but a $2,800 deficiency remained which precluded the matter from closing, and neither Mr. McCants nor Cadle II would supply the missing funds. A representative from Cadle II maintained, however, that Bynes prevented the matter from closing as he refused to pay a portion of the outstanding water bill. Further, in its handling of the escrow, First Federal Savings Bank discovered that the property was in fact titled to the Federal Deposit Insurance Corporation (hereafter referred to as "FDIC"), successor to FSLIC. Thereafter, a liquidation specialist with the FDIC deposited into escrow a quitclaim deed from FDIC to Mr. and Mrs. McCants as divorced and unmarried individuals. A second deed from McCants to Bynes was also deposited into escrow but Mrs. McCants never tendered a deed for her remaining one-half interest in the property to Bynes. In addition there were outstanding real estate taxes totalling $14,000 plus outstanding federal tax liens against McCants from 1981 to 1989 which would attach to the property. The evidence next established that in June 1989, the county treasurer commenced foreclosure proceedings upon the property for collection of delinquent taxes, and Cadle II was a party. Thereafter, in September 1992, a judgment of foreclosure was entered and the parcel was deeded to the county sheriff then sold to the City of Garfield Heights at public auction. The city later sold the property to Lutheran Housing Corporation. - 7 - Bynes asserted that he relied upon Mr. McCants' representation that he owned the property, and would not have entered into an agreement with him had he known that the property were actually deeded to the FSLIC. A representative of Cadle II insisted, however, that the Bynes remained obligated to it under the loan assignment regardless of whether he could ever obtain title to the subject property. On February 20, 1996, the trial court entered judgment for Bynes, and against Cadle II and McCants jointly and severally in the amount of $15,733.45, representing the return of all of Bynes' payments plus interest from the date of payment. The trial court also issued a written opinion in which it found, with regard to the document upon which Cadle II's and McCants' claims against Bynes were derived: A third document was entered into on November 25, 1987, this document being signed by Byram Bynes in blank. It was to embody the terms of the previous documents, but it varied in several important particulars. The monthly payments were reduced from $341.00 per month to $325.00 and a provision was inserted whereby Bynes "assumed a first mortgage obligation to the Cadle Company in the amount of $24,000.00 which the Vendee Assumes and Agrees by this Contractual Document, and in accordance with the above-stipulated Monthly Terms and Interest Rate." Lovia McCants did not sign the "Land Installment Agreement." Bynes signature was not witnessed nor was the contract recorded by the Vendor. Bynes made payments to Cadle as required by contract. Cadle, however, did not pay the taxes or the insurance premiums required to be taken from the monthly installments. *** - 8 - When a vendor has no title to the land at the time he seeks to enforce payment of an installment of the purchase price, a purchaser cannot be required to pay any of the stipulated payments even if this be prior to the time a vendor is required to execute a deed. McCants' inability to convey title goes even fur- ther. He conveyed title away in October, 1984 and cannot regain title short of purchasing it from The Lutheran Housing Corporation which purchased the property from the City of Garfield Heights which purchased the property at a tax foreclosure sale. McCants and Cadle II appeal herein, and Bynes cross appeals. I. McCANTS' APPEAL THE WEIGHT OF THE EVIDENCE DOES NOT SUPPORT THE LOWER COURT RULING AGAINST ROOSEVELT MCCANTS Herein, McCants maintains that the trial court erred in rendering judgment against him since he relied upon Cadle II's representation that Cleveland Community Savings Company never accepted the 1984 deed and was assured by Cadle II that his liability would terminate if he found a buyer for the subject property. In Swirsky v. Van Sweringen Co. (1930), 9 O.L.A. 210, this court held that where, without prior knowledge or consent, one's name is inserted in a conveyance as a grantee assuming a mortgage, such individual is not personally liable on the mortgage. Further, it is well-settled that where a vendor is charged with producing "good and marketable" title, title must be in a condition as would satisfy a buyer of ordinary prudence. G/GM Real - 9 - Estate Corp. v. Suisse Chalet Motor Lodge of Ohio, Inc. (1991), 61 Ohio St.3d 375, paragraph two of the syllabus. In addition, a vendee may recoup damages which he has sustained by reason of false representations of the vendor. See Mulvey v. King (1883), 39 Ohio St. 491, 495. Applying the foregoing, it is clear that McCants entered into a land installment contract and purchase agreement with Bynes regarding property which McCants had already deeded away, and never independently possessed (exclusive of the interest of Lovia McCants). Further, there was competent, credible evidence supporting the trial court's determination that the land contract was signed in blank and did not embody its intended terms in light of the fact that "provision was inserted whereby Bynes `assumed a first mortgage obligation to the Cadle Company in the amount of $24,000.00 which the Vendee Assumes and Agrees by this Contractual Document ***.'" Moreover, the undisputed evidence established that Bynes sustained damages from this conduct. Accordingly, this assignment of error lacks merit. II. CADLE II'S APPEAL A. WHETHER OR NOT THE LOWER COURT ERRED IN FIND- ING THAT DEFENDANT MCCANTS WAS SOLICITED TO EXECUTE AND DELIVER A QUIT-CLAIM DEED "IN LIEU OF FORECLOSURE." B. - 10 - WHETHER OR NOT THE LOWER COURT ERRED IN FINDING THAT THE QUIT-CLAIM DEED FROM DEFENDANT MCCANTS TO THE FAILED BANK WAS ACCEPTED AND RECORDED BY BANK PERSONNEL. C. WHETHER OR NOT THE LOWER COURT ERRED IN FIND- ING THAT DEFENDANT BYRAM BYNES ON NOVEMBER 25, 1987, SIGNED A BLANK LAND INSTALLMENT CONTRACT WHICH INCLUDED MORTGAGE ASSUMPTION LANGUAGE. G. WHETHER OR NOT THE LOWER COURT ERRED WHEN IT FAILED TO RULE ON AND AWARD A JUDGMENT IN FAVOR OF THE CADLE COMPANY, II, INC. ON ITS CAUSE OF ACTION AGAINST ROOSEVELT O. MCCANTS. These assignments of error share a common basis in law and in the record and will be addressed together. In determining whether a judgment is against the manifest weight of the evidence, a court of appeals must be guided by the presumption that the findings of the trier of fact were indeed correct. Seasons Coal Co. v. Cleveland (1984), 10 Ohio App.3d 77, 79-80. The court explained: The underlying rationale of giving deference to the findings of the trial court rests with the knowledge that the trial judge is best able to view the witnesses and observe their demeanor, gestures and voice inflections, and use these observations in weighing the credibility of the proffered testimony. Thus, judgments supported by some competent, credible evidence going to all the essential elements of the case will not be reversed by a reviewing court as being against the manifest weight of the evidence. Id., quoting C.E. Morris Co. v. Foley Construction Co. (1987), 54 Ohio St.2d 279, 261. - 11 - In its first and second assignments of error, Cadle II insists that the trial court erred in determining that McCants executed and delivered a deed in lieu of foreclosure and in failing to conclude that this deed was never accepted by the bank following such execution. We note, however, that there is competent, credible evidence after Cleveland Community Savings Company initiated foreclosure proceedings upon the subject property, a representative of that bank suggested that McCants deed the parcel to the bank "in lieu of foreclosure," and that McCants concluded that this tender extinguished his ownership interest in it and relieved him of further liability on the mortgage. (Tr. 125, 142-143). In addition, the evidence demonstrated that the deed was subsequently filed with the county recorder's office in accordance with the dictates of R.C. 5301.23 which can be construed as manifesting an intention to accept the deed and to pass title to the bank. See R.C. 5301.25. Moreover, following the recording of this deed, the actions of Mr. and Mrs. McCants demonstrated a subjective belief that they were no longer owners of the property. Thus Cadle II's first and second claims lack merit. In its third claim, Cadle II challenges the trial court's determination that Bynes signed the land installment contract in blank. We note, however, that Bynes testified that this document was not completely filled out when he signed it and McCants explained that he was in a hurry and that he and his attorney would fill out the document to reflect the parties' previous agreement - 12 - then mail a copy of it to him. (Tr. 191-192). Bynes also established that he did not knowingly agree to assume the mortgage to Cadle II. (Tr. 192). In addition, the undisputed evidence demonstrated that in the previous agreement, Lovia McCants' signature was included but she was not even present when this document was signed. Indeed, her signature bears a striking similarity to her husband's. Further, Bynes certainly, definitely and unwaveringly established that his signature was not notarized in the manner set forth on the land installment contract and he was not given a copy of this document until several years later. Significantly, this document was never recorded, contrary to the requirements of R.C. 5301.25(A). From the foregoing, we conclude that there was ample competent, credible evidence supporting the trial court's conclusion that this agreement varied from its intended terms to include the assumption of the note assigned to Cadle II. Cadle II next contends that the trial court erred in failing to grant it judgment on its claim against McCants. The undisputed evidence of record demonstrates, however, that Cadle II solicited McCants to find a buyer to assume the note which would relieve him of liability, and in response, McCants entered into the purchase agreement and land installment contract with Bynes. Accordingly, this aspect of the trial court's judgment is supported by competent, credible evidence and will not be reversed herein. D. - 13 - WHETHER OR NOT THE LOWER COURT ERRED AS A MATTER OF LAW WHEN IT FOUND THAT THE CADLE COMPANY II, INC. COULD NOT ENFORCE THE LAND INSTALLMENT CONTRACT, WHICH INCLUDED THE MORTGAGE ASSUMPTION LANGUAGE. E. WHETHER OR NOT THE LOWER COURT ERRED AS A MATTER OF LAW WHEN IT FOUND THAT THE DEFENDANT BYRAM BYNES WAS ENTITLED UNDER PRE-EXISTING LAW AND OHIO REVISED CODE 5303.02 TO THE RETURN OF THE MONEY PAID UNDER THE LAND INSTALLMENT CONTRACT, WITH INTEREST FROM THE DATE OF PAYMENT, FROM THE CADLE COMPANY, II, INC., A THIRD-PARTY CREDITOR BENEFICIARY UNDER THE LAND INSTALLMENT CONTRACT. F. WHETHER OR NOT THE LOWER COURT ERRED AS A MATTER OF LAW WHEN IT AWARDED JUDGMENT AGAINST THE CADLE COMPANY, II, INC. JOINTLY AND SEVER- ALLY, IN THE AMOUNT OF $15,733.45 ON DEFEN- DANT, BYRAM BYNES' COUNTERCLAIM. These assignments of error are related and will be considered together. R.C. 5303.02 provides in relevant part as follows: In actions to recover the puruchase money of real estate by vendor against vendee, the vendee, notwith- standing his continued possession, may by way of counter- claim set up any breach of the covenants of title acquired by him from the plaintiff, and make any person claiming an adverse interest therein a party to the action. Upon the hearing, he may recoup against the plaintiff's demand the present worth of an existing lien or encumbrance thereon. If the adverse interest of the claimant is an estate in reversion or remainder, or contingent upon a future event, with his assent, the court of common pleas may order the vendee to surrender possession to his vendor upon the repayment of so much of the purchase money as has been paid, with interest, ***. - 14 - In addition, the doctrine of merger provides that acquisition of mortgaged land and mortgage debt by one person results in extinguishment of the mortgage lien and discharge of the debt, unless a contrary intention is shown. In re Fluharty (N.D. Ohio 1982), 23 B.R. 426, 430-431. The Fluharty court explained: The theory behind this doctrine is that: "the person owning and controlling the debt can usually have no object in keeping it alive, it being in substance a claim against his own property, and he may consequently be presumed to intend that the debt shall be extinguished ..." 5 Tiffany [The Law of Real Property, Section 1479, (3d ed. 1939)] at Section 1480. It is essential to remember, that as this doctrine is presently applied, the doctrine of merger is governed by equitable principles. 37 Ohio Jur.2d, Mortgages, Section 224 (1959). *** One of the controlling factors in determining if a merger has taken place is whether a merger was intended to take place. Bell v. Tenny, 29 Ohio St. 240 (1876); 37 Ohio Jur.2d, Mortgages, Section (1959). The crucial intent is that of the mortgagee at the time that the transfer takes place. 4 American Law of Property, Section 16.143 (A. Casner ed. 1952). Where no expressed intention at the time of transfer is shown, whether an intent to have merger exists must be determined from the surrounding circumstances. See, also, Marshall v. Ebling (1942), 70 Ohio App. 145, 152, (whether the conveyance of mortgaged premises by the mortgagor to the mortgagee will cause merger of the mortgage liens into the legal title and extinguish the debt depends on the intention of the mortgagee). From the foregoing, it is clear that pursuant to R.C. 5303.02, Bynes could assert a claim for breach of covenants of title and recoup the purchase money he paid with interest. In addition, - 15 - under the clear facts of this matter, the McCantses' execution of the deed to Cleveland Community Savings Company, the mortgagee, caused merger of the promissory note and extinguishment of the debt, as it was delivered and recorded "in lieu of foreclosure." Thus, there was no basis upon which Cadle II could recover from Bynes and he was entitled to recover all of the money he paid due to the joint conduct of McCants and Cadle II. These claims therefore lack merit. III. BYNES' CROSS-APPEAL A. THE TRIAL COURT ERRED IN NOT FINDING FRAUD HAD BEEN COMMITTED AND IN NOT AWARDING PUNITIVE DAMAGES. Within this assignment of error, Bynes maintains that the trial court erred in refusing to credit Bynes' contention that he was defrauded in connection with the purchase agreements and the addition of the loan assumption provision of the land installment contract. In order to establish a claim of fraud, one must prove (1) a material false representation or concealment; (2)knowingly made or concealed; (3) with the intent of misleading another into relying upon it; (4) reliance, with a right to do so, upon the representation or concealment by the party claiming injury; and (5) injury resulting from the reliance. See Burr v. Stark County Board - 16 - of Commissioners (1986), 23 Ohio St.3d 69, paragraph two of the syllabus. In Noth v. Wynn (1988), 59 Ohio App.3d 65, 67, the court concluded that the fourth of these elements, the right to rely upon the representation, is lacking as a matter of law where the subject of the representation was a matter of public record and therefore easily discoverable. The court explained: We nevertheless conclude that the fourth element of fraud is lacking because, as a matter of law, the Noths had no right to rely upon any of defendants' representa- tions. In property transactions, there is no right to rely upon oral representations regarding the property transferred where the true facts are equally open to both parties. Traverse v. Long (1956), 165 Ohio St. 249, 252, 59 O.O. 325, 326-327, 135 N.E.2d 256, 259. Where any adversities regarding title to property are of public record and therefore easily discoverable, the purchaser of the property is not entitled to rely upon the alleged misrepresentations of the seller or the seller's agent. Id. In accordance with the foregoing, we likewise conclude that Bynes cannot establish the fourth essential element of his fraud claim as it pertains to McCants' representation that he had title to the subject property. As to Bynes' additional claim that the loan assumption provision of the land installment contract was fraudulently obtained, we note that the fact that this document did not embody its intended terms in light of the fact that "a pro- vision was inserted whereby Bynes `assumed a first mortgage obligation ***,'" and damages ensued, does provide a basis for recovery for fraud. However, we cannot conclude that the trial court abused its discretion in refusing to award punitive damages on this claim given Bynes' disregard of patent errors and omissions - 17 - in the disputed documents. Cf. Doe v. White (1994), 97 Ohio App.3d 585, 593 (determination of the amount of punitive damages is within the discretion of the trier of fact, and the reviewing court should not substitute its judgment for that of the trier of fact). B. THE TRIAL COURT ERRED IN DENYING BYRAM BYNES MOTION FOR FRIVOLOUS CONDUCT WITHOUT AN ORAL HEARING THEREON. As an initial matter, we note that the trial court did not grant the motion for sanctions within twenty-one days after the entry of judgment, pursuant to the dictates of R.C. 2323.51(B). Therefore, the trial court implicitly denied the motion. Cf. Brannan v. Dare (1994), 99 Ohio App.3d 103, 106. We further note that before a trial court may grant a motion for reasonable attorney's fees for frivolous conduct pursuant to R.C. 2323.51 and render such award, it must conduct an evidentiary hearing upon the motion. See Pisani v. Pisani (1995), 101 Ohio App.3d 83, 87. However, the converse is not true; a trial court is not required to conduct a hearing when an award of attorney's fees is denied. Id. The Pisani court explained: As a practical matter, observing a distinction between granting and denying the motion makes sense. A party should not be found to have engaged in frivolous conduct (an extraordinary event) and assessed attorney fees without the benefit of a due process hearing. On the other hand, the court may know from its own experience with the case that the motion is without merit on its face. *** [T]here may be some circumstances in which a hearing is not required, as where the court has sufficient knowledge of the circumstances for the denial - 18 - of the requested relief and the hearing would be perfunctory, meaningless or redundant. Moreover, while Cadle II did not prevail in its efforts to collect from Bynes, we cannot say as a matter of law that its action served merely to harass or maliciously injure, or that it could not be supported by a good faith argument for an extension, modification,or reversal of existing law. Cf. R.C. 2323.51(A)(2); Tomb & Associates, Inc. v. Wagner (1992), 82 Ohio App.3d 363, 366. In accordance with the foregoing, we find this assignment of error to lack merit. The judgment of the trial court is affirmed. - 19 - 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. PATTON, J., AND SPELLACY, J., CONCUR ANN DYKE PRESIDING JUDGE N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the .