COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 70779 WARREN WOLFSON : : Plaintiff-appellee : : JOURNAL ENTRY -vs- : AND : OPINION EUCLID AVENUE ASSOCIATES : : Defendant-appellant : : DATE OF ANNOUNCEMENT : MARCH 20, 1997 OF DECISION : CHARACTER OF PROCEEDING : Civil appeal from Court of Common Pleas : Case No. CV-283146 JUDGMENT : REVERSED AND REMANDED DATE OF JOURNALIZATION : APPEARANCES: For plaintiff-appellee: For defendant-appellant: ROBERT S. BALANTZOW, ESQ. RICHARD G. HARDY, ESQ. JEFFREY A. HUTH, ESQ. TIMOTHY J. DOWNING, ESQ. McCarthy, Lebit, Crystal & Ulmer & Berne, P.L.L. Haiman Co., L.P.A. Bond Court Bldg. 1800 Midland Bldg. 1300 East 9th Street, Suite 101 Prospect Avenue, East 900 Cleveland, OH 44115 Cleveland, OH 44114-1583 - 2 - PATTON, J. Plaintiff Warren Wolfson brought this money only action seeking judgment of $693,491.38 plus accrued interest on a stipulated foreclosure decree signed by defendant Euclid Avenue Associates (EEA). EEA signed the decree after it defaulted on a loan and promissory note held by First Federal Savings and Loan Association of Rochester, New York (First Federal). Plaintiff claimed entitlement to the proceeds as the assignee of the First Federal note. The trial court rendered summary judgment on plaintiff's behalf in the prayed for amount. The primary issue concerns two separate non-recourse clauses contained in the mortgage and their application to EEA. In July 1973, EEA purchased real property located at 20611 Euclid Avenue by entering into a loan agreement, mortgage and note with First Federal (as the permanent lender) and Chase Manhattan Mortgage Realty and Trust (as the construction lender). Part I of the loan agreement related to the Chase construction loan; Part II of the loan agreement related to the First Federal permanent loan. Shortly thereafter, both the note and mortgage were assigned to First Federal. EEA leased the subject property to Braeview Manor, Inc, which ran a nursing home on the premises. Braeview paid rent to EEA, and EEA in turn paid its obligations under the mortgage and note to First Federal. By 1987, however, Braeview's financial difficulties - 3 - forced it into bankruptcy. Its inability to make rent payments caused EEA to default on the note. First Federal foreclosed on the property. In December 1992, the parties entered into a stipulated foreclosure decree in which they agreed EEA owed First Federal the sum of $2,158,729.67 plus interest. In January 1993, First Federal assigned the note and mortgage to its Ohio affiliate, First Fed Services of Ohio, Inc. (FirstFed). Two weeks later, FirstFed purchased the subject property at a sheriff's sale for $2.2 million. This left a deficiency of $693,491.38 plus accumulated late charges of $51,151.19. In August 1992, FirstFed assigned its interest in the note and mortgage to plaintiff. Plaintiff had an interest in a partnership known as Euclid Health Limited Partnership (EHLP), and wished to continue operating the subject property as a nursing home. In a subsequent document, FirstFed acknowledged that plaintiff succeeded to all the rights FirstFed obtained against EEA. Plaintiff's motion for summary judgment rested entirely on his rights as assignee under the stipulated foreclosure decree. EEA set forth three arguments to support its claim to summary judgment: (1) plaintiff was not a holder of the note, (2) plaintiff's corporate entity EHLP asserted its right to rent due EEA in the Braeview bankruptcy, thus evidencing that plaintiff did not hold the note, and (3) the 1973 loan between EEA and First Federal was a - 4 - non-recourse loan which precluded a deficiency judgment against First Federal and, by way of assignment, plaintiff. The trial court granted summary judgment without opinion. This appeal followed. Civ.R. 56(C) provides that summary judgment shall be rendered only if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. We construe written contracts as a matter of law. Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241, paragraph one of the syllabus; Inland Refuse Transfer Co. v. Browning-Ferris Industries of Ohio, Inc. (1984), 15 Ohio St.3d 321. 1 EEA claims that plaintiff is not entitled to a deficiency judgment since he is not the holder of the note. It first argues that the purchase agreement between FirstFed and plaintiff conveyed the premises only, and that the purchase agreement does not contain any language referencing the sale of the note as an asset or an assignment. This argument overlooks language in Section 2 of the purchase agreement. That section specifically incorporates into the sale of the described property all appurtenant rights, including all "intangible personal property." Words in a contract should be given their plain and ordinary meaning unless "manifest absurdity results or some other meaning is clearly intended from the face or - 5 - overall contents of the instrument." Alexander, supra, at 245- 246; King v. Nationwide Ins. Co. (1988), 35 Ohio St.3d 208, 212. Promissory notes are generally considered intangible property. See Union Investment, Inc. v. Midland-Guardian Co. (1986), 30 Ohio App.3d 59, fn.2; cf. Reif v. Reif (1993), 86 Ohio App.3d 804, 806 ("Intangibles can be divided into two categories: those which are embodied in a document, such as a promissory note, and those which lack physical substance, such as informal contracts or debts."). For purposes of this assignment, we find the note was intangible personal property falling within Section 2 of the purchase agreement; therefore, plaintiff did hold the note. 2. EEA tries to substantiate its argument that plaintiff did not hold the note by noting events that did not occur. For example, it maintains that while First Federal's assignment to FirstFed specifically referenced that the note was to be assigned, the purchase agreement between FirstFed and plaintiff did not reference the assignment, even though the same attorneys represented plaintiff in both actions. In addition, it notes that plaintiff did not act immediately on the note, while he did immediately assert control over the premises. These points prove nothing. A party opposing summary judgment must come forward with specific facts showing a genuine issue for trial. See Civ.R. 56(E). EEA's arguments do not submit direct proof that plaintiff did not hold the note -- they amount to - 6 - nothing more than speculation. For example, the fact that the assignment between First Federal and FirstFed specifically referenced the note, while the assignment between FirstFed and plaintiff did not, may well be attributed to the purchase agreement containing a clause that stated all intangible personal property would be transferred by the assignment. Consequently, a reference to the note would have been superfluous. Moreover, although plaintiff did not act immediately on the note, he had no obligation to do so; therefore, his delay in asserting the claim would not prove that he did not believe he held the note. In any event, plaintiff did ultimately seek judgment on the note (using the stipulated foreclosure decree), so EEA's argument that plaintiff's delay in asserting his rights under the note proved he did not believe he held the note must necessarily fail. Plaintiff counters by presenting evidence that FirstFed signed an agreement subsequent to the purchase agreement in which it stated: "FIRSTFED *** acknowledges and agrees that by virtue of the Agreement of Purchase and Sale dated August 17, 1992, First Fed sold and assigned to Warren Wolfson ("Wolfson") all interests and rights First Fed ever had arising from or in connection with First Fed's interest in the relationship with Euclid Avenue Associates arising out of dealings related to the real estate at 20611 Euclid Avenue ***." Although this subsequent agreement supports plaintiff's argument that the purchase agreement incorporated the promissory note, we have serious reservations about applying the agreement to - 7 - divine the intent of the parties to the contract. On the one hand, EEA correctly notes that the subsequent agreement is not dated, nor is it supported by any consideration. On the other hand, the subsequent agreement falls outside the parol evidence rule because it is a writing made after the contract. See Am. Gen. Finance v. Beemer (1991), 73 Ohio App.3d 684, 687. We need not resolve this conflict, however, because we find the express terms of the assignment from FirstFed to plaintiff fully incorporated the mortgage and note, so reference to the subsequent agreement is, for purposes of this appeal, unnecessary. EEA next argues that plaintiff has taken an inconsistent position by asserting ownership of the note in this action while at the same time arguing that EHLP has attempted to usurp EEA's rent claim against Braeview. EEA cited to an objection filed by EHLP in the Braeview bankruptcy matter. In that objection, EHLP recounted the facts of the matter and stated: "FirstFed assigned to EHLP all of FirstFed's interest in the premises, including all executory and other contracts *** [a]ccordingly, EHLP possesses any claim that any of the predecessor mortgagees had under the terms of the Note, Mortgage or other loan documents, the foreclosure litigation, or in these proceedings." Putting aside EHLP's representations in the bankruptcy matter, all evidence submitted in the motions did, in fact, name plaintiff, not EHLP, as the assignee. The purchase agreement states: This Agreement, executed and delivered on August 17, 1992 constitutes the Agreement of Purchase and Sale by and between FIRSTFED - 8 - SERVICES OF OHIO, INC., an Ohio corporation ("Seller"), and WARREN L. WOLFSON, an individual ("Buyer"). (emphasis added). Ironically, EEA's own evidentiary material undercuts its argument. EHLP's objections in the bankruptcy court also stated, "FirstFed subsequently reconfirmed the full breadth of the interest assigned by noting it executed an agreement in which FirstFed stated that it had sold and assigned to Wolfson [all interests and rights FirstFed had in the subject premises]." (emphasis added). The parties have both used Wolfson's name and EHLP interchangeably during the proceedings, so EHLP's arguments in the bankruptcy court are not dispositive. Accordingly, we find EEA is not entitled to summary judgment on its claim that plaintiff did not hold the assignment. 3 EEA's principal argument is, regardless who owns the note, by its terms, the note provided recourse solely to the premises pursuant to the mortgage. As a consequence, EEA maintains First Federal was not entitled to a deficiency judgment against EEA; therefore, plaintiff could not assert the same right to a deficiency judgment by assignment against EEA. The mortgage is written in two conflicting parts. Part I of the mortgage states there is no recourse against either EEA or its partners, while Part II of the mortgage contains language stating non-recourse only to EEA's individual partners. - 9 - Part I (the construction loan), contains the following non- recourse language in Section 3.07: "Anything contained in this Mortgage or in the Note to the contrary notwithstanding the Mortgagee agrees that (i) in an action to foreclose this Mortgage, the Mortgagor, or the individual partners thereof, shall not be liable for any deficiency, including for the costs of enforcement between the total amount secured by this Mortgage and the proceeds of the foreclosure sale, and no deficiency judgment will be sought against the Mortgagor, or the individual partners thereof, in such foreclosure action and (ii) no action shall be brought against the Mortgagor, or the individual partners thereof, for payment of the indebtedness secured hereby or for the performance of any of the terms, covenants or conditions of this Mortgage ***." A recital to Part I states that the language contained in that part controls the mortgage "until such time as this Mortgage is assigned to the Permanent Mortgagee ***." Part II contains express non-recourse language in section 41: "The individual partners of Mortgagor (both General and Limited Partners thereof), shall not be personally liable hereon, jointly or severally, and no deficiency or personal judgment shall be sought and/or rendered against the said individual partners of the Mortgagor (both General and Limited Partners thereof) in any action or proceeding brought on this note by the Mortgagee or assigns." While Section 41 of Part II provides that there is no recourse against the individual partners of EEA, the parties apparently intended that recourse could be had against the partnership itself because two other sections of Part II expressly incorporate language authorizing foreclosure and collection of unpaid sums. - 10 - Section 34 of Part II states that the mortgagee is authorized to foreclose the mortgage and the mortgagee's failure to join tenants as parties to the foreclosure cannot be asserted as a defense to any deficiency remaining unpaid after the foreclosure sale of the subject premises. Section 38 of Part II states that the mortgagee may sue and recover judgment for the enforcement of the mortgage, and: "In case of a foreclosure sale of any of the mortgaged property and of the application of the proceeds of sale to the payment of the debt hereby secured, the Mortgagee shall be entitled to enforce payment of and to receive all amounts then remaining due and unpaid upon the note, and the Mortgagee shall be entitled to recover judgment for any portion of the debt remaining unpaid, with interest. Rules of contract construction require us to give effect to the words used, and neither delete words used nor add words not used. Cleveland Elec. Illum. Co. v. Cleveland (1988), 37 Ohio St.3d 50, paragraph three of the syllabus. Clearly, sections 34 and 38 of Part II contemplate recourse on the mortgage, while section 41 provides for no recourse against the individual partners. Giving these words their natural effect, we find the non-recourse language of Part II applies only to the individual investors, not to EEA itself. The issue presented, then, is whether the non-recourse language of Section 3.07 of Part I overrides the language of Part II of the mortgage. The recital to Part I of the mortgage states that, at the time the mortgage is assigned to the permanent lender, "the terms and - 11 - provisions of Part I hereof shall be set forth in Part II without the necessity for the execution or recording of any further document or instrument." EEA maintains section 3.07's language that "anything contained in this Mortgage or in the Note to the contrary notwithstanding" expressly incorporates section 3.07 into Part II. This would make the entire mortgage non-recourse and preclude plaintiff's recovery as a matter of law. A recital to Part II states that, at the time the mortgage is assigned to the permanent lender, "all of the terms and provisions of this Part II shall control and govern this transaction and instrument ***." Moreover, Section 42 of Part II of the loan agreement states: "All of the terms, provisions and conditions not inconsistent with part II contained in part I hereof and in the permanent agreement of even date herewith are incorporated herein ***." (emphasis added). We find the contract exhibits ambiguity. We are mindful that section 42 requires any inconsistent provisions of Part I to give way to Part II, but section 42 would circumvent section 3.07's express admonition that it applies notwithstanding anything contained in the mortgage to the contrary. Simply put, these sections are diametrical. EEA argues that this contradiction does not preclude summary judgment in its favor because extrinsic evidence showing the intent of the parties to the mortgage shows they intended the non-recourse language of section 3.07 to govern exclusively. - 12 - First, EEA maintains that Section 3.07 is typewritten onto a printed form agreement and must take precedence over the printed form. Since paragraphs 34 and 38 of Part II of the mortgage directly contradict Section 3.07 of Part I of the mortgage, EEA argues that Section 3.07 (the typewritten language) must apply over the printed language in Part II. It is true that if two contract provisions are inconsistent, the typed portion of a contract will prevail over the printed portion. O'Neill v. German (1951), 154 Ohio St. 565, paragraph two of the syllabus; Malcuit v. Equity Oil & Gas Funds, Inc. (1992), 81 Ohio App.3d 236, 239. Section 3.07 is clearly typed onto a preprinted mortgage. But our examination of Part II of the mortgage leads us to believe that part, as well, may not be printed on a form. We are unable to ascertain whether sections 3.07 and Part II were typed at the same time, although we note Part II contains personal pronouns specific to the parties (e.g., "First Federal"), as opposed to the indefinite language (e.g., "mortgagee") used in Part I. Hence, the rule of law pertaining to typed portions of contracts prevailing over printed portions of contract is not clearly applicable. Second, EEA submitted the affidavit of Norman Spindleman, one of its partners. Spindleman stated he specifically negotiated the non-recourse provision with respect to EEA and its partners so that "neither EEA nor any of its individual partners would have liability for any deficiency amount which might exist between the - 13 - total amount secured by the Mortgage and the proceeds of any foreclosure sale." Spindleman Aff. at paragraph 7. The affidavit further stated: "11. The non-recourse language was to be effective as to both the construction loan and permanent loan provisions (parts I and II of the Mortgage) and was to supersede any language to the contrary contained in either the Mortgage or Note as reflected by the following language contained in Section 3.07, `Anything contained in this Mortgage or the Note to the contrary notwithstanding ...'" Spindleman went on to state that the non-recourse language "would have been meaningless if it were effective only during the construction phase and not when the loan became permanent." Spindleman Aff. at paragraph 12. Ambiguities in contracts are ordinarily construed against the party who drafted the contract language. Smith v. Eliza Jennings Home (1964), 176 Ohio St. 351, 355. Spindleman, an EEA partner, drafted the ambiguous language, so as a general proposition, we would be inclined to construe the conflicting language against EEA. There are some exceptions to the rule of contract construction relating to ambiguous exculpation provisions in contracts. While exculpation clauses which limit the liability of the drafter are ordinarily strictly construed, such strict construction need not be applied when the exculpation clause is entered into between entities in the context of free negotiation. Prudential Ins. Co. of Am. v. Corporate Circle, Ltd. (1995), 103 Ohio App.3d 93, 98- 99. - 14 - Because of the ambiguity between the non-recourse language of Parts I and II, Spindleman's affidavit is admissible as extrinsic evidence of the parties' intentions with the non-recourse language of Part I. Shifrin v. Forest City Ent., Inc. (1992), 64 Ohio St.3d 635, syllabus. From a contract interpretation standpoint, however, that affidavit tends to undercut EEA's position since Spindleman averred that he alone insisted upon the non-recourse language and drafted Section 3.07. See Spindleman Aff. at paragraphs 7 and 10. Consequently, the ambiguity between Section 3.07 and Section 42 cannot be resolved solely on the basis of Spindleman's affidavit. Accordingly, we find reasonable minds can disagree as to the effect of the non-recourse language in the mortgage. Although both parties sought summary judgment as a matter of law, the existing question of fact nonetheless precludes summary judgment. See Heritage Mut. Ins. Co. v. Ricart Ford, Inc. (1995), 105 Ohio App.3d 261, 264. We therefore sustain the first assignment of error as it relates to the summary judgment granted to plaintiff, and overrule the second assignment of error as it relates to the trial court's failure to grant summary judgment to EEA. Judgment is reversed and remanded. - 15 - This cause is reversed and remanded to the lower court for further proceedings consistent with this opinion. It is, therefore, considered that said appellant recover of said appellee its costs herein. It is ordered that a special mandate be sent to said 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. JAMES D. SWEENEY, C.J., TIMOTHY E. McMONAGLE, J., CONCUR. JUDGE JOHN T. PATTON 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 .