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Wells Fargo Bank, N.A. v. Michael

Court of Appeals of Ohio, Seventh District

June 10, 2013

WELLS FARGO BANK, N.A., PLAINTIFF-APPELLANT,
v.
DALE AND DEBORAH MICHAEL, DEFENDANTS, JAMES AND NORMA FLEAGANE, DEFENDANTS-APPELLEES.

Civil Appeal from Common Pleas Court, Case No. 10CV399.

For Plaintiff-Appellant: Attorney Amelia Bowser Attorney David VanSlyke

For Defendants-Appellees: Attorney Michael McCormick

Hon. Joseph J. Vukovich Hon. Gene Donofrio Hon. Cheryl L. Waite

OPINION

VUKOVICH, J.

{¶1} Plaintiff-appellant Wells Fargo Bank, N.A., appeals the decision of the Belmont County Common Pleas Court that denied in part its motion for summary judgment against defendants-appellees James and Norma Fleagane. The decision to grant in part and deny in part the motion for summary judgment permitted Wells Fargo to foreclose on the real estate located at 55022 Ridge Road, Bellaire, Ohio, which was owned by Dale and Debra Michael. However, the trial court determined that the right to foreclose was subject to the Fleaganes' repurchase option and the right of first refusal that they acquired when they sold the property to Dale and Debra Michael.

{¶2} Two issues are raised in this case. The first is whether the repurchase option runs with the land and can be invoked by the Fleaganes following foreclosure. The second issue is whether the right of first refusal can be invoked following foreclosure at the Sheriffs sale to acquire the property for the same amount as the highest bidder.

{¶3} For the reasons discussed below, we hold that the repurchase option does not run with the land. As for the right of first refusal, given the specific language used in the covenant, foreclosure is not a triggering event. Or in other words, the Fleaganes do not have a right of first refusal at the Sheriffs sale. Therefore, the trial court erred when it did not grant Wells Fargo's motion for summary judgment in its entirety. The decision of the trial court is hereby reversed and the cause is remanded.

Statement of the Case

{¶4} The Michaels purchased real property located at 55022 Ridge Road, Bellaire, Ohio, from the Fleaganes on February 20, 2002. The deed contains two covenants - a repurchase option and a right of first refusal.

{¶5} In April 2003, the Michaels took out a mortgage with Novastar Mortgage that was secured by the property located at 55022 Ridge Road, Bellaire, Ohio. That mortgage was later assigned to Wells Fargo. Thus, Wells Fargo had knowledge of the repurchase option and the right of first refusal when it acquired the mortgage.

{¶6} The Michaels eventually defaulted on the mortgage and Wells Fargo initiated foreclosure proceedings. The original complaint did not name the Fleaganes as defendants.

{¶7} The Michaels did not file an answer to the complaint, which resulted in Wells Fargo moving for default judgment. The trial court granted this motion, however, in March 2011, Wells Fargo moved to vacate the default judgment award. Wells Fargo asked for vacation because all parties in interest had not been named in the original complaint. The trial court granted the motion. 03/15/11 J.E.

{¶8} Thereafter, Wells Fargo filed an amended complaint and added the Fleaganes as defendants. The Fleaganes filed an answer asserting the repurchase option and the right of first refusal as affirmative defenses to the action.

{¶9} Wells Fargo then filed a motion for summary judgment against the Fleaganes and the Michaels. It claimed that the Michaels are in default on the loan and it has the right to foreclose. As to the Fleaganes, Wells Fargo claimed that the repurchase option and right of first refusal did not run with the land and were not enforceable in the context of foreclosure.

{¶10} The Fleaganes filed an answer brief arguing that the right of first refusal was not extinguished by foreclosure. It cited an Ohio case, National City Bank v. Welch, 188 Ohio App.3d 641, 2010-Ohio-2981, 936 N.E.2d 539 (10th Dist.), in support of its position. Wells Fargo replied once again asserting that the right of first refusal was not enforceable and did not run with the land.

{¶11} After reviewing the parties' arguments, the trial court granted Wells Fargo's motion for summary judgment against the Michaels. However, as to Wells Fargo's motion for summary judgment against the Fleaganes, it granted the motion in part and denied it in part. The trial court explained that while Wells Fargo is entitled to foreclosure on the real estate, that entitlement is subject to the preemptive rights of the Fleaganes. Thus, the trial court held that both the repurchase option and the right of first refusal survived foreclosure. Therefore, it determined that if Wells Fargo purchased the property at the foreclosure sale it would not be a bona fide purchaser and the Fleaganes at that point could invoke either their repurchase option or the right of first refusal. 06/15/12 J.E.

{¶12} Wells Fargo appeals from that decision claiming that the right of repurchase does not survive the foreclosure and that the right of first refusal is not invoked in the foreclosure setting.

Standard of Review

{¶13} Both assignments of error address the trial court's summary judgment decision and thus, the same standard of review is used. In reviewing a summary judgment award, we apply a de novo standard of review. Cole v. Am. Industries & Resources Corp., 128 Ohio App.3d 546, 552, 715 N.E.2d 1179 (7th Dist.1998). Thus, we apply the same test as the trial court. Civ.R. 56(C) provides that the trial court shall render summary judgment if no genuine issue of material fact exists and when construing the evidence most strongly in favor of the nonmoving party, reasonable minds can only conclude that the ...


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