Court of Appeals of Ohio, Eighth District, Cuyahoga
RICHARD G. JOHNSON, ESQ. PLAINTIFF-APPELLANT
U.S. TITLE AGENCY, INC., ET AL. DEFENDANTS-APPELLEES
Appeal from the Cuyahoga County Court of Common Pleas Case
ATTORNEYS FOR APPELLANT Robert D. Kehoe Lauren N. Orrico
Tatyana Pishnyak Kehoe & Associates L.L.C.
ATTORNEYS FOR APPELLEES For U.S. Title Agency, Inc. Debra J.
Horn Meyers, Roman, Friedberg & Lewis.
Chicago Title Insurance Company Alexander E. Goetsch Sikora
BEFORE: Laster Mays, J., Keough, A.J., and Boyle, J.
JOURNAL ENTRY AND OPINION
LASTER MAYS, J.
Plaintiff-appellant Richard G. Johnson, Esq.
("Johnson") appeals the trial court's grant of
summary judgment on behalf of defendants-appellees, U.S.
Title Agency, Inc. ("US Title") and Chicago Title
Insurance Company ("Chicago Title") on several
grounds, arising from the closing of a home renovation
construction loan. After a thorough review of the record, the
matter is reversed and remanded.
BACKGROUND AND FACTS
In 2008, Johnson hired Berns Custom Homes ("Berns")
as the general contractor ("Contractor") to
renovate his recently purchased home in Bentleyville, Ohio
("Property"). Johnson obtained a $815, 581
construction loan (the "Loan") from KeyBank
National Association ("KeyBank") to satisfy the
existing mortgage and finance the renovations.
Johnson, an attorney specializing in legal malpractice
issues, retained counsel Mark Wachter ("Wachter")
to assist him with negotiating the Loan. A key factor in the
negotiations was to ensure that the project proceeded to
completion and that contractual and insurance protections
were sufficient to accomplish this goal.
At Wachter's recommendation, the parties agreed that U.S.
Title would serve as the closing agent, escrow agent, and
title agent for Chicago Title who would issue the title
policies. KeyBank provided written closing instructions to
U.S. Title for the transaction, entitled
"Construction-to-Permanent Closing Instructions"
("Closing Instructions"). Wachter allegedly issued
verbal closing instructions to U.S. Title ("Johnson
Closing Instructions"), asking for the same protections
against mechanics liens that KeyBank received, and for
compliance with KeyBank's Closing Instructions.
Closing took place at the offices of U.S. Title, who was
charged with, among other responsibilities, adhering to the
Closing Instructions or absorbing liability for their failure
to do so. Documents executed at the closing included the
construction loan agreement and rider dated May 27, 2010
(collectively "Loan Agreement"), and the mortgage
agreement that included a construction rider
("Mortgage"). The Mortgage, executed by Johnson and
KeyBank, and recorded by U.S. Title, included a construction
rider, and a provision that no lien whatsoever could take
priority over the Mortgage.
Following the printed provisions, the Loan Agreement contains
a signature block signed by Johnson and the date May 27,
2010. The next page contains a contractor's consent
clause (the "Consent Clause") with a signature
block for Berns and the date of May 27, 2010 inserted,
followed by a signature page executed by a KeyBank director,
on behalf of KeyBank.
The Consent Clause provides that the Contractor "hereby
subordinates its lien on the Property, now existing or
hereafter arising, to the lien of the Security
Documents." The sum of $477, 723.00 is also set forth,
representing the amount of the construction contract between
Johnson and Berns. The signature portion below the
subordinate clause contained typewritten language:
May 27, 2010
Berns Custom Homes, Inc.
By: Name: Justin Berns, Authorized Signatory
US Title concedes in its appellate brief that, "when
signed, " the Consent Clause, "provides for the
Contractor to contractually subordinate his rights to any
liens the Contractor may file on the property, now or in the
future, in favor of the Mortgage such that the Mortgage would
still remain in first position." Though the May 27, 2010
date is inserted below the clause, and the name of the
authorized signatory for Berns is typed underneath the
signature line, U.S. Title states that it did not have Berns
sign because Berns was not a party to the Loan, and it was
not required by the Closing Instructions.
On June 14, 2010, U.S. Title provided Johnson with a copy of
the HUD-1 settlement statement setting forth the charges and
allocations for the transaction. The HUD-1 reflects
Johnson's payment for Closing Protection Coverage
("CP Coverage"). On July 15, 2010, U.S. Title
provided Johnson's counsel with a copy of the owner's
policy of title insurance ("Owner's Policy")
issued by Chicago Title for the Loan and Mortgage. Also on
that date, U.S. Title states it provided KeyBank with a copy
of the lender's policy of title insurance
("Lender's Policy") issued by Chicago Title.
As required by Ohio law,  Johnson was offered CP Coverage via a
closing protection letter form ("CP Letter") from
U.S. Title that Johnson signed indicating acceptance.
According to the language of the CP Letter, the CP Coverage
indemnified Johnson for any loss resulting from listed
conditions, including the closing agent's "[f]ailure
to comply with any applicable written closing instructions,
when agreed to by the Licensed Agent [US Title]." No
exclusions are listed in the CP Letter. The parties agree
that Johnson paid for and was entitled to the CP Coverage,
but did not receive a copy of the CP Coverage.
During September 2010 to October 2010, a dispute arose
between Berns and Johnson. Johnson terminated Berns. Berns
and four subcontractors filed mechanic's liens for $297,
191. The matter proceeded to mandatory mediation and, later,
US Title notified KeyBank of the liens on December 29, 2010.
KeyBank dishonored Johnson's draw request as a result.
Subsequently, Johnson discovered that: (1) the Lender's
Policy had not been issued to KeyBank until after KeyBank was
provided with notice of the liens, an assertion disputed by
U.S. Title, (2) the CP Coverage policy that Johnson purchased
had not been provided to Johnson, (3) the Consent Clause
containing the Contractor's consent to subrogation to the
Mortgage of all liens had not been executed by the
Contractor; (4) neither the Owner's Policy nor the
Lender's Policy contained a future advance endorsement or
exclusion protecting against priority of mechanics liens, and
(5) the use of an open end form of mortgage instead of the
Mortgage used in this transaction would have assured priority
for future advances.
On several dates between December 31, 2010 and January 17,
2011, Johnson and his counsel corresponded with U.S. Title
and Chicago Title requesting removal of the liens pursuant to
the CP Coverage and the title insurance under the Owner's
Policy, and asserting Johnson's third-party beneficiary
status under KeyBank's Lender's Policy. Johnson also
requested that the Owner's Policy be corrected to remove
the lien exceptions, and that appellees satisfy the mechanics
liens claim. Johnson asserted that appellees' failure to
comply with the Closing Instructions caused the current
issues. Appellees did not respond to the claim requests. The
liens remained and KeyBank refused to release further draws.
Johnson filed suit against U.S. Title and Chicago Title. The
complaint asserts six counts:
I. U.S. Title - breach of contract against U.S. Title
including the failure to insure for mortgage priority,
violating the Closing Instructions, failing to have the
contractor sign the Construction Loan, refusal to honor the
II. Chicago Title - breach of contract against Chicago Title
including the failure of Chicago Title's agent, U.S.
Title, to properly handle the closing; and denial of claims
under the owner's policy, closing protection coverage,
and as a third-party beneficiary of KeyBank's
III. Chicago Title and U.S. Title - specific performance and
injunctive relief requiring that appellees extinguish the
liens, provide for subordination of the liens or issue title
insurance insuring over any after-filed liens.
IV. U.S. Title - alleging U.S. Title was negligent in
performing professional services by failing to issue the
proper title insurance policies, filing closing documents
without properly examining them for compliance with the
requirement that the Mortgage must maintain priority over
V. U.S. Title - breach of fiduciary duty to Johnson,
including the failure to correctly conduct the closing to
effect the intention of the parties that the Mortgage
maintain priority at all time, and to record and/or issue the
VI. Chicago Title and U.S. Title - breach of duty of good
faith and fair dealing by failing to remedy the problems
caused by the breaches set forth in Counts I through V.
Private mediation between the parties was unsuccessful. The
court ordered plaintiffs expert deadline of May 15, 2013,
defense's expert deadline of June 15, 2013, and
dispositive motion deadline of July 1, 2013.
Chicago Title filed for summary judgment on June 27, 2013,
supported by evidence including testimony from Johnson,
Edward R. Horejs, Jr. ("Horejs") of Chicago Title,
Michael Gerome ("Gerome") of U.S. Title, title
expert Michael Waiwood ("Waiwood"), and various
exhibits. U.S. Title filed for summary judgment on June 28,
2013. The motion was supported by Waiwood's affidavit.
Appellees also filed motions to prevent Johnson from offering
expert witness testimony at trial due to his failure to
designate an expert by the deadline.
Johnson filed for summary judgment on July 1, 2013, with
evidence that included a supporting affidavit by Johnson.
Johnson was granted leave until August 14, 2013, to respond
to appellees' motions for summary judgment. On August 14,
2013, Johnson filed the replies to summary judgment, and a
motion for leave to submit the expert report of Dr. Robert
Belinger ("Belinger"), opposed by appellees. A
series of motions ensued between the parties regarding the
expert report; however, there are no dispositive journal
entries in the record resolving any of these motions. On
August 29, 2013, Johnson filed the notice of original
affidavit of Belinger.
On September 18, 2013, the trial court granted appellees'
motions for summary judgment, and denied Johnson's
(1) Johnson's claims are excluded by the express terms of
the Owner's Policy and CP Coverage as the liens were
created by Johnson after closing and after he chose to fire
(2) Johnson's claims were excluded by the CP Coverage
terms, as Johnson created the lien problem and he failed to
provide written closing instructions to U.S. Title seeking a
variance of the customary exclusions and limitations
regarding mechanics liens;
(3) Johnson lacked standing to assert a breach of contract
regarding the KeyBank's Lender's Policy and Closing
Instructions, as he failed to demonstrate that he was a party
to those documents; and
(4) the claims for bad faith, specific performance and
injunctive relief failed as a result of the court's
finding on the stated issues.
Johnson appealed; however, this court dismissed the appeal
because Counts IV and V of the amended complaint had not been
resolved. On February 21, 2014, the trial court
dismissed the two counts pursuant to Civ.R. 41(A), without
A second appeal was filed on March 24, 2014. This court
granted Johnson's motion to dismiss the appeal on June
13, 2014, because the Civ.R. 41(A) dismissal was not
sufficient to constitute a final appealable order:
A court order granting a motion for summary judgment without
actually entering judgment for any party is not an final
order. Bapst v. Goodwin, 4th Dist. Pike No. 08CA780,
2009-Ohio-6244, ¶ 9. It is not made final or appealable
by the dismissal of some other claims without prejudice.
The trial court returned the case to the active docket and
issued dispositive motion deadlines for the remaining counts.
U.S. Title and Johnson filed "renewed" motions for
summary judgment. Johnson's filing included an affidavit
from Wachter. The affidavit was not submitted with
Johnson's prior motion for summary judgment.
On September 24, 2015, the trial court granted summary
judgment for appellees on Counts IV and V of the amended
complaint without opinion. This appeal followed.
ASSIGNMENTS OF ERROR
Johnson advances four assignments of error proposing various
grounds upon which the trial court improperly granted summary
judgment in this case:
I. The trial court erred in granting summary judgment in
favor of defendants as to plaintiff's claims for breach
of contract where defendants failed to properly execute the
Closing Instructions, failed to honor the terms of their
policies, and failed to issue the correct policy.
II. The trial court erred in granting summary judgment in
favor of U.S. Title as to plaintiff's claim for breach of
fiduciary duty where U.S. Title served as an escrow agent for
plaintiff and KeyBank, and breached its duty to follow the
III. The trial court erred in granting summary judgment in
favor of U.S. Title as to plaintiffs claim for negligence
where U.S. Title failed to secure the correct form of
coverage for plaintiff and failed to follow Closing
IV. The trial court erred in granting summary judgment in
favor of defendants as to plaintiffs claim for bad faith
where defendants failed to acknowledge receipt and pay
STANDARD OF REVIEW
Our standard of review for summary judgment appeals is de
We review the trial court's decision on summary judgment
de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d
102, 105, 671 N.E.2d 241 (1996). In so doing, we use the same
standard as the trial court. Lorain Natl. Bank v.
Saratoga Apts., 61 Ohio App.3d 127, 129, 572 N.E.2d 198
(9th Dist.1989). The party moving for summary judgment bears
the initial burden of apprising the trial court of the basis
of its motion and identifying those portions of the record
which demonstrate the absence of a genuine issue of fact on
an essential element of the nonmoving party's claim.
Dresher v. Burt, 75 Ohio St.3d 280, 293, 662 N.E.2d
264 (1996). Once the moving party meets its burden, the
burden shifts to the nonmoving party to set forth specific
facts demonstrating a genuine issue of material fact exists.
Id. To satisfy this burden, the nonmoving party must
submit evidentiary materials showing a genuine dispute over
material facts. PNC Bank, NA. v. Bhandari, 6th Dist.
Lucas No. L-12-1335, 2013-Ohio-2477, ¶ 9.
Lillie & Holderman v. Dimora, 8th Dist. Cuyahoga
No. 100989, 2015-Ohio-301, ¶ 9.
The following elements must be established to grant summary
The motion for summary judgment may only be granted when the
following are established: (1) that there is no genuine issue
as to any material fact; (2) that the moving party is
entitled to judgment as a matter of law; and (3) that
reasonable minds can come to but one conclusion, and that
conclusion is adverse to the party against whom the motion
for summary judgment is made, who is entitled to have the
evidence construed most strongly in its favor. Harless v.
Willis Day Warehousing Co., 54 Ohio St.2d 64, 67, 375
N.E.2d 46 (1978); Civ.R. 56(C).
We, as the reviewing court, evaluate the record in a light
most favorable to the nonmoving party. Saunders v.
McFaul, 71 Ohio App.3d 46, 50, 593 N.E.2d 24 (8th
Dist.1990). Any "doubts must be resolved in favor of the
nonmoving party." Murphy v. Reynoldsburg, 65
Ohio St.3d 356, 358-359, 604 N.E.2d 138 (1992).
LAW AND ANALYSIS
Johnson argues that the trial court decision misconstrues the
facts and is contrary to Ohio law. We agree.
Preliminary Evidentiary Issues
An appellate court reviews "the same evidentiary
materials that were properly before the trial court at the
time it ruled on the summary judgment motion." Am.
Energy Servs., Inc. v. Lekan, 75 Ohio App.3d 205, 208,
598 N.E.2d 1315 (5th Dist.1992). Appellees argue the Belinger
and Wachter affidavits should be excluded from consideration
because they were not properly before the court.
Belinger Affidavit and Report
Appellees posit that the affidavit and report of Belinger
(collectively "Belinger Report") may not be
considered because the affidavit was not accompanied by the
report upon initial filing, the report was submitted after
the expert disclosure deadline of May 15, 2013, and that, due
to the trial court's failure to rule on the subsequent
motion for leave to file the report, the motion was
presumptively denied when final judgment was granted.
Kostelnik v. Helper,96 Ohio St.3d 1,
2002-Ohio-2985, 770 N.E.2d 58, ¶ 13 ("a motion not
expressly decided by a trial court when the case is concluded