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Fordyce v. Hattan

Court of Appeals of Ohio, Second District, Montgomery

August 9, 2019

SETH FORDYCE, et al. Plaintiffs-Appellants
v.
KENNETH M. HATTAN, et al. Defendants-Appellees

          Trial Court Case No. 2016-CV-5856 (Civil Appeal from Common Pleas Court)

          BARRY W. MANCZ, Attorney for Plaintiffs-Appellants

          STEPHEN E. KLEIN, and PATRICK J. JANIS, Attorneys for Defendants-Appellees

          OPINION

          HALL, J.

         {¶ 1} The plaintiffs-appellants, Seth Fordyce and Fordyce Finishing Company, LLC, appeal the trial court's entry of summary judgment for the defendants-appellees, Kenneth Hattan and Acquisition Services, LLC, on the appellants' claims for misrepresentation. We conclude that there was no justifiable reliance and that the claims were barred by the applicable statute of limitations, and we affirm the trial court's judgment.

         I. Facts and Procedural History

         {¶ 2} This case involves the sale of a business and the seller's claim that his broker misrepresented to him the terms of the sale. The business was Fordyce Finishing Company, LLC, owned by Seth Fordyce. (We will refer to them collectively as "Fordyce.") Fordyce hired Kenneth Hattan and his company, Acquisition Services, LLC, to be his agent in the sale. (We will refer to them collectively as "Hattan.") Hattan found a buyer in Couch Business Development, Inc., and its owner David Couch. (We will refer to them collectively as "Couch.")

         The negotiations

         {¶ 3} On April 1, 2010, Hattan faxed Fordyce an exclusive right-to-sell agency agreement for Fordyce to sign. Two months later, on June 21, Couch sent Fordyce a letter of intent to purchase Fordyce's business for $1.9 million. The letter, which had been drafted by Couch's attorney, provided that Fordyce would agree to provide consulting services for six months after the closing-the first 280 hours at no cost to Couch and additional hours at $50 per hour. The letter further provided that Fordyce would agree to "take up to a 15% financial holdback position as required by the lending institution." Fordyce had his attorney, Michael Sandner, review the letter and then Fordyce signed it.

         {¶ 4} Couch then used the letter of intent to apply for a loan from Huntington National Bank. Huntington at first rejected Couch's application, but later the bank sent Hattan and Couch an email telling them that the loan application would be reconsidered if, among other things, Fordyce agreed to finance $515, 000 of the purchase price and to sign a full-term standby agreement that would preclude Fordyce from accepting payments from Couch until Huntington's loan was paid in full. There is no dispute that Hattan told Fordyce about the first requirement, but there is a dispute as to whether Hattan told him about the full-term standby agreement.

         {¶ 5} In September, Huntington sent Couch a Commitment Letter agreeing to lend him $1, 128, 000 over 16 years. Fordyce signed a "Statement of Seller's Intent to Finance," stating that he was willing to finance up to $515, 000 of the sale over a term of 10 years and that he was "willing to sign a 'Stand-by Agreement' in favor of bank financing provided." Fordyce did not have his attorney review the Statement of Intent.

         {¶ 6} At the same time, Fordyce's attorney and Couch's attorney were drafting, reviewing, and revising several other agreements relating to the sale, including an Asset Purchase Agreement (APA) and a Consulting Agreement. Sometime after September 15, but before the closing, Fordyce and Couch signed the APA, which provided that $515, 000 of the $1.9 million purchase price would be paid by a promissory note "payable upon such terms and conditions to comply with the Purchaser's banks' requirements." (Article 1.3(a)). The APA further provided that for six months after closing, Fordyce, under a Consulting Agreement attached to the APA, would provide 280 hours of consulting services at no cost and any additional hours at a rate of $35 per hour. (Article 9). The Consulting Agreement was not attached to the APA.

         The closing and post-closing

         {¶ 7} The closing occurred on November 19, 2010. Fordyce, Hattan, and Couch were present, but neither Fordyce's nor Couch's attorney was. Couch signed a promissory note to Huntington for $1, 128, 000. He also signed a promissory note to Fordyce (Seller Note) for $515, 000, plus interest, which included this provision:

This Note shall be subordinate to the Promissory Note of the Huntington National Bank and shall be payable upon the Promissory Note to Huntington National Bank being paid in full, and the Maker shall make monthly installments of $10, 000 of principal and interest which shall be paid on the 1st day of each month beginning thirty (30) days from the date that the Promissory Note to Huntington National Bank has been paid in full, and shall continue to be paid until the entire unpaid principal balance and accrued interest has been paid in full.

         A draft of the Seller Note was reviewed by Fordyce's attorney, and Fordyce read the Seller Note at the closing. For his part, Fordyce signed a "Standby Creditor's Agreement," referred to in the Statement of Intent that he had signed earlier. In the Standby Agreement, Fordyce agreed, among other things:

1. To accept no further payments on the Standby Loan until Lender's Loan is satisfied[.]
3. To take no action to enforce claims against Standby Borrower on the Standby Loan until Lender's ...

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