Prime Properties Ltd. Partnership v. Badah Ents. , 2014 Ohio 206 ( 2014 )

[Cite as Prime Properties Ltd. Partnership v. Badah Ents., 2014-Ohio-206.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 99827
PRIME PROPERTIES LTD. PARTNERSHIP
PLAINTIFF-APPELLANT
vs.
BADAH ENTERPRISES, ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cleveland Municipal Court
Case No. 2012 CVH 015178
BEFORE: S. Gallagher, J., Jones, P.J., and Blackmon, J.
RELEASED AND JOURNALIZED: January 23, 2014
ATTORNEYS FOR APPELLANT
Thomas L. Brunn, Jr.
Alison D. Ramsey
The Brunn Law Firm Co., L.P.A.
208 Hoyt Block Building
700 West St. Clair Avenue
Cleveland, OH 44113
ATTORNEYS FOR APPELLEES
Robert T. Glickman
Charles A. Nemer
Christina E. Niro
McCarthy, Lebit, Crystal & Liffman Co., L.P.A.
101 W. Prospect Avenue
Suite 1800
Cleveland, OH 44115
SEAN C. GALLAGHER, J.:
{¶1} Plaintiff Prime Properties Limited Partnership (“Prime Properties”) appeals
the trial court’s decision granting summary judgment in favor of defendants Badah
Enterprises, Inc., Essam Abdallah, and Ennan Abdallah (collectively “Badah”) upon
their counterclaim for breach of contract, which was predicated on an alleged settlement
agreement entered in a previous action. For the following reasons, we reverse the
decision of the trial court and remand for further proceedings consistent herewith.
{¶2} In 2007, Prime Properties leased commercial property to Badah for the
operation of a fuel station. In 2010, a petroleum leak occurred on the property, resulting
in the shutdown of the fuel station. A dispute arose between Badah and Prime Properties
regarding the maintenance and repair of the fuel storage tanks, lines, and dispensing
systems. Prime Properties filed a complaint for forcible entry and detainer in May 2010
in Cleveland Municipal Court’s Housing Division, later amended to include claims
relating to the leaked petroleum. Badah filed a counterclaim in that action, seeking lost
profits based on Prime Properties’ alleged failure to maintain the premises. There was
another action pending in Rocky River Municipal Court involving claims between the
parties, although the scope of those claims is not clear from the record in this appeal.
{¶3} During the course of those 2010 cases, the parties engaged in protracted
settlement negotiations at the deposition of Prime Properties’ representative in July 2011.
Prime Properties’ Civ.R. 30(B)(5) deponent, Elias Kassouf, was allowed to participate in
the settlement negotiations, but the ultimate settlement authority for Prime Properties
rested with James Kassouf. The parties’ lawyers tentatively agreed to a global settlement
in which Badah would pay Prime Properties a total sum of $75,000, with $35,000 to be
deposited no later than August 5, 2011, and the remainder to be paid monthly thereafter.
Any breach subjected Badah to a consent judgment of $90,000, less any payments. The
parties further agreed to mutual dismissals of all claims, and Badah argues the parties
agreed to general mutual releases of all future claims.
{¶4} The next day, the parties began memorializing a global settlement agreement
based on the oral discussions. After a few versions of the settlement agreement were
exchanged, Prime Properties submitted a version that included a carve-out exception to a
general release, for environmental issues. Leading to the carve-out exception, Prime
Properties’ attorney forwarded a copy of the proposed agreement to James Kassouf, who,
in turn, forwarded the copy to another Prime Properties’ lawyer who was handling the
environmental impact of the petroleum leak. It was Prime Properties’ specialist who
recommended the inclusion of the carve-out exception in any settlement. Badah balked
at the environmental carve-out of the general release, and the settlement agreement was
never consummated.
{¶5} During this time, the parties filed an agreed judgment entry with the Rocky
River Municipal Court seeking a continuance of the then-impending trial in which the
parties agreed that a “settlement has been reached and that the parties are currently
negotiating the terms and language of a settlement agreement.” That trial court ordered
the trial continued in “order to allow the parties to come to an agreement on settlement
terms, reduce the terms to writing, and execute a settlement agreement.” Both parties
signed the agreed judgment entry, dated August 12, 2011.
{¶6} The respective courts apparently dismissed the 2010 cases without prejudice
when the settlement discussions faltered. According to the record on appeal, Badah did
not seek to enforce any alleged oral settlement agreement at the time of those dismissals.
Instead, on September 12, 2012, Prime Properties refiled its claims against Badah in
Cleveland Municipal Court, Housing Division, case No. 2012 CVH 015178. Badah
answered the complaint but did not raise any claim regarding the alleged settlement. It
was not until Badah sought leave to file an amended counterclaim that it advanced a
breach of contract action against Prime Properties, claiming Prime Properties breached
the terms of a settlement agreement by filing the 2012 action. Badah sought specific
performance of the terms of the purported settlement agreement and filed a motion to
enforce a settlement agreement that the trial court converted to one for summary
judgment. Prime Properties claimed that no binding settlement agreement was ever
consummated. The trial court granted summary judgment in favor of Badah upon its
counterclaim, and entered an order enforcing the oral settlement agreement allegedly
entered at the July 2010 settlement discussion.
{¶7} It is from this decision that Prime Properties timely appeals, advancing two
assignments of error, the second of which is dispositive of this appeal.1 In its second
Prime Properties’ first assignment of error provides that “[t]he trial court erred as a matter of
1
law by granting summary judgment as to the existence and enforceability of a settlement agreement
without first holding an evidentiary hearing.” In light of the fact that we find that the trial court
assignment of error, Prime Properties claims, “The trial court erred as a matter of law in
determining that the parties entered into an enforceable settlement agreement.” For the
following reasons, we sustain Prime Properties’ argument.
{¶8} A settlement agreement, at its lowest level, is an issue of contract law,
requiring a meeting of the minds as well as an offer and acceptance in order to create a
binding contract. Natl. Court Reporters, Inc. v. Krohn & Moss, Ltd., 8th Dist. Cuyahoga
No. 95075, 2011-Ohio-731, ¶ 10. While it “is preferable that a settlement be
memorialized in writing[,] * * * an oral settlement agreement may be enforceable if there
is sufficient particularity to form a binding contract. Terms of an oral contract may be
determined from ‘words, deeds, acts, and silence of the parties.’” (Citations omitted.)
Kostelnik v. Helper, 96 Ohio St.3d 1, 3, 2002-Ohio-2985, 770 N.E.2d 58, quoting
Rutledge v. Hoffman, 81 Ohio App. 85, 75 N.E.2d 608 (12th Dist.1947), paragraph one of
the syllabus. In order for the oral settlement agreement to form a binding contract, there
must be a meeting of the minds of the parties, and an offer on one side and an acceptance
on the other. Gutbrod v. Schuler, 8th Dist. Cuyahoga No. 94228, 2010-Ohio-3731, ¶ 17.
Generally, whether a meeting of the minds has been obtained is a question of fact to be
determined by the trier of fact from all the relevant facts and circumstances. Id., citing
Garrison v. Daytonian Hotel, 105 Ohio App.3d 322, 325, 663 N.E.2d 1316 (2d
Dist.1995).
erred in granting summary judgment in favor of Badah, the first assignment of error is moot.
{¶9} There are two avenues to enforce a purportedly binding oral settlement
agreement. Natl. Court Reporters, Inc. at ¶ 12. “The settlement agreement may be
enforced either through filing an independent action for breach of contract, or by filing a
motion to enforce the settlement agreement in the same action pursuant to Civ.R. 15(E).”
(Emphasis added.) Id. In this case, Badah proceeded with the former enforcement
mechanism, in light of the fact that the original case had been dismissed without prejudice
over a year prior to Badah’s counterclaim for breach of contract. Therefore, and as
recognized by the trial court in this case, Badah’s motion to enforce a settlement
agreement was really one for summary judgment upon its counterclaim for breach of
contract or, more specifically, breach of the alleged settlement agreement.
{¶10} We must clarify one over-arching issue. Essentially, the parties treated
Badah’s breach of contract claim as if it were a motion to enforce a settlement agreement
filed in the case terminated by the agreement, rather than addressing the merits of Badah’s
new, independent breach of contract claim. These are two different mechanisms not to
be conflated. See Rulli v. Fan Co., 79 Ohio St.3d 374, 683 N.E.2d 337 (1997) (where the
existence or meaning of a settlement agreement is an issue for resolution of a motion to
enforce a settlement agreement filed in the case for which the settlement agreement
applies, a hearing is required); Consolo v. Menter, 9th Dist. Summit No. 25394,
2011-Ohio-6241, ¶ 11 (a stand-alone claim for breach of a settlement agreement is
enforced under the same standard as a breach of contract claim). The resulting confusion
of whether to address this as a motion to enforce a settlement or as a breach of contract
action muddied the process for all parties in the trial court.
{¶11} Prime Properties argues that a hearing was necessary to resolve the
“formation of the agreement” issue, while Badah argues that it established the existence
of a valid oral contract by demonstrating no genuine issues of material fact existed
regarding the enforceability of that settlement agreement. Unfortunately, these arguments
both miss the point. The confusing and complicated nature of these settlement
negotiations contributed to this apparent blurred distinction between the enforcement of
an oral settlement agreement and a breach of contract action.
{¶12} Thus, the issues presented to the trial court were miscast. This is not a case
where the parties may conduct a hearing to resolve this formation dispute for two
important reasons. First, both parties requested a jury in their respective pleadings to
resolve all claims. In light of that, the parties’ reliance on Rulli or any expedited hearing
procedure to resolve the breach of contract counterclaim is simply misplaced.2
In Rulli, the plaintiff and defendant reached an agreement to settle the case
2
and proceeded to place that agreement on the record pending a final agreed
judgment entry. Rulli v. Fan Co., 7th Dist. Mahoning No. 94 C.A. 14, 1995 Ohio
App. LEXIS 5622 (Dec. 20, 1995) *3. The Rulli parties then disagreed about the
terms of the settlement, and one side filed a motion to enforce. Id. In that
context, the Ohio Supreme Court determined that a hearing was necessary when
there was an issue regarding the formation of the settlement agreement, which
resolved the claims in the same action as the motion to enforce the settlement
agreement was filed. Rulli, 79 Ohio St.3d 374, 377, 683 N.E.2d 337. On the
contrary, the Consolo case is illustrative of the procedure courts employ when the
party seeking to enforce a settlement agreement files a separate action, including,
as here, a counterclaim, claiming another party breached an oral, but binding,
settlement agreement. Consolo, 9th Dist. Summit No. 25394, 2011-Ohio-6241.
{¶13} Second, and more importantly, in situations where the party seeking
enforcement of a settlement agreement files a separate breach of contract action, the
inquiry goes beyond determining the formation of a binding agreement. In order to
substantiate a breach of contract claim, a party must establish four elements: (1) a
binding contract or agreement was formed; “[(2)] the nonbreaching party performed its
contractual obligations; [(3)] the other party failed to fulfill its contractual obligations
without legal excuse; and [(4)] the nonbreaching party suffered damages as a result of the
breach.” Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115 Ohio App.3d 137, 144, 684
N.E.2d 1261 (9th Dist.1996), citing Garofalo v. Chicago Title Ins. Co., 104 Ohio App.3d
95, 108, 661 N.E.2d 218 (8th Dist.1995). The mere fact that a binding settlement
agreement exists is insufficient to warrant a breach of contract award, even when the
damages sought is specific performance. In other words, there must be a breaching act
that triggered the filing of a separate breach of contract action even where the contract is
a settlement agreement. See Consolo, 9th Dist. Summit No. 25394, 2011-Ohio-6241.
{¶14} In short, the crux of this appeal lies in the trial court’s granting summary
judgment upon Badah’s breach of contract claim. Appellate review of summary
judgment is de novo, governed by the standard set forth in Civ.R. 56. Comer v. Risko,
106 Ohio St.3d 185, 2005-Ohio-4559, 833 N.E.2d 712, ¶ 8. “Summary judgment may
be granted only when (1) there is no genuine issue of material fact, (2) the moving party is
When the party seeking to enforce a settlement agreement files a separate breach of
contract claim, that party must establish all the elements of a breach of contract
action, otherwise no action lies. Id.entitled to judgment as a matter of law, and (3) viewing the evidence most strongly in
favor of the nonmoving party, reasonable minds can come to but one conclusion and that
conclusion is adverse to the nonmoving party.” Marusa v. Erie Ins. Co., 136 Ohio St.3d
118, 2013-Ohio-1957, 991 N.E.2d 232, ¶ 7. A party requesting summary judgment bears
the initial burden to show the basis of the motion. Dresher v. Burt, 75 Ohio St.3d 280,
293-294, 662 N.E.2d 264 (1996). Only when the moving party satisfies this burden of
production is the opposing party’s reciprocal burden triggered, requiring introduction of
evidence allowed under Civ.R. 56(C) to demonstrate genuine issues of material fact. Id.{¶15} In this case, Badah advanced a breach of contract action premised on Prime
Properties refiling its claims despite an alleged settlement contract. Badah, however,
focused on the formation element of an independent breach of contract claim, to the
exclusion of establishing a breach and the non-breaching party’s performance under the
purported contract. Badah bore the burden of establishing that there were no genuine
issues of material fact regarding its breach of contract claim, elements of which are
formation and Badah’s performance pursuant to the contractual terms. Textron Fin.
Corp., 115 Ohio App.3d 137, 144. If Badah performed, or attempted to perform, under
the terms of the purported oral agreement, we have no evidence of this in the record
before us to support the conclusion that a breach of contract existed.
{¶16} Nevertheless, even if we considered the issues as framed by the parties, after
reviewing the entire record, there are genuine issues of material fact regarding Badah’s
belief that a binding contract was consummated in July 2010, and summary judgment
upon all claims was therefore improper for three important reasons.
{¶17} First, the only evidence in support of summary judgment, regarding the
formation element of Badah’s breach of contract claim, offered for the trial court’s review
was an affidavit from Badah’s lawyer, who attempted to negotiate a settlement in the
2010 cases. As explained in his affidavit, Badah’s lawyer attempted to reach a global
settlement of all the 2010 claims, and at a deposition agreed to all the material terms of
the settlement with Prime Properties’ attorney and the Civ.R. 30(B)(5) deponent.
{¶18} Generally, however, courts cannot presume an agent’s or a lawyer’s
authority to bind a principal to an oral contract unless there is evidence that the principal
extended or cloaked the lawyer with authority to settle.3 Schalmo Builders, Inc. v. Zama,
8th Dist. Cuyahoga No. 90782, 2008-Ohio-5879, ¶ 17-18. “Absent specific
authorization, an attorney has no implied or apparent authority to compromise and settle
his client’s claims.” Id., quoting Garrison, 105 Ohio App.3d 322, 326, 663 N.E.2d 1316.
A party’s retention of an attorney, in and of itself, is not authorization for the attorney
to settle the matter. Id. Whether a party authorized the attorney to settle a case is a
question of fact, which shall not be disturbed on appeal if supported by some competent,
credible evidence. Id. More important,
under an apparent-authority analysis, it is the client’s acts that must create
the apparent authority, not the acts of the attorney. The Ohio Supreme
Court has stated the following: “Under an apparent-authority analysis, an
agent’s authority is determined by the acts of the principal rather than by the
acts of the agent. The principal is responsible for the agent’s acts only
when the principal has clothed the agent with apparent authority and not
when the agent’s own conduct has created the apparent authority.”
3
The final judgment entry reflects that the trial court determined that James Kassouf had the
final settlement authority for Prime Properties, and Badah did not contest the trial court’s
determination on that point.
Id., quoting Ohio State Bar Assn. v. Martin, 118 Ohio St.3d 119, 2008-Ohio-1809, 886
N.E.2d 827. Badah’s evidentiary submission is silent as to whether James Kassouf
cloaked his agents, Prime Properties’ attorney and deponent Elias Kassouf, with apparent
settlement authority.
{¶19} For the purposes of this case, it is irrelevant that Badah’s affidavit claimed
the lawyer for Prime Properties indicated Elias Kassouf had authority to bind Prime
Properties. The only party with that ability, according to the uncontested evidence, was
James Kassouf on behalf of Prime Properties. The trial court acknowledged that James
Kassouf had sole authority to settle on behalf of Prime Properties, but dismissed that
authority with the statement that Prime Properties’ “counsel and representative did not
contact James Kassouf frequently enough.” Despite this finding by the trial court,
Badah’s evidentiary submissions were silent on the issue, only indicating that it was the
statements of Prime Properties’s lawyer that established the apparent authority to settle.
This disregards the premise of apparent-authority law in Ohio. It is the acts of the
principal and not the agent that create apparent authority to act.
{¶20} Second, there are genuine issues of material fact regarding the contract
formation when all the evidentiary submissions are considered. The parties signed and
filed an agreed judgment entry in the Rocky River Municipal Court on August 12, 2011,
after the settlement discussions faltered. In that entry, the parties agreed that although a
settlement had been reached, the parties were currently negotiating the terms and
language in order to execute that settlement agreement. The trial in that particular 2010
case was expressly continued in order for the parties to agree to settlement terms, reduce
those terms to writing, and execute an agreement. While we question settlement
agreements that seem to “kick the can down the road,” leaving intricate details
unresolved, we understand that the complicated nature of this transaction placed the
parties, and the trial court, in the unenviable position of trying to foster and memorialize a
settlement agreement when at least some of the conditions were still fluid. This is
supported by the fact that the agreed journal entry itself, signed and dated after the July
2011 settlement discussions, raises genuine issues of material fact that a settlement had
been reached by continuing the case “for the parties to agree to settlement terms, reduce
those terms to writing, and execute an agreement.” This suggests, on its face, that there
was more to memorialize in their agreement than simply writing down the terms of the
July discussions.
{¶21} Finally, the terms of the settlement Badah seeks to enforce required a
lump-sum payment in August 2011, and monthly payments thereafter. In reviewing the
record, it is apparent that Badah did not seek to enforce an agreement until after Prime
Properties exercised its right to refile the claims in the underlying action, and even then,
Badah had to amend its answer to include the counterclaim for breach of the contract.
Badah’s claim that Prime Properties is barred from raising this argument because it lacked
evidentiary support is misplaced.
{¶22} We have no evidence on this point to establish whether Badah specifically
performed under the purported contract to establish its breach of contract claim. This
omission creates a genuine issue of material fact regarding whether all parties believed an
oral settlement agreement had in fact been consummated. As Badah made clear, the
terms of an oral contract may be determined from “words, deeds, acts, and silence of the
parties.” Kostelnik, 96 Ohio St.3d 1, 3, 2002-Ohio-2985, 770 N.E.2d 58.
{¶23} Reluctantly, for the foregoing reasons, we must find that the trial court erred
in determining that Badah presented sufficient evidence to sustain its burden to
demonstrate that no genuine issues of material fact existed upon its counterclaim for
breach of contract. Most important to this analysis, Badah failed to demonstrate that all
elements of the breach of contract claim were satisfied for the purposes of summary
judgment. Further, a review of the evidence produced by Badah established genuine
issues of material fact, necessitating resolution by the trier of fact, upon the formation
element of their breach of contract counterclaim.
{¶24} The decision of the trial court is reversed, and this cause is remanded for
further proceedings consistent herein.
It is ordered that appellant recover from appellees 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 municipal
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.
SEAN C. GALLAGHER, JUDGE
LARRY A. JONES, SR., P.J., and
PATRICIA ANN BLACKMON, J., CONCUR