Town & Country Co-op, Inc. v. Sabol Farms, Inc. , 2012 Ohio 4874 ( 2012 )

[Cite as Town & Country Co-op, Inc. v. Sabol Farms, Inc., 2012-Ohio-4874.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF WAYNE )
TOWN & COUNTRY CO-OP, INC. C.A. No. 11CA0014
Appellee
v. APPEAL FROM JUDGMENT
ENTERED IN THE
SABOL FARMS, INC., et al. COURT OF COMMON PLEAS
COUNTY OF WAYNE, OHIO
Appellants CASE No. 09-CV-0044
DECISION AND JOURNAL ENTRY
Dated: October 22, 2012
CARR, Judge.
{¶1} Appellants, Sabol Farms, Inc. and Kenneth Sabol Jr., appeal the judgment of the
Wayne County Court of Common Pleas that granted summary judgment in favor of appellee,
Town & Country Co-op, Inc. This Court reverses and remands.
I.
{¶2} In 2002, Sabol Farms, through Mr. Sabol, executed a business credit agreement
with Town & Country, whereby Sabol Farms, as the customer, agreed to pay for goods and
services purchased from Town & Country. The business credit agreement included a provision
that Mr. Sabol, irrespective of the capacity in which he signed the agreement, would be
personally liable for all debts incurred, created or acquired by Sabol Farms. The parties
maintained a business relationship for several years without incident. In 2007, the parties
executed a commodity purchase contract (the “grain contract”) whereby Sabol Farms agreed to
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deliver 10,000 bushels of wheat to Town & Country for $4.37 per bushel between July 1, 2008,
and August 31, 2008.
{¶3} In January 2009, Town & Country filed a complaint against Sabol Farms,
Kenneth Sabol, and William Sabol,1 alleging numerous claims that all arose out of Sabol Farms’
alleged failure to deliver the wheat under the terms of the grain contract. In count one, Town &
Country alleged that Sabol Farms and Mr. Sabol “without justification, unilaterally cancelled
their grain contract with [Town & Country] by failing to deliver the contracted grain within the
time specified in the contract.” The Uniform Commercial Code, applicable to contracts for the
sale of goods, defines “cancellation” as one party’s termination of the contract “for breach by
the other[.]” R.C. 1302.01(A)(14). Moreover, the code identifies cancellation as a remedy
available to sellers, like Sabol Farms, for breach by the buyer, here Town & Country. R.C.
1302.77(F). Despite Town & Country’s inartfully articulated claim, however, it clearly
intended to allege that Sabol Farms and Mr. Sabol breached the grain contract. It did so,
however, by alleging that it issued a “cancellation notice” to Sabol Farms and Mr. Sabol “in the
amount of $15,500.00” and that Sabol failed to pay, thereby breaching the grain contract.
{¶4} Count three alleged that Sabol Farms breached the business credit agreement by
failing to pay for “certain products” furnished by Town & Country. Those products were not
identified in the complaint. In counts two and four, Town & Country alleged a claim for
money due on account. The sum requested corresponded to the amount due for “cancellation”
of the grain contract and/or breach of the business credit agreement, plus interest, service
charges, costs, and expenses. Town & Country alleged in count five that Sabol Farms and
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William Sabol died shortly after the complaint was filed. Sabol Farms filed a
suggestion of death. The trial court ultimately substituted Kenneth Sabol, executor of William
Sabol’s estate, for William Sabol.
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Messrs. Sabol were unjustly enriched as a result of products received by them from Town &
County and for which they failed to pay. Again, the complaint did not identify the products.
Finally, in count six, Town & Country alleged that Mr. Sabol personally guaranteed payment of
all amounts owed to Town & Country under the business credit agreement and that he was in
default of such payment.
{¶5} In their answer, Sabol Farms and Mr. Sabol admitted that they entered into the
grain contract with Town & Country and further admitted that “interest is due,” although they
denied owing the amount of $15,500.00 as for cancellation fees. Moreover, although they
denied the allegation that they entered into the business credit agreement with Town & Country,
Sabol Farms and Mr. Sabol admitted that they agreed to pay according to the terms of their
account with Town & Country in consideration of the credit extended and goods furnished by
Town & Country. Sabol Farms and Mr. Sabol denied all other allegations in the complaint.
{¶6} Sabol Farms and Mr. Sabol moved the trial court to stay the proceedings and
compel arbitration based on an arbitration provision in the grain contract. The trial court denied
the motion and Sabol appealed. This Court affirmed the trial court’s judgment. Town &
Country Co-op, Inc. v. Sabol Farms, 9th Dist. No. 09CA0072, 2010-Ohio-5300.
{¶7} After resolution of Sabol’s appeal, Town & Country filed a motion for summary
judgment on all its claims except the claim of unjust enrichment, asserting that that claim would
be moot if the court granted summary judgment in its favor on its other claims. Sabol Farms
and Mr. Sabol filed a brief in opposition, and Town & Country replied. The trial court found
that Mr. Sabol assumed personal liability for debts owed to Town & Country under the terms of
the business credit agreement; that Mr. Sabol’s personal liability pursuant to the business credit
agreement made him personally liable for payment of the invoice sent based on Sabol’s failure
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to perform under the grain contract; and that it was not improper for the court to rule on the
motion for summary judgment even though Town & Country had not responded to Sabol’s
discovery requests because Sabol failed to move to compel discovery, properly request a
continuance, or demonstrate that further discovery would aid this case. The trial court entered
judgment in favor of Town & Country in the amount of $15,500.00, plus interest at the
contractual rate of 24% per annum, the rate referenced solely in the business credit agreement.
Sabol Farms and Mr. Sabol appealed, raising four assignments of error for review.
II.
ASSIGNMENT OF ERROR I
THE COURT ABUSED ITS DISCRETION BY GRANTING APPELLEE-
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT WHEN A GENUINE
ISSUE OF MATERIAL FACT EXISTED AS TO WHETHER THE BUSINESS
CREDIT AGREEMENT APPLIED TO THE COMMODITY PURCHASE
CONTRACT.
{¶8} Sabol Farms and Mr. Sabol argue that the trial court erred by granting summary
judgment in favor of Town & Country pursuant to the terms of the business credit agreement in
relation to Sabol’s actions arising out of the grain contract. This Court agrees.
{¶9} This Court reviews an award of summary judgment de novo. Grafton v. Ohio
Edison Co., 77 Ohio St.3d 102, 105 (1996). This Court applies the same standard as the trial
court, viewing the facts in the case in the light most favorable to the non-moving party and
resolving any doubt in favor of the non-moving party. Viock v. Stowe-Woodward Co., 13 Ohio
App.3d 7, 12 (6th Dist.1983).
{¶10} Pursuant to Civ.R. 56(C), summary judgment is proper if:
(1) No genuine issue as to any material fact remains to be litigated; (2) the
moving party is entitled to judgment as a matter of law; and (3) it appears from
the evidence that reasonable minds can come to but one conclusion, and viewing
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such evidence most strongly in favor of the party against whom the motion for
summary judgment is made, that conclusion is adverse to that party.
Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327 (1977).
{¶11} To prevail on a motion for summary judgment, the party moving for summary
judgment must be able to point to evidentiary materials that show that there is no genuine issue
as to any material fact, and that the moving party is entitled to judgment as a matter of law.
Dresher v. Burt, 75 Ohio St.3d 280, 293 (1996). Once a moving party satisfies its burden of
supporting its motion for summary judgment with sufficient and acceptable evidence pursuant
to Civ.R. 56(C), Civ.R. 56(E) provides that the non-moving party may not rest upon the mere
allegations or denials of the moving party’s pleadings. Rather, the non-moving party has a
reciprocal burden of responding by setting forth specific facts, demonstrating that a “genuine
triable issue” exists to be litigated for trial. State ex rel. Zimmerman v. Tompkins, 75 Ohio St.3d
447, 449 (1996).
{¶12} The non-moving party’s reciprocal burden does not arise until after the moving
party has met its initial evidentiary burden. To do so, the moving party must set forth evidence
of the limited types enumerated in Civ.R. 56(C), specifically, “the pleadings, depositions,
answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written
stipulations of fact[.]” Civ.R. 56(C) further provides that “[n]o evidence or stipulation may be
considered except as stated in this rule.”
{¶13} Significantly, Town & Country did not allege that Sabol breached the grain
contract by failing to deliver the wheat as required. Rather, Town & Country considered
Sabol’s failure to deliver the wheat by 2:00 p.m. on August 29, 2008, a cancellation entitling it
to payment of the difference between what it would have paid for the wheat and that day’s
market price for wheat, plus a ten cents per bushel cancellation fee. It then sent an invoice to
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Sabol for $15,500.00. It was Sabol’s failure to pay the invoiced amount which gave rise to
Town & Country’s claims for breach of the grain contract and breach of the business credit
agreement. The trial court entered judgment against both Sabol Farms and Mr. Sabol, jointly
and severally, under terms relevant to the business credit agreement.
{¶14} Sabol argues that the trial court erred by entering judgment against it because the
business credit agreement is separate and distinct from the grain contract and the two are
mutually exclusive. Significantly, Sabol Farms and Mr. Sabol do not contest that they did not
pay the invoice issued by Town & Country. Rather, they argue that the business credit
agreement was not the proper mechanism by which Town & Country could recover damages for
breach of the grain contract.
{¶15} “The interpretation of written contracts, including any assessment as to whether a
contract is ambiguous, is a question of law subject to de novo review on appeal.” Watkins v.
Williams, 9th Dist. No. 22162, 2004-Ohio-7171, ¶ 23, citing Long Beach Assn., Inc. v. Jones, 82
Ohio St.3d 574, 576 (1998). Only if the terms of a contract may reasonably be understood in
more than one sense can they be construed as ambiguous. Preferred Tax & Fin. Servs., Inc. v.
Mark W. Boslett, Inc., CPA, 9th Dist. No. 22801, 2006-Ohio-2690, ¶ 14. Where a contract, by
its terms, is clear and unambiguous, its interpretation is a matter of law, and there remain no
issues of fact for determination. Denman v. State Farm Ins. Co., 9th Dist. No. 05CA008744,
2006-Ohio-1308, ¶ 13. “Where an ambiguity exists, however, interpretation of a contract
involves both factual and legal questions. Where that ambiguity is coupled with a material issue
of fact supported by proper evidentiary materials, summary judgment is improper.” (Internal
citations omitted.) Watkins at ¶ 23.
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{¶16} Town & Country argued in its motion for summary judgment that Sabol Farms
and Mr. Sabol were obligated to pay the $15,500.00 invoice based on the terms in the parties’
business credit agreement. They rely on a provision in that agreement which stated: “I/We
agree to pay the full purchase price for all goods, materials, equipment and/or services
purchased from Town & Country within thirty (30) days of the billing date shown on each
invoice or monthly account statement.” Town & Country argued that Mr. Sabol was personally
liable to pay the invoice based on the following provision in the business credit agreement: “* *
* I/We, regardless of the capacity in which my/our signature(s) may appear below, do
absolutely, irrevocably, unconditionally and personally guarantee the prompt and punctual full
payment when due, by acceleration or otherwise, of each and every debt obligation now existing
or hereafter incurred, created or acquired by the foregoing Customer to Town & Country,
including all finance charges, penalties, costs and attorney[’]s fees.” A later provision
established a 24% annual service charge for late payments. The business credit agreement
further contained the following purpose clause: “This Credit Agreement is made and effective
as of ______, 20___, by and among the following Customer(s) [Sabol Farms] and Town &
Country Co-op, Inc. (“Town & Country”) for the purpose of obtaining credit from Town &
Country.”
{¶17} Sabol failed to pay the invoice issued by Town & Country after Town & Country
claimed Sabol cancelled the grain contract by failing to deliver wheat as agreed. Town &
Country failed to present any evidence that its mere issuance of an invoice to Sabol for
cancellation of the grain contract provided any “goods, materials, equipment and/or services
purchased from Town & Country.” Town & Country appended the affidavit of Mike Mooney,
its credit manager, who averred that the business issued an invoice to Sabol for cancellation fees
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associated with the grain contract but he did not explain how that invoice constituted anything
purchased by Sabol from Town & Country.
{¶18} Moreover, Town & Country failed to present evidence that the $15,500.00 invoice
constituted a valid “debt” which obligated both Sabol Farms and Mr. Sabol. Mr. Mooney
averred that Town & Country would have received a profit of $1.45 per bushel, based on the
difference between the market price and contract price for the wheat. Based on its anticipated
purchase of 10,000 bushels for resale, Town & Country would have realized a profit of
$14,500.00, assuming it had a buyer for the wheat. Town & Country failed to present any
evidence that it had a buyer for the 10,000 bushels at any price. In addition, Mr. Mooney did
not aver in his affidavit that there was a ten cent per bushel cancellation fee which would have
accounted for the remaining $1000.00 reflected in the invoice. Moreover, there are no
provisions in the grain contract which address cancellation, cancellation fees, or liquidated
damages, so it is unclear how Town & Country justified the additional cancellation fee.
Because there is no evidence in the record to support its assertion that Sabol owed the sum of
$15,500.00 as a result of any cancellation of the grain contract, Town & Country did not meet
its initial burden under Dresher in that regard.
{¶19} Finally, a review of the business credit agreement indicates that this is not a
contract the terms of which may be reasonably understood in only one sense. The clearly
enunciated purpose of the agreement was to allow Sabol Farms to obtain credit from Town &
Country, specifically to purchase goods, materials, equipment and/or services from Town &
Country. On the other hand, the agreement stated that the customer, in both a business and
personal capacity, would be liable for “each and every debt obligation now existing or hereafter
incurred, created or acquired” by Sabol. Because some debt obligations, including “all finance
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charges, penalties, costs and attorney[’]s fees” would reasonably be outside the realm of
“purchase[s] from Town & Country[,]” and not subject to the extension of credit, the business
credit agreement is ambiguous on its face. Therefore, a genuine issue of material fact existed
regarding whether the business credit agreement was applicable to impose a debt and liability
on both Sabol Farms and Mr. Sabol for the alleged breach of the grain contract. Under these
circumstances, Town & Country failed to meet its initial burden of showing that no genuine
issues of material fact existed and that it was entitled to judgment as a matter of law.
Accordingly, the trial court erred by granting summary judgment in favor of Town & Country.
The first assignment of error is sustained.
ASSIGNMENT OF ERROR II
THE COURT ABUSED ITS DISCRETION BY GRANTING APPELLEE-
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT WHEN A GENUINE
ISSUE OF MATERIAL FACT EXISTED AS TO WHETHER KENNETH SABOL
JR. SUBJECTED HIMSELF TO PERSONAL LIABILITY BY SIGNING THE
CREDIT AGREEMENT IN HIS OFFICIAL CAPACITY AS
SECRETARY/TREASURER FOR SABOL FARMS INC.
ASSIGNMENT OF ERROR III
THE COURT ABUSED ITS DISCRETION BY GRANTING APPELLEE-
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT WHEN A GENUINE
ISSUE OF MATERIAL FACT EXISTED AS TO WHETHER KENNETH SABOL
JR. SUBJECTED HIMSELF TO PERSONAL LIABILITY BY SIGNING THE
COMMODITY PURCHASE CONTRACT IN HIS OFFICIAL CAPACITY AS
SECRETARY/TREASURER FOR SABOL FARMS INC.
ASSIGNMENT OF ERROR IV
THE COURT ABUSED ITS DISCRETION BY GRANTING APPELLEE-
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT WHEN DISCOVERY
HAD NOT BEEN COMPLETED.
{¶20} Based on this Court’s resolution of the first assignment of error, we decline to
address the remaining assignments of error as they have been rendered moot. See App.R.
12(A)(1)(c).
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III.
{¶21} Sabol Farms’ and Mr. Sabol’s first assignment of error is sustained. We decline
to address the remaining assignments of error. The judgment of the Wayne County Court of
Common Pleas is reversed and the cause remanded for further proceedings consistent with this
opinion.
Judgment reversed,
and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Wayne, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellee.
DONNA J. CARR
FOR THE COURT
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WHITMORE, P. J.
CONCURS.
MOORE, J.
DISSENTING.
{¶22} Because I can discern no ambiguity in the business credit agreement, and because
the parties do not dispute that Sabol Farms’ breached the grain contract, thereby creating a debt
owing from Sabol Farms to Town & Country, I respectfully dissent. In the business credit
agreement, Mr. Sabol personally guaranteed payment of “each and every” debt then “existing or
[t]hereafter incurred,” by Sabol Farms to Town & Country. Therefore, the parties created an
unambiguous personal guarantee, unlimited by the nature of the transaction, the time the debt
was incurred, or the amount of the debt. See Lager v. Miller-Gonzalez, 120 Ohio St.3d 47, 2008-
Ohio-4838, ¶ 16 (“Ambiguity exists only when a provision at issue is susceptible of more than
one reasonable interpretation,” and “a court cannot create ambiguity in a contract where there is
none.”). Accordingly, I would affirm the decision of the trial court granting summary judgment
to Town & Country.
APPEARANCES:
GINO PULITO, Attorney at Law, for Appellants.
DAVID J. WIGHAM, Attorney at Law, for Appellee.