Anna Holdings, L.L.C. v. McClanahan , 2019 Ohio 4697 ( 2019 )

[Cite as Anna Holdings, L.L.C. v. McClanahan, 2019-Ohio-4697.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
CHAMPAIGN COUNTY
ANNA HOLDINGS, LLC :
:
Plaintiff-Appellant : Appellate Case No. 2019-CA-11
:
v. : Trial Court Case No. 2019-CVG-54
:
EMILY MCCLANAHAN, et al. : (Civil Appeal from Municipal Court)
:
Defendants-Appellees :
:
...........
OPINION
Rendered on the 15th day of November, 2019.
...........
ZACHARY M. HARVEY, Atty. Reg. No. 0095991, 30 Warder Street, Suite 250,
Springfield, Ohio 45504
Attorney for Plaintiff-Appellant
EMILY MCCLANAHAN, 1548 Regent Avenue, Springfield, Ohio 45503
Defendant-Appellee, Pro Se
.............
FROELICH, J.
-2-
{¶ 1} Anna Holdings, LLC (“Anna”) appeals from a judgment entry of the
Champaign County Municipal Court, which offset Anna’s damages under a land
installment contract by the amount of the buyers’ down payment and awarded no
damages. For the following reasons, the trial court’s judgment will be affirmed.
{¶ 2} According to the complaint, Anna was the owner of residential premises
located at 602 College Way in Urbana, and it contracted to sell the premises to Emily
McClanahan and Tracy McCain, Jr., pursuant to an installment land contract, a copy of
which was attached to the complaint (Exhibit A). Under that contract, the buyers agreed
to purchase the property for $89,900 and to make a down payment of $7,495. The
balance ($82,405.00) would be paid in monthly installment payments of $751.06 until the
principal amount was paid in full; those payments included $604.66 for principal and
interest, $120.82 for pro-rated real estate taxes, and $25.58 for pro-rated homeowner’s
insurance. The unpaid principal balance would bear interest at the rate of 8% per
annum. The buyers further agreed to pay utilities and a late payment fee of 5% of the
total monthly payment.
{¶ 3} The contract also contained a provision concerning default. It provided, in
part:
In the event that Buyer shall fail to pay an installment hereunder (or shall
fail to pay the taxes, assessments, or insurance premiums when due, if
applicable), or shall fail to perform any other condition of this Contract and
such default shall continue for a period of thirty (30) days, then all amounts
remaining unpaid shall immediately at option of the Seller become due and
payable, and Seller may terminate this Agreement by giving Buyer ten (10)
-3-
days written notice in compliance with Ohio Revised Code Section 5313.06.
After said (10) day period, if Buyer has not remedied such default, the
Contract shall be terminated. Unless Buyer has made payments in
accordance with the terms hereof for a period of five (5) years or more from
the due date of the first payment, or Buyer has paid at least twenty percent
(20%) of the purchase price, all payments made hereunder by the Buyer
shall be retained by the Seller as liquidated damages for the
nonperformance of this Contract and for the use and occupancy of said
premises by Buyer. In addition thereto Seller shall retain all rights under
Ohio Revised Code Section 5313.10.
(Emphasis added.)
{¶ 4} On January 23, 2019, Anna filed a “Complaint in Forfeiture and Eviction of
Land Installment Contract” against McClanahan, McCain, and “all other occupants.” In
its complaint, Anna alleged that the buyers “have been delinquent in their total monthly
payments since August of 2018, plus penalties and interest, and utility bills are due and
owing in an amount yet to be determined.” The complaint further provided that
“Defendants’ delinquent balance due and owing the Plaintiffs amounts to $4,663.31 for
delinquent monthly installment payments; late fees; and delinquent utilities in an amount
yet to be determined.”
{¶ 5} Count I of the complaint claimed that, pursuant to R.C. 5313.06, “these
obligations not having been paid, [Anna] gave to the Defendants a ten (10) day Notice of
Forfeiture, said notice was posted to the property on January 9, 2019 * * * [and] [t]he
installment land contract has been in effect less than five (5) years and Defendants’ equity
-4-
in the property is less than twenty (20) percent.” In Count II, Anna claimed that the
buyers had damaged the property and owed Anna for unpaid monthly installments and
utility costs. Anna sought restitution of the property, forfeiture of the installment land
contract, damages for the premises in an amount to be further determined, and delinquent
land installment contract payments.
{¶ 6} In addition to the land installment contract (Exhibit A), Anna also attached to
its complaint a notice of forfeiture (land contract) (Exhibit B) and a calculation of the
buyers’ equity in the property (Exhibit C). Exhibit C showed principal payments totaling
$8,993.73, and an “equity percentage” of 9.9958% ($89,900 / $8,993.73).
{¶ 7} On February 6, 2019, the municipal court issued an “Entry of Restitution and
Cancellation of Land Contract.” The court found, pursuant to Ohio Revised Code
Sections 5313.07 et al., that the buyers had paid a sum of less than 20% toward the
purchase price of the real property and that the land installment contract had been in
effect for less than five years. The court granted restitution of the College Way premises
to Anna and cancelled the land installment contract. In a separate entry, the court
scheduled a damages hearing for March 6, 2019.
{¶ 8} Anna filed multiple exhibits at the damages hearing.1 Exhibit D was a list of
alleged damages totaling $7,079.49, as follows: 1) delinquent land installment contract
payments and late fees ($4,663.31); 2) clean-out expense to Castle Hauling ($525);
3) cost of new banister railing which was damaged/torn from wall ($117.93); 4) labor to
1 Anna initially requested a transcript of the hearing, but withdrew its request for the
preparation of a transcript on the ground that it was not appealing the trial court’s findings
regarding the amount of damages that Anna established. Consequently, the record does
not include a transcript of the damages hearing.
-5-
install new railing ($160); and 5) carpet replacement to Fazio Color Shop ($1,613.25).
Anna also submitted a receipt from Castle Hauling in the amount of $525 (Exhibit E), a
receipt from Menards for fencing material in the amount of $117.93 (Exhibit F), a receipt
from Fazio Color Shop for carpet in the amount of $1,613.25 (Exhibit G), and a “Move
Out Report” showing a statement of the buyers’ account, reflecting a balance due of
$4,663.31 (Exhibit H).
{¶ 9} On the same date as the hearing (March 6, 2019), the trial court entered a
judgment entry, finding that “Plaintiff established that there was rent/land contract
payments owed in the sum of $4,663.31,” that Anna established damages of $525 for
trash hauling, and that Anna retained an “upfront payment on land contract” of $7,495.
The court concluded: “[A]fter consideration of the forfeited amount in land contract and
no countersuit of defendants, plaintiff retains more than shown as damages[;] no
judgment is granted to the Plaintiff.” Anna sought reconsideration, which the trial court
denied.
{¶ 10} In its sole assignment of error, Anna claims that “the decision of the trial
court to off-set seller’s proven damages under a land installment contract by the amount
of the Buyer’s down payment is contrary to law and against the manifest weight of the
evidence presented at trial.”
{¶ 11} R.C. Chapter 5313 governs land installment contracts for residential
dwellings. In a land installment contract, the “vendor agrees to convey title in real
property located in this state to the vendee and the vendee agrees to pay the purchase
price in installment payments, while the vendor retains title to the property as security for
the vendee’s obligation.” R.C. 5313.01(A). The parties do not dispute that they entered
-6-
into a land installment contract.
{¶ 12} We, and other Ohio appellate courts, have described R.C. Chapter 5313 as
“essentially a ‘consumer protection law.’ ” (Citations omitted.) Kossoudji v. Stamps,
2016-Ohio-7693, 65 N.E.3d 815, ¶ 42 (2d Dist.). The statute is “intended to prevent a
‘windfall to a vendor who has previously collected substantial sums under a land contract
and/or has actually recovered the property.’ ” Howard v. Temple, 172 Ohio App. 3d 21,
2007-Ohio-3074, 872 N.E.2d 1260, ¶ 9 (4th Dist.), quoting Farkas v. Bernard, 10th Dist.
Franklin App. No. 95APE10-1365, 1996 WL 257455, *4 (May 16, 1996).
{¶ 13} When the land installment contract has been in effect for less than five
years, as was the case here, the vendor “may bring an action for forfeiture of the vendee’s
rights in the land installment contract and for restitution of his property under Chapter
1923. of the Revised Code. * * * The court may also grant any other claim arising out of
the contract.” R.C. 5313.08. Upon pursuing an action under R.C. 5313.08, the vendor’s
remedy is limited by R.C. 5313.10, which provides:
The election of the vendor to terminate the land installment contract by an
action under section 5313.07 2 or 5313.08 of the Revised Code is an
exclusive remedy which bars further action on the contract unless the
vendee has paid an amount less than the fair rental value plus deterioration
or destruction of the property occasioned by the vendee’s use. In such
2
R.C. 5313.07 provides: “If the vendee of a land installment contract has paid in
accordance with the terms of the contract for a period of five years or more from the date
of the first installment payments or has paid toward the purchase price a total sum equal
to or in excess of twenty per cent thereof, the vendor may recover possession of his
property only by use of a proceeding for foreclosure and judicial sale of the property as
provided in section 2323.07 of the Revised Code. * * *.”
-7-
case the vendor may recover the difference between the amount paid by
the vendee on the contract and the fair rental value of the property plus an
amount for the deterioration or destruction of the property occasioned by
the vendee's use.
R.C. 5313.10 thus “limits recovery to an ‘award for property damage and for the balance
of the fair rental value for the holdover period * * *.’ ” Voska v. Coffman, 6th Dist. Sandusky
No. S-13-008, 2013-Ohio-5474, ¶ 11, quoting Goodrich v. Sickelbaugh, 6th Dist. Lucas
No. L-85-194, 1986 WL 3447, *2 (Mar. 21, 1986).
{¶ 14} As noted by the Sixth District:
The fair rental value is the amount a willing landlord rents the property for
and what a reasonable tenant is willing to pay. The installment amount set
forth in a land contract is evidence of its fair rental value. Sanders v.
Crawford, 5th Dist. Stark No. 2006CA 00194, 2007-Ohio-2326, ¶ 33. * * *
Fair rental value may also include unpaid taxes, insurance, and water
charges. Frey v. Hibbard, 62 Ohio App. 3d 781, 785, 577 N.E.2d 669 (1st
Dist.1989).
Voska at ¶ 13.
{¶ 15} On appeal, Anna argues that the buyers’ monthly installment payment of
$756.06 3 “was the fair rental value of the property. It acknowledges that where the
purchaser defaults on the contract, the court may not award a deficiency judgment, but
argues that the court may consider the amounts due under the contract as evidence of
3
As noted above, the complaint and the contract provided that the monthly amount due
was $751.06.
-8-
the fair rental value of the property. Anna emphasizes that the trial court determined that
Anna had established that it was owed monthly payments totaling $4,663.31 and
damages for hauling trash in the amount of $525. Anna thus claims that the trial court
acted contrary to R.C. 5313.10 when it found that Anna had established damages, but
then unilaterally off-set that amount by the amount of the buyers’ down payment.
{¶ 16} With the record before us, we find no error in the trial court’s judgment. The
contract between the parties provided that all payments made would be retained by Anna,
the seller, as liquidated damages for the use and occupancy of the premises. Liquidated
damages are defined as an “amount contractually stipulated as a reasonable estimation
of actual damages to be recovered by one party if the other party breaches.” Black’s Law
Dictionary (7 Ed.1999) 395, quoted by, e.g., Whittle v. Davis, 12th Dist. Butler No.
CA2012-08-169, 2013-Ohio-1950, ¶ 15; L.S. Industries v. Coe, 9th Dist. Summit No.
22603, 2005-Ohio-6736, ¶ 22. In this case, Anna, the seller, only had to prove that buyer
defaulted and that the contract contained a liquidated damage provision.
{¶ 17} Anna’s Exhibit C established that the buyers made an initial down payment
of $7,495 and were charged $604.66 monthly for principal and interest. Exhibit H
showed the various charges and credits to the buyers’ account, including charges for
property taxes, insurance, and late payments. Under the default provision of the land
installment contract, Anna was entitled to retain the $7,495 down payment, plus all
additional payments made between April 30, 2016 and July 31, 2018, when the buyers
made their last payment.
{¶ 18} R.C. 5313.10 allowed Anna to seek forfeiture of the buyers’ rights in the
land installment contract and to obtain restitution and, if the amount paid by the buyers
-9-
was less than the fair rental value of the property, to recover the difference between the
amount paid and the fair rental value. Anna established, and the trial court found, that
the unpaid “rent/land contract payments” totaled $4,663.31. Stated differently, the trial
court found that the installment payments charged to the buyers constituted the fair rental
value of the property, and the unpaid balance of that fair rental value was $4,663.31.
There is nothing in the record to suggest that the fair rental value exceeded the amount
charged as installment payments, and in the absence of a transcript of the damages
hearing, we presume that the evidence supported the trial court’s findings. See Kahler
v. Eytcheson, 2d Dist. Montgomery No. 23523, 2012-Ohio-208, ¶ 34.
{¶ 19} The court further found that the buyers had paid a down payment of $7,495,
which was in excess of the fair rental value. Since the amount paid by the buyers as a
down payment ($7,495) was not less than the fair rental value ($4,663.31), R.C. 5313.10
did not permit Anna, the seller, to recover anything more than it already retained.
{¶ 20} Anna’s assignment of error is overruled.
{¶ 21} The trial court’s judgment will be affirmed.
.............
HALL, J., concurs.
DONOVAN, J., concurs in judgment only.
Copies sent to:
Zachary M. Harvey
Emily McClanahan
Tracy McCain, Jr.
Hon. Gil S. Weithman