Shrock v. Spognardi

[Cite as Shrock v. Spognardi, 2015-Ohio-4555.]
COURT OF APPEALS
RICHLAND COUNTY, OHIO
FIFTH APPELLATE DISTRICT
GARY SHROCK AND MARY SHROCK JUDGES:
Hon. W. Scott Gwin, P.J.
Plaintiffs-Appellants/Cross-Appellees Hon. William B. Hoffman, J.
Hon. Sheila G. Farmer, J.
-vs-
Case No. 15CA33
NICHOLAS SPOGNARDI, ET AL.
Defendants-Appellees/Cross-Appellants OPINION
CHARACTER OF PROCEEDING: Appeal from the Mansfield Municipal Court,
Richland County, Case No.
2014CVG02468
JUDGMENT: Vacated and Remanded
DATE OF JUDGMENT ENTRY: November 2, 2015
APPEARANCES:
For Plaintiffs-Appellants/Cross-Appellees For Defendants-Appellees/Cross-Appellants
ERIC S. MILLER BYRON D. CORLEY
13 Park Avenue West, Suite 608 22 N. Walnut Street
Mansfield, Ohio 44902 Mansfield, Ohio 44902
Richland County, Case No. 15CA33 2
Hoffman, J.
{¶1} Plaintiffs-appellants/cross-appellees Gary Shrock and Mary Shrock appeal
the April 9, 2015 Judgment Entry entered by the Mansfield Municipal Court which
vacated the magistrate’s December 2, 2014 decision, and dismissed the case.
Defendants-appellees/cross-appellants are Nicholas Spognardi, et al. Appellees cross-
appeal the same entry in which the trial court ordered the escrowed funds be returned
to Appellants.
STATEMENT OF THE FACTS AND CASE
{¶2} Appellants purchased a single family home at 52 Wellington Avenue,
Mansfield, Ohio, in March, 2009. Appellants invested time and money rehabilitating the
property. Appellants subsequently attempted to sell the property. Appellees proposed
to buy the property through a land contract, but Appellants rejected the proposal.
{¶3} On March 19, 2012, the parties entered into a Residential Lease
Agreement (“the Lease”). The term of the Lease was from May 1, 2012, until May 1,
2013. The rental payment was $600/month. The lease expressly provided the landlord,
i.e., Appellants, was responsible for real estate taxes and insurance on the property.
Appellees did not pay a security deposit or an additional month’s rent. The Lease
included a provision if Appellees failed to pay the rent on time or violated any other
terms of the Lease, Appellants had the right to terminate the Lease. The Lease also
expressly provided, “this lease is the entire agreement between [the parties]”.
{¶4} On the same day, the parties entered into a Purchase Real Estate
Agreement (“Purchase Agreement”). The Purchase Agreement provided:
Richland County, Case No. 15CA33 3
The Seller [Appellants] now owns the following described real
estate, located at 52 Wellington Ave, City of Mansfield, State of Ohio:
For valuable consideration, the Seller agrees to sell and the Buyer
[Appellees] agrees to buy this property for the following price and on the
following terms:
1. The Seller will sell this property to the Buyer, free from all claims,
liabilities, and indebtedness, unless noted in this agreement.
***
3. The Buyer agrees to pay the Seller the sum of $ __75,900__,
which the Seller agrees to accept as full payment.
4. The purchase price will be paid as follows:
Total Purchase Price……………………………………….$75,900
Down Payment(Escrow)..…………………………………..$_2,000
Total Buyout at purchase time…………………………….$73,900
5. The Seller acknowledges receiving the earnest money deposit of
$_2,000_ from the Buyer. If Buyer fails to perform this agreement, the
Seller shall retain the money. If Seller fails to perform this agreement, this
money shall be returned to the Buyer or Buyer may have the right of
specific performance.
6. This agreement will tentatively close on _March 1, 2013, at _5_
o’clock pm.1 At that time, and upon payment by the Buyer of the portion of
1 The tentative closing date of March 1, 2013, was subsequently changed by the parties
to September 30, 2014.
Richland County, Case No. 15CA33 4
the purchase price then due, the Seller will deliver to Buyer the following
documents: * * *
10. Between the date of this agreement and the date for closing,
the property shall be maintained in the condition as existed on the date of
this agreement. * * *
11. The parties also agree to the following additional terms:
The [B]uyer will be responsible to pay for and keep current the
Taxes and Insurances for the said property.
{¶5} Appellees paid Appellants $2,000 as a down payment pursuant to the
terms of the Purchase Agreement. Appellees also paid Appellants $600/month for
approximately 24 months. On November 10, 2014, after Appellees failed to tender the
$600 monthly payments in May, June, July, August, September, October, and
November, 2014, Appellants served Appellees with a notice to leave the premises.
{¶6} On November 17, 2014, Appellants filed a Complaint for forcible entry and
detainer. Appellees filed a motion to dismiss for lack of subject matter jurisdiction.
Appellees asserted the action should be one in foreclosure. The magistrate conducted a
hearing on December 2, 2014. Via Decision filed December 2, 2014, the magistrate
found the court had jurisdiction over the action. The magistrate further found Appellants
were the record titleholders of the premises, and Appellees were residential tenants and
were in default in rent. The magistrate ordered possession of the premises returned to
Appellants.
{¶7} Appellants filed for a writ of restitution on December 3, 2014. Appellees
filed objections to the magistrate’s decision on December 5, 2014. The trial court stayed
Richland County, Case No. 15CA33 5
the matter pending a ruling on the objections. Appellants sought an increase in the
amount of the supersedeas bond, which had previously been set at $600.00/month. The
trial court ordered the amount of the supersedeas bond be modified to reflect the fair
market value of the property, and, accordingly, ordered Appellees to pay an additional
$100.00/month. A transcript of the hearing before the magistrate was filed on February
9, 2015. Appellees filed supplemental objections on March 2, 2015. Appellants filed a
memorandum in support of the magistrate’s decision.
{¶8} Via judgment entry filed April 9, 2015, the trial court vacated the
magistrate’s decision and dismissed the case.
{¶9} It is from this judgment entry Appellants appeal, raising the following
assignments of error:
{¶10} "I. THE COURT BELOW ERRED IN HOLDING THAT THE PARTIES HAD
A LAND CONTRACT RATHER THAN A RESIDENTIAL LEASE AND AN OPTION TO
PURCHASE REAL ESTATE.
{¶11} "II. THE COURT BELOW ERRED IN VACATING RATHER THAN
AFFIRMING THE MAGISTRATE’S DECISION."
{¶12} Appellees cross-appeal, assigning as error:
{¶13} "I. THE TRIAL COURT ERRED IN RETURNING THE ESCROWED
FUNDS TO THE CROSS-APPELLEES WHEN THE DECISION OF THE MAGISTRATE
WAS VACATED AND DISMISSED."
Richland County, Case No. 15CA33 6
APPEAL
I, II
{¶14} Appellants addressed their two assignments of error together; therefore,
we shall do the same. In their first assignment of error, Appellants maintain the trial
court erred in finding the parties had entered into a land contract rather than a
residential lease and an option to purchase real estate. In their second assignment of
error, Appellants contend the trial court erred in vacating the magistrate’s decision. We
agree.
{¶15} A land installment contract conveys a present ownership interest in realty.
Am. Servicing Corp., citing Riverside Builders, Inc. v. Bowers, 10th Dist. Franklin No.
89AP–834, 1990 WL 75433 (June 7, 1990). A lease, on the other hand, creates a
possessory interest, or right of possession in real estate. Eller Media Co. v. DGE, Ltd.,
8th Dist. Cuyahoga Nos. 83273 and 83286, 2004–Ohio–4748, ¶ 35. A lease is a
conveyance of an estate in real property for a limited term, with conditions attached, in
consideration of rent. Fadelsak v. Hagley, 4th Dist. Lawrence No. 02CA41, 2003-Ohio-
3413, ¶ 9.
{¶16} R.C. Chapter 5313 governs land installment contracts. R.C. 5313.01(A)
defines the term “land installment contract” as follows:
[A]n executory agreement which by its terms is not required to be
fully performed by one or more of the parties to the agreement within one
year of the date of the agreement and under which 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
Richland County, Case No. 15CA33 7
the vendor retains title to the property as security for the vendee's
obligation. Option contracts for the purchase of real property are not land
installment contracts.
{¶17} R.C. 5313.02(A) sets forth 16 minimum requirements for land installment
contracts:
(1) The full names and then current mailing addresses of all the
parties to the contract;
(2) The date when the contract was signed by each party;
(3) A legal description of the property conveyed;
(4) The contract price of the property conveyed;
(5) Any charges or fees for services that are includable in the
contract separate from the contract price;
(6) The amount of the vendee's down payment;
(7) The principal balance owed which is the sum of divisions (A)(4)
and (5) less division (A)(6) of this section;
(8) The amount and due date of each installment payment;
(9) The interest rate on the unpaid balance and the method of
computing the rate;
(10) A statement of any encumbrances against the property
conveyed;
(11) A statement requiring the vendor to deliver a general warranty
deed on completion of the contract, or another deed that is available when
the vendor is legally unable to deliver a general warranty deed;
Richland County, Case No. 15CA33 8
(12) A provision that the vendor provide evidence of title in
accordance with the prevailing custom in the area in which the property is
located;
(13) A provision that, if the vendor defaults on any mortgage on the
property, the vendee can pay on that the [sic] mortgage and receive credit
on the land installment contract;
(14) A provision that the vendor shall cause a copy of the contract
to be recorded;
(15) A requirement that the vendee be responsible for the payment
of taxes, assessments, and other charges against the property from the
date of the contract, unless agreed to the contrary;
(16) A statement of any pending order of any public agency against
the property.
{¶18} Under a land installment contract, the purchaser acquires equitable title to
the property to the extent of the payments made. Riverside Builders, Inc. v. Bowers,
10th Dist. No. 89AP–834 (June 7, 1990); Jefferson Local School Dist. Recreation
Council v. Roby, 10 Dist. No. 85AP–1050 (Sept. 18, 1986), citing Coggshal v. Marine
Bank Co., 63 Ohio St. 88 (1900), paragraph one of the syllabus. Conversely, an option
contract for the purchase of real property is defined as “an agreement wherein the legal
titleholder of the property grants another person the privilege, without the obligation, to
purchase the real property at a set price within a set time.” Judson v. Lyendecker, 10th
Dist. Franklin No. 12AP–615, 2013–Ohio–1060, ¶ 10. An option contract “consists of
two independent elements: (1) an offer to buy, sell, or perform some act, which
Richland County, Case No. 15CA33 9
becomes a contract if properly accepted; and (2) the binding agreement to leave the
offer open for a specified period of time.” Cent. Funding, Inc. v. CompuServe Interactive
Servs., Inc., 10th Dist. Franklin No. 02AP–972, 2003–Ohio–5037, ¶ 38.
{¶19} To determine whether an agreement is a land installment contract or a
lease with an option to purchase, a court must analyze the intent of the parties at the
time they executed the agreement. Fadelsak v. Hagley, 4th Dist. No. 02CA41, 2003–
Ohio–3413, ¶ 10;Hubbard v. Dillingham, 12th Dist. No. CA2002–02–045, 2003–Ohio–
1443, ¶ 11.Courts presume the intent of the parties to a contract resides in the language
they chose to employ in the contract. Kelly v. Med. Life Ins. Co., 31 Ohio St.3d 130(1987), paragraph one of the syllabus. When the language of a written contract is clear,
a court may look no further than the writing itself to find the intent of the parties. Sunoco,
Inc. v. Toledo Edison Co., 129 Ohio St.3d 397, 2011–Ohio–2720, ¶ 37. However, where
a contract is ambiguous, a court may consider extrinsic evidence to ascertain the
parties' intent. Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003–Ohio–5849, ¶ 12.
{¶20} In the instant action, the parties entered into two separate agreements, to
wit: the Lease and the Purchase Agreement. The Lease provided Appellants would
rent the property to Appellees, and the rental payment would be $600, due on the first of
each month. The Lease did not provide the amounts Appellees paid Appellants as rent
would be held as a deposit and credited against the purchase price of the property.
The Purchase Agreement granted Appellees the privilege, without the obligation, to
purchase the real property at a set price within a set time. Appellees were not obligated
to purchase the property at the expiration of the term. Appellees were not required to
make monthly installment payments. The Purchase Agreement did not mandate
Richland County, Case No. 15CA33 10
conveyance of title to the property to Appellees. Rather, transfer of the title would only
occur “if” Appellees purchased the property as stated in the agreement.
{¶21} We find neither document, individually or collectively, satisfies the
requirements of a land installment contract as set forth in R.C. 5313.02. The documents
do not include the majority of the statutory requirements, including, but not limited to, a
legal description of the property to be conveyed; the amount and due date of each
installment payment; and the interest rate on the unpaid balance and the method of
computing the rate. Furthermore, there is no evidence the parties recorded the
documents.
{¶22} For the foregoing reasons, we conclude the Lease and the Purchase
Agreement did not constitute a land installment contract. Accordingly, we find the trial
court erred in concluding the parties entered into a land installment contract, and
vacating the magistrate’s decision.
{¶23} Appellants’ first and second assignments of error are sustained.
CROSS-APPEAL
I
{¶24} In their sole assignment of error on cross-appeal, Appellees argue the trial
court erred in returning the escrowed funds to Appellants when the decision of the
magistrate had been vacated and dismissed.
{¶25} In support of their position, Appellees cite R.C. 1923.061(B), which
provides, “In an action for possession of residential premises based upon non-payment
of the rent in an action for rent when the tenant is in possession, the tenant may
counterclaim for any amount he may recover under the rental agreement. In the event,
Richland County, Case No. 15CA33 11
the court from time to time may order the tenant to pay into the court all or part of the
rent becoming due during the pendency of the action. After trial and judgment, the party
to whom a net judgment is owed shall be paid first from the money paid into court.”
{¶26} Appellees explain they paid into the court, as escrow, the sum of $3500,
as, and for, future monthly payments. Appellees assert because the trial court
concluded it lacked subject matter jurisdiction, they are owed the net judgment of
$3500. We disagree.
{¶27} Appellees sought and obtained a stay of execution on the writ of
restitution. The trial court ordered Appellees to pay $700/month to satisfy the terms of
the supersedeas bond. The amount represented the fair rental value of the property.
Because we found, supra, the trial court erred in vacating the magistrate’s decision, we
find Appellants are entitled to the monies Appellees paid into the court
{¶28} Appellees’ sole assignment of error on cross-appeal is overruled.
{¶29} The judgment of the Mansfield Municipal Court is vacated and the matter
remanded for further proceedings in accordance with our opinion and the law.
By: Hoffman, J.
Gwin, P.J. and
Farmer, J. concur