[Cite as B&J Resources, L.L.C. v. 28925 Lorain Inc.,

.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 105323

B&H RESOURCES, L.L.C. PLAINTIFF-APPELLEE/ CROSS-APPELLANT

vs.

28925 LORAIN INC., ET AL. DEFENDANTS

[Appeal By Resource Title National Agency, Inc. Defendant-Appellant/Cross-Appellee]

JUDGMENT: AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-13-819069

BEFORE: Stewart, J., Kilbane, P.J., and Celebrezze, J.

RELEASED AND JOURNALIZED: August 17, 2017 ATTORNEY FOR APPELLANT/CROSS-APPELLEE

David M. Cuppage Climaco, Wilcox, Peca & Garofoli Co., L.P.A. 55 Public Square, Suite 1950 Cleveland, OH 44113

ATTORNEYS FOR APPELLEE/CROSS-APPELLANT

Christopher A. Murray 9715 Lake Avenue Cleveland, OH 44102

For 28925 Lorain Inc., et al.

John Chirayil Statutory Agent 3110 Springdale Avenue Glenview, IL 60025 MELODY J. STEWART, J.:

{¶1} While conducting due diligence for the purchase of real property,

plaintiff-appellee/cross-appellant B&H Resources, L.L.C. (through its sole shareholder,

Tanios Bougebrayel), learned that there were delinquent taxes resulting from the seller’s

ongoing dispute with the board of revision’s decision to assign the property a higher

valuation than what the seller believed should be assigned. Believing that the tax issues

had been resolved, Bougebrayel signed a purchase agreement that prorated taxes and

assessments based on the last available tax duplicate. Unknown to Bougebrayel was that

the ongoing tax appeals meant that the board of revision’s higher valuation of the

property had yet to be reflected on the tax duplicate existing at the time of closing and

used by defendant-appellant/cross-appellee Resource Title National Agency (“Resource

National”), the escrow agent. When the tax appeals were finally resolved, B&H received

a sizable tax bill.

{¶2} B&H brought this action against Resource National, 1 alleging that it

breached its contractual and fiduciary duties, and that it negligently performed the title

exam by failing to provide information relating to potential title issues and property tax

liens. Resource National counterclaimed, alleging that B&H and the seller agreed to

B&H also named as defendants the seller, 28925 Lorain Inc. and its principal, John Chirayil; 1

First American Title Insurance Company, the title insurer; Mark A. Parks, the Cuyahoga County Fiscal Officer; Jeannet Wright, the Cuyahoga County Treasurer; and the North Olmsted Board of Education. These defendants were all dismissed. hold Resource National harmless for any loss or damage resulting from the exercise of its

services and that B&H should compensate it for its costs of litigation. Ruling without

opinion on cross-motions for summary judgment, the court found in favor of Resource

National on B&H’s complaint and in favor of B&H on Resource National’s counterclaim.

Both parties appeal.

{¶3} The underlying facts are largely undisputed. The subject property is used as

a gas station. The seller purchased the property in 2007 for $1.1 million, but claimed

that only $600,000 of that price went to the property itself — the remaining $500,000

covered inventory, costs associated with the gas station, and the purchase of a gas station

in Illinois.

{¶4} When Cuyahoga County valued the property for tax purposes at the $1.1

million price payed by the seller in 2007, the seller objected on grounds that $1.1 million

purchase price had been artificially inflated. He contested the valuation to the board of

revision in two separate tax appeals: one appeal covered tax years 2007 and 2008; the

other appeal covered tax years 2009-2011.

{¶5} As these tax appeals were progressing, Bougebrayel and the seller began

negotiations for the sale of the gas station. Bougebrayel learned that there were

delinquent taxes owed on the property. He was referred to the seller’s attorney who told

him that the matter had been “taken care of” and Bougebrayel only had to worry about

future taxes because “back taxes will be on [the seller]” and come out of the seller’s

proceeds. Bougebrayel said that the seller’s attorney did not give him any “detail” about the tax issue, and he conceded that he did not request any documentation, nor did he make

further inquiry into the tax matter.

{¶6} In fact, the tax appeals had been resolved adversely to the seller prior to

closing on the sale, with the board of revision valuing the property at $1.1 million for all

relevant tax years. This valuation was not, however, completely reflected in the tax

duplicate available at the time of closing: the tax duplicate showed only that the property

had been valued at $1.1 million for tax year 2011. Consistent with the parties’

agreement to adjust outside of escrow any change in taxes resulting from a change in

property valuation as reflected on the last available tax duplicate, the seller assumed the

additional tax debt for tax year 2011. After closing, the new valuation caused B&H to

incur tax liabilities of $53,308.12 for tax years 2007 and 2008, and $55,592.94 for tax

years 2009 and 2010.

I. The Cross-Appeal

{¶7} We first address the cross-appeal filed by B&H because its resolution could

potentially render Resource National’s appeal moot. Two issues are presented: (1) that

the court erred by finding that Resource National did not breach its contract and (2)

notwithstanding any alleged breach of contract, B&H had a viable negligence claim

against Resource National for its failure to discover the outstanding tax issues and make

those issues known to B&H.

A. Breach of Contract {¶8} B&H chose Resource National to provide title exams, settlement, and closing

services. The “standard conditions of appointment of settlement agent and acceptance of

escrow” stated that “[p]rorations of taxes or assessments shall be on the basis of the

amount shown on the last available Tax Duplicate/Municipal Tax Invoice when required

by the instructions [for escrow].” These terms were consistent with terms stated in the

purchase agreement:

PRORATIONS: Taxes and assessments, based on the last available tax duplicate, shall be prorated by the Escrow Agent as of the date of recording of the deed. The parties hereto agree to adjust directly outside escrow any change in taxes or assessments resulting from a change in property valuations, tax rate and/or the construction of improvements occurring before recording of the deed, but not reflected on the last available tax duplicate.

{¶9} In addition, B&H signed a property tax disclaimer acknowledging that

Resource National “based tax prorations on the most recent data available from the

county treasurer” and that Resource National “cannot be held responsible for adjustments

and/or increases in property tax bills after closing. We must use information provided by

the county.”

{¶10} There is no question that Resource National used the “last available tax

duplicate” at closing. That tax duplicate showed a total of $64,520.60 payable. That

amount was withheld from the seller’s proceeds and paid as real estate taxes at the time

the deed was recorded. There is also no question of fact that the taxes that are the

subject of this appeal were assessed post-closing. As required by the terms of the

standard conditions of escrow, Resource National fully complied with its obligations by using the last available tax duplicate as a basis for prorating taxes. As a matter of law, it

did not breach its contract with B&H. Gattozzi v. Midland First Am. Natl. Title, 8th Dist.

Cuyahoga No. 77148,

, 8 (Sept. 21, 2000).

{¶11} B&H does not dispute that Resource National prorated taxes based on the

last available tax duplicate. It maintains, however, that the proration language was only

meant to apply to the current year’s taxes being prorated as of the closing date and

credited against the purchase price. It insists that by failing to inform it of the pending

tax appeals, Resource National did not fulfill its contractual duties with care, skill, and

faithfulness.

{¶12} “[T]here is an implied duty of good faith and fair dealing in every

contract.” Am. Contr.’s Indemn. Co. v. Nicole Gas Prod., Ltd., 10th Dist. Franklin No.

07AP-1039,

. In this context, the implied duty of good faith and

fair dealing does not mean that parties are forbidden from exercising the rights and duties

defined in a contract — it means that parties should not take “opportunistic advantage” of

contractual terms in a way that was not contemplated at the time of drafting. Ed Schory

& Sons v. Francis,

,

(1996), citing Kham &

Nate’s Shoes No. 2, Inc. v. First Bank of Whiting,

(7th

Cir. 1990).

{¶13} The implied duty to not take opportunistic advantage of contractual terms

does not mean that parties to negotiated contracts cannot enforce those terms “to the

letter,” even “to the great discomfort of their trading partners.” Kham & Nate’s

“Courts presume that a contract’s intent resides in the language the parties chose

to use in the agreement.” Huff v. FirstEnergy Corp.,

,

,

, ¶ 12, citing Shifrin v. Forest City Ents., Inc.,

,

(1992). That language controls the relationship to the

point where no implied covenants can arise in a contract when the matter to be implied is

covered by the written terms of the agreement. Hamilton Ins. Servs. v. Nationwide Ins.

Cos.,

,

(1999).

{¶14} The contract plainly required Resource National to use the last available tax

duplicate to prorate taxes and assessments without reference to any other requirements in

this regard. Stated differently, nothing in the contract required Resource National to do

more than use the last available tax duplicate to determine the amount to be withheld from

the seller at closing. And to further solidify the point, Section 10(g) of the conditions of

escrow expressly states that Resource National would not be responsible for “anything

not specifically assumed or agreed to” in the standard conditions of escrow. As a matter

of law, the terms and conditions of escrow, coupled with the purchase agreement itself,

required Resource National to use the last available tax duplicate to apprise B&H of its

tax liability or credits. This it did, so as a matter of law B&H did not breach the contract.

B. Negligence

{¶15} B&H’s negligence argument is not fundamentally different from its breach

of implied contract argument: it maintains that Resource National failed to fully investigate the property and failed to provide B&H with information relating to adverse

board of revision decisions.

{¶16} The doctrine of “economic loss” states that a party cannot recover purely

economic damages in a tort action against another party based upon the breach of

contractually created duties. Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc.,

,

,

, syllabus. Tort law “is not intended to

compensate parties for monetary losses suffered as a result of duties that are owed to

them simply as a result of the contract.” Digiknow, Inc. v. PKXL Cards, Inc., 8th Dist.

Cuyahoga No. 96034,

, citing Floor Craft Floor Covering, Inc. v.

Parma Community Gen. Hosp. Assn.,

,

(1990).

{¶17} The damages that B&H seeks in its negligence claims are based on

Resource National’s alleged violation of a contract. The relationship between the parties

was defined solely by contract, and to the extent that Resource National allegedly

breached the contract, the breach of contract cause of action would be the sole avenue of

recovery for B&H. On this basis we find as a matter of law that the court did not err by

granting summary judgment on the causes of action that sounded in negligence.

{¶18} Apart from being barred by the doctrine of economic loss, the claims

sounding in negligence failed to establish that Resource National breached any duty of

care. Bougebrayel insisted that it was his understanding that it was the title agency’s job

to “dig up these things and bring it to my attention.” Yet B&H has not cited any

authority for the proposition that a title agency has a duty to go beyond what is specifically agreed to in the written documentation. In fact, current standards established

by the Ohio State Bar Association “except special taxes and assessments not shown on

the county treasurer’s public access records” from those things that title examiners have

a duty to report. Lone Star Equities, Inc. v. Dimitrouleas,

,

, ¶ 83 (2d Dist.). Again, there is no question of fact that Resource National used the

latest tax duplicate consistent not only with its contractual obligations, but in keeping

with industry standards.

{¶19} A breach of the duty of care is an essential element of a negligence claim.

Safeco Ins. Co. of Am. v. White,

,

,

. B&H failed to show that Resource National breached the applicable standard of

care. The court did not err by granting summary judgment on the negligence counts.2

{¶20} B&H also pleaded a claim for negligent misrepresentation, alleging that

Resource National provided “false, incomplete, and/or misleading information” to B&H

regarding adverse board of revision decisions.

The elements of a claim of negligent misrepresentation are: (1) one who, in the course of his or her business, profession, or employment, or in any other transaction in which he or she has a pecuniary interest; (2) supplies false information for the guidance of others in their business transactions; (3) is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information; and (4) if he or she fails to exercise reasonable care or competence in obtaining or communicating the information.

Bougebrayel said that the seller’s attorney told him “that any past taxes due would come out 2

of the purchase price, and that I only had to worry about taxes going forward.” This statement does not support a negligence claim against Resource National. Delman v. Cleveland Hts.,

,

(1989).

{¶21} Fatal to B&H’s claim is that Resource National did not supply “false”

information regarding the pending tax proceedings. A claim of negligent

misrepresentation requires an affirmatively false statement, not merely an omission.

Zuber v. Ohio Dept. of Ins.,

,

(10th Dist. 1986);

Leal v. Holtvogt,

,

(2d Dist. 1998). B&H

alleged only that Resource National omitted any mention of pending tax proceedings

affecting the property. It presented no evidence to show that Resource National made

any affirmative claims not based on the last available tax duplicate.

{¶22} Civ.R. 56(C) permits the trial court to enter summary judgment if, after

construing 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 party against

whom the motion for summary judgment is made[.]” B&H has offered no evidence to

create any genuine issue of material fact sufficient to forestall summary judgment.

II. The Appeal

{¶23} The basis for Resource National’s appeal is that the court erred by refusing

to find that the indemnification clauses contained in the conditions of escrow required

that Resource National be reimbursed for all of its costs and expenses, including

reasonable attorney fees, because it was required to respond to this action despite it

bearing no fault. {¶24} The conditions of escrow contains two clauses that indemnified Resource

National. Section 1 of the conditions of escrow states:

The parties hereby agree to save Agent harmless from any loss or damage resulting from such termination or declination and hereby indemnify Agent for any loss, cost or damage including, without limitation, attorney fees and costs of litigation which Agent may incur.

Section 3 of the conditions of escrow states: “if the escrow agent is required to respond

to any court action without fault of the escrow agent, that the escrow agent shall be

reimbursed for all his costs and expenses including reasonable attorney fees, all of which

shall be charged to the appropriate party.” B&H argued below that these provision of the

terms and conditions of escrow were meant to apply to the appointment of a settlement

agent, but that its claims were based on Resource National’s acting as title agent, not a

settlement agent.

{¶25} We agree with B&H that Section 1 of the conditions of escrow does not

provide indemnity for claims relating to title. That section is titled “Escrow Deposits.” It

broadly addresses the termination of escrow and grants Resource National the right, upon

termination of escrow, to retain sufficient funds until its “fees and costs are paid or

secured to its satisfaction or, at its option, deduct such fees and costs from any such funds

deposited in escrow.”

{¶26} “In interpreting a provision in a written contract, the words used should be

read in context and given their usual and ordinary meaning.” Carroll Weir Funeral

Home v. Miller,

,

(1965). Read in context, the

indemnity provision applies only to Resource National’s conduct in terminating or declining escrow based on nonpayment of its fees and costs. B&H’s complaint does not

allege that Resource National improperly terminated or declined escrow, nor does

Resource National make that allegation in its counterclaim.

{¶27} We reach a similar conclusion with respect to the indemnification clause

contained in Section 3 of the terms and conditions of escrow. That section is titled

“Settlement Charges” and refers to escrow, settlement, title transfer, and recording of

costs and sets forth the manner in which the seller and buyer will be charged. As with

Section 1, Section 3 states that “Agent shall be paid in full at the settlement for all title,

escrow and settlement fees and costs and may withhold settlement and retain all funds

and documents held as escrow or settlement agent until such fees and costs are paid or

secured to Agent’s satisfaction.” Read in context, the indemnity portion of Section 3 —

that

if the escrow agent is required to respond to any court action without fault of the escrow agent, that the escrow agent shall be reimbursed for all his costs and expenses including reasonable attorney fees, all of which shall be charged to the appropriate party

— applies only to Resource National’s liability for withholding settlement and retaining

all funds and documents held as escrow until it is paid. Resource National does not

argue that its right to indemnity in this case exists because it withheld settlement pending

payment of its fee.

{¶28} The specificity of the two indemnification clauses in the terms and

conditions of escrow is important. Not only do they state different circumstances in

which indemnity will apply, there is no overlap between them. In other words, they do not provide wholesale indemnity protection for Resource National. If Resource National

intended that B&H indemnify it for any and all acts without reference to specific

circumstances, it could easily have done so without regard to specific sections in the

terms and conditions of escrow.

{¶29} Resource National cites Solomon v. Harwood, 8th Dist. Cuyahoga No.

96256,

, a case where it acted as escrow agent, for the proposition that

this court previously upheld a summary judgment to it for attorney fees and litigation

costs under the same indemnity clause. The facts in Solomon are distinguishable:

Resource National opened escrow for the pending sale of a property, but the sale fell

through and it refunded a deposit made by the buyer. The seller brought suit against

Resource National for breach of contract and Resource National counterclaimed for its

costs of litigation pursuant to an indemnification clause in the standard conditions of

settlement agent and acceptance of escrow relating to “termination or declinations.” The

court granted summary judgment to Resource National and we affirmed, noting that

“[w]hen it became known to the title company that the purchase was not going to go

through, the company refunded Solomon’s $200,000 deposit.” Id. at ¶ 33. Unlike the

present case in which Resource National was not alleged to have acted improperly in

terminating or declining escrow, the Solomon refund of funds held in escrow plainly

involved a termination of escrow sufficient to invoke coverage under the indemnification

provision. The assignment of error is overruled.

{¶30} Judgment affirmed. It is ordered that the parties share the 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 common

pleas 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.

______________________________________________ MELODY J. STEWART, JUDGE

MARY EILEEN KILBANE, P.J., and FRANK D. CELEBREZZE, JR., J., CONCUR