Commercial Real Estate Breach of Fiduciary Duty Case Dismissal Affirmed by Court of Appeals

The Eighth District Court of Appeals affirmed a Trial Court decision that dismissed breach of fiduciary duty claims brought against multiple local commercial real estate professionals, and now the Plaintiffs have asked the Ohio Supreme Court to hear the case.  See Tuttle v. Collins, 2020-Ohio-4062.

The facts of Tuttle begin in 2012, when the Dunhum Tavern Museum (“DTM”) acquired 2.28 acres of land (“Midtown Land”) in furtherance of DTM’s mission.  DTM is a non-for-profit corporation whose mission is to maintain, develop, and share the DTM campus for educational and cultural purposes; provide urban green space in Midtown Cleveland; and return the DTM to its roots by serving as a place for urban history, education, nature, and community.  Thereafter, DTM raised over $700,000 to be invested into the the Midtown Land.

In 2018, the Cleveland Foundation expressed an interest in purchasing 1.2 acres of the Midtown Land for its new headquarters.  David Wagner (“Wagner”) and the husband of another board member obtained an appraisal and attempted to have DTM move forward with the sale, which was opposed by 26 members of DTM.  Nonetheless, two separate votes by DTM’s Board went forward, and both votes resulted in the approval of the sale of a portion of the Midtown Land to the Cleveland Foundation.

In May of 2019, Appellants filed a lawsuit naming Tim Collins (“Collins”) and Wagner as Defendants, asserting claims of breach of fiduciary duty, violating bylaws relating to conflicts of interest, and violating bylaws relating to voting procedures.

The Trial Court found that the Appellants’ allegations were merely conjecture and supposition, and that they lacked any factual basis.  Ohio’s Eighth District Court of Appeals concluded that the Complaint failed to provide sufficient facts to support the elements of the claims, and affirmed the Trial Court’s dismissal of the case.  To review the Court of Appeals’ Decision, click here.

Had that case gone the other way, it really could have created a slippery slope and dangerous precedent for all sorts of claims to be brought against commercial real estate professionals – especially those who serve on boards.  Thankfully, the Trial Court and the Court of Appeals reached the correct conclusion.

No Stay + No Bond = No Lis Pendens Says Ohio’s First District Court of Appeals

Sikora Law obtained its 32nd appellate victory (now on 25 different real estate title and escrow subjects) in an Opinion focused on lis pendens.  Clinton v. Home Investment Fund V, LP, 2020-Ohio-4555 (1st Dist.).  Plaintiffs filed a quiet title action, seeking to confirm that a mortgage originally granted in favor of Huntington National Bank and its nominee MERS, and later assigned to Home Investment Fund, had been extinguished in a prior foreclosure case.  The trial court granted summary judgment in Plaintiffs’ favor, and rejected the mortgagee’s primary argument that MERS should have been named in the prior foreclosure case, in addition to Huntington.  After final judgment by the trial court, the mortgagee filed an appeal, but did not seek a stay of the trial court’s judgment or post a supersedeas bond.

After the mortgagee filed its appeal, the Plaintiffs sold the property, and our firm filed a Motion to Dismiss the Appeal as Moot.  The mortgagee vigorously opposed dismissal, arguing that the validity of the Huntington/MERS mortgage had not been finally determined, and that lis pendens continued during the appeal, preventing the parties’ dispute from becoming moot.  The Court of Appeals unanimously rejected the mortgagee’s arguments and dismissed the appeal.

To review the Clinton Opinion issued by Ohio’s First District Court of Appeals, click here.

Click here to learn how Sikora Law can help Title Insurance Companies streamline their legal needs.

Marketable Title Act and Dormant Minerals Act Afford Separate Paths to Extinguish Mineral Rights

A recent decision by Ohio’s Fifth District Court of Appeals upheld a Trial Court decision, finding that the Marketable Title Act (“MTA”) was applicable to severed oil and gas rights and that the Appellants’ interests had been extinguished by operation of law based upon the MTA.  See Cain v. Horn, 2020-Ohio-3171.

The dispute in Cain arose from disputed ownership of oil and gas rights related to approximately 110 acres of real property.   On December 27, 1926, Clara Burrett and Claude Burrett transferred their interest in fifty (50) acres of the property at issue to Viola Romans via a Warranty Deed (the “Warranty Deed”), which was recorded on February 24, 1927.   The Warranty Deed specifically reserved a one-half interest in the Burretts in all of the oil and gas underlying the fifty acre tract (“Burrett Reservation”).

Appellees obtained ownership of the property by virtue of two survivorship warranty deeds, recorded in 2002 and 2003.  Appellees initially filed an action to quiet title under the DMA and were unsuccessful upon the Appellants’ filing of a Claim to Preserve Mineral Interests pursuant to R.C. 5301.56.   Subsequently, Appellees filed a new action against Appellants seeking to quiet title to the oil and gas rights under the MTA.

The Trial Court found in favor of the Appellees and ruled that the Burrett Reservation was automatically extinguished by the MTA because that interest was not reflected in an instrument after the root of title under the MTA.  The Fifth District upheld the Trial Court’s decision and further held that the MTA and DMA are separate and distinct statutes, and that a determination under one is not dispositive of the other.

Cain provides a useful reminder of two of the separate and distinct ways in which mineral interests can be extinguished and the differences between them.

Click here to learn how Sikora Law can help Title Insurance Companies streamline their legal needs.

Failure to Strictly Comply with Cognovit Note Language Renders Provision Useless

Ohio’s Eighth District Court of Appeals recently mandated strict compliance with cognovit judgment language in order to enforce a cognovit note.  In 2017, L&M Estates, L.L.C. (“L&M”) executed a Cognovit Note in favor of Ace Property Group of Ohio, L.L.C. (“Ace Property”).  The Note stemmed from a commercial loan that L&M received from Ace Property (the “Note”).  As part of the commercial loan transaction, a principal of L&M, Lisa Cochran (“Cochran”), executed a personal guaranty (the “Guaranty”). After the borrower failed to timely make required payments on the Note, Ace Property obtained cognovit judgments against L&M under the Note and against Cochran under the Guaranty.  Cochran appealed on the basis that the Guaranty did not contain the required language under Ohio law to obtain a cognovit judgment.

On appeal, the Eighth District Court of Appeals overturned the trial court’s decision.  The Court of Appeals held that cognovit provisions must strictly comply with Ohio law in order to be enforceable.

The Ace Property case is a helpful reminder to commercial real estate professionals to make sure cognovits provisions strictly comply with the requirements of Ohio law if enforcing it is important to you.

Click here to learn how Sikora Law can help CRE Developers & Owners streamline their legal needs.

Appellate Victory in Title Coverage and Closing Protection Coverage Case

Sikora Law obtained its 31st appellate victory (now on 24 different real estate subjects) in an Opinion affirming a Jury Trial verdict in favor of a major title insurance underwriter.  Johnson v. U.S. Title Agency, Inc., 2020-Ohio-4056.   Plaintiff asserted claims for breach of contract and bad faith stemming from mechanic’s liens that were recorded after the issuance of an Owner’s Policy of Title Insurance and also asserted a claim for breach of the Closing Protection Letter.   After a nine-day Jury Trial, the jury specifically found that the underwriter had not breached the terms of the Policy or Closing Protection Letter, and entered a defense verdict on all claims.

In a 44-page Opinion, the 8th District Court of Appeals unanimously affirmed, specifically rejecting each of the Plaintiff’s assignments of error, and affirming that, based on the evidence presented at Trial, the mechanic’s liens at issue were not covered matters under the Owner’s Policy because those liens arose after the Owner’s Policy was issued.  Plaintiff’s transactional counsel claimed to have given vague, oral closing instructions to the closing agent, which testimony Plaintiff then used to argue that Plaintiff should be considered a third-party beneficiary of the lender’s closing instructions.   That important subject became the main issue at Trial, and Plaintiff was defeated on that point – both at Trial and on Appeal.

To review the Johnson v. U.S. Title Opinion, click here.

Click here to learn how Sikora Law can help Title Insurance Companies streamline their legal needs.