Rockford Homes, inc. v. Handel, 2007 Westlaw 1544711 (Ohio App. 5/25/07)
Buyer, a home builder, contracted to purchase 75 acres of land from Seller. Some of the land was wooded, and Buyer regarded this as a desirable feature, making possible premium priced lots. Nevertheless, the contract contained no mention of trees on the property. The contract contained contingencies relating to title, and Seller was unable to satisfy the title contingencies by the original time of closing or by the expiration of two subsequent extensions. Thus, as of June 1, 2004, the contract was not in effect.
The parties, however, later extended the contract again (presumably this was effectively a new contract), with an expiration of October 16. Seller still was unable to satisfy the title problem.
Sometime in mid-October (the record apparently is vague on the point), Seller entered into an oral agreement with a lumber harvester to harvest trees on the property. On November 19, Seller again contacted Buyer to ask that the contract be renewed (effectively another thirty day contract. Buyer executed the renewal on November 22, and Seller executed it on November 25. Earnest money was paid on December 8 and the parties closed on December 10.
A few weeks later, Buyer learned for the first time that the trees that Buyer had thought valuable to his home development purposes had been removed from the property. Seller testified that the trees probably were removed prior to the renewal agreement, but no specific date was provided.
Buyer brought suit for fraud, breach of contract, waste and conversion. The trial court granted summary judgment on all counts and Buyer appealed.
On the breach of contract claim, Buyer claimed that the trial court should have found that the trees were cut while the property was under contract. According to the court, the issue was moot because even if the cutting of the trees did breach the purchase contract, Buyer lost any claim for breach of contract under the concept of merger by deed.
The court acknowledged that there is an exception to the merger by deed doctrine in Ohio when the party affected by the merger can show fraud by the other side. But the court held that there can be no fraud in a land contract as to matters that are readily observable by inspection as, of course, was the case here. (There is some question as to whether there would be fraud if the trees were cut while the property was under the extension contract anyway, since by then the Buyer already had agreed to buy and any claim would have to be based on something other than fraud.) No one claimed that Seller ever represented to Buyer that the trees were still on the property.
On the waste claim, the Ohio court ruled,, that waste is not a recognized doctrine in Ohio. [Oh? Thats interesting. In all contexts - including fiduciary relationships, life estates, mortgages, leases, etc. etc.]
As to the conversion claim, the court held that, even assuming that the logs were cut while the contract was in effect, the Seller was still in title, and therefore there was no conversion of Buyers property.
Comment 1: The lawyer who sent this case to the editor clearly felt it was an improper result. A frequent critic of his own states judicial decisions, he commented:Only in Ohio. The editor disagrees. Many other states would have reached the same outcome, but likely on different grounds.
Comment 2: The contract never mentioned the trees. So it certainly is quite arguable that the Seller did not know that the Buyer valued them. If they were cut prior to the last extension agreement, then the editor would agree, absent more facts, that the Seller had no duty to disclose that they had already been cut. Buyer should have reinspected the premises. Do other readers disagree?
Comment 3: But what if they hadnt already been cut as of the time of the extension (new contract)? The court said that there is no doctrine of waste in Ohio. On what grounds would be Buyer have a claim?
Well, what about equitable conversion? But court notes that an Ohio statute, plus common law conversion, would give a remedy against one who cuts trees on the land of another. But it says that the Seller had title to the property, and thats the end of the argument. Is it? Under the doctrine of equitable conversion, recognized in many jurisdictions, the buyer becomes effectively the owner of the property once the contract becomes subject to specific performance.
Did equitable conversion occur here? Hard to say. But clearly summary judgment was inappropriate if there were alleged facts that Buyer was denied the opportunity to prove that would have supported such a claim.
Comment 4: But the court found that merger by deed cut off the Buyers right to complain. The editor believes that, although some states might apply merger by deed to these facts, such application would be wrong. The doctrine ought to apply only when the party accepting the deed has actual knowledge that buyer is not getting what he contracted to get. Further, in many jurisdictions, the concept is limited to title defects. Otherwise, of course, a court could find a knowing waiver, and this is essentially the same as calling the situation a merger, but here there is no evidence that the buyer knew that the trees were gone.
In any event, Buyer would have a conversion claim notwithstanding merger because the claim arose when the trees were cut.
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