IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO

IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO HUNTINGTON NATIONAL BANK ) CASE NO. CV 13 801976 ) ) JUDGE JOHN P. O DONNELL Plaintiff, ) ) vs. ) ) HINDA T. APPLE ) JOURNAL ENTRY GRANTING ) HUNTINGTON S MOTION FOR Defendant. ) SUMMARY JUDGMENT Plaintiff Huntington National Bank sued defendant Hinda T. Apple on a promissory note on February 22, 2013. Huntington has now filed a motion for summary judgment. Apple opposed the motion and Huntington replied to Apple s brief in opposition. This entry follows. On October 12, 2007, Apple signed and delivered to Huntington a promissory note in the principal amount of $600,000. Among other terms, the note provides: PROMISE TO PAY. I ( Borrower ) jointly and severally promise to pay to the Huntington National Bank ( Lender ), or order, in lawful money of the United States of America, on demand, the principal amount of Six Hundred Thousand and 00/100 Dollars ($600,000) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. PAYMENT. I will pay this loan in full immediately upon lender s demand. The note replaced a $400,000 note delivered on June 22, 2007, which, in turn, apparently replaced a loan made on November 17, 2006. 1 Apple also agreed to make regular monthly payments. The note goes on to define the failure to make any payment when due as an event of default and gives Huntington the right to declare all unpaid principal and interest due if Apple defaults. 1 Plaintiff s reply brief, exhibit A, consumer pledge agreement. This is dated November 17, 2006, and was apparently executed in connection with the original loan. 1

On January 29, 2013, Huntington sent a letter to Apple demanding full payment. Apple did not pay and, as of June 13, 2013, the amount of unpaid principal was $562,696.01 and interest had accumulated in the amount of $206,410.60. Interest continues to accrue at an annual rate of 8½%. Apple admits that she signed the note for herself and, pursuant to a 2001 power of attorney, for her husband, Irwin J. Apple. Yet Apple makes several arguments opposing summary judgment. First, she claims Huntington is estopped by its own conduct from enforcing the note. Specifically, she asserts that Huntington employees assured her that, if she defaulted on the note, Huntington would never seek recourse from any source other than stock in the Ohio Savings Financial Corporation that she pledged as collateral. Second, she argues that Huntington itself is in breach of the note by failing to use reasonable care in preserving the collateral. 2 Third, Apple says that Huntington s oral agreement not to pursue her for collection beyond the security waived its rights to collect, in the event of default, from any other asset. Last, the defendant argues that the loan documents contain material misstatements that preclude their enforcement. As an alternative to her position that there are genuine issues of material fact about whether she is even liable on the note, Apple argues that Huntington is still in possession of her collateral and there is a genuine question of material fact about the amount owed because Huntington s calculation of damages, as attested to by the affidavit of Huntington vice president Andy Kelly in support of the summary judgment motion, does not account for anything the plaintiff received for the sale of her collateral, the Ohio Savings stock. These arguments will be addressed in the order they were presented by the defendant. 2 Brief in opposition, page 7. 2

A promissory note is defined as a written promise to pay a certain sum of money at a future time, unconditionally. Burke v. State, 104 Ohio St. 220, 222 (1922). Ohio courts treat promissory notes as contracts, meaning that the precepts of contract law govern their interpretation. Wells Fargo Bank N.A. v. Freed, 3 rd Dist. No. 5-12-01, 2012-Ohio-5941, 37. One of those governing principles is the parol evidence rule. The parol evidence rule is a principle of substantive law providing that a writing intended by the parties to be a final embodiment of their agreement cannot be modified by evidence of earlier or contemporaneous agreements that might add to, vary, or contradict the writing. Bellman v. Am. Internatl. Group, 113 Ohio St.3d 323, 2007-Ohio-2071, 7. The rule operates to prevent a party from introducing extrinsic evidence of negotiations that occurred before or while the agreement was being reduced to its final written form because it assumes that the formal writing reflects the parties' minds at a point of maximum resolution and, hence, that duties and restrictions that do not appear in the written document were not intended by the parties to survive. Id. A contract is integrated, and the rule applies, when there is a single and final memorial of the understanding of the parties. Galmish v. Cicchini, 90 Ohio St. 3d 22, 27 (2000). The contract between Apple and Huntington is integrated. It identifies the parties, the amount of the loan, the interest rate, payment terms, and is explicit that the principal amount is payable on demand. The parol evidence rule is therefore applicable to exclude from consideration Apple s testimony by affidavit testimony that Huntington s employees George Tamas and Roger Godin advised me that the bank s only recourse in the event of default would be the pledge of the 100 shares of Ohio Savings Financial Corporation stock. The bank officers assured me that the bank would not seek payment from me and my husband in the event of a default. I would not have agreed to execute the loan documents unless these representations had been made. 3 3 Br. in opp., exhibit 1, Apple affidavit, 9. 3

To allow that testimony to create a genuine issue of material fact would be to do exactly what the parol evidence rule is designed to prohibit. An oral agreement cannot be enforced in preference to a signed writing which pertains to exactly the same subject matter, yet has different terms. Marion Production Credit Assn. v. Cochran, 40 Ohio St. 3d 265 (1988), syllabus three. Nor can Apple use the fraudulent inducement exception to avoid the application of the parol evidence rule because she claims only to have received an oral promise that is merely inconsistent with the terms of the writing instead of a promise that is consistent with, or made independently of, the written agreement. Since Apple s testimony about oral terms that are inconsistent with the contract s written terms is not admissible, her affidavit cannot be used to create a genuine issue of material fact about the note s terms and whether she is in default. Her next argument is that Huntington breached the parties contract before she did because the bank failed to monitor the stock [pledged as collateral], to advise Mrs. Apple regarding the value of the stock and whether the stock had increased or decreased in value, and/or did not recommend the sale of the volatile investment. 4 Apple and her husband originally pledged the stock as security for money borrowed on November 17, 2006. Huntington s and Apple s obligations with respect to the collateral are contained in a consumer pledge agreement of that same date. 5 By that separate contract, Apple agreed that Huntington, without first obtaining her consent, could exchange or release the stock. She also agreed that Huntington could hold the stock until the loan was fully paid and that she would not sell or otherwise dispose of the shares. Finally, the agreement includes the following limitations on Huntington s obligations: 4 Br. in opp, p. 6 to 7. 5 Reply brief, exhibit A, consumer pledge agreement. 4

Lender will use ordinary reasonable care in the physical preservation and custody of the Property in Lender s possession, but will have no other obligation to protect the Property or its value. Lender will not be responsible for (A) collecting or protecting any income from the Property; (B) preserving rights against parties to the Property or against third persons; (C) ascertaining any maturities, calls, conversions, exchanges, offers, tenders, or similar matters relating to any of the Property; or (D) informing me about any of these matters, whether or not Lender has or is deemed to have knowledge of such matters. Except as provided above, Lender will have no responsibility or liability whatsoever to me or to anyone else for any deterioration or decrease in the value of the Property. (Emphasis in italics added.) Apple is unable to point to any contractual terms that impose a duty on Huntington to monitor the stock s price and advise her whether to hold or sell the shares. As a result, Huntington s failure to do so cannot be considered a breach of contract preventing its recovery for Apple s breach. To the extent that Huntington has any duty outside the contract to preserve the value of the stock and assuming 1) such a duty cannot be waived by contract and 2) it was owed to Apple as a principal borrower 6 Apple has a separate cause of action that she waived by not asserting it as a counterclaim here. Moreover, Apple s answer to the complaint does not include the affirmative defense of impairment of collateral, so it too is waived. Apple s second argument is unsupported by the law and the evidence. The defendant s next rationale in opposition to summary judgment is essentially the same as her claim that there is a genuine issue of material fact about whether the contract included a term that Huntington could only recover from the pledged collateral. Here, she refers back to the alleged promises not to collect from her other than by executing against the collateral and claims that Huntington understood that it was waiving its rights [to collect other than through the stock] by making representations to that effect to Apple. 7 But whether she characterizes the 6 The defense of impairment of collateral is ordinarily extended only to a surety, not a principal borrower. See Huron Cty. Banking Co. v. Knallay, 22 Ohio App. 3d 110 (6 th Dist. 1984). While on the subject of defenses, it is noteworthy that Apple s brief in opposition to summary judgment alludes to her age and her husband s infirmity as reasons the note can t be enforced, yet she never asserted the affirmative defense of duress provided by R.C. 1303.35(A)(1)(b). 7 Br. in opp, p. 9. 5

oral promise not to seek recourse from anything other than the collateral as a contract term or a waiver of a contract term, evidence of the inconsistent oral promise is excluded by the parol evidence rule and does not operate to create a genuine issue of material fact. For her last reason why summary judgment on the question of her liability for repayment is not appropriate, Apple says that the promissory note uses Huntington s prime commercial interest rates as the basis for the interest rate even though her loan was a consumer loan. Apple, however, does not support this argument with reference to any statutory or case law, presumably because there is no prohibition against using a commercial interest rate to calculate the interest rate for a consumer loan. Finally, Apple contends that even if she is liable for repayment there is a genuine issue of material fact as to the amount she owes because Huntington has not accounted for the proceeds it received as a result of its liquidation, sale or transfer of the Ohio Savings Financial Corporation stock. 8 The only evidence in support of this argument is at paragraph 15 of Apple s affidavit, where she says that Huntington has never accounted to me for any proceeds received as a result of its possession, liquidation, sale or transfer of the stock. Missing from the affidavit, and the record in this case, is any evidence that Huntington sold, transferred or liquidated the stock. Indeed, the opposite is true: Huntington has not liquidated the collateral. 9 As a result, Apple s affidavit does not create a genuine issue of material fact and leaves as the only evidence of the amount due on the note the uncontradicted affidavit of Kelly attached as exhibit B to the motion for summary judgment. Because there are no genuine issues of material fact about 1) Apple s obligation to repay Huntington under the terms of the promissory note and 2) the amount of principal and interest 8 Br. in opp, p. 11. 9 Reply br., exhibit B, affidavit of Andy Kelly, 2. 6

due, Huntington s June 26, 2013, motion for summary judgment is granted and judgment is entered in favor of the plaintiff Huntington National Bank and against defendant Hinda T. Apple in the principal amount of $562,696.01 with interest at a rate of 8½% per annum beginning June 13, 2013, plus interest accrued to that date in the amount of $206,410.60, plus court costs. IT IS SO ORDERED: Judge John P. O Donnell Date following: SERVICE A copy of this journal entry was sent by email this day of August, 2013, to the David D. Black, Esq. dblack@cavitch.com Daniel C. Wolters, Esq. dwolters@cavitch.com Attorneys for the plaintiff Steven B. Potter, Esq. spotter@dhplaw.com Benjamin D. Carnahan, Esq. bcarnahan@dhplaw.com Joseph M. Saponaro, Esq. jsaponaro@dhplaw.com Attorneys for the defendant Judge John P. O Donnell 7