[Cite as JNT Properties, L.L.C. v. Keybank Natl. Assn., 2011-Ohio-3260.]


          Court of Appeals of Ohio
                                 EIGHTH APPELLATE DISTRICT
                                    COUNTY OF CUYAHOGA


                                JOURNAL ENTRY AND OPINION
                                         No. 95822




                                  JNT PROPERTIES, LLC
                                                   PLAINTIFF-APPELLEE

                                                     vs.


                   KEYBANK, NATIONAL ASSOCIATION

                                                   DEFENDANT-APPELLANT




                                     JUDGMENT:
                               REVERSED AND REMANDED


                                       Civil Appeal from the
                              Cuyahoga County Court of Common Pleas
                                       Case No. CV-681873

        BEFORE: Kilbane, A.J., Stewart, J., and Boyle, J.
       RELEASED AND JOURNALIZED: June 30, 2011

ATTORNEYS FOR APPELLANT

Steven M. Weiss
55 Public Square, Suite 1009
Cleveland, Ohio 44113

Mark R. Koberna
Mark E. Owens
Rick D. Sonkin
Sonkin & Koberna, Co., L.P.A.
3401 Enterprise Parkway, Suite 400
Cleveland, Ohio 44122

Ingrid L. Moll
William H. Narwold
Motley Rice L.L.C.
One Corporate Center
20 Church Street, 17th Floor
Hartford, CT 06103

ATTORNEYS FOR APPELLEE

Hugh M. Stanley, Jr.
Benjamin C. Sasse
Thomas R. Simmons
Tucker, Ellis & West
1150 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44115
MARY EILEEN KILBANE, A.J.:

      {¶ 1} Plaintiff-appellant, JNT Properties, LLC (JNT), appeals the trial

court’s decision granting summary judgment in favor of defendant-appellee,

KeyBank National Association (KeyBank). Finding merit to the appeal, we

reverse and remand.

      {¶ 2} In January 2009, JNT filed a class action against KeyBank.        In

its first amended class action complaint, JNT alleges that it obtained a loan

from KeyBank in the principal amount of $375,350, and pursuant to the

promissory note (“Note”), JNT agreed to repay the principal together with

interest at the rate of 8.93 percent per annum. JNT alleges that KeyBank

has breached the promissory note between JNT and other class members

when KeyBank assessed interest based on a calculation known as the

“365/360 method.”1



      1InRepublic of France v. Amoco Transport Co. (C.A.7, 1993), 4 F.3d 997, the
Seventh Circuit Court of Appeals summarized the 360/365 method as follows:

      “Because the Gregorian calendar makes it impossible to have
      both equal daily interest charges and equal monthly interest
      charges throughout the year, banks have developed three
      methods of computing interest. These are the 365/365 method
      (exact day interest), the 360/360 method (ordinary interest) and
      the 365/360 method (bank interest). * * * [Under the 365/360
      method,] the bank first divides the annual interest rate by 360
      to produce a daily interest factor. It then applies that factor
{¶ 3} The Note provides in pertinent part:

                       “PROMISSORY NOTE
                          (Variable Rate)

Principal Amount: $370,350.00      Initial Interest Rate: 8.93%

PAYMENT. * * *[JNT] will pay this loan in accordance
with the following payment schedule:

One interest only payment on July 1, 2007, with interest
calculated on the unpaid principal balance at an interest
rate of 8.93%; followed by consecutive monthly principal
and interest payments in the initial amount $3,315.48 each,
beginning August 1, 2007, with interest calculated on the
unpaid principal balance at an initial interest rate of
8.93%; and 1 final principal and interest payment in the
estimated amount of $3,315.48. * * * The interest rate will
be adjusted on July 1, 2012, July 1, 2017 and July 1, 2022 to
reflect the current Index defined below plus 325 basis
points.    The monthly payment [JNT] shall pay to
[KeyBank] will be adjusted on July 1, 2012, July 1, 2017
and July 1, 2022, to a monthly payment of principal and
interest, based on the above-referenced adjusted interest
rate[.]

The annual interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding.

VARIABLE INTEREST RATE. The interest rate on this
Note is subject to change on July 1, 2012, July 1, 2017 and

to each of the 365 or 366 days in the year, even though the
borrower has paid the nominal ‘annual’ interest due after 360
days. Thus this method generates five or six extra days of
interest for the bank each year, increasing the effective
interest rate for the calendar year by 1/72.”      (Citations
omitted.)
      July 1, 2022 based on changes in an Index which is the
      Federal Home Loan Bank of Seattle Five (5) Year
      Intermediate/Long Term Advances Fixed Rate published
      daily by the Federal Home Loan Bank of Seattle[.] * * *
      The Index is currently at 5.68% per annum. The initial
      interest rate to be applied to the unpaid principal balance
      of this Note will be at a rate of 325 basis points (3.25%)
      over the index, resulting in an initial rate of 8.93% per
      annum.”

      {¶ 4} JNT further alleges that KeyBank’s improper use of the 365/360

method created an interest rate of 9.05 percent per annum, rather than the

8.93 percent per annum listed on the Note. JNT’s complaint raises a claim

for breach of contract, seeks class treatment, requests declaratory and

injunctive relief requiring KeyBank to cease using the 365/360 method of

computing annual interest, and prays for damages, costs, attorney’s fees, and

other relief.

      {¶ 5} In response to JNT’s complaint, KeyBank filed a motion to

dismiss, which JNT opposed. The trial court denied KeyBank’s motion and

KeyBank appealed to this court. This court dismissed the appeal for lack of

a final appealable order in December 2009. See JNT Properties, LLC v. Key

Bank Natl. Assoc., Cuyahoga App. No. 94045.

      {¶ 6} On remand, KeyBank answered JNT’s complaint and asserted a

counterclaim for reformation. Following discovery focused on the intentions

of the parties to the Note, KeyBank moved for summary judgment. KeyBank

argued the only reasonable interpretation of the interest calculation provision
is that the interest payments would be calculated from the annual interest

rate (8.93%) disclosed in the Note using the 365/360 method. JNT opposed,

arguing that because the “initial rate of 8.93% per annum” is unambiguous,

KeyBank cannot use the unintelligible 365/360 formula in the Note to charge

JNT more than 8.93 percent interest per year.2

     {¶ 7} In September 2010, the trial court granted KeyBank’s motion for

summary judgment, finding that:

     “[T]he contract [Note] is clear that [KeyBank] intended to
     use the 365/360 method to calculate interest. There is no
     evidence that [JNT] either didn’t consent to the 365/360
     method or intended the use of some other method.

     The fact that the words used to describe the formula for
     calculating the interest rate (‘that is, by applying the ratio
     of the annual interest rate over a year of 360 days,
     multiplied by the outstanding principal balance,
     multiplied by the actual number of days the principal
     balance is outstanding’) do not correctly describe the
     365/360 calculation does not change the parties’ agreement
     that ‘the annual interest rate for this note is computed on
     a 365/360 basis.’

     As JNT notes at Page 6 of its opposition brief, ‘when a
     single portion of a lengthy contract is unintelligible, but
     yet severable from the remainder, a court may strike that
     portion itself without affecting the enforceability of the
     remainder.’ In this case the unintelligible verbal formula
     may be ignored, but the reference to the 365/360 method
     [for computing interest] – accepted shorthand for a
     commonly used formula – [will be] retained and enforced.”



     2Both   parties agree that the term “per annum” means “per year.”
       {¶ 8} It is from this order that JNT appeals, raising one assignment of

error, in which it argues that the trial court erred when it granted summary

judgment in favor of KeyBank.

                                        Standard of Review

       {¶ 9} Appellate review of summary judgment is de novo.           Grafton v. Ohio Edison

Co., 77 Ohio St.3d 102, 105, 1996-Ohio-336, 671 N.E.2d 241; Zemcik v. LaPine Truck Sales

& Equip. Co. (1998), 124 Ohio App.3d 581, 585, 706 N.E.2d 860.         The Ohio Supreme Court

set forth the appropriate test in Zivich v. Mentor Soccer Club, 82 Ohio St.3d 367, 369-370,

1998-Ohio-389, 696 N.E.2d 201, as follows:

       “Pursuant to Civ.R. 56, summary judgment is appropriate when (1) there is no
       genuine issue of material fact, (2) the moving party is entitled to judgment as
       a matter of law, and (3) reasonable minds can come to but one conclusion and
       that conclusion is adverse to the nonmoving party, said party being entitled to
       have the evidence construed most strongly in his favor. Horton v. Harwick
       Chem. Corp. (1995), 73 Ohio St.3d 679, 653 N.E.2d 1196, paragraph three of
       the syllabus. The party moving for summary judgment bears the burden of
       showing that there is no genuine issue of material fact and that it is entitled to
       judgment as a matter of law. Dresher v. Burt (1996), 75 Ohio St.3d 280,
       292-293, 662 N.E.2d 264, 273-274.”

       {¶ 10} Once the moving party satisfies its burden, the nonmoving party “may not rest

upon the mere allegations or denials of the party’s pleadings, but the party’s response, by

affidavit or as otherwise provided in this rule, must set forth specific facts showing that there

is a genuine issue for trial.”   Civ.R. 56(E); Mootispaw v. Eckstein, 76 Ohio St.3d 383, 385,
1996-Ohio-389, 667 N.E.2d 1197.   Doubts must be resolved in favor of the nonmoving party.

 Murphy v. Reynoldsburg, 65 Ohio St.3d 356, 358-359, 1992-Ohio-95, 604 N.E.2d 138.

                                       The Contract

      {¶ 11} “A contract is generally defined as a promise, or a set of promises,

actionable upon breach. Essential elements of a contract include an offer,

acceptance, contractual capacity, consideration (the bargained for legal

benefit and/or detriment), a manifestation of mutual assent and legality of

object and of consideration.’         Perlmuter Printing Co. v. Strome, Inc.

(N.D.Ohio 1976), 436 F.Supp. 409, 414. A meeting of the minds as to the

essential terms of the contract is a requirement to enforcing the contract.

Episcopal Retirement Homes, Inc. v. Ohio Dept. of Indus. Relations (1991), 61

Ohio St.3d 366, 369, 575 N.E.2d 134.” Kostelnik v. Helper, 96 Ohio St.3d 1,

2002-Ohio-2985, 770 N.E.2d 58, ¶16.

      {¶ 12} When confronted with issues of contractual interpretation, the

role of the court is to give effect to the intent of the parties to the agreement.

Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, ¶11.

As the Ohio Supreme Court in Westfield stated:

      “We examine the insurance contract as a whole and
      presume that the intent of the parties is reflected in the
      language used in the policy. We look to the plain and
      ordinary meaning of the language used in the policy
      unless another meaning is clearly apparent from the
      contents of the policy. 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. As a matter
      of law, a contract is unambiguous if it can be given a
      definite legal meaning.

      On the other hand, where a contract is ambiguous, a court
      may consider extrinsic evidence to ascertain the parties’
      intent. A court, however, is not permitted to alter a
      lawful contract by imputing an intent contrary to that
      expressed by the parties.

      It is generally the role of the finder of fact to resolve
      ambiguity.     However, where the written contract is
      standardized and between parties of unequal bargaining
      power, an ambiguity in the writing will be interpreted
      strictly against the drafter and in favor of the nondrafting
      party.”3 (Citations omitted.) Id. at ¶11-13.

      {¶ 13} In the instant case, JNT argues the parties intended that the

interest on the loan would be 8.9 percent per year and KeyBank breached this

agreement by using the 365/360 method and charging 9.05 percent interest

per year instead. JNT relies primarily on Ely Ents., Inc. v. FirstMerit Bank,

N.A., Cuyahoga App. No. 93345, 2010-Ohio-80, appeal not allowed, 125 Ohio

St.3d 1415, 2010-Ohio-1893, 925 N.E.2d 1003, to support its position that the

plain language of the Note requires KeyBank to charge interest at an initial

rate of 8.93 percent per year.




      3“A  contract is ambiguous if its terms cannot be clearly determined from a
reading of the entire contract or if its terms are susceptible to more than one
reasonable interpretation.”    Militiev v. McGee, Cuyahoga App. No. 94779,
2010-Ohio-6481, ¶30, citing United States Fidelity & Guar. Co. v. St. Elizabeth Med.
Ctr. (1998), 129 Ohio App.3d 45, 716 N.E.2d 1201.
      {¶ 14} In Ely, a commercial borrower (Ely) brought a breach of contract

class action against FirstMerit, alleging that “FirstMerit breached the

promissory note between the parties when it assessed interest based on a

calculation known as the ‘365/360’ method, which created an effective interest

rate of 11.153% per annum.” Id. at ¶2. FirstMerit filed a motion to dismiss,

which the trial court granted.

      {¶ 15} Ely appealed, arguing the 365/360 interest rate computation

method used by FirstMerit imposed a per annum that was greater than the

11.000% provided in the promissory note.       FirstMerit argued the parties

agreed to alter the meaning of the term “per annum” by agreeing to the

365/360 calculation method. This court found that the “term ‘per annum’ is

ordinarily defined as ‘by the year’” and “[t]he computation of interest

provision [in the promissory note] did not indicate an actual calculated

interest rate.   The calculation [used by FirstMerit contained] the ‘annual

interest rate’ as part of the equation, and [did] not change the stated interest

rate on the note. * * * [T]he calculation allegedly was applied to impose a

greater interest rate than the stated rate of 11.000% per annum.” Id. at ¶10

and 13. Therefore, we concluded that FirstMerit was not entitled to a Civ.R.

12(B)(6) dismissal because “to the extent the calculation and the monthly

payment amount [were] inconsistent with the more specific terms of principal

and stated interest rate, the promissory note is ambiguous.” Id. at ¶17.
      {¶ 16} In reaching our decision, this court relied in part on Hamilton v.

Ohio Sav. Bank, 70 Ohio St.3d 137, 1994-Ohio-526, 637 N.E.2d 887.                In

Hamilton, mortgagors challenged the mortgagee bank’s use of a 365/360

method for calculating interest.      The mortgagors sought to terminate the

bank’s alleged practice of overcharging interest. The Ohio Supreme Court

reviewed inconsistencies among the documents and determined that the

record was contradictory as to what was disclosed between the parties. The

court concluded there were genuine issues of material fact precluding

summary judgment. Id. at 140.4 We noted that “[a]lthough Hamilton dealt

with certain disclosure issues not presented herein, the case did contain

allegations of overcharging interest through the use of a 365/360 method of

calculating interest, and the action was allowed to proceed as a class action.”

Ely at ¶16.

      {¶ 17} The matter before us presents a situation similar to Ely and

Hamilton. Here, the interest computation provision used by KeyBank does

not indicate an actual stated interest rate. Rather, the formula provides that

“[t]he annual interest rate * * * is computed * * * by applying the ratio of the

annual interest rate over a year of 360 days, multiplied by the outstanding


      4 Ina later appeal, the Ohio Supreme Court held that the action was to
proceed as a class action and that the entire class be certified with respect to all
claims. Hamilton v. Ohio Sav. Bank, 82 Ohio St.3d 67, 1998-Ohio-365, 694 N.E.2d
442.
principal balance, multiplied by the actual number of days the principal

balance is outstanding.”

       {¶ 18} KeyBank argues the “initial interest rate” of 8.93 percent was to

be used as a starting point to calculate a daily interest factor by dividing 8.93

by 360, which would then be multiplied by the number of days in the year

that the principal is outstanding (366 days in leap years and 365 days in all

other years). KeyBank further argues the parties intended that the yearly

interest rate would be computed on a 365/360 basis. To support its argument,

KeyBank relies on correspondence that indicated the initial interest rate was set by adding 3.25

percent to the Federal Home Loan Bank of Seattle Five Year Intermediate/Long

Term Advances Fixed Rate and an affidavit of a senior vice president who asserted that

KeyBank’s intent was that the 365/360 method would be applied to the initial rate 8.93 percent

to calculate interest, which would “result[ ] in a slightly higher yield to KeyBank” than if

another method was used.  5




       {¶ 19} However,“where         the written contract is standardized and

between parties of unequal bargaining power, an ambiguity in the writing

will be interpreted strictly against the drafter and in favor of the nondrafting



       5 KeyBank provided this court with Kreisler & Kreisler, LLC v. Natl. City
Bank (E.D. Mo. 2011), Case No. 4:10CV956 CDP and RBS Citizens, Natl. Assn. v.
RTG-Oak Lawn, LLC (C.A.1, 2011), 407 Ill.App.3d 183, 943 N.E.2d 198, as
supplemental authority to support its position. We find these cases easily
distinguishable. Both cases are based on Illinois law and the interest provision at
party.”   Westfield at ¶13.      In its decision denying KeyBank’s motion to

dismiss, the trial court described the formula as unintelligible, stating “how

can a calculation that is supposed to result in an ‘annual interest rate’ start

with the ‘annual interest rate’ if it isn’t both divided and multiplied by the

same number?” We agree.

      {¶ 20} Here, the calculation used by KeyBank in the instant case

imposes a greater interest rate than the stated interest rate of 8.93 percent

per annum. When the trial court granted summary judgment in favor of

KeyBank, it severed the “unintelligible verbal formula,” but retained

KeyBank’s reference to the 365/360 method.            The court rewrote the

calculation to state that “[t]he annual interest rate for this Note is computed

on a 365/360 basis[.]” The court further stated that this method is “accepted

shorthand for a commonly used formula,” but never defined the formula.

      {¶ 21} “Summary judgment may not be granted when reasonable minds

could come to differing conclusions.” Hamilton at 140. Thus, just as in Ely, we

find that the 365/360 formula used to calculate interest in the instant case

cannot be read “as clearly evidencing an intent of the parties to alter the

ordinary meaning of the term ‘per annum,’ or as creating an ‘annual interest

rate’ other than the stated rate” of 8.93 percent. Id. at ¶11.



issue in RBS is different than the instant case.
       {¶ 22} Since we cannot conclude that there is no genuine issue of material fact, the

trial court’s decision granting summary judgment in favor of KeyBank is

reversed.

       {¶ 23} The sole assignment of error is sustained.

       {¶ 24} Accordingly, judgment is reversed and the case is remanded for

further proceedings consistent with this opinion.

       It is ordered that appellant recover from appellee costs herein taxed.

       The court finds there were reasonable grounds for this appeal.

       It is ordered that a special mandate be sent to said 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.




MARY EILEEN KILBANE, ADMINISTRATIVE JUDGE

MARY J. BOYLE, J., CONCURS;
MELODY J. STEWART, J., CONCURS IN JUDGMENT ONLY
