                NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 07a0140n.06
                           Filed: February 20, 2007

                                            No. 06-3688

                           UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT


KENA PROPERTIES, LLC, LESLIE FOSTER, and                   )
JAMES FOSTER,                                              )
                                                           )        ON APPEAL FROM THE
       Plaintiffs-Appellants,                              )        UNITED STATES DISTRICT
                                                           )        COURT     FOR     THE
               v.                                          )        SOUTHERN DISTRICT OF
                                                           )        OHIO
MERCHANTS BANK & TRUST,                                    )
                                                           )
      Defendant-Appellee.                                  )
__________________________________________                 )



BEFORE: GUY, SUHRHEINRICH, and GRIFFIN, Circuit Judges.

       PER CURIAM.

       Plaintiffs Kena Properties, LLC (“Kena”), Leslie Foster, and James Foster appeal the district

court’s order of summary judgment in favor of defendant Merchants Bank & Trust (“Merchants”)

on their claims of breach of contract and promissory estoppel. Plaintiffs argue that the district court

erred in concluding that no genuine issue of material fact existed with regard to Merchants’

cancellation of two commitment letters that it sent to Kena concerning the refinancing of properties

owned by Kena and the Fosters. Plaintiffs assert further that the district court erred in granting

Merchants’ motion for summary judgment on plaintiffs’ claim of promissory estoppel with respect

to Merchants’ decision to withdraw an alleged oral commitment to assist in the financing of a real
No. 06-3688
Kena Properties, LLC et al. v. Merchants Bank & Trust


estate venture known as the Alpine Terrace project. For the reasons set forth below, we affirm the

district court’s entry of summary judgment in favor of defendant Merchants.

                                                  I.

       Kena is a limited liability company owned by plaintiffs Leslie and James Foster. In 2003,

Leslie Foster and Merchants engaged in negotiations to refinance and renovate properties owned by

Kena. The negotiations resulted in Merchants issuing two commitment letters to plaintiffs. The first

letter, issued July 14, 2003, concerned the refinancing of seven investment properties located in

Cincinnati, Ohio. The second letter, issued August 25, 2003, approved plaintiffs’ request for a

$250,000 revolving line of credit to renovate the Fosters’ home in Lexington, Kentucky. Each letter

contained the following statement: “This commitment may be deemed null and void if there are any

material adverse conditions with respect to the Borrower that occur before the closing.”

       After Merchants issued these letters to plaintiffs, Leslie Foster discussed with Merchants the

financing of a condominium development known as Alpine Terrace. Plaintiffs allege that Foster

received a phone call from Merchants’ Assistant Vice President Diana Barhorst during which

Barhorst told Foster that Merchants would supply financing for the Alpine Terrace project. Plaintiffs

claim that, in reliance on Merchants’ alleged oral commitment to finance the Alpine Terrace project,

Leslie Foster entered into a $110,000 contract to develop the project. The contract was signed on

September 22, 2003.

       On or about September 12, 2003, Merchants learned of a lawsuit that had been filed in the

United States District Court for the Southern District of Ohio, Fletcher v. Minger et al., No. 03-616,


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in which Kena was named as a defendant. The Fletcher plaintiffs alleged that numerous defendants,

including Kena, engaged in a complex mortgage fraud to sell overpriced homes to uneducated

buyers, a practice commonly referred to as “flipping.” The complaint asserted specifically that Kena

acted as a “property speculator,” where it “masqueraded as [a] legitimate property owner[]” and

“acquired depressed real estate and arranged to sell the properties at vastly inflated prices to innocent

buyers . . . .”

        In response to the Fletcher complaint, Merchants’ President Don Patterson called Leslie

Foster to discuss the lawsuit. After initially agreeing to come in to discuss the lawsuit with

Patterson, Foster later changed her mind. Instead, Foster, her attorney William Sulau, Patterson, and

Merchants’ attorney Arthur Weber engaged in a conference call on September 15, 2003, during

which Weber informed Foster and Sulau that Merchants would “not be moving forward on anything

with Kena Properties until [the Fletcher case] is resolved.” After further negotiations between

plaintiffs and Merchants failed, Merchants announced that it had withdrawn its offer to finance

Kena’s properties.

        Plaintiffs filed a complaint on August 27, 2004, in the Hamilton County Court of Common

Pleas, asserting claims of breach of contract and promissory estoppel against Merchants. Merchants

timely removed this case to federal court on September 29, 2004. On March 1, 2006, Merchants

moved for summary judgment. The district court granted Merchants’ motion on April 24, 2006.

This timely appeal followed.

                                                   II.


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        We review de novo the district court’s entry of summary judgment in favor of Merchants.

Brainard v. Am. Skandia Life Assur. Corp., 432 F.3d 655, 660 (6th Cir. 2005); see also Parrett v.

American Ship Bldg. Co., 990 F.2d 854, 858 (6th Cir. 1993) (noting that under Ohio law, “[t]he

question of whether the language of a written agreement is ambiguous is one of law”). Summary

judgment is proper when there are no genuine issues of material fact in dispute and the moving party

is entitled to judgment as a matter of law. FED . R. CIV . P. 56(c). A genuine issue for trial exists only

when there is sufficient “evidence on which the jury could reasonably find for the plaintiff.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). “[T]o the extent that there is

disagreement about the facts . . . we must review the evidence in the light most favorable to the

Plaintiffs, taking all inferences in their favor.” Champion v. Outlook Nashville, 380 F.3d 893, 900

(6th Cir. 2004), cert. denied sub nom. Dickhaus v. Champion, 544 U.S. 975 (2005).

        With regard to their breach of contract claim against Merchants, plaintiffs first argue that the

district court erred in concluding that the commitment letters’ “any material adverse conditions”

clause was satisfied by the Fletcher complaint filed against Kena. The district court reasoned as

follows:

        The phrase “material adverse condition” is unambiguous. It means a meaningful or
        significant, negative or disadvantageous situation. In the context in which the phrase
        is used in the agreements in question, it means a significant disadvantageous situation
        arising in the life or existence of a borrower under the agreement. The parties may
        squabble over the degree of significance of the real estate flipping lawsuit, but
        Plaintiffs cannot seriously argue that the lawsuit was immaterial, given the virtual
        certainty that it would affect the financial position of Kena Properties, if only as a
        result of the expenditure of legal fees. The parties may also squabble over the degree
        of adverseness of the lawsuit, but Plaintiffs cannot seriously deny that its filing was
        an adverse condition. The Court can conceive of no interpretation of the phrase

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       “material adverse condition” that would not encompass the filing of the lawsuit
       naming Kena Properties as a defendant after the agreements in question were
       executed. Because the agreements include the word “any” before “material adverse
       condition,” Defendant was permitted to nullify the agreements whenever a material
       adverse condition of any sort arose. Its doing so did not amount to a breach of the
       agreements embodied in the commitment letters.

We agree with the district court, and affirm its order of summary judgment with respect to plaintiffs’

breach of contract claim against Merchants.

       Plaintiffs contend that, because the term “material adverse condition” is not defined in the

commitment letters, the phrase is ambiguous and a genuine issue of material fact exists as to its

meaning. We disagree. Under Ohio law, “[t]he fact that the parties fail to specifically define a term

within the contract does not make the term ambiguous.” State ex rel. Petro v. R.J. Reynolds Tobacco

Co., 820 N.E.2d 910, 915 (Ohio 2004) (citing Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm,

652 N.E.2d 684, 686 (Ohio 1995)). Rather, “common, undefined words appearing in a written

instrument ‘will be given their ordinary meaning unless manifest absurdity results, or some other

meaning is clearly evidenced from the face or overall contents of the instrument.’” Id. (quoting

Alexander v. Buckeye Pipe Line Co., 374 N.E.2d 146, 150 (Ohio 1978)). We agree with the district

court that the phrase “material adverse condition” is unambiguous and that the phrase means, in this

context, “a significant disadvantageous situation arising in the life or existence of a borrower under

the agreement.”

       Plaintiffs next contend that a genuine issue of material fact exists as to whether the Fletcher

lawsuit constitutes a “material adverse condition” because Merchants failed to investigate the merits

of the lawsuit’s claims against Kena. This argument also fails. Neither commitment letter provides

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that Merchants owes a duty to investigate claims brought against Kena, and plaintiffs do not cite to

any case – Ohio or otherwise – which suggests that a lender owes a borrower such a duty. Moreover,

as the district court’s order suggests, the Fletcher lawsuit imposed a substantial burden on plaintiffs,

regardless of the lawsuit’s merits. Thus, whether the Fletcher lawsuit constituted a “material adverse

condition” did not depend solely on the merits of the lawsuit.

        Finally, plaintiffs argue that because the Fletcher lawsuit named Kena as a defendant – and

not James and Leslie Foster – there were no material adverse conditions against the Fosters. We

disagree for two reasons. First, although plaintiffs argue that the revolving credit line commitment

was made for the Fosters’ personal use, Kena – rather than the Fosters – is identified as the borrower

on that loan in a July 14, 2003, letter from Merchants to plaintiffs. Second, the Fosters were

guarantors of the loan and the sole members of Kena. Any material adverse condition that would

affect Kena would likewise affect the Fosters. For these reasons, and the reasons stated by the

district court, we affirm the order granting summary judgment against plaintiffs with respect to their

breach of contract claim against Merchants.

                                                  III.

        Plaintiffs next argue that the doctrine of promissory estoppel precluded Merchants from

withdrawing its alleged oral agreement to finance the Alpine Terrace project. Plaintiffs rely on the

following deposition testimony by Leslie Foster regarding an alleged oral promise made by Barhorst

to provide financing for the Alpine Terrace project:




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       Q:      As I understand from your testimony, please correct me if I’m wrong, Ms.
               Barhorst indicated to you after you had this long discussion with her that she
               had to run it by people at the bank?

       A:      Correct.

       Q:      How long was it before she got back to you?

       A:      Less than 24 hours.

       Q:      And again, what did she indicate to you when she got back to you?

       A:      Her exact comment was, hi, Leslie, this is Diana. I’ve got great news. The
               bank is going to fund this project for you. I said, great. She said, this is what
               I need.

               That’s when she asked me for the information on Temple to use as my
               collateral and when she asked me for the information from Jerry Tepe at
               Neyer. And that was on that Friday.

       Q:      And the Temple property is owned by Kena?

       A:      Kena Properties, correct.

       Q:      Was there any discussion of a written commitment letter or anything of that
               type?

       A:      Yes. She said she would be forwarding something to me in writing.

       In its April 24 order, the district court properly identified four elements that must be met for

a promissory estoppel claim to succeed in Ohio: (1) a clear and unambiguous promise; (2) reliance

upon the promise by the person to whom the promise is made; (3) the reliance is reasonable and

foreseeable; and (4) the party seeking to enforce the agreement is injured as a result of its reliance.

Weiper v. W.A. Hill & Assocs., 661 N.E.2d 796, 803 (Ohio Ct. App. 1995); see also Stonecreek

Props. v. Ravenna Sav. Bank, 2004 WL 1559725, at *7 (Ohio Ct. App. July 9, 2004) (unpublished)

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(same). With regard to the merits of plaintiffs’ promissory estoppel claim, the district court

reasoned:

       The parties agree that Defendant did not provide funding for the Alpine Terrace
       Project. Plaintiff Leslie Foster represents that Diana Barhorst told her that Defendant
       would provide financing for the Alpine Terrace Project in a telephone conversation
       during which she also told Ms. Foster that Defendant would need documentation
       concerning the property to be used as collateral and that a written commitment would
       follow. Plaintiffs have offered some evidence of detrimental reliance upon the
       statement. Under those circumstances, the Court is persuaded, as a matter of law,
       that to the extent that Ms. Barhorst’s statement was clear and unambiguous it
       indicated that Defendant intended to provide financing but that it would formally
       commit to doing so after receiving information from Kena Properties or Ms. Foster.
       The statement did not clearly and unambiguously indicate that Defendant would
       provide such financing regardless of Plaintiffs’ ability to document the sufficiency
       of the collateral. The statement was either ambiguous and, thus, not a basis for a
       promissory estoppel claim or unambiguous in a manner that would not permit a
       showing of justifiable reliance by Plaintiffs. Accordingly, the first element of the
       promissory estoppel claim is not satisfied.

       The Court is equally persuaded that Plaintiffs cannot satisfy the third element. The
       promise to provide financing was implicitly conditioned upon the receipt of, and
       Defendant's satisfaction with, information from Plaintiffs. Not having received
       written confirmation after having provided that information, Plaintiffs’ actions in
       reliance upon Ms. Barhorst’s oral statement were not, as a matter of law, reasonable
       or foreseeable. Accordingly, Defendant is entitled to summary judgment with respect
       to Plaintiffs’ promissory estoppel claim.

       Plaintiffs first contend that, because their argument is based on the doctrine of promissory

estoppel, the statute of frauds is inapplicable and does not bar their claim. Plaintiffs’ argument is

misplaced, however, as the district court did not rely on the statute of frauds to bar plaintiffs’

promissory estoppel claim regarding the Alpine Terrace project. Rather, the district court held that

Ohio’s statute of frauds, OHIO REV . CODE § 1335.02, bars any breach of contract claim concerning

Barhorst’s alleged oral promise to finance the Alpine Terrace project.

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        Plaintiffs next argue that the district court erred in granting Merchants’ motion for summary

judgment with respect to plaintiffs’ promissory estoppel claim because they offered evidence that

Leslie Foster relied on Barhorst’s alleged promise in entering into a written contract with Neyer

Properties for $110,000 to develop the Alpine Terrace project. The district court held that plaintiffs

could not satisfy the elements of promissory estoppel because Barhorst’s alleged statement was

ambiguous and because Foster’s reliance was unreasonable. We agree with the district court.

        Foster’s reliance on Barhorst’s alleged oral promise was unreasonable. First, Barhorst

informed Foster that she would need information concerning the property to be used as collateral and

that a written commitment letter would later be issued before the financing could be completed.

Because Foster had already applied for – and received – financing commitments from Merchants for

two other loans, it was unreasonable for Foster to expect that Merchants’ alleged commitment to

finance the Alpine Terrace project would be binding, regardless of its approval of Foster’s proposed

collateral.

        Moreover, Foster acted unreasonably in signing a contract with Neyer Properties for

$110,000 in reliance on Barhorst’s alleged oral promise. During the September 15 conference call

with Patterson and Merchants’ attorney, Foster was told that Merchants would “not be moving

forward on anything with Kena Properties until [the Fletcher case] is resolved.” Nonetheless, on

September 22, Foster signed the contract with Neyer to develop the Alpine Terrace project. Foster

contends that, although Merchants’ attorney Arthur Weber had informed her during the conference

call that Merchants would not be providing any financing until the Fletcher case had been resolved,


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Merchants allegedly agreed during that conference call to provide financing for the Alpine Terrace

project. Regardless of this claimed promise, Foster was put on notice that Merchants was concerned

about the impact of the Fletcher lawsuit and that it was at least disinclined to provide plaintiffs

financing until the case had been resolved. We conclude that Foster’s decision to sign a contract

with Neyer and assume further debt under such circumstances was unreasonable.

       Because plaintiffs cannot show that they reasonably relied on the alleged oral promise by

Barhorst to finance the Alpine Terrace project, they cannot establish a promissory estoppel claim.

We therefore affirm the district court’s entry of summary judgment in favor of Merchants with

respect to plaintiffs’ promissory estoppel claim.

                                                IV.

       For the reasons set forth above, we affirm the district court’s entry of summary judgment in

favor of Merchants.




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