Judge LeGrow Denies Motion to Dismiss Breach of Contract, Unjust Enrichment, and Promissory Estoppel Claims

February 21, 2023

Publication| Commercial Litigation

In Parma VTA LLC v. Parma GE 7400, LLC, C.A. No. N22C-03-092 AML CCLD, Judge LeGrow denied a motion by defendant Parma GE 7400, LLC to dismiss claims of breach of contract, unjust enrichment, and promissory estoppel asserted by plaintiff Parma VTA LLC in its amended complaint.

In this case, the parties executed a tenants in common agreement (the “TIC Agreement”) to govern their joint ownership of commercial property in Ohio (the “Property”).  The TIC Agreement set out the parties’ respective ownership interests in the Property.  It also provided that the plaintiff would serve as property manager, who could pay all Property expenses and be reimbursed for all amounts advanced on the defendant’s behalf.  When the parties acquired the Property, they assumed a mortgage loan from the previous owner in proportion to their respective interests.  When the loan came due, the plaintiff refinanced it with Ladder Capital Finance, which prevented foreclosure and loss of the Property.  The refinancing resulted in a second mortgage to satisfy the original mortgage (the “Ladder Mortgage Loan”).  In connection with that loan, the plaintiff retained counsel and a certified public accountant.  The plaintiff then issued cash calls to itself and the defendant to cover the costs.  The defendant did not pay its share, so the plaintiff paid the expenses in full.

Thereafter, the plaintiff sued to recover all amounts advanced on behalf of the defendant in connection with the Ladder Mortgage Loan.  The plaintiff’s amended complaint alleged breach of the TIC Agreement and, in the alternative, unjust enrichment and promissory estoppel.  The defendant moved to dismiss all three claims.

On the breach of contract claim, the defendant argued that (1) Ohio law required a plaintiff to have performed under the agreement at issue, and the plaintiff failed to do so because it did not obtain the defendant’s approval to mortgage the Property as required by the TIC Agreement; (2) the defendant’s acknowledgement of its obligation to pay its portion of the Ladder Mortgage Loan was an unenforceable gratuitous promise; and (3) the plaintiff’s reliance on the acknowledgement did not satisfy Ohio’s statute of frauds.  The Court rejected each of these arguments.  Regarding the defendant’s non-performance argument, the Court explained that the plaintiff did not need the defendant’s approval because it was seeking not to enforce the mortgage but to recover funds expended to keep the mortgage from foreclosure.  As for the defendant’s gratuitous-promise argument, the Court noted that the plaintiff had alleged that the defendant acknowledged its obligation to pay under the Ladder Mortgage Loan in exchange for dismissal of the plaintiff’s arbitration proceedings and to moot the plaintiff’s argument in the Ohio Court of Appeals.

On the unjust enrichment and the promissory estoppel claims, the defendant argued that these claims should be dismissed because the TIC Agreement governed the parties’ relationship.  The Court disagreed, noting that the plaintiff had expressly pled these claims in the alternative.  The plaintiff pled its unjust enrichment claim in case the Court were to find the TIC Agreement unenforceable against the defendant regarding the Ladder Mortgage Loan.  And the plaintiff pled its promissory estoppel claim in case the Court were to find that the defendant was not obligated to pay the cash calls under the TIC Agreement.

Accordingly, the Court denied the defendant’s motion to dismiss in its entirety.

Analysis:  This case highlights the type of cases the CCLD commonly handles.  Indeed, CCLD cases often involve a contract claim accompanied by quasi-contractual claims pled in the alternative.  Given the liberal pleading standard, such claims routinely survive motions to dismiss when the quasi-contract claims are expressly pled in the alternative.   

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