Friday, February 24, 2012

Love And Contracts In Ohio

From yesterday's Ohio Supreme Court web page:

The Supreme Court of Ohio ruled today that moving into a home with another person to re-engage in a romantic relationship does not satisfy the legal requirement of “consideration” that is necessary to form a contract. The Court’s 6-1 decision, authored by Justice Judith Ann Lanzinger, reversed a ruling in which the 9th District Court of Appeals held that a Medina woman’s agreement to move back into a home with the homeowner and resume a romantic relationship with him could be sufficient consideration to support a contract granting the woman an ownership interest in the home.

In May 2004 Frederick Ormsby moved into a house owned and occupied by Amber Williams, with whom he had begun a nonmarital relationship.  Amber had obtained title to the house, which was encumbered by a mortgage with a remaining balance of approximately $310,000, through a divorce settlement with her former husband.   

In August 2004, Frederick began making the mortgage payments on the house and also paid the 2004 property taxes. In December 2004, he paid off the full balance of the mortgage, and Amber signed a quit-claim deed transferring title to the property to him. 

Although the couple had planned to marry, they cancelled their plans in January 2005 when Frederick’s anticipated divorce did not occur. The couple continued to live together in the house until March 2005, when after a disagreement Amber moved out and  Frederick obtained a restraining order against her.  On March 24, 2005, the two signed a document providing that the house would be sold immediately with the first $324,000 of the sale proceeds going to Frederick and any remaining proceeds going to Amber. 

Two months later, the couple tried to reconcile and attended couples’ counseling. Amber refused to move back into the house unless Frederick granted her an undivided one-half interest in the property. On June 2, 2005, they signed a second document, purportedly making themselves “equal partners” in the Medina house and, among other things, providing for property disposition in the event that their relationship ended. Amber then returned to the house, and the couple resumed their relationship. But by April 2007, they were living in separate areas of the house, and although they tried counseling again, Amber ended the relationship in September 2007.  The two continued living in separate areas of the house until Frederick left in April 2008.

One month later, Amber and Frederick filed suit against each other. Amber’s complaint sought a court order forcing Frederick to comply with the June 2005 document that she said vested her with a half-interest in the house, or in the alternative awarding damages against him for breach of that contract. Frederick’s complaint sought a declaratory judgment that neither the March 2005 nor the June 2005 document was an enforceable contract, because they provided no consideration from Amber in return for a putative ownership interest in the property.

The trial court granted summary judgment dismissing Amber’ half-ownership claim. In its decision, the court held that the March 2005 document was a valid contract because it included sufficient consideration, but that the June 2005 document was not valid or binding on the parties because it conveyed an ownership interest in the house to Amber in exchange for her return to the romantic relationship, which Ohio law does not recognize as legal consideration sufficient to support a binding contract between unmarried persons. 

Amber appealed. On review the 9th District Court of Appeals reversed the award of summary judgment and remanded Amber’s claims to the trial court for further proceedings.  The court of appeals held that, under the facts of this case, a judge or jury could find that Amber’s agreement to return to the house and resume her relationship with Frederick was sufficient consideration to qualify the June 2005 document as an enforceable contract. Frederick appealed the court of appeals decision, and the Supreme Court agreed to review the case.

In today’s decision reversing the 9th District, Justice Lanzinger began by emphasizing that today’s ruling does not address all agreements involving cohabiting couples, but applies only to cases in which no evidence is presented of shared financial resources and obligations between the parties, and in which the only “consideration” received by one party is the other  party’s agreement to move in together and begin or resume a romantic relationship.

Justice Lanzinger reviewed three prior court decisions, a 1949 Ohio Supreme Court case, Snyder v. Warde, and decisions from Oregon and New Jersey courts, that were cited by the 9th District in support of its ruling that Amber’s agreement to resume a relationship with Frederick could constitute legal consideration for a contract.  In each case, however, Justice Lanzinger found factual and legal distinctions with the dispute between Amber and Frederick, and rejected all three as valid precedents.
Justice Lanzinger wrote: “Having rejected the cases that the court of appeals relied upon, we conclude that our decision in Flanders v. Blandy  (1887) is instructive on whether moving into a home with another while  engaging in a romantic relationship are consideration for the formation of a contract.  In Flanders, a father had intended to give his daughter certain bonds worth $2,000 in addition to interest.  But the daughter did not receive the bonds as a gift because they were never delivered to her.  Her father then delivered to her a written promise to pay her $2,000 with interest in lieu of the bonds.  Upon her father’s death, the daughter sought to enforce the written promise, but we held that her father’s promise to give her the value of the bonds was not enforceable as a contract because that promise lacked consideration.” 

“ ... (W)e continued to explain why the father’s written promise would not be enforced:  ‘[a]n agreement to give for the consideration of love and affection, whether the gift is to be of goods and chattels or of a chose in action, neither transfers the property to the donee, nor secures him a right by suit to compel a completion of the contract.’ ....  Thus, for more than a century, love and affection alone have not been recognized as consideration for a contract.”

While the 9th District’s decision held that in agreeing to resume her relationship with Frederick Amber had “agreed to undertake a way of life which entailed among other things ‘providing companionship, and fulfilling each other’s needs, financial, emotional, physical, and social, as best as [she was] able,’” Justice Lanzinger observed that no such language appears in the June 2005 document on which Amber based her claim.

Justice Lanzinger wrote that “(a)lthough the June document states that the agreement was made ‘for valuable consideration,’ it does not specify what the consideration is. The document does not refer to ‘fulfilling each other’s needs, financial, emotional, physical, and social.’ The court of appeals supplied those terms on its own.”

“... Rather, the evidence demonstrates that the only consideration offered by Amber for the June 2005 agreement was her resumption of a romantic relationship with Frederick.  There is no detriment to Amber in the June 2005 document, only benefit.  Essentially, this agreement amounts to a gratuitous promise by Frederick to give Amber an interest in property based solely on the consideration of her love and affection. Therefore, the June 2005 document is not an enforceable contract because it fails for want of consideration.”

Justice Lanzinger’s opinion was joined by Chief Justice Maureen O’Connor and Justices Evelyn Lundberg Stratton, Robert R. Cupp and Yvette McGee Brown. Justice Terrence O’Donnell concurred in judgment only.

Justice Paul E. Pfeifer entered a separate  opinion in which he concurred with the majority syllabus holding that love and affection is insufficient consideration to support a binding contract, but dissented from the majority’s conclusion that “love and affection” was the consideration conveyed by Amber to Frederick in the June 2005 document. Justice Pfeifer wrote that in his view the June document was a straightforward renegotiation of the March 2005 agreement, upheld as valid and binding by the trial court, under which Amber and Frederick each had a significant ownership interest in the proceeds from the planned sale of the property.

Justice Pfeifer wrote: “Among the consideration that Williams and Ormsby offered for the second agreement was the voiding of the first agreement, which denied to each of them rights that the first agreement granted.  ... The first clause of the June 2005 contract resolves the issue before us.  It states: ‘FOR VALUABLE CONSIDERATION that is mutually agreed upon, the AGREEMENT deems all other agreements concerning the items stated below to be null and void ...’ . Could it be more clear? The March 2005 contract required that the house be sold and entitled Williams to, among other things, sales proceeds in excess of $324,000 and to live in the house until its sale. In consideration for giving up those rights, Williams entered into the June 2005 contract, which entitled her to different rights.”

“... I am convinced that Williams and Ormsby offered consideration for the second contract. The case is so fact specific and so riven with bizarre, if irrelevant, details, however, that it provides no meaningful guidance to the bench and bar. Accordingly, I believe that this case should be dismissed as having been improvidently accepted.”

The opinion is linked here. (MIke Frisch)

http://lawprofessors.typepad.com/legal_profession/2012/02/from-yesterdays-ohio-sureme-court-web-page-the-supreme-court-of-ohio-ruled-today-that-moving-into-a-home-with-another-per.html

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