McGovern v. First Housing Development Corporation of Florida
Filing
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Memorandum of Opinion & Order granting in part and denying in part Defendant's Motion for summary judgment (Related Doc # 18 ). Judgment is hereby entered in favor of First Housing on counts two through five of the complaint, partial judgment is to First Housing on count one of the complaint. Counts two, three, four, and five of the complaint are DISMISSED, count one is DISMISSED IN PART.Signed by Judge John R. Adams on 9/30/2015.(R,Sh)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
GEORGE F. MCGOVERN
Plaintiff,
vs.
FIRST HOUSING DEVELOPMENT
CORPORATION OF FLORIDA,
Defendant.
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CASE NO. 1:13 CV 2460
JUDGE JOHN R. ADAMS
MEMORANDUM OF OPINION
(Resolving Doc. 18)
This matter is before the Court on Defendant First Housing Development Corporation of
America (“First Housing”) motion for summary judgment. For the reasons that follow, First
Housing’s motion (Doc. 18) is GRANTED in PART and DENIED in PART.
I.
FACTS
First Housing is a lender, and offers additional services and financial products intended to
facilitate multifamily residential construction projects. First Housing is a Florida Corporation
with a principal place of business in Tampa, Florida, and operations nationwide. Plaintiff George
F. McGovern (“McGovern”) began employment with First Housing as a loan originator on
December 1, 2010. McGovern was employed by First Housing as the “Director of FHA
Originations – Midwest.” McGovern is a resident of Cuyahoga County.
First Housing, through Edward Busansky, extended an offer of at will employment to
McGovern via letter dated October 26, 2010 (“Offer Letter”). The letter included the following
terms of compensation, which the parties do not dispute:
BASE SALARY:
$75,000 annually
COMMISSION PLAN:
Quarterly payout upon achievement of $225,000
annual threshold in origination fees, and/or trade premiums generated through
sale or placement of loans originated by you; Commissions [sic] to be paid on the
following scale:
$.00 - $225,000
$225,001 - $450,000
$450,001 - $650,000
$650,001(+)
Trade Premiums
0%
20%
30%
40%
20%, up to $200,000
In addition to base salary and commissions the offer also provided reimbursement for office
operating expenses and travel “subject to review.” (Motion for Summary Judgment, Exhibit A.)
Prior to accepting the offer of employment, McGovern negotiated with Busansky to increase his
monthly reimbursement for office expenses from $600 to $650 and to include “related” expenses
within the $1,000 travel reimbursement figure. McGovern also negotiated two exceptions to the
Commission Plan for specific projects in Midtown Detroit – Woodward Garden Apartments and
Sugar Hill Apartments/74 Garfield Apartments. McGovern drafted the amendment to the offer in
the form of a Memorandum dated November 10, 2010 (“Memorandum”), the amended language
provides:
The Commission Plan as you proposed applies to all deals I originate except for
the following project financings.
Woodward Garden Apartments, Midtown Detroit, Michigan (about $8.5
million, FHA 220 mortgage)
Sugar Hill Apartments/74 Garfield Apartments, Midtown Detroit,
Michigan (about $6 million, FHA 220/221d mortgage)
Commission. For these two financings George McGovern’s commission
will begin at the $225,001 - $450,000/20% Commission Plan level. His
commission for such deals will be based upon the gross amount of
origination fees, including any consultant fees, and premium earned
2
through the sale of GNMA1 securities for the transaction less any salary,
office expense, travel expense, and revenue paid to Forest City Capital
Corporation as of the date of settlement.
In the instance where both financings (or other financings) close in the
same fiscal year, the commission calculation will escalate from the 20%
level as is normally the case under First Housing Commission Plan.
The negotiated exception differs from the original Commission Plan in three respects: the
threshold for commission, the revenue streams used to generate commission, and by specifying
the deductions taken when calculating commission. The Commission Plan included in the Offer
Letter is silent as to the calculation of commission, it merely states threshold levels for
commission percentages. The amendment differs from the original plan by specifically stating
how commission is to be calculated and by allowing commission on the first dollar earned for the
named projects. The parties agree that McGovern’s at-will employment began with these terms
of compensation after he signed the offer letter on November 10, 2010. The Offer Letter, by its
own terms, contained “salient components,” and referenced company policy and an attached
summary chart that prescribed 401k, paid time off and other benefits for which McGovern was
eligible. Neither party has produced or referred to these documents in this matter. The Offer
Letter was subject to specific amendments reflected in the Memorandum. According to First
Housing, these two documents are the entirety of the terms of compensation under which
McGovern began his employment on December 1, 2010. (Busansky Declaration, ¶ 9.)
McGovern did not close Woodward, Sugar Hill, or any other financing deal during his
first year of employment by First Housing. It is undisputed that he received his base salary and
reimbursements pursuant to the terms of the compensation agreement in 2011. In 2012
McGovern closed five financing projects:
1
GinnieMae or “Government National Mortgage Association” Guaranteed Securities issued to secure the
financing of an FHA insured project.
3
(1) Bridlewood Village Apartments – 4/24/12
(2) Woodward Garden Apartments – 5/8/12
(3) Woodruff Village Apartments – 7/12/12
(4) Luther Hills Apartments – 7/19/12
(5) Luther Woods Apartments – 7/19/12
According to First Housing, McGovern was paid commission in June and in September of 2012.
McGovern’s commissions were calculated by his supervisor Edward Busansky, who explains:
It is custom and practice in the industry to deduct attorney fees from placement
and origination fees when calculating the commission earned by a loan originator.
In determining the amount eligible for commission the following formula is used
in the industry: (origination fees + (placement fees – legal fees) – expenses.
***
The formula I used to calculate McGovern’s commission on aggregate fees in
2012 was: ((origination fees) + (placement fees – legal fees) – expenses)) x
applicable percentage = commission. The total generated origination fees were
$224,017. Placement fees less legal fees were $79,785 ($162, 285 - $82,500). The
total expenses including for any salary, office travel expenses [($135,345)] and a
broker’s fee of $22,938 for a total of $158,2872. The amount of commission paid
was $29,103 (20% x $145,515).
(Busansky Declaration, paras. 6 & 11.) In addition to commission on the placement and
origination fees, under the compensation agreement, McGovern receives a fixed 20%
commission on the “trade premiums” generated through the issue and sale of GNMA guaranteed
securities to support the financing of each project. According to Busansky, McGovern was
compensated $60,030 in 2012, which reflects approximately 20% of $300,149.333 in GNMA
premiums. McGovern does not dispute that he was paid $29,103 in commissions on fees and
$60,030 for trade premiums, for a total commission of $89,133 in 2012, he alleges that the
2
The arithmetic in the Bunsansky Declaration contains a small error (135,345 + 22,938 = 158,283 not
158,287); if the error is corrected, the resulting 20% commission is $29,103.80 not $29,103.00.
3
The arithmetic in this instance rounds up to $60,030 from $60,029.86.
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compensation paid by First Housing does not reflect the full amount owed him under the
Commission Plan as amended by his Memorandum.
McGovern’s objections to the calculation of his commission began with the first quarter
he was entitled to commission. First Housing has produced a series of emails between McGovern
and his supervisor, Busansky, which reflect McGovern’s inquiries into and disagreements with
the numbers used by Busansky to calculate his commissions. (Defendant’s Motion for Summary
Judgment, Exhibits H–P.)
The emails appear to have resulted in some changes to the
calculations – fee totals were updated for Woodward Garden, the amount legal fees was reduced
– other deductions (such as those for travel) remained the same. These exchanges continue into
October 2012. The next email included by Defendant is a November 8, 2012 “pipeline update”
in which McGovern identifies six construction projects and an upcoming conference as his
agenda remaining for the end of 2012 and early 2013. McGovern identifies Luther Haus as a
financing possibly closing in December 2012 and Mayslake as ongoing, he references Amherst,
Addison Apartments, Prairie Apartments, and Nailah Apartments all at various stages.
McGovern’s next email requests a conversation with Busansky which is followed by a
December 7, 2012 email from McGovern proposing to change his employment status from
salaried, full-time, employee, to a fee-based consultant. McGovern cites concerns over continuity
in the handling of the Mayslake, Luther Haus, and Woodward Garden projects as the motivating
force, and proposes that he continue to work those projects only on a fee basis. Attached to the
email is a document titled “executed letter to Ed Busansky re resignation.12.7.2012.pdf.”
(Motion for Summary Judgment, Exhibit Q.) The attached letter details his proposal concerning
the three projects, with a commission of 25% on overall compensation earned by First Housing
net of any “Lender legal costs customarily incurred” to be paid two weeks after the settlement of
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securities for trade premiums and two weeks after initial endorsement for financing and
placement fees. He proposes that the commission be calculated from the first net dollar earned,
without a threshold. Busansky replied on December 11, 2012, accepting McGovern’s resignation
as of December 7, 2012, and included terms of the resignation, stating “[a]s discussed, we will
pay your cell phone and office rent through the end of December. Your salary will be stopped
on 12/15/2012.” (Summary Judgment, Exhibit R.) Busansky continued to reject the fee based
consulting arrangement proposed by McGovern, and instead stated that McGovern would be
paid commission pursuant to the original Commission Plan, with the same threshold schedule,
for the Mayslake, Amherst, and Luther Haus projects; remaining premium income for
Woodward Garden was conditioned on the completion of construction by 12/31/13, all payments
on a quarterly basis, ending 12/31/13, First Housing would retain any income earned after
12/31/13.
On December 13, 2012, McGovern rejected the terms communicated by Busansky and
responded with a counter offer, proposing commission at the 20% rate, removing restrictions on
Woodward Garden premiums, and reducing the threshold for commission to $75,000. Busansky
did not respond directly to this proposal in the materials produced, however, a signed letter dated
December 19, 2012 reiterates First Housing’s acceptance of McGovern’s resignation “without
conditions.” (Summary Judgment, Exhibit W.) The letter continues:
[y]ou have offered to continue in an advisory capacity and we provided terms that
would be acceptable to First Housing. You have indicated that these terms are not
acceptable. You have further tried to make contact with our customers and
undermine our relationships. This must end immediately. We wish you the best
of luck in your future endeavors.
(Motion for Summary Judgment, Exhibit W.) Neither party, in seeking summary judgment or
responding to the motion, has provided any document or other evidence indicating that
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McGovern and First Housing reached an agreement for the payment of commission for projects
that closed or income generated after McGovern left First Housing’s employ.
McGovern filed suit disputing the amount of commission paid in 2012 and claiming
additional compensation should be provided for financing contracts that closed after he left First
Housing. McGovern asserts five causes of action in his Complaint: 1) breach of contract for
failing to pay in full commissions owed in 2012; 2) Promissory Estoppel, again for failure to pay
the full amount of commission owed under the compensation agreement; 3) Quasi-Contract,
restating claims one and two, for unpaid commission in 2012; and 4) Unjust Enrichment which
overlaps with counts one through three with regard to commission during his employment, but
also claims continuing commission is due on all projects he was involved in while employed by
First Housing, including those that closed after he resigned; McGovern also seeks 5) Declaratory
Judgment determining the legal rights of the parties to future income generated by the “Mayslake
Center II Apartments” project.
II.
LEGAL STANDARD
Summary judgment is appropriate when the “pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any, show that there is no
genuine issue of material fact and that the moving party is entitled to judgment as a matter of
law.” Estate of Smithers v. City of Flint, 602 F.3d 758, 761 (6th Cir. 2010). A fact must be
essential to the outcome of a lawsuit to be ‘material.’ Anderson v. Liberty Lobby Inc., 477 U.S.
242, 248 (1986). Summary judgment will be entered when a party fails to make a “showing
sufficient to establish…an element essential to that party’s case.” Celotex Corp. v. Catrett, 477
U.S. 317, 322-23. “Mere conclusory and unsupported allegations, rooted in speculation, do not
meet [the] burden.” Bell v. Ohio State Univ., 351 F.3d 240, 253 (6th Cir. 2003).
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Summary judgment creates a burden-shifting framework. See Anderson, 477 U.S. 250.
The moving party has the initial burden of showing there is no genuine issue of material fact.
Plant v. Morton Int’l, Inc., 212 F.3d 929, 934 (6th Cir. 2000). Specifically,
“A party asserting that a fact cannot be or is genuinely disputed must support the
assertion by:
(A) citing to particular parts of materials in the record, including depositions,
documents, electronically stored information, affidavits or declarations,
stipulations (including those made for purposes of the motion only), admissions,
interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence of a
genuine dispute, or that an adverse party cannot produce admissible evidence to
support the fact.”
Fed.R.Civ.P. 56(c)(1).
The burden then shifts to the nonmoving party to prove that there is an issue of material fact
that can be tried. Plant, 212 F.3d at 934. If this burden is not met, the moving party is then
entitled to a judgment as a matter of law. Bell, 351 F.3d at 253. When evaluating a motion for
summary judgment, the Court construes the evidence and draws all reasonable inferences in the
light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). The non-moving party may not simply rely on its pleadings; rather it
must “produce evidence that results in a conflict of material fact to be resolved by a jury.” Cox v.
Kentucky Dep’t of Transp., 53 F.3d 146, 150 (6th Cir.1996). A fact is “material” only if its
resolution will affect the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S.
242248 (1986).
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III.
ANALYSIS
a) Breach of Contract
McGovern alleges breach of contract stating that First Housing has paid less than the
amount owed him in commission for 2012. McGovern contends that he is not required to specify
the exact amount he was underpaid, he nevertheless states that he was underpaid commission by
$33,734.00 in 2012.4 According to McGovern’s deposition testimony, he reached this number by
reducing the expenses deducted by First Housing; including consulting fees from the Mayslake
project; increasing the commission percentage from 20% to 30% for the Bridlewood Apartment
Project; and increasing the percentage again to 40% for the Woodruff Village, Luther Hills, and
Luther Woods projects. First Housing maintains that McGovern was properly compensated
under the terms of the Offer Letter and Memorandum and that, in addition the other
manipulations, McGovern failed to account for legal fees associated with the Woodward Garden,
Luther Hills, and Luther Woods projects.
Because this matter was removed pursuant to this Court’s diversity jurisdiction, state law
governs the substantive issues and federal law governs the procedural issues. Gass v. Marriott
Hotel Servs., Inc., 558 F.3d 419, 425–26 (6th Cir. 2009). “Under Ohio law, the elements of a
breach of contract claim are: (1) the existence of a contract; (2) performance by the plaintiff; (3)
breach by the defendant; and (4) damage or loss to the plaintiff as a result of the breach.” V & M
Star Steel v. Centimark Corp., 678 F.3d 459, 465 (6th Cir. 2012), citing Savedoff v. Access Grp.,
Inc., 524 F.3d 754, 762 (6th Cir.2008) (applying Ohio law) inter alia. The interpretation of
written contract terms, including the determination of whether those terms are ambiguous, is a
matter of law for initial determination by the court. Parrett v. Am. Ship Bldg. Co., 990 F.2d 854,
4
This number reflects the totals provided in McGovern’s opposition to summary judgment, which alleges
underpayment of $10,029.00 in June 2012 and underpayment of $23, 705.00 in September 2012.
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858 (6th Cir.1993) (applying Ohio law). “If a contract is clear and unambiguous, then its
interpretation is a matter of law and there is no issue of fact to be determined. However, if a term
cannot be determined from the four corners of a contract, factual determination of intent or
reasonableness may be necessary to supply the missing term.” Inland Refuse Transfer Co. v.
Browning–Ferris Indus. of Ohio, Inc., 15 Ohio St.3d 321, 474 N.E.2d 271, 272–73 (1984).
“The role of courts in examining contracts is to ascertain the intent of the parties.” City of
St. Marys v. Auglaize Cty. Bd. of Commrs., 115 Ohio St.3d 387, 875 N.E.2d 561, 566 (2007).
“The intent of the parties is presumed to reside in the language they choose to use in their
agreement.” Graham v. Drydock Coal Co., 76 Ohio St.3d 311, 667 N.E.2d 949, 952 (1996);
accord State ex. rel Petro v. R.J. Reynolds Tobacco Co., 104 Ohio St.3d 559, 820 N.E.2d 910,
915 (2004). “Where the terms in a contract are not ambiguous, courts are constrained to apply
the plain language of the contract.” City of St. Marys, 875 N.E.2d at 566. “[W]here the terms in
an existing contract are clear and unambiguous, this court cannot . . . create a new contract by
finding an intent not expressed in the clear language employed by the parties.” Alexander v.
Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146, 150 (1978)). Extrinsic evidence is
admissible “to ascertain the intent of the parties when the contract is unclear or ambiguous, or
when circumstances surrounding the agreement give the plain language special meaning.”
Graham, 667 N.E.2d at 952; accord R.J. Reynolds, 820 N.E.2d at 915. Nevertheless, a court “is
not permitted to alter a lawful contract by imputing an intent contrary to that expressed by the
parties” in the terms of their written contract. Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216,
797 N.E.2d 1256, 1261–62 (2003).
Contractual language is ambiguous “only where its meaning cannot be determined from
the four corners of the agreement or where the language is susceptible of two or more reasonable
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interpretations.” Covington v. Lucia, 151 Ohio App.3d 409, 784 N.E.2d 186, 190 (2003).
“[C]ourts may not use extrinsic evidence to create an ambiguity; rather, the ambiguity must be
patent, i.e., apparent on the face of the contract.” Id. at 190. In determining whether contractual
language is ambiguous, the contract “must be construed as a whole,” Tri–State Group, Inc. v.
Ohio Edison Co., 151 Ohio App.3d 1, 782 N.E.2d 1240, 1246 (2002) (quoting Equitable Life Ins.
Co. of Iowa v. Gerwick, 50 Ohio App. 277, 197 N.E. 923, 926 (1934)), so as “to give reasonable
effect to every provision in the agreement.” Stone v. Nat'l City Bank, 106 Ohio App.3d 212, 665
N.E.2d 746, 752 (1995). “The meaning of a contract is to be gathered from a consideration of all
its parts, and no provision is to be wholly disregarded as inconsistent with other provisions
unless no other reasonable construction is possible.” Burris v. Grange Mut. Co., 46 Ohio St.3d
84, 545 N.E.2d 83, 88 (1989) (quoting Karabin v. State Auto. Mut. Ins. Co., 10 Ohio St.3d 163,
462 N.E.2d 403, 406 (1984)). “[C]ommon words appearing in the written instrument are to be
given their plain and ordinary meaning unless manifest absurdity results or unless some other
meaning is clearly intended from the face or overall contents of the instrument.” Alexander, 374
N.E.2d at 150. If the language in the contract is ambiguous, the court should generally construe it
against the drafter. Mead Corp. v. ABB Power Generation, Inc., 319 F.3d 790, 798 (6th
Cir.2003) (applying Ohio law).
Initially, First Housing averred that the offer letter and the November 10, 2010
Memorandum did not fully set forth the commission plan or employment agreement between the
parties. (Answer ¶14.) First Housing’s motion for summary judgment and supporting materials
alter this position. The Busansky Declaration indicates that the November 10, 2010
Memorandum, which was understood as a negotiated condition of McGovern’s employment,
was accepted by First Housing and constitutes the parties’ entire agreement. Busansky explains:
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I calculated McGovern’s commission in accordance with the Commission Plan set
forth in my October 26, 2010 offer letter (Exhibit A) as amended by McGovern
in his November 10, 2010 memo to me (“amended offer letter”) (Exhibit B). Both
Exhibits A and B are true and accurate copies. Together those two documents
comprised our entire agreement as to McGovern’s compensation and expense
reimbursement. I never had any conversations with McGovern nor made any
promises to him, verbally or in writing, that differed from our written agreement.
(Busansky Declaration, ¶ 9. With regard to McGovern’s breach of contract claim, the Court
finds, as the parties indicate, that the Offer Letter and Memorandum govern the calculation of
McGovern’s commission; the Court further finds that First Housing has not pled and does not
now allege that McGovern failed to perform under the terms of this agreement. Having satisfied
the first two elements of a breach of contract suit, the Court turns to the question of whether First
Housing has breached the terms of the agreement. V & M Star Steel, supra at 465.
Although the parties now agree that McGovern’s 2012 Commission for the Woodward
Garden project was completely governed by the Memorandum, each party seeks to alter the plain
language of the terms reflected in the Memorandum. The Memorandum is expressly limited to
“the following project financings. Woodward Garden Apartments, Midtown Detroit, Michigan
(about $8.5 million, FHA 220 mortgage)” and “Sugar Hill Apartments/74 Garfield Apartments,
Midtown Detroit, Michigan (about $6 million, FHA 220/221d mortgage)” Plaintiff, however,
seeks to extend the provision that includes consulting fees among the revenue streams that
generate his commission to include the Mayslake project. (Complaint ¶ 19.) Although the
agreement also provides “in the instance where both financings (or other financings) close in the
same fiscal year the commission calculation will escalate from the 20% level as is normally the
case under the First Housing Commission Plan,” the calculations on which McGovern bases his
breach of contract claim include the 30% and 40% Commission rates, but do not demonstrate
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that he has reached the necessary $450,001 and $650,001+ thresholds dictated by the
Commission Plan reflected in the October 26, 2010 offer letter.
Similarly, although the Memorandum defines the calculation for commission applicable
to the named projects:
For these two financings, George McGovern’s commission will begin at the
$225,001 - $450,000/20% Commission Plan level. His commission for such deals
will be based upon the gross amount of origination fees, including any consultant
fees, and premium earned through the sale of GNMA securities for the
transaction, less any salary, office expense, travel expense, and revenue paid to
Forest City Capital Corporation as of the date of settlement.
(Defendant’s Motion for Summary Judgment, Exhibit B.) First Housing seeks to include “trade
custom” that would include legal fees among the items to be deducted prior to calculating
McGovern’s commission on the two projects. (Busansky Declaration, ¶ 11.)
Although First Housing identifies the Offer Letter and Memorandum as the entirety of
the agreement between the parties, First Housing alleges that industry custom and practice
should be incorporated in both, in the absence of any reference to custom in either writing. First
Housing contends that McGovern has conceded that the deduction of legal fees was industry
custom during his deposition. It is true that in the context of discussion McGovern’s calculation
of the commission owed him for the Luther Hills and Luther Woods deals, McGovern indicated
that legal expenses would have been customarily “incurred” as part of the transaction.
(McGovern Deposition, 172.) Later during the deposition, when discussing McGovern’s attempt
to negotiate a consulting relationship with First Housing, McGovern was directed to the
following language in his proposal “Compensation earned by First Housing would be net of any
Lender legal costs customarily incurred.” (McGovern Deposition, 186.) McGovern explained in
the deposition that his intent was to reflect industry custom as part of the consulting agreement,
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and that if it was customary to deduct legal fees before calculating commission, he would accept
that for his compensation as consultant. (McGovern Deposition, 187.)
This Court is required to first determine whether, as a matter of law the agreement is
clear and unambiguous. City of St. Marys, supra, at 566. Where the “terms in an existing
contract are not ambiguous, courts are constrained to apply the plain language of the contract.”
Id. “Contractual language is ambiguous ‘only where its meaning cannot be determined from the
four corners of the agreement or where the language is susceptible of two or more reasonable
interpretations.’” Savedoff v. Access Group, Inc., 524 F.3d 754, 763 (6th Cir. 2008), quoting
Covington v. Lucas, 151 Ohio App.3d 409, 784 N.E.2d 186, 190 (2003).
Nothing in the
Memorandum suggests ambiguity. The words themselves are common, as such they “are to be
given their plain and ordinary meaning unless manifest absurdity results or unless some other
meaning is clearly intended from the face or overall contents of the instrument.” Savedoff, at 764,
citing Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146, 150.
The language of the Memorandum sets forth a straightforward calculation for
commission, it is limited to two projects, and accounts for expenses; nothing in the provision is
manifestly absurd.
The overall content of the instrument is an offer of employment, the
acceptance of which was conditioned on more favorable terms of commission for financing
projects the prospective employee had already developed. The content of the document readily
suggests that First Housing was interested in both McGovern’s FHA Financing experience and
the possibility he could deliver two multi-million dollar financing projects immediately. The
idea that Fist Housing was willing to deviate from its standard commission plan and negotiate
more favorable terms of compensation for these projects is entirely consistent with the content of
the documents. Similarly, McGovern was clearly interested in the offer of employment, but
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wished to secure enhanced commission terms for work he had begun prior to employment.
Limiting the more favorable terms to projects he had already developed is reasonable in the
context – as is applying First Housing’s standard Commission Plan to future projects which,
unlike the named projects, he would develop while on salary with expenses reimbursed.
Where, as here, the content of an agreement is unambiguous, courts “may not use
extrinsic evidence to create an ambiguity; rather an ambiguity must be patent, i.e., apparent on
the face of the contract.” Savedoff at 763, citing Covington. Thus, First Housing’s belief that
industry custom should be read into the Memorandum and allow legal fees to be included with
the named items to be deducted from the gross fees generated requires the Court to ignore the
plain meaning of the contract through the use of extrinsic evidence. Not only is the use of
extrinsic evidence inappropriate in this instance, it would prevent the Court from construing the
contract as a whole – introducing industry custom would negate the preclusive effect of the
specific commission language in the Memorandum. Savedoff, at 763, quoting Tri-State Group,
Inc. v. Ohio Edison Co., 151 Ohio App.3d 1, 782 N.E.2d 1240 (“a contract must be construed as
a whole”). Thus, the amendment to the compensation agreement negotiated by the parties does
not include a deduction for legal fees applicable to the Woodward Garden and Sugar Hill
projects.
The remainder of McGovern’s breach of contract claims have no basis in the Offer Letter
or Memorandum. The Memorandum differs from the Commission Plan stated in the Offer Letter
in three important ways, (1) the calculation of commission begins with the first dollar generated;
(2) the calculation of commission is defined to include “the gross amount of origination fees,
including any consultant fees, and premium earned through the sale of GNMA securities for the
transaction”; and (3) the Memorandum defines the deductions to be taken from as “less any
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salary, office expense, travel expense, and revenue paid to Forest City Capital Corporation as of
the date of settlement.” (Defendant’s Motion for Summary Judgment, Exhibit B.) This
specificity is in contrast to the Commission Plan, which is silent as to the calculation involved in
generating commission, and separates Trade Premiums earned on GNMA Securities from the
escalating commission scale, to instead impose a flat 20% trade premium commission rate with
an annual cap of $200,000.00. The escalating commission rate that applies to non-trade Premium
Commissions is presented simply: “Quarterly payout upon achievement of $225,000 annual
threshold in origination fees, and/or trade premiums generated through sale or placement of loans
generated by you;” and sets thresholds for increased rates of commission – 225,001 for 20%;
$450,001 for 30%; and $650,001+ for 40%. As stated above, McGovern was entitled to
commission for the consulting fees generated in the Woodward Garden and Sugar Hill projects
only. McGovern has not identified any basis in fact or law that supports his claim to consulting
fees for other projects, or his claims that he is owed commission at the 30 or 40% rates.
McGovern does not dispute the revenue numbers used to calculate his commissions, only the
deductions taken from them and the rates of calculation. Nothing in the information provided by
First Housing, or by McGovern, indicates that he generated revenue reaching the thresholds
necessary to increase his commission rate.
To the extent that legal fees were included in the deductions from the Luther Hills and
Luther Woods projects, those projects are subject to the Commission Plan, not the Memorandum,
and the Plan, unlike the Memorandum, is silent as to the calculation used to determine
commission. This omission, however, does not create ambiguity. Savedoff at 764. Under Ohio
law, “[i]f a contract is silent, as opposed to ambiguous, with respect to a particular matter” the
parties “to a contract are required to use good faith to fill the gap of a silent contract.” Savedoff
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at 764, (citations omitted). “What the duty of good faith consists of depends upon the language
of the contract in each case which leads to an evaluation of reasonable expectations of the
parties.” Id. (citation omitted.) In this instance, according to First Housing and, to a degree,
McGovern, industry custom represents the good faith solution that provides the
calculation remedying the absence of specific provisions in the Commission Plan.
For these reasons, the Court finds that First Housing is in breach of the Memorandum as
to payment of commission for Woodward Garden. First Housing’s motion for summary
judgment is therefore DENIED IN PART as to commission paid on Woodward Garden.
McGovern’s remaining claims regarding his 2012 commission are wholly without merit. First
Housing’s motion for summary judgment is therefore GRANTED IN PART as to the
commission paid on the remaining projects in 2012.
b) Promissory Estoppel, Quasi-Contract, and Unjust Enrichment
McGovern argues promissory estoppel, quasi-contract, and unjust enrichment as
alternatives to his breach of contract claim. He also makes a separate claim for commission that
would have accrued on projects he was involved in, but that did not conclude, or generated
additional income, after he was no longer employed by First Housing.
With regard to McGovern’s additional claims under the terms of the Commission Plan
and Amendment, the Court has determined that an enforceable contract governs these
allegations. In Ohio, “[w]here the parties have an enforceable contract and merely dispute its
terms, scope, or effect, one party cannot recover for promissory estoppel....” O'Neill v. Kemper
Ins. Companies, 497 F.3d 578, 583 (6th Cir. 2007) (citing Terry Barr Sales Agency, Inc. v. AllLock Co., Inc., 96 F.3d 174, 181 (6th Cir.1996)). Similarly, “A claim for unjust enrichment is an
equitable claim, and is based on a legal fiction where courts will imply a ‘contract’ as a matter of
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law. See Wuliger v. Mfrs. Life Ins. Co., 567 F.3d 787, 799 (6th Cir. 2009). “Unjust enrichment is
an equitable doctrine to justify a quasi-contractual remedy that operates in the absence of an
express contract or a contract implied in fact to prevent a party from retaining money or benefits
that in justice and equity belong to another.” Wuliger v. Mfrs. Life Ins. Co. (USA), 567 F.3d 787,
799 (6th Cir.2009). An implied-in-law, “quasi-contract,” however, is neither necessary nor
appropriate when an express contract governs the dispute between the parties. Accordingly,
because the Court concludes, and the parties agree, that there was an enforceable express
compensation agreement between McGovern and First Housing, the Court dismisses
McGovern’s promissory estoppel, quasi-contract, and unjust enrichment claims as they relate to
the 2012 commission payments.
To the extent that McGovern makes a claim for commissions that would have been
generated by financing projects in 2013 and beyond, after his employment with First Housing
ended, there is no writing that entitles him to such payments. Few state or federal courts in Ohio
have been called upon to evaluate a claim for post-employment commission, those courts that
have are united in finding that in Ohio “[a]bsent a contract for future commissions, an employee
is not entitled to post-employment commissions on previously generated business” Ragen v.
Hancor, Inc., No. 3:08 CV 1022, 2010 WL 301761, at *5 (N.D. Ohio Jan. 19, 2010), citing
International Total Services, Inc. v. Glubiak, 1998 WL 57123 at *2 (Ohio App. 8 Dist. Feb.12,
1998). Plaintiff has not pled the elements of a valid contract for post-termination commissions.
The contract between the parties provides only for commissions while McGovern was employed
by First Housing, as an at will employee who could be terminated, or leave employment, at any
time. There is no allegation of an independent oral contract for post-termination commissions.
Under these circumstances, the fact that the parties agreed to a commission schedule does not
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constitute, “as a matter of law, a promise to pay commissions in perpetuity.” Weiper v. W.A. Hill
& Assoc., 104 Ohio App.3d 250, 258, 661 N.E.2d 796 (Ohio App. 1 Dist.1995). Absent a written
contract contemplating the payment of commission post-termination there is no legal basis for
McGovern’s claim nor is there an issue of material fact that could be resolved to entitle Plaintiff
to commission for projects that concluded or generated income after his employment ended.
Accordingly, First Housing’s motion for summary judgment as to McGovern second, third, and
fourth claims for promissory estoppel, quasi-contract, and unjust enrichment, is GRANTED, the
claims are DISMISSED.
c) Declaratory Judgment
McGovern seeks judgment determining the legal rights of the parties to future income
from the by the “Mayslake Center II Apartments” project. First Housing has produced a letter
dated May 8, 2013, which terminated First Housing’s role as lender in the Mayslake Project.
(Summary Judgment, Exhibit X.) In the absence of any legal basis for McGovern’s claim to
commission on future income generated by First Housing, as stated above, and due to the fact
that First Housing has ended its involvement in the Mayslake project, there is no outstanding
issue of material fact that could be resolved in McGovern’s favor resulting in a right to income
from Mayslake. Accordingly, First Housing’s motion for summary judgment is GRANTED as
to McGovern’s Fifth Cause of Action, the claim is DISMISSED.
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IV.
CONCLUSION
First Housing’s motion for summary judgment is DENIED IN PART AND GRANTED IN
PART. Judgment is hereby entered in favor of First Housing on counts two through five of the
complaint, partial judgment is to First Housing on count one of the complaint. Counts two, three,
four, and five of the complaint are DISMISSED, count one is DISMISSED IN PART.
IT IS SO ORDERED.
John R. Adams
_______________________
JUDGE JOHN R. ADAMS
UNITED STATES DISTRICT COURT
DATED: SEPTEMBER 30, 2015
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