Spaeth v. Radermacher, Jr. et al

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
In re:
James W. Owens,
Debtor.
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Case No. 03-38918
Chapter 7
Judge William A. Clark
Paul H. Spaeth, Trustee,
Plaintiff,
v.
Herschel L. Radermacher, Jr., et al.,
Defendants.
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Adv. Pro. No. 05-03186
MEMORANDUM DECISION DENYING PLAINTIFF’S MOTION IN LIMINE
Dated at Dayton, Ohio this 28th Day of September, 2005:
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: September 29, 2005
____________________________________________________________
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This matter is before the court on the Plaintiff Trustee’s Motion in Limine, [Adv. Doc. #
27], and Defendants Herschel L. and Pamela D. Radermacher’s Responsive Pleading in
Opposition to Motion in Limine, [Adv. Doc. # 33]. 	The court has jurisdiction over this matter
pursuant to 28 U.S.C. § 157 and 1334 and the standing order of reference entered in this district.
This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2).
In his Motion in Limine, the Trustee requests that the court exclude any evidence of an
alleged agreement between the Debtor, James W. Owens, and the Defendants relating to the
price of real estate located at 7133 Historic Court, Dayton, Ohio (the “Property”) sold by the
Debtor to the Defendants, other than as set forth in the written agreement between the parties.
The Trustee requests that the court order the exclusion of other evidence based on the parol
evidence rule.
I. Procedural and Factual Background
On March 1, 2002, the Debtor and Defendants executed an agreement whereby the
Debtor agreed to sell the Property to the Defendants. 	The agreement calls for a sales price of
$350,000.00 and indicates that the buyers would tender that amount by financing $200,000.00
through a bank and the remaining $150,000.00 through the seller. In support of the $150,000.00
seller financing, the Defendants executed a promissory note in the amount of $150,000.00
payable to the Debtor. 	The closing took place on May 7, 2002 and the note was secured by a
mortgage on the Property dated that same day. Debtor cancelled the note on July 1, 2002.
The Debtor filed bankruptcy on October 10, 2003. The Trustee instituted this Adversary
Proceeding on April 26, 2005 alleging that the cancellation of the promissory note from the
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Defendants to the Debtor was a fraudulent transfer under 11 U.S.C. §§ 544 and 548. The Trustee
seeks judgment in the amount of $260,147.38.1
In their Answer to the Trustee’s Complaint, the Defendants state that the $350,000 sales
price listed on the agreement was not the parties’ intent at the time of making the agreement.
According to the Defendants, the parties entered into a contemporaneous oral agreement in
which the sales price was $200,000.00. 	Under the terms of this oral agreement, the parties
executed the $350,000.00 sales agreement in order to intentionally inflate the contract price so
that the Defendants could finance the purchase without a cash down payment and the Debtor
would cancel the note after the closing. 	The $150,000.00 note, therefore, was a sham that the
parties agreed the Debtor would cancel at a later date.
In the present Motion, the Trustee seeks to bar the Defendants from producing evidence
of the alleged contemporaneous agreement that contradicts the written agreement executed on
March 1, 2002.
II. Discussion
The parol evidence rule generally holds that “absent fraud, mistake or other invalidating
cause, the parties’ final written integration of their agreement may not be varied, contradicted or
supplemented by evidence of prior or contemporaneous oral agreements, or prior written
agreements.” 	Galmish, et al. v. Cicchini, 734 N.E. 2d 782, 788, 90 Ohio St. 3d 22 (2000)
(quoting Williston on Contracts (4 Ed. 1999) 569-70, Section 33:4). The contract in this matter
is clearly an integrated, written agreement and according to a plain interpretation of the parol
evidence rule, evidence of contemporaneous oral or written agreements would be excluded.
1 The Trustee originally sought judgment in the amount of $150,000.00, the amount of the cancellation of debt. On
September 23, 2005, the Trustee amended the Complaint to increase the amount sought to the difference between
the sales price and the payoff balance owed by the Debtor on the date of the transfer, $260,147.38.
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There are, however, exceptions to the parol evidence rule. One of those exceptions is that
parol evidence may be introduced to show that parties never intended to be bound by the
contract. 	See Natl. City Bank, Akron v. Donaldson, 95 Ohio App. 3d 241, 642 N.E. 2d 58, 60
(1994); F.W. Dodge Corp. v. Fultz, 175 N.E.2d 543, 546 (Hamilton County Ct. 1961); see also
Glazer v. Lehman Bros., Inc., 394 F.3d 444, 457-58 (6th Cir, 2005) (discussing the holdings in
Donaldson and Fultz). For example, if a contract is intended as a joke or a “disguise to deceive
others,” then parol evidence will be examined to parse out the intent of the parties and the nature
of the true contract. In re Hicks & Son, Inc., 82 F.2d 277, 279 (2d Cir. 1936).
Such is precisely the issue in this case. 	Although the parol evidence rule is intended to
“protect the integrity of written contracts,” Galmish, 734 N.E. 2d at 789 (quoting Ed Schory &
Sons, Inc. v. Soc. Natl. Bank, 75 Ohio St. 3d 433, 662 N.E.2d 1074, 1080 (1996)), such a rule
cannot be relied upon when one party alleges that the entire contract was a sham. 	In such a
situation, it would be beyond reason to rule that the parties should be bound to the terms of a
written contract that neither party intended to abide by from the outset.
In addition, this case is unique because the Trustee, standing in the shoes of the Debtor,
seeks to exclude the Debtor’s testimony as to the intentions of the parties at the time they entered
into to the contract. 	Yet the Defendants argue that the Debtor’s testimony will show that the
parties to the contract intended to intentionally inflate the sales price of the Property. 	If that is
the case, then the entire contract was a sham.
This case is one of the unique circumstances under the parol evidence rule where oral
testimony is required to parse out the intentions of the parties at the inception of the contract.
The Defendants will be allowed to present the court with evidence of the true agreement and
have the underlying matter decided based on that agreement.
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III. Conclusion
In this Motion in Limine, the Trustee seeks to prevent the Defendants from presenting
evidence of a contemporaneous oral agreement to a written contract by requesting that the court
exclude that evidence under the parol evidence rule. 	This case, however, falls under a limited
exception to the parol evidence rule in which parol evidence of a contemporaneous oral
agreement will be admitted to show the parties intent in making the agreement. The exception is
particularly applicable in this case where the Defendants allege that the entire contract is a sham
and the parties never intended to abide by its terms.
The Trustee’s Motion in Limine is denied. 	The court will allow evidence regarding the
true intent of the parties with regard to the contract and its terms.
It is so ordered.
cc:
Roger E. Luring, 314 W. Main Street, Troy, Ohio 45373
Paul H. Spaeth, 12 W. Monument Avenue, Suite 100, Dayton, Ohio 45402
James W. Owens, 7713 Historic Court, Dayton, Ohio 45414
United States Trustee
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