Holloway v. Bucher
2018 Ohio 3301 (2018)
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Rule of Law:
An oral agreement for a loan to be repaid in installments is unenforceable under the statute of frauds if the payment schedule, by its terms, necessarily requires more than one year to complete performance and the agreement does not contain a specific provision allowing for an early payoff.
Facts:
- On January 1, 2004, Janet Holloway orally agreed to loan her daughter, Suzanne Bucher, and her husband, William Bucher, a total of $163,800 at 1.5% annual interest.
- The loan was intended to help the Buchers pay off an existing home equity loan and purchase a new residence.
- The oral agreement required the Buchers to make monthly payments of $300 until their old residence was sold, at which point the payments would increase to $500 per month.
- In August 2004, the Buchers sold their old residence and applied the profit of $63,025.50 as a lump-sum payment toward the loan.
- Following the sale, the Buchers began making the agreed-upon $500 monthly payments.
- In February 2013, the Buchers ceased making payments after Suzanne lost her job.
- Holloway stated she granted a temporary forbearance, while Suzanne Bucher believed the remaining loan balance was forgiven.
- Holloway later demanded the payments resume, but the Buchers refused to pay.
Procedural Posture:
- Janet Holloway (appellant) filed a complaint for breach of contract against Suzanne and William Bucher (appellees) in the Wood County Court of Common Pleas (trial court).
- Appellees filed a motion to dismiss, arguing the oral agreement was unenforceable under the statute of frauds.
- The trial court denied the motion to dismiss.
- After discovery, both parties filed cross-motions for summary judgment, with appellees reasserting the statute of frauds defense.
- The trial court granted summary judgment in favor of the appellees, finding the oral agreement unenforceable, and denied appellant's motion.
- Holloway, as appellant, filed a timely appeal of the trial court's judgment to the Court of Appeals of Ohio, Sixth Appellate District.
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Issue:
Does Ohio's statute of frauds render an oral loan agreement unenforceable when the agreed-upon installment payments would necessarily extend performance beyond one year, and the agreement does not include a term allowing for early payoff?
Opinions:
Majority - Jensen, J.
Yes, the oral loan agreement is unenforceable. An agreement that by its terms cannot be performed within one year must be in writing to be enforceable under the statute of frauds (R.C. 1335.05). Citing the precedent set in Sherman v. Haines, the court reasoned that an oral installment loan agreement falls within the statute of frauds if its payment terms necessarily extend beyond one year, unless the agreement explicitly contains a provision for early payoff. Here, the fixed monthly payments of $300 and later $500 on a $163,800 loan would require significantly more than one year to complete. The court found no evidence that an early payoff option was a term of the agreement at its inception; Holloway’s later acceptance of a lump sum payment and her self-serving testimony that she would have allowed an early payoff are irrelevant to the original terms. The court also rejected the partial performance doctrine, noting that in Ohio, this exception is narrowly applied to cases involving the sale of real estate or marriage settlements, not to loan agreements where the funds are merely used to purchase realty from a third party.
Analysis:
This decision reinforces the strict application of the statute of frauds to oral installment contracts in Ohio, following the precedent of Sherman v. Haines. It clarifies that the possibility of early performance must be an explicit term of the agreement at its formation, not merely a hypothetical possibility or a later accommodation by the parties. The ruling serves as a significant caution against relying on oral agreements for long-term financial arrangements, even within families. Furthermore, the court's refusal to apply the partial performance doctrine underscores its limited scope in Ohio, preventing it from serving as a broad equitable remedy for oral contracts that otherwise fall squarely within the statute of frauds.
