Recent Blog Posts

Peggy Kirk Hall, Asst. Professor, OSUE Agricultural & Resource Law Program     

A recent decision by the Ohio Court of Appeals addressed two important legal standards: the proof necessary to claim title to another's land by adverse possession and conditions allowing a trial court to set aside a jury's verdict.

The case, Kiesel v. Hovis, centers on a land dispute between two adjacent farms in Sandusky County, Ohio.   A recent land survey established a new legal description and a boundary line between the farms; the survey placed the boundary line 126 feet east of a ditch that the Kiesels had previously considered the boundary.   Since the new boundary reduced their parcel by seven acres, the Kiesels filed a lawsuit, claiming title to the seven acres of land by adverse possession.

Adverse possession is an old law; its historical purpose was to encourage settlement of the frontier by rewarding "squatters" who put land into productive use.  Today, adverse possession is a controversial law used to try to resolve misunderstandings about boundaries established long ago.  A party claiming land by adverse possession must prove that he or his predecessors had exclusive, continuous possession of the disputed land for at least 21 years and that the possession was open, notorious and adverse to the legal title holder.   If the party proves each element of adverse possession, the court will order a new deed that changes title to the property.

Offering Evidence to Prove Adverse Possession

Landowners often ask what type of evidence will prove the elements of adverse possession.  In this case, the Kiesels offered proof through the testimony of several witnesses.   Two farmers testified that they had farmed the disputed land for the Kiesels' predecessor from 1975 to 1993, although one farmer stated that he didn't believe all of the land had belonged to the predecessor.   The Kiesels also testified, stating that they had owned the land since 1993, had farmed up to the ditch for ten years,  had placed the land into the Conservation Enhancement Reserve program in 2003 and still received annual payments from the government for the land.

Hovis, the neighboring landowner and defendant in the case, offered witnesses to dispute the Kiesels' claims.  The surveyor for Hovis testified that the new boundary line was consistent with old legal descriptions for other parcels and with old tax maps.  The surveyor also stated that early maps did not show the ditch; a ditch did not appear on any government map until 1959.  Hovis called a witness from the county auditor's office, who testified that the new survey line was consistent with old tax maps and that the auditor's office had  ordered the new survey because the old legal description was ambiguous.  Hovis also testified that his father had owned the land since 1966, that he and his father had paid taxes for the disputed strip since that time, and that his father and the owner previous to Kiesels were friends but that he didn't know whether they had an agreement about the use of the land in question.  In reference to whether he had given the Kiesels permission to use the land, Hovis testified that he had never said anything but had consented to the use by his inaction, as it was difficult to get his equipment across the ditch to access the land.

Who Gets the Land?

As is often the situation in adverse possession cases, the jury sided with the legal title holder.  A unanimous verdict by the jury rejected the Kiesels' claim of adverse possession and ruled in favor of Hovis.

A Court's Power to Set Aside a Jury Verdict

After the jury verdict, the Kiesels asked  the court for a “judgment notwithstanding the verdict.”  This motion argues that the court should set aside a jury verdict because reasonable minds could have come to only one conclusion based on the evidence submitted, and that conclusion was opposite the jury’s decision.   The trial court agreed and granted the Kiesels' motion to replace the jury’s verdict, commenting that the jury had “lost its way.”   Hovis immediately appealed the court’s decision to the court of appeals, arguing that sufficient evidence existed to refute the claim of adverse possession, the trial court had used the wrong standard for determining whether to set aside the jury's decision, and  the trial court had invaded the “province of the jury.”

The Review by the Court of Appeals

The Sixth District Court of Appeals reinstated the jury’s verdict.  The trial court’s conclusion that the jury had “lost its way” was "patently the wrong standard to use," the court of appeals stated.  Instead, the trial court should have determined whether reasonable minds could have disagreed on the decision.  Examining all of the witness testimony, the appeals court concluded that the testimony was not conclusive either way;  reasonable minds could have examined the evidence and reached different conclusions about whether the Kiesels had proven adverse possession.  For this reason, the trial court erred by setting aside the jury's verdict.

Lessons Learned

The case reminds us once again of the difficulty of proving adverse possession.  Imagine the jury's challenge:  whether to take land from one landowner and give it to another.   The difficulty of this task is likely one reason that adverse possession claims are hard to win; another could be that "permission" for the use by the title owner is a defense to the claim that the use was "adverse" or against the wishes of the owner.   While the Kiesels and predecessors had clearly used the land in dispute for more than 21 years, they weren't able to convince the jury that their use was adverse.  Hovis, on the other hand, apparently established enough evidence to suggest that both he and his predecessor had allowed the use of the land since it was on the other side of the ditch and not easily accessible, thereby giving permission for the use.  The law of adverse possession does not allow a party to claim the land of one who has given permission or "acquiesced" in the use of his or her land by another, even if the other party mistakenly believes he or she owns the land.

This case also reminds us about the role of juries and judges in our legal system.  While a trial court judge can disagree with a jury, the judge does not have automatic authority to deprive the jury of its decision.  Only if there's no uncertainty about the interpretation of evidence--no room for reasonable minds to disagree about what the evidence proves--can a court step in and replace a jury's verdict.   This is an important principle of our legal process, intended to balance power between the people and the courts.

Time will tell whether the Kiesels invoke another significant component of our legal process--the right to request a review of the appellate court's decision by the Ohio Supreme Court. The appellate court's decision in Kiesel v. Hovis is here.

Peggy Hall, Asst. Professor, OSU Extension Agricultural & Resource Law Program           .

Tree obstructions, unwanted vegetation and noxious weeds are serious matters for Ohio farmers, which is why several Ohio laws provide mechanisms for addressing these problems through the board of township trustees.   Two recent Ohio court cases illustrate the practical impacts of the laws and demonstrate the consequences of both following and failing to follow the processes provided by these laws.

The first case, Kilroy v. Jackson Township, concerned the clearing of weeds and vegetation in a partition fence row.   The case recently resulted in a judgment of over $56,000 against the board of trustees of Jackson Township in Montgomery County, including an unusual finding of personal liability against each trustee.  The court determined that the trustees failed to perform a settlement agreement with the Kilroys concerning the clearing of their neighbor’s fence row.  The settlement agreement arose from a lawsuit filed by the Kilroys asking the court to require the township trustees to perform their legal duties to have the neighbor’s fence row cleared of weeds and vegetation.

Ohio Revised Code 971.34 allows a landowner in a rural area to ask a neighbor to clear his or her side of a partition fence between the properties and, if the landowner fails to do so, to petition the township trustees to step in and resolve the problem.  The trustees must view the property and determine whether the fence row contains brush, briers, weeds and vegetation and if so, “shall cause them to be cut, by letting the work to the lowest bidder, or by entering into a private contract therefor.” The Kilroys petitioned the trustees under this process after their neighbors failed to clear the fence row when requested, but the trustees did not act on the petition or arrange for removal of the vegetation.

After the Kilroys filed suit against the trustees and the neighbors, the parties entered into a settlement agreement in which the neighbors agreed to clear the fence row and the trustees agreed to have the row cleared if the neighbors didn’t do the work.  The Kilroys later filed a second complaint alleging breach of the settlement agreement after neither the trustees nor the neighbors cleared the fence row.  The second complaint included individual claims against the trustees for intentional interference with a contract and civil conspiracy.  The neighbors finally cleared the fence row, but the Kilroys maintained the lawsuit against the trustees.  The parties entered into a second settlement agreement in which the trustees agreed to pay the sum of $15,000 and to issue an apology letter to the Kilroys.  Eventually, the matter ended up in court again for a breach of the agreement because the Kilroys did not receive either the $15,000 or the apology letter.   The trial court determined that the trustees had signed the settlement agreement in both their official and individual capacities and had subsequently breached the agreement; the court awarded the Kilroys $15,000 as specified in the agreement plus an additional $37,558 in attorney fees and $3,888 for fees paid to expert witnesses.  The trustees filed an appeal, but the Second District Court of Appeals agreed with the trial court’s decision.

Contrast the Kilroy case with a second dispute in Sterling Township, Brown County, where a farmer could not drive his new combine down a township road because of overgrown trees and brush along the road.  The farmer asked the trustees to trim the trees and vegetation but the trustees did not do so.  The farmer then trimmed the vegetation himself and submitted an invoice to the township for $1,863.  When the township did not pay the invoice, the farmer filed a lawsuit claiming that the township trustees had failed in their duty to keep the road free of obstructions and had also failed to eliminate a known safety hazard.  Included in the suit was a request to remove the trustees from office for failure to perform their official duties.  The Brown County Municipal Court dismissed the farmer’s case and the farmer filed an appeal on the claim alleging that the trustees had failed their statutory duty to maintain the roadway.

The court of appeals analyzed Ohio Revised Code sections 5571.02 and 5579.08, which state that a township shall keep its roadways in good repair and shall cut or destroy all brush, briers, vines, and noxious weeds growing along the roadways between the first and twentieth days of June, August and, if necessary, September.  The court noted that these sections of law do not provide the process for a private cause of action against the trustees as demanded by the farmer.  To enforce the law, the farmer must follow the proper legal process, explained the court, which is to first formally request the trustees to perform the action and then ask the court for an order compelling the action, referred to as a “writ of mandamus,” if they fail to do so.

In this case, the farmer did not formally present his request to have the trees trimmed to the township trustees.   He had called each trustee personally by phone and had visited one trustee at his home.  The County Prosecutor had advised the farmer to make an official complaint to the trustees, but the farmer never attended a trustee meeting or made a formal complaint about the vegetation.  By choosing instead to take matters into his own hands and trim the trees and vegetation himself, the farmer had “self-imposed” his own damages, said the court.  Seeking reimbursement for his own work was not the proper method for enforcing the township’s duty to clear the vegetation.

The lesson here should be clear to both township trustees and farmers.  Ohio law establishes duties and remedies for dealing with trees, weeds and vegetation in rural areas; township trustees must perform these duties and farmers must know how to seek a remedy.  The different outcomes from these cases illustrate the importance of knowing and following the proper legal process.

Read Kilroy v. Jackson Township here and Mezger v. Horton here.  See Ohio Revised Code sections here: 971.34 and 5579.08

Peggy Hall, Asst. Professor, OSUE Agricultural &  Resource Law Program

The Ohio legislature has already addressed a legal issue that recently created discord on Ohio's Sixth District Court of Appeals.  In its recent decision in Ohio Department of Agriculture v. Central Erie Supply & Elevator Association, the appeals court disagreed over how to interpret the statutory lien provisions in Ohio's Agricultural Commodity Handler's Law.  The majority held that the  statutory lien favors farmer claimants over all other interests while the dissent argued that the statute is "entirely silent" on the issue of priorities between farmers and competing parties who have security interests in the proceeds of a failed grain handler.  Obviously attuned to the problem, the Ohio legislature revised the  law just over a month ago to include language that removes any doubt on the matter.

Ohio's Agricultural Commodity Handler's law contains many provisions designed to protect farmers from the risks of doing business with a grain elevator or other grain handler.  If a handler suffers financial distress before paying farmers who've deposited grain with the handler, the law establishes an automatic statutory lien on behalf of the farmers.  The law grants the Director of the Ohio Department of Agriculture power to enforce the statutory lien against the grain handler and distribute lien proceeds among the unpaid farmers.  The law also states that the commodity handler's law takes precedence over any conflicting provisions for secured transactions in another section of Ohio law, Ohio Revised Code section 1309.

In the Central Erie Supply case, the question before the court was whether the statutory lien for the farmers had priority over a $425,691 security interest established by Citizens Banking Company, a creditor of the failed grain handler.  The panel of judges examined the commodity handler's law and reached opposite conclusions.  The majority concluded that the law conflicted with R.C. section 1309 and thus took precedence over the bank's security interest that was established under section 1309.  The dissent argued that the language about conflicts between the different laws referred only to the issue of how to distribute proceeds between farmers and did not pertain to other security interests established under R.C. section 1309.  Both sides did agree, however, that the issue of priority between farmers and other security interests is a matter for the legislature, not the courts.  "Yet, unless and until the legislature acts, we are bound to interpret the law as it is currently written, not as we wish it to be," stated dissenting Judge Yarbrough.

The Ohio legislature did act on the matter--and did so before the court had even issued its ruling.  In late June of this year, the legislature approved S.B. 66 (see our earlier post) and added this language to the commodity handler's law:  “The lien established under this section shall have priority over all competing lien claims asserted against the  agricultural commodity assets.”   The legislation ascertains that upon its effective date of October 11, 2013, a statutory lien established under the commodity handler's law will be first in line ahead of all other liens claimed against the assets of a failed grain handler.  Until October 11, the Central Erie Supply decision bolsters an argument seeking the same order of priority stated in the new law.   Based on the recent actions of the legislature and the court of appeals, the commodity handler's statutory lien now has a few more teeth.

Read the Central Erie Supply decision here, S.B. 66 here and the Agricultural Commodity Handler's Law here.

Erin Porta, OSUE Agricultural and Resource Law Extern and Peggy Hall, Asst. Professor, OSUE Agricultural and Resource Law Program

Like much of the business world, many Ohio farmers are choosing to operate as Limited Liability Companies (LLCs) to gain personal liability protection for LLC members and ample estate, tax, management and business succession advantages.

Under Ohio’s LLC statute (ORC § 1705), an LLC is treated as a separate legal entity apart from its owners. Thus, the general rule places the debts, obligations, and liabilities of an LLC, whether arising in contract, tort, or otherwise, solely on the shoulders of the LLC—not its members or managers. LLC members and managers stand to lose only the money they've invested in the LLC, not their own house, car or other personal possessions.

Increasingly, those who deal with LLCs are finding ways around this personal liability “shield.”  One strategy that is becoming more frequent among lenders, landlords and other businesses doing business with LLCs is to require a personal guaranty from individual LLC members or managers.  The personal guaranty binds the LLC members or managers to a promise to be personally liable for the debts and liabilities of the LLC.

While personal guaranties are becoming a ubiquitous part of doing business, their legal implications are far from routine. When faced with a demand for a personal guaranty, here are several important points LLC members or managers should keep in mind:

1. A valid personal guaranty will negate the personal liability protection provided by the LLC.  By signing a personal guaranty you are essentially waiving your LLC personal limited liability shield. For example, if the LLC cannot repay the loan you guaranteed, the creditor may come after your personal assets. However, the personal guaranty will not negate other LLC liability protections, such as liability for torts committed by the business.
2. The word “guaranty” is not necessary to create a personal guaranty.  There are no formal magic words required for the formation of a personal guaranty; it is sufficient if the document contains words that unequivocally create a promise to answer for the debt of another.[i] Examples of language that create a personal guaranty include:  a party "guarantees" an obligation of another; a party agrees to immediately undertake the obligations of borrowers upon written notice of default from the creditor; a creditor has the right to "call" upon the LLC manager to make payments due from the LLC; or the LLC manager agrees to be "responsible for" an obligation when due.[ii]
3. How you sign may matter.  Ohio cases indicate that signing your name followed by your business title (“John Doe, President”) on an agreement that contains personal guaranty language does not negate personal liability or shift liability to the LLC. [iii]  However,  disclosing that you are representing the LLC by using “by,” “per,” “on behalf of” and indicating the name of the business may deem the agreement ambiguous and prevent personal liability. [iv]  There is a major hurdle to this strategy, however:  the other party must accept this form of signature—a tall order considering it would essentially render the personal guaranty agreement meaningless.
4. You will almost always be responsible for the entire debt. The personal guaranty agreement will specify your obligations; however, most create unconditional joint and several liability for all who sign the agreement. In other words, each LLC member or manager who signs is responsible for the full amount of the debt and the bank may pursue any and all LLC members or managers who signed the guaranty.
5. Some personal guaranties live beyond the original transaction.  A guaranty may be restricted to a single transaction or may continue to apply to some or all future transactions.  Phrases such as "now or at any time hereafter,"  "all obligations however and whenever incurred," and "now existing or hereafter contracted" are examples of language that may create a personal guaranty for future transactions of the LLC.  Under Ohio law, a guaranty will likely not be interpreted as one that continues into the future absent this type of language, which displays a clear intent to be bound in the future.[v]   Where the guaranty is a continuing guaranty, it remains effective until the LLC manager or member clearly communicates an intent to revoke and no longer be bound by the guaranty.[vi]
6. Some lenders or property owners are willing to negotiate. While personal guaranties are becoming very common, they can be negotiable and tailored to your company's situation.  Some businesses automatically include personal guaranty agreements or language in their standard business transactions and it's possible that a deal could go through without the guaranty .[vii]  For example, an LLC that can show adequate capital in its reserves may be able to negotiate a loan without a personal guaranty.  Alternatives to a personal guaranty, such as larger security deposits or letters of credit, may also be negotiated.  If the person or business insists on having a personal guaranty, there are still ways to limit personal risk such as proposing an endpoint to the guaranty when certain conditions are met (dollar amount caps, no default for a set period of time); subjecting only certain personal assets to the guaranty;  ensuring the guaranty is limited to the particular transaction at hand and not future transactions and exempting a spouse of an LLC manager or member from the guaranty.
7. Ignorance is not bliss. Claims that a party thought he or she was signing something other than a personal guaranty, did not read the entire document, or was not made aware of the personal guaranty have generally not been well received by Ohio’s courts as reasons to negate a personal guaranty.[viii]  To void a personal guaranty on the basis of "ignorance," there must be evidence demonstrating that a party committed fraud in securing a personal guaranty from another party—a hard standard to meet.
8. Personal guaranties are not the only way to waive LLC personal liability protection. Be aware that co-signing a loan, signing a contract in your own name, pledging personal property as collateral, acting without authority, or making fraudulent representations or omissions when applying for the loan may also place your personal assets at risk.

Nearly any sort of business deal can involve a personal guaranty. The following recent Ohio court case [ix] demonstrates how a simple personal guaranty can have lasting consequences:

• The owner of an Ohio building company submitted a credit application to a supplier in order to purchase materials on credit.  As part of the credit application, the owner signed a personal guaranty for the company's transactions.  The guaranty included language stating that it was “a continuing guaranty for all sales heretofore and hereafter made” between the two companies until “the time that notice of the termination of this guaranty shall be received, in writing, by personal mail at the principal office of (the supplier).”
• Upon approval of the credit application, the owner of the building company purchased materials on credit and promptly paid the supplier in full.  The owner of the building company then continued to purchase materials from the supplier on credit for over a decade and the building company paid the amounts due.  However, thirteen years after the personal guaranty and original purchase was made, the building company was unable to pay for its purchases.
• The supplier alleged that the owner of the building company was personally liable by way of the thirteen year old personal guaranty, which the building company owner had failed to terminate or revoke in writing.
• The court enforced the personal guaranty, despite the building company owner’s belief that he guaranteed payment only for the original purchase of materials.  In holding the building company owner personally liable for the company's debt, he court pointed to the language in the original guaranty which used the word “continuing,” and noted that the guaranty did not have language limiting its duration or application to any specific purchase.

This case is a good reminder that failing to understand or negotiate personal guaranty language can lead to serious and unintended results for the managers or members of LLCs. * * * For information on organizing an LLC, see Robert Moore & Barry Ward, OSU Extension, Fact Sheet: Starting, Organizing, and Managing an LLC for a Farm Business, available at http://ohioline.osu.edu/bst-fact/pdf/LLC_Farm_Business.pdf.