Kish v. Magyar ( 2016 )

[Cite as Kish v. Magyar, 2016-Ohio-7355.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
ASHTABULA COUNTY, OHIO
JEFFERY L. KISH, : OPINION
Plaintiff-Appellant, :
CASE NO. 2015-A-0059
- vs - :
JEFFREY R. MAGYAR, et al., :
Defendants-Appellees. :
Civil Appeal from the Ashtabula County Court of Common Pleas, Case No. 2014 CV
437.
Judgment: Reversed and remanded.
Jon L. Lindberg and Ryan M. Ellis, 134 West 46th Street, P.O. Box 2300, Ashtabula,
OH 44005-2300 (For Plaintiff-Appellant).
Michelle M. French, Law Offices of Michelle M. French, LLC, 28 West Jefferson Street,
Jefferson, OH 44047 (For Defendants-Appellees).
THOMAS R. WRIGHT, J.
{¶1} Appellant, Jeffery L. Kish, appeals the trial court’s decision dismissing his
complaint under Civ.R. 12(B)(6) and denying his subsequent motion for relief from
judgment. For the following reasons, we reverse and remand.
{¶2} The following facts are derived solely from the documents attached to
Kish’s complaint pursuant to Civ.R. 10(D)(1) and that are “a part of the pleading for all
purposes” per Civ.R. 10(C).
{¶3} Kish sold 36 acres of real estate known as 2468 Sodom Road, Orwell,
Ohio 44076, parcel number 59-020-00-002-00 to appellees, Jeffrey and Mary Magyar
(“Magyars”), in September of 2012. Kish originally agreed to sell the property to JPOL
Trust, with Michelle French acting as trustee in the transaction, but the trust
subsequently assigned the sale to the Magyars as purchasers via an addendum to the
purchase contract executed by Kish, the Magyars, and the trustee. The first page of the
real estate purchase agreement, under the heading “ADDITIONAL AGREEMENTS
AND CONTINGENCIES” states: “Buyer to receive mineral, timber, and surface rights.
Seller to collect bonus money paid by NELA. Subject to review of current lease and
verification of release of original gas and oil lease.” This section also includes additional
handwritten information, which is illegible.
{¶4} Prior to entering this real estate purchase agreement, Kish entered into a
lease with the Northcoast Environmental Landowners Association, LLC (“NELA”) to
lease the property’s oil and gas rights in January of 2012 for a five-year period. This
lease agreement provided that Kish was to receive a bonus of at least $2,110.00 per
acre minus a 5.5% commission upon NELA’s assignment of the lease to an oil and gas
exploration and producing firm.
{¶5} The following language was included in the survivorship warranty deed
recorded with Ashtabula County Recorder in September of 2012 following the Magyars
purchase of the property:
{¶6} “The Grantor herein, on behalf of himself, his heirs and assigns, hereby
reserves the right to be paid the ‘Original Lease Bonus Payment’ that might be paid in
the future pursuant to an Oil and Gas Lease granted by Jeffery L. Kish to Northcoast
2
Environmental Landowners Association, LLC, on January 17, 2012, covering the lands
subject to this Deed.”
{¶7} On December 5, 2012, the Magyars entered an oil and gas lease
agreement with Beland Energy, LLC (“Beland”), leasing the oil and gas rights
associated with the property. The memorandum of this oil and gas lease agreement
was recorded with the Ashtabula County Recorder on December 6, 2012.
{¶8} Thereafter, on December 18, 2012 a release of oil and gas lease between
NELA and Kish was recorded with the Ashtabula County Recorder, stating in part that
NELA releases and discharges all of its rights, title, and interest to the oil and gas rights
to the 36 acres as leased to it by Jeffery L. Kish in January 2012.
{¶9} Kish filed suit against the Magyars asserting several causes of action.
Specifically, he alleged that the Magyars breached their duty of good faith and fair
dealing; converted his lease bonus payment; fraudulently induced him to enter the real
estate purchase agreement; and that the Magyars were unjustly enriched by their
receipt and retention of the lease bonus payment from Beland and that their wrongful
actions warranted an accounting.1
{¶10} In response, the Magyars filed a motion to dismiss the complaint pursuant
to Civ.R. 12(B)(6). Kish filed a brief in opposition. The magistrate conducted a hearing
on the motion and issued its decision granting the Magyar’s motion to dismiss and
dismissing Kish’s complaint on July 8, 2015. Kish filed objections to the magistrate’s
decision, which were “dismissed” by the trial court judge based solely on Kish’s failure
to provide the transcript of proceedings or affidavit of evidence under Civ.R.
53(D)(3)(b)(iii) in support of his objections. This September 29, 2015 judgment
1. Kish does not appeal the trial court’s dismissal of his claim for an accounting.
3
dismissed the objections, but did not state whether the court was adopting the
magistrate’s decision as required under Civ.R. 53(D)(4).
{¶11} Kish filed a motion for relief from judgment asking the trial court judge to
consider the merits of his objections based on its erroneous application of Civ.R.
53(D)(3)(b)(iii) as “any other ground justifying relief from judgment” pursuant to Civ.R.
60(B)(5). The trial court overruled his motion for relief from judgment via its October 9,
2015 judgment entry. The judge again relied on Kish’s failure to provide a transcript of
the Civ.R.12(B)(6) hearing, explaining that the transcript was necessary because the
magistrate’s decision granting the motion to dismiss included factual findings.
{¶12} The trial court adopted the magistrate’s decision in its October 9, 2015
judgment, but did not formally dismiss Kish’s complaint. Thus, we remanded the case
to the trial court for it to issue a final appealable order setting forth its disposition of the
case. The trial court subsequently issued its amended judgment entry February 3,
2016, adopting and approving the magistrate’s July 8, 2015 decision and dismissing the
proceedings.
{¶13} Kish appeals, asserting four assignments of error:
{¶14} “The trial court committed prejudicial error in dismissing Count I of Kish’s
Complaint (Breach of Contract) by failing to consider the Magyars’ breach of the
contractual duty of good faith and fair dealing.
{¶15} “The trial court committed prejudicial error in dismissing Count III of Kish’s
Complaint (Promissory Fraud) by requiring Kish to prove all the elements of his claim at
the pleading stage.
4
{¶16} “The trial court committed prejudicial error in summarily dismissing Count
II (Conversion) and Count IV (Unjust Enrichment) of Kish’s Complaint.
{¶17} “The trial court committed prejudicial error by incorrectly applying the legal
standard for the filing of a transcript of the evidence under Civ.R.53(D)(3)(b).”
{¶18} We address Kish’s arguments out of order for ease of analysis. His fourth
assigned error challenges the trial court’s denial of his motion for relief from judgment
and its decision overruling his objections to the magistrate’s decision that recommended
dismissal of the case under Civ.R. 12(B)(6).
{¶19} A decision granting or denying a Civ.R. 60(B) motion is within the trial
court's discretion and will only be reversed upon an abuse of discretion. Sain v. Roo,
10th Dist. Franklin No. 02AP-448, 2003-Ohio-626, ¶11; Oberkonz v. Gosha, 10th Dist.
Franklin No. 02AP-237, 2002-Ohio-5572, ¶12. Further, issues that could have been
raised in a direct appeal are not the proper bases for Civ.R. 60(B) relief. Blasco v.
Mislik, 69 Ohio St.2d 684, 686, 433 N.E.2d 612 (1982); Daroczy v. Lantz, 10th Dist.
Franklin No. 02AP-31, 2002-Ohio-5417, ¶34; Kelm v. Kelm, 73 Ohio App.3d 395, 399,
597 N.E.2d 535 (10th Dist.1992), affirmed, 68 Ohio St.3d 26, 1993 Ohio 56, 623 N.E.2d
39 (1993). Thus, because the issues raised herein are currently pending before us on
appeal, they were not the proper subject for a motion for relief from judgment. Id.Moreover, the trial court’s original judgment dismissing Kish’s objections did not fully
dispose of the case, but only dismissed Kish’s objections. Thus, it was not a final
appealable order subject to a motion under Civ.R. 60(B). Settlers Bank v. Burton, 4th
Dist. Washington Nos. 11CA10, 11CA12, & 11CA14, 2012-Ohio-2418, ¶16 (holding that
denial of Civ.R. 60(B) motion did not constitute a final, appealable order because the
5
trial court never entered a final judgment from which it could seek Civ.R. 60(B) relief.);
Bencin v. Bencin, 9th Dist. Medina Nos. 10CA0097-M & 10CA0113-M, 2012-Ohio-4197,
¶11.
{¶20} Regardless, we reach the substance of Kish’s argument underlying his
Civ.R. 60(B) motion, i.e., that the trial court erroneously applied Civ.R. 53(D)(3)(b)(iii) in
overruling his objections to the magistrate’s decision, because this is the same reason
for the trial court’s decision overruling his objections, which is properly before us.
{¶21} Civ.R. 53(D)(3)(b)(iii) “Objection to magistrate’s factual finding; transcript
or affidavit” states,
{¶22} “An objection to a factual finding, whether or not specifically designated as
a finding of fact under Civ.R. 53(D)(3)(a)(ii), shall be supported by a transcript of all the
evidence submitted to the magistrate relevant to that finding or an affidavit of that
evidence if a transcript is not available. With leave of court, alternative technology or
manner of reviewing the relevant evidence may be considered. The objecting party
shall file the transcript or affidavit with the court within thirty days after filing objections
unless the court extends the time in writing for preparation of the transcript or other
good cause. If a party files timely objections prior to the date on which a transcript is
prepared, the party may seek leave of court to supplement the objections.” (Emphasis
added.)
{¶23} The filing of a transcript pursuant to Civ.R. 53(D)(3)(b)(iii) is mandatory
and is designed to ensure that the substance of a magistrate hearing is preserved for
review. The trial court must accept the magistrate's factual findings and limit its review
6
to the magistrate's legal conclusions if an objecting party fails to submit a transcript or
affidavit. Ross v. Cockburn, 10th Dist. Franklin No. 07AP-967, 2008-Ohio-3522, ¶5.
{¶24} A court considering a motion to dismiss must accept as true all the
material factual allegations of the complaint and construe all reasonable inferences from
those facts in favor of the nonmoving party. Garofalo v. Chicago Title Ins. Co., 104
Ohio App.3d 95, 104, 661 N.E.2d 218 (8th Dist.1995). Furthermore, a decision granting
a motion to dismiss for failure to state a claim presents a question of law, which is
reviewed de novo. Schiavoni v. Steel City Corp., 133 Ohio App.3d 314, 317, 727
N.E.2d 967 (7th Dist.1999) citing Cleveland Elec. Illum. Co. v. Pub. Util. Comm., 76
Ohio St.3d 521, 523, 668 N.E.2d 889 (1996).
{¶25} “‘A motion to dismiss for failure to state a claim upon which relief can be
granted is procedural and tests the sufficiency of the pleading.’ State ex rel. Hanson v.
Guernsey Cty. Bd. of Commrs. (1992), 65 Ohio St.3d 545, 548, 605 N.E.2d 378. * * * In
resolving a Civ.R. 12(B)(6) motion, courts are confined to the averments set forth in the
complaint and cannot consider outside evidentiary materials. In order for a court to grant
a motion to dismiss for failure to state a claim, it must appear ‘beyond doubt that the
plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’
O'Brien v. University Community Tenants Union (1975), 42 Ohio St.2d 242, 245, 327
N.E.2d 753.” (Emphasis added.)
{¶26} Grange Mut. Cas. Co. v. Klatt, 10th Dist. Franklin No. 96APE07-888, 1997
Ohio App. LEXIS 1125, at *10-12 (Mar. 18, 1997).
{¶27} “When a court dismisses a complaint pursuant to Civ.R. 12(B)(6), it makes
no factual findings beyond its legal conclusion that the complaint fails to state a claim
7
upon which relief can be granted. Thus, the court does not assume the role of factfinder
and has no duty to issue findings of fact and conclusions of law.” State ex rel. Drake v.
Athens Cty. Bd. of Elections, 39 Ohio St.3d 40, 41, 528 N.E.2d 1253 (1988) citing
Paramount Supply Co. v. Sherlin Corp., 16 Ohio App.3d 176, 180, 190, 475 N.E.2d 197(1984) and Civ.R. 52. Thus, a decision granting a Civ.R. 12(B)(6) motion to dismiss
does not implicate Civ.R. 53(D)(3)(b)(iii).
{¶28} The trial court explained its decision to employ Civ.R. 53(D)(3)(b)(iii) in
overruling Kish’s objections:
{¶29} “As noted in the July 8, 2015 Magistrate’s Decision, the Magistrate
‘considered the parties’ arguments, exhibits, and previously filed briefs’ in arriving at his
Decision. At a bare minimum, Plaintiff’s failure to provide this Court with a transcript of
the May 20, 2015 hearing denied this Court the opportunity to consider any exhibits
admitted during the hearing.
{¶30} “Moreover, the Court rejects Plaintiff’s contention that he only objected to
the Magistrate’s legal conclusions. * * * For example, Plaintiff objected that the
Magistrate ‘failed to consider Defendants’ obvious breach of their contractual duty * * *.’
Here, Plaintiff is challenging the Magistrate’s factual findings with regard to Defendant’s
alleged breach of contract.
{¶31} “A review of the Magistrate’s Decision reveals that the Magistrate
considered and weighed the factual allegations set forth in the Complaint to determine
whether they were sufficient to withstand Defendants’ Motion to Dismiss.”
{¶32} However, because a Civ.R. 12(B)(6) motion to dismiss a complaint is a
legal determination, based in part on the trial court’s construction of the allegations in
8
the complaint in a light most favorable to the plaintiff, a trial court is not authorized to
render factual findings based on the presentation of evidence at a hearing or otherwise.
Here, the trial court misconstrued its duty to presume the allegations of fact as true
under Civ.R. 12(B)(6) as making findings of fact in support of its decision. Accordingly,
Civ.R. 53(D)(3)(b)(iii) was inapplicable, and as such, Kish’s fourth assignment of error
has merit.
{¶33} We collectively address Kish’s first, second, and third assigned errors
challenging the substance of the magistrate’s decision recommending dismissal of the
complaint based on Civ.R. 12(B)(6).
{¶34} An appellate court reviews Civ.R. 12(B)(6) dismissals de novo without
deference and presumes that the factual allegations in the complaint are true, making
all reasonable inferences in the plaintiff’s favor. Perrysburg Twp. v. Rossford, 103 Ohio
St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44, ¶5; Mitchell v. Lawson Milk Co., 40 Ohio
St.3d 190, 192, 532 N.E.2d 753 (1988); LaMusga v. Summit Square Rehab, LLC, 122
Ohio App.3d 378, 2015-Ohio-5305, 43 N.E.3d 504, ¶45 (2d Dist.)
{¶35} Under Ohio's liberal pleading rules, all that is required of a plaintiff bringing
suit is “‘(1) a short and plain statement of the claim showing that the party is entitled to
relief, and (2) a demand for judgment for the relief to which the party claims to be
entitled.’” Ivancic v. Enos, 11th Dist. Lake No. 2011-L-050, 2012-Ohio-3639, 978 N.E.2d
927, ¶42 quoting Civ.R. 8(A).
Breach of Implied Duty of Good Faith and Fair Dealing
{¶36} Kish first challenges the trial court’s decision that he failed to state a viable
claim for breach of the implied duty of good faith and fair dealing. The first claim in
9
Kish’s complaint sets forth a cause of action for breach of contract and alleges that the
Magyars breached the implied duty of good faith and fair dealing.
{¶37} “‘[T]here is an implied duty of good faith and fair dealing in every contract.’
Am. Contractor's Indemn. Co. v. Nicole Gas Production, Ltd., 10th Dist. No. 07AP-1039,
2008-Ohio-5056, ¶13, citing DVCC, Inc. v. Med. College of Ohio, 10th Dist. No. 05AP-
237, 2006-Ohio-945, ¶20. Good faith is a ‘“‘compact reference to an implied undertaking
not to take opportunistic advantage in a way that could not have been contemplated at
the time of drafting, and which therefore was not resolved explicitly by the parties.’”’
Interstate Gas Supply, Inc. v. Calex Corp., 10th Dist. No. 04AP-980, 2006-Ohio-638,
¶97, quoting Ed Schory & Sons, Inc. v. Francis, 75 Ohio St.3d 433, 443-44, 1996 Ohio
194, 662 N.E.2d 1074 (1996), quoting Kham & Nate's Shoes No. 2, Inc. v. First Bank of
Whiting, 908 F.2d 1351, 1357 (C.A.7, 1990); and citing Kirke La Shelle Co. v. Paul
Armstrong Co., 263 N.Y. 79, 87, 188 N.E. 163 (N.Y.App.1933) (stating that ‘“in every
contract there is an implied covenant that neither party shall do anything which will have
the effect of destroying or injuring the right of the other party to receive the fruits of the
contract, which means that in every contract there exists an implied covenant of good
faith and fair dealing”’). The duty of good faith ‘“‘emphasizes faithfulness to an agreed
common purpose and consistency with the justified expectations of the other party.’”’
(Emphasis added.) In re Progressive Medina Real Estate, L.L.C., 10th Dist. No. 11AP-
141, 2012-Ohio-1071, ¶23, quoting Littlejohn v. Parrish, 163 Ohio App.3d 456, 2005-
Ohio-4850, ¶26, 839 N.E.2d 49 (1st Dist.), quoting Restatement of the Law 2d,
Contracts, Section 205, comment a (1981).”
10
{¶38} Pertoria, Inc. v. Bowling Green State Univ., 10th Dist. Franklin Nos. 13AP-
1033, 14AP-63, 2014-Ohio-3793, ¶22.
{¶39} Kish alleges that the Magyars breached the duty of good faith and fair duty
based on their intentional circumvention of the terms of the parties’ agreement. He
claims that the Magyars purchased his real property, acknowledged Kish’s right to the
lease bonus payment, and then deceptively procured the lease bonus payment for
themselves. Kish alleges that the Magyars paid NELA to break its lease agreement
with him in spite of the fact that the Magyars and Kish agreed that Kish would retain this
potential lease bonus payment in their real estate purchase agreement. Kish claims
that he lost this potential lease bonus payment totaling more than $150,000. As
outlined previously, Kish’s allegations are bolstered by the timeline and facts as
depicted in the documents attached to his complaint, including the real estate purchase
agreement, Kish’s gas and oil lease, and the Magyar’s subsequent gas and oil lease
with Beland. Although the parties’ agreement did not guarantee that Kish was to
receive this lease bonus payment, the agreement nevertheless contemplated that he
would have an opportunity to obtain the benefit of the bonus.
{¶40} Thus, upon presuming Kish’s allegations are true as dictated by Civ.R.
12(B)(6), we cannot find that he fails to state a claim for breach of the duty of good faith
and fair dealing as a matter of law. Kish’s allegations that the Magyars intentionally
frustrated his opportunity for financial gain are sufficient to survive a Civ.R. 12(B)(6)
motion to dismiss. Accordingly, Kish’s first assigned error has merit.
Fraudulent Inducement
11
{¶41} Kish’s second assignment of error challenges the disposal of his
promissory fraud or fraudulent inducement claim under Civ.R. 12(B)(6). He alleges the
trial court held him to an improperly high standard of proof at the pleading stage and
essentially required him to prove all of the elements of his claim.
{¶42} In order to establish fraud, one must prove:
{¶43} “(1) a representation (or concealment of a fact when there is a duty to
disclose) (2) that is material to the transaction at hand, (3) made falsely, with knowledge
of its falsity or with such utter disregard and recklessness as to whether it is true or false
that knowledge may be inferred, and (4) with intent to mislead another into relying upon
it, (5) justifiable reliance, and (6) resulting injury proximately caused by the reliance.”
Volbers-Klarich v. Middletown Mgmt., 125 Ohio St.3d 494, 2010-Ohio-2057, 929 N.E.2d
434, ¶26 citing Burr v. Stark Cty. Bd. of Commrs., 23 Ohio St.3d 69, 73, 23 Ohio B. 200,
491 N.E.2d 1101 (1986).
{¶44} Further, Civ.R. 9(B) provides that “[i]n all averments of fraud or mistake,
the circumstances constituting fraud or mistake shall be stated with particularity. Malice,
intent, knowledge, and other condition of mind of a person may be averred generally.”
(Emphasis added.)
{¶45} Kish’s complaint alleges that the Magyars intentionally mislead him into
selling his real property at a lower price than he would have based on the parties’
inclusion of the condition that Kish was to maintain the benefit of receiving the potential
lease bonus payment pursuant to his gas and oil lease with NELA. Kish claims to have
relied on this representation to his detriment since the Magyars circumvented the
agreed upon terms and improperly secured the release of his NELA lease thereby
12
eliminating his benefit of receiving the potential lease bonus payment. Kish likewise
avers that the Magyars conditioned their decision to enter the real estate purchase
agreement upon viewing Kish’s lease agreement with NELA. Thereafter, the Magyars
leased the oil and gas rights to Beland and the Magyars received a $153,000 lease
bonus payment.
{¶46} Kish’s complaint asserts in part, “Defendants’ representations that [they]
intended to provide Plaintiff with the lease bonus payment were false and done for the
specific purpose of misleading Plaintiff and inducing Plaintiff into surrendering dominion
and control over both the Real Estate and its oil and gas rights. * * * Defendants
promised Plaintiff the reserved right to the bonus payment while, at the same time,
intending to thwart Plaintiff’s chance of receiving any benefit therefrom.” Kish’s
allegations are supported, in part, by the contracts and agreements attached to Kish’s
complaint as outlined previously. Based on the foregoing, Kish’s complaint pleads fraud
with sufficient particularity, and as such, his second assigned error has merit.
Conversion
{¶47} Kish’s third assignment of error asserts that the trial court erred in
summarily dismissing his claims for conversion and unjust enrichment. Again, our
review requires us to presume that all of the allegations set forth in the complaint are
true and determine whether the complaint fails to set forth a viable cause of action as a
matter of law. Civ.R. 12(B)(6).
{¶48} In order to set forth a cause of action for conversion, one must allege that
he has ownership or a right to possess the property at the time; that another wrongly
converted or disposed of the property; and resulting damages. KeyBank Nat'l Assoc. v.
13
Guarnieri & Secrest, P.L.L., 7th Dist. Columbiana No. 07 CO 46, 2008-Ohio-6362, ¶15.
“Where an action for conversion is based on the conversion of cash, the action will ‘only
lie if “identification is possible and there is an obligation to deliver the specific money in
question.”’” (Citations omitted.) Id.{¶49} Kish’s conversion claim asserts that the Magyars wrongfully exercised
control over the $153,000 lease bonus payment that he was entitled to receive and that
he lost the benefit of this bonus payment as a result of the Magyar’s wrongful taking of
this money. Upon assuming that all of Kish’s allegations are true, his complaint sets
forth a conversion claim sufficient to survive a Civ.R. 12(B)(6) motion.
Unjust Enrichment
{¶50} To set forth an unjust enrichment claim, a plaintiff must allege: “‘(1) a
benefit conferred by a plaintiff upon a defendant, (2) knowledge by defendant of the
benefit, and (3) retention of the benefit by the defendant under circumstances where it
would be unjust to do so without payment.’” In re Estate of Bohl, 12th Dist. Brown Nos.
CA2015-01-005, CA2015-01-006, 2016-Ohio-637, ¶40 quoting Aztec Int'l Foods, Inc. v.
Duenas, 12th Dist. Clermont No. CA2012-01-002, 2013-Ohio-450, ¶75.
{¶51} Kish alleges in his complaint that the Magyars benefitted from his sale of
real estate at a low price, which was based on his retention of the possible NELA lease
bonus payment. Kish also claims that the Magyars improperly and intentionally
thwarted his opportunity to obtain this benefit contrary to their agreement. Kish asserts
the Magyars improperly obtained their $153,000 lease bonus payment from Beland by
deceptively securing the release of Kish’s lease agreement with NELA.
14
{¶52} Presuming that these factual allegations are true, we cannot find that Kish
fails to state a claim for unjust enrichment as a matter of law. Thus, Kish’s third
assigned error has merit since neither his conversion nor his unjust enrichment claim
should have been dismissed under Civ.R. 12(B)(6).
{¶53} For the foregoing reasons, Kish’s assigned errors have merit. The trial
court’s decision is reversed and the case is remanded.
CYNTHIA WESTCOTT RICE, P.J.,
TIMOTHY P. CANNON, J.,
concur.
15