Pointe At Gateway Condominium Owner's Assn., Inc. v. Schmelzer ( 2013 )

[Cite as Pointe At Gateway Condominium Owner's Assn., Inc. v. Schmelzer, 2013-Ohio-3615.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
Nos. 98761 and 99130
POINTE AT GATEWAY CONDOMINIUM
OWNER’S ASSOCIATION, INC.
PLAINTIFF-APPELLANT
vs.
JEROME H. SCHMELZER, ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-780002
BEFORE: Jones, P.J., Kilbane, J., and McCormack, J.
RELEASED AND JOURNALIZED: August 22, 2013
ATTORNEYS FOR APPELLANT
Steven M. Ott
Nicole D. Leclair
Ott & Associates Co., L.P.A.
55 Public Square
Suite 1400
Cleveland, Ohio 44113
ATTORNEYS FOR APPELLEES
Edgar H. Boles
Moriarty & Jaros, P.L.L.
30000 Chagrin Blvd.
Suite 200
Pepper Pike, Ohio 44124
Lee A. Chilcote
The Chilcote Law Firm, L.L.P.
12434 Cedar Road
Suite 3
Cleveland Heights, Ohio 44106
LARRY A. JONES, SR., P.J.:
{¶1} In two appeals, plaintiff-appellant, Pointe at Gateway Condominium
Owners’ Association, Inc. (“Association”), appeals the trial court’s judgments granting the
motion to dismiss and the motion for a permanent injunction of defendants-appellees,
Jerome Schmelzer, Lawrence Schmelzer, Pointe at Gateway Condominium, L.L.C., and
Pointe at Gateway, L.L.C. (collectively “appellees”). The appeals have been
consolidated for our review. We affirm.
I. Procedural History and Facts
{¶2} According to the Association’s complaint, the Association was organized
under R.C. Chapter 5311 for the purpose of administering the property known as Pointe at
Gateway Condominium in Cleveland. The property, which is a historic building, consists
of condominium units and appurtenant common elements.
{¶3} Appellee Pointe at Gateway Condominium, L.L.C. was the developer of the
property, and appellees Jerome and Lawrence Schmelzer were board of trustee members
of Pointe at Gateway Condominium, L.L.C., and Jerome Schmelzer was its chief executive
officer. The complaint alleged that Pointe at Gateway, L.L.C. was the original owner of
the property, and the Schmelzers were members of its board of trustees.
{¶4} According to the complaint, the Schmelzers “used their complete control over
the financial affairs and business decisions” of Pointe at Gateway Condominium, L.L.C.,
and Pointe at Gateway, L.L.C. to commit the alleged acts. The complaint alleged that in
March 2004, Pointe at Gateway subdivided the property so as to separate ownership of the
facade of the building from ownership of the rest of the building. Approximately two
weeks later, Pointe at Gateway transferred the “facade parcel” to Pointe at Gateway
Condominium.
{¶5} In May 2004, Pointe at Gateway Condominium created the Association and
dedicated the remainder of the property to it, but retained ownership of the facade
property. According to the Association’s complaint, the appellees orchestrated the lot
split so that they could continue leasing the facade for commercial advertising. The
Association alleged that the subdivision was improper and unlawful.
{¶6} The property was turned over to the member owners of the Association in
December 2011. The complaint alleged that from May 2004 until December 2011, the
Schmelzers “held a controlling interest in the Association Board of Trustees and ran the
day-to-day Association operations, Association management, and handled all Association
bookkeeping * * *.”
{¶7} In April 2012, the Association filed a complaint against appellees, seeking
relief based on the following 12 counts: Count 1, a declaratory judgment stating that the
lot split was invalid; Count 2, alternatively, a declaratory judgment stating that the facade
parcel was common property of the Association as of May 19, 2009; 1 Count 3,
compensatory damages based on the revenues appellees received from the facade parcel,
1
Under Article II, Section 4 of the Bylaws, the period of developer control was to end within
30 days of 5 years following the establishment of the Association, or the sale by the developer of 75%
ownership in the common elements of the Association.
but which belong to the Association; Count 4, failure to perform in a workmanlike
manner; Count 5, violations of the Consumer Sales Practices Act; Count 6, breach of
fiduciary duty; Count 7, negligence; Count 8, fraudulent concealment; Count 9, breach of
contract; Count 10, unjust enrichment; Count 11, conversion; and Count 12, trespass to
chattels.
{¶8} Appellees filed a motion for a temporary restraining order and preliminary
injunction. In the motion, appellees requested the trial court order the Association to (1)
stop depleting the condominium’s reserve fund with expenditures on attorney fees,
accountants’ fees and other costs and fees incurred in litigating this action, (2) provide the
unit owners with an accounting of the costs and expenditures already incurred in litigating
this case and an estimate of future costs and expenditures for continuing the litigation, and
(3) assess the specific unit owners who supported the litigation for the costs already
incurred and future costs.
{¶9} The motion was based on the following facts contained in the record. In July
2010, the Board of Managers of the Association unanimously approved a “Reserve Study”
that examined the needs for the reserve fund. The Study indicated that $208,900 was
needed; funding began in 2010. By January 2012, $109,308 was accumulated in the
fund.
{¶10} On January 12, 2012, the Association began commingling the reserve funds
with the Association’s general operating funds account. The commingling continued
until March 2012, when a new reserve fund was created. At that time, the fund contained
$75,000. During the time that reserve funds were commingled with operating account
funds, the Association used the commingled funds to pay for accounting and legal services
arising from this litigation.
{¶11} Appellees also filed a Civ.R. 12(B)(6) motion to dismiss the Association’s
complaint. In their motion, appellees contended that Counts 1, 2, and 3, for declaratory
judgment and compensatory damages, were “fictitious claims, unsupported by law * * *.”
In addition to other reasons, which will be discussed more within, appellees contended that
all of the Association’s counts were time-barred.
{¶12} The trial court granted appellees’ motion for a temporary restraining order
and preliminary injunction in part and denied it in part. The motion was granted to the
extent that the Association was enjoined from depleting the reserve funds with
expenditures on attorney fees, accounting fees, and other costs and fees associated with
this litigation, but was denied as to appellees’ request for an accounting and restoration of
funds.
{¶13} Appellee Pointe at Gateway Condominium filed a counterclaim and
complaint for permanent injunction. Through these pleadings, Pointe at Gateway
Condominium sought to permanently enjoin the Association from the further use of the
reserve funds and to restore $34,308.59 to the reserve fund.
{¶14} In September 2012, a hearing was held on Pointe at Gateway
Condominium’s counterclaim for a permanent injunction; the court granted judgment in
favor of Pointe at Gateway Condominium on the counterclaim. The court also granted
appellees’ motion to dismiss the Association’s complaint.
{¶15} The Association now raises the following eight assignments of error for our
review:
[I.] The trial court erred in finding that there was no justiciable issue with
regard to the subdivision of the facade of a condominium from the rest of the
building.
[II.] The trial court erred when it held that Appellant’s claims for Failure to
Perform in a Workmanlike Manner, Negligence, Fraudulent Concealment,
Unjust Enrichment, Conversion, and Trespass to Chattels were barred by the
statute of limitations because it failed to consider the actions of the
Appellees between May of 2004 and December of 2011 as alleged in the
Association’s Complaint.
[III.] The trial court erred when it dismissed Appellant’s claim for Breach of
Fiduciary Duty by failing to consider the allegations asserted against the
individual Defendants, J. Schmelzer and L. Schmelzer.
[IV.] The trial court erred when it dismissed Appellant’s claim for
Fraudulent Concealment by implementing the wrong standard.
[V.] The trial court erred when it dismissed Appellant’s claim for Breach of
Contract because it failed to consider all allegations in Plaintiff’s Complaint
as true.
[VI.] The trial court erred when it dismissed Plaintiff’s claim for Unjust
Enrichment because it failed to consider whether the Defendant[s]-Appellees
were legally entitled to separate the facade of the building from the rest of
the condominium property.
[VII.] The trial court erred when it dismissed Plaintiff-Appellant’s claims for
Conversion and Trespass to Chattels without considering all facts as alleged
in the Complaint as true.
[VIII.] The trial court erred as a matter of law in determining that
Plaintiff-Appellant is prohibited from using reserve funds for non-capital
expenses.
II. Law and Analysis
{¶16} With the exception of the last assignment of error, all the assignments relate
to the trial court’s judgment granting appellees’ motion to dismiss pursuant to Civ.R.
12(B)(6).
{¶17} In Counts 1 and 2 of its complaint, the Association sought declaratory
judgments. In Count 1, the Association sought a declaration invalidating the lot split that
created the facade parcel and a designation of the area as Association common property.
In Count 2, the Association sought, alternatively, a declaration of the facade parcel as
Association common property as of May 2009.
{¶18} The trial court held that the allegations contained in Counts 1 and 2 failed to
demonstrate the existence of a controversy or justiciable issues between the parties. In so
finding, the court relied on the Declaration, which it found specifically excluded the
facade parcel from the definitions of both condominium property and Association common
elements. The court therefore found that the “contractual language is clear and
unambiguous, and [the Association] has provided [the] Court with no legal basis to
derogate from it.”
{¶19} In its first assignment of error, the Association contends that the trial court
erred by relying solely on the Declaration language and not considering whether, legally,
ownership of the facade of a condominium building can be separated from the remainder
of the building. According to the Association, under R.C. 5311.01, it can not. Thus, in
other words, according to the Association, the Declaration binds the parties to an illegal
act.
{¶20} R.C. 5311.01 contains the definitions for R.C. Chapter 5311, governing
condominium property. Under subsection (F)(2)(a), common elements includes
“[f]oundations, columns, girders, beams, supports, supporting walls, roofs, halls, corridors,
lobbies, stairs, stairways, fire escapes, entrances, and exits of buildings.” The
Association contends that the facade parcel is “primarily comprised of foundations and
supports” and, therefore, must necessarily be part of the common elements. But the
Association ignores the beginning language of the subsection of the statute, which states
that common elements are defined by the statute “unless otherwise provided in the
declaration.” Id.{¶21} The Declaration here specifically provides that “[t]he facades of and the
space above the Building shall be expressly excluded from the Condominium Property,
including the Common Area and Facilities.” Article I, Section (E)(3) of Declaration.
Further, the Declaration describes the common areas and facilities as the
entire balance of Condominium Property described in Exhibit 1 and the
improvements, structure and fixtures therein and thereon, including but not
limited to, those portions of the Building, foundations, roof, main and
supporting walls, columns, girders, beams, halls, corridors, stairways not
within units, storage spaces, the entrance improvement, including signage,
community facilities, if any, pumps, balconies, decks, patios, wires, conduits,
utility lines and ducts now or hereafter situated on the Condominium
Property, all as hereinbefore more specifically described as “Common Areas
and Facilities” in Article I hereof, are hereby declared and established as the
Common Areas and Facilities, including all electric fixtures, utility pipes and
lines, faucets, shower heads, plugs, connections, or fixtures as defined by the
laws of the State of Ohio and all replacements thereof shall be a part of the
Common Areas and Facilities, but specifically excluding the exterior facades
of and air space above the Building * * *.
(Emphasis added.) Id. at Article II, Section (B)(1).
{¶22} The Declaration also defines condominium property as
the condominium parcels, those portions of the Building, including the
improvements, structures and fixtures, on, in or under the Condominium
Parcels, specifically excluding the facades of and space above the Building,
all easements, rights and appurtenances belonging to the Condominium
Parcels, and all articles of personal property submitted to the provisions of
the Act.
(Emphasis added.) Id. at Article I, Section (O).
{¶23} The Association contends that we review de novo the dismissal of its
requests in Counts 1 and 2 for declaratory judgment. Appellees, on the other hand,
contend that, because the trial court dismissed due to a finding of a lack of justiciable
issue, we review for an abuse of discretion.
The Standard of Review and the Concept of Justiciability
{¶24} In Arnott v. Arnott, 132 Ohio St.3d 401, 2012-Ohio-3208, 972 N.E.2d 586,
the Ohio Supreme Court addressed the issue of the standard of review governing
dismissals of declaratory judgment actions for lack of a justiciable issue. The court held
that the “abuse-of-discretion standard applies to the review of a trial court’s holding
regarding justiciability; once a trial court determines that a matter is appropriate for
declaratory judgment, its holding regarding questions of law are reviewed on a de novo
basis.” Id. at ¶ 13.
{¶25} A review of the concept of justiciability will be helpful for our purposes here.
The subject-matter jurisdiction of common pleas courts is limited by the Ohio
Constitution, Article IV, Section 4(B) to “justiciable matters.” The Ohio Supreme Court
has interpreted a justiciable matter to mean an actual controversy between the parties.
State ex rel. Barclays Bank PLC v. Hamilton Cty. Court of Common Pleas, 74 Ohio St.3d
536, 542, 660 N.E.2d 458 (1996). The justiciability requirement includes an action for a
declaratory judgment. Mid-Am. Fire & Cas. Co. v. Heasley, 113 Ohio St.3d 133,
2007-Ohio-1248, 863 N.E.2d 142, ¶ 9.
{¶26} “A ‘controversy’ exists for purposes of a declaratory judgment when there is
a genuine dispute between parties having adverse legal interests of sufficient immediacy
and reality to warrant the issuance of a declaratory judgment.” (Internal citations
omitted.) Wagner v. Cleveland, 62 Ohio App.3d 8, 13, 574 N.E.2d 533 (8th Dist.1988),
citing Burger Brewing Co. v. Liquor Control Comm., 34 Ohio St.2d 93, 296 N.E.2d 261(1973); see also Kincaid v. Erie Ins. Co., 128 Ohio St.3d 322, 2010-Ohio-6036, 944
N.E.2d 207, ¶ 10 (an actual controversy is “more than a disagreement; the parties must
have adverse legal interests”).
{¶27} Ohio’s Declaratory Judgment Act is a statutory scheme created in derogation
of the common law, and the existence of jurisdiction in a declaratory-judgment action must
be evident from the allegations in the complaint. Van Stone v. Van Stone, 95 Ohio App.
406, 411, 120 N.E.2d 154 (6th Dist.1952). If the complaint fails to show the existence of
a real, present dispute, then any opinion by a court would be merely advisory; it is a
well-established principle of law that a court cannot issue an advisory opinion. Scott v.
Houk, 127 Ohio St.3d 317, 2010-Ohio-5805, 939 N.E.2d 835, ¶ 22.
{¶28} By way of example of what constitutes a justiciable matter, we consider two
cases: State ex rel. Bolin v. Ohio EPA, 82 Ohio App.3d 410, 612 N.E.2d 498 (9th
Dist.1992) and Arnott v. Arnott, 132 Ohio St.3d 401, 2012-Ohio-3208, 972 N.E.2d 586.
{¶29} In Bolin, plaintiff Bolin entered into an agreement with Shell Oil Company
whereby Shell agreed to purchase Bolin’s property if Bolin would reduce soil and
groundwater contamination to acceptable levels. Bolin hired a company that remediated
the contamination on Bolin’s property, and that company then sought confirmation from
the Ohio EPA that the property complied with applicable environmental laws. The Ohio
EPA would neither confirm the remediation measures, nor conduct its own tests, but told
the company that it reserved the right to conduct future tests. Bolin filed a
declaratory-judgment action against the Ohio EPA, its director, and the state, alleging that,
as a result of the Ohio EPA’s refusal to confirm that his property was in compliance with
Ohio’s environmental statutes governing hazardous wastes and water pollution, Shell
would not exercise its option to purchase his property. Bolin specifically sought a
declaratory judgment that his property complied with the applicable environmental laws
and was exempt from Ohio EPA regulation.
{¶30} The trial court granted the Ohio EPA and the other defendants’ motion to
dismiss the complaint under Civ.R. 12(B)(6), and Bolin appealed. As to Bolin’s request
for declaratory judgment, the Ninth District determined that no justiciable controversy
existed between Bolin and the Ohio EPA. In reaching that determination, the Ninth
District reasoned that the Ohio EPA had never claimed that Bolin’s property had not been
in compliance with applicable laws, nor had it initiated any investigation or proceeding
claiming noncompliance. Thus, the Ninth District affirmed the trial court’s dismissal of
Bolin’s complaint for declaratory judgment for lack of a justiciable issue.
{¶31} In Arnott, a revocable living trust gave James Arnott, the trust’s successor
trustee, and his brother, Kenneth Arnott, the option to purchase specified parcels of
farmland owned by the trust “at a price equal to the appraised value of said property as
affixed for federal and/or state estate tax purposes.” That price-determining phrase
caused disagreement. Specifically, Kenneth and certain other beneficiaries argued that
pursuant to the trust language, the option price was the fair market value as determined by
an appraiser, whereas James and certain other beneficiaries contended that the trust set the
option price as the appraiser’s value less the estate-tax deduction allowed for farmland in
either the federal or state tax code.
{¶32} Kenneth filed a complaint for declaratory judgment in probate court, seeking
judicial interpretation of the provision at issue. The trial court held that the matter was
appropriate for disposition through a declaratory-judgment action and concluded that the
disputed phrase was unambiguous — the option price was simply the fair market value as
determined by the appraisal.
{¶33} James appealed, and contended that there was insufficient evidence of a
justiciable controversy to permit the declaratory-judgment action to go forward and that
even if declaratory judgment was proper, the trial court had improperly interpreted the
contested language of the trust.
{¶34} The Fourth Appellate District reviewed under an abuse-of-discretion
standard on the first issue James raised, which was, whether there were grounds for
proceeding on a declaratory-judgment action. In re Arnott, 190 Ohio App.3d 493,
2010-Ohio-5392, 942 N.E.2d 1124 (4th Dist.). Finding that the court had not abused its
discretion in proceeding on the action, the appellate court moved on to the issue of
whether the trial court had erred in finding that the trust language — “the appraised value
* * * affixed for federal and/or state estate tax purposes” — was equivalent to “fair market
value.” In addressing this issue, the court employed a de novo standard of review. The
court wrote,
[a] trial court’s determination of purely legal issues is never one of degree or
discretion. Regardless of whether the action is styled as one for declaratory
relief, the trial court must correctly apply the law.
Id. at ¶ 42.
{¶35} Reviewing the trust document de novo, the court reversed, finding that the
option language was “susceptible of more than one reasonable interpretation” and, “guided
by the rule that [the court] should review the Trust as a whole to determine the settlor’s
intent,” the court ultimately determined that “the settlor intended the option price to be the
value established for federal and/or state estate-tax purposes, in this case, the federal
and/or Ohio qualified-use value.” Id. at ¶ 4.
{¶36} As mentioned, on appeal to the Ohio Supreme Court, the court found that
the abuse-of-discretion standard applies to dismissals of declaratory judgment actions as
not justiciable, but a de novo standard of review applies regarding questions of law.
Applying its finding, the court noted the following:
The determination of the meaning of the disputed language of the trust at the
heart of this case is a question of law. ‘A court’s purpose in interpreting a
trust is to effectuate, within the legal parameters established by a court or by
statute, the settlor’s intent.’ Domo v. McCarthy, 66 Ohio St.3d 312, 612
N.E.2d 706 (1993), paragraph one of the syllabus. Interpreting a trust is
akin to interpreting a contract; as with trusts, the role of courts in interpreting
contracts is ‘to ascertain and give effect to the intent of the parties.’
Saunders v. Mortensen, 101 Ohio St.3d 86, 2004-Ohio-24, 801 N.E.2d 452,
¶ 9. This court has held that ‘[t]he construction of a written contract is a
matter of law that we review de novo.’ Id.Arnott at ¶ 14.
The Concept of Justiciability Applied to this Case
{¶37} Here, although the trial court found that no justiciable issue existed between
the parties, it interpreted the contract (the Declaration). We disagree with the trial court’s
finding of lack of justiciability. This case is akin to Arnott. A contract, the Declaration,
existed, and interpretation of the Declaration was germane to resolving the parties’
dispute. Because a justiciable issue existed, and the trial court in fact interpreted the
contract, we review de novo.
{¶38} Upon such review, notwithstanding that the trial court erred in finding no
justiciable issue, it nonetheless properly interpreted the Declaration and dismissed Counts
1, 2, and 3 of the complaint.
{¶39} As mentioned, R.C. 5311.01(F)(2)(a) defines what constitutes common
property “unless otherwise provided in the declaration.” The Declaration here
specifically excludes the facade of the building as common property. Thus, the trial court
properly dismissed Count 1 of the Association’s complaint.
{¶40} The Association further contends that the trial court erred in dismissing
Count 2, which alleged that Pointe at Gateway Condominium’s control over the facade
parcel ended in May 2009, because it failed to consider the actions of the appellees
between the “developer-controlled period” of May 2004 through December 2011.
{¶41} R.C. 5311.25(B) prohibits a developer of condominium property from
retaining a property interest in “any of the common elements after unit owners other than
the developer assume control of the unit owners association.” As already mentioned,
R.C. 5311.01(F) defines various aspects of condominium property as being common
elements “unless otherwise provided in the declaration.” Again, the Declaration
specifically excludes that facade of the building as common property. The trial court
therefore properly held that there was “no legal basis * * * to ignore the directly applicable
language.”
{¶42} Therefore, the trial court’s dismissal of Count 2 of the complaint was proper.
Moreover, its dismissal of Count 3, which was for compensatory damages due to Pointe
at Gateway Condominium’s ownership of the facade parcel, was also proper because the
underlying claims failed.
{¶43} In light of the above, the first assignment of error is overruled.
Dismissal of the Remaining Claims
{¶44} The second through the seventh assignments of error challenge the trial
court’s dismissal of the Associations remaining claims.
{¶45} Our standard of review on a Civ.R. 12(B)(6) motion to dismiss is de novo.
Greeley v. Miami Valley Maintenance Contrs. Inc., 49 Ohio St.3d 228, 551 N.E.2d 981(1990). A motion to dismiss for failure to state a claim upon which relief can be granted
is procedural and tests the sufficiency of the complaint. State ex rel. Hanson v. Guernsey
Cty. Bd. of Commrs., 65 Ohio St.3d 545, 605 N.E.2d 378 (1992). Under a de novo
analysis, we must accept all factual allegations of the complaint as true and all reasonable
inferences must be drawn in favor of the nonmoving party. Byrd v. Faber, 57 Ohio St.3d
56, 565 N.E.2d 584 (1991).
{¶46} The statute of limitations for the remaining claims (except Count 9, breach of
contract)2 are as follows: Count 4, failure to perform in a workmanlike manner, four
years (R.C. 2305.09(D)); Count 5, consumer sales practices act, two years (R.C. 1345.10);
Count 6, breach of fiduciary duty, four years (R.C. 2305.09); Count 7, negligence, four
years (R.C. 2305.09); Count 8, fraudulent concealment, four years (R.C. 2305.09); Count
10, unjust enrichment, six years (R.C. 2305.07); and Counts 11 and 12, conversion and
trespass to chattels, four years (R.C. 2305.09).
{¶47} The trial court found that the “operative” events that would have triggered
the statutes occurred in 2004 and, therefore, were time-barred by the 2012 lawsuit.
{¶48} The Association contends that paragraph 25, contained in the “background”
section of its complaint, demonstrated that the above-mentioned counts were not
time-barred. The paragraph read as follows:
2
Count 9, breach of contract, was not originally dismissed by the trial court. After its
dismissal of the other claims, however, the trial court issued a nunc pro tunc entry dismissing Count 9
for a reason other than the statute of limitations.
From May 11, 2004, until December 14, 2011 (the date of the turnover
meeting), J. Schmelzer and L. Schmelzer held a controlling interest in the
Association Board of Trustees and ran the day-to-day Association
operations, Association management, and handled all Association
bookkeeping for that time period.
{¶49} We agree with the trial court that the claims were time-barred. Pointe at
Gateway Condominium subdivided the property in March 2004, and created the
Association in May 2004. Therefore, the operative facts relative to the claims occurred
in 2004, and the limitation had expired when the Association filed this action in 2012.
{¶50} We are not persuaded by the Association’s contention that paragraph 25 of its
complaint should have saved their claims from being time-barred because appellees
controlled the day-to-day operations of the property from May 2004 through December
2011. The allegation was conclusory and does not allege facts relative to the specific
claims so as to survive a motion to dismiss. See Allstate Ins. Co. v. Electrolux Home
Prods., Inc., 8th Dist. Cuyahoga No. 97065, 2012-Ohio-90, ¶ 9-10.
{¶51} Moreover, other reasons for dismissal apart from the statute of limitations
existed for most of the claims. We briefly consider them below.
Consumer Sales Practices Act
{¶52} In regard to the Association’s claim of violations of the Consumer Sales
Practices Act, we agree with the trial court’s finding that the “Act has no application to a
‘pure’ real estate transaction.” (Trial court’s opinion, citing Brown v. Liberty Clubs, Inc.,
45 Ohio St.3d 191, 193, 543 N.E.2d 783 (1989); Keiber v. Spicer Constr. Co., 85 Ohio
App.3d 391, 392, 619 N.E.2d 1105 (2d Dist.1993)). The trial court further noted that
although this court and another Ohio court have held that the Act applies to real estate
transactions involving “contracts to construct,” those cases are distinguishable from this
case because they involved individual purchasers buying a new home or condominium.
See Suttle v. DeCesare, 8th Dist. Cuyahoga No. 81441, 2003-Ohio-2866, ¶ 29 (The Act
“applies to transactions that include a contract to construct a residence.”); Fine v. U.S. Erie
Islands Co., Ltd., 6th Dist. Ottawa No. OT-07-048, 2009-Ohio-1531.
{¶53} This case did not implicate a “contract to construct,” and therefore, we find
that the Consumer Sales Practices Act did not apply. The trial court properly dismissed
the claim.
Breach of Fiduciary Duty
{¶54} In regard to the Association’s breach of fiduciary duty claim, the Ohio
Supreme Court has held that the Ohio Condominium Act “does not create a fiduciary
relationship between developers and owners, developers and owners’ associations, or
developers and purchasers” and “plainly recognizes that developers, owners, and
purchasers have different, and often competing, financial interests.” Belvedere
Condominium Unit Owners’ Assn. v. R.E. Roark Cos., Inc., 67 Ohio St.3d 274, 283, 617
N.E.2d 1075 (1993).
{¶55} Further, to the extent that the breach of fiduciary duty claim related only to
the Schmelzer defendants individually, the complaint did not allege that the Schmelzers
owed the Association a special duty and, therefore, did not set forth a claim against the
Schmelzer defendants individually.
{¶56} In light of the above, the trial court properly dismissed the Association’s
claim for breach of fiduciary duty.
Fraudulent Concealment
{¶57} In regard to the Association’s claim of fraudulent concealment, we agree
with the trial court’s finding that the claim was not pled with the requisite particularity
under Civ.R. 9(B). This court has held that the particularity requirement of Civ.R. 9(B)
includes “‘the time, place and content of the false representation, the fact misrepresented,
and the nature of what was obtained or given as a consequence of the fraud.’” Reinglass
v. Morgan Stanley Dean Witter, Inc., 8th Dist. Cuyahoga No. 86407, 2006-Ohio-1542,
quoting Carter-Jones Lumber Co. v. Denune, 132 Ohio App.3d 430, 433, 725 N.E.2d 330(10th Dist.1999), citing Baker v. Conlan, 66 Ohio App.3d 454, 458, 585 N.E.2d 543 (1st
Dist.1990).
{¶58} The complaint did not allege any specific instances of concealment or false
representations; rather, it contained conclusory statements, which were insufficient to
properly plead the claim. Therefore, the trial court properly dismissed the Association’s
fraudulent concealment claim.
Breach of Contract
{¶59} For its breach of contract claim, the Association alleged that Pointe at
Gateway Condominium and the Schmelzers breached their fiduciary duties and, therefore,
breached the contract with the Association. Having found that the trial court properly
dismissed the breach of fiduciary claim, we necessarily find that it also properly dismissed
the breach of contract claim.
Unjust Enrichment
{¶60} In its unjust enrichment claim, the Association claimed that Pointe at
Gateway Condominium wrongfully subdivided and remained in possession of the facade
parcel.
{¶61} A claim of unjust enrichment requires:
(1) a benefit conferred by a Plaintiff upon a Defendant; (2) knowledge by the
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.
Miller v. Keybank Natl. Assn., 8th Dist. Cuyahoga No. 86327, 2006-Ohio-1725, ¶ 43.
{¶62} We are not persuaded by the Association’s claim that appellees’ continued
possession of the Facade parcel is the conferred benefit. Generally, there can be no
recovery on an unjust enrichment claim if there is an express contract covering the same
subject. See Aultman Hosp. Assn. v. Community Mut. Ins. Co., 46 Ohio St.3d 51, 55, 544
N.E.2d 920 (1989). The Declaration governed the parties’ rights and obligations
regarding the facade parcel, and pursuant thereto, the Association never had any rights to
the facade parcel. As such, an unjust enrichment claim was not available to the
Association and the trial court, therefore, properly dismissed the claim.
Conversion and Trespass to Chattels
{¶63} For its conversion and trespass to chattels claims, the Association alleged that
appellees converted the Association’s property and monies inconsistent with the
Association’s right of possession, and intentionally used or “intermeddled” with the
Association’s property, respectively.
{¶64} In Tabar v. Charlie’s Towing Serv., Inc., 97 Ohio App.3d 423, 427-428, 646
N.E.2d 1132 (8th Dist.1994), this court set forth the requisite elements of conversion as
follows:
Conversion is the wrongful control or exercise of dominion over the property
belonging to another inconsistent with or in denial of the rights of the owner.
Bench Billboard Co. v. Columbus (1989), 63 Ohio App.3d 421, 579 N.E.2d
240; Ohio Tel. Equip. & Sales, Inc. v. Hadler Realty Co. (1985), 24 Ohio
App.3d 91, 24 Ohio B. 160, 493 N.E.2d 289. In order to prove the
conversion of the property, the owner must demonstrate (1) he or she
demanded the return of the property from the possessor after the possessor
exerted dominion or control over the property, and (2) that the possessor
refused to deliver the property to its rightful owner. Id. The measure of
damages in a conversion action is the value of the converted property at the
time it was converted. Brumm v. McDonald & Co. Securities, Inc. (1992),
78 Ohio App.3d 96, 603 N.E.2d 1141.
{¶65} A claim of conversion must be based on the taking of identifiable personal
property. Landskroner v. Landskroner, 154 Ohio App.3d 471, 2003-Ohio-5077, 797
N.E.2d 1002, ¶ 27 (8th Dist.)
(Because the property subject to appellant’s conversion claim is not
identifiable, personal property but rather comprises monies appellant claims
are due and owing him under an agreement, appellant can prove no set of
facts that would entitle him to recover on his claim for conversion and
dismissal was appropriate under Civ.R. 12(B)(6).).
{¶66} The Association contends that its allegations contained in paragraphs 88 and
99 of its complaint were sufficient to survive a motion to dismiss. Paragraph 88
(contained in the unjust enrichment count) alleged that:
[u]pon information and belief, [Pointe at Gateway Condominium] failed to,
among other things, make all monthly maintenance fee payments to the
Association attributable to unsold units and/or for units otherwise owned by
[Pointe at Gateway Condominium] from the date the Declaration was filed
up to the sale date of said unit(s).
{¶67} Paragraph 99 alleged that appellees
unlawfully, wrongfully, and fraudulently exercised * * * dominion and
control over [the Association’s] property and monies inconsistent with the
right of possession of [the Association] by unlawfully using [the
Association’s] monies and property for [appellees’] own business and
benefit.
{¶68} The counts do not allege the conversion of identifiable personal property, and
therefore, the conversion claim was properly dismissed.
{¶69} A trespass to chattel occurs when one intentionally dispossesses another of
their personal property. Conley v. Caudill, 4th Dist. Pike No. 02CA69775,
2003-Ohio-2854, ¶ 7. The complaint does not allege what chattel was trespassed upon
and, as such, on its face fails to state a claim upon which relief can be granted.
{¶70} In light of the above, the trial court properly dismissed Counts 4 through 12
of the Association’s complaint, and the Association’s second through seventh assignments
of error are overruled.
Permanent Injunction
{¶71} In its final assignment of error, the Association contends that the trial court
erred in granting Pointe at Gateway Condominium’s motion for a permanent injunction,
thereby enjoining the Association from using reserve funds on non-capital expenses.
{¶72} The standard of review for this court regarding the granting of an injunction
by a trial court is whether the trial court abused its discretion. Perkins v. Quaker City,
165 Ohio St. 120, 125, 133 N.E.2d 595 (1956). In an action for a temporary or
permanent injunction, the plaintiff must prove his or her case by clear and convincing
evidence. Franklin Cty. Dist. Bd. of Health v. Paxon, 152 Ohio App.3d 193, 202,
2003-Ohio-1331, 787 N.E.2d 59 (10th Dist.).
{¶73} Clear and convincing evidence has been defined by the Supreme Court of
Ohio as that measure or degree of proof that will produce in the mind of the trier of facts a
firm belief or conviction as to the allegations sought to be established. Cross v. Ledford,
161 Ohio St. 469, 477, 120 N.E.2d 118 (1954). It is intermediate, being more than a
mere preponderance, but not to the extent of such certainty as is required beyond a
reasonable doubt, as in criminal cases. Id. It does not mean clear and unequivocal. Id.{¶74} In determining whether to grant injunctive relief, courts take into
consideration the following four factors: (1) the likelihood or probability of a plaintiff’s
success on the merits; (2) whether the issuance of the injunction will prevent irreparable
harm to the plaintiff; (3) what injury to others will be caused by the granting of the
injunction; and (4) whether the public interest will be served by the granting of the
injunction. Corbett v. Ohio Bldg. Auth., 86 Ohio App.3d 44, 49, 619 N.E.2d 1145 (10th
Dist.1993).
{¶75} In granting the motion for permanent injunction, the trial court found that the
appellees were irreparably harmed by the Association’s use of reserve funds to finance this
litigation. The Association now contends that there was no evidence of irreparable harm.
We disagree.
{¶76} At the motion hearing, Scott Phillips, a local realtor, testified for the
appellees. According to Phillips, a condominium association would suffer in value and
saleability if its reserve funds are depleted. Phillips was of the opinion that “among the
most important factors that affect the overall value of a condominium unit is the adequacy
of the condominium’s reserve funds.” According to Phillips, one potential buyer of a
Gateway condo cancelled his intent to purchase a unit because of this litigation.
{¶77} Phillips opined that
immediate and irreparable damage will occur if the reserve funds at the
Condominium are diminished or depleted for purposes other than those
budgeted for in the reserve study * * * and the units will suffer lower market
values as a direct result. Moreover, the Condominium will also suffer a
poor market reputation as another result of this diminishment or depletion.
{¶78} On this record, we find that appellees (and the individual unit owners) would
have been irreparably harmed if the Association had been permitted to continue using
reserve funds for the expense of this litigation.
{¶79} Moreover, this type of expenditure was not authorized by the condominium
Bylaws. The Association contends that the following sentence in the Bylaws authorizes
such expenditures: “[e]xtraordinary expenditures not originally included in the annual
estimate which may be necessary for the year, shall be charged first against such reserve
fund.” But, when the sentence is read in context with the rest of the section where it is
contained, the plain language does not authorize the expenditures at issue. Specifically,
the section provides, in relevant part, as follows:
Section 3. Reserve for Contingencies and Replacements. The
Association shall be obligated to build up and maintain a reasonable working
capital reserve fund to finance the cost of repair or replacement of the
Common Areas and Facilities. * * * Extraordinary expenditures not
originally included in the annual estimate which may be necessary for the
year, shall be charged first against such reserve fund.
Bylaws, Article V, Section 3.
{¶80} The above-quoted section does not authorize the Association’s use of reserve
funds for litigation expenses.
{¶81} Further, Article V, Section A of the Declaration, governing assessments,
provides as follows:
(A) General. Assessments for the management, maintenance, repair and
insurance of the Common Areas and Facilities and amounts determined by
the Board of Managers of the Association for the establishment and
maintenance of the reserve fund to meet the cost and expense of repair and
replacement of the Common Areas and Facilities together with the payment
of the Common expenses, shall be made in the manner herein, and in the
manner provided by the Bylaws.
{¶82} When the Bylaws and Declaration are read in context and together, it is clear
that they do not authorize the use of the reserve fund for litigation and associated costs.
{¶83} In light of the above, the trial court did not abuse its discretion in granting
appellees’ motion for a permanent injunction. The eighth assignment of error is therefore
overruled.
{¶84} Judgment affirmed.
It is ordered that appellees recover of appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the Cuyahoga
County Court of Common Pleas to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the
Rules of Appellate Procedure.
LARRY A. JONES, SR., PRESIDING JUDGE
MARY EILEEN KILBANE, J., and
TIM McCORMACK, J., CONCUR