Guehl v. Carillon House Assn., Inc. , 2017 Ohio 5491 ( 2017 )

[Cite as Guehl v. Carillon House Assn., Inc., 2017-Ohio-5491.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
ROBERT GUEHL, et al. :
:
Plaintiffs-Appellants : Appellate Case No. 27438
:
v. : Trial Court Case No. 2015-CV-4872
:
CARILLON HOUSE ASSOCIATION, : (Civil Appeal from
INC., et al. : Common Pleas Court)
:
Defendant-Appellee :
...........
OPINION
Rendered on the 23rd day of June, 2017.
...........
ROBERT GUEHL, Attorney Reg. No. 0005491, 2312 Far Hills Avenue, Suite 350, Dayton,
Ohio 45419
Plaintiffs-Appellants-Pro Se
ROBERT E. KMIECIK, Atty. Reg. No. 0022545, GARRETT B. HUMES, Atty. Reg. No.
0089326, 470 Olde Worthington Road, Suite 460, Westerville, Ohio 43082
Attorneys for Defendant-Appellee
.............
WELBAUM, J.
{¶ 1} In this case, Plaintiffs/Appellants, Robert Guehl and Karen Bartley,
(collectively referred to as “Guehl”) appeal from a judgment dismissing their legal
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malpractice claim against Defendant/Appellee, Kaman & Cusimano, LLC (“Kaman”). As
support for their appeal, Guehl contends that Count Five of the complaint adequately
stated a claim against Kaman.
{¶ 2} We conclude that the trial court did not err in dismissing Guehl’s claim for
legal malpractice pursuant to Civ.R. 12(B)(6). Guehl did not have an attorney-client
relationship with Kaman, and Guehl was not in privity with Kaman’s client. As a result,
Kaman was not liable to Guehl for any alleged legal malpractice. Accordingly, the
judgment of the trial court will be affirmed.
I. Facts and Course of Proceedings
{¶ 3} All the factual information in the statement of facts and proceedings will be
taken from the complaint and amendments to the complaint filed in the trial court. Since
2007, Robert Guehl had owned condominium #11 in the Carillon House Condominiums
located at 2230 S. Patterson Boulevard, Kettering, Ohio. In September 2015, Guehl filed
a complaint against Carillon House Association, Inc. (“Carillon”) and Towne Properties
Asset Management Company (“Towne”). Carillon was a non-profit organization
consisting of the members who owned condominium units, and Towne was a
management company that had managed the property between 1999 and 2014.
{¶ 4} Guehl also added U.S. Bankcorp dba U.S. Bank Home Mortgage (“US Bank”)
as an involuntary plaintiff. According to the complaint, Robert Guehl had purchased his
condominium for $115,000 in 2007, had added improvements, and currently owed US
Bank more than $69,000. Robert claimed his mortgage was “underwater,” jeopardizing
both his and the bank’s equity interests.
{¶ 5} In essence, the complaint alleged that Carillon’s board of directors (“Board”)
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failed to adequately set aside funds for reasonably anticipated capital improvements, and
had caused Guehl’s property to be unmarketable due to the likelihood of special
assessments. The complaint contained four counts: (1) for a declaratory judgment that
Carillon’s board was required to adopt a budget for reserves adequate to repair and
replace major capital items without the need for special assessments; (2) for breach of
contract against Towne, based on its failure, among other things, to adequately inspect
the building and advise Carillon about adequate reserve funding; (3) for negligence
against Carillon and Towne, for failure to adequately monitor maintenance of the building
and construction projects; and (4) for breach of fiduciary duty by the Board based on
various failures pertaining to budgeting, overseeing Towne, repairing the property, and
pursuing legal action against Towne.
{¶ 6} In October 2015, Towne filed a Civ.R. 12(B)(6) motion to dismiss; Guehl then
dismissed Towne as a party in November 2015, pursuant to Civ.R. 41(A). In November
2015, Guehl also filed a first amended complaint, which added various past and current
members of the Board to the lawsuit. The amended complaint contained essentially the
same allegations, but eliminated former Count Two, which had raised Towne’s breach of
contract. Instead, former Count Three became Count Two, in which Guehl alleged that
the Board and members of the Board had been grossly negligent in several ways,
including: failing to monitor Towne’s maintenance of the property, failing to maintain the
building, failing to adequately budget, and so forth.
{¶ 7} Former Count Four (breach of fiduciary duty) now became Count Three, and
Guehl included the past and current members of the Board in the claims for breach of
fiduciary duty. Finally, in new Count Four, Guehl asked for injunctive relief against the
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Board members, to prevent them from continuing their alleged fraudulent acts.
{¶ 8} Subsequently, on December 5, 2015, Guehl filed a motion for partial
summary judgment on two points: (1) the interpretation of R.C. 5311.08(A) as applied
to Carillon’s reserve budgeting process; and (2) the current Board’s alleged neglect and
breaches in connection with the 2015-2016 budgeting process. In January 2016,
Carillon and several Board members filed an answer to the first amended complaint.
Among other things, they alleged that Robert Guehl, himself, was on the Board from July
1, 2007 to June 21, 2010, and from June 20, 2011 to June 16, 2014, and had taken the
actions about which he was complaining.
{¶ 9} In February 2016, Guehl filed a cross-complaint against an entity called Five
Brothers, which was involved in a foreclosure action that US Bank had brought against
Robert with respect to the Carillon condominium. Guehl also added the real estate listing
agent for the condominium as an involuntary plaintiff. In addition, Guehl asked the court
to consolidate the foreclosure action with the current action. However, the court
overruled the motion in April 2016, finding insufficient commonality of issues. Eventually,
in June 2016, Guehl dismissed US Bank, Five Brothers, and the real estate agent from
the current action. At this point, Carillon and the Board members were the only parties
remaining in the case.
{¶ 10} Previously, in April 2016, the parties had agreed to suspend briefing on the
summary judgment motion until after discovery had been completed. In late July 2016,
Guehl filed a motion asking for leave to file a second amended complaint to add Kaman,
a law firm that had handled legal matters for Carillon. The court granted leave in
September 2016, and Guehl then filed a second amended complaint, adding Kaman as
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a party. Guehl also added Count Five, which was a legal malpractice claim against
Kaman. In this count, Guehl alleged that Kaman had provided incorrect and negligent
advice regarding adequate funding of reserves, and that as a result of Kaman’s
negligence, Guehl and other owners of units had suffered damages in the form of special
assessments on two separate occasions, and anticipated an additional assessment of
1.8 million dollars.
{¶ 11} On October 7, 2016, Kaman filed a Civ.R. 12(B)(6) motion to dismiss Count
Five of the Second Amended Complaint. The motion contended that Guehl lacked
standing to file a claim for legal malpractice against the law firm. After Guehl responded
to the motion, the trial court granted the motion on January 11, 2017, and dismissed Count
Five. The trial court also added a Civ.R. 54(B) certification. Subsequently, on January
23, 2017, Guehl filed a motion for reconsideration, which the trial court denied, stating
that final appealable orders cannot be reconsidered. Guehl then appealed the dismissal
of Count Five of the Second Amended Complaint.
II. Did the Court Err in Dismissing the Legal Malpractice Claim?
{¶ 12} Guehl’s sole assignment of error states that:
The Trial Court Erred in Dismissing Count 5 of the Complaint
Pursuant to Civil Rule 12(B)(6). Count 5 Adequately Stated a Cause of
Action for Legal Malpractice Against Defendant Kaman & Cusimano, LLC.
{¶ 13} Under this assignment of error, Guehl contends that the trial court erred by
granting Kaman’s motion to dismiss because the complaint stated operative factual
allegations of an attorney-client relationship between Guehl and Kaman that was
sufficient to withstand a motion to dismiss. Guehl also argues that the trial court made
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factual determinations without any evidentiary basis, while disregarding evidence
presented by Guehl.
{¶ 14} Before we address these issues, we must first consider whether we have
jurisdiction over the appeal, which is a matter that we can raise on our own motion. See,
e.g., Care Risk Retention Group v. Martin, 191 Ohio App. 3d 797, 2010-Ohio-6091, 947
N.E.2d 1214, ¶ 97 (2d Dist.), citing State ex rel. White v. Cuyahoga Metro. Hous. Auth.,
79 Ohio St. 3d 543, 544, 684 N.E.2d 72 (1997).
A. Final Appealable Order Status
{¶ 15} “An order of a court is final and appealable only if it meets the requirements
of both Civ.R. 54(B) and R.C. 2505.02.” (Citation omitted.) Denham v. New Carlisle,
86 Ohio St. 3d 594, 596, 716 N.E.2d 184 (1999). Accord McKay v. Promex Midwest
Corp., 2d Dist. Montgomery No. 20112, 2004-Ohio-3576, ¶ 25.
{¶ 16} As pertinent here, R.C. 2505.02(B)(1) provides that an order is final for
purposes of appeal if it is “[a]n order that affects a substantial right in an action that in
effect determines the action and prevents a judgment * * *.” “The term ‘substantial right’
has been construed to mean a ‘legal right,’ one protected and supported by law.”
(Citation omitted.) Hamilton Cty. Bd. of Mental Retardation & Developmental Disabilities
v. Professionals Guild of Ohio, 46 Ohio St. 3d 147, 153, 545 N.E.2d 1260 (1989). “A
court order which deprives a person of a remedy which he would otherwise possess
deprives that person of a substantial right.” Chef Italiano Corp. v. Kent State Univ., 44
Ohio St. 3d 86, 88, 541 N.E.2d 64 (1989). Furthermore, “[f]or an order to determine the
action and prevent a judgment for the party appealing, it must dispose of the whole merits
of the cause or some separate and distinct branch thereof and leave nothing for the
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determination of the court.” (Citations omitted.) Hamilton Cty. Bd. of Mental
Retardation & Developmental Disabilities at 153.
{¶ 17} Under these standards, the order in question did affect a substantial right,
as it deprived Guehl of a remedy for legal malpractice and prevented him from obtaining
a judgment against Kaman. Nonetheless, the trial court dismissed only one count of the
complaint, while leaving claims against other parties pending. In such situations, Civ.R.
54(B) requires the court to expressly determine “that there is no just reason for delay.”
Consistent with this rule, the trial court attached a Civ.R. 54(B) certification to the end of
its decision, and stated there was no just reason for delay. The Supreme Court of Ohio
has said that this is “essentially a factual determination – whether an interlocutory appeal
is consistent with the interests of sound judicial administration.” Wisintainer v. Elcen
Power Strut Co., 67 Ohio St. 3d 352, 617 N.E.2d 1136 (1993), paragraph one of the
syllabus. In Wisintainer, the court further stressed that:
In making its factual determination that the interest of sound judicial
administration is best served by allowing an immediate appeal, the trial
court is entitled to the same presumption of correctness that it is accorded
regarding other factual findings. An appellate court should not substitute
its judgment for that of the trial court where some competent and credible
evidence supports the trial court's factual findings.
Id. at 355, citing Seasons Coal Co. v. Cleveland, 10 Ohio St. 3d 77, 461 N.E.2d 1273
(1984).
{¶ 18} Trial courts do not have to give reasons for their Civ.R. 54(B) decisions,
“ ‘so long as the record supports adding the language.’ ” Winkle v. Co, 2d Dist.
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Montgomery No. 27066, 2016-Ohio-6957, ¶ 48, quoting Dywidag Sys. Internatl., USA,
Inc. v. Ohio Dept. of Transp., 10th Dist. Franklin No. 10AP-270, 2010-Ohio-3211, ¶ 29.
However, “the presumption of correctness does not apply * * * where the judgment entry
indicates the trial court acted reflexively and employed the language as boilerplate.”
(Citation omitted.) Dywidag at ¶ 29.
{¶ 19} In the case before us, the trial court did not discuss its reasons for the
certification. Instead, the language at the end of the entry appears to be boilerplate.
Consequently, we look to the record to see if it supports the court’s decision. Aid in doing
so comes from analysis outlined in our prior opinion in LaMusga v. Summit Square Rehab,
L.L.C., 2015-Ohio-5305, 43 N.E.3d 504 (2d Dist.). In that case, we discussed Civ.R.
54(B) and 1992 amendments to Civ.R. 54(B) and App.R. 4 that occurred in response to
Chef Italiano. Id. at ¶ 26-27. We noted that these amendments were intended to clarify
that Civ.R. 54(B) applies to multiple claims arising from separate transactions as well as
to multiple claims arising from the same transaction. Id. at ¶ 27, citing Walker v.
Firelands Community Hosp., 6th Dist. Erie No. E-06-023, 2006-Ohio-2930, ¶ 16, and
1992 Staff Notes to Civ.R. 54(B).
{¶ 20} We further noted the Supreme Court of Ohio’s discussion about the 1992
amendments and federal law interpreting Fed.R. Civ.54(B). LaMusga at ¶ 28, discussing
State ex rel. Wright v. Ohio Adult Parole Auth., 75 Ohio St. 3d 82, 661 N.E.2d 728 (1996).
In Wright, the court stressed that “ ‘[i]f claims are factually separate and independent,
multiple claims are clearly present,’ ” and that “ ‘[t]wo legal theories that require proof of
substantially different facts are considered separate claims for purposes of Civ.R. 54(B).’
” Id., quoting Wright at 86, 661 N.E.2d 778. Accordingly, we concluded that the
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appropriate analysis under Wright, as articulated by the Sixth District Court of Appeals,
was as follows:
“First, are the disposed of claim(s) factually separate and independent from
the remaining claim(s)? An example would be claims that are based on
different transactions or occurrences such as one claim for slander and
another for negligence because of an automobile accident. Second, if the
claims are not factually separate and independent, do the legal theories
presented in the disposed of claim(s) require proof of substantially different
facts and/or provide for different relief from the remaining claim(s)?”
LaMusga, 2015-Ohio-5305, 43 N.E.3d 504, at ¶ 29, quoting Walker, 6th Dist. Erie No E-
06-023, 2006-Ohio-2930, at ¶ 23. (Other citation omitted.)
{¶ 21} Applying this analysis to the case before us, the legal malpractice claim was
connected to some facts asserted in the negligence and breach of fiduciary duty claims.
However, the malpractice claim involved a discrete portion of the case, and also involved
different transactions than other claims that remained.
{¶ 22} Specifically, the complaint alleged that Kaman, since its retention by
Carillon, had rendered incorrect advice about waiver of adequate reserve funding under
R.C. 5311.081(A)(1). This was a limited claim involving a specific issue. In contrast,
the claims against Carillon and the Board members covered a wide range of facts and
transactions, including failures to adequately staff, maintain, and inspect the
condominium building, failure to adequately supervise contractors, failure to use good
management practice in anticipating expenses over the life expectancy of capital projects,
and failure to adopt assessments to fund budgets for operations and reserves. Several
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different projects were also involved, including roof replacement, parking deck
maintenance, parking garage maintenance, swimming pool maintenance, deterioration of
the HVAC system, and deterioration of the common plumbing system. Doc. # 110,
Second Amended Complaint, pp. 9-12.
{¶ 23} Furthermore, punitive damages would have been permissible against
Carillon and the Board members for gross negligence and breach of fiduciary duty,
whereas punitive damages would not be allowed for the law firm’s alleged negligence, in
the absence of malice or gross negligence. Compare Schafer v. RMS Realty, 138 Ohio
App.3d 244, 301, 741 N.E.2d 155 (2d Dist.2000) (punitive damages are allowed for
breach of fiduciary duty) with Preston v. Murty, 32 Ohio St. 3d 334, 335, 512 N.E.2d 1174
(1987) (“something more than mere negligence is always required” for recovery of
punitive damages).
{¶ 24} In a similar situation in LaMusga, we concluded that a final appealable order
existed. LaMusga, 2015-Ohio-5305, 43 N.E.3d 504 at ¶ 32-24. Accordingly, we
conclude that the order dismissing Count Five of the Second Amended Complaint is a
final appealable order and that we have jurisdiction over the appeal.
B. Whether Guehl Had Standing to Assert Legal Malpractice Claims
{¶ 25} As was noted, Guehl contends that the trial court erred in dismissing Count
Five of the complaint because the complaint contained sufficient allegations to withstand
a motion to dismiss.
{¶ 26} “In order for a court to dismiss a complaint for failure to state a claim upon
which relief can be granted (Civ.R.12(B)(6)), it must appear beyond doubt from the
complaint that the plaintiff can prove no set of facts entitling him to recovery.” (Citation
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omitted.) O'Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St. 2d 242, 327
N.E.2d 753 (1975), syllabus. In deciding such motions, courts presume the truth of all
factual allegations in a complaint and construe all reasonable inferences in favor of non-
moving parties. (Citations omitted.) Mitchell v. Lawson Milk Co., 40 Ohio St. 3d 190,
192, 532 N.E.2d 753 (1988). We review the trial court’s decision on a de novo basis.
Grover v. Bartsch, 170 Ohio App. 3d 188, 2006-Ohio-6115, 866 N.E.2d 547, ¶ 16 (2d
Dist.).
{¶ 27} The trial court concluded that Guehl lacked standing to sue because Kaman
and Guehl did not have an attorney-client relationship, and Guehl was not in privity with
Kaman. As noted, the allegations of the complaint are accepted as true. Count Five of
the Second Amended Complaint states as follows:
Kaman & Cusimano [hereafter “Kaman”] has served as legal counsel
to the Carillon House Association, Inc., consisting of the Owners of
condominium units within the Carillon House condominium building located
at 2230 S. Patterson Boulevard, Kettering, Ohio, and the Owners[’] duly-
elected Board of Directors.
Plaintiff [sic] are “Owners” of Unit #11 in the Carillon House and both
have served on the Board of Directors of the Association in various
capacities, and in such capacities are and have been clients of Kaman.
Kaman advised and has continually advised since retention as legal
counsel, the Board of Directors and Owners of Defendant Carillon that
Special Assessments could be waived on an annual basis by vote of the
Owners of Carillon condominium units, in contravention of the specific
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requirements of O.R.C. § 5311.081(a)(1).
Kaman’s advice concerning waiver of adequate funding of reserves
is incorrect and negligent in regard to its legal representation of the Board
and Owners of units in Carillon House, insofar as the statute does not allow
for waiver of the obligation to adequately budget reserves except in the
single instance where the Reserve budget amounts to less than ten percent
of the Association’s annual budget for operation expenses.
The Reserve budget in each applicable year for Reserves amounted
to more than ten percent of Defendant Carillon’s operating budget, thus
precluding a waiver of Reserve budgeting on an annual basis during all
applicable time frames relevant to this lawsuit.
As a direct and proximate consequence of Kaman’s mistaken and
negligent advice concerning Special Assessments in violation of O.R.C. §
5311.081(a)(1), Plaintiffs (along with all other Owners of units in the
Building) have suffered damages in the form of Special Assessments from
Defendant Carillon on two separate occasions, and anticipated additional
assessment of 1.8 million.
Plaintiffs have suffered damages in the form of payment of Special
Assessments in excess of Twelve Thousand Dollars ($12,000.00) as well
as decreased valuation of their respective units due to negligent advice from
Kaman regarding financing.
Doc. #110, Second Amended Complaint, pp. 13-14, ¶ 54-60.
{¶ 28} The issue is whether in view of these allegations, Guehl has a cause of
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action for legal malpractice claims against Kaman. “To establish a cause of action for
legal malpractice based on negligence, the following elements must be proved: (1) an
attorney-client relationship, (2) professional duty arising from that relationship, (3) breach
of that duty, (4) proximate cause, (5) and damages.” (Citations omitted.) Shoemaker
v. Gindlesberger, 118 Ohio St. 3d 226, 2008-Ohio-2012, 887 N.E.2d 1167, ¶ 8.
{¶ 29} If an attorney-client relationship is established, the first prong is satisfied.
Where such a relationship is not established, “attorneys in Ohio are not liable to a third
party for the good-faith representation of a client, unless the third party is in privity with
the client for whom the legal services were performed.” Shoemaker at ¶ 9, citing Scholler
v. Scholler, 10 Ohio St. 3d 98, 462 N.E.2d 158 (1984), paragraph one of the syllabus. In
Shoemaker, the court stressed that “[t]his rule is rooted in the attorney's obligation to
direct attention to the needs of the client, not to the needs of a third party not in privity
with the client.” Id., citing Simon v. Zipperstein, 32 Ohio St. 3d 74, 76, 512 N.E.2d 636
(1987). Shoemaker also stated that “[t[he necessity for privity may be overridden if
special circumstances such as ‘fraud, bad faith, collusion or other malicious conduct’ are
present.” Shoemaker at ¶ 11, quoting Zipperstein at 76.
{¶ 30} Recently, we considered the extent to which attorneys can be sued by third
parties to the attorney-client relationship. See Omega Riggers & Erectors, Inc. v.
Koverman, 2016-Ohio-2961, 65 N.E.3d 210 (2d Dist.). Omega Riggers involved
individual claims of minority shareholders against a corporate attorney. The claims
arose from the attorney's involvement in a sale of assets of a closely held corporation.
Id. at ¶ 3-4.
{¶ 31} We stressed that in the absence of an attorney-client relationship, “case law
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has developed three potential avenues around, or substitutes for, such a relationship: (1)
the claimant is so situated that it is deemed in ‘privity’ with the actual client, (2) the attorney
acted with malice toward the claimant such that an action for recovery is justified, or (3)
the injury or damages caused by a tortfeasor to a corporate shareholder claimant are
unique and distinct from those suffered by other shareholders, which justify a direct claim
by the shareholder against the tortfeasor.” Id. at ¶ 23. After making these remarks, we
considered a line of cases in which the Supreme Court of Ohio had considered the ability
of third parties to sue attorneys. Id. at ¶ 24-27. We ultimately concluded that:
[T]he privity substitute for lack of an attorney-client relationship has been
extended only to undeniably-vested beneficiaries of an estate and to the
limited partners of a partnership. The exception has not been extended to
minor children affected by representation of a parent in a divorce or to
potential beneficiaries of a will. Significantly, there is no Ohio case that has
extended the privity concept to allow a shareholder, who does not have a
direct attorney-client relationship with corporate counsel, to sue a
corporation's attorney for malpractice. We do not believe we should create
one.
Id. at ¶ 29.
{¶ 32} With these principles in mind, we will consider first, whether Guehl had an
attorney-client relationship with Kaman.
(i) Existence of Attorney Client Relationship
{¶ 33} Guehl’s appellate brief acknowledges our decision in Omega Riggers, but
argues that in contrast to that case, the parties here “did not dispute” the issue of “a direct
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attorney-client relationship between the parties.” Merit Brief of Plaintiffs-Appellants, p. 6.
This assertion misrepresents the record.
{¶ 34} In the trial court, Robert Guehl argued that he had a direct attorney-client
relationship because he was a member of the Board and had communications with
Kaman. 1 Kaman specifically disputed Guehl’s position, and asserted that in Ohio,
“Corporate Board members do not, as a matter of law, have an attorney-client relationship
with the lawyer for the corporation.” Doc. #121, p. 4. See also Doc. #129, p. 2, in which
Kaman responds to, and rejects, Guehl’s contention that Board members and unit owners
had attorney-client relationships with Kaman because Kaman communicated with them.
{¶ 35} The Supreme Court of Ohio has said that “[w]hile it is true that an attorney-
client relationship may be formed by the express terms of a contract, it ‘can also be formed
by implication based on conduct of the lawyer and expectations of the client.’ ” (Citations
omitted.) Cuyahoga Cty. Bar Assn. v. Hardiman, 100 Ohio St. 3d 260, 2003-Ohio-5596,
798 N.E.2d 369, ¶ 10. “The determination of whether an attorney-client relationship was
created turns largely on the reasonable belief of the prospective client.” (Citation
omitted.) Id. Accord Collett v. Steigerwald, 2d Dist. Montgomery No. 22028, 2007-
Ohio-6261, ¶ 33.
{¶ 36} In its decision, the trial court held that no attorney-client relationship existed
because Guehl lacked a reasonable belief that limited conversations with Kaman
concerning Board matters created an attorney-client relationship. Doc. #135, pp. 9-10.
Upon consideration, we agree with the trial court. Although Guehl did not mention
1 This was not alleged in the complaint, but was asserted in memoranda. In the
complaint, Guehl stated only that plaintiffs had served on the Board and, in that capacity,
were Kaman’s clients.
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communications specifically in the complaint, a reasonable inference from the complaint
is that Carillon’s law firm communicated with members of the Board.
{¶ 37} This is based on the fact that “a body corporate must act through agents,
simply because it cannot function in any other manner.” William Coale Dev. Co. v.
Kennedy, 121 Ohio St. 582, 586, 170 N.E. 434 (1930). See also Tokles & Son, Inc. v.
Midwestern Indemn. Co., 65 Ohio St. 3d 621, 627, 605 N.E.2d 936 (1992) (stressing that
“[a]s an artificial person, a corporation does not speak on its own, but, rather, only through
the authorized acts of its agents or alter egos, the officers charged with its management”).
Thus, Kaman could not discuss legal matters with Carillon; the only way to communicate
was through Board members or officers. The mere fact of communication in these
circumstances, even if involving legal advice, fails to establish an attorney-client
relationship, and a reasonable person would not conclude otherwise.
{¶ 38} We also note that both Hardiman and Collett involved individuals, rather
than corporate entities. In New Destiny Treatment Ctr., Inc. v. Wheeler, 129 Ohio St. 3d
39, 2011-Ohio-2266, 950 N.E.2d 157, attorneys had been hired by a dissident
shareholder who had improperly taken over a corporation. Subsequently, the
corporation sued these attorneys for malpractice, alleging that “they had breached their
obligations as attorneys and had negligently represented that a quorum had been
present” at a board meeting. Id. at ¶ 17. This representation about the quorum was
later found to be incorrect and had improperly allowed the dissident shareholder to oust
other board members and take over the corporation. Id. at ¶ 16-17.
{¶ 39} When considering the issue of whether the corporation could sue the
attorneys, the court noted the general principle about looking to the intentions of the
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attorney and a prospective client. Id. at ¶ 26. In this regard, the court stated that:
However, in this case, the putative client is a corporate entity, and an
attorney employed or retained by a corporation represents the organization
acting through its constituents; the attorney does not owe allegiance to a
stockholder, director, officer, or other person connected with the
corporation. Prof.Cond.R. 1.13(a); former EC 5-19. Thus, because a
corporate attorney represents the organization acting through its agents, id.,
in order to form an attorney-client relationship with a corporation, the party
hiring counsel on behalf of the corporation must necessarily have authority
to do so and must reasonably believe that an attorney-client relationship
has been established.
Id. at ¶ 27.
{¶ 40} The Supreme Court of Ohio then held that the corporation could not assert
a malpractice claim against the attorneys because no one with authority to employ
counsel had retained the attorneys, and no corporate resolution to that effect existed.
New Destiny, 129 Ohio St. 3d 39, 2011-Ohio-2266, 950 N.E.2d 157, at ¶ 28. In addition,
the dissident shareholder had previously been relieved of authority and lacked authority
to hire counsel for the corporation. Id. The court also commented that no other
constituent with authority to hire the attorneys had retained them. Id. at ¶ 29.
{¶ 41} Although the case before us presents a different situation, in that a member
of a corporation is attempting to claim an attorney-client relationship, the instructive part
of New Destiny is that corporate attorneys represent the corporation, not other persons
connected to the corporation. Such an attorney owes allegiance to the corporation and
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a board member should not reasonably expect that the attorney represents or owes
allegiance to that party.
{¶ 42} Accordingly, the trial court correctly concluded that Guehl failed to establish
the existence of an attorney-client relationship.
(ii) Privity
{¶ 43} Since no attorney-client relationship existed, Guehl would have had to show
that he was in privity with Carillon. Shoemaker, 118 Ohio St. 3d 226, 2008-Ohio-2012,
887 N.E.2d 1167, at ¶ 9. Privity is defined as “ ‘[t]he connection or relationship between
two parties, each having a legally recognized interest in the same subject matter.’ ” Id.
at ¶ 10, quoting Black’s Law Dictionary 1237 (8th Ed.2004). The trial court found a lack
of privity because the interests of Carillon and Guehl could not be deemed to be
concurrent. This is consistent with applicable legal authority. See, e.g., Omega
Riggers, 2016-Ohio-2961, 65 N.E.3d 210, at ¶ 51 (Fain, J., dissenting) (noting that privity
exists where the client and third party share concurrent interests or mutuality of interest);
Ryan v. Wright, 10th Dist. Franklin No. 06AP-962, 2007-Ohio-942, ¶ 9.
{¶ 44} Guehl contends that the trial court erred concerning this point by making a
finding of fact that was outside the pleadings, while ignoring factual evidence that Guehl
presented in responding to Kaman’s motion to dismiss. In this regard, Civ.R. 12(B)
allows trial courts to treat motions to dismiss as motions for summary judgment, where
matters outside the pleadings are presented and the court does not exclude the materials.
Courts have discretion in deciding “whether to convert a Civ.R. 12(B)(6) motion to a
summary-judgment motion, but in most instances a court should exclude matters outside
the pleadings.” Coors v. Fifth Third Bank, 1st Dist. Hamilton No. C-050927, 2006-Ohio-
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4505, ¶ 10, citing Eulrich v. Weaver Bros., 165 Ohio App. 3d 313, 2005-Ohio-5891, 846
N.E.2d 542, ¶ 11 (3rd Dist.). An abuse of discretion “ ‘implies that the court's attitude is
unreasonable, arbitrary or unconscionable.’ ” (Citations omitted.) Blakemore v.
Blakemore, 5 Ohio St. 3d 217, 219, 450 N.E.2d 1140 (1983).
{¶ 45} Given the above discussion, the trial court had discretion to exclude any
factual materials Guehl submitted, and we find no abuse of discretion in the court’s
decision. As was noted, in most instances, trial courts will exclude such materials.
Furthermore, the trial court did not consider matters outside the pleadings when deciding
the motion.
{¶ 46} After analyzing the law pertinent to the privity issue the trial court concluded
that the interests of Guehl and Carillon clearly might diverge with respect to the issue of
reserve funding, special assessments, and maintenance of property. After reviewing the
complaint, we agree. As a fundamental matter, Guehl brought this action because he
disagreed with Carillon’s action or inaction on many matters, including budgeting,
property maintenance, supervision of construction, management practices, oversight of
its property manager, assessments, and reserve studies. Second Amended Complaint,
Doc. # 110, pp. 5-7, and 10-13. The interests of Carillon and Guehl are clearly neither
concurrent nor mutual, and that is apparent on the face of the complaint.
{¶ 47} In arguing that the trial court erred, Guehl’s brief also relies on Judge Fain’s
dissent on privity in Omega Riggers, in which the judge said he would reverse the
summary judgment and remand the case, because “ ‘[t]here is a genuine issue of material
fact in this case whether Koverman [attorney] committed an act or acts of malpractice,
before January 1, 2007, that had the proximate result of injuring the plaintiffs.’ ” Merit
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Brief of Plaintiffs-Appellants, p. 7, quoting Omega Riggers, 2016-Ohio-2961, 65 N.E.3d
210, at ¶ 49 (Fain, J., dissenting). Notably, this statement is in a dissent, not in the
majority opinion. Nonetheless, Guehl omits a critical part of Judge Fain’s remarks.
{¶ 48} In the part of the quotation that Guehl omitted, Judge Fain noted that “[a]n
attorney is not vicariously liable for the torts of his client, but if the attorney commits
malpractice before January 1, 2007, he is liable for injuries to a person in privity with his
client proximately caused by his malpractice.” (Emphasis added.) Id. The footnote
accompanying this statement states that “[f]or malpractice accruing on or after that date,
R.C. 1705.61 or R.C.1701.921 precludes liability to a non-client.” (Emphasis added.)
Id. at ¶ 49, fn.4.
{¶ 49} R.C. 1701.921, which pertains to corporations and was effective in October
2006, states that:
(A) Absent an express agreement to the contrary, a person providing
goods to or performing services for a domestic or foreign corporation owes
no duty to, incurs no liability or obligation to, and is not in privity with the
shareholders or creditors of the corporation by reason of providing goods to
or performing services for the corporation.
{¶ 50} In Omega Riggers, Judge Fain recognized in his dissent that “public policy
has changed with regard to the relationship between entities and persons providing
services to entities, who are now considered not in privity with the entity or individual
members of that entity, unless a written agreement expressly establishes privity”
(Citation omitted.) Omega Riggers, 2016-Ohio-2961, 65 N.E.3d 210, at ¶ 56 (Fain, J.,
dissenting). Judge Fain did say that it was not clear to him whether “the statutory
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elimination of privity” was intended to apply strictly to breach of contract claims, or whether
it “should also extend to tort claims based on negligent conduct.” Id. He concluded that
“[f]or an action alleging a lawyer's negligence, these statutes must also be read, in para
materia, with common law tort principles, and the ethical duties imposed upon lawyers by
statute and common law.” (Emphasis sic.) Id. As a result, the judge reviewed certain
sections of the Rules of Professional Conduct.
{¶ 51} First, Judge Fain focused on Prof. Cond. Rule 1.2, which prohibits corporate
lawyers from counseling clients to engage in illegal or fraudulent conduct. Id. at ¶ 57.
This rule is irrelevant to the case before us, as Kaman was not accused of such conduct.
{¶ 52} Judge Fain also focused on Prof. Cond. Rule 1.13 and its comments, which
“recognize that an organizational client cannot act except through its constituents,
including officers and shareholders.” Id. at ¶ 58. He concluded, as a result, that “when
acting on behalf of a corporation, an attorney will necessarily act under the direction of,
and advance the interests of, the controlling shareholder or officer.” Id. Again, this is
not relevant to the case before us, as Carillon was not a closely held corporation, with
controlling and minority shareholders.
{¶ 53} Judge Fain recognized that Ohio had chosen “not to recognize a civil action
for aiding and abetting tortious conduct,” and had not adopted the Restatement (2d) of
Torts, § 876 [which involves corporate lawyer liability for aiding and abetting breaches of
fiduciary duty]. Omega Riggers, 2016-Ohio-2961, 65 N.E.3d 210, at ¶ 58-59, citing
DeVries Dairy, L.L.C. v. White Eagle Coop. Assn., Inc., 132 Ohio St. 3d 516, 2012-Ohio-
3828, 974 N.E.2d 1194. Nonetheless, based on case law that existed before statutory
changes in this area in 2006 and 2007, Judge Fain concluded that the majority
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stockholder of the closely held corporation owed a heightened duty to the minority
shareholder, and that “the attorney retained by the majority shareholder/fiduciary for the
corporation owed a similar duty to that minority shareholder, creating privity between the
attorney's corporate client and the minority shareholder.” Id. at ¶ 63. Again, this is not
relevant for purposes of the present case.
{¶ 54} Judge Fain was careful to stress the narrow scope of his discussion, by
stating that:
My conclusion in this case is limited to actions taken by corporate counsel
in relation to minority shareholders of a closely held corporation prior to the
statutory changes that limit the liability of service providers by eliminating
privity between service providers and third persons. Whether privity can
be established between a corporate lawyer and a minority shareholder
based on tortious conduct occurring after the statutory changes is a legal
issue that can only be addressed in a future case.
Omega Riggers at ¶ 63 (Fain, J., dissenting).
{¶ 55} Unlike Omega Riggers, the case before us does not involve an attorney's
employment by a majority shareholder in a closely held corporation or a breach of
fiduciary duty to disenfranchise a minority shareholder. As a result, most of Judge Fain’s
comments and conclusions about privity are simply not relevant to the situation before
us.
{¶ 56} This case does involve events that occurred after R.C. 1701.921 was
adopted in 2006. R.C. 1701.921 provides that persons performing services for
corporations are not in privity with shareholders in the absence of an express agreement.
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Whether this statute extends to tort actions, as Judge Fain discussed, is not something
we need to decide for purposes of the present case, as we agree with the trial court that
no privity existed due to lack of concurrent interests, and there is no basis for privity under
our majority decision in Omega Riggers. This case does not even remotely approach
the circumstances that Judge Fain’s dissent addressed.
{¶ 57} We further note that R.C. 1701.921 does indicate a lack of intent to extend
privity. This is consistent with the majority decision in Omega Riggers, which stated that
“[s]ignificantly, there is no Ohio case that has extended the privity concept to allow a
shareholder, who does not have a direct attorney-client relationship with corporate
counsel, to sue a corporation's attorney for malpractice. We do not believe we should
create one.” Omega Riggers, 2016-Ohio-2961, 65 N.E.3d 210, at ¶ 28.
{¶ 58} Furthermore, as was noted, the Supreme Court of Ohio recently stressed
that corporate attorneys represent the organization and do not owe allegiance to
stockholders, directors, or other persons associated with the corporation. New Destiny,
129 Ohio St. 3d 39, 2011-Ohio-2266, 950 N.E.2d 157, at ¶ 27, citing Prof. Cond. Rule
1.13.
{¶ 59} As a final matter, Guehl contends that Kaman has ignored the fact that dual
representation is a recognized “practice risk.” As support, Guehl cites cases pertaining
to issues with dual representation. Guehl also argues that Kaman has violated rules
pertaining to "candor toward the tribunal," by failing to cite such adverse cases and the
full text of Prof. Cond. R. 1.13 in its brief. We disagree that any such violation occurred.
{¶ 60} In the first place, some cases that Guehl cites are inapplicable and some
statements in cited cases are taken out of context. As an example, the court did say in
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State v. Clark, 8th Dist. Cuyahoga No. 87938, 2007-Ohio-713 (in a criminal context), that
“[d]ual representation is not a per se violation of due process.” (Citations omitted.) Id.
at ¶ 12. However, the court also followed that remark by commenting that “dual
representation can [possibly] work to the advantage of the clients in cases when they
mount a common defense against charges.” Id.
{¶ 61} Due process has many requirements in criminal cases, including the right
to assistance of counsel, State v. Gibson, 45 Ohio St. 2d 366, 376, 345 N.E.2d 399 (1976),
and that “the state establish beyond a reasonable doubt every fact necessary to constitute
the crime charged.” (Citation omitted.) State v. Gardner, 118 Ohio St. 3d 420, 2008-
Ohio-2787, 889 N.E.2d 995, ¶ 36. It also requires “ ‘a jury capable and willing to decide
the case solely on the evidence before it,’ ” State v. Adams, 103 Ohio St. 3d 508, 2004-
Ohio-5845, 817 N.E.2d 29, ¶ 42, quoting Smith v. Phillips, 455 U.S. 209, 217, 102 S. Ct.
940, 71 L. Ed. 2d 78 (1982), and provision of counsel and transcripts to indigent parents in
parental termination cases. State ex rel. Heller v. Miller, 61 Ohio St. 2d 6, 399 N.E.2d 66
(1980).
{¶ 62} In contrast, due process in civil cases requires only notice and an
opportunity to be heard. See, e.g., Ohio Valley Radiology Assoc., Inc. v. Ohio Valley
Hosp. Assn., 28 Ohio St. 3d 118, 124, 502 N.E.2d 599 (1986). Additionally, “[t]here is no
generalized right of counsel in civil litigation.” State ex rel. Jenkins v. Stern, 33 Ohio
St.3d 108, 110, 515 N.E.2d 928, 930 (1987).
{¶ 63} However, a due process argument is beside the point. Due process has
little application in situations occurring prior to litigation, except where it may be required,
for example, as part of the process of terminating employment. See, e.g., Ohio Assn. Of
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Public School Emp. AFSCME, AFL-CIO v. Lakewood City School Dist. Bd. Of Edn., 68
Ohio St. 3d 175, 624 N.E.2d 1043 (1994). Thus, the fact that an attorney has represented
more than one party prior to litigation would not violate due process. It could violate
ethical rules, but it would not violate due process.
{¶ 64} Similarly, Highland Business Park, LLC v. Grubb & Ellis Co., 8th Dist.
Cuyahoga No. 85225, 2005-Ohio-3139, another case cited by Guehl, is irrelevant, as it
did not even involve attorneys; the case involved “dual representation” by real estate
brokers. Id. at ¶ 1-8.
{¶ 65} There is no question that “[t]he primary purpose behind the prohibition in
[ethical rules] against dual representation of clients with adverse interests is to ensure
that confidences or secrets of a client imparted to an attorney in the course of their
attorney-client relationship will not be revealed to an adverse party or used to the client's
disadvantage.” Kelley v. Buckley, 193 Ohio App. 3d 11, 2011-Ohio-1362, 950 N.E.2d
997, ¶ 26 (8th Dist.), citing former DR 5-105.2 The comments to Prof. Cond. Rule 1.7
also stress, among other things, that “[t]he principles of loyalty and independent judgment
are fundamental to the attorney-client relationship and underlie the conflict of interest
provisions of these rules.” However, the case before us does not involve dual
representation. Guehl did not have an attorney-client relationship with Kaman, nor was
Guehl in privity with Carillon, who was Kaman’s client.
{¶ 66} Based on the preceding discussion, we find no error in the trial court’s
decision. Accordingly, Guehl’s sole assignment of error is overruled.
2 DR 5-105 was part of the Ohio Code of Professional Responsibility, which was
superseded in 2007 by the Ohio Rules of Professional Conduct. Conflicts of interest are
now covered in Prof. Cond. Rules 1.7, 1.8, 1.9, and 1.10.
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{¶ 67} As a housekeeping matter, we note that Guehl filed a motion to strike
Kaman’s motion for leave to file a sur-reply brief and the sur-reply brief. The motion was
filed on April 18, 2017, but we had already ruled on April 14, 2017, that the sur-reply brief
could be filed. See Guehl v. Carillon House Assn., Inc., 2d Dist. Montgomery No. 24738
(Apr. 14, 2017). The motion to strike raises issues we have rejected, like Kaman’s failure
to cite relevant adverse authority. Based on the discussion in this opinion, we find the
motion to strike is not well-taken, and it is overruled.
III. Conclusion
{¶ 68} Guehl’s sole assignment of error having been overruled, the judgment of
the trial court is affirmed. Guehl’s motion to strike is also overruled.
.............
DONOVAN, J. and FROELICH, J., concur.
Copies mailed to:
Robert L. Guehl
Robert E. Kmiecik
Garrett B. Humes
David Ahlstrom
Benjamin Maraan
John Phillips
Anthony Holman
Anne Keeton
Evelyn Davidson
Hon. Dennis J. Langer