Wells Fargo v. Smith

[Cite as Wells Fargo v. Smith, 2013-Ohio-855.]
IN THE COURT OF APPEALS
TWELFTH APPELLATE DISTRICT OF OHIO
BROWN COUNTY
WELLS FARGO BANK, :
Plaintiff/Appellee, : CASE NO. CA2012-04-006
- vs - : OPINION
3/11/2013
DONALD RAY SMITH, :
EXECUTOR OF THE ESTATE
OF EVELYN MAY SMITH, :
Defendant/Third-Party Plaintiff/ :
Appellant,
:
- vs -
:
AMERIFIRST FINANCIAL, et al.,
:
Third-Party Defendants/Appellees.
:
CIVIL APPEAL FROM BUTLER COUNTY COURT OF COMMON PLEAS
Case No. CVE20101299
Scott A. King, Austin Landing, 10050 Innovation Drive, Suite 400, Dayton, Ohio 45342-4934,
for plaintiff/appellee
Andrew M. Engel, 7071 Corporate Way, Centerville, Ohio 45459, for plaintiff-appellee, Wells
Fargo Bank and defendant/third-party plaintiff/appellant, Donald Ray Smith, Executor of the
Estate of Evelyn Mae Smith
Sebaly, Shillito & Dyer, Dianne F. Marx, 1900 Kettering Tower, 40 North Main Street, Dayton,
Ohio 45423, for third-party defendants/appellees, Amerifirst Financial and Gary Hamminga
James Winkelman, 43 Hummingbird Way, Amelia, Ohio 45102, third-party defendant, pro se
Brown CA2012-04-006
M. POWELL, J.
{¶ 1} Third-party plaintiff/appellant, Donald Ray Smith, Executor of the Estate of
Evelyn Mae Smith (Mrs. Smith), deceased, appeals a decision of the Brown County Court of
Common Pleas granting summary judgment to third-party defendants/appellees, AmeriFirst
Financial Corporation and Gary Hamminga. For the reasons stated below, we affirm.
{¶ 2} This case involves a failed investment in fraudulent unregistered securities
purchased by Mrs. Smith. The fraudulent securities were part of a multi-million dollar Ponzi
scheme run by Diversified Lending Group (DLG). American Benefits Concepts (ABC), a
company that sold Medicare supplemental insurance and investments, offered the DLG
investment to its clients. ABC structured the financing of the investment so that their clients
would mortgage their homes and apply the proceeds to purchase the DLG investment. In
return, DLG was to make the customer's monthly mortgage payments. Any extra proceeds
from the customer's investments would be given directly to the customer. In order to close
the loans, ABC used several mortgage banking firms, including AmeriFirst. Eventually, DLG
was unable to meet its obligations and the Ponzi scheme collapsed.
{¶ 3} AmeriFirst started closing mortgage loans for ABC's clients in 2007. This
relationship began when Gary Hamminga, a loan officer with AmeriFirst, unexpectedly
encountered an acquaintance at a restaurant who was an ABC employee. The employee
expressed to Hamminga that ABC was looking for banks to close mortgages for its
customers that were investing with DLG and explained the DLG investment. Hamminga
agreed to look at some of ABC's customers to see if he could assist them in obtaining a
mortgage. Hamminga received many referrals from ABC during 2007 and 2008. Most of the
referrals he received from ABC were customers who wished to invest in DLG.
{¶ 4} During the relationship with ABC, Hamminga did not solicit clients to invest in
DLG or promote DLG in any way. Hamminga did not contact ABC's clients directly, instead
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an ABC employee would notify Hamminga if a customer was interested in obtaining a
mortgage or the client would contact Hamminga directly. The compensation arrangement
between the companies was customary, neither AmeriFirst nor ABC gave the other
compensation for referrals. Instead, AmeriFirst earned money once the loan was closed and
the loan officers received their customary 40 percent of the gross revenue earned by
AmeriFirst on the loan. AmeriFirst also did not plan or organize underwriting of the mortgage
loans. There was no legal relationship between the two companies.
{¶ 5} In the fall of 2007, Hamminga was informed by an ABC salesman that Mrs.
Smith was interested in obtaining a mortgage. Hamminga then contacted Mrs. Smith who
told him that she was not interested in a mortgage. Hamminga relayed this information to
ABC and did not speak with Mrs. Smith further. About a month later, Hamminga was
contacted by an ABC employee who told him that Mrs. Smith had changed her mind about
procuring a mortgage. Hamminga called her a second time. During this conversation, he
reminded her that she previously did not want a mortgage. Mrs. Smith assured Hamminga
that she had changed her mind and wanted a mortgage. Hamminga then proceeded with the
mortgage process.
{¶ 6} After this conversation, Hamminga obtained financial information from Mrs.
Smith and confirmed that she qualified for a mortgage. When filling out the loan application,
Hamminga included the income Mrs. Smith expected to receive from the DLG investment on
her application even though this income was not needed in order to qualify her for the
mortgage loan. Hamminga then arranged a date for Mrs. Smith to sign documents so that
she could close on the loan. During this process, Hamminga believed that Mrs. Smith was
competent and not confused about the events that were taking place. Hamminga kept ABC
informed of the status of Mrs. Smith's loan application even though this was not his normal
custom. Except for this communication, Hamminga performed his normal banking
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procedures for closing a mortgage.
{¶ 7} In January 2008, Mrs. Smith closed on the mortgage loan. Three days after the
closing, AmeriFirst performed its normal business practice of giving the loan proceeds
directly to Mrs. Smith. AmeriFirst did not advise Mrs. Smith as to how to invest her money.
Subsequently, Mrs. Smith used the loan proceeds to invest in the DLG notes. After Mrs.
Smith's loan was closed, Hamminga provided information regarding Mrs. Smith's loan
number, account number, and mortgage payment to ABC although this was not his normal
custom. Hamminga communicated this information to ABC to facilitate DLG's payment of
Mrs. Smith's mortgage as she had agreed. All other communications between the
companies were according to Hamminga's normal business practices.
{¶ 8} Eventually, DLG ceased paying Mrs. Smith's mortgage. Following a SEC
investigation, DLG was placed into a receivership in March of 2009. In December 2010,
Wells Fargo filed a complaint for foreclosure.1 Mrs. Smith responded and filed a third-party
complaint against AmeriFirst and Hamminga alleging, among other things, that the parties
participated in and aided the illegal sale of unregistered securities. In July 2011, Mrs. Smith
passed away and her son, Donald Ray Smith, as the executor of her estate, proceeded with
the suit. AmeriFirst and Hamminga moved for summary judgment on all the claims against
them. On March 12, 2012, the trial court granted AmeriFirst and Hamminga's motion for
summary judgment.
{¶ 9} Executor now appeals, raising two assignments of error.
{¶ 10} Assignment of Error No. 1:
{¶ 11} THE TRIAL COURT ERRED IN IMPLICITY OVERRULING [EXECUTOR'S]
MOTION TO STRIKE THE AFFIDAVIT OF JASON JUBERG.
1. Mrs. Smith initially filed a suit against AmeriFirst and Hamminga in a separate, earlier action. However, this
case was voluntarily dismissed.
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{¶ 12} Executor argues that the court erred in overruling his motion to strike the
affidavit of Jason Juberg. Juberg was the president of ABC and submitted an affidavit that
discussed ABC's relationship with AmeriFirst. Executor contends that Juberg's affidavit
violated Civ.R. 56(E) because Juberg testified to the conduct of persons without setting forth
the proper foundation for his personal knowledge of that conduct. Additionally, executor
maintains that the affidavit was improper because it referenced certain documents that were
not attached to the affidavit.
{¶ 13} The determination of a motion to strike is within the trial court's broad
discretion. Ireton v. JTD Realty Invests., L.L.C., 12th Dist. No. CA2010-04-023, 2011-Ohio-
670, ¶ 19. A court's ruling on a motion to strike will be not reversed on appeal absent an
abuse of that discretion. State ex rel. Ebbing v. Ricketts, 133 Ohio St.3d 339, 2012-Ohio-
4699, ¶ 13. A decision constitutes an abuse of discretion when it is unreasonable, arbitrary,
or unconscionable. State ex rel. Striker v. Cline, 130 Ohio St.3d 214, 2011-Ohio-5350, ¶ 11.
{¶ 14} The trial court did not expressly rule on executor's motion to strike Juberg's
affidavit in its final judgment entry. Generally, when a trial court fails to rule on a motion, the
appellate court will presume the trial court overruled the motion. Lee v. Barber, 12th Dist. No.
CA2000-02-014, 2001 WL 733449, *3 (July 2, 2001). Therefore, executor's pending motion
to strike Juberg's affidavit was implicitly overruled by the grant of summary judgment in favor
of AmeriFirst and Hamminga.
{¶ 15} Civ.R. 56(C) provides an exclusive list of materials that a trial court may
consider when deciding a motion for summary judgment. State ex rel. Varnau v. Wenninger,
12th Dist. No. CA2009-02-010, 2011-Ohio-3904, ¶ 7. Those materials are "pleadings,
depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence,
and written stipulations of fact." Civ.R. 56(C). To be considered in a summary judgment
motion, an affidavit "shall be made on personal knowledge, shall set forth such facts as
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would be admissible in evidence, and shall show affirmatively that the affiant is competent to
testify as to the matters stated in the affidavit." Civ.R. 56(E).
{¶ 16} Personal knowledge is defined as "knowledge of the truth in regard to a
particular fact or allegation, which is original, and does not depend on information or
hearsay." Re v. Kessinger, 12th Dist. No. CA2007-02-044, 2008-Ohio-167, ¶ 32. Absent
evidence to the contrary, an affiant's statement that his affidavit is based on personal
knowledge will suffice to meet the requirement of Civ.R. 56(E). Churchill v. G.M.C., 12th
Dist. No. CA2002-10-263, 2003-Ohio-4001, ¶ 11. Additionally, in the absence of a specific
statement, personal knowledge may be inferred from the contents of an affidavit. Bank One,
N.A. v. Swartz, 9th Dist. No. 03CA008308, 2004-Ohio-1986, ¶ 15. However, "[i]f particular
averments contained in an affidavit suggest that it is unlikely that the affiant has personal
knowledge of those facts, then * * * something more than a conclusory averment that the
affiant has knowledge of the facts would be required." Id. at ¶ 14, quoting Merchants Natl.
Bank v. Leslie, 2d Dist. No. 3072, 1994 WL 12433 (Jan. 21, 1994).
{¶ 17} Additionally, documents that are referred to in an affidavit must be attached to
the affidavit and must be sworn or certified copies. Civ.R. 56(E). When an affiant relies on
documents in his affidavit and does not attach those documents, the portions of the affidavit
that reference those document must be stricken. Third Federal S. & L. Assn. of Cleveland v.
Farno, 12th Dist. No. CA2012-04-028, 2012-Ohio-5245, ¶ 10. See Wenninger at ¶ 10
(striking portions of affidavit where documents were reviewed and relied upon in drafting
affidavit but not attached to affidavit or served therewith).
{¶ 18} In the case at bar, Juberg's affidavit contained several paragraphs which
outlined the background of ABC's involvement with DLG, and ABC's and AmeriFirst's actions
regarding Mrs. Smith and the DLG investment. Juberg explained that he was president of
ABC and that ABC offered an investment to its clients through DLG. Juberg then states that
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he is named as a defendant in a separate civil case filed by Mrs. Smith and that he is
"familiar with the claims" made in this case and has "reviewed relevant documents relating to
it," including "telephone logs Bates labeled ABC Wert 0349-0571." Juberg avers in
paragraph 11 that based on his review of these documents, any communication between
ABC and AmeriFirst regarding Mrs. Smith's investment was solely for the purposes of
determining if DLG had paid the monthly mortgage payment for Mrs. Smith. These
documents were not attached to Juberg's affidavit. Additionally, Juberg makes statements
regarding AmeriFirst's actions in paragraphs 11, 13, 14, and 16-19. For example, Juberg
states that AmeriFirst never planned or organized the underwriting of the DLG investment,
AmeriFirst never prepared any documents for ABC to attract potential investors, and
AmeriFirst never offered any confidential information to ABC regarding Mrs. Smith.
{¶ 19} We find that the court abused its discretion when it admitted portions of
Juberg's affidavit. First, the admission of the paragraphs of Juberg's affidavit that relied on
his review of the telephone logs and other records was in error as these documents were not
attached to the affidavit. Second, the court erred in admitting portions of Juberg's affidavits
that discussed AmeriFirst's conduct in Mrs. Smith's transaction and the DLG investment in
general. While Juberg's statement that he was president of ABC during all relevant times
was sufficient to demonstrate personal knowledge of ABC's actions, this statement did not
demonstrate how he acquired personal knowledge of AmeriFirst's conduct. We cannot infer
Juberg's personal knowledge of AmeriFirst's behavior from the statements made in the
affidavit as Juberg did not aver that he was also employed with AmeriFirst or had some other
relationship that would provide him with this information. Juberg is not competent to testify
regarding Amerifirst's actions without providing a basis for his personal knowledge of
AmeriFirst.
{¶ 20} Therefore, the court abused its discretion when it admitted portions of Juberg's
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affidavit that relied on documents that were not attached to the affidavit. Additionally, the
court erred when it admitted the portions of Juberg's affidavit that discussed AmeriFirst's
actions when these statements were not based on personal knowledge. Thus, paragraphs 7,
9, 11, 13, 14, 16-19 are stricken. The rest of the affidavit is admissible.
{¶ 21} Executor's first assignment of error is partially sustained.
{¶ 22} Assignment of Error No. 2:
{¶ 23} THE COURT OF COMMON PLEAS ERRED IN GRANTING APPELLEE'S
MOTION FOR SUMMARY JUDGMENT.
{¶ 24} In his second assignment of error, executor argues the court erred in granting
summary judgment on a number of issues. This court's review of a trial court's ruling on a
summary judgment motion is de novo, which means we review the judgment independently
and without deference to the trial court's determination. Simmons v. Yingling, 12th Dist. No.
CA2010-11-117, 2011-Ohio-4041, ¶ 18, citing Burgess v. Tackas, 125 Ohio App.3d 294, 296
(8th Dist.1998). We utilize the same standard in our review that the trial court uses in its
evaluation of the motion.
{¶ 25} Summary judgment is appropriate when there are no genuine issues of material
fact to be litigated, the moving party is entitled to judgment as a matter of law, reasonable
minds can come to only one conclusion, and that conclusion is adverse to the nonmoving
party. Civ.R. 56(C); Williams v. McFarland Properties, L.L.C., 177 Ohio App.3d 490, 2008-
Ohio-3594, ¶ 7 (12th Dist.). To prevail on a motion for summary judgment, the moving party
must be able to point to evidentiary materials that show there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a matter of law. Dresher v.
Burt, 75 Ohio St.3d 280, 293 (1996). The nonmoving party must then present evidence that
some issue of material fact remains to be resolved; it may not rest on the mere allegations or
denials in its pleadings. Id. All evidence submitted in connection with a motion for summary
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judgment must be construed most strongly in favor of the party against whom the motion is
made. Morris v. First Natl. Bank & Trust Co., 21 Ohio St.2d 25, 28 (1970).
R.C. 1707.43
{¶ 26} Executor first contends that the trial court erred when it granted summary
judgment in favor of AmeriFirst and Hamminga for his claim under R.C. 1707.43. Executor
argues there was a genuine issue of material fact regarding whether AmeriFirst and
Hamminga aided or participated in the sale of the DLG investment.
{¶ 27} R.C. 1707.43 provides remedies for a purchaser in an unlawful sale of
securities. The statute allows a purchaser to void every sale or contract for sale made in
violation of Chapter 1707. Id. at (A). The statute goes on to state, "[t]he person making such
sale or contract for sale, and every person that has participated in or aided the seller in any
way in making such sale or contract for sale, are jointly and severally liable to the purchaser *
* *." (Emphasis added.) Id. The language in this provision has been held to be broad in
scope. Fed. Mgt. Co. v. Coopers & Lybrand, 137 Ohio App.3d 366, 391 (10th Dist.2000).
{¶ 28} Courts have considered several factors in deciding whether a person or entity
shall be responsible for the sale of illegal securities under R.C. 1707.43(A). These factors
include relaying information, such as the proposed terms of the sale, from the sellers to the
investors, arranging or attending meetings between the investors and the sellers, collecting
money for investments, distributing promissory notes and other documents to the investors
from the sellers, distributing principal and interest payments to the investors, and actively
marketing the security or preparing documents to attract investors. Boland v. Hammond, 144
Ohio App.3d 89, 94 (4th Dist.2001). See Gerlach v. Wergowski, 65 Ohio App.3d 510, 513-
514 (1st Dist.1989); Perkowski v. Megas Corp., 55 Ohio App.3d 234 (9th Dist.1990).
{¶ 29} In a case involving whether a creditor bank could be held liable under R.C.
1707.43(A), the Tenth District noted that an important factor for determining liability is
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whether the bank's actions went beyond normal commercial banking activities. Fed Mgt. Co.
at 393. In Fed. Mgt. Co., summary judgment was inappropriate where a bank's action in
reorganizing debt, directly participating in the underwriting of the investment, and sharing
secret information about the investment with other bankers were not normal banking
activities. Id. at 377. On the other hand, a bank was not liable for the illegal sale of
securities when the bank simply collected and held premiums from investors, facilitated
payments from the investment, and assisted in distribution of the investment. Boomershire v.
Lifetime Capital, Inc., 2nd Dist. No. 22179, 2008-Ohio-14, ¶ 15. Instead, "[t]he willingness of
a bank to become the depository of funds does not amount to a personal participation or aid
in the making of a sale." Hild v. Woodcrest Assn., 59 Ohio Misc. 13, 30 (M.C.1977).
{¶ 30} We find that there was no genuine issue of material fact as to whether
AmeriFirst or Hamminga "participated in or aided" ABC in selling the DLG investment. The
evidence established that both AmeriFirst and Hamminga engaged in normal banking
procedures in regards to the DLG investment. In Hamminga's deposition, he testified that he
would often receive referrals from ABC regarding mortgages that needed to be closed.
Hamminga was aware that most of the mortgages would be used for an investment into DLG
but he never solicited clients for this investment. AmeriFirst never paid ABC any
compensation for these referrals and neither AmeriFirst nor Hamminga ever received a
referral fee from ABC. Hamminga communicated with ABC like all other companies from
which he received a referral except that he informed ABC of the client's loan number, loan
amount, and the date the mortgage payment was due. He explained he did this to facilitate
ABC's payments of these clients' mortgages every month. Further, the president of
AmeriFirst averred that there was no legal relationship between the two companies, no
AmeriFirst employees ever planned, organized, or participated in the underwriting of the DLG
investment, and AmeriFirst did not prepare any documents for ABC to attract investors to
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DLG.
{¶ 31} The evidence also established that Hamminga's actions in processing Mrs.
Smith's mortgage did not amount to "participating in or aiding" an illegal sale of securities.
Hamminga did not solicit Mrs. Smith. Hamminga first contacted Mrs. Smith when an ABC
representative told him she was interested in obtaining a mortgage on her home. However,
Hamminga did not proceed with the mortgage at that time because Mrs. Smith told him that
she was not interested in obtaining a mortgage. Approximately one month later, Hamminga
contacted Mrs. Smith again after an ABC employee told him she was interested. Hamminga
reminded her that she previously declined the mortgage offer, but she indicated that was she
interested this time.
{¶ 32} Hamminga proceeded with his normal routine of obtaining the borrower's
information and sending the loan to processing and underwriting. Hamminga acknowledged
that he included the potential DLG income on Mrs. Smith's loan application but stated that
she qualified for the mortgage without the inclusion of this income. Mrs. Smith's loan was
closed and Hamminga directly forwarded her the proceeds of the loan as this was his usual
practice. Hamminga did not encourage Mrs. Smith to invest the money into DLG. AmeriFirst
and Hamminga's knowledge of Mrs. Smith's use of the money, investing in what they
believed to be a lawful company, does not equate to participating in or aiding in the sale of
securities. Further there was no evidence that Mrs. Smith was incompetent.
{¶ 33} Therefore, there were no genuine issues of material fact regarding whether
AmeriFirst or Hamminga participated in or aided the illegal sale of securities. Thus, we find
that the trial court did not err in finding summary judgment was appropriate for executor's
R.C. 1707.43 claim.
Tort of Aiding and Abetting Fraud
{¶ 34} Executor next argues that the trial court erred when it granted summary
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judgment to executor's civil claim of "aiding and abetting." While executor does not specify
what tortious act AmeriFirst or Hamminga aided and abetted, he essentially argues that they
aided and abetted fraud.2 The trial court found that Ohio does not recognize a claim of aiding
and abetting fraud.
{¶ 35} Until recently, Ohio courts of appeals expressed differing opinions regarding
whether a claim for aiding and abetting tortious conduct was cognizable as outlined by 4
Restatement of the Law 2d, Torts Section 876 (1979). See Fed Mgt. Co., 137 Ohio App.3d
at 382; Whelan v. Vanderwist of Cincinnati, Inc., 11th Dist. No. 2012-G-2999, 2011-Ohio-
6844, ¶ 19; Collins v. Natl. City Bank, 2nd Dist. No. 19884, 2003-Ohio-6893, ¶ 32. This
Restatement section provides that a person acting in concert with a wrongdoer is liable if the
person:
(a) Does a tortious act in concert with the other or pursuant to a
common design with him, or
(b) Knows that the other's conduct constitutes a breach of duty
and gives substantial assistance or encouragement to the other
so to conduct himself, or
(c) Gives substantial assistance to the other in accomplishing a
tortious result and his own conduct, separately considered,
constitutes a breach of duty to the third person.
{¶ 36} The Ohio Supreme Court recently stated that "[t]his court has never recognized
a claim under 4 Restatement 2d of Torts, Section 876 (1979), and we decline to do so under
the circumstances of this case." De Vries Dairy, L.L.C. v. White Eagle Coop. Assn., Inc., 132
Ohio St.3d 516, 2012-Ohio-3828, ¶ 2. See Sacksteder v. Senney, 2nd Dist. No. 24993,
2012-Ohio-4452, ¶ 76. Therefore, Ohio does not recognize a cause of action for aiding and
abetting a tortious act. A person is liable only if he engages in behavior that is unlawful and
2. Count XIII of executor's amended complaint alleges that AmeriFirst and Hamminga aided and abetted ABC
and Winkleman in defrauding Mrs. Smith. However, executor's precise argument of the type of tortious act that
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not simply because he aided or abetted wrongful conduct. Fed. Mgt. Co. at 381. See In re
Natl. Century Fin. Ent., Inc., Invest. Litigation v. Deloitte & Touche, L.L.P., __ F.Supp.2d __,
2012 WL 5334027, *20 (Oct. 26, 2012). Consequently, the trial court did not err in granting
summary judgment as to executor's aiding and abetting claim.
R.C. 1345.031
{¶ 37} Executor contends the trial court erred when it granted summary judgment on
his claim under R.C. 1345.031. R.C. 1345.031(B)(8) requires suppliers of consumer
residential mortgages to provide consumers with a disclosure form informing consumers of
their rights when completing a mortgage transaction. Executor argues that the court erred
when it relied on an affidavit which discussed this disclosure form but did not attach the form
to the affidavit. Executor also asserts that genuine issues of material fact remain as to
whether AmeriFirst or Hamminga violated the disclosure requirements under the statute.
{¶ 38} We begin by addressing executor's first argument, whether the court erred in
relying on paragraphs of an affidavit that mentioned the disclosure form when the form was
not attached to the affidavit. In support of their motion for summary judgment, AmeriFirst and
Hamminga submitted an affidavit of Mark Jones, President of AmeriFirst. Jones' affidavit
outlined AmeriFirst's relationship with ABC and the company's role in closing Mrs. Smith's
mortgage. Paragraphs 15 and 16 of Jones' affidavit referenced the disclosure form that
AmeriFirst provided Mrs. Smith in compliance with R.C. 1345.031(B)(8). Jones stated that
Mrs. Smith signed and returned this form. AmeriFirst and Hamminga did not provide a copy
of this form to the trial court.
{¶ 39} We find that the trial court did not err in relying on paragraphs 15 and 16 of
Jones' affidavit. While executor did not cite any legal authority in his brief to explain why the
the parties have concert liability for is irrelevant due to the Ohio Supreme Court's recent decision discussed
below.
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court erred in relying on this affidavit, it appears executor argues that the affidavit did not
comply with Civ.R. 56(E). As discussed in the first assignment of error, Civ.R. 56(E) requires
that all documents referenced in an affidavit be attached to that affidavit. When a party does
not attach those documents, the portions of the affidavit that refer to the documents must be
stricken. Third Federal S. & L. Assn. of Cleveland, 12th Dist. No. CA2012-04-028, 2012-
Ohio-5245, ¶ 10. However, a party waives this argument if it fails to file a motion to strike the
affidavit. Hammock v. Sav. of Am., 12th Dist. No. CA90-01-006 (Sept. 10, 1990); Darner v.
Richard E. Jacobs Group, Inc., 8th Dist. No. 89611, 2008-Ohio-959, ¶ 15. In this case
executor did not move to strike Jones' affidavit. Therefore, executor has waived this
argument on appeal and the trial court properly considered Jones' affidavit under the R.C.
1345.031 claim.
{¶ 40} Next, we determine whether the trial court erred in granting summary judgment
to AmeriFirst and Hamminga regarding this claim. R.C. 1345.031(A) provides that no
supplier shall commit an unconscionable act in connection with a consumer residential
mortgage. An unconscionable act includes:
[f]ailing to disclose to the consumer at the closing of the
consumer transaction that a consumer is not required to
complete a consumer transaction merely because the consumer
has received prior estimates of closing costs or has signed an
application and should not close a transaction that contains
different terms and conditions than those the consumer was
promised.
Id. at (B)(8).
{¶ 41} Ohio Adm.Code 109:4-3-23(A) provides that no suppliers shall fail to disclose to
the consumer at the closing of the consumer transaction the above mentioned disclosures.
To comply with R.C. 1345.031, "a supplier must provide the notice attached to this rule as
addendum A * * *." Id. at (B).
{¶ 42} In support of its motion for summary judgment, AmeriFirst and Hamminga
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submitted Mark Jones' affidavit and Greg Hamminga's deposition. In Hamminga's
deposition, he explained that the company utilizes a computer system to insure AmeriFirst
complies with each state's mortgage and consumer protection laws. Under this system, the
loan processor enters a state name which in turn generates the application and all the
required closing documents for that state. He used this system to ensure he complied with
Ohio's laws in closing a mortgage. In Jones' affidavit, he stated:
15. AmeriFirst provided a form for Evelyn Mae Smith to sign at
her closing on January 25, 2008. This form was computer
generated and complied with R.C. 1345.031(8). [sic]
16. To the best of my knowledge, Evelyn Mae Smith returned the
form referenced in paragraph 15, executed and dated. * * *
{¶ 43} The evidence established that AmeriFirst utilized a form that complied with R.C.
1345.031(B)(8) and this was given to Mrs. Smith. Hamminga explained that AmeriFirst
closes mortgages in many states and utilizes a system to ensure compliance with each
state's laws. Jones' affidavit clearly stated that the R.C. 1345.031(B)(8) form was utilized in
Mrs. Smith's mortgage closing. Therefore, AmeriFirst pointed to evidentiary materials that
showed there was no genuine issue as to any material fact and that they were entitled to
judgment as a matter of law. Executor's response to appellee's evidence was that Jones
stated that his company provided a form in compliance with "R.C. 1345.031(8)" instead of
R.C. 1345.031(B)(8). In light of the fact that there is no subsection 8 in R.C. 1345.031 and
there was no doubt that the specific provision, R.C. 1345.031(B)(8) was at issue during the
summary judgment motions, we find executor's argument unpersuasive. As discussed
above, the evidence established that there was no genuine fact that AmeriFirst complied with
R.C. 1345.031(B)(8). Therefore, the court did not err in granting summary judgment for this
claim.
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R.C. 1349.41
{¶ 44} Executor contends that AmeriFirst and Hamminga violated R.C. 1349.41 when
they engaged in a transaction that was fraudulent and not in good faith and fair dealing. In
particular, executor argues that the transaction was unfair because AmeriFirst and
Hamminga failed to comply with R.C. 1345.031(B)(8) and provide Mrs. Smith a disclosure
form. Additionally, executor asserts that there were genuine issues of material fact regarding
whether AmeriFirst and Hamminga acted in good faith because they knew and specifically
intended for Mrs. Smith to invest in a highly questionable investment that was ultimately
fraudulent.
{¶ 45} R.C. 1349.41(B) provides, "[a] lender shall not engage in a transaction,
practice, or course of business that is not in good faith or fair dealing, or that operates a fraud
upon any person, in connection with the attempted or actual making, purchase, or sale of any
mortgage loan." This statute was enacted in 2007 and the parties have not cited any Ohio
case law interpreting this statute. Based upon our research, the interpretation of this statute
appears to be one of first impression in Ohio.
{¶ 46} Good faith has been defined generally as "'honesty in fact in the conduct or
transaction concerned.'" DiPasquale v. Costas, 186 Ohio App.3d 121, 2010-Ohio-832 (2nd
Dist.), ¶ 126-127, quoting Casserlie v. Shell Oil Co., 121 Ohio St.3d 55, 57, 2009-Ohio-3, ¶
10. The Supreme Court of Ohio has also defined the term as follows:
A lack of good faith is the equivalent of bad faith, and bad faith,
although not susceptible of concrete definition, embraces more
than bad judgment or negligence. It imports a dishonest
purpose, moral obliquity, conscious wrongdoing, breach of a
known duty through some ulterior motive or ill will partaking of
the nature of fraud. It also embraces actual intent to mislead or
deceive another.
Hoskins v. Aetna Life Ins. Co., 6 Ohio St.3d 272, 276 (1983).
{¶ 47} Fraud has been defined as "[a] knowing misrepresentation of the truth or
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concealment of a material fact to induce another to act to his or her detriment." Black's Law
Dictionary (9th Ed.2009). See Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 475 (1998).
{¶ 48} We find that the evidence established that AmeriFirst and Hamminga did not
violate R.C. 1349.41 in participating in the closing of Mrs. Smith's mortgage loan. First,
AmeriFirst and Hamminga did not act in bad faith or perpetrate a fraud on Mrs. Smith in
regards to the disclosure form required by R.C. 1345.031(B)(8). As discussed in the previous
issue, the evidence showed that AmeriFirst provided this form. Mark Jones' affidavit and
Greg Hamminga's deposition explained AmeriFirst's actions in providing the disclosure form
to Mrs. Smith and the general process AmeriFirst uses to provide consumers with the
disclosure form. Thus, since the evidence established that the disclosure form was provided,
this court refuses to find any bad faith associated with the alleged failure to provide this form.
{¶ 49} Additionally, there was no evidence that AmeriFirst and Hamminga did not act
in good faith, fair dealing, or perpetrated a fraud on Mrs. Smith. In Hamminga's deposition,
he explained that AmeriFirst engaged in normal banking procedures when it closed Mrs.
Smith's loan. He did not solicit Mrs. Smith; he stopped contact with Mrs. Smith when she told
him that she was not interested in obtaining a mortgage, and then reinitiated contact only
when ABC informed Hamminga that Mrs. Smith was interested in acquiring a mortgage
again. Additionally, after closing the loan, Hamminga gave Mrs. Smith the mortgage
proceeds directly, as this was his usual custom after closing a mortgage. Hamminga also
testified that Mrs. Smith understood the loan she was entering into and did not seem
incompetent. The evidence also established that there was no legal relationship between
ABC and AmeriFirst. AmeriFirst never received nor gave any referral fees to ABC, and
neither AmeriFirst nor Hamminga solicited clients or promoted the DLG investment.
{¶ 50} Therefore, the trial court did not err in granting summary judgment to AmeriFirst
and Hamminga on the R.C. 1349.41 claim. There was no evidence that AmeriFirst or
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Hamminga did not act in good faith, fair dealing or operated a fraud upon Mrs. Smith.
Civil Conspiracy
{¶ 51} In his last issue, executor argues the court erred when it granted summary
judgment on the civil conspiracy claim. Specifically, executor contends that the trial court
erred when it sua sponte granted summary judgment as AmeriFirst and Hamminga did not
move for summary judgment on this issue.
{¶ 52} It is well-settled that a trial court "may not sua sponte grant summary judgment
premised on issues not raised by the parties." Safe Auto Ins. Co. v. Semenov, 12th Dist. No.
CA2008-10-123, 2009-Ohio-2334, ¶ 10 quoting Ranallo v. First Energy Corp., 11th Dist. No.
2005-L-187, 2006-Ohio-6105, ¶ 26. When seeking summary judgment, a party must
specifically delineate the basis upon which the motion is brought. Such specificity is
necessary "in order to allow the opposing party a meaningful opportunity to respond."
Patterson v. Ahmed, 176 Ohio App.3d 596, 2008-Ohio-632 (6th Dist.), ¶ 13, quoting Mitseff v.
Wheeler, 38 Ohio St.3d 112 (1988), syllabus. Contrary to executor's assertion, AmeriFirst
and Hamminga did move for summary judgment on the civil conspiracy claim. AmeriFirst
stated numerous times in its motion for summary judgment that it was seeking summary
judgment "on all of Third Party Plaintiff's claims." Thus, the trial court's grant of summary
judgment on the civil conspiracy claim was not sua sponte as AmeriFirst moved for this relief
on the claim.
{¶ 53} Additionally we note that there was no genuine issue of material fact regarding
whether AmeriFirst or Hamminga were liable for civil conspiracy. A civil conspiracy is a
"malicious combination of two or more persons to injure another person or property, in a way
not competent for one alone, resulting in actual damages." Mohme v. Deaton, 12th Dist. No.
CA2005-12-133, 2006-Ohio-7042, ¶ 36, citing Kenty v. Transamerica Premium Ins. Co., 72
Ohio St.3d 415, 419 (1995). An action for civil conspiracy cannot be maintained unless an
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underlying unlawful act is committed. Wilson v. Harvey, 164 Ohio App.3d 278, 2005-Ohio-
5722 (8th Dist.), ¶ 41.
{¶ 54} We have held that the trial court correctly granted summary judgment in favor of
AmeriFirst and Hamminga on all counts alleged against them. Without an underlying tort,
executor cannot establish a claim for civil conspiracy. In addition, there is no evidence in the
record to support a claim that AmeriFirst or Hamminga conspired with any other entity to
harm Mrs. Smith. Consequently, the trial court did not err in granting summary judgment in
favor of AmeriFirst and Hamminga on the civil conspiracy claim.
{¶ 55} Executor's second assignment of error is overruled.
{¶ 56} The trial court's judgment is affirmed. Executor's first assignment of error is
sustained to the extent the court erred in admitting portions of Jason Juberg's affidavit.
Executor's second assignment of error is overruled as the remaining admissible evidence
established that AmeriFirst and Hamminga were entitled to judgment as a matter of law and
that there were no genuine issues of material fact on all of executor's claims. Thus, the court
did not err in granting summary judgment in favor of AmeriFirst and Hamminga against
executor.
{¶ 57} Judgment Affirmed.
RINGLAND, P.J., and PIPER, J., concur.
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