[Cite as Chateau Estate Homes, L.L.C. v. Fifth Third Bank, 2017-Ohio-6985.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
CHATEAU ESTATE HOMES, LLC, : APPEAL NO. C-160703
TRIAL NO. A-1600887
and :
O P I N I O N.
TODD CLIFFORD, :
Plaintiffs-Appellants, :
vs. :
FIFTH THIRD BANK, :
Defendant-Appellee. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: July 28, 2017
Kircher Law Office, LLC, Konrad Kircher and Ryan J. McGraw, for Plaintiffs-
Appellants,
Keating Muething & Klekamp PLL, James E. Burke and Jacob D. Rhode, for
Defendant-Appellee.
OHIO FIRST DISTRICT COURT OF APPEALS
D ETERS , Judge.
{¶1} Plaintiff-appellants Chateau Estate Homes LLC and Todd Clifford
(collectively “Chateau”) appeal a decision of the trial court granting summary
judgment in favor of defendant-appellee Fifth Third Bank because the complaint was
filed outside the applicable statute of limitations. We find no merit in Chateau’s two
assignments of error, and we affirm the trial court’s judgment.
I. Facts and Procedure
{¶2} Chateau filed a complaint against Fifth Third alleging negligence,
breach of contract, and breach of fiduciary duty, relating to the issuance of an
insurance policy in 2007. Clifford and his business partner, Joseph Fiore, formed
and operated Chateau. In July 2007, Clifford and Fiore on behalf of Chateau
engaged Fifth Third to broker life insurance policies for them. Chateau alleged that
the parties had intended for these policies to be key man insurance for the purpose of
providing funds to the company in the event of their deaths. It further alleged that
the operating agreement for Chateau required the proceeds of the life insurance
policies to be distributed between the surviving spouse of the deceased member and
Chateau.
{¶3} According to Chateau, Fifth Third failed to follow Clifford and Fiore’s
instructions and mishandled the application process. That failure caused the
issuance of a $2 million life insurance policy as an individual policy on Fiore’s life
with Fiore as the owner and his wife, Mary Fiore, as the sole beneficiary.
{¶4} The life insurance policy was issued on September 28, 2007. The last
document related to the policy was an “amendment to application” dated October 7,
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2007. In that document, Fiore confirmed the terms of the life insurance policy,
including naming himself as the owner and his wife as the sole beneficiary.
{¶5} Fiore died on February 13, 2012. Under the terms of the life insurance
policy, the entire $2 million in proceeds went to Mary Fiore. Chateau contends that
if the policy had been issued as key man insurance as the parties had intended, Mary
Fiore would have received half of the proceeds and Chateau would have received the
other half.
{¶6} Fifth Third filed a motion for summary judgment. In support of its
motion, it filed the record of a previous lawsuit in Warren County, Ohio between
Chateau and Mary Fiore involving numerous claims and counterclaims. One claim
involved Chateau’s assertion that it should have received half of the proceeds of
Fiore’s life insurance policy under the terms of its operating agreement. The court in
that case granted summary judgment in favor of Mary Fiore based on the language of
the operating agreement.
{¶7} The trial court rejected Fifth Third’s argument that the issue of the
parties’ intent was barred by collateral estoppel because it had been decided in the
previous case in Warren County. But the court found that the complaint was filed
outside the six-year statute of limitations for the breach-of-contract claim and the
four-year statute of limitations for the negligence claims because the cause of action
accrued in October 2007 at the latest. Therefore, the complaint was time-barred.
This appeal followed.
{¶8} In its first assignment of error, Chateau contends that the trial court
erred in granting summary judgment in favor of Fifth Third on its claim for breach of
contract. It argues that the cause of action did not accrue until it suffered actual
damage as a result of the breach. Thus, the cause of action accrued in February 2012,
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when the insurance proceeds from the policy on Fiore’s life were paid entirely to
Mary Fiore, rather than half to Chateau and half to Mary Fiore.
{¶9} In its second assignment of error, Chateau contends that the trial court
erred in granting Fifth Third’s motion for summary judgment on its claims for
negligence and breach of fiduciary duty. Again, it contends that the cause of action
did not accrue until it incurred actual damage at the time of Fiore’s death in
February 2012. We address these assignments together. We find no merit in
Chateau’s arguments.
II. Standard of Review
{¶10} An appellate court reviews a trial court’s ruling on a motion for
summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671
N.E.2d 241 (1996); Evans v. Thrasher, 1st Dist. Hamilton No. C-120783, 2013-Ohio-
4776, ¶ 25. Summary judgment is appropriate if (1) no genuine issue of material fact
exists for trial, (2) the moving party is entitled to judgment as a matter of law, and
(3) reasonable minds can come to but one conclusion and that conclusion is adverse
to the nonmoving party, who is entitled to have the evidence construed most strongly
in his or her favor. Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327, 364 N.E.2d
267 (1977); Evans at ¶ 25.
III. The Gist of the Complaint Controls
{¶11} The trial court found that the six-year statute of limitations for
contracts not in writing set forth in R.C. 2507.07 applied to the breach-of-contract
claim. We disagree. Courts, including this one, have held that the statute of
limitations to be applied is determined from the essential ground or gist of the
complaint. See Kunz v. Buckeye Union Ins. Co., 1 Ohio St.3d 79, 80-81, 437 N.E.2d
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1194 (1982); Fronczak v. Arthur Andersen, L.L.P., 124 Ohio App.3d 240, 245-246,
705 N.E.2d 1283 (10th Dist.1997); Elizabeth Gamble Deaconess Home Assn. v.
Turner Constr. Co., 14 Ohio App.3d 281, 286-287, 470 N.E.2d 950 (1st Dist.1984).
{¶12} The factual basis of Chateau’s breach-of-contract claim is exactly the
same as that of its negligence claims: that Fifth Third was “engaged to procure key
man life insurance for Chateau” and it issued a policy “on the life of Fiore with Fiore
as the owner and his wife as the sole beneficiary.” Therefore, the breach-of-contract
claim was simply a restatement of the negligence and breach-of-fiduciary-duty
claims, and the gist of the action was in tort. The four-year statute of limitations for
actions for tort claims found in R.C. 2305.09(D) applied to the entire action. See
Kunz at 80-81; Fronczak at 245-246; Elizabeth Gamble at 286-287.
IV. Accrual of the Cause of Action
{¶13} As a general rule, a cause of action accrues at the time the wrongful act
is committed. Flagstar Bank, F.S.B. v. Airline Union’s Mtge. Co., 128 Ohio St.3d
529, 2011-Ohio-1961, 947 N.E.2d 672, ¶ 13. An exception to the general rule is the
discovery rule. It provides that a cause of action does not arise until the plaintiff
knows, or by the exercise of reasonable diligence should know, that he or she has
been injured by the defendant’s conduct. Id. at ¶ 13-14. The discovery rule tolls the
running of the statute of limitations. LGR Realty, Inc. v Frank & London Ins.
Agency, 2016-Ohio-5044, 58 N.E.3d 1179, ¶ 14 (10th Dist.), appeal allowed, 148
Ohio St.3d 1425, 2017-Ohio-905, 71 N.E.3d 297.
{¶14} A related concept is the delayed-damages rule. Under that rule,
“where the wrongful conduct complained of is not presently harmful, the cause of
action does not accrue until actual damage occurs.” Flagstar at ¶ 19, quoting Velotta
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v. Leo Petronzio Landscaping, Inc., 69 Ohio St.2d 376, 379, 433 N.E.2d 147 (1982).
Unlike the discovery rule, the delayed-damages rule does not just toll the running of
the statute of limitations, it adjusts when the cause of action accrues. LGR Realty at
¶ 14. “In other words, a cause of action for negligence is not complete, and the
statute of limitations does not begin to run, until there has been an injury.” Flagstar
at ¶ 19.
A. Kunz v. Buckeye Union Ins. Co. and the Delayed-Damages Rule
{¶15} Chateau relies on the delayed-damages rule, citing Kunz, 1 Ohio St.3d
79, 437 N.E.2d 1194. In that case, the insureds purchased insurance through an
insurance agent on their business equipment, including a hyrdro-crane. Later, they
discussed consolidating various policies on the equipment into a single omnibus
policy. In April 1970, the agent presented the insureds with a consolidated policy,
which the insureds believed provided the same coverage that they formerly had
under the individual policies. The insureds renewed the policy in 1973.
{¶16} In April 1975, the hydro-crane was involved in a job site accident. The
insurance company denied coverage, citing exclusionary provisions in the
consolidated policy, which were not contained in the pre-1970 insurance policy on
the hydro-crane.
{¶17} In April 1977, the insureds filed a complaint against the insurance
company and the agent for failing to obtain the required coverage and failing to
disclose a change in the coverage. The trial court granted the defendants’ motion for
summary judgment on the basis that the four-year statute of limitations had expired.
The court of appeals affirmed the trial court’s decision.
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{¶18} The Ohio Supreme Court reversed the appellate court’s decision,
analogizing the cause of action to medical or legal malpractice. Kunz, 1 Ohio St.3d at
80, 437 N.E.2d 1194. It held that the insureds’ cause of action did not accrue until
they suffered an actual loss to their equipment in 1975. It stated, “[T]here was no
invasion, or infringement upon or impairment of such interest until there had been a
loss to [the insureds’] equipment because until that event occurred such protection
could avail [the insureds] nothing. Their interest was in having protection when it
was needed.” Id. at 81-82.
B. Later Supreme Court Precedent in Professional-Negligence Cases
{¶19} Chateau points out that Kunz has never been overruled. Fifth Third
contends that it has been implicitly overruled by later Ohio Supreme Court cases. In
Investors REIT One v. Jacobs, 46 Ohio St.3d 176, 546 N.E.2d 206 (1989), the court
held that claims of negligence against an accountant were governed by the four-year
statute of limitations for negligence found in R.C. 2305.09(D). Id. at 181. It noted
that R.C. 2305.09 expressly included its own discovery rule, which did not apply to
general negligence claims. Id. Therefore, the court held that the discovery rule “is
not available to claims of professional negligence brought against accountants.” Id.
at paragraph 2a of the syllabus. As a result, it held that the statute of limitations
began to run immediately when the acts of accounting negligence occurred.
Auckerman v. Rogers, 2d Dist. Green No. 2011-CA-23, 2012-Ohio-23, ¶ 13. The
Supreme Court later reaffirmed that holding in Grant Thornton, Inc. v. Windsor
House, 57 Ohio St.3d 158, 160-161, 566 N.E.2d 1220 (1991).
{¶20} Subsequently, in Flagstar, 128 Ohio St.3d 529, 2011-Ohio-1961, 947
N.E.2d 672, the Supreme Court held that a cause of action for professional
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negligence against an appraiser “accrues on the date that the negligent act is
committed, and the four-year statute of limitations commences on that date.” Id. at
syllabus. The court briefly discussed Kunz and the delayed-damages rule and
expressly refused to apply the rule in that case. It stated:
Both the discovery rule and the delayed-damages rule relate to when a
cause of action for negligence accrues. Nevertheless, with regard to
claims for professional negligence under R.C. 2305.09, this court has
clearly stated that the cause of action accrues when the allegedly
negligent act is committed. * * * In Investors REIT One, we explicitly
rejected the application of the discovery rule for these causes of
actions. * * * We implicitly rejected the delayed-damages rule in
Grant Thornton.
Flagstar at ¶ 25, citing REIT One, 46 Ohio St.3d at 182, 546 N.E.2d 206, and Grant
Thornton, 57 Ohio St.3d 158, 566 N.E.2d 1220.
C. Conflicting Appellate Court Cases
{¶21} In support of its argument that the delayed-damages rule applies in
this case, Chateau relies upon Vinecourt Landscaping, Inc. v. Kleve, 11th Dist.
Geauga No. 2013-G-3142, 2013-Ohio-5825. In that case, the plaintiffs brought a
negligence action against their insurance agents for providing erroneous coverage.
The Eleventh Appellate District held that the cause of action accrued not when the
policy was issued, but when the plaintiffs were denied coverage. Id. at ¶ 26. The
court relied on Kunz, holding that Flagstar did not implicitly overrule it. Id. at ¶ 23.
Accord LGR Realty, 2016-Ohio-5044, 58 N.E.2d 1179, at ¶ 41. We disagree with the
reasoning of Vinecourt Landscaping, and we, therefore, decline to follow it.
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{¶22} Instead, we agree with the Second Appellate District in Auckerman, 2d
Dist. Greene No. 2011-CA-23, 2012-Ohio-23, which also involved claims for
negligence against an insurance agent. The court stated:
Having reviewed Flagstar, we conclude that the Ohio Supreme
Court therein implicitly overruled Kunz with regard to the application
of the delayed-damages rule in cases of professional negligence
governed by R.C. 2305.09. In Kunz itself, the majority characterized a
negligent-procurement claim against an insurance agent as one
alleging negligent performance of “professional services.” In Flagstar,
the Ohio Supreme Court explicitly stated that “[a] cause of action for
professional negligence accrues when the act is committed.” It also
foreclosed application of a discovery or delayed-damages rule in cases
involving professional negligence governed by R.C. 2305.09. In so
doing, it rejected the notion that the statute of limitations should not
run “where damages may be delayed until some point in the future[.]”
Although the facts of Flagstar involved an appraiser’s
professional negligence, we see no principled reason why an insurance
agent’s professional negligence should be treated differently.
Therefore relying on Flagstar (and Investors REIT One), we hold that
the statute of limitations began to run on [the plaintiff’s] negligent-
procurement claim when she obtained her insurance policy. Because
she filed her negligent-procurement claim against [the insurance
agent] more than four years after that date, the trial court properly
dismissed the claim as time-barred.
(Citations omitted.) Auckerman at ¶ 17-18.
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D. Our Case Law
{¶23} Auckerman is in line with our precedent. Hater v. Gradison Div. of
McDonald and Co. Securities, Inc., 101 Ohio App.3d 99, 655 N.E.2d 189 (1st
Dist.1995), was decided after Investors REIT One, but before Flagstar. In that case,
this court held that the reasoning of Investors REIT One could reasonably be
extended to the claims of professional negligence brought against broker dealers and
appraisers. Id. at 109. We held that the cause of action accrued at the time of the
alleged negligent act and that neither the discovery rule nor the delayed-damages
rule applied.
{¶24} We noted that the Supreme Court had explicitly rejected the
application of the discovery rule in Investors REIT One. We stated that the
distinction between the discovery rule and the delayed-damages rule is “a distinction
without a difference.” Id. at 110. We went on to state that “[r]egardless of its validity
or support in the common law of torts, the delayed-damage theory cannot, we
believe, be used to circumvent the clear holding of REIT One by resurrecting the
discovery rule in a different analytical guise.” Id. at 110-111.
V. Summary
{¶25} Based on our analysis of the case law, we hold that the rule in
Investors REIT One and Flagstar applies in this case. Therefore, the cause of action
accrued at the latest in October 2007 when the alleged negligence occurred. Because
Chateau’s complaint was not filed within the four-year statute of limitations set forth
in R.C. 2305.09(D), its claims for negligence, breach of fiduciary duty and breach of
contract were time-barred. Fifth Third was entitled to judgment as a matter of law,
and the trial court did not err in granting its motion for summary judgment.
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Consequently, we overrule Chateau’s first and second assignments of error and
affirm the trial court’s judgment.
Judgment affirmed.
C UNNINGHAM , P.J., and Z AYAS , J., concur.
Please note:
The court has recorded its own entry this date.
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