Kish v. Magyar

[Cite as Kish v. Magyar, 2016-Ohio-7355.]

IN THE COURT OF APPEALS

ELEVENTH APPELLATE DISTRICT

ASHTABULA COUNTY, OHIO

JEFFERY L. KISH, : OPINION

Plaintiff-Appellant, :
CASE NO. 2015-A-0059
- vs - :

JEFFREY R. MAGYAR, et al., :

Defendants-Appellees. :

Civil Appeal from the Ashtabula County Court of Common Pleas, Case No. 2014 CV
437.

Judgment: Reversed and remanded.

Jon L. Lindberg and Ryan M. Ellis, 134 West 46th Street, P.O. Box 2300, Ashtabula,
OH 44005-2300 (For Plaintiff-Appellant).

Michelle M. French, Law Offices of Michelle M. French, LLC, 28 West Jefferson Street,
Jefferson, OH 44047 (For Defendants-Appellees).

THOMAS R. WRIGHT, J.

{¶1} Appellant, Jeffery L. Kish, appeals the trial court’s decision dismissing his

complaint under Civ.R. 12(B)(6) and denying his subsequent motion for relief from

judgment. For the following reasons, we reverse and remand.

{¶2} The following facts are derived solely from the documents attached to

Kish’s complaint pursuant to Civ.R. 10(D)(1) and that are “a part of the pleading for all

purposes” per Civ.R. 10(C).
 {¶3} Kish sold 36 acres of real estate known as 2468 Sodom Road, Orwell,

Ohio 44076, parcel number 59-020-00-002-00 to appellees, Jeffrey and Mary Magyar

(“Magyars”), in September of 2012. Kish originally agreed to sell the property to JPOL

Trust, with Michelle French acting as trustee in the transaction, but the trust

subsequently assigned the sale to the Magyars as purchasers via an addendum to the

purchase contract executed by Kish, the Magyars, and the trustee. The first page of the

real estate purchase agreement, under the heading “ADDITIONAL AGREEMENTS

AND CONTINGENCIES” states: “Buyer to receive mineral, timber, and surface rights.

Seller to collect bonus money paid by NELA. Subject to review of current lease and

verification of release of original gas and oil lease.” This section also includes additional

handwritten information, which is illegible.

{¶4} Prior to entering this real estate purchase agreement, Kish entered into a

lease with the Northcoast Environmental Landowners Association, LLC (“NELA”) to

lease the property’s oil and gas rights in January of 2012 for a five-year period. This

lease agreement provided that Kish was to receive a bonus of at least $2,110.00 per

acre minus a 5.5% commission upon NELA’s assignment of the lease to an oil and gas

exploration and producing firm.

{¶5} The following language was included in the survivorship warranty deed

recorded with Ashtabula County Recorder in September of 2012 following the Magyars

purchase of the property:

{¶6} “The Grantor herein, on behalf of himself, his heirs and assigns, hereby

reserves the right to be paid the ‘Original Lease Bonus Payment’ that might be paid in

the future pursuant to an Oil and Gas Lease granted by Jeffery L. Kish to Northcoast

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Environmental Landowners Association, LLC, on January 17, 2012, covering the lands

subject to this Deed.”

{¶7} On December 5, 2012, the Magyars entered an oil and gas lease

agreement with Beland Energy, LLC (“Beland”), leasing the oil and gas rights

associated with the property. The memorandum of this oil and gas lease agreement

was recorded with the Ashtabula County Recorder on December 6, 2012.

{¶8} Thereafter, on December 18, 2012 a release of oil and gas lease between

NELA and Kish was recorded with the Ashtabula County Recorder, stating in part that

NELA releases and discharges all of its rights, title, and interest to the oil and gas rights

to the 36 acres as leased to it by Jeffery L. Kish in January 2012.

{¶9} Kish filed suit against the Magyars asserting several causes of action.

Specifically, he alleged that the Magyars breached their duty of good faith and fair

dealing; converted his lease bonus payment; fraudulently induced him to enter the real

estate purchase agreement; and that the Magyars were unjustly enriched by their

receipt and retention of the lease bonus payment from Beland and that their wrongful

actions warranted an accounting.1

{¶10} In response, the Magyars filed a motion to dismiss the complaint pursuant

to Civ.R. 12(B)(6). Kish filed a brief in opposition. The magistrate conducted a hearing

on the motion and issued its decision granting the Magyar’s motion to dismiss and

dismissing Kish’s complaint on July 8, 2015. Kish filed objections to the magistrate’s

decision, which were “dismissed” by the trial court judge based solely on Kish’s failure

to provide the transcript of proceedings or affidavit of evidence under Civ.R.

53(D)(3)(b)(iii) in support of his objections. This September 29, 2015 judgment

1. Kish does not appeal the trial court’s dismissal of his claim for an accounting.

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dismissed the objections, but did not state whether the court was adopting the

magistrate’s decision as required under Civ.R. 53(D)(4).

{¶11} Kish filed a motion for relief from judgment asking the trial court judge to

consider the merits of his objections based on its erroneous application of Civ.R.

53(D)(3)(b)(iii) as “any other ground justifying relief from judgment” pursuant to Civ.R.

60(B)(5). The trial court overruled his motion for relief from judgment via its October 9,

2015 judgment entry. The judge again relied on Kish’s failure to provide a transcript of

the Civ.R.12(B)(6) hearing, explaining that the transcript was necessary because the

magistrate’s decision granting the motion to dismiss included factual findings.

{¶12} The trial court adopted the magistrate’s decision in its October 9, 2015

judgment, but did not formally dismiss Kish’s complaint. Thus, we remanded the case

to the trial court for it to issue a final appealable order setting forth its disposition of the

case. The trial court subsequently issued its amended judgment entry February 3,

2016, adopting and approving the magistrate’s July 8, 2015 decision and dismissing the

proceedings.

{¶13} Kish appeals, asserting four assignments of error:

{¶14} “The trial court committed prejudicial error in dismissing Count I of Kish’s

Complaint (Breach of Contract) by failing to consider the Magyars’ breach of the

contractual duty of good faith and fair dealing.

{¶15} “The trial court committed prejudicial error in dismissing Count III of Kish’s

Complaint (Promissory Fraud) by requiring Kish to prove all the elements of his claim at

the pleading stage.

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 {¶16} “The trial court committed prejudicial error in summarily dismissing Count

II (Conversion) and Count IV (Unjust Enrichment) of Kish’s Complaint.

{¶17} “The trial court committed prejudicial error by incorrectly applying the legal

standard for the filing of a transcript of the evidence under Civ.R.53(D)(3)(b).”

{¶18} We address Kish’s arguments out of order for ease of analysis. His fourth

assigned error challenges the trial court’s denial of his motion for relief from judgment

and its decision overruling his objections to the magistrate’s decision that recommended

dismissal of the case under Civ.R. 12(B)(6).

{¶19} A decision granting or denying a Civ.R. 60(B) motion is within the trial

court's discretion and will only be reversed upon an abuse of discretion. Sain v. Roo,

10th Dist. Franklin No. 02AP-448, 2003-Ohio-626, ¶11; Oberkonz v. Gosha, 10th Dist.

Franklin No. 02AP-237, 2002-Ohio-5572, ¶12. Further, issues that could have been

raised in a direct appeal are not the proper bases for Civ.R. 60(B) relief. Blasco v.

Mislik, 69 Ohio St.2d 684, 686, 433 N.E.2d 612 (1982); Daroczy v. Lantz, 10th Dist.

Franklin No. 02AP-31, 2002-Ohio-5417, ¶34; Kelm v. Kelm, 73 Ohio App.3d 395, 399,

597 N.E.2d 535 (10th Dist.1992), affirmed, 68 Ohio St.3d 26, 1993 Ohio 56, 623 N.E.2d

39 (1993). Thus, because the issues raised herein are currently pending before us on

appeal, they were not the proper subject for a motion for relief from judgment. Id.

Moreover, the trial court’s original judgment dismissing Kish’s objections did not fully

dispose of the case, but only dismissed Kish’s objections. Thus, it was not a final

appealable order subject to a motion under Civ.R. 60(B). Settlers Bank v. Burton, 4th

Dist. Washington Nos. 11CA10, 11CA12, & 11CA14, 2012-Ohio-2418, ¶16 (holding that

denial of Civ.R. 60(B) motion did not constitute a final, appealable order because the

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trial court never entered a final judgment from which it could seek Civ.R. 60(B) relief.);

Bencin v. Bencin, 9th Dist. Medina Nos. 10CA0097-M & 10CA0113-M, 2012-Ohio-4197,

¶11.

{¶20} Regardless, we reach the substance of Kish’s argument underlying his

Civ.R. 60(B) motion, i.e., that the trial court erroneously applied Civ.R. 53(D)(3)(b)(iii) in

overruling his objections to the magistrate’s decision, because this is the same reason

for the trial court’s decision overruling his objections, which is properly before us.

{¶21} Civ.R. 53(D)(3)(b)(iii) “Objection to magistrate’s factual finding; transcript

or affidavit” states,

{¶22} “An objection to a factual finding, whether or not specifically designated as

a finding of fact under Civ.R. 53(D)(3)(a)(ii), shall be supported by a transcript of all the

evidence submitted to the magistrate relevant to that finding or an affidavit of that

evidence if a transcript is not available. With leave of court, alternative technology or

manner of reviewing the relevant evidence may be considered. The objecting party

shall file the transcript or affidavit with the court within thirty days after filing objections

unless the court extends the time in writing for preparation of the transcript or other

good cause. If a party files timely objections prior to the date on which a transcript is

prepared, the party may seek leave of court to supplement the objections.” (Emphasis

added.)

{¶23} The filing of a transcript pursuant to Civ.R. 53(D)(3)(b)(iii) is mandatory

and is designed to ensure that the substance of a magistrate hearing is preserved for

review. The trial court must accept the magistrate's factual findings and limit its review

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to the magistrate's legal conclusions if an objecting party fails to submit a transcript or

affidavit. Ross v. Cockburn, 10th Dist. Franklin No. 07AP-967, 2008-Ohio-3522, ¶5.

{¶24} A court considering a motion to dismiss must accept as true all the

material factual allegations of the complaint and construe all reasonable inferences from

those facts in favor of the nonmoving party. Garofalo v. Chicago Title Ins. Co., 104

Ohio App.3d 95, 104, 661 N.E.2d 218 (8th Dist.1995). Furthermore, a decision granting

a motion to dismiss for failure to state a claim presents a question of law, which is

reviewed de novo. Schiavoni v. Steel City Corp., 133 Ohio App.3d 314, 317, 727

N.E.2d 967 (7th Dist.1999) citing Cleveland Elec. Illum. Co. v. Pub. Util. Comm., 76

Ohio St.3d 521, 523, 668 N.E.2d 889 (1996).

{¶25} “‘A motion to dismiss for failure to state a claim upon which relief can be

granted is procedural and tests the sufficiency of the pleading.’ State ex rel. Hanson v.

Guernsey Cty. Bd. of Commrs. (1992), 65 Ohio St.3d 545, 548, 605 N.E.2d 378. * * * In

resolving a Civ.R. 12(B)(6) motion, courts are confined to the averments set forth in the

complaint and cannot consider outside evidentiary materials. In order for a court to grant

a motion to dismiss for failure to state a claim, it must appear ‘beyond doubt that the

plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’

O'Brien v. University Community Tenants Union (1975), 42 Ohio St.2d 242, 245, 327

N.E.2d 753.” (Emphasis added.)

{¶26} Grange Mut. Cas. Co. v. Klatt, 10th Dist. Franklin No. 96APE07-888, 1997

Ohio App. LEXIS 1125, at *10-12 (Mar. 18, 1997).

{¶27} “When a court dismisses a complaint pursuant to Civ.R. 12(B)(6), it makes

no factual findings beyond its legal conclusion that the complaint fails to state a claim

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upon which relief can be granted. Thus, the court does not assume the role of factfinder

and has no duty to issue findings of fact and conclusions of law.” State ex rel. Drake v.

Athens Cty. Bd. of Elections, 39 Ohio St.3d 40, 41, 528 N.E.2d 1253 (1988) citing

Paramount Supply Co. v. Sherlin Corp., 16 Ohio App.3d 176, 180, 190, 475 N.E.2d 197

(1984) and Civ.R. 52. Thus, a decision granting a Civ.R. 12(B)(6) motion to dismiss

does not implicate Civ.R. 53(D)(3)(b)(iii).

{¶28} The trial court explained its decision to employ Civ.R. 53(D)(3)(b)(iii) in

overruling Kish’s objections:

{¶29} “As noted in the July 8, 2015 Magistrate’s Decision, the Magistrate

‘considered the parties’ arguments, exhibits, and previously filed briefs’ in arriving at his

Decision. At a bare minimum, Plaintiff’s failure to provide this Court with a transcript of

the May 20, 2015 hearing denied this Court the opportunity to consider any exhibits

admitted during the hearing.

{¶30} “Moreover, the Court rejects Plaintiff’s contention that he only objected to

the Magistrate’s legal conclusions. * * * For example, Plaintiff objected that the

Magistrate ‘failed to consider Defendants’ obvious breach of their contractual duty * * *.’

Here, Plaintiff is challenging the Magistrate’s factual findings with regard to Defendant’s

alleged breach of contract.

{¶31} “A review of the Magistrate’s Decision reveals that the Magistrate

considered and weighed the factual allegations set forth in the Complaint to determine

whether they were sufficient to withstand Defendants’ Motion to Dismiss.”

{¶32} However, because a Civ.R. 12(B)(6) motion to dismiss a complaint is a

legal determination, based in part on the trial court’s construction of the allegations in

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the complaint in a light most favorable to the plaintiff, a trial court is not authorized to

render factual findings based on the presentation of evidence at a hearing or otherwise.

Here, the trial court misconstrued its duty to presume the allegations of fact as true

under Civ.R. 12(B)(6) as making findings of fact in support of its decision. Accordingly,

Civ.R. 53(D)(3)(b)(iii) was inapplicable, and as such, Kish’s fourth assignment of error

has merit.

{¶33} We collectively address Kish’s first, second, and third assigned errors

challenging the substance of the magistrate’s decision recommending dismissal of the

complaint based on Civ.R. 12(B)(6).

{¶34} An appellate court reviews Civ.R. 12(B)(6) dismissals de novo without

deference and presumes that the factual allegations in the complaint are true, making

all reasonable inferences in the plaintiff’s favor. Perrysburg Twp. v. Rossford, 103 Ohio

St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44, ¶5; Mitchell v. Lawson Milk Co., 40 Ohio

St.3d 190, 192, 532 N.E.2d 753 (1988); LaMusga v. Summit Square Rehab, LLC, 122

Ohio App.3d 378, 2015-Ohio-5305, 43 N.E.3d 504, ¶45 (2d Dist.)

{¶35} Under Ohio's liberal pleading rules, all that is required of a plaintiff bringing

suit is “‘(1) a short and plain statement of the claim showing that the party is entitled to

relief, and (2) a demand for judgment for the relief to which the party claims to be

entitled.’” Ivancic v. Enos, 11th Dist. Lake No. 2011-L-050, 2012-Ohio-3639, 978 N.E.2d

927, ¶42 quoting Civ.R. 8(A).

Breach of Implied Duty of Good Faith and Fair Dealing

{¶36} Kish first challenges the trial court’s decision that he failed to state a viable

claim for breach of the implied duty of good faith and fair dealing. The first claim in

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Kish’s complaint sets forth a cause of action for breach of contract and alleges that the

Magyars breached the implied duty of good faith and fair dealing.

{¶37} “‘[T]here is an implied duty of good faith and fair dealing in every contract.’

Am. Contractor's Indemn. Co. v. Nicole Gas Production, Ltd., 10th Dist. No. 07AP-1039,

2008-Ohio-5056, ¶13, citing DVCC, Inc. v. Med. College of Ohio, 10th Dist. No. 05AP-

237, 2006-Ohio-945, ¶20. Good faith is a ‘“‘compact reference to an implied undertaking

not to take opportunistic advantage in a way that could not have been contemplated at

the time of drafting, and which therefore was not resolved explicitly by the parties.’”’

Interstate Gas Supply, Inc. v. Calex Corp., 10th Dist. No. 04AP-980, 2006-Ohio-638,

¶97, quoting Ed Schory & Sons, Inc. v. Francis, 75 Ohio St.3d 433, 443-44, 1996 Ohio

194, 662 N.E.2d 1074 (1996), quoting Kham & Nate's Shoes No. 2, Inc. v. First Bank of

Whiting, 908 F.2d 1351, 1357 (C.A.7, 1990); and citing Kirke La Shelle Co. v. Paul

Armstrong Co., 263 N.Y. 79, 87, 188 N.E. 163 (N.Y.App.1933) (stating that ‘“in every

contract there is an implied covenant that neither party shall do anything which will have

the effect of destroying or injuring the right of the other party to receive the fruits of the

contract, which means that in every contract there exists an implied covenant of good

faith and fair dealing”’). The duty of good faith ‘“‘emphasizes faithfulness to an agreed

common purpose and consistency with the justified expectations of the other party.’”’

(Emphasis added.) In re Progressive Medina Real Estate, L.L.C., 10th Dist. No. 11AP-

141, 2012-Ohio-1071, ¶23, quoting Littlejohn v. Parrish, 163 Ohio App.3d 456, 2005-

Ohio-4850, ¶26, 839 N.E.2d 49 (1st Dist.), quoting Restatement of the Law 2d,

Contracts, Section 205, comment a (1981).”

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 {¶38} Pertoria, Inc. v. Bowling Green State Univ., 10th Dist. Franklin Nos. 13AP-

1033, 14AP-63, 2014-Ohio-3793, ¶22.

{¶39} Kish alleges that the Magyars breached the duty of good faith and fair duty

based on their intentional circumvention of the terms of the parties’ agreement. He

claims that the Magyars purchased his real property, acknowledged Kish’s right to the

lease bonus payment, and then deceptively procured the lease bonus payment for

themselves. Kish alleges that the Magyars paid NELA to break its lease agreement

with him in spite of the fact that the Magyars and Kish agreed that Kish would retain this

potential lease bonus payment in their real estate purchase agreement. Kish claims

that he lost this potential lease bonus payment totaling more than $150,000. As

outlined previously, Kish’s allegations are bolstered by the timeline and facts as

depicted in the documents attached to his complaint, including the real estate purchase

agreement, Kish’s gas and oil lease, and the Magyar’s subsequent gas and oil lease

with Beland. Although the parties’ agreement did not guarantee that Kish was to

receive this lease bonus payment, the agreement nevertheless contemplated that he

would have an opportunity to obtain the benefit of the bonus.

{¶40} Thus, upon presuming Kish’s allegations are true as dictated by Civ.R.

12(B)(6), we cannot find that he fails to state a claim for breach of the duty of good faith

and fair dealing as a matter of law. Kish’s allegations that the Magyars intentionally

frustrated his opportunity for financial gain are sufficient to survive a Civ.R. 12(B)(6)

motion to dismiss. Accordingly, Kish’s first assigned error has merit.

Fraudulent Inducement

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 {¶41} Kish’s second assignment of error challenges the disposal of his

promissory fraud or fraudulent inducement claim under Civ.R. 12(B)(6). He alleges the

trial court held him to an improperly high standard of proof at the pleading stage and

essentially required him to prove all of the elements of his claim.

{¶42} In order to establish fraud, one must prove:

{¶43} “(1) a representation (or concealment of a fact when there is a duty to

disclose) (2) that is material to the transaction at hand, (3) made falsely, with knowledge

of its falsity or with such utter disregard and recklessness as to whether it is true or false

that knowledge may be inferred, and (4) with intent to mislead another into relying upon

it, (5) justifiable reliance, and (6) resulting injury proximately caused by the reliance.”

Volbers-Klarich v. Middletown Mgmt., 125 Ohio St.3d 494, 2010-Ohio-2057, 929 N.E.2d

434, ¶26 citing Burr v. Stark Cty. Bd. of Commrs., 23 Ohio St.3d 69, 73, 23 Ohio B. 200,

491 N.E.2d 1101 (1986).

{¶44} Further, Civ.R. 9(B) provides that “[i]n all averments of fraud or mistake,

the circumstances constituting fraud or mistake shall be stated with particularity. Malice,

intent, knowledge, and other condition of mind of a person may be averred generally.”

(Emphasis added.)

{¶45} Kish’s complaint alleges that the Magyars intentionally mislead him into

selling his real property at a lower price than he would have based on the parties’

inclusion of the condition that Kish was to maintain the benefit of receiving the potential

lease bonus payment pursuant to his gas and oil lease with NELA. Kish claims to have

relied on this representation to his detriment since the Magyars circumvented the

agreed upon terms and improperly secured the release of his NELA lease thereby

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eliminating his benefit of receiving the potential lease bonus payment. Kish likewise

avers that the Magyars conditioned their decision to enter the real estate purchase

agreement upon viewing Kish’s lease agreement with NELA. Thereafter, the Magyars

leased the oil and gas rights to Beland and the Magyars received a $153,000 lease

bonus payment.

{¶46} Kish’s complaint asserts in part, “Defendants’ representations that [they]

intended to provide Plaintiff with the lease bonus payment were false and done for the

specific purpose of misleading Plaintiff and inducing Plaintiff into surrendering dominion

and control over both the Real Estate and its oil and gas rights. * * * Defendants

promised Plaintiff the reserved right to the bonus payment while, at the same time,

intending to thwart Plaintiff’s chance of receiving any benefit therefrom.” Kish’s

allegations are supported, in part, by the contracts and agreements attached to Kish’s

complaint as outlined previously. Based on the foregoing, Kish’s complaint pleads fraud

with sufficient particularity, and as such, his second assigned error has merit.

Conversion

{¶47} Kish’s third assignment of error asserts that the trial court erred in

summarily dismissing his claims for conversion and unjust enrichment. Again, our

review requires us to presume that all of the allegations set forth in the complaint are

true and determine whether the complaint fails to set forth a viable cause of action as a

matter of law. Civ.R. 12(B)(6).

{¶48} In order to set forth a cause of action for conversion, one must allege that

he has ownership or a right to possess the property at the time; that another wrongly

converted or disposed of the property; and resulting damages. KeyBank Nat'l Assoc. v.

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Guarnieri & Secrest, P.L.L., 7th Dist. Columbiana No. 07 CO 46, 2008-Ohio-6362, ¶15.

“Where an action for conversion is based on the conversion of cash, the action will ‘only

lie if “identification is possible and there is an obligation to deliver the specific money in

question.”’” (Citations omitted.) Id.

{¶49} Kish’s conversion claim asserts that the Magyars wrongfully exercised

control over the $153,000 lease bonus payment that he was entitled to receive and that

he lost the benefit of this bonus payment as a result of the Magyar’s wrongful taking of

this money. Upon assuming that all of Kish’s allegations are true, his complaint sets

forth a conversion claim sufficient to survive a Civ.R. 12(B)(6) motion.

Unjust Enrichment

{¶50} To set forth an unjust enrichment claim, a plaintiff must allege: “‘(1) a

benefit conferred by a plaintiff upon a defendant, (2) knowledge by defendant of the

benefit, and (3) retention of the benefit by the defendant under circumstances where it

would be unjust to do so without payment.’” In re Estate of Bohl, 12th Dist. Brown Nos.

CA2015-01-005, CA2015-01-006, 2016-Ohio-637, ¶40 quoting Aztec Int'l Foods, Inc. v.

Duenas, 12th Dist. Clermont No. CA2012-01-002, 2013-Ohio-450, ¶75.

{¶51} Kish alleges in his complaint that the Magyars benefitted from his sale of

real estate at a low price, which was based on his retention of the possible NELA lease

bonus payment. Kish also claims that the Magyars improperly and intentionally

thwarted his opportunity to obtain this benefit contrary to their agreement. Kish asserts

the Magyars improperly obtained their $153,000 lease bonus payment from Beland by

deceptively securing the release of Kish’s lease agreement with NELA.

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 {¶52} Presuming that these factual allegations are true, we cannot find that Kish

fails to state a claim for unjust enrichment as a matter of law. Thus, Kish’s third

assigned error has merit since neither his conversion nor his unjust enrichment claim

should have been dismissed under Civ.R. 12(B)(6).

{¶53} For the foregoing reasons, Kish’s assigned errors have merit. The trial

court’s decision is reversed and the case is remanded.

CYNTHIA WESTCOTT RICE, P.J.,

TIMOTHY P. CANNON, J.,

concur.

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