2021 Ohio 1429
Ohio Ct. App.2021Background
- In 2016 Plaintiff Greg Dart transferred the Journal Herald Building to Journal Herald Building, LLC (JHB); Dart alleges he paid the purchase price and that JHB (and Katz, JHB's sole member/officer) agreed to hold the property for Dart's benefit and not to encumber or transfer it.
- Dart alleges he loaned Katz/JHB $150,000 at closing (paid to the IRS) and later continued to occupy, maintain, and improve the building, paying taxes, utilities, insurance, and security.
- In June 2016 Dart and Katz signed a written agreement stating Katz was sole member of JHB and that the building remained ‘‘100% owned by Greg Dart’’ and must not be encumbered or transferred without Dart’s written approval.
- In June 2018 Katz (as JHB officer) executed a mortgage to Windsor Fire Blocks, LLC creating a lien of about $244,726; Plaintiffs allege Windsor knew of the restriction on encumbrance.
- Plaintiffs sued Katz, JHB, and Windsor asserting claims including constructive trust/unjust enrichment, breach of fiduciary duty, breach of trust, breach of contract, promissory estoppel, tortious interference, and a declaratory judgment; the trial court dismissed all claims; this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract (parol evidence/consideration) | Dart: oral and later written June 7 agreement (and loans) create enforceable obligations not to encumber; consideration existed (Dart’s loan). | Katz/JHB: purchase contract is integrated; parol evidence bars prior oral promises; no consideration to support post-transfer promises by Katz personally. | Court: Dismissal of breach-of-contract as to Katz and JHB was erroneous; June 7 agreement sufficiently pled (agency/individual signature + consideration alleged) — claim survives. |
| Constructive trust / unjust enrichment | Dart: JHB/Katz unjustly retain property/benefits; equitable relief (constructive trust) available even absent fraud. | Katz/JHB: no fraud alleged; JHB a separate entity; unjust-enrichment unavailable where contract exists. | Court: Dismissal reversed as to Katz and JHB; constructive trust/unjust-enrichment viable at pleading stage and may reach property/funds held by third parties (Windsor remains necessary party). |
| Breach of fiduciary duty (partnership/joint venture) | Dart: pre-sale joint venture/partnership and partial performance created fiduciary duties; Katz/JHB breached them. | Katz: no partnership pleaded in trial court; June 7 agreement expressed only intent to form partnership. | Court: Allegations of joint venture/partnership and part performance suffice to plead fiduciary duties against Katz and JHB; dismissal reversed. |
| Breach of a trust agreement (R.C. Ch. 5801 applicability) | Dart: equitable/trust remedies and R.C. 5801 may provide remedies. | Katz/JHB: statutory trust code controls and no express trust exists. | Court: Ohio Trust Code does not govern resulting/constructive trusts; dismissal of Count 3 as to Katz is affirmed (no breach of express trust), but resulting/purchase-money trust theory against JHB survives. |
| Promissory estoppel | Dart: reasonably relied on Katz’s/JHB’s promises not to encumber; expenditure and continued occupation show detrimental reliance. | Katz: written purchase contract bars oral promises; promises as to land transfers must be in writing. | Court: Promissory estoppel adequately alleged against Katz and JHB; dismissal was erroneous. |
| Tortious interference (Windsor) | Dart: Windsor knew of restriction and intentionally procured encumbrance; lack of justification and damages alleged. | Windsor: argued dismissal (minimal briefing). | Court: Complaint pleads knowledge and unjustified interference; Count for tortious interference against Windsor survives. |
| Declaratory judgment | Dart: real justiciable controversy exists over ownership, encumbrance, and rights. | Defendants: sought dismissal based on other rulings. | Court: Declaratory-judgment claim should survive against Katz, JHB, and Windsor; dismissal was erroneous. |
Key Cases Cited
- Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190 (1988) (on accepting complaint allegations as true when ruling on motion to dismiss)
- Vail v. The Plain Dealer Publishing Co., 72 Ohio St.3d 279 (1995) (12(B)(6) standard and reasonable inferences for plaintiff)
- Perrysburg Twp. v. Rossford, 103 Ohio St.3d 79 (2004) (de novo review of Civ.R. 12 motions)
- Lake Land Emp. Group of Akron, LLC v. Columber, 101 Ohio St.3d 242 (2004) (elements of contract and necessity of consideration)
- Galmish v. Cicchini, 90 Ohio St.3d 22 (2000) (parol evidence rule and its exceptions)
- Williams v. Spitzer Autoworld Canton, L.L.C., 122 Ohio St.3d 546 (2009) (collateral-agreement exception to parol evidence rule)
- Estate of Cowling v. Estate of Cowling, 109 Ohio St.3d 276 (2006) (constructive trust may reach assets in hands of third parties and fraud not always required)
- Hummel v. Hummel, 133 Ohio St. 520 (1938) (unjust enrichment principles)
- Fred Siegel Co., L.P.A. v. Arter & Hadden, 85 Ohio St.3d 171 (1999) (elements and justification analysis for tortious interference with contract)
- Damon's Missouri, Inc. v. Davis, 63 Ohio St.3d 605 (1992) (agency principles; agent binds principal when acting within authority)