22 EXCHANGE, LLC v. EXCHANGE STREET ASSOCIATES, LLC, et al.
C.A. No. 27472
IN THE COURT OF APPEALS NINTH JUDICIAL DISTRICT COUNTY OF SUMMIT
Dated: May 6, 2015
2015-Ohio-1719
SCHAFER, Judge.
APPEAL FROM JUDGMENT ENTERED IN THE COURT OF COMMON PLEAS COUNTY OF SUMMIT, OHIO CASE Nо. CV 2013-08-3748
SCHAFER, Judge.
{¶1} Plaintiff-Appellant, 22 Exchange, LLC (“22 Exchange“), appeals from the judgment of the Summit County Court of Common Pleas in favor of Defendant-Appellees, Exchange Street Associates, LLC (“Exchange Street“) and Richland Communities, LTD., Richland Development Corp., Martin J. Mehall, Brent Mehall, and Michael Weiss (collectively “the Additional Defendants“). This Court affirms.
I.
{¶2} This appeal concerns the sale of an apartment building used for student housing and located at 22 East Exchаnge Street in Akron (“the Property“). Prior to the instant litigation, the Property was owned by Exchange Street. On March 1, 2012, Exchange Street contracted with PEP Investment Operations, LLC (“PEP Investment“) for the sale of its interest in the Property. The two entities amended their agreement multiple times over the course of the following year and executed their final amendment (“the Eighth Amendment“) on March 21,
{¶3} Prior to the closing date set forth in the Eighth Amendment, PEP Investment assigned its interest in the Property to 22 Exchange. On April 4, 2013, Exchange Street presented 22 Exchange with a Seller‘s Closing Certificate and, on April 15, 2013, the parties closed on the Property. The following day, Exchange Street formally assigned its interest in the Property to 22 Exchange.
{¶4} In August 2013, 22 Exchange brought suit against Exchange Street for breach of contract. 22 Exchange alleged that the Velocity Report for which Exchange Street had vouched in the Eighth Amendment, and more generally in the Seller‘s Closing Certificate, was inaccurate. Specifically, it contained both floorplan lease dates and unit lease dates,1 without distinguishing between the two. 22 Exchange alleged that the inaccuracies in the Velocity Report had caused it to overestimate the projected number of leases that it had expected it would secure at the Property. It further alleged that Exchange Street knew about the inaccuracies in the Velocity Report at the time of its submission. Consеquently, it argued that Exchange Street had materially breached their agreement.
{¶5} After Exchange Street answered the complaint, it filed a motion for judgment on the pleadings. Exchange Street argued that 22 Exchange‘s contract claim had to fail because
{¶6} Before the trial court ruled on Exchange Street‘s motion for judgment on the pleadings, 22 Exchange filed a motion for leave to amend its complaint. 22 Exchange alleged that it had recently uncovered numerous misrepresentations and omissions on the part of Exchange Street and/or several of its agents. Specifically, it allegеd that Exchange Street and/or its agents: (1) had masked water leaks in the building with paint and had not disclosed them; and (2) had failed to disclose that it/they had enticed new tenants with free iPads. 22 Exchange sought to add the Additional Defendants to its complaint, all of whom were agents of or otherwise affiliated with Exchange Street, and four additional causes of action. The additional causes of actions were for: (1) fraud as a result of misrepresentations or omissions about the occupancy rates, the water leaks, and the iPad enticement; (2) negligent misrepresentation as a result of the occupancy rates; (3) negligent concealment as a result of the occupancy rates, the water leaks, and the iPad enticement; and (4) breach of the warranty contained in the Eighth Amendment. Exchange Street opposed the amendment to the complaint, and 22 Exchange filed a reрly brief.
{¶7} On February 5, 2014, the court issued a journal entry in which it ruled on both Exchange Street‘s motion for judgment on the pleadings and 22 Exchange‘s motion for leave to amend its complaint. The court allowed the amendment to the complaint, but granted a judgment on the pleadings in favor of Exchange Street on several of the claims within the
{¶8} 22 Exchange filed its amended complaint on February 11, 2014, but sought an additional amendment the following month. Specifically, on March 21, 2014, 22 Exchange asked to amend its complaint a second time in order to add a claim for fraudulent inducement. The proposed claim alleged that Exchаnge Street and three of the Additional Defendants had induced 22 Exchange to purchase the Property by misrepresenting the occupancy rates at the Property, concealing water leaks on the Property, and concealing the fact that they had enticed new tenants with iPads. Exchange Street opposed 22 Exchange‘s request for leave to amend, arguing that its proposed claim simply rehashed the allegations that 22 Exchаnge had made in its first amended complaint.
{¶9} Within several days of 22 Exchange‘s motion for leave, Exchange Street and the Additional Defendants also filed a motion to dismiss the first amended complaint in whole or in part. 22 Exchange responded to the motion to dismiss. On May 14, 2014, the trial court issued its ruling on both the motion to dismiss and 22 Exchange‘s motion for leave to file a second
{¶10} 22 Exchange now appeals from the trial court‘s judgment and raises two assignments of error for our review. For ease of analysis, we reorder the assignments of error.
II.
ASSIGNMENT OF ERROR II
THE TRIAL COURT ABUSED ITS DISCRETION BY DENYING APPELLANT LEAVE TO FILE A SECOND AMENDED COMPLAINT TO INCLUDE A FRAUDULENT INDUCEMENT CLAIM.
{¶11} In its second assignment of error, 22 Exchange argues that the trial court abused its discretion by denying its motion for leave to file a second amended complaint. We disagree.
{¶12} “This Court reviews the denial of a motion for leave to amend a pleading for an abuse of discretion.” Jacobson-Kirsch v. Kaforey, 9th Dist. Summit No. 26708, 2013-Ohio-5114, ¶ 12. While first amendments may be made as a matter of course if they are timely, additional amendments may be made “only with the opposing party‘s written consent or the court‘s leave.”
{¶13} 22 Exchange filed its initial complaint for breach of contract on August 2, 2013. After Exchange Street filed a motion for judgment on the pleadings, 22 Exchange sought leave to amend its complaint. The proposed amendments included the addition of the Additional Defendants and four new claims, all of which this Court outlined above. Exchange Street opposed the amendment on both procedural and substantive grounds, and 22 Exchange responded. Subsequently, the trial court allowed 22 Exchange‘s amendment, but partially granted Exchange Street‘s motion for judgment on the pleadings. The court‘s order, dated February 5, 2014, struck portions of 22 Exchange‘s claims for fraud, negligent misrepresentation, and negligent concealment because the court determined that the parties’ agreement subsumed those claims.
{¶14} More than six weeks after the court struck portions of its claims, 22 Exchange again sought leave to amend its complaint in order to add a claim of fraudulent inducement. 22 Exchange argued that “[b]ecаuse [it] had not pleaded a fraudulent inducement claim—and such a claim [could] clearly co-exist with contract claims under Ohio law—[it] [sought] leave to add a fraudulent inducement claim, in order to complete the pleadings and bring all applicable claims in one case.” It argued that the defendants would not be prejudiced by the amendment because the case was still in its initial stages. Yet, Exchange Street opposed the motion for leave, noting that it was nothing more than an attempt to circumvent the court‘s prior ruling and resurrect the same allegations by recasting them as a different type of fraud. The defendants also filed a motion to dismiss, arguing that 22 Exchange‘s first amended complaint contained claims for which relief could not be granted.
{¶16} Having reviewed the record, we cannot conclude that the trial court went so far as to abuse its discretion in denying 22 Exchange‘s motion for leave to file a second amended complaint. On multiple occasions, this Court has noted that a plaintiff‘s attempt to amend its complaint following the filing of a dispositive motion “raises the spectre of рrejudice.” E.g., Bear v. Bear, 9th Dist. Summit No. 26810, 2014-Ohio-2919, ¶ 10-12 (undue prejudice where plaintiff sought amendment after defendant filed motion for summary judgment); Jacobson-Kirsch, 2013-Ohio-5114, at ¶ 12-14 (undue prejudice where plaintiff sought amendment after defendant filed motion to dismiss). 22 Exchange only sought to add its claim of fraudulent inducement after Exchange Street sought a judgment on the pleadings and the trial court ruled in its favor on several of 22 Exchange‘s claims. Moreover, the allegations that 22 Exchange sought to allege in its second amended сomplaint were the same allegations that it had raised in its first amended complaint. 22 Exchange did not offer any reason for not having brought a claim of fraudulent inducement in its first amended complaint. Indeed, it all but admitted that it had filed its second motion for leave in an effort to avoid the court‘s unfavorable ruling on the tort claims raised in its first amended complaint. It was not unreasonable, arbitrary, or unconscionable for
ASSIGNMENT OF ERROR I
THE TRIAL COURT ERRED BY DISMISSING APPELLANT‘S FRAUD CLAIM.
{¶17} In its first assignment of error, 22 Exchange argues that the trial court erred by dismissing its fraud claim against Exchange Street and the Additional Defendants. We disagree.
{¶18} This Court reviews de novo a trial court‘s decision to dismiss for failure to state a claim under
{¶19} The vast majority of 22 Exchange‘s argument in this assignment of error is premised on a claim of fraudulent inducement, not fraud. According to 22 Exchange, the fraud
{¶20} In seeking to amend its complaint for a second time, 22 Exchange specifically asked the trial court to allow it to file a claim for fraudulent inducement because it had not done so. 22 Exchange did not argue that its first amended complaint already contained a claim fоr fraudulent inducement,3 and it may not do so now. In ruling on the defendants’ motion to dismiss, the trial court treated 22 Exchange‘s claim as one alleging fraud, not fraudulent inducement. Accordingly, we only consider whether the trial court erred by dismissing 22 Exchange‘s stated claim of fraud.
{¶21} Initially, we note that, with regard to Exchange Street, the trial court‘s dismissal only pertained to the allegations that Exchange Street had failed to disclose and/or concealed “ongoing defеcts” on the Property that resulted in “serious water leaks.” The remaining fraud allegations against Exchange Street were disposed of by way of a judgment on the pleadings. Because 22 Exchange‘s captioned assignment of error only pertains to the court‘s judgment of dismissal, we limit our review to its ruling strictly on the motion to dismiss. See J.B. v. Harford, 9th Dist. Summit No. 27231, 2015-Ohio-13, ¶ 36, quoting State v. Brown, 9th Dist. Summit No. 23637, 2008-Ohio-2670, ¶ 24 (“An appellant‘s ‘assignment of error provides a roadmap for our review and, as such, directs our analysis of the trial court‘s judgment * * *.‘“).
{¶23} Because 22 Exchange did not allege that the defendants made any affirmative misrepresentations about the alleged water leaks at the Property, it had to show that they concealed the water leaks when they were under a duty to disclose them. Loya at ¶ 13. 22 Exchange specifically alleged that the defendants took measures to conceal “serious water leaks” at the Property. It did not, however, explain how Exchange Street and/or its agents concealed the water leaks. It also failed to allege that it had not detected the leaks after reasonable inspection.
{¶24} “[W]hen pleading fraud * * *, the circumstances constituting fraud * * * shall be pleaded with particularity.” Bear, 2014-Ohio-2919, at ¶ 23, citing
{¶25} 22 Exchange also brought a fraud claim against the Additional Defendants on the basis that they had repeatedly misrepresented the occupancy rates at the Apartment. Specifically, 22 Exchange alleged that the Additional Defendants knowingly gave it an inaccurate Velocity Report and falsеly asserted that the Property‘s tenants had signed their leases in the absence of an incentive, when in fact they had been offered free iPads. The trial court determined that 22 Exchange‘s fraud claim against the Additional Defendants was subsumed by the agreement on the Property, which contained numerous disclaimers that protected both Exchange Street and its agents from suit.
{¶27} “In Ohio, a breach of contract does not creаte a tort claim.” Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115 Ohio App.3d 137, 151 (9th Dist.1996). When tort and contract claims are premised upon the same actions, they may coexist “only if the breaching party also breaches a duty owed separately from that created by the contract, that is, a duty owed even if no contract existed.” Id. Additionally, “an action arising out of contract which is also based upon tortious conduct must include actual damages attributable to the wrongful acts of the allеged tortfeasor which are in addition to those attributable to the breach of the contract.” (Emphasis sic.) Id. “To hold otherwise would be to convert every unfulfilled contractual promise, i.e., every alleged breach of a contract, into a tort claim.” Telxon Corp. v. Smart Media of Delaware, Inc., 9th Dist. Summit Nos. 22098, 22099, 2005-Ohio-4931, ¶ 34.
{¶28} In the simplest sense, 22 Exchange alleged that the Additional Defendants committed fraud when they made false promises about the number of tenants 22 Exchange could
III.
{¶29} 22 Exchange‘s assignments of error are overruled. The judgment of the Summit County Court of Common Pleas is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
Costs taxed to Appellant.
JULIE SCHAFER
FOR THE COURT
HENSAL, P. J.
WHITMORE, J.
CONCUR.
APPEARANCES:
CAROLINE L. MARKS, JOHN C. FAIRWEATHER, and CHRISTOPHER F. SWING, Attorneys at Law, for Appellant.
MICHAEL R. STAVNICKY, Attorney at Law, for Appellees.