Pierre Investments, Inc. v. CLE Capital Group, Inc., et al.
Court of Appeals No. L-21-1229
Trial Court No. CI0201904258
IN THE COURT OF APPEALS OF OHIO SIXTH APPELLATE DISTRICT LUCAS COUNTY
December 2, 2022
2022-Ohio-4311
Joseph W. Westmeyer, III, for appellant.
Zachary J. Murray, for appellees, CLS Capital Group, Inc., Reyanaldo Uballe, Jr., and Comprehensive Lending Services Capital Group, LLC.
Monica A. Sansalone and Maia E. Jerin, for appellees, Mark Mockensturm, Brandon Rehkopf, and Mockensturm, Ltd.
*****
{¶ 1} This is an appeal from two judgments by the Lucas County Common Pleas Court partially granting appellees’ two motions for summary judgment and, following a bench trial, a judgment denying appellant‘s breach of contract claim. For the reasons set forth below, this court affirms the judgments of the trial court.
{¶ 2} Plaintiff-appellant Pierre Investments, Inc. filed this appeal setting forth two assignments of error:
1. After hearing evidence that several other parties were involved in the loan in this case, the trial court improperly dismissed several parties on summary judgment.
2. In spite of the evidence to the contrary, the trial court found in favor [of] the Appellee that he is not liable for the money that he was given when the other party performed their obligations under the agreement.
I. Background
{¶ 3} On June 16, 2020, appellant sought leave to amend its October 28, 2019 complaint alleging six causes of action against defendants-appellees, CLS Capital Group, Inc. (“CLS“); Reynaldo Uballe, Jr.; Mark Mockensturm; Brandon Rehkopf; and Mockensturm, Ltd., to add one additional defendant-appellee, Comprehensive Lending Services Capital Group, LLC (“Comprehensive“). The trial court granted the motion, and on July 1, 2020, appellant filed an amended complaint alleging the following six causes of action: (1) fraud/misrepresentation by the defendants, (2) third-party legal malpractice by the Mockensturm Defendants,1 (3) breach of contract by the CLS Defendants,2 (4) unjust enrichment by the CLS Defendants, (5) promissory estoppel by the CLS Defendants, (6) and deceptive trade practices3 by the defendants.
{¶ 4} In summary, appellant, a Texas corporation, through its owner and president, Ken Gazian, alleged it attempted in 2018 to secure $10 million in funding from appellee CLS, “a Delaware corporation doing business in Ohio” of which Mr. Uballe is the owner and president, for a $1.95 million dollar Texas land development project.
{¶ 5} The CLS Defendants counterclaimed for breach of the contract by appellant for failing to meet the funding conditions, and appellant moved to dismiss the counterclaim.
{¶ 6} Meanwhile, the Mockensturm Defendants5 and the CLS Defendants6 separately moved for judgment on the pleadings to dismiss appellant‘s amended complaint and for sanctions. Appellant opposed the motions. As journalized on September 11, 2020,7 the trial court partially granted the motion by the Mockensturm Defendants with respect to claim No. 2, third-party legal malpractice.
{¶ 7} Discovery among the parties continued. On December 22, 2020, the Mockensturm Defendants moved for summary judgment on count No. 1, and, over appellant‘s objections, on March 24, 2021, the trial court granted the motion. On December 30, 2020, the CLS Defendants moved for summary judgment on count Nos. 1, 3, 4, 5 and 6, and, over appellant‘s objection, on March 24, 2021, the trial court granted the motion for count Nos. 1, 4, 5 and 6 and denied the motion for count No. 3. The trial court further granted appellant‘s motion to dismiss Mr. Uballe‘s counterclaim,8 but denied appellant‘s motion to dismiss the counterclaim of CLS and Comprehensive.
{¶ 8} The remaining reciprocal breach of contract claims between appellant and appellees CLS and Comprehensive proceeded to a two-day bench trial. The bench trial commenced on September 20, 2021, in which the trial court heard testimony from three witnesses and admitted 18 exhibits into evidence. After issuing notice pursuant to
{¶ 9} Appellant‘s first assignment of error challenges the trial court‘s March 24, 2021 journalized decisions granting, in part, the motions for summary judgment by the Mockensturm Defendants on count No. 1, and, separately, by the CLS Defendants on count Nos. 1 and 6.9
A. Standard of Review
{¶ 10} We review de novo a trial court‘s grant of summary judgment. Ratonel v. Roetzel & Andress, L.P.A., 147 Ohio St.3d 485, 2016-Ohio-8013, 67 N.E.3d 775, ¶ 18. Pursuant to
B. Fraudulent Inducement
{¶ 11} Appellant‘s amended complaint styles count No. 1 as “fraud/misrepresentation” and alleges the following: (1) “Defendants represented CLS was a direct lender and not a third-party broker or financial liaison“; (2) “CLS Defendants guaranteed that the loan was a Guaranteed Loan10 and not subject to any additional circumstances, conditions, or third-party approvals, and knew [the] statement was false when made“; (3) “Mockensturm Defendants misrepresented the relationship that existed between them and CLS Defendants and fabricated a history of underwriting business“; (4) “All Defendants knew all representations were false, made with intent to deceive, and/or made with such utter disregard as to infer knowledge of defraudment“; (5) “To its detriment, the Plaintiff reasonably relied on Defendants’ representations“; and (6) incurred the following damages: (a) “the loss for expected and foreseen profits from the intended real estate development“; (b) “loss of the contract to purchase land subject to lending transaction“; (c) “loss of $97,000 real estate commission paid to Ken Gazian intended for the project use“; (d) “loss of $75,000 commitment fee pledged for the loan“; (e) “loss of use of funds“; and (f) “loss of $10,000 earnest money deposit pledged with the title company.”
{¶ 12} Despite appellant‘s style of count No. 1, the trial court explained in its March 24, 2021 journalized entry why it will analyze count No. 1 as fraud only: “The Court notes that Plaintiff‘s Count 1 for ‘fraud/misrepresentation’ contains no
{¶ 13} We will proceed to review appellant‘s fraud claim, which is more accurately argued by appellant as a fraudulent inducement11 claim.
A claim of common-law fraud requires proof of the following elements: (a) a representation or, where there is a duty to disclose, concealment of a fact, (b) which is material to the transaction at hand, (c) 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, (d) with the intent of misleading another into relying upon it, (e) justifiable reliance upon the representation or concealment, and (f) a resulting injury proximately caused by the reliance. Mike McGarry & Sons, 2018-Ohio-528, 107 N.E.3d 91, at ¶ 74; BAS Broadcasting, Inc. v. Fifth Third Bank, 2018-Ohio-1324, 110 N.E.3d 171, ¶ 16 (6th Dist.) (appellant‘s burden of proof of the same six elements are required for a claim of fraudulent inducement).
1. The Mockensturm Defendants
{¶ 14} Appellant‘s fraudulent inducement claim against the Mockensturm Defendants argues they made knowingly false statements to induce appellant to enter into the $10 million Loan Commitment with CLS in order to facilitate CLS to obtain the $75,000 loan commitment fee from appellant. Appellant argues the following are five “manipulative, lying, and deceitful” statements by the Mockensturm Defendants and “issues of fact that were inexplicably left unaddressed” by the trial court‘s summary judgment decision: (1) that “CLS was a legitimate legal entity who performed numerous lending transactions with Mockensturm“; (2) that “Mockensturm had underwritten documentation for all those loan transactions“; (3) that “CLS Defendants had been clients of Mockensturm for many years“; (4) that “CLS Defendants were capable of closing the intended transaction for Mr. Garzian“; and (5) that “Mockensturm would be engaged in connection with Mr. Garzian‘s transaction.” We disagree and, upon de novo review, find that appellant failed to identify a genuine issue of material fact ignored by the trial court.
{¶ 15} There are a number of relevant, undisputed facts in the record. Mr. Mockensturm and Mr. Rehkopf are attorneys with the law firm Mockensturm, Ltd.
{¶ 16} Appellant never hired the Mockensturm Defendants to represent it in the funding transaction with CLS, nor to represent it in any prior funding transactions with CLS. The CLS Defendants never hired the Mockensturm Defendants to represent them in the funding transaction with appellant, nor to represent them in prior funding transactions with appellant. The Mockensturm Defendants are neither parties to the Loan Commitment, nor parties to any prior contract with appellant. There is nothing in the record to indicate the funding transaction between appellant and CLS was not an ordinary, arm‘s length business transaction.
{¶ 17} Finally, it is undisputed that appellant‘s attorney, Walter Musgrove III, initiated contact with the Mockensturm Defendants, and both Mr. Musgrove and Mr. Gazian continued the contact after knowing the Mockensturm Defendants were not engaged for appellant‘s funding transaction with CLS. Inexplicably, Mr. Gazian unilaterally chose to pursue contact with the Mockensturm Defendants. When asked at his deposition, “You relied on the advice of Walter Musgrove when you signed this document [the Loan Commitment]?” Mr. Gazian replied, “Not true. I did not. * * * I used my judgment based on my understanding of our communication with Mockensturm.” Later, Mr. Gazian testified that signing the Loan Commitment on November 5, 2018, “was my own decision. But [Mr. Musgrove] reviewed the document and said that I don‘t see anything else that may cause as (sic.) a problem, so it‘s up to you.” More specifically, when Mr. Gazian was asked, “But Mr. Musgrove didn‘t find out that CLS would defraud you, did he?” the response was, “Mr. Musgrove did not rely on CLS’ representation at all, because I told Walter, I am not going to get this deal done unless we have a representation and legal representative (sic.) [from the Mockensturm Defendants].”
{¶ 18} We find appellant presents no evidence to establish the Mockensturm Defendants had a duty to disclose any material fact to appellant for the arms’ length funding deal it sought with CLS. “Ordinarily in business transactions where parties deal at arm‘s length, each party is presumed to have the opportunity to ascertain relevant facts available to others similarly situated and, therefore, neither party has a duty to disclose material information to the other.” Blon v. Bank One, Akron, N.A., 35 Ohio St.3d 98, 101, 519 N.E.2d 363 (1988). Determining the existence of a duty is a question of law. Estate of Ciotto v. Hinkle, 2019-Ohio-3809, 145 N.E.3d 1013, ¶ 13 (6th Dist.). Mr. Gazian testified at his deposition, that, although he was an experienced land developer, he lacked the assets and other criteria to be eligible for a $10 million loan from any other lender, large or small, and, instead, exclusively pursued CLS. It was Mr. Gazian‘s sole business decision to exclusively pursue funding from CLS hoping that
{¶ 19} Upon de novo review of the evidence most favorable to appellant for summary judgment purposes, we find appellant‘s evidentiary support for fraudulent inducement fails to show that the five allegedly “manipulative, lying, and deceitful” statements are genuine issues of material fact. Appellant‘s own summary of the alleged representations made by Mr. Rehkopf to Mr. Musgrove three weeks prior to appellant signing the Loan Commitment were not ignored by the trial court and contradict appellant‘s conclusion they are “manipulative, lying, and deceitful.” The trial court‘s March 24, 2021 journalized entry recites verbatim from the record Mr. Musgrove‘s October 19 email to Mr. Rehkopf unilaterally summarizing their telephone conversation:
Per our conversation, you were able to confirm that you and Mockensturm have provided legal representation to CLS in connection with the documents used for its loans. At the present time, you have not been asked to draft any documents relating to any loans concerning my client, but if requested by your client, CLS, you would be involved in drafting the loan documents. The scope of your representation has also included serving as escrow attorney in which you have held broker fees related to loans made by CLS. You also confirmed that most of your communication with CLS has been through its president Mr. Ray Uballe.
{¶ 20} By the foregoing, we find that appellant acknowledges the truth of the first, second, third, and fifth statements. As for whether “CLS was a legitimate legal entity” portion of the first statement and the fourth statement, we find the trial court also did not ignore those issues.
{¶ 21} First, the trial court‘s October 29, 2021 journalized entry states appellant‘s August 19, 2021 motion to dismiss the counterclaims by CLS “was the first time Plaintiff raised the allegation that CLS lacked legal existence.” Thus, appellant failed to raise the issue with the trial court prior to the March 24 entry being appealed.
{¶ 22} Second, we further agree with the trial court‘s March 24 analysis of the allegedly “manipulative, lying, and deceitful” fourth statement:
[W]hile Musgrove also stated by affidavit that Rehkopf had “reassured” him that “Uballe was capable of closing” the $10 million dollar loan under the Loan Commitment, Musgrove later clarified at deposition, “No, [Rehkopf] did not assure me. He didn‘t say, ‘I guarantee you that they could lend $10 million.‘” As pointed out by the Mockensturm Defendants, an affidavit which contradicts deposition testimony does not, without sufficient explanation, create an issue of fact precluding summary judgment. Absent such sufficient explanation, the Court finds Plaintiff‘s fraud/misrepresentation claim against the Mockensturm Defendants fails on this ground alone. (Citations omitted.)
{¶ 23} The Ohio Supreme Court has determined “that an affidavit of a party opposing summary judgment that contradicts former deposition testimony of that party may not, without sufficient explanation, create a genuine issue of material fact to defeat a motion for summary judgment.” Byrd v. Smith, 110 Ohio St.3d 24, 2006-Ohio-3455, 850 N.E.2d 47, ¶ 28. In addition, appellant‘s self-serving assertions in the record that baldly contradict appellee‘s supported motion, without
{¶ 24} Nor does Mr. Gazian‘s deposition testimony bolster the contradictions between Mr. Musgrove‘s affidavit and his own deposition testimony. Mr. Gazian repeatedly testified during his deposition that “tricky words” appeared wherever the final, binding Loan Commitment content differed from his assumptions, such as stating CLS was a “lender” and not a “direct lender.” For example, when Mr. Gazian conceded the Loan Commitment never uses the label “direct lender” for CLS, he said it was somehow implied: “It‘s a language that is indirect that says he is a direct lender. Okay?” This is after Mr. Gazian directed every revision to the Loan Commitment that Mr. Musgrove negotiated with CLS - all without any involvement of the Mockensturm Defendants. Mr. Gazian testified he intentionally did not direct Mr. Musgrove to clarify that the $10 million loan was “guaranteed” without conditions because he deemed all conditions irrelevant: “Well, I left it [the conditions precedent] there because I knew it really doesn‘t matter.” Yet, the Loan Commitment clearly contains an integration clause, which Mr. Gazian kept. When asked at his deposition, “And you understand that this document supersedes all prior correspondence, other agreements and oral or other communications, and you understand that?,” Mr. Gazian replied, “Yes, to my understanding, we are only talking from this contract on, not anything behind, right.”
{¶ 25} Upon de novo review, we find none of the foregoing five statements are genuine issues of material fact affecting the outcome of the litigation because, when viewing such evidence most strongly in favor of the non-moving party, reasonable minds can come to but one conclusion, and appellant fails to support a claim of fraudulent inducement by the Mockensturm Defendants.
2. The CLS Defendants
{¶ 26} Appellant‘s fraudulent inducement claim against the CLS Defendants is similar to the claim against the Mockensturm Defendants: “The fraud in this case was not the breach of contract - the fraud occurred when the other party on the contract made misrepresentations in order to facilitate the agreement and unjustly collect commitment fees.” Appellant argues the following are eight false statements by the CLS Defendants that the trial court failed to consider in its summary judgment decision: (1) “being a director of CLS with multiple managing directors and a committee“; (2) “being represented by Mockensturm, Ltd. Law firm“; (3) “having hundreds of millions to lend $10 million“; (4) “holding out Helen Odom as an employee of CLS“; (5) “having the loan approved and guaranteed for $10 million by CLS committee (Uballe Dep. P. 74-76)“; (6) “closing many loans with MFG [Momentum Financial Group, LLC, a financial guarantor] and Mockensturms” (sic.); (7) “that CLS was a lender and not a broker (Uballe Dep. P. 28)“; and (8) “an interrogatory response that CLS was a loan underwriter (Uballe Dep. P. 51).”
{¶ 28} Appellant has the burden to prove the following three-part test to pierce the corporate veil:
Thus, the corporate form may be disregarded and individual shareholders held liable for corporate misdeeds when (1) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own, (2) control over the corporation by those to be held liable was exercised in such a manner as to commit fraud or an illegal act against the person seeking to disregard the corporate entity, and (3) injury or unjust loss resulted to the plaintiff from such control and wrong.
Belvedere Condominium Unit Owners’ Assn. v. R.E. Roark Cos., Inc., 67 Ohio St.3d 274, 289, 617 N.E.2d 1075 (1993). The Ohio Supreme Court subsequently determined appellant has the burden for the second prong of the Belvedere test to “demonstrate that the defendant shareholder exercised control over the corporation in such a manner as to commit fraud, an illegal act, or a similarly unlawful act. Courts should apply this limited expansion cautiously toward the goal of piercing the corporate veil only in instances of extreme shareholder misconduct.” Dombroski v. WellPoint, Inc., 119 Ohio St.3d 506, 2008-Ohio-4827, 895 N.E.2d 538, ¶ 29.
{¶ 29} Upon our de novo review we agree with the trial court that appellant failed to meet its burden to pierce the corporate veil. The trial court stated that appellant‘s “support for these allegations, on review, is conclusory and otherwise unsupported by the record,” citing Youssef v. Parr, Inc., 69 Ohio App.3d 679, 689, 591 N.E.2d 762 (8th Dist.1990) (an affiant opposing summary judgment pursuant to
{¶ 30} Appellant also fails to point to any part of the record to indicate the business transaction between appellant and CLS was other than an ordinary, arm‘s length business transaction, such that the CLS Defendants had “no duty to disclose material information to the other [party].” BAS Broadcasting, 2018-Ohio-1324, 110 N.E.3d 171, at ¶ 20, quoting Blon at 101. Nor does appellant show where the record contains material facts of special circumstances to transform the ordinary debtor-creditor business transaction between CLS and appellant into a fiduciary relationship. U.S. Bank N.A. as Tr. of Holders of J.P. Morgan Mtge. Acquisition Tr. 2006-CH2 v. Hill, 6th Dist. Ottawa No. OT-17-029, 2018-Ohio-4532, ¶ 52.
{¶ 31} We next turn to the three specific parts of the record identified by appellant to support its summary judgment opposition to support its fraudulent inducement claim. First, appellant specifically points to page 28 of Mr. Uballe‘s deposition transcript as evidence “that CLS was a lender and not a broker.” However, Mr. Uballe‘s deposition on page 28 demonstrates the opposite when he answered “yes” to this specific question: “And that‘s predominantly what CLS Capital does, isn‘t that correct, broker deals between one party and to the other party?” Such evidence does not support appellant‘s summary judgment burden.
{¶ 32} Second, appellant points to page 51 of Mr. Uballe‘s deposition transcript as evidence of “an interrogatory response that CLS was a loan underwriter.” Appellant refers to interrogatory No. seven, which asked CLS, “Please indicate what CLS‘s role in this loan or transaction was, identify the lender by name, identify the financial guarantor by name, identify the underwriter by name, and who was the law firm identified in [the] loan commitment and what documents support CLS‘s position.” CLS‘s response to that interrogatory complied with
Objection. This interrogatory is vague, ambiguous, overly broad, unduly burdensome and oppressive, not relevant nor calculated to lead to the discovery of admissible evidence and, further, seeks material protected by the attorney/client or other privilege and the work product doctrine. Without waiving said objection and to the extent the answering party understands this confusing and unclear request, CLS was the loan underwriter. Momentum Financial Group, LLC was providing the financial guarantee. The law firm was going to be retained to prepare closing documents upon approval of the financial guarantee by MFG which did not occur due to Plaintiff‘s own actions and misrepresentations.
{¶ 33} We find that such evidence does not support appellant‘s burden, particularly when Mr. Musgrove and Mr. Gazian each testified at their depositions of their understanding that Mr. Rehkopf was the “underwriter,” meaning the person
preparing the loan documents. It is undisputed appellant‘s funding deal with CLS never reached the point of loan document preparation.13 Mr. Musgrove then testified that prior to the November 5, 2018 Loan Commitment, he and Mr. Garzian knew MFG was the financial guarantor to “underwrite” the $10 million deal sought by appellant from CLS. This is corroborated by Mr. Uballe‘s deposition testimony, also at page 51 of the transcript, where he explained CLS’ response to appellant‘s interrogatory No. seven:
I‘m not the one issuing the financial guarantee so * * * we do a underwriting for the first part to see if it‘s even worthy of doing the transaction. * * * I‘m clarifying for you. * * * It doesn‘t say here that we issued the financial guarantee, either, does it? We‘re not the issuer of the financial guarantee, so. The part of CLS, we underwrite what we need for CLS.
{¶ 34} Third, appellant points to pages 74-76 of Mr. Uballe‘s deposition transcript as evidence of “having the loan approved
{¶ 35} Upon de novo review, we find none of the foregoing eight statements are genuine issues of material fact affecting the outcome of the litigation because, when viewing such evidence most strongly in favor of the non-moving party, reasonable minds can come to but one conclusion, and appellant fails to support a claim of fraudulent inducement by the CLS Defendants.
{¶ 36} Finally, the trial court further determined in its journalized entry, “In any event, the Court finds the terms of the conditional Loan Commitment govern the parties’ interactions on these very same issues, rendering further review of these allegations unnecessary.” Again, we agree.
{¶ 37} The essence of appellant‘s fraudulent inducement allegation is that the CLS Defendants misrepresented facts to induce appellant to sign the Loan Commitment and pay the $75,000 commitment fee on the promise of receiving $10 million. According to Mr. Gazian‘s testimony, the absence of receiving the promised $10 million resulted in all of appellant‘s alleged damages. A claim for fraud that duplicates a contract claim is not viable. Dayton Children‘s Hosp. v. Garrett Day, LLC, 2019-Ohio-4875, 149 N.E.3d 1004, ¶ 105-111 (2d Dist.). Since appellant‘s causes of action for fraudulent inducement and breach of contract (discussed below) are factually intertwined, the fraudulent inducement claim will fail as a matter of law unless appellant shows that the tort claim exists notwithstanding the contract and that there are additional, actual damages attributable to the fraudulent inducement claim separate from those attributed to the breach of contract claim. U.S. Bank N. A. v. MMCO, L.L.C., 2021-Ohio-4605, 183 N.E.3d 499, ¶ 53 (8th Dist.). A tort claim based upon the same actions as a breach of contract fails as a matter of law where no duty is owed in the absence of the obligations under the contract, i.e. the duty is owed even if no contract existed. LaBounty v. Big 3 Automotive, 6th Dist. Ottawa No. OT-18-022, 2019-Ohio-1919, ¶ 88, citing Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115 Ohio App.3d 137, 151, 684 N.E.2d 1261 (9th Dist. 1996). Appellant, again, does not meet its burden, and the claim for fraudulent inducement by the CLS Defendants also fails as a matter of law.
R.C. 4165.02 )
{¶ 38} Appellant‘s amended complaint styles count No. 6 as “Deceptive Trade Practices,” made pursuant to
{¶ 39} Mr. Gazian‘s testified at his deposition that he is familiar with deceptive trade practices, and explained, “It‘s under fraud. In Texas, it would be under certain rules. I did not know if it [is] applicable in Ohio, but apparently it is, so, yeah. It‘s there.” On appeal, appellant argues that “misleading statements were made, it was intended to deceive the intended audience, it influenced the consumer‘s purchasing decisions, it was introduced into interstate commerce, and there was a link between the statements and the harm to the plaintiff. The absence of case law does not preclude recovery on this type of case when the elements are present.” Appellant then relies on the trial court‘s October 29, 2021 journalized entry, which did not determine summary judgment on the deceptive trade practices claim: that CLS did not exist (“no Board, no valid corporation“) at the time CLS assigned the Loan Commitment to Comprehensive. Our de novo review is limited to the record available as of the March 24, 2021 journalized entry upon which summary judgment was determined.
{¶ 40} Appellant‘s cause of action alleges four violations of
A person engages in a deceptive trade practice when, in the course of the person‘s business, vocation, or occupation, the person does any of the following: (1) Passes off goods or services as those of another; (2) Causes likelihood of confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services; (3) Causes likelihood of confusion or misunderstanding as to affiliation, connection, or association with, or certification by, another; * * * (7) Represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that the person does not have; * * *
Appellant also alleges a violation under common law, which can be asserted in tandem.
{¶ 42} Thus, appellant has the burden to show:
(1) the defendant has made false or misleading statements of fact concerning his own product or another‘s; (2) the statement deceives or tends to deceive a substantial portion of the intended audience; (3) the statement is material in that it will likely influence the deceived consumer‘s purchasing decisions; (4) the advertisements were introduced into interstate commerce; and (5) there is some causal link between the challenged statements and harm to the plaintiff. (Citations omitted.)
Enduring Wellness at ¶ 47. When seeking damages for false advertising, the plaintiff must present evidence that a significant portion of the consumer population was deceived by it. Id. at ¶ 49.
{¶ 43} Appellant fails to meet its burden. Even if we were to accept that CLS made a false statement of fact concerning the terms of the Loan Commitment, appellant has not, for example, shown that such statement deceived or tended to deceive a significant portion of the public seeking loans from CLS. As a further example, appellant has not shown that a significant portion of the public seeking loans from CLS were likely confused about the “source of the goods and services.” Wooster Floral & Gifts, L.L.C. v. Green Thumb Floral & Garden Ctr., Inc., 164 Ohio St.3d 57, 2020-Ohio-5614, 172 N.E.3d 60, ¶ 17, citing
{¶ 44} Upon de novo review, we find none of the foregoing issues are material facts affecting the outcome of the litigation because, when viewing such evidence most strongly in favor of the non-moving party, reasonable minds can come to but one conclusion that appellant fails to support a claim of deceptive trade practices by the CLS Defendants.
{¶ 45} Appellant‘s first assignment of error is not well-taken.
III. Reciprocal Breach of Contract Claims
{¶ 46} Appellant‘s second assignment of error challenges as against the manifest weight of the evidence the trial court‘s October 29, 2021 journalized decision dismissing appellant‘s breach of contract claim against CLS. Appellant‘s arguments echo its fraudulent inducement claim against CLS. Appellant argues that it detrimentally relied upon Mr. Uballe‘s14 assurances, “as secondary from
{¶ 47} “We review a trial court‘s judgment following a bench trial under the manifest weight of the evidence standard.” Zak v. Airhart, 6th Dist. Lucas No. L-21-1052, 2021-Ohio-4399, ¶ 42. In such review, “we weigh the evidence and all reasonable inferences, consider the credibility of the witnesses, and determine whether the trial court clearly lost its way in resolving conflicts in the evidence, creating such a manifest miscarriage of justice that reversal and a new trial are necessary.” Id. We will not reverse the trial court‘s judgment if the essential elements of the case are supported by some competent, credible evidence in the record. Id. The essential elements of appellant‘s breach of contract claim against CLS are “by a preponderance of the evidence that: (1) the parties reached a valid and binding agreement; (2) that the defendant breached the terms of that agreement; and (3) that the nonbreaching party suffered damages as a result of the breach of contract.” (Citations omitted.) Baker v. Lifeline Field Marketing, LLC, 2017-Ohio-5675, 93 N.E.3d 1231, ¶ 21 (6th Dist.).
{¶ 48} It is undisputed that the subject of the reciprocal breach of contract claims is the November 5, 2018 written Loan Commitment signed by Mr. Gazian for appellant and signed by Mr. Uballe for CLS. Mr. Gazian‘s initials also appear on each page of the five-page document, with an exhibit attached. Both sides argue the Loan Commitment is a valid, binding contract which the other side breached. Appellant alleges CLS breached the Loan Commitment by not being a “direct lender” for the “guaranteed” $10 million loan and by relying on a financial guarantor‘s participation in the loan. CLS alleges appellant breached the Loan Commitment by failing to satisfactorily meet all conditions precedent to funding and by failing to abide by the indemnity clause.15 Further, neither party disputes the trial court‘s determination that the contract assigned by CLS to Comprehensive on June 9, 2020, was not the November 5, 2018 signed agreement, but an unsigned draft dated October 16, 2018.16
{¶ 49} As a preliminary matter, it is undisputed that the Loan Commitment explicitly states the parties’ agreement is “intended to be governed and constructed in accordance with Delaware Law without regard to its conflict of law provisions.” The law of the state chosen by the parties governs their contractual rights and duties. Morse v. Reiser, 6th Dist. Wood No. WD-02-048, 2003-Ohio-3451, ¶ 7, citing Ohayon v. Safeco Ins. Co. of Illinois, 91 Ohio St.3d 474, 477, 747 N.E.2d 206 (2001). According to the trial court, the determination of CLS’ legal non-existence under Delaware law was dispositive on the reciprocal breach of contract claims. We agree.
{¶ 50} The trial court‘s October 29, 2021 journalized entry, over CLS’ objection17 and with appellant‘s support, took “judicial notice that Defendant, CLS Capital Group, Inc., is no longer in existence and became inoperative and void as of March 1, 2012, as indicated by the public records available through the Delaware Secretary of State.”
corporation. Id. However, we find no evidence in the record of such direction of an extension by the Delaware Court of Chancery. Nor do we find any evidence in the record that CLS “continued as a body corporate” because appellant did not commence its litigation during CLS‘s windup period. Id.
{¶ 51} Thus, CLS‘s legal capacity to be sued by appellant on October 28, 2019, for breach of the Loan Commitment was beyond the Delaware statutory windup period following its March 1, 2012 dissolution. O‘Dell v. Dana Corp., 3d Dist. Crawford No. 3-94-5, 1994 WL 424064, *2 (Aug. 9, 1994), citing
{¶ 52} The trial court cited
{¶ 53} A void judgment is a legal nullity as if it never occurred. See State ex rel. Haley v. Davis, 145 Ohio St.3d 297, 2016-Ohio-534, 49 N.E.3d 279, ¶ 13; Patasce v. Stambaugh Garage, 11th Dist. Trumbull No. 91-T-4594, 1992 WL 208564, *4 (Aug. 28, 1992) (“Any judgment rendered against a non-legal entity is a nullity“). The trial court has the inherent authority to vacate a judgment entered against a nonentity. Davis at ¶ 13, citing Hartley at ¶ 9. However, we agree with the trial court when it determined, “being disinclined to issue a void judgment, [the court] is similarly disinclined to issue a judgment for or against a non-existent entity.” The trial court lamented, “Plaintiff could have saved all parties involved considerable time and resources by raising the non-existence issue sooner, perhaps even before filing the instant lawsuit.” As a result, the trial court dismissed outright appellant‘s breach of contract claim against CLS, a non-existent entity, and dismissed CLS‘s19 breach of contract indemnification claim against appellant. We agree.
{¶ 54} Appellant‘s arguments supporting this second assignment of error are silent regarding the foregoing legal consequence of CLS‘s nonexistence and its capacity to be sued. Appellant merely repeats the essence of its fraudulent inducement claims to reach CLS and Mr. Uballe, which we have found not well-taken. The record contains appellant‘s October 21, 2021 brief supporting the trial court‘s notice of intent to take judicial notice that CLS ceased legal existence as of March 1, 2012, and merely announces:
R.C. 1703.29 does not affect Plaintiff‘s claim against the defunct corporation. Public policy gives Plaintiff the right to file suit against any defunct corporation that continues to do business as if theywere still in business. Here, corporate documents were used by a former co-director to make it appear that the corporation was still in business, therefore CLS Capital Group Inc. is a proper party.
{¶ 55} Appellant provides no legal authority for its foregoing pronouncement. To the extent appellant relies on P.K. Springfield, Inc. v. Hogan, 86 Ohio App.3d 764, 621 N.E.2d 1253 (2d Dist. 1993), such reliance is misplaced, as the court stated, ”
{¶ 56} Furthermore,
{¶ 57} We find the trial court‘s decision dismissing appellant‘s breach of contract claim against CLS is not against the manifest weight of the evidence. There is some competent, credible evidence in the record showing CLS lacked the capacity to be sued due to CLS‘s legal non-existence.
{¶ 58} Appellant‘s second assignment of error is not well-taken.
IV. Conclusion
{¶ 59} On consideration whereof, the judgments of the Lucas County Court of Common Pleas are affirmed. Appellant is ordered to pay the costs of this appeal pursuant to
Judgment affirmed.
A certified copy of this entry shall constitute the mandate pursuant to
Mark L. Pietrykowski, J.
JUDGE
Thomas J. Osowik, J.
JUDGE
Gene A. Zmuda, J.
CONCUR.
JUDGE
This decision is subject to further editing by the Supreme Court of Ohio‘s Reporter of Decisions. Parties interested in viewing the final reported version are advised to visit the Ohio Supreme Court‘s web site at: http://www.supremecourt.ohio.gov/ROD/docs/.