Dundics v. Eric Petroleum Corp. , 2017 Ohio 640 ( 2017 )

[Cite as Dundics v. Eric Petroleum Corp., 2017-Ohio-640.]
STATE OF OHIO, MAHONING COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
THOMAS DUNDICS, ET AL., )
)
PLAINTIFFS-APPELLANTS, )
) CASE NO. 15 MA 0156
V. )
) OPINION
ERIC PETROLEUM CORPORATION, ET )
AL., )
)
DEFENDANTS-APPELLEES. )
CHARACTER OF PROCEEDINGS: Civil Appeal from Court of Common
Pleas of Mahoning County, Ohio
Case No. 2014 CV 02981
JUDGMENT: Affirmed
JUDGES:
Hon. Gene Donofrio
Hon. Mary DeGenaro
Hon. Carol Ann Robb
Dated: February 17, 2017
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APPEARANCES:
For Plaintiffs-Appellants Attorney Thomas Hull II
Attorney David Detec
201 East Commerce Street
Youngstown, Ohio 44503-1541
For Defendants-Appellees Attorney Thomas Hill
6075 Silica Road, Suite A
Austintown, Ohio 44515-1053
For Amicus Curiae Attorney Timothy McGranor
Attorney Mitchell Tobias
52 East Gay Street
P.O. Box 1008
Columbus, Ohio 43216-1008
[Cite as Dundics v. Eric Petroleum Corp., 2017-Ohio-640.]
DONOFRIO, P.J.
{¶1} Plaintiffs-Appellants, Thomas Dundics and IBIS Land Group, Ltd.,
appeal the dismissal of their complaint by the Mahoning County Court of Common
Pleas for failure to state a claim upon which relief can be granted.1
{¶2} Appellants filed a complaint on November 14, 2014 against
Defendants-Appellees, Eric Petroleum Corporation and Bruce Broker. Appellants’
complaint included five counts. In count one of their complaint, Appellants alleged
that they entered into an agreement with Appellees whereby Appellants would find
property owners, negotiate gas leases, and work with Appellees to obtain executed
gas leases. For compensation, Appellants alleged they were to receive $10.00 per
leased acre and a 1% working interest in all wells placed on the leased acreage.
Appellants further claimed in their complaint that oil and gas leases are not real
estate and that, therefore, they did not need to be licensed real estate brokers to
perform these services for Appellees. Appellants complained that they performed
their end of the bargain and received some compensation. Now, Appellants
complain, the leases may have been sold but Appellees refuse to provide an
accounting or pay the monies due Appellants for services rendered. In counts two,
three, four, and five of their complaint, Appellants assert alternative theories of
conversion, fraud, unjust enrichment, and quantum meruit for the requested relief.
{¶3} On January 28, 2015, Appellees filed a motion to dismiss Appellants’
complaint for failure to state a claim upon which relief could be granted because
Appellants did not allege they were licensed real estate brokers as required by R.C.
4735.21, because the breach of contract claims were barred by the statute of frauds,
because Appellants failed to plead fraud in their complaint with the particularity
required by Civ.R. 9(B), and because Appellants failed to include in their complaint
sufficient allegations necessary on any legal theory pled. Appellants filed a brief in
opposition along with a motion to amend their complaint.
{¶4} On March 16, 2015, a hearing was held before a magistrate. The
1Amicus Curiae, American Association of Professional Landmen (Landmen), filed a Merit Brief in
support of appellants’ Merit Brief.
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magistrate filed a Magistrate’s Decision on May 27, 2015. The magistrate concluded
that Appellants were required to have a real estate broker’s license to perform the
alleged services and Appellants were required to allege the same in their complaint
pursuant to R.C. 4735.21. Because they did not make such an allegation, the
magistrate concluded that Appellants failed to state a claim upon which relief could
be granted and that their complaint must be dismissed. The magistrate denied
Appellants’ motion to amend their complaint because there was no set of
circumstances that would provide them with a cognizable claim in law or equity.
{¶5} On June 17, 2015, Appellants filed objections to the Magistrate’s
Decision. Appellees filed a response on June 24, 2015. Appellants filed a motion for
leave to supplement their objections on August 6, 2015, based on new information.
On August 12, 2015, the trial court overruled Appellants’ objections but did not rule
on Appellants’ August 12, 2015 motion for leave to supplement Appellants’
objections. Appellants filed a timely appeal.
{¶6} Appellants assign two errors to the trial court. Their first assignment of
error states:
THE TRIAL COURT ERRED IN GRANTING
DEFENDANTS/APPELLANTS’ [sic.] MOTION TO DISMISS.
{¶7} In Javorsky v. Sterling Med., 7th Dist. No. 14 MA 87, 2015-Ohio-2113, ¶
11-12, we reiterated the standard of review regarding a trial court’s dismissal of a
complaint for failure to state a claim upon which relief can be granted. A Civ.R.
12(B)(6) motion to dismiss for failure to state a claim upon which relief can be
granted is a procedural motion that tests the sufficiency of the complaint. Id. citing
State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St. 3d 545, 548,
1992-Ohio-73, 605 N.E.2d 378. In order to dismiss a complaint for failure to state a
claim upon which relief can be granted, the court must find beyond doubt that the
plaintiff can prove no set of facts warranting relief after it presumes all factual
allegations in the complaint are true, and construes all reasonable inferences in the
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plaintiff's favor. Javorsky, at ¶ 11-12 citing State ex rel. Seikbert v. Wilkinson, 69 Ohio
St.3d 489, 490, 1994-Ohio-39, 633 N.E.2d 1128. The appellate court is required to
independently review the complaint to determine if the dismissal was appropriate.
Javorsky, at ¶ 11-12 citing Ferreri v. Plain Dealer Publishing Co., 142 Ohio App. 3d
629, 639, 756 N.E.2d 712 (8th Dist.2001).
{¶8} The parties and Amicus Curiae agree that there are two decisions
which have previously decided the issue before this court, Binder v. OG Land
Development and Exploration, LLC N.D.Ohio No. 4:11-cv-02621, 2012 WL 1970239
(May 31, 2012), and Wellington Resource Group, LLC v. Beck Energy Corp., 975
F. Supp. 2d 833 (S.D.Ohio 2013). The courts in Binder and Wellington reached
conflicting results. The Binder court concluded that one who engages in the brokering
of oil and gas leases is subject to the provisions of R.C. 4735.21. The Wellington
court concluded that such individuals are not limited by R.C. 4735.21. Appellants
argue that the Wellington decision is the correct one and Appellees argue Binder is
the correct decision.
{¶9} Appellants and Landmen (unless noted otherwise, collectively referred
to as “Appellants”) argue that R.C. 4735.21 is inapplicable because oil and gas
leases are not interests in real estate. Appellants assert that Wellington is directly on
point and that its reasoning requires that the trial court’s decision be reversed. They
suggest that to require a real estate broker’s license to perform the services which
Appellants performed here would require needless regulation and increased costs.
Further, Appellants argue that the recent decision of the Ohio Supreme Court in
Chesapeake Exploration LLC., v. Buell, 144 Ohio St. 3d 490, 2015-Ohio-4551, 45
N.E.3d 185, does not invalidate Wellington nor otherwise resolve the issue regarding
the interpretation of R.C. 4735.21. Appellees argue that oil and gas rights are real
estate under Ohio law and that the decisions interpreting the nature of these rights,
including the recent decision by the Ohio Supreme Court in Buell, support the
decision of the trial court.
{¶10} R.C. 4735.21 provides, in pertinent part:
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No right of action shall accrue to any person, partnership, association,
or corporation for the collection of compensation for the performance of
the acts mentioned in section 4735.01 of the Revised Code, without
alleging and proving that such person, partnership, association, or
corporation was licensed as a real estate broker or foreign real estate
dealer.
{¶11} R.C. 4735.01 defines a “real estate broker” as one who engages in
certain specified conduct for compensation. The trial court concluded that Appellants’
complaint alleged that they engaged in conduct identified in the statute. Specifically,
the trial court concluded that Appellants’ complaint alleged that they engaged in the
following conduct identified in R.C. 4735.01(A):
(1) Sells, exchanges, purchases, rents, or leases, or negotiates the
sale, exchange, purchase, rental, or leasing of any real estate;
(2) Offers, attempts, or agrees to negotiate the sale, exchange,
purchase, rental, or leasing of any real estate;
***
(7) Directs or assists in the procuring of prospects or the negotiation of
any transaction, other than mortgage financing, which does or is
calculated to result in the sale, exchange, leasing, or renting of any real
estate;
R.C. 4735.01(B) defines “real estate” as including “leaseholds as well as any
and every interest or estate in land situated in this state, whether corporeal or
incorporeal, whether freehold or nonfreehold, and the improvements on the land, but
does not include cemetery interment rights.”
{¶12} In Binder, plaintiff alleged that he agreed, in return for compensation, to
identify landowners with whom defendant could negotiate to obtain mineral rights.
Binder at *1. Plaintiff acknowledged that some payment had been offered by
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defendant but that, for reasons irrelevant to that case, he refused to sign the check.
He then filed suit. Defendant asked that plaintiff’s claim be dismissed on the
pleadings since plaintiff was not a licensed real estate broker pursuant to the above
quoted statutes and, as a result, he could not maintain his lawsuit. The Binder court,
relying on Colucy v. D & H Coal Co., 186 N.E.2d 767 (Ohio C.P. 1961), concluded
that, under Ohio law, mineral rights such as rights to coal, oil, and gas, are “real
estate” as defined in R.C. 4735.01(B). As a result, plaintiff’s claim was dismissed on
the pleadings.
{¶13} Colucy involved a plaintiff who was given the right to purchase mineral
rights, including rights to coal, oil, and gas, for the defendant. Colucy at 771. The
Tuscarawas Common Pleas Court concluded “that it is quite apparent that the
service the plaintiff performed or was to perform comes within the strict definition of
the term ‘Real Estate Broker’ as defined by the statute.” Id.
{¶14} The year after Binder, the Wellington court reached a different
conclusion. The Wellington court determined that oil and gas leases are not “real
estate” under Ohio law. Wellington at 838. The court in Wellington concluded that its
“thorough survey of Ohio case law leaves this [the Wellington] Court convinced that
the Ohio Supreme Court, if given the occasion to rule on this issue today, would so
hold.” Id. Referring to its prior decision in In re Frederick Petroleum Corp., 98 B.R.
762 (S.D. Ohio 1989), the court acknowledged that the exact nature of a lessee’s
interest under an oil and gas lease has not been clearly established in Ohio. Id. at
839. The court then summarized a number of Ohio decisions for purposes of
illustrating its observation that Ohio courts have treated oil and gas leases differently
from an interest in real property.
{¶15} Wellington refers to Detlor v. Holland, 57 Ohio St. 492, 505, 49 N.E.
690 (1898), for the proposition that the right to produce oil and gas from a tract of
land is not a lease but a grant of an exclusive right to produce oil and gas for the term
of the agreement. Wellington at 839, quoting Detlor at 505-506. Detlor was an action
to quiet title where the agreement to produce oil was limited to 90 days unless a
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paying well was established within that time. It was not, and thus the court rejected
the lessee’s argument that oil and gas was included under the general language
“other mineral rights.” Id. at 503-504.
{¶16} However, as the Wellington court acknowledged, in Harris v. Ohio Oil
Co., 57 Ohio St. 118, 48 N.E. 502 (1897), the Ohio Supreme Court, stated that an oil
and gas lease is more than a mere license and concluded that a lease to drill for oil
and gas “is a lease of the land” and that “the lessee has a vested right to the
possession of the land to the extent reasonably necessary * * *” Id. at 129-130.
{¶17} And, Wellington explained, more recently, in Back v. Ohio Fuel Gas
Co., 168 Ohio St. 81, 113 N.E.2d 865 (1953), the Ohio Supreme Court considered
whether an instrument conveying a right and privilege to operate on land to obtain oil
and gas and to lay pipe over the land to transfer the oil and gas should be recorded
in the record of leases or in the record of deeds. Id. at 83. In considering whether
such an instrument was a lease or a license, the Supreme Court discussed the
nature of the activity of drilling for oil and gas:
The character of the instrument of conveyance reveals that it is other
than a grant of real property. Possession of oil and gas, having as they
do a migratory character, can be acquired only by severing them from
the land under which they lie, and in effect the instrument of
conveyance in the instant case is no more than a license to effect such
a severance. The very sale of oil and gas, separate and apart from the
real estate surface, constitutes, in law, a constructive severance such
as occurs in the case of sale of standing timber or growing crops.
Id. at 87. The Court then observed that in most producing states, gas and oil in situ
are not subject to absolute ownership. Id. The Court concluded that the instrument in
Back was, for recording purposes, a license rather than a deed of conveyance. Id. at
89. The Supreme Court observed that many authorities hold that the owner of the
land surface does not own the oil and gas that may be in place thereunder. Id. at 86-
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87. Apparently agreeing with its prior explanation in Kelly v. Ohio Oil Co., 57 Ohio St.
317, 328, 49 N.E. 399 (1897), the Supreme Court observed that, while in the earth,
oil is part of the realty “in which it tarries for the time being” until it is raised to the
surface and then it becomes the subject of ownership separate from the realty. Back
at 88-89 citing Kelly at 328. The Supreme Court held that the instrument in question
there was a license rather than a deed and thus recording the instrument in the
record of leases was sufficient to constitute constructive notice of its existence to a
subsequent purchaser of the land. Back at 90. Thus, at first blush, it would appear
that Harris (more than a mere license) and Back (no more than a mere license) are in
conflict.
{¶18} Appellees argue that the recent Buell decision validates the trial court’s
decision here. Buell was an action brought in the federal district court for the
Southern District of Ohio to quiet title to oil and gas rights against a surface property
owner. Buell at ¶ 13. Because of the lack of available authority from Ohio courts
regarding the interpretation of Ohio’s Dormant Mineral Act in the context of an Ohio
oil and gas lease, the federal court certified two questions to the Ohio Supreme
Court. Although Buell does not involve R.C. 4735.21, some of its discussion about
the nature of oil and gas is instructive.
{¶19} Buell observes that “[o]il and gas can be viewed as realty or personalty
depending on the location of the oil and gas relative to the land in which it lies.” Id. at
¶ 20. According to Buell, oil and gas underlying the surface have, in Ohio, long been
recognized as part of the realty. Id. at ¶ 21. The interests in the surface and the
minerals below the surface can be severed. However, even though these rights may
be severed, the rights to the subsurface oil and gas may still affect the rights and/or
value of the surface rights. According to Buell, absent language to the contrary in the
conveying instrument, “a severed mineral estate is considered to include those rights
to use of the surface as are reasonably necessary for the proper working of the mine
and the obtaining of the minerals.” Id. at 23.
{¶20} In Buell, the Supreme Court confronted the seemingly different
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perceptions of the nature of oil and gas leases in Harris and Back. Indeed, the
federal court suggested in its order certifying its questions to the Supreme Court that
Harris and Back took divergent views of the nature of oil and gas leases. Buell at ¶
45. Buell explained that Harris and Back are “not in direct conflict” because of the
different language in the instruments at issue in each case. Id. at ¶ 48. In Back, the
instrument was not a lease because the grant of the oil and gas rights was “forever.”
Id. at ¶ 46. According to Buell, the Back decision concluded that the instrument was a
license rather than a deed of conveyance granting real property. Id. Thus, the Court
concluded that, under the relevant statute, recording the instrument in the lease
records rather than the deed records was sufficient constructive notice to a
purchaser. Id. The instrument in Harris, however, was, according to Buell,
“indisputably a lease.” Id at ¶ 47. Buell explains that Harris concluded that the Harris
instrument is more than a mere license, “it is a lease of land * * * ” Buell at ¶ 47, citing
Harris at 129-130.
{¶21} Buell then notes that this court’s decision in Eisenbarth v. Reusser,
2014-Ohio-3792, 18 N.E.3d 477 (7th Dist.), is in accord with the Columbiana County
Common Pleas Court in Bender v. Morgan, Columbiana C.P. No. 2012-CV-378 (Mar.
20, 2013), where the common pleas court observed that, in analyzing the meaning of
a title transaction, the courts have “concluded that an oil and gas lease conveyed a
fee simple determinable in the severed mineral rights subject to a reverter on
conditions described in the lease * * * ” Buell at ¶ 51. Kramer v. PAC Drilling Oil &
Gas, L.L.C., 197 Ohio App. 2d 554, 2011-Ohio-6750, 968 N.E.2d 64, (9th Dist.) ¶ 11,
is cited by Buell for reaching the same conclusion as Bender, i.e., an oil and gas
lease grants a fee simple determinable to the lessee. Id. at ¶ 52. The Eleventh
District similarly stated that the typical oil and gas lease “grants a fee simple
determinable interest to the lessee.” Bernard Philip Dedor Revocable Trust v.
Reserve Energy Exploration Co., 11th Dist. No. 2014-P-0001, 2014-Ohio-5383, 24
N.E.3d 1225, ¶ 20.
{¶22} In considering whether the services allegedly performed by Appellants
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here come under the requirements set out in R.C. 4735.21, the following explanation
in Buell is of some import: “Because the lessee also enjoys reasonable use of the
surface estate to accomplish the purposes of the lease, the lease also similarly
affects the surface estate. Thus, the lease affects the possession and custody of both
the mineral and surface estates.” Id. at 60. If the lessor conveys title to either the
surface or mineral estates to a third party, the lease is binding on those successors
and is therefore an encumbrance that remains with the realty. Id. at ¶ 61, citing
Eisenbarth at ¶ 30. The lease affects the value of the property. Id. at ¶ 64. The “effect
on ownership, possession, and custody is an inherent attribute of an oil and gas
lease.” Id.
{¶23} In light of the above, we return to the language of R.C. 4735.01(B)’s
definition of “real estate.” Real estate “includes leaseholds as well as any and every
interest or estate in land.” Buell reminds us that the Ohio Supreme Court has “long
held that the use of the term ‘any’ in a phrase encompasses ‘every’ and ‘all’
examples of the subject described.” Id. at ¶ 34. Further, the word “includes” indicates
a partial list. Id. at ¶ 35. This definition includes the various descriptions and
explanations discussed above. Whether described as licenses, leases, fee simple
determinable estates, or something else, any instrument affecting oil and gas
necessarily affects the surface rights as well, either in terms of the right to access the
surface for transportation, drilling, etc., or because it affects the value of the surface
rights, it falls under the definition of “real estate.” Thus, to engage in any of the
activities alleged here for compensation, one must have a broker’s license.
{¶24} In further support of Appellants’ first assignment of error, the Landmen
argue that recent proposed legislation, seeking to establish requirements governing
oil and gas land professionals, supports its position that Chapter 4735 does not apply
to Appellants here, even though the legislation was never adopted. But the proposed
un-enacted legislation upon which Appellants rely is insufficient to establish a
contrary interpretation to Chapter 4735.
{¶25} Next, the Landmen complain that the requirements necessary to obtain
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a real estate broker’s license focus on residential and commercial surface estates
and do not contain requirements germane specifically to oil and gas. But the
Landmen cite no authority which suggests we must find R.C. 4753.21 inapplicable
here because the licensing requirements are less than what they might be, or that
there should be additional requirements more specific to oil and gas rights. The
Landmen also complain that this statute is susceptible to more than one
interpretation and that we, therefore, should glean the General Assembly’s intent,
including the spirit of the statute and the public policy that induced the statute’s
enactment. However, as is discussed above, the fact that oil and gas rights are
different does not excuse third parties who ask the courts to enforce their
engagement with either owners of surface real estate or those who wish to extract
subsurface oil or gas from the real estate broker’s license requirements at issue here,
nor do the Landmen explain why the difference should compel this result.
{¶26} As Appellees observe, this court recently confirmed the rule that inquiry
into legislative intent, legislative history, public policy, the consequences of an
interpretation, or other factors identified in R.C. 1.49, is inappropriate unless we find
the statute is ambiguous. Tribett v. Sheperd, 7th Dist. No. 13 BE 22, 2014-Ohio-
4320, fn.1, appeal pending, 142 Ohio St. 3d 1447, 2015-Ohio-1591, citing Dunbar v.
State, 136 Ohio St. 3d 181, 2013-Ohio-2163, ¶ 16. The statute is unambiguous. The
question presented is whether a third person, with some exceptions, who uses his or
her skills to bring together landowners with those engaged in extracting oil and gas
from below the surface needs to have a real estate broker’s license in order to
maintain an action for compensation for those services, as required by R.C. 4735.21.
Answering that question requires a consideration of the nature of oil and gas leases
under Ohio law. Although Binder and Wellington reached different results, it was not
because the statute was ambiguous. It involved, instead, a determination of the
meaning of the words “any and every interest or estate in land” as used in R.C.
4735.01(B). We conclude that the right to subsurface oil and gas is such an interest.
{¶27} As discussed above, any agreement allowing one to reach beneath
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surface land for oil and gas, no matter what instrument is used to memorialize that
agreement, necessarily affects the surface land either by allowing one of the parties
to enter and/or use the surface land for various purposes or by affecting the value of
the surface land. Appellees contend that third parties engaged in this process must
have a real estate broker’s license and, unlike the Landmen, discuss the history of
R.C. 4735.21, the statutory construction, the object of the legislation, and the nature
of landmen. For example, Appellees point out that a 1942 Ohio Attorney General
opinion concluded that gas and oil leases are included in the definition of real estate
and third parties engaging in the sale, exchange, or purchase of oil and gas leases
for compensation had to have a real estate broker’s license. Appellees also explain
that a 1936 Ohio Attorney General Opinion that concluded that the sale of cemetery
lots were also included in this definition resulted in a statutory amendment excluding
the same. Appellees also argue that many landmen are excluded from the licensing
requirement of R.C. 4735.21 by the exclusions provided in R.C. 4735.01(I)(1)(a).
Under that provision, regular employees of “persons, partnerships, associations” are
excluded with reference to real estate owned by such persons or entities. Neither
Appellants nor the Landmen have replied to these representations by Appellees.
{¶28} Appellants further argue that even if R.C. 4735.21 is applicable, they
should nonetheless be able to pursue their fraud claim. (The Landmen do not
address this issue). Appellants assert that there should be an exception to a claim of
fraud in relation to R.C. 4735.21 in order to prevent one from using the law to help
perpetrate a fraud. Appellants first rely on the syllabus in Gathagan v. Firestone Tire
and Rubber Co., 23 Ohio App. 3d 16, 490 N.E.2d 923 (9th Dist. 1985). Gathagan, as
it pertains here, involved an alleged oral promise of employment for at least two
years. R.C. 1335.05, a part of the statute of frauds, provides that contracts that
cannot be completed in two years must be in writing. There, the court indicated it
would not permit a statute designed to prevent fraud to be used as a shield to protect
against fraud. Id. at 16. Similarly, Appellants rely on this court’s decision in Filo v.
Liberato, 7th Dist. No. 11 MA 18, 2013-Ohio-1014, based, in pertinent part, on the
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“lead object rule.” Again, however, Filo was concerned with the statute of frauds.
{¶29} Appellees respond by arguing that Appellants cannot assert this issue
as error because they did not present it as an objection to the Magistrate’s Decision
in the trial court. Civ.R. 53(D)(3)(b)(iv) provides:
Except for a claim of plain error, a party shall not assign as error on
appeal the court's adoption of any factual finding or legal conclusion,
whether or not specifically designated as a finding of fact or conclusion
of law under Civ.R. 53(D)(3)(a)(ii), unless the party has objected to that
finding or conclusion as required by Civ.R. 53(D)(3)(b).
{¶30} A fair reading of Appellants’ objections to the Magistrate’s Decision
reflects that the argument that fraud be an exception to the requirement in R.C.
4735.21 was not made to the trial court and thus cannot be considered on appeal.
{¶31} Appellees also argue that, even if the fraud exception argument is
considered, it should nonetheless be rejected. Indeed, in Binder the court concluded
that the plaintiff’s fraud claim was barred by his failure to hold a real estate broker’s
license as required by R.C. 4735.21. Appellees also respond to Appellants’ attempt
to discount the decisions in Kapel v. Carnegie Management & Dev. Corp., 8th Dist.
No. 67939, 1995 WL 277118 (May 11, 1995) and Peltier v. McCoppin, 2nd Dist. No.
75 CA 2, 1975 WL 182192 (Aug. 19, 1975) because those cases were decided on
summary judgment rather than for failure to state a claim on which relief can be
granted, as here. In Kapel, the court observed that if a party is barred from pursuing
a claim under R.C. 4735.01, it does not matter that he also claims causes of action
under the theories of breach of contract, fraud, quantum meruit and unjust
enrichment. Kapel at *4. If barred from pursuing a claim for commissions by statute,
one cannot reach for equitable or other forms of relief in order to defeat the public
policy adopted by the legislature. Id. Similarly, in Peltier, the court concluded that
since the plaintiff incorporated the facts from his breach of contract claim into his
fraud claim, as Appellants did here, the contract claim was barred by R.C. 4735.21,
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as was the fraud claim. Appellants cite no law to the contrary.
{¶32} Accordingly, Appellants’ first assignment of error is without merit and is
overruled.
{¶33} Appellants’ second assignment of error states:
THE TRIAL COURT ERRED IN FAILING TO ALLOW
PLAINTIFFS/APPELLANTS TO AMEND THEIR COMPLAINT TO
CLARIFY THE FACTS AT ISSUE AND STATE A CLAIM THAT IS NOT
BARRED BY O.R.C. 4735.21.
{¶34} Appellants filed with the trial court what they styled an alternative
motion to amend their complaint. In their initial motion, Appellants simply stated that,
in the event the trial court found merit in any of the arguments offered by Appellees,
Appellants sought leave to amend the complaint to correct any deficits in the
pleading. Appellants offered no other reason and did not file a proposed amended
complaint. In a subsequent pleading Appellants asserted that they had not supplied
reasons to amend their complaint because they did not believe there was any reason
to amend their complaint. Appellants suggest that the amendment would only be
necessary if the trial court concluded that their claims for fraud and conversion were
insufficiently pled.
{¶35} The trial court ultimately did not dismiss any of Appellants’ claims
because they were insufficiently pled. Instead, citing Walgate v. Kasich, 10th Dist.
No. 12AP-548, 2013-Ohio-946, 989 N.E.2d 140, ¶ 35, affirmed in part and reversed
in part, Walgate v. Kasich, 2016-Ohio-1176, the magistrate, and then the trial court,
denied Appellants’ motion to amend the complaint because they provided no grounds
as to why leave should be granted, no explanation of any new matters they wished to
include in the complaint, and no explanation of how the amendment would cure any
deficiencies in the complaint.
{¶36} In their Objection to the Magistrate Decision, Appellants did not object
to the denial of their alternative motion to amend their complaint.
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{¶37} As Appellees point out, the trial court signed its judgment entry on
August 3, 2015. It was not filed until August 12, 2015. Appellants, on August 6, 2015,
filed a Motion for Leave to Supplement Plaintiff’s Objections to the Magistrate
Decision of May 27, 2015 Based on New Information. Leave was never granted or
denied. Appellants state therein that the reason for the filing was to support its motion
for leave to file an amended complaint and to support the fraud allegation. Attached
were an email from 2011, the affidavit of Appellant Dundics, and a First Amended
Complaint With Jury Demand. In essence, in addition to the previous claims,
Appellants now alleged that they performed consulting services directly to Appellees
based on Appellant Dundics’ extensive oil and gas knowledge and expertise and that
those services are not governed by R.C. 4735.21.
{¶38} It is clear that this last filing was never considered by the magistrate or
the trial court. As noted above, the motion for leave to supplement was not timely
filed, leave was never granted, and, because of the timing, the trial court never
considered the motion. Appellees draw the court’s attention, again, to Civ.R. 53(D)
(3)(b)(iii) as interpreted in Abshire v. Mauger, 10th Dist. No. 09AP-83, 2010-Ohio-
787, ¶ 17, quoting Beasely v. Beasely, 4th Dist. No. 06CA821, 2006-Ohio-2000, ¶ 13:
[N]either Civ.R. 53 nor statutory law permits a party to submit a
memorandum supplementing her timely objections to a magistrate’s
decision, as of right, after the time for filing objections has passed.
Civ.R. 53(E)(3)(a) only permits a party to file objections to a
magistrate’s decision within fourteen days of the filing of the decision.
Courts may grant a party leave to supplement [her] objections upon
request.
{¶39} Here, the Magistrate’s Decision was filed on May 27, 2015. Appellants
filed objections to the Magistrate’s Decision on June 17, 2015. In each of its
pleadings prior to the last, Appellants offered no proposed amended complaint, no
reason why an amended pleading should be permitted, and no proposed allegations
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which might establish a different claim for relief. Instead, as Appellees note,
Appellants asserted that they saw no need to file an amended complaint unless the
trial court concluded that their initial claims were somehow deficient. They suggested
no alternative legal theory or facts. Under these circumstances, we cannot conclude
that the trial court erred in denying Appellants’ leave to amend their complaint. The
last pleading was untimely and was never ruled upon by the trial court.
{¶40} Accordingly, Appellants’ second assignment of error is without merit
and is overruled.
{¶41} For the reasons stated above, the trial court’s judgment is hereby
affirmed.
DeGenaro, J., concurs.
Robb, P.J., concurs.