Aronoff v. PAJ Ents., Inc.

2022 Ohio 1759

• Court: Ohio Court of Appeals
• Decided: May 26, 2022
• Docket: 110714
• Status: Published

Opinion

[Cite as Aronoff v. PAJ Ents., Inc., 2022-Ohio-1759.]

COURT OF APPEALS OF OHIO

EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

BRUCE ARNOFF, :

Plaintiff-Appellant, : No. 110714 v. :

PAJ ENTERPRISES, LLC, :

Defendant-Appellee. :

JOURNAL ENTRY AND OPINION

JUDGMENT: AFFIRMED IN PART; REVERSED AND REMANDED IN PART RELEASED AND JOURNALIZED: May 26, 2022

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-21-946524

Appearances:

Bruce Arnoff, pro se.

DeBlasis Law Firm, LLC, and Rick D. DeBlasis, for appellee.

KATHLEEN ANN KEOUGH, P.J.:

This appeal is before the court on the accelerated docket pursuant to

App.R. 11.1 and Loc.App.R. 11.1. The purpose of an accelerated appeal is to allow an

appellate court to render a brief and conclusory decision. State v. Trone, 8th Dist. Cuyahoga Nos. 108952 and 108966, 2020-Ohio-384, ¶ 1, citing State v. Priest, 8th

Dist. Cuyahoga No. 100614, 2014-Ohio-1735, ¶ 1.

Plaintiff-appellant, Bruce Arnoff (“Arnoff”), pro se, appeals from the

trial court’s judgment that granted the Civ.R. 12(B)(6) motion of defendant-

appellee, PAJ Enterprises, L.L.C. (“PAJ”), to dismiss Arnoff’s complaint for failure

to state a claim upon which relief can be granted. Finding some merit to the appeal,

we affirm in part, reverse in part, and remand for further proceedings.

I. Background

In April 2021, Arnoff, on behalf of himself and his company, ATT

Security, filed a pro se complaint captioned “Intentional Fraudulent Tort, Civil

Conspiracy, Negligence, Recoupment & Damages” against PAJ. The complaint

alleged that PAJ is a predatory lender that circumvents various state and federal

lending laws through its alleged fraudulent practices. The gist of Arnoff’s complaint

was that he had an ownership interest or a mechanic’s lien, or both, on real property

at 5045 Harper Road in Solon, Ohio (the “property”), and PAJ engaged in unlawful

conduct that caused him to lose his interest.

Specifically, Arnoff’s complaint alleged that PAJ made a fraudulent

loan to the buyer of the property by encouraging him to create a shell company so

PAJ could issue a commercial loan for the property, even though the buyer could not

afford the down payment or monthly payments and 38 other residential properties

he had purchased under various company names had been foreclosed upon since

2011. Arnoff alleged that when the unqualified buyer could not make the down payment, PAJ encouraged him to sell the property to Arnoff, which he did, but that

PAJ then fraudulently used Arnoff’s purchase money wire transfer as the down

payment for its own buyer’s loan.

Arnoff further alleged that he and ATT Security performed over

$200,000 in renovations on the property, for which he was not paid by the owner,

and that PAJ foreclosed on the property after the renovations were complete. Arnoff

alleged that although he had two mechanic’s liens on the property that should have

been the primary liens, because the Cuyahoga County Auditor misfiled one lien and

PAJ foreclosed without paying the other lien, PAJ was able to buy the property at

the foreclosure sale for $60,000 after refusing to allow Arnoff’s partner to make a

cash offer of $170,000 on the home.

Attached to Arnoff’s complaint was a document entitled “Subpoena

and Interrogatory for PAJ Enterprises, L.L.C.” The subpoena sought “all

information and documentation used for loans/mortgages made on 5045 Harper

Road in Solon, Ohio.” The interrogatories asked various questions regarding PAJ’s

lending practices generally and specifically regarding the property at 5045 Harper

Road.

In response, PAJ filed a Civ.R. 12(B)(6) motion to dismiss the

complaint for failure to state a claim upon which relief can be granted. PAJ argued

that the complaint should be dismissed because “the complaint does not allege

sufficient underlying facts to state any cause of action against PAJ.” It also argued

that the complaint should be dismissed as to all plaintiffs other than Arnoff because Arnoff is not a licensed attorney and thus cannot bring an action on behalf of any

other individual or entity. Arnoff did not file a response to PAJ’s motion. The trial

court granted PAJ’s motion and dismissed the case with prejudice without

specifying the basis for the dismissal. This appeal followed.

II. Law and Analysis

A. Civ.R. 12(B)(6) Motion to Dismiss

In his first assignment of error, Arnoff contends that the trial court

erred in granting PAJ’s Civ.R. 12(B)(6) motion to dismiss without ruling on the

merits of the case.

A Civ.R. 12(B)(6) motion to dismiss for failure to state a claim tests

the sufficiency of the complaint. Antoon v. Cleveland Clinic Found., 8th Dist.

Cuyahoga No. 101373, 2015-Ohio-421, ¶ 7. In resolving a Civ.R. 12(B)(6) motion,

the court’s review is limited to the allegations contained in the complaint, along with

any documents properly attached to or incorporated within the complaint. Glazer

v. Chase Home Fin. L.L.C., 8th Dist. Cuyahoga Nos. 99875 and 99736, 2013-Ohio-

5589, ¶ 38.

For a court to dismiss a complaint under Civ.R. 12(B)(6), it must

appear beyond doubt from the complaint that the plaintiff can prove no set of facts

entitling the plaintiff to relief after all factual allegations of the complaint are

presumed true and all reasonable inferences are made in the nonmoving party’s

favor. Windsor Realty & Mgmt., Inc. v. N.E. Ohio Regional Sewer Dist., 8th Dist.

Cuyahoga No. 103635, 2016-Ohio-4865, ¶ 23, citing O’Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St.2d 242, 327 N.E.2d 753 (1975), syllabus. If there is

a set of facts consistent with the plaintiff’s complaint that would allow the plaintiff

to recover, the court may not grant a defendant’s motion to dismiss. York v. Ohio

State Hwy. Patrol, 60 Ohio St.3d 143, 145, 573 N.E.2d 1063 (1991). A court may not

dismiss a complaint under Civ.R. 12(B)(6) merely because it doubts the plaintiff will

prevail. Bono v. McCutcheon, 159 Ohio App.3d 571, 2005-Ohio-299, 824 N.E.2d

1013, ¶ 8 (2d Dist.).

An appellate court conducts a de novo review of a trial court’s ruling

on a Civ.R. 12(B)(6) motion to dismiss. Perrysburg Twp. v. Rossford, 103 Ohio

St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44, ¶ 5. Accordingly, we undertake an

independent analysis without deference to the trial court’s decision. Hendrickson

v. Haven Place, Inc., 8th Dist. Cuyahoga No. 100816, 2014-Ohio-3726, ¶ 12.

PAJ contends that we should affirm the trial court because in light of

the foreclosure action regarding the property,1 all of Arnoff’s claims are barred by

the doctrine of res judicata. At first glance, this would appear to be a persuasive

argument. In the complaint, Arnoff conceded there was a foreclosure action in

which his interest in the property was resolved, albeit not to his satisfaction.

Because Arnoff’s claims in this case arise out of the same transaction that was the

subject matter of the foreclosure case, they would indeed appear to be barred by the

doctrine of res judicata.

1 PAJ Ent., L.L.C. v. Cleveland Properties of Ohio, L.L.C., et al., Cuyahoga C.P. No.

CV-17-881521. PAJ did not raise the issue of res judicata in its motion to dismiss,

however. It is well established that arguments not raised below are waived for

purposes of appeal. Perk v. Tomorrows Home Solutions, L.L.C., 8th Dist. Cuyahoga

No. 104270, 2016-Ohio-7784, ¶ 8. Moreover, as this court recently reiterated, “res

judicata is not a defense that can be raised by a motion to dismiss pursuant to Civ.R.

12(B) because that defense must be proved with evidence outside the pleadings.”

Kobal v. Kobal, 8th Dist. Cuyahoga No. 110317, 2022-Ohio-812, ¶ 10, citing

Commons v. Raaber, 8th Dist. Cuyahoga No. 96867, 2011-Ohio-6084, ¶ 10, citing

State ex rel. Freeman v. Morris, 62 Ohio St.3d 107, 579 N.E.2d 702 (1991). Thus,

had PAJ argued in its motion that res judicata barred Arnoff’s claims, the trial court

would have been required to convert the motion to dismiss into a motion for

summary judgment. Kolar at ¶ 12, citing Hecht v. Equity Trust Co., 8th Dist.

Cuyahoga Nos. 110380 and 110650, 2022-Ohio-198, ¶ 29 (“Where the

determination of a motion to dismiss requires reference to materials outside the

pleadings, the trial court should convert the motion to dismiss into a motion for

summary judgment.”); see also Civ.R. 12(B). Nevertheless, we find that the trial

court properly granted PAJ’s motion to dismiss for other reasons.

Arnoff’s complaint alleged claims for fraud, civil conspiracy, and

negligence. A case for common law fraud requires proof of (1) a representation or,

where there is a duty to disclose, omission of a fact, (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, (4) with the intent of misleading another into relying upon it, (5) justifiable

reliance upon the representation or concealment, and (6) a resulting injury

proximately caused by such reliance. Cohen v. Lamko, Inc., 10 Ohio St.3d 167, 462

N.E.2d 407 (1984). Civ.R. 9(B) provides that fraud claims must be pleaded with

particularity. This court has held that the particularity requirements of Civ.R. 9(B)

includes “the time, place and content of the false representation, the fact

misrepresented, and the nature of what was obtained or given as a consequence of

the fraud.” Pointe at Gateway Condominium Owners’ Assn. v. Schmelzer, 8th Dist.

Cuyahoga Nos. 98761 and 99130, 2013-Ohio-3615, ¶ 65.

Moreover, “the elements of fraud must be directed against the alleged

victim.” Wiles v. Miller, 10th Dist. Franklin No. 12AP-989, 2013-Ohio-3625, ¶ 33.

Accordingly, “a plaintiff fails to plead a valid cause of action for fraud when he alleges

that a third party relied on misrepresentations made by a defendant and that he

suffered injury from that third party’s reliance.” Id. Arnoff’s complaint alleges that

PAJ committed fraud by using false bank records and other documents to enable

“unqualified individuals,” including the third-party buyer of the property at issue in

this case, to qualify for mortgage loans. But these allegations allege fraud against a

third party — the unnamed bank(s) that in reliance on allegedly false documents

gave loans to “unqualified individuals” and to the third-party buyer — and thus are

insufficient to establish Arnoff’s fraud claim. “A fraud claim cannot be predicated

upon misrepresentations made to third parties.” Lucarell v. Nationwide Mut. Ins.

Co., 152 Ohio St.3d 453, 2018-Ohio-15, 97 N.E.3d 458, ¶ 68. The only allegation of fraud relating to Arnoff specifically is that PAJ

waited to notify him there were liens on the property until after he had completed

his renovations to the property. But Arnoff’s complaint does not demonstrate any

contact or relationship between him and PAJ that would give rise to any duty by PAJ

to disclose the liens.

Arnoff also contends that PAJ committed fraud by allegedly violating

unspecified foreclosure laws during the foreclosure action. But the facts alleged in

the complaint fail to demonstrate that PAJ made a misrepresentation to Arnoff or

failed to disclose anything it had a duty to disclose under the unspecified foreclosure

laws, that PAJ’s alleged violation of the unspecified laws was made with the intent

of misleading Arnoff into relying on the alleged misrepresentation or omission, and

that he justifiably relied on the misrepresentation or concealment. Moreover, PAJ’s

alleged violation of the unspecified foreclosure laws, if true, would appear to be

fraud against a third-party, i.e., the court, instead of against Arnoff. Accordingly,

because the operative facts alleged in the complaint do not demonstrate that Arnoff

has a viable claim of fraud against PAJ, the trial court properly granted PAJ’s motion

to dismiss this claim.

Arnoff’s complaint also alleged that PAJ committed a civil conspiracy

by applying his downpayment monies to its own buyer’s loan. To maintain a claim

of civil conspiracy, a plaintiff must demonstrate (1) a malicious combination of two

or more persons, (2) causing injury to another person or property, and (3) the

existence of an unlawful act independent from the conspiracy itself. Syed v. Poulos, 8th Dist. Cuyahoga Nos. 103137 and 103499, 2016-Ohio-3168, ¶ 28, citing Kenty v.

Transamerica Premium Ins. Co., 72 Ohio St.3d 415, 419, 650 N.E.2d 863 (1995). A

claim of civil conspiracy rests upon an actual agreement to participate in wrongful

activity. Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 475, 700 N.E.2d 859 (1998).

Arnoff’s complaint alleges no operative facts constituting an agreement between

PAJ and others to commit unlawful acts. Moreover, “[a] civil conspiracy claim is

derivative and cannot be maintained absent an underlying tort that is actionable

without the conspiracy.” Adams v. Margarum, 10th Dist. Franklin No. 16AP-515,

2017-Ohio-2741, ¶ 21. Arnoff’s complaint alleged no underlying fraud claim with

respect to the conspiracy and, in any event, as noted above, the operative facts do

not support a fraud claim. Accordingly, the civil conspiracy claim necessarily fails.

Arnoff’s complaint also failed to establish a claim for negligence. The

elements of a negligence claim are (1) a duty, (2) a breach of that duty, and (3)

damages proximately caused by that breach. Texler v. D.O. Summer Cleaners &

Shirt Laundry Co., 81 Ohio St.3d 677, 680, 693 N.E.2d 271 (1998). The facts alleged

in the complaint do not demonstrate that Arnoff was a borrower impacted by PAJ’s

alleged fraudulent lending practices nor does the complaint identify a

creditor/debtor relationship between PAJ and Arnoff, or any relationship, that

would give rise to a duty owed by PAJ to Arnoff. Arnoff’s negligence claim therefore

failed to state a claim upon which relief could be granted.

Accordingly, because on the basis of the facts and law alleged, Arnoff

could prove no set of facts that would entitle him to relief, the trial court properly granted PAJ’s Civ.R. 12(B)(6) motion and dismissed Arnoff’s claims with prejudice.

Dismissal with prejudice was appropriate because the operative facts establish that

no relief is available to Arnoff on his claims, however they are pleaded. See

Fletcher v. Univ. Hosps. of Cleveland, 120 Ohio St.3d 167, 2008-Ohio-5379, 897

N.E.2d 147, ¶ 17 (a Civ.R. 12(B)(6) dismissal is without prejudice unless the claims

can be pleaded in no other way).

The court erred, however, in dismissing ATT Security’s claims with

prejudice. The caption of the complaint listed “Bruce Arnoff, et al.” as plaintiffs. The

case classification form filed with the complaint listed “Bruce Arnoff/ATT Security”

as plaintiffs. It also listed “Keith Eckmeyer P.O.A.” as attorney of record. Arnoff was

the only signatory to the complaint, however; neither Keith Eckmeyer nor any

attorney of record signed the complaint. Accordingly, we conclude the action was

filed solely by Arnoff.

Arnoff is not an attorney, however, and although he may represent his

own interests in court, he may not represent ATT Security, even if he is a member of

the corporation. Mun. Realty Corp. v. Ergur, 6th Dist. Lucas No. L-13-1241, 2014-

Ohio-1557, ¶ 7 (an Ohio corporation must be represented by an attorney and cannot

be represented in court by a nonattorney officer). Consequently, the trial court’s

dismissal of ATT Security should have been without prejudice rather than with

prejudice. As this court stated in Kinasz v. S.W. Gen. Health Ctr., 8th Dist.

Cuyahoga No. 100182, 2014-Ohio-402, “[w]hen a non-attorney files a complaint in a court in violation of R.C. 4705.01,2 the court should dismiss the complaint without

prejudice.” Id. at ¶ 18, citing Williams v. Global Constr. Co., Ltd., 26 Ohio App.3d

119, 498 N.E.2d 500 (10th Dist.1985), paragraph two of the syllabus. The court

explained that “it would be ‘inconsistent’ for a court to hold that a nonattorney had

no authority to assert a claim on behalf of another, yet hold that the claim the

nonattorney had wrongfully attempted to assert on behalf of that party was, as a

result, subject to dismissal with prejudice.” Id., citing Williams at 121. Accordingly,

the trial court erred in dismissing ATT Security’s claims with prejudice.

With respect to the listing of “Keith Eckmeyer P.O.A.” on the

complaint as attorney of record, we note that a nonlawyer with a power of attorney

may not appear in court on behalf of another or otherwise practice law. Office of

Disciplinary Counsel v. Coleman, 88 Ohio St.3d 155, 158, 724 N.E.2d 402 (2000).

However, because only Arnoff signed the complaint and Keith Eckmeyer did not

sign in any capacity, we point out the error but need not address it in any way.

Accordingly, the first assignment of error is sustained in part and

overruled in part. The trial court’s judgment dismissing Arnoff’s claims with

prejudice is affirmed; the court’s judgment dismissing ATT Security’s claims with

2 R.C. 4705.01 provides that “[n]o person shall be permitted to practice as an

attorney and counselor at law, or to commence, conduct, or defend any action or proceeding in which the person is not a party concerned either by using or subscribing the person’s own name, or the name of another person, unless the person has been admitted to the bar by order of the Supreme Court in compliance with its prescribed and published rules.” prejudice is reversed and the matter is remanded for the trial court to enter

judgment dismissing ATT Security’s claims without prejudice.

B. Summary Judgment

In his second assignment of error, Arnoff contends that the trial court

should have granted summary judgment in his favor because PAJ did not answer

the complaint within 28 days as required by Civ.R. 12(A)(1). This argument is

without merit.

Civ.R. 12(B) provides that certain defenses, including “failure to state

a claim upon which relief can be granted,” may at the option of the pleader be made

by motion before pleading in response to a complaint. As this court has recognized,

“[t]he filing of a Civ.R. 12(B)(6) motion to dismiss is an alternative to answering the

complaint.” Cromartie v. Goolsby, 8th Dist. Cuyahoga No. 93448, 2010-Ohio-

2604, ¶ 14. Civ.R. 12(A) provides that if a party files a motion permitted by Civ.R.

12(B)(6), its time to answer the complaint is delayed until the court renders a

decision on the motion. Thus, because PAJ filed a Civ.R. 12(B)(6) motion to dismiss,

it was not required to answer the complaint until after the motion was decided. And

because the trial court granted PAJ’s motion, it was not required to answer the

complaint at all. The second assignment of error is therefore overruled.

In his third assignment of error, Arnoff contends that the trial court

should have granted summary judgment in his favor because PAJ did not answer

the interrogatories attached to his complaint. This argument is likewise without

merit. Civ.R. 37 allows a party whose discovery requests have not been

answered to file a motion to compel discovery responses but provides that such a

motion may be made only after the movant has made a good-faith effort to confer

with the party that has failed to respond. Civ.R. 37 further provides that the court

may grant the motion to compel and issue an order compelling discovery responses

and that if the order is ignored, the court may impose sanctions, including granting

a default judgment against the disobedient party.

The record contains nothing demonstrating that Arnoff made any

effort to obtain a response to his discovery requests, as required by Civ.R. 37, or that

he ever filed a motion to compel discovery. Without such a motion, there can be no

error in the trial court’s failure to impose any sanctions on PAJ. The third

assignment of error is overruled.

Judgment affirmed in part; reversed and remanded in part.

It is ordered that the parties share equally the costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate be sent to said court to carry this judgment

into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27

of the Rules of Appellate Procedure.

KATHLEEN ANN KEOUGH, PRESIDING JUDGE

LISA B. FORBES, J., and EILEEN T. GALLAGHER, J., CONCUR