Brock v. Cobblestone Park Dev. Group, L.L.C.

2024 Ohio 2949

• Court: Ohio Court of Appeals
• Decided: August 5, 2024
• Docket: 2023CA0064-M
• Status: Published

Opinion

[Cite as Brock v. Cobblestone Park Dev. Group, L.L.C., 2024-Ohio-2949.]

STATE OF OHIO ) IN THE COURT OF APPEALS )ss: NINTH JUDICIAL DISTRICT COUNTY OF MEDINA )

AMIE BROCK, et al. C.A. No. 2023CA0064-M

Appellants

v. APPEAL FROM JUDGMENT ENTERED IN THE COBBLESTONE PARK DEVELOPMENT COURT OF COMMON PLEAS GROUP, LLC, et al. COUNTY OF MEDINA, OHIO CASE No. 21CIV0488 Appellees

DECISION AND JOURNAL ENTRY

Dated: August 5, 2024

FLAGG LANZINGER, Judge.

{¶1} Amie Brock and Timothy Gacek appeal from the judgment of the Medina County

Court of Common Pleas. For the following reasons, this Court reverses.

I.

{¶2} According to their verified complaint, Brock and Gacek (“Homeowners”) each own

a home(s) in Cobblestone Park, a planned community located in Medina County. Cobblestone

Park is governed by the Cobblestone Park Homeowners Association, Inc. (the “HOA”).

Homeowners alleged that Cobblestone Park Development Group LLC (“CPDG”) was the

declarant of the HOA, and that Premier Property Management Group, LLC (“Premier”) was the

property manager for the HOA.

{¶3} In June 2021, Homeowners sued CPDG, Premier, and three board members of the

HOA (the “Defendant Board Members”) (in combination or collectively, the “Defendants”)

asserting claims for: (1) breach of contract against CPDG; (2) breach of contract against Premier; 2

(3) breach of fiduciary duty against the Defendant Board Members; and (4) negligence against the

Defendant Board Members. Homeowners’ claims were based upon allegations that the Defendants

wrongfully maintained control of the HOA, improperly expended HOA funds, and failed to

properly account for HOA funds or allow Homeowners access to the HOA’s books and records.

{¶4} In their complaint, Homeowners alleged that they were bringing their claims

derivatively on behalf of the HOA. To that end, Homeowners alleged that they made a demand

on the Board of the HOA to pursue claims against the Defendants, but that the Board did not act.

Homeowners also alleged that, even though they made a demand, it (and any further demand) was

futile since the Defendant Board Members held three out of the five seats on the Board.

Homeowners, therefore, alleged that they were pursuing these claims derivatively “in the name of

and for the benefit of the [HOA] to redress injuries suffered, and to be suffered, by the [HOA] . . .

.” Homeowners also asserted separate claims for declaratory judgment and preliminary and

permanent injunctive relief. Homeowners did not name the HOA as a party in the complaint.

{¶5} Instead of filing an answer, the Defendants requested and received multiple

extensions while the parties engaged in settlement discussions. This culminated in the parties

executing a “Settlement Term Sheet” on December 31, 2021. In it, the parties agreed that: (1) the

Defendant Board Members would resign from the Board; (2) Premier would resign as property

manager; and (3) Premier and the Defendant Board Members would turn over control of the

HOA’s finances and bank accounts. The parties also agreed to a process by which Homeowners

would review the records and identify challenged expenditures, and the Defendants would provide

explanations for those expenditures. The parties agreed that they would attempt to resolve any

disputed expenditures, as well as Homeowners’ claim for attorney’s fees. Additionally, the parties 3

agreed that they would submit any disputed claims and/or attorney’s fees to the court for

determination if they were unable to reach a compromise.

{¶6} Despite the purported settlement, discovery disputes arose between the parties. The

parties engaged in additional motion practice, including motions to enforce the Settlement Term

Sheet. The magistrate set the matter for a hearing on the pending motions.

{¶7} After the hearing, the magistrate denied the pending motions because “[t]he parties

reached an agreement to continue to independently (without Court intervention) work through the

pending issues related to the settlement agreement.” The magistrate then held several additional

case management conferences wherein the parties indicated that they were still working through

outstanding discovery/pre-trial issues.

{¶8} Several months later, the parties executed a stipulated jury waiver and consented to

a trial before the magistrate. The magistrate set the matter for a bench trial on March 7, 2023, and

ordered the parties to submit trial briefs. In their trial brief, Homeowners asserted that “the parties

in this case have agreed to a settlement.” Homeowners explained that the only two issues for the

court to determine at trial were: (1) “the amount of financial damage sustained by the [HOA];”

and (2) “the reasonableness of the attorneys fees that the Defendants (other than Premier) agreed

to pay.”

{¶9} About six weeks before trial, the Defendants filed their respective answers to

Homeowners’ complaint. Five days before the scheduled trial date, the Defendant Board Members

and Premier moved for judgment on the pleadings.

{¶10} In their motion for judgment on the pleadings, the Defendants argued that: (1) if

Homeowners intended to bring derivative claims, then they were required to name the HOA as a

plaintiff (which they did not) because the HOA was an indispensable party; (2) demand futility for 4

purposes of bringing derivative claims no longer existed because the Defendant Board Members

had resigned from the Board of the HOA; (3) Homeowners lacked standing; and (4) the trial court

could not award damages because any damages belonged to the HOA (a non-party), not

Homeowners. The Defendants also argued that, since Homeowners lacked standing, they also

lacked standing to add the HOA as a party. Thus, the Defendants argued that Homeowners could

not cure the defects in their complaint by adding the HOA as a plaintiff. This Court will briefly

address some of the Defendants’ arguments.

{¶11} Regarding Homeowners’ failure to name the HOA as a plaintiff, the Defendants

asserted that Homeowners brought their complaint in their individual capacities only, as evidenced

by the complaint’s caption, description of the parties, and prayer for relief. The Defendants

acknowledged that Homeowners alleged in their complaint that they were asserting derivative

claims on behalf of the HOA. They argued, however, that mere reference to seeking derivative

claims was insufficient to cure the defect of not naming the HOA as a plaintiff.

{¶12} Regarding demand futility, the Defendants asserted that, at the time Homeowners

filed their complaint, the Defendant Board Members comprised three-fifths of the Board, which

caused Homeowners to assert that any further demand on the Board would be futile. The

Defendants asserted that, per the Settlement Term Agreement executed in December 2021, the

Defendant Board Members resigned from the Board. Thus, the Defendants argued that demand

futility no longer existed as of December 2021.

{¶13} Regarding the lack of standing, the Defendants asserted that Homeowners lacked

standing to pursue a derivative action because they had not made a demand on the current Board

and, therefore, could not establish demand futility. 5

{¶14} On the day of the scheduled trial, Homeowners moved to amend their complaint

by interlineation. Specifically, Homeowners sought to add: (1) a claim for spoliation of evidence;

(2) a claim for breach of the parties’ settlement agreement; and (3) the HOA as a nominal plaintiff.

Regarding the latter, Homeowners asserted that the parties “have already settled the case[,]” but

that it was seeking to add the HOA as a nominal party “as a belt and suspenders approach[.]”

Homeowners argued that they had always pursued the underlying claims as derivative claims, and

that they were never seeking personal recovery from the Defendants. Homeowners concluded

that, while they “believe that the Complaint clearly identifies that the claims are being asserted

derivatively and the Defendants chose to settle those derivative claims, should the Court believe it

necessary, amendment by interlineation will resolve any objections that Defendants now assert.”

{¶15} In light of the “last minute” motion practice, the trial did not proceed as scheduled.

Instead, the magistrate set forth a briefing schedule for the parties to file responsive briefs, and

scheduled a non-oral hearing to address the pending motions. After the time for filing responsive

briefs expired, the HOA moved to intervene as a nominal plaintiff, which the Defendants opposed.

{¶16} In a combined judgment entry, the trial court granted the Defendants’ motion for

judgment on the pleadings, denied Homeowners’ motion to amend the complaint by interlineation,

and dismissed the case. The trial court denied the HOA’s motion to intervene when it denied

“[a]ny other pending motion not specifically ruled on herein . . . .” Homeowners now appeal,

raising three assignments of error for this Court’s review.

II.

ASSIGNMENT OF ERROR I

THE TRIAL COURT ERRED BY GRANTING APPELLEES’ MOTION FOR JUDGMENT ON THE PLEADINGS. 6

{¶17} In their first assignment of error, Homeowners argue that the trial court erred by

granting the Defendants’ motion for judgment on the pleadings. This Court agrees.

{¶18} Civ.R. 12(C) provides that “[a]fter the pleadings are closed but within such time as

not to delay the trial, any party may move for judgment on the pleadings.” “Under Civ.R. 12(C),

dismissal is appropriate where a court (1) construes the material allegations in the complaint, with

all reasonable inferences to be drawn therefrom, in favor of the nonmoving party as true, and (2)

finds beyond doubt, that the plaintiff could prove no set of facts in support of his claim that would

entitle him to relief.” Greer v. Finest Auto Wholesale, Inc., 2020-Ohio-3951, ¶ 16 (9th Dist.),

quoting Evanston Ins. Co. v. Procentury Ins. Co., 2019-Ohio-4214, ¶ 15 (9th Dist.).

{¶19} “A trial court’s determination on a motion for judgment on the pleadings is

restricted solely to the allegations in the pleadings, as well as the documents attached and

incorporated into the pleadings.” Green Tree Servicing, L.L.C. v. Olds, 2015-Ohio-3214, ¶ 22 (9th

Dist.). “It cannot be supported by facts outside those pleadings.” Hall v. Crystal Clinic, Inc.,

2017-Ohio-8471, ¶ 6 (9th Dist.), quoting Epperly v. Medina City Bd. of Edn., 64 Ohio App.3d 74,

75-76 (9th Dist. 1989).

{¶20} Here, the trial court stated that Homeowners “brought this matter as a derivative

suit because at the time of the filing, the defendants were in control of the [HOA] and refused to

bring suit despite demand.” It then stated that “it appears even the parties cannot agree on what

causes of action are pending before the Court and what causes of actions are actually settled in this

matter.” The trial court found that “to the extent the complaint in this matter actually remains

pending and the matter is not settled, the [HOA] would not be a nominal plaintiff, the [HOA]

would be the only plaintiff that would legally be permitted to recover damages in this matter.” The

trial court explained: 7

Even if [Homeowners] brought proper derivative claims at the time this matter was filed, the [HOA] became the proper party to pursue the claims once the defendants were no longer in control of the [HOA]. The [HOA] now has the ability to decide whether it wants to seek damages against the defendants that belong to the [HOA]. The defendants have not been in control of the [HOA] since December of 2021, and until recently, [Homeowners] made no attempts to amend the complaint. [Homeowners] cannot simply collect damages that belong to the [HOA] and then promise to deliver those sums to the [HOA] under the facts of this case as they exist today. Nor can the Court award damages to a non-party . . . . The defendants’ motion for judgment on the pleadings is granted. The claims in this matter belong to the [HOA] and the current plaintiffs cannot collect those damages on behalf of the [HOA].

{¶21} The trial court’s analysis reflects that it did not confine itself to the allegations in

the pleadings when it granted the Defendants’ motion for judgment on the pleadings. Instead, it

relied upon the fact that the parties eventually executed the Settlement Term Sheet, which required

the Defendant Board Members to resign from the Board. The trial court appears to have concluded

that Homeowners could no longer pursue their claims derivatively because demand futility has not

existed since 2021 (i.e., since the parties executed the Settlement Term Sheet). The trial court’s

failure to confine its analysis to the pleadings is reversible error. See Hall v. Crystal Clinic, Inc.,

2017-Ohio-8471, ¶ 7 (9th Dist.) (“[B]ecause a Civ.R. 12(C) motion is restricted solely to the

allegations in the pleadings, we conclude the trial court erred in granting the motion to dismiss

based upon facts outside of the pleadings.”).

{¶22} In reaching this conclusion, we note that the trial court’s judgment entry contains

no discernable analysis as to whether the Defendants were entitled to judgment on the pleadings

based upon the Defendants’ argument that the HOA was an indispensable party at the time

Homeowners filed their complaint (i.e., when demand futility existed). Instead, the only

discernable analysis contained within the trial court’s judgment entry was premised upon the

implications of the Settlement Term Sheet, which went well beyond the allegations in the

pleadings. The trial court’s failure to provide a discernable analysis as to Homeowners’ failure to 8

include the HOA as a party at the time they filed their complaint puts this Court in the position of

having to decide the merits the Defendants’ argument in that regard in the first instance, which this

Court will not do. In re Adoption of M.E.W., 2024-Ohio-234, ¶ 10 (9th Dist.). While our review

is de novo, this Court is a reviewing court; “we cannot make a determination regarding the merits

of an argument in the first instance.” Catalanotto v. Byrd, 2016-Ohio-2815, ¶ 12 (9th Dist.).

{¶23} Moreover, this Court notes that the trial court’s judgment entry contains no

reference to Civ.R. 12(C), R.C. 5312.13, or R.C. 5312.14 (the statutory framework relevant to

Homeowners’ claims), no discernable application of the Civ.R. 12(C) standard, and no citations to

legal authority in support of its conclusions, some of which appear internally inconsistent. For

example, the trial court indicated that it was granting the Defendants’ motion for judgment on the

pleadings, ostensibly finding that Homeowners could prove no set of facts in support of their

claims that would entitle them (individually or derivatively) to relief. Yet it later indicated that

Homeowners’ complaint was “dismissed as this matter is settled.” In doing so, the trial court did

not indicate which claims were settled, and elsewhere noted that “even the parties cannot agree on

what causes of action are pending before the Court and what causes of actions are actually settled

in this matter.” In short, the trial court’s failure to confine its analysis to the allegations in the

pleadings is compounded by the fact that its analysis is otherwise difficult to reconcile.

Inconsistencies aside, the trial court committed reversible error by relying upon facts outside of

the pleadings when granting the Defendants’ motion for judgment on the pleadings. Homeowners’

first assignment of error is sustained.

{¶24} We note that the trial court’s granting of the Defendants’ motion for judgment on

the pleadings and/or its determination that the parties settled their claims affected its other rulings, 9

including its ruling on Homeowners’ motion for leave to amend their complaint. As noted below,

any review of those rulings is now premature.

ASSIGNMENT OF ERROR II

THE TRIAL COURT ERRED IN DISMISSING THE CASE RATHER THAN MAKING THE ASSOCIATION A PARTY TO THE CASE EITHER BY GRANTING LEAVE TO AMEND THE COMPLAINT OR GRANTING THE ASSOCIATION’S REQUEST TO INTERVENE.

{¶25} In their second assignment of error, Homeowners argue that the trial court erred by

denying their motion for leave to amend the complaint. In light of this Court’s disposition of

Homeowners’ first assignment of error, this Court declines to address this argument on the basis

that it is premature.

{¶26} Homeowners also argue that the trial court erred by denying the HOA’s motion to

intervene. Homeowners, however, cannot pursue an appeal of that decision on behalf of the HOA.

Soliman v. Nawar, 2023-Ohio-3650, ¶ 9 (10th Dist.), quoting In re D.B., 2019-Ohio-4439, ¶ 16

(10th Dist.) (“An appellant cannot raise issues on another’s behalf, especially when that [other]

party could have appealed the issues appellant posits.”).

{¶27} In light of the foregoing, Homeowners’ second assignment of error is overruled.

ASSIGNMENT OF ERROR III

THE TRIAL COURT ERRED BY DENYING APPELLANTS’ REQUEST TO ADD CLAIMS FOR SPOLIATION AND BREACH OF THE SETTLEMENT AGREEMENT.

{¶28} In their third assignment of error, Homeowners argue that the trial court erred by

denying their request to add claims to their complaint. In light of this Court’s disposition of

Homeowners’ first assignment of error, this Court declines to address Homeowners’ third

assignment of error on the basis that it is premature. Homeowners’ third assignment of error is

overruled on that basis. 10

III.

{¶29} Homeowners’ first assignment of error is sustained. Homeowners’ second and

third assignments of error are overruled. The judgment of the Medina County Court of Common

Pleas is reversed.

Judgment reversed.

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 Medina, 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 instructed to

mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the

docket, pursuant to App.R. 30.

Costs taxed to Appellees.

JILL FLAGG LANZINGER FOR THE COURT

STEVENSON, P. J. SUTTON, J. CONCUR. 11

APPEARANCES:

ROBERT D. KEHOE and KEVIN P. SHANNON, Attorneys at Law, for Appellants.

JON W. OEBKER, Attorney at Law, for Appellees.

LESLEY A. WEIGAND, Attorney at Law, for Appellee.

MICHAEL J. MATASICH, Attorney at Law, for Appellee.