[Cite as David Rentals, L.L.C. v. Virginia Woods, L.L.C., 2024-Ohio-1446.]
IN THE COURT OF APPEALS FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO
DAVID RENTALS, LLC, d.b.a. RAW : APPEAL NO. C-230374 PROPERTY MANAGEMENT, TRIAL NO. A-1703941 : Plaintiff-Appellee/Cross- Appellant, : O P I N I O N. vs. :
VIRGINIA WOODS, LLC, :
and :
CYPRESS WOODS, LLC, :
Defendants-Appellants/Cross- : Appellees, : and : LAKONA HOLDINGS, LTD, et al.,
Defendants. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed in Part, Reversed in Part, and Cause Remanded
Date of Judgment Entry on Appeal: April 17, 2024 OHIO FIRST DISTRICT COURT OF APPEALS
Flagel & Papakirk, LLC, Gregory E. Hull and James Papakirk, for Plaintiff- Appellee/Cross-Appellant,
Finney Law Firm, Christopher P. Finney and Casey A. Jones, for Defendants- Appellants/Cross-Appellees.
2 OHIO FIRST DISTRICT COURT OF APPEALS
WINKLER, Judge.
{¶1} In this property-management dispute, defendants-appellants/cross-
appellees Virginia Woods, LLC, and Cypress Woods, LLC, (collectively “Virginia
Woods”) appeal the judgment of the trial court ordering them to pay damages and
attorney’s fees to their former property-management company, plaintiff-
appellee/cross-appellant David Rentals, LLC, doing business as RAW Property
Management (“RAW”). Virginia Woods also appeals the dismissal of its counterclaims
for slander of title and breach of fiduciary duty. RAW cross-appeals that portion of
the trial court’s judgment determining that RAW owes damages to Virginia Woods for
mishandled security deposits and undelivered pest-control materials and failing to
award prejudgment interest. For the reasons set forth below, we reverse the trial
court’s judgment dismissing Virginia Woods’ slander-of-title counterclaim and its
judgment awarding damages to RAW, which failed to show that it acted as a licensed
real estate broker under R.C. 4735.21.
Background
{¶2} In 2014, RAW entered into a property-management contract (“PMC”)
with Virginia Woods regarding the management of two, separate apartment
complexes located on Rockdale Avenue. The relationship between RAW and Virginia
Woods eventually deteriorated, and RAW filed a mechanic’s lien against Virginia
Woods’ property in September 2016. In July 2017, RAW filed a complaint against
Virginia Woods. Relevant to this appeal, RAW alleged that Virginia Woods had failed
to pay RAW management fees as required under the PMC, and that Virginia Woods
terminated the PMC without the required 60 days’ notice.
3 OHIO FIRST DISTRICT COURT OF APPEALS
{¶3} Virginia Woods filed a counterclaim against RAW, which alleged
relevant to this appeal, that RAW had breached the PMC by failing to deposit all
tenants’ security deposits and rent into the appropriate account owned by Virginia
Woods and by hiring an onsite caretaker for the property. Virginia Woods also filed
counterclaims against RAW for breach of fiduciary duty and for slander of title with
regard to RAW’s mechanic’s lien.
{¶4} Prior to trial, the trial court dismissed Virginia Woods’ slander-of-title
counterclaim. Virginia Woods then made a cash deposit with the clerk of courts to
release RAW’s mechanic’s lien and filed a motion for leave to file a supplemental
counterclaim for slander of title. The trial court permitted Virginia Woods to file the
supplemental counterclaim, and the trial court entered an order releasing the
mechanic’s lien.
{¶5} The matter eventually proceeded to trial before the magistrate. During
trial, RAW filed a motion to dismiss Virginia Woods’ supplemental slander-of-title
counterclaim on statute-of-limitations grounds, which the trial court granted. At the
close of all evidence, the magistrate determined that Virginia Woods materially
breached the PMC by terminating it without giving RAW the required 60 days’ notice.
As a result, the magistrate determined that RAW was entitled to two months of
property-management fees under Section 10 of the PMC, in the amount of $5,390.
The magistrate further determined that RAW was entitled to recover $33,064.28 from
Virginia Woods, LLC, and $898.38 from Cypress Woods, LLC, for unpaid fees and
commissions. With respect to Virginia Woods’ counterclaims, the magistrate
determined that RAW had wrongfully withheld security deposits from Virginia Woods
in the amount of $10,120, and that RAW owed Virginia Woods $685 for pest-control
4 OHIO FIRST DISTRICT COURT OF APPEALS
materials that RAW failed to deliver. The magistrate also awarded RAW its attorney’s
fees as provided for in the PMC after the magistrate found RAW to be the prevailing
party in the action.
{¶6} Virginia Woods and RAW filed objections to the magistrate’s decision.
The trial court overruled the parties’ objections and adopted the decision of the
magistrate. Virginia Woods appealed and RAW cross-appealed. This court dismissed
the appeal and cross-appeal for lack of a final, appealable order. The trial court
entered another order overruling the objections and adopting the magistrate’s
decision. The parties again filed an appeal and a cross-appeal. This court dismissed
the appeal and cross-appeal for a second time because the trial court had awarded
RAW its attorney’s fees without determining the amount of fees. The trial court then
ordered Virginia Woods to pay RAW its attorney’s fees in the amount of $134,354.90.
This third appeal and cross-appeal ensued.
Virginia Woods’ Appeal
1. Supplemental Counterclaim for Slander of Title
{¶7} In its first assignment of error, Virginia Woods argues that the trial
court erred in dismissing its supplemental counterclaim for slander of title.
{¶8} Virginia Woods filed a counterclaim for slander of title with its original
answer and counterclaim on the basis that RAW had wrongfully filed a mechanic’s lien
against Virginia Woods’ property. The trial court dismissed Virginia Woods’
counterclaim prior to trial. The trial court later permitted Virginia Woods to file a
supplemental counterclaim after it posted a cash deposit with the clerk of courts and
moved the court for an order releasing the mechanic’s lien, so that Virginia Woods
could sell its property with clear title. Virginia Woods alleged in its supplemental
5 OHIO FIRST DISTRICT COURT OF APPEALS
counterclaim that RAW’s wrongful lien imposed an impediment to selling its property
and it suffered damages in the form of attorney’s fees.
{¶9} During trial, RAW moved to dismiss Virginia Woods’ supplemental
counterclaim for slander of title on the basis that it had been filed outside the one-year
statute of limitations. RAW’s mechanic’s lien was recorded on September 22, 2016,
and although the original complaint was filed on July 26, 2017, the supplemental
counterclaim was not deemed filed until August 24, 2018. The trial court dismissed
Virginia Woods’ slander-of-title counterclaim as falling outside the statute of
limitations.
{¶10} The dismissal of a claim on statute-of-limitations grounds presents a
question of law that we review de novo. Potter v. Cottrill, 4th Dist. Vinton No.
11CA685, 2012-Ohio-2417, ¶ 9. Both parties agree that the statute of limitations for a
slander-of-title action is one year. See R.C. 2305.11(A); Metzler v. Fifth Third Bank,
10th Dist. Franklin No. 16AP-638, 2017-Ohio-7088, ¶ 13. A cause of action for slander
of title accrues when the allegedly wrongful document is filed with the recorder’s
office, even if the full extent of the damages is not yet known. Smith Elec. v. Rehs, 9th
Dist. Summit No. 18433, 1998 Ohio App. LEXIS 537, 6 (Feb. 18, 1998).
{¶11} Virginia Woods’ original counterclaim for slander of title was timely
filed within one year of the recorded mechanic’s lien, but the parties dispute whether
Virginia Woods’ supplemental counterclaim, which was filed outside of the one-year
lien date, relates back to the date of its original counterclaim.
{¶12} Civ.R. 15 governs both amended and supplemental pleadings. Civ.R.
15(C) addresses whether amended pleadings can relate back to the original pleading,
and it provides that “[w]henever the claim or defense asserted in the amended
6 OHIO FIRST DISTRICT COURT OF APPEALS
pleading arose out of the conduct, transaction, or occurrence set forth or attempted to
be set forth in the original pleading, the amendment relates back to the date of the
original pleading.”
{¶13} Civ.R. 15(E) addresses supplemental pleadings and permits a party,
upon motion and court approval, “to serve a supplemental pleading setting forth
transactions or occurrences or events which have happened since the date of the
pleading sought to be supplemented. Permission may be granted even though the
original pleading is defective in its statement of a claim for relief or defense.”
{¶14} Civ.R. 15 does not explicitly answer the question of whether the relation-
back provision that applies to amendments of pleadings under Civ.R. 15(C) also
applies to supplemental pleadings. However, the staff notes to Civ.R. 15(E) support
the notion that a supplemental claim relates back to the original claim. The staff notes
to Civ.R. 15(E) explain that a supplemental pleading is a continuation of the original
pleading and permits a party to allege facts that have occurred since the original
pleading. “The purpose of [Civ.R. 15(E)] is to avoid the necessity of filing a new
complaint even though events occurring subsequent to the filing of the original
complaint and relating to the operative facts of the original complaint have made clear
the right to relief.” See Staff Note to Civ.R. 15(E).
{¶15} Moreover, federal cases interpreting the federal counterpart to Civ.R.
15(E), Fed.R.Civ.P. 15(d), have held that a supplemental pleading should generally
relate back to the original pleading. See Bromley v. Michigan Educ. Assn.-NEA, 178
F.R.D. 148, 156 (E.D.Mich.1998), relying on Davis v. Piper Aircraft Corp., 615 F.2d
606, 609 (4th Cir.1980), fn. 3; T Mobile Northeast LLC v. City of Wilmington, 913
F.3d 311, 327 (3d Cir.2019) (“[E]ven though Rule 15(d) is in a separate statutory
7 OHIO FIRST DISTRICT COURT OF APPEALS
provision from Rule 15(c), a supplemental complaint can relate back.”). Therefore, we
hold that that supplemental pleadings under Civ.R. 15(E) relate back to the date of
original pleadings.
{¶16} Given that supplemental pleadings filed under Civ.R. 15(E) relate back
to the original pleading as would an amendment to a pleading filed under Civ.R. 15(C),
Virginia Woods’ supplemental counterclaim filed in August 2018 relates back to its
original counterclaim filed in August 2017.
{¶17} RAW makes the argument that Virginia Woods’ supplemental slander-
of-title counterclaim should not relate back to its original counterclaim because the
trial court dismissed the original counterclaim prior to the filing of the supplemental
counterclaim. We disagree. Civ.R. 15(E) specifically provides that a court may grant
a supplemental pleading “even though the original pleading is defective in its
statement of a claim for relief or defense.” Furthermore, although the trial court
dismissed Virginia Woods’ original counterclaim, it also permitted, over RAW’s
objection, the filing of a supplemental counterclaim. The trial court’s decision to
dismiss the original counterclaim for slander of title could be revisited, because that
decision was an interlocutory order and thereby subject to revision prior to final
judgment. See Littleton v. Holmes Siding Contr., Ltd., 10th Dist. Franklin No. 13AP-
138, 2013-Ohio-5602, ¶ 6 (interlocutory orders not immediately appealable are
subject to revision any time prior to final judgment).
{¶18} Therefore, because Virginia Woods’ supplemental slander-of-title
counterclaim related back to the date of its original counterclaim, the trial court erred
in dismissing Virginia Woods’ supplemental counterclaim on statute-of-limitations
grounds. We sustain Virginia Woods’ first assignment of error.
8 OHIO FIRST DISTRICT COURT OF APPEALS
2. Material Breach of Contract
{¶19} In its second assignment of error, Virginia Woods argues that the trial
court erred in determining that it had materially breached the PMC.
{¶20} Whether a party has materially breached a contract is generally a
question of fact, and an appellate court applies a manifest-weight-of-the-evidence
standard of review to a trial court’s determination after a bench trial. Investor Support
Servs., LLC v. Dawoud, 12th Dist. Warren No. CA2020-09-060, 2021-Ohio-2293, ¶
22. “[A] ‘material breach’ of contract is a party’s failure to perform an element of the
contract that is ‘so fundamental to the contract’ that the single failure to perform
‘defeats the essential purpose of the contract or makes it impossible for the other party
to perform.’ ” O’Brien v. Ohio State Univ., 10th Dist. Franklin No. 06AP-946, 2007-
Ohio-4833, ¶ 56, quoting 23 Williston on Contracts, Section 63:3 (4th Ed.1990).
{¶21} The trial court determined that Virginia Woods materially breached the
PMC when Virginia Woods’ managing member, Jason Purden, emailed RAW and
terminated RAW’s management duties under the PMC without the required 60 days’
notice.
{¶22} Virginia Woods argues that RAW repeatedly breached the PMC first by
depositing tenants’ security deposits into RAW’s escrow account instead of the
designated bank accounts owned by Virginia Woods. RAW does not dispute that the
PMC required RAW to deposit all security deposits into Virginia Woods’ accounts, nor
does RAW dispute that it violated the PMC’s terms, instead RAW argues that Virginia
Woods waived this requirement by allowing RAW to deposit checks into its own
account for a period of years without objection. The trial court found, and the record
supports, that RAW deposited some tenants’ checks into its own escrow account
9 OHIO FIRST DISTRICT COURT OF APPEALS
almost from the outset of the parties’ dealings, and that Virginia Woods continued its
relationship with RAW despite RAW’s actions. Therefore, the trial court’s
determination that RAW did not materially breach the PMC by depositing tenants’
checks into RAW’s escrow account is not against the manifest weight of the evidence.
{¶23} Virginia Woods also argues that RAW anticipatorily repudiated the
PMC when RAW notified Virginia Woods that RAW would no longer perform
emergency repairs to the properties. “Where one party to a contract refuses to perform
under the terms of the contract, an anticipatory repudiation is said to occur.”
Southeast Land Dev., Ltd. v. Primrose Mgmt., L.L.C., 193 Ohio App.3d 465, 2011-
Ohio-2341, 952 N.E.2d 563, ¶ 7 (3d Dist.). “If an anticipatory breach of contract is
found to occur, the injured party has the option of either terminating the contract and
suing the breaching party immediately or continuing the contract and suing the
breaching party for damages after the time for performance has passed.” Id., citing 18
Ohio Jurisprudence 3d, Contracts, Section 238 (2011).
{¶24} In rejecting Virginia Woods’ anticipatory-repudiation argument, the
trial court found that RAW and Virginia Woods communicated repeatedly regarding
the failure of Virginia Woods to pay obligations in a timely manner. In July 2016,
Virginia Woods requested that RAW perform maintenance work to several apartment
units that had failed inspection by city housing authorities, and although this work was
outside the scope of the PMC, RAW performed the work. Virginia Woods failed to pay
the entire amount owed to RAW, and RAW eventually sent an email to Purden that
outlined the delinquent financial issues, and also a proposed way to continue the
business relationship. Purden did not respond. RAW then sent an email to Purden
explaining that it could no longer perform repair work, which would require RAW to
10 OHIO FIRST DISTRICT COURT OF APPEALS
extend further credit to Virginia Woods. RAW still performed its required
management duties under the PMC and continued to keep Purden advised of any
issues. Purden then terminated the PMC without giving RAW 60 days’ notice.
Therefore, because RAW attempted to reach an agreement with Purden regarding
their financial disagreements and continued to provide management oversight, the
trial court did not err in determining that RAW’s refusal to perform further repair
work did not amount to an anticipatory repudiation of the PMC.
{¶25} Based on the testimony presented at trial, the trial court’s determination
that Virginia Woods materially breached the PMC by terminating it without 60 days’
notice is not against the manifest weight of the evidence.
{¶26} We overrule Virginia Woods’ second assignment of error.
3. Unlicensed Real Estate Broker
{¶27} In its third assignment of error, Virginia Woods argues that the trial
court erred in awarding damages to RAW because RAW performed property-
management duties under the PMC as an unlicensed real estate broker.
{¶28} Only a licensed real estate broker can obtain legal recovery for broker
activities under R.C. 4735.21, which provides: “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.”
{¶29} RAW does not dispute the fact that it failed to prove at trial that it was
a licensed real estate broker, but instead RAW makes a statutory-construction
argument that it is exempt from R.C. 4735.21 because it is a limited liability company,
11 OHIO FIRST DISTRICT COURT OF APPEALS
which is not expressly mentioned in R.C. 4735.21. The trial court agreed with RAW’s
argument and determined that RAW, as a limited liability company, was not bound by
R.C. 4735.21.
{¶30} Whether RAW, as a limited liability company, is bound by R.C. 4735.21
is a legal question that we review de novo. See Wray v. Gahm Properties, 2018-Ohio-
50, 103 N.E.3d 148, ¶ 8 (4th Dist.) (issues of statutory construction are reviewed de
novo).
{¶31} Courts have strictly interpreted R.C. 4735.21 to hold that only a licensed
real estate broker can maintain an action for broker activities. Jones v. Sittineasy
L.L.C., 8th Dist. Cuyahoga No. 103294, 2016-Ohio-712, ¶ 8.
{¶32} R.C. 4735.01(A) defines a “real estate broker” as follows:
[A]ny person, partnership, association, limited liability company,
limited liability partnership, or corporation * * * who for another,
whether pursuant to a power of attorney or otherwise, and who for a fee,
commission, or other valuable consideration, or with the intention, or
in the expectation, or upon the promise of receiving or collecting a fee,
commission, or other valuable consideration does any of the following:
(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;
(3) Lists, or offers, attempts, or agrees to list, or auctions, or offers,
attempts, or agrees to auction, any real estate;
***
12 OHIO FIRST DISTRICT COURT OF APPEALS
(5) Operates, manages, or rents, or offers or attempts to operate,
manage, or rent, other than as custodian, caretaker, or janitor, any
building or portions of buildings to the public as tenants;
(6) Advertises or holds self out as engaged in the business of selling,
exchanging, purchasing, renting, or leasing 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[.]
{¶33} R.C. 4735.21 does not expressly list a limited liability company among
the entities prohibited from seeking recovery for broker activities without first proving
it has a valid real estate license; however, R.C. 4735.21 does apply to any “person.”
R.C. Chapter 4735 does not specifically define “person” for purposes of the chapter.
R.C. Chapter 1701, governing general corporate law, defines “person” to include a
“limited liability company.” R.C. 1701.01(G). At least one other court has looked to
the statutes governing corporate law when defining “person” used in another statutory
context. See City of Cleveland v. Go Invest Wisely, L.L.C., 8th Dist. Cuyahoga Nos.
95189, 95190, 95191, 95192, 95193, 95194, 95195, 95196, 95197, 95198, 95199, 95200,
95201, 95202, 95203, 95204, 95205 and 95206, 2011-Ohio-3410, ¶ 17-18 (appellate
court rejected the argument of a limited liability company that it could not be found
guilty under a city ordinance that prohibits a “person, agent, firm or corporation” from
selling real property without furnishing a certificate of disclosure because the court
relied on former R.C. 1705.01(K) defining a “person” to include a limited liability
company).
13 OHIO FIRST DISTRICT COURT OF APPEALS
{¶34} Therefore, we hold that a limited liability company is a “person” for
purposes of R.C. 4735.21 and cannot seek recovery for broker activities without first
proving that it has a valid real estate license under R.C. Chapter 4735.
{¶35} Our holding that a limited liability company is bound by R.C. 4735.21
and cannot recover for broker activities without first proving that it holds a valid real
estate license is consistent with the plain language of R.C. 4735.21, and to hold
otherwise and exclude a limited liability company from the dictates of R.C. 4735.21
would lead to an absurd result. “[W]hen the General Assembly enacts a statute, it does
not intend to produce an absurd result.” State ex rel. Clay v. Cuyahoga Cty. Med.
Examiner’s Office, 152 Ohio St.3d 163, 2017-Ohio-8714, 94 N.E.3d 498, ¶ 22, citing
R.C. 1.47(C). R.C. Chapter 4735 governing real estate brokers clearly applies to limited
liability companies. See R.C. 4735.01(A) (defining a “real estate broker” to include a
“limited liability company”); R.C. 4735.02(A) (including a limited liability company
among the entities required to obtain a real estate broker license). Given that R.C.
Chapter 4735 generally applies to limited liability companies, to hold that a limited
liability company can evade real estate licensing requirements and still pursue legal
recovery for broker activities in contravention of R.C. 4735.21 cannot be a result
intended by the legislature.
{¶36} At trial, RAW did not provide any proof that it acted as a licensed real
estate broker, and therefore, it cannot recover damages for broker activities under R.C.
4735.21. Because the trial court determined that R.C. 4735.21 did not apply to RAW,
we cannot discern what portion of RAW’s damages for breach of the PMC related to
broker activities under R.C. 4735.01. Therefore, we sustain Virginia Woods’ third
14 OHIO FIRST DISTRICT COURT OF APPEALS
assignment of error to the extent that any damages awarded to RAW relate to broker
activities under R.C. 4735.01.
4. Breach of Fiduciary Duty
{¶37} In its fourth and fifth assignments of error, Virginia Woods argues that
the trial court erred in determining that RAW owed no fiduciary duty to Virginia
Woods and in dismissing its breach-of-fiduciary-duty counterclaim against RAW.
{¶38} Virginia Woods contends that RAW is a fiduciary under R.C. 4735.62,
because it acted as a licensed real estate broker. As stated under the third assignment
of error above, no proof exists that RAW acted as a licensed real estate broker.
Therefore, R.C. 4735.62 does not apply.
{¶39} Virginia Woods argues that even if RAW is not bound by a statutory
fiduciary duty, RAW owed a fiduciary duty to Virginia Woods based on RAW’s role as
a property manager. Under the PMC, RAW agreed “to promote the interest of the
Owner [Virginia Woods] with the most good faith, loyalty, and fidelity[.]” Virginia
Woods contends that RAW breached its fiduciary duties by (1) misappropriating funds
owed to Virginia Woods, (2) charging Virginia Woods for finding the caretaker for the
property as a tenant and also for the caretaker’s labor, and (3) hiring the caretaker,
despite knowing his status as a registered sex offender.
{¶40} In order to succeed on a breach-of-fiduciary-duty claim, a claimant
must show: “(1) the existence of a duty arising from a fiduciary relationship, (2) the
failure to observe the duty, and (3) an injury proximately resulting.” Vontz v. Miller,
2016-Ohio-8477, 111 N.E.3d 452, ¶ 28 (1st Dist.).
{¶41} In determining whether a fiduciary relationship exists, “the main
question is whether a party agreed to act primarily for the benefit of another in matters
15 OHIO FIRST DISTRICT COURT OF APPEALS
connected with its undertaking.” Hope Academy Broadway Campus v. White Hat
Mgt., L.L.C., 145 Ohio St.3d 29, 2015-Ohio-3716, 46 N.E.3d 665, ¶ 43. The Supreme
Court defines a fiduciary relationship “as one ‘in which special confidence and trust is
reposed in the integrity and fidelity of another and there is a resulting position of
superiority or influence, acquired by virtue of this special trust.’ ” Id., quoting In re
Termination of Emp. of Pratt, 40 Ohio St.2d 107, 115, 321 N.E.2d 603 (1974).
{¶42} Assuming for the sake of this appeal that RAW, the property manager,
owed fiduciary duties to Virginia Woods, the property owner, Virginia Woods has
failed to show that the trial court’s decision dismissing the breach-of-fiduciary-duty
counterclaim after trial was against the manifest weight of the evidence. With regard
to RAW’s placement of a registered sex offender as the caretaker at the property,
Virginia Woods argues that RAW placed tenants in danger, but this argument is
merely conjecture. Virginia Woods failed to produce any evidence at trial to show that
the caretaker’s placement caused any injury. Virginia Woods also argues that RAW
engaged in self-dealing by charging Virginia Woods a commission for finding the
caretaker as a tenant, and also by charging Virginia Woods for the caretaker’s labor.
As the trial court determined, Virginia Woods would have been responsible under the
PMC to find tenants and to hire maintenance workers for the properties, and it just so
happened that RAW found one person to fill both roles. Therefore, Virginia Woods
has failed to show that the caretaker’s pay arrangement caused injury.
{¶43} Finally, Virginia Woods argues that RAW’s mishandled security
deposits constituted a breach of fiduciary duty. The trial court awarded Virginia
Woods $10,120 on its breach-of-contract claim for the mishandled security deposits,
and Virginia Woods has not alleged damages separate from its breach-of-contract
16 OHIO FIRST DISTRICT COURT OF APPEALS
claim. Therefore, Virginia Woods is not entitled to double recovery, and it has not
shown that RAW acted with actual malice such that punitive damages would be
appropriate. See Blair v. McDonagh, 177 Ohio App.3d 262, 2008-Ohio-3698, 894
N.E.2d 377, ¶ 65 (1st Dist.) (“An award of punitive damages may be appropriate on a
claim for breach of fiduciary duty upon a showing of malice.”). We conclude that the
trial court did not err in dismissing Virginia Woods’ breach-of-fiduciary-duty
counterclaim against RAW after trial.
{¶44} We overrule Virginia Woods’ fourth and fifth assignments of error.
5. Prevailing Party Attorney’s Fees
{¶45} In its sixth assignment of error, Virginia Woods argues that the trial
court erred in awarding RAW its attorney’s fees.
{¶46} Generally, a party cannot recover its attorney’s fees in an action, but an
exception exists where the contract between the parties provides for fee shifting.
United States Fire Ins. v. Am. Bonding Co., 1st Dist. Hamilton Nos. C-160307 and C-
160317, 2016-Ohio-7968, ¶ 47. Here, the PMC allowed RAW to seek an award of
attorney’s fees if RAW is the “prevailing party” in an action brought by RAW. A
prevailing party is generally one in whose favor the decision or verdict is rendered and
judgment entered. Keal v. Day, 164 Ohio App.3d 21, 2005-Ohio-5551, 840 N.E.2d
1139, ¶ 8 (1st Dist.).
{¶47} Because this court has determined that the trial court erred in
dismissing Virginia Woods’ slander-of-title counterclaim and erred in failing to apply
R.C. 4735.21 to RAW, the trial court must reconsider on remand whether RAW
remains a “prevailing party” under the PMC and Ohio law.
17 OHIO FIRST DISTRICT COURT OF APPEALS
{¶48} Therefore, we decline to address Virginia Woods’ sixth assignment of
error.
RAW’s Cross-Appeal
1. Mishandled Security Deposits
{¶49} In its first cross-assignment of error, RAW argues that the trial court
erred in determining that RAW breached the PMC by depositing tenants’ security
deposits into RAW’s escrow accounts instead of Virginia Woods’ bank account.
Relatedly, in RAW’s second cross-assignment of error, RAW argues that the trial court
erred in determining that Virginia Woods was entitled to $10,120 for the mishandled
security deposits.
{¶50} Contract modification can occur where the parties mutually intend to
modify the contract through their course of dealing. Third Fed. S. & L. Assn. of
Cleveland v. Formanik, 8th Dist. Cuyahoga Nos. 100562 and 100810, 2014-Ohio-
3234, ¶ 13. Along with mutual assent, a modification of a contract must also be
supported by consideration. RotoSolutions, Inc. v. Crane Plastics Siding, LLC, 10th
Dist. Franklin Nos. 13AP-1 and 13AP-52, 2013-Ohio-4343, ¶ 16. By contrast, waiver of
a contract term occurs when a party voluntary relinquishes its right to enforce a
contract term. EAC Properties, LLC v. Brightwell, 10th Dist. Franklin No. 10AP-853,
2011-Ohio-2373, ¶ 21.
{¶51} Section 2 of the PMC provides that “[a]ll amounts collected shall be
deposited into the Owner’s designated bank accounts for each building.” RAW argues
that the parties either modified or waived the requirement that any collected amount
be deposited in accounts held by Virginia Woods.
18 OHIO FIRST DISTRICT COURT OF APPEALS
{¶52} RAW admits that some tenants’ security deposits were placed into its
own escrow account, and that RAW used a portion of those funds to pay Virginia
Woods’ debts. Although RAW admits to these actions, RAW argues that Purden
acquiesced in RAW’s actions because he received monthly financial statements that
included these transactions, and he requested and received a separate accounting of
RAW’s escrow account. RAW also argues that its actions were authorized by Section
5 of the PMC, which stated “[a]ny deficiency in funds owed by Owner shall be
considered a loan subject to repayment with interest, and Owner hereby agrees to
reimburse agent, including interest and hereby authorizes agent to deduct such
amounts from any future collected monies due Owner.” Finally, RAW argues that the
evidence it presented at trial showed that $4,281 from the escrow account was used to
reimburse a tenant’s security deposit and to offset amounts Virginia Woods owed to
RAW.
{¶53} The trial court rejected RAW’s modification and waiver arguments with
regard to Section 2 of the PMC. The trial court reasoned that the parties had crossed
out and initialed a provision in Section 2 of the PMC that stated: “Funds in the escrow
account remain the property of the owner and are subject to disbursement of expenses
by agent as described in this agreement.” Furthermore, Jonathan Roth, RAW’s
managing member, admitted at trial that the PMC did not authorize RAW to hold
funds in its own escrow account. Roth also admitted that Purden was “surprised” to
learn that RAW had been withholding some of the deposits.
{¶54} Therefore, the trial court’s determination that RAW breached the PMC
by mishandling security deposits owed to Virginia Woods in the amount of $10,120
was not against the manifest weight of the evidence presented at trial.
19 OHIO FIRST DISTRICT COURT OF APPEALS
{¶55} We overrule RAW’s first and second cross-assignments of error.
2. Pest-Control Materials
{¶56} In its third cross-assignment of error, RAW argues that the trial court
erred in finding that Virginia Woods was entitled to a “set off” for undelivered pest-
control materials.
{¶57} At trial, Roth testified that when he ordered materials for the Virginia
Woods properties, he would typically have them delivered to his personal residence.
Roth recalled ordering the pest-control materials and having them delivered to his
home. Roth testified that he took the materials to the Virginia Woods properties, but
the materials were ordered and delivered around the time that Purden officially
terminated the PMC. Roth admitted that the unused pest-control materials
“presumably” ended up at RAW’s office after Purden terminated the parties’
relationship. Purden testified that he did not receive the materials.
{¶58} The trial court’s determination that RAW owed Virginia Woods $685
for pest-control materials is not against the manifest weight of the evidence.
{¶59} We overrule RAW’s third cross-assignment of error.
3. Prejudgment Interest
{¶60} In its fourth cross-assignment of error, RAW argues that the trial court
erred in failing to award prejudgment interest.
{¶61} RAW contends that the trial court erred in failing to award prejudgment
interest as provided for in the PMC and in R.C. 1343.03(A). RAW did not file a motion
for prejudgment interest at the conclusion of the trial, although it did mention in its
objections to the magistrate’s decision that the magistrate had failed to order
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prejudgment interest. Moreover, on remand, the trial court can determine whether
RAW may be entitled to prejudgment interest.
{¶62} We overrule RAW’s fourth cross-assignment of error.
Conclusion
{¶63} In conclusion, we affirm the trial court’s dismissal of Virginia Woods’
breach-of-fiduciary counterclaim, and we also affirm that portion of the trial court’s
judgment awarding Virginia Woods damages with regard to its counterclaims for
mishandled security deposits and undelivered pest-control materials. We reverse the
trial court’s judgment with respect to the dismissal of Virginia Woods’ slander-of-title
counterclaim on statute-of-limitations grounds, and we remand that portion of the
judgment for further proceedings. We also reverse that portion of the trial court’s
judgment awarding RAW money damages for Virginia Woods’ breach of the PMC, to
the extent that these damages result from RAW’s actions in undertaking real estate
broker activities under R.C. 4735.01, and we remand the matter to the trial court to
determine what portion of these damages are recoverable under R.C. 4735.21.
Judgment affirmed in part, reversed in part, and cause remanded.
BOCK, P.J., concurs. BERGERON, J., concurs in part and dissents in part.
BERGERON, J., concurring in part and dissenting in part.
{¶64} I respectfully dissent from the majority’s conclusion reading “limited
liability corporation” into a statute where it is glaringly, albeit perplexingly, absent.
Because R.C. 4735.21, by its plain text, excludes limited liability companies (“LLCs”)
from the requirement that only real estate broker licensees can recover damages for
real estate broker-related activities, I would hold that RAW was entitled to recover
21 OHIO FIRST DISTRICT COURT OF APPEALS
damages for those activities regardless of its licensee status. I otherwise concur in the
majority opinion on all other matters.
{¶65} Throughout R.C. Chapter 4735, the General Assembly repeatedly
includes the term “limited liability company” when listing the types of entities bound
by the code’s terms. For instance, R.C. 4735.01 defines “Real estate broker” as “any
person, partnership, association, limited liability company, limited liability
partnership, or corporation, foreign or domestic” who engages in real estate broker-
related activities. R.C. 4735.02 features the same list in requiring such entities to be
licensed as real estate brokers. R.C. 4735.03 again uses the same terms in listing the
entities subject to regulation by the Ohio Real Estate Commission.
{¶66} I could go on, but skipping ahead to R.C. 4735.21, governing rights of
action for real estate broker-related activities, LLCs simply drop off the list. The list
of entities that need a real estate broker license to recover for real estate broker-related
activities reads: “No right of action shall accrue to any person, partnership,
association, or corporation * * *.” (Emphasis added.) R.C. 4735.21. Reading this
statute as the General Assembly wrote it, in the context of the full chapter and the
Revised Code as a whole, LLCs are exempted from needing a license to bring an action
for real estate broker-related activities.
{¶67} To get around this omission, the majority opinion borrows the
definition of “person” from R.C. 1701.01(G), which includes LLCs. But R.C. 1701.01
defines “person” only for that chapter—“[a]s used in section 1701.01 to 1701.98 of the
Revised Code”—which clearly does not encompass R.C. Chapter 4735. R.C. 1701.01.
To be clear, I do not suggest that a court’s interpretation of one chapter of the law
cannot borrow (by analogy or otherwise) from another, but in this case, the context of
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the relevant chapter and section make it clear that “person,” as used in R.C. 4735.21
and throughout R.C. Chapter 4735, is not used in the way R.C. 1701.01 defines it.
{¶68} For example, R.C. 1701.01’s definition of “person” also includes
“corporation[s]” and “partnership[s].” So, if the General Assembly intended to borrow
R.C. 1701.01’s definition of “person” as it is used in R.C. Chapter 4735, why would it
repeatedly add “corporation,” “partnership,” and, usually, “limited liability company”
in addition to “person” throughout R.C. Chapter 4735? Construing the statute this
way cuts against the surplusage canon of statutory interpretation: courts generally
presume that the legislature does not include meaningless words in a statute, and thus,
courts should avoid interpretations “that would render any provision superfluous.”
State v. Reed, 162 Ohio St.3d 554, 2020-Ohio-4255, 166 N.E.3d 1106, ¶ 15, citing
Rhodes v. City of New Philadelphia, 129 Ohio St.3d 304, 2011-Ohio-3279, 951 N.E.2d
782, ¶ 23. Reading “LLC” into “person” when such logic would dictate that “person”
also includes “corporation” and “partnership” renders R.C. 4735.21’s listing of those
latter terms duplicative and meaningless.
{¶69} This reading of the statute also runs against the negative implication
canon, also known as the expressio unius est exclusio alterius canon: “the expression
of one or more items of a class implies that those not identified are to be excluded.”
State v. Droste, 83 Ohio St.3d 36, 39, 697 N.E.2d 620 (1998). By including “person,”
“corporation,” “partnership,” and other entities in the list of regulated entities, but
excluding LLCs, the clear implication is that LLCs are not subject to that regulation.
LLCs are otherwise regularly part of the “class” of regulated entities throughout the
chapter, and, guided by the negative implication canon, their exclusion should mean
something here.
23 OHIO FIRST DISTRICT COURT OF APPEALS
{¶70} I fully acknowledge that the General Assembly’s exclusion of LLCs from
the list of regulated entities in R.C. 4735.21 is puzzling, but I would not go so far as to
say that reading the plain text of this statute, in context, reaches an absurd result, as
the majority concludes. The disparity might be explained by the fact that this part of
R.C. 4735.21 predates the advent of LLCs in Ohio in 1994. But the General Assembly
has amended R.C. Chapter 4735, including R.C. 4735.21, several times since then.
Indeed, it added LLCs to many provisions of R.C. Chapter 4735, but not to R.C.
4735.21. Whether this was oversight or purposeful, it’s not for us to speculate when
the plain language is clear.
{¶71} We should trust that the General Assembly, in its capacity as a
lawmaking entity, means what it says, and here it plainly says that LLCs do not need a
real estate broker license to recover damages for real estate broker-related activities
under R.C. 4735.21. See Jones v. Action Coupling & Equip., Inc., 98 Ohio St.3d 330,
2003-Ohio-1099, 784 N.E.2d 1172, ¶ 12 (“When the statutory language is plain and
unambiguous, and conveys a clear and definite meaning, we must rely on what the
General Assembly has said.”). If it did not mean to say that, it should fix the statutory
language, not us. Accordingly, I respectfully dissent in part.
Please note:
The court has recorded its entry on the date of the release of this opinion.