[Cite as D&H Autobath v. PJCS Properties I, Inc., 2012-Ohio-5845.]
IN THE COURT OF APPEALS
TWELFTH APPELLATE DISTRICT OF OHIO
FAYETTE COUNTY
D&H AUTOBATH, LLC, et al., :
Plaintiffs-Appellants : CASE NO. CA2012-05-018
: OPINION - vs - 12/10/2012 :
PJCS PROPERTIES I, INC., et al., :
Defendants-Appellees. :
CIVIL APPEAL FROM FAYETTE COUNTY COURT OF COMMON PLEAS Case No. 10CVH00156
Michael J. Anthony and Vincent P. Zuccaro, 383 North Front Street, LL, Columbus, Ohio 43215, for plaintiffs-appellants
Joshua R. Bills, 10 West Broad Street, Suite 400, Columbus, Ohio 43215, for defendants, PJCS Properties 1, Inc. and Courtney Jenkins
J. Phillip Jensen, 7440 Stanley Mill Drive, Centerville, Ohio 45459, defendant-appellee, pro se
Stephen M. Spicer, 621 Watervliet Avenue, Dayton, Ohio 45420, defendant-appellee, pro se
Consultax, Inc., 621 Watervliet Avenue, Dayton, Ohio 45420, defendant-appellee, pro se
Frost Brown Todd LLC, Bonnie L. Wolf, 10 West Broad Street, Suite 2300, Columbus, Ohio 43215, for defendant-appellee, Gerard Chadwick
Frost Brown Todd LLC, Douglas R. Dennis, 2200 PNC Center, 201 East Fifth Street, Cincinnati, Ohio 45202, for defendant-appellee, Gerard Chadwick Fayette CA2012-05-018
S. POWELL, P.J.
{¶ 1} Plaintiffs-appellants, D&H Autobath, LLC, Janie E. Harris, and Angela and
Rodney Dalton, appeal the decision of the Fayette County Court of Common Pleas granting
summary judgment in favor of defendants-appellees, Stephen M. Spicer, Consultax, Inc., and
Gerard T. Chadwick.
{¶ 2} In the summer of 2007, negotiations began between appellants and PJCS
Properties I, LLC ("PJCS") for appellants to purchase one of three car wash businesses
owned by PJCS (the "Business").1 Offers to purchase were submitted by appellants to PJCS
in May and again in September 2007. Around this time, Chadwick became involved in the 2 transaction, acting as broker for PJCS in the sale of the Business.
{¶ 3} In December 2007, prior to appellant's purchase of the Business, Chadwick and
PJCS went over the financial records, including the profit and loss statements and tax returns
of all three car wash businesses owned by PJCS. Chadwick created a spreadsheet
calculating the differences between the combined totals of the profit and loss statements
against the tax returns. According to Chadwick's spreadsheet, in 2005, the profit and loss
statements indicated a gross revenue of $463,901 for the car washes while the tax return
showed a gross revenue of only $361,942. The profit and loss statements also indicated a
net profit of $205,409 for 2005 while the tax returns showed a net loss of $105,355. For
2006, the profit and loss statements indicated a net profit of $328,691 while the tax return
showed a net loss of $55,014. Due to these discrepancies, Chadwick wrote to the principals
of PJCS, J. Phillip Jensen and Cortney Jenkins, asking if he was "missing
1. At the time of this transaction, PJCS owned and operated three car washes in Ohio located on Leesburg Avenue, Linden Avenue, and Minute Lane. The car wash at issue in this case is located on Leesburg, in Washington Court House.
2. Both Sunbelt Business Advisors, a company owned by Chadwick, and Allen Beck also acted as brokers during the sale of the Business but are not parties to this appeal. -2- Fayette CA2012-05-018
something." Jensen responded, explaining that the three car washes had "alot [sic] of cash
sales that previously went unreported" and that Jensen and Jenkins were "trying to clean up
[their] books during a couple of years where [they] didn't fully report [their] sales."
{¶ 4} Chadwick then sent an email to Jensen stating that PJCS needed to acquire a
letter from a CPA attesting to the accuracy of the profit and loss statements for the Business,
as well as profit and loss statements for all three car washes which added up to the tax
returns. Approximately one hour after this email was sent, Spicer, as owner of Consultax and
the former accountant for PJCS, certified the financial records. According to appellants,
Spicer knew that the financial records he certified did not match the records Consultax had
on file for PJCS. Specifically, the records produced by PJCS showed the Business earning a
net profit of $123,648 in 2004, $125,388 in 2005, and $134,738 in 2006. However, the
financial records maintained by Consultax and Spicer showed a net loss for the Business of
$147,763.83 in 2004, a net loss of $31,415.75 in 2005, and a net profit of $78,755.60 in
2006. Nevertheless, Spicer verified the financial records provided by PJCS after speaking
with Jensen and doing some online research on car washes that satisfied his concerns.
{¶ 5} In January 2008, Chadwick again spoke with Jensen regarding discrepancies
between the profit and loss statements of the Business with the 2004 and 2006 tax returns.
Chadwick questioned Jensen, "are the numbers just being changed or is there some
explanation that goes with the differences?" In response, Jensen cited "bookkeeper oversite
[sic]" for the problem and assured Chadwick that Spicer was "willing to accept the changes
and certify the revisions."
{¶ 6} In April 2008, appellants began to grow uneasy regarding the length of time it
required PJCS to provide profit and loss statements each time one was requested.
Consequently, Angela Dalton contacted Chadwick, stating that the delay in receiving the
profit and loss statements made her a "little nervous," as if PJCS was "trying to make -3- Fayette CA2012-05-018
something up." Chadwick responded that Jensen and Jenkins wanted appellants to
"succeed" and would do "what they can do assist" appellants. Chadwick further assured
Angela Dalton in May 2008 that there was "nothing that [he was] aware of to worry about."
{¶ 7} On February 2, 2008, appellants and PJCS signed an Agreement to Purchase
document. The purchase agreement included provisions relating to the sale of the Business
as well as a provision regarding the role of the broker. Specifically as to the role of the
broker, the purchase agreement stated:
Brokers
Seller agrees to pay herewith a sales commission to the Broker as set forth in the commission agreement. The Broker does not make any warranty, express or implied, as to the condition of the equipment or inventory transferred pursuant to this Agreement, to its merchantability, to the value of the business transferred herein, the volume of the business experienced by the Seller or expected by the Purchaser, the accuracy of any records provided by the Seller or the existence or transferability of any business or professional license, nor does the Broker represent that the form or substance of this transaction is beneficial to either Purchaser or Seller under the Federal or State tax laws or Regulations. The Broker has not inspected the Purchase Assets or the title to said Purchased Assets conveyed by Seller and makes no representation as to the status of Seller's title, if any, to the Purchased Assets transferred herein.
The purchase agreement also included an integration clause stating that the purchase
agreement "constitutes the entire agreement between the parties." Each appellant, as well
as Jensen and Jenkins, signed the purchase agreement and, on May 21, 2008, appellants
purchased the Business from PJCS for $974,000.
{¶ 8} On April 14, 2010, appellants filed suit against PJCS, Jensen, Jenkins,
Chadwick, Spicer, and Consultax. The complaint alleged claims of fraud, breach of contract,
breach of fiduciary duty, and negligence all relating to the production, compilation, and
distribution of allegedly fraudulent financial records. Appellants claimed that these fraudulent
financial records, provided by PJCS and Chadwick, and verified by Spicer and Consultax, -4- Fayette CA2012-05-018
induced appellants into purchasing the Business. Had appellants known the real financials of
the Business, they state that they would not have purchased it.
{¶ 9} On March 4, 2011, Spicer and Consultax, as well as Chadwick, moved for
summary judgment in two separate, but nearly identical, motions. On August 16, 2011, the
trial court granted summary judgment in favor of Chadwick, Spicer, and Consultax and
dismissed the lawsuit against those parties. Appellants' claims against PJCS, Jensen, and 3 Jenkins remained, but were later voluntarily dismissed by appellants. Appellants now timely
appeal their claims as to Chadwick, Spicer, and Consultax, raising two assignments of error.
{¶ 10} Under both assignments of error, appellants claim the trial court improperly
granted summary judgment. This court reviews a trial court's decision on summary judgment
under a de novo standard of review. Harold v. Nationwide Mut. Ins. Co., 12th Dist. No.
CA2007-01-013, 2008-Ohio-347, ¶ 11. Summary judgment is proper when: (1) there is no
genuine issue of material fact; (2) the moving party is entitled to judgment as a matter of law;
and (3) reasonable minds can only come to a conclusion adverse to the party against whom
the motion is made, construing the evidence most strongly in that party's favor. Civ.R. 56(C).
The party requesting summary judgment bears the initial burden of informing the court of the
basis for the motion and identifying those portions of the record that demonstrate the
absence of a genuine issue of material fact as to the essential elements of the nonmoving
party's claims. Dresher v. Burt, 75 Ohio St.3d 280, 293 (1996). Once a party moving for
summary judgment has satisfied its initial burden, the nonmoving party has the reciprocal
burden to set forth specific facts showing that genuine issues remain. Id.; Civ.R. 56(E).
Summary judgment is proper if the party opposing the motion fails to set forth such facts. Id.
{¶ 11} Assignment of Error No. 1:
3. The claims against Jenkins had been stayed prior to dismissal due to Jenkins filing bankruptcy.
-5- Fayette CA2012-05-018
{¶ 12} THE TRIAL COURT ERRED IN DISMISSING [APPELLANTS'] CLAIMS
AGAINST CHADWICK.
{¶ 13} In their first assignment of error, appellants argue the trial court erred in
granting summary judgment to Chadwick on their claims of fraud, intentional
misrepresentation, constructive fraud, and breach of a fiduciary duty.4 Specifically,
appellants contend Chadwick knew that PJCS was intentionally misrepresenting its financial
records and that the Business was losing money. Yet, Chadwick helped "orchestrate a
scheme" to defraud appellants and induce them into purchasing the Business. If not for
Chadwick's numerous material misrepresentations and omissions, appellants would not have
entered into the purchase agreement with PJCS.
{¶ 14} Appellants further argue that, throughout the purchasing process, Chadwick
acted as a trusted advisor to appellants. By acting in such a manner, appellants contend that
a fiduciary relationship developed between themselves and Chadwick which Chadwick
breached by recommending appellants enter into the purchase agreement with PJCS. We
shall address each of appellants' arguments in turn.
Intentional Misrepresentation and Fraud
{¶ 15} Appellants first argue that the trial court erred in determining that the parol
evidence rule applies in this case to prohibit the introduction of parol and extrinsic evidence
regarding Chadwick's material misrepresentations and omissions. Chadwick counters that
the trial court correctly determined that the parol evidence rule applies because the alleged
misrepresentations and omissions are directly contradicted by the language of the purchase
agreement.
4. Appellants also brought claims against Chadwick for unjust enrichment, promissory estoppel, and violation of R.C. 4735.02. However, appellants fail to address these claims in their brief. As such, we shall not address these claims in our decision, as no evidence has been presented that these claims were dismissed in error. -6- Fayette CA2012-05-018
{¶ 16} The elements of an action in fraud under Ohio law are: (1) a false
representation concerning a fact, (2) knowledge of the falsity of the representation or utter
disregard for its truthfulness, (3) intent to induce reliance upon the representation, (4)
justifiable reliance upon the representation, and (5) injury proximately caused by the reliance.
Crown Property Dev., Inc. v. Omega Oil Co., 113 Ohio App.3d 647, 656 (12th Dist.1996);
Gaines v. Preterm-Cleveland, Inc., 33 Ohio St.3d 54, 55 (1987). To avoid summary
judgment in this case, appellants were required to "set forth specific facts showing that there
is a genuine issue for trial" as to whether appellants suffered damages caused by their
justifiable reliance on Chadwick's allegedly intentional misrepresentations or omissions
regarding the financial stability of the Business. Four-O Corp. v. Mike's Trucking, Ltd., 12th
Dist. Nos. CA2007-01-002, CA2007-01-003, 2007-Ohio-5628, ¶ 25; Civ. R. 56(E); Haddon
View Invest. Co. v. Coopers & Lybrand, 70 Ohio St.2d 154 (1982).
{¶ 17} "The parol evidence rule states that, 'absent fraud, mistake or other invalidating
cause, the parties' final written integration of their agreement may not be varied, contradicted
or supplemented by evidence of prior or contemporaneous oral agreements, or prior written
agreements.'" Galmish v. Cicchini, 90 Ohio St.3d 22, 27 (2000), quoting 11 Williston on
Contracts (4 Ed.1999) 569-570, Section 33:4. "The parol evidence rule is a rule of
substantive law that prohibits a party who has entered into a written contract from
contradicting the terms of the contract with evidence of alleged or actual agreements."
Provident Bank v. Adriatic, Inc., 12th Dist. No. CA2004-12-108, 2005-Ohio-5574, ¶ 17, citing
Ed Schory & Sons, Inc. v. Society Nat'l. Bank, 75 Ohio St.3d 433, 440, 1996-Ohio-194.
{¶ 18} "Nevertheless, the parol evidence rule does not prohibit a party from introducing
parol or extrinsic evidence for the purpose of proving fraudulent inducement." Galmish at 28,
citing Drew v. Christopher Constr. Co., Inc., 140 Ohio St. 1 (1942), paragraph two of the
syllabus. However, "the parol evidence rule may not be avoided by a fraudulent inducement -7- Fayette CA2012-05-018
claim which alleges that the inducement to sign the writing was a promise, the terms of which
are directly contradicted by the signed writing." Id. at 29; see also Board of Trustees of Union
Twp. v. Planned Development Co. of Ohio, 12th Dist. No. CA2000-06-109, 2000 WL
1818540, *8. Accordingly, "an oral agreement cannot be enforced in preference to a signed
writing which pertains to exactly the same subject matter, yet has different terms." Id., citing
Marion Production Credit Ass'n. v. Cochran, 40 Ohio St.3d 265, 274 (1988).
{¶ 19} In other words:
While it is true that a party may not commit fraud in securing a written agreement, then hide behind the protection of the parol evidence rule, fraudulent inducement or misrepresentation claims that merely allege a prior statement or agreement that is different from that which is contained in the written contract do not suffice to overcome the parol evidence rule.
Adriatic at ¶ 18, citing Shory at 440. "Thus, parol evidence can only be introduced to
challenge a written contract when the alleged oral misrepresentations are consistent with the
written contract." Westwinds Dev. Corp. v. Outcalt, 11th Dist. No. 2008-G-2863, 2009-Ohio-
2948, ¶ 58.
{¶ 20} We find this case similar to the First Appellate District's case of Citicasters Co.
v. Bricker & Eckler, LLC, 149 Ohio App.3d 705 (1st Dist.2002). In Citicasters, the buyer
entered into negotiations to buy a radio station from seller, who was represented by a law
firm in the negotiations. Id. at ¶ 2. Buyer and seller entered into a purchase agreement, but,
ultimately, the parties were unable to consummate the sale of the station. Id. at ¶ 2-3. The
buyer then filed suit against the law firm, alleging that it had misrepresented the financial
status of the radio station. Id. at ¶ 3. Specifically, the buyer alleged that the law firm had
misrepresented the amount of money necessary to obtain a release of liens on the radio
station as well as the radio station's financial ability to secure the release of the liens. Id.
{¶ 21} During the course of the lawsuit, the trial court granted the law firm's motion for
-8- Fayette CA2012-05-018
judgment on the pleadings based upon the parol evidence rule. Id. at ¶ 4. On appeal, the
First Appellate District determined that the alleged misrepresentations of the law firm
regarding the financial status of the radio station were within the scope of the purchase
agreement, as the purchase agreement between the buyer and seller made the release of
the liens a condition of closing. Id. at ¶ 13. The alleged misrepresentations of the law firm
regarding the amount of money necessary to obtain the release and the radio station's ability
to secure the release were not part of the purchase agreement, but were "squarely within the
scope of the written contract." Id. In so holding, the court stated that "[t]he substance of the
alleged oral promise is part and parcel of the subject matter contained in the integrated
agreements * * *." Id. at ¶ 11, quoting Bollinger, Inc. v. Mayerson, 116 Ohio App.3d 702, 713
(1st Dist.1996).
{¶ 22} The issue was also similarly addressed by the Eleventh Appellate District in
Westwinds Development Corp. v. Outcalt, 11th Dist. No. 2008-G-2863, 2009-Ohio-2948. In
Outcalt, the buyers and seller entered into a purchase agreement for the sale of a lot in a
residential subdivision. Id. at ¶ 2. The purchase agreement recited that it was the parties'
intent that the buyers would contract with the seller's builder to build a residence on the lot.
Id. at ¶ 3. After the closing of the purchase agreement between the buyers and seller,
negotiations between the buyers and builder failed. Id. at ¶ 6. In addition, the relationship
between the buyers and seller began to deteriorate and, eventually, the seller brought a suit
against the buyers arguing, inter alia, fraud. Id. at ¶ 7. The trial court granted the buyers'
motion for judgment on the pleadings soon after. Id. at ¶ 9.
{¶ 23} On appeal, the Eleventh District determined that the parol evidence rule
prohibited the admittance of parol or extrinsic evidence because the alleged
misrepresentations by the buyers that they would allow the builder to construct a residence
on the lot was contrasted by the language in the purchase agreement which "merely -9- Fayette CA2012-05-018
obligated the buyers to negotiate a construction contract with the builder 'prior to closing.'" Id.
at ¶ 59. Thus, under the parol evidence rule, the Eleventh District determined that "evidence
of the buyers' alleged misrepresentations would not be admissible to vary the terms of the
purchase agreement." Id.
{¶ 24} In the case at hand, appellants assert that Chadwick made material
misrepresentations and omissions regarding the financial state of the Business and the
accuracy of the financial records provided to appellants in relation to the Business.
Specifically, appellants contend that Chadwick provided financial documents which he
alleged to be accurate and made representations that Jenkins and Jensen wanted appellants
to succeed and would do what they could to assist appellants, as well as misrepresentations
that the "problem" with the sales figures being "off" had "been fixed."
{¶ 25} However, the purchase agreement between appellants and PJCS explicitly
provides that Chadwick makes "no warranty, express or implied," as to the "value of the
business transferred herein" or the "accuracy of any records provided by [PJCS]." The
purchase agreement goes on to state that Chadwick does not "represent that the form or
substance of this transaction is beneficial to either [appellants] or [PJCS]."
{¶ 26} As appellants agreed in the purchase agreement that Chadwick made no
representations as to the value of the business they were purchasing, and no warranties as
to the accuracy of the information he provided, appellants cannot now argue that Chadwick
made misrepresentations and omissions which directly contradict that provision of the
purchase agreement. Galmish, 90 Ohio St.3d at 29. Thus, under the parol evidence rule,
evidence of Chadwick's alleged misrepresentations and omissions would not be admissible
to vary the terms of the purchase agreement. Consequently, no genuine issues of material
fact exist and the trial court did not err in granting summary judgment to Chadwick.
Breach of Fiduciary Duty and Constructive Fraud - 10 - Fayette CA2012-05-018
{¶ 27} Appellants next contend that the trial court erred in granting summary judgment
in favor of Chadwick on their claims of breach of fiduciary duty and constructive fraud.
Specifically, appellants argue that Chadwick formed a special and distinct business
relationship with appellants and, especially, Angela Dalton that ultimately created a fiduciary
relationship between appellants and Chadwick. Appellants further contend Chadwick
breached this fiduciary duty when he provided them fraudulent financial records.
{¶ 28} "To succeed on a claim for breach of fiduciary duty, a party must show: (1) the
existence of a duty arising from a fiduciary relationship; (2) a failure to observe the duty; and
(3) an injury resulting proximately therefrom." Fairbanks Mobile Wash, Inc. v. Hubbel, 12th
Dist. Nos. 2007-05-062, 2007-05-068, 2009-Ohio-558, ¶ 83, quoting Estate Planning Legal
Services, P.C. v. Cox, 12th Dist. Nos. CA2006-11-140, CA2006-12-141, 2008-Ohio-2258, ¶
44; Strock v. Presnell, 38 Ohio St.3d 207, 217 (1988). "'A 'fiduciary relationship' is 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.'"
Stone v. Davis, 66 Ohio St.2d 74, 79 (1981), citing In re Termination of Employment, 40 Ohio
St.2d 107, 115 (1974). The term 'fiduciary' is defined as "a person having a duty, created by
his undertaking, to act primarily for the benefit of another in matters connected with his
undertaking." Groob v. Key Bank, 108 Ohio St.3d 348, 2006-Ohio-1189, ¶ 16; Strock at 216.
"A fiduciary relationship need not be created by contract; it may arise out of an informal
relationship where both parties understand that a special trust or confidence has been
reposed." Id., citing Umbaugh Pole Bldg. Co., Inc. v. Scott, 58 Ohio St.2d 282, 287 (1979).
{¶ 29} Similarly, a claim for constructive fraud exists only where a fiduciary or
confidential relationship has formed between the parties. Constructive fraud often exists
where the parties have "a special confidential or fiduciary relation which affords the power
and means to one to take undue advantage or exercise undue influence over another." - 11 - Fayette CA2012-05-018
Heller v. Bohecker's Business College, Inc., 12th Dist. No. CA92-03-046, 1992 WL 276540 at
*2 (Oct. 5, 1992), citing Hanes v. Giambrone, 14 Ohio App.3d 400, 406 (2nd Dist.1984).
"Constructive fraud is the same as actual fraud with the exception that constructive fraud
does not require proof of fraudulent intent." Id. Summary judgment may be granted to a
defendant "upon a claim of fraud where, after construing the evidence most strongly in favor
of [appellants], reasonable minds could only conclude that there is no genuine issue as to
any of the material elements of fraud and [Chadwick] is entitled to judgment as a matter of
law." Id., citing Goens v. Torco Companies, 12th Dist. No. CA89-06-092, 1990 WL 4259
(Jan. 22, 1990).
{¶ 30} Here, appellants contend that a fiduciary relationship was created between
Chadwick and appellants through an informal relationship where both parties understood that
a special trust was created. Specifically, appellants assert that throughout September 2007
to May 21, 2008, Chadwick formed a business relationship with Angela Dalton separate and
distinct from his role as broker for PJCS. Chadwick acted on behalf of Angela Dalton and
appellants in "dealing with lenders, comparing loan offers, and completing due diligence
checklists." Angela Dalton confided in Chadwick and sought his advice regarding the
purchase of the Business. Furthermore, Angela Dalton stated that she trusted Chadwick so
much, that when her lawyer gave her legal advice regarding the purchase of the Business,
Angela Dalton asked Chadwick to advise her on the assignments and improvements for the
Business. Moreover, Chadwick also assisted appellants in transferring the lease for the
Business and the ATM located within.
{¶ 31} In this case, appellants fail to establish that a fiduciary relationship was created
between Chadwick and appellants. As defined above, the term "fiduciary" means that a
person has a duty to act primarily for the benefit of another. See Groob at ¶ 16. In this case,
the purchase agreement between appellants and PJCS clearly indicates that Chadwick - 12 - Fayette CA2012-05-018
worked primarily for the benefit of PJCS, as PJCS was the party required to pay Chadwick's
sales commission. Furthermore, there is no evidence in the record that Chadwick had the
mutual understanding that a special trust or confidence existed between himself and Angela
Dalton, let alone with appellants. Moreover, as discussed above, the purchase agreement
makes clear that Chadwick offered no warranty or representation to appellants regarding the
business transaction.
{¶ 32} Appellants placed their trust in Chadwick because he offered them advice and
guidance during the sale of the Business. However, this alone does not make a fiduciary
relationship. Based upon our review of the record, we find that no genuine issues of material
fact remain as to whether a fiduciary relationship existed between Chadwick and appellants.
Therefore, Chadwick is entitled to judgment as a matter of law on appellants' claim for breach
of fiduciary duty. Inasmuch as no fiduciary relationship existed, and appellants cannot prove
their fraud claim, Chadwick is also entitled to judgment as a matter of law as to appellants'
constructive fraud claim.
{¶ 33} Accordingly, appellants' first assignment of error is overruled.
{¶ 34} Assignment of Error No. 2:
{¶ 35} THE TRIAL COURT ERRED IN DISMISSING [APPELLANTS'] CLAIMS
AGAINST SPICER AND CONSULTAX.
{¶ 36} In their second assignment of error, appellants argue that the trial court erred in
granting summary judgment to Spicer and Consultax because their actions in verifying the 5 fraudulent financial records constituted negligent misrepresentation or fraud. Spicer and
Consultax failed to file briefs in this appeal.
5. Appellants also brought claims of breach of fiduciary duty, negligent performance of professional services, and promissory estoppel against Spicer and Consultax. However, appellants fail to address these claims in their brief. As such, we shall not address these claims in our decision, as no evidence has been presented that these claims were dismissed in error. - 13 - Fayette CA2012-05-018
Negligent Misrepresentation
{¶ 37} The elements of negligent misrepresentation provide that "one who, in the
course of his business, profession or employment, * * * supplies false information for the
guidance of others in their business transactions, is subject to liability for pecuniary loss
caused to them by their justifiable reliance upon the information, if he fails to exercise
reasonable care or competence in obtaining or communicating the information." Haddon
View Invest. Co. v. Coopers & Lybrand, 70 Ohio St.2d 154 (1982); Four-O Corp., 2007-Ohio-
5628 at ¶ 13-17.
{¶ 38} In cases addressing the allegedly negligent conduct of an accountant, said
"accountant may be held liable by a third party for professional negligence when that third
party is a member of a limited class whose reliance on the accountant's representation is
specifically foreseen." Haddon View at 157. "[A]ccountants make reports on which people
other than their clients foreseeably rely in the ordinary course of business." Id. "This being
the case, the accountant's duty to prepare reports using generally accepted accounting
principles extends to any third person to whom they understand the reports will be shown for
business purposes." Id.
{¶ 39} Here, Spicer and, through him, Consultax, verified that the financial records
provided by PJCS were accurate. Spicer acknowledged that he knew that "the people that
[Jensen] was working with needed a third party's stamp of approval" on the financial records.
Thus, Spicer was aware that the financial records would be shown to a third party for
business purposes. As such, the trial court erred in granting judgment in favor of Spicer and
Consultax as to appellants' negligent misrepresentation claim. Questions of fact remain as to
whether Spicer and Consultax exercised reasonable care or competence in verifying the
financial records that were ultimately provided to appellants.
Fraud - 14 - Fayette CA2012-05-018
{¶ 40} Appellants also assert that the trial court erred in granting summary judgment to
Spicer and Consultax on appellants' claim of fraud, as questions of fact remain as to whether
Spicer's verifying of the financial records for the Business provided by PJCS was done with
an utter disregard for the truth.
{¶ 41} As provided above, the elements of fraud are: (1) a false representation
concerning a fact, (2) knowledge of the falsity of the representation or utter disregard for its
truthfulness, (3) intent to induce reliance upon the representation, (4) justifiable reliance upon
the representation, and (5) injury proximately caused by the reliance. Crown Property, 113
Ohio App.3d at 656. The record below makes clear that Spicer verified that the financial
records he received from PJCS were accurate when there was evidence that they did not
match the records maintained by Spicer and Consultax. There is also evidence in the record
that Spicer knew his verification would be relied upon by third parties and that appellants did
rely upon the verified financial records in purchasing the Business. Therefore, we find that
genuine issues of material fact remain as to whether Spicer and Consultax acted fraudulently
in verifying the financial records in this case. As such, the trial court erred in granting
summary judgment in favor of Spicer and Consultax as to appellants' fraud claim.
{¶ 42} Accordingly, appellants' second assignment of error is sustained.
{¶ 43} Based upon the foregoing, we find that Chadwick is entitled to judgment as a
matter of law on appellants' claims for fraud, constructive fraud, intentional
misrepresentation, and breach of fiduciary duty. Spicer and Consultax, however, are not
entitled to judgment as a matter of law on appellants' claims of negligent misrepresentation
and fraud.6
6. It should be noted that Spicer, as a non-lawyer, is representing Consultax, Inc. and filed the motion for summary judgment, which led to this appeal, on behalf of himself and Consultax. If Consultax is a corporation, Spicer is not permitted to represent Consultax as a pro se advocate in court. Union Savings Association v. Home Owner's Aid, Inc., 23 Ohio St.2d 60 (1971). Upon remand, the trial court should determine whether Consultax is a corporation and proceed accordingly. - 15 - Fayette CA2012-05-018
{¶ 44} The trial court's judgment is affirmed in part, reversed in part, and the cause is
remanded for further proceedings consistent with this opinion.
RINGLAND and HENDRICKSON, JJ., concur.
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