Dixon v. Huntington Natl. Bank

2014 Ohio 4079

• Court: Ohio Court of Appeals
• Decided: September 18, 2014
• Docket: 100572
• Status: Published

Opinion

[Cite as Dixon v. Huntington Natl. Bank, 2014-Ohio-4079.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 100572

JAMES DIXON, ET AL. PLAINTIFFS-APPELLANTS

vs.

HUNTINGTON NATIONAL BANK, ET AL. DEFENDANTS-APPELLEES

JUDGMENT: AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-13-806584

BEFORE: E.T. Gallagher, J., E.A. Gallagher, P.J., and Stewart, J.

RELEASED AND JOURNALIZED: September 18, 2014 ATTORNEY FOR APPELLANTS

Brent L. English Law Offices of Brent L. English 820 Superior Avenue West The 820 Building, Suite 900 Cleveland, Ohio 44113

ATTORNEYS FOR APPELLEES

For Huntington National Bank

Alexander E. Goetsch Komlavi Atsou Cavitch, Familo & Durkin Co., L.P.A. 1300 East Ninth Street 20th Floor Cleveland, Ohio 44114

For Third Federal Savings & Loan, Etc.

Janeane R. Cappara Kirk W. Roessler Ziegler & Metzger, L.L.P. 2020 Huntington Building 925 Euclid Avenue Cleveland, Ohio 44115 EILEEN T. GALLAGHER, J.:

{¶1} Plaintiffs-appellants, James and Penny Dixon (“the Dixons”), appeal from the

trial court’s order granting defendant-appellee’s, Third Federal Savings and Loan

Association (“Third Federal”), motion to dismiss. The Dixons also appeal from the

court’s denial of their motion to reconsider the court’s judgment granting

defendant-appellee’s, Huntington National Bank (“HNB”), motion to dismiss. Finding

no merit to the appeal, we affirm.

Facts

{¶2} In May 2013, the Dixons filed a complaint against Third Federal, HNB, and a

group of six attorneys from the law firm of Weltman, Weinberg and Reis, Co., L.P.A.

(“Weltman”), 1 pursuant to the Ohio Corrupt Practices Act, R.C. 2923.31, et seq.

(“OCPA”), and the federal Racketeer Influenced Corrupt Organizations Act, 18 U.S.C.

1961, et seq. (“RICO”).

{¶3} The Dixons alleged in their original complaint that the defendants

participated in a pattern of corrupt activity, in violation of both the OCPA and RICO

during foreclosure proceedings that HNB had initiated against the Dixons’ adult daughter,

on a parcel of residential property. The Dixons had a mortgage interest on the property,

and HNB subsequently named them as defendants. In the instant case, the Dixons

The six individual Weltman attorneys were voluntarily dismissed from the action on 1

September 16, 2013. alleged they were unlawfully deprived of their interest in the property when defendants

obtained a default judgment against them and their daughter, because the Dixons allege

that the defendants failed to properly serve them with the complaint.

{¶4} The Dixons subsequently filed an amended complaint, removing the RICO

claims alleged in Counts 3 and 4. On July 25, 2013, defendant HNB filed a motion to

dismiss the Dixons’ amended complaint, pursuant to Civ.R. 13(A). The motion was ripe

for ruling on August 5, 2013, and the trial court granted the motion on August 8, 2013.

As of August 8, 2013, the Dixons had not filed a brief in opposition.

{¶5} On August 2, 2013, the Dixons filed a motion for enlargement of time to

respond to all pending motions. The Dixons’ motion was not granted until August 9,

2013, one day after HNB’s motion was granted.

{¶6} On July 26, 2013, defendant Third Federal also filed a motion to dismiss,

which the Dixons opposed. On August 23, 2013, the Dixons filed a motion for

reconsideration of the court’s judgment granting HNB’s motion to dismiss, which HNB

opposed. On September 17, 2013, the court held a hearing to address all outstanding

motions. The transcript of that hearing was not filed in the instant case.

{¶7} On September 26, 2013, the trial court denied the Dixons’ motion to

reconsider its order granting HNB’s motion to dismiss and also granted Third Federal’s

motion to dismiss. The Dixons now appeal from the trial court’s judgments granting

Third Federal’s motion to dismiss and denying their motion for reconsideration. They

raise seven assignments of error. Third Federal’s Motion to Dismiss

{¶8} In their first assignment of error, the Dixons argue the trial court erred in

granting Third Federal’s motion to dismiss. In their third assignment of error, they

argue the trial court erred in dismissing the OCPA claim against Third Federal. These

two assignments of error are interrelated and shall be addressed together.

{¶9} We review an order dismissing a complaint for failure to state a claim for

relief de novo. Perrysburg Twp. v. Rossford, 103 Ohio St.3d 79, 2004-Ohio-4362, 814

N.E.2d 44. In O’Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St.2d 242, 327

N.E.2d 753 (1975), the Ohio Supreme Court established the standard of review that is to

be applied to a motion to dismiss pursuant to Civ.R. 12(B)(6), holding that:

[i]n order for a court to dismiss a complaint for failure to state a claim upon which relief can be granted (Civ.R. 12(B)(6)), it must appear beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery. (Conley v. Gibson, 355 U.S. 41 [78 S.Ct. 99, 2 L.Ed.2d 80], followed.)

Id. at the syllabus. When reviewing a Civ.R. 12(B)(6) motion to dismiss, we must

accept the material allegations of the complaint as true and make all reasonable inferences

in favor of the plaintiff. Johnson v. Microsoft Corp., 106 Ohio St.3d 278,

2005-Ohio-4985, 834 N.E.2d 791.

{¶10} However, “unsupported conclusions of a complaint are not considered

admitted * * * and are not sufficient to withstand a motion to dismiss.” State ex rel.

Hickman v. Capots, 45 Ohio St.3d 324, 324, 544 N.E.2d 639 (1989). To prevail on the motion, it must appear from the face of the complaint that the plaintiff can prove no set of

facts that would justify a court granting relief. O’Brien at paragraph one of the syllabus.

{¶11} The Dixons argue the trial court erred in relying on Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal,

556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), in dismissing their claims. They

contend that based on these cases, the trial court erroneously held their amended

complaint to stricter standards and requirements than necessary. We disagree.

{¶12} In Tuleta v. Med. Mut. Of Ohio, 8th Dist. Cuyahoga No. 100050,

2014-Ohio-396, ¶ 30, this court reversed the trial court’s judgment in which the trial court

relied upon Bell Atlantic and Iqbal, finding that neither the Ohio Supreme Court nor this

court had adopted the heightened federal pleading standards set forth in these two cases.

{¶13} Whereas this court has not adopted the stricter federal pleading standards for

all cases, case law clearly establishes that this court has adopted stricter standards for

cases in which RICO and/or OCPA claims are alleged. The complaint in Tuleta did not

contain RICO or OCPA claims, and therefore was not subject to the more stringent

requirements under which the pleading in the instant case is reviewed.

{¶14} In Universal Coach, Inc. v. New York City Transit Auth., Inc., 90 Ohio

App.3d 284, 629 N.E.2d 28 (8th Dist.1993), this court discussed the degree of specificity

required in pleadings alleging OCPA violations, and set forth a stricter standard of

pleading for RICO and OCPA claims. This court pointed out that OCPA is directly

adopted from RICO, and despite some minor differences, this court is in no way prohibited from applying federal requirements of pleading specificity when addressing

OCPA claims before the court. Id. at 292.

{¶15} To survive a motion to dismiss, the court in Universal held that the

complaint must allege the following specific elements:

The United States Supreme Court and numerous other federal courts have examined the elements required to establish a RICO violation: (1) conduct of the defendant which involves the commission of two or more of specifically prohibited state or federal criminal offenses; (2) the prohibited criminal conduct of the defendant constitutes a pattern of corrupt activity; and (3) the defendant has participated in the affairs of an enterprise or has acquired and maintained an interest in or control of an enterprise. Sedima S.P.R.L. v. Imrex Co. (1985), 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346. We hold that the failure of a plaintiff to plead any of the elements necessary to establish a RICO violation results in a defective complaint which cannot withstand a motion to dismiss as based upon a failure to state a claim upon which relief can be granted. Compare Van Dorn Co. Cent. States Can. Co. v. Howington, 623 F.Supp. 1548 (N.D.Ohio 1985).

Id. at 291 (Emphasis added.).

{¶16} In the instant case, the Dixons failed to allege that Third Federal’s conduct

involved the commission of two or more of the specifically prohibited state criminal

offenses and that such conduct constituted a pattern of corrupt activity, as required by

R.C. 2923.31(E). In fact, the Dixons failed to set forth a single criminal offense on the

part of Third Federal. Rather, the Dixons’ amended complaint listed the foreclosure

default, which was taken by HNB, as an example of criminal activity.

{¶17} Moreover, the Dixons failed to properly allege an enterprise as defined by

R.C. 2923.31(C):

[I]n order to establish the existence of an “enterprise” under Ohio’s RICO Act, there must be some evidence of: (1) an ongoing organization, formal or informal; (2) with associates that function as a continuing unit; and (3) with a structure separate and apart, or distinct, from the pattern of corrupt activity.

State v. Warren, 10th Dist. Franklin No. 92AP-603, 1992 Ohio App. LEXIS 6755 (Dec.

31, 1992); United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246

(1981).

{¶18} In Patton v. Wilson, 8th Dist. Cuyahoga No. 82079, 2003-Ohio-3379, this

court explained:

This court has held that an enterprise must be a separate entity that acts apart from the pattern of activity in which it engages. U.S. Demolition & Contracting, Inc. v. O’Rourke Constr. Co. (1994), 94 Ohio App.3d 75, 640 N.E.2d 235, citing Old Time Enterprises, Inc. v. Internatl. Coffee Corp., (C.A.5, 1989), 862 F.2d 1213. A pattern of racketeering activity alone is insufficient to establish an enterprise. Id. Although Patton is correct that a corporation may be part of an enterprise, the enterprise may not simply be composed of a corporation and its officers or employees.

Id. at ¶ 20.

{¶19} The Dixons failed to allege that Third Federal is an enterprise in their amended

complaint. It is clear on the face of the complaint that the Dixons also failed to establish that

Third Federal was a part of an entity separate and apart from itself. There is no specific

allegation in the complaint that there was “structure, continuity, and separate existence from the

corrupt pattern.” Herakovic v. Catholic Diocese of Cleveland, 8th Dist. Cuyahoga No. 85467,

2005-Ohio-5985, ¶ 24.

{¶20} Therefore, the Dixons’ failure to plead their OCPA claims with the specificity

required for such claims resulted in a defective complaint against Third Federal. The trial court

did not err in granting Third Federal’s motion to dismiss in its entirety. {¶21} Accordingly, the Dixons’ first and third assignments of error are overruled.

Civil Conspiracy

{¶22} In their second assignment of error, the Dixons argue the trial court erred in

dismissing the civil conspiracy claim against Third Federal.

{¶23} A civil conspiracy is “a malicious combination of two or more persons to

injure another person or property, in a way not competent for one alone, resulting in

actual damages.” Kenty v. Transamerica Premium Ins. Co., 72 Ohio St.3d 415, 419, 650

N.E.2d 863 (1995), quoting LeFort v. Century 21-Maitland Realty Co., 32 Ohio St.3d

121, 126, 512 N.E.2d 640 (1987).

{¶24} In order to prevail on a civil conspiracy claim, a plaintiff must demonstrate

the existence of an underlying unlawful act. Williams v. Aetna Fin. Co., 83 Ohio St.3d

464, 475, 700 N.E.2d 859 (1998), citing Gosden v. Louis, 116 Ohio App.3d 195, 219, 687

N.E.2d 481 (9th Dist.1996).

{¶25} Further, the failure to successfully allege an OCPA violation negates a civil

conspiracy cause of action. Herakovic, 2005-Ohio-5985 at ¶ 37, citing Stachon v.

United Consumers Club Inc., 229 F.3d 673, 677 (7th Cir.2000); Miller v. Norfolk S. Ry.

Co., 183 F.Supp.2d 996, 1002-03 (N.D.Ohio 2002). This court, in Herakovic,

explained;

Without these parameters, individual plaintiffs could fashion broad conspiracy claims that have the illusion of a pattern and of an enterprise, when, in fact, they have individual defendants acting in their own individual affairs and not that of an enterprise. This would nullify the mandate under OCPA that before one can claim conspiracy, one must allege with specificity an OCPA violation. Id. at ¶ 18.

{¶26} As set forth above, the Dixons’ complaint failed to state a claim for an

OCPA violation because they did not plead that claim with specificity. Having failed to

properly plead the underlying tort, there can be no civil conspiracy, and the trial court

properly dismissed the Dixons’ civil conspiracy claim.

{¶27} Accordingly, the Dixons’ second assignment of error is overruled.

Huntington National Bank’s Motion to Dismiss

{¶28} In their fourth assignment of error, the Dixons argue that the trial court erred

in granting HNB’s motion to dismiss, arguing that the complaint alleged sufficient facts

and legal theories upon which relief could be granted.

{¶29} HNB sought dismissal pursuant to Civ.R. 13(A). In its motion to dismiss,

HNB argued that the Dixons’ claims should be dismissed because they were already

raised in separate litigation, as compulsory counterclaims in a foreclosure action that was

still pending.2

{¶30} Civ.R. 13(A) provides:

(A) Compulsory counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.

The Huntington Natl. Bank v. Debra Dixon, et al., Cuyahoga C.P. No. CV-06-585873 2

(Oct. 9, 2008). The Ohio Supreme Court has held that “[a]ll existing claims between opposing parties

that arise out of the same transaction or occurrence must be litigated in a single lawsuit

pursuant to Civ.R. 13(A), no matter which party initiates the action.” Rettig Ents., Inc.

v. Koehler, 68 Ohio St.3d 274, 626 N.E.2d 99 (1994), paragraph one of the syllabus.

{¶31} In addition to promoting judicial economy, the rule is designed to assist

courts with the “orderly delineation of res judicata.” Lewis v. Harding, 182 Ohio

App.3d 588, 2009-Ohio-3071, 913 N.E.2d 1048, ¶ 12 (8th Dist.). A party who fails to

assert a compulsory counterclaim at the proper time is barred from litigating that claim in

a subsequent lawsuit. Id.

{¶32} Ohio courts use the “logical relation” test to determine whether a claim is a

compulsory counterclaim. Rettig Ents. at paragraph two of the syllabus. Under this

test, a compulsory counterclaim exists if that claim “is logically related to the opposing

party’s claim” such that “separate trials on each of their respective claims would involve a

substantial duplication of effort and time by the parties and the courts.” Id.

{¶33} Accordingly, “multiple claims are compulsory counterclaims where they

‘involve many of the same factual issues, or the same factual and legal issues, or where

they are offshoots of the same basic controversy between the parties.’” Id. at 279,

quoting Great Lakes Rubber Corp. v. Herbert Cooper Co., 286 F.2d 631, 634 (3d

Cir.1961). “If both prongs are met, then the present claim was a compulsory

counterclaim in the earlier action and is barred by virtue of Civ.R. 13(A).” Rettig Ents., Inc. v. Koehler, quoting Geauga Truck & Implement Co. v. Juskiewicz, 9 Ohio St.3d 12,

14, 457 N.E.2d 827 (1984).

{¶34} In the instant case, the Dixons’ claims meet both prongs of the logical

relation test. The Dixons’ claims 1) existed at the time of HNB’s pleading in the

foreclosure action, and 2) arose out of the transaction that is the subject matter of the

foreclosure action.

{¶35} The Dixons argue the trial court must have gone outside the four corners of

the complaint to determine whether or not these claims were compulsory counterclaims in

the foreclosure action. However, in the amended complaint, the Dixons themselves set

forth the facts of the foreclosure action in great detail, referring to “the instant mortgage

foreclosure action” multiple times. Indeed, it is evident from the face of the complaint

that the Dixons’ claims not only existed at the time of HNB’s foreclosure action but also

that their claims arose out of the transaction that was the subject of the foreclosure action.

{¶36} Therefore, the trial court did not err in granting HNB’s motion to dismiss

pursuant to Civ.R. 13(A). Accordingly, the Dixons’ fourth assignment of error is

overruled.

Time to Respond

{¶37} In their fifth assignment of error, the Dixons argue the trial court abused its

discretion when it dismissed their claims against HNB without giving them an

opportunity to respond. {¶38} Although an abuse of discretion is typically defined as an unreasonable,

arbitrary, or unconscionable decision, State v. Beavers, 10th Dist. Franklin No.

11AP-1064, 2012-Ohio-3654, ¶ 8, we note that no court has the authority, within its

discretion, to commit an error of law. State v. Beechler, 2d Dist. Clark No. 09-CA-54,

2010-Ohio-1900, ¶ 70; State v. Peterson, 10th Dist. Franklin No.12AP-646,

2013-Ohio-1807, ¶ 21.

{¶39} Loc.R. 11 of the Court of Common Pleas of Cuyahoga County, General

Division, requires a party opposing a motion, other than a motion for summary judgment,

to file their brief in opposition within seven calendar days after service by mail. Civ.R.

6(D) extends the seven day window to 10 days, allowing additional time for service of the

motion.

{¶40} HNB filed it’s motion to dismiss on July 25, 2013. The trial court granted

this motion 14 days later, on August 8, 2013. The motion was ripe for ruling as early as

August 5, 2013. On August 2, 2013, The Dixons filed a motion for enlargement of time

to respond to all pending motions. However, plaintiffs’ motion was not granted until

August 9, 2013, a day after the trial court granted HNB’s motion to dismiss.

{¶41} On August 23, 2013, after the court had granted HNB’s motion to dismiss,

the Dixons filed a motion for reconsideration of the court’s dismissal. HNB filed a brief

in opposition on September 6, 2013. On September 26, 2013, the trial court denied the

Dixons’ motion for reconsideration, finding that the Dixons were afforded more than ten

days in which to respond to the motion to dismiss. {¶42} The record clearly supports the fact that the court ruled on HNB’s motion

after the motion became ripe for ruling. The court’s decision to grant the Dixons an

enlargement of time to respond to remaining pending motions is separate from the fact

that it did not extend the response time to HNB’s motion prior to ruling on it.

{¶43} The court’s denial of the Dixons’ motion for reconsideration supports the

conclusion that the court’s granting of HNB’s motion and the subsequent granting of the

Dixons’ motion for enlargement of time was not a mistake or coincidence. We find no

abuse of discretion in the denying of the Dixons’ motion to reconsider.

{¶44} Accordingly, the Dixons’ fifth assignment of error is overruled.

Due Process

{¶45} In their sixth assignment of error, the Dixons argue that the trial court

denied them their due process rights when the court granted HNB’s motion to dismiss

before the Dixons filed a response.

{¶46} Due process requires that an individual be given notice and an opportunity

to be heard at a meaningful time and in a meaningful manner. Fuentes v. Shevin, 407 U.S.

67, 80, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972). To establish either a procedural or

substantive due process claim, a plaintiff must first identify the constitutionally protected

interest of which he was deprived. Bd. of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701,

33 L.Ed.2d 548 (1972).

{¶47} The Dixons fail to cite to any case law or evidence in the record to support

their contention that the trial court’s judgment granting HNB’s motion to dismiss violated their due process rights. As discussed above, the Dixons had an opportunity to respond

and failed to respond before the response deadline had passed. This is not a case where

the court granted a motion to dismiss before a response was due. The Dixons had an

opportunity to be heard. Therefore, we find that the Dixons’ due process rights were in

no way violated by the court’s order.

{¶48} Accordingly, the Dixons’ sixth assignment of error is overruled.

Conversion of HNB’s Motion

{¶49} In the seventh assignment of error, the Dixons argue the trial court erred in

granting HNB’s motion to dismiss, when the motion should have been converted to a

motion for summary judgment.

{¶50} Again, the Dixons argue the trial court looked outside of the four corners of

the complaint in order to make its decision to grant HNB’s motion to dismiss. They

contend the motion should have been converted to a motion for summary judgment.

There is simply no evidence to support this claim.

{¶51} In reviewing the amended complaint, the Dixons themselves admitted that

HNB had filed a foreclosure action against them that was still pending. The Dixons

specified in the amended complaint that they had a $100,000 mortgage lien on their

daughter’s property and that their daughter’s property was the subject of an ongoing

foreclosure action. The court did not need to confirm these allegations; it simply

accepted these admissions as true. It follows that the trial court need not have converted HNB’s motion to dismiss to a motion for summary judgment in order to properly rule

upon it.

{¶52} Accordingly, the Dixons’ seventh assignment of error is overruled.

{¶53} Judgment affirmed.

It is ordered that appellees recover from appellants costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate be sent to the common pleas 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.

EILEEN T. GALLAGHER, JUDGE

EILEEN A. GALLAGHER, P.J., and MELODY J. STEWART, J., CONCUR