Opinion
L-21-1052
11-19-2021
John Zak Appellee v. Dale Airhart, et al. Appellant
Taylor R. Ward, for appellee. Anthony J. Richardson, II, for appellant.
Trial Court No. CI0201901459
Taylor R. Ward, for appellee.
Anthony J. Richardson, II, for appellant.
DECISION AND JUDGMENT
ZMUDA, P.J.
I. Introduction
{¶ 1} This matter is before the court on appeal of the Lucas County Court of Common Pleas, general trial division, judgment for plaintiff in the amount of $40,000 following a bench trial. For the reasons that follow, we affirm.
II. Background and Procedural History
{¶ 2} For several years, appellant, Dale Airhart, and appellee, John Zak, were neighbors and friends. They shared common interests and enjoyed golfing together. They also agreed on political issues, and often emailed and forwarded information to each other on the topic. At the end of 2010, Zak was struggling with mental health issues arising from a recent retirement and an imminent move as a result of his divorce from his wife of 38 years. In the midst of these life changes, Airhart approached Zak with a time-sensitive investment opportunity. Airhart proposed purchasing an oil drilling truck from a seller in Pennsylvania for $80,000, and transporting the truck to North Dakota to operate in the Bakken oil fields. Airhart proposed his acquaintance, Billy Ray Russell, would operate the truck. With $60,000 from Zak and $20,000 from Russell, Airhart would purchase the truck and provide logistics, support, and his expertise to the venture, drawing on his claimed experience in the trucking and oil industries. When Zak inquired about potential returns on the investment, Airhart shared numerous articles, websites, and apparent invoices, showing returns paid out to various people that owned trucks and participated in similar ventures. Airhart also indicated the truck would only be available for purchase for the next three days, requiring fast action to secure the opportunity.
{¶ 3} Based on their conversations, Zak decided to invest in Airhart's idea. At Airhart's request, Zak deposited a check for $60,000 in Airhart's personal bank account and delivered the receipt to Airhart. In the spring of 2011, Airhart told Zak that he had purchased the truck and was arranging permits to get it transported to North Dakota. Around that same time, Airhart sent Zak emails, detailing oil exploration opportunities in North Dakota as additional information for Zak. Airhart also provided updates to Zak by phone, explaining the process of transporting the truck and later indicating the truck was not operable and needed repairs.
{¶ 4} Soon after, Airhart flew to North Dakota to oversee repairs. Airhart also informed Zak that the truck was the wrong kind of drill for use in North Dakota, but could be operated in Texas. Zak believed Airhart was going to take possession of the truck from Russell and move it to Texas. By July of 2011, it seemed the venture would not be profitable. Zak received $20,000 from Airhart, with Airhart representing to Zak that he would pay the remaining $40,000 soon as a buy-out of Zak's interest in the truck. Zak continued to follow-up regarding the $40,000.
{¶ 5} The pair remained friends for several months, even after Zak moved away, and Zak remained hopeful that Airhart would pay the remaining $40,000. Throughout the proposed venture, Zak never saw the truck or knew of the truck's location, and Zak did not believe he held title to the truck. Airhart did not share any documentation with Zak for the truck regarding the title, the location, or expenses for repairs and/or storage.
{¶ 6} As to Russell, Zak listened to a phone conversation between Airhart and Russell while riding in Airhart's car, but otherwise had little knowledge of Russell. Airhart, however, claimed Zak and Russell met - once - at Airhart's home. Zak had no further contact with Russell, and after the purported purchase of the truck, Russell appeared to have no further involvement in any venture.
{¶ 7} Zak never received the remaining $40,000 from Airhart as promised, and in 2016 he filed suit in Lucas County Common Pleas case No. CI 201605547, seeking to collect. The trial court dismissed that case, without prejudice, on August 22, 2018.
{¶ 8} On February 14, 2019, Zak refiled the action, and by amended complaint on September 18, 2019, asserted claims for breach of contract, collection on account, fraud, breach of joint venture, and conversion. He also asserted a claim for an accounting. Airhart filed his answer on January 21, 2020, denying the allegations in support of each claim and asserting defenses to the contract and collection claims.
{¶ 9} On June 18, 2020, Airhart's trial counsel filed a motion to withdraw. After a hearing with counsel and the parties, the trial court granted the motion to withdraw on July 1, 2020, and granted Airhart time to obtain new trial counsel. On July 15, 2020, new trial counsel entered an appearance for Airhart. Soon after, Airhart's new trial counsel sought leave to file a motion for summary judgment, which the trial court granted.
{¶ 10} On August 7, 2020, Airhart filed his motion for summary judgment. Zak requested an extension, pursuant to Civ.R. 56(F), seeking more time for discovery. The trial court granted the motion and extended the discovery deadline, and on September 15, 2020, Airhart appeared for a teleconference deposition. In his deposition, Airhart insisted the investment venture involved only Zak and Billy Ray Russell, and Airhart knew very little about the truck. Airhart also claimed he did not know why Zak gave the $60,000 to him, personally, but he wrote his own check for $50,000 from the funds to a third party, as directed by Russell, with the remaining funds paid to Silk Road Transport for delivery of the truck to North Dakota and to Russell for his expenses. Airhart's testimony acknowledged his control over the funds while disclaiming any role in the transaction, as follows:
Q: So to recap, $50,000 of John Zak's $60,000 check went to a person that you cannot identify at this time. Around 9, 000 of it went to Silk Road Transport, and the balance of the $60,000 was given to Billy Russell?
A: Yes.
Q: Did you speak to John Zack before you sent this money in different directions?
A: No.
Q: Why not?
A: It was between him and Billy. Mr. Russell. So did what Mr. Russell asked. John was aware of it.
Q: When was the 9, 000 or so paid to Silk Road Transport?
A: Whenever it was hauled, I guess.
Q: Did you have any - actually, before we skip ahead, let's just stay on this for a second. Did you receive the title to the truck?
A: No.
Q: Do you know who the truck's name was put into?
A: No.
Q: Do you know what state it was titled under?
A: No.
Q: Do you know the actual date of the purchase of the truck?
A: No.
Q: Who told you there was an arrangement to buy the truck for $80,000? Was that coming from Billy Russell or John Zack? Who told you that?
A: Both.
Airhart also claimed he viewed the truck several times, but could not describe it in detail, with no knowledge of the make or model. Airhart also claimed to have moved the truck from one farm to another, but did not know the address or even the city where either farm was located. Airhart also claimed that an unknown party seized the truck in attempting to collect a debt owed by Russell, and Airhart made sure this party knew that Zak held the majority interest in that asset. Airhart could provide no details regarding the third party or the debt.
{¶ 11} Zak filed opposition to the motion for summary judgment and Airhart filed a reply brief, and on December 29, 2020, the trial court ruled on the motion for summary judgment. The trial court found issues of fact remained as to the existence of a contract and joint venture, citing evidence that included part performance of the terms of the alleged agreement. The trial court also found issues of fact remained regarding Zak's claims for fraud and conversion. However, the trial court determined summary judgment was appropriate as to the claims for an accounting and action on an account, and granted the motion as to these claims. The trial court denied the motion as to the claims for breach of contract, breach of a joint venture, fraud, and conversion.
{¶ 12} Leading up to the trial date, the trial court held a final settlement conference but no settlement was reached. The parties agreed to try the matter to the bench, with trial scheduled for January 27, 2021. However, on December 30, 2020, Airhart sought leave to file an amended answer to add an affirmative defense, arguing the statute of limitations barred Zak's claims. Zak opposed the motion, arguing undue delay and undue prejudice, considering the imminent trial date and completion of discovery. Zak also noted the trial court's prior ruling, deeming the statute of limitations defense waived, as the law of the case. The trial court denied the motion for leave, finding Airhart's motion untimely, and that he failed to demonstrate good cause. The trial court further determined that permitting amendment after close of discovery and less than a month before trial would unduly prejudice Zak.
{¶ 13} The matter proceeded to a bench trial on January 27, 2021, with Airhart filing notice of his intent to seek a finding regarding the percentage of liability for nonparties, pursuant to R.C. 2307.23. The parties and their counsel all appeared by Zoom, with exhibits shared on-screen, including bank statements, emails, and interrogatory and deposition excerpts. Zak's trial counsel also played recordings of voicemails left by Airhart for Zak, received during the pendency of the case.
{¶ 14} Zak testified regarding his friendship with his then-neighbor, Airhart, and Airhart's proposal of an investment opportunity. He testified:
[Airhart] explained to me that he had worked in the oil business, there was a big oil find out there, and it was in the news. I didn't know anything about the oil business, I didn't know about oil anything.
So he proceeded to explain to me that there was an oil drilling truck that he had located in Pennsylvania somewhere, and that it was available for purchase for $80,000. And he said it's only going to be available for a short time and that I had, you know, to make, if I wanted to go ahead with something like that with him, then I had to put in $60,000 and do it within roughly a three-day period or a short period of time, I think it was maybe like three days, he'd need an answer.
After further questioning by Zak, Airhart invited Zak to his house and "showed [Zak] what appeared to be invoices and returns that were being paid out to various people that owned trucks, and they were substantial amounts." Zak testified he had a "string of conversations" about the opportunity with Airhart, and Airhart "was always, he was emphasizing we've got to move quickly."
{¶ 15} Persuaded by Airhart's information and his expertise, Zak deposited his personal check for $60,000 directly in Airhart's bank account, according to Airhart's directions, and placed management of the venture in Airhart's hands, trusting his claimed expertise. Zak indicated he never met Billy Ray Russell in person, but listened in on a phone call between Airhart and Russell once, when he was a passenger in Airhart's car. After Zak transferred funds, Airhart continued to supply Zak with information related to his investment.
{¶ 16} Eventually, Airhart informed Zak the venture would not be profitable and that Airhart planned to use the truck himself in Texas. Airhart indicated he would buy the truck from Zak and Airhart wrote Zak a check for $20,000, with a promise to pay the rest of the money soon. When Airhart failed to pay the balance owed, Zak filed suit. While the suit was pending, Airhart left voicemails for Zak indicating unidentified creditors were owed $35,000 for repairs made to the truck, and they wanted their money. Zak considered the messages to be threats.
While testimony references the content of the voicemail messages, and the recordings were played at trial, the record on appeal does not include any recordings. The documentary exhibits were filed by each party with the trial court prior to the trial date, but no audio recordings were filed with the trial court or as part of the appeal.
{¶ 17} Airhart also testified, and some of his testimony was inconsistent with prior deposition and interrogatory responses. He testified that he knew Zak was going through some difficulties related to his divorce, but he believed he was merely helping Zak go into business with Billy Ray Russell. Airhart denied being part of any business venture, despite acknowledging the roles he ostensibly played in introducing Russell to Zak, purchasing the truck, transporting the truck, and traveling to North Dakota to inspect the truck and then drive the truck to a farm he could not identify by address or through the property owner. Airhart also claimed that Zak and Russell met face-to-face at his home before the sale, and Zak and Russell entered into their partnership at that time without Airhart's participation.
{¶ 18} Airhart's story of his connection to Russell also varied. At first, Airhart indicated he and Billy Ray Russell met each other about 27 years earlier, when they briefly lived at the same apartment complex, and they only recently reconnected. While both Airhart and Russell were employed in the trucking industry, Airhart also claimed the two never worked together. At trial, however, Airhart admitted that he and Russell worked together in North Dakota, with both associated with New Energy Drilling, a company owned or controlled by Russell. Airhart had also communicated with Zak using a New Energy Drilling email address.
{¶ 19} As to the money that changed hands, Airhart initially claimed he delivered a check for $60,000 to the seller. Later, he claimed he tendered $50,000 for the purchase and applied the rest toward transportation. At trial, Airhart indicated he used some of the funds for his own expenses. Airhart could not explain why Zak deposited $60,000 in his account instead of Russell's, and he also could not identify the truck seller, to whom he would have written a sizeable check from his personal account. He further testified that he later gave Zak $20,000 as a loan, believing Zak would apply it toward the repair bill for the truck that Zak and Russell owned together. Finally, despite the fact that Zak never traveled to North Dakota or even saw the truck, Airhart claimed Zak abandoned the truck by leaving it in North Dakota in disrepair.
{¶ 20} In addition to Airhart's testimony, a long-time friend of Airhart testified that he witnessed Airhart with a truck at a North Dakota farm. He indicated the truck was a red, single-steer truck, but he "never did take a look at it." The third party, identified by Airhart in his voicemail message as a party that performed repairs on the truck and expected payment for that work, was not identified at trial and Airhart presented no evidence regarding repairs or a resulting debt.
{¶ 21} At the close of trial, the parties presented closing argument through their counsel. Zak argued that Airhart persuaded him to invest in a business opportunity that Airhart would manage using a truck purchased by Zak. Despite these promises, Zak noted that Airhart testified he had no intention of going into business with Zak. Airhart repaid a portion of the $60,000 investment and promised to repay the rest, but never did.
{¶ 22} In contrast, Airhart argued that Zak purchased the truck with Russell and the two failed to succeed in their venture together, without Airhart's involvement. He also argued that the oil boom was real, so Airhart's representations regarding the opportunity were not false. Finally, Airhart argued that any liability should also be attributed to Russell as a non-party bearing responsibility despite the fact that none of Zak's claims sought damages for injury to person or property.
{¶ 23} The trial court granted the parties leave to supplement argument with proposed findings of fact and conclusions of law. On March 8, 2021, the trial court issued its judgment for Zak, awarding him $40,000.
While the trial court referenced proposed findings of fact and conclusions of law, submitted by both parties, the record contains no record of these filings from either party.
{¶ 24} In its findings, the trial court found that Airhart initiated discussions with Zak regarding the investment opportunity and held himself out as having "extensive experience in the oil industry." Airhart received a $60,000 check from Zak and then emailed Zak articles about "high yields of the Bakken Oil Fields and the potential profits they could make." Airhart had no documentation regarding the purported purchase of the truck, and could not remember any information about the seller. Airhart also registered an LLC with the Ohio Secretary of State, called JZ Trucking, LLC, and listed himself as the only statutory agent. However, while Airhart agreed to purchase the truck and take necessary steps to start an oil trucking business, the parties did not reduce their agreement to writing.
{¶ 25} The trial court found Airhart's testimony regarding the events entirely unbelievable. The trial court considered Airhart's vague recollection of key people and dates, his inability to account for the money involved, and the many different versions of events recounted, and concluded that Airhart took Zak's money while representing he would purchase a truck and start an oil drilling business, but failed to demonstrate such a purchase ever occurred. Airhart did, however, continue to provide information and provide minimal updates regarding the venture, before admitting failure and reimbursing Zak a portion of the funds, $20,000.
{¶ 26} In ruling on Zak's claims, the trial court found the lack of a written contract barred claims based on breach of contract or breach of a joint venture. The trial court instead found all elements satisfied demonstrating fraud and conversion of property, and awarded damages in the amount of $40,000, representing the remainder of Zak's investment with Airhart.
{¶ 27} Airhart filed a timely appeal of this judgment.
III. Assignment of Error
{¶ 28} Appellant now challenges the judgment with the following assignment of error:
1. THE TRIAL COURT WAS UNREASONABLE IN DENYING LEAVE TO AMEND A PLEADING MEANT TO, AMONG OTHERS, PROPERLY PRESERVE AN APPLICABLE AFFIRMATIVE DEFENSE.
2. THE TRIAL COURT INCORRECTLY HELD IN FAVOR OF APPELLEE ON THE CIVIL CAUSES OF ACTION FOR FRAUD AND CONVERSION.
3. THE TRIAL COURT INCORRECTLY HELD THAT APPELLANT WAS LIABLE FOR THE ENTIRE LOSS ALLEGEDLY SUSTAINED BY APPELLEE.
IV. Analysis
A. Leave to Amend
{¶ 29} In his first assignment of error, Airhart contends the trial court abused its discretion in denying his request to amend his answer to add an affirmative defense. Airhart sought to assert a statute of limitations defense less than a month before the trial date. Zak opposed the request for leave to amend, and the trial court denied amendment, noting the prejudice that would result from Airhart's delay in requesting leave until the eve of trial.
{¶ 30} In arguing an abuse of discretion, Airhart characterizes the trial court's reasoning as "conclusory" and without support in the record, considering the requirements under Civ.R. 15(A) to freely grant leave. The trial court's reasoning, however, was neither conclusory nor lacking in support.
{¶ 31} In finding undue prejudice would result from granting leave, the trial court noted that Airhart's motion was filed less than a month before the scheduled trial date of January 27, 2021, as well as the following chronology:
Airhart's answer to Zak's amended complaint, filed on January 21, 2020, did not include the Statute of Limitations as an affirmative defense. He filed a motion for summary judgment on August 7, 2020. In his memorandum in support of summary judgment, Airhart did not argue that the Statute of Limitations applied to any of the counts of Zak's complaint. Airhart raised the issue of the Statute of Limitations in his reply
memorandum in support of his summary judgment motion. On December 29, 2020, this Court found that Airhart had waived the affirmative defense of the Statute of Limitations due to his failure to plead it in his answer.
The trial court further noted that Airhart did not "argue newly discovered information giving rise to a [s]tatute of [limitations defense" and permitting amendment would potentially necessitate additional discovery and continuation of the trial date. At the time Airhart sought leave to amend, Zak's claims had been pending for over a year, discovery was complete, and trial was imminent.
{¶ 32} Civ.R. 15(A) permits liberal amendment, with leave to amend within the discretion of the trial court. Turner v. Cent. Local School Dist, 85 Ohio St.3d 95, 99, 706 N.E.2d 1261 (1999), citing Wilmington Steel Products, Inc. v. Cleveland Elec. Illum. Co., 60 Ohio St.3d 120, 121-122, 573 N.E.2d 662 (1991). However, "motions to amend pleadings pursuant to Civ.R. 15(A) should be refused if there is a showing of bad faith, undue delay, or undue prejudice to the opposing party. Turner at 99, citing Hoover v. Sumlin, 12 Ohio St.3d 1, 465 N.E.2d 377 (1984), paragraph two of the syllabus.
{¶ 33} We review the trial court's refusal of leave to amend for an abuse of discretion. Journeymen Professionals, Inc. v. Am. Family Ins. Co., 6th Dist. Lucas No. L-05-1404, 2006-Ohio-5624, ¶ 25, citing Wilmington Steel at 122. An abuse of discretion requires more than error of law or judgment, requiring a finding that the trial court acted unreasonably, arbitrarily, or unconscionably and failed to consider whether the amendment was requested in good faith, the new matters had support, the amendment was not sought for delay, and the amendment would not unfairly prejudice the opposing party. Journeyman at ¶ 25, citing Solowitch v. Bennet, 8 Ohio App.3d 115, 117, 456 N.E.2d 562 (8th Dist.1982).
{¶ 34} In this case, Airhart argues the proposed affirmative defense did not necessitate a delay for additional discovery, as the prior discovery sufficiently demonstrated Zak's tort claims were time-barred. In contrast, Zak argues that the discovery already completed in the case addressed only the "pleadings and affirmative defenses proffered," and not the new affirmative defense Airhart sought to introduce at the eleventh hour. Zak further argues that Airhart possessed all necessary information to assert his defense more than a year prior to seeking leave to amend, and Airhart waived the defense by not raising it in his answer.
{¶ 35} Airhart's argument regarding abuse of discretion focuses on the potential merit of his statute of limitations defense, and not his failure to seek amendment earlier than weeks before the trial date or the potential prejudice to Zak. The statute of limitations defense must be raised in a timely manner or it is waived. Drenning v. Blue Ribbon Homes, 6th Dist. Fulton No. F-06-001, 2007-Ohio-1323, ¶ 74, citing Jim's Steak House, Inc. v. Cleveland, 81 Ohio St.3d 18, 20, 688 N.E.2d 506 (1998). Furthermore, contrary to Airhart's argument, the trial court did consider the timeliness of the request for leave, as well as the prejudice that could result from amendment within weeks of the trial date.
{¶ 36} The trial court found Airhart's motion untimely. On appeal, Airhart does not claim his request for leave was timely, but instead highlights the probable success of his new defense based on facts available to him from the earliest days of the proceeding. However, the merits of his statute of limitations defense only matter if he asserted that defense in a timely manner. Airhart waited almost a year after filing his answer to seek amendment. The trial court had already considered and ruled on his motion for summary judgment, and the parties' trial preparations were in their final days.
{¶ 37} The trial court also considered the prejudice that late amendment would cause to Zak, noting Airhart filed the request "less than one month before the trial date." Prejudice and timeliness may be related considerations, as amendment after an unjustified delay could result in prejudice to the opposing party. Additionally, "prejudice is the most critical factor to be considered in determining whether to grant leave to amend." Musil v. Gerken Materials, Inc., 6th Dist. Lucas No. L-19-1262, 2020-Ohio-3548, ¶ 25, citing CommuniCare, Inc. v. Wood Cty. Bd. of Commrs., 161 Ohio App.3d 84, 89, 2005-Ohio-2348, 829 N.E.2d 706, ¶ 17 (6th Dist), citing Frayer Seed, Inc. v. Century 21 Fertilizer & Farm Chem., Inc., 51 Ohio App.3d 158, 165, 555 N.E.2d 654 (3d Dist.1988).
{¶ 38} Here, the trial court determined that Airhart waited until after filing a motion for summary judgment and receiving an adverse decision to seek amendment, and late amendment would jeopardize the scheduled trial date and require a reopening of discovery to address the new defense. While Airhart argues no additional discovery would have been necessary because he had all the discovery he required, this argument misses the mark. The issue of prejudice - as appropriately viewed by the trial court -concerned Zak 's position relative to the new defense. The new defense implicated the time limitations for Zak's claims, and because the time for filing suit might be extended by discovery of the wrongdoing, Zak would have been entitled to conduct additional discovery to counter Airhart's purported defense. See, e.g., Invrs. REIT One v. Jacobs, 46 Ohio St.3d 176, 181, 546 N.E.2d 206 (1989) (actions arising from a taking of personal property or fraud do not accrue until the wronged party discovers the taking or the fraud).
{¶ 39} Considering the record, and the complete lack of any explanation for Airhart's delay in seeking to amend his answer until after the ruling on summary judgment, we find no abuse of discretion by the trial court in denying leave to amend his pleading and raise an eleventh hour affirmative defense. To require amendment in such circumstances would subject an opposing party to piecemeal motions that delay trial and force duplication of time and resources in responding to the newly asserted defenses. See, e.g., Turner, 85 Ohio St.3d at 99, 706 N.E.2d 1261, citing Hoover v. Sumlin, 12 Ohio St.3d 1, 6, 465 N.E.2d 377 (1984) (it is an abuse of discretion to permit unexplained, piecemeal amendment once discovery is complete, the court has ruled on summary judgment, and trial is scheduled, even if the new defense could have been dispositive).
{¶ 40} The trial court considered both the timeliness of Airhart's motion seeking leave, as well as the prejudice that would result from granting the motion. In denying leave, the trial court determined Airhart's request was untimely and granting leave would result in undue prejudice to Zak. We find no abuse of discretion by the trial court in this regard. Accordingly, we find Airhart's first assignment of error not well-taken.
B. Manifest Weight
{¶ 41} In his second assignment of error, Airhart argues the verdict in favor of Zak on his claims for fraud and conversion was against the weight of the evidence as a matter of law. Essentially, Airhart argues that - because the trial court found no contract - there could be no tort claim based on the same economic loss claimed for breach of contract. Additionally, Airhart argues there were no facts supporting a finding of either fraud or conversion.
Airhart suggests we should review the adverse summary judgment decision based on the facts, and reverse, notwithstanding the verdict. Because a trial on the merits precludes review of a denial of summary judgment based on the factual issues first raised in summary judgment, we do not review the ruling on summary judgment. See Continental Ins. Co. v. Whittington, 71 Ohio St.3d 150, 159, 642 N.E.2d 615 (1994).
{¶ 42} We review a trial court's judgment following a bench trial under the manifest weight of the evidence standard. Multibank 2009-1-CML-ADC Venture, LLC v. S. Bass Island Resort, Ltd. 2017-Ohio-344, 77 N.E.3d 565, ¶ 18 (6th Dist), citing Terry v. Kellstone, Inc., 6th Dist. Erie No. E-12-061, 2013-Ohio-4419, ¶ 12. In reviewing the judgment, we weigh the evidence and all reasonable inferences, consider the credibility of the witnesses, and determine whether the trial court clearly lost its way in resolving conflicts in the evidence, creating such a manifest miscarriage of justice that reversal and a new trial are necessary. (Citations omitted) Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, 972 N.E.2d 517, ¶ 20. As part of this review, we are guided by a presumption that the trial court's findings of fact were correct, as the trial court "is best able to view the witnesses and observe their demeanor, gestures and voice inflections, and use these observations in weighing the credibility of the proffered testimony." Seasons Coal Co., Inc. v. City of Cleveland, 10 Ohio St.3d 77, 80, 461 N.E.2d 1273 (1984); see also CE. Morris Co. v. Foley Construction Co. 54 Ohio St.2d 279, 376 N.E.2d 578 (1978) at the syllabus ("Judgments supported by some competent, credible evidence going to all the essential elements of the case will not be reversed by a reviewing court as being against the manifest weight of the evidence.").
{¶ 43} With his first argument, Airhart invokes the economic loss rule as a bar to awarding damages for fraud and conversion. The economic loss rule generally bars recovery in tort for a plaintiff who has suffered only economic loss. Corporex Dev. & Constr. Mgt, Inc. v Shook, Inc., 106 Ohio St.3d 412, 2005-Ohio-5409, 835 N.E.2d 701, ¶ 6, citing Chemtrol Adhesives, Inc. v. Am. Mfrs. Mut. Ins. Co., 42 Ohio St.3d 40, 44-45, 537 N.E.2d 624 (1989); Floor Craft Floor Covering, Inc. v. Parma Community Gen. Hosp. Assn., 54 Ohio St.3d 1, 3, 560 N.E.2d 206 (1990). "This rule stems from the recognition of a balance between tort law, designed to redress losses suffered by breach of a duty imposed by law to protect societal interests, and contract law, which holds that 'parties to a commercial transaction should remain free to govern their own affairs.'" Corporex at ¶ 6, quoting Chemtrol at 42; see also Floor Craft at 7 (additional citation omitted.).
{¶ 44} Not all tort claims fall under the economic loss rule. "A plaintiff may pursue such a tort claim if it is 'based exclusively upon [a] discrete, preexisting duty in tort and not upon any terms of a contract or rights accompanying privity.'" Windsor Medical Center, Inc. v. Time Warner Cable, Inc., 2021-Ohio-158, 167 N.E.3d 23, ¶ 27 (5th Dist), quoting Corporex at ¶ 9. Claims for fraud or conversion, for example, can survive application of the rule where the "tort duty was breached independent of the contract[.]" Windsor Medical at ¶ 28, citing Campbell v. Krupp, 195 Ohio App.3d 573, 2011-Ohio-2694, 961 N.E.2d 205, ¶ 16 (6th Dist.) (additional citation omitted.).
{¶ 45} Without addressing whether the alleged fraud or conversion related to a duty also assumed by contract, Airhart argues that any claim of an agreement will bar all tort claims. However, in this case, the trial court weighed the evidence presented at trial and determined the parties did not form a contract, and as a result, ruled in Airhart's favor on the contract-related claims. Without any contractual duties, Airhart's position regarding application of the economic loss rule lacks merit, as the trial court considered only duties owed under tort law. Therefore, based on these findings of the trial court that no contract existed, we find the economic loss rule inapplicable in this case.
{¶ 46} Airhart next argues that the claims for fraud and conversion lack support in the record, based on the lack of sufficient competent, credible evidence to support all elements of each claim. As to fraud, Airhart argues only truthful statements and that Zak presented no evidence to support the required reliance on Airhart's representations regarding the venture. As to conversion, Airhart argues Zak presented evidence that only demonstrated Airhart acted with Zak's approval regarding the funds, negating any conversion claim. We address each claim in turn.
1. Fraud
{¶ 47} To prevail on his fraud claim, Zak had the burden of demonstrating a material misrepresentation by Airhart and Airhart's knowledge or reckless disregard of his false statements. Zak also had to demonstrate Airhart had an intent to mislead him into relying on the misrepresentation, and as a proximate result of Zak's justifiable reliance, Zak sustained the claimed injury. Volbers-Klarich v. Middletown Mgt, Inc., 125 Ohio St.3d 494, 2010-Ohio-2057, 929 N.E.2d 434, ¶ 27, citing Burr v. Stark Cty. Bd. of Commrs., 23 Ohio St.3d 69, 73, 491 N.E.2d 1101 (1986).
{¶ 48} Airhart challenges only proof of two of the required elements for fraud on appeal. He argues there was no false representation about the Bakken oil fields, which do exist, and that Zak could not have justifiably relied on any of his statements, as he gave Zak much of the information about the oil business after he received Zak's money. As to each element, Airhart construes the alleged misrepresentations as a broad promise to make money in the oil business and does not address Zak's actual claim, in which Zak specifically alleged that Airhart "solicited" him "for the purpose of inducing [him] to purchase an oil rig truck" and represented that possessing an oil drilling truck would permit Zak and Airhart to realize "substantial profits" in their joint business venture in the oil business. Airhart also fails to address the evidence demonstrating the representations made prior to the exchange of money, as supporting justifiable reliance, such as the purported invoices and returns that Airhart showed to Zak in promoting the investment venture.
{¶ 49} Zak and Airhart gave opposing testimony at trial, and the trial court, as the trier of fact, considered the credibility of the witnesses. We defer to the trial court's findings, as "the trial judge is best able to view the witnesses and observe their demeanor, gestures and voice inflections, and use these observations in weighing the credibility of the proffered testimony." See Seasons Coal Co., Inc. v. City of Cleveland, 10 Ohio St.3d 77, 80, 461 N.E.2d 1263 (1984).
{¶ 50} In this case, Zak's testimony was consistent regarding Airhart's material misrepresentations regarding the business and his purported role. Zak also testified that he relied on Airhart's expertise and advice, bolstered by their close friendship and the information Airhart shared regarding the potential profits. As a proximate result of this reliance on Airhart, Zak testified he sustained the claimed injury. Considering the representations made by Airhart and Airhart's subsequent conduct once he obtained Zak's money, an intent to deceive could be inferred from the testimony.
{¶ 51} In contrast, Airhart's testimony was not consistent. For example, Airhart provided different stories regarding the destination of Zak's funds after they disappeared from Airhart's personal account, with no documentation of the truck purchase and no recollection - by Airhart - of any identifying details of the purported truck. Airhart also claimed he never intended to participate in any business with Zak, and specifically, never intended to purchase an oil truck with Zak. Airhart's actions, however, supported Zak's testimony that Airhart participated in the investment scheme.
{¶ 52} Airhart received $60,000 from Zak, filed the necessary paperwork to obtain an LLC for the business, and provided updates to Zak regarding the purported truck. Airhart also claimed he traveled to North Dakota to deal with the truck and possibly moved it to an unknown location. Airhart also gave Zak $20,000, consistent with Zak's testimony of a buy-out, and Airhart's claim of a loan was deemed not credible by the trial court.
The trial court appeared skeptical that Airhart ever actually purchased a truck with Zak's money, noting "[e]very vague answer regarding the oil truck came from Airhart[, ]" with a lack of "any evidence of a title to the oil truck or anything to show [Airhart] purchased the [truck]." The trial court further challenged Airhart's claim that he drove a truck for 35 miles at a top speed of 35 m.p.h. that he also claimed needed extensive repairs, had no plates or permits, and had rotting tires.
{¶ 53} Considering the record, Zak presented competent evidence to support each element of his fraud claim, and significant to the issues raised on appeal, evidence of both misrepresentations and justifiable reliance. Airhart's evidence, on the other hand was found to lack credibility, with the trial court especially noting the conflicts in his testimony and his "every vague answer" regarding the truck. As a result of Zak's reliance on his more knowledgeable, good friend's representations regarding a business opportunity, managed by Airhart, the trial court concluded that "Zak entrusted Airhart with $60,000" and after Airhart returned only some of the funds, "suffered damages in the amount of $40,000."
{¶ 54} Based on the evidence adduced at trial, the trial court could reasonably conclude that Airhart made material misrepresentations to Zak, and Zak justifiably relied on these misrepresentations. Accordingly, we find the trial court's judgment on Zak's fraud claim was supported by the manifest weight of the evidence.
2. Conversion
{¶ 55} Airhart also challenges the verdict in Zak's favor on his conversion claim. "Conversion is the wrongful exercise of dominion or control over property in exclusion of the owner's right, or the withholding of property from the owner's possession under a claim inconsistent with the owner's rights." (Citations omitted) Peirce v. Symanski, 6th Dist. Lucas No. 11-1298, 2013-Ohio-205, ¶ 19. To prevail on a conversion claim, a plaintiff must establish ownership or right to possession at the time of conversion, conversion by wrongful act, and damages. Id.
{¶ 56} Where, as here, the property at issue is money, a plaintiff must also demonstrate the funds were "earmarked" for a particular purpose. See RAE Assocs., Inc. v. Nexus Communications, Inc., 2015-Ohio-2166, 36 N.E.3d 757, ¶ 31 (10th Dist), citing Haul Transport of Virginia, Inc. v. Morgan, 2d Dist. Montgomery No. CA 14859, 1995 WL 328995 (June 2, 1995). Here, the parties do not dispute that Zak's $60,000 was earmarked for purchase of an oil truck. While Airhart argued that Zak was purchasing the truck with Russell, there is also no dispute that Zak never took possession of an oil truck and no claim that Russell ever had possession of the money, earmarked for that purchase.
{¶ 57} Instead, Airhart disputes a wrongful act attributable to him, arguing that, because Zak gave him the funds to purchase the oil truck, there was no evidence "demonstrating that [Airhart] converted any property of [Zak] outside of the direction and authority given to [Airhart]" and "Billy Russell should be to blame for conversion" as to the truck. Airhart further argues that a failed business does not "equate to conversion in this case." This argument does not address the facts, as presented through evidence at trial or as determined by the trial court in rendering judgment.
{¶ 58} As an initial matter, we note that a failed business venture - by itself - does not automatically give rise to a conversion claim. See, e.g., Kudukis v. Mascinskas, 8th Dist. Cuyahoga No. 81663, 2003-Ohio-1355, ¶ 18 ("An individual's investment in a business venture does not, in and of itself, arise to a conversion claim against co-shareholder s/co-investors for the mere fact that the venture failed"). However, that was not the essence of Zak's claim. Instead, Zak claimed, and demonstrated through evidence presented at trial, that Airhart took his money to purchase a truck, but used some of the funds for other purposes and otherwise failed to produce a truck. Some of the evidence, moreover, included Airhart's own admission that he never intended to join Zak in his oil truck venture and that Airhart gave Zak $20,000. While the parties disagreed as to the significance of this transfer of $20,000, the trial court credited Zak's testimony that Airhart intended to pay Zak for his interest in the truck, with the balance of that interest remaining due.
{¶ 59} In this case, the trial court was confronted with widely divergent testimony regarding the parties' dealings, and based on the evidence, found Zak's testimony more credible. For example, the trial court determined that Zak believed he was starting a business with Airhart, and not with Billy Ray Russell, based on the fact that Zak had a relationship with Airhart, Zak conveyed the funds to Airhart, and Airhart "continued to take actions that led Zak to believe he was managing and operating the trucking business." The trial court, furthermore, found no evidence supporting Airhart's version of events regarding purchase of a truck, but instead noted the varying stories told by Airhart regarding the disposition of Zak's investment funds. The trial court also noted, as dubious, Airhart's lack of documentation and his lack of recollection regarding the location or even a basic description of the truck. In finding in favor of Zak on his conversion claim, the trial court concluded:
An action for Conversion requires that the plaintiff either had ownership of the converted property or had the right to possess the converted property. In this case, it is beyond dispute that Zak had ownership of the $60,000 he gave to Airhart for the purpose of purchasing the oil truck.
The greater weight of the evidence supports a finding that Zak never received the benefit of his $60,000. Airhart did not introduce any evidence at trial to indicate he purchased an oil truck with Zak's money. He testified he sent $50,000 to "a" seller in Pennsylvania, but he could not remember
where he sent the money to, he did not have a copy of his cancelled $50,000 check, and he could not account for how he spent the rest of Zak's money.
If Airhart used Zak's money to purchase an oil truck, Zak therefore had the legal right to possess a majority interest in the truck. Airhart did not have the oil truck titled to Zak or JZ Trucking, LLC, nor provide any documentation as to who possessed the title to Zak. Airhart later paid Zak $20,000 to buy Zak's interest in the truck, but he never paid the remaining $40,000, and never returned the truck to Zak.
{¶ 60} Without addressing the contrary evidence or facts, Airhart acknowledges the $60,000 was earmarked for purchase of an oil truck and maintains his position that he acted only at the direction of Zak, ignoring the actions he took that supported Zak's version of events. Significantly, Airhart fails to address the evidence demonstrating that he took Zak's money and Zak received neither an oil truck nor a return of his purchase money, and Airhart admittedly used some of the funds himself rather than apply the total sum toward the intended purchase. Furthermore, after reviewing the testimony and evidence, the trial court found Airhart's claims regarding a truck purchase dubious. Because Zak, ultimately, lost $40,000 in his dealings with Airhart, the trial court determined the value of converted property equaled that sum.
{¶ 61} The record, in this case, supports the trial court's credibility determination regarding witness testimony and, specifically, its finding regarding conversion. Therefore, we find no error by the trial court in awarding judgment for Zak on his conversion claim. As to the weight of the evidence in support of Zak's claims for fraud and conversion, accordingly, we find no error, and Airhart's second assignment of error is not well-taken.
C. Apportionment of Liability
{¶ 62} In his final assignment of error, Airhart argues the trial court erred in failing to apportion damages between Airhart and Billy Ray Russell, as provided by R.C. 2307.23(A), which provides:
(A) In determining the percentage of tortious conduct attributable to a party in a tort action under section 2307.22 or sections 2315.32 to 2315.36 of the Revised Code, the court in a nonjury action shall make findings of fact, and the jury in a jury action shall return a general verdict accompanied by answers to interrogatories, that shall specify all of the following:
(1) The percentage of tortious conduct that proximately caused the injury or loss to person or property or the wrongful death that is attributable to the plaintiff and to each party to the tort action from whom the plaintiff seeks recovery in this action;
(2) The percentage of tortious conduct that proximately caused the injury or loss to person or property or the wrongful death that is attributable
to each person from whom the plaintiff does not seek recovery in this action.
{¶ 63} R.C. 2307.23, a comparative negligence statute, permits apportionment of liability for personal injury or wrongful death among a plaintiff and the named tortfeasors or third parties, not named as parties in the action. In arguing the applicability of R.C. 2307.23 to Zak's fraud and conversion claims, Airhart does not indicate how these actions fall within an "injury or loss to person or property." Regardless, Airhart, as defendant, bore the "burden of proof in establishing such defense." (Citations omitted) Miller v. State, 10th Dist. Franklin No. 13AP-849, 2014-Ohio-3738, ¶ 64.
{¶ 64} Airhart argues the trial court erred in failing to apportion liability, but points to no evidence - adduced at trial - that supported attributing some of the damages to Billy Ray Russell. Instead, Airhart argues that Zak's actions "of including Billy Russell in his fact pattern and contractual obligations at all times, demonstrates that he considers how Russell played a part in the failed venture and truck." Therefore, Airhart contends, Zak provided proof that the $40,000 loss suffered by Zak "must then be attributable to Billy Ray." Contrary to Airhart's position, Zak's theory of the case did not provide the requisite proof of comparative fault.
{¶ 65} At trial, Airhart attempted to blame Russell for the entire failed venture and steadfastly denied any culpability. He otherwise failed to support his theory of Russell as the sole tortfeasor with factual evidence. Zak, however, testified that he conveyed $60,000 to Airhart based on Airhart's representations regarding an oil drilling business, but later learned that Airhart's representations were false and Zak had neither funds nor a demonstrable interest in a truck once he discovered the falsity. There was no evidence presented demonstrating Billy Ray Russell committed any tortious conduct, as evidence of Russell was generally limited to a single encounter between Zak and Russell, and Airhart's ever-changing story of Airhart's own relationship with Russell. In light of other evidence demonstrating Airhart's role in perpetuating the scheme, we find no error by the trial court in attributing all of Zak's damages to Airhart. Accordingly, Airhart's third and final assignment of error is not well-taken.
V. Conclusion
{¶ 66} For the forgoing reasons, we affirm the judgment of the Lucas County Court of Common Pleas, awarding judgment in the amount of $40,000 to the appellee, John Zak. Appellant is ordered to pay the costs of this appeal pursuant to App.R. 24.
Judgment affirmed.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.LocApp.R. 4.
Thomas J. Osowik, J., Christine E. Mayle, J., Gene A. Zmuda, P.J., CONCURS.