HEALTH AND WELLNESS LIFESTYLE CLUBS -vs- CAROLYN VALENTINE

Canton, Ohio - Business litigation attorney represented Carolyn Valentine with fraudulent and negligent misrepresentation (Count I), promissory estoppel (Count II), and professional negligence (Count III) charged.

On August 6, 2019, appellant Health and Wellness Lifestyle Clubs, LLC,

filed a complaint against appellee Carolyn Valentine for fraudulent and negligent

misrepresentation (Count I), promissory estoppel (Count II), and professional negligence

(Count III) in the Stark County Court of Common Pleas.

{¶3} Appellant in this case previously filed a complaint in the United States

District Court for the Northern District of Ohio in October of 2017 against multiple

defendants, including Raintree Golf Club, LLC, and John Rainieri. The district court

classified these defendants as the "Raintree Defendants.” Appellee was not named as a

defendant in the district court case. Appellant brought claims against the Raintree

Defendants for breach of contract, negligence, misrepresentation, fraudulent

concealment, fraudulent inducement, and common law fraud. The Raintree Defendants

moved for partial summary judgment against appellant on their breach of contract claim.

Appellant sought summary judgment on the Raintree Defendant's counterclaim seeking

a declaratory judgment that no contract currently exists between the Raintree Defendants

and appellant, and that the Raintree Defendants are under no obligation to sell either golf

course to appellant.

{¶4} The district court issued an order and decision on March 28, 2019, granting

partial summary judgment to the Raintree Defendants on Count I of appellant's complaint

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and Count I of the Raintree Defendants' counterclaim. Health and Wellness Lifestyle

Clubs, LLC v. Raintree Golf, LLC, et al., N.D. Ohio No. 1:17CV2189, 2019 WL 1409364

(March 28, 2019).

{¶5} The district court found appellant could not succeed on its breach of contract

claim for the following reasons: the purchase agreements were expressly conditioned on

appellant providing unconditional commitment(s) for financing, and no such

commitment(s) were ever provided; all of the closing deadlines expired; there was no

"breach” by the Raintree Defendants; and appellant is not entitled to the relief of specific

performance that it requests. According to the district court, the failure of the Raintree

Defendants to disclose the overall poor financial condition of the golf course did not

prevent the condition precedent from occurring; in fact, had the Raintree Defendants

disclosed the overall poor financial condition, lenders would not have approved the

financing.

{¶6} In May of 2019, the parties stipulated to the dismissal of appellant's

remaining claims, without prejudice, shortly after the district court entered summary

judgment on appellant's breach of contract claim. In Health and Wellness Lifestyle Clubs,

LLC v. Raintree Golf, LLC and John Rainieri, 6th Cir. No. 19-3533, 808 Fed.Appx. 338

(April 6, 2020), the Sixth Circuit Court of Appeals affirmed the decision of the district court

granting summary judgment to the Raintree Defendants on other grounds, finding the

contract was unambiguous regarding the financial disclosure requirements and that no

amount of discovery would have changed the unambiguous language of the parties'

contract.

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{¶7} In this case, the complaint provides as follows with respect to the fraudulent

and negligent misrepresentation claim: Valentine is a certified public accountant who

provided accounting services to Raintree County Club, Prestwick Country Club, and their

affiliated entities; appellant was under contract to purchase both country clubs in 2017;

during the due diligence process, a series of financial documents, accountings, and

reports were provided to appellant by and through appellee; appellee never disclosed her

familiar relationship with the owners of Raintree County Club and Prestwick Country Club;

the financial information, accountings, reports and data provided by appellee was

materially inaccurate and misleading, due in part to the interrelated nature of the

companies and the common ownership; this caused misleading accounts receivables

inflating the business value and contrastingly, when the receivables were written off, it

created phantom income without actual value; the financial information, accountings,

reports, and data provided by appellee were not prepared in accordance with GAAP; and,

as a result of appellee's negligent and fraudulent misrepresentations of the financial

information, appellant has been damaged in an amount to be determined at trial.

{¶8} Appellee filed a motion for judgment on the pleadings on November 27,

2019. In her motion, appellee argued: as to Count I, the complaint fails to plead fraud

with particularity; appellant cannot maintain a fraud claim because appellee did not

conceal any facts which she had a duty to disclose; Count II fails to state a claim for

promissory estoppel; and Count III fails to state a claim for accountant negligence. On

January 8, 2020, appellant filed a "brief in opposition to motion for judgment on the

pleadings or in the alternative leave to file an amended complaint.” Appellant argued the

motion should be denied because appellee failed to show that appellant could prove no

Stark County, Case No. 2020CA00083 5

set of facts in support of its claim that would entitle it to relief. Appellant also filed an

alternative motion to amend its complaint to provide additional detail if the trial court found

a more specific statement was necessary. Appellee filed a reply on January 27, 2020.

{¶9} The trial court issued a judgment entry granting appellee's motion for

judgment on the pleadings on April 7, 2020. The trial court cited the district court decision

in the Health and Wellness Lifestyle Clubs, LLC v. Raintree Golf, LLC, et al., N.D. Ohio

No. 1:17CV2189, 2019 WL 1409364 (March 28, 2019) case in its analysis. The trial court

stated that, even if appellant's claims against appellee were true, appellee's alleged

conduct of overstating the business value of the golf courses could not have prevented

appellant from obtaining the requisite third-party financing necessary to close the sale;

rather, it was appellant's failure to obtain financing that caused any alleged damages as

was the case in the federal lawsuit. Further, "had Valentine not allegedly inflated the

clubs' value in the financial reports she prepared, but instead disclosed the alleged poor

financial condition of the clubs, then the same result would have occurred, perhaps

worse.”

{¶10} Additionally, as to appellant's request for leave to file an amended

complaint, the trial court found such amendment would have been futile, as the amended

complaint would be subject to the motion to dismiss. The court therefore denied

appellant's request for leave to amend the complaint.

{¶11} Appellant appeals the April 7, 2020 judgment entry of the Stark County

Court of Common Pleas and assigns the following as error:

{¶12} "I. THE TRIAL COURT ERRED IN GRANTING THE MOTION FOR

JUDGMENT ON THE PLEADINGS AS VALID CLAIMS WERE ALLEGED.

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{¶13} "II. THE TRIAL COURT ERRED IN GRANTING THE MOTION FOR

JUDGMENT ON THE PLEADINGS BY CLAIMING A CONDITION PRECEDENT

BARRED A TORT CLAIM.

{¶14} "III. THE TRIAL COURT ERRED IN GRANTING THE MOTION FOR

JUDGMENT ON THE PLEADINGS FINDING NO DAMAGES.

{¶15} "IV. THE TRIAL COURT ERRED IN NOT ALLOWING PLAINTIFF TO

AMEND.”

Motion for Judgment on the Pleadings

{¶16} The trial court granted judgment on the pleadings for appellee and against

appellant. Motions for judgment on the pleadings are governed by Civil Rule 12(C), which

provides, "After the pleadings are closed but within some time as not to delay the trial,

any party may move for judgment on the pleadings.” Pursuant to Civil Rule 12(C),

dismissal is only appropriate where a court (1) construes the material allegations in the

complaint, with all reasonable inferences to be drawn therefrom, in favor of the nonmoving party as true, and (2) finds beyond doubt that the plaintiff could prove no set of

facts in support of his claim that would entitle him to relief. State ex. Rel. Midwest Pride

IV, Inc. v. Pontious, 75 Ohio St.3d 565, 664 N.E.2d 931 (1996).

{¶17} Our appellate standard of review on a Civil Rule 12(C) motion is de novo.

Columbus v. Sanders, 5th Dist. Delaware No. 11 CAE 05 0047, 2012-Ohio-1514. Under

a de novo analysis, we must accept all factual allegations of the complaint as true and all

reasonable inferences must be drawn in favor of the nonmoving party. Kramer

Installations Unlimited, 147 Ohio App.3d 350, 770 N.E.2d 632 (5th Dist. 2002).

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I., II., III.

{¶18} In appellant's first three assignments of error, appellant contends the trial

court committed error when it granted appellee's Civil Rule 12(C) motion for judgment on

the pleadings.

{¶19} Appellant first argues the trial court reached beyond the pleadings into

hypothetical factual analysis and made factual determinations beyond the four corners of

the pleadings. We agree with appellant.

{¶20} In its decision, the trial court cited the district court decision and determined

that, had appellee not allegedly inflated the clubs' value in the financial reports, then the

same result would have occurred, perhaps worse, and any damages were not caused by

appellee's actions. These determinations by the trial court are factual determinations.

{¶21} The district court's partial summary judgment decision only dealt with the

breach of contract claim and corresponding declaratory judgment counterclaim. The

remaining claims against the Raintree Defendants were dismissed. In this tort case,

appellant is not seeking damages from the seller of the golf courses like they were in the

district court case; rather, appellant is seeking damages from the seller's accountant.

Accordingly, this case involves a different factual analysis and requires the resolution of

factual matters beyond the scope of the pleadings. State ex rel. Lee v. Trumbull Cty.

Probate Court, 83 Ohio St.3d 369, 700 N.E.2d 4 (1998).

{¶22} Because a Civil Rule 12(C) motion is restricted solely to the allegations in

the pleadings, the trial court's decision based upon the judgment entries of the district

court was premature in that the issues were beyond the four corners of the pleadings.

Stark County, Case No. 2020CA00083 8

Carver v. Mack, 5th Dist. Richland No. 2005CA0053, 2006-Ohio-2840. We find the trial

court committed error in granting appellee's motion for judgment on the pleadings.

{¶23} Appellee encourages this Court, in our de novo review, to affirm the granting

of the motion for judgment on the pleadings for a separate reason not cited by the trial

court in its decision. Appellee argues appellant's complaint fails to plead fraud with

particularity, as mandated by Ohio Civil Rule 9(B). In its judgment entry, the trial court

held that appellee's motion to dismiss was granted based upon the rationale contained in

the district court decision, and did not address whether the complaint was pled with

sufficient particularity.

{¶24} To prove fraud, a plaintiff must establish the following elements: (1) a

representation, or silence where there is a duty to disclose, (2) which is material to the

transaction, (3) made falsely, with knowledge of its falsity, or with such utter disregard as

to its truth that knowledge may be inferred, (4) with the intent to mislead another into

relying on it, (5) justifiable reliance on the representation, and (6) resulting injury

proximately caused by the reliance. Williams v. Aetna Finance Co., 83 Ohio St.3d 464,

700 N.E.2d 859 (1998). In addition, a plaintiff alleging fraud must plead with particularity

the circumstances constituting fraud. Civil Rule 9(B).

{¶25} The circumstances constituting fraud include the time, place, and content

of the false representation; the fact misrepresented; the identification of the individual

giving the false representation; and the nature of what was obtained or given as a

consequence of the fraud. First-Knox Nat'l Bank v. MSD Properties, Ltd., 5th Dist. Knox

No. 15CA6, 2015-Ohio-4574. However, the Civil Rule 9(B) requirement of particularity in

the pleading of fraud "must be applied in conjunction with the general directives in Civ.R.

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8 that the pleadings should contain a 'short and plain statement of the claim' and that

each averment should be 'simple, concise, and direct.'” F&J Roofing Co. v. McGinley &

Sons, 35 Ohio App.3d 16, 518 N.E.2d 1218 (9th Dist. Summit 1987)

{¶26} This Court has previously found that fraud complaints are not pled with

particularity when the allegations contained in the complaint are general. First-Knox Nat'l.

Bank v. MSD Properties, Ltd., 5th Dist. Knox No. 15CA6, 2015-Ohio-4574 (general

allegation that appellants were misled by appellees at the time they entered a lease did

not plead fraud with particularity); Advanced Prod. Ctr., Inc. v. Emco Maier Corp, 5th Dist.

Delaware No. 2003CAE03020, 2003-Ohio-6206 (complaint failing to allege the time or

place of the false representation and failing to set forth the individual who made the false

representation was not pled with particularity); Miller v. Med. Mut. of Ohio, 5th Dist.

Coshocton No. 2012CA0020, 2013-Ohio-3179 (appellants fraud complaint was not pled

with particularity when appellants failed to identify: the content of the allegations, when

such allegations were made, by whom they were made, the falsity of the allegations, and

the consequences of such misrepresentations).

{¶27} However, unlike the cases cited above, in this case, the complaint sets forth

the time of the fraud (during the due diligence process culminating in a contract to

purchase in 2017), the identification of the individual giving the false representation

(Valentine, as a certified public accountant), and the nature of what was obtained or given

as a consequence of the fraud (materially inaccurate and misleading reports and financial

information provided by appellee caused misleading accounts receivables inflating the

business value and created phantom income without actual value).

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{¶28} Appellee contends the averments in the complaint do not sufficiently set

forth the content of the false representation. We disagree. The complaint did not merely

say that misrepresentations or omissions were made. It specified that appellee provided

materially inaccurate and misleading financial information, accounting, reports, and data

regarding the financial position by including misleading accounts receivables inflating the

business value and writing the receivables off, creating phantom income without actual

value. See Koltcz v. Alchem Corp., 8th Dist. Cuyahoga No. 59205, 1991 WL 232186

(Nov. 7, 1991); Haddon View Investment Co. v. Lybrand, 70 Ohio St.2d 154, 436 N.E.2d

212 (1982) (finding fraud pled with particularity when allegations of fraud in the complaint

were based on misstatements and omissions of information from the financial statement

on which the partners relied); Korodi v. Minot, 40 Ohio App.3d 1, 531 N.E.2d 318 (10th

Dist. 1987). In this case, appellee was sufficiently apprised of the specific claims it was

required to answer. Haddon View Investment Co. v. Lyband, 70 Ohio St.2d 154, 436

N.E.2d 212 (1982).

{¶29} Appellee also contends the counts of promissory estoppel and professional

negligence are subject to their motion for judgment on the pleadings. Promissory

estoppel and professional negligence claims are not fraud claims pursuant to Civil Rule

9(B). Ohio is a notice-pleading state; the plaintiff need not prove its case at the pleading

stage. Thompson v. Buckeye Joint Vocational School Dist., 5th Dist. Tuscarawas No.

2015 AP 08 0047, 2016-Ohio-2804. Pursuant to Civil Rules 8(A) and 8(E), notice

pleading simply requires that a claim or defense concisely set forth only those operative

facts sufficient to give "fair notice of the nature of the action.” Devore v. Mutual of Omaha

Ins. Co., 32 Ohio App.2d 36, 288 N.E.2d 202 (7th Dist. 1972).

Stark County, Case No. 2020CA00083 11

{¶30} In its complaint, appellant alleges the following as to Count II, promissory

estoppel: appellee promised the financial information provided was true and accurate, but

the financial information was not accurate, not prepared in accordance with GAAP, and

was materially misleading; appellant reasonably relied to its detriment on appellee's

promises; and as a result of appellant's reasonable, detrimental reliance upon appellee's

promises, appellant has been damaged in an amount to be determined at trial. As to

Count III, professional negligence, appellant avers in the complaint as follows: appellee

prepared financial documents and reports that were foreseeably being relied upon by

appellant in seeking to purchase the Raintree Country Club and Prestwick Country Club;

appellee's duty as an accountant was to prepare all financial documents and reports using

generally accepted accounting principles; this duty extends to any third person to whom

they understand the information or reports will be shown to for business purposes,

including appellant to whom appellee directly communicated on numerous occasions;

and, as a result of appellant's reasonable and foreseeable reliance upon appellee's

reports and financial information, appellant was damaged in an amount to be determined

at trial.

{¶31} The elements necessary to establish a claim for estoppel are: (1) a promise

clear and unambiguous in its terms; (2) reliance by the party to whom the promise was

made; (3) the reliance must be reasonable and foreseeable; and (4) the party claiming

estoppel must be injured by the reliance. Huggins v. Ark, 5th Dist. Delaware No. 17 CAE

08 0059, 2018-Ohio-658. In an action for professional negligence, the plaintiff must

demonstrate: (1) the existence of a legal duty; (2) a breach of that duty; (3) proximate

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cause; and (4) injury or damages. Ortner v. Kleshinski, Morrison & Morris, 5th Dist.

Richland No. 02-CA-4, 2002-Ohio-4388.

{¶32} Upon review and construing the allegations of the complaint as true and all

reasonable inferences to be drawn therefrom in a light most favorable to appellant, we

find appellant at this stage has sufficiently alleged causes for promissory estoppel and

negligence in its complaint.

{¶33} We therefore decline to affirm the trial court's Civil Rule 12(C) dismissal of

this case based on appellee's theory, not used by the trial court in its analysis, that the

counts were not properly pled in the complaint. Construing the allegations in the

complaint as true and all reasonable inferences in a light most favorable to appellant, we

find appellant sufficiently alleged fraud with particularity, promissory estoppel, and

professional negligence.

{¶34} Both appellant and appellee make several other arguments in their

appellate briefs, such as whether appellant can prove damages, whether the failure to

obtain financing was the cause of appellant's damages, whether the condition precedent

of financing was applicable to this tort case, and whether, pursuant to both Haddon View

Investment Co. v. Coopers & Lybrand, 70 Ohio St.2d 154, 436 N.E.2d 212 (1982) and

Ortner v. Kelshinski, Morrison & Morris, 5th Dist. Richland No. 02-CA-4, 2002-Ohio-4388,

reasonable minds could conclude that appellant is a member of a limited class whose

reliance on the accountant's (appellee's) representation is specifically foreseen.

However, both parties include information and matters outside the pleadings in these

arguments. A 12(C) motion is restricted solely to the allegations in the pleadings.

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{¶35} The only question at this point in time is whether, construing the material

allegations in the complaint in favor of appellant, whether appellant could prove any set

of facts in support of its claim that would entitle it to relief. As detailed above, we find

appellant sufficiently apprised appellee of the claims she was required to answer. The

balance of the arguments that reference matters and include information outside the

pleadings are premature.

{¶36} The portion of appellant's assignments of error arguing the trial court erred

in granting appellee's motion for judgment on the pleadings are sustained.

IV.

{¶37} In its fourth assignment of error, appellant contends the trial court abused

its discretion when it denied appellant's motion to amend.

{¶38} The trial court denied appellant's motion to amend the complaint, finding

such amendment would be futile, as the amended complaint would also be subject to the

motion to dismiss.

{¶39} Based upon our determination that the trial court erred in granting appellee's

motion for judgment on the pleadings, we find the trial court also committed error in

determining an amended complaint would be subject to the motion for judgment on the

pleadings. However, we also found the complaint sufficiently pled fraud, promissory

estoppel, and professional negligence. Accordingly, appellant's fourth assignment of

error is moot.

Based on the foregoing, the portion of appellant’s first three assignments of

error arguing the trial court erred in granting appellee’s motion for judgment on the

pleadings are sustained. Appellant’s fourth assignment of error is moot.





{¶41} The April 7, 2020 judgment entry of the Stark County Court of Common

Pleas is reversed and remanded to the trial court for further proceeding consistent with this opinion.