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Dundics v. Eric Petroleum Corp.

Court of Appeals of Ohio, Seventh District, Mahoning

February 17, 2017

THOMAS DUNDICS, ET AL., PLAINTIFFS-APPELLANTS,
v.
ERIC PETROLEUM CORPORATION, ET AL., DEFENDANTS-APPELLEES.

         Civil Appeal from Court of Common Pleas of Mahoning County, Ohio Case No. 2014 CV 02981

          For Plaintiffs-Appellants Attorney Thomas Hull II Attorney David Detec.

          For Defendants-Appellees Attorney Thomas Hill.

          For Amicus Curiae Attorney Timothy McGranor Attorney Mitchell Tobias.

          Hon. Gene Donofrio, Hon. Mary DeGenaro, Hon. Carol Ann Robb.

          OPINION

          DONOFRIO, P.J.

         {¶1} Plaintiffs-Appellants, Thomas Dundics and IBIS Land Group, Ltd., appeal the dismissal of their complaint by the Mahoning County Court of Common Pleas for failure to state a claim upon which relief can be granted.[1]

         {¶2} Appellants filed a complaint on November 14, 2014 against Defendants-Appellees, Eric Petroleum Corporation and Bruce Broker. Appellants' complaint included five counts. In count one of their complaint, Appellants alleged that they entered into an agreement with Appellees whereby Appellants would find property owners, negotiate gas leases, and work with Appellees to obtain executed gas leases. For compensation, Appellants alleged they were to receive $10.00 per leased acre and a 1% working interest in all wells placed on the leased acreage. Appellants further claimed in their complaint that oil and gas leases are not real estate and that, therefore, they did not need to be licensed real estate brokers to perform these services for Appellees. Appellants complained that they performed their end of the bargain and received some compensation. Now, Appellants complain, the leases may have been sold but Appellees refuse to provide an accounting or pay the monies due Appellants for services rendered. In counts two, three, four, and five of their complaint, Appellants assert alternative theories of conversion, fraud, unjust enrichment, and quantum meruit for the requested relief.

         {¶3} On January 28, 2015, Appellees filed a motion to dismiss Appellants' complaint for failure to state a claim upon which relief could be granted because Appellants did not allege they were licensed real estate brokers as required by R.C. 4735.21, because the breach of contract claims were barred by the statute of frauds, because Appellants failed to plead fraud in their complaint with the particularity required by Civ.R. 9(B), and because Appellants failed to include in their complaint sufficient allegations necessary on any legal theory pled. Appellants filed a brief in opposition along with a motion to amend their complaint.

         {¶4} On March 16, 2015, a hearing was held before a magistrate. The magistrate filed a Magistrate's Decision on May 27, 2015. The magistrate concluded that Appellants were required to have a real estate broker's license to perform the alleged services and Appellants were required to allege the same in their complaint pursuant to R.C. 4735.21. Because they did not make such an allegation, the magistrate concluded that Appellants failed to state a claim upon which relief could be granted and that their complaint must be dismissed. The magistrate denied Appellants' motion to amend their complaint because there was no set of circumstances that would provide them with a cognizable claim in law or equity.

         {¶5} On June 17, 2015, Appellants filed objections to the Magistrate's Decision. Appellees filed a response on June 24, 2015. Appellants filed a motion for leave to supplement their objections on August 6, 2015, based on new information. On August 12, 2015, the trial court overruled Appellants' objections but did not rule on Appellants' August 12, 2015 motion for leave to supplement Appellants' objections. Appellants filed a timely appeal.

         {¶6} Appellants assign two errors to the trial court. Their first assignment of error states:

THE TRIAL COURT ERRED IN GRANTING DEFENDANTS/APPELLANTS' [sic] MOTION TO DISMISS.

         {¶7} In Javorsky v. Sterling Med, 7th Dist. No. 14 MA 87, 2015-Ohio-2113, ¶ 11-12, we reiterated the standard of review regarding a trial court's dismissal of a complaint for failure to state a claim upon which relief can be granted. A Civ.R. 12(B)(6) motion to dismiss for failure to state a claim upon which relief can be granted is a procedural motion that tests the sufficiency of the complaint. Id. citing State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548, 1992-Ohio-73, 605 N.E.2d 378. In order to dismiss a complaint for failure to state a claim upon which relief can be granted, the court must find beyond doubt that the plaintiff can prove no set of facts warranting relief after it presumes all factual allegations in the complaint are true, and construes all reasonable inferences in the plaintiffs favor. Javorsky, at ¶ 11-12 citing State ex rel. Seikbert v. Wilkinson, 69 Ohio St.3d 489, 490, 1994-Ohio-39, 633 N.E.2d 1128. The appellate court is required to independently review the complaint to determine if the dismissal was appropriate. Javorsky, at ¶ 11-12 citing Ferreri v. Plain Dealer Publishing Co., 142 Ohio App.3d 629, 639, 756 N.E.2d 712 (8th Dist.2001).

         {¶8} The parties and Amicus Curiae agree that there are two decisions which have previously decided the issue before this court, Binder v. OG Land Development and Exploration, LLC N.D.Ohio No. 4:11-cv-02621, 2012 WL 1970239 (May 31, 2012), and Wellington Resource Group, LLC v. Beck Energy Corp., 975 F.Supp.2d 833 (S.D.Ohio 2013). The courts in Binder and Wellington reached conflicting results. The Binder court concluded that one who engages in the brokering of oil and gas leases is subject to the provisions of R.C. 4735.21. The Wellington court concluded that such individuals are not limited by R.C. 4735.21. Appellants argue that the Wellington decision is the correct one and Appellees argue Binder is the correct decision.

         {¶9} Appellants and Landmen (unless noted otherwise, collectively referred to as "Appellants") argue that R.C. 4735.21 is inapplicable because oil and gas leases are not interests in real estate. Appellants assert that Wellington is directly on point and that its reasoning requires that the trial court's decision be reversed. They suggest that to require a real estate broker's license to perform the services which Appellants performed here would require needless regulation and increased costs. Further, Appellants argue that the recent decision of the Ohio Supreme Court in Chesapeake Exploration LLC, v. Buell, 144 Ohio St.3d 490, 2015-Ohio-4551, 45 N.E.3d 185, does not invalidate Wellington nor otherwise resolve the issue regarding the interpretation of R.C. 4735.21. Appellees argue that oil and gas rights are real estate under Ohio law and that the decisions interpreting the nature of these rights, including the recent decision by the Ohio Supreme Court in Buell, support the decision of the trial court.

         {¶10} R.C. 4735.21 provides, in pertinent part:

No right of action shall accrue to any person, partnership, association, or corporation for the collection of compensation for the performance of the acts mentioned in section 4735.01 of the Revised Code, without alleging and proving that such person, partnership, association, or corporation was licensed as a real estate broker or foreign real estate dealer.

         {¶11} R.C. 4735.01 defines a "real estate broker as one who engages in certain specified conduct for compensation. The trial court concluded that Appellants' complaint alleged that they engaged in conduct identified in the statute. Specifically, the trial court concluded that Appellants' ...


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