[Cite as Kemp v. Reno, 2011-Ohio-4168.]


STATE OF OHIO                   )                   IN THE COURT OF APPEALS
                                )ss:                NINTH JUDICIAL DISTRICT
COUNTY OF MEDINA                )

DAVID KEMP, et al.                                  C.A. No.       10CA0033-M

        Appellants

        v.                                          APPEAL FROM JUDGMENT
                                                    ENTERED IN THE
BLAKE RENO, et al.                                  COURT OF COMMON PLEAS
                                                    COUNTY OF MEDINA, OHIO
        Appellees                                   CASE No.   04 CIV 0171

                                DECISION AND JOURNAL ENTRY

Dated: August 22, 2011



        MOORE, Judge.

        {¶1}    Appellants, David Kemp, Francyne Kemp, Robert A. Furr, Benjamin Kemp,

Diana Kemp, Kenneth Kiemschies, James T. Mapes, Kurt Shadi, Sharon Simpson, Charles

Stangle, Diana Sutton, Steven Sutton, Andrea Watkins, John Watkins, and Steven Wood, appeal

the judgment of the Medina County Court of Common Pleas. This Court affirms.

                                               I.

        {¶2}    Blake Reno, a defendant in the underlying action, created two corporations known

as Central Enterprise Limited Company (“CELCO”) and Youngstown Urban Development

Agency Corp. (“YUDA”).            Through CELCO, Reno would locate investment properties,

negotiate a sales price with the seller, and find an investor to buy the property. Unbeknownst to

the investors, Reno would negotiate a purchase price with the sellers at an amount much lower

than he had told the investors. He would obtain a mortgage, based on inflated appraisals, in the

investors’ names for the higher amount. At closing, the excess money was paid from the seller’s
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proceeds to CELCO for work which was supposed to be performed at the property after closing

in order to make the property suitable for leasing. The investors would then enter into a lease

agreement with YUDA. Upon CELCO’s completion of the repairs, YUDA was to find a tenant

for the property. For each month that the property was rented to a third party tenant, the investor

was to receive $100 from YUDA or CELCO. CELCO or YUDA also paid the investors a

$1,200 to $2,000 security deposit for each property that the investors purchased. Essentially,

Reno promised each investor that they could buy properties without having to expend any money

up front and then his companies would renovate the properties and find tenants to lease the

property. This was known as the “CELCO System.”

       {¶3}    On February 26, 2001, Appellant Diana Kemp was hired by Reno to be his

personal assistant and bookkeeper at CELCO. Diana handled the billing, invoicing, accounts

receivable, and accounts payable for CELCO. She testified that she knew that Reno did not buy

any of the properties in his own name because his credit was too poor to allow him to obtain

financing. In 2002 she bought two properties through the CELCO System. She also referred her

husband, Ben Kemp, her brother-in-law, David Kemp, his wife, Francine Kemp, her brother,

Robert Furr, Diana and Steven Sutton, Sharon Simpson and Kenneth Kiemschies. She received

$200 for each referral. Appellant Robert Furr, Diana’s brother, also worked for CELCO and

referred the remaining Appellants: James Mapes, Kirk Shadi, Charles Stangle, Andrea and John

Watkins and Stephen Wood.

       {¶4}    Appellants purchased a total of sixty-three properties through CELCO. Security

Title Agency, Inc., under the company president John Seidner, provided title and escrow services

for the closings of fifty-three of these properties. Appellee, First American, was the underwriter

for title insurance in those transactions. CELCO did not renovate the properties as promised. In
                                                3


addition, YUDA had difficulty obtaining and retaining tenants for the properties. YUDA would

not pay for the damage caused to some properties by tenants, and ultimately was unable to obtain

new tenants for those properties. YUDA eventually defaulted on its lease payments for the

properties and Appellants’ mortgage payments went into default. Appellants then discovered

that the actual value of the properties was less than the mortgage amount or the stated appraisal

value.

         {¶5}   On October 13, 2004, Appellants filed an amended complaint which named forty-

two defendants. They claimed that they had been defrauded through a series of real estate

transactions orchestrated by Reno in which they purchased a total of sixty-three properties at

inflated prices. Named defendants included Reno, a number of his business associates, property

appraisers, mortgage brokers, lenders that financed the transactions, the title/escrow company

(Security Title), and Old Republic Title Insurance Company. At the time, Appellants believed

that Old Republic was Security Title’s underwriter for title insurance. When they discovered

that it was actually First American, they filed a motion to substitute Old Republic with First

American. The motion was granted by the trial court on November 8, 2004.

         {¶6}   First American filed twelve motions for summary judgment against Appellants on

June 9, 2005. On July 22, 2005, in a single document, Appellants filed a brief in opposition to

the motion filed by First American, as well as numerous other defendants.

         {¶7}   On July 19, 2006, the trial court granted First American’s motion for summary

judgment. On May 19, 2010, the trial court entered a final judgment entry granting default

judgment against the remaining defendants whose claims had not been settled or dismissed.

Appellants timely filed a notice of appeal and raise one assignment of error.
                                                 4


                                                II.

                                  ASSIGNMENT OF ERROR

       “THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN
       FAVOR OF [] FIRST AMERICAN TITLE INSURANCE COMPANY[.]”

       {¶8}     In their sole assignment of error, Appellants argue that the trial court erred in

granting summary judgment in favor of First American. We do not agree.

       {¶9}     This Court reviews an award of summary judgment de novo. Grafton v. Ohio

Edison Co. (1996), 77 Ohio St.3d 102, 105. We apply the same standard as the trial court,

viewing the facts of the case in the light most favorable to the non-moving party and resolving

any doubt in favor of the non-moving party. Viock v. Stowe-Woodward Co. (1983), 13 Ohio

App.3d 7, 12.

       {¶10} Pursuant to Civ.R. 56(C), summary judgment is proper if:

       “(1) No genuine issue as to any material fact remains to be litigated; (2) the
       moving party is entitled to judgment as a matter of law; and (3) it appears from
       the evidence that reasonable minds can come to but one conclusion, and viewing
       such evidence most strongly in favor of the party against whom the motion for
       summary judgment is made, that conclusion is adverse to that party.” Temple v.
       Wean United, Inc. (1977), 50 Ohio St.2d 317, 327.

       {¶11} The party moving for summary judgment bears the initial burden of informing the

trial court of the basis for the motion and pointing to parts of the record that show the absence of

a genuine issue of material fact.       Dresher v. Burt (1996), 75 Ohio St.3d 280, 292-93.

Specifically, the moving party must support the motion by pointing to some evidence in the

record of the type listed in Civ.R. 56(C). Id. Once this burden is satisfied, the non-moving party

bears the burden of offering specific facts to show a genuine issue for trial. Id. at 293. The non-

moving party may not rest upon the mere allegations and denials in the pleadings but instead
                                                5


must point to or submit some evidentiary material that demonstrates a genuine dispute over a

material fact. Henkle v. Henkle (1991), 75 Ohio App.3d 732, 735.

       {¶12} First American filed motions for summary judgment against each Appellant. In

each motion, First American contended that Appellants could not show that it was liable for

negligence because they were unable to show a duty owed by First American to Appellants. In

addition, First American argued that Appellants were unable to show a breach of a duty,

causation or damages to Appellants caused by the breach. Essentially, First American argued

that as a title insurance company, it was governed by Chapter 3953 of the Ohio Revised Code.

As such, it only insures against financial loss from defects in the title to the underlying real

property. It noted that Appellants failed to present any case law to support their contention that

the title insurance company owed a duty of due diligence to them. In addition, First American

stressed that Appellants were not attempting to make a claim on a title insurance policy. Instead,

they were essentially attempting to collect from First American for their own failures to exercise

due diligence in their investments.

       {¶13} As to the claim that First American assumed a duty to Appellants by reviewing

the CELCO System and the underlying transactions, First American pointed out that the

depositions cited by Appellants for this proposition never mentioned First American, but rather

another title insurance company, “Old Republic.” First American contended that there was no

evidence that it conducted any such review or assumed any such duty. Finally, First American

contended that Appellants’ claims that the closings were not completed or were “defective,

unauthorized or incorrect” was not supported by any evidence.

       {¶14} In their memorandum in opposition to summary judgment, Appellants alleged that

First American did owe a duty to adequately review the actions of Security Title and the real
                                                 6


estate transactions, and that it failed to perform these duties. Specifically, they argued that First

American, as the insurer of Security Title, “should have known that the closings were

inappropriate.” In addition, they claimed that it was “clear that First American undertook a duty

to review and insure the transactions.” Appellants cited to no case law or evidentiary material in

the record to support this contention.

       {¶15} Appellants also argued that First American insured them “against the improper

actions of Security Title.” As support, they referenced a “Closing Protection Letter” that was

issued by First American. They argued that, under this letter, First American “assumed a duty to

insure the wrongful actions of John Seidner and Security Title.” Again, they cited no case law to

support this contention.

       {¶16} In its reply, First American argued that Appellants were attempting to make two

new arguments for liability, and that each argument failed as a matter of law. As to the claim

that First American reviewed the transactions of the CELCO System and approved the

transactions, First American once again pointed to Reno’s deposition in which he stated that Old

Republic was the company that reviewed the CELCO System transactions. In addition, First

American referenced the deposition of Seidner who testified that First American had not

reviewed or audited any of his transactions, and that, to his knowledge, it had not looked at any

of the transactions involving CELCO or Reno. Again, First American stressed that there was no

evidence or testimony that it reviewed the transactions or assumed any duty.

       {¶17} First American also argued that it was not liable to Appellants under the Closing

Protection Letter. It averred that a closing protection letter is a contract and that Appellants had

not asserted a contract claim. The language of the letter required Appellants to make a claim

according to the instructions in the letter, and Appellants made no such claims.              While
                                               7


Appellants argued that Seidner and Security Title breached a duty to the buyers by making

disbursements to CELCO, the evidence attached to First American’s reply demonstrated that it

was the sellers’ funds, not the buyers’, from which the disbursements were made. Accordingly,

it argued, it was not liable to Appellants under the Closing Protection Letter. The trial court

granted summary judgment in favor of First American.

       {¶18} On appeal, Appellants reiterate their arguments from their brief in opposition filed

in the court below. Specifically, they assert that First American assumed a duty to them by

reviewing the CELCO System and that it breached that duty by allowing the “fraudulent CELCO

system transactions to go forward to the detriment” of Appellants. The question of whether or

not a legal duty exists is a question of law for the court. Baughman v. State Farm Mut. Auto Ins.

Co., 9th Dist. No. 22204, 2005-Ohio-6980, at ¶18. As First American correctly pointed out,

there is no evidence that First American reviewed the CELCO System. The only evidence in the

record demonstrates that Old Republic, another title insurance company, reviewed the

transactions and provided advice to Reno on the system. While Appellants urge us to assume

that Reno was mistaken in his deposition, and that he meant First American, there is nothing in

the record that allows us to do so. In addition, Seidner’s deposition expressly states that First

American did not review the transactions. Appellants have failed to cite any legal authority

which would allow this Court to impose an assumed duty upon First American. Case law

indicates that “title insurance companies are not held liable in tort for claims by an insured

regarding title searches, escrow, or closing matters.” Countrywide Home Loans, Inc. v. Huff,

11th Dist. No. 2007-T-0121, 2008-Ohio-4974, at ¶38, citing Chicago Title Ins. Co. v. Huntington

Natl. Bank (1999), 87 Ohio St.3d 270.
                                                 8


       {¶19} Appellants have also failed to demonstrate that First American assumed a duty.

Under Ohio’s assumed duty doctrine, “one who gratuitously undertakes a voluntary act assumes

the duty to complete it with the exercise of due care under the circumstances.” Seley v. G. D.

Searle & Co. (1981), 67 Ohio St.2d 192, 202, citing Briere v. Lathrop (1970), 22 Ohio St.2d 166,

172. To recover for a breach of assumed duty, Appellants would need to demonstrate (1)

reliance on an assumed duty, or an increased risk of harm, and (2) physical injury (in medical

negligence matter). Seeley, 67 Ohio St.2d at 202. “[A] claimant must demonstrate physical

injury, not mere economic loss, in order to state a viable breach of assumed duty claim.”

Baughman v. State Farm Mut. Auto Ins. Co., 9th Dist. No. 22204, 2005-Ohio-6980, at ¶51. The

facts indicate that Appellants admitted that they did not speak with anyone at First American

prior to closing, so they could not have relied on First American. Accordingly, this argument is

without merit.

       {¶20} Next, Appellants argue that First American is liable to them under the Closing

Protection Letter. As discussed above, Appellants are not asserting a breach of contract claim.

Instead they are attempting to create a negligence claim out of the notion that First American’s

issuance of this letter insured them from the wrongful acts of Seidner and Security Title.

Appellants have failed to establish that they are entitled to closing protection coverage. A single

Closing Protection Letter was issued to Equi First, a lender, in one of the sixty-three real estate

transactions. It provides coverage to Equi First if it purchases a title insurance policy from First

American in connection with the closing of a real estate transaction in which Equi First obtains a

mortgage on the property. The letter extends coverage to Equi First borrowers only if the

borrowers purchase an “Owner’s Policy of Title Insurance” from First American. Nothing in the

record demonstrates that Appellants did so. Accordingly, Appellants have failed to demonstrate
                                                 9


that they are entitled to closing protection coverage. In addition, Appellants have failed to

demonstrate that their claims are covered by the protection letter.          They claim that First

American is liable to them based on the actions by Seidner and Security Title that constituted

fraud. However, the depositions demonstrate that Appellants testified that they did not know of

any acts of fraud or other wrongdoing committed by Security Title.             Instead, the record

demonstrates that Appellants entered into business transactions without conducting the

appropriate due diligence, and now seek indemnification from any and all parties involved in the

transactions, including the title insurance company.        Because Appellants were unable to

demonstrate a genuine issue of material fact, including a duty owed to them by First American,

or liability under the Closing Protection Letter, summary judgment was appropriate.

Accordingly, Appellants’ sole assignment of error is overruled.

                                                III.

       {¶21} Appellants’ assignment of error is overruled.         The judgment of the Medina

County Court of Common Pleas is affirmed.

                                                                                Judgment affirmed.




       There were reasonable grounds for this appeal.

       We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Medina, State of Ohio, to carry this judgment into execution. A certified copy

of this journal entry shall constitute the mandate, pursuant to App.R. 27.

       Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
                                                10


period for review shall begin to run. App.R. 22(E). The Clerk of the Court of Appeals is

instructed to mail a notice of entry of this judgment to the parties and to make a notation of the

mailing in the docket, pursuant to App.R. 30.

       Costs taxed to Appellants.




                                                     CARLA MOORE
                                                     FOR THE COURT



WHITMORE, J.
CONCURS

CARR, P. J.
CONCURS IN JUDGMENT ONLY


APPEARANCES:

THEODORE J. LESIAK, Attorney at Law, for Appellants.

DAVID A. FREEBURG and MONICA E. RUSSELL, Attorney at Law, for Appellees.
