[Cite as Faith Lawley, L.L.C. v. McKay , 2021-Ohio-2156.] IN THE COURT OF APPEALS

TWELFTH APPELLATE D ISTRICT OF OHIO

WARREN COUNTY

FAITH LAWLEY, LLC, et al., Appellees,

- vs -

JOHN MCKAY, Appellant. :

:

:

:

:

: CASE NO. CA2020-08-052

O P I N I O N

6/28/2021

CIVIL APPEAL FROM WARREN CO UNTY COURT OF COMMON PLEAS Case No. 18CV91051

Robbins, Kelly, Patterson & Tucker, LPA, Richard O. Hamilton, J r., Robert M. Ernst, 7 West Seventh Street, Suite 1400, Cincinnati, Ohio 45202, for appelle es Gottesman & Associates, LLC, Zachary Gottesman, 404 East 12th S treet, First Floor, Cincinnati, Ohio 45202 and Crehan & Thumann, LLC, Lynne M. Long tin, 404 East 12th Street, Second Floor, Cincinnati, Ohio 45202, for appellant

BYRNE, J. {¶1} Defendant-appellant, John McKay, appeals from the summary judgm ent decision of the Warren County Court of Common Pleas. The trial court dismissed McKay's counterclaims against plaintiffs-appellees, Eric Novicki, Chris topher Lawley, and Faith Lawley, LLC ("the plaintiffs"), and granted the plaintiffs' req uested declaratory judgment. For the reasons set forth below, we agree that McKay failed to identify any disputed issuesWarren CA2020-08-052

- 2 - of material fact precluding summary judgment. Accordingly, we affirm the trial court's

decision. 1 I. Factual Background {¶2} McKay purchased an investment unit of Granite Creek Flexcap I, L.P. ("Granite Creek"), a small business investment hedge fund. McK ay's funding commitment for the unit was $1.5 million. From June 2006 through the firs t quarter of 2010, McKay funded the unit with $900,000. McKay also paid $165,000 in tax es related to the unit. {¶3} In early 2010, Granite Creek issued McKay a capital call for $7 5,000. McKay, however, was in the midst of a divorce and facing liquidity iss ues. He could not afford the

cash call. {¶4} McKay was acquaintances with Novicki and Lawley and had done bu siness deals with them in the past. According to McKay, he approached Novicki and Lawley with a proposal that would allow him to avoid losing or diluting his investment. He would sell them the Granite Creek unit but retain an option to repurchase the unit at a later date. {¶5} Novicki and Lawley agreed to this transaction and together they formed Faith Lawley, LLC – of which they would be the sole members – to hold the investment. To memorialize the transfer and option to repurchase, McKay had hi s attorney prepare a transfer agreement ("Transfer Agreement"). {¶6} Under the Transfer Agreement, Faith Lawley, LLC agreed to pay M cKay $125,000 for the Granite Creek unit. Faith Lawley, LLC further agreed to pay the $75,000 capital call. According to McKay, the price for the unit was s et "well below" his investment because the deal was intended to provide him with a quick cash infusion until he could repurchase the unit.

1. Pursuant to Loc.R. 6(A), we have sua sponte removed this ap peal from the accelerated calendar and placed it on the regular calendar for purposes of issuing this opinion.Warren CA2020-08-052

- 3 - {¶7} The Transfer Agreement provided McKay with an option to repurch ase the Granite Creek unit at any time through and including December 3 1, 2012. Thus, McKay had slightly less than two years to exercise the option. To ex ercise the option, the Transfer Agreement required McKay to give Faith Lawley, LLC written noti ce of his intent to exercise the option and to pay the option price prior to the expiration of the option period. {¶8} The option price was the original purchase price of $125,0000 p lus the $75,000 capital call payment, plus any other capital calls incu rred by Faith Lawley, LLC, plus interest at 25% per annum on the total. 2 McKay characterized this 25% interest as Novicki and Lawley's "additional incentive," to enter the deal. {¶9} The Transfer Agreement contained an integration clause. The cl ause provided that no provision of the agreement could be modified, amended, or waived except by a written agreement, executed by all the parties. {¶10} On February 26, 2010, the parties executed the Transfer Agreeme nt. Faith Lawley, LLC paid McKay the purchase price and further paid Gran ite Creek's capital call. The transfer of the investment unit required Granite Creek's ap proval, and Faith Lawley, LLC subsequently entered into a separate subscription agreement with Granite Creek. Consequently, the transfer was completed. {¶11} In September 2012, approximately three months before the expira tion of the option, McKay approached Lawley and Novicki to discuss what he called a "tail" agreement. According to McKay, this would be an alternative to exercising the option and would permit him to instead buy back an interest in the Granite Creek unit. On December 17, 2012, McKay emailed Novicki a detailed proposal containing his terms for this proposed "tail" agreement. Novicki responded, said he would call Lawley the fo llowing week, and told

2. The option price also included a payment to account for cer tain taxes, and a minimum interest payback of $20,000.Warren CA2020-08-052

- 4 - McKay to contact Lawley about setting up a meeting. In a follo w-up e-mail, Novicki told McKay to forward the proposal to Lawley. No agreement was reac hed concerning the "tail" agreement proposal prior to the expiration of the option. {¶12} It is undisputed that McKay never sent Faith Lawley, LLC writte n notice of his intent to exercise the option prior to the December 31, 2012 op tion deadline, or at any other time. Nor did McKay tender the option price to Faith Lawley, L LC at any time. McKay never obtained any written extension of the option deadline from the plaintiffs. {¶13} Following the expiration of the option deadline, McKay continue d to communicate with Novicki and Lawley concerning the proposed "ta il" agreement. The parties met for an in-person meeting on January 7, 2013. This meeting became "heated" and the parties left with no agreement in place. According to Lawley, McKay had refused to consider a proposal by the plaintiffs that would require McK ay to "back stop" what the plaintiffs had paid into the Granite Creek unit with McKay's st ock in a separate company. {¶14} Over the next three years, McKay continued communicating with N ovicki and Lawley concerning potential agreements to buy back into the Gra nite Creek unit. Many of these discussions were memorialized in e-mails. However, none of McKay's efforts to broker a new deal concerning the Granite Creek unit resulted in any agreement. {¶15} On May 4, 2016, McKay e-mailed Novicki and Lawley purporting to accept a proposal that they had made to him during the in-person meeting on January 7, 2013 – more than three years earlier. Both Novicki and Lawley quickly responded, repudiating that any offer was available to accept. In Lawley's response, he re minded McKay that in 2013, the Granite Creek unit was not producing any investment return. For that reason, the plaintiffs were only willing to allow McKay to join with them i n the investment if he agreed to take on some of the risk. They had asked him to share that ris k by putting up his separate company stock, and he had refused. Lawley indicated that Grani te Creek had since hit aWarren CA2020-08-052

- 5 - "home run" with one of its investments and the unit was startin g to produce a return. Therefore, the risk that was present in 2013 was no longer pres ent, and, thus, the deal that the plaintiffs would have potentially considered then was not a possibility in 2016. II. Procedural Background {¶16} McKay, an Illinois resident, filed suit against the plaintiffs in Illinois to "enforce his rights regarding the [Granite Creek] unit * * *." The outc ome of the Illinois lawsuit is not apparent from the record. {¶17} The plaintiffs then filed this lawsuit in Warren County. The p laintiffs' complaint contained a single count for declaratory judgment. The plainti ffs asked the court to declare that McKay was not entitled to any share of the funds he invest ed in the Granite Creek unit prior to selling it to Faith Lawley, LLC, that McKay was not en titled to any distributions or proceeds from Granite Creek payable to Faith Lawley, LLC, and t hat McKay was not entitled to any additional compensation from Faith Lawley, LLC. {¶18} In his amended answer, McKay asserted six counterclaims. Only Count Four and Count Five are relevant to this appeal. 3 Count Four was labeled "estoppel and waiver of limitation of time to execute repurchase option." In it, Mc Kay asserted that the plaintiffs had represented to him that they would pay him "additional cons ideration" if he were to forbear on exercising his option to repurchase the Granite Cree k unit. McKay alleged that the plaintiffs made these representations before and after the option deadline of December 31, 2012. McKay additionally claimed that the plaintiffs repre sented, before and after December 31, 2012, that they would allow McKay to exercise the option after its expiration

3. In Counts One through Three, McKay asserted claims of breac h of contract, fraud, and "estoppel barring contract enforcement." These claims relate to McKay's argument that Faith Lawley, LLC was contractually required to obtain Granite Creek's consent to the transfer of t he investment unit, and that it had failed to do so. In the summary judgment proceedings, the plaintiffs submit ted proof that Granite Creek had approved the transfer. The trial court found likewise. This issue has not been appealed. Count Six was a claim for prejudgment interest, which was dismissed and also has not been appealed.Warren CA2020-08-052

- 6 - if the parties did not enter into this "forbearance agreement." McKay asserted that he reasonably relied on these representations and therefore the pl aintiffs should be equitably estopped from enforcing the contractual limitation of time to e xercise the option. {¶19} In Count Five, McKay alleged fraud. McKay pled that the plaint iffs falsely represented that they would negotiate with him in good faith re garding paying him to forbear exercising the option and that they misrepresented that they wo uld extend the option deadline in conjunction with ongoing negotiations. {¶20} The parties filed cross-motions for summary judgment. A magist rate subsequently issued a decision recommending that summary judgme nt be granted to the plaintiffs. Following McKay's objections, the magistrate's dec ision was later adopted in full by the trial court. {¶21} With respects to Counts Four and Five, the decision noted that McKay's amended counterclaim failed to identify any particular statemen ts or communications by the plaintiffs wherein they had made representations concerning pay ing additional consideration to McKay for forbearing on the option or where th ey had agreed to extend the option period. The court noted that the only summary judgment evidence that McKay had presented that would indicate that the plaintiffs made any such promises was his "naked" and "self serving" affidavit, which was insufficient to create a genuine issue of material fact.

The court determined that no reasonable finder of fact could fi nd that the plaintiffs "sought or desired any forbearance from McKay in exercising his Option, or that they represented the Option Period would be extended if no alternative agreement was reached for McKay to buy in once the Option Period had expired." {¶22} The court issued a final judgment entry granting the plaintiffs judgment as a matter of law on their request for declaratory judgment. The c ourt dismissed all of McKay's

counterclaims.Warren CA2020-08-052

- 7 - III. Law and Analysis {¶23} McKay raises the following sole assignment of error: {¶24} THE TRIAL COURT ERRED IN HOLDING THAT MCKAY FAILED TO

OFFER EVIDENCE OF MATERIAL FACTS SUFFICIENT TO DEFEAT SUMMARY JUDGMENT OF HIS COUNTERCLAIMS OF ESTOPPEL, WAIVER AND FRAUD. {¶25} McKay argues that the court erred in granting summary judgment in favor of the plaintiffs on Count Four, promissory estoppel/waiver, and C ount Five, fraud. Within his discussion of this assignment of error, McKay presents three "i ssues" for review.

A. Standard of Review {¶26} This court reviews a trial court's summary judgment decision un der a de novo

standard. Deutsche Bank Natl. Trust Co. v. Sexton , 12th Dist. Butler No. CA2009-11-288, 2010-Ohio-4802, ¶ 7. Summary judgment is appropriate under Civ .R. 56 when (1) there is no genuine issue of material fact remaining to be litigated, (2 ) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds can co me to but one conclusion and that conclusion is adverse to the nonmoving party, who is e ntitled to have the evidence construed most strongly in his favor. BAC Home Loans Servicing, L.P. v. Kolenich , 194 Ohio App.3d 777, 2011-Ohio-3345, ¶ 17 (12th Dist.), citing Zivich v. Mentor Soccer Club,

Inc. , 82 Ohio St.3d 367, 369-370 (1998). {¶27} The party requesting summary judgment bears the initial burden of informing the court of the basis for the motion and identifying those por tions of the record that demonstrate the absence of a genuine issue of material fact. Dresher v. Burt , 75 Ohio St.3d 280, 293 (1996). Once a party moving for summary judgment has satisfied its initial burden, the nonmoving party "must then rebut the moving party's evidenc e with specific facts showing the existence of a genuine triable issue; it may not re st on the mere allegations or denials in its pleadings." Sexton at ¶ 7; Civ.R. 56(E).Warren CA2020-08-052

- 8 - B. Promissory Estoppel/Waiver i. Whether McKay's Affidavit Creates a Genuine Issue of Materi al Fact {¶28} In his first issue presented, and with reference to Count Four, promissory estoppel, McKay contends that an averment in his affidavit crea ted a disputed issue of material fact as to whether the plaintiffs promised to extend o r waive the Transfer Agreement option deadline. {¶29} Promissory estoppel is an equitable doctrine for enforcing the right to rely on promises. A N Bros. Corp. v. Total Quality Logistics, L.L.C. , 12th Dist. Clermont No. CA2015-02-021, 2016-Ohio-549, ¶ 32. In order to establish a cl aim for promissory estoppel, a party must establish (1) a clear and unambiguous promise was made, (2) upon which it would be reasonable and foreseeable for the party to rely, (3) actual reliance on the promise, and (4) the party was injured as a result of the relia nce. Id. {¶30} McKay's promissory estoppel claim was premised on his allegatio n that the plaintiffs represented that they would waive the December 31, 2 012 option deadline while attempting to negotiate the "tail" agreement. McKay points to the following averment in McKay's own affidavit as establishing a genuine issue of fact o n this issue: Plaintiffs knew the negotiations were in lieu of McKay exercisi ng the repurchase option. [Excerpt from Eric Novicki Deposition], page 52. Plaintiffs told Defendant both before and after the deadline that Defendant still had the right to repurchase his interest in Granite Creek while the parties negotiated." [ Id. ], page 52, line 1-9 and page 54, line 12-15. {¶31} Even if we accept these two statements as true, neither stateme nt clearly and unambiguously indicates that the plaintiffs made any promise co ncerning extending or waiving the option deadline. 4 The first sentence vaguely implies that the plaintiffs were

4. We note that any verbal modification to the Transfer Agreem ent was specifically excluded by the agreement's integration clause. This calls into question wheth er McKay could reasonably rely on a verbal promise to extend the deadline.Warren CA2020-08-052

- 9 - aware that McKay intended to negotiate a new agreement instead of exercising the option. The second sentence could be true without the plaintiffs ever h aving waived or extended the option deadline. The plaintiffs could have independently d ecided to grant McKay the right to repurchase an interest in the investment, outside of t he transfer agreement. {¶32} The two sentences of the averment cite separate portions of Nov icki's deposition testimony. However, upon review, neither cited port ion of Novicki's deposition involves any discussion of extending the option deadline. The testimony on page 52 involves Novicki discussing his understanding of a remark Lawle y made to him about letting McKay "buy in for cash." Lawley's "buy in for cash" remark was referenced in an e-mail Novicki sent to McKay on January 8, 2013, the day following the unsuccessful meeting between the parties. The e-mail provided in relevant part: [McKay], I think it is better if you and [Lawley] work this out. I work ed really hard to even get [Lawley] to the table. His questions a nd comments to me were "why are we doing anything" and "I will let him buy in for cash[.]" {¶33} It is not clear from the e-mail when Lawley made the remark to Novicki about being willing to let McKay buy in for cash. In an uncontrovert ed affidavit submitted in the summary judgment proceedings, Novicki clarified that Lawley mad e this statement to him prior to the Transfer Agreement option deadline. {¶34} However, McKay argues that because this e-mail was sent after the option deadline, the statement implies that Lawley was waiving the dea dline. McKay further notes that during Novicki's deposition, Novicki explained that by "bu y in for cash," he believed Lawley was referring to the Transfer Agreement's option provisi on. Thus, according to McKay, Lawley must have extended the option deadline if he was going to let him "buy in for cash" after the option expired.Warren CA2020-08-052

- 10 - {¶35} The "buy in for cash" comment does not support McKay's claim th at there was a promise of an option extension or waiver. If it is accepted that Lawley stated that McKay could "buy in for cash" prior to December 31, 2012, then this i s merely a statement of fact. It was McKay's right under the Transfer Agreement. If Lawley t old Novicki that he would allow McKay to "buy in for cash," and meant after December 31, 2012, then this merely reflects ongoing negotiations regarding McKay's continued inter est in obtaining an interest in the Granite Creek unit. Moreover, any statement or conduct occurring after the option deadline would be irrelevant to McKay's promissory estoppel cla im. {¶36} We next turn to McKay's citation to testimony on page 54 of Nov icki's deposition. The cited testimony consists of McKay's attorney a sking Novicki if he agreed with Lawley's statement about allowing McKay to buy in for cash . Novicki explained that it did not matter if he agreed or not, because (as was just discus sed), this was McKay's right under the Transfer Agreement. {¶37} Consequently, to the extent McKay's affidavit averment vaguely suggests the extension or waiver of the Transfer Agreement option, it appear s unsupported by the very testimony that McKay cited. A party's unsupported and self-ser ving assertions, offered by way of affidavit, standing alone and without corroborating mate rials under Civ.R. 56, will not

be sufficient to demonstrate material issues of fact. Hillstreet Fund III, L.P. v. Bloom , 12th Dist. Butler No. CA2009-07-178, 2010-Ohio-2961, ¶ 10. {¶38} Other evidence in the record supports the conclusion that the p laintiffs made no promises to extend the option deadline and instead merely ag reed to listen to McKay's alternative proposal. According to Novicki, the reason that Mc Kay approached the plaintiffs about the "tail" agreement was that McKay could not afford to e xercise the option. Novicki

testified: McKay came to me [some time before September 24, 2012] andWarren CA2020-08-052

- 11 - said, I can't perform on the contract. I don't have the money to do it. I can't perform on the contract. Is there a way that w e can modify or change the agreement or a way for me to get back in the interest? And I said, well, I don't know. Let me talk to [Lawley]. I talked to [Lawley] and his response was, why would I give him our money? And I said, I agree, it doesn't make any sense. And I said, but [McKay] thinks he has some proposals that will make sense and maybe we should listen to him and see what he's got to propose. So [Lawley] agreed to that and that's where we were at. {¶39} Shortly before the option would expire, McKay e-mailed Novicki on December 17, 2012. This e-mail appeared to memorialize the terms of McK ay's proposed "tail" agreement and included a very detailed summary of the proposal. However, McKay never mentioned the option. He did not discuss extending the option period. He never mentioned any proposal to "forbear" exercising the option. Nor was there any explanation of how the plaintiffs paying McKay to forbear would provide the plaintiffs with any benefit. McKay did not state he was prepared to exercise the option if the plainti ffs did not agree to this "tail" agreement. And there was no reference in the e-mail to any pro mises made by Novicki or the plaintiffs towards McKay. T he e-mail was simply McKay's pr oposal to the plaintiffs. {¶40} Perhaps most notably, the record c ontains an e-mail McKay sent to Novicki in February 2013, again indicating his desire to make some deal with regard to the Granite Creek unit. In it, he referred back regretfully to the January 7, 2013 meeting and indicated he would like to "resolve something we could both live with and move forward with our friendship." He mentioned his desire to "claw back for a littl e bit before you take the rest" and indicated he thought it was fair to ask for "a bone, only a fter you make a good return." McKay then stated, "Propose whatever you want – I know my contract rights are gone ." (Emphasis added.) This statement flatly contradicts McKay's af fidavit averments made nearly seven years later.Warren CA2020-08-052

- 12 - {¶41} The evidence submitted in this case reflects that prior to the option deadline, McKay was not in a financial position to exercise the option. Or, for reasons that are not clear from the record, McKay did not want to exercise the optio n but wanted to partner with the plaintiffs on the investment. Regardless, it is clear that McKay was still seeking some way to "get back in the interest." While the plaintiffs were d ubious that McKay could propose anything that they would be interested in, they were willing to listen to his proposal. Otherwise, as stated by Lawley, McKay could "buy in for cash." We agree that the averment in McKay's affidavit is unsupported by the summary judgment evi dence and insufficient to create a genuine issue of material fact. {¶42} In support of the contention that his affidavit was not "self-s erving" and was sufficient to preclude summary judgment, McKay cites Judge Ring land's concurring opinion

in Hillstreet Fund , 2010-Ohio-2961. There, Judge Ringland distinguished cases wh ere defendants submitted affidavits generally denying liability or contesting their involvement in an event from those cases where a party describes the statement against interest of an opposing party. Id . at ¶ 17-18. Hillstreet is distinguishable and does not support McKay's argument. In Hillstreet , the affidavit describing the admission against interest specifi cally identified the person who made the statement and described the person's statement. Id . at ¶ 18. McKay's affidavit is far less detailed. It failed to sp ecifically identify who made the promises regarding the option deadline and only vaguely describ ed what statements were made. Moreover, McKay's affidavit is uncorroborated and contra dicted by other evidence

in the record. {¶43} We agree with the plaintiffs' suggestion that this case is more similar to Citibank v. Eckmeyer , 11th Dist. Portage No. 2008-P-0069, 2009-Ohio-2435. There, Citibank sued the appellant for approximately $20,000 as a resu lt of a default on a credit card agreement. Id . at ¶ 2. The appellant submitted his affidavit in which he av erred thatWarren CA2020-08-052

- 13 - he contacted Citibank to negotiate a settlement and that Citiba nk had agreed to settle the account for $7,000. Id. at ¶ 59. The court of appeals concluded that the affidavit was selfserving, failed to identify the individual whom the appellant c laimed to have contacted, and failed to establish whether that person had any authority to se ttle the debt. In addition, the court noted that the appellant had conceded receiving a letter rejecting his offer to settle the

account. Id . Like the present case, the affidavit in Citibank set forth an alleged admission by a party opponent, but was unsupported by any other evidence, and failed to identify the individual alleged to have made the statement. {¶44} In sum, McKay has failed to point to specific facts in the summ ary judgment record evidencing a clear and unambiguous promise made by the p laintiffs to McKay concerning the option. There are no disputed issues of materia l fact precluding summary judgment. Consequently, we find no merit in McKay's first issu e presented for review.

ii. Evidence of Waiver {¶45} In McKay's second issue presen ted, he argues that "a party's af fidavit testifying to statements of a party opponent and accompanying e vidence of the opposing party's conduct are admissible evidence of a claim of waiver." Initially, we observe that waiver is not a claim; it is an affirmative defense. Miller v. Wikel Mfg. Co. , 46 Ohio St.3d 76, 78 (1989). Waiver is a "voluntary relinquishment of a know n right. It may be made by express words or by conduct which renders impossible a performa nce by the other party, or which seems to dispense with complete performance at a time when the obligor might fully perform." List & Son Co. v. Chase , 80 Ohio St. 42, 49 (1909). Waiver must be "intentional, with knowledge of the facts and of the party's ri ghts." Id . at 51. {¶46} As set forth above, there was no evidence presented of any inte ntional waiver of the option deadline by the plaintiffs. The plaintiffs' agre ement to listen to McKay's proposal or negotiate an alternative agreement does not constit ute a waiver of any rightWarren CA2020-08-052

- 14 - under the Transfer Agreement. And as explained above, the evid ence regarding allowing McKay to "buy in for cash" also does not set forth any grounds for waiver. McKay argues that the trial court ignored evidence of waiver, but in each in stance cited by McKay, the evidence was discussed and sufficiently addressed by the court. McKay's arguments concerning waiver lack merit.

C. Fraud {¶47} In his third issue presented for review, McKay argues that his affidavit created a genuine issue of material fact as to his fraud claim. McKay incorporates the same arguments he presented with respect to his promissory estoppel claim. For the same reasons described previously, McKay failed to present evidence of any representation by the plaintiffs concerning extending the option period. Accordi ngly, he has failed to identify a genuine disputed issue of fact for trial as to any misreprese ntation in conjunction with the

fraud claim. {¶48} For the foregoing reasons, we overrule McKay's sole assignment of error and affirm the trial court's decision dismissing McKay's countercla ims and granting the declaratory judgment requested by the plaintiffs. {¶49} Judgment affirmed.

M. POWELL, P.J., and H ENDRICKSON, J., concur.