COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 58616 ADMINISTRATOR OF VETERANS : AFFAIRS : : Plaintiff-appellee : : JOURNAL ENTRY -vs- : AND : OPINION GARY KORYTA : : Defendant-third party : plaintiff-appellee : : CHRISTOPHER J. MALLIN : : Third-party defendant-: appellant : : DATE OF ANNOUNCEMENT OF DECISION: DECEMBER 12, 1991 CHARACTER OF PROCEEDING: Civil appeal from Court of Common Pleas Case No. 87-CV-132086 JUDGMENT: Affirmed in part and reversed in part. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellee: For Defendant-Appellant Pro Se: JAMES N. HARDING, ESQ. CHRISTOPHER J. MALLIN 653 Broadway Avenue, #204 P.O. Box 46565 Bedford, Ohio 44146 Bedford, Ohio 44146 Attorney for Gary Koryta - 1 - DYKE, J.: Appellee, the Administrator of Veterans Affairs, brought suit against appellee, Gary Koryta, Michael J. Checkovsky, trustee, and the DSAM Trust, the owners of the property in question, for an amount due on a note and a mortgage securing the note. Koryta sued appellant, Christopher J. Mallin, and alleged that Koryta signed the note only after Mallin said that he would remove Koryta's name and assume responsibility for the loan. By agreement with Mallin Koryta deeded part of the property to a trust for the benefit of Mallin's daughter (and then to DSAM trust) and quit claimed the rest to a trust for the benefit of another daughter of Mallin. However, Koryta remained responsible for the debt and the Administrator foreclosed. A summary judgment was entered for the Administrator and against Koryta, Checkovsky and DSAM. The complaint was amended to allege that Mallin was responsible for all damages resulting from the transaction including a deficiency judgment against Koryta. After a trial to the bench judgment was entered for $16,231.12. On appeal appellant assigns eight errors for review. I THE COURT [IMPROPERLY] DENIED DEFENDANT- APPELLANT'S MOTION TO DISMISS AT THE CLOSE OF THE PLAINTIFF-APPELLEE'S CASE. II THE COURT DENIED DEFENDANT-APPELLANT THE OPPORTUNITY TO PRESENT ARGUMENTS IN SUPPORT OF HIS MOTION TO DISMISS AT THE CLOSE OF THE PLAINTIFF'S CASE. - 2 - The trial judge responded to Mallin's request to make a motion for a directed verdict by flatly denying it. However, Mallin waived any error in the denial when he failed to renew his motion for a directed verdict upon the completion of all the evidence. Helmick v. Republic-Franklin Ins. Co. (1988), 39 Ohio St. 3d 71 (paragraph one of the syllabus). Assignments of error No. I and II are overruled. III THE COURT ARRIVED AT ITS JUDGMENT BASED UPON INFORMATION RECEIVED OUTSIDE THE SCOPE OF THE TRIAL WHICH INFORMATION WAS NOT SUBJECT TO EXAMINATION OR ARGUMENT BY THE DEFENDANT- APPELLANT. The trial judge stated that Koryta's counsel indicated that he was not asking for a judgment on any basis but fraud because he wanted the judgment to be non-dischargeable in bankruptcy court. (Tr. 143.) Mallin contends that this comment reflects an ex parte exchange and improperly considers the future rights of the parties. First, there was no objection. Second, the third party complaint sounds only in fraud. Third, the trial court's comments immediately subsequent to this statement clearly indicate that judgment was entered for Koryta because the judge concluded that Mallin did defraud Koryta. (Tr. 147.) Last, there was no prejudice when the judgment was supported by the evidence. Assignment of error No. III is overruled. - 3 - IV THE COURT GRANTED THE PLAINTIFF-APPELLEE'S MOTION TO AMEND HIS COMPLAINT AFTER THE CLOSE OF THE DEFENDANT-APPELLEE'S CASE AND AFTER FINAL ARGUMENTS, PREVENTING ANY RESPONSE BY THE DEFENDANT-APPELLANT TO THE SUBSTANTIAL AND SUBSTANTIVE AMENDMENTS MADE TO PLAINTIFF- APPELLEE'S COMPLAINT. In Koryta's opening statement he argued that the damage incurred included the liability for the deficiency. (Tr. 5-6.) Mallin responded in his opening statement by correctly noting that the complaint only specifically claims damage to credit and reputation. Koryta testified that he had been damaged in that he had problems with his credit, owed an outstanding water and sewer bill and was liable for the deficiency. (Tr. 43.) Mallin did not object. After closing arguments Koryta moved to amend the pleadings to conform with the evidence. Koryta argued that the third party complaint also asked for damages in the amount of the deficiency (Tr. 139) and even if the pleadings were not as specific as Mallin would wish the pleadings may be amended to conform with the evidence (Tr. 140). The motion was granted and Mallin objected that the motion was untimely and substantially altered the claim. (Tr. 142.) No continuance was requested. The third party complaint originally stated as follows: That Defendant, CHRISTOPHER J. MALLIN'S intention from the outset of the entire transaction was to defraud Defendant, GARY KORYTA and Defendant, CHRISTOPHER J. MALLIN did so, as set forth above; that based on representations or omissions, Defendant, CHRISTOPHER J. MALLIN knew were false or would give a false impression, Defendant, GARY KORYTA assumed a legal liability for no consideration and for no benefit - 4 - to him; that all non-government documents were prepared and presented to Defendant, GARY KORYTA by Defendant, CHRISTOPHER J. MALLIN, and that the ultimate beneficiary of Defendant, CHRISTOPHER J. MALLIN's fraud was a trust set up for Defendant, CHRISTOPHER J. MALLIN's children; and that due to Defendant, CHRISTOPHER J. MALLIN's fraudulent representations and Defendant, GARY KORYTA's reliance on them, Defendant, GARY KORYTA's reputation and credit have been damaged. (Emphasis added.) The amendment added the following: That defendant Gary Koryta was found liable on the underlying note and mortgage to the Veterans Affairs and that defendant Christopher Mallin should be found to be responsible for all damages to defendant Gary Koryta resulting from the described transaction: That defendant Christopher Mallin misled defendant Gary Koryta in entering into the original obligation and also misled defendant Gary Koryta into believing that defendant Gary Koryta would have no legal obligations after transfer of title into the control of the defendant Christopher Mallin. (Emphasis added.) The complaint could be read to claim not only damage to Koryta's reputation and credit but also that he was damaged when he "assumed a legal liability." The Administrator's judgment on the note followed the filing of the third party complaint. Koryta made it clear in his opening statement that the liability was the judgment and was part of the damages claimed. Civ. R. 15(B) states as follows: (B) Amendments to conform to the evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment. Failure to amend as provided herein does not affect the - 5 - result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in his action or defense on the merits. The court may grant a continuance to enable the objecting party to meet such evidence. (Emphasis added.) The motion to amend was not untimely. Mallin failed to object to Koryta's testimony on damages. An implied amendment of the pleadings under Civ. R. 15(B) will not be permitted where it results in substantial prejudice to a party. Various factors to be considered in determining whether the parties impliedly consented to litigate an issue include: whether they recognized that an unpleaded issue entered the case; whether the opposing party had a fair opportunity to address the tendered issue or would offer additional evidence if the case were to be tried on a different theory; and, whether the witnesses were subjected to extensive cross-examination on the issue. Under Civ. R. 15(B), implied consent is not established merely because evidence bearing directly on an unpleaded issue was introduced without objection; it must appear that the parties understood the evidence was aimed at the unpleaded issue. Whether an unpleaded issue is tried by implied consent is to be determined by the trial court, whose finding will not be disturbed, absent showing of an abuse of discretion. State, ex rel. Evans v. Bainbridge Twp. Trustees (1983), 5 Ohio St. 3d 41 (syllabus). A review of the transcript reveals that Mallin recognized that Koryta was alleging that he was due damages because the fraud made him liable for the deficiency and that Mallin failed to cross-examine Koryta on the question of what he ultimately - 6 - owed. Mallin was given notice during Koryta's opening statement and allowed Koryta to testify that the damages included the liability. That testimony went to the damages issue. We find no abuse of discretion. Even if Mallin's opening statement can be construed to be an objection the amendment was proper. Under Civ. R. 15(B), in order to justify the exclusion of evidence on the basis of prejudice, the objecting party must satisfy the court that admission of such evidence will put him to serious disadvantage in presenting his case. In the event an objecting party is not prepared for evidence offered outside the pleadings, the court may still allow an amendment under Civ. R. 15(B) and grant a continuance to enable the opposing party to meet the new evidence. Hall v. Bunn (1984), 11 Ohio St. 3d 118 (syllabus). Mallin insists that he never had an opportunity to argue or cross- examine on the new claim for damages and would have challenged the judgment for the Administrator as excessive. Mallin also contended that the new damages were added only after Koryta failed to prove the damages in the complaint but we note that Koryta had mentioned them in the opening statement. Mallin never asked to re-open cross-examination of Koryta or closing argument and never asked for a continuance. The motion was properly granted. Assignment of error No. IV is overruled. V THE COURT AWARDED PUNITIVE DAMAGES AGAINST THE DEFENDANT-APPELLANT WITHOUT ANY BASIS THEREFORE. - 7 - There was no evidence to support an award of punitive damages. In a case seeking punitive damages, a jury must first determine that the defendant has acted with malice before determining the amount of punitive damages due to the plaintiff. The necessary element of malice may be based upon evidence showing actual malice or malice by implication, i.e., legal malice. This court has recognized that '[o]ne who has committed an act would scarcely admit that he was malicious about it, and so, necessarily, malice can be inferred from conduct.' Davis v. Tunison (1959), 168 Ohio St. 471, 475, 7 O.O. 2d 296, 298, 155 N.E. 2d 904, 907. Our prior cases have identified two general categories of conduct by which malice may be shown, either actual or by inference. As set forth in the syllabus of Preston, supra, punitive damages may be awarded upon proof of conduct '(1) *** characterized by hatred, ill will or a spirit of revenge, or (2) a conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm.' (Emphasis in original.) Digital & Analog Design Corp. v. North Supply Co. (1989), 44 Ohio St. 3d 36, 43-44 (citations omitted) citing Preston v. Murty (1987), 32 Ohio St. 3d 334. With regards to fraud the Ohio Supreme Court has been more specific about the standard for punitive damages. In each case of alleged fraud the plaintiff, in order to be awarded punitive damages, must establish not only the elements of the tort itself but, in addition, must either show that the fraud is aggravated by the existence of malice or ill will, or must demonstrate that the wrongdoing is particularly gross or egregious. Combs Trucking Inc. v. Int. Harvester Co. (1984), 12 Ohio St. 3d 241 (emphasis added) citing Logsdon v. Graham Ford (1978), 54 Ohio St. 2d 336, 339 (punitive damages allowed for fraud if malicious, deliberate, gross or wanton and the damages resulted from a fraud intentionally committed with the purpose to injure). - 8 - As in Logsdon, we find that although the conduct of Mallin was fraud it was not the egregious fraud for which punitive damages are awarded. A "bare" case of fraud will not permit the recovery of punitive damages. Id. at 339. Therefore, the award of punitive damages may not stand. Assignment of error No. V is sustained. VI THE COURT AWARDED COMPENSATORY DAMAGES WHERE THE EVIDENCE SHOWED THAT THE DAMAGES ALLEGED BY THE PLAINTIFF-APPELLEE HAD BEEN MITIGATED TO THE POINT THAT NO DAMAGES WHATEVER REMAINED TO BE COMPENSATED. Mallin contended that the damages ($16,231.12) were actually less than the amount of the judgment ($15,037.40) plus the sewer and water bill ($1,193.72) because Koryta purchased the property at the sheriff's sale in 1989. Koryta's theory is that he was defrauded into financial responsibility for the note when he never intended to pay anything. His purchase of the property after the foreclosure helped reduce the deficiency but still left him responsible for the difference. As Mallin concedes the documentation was in evidence and should have been argued then. Koryta was legally responsible for the deficiency and a judgment establishing that amount had been entered. The compensatory damage award was correct. Assignment of error No. VI is overruled. - 9 - VII THE COURT AWARDED COMPENSATORY DAMAGES IN EXCESS OF THE AMOUNT OF DAMAGES PURPORTEDLY SUBSTANTIATED BY THE PLAINTIFF-APPELLEE. Mallin argues that the judgment improperly included the water and sewer bill when there was no evidence Koryta was liable for the bill and, also argues, without citation to any authority, that the sheriff's sale eliminates any lien on the property. Koryta testified that the water and sewer bill was sent to the property (Tr. 40) and that the damage incurred by reason of the fraud included the water and sewer bill (Tr. 44). There was no evidence that anyone else had agreed to assume responsibility for them. As the owner of the property he would ultimately be liable for unpaid water and sewer bills. The city was not a party to the sale but even if the city has lost any right to the proceeds the money for the bill is still owed. Assignment of error No. VII is overruled. VIII THE JUDGMENT ENTERED BY THE COURT IS MANIFESTLY AGAINST THE WEIGHT OF THE EVIDENCE. Koryta sued Mallin for fraud. The complaint alleged that Mallin proposed to Koryta that Koryta buy a certain property and Mallin would remove Koryta's name and assume responsibility for the loan but Mallin defaulted on the note and mortgage and Koryta's reputation and credit were damaged as a result. The - 10 - amended complaint added that Mallin was responsible for all damage resulting from the transaction. A claim of common-law fraud requires proof of the following elements: (a) a representation or, where there is a duty to disclose, concealment of a fact, (b) which is material to the transaction at hand, (c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, (d) with the intent of misleading another into relying upon it, (e) justifiable reliance upon the representation or concealment, and (f) a resulting injury proximately caused by the reliance. Russ v. TRW, Inc. (1991), 59 Ohio St. 3d 42, 49. Mallin argues that there was no evidence of a misrepresentation, fraudulent intent, a fiduciary relationship, Koryta's liability for the deficiency, damage to Koryta's credit or reputation or a basis for punitive damages. First, although Koryta initially testified that there was no discussion about responsibility for the mortgage he later testified that Mallin was to assume financial responsibility and Koryta never wanted to put up any money. (Tr. 17.) Second, Mallin emphasizes that Koryta's counsel stated that he didn't think Mallin intended to default. Mallin insists that this concession precluded actual intent to defraud. However, one could hope to pay off the mortgage and reap the benefit but still deliberately mislead another into maintaining responsibility for the debt in the event of a default. Third, Mallin contends that there was no constructive fraud arising from an attorney-client relationship because there was no such relationship at the time - 11 - the parties discussed the purchase of the property. Koryta testified that he considered Mallin his attorney at the time because prior to that (1) Mallin had acted as a realtor/attorney when he drew up the contracts between Koryta and the seller of a building Koryta bought through Mallin, (2) Mallin replied to a letter from a lawyer regarding an assault allegation involving Koryta, and (3) Mallin signed personally for a loan Koryta made to a constructing company Mallin represented. Koryta testified that Mallin received no compensation beyond the commission for the sale. Even if the first and third examples are questionable in the second example the October 5, 1982 letter regarding the altercation clearly states that Koryta was Mallin's client as of the date of the letter. The offer to purchase the subject property was in April of 1983. Koryta testified that he considered Mallin his attorney at the time. Fourth, Koryta was liable for the deficiency and a summary judgment had been entered against him. Fifth, although Koryta admitted that part of the reason that he was turned down for a loan was the size of the loan he also insisted that part of the reason was the deficiency. The judge ultimately did not believe that testimony. Last, as noted, there was no evidence to support an award of punitive damages. There was competent, credible evidence of fraud. Koryta testified that Mallin told him that if he would buy the property, Mallin would put it in Mallin's name and assume financial - 12 - responsibility. Mallin had Koryta sign the documents (including a power of attorney) which Koryta was told would put the property in Mallins' name and relieve him of financial responsibility for the debt. Although he failed to read the documents that failure does not preclude a finding that there was justifiable reliance since the papers' significance would not be apparent to a non- lawyer. Mallin was Koryta's lawyer and told him that executing these documents would remove Koryta as owner and end his responsibility for the property. He justifiable relied on that representation. Mallin did make a material representation falsely (knowing that Koryta would still be responsible) and with the intent of misleading Koryta into reliance. The fact that Mallin did not intend the default does not alter the fact that he intended that Koryta buy the property and still be responsible for the note and mortgage in the event that there was a default. Koryta justifiably relied upon the representation and was proximately injured. "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." C.E. Morris Co. v. Foley Construction Co. (1978), 54 Ohio St. 2d 279. The verdict was not against the manifest weight of the evidence except as to the award of - 13 - punitive damages. Assignment of error No. VIII is sustained in part and overruled in part. Judgment affirmed in part and reversed in part. The award of punitive damages is vacated. - 14 - It is ordered that appellant recover of appellee its costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. BLACKMON, J., AND *SPELLERBERG, J., CONCUR. PRESIDING JUDGE ANN DYKE *Sitting By Assignment: Judge Thomas R. Spellerberg, Seneca County Common Pleas Court. N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announce- ment of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journaliza- tion, at which time it will become the judgment and order of the court and time period for review will begin to run. .