involves a substantial constitutional question or … failure to distinguish between...

IN THE SUPREME COURT OF OHIO

Estate of Robert V. GrilliBy and through Virginia Grilli

Plaintiff-Appellee,

vs.

Virginia Smith, et al.

Defendants-Appellant

3 - 0 4 5 7On Appeal from the FairfieldCounty Court of Appeals,Fifth Appellate District

Court of AppealsCase No. 2012-CA-00012

APPELLANTS' VIRGINIA SMITH, DIANA CAMDEN,GRILLI REAL ESTATE CORPORATION, INC. AND

VALERIO'S INC. MEMORANDUM IN SUPPORT OF JURISDICTION

Ronald B. Noga (0013345)1010 Old Henderson Road, Suite 1Columbus, Ohio 43220614/326-1954614/447-1673 - faxmoga@no galaw.netAttorney for Appellants

Mark R. Riegel (0015790)Dagger, Johnston, Miller, Ogilvie

& Hampson, LLP144 E. Main StreetP. O. Box 667Lancaster, Ohio 43130-0667740/[email protected] for Appellees

F1110

6 sg 2 1 ?013

CLERK OF COURTSUPREME COURT OF OHIO

TABLE OF CONTENTS

Statement of Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 03

Statement of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 03

Law and Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 08

Proposition of Law No. 1

The Lower Court's denial of a hearing on damages stemmed from theirfailure to distinguish between "liquidated" damages as being a sum certainand "liquidated damages" agreed to by contract resulting in a violation ofAppellants' constitutional right of Due Process ....................... .. ....... 08


Under O.R.C. Section 2305.09 the cause of action for breach of fiduciaryduty accrues at the latest when the fiduciary refuses to repay anunauthorized loan not the date the unauthorized loan is taken ...... .... ..... ...... 11

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Certificate of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Appendix

Judgment Entry of Court of Appeals on Reconsideration,Case No. 2012-CA-12 (February 7, 2013) ................................................... 01

Judgment Entry of Court of Appeals, Case No. 2012-CA-12 ..................................... 03

Opinion of court of Appeals, Case No. 2012-CA-12 ....................................... 04

Judgment Entry of Court of Common Pleas (Judge Berens), Case No.2006-CV-345 (1/10/12) .................... . ............................................... 23

Partial Summary Judgment Entry on Damages, (July 14, 2010)(August 9, 2010) (Judge Berens) ............................................................. 42

Judgment Entry on Attorneys Fees, Case No. 06-CV-345 (Judge Berens)(February 13, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Judgment Entry of Court of Common Pleas (Judge Martin), Case No. 2009-CV-79. 59

EXPLANATION OF WHY THIS CASE IS OF PUBLICOR GREAT GENERAL INTEREST AND

INVOLVES A SUBSTANTIAL CONSTITUTIONAL QUESTION

The issues presented herein take place in the context of a tremendous miscarriage of

justice.

The Appellee Estate of Robert V. Grilli is the legal representative of a man who

unquestionably stole hundreds of thousands of dollars from his sisters, the Appellants herein, by

withdrawing cash from inherited family corporations he held in equal shares with Appellants.

His misdeeds have been protected by a series of legal maneuvers focused entirely on the

application of statutes of limitation and a default judgment. The few times the merits of any of

the issues involved in this litigation have been reached the Appellee Estate's claims have been

defeated.

Furthermore had the Courts below correctly applied the law to the issues set forth herein

the Appellees would be defeated again. However, for whatever reason, the Courts below have

misapplied the law leading not only to the wrongful judgment appealed herein but also to the

propagation of legal precedent which will put future litigants in similar jeopardy.

First, the argument presented under Proposition of Law No. 1 demonstrates that unless

this Court corrects the path taken by the Trial Court and affirmed by the Court of Appeals,

parties will be denied a hearing and an opportunity to be heard as to damage claims solely on the

erroneous ground that the damage claim can be calculated to a sum certain. This erroneous

result stems from the lower courts confusing "liquidated" damages (damages calculable to a sum

certain) with "liquidated damages" provided for by contract. To the extent this kind of confusion

is permitted to exist uncorrected the whole process of adjudication of default claims becomes

distorted and unjust. This is especially significant as such claims constitute a huge volume of

9>

claims outside the context of a family corporation dispute involved herein. The Courts of this

state deal daily with defaults arising out of credit card agreements, mortgage loans and the other

secured and unsecured debt. Whether a hearing will be afforded defendants in those contexts

will be directly impacted by the legal principles at issue here. Should the ruling endorsed by the

Fifth Appellate District in its Decision in this case stand, Defendant debtors will be at the mercy

of collection agencies and debt buyers as they will be unable to defend against inflated damage

claims, attorneys fees and the "made up" charges which proliferate in those cases. Rather the

stock answer will be "if we can compute it, they will pay."-

Secondly, in Proposition of Law No. 2 Appellants demonstrate that the Court of Appeals

for the Fifth Appellate District in affirming the decision of the trial court has misinterpreted and

misapplied O.R.C. Section 2305.09, the statute of limitation with respect to breach of fiduciary

duty. Not only did the Court err as a matter of law in determining when that cause of action

accrues, it affirmed an award of attorneys fees based on that misapplication. Consequently this

case not only will allow this Court to "iron out" the inconsistencies in the interpretation of the

statute of limitation for breach of fiduciary duty claims among the various Court of Appeals it

can eradicate the chilling effect the assessment of attorney fees in statute of limitation cases

presents.

In sum this case presents important legal issues regarding Due Process and the

application of Ohio's statutes of limitation.

2

1. Statement of Case

This case originated in the Fairfield County Court of Common Pleas in 2006.

After lengthy litigation a final appealable Order was issued on February 13, 2012.

Appellants herein appealed that Decision to the Court of Appeals of Fairfield County,

Fifth Appellate District.

On December 26, 2012 the Court of Appeals issued its Decision. (Appendix 4)

Subsequent to that Decision the Appellants filed a timely Application for

Reconsideration.

On February 7, 2013 the Court of Appeals denied that Application. (Appendix 1)

Appellants now seek review in this Court.

II. Statement of Facts

Appellee, Estate of Robert V. Grilli, Plaintiff below, initiated this action on March 31,

2006 by filing a complaint for declaratory judgment and an accounting with respect to the

operation of two corporations, Appellant Grilli Real Estate Corporation Inc. (also GRE Inc.) and

Appellant Valerio's Inc. (Valerio's), and certain transactions which involved the three

shareholders of those corporations.

The two corporations in issue had been solely owned by Valerio Grilli, the father of three

children, Robert V. Grilli, Virginia Smith (nee Grilli), Appellant and Diana Camden (nee Grilli),

Appellant.

At Valerio Grilli's death in 1993 the three children inherited the father's interest in the

corporations in equal shares, one-third each.

3

Robert V. Grilli, as the only son, took charge of the corporations and operated them for

the next ten years as basically his own, keeping his sisters only marginally informed even though

they owned two thirds of the shares and were officers and directors of the corporations.

On July 15, 2004 Robert V. Grilli died.

During the six month period following his death, i.e. the six month period during which a

claim against an Estate must be filed under ORC Section 2711.06, a dispute arose between

Appellants Virginia Smith, Diana Camden and Virginia Grilli, Administrator of the Estate of

Robert V. Grilli and her counsel, who Appellants herein believed had been representing all of the

parties and not just Virginia Grilli and the Estate. This dispute resulted in a separate legal

malpractice lawsuit which is still pending, and the instant action.

During the course of the lengthy litigation of this case the Appellee Estate amended its

Complaint against Appellants by adding eight new counts alleging breach of fiduciary duties,

conversion, misappropriation, abuse of authority/waste, unjust enrichment, directors liability,

unlawful loans, dividends and distributions, dissolution and a request for a Receiver.

At that point Appellants' counsel, who had been representing them in the matter for over

two years, including two appeals, withdrew from the action leaving Appellants without counsel,

and without arranging for an extension of time to Answer the Amended Complaint. Immediately

thereafter Appellee filed a motion for default judgment which was granted as to the eight new

claims but not as to the original complaint for an accounting as an Answer had been filed at the

initiation of the case.

Eventually a trial was scheduled for May 10, 2011 on the accounting and declaratory

judgment actions of the original Complaint and as to damages on the eight counts which were

subject to the Court's default judgment entry.

4

At that time a dispute arose over evidence Appellants sought to introduce under the

common law defense of recoupment. The Court adjourned the trial to have the parties brief the

issue. In an Entry dated June 1, 2011 the Trial Judge refused to allow Appellants to present any

evidence under the defense of recoupment.

The trial was reconvened on November 7, 2011 to consider Appellee's claims from the

original. Complaint and damage claims raised by Appellee pertaining to the defaulted causes of

action including compensatory damages, attorneys fees and punitive damages.

In an Entry dated January 20, 2012 the Trial Judge rejected all of Appellee's

compensatory damage claims except for a $32,950 claim which had been granted on a partial

summary judgment motion plus $8,072 in attorneys fees related solely to that summary judgment

and $2.00 in punitive damages. (Appendix 42, 51)

With respect to the motion for partial summary judgment the Trial Court had refused to

hold a hearing as to damages even though the Court was imposing liability pursuant to the

default judgment referred to above, and even though it was holding a hearing as to damages on

the other defaulted claims.

The basis for the Trial Court's refusal was that the damages alleged were "liquidated" in

the sense that they could be calculated as a sum certain even though they were being awarded

pursuant to a tort cause of action (breach of fiduciary duty) and not pursuant to contract. As will

be discussed in Proposition of Law No. 1 this was an erroneous conclusion.

The Court of Appeals in its review of this issue simply adopted the Trial Court's

erroneous ruling on the law holding that the Trial Court did not err.

In fact, both the Trial Court and the Court of Appeals erred on the law and thereby denied

Appellants Due Process of law in that they were denied a hearing on a damage claim arising out

5

11

of a tort cause of action. The impact of this denial is compounded when one recognizes the only

significant damages awarded to Appellees in this seven year process arose out of a failure to

provide Appellants a hearing and an opportunity to be heard on this single claim.

A. Consolidation of a Second Lawsuit

During the pendency of the case discussed above Appellants herein filed a separate action

directed at Virginia Grilli as an individual in the Fairfield County Court of Common Pleas. This

lawsuit styled Grilli Real Estate Corporation Inc., et al. v. Virginia Grilli as Administrator and

Individually, Case No. 2009-CV-79, was assigned to Judge Martin. The principal purpose of this

lawsuit was to hold Virginia Grilli, the surviving spouse of Robert V. Grilli, personally

responsible for returning the funds Robert V. Grilli had misappropriated from the two

corporations Grilli Real Estate Corporation Inc., and Valerio's Inc., during his life. The

Complaint recited the individual actions of Virginia Grilli as well as her personal actions as the

Administrator of the Estate. The Estate itself was not named a party to the action by Appellants.

The Complaint addressed the individual actions of Virginia Grilli and set forth claims as

to breach of fiduciary duty and unjust enrichment.

Appellee Virginia Grilli filed a motion for summary judgment in Case No. 2009-CV-79

on the ground that Appellants' counts sounding in 1) Breach of Fiduciary Duty; 2) Fraud; and 3)

Unjust Enrichment were barred by the statute of limitations.

The Trial Court granted Appellee summary judgment in a decision issued July 9, 2009.

(Appendix 59) The decision focused solely on two promissory notes signed by Robert V. Grilli

representing loans he gave to himself from corporate funds without authorization and without

notifying Appellants, who owned two thirds of those corporations. One note, payable to Grilli

Real Estate Corporation Inc., was for $115,627 with no interest signed December 1, 2002

6

t

payable December 1, 2003; the other was payable to Valerios Inc., signed December 31, 2002 in

the amount of $38,601 with no interest payable December 31, 2003. These notes were never

paid.

The Trial Court (Judge Martin) in its Decision set forth the issues with respect to the

claims of breach of fiduciary duty, fraud, and unjust enrichment and then adopted the legal

position argued by Appellees without further explanation or authority and granted Appellees

summary judgment on the basis of the alleged defense of statute of limitations. (Appendix 59)

After Judge Martin's interlocutory decision in Case No. 2009-CV-79 that case was

consolidated with the instant case.

After the consolidation the Appellees herein claimed the filings in Case No. 2009-CV-79

were frivolous and requested attorney fees.

The Trial Court (Judge Berens) held a hearing on this claim and found that-one of the

four claims, the claim for breach of fiduciary duty was frivolous and awarded Appellees $1900

in attorneys fees.

Appellants have consistently contended that Judge Martin's ruling was erroneous as a

matter of law.

The Court of Appeals offered no discussion or analysis of the issue regarding the accrual

date of a claim for breach of fiduciary duty in applying the statute of limitations in O.R.C.

Section 2305.09 other than to recap the holding of the Trial Court.

Appellants will demonstrate in Proposition of Law No. 2 that the Courts below have

erred as a matter of law and compounded that error by concluding that Appellants' claim was

frivolous solely because it was filed outside the erroneously defined period of limitation.

7

III. Law and Ar ug ment


The Lower's Court's denial of a hearing on damages stemmed from their failure to distinguishbetween "liquidated" damages as being a sum certain and "liquidated damages" agreed to bycontract resulting in a violation of Appellants' constitutional right of Due Process.

The basic requirement of Due Process where property rights are at stake is that there be a

right to a hearing, an adequate opportunity to be heard at a meaningful time and in a meaningful

manner. Parratt v. Taylor ( 1981), 451 U.S. 527.

Moreover, the right to a hearing is not precluded in a default judgment context. As held

in American Bankers Ins. Co. v. Leist, 117 Ohio App. 20 (1962), it is well settled that damages

relative to a tort or negligence claim cannot be determined without a hearing because they are not

admitted as part of the default.

Nonetheless in the instant case the Court of Appeals affirmed the Trial Court's refusal to

grant Appellants a hearing on damages claimed to result from a default judgment based on a

breach of fiduciary, i.e, tort claim. The Court of Appeals justified that result in holding:

{¶70} The trial court found the damages were liquidated damages which stated asum certain. Appellants did not challenge the actual amount of the payments, butargued they were not liable. The trial court correctly found this argument to bemoot because it had granted default judgment as to liability.

{¶71 } A trial court may award liquidated damages without conducting a hearing.

Civ. R. 55 (A); Buckeye Supply Company v. Northeast Drilling Co., 24 Ohio

App.3d 134, 493 N.E.2d 964 (1985).

{¶72} We find the trial court did not err.

The foregoing holding is erroneous in that it confuses the concept of "liquidated"

damages (pertaining to a calculable sum) and "liquidated damages" (pertaining to a contractual

term which can be admitted by default on liability).

8

The difference between these concepts is crucial in this case and in any case where tort

damages are not the product of estimations or multiples but are calculable to a sum certain. In

the instant case the "liquidated" damages calculated by the Appellee consisted of one-third of a

number of payments under a promissory note held jointly by the Appellants and Appellee.

Specifically these payments arose under a note denominated the "Hines Note" in these

proceedings. (Contrary to the holding of the Court of Appeals this note arose not out of the sale

of the corporations but out of the sale or real property by the corporation Grilli Real Estate Inc.)

The dispute between the parties concerned how the $1938.25 monthly payments would

be distributed among the parties and whether those payments were subject to the debts of GRE

Inc., such as certain mortgage loans incurred by Robert V. Grilli for his personal benefit.

Although the Appellees' claim to a portion of these funds was initiated under a claim for an

Accounting, the Trial Court awarded Appellee judgment in the amount of $32,950 solely under

its default judgment ruling which pertained only to tort claims such as breach of fiduciary duty

which were part of Appellee's Amended Complaint.

The erroneous legal principal established by the lower courts under their analysis in this

case is that as long as a damage figure can be derived from documentary evidence as a sum

certain, no hearing need be afforded to a defaulting defendant subject to a tort claim. This

holding perverts the settled law to date that even in a default context tort damages are not

admitted pursuant to the default. See also Buckeye Supply Co. v Northeast Drilling Co., 24

Ohio App.3d 134, 136. Most importantly, this Decision violated Appellants' right to Due

Process by denying Appellants a hearing on the issue of damages stemming from a tort.

The confusion over "liquidated" damages versus "liquidated damages" must be cleared

up by this Court before it spreads to other trial courts and appellate districts in this State.

9

.^ . . ,.^ . .. . . . . . . .. . . . . . . . . . .. .

Finally, by allowing Appellants a hearing on this issue Appellants would have been able

to establish that the payments in question were used solely to pay corporate obligations incurred

for the personal benefit of Robert V. Grilli. To require Appellants to pay to the Estate of Robert

Grilli from their own funds $32,950 which Appellants had paid to the creditors of GRE, Inc., on

behalf of Robert V. Grilli, is the grossest of injustices, an injustice that should have shocked the

conscience of the lower courts.

10


Under O.R.C. Section 2305.09 the cause of action for breach of fiduciary duty accrues at thelatest when the fiduciary refuses to repay an unauthorized loan not the date the unauthorized loan

is taken.

As discussed above the Trial Court and the Court of Appeals committed a significant

legal error involving the latest date for the accrual of a cause of action for breach of fiduciary

duty.

As reviewed in the Statement of Facts, the Trial Judge concluded that where there was a

claim for breach of fiduciary duty arising out of unauthorized corporate withdrawals in the form

of promissory notes the date the notes were signeded by the tortfeasor constituted the date the cause

accrued not the date the tortfeasor refused to pay the note according to its terms. In this case the

refusal to pay the notes according to their terms was made expressly in Probate Court

proceedings by the Appellee herein, Virginia Grilli, spouse of Robert V. Grilli and administrator

of his Estate. This refusal to pay was made at a time when the Estate was a one third owner of

Grilli Real Estate Corporation and, therefore, owed fiduciary duties to its fellow shareholders,

the Appellants.

The Trial Court's understanding of the issue was set forth as follows:

"Defendants contend that the time began to run on Plaintiffs' claims at the timethe Notes were signed by decedent Grilli in December 2002. Thus, Plaintiffsshould have filed their breach of fiduciary duty claim no later than December2006 and their unjust enrichment claim no later than December 2008. The presentComplaint was filed on January 20, 2009."

The Trial Court's final holding did not analyze or explain this understanding, it merely

granted Appellee summary judgment based on a statute of limitations defense. Unfortunately the

Court of Appeals added nothing.

11

However, this rationale is countered by holdings of other Courts of Appeals. For

example in Jim Brown Chevrolet Inc. v. Snodgrass (2001), 141 Ohio App.3d 583, the Court of

Appeals for the Eleventh Appellate District held a breach of fiduciary duty accrues when the

claimant's interest is impaired by such breach. Appellants contended below and reassert here

that under this language the accrual of their claim cannot be dated to the dates the notes were

signed but to the date Virginia Grilli as Administrator of the Estate of Robert V. Grilli rejected

the probate claims of Appellants, which included these notes, a date well within the statute of

limitations in O.R.C. Section 2305.09. This was the point at which Appellants interests were

finally and irretrievably impaired by the actions of Robert V. Grilli and Virginia Grilli. Prior to

that date the notes though unauthorized were assets of the corporations.

Additionally Appellants relied on Cassner v. Bank One Trust Company, 2004 Ohio App.

Lexis 3101 (10th App. Dist., July 1, 2004), where it was held the statute of limitations for breach

of fiduciary duty does not begin to run while the fiduciary still remains in control. That principle

applies in the instant case. The Estate of Robert V. Grilli, Deceased, was open at the time this

issue arose and remains open to this date. Consequently, under the above legal principle the

statute of limitations on the breach of fiduciary duty had not yet began to run and O.R.C.

§2305.09 was never a bar to this claim.

The law regarding the accrual of a claim for breach of fiduciary duty as shown above is

now inconsistently applied in the various Courts of Appeals of this State. This is a state of

affairs which must be corrected by this Court. Moreover, that the Trial Court assessed attorney

fees against Appellants based on this single claim as if the filing was frivolous magnifies the

necessity for this Court to address the issue and correct this further injustice.

12

IV. Conclusion

For the reasons discussed above Appellants submit this case presents a substantial Due

Process Constitutional question and issues of public and great general interest. Therefore

Appellants request this Court accept jurisdiction of this case so these significant issues can be

resolved.

Respectfully submitted,

Ronald B. Noga (0013345)1010 Old Henderson Road, Suite 1Columbus, Ohio 43220614/326-1954Attorney for Appellants

13

CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing Brief of Appellants has been sent by ordinary

U.S. mail, postage prepaid, to Mark R. Riegel, Attorney for Appellees, 144 E. Main Street,

Lancaster, Ohio 43130-0667, on this ^Iday of March, 2013.

14

»,

^^^^^Z ^4 a ^E

r^L. 1:^ D^,^-,„^;:f^^1I^I THE COURT OF APPEALS FOR FAIRFIELD COUNTY, OHIO

x. a .i ^...^

FIFTH APPELLATE DISTRICT 2013 FEB -1 AM 7: 34Ft j ^ ar

Iq P9. 32G t32'7C 0^ OURT^

ESTATE OF ROBERT V. GRILLI : I:AIRI: IEl.D 00. ONlO

Plaintiff-Appellee

-vs- JUDGMENT ENTRY

VIRGINIA SMITH, ET AL

Defendants-Appellants : CASE NO. 2012-CA-12

This matter came before the Court upon appellants' motions for reconsideration

pursuant to App.R. 26(A) filed January 7, 2013. Appellee filed a response January 11,

2012.

App. R. 26 does not provide specific guidelines to be used by an appellate court

when determining whether a decision should be reconsidered or modified. In Mathews

v. Mathews, 5 Ohio App.3d 140, 143, 450 N.E. 2d 278 218(10th Dist.1981), the court

stated: [t]he test generally applied in [A]pp. R. 26 (A) motic^n^] is whether the motion for

reconsideration calls to the attention of the court an obvious error in its decision or

raises an issue for our consideration that was either not considered at all or was not

fully considered by us when it should have been." See also, State v. Owens, 112 Ohio

App.3d 334, 678 N.E. 2d 956(11th Dist. 1996); Erie Insurance Exchange v. Colony

Development Corp., 136 Ohio App.3d 419, 736 N.E.2d 950(10th Dist. 2000).

Fairfield County, Case No. 2012=CA-00012 2

A review of appellant's motion reveals that it has not demonstrated any obvious

error or pointed out any issue that was not adequately addressed in the opinion. "An

Application for Reconsideration is not designed for use in instances where the parties

simply disagree with the conclusions reached and logic used by an appellate court. App.

R. 26 provides a mechanism by which a party may prevent miscarriages of justice that

could arise when an appellate court makes an obvious error or renders an

unsupportable decision under the law." Id. Bonnell has made no such demonstration in

his application for reconsideration.

Upon a complete review of Appellants' Motion for Reconsideration, this court

finds that the issues had been thoroughly considered by this court in the original appeal.

For these reasons, appellant's Motion for Reconsideration is found not well taken.

Appellants' motion for reconsideration is denied.

IT IS SO ORDERED.

^------- '

HON. W.'SCOTT GWIN

-HON. PATRICIA A. DELANEY►

HON. WILLIAM B. HOF N

^

F. . .-

IN THE COURT OF APPEALS FOR FAIRFIELD COUNTY, oFiL ^

FIFTH APPELLATE DISTRICT 2012DEC26 AHf I *Z t

0E1;4fi01 SMALLEY

ESTATE OF ROBERT V. GRILLI : CLERK 0F C00RT'SFAIRFIELD CO. UHlo

Plaintiff-Appellee

-vs-


JUDGMENT ENTRY

Defendants-Appellants CASE NO. 2012-CA-12

For the reasons stated in our accompanying Memorandum-Opinion, the judgment of

the Court of Common Pleas of Fairfield County, Ohio, is affirmed. Costs to appellant.

HON. W. SCOTT GW--IN

. . ^/l .HON. PATRICIA A. DELANEY

HON. WILLIAM B. HO N

3

F I L E^

COURT OF APPEALS.'CFAIRFIELD COUNTY, OHIO 201,£ DEC ^^ AM11 :2 I

FIFTH APPELLATE DISTRICTDEBORAH SH.^' LLEY

I"J JUDGES: = CLERK OFCOUR7S

OF ROBERT V. GRILLI :Hon. Patricia A. Delaney; F^^1F^FIELD CO° OHt0

ESTATE Hon. W. Scott Gwin, J.

Plaintiff-Appellee : Hon. William B. Hoffman, J.

-vs-


• Defendants-Appellants

CHARACTER OF PROCEEDING:

JUDGMENT:

DATE OF JUDGMENT ENTRY:

APPEARANCES:-

For Plaintiff-Appellee

MARK R. RIEGELDagger, Johnston, Miller, Ogilvie &Hampson, LLP144 E. Main StreetP. 0. Box667Lancaster, Ohio 43130-0667

Case No. 2012-CA-12

OPINION

Civil appeal from the Fairfield County Courtof Common Pleas, Case No.2006CV00345

Affirmed

For Defend -ants-Appellants

RONALD NOGA1010 Old Henderson Road, Suite IColumbus, Ohio 43220

.^^

Fairfield County, Case No. 2012-CA-122

Gwin, J.,

{11} Defendants-appellants Virginia Smith, Diana Camden, Grilli Real Estate

Corporation and Valerio's, Inc., appeal a judgmentof the Court of Common Pleas of

Fairfield County, Ohio,entered in favor of plai ntiffs-appel lees the Estate of Robert V.

Grilli by and through Virginia Grilli, the Executor and Administrator and Virginia Grilli in

her individual capacity. Appellants assign six errors to the trial court:

{12} "I. THE TRIAL COURT ERRED AS A MATTER OF LAW AND ABU-SED

ITS DISCRETION IN GRANTING APPELLEE A DEFAULT JUDGMENT ON AN

AMENDED COMPLAINT WHEN APPELLANTS HAD APPEARED IN THE CASE, HAD

BEEN LITIGATING THE DISPUTE FOR OVER THREE YEARS AND HAD FILED A

PROPOSED ANSWER AND MOTION TO FILE OUT OF RULE WITHIN 42 DAYS

FROM THE DATE THEIR COUNSEL HAD WITHDRAWN.

{13} "II. THE TRIAL COURT ERRED AS A MATTER OF LAW IN REFUSING

TO PERMIT APPELLANTS TO PRESENT EVIDENCE CONSISTENT WITH THE

COMMON LAW DEFENSE OF RECOUPMENT TO NULLIFY THE DAMAGE CLAIMS

OF APPELLEE.

{14} "Ill. THE TRIAL COURT ERRED AS A MATTER OF LAW AND ABUSED

ITS DISCRETION IN ORDERING JUDICIAL DISSOLUTION OF APPELLANTS, GRILLI

REAL ESTATE CORPORATION INC., AND VALERIO'S INC., WHEN THE

STATUTORY REQUIREMENTS FOR SUCH DISSOLUTION WERE NOT MET; NONE

OF THE PLEADINGS RECITED THE ELEMENTS NECESSARY FOR JUDICIAL

DISSOLUTION; THE ISSUE OF DISSOLUTION WAS NEVER EXPRESSLY TRIED;

AND JUDICIAL DISSOLUTION WOULD PREJUDICE APPELLANTS IN THAT BOTH

3Fairfield County, Case No. 2012-CA-12

CORPORATIONS HAVE PENDING CLAIMS IN THE COMMON PLEAS COURT

AGAINST COUNSEL FOR APPELLEE HEREIN FOR LEGAL MALPRACTICE.

{15} "IV. THE TRIAL JUDGE (MARTIN) ERRED AS A MATTER OF LAW IN

HOLDING THAT THE THREE COUNTS OF THE COMPLAINT FILED BY

APPELLANTS HEREIN AGAINST APPELLEE, VIRGINIA GRILLI, AS AN INDIVIDUAL,

WERE BARRED BY THE STATUTE OF LIMITATIONS.

{16}'V. THE COMPLAINT FILED AGAINST VIRGINIA GRILLI INDIVIDUALLY

IN CASE NO. 2009-CV -79, CONSOLIDATED HEREIN, WAS NOT FRIVOLOUS AND

CANNOT BE THE BASIS FOR SANCTIONS.

{117} "VI. THE TRIAL JUDGE ERRED AS A MATTER OF LAW IN GRANTING

APPELLEE A PARTIAL SUMMARY JUDGMENT ON DAMAGES WITHOUT HOLDING

THE HEARING PREVIOUSLY ORDERED BY THE COURT."

(18) This is the third time these matters have come to us for review. There

have been three original cases filed: one in probate court and two in common pleas

court. Thereis also a pending legal malpractice case arising out of these cases. In order

understand whatissues are before us, a condensed statement of facts and procedure

to

is necessary.The Proceedings in Probate Court

{¶g} In Smith v. Estate of Grilli, 5th Dist. No. 05CA33, 2005-Ohio-5711 (Grilli 1.)

we reviewed the proceedings in the probate case, No. 62498. We found Robert Grilli

died intestate on July 15, 2004, and his widow, Virginia Grilli, was appointed the

administratrix of his estate. The Probate Court gave Virginia Grilli until April 30, 2005 to

file an inventory of his estate. Part of the estate was the decedent's interest in tvvo

G


businesses decedent and his two sisters had inherited from their father, Grilli Real

Estate Corporation and Valerio's, Inc.

{110} On FebruarY 4, 2005, decedent's sisters, appellants Virginia Smith and

den on behalf of themselves individually and as shareholders of Grilli RealDiana Cam ,

Estate Corporation and Valerio's, Inc.; and on behalf of Grilli Real Estate Corporation as

officers, filed a claim against Virginia Grilli in the amount of $1,505,895.79, baseditsupon the decedent's business transactions with regard to the corporations. The claim

was not filed within six months of the decedent's death. Smith and Camden filed a

petition for leave to file the late claim, arguing they had not filed the claim within the

six months of the decedent's death because the business records necessary torequired

make them aware of the existence of the claim were in the decedent's possession.

{1111} On February 11, 2005, appellee Virginia Grilli acting as administratrix of

the estate, rejected the claims as untimely. The Probate Court agreed and on February

16 ,2005, found the claim was time barred. The first appeal then came to this court.

{112} In Grilli I,we affirmed the Probate Court's judgment based upon R.C.

21 17.06. We alsoheld the proper forum to litigate for equitable relief would not be in

the Probate Court, but rather in the General Division of the Common Pleas Court,by

filing a complaint on the rejected claim. R.C. 2117.12. Our decision was not appealed

to the Supreme Court.

The Complaint and Counterclaim in the General Division, No. 06-CV-0345

March 31, 2006, the estate filed a complaint against appellants Smith{¶13} On

and Camden for an accounting and declaratory judgment. The complaint requested an

accounting for, among other things, the unauthorized sale of assets of both corporations

1


by appellants Smith and Camden. The complaint asked for a declaratory judgment to

determine the parties' shareholder interest in Valerio's, Inc.

{114} The complaint recited that decedent Robert Grilli was the registered owner

and holder of one-third shareholders/ownership interest 'in the Grilli Real Estate

CorPoration. Appellees alleged that during the proceedings, appeliants had made

contradictory statements regarding the interests decedent, Smith, and Camden held in

Grilli Real Estate and Valerio's.

{115} Appellants Diana Camden and Virginia Smith are the sole officers of Grilli

Real Estate, and also claim to be the sole officers of Valerio's. Appellees alleged these

appellants had custody and control of all -records, bank accounts, income and assets of

both corporations. Appellees alleged in October 2005 the appellants sold assets of both

the corporations without corporate meetings or authorization.

{116} Appellants filed a counterclaim based upon the facts of the 2005 claim

against the estate that had previously been rejected as untimely in the probate

proceedings. On August 7, 2007, the trial court granted summary judgment in favor of

appellees as a matter of law on the counterclaim, finding the action had not been

commenced within two months after rejection of the claim, as required by R.C. 2117.12.

The court also ruled on other matters not at issue in this appeal, but did not rule on the

merits of appellees' complaint. In the Estate of Grilli v. Smith, 5th Dist. No. 07CA51,

2008-Ohio-3126 (Grilli Il) we affirmed the court's decision.

{¶17} After we announced our decision in Grilli 11, appellees sought leave to

amend their original complaint. The court granted leave on September 4, 2008, but the

appellees did not actually file the amended complaint until February 13, 2009.

I


The Amended Complaint and the Counterclaim

6

{118} In the amended complaint, appellees alleged eight counts, including the

original two counts from the first complaint, for an accounting and for a declaratory

judgment delineating the various parties' interest, rights, and obligations in the

businesses.

{119} Count Three of the complaint was for breach of fiduciary duties, alleging

appellants had failed to protect the assets of the corporations, had improperly paid

themselves salaries, had failed to render appropriate accountings, had taken personal

loans from the corporation and converted assets, and had failed to properly market the

various assets for sale. The amended complaint included an allegation the two

individual appellants improperly gave themselves $10,000.00 each after the sale of the

corporate assets. Appellees alleged appellants negotiated the sales without conducting

corporate meetings, and damaged the businesses' good will and value. Appellees also

alleged appellants had paid personal bills with corporate funds.

{120} The amended complaint alleged there were further breaches of fiduciary

duties, the full extent of which appellee could not know. Appellees alleged appellants

acted with callous disregard of appellees' rights, and their actions were so intentional,

willful, and wanton as to.support an award of punitive damages.

{121} Count Four was for appropriation or conversion of corporate assets, while

Count Five alleged abuse of authority and waste. Count Six was for unjust enrichment.

Count Seven was captioned director liability, and asked the court to remove and/or

enjoin appellants from acting as officers, directors and/or managers of the two

corporations, and to replace them with appellee Virginia Grilli.

I


{122} Count Eight alleged the individual appellants had taken unlawful loans of

funds from the corporations. Count Nine prayed for dissolution of the corporations or in

the alternative for the appointment of a receiver, and Count Ten was for a permanent

injunction prohibiting appellants from continuing the behavior alleged in the earlier

counts. Appellees alleged damages in an amount in excess of $25,000.00 in Counts

Three, Four, Five, Six, Seven and Eight, but pled no specifics.

{123} Seven days after the filing of the amended complaint, appellants' counsel

asked for leave to withdraw. The court granted leave on February 26, 2009. Appellants

alleged the withdrawal of counsel impaired their ability to answer the amended

complaint. Appellants alleged they were unable to obtain new local counsel to become

involved in the litigation at least in part because appellants had filed a malpractice suit

against appellees' counsel and his law firm, an action which is not a part of the instant

appeal.

{124} On March 17, 2009, appellees filed a motion for default judgment as to the

allegations in its amended complaint. On April 9, 2009, appellants secured new counsel

who filed a notice of appearance, a memorandum contra the motion for default

judgment, and a proposed answer with a motion for leave to file out of rule. On July 7,

2009, the court overruled appellants' motion to file an answer out of rule. On August 7,

2009, the trial court overruled appellants' motion to reconsider the motion to file their

wer. The court found appellants had not shown excusable neglect in their firstans

motion, although they had an opportunity to do so.

{125} The trial court found that the first two counts of the amended complaint re-

stated claims for declaratory judgment and accounting raised in the original complaint

l0

I Faitfield County, Case No. 2012-CA-128

and appellants had timely answered. The court held default judgment was improper on

the two counts, finding appellants were entitled to a trial on the merits of the issues

raised therein.

The court found it was appropriate to' hold in abeyance its ruling on the{¶26}

motion for default judgment on the remaining claims until such time as it could conduct

a hearing on damages. The court found a hearing was necessary pursuant to Civ. R.

55O because the appellees had not presented their damages with certainty, but

rather, alleged unliquidated damages, equitable claims, and even claims where the

damages were unknown to appellees. The court ordered the parties to conduct

discovery and consolidated the damages hearing with the trial on the merits of

appellees' first two claims.

Consolidation of Cases 2009-CV-079 and 2006-CV-345

In 2009, appellants filed a new action, styledGrilli Real Estate

{¶27}

CorPoration, Inc. v. Virginia Smith, as Administrator of the Estate of Robert Grilli,

Fairfield Common Pleas Case No. 2009-CV-0079. Appellees characterized this lawsuit

a re-statement of appellants' original claim that had been filed and rejected inas

Probate Court and subsequentiy in Common Pleas Court, although now appellants

were attempting to pursue Virginia Grilli individually. In their complaint appellants

argued she could be held liable even if appellants could not recover from the estate.

{128} On July 9, 2009, the court granted a partial summary judgment in favor of

appellees, on appellants' complaint in case 2009-CV-0079, finding the appellants'

counts for breach of fiduciary duty, fraud, and unjust enrichment were time barred.

H


{129} On August 13, 2009, appellees filed a motion to consolidate cases 2006-

CV-345 and 2009-CV-0079, arguing the two cases presented common questions of law

and fact and involved the same parties. The court agreed and consolidated the two

cases.

{130} On October 7, 2009, appellants filed a motion to supplement their

counterclaim, asserting Virginia Grilli in her administration of the estate, had deliberately

and maliciously damaged the assets of Grilli Real Estate Company, by forcing it to

expend funds to defend this action. On April 1, 2010, the court overruled appellants'

motion to file the supplemental counterclaim. The court also considered appellees'

motion for summary judgment on appellants' claim of fraudulent transfer, and appellees'

counterclaim of abuse of process, vexatious litigation, claim on account, and unjust

enrichment. The court found reasonable minds cannot come to but one conclusion

regarding any of those claims and therefore denied summary judgment on each.

{131}, On July 14, 2010, the trial court considered appellees' motion for partial

summary judgment for the sale of assets and the damages associated with the sale, as

well as for sanctions for discovery violations. The court sustained the motion for partial

summary judgment on some of the claimed sales and damages but overruled it as to

some of the claims for sale of assets, as well as the motion for sanctions. The court

awarded appellees $32,950 in compensatory damages, $8,072 for attorney fees, and

$2.00 punitive damages. The court directed appellees to prepare an entry, which it

journalized on August 9, 2010.

la


{132} While the court declined to order sanctions for the discovery issues, it did

construe the motion as a motion to compel discovery, and directed appellants to

produce the requested items.

{1133}. This appears to leave the counts for the sale of the corporate assets,

abuse of authority, waste, director liability, and unlawful loans remaining. The counts for

an accounting, dissolution of the corporations or in the alternative for the appointment of

ceiver removal of the appellants Smith and Camden from the operations of thea re ,

^r^ _^businesses, and for a permanent injunction also remained unresolved at this point in the

proceedings, as did appellants' counterclaim.

{134} On May 10, 2011, the trial court began a trial on the remaining claims, but

was abruptly cut short. In the course of appellants' opening statement, appelleesit

objected to appellants' stated intention to adduce evidence demonstrating the decedent

had intentionally, purposely, and wrongfully appropriated the assets of Grilli Real Estate

Corporation and Valerio's, Inc. for his personal benefit, thereby denying appellants

Smith and Camden their share. Appellees argued appellants had not pled recoupment

as an affirmative defense in the action. As a result of the objection, the court adjourned

the trial to permit the parties to prepare and submit written briefs regarding the defense

of recoupment.{135} In their motion contra to appellees' objection, appellants stated their

original answer and counterclaim set forth the pertinent facts which supported the

defense of recoupment, even though it was not labeled as such. Appellants asserted

their original counterclaim had alleged decedent had wrongfully and fraudulently

appropriated corporate assets in excess of $1,000,000.00. Appellants conceded the

t 3


counterclaim was subsequently found to be barred by the statute of limitations, but they

asserted the facts alleged should still give rise to the defense of recoupment.

{136} The trial was scheduled to re-convene on August 2, 2011, but was

continued several times.

} On May 12, 2011, appellees filed a motion pursuant to Civ. R. 41 for{137

partial dismissal of its claims. Appellees withdrew their claims for an accounting and for

an injunction to allow inspection of records because appellants had produced

documents and corporate records. Appellees also dismissed without prejudice the

claim for declaratory judgment and their counterclaim in 2009-CV-0079 concerning

Valerio's, because after discovery was concluded, it appeared Valerio's Inc. had no

assets and litigating any damages claim against the corporation was pointless.

{138} In June, 2011 the trial court ruled appellants could not introduce evidence

of recoupment because the counterclaim did not sufficiently state the necessary

elements of recoupment as an affirmative defense. On January 18, 2012, appellees

dismissed their remaining claims, except for the claim that appellants' complaint, filed in

case number 09-0079, was frivolous. Appellees renewed their prayer for costs, attorney

{139} The trial court found appellees were not entitled to compensatory

damages except as awarded in the previous summary judgment. On February 13, 2012,

the court found appellees were entitled to recover on their last-remaining claim that

appellants should be sanctioned for filing the complaint in 2009-CV-0079 against

appellee Virginia Grilli personally for the acts originally brought in the Probate Court in

fees, and reasonable expenses.


2005. The court awarded appellee Virginia Grilli $1,900 in attorney fees. This entry

disposed of the last of the claims and this appeal ensued.

. I.

{140} In their first assignment of error, appellants argue the trial court erred as a

matter of law and abused its discretion in granting default judgment in favor of appellees

on their amended complaint when appellants had appeared in the case and litigated the

dispute for over three years. Appellants argued the court erred in overruling their

motion to file an answer out of rule.ellees filed their amended complaint appellants'

{¶41} One week after app

counsel of record filed a motion to withdraw, stating he had provided appellants with the

amended complaint and advised them to seek an extension of time to file their answer.

The court granted the motion to withdraw, but appellants did not file a motion for

extension of time nor did they file an answer or any other responsive pleading within

rule. Their answer to the amended complaint was due March 1, 2009. Over a month

later, on April 8, 2009, appellants filed their motion to file their answer out of rule.

{142} Civ. R. 6 (B) provides if the Rules specify a time limit for any act, after the

expiration of the time'period a court can allow the act upon motion where the failure to

act in a timely manner was the result of excusable neglect. The court here specifically

found appellants had made no showing of any excusable neglect for their failure to file a

timely answer.

{143} A trial court's decision on whether a party's neglect was excusable may

not be reversed absent an abuseof discretion. Marion Prod. Credit Association v.

an 40 Ohio St.3d 265, 271, 533 N.E.2d 325 (1988). The Supreme Court hasCochr ,

1<

Fairfield County, Case No. 2012-CA-12 13

frequently defined the term abuse of discretion as showing the court's attitude is

unreasonable, arbitrary or unconscionable. See, e.g., Blakemore v. Blakemore, 5 Ohio

St. 3d 217, 450 N.E.2d 1140 (1983).

{144} We find the trial court did not err as a matter of law or abuse its discretion

in finding appellants' motion to file an answer out of rule was not well taken, and

proceeding to consider the matters under a default judgment standard.

{145} The first assignment of error is overruled.

II.

{146} In their second assignment of error, appellants argue the trial court erred

as a matter of law when it did not permit them to present evidence of the common law

defense of recoupment to nullify or reduce appellees' damage claims.

{147} Appellants argue their original counterclaim pled sufficient facts to state

the affirmative defense of recoupment. The trial court found the counterclaim was a

claim for damages, not a mistakenly designated affirmative defense, and it had

dismissed the counterclaim two years prior to the appellants' attempt to raise the

defense of recoupment. The court found considering the length of time the matter had

been pending, there was no reason appellants could not have raised the defense before

the day of trial.

{¶48} We find the transactions at issue in appellants' recoupment defense had

been originally rejected in the Probate Court, and affirmed by this court in Grilli l, and

raised in the counterclaim, which the Common Pleas Court dismissed and this court

affirmed in Grilli 11. We also agree with the trial court appellants could not raise the V

defense for the first time in their opening statement at trial.

1`

14t:_airfield County, Case No. 2012-CA-12

{149} We find the trial court did not err in finding appellants could not present

evidence regarding the common law defense of recoupment.

{150} The second assignment of error is overruled.

Ill.

{¶51} In their third assignment of error, appellants argue the pleadings and

evidence before the court did not recite the elements necessary for judicial dissolution

of the Grilli Real Estate Corporation and of Valerio's, Inc.

{152} In its judgment entry of January 10, 2012, the trial court discussed counts

nine and ten of appellees' amended complaint which requested that the court either

appoint a receiver to wind up and dissolve the corporations or enjoin appellants Smith

and Camden from taking action with respect to the corporations.

{153} The trial court correctly cited R.C. 1701.91 as vesting authority in the court

of common pleas to order the dissolution of a corporation under four circumstances: (1)

Where shareholders bring an action for voluntary dissolution and the court makes

certain findings; (2) Where a majority of shareholders, or a lesser number as provided in

the Articles of Incorporation, bring an action for dissolution and the court determines

that judicial dissolution is beneficial to the shareholders; (3) In the event of certain

described deadlocks between the directors of the corporation; or (4) When the

prosecuting attorney brings an action for dissofution of a corporation used for criminal

purposes.

{154} The trial court found the amended complaint did not allege any of the

circumstances as set forth in R.C. 1701.91, but during the pendency of the action and

particularly during the trial of the matter, both appellants Smith and Camden

ki

15Fairfield County, Case No. 2012-CA-12

represented they were seeking to conclude the affairs of both corporations. The court

found appellant Smith specifically testified that the sale of the assets at issue in the

case was an attempt to wrap up the business of the corporations and dispose of the

assets. The trial court concluded even though the pleadings did not meet the

requirements of R.C. 1701.91, the parties had presented sufficient evidence and the

issues had actually been tried. The court found all three shareholders of the corporation

sought dissolution of both corporations. The court further found that judicial dissolution

would be beneficial to the shareholders because the relationship between the

shareholders of the corporations has diminished to such an extent as had the value of

the corporate assets.

{155} Our review of the record leads us to conclude the trial court correctly

stated the law and applied it to the facts before it. e

{156} The third assignment of error is overruled.

IV.

{157} In their fourth assignment of error, appellants argue the trial court erred in

finding that three counts of appellants' complaint filed in Case No. 2009-CV-079 were

barred by the statute of limitations. The complaint alleged appellee Virginia Grilli was

personally responsible for the funds the decedent had misappropriated from Grilli Real

Estate Corporation and Valerio's Inc. Specifically, appellants alleged the decedent took

personal loans from corporate funds in 2002 and 2003, and did not repay the loans.

Appellants' complaint was filed in 2009.

{158} Count One in Case No. 2009-CV-079 alleged a breach of fiduciary duty,

which has a four-year statute of limitations, pursuant to R.C. 2305.09. The second

\06


count alleged fraud, which also has a four-year statute of limitations, which accrues

when the fraud is discovered. Appellants admitted they learned of the alleged fraudulent

behavior in October 2004, more than four years before they filed their complaint.

{159} Count Three of the complaint alleged unjust enrichment. Unjust

enrichment has a six year statute of limitations pursuant to R.C. 2305.07. However, as

the court correctly found, there is no discovery rule for claims of unjust enrichment.

{160} Appellants argue the wrongful act giving rise to the unjust enrichment

occurred in December 2003 when decedent did not repay the unauthorized loans, even

though decedent first acquired the funds improperly in December 2002.

{161} In Ignash v. First Service Federal Credit Union, 10th Dist. No. 01 AP-

1326, 2002-Ohio-4395, the Franklin County Court of Appeals found a claim for unjust

enrichment accrues on the date on which the money is wrongfully obtained. We agree.

If decedent was never authorized to acquire the funds, then the date on which he first

took the loans is the accrual date for a claim for unjust enrichment.

{162} We find the trial court did not err in finding that appellants' claims for

breach of fid -uci -ary duty, fraud, and unjust enrichment were time barred.

{163} The fourth assignment of error is overruled.

V.

{164} In their fifth assignment of error, appellants argue the trial court erred in

finding the claims referred to in IV supra were frivolous. The trial court found appellees

were entitled to recover $1,900.00 from appellants Smith and Camden and their counsel

for the expenses of defending the case.

{165} R.C. 2323.51 defines the term frivolous conduct:

kVt


(2) "Frivolous conduct" means either of the following:

(a) Conduct *** that satisfies any of the following:

(i) It obviously serves merely to harass or maliciously injure another party

to the civil action or appeal or is for another improper purpose, including,

but not limited to, causing unnecessary delay or a needless increase in

the cost of litigation.

(ii) It is not warranted under existing law, or cannot be supported by a

good faith argument for an extension, modification, or reversal of existing

law, or cannot be supported by a good faith argument for the

establishment of new law.

(iii) The conduct consists of allegations or other factual contentions that

have no evidentiary support or, if specifically so identified, are not likely to

have evidentiary support after a reasonable opportunity for further

investigation or discovery.

(iv) The conduct consists of denials or factual contentions that are not

warranted by the evidence or, if specifically so identified, are not

17

reasonably based on a lack of information or belief.

{166} In the recent case of Helfrich v. Madison, 5th Dist. No. 2011-CA-89, 2012-

Ohio-3701, we noted such matters present a mixed question of law and fact. With

zereas we,:defer.toregard to the legal issues, we review the court's decision de novo, wh

some degree in reviewing a trial court's factual determinations. Helfrich, ¶22, citations

deleted. In Helfrich, we stated if the court finds the conduct to be frivolous, the decision

p

Fairfield County, Case No..2012-CA-12

to assess a penalty lies within the sound discretion of the trial court, Helfrich, ¶ 23,

citations deleted.

{167} We find the trial court did not err as a matter of law or abuse its discretion

in determining appellants' complaint was frivolous, and awarding appellees attorney

fees incurred in defending against it.

{¶68} The fifth assignment of error is overruled.

Vi.

{169} In their sixth assignment of error, appellants argue the trial judge erred as

a matter of law in entering partial summary judgment on appellees'.complaint without

conducting a hearing. The issue was whether appellants had retained installment

payments on the sale of the corporations without giving appellees their share.

{170} The trial court found the damages were liquidated damages which stated

a sum certain. Appellants did not challenge the actual amount of the payments, but^ ,...:

argued they were not liable. The trial court correctly found this argument to be moot F :..

becaupe it had granted default judgment as to liability.

{171} A trial court may award liquidated damages without conducting a hearing.

Civ. R. 55 (A); Buckeye Supply Company v. Northeast Drilling Co., 24 Ohio App. 3d

134 1 493 N.E. 2d 964 (1985).r

{172} We find the trial court did not err.

i"1! {173} The sixth assignment of error is overruled.

; --^:

- `. ----- ..

Oil


{174} For the foregoing reasons, the judgment of the Court of Common Pleas of

Fairfield County, Ohio, is affirmed.

By Gwin, J.,

Delaney, P.J., and

Hoffman, J., concur

.---Gc--c_^

HON. W. SCOTT GWIN

HON. PATRICIA A. DELANEY

. 4HFHON.WILLIA . F

WSG:clw 1130

,ie v

IN THE COMMON PLEAS. COURT OF FAIRFIELD COUNTY, OHIO

ESTATE OF ROBERT V. GRILLI, , . ZL i i AN ^0 pP, 2; 3 1

Plaintiff, . Case No. 06 CV 345 %E S. • ôv i Y^ - RL; r;;c3i-î

v`fîvV. Judge Berens i D

VIRGINIA SMITH, ET AL., JUDGMENT ENTRY RegardingDamages

Defendants. •

This matter came on for trial before the Court sitting without a jury on November 7,

2011. The Court thereafter granted the parties time to submit written closing arguments, which

the Court has received and considered. The matter is fully briefed and ripe for review.

STATEMENT OF THE CASE

The unusual length and procedural complexity of this action necessitates a lengthy

summary of the procedural history of the matters before the Court.

This action was originally filed on March 31, 2006. At that time, Plaintiff sought an

accounting a.nd a mandatory injunction to permit the inspection of documents pertaining to the

sale of assets of two corporations, Defendant Grilli's Real Estate Corporation, Inc., and

Defendant Valerio's of Lancaster, Inc., each of which were closely held. corporations in which

the Plaintiff and Defendants Virginia Smith and Diana Camden had an interest. Plaintiff also

sought a declaratory judgment as to the amount of Plaintiffs interest in the two corporations.

Defendants timely answered and counterclaimed against Plaintiff for misappropriations of

corporate funds. Defendants also sought the disqualification of Plaintiff's counsel. The Court

entered summary judgment in favor of Plaintiff on Defendants' counterclaim based on the

applicable statute of limitations and ruled against disqualification. Both rulings were appealed to

the Fifth District Court of Appeals, which affirmed the Court's decisions.

I

^J

Upon the remand of this action, the Court granted leave for Plaintiff to file an amended

complaint, which Plaintiff did on February 13, 2009.. In that Amended Complaint, Plaintiff

asserted additional claims against Defendants for breach of fiduciary duties arising from

Defendants Smith and Camden's management of the corporations, conversion and

misappropriation of corporate funds, abuse of authority and waste, unjust enrichment, director's

liability, unlawful loan, dividends, and distribution of assets, dissolution of the corporations, and

a request for an injunction preventing Defendants Smith and Camden from taking certain actions

as directors and officers of the corporations. The attorneys then representing Defendants were

granted permission to withdraw, and Defendants' time to answer expired.

Defendants retained new counsel in April of 2009, who moved the Court for leave to file

an untimely answer. The Court overruled that motion, finding that Defendants' neglect was not

excusable. In August of 2009, the Court overruled Plaintiff's motion for default judgment,

finding that some of the claims asserted in Plaintiff's Amended Complaint were fairly addressed

by Defendants' Answer to the original Complaint and finding that further evidence of damages

was required as to Plaintiff's other claims.

Meanwhile, the Defendants filed a new action against Plaintiff, the Administrator of the

Plaintiff Estate as an individual, and the Trustee of a trust established by the Administrator,

which was assigned Case Number 09-CV-79. In that action, . Defendantsl asserted that the

Estate's decedent took unauthorized loans, distributions and income frorn_ Defendant Grilli Real

Estate Corporation, Inc., while serving as the president of that corporation. Defendants further

asserted that the Administrator breached fiduciary duties to Defendants, committed fraud, and

' To prevent confusion, the Court will refer to the parties who are Defendants in Case Number 06-CV-345

and Plaintiffs in Case Number 09-CV-79 as "Defendants."2

a4t

40

was unjustly enriched by furthering and concealing the Estate's decedent's actions. Finally,

Defendants asserted that the Administrator had fraudulently transferred certain assets into the

trust to hinder Defendants' ability to collect. The defendants in Case Number 09-CV-79

answered and counterclaimed against Defendants for abuse of process, vexatious litigation, an

accounting, and unjust enrichment. In July 2009 the Court granted partial summary judgment in

favor of Plaintiff, the Administrator, and the Trustee as to the allegedly unauthorized loans.

Shortly thereafter, Case Number 09-CV-79 was consolidated with this action.

On July 14, 2010, the Court entered partial summary judgment in favor of Plaintiff and

against Defendants Smith and Camden on the issue of Defendants Smith and Camden's failure to

remit payments owed to Plaintiff as a co-payee with Defendants Smith and Camden on a

promissory note identified by the parties as "the Hines note." The amount of that judgment is

$32,950.32, jointly and severally, plus prejudgment interest at the statutory rate from March

2005 through May 2009 and post-judgment interest at the statutory rate from the date of the

judgment entry.

The Court attempted to conduct a trial as to the remaining matters on May 11, 2011.

During opening statements, however, it became apparent that there was some confsion as to the

scope of the matters to be tried. The Court therefore continued the trial date and ordered the

parties to submit a joint pretrial statement outlining the matters remaining for consideration. In

the intervening time and upon Plaintiff s motion, the Court dismsssed ?laintiff's claim for an

accounting as set forth in Count One of the First Amended Complaint, Plaintiff's claim for

declaratory judgment as set forth in Count Two of the First Amended Complaint as it related to

Defendant Valerios of Lancaster, Inc., and Virginia Grilli's claim for an account as set forth in

Count Three of the Counterclaim filed in Case Number 09-CV-79.

3

The parties filed a joint pretrial statement, as ordered, on June 21, 2011. In that joint

statement, the parties stated their agreements as to the remaining claims and issues for trial. As to

the claims remaining from Plaintiff's First Amended Complaint, the parties stated that Plaintiff's

claims for breach of fiduciary duties, conversion and misappropriation of corporate funds, abuse

of authority and waste, unjust enrichment, director's liability, unlawful loan, dividends, and

distribution of assets remained pending and that "the issues in [those] claims [would] be the

amount of Plaintiff's damages." The parties also stated that the claims for dissolution and

permanent injunction remained pending. As to the claims from Case Number- 09-CV-79, the

parties agreed that Defendants' remaining claim for fraudulent conveyance could not proceed in

light of the summary judgment rendered against Defendants' other claims in that case. The

parties also stated that Plaintiff and the Administrator had pending counterclaims against

Defendants for abuse of process and vexatious litigation.

On November 7, 2011, the matter came before the Court for trial on the issues set forth in

the joint pretrial statement. At that time, to aid the clear presentation or the issues, the Court

ordered that Plaintiff and the Administrator's counterclaims from Case Number 09-CV-79 be

tried separately from the remaining claims in Case Number 06-CV-345. The Court then heard

evidence on the remaining issues in Case Number 06-CV-345 as, outlined in the parties' joint

pretrial statement.

LAW & ANALYSIS

I . Plaintiff's Claims in Counts 3 through 8 of the First Amended Complaint.

As noted in the parties' joint pretrial statement, Plaintiff's Claims in Counts 3 through 8

_ of the First Amended Complaint came on for trial to the Court on the issue of damages alone.

Therefore, it is incumbent upon the Court to review the allegations in Plaintiff's First Amended

4

26Or

Complaint and the evidence presented at the hearing to determine what damages Plaintiff proved

were proximately caused to it by Defendant's actions as alleged in the First Amended Complaint.

See Turner v. Progressive Ins. Co., 5th Dist. App. No. 2007 CA 0015, 2008-Ohio-4988, T 26.

A. Breach of Fiduciary Duties

Plaintiffs third count alleged that Defendants Smith and Camden breached fiduciary

duties they owed to Plaintiff in a number of ways. First, Plaintiff alleged that Defendants Smith

and Camden failed to respond to Plaintiff's requests for information relating to the sale of assets

owned by Defendants Grilli's Real Estate Corporation, Inc. and Valerio's of Lancaster, Inc. in

2005. Second, Plaintiff alleged that Defendants Smith and Camden failed to properly structure

the transaction for that sale of assets by: (1) paying a commission to a realtor based on the full

purchase price and not on the amount paid at closing, (2) failing to obtain counsel, (3) allowing

the transaction to be structured by an attorney retained by the buyer, (3) misrepresenting the

shareholder interests in Grilli's Real Estate Corporation; Inc., (4) transferring the liquor license

held by Valerio's of Lancaster, Inc., to the buyer outright instead of entering into a management

agreement with the buyers, (5) allowing the transaction to be structured in a way that caused

additional and unnecessary costs to be incurred by Grilli's Real Estate Corporation, Inc. and

Valerio's of Lancaster, Inc., after default by the buyers. Third, Plaintiff alleged that Defendants

Smith and Camden voted to pay themselves salaries from the corporations when there were no

assets to actively manage. Fourth, Plaintiff alleged that Defendants Smith and Camden failed to

account for and disburse amounts due to Plaintiff under the Hines Note? Fifth, Plaintiff alleged

that Defendants Smith and Camden failed to reimburse personal loans made by the. corporations.

2 Plaintiffs fourth allegation of breach of fiduciary duties alleges the nonpayment for which this Courthas previously entered judgment in favor of Plaintiff.

5

a^

Sixth, Plaintiff alleged that Defendants Smith and Camden converted corporate assets to pursue

their own personal claims against Plaintiff in Probate Court and in the actions consolidated

herein. Seventh, Plaintiff alleged that Defendants Smith and Camden failed to properly market

the assets of the two corporations, failed to consider offers made to purchase the assets of the

corporations after the default of the•`buy.ers, and failed to reopen the buSkrkesses previously.

operated by the corporations

The Court notes that there is no dispute that Defendant Smith and Camden owed

fiduciary duties to Plaintiff. First, Defendants stated in the joint pretrial statement that the only

issue for consideration at trial on PlaintifPs claim for breach of fiduciary duties was damages.

Second, the two corporations at issue in this action were close corporations and the shareholder

of close corporations "owe one another a fiduciary duty to act in good faith." Morgan v. Ramby,

12th Dist. No. CA 2007-12-147, 2008-Ohio-6194, ¶ 21. Similarly, the joint pretrial statement

submitted by the parties made it clear that there is no issue as to whether Defendants Smith and

Camden breached their fiduciary duties to Plaintiff.

Therefore, the remaining question for the Court is what damages, if any, Plaintiff has

proved were proximately caused to it by Defendants' actions. This is a direct action by a

shareholder in two closely-held corporations against the corporations and the other shareholders

in the corporations. In this instance, Plaintiff was a minority shareholder and Defendants Smith

and Camden together controlled a two-thirds majority interest in each corporation. Therefore,

under controlling law from the Ohio Supreme Court, Plaintiff was entitled to bring both an

individual (direct) action and a derivative action on behalf of the corporations. Crosby v. Beam,

6

^

ir• . ^ . . . . . .

47 Ohio St.3d 105, 109 (1989). In this instance, however, Plaintiff brought only an individual

action and did not attempt a derivative suit on behalf of the corporations.3

In a direct action against other shareholders, the Ohio Supreme Court has stated that the

plaintiff is entitled to damages only for those harms he or she suffered "in a way separate and

distinct from an injury to the corporation." Weston v. Weston Paper & Mfg. Co., 74 Ohio St.3d

377, 379, 658 N.E.2d 1058 (1996), quoting Crosby v. Beam at 107. Even in a close corporation,

where a minority shareholder may bring either a derivative action or a direct action, the Supreme

Court, has stated that a direct action may only proceed where the "harm can be construed to be

individual in nature." Crosby at 109. Such harm arises when, as was the situation in Crosby, the

majority shareholders control the corporation to their own advantage and deny minority

shareholders "equal opportunity to benefit." (Emphasis added.) Crosby at 109.

Reviewing the allegations in the First Amended Complaint and the evidence presented at

the trial, the Court finds that Plaintiff proved no harms proximately caused to it by Defendants'

actions that were separate and distinct from injuries suffered by the corporations.4

A review of Plaintiff's allegations will demonstrate the reasons for the Court's finding.

For the most part, Plaintiff alleged that Defendants breached their fiduciary duties to Plaintiff by

excluding it from participation in the sale of corporate assets and by botching that sale of assets

in a number of ways. But Plaintiff failed to prove it was specially damaged by those actions.

First, Plaintiff has not proved that the sale would have been structured or managed any

3 This is apparent from the facts that Plaintiff named the corporations as defendants in this action and thatPlaintiff has never represented itself to be standing in the shoes of the corporations but has consistently

prayed for relief as a shareholder.4 This finding excludes the lack of payments due to Plaintiff under the Hines Note, for which the Courthas already rendered judgment in favor of Plaintiff.

7

differently if Defendants had provided the information Plaintiff requested. Plaintiff and the

individual Defendants each had approximately a one-third interest in each corporation. Neither

party has introduced the articles of incorporation for either corporation, nor have the parties

given any reason the resolution for the sale of assets would have required more than two-thirds

of the shareholders to approve the sale. Therefore, the Court cannot say that the sale would have

been structured any differently if the requested information would have been provided to

Plaintiff and Plaintiff has failed to establish causation for any damages arising from that sale:

Second, Plaintiff did not show any way in which it was especially damaged by the sale of

assets, however woefully mismanaged. Instead, it is apparent that the corporations themselves

lost value through the sales, with all of the shareholders suffering for that loss in proportion to

their ownership of the corporations.5 Unlike in Crosby, this is not a situation where the minority

shareholder complains that the majority failed to provide him an equal opportunity to benefit

from its interest in the corporations. Instead, this is an action in which Plaintiff complains that it

suffered the same decline in corporate value as ali other shareholders. The law as set forth in

Crosby and Weston bars Plaintiff from recovering for the hanns to the corporations in this direct

action. The damages Plaintiff seeks would be properly awarded to the corporations only through

a derivative action, which Plaintiff apparently elected not to bring.

Similarly, Plaintiffs other allegations pertain only to losses suffered by the corporation

instead of to Plaintiff particularly. To the extent Defendants Smith and Camden failed to repay

personal loans to the corporations, converted the assets of the corporations, or failed to properly

Plaintiff was in fact insulated from that loss of value to a certain extent by the entity status of the

corporations. Ohio Constitution, Article XIII, Section 3; See also Belvedere Condominium Unit Owners'

Assn. v. RE. Roark Cos., 67 Ohio St.3d 274, 287, 618 4 N.E.2d 1075 (1993).

.56

provide for the proper disposition of corporate assets or the continued profitability of the

corporations, Defendants Grilli's Real Estate Corporation, Inc. and Valerio's of Lancaster, Inc.,

suffered harms from those actions. Plaintiff provided no evidence of any harm to Plaintiff that

was suffered separately or distinctly.

Therefore, the Court finds that Plaintiff has^ : proved no damages stemming from

Defendants Smith and Camden's breach of fiduciary duties.

B. Conversion and Misappropriation

Plaintiff s claim for conversion and misappropriation alleged that the acts of Defendants

Smith and Camden also constituted conversion and misappropriation. However, Plaintiffs First

Amended Complaint alleged only that Defendants Smith and Camden converted and

misappropriated the fimds of Grilli's Real Estate Corporation, Inc., and Valerio's of Lancaster,

Inc., and not Plaintiff's own assets. In addition, Plaintiff produced no evidence of damages to it

personally,6 but only evidence of damages to the corporations. Again, under Ohio law, a

corporation has an existence separate from that of individual shareholders, and the assets of the

two corporations at issue in this matter were not Plaintiff's assets, but belonged to the

corporations.

Therefore, for the same reasons as set forth in the previous section of this entry, the Court

finds that Plaintiff has proved no damages stemming from Defendants Smith and Camden's

conversion and misappropriation of corporate assets.

C. Abuse of Authoritv/Waste

Plaintiffs claim for abuse of authority and waste asserted that Defendants Smith and

6 Other than the nonpayment of amounts due under the Hines Note, for which the Court has already

entered judgment in favor of Plaintiff. 9

i

3 r" I 6 1

Camden placed themselves in sole and complete control and authority over Grilli's Real Estate

Corporation, Inc., and Valerio's of Lancaster, Inc. Plaintiff prayed for Defendants Smith and

Camden to be removed from their positions in both corporations, that it be placed in control of

both corporations, and for damages in an amount exceeding $25,000.

As the Court has previously stated Plaintiff has proved no damages to it personally' but

has alleged and proved damages to both corporations. Therefore, the Court finds that Plaintiff

has proved no damages stemming from Defendants Smith and Camden's abuse of authority over

the two corporations and waste of the resources of those corporations.

As to the removal of Defendants Smith and Camden as officers and directors of the two

corporations, Plaintiff has offered no statement of the authority under which this Court could

make such an order. R.C. 1701.58 governs the removal of corporate directors and provides that

such removal may be performed by the other directors or by the shareholders. It does not provide

a means by which a court of competent jurisdiction may do so. Similarly, R.C. 1701.64 controls

the removal_ of corporate officers and provides that such removal may be performed by the

directors. It also does not provide for removal of officers by court order. Therefore, the Court

will make no such order.

D. Unjust Enrichment

The elements of unjust enrichment are "(1) a benefit conferred by a plaintiff upon a

defendant; (2) knowledge by the defendant of the benefit; and (3) retention of the benefit by the

defendant under circumstances where it would be unjust to do so without payment[.] "Jury v.

Ridenour, 5th Dist. No. 98CA100 (1999), citing Hambleton v. Barry Corp., 12 Ohio St.3d 179,

7 Again, other than nonpayment of amounts due under the Hines Note.10

183, 465 N.E.2d 1298 (1984). Therefore, the damages available under an unjust enrichment

theory are limited to "the amount the defendant benefitted." Meyer v. Chieffo, 193 Ohio App.3d

51, 2011-Ohio-1670, 950 N.E.2d 1027,137 (10th Dist.).

At the trial of this matter, the parties produced evidence of the vast amounts of money

spent during the events from which this action arises and during the-course of this litigation.

However, considering all of that evidence, the Court finds that Plaintiff has proved no benefit

retained by the Defendants under circumstances where it would be unjust. There was some

evidence that Defendants Smith and Camden accepted checks from both corporations, but there

is no evidence that Defendants Smith and Camden are unjustly retaining a benefit conferred by

Plaintiff with the notable exception of the payments due under the Hines Note, for which the

Court has already entered a judgment in favor of Plaintiff.

Director's Liability

In Count Eight of the First Amended Complaint, Plaintiff alleged Defendants Smith and

Camden violated their duties as directors of the two corporations set forth in R.C. 1701.59

because Defendants Smith and Camden acted with reckless disregard of the interests of Plaintiff,

Grilli's Real Estate Corporation, Inc., and Valerio's of Lancaster, Inc, or with a deliberate intent

to harm Plaintiff. By the statement in the parties' joint pretrial statement that damages was the

only remaining issue as to Count Eight, defendants effectively admitted that reckless disregard

and deliberate intent.

R.C. 1701.59(D) clearly states, however, that corporate directors are liable "only if ***

the director's action or failure to act involved an act or omission undertaken with deliberate intent

to cause injury to the corporation or undertaken with reckless disregard for the best interests of

the corporation." By that language, the legislature signaled that it intended a director's liability

11

33

to be to the corporation and not to an individual shareholder. For that reason, the Court finds that

Plaintiff has no standing to bring a direct action against Defendants Smith and Camden for

director's liability under R.C. 1701.59. In addition, the Court finds that Plaintiff failed to

demonstrate that it suffered an injury from Plaintiffs actions separate and distinct from the

. injuries suffered by the corporations beyond the nonpayment of the amounts due under the Hines

Note, for which the Court has already entered judgment in favor of Plaintiff.

Therefore, the Court finds that Plaintiff has proved no damages stemming from

Defendants Smith and Camden's breach of their duties as directors of Grilli's Real Estate

Corporation, Inc., and Valerio's of Lancaster, Inc.

2: Plaintiff's Requests for Dissolution, Appointment of Receiver, or Injunction.

In Counts Nine and Ten of the First Amended Complaint, Plaintiff requested the Court

either order Defendants Grilli's Real Estate Corporation, Inc., and Valerio's of Lancaster, Inc.,

wind up their affairs, preferably under the direction of a receiver, or that Defendants Smith and

Camden be enjoined from taking certain actions with respect to the corporations.

The power of judicial dissolution of a corporation is defined by R.C. 1701.91. R.C.

1701.91(A)(2)-(4) provides that a court of common pleas may order the dissolution of a

corporation in four circumstances: (1) where shareholders bring an action for voluntary

dissolution and the court makes certain findings, (2) where a majority of shareholders (or a lesser

number as provided in the articles of incorporation) bring an action for dissolution and the court

determines that judicial dissolution is beneficial to the shareholders, (3) in the event of certain

described deadlocks between the directors of the corporation, or (4) where the prosecuting

attorney brings an action for dissolution of a corporation used for criminal purposes. R.C.

1701:91(C) authorizes the court hearing an action for judicial dissolution to appoint a receiver or

12

3 1^Vk

to issue injunctions.

Plaintiff's First Amended Complaint did not allege the existence of any of the

circumstances set forth in R.C. 1701.91(A)(2)-(4). However, during the pendency of this action

andespecially during the trial in this matter, Defendants Smith and Camden have represented to

the. Court that they have been seeking to wrap up the affairs of both corporations. In fact,

Virginia Smith testified that the sale of assets for which Plaintiff sought information was an

attempt to wrap up the corporations and dispose of the assets.

Therefore, the Court finds that the requirements of R.C. 1701.91(A)(3) were met by the

presentation of the evidence and the issues actually tried and hereby amends the pleadings

accordingly under Civ.R. 15(B). All three shareholders of the corporations seek dissolution of

both corporations. In addition, the Court finds that the relationship between the shareholders of

both corporations and the vat_tie of the corporate assets have dimin^shed to sia.ch an extent that

judicial dissolution would be beneficial to the shareholders.

Therefore, the Court will order the appointment of a receiver with all powers necessary to

provide for the wrapping up of the affairs of Grilli's Real Estate Corporation, Inc., and Valerio's

of Lancaster, Inc., and the dissolution of both corporations. Plaintiff shall submit a proposed

entry for the appointment of that receiver by February 1, 2012 at 4:00 p.m. Since the Court will

make orders for the dissolution of both corporations, the Court DENIES PlaintifPs request for

an injunction as set forth in Count Ten of the First Amended Complaint.

3. Plaintiff's Reasonable Attorney's Fees

As an additional matter, Plaintiff alleged that Defendants Smith and Camden acted with

such a callous disregard for the rights of Plaintiff as to support an award of punitive damages,

including reasonable attorney's fees. An award of reasonable attorney's fees is proper where

13

punitive damages are warranted because of egregious conduct, malice, or ill will. See Charles R.

CombTrucking, Inc. v. Int'l Harvester Co., 12 Ohio St.3d 241, 245, 466 N.E.2d 883 (1984). In

this instance, Defendants have acknowledged liability for punitive damages stemming from

malice and ill will toward Plaintiff by virtue of default and the joint pretrial statement.

The Court has previously entered judgment in favor of Plaintiff for the nonpayment of the

amounts due under the Hines Note. The Court finds that, in light of Defendants' acknowledged

liability for punitive damages, an award of punitive damages and reasonable attorney's fees is

warranted. "The purpose of punitive damages is not to compensate the Plaintiff, but to punish

and deter certain conduct." Moskovitz v. Mt. Sinai Med. Ctr., 69 Ohio St.3d 638, 651, 635 N.E.2d

331 (1994). Considering the conduct of Defendants, the evidence presented as to Defendants'

financial situation, and other releva.nt factors, the Court finds that a nominal award of punitive

damages will be sufficient to serve the purposes of punitive damages.

As to the matter of attorney's fees, the Court must consider: (1) the time and labor

involved in maintaining the litigation, (2) the novelty; complexity, and difficulty of the questions

involved, (3) the professional skill required to perform the necessary legal services, (4) the

experience, reputation, and ability of the attorneys, (5) the miscellaneous expenses of the

litigation, (6) the fee customarily charged for similar services, (7) the amount involved, and (8)

the result obtained. Villella v. Waikem Motors, Inc., 45 Ohio St.3d 36, 41, 543 N.E.2d 464

(1989). The evidence before the Court includes the itemized bills of Plai.ntiff's counsel, the

testimony of Plaintiffs counsel, and the testimony of Jon Clark, an experienced attorney who

practices in Fairfield County.

Plaintiff seeks an award of attorney's fees for the entirety of this litigation. The Court

finds, however, that would be excessive under the circumstances. As discussed above, most of

14

3

acts alleged by Plaintiff may have been directed at harming Plaintiff, but they truly harmed

Grilli's Real Estate Corporation, Inc., and Valerio's of Lancaster, Inc. Plaintiff acknowledged

that reality as early as the First Amended Complaint when it repeatedly alleged that Defendants

Smith and Camden's acts "directly and proximately caused harm and damages to the

shareholders of GRE and Valerio's- and the Plaintiff as a shareholder of these corporations."

Therefore, the Court finds that Plaintiff knew or should have known at the time of the First

Amended Complaint that its action should have been brought in the name of the two

corporations as a shareholder derivative suit and some portion attorney's fees expended

furthering Plaintiff's personal claims were therefore unreasonably incurred.

Plaintiff has argued that the amount of fees for the entire litigation was a reasonable

award in light of the time involved in this litigation and the fact that Plaintiff sought damages in .

excess of 1.5 million dollars. But the Court must also consider the results obtained. To this point,

Plaintiff has obtained only a judgment in the amount of $32,950:32. That judgment was for the

amounts payable to Plaintiff under the Hines Note. Therefore, the Court must determine the

amount of attorney's fees reasonably incurred by Plaintiff in obtaining that judgment.

The evidence of attorney's fees as submitted by Plaintiff was largely comprised of billing

statements covering the entire period from the beginning of the administration of the estate of

Robert Grilli to the present. Those billing statements pertained not only to the claim for lack of

payment on the Hines Note, but also to the remainder of the claims in Case Number 06-CV-345,

the Probate Court litigation, Case Number 09-CV-79, a malpractice action filed by Defendants

against Plaintiffs counsel, and the appeal taken in Case Number 06-CV-345. The Court must

therefore determine which of the fees and expenses were related to the judgment entered in

Plaintiffs favor.

15

Plaintiffs claim for money due under the Hines Note first appeared in Plaintiff's First

Amended Complaint, which required a motion for leave of court to file. Plaintiff s motion for

leave was filed on October 2, 2007. The Court granted that motion on September 4, 2008.

Plaintiff filed the First Amended Complaint on February 13, 2009. Plaintiff thereafter obtained a

partial ruling on a motion for default judgment pertaining to the Hines Note and finally obtained

a judgment on amounts due under the Hines Note on August 9; 2010. Those events define the

general contour of the Court's determination of reasonable attorney's fees.

Reviewing the evidence, the Court fmds a number of entries in the billing statements

reflect a relationship to the pursuit of the judgment granted in this matter on the amounts due

under the Hines Note to a reasonable degree of certainty. Those entries are reflected on the table

below:

Date Service Provider Service(s) Provided Hours

10/01/2007 Mark R. Riegel (Smith/Camden) Legal Research. Worked 2.00on Motion to Amend.

10/02/2007 Mark R. Riegel (Smith/Camden) Completed Motion to 1.20Amend. Worked on Discovery. Letter toClient

11/13/2007 Mark R. Riegel Telephone conference with client. Letter to 1.20Court with Entry re Amended Complaint.Letter to Defendant's attorney with Entry re;Injunction

11/20/2007 Mark R. Riegel Telephone conference with Stebleton, Pam 1.80Hines' attorney, received and reviewedmortgage extension. Telephone conferencewith client. Drafted letter to Stebleton

2/11/2009 Mark R. Riegel Legal research. 'Norked on Answer & 3.50Counterclaim in third lawsuit. Worked onAmended Complaint in first lawsuit.

2/12/2009 Mark R. Riegel Conference with client. Legal research. 2.80Worked on pleadings.

2/13/2009 Mark R. Riegel Completed pleadings. Instructions to staff. 0.603/16/2009 Mark R. Riegel Second lawsuit - Prepare default judgment 0.70

pleadings3/17/2009 Brian D. Shonk Conference with Mark Reigel regarding 0.30

16 -

3$

default judgment procedures; research

3/17/2009 Nick R. Grilli Research service on Default Judgment 0.60

4/9/2009 Mark R. Riegel Initial conference with court in third lawsuit. 2.00Instructions to staff. Telephone conferencewith client. Worked on Memo ContraSmith's Motion to Allow Late Answer.

4/9/2009 Jeff J. Spangler Research compulsory counterclaim issues; 1.00Legal research: 6(B)

4/10/2009 Mark R. Riegel Legal research. Worked on memo contra 3.00Smith's Motion to Allow Late Answer.

4/10/2009 Jeff J. Spangler Research 6(B) 0.404/13/2009 Mark R. Riegel Received and reviewed Defendant's Memo 0.70

Contra to Motion for Default. FiledSupplemental Authority. Letter to client.

4/16/2009 Mark R. Riegel Received and reviewed court's notices. 0.20Instructions to staff re letter to clients.

7/16/2009 Mark R. Riegel Entry from court.' Letter to client. Re-filed 0.30motion for default judgment.

7/28/2009 MarkR. Riegel Received and reviewed motion to extend 0:30time. Prepared opposition. Letter to client.

4/5/2010 Mark R. Riegel Receive and review Entry; Letter to client; 0.30Letter to Defendant Attorney

4/16/2010 Mark R. Riegel Prepare motion to extend discovery. Worked 0.80- on Motion for Partial Sununary Judgment:

Letter from Noga.4/16/2010 Mark R. Riegel Completed Motion for Partial Summary 2.00

Judgment. Worked on Answer in foreclosure

action.5/3/2010 Mark R. Riegel Prepared Reply to Defendant's Memo 1.00

Contra PlaintifPs Motion for PartialSummary Judgment.

5/4/2010 Mark R. Riegel Completed Reply Brief 0.60

5/13/2010 Mark R. Riegel Work on second motion for partial summary 1.00judgment on damages.

5/21/2010 Mark R. Riegel Received and reviewed discovery responses. 0.20Instructions to staff re case law. Letter to

client.

6/15/2010 Mark R. Riegel Reviewed Noga's pleadings. Letter to client. 0.20

6/17/2010 Mark R. Riegel Letter to Noga. 0.30

.7/16/2010 Mark R. Riegel Work on Entry 0.407/28/2010 Nick R. Grilli Conference with MRR RE: Judgment Entry 0.40

and Renewed Motion for SummaryJudgment; Review Judgment Entry; Review

Pleadings

17

' 1 Y ' c

8/04/2010 Nick R. Grilli Prepare Affidavits 0.808/05/2010 Mark R. Riegel Response to Defendant's Motion regarding 1.00

Judgment Entry8/06/2010 Mark R. Riegel Complete response Brief regarding 1.00

Judgment Entry8/9/2010 Mark R. Riegel Instruct para/staff; Telephone conference 0.20

with client

To summarize, Plaintiff's attorneys billed Plaintiff for 32.8 hours,of attorney time in furtherance

of obtaining a judgment on the amounts due to Plaintiff under the Hines Note. Although the

hourly rates for each of the attorneys who performed that work are'not in evidence before the

Court, simple arithmetic demonstrates that Plaintiff's primary attorney, Mark R. Riegel, provided

legal services to Plaintiff at a rate of $240.00 per hour. In light of the evidence adduced at the

trial on this matter, especially the testimony of Mark R. Reigel and Jon Clark, the Courk f??ds

that $240.00 per hour is a reasonable rate for the services at issue in this action. Therefore, the

Court finds that Plaintiff incurred $7,872.00 in attorney's fees in furtherance of obtaining a

judgment on the amounts due to Plaintiff under the Hines Note. In addition, the Court finds that

Plaintiff's attorneys generated bills for $200.00 in expenses for online legal research for the same

matters.

CONCLUSION

Therefore, for the reasons stated above, the Court finds in favor of Plaintiff, the Estate of

Robert V. Grilli, on Counts Tliree, Four, Five, Six, Se-ven; aiid Eight- of the First Amended

Complaint in Case Number 06-CV345, and it is ORDERED and ADJUDGED that the Plaintiff,

the Estate of Robert V. Grilli, recover of the Defendants, Virginia Smith and Diana Camden, the

sum of $2.00 in punitive damages, $8,072.00 in attorney's fees and expenses, with interest

thereon at the rate provided by law, and its costs of action.

18

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Further, the Court grants the petition for judicial dissolution of the Defendants Grilli's

Real Estate Corporation, Inc., and Valerio's of Lancaster, Inc., in Count Nine of the First

Amended Complaint as amended by the Court under Civ.R. 15(B) and ORDERS that Plaintiff

shall submit a proposed entry for the appointment of a receiver to direct the wrapping up of the

affairs of those corporations by February 1, 2012 at 4:00 p.m.

The remainder of the claims in this consolidated action shall come before the Court for

trial on the 20th day of January, 2012 at 10:00 a.m. As the remaining issues are intimately

entwined with those upon which the Court has rendered judgment in this Entry, the Court finds

there is just cause to delay any appeal until the resolution of the remaining claims or until a final

order is otherwise entered.r r

IT IS SO ORDERED.

- Judge Rich^rid E. erens-

Copies to:

Mark R. Riegel, Courthouse mailboxRonald B. Noga, 1010 Old Henderson Rd., Ste. 1, Columbus, OH 43220

19

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i ^ •

IN THE COURT OF COMMON PLEAS,FAIRFIELD COUNTY, OHIO

l^^

lt^ ..^^^..`,^

14 ^^F,

3 8, 5 0

ESTATE OF ROBERT V. GRILLI, RK 0 (;iT5THROUGH VIRGINIA F'A I ;;; L0 U01 01 "110BY AND

GRILLI, EXECUTOR ANDADIVIINISTRATOR,

Plaintiff,

V.

VIRGINIA SMITH, et al.,

Defendants.

Case No. 06 CV 345

Judge Richard E. Berens

ENTRY

This matter comes before the Court upon Plaintiff Estate of Robert Grilli's ("the Estate")

Motion for Partial Summary Judgment on Damages, Motion for Summary Judgment on. the Sale

of Assets, Motion to Extend the Deadline for Dispositive Motions, and Motion for Sanctions.

For the reasons set forth herein, the Court SUSTAINS the motion for partial summary judgment

on daxnages, OVERRULES the motion for summary judgment on the sale of assets,

SUSTAINS the motion to exterid the deadline for filing dispositive motions, and OVERRULES

the motion for sanctions.

A. Motion for Partial Summary Judgment on Damages

The Estate moved for summary judgment on damages regarding its claims concerning

Defendants' failure to remit portions of payments made on a promissory note, referred to as the

"Hines note." The Estate believes that the deceased and defendants. Smith and Camden were all

co-payees on the Hines note and each should have received one-third of the proceeds. As

monthly payments were set at $1,93 8.25, the. Estate should have received approximately $646.08

r

per month.'

But the Estate claims that it did not receive payment from March 2005 to May 2009, yet

the maker was paying the full $1,938.25 per month, for a total of $32,950.25 due the Estate for

payments duri ng that time. The Estate believes that its evidence supports this claim for damages

and as liability has already been established through default judgment, its motion should be

granted.

Defendants argue there are genuine issues of fact regarding the deceased's unilateral

extension of the repayment period of the note, to what claims this motion applies, and to what

defendants the motion applies. Defendants also believe that damages on torts must be

established through a hearing, not motions.

Summary judgment should be granted if the Court, upon reviewing the evidence in a light

most favorable to the nonmoving party, determines:

[1] that there is no [genuine] issue as to any material fact,.

[21 that the moving pariy is entitled to judgment as a matter of law, and

[3] that reasonable minds can come to but one conclusion, and that conclusion is

adverse to the nonmoving party. 2

With summary judgment, the movant bears the initial burden of informing the trial court

of the basis for its motion and must specifically identify those portions of the record, pursuant to

Civ. R. 56(C), which entitle the movant to judgment as a matter of law.3 Once the movant has

properly supported its motion -for summary judgment with sufficient and acceptable evidence,

the adverse party has a reciprocal burden to respond by setting forth specific facts that

' It is actually $646.0833. per month due to the three-way split.

2 Mzller v. Bike Athletic Co. (1998), 80 Ohio St. 3d 607, 617, 687 N.E.2d 735. See also Civ. R. 56(C).

3 Dresher v. Burt (1996), 75 Ohio St. 3d 280, 288-89, 662 N.E.2d 264.

2 ^3

1 r L t

demonstrate a genuine issue for trial exists 4 A motion for sunmmary judgment forces the

nonmoving party to produce evidence on any issue for which that party bears the burden of

Production at trial.5 When considering summary judg?nent, courts are required to resolve any

doubts in favor of the nonmoving party.6 "If the moving party fails to satisfy its initial burden,

the motion for summary judgment must be denied."^

Here, the Estate has satisfied its initial burden to demonstrate that there are no genuine

issues of material fact and it is entitled to judgment as matter of law. The note and mortgage

attached to the complaint, along with the affidavit of Virginia urilli,8 establish that the Estate is

entitled to damages in the amount of $32,950.25 for its claims regarding the Hines note.

Conversely, Defendants have failed to submit any evidence that raises a genuine issue of

materia.l fact regarding the amount of damages the Estate claims. Defendants' arguments instead

address their liability, an arguxn.ent which is moot, given that default judgment has already been

entered against them. Defendants have submitted no evidence that establishes $32,950.25 is an

erroneous amount or that some other number is the proper measure of the Estate's da^-nages on

Counts III-VIII.

Therefore, the Court finds that there is no genuine issue of material fact regarding the

damages due to the Estate on its Counts III through VIII and the Estate is entitled to judgment as

a matter of law. The Court SUSTAINS the Estate's motion for partial summary judgment on

^, p 58 Ohio St. 3d 48,52,567 N.E.2d 1027.4 See Jackson V. Alert Fire & Safe Equi ., Inc. (1991),

570 N.E.2d 1095 (citing Celotex v.5 Wing v. Anchor Media, Ltd of Texas (1991), 59 Ohio St.3d 108, 109,

Catrett (1986), 477 U.S. 317, 322-323, 106 S.Ct. 2548, 91 L.Ed.2d 265;Mitseff v. Wheeler (1988), 38

Ohio St.3d 112, 114, 526 N.E.2d 798).

6 Osborne v. Lyles (1992), 63 Ohio St. 3d 326, 617 N.E.2d 1123.

Dresher, supra, at 293.

8 See the Estate's Mot. for Partial Summ. J. on Damages, Ex. 2, at 13.

3

^

damages. The Estate shall submit a final Entry on its claims within 21 days for the Court's

approval.

B. Motion for Partial Summary Judgment Concerning the Sale of Assets

The Estate next argues that Defendants sold certain real estate and personal property to

which it is entitled to one-third of the proceeds. The Estate requests summary judgment on the

issue of damages in the amount of $17,889.94.

Defendants make no argument regarding the merits of the Estate's motion, but instead

request that the. Court hold its ruling in abeyance pending the outcome of the Estate's motion for

summary judgment regarding damages on Counts III-VIII. Defendants believe that the Estate

has filed "serial, meritless motions" in an attempt to overburden them.

The Court does not find this argument to be well-taken, and insofar as Defendants have

requested the Court stay its ruling in the Estate's motion for partial summary judgment regarding

the sale of assets, the Court OVERRULES such motion.

Using the above-stated standard for summary judgment, the Court finds inat the Estate

has failed to produce competent evidence to demonstrate that it is entitled to summary judgment.

Ohio Rule of Civil Procedure 56(C) provides that the Court can only consider "pleadings,

depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence,

and written stipulations of fact" when determining whether there is a genuine issue of material

fact and whether a party is entitled to judgment as a matter of law. This list is exclusive.

Here, the ' Estate has provided no afiidavit that incorporates the exhibits attached to its

motion for partial summarY judgment. Nor has it demonstrated that the attached exhibits fall into

the categories of evidence that is acceptable under Civ. R. 56(C). Thus, the Court cannot

properly consider the Estate's attached evidence when ruling on its motion.

4 .^ f

. ^o

Thus, the Estate has failed to demonstrate through competent and acceptable evidence

that there is no genuine issue of material fact and that it is entitled to judgment as a matter of

law. Accordingly, the Court OVERRULES the Estate's motion for partial summary judgment

regarding the sale of assets.

C. Motion for Sanctions

The Estate asks the Court to impose sanctions upon Defendants because they have still

failed to completely provide discovery. The Court had previously ordered Defendants, on

September 28, 2009, to comply with discovery requests and imposed a $300 sanction for their

failure to do so up to that point.

The Estate now represents that Defendants have still not fully provided discovery, despite

their attorney's numerous representations that they would do so by a date certain. Defendants

have also not paid the $300 sanction. The Estate asks for an additional $500 sanction for having

to revisit this issue.

Defendailts' counterargument is two-fold. First, they filed a motion for a protective order

on October 29, 2009 and waited until the Court ruled on the motion before beginning to provide

discovery. Second, Defendants have been providing discovery, but it is voluminous and an

ongoing process.

Prelirninarily, the Court construes the Estate's motion as both a motion to compel and a

motion for sanctions, despite the stylization as solely a motion for sanctions. While the Estate is

asking for sanctions, it is also asking that Defendants provide the remainder of the requested

discovery.

The Ohio Rules of Civil Procedure provide:

(2) If any party... fails to obey an order to provide or permit discovery... thecourt in which the action is pending may make such orders in regard to the failure

5

^ u R I e 6 ^

as are just, and among others the following:

(c) An order striking out pleadings or parts thereof, or staying further proceedingsuntil the order is obeyed, or dismissing the action or proceeding or any partthereof, or ren.dering a judgment by default against the disobedient party;

^**

In lieu of any of the foregoing orders or in addition thereto, the court shall requirethe party failing to obey the order or the attorney advising him or both to pay thereasonable expenses, including attomey`s fees, caused by the failure, unless thecourt expressly finds that the failure was substantially justified or that othercircumstances make an award of expenses unjust.9

Here, the Court finds that Defendants have failed to comply with the Court's order of

September 28, 2009. Regardless of the Defendants requesting a protective order, it has been

over 90 days since the Court overruled such motion and discovery is still not completed. Despite

Defendants' representation that they are actively producing discovery, this phase of the litigation

must come to a close. As the parties cannot remedy this situation on their own, the Court finds it

necessary to again impose a deadline.

Thus, the Court SUSTAINS the Estate's construed motion to compel discovery and

ORDERS Defendants complete the production of discovery by August 15, 2010. Failure to

comply with this order may result in additional sanctions, including an entry of default against

Defendants on the Estate's remaining claims. But the Court OVERRULES the Estate's motion

for sanctions as it finds that circumstances make an award of additional unjust at this time.

D. Motion to Extend the Deadline to File Dispositive Motions

The Estate requests that the original deadline for filing dispositive motions of May 14,

2010 be extended, as Defendants have not yet fully provided discovery. It requests 30 days from

9 Civ. R. 37(B).

6

Defendants' completion of production of discovery to be able to file such motions.

Defendants oppose the motion, but give not definitive reason why. Defendants then

agree that the Court should continue the deadline to complete discovery, but the Court is

unaware that either party ever requested such.

As discovery has not yet been completed, the Court SUSTAINS the Estate's motion to

extend the deadline for filing dispositive motions. The parties shall have 30 days from

Defendants' completion of production of discovery to file dispositive motions. The Court

ORDERS that a party must certify, within its dispositive motions, upon what date discovery was

completed.

This matter shall proceed accordingly.

Copies to:

Mark R. Riegel144 East Main StreetP.O. Box 667Lancaster, OH 43130Attorneyfor Plaintiff

Ronald B. Noga1010 Old Henderson Road, Suite 1Columbus, Ohio 43220AttorneyfoY Defendants

Judge Richard E. Berens

7

NB

1 ^ : 1 M1 t

.. , ^ ^ k ^^

^ • ..

^ i^CF ^

^ iF "t

IN THE COURT OF COMMON. PLEAS OF FAIRFIELD COUNTY, OIiIOZtl ig A-UG -^ A M, - 8: , 4 s

Estate of Robert V. Grilli, by and through Case No.: 06-CV-0345 ,^^

S..A+.^

r.-

^v'L^ ^

"3 ^ ^.

Virginia Grilli, Executor and Administrator 'L ^R _ i,! , t; TS: Judge RichardE. Berens-^iRr ;EL0 0

Plaintiff,

vs.PARTTATI JUDGMENT ENTRY

Virginia Smith, et al. ON DAMAGES

Defendants

This matter having come before the Court on the Motion for Partial Summary Judgment on

Damages filed by the Plaintiff, Estate of Robert V. Grilli (the "Estate"); the Court having considered

the record and pleadings and having issued its Entry dated July 14, 2010, incorporated herein by

reference; the Court having determined that there is no genuine issue as to any material fact

concerning the requested relief, that the moving party is entitled to partial summary judgment as a

matter of law, that reasonable minds could come to one conclusion and that conclusion is adverse

to the Defendants concerning said motion; the Court having determined that the Estate is entitled to

partial summary judgment against the Defendants, Virginia Smith and Diana Camden, based on their

collection of paynaents on a Note payable to Robert V. Grilli, Virginia Smith and Diana Camden,

referenced as the Hines Note, and Defendants' failure to transmit one-third of the total amount they

collected to the Estate, said one-third amount totaling $32,950.25; it is therefore:

ORDERED, ADJUDGED and DECREED that the Plaintiff, Estate of Robert V. Grilli, by

and through Virginia Grilli, Executor and Administrator, is hereby awarded judgment against

Defendants, Virginia Smith and Diana Camden, jointly and severally, in the amount of $32,950.25,

plus, as prayed for in Plaintiff s First Amended Complaint, pre-judgment interest at the statutory rate

from the date of each monthly payment on the Note from March, 2005 through May, 2009, to the

date of this Judgment Entry and post-judgment interest on the entire judgment amount at the

statutory rate -from the date of this Judgment Entry.

1

A- ^,^ 4v. 4 ^JUDGE RICHARD E. BERENS

APPROVED BY:

Mark . Riegel # 157 0DAGGER, JOHNSTON,IVIILLER,OGLVIE & HAlY1PSON, LLPAttorn.ey for Plaintiff

bu ^ n^'^ ^ ^

Ronald B. NogaAttorney for Defendants

S°

. . . . . ^ ^ . . . . ^ ^ . ^ . . ^©^y . . ^^^? .

IN THE COMMON PLEAS COURT OF FAIRFIELD COUN'TY, OHIO

ESTATE OF ROBERT V. GRILLI, , • '``•^; f; L,,,r 6?Case No. 06 CV 345

Plaintiff, ' ,^..

, Judge Berensv. ,

VI-RGINIA SMITH, ET AL.,

Defendants.

JUDGMENT ENTRY Regarding-

Attorney's Fees

This matter came on for an evidentiary hearing before the Court on January 20, 2012 on

Plaintiff's motion for sanctions under- R.C. 2323.51 a.^id Civ.R. 11. The Court thereafter granted

the parties time to. submit written closing arguments, which the Court has received and

considered. The matter is fully briefed and ripe for review.

STATEMENT OF THE CASE

The unusual length and procedural complexity of this action necessitates a lengthy

summary of the procedural history of the matters before the Court.

This action was originally filed on March 31, 2006. At that time, Plaintiff sought an

accounting and a mandatory injunction to permit the inspection of documents pertaining to the

sale of assets of two corporations, Defendant Grilli's Real Estate Corporation, Inc., and

Defendant Valerio's of Lancaster, Inc., each of which were closely held corporations in which

the Plaintiff and Defendants Virginia Smith- and Diana Camden had an uiterest: Plaintiff also

sought a declaratory judgn"lent as to the. amount of Plain.tiff's interest in the two corporations.

Defendants timely answered and counterclaimed agaiiist Plaintiff for misappropriations of

corporate funds. Defendants also sought the disqualification of Plaintiff's counsel. The Court

entered summary judgment in favor of Plaintiff on Defendants' counterclaim based on the

applicable statute of limitations and ruled against disqualification. Both rulings were appealed to

1

---___------ -^

the Fifth District Court of Appeals, which affirmed the Court's decisions.

Upon the remand of this action, the Court granted leave for Plaintiff to file an amended

complaint, whsch Plaintiff did or_ February 13, 2009. ?n that pnnended Complaint, Plaintiff

asserted additional claims against Defendants for breach of fiduciary duties arising from

Defendants Smith and Camden's management of the corporations, conversion and

misappropriation of corporate funds, abuse of authority and waste, unjust enrichment, director's

liability, unlawful loan, dividends, and distribution of assets, dissolution of the corporations, and

a request for an injunction preventing Defendants Smith and Camden from taking certain actions

as directors and officers of the corporations. The attorneys then representing Defendants were

granted permission to withdraw, and Defendants' time to answer expired.

Defendants retained new counsel in April of 2009, who moved the Court for leave to file

an untimely answer. The Court overruled that motion, finding that Defendants' neglect was not

excusable. Ln- August of 2009, the Co»xt overruled Plain.tiff's motion for default judbgrnent,

finding that some of the clair s asseited ili Plainti^s Alnended Complaint were fairly addressed

by Defendants' Answer to the original Complaint and finding that further evidence of damages

vvas required as to Plaintiff's other claims.

Meanwhile, the Defendants filed a new action against Plaintiff, the Administrator of the

1•Dlaintiff Estate as an individual, and the Trustee of a trust- established by the Administrator,

which was assigned Case Number 09-CV-79. Tn. that action, Defendan_tsl a^se?ted that the

Estate's decedent'took unauthorized loans, distributions and income from Defendant Grilli Real

Estate Corporation, Inc., while serving as the president of that corporation. Defendants further

1 To prevent confusion, the Court will refer to the parties who are Defendants in Case Number 06-CV-345

_ and Plaintiffs in Case Number 09-CV-79 as "Defen ^ ts."

s1

asserted that the Administa'ator breached fiduciary duties to Defendants, committed fraud, and

was unjustly enriched by furrthering and concealing the Estate's decedent's actions. Finally,

Defendants asserted that the Administrator had fraudulently transferred certain assets into the

trust to hinder Defendants' ability to collect. The defendants in Case Number 09-CV-79

answered and counterclaimed against Defendants for abuse of process, vexatious litigation, an

3ccounting, and unjust enrichment. In July 2009 the Court granted partial summary judgment in

favor of Plaintiff, the Administrator, and the Trustee as to the allegedly unauthorized loans.

Shortly thereafter, Case Number 09=CV-79 was .consolidated with this action.

On July 14; 2010, the Court entered partial summary judgment in favor of Plaintiff and

against Defendants Smith and Camden on the issue of Defendar_ts Smith and Camden's failure to

remit payments owed to Plaintiff as a co-payee with Defendants Smith and Camden on a

prornissory note identified by the parties as "the Hines note•" The a-'T'°unt of ±hat judgment is

$32 950.32, jointly and severally, pl'as prej udgment interest at the statu.tory rate from March,

2005 through May 2009 and post-judgment interest at the statutory rate froin the date of the

judgment entry.

The Court attempted to conduct a trial as to the remaining matters on May 11, 2011.

Duri-ng opening statements, however, it became apparent that there was some confusion as to the

sco e of the matters to be tried. The Court therefore continued the trial date and ordered theP

oarties to submit a jo?nt pretrial statemer_t outlining the matters reTna?ning finr vonsir^eratlon. In

the intervening time and upon Plaintiff's motion, the Court dismissed Plaintiffs claim for an

accounting as set forth in Count One of the First Amended Complaint, Plaintiff''s claim for

declaratory judgment as set forth in. Count Two of the First Amended Complaint as it related to

Defendant Valerio's of Lancaster, Inc., and Virginia Grilli's claim for an account as set forth in3

f^

^ 1 t ^ 1

Count Three of the Counterclaim filed in Case Number 09-CV-79.

The parties filetl a joint pretrial statement, as ordered, on June 21, 2011. In that joint

statement, the parties stated their agreements as to the remaining claims and issues for trial. As to

the claims remaining from Plaintiff's First Amended Complaint, the parties stated that Plaintiff s

claims for breach of fiduciary duties, conversion and misappropriation of corporate funds, abuse

of authority and waste, unjust enrichment, director's liability, unlawful loan, dividends, and

distribution of assets iemained pending and that "the issues in [those] claims [would] be the

amount of Plaintiff's damages." The parties also stated that the claims for dissolution and

permanent injunction remained pending. As to the claims from Case Number 09-CV-79, the

-varties agreed that Defendants' remaining claim for fraudulent conveyance could_not proceed in

light of the summary judgment rendered against Defendants' other claims in that case. The

parties also stated that Plaintiff and t_he Ad_7nilustrator had pending counterclaims against

Defendants for abuse of process and vexatious litigation.

On Noverreer 7, 2011, the matter came before flie Court for trial on the issues set forth in

the joint pretrial statement. At that time, to aid the clear presentation of the issues; the Court

ordered that Plaintiff and the Administrator's counterclaims from Case Number 09-CV-79 be

tried separately from the remaining claims in Case Number 06-CV-345. The Court then heard

evidence on the remaining issues in Case Number 06-CV-345 as outlined in the parties' joint

077'1en'I' 7 at nr -f D^^^ '^ '• +'jca . P^ 717Cipretrial statement. On J^nuany 1 02012, the Court .^^_.:_Y1tPYP_^ ,»^^- .n f^ I,,.. c^ ^ ^^unt^^i u^ u• e

amount of $2.00 in punitive damages and $8,072.00 in attorney's fees and expenses.

On January 18, 2012, Plaintiff voluntarily dismissed its counterclaims from Case Number

09-CV-79,leaving only Plaintiff's motion for sanctions under R.C. 2323.51 and Civ.R. 11.

4

S ti

LAW & ANALYSIS

Civ.R. 11 and R.C. 2323.51 provide slightly differentstandards regulating litigation

conduct. Civ.R. 11 requires a signature on litigation documents certifying "that the attoxney or

party has read the document; that to the best of the attorney's or party's knowledge, information,

and belief there is good ground to support it; and that it is not interposed for delay." Although

any violation of the rule can result in the action proceeding as if the document was ` never filed,

an attorney or party is subject to more severe sanctions, including the award of attorney's fees,

for a willful violation. Civ.R. 11. Accordingly, attorney's fees (the sanction requested in

Defendants' motion) may be awarded only where the attorney or party acted in subjective bad

faith in filing a paAicular document.

R.C. 2323.51, on the other hand, authorizes the award of attomey's fees to "any parly to

t; ] who was adversely afr.ctP,_ by f=i^^olous cond,^c±^,," R.C. 2323.51(B)(1}.affected`a ac-_o-n-

^'laintiff premjised its motion on the definition of frivolous conduct stated in R.C.

2323 51(A)(2}(a)(ii): "It is not warranted under existing law, cannot be supported by a good faith

argument for an extension, modification, or reversal of existing law, or cannot be supported by a

good faith argument for the establishment of new law." Courts have held that the frivolous

conduct standard in R.C. 2323.51(A) is an objective standard, as the statute makes no reference

to what the litigant knew or believed at the time of the conduct.Ceol v. Zion Indus. Inc., 81 Ohio

App.3d 286, 291, 610 N.E.2d 1076 (1992).

Plaintiffs motion asserts that Defendants' Complaint in Case Number 09-CV-79 was

wholly and willfully frivolous. Specifically, Plaintiff argues that Defendants' Complaint was a

third complaint alleging time-barred claims and was filed after those claims had been twice held

to be time-barred by the Court of Appeals. Additionally, Plaintiff argues that Defendants' claims

5

rf

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in Case Number 09-CV-79 were clearly barred by the applicable statutes of limitations at the

time'of filing.

Reviewing the record of proceedings and the evidence presented at the hearing on

Pl'"tifPs motion, the Court finds that some of.the claims asserted in Defendants' Complaint ixiam

Case Number 09-CV-79 were frivolous in that they were filed well after the end of the applicable

statute of limitations. The Court finds that, under the circumstances, some of those claims were

not warranted by existing law and could not be supported by a good faith argument, for the

extension, modification, or reversal of existing law, or for the establishment of new law.

Count One of Defendant's Complaint in Case Number 09-CV-79 asserted a breach of

fiduciary, duty, in part through "facilitate[ing] the fraudulent and unlawful actions of Robert V.

Grilli" in taking unauthorized shareholder loans from Grilli's Real Estate Corporation, Inc. and

^,^P^^ by r.,Valerio's of LaneasteY, Inc. mP..r^^

Yy nrialz^ ^ vtes given..^^ on D°......rPrl'iber 1, 2002 andDeceluber

31, 2^v02 and which were due and payable under their tenus by December l, 2003 and December

; i 2003 respectively. The statute of limitations applicable to that claim.. is set forth in,

2305.09(D) and is four years with no "discovery rule." Instead, the statute of lixnitations begins

to run when"the claimant's- interest is impaired." Jim BYown Chevrolet, Inc. v. S.R. Snodgrass,

A.C.,141 Ohio App:3d 583, 587, 752 N.E.2d 335 (11th Dist. 2001).

'Defendants asserted that their claim had arisen on February 11, 2005, when their claim

/^- • A^,.^^^y^' u^itratrer l^c^c+^l^+ll

^F

R l1bP^ vTl-IYli was rejected}J^7 the ,yj^yjytistrator. 1VYYVY l, LV a11LT

^vainat th? Estate of! 1 L J

c-----" -

claimed an interest in the proceeds of the notes by virtue of their ownership of the corporations

to which the notes were given. Under the circumstances, it was clear at the time -of filing.that

Defendants' interest was impaired on or about December 2003, when the amount due under the

notes was not paid. In addition, Defendants represented to the Court *in a separate action, filed in

6

fG

2008 and involving the same transactions, that they discovered the unpaid notes in the latter

portion of 2004. In either event, the statute of limitations for a breach of fiduciary duty claim

relating to the notes expired, at the latest, at the end of 2008.

Similarly, Count Three of Defendants' Complaint asserted a claim for unjust enrichment,

based in part upon the Administrator's retention of the benefit of the two notes addressed above.

The applicable statute. of limitations is R.C. 2305.07 and establishes a limitations period of six

years. As to that claim, however, the Court finds that Defendants did have and advance a good

faith argument that the claim was within the statute of limitations. Although Defendants' claim

was held to be time-barred as having arisen at the time the notes were given, Defendants

advanced a good-faith, supportable argument that the statute of limitations did not begin to run

until December 1, 2003 and December 31, 200' ), when the notes were due and not paid. Desai v.

Fra.nklin, 177 Ohô A_pp2d 679, 2008-0hio-3957, 895 N.E2d 875, ¶? 9. Therefore, the Court

finds that portion of Defendâr.its' claim was not f7ivolous.

In addition, the. Court notes that the Entry of 7uly 9, 2009 did not grant summary

judgment on all of Defendants' claims in Case Number 09-CV-79, -but only on the portion of

those claims that relied upon the notes discussed above. It was not until the Joint Pretrial

statement that the Court was informed by counsel that Defendants were not pursuing those other

claims. Those other claims were never adjudicated to have beein filed beyond the statute of

,,;x,^;ch it could ,^, +^, + â,.o ;,,ulimit_tinns and the Co11Tr 1C LSIIt}1QIlt ly?lfnrmation -r^^m âlie ûa^ .^VL.l'ta

+llV

.based on the record of proceedings. Therefore, the Court finds that Plaintiff has not shown the

remaining claims were frivolous.

Based on the foregoing, the Court has found tliat only a small portion of the claims raised

in Defendants' Complaint in Case Number 09-CV79 were frivolous. In light of that, the Court

7

5^

must determine to what extent Plaintiff was adversely affected by that frivolity and what amount

of attorney's fees is appropriate. Plaintiff has introduced evidence that it incurred $5,790.00 in

attorney's fees in defending Case Number 09-CV-79 to the point of summary judgment. During

that defense, the issues that were meaningfully litigated were primarily the issues arising from

Plaintiff's statute of limitations defense. Of those, the Court has found that approximately one-

third of the claims litigated were frivolously made. Therefore, after reviewing the evidence and

the record of proceedings, the Court finds that $1,900.00 is a reasonable amount of attorney's

fees incurred by Plaintiff as a result of Defendants' frivolous claim.

Therefore it is ORDERED that Virginia Grilli shall recover of Grilli's Real Estate

Corporation, Inc., Valerio's of Lancaster, Inc., Virginia Smith, Diana Camden, and Ronald

Noga, jointly and severally, in the amountof $1,900.00 for attorney's fees incurred as a result of

the frivolous conduct of Gril1i's Real Estate Corporation, Inc., Valerio's of Lancaster, Inc.,

Virginia Smith, Diana Camden, and Ronald Noga.

Because this Entry resolves the remaining issues in this action except for tl-Le matter of

wrapping up the affairs of Grilli's Real Estate Corporation, Inc. and Valerio's of Lancaster, Inc.,

at the direct of a receiver, the Court finds there is no just cause for delay of any appeal for

purposes of Civ.R. 54(B).

IT IS SO ORDERED.

- _ - - L- o^- ^

Jud e Rich^d E. Berens

Copies to:

Mark R. Riegel, Courthouse mailbox _Ronald B. Noga, 1010 Old Henderson Rd., Ste. 1, Co:ui' ;_

t.,,,.8

IN THE COURT OF COMMON PLEASFAIRFIELD COUNTY, OHIO

^ ^'11

Grilli's Real Estate Corporation, Inc.,et al., •

Plaintiffs, •

V. •

Virginia Grilli, Administrator, et al.,

Defendants. •

41^J •-9 Ai; .I 1' 03`•",`:y

Case No=CV 79

JUDGE CHRIS A. MARTIN

ENTRY

This matfer comes before the court upon Defendants' Motion for Partial

Summary Judgment on the Statute of Limitations with regard to Plaintiffs' claims of

breach of fiduciary duty, fraud and unjust enrichment. Plaintiffs filed a Memorandum

Contra and Defendants filed a Reply.

Count One of Plaintiffs' Complaint alleges a claim of breach of fiduciary duty.

Pursuant to R.C. 2305.09, such a claim has a four-year statute of limitations, Count

Two of Plaintiffs' Complaint alleges fraud. Pursuant to R.C. 2305.09, such a claim has

a four-year statute of limitations. Count Three of Plaintiffs' Complaint alleges unjust

enrichment. Pursuant to R.C. 2305.07, such a claim has a six-year statute of

limitations.

Plaintiffs assert that Robert Grilli, decedent, took two unauthorized shareholder

loans from Plaintiff Grilli Real Estate Corporation for which Robert Grilli signed Notes -

V

one in the amount of $115,627 dated December 1, 2002 and the second in the amount

of $38,601 dated December 31, 2002. Plaintiffs contend that Grilli's taking of the loans

are the partial basis for their allegations of breach of fiduciary duty, fraud and unjust

enrichment.

Defendants contend that the statutes of limitations in R.C. 2305.09 bars P

claim of breach of fraud because said claim was not filed within four years of th

discovery of the fraud. Defendants contend that Plaintiffs have asserted in previous

litigations in this court and in the probate court that they learned of the Notes in October

2004. Thus, according to the "discovery" rule, said claim should have been filed within

four years, no later than October 2008. Said Complaint was filed on January 20, 2009.

Defendants further contend that there is no "discovery" rule with regard to claims of

breach of fiduciary duty and unjust enrichment. Defendants contend that the time

began to run on Plaintiffs' claims at the time the Notes were signed by decedent Grilli in

December 2002. Thus, Plaintiffs should have filed their breach of fiduciary duty claim

no later than December 2006 and their unjust enrichment claim no later than December

2008. The present Complaint was filed on January 20, 2009. Defendants assert that

they are entitled to partial summary judgment on all of Plaintiffs' claims concerning the

Notes dated December 1, 2002 and December 31, 2002.

Upon a motion for summary judgment, a court must adhere to Civ.R. 56(C).

Civ.R. 56(C) sets forth the following:

"Summary Judgment shall be rendered forthwith if the pleadings,depositions, answers to interrogatories, written admissions, affidavits,transcripts of evidence in the pending case, and written stipulations of fact,if any, timely filed in the action, show that there is no genuine issue as toany material fact and that the moving party is entitled to judgment as a

matter of law."

In order to properly grant a summary judgment motion pursuant to Civ.R. 56(C),

a trial court must review the pleadings, deposition testimony, and other evidentiary

materials and determine that:

"(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) itappears from the evidence that reasonable minds can come to but oneconclusion, and viewing the evidence most strongly in favor of the partyagainst whom the motion for summary judgment is made, that conclusion

is adverse to that party."

2

LOA

Temple v. Wean United, Inc. (1977), 50 Ohio St.3d 317, 327.

Furthermore, the party seeking summary judgment bears the responsibility of

informing the court of the basis for the motion and identifying those portions of the

record which demonstrate the absence of genuine issues of material fact and upon

which the moving party is entitled to judgment as a matter of law. Dresher v. Burt

(1996), 75 Ohio St.3d 280. Pursuant to the above rule, a trial court may not enter a

summary judgment if it appears a material fact is genuinely disputed. The party moving

for summary judgment bears the initial burden of informing the trial court of the basis for

its motion and identifying those portions of the record that demonstrate the.absence of a

genuine issue of material fact. The moving party may not make a conclusory assertion

that the non-moving party has no evidence to prove its case. The moving party must

} specifically point to some evidence which demonstrates the non-moving party.-cannot

support its claim.

Consequently, once the moving party satisfies its Civ.R. 56 burden, the burden

shifts to the nonmoving party to demonstrate, by affidavit or by producing evidence of

the type listed in Civ.R. 56(C) that a genuine issue of material fact remains for trial.

Vahila v. Hall, 77 Ohio St.3d 421, 429, 1997-Ohio-259, citing Dresher v. Burt, 75 Ohio

St.3d 280, 1996-Ohio-107. See, also, Schwenke v. Wayne-Dalton Corp. (Mar 27,

2008), Holmes App. No. 07-CA-003, 2008-Ohio-1412; Rickels v. Captain Woody's Pub

& Grub (Jul. 7, 2006), Licking App. No. 05CA99, 2006-Ohio-3542; Griffiths v. Rose Ctr.

(Mar. 29, 2006), Stark App. No. 2005CA00256, 2006-Ohio-1573; Woods v. Wright (Aug.

24, 2004), Tuscarawas App. No. 2003AP110086, 2004-Ohio-4547.

After reading the Motion for Summary Judgment, Memorandum Contra and

3

^

Reply, reviewing the pertinent law, and considering the evidence available to the Court

pursuant to Civ.R. 56, the Court finds that granting partial summary judgment in favor of

Defendants as to all claims in Plaintiffs' Complaint concerning the Notes signed by

Robert Grilli dated December 1, 2002 and December 31, 2002, specifically Plaintiffs'

claims of breach of fiduciary duty, fraud and unjust enrichment is appropriate.

Reasonable minds can come to but one conclusion regarding whether Plaintiffs' claims

of breach of fiduciary duty, fraud and unjust enrichment were filed within the time set

forth in R.C. 2305.09 and 2305.07 and, viewing the evidence most strongly in favor of

the parties against whom the motion for partial summary judgment is made, that

conclusion is adverse to the Plaintiffs and Defendants are entitled to judgment as a

matter of law. Temple, supra at 327.

Upon consideration, the court finds that the claims of breach of fiduciary duty,

fraud and unjust enrichment alleged in Plaintiffs' Complaint concerning the Notes dated

December 1, 2002 and December 31, 2002 are time barred as having been filed

beyond the applicable statutes of limitations. Therefore, Defendants' Motion for Partial

Summary Judgment is GRANTED. This matter shall proceed accordingly on Plaintiffs'

remaining claims.

{t is so ORDERED.

XC:RONALD B. NOGA1010 OLD HENDERSON ROADSUITE 1COLUMBUS, OHiO 43220

MARK R. RIEGELCOURTHOUSE MAILBOX

4

CHRIS A. MARTIN, JUDGE

involves a substantial constitutional question or … failure to distinguish between...

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