Ossco Properties, Ltd. v. United Commercial Property Group, L.L.C.
197 Ohio App. 3d 623
| Ohio Ct. App. | 2011Background
- Ossco Properties, Ltd. loaned up to $750,000 to United Commercial Property Group, L.L.C. (UCPG) under an operating agreement identifying Ossco and Escaja as managing members who received a $10,000 monthly management fee.
- Escaja ran day-to-day operations; Ossco maintained UCPG’s accounts and handled invoice payments; Escaja or staff submitted bills to Posar at Ossco for payment.
- By 2008 the relationship soured; Ossco continued some loans and payments, including a large year-end loan with fees; by July 20, 2010, Ossco calculated outstanding principal at $769,707.17 and accrued interest at $144,095.34.
- Ossco filed suit August 5, 2010 seeking repayment of principal and accrued interest plus interest at prime +1%; the trial court held Ossco owed $769,707.17 principal and $144,095.34 interest.
- UCPG appealed arguing the trial court's decision was against the manifest weight of the evidence, contesting deductions of certain expenses and an intercompany interest transaction.
- The appellate court affirmed in part, reversed in part, and remanded: deductions for a December 2008 $26,700 interest payment and related principal adjustment were necessary; set-off against Madison-related debt was denied; other aspects of the judgment were affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were certain payments charged to the Ossco loan balance proper? | Ossco argues many payments were ordinary UCPG expenses charged to the loan balance. | UCPG contends several payments were not ordinary expenses and should not inflate the loan balance. | Some expenses were ordinary; others require deduction or recharacterization. |
| Was the December 2008 $26,700 interest payment properly charged to the loan balance? | Ossco asserts the payment was an ordinary interest payment under the loan. | UCPG claims the payment was an unusual transaction and possibly a conflict of interest needing member approval. | Not an ordinary expense; deduct from principal and add to accrued interest; requires member-approval considerations. |
| Are the monthly management fees to Escaja’s related entity properly counted in the loan balance? | Ossco/Escaja’s fee payments are ordinary business expenses necessary to operate UCPG. | Fees should not inflate the loan balance if they are not ordinary expenses or if conflicts of interest exist. | Fees held as ordinary expenses; properly included in the balance. |
| Is UCPG entitled to any set-off against Madison-related debt? | UCPG seeks a set-off against Madison debt due to related transactions. | There is no mutuality or agency linkage to permit a set-off against Ossco. | Set-off denied due to lack of mutuality and lack of piercing the corporate veil. |
Key Cases Cited
- Seasons Coal Co., Inc. v. Cleveland, 10 Ohio St.3d 77 (Ohio 1984) (manifest weight review for trial court credibility)
- Bechtol v. Bechtol, 49 Ohio St.3d 21 (Ohio 1990) (trial court facts and credibility reassessment)
- Belvedere Condominium Unit Owners’ Assn. v. R.E. Roark Cos., Inc., 67 Ohio St.3d 274 (Ohio 1993) (corporate veil and control standards)
- Nichols v. Metro. Life Ins. Co., 137 Ohio St.542 (Ohio 1941) (mutuality requirements for set-off/counterclaim)
- Andrews v. State ex rel. Blair, Supt. of Banks, 124 Ohio St. 348 (Ohio 1931) (set-off principles; cross-demands mutuality)