2020 Ohio 48
Ohio Ct. App.2020Background
- In 2008 Servpro and Possert performed water-remediation and repair work for 369 West First St., LLC (369) and were not paid; mechanics liens and later suits produced judgments for the contractors and, in July 2015, an award of $60,143.25 in attorney fees.
- Whichard was the sole member of 369 and multiple related LLCs (Ashton, NW Fashion, Olympia); 369 sold its Dayton property for $300,000 in January 2009 and subsequently transacted through other property sales and transfers in 2012–2013.
- Four transfers were focal: a $100,000 member draw to Whichard (Jan 22, 2013); $123,690 to Ashton (Jan 23, 2013); $8,000 to NW (Nov 3, 2015); and $6,000 to Olympia (Nov 24, 2015).
- Trial court set aside the November 2015 transfers and held Whichard, NW, and Olympia jointly and severally liable for $14,000 under Ohio’s UFTA, but rejected piercing the corporate veil and declined to set aside the January 2013 transfers.
- On appeal the court affirmed the $14,000 award, held there were genuine disputes of material fact on veil-piercing and the January 2013 transfers, reversed summary judgment on those issues, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Piercing the corporate veil of 369 (alter ego / liability of Whichard) | Whichard dominated 369, commingled funds, undercapitalized the LLC, and used transfers to defeat creditors; veil should be pierced under Belvedere/Dombroski. | 369 observed LLC form; Whichard did not exercise complete control or personally guarantee obligations; summary judgment in favor of defendants appropriate. | Reversed summary judgment for defendants: genuine issues of material fact exist on alter-ego, unlawful-act prongs, and resulting injury — remand for further proceedings. |
| Fraudulent transfers — Jan 2013 ($100,000 to Whichard; $123,690 to Ashton) under R.C. 1336.04(A) (actual intent) | Transfers were to insiders, occurred while 369 was insolvent or leaving it insolvent, lacked reasonably equivalent value, and show multiple badges of fraud — intent may be inferred. | No proof Whichard knew of the exact Dayton judgment at time of transfers; trial court correctly found no actual intent to defraud. | Reversed summary judgment for defendants on these transfers: material factual disputes exist about badges of fraud and intent; plaintiff’s appeal sustained as to Jan 2013 transfers. |
| Fraudulent transfers — Nov 2015 ($8k NW; $6k Olympia) under R.C. 1336.05(A) (constructive fraud) | Transfers were made while 369 was insolvent and for no reasonably equivalent value; summary judgment setting these aside was proper. | Defendants argued insufficient evidence of transfers/value and raised bankruptcy-based defenses. | Affirmed summary judgment for plaintiffs as to the November 2015 transfers — elements of constructive fraud (insolvency + no equivalent value) were satisfied; $14,000 judgment stands. |
| Effect of 369's Chapter 7 bankruptcy / trustee on fraudulent-transfer claims | Plaintiffs: trustee did not pursue or recover estate claims; closure/discharge left non-debtor defendants liable; state-court claims may proceed. | Defendants: fraudulent-transfer claims became estate property on bankruptcy; only trustee could prosecute while case open; state-court judgment is precluded. | Overruled defendants’ cross-assignment: bankruptcy estate was administered and closed without trustee pursuing these claims; discharge does not extinguish third-party liability; trial court properly reactivated and adjudicated state claims. |
Key Cases Cited
- Belvedere Condominium Unit Owners' Assn. v. R.E. Roark Cos., Inc., 67 Ohio St.3d 274, 617 N.E.2d 1075 (1993) (sets three‑part test for piercing corporate veil: alter ego, wrongful conduct, and resulting injury)
- Dombroski v. WellPoint, Inc., 119 Ohio St.3d 506, 895 N.E.2d 538 (2008) (modifies Belvedere: second prong includes fraud, illegality, or similarly unlawful/egregious conduct)
- Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 95 Ohio St.3d 512, 769 N.E.2d 835 (2002) (standard for directed verdict/summary judgment review: consider evidence most strongly in favor of nonmoving party)
- Celotex Corp. v. Catrett, 514 U.S. 300 (1995) (summary-judgment standards and burdens)
- Stern v. Marshall, 564 U.S. 462 (2011) (bankruptcy jurisdiction and core proceedings include fraudulent-conveyance avoidance actions)