ROBERT BERRYHILL v. RUSTOM R. KHOURI, ET AL.
No. 109411
COURT OF APPEALS OF OHIO EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
February 25, 2021
[Cite as Berryhill v. Khouri, 2021-Ohio-504.]
SEAN C. GALLAGHER, P.J.
JOURNAL ENTRY AND OPINION; JUDGMENT: AFFIRMED
Appearances:
Robert Berryhill, pro se.
Tucker Ellis L.L.P., John F. McCaffrey, Courtney E.S. Mendelsohn, and Melissa Z. Kelly, for appellees.
SEAN C. GALLAGHER, P.J.:
{¶ 1} Plaintiff-appellant Robert Berryhill (“Berryhill“) appeals from the decision of the trial court that granted the
Background
{¶ 2} This appeal is taken from a ruling from the trial court that found the claims raised by Berryhill in this action “should have been brought as compulsory counterclaims in a prior action and are now barred by res judicata.” The trial court conducted a hearing on appellees’
{¶ 3} The prior action, Cuyahoga C.P. No. CV-10-721073 (“the 2010 case“), was brought in March 2010 by Berryhill‘s wife, Mary Berryhill (“Mary B.“). She raised claims against Rustom Khouri, Mary Khouri (collectively “the Khouris“), Carnegie Management and Development Corporation (“Carnegie“), and various
{¶ 4} The defendants in the 2010 case filed an answer and counterclaim that named Berryhill as a counterclaim defendant. In the counterclaim, the defendants described their business relationship with Berryhill and specifically alleged that in August 1998, they “entered into a business relationship” for the purpose of assisting Carnegie in “the development of retail and other specialty build-to-suit real estate projects.” The defendants also alleged that “Carnegie and the Khouris offered Mr. Berryhill the option to become a part-owner in Carnegie‘s development projects on a number of occasions throughout the course of their relationship” and that Berryhill “requested that the ownership interests be transferred to his wife, Mrs. Berryhill.” The defendants admitted to Mary B.‘s ownership interest and admitted she had been issued a Schedule K-1 statement, which set forth her receipt of income for several of the limited liability companies. However, the defendants maintained that the ownership interest was obtained by fraud and that Berryhill had made false representations about his credentials. Additionally, the counterclaim described a wide-ranging embezzlement scheme by
{¶ 5} The trial court granted partial summary judgment to the defendants on Mary B.‘s claims, finding that Berryhill‘s embezzlement excused the defendants’ performance after August 6, 2008. Eventually, the trial court granted the defendants summary judgment on all of Mary B.‘s claims upon finding Berryhill “fraudulently induced the defendants into entering the underlying employment contract, the contract is void and [Mary B.] does not have an interest in any of the L.L.C.s listed in her complaint.” The trial court also granted the defendants summary judgment on their counterclaim for embezzlement and found Berryhill owed $219,796.45 for funds embezzled from one of the projects.
{¶ 6} The trial court‘s decision in the 2010 case was affirmed by this court on appeal in Berryhill v. Khouri, 8th Dist. Cuyahoga No. 100173, 2014-Ohio-5041 (”Berryhill I“). This court found that “[t]he record contains unrefuted evidence that demonstrates that when Robert first sought employment with Carnegie in 1998, he made the untrue representations” and that “since the association between the parties proceeded as a series of transactions, the false representations were material to each ensuing transaction.” (Emphasis sic.) Id. at ¶ 18-19.
{¶ 7} In January 2015, the trial court in the 2010 case granted the defendants summary judgment on rescission of their agreement with Berryhill and entered judgment in an amount exceeding $2 million, plus attorney fees and costs.3 That decision was not appealed.
{¶ 8} In July 2015, Berryhill filed a motion to reopen judgment, which was denied by the trial court. That decision was affirmed in Berryhill v. Khouri, 8th Dist. Cuyahoga No. 105587, 2018-Ohio-1757 (”Berryhill II“). In that appeal, Berryhill had argued there was “a dispute between partners over a long-standing real estate partnership that was absent a partnership agreement * * * for over an eleven-year period * * *.” Id. at ¶ 2. This court recognized that in Berryhill I, we affirmed the trial court‘s finding that Berryhill fraudulently induced the parties into contracting with him and that “[t]he crux of appellant‘s motion to vacate is to challenge the previously adjudicated issue of the determinations as to fraud in this case.” Id. at ¶ 29. This court determined that Berryhill‘s challenge was barred by res judicata and law of the case. Id. at ¶ 28-29.
{¶ 9} On May 8, 2019, Berryhill filed his complaint in this case. Berryhill claimed that in April 1998, prior to any alleged unwritten employment agreement, the parties created a partnership, which was absent a written partnership agreement. The complaint sets forth factual allegations and raises several causes of action stemming from the business relationship with appellees. The complaint
{¶ 10} In their answer, appellees raised several affirmative defenses, including res judicata as a bar to the claims and the failure to assert the claims as compulsory counterclaims in the 2010 case. The answer attached and incorporated documents relevant to the issue of res judicata, including certified documents relating to the 2010 case and a federal criminal case involving Berryhill‘s embezzlement from Carnegie.
{¶ 11} On July 10, 2019, appellees filed their
Law and Analysis
{¶ 12} Under his first assignment of error, Berryhill claims that the trial court abused its discretion in granting appellees’
{¶ 13} “Appellate review of a judgment on the pleadings involves only questions of law and is therefore de novo.” New Riegel Local School Dist. Bd. of Edn. v. Buehrer Group Architecture & Eng., Inc., 157 Ohio St.3d 164, 2019-Ohio-2851, 133 N.E.3d 482, ¶ 8, citing Rayess v. Educational Comm. For Foreign Med. Graduates, 134 Ohio St.3d 509, 2012-Ohio-5676, 983 N.E.2d 1267, ¶ 18. Motions for judgment on the pleadings are governed by
{¶ 14}
A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party‘s claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.
{¶ 15} ”
{¶ 16} The Supreme Court of Ohio has adopted the “logical relation” test to determine whether the claims arise out of the same transaction or occurrence. Id. at paragraph two of the syllabus. The test provides that “a compulsory counterclaim is one which is logically related to the opposing party‘s claim where separate trials on each of their respective claims would involve a substantial duplication of effort and time by the parties and the courts[.]” Id.;
{¶ 17} The purpose of
{¶ 18} Under the doctrine of res judicata, “a valid, final judgment rendered upon the merits bars all subsequent actions based upon any claim arising out of the same transaction or occurrence that was the subject matter of a previous action.” Grava v. Parkman Twp., 73 Ohio St.3d 379, 382, 653 N.E.2d 226 (1995). Res judicata bars a second action when the following four elements are met:
(1) a court of competent jurisdiction rendered a valid final judgment on the merits in an earlier action, (2) the second action involves the same parties or their privies; (3) the second action raises claims that were or could have been litigated in the first cause of action, and (4) the second action arises out of the same transaction or occurrence that was the subject of the first action.
State ex rel. Armatas v. Plain Twp. Bd. of Zoning Appeals, 160 Ohio St.3d 161, 2020-Ohio-2973, 154 N.E.3d 74, ¶ 9, citing Portage Cty. Bd. of Commrs. v. Akron, 109 Ohio St.3d 106, 2006-Ohio-954, 846 N.E.2d 478, ¶ 84. “Res judicata involves both claim preclusion and issue preclusion” and can operate to bar “the same issue between the same parties or those in privity with them.” McAdams v. Mercedes-Benz USA, L.L.C., Slip Opinion No. 2020-Ohio-3702, ¶ 21, citing Brooks v. Kelly, 144 Ohio St.3d 322, 2015-Ohio-2805, 43 N.E.3d 385, ¶ 7.
{¶ 19} Initially, we address Berryhill‘s argument that res judicata is not grounds for dismissal under
{¶ 20} The Supreme Court of Ohio has recognized that although ordinarily res judicata is not a proper basis for dismissal under
{¶ 21} In this case, appellees attached and incorporated in their answer, certified copies of pleadings, filings, and orders from the 2010 case, certified copies of the decisions in Berryhill I and Berryhill II, and a certified copy of the docket in the federal criminal litigation. Because we do not need to resort to any evidence outside the pleadings to determine whether the action is barred by res judicata, the
{¶ 22} Upon our de novo review, we must consider whether the claims should have been brought as compulsory counterclaims in the prior action and whether they are precluded under the doctrine of res judicata. That this action alleges a partnership, as opposed to an employment agreement, or an interest in the Mary Berryhill Trust, as opposed to the individual, is not determinative in this matter. Although Berryhill believes that the trial court expanded the judgment in the 2010 action to include the alleged partnership agreement, there is no merit to this argument. The trial court engaged in a proper analysis for determining whether the claims in this case should have been brought as compulsory counterclaims in the
{¶ 23} Upon our review, we find that the claims raised in this action should have been brought as compulsory counterclaims in the 2010 case. The complaint describes the business relationship between Berryhill and appellees, his work on behalf of Carnegie, alleged misconduct by appellees with respect to the business relationship and the L.L.C.s, and the asserted ownership interest involving the L.L.C.s. The claims raised in this case, like the claims raised in the 2010 case, stem from the parties’ business relationship and the alleged ownership interest relating to the L.L.C.s. The counterclaim in the 2010 case discussed the parties’ business relationship and alleged that Berryhill was offered the option to become a part-owner in Carnegie‘s development projects and that Berryhill requested his ownership interests be transferred to his wife. Further, the pleadings in this case reflect that Berryhill relies upon many of the same facts and he places the same issues in controversy that were the subject matter of the 2010 case, including the scope of the business relationship, the obligations of the parties arising from the
{¶ 24} Additionally, it is evident from the pleadings that the present claims existed at the time of the 2010 case. Insofar as Berryhill relies upon an alleged partnership entered prior to the employment agreement, this does not change our analysis. Berryhill was aware of these claims before he was a party to the 2010 case.
{¶ 25} Berryhill also is precluded from relitigating any purported right arising out of Mary B.‘s interest in the L.L.C.s. The prior action determined that Berryhill‘s fraudulent inducement voided any interest Mary B. had in the L.L.C.s, which was upheld in Berryhill I.
{¶ 26} Because the claims in the present action should have been brought as compulsory counterclaims in the 2010 case, res judicata bars this action. Additionally, common law res judicata bars this action. There was a valid final judgment on the merits in the 2010 action, and the present action involves the same parties or their privies, raises claims that were or could have been litigated in the first action, and arises out of the same transaction or occurrence that was the subject of the first action. Berryhill‘s sole assignment of error is overruled.
Conclusion
{¶ 27} Having reviewed the pleadings in this matter, we find it appears beyond doubt that Berryhill can prove no set of facts warranting the requested relief because his claims are compulsory counterclaims that should have been raised in the 2010 case and the action is barred by res judicata. Accordingly, we uphold the trial court‘s decision to grant appellees’
{¶ 28} Judgment affirmed.
It is ordered that appellees recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the common pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
SEAN C. GALLAGHER, PRESIDING JUDGE
KATHLEEN ANN KEOUGH, J., and MICHELLE J. SHEEHAN, J., CONCUR