GARY R. GORBY & ASSOCIATES, LLC v. DAVID CHARLES McCARTY, etc., et al.
C.A. CASE NO. 2010 CA 71
IN THE COURT OF APPEALS FOR CLARK COUNTY, OHIO
April 22, 2011
2011-Ohio-1983
DONOVAN, J.
T.C. NO. 07CV1656; (Civil appeal from Common Pleas Court)
OPINION
Rendered on the 22nd day of April , 2011.
. . . . . . . . . .
RICHARD F. HEIL, JR., Atty. Reg. No. 0033661, One South Limestone Street, Suite 800, P. O. Box 1488, Springfield, Ohio 45501
Attorney for Plaintiff-Appellant
DANIEL C. HARKINS, Atty. Reg. No. 0029750 and MARK D. DeCASTRO, Atty. Reg. No. 0079505, 333 N. Limestone Street, Suite 203, P. O. Box 1125, Springfield, Ohio 45501
Attorney for Defendant-Appellee
. . . . . . . . . .
DONOVAN, J.
{¶ 1} This matter is before the Court on the Notice of Appeal of Gary R. Gorby & Associates, LLC (“Gorby“), filed July 30, 2010.
{¶ 2} On April 8, 2006, Gorby entered into an “Asset Purchase Agreement”
{¶ 3} The Agreement provides that the aggregate purchase price is $350,000.00, and that $300,000.00 of that amount is allocated for the assets and book of business, with the remaining $50,000.00 allocated for a covenant not to compete. The “Non-Competition Agreement” provides as follows:
{¶ 4} “For a period of five (5) years from the date of closing, Seller, David C. McCarty, [and] Cynthia K. McCarty * * * shall not:
{¶ 5} “(a) Canvass, solicit, or accept any business for any other insurance agency, from any present or past clients of the Purchaser‘s agency.
{¶ 6} “(b) Give any other person, firm, or corporation the right to canvass, solicit, or accept any business for any other insurance agency, from any present or past clients of the Purchaser‘s agency.
{¶ 7} “(c) Directly or indirectly request or advise any present or future clients of the Purchaser‘s agency to withdraw, curtail, or cancel business with the Purchaser‘s agency.
{¶ 8} “(d) Directly or indirectly disclose to any other person, firm, or corporation the names of past, present or future clients of the Purchaser‘s agency.
{¶ 9} “(e) Directly or indirectly induce, or attempt to influence, any employee of the
{¶ 10} “(f) Directly or indirectly engage in the insurance business in Clark County in the State of Ohio, either as an employee, proprietor, partner, member or stockholder, except for Purchaser‘s agency.”
{¶ 11} The Agreement also contains an arbitration provision that provides, “All disputes arising under this Agreement, which are not settled within thirty (30) calendar days after they arise, shall be settled by arbitration in Springfield, Ohio, conducted by a single arbitrator.”
{¶ 12} According to Gorby, on March 9, 2007, David McCarty purchased a building located at 1237 North Limestone Street, in Springfield, and the Limestone premises are located within one mile of the Agency. McCarty leased the premises to Nancy Beth Turnmire, his niece and Gorby‘s former employee, who operated an insurance agency therein known as “Affordable Insurance Agency.” According to Gorby, “the “Agency formation” printout from the Ohio Department of Insurance‘s Website, attached as Exhibit C to the Verified Complaint, shows that ABA of Tampa, Inc., aka ABA Insurance Agency of Springfield, Inc., are the registered names of the competing insurance agency at 1237 North Limestone Street, * * * that Appellee David Charles McCarty is its President, and that Nancy Beth Turnmire and Tina Ann Turnmire are his Agents beginning July 19, 2007. In addition, the telephone number listed for the competing insurance agency with the Ohio Department of Insurance, 937-927-0711, is listed in the name of Dave McCarty in the 2007 AT&T Telephone Directory for Springfield and vicinity at the 1237 North Limestone Street address.”
{¶ 13} On December 11, 2007, Gorby filed a verified complaint against McCarty, individually and as President and co-owner of ABA of Tampa, Inc., fka & dba ABA Insurance
{¶ 14} On December 11, 2007, the trial court granted the motion for a temporary restraining order. On December 13, 2007, Nancy Turnmire and Tina Turnmire filed a “Motion Requesting that Plaintiff Post Bond Pursuant to
{¶ 15} On January 17, 2008, an Agreed Permanent Injunction was issued, pursuant to which the Turnmires were enjoined, until April 12, 2011, from competing with Gorby.
{¶ 16} After multiple unsuccessful attempts, service of the complaint was perfected on the McCartys on August 27, 2008.
{¶ 17} On January 22, 2010, Gorby filed a Motion for Default Judgment against McCarty, Cynthia McCarty, and ABA (“Appellees“). According to Gorby, he learned that “over 90% of the clients of Defendants’ competing insurance agency were his former clients that he had paid Defendants $350,000.00 to acquire.” The trial court granted the motion without analysis, and the Default Judgment Entry provides that Gorby shall recover judgment from Appellees “for fraudulent misrepresentation, breach of contract, and pursuant to Defendants’ indemnification
{¶ 18} On June 18, 2010, Appellees filed a Motion for Relief from judgment, pursuant to
{¶ 19} Appellees asserted that they retained an attorney “to answer the Complaint and potentially pursue Counterclaims against” Gorby. Appellees asserted that they “tendered two retainer payments to [counsel], for a total of Two Thousand Dollars.” Appellees averred that their attorney contacted counsel for Gorby in an attempt to negotiate a settlement, and that “negotiation failed to result in a settlement.” Appellees asserted that Gorby did not serve a copy of the motion for default judgment on either them or their counsel.
{¶ 20} Attached to Appellees’ memorandum is the affidavit of McCarty, which provides in part, “After the Complaint for the above-captioned matter * * * was filed, I retained Miguel A. Pedraza * * * to represent my interests in the above-captioned matter. * * * [Pedraza‘s] most recent billing statement indicated that Mr. Pedraza on May 29, 2008, was drafting an Answer and Counterclaim to be filed on my behalf in the above-captioned matter. Copies of the billing statements have been collectively marked and attached as Exhibit 1. * * * I recently learned that
{¶ 21} Attached to the Affidavit as Exhibit I are billing statements from Pedraza to McCarty, dated March 10, 2008; May 5, 2008; and June 6, 2008. The first entry on the March statement, dated February 21, 2008, provides, in part, “Telephone and office conferences with client regarding Gary Gorby suit,” and another entry, dated February 27, 2008, provides in part as follows: ” * * * draft letter to Attorney Heil regarding Gorby suit.” An entry on the May statement, dated April 28, 2008, provides, “Telephone call from Attorney Heil regarding his attempts at service of complaint and regarding David‘s potential counterclaim.” An entry on the June statement, dated May 29, 2008, provides, “Review correspondence received from Attorney Heil regarding Gorby suit; begin researching and drafting answer and counterclaim.” Attached as Exhibit B of the affidavit is a copy of the Asset Purchase Agreement. Significantly, there are no emails from McCarty to Pedraza attached to the affidavit as McCarty asserted.
{¶ 22} Gorby opposed the motion for relief from judgment. According to Gorby, “it is clear that the defaulting Defendants waived their right to arbitration and the Court is without authority to order arbitration. Therefore, the defaulting Defendants have no meritorious defense or claim to present * * * .” Gorby noted that there were no emails attached to McCarty‘s affidavit, and he asserted, “David McCarty‘s Affidavit raises more questions than it answers and
{¶ 23} Attached to the “Motion in Opposition” is the Affidavit of Richard Heil, which provides in part as follows: “Attached hereto as Exhibit D are filed copies of all of my correspondence to and from attorney Miguel Pedraza in this matter, consisting of attorney Pedraza‘s one and only letter to me, dated, February 28, 2008, in which he invited settlement, my letter to him of April 2, 2008, presenting Plaintiff‘s settlement demand, and my follow-up letter to him of May 23, 2008, in which I acknowledge receiving no response to my settlement demand letter or my two follow-up phone calls, and advise him that if I do not receive a response to this letter, I will assume that David McCarty has no interest in settling this matter and proceed with my lawsuit. I have not received any further response from attorney Pedraza in this matter. In attorney Pedraza‘s letter to me, he notes that David McCarty has not yet been served with a summons and complaint. In a telephone conversation I had with Attorney Pedraza, after my receipt of his letter, I asked him if he would accept service for the McCarty‘s and their Corporation, ABA of Tampa, Inc., but he was unwilling to do so. In the filed copy of my May 23, 2008 letter to attorney Pedraza, my note to Gary Gorby notes my many failed attempts to serve the McCarty‘s and recommends that he hire a professional process server in Tampa, Florida.”
{¶ 24} On July 19, 2010, the trial court issued an Entry, without a hearing or any analysis, sustaining the motion for relief and vacating the default judgment. The Entry provides, “defendants are granted leave to file an answer and/or counterclaim within the next twenty-eight days. No bond is required and an award for fees and costs is denied. The pending controversy is
{¶ 25} Gorby voluntarily dismissed the Turnmires on July 28, 2010, and filed a “Motion for a Partial Stay Pending Appeal; Motion in Opposition to Motion for Release of Certificate of Judgment; and Memorandum Approving Motions for Release from Garnishments,” on July 30, 2010. The Appellees filed a Motion for Stay Pending Arbitration on July 30, 2010, which the trial court granted. The court also issued an “Order for Partial Stay Pending Appeal, Denying Motion for Release of Certificate of Judgment and Granting Motions for Release from Garnishments,” which “DISMISSES Garnishment Case Nos. 10-GR-0047 and 10-GR-0048 [and] ORDERS a partial stay pending appeal, preserving Plaintiff‘s Certificate of Judgment, while Plaintiff‘s appeal is pending, and * * * DENIES Defendant‘s Motion for Release of Certificate of Judgment. * * * .”
{¶ 26} On August 11, 2010, Appellees filed an Answer. They also filed a Motion for Reconsideration of the trial court‘s entry ordering a partial stay, and preserving the Certificate of Judgment pending appeal, and denying their motion for release of certificate of judgment. According to Appellees, “the Certificate of Judgment was rendered a nullity when the Court provided relief from the previous Default Judgment. Accordingly, the Certificate of Judgment may not be preserved.”
{¶ 27} Gorby asserts one assignment of error with subparts as follows:
{¶ 28} “THE TRIAL COURT COMMITTED REVERSIBLE ERROR PREJUDICIAL TO PLAINTIFF-APPELLANT BY SUSTAINING THE
{¶ 29} “I. THE APPELLEES ARE NOT ENTITLED TO RELIEF FROM JUDGMENT DUE TO EXCUSABLE NEGLECT, UNDER
{¶ 30} “II. THE APPELLEES ARE NOT ENTITLED TO RELIEF FROM JUDGMENT UNDER
{¶ 31} “III. THE APPELLEES ARE NOT ENTITLED TO RELIEF FROM JUDGMENT UNDER
{¶ 32} Appellees respond that, in addition to relief pursuant to
{¶ 33} Regarding the default judgment issued by the trial court,
{¶ 34} “A party appears in an action for purposes of
{¶ 35} In Miamisburg Motel, we affirmed the trial court‘s denial of Huntington National Bank‘s untimely motion for relief from default judgment, but we concluded that the trial court made an error of law when it found that the bank had not made an appearance within the meaning of
{¶ 36}
{¶ 37}
{¶ 38} To prevail on a motion pursuant to
{¶ 39} “[W]here timely relief is sought from a default judgment and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment so that cases may be decided on their merits.” Id.
{¶ 40} In GTE, the trial court granted relief on the single ground that appellant‘s neglect was excusable. Quoting Link v. Wabash R.R. Co. (1962), 370 U.S. 626, 633-34, 82 S.Ct. 1386, 8 L.Ed. 2d 734, the Supreme Court of Ohio addressed the issue as follows: “‘There is certainly no merit to the contention that dismissal of petitioner‘s claim because of his counsel‘s unexcused conduct imposes an unjust penalty on the client. Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyeragent and
{¶ 41} “* * *
{¶ 42} “‘* * * Surely if a criminal defendant may be convicted because he did not have the presence of mind to repudiate his attorney‘s conduct in the course of a trial, a civil (defendant) may be deprived of his (defense) if he failed to see to it that his lawyer acted with dispatch in the prosecution of his lawsuit. And if an attorney‘s conduct falls substantially below what is reasonable under the circumstances, the client‘s remedy is against the attorney in a suit for malpractice. But keeping this suit alive merely because * * * (defendant) should not be penalized for the omissions of his own attorney would be visiting the sins of * * * (defendant‘s) lawyer upon the * * * (plaintiff).‘” Id. at 152.
{¶ 43} The GTE Court then defined excusable neglect in the negative, determining that the inaction of a defendant is not excusable neglect if the attorney‘s conduct “reveals a complete disregard for the judicial system and the rights of the [plaintiff].” Id., at 153.
{¶ 44} “Our review of the trial court‘s judgment is a narrow one. ‘It is within the sound discretion of the trial court to decide whether to grant a motion for relief from judgment, and in the absence of a clear showing of abuse of discretion, the decision of the trial court will not be disturbed on appeal.‘” Hanks v. Burt (Dec. 21, 1994), 99 Ohio App. 3d 403.
{¶ 45} “‘Abuse of discretion’ has been defined as an attitude that is unreasonable, arbitrary or unconscionable. (Internal citation omitted). It is to be expected that most instances of abuse of discretion will result in decisions that are simply unreasonable, rather than decisions that are unconscionable or arbitrary.
{¶ 46} “A decision is unreasonable if there is no sound reasoning process that would
{¶ 47} Having reviewed the record, we conclude that the trial court abused its discretion in granting Appellees’ motion for
{¶ 48} Further, Appellees’ reliance upon Kay v. Glassman, Inc. (1996), 76 Ohio St. 3d 18,
{¶ 49} in the process of helping to sort out the law firm‘s bookkeeping system following the retirement of the firm‘s bookkeeper, and she mistakenly placed the above documents in the file drawer instead of mailing them. Attached to the motion for relief were the affidavits of counsel for defendant, the secretary, and the law clerk. The Ohio Supreme Court held that the attorney‘s conduct in that case constituted excusable neglect. Here, there is no such evidence of a simple shortcoming of which Appellees were unaware, and the case of Pence v. Smith (Nov. 7, 1994), Madison App. No. CA93-11-031, further relied upon by Appellees, supports our distinction. In Pence, the Twelfth District affirmed the trial court‘s vacation of a default judgment where “Appellee‘s attorney explained that no answer was timely filed because the attorney misplaced his client‘s file while in the process of moving his office. The attorney also complained that he had recently been assaulted and noted that he had been forced to begin a “mass filing of continuances” in a number of courts.” In contrast to Kay and Pence, the Appellees’ inaction herein, in the face of Pedraza‘s alleged neglect, is not attributable to isolated events within Pedraza‘s office, and Pedraza‘s alleged neglect is properly imputed to Appellees. To hold otherwise would punish Gorby for Pedraza‘s conduct.
{¶ 50} Regarding Appellees’ claim for relief pursuant to
{¶ 51} It is undisputed that Appellees had notice and knowledge of the suit against them. Pedraza‘s billing records do not reflect that he filed an answer. There is no evidence of any contact between Appellees and Pedraza after the final billing statement in June, 2008, two
{¶ 52} Having found that Appellees failed to satisfy the second prong of the GTE test, in that they are not entitled to relief pursuant to
{¶ 53} Finally, Appellees’ assertion that their right to arbitration is a meritorious defense, in primary reliance upon Baker v. Schuler, Clark App. No. 02CA0020, 2002-Ohio-5386, also fails. In Baker, the plaintiffs moved for default judgment against Washington Square, one of four defendants, 52 days after filing their complaint, and default judgment was entered seven days later. Counsel for the remaining defendants, with whom plaintiff had entered into a stipulation agreeing to extend the date by which responsive pleadings were due, presented evidence that the stipulated extension of time applied to all four defendants. Counsel had moved to enforce the arbitration agreement between the plaintiff and all four defendants prior to the expiration of the extension of time. The trial court vacated the default judgment. In affirming the trial court‘s decision and overruling Appellant‘s first assigned error, namely that the court erred in setting aside the default judgment, we noted, “Washington Square demonstrated that its counsel represented it as well as the other defendants in the joint stipulation, and that counsel for the Bakers was aware of that fact. Omission of Washington Square from the ‘defendants’ who were identified in the stipulation was clearly a mistake on its counsel‘s part. He moved to vacate the default judgment promptly upon learning of it. And, Washington Square‘s right of arbitration was a meritorious defense in law to the Bakers’ claims for relief.” ¶ 23.
{¶ 54} Appellees quote Baker for the proposition that ”
{¶ 55} Since Appellees failed to satisfy the test in GTE, Gorby‘s sole assigned error is sustained, and the judgment of the trial court granting Appellees’ motion for relief from judgment will be reversed and vacated.
. . . . . . . . . .
GRADY, P.J. and FAIN, J., concur.
Copies mailed to:
Richard F. Heil, Jr.
Daniel C. Harkins
Mark D. DeCastro
Hon. Douglas M. Rastatter