MADFAN, INC., ET AL. v. DINO MAKRIS, ET AL.
No. 103655
Court of Appeals of Ohio, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
RELEASED AND JOURNALIZED: October 20, 2016
[Cite as MADFAN, Inc. v. Makris, 2016-Ohio-7395.]
BEFORE: E.T. Gallagher, J., Kilbane, P.J., and S. Gallagher, J.
Civil Appeal from the Cuyahoga County Court of Common Pleas, Case No. CV-11-749225
Michael F. Westerhaus
362 Arbour Garden Avenue
Las Vegas, Nevada 89148
ATTORNEY FOR APPELLEES
Michael J. Cheselka, Jr.
75 Public Square, Suite 920
Cleveland, Ohio 44113-2084
{¶1} Defendant-appellant, attorney Michael Westerhaus (“Westerhaus“), appeals a judgment rendered after a jury verdict, finding him liable to plaintiffs-appellees, MADFAN, Inc., Alexander Stewart (“Alex“), Andrew Peloza (“Andrew“), Fred Cieslik (“Fred“), and Michael Allen (“Michael“) (collectively “appellees“), on their complaint for fraud and conspiracy, in the amount of $300,000. Westerhaus raises the following four assignments of error:
- The trial court erred by failing to grant appellant‘s motion for more definite statement and motion to dismiss so that appellant was not able to prepare for trial.
- The verdict is not supported by the weight and sufficiency of the evidence and the court erred by not granting appellant‘s motion for directed verdict.
- The trial court erred by failing to give the requested instruction as to the code of professional responsibility.
- The trial court erred by failing to grant appellant‘s motion for judgment notwithstanding the verdict and/or for a new trial.
{¶2} We find no merit to the appeal, and affirm the trial court‘s judgment.
I. Facts and Procedural History
{¶3} This case involves fraud and conspiracy claims against an attorney. Appellees alleged that Westerhaus prepared documents to create a corporation that ultimately failed because his long-time client stole money from the corporate business. Consequently, appellees filed a complaint against Westerhaus, Dino Makris (“Dino“), and his brother
{¶4} Prior to trial, Westerhaus filed a motion for a more definite statement, which was denied. Westerhaus subsequently filed a motion to dismiss the complaint for failure to state a claim upon which relief could be granted, which was also denied. Appellees dismissed the conversion, due process, and RICO claims before the jury returned its verdict and dismissed their claims against Nick because he passed away shortly after the complaint was filed. Thus, only appellees’ common law fraud and conspiracy to commit fraud claims remained for trial.
{¶5} Appellees testified at trial that in 2002, Dino suggested to them that they open a restaurant together. By this time, Dino had an established attorney-client relationship with Westerhaus and owned other restaurants and businesses including Pizza King Inc., Buy Greek Islands, Inc., Jimmy‘s Pizza, and Olympic Investment. At Dino‘s direction, appellees and Dino met with Westerhaus at Westerhaus‘s home to discuss their business plan. They decided to form a corporation and call it MADFAN, Inc. (“MADFAN“). MADFAN is an acronym of the first letter of each shareholder‘s name, i.e., Michael, Alex, Dino, Fred, Andrew and Nick.
{¶7} Olympic Investment owned a dilapidated building on Pearl Road in Medina County. (Tr. 81.) The parties agreed to renovate the building to house their restaurant, which they called the Streetside Café. Appellees had no knowledge that Westerhaus owned 100 percent of the stock in Olympic Investment, in trust, for Nick and Dino‘s benefit. Dino was the president of Olympic Investment with full authority to act on behalf of the corporation.
{¶8} Westerhaus conceded at trial that Olympic Investment owned Dino‘s share of MADFAN, as opposed to Dino individually, because he was hiding from creditors. Westerhaus testified:
Dino, he was a little shy, in terms of putting assets in his name. Okay. Just because he might have a creditor out there. So that‘s why he insisted on his shares going into Olympic Investment instead to his name personally.
(Tr. 178.)
We tore apart the whole building. We gutted the whole building. I mean, it was set up as a partial restaurant already. We tore down walls, the plumbing, the flooring. We — the basement was flooded, we had to pump it out.
We had redone everything. Put in sump pumps, fixed the flooring, restructured the floor so it would hold up the weight, so to pass all the — I did go on the roof. Painting, siding, landscaping, driveway. Anything — everything in that building. The water main outside. I can‘t even remember everything else. Decorating, painting, going to auctions.
(Tr. 118.) Alex, Fred, and Michael had full time jobs and contributed as much time as they could to the renovations. For Andrew, however, the new business was his full-time job. In describing the work he performed on the building prior to opening, Andrew testified:
I was probably there more than anybody. * * * I had to be there every time, you know, an electrician showed up, a plumber, to open the doors for them. I did a lot of work inside, painting, staining, tearing down, gutting it out, outside work.
(Tr. 85.)
{¶10} Westerhaus prepared all the corporate documents for MADFAN. In May 2004, appellees again met in Westerhaus‘s home and signed a “Subscription Agreement and Investment Letter,” reflecting the amount of each shareholder‘s capital contribution to the new corporation. Appellees collectively invested $87,000. Another document titled “Meeting of the Directors of MADFAN, Inc.” showed the amounts each
{¶11} Streetside Café opened in March 2005 and was very busy. Andrew worked between 80 and 100 hours per week, performing the day-to-day operations. He testified that the business “did double the sales we projected.” However in 2010, Andrew informed his partners that he had to quit working as the manager because he was not getting paid, and he needed to make a living. As the manager, he was supposed to receive a salary in addition to his share of the profits, but Andrew had a “hard time collecting most of the time, because Dino, who was corporate treasurer and CEO, kept saying how much * * * the rent was behind, [and] the property taxes were behind.” (Tr. 108.)
{¶12} In 2007, while Dino was in Greece for an extended period of time, Andrew reviewed the corporate finances and discovered that Dino was purchasing food for Pizza King Inc. on MADFAN‘s account. Dino was also personally charging MADFAN “consulting fees,” and Olympic Investment was charging double the rent each month to pay an arrearage. (Tr. 108-109.) Andrew explained:
[I]t was pretty much Dino and I were arguing because I didn‘t understand where all the money was. We did so well, and there was no money in the business. We had no business going out of business.
(Tr. 99.)
{¶14} Westerhaus, who represented himself, testified at trial. Appellees’ theory against Westerhaus was that he knew Dino deceived numerous creditors before forming MADFAN but nevertheless formed MADFAN knowing appellees would invest large sums of money in it. Appellees claimed that each time one of Dino‘s other corporations was sued, Westerhaus created a new corporation that allowed Dino to reinvent himself and hide from creditors.
{¶15} Westerhaus claimed that although he was the statutory agent for all of Dino‘s corporations, he had no knowledge that Dino‘s corporations had been sued. However, he later acknowledged that he defended Dino in at least one lawsuit brought by a creditor. (Tr. 145.) Westerhaus also admitted that he changed the names of Dino‘s corporations to hide from creditors and to obtain new accounts with new vendors and investors. (Tr. 148-149.)
{¶16} As previously stated, Dino‘s signature was absent from the articles of incorporation that was filed with the secretary of state even though appellees each separately testified that they witnessed him sign the articles at Westerhaus‘s house.
{¶17} Westerhaus further conceded that he drafted the lease by which MADFAN leased the property for the Streetside Café. None of the appellees signed the lease, nor did they have knowledge of it. Dino simultaneously signed the lease on behalf of both Olympic Investment, the lessor, and MADFAN, the lessee, in 2003, nearly two years before Streetside Café opened for business. (Tr. 152.) Indeed, Westerhaus notarized Dino‘s signatures on the lease. Consequently, MADFAN was indebted to Olympic Investment in the amount of $65,000 before it ever opened for business.
{¶18} Westerhaus testified to the jury that he did not disclose Dino‘s poor credit history to appellees before forming MADFAN because Dino was his client and his ethical duty of loyalty to his client prohibited him from disclosing Dino‘s “embarrassing” secrets. (Tr. 185.) Westerhaus further told the jury that once MADFAN was formed, he became MADFAN‘s corporate attorney, and his loyalty was to the corporation, not to any particular shareholder or officer. When asked whether Westerhaus informed anyone at MADFAN that they were being sued, he replied “I represent MADFAN. I deal with the president.” (Tr. 201.) He did not inform appellees that MADFAN was being sued for unpaid bills.
If you find for the plaintiffs, you will decide from the greater weight of the evidence what amount of money would reasonably compensate them for the actual damage directly caused by the [fraud or conspiracy].
{¶20} The jury returned a general verdict in favor of appellees and against Westerhaus in the amount of $300,000. Neither party requested jury interrogatories. After the jury returned the verdict, appellees dismissed their punitive damages claim. Westerhaus now appeals the trial court‘s judgment.
II. Law and Analysis
A. Motion for a More Definite Statement and Motion to Dismiss
{¶21} In the first assignment of error, Westerhaus argues the trial court erred in denying his motion for a more definite statement and to dismiss. He contends that because the complaint was “unintelligible,” he was unable to adequately prepare for trial. We discuss these arguments together because they are closely related.
{¶22} Under the notice pleading requirements of
{¶24} To prove fraud, a plaintiff must demonstrate (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred; (4) with the intent of misleading another into relying upon it; (5) justifiable reliance upon the representation; and (6) a resulting injury proximately caused by the reliance. Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 475, 700 N.E.2d 859 (1998).
{¶25} “‘Civil conspiracy’ has been defined as ‘a malicious combination of two or more persons to injure another in person or property, in a way not competent for one alone, resulting in actual damages.‘” Kenty v. Transamerica Premium Ins. Co., 72 Ohio St.3d 415, 650 N.E.2d 863 (1995), paragraph two of syllabus, quoting LeFort v. Century 21-Maitland Realty Co., 32 Ohio St.3d 121, 126, 512 N.E.2d 640 (1987),
{¶26} The complaint in this case provides specific allegations of fraud and conspiracy to commit to fraud. According to the second amended complaint,
{¶27} In particular, the second amended complaint alleges that Dino took cash from MADFAN and applied it to his other businesses. The businesses are specifically identified by name. (Second amended complaint ¶ 31-37.) The second amended complaint also alleges that Dino, “aided and abetted by Michael Westerhaus, * * * misappropriat[ed] * * * materials and food products that belonged to MADFAN and directed and applied [them] to the myriad of other business interests which benefitted Dino Makris and/or Michael Westerhaus.”
{¶28} According to the complaint, Westerhaus maintained custody of MADFAN‘s corporate records and some of the records were falsified to conceal Dino‘s misdealings. (Second amended complaint ¶ 38-44, 47.) The complaint further states that certain accountants were employed to “cook the books.” Under the fraud count, the second amended complaint alleges, in relevant part:
72. The Defendants in this case did willfully entice, deceive, mislead, and steal the assets, sweat equity, cash, credit ratings and good names of Plaintiffs.
73. Makris’ track record was known to Westerhaus as he had counseled his co-Defendant out of similar situations on more than one prior occasion.
74. Westerhaus maintained financial interests in more than one of his client‘s business interests. 75. Defendants engaged in cover-up activities after Olympic Investment Limited was canceled by the state of Ohio.
76. Defendants misapplied “Madfan” revenue to other of their varied business interests.
* * *
80. Defendants used Streetside Café as a cash cow for their other varied business interests from its inception.
81. Defendants co-mingled funds from Streetside Café and his disclosure of same from “Madfan.”
These allegations are specific and describe the circumstances of the fraud with particularity. Therefore, a more definite statement was not necessary. Moreover, the allegations state claims for both fraud and conspiracy. Therefore, the trial court properly denied Westerhaus‘s motion for a more definite statement and motion to dismiss for failure to state a claim upon which relief might be granted.
{¶29} The first assignment of error is overruled.
B. Sufficiency and Weight of the Evidence
{¶30} In the second assignment of error, Westerhaus argues the jury‘s verdict finding him liable for fraud in the amount of $300,000 was against the manifest weight of the evidence and was not supported by sufficient evidence. He contends the court should have granted his motion for directed verdict.
1. Fraud
{¶32} Counsel‘s definition of fraud is not an accurate statement of the law because to establish fraud, the plaintiff must prove that the defendant made a false representation that is material to the transaction at issue. Id. Nevertheless, the charge provided the jury with a proper instruction on the law of fraud and juries are presumed to follow the court‘s jury instructions. Pang v. Minch, 53 Ohio St.3d 186, 559 N.E.2d 1313 (1990), paragraph four of the syllabus.
{¶34} Westerhaus‘s act of creating the corporate documents and facilitating their execution was a representation to appellees that their investments in MADFAN were in their best interests. Westerhaus created individual subscription agreements for each shareholder representing his ownership of shares in the corporation. These documents likely gave appellees a false sense of security because they “owned” something. Therefore, the formation of the corporation and the creation of corporate documents constituted a “material representation” that the formation of the corporation served appellees’ interests. Under these circumstances, appellees reasonably relied on their attorney‘s apparent approval of their corporate venture.
2. Damages
{¶36} Westerhaus argues there was no evidence of damages because there was no evidence as to what appellees’ shares were worth at the time of trial. He contends that because appellees never tried to sell their shares in MADFAN, there was no evidence of a diminution in the value of the shares, and therefore no evidence of damage.
{¶37} However, there was evidence that (1) Andrew was not getting paid his salary “most of the time,” (2) none of the shareholders were receiving their share of the profits, (3) Olympic Investment was charging back rent for a two-year arrearage, pursuant to a lease that was executed without appellees‘s knowledge, (4) Dino was paying himself “consulting fees,” and (5) Dino was caught purchasing food for one of his other restaurants on MADFAN‘s account. Indeed, Andrew testified “there was no money in the business.” (Tr. 99.)
{¶38} Juries are expected to apply common sense and general knowledge in drawing reasonable inferences from the evidence at trial. United States v. Diabate, 317 Fed. Appx. 638, 639 (9th Cir. Nov. 21, 2008). Based on this evidence, a jury could reasonably infer that appellees’ shares in MADFAN had no value when Streetside Café went out of business. The company was insolvent. Not even the taxes were paid, and MADFAN‘s creditors were pursuing Andrew personally to satisfy MADFAN‘s debts.
{¶39} In the charge, the court instructed the jury that “[t]he measure of damages is the difference between the represented value and the actual value at the time of the transaction.” Value of what? What transaction? The court did not instruct the jury to consider the difference between the represented value of MADFAN shares, the true value of those shares at the time of the transaction, or the value of the shares at the time of trial. Without additional information regarding stock valuation and transaction dates, this instruction was nonsensical.
{¶40} Westerhaus did not object to this ambiguous instruction. Errors arising during the course of trial that are not brought to the attention of the court by objection or otherwise are waived and may not be raised on appeal. State v. Williams, 51 Ohio St.2d 112, 364 N.E.2d 1364 (1977), paragraph one of the syllabus. Therefore, Westerhaus forfeited his argument on appeal that damages should be measured by the difference between the value of the shares at the time of trial and the value of the shares at the time of purchase. McQueen v. Greulich, 8th Dist. Cuyahoga No. 100544, 2014-Ohio-3714, ¶ 20 (“[I]n order to preserve the right to appeal the giving or failure to give an instruction, a party must object to the instruction.“). Furthermore, as previously stated, appellees did
{¶41} Nevertheless, the court‘s failure to instruct the jury to consider the value of MADFAN stock on various dates was harmless since the court properly instructed the jury on the law of damages for fraud and conspiracy to commit fraud. Regarding conspiracy to commit fraud, the court charged the jury, in relevant part:
Damages for civil conspiracy. If you find for the plaintiffs, you will decide from the greater weight of the evidence what amount of money would reasonably compensate them for the actual damages directly caused by [the] conspiracy.
(Tr. 260.) Regarding damages for fraud, the court instructed the jury, in relevant part:
Damages for fraud. If you find for the plaintiffs * * * you will decide from the greater weight of the evidence what amount of money will reasonably compensate them for the actual damage caused by the fraud.
(Tr. 257-258.)
{¶42} The Restatement 2d, Torts, Section 549 (1977) sets forth the measure of damages for fraud, and states, in relevant part:
(1) The recipient of a fraudulent misrepresentation is entitled to recover as damages in action of deceit against the maker the pecuniary loss to him of which the misrepresentation is a legal cause including
(a) the difference between the value of what he has received in the transaction and its purchase price or other value given for it; and
(b) pecuniary loss suffered otherwise as a consequence of the recipient‘s reliance upon the misrepresentation.
(Emphasis added.) Thus, damages for fraud are not limited to the difference between a represented price and the actual value of the item at the time of the transaction; they
Loss may result from a recipient‘s reliance upon a fraudulent misrepresentation in a business transaction in one of several ways. The most usual is when the falsity of the representation causes the article bought, sold or exchanged to be regarded as of greater or less value than that which it would be regarded as having if the truth were known. The rule applicable in this situation is that stated in Clause (a). * * *
Loss that may be suffered in reliance upon a fraudulent misrepresentation otherwise than as stated in Clause (a) includes two types of situations both of which the rule stated in Clause (b) applies.
{¶43} The second of the two situations described in the comment is relevant here. The comment describes this situation as follows:
A second situation in which loss may be sustained otherwise than through difference in value as stated in Clause (a) is when a buyer, in reliance upon a misrepresentation, uses the subject matter of the sale in the belief that it is appropriate for a use * * * when he has incurred expenses in preparation for use of the article for which it would have been appropriate if the representation had been true. In these latter situations the loss depends upon the particular use to which the plaintiff puts the article and is not inherent in the nature of the transaction and the damages are often called special or consequential damages.
{¶44} Appellees’ claims were not pleaded or tried as alleged misrepresented stock prices. Their claims were based on damages resulting from their reasonable reliance on a fraudulent misrepresentation. The jury, who is expected to apply common sense, likely,
{¶45} A plaintiff must prove damages with “reasonable certainty” rather than speculation or conjecture. Marzullo v. J.D. Pavement Maintenance, 8th Dist. Cuyahoga No. 96221, 2011-Ohio-6261, ¶ 31. However, the plaintiff need not establish proof of damages with mathematical certainty as long as there is evidence upon which to make a “reasonable estimate.”
{¶46} The jury awarded appellees $300,000. Appellees sought, among other things, to recover the amounts of their initial investments and unsecured loans to MADFAN, which totaled $128,500. Each appellee testified as to the amount of his individual investment and, based on their testimony, they collectively invested $128,500 in MADFAN. They lost these sums when MADFAN went out of business. Therefore, the amount of $128,500 in damages is supported by competent, credible evidence.
{¶47} Appellees also sought to recover damages for unpaid salaries as well as the time and labor they invested in the business. Appellees testified that they gutted the building owned by Olympic Investment, and rebuilt it from the bottom up, including the installation of floor joists, walls, and ceilings. They installed a new roof, a new
{¶48} Nevertheless, noneconomic damages may be awarded in tort cases pursuant to
nonpecuniary harm that results from an injury or loss to person or property that is a subject of a tort action, including, but not limited to, pain and suffering, loss of society, consortium, companionship, care, assistance, attention, protection, advice, guidance, counsel, instruction, training, or education, disfigurement, mental anguish, and any other intangible loss.
{¶49} The phrase “any other intangible loss” has been interpreted to include “inconvenience, aggravation, frustration, humiliation, and mental distress.” Favors v. Burke, 8th Dist. Cuyahoga No. 98617, 2013-Ohio-823, ¶ 7, citing Whitaker v. M.T. Automotive, Inc., 111 Ohio St.3d 177, 2006-Ohio-5481, 855 N.E.2d 825, ¶ 21-22. Courts have held that this interpretation of noneconomic damages “is consistent with the general tort definition set forth in
{¶50} Further, noneconomic damages are included in general damages and need not be specifically pleaded. Robb v. Lincoln Publishing (Ohio) Inc., 114 Ohio App.3d 595, 683 N.E.2d 823 (12th Dist.1996) (general damages are presumed to flow from injury); Baker v. Cleveland, 8th Dist. Cuyahoga No. 93952, 2010-Ohio-5588, ¶ 46 (general damages include economic and noneconomic damages). Therefore, appellees were not required to make a separate claim for noneconomic damages in order to recover them.
{¶51} “[T]he assessment of damages is so thoroughly within the province of the jury that a reviewing court is not at liberty to disturb the jury‘s assessment absent an affirmative finding of passion and prejudice or a finding that the award is manifestly excessive.” Moskovitz v. Mt. Sinai Med. Ctr., 69 Ohio St.3d 638, 655, 635 N.E.2d 331 (1994).
{¶52} The jury heard all the evidence regarding appellees’ endeavors to make their business a success, both physical and mental. Appellees spent countless hours rehabilitating the building. And there was evidence that the business was successful, or at least provided a reasonable expectation of success. Andrew testified they “did double the sales [they] projected.” Yet MADFAN was doomed from the start, in part because, unbeknownst to appellees, MADFAN was indebted to Olympic Investment for two years of unpaid rent before the restaurant opened for business. The jury also heard evidence that even though Westerhaus knew of Dino‘s history of stealing from creditors and investors, he set appellees up in business with him.
{¶53} If the business had simply failed due to market forces, appellees would have undoubtedly been disappointed. But appellees suffered more than disappointment. Andrew quit his job to work full time for MADFAN. The evidence showed that appellees invested their time, money, and souls in the business only to discover that their friend and partner, Dino, and their trusted counsel, Westerhaus, worked against them from the very beginning. The jury heard each plaintiff describe how their hopes, enthusiasm, and hard work were dashed by squandering and betrayal. Any ordinary, reasonable person would understand the anger, frustration, and aggravation the appellees must have felt when the fraud and conspiracy were uncovered. The jury‘s verdict reasonably includes an award of noneconomic damages to compensate appellees for this “intangible loss.”
{¶54} It is possible that the jury erroneously awarded damages for appellees’ physical labor and unpaid salaries instead of limiting the award to damages for loss of capital and noneconomic damages. But we have no way to determine if any portion of the verdict was awarded in error because Westerhaus did not to submit interrogatories to the jury. Jury interrogatories test the correctness of the general verdict by asking the jury to disclose its opinion on the determinative issues in a case, including damages, based upon the trial evidence. Freeman v. Norfolk & W. Ry. Co., 69 Ohio St.3d 611, 613-614, 635 N.E.2d 310 (1994). An untested jury verdict on the issue of damages is construed in favor of the successful party. Bobb Forest Prod., Inc. v. Morbark Industries, Inc., 151 Ohio App.3d 63, 2002-Ohio-5370, 783 N.E.2d 560 (7th Dist.).
{¶55} As previously stated, there was competent, credible evidence that appellees invested $128,500 in cash in MADFAN and that they lost these sums when the corporation became insolvent. The jury‘s award of $175,000 above the amount of money appellees paid into MADFAN is not manifestly excessive when one considers how much appellees mentally invested in the doomed corporation and the frustration and aggravation they experienced as a result of the defendants’ deceit and betrayal. The jury‘s verdict was not the product of passion or prejudice, nor was it manifestly excessive based on the evidence.
{¶56} Therefore, the second assignment of error is overruled.
C. Jury Instruction
{¶57} In the third assignment of error, Westerhaus argues the trial court erred by failing to instruct the jury on the professional rules regarding attorney-client privilege and confidentiality. He asserts the attorney-client privilege as a defense to explain why he did not disclose Dino‘s deceitful character to appellees before they invested in MADFAN. However, appellees were Westerhaus‘s clients too. See Hardiman, 100 Ohio St.3d 260, 2003-Ohio-5596, 798 N.E.2d 369, ¶ 8.
{¶58} Appellees sought Westerhaus‘s legal counsel in the formation of a corporation, and they reasonably believed Westerhaus was their lawyer acting in their best interests. The fact that Dino was already Westerhaus‘s client did not change that fact; it merely created a conflict of interest for Westerhaus.
{¶59} The fact that Westerhaus and Dino had an attorney-client relationship did not excuse Westerhaus‘s misconduct vis-a-vis appellees, who were also his clients. Therefore, an instruction regarding attorney-client privilege would have been confusing and misleading. Moreover, if an instruction on attorney-client privilege were given, it would only be fair to instruct the jury on how the attorney-client relationship is formed, the reasonable expectations of the client, and the ethical rules regarding conflicts of interest.
{¶60} Appellate courts review the trial court‘s refusal to give a requested jury instruction for an abuse of discretion. Harris v. Noveon, Inc., 8th Dist. Cuyahoga No. 93122, 2010-Ohio-674, ¶ 20. The decision not to give such an instruction on attorney-client privilege was not an abuse of discretion under the facts of this case.
{¶61} Therefore, the third assignment of error should be overruled.
D. JNOV and/or a New Trial
{¶62} In the fourth assignment of error, Westerhaus argues the trial court should have granted his motion for judgment notwithstanding the verdict (“JNOV“), or in the alternative, for a new trial, because (1) appellees’ counsel argued facts not in evidence in closing argument, (2) appellees’ counsel committed misconduct in closing argument, (3) the verdict was given under the influence of passion or prejudice, and (4) the verdict was contrary to law.
1. JNOV
When a motion for a directed verdict has been properly made, and the trial court, after construing the evidence most strongly in favor of the party against whom the motion is directed, finds that upon any determinative issue reasonable minds could come to but one conclusion upon the evidence submitted and that conclusion is adverse to such party, the court shall sustain the motion and direct a verdict for the moving party as to that issue.
Neither the weight of the evidence nor the credibility of the witnesses is to be considered in ruling on these motions. Posin v. A.B.C. Motor Court Hotel, Inc., 45 Ohio St.2d 271, 275, 344 N.E.2d 334 (1976). JNOV is appropriate if the nonmoving party failed to present any evidence on one or more of the essential elements of a claim. Id. JNOV should be denied, however, if there exists evidence on which reasonable minds may reach differing conclusions. Id.
{¶64} The trial court properly denied Westerhaus‘s motion for JNOV. There was evidence that reasonable minds could reach differing conclusions that Westerhaus prepared corporate documents to create MADFAN knowing that Dino would convert money from the corporation to fund his other ventures. The evidence that Westerhaus created a lease for the Steetside Café two years before it opened and notarized Dino‘s signatures as both landlord and tenant on the lease supports appellees’ fraud and
2. New Trial
{¶65} Appellate courts review a trial court‘s judgment on a
(2) Misconduct of the jury or prevailing party;
* * *
(4) Excessive or inadequate damages, appearing to have been given under the influence of passion or prejudice;
* * *
(6) The judgment is not sustained by the weight of the evidence; however, only one new trial may be granted on the weight of the evidence in the same case;
(7) The judgment is contrary to law;
* * *
In addition to the above grounds, a new trial may also be granted in the sound discretion of the court for good cause shown.
{¶66} As previously stated, Westerhaus contends he was entitled to a new trial under
a. Closing Argument
{¶67} Westerhaus argues appellees’ counsel improperly argued facts not in evidence. He also complains that appellees‘s counsel misstated the law pertaining to statutory agents. Specifically, Westerhaus complains about the following statements in closing argument:
What we have claimed from the beginning — and the Judge will give you the instruction and all the definitions of law — is that there is a conspiracy to commit fraud with regard to what transpired between Mr. Westerhaus, Dino Makris, all the other defendants that didn‘t show up, that are still hiding from you, that the deception continues.
* * *
And that‘s what happened here, because going way back into the 90‘s — 20 years — 10 to 20 years before this fraud, Mr. Westerhaus, Dino Makris, Nick Makris, and all these business entities, Makris Brothers, Papa Jim‘s, Pizza King, Mama Stamatia‘s, Olympic Investments, Buy Greek Islands, Berea Pizza King, MADFAN, NALD, and others, were created over and over and over again on behalf of Nick or Dino, or some combination thereof.
(Tr. 221-223.)
{¶68} Normally, counsel is afforded great latitude in the presentation of closing argument to the jury. Minch, 53 Ohio St.3d 186, 194, 559 N.E.2d 1313 (1990). In this case, Westerhaus failed to object to any of the statements with which he now takes issue. A party must raise a timely objection to preserve a claim of error. Villella v. Waikem Motors, Inc., 45 Ohio St.3d 36, 39-40, 543 N.E.2d 464 (1989). Therefore, failure to object in closing arguments prevents reversal absent gross and persistent abuse of counsel‘s privilege in closing argument. Snyder v. Stanford, 15 Ohio St.2d 31, 238 N.E.2d 563 (1968).
{¶69} Despite Westerhaus‘s argument to the contrary, there was evidence that Westerhaus knew Dino‘s other corporations had been sued by creditors on more than one prior occasion. Westerhaus testified, in relevant part:
Q: In 1992, you had to defend Makris Brothers Management, Nick Makris, and Dino Makris, in a lawsuit brought by Cleveland Imported Groceries and Wine, known as Zannoni‘s, correct?
A: That could be correct.
* * *
Q: Have you known since 1992 that Dino and Nick, before he passed, owed that company $40,000?
A: One of the companies we settled by doing mortgages; I think that was the one.
{¶70} There was also evidence throughout the entirety of the trial suggesting that Westerhaus created new corporations for Dino in order to evade creditors. Although Westerhaus denied these allegations, he admitted doing so on at least one occasion:
Q: Isn‘t it true that you kept changing names of the corporation for Dino, so that he could continue to run up all these debts, and screw all these creditors, and investors, and then reinvent himself with a clean name and a clean slate over and over and over again?
A: There is some truth to that, for the Pizza King in Berea.
Q: Again ----
A: I did change the name, and we bought assets and started another corporation.
Therefore, Westerhaus‘s claim that counsel argued facts not in evidence is not supported by the record.
{¶71} Westerhaus also complains about the following comment regarding statutory agents:
The common denominator through this is Mr. Westerhaus. And every single time one of these business entities got sued, Mr. Westerhaus, in most of these cases and especially here, was the statutory agent.
And you heard Mr. Westerhaus say, well, sometimes the statutory agent doesn‘t get served. Ladies and gentlemen, the statutory agent of a corporation is designed to be the person that does get served. That‘s the person who gets notice when you don‘t pay your taxes, when you‘re about to lose your liquor license, when you‘ve been sued.
And so knowing full well that Nick, Dino, or any combination of these business entities were sued over and over and over and over again, by Zannoni‘s, by Hillcrest Egg, by Peck Distributors, by RDP Food Services, by the Ohio Department of Taxation, and later on by the woman who owned the building that Dino claimed that they could open MADFAN and Streetside in, Mr. Westerhaus was aware of this.
{¶72} Westerhaus argues appellees’ counsel falsely instructed the jury that a corporation‘s statutory agent is always served with the complaint when the corporation is sued. However, Westerhaus mischaracterizes counsel‘s statements. Counsel did not tell the jury that statutory agents are always served. He told the jury that the statutory agent “is designed to the be person that gets served.” In other words, although statutory agents are available to be served with process, service could nevertheless be obtained on some other agent of the corporation. Thus, Westerhaus‘s claim that he had no notice of
{¶73} Moreover, counsel‘s statement regarding statutory agents is an accurate statement of the law.
b. Passion or Prejudice
{¶74} Westerhaus contends he was entitled to a new trial because the jury verdict was the result of passion or prejudice. Westerhaus contends appellees’ references to Dino as “Dracula” and “a thief” inflamed the jury.
{¶75} In determining whether a verdict was influenced by passion or prejudice, the court should consider the amount of damages returned and whether the record discloses that the verdict was induced by “‘(a) admission of incompetent evidence, (b) misconduct on the part of the court or counsel, or (c) by any other action occurring during the course of the trial which can reasonably be said to have swayed the jury in their determination of the amount of damages that should be awarded.‘” Banas v. Shively, 8th Dist. Cuyahoga No. 96226, 2011-Ohio-5257, ¶ 44, quoting Fromson & Davis Co. v. Reider, 127 Ohio St. 564, 569, 189 N.E. 851 (1934).
{¶76} In addition to calling Dino a “thief,” counsel stated during closing argument:
And I told you in my opening statement, if your client is Dracula, and you keep bringing people into the room, and leaving, you can‘t walk in the room later and go, oh, my goodness, they‘ve been sucked dry, what a surprise.
{¶77} There was substantial evidence at trial establishing that Dino was a thief and “sucked” funds out of MADFAN for his own personal use. These characterizations were firmly supported by the record. Therefore, they were not unfairly prejudicial.
{¶78} Furthermore, Dino‘s thievery is irrelevant to the jury in Westerhaus‘s trial1 unless Westerhaus knowingly participated and assisted in it. The jury would not blame Dino‘s attorney for stealing unless his attorney was guilty of participation. Therefore, the references to Dracula and a “thief” did not unfairly prejudice Westerhaus.
c. Verdict Contrary to Law
{¶79} Finally, Westerhaus argues the judgment is contrary to law because MADFAN was a plaintiff in the action. He contends appellees’ fraud claim does not give MADFAN any theory of recovery because “[t]here was no theory or facts presented at trial by which a corporation could bring suit against its president, particularly one who controls 50% of the shares.”
{¶80} We need not delve into the validity of this argument because, even assuming the argument is correct, it does not preclude the individual appellees from pursuing their
{¶81} Therefore, the fourth assignment of error is overruled.
{¶82} The trial court‘s judgment is 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 be sent to 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.
EILEEN T. GALLAGHER, JUDGE
MARY EILEEN KILBANE, P.J., CONCURS;
SEAN C. GALLAGHER, J., DISSENTS (WITH SEPARATE OPINION)
SEAN C. GALLAGHER, J., DISSENTING:
{¶83} I respectfully dissent. This case is deceptively simple — can we total up the damages sought at trial in the effort to demonstrate that the jury‘s award of $300,000
{¶84} Actual tort damages may not be established without evidence demonstrating the amount lost or a reasonable guide to the computation of monetary damages. The shareholders simply alleged a type of damage, but failed to demonstrate a specific amount actually lost. The jury was left to just guess the amount. In my view, this position is in conflict with the law of this district — compensatory, pecuniary damages for fraud must be shown with certainty, and based on evidence and a theory that provides the finder of fact with “known, reliable factors that can reasonably guide the computation of damages.” Carey v. Down River Specialties, Inc., 8th Dist. Cuyahoga No. 103595, 2016-Ohio-4864, ¶ 29. There was no support for the $300,000 judgment or any reasonable method of calculating those damages in this case, and the judgment must be reversed.2
{¶86} The shareholders had a good reason for this omission. Such damages cannot be recovered upon the claims asserted. Ohio does not recognize noneconomic damages for injury to property or upon claims for fraud by misrepresentation. Sokolovic v. Hamilton, 195 Ohio App.3d 406, 2011-Ohio-4638, 960 N.E.2d 510, ¶ 14 (8th Dist.); Restatement of the Law 2d, Torts, Section 549 (1977), adopted by Northpoint Properties v. Charter One Bank, 8th Dist. Cuyahoga No. 94020, 2011-Ohio-2512, ¶ 32-33. As the majority recognized, the shareholders claimed the fraud caused damage to the value of their business and their investments, and deprived them of the expected value of their property.
{¶87} The Restatement of the Law 2d, Torts, Section 549 (1977), confirms this district‘s conclusion in Hamilton. A plaintiff may elect to recover pecuniary losses or the difference in market value of the property at issue. Hamilton at ¶ 15. It is unclear how the restatement section could be read to include a right to recover nonpecuniary damages. On this point, the majority relies on Favors v. Burke, 8th Dist. Cuyahoga No. 98617, 2013-Ohio-823, which is inapplicable. That decision deals with violations of the Consumer Sales Protection Act (“CSPA“), which legislatively authorized a right to recover noneconomic, nonpecuniary losses in CSPA actions.
{¶88} Further, even if noneconomic damages could be a measure of damages in this case, the mental anguish the shareholders experienced while running their business is not evidence of noneconomic damages flowing from the fraud claim. When the shareholders experienced their supposed “mental anguish,” none were aware the fraud had even occurred. It is nonsensical to conclude that the mental distress caused by the fraud was experienced before the shareholders were aware they were being defrauded. It also cannot be assumed that the shareholders would have felt angered or frustrated, or suffered aggravation or humiliation when the fraud was uncovered as “any reasonable person” would understand. Although certainly a reasonable person would have understood such, no shareholder testified to any of that, which again goes back to the fact that noneconomic damages are not recognized for fraudulent misrepresentation claims.
{¶89} I understand the vitriol directed at both Makris and Westerhaus from the appellees’ perspective. This appeal, however, is not about the parties’ underlying conduct. We are a court of law, tasked first and foremost with ensuring the proper application of legal doctrines. It must be remembered that we are supposed to review the grant or denial of a motion for directed verdict de novo. Groob v. KeyBank, 108 Ohio St.3d 348, 2006-Ohio-1189, 843 N.E.2d 1170, ¶ 14. There is no deference to be given to the jury‘s determination, especially in regard to the legal issues involved.
{¶90} The majority concludes that there is evidence of nonspeculative damages totaling $300,000 in the form of (1) lost profits,3 (2) unpaid salaries,4 (3) $65,000 in rent
{¶91} The conclusion from Carey is based on a longstanding approach to damages. Kinetico, Inc. v. Indep. Ohio Nail Co., 19 Ohio App.3d 26, 30, 482 N.E.2d 1345 (8th Dist.1984). In Kinetico, the plaintiff at least offered a conclusory statement suggesting an amount of lost profits caused by the defendant‘s alleged conduct. Id. This court, however, unambiguously held that
[m]ore is required of the plaintiff than merely his assertion (either directly or through an expert witness) that he would have made a particular amount in profits. Unless the figure is substantiated by calculations based on facts
available or in evidence, the courts will properly reject it as speculative or uncertain.
Id. at 30.
{¶92} There is no difference between the self-serving, conclusory statements in Carey and Kinetico and the statements made by the shareholders in this case. The shareholders listed a series of potential types of damages — such as unpaid salary, lost profits, or some form of fraudulent billing — and left the jury to speculate as to the value to attach to each category without any computational guide to determine the actual damages incurred. If a conclusory statement itemizing damages is insufficient to support a judgment, then by implication, a blanket statement that an unknown amount was owed would be insufficient to an even greater extent. I would follow the precedent from this court and hold that shareholders failed to offer any evidence justifying the $300,000 judgment. Further, the jury verdict exceeded the itemized damages sought at trial, and as such, it must be presumed that the judgment was speculative. Bokar, 8th Dist. Cuyahoga No. 75929, 2000 Ohio App. LEXIS 1654, *4 (Apr. 13, 2000).
{¶93} I acknowledge that at least the rent arrearage was reduced to an itemized amount in this appeal. We do not know the amount of rent arrearage based on the record. The $65,000 figure came from the shareholders’ trial counsel, not any of the witnesses. At one point during cross-examination, counsel asked, in reference to the lease agreement being signed the date MADFAN took possession of the building in order to begin renovations instead of from when the restaurant opened: “without anybody else in this room knowing what you did, you sat down with [Makris], and created a document
{¶94} The majority position ignores the shareholders’ own theory of the case and self-limited reliance on an inapplicable measure of damages. None of the damages the majority claims as supporting the jury‘s verdict were actually requested as a measure of damages at trial.
{¶95} “‘Ohio courts have generally followed, whether specifically noted or not, the principles set forth in the Restatement (Second) of Torts when discerning the propriety and amount of damages in fraud cases.‘” Northpoint Properties, 8th Dist. Cuyahoga No. 94020, 2011-Ohio-2512, ¶ 32, quoting Auto Chem Laboratories, Inc. v. Turtle Wax, Inc., S.D.Ohio No. 3:07cv156, 2010 U.S. Dist. LEXIS 100677 (Sept. 24, 2010). The applicable provisions provide that one may recover for fraud, including in the concealment or omission, the difference in the value of what was actually received as compared against the purchase price or other value given along with any other demonstrated pecuniary or economic loss. Restatement of the Law 2d, Torts, Section 549 (1977).
{¶96} The shareholders willingly limited their measure of damages at trial. As the jury was unambiguously instructed, the damages sought upon the fraud and civil conspiracy claims were “the actual damage directly caused by the fraud. The measure of damages in this case is the difference between the represented value and the actual value
{¶97} Actual damages in fraud cases can be calculated through the difference in value or cost to repair, among other measuring sticks. Melenick v. McManamon, 8th Dist. Cuyahoga No. 92453, 2010-Ohio-1051, ¶ 43. Thus, there is a stark difference between instructing the jury that a plaintiff is only entitled to actual damages and instructing on how to measure or compute those actual damages. In this case, the shareholders decided that their measure of actual damages was the difference between the represented and actual value of the asset based on a misrepresentation. Unfortunately, the shareholders failed to introduce evidence substantiating their chosen method of computing actual damages. As “nonsensical” as the majority believes the theory of the shareholders’ case to be, it was their decision to limit their claim for damages. Courts are not in the business of protecting parties from their chosen trial strategies.
{¶98} In my view, the majority supplants the shareholders’ chosen strategy with the majority‘s approach of bundling any and all potential measures of damages, neither sought from nor considered by the jury, and never itemized by the shareholders, claiming that under the Restatement of the Law 2d, Torts, a plaintiff is permitted to seek all pecuniary damages. The majority, however, does not affirm based on evidence of pecuniary damages. Instead, the majority relies on
{¶99} The only evidence of actual, itemized damages presented to the jury was the shareholders’ initial purchase of the MADFAN shares totaling $87,000 and the $41,500 the shareholders loaned to the corporation pursuant to the meeting of the directors (the directors included three of the shareholders) on May 21, 2007. Neither claim is evidence of ascertainable damages even if we assume that the shareholders individually had the right to recover for diminution of corporate worth caused by the fraudulent conduct. Adair v. Wozniak, 23 Ohio St.3d 174, 178, 492 N.E.2d 426 (1986) (wrongdoing of a defendant damaging the corporate worth, demonstrated through the diminution in value of stock, accrues to the corporation and not to the shareholders individually); Eppich, 8th Dist. Cuyahoga No. 95788, 2011-Ohio-2407, ¶ 14 (shareholder only has individual right to recover in tort if defendant‘s wrongdoing caused direct damage to the individual and is not duplicative of the harm caused to the corporation).6
{¶101} Moreover, it cannot be inferred that the shares were worthless. The shareholders testified that the restaurant ceased operations; however, that evidence alone does not support an inference that the shares in MADFAN are without any value so as to entitle the shareholders to full recovery of their stock purchase. To reach a conclusion as to the ending value of the shares, one would impermissibly be required to stack an inference — that MADFAN disposed of every asset after ceasing operations, which directly impacts the value of the shares — on top of another inference — that the sale of those assets was insufficient to cover all outstanding liabilities and buy out the dissatisfied shareholders. Bier v. Am. Biltrite, 8th Dist. Cuyahoga No. 97085, 2012-Ohio-1195, ¶ 22 (Ohio law precludes the stacking of inferences to prove a claim); Mercer v. Wal-Mart Stores, Inc., 10th Dist. Franklin No. 13AP-447, 2013-Ohio-5607, ¶
{¶102} We cannot infer that MADFAN‘s assets were entirely disposed of after the restaurant ceased operations for a more basic reason — the shareholders and MADFAN admitted that they failed to remove MADFAN‘s assets after the restaurant ceased operations. In Westerhaus‘s requests for admissions, the shareholders were asked to admit that they simply abandoned all corporate assets, necessarily meaning that the shareholders failed to properly liquidate them to cover MADFAN‘s outstanding debts. The trial court deemed the unanswered request as admitted for trial without objection. The shareholders, as directors of MADFAN, failed to take even the rudimentary steps of liquidating assets to cover their losses, which is also supported by the fact that the trial court in its September 29, 2015 journal entry referenced the shareholders’ request to gain access to MADFAN‘s property.7
{¶103} The majority cannot now rely on its sua sponte claim that the corporate shares were worthless as one measure of damages when the shareholders are going to receive a double recovery, one for the judgment and the second when they sell off MADFAN‘s assets after obtaining a postjudgment order entitling the shareholders to enter Olympic Investment‘s property. At trial, the shareholders were precluded from
{¶104} I briefly need to address the majority‘s analysis used to overrule Westerhaus‘s assigned error regarding the judgment notwithstanding the verdict. The majority concludes that the judgment notwithstanding the verdict was properly denied because Westerhaus aided Makris in converting money and assets from MADFAN. The majority then concludes that the conversion was a fraud committed by Westerhaus. Conversion and fraud are separate tort claims. Westerhaus‘s complicity in aiding a
{¶105} Nevertheless, without evidence demonstrating actual damages, the plaintiffs were unable to establish each element of their fraud and conspiracy to commit fraud claims at trial. Even if we assume that every other element had been proven, Westerhaus was entitled to a judgment as a matter of law on the issue of damages alone. The trial court should have granted the motion for a directed verdict or judgment notwithstanding the verdict. Coupling the majority‘s contravention of precedent with the disregard for the shareholders’ own theory of recovery, I must dissent.