Reinbolt v. KernReinbolt v. Kern
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Robert E. Searfoss, III, for appellee.
Mark D. Tolles, for appellants.
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JENSEN, J.
{¶ 1} Defendants-appellants, James D. Kern and Linda L. Kern, timely appeal several orders of the Wood County Court of Common Pleas rendered in connection with the June 5, 2012 jury verdict against them and the July 3, 2012 award of attorneys fees to appellee, John F. Reinbolt, Jr. Appellants assign five errors for our review:
ASSIGNMENT OF ERROR NO. 2: The trial court erred to the prejudice of defendants-appellants in overruling the motion for a directed verdict of the defendants-appellants at the close of the plaintiffs-appellees [sic] case in chief.
ASSIGNMENT OF ERROR NO. 3: The trial court erred in granting attorneys fees to the disqualified attorney where the disqualification arose from representation of a party by the attorneys [sic] firm who was an indispensable party defendant in this action.
ASSIGNMENT OF ERROR NO. 4: The trial court erred in granting a separate award of attorneys fees to a party that had a contingency fee agreement with the attorney.
ASSIGNMENT OF ERROR NO. 5: The trial court erred to the prejudice of defendants-appellants in instructing the jury on money damages, where the amended complaint requested only a foreclosure on the premises.
I. FACTUAL BACKGROUND
{¶ 3} To properly address appellants’ assignments of error, it is necessary to review the relationship between the parties and the earlier legal proceedings that gave rise to this appeal.
A. The Underlying Action
{¶ 4} Appellee, John F. Reinbolt, Jr., was appointed guardian of sisters Lori D. and Arlene M. St. Clair by the Wood County Probate Court on August 3, 2007. Reinbolt filed a lawsuit on October 15, 2007, on behalf of the St. Clair sisters against appellant Linda Kern alleging that Mrs. Kern mishandled or converted social security payments totaling $88,349.60 in her capacity as the representative payee for her cousins, the St. Clairs, who have mental or intellectual limitations. Reinbolt also alleged in the lawsuit that Mrs. Kern had failed to repay $1,989.35 loaned to her by Arlene St. Clair and that she cashed in two $5,000 life insurance policies that Lori and Arlene St. Clair had received from their parents. Mrs. Kern failed to answer and a default judgment was entered in Reinbolt‘s favor on February 28, 2008.
{¶ 5} The trial court held a damages hearing at which Reinbolt sought compensatory damages of over $100,000 and punitive damages of more than $269,000. The court awarded only nominal damages of $1, holding that Reinbolt‘s evidence in support of his damages claim had not been authenticated. Reinbolt appealed to this court.
B. The Kerns’ Dissolution
{¶ 6} On December 4, 2007, approximately two months after case No. 2007CV0830 was filed and after 37 years of marriage, Linda and James Kern filed a petition for dissolution in the Wood County Domestic Relations Court. In the proposed decree of dissolution, Mrs. Kern sought to surrender to her husband her interests in the following three properties:
- (1) 76.44 acres located at 6374 C.R. 33 in Section 23 of Scott Township, Sandusky County, Ohio (Parcel ID No. 231600000500) (“the Sandusky County property“) (Trial Exhibit 1);
- (2) 5.05 acres located at 1385 Bowling Green Road East, Bradner, Ohio 43406 (Parcel ID No. L46-412-010000010000) (“the Route 6 property“) (Trial; Exhibit 2); and
- (3) 40.89 acres in Freedom Township, Wood County, Ohio (Parcel ID No. D13-512-360000017000) (“the Freedom Township property“) (Trial Exhibit 3).
{¶ 8} In light of his judgment against Mrs. Kern, Reinbolt sought, and was granted, leave to intervene in the Wood County dissolution. The Kerns failed to pursue the dissolution and they ultimately dismissed the action on May 30, 2008, indicating that they did not wish to proceed with the divorce at that time. What the Kerns did not divulge is that on March 4, 2008, approximately two weeks after Reinbolt was permitted to intervene in the Wood County action, they had filed a petition for dissolution in Sandusky County, proposing to dispose of their property in the same manner as described above. Reinbolt was unaware of the Sandusky County proceedings. The Kerns obtained a decree of dissolution on April 16, 2008. The estimated $466,000 in property was awarded to Mr. Kern as the couple had proposed.
C. The Allegedly Fraudulent Land Transfers
{¶ 9} Appellants jointly owned the Route 6 and Freedom Township properties described above. The Sandusky County property was owned by Linda Kern, James D. Kern, James A. Kern, and Michelle E. Kern. Linda Kern transferred her ownership interest in all three of the properties to James Kern via quitclaim deeds signed on February 10, 2007 in consideration of “$1.00 and other good and valuable considerations.” James A. and Michelle E. Kern also quitclaimed their interests in the Sandusky County property to James D. Kern. The deed for the Sandusky County
{¶ 10} Although Reinbolt‘s original lawsuit was filed October 15, 2007, he claims that Linda Kern and her now ex-husband, co-appellant James D. Kern, fraudulently transferred these parcels of land, and other property described in the domestic relations actions, to divest Linda Kern of assets from which she may ultimately have been obligated to pay on the judgment in case No. 2007CV0830. These transfers by Mrs. Kern precipitated the present lawsuit. Reinbolt filed his complaint in case No. 2010CV00507 seeking to void the transfers, marshal the liens, and foreclose and sell the properties to satisfy the $11,989 judgment. He also requested punitive damages, attorneys fees, and other damages available under the Uniform Fraudulent Transfer Act,
D. Appellee‘s Attorney‘s Conflict of Interest
{¶ 11} When appellee initially filed the 2007 action and the present action, he was represented by Drew Hanna of the law firm of Hanna & Hanna. Appellants James D. and Linda Kern have a son, James A. Kern. The Sandusky County property that was quitclaimed to James D. Kern had been owned by James D. Kern, Linda Kern, James A. Kern, and James A. Kern‘s then-wife, Michelle E. Kern. Drew Hanna‘s brother, attorney Harold Hanna, represented James A. Kern in his divorce from Michelle E. Kern. James A. and Michelle Kern filed for divorce on April 16, 2007. Those divorce proceedings were lengthy and continued through 2012.
E. The Trial
{¶ 13} The parties tried the fraudulent transfer case to a jury on May 16 and 17, 2012. The jury heard from a number of witnesses, including Reinbolt, Linda Kern, James D. Kern, and Arlene St. Clair.
{¶ 14} As background, Reinbolt testified that he became the guardian for Arlene and Lori St. Clair after they requested his assistance when they were unable to pay for groceries and gas for the heat in their trailer. Reinbolt gathered information about their income and learned that each of the sisters was supposed to receive just under $1,000 per month in social security payments. The sisters told them that Mrs. Kern was their representative payee and was giving them only $435 per month. After some discussions with the Social Security Administration, the SSA sent a letter to Mrs. Kern dated February 22, 2006, informing her that she was being removed as payee. Reinbolt
{¶ 15} Reinbolt told the jury that Mrs. Kern had owned land but signed quitclaim deeds in February 2007, transferring her interests to her then-husband. He identified the various deeds and dates of transfers. Reinbolt told the jury that through this lawsuit, he wanted to foreclose on the properties to retrieve money to satisfy the judgment. He also requested compensatory damages, punitive damages, and attorneys fees.
{¶ 16} Reinbolt testified about the Kerns’ Wood County divorce proceedings, his efforts to intervene in that action to prevent a fraud on the St. Clair sisters as creditors of Mrs. Kern, the Kerns’ dismissal of the Wood County domestic relations case on May 30, 2008, and the Kerns’ filing and finalizing of their dissolution in Sandusky County on April 16, 2008, without his knowledge. Reinbolt testified that the Kerns’ decree of dissolution granted to Mr. Kern all the land, vehicles, and the RV that the couple had owned. The Kerns had their marriage dissolved in Sandusky County before dismissing the Wood County action and without Reinbolt having an opportunity to intervene.
{¶ 17} Reinbolt testified that despite the decree of dissolution and despite the transfer of property to Mr. Kern, Mrs. Kern continued to occupy the home on Route 6. He said that he passes by the home often on his usual route to Bowling Green and has seen Mrs. Kern landscaping, preparing for a garage sale, and tinkering in the garage. A sign remains on the home that says “Linda and James Kern.” Her car is frequently there.
{¶ 18} Reinbolt testified that there was no property and no accounts from which to collect his 2008 judgment; he believes Mrs. Kern transferred her entire estate to Mr. Kern; the Kerns were married at the time of the transfer; there was a threat that Reinbolt would sue at the time of the transfers; there was a lawsuit pending at the time that the quitclaim deed was recorded with respect to the Freedom Township property; Mrs. Kern still uses the property; Mrs. Kern is insolvent; and no consideration was given for the transferred properties.
{¶ 19} Mrs. Kern, on the other hand, denied that she knew that there was any investigation into the social security funds. She could not recall when she learned that Reinbolt was seeking to be appointed guardian, but insisted that she never received the letter from SSA. She claimed that she first saw it when it was presented to her by Drew Hanna during the first litigation.
{¶ 20} Mrs. Kern testified that she has lived in a camper on the Sandusky County property since leaving her husband in December 2005. She said that she sometimes goes to the Route 6 property to visit with her grandchildren, but denied that she retains control over the property. She admitted that she may do things around the property such as pulling weeds in the yard. She said she sometimes stays two to six hours but does not stay the night there. Mrs. Kern claimed that her ex-husband is usually not there when she
{¶ 21} Mrs. Kern insisted that she and Mr. Kern divorced because he was meeting women on the Internet and bringing them home. She claimed that she moved out of the house in December 2005, but waited to file the Sandusky dissolution action because it was at that point that she met someone else and did not want to delay the divorce. She said the Wood County action was filed by Mr. Kern. She admitted that she signed affidavits and the separation agreement in the Wood County dissolution. She acknowledged that their dissolution was finalized in Sandusky County two months before they dismissed the Wood County action, but denied that she was trying to prevent Reinbolt from intervening in Sandusky County. She claimed that it was coincidental that she filed in Sandusky County eight days after Reinbolt was permitted by the court to intervene in the Wood County action.
{¶ 22} Mrs. Kern admitted that she signed the quitclaim deeds in February 2007. She admitted that Mr. Kern gave her no money in exchange for her transfer of the
{¶ 23} Mrs. Kern testified that her son and husband own the property on which she lives. She said that her son owns the particular spot on the Sandusky County property where she resides but admitted that the land is not legally divided in such a way. She claimed that she pays her son $100 per month as rent. She did not know if her son‘s name is on the deed but said he is a party to the loan on the property. She testified that the validity of her son‘s transfer of the property to his father is being questioned in his divorce proceedings with his wife, Michelle.
{¶ 24} Mr. Kern testified. He clarified that his son owns no interest in the properties but that the loan for the Sandusky County property is in his son‘s name. He claimed that although Mrs. Kern‘s name was originally on the deeds, he paid for the properties with his disability payments. He, too, confirmed that he paid her nothing in exchange for the quitclaim deeds. He said that Mrs. Kern walked away with no property at all after the dissolution except her clothing and personal effects. Mr. Kern also testified that he and Mrs. Kern had maintained separate bank accounts since 1989 or 1990. He confirmed that they were married at the time of the real estate transfers and admitted that they bought the properties in 1988 or 1989—before he became disabled in 1990. He insisted that the transfer of properties was in February 2007, before the lawsuit
{¶ 25} Mr. Kern verified that Mrs. Kern lives on the Sandusky County property. He said she can be in his house whenever she wants and that they wanted to insulate their grandchildren from the divorce. He also confirmed that he owns the camper she lives in but said his son is responsible for dealing with Mrs. Kern as to her residing on the Sandusky County property. With respect to the Sandusky County property, he said that the February 2007 transfer was precipitated by his son and daughter-in-law‘s divorce.
{¶ 26} Mr. Kern insisted that he and Mrs. Kern filed their dissolution action in Sandusky County because they thought Wood County lost jurisdiction because they had not finalized their dissolution within 90 days of filing. He knew that Reinbolt had intervened in the Wood County action.
{¶ 27} Arlene St. Clair testified in rebuttal. Her testimony focused on the facts underlying the decision to remove Mrs. Kern as the representative payee for her sister‘s and her social security checks. Before she testified, appellants’ counsel challenged her competency to testify under
F. The Award of Attorneys Fees
{¶ 29} The court conducted a hearing on Reinbolt‘s motion for attorneys fees on June 27, 2012. Reinbolt presented expert testimony from Ohio attorney William Hayes. Mr. Hayes testified that the invoices submitted by Reinbolt‘s attorney, Mr. Searfoss, for 110.95 hours at $200 per hour were reasonable. Mr. Hayes was questioned about the fact that Reinbolt and Mr. Searfoss had a contingent fee agreement. Mr. Hayes testified that the court should take both calculations into account, along with the factors described under Prof.Cond.R. 1.5(a), in determining Mr. Searfoss’ reasonable fee. Under the contingent fee agreement, Mr. Searfoss would be owed 40 percent of Reinbolt‘s recovery, approximately $19,183. At an hourly rate of $200 per hour for 110.95 hours, Mr. Searfoss would be owed $24,280. After review of the briefs of counsel and consideration of the expert testimony, the trial court awarded Reinbolt attorneys fees of $21,000 for Searfoss’ invoices.
{¶ 30} In addition to Mr. Searfoss’ fee, Reinbolt also sought attorneys fees for amounts charged by Mr. Hanna in both case No. 2007CV0830 and case No. 2010CV0507, even though he had been disqualified due to his firm‘s conflict of interest. Reinbolt presented evidence that Mr. Hanna billed fees of $39,737.04 in case
{¶ 31} The court declined to award fees in the first matter and with respect to the second matter, the trial court ordered appellants to pay a reduced fee to Mr. Hanna of $7,000.
II. LAW AND ANALYSIS
ASSIGNMENT OF ERROR NO. 1: The trial court erred to the prejudice of defendants-appellants in allowing the testimony of plaintiff appellant [sic] Arlene St. Clair without first making a determination in the present proceeding of her competency when such issue was raised by defendants-appellants prior to her testifying.
{¶ 32} Under
{¶ 33} “The criteria for determining incompetence for purposes of establishing a guardianship are substantially different than those used in establishing whether a witness is competent to testify at trial.” Id. at ¶ 13. A person is “incompetent” for purposes of establishing a guardianship if he or she “is so mentally impaired as a result of a mental or physical illness or disability, or mental retardation, or as a result of chronic substance abuse, that the person is incapable of taking proper care of the person‘s self or property or fails to provide for the person‘s family or other persons for whom the person is charged by law to provide.” Id., citing
{¶ 34}
{¶ 35} In addition, upon appellants’ request that a competency hearing of Arlene St. Clair be conducted, the trial court indicated that Ms. St. Clair had been competent to
{¶ 36} Finally, Ms. St. Clair was called only as a rebuttal witness. Her testimony revolved around the facts leading to the underlying action in which Reinbolt obtained the judgment on her behalf. She was not questioned about the Kerns’ transfer of property or about the dissolution proceedings through which Mrs. Kern disposed of her property interests. As such, her testimony was largely irrelevant to the issues pertinent to the present case and did not go to the elements of the fraudulent transfer claims.
{¶ 37} Appellants’ first assignment of error is found not well-taken.
ASSIGNMENT OF ERROR NO. 2: The trial court erred to the prejudice of defendants-appellants in overruling the motion for a directed
{¶ 38} The standard of review for a motion for directed verdict is analogous to that of a motion for summary judgment. Ohio Cas. Ins. Co. v. D & J Distrib. & Mfg., Inc., 6th Dist. No. L-08-1104, 2009-Ohio-3806, ¶ 29. Summary judgment will be granted when there remains no genuine issue of material fact and, when construing the evidence most strongly in favor of the nonmoving party, reasonable minds can only conclude that the moving party is entitled to judgment as a matter of law.
{¶ 39} Under
(A) A transfer made or an obligation incurred by a debtor is fraudulent as to a creditor, whether the claim of the creditor arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation in either of the following ways:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor * * *.
(B) In determining actual intent under division (A)(1) of this section, consideration may be given to all relevant factors, including, but not limited to, the following:
(1) Whether the transfer or obligation was to an insider;
(2) Whether the debtor retained possession or control of the property transferred after the transfer;
(3) Whether the transfer or obligation was disclosed or concealed;
(4) Whether before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit;
(5) Whether the transfer was of substantially all of the assets of the debtor;
(6) Whether the debtor absconded;
(7) Whether the debtor removed or concealed assets;
(8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
(9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
(10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred;
(11) Whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor.
{¶ 41} If the creditor demonstrates a sufficient number of “badges,” an inference of actual fraud arises and the burden then shifts to the debtor to prove that the transfer was not fraudulent. Blood at ¶ 36, citing Baker & Sons Equip. Co. v. GSO Equip. Leasing, Inc., 87 Ohio App.3d 644, 650, 622 N.E.2d 1113 (10th Dist.1993); Aristocrat Lakewood Nursing Home v. Mayne, 133 Ohio App.3d 651, 662, 729 N.E.2d 768 (8th Dist.1999); Abood v. Nemer, 128 Ohio App.3d 151, 713 N.E.2d 1151 (9th Dist.1998). A party need not demonstrate the presence of all badges of fraud; as few as three badges have been held sufficient to constitute clear and convincing evidence of actual fraudulent intent. Bank One, N.A. v. Plaza East, 10th Dist. No. 97APE02-184, 1997 WL 710664 (Nov. 10, 1997).
{¶ 43}
{¶ 44}
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{¶ 46}
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{¶ 48}
{¶ 49}
{¶ 50} Reinbolt‘s evidence was sufficient to withstand appellants’ motion for directed verdict. Appellants’ second assignment of error is found not well-taken.
ASSIGNMENT OF ERROR NO. 3: The trial court erred in granting attorneys fees to the disqualified attorney where the disqualification arose from representation of a party by the attorneys [sic] firm who was an indispensable party defendant in this action.
{¶ 51} An award of attorneys fees is a matter within the sound discretion of the trial court which will not be reversed absent an abuse of that discretion. Julian v. Creekside Health Ctr., 7th Dist. No. 03MA21, 2004-Ohio-3197, ¶ 86, citing Swanson v. Swanson, 48 Ohio App.2d 85, 90, 355 N.E.2d 894 (8th Dist.1976). An “abuse of discretion” connotes “an unreasonable, arbitrary or unconscionable attitude upon the part of the court.” Kaffeman v. Maclin, 150 Ohio App.3d 403, 2002-Ohio-6479, 781 N.E.2d 1050, ¶ 19 (8th Dist.).
{¶ 52} The trial court found that there was, in fact, a conflict of interest requiring appellants’ original attorney, Drew Hanna, to decline or discontinue representing him. After hearing expert testimony as to the reasonableness of attorneys fees, the trial court did not require appellants to pay Mr. Hanna for any portion of the over $37,000 in fees
{¶ 53} Some courts have addressed the issue of whether a client should be forced to pay attorneys fees to his or her attorney who has been disqualified because of a conflict. It appears that no Ohio state court has addressed the issue of whether a non-prevailing party can properly be ordered to pay attorneys fees to a lawyer who was disqualified from representing the prevailing party because of a pre-existing conflict with the non-prevailing party. The considerations are somewhat different under these circumstances. The award of attorneys fees to the prevailing party being somewhat punitive in nature, the non-prevailing party should not necessarily benefit from the fact that, but for the alleged violation of professional responsibility by the original attorney, he or she would have been required to pay a greater fee to the prevailing party‘s attorney. On the other hand, rewarding the disqualified attorney is not a desirable result either.
{¶ 54} In this case, appellants waited almost a year before raising the issue of Mr. Hanna‘s conflict and moving for his disqualification. In addition, appellants provided no evidence of harm caused by Mr. Hanna representing Reinbolt. So although we do not believe that Mr. Hanna should be rewarded for his lack of diligence by an award of his entire fee, we find that the trial court‘s award of the reduced attorneys fee of $7,000 was not so unreasonable, arbitrary or unconscionable as to constitute an abuse of discretion.
{¶ 55} Appellants’ third assignment of error is found not well-taken.
{¶ 56} As with appellants’ third assignment of error, we review appellants’ fourth assignment of error under an abuse of discretion standard.
{¶ 57} A contingency fee agreement is not necessarily controlling in determining the amount of attorneys fees to be awarded. Julian, 7th Dist. No. 03MA21, 2004-Ohio-3197, at ¶ 106. A trial court is not required to award attorneys fees in a certain amount merely because that was the amount agreed upon between the party seeking fees and his or her attorneys. Id., citing Galmish v. Cicchini, 90 Ohio St.3d 22, 35, 734 N.E.2d 782 (2000). If other factors suggest that the fee should be more than the contingency fee, then it is not an abuse of discretion for the trial court to award a different amount than originally agreed upon between the party and his attorney. Id.
{¶ 58} In determining the fee, a trial court must first calculate the number of hours reasonably spent on the matter, multiply it by a reasonable hourly rate, and then modify the calculation after taking into consideration the various factors set forth in Prof.Cond.R. 1.5(a). Bittner v. Tri-County Toyota, Inc., 58 Ohio St.3d 143, 569 N.E.2d 464 (1991) (considering the factors set forth in analogous DR-2-106(B) in determining the reasonableness of attorney fees). Those factors are:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; - (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
- (3) the fee customarily charged in the locality for similar legal services;
- (4) the amount involved and the results obtained;
- (5) the time limitations imposed by the client or by the circumstances;
- (6) the nature and length of the professional relationship with the client;
- (7) the experience, reputation, and ability of the lawyer or lawyers performing the services;
- (8) whether the fee is fixed or contingent.
{¶ 59} The trial court heard testimony from attorney William Hayes who appropriately explained that this was the standard to be applied. He opined as to the reasonableness of the hours and the rate for Mr. Searfoss’ services and although he acknowledged that there was an issue with Mr. Hanna‘s fees (as addressed above), he testified that there was no reason to deem Mr. Searfoss’ fees unreasonable under the rules. He agreed that the court should also take into account the contingency fee
{¶ 60} Appellants’ fourth assignment of error is found not well-taken.
ASSIGNMENT OF ERROR NO. 5: The trial court erred to the prejudice of defendants-appellants in instructing the jury on money damages, where the amended complaint requested only a foreclosure on the premises.
{¶ 61} The Uniform Fraudulent Transfer Act provides not only for the setting aside of a fraudulent transfer to the extent necessary to satisfy a debt; a creditor may also obtain “any other relief that the circumstances may require.”
{¶ 63} Contrary to appellants’ fifth assignment of error, Reinbolt in his amended complaint did, in fact, request relief in addition to foreclosure on the premises. Reinbolt requested “any other relief the circumstances may require,” as provided for by
{¶ 64} Appellants’ fifth assignment of error is found not well-taken.
{¶ 65} The court finds appellants’ five assignments of error not well-taken, and affirms the orders of the Wood County Court of Common Pleas. The costs of this appeal are assessed to appellants pursuant to
Judgments affirmed.
A certified copy of this entry shall constitute the mandate pursuant to
Mark L. Pietrykowski, J. _______________________________
JUDGE
Thomas J. Osowik, J.
_______________________________
James D. Jensen, J. JUDGE
CONCUR.
_______________________________
JUDGE
This decision is subject to further editing by the Supreme Court of Ohio‘s Reporter of Decisions. Parties interested in viewing the final reported version are advised to visit the Ohio Supreme Court‘s web site at: http://www.sconet.state.oh.us/rod/newpdf/?source=6.