724 N.E.2d 1232 | Ohio Ct. App. | 1999
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *327 Plaintiffs-appellants, Van American Insurance Company and Clarendon National Insurance Company appeal the decision of the Jefferson County Court of Common Pleas issuing a protective order against interrogatories and a request for production of documents filed by appellants against defendant-appellee, Michael Schiappa, in his capacity as Executor of the Estate of Orlando Schiappa.
Appellants are insurance companies providing coal mining reclamation bonds to coal operators. Sometime prior to 1994, appellants issued reclamation bonds to American Industries and Resources Corporation [hereinafter AIR Corp.] of which Orlando Schiappa was president. The bonds were to be issued to American Coals Corporation, a wholly owned subsidiary of AIR Corp, and were for an aggregate principal amount of $415,000. In connection with the issuance of the bonds, AIR Corp provided appellants with a general contract of indemnity executed by Orlando Schiappa personally, and in his capacity as President of AIR Corp. A guarantee was also executed in favor of appellants by AIR Corp and Orlando Schiappa personally.
On September 23, 1994, American Coals Corporation filed for voluntary bankruptcy in the United States Bankruptcy Court for the Northern District of West Virginia. Appellants then made a formal demand of Orlando Schiappa that, pursuant to the general contract of indemnity, he deposit with appellants the sum of $415,000. Orlando Schiappa did not comply with the request, and appellants filed a complaint in the Jefferson County Court of Common Pleas. *328
Orlando Schiappa died on May 30, 1995. Consequently, appellee as Executor of the Estate of Orlando Schiappa was substituted as the party defendant. Thereafter, appellants and appellee reached an agreement whereby appellants would receive a judgment against appellee in the amount of $400,000, but would agree not to levy on any funds or property included within the probate estate, but instead would share pro rata with other claimants in the usual order of distribution. This agreement was journalized in a judgment entry dated November 1, 1996.
Believing that during his lifetime Orlando Schiappa had transferred assets to others in violation of the Ohio Uniform Fraudulent Transfer Act, on March 10, 1997 appellant filed a separate action against the heirs of Orlando Schiappa seeking to have the transfers voided. (Case No. 97 CV 202).1 Appellee was not named in this separate action, except in his personal capacity as an heir at law.
On June 19, 1997, appellants served Plaintiffs First Set of Interrogatories and Requests for Production of Documents in Aid of Execution upon appellee. On July 21, 1997, appellee filed objections to appellants' interrogatories and demand requests, and requested a protective order claiming that the requested discovery was not in aid of execution of the judgment but was instead a collateral attempt to obtain discovery for the separate civil action filed against the heirs of Orlando Schiappa. Following a hearing, on August 7, 1997, the trial court sustained appellee's motion for a protective order. The trial court noted that matters relating to the estate of Orlando Schiappa should be addressed in probate court, and that the requested discovery appeared to be irrelevant inasmuch as the judgment entry of November 1, 1997 prohibited execution on probate assets. It is from this order of August 7, 1997 granting the protective order that appellant brings this timely appeal.
Appellants bring two assignments of error, the first of which states:
"THE TRIAL COURT ERRED IN PROHIBITING POSTJUDGMENT DISCOVERY ON THE GROUND THAT SUCH DISCOVERY SHOULD BE PURSUED IN PROBATE COURT."
Appellants claim to have a good faith belief that Orlando Schiappa transferred assets during his lifetime, and that because these transfers did not involve real estate, the exact circumstances of the transfers in question are exclusively in the control of the heirs at law and of appellee in his capacity as executor. Appellants also note that under Civ.R. 69 discovery may be had of any person in order that a judgment creditor may discover property subject to execution. *329
Appellants note that the staff notes to Civ.R. 69 state that the rule is essentially the same as Fed.R.Civ.P.
Finally, appellants cite to Caisson Corporation v. County West BuildingCorp. (E.D.Pa. 1974),
In response, appellee argues that appellants have not requested any proceedings in aid of execution of the judgment and hence the requested discovery is not in aid of execution of the instant judgment as required by Civ.R. 69, nor is it intended to discover property subject to execution in satisfaction of the judgment. Appellee claims that a cursory review of the discovery request reveals that it is intended not to discover assets of appellee as executor, but to obtain information pertinent to the separate action filed against persons not party to the instant action. As evidence of this intent, appellee notes that in a motion filed by appellants in the separate civil action, appellants state that they "believe that once the answers to interrogatories filed in 96 CV 21 [the instant case] are received the necessary information will then become available" (See Motion for New Trial, 97 CV 202). Hence, appellee argues that because the discovery was not designed to discover property subject to execution in the instant case, the trial court did not err in granting the protective order.
Appellee also argues that the trial court did not err in denying appellants' discovery requests insofar as appellants did not obtain an order to proceed from the probate court as required by R.C.
"No execution against the assets of an estate shall issue upon a judgment against an executor or administrator unless upon the order of the probate court which appointed him."
Appellee notes that no such order from the Jefferson County Probate Court is in the record. *330
Appellee also notes that Fed.R. 69 differs from Civ.R. 69 in that the former permits discovery "in the manner provided in these rules or in the manner provided by the practice of the state in which the district court is held." Hence, appellee argues the federal rule defers to the Ohio practice requiring probate court approval prior to execution against assets. Finally, appellee notes that in Ranney-Brown, cited by appellants, the court refused to decide a motion to compel postjudgment discovery unless the judgment creditor first instituted proceedings in aid of execution of the underlying judgment, which appellee notes appellants have not done in the instant case.
In their reply brief, appellants note that because they are not requesting an execution against the assets of the estate there is no need for an order from the probate court.
A trial court has broad discretion to regulate discovery proceedings.Trimble-Weber v. Weber (1997),
However, where a trial court's order is based on a misconstruction of law, it is not appropriate for a reviewing court to use an abuse of discretion standard. Castlebrook, Ltd. v. Dayton Properties Ltd.Partnership (1992),
We begin by discussing the applicability of Civ.R. 69. Civ.R. 69 provides as follows:
"Process to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise. The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be as provided by law. In aid of the judgment or execution, the judgment creditor or his successor in interest when that interest appears of record, may also obtain discovery from any person including the judgment debtor, in the manner provided in these rules."
Civ.R. 69 permits judgment creditors to obtain discovery in aid of execution of a judgment. See State ex rel. Klein v. Chorpening (1983),
Nonetheless, 'appellants may still request discovery that is permitted under the general rubric of Civ.R. 26. Civ.R. 26 provides in pertinent part:
"(B) Scope of discovery. Unless otherwise ordered by the court in accordance with these rules, the scope of discovery is as follows:
"(1) In general. Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence." (Emphasis added.)
Civ.R. 26 provides that parties may obtain discovery on any unprivileged matter that is relevant to the subject matter involved in the pending action. See Mohan J. Durve, M.D., Inc. v. Oker (1996),
"The test for relevancy under Civ.R. 26(B)(1) is much broader than the test to be utilized at trial. It is only irrelevant by the discovery test when the information sought will not reasonably lead to the discovery of admissible evidence." Tschantz v. Ferguson (1994),
97 Ohio App.3d 693 ,715 (internal quotation and citatation omitted)
This standard presents difficulties when, as in this case, the action is no longer pending and a judgment has been issued. As Judge Clifford Scott Green noted in discussing Fed.R. 69:
"[T]he limits of the concept of relevancy in connection with discovery in aid of execution of judgment, as here, must be somewhat different as a result of the fact that there is no longer an action pending which may be utilized by reference to its *332 subject matter to assist in definition of the scope of discoverable matter." See Caisson, supra, at 333
In Ranney-Brown, supra, relied on by appellants, the trial court noted that:
"[o]rdinarily, Rule 26 will not permit the discovery of facts concerning a defendant's financial status, or ability to satisfy a judgment, since such matters are not relevant, and cannot lead to the discovery of admissible evidence."
75 F.R.D., at 5
The trial court went on to note that the requested discovery could be had by means of Fed.R.Civ.P.
Appellants' first assignment of error is without merit.
Appellants' second assignment of error states:
"THE TRIAL COURT ERRED IN PROHIBITING POSTJUDGMENT DISCOVERY ON THE GROUND THAT SUCH PURSUIT OF CERTAIN FRAUDULENT CONVEYANCES WOULD RESULT IN THOSE ASSETS BECOMING PROBATE ASSETS."
According to appellants, the trial court appeared to believe that if appellants were successful in their separate action under the Ohio Uniform Fraudulent Transfer Act that the property transferred would be returned to the estate of Orlando Schiappa where appellants could not execute upon it. Hence, the trial court ruled that the discovery requests appeared to be irrelevant. Appellants argue that this determination was error and that the law does not provide for the return of the transferred property to the estate of the transferor. Rather, appellants argue that under R.C.
In response, appellee argues that any property fraudulently transferred would be returned to appellee as a probate asset subject to the satisfaction of all claims and pursuant to the priorities in R.C.
In ruling as it did, the trial court apparently believed that appellants' requested discovery was irrelevant given that the agreement of November 1, 1996 prohibited execution against probate assets.
In its journal entry, the trial court stated:
"Even if Plaintiff could unwind pre-death transactions they would become probate assets and not subject to execution by this Plaintiff."
This is an erroneous statement of the remedies available under the Ohio Uniform Fraudulent Transfer Act. We note, for example, that under R.C.
However, an appellate court will not reverse a correct judgment merely because a lower court assigned erroneous reasons as the basis of the judgment. See Taylor v. Yale Towne Mfg. Co. (1987),
Both of appellants' assignments of error having been found to be without merit, the decision of the trial court is hereby affirmed.
Hon. Gene Donofrio, Hon. Edward A. Cox, Hon. Joseph J. Vukovich, JUDGES.
Cox, J., concurs
Vukovich, J., concurs
APPROVED:
_________________________________ Gene Donofrio Presiding Judge