VIENNA BEAUTY PRODUCTS CO. v. BRENDA COOK, et al.
Appellate Case No. 2015-CA-1
Trial Court Case No. 12-CV-806
IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT MIAMI COUNTY
December 4, 2015
2015-Ohio-5017
HALL, J.
Civil Appeal from Common Pleas Court
Rendered on the 4th day of December, 2015.
BARRY W. MANCZ, Atty. Reg. No. 0011857, and CYNTHIA WESTWOOD, Atty. Reg. No. 0079435, Rogers & Greenberg, LLP, 2160 Kettering Tower, Dayton, Ohio 45423 Attorneys for Plaintiff-Appellant/Cross-Appellee, Vienna Beauty Products Co.
ROBERT J. HUFFMAN, JR., Atty. Reg. No. 0040316, 80 South Plum Street, Troy, Ohio 45373 Attorney for Defendants-Appellees/Cross-Appellants, Rarely Idle Ranch, Accurate Construction Equipment Repair, LLC, and Roderick Cook
ANDREW R. PRATT, Atty. Reg. No. 0063764, 18 East Water Street, Troy, Ohio 45373 Attorney for Defendant-Appellee, Brenda Cook
{¶ 1} Plaintiff-appellant Vienna Beauty Products Co. (“Vienna“) appeals from the trial court‘s entry of a directed verdict in favor of defendant-appellee Roderick Cook on its claim for conversion. In a cross appeal, defendant-cross appellant Accurate Construction Equipment Repair, LLC (“ACER“) appeals from the trial court‘s entry of summary judgment against it on Vienna‘s claim for conversion.
{¶ 2} The record reflects that Vienna filed a December 2012 complaint against Brenda Cook, Roderick Cook, ACER, and Rarely Idle Ranch, LLC (“Rarely Idle“). The complaint alleged that Mrs. Cook had worked as a bookkeeping manager for Vienna until November 2012. It further alleged that her husband, Mr. Cook, owned ACER and Rarely Idle. According to the complaint, Mrs. Cook stole hundreds of thousands of dollars from Vienna by forging checks. In essence, the complaint alleged that the Cooks and ACER had acted in complicity and in a conspiracy to convert and funnel the stolen money from Vienna into and through ACER‘s bank account.
{¶ 3} As relevant here, Vienna‘s complaint proceeded against the Cooks and ACER on claims of conversion and civil conspiracy.1 In January 2014, Mr. Cook, ACER, and Rarely Idle moved for summary judgment. (Doc. #23). Vienna opposed the motion and filed its own summary judgment motion. (Doc. #25). After briefing, the trial court found
{¶ 4} The unresolved claims came before the trial court for a June 2014 bench trial. After hearing evidence, the trial court directed a verdict for Mr. Cook on the conversion and civil conspiracy claims against him. The trial court found ACER liable to Vienna for civil conspiracy. It also found Vienna entitled to statutory treble damages against Mrs. Cook and ACER, resulting in a final judgment against each of these defendants for $1,224,000. This appeal followed.
{¶ 5} In its sole assignment of error, Vienna contends the trial court erred in directing a verdict for Mr. Cook on its conversion claim. In the cross appeal, ACER asserts that the trial court erred in entering summary judgment against it for conversion.2
{¶ 6} In entering summary judgment against ACER on the conversion claim, the trial court reasoned:
[ACER] only maintained one bank account into which flowed much of the Plaintiff‘s funds which were converted. Brenda Cook acknowledged she was the manager agent for ACER.
Both Cooks further admitted they had credit cards issued to ACER which they both used to pay for personal bills. Most interesting is the testimony that ACER gives nothing in writing either before or after work is done for the customer.
The Court finds no genuine issue of material fact and that the Plaintiff is entitled to judgment as a matter of law against ACER in the amount of $408,484.23, on the claim for conversion, since Brenda Cook was acting as agent for ACER when she essentially laundered the stolen money through the ACER account. ACER is also subject to the statutory treble damages.
(Doc. #33 at 3) (Citations omitted).
{¶ 7} The trial court subsequently denied ACER‘s motion for reconsideration of the interlocutory summary judgment ruling against it. In support, the trial court reasoned:
* * * [T]here was [deposition] testimony from Brenda Cook that ACER neither had nor kept any organizational documents except the Articles of Incorporation, and that she was the managing agent of ACER. She also testified that she and Rodney had credit cards issued in the name of ACER that each of them then used for personal items.
Rodney Cook testified that ACER only had one bank account and all the checks Brenda endorsed went through this one account. Rodney claimed to know nothing about the finances of ACER and that he even let his wife sign his name to the tax returns. He further noted ACER puts nothing in writing when it does work for a customer. There was testimony
this has been going on since the incorporation in 2004 and the financial records of ACER are clearly fabricated. Acts of an agent done within the discharge of her duties and within the scope of her authority, whether the authority is express, implied, or apparent, are binding on the principal.
In an apparent authority analysis, the acts of the principal, rather than the agent, are examined.
In the present case, ACER gave Brenda Cook the full, unchecked authority to run it. In addition, ACER never operated as an independent entity; it never had any organizational documents; never kept a system of checks and balances; and never kept written records of work performed for customers.
ACER appeared to exist for the purpose of allowing Brenda Cook to use it as a conduit for the money she was embezzling.
(Doc. #38 at 1-2) (Citations omitted).
{¶ 8} In directing a verdict for Mr. Cook at trial on the conversion claim, however, the trial court orally reasoned:
On the conversion claim, the Court would find that the evidence clearly shows that Brenda Cook committed criminal and civil violations in her embezzlement of money from Vienna Beauty Products.
The evidence does not show Mr. Cook directly participated in taking the money or even ask where the money was coming from which nevertheless permitted him to do his construction. The evidence does show
he benefitted from the increased funds flowing into the ACER account because ACER paid his personal credit card bills. The question is was that ACER money or Vienna money he spent because the money was comingled apparently by Ms. Cook in this one lump account. While the Court has deep suspicions about the extent of Mr. Cook‘s knowledge about this entire scenario it‘s not based upon the evidence. I‘m afraid it‘s based upon the Court‘s own personal experience of human events.
However, the Court must find that the Plaintiff has not established by a preponderance of the evidence that Roderick Cook converted the funds himself from Vienna nor does it show he signed any of the forged checks or did anything else which would allow the Court to infer that he did have direct knowledge and was actually participating in the conversion.
Therefore, the Defendant‘s motion for directed verdict as to Roderick Cook is granted.
(Doc. #48 at 44-45).
{¶ 9} The trial court reiterated its findings in a final judgment entry, stating:
This Court found that the Defendant Roderick Cook did not directly participate in the embezzlement of Plaintiff‘s money and that Defendant Roderick Cook did not inquire of Defendant Brenda Cook as to where the embezzled funds, which facilitated his construction work, had come from. This Court found that Roderick Cook benefitted from Plaintiff‘s funds going into his business account in the name of Accurate Construction Equipment
Repair, LLC because the business account was used to pay Roderick Cook‘s personal credit card bills. This Court found that embezzled funds were commingled by Defendant Brenda Cook into the single business account in the name of Accurate Construction Equipment Repair, LLC. While this Court is deeply suspicious as to Roderick Cook‘s knowledge of Brenda Cook‘s activities, this Court found that Plaintiff had not established by a preponderance of the evidence that Roderick Cook actually converted Plaintiff‘s funds himself, did not endorse any of the forged checks or otherwise do anything which would allow an inference that Defendant Roderick Cook had direct knowledge of and was actually participating in the conversion of Plaintiff‘s money. According, this Court finds that Roderick Cook is entitled to judgment on both civil conspiracy and conversion.
(Doc. #42 at 2).
{¶ 10} On appeal, Vienna asserts that Mr. Cook benefitted from the checks Mrs. Cook converted and placed in ACER‘s bank account. Vienna argues that he is liable for conversion due to the unlawful conduct of Mrs. Cook, ACER‘s agent, particularly where he provided no oversight or supervision and turned a blind eye toward her activities with respect to ACER. Under these circumstances, Vienna contends it was not required to prove Mr. Cook‘s actual knowledge of Mrs. Cook‘s conversion. For his part, Mr. Cook claims he cannot be held liable for conversion where he did not steal any checks and had no knowledge of his wife‘s criminal activity. Mr. Cook additionally claims Vienna failed to establish with any degree of certainty that he personally benefitted from the stolen checks, which Mrs. Cook deposited and co-mingled with ACER‘s own legitimate funds.
{¶ 12} Upon review, we see no error in the trial court‘s entry of a directed verdict in favor of Mr. Cook personally. “A cause of action for conversion is founded upon ‘an intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel.” (Emphasis added). Hodges v. Byars, 2d Dist. Montgomery No. 12839, 1992 WL 113027, *4 (May 28, 1992), quoting Restatement of the Law 2d, Torts (1965) 431, Section 222A. “Wrongful purpose or intent is not a necessary element of conversion; thus, a defendant is liable even if he is acting under a misapprehension or mistake.” Gordon v. Morris, 2d Dist. Greene No. 2000-CA-69, 2001 WL 85797, *4 (Feb. 2, 2001). The only intent required is the intent to exercise dominion or control over the property. Hodges at *4.
{¶ 13} Here we see no evidence that Mr. Cook, himself, ever intentionally exercised dominion or control over the checks Mrs. Cook stole from Vienna. The record reflects that she stole the checks in her capacity as a bookkeeper for Vienna. She then
{¶ 14} The record supports the trial court‘s conclusion. Mr. Cook testified at trial that his wife conducted all of their personal and business-related financial transactions. (Trial Tr. at 9; see also Mr. Cook depo. at 139). When money came into the ACER account, Mrs. Cook did “what she wanted with it” or “did with it as she pleased.” (Trial Tr. at 9; Mr. Cook depo. at 35). Mr. Cook never looked at bank statements or any other financial records. (Trial Tr. at 8). Although the Cooks both had business and personal credit card bills that were paid out of the ACER account, Mrs. Cook was the one responsible for issuing checks to pay the bills. (Id. at 15).
{¶ 15} In short, the record supports a determination that Mrs. Cook, acting without Mr. Cook‘s knowledge, stole checks from Vienna, deposited the checks in ACER‘s business account, and then withdrew money to pay various expenses. On these facts, Vienna failed to prove, by the preponderance of the evidence, that Mr. Cook had knowledge of his wife‘s actions, that he personally exercised dominion or control over Vienna‘s checks or the proceeds therefrom, or that he otherwise participated in her conversion. Although Mrs. Cook placed the stolen checks into a business account over
{¶ 16} In reaching the foregoing conclusion, we reject Vienna‘s suggestion that Mr. Cook is liable for conversion simply because he “benefitted” from Mrs. Cook‘s theft of the checks. At least one Ohio appellate court correctly has recognized that “benefit is not an element” of a conversion claim. Keybank Natl. Assoc. v. Guarnieri & Secrest, PLL, 7th Dist. Columbiana No. 07 CO 46, 2008-Ohio-6362, ¶ 16. Therefore, with regard to Mr. Cook‘s liability for conversion, whether he “benefitted” from his wife‘s misconduct is “irrelevant” to Vienna‘s conversion claim.3 This is particularly true in the absence of evidence that he even knew about her theft of the checks.
{¶ 17} Finally, we are unpersuaded by Vienna‘s claim that Mr. Cook is personally liable for conversion based on his status as the sole owner of ACER, his incorporated construction company. In support of this proposition, Vienna relies on the following language from Schafer v. RMS Realty, 138 Ohio App.3d 244, 741 N.E.2d 155 (2d Dist. 2000):
“* * * All acts and contracts of an agent done or made within the discharge of his duties, and within the scope of his authority, whether that authority is express, implied, or apparent, are obligatory upon the principal, and no ratification or assent on the latter‘s part is necessary to give them validity. * * * The principal is always liable to third persons for misfeasances and the omission of duty of his agent, in all cases within the scope of his agency, equally as for acts of his own although the agent himself is liable for positive wrongful acts and misfeasances committed while acting as agent.”
Id. at 292, quoting Foust v. Valleybrook Realty Co., 4 Ohio App.3d 164, 446 N.E.2d 1122 (6th Dist. 1981).
{¶ 18} Vienna‘s argument is that Mrs. Cook was a bookkeeper agent of her husband‘s construction company, ACER. Therefore, Vienna argues that he is personally liable for her conversion activity, which it claims was done within the scope of her authority as ACER‘s agent. We disagree. Notably, Schafer involved claims brought against a partnership and its partners for converting another partner‘s interest in the partnership. On this issue, the members of the partnership, as principals, were found liable for the acts of their authorized agent, who was also a “de facto partner.” Schafer at 292.
{¶ 19} Unlike Schafer, Mr. Cook‘s construction company is not a partnership. It is a limited liability corporation. (Mr. Cook depo. at 28-30). For purposes of the agent-principal analysis in Schafer, supra, we believe the relevant potentially-liable party when a corporation is involved is the corporation itself, not its sole shareholder, at least absent
{¶ 21} New Bremen bears no similarity to Vienna‘s argument regarding Mr. Cook‘s personal liability, as opposed to ACER‘s liability, based on the actions of his wife. Even setting aside the contract-tort distinction drawn in New Bremen, Vienna‘s assignment of error is not seeking to hold ACER liable for conversion on a theory that Mrs. Cook, the bookkeeper agent of ACER, and Mrs. Cook, the private tortfeasor, necessarily had the same knowledge regarding her conversion of Vienna‘s funds into ACER‘s account. If that were the argument under Vienna‘s assignment of error on appeal, New Bremen would bear some similarity to the facts before us. But it is not. Rather, Vienna argues in its appeal that because Mrs. Cook was ACER‘s sole bookkeeper agent, her knowledge regarding her tortious activity necessarily is imputed to Mr. Cook personally. We do not believe a fair reading of New Bremen supports this conclusion, which is contrary to our analysis above.
{¶ 22} For the foregoing reasons, we overrule Vienna‘s sole assignment of error alleging that the trial court erred in entering a directed verdict for Mr. Cook personally on Vienna‘s conversion claim.
{¶ 23} We turn next to ACER‘s cross-appeal from the trial court‘s entry of summary judgment against it on Vienna‘s conversion claim. ACER asserts that it is not liable because Mrs. Cook was not acting as its agent when she “laundered the stolen money” through its bank account. More specifically, ACER argues:
* * * The stolen assets were never entered into the books of ACER. [Mrs.] Cook‘s theft of the funds and laundering of the funds through the ACER account had no relevance or benefit to the operation of ACER. While
there has been speculation that ACER benefitted from the comingling of the funds, no evidence was submitted to substantiate such a theory. Vienna Beauty submitted no evidence that attempted to segregate or account for which funds, if any, benefitted ACER. The trial court also erred by holding ACER liable for the entire amount stolen by [Mrs.] Cook. At best, ACER would be liable for the amount that [it] actually benefitted from [Mrs.] Cook‘s conduct. However, ACER is not liable for the intentional and criminal acts of its agent when such conduct was not within the scope of her authority or calculated to promote the business of ACER.
(Brief of cross-appellant ACER at 13).
{¶ 24} Upon review, we see no error in finding ACER liable for conversion based on Mrs. Cook‘s actions. The record reflects that Mr. Cook was the sole owner and officer of ACER. His wife was the only other person affiliated with the company. Mr. Cook delegated to Mrs. Cook “all” authority to serve as an agent of the company and to perform all bookkeeping tasks, which included receiving and issuing bills and checks. (Doc. #48, Trial Tr. at 15, 25). The trial court correctly found, based on the evidence presented, that Mr. Cook, in his capacity as sole owner and officer of ACER, “gave [Mrs.] Cook full, unchecked authority to run it.” (Doc. #38 at 2; Mrs. Cook depo. at 28). Mrs. Cook, alone, endorsed the fraudulent checks drawn on Vienna‘s account and admittedly deposited all of the stolen funds into ACER‘s one-and-only bank account. (Doc. # 48, Trial Tr. at 16, 31, 39; Mrs. Cook depo. at 14-15). She also admittedly signed and deposited into ACER‘s business account all of Vienna‘s customer‘s checks that she intercepted before changing the payee from Vienna to ACER. (Doc. #48, Trial Tr. at 34; Mr. Cook depo. at 14-15, 19).
{¶ 26} Based on the reasoning set forth above, the judgment of the Miami County Common Pleas Court is affirmed.
Copies mailed to:
Barry W. Mancz
Cynthia L. Westwood
Robert J. Huffman, Jr.
Andrew R. Pratt
Miami County Common Pleas Court