Designers Choice, Inc. v. Attractive Floorings, L.L.C. ( 2020 )

[Cite as Designers Choice, Inc. v. Attractive Floorings, L.L.C., 2020-Ohio-4617.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF LORAIN )
DESIGNERS CHOICE, INC. C.A. No. 19CA011576
Appellant
v. APPEAL FROM JUDGMENT
ENTERED IN THE
ATTRACTIVE FLOORINGS, LLC, et al. COURT OF COMMON PLEAS
COUNTY OF LORAIN, OHIO
Appellees CASE No. 15CV188007
DECISION AND JOURNAL ENTRY
Dated: September 28, 2020
HENSAL, Judge.
{¶1} Designers Choice, Inc. appeals the denial of its motion for directed verdict, motion
to reopen the judgment, and motion for new trial in the Lorain County Court of Common Pleas.
For the following reasons, this Court affirms in part and reverses in part.
I.
{¶2} Designers Choice and Attractive Floorings, LLC were both in the floor covering
business. Interested in expanding its business, Attractive Floorings entered into an asset purchase
agreement with Designers Choice in 2012. Under the terms of the agreement, Attractive Floorings
acquired all of the assets of Designers Choice, including its inventory, furniture, fixtures,
equipment, and all other tangible and intangible property. In exchange, Attractive Floorings
agreed to pay Designers Choice $355,000. Attractive Floorings signed a promissory note,
promising to pay Designers Choice $3,697.92 monthly until January 1, 2020, followed by the
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remainder of the principal. Attractive Floorings’ owner, Eric Moen, signed a guaranty of the
payments.
{¶3} Everything went well until 2015 when Mr. Moen suffered a series of health issues.
Unable to keep Attractive Floorings’ business going, he informed the owner of Designers Choice,
Jon Lilley, that he was going to have to declare bankruptcy. Sympathetic to Mr. Moen’s situation,
Mr. Lilley allegedly told him that, if he returned some of the equipment Attractive Floorings had
purchased and got up to date on a separate rental agreement he had signed with Mr. Lilley and his
mother, Mr. Lilley would forgive the balance remaining on the asset purchase agreement. Mr.
Moen complied with Mr. Lilley’s terms, but did not end up filing for bankruptcy because he was
able to sell one of his other locations. When Mr. Lilley learned that Mr. Moen did not file for
bankruptcy, had sold one of his locations for a substantial amount, and that Attractive Floorings
had run up a large balance on Designers Choice’s line of credit at various merchants, he demanded
payment of the balance of the asset purchase agreement and accelerated the promissory note.
{¶4} When Mr. Moen did not pay the rest of the balance owed, Designers Choice sued
Attractive Floorings for breach of contract and to collect on the note. It also sued Mr. Moen under
his guaranty. Attractive Floorings and Mr. Moen counterclaimed, alleging that the parties had
orally amended the agreement. At trial, Designers Choice sought $200,885.28, which it claimed
was the balance of the promissory note. Following the presentation of the evidence, it moved for
a directed verdict, which the trial court denied. The jury found in favor of Designers Choice, but
only awarded it $50,000 in damages. The trial court subsequently entered a judgment in favor of
Designers Choice for $50,000 without interest. Designers Choice moved to reopen the judgment
and for a new trial, seeking the entire $200,885 plus prejudgment and post-judgment interest, but
the trial court denied its motions. Designers Choice has appealed, assigning five errors.
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II.
ASSIGNMENT OF ERROR I
THE TRIAL COURT ERRED WHEN IT DENIED DESIGNERS CHOICE,
INC.’S MOTION FOR A DIRECTED VERDICT.
{¶5} In its first assignment of error, Designers Choice argues that the trial court
incorrectly denied the motion for directed verdict that it made at the close of Attractive Floorings’
case. A motion for directed verdict tests the legal sufficiency of the evidence supporting a claim.
Ruta v. Breckenridge-Remy Co., 69 Ohio St.2d 66, 68 (1982). Consequently, a motion for directed
verdict can only be granted when, having construed the evidence most strongly in favor of the
nonmoving party, the trial court concludes that reasonable minds could only reach a conclusion
upon the evidence submitted that is adverse to the nonmoving party. Civ.R. 50(A)(4). If there is
substantial and competent evidence supporting the position of the nonmoving party and reasonable
minds might reach different conclusions, a trial court must deny the motion. Hawkins v. Ivy, 50
Ohio St.2d 114, 115 (1977). “The ‘reasonable minds’ test mandated by Civ.R. 50(A)(4) requires
the court to discern only whether there exists any evidence of substantive probative value that
favors the position of the nonmoving party.” Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur.
Co., 95 Ohio St.3d 512, 2002-Ohio-2842, ¶ 3. This determination does not involve either weighing
the evidence or evaluating the credibility of witnesses. Wagner v. Roche Laboratories, 77 Ohio
St.3d 116, 119 (1996), quoting Ruta at 68-69. Because a motion for directed verdict presents a
question of law, this Court’s review is de novo. Goodyear at ¶ 4.
{¶6} Initially, Designers Choice argues that the trial court should have granted it a
directed verdict on Attractive Floorings’ claim that there had been an oral modification of the asset
purchase agreement. We conclude, however, that this argument was rendered moot by the jury’s
verdict in its favor. Attractive Floorings acknowledged at the start of the trial that its counterclaim
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was essentially for setoff. The court instructed the jury that, if it either found that Designers Choice
did not prove that Attractive Floorings breached the contracts or that Attractive Floorings proved
that Designers Choice agreed to waive the provision that modifications had to be in writing and
agreed to modify the agreement, it should enter a verdict for Attractive Floorings. The court
explained that the jury would enter a verdict for Attractive Floorings by writing “did not breach”
on the first verdict form. The jury, instead, found that Attractive Floorings “breached” the
agreement. Thus, in determining that Attractive Floorings breached the agreement, the jury
necessarily decided that there had not been an oral modification of the agreement.
{¶7} Designers Choice next argues that it was entitled to a directed verdict on Attractive
Floorings equitable estoppel and fraud claims. It also argues that it was entitled to a directed
verdict on Attractive Floorings’ argument that it had agreed to waive a clause in the agreement
that required all changes to be in writing. Specifically, Designers Choice argues that there was no
evidence that it waived the requirement that Mr. Moen had to purchase a life insurance policy that
had Designers Choice as its primary beneficiary or the requirement that Attractive Floorings was
responsible for paying any charges it made under its line of credit at the Edward R. Hart Company.
In light of the jury’s verdict, we conclude that these arguments are also moot. Accordingly,
because Designers Choice’s arguments concerning the trial court’s denial of its motion for directed
verdict are moot, its first assignment of error is overruled.
ASSIGNMENT OF ERROR II
THE TRIAL COURT ERRED WHEN IT DENIED DESIGNERS CHOICE,
INC.’S MOTION TO REOPEN THE JUDGMENTS AND ENTER JUDGMENTS
FOR THE AMOUNT OF THE LIQUIDATED DAMAGES.
{¶8} In its second assignment of error, Designers Choice argues that the trial court
incorrectly denied its motion for a judgment notwithstanding the verdict. Civil Rule 50(B)
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provides that, after a court enters judgment on a jury's verdict, a party may file a motion for
judgment notwithstanding the verdict in order to have the judgment set aside on grounds other than
the weight of the evidence. In ruling on such motions, the trial court applies the same test as a
motion for directed verdict. Osler v. City of Lorain, 28 Ohio St.3d 345, 247 (1986). “[T]his Court
reviews a trial court’s grant or denial of a judgment notwithstanding the verdict de novo.” Jackovic
v. Webb, 9th Dist. Summit No. 26555, 2013-Ohio-2520, ¶ 15.
{¶9} According to Designers Choice, the trial court should have granted its motion
because the evidence established that it was entitled to $200,885.28 for the breach of the
agreement. This Court has held, however, that a motion for judgment notwithstanding the verdict
is not an appropriate method of challenging the amount of a jury’s damages award. Desai v.
Franklin, 177 Ohio App.3d 679, 2008-Ohio-3957, ¶ 25 (9th Dist.), quoting Jemson v. Falls Village
Retirement Community, Ltd., 9th Dist. Summit No. 20845, 2002-Ohio-4155, ¶ 17. Rule 50(B)
“provides the means to challenge the jury’s verdict, not the jury’s award of damages.” Jemson at
¶ 17. We, therefore, conclude that the trial court did not err when it denied Designers Choice’s
motion for judgment notwithstanding the verdict. Designers Choice’s second assignment of error
is overruled.
ASSIGNMENT OF ERROR III
THE TRIAL COURT ERRED WHEN IT DENIED THE MOTION FOR A NEW
TRIAL ON DAMAGES.
{¶10} In its third assignment of error, Designers Choice argues that the trial court
incorrectly denied its motion for new trial under Civil Rule 59(A)(4) and (5). That rule provides
that “[a] new trial may be granted * * * on all or part of the issues upon * * * (4) [e]xcessive or
inadequate damages, appearing to have been given under the influence of passion or prejudice;
[or] (5) [e]rror in the amount of recovery, whether too large or too small, when the action is upon
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a contract * * *[.]” “Depending upon the basis of a motion for a new trial, this Court reviews the
trial court’s decision to grant or deny the motion under either a de novo or an abuse of discretion
standard of review.” Calame v. Treece, 9th Dist. Wayne No. 07CA0073, 2008-Ohio-4997, ¶ 13,
citing Rohde v. Farmer, 23 Ohio St.2d 82 (1970), paragraphs one and two of the syllabus. “[If]
the basis of the motion involves a question of law, the de novo standard of review applies, and
when the basis of the motion involves the determination of an issue left to the trial court’s
discretion, the abuse of discretion standard applies.” Dragway 42, L.L.C. v. Kokosing Constr. Co.,
Inc., 9th Dist. Wayne No. 09CA0073, 2010-Ohio-4657, ¶ 32.
{¶11} Designers Choice argues that the jury’s damages award was too small and appears
to have been given under the influence of passion or prejudice because its actual damages was the
“liquidated sum of $200,885.28.” Initially, we note that the Ohio Supreme Court has held that,
“[if] the parties have agreed on the amount of damages, ascertained by estimation and adjustment,
and have expressed this agreement in clear and unambiguous terms, the amount so fixed should
be treated as liquidated damages” provided certain conditions exist. Samson Sales, Inc. v.
Honeywell, Inc., 12 Ohio St.3d 27 (1984), syllabus. Neither the asset purchase agreement nor the
promissory note, however, had a provision concerning stipulated or liquidated damages.
{¶12} Under the terms of the agreement, Attractive Floorings agreed to pay Designers
Choice $355,000 to acquire “substantially all the assets of [Designers Choice], including
inventory, furniture, fixtures, equipment, and all other property owned by it and used in the
operation of the Business, both tangible and intangible * * *.” The agreement also provided that
the purchase price for the assets “shall be allocated in accordance with Exhibit B attached
hereto[.]” Exhibit B, however, was left blank, except for its title of “Allocation of Purchase
Price[.]”
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{¶13} Mr. Lilley admitted that Mr. Moen returned a tow motor and carpet cutting machine
that were part of the assets Attractive Floorings acquired from Designers Choice. He also admitted
that Mr. Moen “left all of the assets that were a part of the purchase agreement” when he closed
Attractive Floorings. Although Mr. Lilley alleged that the assets Attractive Floorings left behind
did not benefit Designers Choice, he admitted that he did not actually look at any of the equipment
or take an inventory.
{¶14} In ruling on the motion for new trial, the trial court determined that it was within
the province of the jury to set-off the value of the returned assets from the amount that Attractive
Floorings still owed under the purchase agreement. Designers Choice does not challenge that
determination in its appellate brief. The trial court also noted that the damages instruction broadly
directed the jury to decide the “amount of money that will reasonably compensate [Designers
Choice] for the actual dam[ages] * * * proximately caused by the conduct of [Attractive
Floorings].”
{¶15} Upon review of the record, we conclude that Designers Choice has not established
that the amount of its recovery was too small or that it was given under the influence of passion or
prejudice. The trial court, therefore, did not err when it denied Designers Choice’s motion for new
trial. Designers Choice’s third assignment of error is overruled.
ASSIGNMENT OF ERROR IV
THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT
SPECIFICALLY ORDERED THAT THE MONETARY JUDGMENT FOR
DESIGNERS CHOICE, INC. WILL NOT ACCRUE STATUTORY INTEREST.
{¶16} In its fourth assignment of error, Designers Choice argues that the trial court should
have awarded it post-judgment interest. It argues that, under Revised Code Section 1343.03, a
party receiving a definite money judgment is automatically entitled to post-judgment interest at
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the statutory rate. Attractive Floorings argues that because the agreement provided there would
be no interest, the trial court correctly determined that Designers Choice was not entitled to post-
judgment interest.
{¶17} Section 1343.01(A) provides that the parties to a promissory note “may stipulate
therein for the payment of interest upon the amount thereof at any rate not exceeding eight per cent
per annum payable annually * * *.” Section 1343.03(A) provides that, “[i]n cases other than those
provided for in section[ ] 1343.01 * * *,” “when money becomes due and payable upon any * * *
judgment[ ] * * * for the payment of money arising out of * * * a contract * * *, the creditor is
entitled to interest at the rate * * * determined pursuant to section 5703.47 * * *, unless a written
contract provides a different rate of interest in relation to the money * * *.” “Therefore, a judgment
creditor is entitled to a contractual interest rate instead of the statutory rate ‘when (1) the parties
have a written contract, and (2) that contract provides a rate of interest with respect to money that
becomes due and payable.’” John Soliday Fin. Group, LLC v. Stutzman, 9th Dist. Wayne No.
08CA0046, 2009-Ohio-2081, ¶ 7, quoting First Bank of Ohio v. Wigfield, 10th Dist. Franklin Nos.
07AP-561, 07AP-562, 2008-Ohio-1278, ¶ 20.
{¶18} The asset purchase agreement indicated that the purchase price was $355,000. It
did not have any language regarding interest rates. A separate promissory note, however, detailed
that there would be “no interest thereon” the $355,000, meaning that Attractive Floorings would
repay the balance by making 96 monthly payments of $3,697.92. In its complaint, Designers
Choice alleged that Attractive Floorings both failed to perform the asset purchase agreement and
the promissory note. The jury found that Attractive Floorings “breached [t]he Asset Purchase
Agreement and/or Promissory Note[.]”
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{¶19} Although the parties’ agreement provided that no interest would accrue on the
initial balance, allowing Attractive Floorings to space its payment of the $355,000 over 96 months,
there is no language in the contract concerning the rate of interest that would apply to amounts that
had become due and payable. The promissory note’s acceleration clause also does not provide
that no interest will apply if the entire amount remaining immediately becomes due and payable
or in the event of a judgment against Attractive Floorings. Accordingly, because the asset purchase
agreement and promissory note do not provide “a different rate of interest in relation to the money
that becomes due and payable,” we conclude that Designers Choice was entitled to post-judgment
interest at the statutory rate. R.C. 1343.03(A). Designers Choice’s fourth assignment of error is
sustained.
ASSIGNMENT OF ERROR V
THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT DID NOT
DETERMINE THE ACCRUAL DATE FOR PREJUDGMENT INTEREST AND
FAILED TO AWARD PREJUDGMENT INTEREST.
{¶20} In its fifth assignment of error, Designers Choice argues that the trial court
incorrectly determined that it was not entitled to prejudgment interest. Section 1343.03(A)
“‘establishes interest rates for both prejudgment and post-judgment interest’ in actions based on
contract.” Rutledge v. Lilley, 9th Dist. Lorain No. 09CA009691, 2010-Ohio-2275, ¶ 10, quoting
Stutzman, 2009-Ohio-2081, at ¶ 7. As previously noted, Section 1343.03(A) provides that, “when
money becomes due and payable upon any * * * note, * * * the creditor is entitled to interest at
the rate per annum determined pursuant to section 5703.47 of the Revised Code, unless a written
contract provides a different rate of interest in relation to the money that becomes due and payable
* * *.” Thus, “[f]or entitlement to a rate different than the statutory rate of interest to be charged,
R.C. 1343.03(A) sets forth two requisites: (1) there must be a written contract between the parties,
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and (2) the contract must provide a rate of interest with respect to money that becomes due and
payable.” Yager Materials, Inc. v. Marietta Indus. Ents., Inc., 116 Ohio App.3d 233, 235-236 (4th
Dist.1996). This Court reviews a challenge to the rate of interest de novo. Kulton v. Hoffer, 9th
Dist. Summit No. 24738, 2009-Ohio-5943, ¶ 6.
{¶21} The asset purchase agreement and promissory note provide that no interest will
accrue on the original balance. They do not contain a provision regarding the interest that will be
charged to amounts that have become due and payable. Attractive Floorings argues that the
agreement could have provided that there would be interest in the event of a default and that,
because it did not, no interest applies. Under Section 1343.03(A), however, the default rule is that
prejudgment interest always applies, unless the contract specifically provides otherwise.
{¶22} Upon review of the record, we conclude that Designers Choice was entitled to
prejudgment interest on its damage award. Designers Choice’s fifth assignment of error is
sustained.
III.
{¶23} Designers Choice’s first, second, and third assignments of error are overruled. Its
fourth and fifth assignments of error are sustained. The judgment of the Lorain County Court of
Common Pleas is affirmed in part and reversed in part, and this matter is remanded for proceedings
consistent with this decision.
Judgment affirmed in part,
reversed in part,
and cause remanded.
There were reasonable grounds for this appeal.
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We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Lorain, State of Ohio, to carry this judgment into execution. A certified copy of
this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period
for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to
mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the
docket, pursuant to App.R. 30.
Costs taxed equally to both parties.
JENNIFER HENSAL
FOR THE COURT
CALLAHAN, P. J.
TEODOSIO, J.
CONCUR.
APPEARANCES:
MARK E. STEPHENSON, Attorney at Law, for Appellant.
GEOFFREY R. SMITH, Attorney at Law, for Appellees.