AEP Energy, Inc. v. Vemulapalli , 2018 Ohio 107 ( 2018 )

[Cite as AEP Energy, Inc. v. Vemulapalli, 2018-Ohio-107.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
AEP ENERGY, INC. :
:
Plaintiff-Appellee : C.A. CASE NO. 027568
:
v. : T.C. NO. 2016-CV-1123
:
SASIKALA VEMULAPALLI, et al. : (Civil Appeal from
: Common Pleas Court)
Defendant-Appellant :
:
...........
OPINION
Rendered on the 12th day of January, 2018.
...........
ELIZABETH L. MOYO, Atty. Reg. No. 0081051 and ALLEN T. CARTER, Atty. Reg. No.
0085393, Porter Wright Morris & Arthur, LLP, 41 S. High Street, Columbus, Ohio 43215
Attorneys for Plaintiff-Appellee
CHRISTOPHER J. PAGAN, Atty. Reg. No. 0062751, 1501 First Avenue, Middletown,
Ohio 45044
Attorney for Defendants-Appellants
.............
DONOVAN, J.
{¶ 1} This matter is before the Court on the May 3, 2017 Notice of Appeal of
Sasikala Vemulapalli, and Moraine Inn, LLC. (together, “Defendants”). Defendants
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appeal from the April 5, 2017 decision of the trial court overruling their Civ.R. 60(B) motion
for relief from judgment. Defendants filed the motion for relief after the trial court granted
default judgment in favor of AEP Energy, Inc. (“AEP”) in the amount of $66,931.26. We
hereby affirm the judgment of the trial court.
{¶ 2} AEP filed a complaint against Vemulapalli and 2455 Dryden LLC on
February 29, 2016. The complaint provides that AEP provided retail electric supply and
related services to Vemulapalli, who owned and operated the Moraine Inn & Suites,
located at 2455 Dryden Road, and that 2455 Dryden LLC owned the real property where
the Inn is located. According to the complaint, Vemulapalli’s manager signed a written
contract for the services in August 2014, pursuant to which AEP agreed to provide, and
Vemulapalli agreed to pay for, electric supply. A copy of the August 21, 2014 contract is
attached to the complaint, and it identifies Vemulapalli as “Customer” and is signed by “A.
Taylor,” who is identified as “Manager.” The complaint provides that copies of AEP’s
pertinent electronic billing and payment data are also attached.
{¶ 3} The complaint provides that “under the terms of the Agreement, ‘Later
payments shall incur interest charges at a rate of interest equal to a per annum rate of
eighteen percent (18%) or the maximum allowed under applicable law, whichever is less.
* * * Customer shall be liable for all costs incurred by AEP Energy, including attorneys’
fees, for collections on accounts greater than thirty (30) calendar days past due.’ ” AEP
alleged that Vemulapalli terminated the agreement in August 2015, 24 months prior to the
end of its term. According to the complaint, AEP sent Vemulapalli a termination statement,
which “sets forth the early termination fees, comprised of AEP Energy’s lost margins and
termination costs, calculated pursuant to Section X(A) of the Agreement.” A copy of the
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termination statement is attached to the complaint. The complaint provides that as of
February 6, 2016, the unpaid balance of $44,051.49 is due and owing, “exclusive of
additional late payment interest after such date and costs of collection, including but not
limited to attorneys’ fees and costs.”
{¶ 4} On April 20, 2016, Vemulapalli and 2455 Dryden LLC filed a motion to
dismiss, pursuant to Civ.R. 12(B)(6), asserting in part that AEP’s “claims for breach of
contract and related claims cannot lie due to the operation of the statute of frauds,” that
AEP “cannot state a claim for relief sounding in quasi contract when a contract exists,”
and that AEP “has failed to name indispensable parties to this action pursuant to Civ.R.
12(B)(7),” namely Manager Amber Taylor.
{¶ 5} On April 29, 2016, AEP filed an amended complaint, adding Moraine Inn,
LLC, as a party and asserting that “Moraine Inn, LLC operates Moraine Inn & Suites.”
According to the amended complaint, “Moraine Inn, LLC, through its owner and operator
Vemulapalli and through its manager Amber Taylor, had knowledge of the terms of the
agreement between Vemulapalli and AEP Energy, and accepted and paid for Electric
Supply under the Agreement.”
{¶ 6} On May 25, 2016, the trial court overruled in part and granted in part the
motion to dismiss. The court noted that “because the Agreement is in writing, the time
requirement set forth in the Statute of Frauds does not apply.” The court noted that while
AEP failed to name Moraine Inn LLC in its original complaint, AEP added Moraine Inn
LLC as a party in its amended complaint. The court noted that both “parties agree that
Amber Taylor, the individual who signed the Agreement, was the manager” of Moraine
Inn & Suites and “therefore, the Court finds that she likely had the authority to sign
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documents” on Moraine Inn, LLC’s behalf. The court noted that “there is no evidence
currently before the Court to establish that Ms. Taylor was not authorized to sign the
Agreement, as manager of [Moraine Inn & Suites]. Therefore, the Court finds Plaintiff’s
arguments with respect to the Statute of Frauds to be unpersuasive.” The court further
found that, “because Plaintiff has raised a claim relating to the breach of a written contract,
its claim for quantum meruit must be dismissed.” Regarding Appellant’s assertion that
AEP failed to name indispensable parties, the court concluded that because Taylor
managed Moraine Inn and Suites, “and possibly acting on its behalf when she signed the
Agreement, the Court finds that [AEP] sufficiently remedied this aspect of Defendant’s
Motion to Dismiss by naming” Moraine Inn LLC.
{¶ 7} On June 2, 2016, AEP filed a motion for reconsideration of the May 25, 2016
decision, asserting that because AEP “timely amended its complaint as a matter of
course, the Court should not have addressed the merits of Defendants’ Motion to
Dismiss.” AEP asserted that a “12(B) motion * * * is not the appropriate stage at which
to limit a party’s pursuit of alternative theories.” Finally, AEP asserted that it “did not
bring a contract claim” against 2455 Dryden, LLC, so the Court’s decision had the effect
of dismissing that Defendant.
{¶ 8} On June 15, 2016, Defendants filed a motion for additional time to answer
the amended complaint, with a “proposed Answer” attached.
{¶ 9} On June 20, 2016, the trial court overruled the motion to reconsider, noting
that the “parties are entitled to raise alternative claims,” and further noting that “the parties
to the present action agree that a written contract exists.” The court noted that “all of
Plaintiff’s claims are based upon the written contract at issue, and Plaintiff did not argue
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or demonstrate that its claim for quantum meruit was based upon a separate transaction,
outside of the written contract between the parties.” According to the court, the “fact that
[AEP] drafted its Amended Complaint in a way that may require the dismissal of
Defendant 2455 Dryden, LLC is not sufficient grounds for reconsideration of the Court’s
original ruling. Therefore, the May 25, 2016 Decision shall stand.”
{¶ 10} On June 20, 2016, the court issued an “Entry Granting Motion for
Additional Time to Answer Plaintiff’s Amended Complaint,” giving Defendants until June
23, 2016 to file an Answer. On June 28, 2016, the court issued a “Notice (Default),”
noting that Appellants were “in default for answer or appearance.” The Notice provides
that failure to respond within 14 days “may result in the administrative dismissal of this
action.” On the same day Defendants filed an answer, along with a “Motion Deeming
Answer Filed.” On July 8, 2016, the court issued an entry deeming the answer timely
filed.
{¶ 11} On July 12, 2016, the court scheduled a pretrial scheduling conference for
July 29, 2016, and on August 4, 2016 it issued a final pretrial order. On August 26, 2016,
AEP moved the court for an extension of the summary judgment deadline from
September 2, 2016 to October 3, 2016, noting that discovery was served on Defendants
on August 3, 2016, with responses due on August 31, 2016. AEP asserted that their
“ability to prepare for the September 2, 2016 deadline has been hampered by Defendants’
multiple requests to extend their Answer deadline.” The court granted the motion on
September 1, 2016, extending the summary judgment deadline until October 4, 2016.
{¶ 12} On September 20, 2016, a “Motion of Plaintiff AEP Energy, Inc. for Status
Conference Regarding Discovery Impasse and for Appropriate Sanctions” was filed.
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The motion provides that Defendants:
1. Refused to work with AEP Energy’s counsel to schedule Defendants’
depositions;
2. Refused to appear at properly noticed depositions;
3. Missed the deadline to respond and not otherwise provided AEP Energy
with so much as partial responses to AEP Energy’s requests for production
and interrogatories; and
4. Served only unsigned responses to AEP Energy’s requests for
admissions.
Attached to the motion is the Affidavit of Allen T. Carter, counsel for AEP, AEP’s discovery
requests to Defendants, and email correspondence between counsels for the parties.
{¶ 13} The court ordered a telephone status conference on September 26, 2016.
On that date, counsel for Defendants filed a “Motion to Withdraw as Counsel and Motion
to Continue Deadlines.” The court scheduled a hearing on the motion for October 3,
2016.
{¶ 14} On September 30, 2016, AEP filed a motion to compel discovery and for an
order deeming as admitted the matters contained in AEP’s requests for admissions.
Attached is the affidavit of Allen T. Carter.
{¶ 15} On October 11, 2016, the court issued a “Proposed Entry and Order” that
provides:
(1) Defendants’ counsels’ Motion to Withdraw is GRANTED. Defendants
have until November 3, 2016, for new counsel to enter an appearance on
the record in this case.
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(2) Plaintiff’s Motion to Compel is GRANTED. Defendants have until
October 17, 2016 to serve responses, verified by each party and signed by
counsel or the party to whom the requests are directed to Plaintiff’s
interrogatories and document requests. Defendants must appear for the
depositions properly noticed to take place on October 20, 2016, or on a date
that is otherwise agreeable to Plaintiff’s counsel. The matters in Plaintiff’s
requests for admissions to the parties are deemed admitted.
{¶ 16} Also on October 11, 2016, an “Entry Granting Motion to Withdraw as
Counsel and Motion to Continue Deadlines” was filed, which provides:
***
Therefore, IT IS SO ORDERED, that Joseph C. Lucas and John R. Glankler
and hereby noted [sic] was withdrawn as counsel of record for the above
named Defendants.
All future dates as established by the Court’s Final Pre-Trial Order of August
4, 2016, including the Chambers Final Pre-Trial Conference of November
17, 2016 and the Trial date of December 1, 2016 are hereby vacated.
Defendant’s [sic] shall have thirty (30) days to obtain replacement counsel.
{¶ 17} On November 22, 2016, AEP moved for default judgment against
Defendants, asserting that Appellants “failed to comply with this Court’s October 11, 2016
Order compelling Defendants to answer discovery, appear for depositions, and retain new
counsel. Defendants have flaunted this Court’s Orders and failed to defend this case
warranting default judgment to be entered against them.” AEP asserted as follows:
* * * Defendants have repeatedly, without justification, refused to
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comply with even the basic discovery requirements. Instead of issuing
sanctions immediately pursuant to Ohio Civ.R. 37(D), this Court gave
Defendants the opportunity to comply with discovery – without sanction –
by issuing its Order compelling Defendants’ compliance with Plaintiff’s
discovery requests and ordering Defendants to appear for their depositions.
Defendants willfully ignored the second chance given to them by the Court,
and have not participated at all in the case since the Court’s October 11,
2016 Order.
{¶ 18} Attached to the motion are the affidavits of Allen T. Carter and Kevin
Weber, Vice President of Operations for AEP. Carter’s affidavit provides that on August
3, 2016, he served AEP’s first set of interrogatories and requests for production of
documents, and requests for admissions to Vemulapalli and to Moraine Inn, LLC
(“discovery requests”), and a cover letter requesting depositions in the third week of
September, 2016. Carter averred that responses to the discovery requests were due
August 31, 2016. According to Carter, “Defendants did not provide me with dates for
Defendants’ depositions or otherwise respond to my request for those dates.”
{¶ 19} Carter averred that on August 25, 2016, he “provided Defendants’ former
counsel with an advance copy of an unopposed motion to extend the summary judgment
deadline that I intended to file on AEP Energy’s behalf.” Carter averred that he “sought
permission from counsel to stylize the motion as unopposed and indicated to counsel that
the length of my requested extension was based on my expectation that I would receive
timely responses to the Discovery Requests. Defendants did not reply or otherwise
respond to my August 25, 2016 correspondence.” Carter averred that on August 26,
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2016, he filed the motion for extension of the summary judgment deadline “without
stylizing it as unopposed.”
{¶ 20} Carter averred that on August 31, 2016, Defendants “served uncaptioned,
unsigned responses to AEP Energy’s requests for admissions, and did not otherwise
respond to the Discovery Requests.” He asserted that former counsel for Defendants
“indicated in the email attaching those unsigned responses that ‘Responses to the other
parts should be coming by the end of this week.’ ” Carter averred that he renewed his
inquiry regarding any opposition by the Defendants to the motion to extend the summary
judgment deadline, and “Defendants indicated that they did not intend to oppose it.”
{¶ 21} Carter averred that Defendants did not request an extension for their
responses, and that the court extended the summary judgment deadline to October 4,
2016. Carter averred that “Defendants failed to serve any responses to AEP Energy’s
requests for production and interrogatories and also failed to serve signed responses to
AEP Energy’s requests for admissions.” Carter further averred as follows:
On September 8, 2016, I served a letter via email and regular mail
on the Defendants requesting that they provide their responses to AEP
Energy’s Discovery Requests by September 9, 2016. The letter also
attached deposition notices for Defendants to appear in the Dayton, Ohio
office of Porter Wright Morris & Arthur, LLP, on September 15, 2016, and
made clear that I would work with Defendants to find a convenient date if
Defendants were not available on the notice date. * * *
{¶ 22} Carter averred that Defendants did not respond to his September 8, 2016
letter or email or communicate with him in any way between August 31, 2016 and
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September 14, 2016, nor object to the deposition notices. Carter averred that on
September 14, 2016, he “informed Defendants’ former counsel that because Defendants
had failed to provide responses to the Discovery Requests, AEP Energy intended to move
forward with the depositions as noticed but would have to keep the depositions open.”
Carter averred that on the same day, Defendants’ former counsel “informed me that he
had not been able to reach his clients regarding the Discovery Requests or the
depositions, and therefore, his clients would not appear at the depositions the next
morning. * * *.”
{¶ 23} Carter averred that at the September 26, 2016 status conference,
Defendants’ former counsel advised Carter and the court that “he had moved to withdraw
as counsel of record * * * due to irreconcilable differences with the Defendants.” He
averred that the court’s “October 11, 2016 Order required Defendants to (1) attend
depositions to take place on October 20, 2016; (2) serve responses to Plaintiff’s
interrogatories and documents requested by October 17, 2016; and (3) have new counsel
enter an appearance on the record in this case by November 3, 2016.” He averred that
on October 3, 2016, just before the hearing on the motions to withdraw and compel,
“Defendants, through a non-lawyer representative, provided incomplete answers to
Plaintiff’s discovery requests.” Carter averred that Vemulapalli’s “responses were not
properly verified by her,” and that Defendants “failed to produce a single document.”
Carter averred that Defendants failed to appear for depositions as ordered on October
20, 2016, and that replacement counsel has failed to appear on the record or contact
AEP.
{¶ 24} Weber averred that he is responsible for and supervises the billing of AEP’s
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books of account for all AEP customers. He averred that AEP and Defendants entered
into an agreement that “was signed executed and delivered by the Defendants’ manager
Amber Taylor on August 14, 2014.” According to Weber, the amount due to AEP is
$49,742.38, exclusive of attorneys’ fees and costs. Weber averred, “I understand from
AEP Energy’s counsel that attorneys’ fees and costs accrued to date total $17,188.88
(one-third contingent collection fee of $16,580.79 + billed expenses of $608.09).” Weber
averred that AEP sought judgment in the amount of $66,931.26.
{¶ 25} The court entered default judgment for the requested amount in favor of
AEP on December 12, 2016. The Entry provides as follows:
* * * Defendants have unfairly prejudiced AEP Energy’s ability to
reach judgment by repeatedly flaunting the Ohio Rules of Civil Procedure
and ignoring this Court’s orders. Defendants are in contempt of this
Court’s October 11, 2016 Order, having failed to engage in discovery and
having failed to appear for depositions at which they were ordered by this
court to appear. Defendants failed to cooperate with their counsel, and
when their counsel withdrew, Defendants failed to have new counsel appear
on the record. Defendants have failed to defend this case in any
meaningful way.
THEREFORE, Defendants are jointly and severally liable for the
amount of $66,931.26, representing all amounts due and owing under the
parties’ Electric Service Agreement, including attorneys’ fees and costs
arising thus far. AEP Energy is entitled to post-judgment interest at the
statutory rate, from this date forward, until this judgment is satisfied in full.
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AEP Energy may obtain, by submission of an ex parte affirmation,
supplemental judgment for any additional interest and costs of collection,
including, but not limited to, attorneys’ fees and costs and other charges
associated with this briefing and that may accrue. There is no just cause
for delay.
It is hereby ORDERED.
{¶ 26} Defendants did not file a direct appeal. Defendants filed their Civ.R 60(B)
motion for relief on February 17, 2017, along with a notice of appearance of counsel.
According to Defendants, they were “unable to obtain replacement counsel timely.” They
asserted that the default judgment “is unjust as it is based on an Agreement signed
fraudulently” and without authority. Defendants asserted that while they “may be
responsible for the reasonable value of electrical services utilized by Defendants’
business, the law will not hold corporations nor individuals to be bound by liquidated
damages provisions within a contract for which they were not signatory too [sic].”
Defendants assert that they “had no idea that [the] alleged Business ‘Manager’ changed
electric suppliers until after Plaintiff sought damages for cancellation of the Agreement.”
Defendants asserted that they “have a meritorious defense in that the alleged Agreement
in question was obtained fraudulently or alternatively was obtained by Plaintiff pursuant
to mistake or inadvertence.” Defendants asserted that their motion is timely filed, “less
than 90 days from the date of the default judgment.”
{¶ 27} On March 3, 2017, AEP opposed the motion. According to AEP,
“Defendants have not established a meritorious defense; at best, they have a claim
against a third party.” According to AEP, “Defendants have not sought relief in a timely
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manner; Defendants did not move for relief until AEP garnished funds, 66 days after
judgment.” AEP asserted that Defendants did not provide a basis for relief pursuant to
Civ.R. 60(B). AEP argued that first, “Defendants’ failure to participate in discovery, even
after this Court ordered Defendants to do so, was not ‘excusable neglect’ or any other
innocent mistake. * * * Flagrant disregard for a court’s order is a mistake, but not the kind
Civ.R. 60(B) will excuse.” AEP asserted that second, “Defendants failed to bring forward
any new evidence which due diligence could not have discovered.” According to AEP,
third, “Defendants have not pointed to any fraud, misrepresentation, or other misconduct
by Plaintiff, nor could they. To justify relief from judgment, the party seeking relief must
point to fraud, misrepresentations, or other misconduct committed by an adverse party.”
AEP asserted, “[f]ourth, the judgment has not been satisfied, released, or discharged.”
Finally, according to AEP, “[f]ifth, no other reason justifies relief from a judgment entered
because of Defendants’ unlawful refusal to follow the Court’s orders.”
{¶ 28} On March 7, 2017, Defendants filed a “Notice of Submitting Supplement to
Civil Rule 60B Motion.” Attached in part is Vemulapalli’s affidavit which provides that she
did not authorize Amber Taylor to negotiate, secure or sign any agreements with AEP on
her behalf. Vemulapalli further averred that she has “personal knowledge and belief that
Amber TAYLOR has been arrested, cited and convicted in Hamilton County, Green [sic]
County and other jurisdictions for fraud and similar matters. (Please see attached).”
Attached are police records relating to Taylor.
{¶ 29} On March 24, 2017, Defendants filed “Defendants’ Request to Supplement
its Previously Filed Motion Pursuant to Rule 60(B) filed on 2/17/17.” Therein they
asserted as follows:
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Defendants argue that Plaintiff knew that Defendants were not
interested in changing energy suppliers yet continued to persist. See
Affidavits of Nanda Kishor and Kimberly Woodard attached hereto.
Plaintiff persisted until ultimately Plaintiff was able to gain the signature of
an employee of Defendants who had no authority to bind Defendant to a
contract. Finally, Defendants argue that the individual who signed the
contract in question (Amber Taylor) has been pursued multiple times for
such fraudulent activity. See attached police reports. This matter should
be decided on the merits not on a default judgment. Defendants were
actively involved in the matter and unfortunately had to terminate their
previous counsel, which lead to said default judgment. * * *
{¶ 30} The attached affidavits of Kishor and Woodard provide that each of the
affiants were employed at Moraine Inn & Suites. Kishor averred that Vemulapallii “told all
working at the hotel to tell sales representatives that the hotel was not interested and the
[h]otel will keep (DPL) Dayton power and light as its energy supplier.” Both affiants
averred that they were “surprised when Vemulapalli told me that Amber Taylor signed a
contract with one of said energy reseller company because nobody was authorized to
sign any contract for the Hotel except Vemulapalli.”
{¶ 31} On March 31, 2017 AEP opposed Defendants’ motion to supplement its
Civ.R. 60(B) motion. AEP asserted that the court “entered judgment against the
Defendants because they refused to participate in discovery and failed to appear at their
Court-ordered depositions, not because they lacked counsel. Furthermore, Defendants
did not terminate their previous counsel.” AEP asserted that counsel for Defendants
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“moved to withdraw from representation and a hearing was held on the matter – a hearing
at which Defendants also failed to appear, despite being ordered to do so.” AEP
asserted as follows:
Defendants’ Request to Supplement, at best, attempts to mount a
defense, but it fails to do even that. Defendants have already admitted (1)
Exhibit A to the Complaint is a true and accurate copy of the Agreement; (2)
AEP Energy delivered electricity to the Defendants; (3) Defendants used
the electricity AEP delivered; (4) Amber Taylor, the signor of the Agreement,
was authorized by Defendants to perform certain responsibilities on
Defendants’ behalf, and (5) Defendants have made no payments to AEP
Energy, Inc. after May 29, 2015. * * * Defendants’ affidavits do nothing more
than attempt to contradict the fourth of those five admissions.
Nonetheless, Defendants have no meritorious explanation justifying their
receipt, use, and failure to pay for the electricity delivered under the
last four months of the Agreement, resulting in Defendants’ default and
termination of the Agreement.
{¶ 32} On April 4, 2017, “Defendants’ Motion to Withdraw the Previously Filed
Motion Pursuant to Civ.R. 60(B) filed on 2/17/17 and for leave to file the Attached Motion
Pursuant to Civ.R. 60(B) Instanter” was filed. The attached motion provides in part:
In reading the Entry dated December 12, 2016 * * *, it is apparent
that the main crux of the Default Judgment is due to alleged discovery
violations. Defendants’ previous counsel has executed an affidavit
indicating that the Request for Admissions were timely submitted and that
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Defendants were unable to timely appear for depositions based on the short
timeframe set by Plaintiff and the fact that Defendants were out of State. *
* * On October 20, 2016, Defendants served on Plaintiff Answers to
Interrogatories and Production of Documents. The same is admitted by
Plaintiff in the Motion for Default filed November 22, 2016, * * * at page 4,
although Plaintiff claims the same are incomplete answers and refers to the
same as “faux-discovery responses”. Thus, Defendants have not flaunted
the Rules of Civil Procedure and have in fact provided discovery responses
to Plaintiff’s Counsel. For this fact alone Defendants’ Motion pursuant to
Civ.R. 60(B) should be granted.
{¶ 33} The remainder of the new motion repeats Defendants’ previous arguments.
The attached affidavit of Attorney John Glanker provides in part:
***
2. Mr. Lucas and myself were the counsel of record for Ms. Vemulapalli on
the above captioned matter from April 12, 2016 until the Court granted our
Motion to Withdraw as Counsel on October 11, 2016;
***
4. I timely submitted the Plaintiff’s Request for Admissions to opposing
counsel;
5. I received a notice of deposition for my client on September 8th, 2016;
6. My client was out of State at that time and I was unable to reach her
regarding the deposition.
7. As a result of the short timeframe allotted by Plaintiff’s Counsel, my
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client did not receive sufficient notice to appear for said deposition.
{¶ 34} Also attached is Vemulapalli’s affidavit, which provides in part that she and
her husband did not give Amber Taylor authority to negotiate, secure or sign any
agreements with the Plaintiff. Finally, the affidavit of Kumar Vemulapalli is attached to
the new motion, which provides that he is Sasikala’s husband, and that he and Sasikala
did not authorize Taylor to execute the agreement with AEP.
{¶ 35} The court issued its decision the following day, and it provides that it
considered the Defendants’ initial motion of February 17, 2017, and AEP’s March 3, 2017
response. The court found as follows:
In their motion, Defendants rely on Civ.R. 60(B). In support,
Defendants only argue that they are entitled to relief based on possible
tortious conduct of a former employee. The fraud or misconduct purported
to support their motion only speaks to conduct which could amount to a
defense and does not support the Civ.R. 60(B)(3) requirement of “fraud
involved in the obtaining of judgment.” Thus, since Defendant relies only
on conduct which could amount to a defense, or a third party claim, and has
not proved any facts demonstrating that Plaintiff committed fraud or
misconduct in pursuing the action at hand, Civ.R. 60(B)(3) is inapplicable.
Furthermore, Defendant[s] [have] not demonstrated or argued that they
should be relieved from judgment because of their own mistake,
inadvertence, surprise, or excusable neglect as provided by Civ. R.
60(B)(1). The Court granted Defendants 30 days, until October 11, 2016,
to obtain new counsel. Defendants did not obtain new counsel until
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February 17, 2017, well past the 30 days granted by the Court. During the
time period when Defendants failed to retain new counsel, they also failed
to defend themselves in any manner, including failure to comply with the
discovery order. This failure of Defendants in following the Court’s order
cannot satisfy Civ.R. 60(B)(5) as “any other justifiable reason to allow relief
from judgment.” Defendant[s] did not demonstrate any other reason
justifying relief from the judgment as provided in Civ.R. 60(B)(1-5). Having
failed to satisfy the second GTE prong, Defendants’ motion must be denied.
{¶ 36} Defendants asserts a single assignment of error herein as follows:
THE TRIAL COURT ERRED IN OVERRULING THE 60(B) MOTION.
{¶ 37} According to Defendants, the trial court erred in concluding that they “failed
to prove fraud or misconduct in obtaining the judgment under 60(B)(3).” As a first issue
presented for review, Defendants assert that the trial court abused its discretion in
overruling the 60(B) motion because “AEP committed fraud, misconduct, and
misrepresentation in obtaining judgment for $16,580.79 in attorneys’ fees that were
precluded by Ohio law and unauthorized by the contract.” According to Defendants,
these “fees are not authorized in contracts between commercial parties; and the contract
itself was limited to fees ‘incurred’ by AEP – not a fixed percentage of the sum of liquidated
damages, late fees, and unpaid electric services.” Defendants argue that the “general
rule in Ohio prohibits cost-shifting for attorneys’ fees in commercial contracts,” and that
“the parties entered into a commercial contract for electrical services.” According to
Defendants, the “provision for fee-shifting appeared in small font. The provision
contemplated AEP’s ‘incurred’ costs, not a fixed percentage of the judgment obtained.”
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Defendants assert that “AEP concealed its method for calculating attorneys’ fees in the
contract, refused to respect Vemulapalli’s repeated rejections to enter into the contract,
and negotiated the fee-shifting provision with an unauthorized hotel agent, Amber Taylor,
who was stealing on the job.” Defendants argue that there “is no evidence of a free
negotiation between equally situated and sophisticated parties. The fee-shifting
provision was unlawful, and AEP committed misconduct by pursuing it.” Defendants
further assert that “the contract permitted AEP to recover the fees it incurred. Yet, the
Walker [sic] affidavit does not describe incurred fees. Instead, it states that Walker [sic]
understood from counsel that there was a one-third contingent collection fee, assumed
that the judgment amount was the collected amount, and claimed the attorneys’ fees were
therefore $16,580.79.” Defendants argue that “AEP committed misconduct by
misrepresenting to the court in default judgment that it was entitled to $16,580.79 in fees
that it never incurred. Actually, AEP added $16,580.79 to the judgment by passing on
the costs of a contingency-fee agreement to the Vemulapalli defendants.”
{¶ 38} As a second issue presented for review, Defendants assert that the trial
court abused its discretion in overruling their Civ.R. 60(B) motion because “AEP
committed fraud, misconduct, and misrepresentation in obtaining judgment for
$25,492.17 in liquidated damages that were precluded by Ohio law, not itemized, and
allowed for a double recovery for attorneys’ fees and compensation for actions never
taken.” Defendants assert that “AEP’s evidence for liquidated damages came from the
Walker [sic] affidavit. An attached bill provides that liquidated damages are $25,492.17.”
According to Defendants, there “is no discussion or itemization for retail margin, supply
termination costs, and enforcement costs. Thus it is unclear what the $25,492.17
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represents – despite the fact that AEP promised a calculation in the liquidated-damages
clause.” Defendants assert that without “the itemized calculation, it is impossible to
determine if AEP’s recovery for ‘supply termination costs’ included fees for actions never
taken, or ‘enforcement costs’ for attorneys’ fees that were separately charged and never
incurred.” Defendants argue that “AEP’s failure to itemize the liquidated damages under
the contract formula makes it impossible to decide if it represented compensation or a
penalty.” Defendants assert that “because the contract font is small and blurred, it is
impossible to know what ‘retail margin’ means, let alone what portion of the $25,492.17
relates to it.” Finally, Defendants argue that “a remand is necessary for AEP to calculate
and itemize the liquidated damages, allowing the trial court to determine if AEP committed
fraud, misconduct, or misrepresentation in seeking and obtaining judgment for
$25,492.17 in liquidated damages.”
{¶ 39} AEP responds that Defendants, having failed to appeal the trial court’s
judgment against them, “now characterize the court’s award of contractual liquidated
damages and attorneys’ fees as having resulted from a fraud perpetrated on the court by
AEP Energy. But AEP Energy was clearly entitled to that which the contract allowed,
and Appellants did not even pursue their indefensible fraud theory in their 60(B) motion
below.”
{¶ 40} AEP asserts that Defendants presented neither of the issues identified for
review to the trial court, and that the issues are accordingly waived. AEP argues that in
the trial court, Defendants “moved for relief from judgment because their signatory to the
contract allegedly did not have authority to sign the contract on their behalf, and because
that individual had been accused of stealing money from Appellants.” In other words,
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according to AEP, Defendants “argued the merits of the underlying case, not that AEP
Energy had perpetrated any fraud on the court.” On appeal, according to AEP,
Defendants “have shifted their theory, and they argue that AEP Energy committed a fraud
upon the court merely by enforcing certain contractual terms. Because Appellants did
not raise these defenses below, however, these theories have been waived, and this
appeal is futile.”
{¶ 41} AEP further asserts that Defendants’ “brief to this court * * * focuses on the
merits of their defenses to the awards of attorneys’ fees and liquidated damages, thereby
demonstrating that it is review of those damages they seek, not the correction of some
fraud or misconduct by AEP Energy in obtaining the default judgment.” AEP notes that
the fraud and misconduct allegedly perpetrated by it is a lack of free negotiation by equally
situated parties, and that Defendants’ “ad hominem attacks should not distract the Court
from [Defendants’] attempt to substitute its Rule 60(B) motion for its (unfiled) appeal from
the trial court’s judgment.” Regarding attorneys’ fees, AEP asserts that Defendants
“provide no legal support for the proposition that pursuing contractual remedies is
fraudulent or misconduct.” Regarding liquidated damages, AEP asserts that Defendants
“do not even conjure any actual misrepresentation by AEP Energy, but argue only that
one might exist.” According to AEP, if Defendants “had made such a frivolous argument
to the trial court below (and they did not), AEP Energy would have directed Appellants
and the trial court to Exhibit C of the Complaint, wherein AEP Energy properly calculated
and itemized its liquidated damages pursuant to the contract between the parties.”
{¶ 42} AEP asserts that it “is entitled to recover its attorneys’ fees under the
contract as a matter of law, and therefore, its pursuit of attorneys’ fees was not fraudulent
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or misconduct.” Regarding attorneys’ fees, AEP asserts that the contract at issue is not
a contract of adhesion but a standardized form contract, between “sophisticated persons
or entities who were regularly engaged in commercial activities.” Regarding liquidated
damages, AEP argues that the contract “unambiguously provides, ‘[i]f the Customer is
the Defaulting Party, the Settlement Amount shall equal the greater of (1) Retail Margin,
plus Supply Termination Costs, plus Enforcement Costs or (2) zero.”
{¶ 43} In reply, Defendants assert that they did not waive their arguments on
appeal. Defendants assert that in the trial court, they requested relief from judgment
because Amber Taylor “committed fraud by signing the contract without authority, where
that agent was simultaneously prosecuted for theft and fraud-related offenses at the time
of her employment. On appeal, Vemulapalli has requested relief from judgment because
AEP mispresented its entitlement to damages at the hearing.” Defendants assert that
plain error should be noticed. According to Defendants, “AEP added 33% to the
judgment based on its contingency fee collection contract with counsel. That is
unlawful.” Defendants assert that “Vemulapalli was prejudiced because AEP had
contracted to recover attorneys’ fees it incurred, it did not disclose its contingency-fee
collection contract to Vemulapalli, the contingency of a collection from Vemulapalli never
occurred, and Vemulapalli has been made liable for $17,188.88 in non-existent attorneys’
fees.” Finally, Defendants assert that Exhibit C to AEP’s complaint “does not provide a
definition for retail margin, which is illegible in the contract due to its small font.”
{¶ 44} As this Court has previously noted:
“Civ. R. 60(B) represents an attempt to strike a balance between
conflicting principles that litigation must be brought to an end and that justice
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should be done.” Chapman v. Chapman, Montgomery App. No. 21244,
2006-Ohio-2328, at ¶ 13. Civ.R. 60(B) permits trial courts to relieve parties
from a final judgment for the following reasons: (1) “mistake, inadvertence,
surprise or excusable neglect;” (2) newly discovered evidence; (3) fraud,
misrepresentation or other misconduct of an adverse party; (4) the judgment
has been satisfied, released or discharged; or (5) any other reason justifying
relief from the judgment.
Portfolio Recovery Assocs., LLC v. Thacker, 2d Dist. Clark No. 2008 CA 119, 2009-Ohio-
4406, ¶ 37.
{¶ 45} As this Court has further noted:
The fraud or misconduct contemplated by Civ.R. 60(B)(3) is fraud or
misconduct on the part of the adverse party in obtaining the judgment by
preventing the losing party from fully and fairly presenting his defense,
not fraud or misconduct which in itself would have amounted to a claim or
defense in the case. State Alarm, Inc. v. Riley Industrial Services, et al., 8th
Dist. Cuyahoga No. 92760, 2010–Ohio–900, ¶ 21; First Merit Bank, N.A. v.
Crouse, 9th Dist. Lorain No. 06CA008946, 2007–Ohio–2440, ¶ 32; LaSalle
National Bank v. Mesas, 9th Dist. Lorain No. 02CA008028, 2002–Ohio–
6117, ¶ 15.
Wells Fargo Bank, N.A. v. Brandle, 2d Dist. Champaign No. 2012CA0002, 2012-Ohio-
3492, ¶ 13.
{¶ 46} As this Court further noted in Thacker, ¶ 38-40:
To prevail on a motion brought under Civ.R. 60(B), the movant must
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demonstrate that (1) the party has a meritorious defense or claim to present
if relief is granted, (2) the party is entitled to relief under one of the grounds
stated in CivR. 60(B), and the motion is made within a reasonable
time. GTE Automatic Elec., Inc. v. ARC Industries, Inc. (1976), 47 Ohio
St.2d 146, 351 N.E.2d 113, paragraph two of the syllabus. All of these
requirements must be satisfied, and the motion should be denied if any one
of the requirements is not met. Strack v. Pelton, 70 Ohio St. 3d 172, 174,
637 N.E.2d 914, 1994-Ohio-107; Cincinnati Ins. Co. v. Schaub,
Montgomery App. No. 22419, 2008- Ohio-4729, at ¶ 15.
Where the judgment from which relief is sought is
a default judgment, any doubt should be resolved in favor of the movant so
that cases can be decided on their merits. GTE Automatic Elec., Inc., supra,
at paragraph three of the syllabus; Mount Olive Baptist Church v. Pipkens
Paints and Home Improvement Ctr., Inc. (1979), 64 Ohio App. 2d 285, 287,
413 N.E.2d 850.
We review the trial court's determination of a Civ. R. 60(B) motion
for an abuse of discretion. Griffey v. Rajan (1987), 33 Ohio St. 3d 75, 77,
514 N.E.2d 1122.
{¶ 47} As noted above, AEP moved for default judgment on November 22, 2016,
based upon Defendants’ failure to comply with discovery, retain new counsel and “defend
this case.” We agree with AEP that before the trial court Defendants “argued the merits
of the underlying case” in their motion for relief from judgment and supplemental filings.
In Defendants’ February 17, 2017 motion, they argued that the default judgment “is unjust
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as it is based on an Agreement signed fraudulently” and without authority by Amber
Taylor, and that Defendants are accordingly not signatories thereto. Alternatively, they
asserted that the Agreement was “obtained by Plaintiff pursuant to mistake or
inadvertence.” In their March 7, 2017 supplemental filing, Defendants attached
Vemulapalli’s affidavit, which is again addressed to Taylor’s lack of authority to enter into
the Agreement on Defendants’ behalf. The same is true of the March 24, 2017
supplemental filing with the attached affidavits of employees Kishor and Woodard. In
their April 4, 2017 replacement motion, the Vemulapallis’ attached affidavits are
addressed to Taylor’s conduct in signing the Agreement, allegedly without authority. 1
We conclude that the trial court did not abuse its discretion in finding that “the fraud or
misconduct purported to support [Defendants’] motion only speaks to conduct which could
amount to a defense and does not satisfy the Civ.R. 60(B) requirement of ‘fraud involved
in the obtaining of judgment.’ ”
{¶ 48} We further conclude that the trial court did not abuse its discretion in finding
that Defendants failed to demonstrate that they should be relieved from judgment due to
any mistake or inadvertence on their part, pursuant to Civ.R. 60(B)(1). As the trial court
noted, Defendants failed to obtain new counsel until February 17, 2017, and they failed
to defend themselves in any manner. While Defendants argued in their replacement
motion of April 4, 2017, that they provided timely discovery responses to AEP, citing
Attorney Glanker’s affidavit, it is well settled that a “party may not use a Civ.R. 60(B)
motion as a substitute for a timely appeal.” Doe v. Trumbull County Children Services
1
We note that the trial court appears to have only considered the initial filing of
February 17, 2017.
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Bd., 28 Ohio St. 3d 128, 502 N.E.2d 605 (1986), paragraph two of the syllabus. If
Defendants believed that the trial court erred in finding that they failed to comply with the
discovery order, their proper remedy was a direct appeal from the default judgment.
{¶ 49} On appeal herein, Defendants assert for the first time that the trial court
abused its discretion in concluding that they failed to prove fraud or misconduct in
obtaining the default judgment, pursuant to Civ.R. 60(B)(3). The two issues of whether
“AEP committed fraud, misconduct, and misrepresentation” in obtaining attorney fees in
the amount of $16,580.79, which were “precluded by law and unauthorized by the
contract,” and liquidated damages in the amount of $25,492.17, which were “precluded
by Ohio law, not itemized, and allowed for a double recovery for attorneys’ fees and
compensation for action never taken,” were not raised before the trial court. As AEP
asserts, “[i]ssues not raised and tried in the trial court cannot be raised for the first time
on appeal. Republic Steel Corp. v. Bd. of Revision of Cuyahoga Cty. (1963), 175 Ohio
St. 179, 23 O.O.2d 462, 192 N.E.2d 47.” Holman v. Grandview Hosp. & Med. Ctr., 37
Ohio App. 3d 151, 157, 524 N.E.2d 903 (2d Dist.1987).
{¶ 50} For the foregoing reasons, Defendants’ assignment of error is overruled.
Accordingly, the judgment of the trial court is affirmed.
.............
WELBAUM, J., and TUCKER, J. concur
Copies mailed to:
Elizabeth Moyo
Allen T. Carter
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Christopher J. Pagan
Hon. Dennis J. Adkins