March v. Statman , 2016 Ohio 2846 ( 2016 )

[Cite as March v. Statman, 2016-Ohio-2846.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
PERRIN G. MARCH, IV, as the : APPEAL NO. C-150337
successor trustee of the Perrin G. TRIAL NOS. A-1209832
March, III, Revocable Trust, : A-1301453
A-1303506
and : A-1304301
A-1306119
PERRIN G. MARCH, IV, as the :
successor trustee of the Maud Rydin O P I N I O N.
March Revocable Trust, :
Plaintiffs-Appellants, :
vs. :
ALAN J. STATMAN, :
and :
STATMAN HARRIS & EYRICH, LLC, :
Defendants-Appellees, :
and :
CHRISTINA MARCH, et al. :
Defendants. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: May 6, 2016
OHIO FIRST DISTRICT COURT OF APPEALS
Graydon Head & Ritchey LLP and Michael A. Roberts, for Plaintiffs-Appellants,
Schroeder, Maundrell, Barbiere & Powers and John W. Hust, and George D.
Jonson, for Defendants-Appellees.
Please note: This case has been removed from the accelerated calendar.
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Per Curiam.
{¶1} Plaintiff-appellants Perrin G. March, IV, as the successor trustee of
the Perrin G. March, III, Revocable Trust, and Perrin G. March, IV, as the successor
trustee of the Maud Rydin March Revocable Trust (collectively “PMIV”), appeal the
decision of the trial court granting summary judgment in favor of defendants-
appellants Alan J. Statman and Statman, Harris & Eyrich, LLC, (“SH&E”). We
affirm the trial court’s judgment.
I. Factual Background
{¶2} Perrin March, III, (“PMIII”) was an officer and director of Cincinnati
Incorporated (“CI”), a business owned by the March family for generations. Perrin G.
March, IV, is his son and Christina March is his daughter. In 2004, Christina married
Michiel Schuitemaker. Subsequently, Schuitemaker became an employee of CI and
eventually became CI’s CEO, despite having no experience as a chief executive of a
company.
{¶3} When PMIII’s health began to decline, he went to live with Christina and
Schuitemaker. In 2011, Christina sought a divorce from Schuitemaker. Subsequently,
Schuitemaker engaged in a number of rather questionable transactions with CI assets. A
series of lawsuits involving CI, Schuitemaker, and numerous other parties were filed,
which the trial court eventually consolidated under case number A-1209832.
Subsequently, a jury determined that Schuitemaker had violated his fiduciary duty to CI
and its shareholders, and awarded CI over $8,000,000.
A. Transfer of a $17 Million Note
{¶4} Over time, a myriad of issues between the parties were determined by
the court or settled by the parties. The only remaining issues involve a promissory note
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with a face value of over $17 million. In the early 2000’s, PMIII and his wife had loaned
CI over $17 million dollars in a series of notes to remedy cash-flow problems. That
series of notes was eventually consolidated into the $17 million note. In 2009, PMIII
assigned the consolidated note to Schuitemaker for $50,000.
{¶5} Ken Jenkins of Rippe & Kingston (“R&K”) was PMIII’s long-time
accountant. Jenkins testified that in 2009, PMIII had asked his firm for a valuation of
the note for “gift and estate planning purposes” in connection with a planned transfer of
the note to his family members. At that time, CI was in dire financial straits, and
Jenkins believed that the company and, therefore, the note had no value.
{¶6} On September 11, 2009, Jenkins and his partner Joseph Rippe met with
PMIII and Schuitemaker. At that meeting, PMIII expressed his desire to sell the note for
the lowest price that would be defensible against scrutiny from the Internal Revenue
Service. Jenkins stated that during that meeting, it appeared that PMIII “was lucid,
competent, and acting of his own free will, and that he desired to transfer the note for
$50,000.”
{¶7} PMIII then asked his attorney, Michael Cooney, to draft the note and
assignment. Cooney explained to Schuitemaker that that because he represented PMIII
in the transaction, Cooney would be looking out for PMIII’s interests.
B. Discussions between Schuitemaker and Statman
{¶8} Prior to the meeting, Schuitemaker had contacted Statman, a
bankruptcy attorney and long-time friend, about two issues relating to the transaction:
(1) was a price of approximately $184,000 for the note defensible if the IRS challenged
the transaction as a gift; and (2) how would the note be treated if CI filed for
bankruptcy? Specifically, the issue arose as to whether the note or an unfunded pension
liability would have priority and, therefore, a greater value, in the event of a liquidation.
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{¶9} Statman, Schuitemaker, and Jenkins exchanged a series of emails
regarding those issues. Statman and another attorney at his firm expressed the opinion
that the note would likely be subordinate to the pension liability. Jenkins informed
Schuitemaker that if the note was subordinate to the pension, then “[a]s expected, value
of the note is zero.” Schuitemaker forwarded Jenkins’s email to Statman, stating that
“[i]f the note is the last to be paid, the value is -0-. Just the way I like it!” Statman
responded, “I love it when a plan comes together. Do I get 1/3 of your $17M savings?”
{¶10} Jenkins made repeated requests for Statman to provide written support
for his assertions about priority that had led to the revised valuation. On the morning of
the meeting, he wrote: “For our files (and for us to change the valuation report) we need
something in writing that specifically addresses the priority payout for the pension.”
{¶11} On the morning of the meeting, Jenkins told Schuitemaker that
Dinsmore & Shohl, PMIII’s counsel, had “a different opinion on the priority of the
pension.” Consequently, Jenkins stated that “there needs to be a meeting of the minds
on this issue” and that R&K would “not have the final product for our meeting today.”
Schuitemaker stated that Statman would provide the required confirmation, and he
requested that the meeting and transfer proceed later that day.
{¶12} Subsequently, Statman sent Schuitemaker an email, in which he advised
Schuitemaker that a value of $184,000 for the note could be “defended under the facts
and circumstances you discussed with us and the current economic climate.” As to the
bankruptcy issue, Statman’s email stated:
We believe that the fact that this debt is owed by an insider makes
recovery on the principal in any amount unlikely in a meltdown of the
company. Given the fact there is pension liability and deferred comp
liability, we believe that 11 U.S.C. 510 will come into play (risk of equitable
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subordination). We also believe that loan may be thought of as a capital
contribution and not debt at all if creditors would decide to challenge the
liability.
***
Lastly, we do not believe any debt buyer in today’s market would pay
anymore than $184,000 given the yield and the fact that the company has
lost $2+ million year to date. I can shop the note if you are interested in
an outside offer for it.
While we can issue no guarantees, we believe if a problem arises
we can put forth a reasonable defense on your behalf. Let me know if we
can be of further assistance.
{¶13} At the meeting later that day, PMIII agreed to transfer the note to
Christina for the nominal value of $50,000 based on R&K’s valuation. The following
day, Jenkins sent an email to Cooney, PMIII’s attorney, informing him of the agreement
to transfer the note to Christina. Schuitemaker shared that email with Statman, stating
that “I’m not sure if it’s better for Christina or I to buy the loan. Any thoughts?”
Statman responded, “if there is a divorce do you want her to own the $17M debt to hold
over you and the company.”
{¶14} Subsequently, Cooney sent Schuitemaker a draft of the assignment
stating that the note would be assigned to Christina. But the document that PMIII later
signed identified Schuitemaker as the sole assignee, with an effective date of September
11, 2009.
C. Claims against Statman and SH&E
{¶15} In one of the many lawsuits, PMIV named Statman and SH&E as
defendants. He raised causes of action for fraud and civil conspiracy related to the
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OHIO FIRST DISTRICT COURT OF APPEALS
transfer of the note, alleging that Statman had colluded with Schuitemaker to have
PMIII transfer the note to Schuitemaker for far less than its actual value. The trial court
granted Statman’s motion for summary judgment, finding that the record did not show
that Statman had engaged in any misrepresentation or that PMIII had reasonably relied
on any misrepresentation by Statman. This appeal followed.
{¶16} In his sole assignment of error, PMIV contends that the trial court erred
in granting Statman’s motion for summary judgment. He argues that evidence in the
record creates issues of fact as to whether Statman made an actionable
misrepresentation to PMIII or his advisors, whether PMIII justifiably relied on
Statman’s representations regarding the value of the note, and whether Statman assisted
Schuitemaker to defraud PMIII to obtain possession of the $17 million note. This
assignment of error is not well taken.
II. Standard of Review
{¶17} An appellate court reviews a trial court’s ruling on a motion for summary
judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St. 3d 102, 105, 671 N.E.2d 241
(1996); Evans v. Thrasher, 1st Dist. Hamilton No. C-120783, 2013-Ohio-4776, ¶ 25.
Summary judgment is appropriate if (1) no genuine issue of material fact exists for trial,
(2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds
can come to but one conclusion and that conclusion is adverse to the moving party, who
is entitled to have the evidence construed most strongly in his or her favor. Temple v.
Wean United, Inc., 50 Ohio St. 2d 317, 327, 364 N.E.2d 267 (1977); Evans at ¶ 25.
III. Fraud
{¶18} Fraud is (1) a representation or, where there is a duty to disclose,
concealment of a fact, (2) which is material to the transaction at hand, (3) made falsely,
with knowledge of its falsity, or with such utter disregard and recklessness as to whether
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OHIO FIRST DISTRICT COURT OF APPEALS
it is true or false that knowledge may be inferred, (4) with the intent of misleading
another into relying on it, (5) justifiable reliance upon the representation or
concealment, and (6) a resulting injury proximately caused by the reliance. Williams v.
Aetna Fin. Co., 83 Ohio St. 3d 464, 475, 700 N.E.2d 859 (1998).
{¶19} The trial court stated that PMIV “points to no evidence where Statman
misrepresented anything to PMIII or his advisors regarding the value of the Note.
Plaintiff points to no evidence that Statman failed to disclose any information to PMIII
or his advisors.” We agree.
{¶20} The record shows that PMIII’s own advisors felt that the note had no
value due to the company’s financial condition, that PMIII wanted the note valued for
“estate-planning” purposes, and that all involved in the transaction were searching for a
purchase price other than zero to avoid a later challenge by the IRS. Schuitemaker
asked Statman to provide legal opinions regarding the valuation of the note and how the
note would be treated in the event of a CI bankruptcy. Many of those opinions depended
on the future actions of others. Statman opined that the note’s treatment in the event of
a bankruptcy would depend on whether the creditors would challenge the priority of the
note based on equitable subrogation or seek to have the note characterized as equity or
capital.
{¶21} Nothing in the record shows that Statman misrepresented a fact
material to the transaction. He stated his legal opinion on issues primarily related to
future actions or conduct, which does not constitute a fraudulent misrepresentation.
See Cleveland Constr., Inc. v. Roetzel & Andress, L.P.A., 8th Dist. Cuyahoga No.
94973, 2011-Ohio-1237, ¶ 38; Farris Disposal, Inc. v. Leipply’s Gasthaus, Inc., 9th
Dist. Summit No. 22569, 2005-Ohio-6737, ¶ 15; Lynch v. Dial Fin. Co., 101 Ohio
App.3d 742, 750, 656 N.E.2d 714 (8th Dist.1995); Scotts Co., LLC v. Liberty Mut. Ins.
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OHIO FIRST DISTRICT COURT OF APPEALS
Co., 606 F. Supp. 2d 722, 742, (S.D.Ohio 2009), citing Aetna Ins. Co. v. Reed, 33 Ohio St.
283, 292-295 (1877).
{¶22} Further, PMIV failed to show a material issue of fact as to justifiable
reliance. In determining whether a party justifiably relied on a representation, a
court must consider the nature of the transaction, the representation, the
relationship of the parties, as well any other relevant circumstances. Berger v. Wade,
1st Dist. Hamilton No. C-120863, 2014-Ohio-1262, ¶ 19; Farris Disposal, Inc. at ¶ 18.
The requirement of justifiable reliance tests the credibility of the claim that fraud
induced a party to act and it is generally a question of fact. Berger at ¶ 19-20. But if
no issues of material fact exist as to whether a party justifiably relied on a
misrepresentation, summary judgment on that issue is appropriate. See Donson v.
Comey & Shepherd, Inc., 1st Dist. Hamilton No. C-920105, 1993 Ohio App. LEXIS
1953, *7 (Apr. 7, 1993).
{¶23} Even if PMIV had shown that Statman had made a false
misrepresentation as to the value of the note, nothing in the record shows that PMIII
or his advisors relied upon Statman’s statements. Jenkins, PMIII’s accountant,
testified that R&K did not allow anyone to influence its expert opinions. The
valuation itself specifically stated that “[n]o one provided significant professional
assistance to the preparers of this report.” When asked to describe Statman’s role in
the valuation, Jenkins stated that Statman had “no role.”
{¶24} PMIV argues that PMIII relied on Schuitemaker, and that Statman,
acting in concert with Schuitemaker, provided false information to influence the
result of the valuation. But the evidence does not show that PMIII relied on any
statement or information from Schuitemaker. Much of the financial information
used in R&K’s valuation was provided by other individuals at CI. Further, the
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OHIO FIRST DISTRICT COURT OF APPEALS
undisputed evidence showed that PMIII sought to have the note valued at the lowest
possible amount for “estate-planning” purposes and that he employed R&K to
complete the task. R&K valued the note based on information from the company,
and its conclusions about the company’s financial status were consistent with other
professional opinions at the time. In fact, PMIV testified that he had no reason to
doubt CI’s audited financial statements or the opinion of other professionals who
concluded that, at the time, the company had no value.
{¶25} PMIV presented expert opinions disputing the $50,000 value of the
note at the time of the transfer and criticizing R&K’s methodology in opposing the
various motions for summary judgment. But those experts pointed to no false or
fraudulent data. A disagreement regarding the valuation does not rise to the level of
fraud. See Baker v. Cuyahoga Cty. Bar Assn., 9th Dist. Summit No. 12594, 1986
Ohio App. LEXIS 8375, *7 (Sept. 17, 1986).
{¶26} We find no issues of material fact. Construing the evidence most
strongly in PMIV’s favor, we hold that reasonable minds could come to but one
conclusion—that PMIV failed to prove a genuine issue of material fact on all the
elements of fraud. Consequently, the trial court did not err in granting summary
judgment in Statman’s and SH&E’s favor on PMIV’s fraud claim.
IV. Civil Conspiracy
{¶27} PMIV also argues that the trial court erred in granting summary
judgment on his civil-conspiracy claim. A civil conspiracy is “a malicious
combination of two or more persons to injure another in person or property in a way
not competent of one alone, resulting in actual damages.” Kenty v. Transam.
Premium Ins. Co., 72 Ohio St. 3d 415, 419, 650 N.E.2d 863 (1995). A civil-conspiracy
claim cannot succeed without an underlying unlawful act. Williams, 83 Ohio St. 3d at
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475, 700 N.E.2d 859; Daudistel v. Silverton, 1st Dist. Hamilton No. C-130661, 2014-
Ohio-5731, ¶ 44.
{¶28} Since the substantive fraud claim on which the conspiracy claim is
based is without merit, PMIV’s civil-conspiracy claim must also fail. See Williams at
475; Daudistel at ¶ 44; Doane v. Givaudan Flavors Corp., 184 Ohio App. 3d 26,
2009-Ohio-4989, 919 N.E.2d 290, ¶ 32 (1st Dist.). Therefore, the trial court did not
err in granting Statman’s and SH&E’s motion for summary judgment on PMIV’s
civil-conspiracy claim.
V. Summary
{¶29} In sum, we find no merit in PMIV’s arguments. Therefore, we
overrule his sole assignment of error and affirm the trial court’s judgment.
Judgment affirmed.
F ISCHER , P.J., P OWELL and S UNDERMANN , JJ., concur.
M ICHAEL E. P OWELL , of the Twelfth Appellate District, and J. H OWARD
S UNDERMANN , retired, from the First Appellate District, sitting by
assignment.
Please note:
The court has recorded its own entry this date.
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