PNC Bank, N.A. v. DePalma ( 2012 )

[Cite as PNC Bank, N.A. v. DePalma , 2012-Ohio-2774.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 97566
PNC BANK, N.A.
PLAINTIFF-APPELLEE
vs.
JOHN V. DEPALMA, ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-712198
BEFORE: Kilbane, J., Boyle, P.J., and S. Gallagher, J.
RELEASED AND JOURNALIZED: June 21, 2012
ATTORNEY FOR APPELLANTS
Michael C. Asseff
159 Crocker Park Boulevard
Suite 400
Westlake, Ohio 44145
ATTORNEYS FOR APPELLEE
Robert B. Weltman
David S. Brown
Weltman, Weinberg & Reis Co.
323 West Lakeside Avenue
Suite 200
Cleveland, Ohio 44113
MARY EILEEN KILBANE, J.:
{¶1} Defendants-appellants, John DePalma and Private Jet Management, LLC
(collectively referred to as “appellants”), appeal the trial court’s judgment denying their
motion for relief from judgment under Civ.R. 60(B). Finding merit to the appeal, we
reverse and remand.
{¶2} On December 8, 2009, PNC Bank, N.A. (“PNC”), as the successor in
interest to National City Bank, filed a complaint against John DePalma (“John”) and
Private Jet Management, LLC (“Private Jet”), alleging money due on a business line of
credit issued to Private Jet. PNC alleges that on May 26, 2006, a $50,000 line of credit
was issued to Private Jet based on an application signed by Cheryl DePalma (“Cheryl”),
John’s former wife. The application, which was attached to the complaint, contains a
signature for Cheryl as “Member” of Private Jet. PNC also attached an account
statement, which indicates that as of July 2009, the balance due on the line of credit was
$50,607.73.
{¶3} When PNC made a demand for the balance due, Cheryl executed an
affidavit of forgery, which PNC attached to its complaint. In the affidavit, Cheryl states
that in May 2006, she and John were married, but she filed for divorce in October 2009.
She states that she did not have knowledge of the line of credit established in Private Jet’s
name. She did not execute the small business application on May 26, 2006, nor did she
authorize anyone to execute her name to the application. She further states that John
operated Private Jet and that she never had an active role in the business.
{¶4} In the complaint, PNC alleges that John formed Private Jet, operated Private
Jet, and was the alter-ego of Private Jet, and that John either executed the line of credit
application or knew the person who executed the application in Cheryl’s name. As a
result, PNC claimed that John was unjustly enriched when he received the direct loan
benefits from the line of credit. PNC further alleges that it “has reason to believe that
[John] is either the alter-ego of [Private Jet], knew that the aforesaid Line of Credit was
being executed, [and] was responsible for the execution of the name Cheryl A. DePalma
as guarantor on the aforesaid Application[.]” PNC claimed that as of December 7, 2009,
John owed it $51,283.67.
{¶5} PNC served the complaint separately to John and to “Private Jet, in care of
John DePalma, Member,” at an address in North Olmsted, Ohio. Appellants did not
answer or otherwise respond to PNC’s complaint. Subsequently, on March 18, 2010, the
trial court entered a default judgment in PNC’s favor and against appellants in the amount
of $51,283.67. On August 16, 2010, John filed a pro se motion for relief from judgment
under Civ.R. 60(B)(1), claiming that he was never served with the complaint because his
legal address is in Indialantic, Florida. He attached an affidavit indicating that he did not
form Private Jet, he was not a member of Private Jet, and he did not sign any application
for a line of credit for Private Jet. The trial court set a hearing on the matter for January
18, 2011, but John voluntarily withdrew his motion that same day.
{¶6} Then in August 2011, appellants retained new counsel, who filed a renewed
motion for relief from judgment under Civ.R. 60(B)(5) and requested an oral hearing.
Appellants argued that John is not a member of Private Jet, PNC’s complaint fails to
pierce the corporate veil, and PNC’s complaint fails to state a claim. PNC opposed, and
the trial court denied the motion without holding a hearing.
{¶7} Appellants now appeal, raising the following two assignments of error for
review, which we will address in reverse order.
ASSIGNMENT OF ERROR ONE
The trial court erred and abused its discretion in denying appellants’ motion
for relief from judgment.
ASSIGNMENT OF ERROR TWO
The trial court erred and abused its discretion by denying appellants’ motion
for relief from judgment without first holding an evidentiary hearing.
Standard of Review
{¶8} We review the trial court’s ruling on a motion for relief from judgment
under Civ.R. 60(B) for an abuse of discretion. Rose Chevrolet, Inc. v. Adams, 36 Ohio
St.3d 17, 20, 520 N.E.2d 564 (1988). An abuse of discretion “‘implies that the court’s
attitude is unreasonable, arbitrary or unconscionable.’” Blakemore v. Blakemore, 5 Ohio
St.3d 217, 219, 450 N.E.2d 1140 (1983), quoting State v. Adams, 62 Ohio St.2d 151, 404
N.E.2d 144 (1980).
Civ.R. 60(B) — Motion for Relief from Judgment
{¶9} Civ.R. 60(B) provides in pertinent part:
On motion and upon such terms as are just, the court may relieve a party * *
* from a final judgment, order or proceeding for the following reasons: (1)
mistake, inadvertence, surprise or excusable neglect; (2) newly discovered
evidence which by due diligence could not have been discovered in time to
move for a new trial under Rule 59(B); (3) fraud (whether heretofore
denominated intrinsic or extrinsic), misrepresentation or other misconduct
of an adverse party; (4) the judgment has been satisfied, released or
discharged, or a prior judgment upon which it is based has been reversed or
otherwise vacated, or it is no longer equitable that the judgment should have
prospective application; or (5) any other reason justifying relief from
judgment. The motion shall be made within a reasonable time, and for
reasons (1), (2) and (3) not more than one year after the judgment, order or
proceeding was entered or taken.
{¶10} To prevail on a Civ.R. 60(B) motion, the movant must 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
Civ.R. 60(B)(1) through (5); and (3) the motion is made within a reasonable
time, and, where the grounds of relief are Civ.R. 60(B)(1), (2) or (3), not
more than one year after judgment, order or proceeding was entered or
taken. GTE Automatic Elec. v. ARC Industries, 47 Ohio St.2d 146, 351
N.E.2d 113 (1976), paragraph two of the syllabus.
{¶11} In the second assignment of error, appellants argue that the trial court
abused its discretion when it failed to conduct an evidentiary hearing before ruling on
their motion for relief of judgment. We agree.
{¶12} We recognize that a party moving for relief from judgment under Civ.R.
60(B) is not automatically entitled to an evidentiary hearing. Gaines & Stern Co., L.P.A.
v. Schwarzwald, Robiner, Wolf & Rock Co., L.P.A., 70 Ohio App.3d 643, 646, 591
N.E.2d 866 (8th Dist.1990), citing Adomeit v. Baltimore, 39 Ohio App.2d 97, 105, 316
N.E.2d 469 (8th Dist.1974). “If, however, the material submitted by the movant contains
allegations of operative facts demonstrating that relief is warranted, the trial court should
grant the movant a hearing to take evidence and either verify or discredit the asserted
facts.” (Citations omitted.) Id.{¶13} A “trial court abuses its discretion in denying a hearing where grounds for
relief from judgment are sufficiently alleged and are supported with evidence which
would warrant relief from judgment.” Kay v. Marc Glassman, Inc., 76 Ohio St.3d 18,
19, 1996-Ohio-430, 665 N.E.2d 1102. Thus, “‘[i]f the movant files a motion for relief
from judgment and it contains allegations of operative facts which would warrant relief
under Civil Rule 60(B), the trial court should grant a hearing to take evidence and verify
these facts before it rules on the motion.” Coulson v. Coulson, 5 Ohio St.3d 12, 16, 448
N.E.2d 809 (May 18, 1983), quoting Adomeit at 105.
{¶14} In the instant case, PNC’s complaint alleges that John formed Private Jet,
operated Private Jet, and was the alter-ego of Private Jet and that John either executed the
line of credit application or knew the person who executed the application in Cheryl’s
name. PNC further alleges that it “has reason to believe that [John] is either the alter-ego
of [Private Jet], knew that the aforesaid Line of Credit was being executed, [and] was
responsible for the execution of the name Cheryl A. DePalma as guarantor on the
aforesaid Application[.]”
{¶15} In order to pierce the corporate veil and hold John personally liable for
Private Jet’s debt, PNC must prove that:
(1) [John’s] control over the corporation * * * was so complete that the
corporation has no separate mind, will, or existence of its own, (2) [John’s]
control over the corporation * * * was exercised in such a manner as to
commit fraud or an illegal act against the person seeking to disregard the
corporate entity, and (3) injury or unjust loss resulted to the plaintiff from
such control and wrong.
Belvedere Condominium Unit Owners’ Assn. v. R.E. Roark Cos., Inc., 67 Ohio St.3d 274,
1993-Ohio-119, 617 N.E.2d 1075, paragraph three of the syllabus.
{¶16} Here, PNC failed to provide the trial court with any evidentiary materials to
support the allegations in its complaint. The application PNC attached to its complaint
only lists Cheryl’s name and signature as member of Private Jet. PNC failed to attach the
actual credit agreement between PNC and Private Jet. Furthermore, PNC failed to attach
any documents with John’s name indicating that John formed Private Jet, was a member
of Private Jet, executed the line of credit, or received any benefit from the line of credit.
{¶17} In addition, appellants attached to their renewed motion for relief from
judgment an affidavit from John, in which he states that:
3. I have never been, nor am now, a member of [Private Jet], and have
never held or now hold any economic interest in [Private Jet.]
4. I did not execute the Small Business Credit Application attached as
Exhibit A to the complaint filed in [this case]. I did not forge the
signatures of [Cheryl] on that Small Business Application, nor did I
authorize any other person or entity to forge such signatures, nor do I know
who forged such signatures, if such signatures are indeed forged.
5. I at no time signed [Cheryl’s] name on this Small Business
[A]pplication, either as the applicant or as guarantor, nor did I authorize or
direct any other person or entity to do so, nor do I know the person or entity
that did in fact sign such Small Business Application, if such signatures are
indeed not those of [Cheryl].
6. I have never seen this Small Business Application at any time prior to
being served with the Complaint [in this case], and have had no discussions
or correspondence with either National City Bank or [PNC] prior to the
commencement of [this case].
7. I have not received, accepted, or used any funds, proceeds or any
monies derived from the line of credit referenced in [this case] for my own
personal use or benefit, nor have I personally benefitted from any such
funds, proceeds, or monies in any way, if such funds had in fact been
advanced to [Private Jet].
{¶18} We find that John’s affidavit, combined with PNC’s failure to demonstrate
that John was personally liable for Private Jet’s line of credit, provided sufficient
operative facts that would support a meritorious defense to the judgment. As a result, the
trial court abused its discretion when it failed to conduct a hearing before denying
appellants’ motion for relief from judgment.
{¶19} Accordingly, appellants’ second assignment of error is sustained, and the
matter is remanded to the trial court to conduct a hearing on appellants’ motion for relief
from judgment.
{¶20} In the first assignment of error, appellants’ argue the trial court erred and
abused its discretion by denying their motion for relief from judgment, when they
demonstrated meritorious defenses to the default judgment. However, given our
disposition of the second assignment of error, we overrule the first assignment of error as
moot. See App.R. 12(A)(1)(c).
{¶21} Judgment is reversed and the matter is remanded for a hearing on
appellants’ motion for relief from judgment.
It is ordered that appellants recover from appellee costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into
execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
MARY EILEEN KILBANE, JUDGE
MARY J. BOYLE, P.J., and
SEAN C. GALLAGHER, J., CONCUR