GGNSC Lima, L.L.C. v. LMOP, L.L.C. , 2018 Ohio 1298 ( 2018 )

[Cite as GGNSC Lima, L.L.C. v. LMOP, L.L.C., 2018-Ohio-1298.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 105910
GGNSC LIMA, L.L.C., ET AL.
PLAINTIFFS-APPELLEES
vs.
LMOP, L.L.C., ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
REVERSED, VACATED, AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-17-874161
BEFORE: E.T. Gallagher, P.J., Stewart, J., and S. Gallagher, J.
RELEASED AND JOURNALIZED: April 5, 2018
ATTORNEYS FOR APPELLANTS
Drew Barnholtz
26060 Annesley Rd.
Beachwood, Ohio 44122
Brian J. Seitz
The Seitz Law Firm, L.L.C.
P.O. Box 470138
Broadview Heights, Ohio 44147
ATTORNEYS FOR APPELLEES
For GGNSC Lima, L.L.C.
Donald A. Mauser
Jack W. Hinneberg
Amanda K. Rasbach Yurechko
Robert B. Weltman
Weltman Weinberg & Reis Co., L.P.A.
323 W. Lakeside Ave., Suite 200
Cleveland, Ohio 44113
David S. Brown
Rolf Goffman Martin Lang, L.L.P.
30100 Chagrin Blvd., Suite 350
Cleveland, Ohio 44124
For GGNSC Napoleon, L.L.C.
Matthew G. Burg
Daniel A. Friedlander
Weltman Weinberg & Reis Co., L.P.A.
323 W. Lakeside Ave., Suite 200
Cleveland, Ohio 44113
ATTORNEYS FOR APPELLEES (continued)
For GGNSC Saint Marys, L.L.C.
Amy Clum Holbrook
Weltman Weinberg & Reis Co., L.P.A.
323 W. Lakeside Avenue, Suite 200
Cleveland, Ohio 44113
EILEEN T. GALLAGHER, P.J.:
{¶1} Defendants-appellants, LMOP, L.L.C., et al., appeal from the trial court’s
judgment granting default judgment in favor of plaintiffs-appellees, GGNSC Lima,
L.L.C., et al. Appellants raise the following assignments of error for review:
1. The trial court erred and/or committed reversible error and/or abused its
discretion in granting default judgment.
2. The trial court erred and/or committed reversible error and/or abused its
discretion in granting default judgment when no service of the complaint
was made on the appellants.
3. The trial court erred and/or committed reversible error and/or abused its
discretion in granting default judgment when it failed to vacate the default
judgment when there was a failure of proper service, the court lacked
personal jurisdiction of appellants and the judgment was void ab initio.
4. The trial court erred and/or committed reversible error and/or abused its
discretion when it denied appellants’ 60(B) motion.
5. The trial court erred and/or committed reversible error and/or abused its
discretion in denying the appellants’ Civ.R. 60(B) motion without first
conducting an evidentiary hearing.
{¶2} After careful review of the record and relevant case law, we reverse the trial
court’s judgment and remand for proceedings consistent with this opinion.
I. Procedural and Factual History
{¶3} On January 10, 2017, plaintiffs-appellees, GGNSC Lima, L.L.C., GGNSC
Napoleon, L.L.C., and GGNSC Saint Mary’s, L.L.C. (collectively “plaintiffs”), filed a
complaint against defendants-appellants, LMOP, L.L.C., d.b.a. the Orchards Living &
Rehab Center, a.k.a. The Orchards of Lima Living & Rehab Center (“LMOP”), NCOP,
L.L.C., d.b.a. the Orchards of Napoleon Living & Rehab, a.k.a. The Orchards of
Northcrest Living & Rehab Center (“NCOP”), and VLOP, L.L.C., d.b.a. The Orchards of
St. Mary’s Living & Rehab Center, a.k.a. Vancrest of St. Mary’s (“VLOP”) (collectively
“appellants”).
{¶4} The complaint sought separate monetary judgments against the appellants for
unpaid funds owed to plaintiffs pursuant to the terms of an Operation Transfer Agreement
entered into by the parties in February 2014. The Agreement, which was attached to the
complaint, provides, in relevant part:
The delivery of any notice or communication shall be in writing. The
delivery of such notices or communications, shall be made by fax, by
regular mail or overnight courier to the individuals at the addresses
indicated below:
If to Operator:
Andrew Fishman
Akiva Grunewald
Orchard Healthcare Partners
26945 Amhearst Circle #209
Beachwood, Ohio 44122
with a copy to:
Eric M. Simon, Esq. [sic]
Taft, Stettinius & Hillister LLP
200 Public Square, Suite 3500
Cleveland, Ohio 44114
{¶5} Based on this information, the summons and complaint were served on
appellants by Federal Express, at 26945 Amhearst Circle #209, Beachwood, Ohio 44122
(the “Beachwood address”). The Federal Express receipts were returned as “delivered”
on January 17, 2017.
{¶6} On March 7, 2017, plaintiffs filed a motion for default judgment, arguing that
the appellants, “although duly served with summons and complaint, failed to plead or
otherwise appear within the time prescribed by [Civ.R. 55(A)].”
{¶7} On March 16, 2017, the trial court granted the motion for default judgment,
stating, in relevant part:
Motion for default unopposed and granted; Plaintiffs appear through
counsel and defendants do not appear.
Judgment for Plaintiffs against Defendant [LMOP] in the amount of
$116,036.82 plus interest at the statutory rate of 4% per annum; judgment
rendered for Plaintiff against Defendant [NCOP] in the amount of
$39,107.61, plus interest at the statutory rate of 4% per annum; judgment
against Defendant [VLOP] in the amount of $31,467.26, plus interest at the
statutory rate of 4% per annum.
{¶8} On May 18, 2017, appellants filed a notice of appearance and a motion to
vacate the default judgment pursuant to Civ.R. 60(B). Appellants argued that the default
judgment was void for lack of personal jurisdiction because plaintiffs failed to perfect
service on appellants’ registered agent or to appellants’ usual place of business pursuant
to Civ.R. 4.2.
{¶9} Plaintiffs opposed the motion to vacate, claiming that appellants were
properly served at their business address via Federal Express on January 17, 2017. In its
opposition brief, plaintiffs attached certain registration documents filed by LMOP,
NCOP, and VLOP with the Ohio Secretary of State. Those documents list the
Beachwood address as the appellants’ “business address.” In addition, plaintiffs
submitted a digital image of a website operated by “The Orchards Healthcare Service
Group.” The exhibit depicts the website’s “contact us” page, which also lists the
Beachwood address as the business’s mailing address.
{¶10} On May 22, 2017, the trial court denied appellants’ motion to vacate the
default judgment without holding a hearing.
{¶11} Appellants now appeal from the trial court’s judgment.
II. Law and Analysis
{¶12} Collectively, appellants argue in their first, second, third, fourth, and fifth
assignments of error that (1) the trial court lacked jurisdiction to enter default judgment in
favor of plaintiffs without proper and effective service of process, and (2) the trial court
abused its discretion by denying appellants’ motion to vacate the default judgment
without holding an evidentiary hearing. We address appellants’ assigned errors together
for judicial clarity.
{¶13} A default judgment may be entered against a defendant who has failed to
answer or otherwise defend against allegations raised in a complaint. Ohio Valley
Radiology Assocs., Inc. v. Ohio Valley Hosp. Assn., 28 Ohio St.3d 118, 121, 502 N.E.2d
599 (1986); Civ.R. 55(A). When a defendant fails to answer, default judgment is
warranted because liability has been admitted “by the omission of statements in a
pleading refuting the plaintiff’s claims.” Girard v. Leatherworks Partnership, 11th Dist.
Trumbull No. 2004-T-0010, 2005-Ohio-4779, ¶ 38.
{¶14} However, a judgment rendered without personal jurisdiction over a
defendant is void. Patton v. Diemer, 35 Ohio St.3d 68, 518 N.E.2d 941 (1988),
paragraph three of the syllabus. A court acquires personal jurisdiction over a party in
one of three ways (1) proper and effective service of process, (2) voluntary appearance by
the party, or (3) limited acts by the party or his counsel that involuntarily submit him to
the court’s jurisdiction. Austin v. Payne, 107 Ohio App.3d 818, 821, 669 N.E.2d 543(9th Dist.1995), citing Maryhew v. Yova, 11 Ohio St.3d 154, 156, 464 N.E.2d 538 (1984).
Therefore, “where the plaintiff has not perfected service on a defendant and the
defendant has not appeared in the case or otherwise waived service, the court lacks
jurisdiction to render a default judgment against the defendant.” Professional Bank
Servs. v. Abboud, 8th Dist. Cuyahoga No. 102078, 2015-Ohio-1651, ¶ 12, citing Rite Rug
Co., Inc. v. Wilson, 106 Ohio App.3d 59, 62, 665 N.E.2d 260 (10th Dist.1995).
{¶15} Trial courts have inherent authority to vacate a void judgment; thus a party
who asserts a lack of jurisdiction by improper service does not need to meet the
requirements of Civ.R. 60(B). Patton, 35 Ohio St.3d 68, 518 N.E.2d 941, paragraph
four of the syllabus; Khatib v. Peters, 8th Dist. Cuyahoga No. 104318, 2017-Ohio-95, ¶
30. The party is only required to show that service was invalid. Id. A default
judgment rendered by a court without obtaining service over the defendant is void, and
the party is entitled to vacation of the judgment. State ex rel. Ballard v. O’Donnell, 50
Ohio St.3d 182, 553 N.E.2d 650 (1990), syllabus. The trial court’s decision regarding
the validity of service should be upheld absent an abuse of discretion. Id.The plaintiff bears the burden of obtaining proper service on a defendant.
Cincinnati Ins. Co. v. Emge, 124 Ohio App.3d 61, 63, 705 N.E.2d 408 (1st
Dist.1997). Where the plaintiff follows the civil rules governing service of
process, courts presume that service is proper unless the defendant rebuts
this presumption with sufficient evidence of non-service. Carter-Jones
Lumber Co. v. Meyers, 2d Dist. Clark No. 2005 CA 97, 2006-Ohio-5380, ¶
11. In order to rebut the presumption of proper service, the other party
must produce evidentiary-quality information demonstrating that he or she
did not receive service. McWilliams v. Schumacher, 8th Dist. Cuyahoga
Nos. 98188, 98288, 98390, and 98423, 2013-Ohio-29, ¶ 51, citing
Thompson v. Bayer, 5th Dist. Fairfield No. 2011-CA-00007,
2011-Ohio-5897, ¶ 23.
Relevant to the circumstances presented in this case, the rebuttable
presumption of proper service may be rebutted by evidence that the
defendant did not reside, nor received mail, at the address to which such
ordinary mail service was addressed. Schumacher at ¶ 49, citing Cent.
Ohio Sheet Metal, Inc. v. Walker, 10th Dist. Franklin No. 03AP-951,
2004-Ohio-2816, ¶ 10. “Where the defendant files a motion to vacate
judgment, and swears under oath that he or she did not reside at the address
to which process was sent, the presumption is rebutted, and it is incumbent
upon the plaintiff to produce evidence demonstrating that defendant resided
at the address in question.” Watts v. Brown, 8th Dist. Cuyahoga No.
45638, 1983 Ohio App. LEXIS 15311, 14-15 (Aug. 4, 1983).
Hook v. Collins, 8th Dist. Cuyahoga No. 104825, 2017-Ohio-976, ¶ 14-15.
{¶16} When the movant’s motion to vacate contains allegations of operative facts
that would warrant relief, the trial court should grant a hearing on such motion. Adomeit
v. Baltimore, 39 Ohio App.2d 97, 105, 316 N.E.2d 469 (8th Dist.1974).
{¶17} Service of process must comply with Civ.R. 4.1 through 4.6. Relevant to
this case, Civ.R. 4.2(G) provides that proper service upon a limited liability company can
occur “by serving the agent authorized by appointment or by law to receive service of
process; or by serving the limited liability company at any of its usual places of business
by a method authorized under Civ.R. 4.1(A)(1); or by serving a manager or member.” In
general, the test for determining whether a party was properly served is whether service of
process was “reasonably calculated, under all the circumstances, to apprise interested
parties of the pendency of the action and afford them an opportunity to present their
objections.” Hook at ¶ 13, citing Akron-Canton Regional Airport Auth. v. Swinehart, 62
Ohio St.2d 403, 406, 406 N.E.2d 811 (1980).
{¶18} In this case, appellants argue the default judgment is void for lack of
personal jurisdiction because the plaintiffs failed to comply with the mandates of Civ.R.
4.2. Appellants contend that the Beachwood address listed in the Agreement is not
appellants’ “usual or customary place of business,” or an address for a current agent,
manager, or member of the limited liability companies. Appellants explain that the
Beachwood address is the address of a former operator or representative, Akiva
Grunewald, who separated from the appellants approximately 18 months before plaintiffs
filed this action. Appellants submitted a copy of Grunewald’s separation agreement as
evidence that at the time service was rendered at the Beachwood address, Grunewald was
not “an authorized agent of the defendants or related to the defendants in any capacity.”
Thus, appellants assert that by solely providing service to the Beachwood address,
“plaintiffs failed to make defendants aware of this lawsuit.”
{¶19} In contrast, plaintiffs argue that they complied with the express requirements
of Civ.R. 4 by serving appellants’ authorized agent at the Beachwood address, which is
the address designated in the parties’ Agreement, on appellants’ business website, and
listed with the Ohio Secretary of State. Plaintiffs contend that “using the address provided
by [appellants], and used by [appellants] themselves [was] reasonably calculated to notify
the [appellants] of the pending suit.”
{¶20} In challenging the presumption of valid service in this case, appellants
submitted the sworn statement of Adam Ostreicher, an “authorized representative” of the
appellants. Ostreicher averred, in relevant part:
AFFIANT FURTHER STATES that the named defendants previously
operated nursing facilities located at 599 South Shawnee Street, Lima, OH
45804 (LMOP, LLC), 240 Northcrest Drive, Napoleon, OH 43545 (NCOP,
LLC), and 1140 Knoxville Ave, St. Marys, OH 45884 (VLOP, LLC).
AFFIANT FURTHER STATES that, since April of 2015, Defendants have
never conducted any business at the location that Defendants were allegedly
served at * * * nor has [the Beachwood address] been Defendants’ usual
place of business.
AFFIANT FURTHER STATES that I have never received service in [this]
captioned case.
{¶21} Appellants further submitted the sworn statement of Eric M. Simon, who is
listed in the Ohio Secretary of State’s records as the registered agent for Defendants
NCOP and LMOP, and the “authorized representative” of VLOP. Simon averred, in
relevant part:
AFFIANT FURTHER STATES that I am the registered agent of record
with the Ohio Secretary of State’s office for NCOP, LLC and LMOP, LLC.
AFFIANT FURTHER STATES that, to the best of my knowledge and as
reflected on the court’s docket in this matter, I have never received service
in [this] captioned case.
{¶22} After careful consideration, we find the evidence attached to appellants’
motion to vacate required the trial court to hold an evidentiary hearing. We recognize
plaintiffs’ position that it was not notified that the Beachwood address was outdated, and
therefore, service to that address was reasonably calculated to provide appellants notice of
the pending suit. However, this court has held that a trial court commits reversible error
by “summarily overruling a defendant’s motion to set aside a judgment for lack of
service, when the defendant submits a sworn statement that she did not receive service of
process, without affording the defendant a hearing.” Money Tree Loan Co. v. Williams,
169 Ohio App.3d 336, 2006-Ohio-5568, 862 N.E.2d 885, ¶ 16 (8th Dist.). See also Khatib
v. Peters, 8th Dist. Cuyahoga No. 102663, 2015-Ohio-5144, ¶ 25; Goodwin v. Goodwin,
8th Dist. Cuyahoga No. 961151, 2011-Ohio-3263, ¶ 14.
{¶23} In this case, appellants have submitted two sworn statements from
authorized agents or representatives of appellants indicating that they did not receive
service of plaintiffs’ complaint. Following the clear precedent of this court in Money
Tree, we find a hearing is required to sufficiently assess the credibility of the evidence
submitted by appellants in order to determine whether they rebutted the presumption of
proper service. See Goodwin at ¶ 17.
{¶24} On remand, the trial court must assess the competing evidence submitted by
the parties to determine whether, as of the date this case was filed, service to the
Beachwood address would have constituted service to (1) an agent authorized by
appointment or by law to receive service of process; (2) the limited liability company at
its usual places of business; or (3) a manager or member of the limited liability company.
Upon consideration of this issue, the trial court must remain mindful of the basic tenent
of Ohio law that cases should be decided on their merits when possible. Rafalski v.
Oates, 17 Ohio App.3d 65, 67, 477 N.E.2d 1212 (8th Dist.1984), citing Perotti v.
Ferguson, 7 Ohio St.3d 1, 3, 454 N.E.2d 951 (1983). This is particularly true, where, as
here, large sums of money are at issue. Draghin v. Issa, 8th Dist. Cuyahoga No. 98890,
2013-Ohio-1898, ¶ 23 (“default judgments are not favored where large sums of money
are at issue.”).
{¶25} Based on the foregoing, we find that the trial court abused its discretion by
denying appellants’ motion to vacate default judgment without holding a hearing. The
trial court’s order denying appellants’ motion to vacate the default judgment is vacated,
and this case is remanded for a hearing to determine whether appellants ever received
service of the summons and complaint prior to the entry of judgment. Should the trial
court find after holding a hearing that the evidence submitted in plaintiff’s opposition
brief demonstrates that, despite the submitted affidavits, appellants did receive valid
service of the complaint and summons in compliance with Civ.R. 4.2(G), it shall deny the
motion to vacate. If it finds the service was not perfected upon a valid address, it shall
vacate the default judgment and proceed with the resolution of the case on the merits.
{¶26} Appellants’ fifth assignment of error is sustained. The remaining
assignments of error are rendered moot.
{¶27} Judgment reversed and remanded for the trial court to vacate the default
judgment.
It is ordered that appellants recover from appellees costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the common pleas 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.
EILEEN T. GALLAGHER, PRESIDING JUDGE
MELODY J. STEWART, J., and
SEAN C. GALLAGHER, J., CONCUR