Binsara, L.L.C.. v. Bolog ( 2019 )

[Cite as Binsara, L.L.C.. v. Bolog, 2019-Ohio-4040.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
BINSARA, LLC : JUDGES:
:
: Hon. W. Scott Gwin, P.J.
Plaintiff-Appellee : Hon. William B. Hoffman, J.
: Hon. Patricia A. Delaney, J.
-vs- :
: Case No. 2019CA00013
:
FRANK A. BOLOG, ET AL. :
:
:
Defendants-Appellants : OPINION
CHARACTER OF PROCEEDING: Appeal from the Stark County Court of
Common Pleas, Case No.
2017CV01748
JUDGMENT: AFFIRMED
DATE OF JUDGMENT ENTRY: September 30, 2019
APPEARANCES:
For Plaintiff-Appellee: For Defendants-Appellants:
LAURA L. MILLS JEFFREY JAKMIDES
PIERCE C. WALKER 325 East Main Street
101 Central Plaza South Alliance, OH 44601
Suite 1200
Canton, OH 44702
Stark County, Case No. 2019CA00013 2
Delaney, J.
{¶1} Defendants-Appellants Frank A. Bolog, Frank B. Bolog, Brad B. Bolog, Ben
Bolog, and Davis Motor Coach, Ltd. appeal the December 28, 2018 judgment entry of the
Stark County Court of Common Pleas.
FACTS AND PROCEDURAL HISTORY
Ramjay, Inc. v. US Coach, Ltd., Case Nos. 2013CV01325 and 2014CV01244
{¶2} On May 15, 2013, Ramjay, Inc. filed a complaint against US Coach, Ltd. in
the Stark County Court of Common Pleas, Case No. 2013CV01325. The complaint
alleged a breach of contract for the repair of a passenger bus delivered to US Coach, Ltd.
on June 25, 2012. On September 11, 2013, the parties reached a partial settlement
through mediation. Ramjay was to deposit $69,744 with the trial court to be held in
escrow. US Coach was to return the bus to Ramjay, pending an inspection by an
independent inspector. On May 1, 2014, the parties filed a joint stipulation of dismissal
without prejudice.
{¶3} On May 23, 2014, Ramjay filed a complaint for breach of contract as to the
passenger bus against US Coach in the Stark County Court of Common Pleas, Case No.
2014CV01244. Upon US Coach’s motion to dismiss, the trial court dismissed the
complaint on October 15, 2014, without prejudice.
Binsara, LLC v. US Coach, Ltd., Case No. 2014CV02878
{¶4} On December 16, 2014, Plaintiff-Appellee Binsara, LLC filed a complaint in
the Stark County Court of Common Pleas, Case No. 2014CV02878 against US Coach,
Ltd. alleging claims of breach of contract, unjust enrichment, and fraud. The president of
Binsara is the owner of Ramjay, Inc. Binsara stated in its complaint that on June 25, 2012,
Stark County, Case No. 2019CA00013 3
it delivered a passenger bus to US Coach for repairs. US Coach estimated it would cost
$63,431.64 for it to repair the vehicle and the repairs would be completed by July 31,
2012. In January 2013, Binsara inspected the bus and determined US Coach had not
made the appropriate repairs, rendering the bus inoperable. Binsara claimed US Coach’s
failure to timely and appropriately repair the bus caused it to incur expenses for alternate
transportation and lost profits.
{¶5} US Coach filed an answer, counterclaim, and third-party complaint. In its
third-party complaint, US Coach named Fleet Priority Services, LLC, CNA Insurance, and
Advantage Funding as third-party defendants.
{¶6} On December 15, 2016, the trial court issued a judgment entry stating the
case was settled by agreement of the parties. The trial court dismissed the case but
retained jurisdiction to enforce the settlement agreement. The Settlement Agreement,
which was never filed with the trial court, stated in pertinent part:
1. Settlement Terms
A. Discharge of Lien. The Parties agree that Coach shall discharge the
lien on the Bus owned by Binsara’s financer, Advantage Funding
(“Advantage”). The value of said lien is $70,000.00. Coach shall either 1.)
deliver to Binsara the sum of $70,000.00 to discharge said lien, or 2.) obtain
financing from Advantage sufficient to satisfy and discharge Binsara’s
liability on the Bus. The Parties further agree that upon discharge of the lien
or Coach obtaining financing, Binsara shall transfer title to the Bus to Coach
free and clear of all liens. For the purpose of such transfer, Binsara agrees
Stark County, Case No. 2019CA00013 4
that it will cooperate in good faith and take any and all steps necessary to
effectuate the Bus’s transfer to Coach.
B. Settlement payment. The parties agree that Coach shall deliver to
Binsara the sum of Forty Thousand and No/100 Dollars ($40,000.00) (the
“Payment”) as additional consideration for this Agreement and the
covenants herein contained.
C. Contingencies. The Parties agree and Binsara acknowledges that
Coach’s ability to satisfy its obligations detailed in Paragraphs 1(A) and 1(B)
is dependent on Coach obtaining financing for the same. Notwithstanding
anything to the contrary herein, this Agreement shall be strictly contingent
on Coach obtaining financing to satisfy Paragraphs 1(A) and 1(B) hereof.
Coach shall have ___ days from the execution of this Agreement to obtain
said financing. In the event Coach is unable to secure said financing, this
Agreement shall be void.
{¶7} On May 24, 2017, the parties filed a Stipulated and Agreed Final Judgment
Entry. The entry stated Binsara was awarded judgment against US Coach in the amount
of $110,000. The parties agreed Binsara would not execute on the judgment until the
expiration of 21 days following the filing of the judgment entry. The basis for the 21 day
grace period was to allow US Coach to obtain financing.
{¶8} US Coach failed to pay the judgment and its representatives did not appear
at the debtor’s examination.
Stark County, Case No. 2019CA00013 5
Binsara, LLC v. Frank K. Bolog, et al., Case No. 2017CV01748
{¶9} On August 28, 2017, Binsara filed a complaint against Defendants-
Appellants Frank K. Bolog, Frank A. Bolog, Frank B. Bolog, Brad A. Bolog, Ben Bolog,
and Davis Motor Coach, Ltd.1 In the complaint, Binsara brought three claims: constructive
fraud, piercing the corporate veil, and punitive damages. The complaint alleged that at
the time the parties entered into the Stipulated and Agreed Final Judgment Entry on May
24, 2017, US Coach was defunct and/or not operating any business. The Bologs filed
their amended answer on November 9, 2017.
{¶10} Binsara filed a partial motion for summary judgment on January 26, 2018.
It argued it was entitled to judgment as a matter of law on its claims for constructive fraud
and piercing the corporate veil. In its motion, Binsara stated it had submitted written
discovery to the Bologs on December 8, 2017, with responses due on January 15, 2018.
As of the date of the motion for partial summary judgment, the Bologs had not responded
to its Requests for Admissions; therefore, those Admissions should be deemed admitted
as a matter of law.
{¶11} On January 30, 2018, the Bologs filed a motion for summary judgment and
request for sanctions. In their motion, they argued Binsara’s claims for constructive fraud
and piercing the corporate veil were barred by the doctrine of res judicata, specifically
issue preclusion. The Bologs stated the issue between the parties as to damages for
repair of the passenger bus had been litigated multiple times, resulting in a final judgment
on May 24, 2017. Based on the final judgment, Binsara was precluded from raising new
claims.
1 Frank K. Bolog was dismissed as a party defendant on October 31, 2017.
Stark County, Case No. 2019CA00013 6
{¶12} On March 2, 2018, the trial court issued a judgment entry denying both
parties’ motions for summary judgment.
{¶13} On May 21, 2018, the trial court granted Binsara’s motion to amend its
complaint to add the claim of successor liability against Davis Motor Coach, Ltd. The
Bologs filed a motion to dismiss the successor liability claim.
{¶14} On June 4, 2018, the Bologs filed Motion for Leave and Second Motion for
Summary Judgment. The trial court granted the Bologs’ motion for leave to file a second
motion for summary judgment. In their second motion for summary judgment, the Bologs
argued that pursuant to Berry v. Javitch, Block & Rathbone, L.L.P., 127 Ohio St. 3d 480,
2010-Ohio-5772, 940 N.E.2d 1265, Binsara’s claim for constructive fraud was barred. In
Berry, the Ohio Supreme Court held that when parties to a claim have executed a
settlement agreement and consent judgment entry, a party cannot subsequently institute
a separate cause of action for fraud in the inducement of the settlement agreement
without seeking relief from the consent judgment and rescinding the settlement
agreement. The Bologs stated Binsara never sought relief from the May 24, 2017
Stipulated and Agreed Final Judgment Entry before filing its claim for constructive fraud
against the Bologs.
{¶15} On August 7, 2018, the trial court issued its judgment entry on the Bologs’
motion to dismiss and second motion for summary judgment. The trial court denied the
Bologs’ motion to dismiss Binsara’s successor liability claim. The trial court, however,
granted the Bologs’ motion for summary judgment as to Binsara’s claim for constructive
fraud. The trial court found pursuant to Berry, supra, Binsara could not seek both to
enforce the settlement agreement and pursue a fraud claim because the remedies were
Stark County, Case No. 2019CA00013 7
inconsistent: “one which seeks to enforce the terms of the settlement by recovering the
agreed-upon amount, and the other which seeks to gain more compensation than what
was agreed-upon on the theory that they entered into a settlement due to a fraudulent
misrepresentation.” (Judgment Entry, August 7, 2018).
{¶16} The matter proceeded to a bench trial on September 5, 2018. The only
claims before the trial court were Binsara’s claims for piercing the corporate veil,
successor liability against Davis Motor Coach, Ltd., and punitive damages. On December
28, 2018, the trial court issued its Findings of Fact and Conclusions of Law. The trial court
made the following relevant findings of fact:
{¶17} US Coach was formed on December 1, 2008, by Frank A. Bolog and Ben
Bolog was later added as an agent for US Coach; the current officers and directors of US
Coach are Frank A. Bolog and Ben Bolog. The address for US Coach was listed at 170
Prospect Street in Alliance, Ohio. US Coach kept no meeting minutes, corporate
appointments, or board records. Ben Bolog testified “US Coach” was a trade name for
multiple companies, including A & M Transit Lines and Davis Motor Coach. On October
27, 2010, US Coach filed for bankruptcy and was discharged from bankruptcy on January
20, 2010. The last financial transaction for US Coach was a transfer of $52.00 to Davis
Bus Tours, Ltd. US Coach entered into a contract with Binsara on June 14, 2012 to repair
a passenger bus. After US Coach and Binsara entered into the Settlement Agreement
regarding the repair of the passenger bus, US Coach was unable to secure financing to
pay the funds required by the Stipulated and Agreed Final Judgment Entry.
{¶18} The bankruptcy proceedings showed that US Coach was wholly owned by
Fidelity US Coach. Ben Bolog was listed as the agent for Fidelity US Coach. Fidelity US
Stark County, Case No. 2019CA00013 8
Coach filed for bankruptcy on the same day as US Coach, but the bankruptcy records
showed that Fidelity US Coach was wholly owned by A & M Transit Lines.
{¶19} A & M Transit Lines was formed on January 26, 1968 by Frank A. Bolog. Its
business address was also listed at 170 Prospect Street in Alliance, Ohio. The officers
and directors of A & M Transit Lines are Frank K. Bolog, Frank A. Bolog, and Ben Bolog.
{¶20} Davis Motor Coach was incorporated on November 7, 2011, by Ben Bolog.
There are no corporate records, meeting minutes, or board appointments for Davis Motor
Coach. The original business address for Davis Motor Coach was 170 Prospect Street in
Alliance, Ohio. Davis Motor Coach maintains three bank accounts, for which the address
is listed as 170 Prospect Street in Alliance, Ohio. US Coach Sales & Leasing, Ltd. was
formed on December 22, 2008, by Frank A. Bolog. US Coach Tours, Ltd. was formed on
January 5, 2011, by Brad A. Bolog. Both corporations’ addresses were 170 Prospect
Street in Alliance, Ohio. Bank records showed transfers of money between all the
business entities incorporated by the Bologs.
{¶21} Based on the findings of fact, the trial court made the following conclusions
of law:
{¶22} The trial court considered the three-pronged test to determine whether to
pierce the corporate veil so that the Bologs as individual shareholders should be liable for
wrongs allegedly committed against Binsara: (1) control over the corporation by those
held liable was so complete that the corporation has no separate mind, will, or existence
of its own, (2) control over the corporation by those to be held liable was exercised in
such a manner as to commit fraud, an illegal act, or a similarly unlawful act against the
person seeking to disregard the corporate entity, and (3) injury or unjust loss resulted to
Stark County, Case No. 2019CA00013 9
the plaintiff from such control and wrong. Belvedere Condominium Unit Owners’ Assn. v.
R.E. Roark Cos., Inc., 67 Ohio St. 3d 274, 617 N.E.2d 1075 (1963); Dombroski v.
Wellpoint, Inc., 119 Ohio St. 3d 506, 2008-Ohio-4827, 895 N.E.2d 538.
{¶23} The trial court found the corporate form of US Coach was used to commit a
fraud on Binsara. Specifically, US Coach fraudulently entered into a contract with Binsara
for repairs to its bus when in fact, US Coach was not a valid legal entity at the time of the
contract and had filed bankruptcy in 2010. In doing so, the Bologs used a sham entity to
insulate themselves or their other non-defunct entities for liability. Based on the fraudulent
act by the Bologs and US Coach, Binsara suffered injury and unjust loss when US Coach
was unable to satisfy its obligations.
{¶24} While the trial court acknowledged that piercing the corporate veil is a
remedy, not an independent cause of action, the trial court concluded that US Coach’s
liability was previously determined in Case No. 2014CV02878 pursuant to the Stipulated
and Agreed Final Judgment Entry. Further, the trial court found sufficient evidence to
demonstrate the Bologs used their control over US Coach to perpetrate a fraud on
Binsara.
{¶25} The trial court next found that Binsara’s claims were not barred by res
judicata. The previous litigation between Binsara and US Coach did not consider the
personal liability or corporate status of US Coach.
{¶26} The trial court finally found that Binsara did not establish successor liability
as to Davis Motor Coach.
{¶27} The trial court, finding that the corporate veil should be pierced, ordered that
Frank A. Bolog and Ben Bolog should be held individually liable for the $110,000 judgment
Stark County, Case No. 2019CA00013 10
entered against US Coach, Ltd. in Binsara, LLC v. US Coach, Ltd., Case No.
2014CV02878. It did not award punitive damages.
{¶28} It is from this judgment the Bologs now appeal.
ASSIGNMENTS OF ERROR
{¶29} The Bologs raise two Assignments of Error:
{¶30} “I. AS THE TRIAL COURT HELD, THE CORPORATE VEIL CAN BE
PIERCED AND INDIVIDUAL LIABILITY EXISTS WHEN A CORPORATION IS USED
FOR CRIMINAL OR FRAUDULENT PURPOSES TO THE DETRIMENT OF A THIRD
PARTY. THE TRIAL COURT DISMISSED THE FRAUD CLAIM AGAINST THE
APPELLANTS, AND THUS ITS RULING PIERCED THE CORPORATE VEIL WAS
CONTRADICTORY AND CONTRARY TO OHIO LAW.
{¶31} “II. THE TRIAL COURT FOUND THAT US COACH, LTD. WAS UNABLE
TO SECURE FINANCING TO PAY THE FUNDS REQUIRED BY THE STIPULATED
AND AGREED FINAL JUDGMENT ENTRY. PURSUANT TO THE EXPLICIT WORDING
OF SAID JUDGMENT ENTRY, THIS FAILURE TO SECURE FINANCING RENDERED
THE AGREEMENT VOID. DESPITE THIS FACT, THE TRIAL COURT RULED THAT
THIS CLEARLY VOIDED THE AGREEMENT WAS ENFORCEABLE AGAINST THE
APPELLANTS.”
ANALYSIS
Standard of Review
{¶32} The trial court conducted a bench trial in this case. In Eastley v. Volkman,
132 Ohio St. 3d 328, 2012–Ohio–2179, 972 N.E.2d 517, the Ohio Supreme Court clarified
the standard of review appellate courts should apply when assessing the manifest weight
Stark County, Case No. 2019CA00013 11
of the evidence in a civil case. The Ohio Supreme Court held the standard of review for
manifest weight of the evidence for criminal cases stated in State v. Thompkins, 78 Ohio
St.3d 380, 678 N.E.2d 541 (1997), is also applicable in civil cases. Eastley v. Volkman,
132 Ohio St. 3d 328, 2012–Ohio–2179, 972 N.E.2d 517. A reviewing court is to examine
the entire record and determine “whether in resolving conflicts in the evidence, the finder
of fact clearly lost its way and created such a manifest miscarriage of justice that the
judgment must be reversed and a new trial ordered.” Id.; see also Sheet Metal Workers
Local Union No. 33 v. Sutton, 5th Dist. Stark No. 2011 CA 00262, 2012–Ohio–3549. “In
a civil case, in which the burden of persuasion is only by a preponderance of the evidence,
rather than beyond a reasonable doubt, evidence must still exist on each element
(sufficiency) and the evidence on each element must satisfy the burden of persuasion
(weight).” Eastley v. Volkman, 132 Ohio St. 3d 328, 2012–Ohio–2179, 972 N.E.2d 517.
{¶33} As an appellate court, we are not fact finders; we neither weigh the evidence
nor judge the credibility of witnesses. Markel v. Wright, 5th Dist. Coshocton No.
2013CA0004, 2013–Ohio–5274. Further, “an appellate court should not substitute its
judgment for that of the trial court when there exists * * * competent and credible evidence
supporting the findings of fact and conclusion of law.” Seasons Coal Co. v. Cleveland, 10
Ohio St. 3d 77, 80, 461 N.E.2d 1273 (1984). The underlying rationale for giving deference
to the findings of the trial court rests with the knowledge that the trial judge is best able to
view the witnesses and observe their demeanor, gestures, and voice inflections, and use
these observations in weighing the credibility of the proffered testimony. Id. Accordingly,
a trial court may believe all, part, or none of the testimony of any witness who appears
before it. Rogers v. Hill, 124 Ohio App. 3d 468, 706 N.E.2d 438 (4th Dist. 1998).
Stark County, Case No. 2019CA00013 12
{¶34} As to questions of law, an appellate court applies a de novo review to the
trial court’s legal findings. Hayward v. Summa Health Sys./Akron City Hosp., 139 Ohio
St.3d 238, 2014-Ohio-1913, 11 N.E.3d 243, ¶23; Office of Consumers' Counsel v. Pub.
Util. Comm., 58 Ohio St. 2d 108, 110, 388 N.E.2d 1370 (1979) (“[a]s to questions of law,
[a reviewing] court has complete, independent power of review[;] [l]egal issues are
accordingly subject to more intensive examination than are factual questions”).
{¶35} Pursuant to this standard of review, we consider the Bologs’ first and
second Assignments of Errors.
Piercing the Corporate Veil
{¶36} The Bologs contend in their first Assignment of Error that the trial court erred
when it considered Binsara’s claim for piercing the corporate veil after it found Binsara’s
claim for constructive fraud failed as a matter of law. The Bologs argue that without a
claim of fraud, Binsara could not fulfill the second prong under the Belvedere test for
piercing the corporate veil. We disagree.
{¶37} It is a well-settled principle in Ohio law that shareholders, officers, and
directors of a corporation are generally not liable for the debts of the corporation.
Dombroski v. WellPoint, Inc., 119 Ohio St. 3d 506, 2008-Ohio-4827, 895 N.E.2d 538, ¶ 16
citing Section 3, Article XIII, Ohio Constitution; Belvedere Condominium Unit Owners’
Assn. v. R.E. Roark Cos., Inc., 67 Ohio St. 3d 274, 287, 617 N.E.2d 1075 (1963).
Shareholders, however, do not hold an absolute immunity from liability for the actions of
their corporations. Id. at ¶ 17. The legal fiction of the corporate form cannot stand if used
for a purpose or intent not within its reason and policy. Id. citing State ex rel. Atty. Gen. v.
Std. Oil Co., 49 Ohio St. 137, 30 N.E. 279, paragraph one of the syllabus. When a
Stark County, Case No. 2019CA00013 13
shareholder misuses the corporate form as a shield from liability for their own misdeeds,
Ohio law will permit the piercing of the corporate veil as a rare exception to the guiding
principles of limited shareholder liability. Id. at ¶ 17, 26 citing Belvedere, 67 Ohio St. 3d at
287; Dole Food Co. v. Patrickson, 538 U.S. 468, 475, 123 S. Ct. 1655, 155 L. Ed. 2d 643
(2003). Piercing the corporate veil is a judicial act that imposes personal liability on
otherwise immune corporate officers, directors, or shareholders for the corporation’s
wrongful acts. Denny v. Breawick, LLC, 2019-Ohio-2066, -- N.E.3d –, ¶ 15 (3rd Dist.)
citing Minno v. Pro-Fab, Inc., 121 Ohio St. 3d 464, 2009-Ohio-1247, 905 N.E.2d 613, ¶ 8.
{¶38} To decide whether to pierce the corporate veil, the courts must apply a
three-pronged test established in Belvedere, supra and clarified in Dombroski, supra. The
focus of the test is the extent to which the shareholder controlled the corporation and
whether the shareholder misused his or her control to commit specific egregious acts that
injured the plaintiff: (1) control over the corporation by those to be held liable was so
complete that the corporation has no separate mind, will, or existence of its own, (2)
control over the corporation by those to be held liable was exercised in such a manner as
to commit fraud, an illegal act, or a similarly unlawful 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, supra, at paragraph three of the syllabus; Dombroski,
supra, at ¶ 29.
{¶39} All three prongs of the test must be met for the court to pierce the corporate
veil. Denny v. Breawick, LLC, 2019-Ohio-2066, -- N.E.3d --, ¶ 19 (3rd Dist.). Because
piercing the corporate veil is primarily a matter for the trier of fact, an appellate court will
not reverse a decision to pierce the corporate veil if some competent, credible evidence
Stark County, Case No. 2019CA00013 14
supports the determination. Id. at ¶ 20 citing Snapp v. Castlebrook Builders, Inc., 2014-
Ohio-163, 7 N.E.3d 574, ¶ 85 (3rd Dist.) quoting State ex rel. DeWine v. S & R Recycling,
Inc., 195 Ohio App. 3d 744, 2011-Ohio-3371, 961 N.E.2d 1153, ¶ 29 (7th Dist.). Bates v.
Rose, 6th Dist. Wood No. WD-16-068, 2017-Ohio-7977, 2017 WL 4334178, ¶ 26; Longo
Constr., Inc. v. ASAP Tech. Serv., Inc., 140 Ohio App. 3d 665, 748 N.E.2d 1164 (8th Dist.
2000); Clinical Components, Inc. v. Leffler Industries, Inc., 9th Dist. No. 95CA0085, 1997
WL 28246, *3 (Jan. 22, 1997).
{¶40} The Bologs contend in their appeal that the trial court erred as to the second
prong of the Belvedere test; they raise no argument challenging the trial court’s findings
as to the first or third prongs. As such, our analysis will be limited to whether the plaintiff
demonstrated that the Bologs as corporate officers, directors, or shareholders exercised
control over the corporation in such a manner as to commit fraud, an illegal act, or a
similarly unlawful act. Dombroski, supra at ¶ 29.
{¶41} In Belvedere, the second prong originally stated that corporate control was
exercised in such a manner as to “commit fraud or an illegal act.” Belvedere, supra at
paragraph three of the syllabus. After Belvedere, the Ohio appellate districts were split on
the interpretation of “fraud or illegal act.” Dombroski, supra at ¶ 20-21. Some courts
liberally construed the language of the second prong because piercing the corporate veil
is an equitable remedy. Id. at ¶ 21. The courts allowed additional forms of misconduct to
qualify as “fraud or illegal act” where it would be unjust to allow the shareholders to hide
behind the fiction of the corporate entity. Id. at ¶ 21-22. Other courts strictly interpreted
the second prong to find that a plaintiff must allege the corporate officer, director, or
Stark County, Case No. 2019CA00013 15
shareholder must use their control over a corporation to commit a fraudulent or illegal act
in order to pierce the corporate veil. Id. at ¶ 23-24.
{¶42} In Dombroski, the Court acknowledged there were “compelling reasons” for
expanding the fraud or illegal act test in Belvedere because individuals are normally liable
for their actions. Id. at ¶ 25. The Court struck a balance between the principle of limited
shareholder liability and that shareholders occasionally use the corporate form as a shield
from liability for their own misdeeds. Id. at ¶ 26. The Court therefore clarified the
Belvedere test to include “fraud, an illegal act, or a similarly unlawful act” in order to
address shareholders that abuse the corporate form to commit acts that are as
objectionable as fraud or illegality. Id. at ¶ 28.
{¶43} In the present case, the trial court found the second prong of the Belvedere
test was met because the Bologs engaged in fraud when they, as the corporate officers
of US Coach, entered into the contract with Binsara for the repair of the passenger bus
when in fact US Coach was not a legal entity at the time of the contract. By doing so, the
Bologs used a sham entity to insulate themselves from liability.
{¶44} Upon review of the record, we find there is competent, credible evidence to
support the trial court’s findings that the Bologs engaged in a fraudulent, illegal act, or
similarly unlawful act when they entered into the contract to repair the passenger bus
through the defunct US Coach. The facts of this case demonstrate the rare exception
where the principle of limited shareholder liability must be balanced against corporate
officers who use the corporate form as a shield to protect against their misdeeds.
{¶45} The Bologs argue there must be a pending claim of fraud in order for the
trial court to pierce the corporate veil. As the trial court dismissed Binsara’s claim for
Stark County, Case No. 2019CA00013 16
constructive fraud, the Bologs argue the trial court could not determine the facts
established the Bologs engaged in fraud. The Bologs do not cite to any case law to
support their argument on this issue. Nor do the Bologs challenge the trial court’s findings
of fact as to the bankruptcy status of US Coach at the time it entered into the contract
with Binsara for the repair of the passenger bus.
{¶46} The trial court acknowledged the Bologs’ argument that without a pending
cause of action for constructive fraud, the trial court could not reach the issue of piercing
the corporate veil as it is an equitable remedy. The trial court concluded that the
underlying liability of US Coach was already litigated and determined in Binsara, LLC v.
US Coach, Ltd., Stark County No. 2014CV02878 pursuant to a Stipulated and Agreed
Judgment Entry. The Settlement Agreement between US Coach and Binsara was not
filed with the Stipulated and Agreed Judgment Entry. Further, there was no dispute of fact
that US Coach did not meet its obligations under the Settlement Agreement. In this case,
there was competent, credible evidence to support the trial court’s finding there was a
valid and enforceable judgment against US Coach, the genesis of which arose from the
fraud by the Bologs, as established by Binsara and factually unchallenged by the Bologs
on appeal.
{¶47} We find the judgment of the trial court that Binsara established the three
elements of Belvedere test to pierce the corporate veil is supported by the competent,
credible evidence and law.
{¶48} The Bologs’ first Assignment of Error is overruled.
Stark County, Case No. 2019CA00013 17
Enforceability of the Underlying Settlement Agreement
{¶49} In their second Assignment of Error, the Bologs argue that pursuant to the
terms of the Settlement Agreement, US Coach did not meet its obligations to secure
financing and the Settlement Agreement is therefore void, precluding Binsara from
enforcing the terms of the Settlement Agreement.
{¶50} Upon review of the Bologs’ second Assignment of Error, we cannot find a
reference to the record where the Bologs raised this argument that the Settlement
Agreement was void and the trial court ruled against the Bologs on the issue. The trial
court’s December 28, 2018 judgment states only that “[t]he Settlement Agreement did not
contain the number of days US Coach, Ltd. had to obtain the financing required.”
{¶51} This Court has previously stated in Hadley v. Figley, 2015-Ohio-4600, 46
N.E.3d 1129, ¶ 22 quoting Snyder v. Snyder, 5th Dist. Richland No. 2006 CA 0022, 2006-
Ohio-4795, ¶ 19–20:
“It is well established that a party cannot raise any new issues or legal
theories for the first time on appeal.” Dolan v. Dolan, 11th Dist. Nos. 2000–
T–0154 and Nos. 2001-T-2003, 2002-Ohio-2440, [2002 WL 1012575] , at ¶
7, citing Stores Realty Co. v. Cleveland (1975), 41 Ohio St. 2d 41, 43, 322
N.E.2d 629. “Litigants must not be permitted to hold their argument in
reserve for appeal, thus evading the trial court process.” Nozik v. Kanaga
(Dec. 1, 2000), 11th Dist. No. 99-L-193, [2000 WL 1774136], 2000 Ohio
App. LEXIS 5615.
Failure to raise this issues before the trial court operates as a waiver of
Appellant's right to assert such for the first time on appeal. See Hypabyssal,
Stark County, Case No. 2019CA00013 18
Ltd. v. City of Akron Hous. Appeals Bd. (Nov. 22, 2000), 9th Dist. No. 20000
[2000 WL 1729471], citing State ex rel. Zollner v. Indus. Comm. (1993), 66
Ohio St. 3d 276, 278, 611 N.E.2d 830.
{¶52} Assuming this matter was raised before the trial court, we find there was
competent, credible evidence to support the trial court’s determination that the Bologs
were liable for the May 24, 2017 judgment. On an unknown date, Binsara and US Coach
entered into a Settlement Agreement where US Coach agreed to pay Binsara $110,000
and it was acknowledged that US Coach needed to obtain financing to satisfy the payment
agreement. The time period for which US Coach was to obtain financing was left blank
on the Settlement Agreement. On May 24, 2017, Binsara and US Coach filed a Stipulated
and Agreed Final Judgment Entry where Binsara was awarded judgment against US
Coach in the amount of $110,000.00. The parties further agreed Binsara would not
execute on the judgment for 21 days so that US Coach could obtain financing, pursuant
to the trial testimony of Matthew Mohr, the attorney involved in the litigation between
Binsara and US Coach.
{¶53} The Bologs argue that pursuant to the terms of the Settlement Agreement,
it is void if US Coach did not obtain financing. The evidence in this case shows, however,
that the parties agreed that Binsara was permitted to execute on the judgment after 21
days as of the date of the judgment entry. The 21 day period was to allow US Coach to
obtain financing. After the 21 day period expired, Binsara was permitted to execute upon
the judgment per the terms of the Stipulated and Agreed Judgment Entry.
Stark County, Case No. 2019CA00013 19
{¶54} We find the Bologs’ argument as to the enforceability of the Settlement
Agreement is not supported by the evidence. We therefore overrule their second
Assignment of Error.
CONCLUSION
{¶55} The judgment of the Stark County Court of Common Pleas is affirmed.
By: Delaney, J.,
Gwin, P.J. and
Hoffman, J., concur.