DeBlasio v. Sinclair , 2012 Ohio 5848 ( 2012 )

[Cite as DeBlasio v. Sinclair, 2012-Ohio-5848.]
STATE OF OHIO, MAHONING COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
AL RHODES, PERSONAL )
REPRESENTATIVE OF THE ESTATE )
OF HENRY A. DIBLASIO, )
)
PLAINTIFF-APPELLANT, ) CASE NO. 08-MA-23
)
V. ) OPINION
)
R. ALLEN SINCLAIR et al., )
)
DEFENDANTS-APPELLEES. )
CHARACTER OF PROCEEDINGS: Civil Appeal from Court of Common
Pleas of Mahoning County, Ohio
Case No. 07CV697
JUDGMENT: Affirmed in part
Reversed in part and Remanded
APPEARANCES:
For Plaintiff-Appellant Atty. Alan J. Matavich
945 Windham Court, Suite 3
Youngstown, Ohio 44512
For Defendant-Appellee Atty. R. Allen Sinclair
11 Overhill Road
Youngstown, Ohio 44512
JUDGES:
Hon. Gene Donofrio
Hon. Joseph J. Vukovich
Hon. Mary DeGenaro
Dated: December 4, 2012
[Cite as DeBlasio v. Sinclair, 2012-Ohio-5848.]
DONOFRIO, J.
{¶1} Plaintiff-appellant Al Rhodes, Personal Representative of the Estate of
Henry A. DiBlasio appeals a decision of the Mahoning County Common Pleas Court
granting summary judgment in favor of defendants-appellants R. Allen Sinclair, et al.
on his claims of fraudulent conversion or transfer brought pursuant to the Ohio
Uniform Fraudulent Transfer Act, R.C. Chapter 1336.
{¶2} Upon becoming an attorney in 1991, R. Allen Sinclair (Sinclair) joined
DiBlasio, an attorney with an established practice, in a partnership to practice law.
(Sinclair dep., Vol. I, pp. 8, 29, 34.) Their law office was in a commercial building
owned by DiBlasio located at 11 Overhill Road in Boardman, Ohio. (Sinclair dep.,
Vol. I, p. 63.) DiBlasio steered cases to Sinclair and advanced advertising fees for
the partnership. (Sinclair dep., Vol. I, pp. 28-29, 38.)
{¶3} DiBlasio abruptly retired a few years later. (Sinclair dep., Vol. I, pp. 29,
35.) Consequently, Sinclair owed DiBlasio money for pending cases and the costs
that he had advanced in furtherance of the partnership. (Sinclair dep., Vol. I, p. 30)
Sinclair never denied owing DiBlasio any money. (Sinclair dep., Vol. I, p. 30.)
{¶4} Sinclair purchased the office building at 11 Overhill from DiBlasio
through a company named KAS Enterprises, a fictitious name created by Sinclair and
his wife, Kimberly Sinclair. (Sinclair dep., Vol. I, pp. 8, 32.) Kimberly was the owner
of KAS Enterprises. (Sinclair dep., Vol. I, p. 9.)
{¶5} Subsequently, DiBlasio obtained a judgment against Sinclair in the
Mahoning County Common Pleas Court in the amount of $25,610.64 plus interest in
case number 2003 CV 638 on February 27, 2003. (DiBlasio Appellate Brief,
Appendix 2, p. 2.)
{¶6} At the time, Sinclair and his wife resided at 104 Newport Drive in
Boardman, Ohio. Sinclair had purchased the home in late 2000. Sinclair purchased
the home for $275,000.00 and it was titled solely in his name. (Sinclair dep., Vol. I, p.
12; Sinclair dep., Vol. II, p. 115; Sinclair aff., ¶34; DiBlasio’s Exhibit 6.) Sinclair had
made a $10,000.00 down payment on the house. (Sinclair dep., Vol. I, p. 14.) And
while the property was valued at only $253,000.00, Sinclair and his wife were able to
-2-
mortgage the home to ABN AMRO Mortgage Group, Inc. (ABN AMRO) for
$276,000.00. (Sinclair aff., ¶¶35, 37, Exhibit A.) Additionally, in August 2002, Sinclair
was able to acquire a $67,753.00 home equity line of credit on the home. (Sinclair
aff., ¶38, Exhibit B.)
{¶7} As a result of the February 2003 Mahoning County Common Pleas
Court judgment DiBlasio obtained against Sinclair, DiBlasio perfected a lien on the
Sinclairs’ home at 104 Newport Drive. (Sinclair aff., ¶39.) In July 2004, Sinclair
transferred the property into his wife’s name solely, by quit claim deed. (Sinclair dep.,
Vol. I, pp. 12-13; Sinclair aff., ¶40; DiBlasio’s Exhibit 6.) According to Sinclair, at the
time he transferred the property into his wife’s name, the principal balance on the
ABN AMRO mortgage was $265,087.06 and $47,621.67 remained on the Bank One
home equity line of credit. (Sinclair aff., ¶¶41, 43, Exhibits B, C.)
{¶8} With the suspension of his law license looming, Sinclair turned to real
estate investing and created a company named Newport Investments, LLC in
September 2004.1 (Sinclair dep., Vol. I, p. 52.) He was the organizer and statutory
agent, yet Kimberly was designated as a one hundred percent member. (Sinclair
dep., Vol. I, p. 53.) Newport Investments, LLC is a property management company
and trustee for certain land trusts created by Sinclair to hold title to investment
properties. (Sinclair dep., Vol. I, p. 57.) It collects rents and manages property.
(Sinclair dep., Vol. I, p. 57.)
{¶9} Sinclair also created a company later incorporated as Newport
Development, Inc. (Sinclair dep., Vol. I, pp. 57, 87-89; DiBlasio’s Exhibits 20, 21.)
Newport Development, Inc. manages Newport Investments, LLC. (Sinclair dep., Vol.
I, p. 57, 110-111.) In effect, Newport Investments, LLC is a pass-through entity in
which whatever money came into it goes out to Newport Development, Inc. (Sinclair
dep., Vol. I, pp. 57-58.) According to Sinclair, it is common for real estate investment
1. Sinclair’s law license was indefinitely suspended in December 2004. (Sinclair dep., Vol. I, pp. 8, 27,
69; Mahoning Cty. Bar Assn. v. Sinclair, 105 Ohio St.3d 65, 2004-Ohio-7014, 822 N.E.2d 360.) His
license was reinstated in 2008, but in May 2012 his resignation was accepted with disciplinary action
pending. Mahoning Cty. Bar Assn. v. Sinclair, 117 Ohio St.3d 1205, 2008-Ohio-935, 881 N.E.2d 1258;
In re Resignation of Sinclair, 132 Ohio St.3d 1208, 2012-Ohio-2646, 970 N.E.2d 958.
-3-
companies to be structured this way for accounting purposes and tax advantages.
(Sinclair dep., Vol. I, pp. 58-61.) Newport Development, Inc. controls all of Sinclair’s
real estate investments. (Sinclair dep., Vol. I, p. 112.) He is the sole director,
president, and treasurer of Newport Development, Inc. (Sinclair dep., Vol. I, pp. 112-
113.) Yet, again, his wife, Kimberly, is the sole shareholder. (Sinclair dep., Vol. I, pp.
94-95.)
{¶10} With the impending suspension of his law license and the pursuit of his
new venture into real estate investing, Sinclair began purchasing houses in 2004,
ultimately buying 22 properties in Mahoning County which he placed in the
aforementioned land trusts. Newport Development, Inc. is the beneficiary of most of
the land trusts with Newport Investments, LLC as trustee. (Sinclair dep., Vol. II, p.
57.) Of particular interest to DiBlasio in this case are seven homes that Sinclair or his
wife purchased and were at some point titled solely in Sinclair’s own name. (Sinclair
dep., Vol. II, p. 76, et seq., DiBlasio’s Exhibits 13-19.) Shortly after buying the
properties, Sinclair transferred them to Newport Investments, LLC which then later
sold them for a higher price than which Sinclair had paid for them.
{¶11} Meanwhile, in September 2005, DiBlasio obtained another judgment
against Sinclair; this time in federal court. The judgment was for $255,000.00 plus
interest in the United States District Court, Northern District of Ohio, case number 4:
03 CV 0348. (DiBlasio Appellate Brief, Appendix 3, p. 3.)
{¶12} In 2006, Newport Development, Inc. paid $22,625.16 for repairs and
renovations to the Sinclairs’ home at 104 Newport Drive. (Sinclair dep., Vol. II, p. 146;
DiBlasio’s Exhibit 34.) The home was placed in a trust called the 104 Newport Drive
Trust on February 12, 2006. (Sinclair aff., ¶45.) Tara Snyder, Sinclair’s sister, was
designated the sole beneficiary of the trust. (Sinclair aff., ¶46.) Sinclair’s wife sold
the home to Tara by way of land contract in February 2006. (Kimberly Sinclair dep.,
p. 116; Sinclair dep., Vol. I, p. 50; DiBlasio’s Exhibit 10.) The Sinclairs then
purchased a home for themselves at 171 Newport Drive for $300,000.00, which was
titled solely in Sinclair’s wife’s name. (Kimberly Sinclair dep., p. 59-60.)
-4-
{¶13} In a deed recorded on July 24, 2006, Snyder quitclaimed her interest in
104 Newport Drive back to Kimberly Sinclair. (Plaintiff’s Exhibit 6, p. 4; Kimberly
Sinclair dep., p. 58-59.) Then, just a week later, Kimberly transferred the property to
Sinclair’s mother Thelma Blosser, as trustee of the 104 Newport Drive Trust for
nominal consideration. (Plaintiff’s Exhibit 6, p. 6; Sinclair dep., Vol. II, p. 111.) After
the litigation that led to this appeal was initiated, Blosser resigned as trustee and
Sinclair became trustee of the 104 Newport Drive Trust. (Plaintiff’s Exhibit 51; Sinclair
dep., Vol. II, p. 120.) The property remains titled in Blosser’s name as trustee for the
trust and is listed as a rental on Newport Development, Inc.’s balance sheet.
(Plaintiff’s Exhibit 34.)
{¶14} On August 7, 2007, DiBlasio filed his amended complaint against
Sinclair. (T.d. 35.) It contained two counts. The first count was for fraudulent
conversion or transfer brought pursuant to the Ohio Uniform Fraudulent Transfer Act
(UFTA), R.C. Chapter 1336. The second count was for foreclosure on Sinclair’s
home at 104 Newport Drive. The amended complaint also named as party
defendants: Sinclair’s wife, Kimberly A. Sinclair; Newport Investments, LLC; Newport
Development, Inc.; ABN AMRO Mortgage Group, Inc.; Thelma J. Blosser as trustee;
the Mahoning County Treasurer; Tara and Lawrence Snyder; Newport Investments,
LLC as trustee of the various 22 land trusts; Sinclair as trustee of the 104 Newport
Drive Trust; the 22 land trusts; KAS Financial Group, LLC; Mama Go Shoppin, Inc.;
the 104 Newport Drive Trust; and John Doe’s 1-40.
{¶15} On October 26, 2007, Sinclair filed a motion for summary judgment.
(T.d. 76.) Concerning DiBlasio’s first claim under the UFTA, Sinclair argued that
neither he nor his wife had made any transfers. They insisted that all transfers of
investment properties were undertaken in their capacity as agents for Newport
Development, Inc. and Newport Investments, LLC. As for the 104 Newport Drive
property, Sinclair claimed the property never qualified as an asset for purposes of the
UFTA because it was encumbered by liens that exceeded the property’s value.
{¶16} On December 26, 2007, DiBlasio filed a brief in opposition to Sinclair’s
-5-
motion for summary judgment. (T.d. 93.) In support of his first claim under the UFTA,
DiBlasio argued that there were seven transfers of property in which Sinclair signed
his own name without any agency designation. Also, DiBlasio argued that his
amended complaint included claims for civil conspiracy and to pierce the corporate
veil to address the alleged fraudulent transfers. He argued that the Sinclairs’ various
companies were constructed simply as means of avoiding his judgment liens and that
the companies’ funds were used for the Sinclairs’ personal use. Regarding the
second claim, DiBlasio argued that foreclosure was necessary to determine the
priority, validity, and extent of all liens on the subject property.
{¶17} On January 22, 2008, the trial court granted Sinclair’s motion for
summary judgment finding “that there exists no genuine issue as to any material fact
with regard to [DiBlasio’s] allegations of fraudulent conversion or transfer brought
pursuant to the Ohio Uniform Fraudulent Transfer Act, R.C. Chapter 1336.” (T.d. 96.)
The court concluded, “Summary Judgment is sustained with respect to [DiBlasio’s]
claims of fraudulent conversion or transfer brought pursuant to the Ohio Uniform
Fraudulent Transfer Act, only and judgment is entered in favor of [Sinclair, et al.] and
against [DiBlasio] upon those claims contained in [DiBlasio’s] Amended Complaint.]
(Emphasis added.) (T.d. 96.) The trial court did not provide any further explanation
as to why it believed that Sinclair was entitled to summary judgment on DiBlasio’s
claims brought pursuant to the Ohio Uniform Fraudulent Transfer Act. This appeal
followed.
{¶18} DiBlasio’s sole assignment of error states:
THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT AGAINST APPELLANT ON HIS FRAUDULENT
CONVEYANCE CLAIMS.
Scope of Appealed Judgment Entry
{¶19} Initially, DiBlasio has made an issue of the scope of the trial court’s
decision in this matter. In its entry ruling on Sinclair’s motion for summary judgment,
-6-
the trial court concluded, “Summary Judgment is sustained with respect to
[DiBlasio’s] claims of fraudulent conversion or transfer brought pursuant to the Ohio
Uniform Fraudulent Transfer Act, only and judgment is entered in favor of [Sinclair, et
al.] and against [DiBlasio] upon those claims contained in [DiBlasio’s] Amended
Complaint.] (Emphasis added.) (T.d. 96.) It then added, “All other claims and causes
of action remain pending for further adjudication upon the merits.” (T.d. 96.)
{¶20} As mentioned earlier, DiBlasio’s amended complaint set forth two
counts – one for fraudulent conversion or transfer under the Ohio Uniform Fraudulent
Transfer Act and the other for foreclosure on 104 Newport Drive. In his response to
Sinclair’s motion for summary judgment and again now on appeal, DiBlasio maintains
that the first count in his complaint also contained two additional causes of action for
civil conspiracy and piercing the corporate veil. In response, Sinclair argues that
those causes of action were not contained in the amended complaint.
{¶21} Ohio is a notice-pleading state. York v. Ohio State Highway Patrol, 60
Ohio St.3d 143, 144, 573 N.E.2d 1063 (1991). Civ.R. 8(A) requires only that a
complaint “contain (1) a short and plain statement of the claim showing that the party
is entitled to relief, and (2) a demand for judgment for the relief to which the party
claims to be entitled.” Under this rule, “a plaintiff is not required to prove his or her
case at the pleading stage,” and the complaint is sufficient “as long as there is a set
of facts, consistent with the plaintiff's complaint, which would allow the plaintiff to
recover.” York, 60 Ohio St.3d at 145, 573 N.E.2d 1063.
{¶22} The elements of a civil-conspiracy claim include (1) a malicious
combination, (2) involving two or more persons, (3) causing injury to person or
property, and (4) the existence of an unlawful act independent from the conspiracy
itself. Universal Coach, Inc. v. New York City Transit Auth., Inc. (1993), 90 Ohio
App.3d 284, 292, 629 N.E.2d 28.
{¶23} The elements for piercing the corporate veil are:
(1) control over the corporation by those to be held liable was so
complete that the corporation has no separate mind, will, or existence
-7-
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 Condominium Unit Owners’ Assn.
v. R.E. Roark Cos., Inc., 67 Ohio St.3d 274, 617 N.E.2d 1075 (1993), at
paragraph three of the syllabus, and as modified (bracketed language)
by the syllabus in Dombroski v. WellPoint, Inc., 119 Ohio St.3d 506,
2008-Ohio-4827, 895 N.E.2d 538.
{¶24} A review of the first count of DiBlasio’s amended complaint shows that
it is primarily confined to a claim under the Ohio Uniform Fraudulent Transfer Act.
The first count begins by identifying the two court judgments DiBlasio obtained
against Sinclair. It then identifies DiBlasio as a creditor and Sinclair as debtor under
the Ohio Uniform Fraudulent Transfer Act, R.C. Chapter 1336. It refers to the
remaining defendants as an affiliate and/or insider of Sinclair, clearly referencing the
language used by the Ohio Uniform Fraudulent Transfer Act and R.C. Chapter 1336.
The remaining paragraphs of the first count track R.C. Chapter 1336’s language for a
claim under the Ohio Uniform Fraudulent Transfer Act.
{¶25} While there is no mention of the word “conspiracy” and the language of
the complaint tracks the language of the Ohio Uniform Fraudulent Transfer Act,
paragraph twenty-four references all of the named defendants (i.e., two or more) and
their “malicious” disregard of DiBlasio’s rights and paragraph twenty-three mentions
how all of the defendants were “complicit” therein – satisfying the first, second, and
third elements of a civil-conspiracy claim. The fourth element can be fairly construed
from the allegation of the unlawful transfers themselves.
{¶26} As for piercing the corporate veil, the first element can be found in
paragraph seventeen where DiBlasio alleges that Sinclair used Newport
Development, LLC and Newport Investments, Inc. as “alter-egos” and that they were,
in fact, “fictions” and “shams.” The second element can be construed as before from
-8-
the alleged fraudulent transfers themselves. The injury referenced in paragraph
twenty-four satisfies the third element. Lastly, and moreover, in setting for the relief
sought for his first claim, DiBlasio specifically seeks an order piercing the corporate
veil.
{¶27} While it does appear that DiBlasio may have sufficiently pleaded
causes of action for civil conspiracy or piercing the corporate veil, such a
determination is likely premature. As indicated, in its entry ruling on Sinclair’s motion
for summary judgment, the trial court concluded, “Summary Judgment is sustained
with respect to [DiBlasio’s] claims of fraudulent conversion or transfer brought
pursuant to the Ohio Uniform Fraudulent Transfer Act, only and judgment is entered
in favor of [Sinclair, et al.] and against [DiBlasio] upon those claims contained in
[DiBlasio’s] Amended Complaint.] (Emphasis added.) (T.d. 96.) By employing the
use of the word “only,” it appears the trial court was limiting its decision to the claims
DiBlasio was advancing under the Ohio Uniform Fraudulent Transfer Act. Therefore,
it cannot be said that the trial court necessarily considered and dismissed any of
DiBlasio’s claims, whether or not they included civil conspiracy and piercing the
corporate veil. The trial court’s decision seems confined to DiBlasio’s claims under
the Ohio Uniform Fraudulent Transfer Act.
Summary Judgment
{¶28} An appellate court reviews a trial court’s decision on a motion for
summary judgment de novo. Bonacorsi v. Wheeling & Lake Erie Ry. Co., 95 Ohio
St.3d 314, 2002-Ohio-2220, 767 N.E.2d 707, ¶24. Summary judgment is properly
granted when: (1) there is no genuine issue as to any material fact; (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 party against whom the
motion for summary judgment is made. Harless v. Willis Day Warehousing Co., 54
Ohio St.2d 64, 66, 375 N.E.2d 46 (1976); Civ.R. 56(C).
{¶29} “[A] party seeking summary judgment, on the ground that the
nonmoving party cannot prove its case, bears the initial burden of informing the trial
-9-
court of the basis for the motion, and identifying those portions of the record that
demonstrate the absence of a genuine issue of material fact on the essential
element(s) of the nonmoving party’s claims. The moving party cannot discharge its
initial burden under Civ.R. 56 simply by making a conclusory assertion that the
nonmoving party has no evidence to prove its case. Rather, the moving party must
be able to specifically point to some evidence of the type listed in Civ.R. 56(C) which
affirmatively demonstrates that the nonmoving party has no evidence to support the
nonmoving party’s claims. * * *” (Emphasis sic.) Dresher v. Burt, 75 Ohio St.3d 280,
293, 662 N.E.2d 264 (1996).
{¶30} The “portions of the record” or evidentiary materials listed in Civ.R.
56(C) include the pleadings, depositions, answers to interrogatories, written
admissions, affidavits, transcripts of evidence, and written stipulations of fact that
have been filed in the case. The court is obligated to view all the evidentiary material
in a light most favorable to the nonmoving party. Temple v. Wean United, Inc., 50
Ohio St.2d 317, 364 N.E.2d 267 (1977).
{¶31} “If the moving party fails to satisfy its initial burden, the motion for
summary judgment must be denied. However, if the moving party has satisfied its
initial burden, the nonmoving party then has a reciprocal burden outlined in Civ.R.
56(E) to set forth specific facts showing that there is a genuine issue for trial and, if
the nonmovant does not so respond, summary judgment, if appropriate, shall be
entered against the nonmoving party.” Dresher, 75 Ohio St.3d at 293, 662 N.E.2d
264.
{¶32} Summary judgment is appropriate when there is no genuine issue as to
any material fact. A “material fact” depends on the substantive law of the claim being
litigated. Hoyt, Inc. v. Gordon & Assoc., Inc., 104 Ohio App.3d 598, 603, 662 N.E.2d
1088 (1995), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct.
2505, 91 L.Ed.2d 202 (1986).
Ohio Uniform Fraudulent Transfer Act
{¶33} The claims that were adjudicated herein fall under the Ohio Uniform
- 10 -
Fraudulent Transfer Act. “Ohio’s Uniform Fraudulent Transfer Act was enacted to
create a right of action for a creditor to set aside an allegedly fraudulent transfer of
assets. Sanderson Farms, Inc. v. Gasbarro, 10th Dist. No. 01AP-461, 2004-Ohio-
1460, at ¶40. The Act defines certain types of transfers from a debtor to a transferee
as fraudulent. See R.C. 1336.04(A) & R.C. 1336.05. If a transfer is fraudulent, then a
creditor has the right to sue the original transferee and any subsequent transferee for
the value of the transferred property, subject to certain defenses. R.C. 1336.08.”
Esteco, Inc. v. Kimpel, 7th Dist. No. 07 CO 3, 2007-Ohio-7201, ¶ 8.
{¶34} The Ohio Uniform Fraudulent Transfer Act provides various ways in
which a creditor can prove that a debtor’s transfer of property was fraudulent. One
way is to demonstrate that the debtor made the transfer with actual intent to hinder,
delay, or defraud the creditor. R.C. 1336.04(A)(1). The act also allows the creditor to
set aside fraudulent transfers in other more specific situations. One such situation is
when the debtor does not receive a reasonably equivalent value in exchange for the
transfer of the property. In that case, the creditor can show that the transfer was
fraudulent by proving that (1) the debtor was engaged or was about to engage in a
business or a transaction for which the remaining assets of the debtor were
unreasonably small in relation to the business or transaction or (2) the debtor was
insolvent at that time or the debtor became insolvent as a result of the transfer. R.C.
1336.04(A)(2)(a); R.C. 1336.05(A).
{¶35} The summary judgment pleadings and this appeal concerns the transfer
of seven investment properties and the Sinclairs’ previous home at 104 Newport
Drive. From November 19, 2004 through July 24, 2006, Sinclair purchased seven
investment properties in which he was designated the grantee. (DiBlasio’s Exhibits
13-19.) Five of them he bought in his own name and subsequently transferred to
Newport Investments, LLC or Newport Investments, LLC, Trustee for no money. One
(the sixth) was bought by Kimberly Sinclair who transferred it to Sinclair who then
subsequently transferred it to Newport Investments, LLC for no money. One (the
seventh) was purchased by Newport Investments, LLC and transferred to Sinclair for
- 11 -
no money who then subsequently transferred it back to Newport Investments, LLC.
Sinclair sold each of the properties through Newport Investments, LLC to individual
home buyers for more money than the Sinclairs had originally paid for them, realizing
$336,100.00.
{¶36} Sinclair acknowledges the transfers but argues that they do not qualify
under the Ohio Uniform Fraudulent Transfer Act because he and his wife, Kimberly,
purchased the properties as agents for Newport Investments, LLC. However, as
DiBlasio points out, in none of those transfers are the Sinclairs designated as agents
for Newport Investments, LLC. DiBlasio’s Exhibits thirteen through nineteen reflect
evidence that seven of the investment properties that the Sinclairs purchased were at
one time titled solely in Sinclair’s name. It is well settled law of agency that an agent
who discloses neither the existence of the agency nor the identity of the principal
subjects themselves to personal liability. Dunn v. Westlake, 61 Ohio St.3d 102, 106,
573 N.E.2d 84 (1991).
{¶37} Moreover, if they were indeed acting as agents for Newport
Investments, LLC, why did they see the need to subsequently re-transfer the
properties to Newport Investments, LLC? If they were acting as agents for Newport
Investments, LLC, there would have been no need for the subsequent transfers to
that company. At the very least, the absence of any agency designation on the
transfers creates a genuine issue of material fact with regard to that aspect of
DiBlasio’s fraudulent transfer claim.
{¶38} Given that there appears to be genuine issues of material fact
concerning the status of the transfers themselves, the inquiry next turns to intent. As
indicated earlier, the Ohio Uniform Fraudulent Transfer Act allows a creditor to prove
that a debtor’s transfer of property was fraudulent by demonstrating that the debtor
made the transfer with actual intent to hinder, delay, or defraud the creditor. R.C.
1336.04(A)(1.) While the burden of proof lies with the creditor to prove actual intent,
it is recognized that direct proof of actual intent may be impossible. McKinley Fed. S.
& L. v. Pizzuro Enterprises, Inc., 65 Ohio App.3d 791, 796, 585 N.E.2d 496 (8th
- 12 -
Dist.1990). In Stein v. Brown, 18 Ohio St.3d 305, 308-09, 480 N.E.2d 1121 (1985),
the Ohio Supreme Court noted that “[d]ue to the difficulty in finding direct proof of
fraud, courts of this state began long ago to look to inferences from the
circumstances surrounding the transaction and the relationship of the parties
involved.” Thereafter, statutory provisions in the Act provided guidance.
{¶39} R.C. 1336.04(B) provides that actual intent may be determined by
consideration given to all relevant factors, including, but not limited to, the following:
(1) Whether the transfer or obligation was to an insider;
(2) Whether the debtor retained possession or control of the
property transferred after the transfer;
(3) Whether the transfer or obligation was disclosed or
concealed;
(4) Whether before the transfer was made or the obligation was
incurred, the debtor had been sued or threatened with suit;
(5) Whether the transfer was of substantially all of the assets of
the debtor;
(6) Whether the debtor absconded;
(7) Whether the debtor removed or concealed assets;
(8) Whether the value of the consideration received by the debtor
was reasonably equivalent to the value of the asset transferred or the
amount of the obligation incurred;
(9) Whether the debtor was insolvent or became insolvent shortly
after the transfer was made or the obligation was incurred;
(10) Whether the transfer occurred shortly before or shortly after
a substantial debt was incurred;
(11) Whether the debtor transferred the essential assets of the
business to a lienholder who transferred the assets to an insider of the
debtor.
- 13 -
{¶40} Some of R.C. 1336.04(B)’s factors are present in this case. Sinclair
made the transfers to an insider, namely Newport Investments, LLC. R.C.
1336.04(B)(1). If the debtor is an individual, the Ohio Uniform Fraudulent Transfer
Act defines an insider to include:
(a) A relative of the debtor or of a general partner of the debtor;
(b) A partnership in which the debtor is a general partner;
(c) A general partner in a partnership described in division
(G)(1)(b) of this section;
(d) A corporation of which the debtor is a director, officer, or
person in control.
R.C. 1336.01(G)(1). Here, Sinclair was the person in control of Newport
Investments, LLC. R.C. 1336.01(G)(1)(d). He was the organizer and statutory agent.
(Sinclair dep., Vol. I, p. 53.) He testified that he was one of two front people for the
company, in control of buying the investment properties. (Sinclair dep., Vol. I, p. 113.)
{¶41} Given his position at Newport Investments, LLC and his position as sole
director, president, and treasurer of Newport Development, Inc., the company where
the money realized on the investment properties flowed to, it is fair to say that Sinclair
retained possession or control over the properties after they were transferred. R.C.
1336.01(G)(2). Before the transfers were made, Sinclair had been sued or
threatened with suit by DiBlasio. R.C. 1336.01(G)(4). DiBlasio had obtained the
Mahoning County Common Pleas Court judgment against Sinclair and the federal
suit had already been filed. When Sinclair made the transfers, the transfers were
substantially all of his assets. R.C. 1336.01(G)(5). It is apparent from his deposition
testimony that he had, in fact, no assets – or, at least, no assets in his name other
than the seven aforementioned investment properties which were transferred to
Newport Investments, LLC. DiBlasio’s Exhibits thirteen through nineteen reflect that
Sinclair received nominal consideration for the properties that valued in the tens of
thousands of dollars. R.C. 1336.01(G)(8). Lastly, Sinclair was insolvent or became
- 14 -
insolvent shortly after the transfers. (Sinclair dep., Vol. II, p. 43.) Each of these
factors creates the existence of genuine issue of material fact concerning Sinclair’s
actual intent. They also demonstrate that the transfers may be set aside as
fraudulent under the Ohio Uniform Fraudulent Transfer Act’s other provisions.
{¶42} Sinclair’s failure to receive a reasonably equivalent value in exchange
for the transfers of the property leaves open the possibility that DiBlasio could set
aside the transfers under other provisions in the Act that do not necessarily require
proof of actual intent. A creditor can show that the transfer was fraudulent by proving
that (1) the debtor was engaged or was about to engage in a business or a
transaction for which the remaining assets of the debtor were unreasonably small in
relation to the business or transaction or (2) the debtor was insolvent at that time or
the debtor became insolvent as a result of the transfer. R.C. R.C. 1336.04(A)(2)(a);
R.C. 1336.05(A). Here, Sinclair’s remaining assets were unreasonably small
(perhaps nonexistent) in relation to the transactions and he was either insolvent or
became insolvent shortly thereafter. Thus, there is enough evidence in the record
whereby DiBlasio may be able to sustain his fraudulent transfer claim without having
to prove Sinclair’s actual intent.
{¶43} DiBlasio also sought to set aside the transfer of Sinclair’s 104 Newport
Drive home from Sinclair to his wife under the Ohio Uniform Fraudulent Transfer Act.
In this instance, Sinclair acknowledges that for purpose of the Act, DiBlasio is a
creditor and he is an insolvent debtor with respect to the 104 Newport Drive property.
However, he argues that the transfer to his wife did not qualify as a transfer under the
Act because the property was not an asset.
{¶44} The Act defines an asset to mean property of the debtor, but does not
include property to the extent that it is encumbered by a valid lien. R.C.
1336.01(B)(1).
{¶45} Sinclair purchased the home in late 2000 for $275,000.00. (Sinclair
dep., Vol. I, p. 12; Sinclair dep., Vol. II, p. 115; Sinclair aff., ¶34; DiBlasio’s Exhibit 6.)
Sinclair had made a $10,000.00 down payment on the house. (Sinclair dep., Vol. I, p.
- 15 -
14.) Sinclair and his wife were able to mortgage the home to ABN AMRO Mortgage
Group, Inc. (ABN AMRO) for $276,000.00. (Sinclair aff., ¶ 37.) Additionally, in
August 2002, Sinclair was able to acquire a $67,753.00 home equity line of credit on
the home. (Sinclair aff., ¶38, Exhibit B.)
{¶46} In July 2004, Sinclair transferred the property into his wife’s name
solely, by quit claim deed. (Sinclair dep., Vol. I, pp. 12-13; Sinclair aff., ¶40;
DiBlasio’s Exhibit 6.) According to Sinclair, at the time he transferred the property
into his wife’s name, the principal balance on the ABN AMRO mortgage was
$265,087.06 and $47,621.67 remained on the Bank One home equity line of credit.
(Sinclair aff., ¶¶41, 43, Exhibits B, C.) Thus, when Sinclair transferred the property
into his wife’s name, the property was essentially encumbered by a $312,708.73 valid
lien.
{¶47} When he purchased the home in 2000, Sinclair’s mortgage lender had
the home appraised at $253,000.00. (Sinclair aff., ¶ 35, Exhibit A.) In an affidavit
attached to his motion for summary judgment, Sinclair incorporated a copy of that
appraisal as Exhibit A. In his affidavit dated 2007 he also stated that the Mahoning
County Auditor lists the total market value of the property for tax purposes at
$276,200.00. (Sinclair aff., ¶ 50.) Using either of these values for the property, the
property is encumbered by liens beyond its value. The property therefore does not
qualify as an asset under R.C. 1336.01(B)(1).
{¶48} DiBlasio argues that the “unsworn copy” of the 2000 appraisal should
not have been considered by the trial court as it was not evidentiary material required
by Civ.R. 56(E). Civ.R. 56, the civil rule governing summary judgment motions, and
case law does not support DiBlasio’s argument in this regard.
{¶49} Civ.R. 56 allows a court to consider only “the pleadings, depositions,
answers to interrogatories, written admissions, affidavits, transcripts of evidence, and
written stipulations of fact, if any, timely filed in the action” when ruling on a motion for
summary judgment. Civ.R. 56(C). The copy of the 2000 appraisal does not fit any of
these categories.
- 16 -
{¶50} “The proper procedure for introducing evidentiary matter not specifically
authorized by Civ.R. 56(C) is to incorporate it by reference in a properly framed
affidavit pursuant to Civ.R. 56(E).” Biskupich v. Westbay Manor Nursing Home, 33
Ohio App.3d 220, 222, 515 N.E.2d 632 (8th Dist.1986). “The requirement of Civ.R.
56(E) that sworn or certified copies of all papers referred to in the affidavit be
attached is satisfied by attaching the papers to the affidavit, coupled with a statement
therein that such copies are true copies and reproductions.” State ex rel. Corrigan v.
Seminatore (1981), 66 Ohio St.2d 459, 467, 423 N.E.2d 105. The referenced papers
may also be “sworn or certified” by a certification contained within the paper itself.
Olverson v. Butler, 45 Ohio App.2d 9, 12, 340 N.E.2d 436 (10th Dist.1975). Finally, it
is well settled that unauthenticated documents which are not sworn, certified, or
authenticated by way of affidavit have no evidentiary value and may not be
considered by the trial court in ruling on a motion for summary judgment. Citizens Ins.
Co. v. Burkes, 56 Ohio App.2d 88, 95–96, 381 N.E.2d 963 (8th Dist.1978); Sparks v.
Erie Cty. Bd. of Commrs., 6th Dist. No. E–97–007, 1998 WL 15929 (Jan. 16, 1998).
{¶51} In this case, Sinclair attached a copy of the 2000 appraisal. Paragraph
thirty-five of his affidavit incorporates the appraisal by reference:
At the time of the purchase, my mortgage lender secured an
appraisal of 104 Newport from David DiBernardi that estimated the
market value of the property as of November 13, 2000 as $253,000, a
true and accurate copy of which is attached hereto as Exhibit A.
(Emphasis added.) (Sinclair aff., ¶35.) This statement by Sinclair in his affidavit was
sufficient to allow the trial court to consider the appraisal as summary judgment
evidence.
{¶52} The 2000 appraisal aside, Sinclair stated in his affidavit that the
Mahoning County Auditor listed the property at $276,200 for tax purposes, well below
the outstanding encumbrances of $312,708.73. (Sinclair aff., ¶50.) Yet DiBlasio does
not take issue with the Sinclairs’ statement concerning the auditor’s valuation. So
- 17 -
this uncontested evidence would have been sufficient for the court to find that the
property did not qualify as an asset.
{¶53} In conclusion, we find there is no genuine issue of material fact
concerning whether the 104 Newport Drive property could be set aside under the
Ohio Uniform Fraudulent Transfer Act since it was encumbered by liens beyond its
value and, therefore, did not constitute an asset under the Act. However, concerning
the seven investment properties, DiBlasio did present sufficient evidence to create a
genuine issue of material fact as to whether those transfers could be set aside under
the Act.
{¶54} Accordingly, DiBlasio’s sole assignment of error has merit to the extent
indicated.
{¶55} The trial court’s summary judgment decision is affirmed in part with
respect to its treatment of the 104 Newport Drive property under the Ohio Uniform
Fraudulent Transfer Act. The trial court’s decision is reversed in part and remanded
for trial concerning whether the transfers of the seven investment properties should
be set aside under the Act. As the trial court’s decision itself so indicates, all other
claims and causes of action remain pending in that court for further adjudication upon
the merits.
Vukovich, J., concurs.
DeGenaro, J., concurs.