Ohlman Farm & Greenhouse, Inc. v. Kanakry , 2014 Ohio 4731 ( 2014 )

[Cite as Ohlman Farm & Greenhouse, Inc. v. Kanakry, 2014-Ohio-4731.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
LUCAS COUNTY
Ohlman Farm & Greenhouse, Inc. Court of Appeals No. L-13-1264
Appellee Trial Court No. CI0201105977
v.
Michael M. Kanakry d/b/a
M&M Garden Center, et al. DECISION AND JUDGMENT
Appellants Decided: October 24, 2014
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Gregory L. Arnold, for appellee.
Bradley M. D’Arcangelo, for appellants.
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JENSEN, J.
Introduction
{¶ 1} This is an appeal from a judgment by the Lucas County Court of Common
Pleas. Following a bench trial, the trial court found in favor of appellee, Ohlman Farm &
Greenhouse, Inc. and awarded it $33,952.33 against Michael D. Kanakry, individually.
The award reflects the amount owed to appellee for goods that it delivered to appellants’
retail flower stores in Warren and Frazier, Michigan. Appellants concede the debt, but
claim that the trial court lacked personal jurisdiction over them and that appellant,
Michael M. Kanakry, cannot be held personally liable. For the reasons that follow, we
affirm the trial court.
Factual Background and Procedural History
{¶ 2} Lawrence J. Ohlman, Jr. is the president and sole shareholder of appellee,
Ohlman Farm & Greenhouse, Inc., a wholesaler of flower and vegetable plants, located in
Toledo, Ohio. In April of 2011, Ohlman, on behalf of appellee, and Michael D. Kanakry
orally contracted for appellee to sell and deliver flowers to two retail flower stores
operated by Mr. Kanakry in Michigan.
{¶ 3} The parties’ business relationship first began in 2010 with a single delivery
by appellee to one of Mr. Kanakry’s stores. About a year later, on April 17, 2011,
Kanakry visited appellee’s wholesale facility in Toledo, Ohio for the “limited” purpose of
“viewing [appellee’s] products for the potential purchase.” In the days that followed,
Kanakry and Ohlman had several telephone conversations during which they arranged for
appellee to deliver several shipments of flowers to appellants’ retail stores in Warren
and/or Frazier, Michigan.
{¶ 4} In all, appellee made five deliveries from its Toledo, Ohio nursery to
appellants’ Michigan stores between April 20 and May 5, 2011. Following each delivery,
appellee presented an invoice to Kanakry for payment. Appellee addressed each invoice
2.
to “M&M Gardens.” Ohlman testified that he believed he was doing business with
Kanakry as an individual, who was doing business as “M&M Gardens.”
{¶ 5} Kanakry acknowledged delivery of the goods by initialing four of the five
receipts. Nowhere on the invoices did Kanakry take issue with “M&M Gardens” until
receipt of the last invoice, dated May 5, 2011. On that invoice, Kanakry crossed off
“M&M Gardens” and wrote in its place “Flower Time not M&M.” He also rejected part
of the shipment and claimed a credit of $1,721.25.
{¶ 6} The invoices went unpaid. On October 13, 2011, appellee filed suit in the
Lucas County Court of Common Pleas against Michael Kanakry, dba M&M Garden
Center and Kanakry Enterprises, Inc., dba M&M Garden Center. Appellee demanded
judgment in the amount of $35,673.58, the total unpaid balance.
{¶ 7} On February 13, 2012, the two named defendants filed a motion to dismiss
the case for want of personal jurisdiction and improper venue, pursuant to Civ.R.
12(B)(2) and (3), respectively. The defendants argued that Kanakry’s lone visit to Ohio
did not constitute “transacting any business” in the state and therefore the case ought to
be dismissed.
{¶ 8} By order dated August 8, 2012, the trial court denied the defendants’ motion
to dismiss. On November 9, 2012, appellee filed an amended complaint adding “Warren
Flower Time, LLC” and “Michael M. Kanakry dba Flower Time, LLC” as defendants.
3.
{¶ 9} A bench trial was held on October 10, 2013. At trial, defendants-appellants
argued that because appellee specified “M&M Gardens” and not “Michael Kanakry” on
the invoices, it could not now claim that Mr. Kanakry ought to be held personally liable.
{¶ 10} Exhibits in the trial court record established that, since 2005, Kanakry
operated three distinct businesses within the state of Michigan. From January 6, 2005
until July 15, 2013, Kanakry was the sole shareholder of Kanakry Enterprises, Inc.
Between April 12, 2010 and July 15, 2013, he was the sole shareholder of “Mr. Mike’s
M&M Garden Center, Inc.” Finally, on October 18, 2010, Kanakry created a third
business, called “Warren Flower Time LLC.” Thus, according to the record, at the time
appellee and Kanakry negotiated for the sale and purchase of flower deliveries, Kanakry
was the sole shareholder of three businesses: Kanakry Enterprises, Inc., Warren Flower
Time, LLC, and Mr. Mike’s M&M Garden Center, Inc.1 He argues that the latter two
ought to be found jointly and severally liable for the unpaid invoices.
{¶ 11} Mr. Ohlman testified that he believed he was doing business with appellant,
Kanakry, as an individual who was doing business as “M&M Gardens.” Indeed, despite
the multiple changes in legal status, Kanakry testified that “I have been in business for 20
years, and I am known as M&M Gardens * * *.”
{¶ 12} Kanakry conceded that he never advised appellee that he, Kanakry, was
acting on behalf of a legal entity, whether a corporation or a limited liability company.
Further, Kanakry never provided appellee with any documentation, such as business
1
Mr. Mike’s M&M Garden Center, Inc. is not a named defendant in this case.
4.
cards or stationery, indicating to appellee that he was acting on behalf of either Mr.
Mikes M&M Garden Center, Inc. or Warren Flower Time LLC.
{¶ 13} On the other hand, Mr. Kanakry testified that his business displayed the
name “Mr. Mike’s M&M Garden Center, Inc.” on a sign inside his tent and via the
posting of an eight by ten inch occupancy permit near the cash register. Mr. Kanakry
claims he displayed the name “Warren Flower Time LLC” in the same manner. No
evidence was presented, however, that Mr. Ohlman or anyone representing appellee was
aware of the signs.
{¶ 14} By judgment entry dated October 24, 2013, the trial court awarded
$33,952.33 in damages to appellee ($35,673.58 minus the credit amount of $1,721.25).
The court “resolved all issues regarding witness credibility and the weighing of the
evidence in a manner consistent with these findings.”
{¶ 15} On November 22, 2013, appellants filed a notice of appeal, raising two
assignments of error:
Trial Court Erred in Denying Motion to Dismiss Pursuant to Civ. R.
12(B)(2) & (3) Finding Defendants had Sufficient Contacts In This Forum
To Exercise Personal Jurisdiction and Venue.
Trial Court Erred in Finding Individual Liability of Michael D.
Kanakry For The Judgment Awarded To Plaintiff.
5.
Appellants’ Motion to Dismiss
{¶ 16} Civ.R. 12(B) provides that “every defense, in law or fact, to a claim for
relief in any pleading * * * shall be asserted in the responsive pleading thereto if one is
required, except that the following may at the option of the pleader be made by motion:
(2) lack of jurisdiction over the person, (3) improper venue * * *.” Where the motion is
decided without hearing, the trial court is “to view allegations in the pleadings and the
documentary evidence in a light most favorable to the plaintiffs, resolving all reasonable
competing inferences in their favor.” Goldstein v. Christiansen, 70 Ohio St.3d 232, 236,
638 N.E.2d 541 (1994).
{¶ 17} “Personal jurisdiction is a question of law that appellate courts review de
novo.” Kauffman Racing Equip., L.L.C. v. Roberts, 126 Ohio St.3d 81, 2010-Ohio-2551,
930 N.E.2d 784, ¶ 27.
{¶ 18} The trial court found that appellee “established sufficient minimum
contacts of the [appellants] in this forum for the Court to exercise personal jurisdiction
over it [sic] and that venue is proper in Lucas County, Ohio.” Accordingly, the court
denied defendants-appellants’ motion to dismiss pursuant to Civ.R. 12(B)(2) and (3).
When determining whether a state court has personal jurisdiction
over a foreign corporation the court is obligated to engage in a two-step
analysis. First, the court must determine whether the state’s ‘long-arm’
statute and applicable civil rule confer personal jurisdiction, and, if so,
whether granting jurisdiction under the statute and the rule would deprive
6.
the defendant of the right to due process of law pursuant to the Fourteenth
Amendment to the United States Constitution. (Footnote omitted.) U.S.
Sprint Communications Co. Ltd. Partnership v. Mr. K.’s Foods, Inc., 68
Ohio St.3d 181, 183-184, 624 N.E.2d 1048 (1994).
{¶ 19} Pursuant to Ohio’s long-arm statute, “[a] court may exercise personal
jurisdiction over a person who acts directly or by an agent, as to a cause of action arising
from the person’s: (1) Transacting any business in this state; * * *.” R.C. 2307.382(A)(1).
“When jurisdiction over a person is based solely upon this section, only a cause of action
arising from acts enumerated in this section may be asserted against him.” R.C.
2307.382(C).
{¶ 20} Likewise, Civ.R. 4.3(A)(1), pertaining to venue, authorizes out-of-state
service of process on a defendant who is “[t]ransacting any business in this state[.]”
“[T]he statute and civil rule are consistent and in fact complement each other. R.C.
2307.382(A)(1) authorizes a court to exercise personal jurisdiction over a nonresident
defendant, whereas Civ.R. 4.3(A)(1) provides for service of process to effectuate that
jurisdiction. Both require that the nonresident defendant be ‘transacting any business’ in
Ohio.” Kentucky Oaks Mall v. Mitchell’s, 53 Ohio St.3d 73, 75, 559 N.E.2d 477 (1990).
{¶ 21} As explained in Kentucky Oaks, the term “transacting any business” is
broad in its reach:
It is clear that R.C. 2307.382(A)(1) and Civ.R. 4.3(A)(1) are very
broadly worded and permit jurisdiction over nonresident defendants who
7.
are transacting any business in Ohio. “Transact,” as defined by Black’s
Law Dictionary (5 Ed.1979) 1341, “* * * means to prosecute negotiations;
to carry on business; to have dealings * * *. The word embraces in its
meaning the carrying on or prosecution of business negotiations but it is a
broader term than the word ‘contract’ and may involve business
negotiations which have been either wholly or partly brought to a
conclusion * * *.” (Emphasis added.) Id. at 75.
{¶ 22} In the wake of Kentucky Oaks, this court held, “that a corporate
nonresident, for the purposes of personal jurisdiction, is ‘transacting any business,’ within
the plain and common meaning of the phrase, where the nonresident corporation initiates,
negotiates a contract, and through the course of dealing becomes obligated to make
payments to an Ohio corporation.” Hammill Mfg. Co. v. Quality Rubber Prod., Inc., 82
Ohio App.3d 369, 374, 612 N.E.2d 472 (6th Dist.1992).
{¶ 23} Turning to the facts of this case, appellant Kanakry visited appellee’s
Toledo store on April 17, 2011, just three days before the first delivery of flowers. In
Kanakry’s own words, “the visit was simply limited to viewing [appellee’s] products for
the potential purchase.” In the days following that visit, Ohlman and Kanakry spoke on
the telephone on several occasions. During the course of those conversations, Kanakry
and appellee negotiated for the purchase and sale, respectively, of five shipments of
flowers. Thus, Kanakry, either individually or as an agent of the other named defendants,
became obligated to make payments to an Ohio corporation. Id. at 374. We find that
8.
Kanakry’s visit to Ohio combined with the parties’ subsequent telephone conversations
constitute “transacting any business” for purposes of establishing personal jurisdiction
and venue.
{¶ 24} Having found that Kanakry’s conduct falls within the purview of R.C.
2307.382(A)(1) and Civ.R. 4.3(A)(1), the next issue to resolve is whether the assertion of
personal jurisdiction by an Ohio court over appellants comports with the Due Process
Clause of the Fourteenth Amendment.
{¶ 25} A state may assert personal jurisdiction over a nonresident defendant if the
nonresident has “certain minimum contacts with it such that the maintenance of the suit
does not offend ‘traditional notions of fair play and substantial justice.’” (Citation
omitted.) Hammill Mfg. at 374, quoting Internatl. Shoe Co. v. Washington, 326 U.S. 310,
316, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
{¶ 26} To establish sufficient minimum contacts under the Due Process Clause, a
plaintiff must demonstrate all of the following:
First, the defendant must purposefully avail himself of the privilege
of acting in the forum state or causing a consequence in the forum state.
Second, the cause of action must arise from the defendant’s activities there.
Finally, the acts of the defendant or consequences caused by the defendant
must have a substantial enough connection with the forum state to make the
exercise of jurisdiction over the defendant reasonable. (Citation omitted.)
Century Marketing Corp. v. Aldrich, 6th Dist. Wood No. WD-02-045,
9.
2003-Ohio-1390, ¶ 13, quoting Calphalon Corp. v. Rowlette, 228 F.3d 718,
721 (6th Cir.2000).
{¶ 27} In this case, the parties entered into a series of business deals that began
with a face-to-face meeting in Ohio. By all accounts, a series of phone calls followed
during which the parties agreed on the particulars of each order. As a result of those
orders, some or all of the appellants became obligated to appellee. Thus, the record
demonstrates that appellee’s cause of action clearly arises out of appellants’ transaction
of business in Ohio. Because appellants purposely engaged in a business relationship
with an Ohio businessman, they could have reasonably anticipated being brought into an
Ohio court in the event that a dispute arose. Accordingly, the trial court did not err by
denying appellants’ motion to dismiss the complaint for lack of personal jurisdiction and
lack of venue. Appellants’ first assignment of error is not well-taken.
Individual Liability
{¶ 28} In their second assignment of error, appellants allege that the trial court
erred in finding appellant Michael Kanakry individually liable. Appellants argue that
Warren Flower Time, LLC and Mr. Mike’s M&M Garden Center, Inc. are jointly and
severally liable for the unpaid invoices. For the reasons that follow, we find that
Kanakry may be held personally liable for the debt.
{¶ 29} In reviewing factual findings of a trial court, the standard of review an
appellate court must apply is manifest weight of the evidence. That is, the judgment of
the trial court should not be overturned as being against the weight of the evidence if
10.
some competent and credible evidence supports that judgment. C.E. Morris Co. v. Foley
Constr. Co., 54 Ohio St. 2d 279, 280, 376 N.E.2d 578 (1978). Factual findings of the
trial court are deferred to because the trial court is in a better position to “view the
witnesses and observe their demeanor, gestures and voice inflections, and use these
observations in weighing the credibility of the proffered testimony.” Seasons Coal Co. v.
Cleveland, 10 Ohio St.3d 77, 80, 461 N.E.2d 1273 (1984).
{¶ 30} As to the issue of who bears responsibility for the debt,
It is well-settled in the law of agency that an agent who disclosed
neither the existence of the agency nor the identity of the principal is
personally liable in his or her contractual dealings with third parties. * * *
The reason for this rule is simple. The third party who deals with an agent
while unaware of the existence of the principal and the agency relationship
intends to deal with the agent, and relies upon the agent’s ability to
perform. Dunn v. Westlake, 61 Ohio St.3d, 102, 106, 573 N.E.2d 84(1991).
See also Scheid Concrete, Inc. v. McDonald, 6th Dist. Erie No. E-07-004, 2007-Ohio-
2153, ¶ 12 (“[A]n agent may be held personally liable for the principal’s debt only if the
principal is undisclosed, partially disclosed, or fictitious or nonexistent.”). There are no
facts to support the conclusion that appellant Kanakry affirmatively disclosed his agency
status to appellee or that appellee knew of the existence of either business entity.
11.
{¶ 31} Because appellant Kanakry failed to disclose the existence of his agency
status, he may be held personally liable to appellee as a matter of law. We find that the
judgment of the trial court is not against the manifest weight of the evidence. Appellants’
second assignment of error is not well-taken.
{¶ 32} For the foregoing reasons, we affirm the judgment of the Lucas County
Court of Common Pleas. Appellants are ordered to pay the costs of this appeal pursuant
to App.R. 24.
Judgment affirmed.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.
Mark L. Pietrykowski, J. _______________________________
JUDGE
Arlene Singer, J.
_______________________________
James D. Jensen, J. JUDGE
CONCUR.
_______________________________
JUDGE
This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.sconet.state.oh.us/rod/newpdf/?source=6.
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