Daly v. Rowe , 2022 Ohio 3750 ( 2022 )


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  • [Cite as Daly v. Rowe, 
    2022-Ohio-3750
    .]
    IN THE COURT OF APPEALS
    FIRST APPELLATE DISTRICT OF OHIO
    HAMILTON COUNTY, OHIO
    CLIFFORD LAWTON DALY, JR.,                    APPEAL NOS. C-220026
    :                C-220031
    Plaintiff-Appellee/Cross-            TRIAL NO. A-1805658
    Appellant,
    :      O P I N I O N.
    vs.
    BRUCE ROWE,                               :
    COATING APPLICATIONS, INC.,
    COATING APPLICATIONS LLC,                 :
    and
    :
    COATING APPLICATIONS
    INTERNATIONAL LLC,
    :
    Defendants-Appellants/Cross-
    Appellees/Third-Party Plaintiffs,
    and                                    :
    KATHY R. DALY,
    :
    Third-Party Defendant,
    and
    :
    QUALITY COMPOSITES, INC.,
    Interested-Party Defendant.         :
    Civil Appeals From: Hamilton County Court of Common Pleas
    OHIO FIRST DISTRICT COURT OF APPEALS
    Judgment Appealed From Is:      Affirmed in Part, Reversed in Part, and Cause
    Remanded
    Date of Judgment Entry on Appeal: October 21, 2022
    DeBlasis Law Firm, LLC, and Rick D. DeBlasis, for Plaintiff-Appellee/Cross-
    Appellant,
    Santen & Hughes and Brian P. O’Connor, for Defendants-Appellants/Cross-
    Appellees.
    2
    OHIO FIRST DISTRICT COURT OF APPEALS
    MYERS, Presiding Judge.
    {¶1}   Bruce Rowe and Clifford Daly were business partners for years until
    their relationship dissolved in 2018. Daly brought suit against Rowe when he was
    locked out of the business, and these appeals follow the trial court’s determination of
    claims between the parties. Both plaintiff-appellee/cross-appellant Clifford Daly and
    defendants-appellants/cross-appellees Bruce Rowe, Coating Applications, Inc.,
    Coating Applications LLC, and Coating Applications International LLC (collectively
    referred to as “defendants”),1 appeal from the trial court’s entry following a bench trial
    finding in favor of Daly on his claim for breach of fiduciary duty and awarding him
    damages.
    {¶2}   In these appeals, we are asked to determine whether Daly had standing
    to pursue a direct claim for breach of fiduciary duty against Rowe or whether that
    claim had to be brought derivatively on behalf of the shareholders of the close
    corporation that Daly and Rowe had formed. If we find that Daly had a viable
    individual claim, we must then review the trial court’s award of damages. We conclude
    that the trial court did not err in granting judgment to Daly individually on his claim
    for breach of fiduciary duty. But we further find that the trial court’s award of damages
    was against the manifest weight of the evidence. We accordingly reverse the trial
    court’s award of damages and remand this case for further proceedings.
    Factual and Procedural Background
    {¶3}   Approximately 30 years ago, Daly and Rowe formed Quality
    Composites, Inc., (“QCI”) a close corporation that owns the rights to a product known
    1The Coating Application defendants, as acknowledged in Rowe’s appellate brief, are Rowe’s
    “wholly owned and controlled business entities.”
    3
    OHIO FIRST DISTRICT COURT OF APPEALS
    as Braze Tape, a material used to bind metal products together. Daly and Rowe each
    own 50 percent of QCI. Daly is the president and treasurer of QCI, while Rowe is the
    vice-president and secretary. Daly and Rowe are also directors of the corporation, and
    each appointed one additional director.
    {¶4}   In 1992, QCI purchased the rights, title, and interest in Braze Tape,
    including the manufacturing process to make the tape, from Coating Applications,
    Inc., (“CAI”) a corporation that is owned in part by Rowe. The parties intended QCI
    to operate as a holding company, and in 1994, QCI entered into an agreement with
    CAI authorizing CAI to sell and manufacture Braze Tape. While the agreement
    provided that CAI would receive between a five-percent and ten-percent commission
    on all Braze Tape sales, in practice, QCI never actually paid the commission referenced
    in the agreement. Rather, per the parties’ standard practices, payments received for
    Braze Tape sales by CAI were deposited into a QCI-CAI joint-agency bank account.
    CAI sold other products in addition to Braze Tape, and payments received from the
    sale of CAI’s other products were also deposited into the joint-agency bank account.
    After payments were deposited into the joint-agency bank account, money received
    for Braze Tape sales was transferred into a separate corporate account for QCI.
    {¶5}   QCI was a subtenant of CAI, and it paid a certain percentage of the
    utilities and rent for the office premises. QCI also paid CAI for any bills that were
    submitted for time and material, and labor involved in the manufacture of Braze Tape.
    All profits earned by QCI were equally split between Daly and Rowe, and they were
    paid from the QCI account.
    {¶6}   Unfortunately, the relationship between the parties soured, as Rowe
    began to suspect that Daly was divulging CAI’s trade secrets. Rowe believed Daly
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    OHIO FIRST DISTRICT COURT OF APPEALS
    produced Braze Tape on his own and had misrepresented the quality of the product
    when doing so. On May 28, 2018, Rowe evicted Daly and QCI from the office premises.
    Daly taped the agreement executed between QCI and CAI in 1994 to the wall, along
    with a note stating that the old contract was, as of that day, back in effect. Daly has
    had no access to the premises since that date. Nor has he received any payment from
    QCI since the eviction. On August 24, 2018, Daly, in his capacity as president of QCI,
    sent notice to Rowe that he was terminating QCI’s agreement with CAI.
    {¶7}   Daly, both individually and derivatively on behalf of QCI, and QCI filed
    suit against defendants. Daly did not make a demand on QCI’s Board of Directors
    before filing the action derivatively on behalf of the corporation. He alleged in the
    complaint that “[i]t would be futile for Daly to make further demand on the Board of
    Directors of QCI for several reasons. Daly and Rowe are 50/50 shareholders of QCI.
    Further demand would require Rowe to investigate and bring claims against himself
    for his abusive conduct as described herein. Rowe has clearly evidenced his intent not
    to take any action to correct his misconduct.”
    {¶8}   The complaint sought a declaratory judgment and injunctive relief
    authorizing Daly to terminate the agreement between QCI and CAI, enjoining
    defendants from selling Braze Tape, and authorizing Daly to relicense the sale of Braze
    Tape to other vendors. The complaint additionally asserted claims for breach of
    fiduciary duty, accounting, conversion, theft, replevin, and breach of contract. In
    support of the asserted claims, the complaint alleged that Rowe sold Braze Tape
    without authorization, converted and/or stole checks due to QCI, and wrongfully
    evicted Daly and QCI from the premises.
    5
    OHIO FIRST DISTRICT COURT OF APPEALS
    {¶9}   Defendants filed counterclaims against Daly and QCI for a violation of
    18 U.S.C. 1030 (the Computer Fraud and Abuse Act), breach of fiduciary duty, theft, a
    violation of Ohio’s Deceptive Trade Practices Act, and bad faith. They additionally
    sought a declaratory judgment that Rowe was entitled to indemnification from QCI for
    the costs incurred in defending the lawsuit brought against him. Defendants also filed
    third-party claims for a violation of the Computer Fraud and Abuse Act, theft, and a
    violation of Ohio’s Deceptive Trade Practices Act against Kathy Daly, Daly’s wife who
    had worked as an office manager for QCI.
    {¶10} Defendants filed a motion to disqualify counsel for Daly and QCI,
    arguing that QCI’s Board of Directors had never been asked to vote to authorize the
    lawsuit and that counsel would have “divided loyalties” if engaged in representation of
    both plaintiffs. Subsequent to the filing of this motion, QCI retained separate counsel.
    The court denied the motion to disqualify, stating in relevant part:
    In this case, the Court finds that a demand for a vote by the board of
    directors would have been pointless as Mr. Rowe owns the other 50% of
    the company. Additionally, even if there was an issue of adequate
    representation by [Daly’s counsel], QCI is now represented by
    independent counsel. QCI is a nominal but necessary party to this case.
    The parties later filed an agreed entry realigning QCI as an interested-party defendant.
    {¶11} Daly and third-party defendant Kathy Daly moved for summary
    judgment on defendants’ counterclaims and third-party claims for violations of the
    Computer Fraud and Abuse Act and Ohio’s Deceptive Trade Practices Act, breach of
    fiduciary duty, and theft. The trial court granted the motion with respect to the claims
    for a violation of the Computer Fraud and Abuse Act and theft. But it found that
    6
    OHIO FIRST DISTRICT COURT OF APPEALS
    genuine issues of material fact existed with respect to the claims for breach of fiduciary
    duty and a violation of Ohio’s Deceptive Trade Practices Act.
    {¶12} Defendants moved for summary judgment on Daly’s claims for
    accounting, conversion, and breach of contract. The trial court granted the motion on
    all three claims, additionally stating in its entry that it was of the opinion that the
    claims for theft and replevin should also be dismissed but it could not dismiss them
    because those claims had not been subject to the motion for summary judgment. Daly
    subsequently elected not to pursue the replevin claim at trial. Daly also abandoned
    the breach-of-fiduciary-duty claim that he had brought derivatively on behalf of QCI
    and pursued that claim only in his individual capacity.
    {¶13}    The case proceeded to a bench trial on all remaining claims. Daly and
    Rowe both testified about the business practices of, and the nature of the relationship
    between, QCI and CAI from the relationship’s inception until Rowe essentially evicted
    Daly and QCI from the premises in May of 2018. Several historical profit-and-loss
    statements were entered into evidence. With respect to QCI’s earnings and Daly’s
    claimed lost profits following the eviction, Daly identified an exhibit detailing QCI’s
    earnings in the five-year period preceding the eviction. He testified as follows about
    the exhibit and the corporation’s historical earnings:
    Counsel: And what were the total sales of QCI for that five-year period?
    Daly: That would be $1,689,230.
    Counsel:    And so if we divide that number by five, we get about
    $330,000 annual sales?
    Daly: That would be a good average.
    7
    OHIO FIRST DISTRICT COURT OF APPEALS
    Counsel: Okay. And of course it’s been—this would have been three-
    plus years since you were ejected from QCI; is that right?
    Daly: That’s correct.
    Counsel: So in the normal course, you would expect something in excess
    of a million dollars having been sold by CAI for QCI in that time period;
    is that right?
    Daly: That would be a good estimate.
    Counsel: All right. And is there a line in here that denotes what Mr.
    Rowe took out of the company in those five years?
    Daly: Yes, there would be. On the second page, Page 2, of that, up near
    the top where it says “Professional Fees,” under “Consulting.” That
    would be Mr. Rowe’s, his take.
    Counsel: Okay. So he was paid wages, or was he paid distributions?
    Daly: I believe he was paid a consulting fee.
    Counsel: That’s how he took his part of the profits?
    Daly: That’s correct.
    Counsel:     So over that five-year period, he took out almost—well,
    $276,000 per year?
    Daly: I think that’s a five-year period.
    Counsel: Five-year period, pardon.
    Daly: Yes.
    Counsel: I’m just going to do a tiny bit of math here. So about $55,000
    a year was his share of the profits.
    Daly: Yes.
    8
    OHIO FIRST DISTRICT COURT OF APPEALS
    Counsel: QCI’s business?
    Daly: Correct.
    Counsel: And where in this report is—and that represents 16.3 percent
    of the gross income?
    Daly: Yes; of the sales.
    Counsel: Of the sales. And that’s just his share. That’s not both of you;
    that’s just his share.
    Daly: That’s correct.
    Counsel: And so where are yours? Where does your money come out?
    Daly: Well, if you look on Page 1, you’ll see “Net Wages.” And that
    199,000 represents my take-home pay; after taxes.
    Counsel: Okay. And so there would be withholdings; FICA, Social
    Security, Medicare, I think?
    Daly: Correct.
    *   *   *
    Counsel: So you were paid, actually, W-2 wages, and Mr. Rowe was paid
    consulting fees. Is that’s what you’re telling me?
    Daly: That’s correct, that’s correct.
    Counsel: And were you each paid the same amount over this five-year
    period?
    Daly: Yes. We would take exactly the same amount of money out.
    Counsel: So if I were to ask you what the average annual partner’s
    percentage of sales is a good number to determine profits, what number
    would you say it is?
    9
    OHIO FIRST DISTRICT COURT OF APPEALS
    Daly: I would say whatever that—if you look under Consulting, the 16.3,
    since I would take the same amount, I would say 32.6 would be—
    Counsel: Total, split in half?
    Daly: Yes.
    Counsel: 16.3 percent for each of you?
    Daly: Yes.
    {¶14} In other words, Daly’s testimony established that QCI’s historical profit
    margin was approximately 32.6 percent of gross sales. Thus, even though they
    received payment in different forms, Rowe and Daly each received 16.3 percent of the
    gross sales revenue historically.
    {¶15} Daly and Rowe also both testified about joint exhibit 15, which consisted
    of multiple invoices that they agreed were for CAI’s sales of Braze Tape from April of
    2018 through sometime in 2021.            According to Daly, these invoices totaled
    $338,711.37, and he never received any of his share of the profits for these sales.
    {¶16} In addition to the agreed-upon invoices in joint exhibit 15, Daly testified
    about additional invoices that CAI had submitted to various customers in the years
    after the eviction. Daly and Rowe disputed whether these additional invoices were for
    the sales of Braze Tape or for other products manufactured by CAI. With respect to
    this group of invoices, Daly testified with certainty that particular invoices were for the
    sale of Braze Tape. As to other invoices in this group, Daly could only state that they
    were “likely” or “probably” for sales of Braze Tape. Rowe also testified about these
    disputed invoices, and he conceded that many of the invoices were for the sale of Braze
    Tape.
    10
    OHIO FIRST DISTRICT COURT OF APPEALS
    {¶17} Daly ultimately estimated that CAI had invoiced over one million dollars
    in sales since he was evicted from the premises. And he opined that based on his
    historical share of profits prior to the eviction, he was entitled to receive in profits
    approximately 16.3 percent of sales during that time period.
    {¶18} Rowe also testified about QCI’s historical profit margin, agreeing with
    Daly that QCI’s average profit margin was approximately one third of all sales, with he
    and Daly each receiving 16.3 percent of that amount. He also testified that Daly had
    not been paid by QCI since the eviction, and that no money for the sale of Braze Tape
    had been transferred into QCI’s own account. Rather, QCI’s money was held in a bank
    account in the name of C A Patents. Rowe explained that C A Patents was the holding
    company for his patents, and that money received by CAI was placed into the C A
    Patents account.
    {¶19} Rowe identified multiple checks written from the C A Patents account
    that were clearly for his own personal expenses. Included in these personal expenses
    were payments to his daughter, to a country club, for automobile repairs and expenses,
    and for medical bills. These totaled approximately $45,000.
    {¶20} The trial court found in favor of Daly on his claim for a declaratory
    judgment and injunctive relief, and it issued a declaratory judgment authorizing him,
    as president of QCI, to terminate the agreement between QCI and CAI and to relicense
    the sale of Braze Tape to other vendors. Defendants have not appealed this portion of
    the trial court’s judgment.
    {¶21} The court also found in favor of Daly on his claim for breach of fiduciary
    duty. With respect to damages for the breach of fiduciary duty, the court found that
    Daly “presented a theory of lost profits at trial, but failed to carry his burden of proof
    11
    OHIO FIRST DISTRICT COURT OF APPEALS
    regarding the alleged lost profits. Plaintiff’s proof of gross revenue and profit was
    speculative.” The court further found that Rowe had admitted to spending QCI’s
    profits and that the evidence demonstrated that “Rowe at least in part siphoned the
    income from Braze Tape sales in cash and checks made payable to himself and others,
    as well as payments for Rowe’s personal, recreational and medical expenses.” The
    court stated that these actions constituted a breach of fiduciary duty to Daly and QCI,
    and that Daly was entitled to damages in the amount of $45,090.47 for this breach.
    {¶22} The court found in favor of defendants on Daly’s remaining claim for
    theft. And it found in favor of Daly and Kathy Daly on the counterclaims and third-
    party claims that defendants had asserted against them.2
    {¶23} Both the defendants and Daly have appealed the trial court’s decision.
    In a single assignment of error, defendants argue that the trial court erred in granting
    judgment in favor of Daly. In this assignment of error, they argue that Daly lacked
    standing to pursue a direct claim for breach of fiduciary duty, that it was error to award
    damages on the claim for breach of fiduciary duty after finding that Daly failed to carry
    his burden of proving damages, and that, if damages were properly awarded, the trial
    court’s calculation of damages was erroneous.
    {¶24} In his cross-appeal, Daly argues in a single assignment of error that the
    trial court erred in finding that he failed to carry his burden of proving lost-profit
    damages.
    2 Testimony was presented on these claims at trial, but as the claims were ultimately found to be
    without merit and that finding is not being challenged on appeal, it is not necessary to discuss the
    testimony offered in support of them.
    12
    OHIO FIRST DISTRICT COURT OF APPEALS
    Breach of Fiduciary Duty
    {¶25} We first address the portion of defendants’ assignment of error arguing
    that the trial court erred in granting judgment in favor of Daly because he lacked
    standing to pursue a direct claim for breach of fiduciary duty. Defendants do not
    challenge the trial court’s finding that a breach of fiduciary duty occurred, but rather
    contend that the claim belonged to the corporation, rather than to Daly individually.
    {¶26} QCI is a close corporation.           A close corporation is “generally
    characterized as a corporation with few shareholders who own shares that are not
    traded on a securities market.” Vontz v. Miller, 
    2016-Ohio-8477
    , 
    111 N.E.3d 452
    , ¶ 30
    (1st Dist.).   In such a corporate structure, which resembles a partnership, “the
    relationship between the shareholders must be one of trust, confidence and loyalty to
    thrive.” Id. at ¶ 31, quoting Crosby v. Beam, 
    47 Ohio St.3d 105
    , 108, 
    548 N.E.2d 217
    (1989). Although a close corporation provides many benefits, the nature of the
    corporate structure “also gives majority or controlling shareholders opportunities to
    oppress minority shareholders.” Crosby at 108.         For this reason, a heightened
    fiduciary duty exists between majority and minority shareholders in a close
    corporation. Id.; Maas v. Maas, 
    2020-Ohio-5160
    , 
    161 N.E.3d 863
    , ¶ 70 (1st Dist.).
    {¶27} This heightened fiduciary duty applies not only to majority
    shareholders, but to “controlling shareholders” as well. Crosby at 109; Vontz at ¶ 35.
    And it has been held to apply in a close corporation where the corporate owners are
    equal shareholders (as are Daly and Rowe) where one shareholder who is not
    technically a majority owner “exercises ‘control over the corporation to an extent that
    [the shareholder’s] actions dominate[].’ ” Vontz at ¶ 35, quoting McLaughlin v.
    13
    OHIO FIRST DISTRICT COURT OF APPEALS
    Beeghly, 
    84 Ohio App.3d 502
    , 506-507, 
    617 N.E.2d 703
     (10th Dist.1992); see Heaton
    v. Rohl, 
    193 Ohio App.3d 770
    , 
    2011-Ohio-2090
    , 
    954 N.E.2d 165
    , ¶ 54 (11th Dist.).
    {¶28} A claim for a breach of this heightened fiduciary duty may be brought
    directly by a shareholder on her or his own behalf or derivatively by a shareholder on
    behalf of the corporation. Maas at ¶ 71. A derivative action is appropriate where an
    injury directly affects the corporation and only indirectly affects the shareholders,
    whereas a direct action by a shareholder is appropriate when a complaining
    shareholder suffers an injury directly. Id. at ¶ 72. In a direct action, “[t]he injury to
    the shareholder must be separate and distinct from the injury to the corporation.” Id.
    If the defendant’s wrongdoing has caused direct harm to the corporate worth, the
    cause of action accrues to the corporation, rather than to an individual shareholder.
    Id. at ¶ 73. This is true:
    even though in an economic sense real harm may well be sustained by
    the shareholders as a result of reduced earnings, diminution in the value
    of ownership, or accumulation of personal debt and liabilities from the
    company’s financial decline. The personal loss and liability sustained
    by the shareholder is both duplicative and indirect to the corporation’s
    right of action.
    Id. at ¶ 77, quoting Adair v. Wozniak, 
    23 Ohio St.3d 174
    , 178, 
    492 N.E.2d 426
     (1986).
    {¶29} Here, an understanding of the corporate structure of QCI is helpful in
    determining whether Daly suffered an injury separate and distinct from QCI. Daly and
    Rowe each own 50 percent of QCI and, until Daly’s eviction, split all corporate profits
    equally. Per the parties’ standard business practices, payments received for sales of
    Braze Tape by CAI were initially deposited into the QCI-CAI joint-agency account, and
    14
    OHIO FIRST DISTRICT COURT OF APPEALS
    then later transferred into a corporate account for QCI. After QCI paid all necessary
    expenses, including rent, utilities, cost of materials, and bills submitted by CAI, all
    remaining profits were split equally between Daly and Rowe. QCI never retained any
    earnings.
    {¶30}    It is clear from the record, and the parties’ statements during oral
    argument before this court, that profits earned on the sale of Braze Tape were not
    reinvested into QCI, but rather were wholly distributed to Daly and Rowe. And it is
    also clear that QCI continued to pay all its expenses. So while QCI itself has not
    received any payments for the sale of Braze Tape since Rowe evicted Daly in May of
    2018, it has suffered no injury from Rowe’s breach of fiduciary duty: it has not
    incurred any debt and it would have distributed all profits to Daly and Rowe. Rowe’s
    actions have caused no direct harm to QCI’s corporate worth. See Maas, 2020-Ohio-
    5160, 
    161 N.E.3d 863
    , at ¶ 73. Rather, it was Daly who suffered the injury in this case,
    as Rowe retained all profits from Braze Tape sales, including those to which Daly was
    entitled.
    {¶31} Because Daly suffered an injury separate and distinct from QCI, he had
    standing to bring a direct claim for breach of fiduciary duty, and the trial court did not
    err in awarding judgment in his favor on that claim.
    Damages
    {¶32} Having determined that no error occurred in the trial court’s finding
    that Daly was directly injured by Rowe’s breach of fiduciary duty, we now turn to the
    trial court’s award of damages for that breach.
    {¶33} In their assignment of error, defendants argue that the trial court erred
    in awarding damages after finding that Daly failed to carry his burden of proving
    15
    OHIO FIRST DISTRICT COURT OF APPEALS
    damages, and that, if damages were properly awarded, the trial court’s calculation of
    damages was erroneous. Daly similarly attacks the trial court’s award of damages in
    his cross-appeal, arguing that the trial court erred in finding that he failed to carry his
    burden of proving damages.
    {¶34} In a civil bench trial, we review a trial court’s award of damages to
    determine whether it is against the manifest weight of the evidence. Danopulos v. Am.
    Trading II, LLC, 
    2021-Ohio-2196
    , 
    174 N.E.3d 493
    , ¶ 7 (1st Dist.). Under such review,
    the trial court’s judgment will only be reversed if the court clearly lost its way and
    created a manifest miscarriage of justice. 
    Id.
    {¶35} In determining whether the trial court’s award of damages was
    supported by the weight of the evidence, we are mindful that “[a]n award of damages
    must be shown with a reasonable degree of certainty and in some manner other than
    mere speculation, conjecture, or surmise.” Id. at ¶ 9, quoting Capital Plus, Inc. v.
    Parker Ents. Imperial Dist., Inc., 1st Dist. Hamilton No. C-030046, 
    2004-Ohio-3896
    ,
    ¶ 53. But “once a plaintiff establishes a right to damages, plaintiff’s right will not be
    denied merely because the damages cannot be calculated with mathematical
    certainty.” 
    Id.,
     quoting Austin v. Chukwuani, 
    2017-Ohio-106
    , 
    80 N.E.3d 1199
    , ¶ 21
    (8th Dist.).
    {¶36} Here, with respect to damages, the trial court found that Daly had
    “presented a theory of lost profits at trial, but failed to carry his burden of proof
    regarding the alleged lost profits. Plaintiff’s proof of gross revenue and profit was
    speculative.” The court further found that although Daly had failed to prove lost
    profits, he had proved $45,090.47 in damages for Rowe’s breach of fiduciary duty in
    wrongfully taking corporate assets for his own use. So, contrary to defendants’
    16
    OHIO FIRST DISTRICT COURT OF APPEALS
    argument, the trial court did not find that Daly had entirely failed to carry his burden
    of proving damages.
    {¶37} Turning to the trial court’s finding that Daly’s proof of lost profits was
    speculative, we hold that the trial court’s finding was against the manifest weight of
    the evidence. The damages established by Daly were imprecise, but they were not
    speculative.
    {¶38} Daly testified to QCI’s average annual sales and its profit margins, as
    well the percentage of the profits that he and Rowe had received from those sales, in
    the five-year period preceding his eviction from the premises. In addition, Daly
    identified multiple invoices that the parties agreed were for CAI’s sales of Braze Tape
    from April of 2018 through sometime in 2021. He testified that these invoices totaled
    $338,711.37, and that he never received any of his share of the profits for these sales.
    Daly also identified additional invoices submitted by CAI to various customers
    following the eviction that were in dispute by the parties as to whether they were for
    the sales of Braze Tape or for other products manufactured by CAI. Rowe also testified
    about these disputed invoices, and he conceded that many of the invoices were for the
    sale of Braze Tape. It was established that payments received for these invoices were
    owed to QCI, but were never transferred into QCI’s account and never shared with
    Daly.
    {¶39} Daly opined that based on the historical share of profits that he had
    received prior to the eviction, he was entitled to receive in profits approximately 16.3
    percent of the gross sales made during the time period subsequent to the eviction.
    {¶40} The record establishes that while Daly was unable to provide an exact
    amount of sales or profit that QCI had received in the disputed time period, he
    17
    OHIO FIRST DISTRICT COURT OF APPEALS
    provided historical testimony about the corporation’s annual earnings and his share
    of those earnings in the five-year period prior to the eviction, as well as testimony
    about the sales that QCI had made in the time period following the eviction. There
    was nothing speculative about Daly’s testimony or the evidence presented regarding
    QCI’s lost profits. The trial court’s holding to the contrary was against the manifest
    weight of the evidence.
    {¶41} Daly’s assignment of error challenging the trial court’s finding that he
    failed to carry his burden of proving damages is sustained, and the trial court’s award
    of damages is reversed. We need not address the remainder of the defendants’
    assignment of error on the issue of damages, as it challenges the now-reversed award
    of damages. The defendants’ assignment of error is accordingly overruled.
    Conclusion
    {¶42} Because Daly suffered an injury separate and distinct from QCI, the
    trial court did not err in finding that he had standing to bring a direct claim for breach
    of fiduciary duty. But the trial court erred in finding that Daly failed to carry his
    burden of proving damages and in finding that Daly’s proof of lost profits was
    speculative, and its award of damages is reversed. The case is remanded to the trial
    court to determine an award of damages consistent with the law and this opinion.
    Judgment affirmed in part, reversed in part, and cause remanded.
    BERGERON and BOCK, JJ., concur.
    Please note:
    The court has recorded its own entry on the date of the release of this opinion.
    18
    

Document Info

Docket Number: C-220026 & C-220031

Citation Numbers: 2022 Ohio 3750

Judges: Myers

Filed Date: 10/21/2022

Precedential Status: Precedential

Modified Date: 10/21/2022