James Lumber Co. v. Nottrodt ( 2012 )

[Cite as James Lumber Co. v. Nottrodt, 2012-Ohio-1746.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 97288
THE JAMES LUMBER COMPANY
PLAINTIFF-APPELLEE/
CROSS-APPELLANT
vs.
ROBERT G. NOTTRODT, ET AL.
DEFENDANTS-APPELLANTS/
CROSS-APPELLEES
JUDGMENT:
AFFIRMED IN PART, REVERSED
IN PART, AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-606703
BEFORE: Celebrezze, P.J., Cooney, J., and E. Gallagher, J.
RELEASED AND JOURNALIZED: April 19, 2012
ATTORNEYS FOR APPELLANTS/CROSS-APPELLEES
For Robert G. Nottrodt
William F. Chinnock
8238 Sugarloaf Road
Boulder, Colorado 80302
For Craig P. Metzler
Nicholas E. Phillips
Phillips, Mille & Constabile Co., L.P.A.
7530 Lucerne Drive
Suite 200
Middleburg Heights, Ohio 44130
ATTORNEY FOR APPELLEE/CROSS-APPELLANT
David J. Pasz
12001 Prospect Road
Suite A-1
Strongsville, Ohio 44149
FRANK D. CELEBREZZE, JR., P.J.:
{¶1} Defendant-appellant/cross-appellee, Robert G. Nottrodt, appeals the judgment
of the common pleas court denying his motion for sanctions pursuant to R.C. 2323.51.
Plaintiff-appellee/cross-appellant, The James Lumber Company (“James Lumber”),
appeals the trial court’s judgment granting Nottrodt’s motion to dismiss pursuant to
Civ.R. 12(B). After careful review of the record and relevant case law, we affirm in part,
reverse in part, and remand for further proceedings consistent with this opinion.
{¶2} This case initially arose out of a business relationship between James Lumber
and Summer Hill Homes of Ohio, L.L.C. (“Summer Hill”). At all times relevant to this
appeal, Summer Hill was owned and operated by Robert G. Nottrodt and Craig Metzler
and was engaged in the business of purchasing and developing residential property.
Between 2004 and 2005, Summer Hill purchased approximately $250,000 in building
materials from James Lumber. Summer Hill paid approximately $160,000 on the
account, leaving a balance of $90,218.70.
{¶3} In February 2005, James Lumber filed suit against Summer Hill in Case No.
CV-554010 for the account balance due, alleging causes of action for breach of contract,
unjust enrichment, and fraud. James Lumber also personally joined Craig Metzler as a
defendant.1 Metzler was responsible for purchasing the building materials from James
Lumber on behalf of Summer Hill. Ultimately, the parties executed a Stipulation for
Nottrodt was not named as a defendant in James Lumber’s February 2005 complaint.
1
Dismissal and Judgment Entry specifying that “Defendant Summer Hill Homes of Ohio
confesses judgment in the amount of $90,000.00 to Plaintiff [James Lumber].”2
{¶4} On November 9, 2006, James Lumber filed a complaint against Nottrodt,
Metzler, and Summer Hill, attempting to pierce the corporate veil, alleging that the
principals of Summer Hill had fraudulently transferred assets of the company to avoid
paying creditors, including James Lumber. Nottrodt and Summer Hill did not file an
answer to the complaint. Instead, Nottrodt and Summer Hill filed a motion to dismiss,
pursuant to Civ.R. 12(B), claiming that the 2006 litigation was barred by the doctrine of
res judicata. On January 3, 2007, Metzler filed an answer and cross-claim against James
Lumber. On January 5, 2007, Nottrodt and Summer Hill filed an amended motion to
dismiss with attachments.3
{¶5} On December 27, 2007, the trial court granted Nottrodt’s motion to dismiss,
stating:
Defendant, Robert Nottrodt’s Motion to Dismiss Plaintiff’s Complaint for
lack of subject matter jurisdiction is granted. This Court lacks jurisdiction
based on the doctrine of res judicata as the case was once litigated and
dismissed with prejudice in this Court. The subject matter of the previous
case arose of the same occurrence of the previously litigated case and
therefore, the additional claims could have and should have been brought in
the previous litigation.
James Lumber’s case against Craig Metzler was voluntarily dismissed without prejudice.
2
In the January 3, 2007 motion to dismiss, Nottrodt and Summer Hill attached copies of
3
James Lumber’s February 2005 complaint, the October 2005 stipulation for dismissal and judgment
entry, and the October 2005 journal entry.
{¶6} On January 18, 2008, James Lumber filed a notice of appeal with this court.
Subsequently, Nottrodt filed a motion for sanctions in the trial court against James
Lumber and its counsel for filing an action that was barred by the doctrine of res judicata.
{¶7} Upon review, James Lumber’s appeal was dismissed by this court for lack of
a final, appealable order on April 4, 2008,4 because the cross-claims of Metzler were not
disposed of by the trial court. On April 18, 2008, James Lumber filed with the trial court
a motion for reconsideration or, in the alternative, a motion for a final, appealable order.
On September 13, 2010, the trial court denied Nottrodt’s motion for sanctions and denied
James Lumber’s motion for reconsideration.
{¶8} On October 12, 2010, Nottrodt filed an appeal to this court from the trial
court’s order denying sanctions. However, for a second time, this court dismissed the
appeal for want of a final, appealable order because Metzler’s claims remained pending
and were not disposed of by the trial court.5 On August 15, 2011, the trial court disposed
of Metzler’s claims, thereby creating a final, appealable order.
{¶9} On September 12, 2011, Nottrodt filed his notice of appeal, raising one
assignment of error for review. Subsequently, James Lumber filed its notice of
cross-appeal on September 21, 2011, raising one assignment of error for review.
Law and Analysis
I. James Lumber’s Cross-Appeal
Case No. 90923.
4
Case No. 95835.
5
{¶10} Because our disposition of appellee/cross-appellant’s sole cross- assignment
of error is determinative, we shall initially address James Lumber’s cross-appeal.
{¶11} In its sole assignment of error, cross-appellant, James Lumber, argues that
“the trial court erred by dismissing its complaint based on a finding that prior litigation
that resulted in a judgment and created a judgment creditor/ judgment debtor relationship
is res judicata as to James Lumber’s claim for fraudulent conveyance and piercing the
corporate veil.”
{¶12} In dismissing James Lumber’s complaint for lack of subject matter
jurisdiction pursuant to Civ.R. 12(B)(1), the trial court concluded that the 2006 litigation
was barred under the doctrine of res judicata. We apply a de novo standard of review to
the trial court’s granting of a motion to dismiss under Civ.R. 12(B)(1) for lack of subject
matter jurisdiction. Internatl. Total Servs., Inc. v. Garlitz, 8th Dist. No. 90441,
2008-Ohio-3680, ¶ 6, citing Dzina v. Avera Internatl. Corp., 8th Dist. No. 86583,
2006-Ohio-1363; Madigan v. Cleveland, 8th Dist. No. 93367, 2010-Ohio-1213, ¶ 20,
citing Perrysburg Twp. v. Rossford, 103 Ohio St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44,
¶ 5. Under this standard of review, we must independently review the record and afford
no deference to the trial court’s decision. Herakovic v. Catholic Diocese of Cleveland,
8th Dist. No. 85467, 2005-Ohio-5985.
{¶13} The doctrine of res judicata provides that “[a] valid, final judgment rendered
upon the merits bars all subsequent actions based upon any claim arising out of the
transaction or occurrence that was the subject matter of the previous action.” Grava v.
Parkman Twp., 73 Ohio St.3d 379, 653 N.E.2d 226 (1995), syllabus. In Grava, the court
stated that the doctrine of res judicata bars not only subsequent actions involving the same
legal theory of recovery as the previous action, but also claims that could have been
litigated in the previous action:
“It has long been the law of Ohio that ‘an existing final judgment or decree
between the parties to litigation is conclusive as to all claims which were or
might have been litigated in a first lawsuit’” (emphasis sic) (quoting Rogers
v. Whitehall [1986], 25 Ohio St.3d 67, 69, 25 OBR 89, 90, 494 N.E.2d
1387, 1388). We also declared that “[t]he doctrine of res judicata requires
a plaintiff to present every ground for relief in the first action, or be forever
barred from asserting it.” Grava at 382, quoting Natl. Amusements, Inc.
v. Springdale, 53 Ohio St.3d 60, 62, 558 N.E.2d 1178 (1990).
However,
“[l]itigation that resulted in a judgment and created a
judgment-creditor/judgment-debtor relationship is not res judicata as to a
subsequent claim that the debtor fraudulently transferred property to avoid
paying the judgment. In other words, appellant was not required to add her
claim for fraudulent conveyance to litigation that had not yet resulted in a
judgment. Furthermore, a fraudulent-conveyance claim involves issues
which were not actually litigated or decided in the prior actions.” Nosal v.
Fairlawn Corp. Ctr., 9th Dist. No. 23846, 2008-Ohio-414, ¶ 12, quoting
Blood v. Nofzinger, 162 Ohio App.3d 545, 2005-Ohio-3859, 834 N.E.2d
358, at ¶ 22 (6th Dist.).
{¶14} While Nottrodt is correct in stating that the present litigation derives from
the underlying 2005 litigation to obtain judgment on an account in the amount of $90,000,
he overlooks the fact that the gravamen of the present litigation is based on actions taken
by Nottrodt and Metzler during and subsequent to the pendency of the 2005 litigation.
Specifically, James Lumber alleged in the present complaint that Nottrodt and Metzler
fraudulently transferred James Lumber property “in an attempt to avoid attachment by its
creditors, including James Lumber.”
{¶15} Accordingly, James Lumber’s current action is not an attempt to relitigate a
claim or issue litigated and decided in the 2005 action, nor is it an attempt to litigate a
claim or issue that might have been litigated and decided in the previous action. Rather,
James Lumber’s efforts to hold Nottrodt and Metzler personally liable is a part of James
Lumber’s overall effort to gain compliance with the trial court’s October 2005 order,
which James Lumber could not have done at any time prior to the date the order was
issued. Gilboy v. Marino, 2d Dist. No. 17374, 1999 WL 148117 (Mar. 19, 1999). Thus,
the trial court erred in ruling that James Lumber’s action was barred under the doctrine of
res judicata.
{¶16} Moreover, we find that the trial court erred procedurally in granting
Nottrodt’s Civ.R. 12(B) motion. When Nottrodt was initially served with James Lumber’s
complaint and summons, he did not file an answer, but rather filed a Civ.R. 12(B) motion
claiming that the complaint failed to state a cause of action because it was barred by the
doctrine of res judicata. Civ.R. 12(B), however, does not list res judicata among the
defenses that may be raised in a motion to dismiss the complaint. Compare Civ.R. 8(A);
Lawson Steel Slitting, Inc. v. Cleveland Elec. Illum. Co., 8th Dist. No. 96845,
2012-Ohio-83.
{¶17} Thus, as Ohio courts have recognized, res judicata is not a defense that can
be raised by a motion to dismiss pursuant to Civ.R. 12(B) because that defense must be
proved with evidence outside the pleadings. Ardary v. Stepien, 8th Dist. No. 82950,
2004-Ohio-630, ¶ 18, citing State ex rel. Freeman v. Morris, 62 Ohio St.3d 107, 109, 579
N.E.2d 702 (1991). “Pursuant to Freeman, ‘the court may not dismiss a case, via a
motion to dismiss on res judicata grounds.’” Id., quoting Shaper v. Tracy, 73 Ohio St.3d
1211, 1995-Ohio-37, 654 N.E.2d 1268.
{¶18} Consequently, the trial court erred in dismissing James Lumber’s complaint
on this basis. J & H Reinforcing & Struc. Erectors, Inc. v. Wellston City School Dist.,
4th Dist. No. 09CA8, 2010-Ohio-2312; Morris at 109.
{¶19} While we acknowledge that Nottrodt filed a motion for summary judgment
on May 21, 2007, his argument that the trial court inadvertently referenced his motion to
dismiss in its journal entry is without merit. It is evident from the trial court’s order that
it clearly and intentionally based its decision to dismiss James Lumber’s complaint on
Nottrodt’s Civ.R. 12(B) motion to dismiss. Thus, Nottrodt’s motion for summary
judgment was never ruled on and is deemed to have been denied. Indep. Furniture Sales,
Inc. v. Martin, 184 Ohio App.3d 562, 2009-Ohio-5697, 921 N.E.2d 718 (8th Dist.) (“We
note that when a trial court fails to rule upon a pretrial motion, it may be presumed that
the court overruled it.”). See State ex rel. The V Cos. v. Marshall, 81 Ohio St.3d 467,
469, 692 N.E.2d 198 (1998), citing State ex rel. Cassels v. Dayton City School Dist. Bd.
of Edn., 69 Ohio St.3d 217, 223, 631 N.E.2d 150 (1994).
{¶20} Accordingly, James Lumber’s sole assignment of error is sustained.
II. Nottrodt’s Appeal
{¶21} In Nottrodt’s sole assignment of error, he argues that the trial court erred as
a matter of law in denying his motion for sanctions against James Lumber’s counsel of
record, attorney Ronald Pasz.
{¶22} R.C. 2323.51 provides that a party adversely affected by frivolous conduct
may file a motion for an award of court costs, reasonable attorney fees, and other
reasonable expenses incurred in connection with the civil action.
{¶23} The term “conduct” is defined as “the filing of a civil action, the assertion of
a claim, defense, or other position in connection with a civil action, or the taking of any
other action in connection with a civil action * * *.” R.C. 2323.51(A)(1)(a).
{¶24} The term “frivolous” is defined as conduct by a party to a civil action that
“is not warranted under existing law and cannot be supported by a good faith argument
for an extension, modification, or reversal of existing law.” R.C. 2323.51(A)(2)(a)(ii).
{¶25} In determining whether the claim itself is frivolous, the test is whether no
reasonable lawyer would have brought the action in light of the existing law. Orbit
Electronics, Inc. v. Helm Instrument Co. Inc., 167 Ohio App.3d 301, 2006-Ohio-2317,
855 N.E.2d 91, ¶ 47 (8th Dist.), citing Riston v. Butler, 149 Ohio App.3d 390, 397-398,
2002-Ohio-2308, 777 N.E.2d 857 (1st Dist.); Lisboa v. Kleinman, 8th Dist. No. 89703,
2008-Ohio-1270. “‘In other words, a claim is frivolous if it is absolutely clear under the
existing law that no reasonable lawyer could argue the claim.’” Riston at ¶ 30, quoting
Hickman v. Murray, 2d Dist. No. CA 15030, 1996 WL 125916 (Mar. 22, 1996).
{¶26} In the present case, Nottrodt sought sanctions against James Lumber
pursuant to R.C. 2323.51. In asserting that James Lumber’s suit was frivolous, Nottrodt
argued that James Lumber’s 2006 cause of action against Summer Hill, Metzler, and
Nottrodt was barred under the doctrine of res judicata because it alleged the same
operative facts as its previously adjudicated 2005 case. We find appellant’s argument to
be without merit. As discussed in James Lumber’s cross-appeal, the trial court erred in
dismissing James Lumber’s 2006 litigation based on the doctrine of res judicata.
Accordingly, sanctions against James Lumber pursuant to R.C. 2323.51 would be
inappropriate in this matter.
{¶27} Nottrodt’s sole assignment of error is overruled.
{¶28} Based on the foregoing, we affirm the judgment of the trial court denying
Nottrodt’s motion for sanctions, reverse the judgment of the trial court granting
Nottrodt’s Civ.R. 12(B) motion to dismiss, and remand for further proceedings consistent
with this opinion.
It is ordered that appellee recover of said appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the common
pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
FRANK D. CELEBREZZE, JR., PRESIDING JUDGE
COLLEEN CONWAY COONEY, J., and
EILEEN A. GALLAGHER, J., CONCUR