Berryhill v. Khouri , 2021 Ohio 504 ( 2021 )

[Cite as Berryhill v. Khouri, 2021-Ohio-504.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
ROBERT BERRYHILL, :
Plaintiff-Appellant, : No. 109411
v. :
RUSTOM R. KHOURI, ET AL., :
Defendants-Appellees. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: February 25, 2021
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-19-915052
Appearances:
Robert Berryhill, pro se.
Tucker Ellis L.L.P., John F. McCaffrey, Courtney E.S.
Mendelsohn, and Melissa Z. Kelly, for appellees.
SEAN C. GALLAGHER, P.J.:
Plaintiff-appellant Robert Berryhill (“Berryhill”) appeals from the
decision of the trial court that granted the Civ.R. 12(C) motion for judgment on the
pleadings of defendants-appellees Rustom R. Khouri, et al.1 Upon review, we hold
the action is barred by res judicata and affirm the trial court’s decision.
Background
This appeal is taken from a ruling from the trial court that found the
claims raised by Berryhill in this action “should have been brought as compulsory
counterclaims in a prior action and are now barred by res judicata.” The trial court
conducted a hearing on appellees’ Civ.R. 12(C) motion for judgment on the
pleadings. The trial court determined that Berryhill’s claims “are admittedly
stemming from the business relationship entered into by the parties in 1998” and
that this business relationship is the same business relationship that was the subject
of a prior action in which Berryhill was named as a counterclaim defendant. The
trial court concluded that the claims were barred by res judicata and granted
appellees’ Civ.R. 12(C) motion for judgment on the pleadings.
The prior action, Cuyahoga C.P. No. CV-10-721073 (“the 2010 case”),
was brought in March 2010 by Berryhill’s wife, Mary Berryhill (“Mary B.”). She
raised claims against Rustom Khouri, Mary Khouri (collectively “the Khouris”),
Carnegie Management and Development Corporation (“Carnegie”), and various
1There are 26 defendants-appellees, which include Rustom R. Khouri and Mary
Khouri, Carnegie Management and Development Corporation, Diamond Property
Maintenance Company, Ltd., Mary Khouri Trust, Lauren A. Khouri Trust, Jonathan R.
Khouri Trust, Carolyn A. Khouri Trust, Rustom Raymond Khouri III Trust, Aviana
Company Ltd., Aviana Company II, Ltd., Aviana Company 3 L.L.C., Canton Courthouse
Company, Cartario Company, Ltd., Cartario Company II, Ltd., Clecar Company L.L.C.,
Crown Point VA Company, Illirs Company, Indy Fedreau Company, Knoxbi Company,
Kyle Texas Company L.L.C., Minnalex Company, Ltd., Norcar Company L.L.C., Norcar
Company II L.L.C., Springcar Company, and SSAB Florida Company.
limited liability companies (“L.L.C.s”) managed by Carnegie, a commercial real
estate development company. Berryhill, who was an independent contractor, served
as Carnegie’s senior vice-president until 2009. In her amended complaint, Mary B.
claimed a 10 percent ownership interest in the various limited liability companies,
which was to be part of her husband’s compensation for various development deals
he completed. She raised various claims arising from the business dealings of the
parties.
The defendants in the 2010 case filed an answer and counterclaim
that named Berryhill as a counterclaim defendant. In the counterclaim, the
defendants described their business relationship with Berryhill and specifically
alleged that in August 1998, they “entered into a business relationship” for the
purpose of assisting Carnegie in “the development of retail and other specialty build-
to-suit real estate projects.” The defendants also alleged that “Carnegie and the
Khouris offered Mr. Berryhill the option to become a part-owner in Carnegie’s
development projects on a number of occasions throughout the course of their
relationship” and that Berryhill “requested that the ownership interests be
transferred to his wife, Mrs. Berryhill.” The defendants admitted to Mary B.’s
ownership interest and admitted she had been issued a Schedule K-1 statement,
which set forth her receipt of income for several of the limited liability companies.
However, the defendants maintained that the ownership interest was obtained by
fraud and that Berryhill had made false representations about his credentials.
Additionally, the counterclaim described a wide-ranging embezzlement scheme by
Berryhill.2 The counterclaim raised 11 claims, all of which arose out of Berryhill’s
independent contractor work for Carnegie, his theft and misrepresentations during
that work, and Mary B.’s knowledge and assistance in her husband’s scheme.
The trial court granted partial summary judgment to the defendants
on Mary B.’s claims, finding that Berryhill’s embezzlement excused the defendants’
performance after August 6, 2008. Eventually, the trial court granted the
defendants summary judgment on all of Mary B.’s claims upon finding Berryhill
“fraudulently induced the defendants into entering the underlying employment
contract, the contract is void and [Mary B.] does not have an interest in any of the
L.L.C.s listed in her complaint.” The trial court also granted the defendants
summary judgment on their counterclaim for embezzlement and found Berryhill
owed $219,796.45 for funds embezzled from one of the projects.
The trial court’s decision in the 2010 case was affirmed by this court
on appeal in Berryhill v. Khouri, 8th Dist. Cuyahoga No. 100173, 2014-Ohio-5041(“Berryhill I”). This court found that “[t]he record contains unrefuted evidence that
demonstrates that when Robert first sought employment with Carnegie in 1998, he
made the untrue representations” and that “since the association between the
parties proceeded as a series of transactions, the false representations were material
to each ensuing transaction.” (Emphasis sic.) Id. at ¶ 18-19.
2 Berryhill pleaded guilty to federal charges arising from his conduct and was
sentenced to six years in prison.
In January 2015, the trial court in the 2010 case granted the
defendants summary judgment on rescission of their agreement with Berryhill and
entered judgment in an amount exceeding $2 million, plus attorney fees and costs.3
That decision was not appealed.
In July 2015, Berryhill filed a motion to reopen judgment, which was
denied by the trial court. That decision was affirmed in Berryhill v. Khouri, 8th Dist.
Cuyahoga No. 105587, 2018-Ohio-1757 (“Berryhill II”). In that appeal, Berryhill had
argued there was “a dispute between partners over a long-standing real estate
partnership that was absent a partnership agreement * * * for over an eleven-year
period * * *.” Id. at ¶ 2. This court recognized that in Berryhill I, we affirmed the
trial court’s finding that Berryhill fraudulently induced the parties into contracting
with him and that “[t]he crux of appellant’s motion to vacate is to challenge the
previously adjudicated issue of the determinations as to fraud in this case.” Id. at
¶ 29. This court determined that Berryhill’s challenge was barred by res judicata
and law of the case. Id. at ¶ 28-29.
On May 8, 2019, Berryhill filed his complaint in this case. Berryhill
claimed that in April 1998, prior to any alleged unwritten employment agreement,
the parties created a partnership, which was absent a written partnership
agreement. The complaint sets forth factual allegations and raises several causes of
action stemming from the business relationship with appellees. The complaint
3 The defendants did not seek recovery of salary, benefits, and insurance, or
reimbursements. Rather, they only sought the return of money paid to Berryhill and/or
Mary B. on account of the ownership interest.
raises allegations of appellees’ alleged misconduct that mimic similar allegations
raised in the 2010 case. The complaint also alleges the 10 percent ownership interest
in the limited liability companies was granted to the Mary Berryhill Trust, as
opposed to Mary Berryhill individually.
In their answer, appellees raised several affirmative defenses,
including res judicata as a bar to the claims and the failure to assert the claims as
compulsory counterclaims in the 2010 case. The answer attached and incorporated
documents relevant to the issue of res judicata, including certified documents
relating to the 2010 case and a federal criminal case involving Berryhill’s
embezzlement from Carnegie.
On July 10, 2019, appellees filed their Civ.R. 12(C) motion for
judgment on the pleadings. Following a hearing, the trial court granted the motion
on January 17, 2020, upon finding Berryhill’s claims should have been raised as
compulsory counterclaims in the prior action and were barred by res judicata.
Berryhill timely filed this appeal.
Law and Analysis
Under his first assignment of error, Berryhill claims that the trial
court abused its discretion in granting appellees’ Civ.R. 12(C) motion for judgment
on the pleadings.
“Appellate review of a judgment on the pleadings involves only
questions of law and is therefore de novo.” New Riegel Local School Dist. Bd. of
Edn. v. Buehrer Group Architecture & Eng., Inc., 157 Ohio St.3d 164, 2019-Ohio-
2851, 133 N.E.3d 482, ¶ 8, citing Rayess v. Educational Comm. For Foreign Med.
Graduates, 134 Ohio St.3d 509, 2012-Ohio-5676, 983 N.E.2d 1267, ¶ 18. Motions
for judgment on the pleadings are governed by Civ.R. 12(C), which states: “After the
pleadings are closed but within such time as not to delay the trial, any party may
move for judgment on the pleadings.” “In order to be entitled to a dismissal under
Civ.R. 12(C), it must appear beyond doubt that [the nonmovant] can prove no set of
facts warranting the requested relief, after construing all material factual allegations
in the complaint and all reasonable inferences therefrom in [the nonmovant’s]
favor.” State ex rel. Toledo v. Lucas Cty. Bd. of Elections, 95 Ohio St.3d 73, 74,
2002-Ohio-1383, 765 N.E.2d 854. When considering a Civ.R. 12(C) motion for
judgment on the pleadings, the court may consider the complaint, the answer, and
any material attached as exhibits to those pleadings. Jordan v. Giant Eagle
Supermarket, 8th Dist. Cuyahoga No. 109304, 2020-Ohio-5622, ¶ 20, citing
Schmitt v. Educational Serv. Ctr., 8th Dist. Cuyahoga No. 97623, 2012-Ohio-2210,
¶ 9.
Civ.R. 13(A) governs compulsory counterclaims and states in
pertinent part as follows:
A pleading shall state as a counterclaim any claim which at the time of
serving the pleading the pleader has against any opposing party, if it
arises out of the transaction or occurrence that is the subject matter of
the opposing party’s claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction.
“Civ.R. 13(A) requires all existing claims between opposing parties
that arise out of the same transaction or occurrence to be litigated in a single lawsuit,
regardless of which party initiates the lawsuit.” Rettig Ents. v. Koehler, 68 Ohio
St.3d 274, 278, 1994-Ohio-127, 626 N.E.2d 99. “‘[T]he two-pronged test for
applying Civ.R. 13(A) is: (1) does the claim exist at the time of serving the pleading
* * *; and (2) does the claim arise out of the transaction or occurrence that is the
subject matter of the opposing claim.’” Id. at 277, citing Geauga Truck & Implement
Co. v. Juskiewicz, 9 Ohio St.3d 12, 14, 457 N.E.2d 827 (1984).
The Supreme Court of Ohio has adopted the “logical relation” test to
determine whether the claims arise out of the same transaction or occurrence. Id.at paragraph two of the syllabus. The test provides that “a compulsory counterclaim
is one which is logically related to the opposing party’s claim where separate trials
on each of their respective claims would involve a substantial duplication of effort
and time by the parties and the courts[.]” Id.; Civ.R. 13(A) Staff Notes (1970). “Thus,
multiple claims are compulsory counterclaims where they ‘involve many of the same
factual issues, or the same factual and legal issues, or where they are offshoots of the
same basic controversy between the parties.’” Id. at 279, quoting Great Lakes
Rubber Corp. v. Herbert Cooper Co., 286 F.2d 631, 634 (3d Cir.1961).
The purpose of Civ.R. 13(A) is “to avoid a multiplicity of actions and
to achieve a just resolution by requiring in one lawsuit the litigation of all claims
arising from common matters.” Id. at 278. “In addition to promoting judicial
economy, the rule is designed to assist courts with the ‘orderly delineation of res
judicata.’” Ferrara v. Vicchiarelli Funeral Servs., 2016-Ohio-5144, 69 N.E.3d 171,
¶ 11 (8th Dist.), quoting Lewis v. Harding, 182 Ohio App.3d 588, 2009-Ohio-3071,
913 N.E.2d 1048, ¶ 12 (8th Dist.). Therefore, “[a] party who fails to assert a
compulsory counterclaim at the proper time is barred from litigating that claim in a
subsequent lawsuit.” Id., citing Lewis at ¶ 12.
Under the doctrine of res judicata, “a valid, final judgment rendered
upon the merits bars all subsequent actions based upon any claim arising out of the
same transaction or occurrence that was the subject matter of a previous action.”
Grava v. Parkman Twp., 73 Ohio St.3d 379, 382, 653 N.E.2d 226 (1995). Res
judicata bars a second action when the following four elements are met:
(1) a court of competent jurisdiction rendered a valid final judgment
on the merits in an earlier action, (2) the second action involves the
same parties or their privies; (3) the second action raises claims that
were or could have been litigated in the first cause of action, and (4) the
second action arises out of the same transaction or occurrence that was
the subject of the first action.
State ex rel. Armatas v. Plain Twp. Bd. of Zoning Appeals, 160 Ohio St.3d 161,
2020-Ohio-2973, 154 N.E.3d 74, ¶ 9, citing Portage Cty. Bd. of Commrs. v. Akron,
109 Ohio St.3d 106, 2006-Ohio-954, 846 N.E.2d 478, ¶ 84. “Res judicata involves
both claim preclusion and issue preclusion” and can operate to bar “the same issue
between the same parties or those in privity with them.” McAdams v. Mercedes-
Benz USA, L.L.C., Slip Opinion No. 2020-Ohio-3702, ¶ 21, citing Brooks v. Kelly,
144 Ohio St.3d 322, 2015-Ohio-2805, 43 N.E.3d 385, ¶ 7.
Initially, we address Berryhill’s argument that res judicata is not
grounds for dismissal under Civ.R. 12. Berryhill relies on authority pertaining to a
Civ.R. 12(B) motion to dismiss, rather than a Civ.R. 12(C) motion. Civ.R. 12(B)
instructs that every defense to a claim for relief must be asserted in a responsive
pleading, but the rule makes exception for certain defenses that may be raised by
motion. Res judicata is not among those defenses. Therefore, the Supreme Court
of Ohio has held that “[r]es judicata is not among the defenses that may be raised in
a Civ.R. 12(B) motion to dismiss.” Johnson v. Moore, 149 Ohio St.3d 716, 2017-
Ohio-2792, 77 N.E.3d 967, ¶ 6, citing Jefferson v. Bunting, 140 Ohio St.3d 62, 2014-
Ohio-3074, 14 N.E.3d 1036, ¶ 9-10; State ex rel. Freeman v. Morris, 62 Ohio St.3d
107, 109, 579 N.E.2d 702 (1991). However, a Civ.R. 12(C) motion requires different
consideration.
The Supreme Court of Ohio has recognized that although ordinarily
res judicata is not a proper basis for dismissal under Civ.R. 12, the trial court may
appropriately consider whether res judicata applies when the res judicata defense
“does not depend on documents outside the pleadings.” Jones v. Wainwright, Slip
Opinion No. 2020-Ohio-4870, ¶ 5. “A determination of a Civ.R. 12(C) motion [for
judgment on the pleadings] takes into consideration the complaint, answer, and any
materials attached as exhibits to those pleadings.” Kalski v. Bartimole, 8th Dist.
Cuyahoga No. 108995, 2020-Ohio-4137, ¶ 26, citing Schmitt v. Educational Serv.
Ctr., 8th Dist. Cuyahoga No. 97623, 2012-Ohio-2210, ¶ 9; see also Civ.R. 10(C)
(stating that “[a] copy of any written instrument attached to a pleading is a part of
the pleading for all purposes); Internatl. Union of Operating Engineers, Local 18 v.
CNR Trucking, Inc., 2013-Ohio-2094, 992 N.E.2d 503, ¶ 9 (8th Dist.) (finding trial
court was permitted to consider documents attached to an answer in ruling on a
Civ.R. 12(C) motion). Therefore, a Civ.R. 12(C) motion for judgment on the
pleadings may be granted when the determination of res judicata does not depend
on documents outside of the pleadings. See Carson v. Carrick, 8th Dist. Cuyahoga
No. 108129, 2019-Ohio-4260 (trial court did not err in granting Civ.R. 12(C) motion
for judgment on the pleadings upon finding claim on an account stated was a
compulsory counterclaim not raised in the original action and was barred by res
judicata).
In this case, appellees attached and incorporated in their answer,
certified copies of pleadings, filings, and orders from the 2010 case, certified copies
of the decisions in Berryhill I and Berryhill II, and a certified copy of the docket in
the federal criminal litigation. Because we do not need to resort to any evidence
outside the pleadings to determine whether the action is barred by res judicata, the
Civ.R. 12(C) motion is properly before us.
Upon our de novo review, we must consider whether the claims
should have been brought as compulsory counterclaims in the prior action and
whether they are precluded under the doctrine of res judicata. That this action
alleges a partnership, as opposed to an employment agreement, or an interest in the
Mary Berryhill Trust, as opposed to the individual, is not determinative in this
matter. Although Berryhill believes that the trial court expanded the judgment in
the 2010 action to include the alleged partnership agreement, there is no merit to
this argument. The trial court engaged in a proper analysis for determining whether
the claims in this case should have been brought as compulsory counterclaims in the
2010 case and determined that the claims stemmed from the same business
relationship and business dealings as the 2010 action. Although Berryhill now
asserts a partnership was created before the unwritten employment agreement
addressed in the 2010 action, the pleadings demonstrate that his claims relating to
the alleged partnership are logically related to the claims in the 2010 case. Likewise,
although Berryhill now alleges the ownership interest was in the Mary Berryhill
Trust, the pleadings demonstrate that his claims relate to the ownership interest that
was at issue in the 2010 case.
Upon our review, we find that the claims raised in this action should
have been brought as compulsory counterclaims in the 2010 case. The complaint
describes the business relationship between Berryhill and appellees, his work on
behalf of Carnegie, alleged misconduct by appellees with respect to the business
relationship and the L.L.C.s, and the asserted ownership interest involving the
L.L.C.s. The claims raised in this case, like the claims raised in the 2010 case, stem
from the parties’ business relationship and the alleged ownership interest relating
to the L.L.C.s. The counterclaim in the 2010 case discussed the parties’ business
relationship and alleged that Berryhill was offered the option to become a part-
owner in Carnegie’s development projects and that Berryhill requested his
ownership interests be transferred to his wife. Further, the pleadings in this case
reflect that Berryhill relies upon many of the same facts and he places the same
issues in controversy that were the subject matter of the 2010 case, including the
scope of the business relationship, the obligations of the parties arising from the
business relationship, and the propriety of conduct taken by the parties with respect
to the L.L.C.s. Therefore, separate trials on the respective parties’ claims would
involve a substantial duplication of effort and time by the parties and the courts.
Moreover, the present case presents many of the same factual and legal issues
stemming from the parties’ business relationship and business dealings that were
presented in the 2010 case, and it is apparent that the claims are offshoots of the
same basic controversy between the parties. Accordingly, we find that the claims
are logically related and arise out of the transaction or occurrence at issue in the
prior action. See Rettig, 68 Ohio St.3d at 279, 626 N.E.2d 99 (finding claims
logically related where they were “offshoots of the basic controversy between the
parties over an accounting of various rights, obligations, and liabilities springing
from the business arrangement [between them] and include many of the same
factual and legal issues.”); Ferrara, 2016-Ohio-5144, 69 N.E.2d 171, at ¶ 13 (finding
claims were logically related where “[b]oth lawsuits concerned the mishandling of
the final arrangements of the Ferraras’ relative by the Funeral Home”); McAlpine v.
Patrick, 8th Dist. Cuyahoga No. 86453, 2006-Ohio-1101, at ¶ 16 (finding claims were
logically related because they each arose out of the same relationship between the
parties).
Additionally, it is evident from the pleadings that the present claims
existed at the time of the 2010 case. Insofar as Berryhill relies upon an alleged
partnership entered prior to the employment agreement, this does not change our
analysis. Berryhill was aware of these claims before he was a party to the 2010 case.
Berryhill also is precluded from relitigating any purported right
arising out of Mary B.’s interest in the L.L.C.s. The prior action determined that
Berryhill’s fraudulent inducement voided any interest Mary B. had in the L.L.C.s,
which was upheld in Berryhill I, 8th Dist. Cuyahoga No. 100173, 2014-Ohio-5041.
Because the claims in the present action should have been brought as
compulsory counterclaims in the 2010 case, res judicata bars this action.
Additionally, common law res judicata bars this action. There was a valid final
judgment on the merits in the 2010 action, and the present action involves the same
parties or their privies, raises claims that were or could have been litigated in the
first action, and arises out of the same transaction or occurrence that was the subject
of the first action. Berryhill’s sole assignment of error is overruled.
Conclusion
Having reviewed the pleadings in this matter, we find it appears
beyond doubt that Berryhill can prove no set of facts warranting the requested relief
because his claims are compulsory counterclaims that should have been raised in
the 2010 case and the action is barred by res judicata. Accordingly, we uphold the
trial court’s decision to grant appellees’ Civ.R. 12(C) motion for judgment on the
pleadings. Berryhill’s sole assignment of error is overruled.
Judgment affirmed.
It is ordered that appellees recover from appellant 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.
__________________________________
SEAN C. GALLAGHER, PRESIDING JUDGE
KATHLEEN ANN KEOUGH, J., and
MICHELLE J. SHEEHAN, J., CONCUR