Bakhshi v. Baarlaer

[Cite as Bakhshi v. Baarlaer, 2021-Ohio-13.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
JAY BAKHSHI :
:
Plaintiff-Appellant/Cross- : Appellate Case Nos. 28767 and
Appellee : 28768
:
v. : Trial Court Case No. 2017-CV-2917
:
RICHARD BAARLAER, et al. : (Civil Appeal from
: Common Pleas Court)
Defendants-Appellees/Cross- :
Appellants
...........
OPINION
Rendered on the 8th day of January, 2021.
...........
MICHAEL T. COLUMBUS, Atty. Reg. No. 0076799, 130 West Second Street, Suite 2103,
Dayton, Ohio 45402
Attorney for Plaintiff-Appellant/Cross-Appellee
SCOTT G. OXLEY, Atty. Reg. No. 0039285, 325 North Main Street, Suite 204,
Springboro, Ohio 45066
Attorney for Defendants-Appellees/Cross-Appellants
.............
WELBAUM, J.
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{¶ 1} This case involves separate appeals filed by Plaintiff-Appellant/Cross-
Appellee Jay Bakhshi and Third-Party Defendant-Appellant/Cross-Appellee Miami Valley
Construction Group, LLC, from a trial court judgment filed on February 25, 2020.
Defendants-Appellees/Cross-Appellants, Rick Baarlaer and Marick, LLC, also cross-
appealed in both appeals.1 We consolidated the appeals in April 2020.
{¶ 2} Jay has submitted one assignment of error directed to the trial court’s
rejection of his claims based on a promissory note and mortgage that Rick signed. In
addition, MVCG has asserted four assignments of error relating to the trial court’s findings
concerning the construction contract, a quantum meruit claim, and a damages award.
Rick and Marick, while filing notices of cross-appeal, have not presented any specific
assignments of error; instead, they ask that the trial court judgment be affirmed.
{¶ 3} After considering the assignments of error and the record, we find the
assignments of error without merit, except for a minor matter regarding computation of
damages. Accordingly, the judgment of the trial court will be affirmed in part and
reversed in part, and the matter will be remanded for correction of the judgment entry.
I. Facts and Course of Proceedings
{¶ 4} This case arose from a remodeling project for a bar named Mr. Boro’s
Tavern, which is located in Springboro, Ohio. After selling a taxi-cab business, Rick and
his live-in girlfriend, Marci, began looking for property to lease for a bar. Rick had always
dreamed of owning a bar, and Marci had been involved in bartending and in owning and
1 For clarity and convenience, we will refer to the parties as “Jay,” “MVCG,” “Rick,” and
“Marick.”
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operating bars for many years. Transcript of Proceedings (“Tr.”) p. 435 and 494.
{¶ 5} To this end, Rick formed Marick in December 2015, and he and Marci then
found a property for the bar in Springboro, Ohio, that was the perfect location and size,
but would have to be gutted and remodeled. Tr. 443 and 495. The concept they were
pursuing was that of a friendly neighborhood tavern, which was Marci’s area of expertise.
Tr. 442. Marci had also lived in Springboro for ten years and knew it as a tight, close-
knit community. She had also researched Springboro’s demographics, which revealed
that the city had around 18,000 residents, a higher median income, and no neighborhood
tavern. Id.{¶ 6} After signing a lease in late December 2015, Rick hired an architect, Rob
Fields, to provide an expert opinion on the remodeling needed to fit the theme and to
make preliminary drawings to be used for bidding with general contractors. Tr. 495-496.
Fields prepared drawings in about two weeks and then contracted some general
contractors to provide bids. One backed out because the scope was too big, one was
unreasonably priced, and another wanted the job but could not start until May or June
2016 due to the timing of other jobs. Tr. 496.
{¶ 7} Someone in the neighborhood was a former employee or salesman for Jay
and suggested that Rick contact him. Tr. 497. At the time, Jay was the sole owner of
MVCG. The first meeting occurred around March 25, 2016, at the proposed location of
Mr. Boro’s. Jay brought Mike Kennedy (the eventual project foreman), Mitch Perry (an
interior designer), and Demetrice Minnifield (an electrician) to the meeting. Tr. 27, 106,
229, and 498. According to Jay, Rick was in a hurry to start right away. Tr. 27.
{¶ 8} Rick showed Jay the preliminary drawings and the concept for the bar. Tr.
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499. Based on the preliminary drawings, Jay gave Rick an estimated price from MVCG
of about $156,995 on April 7, 2016. Tr. 500-501. After Jay gave the drawings to his
architect, Jeanne Cabral, she said they were insufficient for a permit and would have to
be redone. Tr. 503. Consequently, on May 11, 2016, Rick gave MVCG a $6,000 check
for payment of Cabral’s architect fees and Perry’s design fees. Tr. p, 504. At that time,
Jay promised that Cabral would provide a workable set of plans within three to four weeks.
Tr. 504 and 511.
{¶ 9} About a week after Rick gave Jay the $6,000 check, Rick and Jay met with
Rick’s landlord, Scott Duro. Duro was concerned that nothing had been happening and
wanted to meet with Rick’s contractor. Tr. 511. Jay told Duro and Rick that the
drawings would be done in three to four weeks, and that he would then need 11 to 12
weeks to complete the project. Under this projection, the project would have been done
by September 2016. Tr. 512. Based on Jay’s comments, Duro gave Rick a rent
reprieve for June, July, and August, with rent to resume in September. Tr. 513.
{¶ 10} During the summer of 2016, Marci and Rick met with Jay a number of times.
Among other things, they discussed the timeframe, which was “huge” for them because
there was a small window before fall and the holidays. Tr. 445. They thought a
September opening was perfect, because that would give them October, November, and
December, during the football season and the holidays, when a lot of restaurants and
bars, especially neighborhood bars like theirs, really got business going. Tr. 445-446.
Jay’s response to opening in early September was that he could get it done. Tr. 446.
During the meetings, Rick conveyed a sense of urgency to get the project moving. Tr.
511.
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{¶ 11} Cabral did not provide plans until late July 2016, and the plans then were
taken to the authorities for approval. Tr. 504 and 513. On July 30, 2016, Rick gave Jay
a check for $36,000, before a written contract had been signed. However, Rick did this
to facilitate the project while the plans were being approved, as demolition did not need
approval and could be started. Jay was also going on vacation and wanted money to
pay his demolition people. Tr. 514. On August 2, 2016, Rick wrote another check for
$22,000 to MVCG, for supplies and to hire subcontractors and get them ready to move
after permit approval. Tr. 514-515. Thus, even before the contract was signed, Rick
had given Jay $58,000.
{¶ 12} By the end of August, the ceiling grids were demolished, a humidor was
removed, and walls were torn down. Tr. 506. To save money, Rick performed some
tasks himself and paid directly for other tasks and supplies. While Jay was on vacation,
Rick demolished the tile floor, which had to be removed to proceed with demolition and
construction. He finished that by the Friday before Labor Day, except for a few piles of
tiles that could not fit in the dumpster Jay had provided. Tr. 506.
{¶ 13} By the time Jay returned from vacation, the health department had
approved the plan with one minor change and had sent the plans to the plumbing
department, which was in the same building. Rick kept asking Jay if he had heard
anything and Jay kept saying no. Eventually, Rick learned that the flow of the hot water
heater needed to improve and that the plans would not be released until a licensed
plumber came to pick up the plans. However, Jay did not have a licensed plumber,
although he had earlier said he had one. Tr. 515-516.
{¶ 14} No work was done between September 2 and September 9, 2016. On
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September 9, 2016, Rick entered into a contract with MVCG, for a price of $193,805.41
and an estimated completion date of October 17, 2016. Tr. 509-510 and Joint Ex. III, p.
1. The contract was signed by Rick as owner of Marick and by Jay as President of
MVCG. Joint Ex. III at p. 5. At the same time, Rick signed a cognovit promissory note
and security agreement, agreeing to pay Jay $40,000 for “value received.” Joint Ex. 1,
p. 1. Monthly payments of $1,809.09 were to be made on the note beginning January 1,
2017, and continuing for 23 more months. Id. The note also had a provision allowing
Rick to defer the initial payment for up to four months by paying $350 per month. Id. In
addition, Rick executed a mortgage, giving Jay a mortgage on Rick’s personal residence
in Centerville, Ohio, as security for payment of the note. Tr. 42 and Joint Ex. II.
{¶ 15} Jay never paid Rick or Marick $40,000, nor was their contractual liability
with MVCG ever decreased by $40,000. According to Jay, his intent in obtaining the
note was to protect himself “personally,” and it was not a construction loan. Tr. 37. Jay
testified that Rick’s understanding was that Jay was giving money to MVCG so it would
have “working capital” to get the job done. Tr. 343-344.
{¶ 16} As to where this was stated in the document, Jay stated: “That is what was
done. That was what was understood. That’s what was known. He [Rick] knew that –
he knew that even when we discussed it, he wasn’t going to get $40,000 from me in turn
to just give it right back to my company. He knew I was going to give it to my company
as working capital on his behalf to execute the contract. Without it, we wouldn’t have
executed the contract.” Tr. 344. At trial, Jay defined “working capital” as “money that’s
needed to do the work and finance the actual work that’s being done.” Tr. 344.
{¶ 17} Rick’s testimony concerning the note differed. He stated that the $40,000
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represented the final payment on the contract, which was basically overhead and profit.
Rick was to provide money up front and also on 75% completion of the project, in order
to provide Jay’s working capital, or what Jay was going to use to pay subcontractors.
There would be a final payment though the promissory note, such that Jay would get his
profit; Rick would then make payment on the note for the next two years. Tr. 517 and
616. Payment was to start in January 2017 because, by that time (based on the
anticipated completion date), Rick would have operated the bar for a few months and
would have capital. Tr. 559 and 615. Additionally, Rick had the option, as noted, to
defer the initial payment for several months by paying a fee. Tr. 615.
{¶ 18} On September 9, 2016, Rick wrote a check to MVCG for another
$33,852.71. Tr. 516. Consequently, by the time the contract was signed, Rick had
already paid $91,852.71, or nearly half of the original contract price.2 The project was
not complete by October 17, 2016, however. As a result, on November 8, 2016, the
parties signed a change order which included money for architectural and engineering
drawings and the increased size of the water heater. These changes were necessitated
because Warren County insisted on certain plumbing changes to push hot water
throughout the building. Tr. 519-521, and Joint Ex. V. The contract price increased by
a little over $4,600, resulting in a total contract price of $198,478.25. Tr. 109, 203, and
521; Joint Ex. V.
{¶ 19} When the change order was signed, Jay continued to assure Rick that he
would be able to complete the project by December 8, 2016, which was the date listed
for completion in the change order. Tr. 521 and Joint Ex. V. At that time, among things
2 The actual percentage was around 47.4%.
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that still needed to be done were: framing, sanding, drywalling, final electricity, rough
plumbing in the floor, new plumbing going to the kitchen and to the bar area, and new
rough electric for walls that were moved and recreated. Tr. 522 and 524.
{¶ 20} On November 16, 2016, Rick wrote MVCG a check for $30,000. This was
based on a text he received from Jay the week before, stating that he should be prepared
to write a check for more than $28,000 in order to reach the 75% completion amount. At
that time, Jay said that the project would be 75% complete. Rick knew that was not the
case, but wrote the check in order to keep the project moving. Tr. 518. This brought
the total amount paid to $121,852.71, or about 63% of the original contract price (and
around 61% of the increased price).
{¶ 21} The project was not completed by December 8, 2016. In fact, substantial
work remained to be done. For example, Jay’s subcontractors did not even finish putting
up drywall until just before Christmas. Tr. 540-541. In addition, 30 to 40 fire-retardant
panels going throughout the kitchen were not installed until around December 23, 2016.
Tr. 542-543. Rick paid Jay another $20,125 on December 23, 2016, making
$147,977.71, or almost 75% of the increased contract price having been paid directly at
that point. Tr. 82, 220-222, and 545. Moreover, Rick also purchased $11,737.30 of
products, for which he was to receive credit towards the contract price. Tr. 122 and 594.
These payments and purchases totaled $159,715.01, or more than 80% of the increased
contract price.
{¶ 22} During January and February, work continued on the project. Tr. 118-121,
232, 546, and 548.3 A soft opening was held for family and friends on March 11, and
3 In an email dated March 7, 2017, Jay sent Rick a notice stating that construction had
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another was held on March 12 for community businesses and realtors. Finally, the
business opened to the community on March 14, 2017. Tr. 490-491.
{¶ 23} Previously, in February 2017, Jay reached out to his sister, Shawna, about
the project. Tr. 137, 388, and 555. Shawna was a marketing and business consultant
who owned a restaurant in Alabama. Tr. 384. Between the beginning of March and
around March 14, 2017, Shawna discussed the menu and some drink items with Marci.
Neither Rick nor Marci contacted Shawna to ask for assistance, and there was no contract
for her services. However, they did speak with Shawna on a few occasions. Tr. 471-
472, 475, 476, 556, 558. On March 14, 2017, Shawna sent Jay an invoice for $6,500
(based on a half-price “friends and family” rate of $125 per hour). Tr. 154. According
to Jay, he was expected to pay this invoice, and ultimately, Rick and Marci were to pay it.
Tr. 156-157.
{¶ 24} As indicated, payments on the note were supposed to start in January 2017.
However, Jay indicated that he would give Rick leeway because the bar was not yet open.
Tr. 552 and 615. Nonetheless, on March 1, 2017, Jay sent a text to Rick stating that “I’m
going to exercise my legal options at this point. You are in default of our agreement and
in breach of our contracts, and I’m going to turn over all documentations to my attorneys
tomorrow and decide which direction I’m going to go.” Tr. 611.
{¶ 25} On March 2, 2017, Jay met with Rick and Marci at Mr. Boro’s to discuss the
been completed on February 6, 2017. Tr. 122 and 13. However, Rick indicated that the
partitions for the bathroom did not arrive until February 14, 2017 and took about four days
for Jay to install. Tr. 548-549. According to Rick, the job was done on February 28,
2017. Tr. 122, 551, and 562. The evidence indicates that the fire department inspection
on the project took place on February 22, 2017, and the health inspection occurred on
February 28, 2017. Tr. 611 and 632.
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final invoice, because changes were made after the November 8 change order. These
changes were not in writing. Tr. 83, 210-211 and 612. At that time, Jay showed up with
an invoice totaling $210,970.70, which had no deduction for the $40,000 promissory note
and also did not credit the $30,000 payment Rick made in November 2016. Tr. 83, 123,
168, 203, and 612. See also Joint Ex. VII (generated by Jay after the meeting).
{¶ 26} Jay attended the soft opening, but things were becoming heated about
completion of the payment issue and the promissory note. Jay was also approaching
Rick with the idea that one option to make things “right” would be to give Jay a limited
partnership. Tr. 652. However, that was never Rick’s intention and he felt like he was
being coerced. Id. The soft opening was the last time Rick and Marci had anything to
do with Jay. Id.{¶ 27} On March 15, 2017, Rick’s attorney sent Jay a check for $1,050 to delay
payment of the promissory note for three months. Tr. 49, and Plaintiff’s Ex. 1 and 2.
Another check was sent on April 1, 2017, to delay payment for another month. Tr. 51-
53, and Plaintiff’s Ex. 3 and 4. Jay cashed those checks. Tr. 587-588. In May 2017,
Rick sent Jay the first two installments on the note, but Jay did not cash those checks
(which were dated after May 1, 2017) and later returned them. Tr. 489-490.
{¶ 28} Shortly thereafter, on June 22, 2017, Jay filed a complaint for money
damages and foreclosure against Rick and Marick.4 Rick and Marick filed an answer
and counterclaim on July 21, 2017, raising various defenses, including fraud, fraud in the
inducement, lack of consideration, and unclean hands. The counterclaims further
4 Other defendants like the Montgomery County Treasurer were also included, but are
irrelevant, because they were dismissed or disclaimed any interest in the real property
involved in the foreclosure.
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alleged that Jay had failed to provide any consideration for the note and that, due to his
actions, the note was void or voidable ab initio.
{¶ 29} Rick and Marick also filed a third-party complaint against MVCG, alleging
that it had breached the construction contract by failing to complete the work in a timely
manner. They also alleged fraud on the part of both Jay and MVCG. On August 24,
2017, MVCG filed an answer to the third-party complaint and included a counterclaim
against Rick and Marick for breach of contract, fraud, and unjust enrichment. MVCG
also included claims of breach of contract and unjust enrichment on behalf of Shawna’s
company (“Grit Marketing”), which had assigned its claims to MVCG.
{¶ 30} After Rick and Marick filed an answer to the third-party counterclaims, the
court referred the case to a magistrate in September 2017. The case was then sent
mediation, which was unsuccessful and terminated in November 2017. Jay filed a
motion for summary judgment in February 2018, contending that the $40,000 promissory
note had nothing to do with MVCG, and that he was entitled to judgment on the note and
to foreclose.
{¶ 31} MVCG also filed a motion for summary judgment in February 2018, which
was supported by Jay’s affidavit. According to the affidavit, the construction contract
was complete, and Rick and Marick owed MVCG $62,927.99 plus interest and attorney
fees. In May 2018, Rick and Marick filed a motion for summary judgment against both
Jay and MVCG, contending that the promissory note was void because Jay never paid
any money to Jay and did not credit the note’s amount against the construction contract.
In addition, they claimed that MVCG had breached the contract.
{¶ 32} In July 2018, the magistrate issued a decision finding that the note and
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mortgage were void and unenforceable due to lack of consideration. The magistrate
further found that MVCG had breached the contract by failing to substantially complete
the contract by December 8, 2016. Due to material issues of fact concerning the amount
due under the contract, the magistrate denied the summary judgment motions of MVCG,
Rick, and Marick.
{¶ 33} After Jay and MVCG objected to the magistrate’s decision, the trial court
sustained the objections in part. The court concluded that a distinction existed between
failure of consideration and want of consideration, and that factual issues precluded
summary judgment. Additionally, the court stated that factual issues existed as to the
reason for the delay in performing the contract. The court, therefore, set a date for trial
to the bench.
{¶ 34} The trial court then held a bench trial, during which it heard testimony from
Jay, Marci, Rick, Shawna, Demetrius Minnifield (Jay’s electrician), and Scott Hull (Mr.
Boro’s accountant). Following the trial, the court filed a judgment entry on February 25,
2020, finding in favor of Rick and Marick on any claims for breach of contract by Jay or
MVCG, and finding in favor of MVCG on claims for unjust enrichment (based on work
performed outside the written construction contract and the change order). The court
also found against the parties on all remaining claims in the complaint, the counterclaim
to the complaint, the third-party complaint, and the third-party counterclaim. See Verdict
and Judgment Entry (“Judgment”), p. 1. After deducting the amount of Rick’s damages
from what he owed MVCG for work performed outside the contract, the court granted
judgment in Jay and MVCG’s favor in the amount of $21,875.33.
{¶ 35} Jay filed a notice of appeal on March 26, 2020, and the appeal was assigned
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Case No. 28767. MVCG also appealed on the same day, and its appeal was assigned
Case No. 28768. Finally, Rick and Marick filed cross-notices of appeal in both cases.
For ease of discussion, we will first consider Jay’s assignments of error and will then
consider MVCG’s assignments of error.
II. Jay’s Assignment of Error
{¶ 36} Jay’s sole assignment of error states that:
The Trial Court Erred by Not Granting Judgment on the Cognovit
Promissory Note and Security Agreement and Mortgage, and by Deciding
the Contractor’s Services and Materials Agreement, Cognovit Promissory
Note and Security Agreement, and Mortgage Constituted the Original
Contract.
{¶ 37} Under this assignment of error, Jay contends that the trial court erred in
construing the contracts together because the contracts do not refer to each other and
are not ambiguous. According to Jay, the purpose of the note and mortgage were to
protect himself personally if the construction contract “went sideways.” Jay further
contends that he incurred a substantial detriment by loaning money so the project could
go forward. The trial court disagreed, finding that the promissory note and the mortgage
were “nothing more” than devices that in part financed the transaction. Judgment at p.
2, fn. 4. Although the trial court did not make a specific finding on this point, implicit in
the court’s decision is that there was a failure of consideration because Jay never paid
Rick anything in relation to the promissory note, nor did he credit Marick or Rick with any
amount in connection with the construction contract.
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{¶ 38} When appellate courts review judgments following bench trials, a
presumption applies that the trial court’s findings are correct. Fed. Ins. Co. v. Fredericks,
2015-Ohio-694, 29 N.E.3d 313, ¶ 21 (2d Dist.), citing State ex rel. Petro v. Gold, 166 Ohio
App.3d 371, 2006-Ohio-943, 850 N.E.2d 1218, ¶ 81 (10th Dist.). As a result, appellate
courts may not substitute their judgment for that of trial courts and must affirm judgments
that are “supported by some competent, credible evidence going to the essential
elements of the case.” Gold at ¶ 81, citing Reilley v. Richards, 69 Ohio St.3d 352, 632
N.E.2d 507 (1994), and Koch v. Ohio Dept. of Nat. Resources, 95 Ohio App.3d 193, 642
N.E.2d 27 (10th Dist.1994). As to questions of law like contract interpretation, our review
is de novo. PNC Bank, N.A. v. Springboro Med. Arts, Inc., 2015-Ohio-3386, 41 N.E.3d
145, ¶ 15 (2d Dist.).
{¶ 39} Appellate courts are also “mindful that in a bench trial, ‘the trial judge is best
able to view the witnesses and observe their demeanor, gestures and voice inflections,
and use these observations in weighing the credibility of the proffered testimony.’ ”
Emswiler v. Bodey, 2d Dist. Champaign No. 2012-CA-3, 2012-Ohio-5533, ¶ 44, quoting
Seasons Coal Co., Inc. v. Cleveland, 10 Ohio St.3d 77, 80, 461 N.E.2d 1273 (1984).
Consequently, “ ‘[i]f the evidence is susceptible of more than one construction, the
reviewing court is bound to give it that interpretation which is consistent with the verdict
and judgment, most favorable to sustaining the verdict and judgment.’ ” Seasons Coal
Co. at 80, fn.3, quoting 5 Ohio Jurisprudence 3d, Appellate Review, Section 60, at 191-
192 (1978). Accord Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, 972
N.E.2d 517, ¶ 21; Emswiler at ¶ 44.
{¶ 40} Consistent with this focus on credibility, the trial court made a specific
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finding after listing the witnesses who had testified at trial; it stated that it “expressly finds
Messrs. Baarlaer and Hull and Ms. [Marci] Johannes credible in every material
respect,” suggesting that the court did not find Jay or his witnesses credible. (Emphasis
sic.) Judgment at p. 2, fn. 3.
{¶ 41} After reviewing the record, we find that competent, credible evidence and
legally appropriate analysis support the trial court’s verdict on the promissory note. As a
preliminary point, we note that while the note in question was labeled as a “cognovit
promissory note and security agreement” and contains the language mandated by R.C.
2323.13(D), it does not contain a warrant of attorney. E.g., Klosterman v. Turnkey-Ohio,
L.L.C., 182 Ohio App.3d 515, 2009-Ohio-2508, 913 N.E.2d 993, ¶ 24 (10th Dist.); Sutton
Bank v. Progressive Polymers, L.L.C., Ohio Slip Opinion No. 2020-Ohio-5101, __ N.E.3d
__, ¶ 12. Compare BJ Bldg. Co. v. LBJ Linden Co., 2d Dist. Montgomery No. 21005,
2005-Ohio-6825, ¶ 3 (indicating content of warrant of attorney in cognovit note found to
be enforceable). Jay also did not seek cognovit relief in his complaint or at any point in
the trial court. See Chattree v. Chattree, 8th Dist. Cuyahoga No. 95051, 2011-Ohio-
1925, ¶ 18. We, therefore, will consider this matter based on traditional principles that
apply to promissory notes rather than considering the note as a cognovit note.
{¶ 42} Notably, promissory notes are contracts, and their interpretation is
governed by rules of contract interpretation. PHH Mtge. Corp. v. Ramsey, 2014-Ohio-
3519, 17 N.E.3d 629, ¶ 33 (10th Dist.), citing Cranberry Fin., L.L.C. v. S & V Partnership,
186 Ohio App.3d 275, 2010-Ohio-464, 927 N.E.2d 623, ¶ 9 (6th Dist.). (Other citations
omitted.)
{¶ 43} “ ‘A contract is generally defined as a promise, or a set of promises,
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actionable upon breach. Essential elements of a contract include an offer, acceptance,
contractual capacity, consideration (the bargained for legal benefit and/or detriment), a
manifestation of mutual assent and legality of object and of consideration.’ ” Kostelnik v.
Helper, 96 Ohio St.3d 1, 2002-Ohio-2985, 770 N.E.2d 58, ¶ 16, quoting Perlmuter Printing
Co. v. Strome, Inc., 436 F.Supp. 409, 414 (N.D.Ohio 1976).
{¶ 44} In the case before us, the dispute concerns consideration for the note.
“ ‘Consideration for a contract can only be that which the parties intended to be the
consideration.’ ” Busch Bros. Elevator Co. v. Unit Bldg. Servs., 190 Ohio App.3d 413,
2010-Ohio-5320, 942 N.E.2d 404, ¶ 7 (1st Dist.), quoting Borgerding v. Ginocchio, 69
Ohio App. 231, 237, 43 N.E.2d 308 (1st Dist. 1942). “Consideration, meaning that which
is bargained for and given in exchange for a promise, is a necessary element of a binding
contract, and the absence of consideration precludes the formation of a valid contract.”
Harvest Land Co-Op, Inc. v. Hora, 2d Dist. Montgomery No. 25068, 2012-Ohio-5915,
¶ 14, citing 17 Ohio Jurisprudence 3d, Contracts, Section 39. “The consideration for a
contract need not necessarily be recited or expressed in writing; instead, the
consideration may be proved by parol evidence or may be inferred from the terms and
obvious import of the contract.” Id. at Section 40.
{¶ 45} “A party may defend against having to pay under a promissory note by
arguing failure or want of consideration for the note.” Santomieri v. Mangen, 2018-Ohio-
1443, 111 N.E.3d 483, ¶ 13 (3d Dist.). A want of consideration differs from a failure of
consideration. “Want of consideration is a total lack of any valid consideration for the
contract. Failure of consideration is the neglect, refusal and failure of one of the
contracting parties to do, perform or furnish, after making and entering into the contract,
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the consideration in substance and in fact agreed upon.” John P. Timmerman Co. v.
Hare, 3d Dist. Allen No. 1-03-14, 2003-Ohio-4622, ¶ 10, citing Colonial Ins. Co. v. Graw,
102 Ohio App. 430, 438, 129 N.E.2d 491 (8th Dist. 1955).
{¶ 46} Under the law, the existence of consideration for promissory notes is
presumed. “[T]his presumption continues until it is shown that there was none; and the
burden of showing this is on the party attacking the note for want of consideration.”
(Citations omitted.) Santomieri at ¶ 16, citing Dalrymple v. Wyker, 60 Ohio St. 108, 53
N.E. 713 (1899). The burden of proving either failure of consideration or want of
consideration is on the party asserting it. Ohio Loan & Discount Co. v. Tyarks, 173 Ohio
St. 564, 568, 184 N.E.2d 374 (1962).
{¶ 47} In the case before us, the consideration is not apparent from the note; it
only says that Rick agreed to repay $40,000 to Jay in installments beginning in January
2017 “for value received.” Joint Ex. I. Because the parties had no relationship other
than the intended construction project, the obligation’s meaning was ambiguous and the
trial court correctly concluded that the note was intertwined with the other documents that
were signed the same day.
{¶ 48} “Under established law, a promissory note ‘may be modified or affected by
another writing executed as part of the same transaction.’ ” England v. O'Flynn, 2d Dist.
Montgomery No. 18952, 2002 WL 27314, *9 (Jan. 11, 2002), quoting Edward A. Kemmler
Memorial Found. v. 691/733 East Dublin Granville Road Co., 62 Ohio St.3d 494, 499, 584
N.E.2d 695 (1992). “ ‘This follows from the general contract principle * * * that writings
executed as part of the same transaction should be read together.’ ” Id.{¶ 49} By way of comparison, the promissory note in Harvest Land “memorialized
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a delinquent debt” that the maker (a farmer) had owed an agricultural cooperative.
Harvest Land, 2d Dist. Montgomery No. 25068, 2012-Ohio-5915, at ¶ 2-3. Here, there
was no such relationship and no apparent reason for the note to have been signed, other
than in connection with the construction contract.
{¶ 50} As indicated, Jay’s story was that he charged Rick $40,000 to “execute” the
construction contract and to provide “working capital” for MVCG. However, by the time
the note was signed, Rick had already paid almost 50% of the contract price.
Furthermore, Jay never offered any evidence at trial to substantiate what his own
expenses were at any time during the project. In fact, when questioned about the
project, Jay testified that he did not have a construction schedule when the contract was
signed and had not yet signed any subcontractors. Tr. 286. He also could not say how
much he had paid subcontractors by the time more than $91,000 had been paid by
November 8, 2016, or when more than $127,000 had been paid on November 16, 2018.
Jay also testified that he could not state the total amount he paid to subcontractors without
looking at the documentation (even though he was testifying at trial, when he presumably
would have brought documents, if they existed). Tr. 289, 290, 294, and 320-321.
However, Jay did not offer any such documentation at trial.
{¶ 51} Jay claimed that he had deposited $40,000 into MVCG after the contract
was signed. He purportedly accomplished this by borrowing money from his father and
brother, and by having MVCG sign promissory notes to himself and his brother. In these
notes, MVCG promised to pay back $40,950 (more than was deposited).
{¶ 52} In addition, Jay signed promissory notes of his own to his father and brother,
apparently for the money that Jay had deposited. However, Jay’s testimony about these
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matters outlined a series of inconsistent and convoluted transactions that did not add up
and did not have dates that corresponded with each other. See Tr. 44-49, 58, and 62-
65, and Plaintiff’s Ex. 9 and 10. Jay attempted to explain the discrepancies by indicating
that he often borrowed money from his father and brother. Later, he would go back and
reconcile how much they lent him, and sign promissory notes. Tr. 65. Jay’s testimony
was so convoluted, however, that, in the midst of this discussion, his lawyer said, “We will
forego the notes.” Tr. 68.
{¶ 53} As indicated, the trial court did not find Jay’s testimony credible. The
court’s view is well-supported by the evidence. In this vein, we also note that during the
contract period, MVCG paid many, many thousands of dollars to various gambling
establishments. As just one example, between September 12 and 14, 2016 (or right
after the contract was signed), MVCG’s Huntington Bank account showed $31,517 being
spent on gambling transactions that were unrelated to the business. Tr. 310 and
Defendant’s Ex. O, MVCG442-445. According to Jay, his cousin, Katy, had access to
the MVCG accounts and was stealing from him to gamble. Tr. 306.
{¶ 54} Although this went on for many months, and even before the contract was
signed, Jay claimed that he did not really look at his accounts and was apparently
unaware of what was going on. Tr. 307. Jay also did not fire Katy even though she had
allegedly defrauded MVCG of many thousands of dollars. Instead, she left in February
2018 based on a medical issue. Tr. 304 and 310. The trial court correctly could have
viewed Jay’s financial accounting as less than credible.
{¶ 55} As indicated, the trial court did not find Jay credible, and it found Rick
credible on all material issues. We agree. The fact is that Jay failed to provide any
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value for the promissory note and failed to either give Rick or Marick $40,000 or to credit
that amount against the final construction price, which had ballooned to more than
$210,000. Instead, when Rick and Jay met after contract completion to discuss the
contract overages, Jay presented Rick with an invoice that did not credit him with any
amount attributable to the promissory note, and in fact, showed Rick as owing $30,000
that Rick had paid. Tr. 290-291, 517, 552-553, 563-564, 596, 605, and 612. Because
there was a failure of consideration, Jay’s sole assignment of error is overruled.
{¶ 56} Having resolved the issue of the promissory note and mortgage, we turn to
consideration of MVCG’s assignments of error, the first of which relates to the finding that
MVCG breached the construction contract.
III. Breach of the Construction Contract
{¶ 57} MVCG’s First Assignment of Error states that:
The Trial Court Erred by Finding Miami Valley Construction Group,
LLC Breached the Terms of the Construction Contract.
{¶ 58} Under this assignment of error, MVCG argues that it did not breach the
contract because it had substantially completed its obligations by December 8, 2016,
despite delay that Rick and Marick caused at the beginning of the project. As support
for this claim of delay, MVCG articulates various items that Rick failed to do or did in an
untimely manner, ranging from plumbing, floor demolition, painting, and installation of
cabinetry and tile. In addition, MVCG also points to items outside the original scope of
work that it was asked to do. See Merit Brief [of] Appellant/Cross-Appellee Miami Valley
Construction Group, Inc., p. 4-8. The items cited in the brief were taken from Jay’s trial
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testimony.
{¶ 59} After considering the evidence, the trial court concluded that “finger-
pointing” about initial delays was irrelevant, because the parties agreed to extend the date
for substantial completion until December 8, 2016, and increased the contract price.
Judgment at p. 2. The court then observed that the parties clearly understood that Rick
was “desperate to open Mr. Boro’s by the looming holiday season, * * * a time of year
when neighborhood bars typically flourish.” Tr. 3. The court then stated that:
But Bakhshi/MVCG failed to substantially complete the work owing
entirely to Bakhshi’s cavalier and reckless failure to do so, thereby violating
the contract’s express provisions, including Paragraph VIII of Joint Ex. III –
the Contractor’s Services and Materials Agreement.
Judgment at p. 3.
{¶ 60} Again, because the trial court held a bench trial, we review the court’s
factual findings to see if they are “supported by some competent, credible evidence going
to the essential elements of the case.” Gold, 166 Ohio App.3d 371, 2006-Ohio-943, 850
N.E.2d 1218, at ¶ 81. We also review contract interpretation de novo. PNC Bank,
N.A., 2015-Ohio-3386, 41 N.E.3d 145, at ¶ 15.
{¶ 61} “The elements of a breach of contract claim are ‘the existence of a contract,
performance by the plaintiff, breach by the defendant, and damage or loss to the
plaintiff.’ ” Becker v. Direct Energy, LP, 2018-Ohio-4134, 112 N.E.3d 978, ¶ 38 (2d
Dist.), quoting Doner v. Snapp, 98 Ohio App.3d 597, 600, 649 N.E.2d 42 (2d Dist.1994).
Nonetheless, “ ‘a breach of one of several terms in a contract does not discharge the
obligations of the parties to the contract, unless performance of that term is essential to
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the purpose of the agreement * * *.’ ” Id., quoting Hansel v. Creative Concrete & Masonry
Constr. Co., 148 Ohio App.3d 53, 772 N.E.2d 138, ¶ 11 (10th Dist.).
{¶ 62} The fact that time was of the essence in this contract was quite obvious.
From the beginning, in April 2016, when Marci and Rick first met with Jay, they told him
that the timeframe was huge, due to the football and holiday season. Tr. 445. Jay
assured them that the project would only take 8 to 12 weeks and that he could get the bar
open in early September. Tr. 445 and 279.
{¶ 63} As noted above, both Jay and Rick also met with Rick’s landlord, who was
pressing about opening. Based on Jay’s assurances, the landlord gave Rick a rent
reprieve for three months, with rent to resume in September. Tr. 511-513 and 599-600.
Delays then occurred during the summer, including the long wait for Jay's architect, and
Marci and Rick continued to stress the necessity of getting the bar open. Tr. 453. 510,
and 599-600.
{¶ 64} When the construction contract was signed, Jay promised he would
complete the project by October 17, 2016, and that was the date used in the contract for
estimated completion. Tr. 456 and 280, and Joint Ex. III, p. 1. Between then and
October 17, 2016, Marci and Rick continued to stress to Jay the importance of opening
the bar on time, and they received reassurances that it would happen. Tr. 456-457 and
519.
{¶ 65} In its brief, MVCG contends that the only evidence of the fact that time was
of the essence came from the “self-serving testimony” of Rick and Marci. MVCG Brief
at p. 10. However, the trial court explicitly found these witnesses credible. In addition,
at trial, Rick provided text messages to Jay supporting his testimony. See Tr. 599-606.
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{¶ 66} Between September 9 and October 17, 2016, further delays occurred. As
the trial court stressed, the reasons are not particularly pertinent, because the parties
agreed to a change order on November 8, 2016. Tr. 109 and 521, and Joint Ex. V. At
that time, Jay assured Rick that he would be able to complete the project by December
8, 2016. Tr. 521. Jay himself testified that when he signed the change order, the
understanding was that he would be substantially completed with his work on that date.
Tr. 288.
{¶ 67} According to the original agreement, “All change orders need to be agreed
upon in writing, including cost, approximate dates when the work will begin and be
completed, * * * and signed by both parties. * * * Additional time needed to complete
change orders shall be taken into consideration in the project completion date.” Joint
Ex. III, Section VIII, p. 3. The change order itself stated that “Date of substantial
completion for this Change Order shall be December 8, 2016.” Joint Ex. V, p. 1.
{¶ 68} “Whether a party has substantially performed under the terms of a contract
is a question of fact.” Steen Elec. v. Homes of Elegance, Inc., 9th Dist. Summit No.
21876, 2004-Ohio-6275, ¶ 9. The contract itself did not define substantial completion.
However, this term has been statutorily defined in the context of the statute of limitations
for suing on improvements to real property as “the date the improvement to real property
is first used by the owner or tenant of the real property or when the real property is first
available for use after having the improvement completed in accordance with the contract
or agreement covering the improvement, including any agreed changes to the contract or
agreement, whichever occurs first.” R.C. 2305.131(G).
{¶ 69} Courts have also interpreted “substantial performance of a contract” to
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mean that “mere nominal, trifling, or technical departures are not sufficient to break a
contract, and that slight departures, omissions and inadvertences should be disregarded.”
Kichler's, Inc. v. Persinger, 24 Ohio App.2d 124, 126, 265 N.E.2d 319 (1st Dist.1970),
citing Ashley v. Henahan, 56 Ohio St. 559, 47 N.E. 573 (1897). “A party fails to
substantially perform when its omissions are material to the essential duties it promised
to perform.” Cad Cam, Inc. v. Adept Mfg. Corp., 2d Dist. Montgomery No. 17687, 1999
WL 961374, *1 (June 25, 1999).
{¶ 70} After reviewing the evidence, we find no question about the fact that MVCG
failed to substantially complete the project by December 8, 2018. As indicated in the
Statement of Facts, above, the drywall and fire-retardant panels were not even installed
or completed until just before Christmas. Tr. 540-543. Further, only the rough electrical
and rough plumbing were done by December 8, 2016. Tr. 110-111. The final inspection
for the electrical work also did not occur until late January 2017. Tr. 248. Other
examples of unfinished work were detailed at trial, but we need not discuss them further,
as the work clearly was not substantially completed by the due date.
{¶ 71} As for MVCG’s contention that Rick caused substantial delays that
prevented MVCG’s performance, the trial court, again, found Rick and Marci credible on
all material issues. We have reviewed the testimony and find that the court’s conclusion
was reasonable. Accordingly, the trial court did not err in concluding that MVCG
breached the terms of the construction contract.
IV. Recklessness
{¶ 72} MVCG’s Second Assignment of Error states that:
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The Trial Court Erred by Finding MVCG Acted Recklessly in Its
Performance of the Contract.
{¶ 73} Under this assignment of error, MVCG contends that it did not act
recklessly, but instead acted diligently in its performance, which was hampered by Rick’s
delays. Further, MVCG again argues that there was no evidence that Rick and Marick
were desperate to open by the 2016 holiday season.
{¶ 74} The Supreme Court of Ohio has defined recklessness as follows:
Reckless conduct is characterized by the conscious disregard of or
indifference to a known or obvious risk of harm to another that is
unreasonable under the circumstances and is substantially greater than
negligent conduct. (2 Restatement of the Law 2d, Torts, Section 500
(1965), adopted.)
Anderson v. Massillon, 134 Ohio St.3d 380, 2012-Ohio-5711, 983 N.E.2d 266, paragraph
three of the syllabus.
{¶ 75} The court also noted in Anderson that “reckless conduct is characterized by
a substantial and unjustifiable risk of harm to others and a conscious disregard of or
indifference to the risk, but the actor does not desire harm.” Id. at ¶ 34, citing Black's
Law Dictionary 1298-1299 (8th Ed.2004). Thus, Rick did not have to prove that Jay
desired to harm him or Marick.
{¶ 76} Applying these standards here, the trial court reasonably concluded that
MVCG’s conduct was both cavalier and reckless. As we have already said, Jay was
aware of the pressing need to open the bar. He was aware that Rick’s rent payments
had been suspended for June, July, and August, based on the fact that the bar would
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open in September. And he was also aware at the time of the change order that much
work remained to allow the bar to open before the holidays.
{¶ 77} Notably, this was the only construction project that MVCG had at the time.
MVCG had only one other project in 2016, which finished by the end of the first quarter.
Tr. 270. In August 2016, when demolition was beginning, Jay took a vacation to
Disneyland, but failed to either take plans for permits to the county or notify Rick that the
plans needed to be filed. Rick found out later and had to take the plans to the county.
Tr. 451-452.
{¶ 78} After the initial contract was signed, Rick and Marci showed up at the bar
on many occasions, and no one was there working. Tr. 457. They repeatedly asked
Jay where his people were, where he was, why the drywall was not going up, and why
the project was not going forward. Id. Jay’s response was that the bar would be open
by October 17. Tr. 456. That did not occur, however.
{¶ 79} After the change order was signed, and knowing that he had only a month
to complete the project, Jay took another vacation for 10 days, to spend Thanksgiving in
Alabama. Tr. 457. Drywall had been delivered to the project by mid-November, but
when Marci questioned Jay about it, he said that he had it under control and drywallers
were coming. On the Tuesday before Thanksgiving, when Jay was getting ready to
leave on vacation, Jay told Rick that he was meeting with the drywallers to explain what
he wanted done. They were supposed to start Wednesday and work through
Thanksgiving. However, when Rick went over Wednesday morning, no one was there,
and neither Jay nor the person he left in charge during his absence responded to Rick’s
texts. Tr. 535-536.
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{¶ 80} No one showed up on Thanksgiving Day, either, and Jay and Rick then had
a heated conversation. Jay claimed the initial drywallers did not show up and stole tools.
Tr. 536. Another group of drywallers was then hired from Craigslist, was unsupervised,
and did poor work. After they were fired, yet another group was hired and began work
on December 1. They were also fired after working for several days. Tr. 536-539 and
620. The next drywall person who was hired did not finish until around Christmas. Tr.
541.
{¶ 81} At a minimum, Jay’s actions indicated complete indifference to the obvious
risk that Rick and Marick would be harmed by MVCG’s failure to perform the contract in
a timely matter. Jay was aware well before signing the contract that opening the bar
quickly was very significant, and he agreed to a time-frame that he then consciously
disregarded by going on vacation and by failing to have competent personnel performing
the work in his absence. Jay was also the sole owner and representative of MVCG, and
his actions were binding on the company. See Vienna Beauty Prods. Co. v. Cook, 2015-
Ohio-5017, 53 N.E.3d 808, ¶ 7 (2d Dist.) (holding that “[a]cts of an agent done within the
discharge of her duties and within the scope of her authority, whether the authority is
express, implied, or apparent, are binding on the principal”).
{¶ 82} Based on the preceding discussion, the trial court did not err in concluding
that MVCG acted recklessly with regard to its failure to substantially perform the work.
Accordingly, MVCG’s Second Assignment of Error is overruled.
V. Award of Consequential Damages
{¶ 83} MVCG’s Third Assignment of Error states as follows:
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The Trial Court Erred by Awarding Consequential Damages and
Consequential Damages Presented Were Wholly Speculative.
{¶ 84} Under this assignment of error, MVCG argues that consequential damages
were not appropriate under Section XII of the contract, which prohibited such damages
except for liability that arose from a person’s willful or reckless actions. Since we have
already addressed the issue of MVCG’s recklessness, we need not consider this point
further.
{¶ 85} MVCG additionally contends that Rick’s lost profits were speculative and
not recoverable. In this regard, MVCG asserts that the testimony of Rick’s expert, Scott
Hull, was based on flawed methodology because Hull looked at profit for years after the
bar opened. MVCG also criticizes Hull’s reliance on the stock market, local
demographics, and local demand. Finally, MVCG disagrees with Hull’s conclusion that
Rick would not become a better bar owner (and therefore have greater profit) over a
period of years, than over the first year of operation.
{¶ 86} The trial court awarded Marick $27,278 in consequential damages, based
on Hull’s testimony and Defendant’s Ex. N (Hull’s analysis of net profit Marick would have
realized if the contract had not been breached). Judgment at p. 5. Before discussing
MVCG’s claims, we note that Hull was one of the witnesses the trial court found credible
in all material respects. Id. at p. 2, fn.3.
{¶ 87} Generally, “lost profits may be recovered by the plaintiff in a breach of
contract action if: profits were within the contemplation of the parties at the time the
contract was made, the loss of profits is the probable result of the breach of contract, and
the profits are not remote and speculative and may be shown with reasonable certainty.”
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Charles R. Combs Trucking, Inc. v. Internatl. Harvester Co., 12 Ohio St.3d 241, 244, 466
N.E.2d 883 (1984). The Supreme Court of Ohio later explained that “in a breach of
contract action, the amount of the lost profits, as well as their existence, must be
demonstrated with reasonable certainty.” City of Gahanna v. Eastgate Properties, Inc.,
36 Ohio St.3d 65, 521 N.E.2d 814 (1988), syllabus (explaining the third prong set forth in
Charles R. Combs).
{¶ 88} As noted, Rick and Marick presented testimony at trial from Scott Hull. Hull
was the owner of a tax accounting service that did taxes and accounting for Mr. Boro’s.
Tr. 657 and 661. Besides being an accountant, Hull was well-experienced in the
restaurant and bar business. Specifically, after graduating with an accounting degree in
1980, Hull worked as a controller for Sheraton Hotels, Westin Hotels, and Hilton Hotels
between 1982 and 1993-1994. Tr. 656-659. These hotels had bars and restaurants
within their premises, and as a controller, Hull handled the cash deposits, recorded sales
and expenses, and created financial statements. Tr. 658
{¶ 89} Since 1994, Hull had operated Padgett Business Services, a franchised
organization that specializes in servicing small retail businesses like restaurants and bars
that are locally owned. Tr. 660-661. Prior to March 2017, Rick hired Hull, who provided
tax and accounting services, as well as consulting services like cost analysis and what
profit percentages should be so the bar could be successful. Tr. 661-662 and 676. Hull
had done work for Mr. Boro’s consistently for two-and-a-half years before he testified at
trial. Tr. 676.
{¶ 90} For trial purposes, Hull calculated the net profit Mr. Boro’s would have
realized had the contract not been breached. That amount was $27,278. Tr. 668 and
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Ex. N. In order to arrive at a figure, Hull compared the net profit from actual statements
from December 2017 through March 2018, and reduced the March 2017 profit figure
because Rick was open for half the month. Tr. 663, 665-667, and 668-669.
{¶ 91} We find no issue with the methodology used. Hull looked at actual
expenses during comparative time periods and the profit generated. Furthermore, Hull
also stated that economic circumstances had been very similar during the two years
(essentially 2017 and 2018), and that, in fact, the monthly accounting figures for the entire
two-and-a-half year span of the business had been “virtually identical.” Tr. 677-678.
According to Hull, the business profit was really good from the day the bar opened. Tr.
677.
{¶ 92} As to figuring in matters like the stock market, local demographics, and local
market, there is no question that Hull had worked in the area for many years, was very
experienced in finances and business consulting in the restaurant/bar area, and would
have known what factors to take into consideration when evaluating profit. During trial,
no evidence was presented to indicate that these factors were improper or that different
factors should have been used.
{¶ 93} Regarding Rick’s experience and the possibility that he would have done
better in ensuing years, we note that the trial court questioned Hull at length on this point.
Tr. 670-675. Rick’s attorney also discussed this with Hull. According to Hull, the bar’s
performance from the beginning had been very consistent, was really good from “day
one,” and Rick’s performance may have been only incrementally better later on. Tr. 672,
674, and 676-677. Consequently, we disagree that this factor was improperly
considered.
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{¶ 94} MVCG’s final argument is that even if consequential damages were
appropriate, the trial court should have prorated the amount to account for the fact that
the contract expiration date was December 8 and the work was completed on February
22. The issue of when the bar was completed vis à vis damages was not raised during
trial and therefore has been waived. E.g., Orthopedic & Neurological Consultants, Inc.
v. Cincinnati Ins. Co., 2018-Ohio-185, 104 N.E.3d 133, ¶ 11 (10th Dist.) (arguments not
raised in the trial court are waived); Wright-Patt Credit Union, Inc. v. Danes, 2d Dist.
Montgomery No. 26433, 2015-Ohio-2184, ¶ 9 (same).
{¶ 95} However, at trial, MVCG did raise the fact that the contract was to be
performed by December 8, and Hull indicated he was unaware of that. Tr. 682. During
redirect examination, Rick’s counsel asked how Hull would account for that, and Hull said
he would simply divide $12,017 (the lost profit for December 2016) by 31 and multiply
that number by eight. Tr. 684-685. The trial court agreed with that analysis but did not
reduce its judgment by that amount. Tr. 685. Instead, the court used the loss reflected
in Defendant’s Ex. N, which was the entire amount.
{¶ 96} We conclude this was error. The amount in question is $3,101.16.
Consequently, the Third Assignment of Error will be overruled in part and sustained in
part, and this matter will be remanded to the trial court for correction of the judgment in
that amount.
VI. Grit Marketing
{¶ 97} MVCG’s final assignment of error states that:
The Trial Court Erred by Failing to Award Damages for Baarlaer’s
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and Marick’s Usurpation of Grit Marketing’s Work.
{¶ 98} Under this assignment of error, MVCG contends that the trial court erred in
failing to award it damages for work done by Jay’s sister, Shawna, who operated Grit
Marketing. According to Jay, Shawna developed a menu and drinks that Mr. Boro’s
used, and MVCG, due to the assignment of the claim, was entitled to recover either
$6,500 or $15,000 for Shawna’s services, on the basis of quasi-contract.
{¶ 99} The trial court rejected this claim, concluding first that there was “no meeting
of the minds between Baarlaer/Marick and Shana Bakhsi/Grit Marketing for services,”5
and therefore, Jay/MVCG’s claims based on an assignment were “of no moment.”
Judgment at p. 6. The court also rejected the claim for quantum meruit/unjust
enrichment because “whatever Shana Bakhshi and Shana Bakhshi/Grit Marketing did,
provided Baarlaer/Marick nothing of value.” Id.{¶ 100} Admittedly, there was no written contract here, and the appropriate remedy
would be in quasi-contract, which is an implied contract used to avoid injustice. Paugh
& Farmer, Inc. v. Menorah Home for Jewish Aged, 15 Ohio St.3d 44, 46, 472 N.E.2d 704(1984). This theory “is a legal fiction that does not rest upon the intention of the parties,
but rather on equitable principles in order to provide a remedy. The two remedies most
often associated with quasi-contracts are restitution and quantum meruit. Each of these
remedies presupposes some type of unjust enrichment of the opposing party.” Id. “In
contracts implied in law there is no meeting of the minds, but civil liability arises out of the
obligation cast by law upon a person in receipt of benefits which he is not justly entitled
5Shawna Bakhshi’s name was spelled as both Shawna and Shana in the trial court. We
have used the spelling found in the trial transcript.
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to retain and for which he may be made to respond to another in an action in the nature
of assumpsit.” Legros v. Tarr, 44 Ohio St.3d 1, 7, 540 N.E.2d 257 (1989).
{¶ 101} “Unjust enrichment occurs when a person ‘has and retains money or
benefits which in justice and equity belong to another.’ ” Johnson v. Microsoft Corp., 106
Ohio St.3d 278, 2005-Ohio-4985, 834 N.E.2d 791, ¶ 20, quoting Hummel v. Hummel, 133
Ohio St. 520, 528, 14 N.E.2d 923 (1938). “A plaintiff seeking to recover under unjust
enrichment or quantum meruit must establish that (1) the plaintiff conferred a benefit on
the defendant, (2) the defendant knew of the benefit, and (3) it would be unjust to permit
the defendant to retain the benefit without payment.” Meyer v. Chieffo, 193 Ohio App.3d
51, 2011-Ohio-1670, 950 N.E.2d 1027, ¶ 37 (10th Dist.), citing Maghie & Savage, Inc. v.
P.J. Dick, Inc., 10th Franklin Dist. No. 08AP-487, 2009-Ohio-2164, ¶ 33. Accord
Schlaegel v. Howell, 2015-Ohio-4296, 42 N.E.3d 771, ¶ 30 (2d Dist.).
{¶ 102} Before we address MVCG’s arguments, we again note the trial court’s
emphasis on credibility. The court specifically found Marci and Rick credible on every
material point, but did not similarly find Jay and Shawna credible.
{¶ 103} Notably, the evidence on which MVCG relies is taken primarily from the
testimony of Jay and Shawna. The appropriate issue, therefore, is whether the court’s
factual findings were “supported by some competent, credible evidence going to the
essential elements of the case.” Gold, 166 Ohio App.3d 371, 2006-Ohio-943, 850
N.E.2d 1218, at ¶ 81. MVCG has not suggested that the trial court erred in applying the
law of quasi-contract.
{¶ 104} After reviewing the evidence, we find ample evidence to support the trial
court’s conclusion. As indicated above, Marci had extensive experience in operating
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neighborhood bars and bartending. Tr. 435 and 442. In her previous experience, she
began as a bartender and then became a general manager, where she was in charge of
bartending training, hiring, firing, ordering, day-to-day logistics, and creating the food
menu. Tr. 435. Marci was also very experienced in food cost analysis, as she had done
it while working at bars. In addition, when designing the bar, Marci learned a great deal
while working with food representatives from Sysco. Tr. 439.
{¶ 105} In the summer of 2016, Marci made several trips to Sysco to work on cost
analysis and food preparation. Sysco had a huge kitchen and had chefs that helped her
design and create her concept. Tr. 448-449. By August or September 2016, Marci had
completed the food and drink menu. She had some craft cocktails on the menu, but most
people who come to neighborhood taverns drink craft beers and standard items like vodka
and tonic. Tr. 452. According to Marci, thousands and thousands of drinks are in the
public domain. Tr. 438. As of late February 2017, Marci had all her menu items ready
to go, through working with Chef Jennifer from Sysco, who had been with her throughout
the whole process. Tr. 468-470. She also worked with a food representative from
Sysco who wrote all the things that were on the menu. Tr. 470.
{¶ 106} Jay mentioned to Marci and Rick that his sister, Shawna, was a bigwig in
corporate restaurants and offered, as a favor, to have her look at what they had and go
over some cost analysis. Marci told Jay that she appreciated it but was already done
and did not want help. She also stressed that corporate restaurants are very different
from neighborhood taverns. Tr. 471-472 and 489. Shawna had some suggestions, and
Marci did talk with her and liked one drink that Shawna suggested. However, everything
concerning food and drinks was in the public domain. Tr. 472, 475, and 489.
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{¶ 107} Neither Marci nor Jay ever contacted Shawna initially or asked her to get
involved in the project, nor did they ever discuss how much Shawna charged for her
services. They also did not tell Shawna that they agreed to pay her. Tr. 471, 554, 557,
558, and 612. At trial, Rick said he assumed that Jay got Shawna involved because Jay
wanted them to succeed and to be able to pay back the promissory note. Tr. 558-559.
In addition, throughout the process, Jay had some interest, and more seriously toward
the end, in wanting to be a partner. Tr. 559. The first time money was ever discussed
was when Shawna offered to fly up for the opening, and Jay told them how much it would
cost. Tr. 558. Rick and Marci turned down that offer, as they already had everything
set up and were ready to go. Tr. 474 and 558-559.
{¶ 108} In view of the above testimony, the trial court’s rejection of the claim for
Shawna’s services was supported by competent, credible evidence. According,
MVCG’s Fourth Assignment of Error is overruled.
VI. Conclusion
{¶ 109} Based on the preceding discussion, Jay Bakhshi’s sole assignment of
error is overruled, and MVCG’s First, Second, and Fourth Assignments of Error are also
overruled. MVCG’s Third Assignment of Error is overruled in part and is sustained in
part, and this matter is remanded to the trial court for deduction of $3,101.16 from the
amount awarded to Jay Bakhshi and MVCG.
.............
TUCKER, P.J. and HALL, J., concur.
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Copies sent to:
Michael T. Columbus
Scott G. Oxley
Code Credit Union
Christine Kurilic
Michele Phipps
Hon. Steven K. Dankof