[Cite as Am. Surface Solutions, L.L.C. v. N. Am., 2019-Ohio-2909.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
AMERICAN SURFACE SOLUTIONS, : L.L.C., Plaintiff-Appellee, : No. 107225 v. :
NICHOLAS NORTH AMERICA, : ET AL., Defendants-Appellants. :
JOURNAL ENTRY AND OPINION
JUDGMENT: REVERSED AND REMANDED RELEASED AND JOURNALIZED: July 18, 2019
Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-17-875451
Appearances:
Bradley Hull, for appellee.
James Alexander, for appellant.
KATHLEEN ANN KEOUGH, J.:
Defendants-appellants, Nicholas North America (“North America”),
and SteepleJacks of America, L.L.C. (“SteepleJacks”) (collectively “appellants”),
appeal the trial court’s decision entering judgment against them and in favor of
plaintiff-appellee, American Surface Solutions, L.L.C. (“appellee” or “American Surface”). For the reasons that follow, we reverse the trial court’s judgment and
remand for further proceedings.
In February 6, 2017, American Surface, through its owner Justin
Morales (“Morales”), filed a complaint against appellants, Christopher Hardin,
American Surface Solutions Group, L.L.C., Network Solutions, L.L.C., and Citizens
Financial Group, a.k.a. Citizens Bank, raising causes of action for fraud, tortious
interference with business relations, negligence with willful and wanton
misconduct, negligence, civil theft, conversion, deceptive trade practices, unjust
enrichment, and fraud in the inducement. The complaint arises out of allegations
that Hardin, without authority, contracted and engaged in work under the guise of
American Surface, but retained all profits and incurred debts. It was alleged that
Hardin’s grandfather, North America, facilitated, perpetuated, and concealed
Hardin’s conduct by establishing a business similar in nature and name to that of
American Surface, and allowing Hardin to utilize North America’s business,
SteepleJacks, as his business operations. American Surface claimed that based on
appellants’ conduct, they were liable for expenses incurred from unpaid invoices and
work not being completed and damage to the business’s reputation.
On the same day that the complaint was filed, American Surface
sought and obtained a temporary restraining order (“TRO”) against appellants,
including a restraint against bank accounts belonging solely to SteepleJacks.
Subsequently, in March 2017, the parties relevant to this appeal, reached an agreement regarding the content of the TRO and it was dismissed; the TRO
remained in effect against Hardin.
At the February 8, 2018 final pretrial, the trial court granted
appellants’ counsel’s oral motion to withdraw. The record reflects that at the hearing
the trial court warned appellants that a continuance of the February 28 trial would
not be granted. Moreover, the trial court advised that although North America could
represent himself, he could not represent SteepleJacks.
Two days prior to trial, new counsel for appellants filed a notice of
appearance and also requested a continuance of trial. The motion to continue was
denied the following day. On February 28, the day of trial, appellants appeared with
counsel, who stated that his presence was for the limited purpose of seeking a
continuance. He indicated that he had been recently retained and was not prepared
to go forward with trial; he would need a continuance. The trial court noted that the
continuance was previously denied. It also stated on the record that North America
was advised at the final pretrial that no continuances of trial would be granted and
that he could not represent SteepleJacks during the proceedings. Because counsel
was unable to proceed and the continuance was denied, North America represented
himself pro se.
Additionally, because SteepleJacks was not represented by counsel,
the trial court proceeded to conduct a “default” hearing against SteepleJacks.
Following the presentation of evidence, the trial court entered a general “default
judgment” in favor of American Surface and against SteepleJacks in the amount of $72,066.61. The court held the determination of punitive damages in abeyance until
after the trial on the claims against North America.
A jury was empaneled and American Surface’s claims solely against
North America were presented to the jury with the following testimony and
evidence.
Morales testified that he owns “American Surface Solutions, L.L.C.,”
a rubber pour-in-place business, that was informally started in 2015. He officially
registered his business with the Ohio Secretary of State on May 5, 2016. According
to Morales, he created the name, logo, and graphics in 2015. He stated that he
created the name “American Surface Solutions” from his previous concrete company
named “Resurfacing Solutions.” He stated that he got into the field of rubber
resurfacing through his friend, Hardin, who used to be in the pour-in-place business
prior to Hardin’s incarceration for getting paid to do jobs, but not performing the
work. Hardin’s prior business was named “American Safety Surface.” According to
Morales, Hardin’s company went under due to Hardin’s conduct and Morales
thought he could help out his friend. Plaintiff’s exhibit No. 9 was an email sent in
February 2014 from Hardin’s email “americansurface@aol.com” to Morales asking
about whether he “ever look[ed] over my business and see what u wanna do? Busy
season starts in a week or two.”
Morales testified that he believed that Hardin did not act in good faith
in attempting to generate business on behalf of American Surface. He stated that they never agreed on distribution of profits and disagreed on “the cut” Hardin
should receive from jobs performed.
In fact, Morales discovered in January 2017 that Hardin was doing
business under the guise of American Surface. Hardin created business cards and
letterhead with American Surface’s logo, but they did not contain any contact
information relating to American Surface — the address was that of SteepleJacks.
The business cards reflected that Hardin was the “owner/project manager” of
American Surface.
Morales testified about a contract that was obtained through
discovery purportedly between American Surface and Fasting Enterprises, a
company in Washington D.C. The contract provided that the proposed start date
would be October 17, 2016, with an estimated finish date of December 17, 2016. The
contract was executed by “Chris Morales, V.P., American Surface Solutions.” The
contract was for $114,760. An accompanying letter provided that American Surface
has “been in business for 10 years.” Morales stated that this statement was not true
as to his company; only Hardin’s prior company would qualify. Additionally,
Morales stated that the references that were listed were not associated with
Morales stated that he did not authorize the contract and that his
business did not receive any compensation from Hardin under this contract. Once
he discovered the existence of the contract, Morales had to take out a loan to correct
Hardin’s work and was damaged $7,000. Morales also testified about a job that Hardin contracted for and
partially completed at a children’s learning center in Indiana. Morales testified that
he became aware of the contract when the center’s coordinator contacted him and
advised him that the work was not completed, but that the money was paid. Based
on the information that he was provided, Morales testified that Hardin prepared an
estimate on March 31, 2016, for the center. The contract was signed by the center
on May 4, 2016, and by Hardin on May 10. It contained Hardin’s personal contact
information and a website “www.americansurfacesolutions.com, but was faxed
between the parties using SteepleJacks’ fax number. The contract provided for
removal of the existing wooden structure, the purchase and installation of new
playground equipment, and repair and resurface of an existing play area. The total
contract price was $68,120.
Morales testified that the center issued two checks payable to
“American Surface Solutions.” The checks were issued on May 5, 2016, and
September 30, 2016, in the amounts of $42,040 and $20,750, respectively and
endorsed by “American Surface Solutions.” According to bank records, the May
check was deposited into a Citizen’s Bank Account owned by “Nicholas North
America, d.b.a. American Surface Solutions.” Morales testified that he never
received, endorsed, or deposited these checks.
Morales also discovered at this time that he did not own the website
domain “www.americansurfacesolutions.com.” According to Morales, Hardin
encouraged him to use the host company “Big Tuna” to set up a website. Morales testified that he was paying for this service, but discovered that the domain name
“americansurfacesolutions.com” was registered to SteepleJacks on December 30,
2015. When he asked Hardin to change ownership of the domain name to him,
Hardin told him “nice try” and laughed it off. Accordingly, Morales was forced to
create a new website: “americansurfacesolutions.net.”
Morales told the jury about negative reviews that American Surface
received on various web-based search engines. Both reviews warned about doing
business with American Surface and Hardin stating that money was paid, but no
work was ever performed.
Morales gave testimony about a truck rental from Penske that he did
not authorize. According to Morales, he was contacted by Penske for an unpaid
balance of $2,276.61 for a truck rental to “American Surface Solutions.” Based on
the records he received through discovery, Morales stated that Hardin rented a
Penske truck on two occasions — May 17 and 23, 2016. The rental agreement noted
that the address for American Surface Solutions was the physical address of
SteepleJacks. Morales stated that he did not pay the outstanding invoice —
$2,276.61 was still due and owing.
Morales also testified about bank records received through discovery.
He stated that the Citizen’s Bank Account, owned by “Nicholas North America, d.b.a.
American Surface Solutions,” was opened on March 3, 2016, and closed in June
2016. He stated that he did not authorize this bank account to be opened. The
records show that the May check received from the Indiana learning center was endorsed by American Surface Solutions and deposited into the account. According
to Morales, the records reveal that money was transferred between this account and
accounts owned by North America and SteepleJacks. Additionally, checks were
issued from this account payable to Hardin, cash, and other individuals. According
to Morales, the signatures on the signature line of the checks were the signatures of
“Nick America” and Hardin; no checks were endorsed by North America. Morales
denied that he ever authorized any deposits, transfers, or payments from this
account.
North America’s Role
Morales testified that North America did not have any authority to act
on behalf of American Surface both before and after it was formally organized.
According to Morales, he sued SteepleJacks and North America because the money
that Hardin collected doing jobs under the guise of American Surface was deposited
into accounts that North America had control over, including the Citizens Bank
account, and Hardin used SteepleJacks’ business address and operations — the
business that North America owned.
Morales further stated that through discovery he obtained a
handwritten document that indicated how Hardin and North America would split
the profits from American Surface Solutions. Morales indicated this was how
Hardin was going to “pay back” North America. Damages
Morales testified that he suffered damages in the amount of
$72,066.61 based on three separate incidents. First, he stated that $62,790 was paid
to “American Surface Solutions” from the Indiana learning center — the job was
performed under his company name, but not paid to his company. He stated that
he had to take out a loan to correct the job that Hardin contracted for with Fasting
Enterprises, but stated he only suffered damage in the amount of $7,000. Finally,
he stated that he suffered damages in the amount of $2,276.61 for the unpaid Penske
bill.
North America’s Testimony
North America was called as a witness by American Surface on cross-
examination. He testified he was trying to help his grandson, Hardin, with a
business venture. North America testified that he formed “American Surface
Solutions” in December 2015, which is when he admitted that he owned the domain
name “americansurfacesolutions.com” and that he did not give it to Hardin to turn
over to Morales even after North America was made aware of the situation. North
America testified that he formally established “American Surface Solutions Group”
with the Ohio Secretary of State for his grandson, who operated the business solely
on his own. North America stated that his grandson had 12-years of experience in
the rubber pour-in-place field and that his grandson previously ran a business —
“American Safety Surface” doing this type of work. He stated he set up the business for his grandson who had just been released from jail. And because of Hardin’s
felony record, he could not get any money to open the business or bank accounts.
North America stated that he know about Morales’s company,
American Surface in December 2015. He agreed that Morales did not authorize him
to create the business “American Surface Solutions Group” or do anything
associated with American Surface. He further admitted that his company,
SteepleJacks, is not in the rubber pour-in place business.
Morales rested his case pending admission of exhibits, which North
America did not object. After a prompt from the trial court, North America moved
for a directed verdict, which the court granted on the fraud in the inducement claim.
Additionally, plaintiff dismissed the civil theft claim. North America did not call any
witnesses, including himself.
Verdict
The jury entered a unanimous general verdict in favor of American
Surface and against North America in the amount of $72,066.61. During the
punitive damages phase of the trial, the jury heard testimony from Morales. A
majority of the jury awarded punitive damages in favor of American Surface and
against North America in the amount of $20,000. A majority of the jury also found
that American Surface should be awarded attorney fees. The trial court then heard
testimony from Morales and Attorneys Bradley Hull and Janet Volle regarding
attorney fees. Following the testimony, the trial court modified the attorney fee
request and awarded attorney fees in favor of American Surface and against North America and SteepleJacks in the amount of $19,855.50. The court order that the
attorney fees be paid jointly and severally by North America and SteepleJacks. The
trial court also ordered punitive damages in favor of American Surface and against
SteepleJacks in the amount of $20,000.
Appellants now appeal, raising five assignments of error. Additional
relevant facts and procedural background will be discussed under the relevant
assignment of error.
As a preliminary matter, American Surface contends that the appeal
should be dismissed as untimely. We disagree. On March 6, 2018, the trial court
entered final judgment, following the jury verdict. Appellants timely filed their
motion for a new trial on April 3, 2018, — 28 days following the judgment. See Civ.R.
59. The trial court denied the motion on April 25, 2018; the appeal was filed on May
23, 2018. Accordingly, the appeal was timely.
I. Temporary Restraining Order
In their first assignment of error, appellants contends the trial court
erred in issuing a prejudicial temporary restraining order that prejudiced them.
Specifically, appellants contend that the motion seeking the restraining order was
not in compliance with Civ.R. 65(A) because it was issued without (1) notice; (2)
certification why the TRO should be issued without notice; (3) certification by the
attorney regarding the efforts made to notify appellants; and (4) posting a bond.
Appellee contends the motion was in compliance, but even if it was not, the issue is
moot because appellants ultimately agreed to the restraining order. Even if we would agree with appellants that the request seeking the
TRO was not in compliance with Civ.R. 65(A), the issue is moot. In this case, the
TRO expired on March 14, 2017, when the parties reached an “agreement,” whereby
the TRO was dismissed against North America, SteepleJacks, Network Solutions,
and Citizens Financial Group. Accordingly, once the TRO expired or was dismissed,
the controversy surrounding the order became moot. State ex rel. Celebrezze v. Bd.
of Cty. Commrs., 32 Ohio St.3d 24, 26, 512 N.E.2d 332 (1987), fn. 2 (injunction no
longer in effect when it expired upon the resolution of the case; the issue of its
propriety is moot); McClead v. McClead, 4th Dist. Washington No. 06CA67, 2007-
Ohio-4624, ¶ 14 (expiration of challenged order renders an appeal of that order
moot). “Issues are moot when they present no actual, genuine, live controversy, the
decision of which can definitely affect existing legal relations.” Kormanik v. Cooper,
195 Ohio App.3d 790, 2011-Ohio-5617, 961 N.E.2d 1187, ¶ 12 (10th Dist.).
Even if the issue was not moot and a claim that a live controversy
exists based on the grant of the TRO, appellants have failed to demonstrate how they
were prejudiced or what damages they sustained as a result of the TRO being issued.
The general statement that the TRO “tied up the bank account for the business
enterprise” is insufficient to prove that they were damaged as a result of the TRO
being issued.
Accordingly, the first assignment of error is overruled as moot. II. Motion to Continue
In their second assignment of error, appellants contend that the trial
court abused its discretion in failing to continue the trial.
We review the decision to deny a motion to continue for an abuse of
discretion. Harmon v. Baldwin, 107 Ohio St.3d 232, 2005-Ohio-6264, 837 N.E.2d
1196, ¶ 15. Our review requires this court to apply a balancing test — weighing the
trial court’s interest in controlling its own docket and the public’s interest in the
prompt efficient dispatch of justice versus any potential prejudice to the moving
party. State v. Unger, 67 Ohio St.2d 65, 67, 423 N.E.2d 1078 (1981). The following
factors should be considered by a trial court when considering a motion for a
continuance: (1) the length of the delay requested; (2) whether other continuances
have been requested and received; (3) the inconvenience in litigants, witnesses,
opposing counsel, and the court; (4) whether the requested delay is for legitimate
reasons or whether it is dilatory, purposeful, or contrived; (5) whether the moving
party contributed to the circumstances that caused the request for a continuance;
(6) and other relevant factors depending on the circumstances of the case. See
Unger at 67-68.
Moreover, because there are no “mechanical tests for deciding when
a denial of a continuance is so arbitrary as to violate due process * * * the answer
must be found in the circumstances present in every case, particularly the reasons
presented to the trial judge at the time the request is denied.” Unger at 67, quoting
Ungar v. Sarafite, 376 U.S. 575, 589, 84 S.Ct. 841, 11 L.Ed.2d 921 (1964). American Surface contends that the trial court did not abuse its
discretion because the motion for continuance was untimely pursuant to the court’s
local rules. Moreover, it asserted that appellants proceeded with firing their
attorney at the final pretrial, despite being warned that (1) no continuance would be
granted (2) any new counsel would need to be prepared to go forward with trial
twenty days later, and (3) that if SteepleJacks did not have any attorney, it would be
in default and unable to defend itself.
The record reveals that the trial court allowed appellants’ counsel to
withdraw at the final pretrial held on February 8. Whether the basis for counsel
withdrawing was because appellants fired their attorneys or whether this was a
voluntary attorney-client separation is unclear from the record; no transcript or
App.R. 9(C) statement has been submitted to this court revealing the exact
circumstances surrounding the withdraw. However, what we can discern from the
February 28 transcript and the arguments from the parties on appeal, that on
February 8, North America was apprised that no continuances would be granted and
he could not represent SteepleJacks at trial.
Appellants contend that the trial court abused its discretion in
denying its request for a continuance because the Unger factors weighed in favor of
granting the continuance. In support of their argument, appellants cite to this
court’s decision in Swanson v. Swanson, 8th Dist. Cuyahoga No. 90472, 2008-
Ohio-4865. In Swanson, a mother appealed the trial court’s judgment that
designated the father the residential parent of the parties’ child. Twenty days before
trial, mother’s counsel filed a motion to withdraw, asserting that mother had fired
him. Twelve days before trial, the court permitted mother’s counsel to withdraw,
and six days before trial, mother filed a motion to continue because she was unable
to obtain substitute counsel. Mother stated in her motion to continue that “she had
made numerous attempts to hire counsel but her phone calls were not returned.”
Id. at ¶ 6. The trial court denied her motion “and forced the mother to proceed pro
se.” Id. Mother appealed and asserted that the trial court abused its discretion by
denying her motion to continue.
This court found that “numerous factors weighed in favor of granting
a short continuance to allow the mother to obtain new counsel.” Id. at ¶ 15. This
court first observed that the case had been pending for approximately eight months,
the court had set the trial only three months before mother requested her
continuance, and she had not requested a prior continuance. This court noted that
"the mother requested the continuance solely to obtain new counsel" and not “to
delay the proceedings.” Id. at ¶ 16. Additionally, this court determined that a short
continuance would not have inconvenienced the parties, except for rescheduling.
This court further recognized that “the mother’s conduct of firing her attorney
contributed to the need for the continuance,” but stated that “this alone does not
warrant the denial of her motion.” Id. at ¶ 18. This court thus determined that “the Unger factors weighed strongly toward granting the mother’s motion for a
continuance.” Id. at ¶19.
We find Swanson persuasive. After reviewing the Unger factors, the
facts of the case, and the procedural history, we find that the trial court abused its
discretion in dying appellants’ motion for a continuance of trial.
It was unreasonable for the trial court to assume that any counsel
appellants would have retained would be properly prepared to go forward with trial
in twenty days. This is a factor that a trial court must take into consideration in
determining whether to grant a motion to withdraw. Especially in light of the trial
court’s statement that it would not grant any continuance. Ohio courts have
repeatedly recognized that a trial court abuses its discretion when it allows an
attorney to withdraw from the case on or near the day of trial and then denies the
unrepresented party’s motion for a continuance. See, e.g., Griffin v. Lamberjack,
96 Ohio App.3d 257, 644 N.E.2d 1087 (6th Dist.1994).
Moreover, much like in Swanson, the complaint was filed
approximately a year prior to trial, and much of the delay into case was attributed to
American Surface’s attempt to secure service on and maintain its case against
Hardin. At all times appellants were represented by counsel and defended the
action, including filing motions to compel discovery and filing a counterclaim.
Additionally, the record reflects that appellants never requested a
continuance of trial. Moreover, the length of the requested continuance was a mere
thirty days to prepare for a case, that the trial court admitted was “document heavy.” Finally, in counsel’s written motion for a continuance and oral request, it
determined that appellants had valid defenses to plaintiff’s complaint. The request
for the continuance was not for dilatory or frivolous purposes.
Although it can be argued that appellants’ actions were the cause for
the continuance because of an allegation that they fired their counsel at the final
pretrial, the record does not reveal the nature for counsel orally requesting to
withdraw. And as this court noted in Swanson, the firing of counsel alone does not
warrant a denial of a motion to continue.
Most importantly, once it was discovered that the principal
defendant, Hardin, had settled his case with plaintiffs on the eve of trial, without any
notification to appellants, the prejudice that this caused to appellants is apparent
based on the allegations in the complaint. This development was not disclosed until
the day of trial. Neither the trial court nor the appellants could have contemplated
this settlement at the time the trial court issued the blanket order on February 8 or
when it summarily denied appellants’ written motion for a continuance two days
prior to trial. This prejudice outweighed the trial court’s desire to control its docket
on a case that was only pending for approximately one year that involved multiple
defendants and complex causes of action. The Unger factors weighed in favor of a
continuance, which the trial court should have granted. It was unreasonable not to
do so. The second assignment of error is sustained. The judgments against
SteepleJacks and North America are vacated and the case is remanded to the trial
court for further proceedings.
Having sustained the second assignment of error, the remaining
assignments of error challenging the individual judgments are hereby rendered
moot.
Judgment reversed and remanded.
It is ordered that appellants recover from appellee costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said 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.
KATHLEEN ANN KEOUGH, JUDGE
EILEEN T. GALLAGHER, P.J., CONCURS; EILEEN A. GALLAGHER, J., DISSENTS WITH SEPARATE OPINION
EILEEN A. GALLAGHER, J., DISSENTING:
I respectfully dissent from the opinion of my learned colleagues.
I do not believe that the trial court abused its discretion in denying an
eleventh-hour motion for a trial continuance. This matter was originally filed on February 6, 2017 with active
motion and discovery practice by all parties. Trial commenced over one year later.
It is the bailiwick of the trial court to schedule its docket. We know
not the reason that counsel withdrew their representation of defendant as the record
does not so reflect. We do know, however, that there were off-the-record discussions
with the court regarding same and that the court indicated at the time that there
would be no continuances of the trial and, therefore, if they chose new counsel, said
counsel would be required to proceed on the previously scheduled trial date.
I would overrule this assignment of error.
I do note that on March 2, 2018, the trial court entered a judgment of
default against defendant SteepleJacks of America, L.L.C., in the amount of
$72,066.61 plus statutory interest and attorney fees.
Defendant SteepleJacks of America, L.L.C. was represented by
counsel and actively participated in motion practice including the filing of an answer
and counterclaim. Therefore, pursuant to Civ.R.55, default judgment was
inappropriate. The trial court should have entered judgment based on an ex parte
trial.