[Cite as Hanamura-Valashinas v. Transitions by Firenza, L.L.C., 2020-Ohio-4888.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
KIMBERLEE : OPINION HANAMURA-VALASHINAS, et al., : Plaintiffs-Appellants, CASE NO. 2019-L-089 : - vs - : TRANSITIONS BY FIRENZA, LLC, et al., : Defendants-Appellees. :
Civil Appeal from the Lake County Court of Common Pleas, Case No. 2017 CV 001631.
Judgment: Affirmed in part, reversed in part, and remanded.
Clair E. Dickinson, Brouse McDowell LPA, 388 South Main Street, Suite 500, Akron, OH 44311, and James T. Dixon and Teresa G. Santin, Brouse McDowell LPA, 600 Superior Avenue, East, Suite 1600, Cleveland, OH 44114 (For Plaintiffs-Appellants).
Gerry Davidson and Jeffrey J. Fanger, Fanger & Associates LLC, 36 Alpha Park, Highland Heights, OH 44143 (For Defendants-Appellees).
MATT LYNCH, J.
{¶1} Plaintiffs-appellants, Tony Valashinas and Kimberlee Hanamura-
Valashinas, appeal the May 7, 2019 Judgment Entry of the Lake County Court of
Common Pleas, granting summary judgment in favor of defendants-appellees,
Transitions by Firenza, LLC, Anthony Fimiani, and Michael Fimiani, with respect to their
claims for fraud and piercing the corporate veil, and the trial court’s May 16, 2019 decision to direct a verdict in favor of defendant-appellee, Joseph A. Mannarino, on their
Home Construction Service Suppliers Act claim. For the following reasons, we affirm in
part and reverse in part the decision of the court below and remand the matter for
further proceedings consistent with this opinion.
{¶2} On October 10, 2017, the Valashinases filed a Complaint for Breach of
Contract; Breach of Implied Duty; Violations of the Home Construction Service
Suppliers Act; Unjust Enrichment; and Slander of Title in the Lake County Court of
Common Pleas against Transitions by Firenza, Inc., and Mannarino as its “managing
partner.” The Complaint was based on a Construction Agreement between the
Valashinases and Transitions, Inc. for the remodeling of their home in Concord
Township.
{¶3} On December 29, 2017, Transitions, Inc. and Mannarino filed an Answer
to Plaintiffs’ Complaint. On the same date, Transitions, Inc. filed a Counterclaim against
the Valashinases, raising claims of Breach of Contract (Count One), Conversion (Count
Two), Unjust Enrichment (Count Three), and Defamation (Count Four).
{¶4} On February 26, 2018, the Valashinases filed an Answer to Transitions,
Inc.’s Counterclaim.
{¶5} On November 29, 2018, the Valashinases filed a First Amended
Complaint adding Transitions, LLC and the Fimianis as defendants. During the course
of the litigation, the Valashinases discovered that all of Transitions, Inc.’s assets had
been transferred to Transitions, LLC in 2016, and that Transitions, LLC’s members had
dissolved the LLC in October 2018. The Amended Complaint identified the Fimianis as
members, part-owners, and incorporators of Transitions, Inc. The following claims were
2 raised against Transitions, Inc., Mannarino, and the Fimianis: Breach of Contract (Count
I); Breach of Implied Duty (Count II); Violations of the Home Construction Service
Suppliers Act (Count III); Unjust Enrichment (Count IV); Slander of Title (Count V);
Fraud (Count VI); and Violations of the Consumer Sales Practices Act (Count VII). An
eighth claim, Fraudulent Conveyance of Property and Assets (Count VIII), was raised
against Transitions, Inc., Transitions, LLC, Mannarino, and the Fimianis.
{¶6} On December 21, 2018, Transitions, LLC filed a Notice of Dissolution
effective October 24, 2018.
{¶7} On January 7, 2019, Transitions, LLC filed a Separate Answer to Plaintiffs’
First Amended Complaint. On the same date, Michael Fimiani and Anthony Fimiani
also filed Separate Answers.
{¶8} On January 17, 2019, Transitions, Inc. and Mannarino filed an Answer to
Plaintiffs’ First Amended Complaint.
{¶9} On January 17, 2019, Transitions, Inc. filed an Amended Counterclaim.
{¶10} On February 1, 2019, the Valashinases filed an Answer to Transitions,
Inc.’s Amended Counterclaim.
{¶11} On April 8, 2019, Transitions, LLC and the Fimianis filed a Motion for
Summary Judgment. On the same date, the Valashinases filed a Motion for Summary
Judgment as to the Counterclaim of Transitions, Inc.
{¶12} On April 25, 2019, Transitions, Inc. filed a Brief in Opposition to the
Valashinases’ Motion for Summary Judgment and the Valashinases filed a Brief in
Opposition to Transitions, LLC and the Fimianis’ Motion for Summary Judgment.
{¶13} On April 30, 2019, Transitions, LLC and the Fimianis filed a Reply Brief to
3 the Valashinases’ Brief in Opposition and the Valashinases filed a Reply in Support of
their Motion for Summary Judgment.
{¶14} On May 7, 2019, the trial court ruled on the Motions for Summary
Judgment. The court dismissed the Valashinases’ Fraud claim (Count VI) as to all
parties. The court granted summary judgment in favor of the Fimianis with respect to
Counts I through VII of the Amended Complaint. The court granted summary judgment
in favor of Mannarino with respect to the Valashinases’ Breach of Contract claim (Count
I), and with respect to Counts II through VII “to the extent that those counts rely on
piercing the corporate veil of Transitions by Firenza, Inc. rather than direct liability.” The
court dismissed Transitions, Inc.’s counterclaim for Defamation (Count Four).
{¶15} On May 13-17, 2019, the case was tried before a jury. At the close of the
trial, Transitions, Inc. withdrew its claims for Conversion (Count Two) and Unjust
Enrichment (Count Three). The trial court merged the Valashinases’ Breach of Implied
Duty (Count II), Unjust Enrichment (Count IV), and Slander of Title (Count V) claims
with their claim for Breach of Contract (Count I) and dismissed the claim for Violations of
the Consumer Sales Practices Act (Count VII). Finally, the court directed a verdict in
favor of Mannarino on the Valashinases’ claim for Violations of the Home Construction
Service Suppliers Act (Count III).
{¶16} The jury found in the Valashinases’ favor and against Transitions, Inc. on
the Breach of Contract (Count I) claim in the amount of $43,516.00 and for Violations of
the Home Construction Service Suppliers Act (Count III) in the amount of $6,400.00
($1,400.00 compensatory damages and $5,000.00 non-economic damages). The jury
found in favor of the Valashinases and against Mannarino, Transitions, LLC, and the
4 Fimianis on their Fraudulent Conveyance (Count VIII) claim in the amount of $9,000.00
but denied an award of punitive damages. The jury found in favor of Transitions, Inc. on
the Fraudulent Conveyance (Count VIII) claim and in favor of the Valashinases on
Transitions, Inc.’s Counterclaim for Breach of Contract (Count One).
{¶17} On June 6, 2019, the trial court entered its Judgment Entry on the verdict.
{¶18} On June 11, 2019, the Valashinases filed a Motion for Award of Attorney’s
Fees.
{¶19} On June 13, 2019, Transitions, LLC and the Fimianis (subsequently joined
by Transitions, Inc. and Mannarino) filed a Motion for Judgment Notwithstanding the
Verdict.
{¶20} On June 21, 2019, Transitions, Inc. and Mannarino filed a Brief in
Opposition to the Motion for Award of Attorney’s Fees. On June 27, 2019, the
Valashinases filed a Reply in Support of the Motion for Award of Attorney’s Fees.
{¶21} On June 27, 2019, the Valashinases filed a Motion for Judgment
Notwithstanding the Verdict, and a Brief in Opposition to Transitions, LLC, the Fimianis,
Transitions, Inc. and Mannarino’s Motion for Judgment Notwithstanding the Verdict.
{¶22} On July 2, 2019, Transitions, LLC and the Fimianis (subsequently joined
by Transitions, Inc. and Mannarino) filed a Brief in Opposition to the Valashinases’
Motion for Judgment Notwithstanding the Verdict.
{¶23} On August 26, 2019, the trial court denied the Motions for Judgment
Notwithstanding the Verdict filed by Transitions, LLC and the Fimianis and by the
Valashinases.
{¶24} On August 26, 2019, the trial court awarded the Valashinases attorney
5 fees against Transitions, Inc. in the amount of $5,375.50.
{¶25} On September 3, 2019, the Valashinases filed a Notice of Appeal.
{¶26} On appeal, the Valashinases raise the following assignments of error:
{¶27} “[1.] The trial court incorrectly granted the defendants summary judgment
on the Valashinases’ fraud claim.”
{¶28} “[2.] The trial court incorrectly granted the defendants summary judgment
on the Valashinases’ piercing the corporate veil claim.”
{¶29} “[3.] The trial court incorrectly directed a verdict in Joseph Mannarino’s
favor on the Home Construction Service Suppliers Act claim.”
{¶30} The first two assignments of error challenge a grant of summary judgment
pursuant to Civil Rule 56(C). Summary judgment is appropriate when “there is no
genuine issue as to any material fact and the moving party is entitled to judgment as a
matter of law,” i.e., when “reasonable minds can come to but one conclusion and that
conclusion is adverse to the party against whom the motion for summary judgment is
made, that party being entitled to have the evidence or stipulation construed most
strongly in the party’s favor.” Civ.R. 56(C). An appellate court’s “review of a summary-
judgment ruling is de novo.” Fradette v. Gold, 157 Ohio St.3d 13, 2019-Ohio-1959, 131
N.E.3d 12, ¶ 6.
{¶31} “The elements of an action in actual fraud are: (a) a representation or,
where there is a duty to disclose, concealment of a fact, (b) which is material to the
transaction at hand, (c) made falsely, with knowledge of its falsity, or with such utter
disregard and recklessness as to whether it is true or false that knowledge may be
inferred, (d) with the intent of misleading another into relying upon it, (e) justifiable
6 reliance upon the representation or concealment, and (f) a resulting injury proximately
caused by the reliance.” Gaines v. Preterm-Cleveland, Inc., 33 Ohio St.3d 54, 55, 514
N.E.2d 709 (1987).
{¶32} The Construction Agreement between the Valashinases and Transitions,
Inc. provided as follows with respect to costs: “For Contractor’s performance on the
Contract, the Owner shall reimburse the Contractor for the Costs of the Work and pay to
Contractor a fee (the ‘Contractor’s Fee’) with a guaranteed maximum price of
$130,000.00 (the ‘Contract Sum’). * * * The Contractor’s Fee shall be $15,000. The
Costs of the Work shall include the costs for subcontracts, labor, material, services, and
supplies, but excluding the Contractor’s on-site personnel (payment for which shall be
included in the Contractor’s Fee) and excluding general home office overhead.”
{¶33} The Valashinases alleged that, contrary to the terms of the Agreement as
well as the parties’ mutual understanding of those terms, Mannarino and Transitions,
Inc. “did adjust, upcharge, and mark-up the invoices of subcontractors and vendors for
work on the Property” and “submitted those fraudulent invoices to the Plaintiffs with the
intent of misleading the Plaintiffs into relying upon those amounts and in an effort to
cause the Plaintiffs to pay those adjusted and fraudulent amounts.” Moreover, “it may
be that fellow co-owners of the company Anthony and Michael Fimiani controlled and
directed billing operations or were aware of the fraudulent behavior.” Amended
Complaint at ¶ 83-84, 88.
{¶34} In their Brief in Opposition to Summary Judgment, the Valashinases
included an affidavit by Kimberlee wherein she averred that Mannarino and Transitions,
Inc. added “hidden mark-ups to vendor and subcontractor invoices to deceive [them]
7 and earn more than the agreed-upon fee,” and that, unaware of this fraudulent behavior,
they paid the invoices. Attached to Kimberlee’s affidavit were invoices received from
Transitions, Inc. for subcontractor work in the amounts of $4,000 (John Lipnos) and
$6,120 (Kelco Hardwood Floors). Also attached was a Transitions, LLC Profit and Loss
Detail indicating that these invoices were originally submitted to Transitions, LLC for
$3,000 (John Lipnos) and $5,095 (Kelco Hardwood Floors).
{¶35} The trial court granted summary judgment as to the fraud claim on the
grounds that “Transitions, Inc.’s duty not to add a mark-up to a subcontractor or vendor
invoice is a contractual obligation, and Plaintiffs cannot assert this alleged contractual
breach as a fraud claim.” The court relied upon the following proposition of law: “Where
the duty allegedly breached by the defendant is one that arises out of a contract,
independent of any duty imposed by law, the cause of action is one of contract.”
Schwartz v. Bank One, Portsmouth, N.A., 84 Ohio App.3d 806, 810, 619 N.E.2d 10 (4th
Dist.1992).
{¶36} The reasoning behind this rule has been set forth by the Ohio Supreme
Court as follows:
The economic-loss rule generally prevents recovery in tort of damages for purely economic loss. See Chemtrol Adhesives, Inc. v. Am. Mfrs. Mut. Ins. Co. (1989), 42 Ohio St.3d 40, 45, 537 N.E.2d 624; Floor Craft Floor Covering, Inc. v. Parma Community Gen. Hosp. Assn. (1990), 54 Ohio St.3d 1, 3, 560 N.E.2d 206. “‘[T]he well-established general rule is that a plaintiff who has suffered only economic loss due to another’s negligence has not been injured in a manner which is legally cognizable or compensable.’” Chemtrol, 42 Ohio St.3d at 44, 537 N.E.2d 624, quoting Nebraska Innkeepers, Inc. v. Pittsburgh-Des Moines Corp. (Iowa 1984), 345 N.W.2d 124, 126. See, also, Floor Craft, 54 Ohio St.3d at 3, 560 N.E.2d 206. This rule stems from the recognition of a balance between tort law, designed to redress losses suffered by breach of a duty imposed by law to protect societal interests, and contract
8 law, which holds that “parties to a commercial transaction should remain free to govern their own affairs.” Chemtrol, 42 Ohio St.3d at 42, 537 N.E.2d 624. See, also, Floor Craft, 54 Ohio St.3d at 7, 560 N.E.2d 206, quoting Sensenbrenner v. Rust, Orling & Neale Architects, Inc. (1988), 236 Va. 419, 425, 374 S.E.2d 55. “‘Tort law is not designed * * * to compensate parties for losses suffered as a result of a breach of duties assumed only by agreement. That type of compensation necessitates an analysis of the damages which were within the contemplation of the parties when framing their agreement. It remains the particular province of the law of contracts.’” Floor Craft, 54 Ohio St.3d at 7, 560 N.E.2d 206, quoting Sensenbrenner, 236 Va. at 425, 374 S.E.2d 55.
Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc., 106 Ohio St.3d 412, 2005-Ohio-5409,
835 N.E.2d 701, ¶ 6.
{¶37} The issue, then, is whether there is a duty not to defraud independent of
the Construction Agreement. We conclude that there is. The societal interest in
protecting persons against fraud, in particular the falsification of billing statements, is
evidenced by both the civil and criminal liability imposed for such actual fraud. See,
e.g., State v. Alexander, 10th Dist. Franklin No. 06AP-647, 2007-Ohio-4177, ¶ 25
(falsified invoices supported conviction for forgery); State v. Fiorenzo, 108 Ohio App.3d
500, 511-512, 671 N.E.2d 287 (11th Dist.1996) (the same). The Valashinases direct us
to two cases involving home remodeling contracts wherein the plaintiffs were allowed to
pursue their claims for fraud and breach of contract based on deceptive billing practices.
Snapp v. Castlebrook Builders, Inc., 2014-Ohio-163, 7 N.E.3d 574, ¶ 104 (3d Dist.)
(“[t]he same actions by Appellants that were alleged to be fraudulent and to result in
breach of contract and unjust enrichment” involved “representations as to price and
billing * * * and excessive billing that included double and triple charges”); Fleischer v.
George, 9th Dist. Medina No. 09CA0057-M, 2010-Ohio-3941, ¶ 33 (plaintiff’s claims for
fraud and breach of contract “dealt with a common set of facts: that [the defendant]
9 misrepresented the degree of completion of the project and did not bill according to the
contract terms”).
{¶38} Similarly, this court, in Dana Partners, L.L.C. v. Koivisto Constructors &
Erectors, Inc., 11th Dist. Trumbull No. 2011-T-0029, 2012-Ohio-6294, implicitly
recognized the viability of a fraud claim in connection with a claim for breach of contract.
In Dana, the plaintiff’s “fraud claim was based upon the allegation that [the defendant]
has purposely made false representations in the monthly invoices concerning the
amount due for the services rendered by his company.” Id. at ¶ 57. In recognizing the
viability of this claim, we noted “that a finding of fraud cannot be predicated upon an
innocent mistake of fact; rather, it must be shown that the defendant had actual
knowledge or was grossly negligent in failing to ascertain the truth.” Id.
{¶39} The appellees counter by citing authority for the proposition that holding a
party liable for fraud based upon actions constituting a breach of contract “would be to
‘abandon the venerable rule that the motive of a breaching party to a contract is
irrelevant to the merit of the promisee’s claim, and would allow parties to convert
contract actions into actions in tort by attacking the motive of the breaching party * * *.’”
(Citation omitted.) Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115 Ohio App.3d
137, 151, 684 N.E.2d 1261 (9th Dist.1996). As stated by the Ohio Supreme Court
almost a century ago, “the averment that the breach was unlawful, willful, wanton, and
malicious does not change the action from one ex contractu to one ex delicto.”
Ketcham v. Miller, 104 Ohio St. 372, 136 N.E. 145 (1922), syllabus; Hoskins v. Aetna
Life Ins. Co., 6 Ohio St.3d 272, 276, 452 N.E.2d 1315 (1983) (“it is no tort to breach a
contract, regardless of motive”).
10 {¶40} These statements are not inconsistent with this court’s position in Dana
that claims for fraud and breach of contract may be raised together when intentional or
purposeful fraud is alleged (other courts have used the term “actual fraud” to contrast
with merely constructive fraud or negligent representation). See, e.g., Huntington
Ingalls Inc. v. Travelers Indemn. Co., E.D.Va. No. 4:18cv147, 2019 WL 5580226, *4
(“[c]laims for actual fraud, as opposed to constructive fraud, are tort claims and are
exempt from the economic loss rule * * * because an actual fraud claim relies on the
duty to be truthful, which is a duty imposed by law, not by contract”) (citations omitted).
{¶41} An examination of the opinion in Textron confirms that, even under the
“venerable rule” that motive is irrelevant for breach of contract, actual fraud claims may
still be raised as arising from a duty outside of the contract. Textron involved the lease
of a computer. Textron sued Nationwide for breaching the lease as well as for fraud.
Textron claimed Nationwide intentionally upgraded the computer without obtaining
Textron’s consent, as required by the lease. The court of appeals rejected the fraud
claim: “Nationwide’s duty to obtain consent for the * * * upgrade was purely contractual”
and the “additional allegation of an intentional failure to obtain Textron’s consent to the
upgrade by claiming concealment does not change the contractual nature of [the]
claim.” Textron at 151.
{¶42} Next, Textron claimed that Nationwide concealed the fact that it had
executed a second sublease of the computer in violation of the lease. Again, the court
rejected the claim as fraud: “Changing the characterization of the allegation against
Nationwide from ‘failure to obtain consent’ to ‘concealment’ of the sublease does not
change the ultimate nature of the action as one for breach of contract.” Id. at 152.
11 {¶43} Finally, Textron argued that Nationwide had concealed the location of the
computer after moving it without obtaining Textron’s consent as required by the lease.
In this instance, the court of appeals recognized the fraud claim. The court was careful
to distinguish that the actionable fraud was not the failure to advise Textron of the
computer’s actual location which was a contractual duty. Rather, Textron “presented
evidence of an affirmative representation by Nationwide that the computer was located
in Columbus, Ohio just days before it was relocated to Minnesota.” Id. The court
recognized the duty of a party to a transaction to fully disclose facts of a material nature
which may induce the other party to act or refrain from acting when the failure to
disclose would result in deception. Nationwide failed to disclose the computer’s true
location after its transfer to Minnesota. “Thus, pertaining to its fraud claim, Textron
offered evidence of a duty to disclose the location of the computer separate from that
created by the master lease. Having made a prior statement which was untrue or
misleading, Nationwide was under a duty to disclose the relocation of the [computer].”
Id. at 153; Ineos USA, L.L.C. v. Furmanite Am., Inc., 3d Dist. Allen No. 1-14-06, 2014-
Ohio-4996, ¶ 21 (“[a] tort claim can proceed where ‘the facts of the case show an
intentional tort committed independently, but in connection with a breach of contract * *
*’”) (citation omitted).
{¶44} Accordingly, we hold that the allegation that Mannarino falsified invoices
before presenting them to the Valashinases for payment violated a duty independent of
the Construction Agreement and so provided grounds for a claim of fraud. This holding
applies to Mannarino and to Transitions, Inc. only and, with respect to these parties, the
grant of summary judgment as to Fraud (Count VI) is reversed. The Valashinases have
12 presented no evidence that Transitions, LLC or the Fimianis had any involvement in or
were even aware of the invoices being inflated. The grant of summary judgment in
favor of Transitions, LLC and the Fimianis stands.
{¶45} A final observation should be made. As noted above, the economic-loss
rule rests on the premise “that tort liability may not be imposed for purely economic
damages.” Floor Craft Floor Covering, 54 Ohio St.3d at 3, 560 N.E.2d 206; Corporex,
106 Ohio St.3d 412, 2005-Ohio-5409, 835 N.E.2d 701, at ¶ 6. Thus, “[w]here the tort
claim alleges a breach of an independent duty, it must also allege damages that are
separate and distinct from the breach of contract.” Ineos USA at ¶ 21; Textron at 151
(“an action arising out of contract which is also based upon tortious conduct must
include actual damages attributable to the wrongful acts of the alleged tortfeasor which
are in addition to those attributable to the breach of the contract”).
{¶46} The appellees argue that the Valashinases failed to offer evidence of
damages arising from the alleged fraud independent of the damages which they
claimed for the breach of the Agreement. Further, the appellees note that the
Valashinases, at trial, “did prevail on a breach of contract claim and received the
compensatory damages award that they are entitled to receive under that claim as
awarded by the jury.” Appellees’ brief at 8. We decline to affirm the grant of summary
judgment on the fraud claim in its entirety on the grounds that the Valashinases failed to
raise an issue regarding damages. Because the trial court dismissed the fraud claim
prior to trial, the jury could only award damages for breach of contract. In several of the
cases cited above, the jury found liability either under the fraud or the contract claims,
but not both. See Dana, 2012-Ohio-6294, at ¶ 13 (liability for breach but not fraud) and
13 Snapp, 2014-Ohio-163, at ¶ 63 (liability for fraud but not breach). The distinction is
consequential inasmuch as a finding of fraud could entail an award of punitive
damages. Accordingly, the Valashinases are entitled to consideration of their fraud
claim as against Transitions, Inc. and Mannarino.
{¶47} To the extent indicated above, the first assignment of error is with merit.
{¶48} In the second assignment of error, the Valashinases argue that the trial
court erred in granting summary judgment on their claim to pierce the corporate veil of
Transitions, Inc. so as to hold Mannarino and the Fimianis personally liable as
shareholders.
{¶49} “The corporate form may be disregarded and individual shareholders held
liable for wrongs committed by the corporation when (1) control over the corporation by
those to be held liable was so complete that the corporation has no separate mind, will,
or existence of its own, (2) control over the corporation by those to be held liable was
exercised in such a manner as to commit fraud or an illegal act against the person
seeking to disregard the corporate entity, and (3) injury or unjust loss resulted to the
plaintiff from such control and wrong.” Belvedere Condominium Unit Owners’ Assn. v.
R.E. Roark Cos., Inc., 67 Ohio St.3d 274, 617 N.E.2d 1075 (1993), paragraph three of
the syllabus. “To fulfill the second prong of the Belvedere test for piercing the corporate
veil, the plaintiff must demonstrate that the defendant shareholder exercised control
over the corporation in such a manner as to commit fraud, an illegal act, or a similarly
unlawful act.” Dombroski v. Well Point, Inc., 119 Ohio St.3d 506, 2008-Ohio-4827, 895
N.E.2d 538, syllabus.
{¶50} The trial court granted summary judgment based on the third factor: “to
14 the extent that Plaintiffs may be injured if they are successful on their claims against
Transitions, Inc., this injury is not separate from their direct claim for fraudulent
conveyance.” We express no opinion as to the propriety of the lower court’s conclusion,
but choose to base our affirmance of that judgment on the first prong of the test.
{¶51} The Valashinases presented the following evidence which they claim
raises a genuine issue of material fact as to whether the first prong is met: Transitions,
Inc. transferred all of its assets to Transitions, LLC; Transitions, Inc. entered into the
Construction Agreement with the Valashinases while it was insolvent; many of the
invoices issued to the Valashinases contain the name “Transitions by Firenza, LLC”;
and no corporate documents were produced regarding the transfer of assets to
Transitions, LLC, any consideration paid by Transitions, LLC, or the winding down or
dissolution of Transitions, Inc. Appellants’ brief at 12.
{¶52} Accepting the foregoing as true and construing all reasonable inferences
therefrom in the Valashinases’ favor, there is no evidence that Mannarino and/or the
Fimianis exercised a control so complete over Transitions, Inc. that it had no separate
mind, will, or existence of its own. The evidence presented by the Valashinases
arguably demonstrates corporate wrongdoing by Transitions, Inc., but wholly fails to
identify a particular shareholder (if any) who was responsible for that wrongdoing.
Given the evidence presented, it is just as probable that the actions taken by
Transitions, Inc. reflected the corporate will of all its shareholders as it did the alter ego
of an individual shareholder.
{¶53} The second assignment of error is without merit.
{¶54} In the third assignment of error, the Valashinases argue that the trial court
15 erred in directing a verdict in Mannarino’s favor on their Home Construction Service
Suppliers Act claim as there was ample evidence that he participated in violations of the
Act.
{¶55} “When a motion for a directed verdict has been properly made, and the
trial court, after construing the evidence most strongly in favor of the party against
whom the motion is directed, finds that upon any determinative issue reasonable minds
could come to but one conclusion upon the evidence submitted and that conclusion is
adverse to such party, the court shall sustain the motion and direct a verdict for the
moving party as to that issue.” Civ.R. 50(A)(4).
{¶56} “A motion for a directed verdict does not present a question of fact or raise
factual issues, but instead presents a question of law, even though in deciding such a
motion it is necessary to review and consider the evidence.” Ruta v. Breckenridge-
Remy Co., 69 Ohio St.2d 66, 430 N.E.2d 935 (1982), paragraph one of the syllabus.
Since it is a question of law, the granting of a motion for directed verdict is reviewed
under a de novo standard. White v. Leimbach, 131 Ohio St.3d 21, 2011-Ohio-6238,
959 N.E.2d 1033, ¶ 22; Environmental Network Corp. v. Goodman Weiss Miller, L.L.P.,
119 Ohio St.3d 209, 2008-Ohio-3833, 893 N.E.2d 173, ¶ 23.
{¶57} The Home Construction Service Suppliers Act provides, in relevant part:
“(A) No home construction service supplier shall[,] * * * (3) [a]fter entering into a contract
with an owner, do any of the following: * * * (d) Fail to perform the home construction
service in a workmanlike manner; * * * (f) Fail to provide a full refund within a
reasonable time period for any goods or services that the home construction service
supplier has failed to deliver in accordance with the terms and conditions of the contract
16 * * * and for which the supplier has received payment; * * * (7) Intentionally understate
or intentionally misstate the estimated cost of the home construction service; (8)
Intentionally misrepresent any aspect of the transaction or the nature or the quality of
the work or materials.” R.C. 4722.03.
{¶58} For the purposes of the Act, a “home construction service supplier” is
defined as “a person who contracts with an owner to provide home construction
services for compensation and who maintains in force a general liability insurance policy
in an amount of not less than two hundred fifty thousand dollars.” R.C. 4722.01(D).
{¶59} Mannarino did not contract with the Valashinases and, therefore, does not
meet the definition of a home construction service supplier under the Act. The
Valashinases’ argument does not however, rely on the terms of the Home Construction
Service Suppliers Act but, rather, on related case law.
{¶60} The Valashinases contend that, prior to 2012, “homeowners brought home
construction claims under [Ohio’s] Consumer Sales Practices Act.” Appellants’ brief at
19-20; Danley v. Bialko, 9th Dist. Lorain No. 91CA005024, 1991 WL 199910, *1 (“home
remodelers are ‘suppliers’ and agreements between remodelers and homeowners are
‘consumer transactions’ within R.C. Chapter 1345”); Collins v. Kingsmens Ents., Inc.,
8th Dist. Cuyahoga No. 66433, 1995 WL 23345, *2 (“the definition of a ‘consumer
transaction’ as used in the Consumer Sales Practices Act * * * contemplates the
inclusion of home improvement services”).
{¶61} Under the Consumer Sales Practices Act, Ohio courts have found
corporate officers personally liable for violation of the Act even apart from the doctrine of
piercing the corporate veil. State ex rel. Fisher v. Warren Star Theater, 84 Ohio App.3d
17 435, 443, 616 N.E.2d 1192 (11th Dist.1992); Luckoski v. Allstate Ins. Co., 2013-Ohio-
5460, 5 N.E.3d 72, ¶ 36 (2d Dist.) (“we need not determine whether to pierce the
corporate veil, since McGarvey’s liability is not based upon his status as a shareholder
but upon his direct actions in violating the OCSPA”). “In order to hold a corporate officer
personally liable for his actions in violation of the CSPA, the evidence must show that
the officer participated in the commission of an act or specifically directed the particular
act to be done.” Yates v. Mason Masters, Inc., 11th Dist. Lake No. 2002-L-001, 2002-
Ohio-6697, ¶ 24.
{¶62} The justification for holding officers personally liable is as follows:
The [CSPA] does not change the existing common law of tort, nor does it change the common law rule with respect to piercing the corporate veil. A corporate officer may not be held liable merely by virtue of his status as a corporate officer. It does, however, create a tort which imposes personal liability upon corporate officers for violations of the act performed by them in their corporate capacities.
Id. at ¶ 25, citing Grayson v. Cadillac Builders, Inc., 8th Dist. Cuyahoga No. 68551,
1995 WL 546916, *3, fn. 1; Garber v. STS Concrete Co., L.L.C., 2013-Ohio-2700, 991
N.E.2d 1225, ¶ 28 (8th Dist.) (“[t]he officer’s ‘liability flows not from his status as * * * an
officer * * *, but from his personal actions in violating CSPA”) (citation omitted).
{¶63} In 2012, the Home Construction Service Suppliers Act was enacted, and
the Consumer Sales Practices Act was amended to exclude “transactions involving a
home construction service contract as defined in section 4722.01 of the Revised Code.”
Am.Sub.H.B. No. 383, Section 1, 2012 Ohio Laws File 107; R.C. 1345.01(A). While
acknowledging that there is no case law applying the rule regarding corporate officers
under the Sales Practices Act to the Home Construction Service Suppliers Act, the
18 Valashinases urge this court to do so and hold that whether Mannarino was subject to
personal liability should have been decided by the jury. We decline to do so.
{¶64} There are substantive differences between the Home Construction
Service Suppliers Act and the Consumer Sales Practices Act. Under the Sales
Practices Act, liability is ultimately imposed for acts or practices deemed either “unfair or
deceptive” under R.C. 1345.02 or “unconscionable” under R.C. 1345.03. In neither
case would liability be imposed for acts or practices simply constituting a breach of
contract. Warren v. Denes Concrete, Inc., 9th Dist. Lorain Nos. 08CA009414 and
08CA009422, 2009-Ohio-2784, ¶ 23 (“[a] CSPA claim will not be successful unless the
contractor’s performance amounted to a deceptive, unfair, or unconscionable act”);
Tsirikos-Karapanos v. Ford Motor Co., 2017-Ohio-8487, 99 N.E.3d 1203, ¶ 38 (8th
Dist.) (“[n]ot every breach of contract constitutes a CSPA violation”) (citation omitted).
Under the Home Construction Service Suppliers Act, in contrast, liability may be
imposed for numerous acts or practices which would not otherwise subject a party to
tort liability, such as failing to enter into a written contract compliant with the provisions
of R.C. Chapter 4722, failing to perform construction in a workmanlike manner, or failing
to provide a refund within a reasonable time for goods and services that are not
delivered. R.C. 4722.03(A)(1), (3)(d), and (f). There is no requirement under the Home
Construction Service Suppliers Act that violations be inherently deceptive, unfair, or
unconscionable. Unsurprisingly, then, there is no comparable provision in the Home
Construction Service Suppliers Act for treble damages as there is in the Consumer
Sales Practices Act. R.C. 1345.09(B).
{¶65} We acknowledge that certain actions taken by Mannarino, discussed
19 above, arguably constitute tortious conduct in and of themselves as well as violations of
the Home Construction Service Suppliers Act. The fact that there is some overlap
between tort law and the Act does not justify the adoption of a rule that would subject
corporate officers to personal liability for all violations of the Act.1
{¶66} The third assignment of error is without merit.
{¶67} For the foregoing reasons, the granting of summary judgment on the
Valashinases’ claim for Fraud (Count VI) is reversed as to Transitions, Inc. and
Mannarino only. In all other respects, the judgment of the lower court is affirmed. This
matter is remanded for further proceedings consistent with this opinion. Costs to be
taxed between the parties equally.
CYNTHIA WESTCOTT RICE, J., concurs in judgment only,
TIMOTHY P. CANNON, P.J., concurs in part and concurs in judgment only in part, with a Concurring Opinion.
_____________________________________________
TIMOTHY P. CANNON, P.J., concurring in part and concurring in judgment only in part.
1. We note that the Valashinases raised claims under both the Home Construction Service Suppliers Act (Count III) and the Consumer Sales Practices Act (Count VII), acknowledging at trial that it was uncertain which Act applied. The Consumer Sales Practices Act excludes “transactions involving a home construction service contract as defined in section 4722.01 of the Revised Code.” R.C. 1345.01(A). “Home construction service” is defined therein as “the construction of a residential building.” R.C. 4722.01(B). The Construction Agreement with the Valashinases was not for the construction of a home, but for the remodeling of an already existing home. The trial court determined that the Home Construction Service Suppliers Act applied and dismissed the claim under the Consumer Sales Practices Act. The Valashinases have not challenged that ruling.
20 {¶68} With regard to the first assignment of error, the majority reverses the
dismissal of the fraud claim by concluding there is evidence that Mannarino committed
fraud independent of his contractual obligations. I concur based on the evidence
presented in opposition to summary judgment.
{¶69} In opposition to the motion for summary judgment, the Valashinases
offered an exhibit to the trial court—incorporated into an affidavit averring fraud on
behalf of Mannarino and Transitions, Inc.—of subcontractor invoices that are
inconsistent with Transitions, Inc.’s own internal records with regard to pricing. The
invoices appear to be a complete fabrication created and submitted to the Valashinases
to appear as though they came directly from the subcontractors. This act is much more
than simply billing the customer with a subcontractor markup that would constitute a
breach of the contract. The discrepancy between the fabricated invoices and the
corporate records demonstrate markups charged to the Valashinases in the amount of
$2,025.00. Based on this, I agree the Valashinases set forth sufficient evidence in
response to the motion for summary judgment to create a genuine dispute of material
fact with regard to whether Mannarino and Transitions, Inc. committed fraud. The
issues on remand, however, must be sufficiently narrow. This court’s holding should
clarify whether the fraud claim should include compensatory damages. I believe that it
should. If the fraud claim is proven, it must be additionally determined whether the
Valashinases are entitled to punitive damages and attorney fees for that claim alone,
which are separate damages from the contract claims.
{¶70} In addition, the majority affirms the second assignment of error by
concluding there was no evidence that Mannarino or the Fimianis exercised the
21 required control over Transitions, Inc. to pierce the corporate veil. The trial court
granted summary judgment based on the third factor, concluding the Valashinases did
not show injury separate from their fraudulent conveyance claim. The majority chose
not to address the trial court’s conclusion. Instead, the majority affirms the summary
judgment ruling based on the first prong of the test, concluding it is just as probable that
the actions taken by Transitions, Inc. reflected the corporate will of all shareholders as it
did the alter ego of an individual shareholder. I concur with the majority’s conclusion
regarding the second assignment of error, but not with the analysis presented therein.
Therefore, I concur with the majority on the first assignment of error and concur
in judgment only on the second assignment of error.