Huttenbauer Land Co., L.L.C. v. Harley Riley, Ltd.

2012 Ohio 4585

• Court: Ohio Court of Appeals
• Decided: October 5, 2012
• Docket: C-110842
• Status: Published

Opinion

[Cite as Huttenbauer Land Co., L.L.C. v. Harley Riley, Ltd., 2012-Ohio-4585.]

IN THE COURT OF APPEALS FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO

HUTTENBAUER LAND COMPANY, : APPEAL NO. C-110842 LLC, TRIAL NO. A-1005141 : Plaintiff-Appellant, O P I N I O N. : vs. : HARLEY RILEY, LTD., : and : KENNETH R. RILEY, : Defendants-Appellees. :

Civil Appeal From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Affirmed in Part, Reversed in Part, and Cause Remanded

Date of Judgment Entry on Appeal: October 5, 2012

Dinsmore & Shohl LLP and James A. Comodeca, for Plaintiff-Appellant,

Thomas W. Kidd, Jr., for Defendants-Appellees.

Please note: This case has been removed from the accelerated calendar. OHIO FIRST DISTRICT COURT OF APPEALS

SYLVIA S. HENDON, Judge.

{¶1} Plaintiff-appellant Huttenbauer Land Company, LLC,

(“Huttenbauer”) has appealed from the trial court’s entry, following a bench trial,

that dismissed its complaint against defendants-appellees Harley Riley, Ltd., and

Kenneth R. Riley. Because we find that the trial court erred in dismissing

Huttenbauer’s claim for breach of contract, we reverse its judgment with respect to

that claim. The judgment of the trial court is otherwise affirmed.

Factual Background

{¶2} Huttenbauer owned the Greenhills Shopping Center. Riley’s

Restaurant, a restaurant and catering business run by Ken Riley, was a longtime

tenant of the shopping center. In September of 2007, Ken Riley and Huttenbauer

negotiated a new retail lease agreement. The agreement was executed by

Huttenbauer and Harley Riley, Ltd. Harley Riley, Ltd. was an entity formed for the

purpose of entering into the lease agreement, and its sole member was Ken Riley.

{¶3} After executing this lease, Ken Riley signed the lease and control of the

restaurant over to a third party, Wink Ventures, LLC. Wink Ventures ran the

restaurant for several years. Per the agreement between these parties, Wink

Ventures paid rent to Ken Riley, who then made rental payments to Huttenbauer.

For reasons unrelated to this lawsuit, the relationship between Ken Riley and Wink

Ventures deteriorated. Wink Ventures withheld rental payments from Riley, who in

turn failed to pay Huttenbauer the rent due under the lease. In February of 2010,

Ken Riley, without notice to Huttenbauer, retook control of the restaurant, closed it,

and changed the locks. The restaurant has not reopened in that location.

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{¶4} Huttenbauer filed suit against Harley Riley, Ltd., and Ken Riley,

raising claims for breach of contract, intentional and negligent property damage,

conversion, tortious interference, fraudulent inducement, and negligent

misrepresentation. Harley Riley, Ltd., and Ken Riley filed several counterclaims

against Huttenbauer, including a counterclaim for breach of contract. Following a

bench trial, the trial court found that Huttenbauer had failed to establish any claim

for relief and it dismissed Huttenbauer’s complaint. The court further found that

Harley Riley, Ltd., and Ken Riley had failed to establish damages, and it likewise

dismissed the defendants’ counterclaims.

{¶5} Huttenbauer has appealed from the trial court’s dismissal of its

complaint. In three assignments of error, Huttenbauer argues that the trial court

erred in failing to apply the clear and unambiguous terms of the lease, that the trial

court erred in finding that it had not established a claim for relief, and that the court

erred by refusing to pierce the corporate veil of Harley Riley, Ltd., and hold Ken

Riley personally liable on the lease.

{¶6} The interpretation of a written contract is an issue of law that this

court reviews de novo. Warmack v. Arnold, 195 Ohio App.3d 760, 2011-Ohio-5463,

961 N.E.2d 1165, ¶ 25 (1st Dist.). The contract must be construed so as to give effect

to the intent of the parties. Aultman Hosp. Assn. v. Community Mut. Ins. Co., 46

Ohio St.3d 51, 53, 544 N.E.2d 920 (1989). When the contract language is clear and

unambiguous, the plain language of the contract will govern the parties’ dispute. Jag

Imperial, LLC v. Literski, 1st Dist. No. C-110760, 2012-Ohio-2863, ¶ 11.

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Breach of Contract

{¶7} We consider Huttenbauer’s first and second assignments of error

together, as each assignment in effect argues that the trial court erred in interpreting

the lease with respect to Huttenbauer’s claim for breach of contract and in

dismissing that claim.

{¶8} To succeed on a breach of contract claim, a plaintiff must demonstrate

the existence of a contract, performance by the plaintiff, a breach by the defendant,

and resulting damages. Brunsman v. W. Hills Country Club, 151 Ohio App.3d 718,

2003-Ohio-891, 785 N.E.2d 794, ¶ 11 (1st Dist.). The contract at issue in this claim is

the lease executed by the parties.

{¶9} At trial, Huttenbauer argued that Harley Riley, Ltd., had breached the

lease agreement by closing the restaurant, by vacating the premises, and by failing to

pay rent. The trial court found that, although Harley Riley, Ltd., had committed

these acts, they did not constitute an act of default under the lease because they were

excused by Huttenbauer’s own commission of several material breaches of the lease.

But in concluding that Harley Riley, Ltd.’s, actions were not a default or breach, the

trial court ignored the plain language of the parties’ lease.

{¶10} Article 19.13 of the lease provides that “[i]n the event of any default by

Landlord, Tenant will give Landlord written notice specifying such default with

particularity, and Landlord shall have thirty days * * * in which to cure any such

default.” Per the plain and unambiguous language of the lease, Harley Riley, Ltd.,

was required to notify Huttenbauer in writing of any default that Harley Riley, Ltd.,

believed had been committed. At trial, Harley Riley, Ltd., argued that Huttenbauer

had committed various defaults under the lease. And the trial court found that

4 OHIO FIRST DISTRICT COURT OF APPEALS

Huttenbauer had defaulted by failing to maintain the premises as required, by failing

to provide a statement of common area costs, and by failing to install a separate

water meter as required by the lease. The trial court further found that

Huttenbauer’s default excused Harley Riley, Ltd.’s, performance under the lease.

{¶11} But the record is clear that Huttenbauer never received written notice

of default at any time prior to Harley Riley, Ltd.’s, closure of the restaurant and

vacation of the premises. Ken Riley conceded during trial that no such notification

had been sent to Huttenbauer. Because the lease provides that Huttenbauer is

entitled to notice and an opportunity to cure an alleged default, and because such

notice and opportunity were not provided in this case, Huttenbauer’s default did not

result in a breach of the lease and its actions could not have served as a basis to

excuse Harley Riley, Ltd.’s, performance under the lease.

{¶12} Article 19.01 of the lease provides that the following are acts of default

by the tenant under the lease: “[t]he failure to pay rent or any other amount payable

within ten (10) days after such payment is first due and payable”; “[t]he vacating of

any portion of the Premises”; and “[c]losure of tenant’s business for any reason

(other than because of casualty loss or condemnation or as otherwise permitted

herein).” The trial court found that Harley Riley, Ltd., had closed the restaurant and

vacated the premises, and these findings were supported by the record. In light of

our determination that Huttenbauer’s default did not excuse Harley Riley, Ltd.’s,

performance, we hold that the trial court’s conclusion that Harley Riley, Ltd., had not

committed a default under the lease was erroneous.

{¶13} Because Huttenbauer established the existence of a contract, its own

performance, and a breach by Harley Riley, Ltd., and presented evidence of damages,

5 OHIO FIRST DISTRICT COURT OF APPEALS

we hold that the trial court erred in dismissing Huttenbauer’s claim for breach of

contract. The trial court must now determine the extent of damages suffered by

Huttenbauer as a result of Harley Riley, Ltd.’s, breach. The first and second

assignments of error are sustained.

Piercing the Corporate Veil

{¶14} In its third assignment of error, Huttenbauer argues that the trial court

erred by refusing to pierce the corporate veil of Harley Riley, Ltd., to hold Ken Riley

personally liable for Harley Riley, Ltd.’s, actions.

{¶15} Harley Riley, Ltd., is a limited liability company. Pursuant to R.C.

1705.48(B),

[n]either the members of the limited liability company nor any

managers of the limited liability company are personally liable to

satisfy any judgment, decree, or order of a court for, or are personally

liable to satisfy in any other manner, a debt, obligation, or liability of

the company solely by reason of being a member or manager of the

limited liability company.

Members of a limited liability company may only be reached individually if the

plaintiff demonstrates that the behavior of the members merits disregarding, or

piercing, the entity’s limited liability structure. What is referred to as the corporate

veil may be pierced 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

6 OHIO FIRST DISTRICT COURT OF APPEALS

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 Co. Inc., 67 Ohio St.3d

274, 617 N.E.2d 1075 (1993), paragraph three of the syllabus.

{¶16} The Ohio Supreme Court clarified the second prong of this analysis. It

held that to establish this prong a plaintiff must demonstrate that the individual

defendant exercised his or her control over the corporation to commit fraud, an

illegal act, or a similarly unlawful act. Dombroski v. Wellpoint, Inc., 119 Ohio St.3d

506, 2008-Ohio-4827, 895 N.E.2d 538, ¶ 29. The court further emphasized that this

“limited expansion” should be applied cautiously, and that the corporate veil should

only be pierced in cases of extreme misconduct. Id.

{¶17} The parties’ lease did not contain a personal guarantee from Ken Riley

making him personally liable for Harley Riley, Ltd.’s, obligations under the lease.

Nor can Huttenbauer satisfy the second prong of the test to warrant piercing the

corporate veil of Harley Riley, Ltd. Ken Riley is the sole member of Harley Riley,

Ltd., and he had sole control over the entity, to the extent that Harley Riley, Ltd., had

no separate existence of its own. But Ken Riley’s control over Harley Riley, Ltd., was

not exercised to commit a fraud or an illegal or unlawful act. Harley Riley, Ltd.’s,

actions resulted in a breach of the parties’ lease, but no act of extreme misconduct

took place in this case.

{¶18} The trial court correctly determined that the corporate veil of Harley

Riley, Ltd., could not be pierced. The third assignment of error is overruled.

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Conclusion

{¶19} The trial court erred in dismissing Huttenbauer’s claim for breach of

contract. This cause is remanded for the trial court to determine the extent of the

damages incurred by Huttenbauer on this claim. The trial court’s judgment

dismissing Huttenbauer’s remaining claims, dismissing the counterclaims, and

holding that the corporate veil of Harley Riley, Ltd., could not be pierced is affirmed.

Judgment affirmed in part, reversed in part, and cause remanded.

HILDEBRANDT, P.J., and CUNNINGHAM, J., concur.

Please note: The court has recorded its own entry on the date of the release of this opinion.