James Lumber Co. v. Nottrodt

2012 Ohio 1746

• Court: Ohio Court of Appeals
• Decided: April 19, 2012
• Docket: 97288
• Status: Published

Opinion

[Cite as James Lumber Co. v. Nottrodt, 2012-Ohio-1746.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 97288

THE JAMES LUMBER COMPANY PLAINTIFF-APPELLEE/ CROSS-APPELLANT

vs.

ROBERT G. NOTTRODT, ET AL. DEFENDANTS-APPELLANTS/ CROSS-APPELLEES

JUDGMENT: AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-606703

BEFORE: Celebrezze, P.J., Cooney, J., and E. Gallagher, J.

RELEASED AND JOURNALIZED: April 19, 2012 ATTORNEYS FOR APPELLANTS/CROSS-APPELLEES

For Robert G. Nottrodt

William F. Chinnock 8238 Sugarloaf Road Boulder, Colorado 80302

For Craig P. Metzler

Nicholas E. Phillips Phillips, Mille & Constabile Co., L.P.A. 7530 Lucerne Drive Suite 200 Middleburg Heights, Ohio 44130

ATTORNEY FOR APPELLEE/CROSS-APPELLANT

David J. Pasz 12001 Prospect Road Suite A-1 Strongsville, Ohio 44149 FRANK D. CELEBREZZE, JR., P.J.:

{¶1} Defendant-appellant/cross-appellee, Robert G. Nottrodt, appeals the judgment

of the common pleas court denying his motion for sanctions pursuant to R.C. 2323.51.

Plaintiff-appellee/cross-appellant, The James Lumber Company (“James Lumber”),

appeals the trial court’s judgment granting Nottrodt’s motion to dismiss pursuant to

Civ.R. 12(B). After careful review of the record and relevant case law, we affirm in part,

reverse in part, and remand for further proceedings consistent with this opinion.

{¶2} This case initially arose out of a business relationship between James Lumber

and Summer Hill Homes of Ohio, L.L.C. (“Summer Hill”). At all times relevant to this

appeal, Summer Hill was owned and operated by Robert G. Nottrodt and Craig Metzler

and was engaged in the business of purchasing and developing residential property.

Between 2004 and 2005, Summer Hill purchased approximately $250,000 in building

materials from James Lumber. Summer Hill paid approximately $160,000 on the

account, leaving a balance of $90,218.70.

{¶3} In February 2005, James Lumber filed suit against Summer Hill in Case No.

CV-554010 for the account balance due, alleging causes of action for breach of contract,

unjust enrichment, and fraud. James Lumber also personally joined Craig Metzler as a

defendant.1 Metzler was responsible for purchasing the building materials from James

Lumber on behalf of Summer Hill. Ultimately, the parties executed a Stipulation for

Nottrodt was not named as a defendant in James Lumber’s February 2005 complaint. 1 Dismissal and Judgment Entry specifying that “Defendant Summer Hill Homes of Ohio

confesses judgment in the amount of $90,000.00 to Plaintiff [James Lumber].”2

{¶4} On November 9, 2006, James Lumber filed a complaint against Nottrodt,

Metzler, and Summer Hill, attempting to pierce the corporate veil, alleging that the

principals of Summer Hill had fraudulently transferred assets of the company to avoid

paying creditors, including James Lumber. Nottrodt and Summer Hill did not file an

answer to the complaint. Instead, Nottrodt and Summer Hill filed a motion to dismiss,

pursuant to Civ.R. 12(B), claiming that the 2006 litigation was barred by the doctrine of

res judicata. On January 3, 2007, Metzler filed an answer and cross-claim against James

Lumber. On January 5, 2007, Nottrodt and Summer Hill filed an amended motion to

dismiss with attachments.3

{¶5} On December 27, 2007, the trial court granted Nottrodt’s motion to dismiss,

stating:

Defendant, Robert Nottrodt’s Motion to Dismiss Plaintiff’s Complaint for lack of subject matter jurisdiction is granted. This Court lacks jurisdiction based on the doctrine of res judicata as the case was once litigated and dismissed with prejudice in this Court. The subject matter of the previous case arose of the same occurrence of the previously litigated case and therefore, the additional claims could have and should have been brought in the previous litigation.

James Lumber’s case against Craig Metzler was voluntarily dismissed without prejudice. 2

In the January 3, 2007 motion to dismiss, Nottrodt and Summer Hill attached copies of 3

James Lumber’s February 2005 complaint, the October 2005 stipulation for dismissal and judgment entry, and the October 2005 journal entry. {¶6} On January 18, 2008, James Lumber filed a notice of appeal with this court.

Subsequently, Nottrodt filed a motion for sanctions in the trial court against James

Lumber and its counsel for filing an action that was barred by the doctrine of res judicata.

{¶7} Upon review, James Lumber’s appeal was dismissed by this court for lack of

a final, appealable order on April 4, 2008,4 because the cross-claims of Metzler were not

disposed of by the trial court. On April 18, 2008, James Lumber filed with the trial court

a motion for reconsideration or, in the alternative, a motion for a final, appealable order.

On September 13, 2010, the trial court denied Nottrodt’s motion for sanctions and denied

James Lumber’s motion for reconsideration.

{¶8} On October 12, 2010, Nottrodt filed an appeal to this court from the trial

court’s order denying sanctions. However, for a second time, this court dismissed the

appeal for want of a final, appealable order because Metzler’s claims remained pending

and were not disposed of by the trial court.5 On August 15, 2011, the trial court disposed

of Metzler’s claims, thereby creating a final, appealable order.

{¶9} On September 12, 2011, Nottrodt filed his notice of appeal, raising one

assignment of error for review. Subsequently, James Lumber filed its notice of

cross-appeal on September 21, 2011, raising one assignment of error for review.

Law and Analysis

I. James Lumber’s Cross-Appeal

Case No. 90923. 4

Case No. 95835. 5 {¶10} Because our disposition of appellee/cross-appellant’s sole cross- assignment

of error is determinative, we shall initially address James Lumber’s cross-appeal.

{¶11} In its sole assignment of error, cross-appellant, James Lumber, argues that

“the trial court erred by dismissing its complaint based on a finding that prior litigation

that resulted in a judgment and created a judgment creditor/ judgment debtor relationship

is res judicata as to James Lumber’s claim for fraudulent conveyance and piercing the

corporate veil.”

{¶12} In dismissing James Lumber’s complaint for lack of subject matter

jurisdiction pursuant to Civ.R. 12(B)(1), the trial court concluded that the 2006 litigation

was barred under the doctrine of res judicata. We apply a de novo standard of review to

the trial court’s granting of a motion to dismiss under Civ.R. 12(B)(1) for lack of subject

matter jurisdiction. Internatl. Total Servs., Inc. v. Garlitz, 8th Dist. No. 90441,

2008-Ohio-3680, ¶ 6, citing Dzina v. Avera Internatl. Corp., 8th Dist. No. 86583,

2006-Ohio-1363; Madigan v. Cleveland, 8th Dist. No. 93367, 2010-Ohio-1213, ¶ 20,

citing Perrysburg Twp. v. Rossford, 103 Ohio St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44,

¶ 5. Under this standard of review, we must independently review the record and afford

no deference to the trial court’s decision. Herakovic v. Catholic Diocese of Cleveland,

8th Dist. No. 85467, 2005-Ohio-5985.

{¶13} The doctrine of res judicata provides that “[a] valid, final judgment rendered

upon the merits bars all subsequent actions based upon any claim arising out of the

transaction or occurrence that was the subject matter of the previous action.” Grava v. Parkman Twp., 73 Ohio St.3d 379, 653 N.E.2d 226 (1995), syllabus. In Grava, the court

stated that the doctrine of res judicata bars not only subsequent actions involving the same

legal theory of recovery as the previous action, but also claims that could have been

litigated in the previous action:

“It has long been the law of Ohio that ‘an existing final judgment or decree between the parties to litigation is conclusive as to all claims which were or might have been litigated in a first lawsuit’” (emphasis sic) (quoting Rogers v. Whitehall [1986], 25 Ohio St.3d 67, 69, 25 OBR 89, 90, 494 N.E.2d 1387, 1388). We also declared that “[t]he doctrine of res judicata requires a plaintiff to present every ground for relief in the first action, or be forever barred from asserting it.” Grava at 382, quoting Natl. Amusements, Inc. v. Springdale, 53 Ohio St.3d 60, 62, 558 N.E.2d 1178 (1990).

However,

“[l]itigation that resulted in a judgment and created a judgment-creditor/judgment-debtor relationship is not res judicata as to a subsequent claim that the debtor fraudulently transferred property to avoid paying the judgment. In other words, appellant was not required to add her claim for fraudulent conveyance to litigation that had not yet resulted in a judgment. Furthermore, a fraudulent-conveyance claim involves issues which were not actually litigated or decided in the prior actions.” Nosal v. Fairlawn Corp. Ctr., 9th Dist. No. 23846, 2008-Ohio-414, ¶ 12, quoting Blood v. Nofzinger, 162 Ohio App.3d 545, 2005-Ohio-3859, 834 N.E.2d 358, at ¶ 22 (6th Dist.).

{¶14} While Nottrodt is correct in stating that the present litigation derives from

the underlying 2005 litigation to obtain judgment on an account in the amount of $90,000,

he overlooks the fact that the gravamen of the present litigation is based on actions taken

by Nottrodt and Metzler during and subsequent to the pendency of the 2005 litigation.

Specifically, James Lumber alleged in the present complaint that Nottrodt and Metzler fraudulently transferred James Lumber property “in an attempt to avoid attachment by its

creditors, including James Lumber.”

{¶15} Accordingly, James Lumber’s current action is not an attempt to relitigate a

claim or issue litigated and decided in the 2005 action, nor is it an attempt to litigate a

claim or issue that might have been litigated and decided in the previous action. Rather,

James Lumber’s efforts to hold Nottrodt and Metzler personally liable is a part of James

Lumber’s overall effort to gain compliance with the trial court’s October 2005 order,

which James Lumber could not have done at any time prior to the date the order was

issued. Gilboy v. Marino, 2d Dist. No. 17374, 1999 WL 148117 (Mar. 19, 1999). Thus,

the trial court erred in ruling that James Lumber’s action was barred under the doctrine of

res judicata.

{¶16} Moreover, we find that the trial court erred procedurally in granting

Nottrodt’s Civ.R. 12(B) motion. When Nottrodt was initially served with James Lumber’s

complaint and summons, he did not file an answer, but rather filed a Civ.R. 12(B) motion

claiming that the complaint failed to state a cause of action because it was barred by the

doctrine of res judicata. Civ.R. 12(B), however, does not list res judicata among the

defenses that may be raised in a motion to dismiss the complaint. Compare Civ.R. 8(A);

Lawson Steel Slitting, Inc. v. Cleveland Elec. Illum. Co., 8th Dist. No. 96845,

2012-Ohio-83.

{¶17} Thus, as Ohio courts have recognized, res judicata is not a defense that can

be raised by a motion to dismiss pursuant to Civ.R. 12(B) because that defense must be proved with evidence outside the pleadings. Ardary v. Stepien, 8th Dist. No. 82950,

2004-Ohio-630, ¶ 18, citing State ex rel. Freeman v. Morris, 62 Ohio St.3d 107, 109, 579

N.E.2d 702 (1991). “Pursuant to Freeman, ‘the court may not dismiss a case, via a

motion to dismiss on res judicata grounds.’” Id., quoting Shaper v. Tracy, 73 Ohio St.3d

1211, 1995-Ohio-37, 654 N.E.2d 1268.

{¶18} Consequently, the trial court erred in dismissing James Lumber’s complaint

on this basis. J & H Reinforcing & Struc. Erectors, Inc. v. Wellston City School Dist.,

4th Dist. No. 09CA8, 2010-Ohio-2312; Morris at 109.

{¶19} While we acknowledge that Nottrodt filed a motion for summary judgment

on May 21, 2007, his argument that the trial court inadvertently referenced his motion to

dismiss in its journal entry is without merit. It is evident from the trial court’s order that

it clearly and intentionally based its decision to dismiss James Lumber’s complaint on

Nottrodt’s Civ.R. 12(B) motion to dismiss. Thus, Nottrodt’s motion for summary

judgment was never ruled on and is deemed to have been denied. Indep. Furniture Sales,

Inc. v. Martin, 184 Ohio App.3d 562, 2009-Ohio-5697, 921 N.E.2d 718 (8th Dist.) (“We

note that when a trial court fails to rule upon a pretrial motion, it may be presumed that

the court overruled it.”). See State ex rel. The V Cos. v. Marshall, 81 Ohio St.3d 467,

469, 692 N.E.2d 198 (1998), citing State ex rel. Cassels v. Dayton City School Dist. Bd.

of Edn., 69 Ohio St.3d 217, 223, 631 N.E.2d 150 (1994).

{¶20} Accordingly, James Lumber’s sole assignment of error is sustained. II. Nottrodt’s Appeal

{¶21} In Nottrodt’s sole assignment of error, he argues that the trial court erred as

a matter of law in denying his motion for sanctions against James Lumber’s counsel of

record, attorney Ronald Pasz.

{¶22} R.C. 2323.51 provides that a party adversely affected by frivolous conduct

may file a motion for an award of court costs, reasonable attorney fees, and other

reasonable expenses incurred in connection with the civil action.

{¶23} The term “conduct” is defined as “the filing of a civil action, the assertion of

a claim, defense, or other position in connection with a civil action, or the taking of any

other action in connection with a civil action * * *.” R.C. 2323.51(A)(1)(a).

{¶24} The term “frivolous” is defined as conduct by a party to a civil action that

“is not warranted under existing law and cannot be supported by a good faith argument

for an extension, modification, or reversal of existing law.” R.C. 2323.51(A)(2)(a)(ii).

{¶25} In determining whether the claim itself is frivolous, the test is whether no

reasonable lawyer would have brought the action in light of the existing law. Orbit

Electronics, Inc. v. Helm Instrument Co. Inc., 167 Ohio App.3d 301, 2006-Ohio-2317,

855 N.E.2d 91, ¶ 47 (8th Dist.), citing Riston v. Butler, 149 Ohio App.3d 390, 397-398,

2002-Ohio-2308, 777 N.E.2d 857 (1st Dist.); Lisboa v. Kleinman, 8th Dist. No. 89703,

2008-Ohio-1270. “‘In other words, a claim is frivolous if it is absolutely clear under the

existing law that no reasonable lawyer could argue the claim.’” Riston at ¶ 30, quoting

Hickman v. Murray, 2d Dist. No. CA 15030, 1996 WL 125916 (Mar. 22, 1996). {¶26} In the present case, Nottrodt sought sanctions against James Lumber

pursuant to R.C. 2323.51. In asserting that James Lumber’s suit was frivolous, Nottrodt

argued that James Lumber’s 2006 cause of action against Summer Hill, Metzler, and

Nottrodt was barred under the doctrine of res judicata because it alleged the same

operative facts as its previously adjudicated 2005 case. We find appellant’s argument to

be without merit. As discussed in James Lumber’s cross-appeal, the trial court erred in

dismissing James Lumber’s 2006 litigation based on the doctrine of res judicata.

Accordingly, sanctions against James Lumber pursuant to R.C. 2323.51 would be

inappropriate in this matter.

{¶27} Nottrodt’s sole assignment of error is overruled.

{¶28} Based on the foregoing, we affirm the judgment of the trial court denying

Nottrodt’s motion for sanctions, reverse the judgment of the trial court granting

Nottrodt’s Civ.R. 12(B) motion to dismiss, and remand for further proceedings consistent

with this opinion.

It is ordered that appellee recover of said appellants costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the common

pleas court to carry this judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure. FRANK D. CELEBREZZE, JR., PRESIDING JUDGE

COLLEEN CONWAY COONEY, J., and EILEEN A. GALLAGHER, J., CONCUR