State ex rel. Dept. of Edn. v. Ministerial Day Care

2016 Ohio 8485

• Court: Ohio Court of Appeals
• Decided: December 29, 2016
• Docket: 103685
• Status: Published

Opinion

[Cite as State ex rel. Dept. of Edn. v. Ministerial Day Care, 2016-Ohio-8485.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 103685

STATE OF OHIO EX REL., DEPARTMENT OF EDUCATION, ET AL. PLAINTIFFS-APPELLEES

vs.

MINISTERIAL DAY CARE, ET AL. DEFENDANTS-APPELLANTS

JUDGMENT: AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-14-820766

BEFORE: Boyle, J., Jones, A.J., and Kilbane, J.

RELEASED AND JOURNALIZED: December 29, 2016 ATTORNEY FOR APPELLANT

Tyrone E. Reed Tyrone E. Reed & Associates 11811 Shaker Boulevard, #420 Cleveland, Ohio 44120

ATTORNEYS FOR APPELLEES

Mike DeWine Ohio Attorney General BY: Todd R. Marti Amy Nash Golian Assistant Attorney Generals Education Section 30 East Broad Street, 16th Floor Columbus, Ohio 43215

Michael T. Fisher Assistant Attorney General 615 W. Superior Avenue, 11th Floor Cleveland, Ohio 44113 MARY J. BOYLE, J.:

{¶1} Defendant-appellant, Ministerial Day Care Association (“Ministerial”),

appeals the trial court’s decision granting summary judgment in favor of

plaintiffs-appellees, the Ohio Department of Education and Ohio Attorney General

Michael DeWine (collectively “ODE”), on their claim for recovery of public funds.

Finding no merit to the appeal, we affirm.

A. Procedural History and Facts

{¶2} In January 2014, ODE sued Ministerial and Verneda Bentley, who was the

former executive director of Ministerial, alleging that they were jointly and severally

liable for public funds illegally expended in the total amount of $7,506,365. According

to the complaint, Ministerial is a 501(c)(3) nonprofit organization and a recipient of

federal, state, and county Head Start funds as a grantee for the purposes of operating day

care and Head Start programs. On January 28, 2008, the Ohio auditor of state’s office

issued a report on a special audit of Ministerial for the period August 1, 1998, through

July 31, 2001 (“the Special Audit Report”), which detailed its audit and “findings for

recovery” against Ministerial “totaling $7,506,365 for public monies illegally expended

and in favor of ODE.” ODE attached the Special Audit Report to the complaint, which

was certified on January 28, 2008.

{¶3} Ministerial answered the complaint and asserted several affirmative

defenses, including res judicata, statute of limitations, and unclean hands. {¶4} Both parties filed cross-motions for summary judgment.

{¶5} ODE moved for summary judgment on the basis that Ministerial is liable

under R.C. 117.28 and 117.36, which allow for the recovery of public money that has

been illegally expended. ODE argued that, in accordance with the regulations

governing the Head Start program, Ministerial was required to keep eligibility

determination records for each participant. Relying on the Special Audit Report, ODE

argued that Ministerial “had records for far fewer children that they obtained funding

for” and that the Special Audit Report specifically calculated the amount of extra

funding Ministerial received for children reported but not documented — a total of

$7,506,365. Under R.C. 117.36, “[a] certified copy of any portion of the report

containing factual information is prima-facie evidence in determining the truth of the

allegations of the petition” seeking to reduce the finding to judgment. Based on the

findings contained in the Special Audit Report, which was certified and attached to the

complaint, ODE argued it was entitled to summary judgment.

{¶6} Although Ministerial purported to file a “motion in opposition to plaintiffs’

motion for summary judgment and memorandum in support thereof,” its filing consisted

of a single page labeled as page “8” — an apparent incomplete portion of a larger

memorandum that was not filed in its entirety. The single page failed to rebut the

grounds asserted in ODE’s motion for summary judgment. On the same day,

Ministerial also separately filed documents titled Exhibits 1, 2, and 3, which appear to be

copies of two state audits and a copy of the case docket of an earlier lawsuit filed between ODE and Ministerial. None of these documents, however, were authenticated

by affidavit.

{¶7} Ministerial, however, filed its own motion for summary judgment on the

grounds that ODE’s claim was barred by both the statute of limitations and the doctrine

of res judicata. ODE opposed the motion, arguing that both grounds failed because

Ministerial has not proven the facts required to establish either defense.

{¶8} After the dispositive motion deadline passed, Ministerial filed a motion to

supplement affidavit of Reverend George Stewart to motion for summary judgment,

which was not ruled upon by the trial court.

{¶9} The trial court ultimately denied Ministerial’s motion for summary

judgment but granted ODE’s motion for summary judgment and awarded judgment

against Ministerial and Bentley, “jointly and severally, in the amount of $7,506,365 plus

statutory interest.” From this order, Ministerial appeals,1 raising the following single

assignment of error:

Should summary judgment have been granted in favor of the State of Ohio if there are questions as to the accuracy of the findings of the State Auditors’ Second Special Audit Report and if the State’s claims should be barred by the doctrine of res judicata?

B. Standard of Review

{¶10} An appellate court reviews a trial court’s decision to grant summary

judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d

1 Bentley has not filed a notice of appeal and therefore is not part of this appeal. 241 (1996). De novo review means that this court “uses the same standard that the trial

court should have used, and we examine the evidence to determine if as a matter of law

no genuine issues exist for trial.” Brewer v. Cleveland Bd. of Edn., 122 Ohio App.3d

378, 383, 701 N.E.2d 1023 (8th Dist.1997), citing Dupler v. Mansfield Journal, 64 Ohio

St.2d 116, 119-120, 413 N.E.2d 1187 (1980). In other words, we review the trial

court’s decision without according the trial court any deference. Brown v. Scioto Cty.

Bd. of Commrs., 87 Ohio App.3d 704, 711, 622 N.E.2d 1153 (4th Dist.1993).

{¶11} Under Civ.R. 56(C), summary judgment is properly granted when (1) there

is no genuine issue as to any material fact; (2) the moving party is entitled to judgment as

a matter of law; and (3) 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. Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 66, 375 N.E.2d 46

(1976). If the moving party fails to satisfy its initial burden, “the motion for summary

judgment must be denied.” Dresher v. Burt, 75 Ohio St.3d 280, 293, 662 N.E.2d 264

(1996). But if the moving party satisfies “its initial burden, the nonmoving party then

has a reciprocal burden outlined in Civ.R. 56(E) to set forth specific facts showing that

there is a genuine issue for trial and, if the nonmovant does not so respond, summary

judgment, if appropriate, shall be entered against the nonmoving party.” Id.

{¶12} In this appeal, Ministerial challenges the trial court’s granting of summary

judgment in favor of ODE on two grounds: (1) ODE’s claim was barred by the doctrine

of res judicata, and (2) the existence of disputed facts as to the accuracy of the 2008 Second Special Audit Report renders summary judgment inappropriate. We will

address each argument in turn.

C. Res Judicata

{¶13} Ministerial argues that the trial court should have denied the ODE’s motion

for summary judgment because res judicata barred its claim. We disagree.

{¶14} Under Ohio law, “[a] valid, final judgment rendered upon the merits bars

all subsequent actions based upon any claim arising out of the transaction of occurrence

that was the subject matter of the previous action.” Grava v. Parkman Township, 73

Ohio St.3d 379, 653 N.E.2d 226 (1995), syllabus. Relying on federal law, the Ohio

Supreme Court has identified four elements necessary to bar a claim under the doctrine

of res judicata: (1) there is a final, valid decision on the merits by a court of competent

jurisdiction; (2) the second action involves the same parties or their privies as the first;

(3) the second action raises claims that were or could have been litigated in the first

action; and (4) the second action arises out of the transaction or occurrence that was the

subject matter of the previous action. Portage Cty. Bd. of Commrs. v. Akron, 109 Ohio

St.3d 106, 123, 2006-Ohio-954, 846 N.E.2d 478, citing Hapgood v. Warren, 127 F.3d

490, 493 (6th Cir.1997).

{¶15} Relevant to this appeal, Ministerial was awarded annual grants for its

participation in Head Start during the time period of 1997-2001 as follows:

Grant Year Amount 1997-1998 $6,106,027 1998-1999 $6,276,930 1999-2000 $7,252,790 2000-2001 $7,694,798

{¶16} The amount of each grant year was based on the number of children

reported as enrolled. In 2003, ODE sued Ministerial after the auditor issued a R.C.

117.28 finding that Ministerial had received far more in Head Start funds than it was

entitled to for the grant year 1997-1998. The finding was based on a special audit that

discovered Ministerial could document far fewer participating children than it identified

in its December 1997 enrollment report. The case was dismissed without prejudice and

refiled in 2006. The case proceeded to a jury trial where the jury ultimately found in

favor of ODE and awarded it $2,582,735. We affirmed the verdict on appeal. See

State ex rel. ODE v. Ministerial Day Care Assn., 8th Dist. Cuyahoga No. 94062,

2010-Ohio-5009.

{¶17} In this case, Ministerial contends that the state should have amended its

2006 complaint to include recovery for the funds distributed during grant years

1998-2001 as opposed to waiting six years and bringing the claim as a second action.

While there is no dispute that this action involves the same parties of the 2006 action and

that a final judgment was reached in the 2006 action, the critical question in this case is

whether the claims in the two actions “arise from the same transaction or series of

connected transactions, or a common nucleus of operative facts.” Miami Valley Hosp.

v. Purvis, 2d Dist. Montgomery No. 21740, 2007-Ohio-4721, ¶ 15. According to

Ministerial, both actions involve the same transaction or a connected series of

transactions and that ODE’s failure to amend their complaint precludes the instant action. We find Ministerial’s argument, however, unpersuasive.

{¶18} It is well settled that res judicata does not bar a subsequent action between

the same parties when the facts giving rise to the second action were not in existence at

the time of commencement of the first action. See, e.g., Ahmmad v. Ahmed, 10th Dist.

Franklin No. 14AP-736, 2015-Ohio-2537, ¶ 43 (plaintiff’s earlier case — filed against

his business partner to prevent him from entering the business premises due to

allegations of theft — did not bar plaintiff’s subsequent case against same partner for

breach of an agreement related to the business when the breach occurred years after the

filing of the first case; the mere existence of agreement at the time of the first filing was

not enough to invoke the doctrine of res judicata); Blake Homes, Ltd. v. First Energy

Corp., 6th Dist. Lucas No. L-03-1109, 2004-Ohio-887 (res judicata did not apply

because the contract at issue was a continuing contract and the failure to pay for each

time period presents a separate partial breach of the contract and separate operative

facts); see also Olmsted Falls Bd. of Edn. v. Cuyahoga Cty Bd. of Revision, 122 Ohio

St.3d 134, 2009-Ohio-2461, 909 N.E.2d 597, ¶ 16 (“[E]ach tax year constitutes a new

‘claim’ or ‘cause of action,’ such that the determination of value for one tax year does

not operate as res judicata that would bar litigation of value as to the next tax year.”).

{¶19} ODE’s claim in the underlying suit is based on different grant years and a

different audit report — these are therefore separate operative facts that preclude the

application of res judicata. The first audit report covered grant year 1997-1998,

whereas this action involves grant years 1998-2001 based on the Special Audit Report of January 2008. Notably, the Special Audit Report was not even completed at the time

that ODE filed the first action in 2006. Further, Ministerial offers no support for its

claim that ODE should have amended its complaint to include its claim based on the

Special Audit Report. Nor do we find any authority that supports such a proposition.

Accordingly, the trial court properly rejected Ministerial’s claim that res judicata applied

and properly granted judgment in ODE’s favor on summary judgment.

D. Disputed Issue of Fact

{¶20} On appeal, Ministerial further attacks the trial court’s granting of summary

judgment on the basis that a genuine issue of material fact exists. Specifically,

Ministerial contends that its dispute of the accuracy of the Special Audit Report relied on

by ODE precludes the award of summary judgment. But the record reflects that

Ministerial failed to rebut ODE’s evidence in the proceedings below. To the extent that

Ministerial relies on the affidavit of Reverend Stewart in support of its claim, Ministerial

did not timely file this affidavit as part of its brief in opposition. Although Ministerial

moved to supplement its cross-motion for summary judgment with this affidavit, the trial

court never ruled on this motion and therefore it is deemed denied. See Solon v. Solon

Baptist Temple, Inc., 8 Ohio App.3d 347, 457 N.E.2d 858, paragraph two of the syllabus

(8th Dist.1982). The affidavit is therefore not properly before us. Accordingly, given

the absence of any Civ.R. 56 evidence rebutting ODE’s claim, we find no basis to

conclude that a genuine issue of material fact exists that would have rendered summary

judgment inappropriate. {¶21} Ministerial’s sole assignment of error is overruled.

{¶22} Judgment affirmed.

It is ordered that appellees recover from appellants 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.

MARY J. BOYLE, JUDGE

LARRY A. JONES, SR., A.J., and MARY EILEEN KILBANE, J., CONCUR