Zhong v. Liang

2020 Ohio 3724, 155 N.E.3d 1042

• Court: Ohio Court of Appeals
• Decided: July 16, 2020
• Docket: 109027
• Status: Published

Opinion

[Cite as Zhong v. Liang, 2020-Ohio-3724.]

COURT OF APPEALS OF OHIO

EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

GRACE W. ZHONG, :

Plaintiff-Appellee/ : Cross-Appellants, No. 109027

v. :

NELSON LIANG, ET AL., :

Defendants-Appellants/ : Cross-Appellees.

JOURNAL ENTRY AND OPINION

JUDGMENT: DISMISSED RELEASED AND JOURNALIZED: July 16, 2020

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-18-898374

Appearances:

Michael P. Harvey Co., L.P.A., and Michael P. Harvey, for appellees and cross-appellants.

Cavitch, Familo & Durkin, Co., L.P.A., Komlavi Atsou, and Yao Liu, for appellants and cross-appellees.

MARY J. BOYLE, P.J.:

Defendant-appellant, Nelson Liang (“Liang”), appeals the trial court’s

imposition of sanctions. He raises two assignments of error for our review: 1. The trial court abused its discretion when it failed to award Liang all reasonable attorney’s fees and other reasonable expenses incurred in defending against Appellee Grace Zhong’s (“Zhong”) frivolous lawsuit.

2. The trial court abused its discretion when it failed to award any sanctions against Zhong’s counsel.

Plaintiff-appellee and cross-appellant, Zhong, appeals the trial court’s

imposition of sanctions. She lists her assignments of error as follows:

1. Whether this Court, after reviewing this matter de novo, will determine that no statutory frivolous conduct occurred.

2. Whether the lower Court’s sanction of $7,500.00 against Zhong for suing Nelson Liang was improperly found to be frivolous.

3. Whether Grace Zhong’s decision to bring Nelson Liang into the litigation was warranted under existing law, or whether there was a good faith argument for it.

4. Whether the lower court had proper evidence that no reasonable lawyer would have brought Nelson Liang into the litigation.

5. Whether the lower court’s decision to award Nelson Liang $7,500.00 was an abuse of discretion and/or was unsupported by the evidence.

6. Whether the lower Court’s award of $7,500.00 to Nelson Liang as not a paper member of the limited liability corporation ignored evidence of actions throughout the years and rewarded his subterfuge.

7. Whether the Appellants’ failure to provide a transcript from the hearing they requested prohibits the presumption of regularity below.

Because the trial court’s imposition of sanctions is not a final

appealable order, we dismiss this appeal and cross-appeal.

I. Factual Background and Procedural History

In May 2018, in Cuyahoga C.P. No. CV-18-898374, Zhong filed a

complaint against Asia Plaza Pharmacy, L.L.C. (the “Pharmacy”) and Liang, for

breach of fiduciary duty, fraud, civil conspiracy, freeze out, accounting, injunctive relief, breach of contract, minimum wage and overtime, and tortious interference

with contract. The complaint alleged that Liang’s ex-wife, Hui Min Wang, and

Zhong created the Pharmacy, that Zhong invested $40,000 in the Pharmacy, and

that Wang pushed Zhong out of the business without refunding Zhong her $40,000

investment. The complaint alleged that Liang was a controlling member of the

Pharmacy and that he should be liable for damages to Zhong.

In July 2018, the trial court consolidated the case with Grace W.

Zhong v. Asia Plaza Pharmacy, L.L.C. & Hui Min Wang, Cuyahoga C.P. No. CV-17-

890108. In September 2018, Liang filed a motion for summary judgment, arguing

that Zhong’s claims against him fail as a matter of law because Liang was never a

member of the Pharmacy. The trial court denied his motion because he filed it

without leave and too close to trial.

In October 2018, the trial court held a three-day joint jury trial for

both CV-17-890108 and CV-18-898374. On the second day of trial, after the close

of Zhong’s case, Liang moved for a directed verdict on all claims against him. The

trial court granted Liang’s motion, stating in its judgment entry, “The defendant

Nelson Liang’s motion for a directed verdict on the complaint in 898374 is granted

in its entirety.” For CV-17-890108, the jury returned a verdict in favor of Zhong.

In November 2018, in CV-18-898374, Liang filed a Motion for

Sanctions Against Plaintiff and Counsel for Frivolous Conduct Pursuant to

R.C. 2323.51 and Request for a Hearing (the “Motion for Sanctions”). In the Motion

for Sanctions, Liang argued that Zhong’s complaint against him was frivolous because it was based on the “frivolous allegation” that Liang was a member of the

Pharmacy. He contended that even before bringing this lawsuit against Liang,

Zhong knew that Liang was never a member of the Pharmacy, and Zhong’s

testimony at trial demonstrated as such. Liang requested compensation for the

attorney fees and expenses he incurred to defend himself through trial, of an amount

to be determined at a hearing.

The trial court scheduled a hearing on Liang’s Motion for Sanctions

for April 1, 2019. On March 26, 2019, Liang filed an expert report. The expert

opined that the legal fees Liang incurred were reasonable. Attached to the report

were three invoices for legal fees in the amounts of $42,306.50, $730.40, and $260.

After the April 1 hearing, Liang filed supplemental invoices in the amounts of $3,353

and $5,760, reflecting the expenses he incurred to prepare for the sanctions hearing.

On August 22, 2019, the trial court entered a journal entry with a

written decision that granted Liang’s Motion for Sanctions. In its written decision

(the “Sanctions Order”), the trial court explained that Wang and Zhong were the sole

members of the Pharmacy. The trial court stated that, “Nelson Liang was never a

member of Asia Plaza Pharmacy, L.L.C. Zhong conceded at trial that she never had

or saw any documentary evidence showing that Liang was a member.” The trial

court explained that it granted Liang’s motion for directed verdict because Zhong

produced no evidence at trial to show that that Liang had a legal relationship with

Zhong or that Liang was a party to the Pharmacy’s operating agreement. The trial

court found that Zhong engaged in frivolous conduct as set forth in R.C. 2323.51(A)(2) since she made allegations premised on factual contentions that had no evidentiary support at the time they were made and, when she made the contentions, she knew they were unlikely to have evidentiary support even after a reasonable opportunity for further investigation or discovery.

The trial court awarded Liang $7,500 plus court costs for CV-18-

898374 against Zhong. The trial court did not impose sanctions against Zhong’s

counsel.

Liang and Zhong now appeal and cross-appeal from the Sanctions

Order.

II. Law and Analysis

We cannot reach the merits of this appeal and cross-appeal because

the Sanctions Order is not a final appealable order. Therefore, we have no

jurisdiction over this appeal and cross-appeal and must dismiss them.

The jurisdiction of a court of appeals is constitutionally limited to the

review of “final” orders. See Section 3(B)(2), Article IV, Ohio Constitution. To

determine whether an order is final, an appellate court must engage in a two-step

process. Walburn v. Dunlap, 121 Ohio St.3d 373, 2009-Ohio-1221, 904 N.E.2d 863,

¶ 13, citing Gen. Acc. Ins. Co. v. Ins. Co. of N. Am., 44 Ohio St.3d 17, 540 N.E.2d 266

(1989). “First, it must determine if the order is final within the requirements of

R.C. 2505.02. If the court finds that the order complies with R.C. 2505.02 and is in

fact final, then the court must take a second step to decide if Civ.R. 54(B) language

is required.” Walburn at ¶ 13. R.C. 2505.02(B) defines the types of orders that can be “final.”

Among those types of final orders are orders that affect a “substantial right made in

a special proceeding or upon a summary application in an action after judgment.”

See R.C. 2505.02(B)(2). R.C. 2505.02(A)(2) defines “special proceeding” as “an

action or proceeding that is specially created by statute and that prior to 1853 was

not denoted as an action at law or a suit in equity.”

Ohio appellate courts have characterized motions for sanctions for

frivolous conduct under R.C. 2323.51 as “special proceedings” or “summary

applications” falling within the purview of R.C. 2505.02(B)(2). Bd. of Cty. Commrs.

Of Putnam Cty. v. Patrick Bros., 3d Dist. Putnam Nos. 12-18-11 and 12-18-12, 2019-

Ohio-3722, ¶ 14; Troja v. Pleatman, 1st Dist. Hamilton Nos. C-160447 and C-

160460, 2016-Ohio-7683, ¶ 21; State Auto Mut. Ins. Co. v. Tatone, 2d Dist.

Montgomery No. 21753, 2007-Ohio-4726, ¶ 6; Victoria’s Garden v. Sheehy, 10th

Dist. Franklin No. 93AP-404, 1993 Ohio App. LEXIS 3759, 4 (July 27, 1993);

Zappola v. Rock Capital Sound Corp., 8th Dist. Cuyahoga No. 100055, 2014-Ohio-

2261, ¶ 21 (“sanctions for frivolous conduct are generally considered to be collateral

to the underlying action”); but see Moskovitz v. Mt. Sinai Med. Ctr., 8th Dist.

Cuyahoga Nos. 60464 and 61166, 1991 Ohio App. LEXIS 4574 (Sept. 26, 1991)

(finding sanctions order was not made in a “special proceeding” based on abrogated

definition of “special proceeding”).

In addition to being issued in a special proceeding or summary

application, an order falling within R.C. 2505.02(B)(2) must also affect a “substantial right.” R.C. 2505.02(A)(1) defines “substantial right” as “a right that

the United States Constitution, the Ohio Constitution, a statute, the common law, or

a rule of procedure entitles a person to enforce or protect.” A decision granting a

motion for sanctions affects a substantial right. Troja, 1st Dist. Hamilton Nos. C-

160447 and C-160460, 2016-Ohio-7683, at ¶ 21; State Auto Mut. Ins. Co., 2d Dist.

Montgomery No. 21753, 2007-Ohio-4726, at ¶ 6. We note that the Sanctions Order

was not made “upon summary application in an action after judgment” because, as

discussed next, there is no final judgment in CV-17-890108. However, since the

Sanctions Order was made in a special proceeding and affects a substantial right, it

is a “final order” within the requirements of R.C. 2505.02(B)(2).

We must next determine whether Civ.R. 54(B) applies and, if so,

whether its requirements were met. Gen. Acc. Ins. Co., 44 Ohio St.3d at 22, 540

N.E.2d 266; Fried v. Abraitis, 8th Dist. Cuyahoga No. 104650, 2017-Ohio-746, ¶ 5;

State Auto Mut. Ins. Co., 2d Dist. Montgomery No. 21753, 2007-Ohio-4726, at ¶ 6.

“Civ. R. 54(B) applies in multiple-claim or multiple-party actions where fewer than

all the claims or fewer than all the parties are adjudicated.” Gen. Acc. Ins. Co. at 22.

“If a court enters final judgment as to some but not all of the claims and/or parties,

the judgment is a final appealable order only upon the express determination that

there is no just reason for delay.” Id.

While Civ.R.54(B) clearly applies to R.C. 2505.02(B)(1), an order that

“affects a substantial right in an action that in effect determines the action and

prevents a judgment,” it is less clear whether Civ.R. 54(B) applies to R.C. 2505.02(B)(2). See, e.g., Garden v. Langermeier, 2017-Ohio-972, 86 N.E.3d

645, ¶ 13, fn. 1 (explaining that Gen. Acc. Ins. Co. has been questioned with respect

to R.C. 2502.02(B)(2)); Guardianship & Protective Servs. v. Setinsek, 11th Dist.

Trumbull No. 2010-T-0099, 2011-Ohio-6515, ¶ 23 (Wright, J., concurring)

(advocating that Civ.R. 54(B) should not apply to R.C. 2505.02(B)(2)); Painter and

Pollis, Ohio Appellate Practice, Section 2:16 (2019). However, we must follow the

Ohio Supreme Court’s precedent from Gen. Acc. Ins. Co. and apply Civ.R. 54(B) to

orders that are otherwise “final” under R.C. 2505.02(B)(2).

Here, Civ.R. 54(B) applies and deprives us of jurisdiction because this

is a multiple-claim and multiple-party action where fewer than all of the claims and

fewer than all of the parties have been adjudicated. “Individual cases that have been

consolidated may not be appealed until the consolidated case reaches its conclusion

absent Civ.R. 54(B) certification in the judgment entry.” Keller v. Kehoe, 8th Dist.

Cuyahoga No. 89218, 2007-Ohio-6625, ¶ 8, citing Whitaker v. Kear, 113 Ohio

App.3d 611, 681 N.E.2d 973 (4th Dist.1996); see also Maggard v. Zervos, 11th Dist.

Lake No. 2004-L-087, 2004-Ohio-5296, ¶ 3 (“It is well-established that the

conclusion of one case in a consolidated action does not constitute a final appealable

order.”), quoting Mezerkor v. Mezerkor, 70 Ohio St.3d 304, 638 N.E.2d 1007

(1994).

There is no final judgment yet in CV-17-890108, despite the jury

verdict, because a motion for prejudgment interest is still pending. Although the

docket of CV-17-890108 is not part of our appellate record in this case, we may take judicial notice of the CV-17-890108 docket entry that the trial court has scheduled a

hearing on prejudgment interest for September 3, 2020. See State v. Cuyahoga Cty.

Common Pleas Court, 8th Dist. Cuyahoga No. 108974, 2019-Ohio-3782, ¶ 5 (taking

judicial notice that bail had been posted in a related criminal case); In re N.V., 8th

Dist. Cuyahoga No. 104738, 2017-Ohio-975, ¶ 19 (taking judicial notice of a

judgment in a related juvenile case); Sultaana v. Horseshoe Casino, 8th Dist.

Cuyahoga No. 102501, 2015-Ohio-4083, ¶ 4 (taking judicial notice that the plaintiff

in the civil case before it was convicted in the underlying criminal case); State ex rel.

Ormond v. Solon, 8th Dist. Cuyahoga No. 92272, 2009-Ohio-1097, ¶ 15 (“Although

this court’s ability to take judicial notice is not unbridled, we may take judicial notice

of findings and judgments as rendered in other Ohio cases.”). A judgment is not

final if a motion for prejudgment interest remains pending. Miller v. First Internatl.

Fid. & Trust Bldg., Ltd., 113 Ohio St.3d 474, 2007-Ohio-2457, 866 N.E.2d 1059;

Zappola, 8th Dist. Cuyahoga No. 100055, 2014-Ohio-2261, at ¶ 25.

Here, the trial court consolidated CV-17-890108 and CV-18-898374

in July 2018, held a joint trial on both cases, and never unconsolidated them. The

trial court granted Liang’s motion for a directed verdict on all Zhong’s claims against

him, and the jury entered judgment in Zhong’s favor for her claims against Wang

and the Pharmacy. While the trial court entered its judgment on Liang’s Motion for

Sanctions on August 22, 2019, the trial court has yet to determine whether Zhong is

entitled to prejudgment interest in CV-17-890108. Moreover, the Sanctions Order

does not contain the Civ.R. 54(B) language that there is no just reason for delay. Accordingly, we have no jurisdiction over this appeal and cross-

appeal.

Appeal and cross-appeal dismissed.

It is ordered that appellee recover of appellant costs herein taxed.

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

27 of the Rules of Appellate Procedure.

MARY J. BOYLE, PRESIDING JUDGE

PATRICIA ANN BLACKMON, J., and LARRY A. JONES, SR., J., CONCUR