Opinion
A0902785
02-23-2012
ARTS RENTAL EQUIPMENT, INC., Plaintiff, v. BEAR CREEK CONSTRUCTION, LLC, et al., Defendants.
DECISION
This case is before the Court on Defendants Bruce Baker, Nathan Bachrach, Daniel Lipson and Thomas Zemboch's ("the non-Schneider Guarantors") Motion for Summary Judgment against the Kraft Group's and Smith and Jolly's claims. For the reasons discussed below, the motion is granted in part and denied in part.
STANDARD
Summary judgment is appropriate when there are no genuine issues of material fact that remain to be litigated and the moving party is entitled to judgment as a matter of law. Civ. R. 56(C); Celotex Corp. v. Catrett (1986), 477 U.S. 317. Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, if any, timely filed in the action and construed most strongly in favor of the non-moving party, show that there is no genuine issue as to any material fact. Civ. R. 56(C). The burden of establishing that the material facts are not in dispute, and that no genuine issue of fact exists, is on the party moving for summary judgment. Vahila v. Hall (1997), 77 Ohio St.3d 421, 674 N.E.2d 1164. If the moving party asserts that there is an absence of evidence to establish an essential element of the non-moving party's claim, the moving party cannot discharge this burden with a conclusory allegation, but must specifically point to some part of the record which affirmatively demonstrates this absence of evidence., Dresher v. Burt (1996), 75 Ohio St.3d 280, 662 N.E.2d 264.
The Ohio Supreme Court has established three factors to be considered upon a motion for summary judgment. These three factors are:
(1) That there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that the conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.Bostic v. Connor (1988), 37 Ohio St.3d 144, 146 N.E.2d 881 (quoting Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.2d 64, 375 N.E.2d 46).
Once a motion for summary judgment has been made and supported as provided in Civ, R. 56(C), the nonmoving party then has a reciprocal burden to set forth specific evidentiary facts showing the existence of a genuine issue for trial and cannot rest on the allegations or denials in the pleadings. Wing v. Anchor Media, Ltd. Of Texas (1991), 59 Ohio St.3d 108, 111, 570 N.E.2d 1095.
DISCUSSION
This motion raises similar issues to Schneider's Motion for Summary Judgment. In fact, the Kraft Group filed a combined brief in opposition to both.
At the oral argument, the Kraft Group indicated it was not pursuing fraud, misrepresentation or civil conspiracy claims against the Guarantors. Additionally, for the reasons stated in the Court's decision as to Schneider, judgment is entered in favor of the non-Schneider Guarantors on these claims.
The Court addresses the remaining claims below.
1. Unjust enrichment
Construing the evidence most strongly in favor of the Kraft Group, they cannot show they conferred a benefit directly upon the non-Schneider Guarantors. Rather, any benefit was to the property owner - KTP. The Court finds that the Kraft Group may be able to establish an unjust enrichment claim against KTP. (See discussion in Schneider opinion) The question is whether they can "pierce the corporate veil" to get to the non-Schneider Guarantors.
Because the Court finds that Kraft cannot as a matter of law succeed on the alter ego/piercing corporate veil claim against the non-Schneider Guarantors (see discussion below), they cannot succeed on their unjust enrichment claim. Thus, summary judgment is granted as to this claim.
2. Piercing Corporate Veil/Alter Ego
The parties agree on the legal test for personal liability.
"[N]ormally, shareholders, officers, and directors are not liable for the debts of the corporation." Belvedere Condominium Unit Owners' Association, v. R.E. Roark Companies, Inc. (1993), 67 Ohio St.3d 274, 287. With respect to limited liability companies,
neither the members of the limited liability company nor any managers of the limited 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.Tenable Protective Servs., Inc. v. Bit E-Technologies, L.L.C. (Ohio Ct. App. 8th Dist. Aug. 21, 2008), Case No. 89958, 2008-Ohio-4233, at ¶ 15 (emphasis added) (dismissing claims including misrepresentation and fraud against the company's members and senior managers in their individual capacities); see also In Re ICLNDS Notes Acquisition, LLC, 259 B.R. 289 (Bankr.N.D.Ohio 2001). "The debts, obligations, and liabilities of a limited liability company, whether arising in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the limited liability company." Tenable Protective Servs., Inc., at ¶ 23 (emphasis added).
The Subcontractors can only reach Schneider, individually (or reach SFP and DOV), if they can demonstrate their conduct warrants piercing KTP's limited liability form. To pierce the corporate veil and hold an individual officer or shareholder of a corporation liable, a plaintiff must prove the following: (i) 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; (ii) control over the corporation by those to be held liable was exercised in such a manner as to commit fraud, an illegal act, or some similarly unlawful 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. Dombroski v. Wellpoint, Inc. (2008), 119 Ohio St.3d 506, 510-11, 513. The burden rests with the "party seeking to impose individual liability on the shareholder to demonstrate that the grounds for piercing the corporate veil exist." Univ. Circle Research Ctr. Corp. v. Galbreath Company (Ohio Ct. App. 8 Dist. 1995), 106 Ohio App.3d 835, 840.
To demonstrate improper control over a corporation, a plaintiff must show that the defendant and the company "are fundamentally indistinguishable" and that the company "had no separate mind, will or existence of its own." Univ. Circle Research Center Corp., 106 Ohio App.3d at 840. Ohio courts have used the following factors in making this determination:
(1) grossly inadequate capitalization, (2) failure to observe corporate formalities, (3) insolvency of the debtor corporation at the time the debt is incurred, (4) shareholders holding themselves out as personally liable for certain corporate obligations. (5) diversion of funds or other property of the company property for personal use, (6) absence of corporate records, and (7) the fact that the corporation was a mere facade for the operations of the dominant shareholder(s).LeRoux's Billyh Supper Club v. Ma (Ohio Ct. App. 6th Dist. 1991), 77 Ohio App.3d 417, 422- 23. ''Undercapitalization is just one of the factors that a court can consider in deciding whether the corporate fiction should be disregarded." Dombroski v. Wellpoint, Inc. (Ohio Ct. App. 7 Dist. 2007), 173 Ohio App.3d 508, 518, rev 'd, 119 Ohio St.3d 506 (2008); see also Southeast Texas Inns, Inc. v. Prime Hospitality Corp. (6th Cir. 2006), 462 F.3d 666, 680 (explaining that "the mere breach of an underlying contract or undercapitalization, alone, do not warrant piercing the corporate veil").
Unlike the case against Schneider, Kraft cannot establish that the non-Schneider Guarantors were the alter ego of KTP or that the corporate veil should be pierced. These non-Schneider Guarantors were passive investors, with no responsibility legally or factually for the operations of KTP. Thus, summary judgment is granted as to this claim.
3. Fraudulent Transfer
The Court went through an extensive analysis of the Fraudulent Transfer Claim in its opinion as to Schneider's Motion for Summary Judgment. The Court attaches that opinion and incorporates it by reference.
For the reasons discussed, questions of fact remain as to whether KTP fraudulently transferred assets to the non-Schneider Guarantors. Thus, the motion for summary judgment is denied as to this claim.
CONCLUSION
The non-Schneider Guarantor's Motion for Summary Judgment is granted as to the unjust enrichment and piercing corporate veil claims of the Kraft Group and Smith and Jolly. It is denied as to the fraudulent transfer claims.
The parties are referred to Local Rule 17 for preparation of an entry.
DECISION
This case is before the Court on the Schneider Defendants' Motion for Summary Judgment as to the cross claims of the Kraft Group and Smith & Jolly Landscape & Design. For the reasons discussed below, the Motion is granted in part and denied in part.
STANDARD
Summary judgment is appropriate when there are no genuine issues of material fact that remain to be litigated and the moving party is entitled to judgment as a matter of law. Civ. R. 56(C); Celotex Corp. v. Catrett (1986), 477 U.S. 317. Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, if any, timely filed in the action and construed most strongly in favor of the non-moving party, show that there is no genuine issue as to any material fact. Civ. R. 56(C). The burden of establishing that the material facts are not in dispute, and that no genuine issue of fact exists, is on the party moving for summary judgment. Vahila v. Hall (1997), 77 Ohio St.3d 421, 674 N.E.2d 1164. If the moving party asserts that there is an absence of evidence to establish an essential element of the non-moving party's claim, the moving party cannot discharge this burden with a conclusory allegation, but must specifically point to some part of the record which affirmatively demonstrates this absence of evidence., Dresher v. Burt (1996), 75 Ohio St.3d 280, 662 N.E.2d 264.
The Ohio Supreme Court has established three factors to be considered upon a motion for summary judgment. These three factors are:
(1) That there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that the conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.Bostic v. Connor (1988), 37 Ohio St.3d 144, 146 N.E.2d 881 (quoting Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.2d 64, 375 N.E.2d 46).
Once a motion for summary judgment has been made and supported as provided in Civ. R. 56(C), the nonmoving party then has a reciprocal burden to set forth specific evidentiary facts showing the existence of a genuine issue for trial and cannot rest on the allegations or denials in the pleadings. Wing v. Anchor Media, Ltd. Of Texas (1991), 59 Ohio St.3d 108, 111, 570 N.E.2d 1095.
DISCUSSION
The Kraft Group asserts claims against the Schneider Defendants for: 1) unjust enrichment (Count 2); 2) piercing corporate veil/alter ego (Count 3); fraudulent transfer and constructive trust (Count 4); 4) fraud (Count 5); 5) misrepresentation (Count 6); and 6) civil conspiracy (Count 8).
Smith and Jolly asserts claims of: 1) unjust enrichment (Count 2); 2) corporate veil piercing (Count 3); and 3) fraudulent transfer and constructive trust (Count 4).
Each is discussed below.
A. Kraft Group
1. Unjust enrichment
In order to state a claim for unjust enrichment, a Claimant must establish that: (1) it conferred a benefit upon the Defendant; (2) the Defendant knew of such benefit; and (3) the Defendant retained the benefit under circumstances where it would be unjust to allow it to do so without payment to the Claimant. Smith v. Vaughn (1st Dist. 2007), 174 Ohio App.3d 473, 477. See also, Andersons, Inc. v. Consol, Inc. (6th Cir. 2003), 348 F.3d 496, 501; accord Maverick Oil & Gas, Inc. v. Barberton City Schools Dist. Bd. of Edn. (9th Dist. 2007), 171 Ohio App.3d 605, 615; Clapp v. Mueller Elec. Co. (8 Dist. 2005), 162 Ohio App.3d 810, 820; Hollis Towing v. Greene (2d Dist. 2003), 155 Ohio App.3d 300, 302.
Dist. Aug. 21, 2008), Case No. 89958, 2008-Ohio-4233, at ¶ 15 (emphasis added) (dismissing claims including misrepresentation and fraud against the company's members and senior managers in their individual capacities); see also In Re ICLNDS Notes Acquisition, LLC, 259 B.R. 289 (Bankr.N.D.Ohio 2001). "The debts, obligations, and liabilities of a limited liability company, whether arising in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the limited liability company." Tenable Protective Servs., Inc., at ¶ 23 (emphasis added).
The Subcontractors can only reach Schneider, individually (or reach SFP and DOV), if they can demonstrate their conduct warrants piercing KTP's limited liability form. To pierce the corporate veil and hold an individual officer or shareholder of a corporation liable, a plaintiff must prove the following: (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, an illegal act, or some similarly unlawful 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. Dombroski v. Wellpoint, Inc. (2008), 119 Ohio St.3d 506, 510-11, 513. The burden rests with the "party seeking to impose individual liability on the shareholder to demonstrate that the grounds for piercing the corporate veil exist." Univ. Circle Research Or. Corp. v. Galbreath Company (Ohio Ct. App. 8 Dist. 1995), 106 Ohio App.3d 835, 840.
In Dombroski, the Supreme Court of Ohio addressed the second prong of the test (control to commit fraud or an illegal act) and held:
Accordingly, we hold that 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. Courts should apply this limited expansion cautiously toward the goal or piercing the corporate veil only in instances of extreme shareholder misconduct. The first and third prongs of the Belvedere test are not affected by this ruling and must still be met for a piercing claim to succeed.
The Court has doubts as to whether the subcontractors can prevail on this issue (establishing that the Schneider Defendants controlled KTP to commit any unlawful act). However, construing the evidence most strongly in favor of the subcontractors, and making all inferences in their favor, questions of fact exist.
To demonstrate improper control over a corporation, a plaintiff must show that the defendant and the company "are fundamentally indistinguishable" and that the company "had no separate mind, will or existence of its own." Univ. Circle Research Center Corp., 106 Ohio App.3d at 840. Ohio courts have used the following factors in making this determination:
(1) grossly inadequate capitalization, (2) failure to observe corporate formalities, (3) insolvency of the debtor corporation at the time the debt is incurred, (4) shareholders holding themselves out as personally liable for certain corporate obligations, (5) diversion of funds or other property of the company property for personal use, (6) absence of corporate records, and (7) the fact that the corporation was a mere facade for the operations of the dominant shareholder(s).LeRoux's Billyh Supper Club v. Ma (Ohio Ct. App. 6
Construing the evidence most strongly in favor of the subcontractors, they cannot show that they conferred a benefit directly upon Schneider or the Schneider Group Defendants. Rather, any benefit was to the property owner - KTP. Schneider's interest is only as a member of KTP.
Schneider argues KTP cannot be liable for unjust enrichment because: 1) it fully paid Bear Creek (the contractor); and 2) Bear Creek is not unavailable for judgment.
As to the first issue, the First District Court of Appeals in Steel Quest, Inc. v. City Mark Construction Services (1 Dist. 1997), 1997 WL 674614 stated:
Dist. 1991), 77 Ohio App.3d 417, 422-23. "Undercapitalization is just one of the factors that a court can consider in deciding whether the corporate fiction should be disregarded." Dombroski v. Wellpoint, Inc. (Ohio Ct. App. 7 Dist. 2007), 173 Ohio App.3d 508, 518, rev'd, 119 Ohio St.3d 506 (2008); see also Southeast Texas Inns, Inc. v. Prime Hospitality Corp. (6
Unjust enrichment occurs when a party retains money or benefits that in justice and equity belong to another, Liberty Mut. Ins. Co. v. Indus. Comm. (1988), 40 Ohio St.3d 109-110-11, 532 N.E.2d 124, 125; Hummel v. Hummel (1938), 133 Ohio St. 520, 528, 14 N.E.2d 923-926-27, "As ordinarily defined, the concept of unjust enrichment includes not only loss on one side but gain on the other, with a tie of causation between them." Fairfield Ready Mix v. Walnut Hills Assoc, Ltd. (1988), 60 Ohio App.3d 1, 3, 572 N.E.2d 114, 116. The defendant must knowingly retain a benefit conferred by the plaintiff under circumstances where it would be unjust to do so without payment. Hambleton v. R.G. Barry Corp. (1984), 12 Ohio St.3d 179, 183, 465 N.E.2d 1298, 1302.
Courts in various jurisdictions have debated whether a subcontract should be able to recover against a property owner, with whom there in no privity of contract, under a theory of unjust enrichment. Some courts have concluded that the only legal remedy available to the subcontractor is a mechanic's lien. Banks v. Cincinnati (1986), 31 Ohio App.3d 54, 57, 508 N.E.2d 966, 969; Annotation (1997), 62 A.L.R.3d 288. However, this court has held that a subcontractor may pursue a claim of unjust enrichment against a property owner even if the subcontractor has failed to properly preserve its rights under a mechanic's lien. Banks, supra, at 57, 508 N.E.2d at 969. However, we have also held that if the owner has paid the general contractor in full for all performance rendered at the construction site, the owner has not received a benefit for which it has not paid. Consequently, the owner has not been unjustly enriched, (some citations omitted).
The Court held that because the undisputed evidence established that the owner paid the general contractor everything owed under the contract, the owner received no benefit to which it was not entitled.
Here, there is not such undisputed evidence. Therefore, the Schneider Defendants are not entitled to judgment on this basis.
As to the second issue, cases hold that before a subcontractor can pursue a claim of unjust enrichment against an owner, the general contractor must be "unavailable for judgment." Apostolos Group Inc. v. Josephson (9 Dist. 2002), 2002 Ohio 753. This is to prevent the possibility of double recovery. Id. Unavailability for judgment would exist, for example, when the general contractor filed for bankruptcy. Id.
Cir. 2006), 462 F.3d 666, 680 (explaining that "the mere breach of an underlying contract or undercapitalization, alone, do not warrant piercing the corporate veil").
Applying these tests and construing the evidence most strongly in the subcontractors' favor, the Court finds that questions of fact exist as to whether the subcontractors can establish that Schneider is the alter ego of KTP or that the corporate veil should be pierced.
Schneider was a managing member of KTP and was authorized to act on behalf of KTP (as were others). This alone, however, is not enough.
Applying the factors of LeRoux, there is also evidence that KTP was undercapitalized and Kraft's expert has opined it was insolvent as of December 31, 2007. There is also evidence that Schneider and other KTP members received payments and distributions from KTP.
Other evidence and expert testimony creates questions of fact as to whether Schneider should have known the project was off budget with cost overruns.
On the other hand, other factors weigh in favor of not piercing the corporate veil. It will be up to the trier of fact to ultimately determine this issue.
3. Fraudulent Transfer
The Kraft Group claims that the Schneider Defendants received fraudulent transfers from KTP. These occurred in the form of cash distributions. They seek to avoid these transfer under the Ohio Uniform Fraudulent Transfer Act ("UFTA"), specifically R.C. § 1336.07. The Kraft Group does not allege that Schneider fraudulently transferred assets to avoid his creditors. Rather, they allege KTP fraudulently transferred its assets to Schneider and others. The Kraft Group seeks to recover the assets from Schneider under R.C. § 1336.08 which permits recovery from the transferee.
R.C. § 1336.04 provides in relevant part:
(A) A transfer made or an obligation incurred by a debtor is fraudulent as to a creditor, whether the claim of the creditor arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation in either of the following ways:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor;
(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and if either of the following applies:
(a) The debtor was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction;
(b) The debtor intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.
(B) In determining actual intent under division (A)(1) of this section, consideration may be given to all relevant factors, including, but not limited to, the following:
(1) Whether the transfer or obligation was to an insider;
(2) Whether the debtor retained possession or control of the property transferred after the transfer;
(3) Whether the transfer or obligation was disclosed or concealed;
(4) Whether before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit;
(5) Whether the transfer was of substantially all of the assets of the debtor;
(6) Whether the debtor absconded;
(7) Whether the debtor removed or concealed assets;
(8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
(9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
(10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred;
(11) Whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor.
This section applies regardless of whether the transfer occurred before or after the claim of the creditor arose.
R.C. § 1336.05 applies only to transfers occurring after a creditors' claim arose. It provides:
(A) A transfer made or an obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.
Construing the evidence most strongly in favor of the Kraft Group, KTP made distributions to Schneider and other both before and after claims arose.
The statue defines "insolvent debtor" in R.C. § 1336.02 as:
(A) (1) A debtor is insolvent if the sum of the debts of the debtor is greater than all of the assets of the debtor at a fair valuation.
(2) A debtor who generally is not paying his debts as they become due is presumed to be insolvent.
Schneider first argues that the Kraft Group attempts to add new claims. Schneider argues that to establish a claim under R.C. § 1336.04(A)(1) the Kraft Group must allege (and then establish) an "actual intent" to defraud. The Court agrees.
The Ohio Uniform Fraudulent Transfer Act ("UFTA") provides two alternative means through which a transaction may be deemed fraudulent: (i) actual fraud pursuant to § 1336.04(A)(1); and (ii) constructive fraud pursuant to § 1336.05. See Carter-Jones Lumber v. Benune (Ohio App. 10 Dist. 1999), 132 Ohio App.3d 430, 433. Constructive fraud requires the plaintiff to show that an asset was transferred without the receipt of reasonably equivalent value for that asset. Id. Unlike actual fraud, constructive fraud focuses on the effect of the transaction rather than the intent with which the transaction was undertaken. Aristocrat Lakewood Nursing Home. v. Mayne (Ohio App. 8 Dist. 1999), 133 Ohio App.3d 651, 668. "Constructive fraud may exist when the debtor has no actual intent to hinder, delay, or defraud an existing or future credit." Id. Thus, under this branch of the UFTA, allegations of specific intent to hinder, delay, or defraud are unnecessary and immaterial. Id.
In alleging fraudulent transfer based on actual fraud under the UFTA, by contrast, a plaintiff must allege specific intent to defraud. See In re Laurel Valley Oil Co. (Bankr.N.D.Ohio May 19, 2009), 2009 WL 1586602, at *2 (finding that "an actual intent to defraud on the part of the transferor is an essential element" of a fraudulent transfer claim under § 1336.04(A)(1) (emphasis added)); In re Liquidation of MedCare HMO, Inc. (Ill.App.Ct. 1997), 689 N.E.2d 374, 382 (affirming dismissal of a complaint under the UFTA where a fraudulent transfer claim, based on actual fraud, failed to allege "intent to defraud"); In re Andrew Velez Constr., Inc. (Bankr. S.D.N.Y. 2007), 373 B.R. 262, 268-69 (dismissing fraudulent transfer claim based upon actual fraud where complaint contained "no allegations whatsoever of the Debtor's own intent to hinder, delay or defraud its creditors" and further holding that "a plaintiff must plead facts showing that the transfer was made by the defendant with the intent to hinder, delay or defraud").
A review of Kraft's claims show that they did not allege any actual intent. This, however, does not end the inquiry because the Kraft Group clearly alleged claims under R.C. § 1336.05. They also allege claims under § 1336.04(A)(2)
As to those claims. Schneider argues that he did receive equivalent value and that KTP was not insolvent. Construing the evidence most strongly in favor of the Kraft Group, questions of fact exist as to both of these issues.
The test of R.C. § 1336.02 for insolvency is debts greater than all assets at fair valuation or failure to pay debts as they become due (which raises a presumption of insolvency). R.C. § 1336.02 defines "assets" and "debts" as:
(1) "Assets" do not include property that has been transferred, concealed, or removed with intent to hinder, delay, or defraud creditors, or that has been transferred in a manner making the transfer fraudulent under section 1336.04 or 1336.05 of the Revised Code.
(2) "Debts" do not include an obligation to the extent that it is secured by a valid lien on property of the debtor not included as an asset.
Based upon the testimony of the Kraft Group's experts and Audey Tarpley, questions of fact exist as to whether KTP was insolvent.
Finally, whether Schneider's addition of capital to KTP cures any alleged fraudulent distribution is also a question of fact.
4. Fraud and Misrepresentation
This Court has examined subcontractors' claims of fraud and misrepresentation against others, particularly the Bank of America. The Court incorporates by reference its legal analysis in those decisions.
Based upon that analysis, the Court finds that the subcontractors have failed to point to any evidence of any misstatements made by the Schneider Defendants to them. Moreover, the Schneider Defendants had no duty to disclose anything to the subcontractors, there being no special relationship or fiduciary relationship between them. The subcontractors imposed no special trust or confidence in the Schneider Defendants. Finally, no evidence exists of any agency relationship between the Schneider Defendants, BCON, Tarpley or other Bear Creek personnel.
The Schneider Defendants are entitled to judgment on these claims.
5. Civil Conspiracy
"To establish a claim for civil conspiracy, a plaintiff must prove (1) a malicious combination (2) involving two or more persons, (3) causing injury to person or property, and (4) the existence of an unlawful act independent from the conspiracy itself." James v. Bob Ross Buick, Inc., 167 Ohio App.3d 338, 345 (2d Dist. 2006) (granting summary judgment for lack of evidence of a malicious combination).
In addition, '"[a] civil conspiracy claim requires an underlying tortious act that causes an injury. Thus, if there is no underlying tortious act, there is no actionable civil conspiracy claim."' Doane v. Givaudan Flavors Corp., 184 Ohio App.3d 26, 37 (1st Dist. 2009) (granting summary judgment because of absence of evidence of underlying tort and of a conspiracy). See also, Slyman v. Shipman, Dixon & Livingston, Co. (2d Dist. 2009), 2009 Ohio 4126 (because court granted summary judgment on tortious interference claim, civil conspiracy claim failed as a matter of law).
The Kraft Group argues that the Schneider Defendants conspired with each other and KTP and its members to injure Kraft - by keeping the project going and the subcontractors working. The tortious acts alleged include fraudulent transfers out of KTP.
Construing the evidence most strongly in favor of the Kraft Group, there is no evidence of a malicious combination between Schneider and anyone else, nor is there evidence of any act taken in furtherance of a conspiracy.
B. Smith & Jolly
For the reasons discussed above as to the Kraft Group, Schneider's motion is denied as to Smith & Jolly's claims.
CONCLUSION
Summary judgment is granted in favor of Schneider on Kraft's claims of: 1) fraud; 2) misrepresentation; and 3) civil conspiracy. Schneider's motion is denied as to Kraft and Smith & Jolly's claims of: 1) unjust enrichment; 2) piercing corporate veil; and 3) fraudulent transfer.
The parties are referred to Local Rule 17 for preparation of an entry.
In this case, the subcontractors' contract was with Bear Creek Construction. Bear Creek is and remains a party to this action. In fact, the Kraft Group has judgment against Bear Creek.
Bear Creek has not filed bankruptcy. However, a question of fact exists as to whether it is "available for judgment."
Because an unjust enrichment claim may exist against KTP, the question then is whether the sub-contractors can "pierce the corporate veil" to get to Schneider. Because the Court finds questions of fact exist as to whether the Kraft Group can succeed on its piercing the corporate veil claim (see discussion below), summary judgment cannot be granted on its unjust enrichment claim.
2. Piercing corporate veil/Alter Ego
The parties agree on the legal test for personal liability.
[N]ormally, shareholders, officers, and directors are not liable for the debts of the corporation." Belvedere Condominium Unit Owners' Association, v. R.E. Roark Companies, Inc. (1993), 67 Ohio St.3d 274, 287. With respect to limited liability companies,
neither the members of the limited liability company nor any managers of the limited 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.Tenable Protective Servs., Inc. v. Bit E-Technologies, L.L.C. (Ohio Ct. App. 8