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Southard Supply, Inc. v. Anthem Contractors, Inc.

Court of Appeals of Ohio, Tenth District

August 22, 2017

Southard Supply, Inc., Plaintiff-Appellee/ Cross-Appellant,
v.
Anthem Contractors, Inc. et al., Defendant-Appellant/ Cross-Appellee.

         APPEAL from the Franklin County C.P.C. No. 14CV-4769 Court of Common Pleas

         On brief:

          Scherner & Sybert LLC, and Dave Lackey, for plaintiff-appellee.

          Timothy S. Rankin and Ilya L. Polyakov, for defendant-appellant.

         Argued:

          Dave Lackey.

          Timothy S. Rankin.

          DECISION

          KLATT, J.

         {¶ 1} Defendant-appellant, Anthem Contractors, Inc. ("Anthem"), appeals a judgment of the Franklin County Court of Common Pleas that sanctioned plaintiff-appellee, Southard Supply, Inc. ("Southard"), for its frivolous conduct under R.C. 2323.51. Southard has filed a cross-appeal from the same judgment. For the following reasons, we affirm the trial court's judgment.

         {¶ 2} Southard sells plumbing, heating, and industrial supplies. Anthem is a construction contractor who has purchased materials from Southard on account.

         {¶ 3} In early 2012, Anthem began renovating the fitness center at the federal courthouse in Columbus, Ohio. Anthony McCleery, the president of Anthem, hired Jerry Ball to perform plumbing work during the courthouse project. In April 2012, McCleery discovered that Ball had used Anthem's credit account with Southard to purchase materials for himself. Anthem refused to pay for the materials Ball purchased because it never authorized Ball to order on credit.

         {¶ 4} On May 2, 2014, Southard filed suit against Anthem, asserting claims for breach of contract and unjust enrichment.[1] In its complaint, Southard alleged that Anthem had authorized Ball to purchase materials using Anthem's credit account. Southard sought to recover $16, 531.93 for the materials that Ball had purchased on credit.

         {¶ 5} The parties then conducted discovery, during which Anthem served interrogatories on Southard. In response to those interrogatories, Southard stated that Anthem had given Southard verbal approval for Ball to order materials on credit. (Pl.'s Resp. to Def's First Set of Interrogs. and Reqs. for Produc. of Docs. at No. 22.)

         {¶ 6} After the completion of discovery, Southard voluntarily dismissed its complaint. Anthem then moved for sanctions against Southard and its attorney under R.C. 2323.51. In its motion, Anthem argued that the deposition testimony of Southard's employees contradicted the factual contention, made in the complaint and in interrogatory responses, that Anthem had authorized Ball to order materials using Anthem's credit.

         {¶ 7} At a hearing on Anthem's sanctions motion, Anthem introduced the contract governing Anthem's credit account with Southard. The contract consisted of Anthem's application for credit, which Southard had approved. The contract included an "Approved Buyers List" and provided that "[o]nly the names listed below will be approved to purchase" using the credit account. (Def.'s Ex. 2.) The list contained only two names, Anthony McCleery and Theresa Smith, and stated, "all others call for approval." Id.

         {¶ 8} McCleery testified at the sanctions hearing that Anthem had never authorized Ball to order materials on Anthem's credit account with Southard. Michael Lawrence, Southard's credit manager, conceded that Anthem had not provided Southard with either written or verbal approval for Ball to purchase materials using Anthem's credit. However, Lawrence maintained that Anthem had authorized Ball to purchase on Anthem's credit because: (1) Ball had previously accompanied McCleery to Southard's office, where McCleery had placed orders and Ball had assisted McCleery by telling him what supplies were needed to complete the work on the courthouse project, and (2) McCleery had allowed Ball to pick up ordered materials and sign invoices to acknowledge the delivery of the materials, and Anthem had paid invoices that Ball had signed.

         {¶ 9} In a judgment issued June 23, 2016, the trial court found that Southard had engaged in frivolous conduct under R.C. 2323.51(A)(2)(a)(iii), which defines "frivolous conduct" as "conduct consisting] of allegations or other factual contentions that have no evidentiary support or, if specifically so identified, are not likely to have evidentiary support after a reasonable opportunity for further investigation or discovery."[2] The trial court determined that Southard's allegation that Anthem had authorized Ball to purchase materials on Anthem's account had no merit from the outset. Additionally, the trial court found that, if Southard had investigated the matter more thoroughly, it would have realized that its own actions had created the debt that it sought to collect from Anthem. The trial court then concluded that sanctions against Southard in the amount of $5, 000 were reasonable, and it ordered Southard to pay that amount to Anthem.

         {¶ 10} Anthem now appeals the trial court's June 23, 2016 judgment, and it assigns the following errors:

[1.] The Trial Court Failed to Find that Southard's Claims were not Warranted Under Existing Law and that Southard and Lackey had an Obligation not to Pursue such Frivolous Conduct.
[2.] The Trial Court Failed to Find that Lackey was Jointly and Severally Liable for Southard's Frivolous Conduct Involving Allegations and Factual Contentions which had no Evidentiary Support from the Outset, or at any Time Prior to Dismissal.
[3.] The Trial Court Abused its Discretion by Failing to Award all of Appellant's Legal Fees, or in the Alternative, the Trial Court Misapplied R.C. 2323.51(2)(A) [sic] to Require Malicious Conduct, which is Inherently Arbitrary and Unreasonable Per Se.

         {¶ 11} Southard cross appeals, and it assigns the following errors:

1. The trial court erred when it granted Anthem Contractor, Inc.'s ("Anthem") motion for sanctions against the ...

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