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Pappas v. FM2, LLC

Court of Appeals of Ohio, Tenth District

November 2, 2017

Patricia Pappas, Plaintiff-Appellee,
FM2, LLC, et al., Defendant-Appellant.

         APPEAL from the Franklin County Court of Common Pleas No. 14CV-11486

         On brief:

          James E. Arnold & Associates, LPA, Damion M. Clifford, and Alvin E. Mathews, Jr., for appellee.

          Brian K. Duncan, for appellant Bret Adams; Bret Adams, pro se.


          Damion M. Clifford.

          Brian K. Duncan.


          PER CURIAM.

         {¶ 1} Defendant-appellant, Bret Adams, appeals the judgment of the Franklin County Court of Common Pleas entered on March 17, 2017, adopting the magistrate's decision on bench trial rendered November 22, 2016, and overruling Adams' objections and supplemented objections to the magistrate's decision. For the following reasons, we affirm the decision of the trial court.


         {¶ 2} The record indicates that plaintiff-appellee, Patricia Pappas, and her daughter, Christine Margarum, had approached Adams in 2013 to work with Margarum on a project, the Fashion Meets Music Festival ("FMMF"). Adams was then a practicing attorney with approximately 30 years of experience, with a focus on sports and entertainment law. Adams and Margarum formed FM2, LLC ("FM2"), with Adams as the majority owner and managing member and Margarum as the minority member, to promote FMMF for the 2014 Labor Day weekend. During 2013 and 2014, Pappas provided $549, 881 in the form of secured and unsecured loans to help finance FMMF.

         {¶ 3} On November 6, 2014, Pappas filed a one-count complaint against Adams, demanding judgment against him in connection with a March 4, 2014 promissory note Adams had signed, promising to repay Pappas $100, 000 plus interest at the rate of 6 percent per annum on or before May 3, 2014. The complaint alleges Adams had defaulted on the obligation, warranting payment of additional interest at the rate of 8 percent per annum, as provided in the promissory note.

         {¶ 4} On December 8, 2014, Pappas amended her complaint to add FM2, LLC d/b/a FMMF as a party-defendant. The amended complaint set forth three counts and requested judgment against Adams and FM2, jointly and severally, in the amount of $549, 881, plus interests, costs, and attorney fees.

         {¶ 5} Count 1 alleged breach of contract against FM2 in connection with a $250, 000 promissory note and a $100, 000 loan fee, for which Pappas sought damages in the amount of $350, 000 plus interest. Count 2 alleged breach of contract against Adams on the March 4, 2014 promissory note, for which Pappas sought damages in the amount of $100, 000 plus contractual interest of 8 percent per annum. Count 3 alleged Adams and FM2 were unjustly enriched by additional, unsecured loans Pappas had made to them in the amount of $159, 881. Pappas sought damages in the amount of the additional loans plus interest. Count 3 further alleged that Adams had given Pappas a $40, 000 check post-dated September 2, 2014, giving full assurance that the check would be good on that date. The complaint alleges that Pappas presented the post-dated check for payment on September 2, 2014, but it was dishonored because Adams had stopped payment on it. Pappas sought damages for $40, 000 plus interest.

         {¶ 6} On February 23, 2015, Adams filed a third-party complaint against Pappas' daughter, Margarum, alleging that she also was a party to the March 4, 2014 promissory note for $100, 000 whereby Adams and Margarum agreed to pay Pappas pursuant to the terms of the note on or before May 3, 2014. That action, assigned Franklin C.P. No. 14 CV 011486, alleged that Pappas had failed to name Margarum as a party-defendant in her action against Adams and FM2, but that Margarum was personally, jointly and/or severally liable for certain damages alleged by Pappas. Adams voluntarily dismissed his third-party complaint against Margarum pursuant to Civ.R. 41(A), without prejudice, on May 1, 2015.

         {¶ 7} On June 3, 2015, Pappas filed a motion for partial summary judgment on Count 1 against FM2 for a $250, 000 promissory note dated July 1, 2013 and a $100, 000 loan fee. On October 19, 2015, the trial court granted Pappas' motion and entered judgment against FM2 in the amount of $350, 000 plus statutory interest from the date of judgment.

         {¶ 8} On December 2, 2015, a bench trial was held before a magistrate on the remaining causes of action as set forth under Counts 2 and 3 of the amended complaint. The record indicates the trial was not recorded electronically, but was recorded by a court stenographer who subsequently filed a transcript of the proceedings with the trial court. The parties filed post-trial briefs on December 23, 2015. However, the record further indicates that magistrate retired before filing a written decision and that, pursuant to Civ.R. 53 and LocR. 99.02 of the Franklin County Court of Common Pleas, General Division, the case was referred to another magistrate for a second bench trial.

         {¶ 9} On August 25, 2015, a retrial of the bench trial was conducted by the second magistrate. Adams was the only witness called to testify at the retrial.

         {¶ 10} Following the retrial, the parties submitted proposed findings of fact and conclusions of law as ordered by the magistrate. On November 22, 2016, the magistrate issued a 20-page decision on bench trial, which included detailed findings of fact and conclusions of law. In her findings of fact, the magistrate stated as follows:

This Magistrate's Findings of Facts are based on the testimony of the sole witness, Bret Adams, and the exhibits introduced into evidence. This Magistrate reviewed all the exhibits and considered each as to its weight and credibility. The credibility of the witness was considered. The credibility of a witness is based upon the appearance of the witness upon the stand; his/her manner of testifying; the reasonableness of the testimony; the opportunity he/she had to see, hear and know the things concerning which he/she testified; his/her accuracy of memory; frankness (or lack of it); intelligence, interest and bias (if any); together with all the facts and circumstances surrounding the testimony.
Of importance in deciding the Findings of Facts, this Magistrate notes that she is free to believe all, some, or none of the testimony of each witness appearing before her. State v. Ellis, 8th Dist, Cuyahoga No. 98538, 2013-Ohio-1184. It should be noted that for purposes of the Findings of Facts, this Magistrate found Adams to be evasive and lacking credibility at times during his testimony.

(Nov. 22, 2016 Mag.'s Decision at 3.)

         {¶ 11} The magistrate found as not credible Adams' testimony regarding the March 4, 2014 promissory note for $100, 000 that Adams had drafted and signed at Pappas' request. The magistrate stated:

7. In a check dated February 4, 2014 from Plaintiff payable to FM2, Plaintiff loaned Adams and Margarum $50, 000.00 for the Festival. Exhibit 3. At Plaintiffs request, Adams drafted the March 4, 2014 promissory note for $100, 000 ("Note"). Adams testified that he did not sign the Note to be personally responsible. Adams' testimony to this effect lacks credibility, especially taking into consideration Adams' extensive legal career with an emphasis in contract law. This Magistrate notes that, in stark contrast to the prior promissory note drafted by Adams and executed on July 1, 2013, FM2 is listed nowhere on the Note, the Note states "the undersigned BRET ADAMS and CHRISTINE MARGARUM promise to pay", and the Note is signed by Adams and Margarum personally without any reference to FM2. The Note provides an interest rate of 6% per annum and was due on May 3, 2014. In the event of default, the Note provided an 8% interest rate per annum. Exhibit 7. In a check dated March 11, 2014 from Plaintiff to FM2, Plaintiff loaned Adams and Margarum $60, 000.00 for the Festival. Exhibit 3. This Magistrate finds that the checks in Exhibit 3 constitute consideration for the Note. Adams testified that both checks in Exhibit 3 were received by FM2, were used for the Festival, and FM2 benefitted from the payments. He further testified that none of the money leant by Plaintiff as evidenced by Exhibits 3 and 7 was repaid to Plaintiff.

(Mag.'s Decision at 4-5.)

         {¶ 12} The magistrate next discussed the additional, unsecured loans totaling $189, 000 that Pappas had made, as appeared in Exhibit 4. The magistrate considered Adams' testimony that all of those loans were received by FM2, were used for FMMF that FM2 benefitted from the payments, and that none of this $189, 000 was repaid to Pappas.

         {¶ 13} The magistrate found that Adams' had withdrawn $323, 882 from FM2 for his personal use. The magistrate's decision lists ten monthly withdrawals totaling $323, 882 that Adams had made for himself in 2014. The magistrate's decision states:

Adams could not definitively recall why he made these payments to himself, however the totals were well above his agreed upon monthly salary of $10, 000.00. At one point he indicated that some of these payments could have gone toward artist payments for the Festival. At another point he testified that he had personally invested over $1.4 million by selling $1 million of personal assets and receiving personal loans from individuals and these withdrawals were to pay himself back for his personal investment. This Magistrate notes that Adams testimony in this regard[] lacks credibility in that (1) he indicated there was absolutely no documentation of such a large investment and/or loans from others; (2) despite very specific notations of other payments in the Check Detail, these substantial withdrawals noted above gave no notation other than "Bret Adams"; and (3) this testimony is contrary to his prior testimony that he did not want to take any risk in his career by investing in FM2. As such, this Magistrate finds that in 2014, Defendant Adams withdrew $323, 882 from FM2 for his personal use.

(Mag.'s Decision at 6.)

         {¶ 14} The magistrate also made a finding in regards to the post-dated (September 2, 2014) $40, 000 check Adams had given Pappas, and which was returned after Pappas presented it because Adams had placed a stop payment order on the check. The magistrate found Adams' testimony that he had informed Pappas of the stop payment "unbelievable." (Mag.'s Decision at 6.)

         {¶ 15} The magistrate's decision also sets forth specific findings supporting Pappas' claim that Adams had transferred FM2 assets to another entity Adams had created, MSD Productions, LLC ("MSD"), specifically:

11.FM2 was approximately $750, 000.00 "in the hole" prior to the 2014 Festival. Exhibit 11 shows the extremeness of FM2' insolvency in August 2015. In October of 2015, Adams unilaterally dissolved FM2 internally. FM2 was dissolved corporately, but not officially with the Secretary of State. As of his testimony, FM2 still had over $400, 000.00 in ...

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