Court of Appeals of Ohio, Eighth District, Cuyahoga
Appeal from the Cuyahoga County Court of Common Pleas Case
ATTORNEYS FOR APPELLANTS For 635 W. Lakeside, Ltd. Megan D.
Stricker Collins, Roche, Utley & Garner, L.L.C. For
Arahova Trust Mark R. Koberna Jennifer L. Speck Sonkin &
Koberna Co., L.P.A. Dean C. Williams Janik, L.L.P.
ATTORNEYS FOR APPELLEE Amanda A. Barreto Steven M. Ott
Lindsey A. Wrubel Ott & Associates Co., L.P.A.
BEFORE: S. Gallagher, J., E.A. Gallagher, A.J., and Laster
JOURNAL ENTRY AND OPINION
C. GALLAGHER, JUDGE.
635 W. Lakeside, Ltd., Arahova Trust, Gus Georgalis, Amy
Georgalis, and Nicholas Zarnas appeal the $823, 106 judgment,
plus $67, 976.25 in attorney fees, entered in favor of Pamela
Akerstrom, a unit owner at the Cloak Factory Condominiums
("Cloak Factory"). Despite awarding Akerstrom
damages individually, the trial court ordered Akerstrom to
"apply any proceeds of this judgment to the benefit of
the unit owners" through the Cloak Factory Home Owners
Association (the "Association") - a tacit
indication that Akerstrom was not the party entitled to the
damages awarded. The Association was not a party in the
lawsuit, nor were the remaining unit owners who are
represented by the Association. The trial court erred in
awarding a monetary judgment in favor of Akerstrom upon
damages incurred by a nonparty.
Akerstrom is the president of the Association, and has been
since April 2015. She purchased a Cloak Factory unit in 2006,
and is responsible for maintenance and other expenses based
on her 2.48 percent ownership of the Cloak Factory.
Individually, she brought a claim for declaratory relief
under R.C. 5311.23(B) to oust the previous board members, the
Georgalises and Zarnas, all of whom were affiliated with
Arahova Trust - the owner of the unsold units at Cloak
Factory. Amy Georgalis and Zarnas were appointed to the board
in 2010. 635 W. Lakeside, Ltd., is owned by Gus Georgalis,
who is also trustee of the Arahova Trust. As of 2014, Arahova
Trust owned just over 55 percent of the 28-unit Cloak
Factory. The permanent injunction was granted, leading to
Akerstrom's ascension to the Association's board.
Akerstrom advanced a claim for breach of fiduciary duty
against Zarnas and Amy Georgalis, along with a claim for
breach of the Association's Declaration and Bylaws for
Arahova Trust's alleged failure to pay the monthly
assessment obligations between 2006 and 2014. Both claims
were purportedly advanced under R.C. 5311.23. Despite naming
herself individually as the sole plaintiff in the action,
Akerstrom readily admitted that she was "not seeking any
damages personally [and any] damages will go to the
Association." Tr. 277:12-13. Indeed, in the complaint,
Akerstrom sought "judgment against Defendants in an
amount to be determined at trial and that such judgment
be paid directly to the Association." (Emphasis
added.) Amended complaint ¶ 89. There were no
allegations of individual damages relating to Akerstrom.
The Association established two accounts of note, one for the
operating and maintenance expenses and another for the
reserve account the Association was required to maintain. The
operating account was opened in November 2007 and the reserve
account in January 2008. There are no records of the expenses
and reserves before those dates. Akerstrom claims that
Arahova Trust failed to pay its share of the assessment and
that of the reserve account to which the unit owners yearly
contributed since 2006.
Akerstrom hired Robert Torok, a forensic accountant, to prove
the Association's damages. Torok reviewed the monthly
bank statements of the two accounts, but did not ascertain
the source of the funds deposited. Akerstrom did the same,
but her numbers differed from the expert's. Tr.
281:22-282:2. According to Torok, between 2006 and 2014, the
unit owners of the Cloak Factory collectively owed $1, 567,
599 for the assessments and $156, 760 for the reserve account
based on the Association's budget statements for each
year. The total reserve obligation represented a fixed amount
equaling 10 percent of the total assessments. Torok conceded
that the budgets for 2008 and 2009 were unavailable, so he
used the surrounding years as guides. Torok determined that
the defendants owed $1, 074, 090 for the operating
assessments between 2006 and 2014.
After simply adding the deposits between 2008 and 2014,
totaling $805, 395 for the operating account, Torok assumed
that the nondefendant unit owners contributed $493, 509 of
that amount between January 2007 and December 2014, despite
his concession that he only reviewed each unit owner's
obligation as a percentage of the budget and did not review
based on the actual billing or payments. Tr. 354:3-6. In
other words, Torok was asked to assume that the defendants
did not meet their obligation, the very fact of consequence
Akerstrom was required to prove by a preponderance of the
evidence. Akerstrom contended that there was evidence that no
unit owner was delinquent on the assessments or reserve
contributions, and therefore, it could be inferred that the
nondefendant unit owners paid all that was required. Torok,
therefore, concluded that the defendants only contributed
$311, 886 owed for all the assessments between 2006 and 2014
($805, 395-$493, 509).
Torok then calculated that the defendants owed $762, 204 for
the assessment owed between 2006 and 2014 ($1, 074, 090-$311,
886). Torok did the same for the reserve account and
determined that the defendants owed $62, 092 between 2006 and
2014, based on the amount deposited between 2008 and 2014.
The trial court accepted Torok's conclusions.
In addition to the unpaid fees issue, Akerstrom alleged that
Amy Georgalis and Zarnas breached a fiduciary duty owed to
the Association by not ensuring that Arahova Trust paid its
share of the assessment. Tr. 451:3-11. Akerstrom did not
contest this assertion that the developer or its agents did
not owe a fiduciary duty to the individual unit owners of the
Cloak Factory. Belvedere Condominium Unit Owners'
Assn. v. R.E. Roark Cos., 67 Ohio St.3d 274, 283, 617
N.E.2d 1075 (1993) (R.C. Chapter 5311 comprehensively defines
and regulates the law of condominium development and creates
no fiduciary obligation between the developer or its agents
and the individual unit owners or the condominium
associations). The trial court concluded that Zarnas and Amy
Georgalis had "breached their fiduciary duty when they
individually served as Board members by failing to act as
board members and by taking actions that have harmed the unit
owners" since they began serving as board members in
2010. According to the trial court, this meant that Zarnas
and Amy Georgalis were jointly liable for the damages caused
to the Association between 2006 and 2014.
The trial court erred by imposing a judgment in favor of