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Parmatown South Association v. Atlantis Realty Co.

Court of Appeals of Ohio, Eighth District, Cuyahoga

June 28, 2018

PARMATOWN SOUTH ASSOCIATION PLAINTIFF
v.
ATLANTIS REALTY CO., LTD. DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT
v.
DEAN RANKIN, ET AL. DEFENDANTS/THIRD-PARTY DEFENDANTS-APPELLEES

          Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-08-669896

          ATTORNEY FOR APPELLANT James E. Boulas James E. Boulas Co., L.P.A.

          ATTORNEYS FOR APPELLEES For Dean Rankin Janet I. Stich

          For Peggy Rankin James L. Wamsley

          For Michael Marron, et al. Michael P. Harvey Michael P. Harvey Co., L.P.A.

          For Expert Construction, Inc. Scott R. Sylkatis Sylkatis Law L.L.C. R. Russell O'Rourke

          For Lorain National Bank Melissa A. Jones Frantz Ward L.L.P.

          BEFORE: Stewart, P.J., Celebrezze, J., and Keough, J.

          JOURNAL ENTRY AND OPINION

          MELODY J. STEWART, PRESIDING JUDGE

         {¶1} This is an appeal from a summary judgment granted to third-party defendants-appellees Dean Rankin, Peggy Rankin, Michael Marron, and Amy Marron on third-party plaintiff-appellant Atlantis Realty Company, Ltd.'s complaint for fraud. Atlantis alleged that the third-party defendants, who operated a general contracting company called Baywest Construction Group, Ltd., took $20, 000 in money earmarked for Baywest's completion of certain contracting services, but failed to complete construction and instead fraudulently used the money for their own purposes. The court approved and adopted a magistrate's decision granting summary judgment because there was no evidence to support the fraud claim. The sole assignment of error contests this ruling.

         {¶2} To understand the nature of the third-party complaint, it is necessary to backtrack to 2008. At that time, Atlantis owned an office building and used Baywest as the general contractor on a buildout of one of the office suites. Expert Construction was an electrical subcontractor on the job. There were issues on the job, and Baywest stopped work because of nonpayment.

         {¶3} As the issues between Atlantis and Baywest were ongoing, Parmatown South Associates sought foreclosure against Atlantis for nonpayment of certain maintenance fees that are unrelated to the issues in this appeal. Expert Construction had a mechanic's lien against the Atlantis premises, necessitating its participation in the Parmatown South action. Atlantis then filed a third-party complaint against Baywest arguing that it breached a contract to provide construction services. It alleged that it paid Baywest $20, 000 based on Baywest's representation, made through its general manager, that the payment would be used to "get the subs back onsite" and allow it to complete construction of the premises. Additional construction did not occur. Baywest ceased operations in 2010. Atlantis filed an amended complaint naming the individual third-party defendants as "principals" of Baywest, seeking to pierce the corporate veil on the allegations that the individual defendants fraudulently used the money for their own personal purposes. Atlantis also alleged that a fraudulent transfer occurred under R.C. 1336.04 because the defendants were "insiders" who accepted the $20, 000 payment with an actual intent to defraud Atlantis.

         {¶4} The Rankins and the Marrons filed separate motions for summary judgment, but made overlapping arguments that they were shielded from personal liability by the corporation. With respect to Atlantis's attempt to pierce the corporate veil, the Rankins and Michael Marron argued that they had no ownership interest in Baywest and were not "principals" of the corporation such that the corporate veil could be pierced to find them personally liable for any debt of Baywest. It was conceded that Amy Marron was a shareholder of Baywest; nevertheless, she argued that no representations had been made to Atlantis about the manner in which the $20, 000 payment was to be used.

         {¶5} Atlantis argued that the $20, 000 payment had been made in actual reliance on Baywest's representations that the payment would be applied to avoid mechanic's liens and complete construction. It cited a Baywest partial waiver of liens against Expert Construction as evidence that Baywest's ...


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