Court of Appeals of Ohio, Eighth District, Cuyahoga
Appeal from the Cuyahoga County Court of Common Pleas Case
Kaufman, Drozdowski & Grendell, L.L.C., and Evan T.
Byron, for appellee.
B. Bruner Co., L.PA., and Harvey Bruner, for appellants.
JOURNAL ENTRY AND OPINION
D. CELEBREZZE, JR., J.
1} Defendants-appellants, John Fortuna
("Fortuna"), Parmatown Spinal Rehabilitation
Center, Inc. ("Parmatown Spinal"), and Parmatown
Physical Therapy, L.L.C. ("Parmatown PT")
(collectively "appellants"), bring the instant
appeal challenging the trial court's denial of their
motion for relief from judgment. Specifically, appellants
argue that the trial court abused its discretion in failing
to hold a hearing on appellants' motion for relief from
judgment. After a thorough review of the record and law, this
Factual and Procedural History
2} This matter arose out of a ten-year promissory
note executed on February 29, 2008, by Fortuna to
plaintiff-appellee, John Kostoglou ("Kostoglou"),
in the amount of $250, 000. Fortuna is a licensed
chiropractor and operated a chiropractic practice. Kostoglou
is also a licensed chiropractor and owned and operated
Parmatown Spinal. Fortuna became an employee of Parmatown
Spinal in 2007. Thereafter, Kostoglou sold all of his shares
in Parmatown Spinal to Fortuna for a total amount of $750,
000. The transaction included a payment of $500, 000 from
Fortuna to Kostoglou, and also included the promissory note
for an additional $250, 000. The promissory note required
Fortuna to pay Kostoglou monthly payments in the amount of
$3, 303.77, plus interest at 10 percent annum, for a period
of 120 months with the first payment due on April 1, 2008.
3} Fortuna failed to make any payments on the note,
and as a result, on May 10, 2015, Kostoglou filed a complaint
against Fortuna to enforce the note. The note contained a
warranty of attorney clause that mandated a confession of
judgment on behalf of Fortuna if Fortuna failed to make
payments on the note. On May 12, 2015, an attorney filed the
confession of judgment against Fortuna. On May 26, 2015, the
trial court awarded judgment in favor of Kostoglou based on
this confession of judgment.
4} On June 24, 2015, Fortuna filed a motion for
relief from judgment pursuant to Civ.R. 60(B). Fortuna argued
that he was never presented with the note for payment.
Fortuna further argued that the note had in effect been
replaced by a subsequent agreement between Fortuna and
Kostoglou. Fortuna contended that he and Kostoglou entered
into a partnership agreement, after execution of the
promissory note, where Fortuna received 80 percent of the
profits of Parmatown Spinal and Kostoglou received 20
percent. Fortuna further argued that the $250, 000 had been
satisfied because the parties had entered into an accord
subsequent to the payments on the note. On December 1, 2015,
the trial court granted Fortuna's motion for relief from
5} On February 16, 2016, Kostoglou filed an amended
complaint. Kostoglou joined Parmatown Spinal and Parmatown PT
as defendants in the amended complaint Kostoglou's
amended complaint alleged a breach of fiduciary duty, breach
of care, breach of loyalty, and various other claims against
appellants. On March 16, 2016, Kostoglou filed a motion to
appoint a receiver. On May 20, 2016, Fortuna filed an answer
to the amended complaint, and asserted a counterclaim against
Kostoglou for overpayments in excess of the original purchase
price of $750, 000 for Parmatown Spinal. On June 2, 2016,
Parmatown Spinal and Parmatown PT filed an answer to
Kostoglou's amended complaint.
6} Thereafter, Kostoglou alleged that Parmatown
Spinal and Parmatown PT had not engaged in discovery, and on
August 11, 2016, Kostoglou filed a motion to compel
discovery, which was unopposed by appellants. Then, on August
22, 2016, the trial court granted Kostoglou's motion to
compel discovery and issued an order compelling appellants to
comply with discovery. The trial court's order stated
"[appellants] are ordered to respond to
[Kostoglou's] discovery requests within seven days of
7} On August 30, 2016, based on appellants'
failure to comply with discovery in accordance with the trial
court's August 22, 2016 order, Kostoglou filed a motion
for sanctions, and again asked the trial court for an
appointment of a receiver. On October 26, 2016, the trial
court granted Kostoglou's motion for sanctions, and
entered an order granting sanctions and appointing a
receiver. In its order, the trial court found that appellants
willfully failed to comply in a meaningful way with discovery
requests and "have willfully failed to comply with the
[c]ourt [o]rder and that [appellants] should be sanctioned
for their failure to comply with the [o]rder." The trial
court further ordered appellants to pay the receivers fees.
On March 22, 2017, the receiver filed a motion seeking to
have his bill reduced to judgment because appellants had not
paid the bill within five business days as required by the
trial court's sanctions order.
8} After the trial court's order, appellants
provided certain paper documents, but failed to fully provide
certain requested documents, namely "electronically
stored information" ("ESI") documents. Then,
on April 7, 2017, Kostoglou filed a motion for entry of
judgment against appellants for their continued failure to
provide discovery documents. Appellants responded to
Kostoglou's motion for entry of judgment, and argued that
they had provided the ESI documents to the receiver.
9} On October 30, 2017, the trial court granted
Kostoglou's motion for entry of judgment, and entered
judgment in favor of Kostoglou in the amount of $250, 000
plus 10 percent interest annum.
10} On November 22, 2017, appellants filed a notice
of appeal. However, this court, sua sponte, on December 4,
2017, issued an order dismissing appellants' appeal for
lack of a final appealable order. R.C. 2505.02; Civ.R. 54(B).
See motion No. 512496.
11} Upon remand, on May 7, 2018, Kostoglou filed
another motion for entry of judgment on the basis of repeated
failures on the part of appellants to comply with discovery
requests, and noting that appellants failed to appear at a
scheduled deposition on March 21, 2018. Appellants sought an
extension of time to respond to Kostoglou's May 7, 2018
motion for entry of judgment, and the trial court granted
this extension. However, appellants did not file a response
motion to Kostoglou's motion for entry of judgment, and
instead, on June 15, 2018, appellants filed a motion for
relief from judgment pursuant to Civ.R. 60(B). Appellants
argued that appellants' counsel
did not have access to all of [Fortuna's] checks issued
from [Parmatown Spinal] because they were initially in the
hands of the [f]ederal [government,  who was investigating
[Fortuna] and in the hands of Kenneth Callahan, the receiver
in this case.
After retrieving the checks, [Fortuna] had an accountant,
Richard Lemongello, go through all of the checks, and for the
period of 2009 through 2016 at the time of the closing of the
[Parmatown Spinal], [Fortuna] had paid [Kostoglou] $685,
354.00, which included both rent and charges for the
building, as well as full payment on the note of $250, 000.00
between [Fortuna] and [Kostoglou].
It is requested that the [c]ourt have hearing on this matter
so that [Fortuna] can put forth the evidence mentioned herein
showing that he has fully paid [Kostoglou].
Attached and marked as Exhibit A are a letter from accountant
Richard Lemongello, and list of the checks, as well as copies
of canceled checks to [Kostoglou].
referenced in appellants' motion, appellants failed to
actually attach "Exhibit A." The trial court
scheduled appellants' motion for a hearing on July 31,
12} On July 27, 2018, appellants filed a motion to
continue the July 31 hearing. As a result, the trial court
converted the July 31 hearing on appellants' motion for
relief from judgment to a settlement conference. Appellants
did not object to the trial court's order converting the
hearing to a settlement conference. Appellants' counsel
and Kostoglou's counsel conducted a settlement conference
on July 31, 2018. Then, on October 31, 2018, the trial court