Jones v. Dlugos

1

2022-Ohio-1076

GREGORY A. JONES, ET AL., Plaintiffs-Appellees, v. KARL DLUGOS, ET AL., Defendants-Appellants.

No. 110915

Court of Appeals of Ohio, Eighth District, Cuyahoga

March 31, 2022

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-19-923954

Karl Dlugos and Lisa Gottschalt, pro se.

JOURNAL ENTRY AND OPINION

JAMES A. BROGAN, JUDGE ^[*]

{¶ 1} In this accelerated appeal, ^[1] the defendants-appellants Karl Dlugos and Lisa Gottschalt ("defendants") argue that the trial court erred when it found (1) they lacked standing to pursue a counterclaim against the plaintiffs-appellees Gregory and Sharon Jones ("plaintiffs") on a land installment contract and (2) the doctrine of judicial estoppel barred the defendants' counterclaim.^[2] For the following reasons, we affirm the lower court's decision.

Factual and Procedural History

{¶ 2} In February 2017, the plaintiffs and the defendants executed a land installment contract ("contract") for property located in North Olmsted Ohio. Pursuant to the contract, the defendants submitted monthly payments to the plaintiffs of $772.64 on the fifteenth of each month. In February 2018, the defendants failed to submit their monthly payment on time. On February 22, 2018, the plaintiffs provided the defendants with written notice that the outstanding balance of $1, 749.12 due under the contract must be submitted within ten days or else the defendants would be required to leave the premises. Failure to leave the premises would result in an eviction and forfeiture action.

{¶ 3} On March 5, 2018, the defendants paid $500 to the plaintiffs. On March 7, 2018, the plaintiffs filed a complaint in the Rocky River Municipal Court for forcible entry and detainer and forfeiture. On March 22, 2018, the defendants filed an answer that claimed, in part, that the plaintiffs accepted their $500 payment.

{¶ 4} On March 26, 2018, the Rocky River Municipal Court magistrate conducted a trial. Following trial, the magistrate recommended judgment in favor of the plaintiffs on their first cause of action, forcible entry and detainer because of the defendants' nonpayment of rent. The magistrate granted the defendants leave until April 16, 2018 to move to plead or to file an answer to the second cause of action, forfeiture.

{¶ 5} On April 2, 2018, the defendants filed a motion to stay eviction that the court denied on April 5, 2018. On April 5, 2018, the plaintiffs filed a writ of restitution to remove the defendants from the subject property and provide restitution of the premises to the plaintiffs. On the same day, the defendants filed a motion to set aside the magistrate's orders and stay the writ of restitution; the municipal court later denied those motions. On April 6, 2018, the municipal court issued a writ of restitution to the defendants.

{¶ 6} On April 12, 2018, the defendants filed objections to the magistrate's March 26, 2018 judgment that the municipal court denied. On April 13, 2018, the defendants filed an answer to the complaint's second cause of action and a counterclaim seeking compensation for, but not limited to, equity in the contract.

{¶ 7} On April 19, 2018, the defendants filed a complaint for Chapter 7 bankruptcy with the United States Bankruptcy Court, Northern District of Ohio, that resulted in an automatic stay of the municipal court case. Despite the automatic stay and pursuant to the previously issued writ of restitution, the defendants were erroneously removed from the subject premises on April 20, 2018. On April 23, 2018, in response to their removal from the premises, the defendants filed an emergency motion for contempt of court with the bankruptcy court stating the plaintiffs' repossession of the subject property was in violation of the bankruptcy court's automatic stay. The defendants ultimately regained possession of the premises. The defendants dismissed their bankruptcy case on May 1, 2018.

{¶ 8} On May 4, 2018, the Rocky River Municipal Court entered judgment for the plaintiffs and against the defendants on the plaintiffs' forcible entry and detainer action.

{¶ 9} On May 14, 2018, the defendants filed another bankruptcy action. The municipal court journalized an entry on May 15, 2018, that stated the action was stayed pending the defendants' second bankruptcy filing. On August 28, 2018, the bankruptcy court lifted the stay on the defendants' second bankruptcy filing and the eviction proceedings resumed.

{¶ 10} On October 4, 2018, the day set for the defendants' eviction, the defendants filed an emergency motion for stay of eviction in this court; they also filed an appeal in this court from the municipal court's judgment that granted the plaintiffs' forcible entry and detainer claim.^[3] The defendants' emergency motion was denied on the same day it was filed, October 4, 2018. ^[4] Meanwhile, the eviction proceeded, the defendants were evicted on October 5, 2018, and the property was restored to the plaintiffs.

{¶ 11} On October 18, 2018, this court sua sponte dismissed the defendants' appeal as untimely. On October 23, 2018, the defendants filed a motion for reconsideration that this court granted on November 7, 2018, finding the defendants' appeal had been timely filed. Pursuant to this court's November 7, 2018 ruling, this court vacated the October 18, 2018 dismissal and reinstated the defendants' appeal. On November 26, 2018, this court sua sponte dismissed the defendants' case, finding an appeal from a forcible entry and detainer action where the defendants have been evicted from the premises is moot.

{¶ 12} On December 4, 2018, the defendants filed a motion for reconsideration that this court granted on December 19, 2018. This court subsequently rendered a decision that found because the defendants had vacated the property, their contentions relating to the alleged impropriety of their eviction was moot. Jones v. Dlugos, 8th Dist. Cuyahoga No. 107757, 2019-Ohio-3039, ¶ 12. The defendants filed a motion for reconsideration on July 31, 2019, that was denied on August 26, 2019.

{¶ 13} On September 4, 2019, the defendants filed a motion with the Rocky River Municipal Court to vacate the magistrate's March 26, 2018 recommendation as void ab initio. Because the March 26, 2018 recommendation granted restitution of the premises to the plaintiffs and the plaintiffs were currently in possession of the premises, the municipal court, on September 30, 2019, denied the defendants' motion as moot.

{¶ 14} On October 7, 2019, the municipal court transferred the case to the Cuyahoga County Common Pleas Court because the defendants' counterclaim exceeded the municipal court's monetary jurisdiction. On November 27, 2019, the defendants filed an amended answer and counterclaim. On March 10, 2020, the defendants filed a second amended answer and counterclaim. On August 5, 2020, the trial court denied the plaintiffs' motion to file an amended complaint. On November 5, 2020, the trial court denied the defendants' motion for summary judgment.

{¶ 15} The case proceeded to an arbitration panel on January 20, 2021. The defendants appealed the arbitrator's report and award on February 23, 2021.

{¶ 16} On March 23, 2021, the trial court ordered the parties to brief the issue of whether the defendants had standing to pursue their counterclaim following the discharge of their assets in bankruptcy. The trial court issued a final opinion and order on September 14, 2021, that determined the defendants were devoid of standing and were judicially estopped from pursuing their counterclaim. Pursuant to that ruling, the trial court dismissed the defendants' counterclaim with prejudice.^[5] On September 24, 2021, the defendants filed a motion for reconsideration of the final opinion and order.^[6]

{¶ 17} On October 13, 2021, the defendants filed a timely appeal raising two assignments of error. ^[7] For the reasons stated below, we affirm.

Legal Analysis

Standing

{¶ 18} The defendants' first assignment of error argues that the trial court erred when it found the defendants' failure to disclose their counterclaim as an asset in their bankruptcy filings precluded them from subsequently pursuing the counterclaim against the plaintiffs.

{¶ 19} "[Standing is required to invoke the jurisdiction of the common pleas court." Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13 2012-Ohio-5017, 979 N.E.2d 1214, ¶ 3. "A determination of standing necessarily looks to the rights of the individual parties to bring the action, as they must assert a personal stake in the outcome of the action in order to establish standing." SW Acquisition Co. v. Akzo Nobel Paints, L.L.C., 2021-Ohio-309, 167 N.E.3d 591, ¶ 33 (8th Dist), citing Ohio Pyro, Inc. v. Ohio Dept. of Commerce, 115 Ohio St.3d 375, 2007-Ohio-5024, 875 N.E.2d 550, ¶ 27. The issue of standing is reviewed de novo. In re C.J., 8th Dist. Cuyahoga Nos. 94210 and 94233, 2010-Ohio-3202, ¶ 15, citing Skirvin v. Kidd, 174 Ohio App.3d 273, 2007-Ohio-7179, 881 N.E.2d 914, ¶ 14 (4th Dist.).

{¶ 20} The filing of a bankruptcy petition impacts standing. The commencement of a bankruptcy action creates an estate and the debtor is divested of essentially all property interests held at the time of the bankruptcy filing. Hargreaves v. Carter, 9th Dist. Summit No. 17450 1996 Ohio App. LEXIS 1167, 4 (Mar. 27, 1996). All of a debtor's assets and liabilities, including civil causes of action, become the property of the bankruptcy estate. Kinder v. Zuzak, 11th Dist. Lake No. 2008-L-167, 2009-Ohio-3793, ¶ 12, citing In re Cottrell, 876 F.2d 540, 542 (6th Cir.1989); Hargreaves at 4, citing In re Cottrell. The bankruptcy trustee, rather than the debtor, then has standing to pursue all claims on behalf of the...