Liberty Aviation Museum, Inc. v. JRM Marine Consulting

223 N.E.3d 881

2023-Ohio-2982

LIBERTY AVIATION MUSEUM, INC., Appellant

v.JRM MARINE CONSULTING, LLC, d/b/a Treasure Cove Marina, et al., Appellees

Court of Appeals No. OT-22-053

Court of Appeals of Ohio, Sixth District, Ottawa County.

Decided: August 25, 2023

Trial Court No. 180CV0169.

Kenneth D. Myers, Cleveland, for appellant.

Eric J. Weiss, for appellee JRM Marine Consulting, LLC, d/b/a Treasure Cove Marina.

Cory J. Martinson, Cleveland, for appellee The Storage Building, LLC.

DECISION AND JUDGMENT

SULEK, J.

{¶ 1} Appellant Liberty Aviation Museum, Inc. ("Liberty Aviation"), appeals the judgment of the Ottawa County Court of Common Pleas awarding R.C. 2323.51 sanctions to appellees John R. Moore III, Joan Moore, Kara B. Johnson (nka Gogokek), Treasure Cove Marina, Inc., Kara B. Johnson, Ltd., Cove West Properties, The Yacht Centre, Ltd., Johnson’s Best Buy Marine, LLC, and 904 Treasure Cove Marine, LLC (collectively "the Moore defendants"), and appellee The Storage Building, LLC ("Storage Building"). Because the trial court did not err in awarding sanctions for attorney fees that were incurred after it became clear that Liberty Aviation’s conduct was frivolous, the judgment of the Ottawa County Court of Common Pleas is affirmed.

I. Background

{¶ 2} The genesis of the present matter began in September 2012 when Liberty Aviation contracted with JRM Marine Consulting LLC d/b/a/ Treasure Cove Marina ("JRM Marine") to repair and restore a World War II era PT Boat owned by Liberty Aviation. The repairs did not go as planned, resulting in claims and counterclaims being filed in 2014. Ultimately, following a bench trial, the trial court awarded approximately $45,000 in damages to Liberty Aviation for labor, parts, and materials overcharges. This court affirmed the trial court’s December 22, 2015 judgment in JMR (sic) Marine Consulting LLC v. Liberty Aviation Museum, Inc., 6th Dist. Ottawa No. OT-16-024, 2017- Ohio-5686, 2017 WL 2838434.

{¶ 3} Thereafter, Liberty Aviation determined that additional damage was done to the boat. On April 23, 2018, Liberty Aviation filed a complaint against JRM Marine alleging that JRM Marine breached a contract or was otherwise liable for damages caused by its failure to properly repair and restore the boat. JRM Marine moved for judgment on the pleadings, which the trial court denied in February 2019. Thereafter, JRM Marine stopped participating in the case. Around October 2019, the sole owner of JRM Marine, John Robert Moore IV ("Rob"), suffered a debilitating stroke. Counsel could not communicate with Rob and could not comply with Liberty Aviation’s discovery requests. On June 9, 2020, counsel moved to withdraw from representing JRM Marine, which the trial court granted.

{¶ 4} On June 15, 2020, Liberty Aviation moved for summary judgment on its claims, which went unopposed. The trial court granted summary judgment to Liberty Aviation as to liability on July 28, 2020. A hearing on damages was then held on August 11, 2020, at which JRM Marine did not appear. Following the hearing, the trial court entered judgment in Liberty Aviation’s favor in the amount of $3,831,643.02 plus attorney fees to be determined at a later time. Rob died on September 18, 2020, from complications from the stroke.

{¶ 5} On February 17, 2021, Liberty Aviation filed a motion to "pierce the corporate veil/join new parties/amend complaint." Liberty Aviation alleged that around the same time that it filed its 2018 lawsuit, Rob and his relatives "engaged in a long process of dissipating [JRM Marine’s] resources for their own use," using "numerous shell corporations to hide ownership, transfer assets and evade financial responsibility." Attached to the motion were voluminous pages of financial documents, bank records, and canceled checks. On February 23, 2021, the trial court granted Liberty Aviation’s motion to amend its complaint.

{¶ 6} On March 23, 2021, Liberty Aviation filed its amended complaint naming JRM Marine and an additional 27 persons and entities as defendants. The amended complaint asserted one count of "fraud or other illegal or unlawful acts" on behalf of all the defendants by "contributing] to misusing the corporate form as a shield from liability for their own misdeeds." The complaint asserted a second count for civil conspiracy based on the defendants' "acts and omissions described above, including but not limited to the acts and omissions involved in commingling, concealing, transferring and/or hiding assets that are subject to the judgment against defendant JRM Marine."

{¶ 7} Between May and June 2021, Liberty Aviation voluntarily dismissed eight of the defendants.

{¶ 8} The parties then engaged in discovery and a number of depositions were taken. On October 19, 2021, Liberty Aviation deposed Rob’s father, John Robert Moore III ("John"). John described the various business relationships in this case. Of note, John was a part-owner of Treasure Cove Marina, Inc., which operated for many years in the boating business. In the mid-1990s, Treasure Cove Malina, Inc. was sold to an unrelated company Marine-Max. Eventually, in 2009, Rob started JRM Marine. JRM Marine used the trade name Treasure Cover Marina.

{¶ 9} John and his wife Joan owned Kara B. Johnson, Ltd. ("KBJ"), and KBJ owned the property located at 900-904 SE Catawba Rd. in Port Clinton, Ohio.¹ In September 2016, JRM Marine entered into a ten-year lease agreement with KBJ to lease the property for a monthly rent of $5,400.

{¶ 10} At the same time, KBJ leased a portion of 904 SE Catawba Rd. to Storage Building for $1 per month, with the understanding that Storage Building would construct and sublet a storage building. Storage Building was owned by John and his son-in-law, Donald L. Williams, Jr. In November 2016, JRM Marine entered into a seven-year lease with Storage Building for use of the storage building that was constructed at 904 SE Catawba Rd. The lease agreement provided that JRM Marine would pay a monthly rent of $3,900. In addition to that lease, in September 2016, JRM Marine executed a loan agreement with Storage Building, whereby JRM Marine borrowed $50,000 at a 5% interest rate, to be repaid in monthly installments of $943.56 over a five-year term.

{¶ 11} In 2018, John and Donald Williams formed Storage Building II to construct a second storage building at 904 SE Catawba Rd.² JRM Marine entered into an agreement in October 2018 with Storage Building II to solicit and service customers who wished to store their boats in the storage building.

{¶ 12} John testified that Rob has not been very successful in his business ventures and provided handwritten ledgers of loans that he made to Rob and to Rob’s various business entities over the years. The ledgers showed that the final disbursement was made in 2007, although John testified that it is possible that he loaned additional money to Rob after that time. The amount of unpaid loans totaled in the millions of dollars.

{¶ 13} John also testified that while he frequently spoke with Rob about business, John was not in any way involved or responsible for the operation of JRM Marine. Before Rob’s stroke, John was never an owner, operator, or employee of JRM Marine; however, for two months after Rob’s stroke, John stepped in and ran the daily operations of the business. John explained that he was at least partially motivated to keep the business running in order to protect his rent check that JRM Marine was paying to KBJ. To facilitate his efforts, John formed 904 Treasure Cove Marine, LLC, but that company was rarely used.

{¶ 14} John testified that when he took over JRM Marine in October 2019, the company was not in a good financial position. John testified that he spent $100,000 of his own money to pay the bills, make payroll, and complete transactions for customers. Approximately two months later, one of JRM Marine’s employees, Kevin Frantz, approached John about taking over and running the company. Frantz then formed Above Board Boats & Brokerage, LLC ("Above Board"), and assumed operations. John testified that no assets were transferred and Above Board did not pay any money for the business. Above Board simply entered into a lease agreement with KBJ and continued servicing JRM Marine’s existing customer base. John testified that when JRM Marine ceased operating it did not have any assets.

{¶ 15} Eventually, in March 2021, John sold KBJ, the property, Storage Building, and Storage Building II to an unrelated company named C-Land.

{¶ 16} Edward Patrick, Jr., the CEO of Liberty Aviation, was deposed on October 20, 2021. Patrick testified that Liberty Aviation’s efforts to pierce the corporate veil and hold the newly named defendants liable were based on the various associations and transactions between the businesses. However, Patrick did not have personal knowledge of any facts that would show that any of the defendants fraudulently or illegally used the corporate form to shield themselves from liability for their own wrongdoing. Nor did Patrick have any personal knowledge that any of the defendants had any ownership of JRM Marine, commingled assets with JRM Marine, or hid or concealed assets on behalf of JRM Marine. Instead, Patrick relied upon the documents attached to Liberty Aviation’s motion to pierce the corporate veil.

{¶ 17} On November 30, 2021, Kevin Frantz was deposed. Frantz testified similarly to John. Frantz began working as the general manager of JRM Marine in the spring of 2019. Frantz testified that prior to Rob having his stroke, JRM Marine was "a complete disaster" financially. JRM Marine’s accounts were always overdrawn, bill collectors were calling, and it had a hard time making payroll. Frantz testified that all of the financial decisions were made by Rob and that only Rob could authorize any transactions out of the bank account. During this time, John was present but had no authority over any of the business operations. Frantz considered John to be more of a...