Mateo v. Proia

227 N.E.3d 389

2023-Ohio-3908

FRANCISCO A. MATEO MD, INC. et al, Plaintiffs-Appellees/Cross-Appellant,

v.Nicholas G. PROIA et al., Defendants-Appellants/Cross-Appellees.

Case Nos. 22 MA 0053, 22 MA 0054

Court of Appeals of Ohio, Seventh District, Mahoning County.

October 26, 2023

Civil Appeal from the Court of Common Pleas of Mahoning County, Ohio, Case No. 2017 CV 01404.

Atty. Timothy H. Hanna, Hanna Rasnick Evanchan Palmisano Hobson & Fox

LLC, 388 South Main Street, Suite 402, Akron, Ohio 44311 for Plaintiff-Appellee/Cross-Appellant Francisco A. Mateo MD, Inc.

Atty. Melissa Z. Kelly, Tucker Ellis LLP, 950 Main Ave., Suite 1100, Cleveland, Ohio 44113, and Atty. Thomas J. Wilson, Comstock, Springer & Wilson Co., LPA, 100 Federal Plaza East, Suite 926, Youngstown, Ohio 44503 for Defendants-Appellants/Cross Appellees Nicholas G. Proia, M.D. and Nicholas G. Proia, M.D., Inc. and Atty. Tim Tusek, 945 Windham Court, Suite 3, Boardman, Ohio 44512 for Defendant/Cross-Appellee Tammy Proia.

BEFORE: Carol Ann Robb, Mark A. Hanni, Judges and Mary Jane Trapp, Judge of the Eleventh District Court of Appeals, Sitting by Assignment.

OPINION AND JUDGMENT ENTRY

Robb, J.

{¶1} Defendants-Appellants Nicholas G. Proia, M.D. and Nicholas G. Proia, M.D., Inc. (Proia Inc.) appeal the judgment entered against them in the Mahoning County Common Pleas Court after a jury trial. Appellants set forth eight assignments of error. We conclude Appellants have failed to show reversible error. We hereby affirm the parts of the judgment challenged in their appeal.

{¶2} Plaintiff-Appellee Francisco A. Mateo, M.D., Inc. (Mateo Inc.) filed a cross-appeal due to the JNOV entered in favor of Cross-Appellee Tammy Proia and the related granting of a new trial to Appellants on damages with a remittitur. The jury awarded Mateo Inc. damages against Mrs. Proia due to her improper receipt of funds from the partnership as a result of Appellants’ conduct. Part of the joint and several damages the jury awarded against Appellants was likewise attributable to this amount. Based on jury interrogatories on the statute of limitations for certain torts, the trial court eliminated the award against Mrs. Proia and found the corresponding portion of the award entered against Appellants was also negatively affected.

{¶3} We hereby affirm the trial court’s judgment eliminating the award against Mrs. Proia but reverse the decision to eliminate part of the award entered against Appellants. Accordingly, the jury verdict rendered against Appellants (Dr. Proia and Proia Inc.) is reinstated.

STATEMENT OF THE CASE

{¶4} Dr. Mateo started practicing medicine with Dr. Proia at Proia Inc. in 1998. Dr. Mateo formed Mateo Inc. Each physician was the sole shareholder, officer, and director of their respective S corporation. Dr. Proia offered to sell half of his practice to Mateo Inc. In 2000 or 2001, they formed the partnership Associates in Pulmonary Medicine (APM), with Proia Inc. and Mateo Inc. as the two partners. In 2016, Dr. Mateo discovered Mateo Inc. had not been receiving half of the profits due to various irregularities. They agreed to dissolve the partnership, effective April 1, 2017.

{¶5} Mateo Inc. then filed suit against Proia Inc., Dr. Proia, and Mrs. Proia. (6/6/17 Comp; 8/14/17 Amd.Comp.). In pertinent part, the complaint alleged Proia Inc. or Dr. Proia directed unauthorized salary and retirement benefits to be paid from APM to Mrs. Proia from 2006 to 2015 and directed the partnership to transfer less funds to Mateo Inc. than to Proia Inc., as a result of submitting Dr. Proia’s personal expenses for payment by APM.

{¶6} The complaint contained tort claims for conversion, fraudulent transfer, fraud, and civil conspiracy. It also presented claims for accounting, recoupment, or dissolution and breach of the partnership agreement, among other claims. The answer contained a counterclaim and alleged Mateo Inc. was the partner who received excess distributions.

{¶7} APM was originally named as an additional plaintiff. However, the claims asserted by APM were dismissed on motion of the defense after the court found the lawsuit was not authorized by the partnership. (11/9/21 J.E.). At the same time, the court denied summary judgment motions filed by the defense against Mateo Inc. The case was tried to a jury with a different trial judge in December of 2021.

{¶8} At trial, Mrs. Proia testified payments to her from APM’s funds only should have been expended for hours she reported and only at rates of $11 to $12 per hour. (Tr. 126). In general, she spent a few hours per month rewriting information on patients her husband saw at the hospital and submitting it to APM for processing; occasionally, she filled in at the office if someone called off sick. (Tr. 125, 145, 153, 428-431). However, she was additionally receiving an annual salary from APM (in the mid-$80,000’s).

{¶9} It was stipulated she erroneously received this annual salary from APM from 2006-2016, which should have been paid by Proia Inc. (Tr. 120, 127, 131); (Pl.Ex. 24). Other evidence indicated her salary was also paid by APM in 2005 while she received an hourly wage from Proia Inc. (Tr. 114-118). From 2001-2004, Mrs. Proia received a salary from Proia Inc., as evidenced in W-2s. (Pl.Ex. 21).

{¶10} It also was stipulated the contributions to Mrs. Proia’s pension should not have been made by APM. (Tr. 132-134). Mrs. Proia received pension contributions from Proia Inc. until 2007 when APM started paying her contributions. She claimed she never noticed her employer was changed to APM until the issue was raised by Dr. Mateo in December 2016. (Tr. 112-113, 135). Her pay was directly deposited into a joint account owned by herself and Dr. Proia; however, in addition to a W-2 showing the employer’s name, each employee received a paystub on payday. (Tr. 129, 166).

{¶11} A longtime employee who performed billing and bookkeeping testified she was hired by the two doctors to work for Proia Inc. in 1999. She provided financial information to the accountants and a payroll company. Dr. Proia signed the checks she presented to him, such as for pension contributions. (Tr. 148, 170-171). She paid expenses out of APM’s account if Dr. Proia instructed her to do so. (Tr. 171).

{¶12} This employee noted Mrs. Proia did not receive a salary from Proia Inc. until 2001. (Tr. 165). She believed the company changed names to APM for tax purposes. (Tr. 143). She said Mrs. Proia’s salary started being paid by APM when other employees started being paid by APM, attributing the change to the accountants. (Tr. 160, 165). She explained Dr. Mateo saw a binder on her desk with information she received from the payroll company and seemed shocked to discover Mrs. Proia was being paid by APM. (Tr. 163).

{¶13} Dr. Proia testified he hired Dr. Mateo to work for him in 1998 and later allowed Dr. Mateo to buy into his practice for $168,000, stating this represented the amount of assets the practice owned on a certain date. (Tr. 1030-1032). He agreed they established APM so each partner would receive half of the profits but claimed salary was to be partly based on productivity. (Tr. 1038-1039). He believed a written partnership agreement was signed by Dr. Mateo but could not find a signed copy. (Tr. 120-1022).

{¶14} Dr. Proia said Accountant 1 advised him to use part of his income to put Mrs. Proia on the payroll so he could establish a pension for her. (Tr. 236, 1058-1059). He acknowledged she should not have been paid the salary and pension from APM, stating he did not know why the "mistake" happened. (Tr. 239-242, 1057, 1073-1080). They repaid the 2016 payments soon after Dr. Mateo raised the issue at the December 2016 annual meeting. (Tr. 240, 372-373, 1080).

{¶15} During questioning related to the first element of corporate veil piercing, Dr. Proia acknowledged a 2016 financial statement he instructed his accountant to prepare to obtain a loan listed personal assets that were elsewhere expensed to Proia Inc. (such as Ferraris, a plane, and a lake house); this financial statement also said Mrs. Proia was APM’s office manager. (Tr. 214-216, 231-234, 251, 1078-1079). From Proia Inc., Dr. Proia also paid salaries to his children (beginning when they were nine and fourteen years old), paid for his daughter’s flying lessons, and provided funds to a chocolate company Dr. Proia owned. (Tr. 249-251, 261). Related to a damage setoff, Dr. Proia testified he spent approximately $23,000 in bookkeeping and storage fees in closing APM. (Tr. 1097-1098).

{¶16} The plaintiff’s expert opined Mateo Inc. was owed $1,070,545 plus $830,457 in interest for a total of $1,901,002. Although he believed the doctors began their venture in 2000, he started his damages evaluation with 2001. (Tr. 283, 298, 314); (Pl.Ex. 21). Because APM was being run through Proia Inc.’s books in the beginning, the plaintiff’s expert used these books when calculating unauthorized payments to Mrs. Proia and personal expenses paid on behalf of Dr. Proia. (Tr. 298-302, 333, 349, 363). He noted pension contributions were made for Dr. Proia from Proia Inc. and then from APM, whereas Dr. Mateo contributed to his own pension after partnership funds were distributed to Mateo Inc. (until APM began contributing for both doctors in 2009). (Tr. 310, 379).

{¶17} Dr. Mateo testified that after working for Proia Inc. in 1998 and 1999, he bought into the practice based on a valuation performed by Dr. Proia’s accountant (Accountant 1). (Tr. 409). Dr. Mateo explained Proia Inc. had accounts receivable based on loans for Dr. Proia’s personal items (such as other companies and a plane) but the valuation specifically showed these items were excluded from the new venture. (Tr. 412). Dr. Mateo said they formed a 50/50 partnership at the end of 1999 or beginning of 2000. (Tr. 409, 421).

{¶18} He indicated they originally operated the company through Proia Inc. before the paperwork was complete for APM. (Tr. 410, 535, 594,...