Desai v. Franklin

• Court: Ohio Court of Appeals
• Writing for the Court: Whitmore
• Citation: Desai v. Franklin, 177 Ohio App.3d 679, 895 N.E.2d 875, 2008 Ohio 3957 (Ohio App. 2008)
• Decision Date: 06 August 2008
• Docket Number: No. 23930.,No. 23939.,23930.,23939.
• Parties: DESAI, Appellee and Cross-Appellant, v. FRANKLIN et al., Appellants and Cross-Appellees.

895 N.E.2d 875

177 Ohio App.3d 679

2008-Ohio-3957

DESAI, Appellee and Cross-Appellant, v. FRANKLIN et al., Appellants and Cross-Appellees.

No. 23930.

No. 23939.

Court of Appeals of Ohio, Ninth District, Summit County.

Decided August 6, 2008.

Scott H. Ruport and Louise M. Mazur, for appellee and cross-appellant.

John N. Childs, E. Lee Wagoner, and Joel A. Holt, for appellants and cross-appellees.

WHITMORE, Judge.

{¶ 1} Appellant and cross-appellee, Aris W. Franklin, M.D., appeals from the decision of the Summit County Court of Common Pleas awarding judgment to appellee and cross-appellant, Ashokkumar J. Desai, M.D. Additionally, Desai cross-appeals from the trial court's ruling on the issues of punitive damages, attorney fees, and other various issues. This court affirms in part and dismisses in part.

I

{¶ 2} In May 1978, Franklin and Desai entered into an employment agreement whereby Desai would join Franklin's professional corporation, Diagnostic Imaging.¹ The employment agreement provided that Desai's compensation "shall be computed as a percentage of the operating net income," which would be calculated by Diagnostic Imaging's accountant. The agreement specified that the distribution of "net income" would be divided into two stages. First, Franklin would receive five percent of the net income "before all salaries, bonuses and pension contributions." Second, Desai would then receive a certain, increasing percentage of the resulting net operating income in the following amounts:

  For the year beginning July 1, 1978 30%
                  For the year beginning July 1, 1979 35%
                  For the year beginning July 1, 1980 40%
                  For the year beginning July 1, 1981 50%
                

The employment agreement also provided that Desai would receive a certain percentage of Diagnostic Imaging's accounts receivable upon his termination. Desai would be entitled to receive 45 percent of the accounts receivable for any termination occurring after July 1, 1981.

{¶ 3} Desai and Franklin signed a buy-sell agreement on the day that they executed their employment agreement. Desai received 15 shares of Diagnostic Imaging on the date of the execution, with Franklin holding the remaining 85 shares. Pursuant to the buy-sell agreement, Desai would purchase an additional 34 shares over the next three years so that he eventually would own 49 shares to Franklin's 51 shares. The buy-sell agreement restricted the sale of any common stock. Furthermore, the agreement contained a redemption clause whereby Diagnostic Imaging would buy back Desai's shares upon the termination of his employment. The agreement provided that the value of the shares would be the net worth of Diagnostic Imaging on the last day of the month preceding termination divided by the number of outstanding shares. The accounts receivable however, would not be included in the calculation of the corporation's net worth.

{¶ 4} Desai formally resigned as an employee of Diagnostic on September 1, 2000. After Desai's resignation, questions arose as to whether or not Franklin had comported with the terms of the employment agreement and the buy-sell agreement. Specifically, Desai and Franklin disagreed over the amount of money that Desai was entitled to for his percentage of the accounts receivable and deferred-compensation payments that he was due under the employment agreement. Desai also alleged that Diagnostic Imaging had failed to redeem his stock as provided for in the buy-sell agreement.

{¶ 5} On January 22, 2002, Desai filed suit against Franklin and Diagnostic Imaging for breach of fiduciary duty, breach of contract as to the employment agreement and the buy-sell agreement, unjust enrichment and self-dealing, punitive damages, and attorney fees. Franklin and Diagnostic Imaging answered on March 13, 2002, and counterclaimed against Desai for breach of contract and unjust enrichment. Subsequently, the parties engaged in a lengthy period of discovery.

{¶ 6} On March 20, 2006, Desai filed an amended complaint to bring an additional claim for fraud against Franklin. According to Desai, Franklin had failed to notify him of shareholder's meetings, had forged Desai's signatures on the shareholder's meeting minutes, and had fraudulently altered the employment agreement to receive a bigger profit. Desai informed the court that he discovered that Franklin had taken these additional actions only after receiving certain evidence in discovery. Consequently, the trial court permitted Desai to bring his fraud claim in addition to his remaining claims. Desai included a request for punitive damages and attorney fees in the prayer for relief of his fraud claim.

{¶ 7} On November 13, 2006, Desai filed a motion for an order compelling Franklin to engage in discovery and sanctioning him for providing incomplete and evasive answers to Desai's discovery requests. The court eventually denied Desai's motion, finding that there was no merit to the issues Desai had raised.

{¶ 8} The matter proceeded to a jury trial on June 4, 2007. Before the jurors began deliberating, the trial court (1) directed a verdict in Diagnostic Imaging's favor on the fraud claim; (2) directed a verdict in Desai's favor on the liability portion of Desai's breach-of-contract claim as to Diagnostic Imaging; (3) ordered that Desai's claim for breach of contract against Franklin be dismissed with prejudice; (4) directed a verdict in Desai's favor on the liability portion of Desai's breach-of-fiduciary-duty claim against Franklin; and (5) ordered that Desai's claim for punitive damages be dismissed with prejudice. Franklin and Diagnostic Imaging also agreed to dismiss their counterclaims against Desai. The jury subsequently awarded judgment to Desai and against Franklin in the following amounts: (1) $50,670.18 for his breach-of-fiduciary-duty claim; (2) $116,248.00 for his fraud claim; and (3) $301,597.34 for his unjust-enrichment claim. The jury determined that Diagnostic Imaging did not owe Desai any compensatory damages pursuant to his breach-of-fiduciary-duty and breach-of-contract claims.

{¶ 9} On June 15, 2007, Desai filed a motion for prejudgment interest in which he argued that Franklin had failed to make a good-faith effort to settle the case in accordance with R.C. 1343.03 and Moskovitz v. Mt. Sinai Med. Ctr. (1994), 69 Ohio St.3d 638, 635 N.E.2d 331. Meanwhile, Franklin filed a motion for judgment notwithstanding the verdict ("JNOV"). The trial court scheduled a hearing to address both motions. The trial court ultimately denied the JNOV and awarded Desai prejudgment interest in the amount of $573,939.76.

{¶ 10} On October 23, 2007, Franklin filed his notice of appeal in this court. On October 31, 2007, Desai filed a separate notice of appeal. This court consolidated the appeals on December 7, 2007. The appeal, containing three assignments of error and five cross-assignments of error, is now before this court. For ease of analysis, we rearrange and consolidate several of the assignments and cross-assignments of error.

II Assignment of Error Number One

The trial court erred in denying Dr. Franklin's motion for judgment notwithstanding the verdict because Dr. Desai recovered damages that were barred by the applicable statute of limitations.

{¶ 11} In his first assignment of error, Franklin argues that the trial court erred in denying his JNOV on Desai's unjustenrichment claim. Specifically, Franklin argues that the court failed to apply R.C. 2305.07's six-year statute of limitations, which would have barred Desai's recovery on any injury accruing before January 22, 1996. We disagree.

{¶ 12} After a court enters judgment on a jury's verdict, a party may file a JNOV to have the judgment set aside on grounds other than the weight of the evidence. See Civ.R. 50(B). This court reviews a trial court's grant or denial of a JNOV de novo. Williams v. Spitzer Auto World Amherst, Inc., 9th Dist. No. 07CA009098, 2008-Ohio-1467, 2008 WL 835839, at ¶ 9, citing Osler v. Lorain (1986), 28 Ohio St.3d 345, 347, 28 OBR 410, 504 N.E.2d 19. "JNOV is proper if upon viewing the evidence in a light most favorable to the non-moving party and presuming any doubt to favor the nonmoving party reasonable minds could come to but one conclusion, that being in favor of the moving party." Williams at ¶ 9, citing Civ.R. 50(B).

{¶ 13} Franklin argues that Desai's unjust-enrichment claim accrued on the date that he wrongly retained the benefit that rightfully belonged to Desai. He further argues that unjust-enrichment claims are governed by the six-year statute of limitations period set forth in R.C. 2305.07 and are not "subject to equitable tolling or a discovery rule." Therefore, Franklin argues, Desai was entitled to recover only for the injuries that he received on the date of the filing of his complaint, January 22, 2002, and the six years preceding that date. He asks that we reduce Desai's unjust-enrichment award from $301,597.34 to $128,705.67, which represents the period from January 22, 1996, to January 22, 2002.

{¶ 14} "A successful claim of unjust enrichment requires that: (1) a benefit has been conferred by a plaintiff upon a defendant; (2) the defendant had knowledge of the benefit; and (3) the defendant retained the benefit under circumstances where it would be unjust to do so without payment." Chef Italiano v. Crucible Dev. Corp., 9th Dist. No. 22415, 2005-Ohio-4254, 2005 WL 1963027, at ¶ 26. Unjust enrichment occurs when a person "has and retains money or benefits which in justice and equity belong to another." Hummel v. Hummel (1938), 133 Ohio St. 520, 528, 11 O.O. 221, 14 N.E.2d 923.

{¶ 15} R.C. 2305.07 governs claims for unjust enrichment and provides that such claims must be "brought within six years after the cause thereof accrued." Hambleton v. R.G. Barry Corp. (1984), 12 Ohio St.3d 179, 182-183, 12 OBR 246, 465 N.E.2d 1298, citing R.C. 2305.07. Unlike other statutes of limitation, R.C. 2305.07 does not define the time at which a claim for...