Gemmell v. Anthony, 18CA8

Citation2019 Ohio 469,129 N.E.3d 934
Decision Date05 February 2019
Docket NumberNo. 18CA8,18CA8
Parties Karry GEMMELL, et al., Plaintiffs-Appellees, v. Mark ANTHONY, et al., Defendants-Appellants.
CourtUnited States Court of Appeals (Ohio)

Charles M. Elsea, Lancaster, Ohio, for appellants.

Timothy E. Miller and Dale D. Cook, Columbus, Ohio, for appellees.

A.C. Strip and Kenneth R. Goldberg, Columbus, Ohio, for receiver.

DECISION AND JUDGMENT ENTRY

ABELE, P.J.

{¶ 1} This is an appeal from a Hocking County Common Pleas Court judgment entered in favor of Karry Gemmell, Hocking Peaks, LLC, GEM Coatings, LLC, and Ohio ATV World, LLC, plaintiffs below and appellees herein. Mark Anthony, M & T Property Investments, Ltd., and Hocking Peaks Adventure Park, LLC, defendants below and appellants herein, assign the following errors for review:

FIRST ASSIGNMENT OF ERROR:
"THE TRIAL COURT ERRED IN NOT GRANTING JUDGMENT AS TO JUDICIAL DISSOLUTION OF HOCKING PEAKS, LLC."
SECOND ASSIGNMENT OF ERROR:
"THE TRIAL COURT ERRED IN NOT GRANTING JUDGMENT TO ANTHONY ON HIS BREACH OF CONTRACT CLAIM DESPITE FINDING THAT GEMMELL CONVERTED PROPERTY, BREACHED HIS FIDUCIARY DUTIES, AND MADE UNAUTHORIZED DISTRIBUTIONS."
THIRD ASSIGNMENT OF ERROR:
"THE TRIAL COURT ERRED IN AWARDING GEMMELL DAMAGES ALLEGEDLY ARISING FROM LOST PROFITS AND FROM HIS ‘CAPITAL CONTRIBUTION.’ "
FOURTH ASSIGNMENT OF ERROR:
"THE TRIAL COURT OTHERWISE ERRED IN ITS CALCULATION OF GEMMELL'S DAMAGES."
FIFTH ASSIGNMENT OF ERROR:
"THE TRIAL COURT ERRED IN IMPOSING JUDGMENT AGAINST M & T PROPERTY INVESTMENTS, LTD. BECAUSE M & T HAD THE UNAMBIGUOUS RIGHT TO TERMINATE THE LEASE WITH HOCKING PEAKS, LLC, AND PROPERLY DID SO."
SIXTH ASSIGNMENT OF ERROR:
"THE TRIAL COURT ERRED IN FAILING TO TERMINATE THE RECEIVERSHIP AND IMPOSING THE COST OF THE RECEIVERSHIP ON ANTHONY AND M & T."

{¶ 2} This is the twisted tale of two business partners who have spent a staggering sum litigating which partner stole more money from Hocking Peaks, LLC (HP), a limited liability company formed in 2010.1 Gemmell and Anthony formed HP to operate a zip line and adventure park on property owned by Anthony's company, M & T Property Investments, Ltd. (M & T). Gemmell's company, Ohio ATV, contracted with Acrobranche U.S., Inc. to purchase and install the zip lines at a cost of $ 385,000. Gemmell's company, GEM Coatings, used its line of credit to make payments to Acrobranche. Anthony, through his company M & T, agreed to lease the property to HP for $ 500 per month.

{¶ 3} M & T's 145-acre property contains Anthony's personal residence, in addition to the adventure park. The park contains three zip line courses, an eighteen-hole disc golf course, a mud bog, an outdoor paint ball theater, an OGO Ball (Hamster Ball) hill, and a Slidezilla water slide.

{¶ 4} To state that the business relationship proved acrimonious is an understatement. After the park opened in 2010, the relationship rapidly deteriorated. Anthony claimed that Gemmell commingled HP's funds with funds from Gemmell's other companies, used HP's funds to pay Gemmell's other companies' debts, and stole large amounts of cash from HP. Anthony also alleged that Gemmell wrongly used HP's funds to pay for the zip lines that were the primary attraction at the park. Anthony believed that although Gemmell paid for the zip lines, HP did not have any obligation to compensate Gemmell for the zip lines. Anthony instead believed that Gemmell would contribute the zip lines to HP and that Anthony would contribute the real estate by agreeing to rent it to HP at a below-market rate. Anthony did not think that either would be compensated for the value of his contribution to HP–Gemmell for his zip-line contribution, and Anthony for the difference between the fair market rental value of the property and the below-market rate HP agreed to pay. Rather, Anthony believed that the parties simply would contribute what they had to offer and then equally divide the profits.

{¶ 5} Gemmell, on the other hand, claimed that the parties agreed that HP would reimburse Gem Coatings for the amounts paid under its line of credit to purchase the zip lines. Gemmell thus wrote checks from HP's account, as well as Gem Coatings's account, to pay the line of credit.

{¶ 6} The parties' operating agreement, however, did not explicitly discuss the import of Gemmell's zip lines or of M & T's below-market-rate rental agreement. The agreement simply specified that neither member was "responsible to make any capital contribution at the time of executing [the operating agreement]." The agreement additionally stated that neither member had "any obligation or liability to the Company to make any contributions to the capital of the Company" and that "[a]ll agreed upon contributions will be re-paid on a pro-rated basis, based upon available funds." The agreement also provided that "[r]e-payments will be issued before dividends or revenue sharing." Nothing in the agreement indicated that the parties agreed that the zip lines constituted Gemmell's capital contribution or that M & T's property constituted Anthony's capital contribution. Additionally, no other written documentation exists to establish either of the foregoing. Nevertheless, Gemmell, through GEM Coating's line of credit, paid Acrobranche, the zip line vendor, $ 258,000 by the end of March 2010. HP also paid approximately $ 30,000 toward the zip-line loan.

{¶ 7} In early 2012, Anthony took over HP's finances. Later in the year, Anthony stopped making any payments toward the zip-line loan. Gemmell asked Anthony to continue making the payments, but Anthony refused. Anthony advised Gemmell to bankrupt GEM Coatings so as to discharge the debt. Chase later obtained a judgment against Gemmell for approximately $ 208,481,2 the remaining principal balance.

{¶ 8} The parties' relationship continued its descent. Around August of 2012, Anthony was under the impression that he and Gemmell had agreed to end their business relationship. Anthony thus closed HP's bank account, opened a new bank account with HP's remaining funds, and started a new company, Hocking Peaks Adventure Park, LLC (HPAP). HPAP differed from HP in name and ownership only.

{¶ 9} On January 3, 2013, Anthony sent a letter to Gemmell's counsel that Gemmell and his wife, Clare Aitken, repeatedly asked Anthony to close HP. Anthony's letter advised that "per their request[,] December 31, 2012 shall be deemed closing date." In early March 2013, Anthony and M & T's counsel sent Gemmell a letter notifying Gemmell that M & T had terminated HP's lease.

{¶ 10} Around that same time, appellees filed the lawsuit that is the subject of this appeal. Appellees claimed that Anthony stole HP's assets and used them to form a new company, HPAP. Appellees also alleged that Gemmell and his two companies, Gem Coatings and Ohio ATV, loaned HP over $ 400,000, and that Anthony and Gemmell agreed that HP would repay the loans. Appellees' amended complaint included claims for conversion, Anthony's breach of the operating agreement, unjust enrichment, Anthony's breach of fiduciary duties, unfair competition, business interference, Anthony's return of unlawful distributions, failure to provide access to HP's financial records, and a declaratory judgment.

{¶ 11} Appellees first asserted that appellants have removed, transferred, misappropriated, and/or stolen appellees' property and assets and converted the property and assets to appellants' own use and benefit. Appellees requested compensatory and punitive damages as a result of appellants' conversion.

{¶ 12} Second, appellees alleged that Anthony breached the operating agreement by taking unauthorized distributions, operating HP in a manner that is contrary to HP's best interest, making unauthorized withdrawals of HP's funds, and unilaterally dissolving HP.

{¶ 13} Appellees' third claim for relief averred that appellants' misappropriations have unjustly enriched appellants.

{¶ 14} Appellees' fourth claim for relief alleged that Anthony's misappropriations breached the fiduciary duties Anthony owed to HP and Gemmell.

{¶ 15} Appellees' fifth claim for relief asserted that appellants have engaged in unfair competition.

{¶ 16} In their sixth claim for relief, appellees claimed that appellees have interfered with appellees' contracts, business rights, and opportunities.

{¶ 17} Appellees' seventh claim for relief alleged that Anthony is liable to appellees for the amount of distributions or payments that Anthony received in excess of those that could have been paid or distributed without a violation of the operating agreement.

{¶ 18} In their eighth claim for relief, appellees asserted that Anthony has violated the operating agreement by denying Gemmell access to HP's financial records and that as a result, appellees have been damaged and continue to suffer damages.

{¶ 19} Lastly, appellees asserted that they are entitled to a judgment declaring that (1) the zip lines and other physical equipment belong to appellees, and (2) HPAP is the alter ego of HP.

{¶ 20} Appellants answered and filed counterclaims that raised seven claims for relief. Appellants first claim for relief alleged that Gemmell converted Anthony's personal property. Appellants' second claim for relief averred that Gemmell breached the operating agreement by taking unauthorized distributions, operating HP contrary to HP's best interest, making unauthorized withdrawals, and misappropriating HP's funds. Appellants' third claim for relief asserted that Gemmell's unauthorized and illegal transfers, withdrawals, and misappropriations have unjustly enriched Gemmell. In their fourth claim for relief, appellants alleged that Gemmell breached the fiduciary and statutory duties he owed to Anthony. Appellants' fifth claim for relief averred that Gemmell violated R.C. 1705.22 and the operating agreement by restricting Anthony's access to HP's financial records; appellants demanded an accounting. In their sixth claim for relief, appellants requested the court to enter...

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