Hambleton v. R.G. Barry Corp.

• Decision Date: 25 July 1984
• Docket Number: No. 83-1680,83-1680
• Citation: 12 OBR 246,465 N.E.2d 1298,12 Ohio St.3d 179
• Parties: , 12 O.B.R. 246 HAMBLETON et al., Appellants, v. R.G. BARRY CORPORATION, Appellee.
• Court: Ohio Supreme Court

Page 179

12 Ohio St.3d 179

465 N.E.2d 1298, 12 O.B.R. 246

HAMBLETON et al., Appellants, v. R.G. BARRY CORPORATION, Appellee.

No. 83-1680.

Supreme Court of Ohio.

July 25, 1984.

On February 2, 1981, appellants, Thomas P. Hambleton and Bruce Pine, filed suit against R.G. Barry Corporation, appellee herein. ¹ In count one of their complaint, appellants alleged that in 1970, they experimented with urethane foam and conceived certain novel ideas for its use in the production of footwear; that they disclosed these ideas to appellee, a manufacturer of footwear; that appellee requested them to proceed with further development that appellants identified this creation as their "Mushroom Project"; that by June 1971, they had produced a prototype and thereafter moved to Columbus, Ohio, to set up laboratory facilities and that appellee expended funds for this project; that in August 1971, appellee arbitrarily locked them out of their laboratory and informed them that "Project Mushroom" had been abandoned; that appellee, without appellants' consent, used their ideas and concepts to produce a line of footwear which it began marketing in 1974 as "Mushrooms"; and that during the fall of 1978 they first learned of appellee's use of their ideas and concepts which appellee had intentionally appropriated to its own use without providing them compensation therefor.

In count two of their complaint, appellants incorporated the allegations in count one and added a claim for unjust enrichment.

The trial court, upon motion, allowed appellee to join Darrell Strub as a party-plaintiff. Strub had been a colleague of the appellants and continued to be employed by appellee after appellants had been terminated. In September 1982, the trial court overruled appellants' motion to amend their complaint by adding to their prayer for relief a request for $10,000,000 in damages.

Thereafter, appellee filed a motion for summary judgment on the grounds that this action was barred by the applicable statute of limitations and the doctrine of laches. In support, an affidavit was attached to this motion wherein appellee's president averred that he had received a letter from appellants' attorney dated September 20, 1971, which requested the return of all materials and files belonging to appellants and which gave notice to appellee that use of appellants' designs and concepts would be considered an infringement of appellants' ownership interest. A copy of appellee's financial report with respect to "Mushrooms" was also attached. The trial court sustained the motion for summary judgment without explanation.

The court of appeals affirmed in part and reversed in part. The court held appellants' action filed in 1979 for the recovery of their personal property was time-barred by the four-year statute of limitations, R.C. 2305.09, reasoning that the action accrued either in 1971, charging appellants with actual notice that appellee was a wrongdoer when appellee did not respond to the September 20, 1971 letter sent by appellants' attorney, or in 1974, charging appellants with constructive notice when appellee began marketing a product utilizing ideas similar to those of appellants. The court also held that the complaint did not state a cause of action in quasi-contract so as to invoke the six-year statute of limitations of R.C. 2305.07.

In view of this disposition, the court found it unnecessary to address whether the trial court erred in overruling appellants' motion to amend their complaint to assert a specific claim for damages and in granting appellee's motion to join Darrell Strub as a party-plaintiff, finding that any error which may have been committed by the trial court on these issues " * * * could not have prejudiced [appellants'] cause."

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Knepper, White, Arter & Hadden, Louis E. Gerber and W. Locke McKenzie, Jr., Columbus, for appellants.

Vorys, Sater, Seymour & Pease, John C. Elam, Michael W. Donaldson and Nancy E. Herrold, Columbus, for appellee.

PER CURIAM.

I

The first issue presented is whether appellants' cause of action as set forth in count one of their complaint is time-barred. For the reasons that follow, this court holds that this action was not timely filed pursuant to the time limitations set forth in R.C. 2305.09(B).

It is undisputed that the applicable statute of limitations as to count one of the complaint is contained in R.C. 2305.09. This section provides in part:

"An action for any of the following causes shall be brought within four years after the cause thereof accrued:

" * * *

"(B) For the recovery of personal property, or for taking or detaining it;

" * * *

"If the action is for * * * the wrongful taking of personal property, the causes thereof shall not accrue until the wrongdoer is discovered * * *." (Emphasis added.)

In order to determine if this action is timely, then, this court must determine when the cause of action accrued, i.e., the time when the party discovered the wrongdoing. The discovery of the wrongdoing may be constructive as well as actual, for in Schofield v. Cleveland Trust Co. (1948), 149 Ohio St. 133, 142, 78 N.E.2d 167 , this court, in construing the predecessor to R.C. 2305.09, stated as follows:

" 'If a person has knowledge of such facts as would lead a fair and prudent man, using ordinary care and thoughtfulness, to make further inquiry, and he fails to do so, he is chargeable with knowledge which by ordinary diligence he would have acquired.' * * * "

The court of appeals determined that appellants could have, had they used reasonably diligent efforts, discovered their claim as early as 1971 and as late as 1974:

"When the uncontroverted fact of [appellee's] marketing the shoes in late 1974 is coupled with [appellants'] knowledge in August and September of 1971, and their not having received a response from [appellee] to their attorney's letter, the conclusion is inescapable that [appellants] were charged with constructive notice of wrongdoing when [appellee] began marketing the shoes. As early as 1971, they possessed knowledge sufficient to lead a reasonably prudent person to make inquiry and, once the shoes were marketed, the circumstances were such that the barest inquiry would have led to actual knowledge of the claimed wrongdoing. See Schofield v. Cleveland Trust Co. (1948), 149 Ohio St. 133, at 142, 78 N.E.2d 167 . [Appellants] were placed on inquiry by the knowledge they possessed in 1971 and the shoes were first marketed in the Fall of 1974, and extensively during 1975; [appellants] cannot avoid constructive notice by failing until the Fall of 1978 to inquire. Instead, they are charged with the knowledge which they would have acquired by the exercise of ordinary diligence.

"Accordingly, as to the intangible personal property interest, whether [appellants] are charged with actual notice that [appellee] was a wrongdoer in 1971, or with constructive notice of that fact in December 1974, their action was not timely filed in late 1979." (Emphasis added.)

This court concurs with the assessment of the court of appeals that appellants' cause of action accrued in late 1974. In addition to the factors enunciated by the appellate court, this court would also note that the record reveals that when appellants were fired, Darrell Strub, one of their colleagues who had likewise been hired for "Project Mushroom," was retained and continued to work for appellee. The record is also devoid of evidence that would indicate appellee was trying to conceal its expenditures of time and money in the development and sale of the polyurethane sole; since 1971, information pertaining to such a sole appeared in appellee's annual reports. Moreover, the fact that appellee began manufacturing and marketing the shoes in 1974 cannot be minimized.

Based on the combination of these factors, the court of appeals was correct in concluding that appellants possessed knowledge sufficient to lead a reasonably prudent person to make inquiry and had such inquiry been made with reasonable care and diligence, it would have led to the discovery of the alleged wrongdoing in 1974. As such, their action filed in 1979 was untimely in that it was filed beyond the four-year statute of limitations specified in R.C. 2305.09(B).

II

The second issue presented is whether appellants pleaded in count two of their complaint an action in contract or quasi-contract so as to invoke the six-year statute of limitations of R.C. 2305.07. ² For the reasons that follow, this court holds that appellants' complaint does state a claim for quasi-contract and is thus subject to the statute of limitations set forth in R.C. 2305.07.

In count two of their complaint, apellants incorporated the allegations contained in count one and added the following:

"[Appellee's] conduct constitutes a violation of its confidential relationship with the [appellants] for the unjust enrichment the [appellee] has realized from such conduct."

Appellants contend that this allegation of breach of a confidential relationship is sufficient to state a cause of action in quasi-contract, whereas appellee asserts this allegation sounds in terms of a tort only.

This court has previously held that, in determining which limitation period will apply, courts must look to the actual nature or subject matter of the case, rather than to the form in which the action is pleaded. The grounds for bringing the action are the determinative factors, the form is immaterial. See, e.g., Kunz v. Buckeye Union Ins. Co. (1982), 1 Ohio St.3d 79, 437 N.E.2d 1194; Peterson v. Teodosio (1973), 34 Ohio St.2d 161, 297 N.E.2d 113 .

In Hummel v. Hummel (1938), 133 Ohio St. 520, 525, 14 N.E.2d 923, this court observed that liability in quasi-contract ...