Harris v. Sunsong Holdings, Inc.
| Citation | 169 N.E.3d 1030 |
| Decision Date | 09 April 2021 |
| Docket Number | No. 28645,28645 |
| Parties | Larry G. HARRIS, et al., Plaintiffs-Appellants v. SUNSONG HOLDINGS, INC., et al., Defendants-Appellees |
| Court | United States Court of Appeals (Ohio) |
RICHARD A. TALDA, Atty. Reg. No. 0023395, and DANIEL J. GENTRY, Atty. Reg. No. 0065283, 33 West First Street, Suite 200, Dayton, Ohio 45402, Attorneys for Plaintiffs-Appellants.
D. JEFFREY IRELAND, Atty. Reg. No. 0010443, 110 North Main Street, Suite 1600, Dayton, Ohio 45402 and JASON W. PALMER, Atty. Reg. No. 0088336, and MELISSA L. WATT, Atty. Reg. No. 0092305, 201 East Fifth Street, Suite 1420, Cincinnati, Ohio 45202, Attorneys for Defendants-Appellees.
{¶ 1} Plaintiffs-appellants, Larry G. Harris, Kristina L. Harris and HMFG Group Limited Partnership, appeal from the trial court's judgment of November 20, 2019, in favor of Defendants-appellees, Sunsong Holdings, Inc., Qingdao Sunsong Co., Ltd. and Harco Manufacturing Group, LLC (collectively "Sunsong"), following a bench trial. Raising five assignments of error, Appellants argue that the trial court's judgment was not supported by the evidence, and that the trial court erred in its application of the law, by finding that predictions and statements of opinion were actionable misrepresentations for purposes of a claim of fraud; that Sunsong justifiably relied on the predictions and statements of opinion in question; that Appellants breached their contract with Sunsong, pursuant to which Sunsong purchased Appellants’ business; that the trial court's award of damages to Sunsong amounted to a windfall; and that the trial court erred by including attorney's fees and prejudgment interest in the award. For the following reasons, we hold that the trial court's judgment was supported by competent, credible evidence, and that the trial court correctly applied the law. The trial court's judgment is therefore affirmed.
{¶ 2} In 2014, Appellants Larry and Kristina Harris owned several corporations, including Harco Industries, Inc., which was registered with the Ohio Secretary of State in 1980; Harco Brake Systems, Inc., which was registered in 1997; and Harco Manufacturing Group, LLC, which was registered in December 2006 (collectively, we refer to these three entities as "Harco").1 See Amended Complaint ¶ 1-2, 6, 10-11, 34, 36 and 45. Appellant HMFG Group Limited Partnership was registered in January 2007. Amended Complaint ¶ 3. The most significant component of Harco's business, for purposes of the instant litigation, was the supply of vehicle parts to General Motors ("GM"). See Appellants’ Brief 3-4.
{¶ 3} Harco's business had been struggling, with "decreasing employment and [sales] volumes" that it "attributed to GM[‘s] using foreign suppliers," which led Harco to seek "political intervention [from U.S. Senators Brown and Portman] to pressure GM to increase [the] volume" of its orders of parts from Harco. See id. at 4 and 22-23; Findings of Fact, Conclusions of Law and Entry of Verdict 2, Nov. 20, 2019 ("Judgment Entry"). In the latter half of 2014, Sunsong began discussions with representatives of Harco concerning a possible manufacturing partnership or acquisition. See Appellants’ Brief 5-6; Appellees’ Brief 3-4.
{¶ 4} On November 3, 2014, representatives of Sunsong visited Harco. Appellants’ Brief 6; Appellees’ Brief 4. Among other things, Harco presented a slideshow that listed a series of recently executed contracts, the "New Business," with GM. See Appellants’ Brief 5-6 and 20-21; Appellees’ Brief 4; Joint Exhibit I. Larry Harris and Richard Garver, Harco's general manager, acknowledged to Sunsong's representatives that Harco was struggling at the time, but Garver represented that the New Business would generate profits for Harco in subsequent years. Trial Transcript 113:1-116:7, 403:15-403:21, 459:18-460:10 and 544:9-546:13; Joint Exhibits I, VI-VII and XX; Defendants’ Exhibit F; see also Appellants’ Brief 7-9.
{¶ 5} Sunsong decided to pursue the acquisition of Harco, and on January 31, 2015, the parties executed a letter of intent. See Appellants’ Brief 9; Appellees’ Brief 6. Effective June 1, 2015, Sunsong and Appellants executed a contract entitled Membership Interest Purchase Agreement (the "MIPA"), by which Sunsong's acquisition of Harco was effected. See Appellants’ Brief 2 and 14; Appellees’ Brief 6. Thereafter, Sunsong named Jessie Wei as president of Harco. Trial Transcript 107:16-108:13.
{¶ 6} Harco continued to struggle following the acquisition, and Wei initiated an investigation. See id. at 111:10-113:19. Wei's investigation revealed that Harco's representatives had made material misrepresentations and concealed information about Harco's finances. See id. at 112:20-116:7. As a result, Sunsong asserted its right to indemnity under the MIPA and disclaimed any obligation to fulfill its remaining contractual obligations. See Appellants’ Brief 2; Appellees’ Brief 2.
{¶ 7} On October 28, 2016, Appellants filed a complaint against Sunsong, asserting claims for breach of contract, conversion, tortious interference with contractual relations, breach of fiduciary duty and fraudulent inducement. Sunsong filed an answer on December 1, 2016, with which it included counterclaims for breach of contract and fraud. Appellants filed an amended complaint on August 15, 2018, in which they withdrew their claims for conversion and fraudulent inducement; Sunsong filed an answer on August 20, 2018, reiterating its counterclaims.
{¶ 8} The case proceeded to a bench trial in December 2018. On November 20, 2019, the trial court entered judgment in favor of Sunsong. Appellants timely filed a notice of appeal on December 19, 2019.
{¶ 9} Appellants argue that the trial court entered judgment in favor of Sunsong contrary to the evidence and the law. The "standard of review following a civil bench trial is whether the trial court's judgment [was] against the manifest weight of the evidence." Downtime Rebuild, L.L.C. v. Trinity Logistics, Inc. , 2019-Ohio-1869, 135 N.E.3d 1253, ¶ 12 (1st Dist.). An appellate court applying this standard "is guided by a presumption that the [trial court's] findings of [fact were] correct," but the trial court's application of the law is reviewed de novo. Illum. Co. v. Bosemann , 2020-Ohio-3663, 154 N.E.3d 1205, ¶ 32 (8th Dist.) ; Huntington Natl. Bank, Successor v. Miller , 10th Dist. Franklin No. 14AP-586, 2016-Ohio-5860, 2016 WL 4986960, ¶ 13, citing Seasons Coal Co., Inc. v. City of Cleveland , 10 Ohio St.3d 77, 80, 461 N.E.2d 1273 (1984).
{¶ 10} Where " ‘the evidence is susceptible of more than one construction, the [appellate] court is bound to give it that interpretation which is consistent with the [the trial court's] judgment,’ " or in other words, that interpretation which is " ‘most favorable to sustaining the * * * judgment.’ " Seasons Coal Co. at 80, 461 N.E.2d 1273, fn.3, quoting 5 Ohio Jurisprudence 3d, Appellate Review, Section 603, at 191-192 (1978) ; see also Emswiler v. Bodey , 2d Dist. Champaign No. 2012-CA-3, 2012-Ohio-5533, 2012 WL 5989636, ¶ 44. The appellate court should, furthermore, be "mindful that in a bench trial, ‘the trial best able to view the witnesses,’ " to observe the witnesses’ " ‘demeanor, gestures and voice inflections, and [to] use these observations in weighing the credibility of the proffered testimony.’ " Emswiler at ¶ 44, quoting Seasons Coal Co. at 80, 461 N.E.2d 1273. Accordingly, a judgment supported by competent, credible evidence should not be reversed on appeal. Miller at ¶ 13, citing C.E. Morris Co. v. Foley Constr. Co. , 54 Ohio St.2d 279, 280, 376 N.E.2d 578 (1978) ; see also State ex rel. Petro v. Gold , 166 Ohio App.3d 371, 2006-Ohio-943, 850 N.E.2d 1218, ¶ 81 (10th Dist.) ().
{¶ 11} For their first assignment of error, Appellants contend that:
THE TRIAL COURT ERRED BY IMPOSING FRAUD LIABILITY FOR FORECASTS AND ESTIMATES[.]
{¶ 12} Appellants claim that Sunsong failed to produce any evidence of their making false representations of fact about the value of Harco. See Appellants’ Brief 19-25. In the absence of such evidence, Appellants argue that the trial court erroneously predicated their liability for fraud on statements related to Harco's future performance, on the non-disclosure of information they had no obligation to disclose, and on alleged misrepresentations of fact made to third parties. See id. ; see also Lucarell v. Nationwide Mut. Ins. Co. , 152 Ohio St.3d 453, 2018-Ohio-15, 97 N.E.3d 458, paragraph seven of the syllabus.
{¶ 13} Fraud consists of: (1) a representation that is " ‘material to [a given] transaction,’ " is made " ‘with the intent of misleading another [person] into relying on it,’ " and is " ‘made falsely, with knowledge of its falsity, or with such utter disregard and recklessness [for the truth] that knowledge [of the falsity of the representation] may be inferred’ "; (2) the other person's " ‘justifiable reliance’ " on the representation; and (3) harm to the other person " ‘proximately caused by the reliance.’ " Groob v. KeyBank , 108 Ohio St.3d 348, 2006-Ohio-1189, 843 N.E.2d 1170, ¶ 47, quoting Gaines v. Preterm-Cleveland, Inc. , 33 Ohio St.3d 54, 55, 514 N.E.2d 709 (1987). To support a cause of action for fraud, a representation must generally "involve a matter of fact that relates to the past or present," as opposed to "predictions or projections relating to future" events. See Lucarell at ¶ 63. Concealment of a material fact, "where there is a duty to disclose," is equivalent to a false representation. See Groob at ¶ 47.
{¶ 14} Here, the trial court concluded that Appellants sought to deceive Sunsong by "misrepresent[ing] Harco's financial status," particularly with respect to the New Business, which was "unprofitable and unsustainable." See Judgment Entry 2. First, the court found that ...
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...trial, we review the trial court's judgment for whether it is against the manifest weight of the evidence. Harris v. Sunsong Holdings, Inc. , 2021-Ohio-1213, 169 N.E.3d 1030, ¶ 9 (2d Dist.). The same manifest weight standard applies in both civil and criminal cases. Eastley at ¶ 17 ; John D......